Financial turmoil and peak oil: join the dots

This month’s La Décroissance has an interesting interview with an unnamed senior official of the European Central Bank. Here are some extracts:

Interviewer: “Why did the world’s stock markets fall sharply at the end of August?”

ECB official: “Hum! Which version do you want?”

Interviewer: “Pardon?”

ECB official “Officially growth and trade are flourishing.”

Interviewer: “And your own analysis of the situation?”

ECB official: “We’re in deep shit and everyone who works as a professional in the economic field knows it…We are surfing on mountains of debt, private and public, which will never be repaid….The Enron and the Parmalat scandals are just a drop of water in the gigantic economic lie. All the players in the global economy are ruined, incapable of repaying even a tenth of their debt tomorrow. The system is holding on by a thread…The central banks throw money at the system so that nobody runs short of liquidity and no-one gets the crazy idea that they should collect on a debt. More than 500 billion dollars have been created by the central banks since the beginning of the crisis.”

Interviewer: “All this is appalling! What to do?”

ECB official: “Do you still have your house in the mountains, with a wood-burning stove, a chicken coop and some good soil for a vegetable garden? Do you have some space for me?”

What about peak oil? Christophe de Margerie, CEO of French oil giant Total came out earlier this month in the Financial Times with some surprising comments on oil production. Contradicting forecasts by the International Energy Agency that oil supply will reach 116 million barrels a day by 2030, up from about 85 million barrels a day at present, he predicted that 100 million barrels a day would be difficult to attain. “Reserves have never been so big,” he said, adding that the constraints were the industry’s ability to produce the oil quickly enough and oil-rich countries’ willingness or ability to develop their reserves.”We have been, all of us, too optimistic about the geology. Not in terms of reserves, but in terms of how to develop these reserves: how much time it takes, how much realistically do you need.” 

Is it therefore surprising to learn that investment money from the oil-producing Middle East nations is increasingly shifting into investments in renewable energy projects, particularly wind turbines? Or that investment professionals themselves are quietly shifting their portfolios into cash?

Nobody wants to say any of this on the record, for obvious reasons, but if you listen carefully all the dots are starting to join up.

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