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Old 08-05-08, 05:03 AM   #1
patentcad
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Why won't oil hit $150bbl? Here's why.

http://biz.yahoo.com/ap/080805/oil_prices.html

I signed up last night to have our 11 year old oil boiler replaced with the Ducati of boilers.



In a typical installation, this unit reduces home heating oil consumption by FORTY PERCENT (it ranges from 30-50%, depending on numerous factors).

But here's the fascinating part. The small heating contractor who is doing the work sold 36 of these units in 2007 and was Energy Kinetics' (the company who makes this boiler) largest NY dealer. This year that same small dealer is on track to install ONE HUNDRED TWENTY, or about 4x as many. And every home that gets one uses about 1/3-1/2 as much oil.

We were going to go geothermal, but decided against it for a number of reasons. This boiler is the Phase One in our Greening of Casa Pcad program. We may well add a high efficiency heat pump and/or solar energy options. We're also spray foam insulating the attic to greatly reduce the load on our HVAC equipment.

There is no cure for stupid oil prices quite as effective as stupid oil prices. It also makes me think that every time Toyota sells a Prius, somebody is replacing a car that gets 22 mpg with a car that gets 45 mpg. They're going to sell almost 200,000 of those fuel sippers this year.

Oil Demand Destruction. It's a beautiful thing. All these changes drastically lower carbon footprints too. That's why, in some ways, the best thing that could ever happen to the USA is $150bbl oil. Painful for many, but ultimately it would lead to a faster Greening of America. Of course if you're a fixed income senior freezing to death in the dark in Vermont in February, that's small consolation. But the anecdotal evidence is strong, from Prius sales to System 2000 installations, that Americans aren't waiting around for government assistance. If they have the means, they're going green now.

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Old 08-05-08, 05:12 AM   #2
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The Ducati of boilers. Does that mean it has to be repaired before it can be used for the first time?
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Old 08-05-08, 05:17 AM   #3
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The Ducati of boilers. Does that mean it has to be repaired before it can be used for the first time?
Quite possibly. But unlike Burnham boilers, the System 2000 has a soul.
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Old 08-05-08, 05:19 AM   #4
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Yeah, I hope they keep running the price up until they run themselves out of existence. Another cool thing I've seen is the tankless hot water heater.

http://www.foreverhotwater.com/
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Old 08-05-08, 05:21 AM   #5
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Yeah, I hope they keep running the price up until they run themselves out of existence. Another cool thing I've seen is the tankless hot water heater.
Silly weenie. 'They' aren't running the price up.

WE are running the price up. And now, hopefully, we're driving it back down.

P.S. 'They' will NEVER go out of business in our lifetime. Unless you can figure out a way to run the world on alternative fuels cheaper between now and 2099. Let us know how that works out for you.
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Old 08-05-08, 05:24 AM   #6
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By the way, I did price solar electric systems for my house. If you take away the massive state and federal subsidies I'd say the price is still about 400% too high based on the raw economics to be competitive. So for residential use, it's a LONG way from being ready for prime time. I do hear that solar power is totally viable for commercial applications (industrial and office buildings, etc.). That's a start. Even with the government subsidies solar power is about 200% too high. I'm hoping that it hits pay dirt within 5-10 years for home owners like me.
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Old 08-05-08, 05:24 AM   #7
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Quite possibly. But unlike Burnham boilers, the System 2000 has a soul.
You'd think they'd come up with a more soulful name. Like the Sistema Due Mille or something.
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Old 08-05-08, 05:28 AM   #8
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By the way, I did price solar electric systems for my house. If you take away the massive state and federal subsidies I'd say the price is still about 400% too high based on the raw economics to be competitive. So for residential use, it's a LONG way from being ready for prime time. I do hear that solar power is totally viable for commercial applications (industrial and office buildings, etc.). That's a start. Even with the government subsidies solar power is about 200% too high. I'm hoping that it hits pay dirt within 5-10 years for home owners like me.
I got solar water heating when my electric system broke down last year at my house in Perth. The economics of it were not great then, but most electricity in Perth is generated from natural gas so I think I made the correct decision given that electricity prices will increase more than inflation.
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Old 08-05-08, 05:34 AM   #9
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When I told my pal Don the boiler was called 'System 2000' he almost fell off his bike. He said it sounded like 'Chef of the Future'. I think they named the product back in 1989 or something. It has been around for a long time. Well established, well proven. But until now not so widely adopted. It's an $8,000 system, I think most boiler/hot water systems are half of that. But with today's home heating oil prices it's TOTAL no brainer. I looked at everything from heat pumps to geothermal to solar hot water and electric. All harder to justify on a cost-return basis, even at $4.50/gallon for heating oil and current nose-bleed electric rates. Not this boiler.

