Crying wolf? What Is At Stake As We Reach The End Of The Plateau

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.

We Will Never Run Out Of Oil

What's that you say? You wouldn't ever expect such a statement to come from me? So you would say if you have ever had a discussion about energy with me. The following series of posts is my version of a peak oil primer.

First, a quick run down of the 5W1H:
WHAT is peak oil? Like gravity, peak oil is a theory and follows as such: Total oil production will, at some point during its period of extraction, hit a peak output (in terms of barrels per day). Once peak is reached, production will never be higher than that historic point. Production may plateau for some time, but will always enter into terminal decline. Less oil will be produced year over year until production becomes a net loser both economically and energetically - i.e. it costs $110 to produce a barrel that sells on the market for $100 or it requires two barrels of oil to pump out one barrel.

WHY and HOW does oil production hit a peak? Oil is a finite resource. A solar savings account built up over thousands of years in the form of, quite literally, liquid assets. Unless you believe abiotic oil is a real thing, there is nothing significant being added to our world petroleum account. Production tends to follow a bell shaped curve. Economics, industrialisation and the huge amount of growth over the past 150 years has resulted in constant, ever-increasing demand for oil. This explains the upward section of the bell curve of production. Industrialised growth has created a bottomless pit for the consumption of fossil fuels. There have (almost) always been markets willing and able to take oil and use it, so producers pump as much and as fast as they can to generate earlier cash flows from their fields. Basic capitalist markets at work. Eventually production hits the downward slope of that bell curve because of geologic limits (sometimes economic or political reasons as well). The characteristics of oil field geology are complex -just try reading a Society of Petroleum Engineers (SPE) technical paper- so I will try to explain in the most simple and basic way possible. Over time, as oil is extracted from a field, it begins to lose its natural pressure. It will eventually drop to the point where oil has to be pumped, then "swept" out of the field. There are tertiary methods of recovery as well, but I won't go into those. The above illustrates this point: the longer you produce an oil field, the slower the rate of extraction as it becomes increasingly difficult to move oil from its location in a geologic formation up the pipe to the surface.

WHO will be involved in the peak oil scenario? Aside from the tribal, pre-industrial peoples, it would be fair to say that everyone uses oil in some way, shape or form. There are a lot of players in the Who question as well as lots of ways to categorise them. There are consumers and producers. Importers and exporters. International Oil Companies - IOCs (BP, Exxon, et al.) and National Oil Companies - NOCs (Aramco, Pemex, etc.). There is the OPEC cartel which produces a bit over 30 mbd (~3/8ths of global production) and there are energy watch dog groups like the International Energy Agency -IEA (AIE en francais) and the U.S. based Energy Information Administration, which monitor production, supply, demand, consumption, inventories, technology, etc for the U.S., OECD countries and the West in general. The cast of characters and supporting roles is diverse. Energy and oil are quickly becoming some of the biggest and most global issues to face humanity. Because oil is such a global commodity, policies designed around its future will affect everyone, except Eskimos.

WHERE is peak oil observable? More importantly, has peak oil been observed? That answer is yes, on local scales. As stated above, production tends to follow a bell curve (unless we are talking about Russia - they are just plain goofy). Whether you are looking at an individual well, an entire oil field or a country, the production profile remains approximately the same, no matter the location. Oil is discovered, production begins and increases (usually at a steep rate) a peak production is reached and production enters either plateau or decline. Have a look at these graphs from the EIA that show the production profile for the United States. You can see that both the lower-48 curve and the Alaska curve on top both had their peaks and are now in decline. The above is a very simplistic explanation of where peak oil occurs and what that shape looks like, so it is a bit ostensible for me to state that production looks the same for all locations. Field management, reservoir characteristics and above ground factors will greatly influence the productivity of an oil field or even country (Iraq!). Another main idea I am trying to convey here is that production is not linear. A field cannot be produced at an ever increasing rate until all recoverable reserves are produced where production then falls immediately to nil. All oil is not produced equally. Where we have not seen a definitive peak, yet, is on a global scale; and this is one of the most hotly contested issues in the peak oil activist and energy community.

