Economics

Alright so we are the group for the economics of oil this some of the basic information we have gotten this far, we will continue adding more information as we receive it. Ask us more detailed questions when you need it...
 * Hey Everybody!**

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Brief History

 * Discovered in 1859 in U.S
 * Supplied only 4% of world's energy at the begging of 20th century
 * Today supplies over 40% of world's energy. Most of it (96%) is used in transportation
 * Since we started using oil, 875 billion barrels of it been used
 * Estimated that there are still 1,000 billion of barrels in reserves that need to be recovered

"The Future of Oil." __Institute for the Analysis of Global Security__. 2003,2004. 22 Nov 2007 <[|http://www.iags.org/futureofoil.html>.]

Supply and Demand

 * The first problem which will arise with oil, is that the demand will be going up and there will not be enough supply. Which will cause the prices to go up.
 * The problems that will cause shortage in supply is that the current oil suppliers are running out and not producing as much oil as they used to. And to start a new reserver it will take years to produce enough efficiently
 * From now up to 2020 oil consumption will rise by 60%
 * Most of the energy that comes from oil, will be consumed in transportation (today there are about 700 million of cars in the world, by 2025 there will be over 1.25 billion cars)
 * Two top countries that will consume most of the oil will be China and India. (China's consumption rate will grow at a rate of 7.5% a year and India at 5.5%)
 * Oil is mostly used in vehicles, aircrafts, ships and trains (the majority of our transportation).

(More information on these will be added shortly) - Ranked 7th in proven oil reserves, Will start running out by 2020 Russia’s largest oil field In 2005 produced 23 million tons of oil 35 – 36 million tons a year by 2010. Approximately 230 million tons of oil, extra 3.5 million tons of stabilized natural gas gasoline, and nearly 6 million tons of natural gas liquids will be produced in this period of 20 years http://www.yukos.com/EP/Priobskoe_Oil_Field.asp Estimated at approximately 3.45 billion barrels In 2003 it's production reached 129.1 million barrels of oil (17.7 million tons), an increase of 49% compared with 2002 production Been upgraded recently with new infrastructure and the production of Priobskoye predicted to grow
 * Future locations that are predicted to have oil**
 * North America 6%
 * Central and Latin America 9%
 * Europe 2%
 * Asia Pacific 4%
 * Africa 7%
 * Former Soviet Union 6%
 * Samotlor Field**
 * Priobskoye field**

[|Greatest Oil Reserves by Country]

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Government Regulations
In Canada there is a Canada Oil and Gas Operations Act, S.C. 1992, c. 35. This act applies to any business involved in oil and gas operations.

Provides regulations concerning the design, safety, construction and installation, inspection, testing, monitoring, operation, maintenance and repair of installations used in the exploration for, development and production of oil and gas in areas not covered by a joint management and resource sharing agreement.

The Act prohibits one from carrying on any work or activity related to the exploration for or the production of oil or gas unless one first obtains a license or authorization issued by the National Energy Board. As part of the application process, a plan must be submitted which shows that Canadians are being employed and that Canadian goods and services are being used. The National Energy Board may require that certain conditions be fulfilled, among them, that the person obtain appropriate insurance and that environmental studies be carried out.

[|Source]

Basic Costs/Benefit Analysis
Basic costs for Canada's oil production
 * by 2015 about $117 billion will be spent on tar sands
 * report by WoodMac entitled "The Cost of Playing in the Oil Sands" shows that the cost have increased by 55% since 2005, for a peak flowing barrel of oil derived from the tar sands
 * Athabascan tar sands operation would cost $11 billion Canadian to expand their operations by only 100,000 barrels per day

Effects on Macro Economy

 * definition of macro economy - study of the economy as a whole..."the big picture"


 * green revolution - blessing or curse?
 * increase in oil consumption due to new technologies in farming equipment
 * definite increase in food supply as new farm equipment is enabling farmers to produce more efficiently
 * some would say this is a step forward in aiding in our fight against world hunger but think again
 * these new technologies are subject only to those with the money and ability to purchase new farming equipment
 * the saying the rich get richer and the poor get poorer
 * the "high end" farmers are producing at a higher efficiency level driving the supply of agricultural goods up which in turn drives the equilibrium price down
 * the "low end" farmers are then attempting to keep up with the production levels and find themselves falling behind and unable to make a living as they cannot sell their products for such a low price and still maintain a profit
 * green revolution has resulted in lower product prices and higher input prices and because the high use of machinery this industry has/is turning from a labour intensive process into a capital intensive process
 * this has resulted in a job cut as less amount of workers are needed to tend to the land
 * due to the high amount of production the fields are also becoming overused as farmers are no longer "resting" their fields as was done; land is becoming unfertile
 * what does this all mean? as more new innovations are being created and used and encouraged in the agricultural industry the demand for oil will surge forward


