Medium-term, is this another 80's oil bubble?

No, not if you define medium-term as less than 10 years.

The oil crisis of 1973-79 was caused by OPEC - the US had lost it's ability to increase oil production (as "swing-producer"), and OPEC tried to corner the market. Unfortunately for them, they tried too early - when consumption fell, and non-OPEC production increased, OPEC couldn't reduce production sufficiently to support prices (it's interesting to note that OPEC tried before, in 1967, to choke off supplies, and was completely unsuccessful - it was much too early).

With the benefit of hindsight we know that the 70's oil crises were "geo-political", but at the time that wasn't so clear - even where this was recognized, it was assumed that very high prices would continue (which they would have, had OPEC been able to manage it). Paradoxically, the 70's "energy crisis" caused an influx of new supply, and a great deal of efficiency and conservation, precisely because people thought this was a long-term problem. If everyone had thought prices would crash in the 80's, no one would have acted as decisively as they did.
As a result, many people got burned. Oil companies invested in projects that didn't pay off. Individuals "relocalized" and forewent children, in anticipation of resource poverty that never arrived.

It's simply not realistic to dismiss the question "what about another 80's style bubble and crash?" by saying that people should have known back then that things weren't that bad, and arguments that "this time is different" need decent proof.

On the other hand, I think it's clear that the current problem was caused by demand exceeding supply, starting very roughly in 2005, rather than primarily by 70's style top-down decisions by OPEC. Whether this is a classic commodity boom-bust cycle caused by lagging capital expenditures, or is caused by Peak Oil, it isn't going to be over quickly: large oil ventures take 5-10 years to take from the inception of exploration to discovery to production, and the oil services industry has been decimated by historically low oil prices in the last 20 years, and will have a hard time catching up to demand.

Now, we don't know if OPEC is contributing somewhat to this shortage, or if they're simply covering up their inability to meet demand, but there's very little question that they're pretty happy with prices above $70 (at minimum), and would defend them. These days it looks like they're happy with $100 oil, and would very likely defend that higher price level. The gradual loss of a surplus supply cushion means that OPEC would be successful in such a defense.

There is a real risk that it won't be over for 20 years: Peak Oil theory (which is explained here in a PDF), and the Export Land Model (as explained by Jeffrey Brown and "Khebab" in their blog) suggest that quantities of oil available to importers such as the US may fall quickly, accompanied by dramatic price increases. See figure 17 in the second website for a range of projected exports for the top 5 oil exporters - these 5 currently account for about 50% of all oil exports (this doesn't include smaller exporters, some of which, like Canada, are likely to increase exports, but these big exporters are important). The chart suggests that there is a real risk that oil exports by the biggest oil producers could drop in half by about 2019.

Here is a recent mainstream perspective.

We could also face a sudden loss off all oil exports from the Persian Gulf due to, say, someone bombing enrichment facilities in Iran, or civil insurrection in the region (monarchies aren't the most stable of governments).

What could be done?

Well, if US imports were to drop by 50% in 11 years that might reduce overall US oil consumption by 30% (we import 57% of consumption - about 11.6M bpd vs consumption of 20.2M). In 1978-1982 the US reduced it's oil consumption by 19% while growing slightly, for a reduction of about 4% per year. At that rate a 30% reduction would require 8 years. So, we could handle it, though possibly with stagnating GDP for some years.

If oil imports were to fall more quickly, people would at some point be ready for real emergency measures. Well, emergency measures could easily reduce consumption by 25% in 6 months by conservation (just make all highway lanes HOV, strictly enforced), and drilling (in ANWR and off the coasts) and large-scale CTL could both be done in 3 years under truly emergency conditions.
Many analysts project conditions that reflect a true emergency, and assume Business As Usual responses. That makes no sense.

On the other hand, none of these are fun scenarios. It's urgent that we, at a national and personal level, start planning ahead, and start reducing consumption ASAP, as well as trying to increase production.

What if China's buying power continues to rise versus that of the US?

That's likely to continue, but how large will the effect be? Keep in mind that Chinese consumers have a lot of alternatives for their buying power, and expensive oil is more expensive than substitutes everywhere, not just in the US. higher prices stop consumption, even in China. We see that China had to cave in and raise price controls, even before the olympics, which is something that they surely didn't want to do. Because of those price controls the effect on Chinese consumption was delayed, but I expect to happen just like anywhere else. Don't forget, much Chinese oil consumption is for diesel electrical generation - we have to think that's unlikely to continue for long in these volumes at these prices.

What about domestic production, which depends on when ANWR and OCS get opened up?

I suspect that ANWR, OCS, as well as CTL, could be done quickly (in very roughly 3 years) in a true emergency, in which environmental precautions are thrown to the wind, various processes are done in parallel, and cost is no object. Perhaps we'll continue to do our frog-boiling thing, but one way or another I think we'll reach a breaking point on domestic production, including CTL, which will both start these projects, and accelerate their development.

Here's an interesting take on OCS. It refers to an EIA study that says that there is quite a bit of oil (41B barrels) in the OCS that is already available to oil companies. That suggests that low oil prices prevented production in these areas in the past, and that scarce resources (rigs, manpower, etc) are now preventing oil production that is likely to be arrive eventually as the oil-services industry expands. The EIA indicates that there are another 18B that would are now legally unavailable, and that require high prices to be viable.

