America uses a disproportionate share of the worlds oil
Why pick out USA to discuss the effect of an internal recession on decreased use of the worlds oil supplies?
Simple. Because the USA uses a hugely disproportionate amount of the oil resource available to the worlds people (in 1999 USA burnt over 17 million barrels a day - four times the amount China burnt, eight times more than India burnt, over four times more than all the former Soviet empire burnt, six times the amount Germany burnt, and so on). Because USA takes hugely more than its fair share, any internal USA recession will drive down the profligate American waste of this finite resource. As a result, the globes common resource will be able to be spun out just a little longer. The American government has an unique ability to delay or mitigate a recession through unilateral military action, possible because of its immense military power, and because of the weak form of democracy in America.

What then are the historical and present political, societal and economic conditions that make a deep recession in USA almost inevitable; and would the effects of a deep USA recession be sufficient to slow global oil depletion?

The American form of democracy is structurally weak and subject to special interests
The American system of governance is via a 'duopoly' (the 'simple majority' form of voting effectively means Republican and Democrat parties are the only parties available to vote for; therefore huge numbers of American people are effectively disenfranchised, so don't vote at all) which has entrenched unelected business and military relationships within all administrations. This erosion of democracy is made worse by an 'office of presidency', whose candidates are under the heavy influence of business-military 'special relationships'. 

The presidential office then assigns itself 'special powers' beyond purview of the peoples elected representatives. The power in the hands of the president - who is also the head of the military - allows him to invade and/or kill people in any country he choses (in consultation with his military and his secret service; some would say and in consultation with business interests _[1]).

The partial capture of the American system of Governance by unelected interests allows a great deal of room for rewarding party donations from big business. It allows a great deal of 'special interest' support - which must be 'paid back'. Pay back is in part by giving important and handsomely paid jobs in governance to party 'friends', instead of to professional and uncorruptable servants of the public. Payback for big money donations from business can come from awarding contracts within USA, and in countries the USA government has invaded, or in which it has based itself.

"Halliburton's contract became the subject of controversy soon after it was awarded in March 2003 without competitive bidding.

Halliburton was originally contracted to protect Iraq's oil infrastructure from sabotage. Instead, the government retained it to buy and deliver fuel to Iraq to stave off civil unrest after the fall of Saddam Hussein's regime. Halliburton shipped in gas, kerosene and other fuel from Kuwait, Jordan and Turkey.

Pentagon officials have said they gave the company the contract without bidding because of the need to move quickly. However, questions remain over the role of administration appointees in its awarding. At least two career civil servants have raised the possibility that political pressure was applied in different stages of the contract process.

The DCAA released a preliminary audit in December 2003 that raised questions over $61 million in possible excess charges. The latest audit increases the total amount in question to $108 million and is much sharper in its criticism."
 -The Los Angeles Times, 15 March 2005, reporting on a Defense Department audit; an audit available only to the presidency; an audit withheld from the Peoples elected Representatives in Congress.

 It can come from designing legislation to favor business (not a citizen of USA i.e. not a 'natural person', and maybe partly foreign), even over the interests of the ordinary citizens. It can come from payment to corporations of taxpayer money as 'subsidies'. Yet the money was paid by American People for Public Governance, not 'corporate welfare'.

Weak democracy leads to a badly informed public, poor presidential accountability, criminal actions
The nett effect of extremely weak democracy and a somewhat autocratic presidential office (with reserve dictatorial powers to repress citizens rights 'in the holster' but not yet drawn) is that a climate of control of information can arise through a 'soft', 'patsy' and 'beholden' mainstream press. The elected representatives of the duopoly are focussed on almost entirely on the American mainland - relatively few congressmen and congresswomen have even travelled to Europe, for example. It is not in their interests - in any sense - to 'stir up' popular apprehension by telling the American People the truth. And so they don't. (With the sole exception of 'the man' - the man bigger than his politics - Roscoe Bartlett, Republican truth teller).

