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Commodity Supply Shock 2012

Discussion in 'Archive: The Senate Floor' started by Jabbadabbado, Dec 3, 2010.

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  1. Raven

    Raven Administrator Emeritus star 6 VIP - Former Mod/RSA

    Oct 5, 1998
    It'll help us transition earlier if there's an attempt made to transition. Speaking locally, I'm still seeing subdivisions going up too far out of the city to get to except by car. Speaking globally, you have Germany rejecting nuclear power going forward. The writing is on the wall, but American Idol and Dancing With the Stars are more important.
  2. Jabbadabbado

    Jabbadabbado Manager Emeritus star 7 VIP - Former Mod/RSA

    Mar 19, 1999
    I agree with part of that. High oil prices encourage oil companies to go after more expensive supplies. That's how it is with all commodities. Industrialization goes after the easiest-to-reach resources first. And new technologies open up new techniques for accessing those ever-harder-to-reach resources.

    One of the key differences for energy resources is that the higher expense also implies higher energy costs to obtain those resources. Alberta oil sand operations use massive amounts of natural gas to process dirt into usable liquid fuel, but as a result the energy return on energy invested is massively lower than that of an old conventional oil field from say the early Texas years. The Alberta operations also use millions of gallons of fresh water, so there's also the opportunity cost of diverting increasingly valuable and scarce fresh water and natural gas from other uses.

    Also, it's interesting to note that the kinds of oil prices that incentivize oil companies to go after the hardest-to-reach resources are also the kinds of oil prices that are invariably associated with a recession. Nearly every recession we've had since the Great Depression was associated with an oil price spike.

    And I don't think peak oil is the only issue. Continuing food price inflation, water resource challenges, and increasing scarcity of all commodity resources are the inevitable consequence of the confluence of population growth and Chinese/India per capita wealth increases.

    Finally, I don't know exactly myself how bad I think it's going to be. There's a lot of room between Malthusian population die off at the one end of the spectrum and life going on as usual on the other. The middle case for me is an endless series of recessions and partial recoveries over the next half century that cycles down the living standards of Americans and western Europeans and turns the entire continent of Africa into even more a cesspool of misery than it already is.

    In that scenario, maybe not everyone loses equally. Maybe parts of Asia and South America continue to gain per capita at our expense. Maybe Canadians end up being our vastly more wealthy neighbors to the north. Maybe Germany and Norway remain islands of prosperity while much of the rest of Europe goes into relative decline.

    I can easily imagine a time when oil has become so expensive that Canadians can't afford to sell it to us because they have Chinese customers willing to send tankers over and buy it for more than Americans can afford.
  3. Vaderize03

    Vaderize03 Manager Emeritus star 5 VIP - Former Mod/RSA

    Oct 25, 1999
    I think Jabba, that we would have gotten long off oil by that point.

    I do agree that China will become the biggest buyer of expensive oil, but I think a fundamental shift away from oil has begun to take root in the US.

    It will be slow (decades), it will be painful, but Americans are beginning to understand that our continued lifestyle is unsustainable with our current energy model. Without a cheap, clean source of domestically producible energy, you are absolutely correct, the US will go into a major decline.

    The question is, will Big Oil and Big Energy be the ones to spark the transition, or will the government have to force it?

    The two parties are in diammetric opposition on how to fix the problem, and that is part of the problem.


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