Tuesday, July 06, 2004
The upcoming oil crisis
I think I may have it figured now. I found another message from Prof. Deffeyes on the oil situation. His main point was that, if there was a shortage of refineries, then that should have meant that not only should gasoline prices go higher, but that crude oil should go LOWER. He explained it in terms of not getting a bonus of some type if an oil possessor can't find a refinery, but I think of it that if I hold some crude oil, and can't get it refined into gasoline or something else useful, then it is worthless. I can't put crude oil in my tank. I had thought of this too, and I wondered about the situation and concluded that there were shortages both of crude and of refineries.
He is still sticking by his date when this thing is supposed to happen as 2005 November 24. Whether he means the peak or D, the point at which demand exceeds supply, is unclear. But I see it this way. We had catastrophically increasing gasoline prices this spring. The Saudis were pressed to increase their production, as everyone else is pumping as much as they can. They had 6 million barrels of spare capacity last year, but only 2.5 million this year. So they said that they would increase production. And indeed, that is what they have done. So gasoline prices are now going down. Incidentally, if there were really a refinery shortage, shouldn't there still be a shortage? The Saudis didn't do anything about that. So shouldn't the price of gasoline still be high?
This shows the increase this spring was due mainly to a possible shortage of crude oil, as refineries were at 95%, not 100%, capacity. Growth is still continuing at 2% in the demand for oil, or maybe even 3 or 4%, because China and India now want some of the good life. So I think this will happen. Gasoline prices will drift slowly downwards and maybe hit $1.40 or $1.50 this winter, with crude at about $32. Then the inexorable climb will begin again in the spring of 2005, and this time the Saudis will be at or very close to capacity, and so will not be able to pump any more. Demand will be continuing to rise, but everyone will be pumping and pumping and pumping as hard and as fast as they can. That's when the crisis will strike. It seems that Deffeyes' date is correct.
Gasoline prices will continue to rise until it measurably decreases demand, wherever that may be. If people feel they can drive where they want at $4/gallon that means that gasoline will rise to $5/gallon or higher. This will happen mainly in the latter half of 2005, in the half that Deffeyes predicts his peak in. Then a number of things may happen.
The rising prices will cause stagflation, and may later even cause an economic collapse and the Great Devaluation that Strauss and Howe have been predicting. People will start to conserve like mad. Carpools will spring up all over the place, housing prices will plummet, especially in areas far from the necessities of life, demand for hybrid vehicles will soar, and SUVs will pile up like garbage in car dealerships.
Also, the high price of crude and gasoline will make oil wildcatting much more lucrative. The Strategic Petroleum Reserve will be opened up. The next President will drill the Arctic National Wildlife Refuge, especially if he is George W. Bush. Renewable energy sources will be a hot item of research, and fuel cells may start to get into the market. Solar panels will spring up like desert flowers in the American Southwest. And the oil production from the tar sands of Canada will probably throttle up to full. This may provide us with a reprieve, but if so, it will only last a few years.
The crisis will clearly strike whoever is elected this fall. If it is Bush, he will become one of the most unpopular presidents in history, and a Democrat will defeat him in 2008; this Democrat will be a Crisis President and may go down in history as one of our best presidents. If it is Kerry, he will be hit by the crisis, and the result could be the election of a Republican in 2008. This Republican will then be a Greatest President, being a Crisis President. Given this, conservatives and Republicans may want to vote for Kerry, and liberals and Democrats for Bush.
What will the end result be? Hopefully one of these alternate fuels, especially a renewable fuel, will catch on and transform the landscape. This won't be easy; there will be many upheavals as these new methods crash crank up to meet the demands of the era. The fact that we will be in a Fourth Turning will help; Fourth Turnings are the time when major civic changes can take place. I hope that these fuels can take their place; otherwise what may be next will be one of the grisly nightmare scenarios of Life after the Oil Crash or Dieoff.
He is still sticking by his date when this thing is supposed to happen as 2005 November 24. Whether he means the peak or D, the point at which demand exceeds supply, is unclear. But I see it this way. We had catastrophically increasing gasoline prices this spring. The Saudis were pressed to increase their production, as everyone else is pumping as much as they can. They had 6 million barrels of spare capacity last year, but only 2.5 million this year. So they said that they would increase production. And indeed, that is what they have done. So gasoline prices are now going down. Incidentally, if there were really a refinery shortage, shouldn't there still be a shortage? The Saudis didn't do anything about that. So shouldn't the price of gasoline still be high?
This shows the increase this spring was due mainly to a possible shortage of crude oil, as refineries were at 95%, not 100%, capacity. Growth is still continuing at 2% in the demand for oil, or maybe even 3 or 4%, because China and India now want some of the good life. So I think this will happen. Gasoline prices will drift slowly downwards and maybe hit $1.40 or $1.50 this winter, with crude at about $32. Then the inexorable climb will begin again in the spring of 2005, and this time the Saudis will be at or very close to capacity, and so will not be able to pump any more. Demand will be continuing to rise, but everyone will be pumping and pumping and pumping as hard and as fast as they can. That's when the crisis will strike. It seems that Deffeyes' date is correct.
Gasoline prices will continue to rise until it measurably decreases demand, wherever that may be. If people feel they can drive where they want at $4/gallon that means that gasoline will rise to $5/gallon or higher. This will happen mainly in the latter half of 2005, in the half that Deffeyes predicts his peak in. Then a number of things may happen.
The rising prices will cause stagflation, and may later even cause an economic collapse and the Great Devaluation that Strauss and Howe have been predicting. People will start to conserve like mad. Carpools will spring up all over the place, housing prices will plummet, especially in areas far from the necessities of life, demand for hybrid vehicles will soar, and SUVs will pile up like garbage in car dealerships.
Also, the high price of crude and gasoline will make oil wildcatting much more lucrative. The Strategic Petroleum Reserve will be opened up. The next President will drill the Arctic National Wildlife Refuge, especially if he is George W. Bush. Renewable energy sources will be a hot item of research, and fuel cells may start to get into the market. Solar panels will spring up like desert flowers in the American Southwest. And the oil production from the tar sands of Canada will probably throttle up to full. This may provide us with a reprieve, but if so, it will only last a few years.
The crisis will clearly strike whoever is elected this fall. If it is Bush, he will become one of the most unpopular presidents in history, and a Democrat will defeat him in 2008; this Democrat will be a Crisis President and may go down in history as one of our best presidents. If it is Kerry, he will be hit by the crisis, and the result could be the election of a Republican in 2008. This Republican will then be a Greatest President, being a Crisis President. Given this, conservatives and Republicans may want to vote for Kerry, and liberals and Democrats for Bush.
What will the end result be? Hopefully one of these alternate fuels, especially a renewable fuel, will catch on and transform the landscape. This won't be easy; there will be many upheavals as these new methods crash crank up to meet the demands of the era. The fact that we will be in a Fourth Turning will help; Fourth Turnings are the time when major civic changes can take place. I hope that these fuels can take their place; otherwise what may be next will be one of the grisly nightmare scenarios of Life after the Oil Crash or Dieoff.
