The Oil Drum

148 comments on DrumBeat: March 2, 2008

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karlof1 on March 2, 2008 - 12:43pm

Hi WT--I would expect oil price to climb as output falls, thus keeping current income in a rough balance. Add to that revenues from NatGas, and Russia is going to exhibit BAU-type growth for at least a decade. This means that internal consumption will grow and thus reduce exports even more than the decline rate, thus driving up export price still more. Pricing energy exports in rubles will cause them to increase in value against other currencies, increase Russians' purchasing power and their rate of consumption. My question are, How long can/will this burst of economic affluence last, and what will the Russians build during this period--US Style sprawl, or infrastructure to sustain Russians after their hydrocarbon wealth is spent? Then there is the question, What will Russia's hydrocarbon customers do when its exports decline to zero?

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westexas on March 2, 2008 - 3:51pm

My question are, How long can/will this burst of economic affluence last, and what will the Russians build during this period--US Style sprawl, or infrastructure to sustain Russians after their hydrocarbon wealth is spent? Then there is the question, What will Russia's hydrocarbon customers do when its exports decline to zero?

Russia is on track, within two years, to become the largest market for new car sales in Europe. Note that Midland, Texas in the Seventies--benefiting from high oil prices even as production fell--reportedly had the largest Rolls Royce dealership in the world outside of the UK.

I have compared a gradual post-peak production decline to a commercial airliner doing a gradual descent for landing. A net export crash is more akin to a terrifying near vertical dive into the ground.

IMO, the lifeblood of the world industrial economy--net oil export capacity--is draining away in front of our very eyes.

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karlof1 on March 2, 2008 - 5:57pm

Once net export capacity drains away, what of regional industrial economies instead of one that is global based on the production of renewable energy devices? Or do you see resource wars detering any chance of fundamental systemic change?