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56 comments on Has OECD oil consumption peaked?
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56 comments on Has OECD oil consumption peaked?
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It doesn't become "unaffordable". It becomes "less attractive". As in "I'd like to go to the grocery store, but that can wait until I go to the hardware store too" or "I'll pick up a whole week's worth of groceries, so I don't have to make two trips this week." Or more pointedly - "I can afford this $20,000 sports car, but I can also afford this $35,000 hybrid which gets better gas mileage. With the price of gas, I guess I'll go with the hybrid".
They _can_ buy more oil, but they _choose_ not to. It is always about tradeoffs. The fact that we choose not to pay more is a sign of strength, not a sign of weakness.
This is interesting.
Would you care to elaborate a little more about this?
The theory appears to be that people in the OECD burn a lot more oil for luxury and discretionary uses (large cars, pleasure trips, long commutes, convenient vs. efficient shopping trips, etc.) than do people in developing countries, and that luxury/discretionary spending is more sensitive to price than business/necessity-related spending. Based on that, we should not be surprised to see higher price elasticity in the OECD than in developing countries.
Essentially, "rich vs. poor" is being outweighed by "luxury vs. necessity". It's apparently been more worth paying a higher oil price for a Chinese factory to move its products to market than for a Jersey soccer mom to leave the engine running for AC while she waits for her kids.
"They _can_ buy more oil, but they _choose_ not to. It is always about tradeoffs. The fact that we choose not to pay more is a sign of strength, not a sign of weakness."
I don't know about that. I think the graph of debt levels of the whole US says that we really don't have that flexibility.
You have two guys : one makes $100K with $300K debt, the other guy makes $5K but he has $10K in cash. Now, who has more flexibility when the amount of jobs (which relates to energy) goes down -- who will in the end has more flexibility. Hard to say, but if both guys lose their jobs tomorrow; that guy with $100K job will be begging the guy with $5K job for food.
Until there is some sort of job security (which translates to economic growth which goes against population and energy) and that debt level is paid off -- that guy with $300K debt really doesn't have that much flexibility he thinks. Sure, he can charge $5K on his credit card to go to Florida or not but that doesn't really mean he's in control of his finance.
Yeah, and if the 5K guy loses his job, he will be in more trouble. the 100K probably has assests he can sell/keep if he files bankrupt, will probably get a severance pay equal to much more than the 5Ker's annueal income, and as we have seen, often that 300K debt might never get repayed.
This comparison seems pointless.