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Low Oil Profits are Bad. Here's Why.

Posted by deleted 8 years ago to Economics
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Low oil profits are bad. Here's why. We all want and need power and we all want and need to minimize climate change. In order to do so, we need a long-range plan to change our infrastructure to a sustainable model. That is going to require a lot of cash. Cash that we can't raise through taxes alone. Think of a rocket ship blasting off from the earth and penetrating into space. It has to reach "escape velocity," the minimum speed and trajectory required to overcome the earth's gravitational field. Our energy future is no different. The oil companies need to invest in technologies, processes, and infrastructure to change the energy landscape. They need to beyond the mechanistic process of refining the "black gold" and embrace more sustainable sources. The oil companies need to diversify their portfolios of products to include the lighter stuff: natural gas, natural gas condensates, etc. To do this, they need to reach a minimum "velocity" of cash flow and minimum “elevation” of profit.
To expand on the notion of diversification in terms of energy, I note that it is a huge benefit to emissions and controlling pollution to change to the newer natural gas fuel source. In fact, it is possible that these fuels are better than even electric cars, depending on where the power to charge them comes from. (Think of a coal-fired power plant with all the innumerable inefficiencies of coal being used to charge a Tesla Electric Vehicle. Not the picture of green we want to see.) We know it is clear that LNG and CNG contribute to climate change 25 percent less than oil does. So, if we want more responsible companies to come out on top and deliver a sustainable future around the globe, we need to know that it is OK to spend cash on oil now so profits go to LNG initiatives and - better yet - alternatives. Certain companies are involved in huge gas projects in the Middle East and Southeast Asia and have recognized climate change as real. I would recommend choosing gasoline not based on price alone, but on companies' energy portfolios, on their environmental records and their prospecti on how they plan to deal with climate change. To summarize: Next time you just want to buy Mobil gas because you don't want to do a U-turn and go to a more expensive supplier across the street, maybe pull the G’s and spend a little extra cash on fuel and a lotto ticket inside. It could make a difference between defying gravity and falling back to earth.


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  • Posted by $ WilliamShipley 8 years ago
    Clearly you don't like trees. They need that CO2, and I'm not terribly concerned about the dreaded global warming -- though if you are, how about advocating for some R&D on Thorium reactors, zero CO2 24/7, doesn't fill the landscape with bird choppers.

    And, why pray tell, are the existing energy companies the ones who need to fund the "new energy". Why not new companies without the old.

    What our economy needs is low cost energy -- which drives everything. Bumping up the cost of energy and siphoning off the resources that everyone needs to fund your cause hurts everyone.
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    • Posted by 8 years ago
      Ideal solution might be Thorium reactors with electric vehicles. Existing companies do not need to be coddled, free market should win, for sure. The statement above is intended to mean "you get what you pay for". The sad truth is, there is such a thing as a blood diamond. Where people do not have rights, the price of their work is artificially low. Dare I say some oil companies produce "blood oil". The trouble with the libertarian argument is that it does not seem to recognize that outside of the West, which is where we get a lot of oil, rights are not part of the game. So the conundrum. Do we still buy from those who enslave others? What comes first economic freedom or political rights? We know you can't have one without the other. In terms of climate change, we know it is happening but we don't know the result. Of course, that is no reason to be a corporatist and I think we all hate fascism. This article means to say that buying for ethical reasons is valid.
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      • Posted by $ WilliamShipley 8 years ago
        The United States recently became a net exporter of oil. I suspect with the prices down we are back to being a net importer because a lot of the new U.S. sources are relatively expensive.

        Your argument about rights covers all imported goods, not just petroleum. Are all the imported solar cells being made in factories that protect human rights? Why focus on oil?
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        • Posted by 8 years ago
          Let me be frank. I like oil, I like cars, planes, and trains. I think we need less government restriction on oil and gas drilling, and I think property rights should govern over fracking. The difference is this. Environment cannot always be improved through property rights arguments. It is sometimes just a question of science and fact. I commend you for at least citing that trees can grow from carbon dioxide. That is a LeChatlier's principle argument, which governs chemistry. Good! The point is that denying climate change is digging our grave. Collectivists have enough of an argument to claim it is happening. Then they use it to expand government. Our job is not to sit back and say its worse to have an oppressive government that runs our lives, even though that is true! We should make choices based on the information. If there is a doubt about climate change, then we should seek to prove objectively that it's not true! However, even Alex Epstein claims it is probably occurring. Thus the argument, as even Shell Oil points out, is how to mitigate the effects while still improving our lives. Since there is no ownership of the air, and since even the most anti-collectivist people believe climate change may be occurring, we need to make reality-based decisions to mitigate it. We can't be a ostrich, we can't be a conservative. We should look to actual solutions like Thorium reactors, or CNG or LNG, or - I hate to say it - more efficient cars and modes of transportation. I hate to say it, but the government will enact climate change law. It will tax you to fund "research" on alternatives with no accountability. Unless you take a stand by (1) proving climate change is false or (2) providing a plan to mitigate any significant effects. I am trying to do the second one.
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  • Posted by XenokRoy 8 years ago
    Well the first assumption here is that global warming is a man made problem. I do not think this to be true. In fact we are seeing global cooling trend now and its been (if I recall correctly) 13 years since the globe was warming.

