The Peak Oil Crisis: 2012 -- Apocalypse Now?

[happyslug]

2. Lets keep Peak oil in perspective, oil production will drop, but gradually not rapidly

Last edited Thu Dec 22, 2011, 08:23 PM - Edit history (1)

Remember Peak Oil is expected to follow the same standard statistical bell curve, most oil fields follow (Some fields, like the North Sea, play out faster then others, but when you add the fields together, as in Peak Oil theory, the overall trend is a Statistical Bell Curve).

The key to that is World Wide oil production (ignoring recessions where oil use tends to fall, and with it production) is believed to have peaked in 2005, thus pol production in 2010 should be about the same as 2000 (And given that all of this is close to one another, it is the Plateau people of talking of when discussing Peak Oil).

Oil production in 2030, will be about the same as 1980. Oil production in 2050, will be about the same as in 1960. Oil production in 2070 will be about the same as 1940. Oil production 2151 will be about what it was in 1859 (When Colonel Drake drilled the first oil well).

Now, this is world wide production, and consumption has changed since 1859. Most Americans did NOT own a car till after WWII (1945), but cars were common by the start of WWI (1914). Most of the people of the world do NOT own an automobile, but almost everyone has seen one.

My point is that the drop in oil production will be gradual. Over time more and more people will NOT be able to afford oil, and will stop using it. That will be a drop in demand and will lead to price stabilization till production drops even more. Thus we will see steps, many steps have already occurred. most people can afford oil for their automobiles till the price of Gasoline per gallon approximates what they earn for an hour work. The Connection is less clear for High Income people, but is is clear for low income people, the main reason the price of oil stop raising in 2008 appears to be that more and more Americans on Minimum wage, could not longer afford to buy the gasoline to get to and from work and thus had to do something, some ended up taking public transportation, many had to make adjustments. If the price had gone further then what it did, many would have had to quit their jobs. American Minimum wage earners had started to crack, but more severe cracks occurred at the same time overseas, so the price of oil broke.

I had discussed this in DU2, even did a calculation:

7.15 x 2080 hours in a 40 hour work week for 52 weeks equals 14, 872
Less Housing (if the worker is in public housing, then 30% of income or $4461
Less taxes, 7 % Social Security tax, 2 % state and 1% Local" $1487
365 days a year, 3 meals a day, total $10 a day ($2 for Breakfast, $3 for Lunch, $5 for Dinner) equal $3650 a year on food

Total: $9598 total expenses, just to be alive, Leaving $5274 for any other expense:

If you assume the person has a car that gets 20mpg, and drives 15,000 a year (the average for most Americans) that is 750 Gallons of Gasoline a year. Divide $5274 by 750 gallons you get $7.03 price of a Gallon of Gasoline where the Minimum wage Worker can NOT feed himself, pay his taxes, pay his rent AND go to and from work.

Now, other expenses exist, such as children, Dental and Medical, thus the actual number is way less then $7.03 but shows you the absolute last time where a minimum wage worker can pay his taxes, pay his rent, feed himself AND go to and from work. At that point something will give, and generally gives way before that point.

Notice I am ignoring several additional costs people incur, for example the cost of buying, maintaining, insuring, licensing an automobile, that is roughly an additional $1000 a year. I am also ignoring the existence of any Medical bills, Dental bills or even children. Feeding one child will be about the same as an adult, thus at least another $1500 a year(Less then half the price of an adult) which leaves only $3774, if you divide that by 750 gallons that gives a cut off of about $5.02 a gallon. If we assume $1000 a year for the above cost of keeping a car over and above the cost of fuel, that leaves $2774 for gasoline and other expenses. That means the cut off is $3.69.

Now, I give the above numbers NOT as the exact cut off point for people to stop buying gasoline, but as a guideline of when people will do so. People will try to avoid paying the price, but minimum wage employees have limitations as to such methods. For example, most minimum wage employees only buy cars 10 or more years old. Small cars of that age is shipped to Asia for re-sale, higher demand in Asia thus higher price. That leave mid size and large American cars for low income people, and such cars made around 2000 tended to gt about 20 mpg. Many such low income workers end up working in the suburbs as nighttime janitors, thus mass transit is not a real option for them given their work schedule.

Thus higher prices for gasoline will force low income people out of their cars, and onto the unemployment lines. Employers will have to do something to retain such workers. Such employers will try everything first, then what they need to do, either, move closer to where their worker live OR move their workers closer to where the work is. Retailers will HATE both choices, building low income housing neat the malls will resisted as will moving back into the inner city. On the other hand employers will have to do one or the other (and probably both) just to stay in business. The price of Gasoline will force the choice, but employers will try EVERYTHING else first AND blame the Government for NOT finding a way to get such employees to the Employers.