“Our ignorance is not so vast as our failure to use what we know.”
Marion King Hubbert
In 1956 a geologist by the name of Marion King Hubbert created a data model that projected that the U.S. would hit peak oil production in 1970. Outside of the field of geology no one of course had any idea of his name or what peak oil meant. Inside the field of geology he was considered at first a harebrained crackpot by many and within the oil industry, he worked for Shell Oil at the time, his scientific reputation and career were almost destroyed. But lo and behold fourteen years later the U.S. did in fact hit its peak in terms of oil production – 9.5 million barrels a day – though the peak, naturally enough, was not recognized as the peak until a few years later when terminal decline set in.
Obviously the accuracy of this prediction created quite a stir within the geological community not to mention the interest that it created for the insiders of the oil industry. For as you might suspect oil men value accurate geological predictions rather highly. I imagine the conversation between some Texas oil magnate and the reputedly crusty Hubbert going something like this:
Ever since 1970 the combined production of the lower 48 states has been dropping year after year. (about 2.5% p/a) At this point all fields in the lower 48 are more than 85% depleted and the zero point could come as soon as 2010. What will also come as a surprise to many is that Alaska too is in terminal decline and the only thing the drilling of the ANWR will do is speed the depletion rate. As to natural gas supplies, in North America at least, current depletion rates are quickly driving up the price of this oil ‘substitute’.
Few people seem to recall that the U.S. was the Saudi Arabia of the world at one time producing more oil than any other country. At the beginning of the last century the U.S. was the greatest oil exporter in the world. 7 out of 8 barrels of oil used in the first and second world wars were U.S. oil barrels. The sale and use of oil is in large part how the U.S. became so rich and powerful. For decades the U.S. was the largest creditor nation in the world. U.S. money, “sound as the dollar”, flooded into countries all over the world as investment capital and at home it allowed the U.S. to fund the greatest investment in pure research, technological advancement and military power that the world has ever seen.
How things have changed. Today the U.S. is both the largest importer of oil in the world as well as by far the largest debtor nation in the world. These two facts being not at all coincidental. It is very difficult for anyone to fully grasp the enormity of what “by far” means in the case of U.S. debt but let me try to give you an idea. The U.S. national debt is 7 trillion dollars,13 trillion if you add State, municipal and consumer debt and 18 trillion if the Bush economic ‘plan’ is fully enacted. The entirety of the third world’s debt is just about two trillion dollars. In other words the U.S. debt is many times the size of a debt that has been large enough to choke the economic life out of two-thirds of the world’s people. Many of whom are being forced to try and get by on $1 a day. To give an idea of what $1 a day means. If you had been paid $1 a day since the time of the birth of Jesus you would not yet have earned your first million. ($731,953 as of this sentence, and now back to our peak oil story.)
M. King Hubbert’s other great crystal ball gazing science parlour prediction (how it was portrayed and dismissed at the time) was to look at the world’s rock oil geological history: ‘petro’ meaning rock hence petroleum, and project from that data basis when the world would hit peak oil production. What he came up with was a peak occurring somewhere around the mid to late 1990’s. It turns out he was off by a little. Though it must be said that if it had not been for the oil shocks and subsequent conservation efforts there is every possibility that his model would have held. The best estimates today according to Colin Campbell, Mathew Simmons, Richard Heinberg, Julian Darley, Michael Ruppert, Paul Erlich, and others, indicate peak oil will be upon us by next year or by no later than 2010. (If it is not already here. Time will tell.) This takes on added importance given the fact that world demand is likely to outstrip world supply by the end of 2004 even if we have not hit peak. It is also of no small import to note that for countries lacking American dollars, the currency currently denominated by OPEC as the only one with which one can buy their oil, demand long ago exceeded supply.
Now a lot of people say, “But I’ve heard that we’ve got oil for another hundred years.” and in a sense they are right. Yes, if we still have people around with technology, and it still makes economic sense to do so, we will still be pulling oil out of the ground a hundred or so years from now. That is unfortunately not at all the issue. People have a tendency to see oil depletion, when they think about it at all, like they do their gas tank. With your car you can be going along at a 100 klicks and right up until the moment when you actually run out of gas you can keep going along very much like there is no impending problem. The simplest rebut to this is of course that the world economy is not your car as much as the car industry would like you to think otherwise. The central problem, and it is a huge one, arises as a result of how closely economic growth is tied to oil and gas and not any oil and gas but inexpensive oil and gas. This leads directly to the even greater problem that the stability of our monetary system and hence our very societies is predicated on economic growth. Compounding this enormously destabilizing fact is the added problem that many of the safety nets that were put in place after the crash of 1929 to compensate for poor growth have largely been taken away over the last twenty five years.
