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May 01, 2006

Peak Means Peak Peak Oil

People always get fooled by peaks (stock market peaks, for example) because peaks are, by definition, the points when things look the rosiest. Peak oil is no exception. At the peak in world oil production, the world will have more oil than ever before — or ever again. By the standards of other eras, the world will be swimming in oil, and all that oil will translate into an enormous amount of economic activity. Everyone will be bullish, and when the downhill slide begins, everyone will be surprised. James Kunstler:

[I]t seems to me that what we are seeing now in financial and commodity markets, and in the greater economic system itself, is exactly what we ought to expect of peak oil conditions: peak activity.

After all, peak is the point where the world is producing the most oil it will ever produce, even while it is also the inflection point where big trouble is apt to begin. And this massive quantity of oil induces a massive amount of work, land development, industrial activity, commercial production, and motor transport. So we shouldn't be surprised that there is a lot happening, that houses and highways are still being built, that TVs are pouring out of the Chinese factories, commuters are still whizzing around the DC Beltway, that obese children still have plenty of microwavable melted cheese pockets to zap for their exhausting sessions with Grand Theft Auto.

But in the peak oil situation the world is like a banquet just before the tablecloth is pulled out from under it. There is plenty on the table, but it is about to be overturned, spilled, lost, and broken. There's more oil available then ever before, but also so many people at the banquet table clamoring for it that there is barely enough to go around, and the people may knock some things over trying to get it.

A correspondent in Texas writes: "On a four week running average basis, total US petroleum imports (crude + products) have been falling since 2/24/06, until last week, when we finally showed an increase of 1.3 percent, after bidding the price of oil up by about 20 percent. IMO, we bid the price up enough to (temporarily) increase our imports. We will see what subsequent weeks show, but I think that we are in the early stages of a bidding war for remaining net export capacity. The interesting question is what countries may not be importing because they can't afford the oil." [Emphasis added]

Obviously, oil production cannot increase forever. Peak is not a question of if, it's a question of when. Oil production will grow until it can't any more, and then it will shrink. We're like the Titanic's passengers, who thought their ship was unsinkable, right up until the moment when it sank.

Posted by Jonathan at May 1, 2006 11:38 AM  del.icio.us digg NewsVine Reddit YahooMyWeb