PhillipS Posted December 13, 2012 Share Posted December 13, 2012 A frequently heard pseudo-skeptical canard is that AGW 'alarmism' is all about climatologists wanting to protect their jobs and ensure research funding. A reality check that illustrates how silly that claim is is to look at the magnitude of the revenue flowing to the fossil fuel producers. In today's news [source] OPEC ministers have decided to stick with the current 30 million barrel per day production quota. The US, which is not a member of OPEC, produces another 6.5 million barrels per day. The current international price for crude oil is about $105 per barrel, and the domestic price is between $80 and $90 per barrel. For this discussion I'll just arbitrarily average the domestic price to $85 per barrel. At these production levels and prices the OPEC nations are making about $3,150,000,000 each and every day. US oil producers are making a mere $550,000,000 each day. Add in the other non-OPEC producers and the aggregate oil revenue is roughly $4,000,000,000 every single day of the year. That's a lot of money - so large a quantity that it's hard to really get a sense of. So let's convert that to units that may be easier to understand. A university professor, for example a climate scientist, costs about $200K per year (for salary, benefits, coffee, graph paper, etc). So a single day's oil revenue would pay the annual salary and upkeep for about 20,000 climate scientists (Are there even 20,000 climate scientists world-wide?). And that wouldn't touch the oil revenue from the other 364 days of the year. Looked at another way, the proposed 2013 budget for NOAA's Office of Oceanic & Atmospheric Research is $414 million [source]. So one day's oil revenue would fund almost ten years of research. Yeah, $4,000,000,000 is a lot of money. Link to comment Share on other sites More sharing options...
Vergent Posted December 13, 2012 Share Posted December 13, 2012 A frequently heard pseudo-skeptical canard is that AGW 'alarmism' is all about climatologists wanting to protect their jobs and ensure research funding. A reality check that illustrates how silly that claim is is to look at the magnitude of the revenue flowing to the fossil fuel producers. In today's news [source] OPEC ministers have decided to stick with the current 30 million barrel per day production quota. The US, which is not a member of OPEC, produces another 6.5 million barrels per day. The current international price for crude oil is about $105 per barrel, and the domestic price is between $80 and $90 per barrel. For this discussion I'll just arbitrarily average the domestic price to $85 per barrel. At these production levels and prices the OPEC nations are making about $3,150,000,000 each and every day. US oil producers are making a mere $550,000,000 each day. Add in the other non-OPEC producers and the aggregate oil revenue is roughly $4,000,000,000 every single day of the year. That's a lot of money - so large a quantity that it's hard to really get a sense of. So let's convert that to units that may be easier to understand. A university professor, for example a climate scientist, costs about $200K per year (for salary, benefits, coffee, graph paper, etc). So a single day's oil revenue would pay the annual salary and upkeep for about 20,000 climate scientists (Are there even 20,000 climate scientists world-wide?). And that wouldn't touch the oil revenue from the other 364 days of the year. Looked at another way, the proposed 2013 budget for NOAA's Office of Oceanic & Atmospheric Research is $414 million [source]. So one day's oil revenue would fund almost ten years of research. Yeah, $4,000,000,000 is a lot of money. People tend to project their own irrationality on others. So when someone denies AGW or the negative consequences thereof, because of an ideology(this is the gospel for my side), or they see that it goes against their personal interests, like they love winter sports, or because they are paid to think that way, or it will cost them money. They assume that others are selfishly or irrationally motivated as well. Basically, they accuse the scientists of doing what they themselves are guilty of doing. When they say "Its a conspiracy" what they are announcing is "we are conspiring". They expect the "other side" to be doing the same thing for similar reason. Most scientists are seeking truth rather than looking to ratify preconceived notions. The real experts (the ones that spent years on submarines or icebreakers, or in Antarctica or Greenland summit) do not subject themselves to such conditions because they know what they are going to find. Link to comment Share on other sites More sharing options...
