The Extra Special, Multiple Post Oil Extravaganza (Part 2)

Welcome back to the extra special, multiple post oil extravaganza! I'm your blogger, Blake Forsberg, and I just realized that I may be spelling "extravaganza" wrong..oh well. My last post introduced the idea of peak oil (if you haven't checked it out, you can find it below this one). It talked of the threat of the world running out of oil in vague detail. This post, and the next two, will further explain the implications of the world oil supply running out. This particular blog will explain the economical impact of a world without oil. Enjoy.

The Economical Impact

To explain the economical impact of oil depletion, I will be utilizing the idea of supply and demand. The supply, obviously being the supply of oil and the demand being the growing thirst the world has for it(see what I did there?). Supply and demand can be visually presented in a graph. In the graph, the supply is an upward sloping curve (line) and the demand is a downward sloping curve (line). Where these two curves intersect is called the equilibrium. The equilibrium is where the price and quantity are determined based on outside influences that shift the two curves, ultimately, setting the quantity and the price per-unit of that quantity...just watch...





Ok. The blue lines indicate supply and demand before, and also the equilibrium where the price and quantity meet (at 1). Notice the positioning of the price where the blue equilibrium is at P1. The red lines indicate the shifts. The supply curve shifts left indicating a decreasing supply of oil (at 3). The demand curve shifts right, indicating an increasing demand for oil (at 2). Where these two new lines meet creates a new equilibrium point (at 4), and also a new, higher price for oil (at 5).


It's Probably Happening


The world supply of oil doesn't have to be completely gone for peak oil to have an economical effect. The world demands more and more oil as the supply diminishes...it spells trouble. Thankfully, for write now, the only thing trouble can spell is m-o-n-e-y and c-o-n-s-u-m-e-r w-a-l-l-e-t.