The End of the Oil Age? Not Quite 28 comments
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Kopin Tan recently wrote an article in Barron’s entitled “Get Ready for the Oil Age to End”. The article cites Paul Sankey’s opinion that electric and hybrid vehicles are game changers and the decline in U.S. gasoline demand as backing up the title’s claim. Further, the article states that competition from natural gas will also crimp oil demand. The overall tone of the article suggests that mankind is moving away from oil, and therefore the age of oil will be over sooner rather than later.
Poppycock!
The facts simply don’t support these claims. While slack demand for gasoline is certainly a fact, it has more to do with economic contraction than any move away from gasoline as a transportation fuel. While Boone Pickens and Clean Fuels (CLNE) have been successful in moving some large truck fleets over to natural gas transportation, this alone will not have a significant effect on U.S. oil consumption.
The U.S. still consumes roughly 25% of the world’s oil and imports 2/3 of that oil. The U.S. uses 70% of this oil in the transportation sector. The only way the U.S. can significantly reduce oil consumption in the transportation sector, over the next 5 years or so, is to leverage its domestic natural gas supplies and get NGVs [natural gas vehicles] in middle class American’s garages. If 50% of American cars and trucks were converted to run on natural gas, the U.S. would reduce oil consumption by 6-7 million barrels a DAY. However, this is simply not happening. President Obama, Energy Secretary Chu, and Congress are asleep at the oil switch.
With respect to electric cars, they too are an illusion and not available. Even when they do arrive, they’ll be way too expensive for the battered American middle class to afford. The battery pack requirements for fully electric vehicles will be very large indeed if the vehicle is to have an acceptable range. Further, there are independent studies showing the raw materials to make the batteries are not only insufficient to build out a worldwide EV fleet, but even if they were, the ability to make them economically viable is highly questionable. Also, the vast majority of farm equipment still being utilized and sold new are all based on gasoline or diesel fuel (oil). So, as in 2008, U.S. consumers will get a triple whammy when the next oil price spike hits:
1) higher gasoline prices
2) higher food prices
3) weaker dollar
No wonder the U.S. government likes to take food and energy out of the inflation numbers (wink-wink).
Natural gas alternative
Meanwhile, the absolute best transportation solution (a natural gas/electric hybrid – think Toyota Prius with a natural gas internal combustion engine), is completely ignored and unavailable although the technology is proven and exists. A natural gas/electric vehicle is superior to gasoline, gasoline/hybrid, or fully electric vehicles for a number of reasons:
Much lower overall emissions
Much smaller battery requirements than 100% EV’s
It runs on natural gas, not gasoline derived from foreign oil
It is more affordable than 100% fully electric vehicles
The technology is mature and proven
The long-term reliability is better than fully electric cars because the battery pack is smaller
The fuel (natural gas, no plug-in) is abundant, cheap, and clean!
The “cash-for-clunkers” program has been touted for reducing oil consumption, which is true, but the big picture view of this program is that the cars purchased still run on gasoline. This will keep the U.S. addicted to oil in a future where worldwide oil supply won’t keep up with worldwide oil demand. It was a bad policy from a strategic point of view. The only way the U.S. will reduce its oil consumption is to adopt a strategic long-term comprehensive energy policy.
This is only common sense for a country whose economy is built on a faulty foundation of foreign oil, so of course such a policy has not been adopted or even discussed. Energy Secretary Chu should be fired.
China's even worse
Things aren’t much better in China. The Chinese don’t have the natural gas infrastructure, pipelines, and home distribution network that the U.S. has. If they did, you can bet they’d make the U.S. look like idiots for not leveraging their network in the transportation sector. The end result here is that China has taken over world leadership in monthly car sales and you guessed it, the overwhelming majority of these vehicles run on gasoline (oil). Thus, China is locking up oil supplies all over the world.
