What is causing this price increase? According to Goldman Sachs, it's pretty much supply and demand:
OPEC agreed last year to lower output by 1.7 million barrels per day (bpd), and Goldman said global oil production is down about 1 million bpd from last summer's levels.Disappointing output growth from non-OPEC producers also helped tighten supplies, Goldman said, adding global demand was up by 1 million bpd from year-ago levels.
Supplies down, demand up, very little spare production capacity worldwide, a continuing "anxious market," a weak dollar, strong speculative investment flows into commodities like oil...all that will certainly drive prices higher.
In addition, the US Energy Information Administration's (EIA's) latest Short-Term Energy Outlook anticipates that world oil demand will increase by 3.0 million barrels per day between the second and fourth quarters of 2007. According to EIA, "[o]f this, OPEC is projected to supply 1.5 million barrels per day, with the rest met by additional non-OPEC supply and a drawdown of inventories."
And BushCheney's "friends" in OPEC? Well, they say that it's pretty much all our fault (refinery problems, higher demand, whatever b.s. excuse they can think of) and assert that there's no reason for them to increase their output. Whoa now, wait a minute: there's no reason to increase oil exports - and hence oil revenues - at $74 per barrel?!? I'm sorry, I know these countries require more oil revenues than they used to (in part because their populations have exploded, as have their subsidies to those populations), but it's simply not credible that $74 per barrel is insufficient economic incentive for OPEC nations to increase their production.
You know, I've never been a "peak oil" person, but it's stuff like this that really makes me start to wonder whether OPEC simply can NOT increase its oil output, despite its claims that it can. In particular, I've just about stopped believing anything the Saudis say about anything; they're just beyond absurd at this point.
The bottom line is that we may very well be on our way to $95 per barrel even WITHOUT a significant oil supply disruption. As someone who worked on world oil markets for 17+ years, that's truly amazing; I remember a time when a $95 per barrel forecast, even IN a disruption scenario, would have been laughed out of the room. God help us if BushCheney attack Iran and the world loses that country's 3.7 million barrels per day of oil production. Even worse, if Iran retaliates and manages to knock Gulf oil facilities offline for any length of time, we could be talking $200 per barrel easily.
This could be a long, cold winter...
it would be worthwhile for people to think about how to go about their business using less fuel. If none of this comes to pass, you still end up saving money - just not quite as much.
I could toss out lots of ideas, but people's lives are all so different that what works for one person wouldn't work for others.
One complicating factor is that there is a lot of misinformation out there, and there are companies and interest groups pushing "solutions" that aren't of any help.
Once you admit that there is some limit, then the question is how much is there actually. One anecdotal comment that I can make is that in each oil producing country in the world, the actual peak for that country has always caught the experts by surprise. Which itself is interesting I guess, but I am not completely sure why. I suppose groupthink could play into it, but it could also be that in the past more drilling always produced more oil, so the possibility that a country has plateaued isn't a part of their everyday thinking.
There is also the paradigm that humans tend to take that their actions are small in relation to the world as a whole, so worldwide resource exhaustion simply isn't possible. Now that I think about it, this is probably the greatest underlying reason that many people reject peak oil out of hand without giving it much thought.
In light of all of this, it is quite conceivable that a worldwide peak will catch the world by surprise as well. That's the nightmare scenario. That the world will be caught unaware, and won't have prepared in any meaningful way.
Lots of people wave around the term "new technologies" almost like a mantra, and most people don't actually have the time or the background to sit down and evaluate the possibilities to see whether they are realistic or whether they are just pie in the sky schemes. Thus they just take comfort in the belief that some sort of technology will arise from somewhere that will solve the problem. Catton calls this thinking cargoism - named for the cargo cults of the South Pacific. I suppose this is an insulting characterization, but based upon comments that I see from the general public, it seems fair if not a bit harsh.
This isn't to say that some technological advance won't be made - technology is impossible to predict in that way.
But these days I see incredible amounts of effort go into technologies that are essentially useless fluff - things like video iPods or iPhones. Or worse yet, new technologies take the form of new and deadlier weapons.
Regarding the unconventional, the trend in recent years is to simply lump that in with reserves without distinguishing it in any way from conventional oil. Getting at tar sands is really a mining operation and not a drilling and reservoir management type of operation. Thus as a result the economics are completely different. In particular, recent projects up in Canada have had massive cost overruns, there are serious questions about scalability, and they require vast quantities of water and natural gas to drive the process.
Based upon what you say though, I expect that when the peak does hit, it will catch us unaware.
And some people here in Virginia (mostly flat earth Republicans) bitch that a small gasoline tax increase will "ruin everything" or some such nonsense. Well, if those few cents would make that big of a difference, then these $4 per gallon prices will certainly turn Virginia into a third world country.