The interests of the American political body is little different to the interests of business, and by extension, its military. The American administration has always protected its business interests in other countries with little regard for human rights; supporting and equipping thugs and dictators (including Saddam Hussein) where it suited American business/military interests, and thereby assisting brutal gangsters to murder and torture huge numbers of ordinary citizens in 'countries of interest' around the world; until the eighties, the US government even ran a torture school in USA.

The American public are fed half truths, managed headlines and misleading sound bites
The American administration obscures the ugly truth of their cynical exploitation both directly and via childish euphisms; women, men, and children of all ages are no longer shot dead or their bodies blown to pieces with cluster bombs by USA military - these corpses of the innocent are no longer aunties and uncles, no longer moms and dads, no longer kids and bubbies, sisters and brothers - they are given the ultimate disrespect, they are not acknowledged as humans at all. Individual humans are de-humanised into a 'class' of broken 'objects', a clinically described 'nothing'. They are merely 'colateral damage'.

Twisting and suppressing 'inconvenient' facts has become an art-form of successive USA administrations. For this reason, hiding the fact that America is now a dependant state for its oil has been easy - so far.

The manipulation of the popular media (and particularly television) has been extraordinarily thorough and astonishingly effective. Hiding the fact that America is now dependant on the goodwill of 'heathen foreigners' - peoples of Saudi Arabia, Iran and Iraq in particular - for its economic wellbeing has been easy so far.
The proof of the extreme effectiveness of manipulation of the minds of the people of America came after Saudi Arabian terrorists murdered thousands of innocent Americans in the attack on the Twin Towers of New York. Most Americans are under the impression to this day that the terrorists were from Iraq. They weren't. The terrorist that murdered the people in the sky scrapers came from Saudi Arabia.

The Bush administration cynically exploited this popular misconception to win popular support for an invasion of the country of Iraq. An American sponsored coup d'etat had been secretly planned since 2001. The pupose was to seize Iraqs oil by installing a puppet regime, in order to break the OPEC monopoly referred to by Cheney in 1999. _[1] The structural weakness of American democracy has historically allowed the USA to install puppets in other peoples countries whenever it suited its interests; American democracy was so much further weakened by the breath-takingly cynical contempt for American citizens (and ordinary military) by the unelected officials and presidency in misrepresenting why they were willing to forgo the US traditional and highly effective indirect 'sponsored brutal puppet regime system' and 'use' their military directly to invade Iraq to secure the oilfields.

What bearing does the seriously flawed nature of American democracy - including influencing and manipulating the mass media - have on the USA domestic rate of use of oil, let alone conditions for a recession?

The importance is that the American People have had the opportunity to make informed choices - to act quickly to reduce consumption for instance - stolen from them because they have been deliberately kept uninformed as a result of a weak form of democracy that has enabled capture of all information and power by a small elitist clique of rich people at the top.

American administration is afraid to tell the television-opiated American People distressing truths
American People have not been fully or truthfully informed by the USA administration. The most popular and wide-reaching media are unlikely to provide the sort of impartial, high quality, in-depth information that highly professional non-partisan information sources such as the BBC provides. The values of personal enrichment and low-cost personal indulgence on TV promote a culture where there is low popular awareness of the world, and low popular awareness of issues of fairness and equity in other societies. The popular expectation is that everything will always be OK. In a business beholden duopoly, no one is going to say otherwise.


People have not been truthfully told petrol will never be cheap again; when they learn that petrol prices will increase from now on, that the alternatives are illusionary, they will be deeply shocked.

People will be shocked when they learn that increased oil prices will structurally 'cement in' higher prices for almost all goods and services, and that some businesses will become uneconomic, and some people will lose their jobs.

When it is finally revealed to American workers that the value of the USA dollar has been backed not by gold (as it used to be prior to 1971), but by American oil, and that backing is no longer there, they will start to ask questions.

When the citizens of America find out for themselves - their political 'masters' are afraid to tell them - that in fact the value of the greenback is now based on psychological confidence and little else, they will worry how long it can last before the value of the greenback drops.

