What does this mean? Let us look at some historical consequences. Much of this is detailed in Chapter 1 of SIMPLE SOLUTIONS for Planet Earth, but the price of gasoline in 1918 adjusted to 2008 dollars was 3.85/gallon. The true value dropped to 1.80/gal until 1973, when the First Energy Crisis increased the price (all the following will also be in 2008 dollars) to 2.30/gal. The Second Energy Crisis of 1979 kicked the price up to 3.17/gal in 1981. Gasoline then continued to drop to 1.35/gal in 1998. "THAT WAS THE ABSOLUTELY LOWEST REAL PRICE OF GASOLINE IN HISTORY".
On December 5, 2008, gasoline was 1.77/gal for regular and 1.94/gal for premium. On December 4, my daily blog reported that oil traders were purchasing gasoline for January delivery at 0.97/gallon. Today oil is being sold for 0.97/barrel (40.81/bbl). The predicted 20/bbl crude is equivalent to 47 cents/bbl. Try not to confuse petroleum price per barrel and gasoline price per gallon. There are 42 gallons in one barrel.
The year or two or three after 1973 and 1979 saw major economic declines when oil prices jumped. Oil caused the recessions. When Ronald Reagan became President in 1982 he decimated the solar budget, which only anguished the renewable supporters. He suffered no consequences because, save for an uptick during the First Gulf War in 1991, gasoline prices dramatically dropped (in 2008 dollars) from 3.17/gallon to 1.35/gallon.
Let us now return to July 11, 2008 when oil peaked at 147.27/bbl, causing gasoline to sell for 4.12/gallon on July 17. Note also that gasoline prices react only a week after the highs, but take forever to actually drop. Anyway, gasoline on December 5 was 57% lower than on July 17. Our stock market has only declined around 40%.
This time, then, the economy affected oil prices, as the recession is reducing use, causing an oversupply. Following the First and Second Energy Crises, higher oil prices dampened the economy. As recovery proceeded, relative oil (and gasoline) prices dropped. This time, the question is, will the recovering economy raise oil prices?
We can then expect the following:
1. It is appearing that oil will drop below 30/bbl.-
2. Gasoline prices could well plunge below 1/gallon. This will be the lowest gasoline will ever be in all of history, even if the decline plateaus at 1.34/gallon.-
3. If no Solar Manhattan effort occurred in 1982 when gasoline prices were near the modern day high, what are the prospects of anything monumental happening when it will be at an ALL-TIME LOW when Barack Obama becomes President on January 20? Remember, T. Boone Pickens, with all his sincere bluster, abandoned his wind farms when oil was still more than 50/barrel.
-4. Late in October, OPEC announced a production cut of 1.5 million barrels to 28.8 million barrels/day. What happened? Petroleum prices crashed, just the opposite of all predictions. Before the year is over, another reduction of 2 million barrels/day can be expected. They want oil to at least climb to 75/barrel. That might take even greater cutbacks.
-5. The economy will recover. It might take all of a year if there is no depression, and, certainly, in 5 years.
-If, in the meantime, oil will someday rise to 75/barrel, and the slack now available to producers will delay any sudden escalation. However, the surging economies of China, India and rest of the world will almost surely further escalate the price beyond 100/barrel, maybe up to 200/barrel in five to ten years. There is such a thing as Peak Oil, and there is further evidence that the Middle East does not really have as much of this resource as publicized.
All things concerned, this could well be a gift to Planet Earth and Humanity, for Peak Oil will be delayed, carbon dioxide in our atmosphere will be somewhat alleviated and we will have this period to work on sustainable options that can begin to competitively replace fossil fuels in time. -Windfarms can generally proceed, but solar photovoltaics and thermal are not quite there yet. The ideal biofuels are not ethanol and biodiesel, so other more promising options such as methanol and the direct methanol fuel cell need at least a decade to develop. Then, there is aviation fuel. Can jet fuel from algae become competitive? Maybe, but that will require at least ten years, if not more. There is no hydrogen jetliner in sight, but the hydrogen dirigible can be readied in a decade or two. The production of clean hydrogen, however, might still be beyond current technology, but, to some degree, it will depend on the actual price of fossil fuels and the seriousness of the Greenhouse Effect.
The following simple solutions can be recommended:
1. Take advantage of this "gift" and comprehensively prepare for a sustainable energy economy.
-2. Research and development costs a fraction of actual commercial investments, so government should work with industry and academia to plan for, fund and implement a visionary developmental program.
-3. Work in a growing carbon tax linked to the price of oil. As crude prices increases, so will, thus, this tax. At 30/barrel, something like a 2 cents / pound carbon dioxide tax is significant but tolerable. When oil eventually jumps to 150/barrel, the tax should be proportionately higher, at 10 cents / pound carbon dioxide. The revenues will fund renewable energy programs.
-4. To kick-off the Planet Earth rescue strategy, immediately add a 1/gallon gasoline investment surcharge (also known as a tax, but the semantics can't hurt), which will result in nearly 150 million/year, also to be applied to the Obama Sustainable Energy Plan.-Let us not miss this opportunity. Accept this miracle and take appropriate action.-
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