Please don't panic.
But in light of the National Emergency President Obama just declared with regards to Libya, there's a bit more to be said.
First, probably the most responsible thing governments can be doing right now, before all else, is making sure that crops get planted in the Northern Hemisphere before any large agricultural producers can be truly rattled by sharp changes in oil's price or availability. If they are working behind the scenes to do this, well, good for them.
Second, the revolution in Libya is critical because that nation is one area not yet suffering dramatic declines in oil production, and because it produces a great deal of oil that can be processed by refineries in Europe that can not handle heavier, dirtier oils provided by many other sources. Which has no doubt had an effect on the price of oil rising faster there than in the U.S. Of course, the fact that the U.S. has fewer people and more oil production than Western Europe, and more waste to cut, has probably also affected those prices.
But overall, that 14% one-month drop bodes ill for us all, even if, hopefully, the nations who lost so much output can not decline much further.
Oh, And Why I Said "Six Months of Oil Left"
Over the last few days, I responded to the stunning numbers on global oil production in December of 2010 by suggesting that we might only have six months of oil left. Why say something that dramatic?
First off, if world production really dropped 14% in December, and if roughly that rate of decline continued and is continuing, then six months -- for a variety of reasons -- might be optimistic.
Why?
In part, because this drop did not start when I posted my first comment on the data. If we take the November 2010 global production numbers as our baseline, then we began this rate of descent in December. Right now, we have two days left in February, which means we have gone through three months of production. We just have the statistics for only one of them.
Now, I've already discussed a few ways in which the one-month 14% drop in world production and the 4.9% drop in Saudi exports might not be quite as bad as they appear... but if that 14% drop or something roughly that bad continues on a monthly basis, we will be in a very bad place production-wise, with incredible speed.
There are numerous complicating factors in this situation, given that several Middle Eastern oil producers are much less stable than their Latin counterparts. The collapse of one or two or three key oil exporters could rapidly wipe out the global supply in even the best of times.
And then remember that if the 14% one-month drop is continuing, we are already three months into it. So when I said, "14%, of course, drops you to to 40% in six months, and a little over 16% in 12," it's important to remember that effectively those stages are three months and nine months away, respectively. Nine months after this situation began, if it persists, we will have a little under 26% of our production left. (Right now, after three months, we would be reduced to a little under 64% of our output, or just under 2/3.)
It's an open question as to whether the world can lose that much of its oil supply, that fast, and not go totally to pieces. Even if revolutions do not continue and spread, it will be difficult to maintain supply lines, spare parts and critical industrial infrastructure when that much fuel and synthetic feedstock has been pulled from the system.
But then, the options I'm assembling aren't necessarily conventional, though quite a few of them are cheap.