And drop it will.

The USA government indebtedness is managed by issuing IOUs unbacked by collateral

The USA national debt is huge (about 500 billion dollars 2004/5). The USA has been printing money on a massive scale. In the six years from from mid 1999 until mid 2005 the Federal Reserve - a private, bank-owned, organisation - 'increased' money supply by a massive 55%, from $6,237 billion to $9,727 billion. It mainly did this by printing and issuing 'treasury bonds'. The bonds are utterly worthless unless someone buys them. The inducement is that the bonds pay interest. They become a government instrument to manipulate the economy. High interest to attract overseas borrowers. Low interest to encourage domestic loans and consumer spending and dissuade saving. As at july 2005, average national individual savings in USA were negative 0.6% - a record low. Bonds are made high interest again when 'excess' consumer spending (often on credit cards or personal loans added to mortgage loans) creates more demand than supply, and shop keepers can cream more profit by raising their sales margins (this is 'inflation').

So long as the huge American internal economy is doing well, treasury bonds are a fairly safe bet. In a USA recession they would still be a safe bet. In a deep recession consumer spending slows right down. Domestic loans are unaffordable. Then overseas bond sales are essential to fund the government deficit spending. Interest rates must go up. Whether the international market buys the bonds - thus loaning money to the USA government to cover its debts - depends on whether the market believes the bonds will be redeemable in the long term. In a USA depression, bonds would reflect both the value the international market puts on both the US dollar, and the fundamental soundness of the USA oil-based economy.

The other way the US government prints money is by taking all liability for mortgage loans written by private business via its Congress-created-and-backed 'Fanny Mae' and 'Freddie Mac' mortgage businesses. Fanny Mae and Freddie Mac buy mortgage debt from private enterprise, guarentee the repayments, then bundle the debt it into securities, which they re-sell to overseas investors. Those private businesses privileged to sell home loans to Fanny Mae seize the public benefit offered them with both hands, and write as much low deposit mortgage they can - and socialise their private risk at the same time! The taxpaying public is burdened with the risk, the mortgage writers take the benefit. With such an ironclad gift for the rich, it is unsuprising that business has managed to create $US1.5 trillion of mortgage debt to the account of these two corporations - with USA tax-payers as guarentors of this massive sum.

Many of these Fanny Mae securities are for short periods. In a deep recession, maturing securities are unlikely to be able to be re-sold, unless interest rates on them are very high. There will be little ability for people to repay higher interest rates on re-newed mortgage loans. Luckily for the banks and businesses that wrote the loans in the first place, Fanny Mae guarantees repayments. Which means the government - the taxpayer - is finally saddled with the debt. The debt must be added to the government deficit - requiring further sales of 'treasury bonds'.

Alternatively, government services must be dramatically slashed so that taxes are released to pay the debt to the banks. The dollar is likely to be weakened.

World central banks hold vast amounts of USA dollars (Between 60% and 70% of currency reserves around the world, whether from oil sales or export trade surplus over spending on imports, are kept in US dollars and US dollar-denominated securities such as US treasury bonds - although the trend as of november 2005 is to reduce USA dollar holdings). Central banks worldwide have sold down their gold to relatively low levels (as at september 2005, a few central banks - Argentina, South Africa, Russia - are re-building gold reserves) or even 'leased' them out to non-existent levels. What would happen, banks muse, if the dollar declined dramatically in value? Their mainly US dollar currency and bond reserves would be worth a great deal less. The USA is heavily indebted. It depends on continuing to issue bonds. As confidence in the dollar drops, bond yeilds drop.

USA 30 year bonds and 6 month bonds now pay a very similar interest rate, indicating very little long term confidence in the USA economy, and a desire to earn as much interest as possible for as long as possible before the bonds ultimately become totally unredeemable. As a result, some of the major buyers are now turning to the Euro.

