ConsumerismEconomicsFood ShortagesPeak Oil

Heading into a Perpetual Recession

Last year I drew a stark charcoal outline around what I saw would be our future over the next few years. I predicted then that we’ll soon see oil prices surge upwards again, as they did in 2008. Since that time I’ve read, here and there, many quiet little voices of reason telling the same story, and, encouragingly, they’ve often been transmitting via mainstream media channels.

Here’s an example from a few days ago:

It’s an interesting situation [major understatement]. When oil prices surged last year, it happened at the height of an economic boom, when, you’d think, the economy would be better able to withstand the shock that your typical tripling of energy prices brings. But when it happens again, and happen it will, it’ll occur when the economy is barely held together – and just with duct tape and twine. Talk about kicking a man when he’s down.

Although the mortgage crisis was the clincher, the energy price spike of 2008 was a large contributor to our present recession/depression (use your word of choice here, since they’re still debating this). A lot of industries were already falling over, pre-sub-prime, particularly those most directly affected by fuel prices, and the chain reaction was felt by most. And yet, it was really just the first blow from our Peak Oil adversary. We saw it before in the 1970s, but 2008 brought us the very first punch based on geological/investment constraints, and it already sent consumption-based capitalism reeling, with the wind knocked out of it. While the ref slowly counts to ten, the economy has struggled up to its knees, with many of us watching, cheering and trying to breathe new life into it. (For most of us, while it may not be much, it is still the only economy we know.) But, the next blow is coming, just as soon as the economy clambers, on wobbly legs, up onto its feet again – and this one will be a real humdinger.

While new oil discoveries are regularly announced, they all have commonalities: Demand and desperation are leading companies to drill in places and/or at ocean depths they’d never have ventured into just a few years ago – dangerous, expensive and environmentally questionable locations – and the quantities are such that each find can be consumed in a matter of months by the U.S. alone.

Graph is EIA data. *2009 data is average through June 30, 2009.
Despite rising prices, oil production has plateaued since 2005

With economies trying to catch their breath, they’re not able to invest the huge dollars the problem demands – well, what it demands if you’re committed to keeping society on its present trajectory, which our world’s leaders seem earnestly determined to do. The IEA, after finally analysing the problem comprehensively, says the world needs to spend over 26 trillion dollars over the next couple of decades, and that’s mainly just to try to maintain present production – and around half of that is to seek for and develop oil fields that may or may not exist. (To give you an idea of what a trillion dollars is, imagine if you’d spent one million dollars every single day, since the time of Christ until now. Even that incomprehensibly profligate spending would total less than three quarters of just one trillion dollars, and so would be one thirty-fifth of the amount the IEA is pressing the world’s governments to invest between now and 2030.)

That kind of money just doesn’t exist any more – well, unless we get the good ‘ol Fed to print it.

It is becoming very clear that we are heading into an era of decline, potentially steeply so, and at a time when projections for demand resemble the lines on so many other charts of significance (temperature increase, water use, population growth, species extinction, etc.), which all dart dramatically upwards. This gap between demand and supply could well be our undoing.

While many readers of our site may be familiar with this prognosis, most of the people I bump into on a day to day basis are either blissfully unaware of the storm brewing, or they acknowledge these realities in one corner of their mind, whilst simultaneously continuing to persevere with plans they drew for their lives way back when they still thought a Jetsons type lifestyle was around the next corner – i.e. the concepts haven’t quite taken root. As such, I dare to labour the point by putting this post up.

So, this is the roller coaster cycle we’re looking at:

  1. increasing demand causes a surge in oil prices, which causes recession
  2. The resulting economic slowback then reduces demand and so oil prices sink
  3. Reduced oil prices reduces investment in energy infrastructure (fossil fuel, alternative, whatever). We’re here
  4. Reduced investment in oil exploration and development means reduced supply, which means increased oil prices
  5. Increased oil prices mean more recession

On top of the cycle above is another parameter as well. Where the recession has meant negative growth for many industrialised countries, it has merely meant a reduction in growth for others, like China, which ‘dived’ from a scorching 11 percent growth in 2007 to a ‘disastrous’ 7 percent in 2008. Recession or otherwise, international demand will inevitably overtake supply – regardless.

Economists and politicians who are currently gleefully welcoming signs of an upturn plainly don’t understand what it portends. They say to be careful what you wish for, because you may get it.

Essentially, we are facing a perpetual recession.

When oil prices surge once more, I think we’ll finally have to consciously acknowledge we’re fighting a losing battle. It may even dawn on us that we’re fighting the wrong one. But, when prices do take that sharp incline, we are unlikely to have time for such philosophising. The world may change shape and form so rapidly that transitioning will not be that beautifully orchestrated and implemented event we might otherwise have wished for. It could well get positively messy.

Wisdom is knowing what to do next; Skill is knowing how to do it, and Virtue is doing it. – David Starr Jordan

Transitioning is the word of the hour (1mb PDF).

Further Reading:

One Comment

  1. yes.
    it’s basically true.
    oil will run out by 2060.
    25% of the way there, about 2030 we will have a massive problem

    i mean we have 20 years to get a new technology……
    but the government has no oil policy.
    its subsidising it or taxing it.

    it can’t afford to subsidise it anymore.

    what will they do?
    probably destroy education and take away public services like the police, like they’re doing.
    i really can’t see any future in the current direction,
    let’s not forget that global warming is irreversible for 3000 years….
    why isn’t that in the news?
    i mean by 2050 drought will disable most of the tropics, and serious famine and disease will begin even in white rich countries…
    by 2100 it’s hard to see massive populations actually BEING ALIVE

    laugh myself to tears?

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