WeatherRusty Posted December 13, 2012 Share Posted December 13, 2012 One reason the fossil fuel industry is so profitable is because the raw material is essentially free, a gift from the Earth to those willing and able to extract it. When the product is consumed the waste products are dumped into the atmosphere and oceans for free. No one pays for these externalities. If the true value were paid by producers and passed on to consumers for these products, the cost would be commensurately higher. It the true cost to environmental pollution were considered monetarily, the cost to consumers would be higher still. As fossil fuels become more scarce the value will be better reflected in the cost. Why shouldn't we all pay for the true cost in consuming these products so that the environmental cost is considered? Link to comment Share on other sites More sharing options...
TerryM Posted December 13, 2012 Share Posted December 13, 2012 The money has bought a propaganda machine that would make Goebbels blush - that and politicians all round the globe. Terry Link to comment Share on other sites More sharing options...
skierinvermont Posted December 13, 2012 Share Posted December 13, 2012 One reason the fossil fuel industry is so profitable is because the raw material is essentially free, a gift from the Earth to those willing and able to extract it. When the product is consumed the waste products are dumped into the atmosphere and oceans for free. No one pays for these externalities. If the true value were paid by producers and passed on to consumers for these products, the cost would be commensurately higher. It the true cost to environmental pollution were considered monetarily, the cost to consumers would be higher still. As fossil fuels become more scarce the value will be better reflected in the cost. Why shouldn't we all pay for the true cost in consuming these products so that the environmental cost is considered? Actually it's not free. The reason oil prices have gone through the roof the last decade is that oil companies are having to turn to more and more expensive sources of oil. Exploration, extraction, transportation have gotten very expensive. Oil companies earn the same profit margins today as when oil was $20/barrel in 1999 (in today's dollars, $13/barrel in 1999 USD) even though the price has been averaging over 4X what it was then (7X nominally). The market mechanisms that control prices and profit margins are the same as for any other industry. This is a common miss-perception that is completely incorrect. Link to comment Share on other sites More sharing options...
WeatherRusty Posted December 13, 2012 Share Posted December 13, 2012 Actually it's not free. The reason oil prices have gone through the roof the last decade is that oil companies are having to turn to more and more expensive sources of oil. Exploration, extraction, transportation have gotten very expensive. Oil companies earn the same profit margins today as when oil was $20/barrel in 1999 (in today's dollars, $13/barrel in 1999 USD) even though the price has been averaging over 4X what it was then (7X nominally). The market mechanisms that control prices and profit margins are the same as for any other industry. This is a common miss-perception that is completely incorrect. It is free, you have to pay to extract and process the stuff. I said as fossil fuels become more scarce the cost to the consumer will increase. Production costs have increased, the cost of the raw material is still nada. Water is free, the cost you pay reflects delivering it to you. Same thing. Link to comment Share on other sites More sharing options...
Vergent Posted December 13, 2012 Share Posted December 13, 2012 Actually it's not free. The reason oil prices have gone through the roof the last decade is that oil companies are having to turn to more and more expensive sources of oil. Exploration, extraction, transportation have gotten very expensive. Oil companies earn the same profit margins today as when oil was $20/barrel in 1999 (in today's dollars, $13/barrel in 1999 USD) even though the price has been averaging over 4X what it was then (7X nominally). The market mechanisms that control prices and profit margins are the same as for any other industry. This is a common miss-perception that is completely incorrect. Oil production up by 10% oil profits up by 300%. As usual, Skier just makes up numbers. Link to comment Share on other sites More sharing options...
skierinvermont Posted December 13, 2012 Share Posted December 13, 2012 It is free, you have to pay to extract and process the stuff. I said as fossil fuels become more scarce the cost to the consumer will increase. Production costs have increased, the cost of the raw material is still nada. Water is free, the cost you pay reflects delivering it to you. Same thing. You said the oil industry is "so profitable." The profits for the oil industry are no different than for any other industry and are governed by the same market principles. It doesn't make a shred of difference whether the cost is to explore, extract, and transport or if they are to manufacture, or to provide a service. Link to comment Share on other sites More sharing options...
