When oil prices collapsed from $147 a barrel in the summer of 2008 to $35 a barrel in January, American drivers, Congress, government bureaucrats, and the mainstream media refocused on other, more pressing issues, like executive bonuses. Peak oil likely occurred between 2005 and 2009; oil production will now embark on a long slow decline. The world isn’t prepared.
Matt Simmons, energy analyst and author of Twilight in the Desert, recently told Reuters
“We are 3, 6, maybe 9 months away from a price shock… These prices now are dangerously low. The lower prices fall, the less oil will be produced and the greater the chance of an oil spike…. [And] unless oil demand falls by 10 or 15% per annum, which it is not going to do, then we don’t need to wait for oil demand to come back before we have a supply crunch.”
In this scenario, low oil prices will continue to take oil fields out of production and reduce exploration. Once prices recover, companies will have trouble gearing back up due to the credit crunch, resulting in production-increase delays.
— From an Op Ed by James Quinn, at Minyanville.