Something doesn’t add up

Thomas Jeffers & Company, LLC

It is estimated that over 600 million passenger cars roam the planet in 2006. For the moment let’s forget about the number of trucks and aircraft and work with these numbers: freight consumes 30% of liquid fuels, and aviation 10%.

It is “conservatively” estimated that by 2030 (data from Exxon CEO Lee Raymond, November 4, 2004, American Chamber of Commerce) Asia will have 400 million cars, North America 300 million, Europe 300 million, South America 150 million and Africa 50 million. In other words, we are going to double the world automobile fleet in 23 years. Let’s assume that freight and aviation growth is proportionate.

Currently, the 2006 world auto, freight, and aviation fleet, consumes about 90% of the world’s daily liquid petroleum production of 84 million+ barrels.

Please! Don’t bother me with fuel efficiency gains (product cycle is 5 years minimum in autos). Everything being equal, we would need to maintain production, without any declines (currently between 4% and 6%) in the existing oil fields, and then discover, develop, and produce 10 NEW SAUDI ARABIAS IN THE NEXT 23 YEARS – A NEW SAUDI ARABIA EVERY 2.3 YEARS!!! Mind you, that is just 5% per year growth in the Automobile industry. Considering Asia’s economies are “projected’ (by whom?) to grow, on average, over 6% per year until 2030, this is not an outlandish assumption. Except for one small problem. It is not possible.

Forget CO2 emissions. Forget inadequate supplies of raw materials such as iron, copper, zink, and rubber. Forget paving over a substantial portion of the world’s remaining arable land for roads, highways, and parking lots. We don’t have to go there. This forecast would have the world consuming over 700 billion barrels of oil during the decade following 2030, 600 or so billion between 2020 and the end of that decade, and 450 billion or so between 2007 and 2019. Well, that ain’t gonna happen, UNDER ANY CIRCUMSTANCE.

But if you read the pasture muffins being promulgated by the various auto manufactures as to their future growth prospects – well, this is what they are telling their investors.

Want to see me do the same trick with housing numbers? They don’t add up, either.

What does it all mean? A great deal, I’m afraid.

Greg Jeffers

Menatt (at) yahoo (dot) com