The Severity of the Situation

Recently an aid to the Saudi Arabian oil ministry stated oil demand may fall 23% to 45%. This is a startlingly candid figure coming from a rather conservative and secretive organisation. If oil demand is falling that much, economic activity as a whole is pretty much falling on par, and the 2007 Depression will become more like Great Depression II, if not the Greatest Depression Ever.

On the other hand, Saudi Arabia is known for its disinformation campaigns. All the while oil was rising from $30 a barrel to $140, Saudi Arabia said "we have plenty of oil at lower prices, it's just that no one wants to buy it." The present situation could be that the Saudis are now recognising the long-predicted collapse of their oil production is now imminent. What better way to cover up their declining production potential than to say "no one wants it."

This in itself would be bad news, of course. It would be more evidence of the certainty of peak oil, and the tremendous difficulty that would present to the world's economies.

A halving of income for citizens of the 'Developed Countries' may well be baked into the cake by now - whether the drop in oil production is cause or effect. It is not a pretty thought, but it would be best to plan for some pretty tough times ahead. Most predictions from mainstream media should be discounted, as they will be attempting not to sound alarmist. Pollyannish advice such as "it's never been a better time to buy real estate," or "the current recession is a bump in the road to greater prosperity" should be seen as a quick route to financial suicide.

The growth paradigm of the past few centuries is over. While up until recently, recession and depression were interruptions of chronic growth; for the foreseeable future, spurts of growth and recovery will be interruptions of chronic collapse. This is quite a change, and at first few will be able to wrap their heads around it. It will turn a lot of rules of thumb upside down.

We are not saying all is doom and gloom. As long as people have the liberty to innovate, the world will adjust to a new (and possibly better) way of doing things. It is possible to live quite well on a 'low throughput' diet. Thrift, conservation, invention and efficiency can deliver a good life on a low budget. On that you can bank.