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238 comments on Countdown to $200 oil: $140 oil and speculation
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238 comments on Countdown to $200 oil: $140 oil and speculation
Comments can no longer be added to this story.
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I'd like to see some probabilities and values in a chart--instead of what appears to be an arbitrary number of 200. For example, if production is declining by 5% a year, then we can expect to pay an extra 25 cents (or what?) over what we are paying now per gallon. Same for the attack on Iran (which may range from zero to 300 percent?).
As for Chinese consumption, you need to maybe lower your estimate a bit. For those who are making enough money to be able to afford a car, they may buy one (but keep the old foot-powered bicycle or electric bicycle), but not necessarily use it that much. When I was living and working in China a couple years ago, the "managers" and higher-ups bought cars (Chinese are very status conscious), but kept them parked most of the time, using the bus for work and the bicycles for errands. The car was a "show off" instrument, rarely used, and when used used to show off, like taking friends to dinner around the corner (but making a big fuss about the car and finding a place to park it, usually right on the sidewalk next to the restaurant). So maybe the Chinese buy cars but not that much gasoline. The same goes for other developing countries where it's far more convenient to walk than drive.
As far as chinese transportation using more oil, a lot of the increase in consumption is for diesel fuel. This is used by the trucking industry (many independant truckers there just like US), along with growth in railroad haulage of containers, coal and minerals. Many routes used for dense RR passenger traffic are electrified, but many heavy RR freight lines are diesel powered. This is based on the opinion of a friend of mine that has been to China several times in recent years.
I have heard that traffic problems are severe in Shanghai and I suppose other large cities. I know that where I live in Thailand there is no recent easing of traffic. To me this implies that even if some do keep their car parked there are still a great many out there driving. While it's hard to say whether Jerome has over or under estimated this I'd say with certainty that 40mpg is an over estimate on typically congestion bound car usage.
The single human being who comes up with a formula to accurately predict price response to each percentage shortfall in petroleum will be a multi-billionaire in short order. Your request is rather odd as no one has yet demonstrated any methodology capable of accurately making such a prediction. The only thing we do know is that there have been price responses to shortfalls in production and that the price responses appear to have varied greatly. In other words, the price response to the first percent of shortfall has not been consistent with the second percent or the third percent.
Your observation about Chinese behavior is identical to US behavior early in the adoption of the automobile. But as time wore on, people used their automobiles for more and more activities. That is already beginning to occur in China and how much higher prices moderate that changeover does not seem to be something we can easily predict. In other words, your anecdote is just an anecdote and is used by you to extrapolate to a guess. Jerome, on the other hand, is observing a statistical trend across a wide body of participants in China.
Buying gas in China is a 3 hour long venture as you go to a gas station and wait in an incredibly long line. I suspect they'll have a short term cure for that during the Olympics, but then return to status quo
It was mentioned a bit ago that China cut some of it's subsidies to gasoline. This was seen as a way to cut demand, but may in fact increase it because they'll have more fuel available to sell.