As Boone Pickens pointed out on CNBC last week, this is a game the U.S. cannot participate in as the Chinese central government control of their oil companies allow them to finance oil transactions with government backing. And, as we all know, the Chinese hold trillions in U.S. dollar reserves. They are certainly in the catbird seat. The China/Exxon (XOM) showdown in Ghana will be interesting to watch. If Exxon cannot compete with the Chinese, what oil company can?
Of course the most obvious sign that the age of oil is not near at an end is the price. Although the severe economic contraction took oil prices down from $145/barrel to under $40/barrel, prices have snapped back to $70/barrel. Think about that for a moment. Here we are in the deepest recession since the great depression and oil prices are still $70/barrel – a price that only 5 years ago would have seemed fantastically high. The chart below is courtesy of Omega Research and SuperCharts. (Click to enlarge)
Light Crude Oil Monthly Prices (CL, NYMEX)
In conclusion, while I certainly agree with Mr. Tan that automobile fuel efficiency will continue to improve, and that gasoline demand in the U.S. has suffered some demand destruction, I disagree with the implied assumption that the “end is nigh for the age of oil” due to man’s movement away from oil. On the contrary, man has done very little to move to transportation solutions away from oil. No doubt Paul Sankey and Kopin Tan both jumped into their gasoline powered automobiles after a hard day’s work at the office. Further, the move to very expensive 100% electric vehicles prior to building out a renewable and nuclear infrastructure to recharge these vehicles will simply put little coal generators on the highways spewing CO2 and toxic particulates into the atmosphere.
So, what we’ll have is another oil price spike with the next 3-5 years, and the price of oil will blow past the last price peak of $145/barrel. The continuation of Bush era deficit spending and weak dollar policies by the Obama administration officials mean the long-term outlook for the U.S. dollar will continue to be weak, giving oil supply/demand fundamentals a financially based kicker. In addition, we all now understand the geopolitical risk premium due to oil wars and continuing tension among countries to obtain long-term oil supplies will also support higher oil prices. The combination of all these factors mean oil prices are locked into a state of permanant long-term “contango”.
How to play it
All that said, I certainly do agree with the article’s assertion that Exxon Mobil (XOM), Occidental Petroleum (OXY), and ConocoPhilips (COP) have mature assets producing low-cost oil and that these stocks are very attractive at current prices. I don’t understand why Exxon Mobil has a lower dividend yield now (in an age when oil prices will continually march upward) then it did back when oil was $20/barrel. See my last article on this subject.
Foreign oil companies will continue to outperform as their dividends are higher and they will benefit from the falling U.S. dollar. In this space, I like BP, StatOil (STO), and Petrobras (PBR). Chevron (CVX) is also undervalued and has a very bright future in terms of year-over-year production increases.
Disclosure: The author owns COP, STO, and PBR.
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This article has 28 comments:
I agree with you that natural gas transportation will help, but to a point.
But remember three things:
1) Natural gas will also exhibit "Peak Gas" one or two decades after "Peak Oil".
2) Conventional natural gas reserve declines are much steeper than oil reserves.
3) Non-conventional gas fields exhibit an even faster decline, up to 50% to 80% reserve decline after only one year. Larry Bellehumeur's SA article of August 18, 2009 had an interesting discussion around this point.
CARS was a stimulus program not an energy strategy. It cleared the dealers lots of 2009 vehicles and provided space for the new model year. I'd love to buy a NG vehicle, just tell me where.
Consider the statistics below from Faisal Humayun's "The Long Term Fundamentals of Crude Oil" Jun 15, 2009 12:17 pm
o In United States the oil consumption per capita
(barrels/year) peaked out at around 27
o In Japan and South Korea the oil consumption per capita
(barrels/year) peaked out at around 17
o In China the oil consumption per capita (barrels/year)
currently stands at 1.8
o In India the oil consumption per capita (barrels/year)
currently stands at 0.8
o Asia is house to over 3.6 billion people which makes up
around 56% of the world's population. The major part of
growth and development is yet to come for most of the
Asian countries.
o Currently, the amount of Oil consumed by 300 million
Americans is equal to the amount of Oil Consumed by
over 3.6 billion Asian.
o In 1964, the world added 48 billion barrels of oil in proven
reserves every year but consumption was only 12 billion
barrels.
o Currently, the world adds 5-6 billion barrels of oil in
proven reserve every year but the consumption is around
30 billion barrels of oil annually.
