The Crash Course - Chris Martenson [120]
Production difficulties, notably in Mexico and Saudi Arabia, combine with rising domestic demand to squeeze exports. Despite official pronouncements that supply issues are only temporary, oil traders and other astute insiders seem troubled by the fact that, for a variety of reasons, less oil seems to be making it to market than in prior years. These glitches, although constantly spun by the U.S. Department of Energy as temporary, are sufficient to drive oil well beyond $147/barrel, the previous record.
A combination of rising internal demand in several key oil-exporting nations and the decision by some countries to export less of their oil (as they prefer to hold it in reserve for future generations) leads to a far more rapid drop-off in the total amount of oil available for purchase on the global markets than most analysts expected. Compounding the predicament, the lighter and sweeter grades of oil are preferentially withheld, forcing a glut of heavier and less desirable grades on the world market. Tuned for the sweeter grades, refineries are unable, and in many cases unwilling, to invest in the expensive retrofits required to process the heavier grades of oil, leading to the widest-ever spreads recorded between the prices for sweet versus sour grades.
Already on edge over the highly volatile and uncertain oil prices, the world is shocked when, in February 2012, the energy minister for Germany announces during an interview on the BBC that Peak Oil is real and that Germany has been quietly preparing for its eventual emergence on the world stage through a combination of efficiency measures, transportation strategies, and industrial realignments. Internal documents detailing German responses to Peak Oil surface from multiple branches of the German government, ranging from the military to the interior ministry. Peak Oil shifts from an eventual worry to a present reality seemingly overnight.
Within a few weeks, a number of countries announce that they are no longer exporting their oil and that they have nationalized the resource to preserve it for future generations. Chaos erupts in the oil markets. Oil prices shoot up to previously unimaginable heights. First $200 per barrel, then $300. People keep thinking, It can’t go any higher; it’s not worth it . . . but it turns out that oil is, indeed, “worth” a lot more than that. And so it goes higher, to $300 and then $400, in fits and starts, sometimes gaining or losing as much as $10 a barrel in a single tick of the trading tape. Volatility reigns.
Fuel rationing quickly occurs in the most dependent of importing countries, including the United States, Japan, and much of Europe. Fuel triage plans already in place1 call for the military, food suppliers, and emergency services to get first dibs; mass transit is next in line. Hapless automobile commuters find themselves second-from-dead-last on the priority list, just barely edging out recreational users. Unable to get to work on their individual fuel allotment, many turn to carpooling, while others, especially in the United States, discover just how little spare capacity exists in the mass transit system. Embarrassed city and regional planners and administrations promise rapid enhancements to the mass transit system and are shocked when the bus and train car suppliers inform them of already-existing multiyear waiting lists.
The worst impacts result from fuel shortages wreaking havoc on finely tuned just-in-time delivery systems for all sorts of industries and sectors. Spot shortages erupt in numerous supply chains, leading to a variety of unpredictable delays in an enormously wide range of services and products. Grape growers in Chile find themselves with mountains of unsellable product, computer manufacturers can only run their assembly lines for brief periods when key components