Quenching our thirst for oil

Growing global oil demand harms U.S. security and economy

china's growing import needs

Global oil demand””led by the United States and followed by China, Japan, and India“”will dramatically increase over the next two decades. China has made oil deals around the world over the past few years that can deliver a supply of more than 7.8 billion barrels of oil to the country over the next several years.

The United States must meanwhile prepare for a coming oil price crunch caused by increasing global demand and slowing global production (see Deutsche Bank: Oil to hit $175 a barrel by 2016 and World’s top energy economist warns peak oil threatens recovery: “We have to leave oil before oil leaves us”).

The safest, cheapest, and fastest path to energy security is to implement oil savings measures””outlined below””to reduce dependence on foreign oil and protect our pocketbooks.  CAP’s Daniel J. Weiss, Rebecca Lefton, and Susan Lyon lay out the problem — and the solution — in this repost.

The national security risks that stem from the United States’ heavy reliance on foreign oil are well documented.  Roughly one in five barrels of U.S. oil come from countries that the State Department considers to be “dangerous or unstable.” And the cost of this oil will rise as global demand increases. These high prices benefit all petro-states regardless of whether the United States is buying from them or not. The United States doesn’t buy Iranian oil, for example, but a $1 increase in oil prices provides an additional $1.5 billion to the Iranian government annually.

The International Energy Agency notes that the United States also remains vulnerable to a Middle East oil disruption: “U.S. dependence on the long-haul Middle East has fallen sharply “¦ [but] since oil is a global market, the relevant measure for that vulnerability is not U.S. dependence, but world dependence on Middle East oil””and that has not shrunk.”

Our allies cannot fill this supply gap. Canada and Mexico are our largest importers. But a majority of Canadian oil comes from tar sands“”a dirty crude oil that can cause as much as five times more greenhouse gas pollution to produce compared to conventional oil. And Mexico’s primary oil sources will be depleted by 2019.

Demand grows, production slows

Forecasts predict that future global oil demand will rise sharply. BP’s 2009 World Energy Review found that oil demand from developing countries outside the Organisation for Economic Co-operation and Development grew in 2008 despite the recession. The International Energy Agency’s newest Oil Market Report forecasts that global oil demand will hit a record high this year and will keep rising as the global economy recovers. And the World Energy Outlook projects that oil demand will grow by almost 25 percent from 85 million barrels per day in 2008 to 105 million barrels per day in 2030.

All this oil demand growth, according to the World Energy Outlook, “comes from non-OECD countries: OECD demand actually falls.” Demand among the developed countries in the OECD already peaked, but non-OECD developing countries want more oil to fuel their burgeoning auto industries caused by a growth in wealth.

More troubling is that a recent New York University study found that official energy agency projections are far too conservative, saying, “Total oil demand will be 138 mbd in 2030″”about 30 mbd greater than what is projected by DOE, IEA, and OPEC.” They noted, “Our projections”¦are higher than projections by those three institutions”¦because we project rest-of-world growth that is consistent with historical patterns, in contrast to the dramatic slowdowns which they project.”

The United States will remain the largest oil consumer in the foreseeable future, followed increasingly closely by China (see figure, “China’s growing import needs”). The average American still consumes about 10 times as much oil as the average Chinese despite persistent growth and rising average income levels in China.

Higher oil production cannot offset demand growth. Non-OPEC oil production has already peaked and world production is estimated to peak in 2014 (see figure, “Projected global oil production through 2100”). A 2008 survey of oil executives found that 48 percent believe the world has or will soon reach “its peak petroleum (liquid hydrocarbon) production rate.”

Growing demand and declining production levels will place upward pressure on future oil prices, increasing U.S. economic vulnerability to price shocks. And high oil prices benefit petro-states such as Iran, even if we buy no oil from them.

China has increased its demand reduction efforts by adopting more efficient fuel economy standards and investments in public transit. But China will remain increasingly reliant on foreign oil imports for years to come as its economy and middle class continue to grow.

China’s growing oil demand

China became a net oil importer in 1993, which means that it now consumes more than it produces. It also became the world’s second-largest petroleum consumer after the United States in 2004. And the IEA projects that Chinese oil consumption will more than double from 7.7 million barrels per day in 2008 to 16.3 million barrels per day by 2030.

project global oil production through  2100

China’s exploding demand for autos, fueled by a growing middle class, made it the largest automobile market in the world by the end of 2009. About 16 Chinese families out of 100 owned a vehicle in 2005, but this doubled to 33 out of 100 in 2008. And McKinsey estimates that China’s vehicle fleet will increase tenfold between 2005 and 2030.

