I can’t say precisely when, so by “soon” I mean within two years at most. My reasoning is below; I’d be curious to hear feedback.
Given that the:
- Price of oil spiked to $147 per barrel in 2008
- Current oil price is $80, even though we’re in the worst recession since the Great Depression
I reason that:
- The price of oil remains ~$80 per barrel because demand is keeping it there.
- The U.S. is in recession with oil at that price, no recovery is coming. We are in a permanent recession.
- With oil at those prices during a recession – four times that of just a few years ago – indicates we have hit the limits of supply at this price. That is, oil producers cannot pump more to get the price down, even if they wanted to (which most don’t).
However, demand in China continues to grow, and we continue to burn far more oil than we’re finding, so this means another oil price spike is almost certain within two years. The U.S. economy may find a way to recover somewhat, too; perhaps another bubble can be found. And the Americans are starting to drive more, again. That will push demand up.
Demand is going to push on supply, and price is going to go up fast, followed by a crash to a lower level than we are now. We have to reach a level of recession where we are consuming considerably less oil, or are considerably less dependent upon oil.
As we’re not doing anything serious about consuming or being less dependent upon oil, there will be another spike and crash.
Don’t wait for your federal government or even state/provincial government to provide leadership. They will at best respond too late, once we’re mid-crisis or beyond. Make your town a transition town.
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This post was mentioned on Twitter by greengordon: Prediction: Another Oil Shock (and therefore deeper recession) is Coming Soon http://goo.gl/fb/QCeP...
[...] This post was mentioned on Twitter by Brian Gordon, Dillon Davie. Dillon Davie said: A prediction that might be spot-on: Another oil shock (and deeper recession) is coming soon http://bit.ly/cbxwih #peakoil [...]
Oil demand/prices over the next decade will to a large degree be driven by emerging economy demand at the margin. Here is another thought experiment using Chinese demand to generate some rough back of the envelope forecasts:
- China moves from 3 bbls/person/year to the South Korean per capita consumption level of 17 bbls/person/year over the next 30 years
- No peak in global production
Result: In next 10 years we must find 44 million BOPD – 26 million BOPD to maintain supply and 18 million BOPD to keep up with demand increases.
If you superimpose peak production on top of this demand profile using the following parameters oil prices would increase approximately 250% in real terms over next 10 years – most likely something would give far before that price level:
- Oil demand elasticity of -0.3
- Current production 84 million BOPD
- Current price US$ 80
- Peak production 100 million BOPD
- Post peak decline rate of 3-4%
If you want to try the china oil demand or the peak oil models for yourself using your own assumptions they can be found at Enquirica in the “Research” section: http://www.enquirica.com/index.php?option=com_content&view=article&id=11&Itemid=13
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