This headline on CNN today (Here comes $100 oil, and $3 gas) caught my attention in relation to a story in our newsletter yesterday. Crude oil futures did actually hit $90 yesterday, after hovering in the $80 range, edging upwards towards $90. Which basically means that more traders are betting that the actual price of crude oil is going to go up, well before it goes down. Other experts are predicting that it’s going to hit $100 before too long.
On that note, a study from Germany’s Energy Watch Group predicts that the coming drop in production as demand increases will lead to war and other dire consequences worldwide. In a story in the Guardian UK, they predict an earlier date (2006) than some for the peak of oil production, but regardless, they point to an increasingly difficult time of war and unrest as demand for extracted oil grows and the supply dwindles.
The report’s author, Joerg Schindler, points to the alarming decline in oil production after the peak and notes that our economies will have to radically change to adapt to a world without plenteous oil. “The world is at the beginning of a structural change of its economic system,” he says. “This change will be triggered by declining fossil fuel supplies and will influence almost all aspects of our daily life.”
As Kevin Norrish, a commodities analyst at Barclays in London said in the CNN story, “the underlying market balance will continue to tighten, and if the geopolitical situation worsens we’ll get to $100 very quickly.”
Whether the “peak” has passed or is yet to come, one thing is certain: we only have so much of a finite resource upon which much of our economy is centered.
What will happen when it is gone?