Comments on: The World’s Biggest Machine is Breaking Down

By: Steve Z

Steve Z — Fri, 02 Feb 2007 01:03:51 +0000

Thanks Jason G. I didn’t realise the pedantry Kirchoff stuff I did at tech was related.

By: JimFive

JimFive — Wed, 31 Jan 2007 16:17:43 +0000

RE: Why should Price reflect EROEI?

Actually, it shouldn’t (necessarily). Price is a reflection of demand, not cost. While Jason’s statement about how competition keeps the price closer to cost is true, it does not follow that price reflects cost. Price reflects the equilibrium point of maximum profit given current supply and demand. If that equilibrium point is below the cost point then the good should not be produced. Aside from that, price and cost are unrelated. While producers would like to price their product at some markup over cost, the actual price is determined by what consumers are willing to pay and those consumers neither know nor care what the production costs are.

JimFive

By: Jason Godesky

Jason Godesky — Wed, 31 Jan 2007 14:35:07 +0000

Well, Ramsey’s theorem is a graph problem, so it is related, but it would be more accurate to say that Ramsey’s theorem is related to graphs. See “Graph theory“

By: Steve Z

Steve Z — Wed, 31 Jan 2007 09:38:16 +0000

The discusion about ‘graphs’ & ‘nodes’ - is this related to Ramsay Numbers?

By: Jason Godesky

Jason Godesky — Thu, 18 Jan 2007 23:14:47 +0000

Actually, the article provided did explain the profits.

Because the wells they are producing from today were drilled in past years, where they used $15-25 per barrel as their estimated selling price for the oil. Thus when the market got tight, they have cheap oil going at a higher price. Why? Simple—demand is high.

Now this higher priced oil is filtering back to them in the form of higher priced goods, so the profits decline slowly over time as higher priced energy enters the economic mill. But right now, they are making a lot of money.

So, the record profits oil companies enjoyed in 2005 were, in fact, precisely because money is such a good proxy of energy flow in our society.

As for my “unwillingness to accept consppiracy as more than just theory,” you’re absolutely right. I demand evidence, and won’t settle for mere paranoia. That’s been a big problem around here lately, from this thread, to “abiotic oil,” the so-called “9/11 Truth Movement” and even global warming skeptics, there’s far too many commenters of late with plenty of paranoia, but have little interest in looking up the facts.

By: Anonymous

Anonymous — Thu, 18 Jan 2007 22:34:44 +0000

the article does not deny massive profits. ceos and lobbyist recieve huge salaries and corruption exposed every day and you are expecting someone to believe they have “level playing field” motives?
your patronizing still does not address the massive profit, reported by oil companies, and the legeslation designed to maximize it.
your pale effort to hide an unwillingness to accept consppiracy as more than just theory is enough for me to end this futile attempt at progressive thinking.
obviously i expect too much

By: Jason Godesky

Jason Godesky — Thu, 18 Jan 2007 22:18:57 +0000

I thought you might be heading towards that old canard. It’s a very sloppy analysis. See The Oil Drum’s “Record Oil Company Profits and High Gas Prices: A Connection?” that debunks this silly conspiracy theory.

By: Anonymous

Anonymous — Thu, 18 Jan 2007 21:53:53 +0000

all this counterpoint about oil and market fairness is only relevant to “The World’s Biggest Machine is Breaking Down” in an atttempt to understand the reasons why we find ourselves in such a state and propose options that are currently available or in development but are undervalued because of the warped dynamics you argue: that fair market is fair.

By: Anonymous

Anonymous — Thu, 18 Jan 2007 21:44:29 +0000

profit margins? so you are saying that 8.4 billion in profits is a troublesome amount? these figures are certainly large enough to tempt individuals to tilt the playing field for their own ends.
http://money.cnn.com/2006/04/27/news/companies/exxon/index.htm
this article shows the ridiculous expectations rampant in big energy.

http://usgovinfo.about.com/library/weekly/aa011402a.htm
i think your scale is in need of reevaluation. these profits are massive by any reconning!

By: Jason Godesky

Jason Godesky — Thu, 18 Jan 2007 18:14:40 +0000

energy is one of the “extremely rare senoarios” you mention, an exeption due to the unfair market monopolies granted to a few.

No, it is not. As mentioned in passing, energy companies do not normally have massive profit margins above their operating costs.