PeakOil is You
Why We Should Be Concerned About Low Oil Prices
Re: Why We Should Be Concerned About Low Oil Prices
by Cog » Sun 07 May 2017, 09:45:23
Purse swinging be serious business yo.
-
Cog - Fusion
- Posts: 13416
- Joined: Sat 17 May 2008, 03:00:00
- Location: Northern Kekistan
Re: Why We Should Be Concerned About Low Oil Prices
by kublikhan » Sun 07 May 2017, 11:24:27
$this->bbcode_second_pass_quote('ralfy', 'O')il price soared, but demand did not plummet. Oil price crashed, but demand did not soar.
Oil prices change quickly in response to supply/demand balances(or perceived future balances).Demand does not respond quickly to price changes.The oil barrel is half-full.
-
kublikhan - Master Prognosticator
- Posts: 5064
- Joined: Tue 06 Nov 2007, 04:00:00
- Location: Illinois
Re: Why We Should Be Concerned About Low Oil Prices
by kublikhan » Sun 07 May 2017, 12:32:04
Then I will explain further. Demand does not respond quickly to price changes. During a price crash, people do not go out and start driving in circles just because gas is cheaper. They may decided to carpool less. Take an extra vacation that year, etc. But the majority of their driving needs/wants are unchanged. A bigger change can be seen when it's time for people to go out and buy a new car. During a price spike, hummers are swapped out for subcompacts. During a price plummet, those glitter SUVs on the showroom floor start looking alot more appealing:
Large SUV Sales Surge Faster Than Small Cars
But it takes awhile to significantly alter the fuel economy of the entire fleet. There are 260 million vehicles in the US fleet. But only around 17 million new vehicles sold every year. In other words, there is a great deal of momentum that doesn't change quickly.
$this->bbcode_second_pass_quote('', 'T')he market is oversupplied, by a significant amount, and no amount of posturing will change that. However, basic economics may. Overlooked by many is the fact that OPEC’s problem is one that automatically diminishes over time even if OPEC does nothing. This is because the demand for oil is short-term inelastic, but long-term elastic. If demand is inelastic, then a price cut doesn’t change the quantity sold very much. Oil demand is, at least in the short-run, price inelastic. If gasoline prices rise $1 per gallon next week, you will still drive almost as much as before.
Oil Price: Not Just About Supply, Consider Demand Elasticity TooLarge SUV Sales Surge Faster Than Small Cars
But it takes awhile to significantly alter the fuel economy of the entire fleet. There are 260 million vehicles in the US fleet. But only around 17 million new vehicles sold every year. In other words, there is a great deal of momentum that doesn't change quickly.
$this->bbcode_second_pass_quote('', 'T')he market is oversupplied, by a significant amount, and no amount of posturing will change that. However, basic economics may. Overlooked by many is the fact that OPEC’s problem is one that automatically diminishes over time even if OPEC does nothing. This is because the demand for oil is short-term inelastic, but long-term elastic. If demand is inelastic, then a price cut doesn’t change the quantity sold very much. Oil demand is, at least in the short-run, price inelastic. If gasoline prices rise $1 per gallon next week, you will still drive almost as much as before.
Markets on the other hand respond quickly to new information. In November 2014 the Saudis announced they will not be implementing an output cut. Future perceptions of the supply/demand balance changed quickly. The price immediately dropped $6 and continued to fall for the next year. In November 2016 oil prices surged after OPEC announced an oil cut. Market perception of the future supply/demand balance changed and prices adjusted accordingly.
The oil barrel is half-full.
-
kublikhan - Master Prognosticator
- Posts: 5064
- Joined: Tue 06 Nov 2007, 04:00:00
- Location: Illinois
Re: Why We Should Be Concerne d About Low Oil Prices
by AdamB » Sun 07 May 2017, 12:37:36
$this->bbcode_second_pass_quote('Cog', 'I') wonder if professional doomers, the ones who get paid to predict doom, ever sit back after their doomer predictions come to naught, think about what a waste their life has been.
I'm betting yes. And the one in particular I have in mind, after their stint at TOD began to be noticed at national professional conferences (much like Savinar when he ditched the dead albatross around his neck and revealed all about peak oil believers), they suddenly got quiet and began sidling away from the entire topic. Guilt by association...they know what that is.
And let's not forget that some of them, when coming to the conclusion you mention, couldn't stand the truth, and acted accordingly.
https://hatrickpenry.wordpress.com/cate ... stigation/
Plant Thu 27 Jul 2023 "Personally I think the IEA is exactly right when they predict peak oil in the 2020s, especially because it matches my own predictions."
Plant Wed 11 Apr 2007 "I think Deffeyes might have nailed it, and we are just past the overall peak in oil production. (Thanksgiving 2005)"
Plant Wed 11 Apr 2007 "I think Deffeyes might have nailed it, and we are just past the overall peak in oil production. (Thanksgiving 2005)"
-
AdamB - Volunteer
- Posts: 11018
- Joined: Mon 28 Dec 2015, 17:10:26
Re: Why We Should Be Concerned About Low Oil Prices
by kublikhan » Sun 07 May 2017, 17:09:27
$this->bbcode_second_pass_quote('pstarr', 'I')n the oil business, the opposite is true. Production does not simply ramp up. New production can take a decade for lease purchase, environmental impact, road and infrastructure development, collection and processing equipment, test wells, development wells, productions wells.
Both are true. Oil is short term inelastic on both the production and demand sides:$this->bbcode_second_pass_quote('', 'B')oth the demand and supply of oil are relatively inelastic in the short run: changes in price have little impact on either the quantity demanded or the quantity supplied. When oil prices rise we spend considerable time and energy complaining but, at least in the short run, spend almost no effort in trying to adjust our habits to consume less. Similarly changes in price do little to spur new supplies in the short run.
$this->bbcode_second_pass_quote('pstarr', 'N')o. The market is not over-supplied, it it under-demanded. We see a demand dearth around the world and even in the United States.
$this->bbcode_second_pass_quote('', 'T')he Federal Highway Administration announced this week that in calendar year 2016, the total number of miles traveled by vehicles on all U.S. roads reached another all-time high of 3.218 trillion, above 2015’s 3.130 trillion, which itself was the highest since 2007’s 3.031 trillion. In 2016, VMT was 10,065 miles per capita – the highest that it has been since 2007’s 10,049 m.p.c. This still is not quite up to the all-time high of 10,117 m.p.c. in 2004. Importantly, note that the rate of increase in VMT per capita over the last three years (an average of 1.7 percent per year) exceeds the average rate of increase over the 13-year 1992-2004 period (an average of 1.3 percent per year). So predictions of a perpetual decline in total VMT per capita appear unfounded.
