People have been shouting for years now about resource exhaustion but have been "wrong" for nearly the whole of human civilisation. I put wrong in quotes because we do live in a finite world, but past predictions never had the timing right. When whale oil became scarce the same concerns were raised, but substitutes were found. When crude oil becomes scarce, will substitutes be found? Why raise these concerns yet again over oil depletion? Finding a substitute for oil will be, in one understated word,
difficult. The immediate response from almost everyone when reacting to first being informed of peak oil is "Well what about such and such?" inserting ones favorite technology or economic system inplace of "such and such." There are plenty of options: coal, nuclear, solar, wind, biomass, thermal, hydro, methane, tidal. I am not writing this post as a response to these alternative technologies and sources of energy. Instead I am writing it to extrapolate my thoughts from the technical complications of why peak oil is happening to how oil depletion is, and will, change our world.
Imagine this: tomorrow you wake up and the flow of oil and its related products have completely stopped. General chaos would ensue while the Strategic Petroleum Reserve is quickly rationed empty (probably to sustain the military). Life would get rather difficult if oil ceased production immediately. How would we get to work? How would many of us heat our homes? Would our electricity grid cope with the loss of natural gas and the small amount of oil fueled power plants? Where would plastic and fertiliser, not to mention an extraordinarily wide range of chemicals, come from? How would we get strawberries from Chile in the winter? How would I get to New Zealand for my next working holiday? This is of course an extreme example as it is most improbable that such an event would occur, but I use it because it clearly gets across just how much we rely and depend on oil for our modern society and quality of life. This is not the situation we face, but neither is reality a rosy picture.
I think that oil production has hit a limit in total month-average daily output. We haven't produced more oil in a month than we did in May 2005, nearly three years ago. (Or December, 2005, or in 2006... depends on what
production numbers are used). I think we will ride a plateau until 2012 - 2015 and will then enter the period of terminal production decline. The production plateau will be characterised by volatile and ever increasing energy prices, global spot shortages, discoveries that are technically difficult to recover and the 3rd world being priced out of the oil market so that OECD countries can continue to operate. See Zimbabwe, for example.
There are above ground factors (war, politics, embargoes, etc.) that may well push the global peak out past 2012 - 2015, but there are also above ground factors that could cause havoc on the availability US oil imports. And once the US can no longer import
other countries' oil, the timing of global peak, while still important, becomes less meaningful. So while factors outside of natural geology could alter the timing, I am fairly certain that "the slide" will happen in the next 10 years. Nearly everyone involved in the Peak Oil community has speculated on what life will be like post (peak) carbon so there is no shortage (ha ha) of predictions. Everything from resource wars to techno/free market fixes to mass die off and all things in between has a book written on it. At present the most one can do is look at the problem at hand, where we stand today, take a best guess and then plan accordingly.
One of the biggest problems I see when looking at PO as a whole is the interconnectedness of energy and economy. Our recent 90 year growth spurt has been predicated on the availibility of cheap fossil fuels, particularily oil and natural gas. When the global economy is hot so is the demand for energy - and it has been strong these last several years as a larger percentage of the global population has become more affluent, be it Indians eating more meat, the Chinese driving more cars or the inclusion of new member states into the EU. These resources are drivers of the economy and their depletion will signal an end to what was thought would be infinite global economic growth. Growth will peak along with oil and then go into decline triggering recessions and, depending on the severity, our generation's Great Depression. For whatever reason it seems the Market views current oil prices as a spike and not a long-term trend. Because of this, I believe the financial analysts and forecasters are over estimating growth (earnings) that will occur because they are undervaluing the cost of capital (debt and equity). An economy and economic system based on debt will buckle when growth, our even the prospect of growth no longer exists. I am not certain
when something like this will play out(probably when we can see in hindsight that production has peaked), or if it will even happen at a large scale. Can it be compared to a teather ball where it starts slowly, unwinding in small circles around the poll before it picks up speed and covers a greater radius? Or does an economic collapse caused by the increasing scarcity of abundant and cheap oil simply bypass any economic safety nets that have been set up? I can't be certain, but I do know our economy cannot continue to grow in an era of declining oil production. I still maintain that the day the world (market) realises the full implications of peak oil, the repricing of assets will trigger a sell off that makes the Crash of '29 look like a walk through the candy store.
