09/17/10 Stockholm, Sweden – It’s somehow reassuring the German government has planning in place in the event of peak oil and the potential global oil shortages that would result. What’s less confidence-inspiring are the dire predictions Germany has made as to what will happen should a trickling oil supply leave world economies in a lurch.
A newly-leaked study — which Der Spiegel has confirmed is authentic — out of the Bundeswehr Transformation Center’s Future Analysis division — which advises the German military — paints a bleak picture of the post-peak oil world, including a complete market collapse and various forms of social unrest. The report was not meant to be made public in its current state, and likely would have been watered down by the Defense Ministry, but as it stands it’s chock full of catastrophic warning.
Here are seven anticipated global market failures and chain reactions as described by Der Spiegel:
- Oil will determine power – …oil-producing nations …[grow to]… in some cases even global leading powers.”
- Increasing importance of oil exporters – “…a more aggressive assertion of national interests on the part of the oil-producing nations.”
- Politics in place of the market – …a supply crisis would roll back the liberalization of the energy market. “The proportion of oil traded on the global, freely accessible oil market will diminish as more oil is traded through bi-national contracts…”
- Market failures – “…Shortages in the supply of vital goods could arise” as a result, for example in food supplies. Oil is used directly or indirectly in the production of 95 percent of all industrial goods. Price shocks could therefore be seen in almost any industry…
- Relapse into planned economy – …peak oil could lead to a “partial or complete failure of markets,” says the study. “A conceivable alternative would be government rationing…”
- Global chain reaction – “…likely that a large number of states will not be in a position to make the necessary investments in time,” or with “sufficient magnitude…”
- Crisis of political legitimacy – …the population could perceive the upheaval triggered by peak oil “as a general systemic crisis.” This would create “room for ideological and extremist alternatives to existing forms of government…”
The potential breakdown as described would be pervasive throughout the global economy and in terms of shifting political influence and strategic alliances. Further, the report bluntly indicates there’s the distinct possibility that “every market-oriented national economy would collapse.” Yet, the problems predicted don’t even end with economic fallout… the study also anticipates that groups unable to get by on reduced resources will, in some cases, end up in “open conflict.”
You can read more details in the full Der Spiegel coverage on how a new German military-related study warns of a potentially drastic oil crisis.
Best,
Rocky Vega,
The Daily Reckoning
Rocky Vega
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let’s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
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But on the bright side, rush hour won’t be so bad anymore.
Interesting.
Exxon spends $41 billion to buy XTO Energy of Fort Worth. It was done primarily to get XTO’s expertise in drilling for shale gas in the Barnett Shale formation of North Texas.
Now Exxon is leading a land-grab in Europe for gas rich shale deposits.
“Western Europe may have held 510 trillion cubic feet of shale gas as of 2007, JPMorgan said. That’s adequate to feed Germany for 175 years, based on BP Plc’s data.” Business Week – 2/11/2010
And the German government is worried about a shortage of oil?
Am I missing something?
Roger,
Yes you are missing something.
Oil is a much higher quality fuel to produce, it costs less to get out of the ground and refine. Therefore if you have less sweet crude oil being replaced by lower quality, more expensive fuels, the price must go up. It’s not about running out of fuel, but the economic impact of having already picked all the “low hanging fruit”.