Crude oil as the liming factor for our complex civilization.

This is how it plays out. I'm no economist and don't know the proper terms or even if there's already a textbook that explains this much more throughoutly... (except maybe Tainter a little)

The principle of unsubstitutability states that as resource depletion progresses with increasing demands of growing population and complexity, a point is reached where ones abundant resource must be replaced by another either because it has peaked or because our demand has outpaced its extraction rate - the same thing really. Inevitably we always have a number of choices which are worse than the original - more expensive, less liquid, less plentiful, poor quality etc. And this keeps happening over and over again. This is the principle of unsubstitutability and no where is this more apparent and dramatic as in the case of crude oil - the golden liquid - only a few pence a cup - but able to transport us and our hunk of junk miles and miles.

Now that we have established that we are utterly dependent of crude oil, we can move on to the principle of diminishing returns. As our extraction rate becomes unsustainable and our hunger and dependence of the stuff just keeps going up, we inevitably start paying larger and larger share of our income, our scares resources, our opportunity - to this black liquid. The problem is that everything else is also dependent on the price of that liquid and the increases in costs go down the chain and branch out at every direction.

And now here's the catch that people miss out - there's a positive feedback from the mirror effects - when transportation costs increase due to increase in oil price, so will the transportation costs to do with surveying, drilling, pumping, refining, and distributing oil itself. In fact with every oil price increase, there will be a converging geometric series of price increases in all aspects of getting more black liquid, which will then echo back into the oil price and start down the same chain again. Currently following this loop back and forth fortunately converges towards zero - and it has to - because the only other mathematical alternative would be infinity - an infinite price for a barrel of oil.

Another way of putting it - and a much better way - which the economist don't like one bit - is to play this out in terms of Energy Returned on Energy Invested or EROEI. As our civilization matures towards a point where we spend all our time, energy and infrastructure just producing oil just to consume it - and consuming oil just to produce it - our other needs and become exceedingly expensive and downright impossible to meet. Food, water, housing, utilities, maintenance of infrastructure. And their complexity no longer produces more efficiency - so called advances in them merely patch up immediate emergency and creates more emergencies for the future. Deforestation, soil-depletion, water-scarcity, they haven't gone away, in fact they are getting worse as we head into the panic mode...

My personal estimate is - don't watch the oil price - watch the food prices - this is a Malthusian train heading for the Liebig's gorge - all cars are linked so its purely academic which of them crashed to the bottom first.

- Ransu

t people make: they equate currency with value. The only currency worth anything now is oil. Time and time again one hears the continual myth that this and that alternative energy is just about to become 'affordable' once oil hits 80 ... a hundred ... or was it 120 dollars a barrel? Now we're at 140. Where are the promised, much hyped solarpanel farms reaching to the horizon? The coastlines dotted with endless windmills?

have you followed solar stocks lately? they have zoomed up? solar and wind are growing at phenomenal rates. however, change won't happen overnight and I think you're setting up a straw man with the "endless" windmills.

do you see boone pickens is building huge windmills? that the largest windmill ever has just been constructed?

http://www.treehugger.com/files/2008/02/enercon_e126_largest_wind_turbin...

T. Boone Pickens Gets Into The Texas Wind: 4,000 Mega-Watts Worth
http://www.treehugger.com/files/2007/06/t_boone_pickens.php

or my my favorite, solar on big box stores! the irony.

Turning Big Box Stores into Solar Power Plants in California
http://www.treehugger.com/files/2008/03/big-box-stores-roofs-solar-power...

those much derided big box stores that peak oil is supposed to do away with may actually be little power plants. some day they may be big greenhouses that grow food with solar panels on the roof. btw- electricity can be used as a fuel. you take you electric bike to wal-mart to buy food and charge off the panels while you're there. brilliant.

ins of 'unconventional' oil waiting to be dug in for endless oil? They are all victims to this fallacy. As the oil price has come up, so has everything else, from building materials (steel and copper) to manufacturing and transportation. At every step and stage and price of oil has inflated their costs and wiped away the competitive price difference.

the price of commodities tend to run together. most mines, even in the this era of high oil prices, are now opening up because the costs of commodities has gone up. they won't always run up at the same time but if mining costs are too high the mine shuts down until they come back in line. we must remember that there is always the demand side of the equation too. as the costs of oil has skyrocketing gypsum board and lumber are mired in the doldrums. we had a surplus of lumber even though oil is high. the companies are eating the costs and some will go out of business until supply and demand are back in balance.

When oil barrel costs 200 - everything else will cost too much - and demand destruction will kick in to hold the price - for a while - since when you're past the peak, its all downhill from there

can you actually prove that using a public companies earnings and annual reports?

wake up John! Peak Oil isn't proven by economics. It's a mathematical fact. Its precise timing is up for debate and this site has seen extensive and wide ranging studies over the years of all aspects of resource depletion from theoretical to down to earth practical points of view - for example field surveys from satellites, analysis by oil geologists, public statistics and insider papers of the very oil companies producing the stuff - all pointing to imminent or post-peak situation.

As of economics themselves - even without peakoil, current status-quo economics is past the point of damage-control - debt based fiat/banking systems, uncontrolled mindless global market mechanisms - unable to respond or insure against deliniar events, unpredictable consequences, positive feedbacks. If peak oil and global warming we're at our door step, economics would be there just behind them to take us down. Start by reading Tainter's analysis on diminishing marginal returns - The Collapse of Complex Societies, ISBN 978-0-521-38673-9

Economics doesn't solve problems. People solve problems. Economics is the solution people cam up with to address a problem, how to exchange goods & services. Economics loses my respect when it becomes a religion. People appeal to the "invisible hand" as if it were a deity who was going to intevene and fix whatever is wrong.

As long as demand is reasonably elastic & supply is effectively unconstrained, an economy will fall into something of a steady state (a.k.a. status quo, BAU). However, when supply becomes constrained (or demand outstrips the possibility of adequate supply), you start getting into "fat tails", and conventional economic theories (religions) become essentially worthless.

We don't solve physical problems with economics, we solve them with physical work.

Economics can play as a mediating party, but do NOT confuse it with physical work.

If you have trouble understanding this distinction, I understand Ayres' paper Accounting for Growth.

http://www.iea.org/textbase/work/2004/eewp/Ayres-paper1.pdf

As for getting love, science gets love here. Most of economics does NOT fall into that category. Real science makes singular, non-random and accurate predictions a priori, not post hoc.

Most economic theories makes multiple conflicting predictions and plenty of economists make them post hoc (completely useless reductive bias). Some of those economic guesses are bound to be half-right, but science it does not economics make.

That's why, no love - at least from me - at least for most branches that are NOT based on physical reality.

Now lets see what John15 has to say on actual privatized water.

http://www.washingtonvotes.org/2005-SB-5113

http://www.citizen.org/documents/Bolivia_(PDF).PDF

http://www.pbs.org/frontlineworld/stories/bolivia/

(Jonh15 can't seem to be bother to comment on what he advocates - privatized water. )

If we don't adopt some way other than money to allocate food & energy, our society is finished

any other way than money would be a bigger disaster than anything capitalism can cause.

Further, beyond peak it is very unlikely that fiat system based on exponentially increasing debt load borrowed from the future can survive.

oh it will. it may be 100 years before we go back into debt like we are now. I bet people thought we'd never get back into debt again after the great depression but we did.

"nor could we afford for survival goods to run out for the industrial workers whose wages were frozen."

have to ration goods because of frozen wages huh? *sigh*