A lot of folks now understand the basis of peak oil theory, namely that there’s only so much recoverable oil in the ground, we can only extract it so fast, and over time the oil we have left is lower quality and harder to extract. Declining supply matched with rising demand = higher oil prices = global economic slowdown = big problems for fiat currencies that depend on economic growth for continued viability.
The latest nuance is the export land model, pioneered by Jeffrey Brown, aka Westexas on The Oil Drum. Mr. Brown has developed the ELM to show how oil exporting countries’ internal consumption of oil grows as they profit from sales of oil. Increasing domestic demand for oil combined with declining production of oil = lowered exports… eventually no exports whatsoever. The UK’s North Sea oil hit peak production in 2000, and by 2006 they had become a net oil importer again. Indonesia is the same way.
Here’s a very good overview of the ELM and what it means for all of us from both an economic & investment viewpoint. It’s worth a few minutes of your time, especially in how it explains that Mexico, currently the #3 supplier of crude to the US, is in danger of having zero net exports of oil by 2014.
Readers of this blog may remember me writing about this last summer, and also in 2006, and an extra year of data has done nothing to dispel this idea. The giant Cantarell field was producing 2 million barrels a day in 2004… now it can barely muster half of that, and production continues to decline at an estimated 15 percent annual rate. We depend on this oil… when it stops flowing, where will we make up the difference from? Most likely it’ll come through bidding the price up and depriving poorer countries… social Darwinism in action.
As the 321Energy article points out, oil prices may rise & fall, but the general trajectory for pricing is up… way up. How prepared are you for living in a world where gas is either rationed, too expensive to purchase, or simply unavailable some of the time?