Kudos to us, to all of us. The US consumer, the smart money said, couldn’t change their spots. We were incapable of change. We would keep buying gas no matter the cost and consequently that consumption graph for the world (and we are a big part of that graph) was going up and to the right and no one could stop it.
To me, the most exciting – the most refreshing event of last year’s rise to $4+ gas and now the decline to $1+ gas was this fundamental assumption was wrong. Declining commercial use and drivers driving less (including a bunch of people who decided to ride bikes and scooters) combined to make a huge difference.
You changed and they didn’t think you could.
Assumptions for increased fuel demand here, in China and India resulted in a forecasted tightening in supply, it was also assumed that mainland China had an evergrowing appetite for fuels based on increasing exports. At just the right time, a faltering investment environment in other markets coupled with electronic trading that can point speculators money at oil today and T-Bills tomorrow piled money into the crude market and drove crude oil prices through the roof.
It happened just like they said it would for a while.
A much larger problem today, the faltering world economy, is more of an 800lb gorilla affecting usage and prices now. But, last summer, that hadn’t happened yet.
Demand destruction, a decrease in energy demand in a market or across the world, was a mythical concept and a quaint theory but couldn’t and wouldn’t happen in this country. “Demand destruction, drive less in the US? Right…”
Then it got real painful to drive. And everyone knew it. What is so interesting to me now is how many smart people didn’t think it would happen. Fueling the vehicle became an inordinate expense and it got our attention. Then things changed and in a big way and real quick too.
http://www.eia.doe.gov/steo
Consumption. Buffeted by the increase in prices to record levels and the weakening economy, total petroleum products consumption in 2008 is projected to fall by 1.2 million bbl/d, or 5.8 percent, from the 2007 average (U.S. Petroleum Products Consumption Growth). Motor gasoline consumption is projected to decline by 320,000 bbl/d, or 3.4 percent, in 2008 with the year-over-year decline narrowing to 50,000 bbl/d in 2009. Despite the recent cold weather that gripped much of the Nation, distillate fuel consumption is projected to decline by 240,000 bbl/d, or 5.7 percent, in 2008, and by an additional 70,000 bbl/d in 2009. In 2009, total petroleum products consumption is projected to fall by 200,000 bbl/d, or 1 percent.
So, we used a lot less in the US and that caused the total world usage to tail off. Wells that weren’t pumping at $60/barrel were all on line at $148/barrel. Over supply, and it didn’t apparently take much, shoved prices down. They say you shouldn’t try to catch a falling knife. That has been the crude market since September of last year.
I’ve been through a couple of times when driving got pricey. Those jags in fuel availability during the oil embargo’s or the last one, a wallet embargo, honestly, provided a lot of personal career motivation throughout my life. I like vehicles, all vehicles. Getting there faster and better through new vehicles is what gets me fired up. I like to see new concepts (SYM has one here) as much as a beautiful restored car. I don’t hold with getting on a fuel-use soapboxes. I never have. If fuel is available to use, I offer the machines to use it. This is a neat country and it’s a big world and machines let us see it. We build more efficient machines, cheaper machines or faster machines and they use energy. So, I don’t say don’t use fuel. If you can afford it and it’s legal, go for it.
But, one thing is sure. We are not too set in our ways that we can’t change. You proved it this past year. We have always embraced new vehicles, different fuels, safety improvements, and yes lets not forget, faster vehicles (’cause going slower just isn’t progress ;^)). But this past year we showed the world that additionally we have the brains and the will to change behaviors when we need to.
Cool.
