Infrastructure Australia council member warns of fresh oil shock

One of the advisers on the Infrastructure Australia council is warning of an impending oil dsafscrunch, which could send the global economy spiralling back toward recession. Curtin University's Professor Peter Newman says peak oil, when demand outstrips dwindling supply, has already hit. However, prices have been kept low because of the global downturn. Professor Newman also blames oil for causing the global recession in the first place, and he's not alone. -from radioaustralia.net.au

Professor Peter Newman of Curtin University who also sits on the Government's Infrastructure Australia Council is sounding the alarm in Australia and calling for a national contingency plan to weather the peak oil crisis that he believes--up until now--has been cushioned by the global recession. But the part of the report that further caused me to raise a brow is when he explained that he further believes that the global oil supply peaked in 2008 and the subsequent decline since then raised oil prices. Therefore as the people who worked several miles from their homes could not afford the gas, but purchased it anyway, thus were faced with a toxic and unaffordable subprime mortgage.

NEWMAN: Peak oil did happen i believe in 2008. 140 dollars a barrel was a massive increase and it didn't happen because some oil exporting country had a revolution or something. it just happened because we couldn't produce enough to meet demand

As for the "cushion" affect, since the bank failures in 2008 through 2009 the global response to stop the failures strengthened the economy and thereby temporarily stabilized oil prices, making them somewhat affordable. As consumers also slowed their buying and unemployment sored, the recession essentially destroyed demand. But the cushioning was/is probably only temporary--and that's just the next argument I believe Newman began to make.

As consumer demand resumes (not only in gas, but everything else) and as the economy tries to re-cooperate we will find that the full-on resumption of growth as we've always known it (infinite economic growth versus finite resources to power it) will cause oil supply to fall short of the renewed energy demand and spur another, possibly harsher, global recession.  This is dangerous and deeply disconcerting.

Newman: The recovery would very quickly unravel, we'd go into the w rather than the v and that w would have a very shaky last part of the letter as well and coming out of it would be not as easy to predict. All of the old formulae would be unravelling and there are people who are beginning to understand that this is a fundamental change not just a quick turnaround that we can do but easily just propping up banks and things we've actually got to do things differently and that means less oil.

(I am in agreement with Newman by further stating that the subprime mortgage bubble in America was a symptom of the peak oil crisis that may have fortunately bought the world some time from oil decline. But moreover it revealed bad business practices in the American mortgage market in the process.)

Now the argument of course will be, has global oil supply peaked? Or more to the point, did global oil supply actually peak in 2008 and spike gas prices? My answer to this question is that all rich nation's leaders begin to, nothing short of, demand OPEC to be clear on our present state of oil reserves. Because if oil is declining, everybody goes down with it. Nothing exists, waiting in the wings to take the place of oil and stabilize an already shaky global economy.

We must shake ourselves of this stupor, or dare I say stupid illusion of security we live in--that life as we've known it will always be.  The road we're on is bound to run out at some point.

Other Source(s):
abc.netau - Global downturn cushioned peak oil impact

Related Link(s):
publicservice.co.uk - Peak oil: Why industry and government should sit up and listen