If you ask someone filling up their gas tank, “At what point will you stop going to the gas station to fill up?” they will respond in a confused manner, “What do you mean? No matter how much you cut back you still have to get gas sooner or later.”  Yet most Americans believe that as oil supplies diminish the price of gas will reach a point where demand will decrease.  Which among us will be the first to make the sacrifice of not commuting to work?  Which trucking and shipping companies will stop delivering as much and as fast as they can?  Which oil-fired power plants will shut down to save money?

The truth is that every oil-saving measure you can think of can only conserve so much oil.  No matter what the price, people and businesses will pay it as long as they can make more money out of it than they put in.  That is capitalism!  So what happens then when the supply of oil isn’t enough to meet demand?  When there’s not enough gas at the station for all the customers?  Rationing won’t help much if supplies will decrease forevermore.

This scenario is going on right now as I type this.  The available supply of oil has been down 13-20 million barrels of oil for the past several weeks compared with this time last year.  We’re quickly approaching the point where “how much we’ve got” is less than “how much we expect” or even “how much we need”.  Even as our economy enters a recession and gas prices go up the demand for oil has not decreased an equivalent amount.

No one knows for sure how long we can sustain our current lifestyles while oil supplies diminish.  I fear that the answer is, “not very long at all.”

Oil hit $104/barrel today. This comes right after OPEC met to talk their usual talk about how much oil they want to pump out of the ground. OPEC is not going to increase production and they claim it is because “supplies are sufficient”. They’re blaming “speculators” for driving up the cost.

What a load of crap

I’m going to call their bluff: OPEC isn’t producing more oil because they can’t. World oil production has peaked. Don’t just take my word for it, have a look at the US oil inventories. We’re presently humming along at a 14-day supply of oil (don’t believe the “Days of Supply” graph on the EIA website—do the math yourself: 14 days!).

Last week we were down 20.5 million barrels/day from this time last year. This week we’re down “only” 18.5 million barrels/day… HOWEVER, we just had a major refinery go up in flames so you’d expect oil inventories to be UP and gas inventories to go DOWN. Essentially, that refinery fire is making the oil inventories look better than they would be otherwise.

Even President Bush (long time oil industry apologist) had this to say (from the NYT article):

As a sign of growing impatience with oil producers, President Bush said on Tuesday that it would be a “mistake” for OPEC not to increase supplies. As the oil group was meeting in Vienna, the president repeated his assault on Wednesday, saying it was “obvious” that demand was stripping supplies, and pushing up prices.

This could very well be the day that historians determine as the start of peak oil economic collapse.