Peak Oil- Threat Assessment
Peak Oil- Threat Assessment
Peak Oil is a concept that has been around for some time. The idea is that all of the oil in the world was created over vast amounts of time and is being consumed very quickly. There are varying degrees of belief in this threat. Like climate change, most people subscribe to one extreme or the other. You will hear people tell you that the end is near and others that tell you there is no problem at all. As with many things, the truth probably lies at some point in between the two extreme stances. Unfortunately, there is very little you can learn from the far right that are in complete denial about peak oil. That leaves us with mostly propaganda from the far left environmentalist to try to glean some truth from.
This video will give you a good understanding of the perceived threat of peak oil. It has a very leftist slant, but the only thing we can get from the right is total denial of the issue. Sometimes you have to eat the grapes and spit out the seeds.
Regardless of which side of the peak oil fence you are on, we can see that gas prices are rising. These price increases are much more that just the geopolitical landscape or inflation. Both of those factors greatly affect the price of gas, but production costs have gone up astronomically. We are having to drill for oil in deeper and deeper waters. We are having to resort to fracking and other more expensive extraction methods. Most of these technologies have production costs of $80 a barrel or more. At prices below that, production ceases. At $150 a barrel, there is quite a bit of oil. Higher oil prices allow companies to spend more to extract oil.
Peak Oil is less about running out of oil and more about running out of cheap oil. This is not as dramatic as waking up tomorrow and there is no more gas. The negative effects come from increasing energy prices that take more and more from family budgets. As more is spent on essentials, less is left for saving, investments and discretionary spending. The real threat of peak oil is economic. On of the catalyst for the 2008 market crash was $150 oil. All of the other factors were already there prior to 2008. Americans were spending 103% of their income, subprime loans were defaulting, credit was drying up and home prices had been falling for over a year. The price shock from skyrocketing oil initiated the confidence crisis. The crash still would have come, but it was intensified by the oil price shock.
Rising oil prices affect every part of our lives. Unless you are 100% self sufficient, whatever you buy at the store got there on a truck that uses oil. Higher transportation costs drive up the costs of everything. Most products we buy are wrapped in plastic or made of plastic, an oil derivative. Tires, roads and fertilizers all use oil as a major component in there manufacturing.
Ten years ago, gas prices were right around $1.50 a gallon. We are just under $4.00 where I live at the time of this writing. That is an 166% increase in ten years. If prices continue to increase at there present rate, the price would be $10.67 in 2022 and $28.44 a gallon in 2032, just 20 years from now. This puts a pretty serious damper on the possibility of growth in our economy. Those prices are assuming the best. They assume there is no major conflicts in the middle east, there is no hyperinflationary economic environment, and the 2 billion Chinese and Indians are content to keep riding bicycles rather than wanting cars.
The challenge of peak oil alone is life changing for America. If we had no $16 trillion dollar debt, Obama Care, or empire creep to pay for, we would have about all we could handle. If you haven’t read our 7 Step Preparedness Plan, please read it. The sooner you start to prepare, the better equipped you will be to handle the changes that are coming our way.
Happy Prepping!
