In an interview with Jim Puplava of the Financial Sense Newshour, author and economist Chris Martenson claimed that a physical shortage of oil is one of the underlying causes of the current economic malaise and societal unrest seen around the world this year. According to Martenson, the civil war in Libya highlighted the increasingly tight supply constraints in the oil market, as demonstrated by the price action following the conflict.
To me the big story is and continues to be this idea that all those other things that we're talking about in the economic sphere and our debt sphere are really just noise when you understand that all of that requires ever increasing amounts of energy to sustain ... All the data I'm tracking continues to suggest that we are unable, for whatever sets of reasons, to really meaningfully increase global supply of the kind of crude [oil] that we really want. I know Saudi Arabia has some extra sour stuff, and the markets seem well supplied with sour, but where's our light sweet? It really only took Libya at 1.3 million barrels a day coming offline to expose just how tight that market really is.
So when you're thinking about a global market that consumes 86 - 88 million barrels per day, depending on how you count, and you take 1.3 million out of the equation and all of a sudden things are really tight, I think that tells you everything you need to know about where we are in this story. We do not have spigots of oil that we can just twizzle to the right and have more oil flow out.
We're working really hard in some really tight formations, really deep formations, really exotic locations at just unbelievable pressures, with just exquisite technology being brought to bare. We're really putting a lot of effort in and everything I'm reading and looking at and able to get my hands on suggest were bumping against a production plateau and I think the price confirms it.
Martenson stated that the world economy lacks the necessary energy to continue growing at its previous pace, and worse, that the crisis in the lack of energy has been further accentuated by the ongoing credit crisis that began in 2008. As a result, prosperity has diminished in many parts of the world, leading to protests and global unrest.
We are experienceing, I believe, geologically driven oil prices, meaning there is actually physical scarcity of supply, which means were having higher than average oil prices. At the same time, we're running into the wall that was created by the bursting of the largest credit bubble ever in history. And this one was a global credit bubble. When you have a credit bubble all on its own, that's a dangerous beast, but when you combine that with rising oil prices that are themselves a limiting function on economic growth and advancement ... when you put those two pieces into one spot, it's absolutely essential to see both of those at the same time. Yes, high oil prices are very highly correlated with recessions, but what do we make of high oil prices in the face of the bursting of the largest credit bubble ever?
That's what were facing. That, to me, explains the riots in Greece or what's going on in the "Occupy Wall St" right now. There's a lot of concern and confusion. What used to work isn't working anymore. If you want to understand why, you have to put thodse two pieces together.
Via Financial Sense.
Listen to the interview here.