http://blogs.wsj.com/environmentalcapital/2008/06/26/oil-shock-analyst-predicts-7-gas-mass-exodus-of-us-cars/#comment-17093
June 26, 2008, 11:12 am
Oil Shock: Analyst Predicts $7 Gas, “Mass Exodus” of U.S. Cars
Posted by Keith Johnson
Oil at $135? That was just the opening skirmish in the “peak oil” wars. The latest smart money? $200 oil in 2010, with gasoline at $7 a gallon. And that is going to turn Americans into car-shunning Europeans once and for all—poor Americans, at least.
That’s the latest gloomy forecast from Jeff Rubin at Canadian brokerage CIBC World Markets, who just a few months ago figured $200 oil would be a thing of the distant future—like 2012.
GasChart_art_200_20080626110012.jpg
Attention-grabber (CIBC)
Mr. Rubin laughs off recent attempts to take the steam out of global oil markets. Saudi production promises of 200,000 barrels a day doesn’t dent the 4 million barrel-per-day decline from aging fields every year, for starters. And it will just be “gobbled up” by increasing domestic consumption in Saudi Arabia, like other oil-producing countries that subsidize fuel.
So what about China’s flirtation with market reality by unwinding some fuel subsidies? No luck in curbing demand or prices, either. Not only does China’s recent move translate into $3.25 a gallon gas—still a steal, relatively speaking—it’s given fresh legs to beleaguered Chinese refiners who’ve been operating in the red, thanks to Chinese price controls. So now they are producing even more gasoline and fueling even more cars than they were before. The upshot?
Over the next four years, we are likely to witness the greatest mass exodus of vehicles off America’s highways in history. By 2012, there should be some 10 million fewer vehicles on American roadways than there are today—a decline that dwarfs all previous adjustments including those during the two OPEC oil shocks.
And who will be parking their cars? The 57 million American households that have both cars and access to something resembling public transit. Gasoline at $7 begins to approach prices Europeans have paid for years, meaning that chunk of America “will start to act more and more like Europeans,” Mr. Rubin says. Not soccer moms in a minivan—soccer fans, searching for tokens:
Our analysis suggests that about half of the number of cars coming off the road in the next four years will be from low income households who have access to public transit. At their current driving habits, filling up the tank will have risen from about 7% of their income to 20%, an increase that will see many start taking the bus.
Gas prices already appear to be reshaping suburbia. But what Mr. Rubin is predicting is a far bigger shock to the American system. Europe has had decades to develop a society based on expensive energy. What will happen if Americans suddenly are forced to shoulder European-style energy prices — but without the European-style society to cope with them?
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Contrary to what US Energy Secretary Samuel Bodman says I don’t think supply and demand are really causing the problem. There are to many other factors at play here. Too many middle men skimming profits. Too much manipulation of supplies and inventories. The price of oil nearly doubled and gas went up a third in just one year and yet figures are coming out that indicate we are using less gas, not more, probably because people are cutting back on gas. That clearly means supply and demand have nothing to do with these prices. Speculation is driving prices !!! Lawmakers blame loopholes in commodities trading like the Swaps loophole or Enron Loophole. Whatever you want to call it, It’s a get rich quick scheme and not much less obvious than a pyramid scheme. There is no way supply is causing this gas crisis. I put the full blame on speculators and commodities traders and I am sick of the smoke and mirrors. The meeting in Saudi Arabia hasn’t achieved any substantial results from what I can see. The price of oil is still going up. There must be something else that’s driving prices up and I think I know what it is. Although il appears to be a good hedge against inflation, a lower dollar and a low oil supply, in reality nothing could be farther from the truth. The main thing driving inflation is oil prices and as inflation goes higher investors buy more oil driving inflation higher again. Some experts predict this will trigger the worldwide recession. This will result in lower gas consumption and it will free up more gas supplies.. I am no expert but even I can see the writing on the wall. Investors are going to loose their shirts on oil. We may be looking at another ENRON. Hedge funds will topple leaving old age pensioners with nothing. The government won’t be able to bail them out this time because the cost would be far to great. The CFTC and ICE will be too slow to react to the cracks forming in commodities trading so the govenment will finally step in. By that time it will probably be too late. www.nbtv.ca
Comment by Ted McKeown - June 26, 2008 at 11:24 am
Ted, The US is not the only country that uses oil. You must account for the whole world when determining demand and supply. The US has for many years lived beyond its means; several developing countries beneath theirs. Also, productivity in the developing countries has been increasing rapidly. It is not surprising that, say, China can more competitively bid against us for oil and other commodities.
Comment by Joe - June 26, 2008 at 11:55 am
Any idea how much excess capacity remains in Chinese refineries? One can’t expect China to suddenly drop all subsidies at once. At some point the Chinese refineries will get close to capacity and (if the Chinese government continues to ease subsidies, big if) the consumption increase will slightly level off.
Comment by Chris - June 26, 2008 at 11:55 am
Hate to rain on your parade, but it is more supply/demand than speculation. The USA is no longer the driving force on oil & gasoline pricing. We are truly in a global economy (the world is flat). For every one driver in the US that cuts back there are 20 in India, China, Brazil & Russia that are waiting to take their place as the middle classes in these countries develop. Americans must wake up and realize that the USA does not control the global economy like it has in the past. A bitter pill to swallow but it is the truth. As you can see, I am in the energy business and personally agree that high oil prices are not good for the USA or the energy industry. However, higher taxes are not the answer. More domestic drilling and alternative energy are the only things that will save us. We should have addressed this 25 years ago but Congress was not brave enough to do it. Even though it will take 5-10 years to see significant domestic increase with government encouragement, it is better late than never. Have to start sometime.