The USA is now dependant on other nations oil - as are all the worlds industrialised and industrialising nations. The question then is, can a nation dependant on other peoples oil dictate to the world that the world should trade in oil only in that dependant nations currency?

So far, for convenience, the answer has been 'yes'. The dollar has been the de facto currency of international settlement since the gold standard was disengaged from backing paper currency. But at that time, the dollar was fully backed by USA oil production, as the USA was the dominant oil producer. That oil reserve backing disappeared with consumption - until USA invasion of Iraq.

But Iraq has not been able to produce significant volumes of oil. It is in desperate financial straits. It must sell to the best advantage. The euro may be the best currency of trade if the dollar weakens. The test of Iraqi 'democracy' will be whether or not the supposed Iraqi 'sovereign nation' can sell its oil to its best commercial advantage in the currency of best commercial advantage.

If most of the oil producers in the Middle East insist on payment in the Euro rather than the greenback, oil, the thing of real value underpinning of the greenback, will be increasingly strengthening the euro - not the dollar. Is it likely that Saudi Arabia and Iran will move away from dollar payment?

The Saudis are financially literate. Social unrest can only be kept capped so long as the current 'boom times' continue. They must be aware that selling some oil in currencies other than the dollar will result in a weakening of the dollar and thus devalue their huge dollar holdings, but, on the other hand, help insulate against falling dollar values. A gradual re-weighting can be done by trading central bank reserves for other currencies and for gold, but the mere fact of continuously selling dollars in order to buy other currencies (and gold) will tend to weaken the dollar anyway. There are already moves for regional currencies, either partially backed by gold (Middle East) or a basket of linked regional currencies (ASEAN). These west Eurasian (euro), Middle Eastern, and East Eurasian/South Asian currencies would provide stable-currency competitiveness within the region for regional exports and imports. And perhaps even beyond.

In the event that any regional currency starts to strengthen significantly against the dollar, Saudi Arabia would be foolish not to price at least some of its oil in that emerging regional currency. This would accelerate the process of re-weighting away from the US dollar. As it stands, China's need to subsidise exports by holding the yuan artificially low, plus its antipathy toward Japan, means an ASEAN regional currency is unlikely to emerge soon.

A Middle Eastern gold-tied regional currency is, on the other hand, more likely. As one of the only currencies to be backed by both black and yellow gold, such a currency might gain an impressive international following.

Iran is due to open an internet-based open market bourse to trade oil and gas in any currency the buyers and sellers may choose. Iran is facing decreasing volumes of oil exports (and already imports petroleum) and a huge domestic dependence on its vast natural gas resources. 30% of Irans oil goes to European markets. Many of Irans imports come from Europe. As a result of European trade, 60% of Iran's foreign reserves are now held in Euros. If Iran had not switched to the euro, it would have experienced significant losses through having to pay for European imports with a depreciating USA dollar, as well as exchange costs.

Like Russia, Irans main volume trade in gas is increasingly by pipeline to regional users on long term contracts. Its main trading is within Eurasia, especially as the USA prohibits USA businesses from trading with Iran. Obviously, Iran saves considerable banking fees by directly selling oil and gas to buy regional products and services, using regional currencies such as the euro, the rupee and the yuan. Iran already trades oil and gas in regional currencies. If it trades increasing proportions of oil and gas in currencies other than the dollar, will it have any influence on the backing of the US dollar by Iraqi and US domestic oil reserves? Not dramatically, no. But a bourse is simply a market place. Any one can come to the bourse to buy and sell oil and gas. It is not a bourse for Iran's oil and gas - it is a bourse for any countries oil and gas, if they wish chose to use it. Some oil exporting countries will chose to sell some of their product via a regional bourse. The trend is likely to increase as a Middle Eastern bourse becomes more active. Over time the Iranian Oil Bourse - more correctly the Middle East Bourse - will help grease the slope leading away from the dollar as currency of international settlement, whether for oil or anything else.

