On Wednesday, DB had a conference call to discuss the report. The first two questioners were an Exxon Mobil (XOM) executive and a Treasury Department official. In other words, The-Powers-That-Be were paying attention. Why the fuss? Well, it was a little like the Pope saying there may not be a God after all. $150 oil by 2010.


Heresy? Not so fast. DB, not wanting to offend clients’ comfort zones, modestly suggested they were only playing with an idea, not making a prediction. A DB analyst ended the call by saying that maybe their next intellectual excursion would explore the reasons why the oil price might drop to $30.

DB made some good points that might be news to the mainstream but probably not to my readers:

1. The U.S. economy wrung a lot of oil-intensiveness out during the ’70s oil shock when it took oil out of electricity generation and U.S. industry became much more oil-efficient. Those savings cannot be replicated no matter how high the oil price goes.

2. On the other hand, U.S. transportation is vastly inefficient and thus can and will reduce oil use as prices rise. This is the most significant available source of oil savings in the OECD world. Of course, DB probably meant to say “cars” rather than “transport”, since trucks which use 1/3rd of transport fuel do not have the same savings potential that cars do.