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The Peak Oil Bandwagon - Museletter 146

The Peak Oil Bandwagon

I was recently asked to write an Afterword to the Italian edition of The Party’s Over (French, German, and Arabic versions are also in the works). What follows is an expanded version of the piece I submitted, which focuses on gathering signs of an impending global oil production peak, and recent events surrounding the American-British invasion and occupation of Iraq.

* * *

In recent weeks interest in peak oil and my book The Party’s Over has heightened noticeably. On the night of April 3, I was interviewed on radio by Art Bell (Coast to Coast AM), whose show, I’m told, is the top-rated late-night radio program in the world. For days afterward I received hundreds of e-mails, as well as letters and phone calls. Amazon.com ran out of copies of my book and displayed a message saying “this title currently not available.”

That was before the major run-up in gas prices of the past few weeks. I now receive an average of at least one request a day for an interview (this morning there were three). One interview appears in the current issue of Z Magazine; another will run in the Russian publication Polar Star (zvezda.ru/).

Meanwhile I’m happy to play a role in a new Canadian documentary film, “The End of Suburbia,” produced by Barry Silverthorn (www.endofsuburbia.com). The film is both entertaining and sobering. James Howard Kunstler (The Geography of Nowhere) is the principal voice carrying the thread of narrative. Much of the discussion centers on oil peak, with appearances by Colin Campbell, Julian Darley, Kenneth Deffeyes, and others. If you would like to alert friends and family to the oil peak issue (and they’re not book readers), one way would be to order the video and host a viewing party and discussion.

With or without the video, people are gathering with increasing frequency to discuss the implications of peak oil. You can keep track of such events — or schedule your own — via the www.PeakOilAction.org web site.

On May 3, my colleagues at New College and I hosted a public symposium with Congresswoman Lynn Woolsey (senior member of the energy subcommittee of the US House of Representatives) and Larry Robinson of the Sebastopol City Council, among other presenters. I gave a short version of my oil-peak presentation, and other speakers discussed what is being done, and can be done, to make our region more sustainable in the face of global climate change and the impending oil shortages. The room was packed and discussion went on until late into the evening (Woolsey had to leave early, unfortunately). At least the conversation has begun, and now includes a few relatively prominent local decision-makers. There will be more such meetings.

This issue of MuseLetter is arriving a bit late because I have just arrived back from Berlin, where I attended the world conference of the Association for the Study of Peak Oil. I hope to share some reflections on the conference in the next MuseLetter.

* * *

The notion that world oil production is within sight of its all-time peak has gained considerable visibility in the past months. The latest and perhaps most visible evidence is the cover story, “The End of Cheap Oil,” in the June 2004 edition of National Geographic. While the article attempts to achieve “balance” by interviewing cheery economists (who assure us, as always, that there will be plenty of oil for . . . well, a couple of more decades anyway) as well as concerned petroleum geologists, the essential information from the latter is portrayed graphically and effectively.

Recent headlines in the New York Times (“The Oil Crunch,” by Paul Krugman, and an editorial May 19 titled “Gasoline Hysteria”), Le Monde (“The Petro-Apocalypse,” by Yves Cochet), CBS Marketwatch (“The Looming Oil Crisis Will Dwarf 1973,” by Paul Erdman), and elsewhere have been prompted by the spectacular run-up in oil prices in recent weeks. Here in northern California regular unleaded gas is trading at upwards of $2.25 per gallon — enough, evidently, to affect the sales of gass-guzzling SUVs, which are now being offered at a discount.

In the short term, the high oil prices are due to increased demand (from China and India, as well as the traditional primary users — the US, Japan, and Europe — all of which are experiencing a spurt of economic growth), lack of refining capacity in the US, and instability in the Middle East (Iraq’s production just can’t seem to get off the ground, given repeated efforts at sabotage on the part of the indigenous population; and the oil companies don’t seem all that excited about investing there, given the unsafe working conditions). “So why wouldn’t oil prices rocket?,” asks Alan Kohler in the title of his May 19 essay on www.smh.com.au/articles/2004/05/18/1084783514440.html. “The last ‘super giant’ oilfield (more than 10 billion barrels) was discovered 40 years ago; the last American refinery was built 25 years ago; each successive American ‘driving season’ guzzles more gas than the last.”

While the newspapers talk about the immediate causes of high gas prices, they only occasionally note that these are riding on a deeper, tectonically shifting terrain.

Global spare production capacity (the amount that exporting nations could produce if called upon, over and above what they are now producing), is now at its lowest point in recent decades — a mere two million barrels per day out of a total global output of about 80 million barrels per day. Most of this spare capacity exists in one nation — Saudi Arabia.

But even this assessment, worrisome as it may be, rests on an assumption that may turn out to be overly optimistic: that is, that official Saudi reserve estimates are correct.

