Instead of Feast and Famine in Oil, Maybe No More Feast

The giant BP oil corporation just released a projection that is shaking big thinkers in business around the world. It concludes long term oil consumption will peak this year. This projection flies in the face of all conventional wisdom that consumption would continue to rise past 2030. If this prediction turns out to be correct many parts of the world will be upended. 

One of those places will be North Dakota which is a high cost producing state. Russia is another and Saudi Arabia will be scrambling. 

And across the Midwest are corn farmers. Roughly half the crop is used for ethanol. This is the same market as oil. When is price tumbles, as it has the past few years farm income tumbles as well.

Because low prices for oil have always rebounded, the belief holds low prices will be followed by high prices, not more low prices. Investments for future are made and bank loans negotiated during low oil prices based on higher prices assumed to be coming. That low prices remain temporarily instill the belief permanently low prices cannot come to pass.

Permanently low prices have been predicted in the past and prices instead eventually went up. This reinforced the view prices will never remain low.

It's a form of entertainment to "think outside the box" about change. What products, industries, services and devices were once thought to be permanent are now lost in the dust bins of history? Use of horses as a source of power is the first that comes to mind. There must have been a million people who made all or part of their living in the horse industry. The coal industry has been declining for years and it seems inevitable it will die like the horses.

The amount of oil used per day in the U.S. is huge, just under 20 million barrels. It hard to imagine how a large reduction could happen. But, it is happening. Off on the horizon is environmentally friendly nuclear power, better batteries with solar and wind and less usage through designs of vehicles and buildings.