To be honest I'm getting well outside my depth and some professional help from someone with and understanding of economics would be a god send for tying WT export land firmly to a realistic economic model.

I think I'm on the right track since its easy enough to see that priced based demand destruction with most of the market participants in denial does not accomplish much. So the mechanism for demand destruction is primarily not demand destruction via high prices. I wonder if this model is ever valid but thats a different issue. So we go with the shortage model. Now what do I do ? How do I model a shortage ?
I'm sure their is a wealth of information but as I said I really need some help from someone who understands this.

It might be better to call my model a correct template not a model since I need more information to pick the right model.

And example I just posted lets say your depleted by a thousand units and you have say 500 customers. Lets assume 250 mess up in getting supples and they each suffer a 4 unit shortage for those with no reserves that use 4 units a day they simply do not use oil. Others draw down stocks etc.

I think you can see where this is going. The problem is you can partition this problem a lot of different ways and the time progression can be complex.
So I'm sure someone has studied this issue and ferreted out the correct or at least common models and parameters.

So basically I need more constraints before it could be a predictive model.

Right now you can easily see that even this simple design is close to reality since running low is very different from running out. A lot of people may well be running low at different times and further depletion will cause a cascade of true shortages. And its a bit insidious so the market can either not see whats happening or write it off to above ground factors. So its easy enough to see how the market could not see this happening and since we have scattered information on a lot of the uses of oil we don't even have enough data to detect the early but critical stages.

So anyone who feels I'm on the right track and can help I'd sure appreciate it I'd love to apply this to WT's export land to see how things play out. I really think we can get good leading indicators if we figure this out.

I looked at the reviews. First if anything I'm Austrian school for economics. But my understanding is feeble at best. I need a helping hand to wade through this.

I emailed Mish over at

http://globaleconomicanalysis.blogspot.com/

See if I could get some help I've followed him for a while and have been impressed with his understanding of economics.

Wish me luck.

Thanks :)

I think you have it about right. The real economy has to be slowing since oil is required for growth. Sure you can think of exceptions but the basic equation is simple oil = real growth.

Thus as you say at the moment the central banks are pumping more and more money into the system to keep it growing for les s and less real return. Its always worked in the past since oil usage simply increased. As your example indicate we go through these cycles and I like the way you describe it. But the problem is this time around they can't keep the GDP going via inflation.

Now I have been trying to find economic info on the effects of a depletion resource and economist generally hate the concept and effectively refuse to deal with the issue.

In normal economics you have your wave example it crashes then a new wave builds plenty of info on this. But near as I can tell our current economic models simply don't work in a era of declining natural resources.

Anyway I still don't have any good economic info on how to actually create a numerically testable model based on known economics.

I guess my simple model is good enough. When you have a market in denial you get shortages but because the market is so large the shortages occur and are corrected in different places and different times so they are viewed as uncorrelated.

To you your wave example its like random waves on a ocean.

But to continue with your wave example they coalesce and grow as depletion continues eventually causing a tsunami.
From the economic side we see fiat money expansion as you say unable to cause economic growth.

Interestingly it seems to be the same model either way you look at it.

Rough Waves may be a better analogy.

http://www.livescience.com/environment/050503_monster_waves.html

And the critical part of my model is the presence of correlation caused by peak oil by events that are generally not considered correlated. This correlation is what allows these waves to build.

If the model is correct the outcome is obvious and stark.
James Howard Kunstler is a flaming optimist and his predictions way underestimate the situation. He should be castigated for giving far to rosy a scenario and his books are rubbish. We simply won't have time for a long emergency.

If my model is correct our economy simply stops.
Now with that said you have to take a hard look at third world economies and how they function since they deal with shortages all the time.

Why I think they work but we collapse worldwide is these economies depend on injection of technology and money from the wealthier countries to keep them semi-functional.
When the wealthier economies are collapsing these injection
are not available. So I don't see how we stop at the third world level instead we will go below this.

So the real question in my mind is how far the collapse will extend before you hit stability. Certainly regions with a wealth of resources food and low populations will be able to maintain a higher standard so fragmentation will have a big effect.

Maybe the only model we have is the break up of the Soviet Union ?
Is their another case of a fairly modern society collapsing ?

And to repeat the key here is correlation !