Have We Reached Peak Oil?

Low Cost Oil is Telling Us Something

Low Cost Oil, Is It Telling Us Something?

If the cost of a barrel of oil jumps up to $145 and then drops to $35, all in less than a year, what’s that called? It’s called peak oil. A 50 percent price increase is followed by a 76 percent price drop all in one year. What does that mean? It means we have reached a point where world demand for oil has been exceeding supply and increasing price reflects the urgency of our demand for oil. It’s simple enough; when there wasn’t enough oil for everyone, the price was bid up based only on how badly the world of buyers wanted oil, having nothing to do with what it cost to produce the oil. Price peaked. Oil is a lot more important to the world than coffee or even corn; so its price peaks much further beyond cost than most commodities.
Chuck Schumer, Bill O’Reilly and similar ‘conspiracy’ advocates look for corporate demons. Conspirators are always more fun to deal with than simple truth. Of course they found none, and now? Well, we find ourselves in a serious recession, and oil demand has declined two percent. Not much, but enough to reduce demand below available supply. Prices fall to the cost of production, collapsing 76 percent. A two percent drop in demand results in a 76 percent fall in price. I’m repeating myself for a reason; we are right on the edge of, right at the top of, peak oil. We will never produce much if any more oil per day than we are right now.
No one looks for demons as price collapses. But there is a demon, one that Bill and Chuck choose to ignore – peak oil. We have found the demon we’ve been denying for decades. The threat of peak oil is a spike in energy price creating an economic recession which results in a drop of demand for energy and low prices eventually ending the recession. The cycle then repeats and repeats; and with less and less oil remaining, each cycle is worse than the last. What does it mean? It means we are running out of oil; natural gas will be next, and we had better do something about it. It means Mr. Schumer and Mr. O’Reilly will keep looking for corporate villains without success, and the world, including you, me, and our children, is in big trouble. It means Mr. Schumer and his allies will press for ‘green energy’ like bio-fuels, wind-farms, solar arrays, geothermal and all sorts of other alternatives that have no chance of matching the energy demands the world will need without 85 million barrels of oil per day. The only option with any promise at all: nuclear, is dismissed or at best given reluctant footnote status. Why? Because, support for this earlier demon might threaten the illustrious careers of our self promoting politicians.
My ugly surprise was, and is, the recession we’re in. Looking for a recession that would be driven by run away oil prices, I wasn’t ready for or paying attention to, the housing cost bubble until it burst. The recession we’re in is driven by a ridiculous new scam for ‘affordable housing.’ In the 1930s we had equally misguided, but genuine ‘affordable housing’ in the form of low cost, minimal, high-rise, subsidized apartments. These were routinely destroyed by the tenants who felt no ownership or pride in them. They became known as ‘projects’, disasters that were eventually torn down. Now, our friend, Mr. Schumer along with Mr. Dodd, Mr. Frank, and others has developed what they still call ‘affordable housing.’ They love ‘affordable housing;’ it’s a big part of the bond between them and their constituent base and they need to find a way to offer their base something – anything. They’ve struck gold with a terrific new idea: ‘affordable money.’ If you make money affordable enough, anyone can buy anything – even ‘affordable housing.’ They managed to upstage what would have been the first of many recessions to be sponsored by the limits of our geological resources. Peak oil upstaged by political greed. Unintentionally Mr. Schumer et-all has exposed peak oil at its peak. Now it’s up to us to understand what Mr. Schumer’s low cost oil is telling us.
We are about to throw money at anyone who can spend it. Spend it on anything. How do you mentally grasp a trillion dollars – a thousand, thousand million dollars? That’s a bunch. If we could get our minds around the importance of energy to our human history and future, we could do something of historic importance. Maybe even more important than heating a big swimming pool in Hawaii, or Alaska’s famous bridge to nowhere. Who knows?