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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: tom pope who wrote (117239)2/3/2009 10:44:44 PM
From: 8bits4 Recommendations  Read Replies (1) of 206151
 
That petroleum consumption falls with higher prices is also a given. The greatest decline was evident in the back-to-back recessions of the early 1980s. In the five year period between 1978 and 1983 petroleum consumption fell by 19%.

There were some dramatic structural shifts in energy consumption, aside from the aforementioned switch to more energy efficient autos as illustrated here:

eia.doe.gov

There was a dramatic drop in the usage of oil for electrical generation:

eia.doe.gov

From 17% to 5% of oil fired electrical generation in 5 years. That's an incredible drop. (We are now below 2%)

Oil used for home heating also dropped:

eia.doe.gov

Note that now only about 7.5% of US homes use oil for heat compared to over 30% in the early 70s:

eia.doe.gov

It would seem that was a substantial reduction in the use of oil for residential heating (mostly replaced by natural gas and electricity) and for electrical generation in the 1970s. We won't replicate these drops in oil usage again to nearly the same degree. About the only sector that could register a substantial sustained drop in demand for oil would be the transportation sector which would hinge on the economy, more efficient vehicles, and more efficient driving patterns. On average vehicles take about 2.5 times as long to replace now as they did in the early 70s so switches to more fuel efficient vehicles will be slower.

This was interesting, from the late 70s to the mid 80s the price of discovering new oil dropped by around 75%

eia.doe.gov

I just don't see that being replicated. (Granted they combine oil and natural gas, the cost of developing the latter has dropped by not by 75%)

This has already been posted earlier but I thought a repost in here would ease comparison, the cost of developing oil now:

investorvillage.com
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