Related to that, I'd add, Simmons expressed hope because commodity prices have been high.

Now the price of corn has fallen to half of what it was this spring.

Oil and gasoline prices are tanking on a daily basis.

All in the midst of the possibility, if not then the probability of imminent shortages of both.

Perhaps those that play the market (people like yourself) assume no one will have money to buy these things due to deflationary pressures.

I'd say that's one risky bet, with lives on the line if you lose.

Sometimes, for whatever reason, markets fail us.

Dear Risky,
A good % of the Peak oil community has been focused on upcoming lack in supply without also focusing on fact that 'peak' also means the most oil ever - for a (short) time, oil demand will drop more than ongoing depletion. (I should point out that the energy surplus from oil peaked many years ago - here is a graph of US Coal - I don't have one for oil):

But Simmons has previously said, we are in for a series of higher highs and higher lows as the end of global growth battles with depletion. The credit crisis will cause an acceleration of total depletion because projects that were planned at the margin will be delayed or scrapped. Also there will be OPEC cuts in production.

Alternative energy cannot make up for the energy surplus we once had in coal, nat gas and oil. This manifests in higher prices and allocations of these resources to the highest bidders. The first casualties from this are poor nations and poor people in rich nations, and the environment. As this occurs, politicians change rules in order to replace the previous subsidy - most of these rules (e.g. easier loans, higher leverage allowed, etc. are all just financial accounting tricks and do not increase real wealth at all. The interplay of energy and finance can only end one way - we are seeing an early salvey now (I don't KNOW the future, but I do perceive the likely distribution of possible futures - so it could be a late salvey, but I think we are going to slow down hard enough to reduce aggregate consumption for a while)

There have been dozens of articles here on energy quality and the timeline needed for renewable scaling -even should we have that time, we would have to completely change our infrastructure to higher % of electric, something that will have enormous costs. I have had conversations with hedge fund managers for years about these concepts and to their detriment, they have never understood net energy or energy quality - because if they did the #1 trade would have been to be short the market, instead of long energy stocks, especially alternative energy stocks.

Here are a couple posts I would recommend:
10 Fundamental Principles of Net Energy
At $100 Oil What the Scientist Can Say to the Investor (and I think the timeline on this post was very 'conservative')
On Energy Transitions Past and Future

Peak Oil - While Smart Folks Disagree Part II
There are many others.

Dear Risky,

I think many of us would Like To Believe the markets alone are enough to do the job. The place where I think that hope falls apart is when you look at the timescale and magnitude of money it will take to react to the end of plentiful and cheap oil.

Let's take cars for instance. The average car is 8.5 years old. The average truck 9.5. Even under extreme prices it will take over a decade to change the US Fleet sufficiently to make an economic difference to Main Street, The Poor and The Middle Class. To top it off, if we wait, the crippling effect of high oil means that the Poor and Middle Class won't have the money needed to make the changes necessary to react to market forces. The result is an deep recession or likely a depression.

Our commercial power producing and consuming infrastructure has equipment lifetimes of 20 to 60 years with appropriately huge price tags.

Waiting for market forces to slam us seems like folly to me, unless our goal is Third World status.

By the way Gail, I love the video parade. Great Idea!

I firmly beleive that hydro carbon prices are headed higher in the longer term, but I just can not see why individual people reacting to prices will not make the adjustment. Will there be so pain, yep. But it is just not that hard for our economy to adjust to higher prices in order to have a 10-20% reductions in usage.

If peak oil was about a 10 to 20% reduction in global oil production, which would then continue at that rate forever, it wouldn't be that bad. But it won't just be a 10 to 20% one-time reduction. There will be 10 to 20% reductions until production hits 0. In order for that to not produce anything more than "some pain" everyone would have to be on board fighting it tooth and nail coming up with replacements. At this point we see building high tech armaments and spy tools as far far more important than building electric trains and cars and tractors and cranes. We see bombing, destroying and occupying countries on the basis of a pack of lies as more important than figuring out how to store electricty on a large scale. When you see the defense budget being slashed to agree with what the rest of the world spends on defense, and the resulting proceeds being used to develop things that can help ease the pain of Peak Oil, then and only then should you consider sanguinity.

The price allocation system has been really clouded, the low interest rates of the Greenspan years has really thrown a spanner into the markets. House prices should've never gone so high, all the bailouts and bail ins and what not are only serving to dislocate the market further. The problem is that we really don't have a free market when it comes to the price of money. It should be set by the market, not by a few blokes meeting every once in a while and coming up with a figure (yes it is determined by the market but the market can be overridden as Greenspan did)

The markets have also deeply failed to look into the future, markets represent human nature which values the present immensely over the future. From a perspective of someone in 2300, to price our richest and most vital source of energy cheaper than a cup of coffee from Starbucks per unit is utter madness. Future generations are going to wonder how on earth we could've been so delusional.

Where markets fail to see the externalities, government must step in. Oil is far to cheap. It's true value is not reflected in the market. I would compare it to water, priced very cheaply but just a slight shortfall of water in the body would lead to death.

Sort of like Al Gore is going to look when the climate crisis does not happen.

It's interesting that people who know literally nothing about climate change or global warming make idiotic comments on blogs. The climate crisis is here right now or don't you connect the dots between Ethiopia's starvation and shifting weather/precipitation patterns?

Of course not because from your "vantage point as a hedge fund manager" science is a rumor.

Demand is elastic to a point and as the elasticity gets stretched, the resistance increases as we cut into neccessity. The real question is can we convert our energy infrastructure into a sustainable sytem faster than we run decrease production? If not then the constraints will be very painful!
When demand hits the supply ceiling, the price increase isn't a linear function. I don't know the exact equation that explains the phenomenon, but I have observed this behavior in the commodity markets.
I have observed the recent price decline, as a result of demand receeding from the supply ceiling. which is also non-linear. I would like to challange anybody to come up with a mathmatical model that explains and predicts this behavior, or one may already exist!
As elasticty of demand gets stretched by price it becomes less effective in controlling the price as fear takes over common sense.
Fear and Greed both have a polarizing affect on common sense. This is all just common sense!!
People tend to beleive what is is in there own best interest and don't want to listen to the truth. Most people would rather hear a lie because it makes them feel better! I have observed this behavior in my buisness with my competators. I try to perform my buisness with complete disclosure and found I am at a disadvantage since it doesn't sound as good as the fast talking salesmen who tell clients what they want to hear. Usually salespoeple don't lie they just tell the partial truth, or the side they think you want to hear. What behavior do you think got us in all the situations we are in?
People see what they want until they can no longer ignore the truth and it slaps them accross the face.
The components we need in our market place are tranparency, objectivity, and accountablity. A system that rewards these traits will be sustainable and stable. When are we going to wake up to not making decisions based on greed and fear??
When we do, all our lives will change for the better as we all consider the whole systems health and as our own best interest.
In this capitalist ecocnomy we reward and promote greed which tends to breed sociopathic behavior in the business world. Look up the characteristics of a sociopath to compare the behavior to what we see everyday in the business world.
Here is one link
http://www.youmeworks.com/sociopaths.html
Do your own homework before making judgments on this statement! I have both researched and observed this behavior over many years in the buisness world and am amazed that more people don't recognize the obvious.
Tranparency, objectivity and accountablity are the opposite of what any sociopath would want when functioning in society or buisness.
Just had to get this off my chest.!!

JB