Jonger Posted December 13, 2012 Share Posted December 13, 2012 The money has bought a propaganda machine that would make Goebbels blush - that and politicians all round the globe. Terry The product sells itself. As a man in your mid 60's, you should be aware that your current age is made possible by the advancements made from cheap energy. Goebbels was responsible for selling death to the public, energy is just the opposite. We will run out of carbon based energy eventually and have to live with the consequences... Arguably only harsh to those who fail to escape the tepid pace of sea level rise. Link to comment Share on other sites More sharing options...
skierinvermont Posted December 13, 2012 Share Posted December 13, 2012 Oil production up by 10% oil profits up by 300%. As usual, Skier just makes up numbers. Production is only very loosely indirectly connected to profit margins. Also notice how profit margins started rising in 2004 when production began to level off. Oil industry profits long-term are no different than for any other industry. Why isn't anybody screaming about Google which earns a much higher profit margin (25%)? Link to comment Share on other sites More sharing options...
WeatherRusty Posted December 13, 2012 Share Posted December 13, 2012 You said the oil industry is "so profitable." The profits for the oil industry are no different than for any other industry and are governed by the same market principles. It doesn't make a shred of difference whether the cost is to explore, extract, and transport or if they are to manufacture, or to provide a service. You are missing my point. They pay nothing for the raw material. Consumers pay nothing to dump the waste product into the free atmosphere. The true value and cost in externalities are not reflected in the price we pay for our energy. The fossil fuel industry gets to exploit a free resource and get bloody rich in doing so. Good for them, but realize how easy it is to over exploit a resource and pollute the environment when there is no monetary cost involved. Link to comment Share on other sites More sharing options...
skierinvermont Posted December 13, 2012 Share Posted December 13, 2012 You are missing my point. They pay nothing for the raw material. Consumers pay nothing to dump the waste product into the free atmosphere. The true value and cost in externalities are not reflected in the price we pay for our energy. The fossil fuel industry gets to exploit a free resource and get bloody rich in doing so. Good for them, but realize how easy it is to over exploit a resource and pollute the environment when there is no monetary cost involved. There is cost involved. It costs hundreds of billions of dollars to explore, extract, transport, and refine. You think it is free to build oil rigs in the arctic ocean? Would you likewise say it is easy to overexploit farming because the sun and CO2 that crops feed on is free? If your point is just generally that oil is a really great source of energy, then I agree. But you specifically referred to industry profits. Industry profits are not high, and it doesn't make a bit of difference that the oil itself is "free" (if you ignore exploration, extraction, transport, refining). Link to comment Share on other sites More sharing options...
WeatherRusty Posted December 13, 2012 Share Posted December 13, 2012 There is cost involved. It costs hundreds of billions of dollars to explore, extract, transport, and refine. You think it is free to build oil rigs in the arctic ocean? Would you likewise say it is easy to overexploit farming because the sun and CO2 that crops feed on is free? The raw product is free. Yes there are production costs. To the degree that farming destroys the natural environment, yes I would say that. However, farming is not to my knowledge creating an environmental disaster like the burning of fossil fuels is. There is no need to discourage farming to feed our people. If you haven't figured it out, I am trying to offer a justification for a carbon tax or cap and trade scheme. Link to comment Share on other sites More sharing options...
skierinvermont Posted December 13, 2012 Share Posted December 13, 2012 The raw product is free. Yes there are production costs. To the degree that farming destroys the natural environment, yes I would say that. However, farming is not to my knowledge creating an environmental disaster like the burning of fossil fuels is. There is no need to discourage farming to feed our people. If you haven't figured it out, I am trying to offer a justification for a carbon tax or cap and trade scheme. As I said in my edit above, my objection was specifically to the reference to profits. If your point is just generally that oil is a really great source of energy, then I agree. But you specifically referred to industry profits. Industry profits are not high, and it doesn't make a bit of difference that the oil itself is "free" (if you ignore exploration, extraction, transport, refining). I do agree it's a great source of energy the earth has given us, much cheaper than others (especially the old sources we have used up). And I do agree the externalities are huge. But I don't agree that the oil industry is "so profitable" because the oil itself is "free" (excluding exploration, extraction, transport and refining). The oil industry profit margins are governed by the same market forces other industries are. Profits are large because the industry is large. Link to comment Share on other sites More sharing options...
