Wednesday, May 18, 2005

peak oil is history.

peak oil is badly named.

there is a levelling off in total oil production - plateau oil.
- and there have been price spikes in the market for oil - oil price spikes.

we, the end consumers of the oil, do not buy what is buried in the ground off the north coast of alaska.
- nor do we buy the oil in production in oil fields or refineries.
- nor do we buy oil in transit in pipelines or tankers at sea.
- we buy petrol and diesel at the pump.

the end consumer does not experience the availability of oil as global oil produced - but as local oil bought after political manipulation, taxation, commercial competition, and futures market speculation. we experience only the retail price at the pump.

'twenty euros diesel,please.'

the underlying global production is not at a peak - but a plateau. if it has begun a gradual decline, it is still too early to know that yet. if global production is on a gradual, if uneven, sloping plateau - something else is the cause of sharp spikes or dips in the price of crude. for economists 'peak oil' - if we are to use that term - is already history. it occurred 25 years ago in the second oil shock, in 1979, when the real price of oil peaked at what would be $100 dollars / barrel in today's money (2005). peak oil is history.

but will there be future price spikes ? the manipulations, negotiations, wars, and speculations underlying spikes in the real price are hard to quantify and almost impossible to predict. anyone who knows what is going to happen, has more to learn - and by the time everyone is agreed where the market is going to go - the market has already completed its move. so the best that anyone can say now is that the global economy must and will enter a period of sustained long term contraction, in step with the contraction of the more convenient forms of fossil fuel energy. radical steps towards fuel economy and personal austerity will only serve to hasten this slowdown. the same fuel energy sources that inflated global growth over the last 150 years will deflate it.

if you do not buy in to this paradigm of economic contraction, or evade the prospect with some notional 'sustainable growth' projection, then you are still, sadly, living in the 'growth illusion.'

long term economic contraction is sustainable. once this is accepted (whatever way the politicians 'spin' the scenario) we may still see a series of 'spikes' in the oil price, but each one, in real terms, lower than the last.

so what causes oil price surges ? the oil price, like a tsunami running into shallow water, grows taller, peaks, then crashes. the bigger the wave peaks are, the harder they fall. the o p e c nations know from experience that when the oil price squeezes the global economy too hard, it chokes off economic activity, which chokes off demand, and once more deflates the price of oil. so that is why a spike is formed. it is the growth momentum built up by cheap oil ( it still costs less than bottled spring water ) that causes a surge when the global economy runs into a bottleneck.

this is a paradox of natural balance - very cheap oil causes sudden rises, and very dear oil causes sudden falls. we will learn to avoid both.

yes, peak oil is history.


Anonymous oil drilling said...

Dear gillies, early Christmas Gift: this cheap gas prices information can save you money from Oil Barons?

3:34 AM  

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