For the past few months, oil investment banker Matthew Simmons has been raising a furor by publicly questioning whether Saudi oil wells really contain all of the oil that Saudi officials claim is there. In articles in the New York Times and elsewhere, Simmons has been quoted as saying that his extensive review of 200 technical papers by scientists working in the Saudi fields has led him to doubt the published figures. For many years the country’s five major oil fields — including Ghawar, the largest oil field ever discovered — have provided the core of Saudi production, but oil field operators are injecting millions of barrels of sea water each day in order to maintain pressure within the underground systems. This practice maintains extraction levels; however, the aging fields — all discovered between 1940 and 1965 — are becoming depleted, and, when the inevitable decline in extraction rates begins, seawater injection could actually accelerate the process, resulting in a rapid drop-off in oil available on the export market.

Simmons’s statements were evidently so worrisome to Saudi officials that the latter arranged a high-profile symposium at the Center for Strategic and International Studies in Washington, D.C. in late April, 2004, at which their own representatives, together with prominent US government officials, assured the world that Saudi Arabia’s oil fields are robust and able to supply increasing global petroleum demands for decades to come. Saudi officials even took the extraordinary step of announcing that official reserve estimates of 261 billion barrels of recoverable oil are far too low; but for this claim to be credible, independent analysts will have to be shown evidence of spectacular new discoveries — of which no word has leaked out. Unless such evidence soon emerges, it would probably be safe to characterize the Saudi statements as an act of desperation intended to shore up US support for the increasingly embattled monarchy.

Meanwhile, Royal Dutch/Shell created shock waves by reducing its reported reserves on three separate occasions within a nine-week period in the spring of 2004. This 20 percent total reserve reduction was startling enough, but an examination of the reasons for the embarrassing corporate admission (which resulted in the firings and resignations of several high-level executives and the hammering of Shell stock prices) leads to deeper questions about standard industry reporting practices, and technologies that are being relied upon to extend current oil production levels in many countries.

Many of Shell’s difficulties issued from the oil-exporting nation of Oman, where production levels have been declining for the past four years. Shell executives in that country apparently expected that horizontal drilling techniques would be able to maintain and even increase extraction rates; this led them to overestimate their company’s reserves within that nation by as much as 40 percent. A similar situation in Nigeria also led to downward reserve revisions.

This was bad enough for Shell, but the really grim news is what is implied for the rest of the industry. Other companies active in Nigeria — including Italy’s ENI, France’s Total, and US-based ChevronTexaco and ExxonMobil — appear to have followed Shell’s practice of exaggerating reserves. What is even worse, while new technologies — which many oil optimists are relying on to fulfill rosy projections for increased global production — appear to be effective at extracting oil from known reserves more quickly and efficiently, the overall result seems to be simply the quicker exhaustion of those reserves.

While questions are being raised about the global oil supply, demand for oil is inexorably growing. China is currently increasing its oil imports by 30% per year. In 2003, that nation surpassed Japan to become the world’s second foremost petroleum importer. In the same year, Shanghai banned bicycles from most of its main streets in favor of automobiles.

The Saudis have dutifully announced that they will request a hike in OPEC export quotas at the organization’s next meeting. But will this move have any real consequences? Already most OPEC nations (excepting Saudi Arabia) are producing flat-out, and are exporting beyond their quotas by about the same amount the Saudis are suggesting the export quotas be hiked. Will the exercise result in an actual increase in available oil on the international market, or will it merely legitimize the status quo for production within OPEC?

As Chris Skrebowski of Petroleum Review notes, a few substantial deepwater oil fields are scheduled to come on line in the next couple of years, so there is some possibility of a stabilization of prices. Moreover, if high prices now cut short the current global economic recovery, then renewed recession could result in a drop in demand, which could in turn lead to lower fuel prices. But that would only be temporary. From the long-term perspective, burgeoning demand is on a collision course with emerging supply constraints, and $50, $60, and even $100 per barrel oil is possible even in the next year or so.

When will the actual global peak of oil production occur? In The Party’s Over, I surveyed several authoritative forecasts and, on that basis, cited a decade-long window of 2006 to 2016 as the most likely period during which the global all-time peak in oil production will take place. The latest data — from Petroleum Review and Matthew Simmons — suggest that the peak may more likely occur during the earlier years of that window. Between now and then, we will continue to experience a bumpy ride as we leave the “petroleum plateau” that we have been on for the past 30 years. Once we’re off the plateau and on the downward skid, times will get really interesting.

