Friday, January 09, 2009

Warning: Major Contraction Ahead

For those surprised by the sudden fall gasoline prices, James Howard Kunstler has a telling line in the epilogue to the 2006 edition of his eye-opening book “The Long Emergency.

“You might think that oil producers would benefit unequivocally from ever higher prices, but the hard lesson learned over the 150-year existence of the industry is that reasonable price stability has greater value than price-jacking because price-jacked economies tend to fall into recessions, cutting demand for oil.”

Although the current recession (impending depression?) was caused by the loosey-goosey, unregulated mortgage market, the stratospheric price of oil made matters worse.

Kunstler explains, that in the past, the oil industry has try has “stabilized” such soaring prices by calling on “swing producers” who boost output and drive down prices.

Of course, this assumes “swing producers” exist.

In this post-oil peak environment, when world-wide oil depletion is real, we no longer have “swing producers.” Accordingly, oil prices will trend upward again even as consumption slowly but surely drops.

If that seems like the beginning of the much welcomed transformation to alternative energy and a happy ending to our various environmental and economic crises, Kunstler says, “Not so fast.”

But I’ll let him tell you about his unremittingly gloomy predictions for 2009 and beyond. They make for the same sober reading that “The Long Emergency” did.

If Kunstler is right, expect wrenching changes in life as we have known it here in this once consumer-crazed, credit-mad world. Welcome to the new world of shared living spaces, home gardening and INvoluntary simplicity.

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