Those of us who accepted the peak oil synopsis have been buying iPods (good for working gardens with hand tools), hand gardening tools, good work boots, homesteading books, and cotton clothing. Incidentally, I read that due to "biofuels" there is a shortage of cotton already because not much as been planted.

My recommendation--think of everything you will need to survive and buy it now--every extra penny. It is not just peak oil, but an increase in price of everything because there is more demand for everything than exists any more. We are at climax population in ecological terms and it is not a sustainable climax. Some of us gotta go. Those with the work boots might be able to stay and the knowledge of knowing what to do with the work boots.

It doesn't matter whether this is the last recession or not--if it isn't consider yourself fed as food prices continue to escalate due to impoverished soils and lack or rain.

Oh shit. I grew up in early 80's Britain. Thatcher's kids, striking miners, punk, mods & skin-heads, collapsing industrial production, 20% inflation, race-riots, 'kid you ain't got no hope', the whole thing was beautifully captured in Pink Floyds ultimate despair movie: 'The Wall':



Some people here have 'no idea' how quickly heaven-on-earth can turn into post-industrial hell. I at least have some memories, which is why I'm very scared about the future right now...

JP

Yeah I think PO is the deep, underlying cause. Our Empire is based on cheap energy - we've had to go further and further to get it, and now we're in a war for it. McCain gets in, we're sure to go to war with Iran too. Anyone gets in but Ron Paul, we'll be at war with Iran, and I'm not so sure about Paul either.

We're heading into the Mother of all great depressions. Everything *but* Peak Oil will be blamed, and PO will be considered a crackpot fringe belief for the rest of our lifetimes. It will be blamed on every other possible cause.

The real cause is that Empires peak and then run into a situation of decreasing returns for each invasion, economic takeover, war. It's just Catton all over again, just like any other Empire, past its peak you make less and less and eventually are working at a loss. In the end there's a big dieoff, and the Goths and Vandals, or is it Hippies in Sandals, take over.

Got this email today from Sen. Sanders:

"Issue January 31, 2008 - http://sanders.senate.gov

The State of the Union Bush Forgot to Talk About
I listened intently to President Bush's State of the Union speech. Frankly, I had a hard time understanding what country he was talking about, what reality he was talking about. Certainly, if the "state of the union" refers to what is happening to the shrinking middle class of this country, and how we as a people are doing, the president had almost nothing to say that rang true. In fact, the speech just reminds us once again how far removed from the reality of ordinary life this president is, and how little he and his administration know about what is going on with the vast majority of Americans.

The president said that "in the long run, Americans can be confident about our economic growth." I wish that was true. Unfortunately, since President Bush has been in office it is important to understand that nearly five million Americans have slipped out of the middle class and into poverty. Amazingly, the poverty rate is higher today than it was during the last recession in 2001.Median household income for working-age Americans has declined by almost $2,500 and overall median household income has gone down by nearly $1,000. More than 8.6 million Americans have lost their health insurance. More than 3 million manufacturing jobs have been lost, including more than 10,000 in Vermont. The list of troubling economic statistics goes on. ... "

Recession is not only the fault of Bush, under Clinton the interest rates were yet lowered to an unresponsible percentage, Bush only went on with the bad policy of depth.

I think PO is only one little cause of the recession, which is driven by depth.

What I would be interested is how will other countries suffer?

One thing is really interesting: oil prices remained relatively high. Until now they didn't get back to let's say $70/barrel. Even there must be some demand destruction.

Peak oil isn't the immediate cause. Greed is. However, the initial stages of the economic calamity now underway will be soon accelerated beyond belief by the coming high cost and scarcity of liquid energy.

Expect the fun to begin shortly after the election.

To that last charge I respond...GREAT!

We need sustained high oil prices in order to motivate real change.

If prices crash back down to $20/barrel and all of these renewable energy projects go out of business, it rolls back the clock 20 years.

High energy prices will sustain the current renewable energy boom and prevent backsliding into inefficiency, like we did last time the world ran out of oil (1980s).

I do not think higher oil prices automatically lead to smarter decisions. Humans have shown the capacity to do stupid things regardless of the situation: high or low prices. For example take a look at ethanol. I'd hardly consider that a "smart" reply to high oil prices. There is nothing environmentally friendly about using precious and finite agricultural land to produce "food for cars".

