There is mounting evidence that we are at or near peak oil. Peak oil is the time at which the world will pump the most amount of oil out of the ground for consumption and both before and after that, we will never produce as much oil. This happened to the US in 1970 and has happened to individual oil field after oil field around the world. And once we peak the back side of the peak will trend towards less and less oil every year no matter how many new oil wells are dug. Many of the organizations and individuals that study peak oil believe that between 2005 and 2010 the world oil production will peak. If this is true, why is oil hovering around $50 a barrel?
I think we saw last summer demand bumping up against supply limits and the market was reacting to it like markets do, by increasing the price. That price increase pushed us into our current recession (which the housing bubble already had us heading) in a big way. Then as the economy started to slow even further, demand for oil dropped below the worlds ability to supply oil and prices dropped. But think about, we are being told that we are in the worst recession/depression since The Great Depression and oil is still at $50 a barrel. How is that possible?
What can we expect over the near term? Well, we can expect that supply will be able to keep up with demand, but two forces will cause us to get back to high oil prices like we had last summer and will push that number higher and demand continues to outstrip supply. First, even in these tough economic times, oil consumption could still potentially climb (slower than if we were in better economic times, but the world is adding more and more people every day, and we have gotten used to a western life style that we want to preserve and that the others around the world want to join demand will start to raise again). Second, is that given the physics of oil extraction history has taught us, the amount of supply possible, will drop. So, raising demand and falling supply capabilities, will cause us to pass that threshold of supply < demand, pushing oil prices back up again and potentially very quickly.
There are a number of other factors that play into this scenario, including geopolitical issues, current industry investment, renewable energy investment,… Right now, all of these trends are pointing towards making the shortfall gap between supply and demand of energy more pronounced, causing further energy price issues and availability concerns. The best solution to this is to continue to increase renewable and start using the supplies we have left to design a future that will less energy.
by Chuck Templeton
Transition Towns Chicago, Transition Town Chicago, Transition Town, Transition Chicago
