Bruce Pile

Not Calling Crude Oil Prices a Bubble For Now

Reduced demand is cited as an automatic trip to lower oil. But consider that net exports is what largely sets price, and net exports are declining even as total liquid production eeks out new highs now and then. And this decline theoretically accelerates post peak per the ELM model, which has been accurate thus far. If exports to the U.S. are declining by 5% per year, that means we must destroy demand at the rate of 5% per year just to keep oil at it's current value (not counting short term speculation).

Per the model, which simulates a hypothetical land where about half of all produced oil is exported around the time of peak (roughly the global condition now), exported oil goes to zero in just 9 years after the global production peak. So we must destroy all demand for imported oil in 9 years to keep oil where it is! If we did a switch to electric cars so fast that half of all vehicles on the road in five years were electric, we could not match this demand destruction rate.

Destroying demand for imported oil is what needed to be done 30 years ago when Carter and Ford tried to get a build out of CTL (coal-to-liquids) plants going along with nuclear power plants, OCS drilling, solar and other things. But nobody believed or understood the math of Hubbert and others about the global production peak even though his modeling of the U.S. oil production peak in 1970 had just been proven stunningly accurate. In his 1956 work projecting the U.S. peak for early 70s, he predicted the global peak for shortly after 2000. So instead of listening to these people, we developed energy policy dictated by environmentalist airheads who reckoned that we needed to ban the needed changes to protect the natural habitat of the yellow speckled squirrel.

Well, here it is 30 years later, and America's natural habitat is about to be destroyed. But thank God, the yellow speckled squirrel is OK.