A: "Who knows?" and "It doesn't really matter." Much higher gasoline prices that are sustained for a long, long time are now inevitable.
The fundamentals in the oil market are that we are in the beginning stages of peak oil. Supply can no longer keep up with demand, which keeps soaring even in the face of record prices. The U.S. Energy Information Administration has the surprising statistics [PDF]:
Preliminary data indicates that global consumption rose by roughly 500,000 barrels per day (bbl/d) during the first half of 2008 compared with year-earlier levels, as a 1.3-million bbl/d rise in consumption outside of the Organization for Economic Cooperation and Development (OECD) was partially countered by an 800,000 bbl/d drop in U.S. consumption compared with year-earlier levels ... Total world oil consumption is expected to grow by a little over 1 million bbl/d during the second half of 2008 and by almost 1 million bbl/d in 2009 compared with year-earlier levels.
That's right, even after "the largest half-year consumption decline in volume terms in the last 26 years" in this country, global demand continues to grow 1 million bbl/d each year. Why?
Over the next year and a half, lower OECD consumption is expected to be more than offset by continued non-OECD consumption growth, led by China, the Middle East, Latin America, and India.
Yes, speculation overextends every move in market price -- but why shouldn't people speculate that oil prices will be much higher in the future? That seems like a very solid bet. And yes, a rising dollar can temporarily help lower prices -- but we are headed for a $10 trillion cumulative trade deficit just in oil between now and 2020. So which way do you think the dollar is headed long-term?
Ultimately only much, much greater demand destruction can stop the inexorable rise of oil prices. And that obviously requires much higher prices than what we've seen in the first half of this year!
Global consumption is now about 85 million barrels a day. Until the last few years, the United States was the major contributor to rising oil demand. From 1995 to 2004, China's annual imports grew by 2.8 million barrels a day. Ours grew 3.9 million. Since then, growth has come mostly from China, India, the Middle East countries themselves, and other developing countries that subsidize their fuel.
The world just can't deal with oil demand rising one million barrels a day or more year after year. In January, Jeroen van der Veer, chief executive officer of Royal Dutch/Shell, e-mailed his staff that the world will peak in conventional oil and gas within the decade. He wrote: "Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand." It used to be unheard of for oil executives to talk about limits to oil production. Now it happens all the time.
John Hess, chairman of Hess Corp., a global oil and mineral exploration company, said recently, "An oil crisis is coming in the next 10 years. It's not a matter of demand. It's not a matter of supplies. It's both." In October, Christophe de Margerie, CEO of French oil company Total S.A., said that production of even 100 million barrels a day by 2030 will be "difficult." In November, James Mulva, CEO of ConocoPhillips, the third biggest U.S. oil company, told a Wall Street conference: "I don't think we are going to see the supply going over 100 million barrels a day ... Where is all that going to come from?"
In the short-term, I suppose it is possible that we can go back to $3 gasoline, although that would probably require a deep global recession, and prices would only stay low for the extent of the downturn.
But the far more important point is that it is now simply too late to adopt policies that can prevent much higher oil prices, as high as $300 a barrel in 10 years, if you believe oilman T. Boone Pickens. Why?
Replacing oil in the transportation sector requires strong government action two decades before a peak because of the time needed to replace vehicles and fuel infrastructure. That was the conclusion of a major study [PDF]funded by the Department of Energy in 2005 -- yes, the Bush DOE -- on Peaking of World Oil Production. The report notes:
The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.
If we start an aggressive move soon to end our addiction to oil, to shift to highly fuel-efficient vehicles and plug-in hybrids, we can perhaps spare our children from the worst impacts of peak oil (and, of course, global warming). But that require a far more progressive President than we have had for the last eight years.
This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.
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Comments
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justlou Posted 8:35 am
21 Aug 2008
We are not only not going to spare our children the worst impacts of peak oil but we old farts are going to feel the reckoning in our lifetimes.
A progressive president won't have a chance unless the people are ready for a major change. I am not sure a majority is ready or will have the where with all to do it.
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Delay And Deny Posted 10:29 am
21 Aug 2008
I just came across this fabulous map...it shows the EXISTING hydrogen infrastructure in the US.
I think it's quite beautiful in the abstract myself:
http://www.h2andyou.org/pdf/nightLights.pdf
We simply need to build the "last miles" to bring the hydrogen direct to the pumps.
Then, on the back end, begin plugging in the Nocera process, wind to hydrogen and solar to hydrogen generators and voila -- a New World!
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Tasermons Partner Posted 2:37 pm
21 Aug 2008
Kinda like how inflation changed $0.39 cent stores into $0.99 cent stores.
Even if inflation suddenly went reverse and we could have 39 cent stores again, 99 cent stores would still probably reign supreme.
And jabailo, ya do realize that the vast majority of facilities on that map have nothin' to do with energy production from hydrogen, correct? And the ones that are mostly for non-vehicular energy? And the very few that are for vehicular energy are almost exclusively for either test labs or for privately operated test fleets, not for thr public, correct?
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amazingdrx Posted 3:07 pm
21 Aug 2008
If only Europe and the US did that? And if the rest of the world demand stabilized?
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Tasermons Partner Posted 3:22 pm
21 Aug 2008
jabailo, why create a middle man? Why not just use wind and solar directly for our energy?
Wouldn't there be additional energy lost in the process of sloar/wind to hydrogen to electric energy conversion compared to just a wolar/wind direct to electric energy conversion?
