Oil – Supply and Demand
In response to my piece on society’s migration to electric vehicles, Dan Conine writes:
There needs to be a build-down of the sprawl simultaneously with the build-out of charging stations. Once they meet, the fringe will still have gas and the majority will be electric.
There are so many interesting scenarios here. Of course there are supply issues, i.e., Peak Oil. But one wonders what will happen if we see a steady erosion in the demand for oil. What will the oil companies do once demand for gasoline drops below a certain point?
The demand curve for gasoline is quite inelastic, i.e., a large increase or decrease in the price of gasoline is required to cause an appreciable change in the volume consumed. And in an EV world, no decrease in the price of gasoline will cause an increase in purchase volume. No one can expect the oil companies (and gas station owners) to stand around for decades as their sale volume goes slowly to zero.
Of course, we need to keep in mind that transportation is not the only driver of oil consumption. Approximately 10 calories of fossil fuels are required to produce every one calorie of food eaten in the US – and most of this is in pesticides and agri-chemicals. Having said that, anyone who cares about sustainability would sure like to see this go away too.
If you Google this subject, you find thousands of pages of reports, analysis, and opinion. Since petrodollars form the very underpinnings of our civilization, I’m sad to say that I think they’ll find a way to keep themselves relevant.
On a related note, I’m deeply saddened to note the passing of Matt Simmons, perhaps the person most responsible for making the world aware of Peak Oil and its consequences. When I interviewed him for my book’s chapter on the subject, he expressed astonishment that we debate that the world goes to war over oil. He pointed out a resource that I recommend highly: Michael Klare, a documentarian from Amherst, and his movie called “Blood and Oil” showing that from World War II on, every single administration has acknowledged that our wars are always fought over oil.
I must say that I find this compelling. In fact, I don’t know how – or even why – anyone would attempt to deny that. After all, it’s not like we’re exactly pacifistic as a nation. We’re pretty-much constantly beating the tar out of someone for some reason. Oil is a resource that lies at the very heart of our culture; the notion that the US wouldn’t fight to preserve its life’s blood is preposterous.
I’d appreciate your comments.
