If a 50% price increase isn't a crisis, then what is?

And more importantly, oil prices are less important to the economy than most people believe.

TL: DR - Oil prices are not that important

ROTFL

https://oilvoice.com/Opinion/24972/Our-Finite-World-Why-We-G...

10y ago we were at almost twice the price and developing countries weren't "on strike full-retard" or seeing oil driven defaults.

The closest to a country really being screwed recently by oil prices have been exporters, especially Russia which depends on higher prices to balance its budgets and had been harmed byow prices.

That's not to say that oil prices "aren't important". It's just that every industry/economy/etc had been forced to learn to weather price volatility. That's. Why there is such a developed futures etc market.

Some context: Indonesian govt. subsidizes fuel to quite a large degree, up to ~50% of relative to petrol prices. Over the years, they've been trying to draw down, but it's a touchy subject.

Last year, ~10% of state budget was spent on fuel subsidies (to give us a sense of scale).

sources: indonesian Ministry of Finance state budget 2018 https://www.kemenkeu.go.id/apbn2018

CNN indonesia post saying fuel subsidies was over the alloted budget: https://www.cnnindonesia.com/ekonomi/20190102172609-532-3580... - sub)

edit: some posterity

I'd argue that this is exactly the sort of price stabilization mechanism that makes oil volatility less scary it sounds on its face. The government is centralizing (and, more controversially, socializing) the financial cost of creating internal price stability. This is actually pretty common, and I'm not sure 10% of budget (at peak) is as outsized as it sounds. In the USA, this takes the form of buying and releasing oil from the strategic reserve, but also in a mountain of foreign policy (read: military) spending on maintaining stable supply lines for energy trading.

[1] https://worldview.stratfor.com/article/indonesia-energy-refo...

Moreover, think of it in the opposite direction. Imagine a getting hit with a 10% tax increase even if a richer guy gets 15%. Him being taxed more doesn't necessarily make that 10 feel much better.

https://www.macrotrends.net/1369/crude-oil-price-history-cha...

Oil prices were double what they are today in 2014, and triple in the depths of the 2008 recession (before falling to roughly current levels in 2009). They were roughly half current levels in the 2000 recession. They were roughly equal during the oil crisis in the 1970s.

Sudden shocks to oil prices seem to be able to cause recessions, like the 250% increase in 1973 or the 200% increase from 2007-2008, capping off a 500% (!) increase from 2002-2008. But these are a lot bigger than the 50% increase postulated here. We've withstood 50% increases (1994, 2004, 2016) or even 150% increases (dot-com boom) with no ill effects.

It's the prisoners' dilemma, but applied to exploiting consumers!

Oil prices were about 2x of what they are today in early 2010's, and I recall nothing of the sort.

Fortunately for me, they hadn’t read the newspaper lately.

It was a lot of fun to quote the collapsed oil price from a newspaper I found lying around and then relax the rest of the debate.

https://www.energy.gov/eere/vehicles/fact-915-march-7-2016-a...

2015-present the price has been around $50-60 with some points below 30 and above 70

Has that 50% drop been some kind of miracle?

We would just be returning to prices of the previous decade.

https://www.macrotrends.net/2516/wti-crude-oil-prices-10-yea...

[Actually petrol is down about ~7%, 140p->130p per litre https://www.racfoundation.org/data/uk-pump-prices-over-time; and fuel-oil about ~10%, £300->270 per 500 litres https://www.cheapestoil.co.uk/articles/trend. But, compare that to https://www.macrotrends.net/2480/brent-crude-oil-prices-10-y... showing 2012 prices at 4 times 2015 prices.]

I think when people are thinking of "oil prices", as consumers they're converting that to "petrol prices" (and fuel oil if they use that) and thinking "if petrol/heating prices rise >50% that's going to be very hard".

Petrol prices only falling by four-twelths when the crude price fell by nine-twelths suggests that petrol costs a lot on top of the crude price and that a 50% crude increase might lead to, say a >100% petrol price increase.

On top of all of those factors I would only guess that at high prices profit margins fell by ratio which was recovered (or just increased) when prices fell.

Why? If petrol price is fairly inelastic to crude price (for reasons siblings note) that means it would increase a little, not a lot.

[1]https://www.macrotrends.net/1369/crude-oil-price-history-cha...

