If this is what oil is going to do, what will happen to the gold price?

First a sentence from The Long Emergency by James Howard Kunstler one of my favorite "wordsmiths."

"It has been very hard for Americans -- lost in dark raptures of non-stop infotainment, recreational shopping, and compulsive motoring-- to make sense of the gathering forces that will fundamentally alter the terms of everyday life in technological society."

This was written probably in 2004 and published in the book released in 2005. At that point in time very, very few people were acquainted with the concept of peak oil; perhaps 1 in 10,000. The viability of this subject is still a matter of great debate.

In 2004 the IEA (International Energy Agency) was still very optimistic in its views toward a future of inexpensive oil. Their models operated on the idea that as price rose, more supply would come on line to capture those profits, and prevent an excessive rise in price. Last year their report, for the first time showed some concern for the future but was not alarming.

This year, probably based on some of what they had discovered last year, they undertook an assessment of the oil fields of the world gathering information very similar to the data gathered by Matt Simmons in preparation for his book Twilight in the Desert." What they found is alarming. They found the depletion rate from the world's oil fields is approximately 9.1%/ year.

From a Joel Bowman report from Dubai (article on Howe Street opinion page), I lifted this quote, "According to the International Energy Agency, the world will need to pump well over one trillion dollars into energy development and production each year just to maintain “adequate supply.”" (emphasis mine)

Now I just had to run the numbers to see what effect this might have on the price of oil per barrel. $1,000,000,000,000 divided by approximately 80,000,000 barrels per day for 365 days = an unbelievable $34.25 (rounded) increase in the price of oil per barrel per year just to keep even. This is just the cost. It includes no profit for the additional outlay of capital. It does not consider the huge portion of the price increase that would be siphoned off by the respective governments in taxes before the oil companies recovered their capital outlay costs by selling product.

This means (if my math and assumptions are correct) that oil prices must increas "well over" $34 a year (without the tack ons) just to maintain "adequate supply."

Suddenly a return to $100 per barrel oil price seems like a bargain. And if the foregoing is correct, the price will likely go up $50 a barrel per year for the forseeable future until The Long Emergency of James Howard Kunstler is a reality not just in America but worldwide.

Have I made a significant mistake? Somebody please help me.

And if this is what is going to happen to the price of oil what will happen to the price of gold? It will be high enough to mine it with pick and shovel, To refine it with deadfall wood fires, And to bring it to civilization on the back of mules. In fact that may be the only way to acquire it.

P.