Peak Oil: Is Today the Day?

Gas lines in Louisiana in 2005. Are they coming soon, to stay? (Photo by Jaseman/Flickr)

What if it were today? What if today were the day that the realization dawned somewhere and spread virus-like across the web and the world: peak oil is here, it’s real, and it’s not going away? How many things would we wish, on the evening of that first day, that we had done before it came?

Today could well be the day. Gasoline prices are higher than they have ever been in their history — for December. Crude oil prices are edging toward $90 per barrel, which is the highest they have ever been except for a nine month period in 2008. (Exclude that same period from the history of gasoline prices, and today’s are the highest in history. Period.)

Applying the law of supply and demand to oil and gas prices is always a chancy proposition, since they depend so heavily on the bets of the professional gamblers who plunk down billions of chips daily at the tables of the commodity-exchange casinos. These folks never take possession of any oil, they simply bet on what their fellow bettors are going to do, and thus decide the course of our lives.

But underneath all that, the law of supply and demand, like the law of gravity, continues to work quietly but inexorably. When a thing is in short supply, and lots of people need it, its price will go up.  Observe that the historically high prices of oil and gas that were recorded in 2008 floated on a massive, global housing-credit bubble, and note that when the bubble collapsed and the economies of the leveraged world fell into deep recession, so did the prices of oil and gas. Now they are on their way back up.

But wait, you shout, au contraire! The U.S. economy has not recovered, so how could there be a demand factor to these price increases? Plus, you may well say, demand for gasoline in the U.S. is down a full eight per cent from 2008, and is not expected ever to rise to 2008 levels again. So why should we worry about peak oil supply when we’ve already had a peak in demand?

Because China’s economy is recovering, and India’s, and together they now exert more power in the world economy than does the U.S. Their huddled masses are being converted by the millions into affluent, American-style consumers, whose care and maintenance require oceans of cheap oil.

It’s not just oil. As the increasingly glum Paul Krugman points out in today’s New York Times, the prices of all the world’s commodities, from copper to corn, have risen by about 25% in six months. A multitude of manipulations? Coincidences in the casino? Or are we running low on everything?

As far as peak oil is concerned, whether or not today is the day is unknowable. It is only on looking back, years into the catastrophe, that we will know for sure when it began. But surely the possibility is high enough now, like the possibility that our house might burn down or our car crash, that it behooves us to do some focussed thinking about the eventuality.

What if gas prices never do go down again, but rise relentlessly to five dollars a gallon and beyond? How will that affect your ability to travel; how will limitations on your travel affect your ability to make a living? Such prices will make everything from air travel to lettuce much, much more expensive and less available than it is now. If that trend starts today, and does not relent, how will you make it?

There is nowhere to go to buy an insurance policy to protect you from this eventuality. It is entirely a do-it-yourself situation. It may not arrive for years. On the other hand, today could be the day.

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