Comment by G R Talley - June 26, 2008 at 12:03 pm
Unfortunately, the US is not the only country that uses oil. China and India are rapidly expanding their use of oil which in turn caused the price of oil to increase. The fact that it has happened so recently is due to the fact that crude oil production has remained, for the most part, flat for the past few years. That indicates either a huge conspiracy by all of the oil producing countries (doubtful) or problems in producing more (likely).
Comment by Jerry L Wilkens - June 26, 2008 at 12:06 pm
China dropped their subsidies on oil last week and raised the price on gas and deisel fuel. Demand is already dropping. Don’t worry. I already did my homework
Comment by Ted - June 26, 2008 at 12:08 pm
Personally I don’t see how we can tell if demand has dropped in China in one week after subsidies were changed. We can’t measure that quickly in the US much less a foreign country. Demand may drop in China but we need time to tell. Right now all we have is speculation that it will drop. Even if China demand slows down it is still a huge market to supply. In running an independent energy company, I make a living by staying on top of oil and natural gas prices. While speculation has increased volatility in the oil market it is not the driving force in the overall price of oil. Supply is still the main factor, devaluation of the dollar ranks high and supply disruption in unstable countries is next.
Comment by G R Talley - June 26, 2008 at 12:16 pm
Mr. Talley,
Back in March U.S. crack spreads were negative.
What does that say about demand for distillates vs. crude?
A friend who trades with Sinopec said that in May they were losing money on every bbl. and had told the Chinese government that they would have to cut back on diesel production to contain the losses.
.
Back in August I pointed out that it took .105 oz. of gold to buy a bbl. of WTI.
Today it takes .15125 oz.
What does this 44% increase (as priced in GOLD) say about the weak dollar theory?
Comment by Climateer - June 26, 2008 at 12:53 pm
Whether or not the world has hit or is within a few years of peak oil is subject to some debate. The fact that the United States has hit a peak in consumption is not subject to debate. Consumption IS falling; not only due to high prices, but because the supply of EXPORTED oil is falling. Exported oil fell from (roughly) 46.3 million barrels a day in 2005 to 44.8 million barrels a day in 2007. (EIA data) I would suggest that its really the EXPORTED oil that sets the world oil price, more than total oil produced. Many Exporting countries subsidize their own oil internally.
Buckle up America! It’s gonna be an interesting ride.
Comment by BillR - June 26, 2008 at 12:53 pm
Scenario: After long summer of high gas prices, economy on the brink, Congress okays drilling everywhere, suggests making biodiesel out of reindeer - Iraq announces great strides in improving oil production & security. They predict pumping XX million barrels a day to meet growing world demand in the near future. Dorky Dems who opposed saving the fine Iraqi people look like dimwits. Oil speculators are routed, driven from the Temples. Gas prices come down, GOP wins by a landslide. George and Dick ride off into the sunset. I love a happy ending.
Comment by Fiction Writer - June 26, 2008 at 1:13 pm
I have never heard the President (or anyone else in the gov.) encourage Americans to USE LESS gasoline (or diesel or whatever).
I remember a sign in the railroad station in 1945: “Is this trip necessary?”
Comment by J P Brazel - June 26, 2008 at 1:29 pm
Climateer:
Crack spreads have taken a big hit that is why refining stocks are falling. As to China, they have been subsidizing their gasoline and still are that is why their gasoline price is still much less than the rest of the world.
As to the devaluation of the dollar, plot the value of the dollar versus crude oil for the last year or two and I think you will see a very nice reverse correlation.
Comment by G R Talley - June 26, 2008 at 2:35 pm
All this talk about America beginning to feel more like Europe with high fuel prices consistently fail to mention the reason Europe endured such high energy prices in the past, when America was on cruise control in terms of low fuel prices, and fuel was relatively cheap to produce. It is largely due to the high tax leveraged on fuel in the EU block. This tax revenue is used to build, maintain and promote the HIGHLY efficeint European rail network, amoung other social benfits mostly absent from the American strata of government. While I am not a indulgent fan of exorbitant tax to fund innovation and it definately contradicts our proud and proven history of capatilist development in the private sector in the land of red, white and blue; where is the investment from the vibrant private sector in highly efficient and effective mass transportation connecting our urban centers? I have a hard time believing we will have major improvements in the near term and therfore will be relagated to our highway bound vehicles to keep up an assembalance of our current way of life in most areas. I doubt most regional goverments can produce the nimble operations needed to make up for lost time, but it seems the demand will quickly become great enough to make it a lucrative investment for private firms in a rapidly shrinking time horizon. Even areas with efficient, yet limited, mass transit (New England for example) are already pushing their current systems to the maximum.
Comment by brian backstrom - June 26, 2008 at 3:17 pm
We are simply seeing importers bidding for declining net oil exports. Our model, recent case histories and current data suggest that we are going to continue to see an accelerating net export decline rate.
For more info, do a Google Search for:
Net Oil Exports + Jeffrey Brown.
Comment by Jeffrey J. Brown - June 26, 2008 at 3:21 pm
peak oil. peak oil. peak oil.
now will you listen?
http://theoildrum.com
Comment by Quincy Walters - June 26, 2008 at 3:31 pm
Mr. Talley,
Thanks.
I interpreted the declining (and negative, if only for one day, I think it was 3-17) crack spread to mean that there was less demand for distillates than for crude, which didn’t make sense.
.
I have a fancy chartmaker that can plot any price in any currency. It was the fact that crude was up, not just against fiat currencies but gold that caught my eye.
That 44% is very close to the number I come up with when I try to figure the impact of the index investors on the run-up from $80, i.e. about 25 bucks.
As Frankenstein would say regarding futures: “Speculators good, Investors bad”.
I know some NYMEX types who won’t take the other side of an index long’s order anymore, the index longs just keep bidding and bidding…
Comment by Climateer - June 26, 2008 at 4:11 pm
So let’s play it all out according to these assumptions. $7 a barrel translates to 10 million fewer cars on the road which leads to more people taking mass transit and moving to urban areas, where transit makes sense. I see the affect of this migration being extremely contractionary for consumer spending and therefore the overall US economy.
