Timothy Siegel revealed some interesting facts last week that tie in perfectly with the worldview I have been writing about for years. There is a population explosion in progress but this one is not people although in the end it is the growing human population that really counts.
Siegel did some research on the population growth of cars. He included every version of vehicle in his research including cars, trucks, busses and commercial vehicles. He said recent production numbers point to production of roughly 83 million new vehicles in 2011. That compares to only 77 million in 2010 as the world recovered from the recession.
He said the average age of a vehicle is 14 years and then it is scrapped. I am going to use his number but I think it is a lot higher than that. After all how many 1997 or older cars are still on the road in the U.S.? I did a brief scan of cars in a grocery store parking lot this weekend and roughly 30% were older than 1997 and this was in a upscale section of Denver. I am sure had I gone to a lower income neighborhood it would have been higher and closer to the 50% range. New cars are simply too expensive for a working class family. If you make $8-$12 and hour you can't buy a $60,000 SUV. You buy a $10,000 SUV that is more than 10-years old and then drive it until the wheels fall off.
Using Siegel's numbers and deducting 1997's global production of 54 million and subtracting those cars from the 2011 production of 83 million that gives us a net gain of 29 million vehicles in 2011. (I suspect it is more like 45 million assuming a 19-year life rather than 14-year life) For the sake of this article let's assume a midpoint of 37 million net new vehicles on the road in 2011. That number will only grow as China and India accelerate their production and complete more of the 100,000 miles of highways under construction. As the people population grows so will the vehicle population. World population today is 6.915 million and growing by more than seven million a month or 85 million per year. Obviously it will be 20 years before all these new people get a car and some will have public transportation but you get the idea.
Let's do some math. Assume the average car will burn 10 gallons of fuel a week. Some will burn less, some a lot more. Of our 37 million net new vehicles less than 1.5 million will be hybrid or electric. We have a long way to go in the acceptance and more importantly the rice of hybrid/electric. That along with range will be the determining factor in eventual acceptance.
If the average per vehicle is 10 gallons a week, 520 gallons per year then the total would be an increase of 19.24 billion gallons per year in increased fuel consumption. The average barrel of oil produces 19.5 gallons of gasoline so 19.24 billion gallons would require 962 million barrels of oil per year or 2.635 million barrels per day. That means we have to find and produce another 2.635 mbpd in 2011 just to keep up with the growth in the automobile population. Next year we will need to find another 2.6 mbpd on top of that because there will be another 37 million net new cars. If you extrapolate that just through 2015 and keep the net new cars constant at 37 million, which we know will not happen, that means we need to find and produce another 13.178 mbpd just to keep up with automobile growth.
That does not count the barrels needed to keep the 85 million new people fed and clothed each year. Everything we do in the developed world requires oil. Diapers are made from oil. Our food is grown, produced and transported with oil. Nearly every product we touch in our daily lives is made with oil. Anything plastic in any form is a byproduct of oil.
Our politicians can blame ruthless speculators for gasoline prices and they will because the election cycle is in full swing. However, that has never been proven. What has been proven is our relentless increase in demand for oil products as each day passes.
Nobody likes $4 gasoline in the USA but overseas people pay the equivalent of $6 to $8 per gallon. Don't kid yourself that those prices are not coming to the USA by 2015. The only thing that can prevent that from happening is another recession caused by the higher price of oil. I would bet the fuel price recession is the next great catastrophe the USA faces. Are you prepared?
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The OilSlick Newsletter is based on the expectations for global oil production of light sweet crude to peak and begin to decline in the 2012-2014 timeframe. I am calling this "Peak Sweet™" instead of Peak Oil. This is the point where global production of conventional light sweet crude supplies can no longer be supplemented by enough oil sands production, deepwater oil production, biofuels and natural gas liquids to offset the decline in existing fields. The roughly 6% annual decline of existing production due to depletion is larger than the rate of new discoveries and new production being added each year. The Peak Sweet™ countdown clock is ticking and time is growing short. Peak Oil will arrive shortly thereafter. Are you prepared?