So we will have to build the distribution pipe lines and filling stations before we can sell natural gas vehicles to anyone with common sense.
You could buy the car and then learn the lesson...lol
The car would be nice for anyone that does not travel beyond the fuel capacity range per day.
I would like to hear from someone who owns one of these vehicles regarding, range, time required to refill, cost to operate, mechanical dependability, etc. Hopefully they will post with this article.
Consequently the conversion of America's consumer auto fleet into various alternatives overstates the saving of oil imports.
Following that logic, if all gasoline powered cars were off the road tomorrow, the U.S. would still need to import oil. Seems like increased domestic production will allow time for technology to catch up and allow a smooth and economical transition to alternatives.
Artep: my point was, any stimulus program aimed toward vehicles would have been much better off addressing the U.S. energy problem. in my opinion, such a program should have been converting all those "clunkers" over to run on natural gas and hanging Phills (natural gas refueling appliances) in people's garage. junking cars and trucks that are less than 10 years old is just more idiotic consumption and a waste of productivity, not to mention raw materials. sure some will be recycled, by many of those SUVs could have been refitted to run on natural gas and served another 10 years. for the billion spent on "cash for clunkers" we could have made a damn good start at solving the NGV and CNG refueling station chicken-n-egg problem.
AO: well said and yours is a wonderful perspective vis-a-vis American vs Asian oil consumption! honestly, i was quite amazed to see two smart and talented guys like Tan and Sankey be part of such an article. one has too wonder what could have motivated them (wink wink) to write such things in the face of oil supply/demand realities. china sure isnt acting as though the end of the oil age is anytime soon!
long_on_oil: well of course we have a chicken and egg problem with NGV and CNG refueling availability. i have written about this many times, but the problems are solvable, and in my opinion we will have no choice but to solve them. the question is, will we solve them in crisis mode (probably) or, wait until peak oil drives a nail in the U.S. coffin and bankrupts the nation and we end up in complete economic (and then social...) chaos? natural gas transportation can be done - it's not nuclear physics or sting theory. enlighted states like Utah and Oklahoma have proven this and now those folks are filling up for around $1.10 per gallon. yes, the honda civic gets 200 per tank, and yes range and refueling is an issue. however, there are many people who could use such a vehicle as a second car. once many NGVs and Phills are sold, the CNG refueling stations will come. so, we can sit and do nothing and wait for another peak oil price spike, and watch our country simply whither away, or, we can take smart prudent action. if not natural gas transportation, what is your solution?
ferdinand: the "future" is now, and is the natural gas electric vehicle discussed in the article. all we need is a LEADER in the white house and LEADERSHIP by congress to enable the car into reality. toyota is ready and willing to make the car, they just want the U.S. government to support their efforts. it's that simple.
a.palmer,jr: on the contrary, a natural gas electric hybrid as i discussed will be *much* cleaner burning than current gasoline cars and with a much smaller battery pack needed than 100% EVs, it is a superior alternative and should have much better reliability than dirtier gasoline burning cars which emit much more toxic particulates through the combustion process. if you don't believe me, put a clean white hankerchief on the tailpipe of a gasoline vehicle and then do the same with a honda civic GX vehcile that runs on natural gas. after looking at the result, then tell me which car you think would have better long term reliability. add a battery pack, and those emissions are even cleaner yet. i would also disagree with your comment on fully electric cars being the solution, unless you consider destroying the air and water a "solution". building 100% EV's in quantity before building the wind and solar and nuclear infrastructure to recharge them will simply be putting little coal plants on the highway spewing CO2 and toxic particulates into the atmosphere. no thanks - i'll pass on that.
So much wrong in this article. The end of cheap oil is already here.
