A few items of note

Four short references that need to be in the record.

First the BBC notes that the first oil is now, a year late, being loaded onto a tanker from the Baku to Ceyhan oil pipeline. Although this is a marker in the step to a current 300 kbd supply, the first tanker is not getting all its oil from the pipeline

BP, which has a 30.1% stake in the project, said that while all the crude had come from the Caspian Sea, some had been held in its storage tankers.
So although this is the opening of a passage that circumvents Russian oil lines, I would not run around shouting Yipee, yet a while.

Secondly Chris at TOD:UK has posted a great piece on analyzing the Joint Energy Security of Supply document just put out in the UK. He shows that the initially optimistic view at the front of the document is not sustained if one drills down into it, and that my being encouraged by wind turbines and rape seed-laden fields is still not going to get the UK to the 10% sustainable level that is the current target.

In summary I think this report has failed in its objective to provide the market with future supply, demand and price information. The quantitative data presented is so optimistic to be virtually worthless with qualitative caveats that don't adequately describe the risk.
However, as he notes, although, as with most studies of future supplies, international competition for LNG and other supplies, usually ignored, will be a subject of next year's report.

Thirdly it seems that the BBC is joining FOX and CNN in running a movie on the problems of world oil. Unfortunately it is going to be on at 11:20 pm on Tuesday night, when even us jet-lagged travelers may find a little late, but if I can stay awake, I'll give you the idea.

And finally, as was noted in the comments just below by totoneila Aletta is the first tropical storm in our parts this season, although it is in the Eastern Pacific and at the lower end of Mexico.

BP says the oil in storage came from the Caspian. If it came from the Caspian, surely it came via the pipeline?
I am sure that it did, but note that however cheap the production costs, the transportation costs are exhorbitant compared to producing oil close to the market. They will need to build refineries in the central asian area, and their is substantial geo-political risk. It ain't gonna be cheap.
Here's the explanation, if you're interested. Several months ago, the BTC company bought one cargo of Azeri Light from AIOC (operator of the fields in the Caspian). The cargo was loaded at Supsa in Georgia (Black Sea terminal of the Azerbaijan/Georgia Western Export Pipeline), shipped through the Bosphorus and discharged at Ceyhan. It was used to fill the storage tanks at the BTC export terminal and to commission things like the metering system, off-spec tankage, open and closed drains, dewatering systems, ESD/C&I and so on, and to provide some ullage for normal operations.

Now the pipeline proper is tested, full of oil, dewatered and flowing, and there will soon be enough oil in storage at Ceyhan for an export cargo. This cargo will inevitably include some of the initial charge of oil that was used to commission the terminal facilities.

This was done to shave a few days or weeks off the commissioning schedule - otherwise they would just be starting in on commissioning Ceyhan round about now. Perfectly standard good engineering practice, not a deep dark dirty secret (in fact I think there was a press release at the time), nothing to see here, move along.

In reply to OilManBob - why build refineries in Central Asia when the local product market is already well supplied? The economic growth, and demand growth, is in the EU and Turkey. The Azeri Light stream will mostly be sold into refineries in the Mediterranean basin. It's similar in quality to Brent, and it will command a slight effective premium because it doesn't have to be shipped all the way from Sullom Voe. I guess it will also displace some of what is coming north through Suez.

The Israelis see Ceyhan as a great way to diversify their energy supply from a country they enjoy good relations with. There's even talk of a spur pipeline, though personally I don't see how that could be economic - they can just use tankers like everyone else.

Sure, BTC was expensive, but it's finished now. The partner companies committed to it when oil was about $30 a barrel. I doubt if they're complaining :)

Nice pipeline you got there. Be a shame if something happened to it.
There's that John Barnes novel Mother of Storms where after a certain point in global warming Pacific hurricanes become able to cross the isthmus of Tehuantepec into the Gulf of Mexico.
I love the description of the mechanics of Hurricane formation in that book.  Are you sure that those super hurricane-spawning huricanes are for real?
Re: "And as economies of developing countries like China and India continue to grow, it is predicted demand will rise by a further 50% by 2030."

I am getting sick and tired of this kind of statement. There are so many misconceptions in this that I don't know where to begin, but I'll just say a few things.

  • 2030 is unimaginably far in the future and the world will be dealing with peak oil long before then. China and India will be effected just like anyone else. Their growth, like that of the US, is not sustainable. This kind of statement is absurd. I can I mention the term "exponential function"?

