The Globe and Mail reports that the International Energy Agency (IEA) has cut its 2008 forecast on global demand for oil. Don't worry, the IEA says demand will still grow. But not by the aforepredicted 1,233,000 barrels per day (BPD). The new figure: 1,030,000 BPD. The 230k BPD adjustment was attributed to softening demand for oil in the USA (still the world's largest consumer) and world-record oil prices. I wonder if those two factoids are connected… Anyway, the news comes as oil futures hit $126.40 per barrel on Monday. Hedging its oil futures bets, the IEA notes that "sustained weakness in European consumption" and "reassessment of fuel subsidies in countries such as Indonesia may create more downside risks." If their predictions come to bear, it'll be a simple affirmation of market principles. That said, if oil prices go down, the consumer will be the last to see it.
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As gas prices creep higher and higher, no one’s immune. And if oil prices go down, the consumer will be the last to see it.
In a round about way of saying, ” We’re getting screwed/hosed coming or going”
Commencing now the seven sisters Exxon, Chevron, BP, Dutch Shell et al will be dspensing free KY jelly at the pump.
The poor unfortunate suffering oil companies really need all the breaks they can get.
If oil prices go down significantly in the next 3 months, I’ll have a good laugh at the people who are buying futures now (though I don’t know what length of contract is selling at $126.40/barrel).
How come no one wants to say it: Peak Oil. More and more countries are past peak oil production and the those who can increase production can’t do it fast enough to make up for the declines elsewhere.
Peak Oil will have a major impact on the auto industry and drivers everywhere. It may be the most important event of the 21st century. Yet few want to even mention it because its so scary.
Scarier yet is the Export Land Model where exporting countries satisfy their own needs first before doing any exports. Since they have oil wealth they are fast growing. They are exporting less each year because local demand which is often subsidized is growing rapidly. Examples are Saudi Arabia, Venezuela and Iran.
This means importing countries like the U.S. will have to cut back more yet or experience very rapid price rises as the wealthy countries complete for declining available oil supply.
Well, a few things:
1. Simple “speculation” appears to be the main cause of the high crude oil prices. Though, to be true, demand appears to be utterly boundless, so that’s probably the biggest thing (even moreso than any “supply” issue) that may be fueling the speculation.
2. The scariest thing is to look how gasoline prices have generally followed crude oil prices in the past — but crude oil prices have increased MUCH, MUCH HIGHER AND FASTER than gasoline prices have lately. If gasoline prices closely paralleled the rise in crude oil prices, we’d be REALLY screwed. Or perhaps we “will be.” “Soon.”
3. There are lots of alternatives in the face of “peak oil.” At the current crude oil prices, a lot of “more difficult to process” oil sources become feasible. And exploration may have stopped in the US (does anyone REALLY know why?), but it goes on elsewhere. Big finds, like the very deep undersea fields near Brazil, are in the news aplenty these days. And, of course, if we can figure out how to make stuff like ethanol out of stuff we wouldn’t put on our dinner tables, then maybe that’ll become a truly reasonable alternative some day. Especially if we can also figure out how to make it without expending more energy than we can get out of it.
In the end, though, our demand for oil is just insanely limitless, and I doubt we’ll see much relief until and unless we manage to bring that demand down. And that just seems to be utterly, utterly hopeless. Which really just leaves the final question:
At what price for gasoline and diesel fuel does the US economy utterly collapse?
Energy is now expensive.
If you have an issue with getting screwed at the pump, buy some oil company stocks.
Nobody ever fusses when GE or Microsoft make a lot of money. Making money with oil is taboo in the USA though because we should have the right to burn lots of cheap energy in our gas guzzling V6 and V8 cars.
No bitching when somebody charges you a fortune for bottled water though.
thoots: I doubt we’ll see much relief until and unless we manage to bring that demand down. And that just seems to be utterly, utterly hopeless.
http://www.greencarcongress.com/2008/04/california-gaso.html
I especially despise doomer talk.
gsp: If you have an issue with getting screwed at the pump, buy some oil company stocks.
Giving money to oil companies just encourages them to dig more out of the ground. Even they know it is waste at this point; diminishing returns are now frankly obvious. But billions continue to be expended on exploring for less marginal supplies (finding a mere billion barrels of the stuff — two months use in the USA — is now front-page news). They do it only because that is the only thing they know how to do.
(Some especially stupid people in Canada are now burning large quantities of valuable natural gas to shake oil free from tar sands and selling the lot to suckers in the USA. As one guy called it, “converting gold into lead”.)
In my opinion, it would be better spent on battery research, vehicle electrification, rail transport, “last mile” trucking, and generally re-tooling society for the inevitable crunch in easily obtained liquid fuels. Oil and gas should be relegated to its more appropriate feedstock status, and let electricity power civilization.
