I see some predictions of $200/barrel for oil, which apparently translates to $7 gas. That seems a little extreme, but we are over $120/barrel now, and $100/barrel was laughed at a few years back. If anything close to this happens, all bets are off for the economy.

People are selling their personal belongings to pay for gas and other expenses now. Sure, some of it is their fault, for overspending when they shouldn't have, but who would guess the gas prices like they are? I know a great idea for stabilizing gas prices, why don't we destabilize the mideast? Oh, wait, that's not working right now because we have incompetents who started the Iraq war.

Luckily, my wife and I can afford gas so far, but the 3 tankfuls between us per week now equal about $7000 a year. Double that, and we will be cutting a lot of things out.

When people run out of things to sell, watch out. As the song says, when you got nothin', you got nothin' to lose. There will be a hard time coming, all because we didn't listen to Jimmy Carter's one right thing, which was invest in alternative energies. Of course, the great god Reagan wiped out that program when he took office.

dbashaggy: I see some predictions of $200/barrel for oil, which apparently translates to $7 gas. That seems a little extreme, but we are over $120/barrel now, and $100/barrel was laughed at a few years back. If anything close to this happens, all bets are off for the economy.

LeRoy: $200/barrel oil would likely translate into $7.50 per gallon for gasoline. And no, that does not sound extreme to me. News item: the Bush administration is drawing up plans for an attack on Iran. Should that happen, $300/barrel is not out of the question.

not permanently, because are other ways to get oil--they're just more expensive than pumping it out of the ground. Oil shale, for example, or converting coal into oil. Nobody has bothered to do that because at 50 or 60 bucks a barrel you can't make a profit. (Don't remember the break even point, exactly but I think it was 70 or 80 bucks a barrel).

Nobody has built these plants because they are waiting to see if this is a temporary spike or not. If it looks like these prices are not a fluke, then someone will step up and build the infrastructure to get oil from non traditional sources. You can bet that no company wants to build a multi-billion dollar operation to get shale oil, to suddenly have peace break out in the Middle East and oil goes back down to 50 bucks a barrel.

And it didn't make economic sense to have a shale oil plant producing oil at 80 bucks a barrel when the rest of the world is producing it a 25 bucks a barrel.

It will make you feel better as the lights go out.

you had better buy some land in Montana, cattle and a bunch of guns and hole up out there.

Get a clue, the energy IS there, it just isn't easy to get to. Nazi Germany ran their economy and continued to make weapons almost to the end of the war, without significant oil reserves. Yet they managed, because they had to. We will manage because we have to---though I don't think we will ever see gas for under 3 bucks a gallon again.

Stop-truth-decay: Get a clue, the energy IS there, it just isn't easy to get to. Nazi Germany ran their economy and continued to make weapons almost to the end of the war, without significant oil reserves. Yet they managed, because they had to. We will manage because we have to---though I don't think we will ever see gas for under 3 bucks a gallon again.

LeRoy: There are serious questions about the ENERGY-RETURN-ON-INVESTMENT of these 'alternative oil sources' like oil shale and the tar sands of Canada. If it takes five barrels of oil worth of energy to extract four barrels worth of oil from shale, such a process does not make PHYSICAL sense. A few years back, a person who was running for re-election to Congress from Colorado jumped on an announcement by Shell Oil that they had discovered a process for extracting oil from shale that would be profitable at an oil price of $20/barrel, and was trumpeting this as the 'solution' to our energy crisis. That was a few years back, though. Note: if there was ANY truth to these claims, the price of oil would not now be at $123/barrel...and rising.

For the past thirty years, America has been dawdling on energy. 'New Scientist' magazine recently claimed that we are spending less on energy R&D today than we were in 1979. Somebody out there is clueless, I guess. I think there WERE possibilities for energy, in such areas as high-altitude wind power, controlled nuclear fusion, and even space-based solar power, but I am lately thinking that we are simply too late. We are out of time, and face a very serious energy crisis. Oil production is declining in Mexico and Russia, and Goldman Sachs is predicting oil prices could spike to $150/barrel or even $200/barrel by October of this year. Early last year, they predicted oil prices would spike to $105/barrel this year, and people (like you?) scoffed at them. They were actually on the underside with their projections.