Today it’s easy to fill your car up with unneeded consumer products when out running errands. What will happen when people start taking the bus and train? I would think pure logistics of carrying your typical Costco load onto a bus will limit daily spending to pure necessities. Even the smaller urban space you would now be forced to live in will constrict what you fill it with, right? What about diminished tourism as a result of high oil? Won’t that decrease overall consumption?
My point is that higher oil can only shrink our consumption and therefore our GDP…at least for the near term. This contraction WILL have a ripple affect on the rest of the world. Unlike Europe (which he tries to draw parallels with) we are the world’s consumers.
A bad assumption would be to assume that China will continue to grow and develop at the same rate (and thus demand the same amount of oil) despite a giant decrease in what they produce—spurred of course by a decrease in American consumption. This decrease in Chinese oil demand will invariably ease oil prices or at the very minimum find equilibrium.
Comment by Joe Ballard - June 26, 2008 at 4:26 pm
We are witnessing the end of the American Republic.
Comment by Ted Harwood - June 26, 2008 at 4:32 pm
Re: Price Equilibrium, “Worst Case”
The problem is that we are probably decades away from the net oil export decline stabilizing, and as noted above, I expect to see the decline rate continue to accelerate. Demand has to fall, as declining net oil exports are allocated to the high bidders.
Comment by Jeffrey J. Brown - June 26, 2008 at 4:58 pm
Hey Keith, any thoughts on this as a solution to our oil problems.
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A $3300 dollar retrofit to turn any car into a plugin hybrid.
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It’d be perhaps the quickest/cheapest way to shift Americans to driving primarily on electricity.
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http://orangehues.com/blog/2008/05/our-inefficient-cars-poulsen-hybrid.html
Comment by David Ahlport - June 26, 2008 at 5:29 pm
And for those who quibble about “Supply and Demand not explaining everything”.
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You can blame a large part of that on the “Demand” for something different entirely.
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US Dollars.
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Thanks due to Deficit Spending, the Trade Deficit, and Irresponsible Market Regulation of issues like the Mortgage/Loan Crisis, the value of the US dollar is plunging.
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As the value of the US dollar goes down, the perceived cost of a barrel of oil rises.
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That’s where that large “unaccounted” price increase for us Americans is coming from.
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http://seekingalpha.com/article/72651-oil-would-be-65-if-the-dollar-had-stayed-strong-agi
Comment by David Ahlport - June 26, 2008 at 5:42 pm
And no, I don’t want to hear any whining about electricity supply, and “What if it comes from coal.
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Since those excuses aren’t substantiated by the facts.
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There’s plenty of electricity.
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And even if we exclusively used the dirtiest coal plants to power our cars, it would still have less emissions than a conventional car using oil.
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http://greyfalcon.net/plugins7
Comment by David Ahlport - June 26, 2008 at 5:47 pm
We will be just fine - it is only a blip, oil prices will come down.
I love the optimism based on macro economic hand waving. What I find amazing is how OPEC and other oil producing countries and the speculators never thought of this ingenious plot to inflate the price of oil a decade ago - hmm…. It just can’t be that supply is not meeting demand - just can’t be!
Eric
blog.pickuppal.com
Comment by Eric Dewhirst - June 26, 2008 at 6:26 pm
Those singletons making less than 30K or a two car family of 4 taking home less than 60K per year are going to be in a world of pooh @ $7.00 per gal. Others aren’t giving up the wheels just yet but when they do, they’ll simply switch to more efficient (foreign) models because they won’t tolerate public transportation given the madness that comes with it. Wall Street had better get its crap in order and in quick freaking fashion or they stand to lose BIG!! We continue to forget that without that 70% (the consumer); we have NOTHING!!! I was filling up the other day when a guy on the opposite isle from started screaming. I was startled as I looked over to ask if he was ok. He then yelled; “someone call the police, I’m watching a robbery in progress”. He stopped the pump at $20.00 (5 gallons) stating he simply can’t take it anymore. Funny thing is, he was driving a Honda.
Comment by Heath - June 26, 2008 at 6:37 pm
Although it will hurt many folks in the near term, having high gasoline prices will force both local, state, and federal governments to provide better and more efficient public transportation. It will also accelerate alternatives such as electric cars. This will be positive in the long term. I am personally very happy that gasoline prices are as high as they are, and hope that they continue to rise to about $10/gallon. Society will eventually adapt, and we’ll all be better off for it.
Comment by shadow - June 26, 2008 at 7:02 pm
As the ostriches of the media and the political classes continue to choose to ignore the realities of finite oil in a finite world, there is now a growing ” cargo cult ” phenomena, where media and politicos are claiming, in effect, ” if ONLY WE DID THIS”,or ” if ONLY WE DID THAT” , we could solve the problem, independent of the realities of global supplies (shrinking ), and global population (booming ), and global use and demand ( burgeoning ).
In short, your media witch doctor cannot solve this problem, by constantly running stories that ” talk down ” oil, by limiting media interviews only to oil bears, and by claiming ” national trends ” of ” mass” exodus from the suburbs, and ” mass ”
rejection of anything with an internal combustion engine.
@@@@@@@@@@@@@@@@@@@@@@@
For more information about the
religious movements known as the cargo cults, see the
wikipedia article.
http://en.wikipedia.org/wiki/Cargo_cult
@@@@@@@@@@@@@@@@@@@@@@@@
Comment by ENERGY -the new Cargo Cult - June 26, 2008 at 8:25 pm
The environmentalists share a lot of blame here … they’ve blocked offshore drilling for years, are preventing the building of coal plants, want to heavily tax carbon emissions, want to tax oil companies … its very unfortunate that there is so much mis-information out there. All of these initiatives, which are spearheaded by liberals and democrats INCREASE our cost of energy and our energy dependance. Let’s face it — solar power is not economical, hybrids require electricity supply which will soon be in shortage in this country, taxing the oil companies will increase the cost curve, biofuels are further fueling inflation, carbon regulation will increase electric bills by 30% or more … Obama, if elected, thinks the easy solution is to raise tax rates on the top earners to their highest levels since the Carter days … if that happens recession will become depression … We need to wake up and realize that we are the Saudia Arabia of coal and we need to start expanding our coal infrastructure and coal power capacity … coal is cheap, plentiful, and practical … you simply cannot have your cake and eat it too here … being the greenest environmentalists and having cheap and available energy are in direct contradiction with one another.
