Figure 4 gives a good overview of not only the history of oil production but also where it is heading in the future, well into 2050. It also provides a good breakdown of where world reserves lie, biggest oil producers and consumers, and the growing gap between oil discovery and production.
After the initial shock of permanent oil scarcity and increased commodity prices people will begin to grow accustomed to life without cheap oil. The first and most noticeable change will come from the government. The historically high gas prices caused by peak oil will lead the government to have more and more trouble subsidizing the oil and gas sectors. Subsidies to fossil fuels currently total 72 billion dollars over a seven year period, averaging out to about 10 billion per year (Environmental Law Institute). As the price of oil only increases and increases after peak oil tax payers will begin to refuse to continue subsidizing the oil sector, regardless, the government wont be able to afford to do so without increasing taxes dramatically and with the economic difficulties we are already facing I dont see that even being an option when things only begin to get worse.
As shown in Figure 5, the 70.2 billion dollars used to subsidize fossil fuels are for the most part damaging to the environment but in a future where it is no longer fiscally sound to subsidize oil, subsidies will begin to shift to renewable energy sources. I think this process will be considerably short, contrary to the long legislative process democracies are known for currently.
At first the world richest and most industrialized countries will continue paying the prices necessary in order to continue importing the oil essential to running their economies, but slowly, as tax payer money becomes increasingly dedicated to subsidizing and purchasing imported oil instead of meeting the basic needs of the people, the international trade is going to slowly diminish before it stops altogether. The countries who's revenue comes primarily petroleum exports are going to be hit the hardest by the effects of peak oil and thus will take the longest to recover. Unless actions are taken before oil peaks to diversify their economies, they are in for the equivalent of economic apocalypse. As the oil begins to run out, countries like the US who represents one of the biggest importers of oil will begin to import less and less oil as it becomes more expensive to transport that oil transnationally than what it would actually sell for. Governments everywhere will begin to lose revenue gained from fuel taxes and those who rely on fuel taxes and revenue from oil exports will be hit twice as hard. In the US although, where the cost of oil imports is 396.8 billion, the lowering in import amounts will lead to the reduction in the deficit of about 700 to 400 billion dollars (Almeida, pg. 1053). I believe that unless any alternative fuel source is found quickly, peak oil will represent the end of international trade and the beginning of an isolationist period where countries concentrate in protecting their economies and providing the basic necessities to their own populations as food and water become more scarce, not only because of fossil fuel depletion but also because of increasing population. Some suggest that peak oil and as a result "peak everything" will cause a spike in resource wars and border conflicts as possibly hundreds of thousands try to migrate to countries where peak oil has not effected the economy as badly (Labban, pg 541). Although I would agree about the migration and huge exodus from some parts of the world, after a couple first conflicts in order to secure the last oil fields, I think governments will be to economically unstable to even think of conducting full fledged "resource wars".
Assuming that no new fuel sources are found, governments and farmers will start having to make the difficult decisions of whether to plant for the production of ethanol or biofuels (the only other developed forms of fuel) or for human consumption.
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