From the "No shit, Sherlock" file: Energy crunch may offset recovery, experts predict

[GliderGuider]

Energy crunch may offset recovery, experts predict

When crude prices hit unprecedented highs last summer, followed closely by gasoline and diesel, consumers reacted by driving less and conserving more.

Then prices began an equally dramatic fall to levels not seen since 2004, exacerbated by the growing global recession.

However, increasing delays in new production projects could create an energy crunch and choke off an economic recovery when demand rebounds, Richard Jones, deputy executive director of the International Energy Agency, said Tuesday in a presentation at Rice University’s James A. Baker III Institute for Public Policy.

The IEA’s outlook said accelerating declines in current producing oil fields increase the uncertainty. The agency’s analysis of 800 oil fields show decline rates are expected to rise over time, from 6.7 percent today to 8.6 percent in 2030. That amounts to a need for the equivalent of four more Saudi Arabias just to offset decline, then another two to meet future demand.

Amy Myers Jaffe, an energy fellow at the Baker Institute, said the year’s ups and downs in oil prices and demand debunked several myths that gained strength during oil’s rise. Those included that economies would keep growing rapidly no matter how high oil prices rose and that American drivers were immune to high prices. When gasoline hit $4 a gallon and higher, demand took a dive and energy-efficient cars became a priority.

"The market has now corrected itself based on the fact that prices do cause a contraction in demand," she said.

But the lull is temporary, Jones noted. When economies recover, demand will return, making it all the more critical that investment continues despite the recession. He said that the IEA outlook foresees an average oil price between now and 2015 of $100 a barrel.

It's hard to pay attention to investing in future energy supplies when your 401(k) is crashing...

[mdavies013]

1. Um...no. Prices fell becuase price speculation ended...think Enron

and apply to the oil markets. People bid up the price of the oil with borrowed money and no interest in using it. No value added...but lined their pockets.

Demand has sunk and I know many people who are not rushing back and driving more becuase prices have fallen. Actually, my family is looking at additional ways to cut energy use. Why? So we can afford food, clothing and shelter.

[jpak]

2. Well said

:thumbsup:

[GliderGuider]

3. I agree. Prices are a lousy indicator on a number of fronts.

Even in the absence of speculation they don't indicate the state of oil supply and demand, because the supply data isn't transparent. And as you point out, having an excess of money looking for a home distorts the signals as well.

However, the central point of this piece is the recognition that low oil prices are going to choke off the development of energy supplies that would be needed by a recovering world economy. This will apply equally to petroleum and alternative energy sources like wind and solar. I think this is the most dangerous aspect of the crash in oil prices. As economies struggle to recover, they will run smack into an energy crunch, and be knocked back to the mat.

[mdavies013]

4. I think that we elected a very talented President who has some of the

greatest minds surrounding him. I think that we will see bold direction and New Deal type thinking. We will have energy independence becuase the government will put money behind it directly or indirectly. We as a nation will have to ask ourselves is it better to invest in infastructure or is it better to pay in high crime rates, unemployement, WIC, food stamps, foster care, etc.

I have seen the ugly side of poverty. I have foster, adopted, mentored, etc. It is sad to see what desperate and hurting people can do to themselves and their children. Not to mention increased crime (shootings, looting, break-ins, mugging, etc)

[GliderGuider]

5. I hope you're right.

I'm rather pessimistic, especially since he's not the president of China, India, Europe or Russia, and this is a global rather than a strictly American problem. However, any little bit helps, and he certainly has a good aura.

Good luck to us all.