Peak Oil - A Family Example...
Peak oil refers to the point in time when the amount of oil produced, world-wide, reaches its maximum amount.
Doesn't sound too interesting does it?
Peak oil can also refer to the overall impacts that maximum global oil production will have on the world.
Such as?
Let's put it this way... Things could get tough. So let's take a simple example.
Imagine a small family of four. Parents work to try to make ends meet. Kids go off to school or day care. Money is tight, and keeping up on the bills is a weekly task.
At the moment, the world's oilwells are producing about 85 million barrels of oil per day. Today, the world also used 85 million barrels (mb/d) of oil. At the same time, projected demand for oil next year is higher than ever. Imagine what happens if 85 mb/d is the most that can be produced.
The price of oil MUST go up in order to decrease the demand back down to 85 mb/d. This is precisely what we have been seeing for about the past three years as the increase in production was INCAPABLE of matching the demand at that price. Oil prices rose during those years from $20/barrel to $70/barrel.
What happens when that 85 mb/d production DROPS to 84 mb/d?
Simple, price must go up until the demand for that oil drops to 84 mb/d.
How much of a rise is that? It all depends.
Currently, various people, businesses, and entire countries have given up trying to purchase oil (or its end-products). These countries are unable to import oil, and have none of their own. At the same time, people are priced out of the market.
You may recall that a few months ago, the price of gasoline was just under $2/gallon. At that time, I remarked that this would be the very last time I ever expected to see the prices so low. Yesterday, gasoline was over 30% more expensive, $2.75/gallon.
What happens to that small family? Well, if they have a fixed amount that they have available to spend on gasoline, here are their choices:
1. Buy less, drive less
2. Buy same, fall behind on bills
3. Buy same, eat less or cheaper
4. Buy same, create money using credit, which falling behind on credit
I'm sure there are other possibilities. The point is that this family will have to make choices in order to continue making ends meet.
When the price of oil rises, that isn't the only price that goes up. So to do the price to produce products where oil is used ANYWHERE in the production of that product... That's about every product and service we buy with our dollars or credit.
Take any object, I'm thinking of a toothbrush for some reason... A toothbrush is made out of oil... So the raw ingredient price goes up. A toothbrush is made in a factory that uses energy... probably from coal or nuclear... coal is shipped to the nuclear plant probably using oil (gasoline/diesel)... the toothbrush is packaged in paper... which was more expensive to ship from the forest to the paper company to the supplier to the toothbrush factory... the packaged toothbrush is shipped to the store and ultimately the person... again transportation is using oil... so, as the price of oil increases, so does the cost of producting that toothbrush.
Over the past few years, as oil raised in price by 250%, perhaps that translated into a 75% increase in the cost to get that toothbrush to you.
Imagine what happens to the entire nation as the price of oil increases. Yes, that is inflation. On the average, the costs of production go up.
Oddly, at the same time, people have less money to buy these things, because they're just trying to pay for their gasoline and bills. So, demand for these products goes down.
Hmm... price to produce goes up... amount people are willing to pay goes down... what happens to price? To keep selling the same number of items, the price must come down. That means, the producer makes less money... and ends up having to make cuts, most likely to jobs.
GM is a great example of this. No one in their right mind would buy an SUV right now. Most people are clued into this. And yet GM keeps making these, at a higher production cost than three years ago, and with less demand. What's going to happen? GM is not going to sell those cars and actually ended up taking a loss just to recoop some of the losses.
In the meantime, those poor suckers that bought the SUVs, thinking that times are getting better, and that gasoline prices will go down eventually, are being taken advantage of due to their ignorance.
Back to the family, the higher the price of oil goes, the tigher the squeeze will be. Many prices will go up. The prices that don't increase only stay low in order to make up a bit of the losses. At the same time, many more loose their jobs, which in turn leads to less demand for products, and less tax revenue.
After a little pondering, you can figure out that as the oil supply decreases, the prices on everything that people need - like food, clothing, heat/energy, security, water, etc - are going to rise.
Peak oil could very well mean a very long term period of price inflation and increasing unemployment. This has happened many times in the past, both in the USA and other nations. But those times, it was not do to a physical limitation in the production capacity, rather the decisions of people on how much to produce and whom to supply.
Back to the family. What are they to do?
1. Get educated. Most people live well into their 70's. If people what to have a good future they need to keep learning, questioning, and making their own logical conclusions about the future.
2. Prepare. Prepare for a day when gasoline is unaffordable, food is unaffordable, electricity is unaffordable, and dollar bills have little or no value for taking care of each other. Living, working, learning, and playing all within close proximity is the reality of the future. People growing and storing their own food, and trading within community is the future. Creating community renewable wind, solar, and hydro generators is the future. Developing alternatives to using dollars for trade is the future.
3. Educate Others. Without everyone understanding what is going on, there will be much tension as things begin to get difficult. Working to educate family, friends, and community is the best way to ensure both security and happiness for the future.
