THE Oil Demand Thread (merged)

[stu]

This may seem like a real stupid observation but I'll try anyway.

At the Edinburgh conference Matthew Simmons said he believed that demand would outstrip supply at the end of this year. If this happens does this mean the beginning of the end of economic growth?

If growth was a balloon and oil was the air that filled the balloon, then we are about to reach a point where the balloon cannot be blown up any further. Therefore it will deflate. This deflation of course means that you can still push back up to the previous level, but you need more air to surpass it. If the air is not forthcoming then the balloon begins a permanent deflation.

[RonMN]

Economic growth already may be about 0 or contracting.

Demand can outpace supply even before the "peak" is reached. When this happens the price will rise (and rise and rise)...sine EVERYTHING runs on oil then the price of everything will rise (and rise and rise).

So i would say (indirectly) yes...once demand is higher than supply (of oil) it will be the end of growth. right now the current situation looks very shakey and this is due to a "lack of extra supply cussion"...when demand exceeds supply by 1 barrel i think we'll be seeing a very different ball game than we are right now.

Keep in mind i am no oil or financial expert...this is only my opinions.

[FatherOfTwo]

This may seem like a real stupid observation but I'll try anyway.

At the Edinburgh conference Matthew Simmons said he believed that demand would outstrip supply at the end of this year. If this happens does this mean the beginning of the end of economic growth?

Not necessarily. Demand could outstrip supply even before a true peak is reached.

Let's say demand outstrips supply at the end of this year. The price of oil goes through the roof, resulting in a recesssion which significantly lowers the demand for oil. Then in addition to this suppose the Saudi's are actually able to turn all of the investments they claim they are making into a significant boost of production. At this point demand can again ramp up to consume the additional supply, perhaps even significantly passing 2005 levels.

But our engine is definitely starting to sputter. (And if this is what you mean by the begining of the end, then, barring some other breakthrough in energy technology, YUP!)

[jaws]

Demand growth already diverged from supply growth early last year, which caused the first price shock. This had for a consequence to slow down demand growth by sending the world economy into stagnation. As long as the price of energy is floating, demand will always more or less balance with supply. There won't be gas lines, but maybe a lot of angry people picketing gas stations.

[Nano]

Demand can outstrip supply as long as inventories hold. After that, demand destruction must balance demand to supply. Make sure there's no demand destruction anywhere in your area, because demand destruction sucks big time.

[tdrive]

Demand can outstrip supply as long as inventories hold. After that, demand destruction must balance demand to supply.

Good point. Demand can NEVER outrstip supply, less inventories,
then the price goes up to lower the demand to match supply via the
demand elasticity.

You cannot escape demand desctuction, regrettaby.

Cheers,

[linlithgowoil]

i think we're nearing the end of economic growth anyway (talking from a UK perspective). we've had about 10 years of growth, but it has been mostly fueled by debt, massive spending by the government and the illusion of wealth created by massive house price inflation.

the signs are that we've reached the limits to the consumers ability to take on more debt and continue to spend. people cant or wont spend any more. this means house prices stall, spending stalls/falls, and if this continues for a little while - thats it - BIG recession. If people arent spending money, bang goes the service economy - leading to a massive domino effect on jobs.

The initial job losses are already starting in the UK - there shall likely be even more to come. When unemployment begins to markedly increase, there'll be no turning back. The way i see it - the UK is about to revisit the 1970's - high unemployment, high interest rates, civil unrest, 3 day working weeks to conserve fuel, etc. etc.

[lee]

If this happens does this mean the beginning
of the end of economic growth?

No. There are three types of growth.
1) Demand growth
2) Supply growth
3) Economic growth

Even if oil goes into decline it is still possible
for economic growth to continue. If we were
able to do more with less oil (become more
efficient) then growth would continue.

Of course, if most of the growth occurs in
Asia, then it is possible for other places to
have negative growth.

If the world doesn't become more efficient,
then, yes, the world economy will contract.
Those who are priced out of the supply will
be hurt to the degree in which they rely upon
oil.

The winners will be those who use energy
efficiently.

[nth]

Our economy is based on oil, so as long as oil production increases, the economy can grow. It doesn't mean it will, but in theory, it can, cuz production of goods will increase as long oil increases. It has nothing to do with prices as long as oil production increases and demand doesn't drop.

Price increase for oil will occur when simply demand doesn't fall when prices increase. Demand surpassing supply, etc... is not really true in real life. Only in theory. In real life, it is all about if suppliers want to raise prices or not. If they do, will demand stay the same or not. If stays the same, then prices will keep going up. If demand drops, then it is up to suppliers to decide if they want to lower prices or not. Nothing should be taken for granted. In theory, they take it for granted that suppliers will keep adjusting prices until they hit the sweet spot, but in real world, not all products do this.

[turmoil]

How much can WORLDWIDE demand be lowered with $100/barrel and trimming the fat by just turning stuff off (like a/c) and driving less?

[MD]

The US alone could reduce by 33%, or 7.5mbpd, without interrupting critical services.

[turmoil]

whats your source for that? thats hard to believe, beneficial to society for the long-term or not.

If true, could that be said for the world then? about 33% could be saved without major disruption to critical services?

what are we defining as critical, because couldn't we say that growth is critical?