* * *

By far the most discussed development since April 2003, when The Party’s Over hit the bookstores, has been the US-British invasion and ongoing occupation of Iraq. As I have said before, I do not believe that this invasion was undertaken simply to commandeer Iraq’s oil supply: the situation is more complex, and hinges on the Washington neoconservatives’ published fantasies of world domination. However, when the Iraq adventure is seen in light of America’s long-term foreign policy in the Middle East, it can certainly be regarded as an oil war. The US would have little interest in that part of the world, were it not for the fact that 60 percent of proven global oil reserves are concentrated there. No doubt the strategy behind the war included the building of several large and permanent military bases in Iraq for the defense of US access to oil supplies in the region, especially in neighboring Saudi Arabia.

Accusations that the invasion was motivated by a thirst for oil gained credibility when American troops, as they entered Baghdad, faithfully guarded the Iraqi oil ministry but allowed other government buildings — including museums — to be looted. However, despite keen attention on the part of US civilian contractors, Iraq’s oil production has languished, partly due to ongoing sabotage on the part of Iraqi resistance fighters.

By now it is clear that the invasion and subsequent occupation were based on lies, and were fraught with almost unfathomable incompetence and poor planning, all issuing from extremely arrogant Washington neoconservative ideologues. Revelations about the torture of Iraqis in American-run prisons have dramatically intensified the widespread perception that the entire exercise was criminal in nature. Even in the US itself, the sentiment is growing that the country has allowed itself to be taken over by a ring of gangsters who have undermined the nation’s international standing and strategic interests. America now faces a no-win situation: whether it tries to continue the occupation or picks up and leaves, in either case it has lost face, made enemies, and squandered opportunities. The entire Middle East has been destabilized, and the flames of Islamic fundamentalism have been fanned to white heat.

One of the best commentaries I’ve seen on the current situation in Iraq comes from British philosopher John Gray, in his essay “Power and vainglory” (news.independent.co.uk/world/middle_east/story.jsp?story=522568). Gray writes:

Misguided from the start, the war in Iraq is spiraling out of control. Any legitimacy the occupying forces may ever have possessed has been destroyed, and there are signs that Iraqi insurgents are coming together to mount a movement of resistance that could render the country ungovernable. With even more damning images likely to find their way into the public realm in the near future, the United States is facing an historic defeat in Iraq — a blow to American power more damaging than it suffered in Vietnam, and far larger in its global implications. . . . In the wake of Vietnam and Somalia, American military doctrine has been based on “force protection” and “shock and awe.” In practice, these strategies mean killing anyone who appears to pose any threat to US forces and overcoming the enemy through the use of overwhelming firepower. Effective in the early stages of the war when the enemy was Saddam and his regime, they are deeply counter-productive when, as in Iraq today, the enemy comprises much of the population. . . . In the US, American withdrawal will be represented as a reward for a job well done. The rest of the world will recognise it as a humiliating defeat, and it is here that the analogy of Vietnam is inadequate. The Iraq war has been lost far more quickly than that in South-east Asia, and the impact on the world is potentially much greater. Whereas Vietnam had little economic significance, Iraq is pivotal in the world economy. No dominoes fell with the fall of Saigon, but some pretty weighty ones could be shaken as the American tanks rumble out of Baghdad.

For the world as a whole the consequences of the Iraq fiasco are likely to be severe and long lasting. The invasion has created a widening rift between US and many other nations, and to a smaller extent between Arab world and the West more generally. It has also hastened the inevitable energy crisis (by at least temporarily undermining Iraq’s production capacity) and has likely made that crisis much harder to solve. This is because the destabilization of the Middle East will lead to greater geopolitical competition for alliances and control of resources. The region cannot simply be left to sort out its problems on its own: all of the world’s oil importing nations have a survival stake in the contest. And that contest is likely to become more chaotic in years ahead, as the Saudis attempt to deal with insoluble internal conflicts (a growing youthful population, declining per capita incomes, increasing Islamic fundamentalist sentiment and violence, and unclear succession from ailing King Fahd).

The old order in the Middle East is nearly finished, and a new one must be negotiated, with the US, Israel, China, Russia, Japan, India, Europe, and the Middle Eastern exporting countries themselves as the primary interested parties. But “negotiated” may be too tidy a term for what lies ahead in the region.

Russia, Europe, and China are seeking a “multipolar” world order to replace the American-led regime of corporate globalization that has characterized the period since the end of the Cold War. Meanwhile the world’s poorer nations — including former US subordinates such as Venezuela and Brazil — have rebelled against the “Washington consensus” at recent World Trade Organization meetings, signaling the effective end of globalization regardless of what the richer nations do, and despite the accelerating outsourcing of jobs from the US to India and China.

* * *

Largely as a result of the neoconservatives’ unbounded hubris, the US economy and geopolitical status are unraveling more quickly than could have been imagined only a few years ago. While the US appears to be in the early stages of an economic recovery, that recovery is being undermined by high oil prices, staggering levels of government debt, and a ballooning trade deficit fed largely by the need for ever greater fuel imports.

