The Economics of Peak Oil

[4dsc]

http://www.powerswitch.org.uk/portal/index.php?option=content&task=view&id=660&Itemid=2

Check out the only two presented scenario's in this article..

An analysis which is being used by the Canadian Imperial Bank of Commerce looks at the potential oil supply shortfall and what price would be needed to close the projected shortfall by destroying demand. They estimate the supply shortfall increasing from about one million barrels a day (b/d) in 2006, which they believe can be closed by oil prices rising to around $60 a barrel, to 2.8 mb/d the year after, when oil will rise to $70. In 2008 they have oil at $80, in 2009 they predict $90 oil, and 2010 oil rises to around $100 a barrel. This would probably result in a gradual slowdown in the global economy as it slips into major recession in 2008 or 2009.

Either way, the result is recession.

[Tux]

1. And

Eventualy depression until we can find a renewable energy source to power our technology.

[brokensymmetry]

2. And those are the good times.

Later, depletion accelerates. Later, we transition from a recession to a global depression - with an open question of whether it will end. And then there is the little issue of the reversion of the global population from the present level to a sustainable level one third of today's.

The really sad thing - there are those who see a future more bleak than the one I see.

[4dsc]

5. Answer to your question and its not good

http://www.powerswitch.org.uk/portal/index.php?option=content&task=view&id=655&Itemid=2

Here's another fine article you'll love!! Right to the point without all the fillers..

OIL and FOOD, INFASTRUCTURE and INTERDEPENDENCIES.

The Worlds' population is now around 6.5 Billion. This was only made possible by fossil fuel operated means of production. In order to grow the great quantities of food necessary to support this many bodies, large-scale distribution, automation, mechanization and co-ordination of countless systems is required. The sophisticated connectivity of modern society makes it possible for the division of labour and mass food production.

This also makes it very fragile.

Moreover, costlier energy will exacerbate our already-worsening water problems by making it costlier to purify and recycle contaminated water and to drill for, pump, and transport ground water.

Peak Oil will severely disrupt our food growing capacity and means of distribution; we will be facing chaos and mass starvation of hundreds of millions worldwide.

The power grid is at risk. If it goes down for any significant period of time (weeks or months), the resulting chaos and economic collapse would ensure our demise as a modern civilization.

International trade will drop to a fraction of current levels. After all, when the fractional banking system and means of payments dissolves, how will shipping companies get paid?....

How can their ships get refuelled and maintained when distribution fails? ...

Where can they get repair parts and tools when automated factories fail?....

Who will buy the products being shipped when most modern economies fail? ....

What will their employees do when they don't get paid?.......

[Ilsa]

3. And I love the disclaimer at the end...

Ask any three economists a question and you'll get at least four answers.

Thanks for this find. My husband's company does some contract work with CIBC, so I emailed this to him.

[Renew Deal]

4. It would suck if such a recession hit a Democratic president.

Because it would be largely the fault of the republicans.

[TreasonousBastard]

6. The human species is remarkably resilient...

and we will undoubtedly find a way to survive without oil, although it may not be pleasant for a while.

Anyway, T. Boone Pickens has weighed in already about the supply and demand issues over oil, and it looks like we're in for interesting times.

Myself, I wouldn't be a bit surprised if we eventually saw a fantastic boom when the new industries replacing oil grow. Just how eventually is the question.

[prodigal_green]

7. Unfortunately

that "boom" will be heard in the far distance since this country has absolutely no interest in developing those technologies. We survived hundreds of thousands of years without oil, we'll get by after. By "we" I mean the human species. I doubt those of us in industrialized nations will get let off very easily though.

[TreasonousBastard]

8. Rockefeller, Ford, Watson/Gates...

cars, airplanes and computers became important in the lifetimes of many still living right now, and it was all small companies that grew into the giants we now have. It goes back to the first Green Revolution that proved Malthus wrong.

We may not seem to be interested, but when the opportunity arises, there are thousands more like Wozniak working in their garages and no matter how retrograde Shrub and his puppetmasters may be, they'll find a need and fill it.

