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113 comments on The Economics of Oil, Part I: Supply and Demand Curves

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sjn on August 19, 2007 - 12:01pm Permalink | Subthread | Comments top

What this misses is that there are "minimum operational levels" for commodities vital to the operation of our civilization. A growing population and envionmental distruction causes the MOL to rise. For example, subsistance farmers finding their land without water as rivers run dry move to urban centres, putting more demand on food and energy from the global pool. Under supply results in parts of the "Globalized Civilization" failing. People dying. War.

Demand destruction doesn't follow a smooth curve. In a complex system when parts fail it can have an unpredictable knock-on effect to other parts of the system. Or even cause complete collapse.

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memmel on August 19, 2007 - 1:02pm Permalink | Subthread | Parent | Comments top

I think that demand destruction is simply to simple of a concept for oil. A much closer idea would be food our water.
Oil is now as critical to people as food water and shelter.

So I agree 100% that the concept should be minimum operating levels for various types of economies before they begin to fail. The concept of some sort of slow squeeze makes no sense and is not justified by any historical comparison. Societies can restructure to operate at lower levels of oil but since this restructuring itself require leveraging the existing oil infrastructure it doubtful that it can be accomplished without foresight.

The issue is how a complex system decays. Using the Arctic melting as a guide and the collapse of previous civilizations suggests that it happens fast several times faster than the underlying reason the system is decaying.

So for example if we are at say 50% of the current production levels in 20 years we can expect the actual collapse to occur in less than 5 years. The limit on complex systems seems to be how fast the can collapse once they fall into positive feedback but in general they collapse as fast as possible.

As and example the Greenland Ice sheet can only collapse as fast as the ice can move this asserts that the collapse will quickly be limited by this factor. Oil seems to have about a 3-6 month delay factor in its distribution. Thus a collapse of the oil infrastructure is measured over at least a few years given a reasonably slow underlying decline in production. But it seems obvious that its less than a decade and more on the order of years before the society that cannot change collapses.

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