[whereagles]

$this->bbcode_second_pass_quote('Mircea', 'Q')uite a few sources claim a -5% net reduction in supply/increase in demand would result in $160 per barrel. I've never seen any math to support it, so I have no idea what they're basing it on, but I suspect it's based on current models, which would go right out the window once shortages appear, so it could very well go to $200 or beyond rather quickly.

[MrBill]

$this->bbcode_second_pass_quote('pup55', 'h')ttp://peakoil.com/fortopic27038-0.html

Here it is. $672 per BOE

[some_math_guy]

Oil is remarkably inelastic if you look at the data. As Stephen Leeb has pointed out his books, during the 70's the price of oil had to increase by a factor of 26 (~1.30$ per barrel before the first oil shock to ~30$ per barrel at the end of the decade) before consumption stopped growing globablly. I think it is a similar situation now...i believe that the price of oil could easily go to 120$ without a reduction in overall usage. People will complain a lot, but when you look at things realistically, commuting is still a good deal at twice the current price of fuel.

Another factor to consider is that when it comes to fuel, the crude oil is only a small part of the final cost at the pumps. Consider that there are about 159L in a barrel of crude oil which sells for say 70$...that's only 44 cents per litre, whereas you might pay 3.50$/L for gasoline at the pump! Even if oil were 120$, gasoline might only cost 5$ per gallon, which most people would pay and decrease their use by little if at all (I'm simplifying somewhat because the entire barrel of crude cannot be used to produce gasoline, but the point still stands)

Also I find it interesting that there is a lot of talk about how everything made from plastics (like the 24.99->32.99 diapers mentioned before) will be unaffordable due to high crude prices etc., there will be massive inflation etc. Plastics are produced using oil as a feedstock, true, but they increase the value of the raw crude by a factor of 10 or sometimes 100. It makes sense if you think about it...how much would it cost for you to buy 300 pounds worth of garbage bags? Probably 1000$...how much is the oil...maybe 60-70$.

The price of oil is so low as to be almost irrelevant or at least not the main cost driving overall prices of most oil-based commodities including fuel, plastics, chemicals, pharmaceuticals (think about it, a bottle of pills is 20$, how much do you think the crude oil cost...5 cents?). I think the crunch will come when prices escalate, people will still pay them and will be poorer as a result, but this will not slake demand significantly...so I do not anticipate price shocks being the problem, rather supply shortages and breakdowns in distribution networks. Oil is still a bargain at 200$ a barrel, because nothing else comes remotely close. I personally probably wouldn't change my commuting habits even if fuel doubled or tripled in price...the increase in price is still better than any alternative transportation schemes currently available in my neck of the woods.

Btw I have PV and solar domestic hot water in my house...I think they're great and the right thing to do, but I see real difficulties down the stretch with oil....it's just too awesome and too cheap to resist!



>Demand for oil is elastic in the long term.
>Whenever the demand of any product or service is elastic, revenues decrease, not increase.