    I seem to recall seeing an article about an impending ice age based on current cooling trends. It was bit sarcastic but interesting.

    It may be that you simply do not like plant life and would like it to die, but otherwise CO2 is needed.

    I tend to lean more in the direction of when Oil and Coal becomes expensive due to shortages of supply man will pretty quickly come up with other ways to make energy. We all ready have them and they will get refined very quickly when needed.

    In the meantime the globe will not stop turning, and if it did, I think we could find a way to start it back up again. We are pretty resourceful when it needed and things like governments get out of the way when its something that big, then things really move.

    So if you are part of the crowd that sees attempted government global temperature controls as a good thing, low energy is bad. On the other hand you think, like everything the government attempt to control, attempting to control global temperature is more likely to nip us in the butt if the government tries (and it all ready has) then I suspect lower oil prices is simply good for as long as it lasts.
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    • Posted by 8 years ago
      Roy, thanks for using reason! It's definitely not something we want government to try and fix. Most likely will be a combination of advancement to CNG and LNG along with some alternative energies that keep the blood suckers away. And some smallish reparations fund to keep the legitimately affected landowners able to reclaim land or relocate, if it comes to that.

      Another thing that climate alarmist nations do to mess with us is to sue us from prior emissions. India and China want to do this. But we didn't know about it. So we can't really be held accountable for climate change before we knew it was happening, if it actually is. They just want to industrialize without being taxed for it, and at the same time to hold us accountable for their land loss (man-made or natural). Although some more detestable individuals want to destabilize our extremely competitive economy. In the extreme case, this is the story behind 911.

      I hope the global cooling trend is real. Thanks for your insight. Remember: we can't allow a mineshaft gap!

      https://www.youtube.com/watch?v=ybSzo...
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  • Posted by Lucky 8 years ago
    Collectivist communistic climate change carbon crap.
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    • Posted by 8 years ago
      Lucky, it's not collectivism the article champions but free choice. It's not about corporatism or anything similar. People don't have political rights elsewhere but we purchase their stuff all the time. China being a classic example. During the American Civil War, was it objectively ethical to purchase cotton from slave owners?
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      • Posted by 8 years ago
        So the question is do you buy from whomever and hope that eventually they respect rights? Or do you respect rights and boycott those who enslave? It is currently unlawful to buy tin from DRC because it's a slave-driven economy. Do you contest this law?
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  • Posted by CircuitGuy 8 years ago
    Is this overcomplicated it? If people had to pay a calcualted cost of the pollution their activites generate, wouldn't this spur investment into new energy sources when it makes economic sense to do so?
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  • Posted by 8 years ago
    I think I need to get involved in the law. I should represent client oil companies and mitigate their reparations funds, limit their exposure. Climate alarmists will try to sue for (1) rising sea levels (Florida, Holland, Bangladesh, etc.), (2) floods, hurricanes, tornados, and other damaging weather, and (3) temperature-related problems (melting ice). It's plain to see they will be sued for the fraction of carbon in the atmosphere they are responsible for emitting. But maybe they'll just comply and not need a lawyer. That's the part that saddens me.
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  • Posted by 8 years ago
    I think people are opposed to this article because it appears to be in favor of corporate welfare. So is it corporate welfare to restrict purchases from those who infringe on the rights of life, liberty, or property?

    Property includes land. Wide swathes of Florida will be underwater in 2100 according to the maps we saw during the GOP debates. Is it up to the landowner to build dikes, levies, and dams? Is it up to those who pull oil from the earth? Is it up to the end users of carbon fuels? This is the argument behind the "carbon tax".

    Do you trust the individual landowners will be compensated for their loss? No? Then are you willing to pay a little bit to every land owner in Florida for the gasoline you use? No? Then property rights are not your concern. Maybe that's why the government feels free to tax you?

    Don't like that much? Then your options are to continue doing what you are doing and deny climate change, hopefully with the various articulations about trees needing carbon dioxide or about natural climate change, or about the lack of data. But obviously no one understands it well enough to deny it with total scientific conviction. Unless you think climate change is equivalent to "gremlins are studying Hegel's logic on the planet Venus".

    If you think carbon dioxide emissions do not explain the increase in temperature, then what does? Until there is a better theory, no one will accept it. And I'm sorry to say, science does not follow "innocent until proven guilty". It explains facts with conceptualization and attempts to integrate theories to predict outcomes. Just as a DNA test shows with some degree of certainty that the smoking gun belongs to a suspect.

    Anyone with a degree in physics in the room? Not me. I'm a chemical engineer. I studied chemical reactions, combustion, and environmental chemistry.
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  • Posted by 8 years ago
    This is the argument to purchase Shell gasoline instead of Exxon. If you believe climate change is false, then what about pollution in general? Is there no such thing? You would purchase fertilizer from a company that discharges into the ocean where you fish? No, you would cite laws against it. Private property arguments are wonderful and primary. But do not allow yourself to be gullible enough to believe that because some individual doesn't own the air or the ocean, that it is off-limits. The reservoir model does not work anymore.
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