Something like 5% of world natural gas consumption is to drive the Haber process to create fertilizer that then drives everything else in modern agriculture. Now, natural gas and oil prices are not as correlated now as they used to be (due to fracking) but there seems to be some residual connection between the two, so that could be something to look out for.

That’s probably it.

A 50% price increase would be bad for people who have to drive and are in a financially precarious situation, but it's not any more a catastrophe than all the other various things that affect people in financially precarious situations, which upper-middle-class people can shrug off as a mild annoyance.

The only times gas has been unavailable for a sustained time is when the government fixed prices or otherwise prevented the market from working.

For example, when there's a natural disaster and anti-gouging laws kick in, gas becomes unavailable.

Later, the DoE started allocating (i.e. rationing) gas to gas stations.

Reagan abolished these by executive order as one of his first acts as President:

https://www.nytimes.com/1981/01/29/us/president-abolishes-la...

and the gas lines disappeared overnight and never returned.

I'm surprised it isn't talked about more. During the gas allocation times, there'd be a glut of gas in Florida and long lines in California because the DoE would allocate gas based on the previous year's usage patterns. Things change constantly, and the DoE was unable to adapt.

I had a friend who bought a gas station. It took him months to get a gas allocation from the DoE because the gas station across the street challenged his allocation, for obvious reasons.

When the market decides where to put the gas, the tanker trucks take gas from the glutted areas and move it to the shortage areas as a natural action. Any reasonable business moves product to where it is selling.

I personally don't think that will ever happen. The increased adoption of renewables means oil demand will not outstrip supply.

The increasing penetration of renewables is dwarfed by increased population + raising living standards.

If the Saudis are under-reporting their reserves, that's why. They don't want oil prices to be higher because it makes alternatives more competitive. It doesn't help them to sell oil for 50% more for a few years while that spurs everyone to buy electric cars and charge them with solar panels, only to have that demand reduction cause oil prices to decline below their current level and stay there forever. Or worse (for them), for consumption to decline to the level that consumers no longer strongly oppose a carbon tax, which would naturally cause consumption to fall off a cliff (as intended) as even more people switch to alternatives.

On top of that, the alternatives need volume to build economies of scale which make them more competitive. This is already happening but would happen faster with higher oil prices, and as it does the result is a permanent reduction in alternative energy costs, making oil less competitive even at lower prices.

They are (kind of), or at least talking loudly about it. They just don't seem to be very good at pulling off these sort of ambitious large scale projects.

https://www.bloomberg.com/news/articles/2018-12-16/why-saudi...

https://www.greentechmedia.com/articles/read/saudi-outlook-r...

https://www.eia.gov/energyexplained/oil-and-petroleum-produc...

Moreover, you don't have to replace all cars to significantly reduce oil demand when each replacement with an electric vehicle reduces that driver's oil consumption by 100%, particularly when the vehicles most likely to be replaced as a result of higher oil prices would be the ones that drive the most miles. On top of that, the non-electric vehicles sold during periods of high gas prices would tend to be high fuel economy vehicles as well, and the vehicles in the existing installed base most likely to be junked would be the most inefficient ones.

The Chinese market in particular is fascinating from an EV perspective. Particularly because it seems to indicate that non-personal vehicles (especially buses, delivery trucks, and semi-trucks) are either going to be not far behind in electrification or even possibly slightly ahead.

It is starting to look like in the US it will be the case that commercial vehicles may electrify faster than the personal vehicle market (at least partly because manufacturers aren't really selling EVs for personal auto sales in a tautological fallacy that they think they won't sell in the US). Amazon's big recent deal with Rivian, for instance, should put a lot of commercial EVs on the streets. UPS' similar older, quieter deals with multiple companies pushing them to hybrid trucks only already and an entire EV fleet supposedly in the next several years. Proterra seems to be making great headwind in the US bus market, as another example.

I think there are some interesting possible big disruptions on the horizon:

- Oil prices go up (as this article is about)

- EVs become the cheapest powertrain option for any new vehicle. VW's ID.3 is already cheaper than all comparable Golf models, and most of the other German manufacturers expect to hit that switchover (due to efficiencies of scale) for almost all their models no later than 2023. (Chinese manufacturers seem to have mostly hit the switchover point already. Most other Asian manufacturers aren't far behind. Traditional US manufacturers GM and Ford are idiots and lagging everyone else again.)

