[DesuMaiden]

How expensive would the price of oil need to be in order for society to not be able to afford oil anymore? Is it $150 dollars a barrel? Or is it more like $200 a barrel? Or is it $250 a barrel? Or is it $300 a barrel? How expensive must oil be in order for industrialized civilization to collapse?

Currently the price of oil is around $90 to $100 a barrel. I think that is already much higher than the historical price of oil. How much higher must oil prices be in order for our economy to no longer be able to afford oil at all? What is the reasonable threshold for oil prices in order for society to function?

Why do oil prices sometimes spike upwards? Like the $147 dollars per barrel price of 2008? Why did the price of oil become so expensive in 2008?

I would like to know because I would like to know what affects the price of oil. And what are the reasonable prices of oil for society.

[Pops]

I'd guess there is no set threshold, more a sliding scale. The lower the price, the less utility required to justify the cost - drive to the QuikSac for a bottle of water. In order to justify a higher price one must receive more utility per unit purchased, more bang for the buck, so a trip to the Sac might require purchasing a flat of waters instead.

I'd guess very cheap energy subsidizes the economy more than any of us can guess.

But as I've said for a while now, the price doesn't necessarily need to increase to some silly number for demand destruction to be evident - the economy could possibly shrink to meet the supply available. In fact if the economy shrinks faster than the supply falls, the price might even fall even as decline takes over.

--
The price of oil is "set at the margin" - in other words, it is an auction and the price paid for the very last barrel supplied is the price paid for every barrel sold at that particular time. If the demand is high price goes up and for a while anyway people are forced to pay - that means the demand is inflexible - people need to drive to work etc. But a little longer term, people make adjustments and drive less, trade vehicles, move closer etc. Again, the people who were wasting the most (receiving the least utility) are the first to cut back. Witness the US, the world champ QuikSac trippers.

[ROCKMAN]

Pops - "In fact if the economy shrinks faster than the supply falls, the price might even fall even as decline takes over." You mean like we're possibly seeing now? LOL. We've talked about it before: the time lag of the dynamics is difficult for some to appreciate. And I know it's a tad catty to pick on folks for the phrases they use but you pretty much made the same point: "society" doesn't buy refined products. Individual consumers buy them. And today some of those consumers can afford products made from $120/bbl oil while others can't when oil is going for $60/bbl. I know it's easier to pontificate in generalities. But such generalities will always be weak when compared to specific situations. For the moment the Chinese "society" seems to handle $100/bbl oil OK. The Greek "society"...not so much.

[RepublicanfromEngland]

Brent crude is currently $86.13.

A french investment bank claimed that possibly by 2015 one barrel could of costed at $300. That is enough for the economy to be severely affected.

[Byron Walter]

Brent crude is currently $86.13.

A french investment bank claimed that possibly by 2015 one barrel could of costed at $300. That is enough for the economy to be severely affected.

Yeah, it figures that it would be a 'French' bank that would spout that kind of idiocy. The French are to banking what Chef Boyardee is to Italian cooking. I do make bets in the markets but I will never bet on the future price of oil at any given point in time other than to say I'm feeling pretty sure oil won't be anywhere near 300 bucks.

[ROCKMAN]

Ding ding ding: I nominate Byron for the "Best Analogy of the Month" award: The French are to banking what Chef Boyardee is to Italian cooking. LOL.

[Byron Walter]

Ding ding ding: I nominate Byron for the "Best Analogy of the Month" award: The French are to banking what Chef Boyardee is to Italian cooking. LOL.

Hey, thanks... I've learned tons of stuff from your excellent posts. OTOH, your character judgment skills might not be tiptop.

[MonteQuest]

How expensive would the price of oil need to be in order for society to not be able to afford oil anymore?

It varies from time to time.



I think the better question is: How expensive would the price of oil need to be in order for GDP growth to stop?

We couldn't have but an anemic economic recovery at $100/barrel, even with zero interest rates and huge debt increases, so I think we are already there.

[MonteQuest]

Why do oil prices sometimes spike upwards?

Sometimes the surge in oil prices has been due to supply restrictions, triggered by OPEC or by war in the Middle East. In 2008, it was due to rapid growth in the demand for oil, coupled with speculation fueled by the spector of oil production possibly not being able to meet that demand, due to the reality of peak oil on the horizon.

[MonteQuest]

How much higher must oil prices be in order for our economy to no longer be able to afford oil at all? What is the reasonable threshold for oil prices in order for society to function?

