Energy crisis ‘one hurricane away’

Shell’s president says we are just one bad storm away from high and volatile oil prices. I wonder what he considers high and volatile?

Shell president: Energy crisis ‘one hurricane away’ in U.S.

“We are one hurricane away from energy scarcity and volatile, high prices,” Hofmeister said a day after crude oil prices topped $80 — a record, unadjusted for inflation. “We are so tight on the demand-supply relationship.”

Americans for the past half-century have largely enjoyed a lifestyle based on the availability of cheap, abundant energy, Hofmeister said. As demand for energy has grown — the nation today consumes 10,000 barrels of oil per second, he said — its “energy security” has been compromised, he said.

“We have seen our country pass, in my opinion, a tipping point of energy supply keeping up with demand,” Hofmeister said.

Hofmeister just described Peak Lite, which should be a pretty good preview of the situation shortly after world oil production actually does peak. He is also spot on about the potential for a storm to bring on the pain. Had we had a Katrina-style hurricane this summer that took some refineries offline for a significant period of time, you would have seen gas stations running out of product very quickly.

But this is also why I think oil company stocks remain a good investment. If you have a product in great demand, and supply can’t keep up, prices are going to stay high (although I do expect prices to correct downward by year-end). Oil companies should be a safe, but perhaps not a sexy place to keep some money for the long-term. I do not subscribe to the viewpoint that oil companies are going to sit around, twiddle their thumbs, and become extinct while alternative energy producers take over the energy industry.

Disclosure: My 401K does contain oil stocks, and I probably have more through various mutual funds.

13 thoughts on “Energy crisis ‘one hurricane away’”

  4. is 10,000bbl/sec correct?
    i would think a worldwide figure one tenth that size.

    oil svc companies seem to offer a more versatile offering to integrateds/e&p.
    would be good for OPEC/nonOPEC business.

    ideal would be merger among integrated oil, svcs,coal,gases[CVX,SVC[?],BTU,PX]. THAT WOULD BE MOUTHFUL–but might be tomorrow’s integrated energy co.

  5. Well, maybe oil supplies will be tight. Or maybe demand will fall so much we get a glut in a couple years.
    Even some doomsters say we will reach 95 mbd in several more years. If so, we almost certainly will have a glut.
    Right now, I think we are seeing Peak Demand for fossil crude. Even in the US, we may see it this year, and it has already happened in most of the developed world.
    I see it spreading to China in five years. Remember, oil prices jumped up relatively quickly. It takes time for consumers and businesses to respond. The response has already been much greater than expected. Crude oil demand is already nearly a flatline, while the world economy has been growing nicely.
    What happens as older, lower MPG cars are scrapped, and newer higher MPG cars come online? Permanent declines in demand, even in the US.
    There could be some price sikes ahead, due to speculation, and the damnable thug states, where production is falling (Venezuela, KSA, Iran, Iraq) due to boobery and corruption, not Peak Oil.
    Can the price of a commodity rise even as demand falls/ Interesting question.
    My bet is we see $40 oil before we see $100.
    There is only two paths going forward: Less and less demand, or lower prices.

  6. How does China regulate demand? I remember reading a couple years ago about their long lines for gas. This was due to their regulating the price of gas (like in the 70’s here). Does anyone know if this is still the case? If they still regulate the price then the Chinese consumer doesn’t really have an incentive to use less.

    Just asking.

  8. If you think the Tesla is expensive, Hydrogen is like buying your own personal private island.
    Amen to that. Now somebody has to tell the mainstream media and Washington…

  9. rOn China: So far, China has been subsidizing gasoline. They want to stop it, just waiting for an opportune moment.
    Over the longer haul, the Chinese are investing tens of billions in all sorts of alternative fuels and coal. Several car companies are also building battery-powered cars in China for export. Of course, the world is waiting to find out if litium batteries will really work.
    My guess is that China will stop increasing imports of oil within five years. They will have alternatives coming online, and possibly coal-to-liquids. If the gas subsidies are ended, consumers will respond.
    If China is lucky, the boom in car ownership will happen in PHEVs, which can be powered by wind, solar, geothermal and (unfortunately) coal.
    But remember: unlike US political parties, the Chinese Communist Party actually has aggressive energy programs, and they are funding those programs in $5 billion chunks. They are not clueless that most of the world’s oil residnes in thug states. And being a thug state, they know what that means, in terms of reliability and cost.
    If oil stays above $60 a barrel, world fossil oil demand will start declining, not increasing, every year. The China boom story is just one facet of the oversold oil shortage scaremonger scenario.
    By the India, fossil oil demand in India is very weak. Check out BP stats.

  10. A PHEV-20 needs an overnight charge of 0.17kWh*20 = 3.4kWh.

    Total number of passenger cars in the US (2005) = 136,568,083

    3.4kWh * 136,568,083 = 464,331,482.2 kWh ~= 464,331 mWh

    Total Electrical generation capacity, contagious US (2005) = 882,125 mWh

    I see a problem. Mind you, I used the most efficient figure for kWh/miles. We’re going to need Dr. Bussard’s fusion reactor to make this work, and that’s going to take a couple of decades to deploy, if everything goes well.

  11. larryd

    Your confusing capacity and generated electricity. The generated electricity for 2005 was 4,054,688 giga-watt hours, which is 4,054,688,000 mega-watt hours.

    As shown by Kintner-Meyer et al., if this technology were utilized by all cars, pickups and SUVs, 84% could be supported by the existing infrastructure.

    “http://www.pnl.gov/energy/eed/etd/pdfs/phev_feasibility_analysis_combined.pdf”

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