- Somewhat similar to above, a small disruption in the complex web of internal combustion engine supply chains could potentially domino to greatly increase new ICE vehicle costs, and even potentially have similarly drastic consequences to ICE vehicle repair/maintenance costs. Internal combustion engines (especially compared to EV motors) have a lot of little, very specialized parts. Even just one supplier pivoting could have fascinating consequences. (With perhaps the only counter-disruption being something like 3D printing hitting certain machining specifications that seem currently unlikely.)

The middle one is definitely happening. The article here suggests the first one is maybe closer than people expect. The third one is one I'm amusedly watching, and I think is going to be a quick accident after the middle one happens. If German manufacturers move to certain sales benchmarks, that definitely affect global suppliers that are Germany-based such as Bosch, as just one example of many, and GM/Ford certainly have plenty of Bosch pieces in their supply chains, whether they admit it or not.

What about the issues with lithium and coltan supply for batteries ?

What about the ~+33% increase required in electric power generation to replace oil in transportation ?

I just don't see how it could be a "surprisingly quick" transition... even if we had started it early !

Lithium is in large supply (Atomic Number 3, right, third place on the Periodic Table), and is easily recyclable from current batteries.

Cobalt is a miniscule portion of current battery compositions. Most battery companies have been working to minimize or remove it. It should be recyclable, but it's never been economically feasible to recycle it from current battery compositions because a) it is such a minority component of current batteries, and b) Cobalt is cheap. (Cobalt is a "waste product" or by-product of Nickel mining today. The threat to Cobalt supply is that most Nickel mines today are in politically questionable regimes such as Columbia and the Democratic Republic of the Congo. But Nickel mining is likely something that continues to happen regardless of politics.)

> What about the ~+33% increase required in electric power generation to replace oil in transportation ?

If every car on the road today switched to EV tomorrow, but made sure to charge only during the "bathtub" of off-peak (evening) hours, there's absolutely no increase in power generation needed. Our culture's day-time peak generation capability, which has to account for most of our industrial use, is more than sufficient so long as consumers are smart about when they charge.

(The difference between Peak demand during the day and off-peak evening hours really is huge. "Filling in the bathtub" that the off-peak hours create in the demand chart is considered something of a holy grail for decades in utility grid planning because it would mean more base load generation that doesn't have to shut down every night and can run more continuously/smoothly every day.)

Smart Grid solutions exist and are being planned where cars can even help solve demand problems by acting as sitting batteries (as owners allow them to) that utilities can "loan" power from a car during peak demands, and pay back with "interest" during off-peak (and potentially doing so at an incredibly granular level).

All of which is to say that there are already market solutions to the increased electricity consumption of EVs. Peak rates might go up, perhaps, but the natural tendency of most EV owners is already to charge during off-peak (at home on the evenings), even without the extra incentives of big cost differentials between peak and off-peak utility rates. Most EVs today already have okay off-peak hours selection tools built-in, even without the detailed electricity price-sensitivity options that Smart Grids might eventually bring to the market. (But Smart Grids are certainly on utility road maps because there's a lot they could do with that extra demand sensitivity.)

I've yet to hear a worst case for EV electricity demand that would need 33% more capacity at Peak demand. That's an interesting and presumably unlikely scenario.

Being at the 3rd place in the atomic table isn't a guarantee of availability - after all hydrogen is first, is 75% of the mass of the universe, and yet isn't directly available to us ! (at a low cost) And recycling batteries won't help much when the goal is to massively increase production...

The only EV producer that's outright complained about battery availability is Tesla, and it's very easy to wonder how much of that was marketing spin to cover other production issues (and the accusation of the traditional car manufacturers that car production is hard and has huge startup hurdles), and maybe even PR/marketing spin to their own investors to explain insourcing battery production (building the "gigafactory") rather than partnering with an existing battery manufacturer.

Tesla probably has scaled faster than most other car companies, but yet it has also scaled much less comparably (to say Renault or VW just signing delivery or plant contracts in partnership with existing battery manufacturers rather than building their own factories from 100% "scratch").

