In 2008, U.S. Oil imports fell 8.5% from 2007.
In 2009, U.S. Oil imports fell approximately 10% from 2008.
So far in 2010, U.S. Oil imports are off just over 6% from 2009.
So, for the sake of THIS discussion, let us assume that Jeffrey Brown's modeling is spot on, and imports into the U.S. fall at double digit percentages for the remainder of the decade (if memory serves the rate of decline should accelerate in early part of the decade, and if Jeff is around he can comment).
It is now 2015 and imports have fallen to 5.0mm bpd from 9.7mm bpd in early 2010, and 12.5mm bpd in 2006:
What happens?
During the last 4 years, the U.S. has experienced a 2.5 mm bpd decline in imports (give or take) but was able to increase production of ethanol 800k bpd, and increase domestic production roughly 500k bpd. Vehicle Miles Traveled for cars fell 3% or so, while consumption of truck diesel and jet fuel fell 15% +/-. In other words, industry took the decrease in supply on the chin with consumers outbidding industry.
I would argue that ethanol, which now consumes by my calculations 42.5% of the U.S. corn crop, was a "one off" with very little capacity left to increase its volume. Same with domestic production of crude, condensates, and NGL's.
Forget price. What happens if the system does in fact lose nearly 5 MILLION bpd, or 26% of the total liquid petroleum products available to us between 2010 and 2015? Of the nearly 9mm bpd of gasoline the U.S. consumes now, what will be available in 2015? If we assume a pari-passu decline in gasoline, - 6.5 mm bpd instead of nearly 9 mm bpd - what are the effects? What about a similar decline in diesel, heating oil, and jet fuel? I'll throw a few out there:
- Car pooling - that means we are not going to be wearing out those cars, tires... like we used to. Think about that and about those folks on unemployment waiting to be rehired in these industries. I guess we will be extending unemployment benefits out until 2020, then 2025, 2030... (snicker/he he/ha ha/)
- Staff that can work from home WILL work from home. Clearly surgeons and waitresses can't work from home... but a lot of folks can and will (be forced to)... and there will be a great many less waitresses and cosmetic surgeons making a living. What are we going to do with all that empty office, retail, and industrial space? What about the support industries surrounding those empty offices (dry cleaning, dog walking, whatever...)? What is the value of the mortgages on those properties? What about the balance sheet of the banks holding that paper?
- Commuter schools. All those exclusive private schools with the drop off/pick up line that mom has to drive to/from/to/from every day? The oil isn't there to support that behavior. Commuter colleges? Same drill.
- Heating. We are going to be doing a great less of it with 25% less Oil. States like Florida that depend on bunker oil for electricity generation are going to suffer rolling blackouts unless they can build and supply coal fired or nuclear power plants. Muhammad Ali said: "Your hands can't hit what your eyes can't see. Float like a butterfly, sting like a bee"; well, "power plants can't burn what they can't see, to generate electricity for your A.C".
- Unemployment. Industries and financial services are going to get CRUSHED.
- Tax revenues would "sh*t the bed". That's a technical term for a severe contraction in tax receipts. Social Security taxes, sales taxes (remember gasoline is a HUGE collector of sales taxes; less gas = less taxes unless the price rise offsets the volume lost), property taxes (who is going to pay taxes on a property they can't get to?) would all go down like a rock in a pond. Considering the fiscal status of the various state and local governments, I see a number of pensions that would be defaulted upon.
- Restaurant and retail traffic will decline precipitously.
- I should think that large homes requiring extensive ongoing maintenance and landscaping will have no resale value. That brings us back to banking...
- Many of those muffler, brake, tire, and car repair eye-soars you see along every main road in every little town in America are going to go DARK - and these properties will get even uglier (if that's possible).
- People will migrate slowly southward. The northeast U.S. relies on heating oil a great deal. That will not turn out so hot, no pun intended.
- The current trucking food distribution model will NOT survive this. Take from that what you will.
- The American people will blame their political leadership. This is absurd, but somebody will have to hang. Maybe literally.
I woud welcome any other economic/social/financial outcomes that don't mention roving hoards of looters eating people as I am putting together a presentation on this and would welcome any intelligent input. If you disagree about declining Oil imports, please save it for a near future post. This post ASSUMES that the rate of decline continues and accelerates slightly over the next 5 years. IF you disagree with my analysis GIVEN THAT INPUT (or lack thereof) please comment accordingly. I could use the idea flow.