Comment by Dan - June 26, 2008 at 11:47 pm
Before the U.S. decided to attack Iraq, Iraq produced 4 million barrels a day, Now at its peak it’s producing 2 million barrels a day. Hey Mr. Rubin, you think maybe that’s why the 200 k the Saudis are putting up dosn’t make a dent. Our government is responsible for knocking off the world market 2 MILLION BARRRELS of supply a day and no pundit on any network says anything about that. Are you kidding me? That is your smoking gun. Their is a world price for oil. So when the policy that drives the military to create an imbalance in supply which excarebates inflation because of the high price oil, and add to that a state of protracted war, which is what’s going on in Iraq and Afghnistan that also fuels inflation, SOMEBODY MUST SAY SOMETHING ABOUT THAT. So in essence the first domino was flicked over by our current administration. With of course the amubulance chasing stylE speculators (code name for the big investment banks that have their hands tied to every administration) chomping at the bit to get theirs. So that is where you are America and the world. Thank you and see you when this adminstration is done screwing up domestic and foreign policy.
Comment by Bill - June 27, 2008 at 12:13 am
re: Dan
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Coal can’t be both cheap and clean at the same time.
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Coal in China is about $1000/kW
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Coal in US/DevelopedWorld is atleast $3500/kW.
greyfalcon.net/costlycoal
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Chuck in Carbon Sequestration on Coal, and you’re looking at $6500/kW atleast.
greyfalcon.net/costlycoal2
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Solar Thermal with Thermal Heat Storage on the other hand is already at $3900/kW
energy.ca.gov/2007_energypolicy/documents/2007-06-12_workshop/presentations/2007-06-12_NAVIGANT_CONSULTING.PDF
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And it’s falling rapidly.
Infact, I don’t see how it’s possible for coal to even try to keep pace with solarthermal.
greyfalcon.net/energy.png
greyfalcon.net/solarthermal
gristmill.grist.org/story/2008/6/20/143633/019
gristmill.grist.org/story/2008/6/10/03431/0012
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Consider that just a third of the land currently used for Corn Ethanol would be plenty to power the entire United States by solar thermal. Day and night.
_________________________
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Nuclear? $8000/kW and climbing. Nuclear ain’t cheap.
nirs.org/images/fplturkeypointcostchart.jpg
Comment by David Ahlport - June 27, 2008 at 1:05 am
Fossil fuel depletion.
There`s definitely a change in the air. I think quite a few people are getting tired of playing “The emperor`s new clothes”.
Comment by James - June 27, 2008 at 3:01 am
Here’s a link to an excellent report on Alaska oil.
http://www.theworldlink.com/articles/2006/08/09/news/news90080906.txt
Comment by Al - June 27, 2008 at 10:35 am
The cure seems to be simple: ride your bike. Not only will this not use gas, it’ll burn off that fat that we’re using good oil to haul around. Get up a half-hour earlier and ride your bike. Quit eating out-of-season produce that uses oil to transport from other parts of the world.
But, more than anything, limit institutions from buying oil contracts when they have no intention of taking delivery. Forbid institutions who own all the oil contracts from announcing price expectations. It’s really easy to buy all the contracts with practically zero margin then say that the price will climb out of control. Of course it will! You own all the contracts!
Plug-in cars aren’t the answer. The answer is to walk or bike to work. If you can’t then get a job closer to home. I used to drive my Jeep 52 miles per day for work. I estimated that I’d save $5,000 per year by working closer to home. Guess what? I found a job really close to home.
Imagine the gas savings if we all lost 10-20 pounds. If 1 million Americans could lose that weight we could save the gas we’re currently wasting to haul 10 to 20 million pounds of manblubber.
Comment by robb - June 27, 2008 at 11:28 am
Nobody is talking about the effect it is having on our economy. Thousands of jobs are going away every day, specially in the automotive business. Gas goes to $7 per gallon, we won’t have to worry about buying gas, because nobody will be able to. This happened way to fast for our economy and I can’t believe we are that stupid ! Old saying “pigs get fat, hogs get slaughtered”
Well guys, their are alot of hogs out there right now !! Its going to be a very bumpy ride for the next couple of years, unless something is done NOW !!
Comment by dan - June 27, 2008 at 11:59 am
I am sick of all you false intellectual types pointing out that our gas is now at European prices. We are a different and larger country. Entire Countries in Europe are smaller than some states.
Comment by Rathburn - June 27, 2008 at 12:32 pm
I’m with robb as far as riding bikes and eating smarter (and line drying). I rode my bike to work this morning. Our leaders, from Reagan pulling the solar panels off the white house in 1980 to the present administration declaring that the american way of life is “non-negotiable” have fallen down on the job of preparing the country for peak oil.
As far as oil contracts, I’m trying to figure out why so-called conservatives are suddenly against market forces.
This is just to sort it out for myself: Oil is pumped out of the ground. The producer needs a guaranteed buyer.
When refineries are ready to buy, they need a guaranteed seller. The market keeps both parties happy and supplied with money and oil. In exchange, the market can profit (or lose) from the differences in prices at the times in takes and releases its positions. The alternative, removing the middle-men, leads to much wilder price and supply fluctuations as wells and refineries go on and off line depending on the specific needs of the parties they have contracts with. In other words, a one to one relationship between producer and consumer is less efficient.
