Pops wrote:I'm thinking people will do nothing at first, just absorb the spike. If 2021 looks like EIA/IEA forecast oil might get to $$80. People won't notice much.
After the second and third year, if fracking hasn't rebounded and OPEC and Iran haven't come back, oil in storage will have fallen below 5 or 10 year averages and the price might get to $100-125—that is if the economy is otherwise recovering. We were there in -08-'14 and I think most folks will still be thinking this is a result of the pandemic and fracking will catch up soon. But they'll try to conserve some, drive a little less, parking the coal roller and taking the Vega sometimes. They'll adjust the budget, starti to combine trips, buy more online and gripe about the fuel surcharges. Just like 2008-14 basically.
Demand has been climbing an average of 1%/yr since forever, so just average growth expects 5% more supply by 2025. If no relief—remember, the period from 2017-2025 could have seen at least 25% of production continuing to decline a couple percent per year, and of course the world will be continuing to deplete at 80-100 MB per day. So it wouldn't be surprising to see prices climbing above $120 to...whatever the limit is at the time.
Hard to guess beyond that, but even holding supply steady should see the price rise.
Pops, I agree overall, but one obvious thing you're omitting, I think, is that we now have more choices for efficient cars that use less gas or even NO gas for city driving. (In the late 70's people were trying to drive smaller cars, but those still burned CONSIDERABLE amounts of gasoline for commuting, etc).
If crude basically triples in price (or even doubles) and stays that way for 30 to 36 months, I think a lot of people will WAKE UP and exercise the option to buy a LOT more efficient car the next time.
With the typical car now staying reasonably reliable for, say, 15 years, that's a fleet replacement rate of roughly 7 percent of cars a year, so that gets pretty significant, re the opportunity to burn a LOT less gas with the newer fleet, if people make that a priority. And if people ARE making that a priority, then I'd expect outfits like Toyota, Ford, Honda, etc. to be producing a LOT more HEV's (making a big impact on city driving) and PHEV's, to the extent they can produce them and ramp that up, as they'll be able to get more or less full price vs. less desirable ICE's selling at significant discounts, suddenly much more expensive to drive and looking to stay that way. (Car companies LOVE to sell very profitable vehicles).
Lots of greens act like it has to be a pure BEV or bust, but the economics says supply and demand and cost of the vehicle matters a lot.
With a PHEV that provides 40 to 50 gas free miles on a charge, I might only burn a little gas a few times a year when going out of town, so literally under 5 gallons a year, except for whatever gasoline the car insists on burning in fuel maintenance mode, which I understand from the Chevy Volt is NOT a lot.
And that's without even carefully planning trips, combining trips, etc.
If the fuel price is painful enough, then at a minimum, I think the "normal" demand increase could easily go away, and instead, could shrink at 2 to 3 times that amount -- IF manufacturers can WAKE UP and build the cars that get great mileage that people want, should high fuel prices persist. As I understand it, outfits like Toyota, VW, Mercedes, etc. are already planning on moving hard toward electrics (including hybrids ahd PHEV's) in the next few years, and beyond, so it would be a real party if nearly all manufacturers feel compelled to compete with that because a lot of the Joe 6 pack crowd doesn't want to pay $4 a gallon or so to gas up the guzzler any more.
Of course, ironically, if enough people drive efficient cars to drop the crude demand relative to supply and the price drops meaningfully, that trend might not last. So as always, trying to make any kind of accurate predictions is well nigh impossible.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
