Sunday, August 31, 2008

Oil Prices Versus Contracting Economies

Here is something to keep in mind as you try to make sense of what is going on in the world, in terms of geopolitics, oil prices and macroeconomics:

"There is a world wide race going to between contracting economies and world oil production, the score of which will be kept in the price of oil."

Tom Whipple, 8/28/08

Tom Whipple is the editor of the Falls Church News-Press, in Falls Church, Virginia

Whipple goes on to say that a wildcard could exist in terms of OPEC's willingness to accept less than "X" dollars for a barrel of oil. In other words, if and when demand destruction and economic contraction drop overall demand and thus the price for oil, OPEC could once again begin restricting production to increase prices.

In summary, a short term drop in oil prices (6 months? 2 years?) does not mean that the effects of worldwide giant oilfield depletion (aka Peak Oil) are over, only that other macroeconomic events have taken precedence, for a bit. Let's hope that the efforts being slowly set in motion (conservation, mass transportation retrofits, natural gas vehicles, expanded natural gas drilling, wind energy, battery/electrical storage research, design/production of more efficient cars, offshore drilling, biofuels research, nuclear plants, coal plants, solar thermal innovations) are not slowed as we enter a possible "eye" of the Peak Oil hurricane.

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