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My theory is that, as long as there is no shock (like tripling of prices overnight) but a slow, steady increase along the oil plateau, then peak oil will not be the end of the world at all- it may be hard, and involve driving 600cc cars, but the markets will prevail. At least in the west.
Phew, sorry about the length of this!

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Shifty,
Could you point me to some instances from history where a small disruption in the supply of oil did not cause a massive spike in a short period of time?
Thus far, I have found only the opposite: reductioins as small as 3-15% cause the price to spike 300%. (See 1970s, for instance)
When US domestic production peaked in 1970, the price went from $1/Barrel to $12/Barrel - this was prior to the 1973 embargo.
So what happens when there is a 2-8% reduction every year? In the context of a banking system that needs 2-8% growth every year?
"Doomers" may be accussed of forgetting we're talking about a curve (I haven't seen any do this) but far more people forget (or are never aware in the first place) how absolutely necessary growth is for our financial system to stave off full blown collapse.
The markets are stable only because the banks and traders are still operating under the assumption that growth is still possible.
Wait till they realize it's not.
Also, credible experts are already talking about $100 oil by the end of this year. What happens for instance, if after 3-5 months of oil in the $100 range, we get a non-geologic disruption similiar to those of 1970s? Then we are talking about $300-$400 oil almost overnight. That would put gas at $10-$15 gallon.
Could this be why the US government is placing such an emphasis on empolying the military in domestic situations? How do you think they are expecting people to react when gas is in that range?
With the House of Saud as unstable as it is, that there will be some sort of major disruption is highly probable. Which is exaclty why the bigwigs are running war games involving this type of scenario.
Best,
Matt