There are numerous components to the continuing rise in oil prices—the falling U.S. dollar; continuing strong demand in the U.S.; rising demand by China, Russia, the Middle East, Brazil, and India; China filling its oil reserve needs prior to the start of the Olympics; rebels attacking the Nigerian oil infrastructure; OPEC’s resistance to increasing production; and more.
The end results are that the price of gasoline has risen above $4.00/gal in many areas of the U.S., $8.00/gal in Germany, and $10.00/gal in the U.K. (equivalents). The other end results are that oil demand in the U.S. is expected to decline by about 190,000 barrels/day according to the U.S. Dept. of Energy (combined effects of high prices and the economic downturn) and that R&D for alternative energy sources are getting a much needed boost in funding.
Investments for wind turbine farms, photovoltaic production, biofuels, and electric vehicles (EVs) have all seen dramatic increases this year alone. Current estimates reveal that wind turbine farms alone could account for nearly a third of the electricity generated in the U.S. by 2030. The current production pace of these developments almost makes you think that this estimate is conservative. A number of new nuclear generating plants are also planned in the U.S., with the first coming online in 2016 or so.
The transition from an oil-fueled society to an electric infrastructure, however, even with the best results imaginable will not be one that occurs quickly. The infrastructure is the key here. The roughly 250 million U.S. vehicles—not counting trucks—are mostly powered by gasoline engines. It would take decades to replace the majority of them, if we could, with EVs or electric engines. And then there are the non-vehicular energy uses of an electric replacement for oil. The transition for commercial, industrial, and consumer applications would also take decades, if it also could be made.
On the positive side, however, is the large number of new jobs, new products, new R&D, and new infrastructures that even a partial transition from a primarily oil-based society to an electric-based society would provide. And real estate developers would have lots of tank farms and refineries for which to find new uses.
