Do the math.

$80 oil for 120 days is a minimum savings of $100 billion to the US economy...money that would otherwise flow overseas. The oil companies have all come out and said they want $80 oil. Throw in a 6 month bottom (minimum) on the dollar last month and the commodity sector is one week away from the big WWF Smackdown pay-per-view event.

2.58 million vehicles were sold in China in the first quarter of 2008
Strong Demand Drives Rising Car Sales in China - WSJ.com

From the CIBC report linked above:
"Car sales in Russia grew by nearly 60 per cent in 2007, 30 per cent in
Brazil and 20 per cent in China."

That's a lot more people driving more. I doubt that the little conservation efforts of comparatively fewer Americans will be able to conserve enough fuel to lower demand globally. All of the people living in new homes in the exurbs still have to get to work somehow.

Did the economist in the 70's have a 30% margin of error?

When the EIA shows U.S. gasoline consumption falling, they don't mean it's actually falling. They mean it's falling below normal growth.

From the EIA's most recent inventory report: "Over the last four weeks, motor gasoline demand has averaged nearly 9.3 million
barrels per day, up by 0.9 percent from the same period last year."

An increase of 0.9 percent in demand means a price increase of 13.5% to 22.5%, assuming production is flat, and depending on which studies you're looking at. More recent studies (2006 and 2008) from U of C Berkeley and U of C Davis show far less drop in demand per unit of price increase than older studies from the Dept. of Energy.

And the 0.9 percent increase in U.S. demand this year is nothing compared to the increase in demand in China and the oil producing countries (Russia and the Middle Eastern oil producers, especially Saudi Arabia).

Info on the increase in demand in China: Chinese demand for oil up 6.2% - The New York Times

Re: one can make the argument that the US Treasury and Fed want high oil prices.

Bernanke wants positive inflation and they want oil and commodities to fuel economic recovery with higher costs and then hope that in 3 years, incomes will adjust upwards to stimulate growth. Higher oil, however, impacts the dynamic of import/export ratios and will greatly influence global inflation. Thus, to assume we can push our economy into positive inflation mode and then have the global economies fall into place and then support lower wages and higher cost of living elements is absurd! What will happen is a Japan like recession connected to a global debt trap.

The same people that brought you global pools of liquid mortgages, e.g, covered bonds, now want globalized socialization and bailouts. These same engineers that co-mingled mortgages into a sure bet with no downside will now find better ways to pool losses and distribute the retardation of subprime magic into monetized intervention!

Let the retarded buyers beware or the retarded sellers and may they both mutually sink into the crust of the earth and become globalized goo!

By the way, my models show oil hitting the low $140s this year. Should drop to $125ish for a short consolidation (4 to 12 weeks) before taking off for the next new high after that.

Craps: The Free Odds Bet

The House Edge

The Free Odds Bet

The Free Odds bet carries no house edge. The casino makes no profit on this bet. This is the only bet you can make on a table game where the odds aren't against you. How can the casino make this bet available when they don't make any money on it? Simple: Most players aren't smart enough to make this bet. If all craps players made Free Odds bets and avoided the other bets, the casino wouldn't be able to offer craps!

"Seems like the goldbugs simmered down once gold took a 10% hit. Will the same hold true for peak-oilers when crude does the same?"

I am short oil DUG, sold calls CVX,... going into next week. That said I won't be on that train long since the world consumes oil. Gold... not so much. I hope the goldbugs here kept tight stops, since there could be a long trip south.

A lot more thing at play here then Supply/demand at the moment.

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Unfortunately, those looking for a drop in the price of crude oil to save the US economy are going to be very disappointed.

Can someone help me reconcile these two series?

Gasoline Retail Deliveries in 1000gallons per day
Natural Gas and Petroleum Navigator Error Page 

US Finished Motor Gasoline Produce Supplied 1000barrels per day
Natural Gas and Petroleum Navigator Error Page

I think that in this context, a barrel is 42 gallons, which means that there is a huge variance here. Deliveries seem to be 80% lower than supply...

Interesting NYT article re one Chinese family's car purchase, and how it changes their lives:

- NY Times

The psychological aspect of car ownership is huge, especially in a developing country that sees itself on the fast track to "developed."

I can imagine the growth in ownership continuing even in the face of rising gas prices and slowing economy.

The Tata Nano will not lead to significantly higher oil comsumption. The Nano will primarily be marketed to, and purchased by, the rising Indian middle class, who are currently riding scooters to work - NOT walking.

If you'd like to stop driving your 17/mpg car long enough to wring your hands over developments in the third world using up oil, you should instead concentrate on the growing number of Chinese scooters throughout South and SouthEast Asia - they tend to replace foot travel, or bicycles.

You may also want to worry about gasoline subsidies, common in Asia, which drive increased consumption.

But the Nano? Pfft.

" but finding and developing a fields takes time & effort. "

takes at least 10 years

They do not know whether oil will go to 40 or 150, but they are confident that ABK is AAA !!!

"Stronger Dollar Boosts Stocks- AP "

You know, I think it actually did. This is what I was trying to get an answer to yesterday. Where will all the $$$$ go if the dollar stiffens up? Today All the money fleeing commodities and the bond maket went straight into equities.

We need another good scare to spook the newly found brave equities buyers back into the treasuries market, and get em to stay there.

Also, as oil prices rise, oil exporting countries get richer. Oil consumption and income correlate very closely, and at low incomes, the correlation is much greater than one.