Nazi Germany collapsed. The Germans were doing things that made no economic sense, and may have made no PHYSICAL sense. They were wildly irrational. That those who are now denying that we face the mother of all energy crises are reduced to citing Nazi Germany is....well....a sign of our times.

Perhaps an apocalyptic sign.

with the 5 for 4 scenario? Did you make that up, or what? I know that ethanol from corn is a BTU loser, but never heard that about shale oil.

Think about it--IF we had developed all these alternative energy sources you cite, they don't replace petroleum except that we wouldn't be using heating oil in houses or to generate electric power. And they are pipe dreams compared to shale oil extraction, which HAS been used in somewhat larger than pilot project endeavors. It just hasn't been profitable to do. I cited Nazi Germany because it shows what you can do IF YOU HAVE THE POLITICAL WILL to do it.

The oil sheiks have been smart enough and have had the oil reserves to keep alternate petroleum production source unprofitable. The environmental lobby would prefer not to develop these sources--they prefer a black out to the potential environmental cost of tar sands or shale oil. The average American won't--he wants the lights on, fuel for the car and a warm house.

Your argument would be believable if you depicted high oil prices in a more polluted world. But to proclaim that the lights are going out is "wildly irrational." Might be good political theater, but it is bogus economics.

Here is the conclusion of a technical report on oil shales and tar sands posted at www.theoildrum.com/node/3839 by Professor Charles Hall of the SUNY College of Environmental Science:

In conclusion, although shale oils represent a huge potential resource they have a history of “always a bridesmaid and never a bride” because as prices for oil increase the prices for extracting shale oil have increased as well. This history represents the very real problems of generating a useful product from the resource. The main problems include the distance of the shale from both the water and labor needed to extract it, the large environmental impact compared to conventional oil and the relatively low EROI . In addition, with both shale and tar sands there is some disagreement whether the in situ should be charged as an energy opportunity cost, (in the same sense that bagasse could be in sugar cane ethanol). Ultimately, the question is, if conventional oil becomes very scarce whether a resource such as shale oil will be developed regardless of cost.

LeRoy: Oil prices have soared 96% in the last year (i.e., have nearly doubled). If the oil sheiks were trying to "keep alternative petroleum production source unprofitable", in your phrase, they would be keeping oil prices low and not 'allowing' them to soar. OPEC is not responsible for the soaring oil prices of the past few years. As The Wall Street Journal reported yesterday in their second page article on oil prices, ALL the OPEC nations are pumping as much oil as they can, with the solitary exception of Saudi Arabia. Saudi Arabia is the ONLY country in the world right now that has ANY spare capacity; and they have very little. OPEC has blamed soaring oil prices on 'the mismanagement of the U.S. economy', and that is surely a large part of the explanation (those 325 bps cuts in the Fed funds rate since the credit crisis began last August). The other part of the explanation is that we are simply running out of cheap oil. 'Scientific American' had an article about a year ago (I do not have the issue at hand) on 'The End of Cheap Oil'. Other serious and sober publications have reported on the same trends. Non-OPEC oil production is in sharp decline. These were some of the reasons for the Goldman-Sachs prediction of a price spike to $150 or $200/barrel by October of this year. (Which was the main feature of the page 2 article in the WSJ yesterday.)

I cannot fathom your argument about 'THE POLITICAL WILL' of Nazi Germany. They also had the political will to exterminate six million Jews and Gypsies and so forth; which hardly makes it a rational project, anymore than their feverish attempts to extract energy in a non-economical way.

The 'bogus economics' is coming from those Americans wearing rose-colored glasses who think that we have a God-given right to cheap energy and 'tooling around' in our insanely inefficient SUVs.

for shale oil, which is the whole point I have been making. Not that it is easy, not that it is as energy efficient as pumping oil out of the ground, and not that it is environmentally friendly. The simple fact of the matter is that it COULD BE DONE, the engineering and science are all there and not someone's daydream about suddenly discovering the physics to do cold fusion.

