[dinopello]

I know Richard Heinberg in End of Suburbia was very clear that economic downturns caused by oil supply constraints would mask and confuse the recognition of the onset of peak oil. and, anyway it's pretty obvious that this is what will happen. Price prediction is a fool's game.

dino in 2007 says...

Anyone who seriously tries to predict prices is a fool.

[kpeavey]

Every time it snows, someone uses the weather as PROOF that global warming is false.

If someone is unable to explain what happens when you die, someone else claims that failure as PROOF there is a god.

A theory does not fail just because of an aberrant data point. The data trend for Peak Oil is not useful over the course of a few weeks or months. It is measured over years. One aspect that has been predicted in these boards and many other PO circles is high volatility in price. This is exactly what we are seeing. A low price does not destroy PO theory, it is supporting evidence.

[Chuckmak]

Personally I'll take a depression with cheap energy over a die off anyday. Still nothing to cheer about.

I agree 100%

[UncoveringTruths]

Many peak oilers predicted a "Greater Depression" or "Grand Depression" that would lower oil prices and hide the peak.

Just curious, but who exactly are you referring to? I don't recall any articles on that theme at the Oil Drum. Please cite the predictions themselves, with links.

Not from the Oil Drum but there are numerous projections around here, here is one from 2004. I like the old analogy of "Wash Rinse Repeat". We are currently in the Rinse cycle.

Such wrote

At some point however, (i suspect around 2007) we will move into a period of a consistent decline since no new major oil projects are expected to begin that year. Weather or not this is will be manageable is concerning... I expect that it will be similar to the oil shocks of the 70's, which were bad but largely manageable. Demand will probably be cut further like the early 80s with a recessive economy. Also, that will probably spur a flurry of activity to begin the last of the major oil projects, which would probably come on stream a few years later and increase oil output one last time. Plus, I can imagine that the Saudis will be forced to open the floodgates completely, opening the last of the reserve fields - the lower quality stuff - and Iraq may be able to be the last swing producer by this time. This then will be the cusp of the cliff.

The peak oil conspiracy Sept 16, 2004

[Armageddon]

Personally I'll take a depression with cheap energy over a die off anyday. Still nothing to cheer about.

I agree 100%

The outcome may be the same.

[mos6507]

The timing of the financial crisis has blurred the line between the impact of peak oil and the impact of the financial crisis. I think it would be unwise for peak oilers to attribute the demand destruction as being solely due to the high prices we experienced earlier in the year. It's also unwise to claim that peak oil popped the housing bubble, which was a ponzi scheme that would have popped on its own sooner or later regardless of gas prices. The housing bubble was a parallel timebomb that I had been tracking all this time and it does not surprise me to see this outcome. The world has more interlocking gears in it than just oil prices.

Ultimately when oil production drops so severely that demand destruction can no longer keep up with it, then we will begin to see the final act of peak oil collapse. Still being on the plateau as we are in a world that continues to waste tons of oil, I think this whole episode just shows how much buffer there is before the store shelves are empty and zombies take to the streets.

[emersonbiggins]

Yergin seems to have been a great contrarian indicator for the price of oil. But he did call the near-$150 ceiling, though...

I've also noticed that he is conspicuously absent from any major articles, as of late.

[dukey]

everything is getting sold off in the market
the down jones is down like 5000 points
the economy has gone to hell, it's no wonder the price of oil has declined

[dohboi]

Mos wrote:

"The timing of the financial crisis has blurred the line between the impact of peak oil and the impact of the financial crisis. I think it would be unwise for peak oilers to attribute the demand destruction as being solely due to the high prices we experienced earlier in the year. It's also unwise to claim that peak oil popped the housing bubble, which was a ponzi scheme that would have popped on its own sooner or later regardless of gas prices. The housing bubble was a parallel timebomb that I had been tracking all this time and it does not surprise me to see this outcome. The world has more interlocking gears in it than just oil prices."

