Quote of the Day week year Oil Age

I know I shouldn't be surprised by a lot of what I find on Drudge, but this one surprised me...

“[T]he prices that we’re paying at the pump today are, I think, going to be ‘the good old days,’ because others who watch this very closely forecast that we’re going to be hitting $12 and $15 per gallon,” [Robert Hirsch, Management Information Services Senior Energy Advisor] “And then, after that, when oil – world oil production goes into decline, we’re going to talk about rationing. In other words, not only are we going to be paying high prices and have considerable economic problems, but in addition to that, we’re not going to be able to get the fuel when we want it.”

Drive Less?

Comments

[Laura]

Maybe this will finally spur us to seriously commit to alternative energy sources. I am ready to hear not only about green motoring, but also green eating, and green computing. On the last topic, I think www.shutdownandprotect is a good resource.

[Laura]

www.shutdownandprotect.com that is

[Bob Murphy]

Tim,

I realize I'm a newcomer and so this might be annoying, but can you explain why you champion "Drive Less" and not, say, "Drill More"?

In other contexts, when demand growth is outstripping supply growth, economists would usually recommend relaxing government prohibitions on new supplies. So why not in this context? Is it for environmental reasons, for example? I'm just curious about your specific views, since we seem to both be stellar economists. :)

[Steve Hamilton]

This quote is for the wastebin. If a regulator chooses to ration oil, then the regulator chooses the price. You can't have it both ways; either a government fixes price and rations, which implicitly raises the opportunity cost of commuting, or market prices ration consumption. Why should I believe a forecast that: (i) prices rise to $12-15/gallon; and (ii) then the government caps price and starts rationing? I doubt it.

[Don Strong]

Tim: The oil companies are very good at drilling more and more, and very good and finding and extracting what is down there. The whole idea here is that oil is a finite resource to Homo sap. While we have used a huge fraction of what was there in about 1900 when we began pumping, it is being regenerated by biogeochemistry at, probably, one hundred trillionth of the rate we are using it.
This fact was pointed out by M. King Hubbert about 50 years ago. It is verified by the fact that the amount of new oil in discoveries have been dropping for quite a while.

[Tim Haab]

Don,

If I'm not mistaken, Hubberts peak opil prediction was for 1970 (or thereabouts). Oops. It amazes me that people hold Hubbert up as the genius founder of peak oil. He predicted that at some point oil production will peak, not shocking and completely uninteresting --and then grossly missed the mark--again not shocking.
Edited by Tim after the next comment pointed out how grossly idiotic and baseless part of this statement is. I still stand by the rest

The economic point to be made here is simple, as oil becomes scarce, prices should rise. If that is indeed what we are seeing, outstanding, the markets are working the way they should. People will adapt.

[Ed Vogt]

Tim, you are mistaken. Hubbert's peak oil prediction was for US oil peak prediction and hit it within 2-3 years. His predictions were ridiculously accurate. It has been difficult to make the same prediction on the world stage because of the uncertainty about the true amount of oil in reservoirs internationally and the changes in drilling technology and reservoir management.

[Tim Haab]

I humbly retract my above comment by admitting I'm an idiot who spouted off without the facts. My mistake.

[Scott]

Tim,

Hubbert's prediction for World Peak Oil appears to be right on schedule, he predicted 2005-2006 as I recall and as can be seen here: http://en.wikipedia.org/wiki/Image:Hubbert_peak_oil_plot.svg

I find it quite surprising that you find that uninteresting considering that our economy (not to mention our food and water supplies as well) is based on energy, specifically oil.

I would have thought if it were predictable that Peak Oil is now occurring it would be of considerable interest to economists. Peak Oil will I think inevitably be followed by a period of economic decline as growth first stagnates and then declines with the energy supply until after a transition period during which a new energy infrastructure is created, a task that will take decades to accomplish.

Peak Oil I would think will be accompanied by the worst economic depression we will ever likely see. Am I wrong?

[Joshua Corning]

I remember in early 2000 when Wired magazine said Microsoft would soon be a trillion dollar company and the Nasdaq would hit 10,000....

I smell a bubble.

[Dano]

Energy Watchdog Warns Of Oil-Production Crunch
IEA Official Says Supplies May Plateau Below Expected Demand
By NEIL KING JR. and PETER FRITSCH
May 22, 2008; Page A1

The world's premier energy monitor is preparing a sharp downward revision of its oil-supply forecast, a shift that reflects deepening pessimism over whether oil companies can keep abreast of booming demand.

The Paris-based International Energy Agency is in the middle of its first attempt to comprehensively assess the condition of the world's top 400 oil fields. Its findings won't be released until November, but the bottom line is already clear: Future crude supplies could be far tighter than previously thought.

Best,

D

[Jonathan]

This is certainly some sort of speculation resulting in today's record high oil price. But i guess the main reason may still be the supply problem. Are oil companies discovering new oil fields? The world is consuming oil like its never going to end. Even if OPEC increases production, it only means that there will be less oil in the future and the market is going to see this point, so they will keep on driving up the oil price.

High Oil Price

[Ironman]

Tim - you're actually more of a mythical pied piper type, if this government data is to be believed:

Americans drove less in March 2008, continuing a trend that began last November, according to estimates released today from the Federal Highway Administration.

[snip]

The FHWA's "Traffic Volume Trends" report, produced monthly since 1942, shows that estimated vehicle miles traveled (VMT) on all U.S. public roads for March 2008 fell 4.3 percent as compared with March 2007 travel. This is the first time estimated March travel on public roads fell since 1979. At 11 billion miles less in March 2008 than in the previous March, this is the sharpest yearly drop for any month in FHWA history.

If we can blame you for $4/gallon gas, is it okay if we blame this on you too?