  • Scapegoats are always convenient. Stephen Leep uses the term "Chindia" to describe how these growing Asian economies are the threat that will keep oil prices high going forward. This is yet another opportunity to say that the US uses 1/4th of the world's daily consumption. When you start talking about the growing quantity demanded and consumption in Asia, you are violating the wise saying of Jesus from the Sermon on the Mount, as given in the gnostic Gospel of Thomas.
    Coptic version: Jesus said, "You see the mote in your brother's eye, but you do not see the beam in your own eye. When you cast the beam out of your own eye, then you will see clearly to cast the mote from your brother's eye."
    The obvious mote being that America is the clearest danger to world overconsumption of fossil fuels. This is just so obvious but so many people fail to consider it. It needs to be repeated time and time again. Not to mention the never ending thirst of the US military so they can conduct successful wars like those in Iraq and Afghanistan.

I find these statements--which I see everywhere--that "Chindia" is the source of all our supply problems duplicitous, hypocritical and just plain wrong. This is like politicians talking about E85 or windfall profits or .... I could go on, there's no dearth of nonsense about this subject.

Slight correction, I meant "Stephen Leeb" (typo), author of The Coming Economic Collapse : How You Can Thrive When Oil Costs $200 a Barrel.

Maybe I should of used the <rant> tag above but I'll tell you, this level of hypocrisy makes me crazy, blaming demand in China and India for the lack of global excess capacity when the US is not embarked in any kind of serious efforts to curb consumption and powerdown. E85? As Robert said the other day, give me a break.

that's actually a Gnostic version written in Coptic and discovered at Naq Hammuradi in Egypt, but what the hey, its still too truthful to be anything but heresy. The rich have always acted like anyone else is getting a slice of the pie is heresy.
   The only real answer is for all of us to start acting responsibly, but this is unlikely to happen quickly. But, take heart. Human Sacrifice was pretty common only a couple of thousand years ago, and slavery was legal in all the world just a couple of hundred years ago. The sum total of human good exists because people decided to act altruisticially and it all adds up.
Good thoughts.  We will all have to rediscover community and working together to get through PO.  

We need to face the fact that no matter what we do, the world will consume every barrel of oil it can get.  If America stopped importing oil tomorrow, the rest of the world would be happy to use it all.  TODers need to realize this.  All the oil on the planet will be consumed, no matter what.  The world course is on full automatic and we don't know where it is going.

Thanks for injecting reality into the discussion.
If America stopped importing oil tomorrow, the rest of the world would be happy to use it all.

My European point of view is that our high gasoline taxes have reduced our imports thereby allowing the USA to 'use it all'. Maybe it's your turn to reduce consumption?

Is "Cry me a river" a correct expression?

The only ones who can claim to have a moral need for using more oil are the poor and developing countries. They need this compact and easy to handle energy source since their ability to handle more advanced technology is limited.

Yes, it is our turn to reduce consumption.  The situation reminds me of what Winston Churchill said:  "America will do the right thing... after its tried everything else".  It will be one person and one gallon at a time over here.  Only higher prices will move us to act.
I hope this slide illustrates well the situation (click for a bigger size):

If you are interested in the rest of the slides, they come from a presentation AEREN (the organization behind the Spanish website Crisis Energética) gave in the Seminar of the Hydrocarbon Age organized by ASPO Portugal early this May: Energy in Spain: Renewables, opportunities and threats (pdf file, 1,6MB).

This is a neat chart, but two bars are labeled "coal" and there is no petroleum.  Is one of the coals really "petroleum"?  
I'll take a wild guess and say the black bar is 'oil'...
But look at China.
I think your guess is wrong. Looking at Chinese consumption the black bar has to be coal and the other "coal" is really petroleum.
Sorry for thre unwanted "contest", coal is black, oil is grey...
I was very surprised at per capita energy use in China.  Already over half of EU use, and many times Indian use (x6 ?).

About half of Chinese GDP goes to capital investment, and an even higher % of energy use I suspect (concrete production, steel making, moving construction materials around).

When (not if) Chinese growth slows down and capital investment drops, I wonder if their energy use will decline as well ?

Some of their investments are renewable or will reduce energy demand in the future, several large hydro projects, 17 subway lines in Shanghai, better railroads. etc.

Sorry, Chinese energy consumption is about half of "other" Europe. and perhaps between a fourth of "Europe 15" per capita energy consumption.
China is the world's fabricator. So, much of their energy consumption goes into products exported to the rest of the world - the energy consumption consumed by them for internal gdp is much lower. India, otoh, exports software and services instead of hardware, which do not require nearly as much energy. Actual internal energy consumption pp of these two countries might be fairly similar.
Japan also exports a lot of fabricated products, not least cars. They too are probably exporting a substantial amount of energy.

