<Tom Tomorrow: A Brief History of Gasoline Consumption in America The Oil Drum DrumBeat: June 4, 2008>
<All that's wrong with 'common wisdom' in one article The Oil Drum: Europe Truth, Lies, Oil and Scotland>

23 comments on The Month of the Psychological Shock (Over Oil) in America?

Comments can no longer be added to this story.

| Show without comments | PDF version

ThatsItImout on June 4, 2008 - 4:41am Permalink | Subthread | Parent | Comments top

Antoinetta III says,
"So I think they realize that their oil will ALWAYS be in demand, and at ever higher prices; naturally they’d want to make the bonanza last as long as possible."

Indeed oil will always be in demand, but how much oil? If we make the assumption that demand can go to 120 million barrels per day (and production can match that) by 2030 as the EIA of the U.S. Department of Energy and the NPC (National Petroleum Council) does, we must be assuming a massive increase in infrastructure in the oil E&P (Exploration and Production), refining and transporting sectors. Who is going to take the risk of footing that bill if they cannot be sure that the demand will indeed be there (remember, we are talking 22 years)? Recall that oil was pushed out of the electric power generation business in barely over a decade. It has been virtually pushed out of the home heating market in barely over that. Oil now has to rely on transportation demand to assure that it has a market, and if it can be pushed out of that market, or reduced to insignificance in the transportation sector, then the builders and investors of the giant infrastructure system built to increase production from 85 million barrels per day to 120 would potentially lose trillions (yes, trillions, using numbers provided by Matthew Simmons and others).

No one knows this better than the Saudi's, who are showing themselves not to be willing to make such a mammoth investment without some type of "demand assurance". They see batteries and plug hybrid technology racing ahead (I know technology is viewed as a joke by most TOD posters but the Saudi's take it seriously, after all, it made them what they are, a world power player), they see carbon limits being discussed and carbon taxes being proposed, and they see continents like Europe essentially declaring a quiet financial war on oil consumption.

In the meantime, the Americans are loathe to pay a bit extra per gallon to help fund the mammoth expenditure needed to raise oil production. All this is premised on the assumption that the oil is out there to produce, but really, it doesn't matter one way or the other if no one is willing to pay to produce it! Peak money long before peak oil...

For reference to Saudi public comments on the demand side issue, see the one key post I have written for TOD,
"A Tale of Two Speeches--OPEC's Demand Side Fear Is Very Real"
http://www.theoildrum.com/node/2978

RC

Comments can no longer be added to this story.
Antoinetta III on June 4, 2008 - 5:40am Permalink | Subthread | Parent | Comments top

RC, I'm going on the assumption that we are at or near peak and that the reason investment in exploration and drilling is low is because it is unlikely there are any large finds left. Certainly no one wants to invest in a bunch of dry holes, in oil that cannot be produced because it does not exist, at least not in any large, easily accessible agglomeration.

And I don't think many people feel that any combination of "renewable" or alternative energies can scale up at a rate fast enough to at least keep up with the ongoing declines in overall production.

So I see the Saudis and the other exporters with declining production continually exporting less and less, but at ever higher prices. This is the first part of Westexas' breakdown, where the exporters will still see increasing income in spite of declining exports. Westexas suggests a point where their exports will decline that the cash flow will also, but I suspect that this will come quite late in the game, if it does at all.

Actually, I suspect that we will blunder along as we have, with oil prices swing up and down, but mostly up, with shortages and crises cropping up more and more frequently and working up the worldwide economic food chain. I can see this continuing for 2-7 years; at some point in this timeframe it will become clear that we are not only post-peak, but a critical mass of the investor/financial world will realize that the 200+ years of more or less continuous economic growth is over, forever. Markets will crash and a worldwide depression would ensue. Oil might go to $5 bucks a barrel, but at that point it won't matter, as $5 then would likely be the equivalent of $500 now. And in seven, or even ten years time, there is nothing that alternative energies, electric cars, hybrids, etc. will be able to do avert any of this.

If the Saudis are afraid of electric cars, battery tech, hybrids, etc., then they are afraid of shadows.

Antoinetta III

Comments can no longer be added to this story.
Daxtatter on June 4, 2008 - 2:57pm Permalink | Subthread | Parent | Comments top

I would have agreed with you even a month or two ago, but I'm starting to believe the effects on aggrigate oil demand shown recently will help us pull through the next 5 or so years until real alternative tech really becomes competitive and available. Truck and SUV sales have been shreaded, the airlines can't seem to lay people off fast enough, vehicle miles are declining even as public transportation ridership is rising tremendously fast, while small cars and particulaherly hybrid sales have exploded. Also developing countries are finally reconsidering their fuel subsidies, which is just as encouraging as US demand destruction.

Comments can no longer be added to this story.

23 comments on The Month of the Psychological Shock (Over Oil) in America?

Comments can no longer be added to this story.

| Show without comments | PDF version