Geopolitical potential for a game-changing gas shortage?

[LTLFTcomposite]

Rightly or wrongly, naysayer arguments are generally framed around comparisons of EVs to traditional ICE vehicles on the basis of cost and convenience in an environment where gasoline is conveniently available at what is arguably still a pretty cheap price:

"When I can get one for $15k that goes 500 miles and recharges in three minutes I'll think about it."

Few remember 1974, as they are either too young or have forgotten, but those were some interesting times, even though they resolved themselves in a relatively short period of time. I have to think that a similar event today would completely change the discussion about EVs. Nobody would give a rat's ass what the LEAF's headlights looks like, the only thing that would matter is knowing who you could talk to to get one without having to pay more than $10k over sticker. All the people who think 50 miles/day is nothing would see it differently if they had to walk it - or sit in a line for four hours to get three a three gallon ration.

Maybe it's my imagination, but the current situations in Syria and Egypt seem worse than usual. Not that I'm hoping for trouble in the interest of EV advocacy, but are we facing a near term potential for a disruption in oil supply? Something more than just a $20/bbl price spike that adds 40 cents a gallon. Or is the supply diversified to the point where a localized disruption from an area of supply wouldn't have that big an impact? Still... even if your oil doesn't come from, say, a big Saudi oil terminal, somebody's does, and if that gets disrupted, some part of whatever was going to you is now going to be in demand by whoever that was going to.

I suppose the status quo could continue reliably for a long time to come... on the other hand it seems like a remote possibility we go on without at least some significant oil supply disruption event.

 

[adric22]

It wouldn't matter.. Americans have very short memories.. Oh look gas is cheap again, lets go buy a Suburban. 2 months later, "What gas is expensive again, who would have ever thought?" So yeah, I'm sure EV sales would shoot through the roof during the issue, but as soon as it passed, everyone would forget about it.

 

[klapauzius]

I think the middle east is no longer crucial to US energy needs.
The US will be a net energy exporter sometime in the near future, so a crisis in the middle east will only have psychological but not real effects.

Canada is supplying currently more oil to the US than all the Persian gulf region combined.
http://www.npr.org/2012/04/11/150444802/where-does-america-get-oil-you-may-be-surprised" onclick="window.open(this.href);return false;

Besides, neither Syria nor Egypt export meaningful quantities of oil anyway.

 

[smkettner]

The real risk is when China/India reach a self sustaining industrial economy and bid the price up while we stagnate.
JMHO

 

[klapauzius]

The real risk is when China/India reach a self sustaining industrial economy and bid the price up while we stagnate.
JMHO

That might take a while...Currently I do not think they can sustain bidding up prices. Also, since none of those two countries is a significant producer, while the US is on a path to self-sufficiency, high prices will hurt them more than us.

All will be fine, if we keep becoming more efficient, while increasing output at the same time.
Right now, the middle east mess might become more a problem for China than for us....

 

[LTLFTcomposite]

My thinking has been if it's just a matter of price (to the consumer) there wouldn't be any rapid shift in attitude, just more of the same man on the street interviews on the evening news of people whining about gas prices. But if the day comes when there's a "no gas today" sign posted at a bunch of stations and long lines at others it will be quite a different situation.

Floridians can tell you how it gets real ugly real fast when pumps are dry. Northeasterners too after Sandy. Imagine widespread shortages, there will be loads of finger pointing, but still a reality to be dealt with.

 

[walterbays]

I think the middle east is no longer crucial to US energy needs.
The US will be a net energy exporter sometime in the near future, so a crisis in the middle east will only have psychological but not real effects.

That's probably if you count coal and natural gas. Which would be fine if that energy were usable for transport, like with lots of EV's and/or CNG cars. But today our transportation runs on oil.

