Collapse: Part 2

Shale natural  gas was supposed to be a multi-century solution to our energy problems but the toxic emissions from all of those extra wells are causing environmental problems.  See:

Saudi Arabia is reducing its exploration plans with an excuse that it is saving those reserves for future generations, another confirmation of peak oil.  On April 20th, the BP oil spill began and the implications continue to develop.  There continues to be a high probability of a major hurricane in the gulf to stir up those 5 million barrels of oil that have leaked out and push them inland.  If that happens, it will close refineries and power plants close to the gulf who rely on large amounts of water for the processes.  The aging energy infrastructure coupled with the end of cheap oil provides a price floor for oil.

BP may not survive this oil spill for the claim that 75% of the oil is gone may prove to be false.  The media reports have been well managed painting an optimistic picture but the lawsuits will overtake BP’s ability to  survive.

The UK Energy Resource Center is reporting that governments are grossly underestimating the coming resource scarcity.  Classification of the various grades of oil misrepresent the overall energy value of reserves, up to 30% of reserves.  Heavy oil cost much more to refine versus “light” crude.  Only destruction of demand offsetting the decline of supply will keep the price of oil down.  In the meantime, China and India’s energy requirements are rising. Economic growth is currently tied directly with energy consumption.  See:

Peak Oil is a frightening story and the government does not want the bad news of peak oil to be distributed especially in the current weak economy according to Robert Hirsch.   Over the last century, oil was cheap therefore economic expansion was achieved without restraint.  $100+ oil will contract the economy and those in power do not want the public to move to even a more defensive posture than currently taking place.  The U.S. is vulnerable to the price swings because we export 60-70% of our consumption whereas Russia is an exporter with substantial reserves.

In the current system: Economics directs politics and politics directs wars.

Bankruptcies are on track to exceed 1.6 million this year.  Not good.

The economic numbers show that we are in a downturn (after they are revised).  The U.S. Dollar is not stable and global investors are keeping a close eye on the “quantitative easing”.  The amount  of money that will be pumped into the system may trigger hyperinflation which would show up early in the price of oil.  If the price of oil rises, you can expect further contraction in the U.S. economy and if it sustains over $100/BBL, a severe contraction is all but assured.

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