Russia, along with Saudi Arabia, is for the moment the key high volume oil producer, and pricing of its oil will have a far greater impact on the dollar (USA produces half the amount of oil Russia does, but it is virtually all consumed internally; albeit US remaining reserves are similar to Russias - but consumption rate of those reserves is very dissimilar). In november 2005 Russia started preparations to denominate its trade in oil and gas exports to europe in the euro. Russias European market is 66% of its total oil and gas export business. Logically, it should price 66% of its around 9 million barrel a day production in euros. When there is a general turn toward paying for oil and gas with euros in West Eurasia, plus central bank desire to 'rebalance' their currency weightings away from dollar dependence, that is when the greenback will start to lose value.

Then the greenback becomes a 'hot potato'. No one wants to be caught holding it. The difficulty is that neither of the two 'mega-holders' of the USA dollar, Japan and China, want to be caught selling off significant amounts.

Why? Well, oversupplying the market drives the value of the dollar down, decreasing the value of the dollar, both making Chinese and Japanese holdings worth less and making their exports more expensive for the USA to buy. But both countries would be very badly affected if there was a sudden 'bargain basement' 'fire sale' of the USA dollar. (Japan at november 2005 held $US824 in foreign exchange reserves. As at december 2005 China has a massive $US819 billion dollar value money reserve, and although some of it is in Euros, an estimated 70% of which is in US dollars. China holds US treasury notes alone to the value of $US247 billion - second only to Japan - as well as US dollar currency holdings. Its dollar holdings have been partly boosted by massive gambling by foreign exchange dealers, who have used US dollars to buy the Yuan in the expectation it will strengthen against the greenback. Paradoxically, China must also buy the USA dollar to keep it strong against the Yuan.)

The game now is for Japan and China (and other countries) to manage the slow quitting of the US dollar so that their central banks reduce their holdings of US dollars in  'lock step' with the progressive shift to sale of oil in other currencies than the greenback. There is some evidence this is already happening. China floated a small part of its currency in July 2005, allowing an almost imperceptible tiny daily float, but over time allowing a considerable shift above the dollar to "better absorb the impact generated by an unstable US dollar" as the Chinese put it. The gradual appreciations against the US dollar from july 2005 to december 2005 has been in total small so far, at 0.5% for the period. This gradual approach is in everyones interest, as USA will be progressively less able to buy cheap Chinese imports, and at the same time China has the opportunity to use US dollars to go on a strategic hydrocarbon and mineral asset buying spree, using its vast reserves of US dollars while they are still relatively strong. In january 2006 China scrapped the law limiting the amount of domestic currency Chinese companies could invest overseas.

China is unlikely to suddenly float its currency, as the yuan would suddenly rise, making its exports expensive just as the USA spending boom starts to flag. A strong yuan would make raw materials cheaper, but with more expensive and therefore reduced exports, any benefit to the  internal Chinese consumption economy is probably outweighed by the loss of export orders.

If China does at some point suddenly floats its currency, it can certainly absorb the 'hit' with its massive padding. In the event of a sudden Chinese float (now unlikely), or either China or Japan commencing selling down quickly, the other country might decide to cut its losses and sell the dollar massively.

So what? So the dollar is then not worth a great deal. Good news for USA exporters. Good news for China if its yuan floats higher than the greenback - it can buy cheaper oil, and imported raw materials also become cheaper due to the favorable exchange rate.

At another level, bad news for China and Japan, or any country selling to the USA. Bad news for USA importers. A large section of the USA economy makes its living from the selling of cheap (mainly Chinese) imports. The cost of imported goods goes up. The cost of oil goes up in USA (but not in countries whose currency/curency mix is used to trade oil). There is less buying. Retail profit margins are cut. There are layoffs in the retail sector. The dollar is very weak, the USA deficit is huge. Bonds must be sold to finance it. The world is not that interested in the USA dollar. Interest rates are cranked up to make the bonds saleable. Domestic USA bank interest rates have to follow as a result. The vast loan industry has lent money for housing speculation, cars, holidays and other lifestyle loans at low rates. (From 1997 to 2004 bank lending for mortgages almost doubled to $US7.4 trillion! In 2003 alone, $US1 trillion in new mortgages were written). Banks have made loans to people with no collateral. Commercial risk to the banks has been socialised by Federal guarantees of bank loans, no matter how flakey or imprudent the banks actions were.

