Peak Oil, Falling Oil Prices, and the Global Economic Crisis

…Now is anyone surprised that oil prices have collapsed in the past few months? Demand for oil is way down, since people can no longer afford to consume.

Far from contradicting the peak oil theory, falling oil prices are an expected result of the super-spikes caused by demand trying to grow against a flat rate of production.


On May 16, 2005, I wrote:

The next five or ten years will offer extreme price volatility for energy, particularly oil and natural gas, as demand bangs repeatedly off the production peak and then crashes under grueling price spikes.

On June 16, 2005, I wrote:

Nearly every reserve assessment not based on suspect USGS data puts the peak somewhere between now and 2010. In fact, there likely won’t be a discrete peak per se. It will probably stretch over several years as volatile prices squash demand periodically. We appear to be entering that jagged plateau now, as described by analysts at Goldman-Sachs and CIBC World Markets. …

[T]he global economy, powered as it is by cheap, abundant oil, will inevitably go haywire as the supply starts to contract.

On August 22, 2005, I wrote:

[I]f the oil infrastructure can continue bringing oil to market fast enough to meet market demand, then the economy will continue to tick along as it has. If, however, the rate of oil production maxes out but demand keeps growing, then the price of oil will keep rising until it gets high enough to push demand down to what the industry can provide. …

So far, rising oil prices haven’t brought on a recession in North America, but there are plenty of reasons to suspect that growth here must stall sooner or later.

Can there be any doubt that we are now in the thick of that “extreme price volatility” (the oil price increased from $100 to $147 in six months and then fell to less than $40 in the next six months), or that the economy has gone “haywire”?

Raise the Hammer