Pump prices for gasoline across the country fell another four cents this morning to average $2.589 per gallon. Current trends are poised to bring prices to $2.50 by election day. This shift has huge implications for US consumers, since we spend over half a billion dollars less every day than at the peak price of $4.11 in early July ($1.50/gallon*42 gallons*9 million barrels/day). Hopefully these savings can help get Americans’ finances in order to pay our debts down and get us out of the recession. The price may fall another 20 cents, but I see a medium-term floor for prices ~$2.30-$2.50 due to the difficulty to grow oil production at today’s price below $70 per barrel.
And the glimpse of a draft IEA report had some sobering insight into long-term oil production.
The Financial Times leaked information from a draft IEA report predicting stagnation in global crude oil production through 2030. In the organization’s first comprehensive look at the hundreds of large fields that provide us with oil, they have apparently found decline rates of 6% to 9%. To offset such decline rates, they believe investment of $360 billion per year is required — higher than current investment levels. The consumption level they project in 2030 is 106.4 million barrels per day (Mbd) rather than their projection last year of 116.3 Mbd. This more than 9% reduction in oil consumption would mean a significant decrease in greenhouse gas emissions. The stagnation in supply would mean IPCC climate emissions models need to be updated to represent lower emissions from oil consumption.
But the IEA reminded readers today that the Financial Times had taken information from an unauthorized draft report. The IEA said for eager reporters and the public to wait until the 12th of November when they officially publish the report to get more accurate and updated information that IEA staff will be ready to discuss.
In the US, the weekly EIA oil report found that crude supplies increased less than expected and gasoline supplies fell, but distillates increased toward average levels. Lower demand continues to make up for lower than average inventories for the time being. The question remains whether winter weather will make heating fuel demand higher than usual or the lower pump prices will spur an increase in consumption in the weeks ahead.
In sum, the US oil supply system is in balance for now. But as an importing country, we need to continue to lower oil consumption so we are ready for continued declines in production at our own fields and those in exporting countries such as Mexico, Norway, and Russia. The bright side of this necessary transition from oil is the potential to deploy climate-friendly efficiency and renewable energy in its place.
Tags: gas prices, IEA, Oil