Normally, I would listen to Robert Hirsch and the legendary Charlie Maxwell, over CNBC’s “Mad” Jim Cramer. But Hirsch and Maxwell are making headlines for saying $12-15 gasoline is around the corner, based on Maxwell’s projection of oil “reaching $180 a barrel in 2015 and $300 a barrel in 2020.”
Sorry, guys — every extra $40 barrel is another dollar a gallon or so at the pump. Don’t quite know how they did the math, but they did it wrong.
When Mad Money‘s Jim Cramer is the voice of sanity, you know the energy world is topsy-turvy, but I happened to catch him explaining to Matt Lauer on Today that such prices take us to $6-7 over the next few years, yes, but $12-15 gasoline requires a price of oil that the world is exceedingly unlikely to get to any time soon — $450-500 a barrel, by my estimate. The world would almost certainly go into a deep global recession long before we hit those prices.
But the situation is dire, as I’ve noted many times. The WSJ had a front page article yesterday: “Energy Watchdog Warns Of Oil-Production Crunch: IEA Official Says Supplies May Plateau Below Expected Demand,” which begins ominously:
The world’s premier energy monitor is preparing a sharp downward revision of its oil-supply forecast, a shift that reflects deepening pessimism over whether oil companies can keep abreast of booming demand …
For several years, the IEA has predicted that supplies of crude and other liquid fuels will arc gently upward to keep pace with rising demand, topping 116 million barrels a day [MMBD] by 2030, up from around 87 million barrels a day currently. Now, the agency is worried that aging oil fields and diminished investment mean that companies could struggle to surpass 100 million barrels a day over the next two decades.
But we’ve been rising maybe 2 percent a year, so we were poised to run into 100 MMBD by around 2020. IEA isn’t alone in its concern, as I noted in my recent article on peak oil:
In October, Christophe de Margerie, CEO of French oil company Total S.A., said that production of even 100 million barrels a day by 2030 will be “difficult.” In November, James Mulva, CEO of ConocoPhillips, the third biggest U.S. oil company, told a Wall Street conference: “I don’t think we are going to see the supply going over 100 million barrels a day … Where is all that going to come from?”
While $12-15 a gallon gas is probably a long way away — and still preventable — it looks increasingly like we dawdled too long on alternatives to avoid $6-7.
This problem cannot be solved rapidly, a point Hirsch made in “Peaking of World Oil Production,” a terrific and widely-cited study [PDF] funded by the Department of Energy in 2005 — yes, the Bush DOE — which concluded:
The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.
But if we are to avoid $12 gas, the next president must begin a rapid transition to advanced hybrids, especially plug-ins.
(You can read the thoughts of Jerome a Paris here.)
This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.