Right now, the market absorbs these variations quite well, and manages to reflect global oil supply and demand.
So, when the price takes off like this, it is a reflection of global conditions, not the actions of specific, imaginary “speculators”
Comment by Tim - June 27, 2008 at 12:40 pm
We’re all experts. Lots of talk about the auto industry, gas prices at the pump and so on. Many sides to this story for sure. Who is right? It may be some time before we know.
I’d just like to add a few things to think about. While its great the we as individuals are thinking about biking, walking and in general driving less, think about the airlines and the shippers. Does there really need to be 17 departures a day from Chicago to Miami? Could that be reduced to just one or two, flights? Perhaps even some destinations only get one flight per week. What about having all those items delivered to your door? Mail ordered, internet ordered, as seen on tv ordered, items that need to be fedex, overnighted or airmailed.
Not to mention that the air traffic alone in ONE DAY in the U.S. puts out as much Carbon Emmissions, in ONE DAY, as all the ground transportation, in the U.S., in One Year! So, while you think you are being a do-gooder by not driving to work, or the park, or your kids recital, it may feel good inside, but has very, very, very, little effect.
Good day!
Comment by Richard Cunningham - June 27, 2008 at 12:59 pm
The problem is that our implementation of the free market is fundamentally flawed, we believe that infinite economic growth is possible. Yet, without infinite resources, such growth is not possible.
This translates to a “readjustment” of the American way of life. If the rest of the world aspires to a middle class life style with a car, a house, a good job, and yearly vacations, we will not be able to pump oil fast enough to satisfy everyone. The reason why the US has been able to offer its citizens such a high standard of living is because for most of the past century, most of the oil was consumed by Western Europe and the U.S., the rest of the world was not sufficiently developed to consume oil in any significant amount.
To make matters worse, the U.S. Oil production peaked in the 1970’s, the U.S. Used to produce more oil than any other country on earth, until 1970. After 1970 production began to fall and kept falling no matter how much technology we used or how much we explored for oil.
I could go on and on, but I believe the following links can explain things much better than I can, doing a little research can greatly improve our understanding of the problem:
Population and Energy: (great introduction to the problem)
globalpublicmedia.com/lectures/461
Peak Oil: (A factor in rising oil prices)
en.wikipedia.org/wiki/Peak_oil
World Energy Resources and Consumption:
en.wikipedia.org/wiki/World_energy_resources_and_consumption
Petroleum:(Great introduction to oil exploration, drilling techniques, and consumption)
en.wikipedia.org/wiki/Petroleum
Good luck
Comment by John Gonzo - June 27, 2008 at 1:21 pm
In talking about demand, also remember inflation in India runs at about 25%. Prices are going up every week. Most Indians can’t afford to buy a car, and if they have one, it’s cheaper to use a bike or train and save their money to afford food.
Look, Saudi Arabia agreed to increase production by 2%. Did prices go down? No, they went up. All this talk about worldwide demand is a smokescreen so speculators can continue driving up prices.
Comment by jw - June 27, 2008 at 1:31 pm
1. Peak oil seems to be real, after reading peak oil sites last year. Looking at their claims, it would seem to be real. I figured if gas went to $4 a gallon peak was probably real because $3 a gallon gas or less is competitive with Ethynol, but corn ethynol is more affordable if gas is over $3 a gallon. So if it’s a conspiracy of oil barons, why would they slit their own throat.
2. We lost the trade war to China. Using them for wage slaves making them most favored nation trading status (thanks to Congress and Clinton), 60,000 factories moving to China, everything closing down here. We owe China 1.8 trillion. They have a eco-nuke button called T-bills and can collapse our society at will. We are living on the good will of the life support system that travels to the communist party headquarters in China.
3. As demand for oil in the world increases and China and India rise, US will fall. We cannot rise GNP without energy. Dreams of energy from crops are just that. 300 million acres to replace gasoline with crops and we have only 200 million for food, so that’s a dream.
4. You cannot keep a car and be sustainable. Big Three don’t realize it. Most posters don’t realize it. My previous Civic had 110 Hp but probably used 70hp on average. That’s the equivalent to 700 slaves pulling me around 1/10th hp per person. My Prius has a 41 hp motor electric and a 59 hp engine, for 110 total. My Prius is a gas hog as well even at 45mpg average.
5. What we can have an sustain. Look at a wind generator 10kw is a big one for a home. Meets about half the needs of a home, they are to big also. My Prius has a 50kw motor and that’s not even half the power needed to run the vehicle. My Prius weights 3000 lbs. It’s too big.
6. Sustainable, is more like 300 to 500lbs three seater. It’s fully electric. It has a 5hp to 20 hp electric motor. 5hp is much more sustainable. It’s an enclosed three wheel, half motorcycle half velomobile. The electrical power would drive it to 45 miles an hour. Have enough batteries for 100 mile range. You can almost charge it with a wind generator or the grid.
7. Ford, GM and Chrysler and the rest of the mainstream press and most normal people don’t get it. Peak oil changes everything and “forever”.
8. The alternate theory, oil manipulation. Having tons of oil in Alaska, having enough Natural Gas in Alaska to heat USA for 100 years, etc. Are all interesting and good, but if this is conspiracy it’s even worse than peak oil, because we have the resources but morons from both left and right wings profit from stopping it or for their own agendas.
9. The big three don’t get it and can’t react quick enough. I figured $5 or $6 a gallon would come in two years, and that might cause the Big 3 to crash. Now people are talking about $5 a gallon this year and they will go under this year. I can’t even calculate or plan for that fast a decline. It’s probably game over.
10. People think it’s only about oil. No it’s about the entire industrial production. Buying crap from Walmart and having traitors/traders in Congress and their friends make quick money and sell the USA down the tubes. The free trade with slave states and low wages and quick profit economically ruined this country and we are just starting to see the results.