In short, and above all else, invest in the future you want.
gsp: Nobody ever fusses when GE or Microsoft make[s] a lot of money.
In order for either of those companies to make money from consumers, most of those consumers MUST FIRST get into their gas-guzzling SUV and go to the ritzy mall, using fuel. No one MUST buy electronics, appliances, computers, movie tickets, dildos, golf clubs, diamond rings, or anything else superfluous. But if you do, YOU MUST USE FUEL to get those products TO AND FROM THE STORE. Stop comparing the profits of the oil companies to that of other companies, especially Hollywood (The Movie “Industry”.). You have to use fuel to go and see a movie, too. It’s insane for the oil companies to be gouging us so badly for something most of us need to survive. I couldn’t give less of a shi_ if movie tickets were $250 or if a plasma tv costs $6000. I don’t NEED those things. These oil prices just make no sense to me, speculation or not. In three years of these “hurricane” artificially inflated prices, has ANYONE had to wait in a gas line? Where’s the shortage in these past 3 years? I just don’t understand the logic. No, wait…it’s coming to me now…GREEEEEEEEEEEEED!!!!
That said, that’s why nobody fusses.
Hey gsp,
Give me a break.
When I go to Ralph’s, I counted over 12 different types of bottled water ranging from $.70/gallon to over $4/gallon, a percentage spread of several hundred percent. Or I could just stay home and have a glass of LA’s finest for a few pennies. True consumer choice.
Tell me, what is the spread comparing Exxon, Chevron, Shell, etc. for a gallon of unleaded?
If there’s a big gap, you have a point. But there’s not, and you don’t.
jkross:
YESSSSSSSSSSSSSSS!!! Another good and true point!!!
kevin klutz- you are so right about the greed- the always seem to find excuses- hurricanes, 2 cats fighting near oil finery, diminishing reserves etc. By the way fuel reserves at the current tempo of consumption are estimated for 80 years. natural gas reserves- 400 years. Coal- 400 years. is there oil shortage? I don`t think so! And plasma set can`t cost 6k now, because noone would buy it. Can you avoid buying Fuel? The day you learn how to avoid fuel, the world will learn to decrease prices!
@thoots
1. Simple “speculation” appears to be the main cause of the high crude oil prices.
This is completely wrong. Which Krugman outlines in detail in an op-ed for the NYT. “The Oil Non-Bubble” goes through the specifics of bubble phenomena, and details why what’s happening to oil prices are unrelated to speculation, and directly related to supply/demand.
Really worth reading.
Speculation can only impact on oil prices if it leads to physical hoarding, according to Krugman. (Think the Texas Hunt-brothers and their cornering of the silver market in the 80s).
He also makes an amusing observation:
Traditionally, denunciations of speculators come from the left of the political spectrum. In the case of oil prices, however, the most vociferous proponents of the view that it’s all the speculators’ fault have been conservatives — people whom you wouldn’t normally expect to see warning about the nefarious activities of investment banks and hedge funds.
The explanation of this seeming paradox is that wishful thinking has trumped pro-market ideology.
After all, a realistic view of what’s happened over the past few years suggests that we’re heading into an era of increasingly scarce, costly oil.
http://www.nytimes.com/2008/05/12/opinion/12krugman.html?_r=1&oref=slogin
Peak Oil? Bullshit. There’s enough in the ground right now that we know of for at least 100 years. We’ve only been using vast quantities of the stuff for what, 150 years? Maybe?
Every 20 years we’ve used oil, we’ve found at least another 20 years more of oil. We keep finding more and more – that doesn’t sound like peak oil to me.
Indeed, some geologists are beginning to wonder where the oil is coming from – there’s way too much of it for it to have all come from ancient life.
Will we run out someday? I doubt it. That is to say, there’s a finite supply, but like everything else, humans learn to adapt and evolve. If oil gets way too expensive (which it isn’t yet) we find something else to use, which we are trying to do now. So as we switch to the to-be-determined new fuel source, we will use less oil, so there’s going to be enough for a very long time – longer than our lives, longer than our children’s lives, hell, I bet we’ll still be using oil to some extent by the year 2500.
lprocter1982, there is plenty of evidence that so-called “peak oil” is either upon us, or just around the corner. Despite the incredibly high price, no one — no one — can increase production to meet demand, let alone exceed it.
http://www.evworld.com/article.cfm?storyid=1436
Krugman’s little rant ignores this reality, as well as the spool up time for production is almost always much longer than ramp up in price. Combine that with the fact that for oil the increases will have very small effects on demand (“price elasticity”) due to a complete lack of substitute at this time, and for the immediate future (5-10 years).
The real problem with this situation isn’t any short-term speculation though. It’s that all this wealth is being funneled towards people who don’t know how to do anything other than look for small puddles of oil — when in the past they were stumbling over oceans of the stuff.
