by RogueEconomist » Mon 26 May 2008, 22:31:52
$135 is definitely a cheap price for Oil, especially considering the precipitous drop in the value of the dollar as the currency is further debased. However, in the absence of an economic crash of herculean proportions, over time substitute forms of energy will come to replace oil. The main problem being that right now the money simply isn't being directed toward building a defferent energy infrastructure and due to the enourmous national debt hanging over our heads, we don't have the economic wherewithal to start building it, at least not without a serious change in government policy.
The skyrocketing cost of oil isn't just going to drive us off using it, its also going to drive everybody else off it also. The Chinese have no more real ability to pay those prices (and higher ones) than we do. Its the interim period between the Oil based Energy of today versus alternative sources we will use in the future that is the risk period, because of the economic disruption inevitable during the transition period. How bad that economic disruption is going to be is a matter of conjecture at the moment, in my worst case scenarios I can see a full blown depression that would make the Great Depression of the 1930s seem like a Boom, followed by a full scale Thermonuclear war for the possession of resources that would mostly likely end Human Existence.
However, its not an absolutely inevitable outcome. There could also be a less intense but more extended period of Global Poverty with a significant portion of the population wiped out thru Hunger and Starvation rather than than War. What resources there are would devolve to the survivors of this period, and then a period of rebuilding would follow creating a new energy infrastructure based on other sources, most likely a combination of coal, nuclear, solar, hydro and wind power, with Portable Power in the form of Hydrogen Fuel Cells and synthesized hydrocarbons from plant matter.
Oil has provided a cheap source of energy in the first century following the Industrial Revolution, it definitely is a finite resource that is running out but its hardly irreplaceable as an energy source. The fundamental energy source we have is for all intents and purposes inexaustible, the Sun. Its probably good for another 4 Billion years. It rains down plenty of energy onto the planet every day to provide us enough heat to drive all our machines, its just a matter of collection and transformation of the energy itno portable power. In the best case scenario, we won't really ever have to give up the type of mobility the automobile and the airplane have afforded us over the last 50 years, they just will be powered differently and have different configurations. In the near term, automobiles will be lighter and made from composite materials and powered by lithium-ion batteries, charged off the grid mainly powered by coal fired electric plants. Longer term, you will see hydrogen fuel cells come to market. Jet Fuel powered airplanes can be replaced by Rail-Gun Fired Gliders, Ballistic on the way up, gliding on the way down like the Space Shuttle does. Its all possible, IF the economic system can survive that is, and that is far from certain.
The problem to focus on here is not so much that oil has peaked in production or that its running out, but in how we will move toward replacing it in the future. there are numerous scenarios to this, none will come without pain, some scenarios have more pain than others. In about all scenarios though, there needs to be a significant die off in the human population of the planet, either thru war or starvation. Way too many people on the planet right now for the Spaceship Earth to support.
Rogue Economist