The Tipping Point on Oil is Here and Now
Jun 11 2008 | Views 352 |
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Tags: Tipping Point in Oil Imminent to be fought intelligently with several means available
Tags: Tipping Point in Oil Imminent to be fought intelligently with several means available
There have been several books written on the concept of Tipping Point in Oil. However to expand on the concept of tipping point one has to point to a book by Malcolm Gladwell called"he Tipping Point: How Little Things Can Make a Big Difference, first published by Little Brown in 2000. Gladwell was using this on socialogical phenomena, but the tipping point is also used in relation to Oil availability.The technical definition of Tipping Point per Wikipedia is
With production now exceeding new discoveries by as much as 8 billion barrels a year and most non-OPEC output levelling off or falling, the world will become increasingly dependent on OPEC to meet growing demand. However, the study suggests that even OPEC will not be able to make up the difference between non-OPEC supply and global demand beyond 2015-2020."
Seeing the handwriting on the wall and seeking to preserve their wealth in the ground, the producers have made some harsh but logical decisions. Firstly, to drive the price of oil up to a level that would discourage consumption. Because of this man made shortage, speculators in the form of big banks have gobbled up futures contracts in oil that they intend to sell to the highest bidder. The above prediction that the beginning of the end as oil as a main stay energy resource was a decade away, only addressed supply and demand and did not reckon that producers and speculators will artificially make oil scarce and thus push its price off the charts. Oil is currently selling at $132 a barrel and could go up to $200 or even more depending upon what the traffic will bear.
Will all this as a backdrop what messsage has it for the US and India, the two countries of my vital interest. Since the industrial revolution in the US, starting with the ambitious and strategic building of trans-continental railroads to unify a nation, the US has retrogressed away from public transportation to a ninety year love affair with the automobile. Thus all lobbying of Big Auto in Detroit and Big Oil from the Oil Patch in Texas and Oklohoma and California has been aimed at making the people dependent on personal autos and consequently the rail roads have been gutted and all effort has been made to scotch efforts to push for improving public transportation systems. Thus, in many parts of the US the only mode of transport is the automobile. I remember, in one of my corporate jobs when I worked for Exxon , I commuted to work from Chappaqua, NY to Florham Park New Jersey, a distance of 75 miles each way. This was when gas was 80 cents a gallon, and seven gallons for 150 miles per day cost me $5.60 per day or $ 120 per month, while at $4.30 a gallon, now it will cost $30 per day or $600 per month. This is the squeeze that people especially in the midwest are being put through. These are people largely of modest incomes making draconian choices, choosing spending money on food over other less demanding expenses. The shift to public transportation is at least a decade away as by its very nature it means, changing the infrastructure, which will take at least that time. However, if the next administration is republican there might be a deliberate choice made to do little or nothing.
As I have quoted sources above that life styles and where we live will have to change to cope with the slow disappearance of oil. However only a visionary President can strategically push a country in that direction.
India is fortunate to have all transportation geared towards the indian Railways and the extensive bus system.Transportation of goods will remain a shared responsibility between the railways and trucking outfits that move product through the length and breadth of India. India got a fully working railroad system which remains the bulwark of all transport in the country. It did not, destroy the rollng stock. ie. destroy public transportation in favor of the private auto. Still India will re-think the placing of industries and people. The pattern of living will have to change and research for alternative energy sources like solar, wind,hydrogen,clean coal etc, vigorously investigated.
Ths high price of gas is here to stay, so both India and the US have to work hard to develop alternate non polluting fuels to replace the fast disappearing gasoline. More importantly, hardheaded decisions requiring real sacrifice will have to be taken. Success or failure depends upon how well the respective countries handle this strategic shift.
"The term tipping point describes a point at which a slow gradual change becomes irreversible and then proceeds with gathering pace. It is derived from the metaphor of a rigid solid object being tilted to a point where it begins to topple.".
The classical definition of tipping point in oil is the point when the producers realize there is less oil in known reserves, than the world would require in a reasonable planning horizon. Another way to define it is when acquisition of new reserves turn out to be less than the current consumprtion of oil.That planning horizon differs with each major producer of oil.:The Arabs, the Venezuelans, the Russians, Nigerians etc., the producers realize that their bonanza is limited and as any prudent owners are trying to conserve their assets but at the same time keep their incomes steady, by increasing prices.The huge increases in global oil prices tells us that the world of oil producers are preferring to keep the increasingly depleting asset(oil) in the ground rather than seiing it to be burnt in internal combustion engines, the world over.
Though the tipping point in oil is imminent, the actual fact will only be seen after several years when people analyze events and say: There, that was the time the tipping point occured.