Today the world economy is based on an ideology which exalts the virtue of supply and demand and in practice at least to an extent this mechanism is allowed to operate in global trade. What this has meant in the past in terms of the oil and gas industry is that as long as demand kept rising production rose to meet that demand. The monkey wrench to this system will come when the reality of oil supply refuses to cooperate with the demands of our economic ‘laws’. (N.B. “When theory and reality collide, theory always gets knocked flat. “, or as our mother’s used to say, “If wishes were fishes we’d all cast nets.”) When the world hits peak oil, much less terminal decline, and demand outstrips supply our economic world order is forever changed. Because from that point on it will not matter to oil production what our governments say, what our corporate leaders demand or what laws the economists at the WTO assure us are as ineluctable as the law of gravity. It took hundreds of millions of years to make the oil we have now and when there is no more, well, there is no more, ever. Unless of course we’re prepared to be somewhat more patient than we have been historically.
“Well what about technology?” people say. “New drilling methods, advances in geology?” It is true to say that there have been major advances in technology and geology. Unfortunately this fact is immaterial and if anything it is likely to aggravate our problem because it will only steepen the depletion curve and thereby rob of us of the very thing we need most, time, to adapt our societies to a world featuring scarce and expensive oil.
Oil discovery peaked in the early 1960’s and today we now find only one barrel of oil for every four that we burn. This gap between production and discovery has only increased for the last 40 years despite significant advances in geology and drilling technology. “Well then how about renewable energy sources?” is the natural next question.
To give you an idea of our level of fossil fuel dependence: Imagine if the U.S. were to double all of its renewable energy capacity and then double it again. This would require all of the planning, approval, skilled labour, capital investment and time necessary to quadruple current renewable energy supply, a supply which has taken decades to build. There would also have to be rigorous safeguards put in place so as to ensure that the time and money that were devoted to this effort actually builds something productive in the end and doesn’t simply through boondoggle and/or theft become an enormous waste of fiscal and political capital. If the U.S. managed to do all of these not inconsiderable things at the end of that time, however long that time may happen to be, the U.S. would have created enough energy to replace 1% of its current fossil fuel energy needs.
Essentially what we are faced with is a situation where our politicians and business men have bet all of our chips on the ability to grow and ‘technology’ our way out of our troubles. As a result what we as a people have been bet on is a house of cards that is held together almost entirely by oil’s horsepower. A horsepower which today gives the average North American the equivalent of 300 energy slaves working for them 24/7. As far as bets go smart is not a word that immediately leaps to mind.
Since the early 80’s the United States has led the charge at the OECD to force global trade into a reliance on ‘market forces’ and the ‘invisible hand of the market place’ in order to regulate trade between North and South. This led to the creation of the WTO in 1995 in order to enshrine in international trade rules the free flow of capital and the elimination of many subsidies and tariffs, foreign ownership laws and other such “barriers to trade”. Rules that the U.S. and the richest nations are strong enough to ignore when it is to their benefit. Poor countries on the other hand are ruinously penalized if they dare such survival strategies.
Unsurprisingly since the enactment of these rules the gap between North and South has widened enormously to profoundly disturbing effect in the poorest nations. Along with this trend there has been among politicians and mainstream media a blind faith unconcerned with fact as to the virtues of ‘smaller government’, ‘deregulation’ and the ‘efficiencies of the market’. The results of our elites unswerving devotion to the ‘freeing of trade’ agenda has been uniform even in the richest countries. i.e. a rapid movement of wealth to the top 1% of the population. This has been especially true in the United States of America and Great Britain. This despite the fact that in that same quarter century America’s GDP more than doubled and productivity went up by about 45%. Britain’s economic performance was not quite as strong over the same period though the wealth concentration figures are virtually identical. This concentration of wealth to the wealthiest sectors of society has been the longest lasting legacy of Reaganism and Thatcherism unless one is of the belief that the implosion of the Former Soviet Union should also be included in their list of ‘accomplishments’. Wealth concentration as a social engineering project has also been something that the Bush men have sought with no small success to accelerate.
Much more importantly, all the while that these battles were being waged and won by the ‘free market supply-siders’ at the expense of social justice, our biggest problem by far was always that the demand for oil is going to exceed the supply for oil and economic growth is dependent on said oil. Something that elementary logic tells us oil men like Cheney, and the Bush men most certainly knew. As stated earlier, the respect that oil men have for accurate geology is not difficult to understand. There is also the equally salient fact that with a similar method to Hubbert’s, “…even though in detail more sophisticated, the study “Global 2000” (commissioned by the US President) predicted in 1980 the date for the global production peak to be somewhere near the end of the 20th century . The biggest uncertainty was predicting oil consumption – not forecasting how much oil still can be found. In fact this study has assessed the total existing reserves with amazing precision (as we now know with much greater certainty) – just the development of demand was greatly overestimated.” Something that recent events in India and China has ‘corrected’. (“What fools we mortals be.”)
