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This is correct, but the scary part for the short term is precisely the later part of the article when he shifts gears from oil reserves to oil production and establishes that even if there is as much oil as the optimists think, production will be outstripped by demand by 2012, and that there is very little that can be done about that. So, we have to brace ourselves for an interesting second decade of this Century.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Jan 22nd, 2006 at 11:11:04 AM EST
[ Parent ]
Leggett suggests it'll be even before that.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Jan 22nd, 2006 at 11:20:07 AM EST
[ Parent ]
I think that he suggests that a bootle-neck at 2007 will give a constant production of oil at least until 2012. My take is that it will be 2007-2017.. probably 2007-2020 if we stops at 70 million barrels a day.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sun Jan 22nd, 2006 at 11:32:39 AM EST
[ Parent ]
Yes, but the problems is that demand will be growing in the meantime. China and India are at a point where car ownership is increasing a LOT faster than economic growth, so their demand for oil will increase even in an economic slowdown.

As we've seen in the past year, oil demand is very unelastic: prices have tripled, and yet demand has been growing at a record pace.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Jan 22nd, 2006 at 11:53:46 AM EST
[ Parent ]
If oil hits a high 90-100$ there will be no apetite for cars. they can still develope a public transportation system. It will cost them as much as paying for the oil.

So China and India demand will probably grow but not as much as espected.

Regarding elasticity of oil. this is exactly my point, nothing is gonna happens until an inelastic break-down happens. So, the moment demand diminishes it will diminish a lot. Think about all the redundant demand in the US, or int he possibilities of India and China not to develope a huge private transport system...

It could go the other way and make China, Japan US and Europe  go through a huge recession.. but it can also be a mild recession or just a change in the priorities in the development of China and India, together with a reduction of the deman in US of around 30% and in Europe of around 10%.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sun Jan 22nd, 2006 at 12:29:40 PM EST
[ Parent ]
But that's what we were saying for $50 dollar oil, and $60 oil, and demand growth did not even slow! Not only is demand not going down, but its rate of increase has not even gone down!

We'll need much more brutal prices changes to have an impact on oil consumption.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Jan 22nd, 2006 at 02:54:52 PM EST
[ Parent ]
No if the demand is inelastic. It means that for certain prices there is almos no change in demand, or even increase, and then, suddenly, at a certain price the demands breaks down. Just as an inelastic material could do when a certain tension is applied.

I really hope that this will be the dynamics. But I could be wrong

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sun Jan 22nd, 2006 at 03:25:45 PM EST
[ Parent ]
This is a great image... The oil market is strong but brittle.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Jan 22nd, 2006 at 03:29:59 PM EST
[ Parent ]
True, but probably if oil hits 90-100$ in a rush in 2007 or because of a double jump (2006 and 2007), then we will probably have the period 2007-2011 to adapt. One part of the adaptation will be proably to secure the 80 million barrels a day necessary for ten more years.
So the transition should go between 2007-2020.

As you say it will be a really interesting decade. "A agarrarse los machos".

Again, I do NOT say that it WILL be smooth, but it certainly CAN be smooth. 10-15 years are enough for building wind power , nuclear , develope the solar at home, insolate houses, get rid of inefficient cars, improve efficiencies in the chemichal industry and use the first easy alternatives for oil in the production of plastic, construction of a complete public transport system, and a railway system for the movement of goods and commodities...

A real huge change....

Take the case of Spain for example. We will increase wind production more, keep the nuclears until we obtain 33 % gas/coal, 33% nuclear 33% wind+hydro. We will need to hurry up a little bit more than expected. We will really have to invest a lot on trains and generate a real spanish rail network. And eventually we will be able to reduce the oil consumption by 50% during this period with biofuels, more efficient cars , transport of goods by train even some gas-oil transformation...then we need the jump to hydrogen in the next two decades using wind solar hydro nuclear and coal to obtain it...so it can be even easy...but again it can also very messy.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sun Jan 22nd, 2006 at 11:30:05 AM EST
[ Parent ]

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