Correlation can't be greater than one.

Why in the world would someone put out an estimate of $91 plus or minus $50. Why bother. Just say, "Beats the hell out of me"

ac,

Noticed something interesting. If you chart SKF vs. GLD you can't help but notice how GLD is essentially a DMA of SKF.

What happened to all those alternative fuels that would become feasible when oil topped $50? Weren't they supposed to cap prices???

HAHAHAHAHAHAHA!!!! I kill myself.

Those are the same standards they use to rate companies AAA.

You are AAA if you are + or - $50 Billion.

For the peak oil deniers, it's very simple. Peak oil is a simple observation - oil fields peak in production, and then decline. They all do. They do it regardless of pumping in water or gas, regardless of horizontal drilling, regardless of anything. It's an observed fact.

Geographical areas with multiple fields follow the same pattern. For rather obvious reasons.

The world of easy and large oil fields has been thoroughly explored. We're not going to find another Ghawar or Cantarell. We might find some decent-sized deep oil or some in the arctic. Neither will come cheap or fast and are unlikely to be found and developed at a high enough rate to offset already known production declines from places like Mexico, the US, Norway/UK, Iran.

So, peak oil is an observation about how oil fields work. Predicting when the world as a whole will peak is tough though - too much of the world is not providing good enough information about their fields to say. However, we know the world WILL peak someday and we can try to model what that peak will look like economically. Does that model appear similar to what you see happening now?

In theory, unconventional oil could make up the gap, but based on how it's currently going, I think its unlikely.

How about $91 plus $200 minus $91? That should hold up.

I love it when they quote a figure to two decimal places (91) and then introduce variability of 50%. Really gives you an idea of where these turds sat during science class in high school. Hint - it was toward the back of the room.

Oh well. They knew they didn't have the right stuff for a career in engineering or science.

Yeah, and just like those fool peak oilers believe in so-called "geology," the idiot Darwinists believe in their religion of "biological sciences."

Rob Dawg wrote:

Since 1975 the continental US has extracted more oil than was proven by the Peakenese to have possibly existed and yet we today have as much remaining in proven reserves as we did then.

You keep claiming this and it is Just. Not. True.

As I posted some months back, if your (gasp!) go back and look at what King Hubbert actually predicted, it was that the peak of onshore oil production in the lower 48 would happen around 1970. It did: in fact the peak of all US production fell in 1970, when some 3.3 Gbbl were produced (figures from EAI). Cumulative production in the lower 48 onshore through 1970 was ~93.3 Gbbl (figure from the 1979 API report, corrected for Alaska and offshore production with the EAI numbers).

Cumulative production in the lower 48 from 1971 through 2006 is ~89.3 Gbbl. In the coming years there may be a bit more produced in the lower 48 than was produced to 1970, but it's not on track to be much. Hubbert called it pretty well.

Oh, and it's worth remembering that at present the US uses some 7.5 Gbbl per year.

It's further worth noting that, after a smaller, secondary peak in 1985 due to Alaska production, US production has been dwindling about 2% per year, while imports have risen about 4% a year over the same timeframe. Currently we produce only 40% of our oil.

Second, proved reserves have gone from ~39 Gbbl (mostly onshore) in 1970 to ~21 Gbbl (all US) now. However, in a perfect world proved reserves would never change. They're your cushion for production; exploration was carried out to replace proved reserves.

A traditional metric was "reserve years"--the number of years of production a given amount of proved reserves represented. Decades ago 10 years was considered a good, conservative number. It hasn't been that high since the mid 1950s(!). Currently it's about 3 years. Hubbert had noted back in the late 1950s that domestic exploration wasn't keeping up--that's one datum that led to his prediction.

You are very quick to throw numbers at people. You should look at some yourself, and stop echoing trivially falsified urban legends. (Oh, and name-calling doesn't change the numbers, either.)

Production falling? Gee nothing to do with the massive disinvestment starting... oh say... around exactly 10 years ago when oil was 1/10th its current spot price? Of course production is falling Iraq is a shambles, Iran leaning theocratic, Venezuela isnear Socialist, Mexico not too far behind. Just how much private capital do you want to give to President Chavez?

That's right. If not "nothing" to do with it then damn little.

A historical example is Texas, whose production peaked in 1972 at a bit less than 3.5 Mbbl/day. When the early 70s oil crunch hit, exploration skyrocketed--and pundits confidently predicted that production would too. That's Ec 101, right? The more effort you put in, the more product you get.

Except it didn't happen. You went from 167,951 producing wells in 1972 to 220,788 in 1985, even as production dropped. Every year. Texas produced 2.288 Mbbl/day in 1985, and currently produces around a million barrels a day.

So over that baker's dozen years 1972-1985 you drilled over 50,000 new wells to produce 2/3rds as much oil. That's depletion, and that's peaking.

It doesn’t matter how much effort you put into an area once it's peaked. That's just historical fact, and claiming that "Peak oil is discredited" strongly suggests you simply haven't looked at the numbers.

Production has fallen in the conterminous US since 1971, and in the US including Alaska since 1985. And, last I looked, you can't blame Iranian theocracy or Venezuelan socialism for any of that.

And let's not forget our own homegrown eco-luddites who have left us with fewer refineries than 30 years ago.

Refineries are irrelevant They take oil to run, you know. It doesn't matter how many refineries you have if there's no raw material to feed to them.

Great post, slg. Robdawg should change his name to "the exurban oracle." Because he knows Everything, lol.