Chinese leaders want to secure future oil supplies to meet this anticipated demand.[1] China’s partially government-owned national oil companies are pursuing oil deals abroad. They have made exploration and production deals in Iran, Sudan, and Venezuela, as well as with other “energy-rich problem states,” throughout the last decade.[2] And a survey of China’s most recent overseas oil deals finds that these contracts hold the combined potential to deliver more than 7.8 billion barrels of oil to China.

This heavy investment can funnel money to unstable or dangerous regimes. China has been the largest foreign investor in Sudanese oil fields and indirectly funded governments in Venezuela, Myanmar, and Iran. China also provides economic assistance in exchange for significant oil exploration rights in oil-rich but poor African and Latin American nations. Erica Downs of The Brookings Institution notes that, “in the first half of 2009 alone, Chinese banks extended more than $45 billion in loans to countries including Brazil, Kazakhstan, Russia, and Venezuela, all major energy producers battered by the fall in oil prices.”

Chinese national oil companies are forced to seek oil from impoverished, dangerous nations because the United States and other OECD nations have long-term contracts for oil from “friendlier” nations.

China is also building its own Strategic Petroleum Reserve, or SPR. It can hold 100 million barrels, about enough to supply its oil needs for 20 days. China plans to build eight additional coastal oil reserves by 2011 to increase its total emergency supply to 281 million barrels. Demand for oil to fill China’s SPR will also keep prices up. The U.S. SPR is full with 727 million barrels, or 72 days worth, of oil.

China isn’t the only country eyeing oil abroad. Indian oil companies are aggressively pursuing overseas energy deals. The country just reached an oil exploration deal with Angola and is seeking deals with other unstable developing nations such as Nigeria and Sudan. Saudi Arabia, the world’s largest crude oil supplier, increased its exports to India sevenfold between 2000 and 2008 and announced in February 2010 that it would nearly double its crude exports to India this year, up to 770,000 barrels per day from last year.

China, India, and other growing economies have responded to increased global demand by securing more energy sources in a variety of different ways. Additionally, China has heavily invested in oil demand reduction strategies for vehicles such as fuel economy standards that are more efficient than those in the United States, aggressive electric vehicle plans and plug-in hybrid deployment, and increased efficiency and technology programs. Japan and India have had to aggressively pursue stricter fuel efficiency standards, too.

Worldwide demand means higher prices

Worldwide oil demand growth will cause economic harm to Americans if left unaddressed. Growing foreign demand combined with U.S. demand will produce rising oil prices””something we’re already beginning to see with oil prices recently hitting an 18-month high of $87 per barrel in April 2010.

Yet the U.S. oil industry’s investments in new production have slowed despite rising demand and a record-high oil price of $147 per barrel in 2008. Bloomberg reported that a Goldman Sachs analyst determined that “Investment into new oil capacity is being held up because ‘political impediments on the flow of capital are still very large.'” EIA reports that the number of “U.S. crude oil and natural gas active well service rigs in operation” dropped by nearly one-third between 2008 and 2009. And the number of active rigs in 2010 are still well below pre-recession levels.

A 2007 study found that in recent years the “big five” U.S.-based oil companies have limited their exploration for future oil reserves, and that their oil production has declined since the mid-1990s.The projected oil demand growth among developing countries, coupled with lower investment in exploration, will create a supply-demand gap. The EIA warns that “just at the time when demand is expected to recover, physical limits on production capacity could lead to another wave of price increases, in a cyclical pattern that is not new to the world oil market.”

Goldman Sachs estimates crude oil shortages will begin in 2011 as “supply fails to keep pace with a recovery in demand.” It predicts oil will rise to $110 per barrel in 2011 because of production capacity constraints. And the International Energy Agency’s most recent Oil Market Report warns that rising oil prices may be “stunt[ing] economic recovery.”

Higher oil prices will mean higher prices at the gas pump. The EIA forecasts that average gasoline prices will exceed $3.00 per gallon by this spring. Drivers will pay 17 percent more for gas compared to summer 2009“”$174 million per day, or an average of $602 per household annually. Energy price volatility like this hurts consumer and business investments, causing families to delay buying a car and spend less on buying or upgrading their homes. Businesses also cut investments, while profits surge in the oil and gas industry.

Drill, baby, drill is futile, baby, futile

The United States consumes more than 7 billion barrels of oil annually, but expanding domestic oil production will not solve our supply problem, make us more secure, or ease our wallets. President Barack Obama made it clear that drilling is not the solution to America’s energy challenges, explaining, “We have less than 2 percent of the world’s oil reserves; we consume more than 20 percent of the world’s oil”¦Drilling alone can’t come close to meeting our long-term energy needs.”

The United States does not have enough accessible nationwide reserves to meet our energy demand, and there is also great uncertainty over how much recoverable oil does exist. Supplies of extractable oil are dwindling. The amount of oil in proven U.S. reserves has steadily decreased since the 1970s, from 31.8 billion barrels to 21 billion barrels in 2007.

