Hi all!
Ever wonder what the year 2040 is going to look like? Well I do and I am conflicted. We have forces acting that are civilization changers.
Oil and Robots. Yep Oil and Robots.
We're just going to focus on the energy here. I'll get to the robots next, and then give a wonderful mind-meld of these two trends.
We're headed for an energy crisis of epic proportions even if we have 30 years before peak oil hits. Why? China and India are experiencing 8-9% growth per year. In other words, as 2.5 billion people move from the stone age to the modern industrial age.
I don't think it will be anywhere near that long before we hit peak oil. Heres the title of a recent presentation by Matthew Simmons, author of 'Twilight in the Desert':
The Energy Crisis has Arrived
Here is Matthew Simmons recent take on China from Dec 2005:
China's inexorable economic growth continues to stimulate seemingly insatiable energy demand, which has contributed to shortages of power generating, refining and petrochemical capacity. Further compounding energy capacity constraints are the rising energy intensity of GDP.
and
China has experienced consistent 8% to 10% GDP growth in each of the last six years, but annual apparent oil demand growth has varied wildly between 2.6% and 15.4%. The lack of visibility into China's oil demand is a key uncertainty going into 2006.
In other words, China could easly grow demand by 15% this year, as they have done this in the very recent past. As they have 8-9% GDP growth, its logical and reasonable to expect at least 8-9% in energy demand. As they increase their energy intensity, we should expect that demand will grow faster than GDP. Yikes.
Also, this is a first page conclusion from his Macro Energy report:
OPEC's spare production capacity ex-Iraq of only 1.7 mb/d (2% of worldwide demand) remains uncomfortably low considering the lack of visibility into Chinese demand growth, the escalating geopolitical tensions in Iran, Iraq and Nigeria and worldwide production challenges. Based on our analysis of OPEC's project backlog, we do not expect spare capacity to increase materially through the end of the decade.
Yikes.
here is that last line again
Based on our analysis of OPEC's project backlog, we do not expect spare capacity to increase materially through the end of the decade.
We have China increasing demand at 8-9% per year, and US is expected to increase demand by 3% per year. Spare capacity is not expected to increase. This means that prices will go up!
Yes, Prices will increase from $75 a barrel to something higher, unless we can solve these geopolitical situations. As I stated in a previous post, George Bush will not solve these geopolitical problems.
A year from today, you will look back at $3 gallon gas and wish it was that cheap.