 * we have exhausted ALL of our "easy" oil resources; making ghost towns of those which in the early discoveries of oil had over predicted the amount of oil available
 * __**East Texas**__
 * increase in production from 7 wells every other week to 7 wells a day to to more than 100 daily
 * this dramatic increase is production of oil allowed Texas to relish in the prosperity
 * as more and more was available this affected the overall cost
 * supply in increased therefore pushing down the price per barrel
 * first barrels extracted sold for $1.10 a barrel than dropped to $0.15
 * by August 1931 Texas alone was producing 1,000,000 b/d
 * **__Venezuela__**
 * world's fifth largest exporter; reserves are among top 10 in the world
 * 80% of the countries total export revenue comes from oil
 * once the oil here runs out Venezuela will soon become one of these "ghost towns" due to 4/5ths of Venezuela's export revenues is from oil
 * once it is exhausted Venezuela will result in a tremendous decrease in standard of living
 * having to depend on only 20% of those export revenues this will result in multiple job losses and money gone leaving not only a dent on money but on the environment around them
 * oil makes up 1/3 of the countries GDP


 * a magnet for war examples; Darfur genocide, Kuwait: invasion of oil fields, Gulf war, 9/11 attack, war in Iraq, WW1 and WW2
 * oil fuels, intensifies and prolongs war


 * __**Iraq**__
 * holds more than 112 billion barrels of oil
 * world's second largest reserve
 * also contains 110 trillion cubic feet of natural gas
 * 90 per cent of the county remains unexplored due to wars and sanctions.
 * has the lowest oil production costs in the world.
 * it's oil is attractive to international oil companies because of:
 * **High quality/high value product**-Iraq's oil is generally high in quality-it has attractive chemical properties,notably high carbon content,lightness and low sulfur content-especially suitable for refining into the high-value products
 * **Huge Supplies-has plentiful oil**-had 112.5(11% of the worlds total) billion barrels in 2002-has 256 prospective drilling sites of which only 125 are drilled-as demand for oil increases and oil reserves in other area decline Iraq's oil represents a steadily-larger proportion of the world's total
 * **Exceptionally low production costs, yielding a high per cent barrel profit**-lowest oil production costs int he world-comes from enormous fields that can be tapped by relatively shallow wells producing a high "flow rate"- Iraq's oil rises rapidly to the surface because of high pressure from water and from associated natural gas deposits-more than a third of Iraq's reserves lie 600 meters(1800 feet) below earth's surface-holds at least 25 billion barrels
 * oil prices fluctuate between $20 and $50.
 * __**Mexico**__
 * oil industry was nationalized in 1938
 * depends on oil for the larger proportion of its energy needs
 * consumes it at an unsustainable rate and goes into debt to obtain it
 * unless it changes it behaviour or finds therapy that works, the prognosis is that it will experience a serious crisis
 * produces 3.3 million barrels per day
 * it is the sixth largest world producer
 * export 1.8 million per day
 * owns one of the 10 largest oil companies, the state monopoly Prtoleos Mexicanos (PEMEX)
 * local oil reserves are expected to last only nine years and eight months at current rates of production
 * in 200 they weer forecast to last 20 years and seven months
 * PEMEX is bankrupt
 * has debts larger than its assets
 * it's extraction costs are rising steadily
 * most of its revenues go straight into the state coffers to finance 36.1 per cent of the national budget
 * over the past few months their revenue has risen by 100 per cent
 * the high oil prices on the international market was not able to reinvest the earnings because most of them went to the state
 * Mexican crude fell 41.7 dollars a barrel on January 16, 2007
 * Mexico has been carelessly using up its oil with no thought for the future
 * biggest oill producing area is the Cantarell oilfield in the Gulf of Mexico-where oil has been extracted since 1979
 * from 2000-2006 production levels increased 320, 000 barrels per day up to 3.3 million barrels per day
 * this was achieved by over-exploiting already active wells
 * for every 100 barrels of oil extracted in Mexico only 26 barrels go into the strategic reserves
 * although Mexico is an oil producer they import 35 per cent of the different fuels it uses
 * oil reserves are expected to run out in a few years because of the rate at which they use their oil
 * tax revenue amount to less than 13 per cent of their GDP
 * PEMEX is bankrupt not because it is an inefficient company but because the state has squeezed out its resources

Impact on our future
It is said that their is only enough oil to last us until 2040. But geologists and analyst don't believe that at all. The reason that someone is saying that their will not be enough oil until 2040is because of the rate that we are using it today.

According to Don Paul, there are about 2 trillion barrels of oil left. As humans, we have used so far about 1.1 trillion. In one day people worldwide use about 3 billion. By 2012, we will have used about 1.5 trillion barrels of oil.

Kanellos, Micheal. "Peak oil projections from Chevron's CTO" __News Blog.__ 2007. 19 Dec 2007. 

Reese, Richard. "Oil and the Future" __Oil and the Future__. 1997. 3 December 2007. 