Stuart Staniford: US Economic Recovery in the Era of Inelastic Oil

Ok, suppose you’d never heard of peak oil.

Or you didn’t believe in it.

What could you conclude from the recent history of price and global oil supply?

The figure below gives the key data – a measure of total global oil production and also of oil price (adjusted for inflation) over the last five years.

I think what you’d have to conclude is that, for whatever reason, we are in an era when oil supply is not very responsive to price. Both axes are zero-scaled, and the most noticeable thing on that scale is that price has fluctuated enormously while the amount of oil supplied and consumed has fluctuated very little. Huge price increases from 2005 – 2008 produced only a few percent increase in the quantity supplied. Similarly, huge price decreases from the beginning of 2008 to the end of that year produced only tiny decreases in oil supply.

Early Warning (Stuart’s new energy blog)