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13 comments on The Models are Converging: What does it mean for energy?

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TRE on September 21, 2005 - 2:54pm Permalink | Subthread | Comments top
This is all good news and for the best folks.  The doomers run about with their hands clenched (or more likely spend inordinate amounts of time over at peakoil.com) screaming about the end-of-the-world.  When in fact, what has to happen is that DEMAND MUST BUMP UP AGAINST SUPPLY and DEMAND DESTRUCTION AND SHORTAGES MUST START.  It is the path to the future.  Whether a revolution in outer oil-eria, a coup in oil-arabia, or a hurricane in oil-mexicangulf, demand destruction must start and the sooner the better.

The human suffering and blatant incompetence (school roomate for FEMA head) is one thing and must be dealt with.  But if necessary, let hurricanes be the instigating force on American's addiction and excessive use of carbon.

Or as Lieutenant Colonel Bill Kilgore said in Apocalypse Now:

"You smell that? Do you smell that? Battered oil rigs, son. Nothing else in the world smells like that. I love the smell of battered oil rigs in the morning. You know, one time we had a hurricane, for twelve hours. When it was all over I sailed up. We didn't find one of 'em, not one stinkin' oil rig. The smell, you know that oil smell, the whole sea. Smelled like... victory. Someday this unnecessary consumption is going to end..."

Well, it was somthine like that.

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Rick on September 22, 2005 - 2:02am Permalink | Subthread | Parent | Comments top
TRE-
We need demand to fall. But for now, I'd expect only a short-term fall in demand, followed by a later rebound. When you can't buy gas in some stations, and the price is very high in the rest, consumption will drop. But it will also return.

There's a phenomenon known as general adaptation level. If people are surrounded by constant loud noise, or a bad smell, or high gas prices, they react at first, then they get used to it.

If a product has inelastic demand, you can increase the pain quite a lot before demand drops. In Canada, doubling the price of cigarettes overnight via a tax increase caused demand destruction of about 6%.

Goldman Sachs (I think) suggested that demand would not drop until prices go over $4.00 a gallon. louGrinzo thinks $6.00 sustained is the threshold, and I think he's closer to the mark. Much as I'd like to see consumption reined in, I don't see it happening yet.

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13 comments on The Models are Converging: What does it mean for energy?

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