Meanwhile the political opposition, led by the Democrat John Kerry, appears unable to comprehend the situation, much less to suggest effective remedies. As of this writing, Democrats are suggesting releasing oil from the Strategic Petroleum Reserve in order to lower gas prices. For once I agree with the Republicans: this will do almost nothing to lower prices (because of the refining bottleneck) and will defeat the purpose of the Reserve. Nevertheless virtually the entire world outside the US is praying for a Kerry victory, if only to unseat the Bush team, who are regarded (again, outside the US, almost universally) as some of the most dangerous individuals in the world today.

Bush and his cronies are clearly on the defensive, and something palpable has changed with regard to media coverage of the president and his efforts to spread democracy to the people of Iraq. I have been convinced for several months that the elites who rule the US from behind the scenes are quite unhappy with the neoconservatives whom they hired to run the country four years ago. That dissatisfaction is evidently now shared by a large and influential segment of the military and intelligence communities. The neocons may not be able to survive long with enemies like these. A perceptive commentary on the situation comes from Richard K. Moore of Ireland Citizens for a Democratic Renaissance (cyberjournal.org):

It is open knowledge that veteran brass and intelligence people are very pissed off at the neocons. Those veterans knew there were no weapons of mass destruction, they know that there was plenty of warning before 9/11, and they know that the interceptors were held back on the day. And yet they’re the ones who are taking the blame for “intelligence failures” and they are the ones who have to send GIs off to die in Iraq. The neocons are arrogant upstarts in DC, a bit like JFK was, and like him they’ve made a lot of enemies. Not even the oil companies are happy about administration policy in Iraq.

How far will each side go?

What we are seeing is a power struggle between the neocons and the old-cons — the traditional conservatives. So far it looks like a replay of Watergate, and if it goes that way the neocons will be out, and Kerry will be working within a new power alignment and a new set of priorities. The glove, to some extent, will be put back on the fascist fist. . . . But the neocons are not pushovers. . . . They too can play hardball. They proved that on 9/11. Whatever little circles pulled that off, domestic or foreign, are still in place — and they’re in it up to their necks now, committed to the program.

These days there is increasing public debate not only about the wisdom of the neocons’ policy in Iraq, but even about government complicity in 9/11 — as evidenced by the well-deserved widespread interest in David Ray Griffin’s recent book The New Pearl Harbor. Amy Goodman’s national radio program “Democracy Now,” which for over two years avoided discussion of the hard questions about 9/11, has interviewed Griffin as well as Gore Vidal and Ellen Mariani (wife of a 9/11 victim, who has filed a racketeering lawsuit against Bush demanding answers and evidence). This may be a signal that the timid American Left has finally overcome its fear of embracing a “conspiracy theory” and is willing at least to contemplate — if not yet to confront — the enormity of the coup that occurred with the 2000 “election.”

If and when Ellen Mariani appears on the cover of NewsWeek it will be clear that the neocons have finally lost all legitimacy among the ruling elites, and that the countercoup has succeeded. In the meantime, a war is being fought behind the scenes, and we the people can only guess at what is happening.

The only chance for a peaceful solution to the global energy crisis is to foster cooperation between nations, the conservation of remaining resources, and the sharing of what oil is left. This is a politically challenging scenario at best, and it has been made far more so by the Bush administration’s crimes and blunders. As the election approaches, we are headed into an extremely dangerous period. Expect some nasty surprises.

* * *

Many readers have contacted me to say that my book is depressing. I am sorry if this is the case, but that was not the intent. My aim has been simply to alert as many people as possible to a profound change that is about to overtake our civilization and our way of life. I did try to offer hope in the final chapter, by suggesting things that people can do to help their families, communities, and nations survive the coming energy famine. In the end, optimism is most useful as a state of mind that fosters constructive action; it is self-delusional to dwell on hopeful images of the future merely to distract ourselves from facing unpleasant truths.

While the international political scene looked bad enough as I was writing this book and, as I have explained above, it looks even more worrisome today, there is at least some good news to report: the subject of global oil peak is quickly getting out to a larger audience. Other books on the subject have been written, and the Hubbert peak is now frequently discussed on national radio programs and in newspapers and magazines (as noted above). This increased awareness will not by itself lead us toward a survivable future, but it is an essential prerequisite.

I believe that if the people of the world can be helped to understand the situation we are in, the options available, and the consequences of the path we are currently on, it is at least possible that they can be persuaded to undertake the considerable effort and sacrifice that will be entailed in a peaceful transition to a sustainable, locally-based, decentralized, low-energy, resource conserving social regime. But inspired leadership will be required. Everywhere I have traveled to speak on this subject, audiences have shown, not just a willingness, but an almost heart-wrenching eagerness to be part of such a collective undertaking. If the people demand action, leaders must eventually follow.

Editorial Notes: Published with permission of the author. Future editions are available here: www.museletter.com/subscription.html

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