Tuesday, August 25, 2009

Peak Oil?

There are two articles in the New York Times today that mention Peak Oil.

One article, is about supply, and the technical debate as to whether or not the worldwide annual production of oil has peaked, as it has in many individual countries such as the United States.

The other article mentions a different kind of peak oil, peak consumption. This article is about how upset the Saudis are that oil consumption in the United States has peaked. The price shocks of the last few years is the largest contributor, but our election of a president who has made a commitment to reducing consumption over the long term has is terrifying them; "the Saudis know that any attempt to reduce gasoline consumption is a threat to the future of the Saudi economy."

This really isn't all that complicated. We produce 7% of the world's oil, while consuming 24%. Simple economics say that we can have a lot more influence on price of oil by managing our demand rather than our production.

In the election last year, you had a candidate who's party was promoting increasing supply ("drill baby drill!") vs. a candidate focusing on reducing consumption. You would think that all of the business people and free market advocates in the Republican Party understand these basic facts, but they are so co-opted by big oil that they are literally being paid not to.

Since the election, the winner has actually been focusing on long term consumption reduction, and the Saudi's are scared shitless. They are now worried about peak oil consumption more than we are about peak oil production. With 230 mpg hybrids and pure electrics on sale next year, they should be.

One final quote from the second article: "the former Saudi oil minister, Sheik Yamani, once said that the stone age didn’t end because the world ran out of stones, and the oil age will not end because the world runs out of oil. It will end when something replaces it."

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