[Oakley]

If you listen to Dr. Albert Bartlett, maybe the problem of peak oil becomes more apparent.

Dr. Bartlett says that it is simple math that anything that has a growth rate eventually doubles. A 5% rate of growth doubles the beginning quantity in 14 years for example.

A rate of contraction also has a halving period. For example, if oil production contracts at 5% a year, then in 14 years production is cut in half. And this is amplified by the simple fact that the first halving of production after peak will be halving of the largest level of production ever achieved. The first halving period will see the largest absolute reduction in production of any following halving period, just like the last doubling period before peak saw the greatest absolute addition to production of any prior doubling period.

And if you further apply Dr. Bartlett's description to the fact that cost of acquiring oil is also doubling at some rate. The rate of 3% has been estimated to describe the past growth of costs which produces a 23+ year doubling period. This was inconsequential when the cost of 1 barrel out of 100 doubled to 2 barrels out of 100. But now that we are at somewhere around 12 barrels out of 100 lost to cost. That means that the next doubling takes us to 24 barrels out of 100 produced lost to cost; before you know it it will cost more oil that we get back.

So the problem comes from at least these two sources. Can you imagine even the effect of one of these problems on the world economies, much less the combined effect? In my dictionary that defines "problem".

[Graeme]

$this->bbcode_second_pass_quote('', 'I')n the longer term, the administration would do well to heed the forecasts and concerns of wide range of a mainstream analysts. Take for example, an oil forecast from an April report from the Commodities Research group at Macquarie, a leading natural resources investment bank:

“When looking out into 2011-12 and beyond, we see global spare capacity reduced to zero by 2013. Prices will again need to rise to accelerate upstream spending. We do not think, however, that production can be ratcheted higher fast enough. Oil prices could then rally to reflect scarcity, just like they did in 2Q of last year.”

Should oil return to $150/bbl, as Saudi Oil Minister, al-Naimi, has warned or as Macquarie implies above, the statistics are not ambiguous.

Expect a recession, and a severe one at that.