Drilling for oil in the Arctic National Wildlife Refuge in Alaska and areas formerly off limits in the Outer Continental Shelf will not close the supply gap. The amount of recoverable oil in the Arctic coastal plain is estimated to be between 5.7 billion and 16 billion barrels. This could supply as little as a year’s worth of oil. And it will take 10 years to produce any oil from this supply. The OCS has only slightly more recoverable oil.

The areas that became open for offshore oil production in 2008 have only a small portion of U.S. reserves. EIA determined that “the OCS areas that were until recently under moratoria in the Atlantic, Pacific, and Eastern/Central Gulf of Mexico are estimated to hold roughly 20 percent (18 billion barrels) of the total OCS technically recoverable oil.” As with the Arctic, EIA predicts that “conversion of the newly available OCS resources to production will require considerable time, in addition to financial investment.” And the horrible tragedy at the Gulf Coast oil rig reminds us of the potential human cost of offshore oil production.

Lower oil demand, more security

The United States cannot produce its way out of the supply-demand gap. The most cost-effective, speedy way to reduce our oil dependence is to reduce U.S. oil demand. And efforts to reduce oil use should focus on vehicles since 70 percent of oil use is for transportation and two-thirds of this is for passenger vehicles. There are three primary methods to reduce oil use:

  • Make vehicles significantly more fuel efficient while commercializing electric vehicles
  • Develop cleaner, alternative non-oil-based fuels
  • Invest in public transportation to provide practical, accessible, economical alternatives to driving

The Obama administration has taken important steps in each of these areas. It set new fuel efficiency standards for automobiles and light trucks. The average fuel efficiency of the new cars and light duty trucks will increase by one-third to 35.5 mpg by 2016. This will save nearly 2 billion barrels of oil over the life of these cars.

The Obama administration launched initiatives to build the infrastructure essential to increase the development and production of advanced biofuels. These measures will assist farmers that grow feedstock for advanced biofuels, as well as aid companies that produce advanced biofuels.

The American Recovery and Reinvestment Act will invest $8 billion in public transit and another $8 billion in high-speed rail. Both of these efforts will help save oil.

President Obama and Congress must also take new steps to reduce oil use. We should establish a National Oil Savings Program that cuts consumption by 7 million barrels of oil per day in 2030 with interim goals of 1 million fewer barrels of oil per day by 2015 and 3 million fewer barrels of oil per day by 2023. This is similar to an oil savings proposal made by Sen. Mary Landrieu (D-LA) in 2003.

The tools to make this promise a reality are within our reach and should include strategies aimed at vehicles, fuel, and transportation.[3] Some of these actions can be accomplished via executive action, and the Obama administration has already taken some essential steps in the right direction, though there are still more opportunities.

More efficient vehicles

  • Increase fleetwide vehicle efficiency to 40 mpg by 2020 and at least 55 mpg by 2030 to build on the administration’s initial standards. Sen. Richard Lugar (R-IN) plans to propose legislation that will automatically strengthen fuel economy standards.
  • Accelerate federal government purchases of alternative-fueled vehicles for its fleets, including natural gas, plug-in hybrid, hybrid, and electric vehicles. These could yield oil savings of up to 3.5 million barrels per day by 2030.
  • Challenge state, local, and private fleet operators to increase their purchase of these natural gas, plug-in hybrid, hybrid, and electric vehicles.
  • Increase the tax credit for fuel-efficient vehicles, apply it to the most fuel-efficient vehicles regardless of technology, and make it permanent.
  • Establish manufacturing incentives for U.S. companies to invest in more efficient vehicle technologies and assembly infrastructure to strengthen the U.S. auto industry and create jobs.
  • Create a federal revolving loan fund that provides loans for small business and clean energy projects, with loan repayments used for loans to other businesses.

Cleaner fuels

  • Offer economic incentives to purchase heavy- and medium-duty trucks and buses powered by cleaner, domestically produced natural gas. The New Alternative Transportation to Give Americans Solutions Act, or NAT GAS Act (S. 1408, H.R. 1835) would accomplish this goal. These bills would also boost investments in the refueling infrastructure. Additional safeguards for shale gas drilling are essential to ensure that increases in gas production do not create environmental hazards.
  • Eliminate existing tax loopholes for big oil companies that would cost U.S. taxpayers $36 billion from 2011 to 2020. This savings is nearly half of what the big five oil companies made in profits in 2009 alone. President George W. Bush even opposed tax breaks for big oil companies in 2005 noting that, “with $55 oil we don’t need incentives to oil and gas companies to explore.”
  • Bring advanced, cleaner cellulosic biofuels to commercial scale as soon as possible. These fuels are made from low input feedstocks, including agricultural waste, wood chips, or dedicated energy crops such as switchgrass. We should also ensure a stable long-term market for advanced biofuels by making short-term investments in the current generation of biofuels’ infrastructure needs.

