Confronting Oil Production Decline.

Those who have been following this blog know that the removal of oil from the transportation equation is not the end of life as we knew it. In fact, the advent of algae derived oil and even ethanol will easily meet all our needs without significantly interfering with crop production.

Although the technology is in its infancy, it also promises very fast implementation. As I mentioned earlier, the idea of a field of large vinyl tubes holding the working fluid is something every farmer can relate to. And 10,000 liters of oil per acre is an awful lot of bio diesel fuel.

We can even imagine a few farms near every major city providing the local fuel needs. That is pretty efficient.

However, while we fiddle, the crude oil industry is steadily converging on the tipping point. And I want to describe what this means. We have had $60.00 oil for four years and every producer went full out to take advantage of this great price. This did not bring an oversupply that knocked the price down. It did in the early eighties.

In fact, supplies are now tightening. We can also easily see that new supply, particularly from the tar sands, face huge lead times. More importantly, this oil is replacing visible declines elsewhere. It is conceivable that North America may achieve oil security for a generation by use of the tar sands. This will not happen elsewhere. Brazil is looking like a genius now because they planned for this.

The problem that no one wants to address is that by squeezing production to maintain current levels, we set the stage for a precipitous decline. Try to imagine the production of Saudi Arabia disappearing over the next three years. It will hurt like hell, even if we have the solution.

My fear right now is that it will be far faster than we can imagine. All other declines were.

Any new production if found will suddenly become too valuable for a country to release it into the global market. Every country will start rationing.

As I posted earlier, we are going to suffer with a $200 to $400 fill up until we can bring bio diesel online.

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