11. It’s like a big ship going under, only all the ships are going down and there’s only a few small islands for way to many people. Probably means resource wars are coming.
12. You think Bible preachers with end time prophesy talk about battles of Armegeddon are bad, read some peak oil sites. It looks worse from an energy perspective.
10.
Comment by Greg K - June 27, 2008 at 2:10 pm
Dan your comment saying “solar power is not economical” is not entirely accurate. Solar power is free. Life as we know it DEPENDS on solar power whether or not you want to acknowledge it.
What allows us to live? Food. Where does our food come from? Plants and animals. Where do the animals get food from? The plants or other animals that eat plants. Where do the plants get food? The sun, dead animals, microbes and other plants. If we could only choose 3 things we need to live they would be food, water and air.
The problem is that we have formed this system where instead of utilizing solar power for the basic necessity of food (the earth is pretty efficient with all of natural systems put together), we are using non-renewable finite sources derived from oil. Instead of letting plants go through their normal cycles and utilizing plants, microbes and animals to fertilize plants, we are supplementing them with Nitrogen fertilizers. These fertilizers are created using oil energy. Instead of having animals that wander around and eat the plants that grew in the sun and fertilize the fields with their waste, we shove them into buildings and pens where we must deliver food to them. The animal food is also transported and processed (using more oil energy). It takes more than one calorie of oil to produce 1 calorie of corn when you factor in fertilizers and oil-powered farm equipment! Since cows, chickens and pigs eat a bunch of this food and produce not just meat, but also bones, skin, fur and waste, we aren’t even turning all of those plant calories into edible animal calories. This chain continues on with losses and inefficiencies of oil usage distributed along the way.
This same process and idea is mirrored over and over again in our lives from things like transportation to lighting in our homes. We have ended up at a system that is so inefficient, very dependent on oil and yet so integrated that it will take either a lot of effort or many things happening out of our control for us to change our ways. If we can manage to untangle ourselves from this situation, it won’t matter that oil is $2 or $45 a gallon. It will hurt in the short term because we don’t really know how to undo what we’ve done. We see this extravagant life we’ve generated for ourselves based on the assumption that these oil inefficients don’t matter because there are infinite resources to pull from. The problem is that there aren’t infinite oil resources. This is where the nature-solar system has the upper hand. When the commercials on tv are still advertising the latest and greatest items for purchase as if nothing is breaking down, it is really easy to dig your head into the sand and say something other than your own actions, thoughts and desires need to be adjusted. It’s hard because advertisers do a very good job of selling you what they have to offer - not what you need or really want.
Comment by M - June 27, 2008 at 2:16 pm
Revision note: Ideal vehicle at low end would be enclosed 500 lb 3 wheeler (not three seater) with 5hp or less electric motor. It would have peak hp of 4 times motor rating for up to 10 or 15 seconds for bursts to cruise speed. (As all motors do). Motors are 80% efficient vs. Gasoline engines being usually under 40%.
A higher end three wheeled vehicle (one or two person) would weigh 700 or 800lbs. It would be an inline vehicle and have up to 20hp electric drive. Why 45mph target speed? We only need highway speed, not freeway speed.
Would these be safe? Well not as safe as cars, but cars won’t be on the road anyway.
And keep in mind for every hp you have in the electric drive you need energy 650 watt hours to drive it. So if you have a 5kw motor, a 10kw wind generator might produce enough power at home to drive it for 4 hours a day. So it’s “sustainable to have a vehicle more like a bike and an electric motor on it. Electricity and the grid are better because:
1. The government will keep the grid up the longest.
2. Electricity can do a number of things.
Also we need to make houses more efficient. Meaning smaller (core) living quarters (like one room) and the rest are unheated. Superinsulate. USe stuff like earth berming and straw bale.
This is the future as we become more “Sustainable” energy. But with that a drop in energy use, means a drop in production. Steal and concrete take a lot of energy. And with that all GNP declines and with that we find we cannot afford our social debts and repaying them. So say goodbye to social promises like Social Security, high priced government jobs go as well. And retirement. It’s probably not going to be there, because much of the economy is not sustainable as we become more like India. Meanwhile the Indians and Chinese become “more like us” as they try to emulate unsustainable practices. As they rise they hit the same problem. As our economy fails it causes the rest of the world to decline. There will be ripple effect depressions happening. Not just “recessions”. Probably resource wars as well.
This is all the certain future if early “peak oil” theorists are correct. It’s held out of the press and denied as a “oil price fixing” conspiracy. But all the pieces of all the negative stories keep coming back to energy.
Competition, energy use and economic sustainability are three legs of modern society. With the decline of one the others start to fall and tip. You cannot keep economically sustainable with energy going down. Dreamers hope for a miracle invention or some huge oil field.
We MUST HAVE Iraqi oil to slow the fall of oil. That’s why we are there. There is a counter thought that Bush wanted to keep Iraqi oil off the market to keep prices up. Without the war it’s possible that Iraq might have flooded the market with oil and kept peak oil at bay. There’s also the arguement I hear from many that we are swimming in oil, it’s created by tectonic plate movement and often capped and governments are controlled by conspiracies to keep the price up. That’s all great and good as a counter argument, but the results are the same, we run out of energy.
Comment by Greg K - June 27, 2008 at 2:27 pm
This is all a plan to get citizens to live in urban bubbles. The Bilderberger Conference just met last week. It’s easy to control 200 million people if they all live in controlled urban centers. Haven’t you seen the increase in “mixed-used” shopping/residential/manufacturing centers? I’m sick of these people telling us to ride a bike or fight with the homeless for a seat on the bus. Where is the government going to get all that tax money when 10 Million cars are no longer driving around? They will increase the fees/taxes/tolls on the people who still drive. The majority of US metro public transportation system are a joke. And the way developers and zoning boards in this country laid out our cities is ridiculous. No one can live near their work any more. Go ahead and ride a bike to work, give your government a reason to tax bike chains at %50. I can see the $4000 bike now (and it’s not a Titus or Lightspeed).
