Monday, June 4, 2018

Hard times coming?


For those of us who believe that energy is a primary need for survival, the collapse of oil prices since 2014 was quite frankly, surreal. How can a globe with a billion light vehicles not continue to need petroleum? The demands for liquid fuels are embedded in the design of our societies. Most people, unfortunately, view the oil giants as these powerful people who can get wars started to defend their interests. Up close, the people who actually get the gasoline to the neighborhood filling station see themselves in a mad, scary scramble to meet this insatiable demand�a demand that will not go away any time soon.

Of course, supply and demand do not always determine price. Lots of crazy stuff happens in the commodity markets so we can have low oil prices while global demand goes up. And high oil prices do not necessarily shrink demand�demand is built in, remember. Yes folks can cut out frivolous consumption but the rest of the demand is considered "inelastic." So high energy prices mostly damage the other folks trading in things that are considered less necessary than energy. So at some time, one of the primary economic laws will kick in�hello $6 a gallon gasoline. And if you run an restaurant, for example, be prepared for fewer customers with less money to spend.

Below is a YouTube of someone who was in charge of getting the crude that the majors convert to the fuels we need. Spent around 40 years at it. His explanation of the supply problem is clear and probably quite accurate.

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