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"it cannot go above 15 percent [of the world GDP]"
- two comments:
(1) as the rate of oil extraction decreases the same % of GDP will allow a higher price per barrel. (Of course, that's assuming the same GDP, which won't hold, so it's more complicated than that.)
(2) when the EROI decreases to 5:1, for example, then 20% of the economic activity will be in energy extraction. Etc.
Either way, the real consequence is that the economy will fundamentally change, which perhaps is what Deffeyes means by "smoldering ruins".
VTP - Of course Deffeyes means the economy is going to fundamentally change...IT'S GOING TO COLLAPSE. How in the hell can you read some quasi-cornucopian crap into a perfectly straight forward statement? He is saying that energy costs are going to destroy the world's economy.
And, as I have looked at his graph time and again, I am scared shitless because the change looks like it is going to be a cliff not some nice time-line that gives people and government years to adjust.
Todd
"...because the change looks like it is going to be a cliff..."
Yes Deffeyes' recently posted graph is beautiful in its simplicity. Clean, clear and crisp. And I share the same sentiment that you have. The message told in that one plot is very sobering.
-best,
Wolf in YVR BC
"it cannot go above 15 percent [of the world GDP]"
You're probably right. Perhaps it can spike for a bit if people reach into their capital.
The world capital markets are worth about $118 trillion dollars, and world real estate was once worth 75 trillion (ok, it's less now). World GDP is about $50 trillion. [I wondered if we could sustain a larger spike in prices by borrowing against our capital, but this doesn't seem likely].
Imagine that we produce 26 billion barrels of oil in 2013 (about 70 million per day), and that prices have reached $500/barrel. That's $13 trillion, 26% of GDP. It's hard to imagine prices going higher than that. Even borrowing against capital (selling our companies and real estate to Saudi Arabia) won't allow much more. But this is in today's dollars. It isn't too hard to imagine 20% inflation, or even 1000% inflation, in which case nominal prices go through the roof. If inflation averages 15% for 5 years, for example, we might have $1000 oil by 2013.
But I expect that even 15% of GDP going to oil will kill the economy [remember, all other forms of energy and food aren't included in this]. $250 oil is probably a real ceiling on the price.
Figures for world valuation: http://www.marketwatch.com/news/story/derivatives-new-ticking-time-bomb/...