The Stairway to ...
Posted: Mon 09 Nov 2015, 20:10:02
So this is my latest doodle. Nothing new, just an exercise in looking at how the price of oil might rise as the volume of oil consumed falls. I'm just imagining that the price reacts when consumption at a certain level exceeds the limit outlined by a Hubert shaped curve. Hubbert thought the curve is the theoretical maximum shape of production unconstrained by economics and such trivia.
some words
As reserves are depleted the difficulty and costs rise, so will the required price
But there is a limit to how much consumers can pay for a given amount of production
However, rather than foregoing oil altogether, they will reduce their consumption and continue to buy what they can afford by increasing the utility they receive per unit*
use less / pay more
Looking at the consumption plot, at first it remains flat, but because it is depleting the resource it moves beyond the hubbert curve (turning red to symbolize the supply deficit)
At that point the price starts to rise.
Then at some point of price pain, demand falls (or production increases marginally).
Demand falls until there is once again a supply surplus (and the plot turns green)
Notice the price also eases at that point
and the fall in demand is halted
Until depletion...
I also sketched in some little curves (a la Laherrere) indicating new resources that become available as the price increases.
Note EROI is inherent in increasing costs. It is impossible to turn a profit for long spending more on energy that you receive for product.
* there are lots of substitutes for oil, just no good replacements.