Aren't existing Alaska, onshore and existing offshore going to go down?

That's not at all guaranteed - I'm including new wells in old fields in "existing". Tertiary methods, especially CO2 injection, have a lot of promise. There's an enormous amount of oil to be extracted in the US. The Bakken alone has upwards of 200B bbls. Only about 4B are economic now, but that's a $30T incentive - there's a likelihood of more to be extracted there, with a significant chance of a great deal more.

Hasn't Hubbert's projection for the lower 48 been very accurate?

That's been exaggerated a bit. Keep in mind the domestic price controls before and during the price peaks, and the crash in prices immediately thereafter. Sure, drilling went up, but how much earlier, higher and longer-lived would that drilling increase have been if the domestic oil industry had received a strong and persistent price signal? Also, Hubbert was far from prescient: he made a similar projection for natural gas that was completely wrong (he projected a crash roughly in the 1980's, while NG production is still fairly stable).

how much do you think US production will decline in the 2010s?

I'm not sure. It will increase when Thunderhorse goes into production, and the EIA projects an substantial increase in the medium (though we don't trust EIA projections much). What I do know is that as discussed above there is a lot of oil to be extracted in the US (a lot of decent prospects are known and just waiting to be exploited), and that the drilling services industry will ramp up with time. I would be very surprised if production fell, and I expect at least a small increase.

Didn't the 1978-1982 period included declining oil prices in the last couple of years?

If prices had been higher there would have been an effect on both oil consumption and GDP - how much we don't know, but we have pretty good evidence that a 4% annual decline can be done without declining GDP.

Didn't we also have a much better trade balance?

Actually, if we exclude oil we have a pretty good balance right now - oil is the problem. I agree it's a big problem - right now we're selling the family silver and hocking our furniture to pay for it. OTOH, if oil exporters are sensible, and recycle petrodollars, we'll have some mix of stagnating domestic consumption (transferred to exports) and go into debt, but not suffer declining incomes.

Won't oil prices go far higher, in inflation-adjusted terms, in the 2010s?

I think current prices are the ceiling for several years, and that $200 oil is a maximum. Roughly 50% of world GDP has their currencies tied to the dollar (including the yen and yuan), and price signals will indeed work.

Don't efficiency increases get harder as you go along?

Not really. Telecommuting will have benefits for all, once we get past the cultural barriers (it's kind've like the Norsemen in Greenland who starved rather than eat fish). Carpooling is an inconvenience, but very, very cheap.

Don't hybrids cost thousands of dollars more per car?

The Honda Insight was cheap, and got 60-70MPG. The Prius (at $24k) is cheaper than the average US light vehicle (at $28k). The Volt will be below $30k easily, with volume production. NEV's can be $15K.

Didn't it take over 20 years for the US to improve by 34% in the 80's and 90'?

Keep in mind that this was in an era of low prices, with efficiency an afterthought. Now it's a high priority .

Won't the oil availability drop be too steep for orderly and timely adjustments?

Probably. The real question is how disruptive this will be. We know that there will be premature obsolescence for a lot of capital (like SUV's, and hopefully coal plants). I just think that a depression is not likely. It's a risk that our policymakers should be paying much, much more attention to, but not likely.

Isn't one of the reasons that the energy intensity of OECD economies has gone down is that energy intensive activities have migrated to less developed countries?

Keep in mind that the energy intensity of the whole world, and especially the "oil intensity" of the whole world, have increased at roughly the same rate. World GDP has been growing at 5% per year for the last several years while oil production has been flat. This is much more a problem of recycling petrodollars than it is of a lack of energy or oil.

What about Saudi Arabia - aren't their exports going to fall dramatically, due to increasing consumption and falling output?

Probably not, though it is a real risk. If we take a look at the best known analysis of this type we see: "Our middle case shows Saudi Arabia approaching zero net exports in 2031, within a range from 2024 to 2037." That's only 23 years away, and is entirely unrealistic: it doesn't take into account the differences between KSA and other producers (KSA is much, much more carefully managed from the top-down); it projects out current consumption growth without change; and it suggests that KSA wouldn't do anything to maintain exports even as it lost all export income.

Hubbert linearization is useful, but only as a preliminary guide - it can't be elevated to the status of supernatural authority. As a very good example, Hubbert's 1970's prediction for Natural Gas in the 80's was completely wrong: he projected that NG would fall off a cliff, while it has stayed very stable for another 30 years. The same criticism applies to the ELM model - it's just a preliminary, rough guide, and needs a great deal of finetuning.Look at his use of historical US production numbers without an acknowledgement of the problems with extending this analogy to the world: US price controls, and import competition. Look at how badly Hubbert's prediction for Natural Gas missed the mark.

KSA's per capita oil consumption is just behind the US's, so it's growth is likely to slow soon. A great expansion of consumption would mostly require industrial energy disintermediation by KSA, with continued net energy exports. In other words, they'd start refining oil, manufacturing fertilizer and smelting aluminum. Those things would be largely exported (or displace imports), so that oil & gas exports would fall, but that would reduce energy needed for those products elsewhere, so the net effect would not be to starve the rest of the world of energy.