Our savings account of carbon-based solar energy has allowed us (the industrialists) to be an extraordinarily mobile society. Since its discovery, oil has been easily produced, transported and refined into a myriad of creative products. We have found countless ways to then use those products to the betterment of our lives. Oil is one of the main drivers behind today's convenience-based lifestyle as there are thousands of hours of work-energy stored in each and every one of the 20-22 million barrels of oil we use every day. All of this potential energy has allowed the "conveniences" (listed above) of the Western/North American lifestyle to happen such as the spread of suburbs, manufacturing bases where labor is cheapest, year-round fresh produce, hurling ourselves at 70 mph down concrete slabs, "green revolution" agriculture and so much more.
This isn't to say these things won't exist or that oil won't be produced in the future. As depleting fossil fuels face greater competition from across the world the equilibrium price (assuming no intervention) will have to rise. Economics 101: resources are finite and price will determine their allocation. The third world has experienced a this shock and many countries have been priced out. The increase over the last 7 years has rattled the first world but business as usual persists. As the shocks climb the ladder of affluence, so too will price increases but I make no attempts to predict how high and fast. $150/bbl by 2010? $500/bbl by 2015? I've said and posted numerous times that the current spot price is not the ultimate indicator of Peak Oil - what we have to observe is the rate of flow. Will my attempt at driving to work be hampered because of my inability to purchase the required fuel because someone with more money bid up the price so they could purchase it for themselves for whatver use? Yes, I find it very likely. As a comparison, much of southern (OK, all) Africa faces starvation yet food is exported because wealthy countries can pay more and... turn it into biofuels! It's the same as an auction - the winner will be the one who can pay the most. The losers of this auction -and there will be many- will face severe unemployment and have no way to pay for transportation, food, heat, etc.
These higher prices will force people to seek out alternatives. What other way do I have to get to work other than driving? Or: How else could I entertain myself rather than boating or ski-dooing on the lake? We will eventually have to substitue all the high energy, highly entropic systems that rely on and require prohibitively expensive fossil fuels with low energy alternatives. It is at this critical point where we will decide our path. Will we wage war over remaining resources to carry on business as usual? Will we wait to discover a tecno fix or new source of energy? Will we begin to powerdown and live within the balance provided us? I would not be surprised to see a great many countries fracture and divide into smaller, more regional governments (or comeplete lack thereof!). We in the Peak Oil community love to point and look at Cuba during the post-soviet-era collapse when oil became incredibly scarce. Cadillacs roamed the streets of Havanah while cheap oil flowed from Russian fields. The break up of the Soviet Union crashed that party. Cuba was able to cope but there was much hardship and living arrangements were completely transformed. As was agriculture, transportation, industry, economy. If the West were able to Powerdown even a fraction as well as Cuba I would call it a success.
But perhaps high oil prices will not force consumers to alter their petroleum based lifestyle. If, because of the recency effect, people believe that tomorrow will be much the same as yesterday and yesteryear, then perhaps the reversal from our current economy and a transition into a "renewable economy" (I'm not really even sure what this means, what it entails, or how we get there) or whatever future scenario we move toward is not possible. This idea has been discussed at The Oil Drum on several occasions relating it to Industrial Agriculture being affected by oil and natural gas depletion. This idea may also play out with society as a whole. We may well not be able to transition into a lifestyle similar to that which existed prior to the industrial revolution.
However peak oil plays itself out in the next 15 years, I am at least certain of one idea: there are gonna be a lot of people who are far less mobile tomorrow than they are today. Discretionary weekend getaways, 25 mile work commutes, cruisin mainstreet - eventually we will simply not be able and willing to pay for these activities. This is the exact reason why people like James Howard Kunstler believe that suburbia is doomed and the days of happy motoring are over. Looking at the situation at hand I tend to agree and would rather be located in a dense, walkable mixed use city or in a rural and self sustaining farming community. As we inch further along the line to the peak oil slide, life will have to become localised; be it entertainment, food production, school, work, etc. Waste will also be trimmed. Europe has just as good as, and in some countries a better standard of living while using half the amount of energy per capita than the United States. Soon enough it will be our turn to go down the peak oil slide and deal with all that comes with it. We can be proactive and at least attempt to mitigate the worst effects today, or party on and let it wake us up out of our oil-drunken slumber and smack us in the face.
Labels: economics, energy, peak oil, post peak, suburbia
