Wednesday, September 20, 2006

Oil Prices Dropping - Don't Gas Up The Car Just Yet

The news is that, Oh My God, oil prices are dropping! The world is saved! Oil will flow forever! It'll be cheap like the old days!

Unfortunately, my intrepid readers, the exact opposite is much more probably. The theory of peak oil is, in essence, that the world will reach a point where oil production tops out. No matter what, the amount of oil found, dug out of the ground, refined, and sold, will start to drop. Not by a alot, by a little, a few percentage points each year.

This will mean price wars, and there won't be enough oil to go around. That means that rich countries can out bid the poorer ones, who simply won't have enough of the oil they need to run their economies, infrastructures, armed forces, etc. And as the bidding wars increase, the price will only go up.

So, you are wondering, whats with the price drop? Well, here are some suppositions, summarized from Howard Kunstler's site,, especially from the week of 9/18.

1) Prices have dropped due to the not so bad hurricane season we're having so far - fears have eased.

2) The Israeli-Lebanon war has calmed down, and there doesn't seem to be an imminent region wide Middle East war.

3) Prices were driven up unbelievably high because certain rich countries were stockpiling, and they have currently stopped purchasing oil, driving the price down.

4. Poorer countries have simply been outbid, so that their demand has been reduced or eliminated. That means that less people can afford the oil, more supply, less demand, less price.

So, oil prices have dropped. But what about production?

Production is DOWN, around the world. By a few percentage points. That hints strongly at the world having not only reached Peak Oil - but also that we're starting to slide down the other side of the bell curve. If you want more details, check out, or the above link to Kunstler's homepage.

Also, some of you might be wondering, quietly - does Bush and his republican party have anything to do with the dropping oil prices, so close to election time?

The short answer is, possibly not, because oil prices are not controlled by singular entities, people, or countries - it is determined by oil companies, their producers, the market demand, and other economic conditions.

The longer answer is, quite probably. In short, it is possible that the U.S. Army stockpiled oil during the last half year, to ease concerns of any drop out in production, or crisis (on the surface.) The other side of this is, if the American Army helped to raise prices by stockpiling, and they now have enough, logically they would stop buying oil currently, which would drive prices down because they are such a large purchaser of refined oil.

So, perhaps the Army IS involved in a conspiracy to help the Republicans, or perhaps they are being used unwittingly. I'm not quite sure. All that is for certain, is that there IS a finite amount of oil, and all the statistics point to us finally reaching the turning point, when oil will stop being cheap, plentiful, and efficable - and will start being a highly prized resource that nations and armed groups will fight to procure.

I'd say thats a pretty good premise for WWIII. What do you think?


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