High oil prices have spurred alot of discussion, reviving peak oil and it's new cousin plateau oil. I think the more interesting and less controversial observation is significant economic growth cannot happen unless either the supply of oil is increased, or demand of oil per unit GDP is reduced. Otherwise, when the world economy recovers, oil demand will increase by 5%, causing a 300% increase in prices, causing the world economy to stall. (I highly recommend watching Shai Agassi's electric vehicle proposal although I am skeptical about his particular solution).
The last time we had an oil shock was the 1970s, and since that time we have decreased the use of oil for generating electricity, which was one factor in improving our GDP per barrel of oil (we did this by cheating a bit, since we replaced oil with natural gas and coal, mostly). Since then we've been getting increasingly efficient in terms of GDP per barrel, despite the popularity of SUVs. However we've had substantial economic growth so we actually returned to our 1970s peak of usage near the turn of the century and have since eclipsed it. In addition the rest of the world has increased their use of oil, in particular China, which has gone from 2 to 7 billion barrels per day during this period.
About 45% of our oil use is for personal transportation, so we can make substantial progress by improving our automobiles. We will not experience another Great Moderation until we do so.
No comments:
Post a Comment