WHEN will we reach global peak oil production? This is where all of the oil players enter the picture. There are geologists, watchdog groups, bloggers, CEOs, governments, corporations and professors all opining on the timing of peak oil. The date ranges anywhere from 2005 to 2100 and beyond. Geologist Kenneth Defeyes controversially stated we would reach peak Thanksgiving Day, 2005 (+/- a few standard deviations). Chairmen and board members of Saudi Aramco claim the world will be supplied for the next century. The EIA offers a cheerful picture as well but warns of short and medium-term price and supply volatility. I have my own inkling of when production will peak, though this will come up later; and I readily admit it is only, at best, a semi-educated conclusion. Two of the biggest problems in attempting to predict the timing of peak oil are the complete lack of data transparency (OPEC!) and an uncertainty of how much oil is still yet to be discovered. Just by saying it was so, OPEC member nations in the 80s increased the proven reserves of their country, some up to a 3 fold gain. How is this possible? There is no certifiable external auditing of remaining and proven reserves; we simply take their word with blind faith. Petroleum geologists also cannot be exactly sure how much recoverable reserves the earth holds, though Geology and Statistics can make us fairly confident. I have no doubt that large discoveries will continue to be made for years to come, but they will be made further and fewer between. World oil discoveries peaked in the 60's and for a long time we have been producing more oil than has been found, in any given year. Our petroleum account is being drained. We are spending like a newly-divorced-gold-digger who thinks she still has a sugar daddy. New discoveries may well delay peak (by months, not decades) but this is no where near a mitigation of peak oil.

"I don't get the title of this post, can you elaborate?" Fact is, we will never "run out" of oil; billions of barrels will remain underground because we do not have the ability to recover them. People who concern themselves with peak oil are not the end-of-days type claiming oil is going to instantly disappear at some point in the future. Well, most aren't. We deal with somewhat more tangible things: supply and demand, engineering, finance, environmentalism and not apocalyptic prophecies. We use these tools to gain some idea of what the effects of a post peak oil world -a world of diminishing resources that face increasing demand- may look like in terms of social-political-economic structures, government, demographics, technology, transportation logistics, agriculture, etc. The list goes on.

I hope that this gives you an idea of what peak oil is, if you are hearing it for the first time. There are a lot of terms and concepts to deal with straight away (acronyms galore!). I am already writing the next post of the series about why on earth this matters and why we should care about it, and how it affects us. Aside from the excessive links to Wikipedia, I am not going to "cite" all of the above. This (and much more) is what I have learned over the last couple of years in my research into this topic. I typed away off the top of my head. Rather, I will list some of the best materials and resources that have been most enlightening to me. "Twilight in the Desert: The Coming Saudi Oil Shock" by Matt Simmons. www.theoildrum.com www.energybulletin.net "Powerdown: Options for a Post Carbon World" by Richard Heinberg. A peak oil documentary and how it will affect Ireland. I recommend seeing Heinberg speak. I also recommend checking out the daily posted "Drum Beat" at the Oil Drum and the discussion that follows.

Feel free to dis/agree with me. Yell at me. Think I am, and call me, crazy. Ask questions (I can answer them in the next post!). Thanks for reading and sorry for typos and grammatical errors.

Let's Do This First

I'm all for the things Bru has just suggested we start moving toward in the beginning of his latest post. Thing is, there will undoubtedly be a period of transition between moving from a high entropic society that motors about, happy as, living in 4,000 sq. ft. homes while buying things from around the world brought to your corner of the earth via 12,000 miles supply chains, to that which is summed up by Bru's three main recommendations.

We have to understand and realise that each and every one of these things is part of a transition period and not the end solution to our energy/PO/global warming crisis: Ethanol (and all biofuels), carbon cap and trade schemes, CAFE standards (really, this is a huge joke: what is it.... 35mpg by 2020 or something? reality will solve this one for us long before 2020! though I'm sure neo liberal economists will chalk it up to the free market.), bus rapid transit and rail electrification (these actually continue past the transition perios) and yes, nuclear power, even with its long lead time.

Here is another action we can take during this transition period: drive sane. Due to my car breaking down, I am driving the car my dad was planning on selling. It has one of those fancy gauges that tells you how much further you can drive on your tank of gas, average speed, instant fuel economy, etc. When I started driving it I was getting an average of 17 mpg (4.2 litre V8). A month later, under my driving habits, I am getting 23.4 mpg, a 38% increase. I've achieved a better fuel economy increase that what those stupid news stories run every time gas prices spike (inflate your tires!) just by driving in a sane manner: gentle acceleration, smooth braking, staying within the speed limit, cruise control. Because I don't have a propensity to drive more because of these changed habits, I have reduced my fuel consumption by 38%. A couple of the contributing editors at The Oil Drum have raised the notion that we could be a lot more effective in conservation by focusing on more efficient uses of our current transportation system. An immediate and massive redesign of cars, for example. I fully maintain we will have to move beyond personal automobiles (around 2015), but realistically the things listed above are probably a lot easier to achieve with the population we have, both in quantity and quality.

Here is the caveat. We only have a few years to start with this transition. The longer we wait to start change, the more likely we will have to make the switch to walkable and bikable communities, electrified rail transport and rethinking how we live in terms of location and proximity. To make an immediate conversion will be rediculously expensive. It will be very difficuly and it will be met with great resistance from the general population. As our good friend Dick has said, "Our way of life is not negotiable."

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I've made my first post on the Brudaimonia! Clicky clicky for ways to green up your lifestyle.