There will be an extremely painful oil supply shortfall sometime between 2018 and 2020. It will be highly disruptive to our over-leveraged global financial system, given how saddled it is with record debts and unfunded IOUs.
Due to a massive reduction in capital spending in the global oil business over 2014-2016 and continuing into 2017, the world will soon find less oil coming out of the ground beginning somewhere between 2018-2020.
Because oil is the lifeblood of today’s economy, if there’s less oil to go around, price shocks are inevitable. It’s very likely we’ll see prices climb back over $100 per barrel. Possibly well over.
The only way to avoid such a supply driven price-shock is if the world economy collapses first, dragging demand downwards.
Not exactly a great “solution” to hope for.
Pick Your Poison
This is why our view is that either
the world economy outgrows available oil somewhere in the 2018 – 2020 timeframe, or the world economy collapses first, thus pushing off an oil price shock by a few years (or longer, given the severity of the collapse) If (1) happens, the resulting oil price spike will kneecap a world economy already weighted down by the highest levels of debt ever recorded, currently totaling some 327% of GDP:
This post was published at PeakProsperity on Friday, June 30, 2017,.