But Cube, 'people' did not opt for Ethanol, politicians did. I think people will respond appropriately to high prices because they are spending their own money.

I think politicians will respond inappropriately because they are spending other people's money.

So, Ethanol is just another example of stupid politicians to add to the pile we already have.

seldom_seen, your graph is more a measure of inflation, not the debt itself. When talking post 1913 dollars you need to stick to inflation-adjusted dollars if you want it to mean anything.

Finally, Gerben called it: recessions happen, just like death and taxes. If we don't have one in 2008 we will have one in 2009, or 2010, whenever. It is inevitable; we are human and therefore prone to bouts of exuberance and pessimism. High oil prices may have caused it to happen sooner, but low oil prices would not have prevented it.

But as I have explained before, the great depression was a unique event in human history. Our history books are filled with the lessons and therefore they are unlikely to be repeated. So another 'great depression' is not going to happen. But, a repeat of the early 1980s recession is possible, as JPL suggested, just not likely. In my opinion this recession will be more similar to the early 1990s recession, which was driven by high oil prices (Iraq war), unwinding housing bust from the S&L collapse, and spiraling government deficits.

and who placed those politicians in office to begin with? --> the people. Granted not every action a politician makes is based on the will of the people. Sometimes a politician will try to be clever and slip a law through that looks innocent on the surface until further inspection reveals how dangerous it may be. MOST people on this forum are against bio-fuels. However not to sound insulting, the average American on the street, is not as "educated" about energy issues as compared to PO.com regulars/fetishists. I think the reason why we have ethanol subsidies is because most Americans haven't done their homework and seriously do not know how bad it is.

agreed

The one thing that we do not learn from history is that we do not learn from history.

Always trying to think out of the box, instead of giving my reason as to why I think it's perfectly possible for us to have a depression...instead I'm going to explain why the recovery was so successful back in the days.
In the 1930's:
1) few people owned stocks - thus few people actually lost money
2) people were not upside down on home mortgages
3) world energy exporter
4) world's greatest creditor
5) people actually saved money the old fashion way (I'm not talking about the equity in your home or 401K)
Basically, as bad as things got during the 1930's America was actually on a very solid foundation....so a strong recovery was inevitable.

If president Hillary Clinton tried to do an FDR style (increase government spending to create a massive public jobs program) the US dollar would get beaten down to hell in the Forex markets and commodities would shoot up to the moon.

my 2 cents....

The great depression wasn't the only depression hence the adjective "great". There had been many other periods of economic depression with the 1890s as a notable example. We won't ever repeat the situation of the 1930s but we may find our own unique way to really foul it up.

Ludi: exactly. How do you get out of a recession with high energy prices?

That's why we're freaked over this supposedly 'normal' recession- as gerben would have it-. This one is different because of the dwindling resources which drive the economic model which allowed for the various 'bubbles' in the first place. With absolutely NO economic model alternative, how is any economy going to drag itself up and out of recession? I think it just aint gonna happen. This is the long dark slide, the long twilight of the soul.

It's a fascinating scenario: presidential election year, two unwinnable wars ongoing, dollar slide, economic standstill. And that's another straw to grab: how will any future pres FUND another war? Wars need money, lots and lots of it. Where's it gonna come from? Some coalition of the willing? I think not.

Here in Spain, as in France, UK and Italy, we are pissed off with 4% inflation on basic goods. The real price of milk, bread, and meat have risen more than the rate of inflation, as much as 20% largely due to the ridiculous decision (as cube says) to burn our food for fuel. And reassurances from politicians that we can weather the storm are falling on deaf ears, because too many of us can remember the 1980s that JLP mentions. But this time, there will be no reduction of crude prices, since even though the major economic motor of the west is slowing down to an utter halt, there's plenty of markets willing to slurp up what they no longer buy.

I agree with seldom_seen: It appears we are now at the end of line, as there is no creative financing techniques or bunker buster bombs that can revive depleted oil fields.

That, and the Export Land Model which tells us the producing countries will need an increasing supply for home consumption, means for once I agree with Tyler: a gradual and painfull change will be forced upon us.

