The following is a summary of oil price fluctuations from the tail-end of the 07/08 recession: -
Oil broke through $110 on March 12, 2008, $125 on May 9, 2008, $130 on May 21, 2008 , $135 on May 22, 2008, $140 on June 26, 2008 and $145 on July 3, 2008. On July 11, 2008, oil prices rose to a new record of $147.27 following concern over recent Iranian missile tests.
However, oil prices declined by more than $20 over the next two weeks, settling around $125 a barrel on July 24, 2008.A strong contributor to this price decline was the drop in demand for oil in the US. Miles driven there in a month were down in March-May 2008 compared to 2007, with the 4% decline in May being the largest drop in history.  Oil further dropped down to its lowest price in 3 months, at around $112 a barrel, on August 11, 2008, and on September 15, oil price fell below $100 for the first time in seven months.On October 11, oil fell as much as $8.89, or 10.17% to $77.70 per barrel as global equities slide .
Oil traded below $70 on October 16, 2008. On December 21, 2008, oil was trading at $33.87 a barrel, less than one fourth of the peak price reached four months earlier. Prices did not rebound once 2009 started. Instead, after initially climbing above $48, prices descended by mid-February to below $34, hurt by forecasts for further declines in world demand. Through March and April 2009, oil traded at about $40 per barrel. By August 2009, prices returned to $70 a barrel.
Since early 2009 the price has been very volatile but has now reached back into the $80's. These high-spikes are indicative of an attempt at recovery, but obviously the world-economy cannot produce and consume more at the level it was at when oil hit triple-digit values. We could well see triple-digit values again in the future, followed by various fluctuations depending on political changes and then a big drop as demand falls. This is known as the bumpy plateau: -
James D.Hamilton wrote a paper that discusses the 2007-08 recession in the context of Peak Oil: -
Whereas historical oil price shocks were primarily caused by physical
disruptions of supply, the price run-up of 2007-08 was caused by strong demand confronting
stagnating world production. Although the causes were different, the consequences for
the economy appear to have been very similar to those observed in earlier episodes, with
significant effects on overall consumption spending and purchases of domestic automobiles in
We can see the energy-inflation trend here quite clearly for pretty much the last decade: -
Some people see Peak Oil as a threat to industrial civilization, and in many ways it is. Although people like Jeff Rubin argue that it is only a threat to our current globalised system. Any large increases in stimulus money may well drive demand to the level of triple-dollar oil prices in the near future - but then the market will find the operating costs too high, and thus drive towards de-centralisation and localisation. Economists believe in the power of prices to determine what the market does. Jeff Rubin suggests high-prices will naturally drive investment towards localised economies, urban farms, alternative energies, etc. But has he really examined the chicken-egg scenario of energy-speculation? And also, has he considered things such as political risk? As summed up by David Nye (a friend of mine in the peak oil community) - "I appreciate Rubin's measured prognosis, but I question whether he is properly accounting for political risk. Alternatively, his dismissal of domestic political risk may be accurate, but political stability may be achieved at the cost of totalitarianism. This would by no means be unprecedented."
Will the worlds' investors and businesses act too late and prevent an affordable transition-period to a low-carbon and more local economy? The short-termism, risk-taking, war-profiteering, outsourcing, bailout lobbying, and speculative behaviour of market-actors is of considerable concern when it comes to price manipulations. All businesses depend on credit in a credit-based economic system. The credit-cavaliers (bankers) have done a lot to destroy the middle-class and we could just maintain the current scenario of energy proxy-wars in Eurasia that show our leaders are more willing to hold onto large oil-guzzling military/industrial power - than to allow a more honest, regulated market dictate.
What constitutes an effective, regulated market is a problematic issue though. It is especially problematic if we consider the potential scenario of civilian-dependency on corporate food such as Monsanto, centralised services, etc in an increasingly centralised and brutal repressive system. Yet, other analysts such as Dimitri Orlov and Mike Ruppert have argued that countries face internal anarchy, internal fragmentation, seccessions, and possible civil wars as the oil-dependent national infrastructure implodes.
The fact is - nobody has certainty as to how each nation will respond to a post-peak world. It could well be that some nations react by letting non-essential economic sectors collapse and then allocating oil-usage to essential services, agriculture, essential food-transport, etc. Such policies could well buy enough time for these nations to enact a transition to a low-carbon, permaculture-based de-centralised economic system without widespread food-riots or wars. This would be the sane option. Indeed, it is important to note that efficiency-savings in fuel-usage may well be bad for energy companies' profits, but potentially very good for energy security as Michael Meacher (former UK Environment Minister) explains here. Regardless, many of these efficiency-directives will require strong government leadership or community-leadership at national or local levels (ideally both). The market may well resist such changes in consumption, as Dutch economist Maarten Van Mourik stated at a 2003 peak oil conference: "I have done a detailed study and I have concluded that it may not be profitable to slow decline". Disturbing words indeed.
