A new State Department revelation may shed light on the debate over peak oil. It seems proponents of the theory that the world is approaching a breaking point for the flow of cheap crude now have more evidence than ever before to support what many claimed to be doom and gloom propaganda:

The US fears that Saudi Arabia, the world’s largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom’s crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.

…

Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly Aramco, met the US consul general in Riyadh in November 2007 and told the US diplomat that Aramco’s 12.5m barrel-a-day capacity needed to keep a lid on prices could not be reached.

According to the cables, which date between 2007-09, Husseini said Saudi Arabia might reach an output of 12m barrels a day in 10 years but before then – possibly as early as 2012 – global oil production would have hit its highest point. This crunch point is known as “peak oil”.

…

The US consul then told Washington: “While al-Husseini fundamentally contradicts the Aramco company line, he is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be thoughtfully considered.”

Source: Guardian

The likelihood that the world will completely run out of oil anytime in the next 100 years is nil. We can’t argue with that theory.

However, the fact that there is less oil available using traditional extraction techniques is quite clear. It is becoming much more expensive and significantly more dangerous to the Earth’s ecosystem, as evidenced by the Deep Horizon spill in April of 2010, to acquire the fuel that makes the world go ’round.

On top of rising commodity prices resulting from horrendous monetary policy the world over, we have a truly frightening supply (and demand) problem.

It’s not that we will just see gas prices at retail pumps go up, causing even more financial damage to an already strapped US and global consumer, but the fallout from peak cheap oil will affect every aspect of our lives, literally.

Everything from farming to food transportation to the production of Tupperware will see soaring price increases.

At some point, it is quite possible that nations like the United States, where oil is a staple good required by every citizen in order to maintain the standard of living to which we’ve become accustomed, will experience what well known peak oil activist Michael Ruppert discussed in his aptly titled documentary Collapse.

In 2008 we saw gas prices exceed $4 per gallon in the United States. It was this rise in gas prices that is believed by many to be the straw that broke the economies back and ushered in the worst recession, likely depression, in U.S. history.

We are now back above $3 territory in most of the country and the pundits and analysts are already talking about how this may lead to a double dip recession if prices aren’t stabilized.

What happens when the price of gas goes to $7 or $10 a gallon and workers’ wages don’t adjust? Realistically, we can expect that wages will not adjust – they will not adjust for inflation, nor will they adjust for rising commodity prices due to global population increases as more people chase fewer resources.

The end result must be – not might be – a more economically equalized populace. To many hammer and sickle wearing progressives this may sound like a good idea. But when you consider what that means to the average person, the idea doesn’t sound so appealing.

Economically equalizing really just means making everyone else in the world poor, while making the power elite at the heads of our governments, financial institutions, and corporations even richer. They’ll be rewarded for being the best and brightest, while the majority of the people of the world will struggle to pay 50% of their wages to maintain a roof over their heads and 40% to cover the cost of food each month like they do in Egypt.

And that’s a best case scenario.

The worst case is essentially a complete all out systemic meltdown.

Either way, we’re in trouble if oil is approaching or has already surpassed peak cheapness.