A useful analysis of world oil markets and jet fuels

Rand Corporation, a non-profit US research and analysis organization, last week published a report for the US Air Force on world oil markets, pricing, and peak oil that seems to GallonDaily to be of value to other large users of petroleum products.

According to Rand, no one can predict where petroleum prices are headed over the next few decades. Controlling costs should include such actions as improving fuel efficiency, investing in technologies that achieve necessary objectives with less energy, adopting less fuel-intensive methods of operation, and eliminating unnecessary fuel use. Rand also observes that even the US Air Force is much too small to have a significant influence on the world oil market.

Contrary to what some in the industry sometimes claim, Rand states that the question is not whether but when the peak in oil production comes about. Rand estimates that it will be sometime between 2030 and 2050 and that it is more likely to be in the form of a plateau that continues for some decades before slowly declining than the sharp peak that some have projected. Consumer prices are likely to rise but the prices paid to producers may fall.

In its conclusions, Rand seems to question why the US Air Force is trialling alternative fuels. On a purely economic basis the conclusions may be justified but GallonDaily is inclined to the view that it is sometimes useful for government agencies to do more than operate in a purely business-like fashion. US military involvement in many fields has historically helped to stimulate economic development and new product manufacturing.  We see US military involvement in renewable fuels as being something that is likely to bring similar benefit to the US economy.

An abstract of the report, with a link to the full report, can be found at http://www.rand.org/pubs/technical_reports/TR1144z1.html

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