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Fodla32

Peak Oil: USA 1970, USSR 1988, World 2008

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This is a very interesting article, by Douglas B. Reynolds, Professor of Energy Economics at the University of Alaska, which puts forward a very plausible argument vis a vie Peak Oil and the current economic collapse.

M. King Hubbert (1956) had very accurately predicted that the USA would start running out of oil in or around 1970. As shown by charts in the article below, this is precisely what happened. The USA would have been facing economic collapse, if it hadn't been able to call on Saudi supply, which it began to do on a massive scale in the year 1970. The USA was still in a very difficult, if not impossible position, given it had to pay for Saudi oil in gold backed currency. In 1972, the USA reneged on its Bretton Woods commitments, and dropped the gold based dollar. From now on, Saudi oil would be paid for in Petrodollars, i.e. dollars based on Saudi oil. It was a remarkable arrangement, that only a global superpower could impose on a backward, Medieval, monarchy. From 1972 on, Saudi Arabia would in effect, pay the USA to use its oil.

The charts below show that the USSR reached Peak Oil production in 1988. It had no Saudi Arabia in its backyard to call on, and if it wanted to buy Saudi oil, it had to do so in Petrodollars. Game, set and match to the USA.

I think future historians are likely to agree that the real victors of WW2 were not those who defeated Germany and Japan, but those who secured the Persian Gulf, and Saudi Arabia in particular, within its hegemonic space. Saudi oil became the most important and potent economic and military asset in the world. Nuclear weapons had no practical use in the Cold War. Saudi oil was the key weapon.

So, where does that leave us today? The world as a whole faces the same crisis that the USA faced in 1970 and the USSR faced in 1988. But, today, there is no new Saudi Arabia to draw on. Renewables often cost us more than they return in energy. In short, there is nothing on the technological horizon that could possibly replace conventional oil.

But, don't take my word for it, read the article:

The Oil Drum | Peak oil and the Fall of the Soviet Union: Lessons on the 20th Anniversary of the Collapse

 

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