The signs of the imminency of the tipping point are everywhere. In the Airline industry, Reutars reported that Continental Airlines are cutting jobs and retiring their fleet of 67 gas guzzling old model Boeing 737 planes, to be replaced by more fuel efficient planes. Other airlines are similarly junking their old fleets for new energy saving aircraft. A new paradigm is coming to be, energy conservation is the key, because it costs too darn much to consume energy the way we used to. The monstor SUV as characterized by that obscenity the Hummer is dead as the dodo and as obsolete as the dinosaur.
Business Week quotes James Howard Kunstler:
www.businessweek.com/magazine/content/08_18/b4082056979063.htm
"Oil wells are running dry and the era of cheap fuel is over. Given the supply constraints, ... the U.S. will have to rethink suburban sprawl, bringing an end to strip malls, big-box stores, and other trappings of the automotive era."
......... He finds suburbia threatened as "Cheap oil is what made suburbia possible. But we'll run into problems with spot shortages. As we get into trouble with these supplies, our economy will suffer. Major instabilities in the system will present themselves much sooner than we are led to believe. And by that I mean the way we produce food, the way we conduct commerce, and the way we move around." Further" is part and parcel of the suburban predicament. How long can they maintain their warehouse-on-wheels as the price of motor fuels goes up? "
The Energy Bulletin published on September 15, 2004 , entitled New Forecast Shows Oil Supply-Demand Tipping Point Within A Decade by the ODAC Bulletin Board makes the following points
With production now exceeding new discoveries by as much as 8 billion barrels a year and most non-OPEC output levelling off or falling, the world will become increasingly dependent on OPEC to meet growing demand. However, the study suggests that even OPEC will not be able to make up the difference between non-OPEC supply and global demand beyond 2015-2020."
Seeing the handwriting on the wall and seeking to preserve their wealth in the ground, the producers have made some harsh but logical decisions. Firstly, to drive the price of oil up to a level that would discourage consumption. Because of this man made shortage, speculators in the form of big banks have gobbled up futures contracts in oil that they intend to sell to the highest bidder. The above prediction that the beginning of the end as oil as a main stay energy resource was a decade away, only addressed supply and demand and did not reckon that producers and speculators will artificially make oil scarce and thus push its price off the charts. Oil is currently selling at $132 a barrel and could go up to $200 or even more depending upon what the traffic will bear.
Will all this as a backdrop what messsage has it for the US and India, the two countries of my vital interest. Since the industrial revolution in the US, starting with the ambitious and strategic building of trans-continental railroads to unify a nation, the US has retrogressed away from public transportation to a ninety year love affair with the automobile. Thus all lobbying of Big Auto in Detroit and Big Oil from the Oil Patch in Texas and Oklohoma and California has been aimed at making the people dependent on personal autos and consequently the rail roads have been gutted and all effort has been made to scotch efforts to push for improving public transportation systems. Thus, in many parts of the US the only mode of transport is the automobile. I remember, in one of my corporate jobs when I worked for Exxon , I commuted to work from Chappaqua, NY to Florham Park New Jersey, a distance of 75 miles each way. This was when gas was 80 cents a gallon, and seven gallons for 150 miles per day cost me $5.60 per day or $ 120 per month, while at $4.30 a gallon, now it will cost $30 per day or $600 per month. This is the squeeze that people especially in the midwest are being put through. These are people largely of modest incomes making draconian choices, choosing spending money on food over other less demanding expenses. The shift to public transportation is at least a decade away as by its very nature it means, changing the infrastructure, which will take at least that time. However, if the next administration is republican there might be a deliberate choice made to do little or nothing.
As I have quoted sources above that life styles and where we live will have to change to cope with the slow disappearance of oil. However only a visionary President can strategically push a country in that direction.
India is fortunate to have all transportation geared towards the indian Railways and the extensive bus system.Transportation of goods will remain a shared responsibility between the railways and trucking outfits that move product through the length and breadth of India. India got a fully working railroad system which remains the bulwark of all transport in the country. It did not, destroy the rollng stock. ie. destroy public transportation in favor of the private auto. Still India will re-think the placing of industries and people. The pattern of living will have to change and research for alternative energy sources like solar, wind,hydrogen,clean coal etc, vigorously investigated.
Ths high price of gas is here to stay, so both India and the US have to work hard to develop alternate non polluting fuels to replace the fast disappearing gasoline. More importantly, hardheaded decisions requiring real sacrifice will have to be taken. Success or failure depends upon how well the respective countries handle this strategic shift.
© Girdhar Gopal., all rights reserved.
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