If you get $150/bbl oil late next yr which I think is very possible, in fact probable, then EV's are going to look very good.
The Author either stretches almost every point and many like Hybrid, EV costs are just plain wrong.
NG for cars is by far better charging EV's from a cogen powerplant because an EV will go 3-6x's as far on the same NG.
Trucks, semi's are NG's transport uses as they have the room and far fewer filling stations will be needed. I liked the point made that NG didn't have to be plugged in as they take longer to refill than an EV does. And how will you fill it if you don't plug the NG nozzle in?
EV's make light, small are far cheaper than a gas car to buy or run getting 100-1000mpg equivalent depending on size, design.
And this will in about 7-10 yrs collapse the price of oil as other energies replace it. So don't invest too long in oil.
If the Biogas Production Incentive Act (Senate Bill 306) should be enacted into law, the 16,000 wastewater treatment plants in the US could rapidly be converted into "biomethane factories" with public/private partnerships. The feedstock for the factories can consist of cellulosic waste (paper), food wastes, steam-exploded landscape waste and wastewater diverted from the municipal wastewater treatment system. Biomethane is produced by anaerobic digestion of the feedstock and the methane component is cleaned to yield pipeline-quality methane. The City of Kobe, Japan is an example of this type of system. See, www.pwri.go.jp/eng/act.... Despite having the natural gas transmission infrastructure already in place and despite having successfully demonstrated biomethane technology in the 1980's, the US is an also-ran behind Japan, Sweden, Germany and even Great Britain with respect to exploiting that infrastructure for a domestic, pipeline-quality biomethane industry.
www.eia.doe.gov/basics...
and scroll down to disposition. the actual number now is 71% of U.S. oil consumption goes to transportation. wrt overstating the impact of oil savings, i have covered the calculations in previous articles and stand by my statement: if half the cars and trucks in the U.S. were converted to natural gas, we could save 6-7 million barrels of oil a day. every day, 365 days a year. it could literally solve the economic problems facing the U.S. think of it, almost a half billion dollars a day would be staying in the country rather than going overseas to oil producing countries, many of which we then go and fight in oil wars. it's simply a ridiculous and unsustainable policy.
redbaron: thanks of the support, i was beginning to think i was all alone on this, or more likely just bored my readers to tears going over the same topic over and over again. however, when something as important as this is being ignored by our leaders, i have no choice. as to why barrons would write it..that's an interesting question...but, as congress, i think there are reasons (wink wink) why people are working so hard to keep us addicted to oil and gasoline. some is raw power at work, some is ignorance. consider the environmentalist who, apparently like obama and chu, think fully electric vehicles are the solution. these same people apparently believe in the myth of the oxymoronic "clean coal" campaign. even if you could economically pump CO2 into the earth, what happens to the fly-ash made of mercury, lead, etc. etc. in my opinion, all this is a direct result of the lame natural gas lobby not getting the true and full message out there. they recently took out two full page ads and said nothing in them but "eureka". that is not educational, it was simply a waste of money. i wish they'd given me full editorial power over those two pages, i would have given the readers much much more to naw on!!
George: yes, i have written many times that the natural gas pipeline infrastructure is the most strategic industrial asset America has. i never fully understood this until i read robert hefner's great book "the grand transistion". sometimes simple and obvious observations are the most brilliant.
The Port of Los Angeles switched over to Natural Gas truck and service vehicles this year, and reported that they greatly reduced their carbon footprint as a result of that. I would expect truck fleets to make the move sooner than passenger cars. Some US cities bus systems run on natural gas already. The infrastructure is there, though it takes quite a larger step to make natural gas more available for private transportation.
Italy already has natural gas vehicles that the average person can purchase. There is also existing technology in several places for a home fill-up kit, or to get fueling station pumps to allow natural gas for passenger cars. Unfortunately demand is low, and many of the big oil companies don't seem interested in changing the existing gasoline stations. It seems there might be more of a push to get natural gas to replace coal at power stations, than there is to have natural gas automobiles.
