[joeltrout]

$this->bbcode_second_pass_quote('timmac', ' ')I think the BIG tipping point will be $4.50 gal for America...

[phaeryen]

What is the demand destruction then, in clear terms?

Say we have a poor nation state economy A, who requires minimum amount of X oil to run their basic infrastructure on a sort of limping, skeleton, only basics covered -sort of scheme.

Economy A enters the marketplace to buy the oil but finds out that however much they cut from nigh everything, they can't meet the price of Y to obtain the X amount. So what do they do? Do they simply "not buy any oil" to send a message through the marketplace that they are unhappy with the high prices? I would assume they don't, but more rather gather up what they have and get as much oil as they can, to avoid the disruptive chaos, disarray and political upheaval that would result. They are priced out of their minimum needs, but still get what they possibly can?

Supply of oil is a constant but the quantity is in decline. The disparity between between X, the minimum amount the A economy needs, and X-Z, where Z is the amount they actually get after they throw all the money they can on the table, is "destroyed demand"? Its not like these guys in nation state A don't demand or need the oil...

Given time more players just like nation state A enter the marketplace and are desperate for oil, but the supply is a constant in decline. What is the price going to do other than shoot into the stars, as these entities compete for the resource they so crave?

We are in 2008 oil is 120$ per barrel. People I (try to) talk to about oil still see the whole idea of peak oil as a kooky tin-foil hat theory. Technology will save us, figure out a way. They reply with that or something similar. But if taken as an entity who produces stuff needing energy input I can't see technology as anything else other than just another child of god like nation state A here, who would like to obtain (more) oil to do some cool stuff with it.

In part, I'm just venting here and plead for forgiveness. Thank you.

[joeltrout]

$this->bbcode_second_pass_quote('phaeryen', 'W')hat is the demand destruction then, in clear terms?

[bigfnman]

I don't see it happening. At a price 1/2 that high no one will be able to afford to do anything thus the die off starts. First via riots and then starvation. Then once the population has been trimmed down to a managable 1 billion, we can get back to business.

[bodigami]

$this->bbcode_second_pass_quote('bigfnman', 'I') don't see it happening. At a price 1/2 that high no one will be able to afford to do anything thus the die off starts. First via riots and then starvation. Then once the population has been trimmed down to a managable 1 billion, we can get back to business.

[emersonbiggins]

$this->bbcode_second_pass_quote('zensui', '')$this->bbcode_second_pass_quote('bigfnman', 'I') don't see it happening. At a price 1/2 that high no one will be able to afford to do anything thus the die off starts. First via riots and then starvation. Then once the population has been trimmed down to a managable 1 billion, we can get back to business.

[bodigami]

$this->bbcode_second_pass_quote('emersonbiggins', '')$this->bbcode_second_pass_quote('zensui', '')$this->bbcode_second_pass_quote('bigfnman', 'I') don't see it happening. At a price 1/2 that high no one will be able to afford to do anything thus the die off starts. First via riots and then starvation. Then once the population has been trimmed down to a managable 1 billion, we can get back to business.

[Ferretlover]

I don't know... How high would it have to be before no-one, anywhere, could afford it?

[skiptamali]

Excellent poll here! The US government doesn't seem to think we're going to reach $1000/barrel by 2018!

Energy Information Administration- Annual Energy Outlook 2008

Does anyone else think that these projections are totally ridiculous? They project a significant decrease in petroleum prices between now and 2018! What's more amusing: the increase in price thereafter seems more gradual than the spikes we've experienced in recent years.

I simply cannot imagine how this is supposed to happen, especially with increasing demand for personal automobiles in China, for example.

[mos6507]

$this->bbcode_second_pass_quote('zensui', '
')I'm in Costa Rica, and honestly USA doesn't look that nice when you consider how military it has become. Good luck surviving in a Nazi-like or 1984-like state!

[emersonbiggins]

$this->bbcode_second_pass_quote('zensui', '')$this->bbcode_second_pass_quote('emersonbiggins', '')$this->bbcode_second_pass_quote('zensui', '')$this->bbcode_second_pass_quote('bigfnman', 'I') don't see it happening. At a price 1/2 that high no one will be able to afford to do anything thus the die off starts. First via riots and then starvation. Then once the population has been trimmed down to a managable 1 billion, we can get back to business.

[Ferretlover]

$this->bbcode_second_pass_quote('skiptamali', 'E')xcellent poll here! The US government doesn't seem to think we're going to reach $1000/barrel by 2018!

