I've been harping on this for a long time and I'm sure that many of you assumed I was crazy and going off the deep end, but more and more, my fears are coming true. Each day brings a new record high for the selling of crude oil and prices at the pump seem to set records every few hours. Oil closed today at over $124 a barrel and all signs point towards $200 a barrel oil by the end of the year or early spring 2009. For me, the two most troubling things about all this is that so many people seem to think that this is a temporary thing and prices will soon be back to normal and as a result, I fully expect governments, especially our dysfunctional one, to do a lot of very stupid things.
As I've said before, there are several reasons for the increase in the price of oil:
1. Production has been flat for nearly three years now- Peak Oil is here.
2. OPEC seems unable to raise production and it now appears that Russia has peaked as well.
3. Countries like Saudi Arabia and Russia, the two largest crude producers, have seen their economies roar with the increase in oil revenues. As a result, they have less and less oil to export thus reducing the amount of oil available to importing nations like America.
4. China and India continue to see strong economic growth and as a result, more and more people are now able to afford to buy automobiles.
5. Americans are incredibly wasteful and use so much more oil than the rest of the world that until demand destruction happens here (and to Europe to a lesser extent) supply will be tight or unable to meet demand.
So what does the future hold? Well, in the short term, it means higher and higher prices at the pump. As fuel prices increase, other goods that depend on oil for production, transport and other inputs (that means pretty much everything) will also rise in price. I'm not sure at what price demand will begin to fall, but we haven't reached that point yet. As of now, only the smallest and poorest countries are being severely affected. It's probable that it won't be long till those at the bottom of the economic rung in this country will begin to be priced entirely out of the oil market. At that point, the only thing that will determine when the rest of us join them is time.
My predictions for the future are not pretty, but maybe if we get our asses in gear in a hurry, we can still prevent the worst of the worst from happening. The near future promises to be tough and what we do during these next five to ten years will determine if things go from mearly bad to downright awful. Our entire economy and way of life is based upon the premise of cheap and abundant energy. Those days are over and will never be back. We must adopt to a new way of life, one that demands that we power down immediately. The illusion that we can continue with business as usual is simply crazy and will only result in heartache and severe loss of life.
I cannot say it enough and so I'll say it once more: THE PARTY IS OVER! It's been a nice run, it really has, but the past 100 years or so will ultimately prove to be nothing more than an abberation in the history of the world. Abundant fossil fuels have made everything possible and I mean everything. The food you eat, the home you live in, the car you drive, the medicine you take and the life you are living is the result of one thing only, cheap energy derived from fossil fuels. Were it not for the discovery of oil, the greatest gift ever given us, most of us would not be here today. We were born only because fossil fuels and more specifically oil, made it possible to overshoot the natural carrying capacity of Mother Earth.
I hope that this is getting through to those of you who read this blog and I wish I had a bigger microphone to yell this from but this is all I've got. Life is really going to change for all of us and some of us are going to be better prepared than others. I want to be optimistic, I really do, but something just tells me that we won't get serious until it's way too late. I hope I'm wrong, but so far, nothing seems to indicate that things will go well. Best hopes for a low energy world. Best hopes for somehow, someway, making it through what James Howard Kunstler calls "The Long Emergency."