[the following article also discusses Colin Campbell's now widely-accepted view that world oil production will peake "by 2005". But Campbell is a geologist, not an economist, and whatever some people may think, there IS a place for economics in analysing such matters. While the theoretical oil peak given what we know about (a) extraction rates and (by) the size of recoverable reserves, may happen in 2005, it is almost useless simply extrapolating current trends this way. An economic recession resulting from high oil prices will precisely impact high-energy consuming industries and markets hardest. Thus demand for oil may fall sharply and almost certainly will. From the 'geologists's' point of view, reduced demand NOW might mean deferring the final peak until later. But in reality, what all this more likely adds up to is that THIS IS ALREADY THE PEAK. Because which big corp, in the fields of transport, avionics, auto manufacture, electrical enginnerring, shipbuilding, is EVER AGAIN going to embark on big investment programmes in new plant, equipment and facilities with 10-20 year paybacks, when the main lesson that everyone has learned is that oil production is an inurmountable constraint on economic growth?The world is already awash with underutilised production facilities. One of the few sectors which has been UNDERINVESTED in recent years is porecisly OIL: few new tankers, pipelines, refineries etc, and why? Because the oil corps new damn well the oil would run out long before they got the money back. This is why the present crisis has aspects of so-called 'distribution' difficulties, and Opec spokesmen are hiding behind the fact that there is no spare refinery capacity etc. But which oil CEO now will ever authorise investment in new refinery capacity? The truth is, the world is not short of refineries etc. It i short of OIL, the fundamental input into transport, agriculture, and manyh other industries. This is one reason why Shaikh Yamani is not the fool some people say, when he argues that most of the oil will just stay in the ground: 'the Stone Age didn't end because we ran out of stones'. And he's right: economic collapse will begin BEFORE the 'theoretical' peak hits. In fact, the End of Big Oil began inm 1973, got worse after the collapse of Soviet oil production, and is now entering its final phase. Capitalism will colapse without ever producing more than a percentage of the THEORETICALLY available reserves. Mark] >From the Sunday Times: The West's boom is built on economies being neither 'too hot nor too cold'. Do soaring oil prices threaten this Goldilocks prosperity? David Smith reports Photograph: Goldilocks image Val Biro/OUP Stretched along the motorway it made a bizarre sight: a 100- strong convoy of tractors, lorries and juggernauts, two abreast, were conducting what the French call Op�rations Escargots. The snail's-pace parade during the rush hour was designed to draw attention to the escalating price of fuel and represented a classic display of French-style direct action. Except that this was not France but England - the A1 on Tyneside. At the head of this army of HGVs were Andrew Spence, a farmer, and Craig Eley, a haulier, representing the alliance importing the techniques that last week brought France to a standstill. For them the West's long boom, driven by the Goldilocks economy - neither too hot, nor too cold - has turned sour. What has sparked their anger is rising fuel prices. "We are leading the way for our industries," said Spence. "We are both young lads but I don't see a future in farming and Craig doesn't see a future in haulage. We have simply had enough of a government that doesn't listen to us." Eley, 29, has built up his small haulage firm, based in Gateshead, over the past 11 years but has seen his profit margins disappear in the space of 12 months. Spence's family farm, near Consett, was hit first by the BSE crisis, then by the slump in agriculture and now by the cost of fuel. They had joined forces on Thursday night, when Farmers for Action descended on Shell's oil refinery at Ellesmere Port, Cheshire. More than 150 protesters arrived from north Wales, driving four tractors across the main access road to prevent lorries entering the site. A further two entrances were also blocked. By Friday morning another blockade had begun at Hemel Hempstead, in Hertfordshire, and that night farmers and lorry drivers decided to lay siege to Pembroke dock in Wales. The tide of protest showed no signs of abating yesterday with refineries in both north and south Wales being picketed. At Ellesmere Port two protesters were arrested. So far the demonstrations have not approached the scale of those in France, where blockades have closed some main roads and many petrol stations. But it will not take much to escalate Britain's problems. Shell has given a warning of serious shortages at petrol stations if the Ellesmere Port blockade continues. For governments, faced with bigger popular protests than during the oil crises in the 1970s, one solution is to cut petrol taxes. Gordon Brown, the chancellor, has made it clear he will not do so. The other solution is to pray for help from the oil producers. Yesterday the large black Mercedes limousines shuttling between the luxury hotels around Vienna's Ringstrasse could mean only one thing: the oil sheikhs were back in town. When they gather at the headquarters of the Organisation of Petroleum Exporting Countries (Opec), close to the Danube canal, the world will be watching. The decisions taken today by the oil-producing countries could mean the difference between the continuation of an unprecedented era of global prosperity and a slide into recession. CAN the Goldilocks phenomenon, which has seen countries chalk up their longest-ever