The us, otoh, is consuming substantially more of the world's energy supply than it appears.

High Oil Prices not Hurting World Economy

Interesting note that came out last Wednesday........

OECD Secretary-General Donald Johnston said on Wednesday it was surprising that high oil prices had not hurt the world economy.

"It's quite remarkable that we can have prices so high without having really harmful consequences for the economy," he told RFI radio.

"Growth exists everywhere in the world today. It seems, obviously, that there's a certain impact on growth (from high oil prices) but it's difficult to measure because it's not like the 1980s, for there is less dependency on this product than before," he added.

The Organisation for Economic Cooperation and Development said on Tuesday it expected growth in the 30 mostly industrialised economies of the OECD to expand 3.1 percent overall this year.

The way I see it, I think it's normal.

To stop growth, the system need a trigering event or a sharp increase in price of gas.  Price of gas has just increased on pace and steadily, giving the time for people, corporations and organizations to cope with the problem.

In many organisation I work with, it was only a matter of deciding to increase the rate of mileage pay for trips.  It amounted to a very low percentage of current revenue or expenses.

The price increase of gas is shown in agricultural and heavy industries nevertheless.  I suspect that in US the impact is of a lesser extend to corn farm because of current subsidizing.  In Canada we have reports of some family (or buisiness) farms barely breaking even or down right closing. Main reason : Increase in fuel, pesticides, fertilizers and transport.

Forestry is also a big chunk of our economy. We see that many machine owners were waiting to the least second to sign deal that would not include a fuel surcharge mechanism.  Large logging and sawmil companies usually negociate fuel prices for each quarter and provide forestry contractors with the needed fuel (a very large quantity indeed).

Big sawmill company are able to run large deficit and getting somewhat easy financing or selling chunk of assets.  They have already closed some sawmills and paper mills.  By contracting loans, they are able to sell at a loss and spending more, thus increasing growth.

Until fall, if something scary occurs in the finance world, I dont see growth stoping to shortly.

You also have to take into account the Russian Ruble and the june 8th opening of the oil bourse in Russia to see what the outcome will be.  I think Russia will be going trough with this.  

As you all know, problems dont arise alone and when something can go wrong, it will.

I think the economy has been hurt by the high price of oil. Inflation is significant but it is not being reported by the MSM. They refer to the fraudulent "core inflation rate" which is becoming more and more an absurdity.  A squeeze of higher energy prices and the resulting inflation is being absorbed by a populace that is ever closer to backruptcy, insane debt levels, job loss, outsourcing and globalization. Lets not forget the rampant cost of health care and the housing bubble starting to blow. I think that the next few years will be very interesting.
"I think the economy has been hurt by the high price of oil."

I would add to that the massive consolidation of American businesses everywhere across this nation, be it mergers and aAcquisitions or internal consolidations of people and resources.  Anything to NOT RAISE PRICES...that is the mantra and it is wearing us thin.

Given that the price of oil is the same around the world, an increase in oil price should just create inflation. Basically, everybody prices will go up, with exporters 'feeling' the pain a little bit more.  This is exactly what we are seeing right now.  
Did you mean importers (of oil) rather than exporters?
I'm sorry, I poorly expressed myself, what I meant to say is that all manufacturers will have to deal with the extra cost of oil.  This also put manufacturers that exports a significant portion of their goods as a slight disadvantage.

Very slight since shipping costs are often a small percentage of a good price.

My work allows me to see that the proportion of invoices sent from suppliers to customers with a extra 'fuel/freight' surcharge as increase significantly.  I guess those suppliers are tired to swallow those costs and try to pass this up the food chain.

The actual OECD report sounds more cautious than the media reports:


Remember the OECD is talking about its own projection, which includes some fairly benign inflation.  That would assume stable or declining oil prices.

So on its face, this report is contradicting itself in more than one dimension.  Which is not unusual for a government report or statement - but the media usually accepts at face value what is spoon fed to it.

Also consider that GDP is a measure that includes, for the US, was military spending in Iraqisthan.  Does the increase in GDP caused by bombs dropped on Iraq or paid to Iraqi 'contract workers' help the average American - or to put it more bluntly - are we paid based on national GDP - or are US salaries even keeping up with the real level of inflation (and not the inflation rate used to compute the GDP)?

