Okay no more multi-tasking when posting.... 1.) You are correct - I grabbed the global consumption number not U.S. when calculating the 1% savings. Even then I screwed up because a 1% reduction in refined oil equals a 2% reduction in crude consumption. 2.) I shifted to the refined products market to make a point but didn't explain that at all to you the reader - The price leverage I was talking about comes from an ethanol study done by Iowa State University which showed that the addition of Ethanol to the fuel supply (totaling about 4%) saved motorists approximately 10-15% at the pump (rough numbers) - which (if you believe the study) means that the marginal 4% of fuel supply is getting a 2-3x leverage in change in price given current supply and demand. Were oil prices to flow directly through to gas prices I suppose that would be a bit more useful an argument... It does, however, illustrate how gas prices have begun to reach a point of inelasticity... and that also underscores how oil prices are behaving differently - which could be an indicator of speculative bubble on oil futures (which I believe is true to the tune of about 20-30%) but is likely due to a number of other factors as well.

Your point about conservation is truly the crux of the biscuit - Peak Oil theory is predicated on economic growth being tied to oil consumption - in that scenario consumption can't be curtailed without economic pain - so we either consume or suffer drastic economic (and therfore societal) upheaval. This makes the supply side much more important to the pricing equation - and where declining supply results in ever acclerating prices in a net sum zero game. The problem is that conservation (or to put it differently how efficient the use of oil to drive economic growth is) isn't calculated at all and neither is shifting due to technological change - particularly in those net importing countries that are the biggest consumers of energy. As a result, worldwide consumption is overestimated because small changes demand behavior in those large importers have large impacts on export markets (where ELM models show no impact whatsoever). And producer country consumption growth (a key component for dwindling exports) is grossly overestimated because they are primarily based on models of industrialized nations such as the U.K. where industrial and economic growth wasn't tied to oil production because of the availability of inexpensive imports. In countries where oil is the primary source of national income that same pattern is unlikely to emerge (because a.) growth in those countries IS tied to oil and 2.) without other industries to support a middle class there is only so much oil the ruling class can use (e.g., a 4% per capita consuption growth rate for Saudi Arabia is silly). This doesn't mean that we won't run out of oil - just that the Peak Oil model has way overstated the impact of dwidling supply in its pricing model mostly by underestimating flexibility in the demand model to react to higher prices to curtail consumption...

Maybe Europe has some natural advantage over the U.S. due to its geography and mass transit infrastructure (to the degree it does, however, its way overblown as a contributing factor) - there is still the fact that Switzerland and most of Western Europe is nearly twice as efficient per GDP dollar than the U.S. So lowering our consumption by more than 2.5% a year without impact on standard of living are well within reach. And since the U.S. imports 50% of its oil - that 2.5% reduction in total consumption of oil is the equivilent of 5% of our imports - we represent 25% of the world import market so that 5% is 1.2% of the world export market - or equal to the rate of projected decline in world exports. How it gets done will be a combination of a number of things - but the biggest, and perhaps the biggest reason that Europe is more efficient than the U.S. today is automobile efficiency. Expect the gas mileage of the U.S. auto fleet to change dramatically over the next few years - even without CAFE standards - it did in the 70s when small cars were crap - today many small efficient cars are quite nice - and there is the whole diesel issue as well which can further change the fuel efficiency of the U.S. fleet (which if bio-diesel starts to work its way into the fuel chain in any significant amount will also make a huge impact on import demand). Second, and this is admittedly a bit warm and fuzzy reason, but the shock to our wallets has opened our eyes to the way that we can make small changes to conserve - and even more importantly that there are options for indivuduals to shift the recurring costs of energy consuption to a capital cost through existing renewable technologies. For instance, in our family we used to segregate our cars by driver - mine and hers - I drove mine, she drove hers - even if it was just her despite the fact that she has a big minivan that gets lousy mileage ... Now we use the smaller car first and the larger car when needed... My car is 30% more efficient so if that shift in driving habits is 10% of our miles driven (which is very conservative) we just lowered our annual fuel consumption by 3% without making any sacrifice at all... It has also gotten people thinking about renewables... At current fuel prices the payback on solar and wind power to support a plug in hybrid would be somewhere around 5 years - less when combined with a system for the household electric. If we get feed-in tarrifs in CA that number goes down further... If gas goes down to $2.00 again and my payback goes up to 10 years - so what - I am free of the two recurring expenses I hate the most - PG&E and the gas station... and I still have 10+ years of free "fuel" left on those systems...