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The Consequences of Oil Dependency

The following article was first published in The Santa Rosa Press Democrat on September 23, 2004.

Everyone knows that oil prices have grown volatile in recent months.  Explanations include rising demand from China and supply limits resulting from pipeline sabotage in Iraq.  Some commentators note that global oil production may be nearing its historic peak, since new discoveries have been dwindling since the 1960s and spare production capacity is evaporating.  One by one, countries that were oil exporters are becoming net importers (US oil production peaked in 1970; natural gas production here is also in decline).

However, the long-term implications of our dependency on quickly depleting non-renewable oil are seldom explored.

Oil and gas account for the lion’s share of US energy consumption and are critical to transportation, home heating, and electricity generation.  Soon we will have less of these fuels to go around, despite an expanding population and the constant demand for more energy to fuel economic growth.

Economists tell us that higher oil prices will stimulate investment in energy alternatives.  However, the prospects for a painless market-driven transition away from fossil fuels are hardly encouraging.  Globally, trillions of dollars will have to be spent on research and on new infrastructureÑtens or hundreds of billions per year, starting immediately.  We are not seeing anything like that level of investment now; we have to assume that it will begin after the global oil peak (that is, after an obvious price signal making alternatives more attractive).  But then, with less energy available to fuel the economy, we will have trouble simply maintaining basic services.  There won’t be any surplus to jumpstart the new energy infrastructure, which will take decades to build.

High energy prices will cause recessions, destroying demand.  Then, reduced demand will lead to partial relaxations of energy prices.  Temporarily lowered prices will stimulate economic recovery and hence renewed demand, which will again be constrained by declining rates of oil extraction, leading to more recessions, and so on.  In other words, as demand begins to exceed supply, expect increasing price volatility, with a general upward and steepening underlying price trend.

The ultimate consequence will be a global depression worse than that of the 1930s.

When will the process begin?  Probably before 2010; we are likely seeing the first signs of global oil peak now.

No government in the world is even remotely prepared.  Even though we were warned by the “Limits to Growth” report of the 1970s that resource shortages would arise in this century, politicians have assured us that all will be well.  None dare suggest that our fossil-fueled way of life cannot be sustained.  This is humanly understandable: voters respond well to optimistic messages.  But the result is that, in the decades since the oil shocks of the 1970s, we have become ever more dependent on oil and gas.

If we are smart, we will begin now to power down by reducing our dependence on fossil fuels.  This will require cooperation and the redirection of investments on an unprecedented scale.  We must find ways to minimize transportation, reduce petrochemical inputs to agriculture, and maximize the benefits of solar power through more intelligent design and construction of homes and other buildings.  We must also forge international agreements limiting oil exports and imports so as to minimize conflict over what remains.

This advice constitutes very strong medicine, but strong medicine is called for.  The American people must recognize the scale of the challenge facing them and signal their willingness to make sacrifices in order to preserve the best of what we have achieved during the past century.  Otherwise, as the fuels that drive our economy dribble away, politicians will merely look for scapegoats, and the next generation will inherit a world of poverty, environmental ruin, and perpetual resource wars.

Richard Heinberg is the author of Powerdown: Options and Actions for a Post-Carbon World and The Party’s Over: Oil, War and the Fate of Industrial Societies; he is a Core Faculty member of New College of California in Santa Rosa.

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