The saying, “A little tuft can often overturn a large load” can be read in Petrus Laale’s book of proverbs. Petrul Laale lived in Denmark during the 15th century and many of his Latin proverbs are thought to date from the 1350s. The saying shows that dramatic things happened even in that time.
The cost for the Iraq war The load that has now overturned is the finance world’s wagon with virtual money. The question is if the US$700,000,000,000 that the American government is now pumping into the economy is real or virtual. To understand the scale of the issue we can compare this amount with the total cost for the Iraq war. During these six years the total oil production in Iraq has been approximately 4.3 billion barrels. Many consider that oil was the reason for the war and if that is the case then the military cost has been the equivalent of US$140 per barrel.
We have discussed the load but what about the tuft? My assertion is that it was the “Peak Oil Price” that was the destabilising factor. Too many people who borrowed money to buy houses at low interest could not handle the interest payments on the loans when interest increased in combination with increasing energy costs and inflation. The houses were repossessed by the banks who could not find new buyers which then caused the collapse.
According to the Energy Information Agency, EIA, we have consumed the following volumes of oil in recent years counted in millions of barrels per day (mbpd): (2004) 83.10 mbpd, (2005) 84.56 mbpd, (2006) 84.52 mbpd, (2007) 84.40 mbpd. This year’s first six months showed an average of 85.55 mbpd but now consumption is dropping. We are on a production plateau that follows our “worst case”. In 2004 the International Energy Agency’s prediction for 2010 was that we would consume over 90 million barrels per day. Now we know that it will be significantly lower.
When they put the wagon back onto its wheels again new oil will be needed to get it moving. Compared with earlier crashes the volume of new oil will be limited and new, clever energy solutions will be needed. It is time to plan for a future after Peak Oil.