Peak Oil is You

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Page added on September 29, 2009

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What Is Peak Oil?

Are we about to run into the absolute geological limits of oil in a way that won’t allow us to increase production going forward? I don’t know and I have nowhere near the appropriate level of knowledge to truly judge the data I see on this weekly. And frankly I don’t particularly care; humanity will hit that peak at one point or another and the exact timing is of very little relevance to me.

What is far more relevant is the price point (and time) at which we hit the economic – rather than the geological – peak: let’s call that Effective Peak Oil (EPO). EPO occurs where the marginal barrel of oil, which sets the price for all barrels of oil in the market, is so expensive that: (1) it triggers a process whereby governments, people and firms search for and find substitutes in a way that alters the structure of the economy and demand for oil forever and; (2) in the process, it also triggers a substantial economic shock. Does EPO look like a nice, smooth bell-shaped curve? Probably not, or at least not when plotted on a timescale relevant to most human beings (i.e. 60 to 90 years).

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