Gas prices set records, soon to reach new highs
Mainstream media outlets throughout the country are now reporting on record-breaking gas prices, the highest ever for this time of the year. Also making the rounds is the commonly cited prediction by former Shell CEO John Hofmeister that there is a better than 50 percent chance that gas prices will reach $5 a gallon by this summer in the U.S. This is in spite of the fact that U.S. oil production is up and oil consumption down, since 2008. What the media isn’t reporting on is the rest of what Hofmeister said in a recent peak oil themed debate he had with Tad Patzek on Feb. 14.
In the debate, Hofmeister said that we’re heading for $7 to $8 gas and rationing by 2015, and rolling blackouts and brownouts. He also made clear that oil is the lubricant of the world’s economy, and there is no alternative. He further stated that China, which used 8 million barrels of oil a day last year, uses 9 million now, and is projected to use 15 million by 2015. India will go from 4 to 7 in the same time frame. And, that there’s “not enough oil out there to meet that demand.”
On CNBC, Hofmeister stated that he expects WTI oil, now at $106 a barrel, to be $120 to $130 over the next six months, and even higher for Brent, which is now at $121. He further stated that OPEC has no spare capacity, and is maxed out. This is what the early stages of peak oil looks like.
Part of the explanation is the possibility of war with Iran, which could escalate to supply disruptions along the straight of Hormuz. If this happens, prices could quickly skyrocket to new highs above $150, and send the global economy into even deeper depression/recession. Donald Trump has now correctly recognized the oil shock of `08 as the cause of the depression we are still in.
As Patzek explains in the debate, world oil production simply has not grown for six years, and is on the cusp of entering terminal decline. There is still a huge amount of energy out there, but it is increasingly difficult and expensive to extract, both in terms of money and energy. What we crave is not energy, but power, or energy per unit of time. The rate we can extract all fossil fuels is peaking, and more nations are vying for their share of a shrinking pie, and chasing after low flow rate and EROEI projects like bitumen and shale. So, we must work to use less energy, which is currently consumed at the rate of over 100 times what our own bodies run on in the U.S.—we have 100 slaves.
The national average cost of gas is now $3.57, up from $3.51 last week, $3.38 last month, and $3.17 this day last year. In Eugene, gas prices average $3.69. Prices could surpass the $4.11 record set in July 2008 very soon. When we reach those levels, only another deep recession can lower prices. Post Carbon Institute has produced an excellent half-hour documentary explaining the situation. We need Obama or Chu to give a speech like President Carter gave on April 18, 1977, and to take a leadership role on helping us make the transition to something more sustainable. Ending all forms of “growth” would be a good start.