Commodity prices are low now, so most people assume resources are still abundant and we can't possibly be close to the end of industrial production. But limits are manifesting in a way mainstream commentators didn't expect. It comes down to two key words which are really two sides of the same coin: profitability and affordability. In our market economy, commodities must be priced at a level which is both profitable for producers and affordable for consumers at the same time. Unfortunately, sustainable prices are by no means guaranteed by forces of nature or economics. When prices can't rise above production costs, we are in serious trouble even if it doesn't seem that way at first. This kind of unsustainable situation has in fact already arrived, if Gail's view is correct. In this comment on her blog she sums up exactly what she thinks will happen:
It depends on how quickly the failure of banks brings the whole system down. I think the most likely scenario is that the next big crash is the last one. We had a big crash in 2008, and were temporarily saved from it. The next one seems likely to be much bigger, and thus to be much harder to avoid the consequences of.
My expectation is that oil prices will go lower than they are now, and that debt defaults will start hitting the system. Some of these defaults will relate to derivative bets gone wrong. This will start hitting in the next few months. We should be feeling the effects by late in 2015 or early 2016. Oil production will start going down in 2015, and we won’t be able to get it back up again.
I don’t see prices bouncing back up again much, expect perhaps briefly in the next few months (and probably to less than $100 barrel), as people speculate that our problems are temporary. I don’t think shale drillers will be able to qualify for more debt, and this will prevent production from increasing again. There will be similar problems with new oil sands investment.I recommend reading Our Finite World to understand the nature of what will be the worst disaster in human history and the end of industrial civilization. Gail does not offer any solutions, though, because she does not believe there are any. If perchance there are ways to avoid or mitigate the collapse, now would be a good time to work them out, because we are running out of time.