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Life After the Oil Crash
Deal With Reality or Reality Will Deal With You
How much time is left?
Originally posted on May 28th, 2008 at the LATOC Breaking News page
Probably the most frequent question I get is "how much time is left?" My reply for the past four plus years has always been "I don't know, a few days, a few months, a few years, maybe longer, maybe not. I wish I knew." Well, Ken Deffeyes just published an analysis at his blog that gives us some type of rough idea. His conclusions appears to be that oil at $300 a barrel will produce, more or less, a total economic shutdown:
So while it is still impossible to answer the question of "How much time is left", we might be able to use the price of oil and gas as some rough indicators of where we're at. We're hovering around $125/barrel and $4/gallon right now and already seeing significant slowdowns in the housing, banking, airline and automotive industries. Shutdowns likely begin around $200/barrel and $8/gallon. At $300/barrel and $12/gallon most everything simply stops.
How big is the problem? Multiplying production (barrels per year) times the oil price (dollars per barrel) gives a total cost in dollars per year. It's an enormous number; tens of trillions of dollars per year. To put a scale on it, the three thin curves on the graph show the oil cost in contrast to the total world domestic product; the annual value the goods and services added up for all the world's countries. The three curves show the oil cost at one percent, two and a half percent, and five percent of the total world economic output. At $130 this morning, we are at six and a half percent.
Oil production obviously cannot consume 100 percent of the world's income. My intuitive, uninformed guess is that it cannot go above 15 percent. If we see oil at $300 per barrel, we will be looking out over the smoldering ruins of the world's economy. Source
A recent article in Forbes echoed Mr. Deffeyes' conclusions:
What is happening now [with oil prices] is not demand destruction, it is a financial disaster. The U.S. consumes 21 million barrels of per day. At $135 per barrel, the U.S. spends $1.0 trillion per year on oil, which is equal to 15% of the $6.8 trillion in take-home pay of everyone who pays taxes. If oil prices rose to $200 per barrel, the U.S. would spend $1.5 trillion per year on oil, which would be equal to 22% of take-home pay.Moreover, those percentages of 15% and 22% do not even include the cost of coal or natural gas. In other words, the U.S. will be broke long before oil prices hit $200 per barrel, and the rest of the world would be sure to follow. Source
If prices do continue to rise at the current rate then any opportunity to make a large scale switchover to alternative sources of energy has, more or less, passed as 6-to-24 months is barely enough time to implement even the most remedial of large-scale mitigation strategies.
FWIW, I don't think you need to worry about the police state or the KBR camps much past $200/barrel and $8/gallon. At those prices, the economic machinery that simultaneously feeds hundreds of millions and imprisons tens of millions begins to shutdown. At that point, a cessation of food and fuel shipments is, in my opinion, much more likely than are mass round ups and imprisonment.
"But what about the camps that the Third Reich ran even as its economy crumbled?" Unlike World War II Germany, we don't have much of a train system in this country and what we do have is pretty decrepit. Furthermore, the lion's share of the energy used to extract the coal to run the trains and the camps comes from oil-derived fuels. Most of that oil is imported from thousands of miles away. (Even the domestically produced stuff is typically imported from hundreds of miles.) The production, import, and refining infrastructure to do all of this is dependent on extremely complex and highly globalized "just-in-time" networks of commerce, finance and telecommunications that are unlikely to exist in sufficient capacities for very long once oil settles in above $200-$250/barrel.
The implications of Ken's calculations seem to support my suspicion that we're quickly running out of time to use the net to meet-up with others in our area. If you're thinking of using the LATOC Forum (or any forum) to meet-up with other like-minded individuals in your area, now is the time to do it.
Best,
Matt
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