Oil Crash?

[sakuraba]

As the price of oil keeps getting higher and higher, more people seem to be becoming aware that the age of cheap oil is coming to an end. I think the current situation is pretty worrying and we will be seeing some stressful times ahead. Predictions of what the peak of oil will cause range from stressful decades to adjust our economy to other kinds of energy, to Doomsday being at hand. The price of petroleum, and petroleum-related products (i.e., just about everything) will skyrocket; transportation, communications, agriculture, indeed, every major industry in the world, will sputter to a standstill; the world economy will stagger and collapse; civil authority will dissolve; and the noisy, messy experiment that was industrial civilization will expire in a world-wide bloodbath, or "die-off," that will reduce the human population by 90 percent, or more, and will leave the planet devastated, ruined, and, quite possibly, dead.


http://www.dieoff.org/

My friend read a book called: "The Party is over. Oil, wars and the fate od industrial societies. He's kind of nervous

What are your thoughts on this? How do you think the oil depletion will affect our civilization?

[ToSeek]

I don't think it will be that bad, but I do wonder if we're leaving in a sort of golden age for humanity, before we use up all the cheap natural resources and while bacteria can still be killed with antibiotics.

[sakuraba]

I don't think it will be that bad, but I do wonder if we're leaving in a sort of golden age for humanity, before we use up all the cheap natural resources and while bacteria can still be killed with antibiotics.

I would hope that technology could still help with those problems in the future. Of course, without energy, it would be impossible.

[Мастер]

Unlike previous episodes of high oil prices, the current one came about not through supply disruption, but through an increase in demand, precisely because the world economy is growing. It may seem like a golden age is coming to an end to people in rich countries, but from a global perspective, what is happening is that large numbers of people from previously dismally poor countries are now able to afford things that only people from rich countries could afford before. To them, the golden age is just beginning.

[sakuraba]

Unlike previous episodes of high oil prices, the current one came about not through supply disruption, but through an increase in demand, precisely because the world economy is growing. It may seem like a golden age is coming to an end to people in rich countries, but from a global perspective, what is happening is that large numbers of people from previously dismally poor countries are now able to afford things that only people from rich countries could afford before. To them, the golden age is just beginning.

It won't last long since oil will start to get more and more expensive. How can their economies improve or even be stable when energy gets more and more expensive?

[Мастер]

Unlike previous episodes of high oil prices, the current one came about not through supply disruption, but through an increase in demand, precisely because the world economy is growing. It may seem like a golden age is coming to an end to people in rich countries, but from a global perspective, what is happening is that large numbers of people from previously dismally poor countries are now able to afford things that only people from rich countries could afford before. To them, the golden age is just beginning.

It won't last long since oil will start to get more and more expensive.

It may not last long, that is possible. But if it does not, it won't be for this reason.

I would point out that the amount of money paid by oil consumers is exactly equal to the amount of money received by oil producers. Some countries are net exporters of energy and others are net importers. The world is (in financial terms) neither a net importer nor a net exporter, since solar energy arrives free of charge. So while a high price of oil is bad for a net importer of energy, how is it bad for the world economy?

How can their economies improve or even be stable when energy gets more and more expensive?

First, some countries are net exporters of energy. Their economies improve automatically when the price of energy goes up. But, even if they are net importers of energy, their economies might improve because the price of energy is not the only factor affecting economic growth. In the US, energy consumption per real GDP is approximately half what it was a few decades ago. In many countries, energy is used very wastefully because it is subsidized. That could change (and probably will change if the price of energy goes up). New sources of energy can be developed; oil is certainly not the only source, it only happens to be the cheapest source at present. Where I live in the US, many people are living in what look like castles, and drive vehicles that look like tanks. That could change.

The price of oil has roughly tripled in a few years, with not only no spectacular decline in the world economy, but sustained growth. Rising enery prices are not incompatible with growth, and even if the predicted collapes of the world economy were actually to take place, why would the price of oil stay high?

I see no reason why a demand-driven increase in prices will bring about economic collapse. A collapse is possible, but not for this reason. Now a supply-driven increase in price, that's a whole different story. But even then, oil is not the only game in town. The world is awash in energy, if the cheapest one is exhausted, it will move on the next one. I personally suspect that environmental considerations are going to more of a problem on growth in energy consumption than lack of supply.

[sakuraba]

How are nations going to deal with this problem? I have heard that conservation would have to be adopted as a way to get oil to last longer while other alternative energy sources become usable. However, the transition would take decades. Some think that would turn people against authority, ending civil authority and starting resource wars.
Whatever happens, it will surely be a slow and painful transition.

[Мастер]

How are nations going to deal with this problem?

In different ways, although as per above, it is not a probelm for countries that are net exporters of energy, unless their domestic consumption grows to the point where they become net importers (perhaps Iran?).

I have heard that conservation would have to be adopted as a way to get oil to last longer while other alternative energy sources become usable.

This is taking place now. If demand for oil becomes stronger, causing the price to go up more, then this will take place faster. The US, despite being a heavy consumer of energy, is consuming only half per unit of real GDP as before the first oil shock after the 1973 Arab-Israeli war.

However, the transition would take decades.

It might, but there are decades worth of oil left. And should the situation change, due to unexpected increases in demand, or to disruption of supply, the price of oil will go up more, creating a strong incentive for the development of alternatives. I think a transition could occur with quite impressive speed given a sufficiently powerful price incentive. It would be disruptive, of course, but it could still happen. I would look at some of the economies of East Asia, it is remarkable how much can be accomplished in a few decades.

Some think that would turn people against authority, ending civil authority and starting resource wars.

Well, to some extent, this is happening now...many claim the US adventure in Iraq is a war for oil, although they could have just purchased the oil a lot more cheaply. But resources play a major role in some African conflicts, and protests over the price of fuel helped bring down 30+ year rule of Suharto in Indonesia...

Whatever happens, it will surely be a slow and painful transition.

I think that these two characteristics "slow" and "painful" are partial substitutes. The slower it is, the less painful it will be. But I would point out that big transitions have taken place in the past. The early stages of the industrial revolution were not powered by oil, so we can't claim that prior to oil, our ancestors were all subsistence farmers.

No doubt exhausting the supply of an important natural resource has impact, but if economies respond to price signals (energy is subsidized in many countries, this is really bad because when it becomes scarce, people do not respond by conserving), they will adjust. Will industrial civilization collapse? Anything is possible, civilizations have collapsed before, but I don't think it is a necessary or even likely consequence of the exhaustion of the supply of oil.

Finally, I would mention oil isn't even as scarce as is often claimed; what is scarce is oil that can be extracted from the ground at a profit. If the price of oil rises, technologies to improve the yields of existing oil fields become economically viable, and currently non-viable sources of oil (e.g., tar fields in Alberta) become viable.

There will be adjustment, no doubt. Personally, I wouldn't bet on the collapse of industrial civilization, though...