[Armageddon]

When demand outstrips supply, the prices will skyrocket resulting in an economic collapse. 10 - 20 years ago, we could have probably avoided a collapse, but with the enormous ( and i mean enormous ) amount of personal and government debt, there is no way to pull out of this one. People are on th brink of bankruptcy already, factor in any slowdown due to high energy prices , and that is the formula for a collapse. People have zero wiggle room to ride this one out. With credit cards averaging $ 11,000 per person, and mortgages maxed out, there is no alternate credit to bail people out. When the collapse happens ( already started ), demand will be 75 % lower, and will never return to current pace, which in results in peak oil being irrelevant. This is my humble analysis of the global situation based on many years of reading and studying from the 'experts'

[MonteQuest]

This has a great degree of plausibility.

Economic chaos may create an oil glut.

But will we just rebuild it like New Orleans on the same unstable economic and ecological ground?

And will the poverty that ensues increase the birth rate for "working hands."

[raketman]

I think your statement goes up for the USA. But there are some countries in a different situation. For example in Belgium (where I live) average savings in the bank per person is about 55,000 euros (about 68,000 dollars I guess) and I think (or hope) this is more or less the case for the wole of the Eurozone. We will go down together anyway, but it won't be a matter of savings here, just a matter of global economy... greetz

[Mesuge]

I'm afraid that system will survive at least in the midterm although scaled down. The global capitalists are not the rulers of this planet without reason. They understand human greed, fear and are smart enough to exploit it efficiently. Environmentalism, NGOism, or attempt to racial desegregation is just a short blip on the radar screen induced by the abundant energy in the past century.

I'm almost certain the rulers will found a way out of the mess by waging resource wars, launching repressive gov. control over population, forced labor camps etc.. You can derive it from the downward slope on Olduvai Gorge collapse graphs there will be short moments of rebound and that's were some freak gets into power and sets brutal order in place..

Raketman> Good for you. I hope I'm not mistaken but isn't it true that Belgium runs one of the worst state deficit in the EU with Italy and others? In that way your bank savings might evaporate to bail out your gov. out of shit..

I've googled it:
You had an accumulated debt to 137,9% of GDP in 1993 and managed to bring it down to 93% by 2005 that's good performance! Your gov used the personal savings to mitigate the problem.

However, I doubt the US can manage it in similar fashion, for one thing, the US has no arbiter above them like the EU to tell them it is necessary to trimm your deficit down. The Chines can play that role but they are likely to wait patiently till the very last moment and then they will ruin/overcome the US in one day. Also the US has no personal savings but rather significant dissavings. Secondly unless another bubble hits the market after they print a few more trillions of petro$ they can't dig out of that hole..
Perhaps 'nano tech' bubble could delay peak for a few years?

[gt1370a]

Is there an analysis which supports the "75% lower" number for demand, or was it just a guess? I'm in the same school of thought. As I've laid out in previous posts, it looks to me like the imminent decline in the housing market will set of a chain of events, affecting real estate, finance, construction, materials, bulk items, decorating, landscaping, etc. The airlines and auto industries are already suffering. The trend will continue with pay cuts, benefit cuts, and layoffs. With already negative savings, there is nothing to fall back on. Bankruptcies will continue to increase. A drop in consumer spending will affect everything. This could lead to the scenario that you wrote, but 75% drop sounds really high to me. I would have guessed about 10%, at which point the price of energy would drop, and "growth" might resume. The Fed will fight this deflation too, as Bernanke has written about in detail. Of course, this bust period with the recession, drop in prices, and resumed growth will take several quarters to play out, maybe years... if it is a 75% drop or anywhere close to that (basically total collapse), then that would be a worst-case scenario, maybe a die-off, from which we might never recover.

[raketman]

Mesuge, that's absolutely correct info you gave. Our government did a real shitty job in the 90's and is now strugglin' to cut back on debts, forced by the union. Anyway, I'm absolutely no economic brainiac so I have no real right of speech but I hoped that the personal savings could slow down the panic trigger effect E.G. people still being able to pay their mortgage and pay for increased fuel prices, even when having lost their job. I think most countries have huge national debts, apart from Saudi-Arabia and Brunei of course

In the end, I think there just is no plausible prediction possible. I hope the European Union will stick together 'cause we will need it. Courage!

[dukey]

demand out stripping supply has already happened
look at all the poor countries
africa etc, they have effectively been priced out the market already

[Anthrobus]

hello racketman,

there was i time, when i thought to understand a bit of economics, but nowadays no more. I can't tell no longer if it is better for the economy, jobs, etc. if i save my money now, and consume later. Or if i spend a lot on credit for a plasma tv, dream holidays and an unneccessary new and large car. On a larger scale, if our Mrs Chanceller is saving, it is bad for economic growth, if she is spending on deficit, our nation seems to be broke someday, so this is bad too??.

