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View Diary: Obama administration to release oil from strategic petroleum reserve (96 comments)

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  •  that's actually a common misconception (1+ / 0-)
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    damfino

    Demand has been fluctuating quite a bit.  A lot of people thought that demand would continue to grow regardless of oil price, but it turns out that a lot of oil demand is price dependent.  The EIA estimates that American gasoline consumption may have peaked in 2007, and with prices as high as they are this isn't likely to change.  So, supply stagnates, demand grows and forces up prices, then demand crashes leading to a price crash, and now we're experiencing the market as it tries to find a new stable set point with stagnant supply in the face of increasing demand.

    Besides, we're still at the plateau, we have yet to experience a drop in oil supply.  There's still a lot of questions as to how long we can maintain this plateau and the slope of the eventual decline.

    •  Uh (0+ / 0-)

      So clearly "peak oil" is  a silly benchmark, artificial in its setting, what only maters is price

      •  I'd disagree (0+ / 0-)

        The high oil prices exacerbated the 2008 economic crash, and high oil prices now are inhibiting recovery.  Price comes out of a relationship between supply and demand, and peak oil says that demand growth will lead to price increases in the absence of supply growth.  These price increases will lead to demand dropping.  In a perfectly efficient economy there would be no boom/bust, just a steadily rising price, but modern economic markets are still plagued with inaccurate pricing mechanisms.

        "Peak Oil" simply talks about the supply side of the economic equation, it takes a little more effort to see how the supply side impacts those things that are more directly observable to us.

        •  OK (0+ / 0-)

          But the supply depends on price, if the price of oil was higher the supply will grow because there is oil out there right now that is not that cost effective to extract. When the barrel goes over $120 it will be.

          The fight is to keep the price low enough so alternative energies are not promoted hastily, but other producers want the price high now. So at the end what matters here is the price during the transition

          •  Supply in this case has nothing to do with price, (0+ / 0-)

            other than to affect the pace at which we use it up. The term "Peak Oil" is used to define when the actual supply of this finite resource--in other words, the amount of oil itself in the ground--can no longer be seen as increasing or plateauing, regardless of human efforts to retrieve it.
            Let's say there are 1 million barrels of oil in existence, and we've found and withdrawn 499,999 barrels of it. The peak will be passed after we get that next barrel out of the ground, irrespective of how much that barrel costs anyone.

    •  Cars take up so freaking much room. (1+ / 0-)
      Recommended by:
      damfino

      We are set up so no one can walk or ride a bike, every house means 4 cars on the road at least.  When we learn how much room we have without cars, kids will wonder why we even had them.

      . . . from Julie, Julia. "Oh, well. Boo-hoo. Now what?"

      by 88kathy on Thu Jun 23, 2011 at 08:00:07 AM PDT

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    •  I don't think you have it quite right (0+ / 0-)

      A report came out a couple of months ago about the elasticity of demand for gasoline and I was rather shocked at how inelastic it has been.  In other words, for America as a whole we don't shift our driving patterns much based on the price of gasoline and thus we tend to use about the same amount no matter what.

      Of course, the Great Recession has lowered demand and so I'm not arguing that we haven't consumed less since 2008 (when prices increased greatly) but it had more to due with the recession and not the price of gasoline.

      As a person who favors raising taxes on energy in general and gas in particular I found it surprising and disappointing that demand for gas wasn't more elastic.

      I'll see if I can find that report and post a link.

      We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

      by theotherside on Thu Jun 23, 2011 at 08:28:53 AM PDT

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      •  i expect this is because we are (0+ / 0-)

        wealthy enough to have disposable income to shift. The elasticity is probably visable in the third world.

        •  Sounds reasonable. (0+ / 0-)

          Of course, I thought it sounded reasonable that demand for gas would be more elastic!

          Anyway, here is an excerpt from a report I found.  I'm not sure if this was the report that I saw the article on recently or not but it says:

          We find that the short-run price elasticity of U.S. gasoline demand is significantly more inelastic today than in previous decades. This result is robust and consistent across several empirical models and functional forms. The observed change provides evidence of a structural change in the U.S. market for transportation fuel and may reflect shifts in land-use, social or vehicle characteristics during the past several decades.

          and:

          The short-run price elasticities differ considerably: and range from -0.034 to -0.077 during 2001 to 2006, versus -0.21 to -0.34 for 1975 to 1980.

          Anyway, this one report can be found at:

          http://www.econ.ucdavis.edu/...

          I did find another article that said that reports about elasticity are all over the map and so I guess we have to take it with a grain of salt.

          We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

          by theotherside on Thu Jun 23, 2011 at 09:19:17 AM PDT

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      •  Time is required to adjust to price (0+ / 0-)

        Reducing demand by switching to higher mileage cars, living closer to work, installing insulation take time for people to adopt.  Longer term switching may include electric cars, cars & trucks  that run on Compressed Natural Gas, etc

        So the demand becomes more elastic over time.

        The most important way to protect the environment is not to have more than one child.

        by nextstep on Thu Jun 23, 2011 at 10:38:31 AM PDT

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        •  Yep, all true. (0+ / 0-)

          That is why we can't simply wait for the market to signal scarcity.  We need to estimate, as well as possible, when peak will be here and then plan 20 years in advance to make the changes as painless as possible.  Of course, I think peak is here or will be shortly and so I favor more aggressive raising of taxes on energy and more aggressive tax cuts on income to offset those increases.  To be more clear I favor taxing consumption more than taxing work and we should slowly change each to acknowledge the world we are living in (or about to enter).

          My thinking has also led me to buy a Volt so that I can walk the talk a little more and reduce my oil consumption by over 90 percent.  It's not a perfect solution but it is supporting a step in the right direction.

          We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

          by theotherside on Thu Jun 23, 2011 at 02:32:49 PM PDT

          [ Parent ]

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