World Sleep Walks into Peak Oil Crisis

With oil prices touching $120 per barrel, reality is finally starting to set in -- the world is heading into the teeth of a vicious Peak Oil crisis. Already signs of strain are beginning to appear in the global system. Oil shortages are springing up in countries which have been out-bid by the world's established and emerging powers. African countries, in recent years, have struggled and, at times, failed to provide fuel to their markets. Even countries like China and India -- which boast increasingly robust economies -- suffer fuel shortages in various regions due to break-neck world demand, flat supply, and strange distortions caused by subsidized oil markets. China particularly faces trouble as it is now more profitable for Chinese oil producers to export oil than to sell it on the domestic market. Even the West is not immune. Recent strikes in Great Britain's oil refining system underscored how vulnerable that country is without its North Sea oil production -- a production base that is in terminal decline.

As oil markets tighten systemic strains are also beginning to appear in industries most dependent upon oil such as transportation and food production. On the air transport side, not a week has gone by without an airline claiming either bankruptcy, price increases, reduction in air traffic, paired down services, or mergers. In the US, it's difficult to find an air carrier that is not in trouble. Fuel cost strains aren't limited to air travel, however, and the past two years have seen a major shift from transport of goods by truck to transport of goods by train. Trains, which are much more efficient per ton of goods transported, are by far the more cost-effective in an oil constrained world. As rail companies have benefited from increased demand, trucking companies have faced increased costs while independent truckers are showing substantial losses or moving out of the business entirely.