Comment by Jack - June 27, 2008 at 2:33 pm
Solar power may not be efficient because of economy of scale needed to produce it. There’s a limit to the amount of energy and raw materials you can use to create wafers. The price and energy and pollution of fresh water to create them may make them not a viable solution.
Solar power is a harvesting of power, which is okay. But if it takes as much energy and price to create the cells as we get back in value, it’s a zero sum gain and not an energy solution. Calculations vary on that. If there’s little gain from solar cells to electric, then it’s just a rich mans battery.
The second thing about solar cells and even wind generators is, they only “harvest” energy that is out there. This is getting a flow of energy, but they don’t “store the energy” as a battery would without batteries. We are an ON DEMAND society and want power when we want it at the flick of a switch, so you have to have a storage location for energy.
Hydrogen is to inefficient as a storage media, it is less efficient than batteries. Batteries require nickel, or other rare earth metals. Some great electric motors require rare earth magnets, and 90% of the rare earth magnetic material is in China.
Even if you could afford to create all the photovoltiac cells and had the energy to create them, you’d still have to store and transmit the power. It’s a tough thing to scale and figure out. The small solution doesn’t scale very well.
If it takes so much fresh water to create them for say 50 million people, that 100 or 200 million others don’t have drinking water is it worth it?
The most obvious answer is you can create much more energy and savings by NOT USING IT in the first place. That means conserving and designing our homes and lives to use less. For example by not driving to lunch and packing it, I can save as much gas in a year as buying a hybrid car. If I live in a one room house that is heated and cooled with other rooms designed to be heated by solar and superinsulated. In other words keep the stuff in the other rooms and use that as weather permits. I save a ton of energy. But we don’t think this way. We think we can plaster some solar cells on the roof of our car and drive around like we currently do and chow down hamburgers from a local drive through. We are in for a real energy wake up call.
Biggest problem with cutting back on energy is it cuts back on GNP and that’s economic power. That means we go down economically and militarily. The strong are usually more high tech and waste more energy to suppress the weak and efficient.
American indians were in tents, pretty efficient. Camel riders in Arabia didn’t use any oil at all with their camels and tents. But “stronger” nations with engines, rail and higher technology took over those places and use the oil resources to drive our modern society. So the highly efficient and closer to the earth person is controlled by the “high tech” more efficient warrior nation. This is simply not sustainable over long periods of time, because we have to many people. I used to be depressed in thinking about this, now I figure it just a part of the natural world that we are seeing unfold before us.
Comment by Greg K - June 27, 2008 at 2:39 pm
HEY, WAS IT OVER WHEN THE GERMANS BOMBED PEARL HARBOR? HELL NO!!!
Comment by Tribeca Ted - June 27, 2008 at 2:42 pm
Greg K must be from Austin or Seattle, maybe San Fran? Stop smoking so much weed, you burned a whole in your ozone, Greg.
Comment by Jack - June 27, 2008 at 2:51 pm
It’s not that these guys are all conspiring to control you. They already do control you. Government has fees for everything and taxes and plans for all the social safety nets that strain. You are already taxed up to 50 % or more with “representation”.
It’s not a conspiracy, it’s just everyone is money grubbing and stupid. They can hardly plan for a simple thing, don’t look for government to save you on this one. The stuff you hear from many high up is a laugh and mostly “green” pr stuff. There’s a lot of conspiracies going on, no doubt. Probably at least one per billionare or per rich person trying to get ahead. Treat that all as a given and noise. It’s nothing compared to peak oil.
Everyone just want’s to bark and blame the others or their favorite villian. The dems blame Bush and Big oil. The Republicans blame environmentalists. It’s just a big blame game, but it’s all ignoring the real nature of the problem. It’s like fighting for deck chairs on the Titanic.
Griping won’t help. And everyone else wants to yell and scream about having to have their toys. I showed a guy at lunch my Prius. He said I have to have an F150 to pull all my toys. I looked at him and thought about a little kid throwing a tantrum saying “I have to have my toys mammy, I have to have my toys”. I have an F150 also, I leave it parked. It’s worthless or almost that. You need to leave the thinking of “darn I’m paying $250 a month for gas” and “who can I blame”. I used to think Al Gore was a joke when he said the Internal combustion engine was the worst thing ever invented. It wasn’t the worst, it was something great and is something great. The problem is, it’s to good, and it was used to much. It’s like having a fire and you all want more and more of it, so you burn down all the farms with it and wonder who can we blame.
As an American, I have to look in the mirror and say, we have to blame ourselves. Our love to excel, which is natural, our competitive nature which is natural. Everyone does it, but we didn’t show constraint. Now the greens, communists, One worlders, vegitarians, and technocrats can all argue and offer a weird solution. But the fact remains, we are running out of energy, that is usable “stored” energy, be it fossil fuel based or “ambiotic oil” based. And that energy as it decreases will cause ripple depressions.
Big oil states we have used 1 trillion barrels in the past 130 years. And will use that much in the next 30. The next 30. Where will it be used? In emerging nations, India and China. We’ll use our share also. Peak Oil therists say we have about 1 trillion left. We reached peak. Big oil says we have 2 trillion left. We’re almost at peak. It’s just a 30 year argument. Better to get ready sooner rather than later.
Some Ambiotic oil theorists say oil is renewable. They dream of it being produced by the earth and plate movement. But that has to come from some carbon source to be pressed into hydrocarbons or natural gas which distills into a hydrocarbon mass of oil. In either case, there’s a limited amount of material in the earth.
Why waste it?
