Monday, October 13, 2008

Peak Oil and all the Crap

In retrospect, a lot of people who blamed the recent oil peak on Peak Oil seem to be quite wrong, including myself. Oil is now 43% below it's peak, and down 6% year-to-year. It seems a lot of people saw in the market what they were predisposed to see (including, again, me).

That's not to say that Peak Oil will not be a factor in the long run. It will be (if it's true that we're running out oil.) I think the lessons, though, are that
  1. few people really know what's going on when markets are in turmoil, and
  2. few people really know what's going on otherwise, and
  3. people tend to find what they're looking for.
Sure, we may be running out of oil, i.e. oil production may be peaking. But it's a long process and you can't expect the world to turn around on a dime. And you can look very stupid in the process.


2 comments:

David Herron said...

Um, I think looking at short term fluctuations and expecting them to tell you a long term story isn't going to work. The short term story might be due to market manipulations such as the blatant manipulations of the faux oil crises of the 1970's. But in the long term it appears peak oil is irrefutable, that there will come a day when oil supply inevitably declines. There may be many short term fluctuations along the way but the long term price for oil is somewhere around the moon.

J Zagar said...

The decline in oil prices from $145 to the current $80 and the financial market turmoil is consistent with Peak Oil. Sub-prime mortgage holders, filling their cars/SUVs with $4 gasoline and buying increasingly expensive food, had little income left for housing payments. Combine this with dubious lending practices and the realization by banks that their business as usual model for leveraging loans was not valid in the face of higher energy prices has resulted in the current liquidity chaos around the world. Economic slowdown/recession/depression will require less oil causing the price of oil to drop. This is not a sign that Peak Oil is crap but is indicative that Peak Oil is valid and the current lower price of oil reflects market fundamentals. Higher energy prices induced by Peak Oil together with an ever increasing & developing world population will continue to find the "weakest link" in the free market system and wreck havoc until ample supplies of alternative energy can meet demand or per capita energy consumption declines. When the market recovers in the next 24 months as suggested, the price of oil will resume its climb... Just watch...