The price of cheap oil (1)

For the last decade or so we have been bombarded with scary scenarios associated with the high price of oil. Expensive oil was to stifle growth and trigger global recession. Deprive the poor countries of access to the affordable transportation and cause border wars over the few remaining oil-rich areas. It was also a frightful reminder that the Earth’s resources were limited and humankind was using up the fossil fuels unsustainably (whatever that means). The price of oil was going to spiral out of control, reflecting the insatiable demand and deepening scarcity of supply. Those gas-guzzling SUVs were going to not only wreck the environment but also cost us all very dearly.

One fine example of the end-of-oil propaganda is the following website:

Peak Oil as a concept applies globally, but it is based on the summation of individual nations experiencing peak oil. In State of the World 2005, Worldwatch Institute observes that oil production is in decline in 33 of the 48 largest oil-producing countries. Other countries have also passed their individual oil production peaks.


“The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented.


  • World oil peaking is going to happen, and it will be abrupt and revolutionary.
  • Oil peaking will adversely affect global economies, particularly those most dependent on oil.
  • Government intervention will be required


Some believe that decreasing oil production portends a drastic impact on human culture and modern technological society, which is currently heavily dependent on oil as a fuel and chemical feedstock.


Some envisage a Malthusian catastrophe occurring as oil becomes increasingly inefficient to produce


some have speculated that decreasing supply of oil will cause modern industrial agriculture to collapse, leading to a drastic decline in food production, food shortages and possibly even mass starvation


 it has been speculated that the numerous products produced with oil would become scarcer, leading to at the very least lower living standards in developed and developing countries alike, and possibly in the worst case to the collapse of the entire international banking system, which could not likely sustain itself without the prospect of growth. The political situation may change dramatically, with potential wars between countries over access to dwindling oil supplies. Accordingly, inequalities between various countries and regions of the world may become exacerbated.

Unless you are reading this blog on another planet you must be aware that these apocalyptic visions came to nothing as the price of oil is currently half of what it was 6 month ago and falling. One would think that it should make the people who have been banging on about expensive oil a bit more optimistic. As in the Logic 101 textbook – if expensive is bad then cheap is good, yes? Well, as it turns out – no!


The price of cheap oil (2)


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