Our Latest Oil Predicament
It is impossible to tell the whole oil story, but perhaps I can offer a few insights regarding where we are today.
[1] We already seem to be back to the falling oil prices and refilling storage tanks scenario.
US crude oil stocks hit their low point on January 19, 2018 and have started to rise again. The amount of crude oil fill has averaged about 365,000 barrels per day since then. At the same time, prices of both Brent and WTI oil have fallen from their high points.
Figure 1. Average weekly spot Brent oil prices from EIA website, with circle pointing to recent downtick in prices.
Many people believe that the oil problem, when it hits, will be running out of oil. People with such a belief interpret a glut of oil to mean that we are still very far from any limit.
[2] An alternative story to running out of oil is that the economy is a self-organized system, operating under the laws of physics. With this story, too little demand for oil is as likely an outcome as a shortage of oil.
Oil and energy products are used to create everything, even jobs. If all humans have is energy from the sun, plus the energy that all animals have, then humans would be much more like chimpanzees. All humans would be able to do is gather plant food and catch a few easy-to-catch animals (earthworms and crickets, for example). They certainly could not extract oil or find uses for it.
It takes a self-organized economy to support the extraction and sale of energy products. We need a complex web that includes:
- Equipment to extract the oil
- Training for engineers and other workers
- Devices that use oil, such as vehicles, farm equipment, road paving equipment
- A financial system to enable transactions to purchase oil
- Buyers with jobs that pay well enough that they can afford to buy goods made with oil
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