Expanded public transportation

  • Double public transportation ridership. Transit ridership has grown over the past few years by up to 15 percent (depending on region) in response to higher gasoline prices. We should continue this trend by establishing a national goal of doubling the ridership for public transportation by 2020, which could save millions of barrels of oil per year.
  • Build on the ARRA investments in transit and high-speed rail by establishing a new discretionary state and local government public transit grant program. The federal government would cover 80 percent of the costs of this program, matched by 20 percent from local and state governments. The grant program should provide $1 billion annually over a decade to fund capital investment in rail and fuel-efficient rapid-bus transit, and preventive maintenance of public transportation infrastructure and joint development projects, with recipients prioritized based on oil savings potential.


James Woolsey, director of Central Intelligence under President Bill Clinton, noted: “We can move quickly to strike a major blow at oil and OPEC’s dominance”¦We can get a long way using existing vehicles, existing technology and affordable natural gas. As other improvements become practical””like charging your electric car from solar panels on your roof””they can be adopted.”

The United States needs comprehensive clean energy and climate policies to decrease our dependence on this expensive and unstable commodity. The bipartisan, comprehensive energy and global warming legislation by Sens. John Kerry (D-MA), Lindsey Graham (R-SC), and Joe Lieberman (I-CT) is expected to include provisions that would reduce U.S. oil demand. If we fail to reduce our oil consumption, energy costs will hurt national security and Americans’ pocketbooks. We can take immediate steps to create oil savings that we know work. We must also take the lead in developing and producing oil savings with vehicles of the future, and we can profit by marketing these products to the world.

31 Responses to Quenching our thirst for oil

  1. Military and intelligence organizations from the U.S. have concluded that global climate change poses a serious national security threat for many nations. For more information see the U.S. Center for Strategic and International Studies (CSIS) and the Center for a New American Security (CNAS) study titled The Age of Consequences: The Foreign Policy and National Security Implications of Global Climate Change and the Center for Naval Analysis study titled: National Security and the Threat of Climate Change. Gwynne Dyer in his book Climate Wars also details the geopolitical impact of climate change. He paints a dire picture.

    In the “business as usual” solution where emissions of GHGs continue to rise, the following consequences are realistic:

    * China and India pass the US as economic superpowers
    * Increased immigration
    * Higher food costs & more starvation
    * Increased authoritarian governments
    * Increased terrorism
    * Nuclear proliferation
    * Regional and global wars between countries with nuclear weapons

    Scott A. Mandia, Professor of Physical Sciences
    Selden, NY
    Global Warming: Man or Myth?
    My Global Warming Blog
    Twitter @AGW_Prof
    “Global Warming Fact of the Day” Facebook Group

  2. China now net importer of coal too, reinvigorating an ailing industry.

    Do our elites give a shit whether their grandchildren have a planet?


  3. fj2 says:

    In addition, global demand for space is increasing especially in urban areas where conventional oversized vehicles are impractical and why GM and other auto companies seem to be developing small two-person electric vehicles like General Motor’s P.U.M.A. prototype using Segway technology suitable for the Asian market.

    A recent Scientific American article describes these new vehicles as well as a video featuring a senior GM engineer on Columbia’s Earth Institute web site.

    It is not clear at all how cars can possibly fit into the future.

  4. Leif says:

    China uses our money to secure oil from rouge Nations. As of May last year the United States, read you and me since EXXON, etc. does not pay taxes here, owe ~3/4 of a Trillion dollars to China alone. China in turn uses that money to secure oil contracts from countries that we shun. It makes no difference it is still our money that shores up these rouge Nations. Do not forget that we pay interest on that money as well. Interest alone will double that 3/4 trillion in ~25 years. All that could and should be invested here but NO! We cannot get the GOP to accept policies that could ween us from our drug habit and open the door to a sustainable future.

    Pitiful, and they have the audacity to call the left un-American…

  5. mike roddy says:

    Projections of both oil and coal use to 2030 are so speculative as to be meaningless, and show a serious lack of imagination by those who compose them. By 2015, and certainly by 2020, we will see much more serious climate disruption than we have so far. This will be the trigger for significant carbon taxes on all fossil fuels.

    Some combination of solar, wind, and geothermal will be sufficiently advanced by 2020 to compete with coal and even natural gas electricity generation. That means better batteries and an auto fleet changeover, reducing demand for oil. Heavy cars will be crushed for scrap, and the Happy Motoring days of taking a 5,000 pound SUV to the mall to buy a few items will thankfully be gone.

