Almost two years ago I moved from Boise ID to Portland OR. I left behind several good friends, and from time to time we exchange emails. A couple of days ago a friend who lives in Boise sent me email asking my opinion on the current economic conditions and their relationship with Peak Oil. Last night I wrote a reply to his question, however another local Portland OR friend suggested I post the reply in the hope that many visitors to this website would find it helpful, thought provoking, and even create an account to comment on the issues raised in my reply. So without further adieu, here it is.

> Is this the start of the real earthquake or just a pre-shock?
>
> The world-wide economy looks really unstable, but I don't
> know if energy is yet expensive enough or in short enough
> supply for this house of cards to fall just yet.
>
> Xxxxx

Xxxxx,
The stock market is but one of many indicators to look at. However the smoke
of inflation is obscuring all of the real fires. So its hard to keep things
in perspective. I would say this was a rather "STRONG" pre-shock and like
all seismic events we really don't know when the real earthquake will come.
All I know is for 2008, I can't imagine any scenario where the US economy
doesn't end up in histories emergency room.

Regarding energy (crude oil in particular), the 3rd world uses about 10
percent of all crude extracted. Currently the developed world is out bidding
the 3rd world for "that 10 percent". Once supply drops below the sacrificed
3rd world 10 percent - things will break, world wide. The world can endure
increasing prices - we'll adjust. It's supply disruptions that stop things.

Here is what I know:
1. Mexico's largest oil field - Cantrell is crashing at 25 percent a year.

2. Mexico will be out of the oil export game within 3 YEARS!

3. Saudi Arabia largest oil field - Gawarhar has peaked and entered production
decline!

4. Canada has put the USA on notice that by 2012 exports of natural gas and
oil from tar sands will be cut by 50 percent!

5. All new crude oil supply being brought online within the next 10 years will
not offset crude oil production declines (from all reasons, mostly
depletion). In short we're screwed - period.

When will the demand and depletion lines meet to cause the calamity? My
crystal ball is cloudy, but the trend is obvious.

Here is what I think about 2008:

1. All sorts of election year schemes will arise to “fix” the problem,
however most if not all will fail.

2. The suburban house building workforce will need to start looking for
something else to do.

3. Suburbia has ran into the implacable wall of Peak Oil.

4. Our lives will start becoming simpler.

5. We will start traveling (much) less distances.

6. 2008 will be the year that the issue of Peak Oil not only takes stage in
the forefront of American politics, but pushes global warming aside as the
most immediate threat to the "modern" way-of-life.

7. Peak Oil implies a pervasive trend of contraction in everything, from our
daily distances we travel to our notion of economic growth (as we currently
understand it in the age of industrial capital).

To sum it all up in one sentence - The first card (in the house of cards) has
been pulled out and the hole structure is starting to wobble.

History never repeats itself, but it does comes damn close each time. With
that said, the Dow crashed in 1929 initially losing 17 percent on its first
leg down from a high of 381.17 (sounds like right now doesn't it?) There
were intervening highs - 30 April 1930 of 294.0. However after the April 30,
1930 high of 294, the "Battan death march" of stock slides began. It finally
ended on July 8, 1932 closing at 41.22, concluding a shattering 89% decline
from the peak.

As it was in 1929, so it is similar to today. It's not a pretty picture in
anyones book. We entered 2008 feeling "Okay" - financially, we'll be lucky
to leave 2008 with 70 - 80 percent of what we started it with.

Yep, I think sometime in 2008 the big one will hit! I never expected to be
both prophet and historian in my lifetime!

Jeff.