$10 Gasoline & Rising Inflation, The Trend of the Future

[valuesystem]

$10 Gasoline & Rising Inflation, The Trend of the Future
by Aaron Wissner
March 1, 2008While it sounds incredible, $10 per gallon gasoline is what we should expect only seven years from now. That is, if everything goes extremely well, between now and then

Comments

[valuesystem]

I don't know that I would call it a prediction as much as an expectation. Just as I expect to live to see the weekend, I also expect that gasoline prices will rise to $10 within 7 years. Note, that is constant dollars, and inflation may accelerate the price increase. Apparently, the TV business news has been awash with concerned CEO's who don't quite understand what is going on with prices. Definitely NOT peak oil aware.

As to heroic drilling effort, we already have every single oil crew in the world at work on every single oil rig in the world. There is no more capacity to drill. To train a crew takes a long time, as does building a good rig.

Perhaps it is even uneconomic to try to get new rigs and crews. The oil discovery rate is very low, something like less than 10% of wells drilled are productive, and that is getting worse every year.

If, on the other hand, we punch more holes in existing fields, then we'll either end up depleting that field more quickly... which you already stated, after all.

As to proposition B, I wonder if a recession could slow oil consumption... or if slowing oil consumption will cause recession. Oil is the master resource. What happens with it determines the economy, not the other way around.

If you take a look at this 70 second video, which I watch every so often to remind myself what is happening, I think you'll find that I agree with you in some ways.

http://www.youtube.com/watch?v=T7vGDwGLU7s

[dtbrookes]

Yes, well, I meant an heroic drilling effort on existing wells. There's no hope of filling the gaps with new discoveries as far as I can tell. Kinda what Saudi Arabia seems to be doing now: punching lots of new holes into their existing oil fields.

Nice video. I see you posted it to youtube, but did you make it too?

[valuesystem]

Yes, I did make that one.

I took Economics 101 Macro about a year ago at the local college. By the end of the class, I really was sharp on supply and demand curves, so I made the video just then.

Unfortunately, I have a hard time keeping that sort of thing in my head very long, so I doubt I could make the same video today. Good thing I have the full PowerPoint (a lot more slides) and the video done, otherwise I might not be able to recapture that degree of understanding on the supply/demand/elasticity.