"He is emphasizing the price of oil being the causative factor in the slump. "

Actually, he's more careful than that. His second analysis showed that high oil prices were a good predictor of economic slowdown. The only underlying explanation he suggested was the transfer of income from exporters to importers.

The first part was also interesting: it analyzed elasticity of demand, showing that there was a lag before high prices caused people to reduce consumption (more than would be explained by reduced incomes from economic slowdown).

"I have been saying that it is the interruption in growth, and the resulting credit unwind, caused by the higher oil prices (based on a squeeze in resources) "

I would suggest that the higher oil prices put greater pressure on a faulty petro-dollar recycling mechanism, causing the credit unwind, which in turn interrupted growth. Take a look at the first part of his analysis: he shows that world growth was unaffected by rising oil prices in 2006 and 2007.

Hello;
Long time reader, first time poster. While I agree that society needs to power down, I think Matt realizes this also. In many speeches, I have heard him say that his big worry was true oil shortages. While most people on this site realize that our “Just In Time” world leaves us vulnerable to many single points of failure, the average person just assumes things will be BAU. Most cities have only about a week’s worth of food on hand. Things could get real ugly real fast if the transport trucks stopped because of fuel shortages. How many meals are we away from collapse?

I think Matt wants to make people realize that things are bad and are going to get worst. The problem is that nobody truly believes him. They are hoping for some miracle solution that will allow BAU. The problem is how do you get people to face problems they don’t know exist and they feel powerless to change?

All solutions for alternate energy will take decades to make a real difference to society as a whole. How do we get from here to there? How do we convince people and governments that we need radical change? Remember it is not only the king who shoots the bearer of bad news. I know, I have the scars to show for trying to talk to people. I have lost more than a few good friends when I tried to talk to them about the coming problems. I now only say that “I will be damn if I give the greedy oil companies one penny more than I have to.” This is acceptable but all talk of oil shortages is not.

I think Matt is trying to change the “Happy days are here again” attitude by harping on the aging workforce and rusting assets. This is a message that is not too far out in left field for most of his audiences but he still is mentioning that there no magic Shangri-La of oil that will save our behinds.

I don’t blindly accept everything Matt says but I respect his attempt to get people to stand up and take a clear look at our energy situation. It is blacker than Matt lets on but it would only turn off the audience and they would stop listening if he was talking about how bad things are really going to get.

I think we can power society down and it does not have to be a collapse but only if we have very great leaders. So I guess it is time to find a quiet hidey hole. :)

I really enjoy the web site, lots great information. Keep up the good work!

I think part of the problem is that demand destruction that takes place with high priced oil is not toward the oil products themselves. Instead, people cut back their purchases of restaurant food, new cars, and all kinds of goods that they can easily cut back on. One ends up with a round about cutback in oil. In the US, the cutback is clearly there, if you measure it correctly. Part of the problem may be the confusing EIA weekly statistics, that are often revised downward.

It doesn't take a very big drop in demand to cause a big drop in the price of oil.

"I think that is sort of what Rune's post will say on Tuesday."

I don't know who "Rune" is, but of course it is what I have been trying to tell folks here for the last year.

If you accept the projections of Deffeyes, Campbell (where's he been, anyway?) and Simmons and other "guiding lights" of the peak oil movement, then what the Americans drive and how much they drive matter only to our national balance of trade and nothing else. As a percent of world consumption we are declining with each day and will only decline faster in the future in both our percentage of world consumption and our percentage of carbon/greenhouse gas will decline as developing world consumption grows and ours stays flat, even if we factor in no technical or logistical changes in our consumption, and there WILL be technical and logistical changes. So much of what Americans do is now at the margins anyway and becoming moreso, and the same is true of Europe and Japan.

Ragarding Simmons presentation, as one poster (at least)above said, somehow it just doesn't add up. I say this being a longtime fan of Matthew Simmons (in many ways, it was him along with Colin Campbell and Westexas here on TOD who introduced me to the modern fundamentals of "Peak Oil" as opposed to the "scare" of the 1970's, a false alarm that altered my thinking and planning for most of my adult life)

Simmons, after saying that the "fundementals" drove everything then makes three improbable statements:

“There is no rational for why oil prices plunged 74% in 90 days.”
“There is no rational to explain why low WTI keeps bouncing around mid-$30 to $40 level.”
“There is no rationale why so many other key crude grades stayed significantly higher.”

No rational? Or simply no rational that Simmons can accept?

In 1999, an act which had prevented large bank, mortgage companies and insurance companies from engaging in high risk speculation without oversight was thrown out the window with the repeal of the Glass-Steagall Act, a act of congress which had contained the financial sector since 1933:
http://en.wikipedia.org/wiki/Glass-Steagall_Act#Repeal_of_the_Act

Look at Simmons charts and notice when the oil prices began to race upward. Oh, by the way, did anyone notice that house prices and all other commodities began to race upward at about the same time?

The explanation of course is SO SIMPLE but one that Simmons for whatever reason (along with most peak oilers) CANNOT force themselves to accept. There was a truly massive flood of money out of the dot com crash looking for a place to go. This combined with the newly freed up money that poured into speculative financial investments from the now freed up banks, mortgage firms and insurance companies and biggest of all, hedge funds (which had formerly been an investment trinket at the margins for the very rich).

This money poured into Collateralized Debt Obligations (CDO's)and mortgages at a truly unbelievable pace. When housing prices had obviously peaked, the money began to move out fast and find another "low risk" formerly underinvested area to go to: You guessed it, commodities and energy in particular. The outcome was assured, peak oil or no peak (until after peak occurs, price of oil and peak oil are almost COMPLETELY unrelated, we proved that with the American peak in the 1970's)

The power of the hedge funds and specuative arms of the banks and insurance companies is ASTOUNDING. Charles Schwab Jr. recently said that at the peak of the last speculative bubbble, after leverage, the hedge funds could move money equal to two thirds of the yearly GDP of the United States. This is not a story at the margins, but is at the HEART of the financial crisis, and it still has not been addressed in any real way.

What bothers me is the absolute refusal to either (a)Acknowledge this factor in the astonishing run up and then crash of oil and commodities prices and (b)or to even be able to see this factor on the part of Matthew Simmons and most of the rest of the peak oil community. Why?

The perception seems to be that if the above financial dislocation of oil prices is admitted somehow the importance or reality of peak oil is diminished.

Nothing could be further from the truth. When peak oil occurs (and it must occur, either on the supply side or the demand side first, then decline at one side of the spectrum will drag down the other, Simmons is right about the fact that the low prices will finally pull down supply even if nothing else does) it will be a major change in the fundamental structure of modern technical economies (it could be a major positive change, or a major negative one, depending on how it is managed) but price be damned, peak conventional oil production/consumption (you can't have one without the other over the long term) WILL OCCUR, and in fact may have already occured. We simply cannot know when.

I cannot know, but I am betting my money on the fact that peak oil and the current financial dislocation have NOTHING to do with one another. As far as oil consumption goes, I have gone from 42 miles commuting daily (5 days per week, 50 weeks per year) to commuting 3.4 miles per day, and am now in an apartment with a $40 utility bill instead of an old rural house wiht a $250 utility bill per month. Is Simmons, linked to the oil industry as he is, able to understand a 90% plus decrease in overall energy consumption? And I know I am not the only person to make this kind of choice, several of my friends and co-workers have done similiar. I worry that those so tightly linked to the oil and gas companies are blinded by their loyalty to the industry that made them, and cannot see what is happening in the larger world. It will be revolutionary.

RC