Sunday, July 20, 2008

Demand Curves Slope Downward

WASHINGTON – U.S. oil demand was significantly down for the first six months of 2008, the API reported Friday in its Monthly Statistical Report. While U.S. refiners churned out record and near-record amounts of oil products, imports – especially product imports -- fell substantially.

Deliveries of all oil products – a measure of demand – fell 3% compared with the same first-half-year period in 2007. For the preceding three years, oil demand had essentially held steady.

API statistics manager Ron Planting said, “At 20.08 million barrels per day, total demand was the lowest in five years. And the decline in gasoline demand was the first significant one recorded in 17 years. Higher pump prices and a slowing economy were undoubtedly factors.”

MP: The three most important solutions to high energy prices: conservation (see above), substitution and innovation.

12 Comments:

At 7/21/2008 7:23 AM, Anonymous EJ said...

well doesnt the saying go, "The best solution for high prices is high prices?"

 
At 7/21/2008 9:13 AM, Blogger Sophist said...

"MP: The three most important solutions to high energy prices: conservation (see above), substitution and innovation."

IMO these are all local minima. Sooner or later a global minimum must be reached. Unless a new and abundant source of energy is found, the energy problem will lead to a global war.

 
At 7/21/2008 9:55 AM, Blogger Marko said...

"MP: The three most important solutions to high energy prices: conservation (see above), substitution and innovation."

MP, what about increases in supply? Not sure if that falls under substitution or inovation, or there may be a fourth important category? Hmm?

Certainly the higher prices, if sustainable, will cause more pumping, drilling and refining. If prices start to fall, that may also increase pumping since you want to get the best price for each barrel. That further drives down price, which producers will want to keep new fields from coming on line. For many years the house of Saud wanted to keep oil prices in the $30 per barrel range to keep the US and others from drilling more. I am expecting a big drop in prices soon, especially if it looks like the US is serious about increasing production.

 
At 7/21/2008 9:59 AM, Blogger Marko said...

Sophist said...

"IMO these are all local minima. Sooner or later a global minimum must be reached. Unless a new and abundant source of energy is found, the energy problem will lead to a global war."

Of course there must be a limit to the amount of oil and gas available, but no one knows what that limit is so it is hard to say we will reach it in our lifetime. Most of the cheap light sweet crude is gone, or so we currently think, so prices go up. There are new methods of drilling all the time, and it is always possible we will find much more. In the medium term, higher prices make more expensive options feasable, such a shale oil and oil from coal. Don't see why this would cause a war. I don't think we have ever really had a war over commodity prices. Wars about who gets to conquer and colonize new areas with untapped resources yes, but because of high prices? I can't think of one.

A massive investment (or allowing a massive investment) in nuclear power should do the trick to put an end to all this nonsense. If we could just get the obstructionist ludite dems out of the way, we could move forward on this.

 
At 7/21/2008 2:26 PM, Blogger juandos said...

Why must there be a limit to the amount of gas and oil available?

Sort of a rhetorical question but maybe, just maybe earth isn't the only place where crude and methane can be had...

CONSIDERATIONS ABOUT RECENT PREDICTIONS OF IMPENDING SHORTAGES OF PETROLEUM EVALUATED FROM THE PERSPECTIVE OF MODERN PETROLEUM SCIENCE

Methane on Mars causes controversy

Eugene Island Block 330 Field--U.S.A. Offshore Louisiana

 
At 7/21/2008 2:45 PM, Anonymous Anonymous said...

"Why must there be a limit to the amount of gas and oil available?"

ok, ok, the doctor said we keep telling you there is not limit...ok?

 
At 7/21/2008 3:27 PM, Blogger juandos said...

Hmmm, anon @ 2:45 PM, your ability for the snarky comment is on par with your ability to read, its absolutely nil...

 
At 7/21/2008 3:47 PM, Anonymous QT said...