Now the rates rise. Even a few percentage points rise on a very large loan creates a large increase in interest repayment dues. High risk 'interest only' 'mortgage-backed securities' ('bundled' in groups and sold in the bond market as interest-bearing securities) have increased rapidly; more than half are 'adjustable' in 2 years. Adjustment direction is most likely 'up'. Salaries don't increase to match it. Average personal savings in USA are close to zero. There is no 'cash cushion' to mitigate or ride out personal indebtedness. Many loans are called in. Houses are selling in a flat market. House prices fall. The equity that people thought they would have because house prices "always" go up disappears. The cheap-credit real estate bubble has burst. Bankruptcies increase. Layoffs increase. The USA deficit goes up (or services are slashed). Economic activity decreases. Less oil is consumed. Oil prices temporarily dip down.

Structural oil-component price increases are added to the cost of goods over time, as world oil demand continues and the ability to physically drag the stuff out of the ground come close to matching demand. The tension (generated by 'oil futures' traders) causes swings up and down in the cost of oil. But the overall trend is driven by the broad trend of diminishing ability to suck it from the ground as fast as the world wants it. The overall trend is for oil prices to remain at higher levels, or incline up as physical supplies diminish. The rate of incline is unknowable, as it is dictated by market forces and whether or not USA seizes further Middle East oil fields (for example, seized fields could be offered exclusively to USA consumers at far below the world price). 
 
How does it all play out?

In the worst case, inevitable oil price rises from supply not fully meeting demand may happen before an 'oil-demand-killing' USA recession (resulting from the high USA domestic interest rates needed to suck in foreign money via treasury bonds and mortgage securities). In this case, there is no significant fall in oil prices.

In the best case, USA recession starts before there is an actual oil supply shortfall, reducing oil demand and reducing oil prices until falling production once more co-incides with the new lower demand level.

So the only factor that might bring oil prices back down for a while is USA recession earlier rather than later. Can anything forestall USA recession?

The American presidential administration/business/military complex may back the dollar with Irans oil and gas
The American administration has long known oil is about to peak.
It knows the medium term future for the world is a future of dependance on natural gas (despite difficulties transporting gas).
It knows it will be dependant on Middle East oil and gas for at least half its supply, probably within ten years.
It knows Iran is the one country with the greatest amount of natural gas, and with gas fields that have not yet peaked.
It knows that so long as Saudi Arabia cooperates by pumping to capacity, oil prices will not spike following an invasion.

The Middle East is the great prize for American business and military interests - and Irans gas is the most important part of it.

Whether the American administration takes Irans natural gas by invasion or by standover tactics (selective missile strikes until favorable contracts are written for American oil companies, blockading food supplies), the question remains - is it enough to put real collateral behind the dollar?

In the best case from the American perspective, the strategy of seizing or controlling significant portions of the Middle East hydrocarbons keeps the dollar as the currency of payment for oil and gas, and so the dollar is seen as firm once more. But USA control of Middle East oil and gas is unlikely to influence the price at which oil and gas is traded globally, as price is ultimately set by supply and demand in an era of depleting supply. (Unless the USA 'sells' Middle East oil to itself at favorable prices - an unlikely scenario).

Permanent high oil and gas prices due to continuous slow depletion of Middle East reserves past their peak of production will lead to recession in USA - and the rest of the world - regardless of who controls the major oilfields. Regardless of oil backing, the US dollar likely slowly drifts down.

The best case from the perspective of the world is the best of two bad outcomes - recession in USA now and slowed rate of oil depletion, versus the less desirable extended artificial USA/global prosperity and increased rate of oil depletion.