Even the government's own data shows that the average worker wage is not even keeping up with the government's official rate of inflation over the last few years.  Which means energy prices are having an aeffect - and will continue to do so.  A fact that will become clear when the fog of ME war disappears.

The oil exporters are seeing huge growth, so overall oil prices don't hurt the world economy at all. It just transfers the growth to the oil exporting countries. After energy production starts to drop there will be a real drop in economic activity. However, it can still be masked by monetary inflation.
Okay, I'll bite. In my mind that assumes one of two things.

First, oil exporters have an internal market capable of supporting the "growth," by which you mean consuption, I assume. Second, if the exporters internal markets cannot support such growth they will expend their new-found wealth by the consumption of imported goods.

Now, you may very well be right, but, because I am incredible stupid (just ask "oilrig medic"), I was hoping you might elaborate.

incredibly not incredible
Thanks for being there for me. In a world so full of itself, it's nice to know one can count on those so full of themselves as well.
I'm here for you jimbo...
to quote my good friend and old college classmate Dudley F.    " I may not be important but I'm all I think about".
So laugh and the world laughs with you, cry and they just think you.'re another Whiney White Man.
See TI's response below. It says what I meant much better. Most of the oil money just cycles right back into the world economy. The oil producers don't burn the money. They finance more oil production, spend on their domestic economy, and buy stocks and bonds. High oil prices may be bad for the US economy, but it isn't hurting Saudi Arabia or Russia.
Oil prices will not hurt economy per se. Overall physical energy is more important. The Chinese foreign trade growth of about 30% a year is the main factor driving the world economy now. The basis of the Chinese growth is rapidly (9% a year) increasing domestic coal production. The volume of the Chinese coal supply is so huge that it shows clearly in total growth of world energy supply. Also world natural gas is still growing. So is nuclear. And global oil suplly has not diminished yet.

Rising oil prices mean mostly income transfer between oil exporting and oil importing countries. And lot of that transferred income is flowing back to the oil importers.

In fact the Chinese energy input in the form of coal is now more important the Chinese oil imports. This means that China is a net exporter of energy in the form of manufactured goods. This shows as the huge positive trade balance of China and as the deficit of the US. So we see that, in fact, China is keeping energy prices down, not up.

China is also controlling its oil imports effectively. The most important reason for oil prices staying relatively stable in spite of declining growth of the world supply is China controlling its oil use and imports. This shows in the Chinese oil imports statistcs. The imports fluctuate heavily and these fluctuations counteract oil price fluctuations.

Very good points. Chinese April coal production up 19% on year before.
Hello Smekhovo,

That implies a lot of rookie coal miners--I certainly hope the Chinese leadership has required large amounts of mandatory safety training, and much more safety equipment and policies.  The Chinese coal miner injury & death rate is already terrible.

Bob Shaw in Phx,AZ  Are Humans Smarter than Yeast?

I read a letter in FT to the effect that China is internalizing massive debt because it faces increased commodity costs, but it needs to keep its exports cheap.  Don't know how true this is, but even if China has to raise prices, we might not be in a position to do much about it (more inflation?)
Most, if not all, commodity prices in China are state regulated. So market commodity prices don't show directly in export pricing, but rather as internal debt etc. Coal prices are also state controlled and bulk of it is produced by state coal companies. China is doing huge investments in coal mining and coal power plants but these do not show in coal or electricity price - coal is subsidized. This is a risk.
(OT) The right wing is disgracing itself by (among other things) claiming that the price of oil is largely being driven by speculators and investors moving into commodities. Here's another example of a claim that there is an oil bubble going on. So here's a question for the rest of y'all: how the hell can a bubble build up in oil? Oil futures trating stops on the 21st of each month and whoever holds the contracts then arranges to receive. So oil should be the kind of bubble that should pop once a month, not something that can build long term, unless these speculators have tank space for all the oil they're buying.

So, is there a mechanism I am missing that would allow for an oil bubble to happen?

The price of natural gas has dropped because of demand destruction. Most nitrogen fertilizer plants, and other manufacturers, who use natural gas as a feedstock, have moved offshore to countries where the price of natural gas is much lower.

Natural gas production peaked in 1973 and then reached a secondary but lower peak in 2001. Since 2001 natural gas production in the US has dropped by about seven percent and by over sixteen percent since 1973.

