mos6507 wrote:You can extrapolate that yes, drivers will change their habits due to high oil prices. You can not extrapolate that this alone (in an economy NOT hobbled by the credit crisis) will moderate prices to this extent. The dropoff in oil demand is largely not due to individual drivers driving less or switching to fuel efficient cars, but the big drop in industrial activity due to the credit crunch.
It isn't even a drop-off in current demand so much as a perceived drop-off in demand (both private and business) over the next couple years, combined w/ OPEC not fulfilling (only ~1.25mbpd so far) their stated production cuts.
mos6507 wrote:So the disheartening message of demand destruction is that individual drivers do not have as much of a lever on gas prices as previously thought. As long as industrial activity snaps back and tries to expand it will push oil prices higher even in the face of universal cutbacks in personal gas consumption.
Individual consumers, not just as drivers, have a pretty darn big impact on oil prices. Cutting back on air travel and driving in the U.S. alone resulted in a ~.4-.5+mbpd drop in consumption over the last six months, which was evidently enough to get the drop from ~$145/bbl going, and the apparent global recession seems to have sealed the deal. Since January of 2008, consumption has only exceeded production by less than ~.1mbpd, and if it wasn't for the reduction in consumption in the U.S. that would've been closer to ~.5mbpd, probably enough to see ~$60-80/bbl+. During the first four months consumption outpaced production by ~.9mbpd, and oil prices reached a maximum about a month after. But during the next six months production outpaced consumption by ~.7mbpd, and only recently in November have OPEC's 1.25mbpd cuts resulted in a 1.32mbpd production shortfall.
To sum it up, give or take a month lag due to lack of data, prices went up when production could not meet consumption, and went down when consumption could not meet production. Recently, production hasn't met consumption due to OPEC's cuts, which is probably why we saw quite a bit of time in the ~$40-50/bbl range, but given a world recession it does not look like people believe OPEC will be able to cut production in line w/ the potential drop in consumption. Probably because they've claimed ~2+mbpd in cuts but only delivered about half that.
mos6507 wrote:There must be a way to get oil out of society as a whole, not just personal transportation. Even if everyone drives an EV, any savings gained in personal transportation will go out the door again in the increased cost of oil intensive goods.
Personal transportation is the easiest to do and a fair number of people as well as local government's already want it. While it would only reduce consumption by a fraction of a percent, the recent jump to ~$145/bbl and drop back down was only caused by a ~.1mbpd shortfall during the last eleven months, which is a .1% difference between consumption and production, but it cost roughly $1.5 trillion extra. As the world's biggest consumer the U.S. dedicates about half of it's oil supply, so around 10% of world supply, to automobiles. .1% of world supply would be 1% of U.S. auto consumption, so if programs such as CA's ZEV mandate had been successful and had been adopted by the other states that follow CARB's lead, we could've seen 1% of the nation's fleet as pure electric vehicles, using no gas/oil. Assuming a $20,000 addition per vehicle, which is what low volume runs cost, probably about twice the premium of mass produced versions, we would have payed an extra ~$62 billion compared to the current fleet. Paying ~$4 billion per year over 15 years so we don't have to pay an extra $250+ billion over one year and the world doesn't have to pay an extra $750+ billion over that same year year seems worthwhile. Especially since those vehicles would probably be at cost parity for their owners and save the state money in terms of externalized costs such as pollution. An ounce of prevention is worth a pound of cure and all that...
