A steepening slope  

Posted by Big Gav in

Tom Whipple's latest peak oil column looks at the impact falling energy prices have on future supply - The peak oil crisis: A steepening slope.

In thinking about who might slow their use of oil in the world these days, let's start with the oil exporting countries as this is where consumption has been growing the fastest. Most of these sell their oil products domestically at discounts, some substantial, to world prices. Their foreign exchange earnings are obviously hurting from much lower prices at the minute and they are starting to talk about slowing economic development projects, but there certainly has been no sign of lower domestic consumption for now.

Oil consumption is so ubiquitous today that, somewhere, oil is used by people in all walks of life - from multi-billionaires to those who are just getting by. As hard economic times descend, it is obvious that people at the bottom of the economic scale will stop consuming oil first. Reduced consumption then will climb right on up through the several billion of us who are at least moderate oil consumers until we get to those who are so rich there is almost no price that would force them to lower their consumption.

Where do we find lots of people who are not particularly well off, are likely to be hit hard by the coming economic problems and who use lots of oil? The answer, of course, is in North America where we consume on the order of 1,000 gallons per capita per year largely because most of the transportation is by automobile. While the rest of the world drives private cars too, they are more likely to be in economically stronger hands, get much better mileage, and are not driven very far. Thus it is not surprising that in the last 12 months of increasing economic difficulties and much higher gasoline prices, consumption of gasoline, diesel, and jet fuel fell by nearly nine percent in the U.S. while consumption in the rest of the OECD countries where they consume about half the oil per capita as in the U.S., consumption was basically flat.

Another place where oil products, especially kerosene and propane, are consumed by relatively poor people is for daily cooking fuel across the underdeveloped world. While this fuel is nearly essential to sustaining life once one is trapped inside a city, in most cases, it is subsidized by the national government and is not consumed in particularly large quantities per capita. There are, of course, millions of small gasoline-powered bicycles and scooters across the world, but most are using small amounts of subsidized fuel.

The message here is that as oil prices drop, it is not at all clear that there will be large reductions in the demand for oil products - at least until the economic situation becomes far more precarious. Discretionary driving such as lengthy motorized vacations and aimless driving by teenagers seems to have declined in the U.S. in recent months. There has been some reduction in the transport of goods due to the weakening economy. We may however be deceiving ourselves that oil consumption is going to drop precipitously in the near future. Oil has become so ingrained in our lifestyles and economies that it may take months or even years of harsh economic conditions before we see significant drops in worldwide demand.

The other side of the coin is oil production. Hardly a day goes by now without a report of some major oil development project being cancelled or placed on hold due to high costs and the unavailability of capital. While these delays may have little immediate impact, a few years down the line the results will be disastrous as world oil production will be declining very rapidly.

Always keep in mind the basic proposition of peak oil that the world is still burning oil at the rate of 31 billion barrels a year. Seventy five million barrels a day are coming from currently producing fields that with each passing year will produce anywhere from 4 to 8 percent less oil. It is simple arithmetic to show that with current production declining, fewer new oil producing projects under construction, and major declines in demand a dubious proposition, shortages are in the offing. Thanks to the worsening economic situation the effects of declining oil production - much higher prices and shortages - look to be even closer and more severe than before the financial crisis emerged. Falling prices at the gas pumps are only a temporary distraction: the real troubles are getting closer all the time.

2 comments

doesn't matter if peak oil was last decade or this. the problem we have is consumption and this is a moral issue.

Peak oil will be next decade.

Regardless of the moral issues (and I am concerned about environmental issues, a million odd dead Iraqis and various other side effects of our oil dependency) the question is how to make the transition to clean alternatives as quickly as possible (something most peak oilers, lamentably, don't focus enough attention on).

Post a Comment

Statistics

Locations of visitors to this page

blogspot visitor
Stat Counter

Total Pageviews

Ads

Books

Followers

Blog Archive

Labels

australia (619) global warming (423) solar power (397) peak oil (355) renewable energy (302) electric vehicles (250) wind power (194) ocean energy (165) csp (159) solar thermal power (145) geothermal energy (144) energy storage (142) smart grids (140) oil (139) solar pv (138) tidal power (137) coal seam gas (131) nuclear power (129) china (120) lng (117) iraq (113) geothermal power (112) green buildings (110) natural gas (110) agriculture (91) oil price (80) biofuel (78) wave power (73) smart meters (72) coal (70) uk (69) electricity grid (67) energy efficiency (64) google (58) internet (50) surveillance (50) bicycle (49) big brother (49) shale gas (49) food prices (48) tesla (46) thin film solar (42) biomimicry (40) canada (40) scotland (38) ocean power (37) politics (37) shale oil (37) new zealand (35) air transport (34) algae (34) water (34) arctic ice (33) concentrating solar power (33) saudi arabia (33) queensland (32) california (31) credit crunch (31) bioplastic (30) offshore wind power (30) population (30) cogeneration (28) geoengineering (28) batteries (26) drought (26) resource wars (26) woodside (26) censorship (25) cleantech (25) bruce sterling (24) ctl (23) limits to growth (23) carbon tax (22) economics (22) exxon (22) lithium (22) buckminster fuller (21) distributed manufacturing (21) iraq oil law (21) coal to liquids (20) indonesia (20) origin energy (20) brightsource (19) rail transport (19) ultracapacitor (19) santos (18) ausra (17) collapse (17) electric bikes (17) michael klare (17) atlantis (16) cellulosic ethanol (16) iceland (16) lithium ion batteries (16) mapping (16) ucg (16) bees (15) concentrating solar thermal power (15) ethanol (15) geodynamics (15) psychology (15) al gore (14) brazil (14) bucky fuller (14) carbon emissions (14) fertiliser (14) matthew simmons (14) ambient energy (13) biodiesel (13) investment (13) kenya (13) public transport (13) big oil (12) biochar (12) chile (12) cities (12) desertec (12) internet of things (12) otec (12) texas (12) victoria (12) antarctica (11) cradle to cradle (11) energy policy (11) hybrid car (11) terra preta (11) tinfoil (11) toyota (11) amory lovins (10) fabber (10) gazprom (10) goldman sachs (10) gtl (10) severn estuary (10) volt (10) afghanistan (9) alaska (9) biomass (9) carbon trading (9) distributed generation (9) esolar (9) four day week (9) fuel cells (9) jeremy leggett (9) methane hydrates (9) pge (9) sweden (9) arrow energy (8) bolivia (8) eroei (8) fish (8) floating offshore wind power (8) guerilla gardening (8) linc energy (8) methane (8) nanosolar (8) natural gas pipelines (8) pentland firth (8) saul griffith (8) stirling engine (8) us elections (8) western australia (8) airborne wind turbines (7) bloom energy (7) boeing (7) chp (7) climategate (7) copenhagen (7) scenario planning (7) vinod khosla (7) apocaphilia (6) ceramic fuel cells (6) cigs (6) futurism (6) jatropha (6) nigeria (6) ocean acidification (6) relocalisation (6) somalia (6) t boone pickens (6) local currencies (5) space based solar power (5) varanus island (5) garbage (4) global energy grid (4) kevin kelly (4) low temperature geothermal power (4) oled (4) tim flannery (4) v2g (4) club of rome (3) norman borlaug (2) peak oil portfolio (1)