The current economic malaise was triggered by falling home
prices and aggressive lending practices, they say.
The other part of the story – where oil prices shot up to
$150 a barrel - has been largely ignored, for
now.
But it happened.
Worldwide peak oil is not a theory. It has
already occurred and the 2008 oil price shock represented the first
real test of what can happen. The after effect
of the sudden oil price rise was so devastating that it temporarily
crippled the entire world and was the primary trigger to what would
become a financial meltdown.
When oil shot up to $150 a barrel, producers had an amazing
incentive to significantly increase production.
But before they had the opportunity, the world economies fell, and
oil consumption dropped. Crude oil prices fell
to as low as one fifth of their peak price.
It may take some time for oil consumption to completely recover,
but when it does, look out. This time around,
financial companies were battered to a point where over three
quarters of the industry’s value vanished.
So what will be the next victim?
Today’s observer might say that the process of a changing
world as a result of expensive energy is already well under
way. When the middle class gets squeezed, they
naturally turn to government officials who make the most
promises. The United States is now led by a
popular liberal president along with liberal representatives in the
nation’s House and Senate. It is no
accident and conservative critics may not be exaggerating when
complaining about a move toward socialism.
Somebody needs to tell conservatives, however, that the move
toward socialism is now inevitable. Just imagine
today’s oil prices doubling or tripling on top of our current
economic problems. The result would be rapid
inflation and a people who are only more desperate, naturally
turning to government officials who make the most
promises. Those who make the most promises are
those who will naturally ignore long term economic
ramifications.
The result is not just a move toward
socialism. It is a loss of opportunity for those
who are not already wealthy. It is a different
kind of America.
Texas energy specialist Matthew Simmons, has predicted that
Saudi Arabia, which is by far the number one oil supplier to the
world, is already experiencing peak oil production while Saudi
officials mask the truth. Recent 2008 production
numbers have suggested that Russia, the number two oil producer in
the world, has just hit its peak. The question
remains, how long will it take for the world’s oil
consumption appetite to rise back up, putting pressure on oil
suppliers to keep their promises that they can meet
demand? Unlike the early 1980’s, when
consumption did not pick up for several years, China, India and
emerging markets have been experiencing a robust and renewed
industrial revolution of their own, fueled by population growth and
improved technology. You can see the result in
the air quality of those respective nations.
If a dramatic rising price of oil is indeed inevitable, as
evidence suggests, the greatest victim may be the United States
middle class, who for so long have enjoyed a special status in the
world. The cruel reality is that the precious
American dream will likely really just be a dream sometime in the
future. If oil were at $150 barrel today in this
environment, it would already be a dream.
But let’s hope those Saudi monarchs are honest thoughtful
individuals who are telling us the truth about their oil production
capabilities.
But don’t get your hopes up.