    It’s also likely that the real rogue states in 2020 will not be those producing oil, but the ones who consume it, and don’t enforce global carbon tax standards. When agriculture starts to fail due to hotter microclimates, and oceans and forests continue to die, people are going to get pissed off. Oil and coal will finally be viewed by the global public as the filthy and destructive elements that they have always been. Let’s just hope it won’t be too late.

  6. BBHY says:

    Solutions are coming very soon. The Chevy Volt and Nissan Leaf will be out this year. Many more electric and hybrid vehicles will come out next year and in 2012.

    I have an electric car and I can tell you that people do not understand this technology at all. People always ask “How long does it take to charge?”. I like to answer “20 seconds, ten seconds to plug it in at night, and ten seconds to unplug it in the morning”.

    How long does it take your cell phone to charge? Who knows? You don’t sit there watching it charge! As long as it’s ready to go in the morning when you are, then it’s not an issue!

  7. David Smith says:

    The switch away from oil is inevitable. The only question is when and whether or not we will control the transition. Also wether or not we will benefit from the transition.

  8. Todd Tanner says:

    This was a good post, although your numbers may be overly optimistic. Worldwide oil production has been essentially flat for the last 5 years. As of right now, the all time all-liquid peak was in July of 2008.

    The biggest problem with reconciling peak oil and climate change is that we’re going to be dealing with declining energy supplies – and the subsequent economic & social shocks – at the same time we’re trying to transition away from fossil fuels and build an entirely new renewable energy infrastructure. At best it’s going to be awfully tough, at worst … well, at worst it won’t be possible.

    Conservation will be the single most important thing in the short run. We need to cut our energy usage dramatically if we’re going to have any chance at coming out the other side of this bottleneck.

  9. James Newberry says:

    The case can be made that oil price shocks during the past century have precipitated recession in the US. With casino “banks” still running the show and the looming oil crunch, prepare for another recession within a few years. The resulting economic and ecologic impoverishment (from climate change, etc.) may then pervade the public as phycological depression (except for military contractor profiteers).

  10. Preston Wright says:

    We are at ‘peak’. It is either all out endless resource wars or collapse. Take your pick….

  11. Bob Wallace says:

    Preston – Bull.

    “Peak” is not the edge of a cliff. It’s a point at which supply tightens and adjustments have to be made.

    We can (and will) make short term adjustments by doing what we’ve done in the past when OPEC tightened supply in the 1970s and back a couple of years ago when gas reached $4 a gallon ($5 where I live). We’ll drive less, carpool and ride public transportation more. We’ll leave our gas hogs in the driveway as much as possible and drive our more efficient vehicle when we can. (And we’ll see a lot of Hummers towed to the crusher.)

    Longer term we’ll do what Mike #5 and BBHY #6 talk about. We’ll switch from petroleum to electricity.

    The graph at the top of the page is a “business as usual” projection. It does not take into account emerging technologies which will flatten the slope of the curve.

  12. Dan B says:

    I’ve been telling my friends for at least a decade that when the Chinese got cars there would be a huge sucking sound in the Middle East.

    Little did I know it would also include Sudan and Brazil (or Iran – see “saber rattling” and “Chinese investment in the Islamic Republic”).

    At present many factors seem to resemble the years before World War II: Extended worldwide economic declines, entrenched elites, aggrieved nations, a scramble for resources, “brushfire conflicts”, and a widespread shortfall of public consciousness of any visionary way out of the mess.

  13. Bob Wallace says:

    India is coming on strong as well. Gone are the days of bikes and motor scooters. It’s now cars and obnoxious twenty-somethings on motorcycles.

    Best we get busy and start getting our alternatives up and running. We won’t be able to outspent the Chinese, they’ve already got our cash….

  14. Rabid Doomsayer says:

    You are still way more optimistic than me. The crunch is coming sooner than you think. Just look at Ghawar, too complex then just look at Ayn Dar.

    Hubbard’s curve assumes secondary recovery on post mature fields. We are using tertiary recovery on allegedly prepeaked fields.

    You know that the quoted reserves around the world are rubbery at best.

    With the foxes still in charge of the hen house we are unlikely to discover the truth of the global financial crisis. After watching Will K Black from last years interview I suspect the crisis is far from over.

  15. David B. Benson says:

    Bob Wallace — The problem is that around peak, with fairly inelastic demand, the price goes way up. We had a taste around the time of the mortgage-derivatives collapse, remember?

  16. Leif says:

    … “the price goes way up.” as David , #15 states. And guess what, those that got oil to sell, EXXON and others, make a LOT more money and get to smile all the way to the bank. Recall also that this past year EXXON took in ~$45 billion and paid NO US taxes. Chances are they could double that amount and still break even on the tax ledger. What a deal. Those are the very same folks that accuse world wide scientists of collusion on effects of Global Climatic Disruption to keep their grant money. What a crock! And the main stream media lets it ride!