No, I am not Pollyanna, and the problems we have now have never been seen in the past, but we will invent our way out of them.

And invent our way into new ones, since we still haven't changed our basic nature.

[prodigal_green]

12. I'm sure the technology will develop, just not in the United States

Too many oil interests are given preferential treatment. Japan has the patent on the current hybrid technology, something which, in an earlier time would have been developed in the United States. Our anti-science, anti-environment culture deadens this kind of invention and innovation now.

[TreasonousBastard]

13. Oh, yeah, there's that...

we still haven't completely lost our penchant for Yankee ingenuity, but there's no question that Europe and Asia are racing far ahead of us technologically now.

Until we started getting pissy about foreign student visas after 9/11, most of our graduate engineering students were foreign, and our kids haven't moved in to fill the gaps. Even Iran is building new technical universities in Qum, but are we? Nope, we just refuse to let Iranian scientists show their papers here. And, US patents are down, while everyone else's are up.

Curious how attitudes have changed. When Sputnik went up, the cry was to get everyone involved in science and technology. The new Airbus, while not nearly as spectacular as Sputnik, just gets yawns and derision.

But, Jesus is getting back into government, so everything must be OK.

[prodigal_green]

14. when I was in Junior High

we had two math periods per day (what a pain!). Science was required for four years of high school too. I don't know if I agree completely with Thomas Friedman that the world is flat, but it is getting a lot less hilly with regards to technological invention/innovation.

[TreasonousBastard]

15. High School back in the 60s...

it was a Lutheran High school, but most were pretty much the same--

The academic (college-bound) curricula included Biology, Chemistry, and Physics, with Algebra, Geometry and Trig required. There were several Senior electives that most of us took.

When I went to City College (it was free back then-- those were the days) at Baruch anyone who hadn't taken advanced algebra in high school had to take remedial math because mathematics of finance and stat courses were pretty rough.

Several years ago I ran into someone from the old neighborhood who said she taught at Baruch (which had since become an independant college).

"What do you teach?"

"Remedial math."

"What's that now?"

"Long division and fractions."

[NickB79]

16. LOL, the Green Revolution proved Malthus wrong?

The Green Revolution is highly dependant on oil and natural-gas-based fertilizers, pesticides, herbicides, irrigation and fuel to maintain high yields. If oil supplies decline as much as is predicted, many farmers that took advantage of the Green Revolution will see their yields decline, even as populations continue to grow.

The Green Revolution didn't prove Malthus wrong; it simply bought us a little more time before an even bigger population crash occurs.

[TreasonousBastard]

19. Wrong Green Revolution...

try one a bit further back when there were no tractors.

[NickB79]

20. Which "Green Revolution" are you speaking of?

All references I've ever seen for the Green Revolution refer to the one that began in the 1940's and 50's. Was there a pre-20th century Green Revolution I'm unaware of?

[TreasonousBastard]

22. Yeah, there was, but...

I can't find any references to it being called that. Probably somebody used the term coined in the '60s for the advances in agriculture and land use reforms starting back in the 18th century that increased food production enormously. And proved Malthus wrong about not being able to feed a larger population.

Anyway, for some reason, I always think back to the 18th century when I hear the term, and forget that it was coined for the present, largely Third World, increase in agriculture.

And, yeah, this latest Green Revolution is turning out to be no so hot after all for a lot of reasons.

[fedsron2us]

21. Is this the one you were talking about

http://www.bbc.co.uk/history/society_culture/industrialisation/agricultural_revolution_01.shtml

The population of England grew from 5.7 million in 1750 to 16.5 million in 1850 due to advances in agricultural practices such as improved crop rotation, the development of higher yielding cereal varieties and above all the use of nitrogen fixing plants such as clover. This occurred at precisely the time Thomas Malthus (1766-1834) was predicting widespread famine due to population growth. Hydrocarbons played virtually no part in this agricultural revolution. The sad fact is that this efficient and sustainable system of farming was undermined by floods of cheap imports from the rest of the world after the repeal of the Corn Laws in 1848 and the widespread adoption of chemical fertilisers during the 20th century. Nonetheless, it does pose a challenge to all those who insist that without cheap oil the planet can only support subsistence farming population levels.

