Monday, 26 September 2011
Oil Peaks Off Peaks And Economics
As well as the financial issues at present gripping the attention of the media there is also the longer beat of change in energy, food, water and population. In The Oil Drum today is a long article of near 3000 words with diagrams going into the economics of it all.
These are not simple. It is a very complicated area which takes in the whole scale of human activity given the critical role played by oil in nearly all our economies and ways of life. The article attempts to deal with what is involved.
The link is below with the conclusions quoted.
"Unless and until adaptive responses are large and fast enough to constrain the upward trend of oil prices, the primary adaptive response will be periodic economic crashes of a magnitude that depresses oil consumption and oil prices.
These have the effect of shifting consumption from incumbent consumers—the advanced economies—to the new consumers in the developing economies.
This is exactly what happened in the last recession when between the start of the recession in January 2007 and its effective end in 1Q 2011 demand rose by 4.3 million b/d in the non-OECD area and fell by 4 million b/d in the OECD area."
In the west we have a lifestyle and indeed social structures essentially built on an era of cheaper oil which is readily and immediately available. Also, our food supplies are largely dependent on oil based agriculture and transport.
Add to that the complex financial arrangements originally designed to deal with it which have recently taken on a life of their own, but dependent on that lifestyle and structures.
It is not looking good.