One cannot compare natural gas to oil because natural gas prices depend on local demand and local production while oil prices are determined by worldwide production and demand. When world oil production drops by sixteen percent I doubt that will not cause any bubble to burst. Well, unless of course that there is a worldwide depression, which is entirely possible. But a world at war is even more possible when oil production drops by that amount.

Roughly 20% of US natural gas is reinjected to help maintain pressure in oil fields.  Much of this is in Alaska, but most is in accessible locations.

There will come a point where any further oil extraction will be written off and that reinjected gas will be tapped.

There must be a large amount of NG stored this way.

An interesting choice, oil or NG ?

Both of course, first the oil, then the NG.
But just when do you cut off the trickle of oil and go after the reinjected gas ?

Because once pressure drops the oil will slow dramatically.

20% of US production is a LOT of gas in storage, waitng for the oil trickle to decline till ... ?

IMNSHO, the right has been a disgrace since Reagan took down the solar panels from the roof of the White House. Granted, they were a symbolic gesture -- he also dismantled all the renewable baby-step subsidies put in place by his predecessor.

But, you are correct, it is OT.

I was an English Literature major at a Catholic university, so fell free to discount my speculations, but, I've over 30 years of experience in the oil patch and read extensively, but, here goes:
1. most of the oil production profits and much of the downstream profits goes to national governments.In Saudi the king gets 3/4ths of the money received from production, the north sea producers pay 50% as royalties to the Governments of the "owners" of the concessions (British Government, Norwegian, ect) plus huge import and excise taxes, the Chinese own all of the refining and distribution as well as their own substantial production, the Russians have just renationalized their oil producers and distributors, and even in the United States about $1.00 a gallon is paid in excise taxes, ad valorem and income taxes by the oil companies. So it is in the interest of all these soveriegn goverments to have high prices. A windfall profits tax will fall on the backs of consumers and independent producers and not serve to lower the price of oil but, instead will raise all of our tax burden. Anyone who believes in  a tax to lower prices isbetter off praying to Santa or the Tooth Fairy.
 2. The "right wing" is just generating more smoke and mirrors . Get real information from industry publications in order to understand the truth. Follow the money! Companies and producers sell their oil in advance to guarantee a set price (hence futures), and the international banks maintain the market so they can seperate the comodity speculators from their money. Guessing which way prices will go is rank speculation since when you don't  understand or control the market. Why do you think oil producers sell futures ?
  1. a lot of new speculators are in the markets. Hedge funds have had  1000% growth in the last 5 years and they take high risks with your money in order to generate big profits. They produce no good or real service. The geopolitical risk in oil production and transportation has hugely increased costs through increased insurance and trnsportation risks (how much would you charge to insure a tanker going to Iran for?, Nigeria?).  
  2. Peak oil is here and quite real. There is less light, sweet crude being produced all the time, and it costs more money all the time.
   That doesn't mean I think the Majors aren't making a pile of money. They quite obviously are, and lots of people are feeling the price squeeze. But follow the money, the facts are enough to make anyone into an anarchist revolutionary.    
Assets under management of hedge funds grow at over 30% per year, but their average return in 2005 was less than 6%. Most hedge fund managers are not like Soros or Simons, except in the fees they charge.
Assets grow by 30%, but the ROI is less than 6%" This is exactly correct, and it is because too much money is chasing too little real profit. Most investors are sheep and rush to put their money in what was profitable a couple of years ago rather than examining the safety and profitability of their current investments. Right now hedge funds doing the commodity speculation thing is just like the purchase and sale of arcane derivatives before the savings and loan crisis during the reign of King George I. The collapse in the last month is just the sheep getting shorn. Unfortunately once again the pension fund managers and other stupid kids of the idle rich are gambling with all our money. The bubble in comodities is real and the real powers of the world are going to reap what others have blindly entrusted to the hedge fund operators. That's why oil and gas futures are for chumps unless you can take delivery and use the stuff yourself.
A recent WSJ story implies if anything, that hedge funds are betting heavily on energy prices falling (that is if exclude the most well know and sucessful bulls like Pickens and Jones/Rainwater.) The bearish view from hedge funds is indicated by the usual bearish talk on the Bloomberg and CNBC from fund managers (again when they don't have Pickens and a few other doomers on.)

So my conclusion is that we are in a kind of anti-bubble for energy prices - where prices could explode to the upside with the smallest of problems.  You may mark my post and even ridicule me at year end if a crisis comes and goes - but the price of oil never exceeds its recent high of $75.

As far as short term trading though - yes, the big guys usually win as the expense of the little guys on margin.