Disclosure: long on Statoil (STO) and Golar LNG (GLNG)
Yes, in the next 5 years, battery prices will still be too high to make plug-in vehicles economical. You must look to 10 years and beyond. Battery prices are going to drop significantly.
You are wrong in saying that there are not enough natural resources in the world to build a world-wide fleet of plug-in vehicles. The Lithium shortage has been debated many times on Seeking Alpha. What I conclude from these debates is that no one knows for sure how much extractable Lithium there is in the world, but there are many places that have good potential. I believe that Lithium is like many other mined resources in that as the demand and price increase, the known resources will increase dramatically with new discoveries and improved technology. Natural gas has done this big time in the last 5 years.
There are some Li-ion batteries, like Lithium Iron Phosphate, that don’t use expensive metals like Cobalt.
Also, the solar world is making huge advances. But, again, in 5 years the impact to oil is not going to be large. But, starting in 10 years, solar is going to be very reasonably priced. Put reasonably priced solar together with affordable plug-in vehicles and you get a strong combination for reducing the use of oil in the world. Throw in much increased use of natural gas for vehicles and for home power generation for charging plug-in vehicles, and you get another hit for oil use.
Michael, I think you need to do some more research to round out your knowledge of the energy world. You don’t seem to understand all the pieces.
On Oct 13 12:21 PM HerrHansa wrote:
> I have seen reports indicating closer to 40% of oil going towards
> transportation usage in the US.
Talk about what you know, not what you think.
On Oct 13 09:55 AM a. palmer jr. wrote:
> The auto industry wants us to go with hybrid cars for one reason,
> they make more money off hybrids than the other types. Hybrids have
> all the parts of a regular car plus the battery parts. When the hybrids
> start getting old, look out! They'll be a maintenance nightmare.
> Probably the best way to go is all electric for normal use and if
> you can afford it you can add solar cells to your garage and maybe
> a windmill in your back yard so you won't be giving all your money
> to the electric company. If I were a little younger that's what I
> would be working on right now, but I don't drive as much now as I
> used to when I was working full-time.
The most interesting fact was that more people bought new Ford F150 trucks than new Toyota Prius Hybrids with the CARS program. So much for encouraging fuel efficent vehicles.
On Oct 13 02:49 PM longoil wrote:
> I recently read some interesting data on the "Cash for Clunkers"
> program. Over 16,000 people that bought new Ford F150 trucks qualified
> for the CARS program. Similarly another 16000 people bought Chevy
> Silverados and also got the CARS rebates. What did these people trade
> in ? Hummers, Sherman tanks ???
>
> The most interesting fact was that more people bought new Ford F150
> trucks than new Toyota Prius Hybrids with the CARS program. So much
> for encouraging fuel efficent vehicles.
I also don't believe that electric cars will be released into the population by the millions. Heck, in the earlier years of any new technology like this they will be lucky to sell any of them. Wind farms and solar panels are already being built, it's not something that's far into the future. As I stated before, we need to get ourselves off our dependence to the middle east.
www.eia.doe.gov/basics...
look under "disposition related" and you see transportation is 71% of oil consumption in the U.S. this number has been relatively stable over the past years, and is accepted truth and an often referred to number by other reputable experts. i'm not sure why people are questioning this number, it's a fact. of course some people still don't think jimmy carter's policies reduced foreign oil imports by 50%, but this to is fact. wr to U.S. military consumption, it are the biggest purchaser of oil in the world and use about as much as Greece:
www.energybulletin.net...
demand is low for natural gas because there are no NGVs and the U.S. is de-instrustrializing.
