Yeah, sorry, gas will not go to $10 a gallon.

Sorry to disappoint you.

I know you Grist ecologists were hoping for the end of the world, but things are actually pretty good for the majority of Americans these days.

It probably will. The financial crisis will dry up credit for oil exploration and development. Similarly, price decreases will further decrease exploration and development. When the economy rebounds, oil prices will go thorough the roof due to the resulting lack of supply.

For candidate Ronald Reagan, it was "Morning in America".

Well, the sun rose a week ago and we find it is "Socialism in America".

For an admitted progressive, liberal, I welcome more and hopefully more resourceful government into my family's life.

We know the penalty of trusting that hedge fund with our earnings. Now, we are putting our faith in the Federal Reserve to bail out our and the global economy. Look around at the imploding institutions and nation-governments looking to government-funded rescues.

So, lets get used to the future of depending upon each other's wealth to get us through this rough and likely extensive global economic contraction. If the private sector is not willing to lend to its private sector brethren because there is no confidence the borrower will survive, it is time to abandon that ship and climb aboard a ship of state.

Lets take this new (revised) state of affairs a long leap forward into US and OECD energy policy and eventually into global energy policy. Exit the private sector. Enter the public sector.

Wind farms and planned wind farms need access to the large urban electricity markets and that requires thousands of miles of expensive transmission lines. US utility dereg has put those investments into the hands of private power line companies who profit from less wire because that causes power transmission congestion at certain times and in certain areas of the country so they can charge more to power suppliers with excess power to sell a high demand customer. Why do we not put an end to this predatory line-lending practice by nationalizing the nation's three un connected grids, Eastern, Western and Texas into one Interstate wire system just like we did for the interstate highways.

Too much to swallow in one bite? I agree.

Huge costs for taxpayers to buy up the privately held transmission wires and towers. Lets put this idea into overdrive and suggest we simply expropriate those wires for the public good. The owners can write off their losses in tax breaks over time.

The State and federal governments (we, the people) enjoy condemnation rights of private property when we deem the owner is holding out for an extortionist selling price. But, the public needs that land and we will not be denied when it is in our collective interest.

Getting control of the wires, we, the people can now use our tax dollars to build what a shaky capitalist system of investors are not willing to do; we can build the wind and solar farms to get that likely 20% max of non-CO2 emitting new power into the grid and start to replace aging and dirty fossil fueled capacity with cleaner, more efficient generating capacity (including next generation nuclear reactors) to assure reliable power in a growing renewable power future.
Does that sound too radical? Ever heard of TVA?
I can stop here and let you add some ideas about getting back control of our energy future by owning it through our tax dollar purchases.

Then, lets get on with propping up the UN system to expand our future think into the global community.

John McCormick

Right on, keep it coming!  I've been hoping that this financial meltdown would unclog some of the ideological arteries in the body politic, and that using the government for a green transformation would get more of a hearing.

The grid is a prime candidate for nationalization, and what makes it more imperative now,is that it would make converting the electrical system to a carbon-free one much easier.  This is because the generation of wind and solar energy needs to be centrally controlled, and having a set of private owners might make this impossible.

I want to also point out that the construction of high-speed rail and intracity transit requires government planning as well -- probably the only way to sustainably overcome the subject of this post, the decline of the supply of oil.

Jon,  

When the votes are counted and Senator Obama assembles his transition tam and their documents, nationalizing the grid should be at the top of his energy proposals.

That happens when people like you get the point across to his transition team.

John McCormick

Don't make the mistake of trying to predict crude oil prices in the future. I've chided Joseph many times, to no avail. Demand is only off 2-3 percent, so why are crude oil prices off 20-30%, may I ask?  

On another blog somebody responded "well that's a REALLY BIG TWO TO THREE PERCENT THERE, SAMMY." What a load of cabonaceous manure mulch.

All it would take is one country taking over the Straits of Hormuz and maybe another shutting down the Suez Canal and we'd have $200 per barrel crude, probably overnight. But if the world goes into a severe recession, well, what's wrong with predicting $20 per barrel?  You have a problem with that number?  

What I don't like are the geo-politics and the concept that as money is shorted in a failing economy, war might be the only answer - economic or with real armies. I predict extreme volatility that has little to do with actual "fundamentals" and that's the story I sticking with.  -sam

Onward through the fog

But if the world goes into a severe recession, well, what's wrong with predicting $20 per barrel?  You have a problem with that number?

Uh, yeah.

Exploration and new production costs are already imposing a de facto price floor of >$70, a number expected to increase significantly by 2012.

The credit crunch is already affecting the industry, with small explorers becoming untenable and big producers scaling back exploration plans.
That's on account of both the general freeze as well as investors believing in particular that the recession will depress energy consumption and revenues, thus causing the flight from oil futures and succeeding price declines.
If this goes further into a severe recession, where are they going to borrow the money?

And as new discovery and production is retarded, even as existing giant fields deplete, the supply crunch will increasingly override demand destruction (which has already plucked all the low-hanging fruit, at least in the West).

As for what OPEC's going to do at their emergency November meeting, that's a wild card. On the one hand you have the price hawks Iran and Venezuela demanding production cuts to support a >$100 price, and at September's meeting OPEC agreed in principle to do this.
But the Saudis were immediately intransigent, informally saying they were going to disregard cut commitments they had just made.

Saudi behavior is difficult to figure out since it depends upon the real status of their reserves, which is a state secret.
But given their increasing domestic consumption, they seem to feel they can maintain foreign revenues only by keeping output high. This does put downward pressure on prices, which is harmful to the smaller OPEC producers.

That's why we're starting to hear talk that OPEC itself is on the verge of breaking up.

So what does all this mean? Exactly what Peak Oil theory predicts - price volatility. In the short run there are plenty of factors pushing prices up and down.

But the long-run trend is clear. We have plateaued global production and increasing exploration and new production costs, to bring oil of ever-lower quality to market. We have demand destruction running up against the wall of diminishing returns.

Add to that the recession and credit crunch. Whether or not (and how much) this is the result of Peak Oil itself is a matter of dispute, but at any rate this is aggravating those Peak Oil phenomena.

So, getting back to the beginning, while prices can be expected to remain volatile, they're certainly not going much below $70 for any significant length of time, and the overall longer-term trend will remain upward.  

Two questions for Joe Romm and the Grist Mill community, if you please.

 Is there even a reasonable chance the adamant determination of the current leaders of the world's unbridled political economy to grow ourselves out of the current calamity in the financial markets and the real global economy could soon threaten human wellbeing, environmental health and the integrity of Earth?

 If the present leadership of the human family keeps relentlessly expanding the leviathan-like global economy in patently unsustainable ways as it is doing now, and the family of humanity keeps getting what we are getting now, what kind of future can be sensibly expected for our children?

Sincerely,

Steve