Regardless of how much oil we get from Canada and Mexico, something like a fourth of the world's oil comes from the Middle East. http://www.eia.gov/countries/regions-topics.cfm?fips=wotc&trk=p3 The biggest threat to energy security from Syria is probably the possibility that it may prevent nuclear disarmament agreements with Iran or may even draw Iran into war. http://abcnews.go.com/US/wireStory/oil-climbs-109-barrel-syrian-crisis-20086422 If Mideast instability seriously disrupted supply, the EU, China, Japan, and India would be bidding for a lot of that Canadian oil that now comes to the U.S.

 

[DaveEV]

Maybe it's my imagination, but the current situations in Syria and Egypt seem worse than usual. Not that I'm hoping for trouble in the interest of EV advocacy, but are we facing a near term potential for a disruption in oil supply? Something more than just a $20/bbl price spike that adds 40 cents a gallon.

Seems unlikely with current events.

IMO one large source of unrest with both Syria and Egypt, is that both countries are running out of oil - production has not kept up with consumption - and with it, easy money. Have a look at these production/consumption plots for each:



At least the current situation neither country is much of an oil exporter any longer if at all, I would think that the effect on global oil supply would be minimal, unless the unrest spreads to other oil exporting countries such as Iraq or Saudi Arabia.

Keep in mind that in both Iraq / Saudi Arabia, they are also facing similar challenges with large increases in internal consumption and struggles to keep production at high levels.

 

[cwerdna]

I think the middle east is no longer crucial to US energy needs.
The US will be a net energy exporter sometime in the near future, so a crisis in the middle east will only have psychological but not real effects.

That's probably if you count coal and natural gas. Which would be fine if that energy were usable for transport, like with lots of EV's and/or CNG cars. But today our transportation runs on oil.

Yep. Per http://www.eia.gov/tools/faqs/faq.cfm?id=32&t=6" onclick="window.open(this.href);return false; "In 2012, about 40% of the petroleum consumed by the United States was imported from foreign countries." More stats http://www.eia.gov/energyexplained/index.cfm?page=oil_home#tab2" onclick="window.open(this.href);return false;.

Regardless of how much oil we get from Canada and Mexico, something like a fourth of the world's oil comes from the Middle East. http://www.eia.gov/countries/regions-topics.cfm?fips=wotc&trk=p3 The biggest threat to energy security from Syria is probably the possibility that it may prevent nuclear disarmament agreements with Iran or may even draw Iran into war. http://abcnews.go.com/US/wireStory/oil-climbs-109-barrel-syrian-crisis-20086422 If Mideast instability seriously disrupted supply, the EU, China, Japan, and India would be bidding for a lot of that Canadian oil that now comes to the U.S.

Yep, http://nbr.com/2013/08/27/nightly-business-report-august-27-2013/" onclick="window.open(this.href);return false; at ~9:15 mentions the potential destabilization of that region.

These might prove insightful to klapauzius.
http://www.eia.gov/countries/cab.cfm?fips=SA" onclick="window.open(this.href);return false;
http://www.eia.gov/countries/country-data.cfm?fips=iz" onclick="window.open(this.href);return false;
http://www.eia.gov/countries/country-data.cfm?fips=IR" onclick="window.open(this.href);return false;
http://www.eia.gov/countries/index.cfm?view=reserves" onclick="window.open(this.href);return false;
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2244rank.html" onclick="window.open(this.href);return false; - esp. if you divide the "proved reserves" that US has by the US daily consumption rate at http://www.eia.gov/energyexplained/index.cfm?page=oil_home#tab2" onclick="window.open(this.href);return false;.

India and China each have over a billion people, each w/a growing middle class, w/a growing # able to afford cars. China's middle class is somewhere around 300 million people, about the population of the entire US.

It wouldn't matter.. Americans have very short memories.. Oh look gas is cheap again, lets go buy a Suburban. 2 months later, "What gas is expensive again, who would have ever thought?" So yeah, I'm sure EV sales would shoot through the roof during the issue, but as soon as it passed, everyone would forget about it.

Yep. Unfortunately, I tend to agree.