In other words those we have entrusted to lead us saw the paradigm shift of peak oil a long time before ‘we the people’ and decided that they would enable legislation for the privatization of as many public resources, utilities and services as possible before the inevitable fundamental shift took place. This program continues apace on the U.S. home-front with Social Security and other ‘entitlements’ next in line. Entitlements being the U.S. government’s bizarre term for the right of its citizens to life. Today the U.S. government is being starved of cash to the point of collapse with a strategy reminiscent of nothing so much as the worst days of David Stockman’s “voodoo economics” budgetary bafflegab.
This time round the recycled Reaganites of the current administration are arranging a fiscal situation where the only politically saleable option for much of what government does and can do will be privatization. To quote CNN, September 24, 2004, “Congress on Thursday approved a $145.9 billion package of tax relief to extend three popular middle-class tax cuts, giving President Bush his fourth major tax victory since taking office.” To gain a proper understanding of just how few people the tax cuts of the last thirty years have benefited I highly recommend David Cay Johnston’s, ‘Perfectly Legal’. Johnston also rightly points out in his excellently researched work that every nation in history that has lost control of its tax system has collapsed. Or to quote Herbert Stein of the Council of Economic Advisors during the Nixon administration, “Things that can’t go on forever, don’t.”
Given the current U.S. debt situation alone these tax cuts should rightly be considered mind-bogglingly, if not criminally, reckless. W. has outdone even Carl Sagan with “trillions and trillions” in tax cuts and with one more term he would easily pass Ronald Reagan as the President who ran up the greatest amount of debt in the history of the United States. No small accomplishment given that Reagan ran up a larger deficit than all the President’s before him combined. Given this reality and the fact that these tax cuts are occurring during a time of war they take on a whole new meaning. In short: This is an effort that is nothing less than the deliberate engineering of a fiscal train wreck. The reason this has been done with the full consent of both parties and houses in the U.S. is a matter for another time. A discussion that will feature prominently panicked greed in the face of the ramifications of peak oil, the crash of 29, the banks, debt based monetary systems, the energy czars, FDR, and the efforts being made to ensure that there is no new deal.
All this to say that the world is about to change radically. Most of us (90%+) on the continent of North America are set to become much poorer monetarily and more importantly in terms of energy than we have been at any time since the great depression and just how poor will ultimately depend on how fast we grasp and address the reality of our new situation. (let’s hope our track record isn’t a perfect indicator of our future choices.) The implosion of Russia’s economy and the resulting population ‘die-off’, 11 million and counting and “a life expectancy dropping to that of Guatemala” , is I think a very frightening harbinger. What ‘staying the course’ will mean for China and India I can only shudder to think.
The seismic shift that Peak Oil represents to the way we orient our societies will demand flexible thinking, an open mind and adaptation to changing circumstances. Historically these have always been the greatest strengths of our species; indeed one could even say of them that they were our hallmark. They will have to be again if we are going to save any of the wonders that have come about as a result of the oil and information age of the last century.
If you are interested in learning more about the coming century, the following links will take you to sites featuring the best minds in the field of peak oil and what it is going to mean for us all. And remember, that while foresight may not like hindsight always be twenty-twenty, being forarmed always beats being armed unless of course you prefer a kill or be killed world.
I leave you finally with the words of a good friend of mine, Senor Juan G. Carbonel, “Those who saw 1929 coming managed to protect their assets as well as possible, those that didn’t jumped off buildings.”
http://www.postcarbon.org/ – Learning to live in a post carbon world.
http://www.globalpublicmedia.com/ – Dr. Colin Campbell’s seminal video lecture.
http://www.geologie.tu-clausthal.de/Campbell/lecture.html – Text and graphs from Campbell’s lecture.
http://www.museletter.com/ – Excellent audio lecture and newsletter by Richard Heinberg
http://www.hubbertpeak.com/hubbert/ – Historical recounting of Hubbert’s contributions and recent developments with peak oil.
http://www.globalpublicmedia.com/LECTURES/ – Marvelous is the only word to describe Julian Darley’s oratorical style.
http://www.energybulletin.net/1548.html – A wealth of information and statistics.
http://www.postcarbon.org/eos/interviews.php – ‘The End of Suburbia’ website. Very infotaining audio lectures.