Graph of the Day: The Cost of Production Of Oil


Estimates of the cost of production for oil production form various locations Image Credit: Oil Drum

Whenever we speak of Peak Oil, the optimists point out that the technology for finding replacements will turn up as the prices rise; look at what has happened with the oil sands and with shale gas. But as this graph shows, each alternative just gets more expensive. A fascinating article by David Murphy in The Oil Drum questions the logic that these expensive options prove that peak oil is not a problem. But Peak Oilers have always pointed out that we will never run out of oil, it will just get a lot more expensive. And when it does, it will crush the economy. Murphy writes:

Oil infiltrates almost every facet of an industrial economy, from personal disposable income, to manufacturing, to service sectors. Therefore higher oil prices restrain growth via declining discretionary consumption as individuals allocate more money towards gasoline and home heating, or as the cost of producing a good increases, etc. Chris Nelder described this situation succinctly, writing: "The true import of peak oil, therefore, may not be sustained high prices, but economic shrinkage. Demand will be destroyed long before oil gets to $200 a barrel.

Two years ago I laughed when Michele Bachmann took credit for gasoline getting down to almost two bucks a gallon. She said "We saw gas at $2.04 today. That was my goal, when I started this year I wanted to get gas below two dollars a gallon and we are almost there..."

Of course she doesn't say that she and her government did this by destroying the economy and tipping it into the biggest recession since the Great Depression. With the current obsession with killing rail and any alternative to the automobile, no doubt Michele will be able to take credit for two dollar gas again soon. More at the Oil Drum
More on Peak Oil
The Ultimate Race: Peak Oil vs. Global Warming
Shell CEO Admits Peak Oil Could be Here in 7 Years
Canada's Heartland - Political Peak Oil's First Refuge
How Will Small Businesses Survive Peak Oil?
How Will Supply and Demand Affect Peak Oil?
5 Years From Now Peak Oil Pinch Could Devastate the UK Economy, New Report Warns

Tags: Alternative Energy | Peak Oil