 

[LTLFTcomposite]

Does it really need to be widespread war in the middle east? If for example Syria wants to retaliate against US military intervention, they would do more damage by knocking out a saudi oil terminal than by any direct attack on US forces. And again, even if there isn't much of our supply coming from such a facility, a substantial portion of somebody's supply is coming from there, and because of fungability, or what I like to call the frat house punch bowl, everyone is affected.

 

[DNAinaGoodWay]

Oil prices are rising on fear alone. Markets don't like uncertainty.

Supply will adjust, and suppliers won't argue with an opportunity to raise prices.

But it's a tragedy for innocent inhabitants.

 

[adric22]

There's another issue people often forget about. Our supply of oil is very closely matched to our demand. Oil companies do not make a lot of excess oil because that would lower the price, and thus their profits. Now, imagine a busy 5 lane highway near rush-hour with traffic moving along at a steady 55 mph. It only takes an extra 2% or 3% of cars to get on the highway before it slows down to a crawl. In the same regard, removing that 2% or 3% will alleviate the problem. Our oil supply is similar. An interruption of only 2% can cause significant price jumps and shortages.

 

[LTLFTcomposite]

An interruption of only 2% can cause significant price jumps and shortages.

Right. 2% may not sound like a lot, unless you're in the 2% who didn't get any this week. Of course that isn't how it works. Instead the price will rise to whatever it needs to for the overall population to reduce the aggregate consumption by 2%. And boy they will squeal like stuck pigs when that happens.

The alternative is price controls, which will mean shortages, exacerbated by 200 million people all running out to top off their tanks the day the news hits.

 

[davewill]

I think the middle east is no longer crucial to US energy needs.
The US will be a net energy exporter sometime in the near future, so a crisis in the middle east will only have psychological but not real effects. ...

It doesn't matter where the oil is coming from, the price is set by the global market. Also, if China's supplies are interrupted don't you think it might affect the supply of all those goods we buy from there?

 

[smkettner]

1974 will not repete the same way unless we again have price controls.

 

[klapauzius]

Yep. Per http://www.eia.gov/tools/faqs/faq.cfm?id=32&t=6" onclick="window.open(this.href);return false; "In 2012, about 40% of the petroleum consumed by the United States was imported from foreign countries." More stats http://www.eia.gov/energyexplained/index.cfm?page=oil_home#tab2" onclick="window.open(this.href);return false;.

Regardless of how much oil we get from Canada and Mexico, something like a fourth of the world's oil comes from the Middle East. http://www.eia.gov/countries/regions-topics.cfm?fips=wotc&trk=p3 The biggest threat to energy security from Syria is probably the possibility that it may prevent nuclear disarmament agreements with Iran or may even draw Iran into war. http://abcnews.go.com/US/wireStory/oil-climbs-109-barrel-syrian-crisis-20086422 If Mideast instability seriously disrupted supply, the EU, China, Japan, and India would be bidding for a lot of that Canadian oil that now comes to the U.S.

Yep, http://nbr.com/2013/08/27/nightly-business-report-august-27-2013/" onclick="window.open(this.href);return false; at ~9:15 mentions the potential destabilization of that region.

These might prove insightful to klapauzius.
http://www.eia.gov/countries/cab.cfm?fips=SA" onclick="window.open(this.href);return false;
http://www.eia.gov/countries/country-data.cfm?fips=iz" onclick="window.open(this.href);return false;
http://www.eia.gov/countries/country-data.cfm?fips=IR" onclick="window.open(this.href);return false;
http://www.eia.gov/countries/index.cfm?view=reserves" onclick="window.open(this.href);return false;
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2244rank.html" onclick="window.open(this.href);return false; - esp. if you divide the "proved reserves" that US has by the US daily consumption rate at http://www.eia.gov/energyexplained/index.cfm?page=oil_home#tab2" onclick="window.open(this.href);return false;.