The high price of oil is the message from the oil producers and refiners that they don’t want you to buy their stuff. So stop doing it. Invest in the future you want.
Isn’t this the same crap everyone talked about in the 70’s? “Oh no, peak oil is here, the end is near, repent!” What happened? We went through the energy crisis and oil was cheaper than it’s ever been. And now, thirty years later, here we go again. History has a tendency to repeat itself, especially because people either don’t know or don’t care to learn from history.
By the way, the oil companies aren’t the ones putting the price up, the oil price is determined by the oil futures, not the actual price. So the oil companies are making a killing right now. But due to the idiotic enviro-retards (and I mean that in the nastiest way possible), the oil companies aren’t allowed to build new refineries, and tap into new oil reserves as quickly as they, and the general motoring population, would like.
Oh, and I am investing in the future I want. Right now is pretty damn good, and I sure as shit don’t want to live in an enviro-weenie run world where people can’t do fuck all because some are worried about a few damn polar bears. I like it right now, so why not invest in a future like this? Where I use my car whenever, and wherever I want.
Mdf:
Just a thought – there was plenty of evidence of weapons of mass destruction in Iraq, too. How’d that turn out?
If peak oil is here, it’s because we’ve hastened its arrival. There is still easy oil available off our coasts and in the ANWR. Then we have coal which can be turned into oil. That’s another environmental no no though.
lprocter1982, you aren’t making much sense here. To list the problems:
1. There was never any evidence of WMD in Iraq.
2. As far as I know, no one predicted global peak-oil to occur in the 1970’s — though interestingly, the USA’s production peak in the late 60’s/early 1970’s was predicted, and it even came true.
3. Given a supply, the oil companies would be building refineries all over the planet to meet demand. They would be giving the finger to the “enviro-weenies” while laughing all the way to the bank. Given a supply…
4. The “right now” you celebrate includes $4/gal gasoline (and rising), essentially flat oil production, and increasing global demand. Google up “unsustainable”.
There is plenty of energy on this planet for billions of years. About half of the low-hanging fruit is gone. Time to work smarter, not harder, is at hand. Giving more money to the fruit-pickers is probably foolish.
Cody said “There is still easy oil available off our coasts and in the ANWR.”
Utterly insignificant. A billion barrels is 2 months of supply for the USA at current consumption. Tell us where we can find trillions of barrels and things will become more interesting.
“Then we have coal which can be turned into oil.”
Actually, you’d want to just convert it straight into the liquid fuel of interest. Question: how much would it cost to create the necessary productive capacity? Is it even wise to chew through all the coal, as well as oil?
The latter is in fact worthy of deep consideration, as we are now being presented with an opportunity to solve two nasty problems at the same time.
I say we get what we ask for,we have had it to good in this country for many years,when I see car’s back up in line at fast food drive thru’s when gas is 4.00 a gallon and diesel is 4.50 a gallon,or get passed by a motorhome going 10 to 20 mph over the speed limit,big rigs well over the speed limit it is clear that we have not reached the point of pain yet.We need to get off our fat butts and try walking a bit more when we can, think of the gas this would save?
It’s easy to say the ANWR is insignificant, especially when you don’t use numbers. Haha. It’s estimated to hold between 4.3 and 10.4 billion barrels. It could supply 5% of our overall consumption for 12 years…not entirely insignificant. That’s just the ANWR, not the coasts. It all adds up. Your point about whether or not we should burn through our coal illustrates my point exactly. We’re not out of fossil fuels, we’re choosing not to use them.
Cody: “[ANWR is] estimated to hold between 4.3 and 10.4 billion barrels.”
US consumption of oil is 20 million bpd. Optimistically taking your 10 billion, we can do some arithmetic: 1e10/2e7 == 0.5e3 == 500 days, which isn’t even two years.
In other words, piffle.
As I said, come back when you have unearthed O(trillions) of barrels.
Mdf:
“2. As far as I know, no one predicted global peak-oil to occur in the 1970’s — though interestingly, the USA’s production peak in the late 60’s/early 1970’s was predicted, and it even came true.”
Uh, yeah, people have been talking about peak oil since the energy crisis of the 70’s. That when it started (the talk, not peak oil). Perhaps few actually said it was peak oil, but it was believed to occur soon (that is, by the early 80’s.) And the reason peak production was reached was because there are no additional refineries built since the 70’s either (not many, anyway.)
“3. Given a supply, the oil companies would be building refineries all over the planet to meet demand. They would be giving the finger to the “enviro-weenies” while laughing all the way to the bank. Given a supply…”
They can’t build refineries because the enviro-weenies won’t let them – they’ve convinced the government that the world is doomed, so no oil refinery building permits. Even if an oil company tried to build a refinery, the enviro-radicals would block the gates, one or two might get themselves killed, but the oil company would back off… unlike the French did to Greenpeace… And by the way, they are laughing all the way to the bank as is, as a result of fear brought about by too many people believing environmentalist rubbish.
