Welcome to Stagflation

I think peak oil is going to result in a long-term economic malaise. A federal tax rebate will help, but remember, this is a loan, not free money. Also a drop in the fed rate will briefly help. But the source of the problem will not go away.

The basic premise of “peak oil” is that supply of “easy oil” has peaked and will either stay the same or even begin to drop. Meanwhile the demand for oil will keep on increasing, unless aggressive conservation measures are taken. The result of falling supply and rising demand is rising petroleum prices. The increased energy costs will result in both inflation and loss in jobs. Stagflation.

The last episode of stagflation was during the Carter administration. Here is the price of oil adjusted for inflation with a peak in 1979-1980. What initiated that was OPEC getting together and reducing oil supply (oil as a weapon). What ended it was a break in OPEC members and the western nations getting scared into reducing their energy use.

OPEC isn’t behind this latest spike in prices. It is simply, we are running out of easy oil. We can’t simply increase the supply, because the supply isn’t there. What is scary is, no one seems to be scared. We won’t fix this problem until we become properly scared or worried. So this is a request to you all, start becoming scared about this. Once you have become properly scared, start demanding that your politicians take action. This should be the number one issue in the next election, and it isn’t. The problem can be fixed, if the proper action is taken. The tax rebates and fed rate drops are not attacking the core issue.

3 Replies to “Welcome to Stagflation”

    1. (Found this by Howard Tayler’s lJ)
      err… while your argument is internally sound, it isn’t a drop in accessible oil, its primarily a rapid increase in consumption by China, combined by decaying infrastructure in Venezuela and Saudi Arabia. China has been buying a rapidly increasing percentage of the world oil production and selling the gasoline domestically at a high subsidy to try to reduce social ill content. Combined with the seizure of oil production by governments around the world with habitually poor decision-making in economic policy, demand is exceeding supply.
      And I’d counsel a little caution in asking congress to make it a number one priority, so far it’s landed an impulsive lurch to ethanol fuel from corn that’s driving of the price of food in the third world and now is predicted to cause water shortages do to corns need for more water than other crops. There’s a very good chance the American alt-fuel policy will kill many more people than its defense policy this decade.
      Energy independence is a good goal, but remember, there is a long mottled history and if a layman to the industry hears something it’s most likely something that’s been batted around for decades, and peak oil is no exception (really, the term has been thrown around every time gas went up a cent since 1960).

      (Understanding emergent phenomenon is my obsession and one learns sooo much from the last 60 years of the global energy industry (also how little otherwise intelligent people know about the reality that keeps them not hungry and not freezing (inset mad scientist laugh here)))

      1. Corn Ethanol is not the final solution… agreement there. Same for any food into energy program. I like the promise of algae to biofuel… especially if they can use salt water instead of fresh water. Unfortunately that is a long way off before being viable. As you alluded to, this isn’t new tech. They have been working on algae to fuel for decades. Not a whole lot show for it.

        The original peak oil forecast back in the 50s was for 1995. Because of the conservation in the 80s and other factors, we got another 10 years. I’d say they did pretty good.

        China was a net exporter of oil until 10 years ago. Now they import… to the extent that they are now 2nd to the US. So yeah, they are a factor in all of this.

        We need energy independence. We need solutions. We will have an energy crisis in the next decade unless action is taken. Somebody needs to take the lead. The politicians have that opportunity, and I wish they would take it.

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