Availability

Even at its current price, oil is still a bit cheaper than it was at its height in the 1970s, once you account for inflation. We're only at the beginning of the peak-induced run-up in oil prices. Just be patient. In the next 4-8 months you'll start to see major disruptions because of both the price and availability of oil.

What happened in the 1970's at the end was the finical markets started to create a worldwide system of oil distribution. The system would created the petro-state, nations that are exporters of oil would be supplied with vitally everything they need. Monetary Inflation was ordered to be under control by the Reagan and in the 1980's and Saudi Arabia started dumping oil on the market - in part some speculate to kill the burgeoning alternative energy movement fostered by Carter but then halted on a governmental level by Reagan.

The upshot is even as as oil increased in price over the years after the 1970's it was under the level of inflation. In the 1980's and 90's the western economy made a transition from heavy industry to information and implemented MPG demands upon cars and enforced the 55 mph speed limit. This heaped curb demand somewhat. In the 80's and 90's within world wide financial markets hard goods such as commodities went out of vogue (oil included).

Now the world wide oil market is simply tapped out. They will never be able to pull out of the ground any more oil then they do now no matter what extraction technology we have to use, in fact we are now seeing declines that will not stop in our lifetimes. What that means to the world economy is, in part what we endlessly debate.

Welcome, Stephan...the vast difference is that we'll see a "fight for a decreasing supply".

That is, as the amount of Oil we can get goes down (it will never actually run out to zero, but it'll get so close we humans won't be able to tell the difference) then the problem becomes"who gets the supply?"

If certain business in the US have their way, Bubba The Big Boned "pickup" driver is owed all the Oil he can buy so he can continue his excessive consumption, because the entire US economy is now so dependant on excess consumption of everything to keep said US economy going. This allocation of resources to Big Bubba is over and above everyone else's trivial requests for Oil to supply unimportant things like fuel for farm machinery. This is especially the case for requests from "other" countries and the "awful foreigners" should realise that the US is far more important than they are and should be grateful for the crumbs they might get and if they keep complaining, welllll (etc). There's plenty in the US who question this alleged logic, as the US' own farmers are also last on the list, it seems.

The farmers are having the last laugh as they change their primary crop from wheat (for food) to corn (for ethanol fuel), and so everyone's food is now more expensive. Wheat prices have rises 120% in this calendar year (2007) alone, thanks to this very trend.

Now, this is what they call "free market rationing" - it's rationing based on price. Whomever can pay for the higher price will get the fuel. If you can't pay (say, like a farmer) then you won't get anything.

So the difference between what happened in the 1970's is that:

#1. That was caused by politics; this is caused by physics (geology) - politicians can be intimidated; physics cannot.

#2. The 1970's DID see great economic upheavals. The "old" pre-1980's central idea was a technocracy based on engineering, which had been the way things had been since the 1790's (yes, you read that correctly...think of when the industrial revolution started). The engineers did not take much notice of the geophysicists when they said ( as M King Hubbard said) that the US - then the world's largest Oil producer - would reach a peak of Oil production in 1970, which it did. When the engineers assumptions (of an ever-cheapening energy supply) ran squarely into the reality of the dead opposite, they came to a shuddering halt. The Economists had been given a huge gain in social articulateness, thanks to the Second World War and the way that engineering had been given it's orders by Economics in the period: war production meant shortages meant economising in the building of everything.

This "new" paradigm of suddenly increasing energy prices, well, heck, the engineers were flummoxed - no-one had told them to expect any such thing! So, given that putting the economists in charge had worked so well in WW 2 , HEY, let's try it now.

The 1970's were the last decade that engineers held any sway, and that was little more than a losing battle, too. By the time that Margaret Thatcher was elected, and then Ronny Ray Gun, the economists had won. This was to be a technocracy, not an engineer lead one, but one where the Economists were in charge. Now, the economy could be predicted, shaped, changed...MOULDED, made into something that would never depend (yada yada yada)...and everyone would be the beneficiary of it. If they could pay. The near Civil War that Thatchernomics unleashed on Britain was only solved by the North Sea Oil which Maggot Hatcher dumped on the world market at US$10.40 per barrel at a time when the Free market was trading Oil at US$40 per barrel. So much for the idea of governments never interfering in the free market. As the North Sea Oil flowed, Oil prices plummeted, thus driving down fuel prices, thus driving down social discontent. Hey, this economist lead technocracy MUST be good, right? So, the economists ideas of greed being good must also be OK, right?

Welll...greed will Drive Oil prices up, (and thus fuel prices) and when it does watch the Social Discontent go through the roof. By the time Margaret Thatcher was finished with Britain, it had been made over so it was so much less self-sufficient in everything, especially money. It was so much more dependant on the largess of complete strangers (the traders in the Free Market) in a way that will come back to haunt it, rather badly.

What North Sea Oil did for Britain, Cantarell did for Mexico and North America in general: an economic BOOM. As the confused post-Empire economically battered Britain of the 1970's became the Cool Britannia of the 1990's, so too Mexico went from complete basket case to merely being economically backward. Watch the reversal of these trends in the next few years.

This (the North Sea Oil and Cantarell Oil) is why the Economic mess of the 1970's became the spin-doctored upbeat 1980's, the frenetic 1990's and rising energy prices is why the years of this decade are so confused, bewildered and dissatisfied.

Cool Britannia no more. North Sea Oil is in massive decline. Cantarell is well on it's way to becoming CAN'T tarell. The two Oil Fields which allowed the Economic Rationalists and free-marketeers to crow about how they had defeated the forces of anti-globalisation and so forth...well, those two Oil fields are gonners. Expect the Economists to be shortly dethroned and somebody else put in their place.

The mechanism of 1970's chaos is back - rising energy prices and those in charge insisting they shouldn't - and is going to cause lots of problems, shortly.

I, myself, do not believe that engineering will be allowed back in charge. For one thing, the powers that be like to make a Quick Buck and engineering is a slow, steady income. Probably ever-more-outlandish schemes will be tried such as the Elf-Aquitaine scandal, where (according to Carl Sagan):

"High French officials, including a former president of France, arranged for millions of dollars to be invested in a scam (the Elf-Aquitaine scandal) to find new petroleum reserves from the air.

http://godslasteraar.org/assets/ebooks/Sagan_Carl_Does_truth_matter_-_Sc... (PDF WARNING...reference about 1/3rd of the way down the page)

The scandal developed into a full-blown political scandal after the various corruption of the ELF company was revealed.

Get used to Elf-Aquitaines in every part of the world, shortly. You have been warned.