Oil Price Volatility and Economic Chaos

Syndicated columnist Gwynne Dyer closed his sobering January 2, 2009 piece on US President-Elect Barack Obama’s challenges with the following observation:

In January 2008, oil reached the $100-per-barrel mark for the first time. In mid-July it touched $147 per barrel; and by late December it was back down below $50 per barrel. This extreme volatility is exactly what is predicted by most models when we are at or near “peak oil,” and it is entirely possible that we are there now. If not, we will certainly be there within a decade.

While oil prices rose steadily over the past several years according to the predictions of peak oil theory, the skeptics, naysayers and deniers scoffed and derided the theory and its proponents as a gaggle of cassandras. (Of course, in the original Greek myth, Cassandra’s curse was that she could predict the future but no one would believe her.)

When oil was trading at $40/barrel, no one believed the claim that it would hit $60 per barrel. When oil passed $60/barrel, no one believed it would break $100/barrel. When it shot past $100/barrel, no one believed it would get close to $150/barrel.

And when peak oil theorists warned that persistent high and rising oil prices would destroy demand for oil by triggering a major economic recession, no one believed us then, either.

Raise the Hammer