Exactly a year ago, ASPO-USA gave me the opportunity to write a weekly column on peak oil and other matters that should be of great concern to all the world’s citizens. I am grateful for the chance to help communicate and clarify the issues.
The last year has sharpened our understanding of the oil markets going forward, but confusion still reigns in the public mind. Peak oil awareness is slowly, grudgingly, coming to the fore, but there’s a long way to go in our consciousness-raising efforts.
The oil price floor has risen just as the fundamentals would dictate, lending credence to the view that a liquids peak before 2015 is likely. The record inflation-adjusted price (Figure 1) is the chief ally of those talking about peak oil. Only starry-eyed optimists are predicting that long-term oil prices will fall to $50/barrel or less anymore, yet such talk was common just a year ago. That’s a subtle but important shift. The mainstream believes that the era of cheap and abundant oil is over now.
Figure 1 (New York Times)
Volatility in the chaotic financial markets, including the decreasing value of the dollar, has clouded the oil price and supply issues. The fallout from the collapsed Housing Bubble continues, the days of easy credit are over, and the U.S. is probably in a recession now, which is only partly a function of the oil price. There is talk of a 1930’s style depression, but the jury is still out on that scenario. Consequently, the false perception that mostly inelastic world oil demand will take a sharp downturn also muddies the waters.
These factors provide shortsighted media commentators all the fodder they need to overlook the longer term trends ─ slow or no growth in the oil supply, burgeoning subsidized demand in the developing countries, and a 6-year rise in the price. Salvation fantasies, like abundant ethanol, the unexplored outer continental shelves, or America as “the Saudi Arabia of Coal,” only serve to reinforce the same mentality. The likelihood that the world’s liquids supply will probably increase a bit in the next few years doesn’t help either.
We’re sailing into a Perfect Storm but mainstream analysts are not watching the horizon. It’s true that the boat hasn’t capsized yet, but everybody’s getting wet. At bottom, people are reluctant to acknowledge that there really are limits to growth, and not all substitutes work as well as the original gift. If people could see that, they wouldn’t be driving three blocks to pick up a Latté at Starbucks.
Several important stories sprang to mind when Steve Andrews invited me to reflect on the past year. I think the “paradigm shift” articles focusing on Saudi Arabia and other oil-rich exporters are must-reading, especially for those who think the Kingdom is going to “pull our chestnuts out of the fire,” as Dr. Sadad al-Husseini put it. I have tried to keep abreast of the looming non-OPEC peak, providing detailed commentaries on production prospects in Russia, Brazil and the Gulf of Mexico. I’ve taken a look at “above-ground” factors impinging on the oil supply, especially in troubled nations like Nigeria or Venezuela. Some of my forays into the economics of peak oil , or prospects for China’s growth in the face of flat or declining supply, are worth another look.
China will not always grow at its current pace, and the price of oil doesn’t always have the immediate effects we might expect ─ it’s always important to question one’s assumptions. So much of the peak oil debate is faith-based and does not embrace the scientific spirit of open, free inquiry. This is only Human Nature, I think. Bias creeps into everything we do.
Controlling part of our own destiny now is preferable to letting inexorable geological and economic events dictate harsh terms as our lives unfold. By their very nature, “free markets” driven by Adam Smith’s “invisible hand” can not comprehend the depth of our oil dependency, and so are not up to the task of “fixing” it. I doubt that constructive actions will be taken, though. Optimistic human tendencies and the gradual nature of the crisis discourage effective responses. Fatalism is part of my thinking now ─ what will be will be.
Over the past months I’ve come to accept that my influence is going to be very limited. The trick is not to let frustration hamper your ability to do a job you still consider important. No one accepted Alfred Wegener’s theory that the continents move until more than three decades after his death. While we can be encouraged by his example, and that of the geologist M. King Hubbert, we don’t have thirty years to get this peak oil problem straightened out.
Sound bites are not my style. I write long, detailed ─ you know, boring ─ articles for a couple of reasons, though I do try to inject a little humor to keep the reader alert. First, my goal is to cover a topic as thoroughly as possible in the allotted time and space, using links to sources and quotes from sources, so as to leave no doubt as to how I drew my conclusions. Second, I write for the historical record. If we can’t leave as much oil to future generations as we have enjoyed in our lifetimes, at least we can show them that some of us were working to point out the oil supply problems and trying to come up with solutions that might help them stay afloat.
As events run their course, I will continue my attempts to explain the peak oil situation as best I understand it, all the while hoping that the unconverted will pay attention to the message. Preaching to the choir is nice if you want a pat on the back, but it doesn’t do much good otherwise. (Keep those pats on the back coming.) As for our prospects in the years ahead, “God bless us every one! said Tiny Tim, the last of all.”
(Note: Commentaries do not necessarily represent ASPO-USA’s positions; they are personal statements and observations by informed commentators.)