I think Americans would do well to take some lessons from Argentina and the Cubans, I reckon the US is going to look a lot like those countries as far as economy goes, in five years time

I do not believe at any level that this US lead global slowdown is in any way related to post peak oil depletion as high crude prices are being caused by a) recent rapid global growth - two-thirds of the new demand is coming from Chindia according to the IEA, and b) nominally high oil prices are a reflection of US dollar weakness and not absolute high prices.




The US dollar was $0.8240 against the euro in 2001. $90 crude is approximately 60 euros at today's exchange rate of $1.4875. If oil was 60 euros, and the US dollar was still as strong as it was in 2001, then crude in US dollars would be $50 and not close to one hundred. This reflects strong demand plus currency devaluation. To look only at the nominal price in US dollars is to lose half of the information.

Assets are falling in price because they were high by historical standards. What I like to call having a Japan Moment [sup]TM[/sup]. When prices can no longer climb any higher (in real terms) they have to fall....


source: historic house prices


I appreciate this graph from Seldom Seen because when I compare it to global asset prices I see a high degree of correlation between debt and asset prices. To be fair, one is US debt and the other is global asset prices, but as we know that central banks have been sterilizing export receipts and increasing their own domestic money supply we can deduce that they are 'almost' mirror reflections of one another. In other words, America as the Consumer of Last Resort over the past decade has been reflected in global asset prices - especially property - as those trade gains are monetized.



When I see these asset prices I think regression to the mean. That would have profound implications for an economy deeply in debt if housing prices were to revert to long-run averages as per that Schiller-Case Reuters article above. Equity prices, of course, would also have to reflect that wealth destruction and lower profits going forward as well.


I think when you look for peak oil everywhere you are bound to find its symptoms, well, everywhere. But bottom-line, world consumption of energy - including transport fuels - is still expanding. We are not suffering from energy shortages, yet. This is a classic financial crisis brought about by excessive debt and money supply creation on a global scale.

The backdrop of recent strong global growth is real, but not the cause of a recession. If anything that strong growth has been masking financial problems that have been manifesting themselves since 1985-1990 according to these charts and that Schiller-Case article.

So although I doubt GWB could have made a bad situation any worse, I also do not think we can pin all the blame on him either. The seeds of this disaster were planted back in the 70s, and will likely cumulate in 2028 as the 'Me Generation' reeks its final havock on public finances and policy! ; - )

http://www.atimes.com/atimes/Global_Eco ... 2Dj04.html

This article does a decent job of joining some dots. The idea is that back in 98 the US produced half of its oil consumption and oil was $10 a barrel, this created the exburbs and the big SUVs and the like. As US production dropped and oil consumption spiked the balance of trade went down and interest rates were raised to defend the dollar, these higher interest rates and increasing energy costs to live in exburbs started the cascade of defaults and dropping consumer spending. The dollar took a further dive driving up the cost of oil again, leaving less money in pockets for luxuaries hurting retail sales. The knee bone being connected to the thigh bone, this leads to job layoffs and so forth.

Not the whole picture I will grant you, but oil has had its own part in all of this.

No, doubt higher energy prices have not helped, but as Threadbear rightly pointed out the consumer was Hell-bent on painting themselves into a tight financial corner despite low energy prices, low interest rates and low inflation. They were literally gambling that everything would always be okay, so they left very little financial room to wiggle if anything went wrong.

Most of the developed world gets by on higher gasoline and diesel prices AND higher taxes than the good ol' USA and does not slip into a recession at the drop of a hat. You cannot argue credibly that the USA slipped into a recession because world growth was strong. It is like saying you got into a car accident because you were wearing a seatbelt. Both might happen, but one does not cause the other.

If you want to argue that CAFE standards in the USA as well as poor consumer choices as to which vehicle to buy contributed to a US slowdown/recession then I would not disagree. Whether oil costs $15 or $90 per barrel it is still a cost. It is a cost of production and it is a cost to the consumer. Therefore, like any other cost it should be optimized (I would say minimalized, but then someone would point out that spending $1500 a year on gasoline to make $60.000 a year working is a good trade-off)! But I really, truly, sincerely doubt that $1500 or $2000 a year (or $500 difference) in gasoline prices is what has caused this recession to occur! ; - )