Wednesday, December 23, 2009

oil, economics, and politics...,

ASPO | If peak oil were our only problem, we could mobilize our nation on an emergency basis to deal with the problem in a straightforward way. In our real world, there is a complex interaction between oil supply, economics and politics. Our economic system is constantly interacting with the politics that makes the rules that govern our economic system. Politics is anything but an efficient way to achieve rational change. The geology is the easy part, but it is the complexity of the social response that makes peak oil difficult to study. The following link provides my expanded explanation in several essays, along with more documentation. Some of the main points are collected below.

Energy analyst Tom Whipple recently pointed out that our global economic options seem to be increasingly narrowed to the choice between continuing global economic stagnation versus a short start at recovery followed by a relapse into economic contraction and global stagnation. Assuming this is true, use of stimulus spending or any other political and economic policies can’t get us back onto the previous path of prosperity for very long, no matter how wise and skillful these methods may be.

With global liquid fuel production probably maxed-out below 90 million barrels a day, and global petroleum reserve capacity thought to be less than 6 million barrels a day, a 5% or more annual average depletion rate implies that the world will use up all our reserve cushion within a year or two. The return of another tight global oil market will be accompanied by the return of the crippling oil price increases we saw in mid-2008, but this time imposed on a weaker economy.

The economic crisis is resulting in a huge gap between the global growth predicted by the banking and finance system versus the disappointing performance of the global economy. This shortfall is strongly reflected as political discontent. Centuries of economic expansion have taught us to regard continuous growth as normal. The economic system seems to be broken when this is not the case, and people expect politicians to fix things. Nobody can predict even the economic outcome very well, because it is so largely based on consumer psychology.