    Journalists, with a few exceptions, FOR SHAME! Editors, what I would like to say to you would defiantly tax Joe’s filters. Use your imagination.

  17. Chris Dudley says:

    In other words, there is a severe supply problem. In that case, the president has the power, already approved by congress, to implement our standby gasoline rationing plan. It is an excellent plan and includes a ‘white market’ in rations so that all needs will be met. Rationing to the level where the price of oil drops to $20/barrel means that problematic supply such as tar sand or risky deep water oil will not be produced. Nations which fund terror will see substantially reduced funds to do so. And, any price signal will be shifted to the rations so that money remains in our domestic economy.

    The solution is already in law and only needs the courage of the president to make it happen. And, the white market will be hugely popular at election time….

  18. David B. Benson says:

    Chris Dudley wrote And, the white market will be hugely popular at election time…. Huh?

  19. Bob Wallace says:

    “The problem is that around peak, with fairly inelastic demand, the price goes way up. We had a taste around the time of the mortgage-derivatives collapse, remember?”

    There’s quite a bit of elasticity in demand. We’ve twice demonstrated that we, in the US, can significantly drop our demand if prices rise or supply drops.

    As I posted earlier we have an ability to quickly cut use by car pooling, using public transportation, cutting down on unnecessary driving, etc.

    During the oil crisis of the 1970s people did all sorts of creative things to cut down on their use of fuel. Some people rented couches or spare bedrooms close to work one or more nights per week in order to avoid long commutes. Some people slept in their office. I knew a couple who took their RV into the city, found a cheap place to park it, and lived aboard for two to four nights a week. Some companies bought multi-passenger vans and paid an employee to be the driver. I sold my house which was 1.5 hours from work and moved to 10 minutes away.

    Longer term (assuming the Volt, Leaf, and MiEV perform as expected) we can start a rapid transition away from petroleum. Commercial fleets, such as UPS, have already started. We’ll see more public transportation spring up. Buses are quick to build. We’ll put more pressure on municipalities to build light rail. And we’ll get cranking on high speed rail.

    And all those new car owners in China and India? Well, they are even more elastic. Many will have pushed their budget to buy a car, high fuel prices will drastically cut their driving. And they already have pretty good public transportation available to them. Same with Europeans. Our car in Bangkok will get used a lot less. You can step out the gate and flag down a songthaew to the bus line, Metro, or SkyTrain.

    I’m kind of thinking that high fuel prices would go a long way toward helping us cut back on carbon and help save our butts.

  20. Chris Dudley says:

    David #18,

    Most people use less gasoline than they would be rationed. That means they’ll be getting checks for the extra. And, gasoline would cost a lot less within the ration limit. Both effects would be very popular. Much better than the checks the prior administration sent out since they would be recurring.

  21. substanti8 says:

    Buried within the large web site of the U.S. Department of Energy is a summary of petroleum products use.  In 2008 (the latest year for complete statistics), 46 percent of petroleum was used for “finished motor gasoline” – which is the demand that Bob argues has “quite a bit of elasticity.”

    Regardless of whether that is true, I wonder how much elasticity there is in the remaining 54 percent.  Non-gasoline uses include diesel fuel (16 percent), which is primarily used for hauling freight.  There’s also heating oil (6 percent), liquefied petroleum gases (10 percent), and jet fuel (8 percent).  There’s also asphalt, lubricants and petroleum feedstock for chemical synthesis.

  22. Bob Wallace says:

    There is elasticity in diesel fuel. Ramp up the cost of shipping goods on trucks and some freight will move to rail, which is much more fuel efficient.

    Additionally, manufacturing sites may move to be closer to the market. If we are talking about a product that has a small amount of labor but is costly to ship, we might well see that manufacturing return to the US from China as shipping prices tip the scales backwards. We might see a generalized decentralization of manufacturing. Some things might be as cheap/cheaper to manufacture locally rather than import.

    There is some elasticity in heating oil. When the price of heating oil rises people set their thermostats lower, install more insulation/weatherstripping, replace inefficient heaters, etc. Longer term there will be more ground effect geothermal heating installed. Higher fuel prices makes other forms of heating more competitive.

    LPG, some of that use is optional, firing up the BBQ and using the outdoor heater. Higher price will drive those uses down. And natural gas will likely take over some of the jobs done by LPG. I could switch my kitchen stove from LPG to NG in a few minutes by simply changing the burner jets.

    Jet fuel. Both commercial and military jets are being flow on biofuels or biofuel/petroleum mixes. It’s basically at the test level at this time, but the tests seem to be going well. Increased oil prices will move planes to more non-petroleum based fuel.