In this case, the American strategy to control the largest part of the Middle East natural gas supply fails. The dollar remains weak and continues to lose value. Negative consequences suppress oil consumption in the major user, the USA. It is impossible to know if the dollar, once disengaged from its oil backing, will see the worst consequences - double digit interest rates, job losses, bankruptcies, downturn in economic activity, smaller taxpayer base, high demand for social security, and so on - unfold quickly and dramatically, or slowly and evenly.
 
If it unfolds quickly due to psychological panic, it is called a crash; and a crash may be followed by a depression of unknown duration.

In a depression there is relatively less spending, as people have less money and there is a very large number of unemployed. It is harder to make money, harder to do any kind of business. What government money there is has to be spent on relief, and relief contracts are usually for bulk commodities from a few suppliers, and do not stimulate the wider economy. Depressions can be deflationary. There is only inflation if central banks literally print money. This is what happened in Germany prior to Hitlers expansionary war of 1939.

Again, recession or depression in the major oil using country, will it help in an oil production decline crisis?

Will a USA recession and depression really help oil last longer?
The benefit of a recession or a depression in the USA is that consumer demand for oil will reduce dramatically, and the USA is the world's most profligate user of oil. As USA is also a major buyer of Chinese manufactures, it would be expected that China's exports would experience a large drop. Indeed, China's exports account for 35% of its gross domestic product. Loss of exports leads to loss of business, which leads to lower oil use. To that extent, the demand for oil in China might also level out and then drop, rather than grow.

China is as much caught by the inflationary effects of high oil and gas prices as any country. Being a one party 'command and control' political/military dictatorship they may reflexively try to 'control' the uncontrollable by handing out cheap loans to 'tide businesses through' ( in the last 3 years their money supply has doubled, partly from earnings, partly from credit creation) or further subsidising the already artificially low oil and gas prices. The end result is an acceleration of the unavoidable inflation, currency collapse, and more extensive business failures than would otherwise have been the case. In other words, drops in consumption will be a world-wide phenomenon. No one is exempt.

It is very hard to quantify what overall percentage drop in oil consumption there would be in USA when it enters recession, let alone if it were tipped into depression. In the 1973 oil shock some countries experienced a 17% drop in oil consumption. This is somewhat artificial, as it happened with extreme rapidity, there was an immediate and sizable absolute shortfall in supply, there were compulsory car-less days, and in many countries a mass shift to powering vehicle with compressed natural gas. At that time, there were willing buyers, but shortfall in supply. This time, there will be no shortfall in supply, but the number of buyers will be fewer due to reduced spending power. How fewer buyers is speculative.

If  there were a 17% reduction in USA oil use, the roughly 882,000,000 tonnes of oil used by USA every year would drop to about 732,000,000 tonnes used annually. The about 150,000,000 tonnes saved each year could be removed from the world consumption figures of about 3,462,000,000 tonnes per year, dropping them to 3,312,000,000 tonnes consumed per year.

As the estimated total world recoverable oil reserves are about 140,400,000,000 tonnes, if world demand (including USA) remained static at this level into the future (it won't, of course), oil will last six months more before running out entirely. As the USA uses roughly a quarter of the worlds oil, then worldwide recession might add two years to the life of oil  - again recognising that this is based on an artificial 'extravagent level' of use for the purposes of illustrating a broadly true principle.

The principle is inescapable. Neither a USA nor a world recession - or depression - would make a material difference to the rate of fading of the oil economy. It is happening in our lifetime, and there is nothing that can be done to prevent it. There is very little that can be done to soften the shock.

Is there any silver lining to the cloud? Perhaps. Perhaps not.

 

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'Secret US plans for Iraq's oil' story reported by Greg Palast.
Published by BBC NEWS: 2005/03/17 15:41:31 GMT
URL:  http://news.bbc.co.uk/go/pr/fr/-/1/hi/programmes/newsnight/4354269.stm

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