Sunday, June 26, 2005

Simulated oil meltdown shows U.S. economy's vulnerability

Simulated oil meltdown shows U.S. economy's vulnerability

From the article:The article is fascinating because its scenario could happen tomorrow. It has nothing to do with "peak oil" -- it has to do with very poor planning and the resulting effects of an instantaneous "oil shock" (see peak oil for details). The article explores the kind of scenario that caused the Arab oil embargo in the 1970s to have such debilitating effects on the United States.

The gist of the article is simple: Even though the world consumes 84 million barrels of oil every day, supply and demand are balanced on a knife edge right now. Therefore, a very small aberation in supply (e.g. - the loss of just 600,000 barrels a day from Nigeria) can have a huge effect on the price of gasoline in the United States. The article concludes with this thought, "The simulation taught him how little influence policy-makers would have in reversing an oil shock wave."

The fact that we are in a situation of such vulnerability is very, very sad. We spend so much time and money worrying about far off threats, but here is a threat to national security and the economy that is right under our noses. Yet we do nothing to mitigate our vulnerability. We are, in essence, sitting ducks.

We can easily get ourselves out of this situation if we simply make the conscious decision to do so. There are many different technologies we can use to supply the energy we need. See The U.S. can be energy self-sufficient within a decade for details.

You say this has nothing to do with peak oil. You also omitted this paragraph from your excerpt that shows how it is related to peak oil:

"This year the world is consuming about 84 million barrels of oil a day. America alone guzzles about 20.8 million barrels a day. Experts think oil-producing nations have only 1.5 million barrels a day or less of unused production capacity right now. A disruption anywhere could cause market panic and spiking prices. That's largely why oil and gasoline prices are so high right now."

The scenario in the article is contingent on the peak oil hypothesis.
The article is about current capacity and demand not total world production over the lifespan of total oil reserves.

It is saying that if a supply was removed due to whatever cause, and it was greater then the amount of surplus inventory there is in the system, then there could be economic impacts due to price increase from the supply and demand curve.

You can read 'Peak Oil' into it if you want, but that is an interpretation. This is the same scenario that played out 5 years or so ago when there was an earthquake in Asia and the cost of computer RAM increases substantially. The supply was reduced and price increased.
Big deal. Nothing 13,000 square miles of solar focusing mirrors hastily installed in the desert couldn't fix.
Nothing that a nationwide SUV speed limit of 55 MPH couldn't fix, if combined with a moratorium on soccer and all the other things that parents rush their kids to in their SUVs after school.

I'm only half-kidding about this; motor gasoline accounts for almost 9 million barrels/day in the USA alone, and cutting both the mileage driven by the most guzzling vehicles and their per-mile consumption could produce a 600,000 bbl/day savings even if the rest of the world does nothing.
Anyone who as read about peak oil should read the other side of the story!
also checkout
This gives just one catastrophic scenario, but there are certainly lots of others (terrorists knock out electric grid or blow up bridges and tunnels into Manhattan, etc., etc.) Improving efficiency often increases vulnerability (oil, economics, computer systems, etc.)

Fortunately, the blockheads in the White House have assured us that none of this is a problem. Whew! I feel better
Global Guerrillas
"Networked tribes, infrastructure disruption, and the emerging bazaar of violence. An open notebook on the first epochal war of the 21st Century."
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