[BigBear]

One final word about peak oil. During my series last week I never reproduced an actual chart of peak oil, so here's one now. The chart below is from former oil company executive Colin Campbell, and his method of constructing it is simple: he estimates oil production from every possible source, including future production from deepwater and polar oil, and adds them all up. The result is his prediction that global oil roduction will peak in about 2007 and then start declining.
Now, I happen to think Campbell is overly pessimistic, but that's not really why I reproduced his chart. Instead, take a look at oil consumption from 1979 to 1982, after the Iranian revolution caused crude oil prices to double. As you can see, world oil consumption dropped by about 15%

_____________________________________________________________ Did any of you read this posting in the News line-up today---A desparate man looking for hope-if we figure in an average world wide use of oil at 23 billion b/y since the Iranian Crisis in the early 80's we come out with 575 billion less barrels of oil in the ground than there was back then or a quarter of the oil that has ever been found. How he can fiqure that another such recession or the equivilant reduction of oil use by any other means will solve our problems is beyond me. Back then we were not facing Peak Production as we are now--

[Taskforce_Unity]

I don't really understand your question.

As for his analysis of the crash. It didn't happen over night it took a few years (if you look at the ASPO chart). The decline over the peak is quite positive on the ASPO chart. (There has for instance been an study done by the EIA a while back which calls on 8% decline rate's after peak).

So the drop after peak because of GEOLOGICAL reasons will be about the same as it was during the Oil crisis. And it will KEEP dropping. it will not stop so it's an indicator but bullshit to say that the consumption will drop. No consumption will not drop. the Supply will drop... and consumption along with it.

[clv101]

I think consumption will drop faster than the geological decline creating a relative oversupply, depressing prices a few years after peak.

[RonMN]

I did read that news article & there were 2 things the writer didn't account for...

1- a recession big enough to cause demand destruction today, would NOT be the same as in the past because of our massive debt & twin deficits (Today that recession would probably bring about the collapse of the dollar due to default or massive printing of the dollar).

2- he didn't account for the fact that this is a permanent situation...not temporary like the geo-polotics of the 70's - early 80's.

[Taskforce_Unity]

$this->bbcode_second_pass_quote('clv101', 'I') think consumption will drop faster than the geological decline creating a relative oversupply, depressing prices a few years after peak.

[MicroHydro]

From my comment on the news page:
$this->bbcode_second_pass_quote('', 'Y')es, recession could cut oil consumption by 15% again and restore spare capacity. But, 2005 is not 1979. Recession will be catastropic for debtor nations and persons, which now means the US government and most Americans.
After five years of cheap(er) oil, the spare capacity will vanish due to continuing depletion, and oil prices will go up again causing a deeping of the recession rather than a recovery. There will not be a repeat of the 1986 oil glut.
Kevin Drum learned the wrong lesson from the last oil crisis. Prior to peak oil, the business cycle was a sawtooth superimposed on a rising trend. After peak oil, the business cycle will be a sawtooth superimposed on a falling trend.

[nero]

I agree it is a flaw in his argument to say that a spike in prices due to peak oil will delay peak. To my way of thinking once you have global oil supply forcing the world into recession you are at peak. It doesn't matter if the record is beaten later. Peaking isn't going to be a single event. It is also quite incorrect to say that the oil price spike of 79-80 caused the recession of the early 80s. That recession was primarily caused by the Fed squeezing inflation out of the system. On the other hand he is quite correct to note that 80-85 demonstrates our economy doesn't crack up when it stops growing. And that after peak we will have quite a few years to search desperately for alternatives.

[clv101]

$this->bbcode_second_pass_quote('Taskforce_Unity', '')$this->bbcode_second_pass_quote('clv101', 'I') think consumption will drop faster than the geological decline creating a relative oversupply, depressing prices a few years after peak.

[Leanan]

I wouldn't want to bet either way on this. It is quite possible that demand will crash with the economy. But I also think the opposite is possible: oil and gas will be completely unavailable to the ordinary user.

The problem is hoarding. It happened when steel and concrete were in short supply last year; companies started hoarding it, because they needed it, and they figured if they didn't need it, they could sell it at a nice profit.

With oil, hoarding is even more likely. Heck, in a way it's already happening. Our strategic oil reserve, China's, and I suspect many other countries will be starting them, if they haven't already. China in particular believes in massive hoarding for a rainy day; they believe that being able to provide for their people in bad times is what keeps a government in power. Thanks to the trade deficit, they have the money to buy quite a bit of oil. (And it's probably a better investment than the U.S. treasuries they are currently investing in.)

And with oil, there's more than civilian use to consider. There's military use. Our government, and likely many others, will want to make sure their military has plenty of oil. Jet fuel for planes, marine diesel for ships, gas for cars, diesel for trucks and tanks. Even the more pacifist countries will want to make sure they have enough oil for transportation, heating, and agriculture.

So...once it's clear the problem is actual physical shortage, both governments and large corporations will start hoarding, and that may keep the price up, even when ordinary people can't afford gas any more.

[ehv_nl]

Leanan wrote:

$this->bbcode_second_pass_quote('', 'A')nd with oil, there's more than civilian use to consider. There's military use. Our government, and likely many others, will want to make sure their military has plenty of oil. Jet fuel for planes, marine diesel for ships, gas for cars, diesel for trucks and tanks. Even the more pacifist countries will want to make sure they have enough oil for transportation, heating, and agriculture.

[marko]

In fact, for the US to continue its pursuit of global military dominance, the civilian economy will have to be suppressed and forced to shrink even faster than a declining oil supply would otherwise require.

I think that the people presently in charge (including both the government and the financial elites, such as Greenspan) intend to wreck the US economy

1. To buy themselves time to (attempt to) gain control of the remaining oil in the Middle East;

2. To maximize the oil available for warfare;

3. To create a desperate population of unemployed people who will provide a steady source of recruits; and

4. To dispossess the middle class through mortgage foreclosures so as to further concentrate the nation's property in the hands of the ultrarich.

Hence the rapid and seemingly deliberate creation of a massive federal budget deficit, and an intention to widen that deficit by expanding tax cuts for the rich. Hence the Federal Reserve's reckless policy of easy money, which has sucked millions into a housing bubble inflated by mortgages that they won't be able to afford when recession hits.

[nth]

Marko,

If your scenario comes true, then it was predicted by Marx. He predict it in the wrong century. Socialism and Communism will rise if Capitalism fails.