until a political or natural event crashes the system.
This is different from the 70‘s in that supply will never rebound. The 70’s were shocks, efficiency and additional production eventually led to lower prices. This promises to be slow strangulation, concluding with a massive shock that will bring our economic system to it’s knees. With supply chronically outstripping supply, we are one Gulf of Mexico hurricane or one revolution away.
This is an example of how the ‘market’ system is dysfunctional when it comes to infrastructure planning. In this case, the energy and transport infrastructure. Because of the lead times required to transform the energy infrastructure once the ‘market’ signals a problem, massive economic distress is now unavoidable, as concluded in the following report prepared for the DOE.
Peaking of World Oil Production: Impacts, Mitigation and Risk Management.
Hirsch, Bezdek, Wendling, February 2005
http://www.hilltoplancers.org/stories/hirsch0502.pdf . . .
Because conventional oil production decline will start at the time of peaking, crash program mitigation inherently cannot avert massive shortages unless it is initiated well in advance of peaking.
Specifically,
* Waiting until world conventional oil production peaks before initiating crash program mitigation leaves the world with a significant liquid fuel deficit for two decades or longer.
* Initiating a crash program 10 years before world oil peaking would help considerably but would still result in a worldwide liquid fuels shortfall, starting roughly a decade after the time that oil would have otherwise peaked.
* Initiating crash program mitigation 20 years before peaking offers the possibility of avoiding a world liquid fuels shortfall for the forecast period.
Without timely mitigation, world supply/demand balance will be achieved through massive demand destruction (shortages), accompanied by huge oil price increases, both of which would create a long period of significant economic hardship worldwide.. . .
From the time world oil peaking occurs or is recognized, it may thus take as long as 15 years until strengthened vehicle fuel efficiency standards significantly increase average on-road fleet fuel efficiency. However, care must be exercised in making extrapolations. Most “realistic” enhanced vehicle fuel efficiency standards might not actually decrease future total gasoline consumed in the U.S.
due to the anticipated continued increase in numbers of drivers and vehicles.
Thus, a new CAFE mandate might decrease the rate at which future gasoline consumption increases, but not necessarily reduce total consumption. Only aggressive vehicle fuel efficiency standards legislation that “pushes the envelope” of fuel efficiency technologies over the next two decades (as determined, for example, in the study by the National Research Council of the National Academy of Sciences) is likely to actually reduce total U.S. gasoline consumption.
. . .
We further assume that vehicle fuel efficiency standards are increased 30 percent three years later -- for cars from 27.5 mpg to 35.75 mpg and for light trucks from 20.7 mpg to 26.9 -- and then increased to 50 percent above the base eight years later -- for cars from 27.5 mpg to 41.25 mpg and for light trucks from 20.7 mpg to 31 mpg; finally, we assume full implementation is assumed 12 years after the legislation is enacted. These assumptions “push the envelope” on the fuel efficiency gains possible from current or impending technologies.
On the basis of our assumptions, the U.S. would save 500 thousand barrels per day of liquid fuels 10 ten years after legislation is enacted; 1.5 million barrels per day of liquid fuels at year 15; and 3 million barrels per day of liquid fuels at year 20.
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