Peak-Oilers Have it Wrong - They Forget that High Oil Price KILLS DEMAND
Peak-Oilers think that oil prices can go to $200 and we'll all just jump in our cars and go off to our jobs at golf courses and movie theaters and toy factories and such, and jump on planes to go to Disneyland for vacation.
Peak oilers don't seem to understand that oil prices above $65-$75 leads to recessions and economic sluggishness and job loss and crashing oil demand.
We're in the era of peak oil PRICES that will keep the lid on the economy and the lid on oil demand. and the lid on oil prices. We'll likely bounce between oil at $30 and oil at $95 over and over. Oil at $30 will help the economy recover, while oil at $95+ will trigger a recession and trigger an oil price crash.
$65 oil may be sustainable, but much higher than that hurts the economy and kills demand.
AT THE END OF 1998, OIL PRICES DIPPED BRIEFLY BELOW $10 A BARREL... LESS THAN 10 YEARS LATER, THEY PEAKED AT $147 A BARREL..... WHAT HAPPENED TO DEMAND AS OIL PRICES ROSE?? DID DEMAND PLUMMET AS EXT4R SUGGESTS WOULD HAPPEN??? no... demand went UP, rather dramatically, as it turns out. High prices WOULD kill demand... but HIGH is a relative term. For us rich Americans... tens of millions of whom drive fancy high powered gas guzzlers... oil at $500 a barrel would likely be a truly high price that would kill demand...FOR MOST OF THE PEOPLE ON eARTH, WHO CAN VBARELY AFFORD A QUART OF KEROSENE FOR LIGHTS OR FOR THEIR COOK STOVES, AN EXTRA 25 CENTS A QUART WOULD BE A DISASTER.... but just another of many disasters. As rich people drive prices for everything ever higher, the low income peoples of the world, and of America, just have to make do. FOR THE RICH, PRICE IS NO OBJECT... AND SINCE THEY USE MOST OF THE OIL AND OTHER CRITICAL RESOURCES, WE CAN EXPECT DEMAND TO KEEP RISING, RIGHT ALONG WITH DEMAND, UNTIL PRICES GET REALLY AND TRULY HIGH... because the world really is running out of oil.
You are right of course. If you look at a graph of global oil consumption, there is a tiny dip in 2008 after the financial crisis, otherwise global oil demand has been steadily rising for decades. The rise in oil prices from $10 to $100 didn't alter that. What did shift was where the demand is coming from - demand in developed economies has certainly been flat to down in recent years, however that drop has been more than conpensated for by increased demand in developing nations. China's demand continued to grow fast all through the financial crisis years of 2008 to 2009.
To be precise, it is demand growth in the developing world which has forced demand in the developed world down. When overall demand is greater than supply, the price rises until it reaches a point where some demand is destroyed and thus supply and demand come into balance. Economics 101. That is exactly what has happened - increased demand from the developing world resulted in the price rising to a point which forced demand destruction in the developed world (which has lower marginal utility from each barrel of oil). In effect, the developed world has been outbid by the developing world for the last barrels of production.
Oil has fallen to the $70's several times in the past 3 years....
Oil above $65 - $70 is NOT self-sustainable.... It has only been temporarily propped up by Ben Bernanke's actions encouraging over-speculation... but that can't last forever.
Emerging economies are DEPENDENT on American spending.