Comment 27964

By Ted Mitchell (registered) | Posted December 21, 2008 at 11:16:51

I think few people realize the degree of 'stiffness' in the fuel market (is there a conventional term for this concept?). I mean the change in total fuel consumption in response to rising prices. Theoretically, if nobody curtails their driving in the face of rising costs, then the price can go to infinity. People do reduce driving, but not by much, therefore the price response is steep.

If the response were stronger (less 'stiff' i.e. widespread carpooling sufficient for 401 congestion to disappear), repeated everywhere in the world, prices would stop climbing.

You don't need any conspiracy theory about speculators to drive up the price, just a world 'addicted' to oil in their inability to reduce consumption in the face of rising prices.

Oil prices used to be fairly independent of natural gas, coal, nuclear, and food prices. This is changing, especially w.r.t coal and food.

Put this together with peak oil and there are two scenarios for the next decade.

  1. Peak oil is false: this is a run of the mill correction and steady growth will follow later in 2009, continuing for many years.

  2. Peak oil is real: economic recovery will be yoked to spikes in oil, energy and food prices which will lead to a sputtering economy and no quick recovery. Likely accompanied by food crises and mass social unrest.

Even an extended global depression will just delay this test.

Since the whole western economy is driven by energy consumption, I see the likely outcome of this as a widespread move to coal.

Why? Hydro and nuclear are maxed out like oil. Wind and solar will help but not very much in the next decade. So that leaves coal, and this seems to be the discussion that peak oil authors ignore or gloss over. Their mindset doesn't consider something so polluting.

Right now, efficiency is at the greenwashing stage. Real results require a thermodynamic efficiency motivated shift to electricity for transportation and massive retrofits of existing infrastructure, less dependence on long distance transport for goods and less wasteful commuting.

This will not happen, other than token examples, without government lead -maybe even requiring multinational govt cooperation- because private capital has little idea how to invest for the long term in good times, nevermind uncertain ones. In many cases that capital doesn't even exist.

The easiest way to do this is a gas tax!

Even with that, environmentalists will not be able to stop economic forces demanding more energy - lots of coal left compared to oil, and the price per energy unit reflects this excess supply.

Sorry if this makes climate changers cringe, but I don't see the world being able to rein in a growing demand for coal. Hope I'm wrong.

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