    Finally, we know how to make plastics from plants materials. It seems that we don’t because petroleum is cheaper. Or perhaps it’s that the cost of changing equipment/building new processing plants holds things back. Price of oil goes up and manufacturers are going to consider moving away from oil.

    Remember, we switched from whale oil to coal oil to kerosene very quickly as a less expensive fuel became available.

  23. Preston Wright says:

    Seriously? “we switched from whale oil to coal very quickly” along with so many other ludicrous statements… The staggering amount of uses for oil and how integrated it is into the American economy as well as our food supply means we should have begun the switch at least a decade ago. To think there will not be resource wars as well as a reduction in the living standards of Americans before alternatives ‘bridge the gap’ is a fallacy at this point. It is clear from an historical perspective that we will only face our problems once we have an emergency. That emergency is coming.
    I agree, all the technologies are there to begin the transition but without beneficial policies and subsidies in place to kick start the transformation we are just grinding our way into a deeper and deeper hole. Any amount of your sunshine pumping is not going to replace the reality that we are staring at the precipice.

  24. Bob Wallace says:

    Preston, in 1850 consumers had several products that they could use to fuel their lamps. By the early 1860’s kerosene dominated the market and the whale oil market was collapsing. Here in the information age we can transition much faster than in the days of the pony express.

    Yes, we would have been smart to start the transition a decade ago. We would have been very smart to have continue Jimmy Carter’s initial work to get us shifted to green energy. But we didn’t.

    Now, if you want to spend your time reading doomer porn and dreaming of your own personal Mad Max future, up to you.

    Me, I’ve been around long enough to have see a series of “end of the world” crises loom in our immediate future and then fade away as we apply ourselves in the effort to save our butts.

    We’ve already started the process. We are rapidly installing wind turbines (wind produced electricity is starting to reduce the cost of electricity to the consumer). Solar technology is zooming ahead and solar has already reached grid parity in ‘sunny’ markets. Geothermal grew by almost 30% last year.

    We’ve got EVs and PHEVs coming to market within the next 12 months. Vehicles which will let almost all of us do almost all our driving on electricity alone. (And remember that approximately 50% of US driving is done with cars five years or less old.)

    It is extremely unlikely that there is a precipice in our future. A period of disruption for many, for an uncomfortable disruption for some, yes. But a world-wide crash and burn? Don’t think so.

  25. substanti8 says:

    I find it curious that the comment I submitted at 4:00 is still embargoed for “moderation”.

    In any case, I would like to add that my last quotation should have been attributed to Eric Holt-Gimenez.

  26. Guava says:

    Your views on this topic are really interesting and give a clear cut view.
    Oil demand gain in the whole world and supply may short.


  27. substanti8 says:

    OK … I’ll try to post this again.

    Bob, thanks for the detailed response.  What you’ve outlined is a best-case scenario, but it’s an unlikely scenario.  I would also quibble with your confidence in American railroads.

    “We have a railroad system that the Bulgarians would be ashamed of.”
    James Howard Kunstler

    Here are a few other skeptical questions for you:

    1.  How would electricity from wind and sunshine help replace our vast reliance on fossil fuel for food production and distribution?  We currently rely on the Haber-Bosch process for ammonia fertilizer, and our fresh food is distributed by an armada of refrigerated trucks.

    2.  How will iron, copper and the wide assortment of metals (critical for industrialism) be mined without fossil fuels?  Without continual mining, there will be few wind towers or solar panels (relative to the industrial need).

    3.  Are you aware that most of the “biofuel” industry is actually an agribusiness scam – due to government subsidies, low EROEI, and severe impact to the environment?  I find it ludicrous that we would sanction the destruction of tropical rainforest for palm oil plantations, so that a few fat Americans can roll up their frequent-flyer mileage.

    “Like the original agrarian transition, the present agro-fuels transition will ‘enclose the commons’ by industrializing the remaining forests and prairies of the world.  It will drive the planet’s remaining smallholders, family farmers and indigenous peoples to the cities.  This government-industry collusion has the potential to funnel rural resources to urban centers in the form of fuel, concentrating industrial wealth.  But this time, there is no cheap fuel to drive industrial expansion and there will be no jobs for the masses of people displaced from the countryside.  Millions of people may be pushed farther into poverty.” – Eric Holt-Gimenez

    Finally, your analogy of switching quickly from whale oil to kerosene is simply not relevant to our current situation – because the new fuels will be more expensive than the cheap oil of the squandered years under Bush-Clinton-Bush.

    [JR: I don’t thing #1 or #2 make much sense (or are straw men), but I’ll let this go through.]