roadrunner: you are right, i am looking out over the next 5 years because if the U.S. doesnt reduce gasoline usage derived by foreign oil, i have a feeling the next big oil spike could put the nail in the coffin of the "american democratic capitalistic experience". so, yeah, we need to do something NOW and, as i have said ad nauseum, the only way to *significantly* reduce foreign oil imports is to embrace natural gas transportation. as far as 100% battery powered cars, if i am wrong, tell me the prices. what's a volt going to cost, $40-44k? what other car is there? just list the prices for me, total cost, not "lease cost" that is the model some companies are going to follow to defeat the total production cost. if i am "wrong", then these prices should be very competitive. but they are not. sure it's a new industry, but why build a 100% electric car (and, if i am wrong, where are they?) with huge battery packs in order to get decent range, when we could be building natural gas electric hybrids now, today, with great range, with much smaller battery packs, cheaper, and with very low emissions?? you may think i am "wrong" about this opinion, but it would be idiotic to do otherwise. unfortunately, the oil, coal, and US media (the Tan/Sankey comments for example..) are blowing smoke up people's backside by giving the **illusion** that something is being done to reduce oil and coal consumption, when in reality, nothing is being done. further, the big push to 100% electric vehicles is going to put little coal generators on the highway spewing CO2 and toxic particulates into the atmosphere because they'll all be re-charged with coal plants. how ironic that environmentalist are embracing this trend. it's all simply ludicrous and terrible energy "policy" imho. thanks for trying to educated me on your "energy world", but i think i'd prefer to look at reality rather than what i want it to look like.
road runner: yeah, i don't know why people are questioning the EIA data. don't get me wrong, i don't believe alot of what the government says (especially inflation numbers!) but as far as i know, the EIA supply/consumption data has never been found to be in error. if it was, why would they be lying and make the U.S. look so bad and make our energy policy look so idiotic? bottom line, the transportation sector in the U.S. takes 71% of U.S. oil consumption. period. it's a fact.
Dave5577: i agree.
pfttit: thanks for the post, it's always good to see real data on SA as it seem more and more like people's comments are simply opinions rather than facts. futher, if you like the gasoline version of the prius, you'll really like the natural gas version (if the U.S. government would ever get behind such a vehicle...)
longoil: that doesn't surprise me, it's america and oh yeah, oil (gasoline) prices have come down, so let's jump in our SUVs again. cash for clunkers was simply an idiotic energy policy, rewarded bad decision makers, penalized good decision makers, and piled on yet more debt. it was touted as the best stimulus package. my opinion is, once again, at odds with the general consensus....
apalmerjr: well, while i too am concerned about the reliability of fully electric cars (with acceptable range) because of the large battery packs and the lack of real user data over say a 10 year vehicle lifespan, everything i have read about the prius is mostly positive (see the above post by pffitt). also, the car i mentioned in the article would be sooo clean, and the battery pack from the prius has alot of real user reliability data in a wide variety of climates. all that said, with respect to working on your car, i like to as well. however, these days it's just about fluids and brakes mostly, everything else is run by a microprocessor, so unless you accesss to the dealer's computer and workbench equipment, you can't do much anyway in terms of engine performance.
Alanvon: yes, Utah and Oklahoma are enlightened when it comes to natural gas transportation. look at this website to see all the CNG refueling stations they have and what they are paying to refuel their NGVs: www.cngprices.com/
in utah, it's $0.93 and in oklahoma it's $1.11
how much are you paying to fill up your car with gasoline in your enlightened state? heh heh
I live in Oklahoma and we were one of the first states to offer generous tax incentives for purchasing CNG powered vehicles. So far, the largest customer base is fleets such as UPS, the public schools for their bus fleets, etc. When gasoline was around $4.00 per gallon, CNG was selling for about $1.29, and CNG vehicles burn cleaner and there is only a small drop in MPG.
The suggestion that car makers build a hybrid incorporating CNG is a great one, and somewhat offsets the disadvantage of limited mileage between fill ups. Bio-diesel and Ethanol are also promising alternatives, although corn ethanol is only beneficial for the farmers. I own a small farm and we grow corn, but corn ethanol is totally inefficient. Brazil's automotive fleet is 100% Ethanol powered, produced from wood pulp and waste products rather than food crops. Brazil is now 100% energy independent, and was one of the few countries which didn't suffer an economic downturn the past couple of years.