edit for typos

[TreasonousBastard]

23. Yeah, that's the one.

[Democrats_win]

9. Here's part of why China's demand has been so high

The reason gasoil demand boomed was because of a large number of power brownouts throughout China. This caused generator usage for backup power to skyrocket, and the demand for diesel fuel to spike accordingly. But these are emergency power sources, and as power plants get built (most of which will be coal- or nuclear-fired), demand from this source could plummet. China will clearly be a factor in the world energy markets for many years to come, but we think that this period will be viewed as something of an aberration when we look back a few years hence.

http://www.rockymountainnews.com/drmn/business/article/0,1299,DRMN_4_3740884,00.html

What else has contributed to this "demand shock"? I would cite three remaining factors: 1. the decline in the U.S. dollar, 2. financial speculation and 3. the backwardation (a market condition in which a futures price is lower in the distant delivery months than in the near delivery months) in the futures markets and its impact on inventory positions. In reality, two of the three factors are financial and derive directly from the massive amount of monetary stimulus applied by the U.S. Federal Reserve from 2001 to 2003 - stimulus that, by the way, is now in reverse.

In summary, we do not think that oil prices will hold at their current levels for very long. Moreover, as we are perhaps in the early stages of a minor oil-induced slowdown in world growth, which could take some of the upward pressure off interest rates, this could bode well for stock prices in the next six to nine months.

[sweetheart]

10. CIBC's once predicted canada should adopt the US dollar...

or collapse. They're hardly economic bedrock... rather the right wing
of canada wrapped up in the halliburton pusch to make nuclear power
look good by making boogie woogie scare stories about oil recessions.

[Strelnikov_]

17. "If Peak Oil Didn't Exist They Would Have Been Forced To Invent It"

In other words, just because they are profiting on it does not mean it is not true. My belief is that the decades of suppression of conservation/alt. energy were intended for when peak eventually hits. The pusher has built up addiction, run off any posse's selling alternatives, and is now ready to jack up the price to all the addicts that have no alternative but to keep using.

http://www.energybulletin.net/5741.html

. . .

Are profits up for oil firms? Yes, they're up monstrously. But this would have been the case regardless of whether Peak Oil is a "scam" or an immediate reality. And certainly, if you "follow the money" in other ways to see who ultimately profits by all this, you can find a myriad of reasons why, as a colleague of mine remarked once, "if peak oil didn't exist they would have been forced to invent it". But "they" didn't. We did. The concerns over oil depletion were not "leaked", they weren't "rumored", they weren't "reported" or "purported"--they were built from the ground up.

[Sooner75]

11. ExxonMobil

Heard that ExxonMobil is:

* getting $1 billion a month as a windfall for the higher fuel prices
* 1st quarter earnings are 44% above 1st quarter last year
* has $25 billion cash on hand
* Chairman Lee Raymond is concerned about WHAT they're going to do with all the extra cash (We should ALL have a problem like that!)

[Strelnikov_]

18. Deep Recession Is Inevitable

As the article notes as a result of the 1970s oil crises the global economy stalled and then retrenched. Demand for oil actually fell for the first time in history. We have experienced the results of oil prices spikes, and to think recession can be avoided as demand chronically outstrips supply seems to be highly improbable.

But with all the negative implications for the future, the history of this period also provides some hope. Oil consumption dropped during this period as a result of both demand destruction and, eventually, the effects of conservation measures coming on line. With the ascendancy of the reich-wing with the Raygun election, we went back to our oil wasting ways. Considering that 80% +/- of oil today is used for transportation, with the vast majority used for personal transportation (cars), shipping plastic junk to Wal-Mart in trucks, and airlines, we have a lot of low hanging fruit to look at for conservation efforts.

I think peak oil will bring on a long recession, similar to the 70's, during the transition period, with a less consumptive 'Merican Way-O-Life' and a somewhat different economic system coming out the other end.

Of course, if our political leaders choose the 'last man standing' approach, the future will probably be a lot like 'The Postman'.