Raise the Hammer

Are oil prices going up, in part, because of collusion between oil companies? That's doubtless...it's what they do. Still...there's a point beyond which demand drops off, either because consumers switch to greener technologies, or because they simply cannot afford to preform those tasks anymore (road trips, air conditioning, etc). Beyond the $100/barrel mark, this becomes a lot more likely.

So why? Because we're running out. We've been running out since the first day we started pumping out of the ground, and we've only accelerated since. Until this point, the momentum has been sustained simply by expanding production, thus depressing the price. Eventually, at it looks increasingly like we've hit this point, this will no longer be possible, and we will embark upon exhausting the remaining supplies at the fastest rate at which we've ever consumed it, having built a society (physically, socially and economically) which is contingent upon such behavior. What we hit that wall, the price of oil will go (or is going) through the roof, encouraging investment in technology, infrastructure and legislation to extract all remaining difficult-to-obtain reserves everywhere.

At that point, a number of things will happen. First, people will look for someone to blame - the oil companies must be gouging us, or maybe the government is taxing oil too much, or maybe it's the fault of (insert non-white nation here) for not being willing enough to pump enough oil to drive down the price to something we find more acceptable. People will demand heavy subsidies to fuel - price freezes, gas tax cuts, and investments in failing oil-intensive industries (aviation, automobiles etc) to preserve the standards of living they've become accustomed to. Unfortunately, for many reasons, once the crisis hits, things will likely snowball for a number of reasons - economic shocks will send investment money into commodities, and the seemingly endless rise in oil prices will make them a speculator's dream. Intensified extraction work will come with intensified disruptions - overworked employees striking, executives getting greedy and military conflicts becoming far more brutal (and in turn, requiring massively fuel-dependent armies to fight).

At the moment, oil production seems to have plateaued, while demand is growing faster than ever. In a few years, at best, the inevitable decline will begin to show itself, and reverse the gains of most moderate conservation strategies.

What's most terrifying is that these kind of economics are not unique to oil, and that many other commodities seem poised to enter the same kind of deadly spirals - seafood, lumber, fresh water, precious metals, etc, and may well enter them soon as well. Our society, by any objective means, simply uses too much, and unless we change that, it will be our downfall.