Personally, we decided to spend carefully (except for a brief christmas shopping spree, buying some chinese-manufactured electronics), pay off our debt on the house and buy everything else on cash. And be wary for insurance brokers. And to hoard oil for heating, rape oil for the car and firewood (must yet convince wife ).

I was quite enthusiastic about the european union in my youth, which has waned somewhat. But the greatest "victory" for the union was to give a clear economic perspective and political roadmap to most of eastern european countries after the wall came down. And it doesn't look too bad, since Ms. Merkel recently joined.

To all the discussion of collapse: There ist a funny and chaotic story of stanislaw Lem about a futurological congress. The list of topics of this congress include the political catastrophy, the economical, the enviromental, the demographic, etc. Something is collapsing all the time. Our city of munich i.e. is almost broke. But people go to work, the subway is running (on deficit too), homes an surplus offices are built, the shopping areas are crowded. So what is this thing, that is going to be nearly broke? Maybe, some day, a huge pile of debt certificates will just be thrown into the fire and life continues like all the time. But, as i said, i dont understand economics no more and i know no one, who does.

Against possible turmoils due to po or other causes, i personally recommend to avoid running into too much debt and to keep to values, that are in some way real or at least not too unreal. Like a prairie dog, have a good place to watch the mess coming and a safe hole to jump into . And some yummy grub down there, possibly a family too, to make all worth wile.

And, good point of you, if times get really hard, lets stick together and show some courage here in old europe. Bye

[Ludi]

$this->bbcode_second_pass_quote('Anthrobus', ' ')There ist a funny and chaotic story of stanislaw Lem about a futurological congress.

[clueless]

The "economy" has been a mystery to the last couple years, but I think I have finally figured it out...If the dollar had appreciatted as much as it should have over the last five years then we would be in big trouble. Which leads me to believe the g7 is in cahoots to keep a managed decline in American consumption occurring. It seems OPEC has purposed to keep oil an a 35-45 basket price band, which is pretty almost a wash for europe if oil is $50 barrel.

The really interesting thing is to see who is using their dollars for what, China is hording commodotties, Saudi Arabia and Venezuela are buying lots of weapons, Iran is using their dollars to build nukes...ANd the US and Europe seem to be comfortable in the consesus bubble. It seems that the hungry nations are preparing for somthing - Well I guess the US and it's 250+ billion defense budget is nothing to sneeze at either.

As soon as Aisa and OPEC get done with the USA we haven't a leg to stand on...

Am I clueless ?

[MonteQuest]

$this->bbcode_second_pass_quote('raketman', ' ')I think most countries have huge national debts, apart from Saudi-Arabia and Brunei of course

[clueless]

I think the national debts are an over-rated factor, given the fact the Saudis don't need to have any debt at all...They seem to think it is all just a game. US consumer debt on the other hand is a much bigger issue. Our economy is driven by 70% concumer spending, and when you have a population that is broke, that is not a good sig. The economy will implode when the American consumer runs out of credit.

Even if you ignored the fact the banks are lobbying for tougher bankruptcy laws, there is no way off the dime when it comes to a population that is broke. When they quit spending we're in trouble. Then foreign investment will slo, leading to an uptick in interest rates which will lead to more defaults which will lead to more economic slowdown..........

On and On - We need a year of jubilee where they forgive the debts...

[raketman]

Monte, thx for pointing that out. Didn't know but it proves exactly my point that national debts maybe aren't that much of a usefull parameter, just as clueless said.

Anthrobus, Maybe your right and is your point of view exactly the policy of the USA. Just take what you can get and don't mind debts, 'cause when the shit really hits the fan, either way (worldwide coöperation to get things back on track, or war over resources) debt certificates indeed will just be useless papers. So never mind trading deficits, just get into the country all you can get... Or did I have too much beers last night?

[clv101]

I’m pretty sure that the demand response will be much larger than the supply response. What I mean is that at peak and soon after oil supply will ‘only’ fail to keep up with affordably demand or reduce by a few percent, the economic crisis this will cause will reduce demand by far more than that, resulting a an oil glut and low prices. This is the classic saw-tooth decent based on the fact that the economy will react faster and more dramatically than the geology.

[crapattack]

I agree that it certainly looks like the economy will burst before we see the major impacts of PO. Once people fully realize where oil is headed money will flee from the markets into gold and other precious metals. Housing will deflate and many will be left with houses they're unable to sell.

2 articles I found really enlightening on the economics of PO were:

http://www.safehaven.com/showarticle.cfm?id=3134

http://deconsumption.typepad.com/decons ... _for_.html

I'm sure there are many other links as well. I think given the amount of debt NA's are carrying there will be no escape for many people who will be stuck in their unsellable homes. I think it is unlikely labour camps will be viable options as millions would have to be captured, fed, housed and policed. There will be plenty of escapes. We will most likely see a banking collapse and their will be few bill collectors coming knocking - and people will just squat anyway.