periods of expansion, survive a trebling of oil prices? Equally worrying, could a failure by Opec to boost output at today's meeting see oil prices, at present $33 (�22.95) a barrel, rise to $40 or $50 over the winter? On three previous occasions - in the mid-1970s, the early 1980s and at the time of the Gulf war in 1990 - a sharp rise in oil prices sent the world economy diving. Most economists insist that this time it will be different. The West's service-based economies use about half the amount of oil to produce a given amount of gross domestic product than they did in the 1970s. The "new" economy, harnessing technology to drive impressive productivity gains, need not skid on oil. "I think if anything people are pleased about it, particularly in the American case where they see it as a tax on the consumer that will help to slow the economy," said John Llewellyn, an economist with the investment bank Lehman Brothers. An analysis by Oxford Economic Forecasting, a consultancy, shows that while dearer oil could slow world economic growth it is unlikely to add significantly to inflation - which was the problem in earlier crises. Tough global competition means that firms are unable to pass rising costs on to consumers. Other analysts worry whether this year's oil shock might cause a worldwide stock market crash or send the dollar tumbling by exposing America's record trade gap, possibly then provoking further crises. On Friday stock markets were hit by fears that dearer oil would carve a deep hole in company profits. At the United Nations millennium summit in New York, President Bill Clinton warned Crown Prince Abdullah, a member of the ruling Saudi Arabian royal family, that high oil prices could bring recession. In Europe the tumbling euro has helped the cost of oil imports to more than quadruple over the past 18 months. In response, Europe's central bank has raised interest rates several times, damaging the prospects for a financial upturn on the Continent where economies have yet to achieve full steam ahead. FOUNDED 40 years ago this weekend by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, Opec first sent shock waves through the world economy in 1973 by announcing a 70% rise in oil prices and cutting output. The effects were immediate. Within a month there were petrol shortages in Britain. Motorists queued for hundreds of yards. The government issued petrol ration books, although formal rationing was never implemented. In December, faced with a simultaneous miners' strike, the government put the country on a three-day week, ended television transmissions at 10.30pm and ordered shops to turn off display lights at night. With Opec's production cuts pushing oil prices yet higher - by January 1974 they had quadrupled - Britain's slide into recession was on the way. As inflation topped 25% in 1975 and the economy sank deeper in the mire, the stock market lost two-thirds of its value, the banking system came close to collapse and fortunes were lost. A second oil "shock" in 1979, when oil prices jumped again in the wake of the overthrow of the Shah of Iran, appeared to confirm Opec's power. Then, equally quickly, it fell away. North Sea oil came on stream. So did other areas, where production would have been uneconomic in the pre-1973 cheap oil era. Opec was put in its place. Two years ago oil prices plunged to under $10 a barrel and appeared to be heading for $5. Opec, which now has 11 members, was in disarray, seemingly unable to halt the slide. Three things came to its rescue. Economic recovery in Asia meant a rise in demand for oil. Low prices had resulted in widespread investment cutbacks throughout the oil industry. And, perhaps most remarkably of all, Opec got its act together. Members agreed to cuts in production quotas and stuck to them. The question for today's meeting is whether Opec can, by increasing output, get prices down. Nobody is sure. Some people believe that after its brief return to the spotlight, Opec's influence will be short-lived. Sheikh Yamani, the former spokesman for Opec, said: "The stone age came to an end, but not for a lack of stones; the oil age will end, but not for a lack of oil." He believes new technology and alternative sources of energy will diminish the demand for oil and render Opec irrelevant. "Longer term it is horrible for Opec," he said. Others disagree strongly. Professor Colin Campbell, a distinguished geologist, has claimed for years that the world has been living in a fool's paradise when it comes to oil. At the start of this year he wrote an article predicting in precise terms how this year's oil shock would occur. In the longer term he is even more gloomy. In five years world oil output will peak, he said, and in 10 years the West will be relying on Opec for 50% of its oil. "The truth is that there is virtually no spare oil capacity in the world today," he said, "and in the markets that dreadful perception has begun to sink in. "There is, of course, a huge amount that can be done in terms of energy saving. But it does imply some fundamental discontinuities in the way the world lives." Most pundits believe oil prices will fall after the winter, settling at $20 a barrel, and that the world economy will sail on relatively untroubled. But nerves are jangling and uncertainty is rife. As Professor Colin Robinson, an energy expert at the Institute of Economic Affairs, said: "People are very bad at predicting. All the great turning points in prices have been missed by the experts." Additional reporting: Adam Luck and Susan Bell _______________________________________________ Crashlist resources: http://website.lineone.net/~resource_base To change your options or unsubscribe go to: http://lists.wwpublish.com/mailman/listinfo/crashlist