And there’s plenty of supply. As I said earlier, we’ve got at least 100 years of oil left that we know of. Who knows how much more we’ll find. So supply is not the problem.
“4. The “right now” you celebrate includes $4/gal gasoline (and rising), essentially flat oil production, and increasing global demand. Google up “unsustainable”.”
The right now I celebrate is where there is abounding wealth, health, and opportunity. Outside of the poor countries, but that’s party the enviro-weenies fault – if they hadn’t managed to get DDT outlawed, millions of Africans wouldn’t be dead and might be providing positive contributions to the world. But at least a few falcons survived (which weren’t in any danger from DDT anyway.) Get rid of the enviro-retards and the world will be a much better place. Literally.
mdf: I especially despise doomer talk.
Well, I suppose you could look at it this way:
It looks like we’ve got maybe one million hybrids and other “new fuel-efficient technology” vehicles on the road now. How many vehicles do we have in the US, in total? 200 million? That’s what comes to my mind. So, one-half of one percent is a start, but I’m thinking more about the other 199 million cars on the road.
Plus, I’m thinking about China and India, which I suppose are adding oil-burning vehicles at a rate several times that of California’s reduction. World-wide, it doesn’t look like much else beyond doomsday.
It doesn’t look like the US will act fast enough to avoid the doubling or tripling of prices compared to what we’ve got now, and it seems that “if we don’t burn the oil, China will,” so I sure don’t expect to see anything much other than some kind of “nuclear winter” for the US economy over the next decade.
Dig that shelter, stock it up, and buy those guns now!
Hmmm, you know, something just hit me after I posted the last comment:
OK. So, California reduced its gasoline usage 4.5% over one month, compared to a year previous.
So, riddle me this, Batman:
Why does California still have nearly the highest gasoline prices (and I presume they still do if you take taxes out of the equation) in the country?
Or, to toss the whole “tax” issue out the window, why haven’t the gasoline price increases slowed down in California as compared to elsewhere?
Bottom line: There just isn’t any “competition” in the oil industry, whatsoever. There’s no such thing as “supply and demand” — it’s all rigged, and we are the victims.
Pretty simple, isn’t it?
Here is an email I sent to Robert Farago…
I have always tried to explain to anyone willing to listen that the price of oil today is being lead by speculation.
When the Goldman report came out last week, I again asked if it wasn’t, in point of fact, being presented by some with a vested interest in the continuing price climb.
http://www.businessweek.com/lifestyle/content/may2008/bw20080513_720178.htm?chan=autos_autos+–+lifestyle+subindex+page_top+stories
Don’t get me wrong. I LIKE the prices being high. We are seeing major advancements in technology we would not have seen for years down the road.
Soon we will see advancements in both air and ground transportation.
And soon I will get my diesels!!!
@lprocter 1982
M King Hubbert first stated his thoughts on Peak Oil in 1948, in a speech at the AAAS conference. He later restated his views, formally, in a speech to the American Petroleum Institute in 1956, and in a National Academy of Science Report in 1962. Throughout, he stated that in the early 1970s, US Peak Oil would happen.
US oil production began declining below consumption (the definition of peak oil) in November 1970.
Hubbert stated that Global Peak Oil would occur in the foreseeable future, and within the early decades of the 21st century — that’s where we are now.
I figure the oil industry is soaking us right now so they can get max profit until the EVs and other alternatives begin to hit the roads in massive numbers in a few years. I mean if you have a 50 mile range in your plug-in hybrid and you only need 30 miles of range, you are never going to need gasoline until you drive out of town – right?
Once you get used to plugging in your EV like a cellphone every night, are you going to want to stand out in the weather wasting 5-10 mins of your time pumping stinky gasoline or diesel? Not if the EV meets your needs.
Also those electric RAVs from the late 90s are all the proof any sane person should need that EVs work now (and back in the late 90s too). The secret is out and more people are taking notice that we are being played for suckers by the oil companies, oil speculators and the car companies.
The average person will be served just fine by a vehicle like the RAV-EV today with that tech. Yeah, some of your gearheads will never be happy with an EV but most of the commuters will.
http://evnut.com/rav_owner_gallery.htm
Be sure to look at the 100K+ page.
By the way Chevron owns the patent to the battery design in the RAV-EV. Their patent expires in 2015 last I heard. If the stuff doesn’t hit the fan before then, it will in 2015. Chevron sued Panasonic and Toyota over the Rav-EV battery design and that is why there are not any more being sold. Whether or not Chevron will license the tech for a reasonable cost I don’t know.
So the old myth of the oil companies withholding technology from the world that would compete with oil is exactly true – in this case at least.