India and China each have over a billion people, each w/a growing middle class, w/a growing # able to afford cars. China's middle class is somewhere around 300 million people, about the population of the entire US.

It wouldn't matter.. Americans have very short memories.. Oh look gas is cheap again, lets go buy a Suburban. 2 months later, "What gas is expensive again, who would have ever thought?" So yeah, I'm sure EV sales would shoot through the roof during the issue, but as soon as it passed, everyone would forget about it.

Yep. Unfortunately, I tend to agree.

I think "foreign country" and "middle east" are not synonymous, are they?

According to this article http://www.npr.org/2012/04/11/150444802/where-does-america-get-oil-you-may-be-surprised" onclick="window.open(this.href);return false;,

12.9 % of the US oil come from the persian gulf ( = "middle east"). 35% are from Canada and South America. Note that is apparently for the total amount of oil, not imports.

I have seen all the http://www.eia.gov/" onclick="window.open(this.href);return false; links too, but I was looking for a more consolidated set of numbers.

As for the Europeans (i.e. the EU) :

http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:EU_Oil_imports,_by_country_of_origin_%28in_%25%29.png&filetimestamp=20120719133014" onclick="window.open(this.href);return false;

It seems that the "middle east" (including Libya, which is really North Africa) makes up ~ 20%. 10% of this are from Libya, which probably will not be drawn into the current turmoil. Noteworthy though that these numbers are from 2010, and since then Libya has changed quite a bit. Current export levels are much lower for them now. On the other hand, the EU has an import ban for Iranian oil in place currently. So overall, the amount of oil coming from the region to Europe is also small.

So, neither Europe nor the the US get large portions of their oil from the region.
I agree that the world economy is connected and if Japan, China or India suffer, we will, to some degree, too. But I dont think it will be like the 70s.

The good thing is that the drive to US self-sufficiency in oil is due to the high oil prices (which make all the expensive methods to get oil profitable here), so a crisis in the middle east should in a perverse way even accelerate this further.
At the same time, gas will stay expensive because of the high production costs here (vs. the "cheap" middle east oil) which is also good.

About the chinese "middle class":
The annual disposable income per capita in the US is $40k. For the Chinese it is $3k. Take the urban middle class there and it is maybe $6k.
Annual gas expenditures for gas in the US per capita are ~ $2k.
They have a long way to go still and are in no position to seriously compete for oil and gas with the US (or Europe) yet...

 

[LTLFTcomposite]

OK so maybe there isn't enough wealth around the world to support a $500/bbl oil market, but I bet there could be prices well above the current $110. From my decidedly naive lack of world perspective I am picturing the guy in NJ with a suburban with an appetite for 1000 gallons/year competing in a world market with 100 people in other countries who each use 10 gallons/year in their scooters. Which of them is better positioned to withstand a quadrupling in price?

Again, I'm not sure it matters where "our" oil comes from, even if we weren't importing a drop, producers will surely export everything they can if they can sell for more elsewhere.

 

[klapauzius]

OK so maybe there isn't enough wealth around the world to support a $500/bbl oil market, but I bet there could be prices well above the current $110. From my decidedly naive lack of world perspective I am picturing the guy in NJ with a suburban with an appetite for 1000 gallons/year competing in a world market with 100 people in other countries who each use 10 gallons/year in their scooters. Which of them is better positioned to withstand a quadrupling in price?

Again, I'm not sure it matters where "our" oil comes from, even if we weren't importing a drop, producers will surely export everything they can if they can sell for more elsewhere.

That one is easy:
The guy in NJ (what's wrong with NJ??? I have seen plenty of those dinosaur-cars in SoCal....)!!!!!


People here in the US are just filthy rich compared with the developing world.

If the prices for oil/gasoline quadruple, the suburban-guy will just start whining and pay up. Maybe cut back on other expenses a bit. Or just put it on his credit card.
In any case, with an average of $40k to spend each year, paying $8k for gas instead of $2k will hurt, but it will not cripple.