One last definition: Peak Oil - the event that will force worldwide cultural change
Doesn't sound too interesting does it?
Peak oil can also refer to the overall impacts that maximum global oil production will have on the world.
Such as?
Let's put it this way... Things could get tough. So let's take a simple example.
Imagine a small family of four. Parents work to try to make ends meet. Kids go off to school or day care. Money is tight, and keeping up on the bills is a weekly task.
At the moment, the world's oilwells are producing about 85 million barrels of oil per day. Today, the world also used 85 million barrels (mb/d) of oil. At the same time, projected demand for oil next year is higher than ever. Imagine what happens if 85 mb/d is the most that can be produced.
The price of oil MUST go up in order to decrease the demand back down to 85 mb/d. This is precisely what we have been seeing for about the past three years as the increase in production was INCAPABLE of matching the demand at that price. Oil prices rose during those years from $20/barrel to $70/barrel.
What happens when that 85 mb/d production DROPS to 84 mb/d?
Simple, price must go up until the demand for that oil drops to 84 mb/d.
How much of a rise is that? It all depends.
Currently, various people, businesses, and entire countries have given up trying to purchase oil (or its end-products). These countries are unable to import oil, and have none of their own. At the same time, people are priced out of the market.
You may recall that a few months ago, the price of gasoline was just under $2/gallon. At that time, I remarked that this would be the very last time I ever expected to see the prices so low. Yesterday, gasoline was over 30% more expensive, $2.75/gallon.
What happens to that small family? Well, if they have a fixed amount that they have available to spend on gasoline, here are their choices:
1. Buy less, drive less
2. Buy same, fall behind on bills
3. Buy same, eat less or cheaper
4. Buy same, create money using credit, which falling behind on credit
I'm sure there are other possibilities. The point is that this family will have to make choices in order to continue making ends meet.
When the price of oil rises, that isn't the only price that goes up. So to do the price to produce products where oil is used ANYWHERE in the production of that product... That's about every product and service we buy with our dollars or credit.
Take any object, I'm thinking of a toothbrush for some reason... A toothbrush is made out of oil... So the raw ingredient price goes up. A toothbrush is made in a factory that uses energy... probably from coal or nuclear... coal is shipped to the nuclear plant probably using oil (gasoline/diesel)... the toothbrush is packaged in paper... which was more expensive to ship from the forest to the paper company to the supplier to the toothbrush factory... the packaged toothbrush is shipped to the store and ultimately the person... again transportation is using oil... so, as the price of oil increases, so does the cost of producting that toothbrush.
Over the past few years, as oil raised in price by 250%, perhaps that translated into a 75% increase in the cost to get that toothbrush to you.
Imagine what happens to the entire nation as the price of oil increases. Yes, that is inflation. On the average, the costs of production go up.
Oddly, at the same time, people have less money to buy these things, because they're just trying to pay for their gasoline and bills. So, demand for these products goes down.
Hmm... price to produce goes up... amount people are willing to pay goes down... what happens to price? To keep selling the same number of items, the price must come down. That means, the producer makes less money... and ends up having to make cuts, most likely to jobs.
GM is a great example of this. No one in their right mind would buy an SUV right now. Most people are clued into this. And yet GM keeps making these, at a higher production cost than three years ago, and with less demand. What's going to happen? GM is not going to sell those cars and actually ended up taking a loss just to recoop some of the losses.
In the meantime, those poor suckers that bought the SUVs, thinking that times are getting better, and that gasoline prices will go down eventually, are being taken advantage of due to their ignorance.
Back to the family, the higher the price of oil goes, the tigher the squeeze will be. Many prices will go up. The prices that don't increase only stay low in order to make up a bit of the losses. At the same time, many more loose their jobs, which in turn leads to less demand for products, and less tax revenue.
After a little pondering, you can figure out that as the oil supply decreases, the prices on everything that people need - like food, clothing, heat/energy, security, water, etc - are going to rise.
Peak oil could very well mean a very long term period of price inflation and increasing unemployment. This has happened many times in the past, both in the USA and other nations. But those times, it was not do to a physical limitation in the production capacity, rather the decisions of people on how much to produce and whom to supply.
Back to the family. What are they to do?
1. Get educated. Most people live well into their 70's. If people what to have a good future they need to keep learning, questioning, and making their own logical conclusions about the future.
2. Prepare. Prepare for a day when gasoline is unaffordable, food is unaffordable, electricity is unaffordable, and dollar bills have little or no value for taking care of each other. Living, working, learning, and playing all within close proximity is the reality of the future. People growing and storing their own food, and trading within community is the future. Creating community renewable wind, solar, and hydro generators is the future. Developing alternatives to using dollars for trade is the future.
3. Educate Others. Without everyone understanding what is going on, there will be much tension as things begin to get difficult. Working to educate family, friends, and community is the best way to ensure both security and happiness for the future.
One last definition: Peak Oil - the event that will force worldwide cultural change