The Oil Drum

I like the broken window parable but in the case of oil its worse the original window cost 6 Francs but because of spiraling oil costs its now 20 Euros :)

No but seriously replacement costs for a lot of items will probably double at least over the coming years. In effect this means say in 10-15 years we will have less than 50% of the infrastructure we have in place today. This could easily be conservative. I expect the number of roads in good condition to be practically nonexistent in 20 years for example.

Whats interesting is its pretty easy to see that infrastructure will quickly decay to African levels whats hard is to understand how it goes. Africa decayed fairly rapidly after the end of WWII.

I think once you see local governments going bankrupt then state government the infrastructure will nose-dive.

This is commons infrastructure but this applies to any durable goods in general they won't be replaced but repaired then abandoned.

Whats fascinating is that our cookie-cutter style economy with tracts of houses strip malls etc is effectively like a mono-culture subject to a blight that can readily wipe out most of the "crop". The lack of diversity will ensure once maintaining a certain amount of infrastructure becomes untenable it will probably be abandoned quickly.

You often hear the phrase "to big to fail".
I think its really so big that when it fails it destroys everything.

Thanks very much.

It is very important to get these things into perspective - always.

Just to set it right I'm not new here. Nevertheless your answer is very useful for those who are. In fact I tried to reply to FF in the form of questions since I think that his problem is an important one to adress. FF made a socratic argument directed at WT in anticipation that WT would use rembrandts numbers to confort his ELM theory. I tried to answer in a socratic manner (because my authority in the field is nothing compared to yours and that of FF). Knowing his official position about peak-oil on TOD and the way he provoked WT, I thought he would like a provocative discussion. What a better discussion than to question the numbers ?

My point is :

GDP is an estimation of the wealth of a country not by measuring the total value of things but by estimating by two methods : either total national expenditures and investiments or total income. The BEA explains the methodology very well. But is this really well correlated to the supply of a nation in terms of distribution of wealth, number of useful items ? Does an increasing GDP reflect a parallel increase in production ? I doubt it very much. For instance, an inside source told me (sorry no link) that military investiments increased a lot in France while the number of useful items (helicopters, ammuntion, arms) decreased or didn't increase in proportion. The investiments increased because of skyrocketing prices but the supply of goods decreases because the industry can't deliver fast enough. In fact the military industry can't increase production much because of the scarcity of metals and high prices. This is one example. Another is the everyday misery I can witness. People spend more and more on food, yet there a more and more people who don't eat their three meals a day. So GDP increases but does that mean that this is parallel to an increase in economic health ? Is production really up in proportion ? This is important because if there is a real increase in activity (production, shipping and so on), energy consumption should increase as Stuart Staniford has clearly shown about a year ago. But if there is a discrepancy then this should be discussed. I know that GDP numbers are corrected for inflation but the prices for food, metals, energy all increased more than the inflation showed. So is the inflation number a useful or truthfull one ?

On the other hand I don't discount the possibility that there is an increase in the energy consumption and even the oil consumption. If this would be the case then we have to conclude that EIA, IEA, API, IFP (institut français du pétrole), ..., numbers are wrong. We know they are. You've said it, these numbers are estimations based on voluntary declarations by the nations. There are other organisms providing numbers for oil productions by various other methods. One method I like is the spying method which estimates the exports of a country by cargo spotting calculating the approximate amount of oil shipped by the immersion of the vessel (alchimede's law). Others try to match import and export numbers declared by the nations and industries which can be purchased in journals or databases. Here some differences emerge. Hence the deduction that there is a black market for oil.

The black market is a huge one. You've provided a list of countries to which I would add Sudan. There is no secret that China, France, the USA and Russia are competing there for oil with all the ugly means of this competition. But what I don't know (but strongly suspect) is if Saudi Arabia has some oil on the black market. The increasing price of oil would be a powerful incentive to get some faithful customers.

In summary, GDP isn't a perfect number to measure economic activity (in the sense of production and exchange), the oil production numbers aren't a perfect measure of oil extraction and energy consumption. So I wouldn't discount WT's ELM model on the behalf of increasing world GDP. OTH the energy black market is certainly something to consider because that makes more energy available than anticipated by the ELM model. But that means also that the "economy" becomes more ruthless which in turn means that we cannot rely very much on rational behaviour to solve the beginning crisis induced by the apparent ongoing or comming peak oil.