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Page added on February 26, 2009

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The Peak Oil Crisis: A Turning Point?

Events are moving faster all the time. Some are highly visible such as the falling stock markets, the steadily rising unemployment numbers and the drumbeat of global gloom and doom emanating from the media.


Others are more subtle such as the drop in the investment needed to sustain oil production at current rates; China’s efforts to corner much of the available world oil supplies during the economic turmoil; and increasing U.S. gasoline consumption in the face of everything else. The only certainty is that we are headed towards a year to remember.


For the present, the availability of oil is not a problem. As the cable financial news assures and reassures us, we are swimming in the stuff. There are said to be 80 million barrels of crude sitting in tankers just off the world’s coasts just waiting to be sold the minute the price goes up a few dollars. Now 80 million barrels may sound like a lot, but it is less than a one day supply for the furnaces and engines of the world.


Chinese oil consumption is no longer growing at 5 or 6 percent annually as it has been doing in recent years, but it does not seem to be dropping significantly either as Beijing is reported to be filling its first strategic petroleum reserve. The Japanese, who just reported a 45 percent drop in exports, imported eight percent less oil in January. The heavily motorized parts of Europe still seem to be consuming close to normal levels as are the oil exporting countries where the oil products are heavily subsidized. The rapid drop in prices has ended the stream of reports from small islands and the poorer Asian, African and Latin American countries about not being able to afford oil for power plants.


In short, it is not obvious exactly where the fabled drop in demand is taking place. The U.S. was down about a million barrels a day (b/d) a couple of months ago, but over the last few weeks consumption of most oil products, except jet fuel, have edged back up again. In a society such as the U.S., which is almost completely motorized, it apparently takes more economic downturn, especially in winter, to keep people out of their cars when cheap gas is available. In another four months, the U.S. vacation driving season will be on us – a time when gasoline consumption usually jumps about 500,000 b/d. Presumably those suffering financial hardships will be more circumspect in their vacation driving this summer even if gasoline remains in the vicinity of $2 a gallon.


Falls Church News-Press



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