Disturbing too; were the words of IEA chief economist Fatih Birol in 2008. The Times reported "Fresh sources of oil equivalent to the output of four Saudi Arabias will have to be found simply to maintain present levels of supply by 2030, one of the world's leading energy experts has said". Now, Saudi Arabia holds 20% of the worlds' proven oil reserves and is the largest petroleum exporter (source: OPEC). Is it no wonder that oil companies are in a desperate bid to head to places like the Arctic in the attempt to meet this seemingly unlikely target of four Saudi Arabias? The Arctic could well have a lot of a lot of oil reserves, although the issue of costs of extraction, refinement and transportation from such a region remain an issue. Indeed, just as in the case of Venezuelan Orinoco Oil, the Arctic may well only have a very limited amount of economically recoverable oil. Thus, it does not seem like the answer to the worlds' energy needs. Unconventional sources, such as the Canada Oil Sands also come with cost-limitations and risks. The post-peak world also spells the end of economic growth for a very long time to come. I say post-peak because, as some people (such as Mike Ruppert) have already claimed the world peaked in oil production in 2006 - others dispute that and claim we arrived at the peak (or plateau) recently and argue about the length of the plateau. Political scientist Nafeez Ahmed has done some good studies on the issue of the energy-crisis, and wrote a good summary here.
China continues to grow, while absorbing a lot of US Treasury debt and also consuming more and more oil and coal. As some say that the world may well reach Peak Coal very soon, China is predicted by some to move more towards natural gas to meet its growing energy-requirements. As discussed above, the central-asian countries are part of this energy market and also part of competing interests from different national-powers. AsiaTimes journalist Pepe Escobar has done an interesting analysis of how he sees this part of the world as a "pipeline-istan" of political instability. The consequences of continued American/European involvement in these energy-motivated conflicts in a post-9/11 world are very dangerous for world security. Such energy proxy-wars are a staple of a reactionary US hegemony in a post-9/11 world with the motive of peak oil in mind. The US-British military intervention in Iraq, for example, was linked to Peak Oil by analysts such as former senior British Army official in Iraq, James Ellery. On 22nd April 2008 he stated that “The reason that oil reached $117 a barrel last week, was less to do with security of supply… than World shortage.”
This just adds on to the dangers of world security that looming currency wars, widescale economic dislocation and increasing unemployment (in a post-peak world) will contribute. As said, every nation may have it's own response - with some being culturally influenced (e.g. Germany seems obsessed with preventing inflation due to memories of pre-war Germany, and the US fearing deflationary crisis from memories of the 1930's).
My own personal view is that there really must be dialogue between the different powers on the energy-issue. This includes sensible agreements between BRIC, G7, SCO, etc to start agreeing to a multi-polar economic and political picture; but with a strong sense of co-operation in helping each other towards internal food and energy-security. Things that the public should pressure world governments to enact could include - permaculture programs as a matter of national security, no-till agriculture to protect threatened soils, special global energy-reserves (to fight the worst-case scenarios of global-warming) could be established to fuel promising geo-engineering technology, non-debt monetary creation backed by fuel from energy-efficiency savings could help revitalize local economies, biomethane from a more de-centralised food-system (with much less waste) and from farms could be used to power essential services, education programs for poor women in developed countries to help reduce population density in politically/environmentally-sensitive locations, etc.
There are many potential options. Sadly, it seems that it will sustained actions to stop traffic and stop business-as-usual in order to MAKE the people in government accept concessions. Protestors and union coalitions in places like France are giving an example of how co-ordinated strikes can be powerful. Obviously, our tactics in the Peak Oil movement should promote civil disobedience but without violence or threats to fuel-security that is required for things like food and medicine. We should be directing our anger at the war-profiteers, energy-companies and the bankers that seem content in enriching the minority and letting the majority suffer. Sadly, we are all encased within this debt-dependent and fossil-fuel dependent system with all it's coercive economic hierarchies. There is a variety of activism that people can partake in to get the ball of resistance rolling - and that includes promoting the most credible information possible, writing to politicians, writing to journalists, sending out emails, talking to people in the street, leafletting, stopping traffic for a few minutes at a time near pedestrian-crossings (while holding placards), etc. What the protests in places like France have demonstrated however - is that the most powerful impact on our stubborn corporate-controlled governments are co-ordinated coalitions of strikes and blocking of traffic in the millions. The mistake of the French protestors, unfortunately, is that their demands lack understanding of real international geopolitical realities that affect us all. They really should be striking over the problems I've discussed in this blogpost - and also constantly pressing for solutions not just for France, but ones that can be pushed all over the world.
For now, the future looks very volatile indeed. God help us all.