They're installing it next week. We will probably invest in other measures to bring that oil consumption down over the next 3-5 years. Started at 1500 gallons annually (we have a 4500 sf house), the attic insulation and this boiler should drop that to <900. Eventually we could get that down to 500-600 or so. But it's not cheap. These improvements are $15K (also adding a mini-split for our basement). Solar hot water and a high efficiency air to air heat pump would cost another $22K or so. But we will eventually be heating our home with about 1/3 the oil we started out with. That's a huge drop. The System 2000 also burns MUCH cleaner, no oil soot on the chimney.

By the way, for all this investment we're making in going green, how much tax incentive is there? None that's easy to access. That's pretty stupid. You'd think they'd be throwing me a $3,000 tax credit. I have to go to a NYSERTA dealer to get an incentive from NY State. Too much of a pain in the ass, the one guy we saw isn't local to us and he's a ahole who doesn't return phone calls. They should make it easier.
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Old 08-05-08, 05:34 AM   #10
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Pcad, you disappoint me. Back to your cage.
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Old 08-05-08, 05:36 AM   #11
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I got solar water heating when my electric system broke down last year at my house in Perth. The economics of it were not great then, but most electricity in Perth is generated from natural gas so I think I made the correct decision given that electricity prices will increase more than inflation.
You can make a far stronger case for solar hot water than solar electric. For example I can add a solar hot water system to my house that will provide most of our hot water for $8,000. But that would only save about 200 gallons of oil annually, which at current prices is about $1,000 per year. Marginal, but close.
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Old 08-05-08, 05:37 AM   #12
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Pcad, you disappoint me. Back to your cage.
But it's not well insulated.
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Old 08-05-08, 05:49 AM   #13
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Sorry, but the number of people in China, India, and wherever planning to buy cars and generally increase their consumption of just about everything more than counteracts the effects of your boiler (nice though it is). Despite localised decreases in oil consumption, the net effect of small cells of demand – village by village, person by person – around the world is increasing overall consumption. I'm expecting well over $150. The decreases we are seeing won't last.
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Old 08-05-08, 05:54 AM   #14
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You can make a far stronger case for solar hot water than solar electric. For example I can add a solar hot water system to my house that will provide most of our hot water for $8,000. But that would only save about 200 gallons of oil annually, which at current prices is about $1,000 per year. Marginal, but close.
$8,000 is a lot. We paid A$3,500 (about US$3,250) and we got $1,000 back from the government. I think we'll save at least A$600 per year on electricity costs, but that's at last year's electricity prices.
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Old 08-05-08, 05:56 AM   #15
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Sorry, but the number of people in China, India, and wherever planning to buy cars and generally increase their consumption of just about everything more than counteracts the effects of your boiler (nice though it is). Despite localised decreases in oil consumption, the net effect of small cells of demand – village by village, person by person – around the world is increasing overall consumption. I'm expecting well over $150. The decreases we are seeing won't last.
Maybe we'll see a drop in demand when China stops subsidising its petrol.
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Old 08-05-08, 06:03 AM   #16
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Sorry, but the number of people in China, India, and wherever planning to buy cars and generally increase their consumption of just about everything more than counteracts the effects of your boiler (nice though it is). Despite localised decreases in oil consumption, the net effect of small cells of demand – village by village, person by person – around the world is increasing overall consumption. I'm expecting well over $150. The decreases we are seeing won't last.
I disagree. High oil prices slam the US economy, that impacts the emerging markets, and demand growth will be impeded there as well. If oil approaches or passes $150bbl, the ability of those countries to subsidize oil starts getting shakier. There's already buzz about that now @ $120bbl.

It's a self-resolving issue. There's so much friggin oil left on this planet it's stupid. They're saying there's ONE TRILLION bbl of oil in the Rocky Mtn shale. There's just not much CHEAP oil left. Ultimately nobody's running out of oil in our lifetimes. The bigger and far stickier issue does appear to be greenhouse gasses and global warming.
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Old 08-05-08, 06:05 AM   #17
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The Ducati of boilers. Does that mean it has to be repaired before it can be used for the first time?
I thought it was going to be red with a tubular frame.