Doesn't seem very efficient.
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ngoddard Posted 6:04 pm
21 Aug 2008
The longer we wait, the higher the oil prices are going. Since it takes oil to build all that new non-oil infrastructure like the replacement of the vehicle fleet with non-oil vehicles, the longer we wait the more expensive it is going to get to transition. Which means, essentially, that living standards are going to go down one way or another to pay for it. Pay now, or pay much more later.
Unless, perhaps, we get moving right away, or, perhaps, there is some technical breakthrough that gets us more oil-equivalent on a global scale within years. Neither very likely!
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scatter Posted 10:17 pm
21 Aug 2008
http://encarta.msn.com/media_701509077/the_national_power ...
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Fort Worthology Posted 12:03 am
22 Aug 2008
That's a dodge. We need to be talking about a lot more than that. Transit, for one. More importantly than anything else, though, we should be talking about building livable, walkable towns and neighborhoods as we did pre-WWII. Traditional urban development requires no heroic new fuel technologies or radical inventions and would do wonders for freeing us not only from oil, but from having to be dependent on a wheeled box we put any fuel in.
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Sam Wells Posted 2:17 am
22 Aug 2008
There are two other key players, one being that Big Oil no longer commands a majority of the supply and production of oil. The majors only control about 20 percent of the worldwide stocks and the nationals control the rest, meaning that geo-politics is an increasing cause of volatility. And now you know why the US-based majors want to further develop some offshore fields.
Then you have a pesky economic downturn that started with funked US housing financing and has now spread to global markets such as China. Yes, as US consumers buy less products overseas, that means less energy demand for offshore manufacturing and shipping.
But game theory explains things so simply - that people make irrational decisions about the market in a psychologically "rational" method. And remember, the house always balances with winners and losers and takes a cut down the middle. Why do you think the casinos hate the PHD heuristic modelers worse than the card counters? Because a sucker is born every minute!
-sammie
Onward through the fog
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RandyPark Posted 2:30 am
22 Aug 2008
The thing with peak oil is the "peak." That means that even if the U.S. and Europe decreased 5% per year, and everyone else was constant (no mean feat) the decline of production would still cause a demand-supply imbalance.
It would be a good start, but it would also mean a 33% decrease after 8 years, and Europe already uses far less than North America.
If you could get this to happen, the big benefit would be delaying the declines so we have more time to find other ways of doing business.
http://www.EnergyPredicament.com
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amazingdrx Posted 3:05 am
22 Aug 2008
Would China and India adopt plugin hybrid technology as they became manufacturers of that technology for western markets?
The economic trends are difficult to analyze with any accuracy.
Could this head off the economic shock of a peak in supply by lowering demand.
It would be a way to cushion the economies that adopt this strategy. But as far as the ones who don't, we could see a huge crash in China and India as fuel prices soar. As well as in regions of the US, mainly the bible belt south, where environmentalism is looked on as a commie conspiracy.
No doubt with the present dip in gas prices, gas guzzlers will start top sell again across southland.
This is why gas rationing might be needed to avert a national and global economic crisis.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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mcronheim Posted 4:51 am
22 Aug 2008
While this is definitely a cause for increased R&D of renewables, regardless of your party / ideological affiliations, it is foremost a call to look within. For worthology mentioned this, though I'm not sure how realistic his noted goals were. The essence of his comment, that we need to focus on our own behavior, is vitally important. As Sam said, power over oil is in the hands of other countries; countries like Iran, Venezuela, and others who are...not too happy.... with the US. This is out of the hands of either presidential candidate, congress, and to a large extent - Big oil. The only person who has the power to reduce your energy bill right now, and forever, is you...
http://autodidacticdropout.wordpress.com/
Matthew Cronheim
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Sam Wells Posted 8:42 am
22 Aug 2008
The ridiculous part is that folks would back a strategy that ONLY concentrates on offshore drilling. The Big Oil majors were backed into that corner and have little room to move, seemingly as if set up for a "checkmate" in a game of chess. If you want to read a typical trail of tears, just Google the offshore rig known as "Thunderhorse."
I love it - Big Oil has been emasculated and no politician can fix it, just like the Big Car makers were literally castrated. Time for these robber-barons to stand aside as a new group of innovators come in with alternative energy sources. You know something is right when people start complaining about "all those darn windmills." -sammie
Onward through the fog
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spaceshaper Posted 8:59 am
22 Aug 2008
The true meaning of life is to plant trees, under whose shade you do not expect to sit.
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Sam Wells Posted 5:33 am
23 Aug 2008
Take that together with the "spayed and neutered airlines." They're going to cut flights and over-fill everything they can starting on Labor Day. Early reports are that many more US travelers are taking short car trips or even using mass transit and buses.
I think I'm on a roll!
Onward through the fog
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Wolverine Posted 9:17 am
23 Aug 2008
Read posts by Stopgreenpath, a few others, and me. Some of us are talking about getting out of cars. It's the only real solution, as cars and their requisite infrastructure (roads, etc.) are very environmentally and ecologically destructive per se. The rest of this is just rearranging deck chairs on the Titanic, so to speak.
The problem is that the vast majority of people, including most who on this site, don't want to give up luxuries like driving and/or have chosen to organize their lives so that driving is necessary in order to maintain their lifestyles. It is those people who we must convince that their lifestyles are killing the planet.
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jarrodondrums1 Posted 1:56 am
04 Sep 2008
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