I think arguments for a steady increase in the price of oil are strong but something short of being totally compelling.
I agree with everything you say in the posts that you have put up. The logic of the Export Land Model is especially powerful.
But there is a problem.
What happens if high oil prices knock us (here in the USA and maybe elsewhere) into recession? Then what?
We know one outcome is certain, a fall in demand for oil, hence a fall in price of oil. In fact, when you really get down to it, I don’t see how the USA escapes recession in a world where oil is ever more scarce.
Now to be sure, I understand that a falling price of oil will set off other tendencies, some working in the direction of increasing the price, or at least putting a floor under it. Take all those countries with lots of dollars, e.g., China. If the Chinese decide to use their dollars to buy oil, they support the price, but .... but ...then....in the next act of the drama ... what if recession in the USA gets China into trouble, and the Chinese decide to use their dollars for something else?
The net of all this is that a strategy of putting a lot of eggs into the single basket of a rising oil price via the commodity market would make me nervous. Peak oil is going to set off tendencies and counter-tendencies in every direction. Predicting outcomes is going to be hard, in no small part because the process is sure to be chaotic (where random small causes occasionally have huge consequences).
For whatever it worth, which I know is not much, I have a vague intuition that peak oil is likely to be paradoxical. It is going to cause the price of oil to be TOO LOW, precisely because spiking prices will torpedo the economy, and then, as the economy recovers, re-torpedo it again and yet again on each upswing. Prices will not convey accurate information, leading to confusion and a vast potential for even more than the usual mischief and stupidity on the part of politicos. |
