Robert Bryce: Gasoline

Given the news from the past few months, it borders on the foolhardy to preach about the looming dangers of peak oil. Doing so seems a bit like warning about the possibility of drought while standing without an umbrella in the midst of a torrential downpour.

Indeed, the price of oil has plummeted from its July peak of $145 per barrel (for West Texas Intermediate at Cushing, Oklahoma) to under $80 by early October. The price collapse coincides with a big drop in oil demand. The Energy Information Administration now expects that U.S. consumption will fall by 4 percent this year. And credit-card issuer MasterCard estimates that gasoline demand during the first week in October fell by 9.5 percent compared to the year-earlier period. Indeed, it appears that the demand destruction associated with the rapid run-up in oil prices has for the moment obliterated all talk of oil going to $200 in the next year or two, or three. Over the longer term, the key question appears obvious: will demand destruction take the


The prospect of $50 oil looms. OPEC is in disarray. The Saudis have made it clear that they will defend the price that suits them, not the prices that Hugo Chavez wants. After all, they are spending tens of billions of dollars to bring on new spare capacity while the Venezuelans have essentially decided to sit on their hands and plunder PDVSA for as much cash as they can. Further, according to the latest projections from the International Energy Agency, Saudi Arabia will add 1.78 million barrels per day of new capacity by 2013. The Saudis are eager to get a return on their multi-billion dollar investments in the fields at Shaybah, Nuayyim, and Khurais.

All of these factors have led to a stock price collapse for essentially all oil and natural gas companies. Between mid-September and early October, shares in Chesapeake Energy, one of the biggest U.S. independents, fell to less than $17, from $40. During that same time, Exxon Mobil fell to just over $62, from $75.

And yet