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Ch. 5: Peak Oil: A Potential Pivot of the 2010s

#60: Jan. - Feb. 2009 (Non-Fiction)
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Chris OConnor

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Ch. 5: Peak Oil: A Potential Pivot of the 2010s

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Ch. 5: Peak Oil: A Potential Pivot of the 2010s

Please use this thread for discussing Ch. 5: Peak Oil: A Potential Pivot of the 2010s.
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realiz

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giselle from chapter 3
On a national interest level, particularly for the US, a weakening economy (a deep dive) is a strategic question and a question of national security. From an oil perspective, I think Phillips does a great job of discussing this point in chapter 5 and I think he also demonstrates the fate of those nations who reach the pinnacle of economic achievement, perhaps represented by global dominance, and then decline.
I am not finished this chapter but I am not sure I am understanding it. Does Phillips mean that the world peak oil usage is here, or almost here and that from now on the demand for oil will decrease? This does not make sense to me looking an China and the increasing demand there and the frantic pace at which development and building is going on. Or did he mean the the US oil usage has peaked?
Also, the attachement of US currency to oil, which I know is something that has perhaps been challenged even further since the publishing of this book, is something that I don't fully grasp, or at least grasp the consequences of this dominance being lost.
Phillips, to me, seems to be saying in this chapter that there is no doubt of the US declining as a world power. Does Obama really believe what he is saying, or is he trying to say what Americans want to hear?
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giselle

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I believe that Peak Oil refers to the supply side, that is, the production of oil not the demand. The problem for many oil producing countries, including the US, is that their oil production has "peaked" and levelled off or is close to that point, even though millions of dollars continue to be poured into oil exploration. Because the US economy (and others incl Cdn) are so oil dependent, reaching peak oil production is considered a sign of weakness to come because the country will have to import mor and more oil to keep growing. Conversely those countries that can show continued increase in oil produciton have the opportunity, say through state run oil companies, to basically hoard or control the flow of oil, driving the prices upward making the imports even more expensive. The combined result is a decline in the economy of the "peak oil" countries. At least that's how I undertand it but I stand to be corrected.

On the tying of currency to oil, I am not too clear. I know that oil is priced and sold in US dollars historically. This creates demand for US currency, keeping the value of that currency up. If oil were sold in some other currency, the US dollar would decline (I think Phillips is saying that this is happening). If a currency loses value, imports to that country (including but not limited to oil) are more expensive adding to the problem above. Ultimately this can lead to a weakening of the economy and a rippling out effect on the tax base and other implications. But as I said I have only a sketchy understanding of this. I'm going to explore it a bit more.
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realiz

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Thank you, that maybe makes more sense. I'd better go back and reread the first half of the chapter before I finish as my first reading was late last night while waiting for a plane to come in and I think I was not really awake.
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realiz

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I don't know what I was reading the other night, I guess I was half asleep.
Phillips is saying that US has passed its peak oil production and is relying more and more on imported world oil, which is also approaching peak production. The US dollar which has been the currency for oil trade is also losing its grip. I don't really understand the implications of this other than that the US dollar will become less desirable, and already has, for investment.
So, the US has been relying on imported oil, and also imported cash to buy that oil. If there is not enough oil to go around, is it really possible that China or anyone else will keep loaning their oil buying competitor cash to compete with? And with the increasing debtload of the US government, will the worldwide confidence of the US ability to pay that loan off disappear?

It seems ludicrous that with this information in hand that a government would encourage a population to keep spending money, buying bigger houses...consume, consume.
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giselle

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It seems ludicrous that with this information in hand that a government would encourage a population to keep spending money, buying bigger houses...consume, consume.
It may be unethical but I'm not sure its ludicrous ... promoting consumption actually makes perfect sense if you buy the capitalist economic model where there are three underlying elements of a healthy, growing economy ... government expenditure, investment and consumer spending ... and they are interrelated and interdependent. If one of these areas fails then the rest are affected and the economy spins downward, or at least, so the model would suggest. Of course, this takes a degree of willfull blindness on the part of many when evidence of systemic problems with the model creep up like those reported in Phillips book.
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Grim

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Only three what about innovation, what about deception and corruption? Who's model are you talking about?

http://video.google.ca/videoplay?docid= ... rank&dur=3

:book:
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depending on who you talk to, innovation can be considered part of investment ... or a fourth element. there will always be corruption and deception (including self-deception) in human systems, economic or otherwise. all they do is warp the basic elements and turn them away from their intended purpose.
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promoting consumption actually makes perfect sense if you buy the capitalist economic model where there are three underlying elements of a healthy, growing economy ... government expenditure, investment and consumer spending ..
But if the economy is NOT healthy and growing, pretending it is will not make it so.
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Realiz: "Phillips, to me, seems to be saying in this chapter that there is no doubt of the US declining as a world power. Does Obama really believe what he is saying, or is he trying to say what Americans want to hear"

Phillips does say that no society he has studied that exhibits the signs that the U.S. does, has not been able to regain its dominance. The question that occurs to me, though, is whether that is a bad thing in itself. Phillips addresses this by saying that after a tough period of a few decades, these societies can become actually more prosperous and healthy than in their glory days--just not, presumably, with the world influence they once had.

Giselle: "Conversely those countries that can show continued increase in oil produciton have the opportunity, say through state run oil companies, to basically hoard or control the flow of oil, driving the prices upward making the imports even more expensive. The combined result is a decline in the economy of the "peak oil" countries. At least that's how I undertand it but I stand to be corrected. "

Phillips says that the knowledge on the part of Bush and his people of peak oil having arrived (even if they're not publicly admitting it), led to the invasion of Iraq. They were sure we needed to have at least good access to the oil of a country that has a lot of it. Giving the Iraqis the gift of freedom and democracy would be a noble-sounding way of achieving this access.
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