We're talking long, not short-term demand. This sort of effect is quite real for short-term demand, but for long-term industry has many more options to deal with price increases. It's a lot easier to economize on consumption when you can buy or develop new, more efficient equipment and shift investment than when everyone is pretty much committed to what they have.Strictly speaking Oil has some level of slack until it doesn't really anymore at which point you'll see a massive price spike as everyone competes for the same insufficient amount of oil until some one really can't afford it anymore. This is thus obviously followed by a large demand destruction cycle as those participants who cracked first drop out and then is afterwards followed by a price collapse as demand drops below supply again. At least for awhile that is, it's something that can become cyclical depending on how various players exactly act.
This is something that economists predicted beforehand for it and is arguably what we saw happen in 2012 when a strong temporary oil spike occurred when there was insufficient supply. It hasn't really reoccurred since as the various oil producing countries seem to favor keeping oil prices permanently at a moderately high level now, which has instead caused a more continuous demand destruction rather then a more spiky one.
So in that sense, it might ramp gently for awhile, but eventually if things get to tight you'd probably eventually see a spike. Unless for instance thus you get a supply side cartel that starts squeezing money from the market instead.
Now this sort of long term trend is going to expose us to more short-term shocks, which are bad. Forming a supply-side cartel to stabilize prices is not a bad idea in this context.
Basically I'm not arguing that oil peaking/tight oil transition are not economic issues. I'm arguing that there isn't an economic Armageddon scenario where our economy, dependent on energy, is forced into a downward spiral from lack of it. At least not as long as the MnKH remains responsive to current and projected prices. Maybe if we just plowed everything into trying to fight it via more extraction and went full consumptive industry we could cause it.
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