WeatherRusty Posted December 13, 2012 Share Posted December 13, 2012 As I said in my edit above, my objection was specifically to the reference to profits. If your point is just generally that oil is a really great source of energy, then I agree. But you specifically referred to industry profits. Industry profits are not high, and it doesn't make a bit of difference that the oil itself is "free" (if you ignore exploration, extraction, transport, refining). I do agree it's a great source of energy the earth has given us, much cheaper than others (especially the old sources we have used up). And I do agree the externalities are huge. But I don't agree that the oil industry is "so profitable" because the oil itself is "free" (excluding exploration, extraction, transport and refining). The oil industry profit margins are governed by the same market forces other industries are. Profits are large because the industry is large. The industry is so large because the demand is so high. The demand would not be so high if the true cost were reflected in the price. The oil companies keep the price low in order to maintain the demand, their raw material is free and for the time being abundant, providing little constraint on production. It's a system run wild while promoting wasteful exploitation of a resource. The word conservation is anathema to the fossil fuel industry and the public's addiction to fossil fuels. But....we don't want to conserve....we want to fly as high as the sky for today and let tomorrow take care of itself. Link to comment Share on other sites More sharing options...
TerryM Posted December 14, 2012 Share Posted December 14, 2012 Jong The propaganda I object to isn't that directed at enticing people to buy more energy rather that aimed at obscuring the damage fossil fuels are doing to the world. Rusty has been pointing out the problem of the commons that profits the energy companies far more than other entities. Without the need to pay for environmental destruction wrought by the extraction and use of the product & with bought and paid for politicians offering depletion allowances to reduce taxation it's no wonder that energy companies have amassed the fortunes that they have. I'm not sure what you're specifically referring to when you equate cheap energy with longevity. Pasteur & Fleming probably have more to do with enhanced life spans than any other two people & those that shut down coal use in London & curtailed smog in LA undoubtedly saved millions from the deadly effects of "cheap energy". If you really think that SLR is going to be the principal killer in the coming years, you just haven't been reading the literature. Terry Link to comment Share on other sites More sharing options...
skierinvermont Posted December 14, 2012 Share Posted December 14, 2012 The industry is so large because the demand is so high. The demand would not be so high if the true cost were reflected in the price. The oil companies keep the price low in order to maintain the demand, their raw material is free and for the time being abundant, providing little constraint on production. It's a system run wild while promoting wasteful exploitation of a resource. The word conservation is anathema to the fossil fuel industry and the public's addiction to fossil fuels. But....we don't want to conserve....we want to fly as high as the sky for today and let tomorrow take care of itself. You could say the same thing about any industry on earth, including the retail industry. Every industry has externalities. Again this has everything to do with fossil fuels having large externalities and nothing to do with the fact that oil is "free." The oil industry has costs just like the clothing retail industry. The price reflects the costs. If oil did not exist, we would use other sources of energy, which would also have externalities which would cause problems without government regulation to account for those externalities. Link to comment Share on other sites More sharing options...
Jonger Posted December 14, 2012 Share Posted December 14, 2012 You could say the same thing about any industry on earth, including the retail industry. Every industry has externalities. Again this has everything to do with fossil fuels having large externalities and nothing to do with the fact that oil is "free." The oil industry has costs just like the clothing retail industry. The price reflects the costs. If oil did not exist, we would use other sources of energy, which would also have externalities which would cause problems without government regulation to account for those externalities. The entire seafood industry could fit into that rationale. Jon Link to comment Share on other sites More sharing options...
skierinvermont Posted December 14, 2012 Share Posted December 14, 2012 The entire seafood industry could fit into that rationale. Jon Or wind or solar power. Nobody is afraid of "over-exploitation" of wind or solar power. Again, the issue is the larger than normal externalities not the fact that it's "free" (but not really). Link to comment Share on other sites More sharing options...
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