[Arjuna]

I have been looking for a graph demonstrating the estimated exponential prices increase after the oil production starts declining while the demand is constantly increasing. Has any expert made good price estimates based on research data and has anybody seen this presented in a graph form? This would be very useful in many discussion forums, presentations etc to really demonstrate what the effect will be.

For instance this graph demonstrates how oil price has been fluctuating in the past.
http://upload.wikimedia.org/wikipedia/en/thumb/4/42/Oil_Prices_1861_2006.jpg/800px-Oil_Prices_1861_2006.jpg

[ReserveGrowthRulz]

$this->bbcode_second_pass_quote('Arjuna', 'I') have been looking for a graph demonstrating the estimated exponential prices increase after the oil production starts declining while the demand is constantly increasing.

[Arjuna]

Demand in industrial western countries may not increase, but does so in India and China. Making the estimate is very difficult of course, as there are so many fluctuating factors. But I assume one could do such an estimate in 5-year scale based on currently known facts.

[MonteQuest]

$this->bbcode_second_pass_quote('ReserveGrowthRulz', ' ')I doubt you'll find anyone dumb enough to assume demand will constantly increase when the supply<demand and is decreasing.

[smiley]

There is a very nice display of the evolution of costs (which not the same of price) for a limited resource as depletion progresses in the article of Ugo Bardi.

The mineral economy: a model for the shape of oil production curves

[MrBill]

I assume that in general petroleum is not an end product, but a production input or cost of production. A very important one, but only one of several or many inputs.

Therefore, on an aggregate level petroleum prices should not outpace the price of the final product unless someone is producing it to sell it at a loss? But that would be the exception, not the rule.

Or to put it another way. We, collectively, are not going to spend more every month on commuting to work than we earn or take home in pay. We can do it for a while as a stop gap measure, but when we can no longer earn enough to pay for our gasoline we will stop driving.

So I am guessing that we are really talking about an 'S' curve in terms of a graph. Everything we have seen up to now is still at the flatter lefthand side of the S curve.

As production levels out or starts to fall in the face of increased or steady demand then the price will take-off vertically and become unsustainably steep. At which time the price of petroleum will start to outpace the value of goods or services for which it is but one input. The top of the S.

At that point the price will be forced to level-out and increases will slow as demand falls or other prices catch-up to the cost of petroleum. Or whatever imperfect alternatives start to displace demand for the remaining expensive petroleum. The righthand, flatter side of the S curve.

I think it is academic to talk about nominal prices as we have seen recently the world adapt to $30, $45, $60 and even $75 oil without denting global growth that has been chugging along pretty much steady at 4-5% p.a. Clearly, the world can adapt to more expensive petroleum. What it cannot live with is its current infrastructure with less energy equivalents in the face of falling supplies of petroleum.

[Arjuna]

MrBill, Thank you for well explained response. This made me to understand the market behavior and it is very logical. Also thanks to smiley, I will read your article later today.

I am posting a sample S-curve just to have a visual representation to MrBill's explanation. (This s-curve is unrelated to petroleum or peak oil)