Gas prices $10 ?
Every time I talk about this, I get the same response,
they (OPEC) would not do it.
But lets look closely at this...
If GAS increases to $10 a gallon, sure OPEC would not sell as much oil,
but they wont have to at that price.
What if they sell %40 of what they were ?
They are still making money overall.
With a reduction in output, there is less they have to...
produce, refine, and ship.
They are still making a huge profit.
They will still have oil to sell in the future.
(when ALL of the oil is used up, they stop making money)
With a reduction in output,
the can only use the wells that produce easy to get, cheap oil.
It then, is much more cost effective for them.
Think about it,
if you had 100 widgets, and you had already sold 60 of them,
and they were in high demand, how much would you raise the price ?
FACT: Saudi Arabia has a large % of world oil.
FACT: A new US President will be elected soon.
FACT: The new Pres will most likely do something to
make the US less dependent on foreign oil.
FACT: The Saudi's and other oil rich countries
are watching this unfold VERY closely.
If YOU were Saudi Arabia, would you WAIT until alternative energies
are being produced by your competitors before raising prices ?
Add to this that some oil producing countries like Venezuela and Russia dont like this USA much right now, and woulnt mind seeing world power shift a bit more to their liking.
China and India are both growing fast, especially their need for oil.
What would happen....
Well, right off the bat, about %15 of people in the USA
would be unemployed within a couple of months.
Prices for many goods and food would triple.
(although they would slowly move up over a year or 2)
Within 1 year, about %40 of people in the USA (that have jobs) would loose them.
Government spending would go up, we are using a huge amount of oil and gas
with the war in Iraq, not to mention the rest of the military here and overseas.
It would look very similar to the great depression.
Soup kitchens, no jobs, inflation, etc...
It may in fact be much worse.
With the current population we (the US Gov) couldnt feed that many people,
couldnt get to the suburbs, old people couldnt get medicine,
kids couldnt go to school...
There would be martial law.
The Gov would have to control all the fuel,
so that they had enough for police, military etc...
At some point, a large percent of the populous
would not be able to pay of electric and water services .
Only the rich would be living comfortable.
All HELL would break loose !
Is it possible ?
Instead, lets ask what is stopping them?
There is no real need to keep oil over $100 a barrel now,
but it is. Oil companies can do just fine if they sold it at $85, but they arent.
So is this a test ?
Are the oil companies raising prices just to see how far they can push ?
Even if this isnt the sole reason, believe me, they are looking at EXACTLY how much we
(especially the USA) are curbing our appetite now.
They KNOW that we have no other choice in the short term,
and it wold be many years before we can significantly lower our dependence on oil.
They would see it coming, and are watching that very closely.
We are walking a fine line
This scenario doesnt even have to be malicious.
All that has to happen is 1 or 2 large refineries in Saudi Arabia,
be it terror attacks, or just accidents.
A combination of a hurricane hitting a few wells /refineries in the USA,
and a couple of accidents at the same time in Saudi Arabia could light this fuse.
We NEED to get off oil NOW, we are much to late to do it "without pain".
If we act NOW, we can minimize the damage, but there needs to be a VERY aggressive solution,
and we are already too late to implement it without at least some
Now, we can look at TRENDS, but like i said, if you have 100 widgets,
and 60 of them are already gone, then you may want to re-think not just the price,
but the future of the company.
You may want to raise the price dramatically to get the absolute MOST
out of the 40 widgets you have left.
I know there lots of oil left, but its not ALL oil that we can look at,
its only the oil that can be gotten out of the ground at a reasonable expense.
Much of the reserves are hard to get to, and very costly.
Keep in mind that in the coming years, maybe by 2010
that it will be much more costly to extract oil.
Many projections show oil at $1000 a barrel by 2020
If you saw that coming with your widgets, wouldnt you start acting NOW?
China and India's needs for oil are increasing VERY fast,
and if the US uses less it will benefit them.
The dollar would be worth less which would benefit many countries besides the US
We have PISSED OFF all of the Arab nations which means they wouldn't mind seeing the US go down the tubes either.
Oil consumption and production in China, 1990-2025 (thousand bd)
$1000 a barrel ?
The results of the oil shocks was worldwide double-figure inflation and a stagnant economy.
The charts below show how the sudden increases in oil prices in the 70s and 80s were reflected by unemployment, inflation and growth in the UK.
The results of the oil rises to come will be worse since there will be no hope of the resumption of cheap oil.
The problems of oil consumption in the future revolve around two factors: population and the increasing use from developing countries. A chart of the US Census Bureau’s world population shows that population is expected to increase steadily over the first half of the this century. (What it doesn’t show is any drop in population that might be caused by oil decline – from wars, recessions, famine, etc).
More people means more demands for fuel, energy, plastics and food – all highly dependent on oil. In the ten years from 2002 to 2012, the world population is expected to rise from 6.23 billion to 6.96 billion, an extra 12% to be fed, supplied and energised. Along with population, the other factor is the increasing use of oil in developing countries – countries which, up to now, had been contributing little to consumption. Compare these charts of oil consumption from selected countries and regions.
The first two show the ‘developed’ countries/regions of USA, Europe, UK and South/Central America. Although the consumption is high (as far as the USA and Europe is concerned), the trend is either gentle or actually in reverse (note how the oil shocks of the 70s and 80s are reflected again). The percentage changes from 1965 to 2005 range from 20% for the UK, to 180% for South/Central America with Europe and USA sitting between (see Chart C10). This compares with overall world consumption which grew by 164%.
But when we look at the charts for Pacific Asia and China, we see a very different view. Chart C8 uses the same scale as Chart C6 and Chart C7, and you can see how the whole of Asia Pacific has already surpassed the levels of the USA and Europe and at a much steeper curve (a change since 1965 of 636%. China’s rise seems more gentle because of the scale: if you isolate China and bring the scale down to fit (Chart C9), the frightening rise in that country’s oil consumption is clear. The percentage change over the 40 years is a whopping 3118%.
Below (C10) is a chart of those percentage changes and it shows the dramatic difference between the developed and the developing world.
The clear omen from this is that oil consumption in Asia is going to increase dramatically in the next few decades and this will outweigh any decrease from Europe and the US. The population of China, even with birth control measures, is still expected to rise. This is the trend. In reality, consumption will slow and decline as oil production decreases and recessions bite, but the exact figures for that are impossible to calculate. What is clear is that, if the world continues as it presently is doing, oil consumption will continue to rise.
This is the worrying chart for oil consumption, a dramatic rise of over seven times (636%) in Asia over the four decades as populations grew and the countries demanded a standard of living closer to the West's. From a 1965 total of 1.19 Gb to 8.74 Gb, from 10.4% of the world's consumption to 29%. China's rise seemed gentler but it actually shows an increase of 3,118%, from 1.7% of the world to 8.5%. The rise is clearer in chart C9.
This chart summarises changes shown in charts C6 to C9. The huge increases in Asia and China over the last four decades are very clear.
If milk prices had increased at the same rate as U.S. natural gas prices, a gallonhttp://www.checkgasprice.info/
of milk would cost $11 today.
Supply, Demand & Price: The Economics 101 of Peak Oil