2011 April 15

The Master Resource Report  2011-04-15

Airlines and fuel costs.    (page 1 ) 

Gasoline price & consumption.    (page 2 ) 

Supply to 2015 on TOD.   (page 3 )

The oil price spike of 2000, do you remember?   (page 4 )

U.S. expenditures on gasoline reach new highs

According to data available from the EIA U.S. consumers paid more in total dollars per day last week at this time of year than at any other time in history, even more than was paid in 2008. That means U.S. gasoline buyers are spending nearly $1.5 billion per day on gasoline.

The graph below uses the average price per gallon reported by the EIA each week and multiplies it by the daily average of gasoline supplied also based on data from the EIA. This provides an average daily expenditure on gasoline for each week thru April 8th for each of these years 2008, 2010 and 2011 since January 1st.

For example for the week of April 8, 2011 (far right of blue line) the U.S. was supplied 9.181 Mb/d of gasoline or 385.6 million gallons per day (42 gallons per barrel). That 385.6 million gallons cost consumers $1.46 billion per day based on the weekly price reported by the EIA of $3.791 per gallon.

 The all time high daily average expenditure occurred during the week of July 4, 2008 when U.S. gasoline consumers spent $1.635 billion per day buying 9.35 Mb/d of gasoline.

Please note that these are estimates based on weekly averages so it is the trends that matter. There are further graphs in this week’s report that highlight other areas of U.S. gasoline consumption trends. But don’t forget that gasoline is the part of the picture which hits consumers hardest.  Airlines, industry and commercial users are hit by the even more important distillate fuel price which this report has repeatedly emphasized.

Oil and GDP

The Economist took a quick look at two analytical chapters just released as part of the IMF’s “World Economic Outlook.” They had this to say about the publically released chapter 3 – “Oil Scarcity, Growth, And Global Imbalances” .

“The most disconcerting part of the IMF analysis is its estimate of the potential impact of declining oil output on world GDP under different output scenarios. In the benchmark case, growth in oil output drops by one percentage point a year and real world GDP two decades from now is about 3 percentage points below where it otherwise would have been. In America, the drop is closer to 4 percentage points. Given greater substitution away from oil, the gap over two decades is closer to 1 percentage point for both the world and the American economy.”

It appears the IMF clearly understands the linkage between petroleum and economic growth. Of course in a post peak oil world expecting only a one percent annual decline in oil output is probably a little too optimistic. But then again it is their benchmark case.

In the IMF’s “Scenario 2” which considers a 3.8 percent decline rate annually rather than the 1 percent in the benchmark things begin to get worse. But the most bizarre projection is “…the increase in world savings implied by this scenario is so large that several regions could, after the first few years, experience nominal interest rates that approach zero, which could make it difficult to carry out monetary policy.”

Too much renewable power…?

Even as the solutions are developed new problems will develop. In this case the Pacific Northwest abundant hydro power gets an extra surge in the spring with the snow melt. This year it is now expected to be above normal confronting BPA with a very difficult dilemma. Produce power or kill fish.

The problem however is compounded by the success of installing wind power in the same region. At the very time the water flow into Columbia River is at its highest so is the wind resource spinning the blades of the wind farms. The result is an abundance of hydro power that no one needs and must be sold in some cases at a loss after they pay transmission costs.

BPA is then confronted with telling the wind power generators to shut down during the time when they have the greatest energy resource to harvest.

“BPA officials said that they couldn’t divert all the water around the hydroelectric turbines without putting too much dissolved gas into the river and placing salmon at risk. So they ended up running more water through the dam turbines and giving away their surplus power to utilities all over the West.”

Imagine how complex this would get if they also had to contend with a large amount of disperse solar added to the mix. These issues will be resolved but in many cases it is going to take time and importantly money. Those are two things unfortunately we seem chronically short of today.