Oil demand soon to decrease?

[justin]

http://biz.yahoo.com/usat/050817/13050759.html

In response to an earlier thread on how high oil prices will skyrocket:


Looks like the high oil/gas prices are slowly starting to affect people's commuting habits. Transit ridership is up. People moving closer to their workplaces, or getting jobs closer to their houses. Those poor SUV owners who are paying $100+/wk for gas are finally feeling the crunch.

In my local area, the regional public transit agency said for every $0.10 increase in gas prices, they see a ridership increase of 1400 per day.

Only time will tell how much change will come about from these high oil and gas prices.

 

[Nords]

Only time will tell how much change will come about from these high oil and gas prices. 

I'd say that the only certainty is that there will be changes in oil & gas prices. Another certainty is that journalists on deadline will find ways to write plenty of articles making both scenarios seem equally plausible.

I'm clueless enough about the petroleum industry to have another question. Does anyone know how much of a barrel of oil is burned for transportation and how much is used by various chemical, textile, pharmaceutical, and other industries?

 

[Danny]

Goldman Sachs take on oil futures - but with their history of oil price analysis, should be taken with a grain of salt gallon of gas..

http://www.bloomberg.com/apps/news?pid=10000103&sid=aB5bwfjqFwEo&refer=us

 

[nuisance]

I'm clueless enough about the petroleum industry to have another question. Does anyone know how much of a barrel of oil is burned for transportation and how much is used by various chemical, textile, pharmaceutical, and other industries?

I brought this up with some friends I have who know about that kind of thing. Apparently there are alternative ways of making plastic that use plants as their base instead of oil. The gist seemed to be that you have to do so much processing to get it already that a little extra in the beginning if you can't have oil doesn't make a huge difference, while gasoline comes out of oil pretty easily.

Tim

 

[justin]

I'm clueless enough about the petroleum industry to have another question. Does anyone know how much of a barrel of oil is burned for transportation and how much is used by various chemical, textile, pharmaceutical, and other industries?

Nords,

I believe out of all world oil consumption, US autos consume 10-14%. This is coming from another thread here on oil where someone cited "official" numbers from somewhere. Maybe 10 million barrels/day? So a 10% drop in US gas consumption would result in a ~1% drop in total world oil consumption. Which means the current surplus in oil production would increase by 50-100%.

 

[wabmester]

Does anyone know how much of a barrel of oil is burned for transportation and how much is used by various chemical, textile, pharmaceutical, and other industries?

In the US, the transportation sector consumes 2/3 of our oil demand.

The DOE projects that world oil demand will increase by about 2/3 from 2002 to 2025. The price of oil has almost trippled from 2002 to 2005. So while demand is increasing, it's obviously nowhere near in proportion to recent price increases.

 

[justin]

In the US, the transportation sector consumes 2/3 of our oil demand.

I think that would include shipping, by truck, ship, train, and air, as well as passengers by bus, air, train, ship, and private cars of course.

The private automobile would be consume a portion of the 2/3 of total US oil demand.

 

[wabmester]

The private automobile would be consume a portion of the 2/3 of total US oil demand. 

Right. As I posted in the other thread, the transportation sector is 2/3 of our demand, and *personal* transportation is 2/3 of the transportation sector.

 

[haha]

The DOE projects that world oil demand will increase by about 2/3 from 2002 to 2025.   The price of oil has almost trippled from 2002 to 2005.   So while demand is increasing, it's obviously nowhere near in proportion to recent price increases.

That is what is meant by "inelasticity". To increase crude supplied to world markets a relatively small amount from 2002 to 2005 required a large increase in price.

Haha

 

[wabmester]

That is what is meant by "inelasticity". To increase crude supplied to world markets a relatively small amount from 2002 to 2005 required a large increase in price.

But obviously the recent price growth of oil is unsustainable.    I don't recall it growing this quickly during the last oil crisis, yet the graph clearly shows that our demand fell off considerably as a result.    It's interesting to see that the transportation sector demand does appear to be pretty inelastic with almost monotonically increasing growth.   Oh well, time for my bike ride. 

 

[haha]

But obviously the recent price growth of oil is unsustainable. 

It may be unsustainable. I know that is your opinion. Still, if it were obvious, then the out months in crude futures would be considerably lower than they now are. The people who deal in oil for a living apparently don't find it obvious that prices are unsustainable.

Haha

 

[Lazarus]

Get used to it. Oil is still cheaper than the other options. When the price gets high enough other energy sources will become competive. This doesn't mean that it will be cheaper than oil though.

 

[wabmester]

It may be unsustainable. I know that is your opinion. Still, if it were obvious, then the out months in crude futures would be considerably lower than they now are. The people who deal in oil for a living apparently don't find it obvious that prices are unsustainable.

Well, I said the price *growth* was unsustainable, and investments are all about growth, right? My impression was that crude futures are selling at about the current price, which implies zero growth (which I still think is optimistic).

 

[haha]

Well, I said the price *growth* was unsustainable, and investments are all about growth, right?   My impression was that crude futures are selling at about the current price, which implies zero growth (which I still think is optimistic).

I missed that. You are of course correct. This would apply to investments in crude futures. But all most service companies, producers, oil sands miners, etc. need is prices that continue in this vicinity and they will do very well in their business. Over time, that will be reflected in dividends, or appreciation, or both.

haha