[WhistleWind]

If true, could that be said for the world then? about 33% could be saved without major disruption to critical services?

Probably not. The US uses about twice as much oil per capita as the rest of the developed world. I doubt that Europeans, with their
40mpg cars, could trade down far enough to gain 30% savings. Cutting back on air con/heating would save gas, not oil. As for the rest of the world (china, India, etc.), they are constantly short of affordable oil already.

what are we defining as critical, because couldn't we say that growth is critical?

This is the $64 Trillion dollar question. The US could in practice cut back a lot without even noticing the difference (except the oil companies profit margins) but the question is academic because
1. The dominant culture sees conservation as a sign of failure
2. The US (and world) economy is on the brink of collapse even if we weren't facing PO.
With careful investment and government intervention conservation can actually boost economies, by providing high tech employment and teaching people to make more use of less resources. Sadly, the US needed to do this 30 years ago, and now it is too late.

[jimmydean]

$100 oil will force conservation or even rationing in poorer nations but to gain real slack we need to see personel conservation in North America. I'm positive that if conservation makes it mainstream in the U.S. we could see 5MBPD or more reduction.
Personel transportation is the key area for creating this slack imho. The $4k tax incentive for hybrid and very fuel efficient cars that Bush is proposing is a great idea to help this along. Also further tax incentives for people to replace in-house appliances, windows etc. with more energy efficient versions would also be positive.

One immediate issue with oil going higher and higher are already ailing airlines just not being able operate. From what I read each $1 bbl rise equates to $1B in extra cost to the airline. At what point do we have an airline crisis on our hands is yet another story. Most surely $75 bbl oil but even if we stay in the $55+ range it could spell disaster.

[NEOPO]

"In the green corner wearing earth tone trunks with 7 watt flourescent neon green trim we have the 4k hybrid tax incentive!!!"
"In the red corner wearing white trunks with blue and red trim, a hat that matches and a long white beard we have the total tax incentive of using a hummer or equivilent for "business purposes only"!!!!"
"Who will win this war is anyones guess?!!?!?"

"Mean Gene, I think the 4k hybrid tax is a dead duck due to a much higher cost of most hybrids so the "average joe" still cannot afford one."
"Yes, even if nipple biting were allowed the 4k hybrid will still have its work cut out for it tonight."
________

Trimming the fat:
The US consuming 5 mbpd less = 23/24% decrease = 5.5% world decrease = the equivilent economic pain index of, considering the average human hair follicle population and the average threshold of pain, pulling every nose, head and back hair from its root while being suspended by your pubes!!!
7.5 MBPD reduction???Now yer talking toe and ass hair buddy!!!
Disclaimer: all numbered estimates are approximates based on the limited amount of data presented and processed by the presentor to the presentee

I agree we must do something.
I agree personal transportation is a huge part of the problem and not far behind that is commercial transportation shoving along an extremely energy inefficient food chain.
I disagree and believe that these "token" measures will NOT make a real difference.
Give us each $4k cash yearly to grow a garden.
Give us incentives to become self sufficient, to build super efficient homes and permaculture, not to drive and to be part of the solution if conservation is truly the goal.
______
MD=MEDICAL DOCTOR? = HOSPITALS AND AMBULANCES = EMPLOYMENT FOR MD? = MD WANTS TO RATIONALIZE THAT HE/SHE WILL STILL HAVE EMPLOYMENT IF THIS SCENARIO WERE TO MATERIALIZE?
Pardon my assumptions

[0mar]

Growth kills any advances we make in reduction of demand. Within three or four years, all those gains are lost with increased demand.

It's useless to talk about conservation with our current economic model in place. Without growth, our economy grinds to a halt like a man getting shot point blank with a 12 gauge.

[NevadaGhosts]

With the world consuming around 82 million, 42-gallon barrels of crude a day and with demand expected to increase to around 86 million barrels in the second half of the year, non-OPEC producers such as Norway, Russia and Mexico could take up the slack

http://www.freep.com/money/business/oil18e_20050618.htm

Am I reading this correctly? World oil demand expected to increase by 4 million barrels per day for second half of 2005? If these numbers are true, we are in serious trouble. There is probably no excess world oil production left.

[I_Like_Plants]

Remember China and India are just entering the petroleum party, and trying their best to live their version of the USA's car-crazed 1950s.

[Ardalla]

<<With the world consuming around 82 million, 42-gallon barrels of crude a day and with demand expected to increase to around 86 million barrels in the second half of the year, non-OPEC producers such as Norway, Russia and Mexico could take up the slack.>>

I have no idea where they are getting this info. Norway, Mexico and Russia taking up the slack?! Are they just making stuff up?

Anyway I think 86 million is about the same figure as the 4th quarter of '04. No real surprise there.

[The_Toecutter]

Russia, Norway, and Mexico picking up the slack is a very cruel joke. It cannot be done. Refining capacity is at its peak, and oil is destined to peak within the next five years, if not peaking already. The after affects won't be felt until about 3 years after peak, so we still have some time, but nothing is being done, and odds are, nothing will be done. Peak will further enrich many already rich executives despite that the rest of us will be fucked, thus they want it to happen and will continue surpressing the most remotely viable alternatives.

Richard Deffeyes of Princeton predicts peak this year. We are simply watching it unfold before our very eyes.