by The_Toecutter » Wed 06 Jul 2005, 16:09:46
$this->bbcode_second_pass_quote('', 'W')hy "unlikely it may be"? Do you believe PO will cause a hard landing? If so, why?
I don't think PO will cause an extremely hard landing or an extremely soft landing, but somewhere in between. That doesn't mean that's how things will be, but I try to look at the factors that surround the crisis. It can go either way and I'm not betting with any modicum of certainty on one or the other.
I am of the opinhion that the landing will be sufficiently hard enough as to lead us to another great depression or worse. Some areas of the U.S. in specific could become very discontent with the economy at $100+/barrel oil. Everything we do is linked to oil, food, plastics, transportation, medicine, roads, police, hospitals, electricity(even though oil isn't normally burned for electricity, it extracts the coal/natural gas, transports it, ect.), everything. Cost of oil goes up and inflation jumps up accordingly. It happened in the 70s, it happened to Germany during WWII, and it will happen to us again in the scenario prices see such a large and sustained jump. Food prices adjusted for inflation have practically doubled in the U.S. over the past decade, and fuel has almost doubled in the span of 2 years. Cost of living itself has been going up for 3 decades, while real wages have declined over that same period. The rate cost of living is going up and the rate that wages decline is related to both the economic system in place and the cost of oil itself due to the functions it serves.
In the 70s and early 80s, adjusted for inflation, oil's highest price was about $80/barrel. This was due to a politically induced supply shortage. We are rapidly approaching that price today due to a shortage that is not politically induced(Even if the crisis itself might be due to the alternatives that have been developed and supressed). In the case peak oil is reached, there will constantly be more demand than supply until alternatives are adopted. But until then, there will be a chronic economic crisis with prices sustained at that level, and alternatives which have been viable for years still won't see adoption due to the asset inertia associated with our current power elite and increasing cost to adopt these alternatives due to the resulting inflation.
Already, we are fighting wars for oil without any concern to the success rate in an effort to gain hold of reserves, the central government is stripping away our civil liberties under the false guise of security, and our economy is already showing signs of tanking without any need for an energy crisis to occur with unecessary deficet spending rearing up to bite this nation in the ass as soon as its debtors demand their money be returned.
PO? Sustained oil prices above $100/barrel? That's going to cause hyperinflation by the likes of what Germany has seen 70 years ago. Germany serves as an example; civil unrest would be immentent. Iraq and other nations can also serve as examples as to what can occur when unemployment reaches over 75% and martial law is imposed. Peak oil brings with it the exact possibility that America too could fall into similar civil conflicts. Even fascism, which is occuring already without a publiscized and acknowledged PO crisis, is growing in this country already(Corporate power protected, labor power supressed, obsession with crime and punishment, continuing and fervent nationalism, erosion of constitutional rights, you know the rest).
Americans are already having trouble affording food and paying the bills. they are in debt tens of thousands of dollars. The government has removed from them an outlet to declare bankruptcy. A recession even as soft as the one that occured in the 70s would be extremely devastating today to the middle class. The middle class would be history. If they can't get fuel, pay the utilities, or put food on the table, or even if large numbers of people lose their nest eggs as the housing bubble bursts, there are going to be major civil problems if the recession remains chronic for over a year. Even a soft recession which peak oil would have no problem causing could wreak this sort of havoc.
$this->bbcode_second_pass_quote('', 'T')he way I understand it there will be a GRADUAL decline in oil production. According to the capitalist economic model this causes an increase in price. The increase in price eventually reigns in demand, until supply = demand. Of course, higher oil prices are painful to everybody (excluding a few well-connected Texans), but it does not mean the immediate end of civilization.
There is a major caveat to this argument. Unlike luxury commodities, oil is a necessity to sustain any economy that has few alternatives to its use in place. Those that do not have oil will lose more than 30% of their energy supply, over 95% of their transport fuel, their military development will grind to a halt, they will have a significant reduction in the amount of food that can be grown, and they will experience higher inflation than everyone else due to the lack of oil, and not just more expensive oil. No matter the price, as long as supply is less than demand, someone is going to do without. Meanwhile, those wealthy enough to purchase that oil? The third worlders see them burning what is necessary for their food in luxury commodities like automobiles to keep the first world economic system afloat? It's not that hard to obtain a nuke these days. Not that will be the case, but those governments and their angry people certainly are not going to let things continue as they are when it means starvation for millions, instead of thousands, of their people. 911 squared, more or less.
$this->bbcode_second_pass_quote('', 'H')igher oil prices will achieve what Kyoto is so far struggling to get.