To answer my own question, a hedge fund manager can roll over futures by selling his contracts for this month and immediately buying contracts for the next. THe price difference should be relatively small. Still, that does put major downward pressure on speculative bubbles, since on the 21st the contracts always end up in the hands of people who actually want this oil.

And it means that with a NYMEX subscription, which some of you have, you can spot this pattern on the last week of each month (i.e. 15th to the 21st) of a sell off of this month's contracts and a buy-in of the next. So if there is a speculative bubble, it is easy to detect.

Since this comment is long, I'll write it as a new comment.

Solar1 said "If America stopped importing oil tomorrow, the rest of the world would be happy to use it all" and BrianT said "Thanks for injecting reality into the discussion".

The usual Jevon's Paradox argument. However, if oil on the world market were priced realistically, various countries (yes, even China) would be forced to regard it as the precious, scarce resource is it. With oil prices well above $100/barrel, efficiency and conversation becomes necessary everywhere. Although I agree with the comment that eventually humankind will use all of it, every last extractible drop, it is a matter of the timeframe and price. At current prices, Jevon's Paradox looks like a strong argument but weakens with much higher energy costs.

Furthermore, the US should be out front on the issue of reducing consumption and wield whatever sway we've got left encouraging others to do the same. The same reasoning holds for climate change. As long as American profligacy continues, other nations will feel encouraged to follow similar policies. A truly effective global policy would label countries as wasteful consumers of fossil fuels or emitters of CO2. This is the idea behind putting a price on Carbon, CO2 credits, etc. Sanctions could be imposed. Generally speaking, this is one pathway toward powering down and encouraging alternative energy. There are many obstacles including the fact that energy prices, especially transportation liquid fuels, are subsidized in so many countries. Everywhere we find that the real price of food & energy, not to mention other commodities, contains hidden costs, which economists call externalities.

An economic side-effect. Externalities are costs or benefits arising from an economic activity that affect somebody other than the people engaged in the economic activity and are not reflected fully in PRICES. For instance, smoke pumped out by a factory may impose clean-up costs on nearby residents; bees kept to produce honey may pollinate plants belonging to a nearby farmer, thus boosting his crop. Because these costs and benefits do not form part of the calculations of the people deciding whether to go ahead with the economic activity they are a form of MARKET FAILURE, since the amount of the activity carried out if left to the free market will be an inefficient use of resources. If the externality is beneficial, the market will provide too little; if it is a cost, the market will supply too much.

Again, we're talking about costs and a significant market failure, especially for light sweet crude. My proposed solution may overly idealistic but it's no more so than Jeffrey's (westexas) suggestion about energy taxes replacing the payroll tax. Radical problems require radical From the Wikipedia article as the paradox relates to Peak Oil.

Also, this principle is often referenced in conjunction with Peak oil, to show why conservation of oil will not slow the arrival or the effects of peak oil. However, a key part of Jevons Paradox assumes a steady supply of a given resource. Under this principle, demand increases after the price came down due to a reduction in demand. Starting with a significant reduction in supply however (as in the case of Peak Oil), prices will go up, requiring an equally significant reduction in demand from increased efficiency just to maintain the status quo of price and therefore consumption.
So, it's not as straightforward as it might seem.

PS -- Please spare me the lecture on the bias in some Wikipedia articles. I cite them when what they contain seems reasonably accurate to me.

I mentioned it previously,but compared to the USA, China produces 2.7 times the GDP for every barrel imported. So presently, China has an increased ability to grow the economy even if prices increase (compared to the USA). I think what is going to happen is the USA will be conserving greatly because the USA will not have a choice (will lose the bidding war).  
Predominantly production [China} versus prodominnatly consumption [U.S.A.] along with a whole lot of muscle power in the production side of China.

Trips to the mall or even commuting to work do not generate GDP. I am not certain what this means other than that a very large percentange of U.S. energy comsumption is in this sence discretionary or at least non productive.

As long a Americans are willing to borrow and spend [and the rest of the world is willing to save and lend] the U.S.A. can probably "outbid" enough of the productive use of oil to get all our voracious appetites demand. If / when that willingness ends ... well it won't exactly be "when the SHTF," but for a lot of Americans it may smell that way.

Good point. I know I am being redundant but I get the feeling that many who are knowledgeable about peak oil forget that oil depletion is occurring alongside a major shift in wealth and economic power from the USA to Asia (mainly China). You're right- China produces and the USA consumes. You cannot consume your way up the ladder, only down the ladder.