I love oil. Not personally. I kind of hate it, and treat it as a necessary evil. I use a manual push "reel type" lawn mower so I do not have to use the smelly stuff to cut my grass. Even as a taxi driver, I minimize my driving an empty cab to the point, I believe I have the highest amount of passenger revenue per gallon of any driver in the city. The other drivers are amazed at how little gas I use each day. I drive the least miles per day of any driver I know.
But I do not understand what is going on with the gas crisis. As a student of economics, I was confident to say we'll never run out of gas. The price will rise as supply drops to the point we will switch to other options over time to the point where when there is only a small amount of oil left, no one will care, because our cars will run on a "Mr Fusion". like in Back to the Future.
I expected the process to be fairly long and drawn out. a gradual rise over time that would be noticed but not a crisis. Thats what is happening personally with my gas usage in my taxi. Since I have always been thrifty when it comes to fuel usage, my fuel usage has only amounted to about 6 gallons a day. Each day, I buy 6 gallons to replace what I used the day before. On average I burn 42 gallons a week in gasoline. It does not take a math wiz to compute that fluctuations in the cents range do not amount to much in terms of daily expenses. In the parlance of the save the children - the price of a cup of coffee. I am sure, I substitute away from such luxuries as an order of cinnamon crispas at Taco Bell with my order, as I find less extra yuppy food coupons in my wallet ($20 bills). But its not the kind of behavior that creates hand wringing on my part. But thats me. I am not typical. Ask anyone.
The overland truckers and airlines are in crisis. Airlines break even with fuel at $90 a barrel. at $130 they are hemorrhaging cash. Their fuel prices are essentially fixed. The only thing than can increase their fuel efficiency is a tail wind. Flying at 100% capacity is possible, but the current way to fill seats is to discount prices. the complexity of market forces, consumers tend to fly less when prices rise. Even business customers find ways to fly less in the long run, if the price of the trip is not recouped with an increase in gross revenue.
Again, I expected fuel prices to rise slowly over time. Allowing technology to adjust and replace the smoke stack industries piece by piece. Having lived through the gas lines of the 1970s, this is not the same. That was a real supply shock. Stations were raising prices, and running out of gas anyway. Currently you can buy all the gas you want. Your only constraint is the size of your tank, and your bank account (or credit).
It does not make sense to me. Opec says this is not a supply problem, but one of speculation. Futures investors are buying up oil, and running up the price. They then store it to sell it at some future date. This is like short selling. You agree to sell something at some future date for a price of X dollars. Currently the price of that product is .90x and the cost of storage for the period between now and then is .01x so your cost is .91x and when the date of sale comes around, you have a profit of .09x on the sale. You have done nothing more than let the calendar roll by.
That happened a while back, and storage capacity topped out, and they had to stop and prices fell as a result. The oil industry says its a refining capacity problem. Refineries cannot just flip a switch and pump out more diesel less gasoline and m ore rocket fuel. The way I understand it is, it is like Raw milk. Raw milk produces a fixed ratio of Heavy Cream Whole Milk. each of which can be further reduced to component parts - butter milk & butter, and 2% and Skim, respectively. Like that the industry says the retail prices have to do with demand for different fuels being out of wack with the ability for the refineries to produce. A trivia point I learned once, was Gasoline was once a byproduct of producing diesel fuel (fuel oil, kerosene, coal oil). That is what is confusing to me about the current diesel price, which is much higher than gasoline. I suspect using the milk analogy that kerosene can be further refined into jet fuel or something not unlike the Heavy cream - butter example.
As the price of fuel ripples through the economy, and causes prices to sky rocket will other technologies become more viable, and become available for us to switch to? I'd love to convert my Taxi to run on french fry oil. But that is not the answer for everyone. We would not want the price of corn to sky rocket because of the fuel needs of the taxi industry. The idea now, is running vehicles on waste oil is efficient. It would not please the heart association to have everyone eat 3 orders of fries a day to produce the waste oil necessary for the fleet either.
I'd like to see photo-voltaic technology improved. At current capacity, a quarter of India would have to be covered in cells to produce enough power for that country. I suppose we could dome the entire continent and create some bio-dome malled environment which could be energy efficient. maybe that is our future. But would we all have to work at the gap?
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and so it goes
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