When people face an increase in oil costs, usually experienced through higher prices at the pump, they have a tendency to cut back in discretionary spending, since many oil expenditures are for necessities, like commuting to work.

Probably the better question is how long before the cost of gas/oil exceeds their discretionary spending budget?

[vtsnowedin]

The question should be "What price of oil is too high for a particular society to afford?" Suburban USA needs much oil, China not so much. The USA uses 61 bbl/day per 1000 people, China only 7. We are not 8x happier nor wealthier than the Chinese. The Chinese don't have big houses, nice cars, pretty shopping malls, but they will continue when we fail.

Societies with intact cities served by modern rail/barge infrastructure (energy efficient) might even thrive post peak. Places where food, manufacturing, resource production, and the populace depend on cheap fuel, big trucks, long commutes will not. That would be the USA and Canada.

I would not count the USA and Canada out so easily. Sure the suburbs that are designed and built around the automobile will fade away but much of the country was viable before oil and will be after oil. NY city was a viable sea port before oil and will continue to be after. The country is well served by railroads and inland waterways such as the Mississippi system and the St. Lawrence seaway. And above all Americans are adaptable and will rise to a challenge. I think North America can and will get along quite nicely using just it's own declining oil production as well as any other area of the world.

[Deputy Barnes]

Neither would Pstarr if he did not hate them so strongly, wishing to see them and the rest of Western civilization fail.

The question should be "What price of oil is too high for a particular society to afford?" Suburban USA needs much oil, China not so much. The USA uses 61 bbl/day per 1000 people, China only 7. We are not 8x happier nor wealthier than the Chinese. The Chinese don't have big houses, nice cars, pretty shopping malls, but they will continue when we fail.

Societies with intact cities served by modern rail/barge infrastructure (energy efficient) might even thrive post peak. Places where food, manufacturing, resource production, and the populace depend on cheap fuel, big trucks, long commutes will not. That would be the USA and Canada.

I would not count the USA and Canada out so easily. Sure the suburbs that are designed and built around the automobile will fade away but much of the country was viable before oil and will be after oil. NY city was a viable sea port before oil and will continue to be after. The country is well served by railroads and inland waterways such as the Mississippi system and the St. Lawrence seaway. And above all Americans are adaptable and will rise to a challenge. I think North America can and will get along quite nicely using just it's own declining oil production as well as any other area of the world.

[MonteQuest]

And above all Americans are adaptable and will rise to a challenge. I think North America can and will get along quite nicely using just it's own declining oil production as well as any other area of the world.

This isn't a challenge to be met by adaptation, unless you mean taking a massive decline in the standard of living and giving up "happy motoring" as adapting.

The US consumes 25% of the world's oil and has 2% of the world's reserves. Rather doubt we will do quite nicely. Of all the countries in the world, we are the last to know what it is like to do without anything.

[Pops]

Here's a related thread:
the-price-of-collapse-t68138.html?hilit=price%20of%20collapse

somewhere in there I said

... China's use is rising and the US's is falling, they are outbidding us [while earning] $1.50/hr because they can make better use of one gallon than we can of another gallon even though we average 16x their income!

[vtsnowedin]

"suburbs that are designed and built around the automobile will fade away"

Like fairy dust? All sparkly . . . then poof!

Or will they become heckholes? (that darn COC)

Just look at Detroit.

[vtsnowedin]

This isn't a challenge to be met by adaptation, unless you mean taking a massive decline in the standard of living and giving up "happy motoring" as adapting.

The US consumes 25% of the world's oil and has 2% of the world's reserves. Rather doubt we will do quite nicely. Of all the countries in the world, we are the last to know what it is like to do without anything.

I think the whole world will take a considerable decline in it's standard of living and yes the US has a higher point to fall from so more room to fall.
Single occupant "happy motoring" should and most likely will end. Car pooling to work will become economically mandatory and many will move their households to within walking distance of their jobs. Walking to work will improve the obesity rate and reduce healthcare costs.
Not all Americans are millennials raised by bubble headed soccer moms. Many have dealt with considerable adversity throughout their lives. Even the pampered x-box players are the grandchildren of the survivors of the Great depression and once challenged will rise to the challenge.

[vtsnowedin]

Here's a related thread:
the-price-of-collapse-t68138.html?hilit=price%20of%20collapse

somewhere in there I said

... China's use is rising and the US's is falling, they are outbidding us [while earning] $1.50/hr because they can make better use of one gallon than we can of another gallon even though we average 16x their income!

I doubt that anyone in China is making better use of a gallon of fuel then a farmer in Iowa is. Now a car idling at a red light in LA that is another matter.