I believe that Oil prices, which were manipulated to a large extent just as Enron manipulated California Energy prices 10 years ago. We had a pair of foxes guarding the nation's hen house for 8 years who, along with a republican congress (for 6 years) were indebted to the tune of $450 million in big oil "campaign contributions" (I prefer the politically incorrect term "bribes"). Since 85% of oil company executive and PAC contributions are given to republicans, Obama and the democrats don't owe their loyalty to big oil. I expect that after the health care bill is passed, Obama will zero in on a comprehensive energy policy. With an economy which is vastly improved, bull market, etc. he should have the political clout to make major strides.
In 1975, republican President Gerald Ford was able to pass CAFE fuel efficiency standards which required automobiles to exceed 40 MPG by 1995. Had it not been for Ronald Reagan gutting the program , citing the evils of "bureaucracy and regulation", we would not be importing ONE DROP of foreign oil and our trade deficit would be far less and our dollar much stronger. China wouldn't own the keys to our economic survival. Cars in Europe now average 45 MPG, so the technology was certainly in place to make it happen.
With all the hype of how much natural gas we supposedly have, the facts about depletion in these newer tight reservoirs has been somewhat overlooked.
I don't touch any company that plays the shales, as I don't believe the reserves or sustained production capabilities of these wells. Only time will prove who is right about this. The Barnett in Texas has shown me plenty of evidence to be wary. The wells will be economical again someday... when NG prices spike back up..and that is inevitable. I'm in favor of the Pickens Plan, but how long it is sustainable is my big question.
Check Final Consumption by Sector
I will not claim to have personal statistics to prove or un-prove this. What would be helpful is links to other sources. I generally consider IEA Statistics to be reliable, but I welcome the opportunity to view other sources that may prove more reliable. Thanks in advance.
On Oct 13 01:21 PM Road Runner wrote:
> HerrHansa, 40% you mention below is not accurate. 45% of oil goes
> to gasoline in the US. Then add in diesel, and you get to about
> 70%.
>
> On Oct 13 12:21 PM HerrHansa wrote:
Obviously I could fire off an e-mail to both, but I liked your article and would like to know your opinions on this. I was just in the Houston Ship Channel a couple days ago, and I have another meeting tomorrow, and it certainly seems that things are much busier than my last trip here. As to what could be gained by fudging the numbers a bit, perhaps that is another approach to digesting EIA numbers. If the US Government never restated nor manipulated economic numbers, then I would be more likely to accept them at face value.
Thanks for the great article and comments.
On Oct 14 09:58 AM Michael Fitzsimmons wrote:
> HerrHansa: well, again, here is the real data:
> www.eia.doe.gov/basics...
> look under "disposition related" and you see transportation is 71%
> of oil consumption in the U.S. this number has been relatively stable
> over the past years, and is accepted truth and an often referred
> to number by other reputable experts. i'm not sure why people are
> questioning this number, it's a fact. ......
Ignoring the rest-of-the-world, and focusing on the US:
Fleet size: ~240 million vehicles
MPG (miles-per-gallon): 22mpg
Annual Replacement Rate: ~6% (14 million vehicles)
Source: www.bts.gov/publicatio...
Note that under present repressed economic conditions the Replacement Rate is probably closer to 3%, but in order to be conservative (i.e. to speed up replacement of the fleet), we'll say 6%. Thus, at a Replacement Rate of 6% it takes 18 years to replace all of the vehicles in our fleet.
To put this in perspective, if 100% of the new vehicles offered for sale today were hybrid vehicles that got 50mpg, it would take 18 years for the entire fleet to move from 22mpg to 50mpg. (halving our oil demand over that time frame)
What this demonstrates is that, as an economy, we have very little short-term control over our demand for oil. (short-term defined here as anything within a 20-yr time horizon)
This factor combined with the supply-side, and political factors alluded to already, spells one thing: P-A-I-N