  28. substanti8 says:

    Joe, it looks like I need to read your book.  Does it address the issue of food production without the use of fossil fuel?

    [JR: No, but we don’t have to go to zero tomorrow. Also ag could be a net C absorber.]

  29. Bob Wallace says:

    Well, I’ve got to say that when you attempt to support a position by calling on Kunstler you’re, well, you’re er, …. Let’s just say “hole dug, now start climbing out”.

    1. Electricity is a good match for farm machinery. Tremendous torque. Short range which makes for convenient battery swaps or rapid chargers.

    And, remember, we don’t have to cut to zero petroleum during year one. We just have to cut back. We ship more by rail, less by truck. We use more electricity for local distribution. And we use petroleum where it is the most needed.

    We already use natural gas to make ammonia. No shortage of NG in our near future.

    2. Electricity is already the common “fuel” for underground. If you do a bit of googling you will find some very large mining equipment that runs off battery packs.

    3. There are biofuel solutions which do not use food or food-production quality land for their feedstock. Switchgrass and camellia are a couple of good candidates.

    Switchgrass is a perennial which can grow on very poor quality soil, needs little water or fertilizer, sequesters carbon, and improves the soil. Switchgrass is an American native plant. It evolved on our plains so it likes our soil and thrives with normal rainfall patterns.

    Camellia is a member of the mustard family and can be inter-cropped with wheat, giving farmers a second crop (and second source of income). Planes are already flying with camellia oil in their tanks.

    Finally, don’t like the “pretty danged quick” way we moved from one fuel to another for our lamps?

    OK, how about the speed at which we moved from horses to cars? From slide rules to calculators? From typewriters to computers? From CDs to MP3s? Film to digital?

    Give people a decent alternative and reason to switch and they switch. Give people a comfortable, affordable EV with a decent range, crank gas prices up to $5/6/7 a gallon and best you don’t try to block the dealers’ doors.

    (Oh, perhaps you don’t know. “Fueling” the Nissan Leaf with $0.105 per kWh electricity is like fueling a 30MPG car with $1 gas. It is not a move from less expensive to more expensive fuel. It’s a move from quite expensive fuel to cheap fuel.)

  30. substanti8 says:

    Regarding the large-scale rollout of biofuel from switchgrass, I’ll believe it when I see it.  Regarding our general agricultural reliance on fossil fuel, electric motors for tractors wouldn’t even make a dent in the problem.

    “No shortage of NG in our near future.”

    I have three responses to that.  First of all, let me remind you that the climate crisis is mostly not about consequences in the “near future” – it’s mostly about taking action now on behalf of future generations.  It seems clear that we need to reduce our use of all fossil fuel ASAP, regardless of misplaced optimism about the supply.

    Secondly, we’re already past the peak of North American natural gas production – which means that the process of increasing scarcity has already begun:

    “The natural gas industry has clearly been mounting a heroic effort to keep natural gas production on plateau in North America.  This effort has raised costs dramatically.  The EROI of Canadian production shows a rapid decline.  Drilling statistics suggest a similar EROI decline is happening in the US.  The falling EROI makes it impossible for natural gas production to maintain both low costs and current levels of production.  It is clear that most of the reserves in the official forecast will never be developed.  Jean Laherrere’s predictions are more likely to be correct.  And if EROI continues to fall at the current rapid rate, he will be remembered as an optimist.” – Nate Hagens

    Thirdly, you sidestepped the main thrust of my question – fertilizer and distribution.  Perhaps replacing the conventional Haber-Bosch process would be no big deal, as Joe seemed to imply above (when he dismissed my question as a straw man).  But it seems that if the answer were easy, then it would be forthcoming.

    “Electricity is already the common ‘fuel’ for underground.”

    I don’t know what you mean by that, but if you’re claiming that something is common, I would like to see your source.

    “If you do a bit of googling you will find some very large mining equipment that runs off battery packs.”

    All of Caterpillar’s trucks are powered by diesel engines.  If you think you’re better at research than I am, then show me the source of your claims.

    “The most evident new component is the Cat C175 diesel engine, which is the power plant for each of the new trucks.” – Jan 2010 issue of Mining magazine, 10 MB pdf

  31. substanti8 says:

    After more research, I realized that I misinterpreted Kunstler’s writing about U.S. railroads in my comment two days ago.  It seems that his criticism is directed at passenger service, not the freight system.  Kunstler’s argument is that our passenger service is pathetic compared to that in Europe.  But I suspect that’s due in large part to the priority given to freight on American railroads.

    Paul Krugman offered this comparison chart between Europe and the U.S. that gives some support to Bob’s argument – that rail could replace a significant portion of truck distribution here.  I remain skeptical, especially since we seem busy in removing tracks across the country and converting the right-of-way to other uses.