The 100 guys with scooters in e.g. India, CHina or Brazil cannot cancel their $100 a month cable TV, their $100 a month cell phone contract, they cant cut the daily latte at starbucks, they cant stop eating out and they cannot downsize their houses to pay for gas.
Needless to say, that none of those 100 scooter-guys will have a credit card.

A quadrupling in gas prices for them will likely mean they will walk or use public transport and probably go to bed hungry (because food prices will follow the oil).

 

[dgpcolorado]

Right. 2% may not sound like a lot, unless you're in the 2% who didn't get any this week. Of course that isn't how it works. Instead the price will rise to whatever it needs to for the overall population to reduce the aggregate consumption by 2%. And boy they will squeal like stuck pigs when that happens.

The alternative is price controls, which will mean shortages, exacerbated by 200 million people all running out to top off their tanks the day the news hits.

Your last point is an interesting observation: it was exactly what happened during the gas shortages in the '70s. Since the gas supply was uncertain, lines long, and many stations had no gas at all, drivers would try to keep their tanks at least half full. That large increase in "rolling storage" in car gas tanks increased the shortage at gas stations.

It is hard for me to see a '70s-style shortage again. Very little of the oil used in the USA comes from the Persian Gulf or from OPEC countries in general. But if Iran did close the Strait of Hormuz, or something similar happened, the world oil prices would shoot up and drivers could expect to pay much higher prices for gasoline/diesel. I wouldn't be surprised to see $150/barrel oil or even $200/barrel (and that would cause an instantaneous reduction in demand). But major supply disruptions in North America seem unlikely because there are so many more sources of oil nowadays. Another OPEC embargo or a Middle East crisis can change the price but the supply wouldn't be affected enough to lead to major shortages. The strategic petroleum reserve could be used to ameliorate minor shortages.

The production of oil is now so widely distributed and the pricing markets so "liquid" that significant gas shortages seem unlikely IMO.

 

[cwerdna]

The guy in NJ (what's wrong with NJ??? I have seen plenty of those dinosaur-cars in SoCal....)!!!!!
People here in the US are just filthy rich compared with the developing world.

If the prices for oil/gasoline quadruple, the suburban-guy will just start whining and pay up. Maybe cut back on other expenses a bit. Or just put it on his credit card.
In any case, with an average of $40k to spend each year, paying $8k for gas instead of $2k will hurt, but it will not cripple.

Re: the bolded part, yes, generally, however, there are a lot of people in the US who spend like crazy, living beyond their means and rack up a lot of debt. I wouldn't be surprised if some of their crazy spending habits include guzzler vehicles (e.g. BRoD-class SUVs) and poor for FE driving habits.

From http://money.cnn.com/2013/06/24/pf/emergency-savings/index.html" onclick="window.open(this.href);return false;

76% of Americans are living paycheck-to-paycheck
By Angela Johnson @ANJ0817 June 24, 2013: 2:53 PM ET
...
Roughly three-quarters of Americans are living paycheck-to-paycheck, with little to no emergency savings, according to a survey released by Bankrate.com Monday.

Fewer than one in four Americans have enough money in their savings account to cover at least six months of expenses, enough to help cushion the blow of a job loss, medical emergency or some other unexpected event, according to the survey of 1,000 adults. Meanwhile, 50% of those surveyed have less than a three-month cushion and 27% had no savings at all.

These types of figures sometimes boggle my mind.

klapauzius: As for some of your other points, see the earlier posts about oil being fungible and producers not producing much beyond the demand.

As for China, it's already the world's 2nd largest economy and is the world's largest auto market (http://www.forbes.com/sites/russellflannery/2013/07/07/china-the-worlds-largest-auto-market-says-passenger-car-sales-rose-12-in-june/" onclick="window.open(this.href);return false. I'm also seeing predictions that India will be the world's 3rd largest auto market by 2016.