Comment by Greg K - June 27, 2008 at 2:53 pm
I see none of you have suggested the most logical solution: mass transit. And if used in large numbers and new technology (like maglev, check out american maglev’s website) and the government only subsidized some of the labor costs (due to the high wages demanded by unions) it would be profitable and companies would see great incentive to expand mass transit infrastructure. Also, the government needs to deregulate zoning codes wich allows for only low density development. This will allow a large enough people to live around the transit to make it effective, and would allow for lower densities outside the zone which mass transit serves.
Its pretty simple. Our country flourished before we had cars, and rebuilding infrastructure to serve our cities is a simple and extremely beneficial solution to not just high gas prices, but the overall economy in general. Its pretty simple fundamentals of city development that nobody seems to understand.
Comment by Jackson Strong - June 27, 2008 at 2:55 pm
I guess, once again, people are dancing around the issue.
Hello, my name is The United States of America, and I’m an addict.
Years of cheap fuel, and lack of foresight, has left of with an automobile infrastructure. That infrastructure works fine when fuel is inexpensive. Now, Fuel will continue to be a problem for us, and the rest of the world. We have a couple of choices.
1, wait and see. I’m not particularly fond of this one. We’ll continue to build suburbs, that are automobile based, and watch them turn into the slums of the future. Our Lincoln Navigator will make a nice planter in our driveway, with 36 months left on the loan.
2. Go electric. what a nice thought. now we’ve just moved the energy problem to coal, and continue to make terrible suburban places. Oh, also, be ready to get new batteries every three to five years, at $5k a pop. The batteries will make fine additions to our landfills. Perhaps your Escalade will be a driveway ornament, because you still owe money on that also.
3. face reality, and change the American way of life. build cities that are car-free, use rail, for all inter-city transportation, and commuter rail for getting between neighborhoods. This actually works, with technology that exists now. With all the money that has disappeared into Iraq, we could have replaced the rail infrastructure a few times over. This is a no brainer issue. We can’t coddle the auto industry, the product that they’re selling has no real place in our future. The byproduct of this change, would be pleasant and livable cities, and preserved farmland. Suburbia needs to be erased, and returned to either productive farmland, or natural areas.
Now, to the people that read this. What would you do, having the money back in your pocket that has been lost on your automobile? the money for insurance, fuel, car payments, maintenance? perhaps go to a shorter workweek? take an eight week vacation a year (like they do in europe)? Turn your garage into something really useful? Perhaps you could find a place in town, that is nice, and comfortable.
Walk, Bicycle, Ride the rails, those are the only real hope for America to continue to be an excellent place to live, and fight for.
Comment by Denn - June 27, 2008 at 2:59 pm
Jack,
Get ready for a surprise. I’m a Reagan Republican from the Midwest. I live in Michigan. I’m not a vegitarian, don’t smoke, attended churches. Believe in Creation, not evolution. Vote pro life and I pro NRA.
I just have a brain and the ability to surf the web and analyze. I post often from a peak oil perspective, but realize it may be wrong. If it’s wrong, no big harm, but if there’s a 20 or 30% of it being correct, then your the one who needs to smoke some dope, because your obviously out of touch with reality.
The reality is:
1. Major foreclosures and big 3 going under or stories of that happening.
2. Continous trade deficit with China and others.
3. We’re in Iraq, and Bush said in one radio address I heard when we were going in, “don’t worry we won’t drop the price of oil when we take over Iraq”. I thought immediately maybe we aren’t going to war for cheap oil, but maybe for expensive oil.
4. Iraq and other countries were propped up by our own government and the CIA. Rumsfield was Sadams handler when we loved him.
5. Other Europeon countries would not go to war with Iraq because of favors, for example Germany was bailed out by major sales of autos to Iraq who ordered them in the past.
6. Yes Oil companies are profiting, but their profit is not producing more oil that is anywhere near what the world needs.
7. China may be buying extra oil to stockpile and driving the price up as well.
8. China can buy any resource or dump T-bills to crash our economy at will.
9. Biggest US debtor, is Social Security fund $4 trillion dollars. I get a note from them every year saying the fund may grow broke. Well where’s the $4 trillion the Congress and government borrowed from us. Twice the Chinese debt? If it’s broke how could that be? Don’t worry they will tax you in the future to pay you back.
10. Abortion kill the kids attitude when they are not useful, will probably work well as we deal with the aged. This society being corrupt and money based. Most people don’t care much about others. Will just retire the Social Security debt rather than repay it. We even see weird posts by young brain dead kids about “Baby boomers needing to die” to make room for them and others. That’s the solution we’ll probably see.
12. We see from past history Americas response to need. We create a cause and say we must go to war to free the country. We needed to free them to get a trade for their resources.
13. Some say we are in Iraq for oil, others for terrorism. I say both. We are there because oil is there and we must have it and those who deny that right are automatically labelled terrorists.
14. In a chess game the first piece in a location doesn’t always win the game. We are in Iraq now. China needs oil and must expand. That’s motive to move to the middle east. Hence Peak Oil folds conveniently into “end time” theories of China going into the Middle East.
15. Competitive nature of man is a fact of nature, not a statement based on a left wing belief system. That’s both nature and a problem. I’m not saying it’s something that can be “solved” by communism or any other systematic solution. But it’s a fact that drives our greed and the greed and drive of any group.
Am I off base or are you just whining. Read it and judge for yourself.
Comment by Greg K - June 27, 2008 at 3:09 pm
Let’s assume speculators are causing the rise in oil prices. If the US acts to regulate speculators in some fashion, I don’t understand why speculators in the U.K., in Russia, in India, etc. can’t just keep running things up by their speculation. Is there some world-wide plan proposed to regulate all speculation? Maybe I’m missing something. (I don’t think speculation is the main cause, by the way).
Comment by Ed K. - June 27, 2008 at 3:22 pm
Is Phil Gramm’s Enron Loophole causing this problem?
http://www.youtube.com/watch?v=RAPhfDRts60
Comment by Ann - June 27, 2008 at 3:23 pm
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