What “Peak Oilers” Don’t Know About Economics

A guest post (by Chris Martenson) over at zero hedge makes the claim that “oil demand will outstrip supplies soon….”  Now I’m no economist, but I can say with great certainty that oil demand will not outstrip supplies soon.  In fact oil demand will never outstrip supplies. As long as government doesn’t mess with the price signals, I predict that oil supply and demand will balance out just about perfectly just about forever.

I know that the guest author knows better, but this slip of the tongue reveals a lot about what is wrong with some of the peak oilers.

(Editor:  Harry Dexter White, wearing the Mask of Zorro, I presume.)

 

And Now, Mr. Tuttle Can’t Help But Chime In (mostly due to his Poor Impulse Control and the fact that HDW left so much space on the page.)

HDW, if that, in fact, is you……Indeed, ECON 101. 

  •   Zenconomics Question: What is the likely price of the last two eggs at the Hunt’s Point Grocery on a morning when Bill Gates really, really wants an omelette?
  • Answer: When you can snatch the pebble from my hand, Grasshopper, you will be Paul Krugman.  No?  How about roughly $1 more than Warren Buffet is willing or able to pay, if he’s come for a sleepover at Bill’s house.

By the way, ignoring – for the moment – that particular faulty statement, I will come a bit to Mr. Martenson’s defense, if somewhat tepidly.  You’re right, he probably does know better and, perhaps, it was an unfortunate slip of the tongue.

He does have some useful insight on the present state of the sovereign debt crisis and preparing for a difficult future.  On that basis, I do encourage you check out his site , even if you have to wade through waist deep self-promotion.   (I also had to laugh a bit at the guest post when he stated, “I began advising accumulation of gold and silver in 2003 and 2004.”  That was about 6 or 7 years after I actually began buying gold and silver, but, well, shoot high, aim low, don’t you know.)

Still, the basic premise he’s presenting is partly correct, don’t you think?  You know, complex systems, the debt and currency crisis, etc.  Most of all, I completely agree that it can and probably will happen very fast. 

But, if all we’re talking about is a triggering event, well sure, he might as well get busy working for GM selling Chevy Volts.  Me, I’d put his list in reverse order or, probably, something more like this:

  1. Currency Debasement ==> Currency War
  2. Currency War ===> Repudiation of US Dollar and USD Debt / Instruments
  3. Repudiation of USD ===>  Sovereign Insolvency and Hyper-Inflation
  4. Hyper-Inflation ===> You Really Don’t Want To Know (But, I’ll whisper it in your ear later.)

And, yes, you’re absolutely right (by inference) oil (priced in $$$) will go higher than the average American can afford, long before the last drop is sucked out of the ground.  But, of course, that’s not Peak Oil, which was your point. 

“Harry T”

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