Nicely put, and I largely agree. But are you claiming that cheap oil prices (and the expectation of continuing cheap oil prices) had nothing to do with the inflation of this housing bubble in the first place? Much of the housing boom happened in the suburbs and exurbs. Would people expect those to be good investments if they thought that gasoline prices were going to go above $4?

There were all sorts of financial shenanigans going on that were sure to implode at some point. I would just argue that for many of these schemes to fly even in the short term depended on a lot of peoples expectations that cheap energy (and all it entails) would be available for the foreseeable future.

[Armageddon]

The housing bubble was directly related to PO. PO caused the economy to stagnate, so they needed a way to keep the party going for a final hurray. They knew what the outcome would be. They also knew it was a way to rape and pillage the most amount of money from the American economy before it blew. They have made out like bandits and the US people are left holding the bag.

[mos6507]

Nicely put, and I largely agree. But are you claiming that cheap oil prices (and the expectation of continuing cheap oil prices) had nothing to do with the inflation of this housing bubble in the first place?

The timing of the housing bubble was mostly due to the the boom in ARM mortgage resets from homeowners who never should have qualified for houses buying in to the ponzi scheme at the tail end, and being the last sucker holding the bag when housing inentories reached a critical mass and prices well out reach.

High energy prices only put an additional downward pressure on exurb home values. The dysfunctional CDO market and the herdlike mentality of the banking industry in gobbling them up just created this domino effect that could have happened at any time in modern history.

If you want to start talking about the energy availability that enabled home construction in the first place, really you might as well expand the view to that of all of industrial society as a whole. Obviously without cheap energy, society as we know it ceases to exist. So that's really too much of a convenient catch-all to use as an argument. It's kind of like the Church lady who no matter what she was discussing, always reduced things to "could it be......... SATAN??"

When TSHTF due to peak oil, we're going to be well off the plateau, and the pain will be far worse than a traditional depression. There simply won't be any debate as to the main driver of the suffering by that point. That's the period in which the general public finally wises up and the powers that be try and fail to plug the dyke as the law of receding horizons kicks in.

I mean, nobody should really give a crap about the statistical peak of oil production. What people are concerned about is the impact of peak oil on quality of life. I think people have to come to grips with the idea that the deep suffering of peak oil that we fear so much is significantly offset in time from the statistical peak. What we experienced over the summer when gas hit $4 will be seen as a minor irritant in comparison. And peak oil is not the only way we can experience collective suffering.

I mean, if it makes you or others feel better to have peak oil take "credit" for the financial crunch, fine. I just don't buy it, and I think we'll look back on this crisis in the years ahead and realize that it was a mild false alarm compared to the main event.

[dohboi]

"If you want to start talking about the energy availability that enabled home construction in the first place, really you might as well expand the view to that of all of industrial society as a whole."

Yes, that is pretty much what I think. I guess that makes me the church lady in the Church of PO

But really, I am not denying that the proximate causes were the ARMs coming due and the overbuilding...; just that most outside this site see these as the only cause, and fail to see the larger underlying context of expectations of forever-cheap oil as playing a major roll in the formation of the housing and other bubbles.

But ultimately, yes, the devil made 'em do it

[Ibon]

There are so many factors that will influence oil price. It is always helpful to remember some real basic points. Even the most optimistic cornocupian will agree that consumption has exceeded discoveries for over 20 years and that the remaining reserves to be discovered are no longer cheap easy to get at oil.

At 50 dollars a barrel where the hell will the investment come to get at the more expensive remaining oil?

Are we not currently setting ourselves up for a far greater spread between demand and supply in the not to distant future?

You bet.

[Concerned]

The price of oil has dropped by nearly 2/3 and no matter how people try and rationalize it you have to admit peak oil is now a hard sell.

IN FACT if you read many posts about Peak Oil you will find one of the bigger disaster scenarios economic collapse due to the end of "cheap oil" Grab a copy of "End of Suburbia" filmed in 2003

[neocone]

It is simply the reversion to a natural prosperity curve:

- Top 1% will enjoy great riches
- Rest is in the slums

Less oil -> Less economy -> Less pie and less pie / greater people => more "savage" capitalism (Somali pirate or Wall Street financiers style) -> Rich get richer and poor get poorer + instability (i.e revolutions)

Silly are those who ignore the three basic laws of thermodynamics.

