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