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June 27, 2005

Oil Rising To the Top

This should come as little surprise, but oil prices just topped $60 per barrel.

While this is the highest nominal price ever, it's far from the highest inflation-adjusted price; in the early 1980s oil topped $94 in today's dollars.  Still, the recent price runup has been pretty darn steep: the price of a barrel of oil has increased roughly fivefold since the winter of 1998. 

As a reminder:  Washington, Oregon, and Idaho combined use about 250 million barrels of oil every year (see this US Energy Information Agency site for details for your state), none of which is produced within the states' borders.  Much of this oil comes from Alaska's North Slope; and this oil is a little cheaper than the light crude to which the spot price refers.  Still, at current prices (link to Anchorage Daily News; registration may be required), our oil consumption habits will siphon off about $14 billion from the combined economies of the three states, which is about one out of every 30 dollars generated in the region.  And, obviously, the more money that leaves the region to pay for oil, the less is left to circulate among local businesses and residents.

Posted by ClarkWD | Permalink

Comments

I'm beginning to feel like a bit of a crank, but I think it is worth pointing out (again) that a number of notable figures both inside and outside the oil industry believe that we are either nearing or are possibly past Hubbert's Peak - the point at which depletion of existing oil wells will outstrip all future development, resulting in less oil being produced in each successive year.

The economic consequences of this situation are potentially dire - at the very least, $60/barrel oil may seem very cheap. Worse, our entire economy, food supply, and way of life is much more dependent on oil than is generally acknowledged, and the alternatives, though much touted, are years from being able to take up the slack.

Seasonal demand for oil doesn't peak until the 4th quarter, and oil prices are already at $60/barrel. This is without any supply disruptions of note and relative (although possibly temporary) calm geo-politically. It ought to be an interesting winter.

Posted by: Roy Smith | Jun 27, 2005 2:41:53 PM

No, Roy, you're no crank. Or, rather, if you're a crank, then I am too: I've been mildly obsessed with Hubbert's Peak for about 3 years now.

Personally, I'm very, very concerned about this. Professionally, though, I'm agnostic. I just don't know enough to be able to say with confidence which side of the debate has more merit. (Though I do think it's telling that the "peak oil is near" crowd seems to be dominated by oil geologists, while the "peak oil is far off, or doesn't matter" side tends to be economists and the like. On issues of fact, I'd tend to side with the geologists...) And, more importantly, as a society we have to figure out how to live sustainably *no matter which side is right.* That is, if peak oil is near, we'll have to figure out how to conserve. But if it won't happen until 2035 or beyond, it's just important--in fact, perhaps moreso--to learn how to live within our ecological means.

Posted by: Clark Williams-Derry | Jun 27, 2005 9:14:15 PM

Why are rising oil prices having an impact on the public? Maybe because the average household expenditure on transportation has doubled since the last oil "crisis". Nationally the average is now 19.1% of household income compared to 10% in the 1960's. While gas costs are a small part of car use, with rising health care and housing costs, families are getting squeezed by this rise in a basic necessity.

Of course in cities where there are transportation options or good land use, families aren't affected nearly as badly by rising transportation costs because they can choose not to drive. For example, Portland Oregon area households spend only 15.1%, keeping 4% of their income in their pockets for other uses.

for the facts, go to http://transact.org/ for their new report, Driven To Spend.

Posted by: rex Burkholder | Jun 29, 2005 12:00:14 PM

For a sense of the price trend in depleting petroleum, try http://www.drydipstick.com,
scrolling to the graph at the bottom of the
homepage and then pushing the appropriate graph-border button for a multi-year plot. For deep background, try James Kunstler's new book _The Long Emergency_, available since May in all big bookstores (and summarized in an essay of his by the same name, on his http://www.kunstler.com). For a description of the poor and struggling civilization we may experience a few generations from now, check my 'Utopia 2184: A Green Manifesto in the Spirit of the Permaculture and Catholic-Worker Movements', on my http://www.metascientia.com. There's trouble ahead, on a scale that will dwarf even World Wars I and II.

Posted by: Toomas (Tom) Karmo | Jul 4, 2005 5:38:45 PM