I'd love to see a better analysis of the battery market right now. I'm betting the catch-22 that car manufacturers don't feel a lot of consumer demand for EVs has more on bottlenecking EV production than batteries in the current term.

Not arguing, but here's the data that should be reconciled:

https://ourworldindata.org/grapher/world-crude-oil-price-vs-...

And for most of the period on that graph, we didn't have the alternatives we do today. When oil prices spiked in 1979, people bought smaller cars that got better mileage, but they still ran on petroleum and used gas stations, and then people started buying petrol SUVs when gas prices came back down. If that happens in 2020 then people buy electric cars rather than econoboxes, and then we get more charging infrastructure and more battery research and economies of scale, and there would be no obvious advantage in ever switching back even if oil prices subsequently declined to their current level.

No such thing. Prices will always hit a point where demand decreases. Inelastic isn't 100%.

So, it’s true, right up until it’s not

Good old-fashioned fraud. Oil prices had nothing to do with it.

Source: acquaintance who spent three years in court testifying about the rampant fraud in the mortgage industry. He worked for an investment bank which is no longer with us.

But I guess that it's a bit academical, as that bubble would have popped soon enough anyway...

You realize that this is the clusterfuck? no? We are looking to a Jojo effect. Oil prices too high? Recession. Oil prices too low? Oil producers can't afford to invest and produce (what is already happening now).

This is actually the reason why we will never run out of oil. No kidding. I assume most of the oil will stay there, where it is. In the ground!

https://ourfiniteworld.com/2019/07/10/why-stimulus-cant-fix-...

Which is how the free market prevents shortages. Whenever there's a sustained shortage or glut, look for government interference.

Why? Why would it not simply stabilize at say 20% higher than now?

> This is actually the reason why we will never run out of oil.

That is either word games or nonsense. People will keep extracting oil and there is only finitely much available at reasonable prices. Note that "run out" here does not mean there is no oil left. Just like a country "running out of food" does not mean that there is nothing edible anywhere in the whole world.

How about 100 or 150%? Above 100 USD you may be able to afford gas. Many people can't.

"That is either word games or nonsense. People will keep extracting oil and there is only finitely much available at reasonable prices."

There are two points you ignore. Falling ROEI (return of energy invested) on energy invested. Good oil has a ROEI over 20 (over 100 AFAIK for the first wells long time ago). This is sinking. It is 1:2 ROEI for shale gas. At 1:1 if does not make sense to try extracting.

The same with money. Energy and money are interlinked. www.declineoftheempire.com/2012/01/wealth-and-energy-consumption-are-inseparable.html

Have a look of the money invested for further exploitation by big oil companies. Constantly sinking. The problem is you need high oil prices to justify investments. At the same time running an economy above 100 USD for oil is tricky. People can simply not afford it. Maybe you can, again, many people cant.

This has nothing to do with what you quoted or what we were discussing.

> At the same time running an economy above 100 USD for oil is tricky. People can simply not afford it. Maybe you can, again, many people cant.

Exactly my point.

Question: when will earth’s oil reserves be 100 percent depleted?

OK, timeout. Before you grab a pencil and break out the scratch paper, I should warn you — the answer isn’t 14.2 years. Or 20.4 years. Or any other number of years.

It’s never."

https://medium.com/@andrew.chamberlain/why-well-never-run-ou...

Of course it will, because we have mroe than enough oil to burn to put out enough CO2 to take us to +20 deg warming or more. So unless we get cheap CCS (carbon capture and storage) it's a good thing that most of the oil stays in the ground.

Non-obviously, only about half of the price of filling up is for the natural gas, the other half is electricity cost to compress it to pressures way beyond the pipeline pressure. This makes home based filling impractical, and CNG filling stations are fairly sparse.

Source: In 2017, I _really_ wanted to get a CNG Crown Vic/Town Car for HOV access, part of which was planning for a purchase in Los Angeles and driving to the Bay Area, refueling on the way; with the limited range, and without access to PG&E stations, I'd need to go up the coast, because I wouldn't make it on the 5.

I owned an LPG-fueled car and it was really no different than gas-fueled one, other than more frequent need for refuel (I had a small tank installed where the spare tire used to be, and it only had around 100 miles of range).

