Saving Oil in a Hurry

While oil hovers around 55 dollars a barrel, IEA is asking countries to prepare a crash oil saving plan, which may be needed in case of supply disruptions.

Oil importing countries should implement emergency oil saving policies if supplies fall by as little as 1m-2m barrels a day, the International Energy Agency will warn next month.

The figure is much lower than the official trigger of 7 per cent of global oil supply equivalent to 6m b/d agreed in the treaty that founded the energy watchdog for industrialised countries after the oil crisis of the 1970s. A fall in supply of just 1m-2m b/d would be equivalent to the disruptions during the 2003 Iraq war or the 2002 oil industry strike in Venezuela.

Meanwhile, yesterday Goldman Sachs created waves by openly admitting that there is a small chance that Oil prices could shoot up to 100 dollars a barrel.

It suggested that only a sharp, sustained increase in energy prices would meaningfully reduce energy consumption and therefore create the spare capacity needed to bring prices lower again.

How will we reduce energy consumption in the face of a "super-spike"? IEA's Saving Oil in a Hurry report has some comments:

The basic approach has been to evaluate the impact of a variety of measures, if applied individually during a crisis, given the necessary emergency planning and preparation before a crisis occurs. In most cases the measures have the effect of reducing light-duty vehicle travel, either by reducing demand or encouraging shifting to public transit or other modes. We have evaluated the following general approaches:
• Increases in public transit usage
• Increases in carpooling
• Telecommuting and working at home
• Changes in work schedules
• Driving bans and restrictions
• Speed limit reductions
• Information on tyre pressure effects
Our main conclusion finds that those policies that are more restrictive tend to be most effective in gaining larger reductions in fuel consumption. In particular, driving restrictions give the largest estimated reductions in fuel consumption. Restrictive policies such as this can be relatively difficult to implement and thus may come at higher political costs. Policies that rely on altruistic behaviour and provide information to consumers can give good reductions in fuel consumption. However, many of these policies are potentially very cost-effective, as the investment needed to implement them is low.

Still think that taking baby steps NOW towards reducing our fuel consumption is a bad idea?

UPDATE (04/03): See The stupid phase of Oil and the Super-Spike report. Personally, I think that the chances of oil shooting as high as $100 a barrel are very small, but as Barry notes, it is the reaction of the markets to the news that is interesting. Last summer, I talked about psychological barrier with 2 dollars a gallon gasoline being broken. By now, most people have gotten used to paying more than $ 1.80 per gallon. This years barrier would be $2.50 a gallon, which we might hit somewhere around Memorial day if the current trend in the oil markets persists.