Peak Oil? Hell, yes.

The cost of oil is cratering.

Oil Below $70, a Price Last Seen in June 2007 - NYTimes.com

… Oil prices plummeted on Thursday, falling below $70 a barrel for the first time in 16 months, and prompting the OPEC cartel to call for an emergency meeting next week…

… Oil prices have dropped sharply in recent weeks amid the economic crisis and lower consumption in developed nations. In New York, oil futures fell as much as 8 percent to $68.57 a barrel on Thursday, their lowest since June 2007. Oil has lost half its value since hitting a record closing price of $145.29 a barrel in July…

So do I stand by my Peak Oil call of August 2008?

I say Peak oil is here.

I say that despite, in my 1979 chemical engineering class, being told that peak oil was coming in the late 1980s (I think we reviewed the 1957 Rickover speech back then). I say this despite remembering Jimmy Carter's peak oil prediction in the 1970s.

Of course I'm really talking about Peak sweet light oil, and I don't mean "Peak" in absolute, or even demand > supply, I mean Peak in terms of rational market expectation of a > 70% probability that demand > supply within 5-8 years.

Basically I'm claiming that the price increases of this past year were due to praiseworthy speculation on the fundamentals rather than salacious speculation on psychology.

This means I'm expecting oil to go to Dyer's $200/bbl limit at least once in the next five years, though it may transiently fall back to $80 along the way. After 5-8 years it will be very apparent that oil will be a shrinking percentage of our energy supply, and that in the absence of a severe carbon tax (or the equivalent) we'll be baking the plane with burning coal and burning tar sands.

It also means that it's now rational to invest in conservation, and to expect real estate prices to reflect increased commuting costs.

More on Peak Oil later, but I was overdue to make my promised call. (It's been a busy month!)

Definitely. Note I said it may transiently fall to $80 along the way.

Ok, one caveat.

I predicted $200/bbl at least once before 2013, and I thought we’d stay above $80.

That was before we entered the Great Global Recession of 2008.

Hey, I’m not Cassandra. (Who was always right, the curse was not that her predictions were wrong, it was that no-one would believe them.)

GGR  pushes things out a few years.

So $200/bbl at least once before 2016.

This would have been a fantastic time to have had a carbon tax in place, one that kept the cost of oil above $100 a barrel. Alas, that kind of intelligence depends on having a superb President, and we are still months away from even a dream of excellence.

Since we don’t have smart leadership, we have see the Saudi’s can stabilize the price of oil – though not too quickly. That $70/bbl price could shorten the Recession by a few months. [1]

[1] So why would I want a Carbon tax now? Because if it stabilized oil at $100 a barrel we could turn the huge revenue stream into tax cuts and other economic stimulants that would do a better job than low cost oil at shortening the Great Global Recession.