The Vulture Economy, San Diego

This from CNN in May:

The International Energy Agency gave advance warning that its previous forecast for supply and demand remaining in pleasant equilibrium over the next two decades was flawed. Its new projections, due in November, will say supplies may fall 10 percent short of demand, according to a report in the Wall Street Journal.

“Stephen Leeb, an investment manager who has authored two books on oil scarcity, said Russia was already seeing a drop in production, and there’s little evidence Saudi Arabia could increase production even if it wanted to.

“If the two biggest oil producers in the world can no longer increase production, that’s a catastrophe, not a bubble,” he said.

Others say there’s no way $130 oil is justified.

“This thing has to turn around, it’s insanity,” said Peter Beutel, an oil analyst at the consultancy Cameron Hanover. “Ultimately we’ll see a huge collapse in prices.”

Beutel doesn’t know when that collapse would come, but he predicts it will be within weeks or months, not years.

But he doesn’t know just what might bring it about – perhaps the Federal Reserve increasing interest rates or a big drop in consumption as people worldwide can no longer afford to fuel their cars or heat their homes.

“If these prices stick, you may see whole neighborhoods where people abandon their homes,” he said predicting that in the Northeast U.S. it will cost $5000 to heat a home unless prices fall.

OK, so this is scary. To my ears, this amounts to an admission that what was foreseen in the WWO game is indeed on the way. One of the experts says oil supply has failed, and so there will be a “catastrophe” as people worldwide run short of oil. The other expert says, no, the “catastrophe” is the high prices, which will cause people worldwide to abandon their cars and their homes. Either way, catastrophe ahead? Photo by gruntzooki via Flickr.