Can the Economy Survive $200-a-Barrel Oil?

Peak Oil

Peak oil occurs when demand outstrips supply. As mentioned here, the “easy oil” has been tapped and is being consumed. Many of these fields show yearly declining production. New oil is getting harder find and harder to extract with lower production. Meanwhile, all the US dollars in China and India are propelling their 3% increase in use of oil. That's a lot of people demanding more at 3% per year. China last year outstripped the US in meat consumption. Oil is coming as an over-consumptive item.

The conversion of corn to ethanol is a disaster. The most favorable calculation is 3/4 units of (oil/gas) energy input to get 1 unit of ethanol output -- so our US breadbasket is becoming an ethanol depot. Just multiple by 4 this conversion: (3/4 units => 1 unit ethanol) to get 3 units => 4 units of ethanol output. Now use 3 of the 4 output units for energy input to this process so American can have energy independence. Wow! Ramp-up ethanol by 4 times to get 1 unit for your vehicle. It’s hopeless even with everyone’s lawn in corn. Some believe the conversion is even less efficient -- giving negative gain. It your tax dollars at work as that effort increases you food bill. The other biofuels are marginal even for sugarcane as the best choice.

We need to use food only as food to lower food-inflation. Then it will just inflate due to the cost of fuel. All electricity needs to use a combination of nuclear and coal. No oil and no gas (methane). Conservation is an essential. Dump SUVs and trucks except with a business license and use high tax. Set 55 MPH maximum speed. All vehicles need high economy and regenerative braking.

Type “peak energy” into your browser to search and read. We are getting closer every day! http://www.google.com/search?hl=en&q=peak+oil&btnG=Google+Search

Clearly the US has no energy policy yet. Time is already too short to wait.

tom of CA @ May 07, 2008 16:58:09 PM

The Party's Over

We've (industrialized nations) devoured the cheap, easily recoverable, oil with no regard for future generations. And now it’s time to pay the piper! We could have invested our petroleum energy in developing realistic energy alternatives over the past few decades; however, we choose to squander away the petroleum instead.

People are more apt to react to crises than respond to warnings!

Hope everyone enjoyed the party while it lasted!

Bob of AK @ May 07, 2008 16:52:56 PM

Why stop at $200?

Here in the UK of what we pay for gas at the pump is 2/3 tax so effectively we already pay the equivalent of $300 a barrel for oil. The US consumer will have to get used to that sooner or later.

Martin @ May 07, 2008 16:44:53 PM

1,000 barrels per second

Can we pump 2,000 barrels a second by mid century? We'll have to pump that much to keep up with India and China's voracious appetite. Considering conventional oil discoveries peaked in 1964, it's obvious that 1,000 barrels per second is quite a feet in it's own right, so let's move on. For me I am glad that oil is getting closer to what it actually should have always been at. It's a very valuable liquid: 1 Barrel =5,930,226,101 joules of energy, At 8 hours a day, it would take a human 2059 work days. More Price = Less Squandering.

Oil is great :)

Matt Coyle of IL @ May 07, 2008 16:39:47 PM

oil price

We're Dead!

bones of TX @ May 07, 2008 16:39:38 PM

$ 2000 a barrel surely?

It's an auction where the highest bidder gets the oil! As supplies dwindle over the coming decades there will be more frantic bidding to secure a share and prices will rise and rise.

The argument that higher prices will spawn increased production only holds good for a little while. That's because oil production is to do with the laws of thermodynamics, rather than economics. The moment you start to use more oil to explore, develop, transport and refine the oil in a new discovery than you get back from production, i.e. there is a net energy loss, it becomes uneconomic to produce the oil, no matter how high the price rises. At that point, oil supply stops.

David Ede of WY @ May 07, 2008 15:30:25 PM