Peak oil means the end of the economy as we have known it
June 26th, 2009Chris Nelder at The Oil Drum in one sentence summarizes the economic effect of peak oil:
It now seems possible that we have reached an inflection point in economic history, where the price at which energy is high enough to sustain new production is the same price at which things become too expensive, leaving us no option but to downsize.
Because of its previous abundance, the centrality of energy has heretofore been invisible to economics. We are seeing now that energy is not simply another commodity.
Declining energy supplies will inevitably result in progressive decline of “the economy” as we have come to think of it.
Spiking energy and commodity prices lead to destruction of the economy, which then gathers itself at a lower overall level until prices spike again, and back around the wheel we go. As energy declines, the ceiling will get lower and lower, and it will take more and more money to buy the same things.
No amount of tinkering with monetary policy can change that. Unlike money, Btus can’t be printed out of thin air.