We haven't done it, because until now, it has not been profitable to do so--it was cheaper to pump oil out of the ground. And it may still be cheaper to do so, IF Irag, Niger and other oil producing countries which are politically unstable suddenly come to their senses. (I don't think they will, but this is a contingency that Big Oil must consider.)

Get over the Nazi analogy, would you...I picked that one because it was a police state (i.e., what the Nazi's wanted they got) and they were forced into a position of producing synthetic oil. So they flat out did it. And it was logical for them, because the alternative was losing the war. They lost anyway, but would you have like to be Hitler, suing for peace? The really smart move was to not start the war in the first place.

Try this for another analogy, using a democracy but not concerning synthetic oil. American weapons production during WW2. Produce, or die as a democracy. So we produced 50,000 planes and 45,000 tanks a year! When there were only a few hundred planes and a few scores of tanks being built in 1939.

Try the Manhattan project. Get the Bomb before the Nazis do. (This time, I hope you get it.) More concrete went into the Hanford Reservation plutonium plant than went into Hitler's Atlantic wall. We emptied the US treasury Department's silver supplies to build Lawrence's calutrons to try to isolate U 235.

Or more recently, the missile race with the USSR.

At 80 bucks a barrel to break even, we won't get back to sub $3 a gallon gas. But we won't see oil prices at $200 a barrel forever, either. Because somebody will see a chance to make a buck (or megabucks) from shale oil or tar sands or coal gasification.

They could be stopped by the environmental movement--but the average American would rather have his "insanely inefficient SUV" and won't give a tinker's damn about the environmental impact of such an industry.

PS: Since you haven't a clue, Royal Dutch Petroleum says their plants return between 4 and 5 barrels of oil per barrel expended.

Stop-truth-decay: for shale oil, which is the whole point I have been making. Not that it is easy, not that it is as energy efficient as pumping oil out of the ground, and not that it is environmentally friendly. The simple fact of the matter is that it COULD BE DONE, the engineering and science are all there and not someone's daydream about suddenly discovering the physics to do cold fusion.

LeRoy: Oops. Non sequitur. I never mentioned cold fusion. Are you going to start talking force fields, ray guns, and time machines next?

Stop-truth-decay:

We haven't done it, because until now, it has not been profitable to do so--it was cheaper to pump oil out of the ground. And it may still be cheaper to do so, IF Irag, Niger and other oil producing countries which are politically unstable suddenly come to their senses. (I don't think they will, but this is a contingency that Big Oil must consider.)

LeRoy: I assume you mean Iraq and Nigeria; and you are right to doubt that they will become politically stable at any time in the foreseeable future. It is really not a matter of 'coming to their senses'. Nigeria is in the throes of the same neo-Malthusian crisis that is afflicting virtually all of sub-Saharan Africa, and Iraq is, well, a grade-A ethnic and sectarian mess. Perhaps you will recall Dick Cheney's amazing prophecy that our invasion of Iraq would lead to LOWER oil prices. Oops.

Stop-truth-decay:

Get over the Nazi analogy, would you...I picked that one because it was a police state (i.e., what the Nazi's wanted they got) and they were forced into a position of producing synthetic oil. So they flat out did it. And it was logical for them, because the alternative was losing the war. They lost anyway, but would you have like to be Hitler, suing for peace? The really smart move was to not start the war in the first place.

LeRoy: The same could be said about us and our misadventure in Iraq. But what the Nazis were doing was not 'logical', anymore than it would be 'logical' for you to give me a $20 bill in exchange for a $10 one; or perhaps you have a different definition of logic. I will 'get over' the Nazi analogy, if you would stop using it to defend irrational positions.

Stop-truth-decay:

Try this for another analogy, using a democracy but not concerning synthetic oil. American weapons production during WW2. Produce, or die as a democracy. So we produced 50,000 planes and 45,000 tanks a year! When there were only a few hundred planes and a few scores of tanks being built in 1939.

LeRoy: I do not find this to be a very persuasive analogy. When America ramped up weapons production during WW2, we were able to do so because we had (1) a lot of idle labor; (2) a lot of idle capital; (3) extremely plentiful natural resources; and especially (4) a lot of very cheap energy (all that oil! Now gone!). Under the present circumstances, we would find it very difficult to ramp up such a major effort today. We are not even winning two wars against 'backward' Third World societies; and our military is at the breaking point. America was a rising power in 1940; we are a declining power in 2008.

