The Peak Oil Crisis: Bankruptcy

By Tom Whipple

A few years back peak oil all seemed so simple.

Worldwide oil production was going to stop growing; shortages were going to develop; prices would go higher and higher; demand would drop; prices would fall; demand would increase; and the cycle would repeat itself. Each repetition would send prices higher than the one before as more and more people would be forced out of the oil age.

Last summer, it looked as if this scenario were happening. Oil prices, which had been rising slowly for several years, suddenly shot up to $147 a barrel causing all sorts of economic havoc. Weak airlines dropped like flies! New car sales plummeted! Politicians postured! The Saudis opened the oil tap a bit! Exactly why this price spike was happening became a matter of national debate.

Many thought it was caused by speculators. Others blamed environmentalists for keeping us from all that oil waiting to be drilled just off our beaches. A few even thought that demand for oil was actually getting ahead of supply and noted the surge of Chinese imports in preparation for the Olympics.

We are going to have to let the historians sort out the causes of the great spike, for oil prices soon dropped even faster than they had gone up. Just as oil prices were spiking, economic activity was dropping. A year ago we were debating the possibility of an economic downturn. Now we are looking for the bottom of a major recession or perhaps something worse. It seems that for the last 30 or 40 years we have been extending ourselves ever increasing amounts of credit. It had to stop somewhere-and it did – just as world oil production was peaking.

Falls Church News-Press