In the 90's (!) much of the taxi fleet (and a good number of trucks) in Moscow, Russia was powered by CNG. Everything worked fine, in spite of a much lower level of technological advancement. If gasoline were to permanently go to $6+/gal, and the industry was deregulated a little, you'd see CNG retrofits that cost sub $1K and last for the lifetime of the car in basically no time at all. All the tech has been in place for decades, it's just a matter of demand now.

> tanks are supposed to be inspected every 3 years, and they expire 20-30 years after manufacture (and the tanks may have been manufactured much earlier than your vehicle). Some fuel stations (notably, PG&E's) require proof of recent inspection. And, replacing the tanks when they expire isn't economically feasible, leaving you with a lump of coal.

wouldn't all of these problems be addressed more adequately by a larger potential customer base & supporting infrastructure? (e.g. annual car inspection==tank inspection, cost decreasing due to bigger market, etc)

broader point still stands I think - if this was required of everyone every year, a secondary market like propane tanks for backyard grills, etc would probably emerge or it would be part of mfg warranties.

side note: no, I don't think market solves everything.

China has sub-$15k equivalent EVs today. Cheap EVs are certainly physically possible even with today's scales, and partly it's just the catch-22 perception hump of "EVs are only for early adopters and luxury cars" (for both consumers and manufacturers) keeping EVs from hitting some scale benchmarks to push them cheaper.

The used market still isn't showing a lot of EVs, but that seems to be that statistically most EV owners keep their cars for longer. That's an interesting statistic, that maybe points to reliability on one side, and a possibly very different replacement rate on the other side. Which is to say that the average EV first owner is currently keeping their vehicle for 7-10 years rather than the 4-5 year replacement rate that has been of typical of ICE vehicle sales. (If EV owners were only keeping their cars for 4-5 years, as you suggest of some hypothetical "HN bubble" that would be a lot more of them on the used car market, and in turn fewer complaints of the high cost of EVs. The long first life of an EV is also keeping the costs up and affecting depreciation rates.)

I'd love to get an EV one day, when the pricing is less nutty than it is today. But it has to be economically viable for me. Right now it's not.

And for electricity, the utilities actually need the extra demand because of energy efficiency reducing lighting costs and distributed solar and subsidized wind providing occasional gluts. Since EVs can fairly easily be set to charge (most the time) on a schedule when electricity is most abundant, this is good for everyone.

EDIT : Whoops, my bad, somehow forgot that we were talking about transportation, which is "only" a quarter of power use...

So you need to go from 24 to 24+(34-1)/4 = ~32 Gwh/year, a 33% increase, and you expect to be able to do that in 2-3 years ?!

(Napkin calculations, not taking into account various (in)efficiencies and intermittency issues, but the order of magnitude should be roughly this one...)

US average electricity is ~475 Gigawatts. But there's a huge difference between average electricity and nameplate capacity. Natural gas peaker plants have about a 200GW nameplate capacity in the US but only produce about 25GW average. If we ran just the peaker plants all-out, we'd generate an additional 175Gigawatts.

US gasoline consumption is about 400 million gallons per day. I drive a Volt, and typically I get about the same range in 10 kWh that I would in a single gallon (Model 3s do even better, however). So roughly speaking, We'd need about 4 TWh per day, or about 167 Gigawatts average extra. Technically, averaged over the year, then, our peaker plants would have enough extra capacity to produce enough electricity. But natural gas combined cycle plants would also generate about another 100GW if ran all-out. (None of this is terribly realistic as there will be local transmission constraints and weather-related demand spikes which the peaker plants are needed for, but it is instructive.)

However, it'd take a good 10-15 years to mostly turnover the whole gas car market in the US even with a revived "cash for clunkers" program, so the capacity expansion would have plenty of time to sort these things out. We can expand solar and wind over this time even while phasing out gas.

The main thing, however, is the battery production.

It's 4% of electricity coming from oil, sorry for the confusion. (Hmm, I might have made another mistake here - eh, it's smaller than the uncertainty anyway...)

167/475 = 35% Nice to see that the math seems to check out with your data too. The issue of intermittence would warrant whole books of studies, hard to do it properly in comments here...

(Hint: we don't. It's estimated it would take us minimum of 2 years to complete the required infrastructure build out)

I don't see how this negates the parent w/r/t the parents-parent.

https://www.transportation.gov/sites/dot.gov/files/docs/fina...