[mmasters]

In the next few years when the spare capacity runs dry (which it will I dont' think anybody here questions it), other than the obvious oil spike and shortages what exactly is going to happen next? a private nationalization of the oil markets? an acknowledged energy crisis with global rationings? more war? the 1970s all over again? What?

[Loki]

All of your questions are answered here.

Seriously, dude, your guess is as good as mine. Economic freefall seems the most likely scenario to me. This could entail government rationing of gas/diesel, or maybe we'll just stick with good old fashioned price rationing. I think global-scale war is pretty improbable, but regional flare ups may be exacerbated; could be a problem if you live in Iran or Pakistan, not so much if you live in Indiana or British Columbia. We in the developed world will likely get much poorer, much faster than we'd like, and we'll have to learn to live with a lot less oil. We'll also likely see political turmoil that will make Occupy Wall Street look like a Girl Scout meeting.

Not sure about the 1970s, I believe bell bottoms have already come back and gone out of fashion again, but porn star mustaches and big sunglasses are still quite popular among the hipster crowd in Portland. Disco is still dead, thankfully.

[JohnRM]

The crisis will be averted as poorer developing nations are priced out of the market, being unable to compete with wealthier countries. This will lead to the exploration of alternatives, in these regions, while the remainder of the world continues, business as usual. As the prices slowly rises over the coming decades, so too will the price level at which the cost of oil causes global recession. If these two ever meet, before we've adequately developed alternatives, we will then start a cycle of deep demand destruction followed by partial recovery, repeated ad infinitum, until either industrial civilization ends or we find another abundant source of cheap energy.

Please be advised that we may already be at that point where we've hit that pattern of deep recession-partial recovery, already. If unemployment ever returns to levels prior to the collapse of 2008-9, then we're not quite there yet, but thus far it appears that we are.

[Kristen]

I imagine price increases will cause demand destruction like we witnessed in 2008, perhaps on a more drastic scale.

[SeaGypsy]

The crisis will be averted as poorer developing nations are priced out of the market, being unable to compete with wealthier countries. This will lead to the exploration of alternatives, in these regions, while the remainder of the world continues, business as usual.

Better be a bit (like a hell of a lot) more specific John. On face value this post isn't worth the electrons it uses to store on google. You could not get wronger. Mark my words.

Kristen. Nope.

[Shaved Monkey]

Bankrupt first world nations may be priced out of the market as resource rich poorer developing countries nationalise their energy assets and direct supply to internal use.

[Corella]

For the short run: my nebula balls are cloudy today.
My deepest worries in a longer run are: new misery and therefore increasing(!) population-grow in parts of the world where it just started to ease a bit due to a certain wealth.

[SeaGypsy]

Google: China Electric Vehicle/ Electric Car/ Electric Scooter/ Stand Alone Power Systems, they are so far ahead it stopped being funny for a few years until it got hilarious with Detroit's latest/ as pumped by oily wherever possible.

[MD]

There will always be spare capacity. The market will always shrink before spare capacity hits zero.

[SeaGypsy]

Either that or everyone's got their head so far up their own backside just trying to survive we don't notice any spare capacity above the rib cage. In which case, we shall wish we planted more food.

[Cog]

There will always be spare capacity. The market will always shrink before spare capacity hits zero.

Or as the Saudi's put it constantly: "The world is well supplied with oil"

They leave out the affordable part though.

[Pops]

So what makes you think it hasn't already run out? Wasn't the release from the SPR last summer pretty good evidence?

I think it was seahorse who said the SPR is the new swing producer.

I believe prices are limited now not by "what the market will bear" but what the economy can survive. Even at that, the price is supported by enough new demand that it will prune inefficient use by us in the "old demand" world. Figure one mile driven in non-OECD equals one less in the OECD.

Did you see that the portion of US GDP representing actual earned income is the lowest ever? Only 44% of GDP is from actual wage and salary income. Consumer debt jumped 11% in November because you can buy a car on credit but aside from cars spending was down in december.

I guessed on a small range of oil price movement this year. Pardon the clumsy metaphor, but economically we're at stall speed with an open throttle, we'll continue to trade "altitude for speed" in the form of falling consumption and good jobs but you can't glide forever.

Anyway, that's my gloomy outlook this morning.

[Heineken]

There will always be spare capacity. The market will always shrink before spare capacity hits zero.

That's a very interesting comment. Thought-provoking.

[mmasters]

Seems like a lot of votes for demand destruction, it seems to make the most sense, the market is more capitalistic and just in time priced than ever. Perhaps a lot of oil based demand destruction will give us an alternative market for NG and electric vehicles out of asia.

We could be in for the 70s too if we get some unexpected events like super hurricanes in the gulf and big quakes in the middle east, or Iran shutting off the gulf.

[SeaGypsy]

Seems like a lot of wishfull American thinking. I can't be bothered arguing further. If I'm right, the late $70's low will hold firm for the forseeable.

[Revi]

Here's an article that has everything:
http://oilprice.com/Finance/Economy/The ... onger.html
We are in trouble already, and it isn't going to get better for a long time.
Enjoy what we have left. It won't be long now...

[rangerone314]

In certain parts of the world, where there are rising expectations, those rising expectations will be dashed.

It seems often that it is when there are rising expectations that are dashed, is when you see violent revolutions and turmoil, like in 18th century France.

[no_wuckin_ferries_mate]

The oil price is solely depending on the affordability of the poorest market participant.

Less oil available, but everybody wants some, so the wealthier participants will offer to pay a little more, and a little more again, until the poorest one gives up.

The so found new price level will be maintained until there is again less oil available. Then the same happens again.

The poorer ones might not give up competing for oil all the sudden. As one can see in Europe now Italy and Greece can't keep up any more since Germany does not send any more money.

So in those countries we have the same situations as above globally.

The poorest ones in Italy and Greece do now without heating oil, going back to where they were 40 years ago.

If countries are not competing for oil on the same market it would not work as described. Like if Iran sells oil to Syria for 70 dollars it does not help the U.S. to offer to buy it for 100 dollars. In this case if the U.S. wants the oil they have to use military power and just take it.

[Corella]

Hi,
the concept "lets run quickier than the slowest" is showing its limits everywhere. I think Germany will pay until the whole thing recovers or reset together with all. How can Germany act else? We are living from export which cannot be a concept for all, because it just don´t work. The payments are like a parasite is trying to cure its host.

cheers

Corella

[ralfy]

Reminds me of this article:

"Peak oil is a done deal"

http://www.energybulletin.net/node/45940