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284 comments on A State of Emergency
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284 comments on A State of Emergency
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There was a recent chart (maybe on TOD but I don't have the reference to hand) which showed that oil consumption in the oil producers themselves plus China, India etc now slightly exceeded OECD consumption. Extensive fuel subsidies are in place in these countries although India and China are trying to reduce them.
On this basis we can conclude that the oil producers are pretty well immune to recession and that their internal oil consumption will carry on rising. China etc could experience recession although OECD nations will still buy some clothing, electronic goods etc. A recession in China might mean their adding just 8m vehicles pa to the roads vs 10m pa as at present...but oil consumption would still rise.
It would therefore take a disproportionate recession in OECD nations to substantially reduce global oil demand. In any event as far as OECD nations are concerned $150 oil with full employment or $80 oil with 10% unemployed (due to oil price super-spike leading to recession) still means that at least 10% are priced out of the oil market.
According to BP Statistical Review 2008, OECD coutries in 2007 consumed about 48 Mb/d out of a total global consumption of 85 Mb/d.
During the recession in the early 80's OECD countries reduced their oil consumption with about 15 % through 3-4 years.
It would not suprise me to see the USA cut oil consumption by 15-25% over the next 5 years (3-5 million bpd). And it wouldn't suprise me to see China, India and OPEC take up all that slack.
That may seem unrealistic - but I'm expecting a LOT of economic pain, and if people hurt bad enough they will change.
The question is how much demand destruction will be due to rising prices, and how much due to a depressed economy.
If the pound (or the dollar) fall, these two factors may blend together. Very high prices in the local currency, but not so much of a rise in Euros or Yuan.
So the demand destruction gets localised to the Anglo countries.
Of course as Euan implies this can become a feedback loop. Weak currency leads to high local prices, hits economy harder, causes currency to fall further.
This is how we "deal with" peak exports, hey WT?
As soon as we are on the downside of the Peak Oil curve( 2008 to 2010), global demand will always exceed production, and so there will be no demand destruction. Currently demand is higher than supply, so we are there already.
This also means that no matter what the USA does to conserve oil, the rate of depletion will continue at the same rate -- unless we can get ourselves and the other 3/4ths of the global demand to conserve. This is not very likely.
So can use the oil that we can buy for risk management, or we can use it to build highways for job creation, or solar and wind, but without oil neither of those has a future. But, this is the direction the USA will take.
Without meaning to be rude, you do not seem to distinguish between a statement and an argument.
You state: 'global demand will always exceed production, and so there will be no demand destruction'
If so, why?
What would be the effect of, for instance, a run on the US currency so that it became effectively worthless - would this not reduce demand?
You also do not distinguish terms tightly enough even in your blanket statements: demand technically always matched supply, it does not exceed it or fall short of it.
The question is: at what price do they balance?
If the price were lower than today following major recession then the statement you make would not be true.
U.S. demand can virtually collapse, and depletion will remain much the same. The U.S. is 1/4th the demand. As supply decreases, demand is progressively higher by comparison.
I'm not sure you understand what "demand destruction" means.
It does not mean "demand falls faster than supply". It means "price dampens demand". Indeed, demand destruction can occur even when demand is increasing - if 2% demand growth is expected and only 1% growth occurs due to high prices, that "missing" 1% is due to demand destruction.
Given that, demand destruction has already been happening for several years, particularly among the rich (and oil-prolifigate) nations; OECD demand is the same as it was in 2003 (by EIA numbers).
So?
Reduced US demand means reduced US money going overseas to pay for imported oil means lower burden on US citizens means less hardship. Import prices will be high (if other nations also conserve) or higher (if they don't), but in either case the US will unilaterally benefit from conservation through the simple expedient of having to pay less.
You keep claiming that; I'm not sure if you realize that that doesn't make it true.
Conversely, it doesn't make it false either!