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Oil prices seem to be quick to spike, so I would expect it to behave more like a step function than something more continuous. It seems certain price levels hav
by arghnoname 16y ago
Oil prices seem to be quick to spike, so I would expect it to behave more like a step function than something more continuous. It seems certain price levels have to be hit to sufficiently dampen demand. If the spike is bad enough you get recession (or depression) which kills demand, and if it isn't big enough the initial investment of alternatives is too high.
Also, if Saudi Arabia or wherever "run out of oil" I'd expect political instability to result there, but also, it not to matter as much. Before running out there, I'd expect it to matter more.
I look forward to some facets of our crazy lifestyles changing (less exurbs and McMansions) but it'll definitely crimp GDP somewhat, more or less depending on the derivative.
- nostrademons 16y agoI actually expect it'll look like a sawtooth wave, trending upwards. Oil has very high inelasticity in both demand and supply, so small supply changes have large effects on price. Changes in demand happen over much longer timescales (i.e. people's car-buying purchase cycles), so it takes longer for prices to go down. The OP asked for the effects of peak oil specifically though, not for actual oil prices. In the short term, oil supply is ruled by geopolitical concerns. We bomb Iraq, the price goes up. Putin decides to flood the market with cheap oil, the price goes down. Chavez starts saber-rattling, the price goes up. World enters recession, the price goes down. The Hubbert curve is what's left when you subtract out all the random political noise. And that slopes gradually down. So if we're limiting ourselves to the effects of Peak Oil only, the trendline for price is going to move slowly, even if the price in any given month gyrates wildly.