[Concerned]

I've been on this group since Aug. 2004, and peak oilers claiming that oil would come back down were as scarce as hen's teeth, until just recently. So what we have here is just another in a long line of blown calls by peak oil theorists, which they will paper over with the usual of ex post facto weasely bullshit. Peak oil theorists (with the notable exception of HeadingOut from TOD) have a hardwired inability to frankly fess up to their mistakes. No matter what happens, they spin it so they were right all along.

Go to the search option and type in "demand destruction" In fact dig up your own post about unimpeded economic growth re: high oil prices. Remember that one? or you just have selective memory when it suits your argument.


Cheap is a relative term and events of 6-12 months are so short term it's not funny. Lets not forget $10 to $50 oil is a 500% increase.

Oil at $50 bbl when you don't have a job or your factory/truck/shop is idle is not much help at all.

[aflurry]

The timing of the housing bubble was mostly due to the the boom in ARM mortgage resets from homeowners who never should have qualified for houses buying in to the ponzi scheme at the tail end, and being the last sucker holding the bag when housing inentories reached a critical mass and prices well out reach.

High energy prices only put an additional downward pressure on exurb home values. The dysfunctional CDO market and the herdlike mentality of the banking industry in gobbling them up just created this domino effect that could have happened at any time in modern history.

i dunno... the housing bubble itself was the last phase in a general trend of increasing leverage over the past 30 years, the underlying cause of which is that we were in the convex arc of oil production increase, the second quarter of the game where each year the rate of increase shrank relative to the previous year, on average. To keep the economy growing, we had to promote continued leveraging of our productive capacity.

your second paragraph analysis just stops short in that it doesn't ask why we were suddenly willing to sell these ARMs and other devices designed to open the credit markets to unworthy borrowers. We were scraping the bottom of the barrel and more willing to take a risk for the last dregs of shaky leverage. And our homes were the final asset we hadn't leverage past the point of unsustainability.

I'm not sure if it was a logical necessity for the peak in production to have occurred exactly prior to the collapse, but it sure does make sense. Since a loan is a promise to pay back more than you borrowed at a future date, loans can only be given in the context of the expectation of future economic growth. Even if you can't pay back the loan, you can always roll it over as long as more growth is expected. But as soon as growth stops, that is, as soon as peak is reached, that expectation completely shuts down.

i think your second paragraph is underestimating the role oil plays in modern life, it isn't just for gas for cars. and the problems resulting in this economic crisis didn't start in 2003 with the housing bubble. That bubble itself was a leveraging of assets to pay for prior loans and keep the economy expanding. Even on the way up, people were saying it would be the final bubble, because basically, our houses were the last thing we had to hock.

[mrobert]

Guys,

A while back, the governor of our central bank, made a statement:
If gas prices rise by 20%, consumption drops by 1%
It might not be exact math, but the fundamental is correct.

Did the doubling in price of gas, made people drive half the distance?
No!
The other way around, if the distance driven drops by a bit due to the recession, the price of oil plumets.

Prices dropped 50% because demand dropped by what .. 3-4%?
That won't change the Peak Oil equation by much.

If you know or have some charts on the price elasticity of gas/oil, please post it.

----

I really don't see anything funny or changed.

[kublikhan]

Chuckmak, your avatar got me again. I almost smashed my screen to try and kill it.

[Rambo]

Rambo-

Hell of an argument. Nice of you to explain your comments so well PO has gone nowhere. Oil production is still heading off a cliff and sooner or later we'll have an entirely new crisis which involves massive shortages and higher prices.

Oil has been following the DOW right down the gutter...You've got cheap gasoline, but no longer have a retirement

I agree peak oil is very real all I said is with the current oil price it's a hard sell for the general public.