We're replacing our furnace/hot water this year too.
http://www.wallhungboilers.com/prod_...nsing_380.html
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Old 08-05-08, 06:06 AM   #18
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Was geothermal too expensive, or it just didn't work with your property? That seems to be a big efficiency boost for many people.
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Old 08-05-08, 06:09 AM   #19
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Was geothermal too expensive, or it just didn't work with your property? That seems to be a big efficiency boost for many people.
At the end of the day, too pricey and involved for our retrofit. Worked out to $70K with all the work we needed to go total geothermal. I can get 2/3 of the oil savings and about 70%+ of the energy cost savings by using a more efficient oil boiler, solar hot water and an air to air heat pump, total cost of those improvements will be <$40K.

If I were building a new house, geothermal would be a total no-brainer however.
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Old 08-05-08, 06:16 AM   #20
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I just bought my house this year, and have a fairly modern oil furnace that uses hot water baseboard for heating, and built in tankless hot water heater as well.

why a tanked system for you pcad?
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Old 08-05-08, 07:55 AM   #21
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Silly weenie. 'They' aren't running the price up.

WE are running the price up. And now, hopefully, we're driving it back down.

...
The "demand" in oil futures was more for the pieces of paper than for the oil itself. Speculators did indeed cause a significant portion of the price run-up. Reaction (being more careful consumers) has helped bring things back towards reality. It's still a bit higher than it should be, but I don't think we'll see it fall to any less than $90/BBL.
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Old 08-05-08, 08:00 AM   #22
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Maybe we'll see a drop in demand when China stops subsidising its petrol.
Actually, a reduction in Chinese oil subsidies will have the opposite effect: what happens is that oil is refined and sold at a huge loss by state-owned refiners, which are part of larger state-owned firms. The parent companies are able absorb the loss because they have other profit-making enterprises. Subsequent government subsidies don't actually cover all those losses.

So the state-owned refiners, which refine most of China's oil, try to minimise the amount of oil they refine. If they were able to sell their products at an uncapped price determined by the market, they would increase their production because they'd actually be making money. And again, while some people would cut back their personal consumption, the overall trend would be more demand.


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I disagree. High oil prices slam the US economy, that impacts the emerging markets, and demand growth will be impeded there as well. If oil approaches or passes $150bbl, the ability of those countries to subsidize oil starts getting shakier. There's already buzz about that now @ $120bbl.

It's a self-resolving issue. There's so much friggin oil left on this planet it's stupid. They're saying there's ONE TRILLION bbl of oil in the Rocky Mtn shale. There's just not much CHEAP oil left. Ultimately nobody's running out of oil in our lifetimes. The bigger and far stickier issue does appear to be greenhouse gasses and global warming.
As you say, there's not much cheap oil left... and $150-$200 a barrel doesn't mean we've run out of it. I don't doubt the ability to find new oil, but getting a lot of that oil is only going to be economically viable if the price of a barrel is high enough.

On the topic of emerging markets being impacted by a slammed US economy, this UBS report notes that, at least in China's case, the export sector isn't as big a deal as people make it out to be. Yes, a damaged US economy hurts everyone, but perhaps not as much as everyone would seem to think.
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Old 08-05-08, 08:21 AM   #23
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Actually, a reduction in Chinese oil subsidies will have the opposite effect: what happens is that oil is refined and sold at a huge loss by state-owned refiners, which are part of larger state-owned firms. The parent companies are able absorb the loss because they have other profit-making enterprises. Subsequent government subsidies don't actually cover all those losses.

So the state-owned refiners, which refine most of China's oil, try to minimise the amount of oil they refine. If they were able to sell their products at an uncapped price determined by the market, they would increase their production because they'd actually be making money. And again, while some people would cut back their personal consumption, the overall trend would be more demand.
So, in effect, you are saying that as the price consumers pay for petrol increases so will their demand?

I am assuming that if the Chinese government is not providing enough petrol there must be a blackmarket that sells petrol at a higher price.
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Old 08-05-08, 08:25 AM   #24
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No, he's saying that the supply of gasoline (and any other subsidized oil-derived products) will increase to satiate demand.

By the way, as long as we're heavily dependent on plastics, we're not going away from our use of oil anytime soon even if we stop using it for fuel. (Not as big a use currently as energy, but just as important a use for oil.)
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Old 08-05-08, 08:29 AM   #25
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why a tanked system for you pcad?
The integral System 2000 boiler water heater is probably more efficient than a stand alone tankless unit. This system is rather amazing. Google Energy Kinetics and read their claims. They are 100% accurate.
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