From the Oil Drum:
What happens when energy resources, such as oil, deplete? Many people believe that oil prices will just go up--but I don't see that to be the case. A more likely result is a future dominated by recession and debt defaults--similar to what we have been seeing recently, but trending over time to be worse. In the midst of this recession, the view may be that there is plenty of oil, if only the price were higher.
Views of Oil Prices
One view is that energy prices will rise, substitutes will be found, and prices will come back down again, perhaps settling at a somewhat higher equilibrium reflecting the cost of producing the substitute energy source. The economy will continue to function pretty much as before. The catch is that we aren't finding reasonably-priced, scalable substitutes, so this isn't happening. Oil prices are down, but not because of substitutes.
Another view, popular among those concerned about peak-oil, is that oil and energy prices will just keep rising. If scalable substitutes aren't found, some expect that oil prices will rise from their current price of $75 barrel, to $100 barrel, to $200 barrel, to $300 barrel, and eventually to $1,000 barrel or more.
The problem with this view is that it doesn't take into account the amount of money people actually have available to spend. Just because oil or energy prices rise doesn't mean that people will get additional income to cover these higher expenditures. In real life, prices can't keep going up.
I expect that what really will happen is oil prices may bounce up, but they will soon come back down again, because of recessionary impacts and credit crunches caused by high oil prices. Most of the time, oil prices will end up in the uncomfortable middle--too high for the economy to buzz along, but too low to encourage much new oil production, or much new renewable production. The result is likely to be continuing recession, getting worse over time, because of what will be generally viewed as inadequate demand for oil.
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