Peak oil review - Dec 6

[Javaman]

http://www.energybulletin.net/stories/2010-12-06/peak-oil-review-dec-6

[happyslug]

1. $3.09 a gallon at $90 a barrel. what would the price be at $120 a Barrel?

Now I live in Johnstown Pa, the gasoline taxes in Pennsylvania is 50.7 cents per gallon (Both Federal and State Taxes). Thus the price of Gasoline without tax is $2.592 per gallon

State motor Fuel Taxes:
http://www.api.org/statistics/fueltaxes/upload/GASOLINE_TAX_MAP_OCTOBER2010.pdf
http://www.api.org/statistics/fueltaxes/

Now, 90 divided by 42 gallon in a barrel on oil comes to $2.14 per gallon. $2.59 less $2.14 is 45 cents a gallon for refining and distribution costs.

Distribution costs is about $4.50 a barrel of oil or about 11 cents a gallon (What the tanker driver and local gas station earns per gallon).
http://www.epa.gov/ttnecas1/regdata/EIAs/gasoline_distribution_eia.pdf
(Yes, the cost of distribution is in there, 9% at $50 a barrel is $4.50 a barrel or 11 cents a gallon).

The above is at $90 a gallon for a Barrel of oil.

How about $120 a barrel? $2,85 would be the well head price per gallon, add the 50.7 cents in State and Federal taxes, the 11 cents for distribution costs and 34 cents per gallon for refining costs (total 95.7 cents) you come to $3.807 per gallon at the local station in Johnstown Pa. Not a good sign.

Please note, I expect Gasoline taxes to go up given the recent drop in Revenue to maintain highways, everyone says they are hate and thus oppose such tax increases, but also hate and oppose bad roads, one of these two hatreds have to be accepted sooner or later.

Another factor is the 34 cents per gallon refining costs (And 11 cents per gallon distribution costs) will also go up with the base price of Gasoline. It will be a slower and lower increase then the general increase in price, but both will have to go up.

Between these three cost (Taxes, Refining and Distribution costs) at $120 a gallon I fully expect to see $4 a gallon gasoline by 2012 unless something breaks.

[4dsc]

2. Higher gas prices are a good sign

because people will tend to use less the higher the price goes.

[happyslug]

3. The problem is short term vs long term adjustments

On a short term basis (i.e. less then a year) most people can NOT make any adjustments as to their oil use. What they can do is limited, for example go 55 mpg instead of 65 mph. Go on less trips (but most trips are to and from work, so reduction in overall miles is limited short term) for example cut back on vacations, weekends trips (or go on a bike ride instead of a car ride), combine trips, doing all the Christmas shopping on one trip not a new trip to each store. You can turn down the thermostat to 68, and add some insulation to the roof (But most houses are at the limit of easy to install insulation).

On a longer term basis (more then one year but less then five years, called "Long Term" in the business community), more things can be done. Trade in the SUV for a SMART car or just buy a SMART car to go to and from work and retire the SUV for Vacations, Weekend trips, and trips with the entire family when you go shopping. Get someone in to replace the windows and to put installation into the walls of the house (Both require a lot more work and expertise then just adding six inches of insulation on the roof AND after you have 12-18 inches of insulation in the roof, replacing the windows will do more good then installing another six inches on the roof on top of the 12-16 inches you already have).

On a more then five year plan (Some times called long range term), you can sell your house in suburbia and move closer to your work so you can walk or bike to work and bike or walk to shop or do other things people have to do by automobile today. The gentrification of the inner city is part of this movement, people want to be closer to their doctors, stores and work for it cuts down gasoline expense, but only after their children have moved out of the nest and on to collage.

Thus the problem with the increase in oil, is the increase today has minimal affect on what people can do today to reduce oil consumption. On the other hand long term and long range terms the increase has a huge affect on how and where people live. That hardship has to be addressed, but is presently being ignored. Worse, for minimum wage employees, the short term affect hits hard and fast i.e. as the price of gasoline nears the hourly minimum wage such minimum wage workers can no longer pay for the Gasoline to get to their jobs in suburbia (Where most of them work) from their homes in the inner city (Where most of them live). When gasoline was hitting $4 plus a gallon in 2008 that was occurring (Minimum wage was only $5.25 an hour). Such workers just can not get to and from work if the price of gasoline gets to high, that affects Janitors, maintenance workers, stockers and even sales clerks. As one business man pointed out any one Janitor maintenance worker, stocker and sales clerk is NOT an essential person, but as a group they are and if as a group such people can NOT afford to get to work, business will have to close.

Now, there is not much business can do short term or long term (i.e. less then five years) about the inability of people to get to work. On the long range term (i.e. more then Five years) business can i.e. relocate nearer to their employees, build or get the local municipality to provide low income housing near the business so the workers can walk to work etc. Local and State Government will hate such proposals, for it means spending money they do not have, but the same governmental units will be facing even less tax money if the businesses move out to a place that has such housing. It will take Five to Ten years of bad times before such housing is built, do to the massive resistance to such housing, but the threat of a business pull out will force the issue (and businesses will have to pull out to be nearer their workers).

I always give the example the the first move to Suburbia by the old main line stores of the old inner cities. The first step was in the 1930s-1940s (some started in the 1920s, other lasted till the 1950s) when they moved out to the end of whatever streetcar service existed at that time. That way their employees could take the streetcar to the new suburban stores, while the middle class shoppers could drive to the stores and shop instead of going downtown.

These first generation Suburban Stores were replaced by the Strip malls of the 1950s as most working class and poor people started to own cars. Starting in the 1950s, gasoline was cheap, 25 cents a gallon, and there were enough used cars for working class people to buy one so they could drive to the strip malls (Which rarely had bus service and never streetcar service) to work as Janitors, maintenance workers, stockers and sales clerks. With the first true model mall opening up in the 1960s, the dis-connection with mass transit was complete. Most malls ended up with some sort of bus services, but the primary means of workers getting to the malls was the same as the shoppers, but automobile. The Strip Malls of the 1950s, the Malls of the 1960s killed off most of the first generation Suburban stores as those same stores moved to the Malls and away from transit as the main means of their workers getting to work.

I bring this up, for since the 1980s the trend to the Suburbs have increased, and the suburbs do NOT have the population density for mass transit to work, since it was built as part of the Car culture, which in turn was built on 25 cents a gallon gasoline. We are in the middle of the reversal of the above trend, but people tend to forget the most big inner city stores survived into the 1950s, and the better ones survive to the 1980s, but over the last 20-30 years that has dropped from abut three stores in the old downtown to just one store. It took over 90 years to achieve that switch (Suburban stores started in the 1920s, and it is now 2010). The reverse will have to occur in a much shorter time period, but we most people who have NOT rode mass transit for over two generations (Most inner city people used transit till after WWII, then switched to cars as rural American and the Upper Middle Class of the Inner cities did in the 1920s). Prior to about 1950 most people walked or took mass transit to work and back, since about 1950 most people took a car (1954 is generally given as the year where more people were buying replacement cars as opposed to the first car their family ever owned, it is also the year where the last rural streetcars stop running, urban streetcars lasted another ten years).

Just pointing out the extent of the change that is needed and the affect it will have by looking at how we arrived where we are today. The reversal will be rough for it has to be shorter and calls for Government to do something that has been out of favor since 1980, increased government spending on housing and transit. The Government will take a long time to accept this duty, but the more people (by voting) put pressure on the government the sooner things will occur.