The Oil Drum

If we are within 20 years of PO (how many of us here at TOD really doubt that?) without any measurable action on mitigation a la Hirsch, et al, then the system already is broken down, but the spaghetti just hasn't hit the fan yet.  

Military spend is less than but close to 5% of global GDP,  marginally higher than 5% US GDP, don't have up to date numbers and it is hard to come by realistic recent ones. US military spend is close to all other countries' military spend added together and has been increasing (in proportion) over the last 5 years.

Global population (current trends, excluding catastrophic adjustments) will be near double 1985 level in 2025, at between 7.5 and 8 billion. Peak oil production per capita was already passed before 1985 (1979 if I remember right).

There is insufficient slack in the current situation to accomodate a 2 to 3 mbpd disruption in supply (without causing a shortfall), present margin seems to be 1 mbpd at most.

Barring major exogenous events affecting supply or demand we will likely reach a supply shortfall within 3 to 6 years. At that point, or should a significant supply disruption occur prior to then, the price of oil will reach a minimum of $100 bbl, quite likely $200 to $500, possibly $1000 or more, dependent on shortfall, associated events, duration.

The economic system will break if those 'quite likely' levels are sustained for any lengthy time. The minimum result will be 1930s in spades, near globally, but could be significantly worse.

How far can we cope relatively comfortably with an extended supply shortfall? Price will be the initial killer, it ends economic growth in the short to medium term. If the shortfall is perceived as permanent then there is virtually no limit to the price of oil. If consequent disruption interrupts electricity supplies for more than a few days then the scenario changes and substantial die-off may occur.

If the transition is more managed, government more in control, population more educated, aware and prepared, then a greater supply shortfall could be absorbed, perhaps 10% to 20% within a year. Under current circumstances I would say a rapid (within a year) supply shortfall of 10% would break the US economic system. I don't know the consequences of that, it hasn't happened before, but a 10% population reduction is plausible before / if stability is briefly resumed.

Your quoted 2 to 3 mbpd shortfall is approx 3%, I would say that is probably manageable but would cause a doubling of oil price and serious US and global economic depression. I don't believe a sudden shortfall of 10% or more for more than 3 months is manageable (without major advance preparation), and I expect such an event within 5 years, probably within 3 years.

One thing I must point out: we often talk about peak oil as if it is a steady and gentle process. It almost certainly won't be. Governments ARE aware of it coming, it can be seen in the ways they are playing their hands already, though mostly they don't really appreciate its implications. It is their misplaying (prior to or about the time of PO) that will cause the greatest problems. That is why one of our most important duties is to inform others - so they can be aware of the context within which their government is acting and exercise control and knowledgeable discussion wherever possible when the time comes.

http://www.wired.com/news/technology/0,68969-0.html

For example, "All told, the military will use more than 6 million gallons of biodiesel this year, according to the Defense Energy Support Center, the government agency that supplies the military with fuel. That's still a drop in the bucket compared to the military's overall fuel needs, however. The Navy and Marine Corps burn through nearly 2 billion gallons of diesel a year, says Grassilli."

Chris