[timmac]

timmac wrote:
I think the BIG tipping point will be $4.50 gal for America...

joeltrout wrote :
Hmmmmmmmmmm that is what people said about $3.00 gas a few years ago.[sup]



" I myself never thought $3.00 a gallon was a serious problem ",, but see what problems there is allready with gas around $3.65 gal,, at $4.50 gal ++ all new problems will raise there ugly head,, remember most Americans are in huge debt,, food and many other things cost so much more and will cost even more when gas hits $4.50 gal,, we are not like Europe or other places,, we are a big driving society,, big highways,, many folks drive a hour each day for work,, our airline companys will be even in more trouble at this point,, the big 3 auto makers are having problems now,, farmers will go broke or just past a higher cost of food on to us,, truckers will be paying $5.00++ at this point,, etc, etc, at this gas price the ecomony of America will really be heading down fast and even more as gas prices go over $5.00 per gal and towards $6.00 a gal,, so I do think when we hit $4.50+ a gal America will be at the tipping point in our economy,, yes people will change there habits on driving but consuming less will also cause big problems with employment,, stocks, etc......America was built on cheap oil,, but our economy can not handle expensive oil for long,, somthing has to give.....

[joeltrout]

$this->bbcode_second_pass_quote('timmac', '
')" I myself never thought $3.00 a gallon was a serious problem ",,

[TheDude]

Found some good links whilst looking for VMT data:

This APTA study shows that vehicle congestion has climbed steadily over the years:



A chart of travel times indicates serious inelasticity for millions of drivers:



These are tangential to oil price per se but indicate the trap many are in regarding consumption. VMT has closely followed GDP in the past, with GDP taking the lead recently, due (I'd guess) to the effect of increased online purchasing. But for the ca. 40 million commuters spending 30 minutes+ a dire future is on the horizon, which will surely lengthen the recession we're in.

This last chart incorporates four factors very nicely:



From a TOD discussion, courtesy KJMClark. Vehicle efficiency had little ultimate effect on VMT or overall fuel consumption, although it was strangled in the crib in the early 90s by increased body weight as the trend went towards heavier vehicles, both LDVs of course, but also frivolous options like power windows.

I present all this to back up joeltrout's contention that demand destruction will take the steam out of fuel prices sooner or later. Also the commuter numbers should give pause to the notion that we'll replace oil any time soon.

[Ayoob]

I don't really see how it could go any other way. Americans consume 25% of the world's oil output, and we have to get that number down significantly to make room for the Indian and Chinese middle class, however large they might be.

Crashing our currency on the international market seems to be the most peaceful way to get that objective accomplished.

How could it be otherwise?

I assume we'll go to war if we decide to maintain our level of consumption. No amount of wailing and gnashing of teeth will increase the value of the US dollar.

[timmac]

timmac wrote:

" I myself never thought $3.00 a gallon was a serious problem ",,

joeltrout wrote :
I bet you weren't saying that when gas was $0.87 a gallon. Hindsight is 20/20.




When gas was under $1.00 a gal most Americans had little credit card debt,, houses in most areas where at a normal price,, no major housing problems,, no major airline problems,, big 3 was ok,, medical cost was alot cheaper,, no food shortages or high price food,, banks where alot better off and our goverment was not borrowing from China than,, and it mostly stayed that way up to around $2.00 to $2,50 a gal,, but now its a economy wreck going on and if gas/oil keeps riseing the way it has been when we hit $4.50 a gal things are going to look alot worse,, I hope I am all wrong but if you ask around and look at things now with oil prices now it can only get worse as it rises,,, America has built its economy on cheap oil and can only stay afloat with cheap oil,, if oil hits above $250.00 a barrel we just might move into a 3rd world status,,,, "I dont think we will ever see $500.00 a barrel"........

[yesplease]

$this->bbcode_second_pass_quote('TheDude', 'V')ehicle efficiency had little ultimate effect on VMT or overall fuel consumption, although it was strangled in the crib in the early 90s by increased body weight as the trend went towards heavier vehicles, both LDVs of course, but also frivolous options like power windows.

[patience]

In the comparatively poor area of Indiana where I live, a big part (half?) of the locals are already shopping at the Goodwill, super-cheap grocery, and only buying gas a few gallons at a time. When gas goes up another $1 or so, they are in big trouble. Already families are moving in with their parents, and thievery is up. This is all going to get worse.

I expect oil will hit the $200 range in the next year, and gas at maybe $6 from what I think I read around here. If so, in this area, we'll have a few creative individuals who scrap out the rototiller and get a pony (free) if they have feed for it, to work the garden and pull a cart to town. Other places, life won't change a lot, but the foreclosure rate will get pretty high, from job loss and debt loads. The tipping points will be different in various parts of the US, just as it is for food prices today.

[joeltrout]

$this->bbcode_second_pass_quote('timmac', ' ')and it mostly stayed that way up to around $2.00 to $2,50 a gal,, but now its a economy wreck going on and if gas/oil keeps riseing the way it has been when we hit $4.50 a gal things are going to look alot worse,, I hope I am all wrong but if you ask around and look at things now with oil prices now it can only get worse as it rises,,,