The United States continues to slumber while a catastrophe lies in wait. Increasing numbers of analysts and policymakers are warning of another super price spike for oil and the likelihood of "peak oil" more generally.
Peak oil is the point at which global oil production reaches a maximum and then declines. The speed of the decline is a key unknown and if it is relatively fast, the results could be truly dire for economies around the world.
We saw prices as high as $147 a barrel in mid-2008 (the dominant factor for gasoline prices well over $4 a gallon), which played a strong role, perhaps the dominant role, in the global Great Recession -- as high oil prices have in most recessions over the last fifty years. Once the recession hit, oil demand dropped and prices plummeted as low as $33 a barrel.
Prices steadily recovered since their low in early 2009 and are back to dangerous levels in early 2011 (about $90 a barrel). We can expect far higher prices as the global recovery continues. An increasing number of analysts are projecting prices as high or higher than the 2008 peak in the next couple of years.
More importantly, global net exports of oil continue to drop as major oil exporters increase their own consumption at the same time as their production is stagnant or falling. As a major oil-importing nation (about 2/3 of our oil is imported, by far the largest import dependency in the world), net oil exports are far more important to the U.S. than total oil production. Even if global oil production increases in the coming years, if there is less available for oil-thirsty nations like ours the situation will be far worse than total oil production figures would otherwise suggest. More on this below.
It is time for public discussion of this issue to reach the same prominence as climate change. Indeed, many solutions to these “twin crises” are the same because reducing petroleum dependence will ameliorate peak oil and climate change.
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