Aren't we really seeing a revival of ideas promulgated by The Club of Rome's "The Limits to Growth"?

http://en.wikipedia.org/wiki/Limits_to_Growth

How is it that the rhetoric has made the quantum leap from high prices to the end of oil and the collapse of our energy intensive western civilization (depending of course on who you read)? The answer is still the same as it was during the last energy crisis, namely, prices reflect the equilibrium of supply & demand.

This subject seems to have more red herrings that an Agatha Christie mystery...speculators, windfall profits, peak oil, etc.

 
At 7/21/2008 4:04 PM, Blogger juandos said...

Well qt you pose an interesting question: "How is it that the rhetoric has made the quantum leap from high prices to the end of oil and the collapse of our energy intensive western civilization (depending of course on who you read)?"

Consider reading Richard Fernandez's commentary: Obama and the Swan...

The question Fernandez relates to is due to his watching an online video is: "why pundits never lost their reputations by making bad predictions. Jonathan Schell, in his famous book the Fate of the Earth predicted Ronald Reagan’s policies would increase the probability of a nuclear war. At that time most analysts in the CIA were predicting that the Soviet Union would last forever. Neither came true. Yet Johnathan Schell is still selling books and one of the analysts who felt confident the USSR would last a long time is now Secretary of Defense, Robert Gates"...

Professor Tetlock (U.C. Berkeley) gives his take on predictions after a 20+ year of studying them...(http://fora.tv/2007/01/26/Why_Foxes_Are_Better_Forecasters_Than_Hedgehogs)

Its an hour and 13 minutes long though...

BTW Tetlock does indeed mention the Club of Rome and how they got it wrong about Reagan...

 
At 7/21/2008 10:25 PM, Anonymous QT said...

Juandos,

Thank you for the links. Most interesting although I suspect Senator Obama's middle east policies may be more inconstant than the writer imagines:

http://jewishworldreview.com/cols/krauthammer070408.php3

Political pundits aren't the only people who get it wrong.

In 1984, John Kenneth Galbraith declared "That the Soviet system has made great material progress in recent years is evident both from the statisitcs and from the general urban scene...One sees it in the appearance of well-being of the people on the streets...and the general aspect of restaurants, theaters, and shops...Party the Russian system suceeds because, in contrast with the Western industrial economices, it makes full use of its manpower". As the time, the Soviet Union was on the brink of complete economic collapse.

It is important to know what tune the devil is playing. Is it not?

 
At 7/22/2008 3:42 PM, Blogger juandos said...

Hey qt its interesting regarding your quoting John Kenneth Galbraith...

There was more people besides JKG who were applauding the Soviet system...

Consider this commentary by Dinesh D'Souza:

(skip)

'Equally imaginative was the assessment of Paul Samuelson of the Massachusetts Institute of Technology, a Nobel laureate in economics, writing in the 1985 edition of his widely used textbook: "What counts is results, and there can be no doubt that the Soviet planning system has been a powerful engine for economic growth. . . . The Soviet model has surely demonstrated that a command economy is capable of mobilizing resources for rapid growth."

Columnist James Reston of the New York Times in June 1985 revealed his capacity for sophisticated even-handedness when he dismissed the possibility of the collapse of communism on the grounds that Soviet problems were not different from those in the U.S. "It is clear that the ideologies of Communism, socialism, and capitalism are all in trouble."

But the genius award undoubtedly goes to Lester Thurow, another MIT economist and well-known author who, as late as 1989, wrote, "Can economic command significantly . . . accelerate the growth process? The remarkable performance of the Soviet Union suggests that it can. . . . Today the Soviet Union is a country whose economic achievements bear comparison with those of the United States."
'

Regarding your question qt, "It is important to know what tune the devil is playing. Is it not?"...

Yes sir!

I can see why the person who is floating this blog Obama's Gaffes won't be running out of material anytime soon...:-)

 
At 7/24/2008 10:39 AM, Anonymous Anonymous said...

"An additional $1 in real gasoline prices would reduce obesity in the U.S. by 15 percent after three years"

http://www.sciencedaily.com/releases/2007/09/070912093556.htm

 

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