Reply #99: You have to do without if you can not afford to buy the gasoline you need [View All]

[happyslug]

See my post #46 above for details, but in a nutshell the simple answer is once the price of Gasoline get near $4 a gallon minimum wage workers can NO LONGER DRIVE TO WORK (i.e they can NO LONGER AFFORD THE GASOLINE TO GET TO WORK). Given there are few other transportation options this will lead to a crisis in the economy over and above these workers NO longer buying gasoline to get to work.

These two interrelated crisis (Workers NOT getting to their jobs AND the affect this lack of low costs employees will have on the Economy) will lead to a reduction in demand for oil (and with it a price stabilization before it gets to $4 a gallon and then a subsequent price decline as supply exceeds the now reduced demand).

Now I am talking only short-term, i.e. less than a year. Once you start to loom at the problem LONG TERM (1-5 years) other option kick in. People will replace their old SUV for much smaller cars (Reducing demand for gasoline), people will look at moving closer to work (To reduce gasoline usage). People may even DEMAND mass transit (through this will be a 5-15 year plan to reduce oil consumption).

The problem with most long term solution is that once peak oil hits you will seen a steady decline in oil production which will require more and more demand destruction to keep the price of gasoline even (or the price will go up and up FORCING Demand destruction). Thus you will see a rapid up and down movement in the price of oil, the over all price will be upward, but you will see rapid decline as people stop using oil they can no longer afford (a downward price spike) and then resume using oil once it drops to a price they can afford (which starts a new upward price spike). This will go on and on till oil is no longer a serious factor in our energy picture (in about 100-140 years).

In many ways these up and down spikes will cause our economy more harm then the general upward price spiral, but together you will see severe problems as people can and then can not afford gasoline (and then can and then again can not afford oil). Together this will FORCE people to demand mass transit and other alternatives to oil based transportation system.