Stop-truth-decay:

Try the Manhattan project. Get the Bomb before the Nazis do. (This time, I hope you get it.) More concrete went into the Hanford Reservation plutonium plant than went into Hitler's Atlantic wall. We emptied the US treasury Department's silver supplies to build Lawrence's calutrons to try to isolate U 235.

LeRoy: How much silver does the U.S. Treasury have today? I have been calling for a major Manhattan-style research program into alternative energy sources for the better part of three decades. It has not happened, largely because people like you do their best to convince the American public that there is an infinite supply of oil out there. But as I pointed out in my first reply to you, WE ARE SPENDING LESS ON ENERGY R&D TODAY THAN WE WERE IN 1979. Blame it on brainless energy policy that thinks the only solution is: drill, drill, and drill. This time, I hope you get it, as you did not notice from the conclusion in the last post: AS OIL PRICES INCREASE, SO DOES THE COST OF EXTRACTING OIL FROM SHALE OR TAR SAND. It takes energy to get energy, which is what is meant by the energy return on energy invested calculation. Oil shale and tar sands are not likely to EVER be economical; and that is NOT EVEN COUNTING THE ENVIRONMENTAL COSTS, which are very considerable indeed. I very strongly suspect that if we initiated the sort of massive program to try to get oil from shale or tar sands that you seem to favor, people (ORDINARY people) would very quickly realize just how dumb it is. Perhaps they have learned a lesson from the ethanol craze that there are always trade-offs that need to be considered.

Stop-truth-decay:

Or more recently, the missile race with the USSR.

LeRoy: Yes, one of the most colossal wastes of resources in the recorded history of mankind. Between the two of them, the United States and the Soviet Union expended many trillions of dollars building missiles to brandish at each other, missiles that both sides knew could never be used, or civilization would perish. Think of the OPPORTUNITY COST of all those resources. And the world is STILL spending more than $1 trillion per year on armaments and missiles and tanks and armies. If we don't wise up, real soon, our civilization WILL perish. In fact, it may very well already be too late.

Stop-truth-decay:

At 80 bucks a barrel to break even, we won't get back to sub $3 a gallon gas. But we won't see oil prices at $200 a barrel forever, either.

LeRoy: Send your objections to Goldman Sachs. They were right last year, when people scoffed. [I bet you were one of the scoffers, weren't you? Fess up: last year, at about this same time, you were probably one of the folks saying oil prices could NEVER hit $120/barrel, because we would start using oil shale and tar sands long before then.]

Stop-truth-decay:

Because somebody will see a chance to make a buck (or megabucks) from shale oil or tar sands or coal gasification.

They could be stopped by the environmental movement--but the average American would rather have his "insanely inefficient SUV" and won't give a tinker's damn about the environmental impact of such an industry.

LeRoy: It's not those 'environmental wackos' stopping us from getting our oil. It's peak oil, still denied by the denialists, but staring us in the face. And I suspect you are deeply wrong about the average American simply not giving a flying rip about the environment and the future of the world's biosphere. Polls show that Americans are now deeply concerned about global climate change and want governmental action on the issue. It is one reason George W. Bush has become the most unpopular President in the history of modern polling. Perhaps other people actually care about the kind of world they are going to leave behind for their children; and perhaps you don't.

Stop-truth-decay:

PS: Since you haven't a clue, Royal Dutch Petroleum says their plants return between 4 and 5 barrels of oil per barrel expended.

LeRoy: Since you haven't a clue, you evidently believe all the hogwash the big oil companies feed you. As I noted, two years ago, in 2006, Shell Oil claimed to have come up with a method to heat oil shale in situ and get high quality crude from it at a cost of $20 per barrel. You will take careful note of the fact that they're not doing that, even though oil is now at $124 per barrel. Gee. Why are they giving up all the megabucks they could be making right now, by producing crude oil from shale and selling it at, say, $60 a barrel?

Are they dumb?