Oil Crisis is moving to the Mainstream Media



Oil Demand to Hit 94.3 Million Barrels a Day by 2012, IEA Says

By Mike Cohen

March 17 (Bloomberg) — The International Energy Agency, an adviser to 27 industrialized nations, expects worldwide demand for oil products to increase an average 1.9 percent annually until 2012, driven mainly by expansion in Asia and the Middle East.

“Demand is projected to grow to almost 94.3 million barrels a day by 2012,” Eduardo Lopez, an analyst with the agency, said in a presentation to the Oil Africa 2008 conference in Cape Town today. “By 2012, demand will be a third higher than in 1996.”


If you are forced to drive a substantial number of miles each month you may want to consider downsizing.  If your vehicle’s gas mileage is less than 25 mpg, you should look at replacing it.  If your job requires a certain vehicle type such as a heavy duty pickup, the upcoming months and years will be a challenge.  The high price of oil appears to be with us for the next 5-10 years at a minimum.  What few people seem to understand is that oil has a much better energy coefficient (energy output vs. energy input to produce) than most alternatives.  On the other hand, ethanol has a low coefficient.  Ethanol requires energy to grow and harvest the crop, transport it to an ethanol plant.  The ethanol plant requires substantial energy to convert the feedstock to ethanol.  Often, the heat source is natural gas.  Oil is still the best deal in town.  Other technologies are just not yet viable.  The world has about 800 million vehicles with 50 million being added every year.  That is a staggering number.  The U.S. vehicle inventory averages 15-17 years to turnover or replace.  If you introduced a new technology today, it would take 30 years or more to move the world to the new infrastructure.  The crisis we are facing cannot wait 30 years.  Late adaptors to energy saving vehicles will be severely impacted.  When we had the oil crisis in the early 80’s, large gas guzzling cars lost substantial value overnight.  For those who owned those vehicles with a substantial loan balance, they were immediately "upside down" on their note.

There have been many inventors claiming a solution to the crisis.  Each invention has its drawbacks.  Ethanol requires a lot of fresh water.  Fresh water may become a scarcity soon.  Wind turbines need a sustaining wind.  Many locations are just not suitable for turbines.  Solar power requires sunlight and land area.  It won’t work in Seattle, Washington or Benton Harbor, Michigan.  They are known to count the days of "no sun".  The biofuels upset our food chain.  You can’t fly an airplane with a giant power cord.  Natural gas is world’s only super-efficient heat source.  It lacks infrastructure to handle current transportation requirements.

Scalability of new technology will be the limiting factor over the next 10 years.  Any alternative will require substantial infrastructure investment.  Infrastructure  development and repair require commodities.  Metals, hydrocarbons, cement, and other products will be in great demand no matter what develops.  Electricity is highly inefficient heat source.  However, nuclear power has tremendous benefits when producing electricity for transportation requirements.  The U.S. infrastructure is based on cheap oil.  The massive highway system is contrasted to Europe’s rail, bus, and subway system.  Blaming the oil companies will not result in any productive change.  The world will need about 10 million barrels of NEW oil per day in 2012.  There is no realistic way to ramp up the supply in time.  A new discovery such as the North Dakota (actually it isn’t new but recently revisited) will require substantial investment and time to develop if found to be confirmed as a major field.  When demand exceeds supply the price goes up to dampen demand.  The decline in the value of the U.S. dollar will only fuel price increases for U.S. domestic consumption.

What am I to do if I can’t change out my vehicle?  One subtle way to offset your energy consumption exposure is to buy "insurance".  How?  Start investing in a dividend paying energy stock.  As energy costs increase, the value and/or dividend of the energy stock should reflect the increase.  Effectively, you become both a supplier and user of energy.  Below is an example of the "insurance":

   Current      Future
Annual miles driven: 15,000 15,000
Vehicle mpg 18 18
Gallons used: 833 833
Cost per gallon 3.18 4.50
Annual Fuel Cost 2,650 3,750
Difference 1,100
PWE Stock Annual Dividend 4.01
# of Shares Needed 274
Price 28.58
Stock Value 7,840


I know, you don’t have $7,840 to go buy PWE(Penn West Energy) stock.  Open up an account and start buying what you can.  The earlier you start dealing with the energy issue, the better shape you will be in when gasoline hits $4.40 per gallon.


See Disclaimer: http://www.servias.org/?p=56

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