First you have to understand Peak Oil, it is the point where world wide oil production peaks after 146 years of production (1859 and Colonel Drake's well to 2005 which appears to be the peak year of world wide oil production) The theory basically follows a classic statistical bell curve, i.e. the downside of the curve is the almost mirror image of the the upside. If 2005 was the peak year, oil production in 2010 will approximate what was produced in 2000. Oil production in 2030 will approximate oil production of 1980. Oil production of 2070 will approximate what was produced in 1940.
In 1940 the US and the USSR ended up defeating Germany five years later, for they were the #1 and #2 producers of oil as of that date. BOTH the US and Russia was still in the top three (Saudi Arabia is the third member of the top three oil producers). Both the US and the USSR used unprecedented amount of oil to defeat Germany, but what a US Army Corp used in fuel in 1944, an Army Division uses today (and there are three divisions to a Corp AND the corp has the equivalent of another three divisions as support troops, a Army Division is about 15,000 men, a Corp is 90-100,000 men). I bring up this difference to show how much more oil we are using today then we used in WWII. It also shows how much less oil we can use and still have a healthy economy. The US Economy boomed during the 1950s and 1960s at a much lower use of oil then we are using today.
One way to use a Stimulus is to direct the Stimulus to ways to encourage the use of less oil. For example building bike ways and electric driven mass transit systems. Even if we do a Stimulus package as it has been done in the past, massive road projects, the projects can lead to less use of oil do to better design of the roads. Furthermore as the effect of high oil prices become clearer, future stimulus packages can concentrate on things that reduce the need for oil (Bike ways and electric mass transit systems are two things that can do that),
Furthermore as the price of oil goes up, people will adapt, either by moving closer to where they work, by buying a more fuel efficient vehicle or other adaption. AS people change the demand for oil will drop and the price will stablize for long periods of time.
You can see how that would work by reading what was written about the rural economy in the 1930s. As things stayed as they were. people stayed on the farm for the alternatives were viewed as worse, but as the economy picked up do to massive stimulus spending, such excess rural labor moved to where their labor was wanted. A similar thing will happen as to oil prices. People will stay in their present home as the price of oil goes up, but only as long as that is the best option they have, but as soon as the economy starts to kick in do to the Stimulus spending, such people will opt for more efficient vehicles (or use mass transit) and even look to move closer to work so that what they spend on oil drops (Walk to work, like most people did till after WWII). That is what happened to the excess rural workers in the late 1930s, the economy started to move and they took jobs in the booming economy. Such excess workers saw that they would do better economically if they moved from the rural farms they were living on into the urban areas where workers were in demand. All driven by economics. The same with high price of oil, as the price goes up, people will adjust their economic situation to reflect that increase in price. No stimulus, no boom, people will stay where they are and use the fuel needed to stay there. With a booming economy, do to stimulus spending, people will have the cash to make an adjustment, buying a more fuel efficient car, move closer to where they work, or other adaption.
My point is the increasing price of oil will be a damper on any economic boom, but the boom will provide people the money to make adjustments to their lives to reflect such increase in oil prices. Thus the Stimulus will NOT be undercut by higher oil prices, instead will give people the confidence to address and adapt to the higher oil prices.
= new reply since forum marked as read
