Just see it this way the human specy is collectively no more intelligent than the other living species and for instance the lemmings.

WHen its environment is favourable its population grows, for instance if it discovers the new hability to feed on oil, its population thrives (try a regression of economic growth on oil demand or pop growth on oil demand), once its environment resources are exhausted (soil erosion, seas going empty and no more oil) population shrinks.

I like the part “diplomacy is saving oil”… Just think of all those useless jet flights over Iraq ..

The variable that you missed placing in the equation is the $. If the US$ keeps depreciating (can’t say why exactly), then the oil priced in USD could still shoot very high even though economic growth slows down (if not globally).

Buying oil with banks

An Op-Ed in the Financial Times (Ask the oil producers to rescue Wall Street explicitly makes a proposal that makes a lot of sense to solve the current financial crisis: let the dollar-rich oil producing countries buy troubled US banks at bargain basement prices. Given how much of the apparent prosperity of the country in recent years has been based on continuing to buy large volumes of oil on credit from producers, it has a lot of logic to it: time to pay up with real assets rather than IOUs, and time to accept that the valuation of the financial sector should reflect both the illusory nature of previously inflated profits and the emergency need right now for fresh cash to recapitalise the banking sector and allow it to regain trust in itself and start lending to the ‘real economy’ again.

Interestingly, that article concludes that this should be seen as more palatable than a nationalisation of the sector, but I can only wonder if the opposite is not true: what might make nationalisation suddenly attractive will be to have as the sole alternative the wholesale transfer of ownership of the secotr to Sausi Arabia, Russia and China… Oh this promises to be fun.

i think that the world is going to take an enforced breather for a couple of decades. the industrial revolution has had a canal age, a railway and steamship age, and an automobile age. what comes next ? in my childhood the answer was the colonising of outer space. that is now clearly ridiculous, but we swallowed it.

one alternative energy source will be the harvesting of energy from slowing down - nothing will have brakes any more unless they are geared to harvest kinetic energy and retain it as electricity.

another energy source is unemployment. commuting is energy intensive.

another alternative energy source is diplomacy. war is an energy intensive activity.

while some people design lightweight vehicles that run for 100 miles per gallon, others will design transport out of the system - they will build or convert cities into walkable sizes with pedestrian centres and clean industries that allow people to live and work in the same general area. urban areas will have to become de-specialised.
houses will huddle together for warmth as in mediaeval italian hill towns.

the cities of the persian gulf can go two ways - either become the heart of new empires, ruling by their control of oil, and their allocation of oil proceeds among the grateful financial centres of the world, themselves becoming the financial centres of the world before the oil age closes - or ghost towns of the oil rush, drowned by the rise in sea level that the burning of fossil fuels will inevitably cause . . .

would anyone like to tackle this one ? - i propose that the industrial world of finite and thus declining fossil fuel energy will inevitably contract. alternative energy (income) cannot be burned at the same intensity as fossil fuel enrgy (capital). also, an expanding and inflationary money supply would be inappropriate to a contracting global economy. thus the future of a stable global economy (keep hoping!) would lie, in time, with declining fossil fuel usage, contracting fossil fuel based industries, a contracting money supply and a gradual decline in the price of oil.

war, energy intensive, destructive and disruptive, would only hasten the process.

In all likelihood, it will at least average that. Whether GCC countries end up with small surpluses remains to be seen. Many are attempting to diversify rapidly into other fields–tourism, transportation….Dubai is creating mega projects on a colossal scale.

In many ways, diversification is a smart move. While we are far from there yet, the world is trying to move away from oil–easier said than done.

The question these shakers and spenders should ask is: What will be the shape of the world that relies less and less on oil? They should be taking the long view–15-20 years out. Dubai, with its mega-rich touristas, is counting on being a prime watering hole for the very rich…as well as being a huge port center. But how we transport (and how much we choose to do, i.e., be more local) will be a key question. Already there are concerns that ships have to go slower to conserve oil.

The bets are on the table. I would go in a slightly different direction. Start investing in alternate forms of energy. But that might let the cat out of the bag, as it were.

Interesting post.