Oil as the cheap energy source has stoked industrial society for a century. However, ominous signs of oil depletion are beginning to appear, in fulfilment of M. King Hubbert’s “Peak Oil” theory. The implications of increasingly scarce oil supplies are catastrophic for the maintenance of industrial societies’ economic development. Even more, the anticipated economic development of the less developed countries is critically threatened. These less developed countries have set their will towards becoming industrialized, similar to that of the Western more developed countries. However, the stark facts of oil depletion herald considerable barriers to thwart the universalization of economic development to the less developed nations as oil prices skyrocket. This may all come together to facilitate civilization clash, as each political bloc frantically strives to secure the world’s oil resources, or at least the reliable supply of oil at the best price. Cohering nations may forge continent-wide civilization superpowers, for self advantage in the imminent new worldwide post-oil era, when abundant and cheap supplies of oil cannot be taken for granted. This may prove to be a contest of how the newly formed superpowers will cooperatively work together or aggressively compete with each other.
We live in a dramatic period of fluctuations and instability in the supply of oil and its market price. In this vein I made the following comments in a recent paper (Leigh, 2008a):
Ted Trainer (1997) predicted large and permanent increases in oil prices after the year 2000 due to increasing scarcity. In fact in March 2008, oil broke through the psychological ceiling of $100 a barrel, and later in early June rose to around $140 on the way to $150. Even the president of OPEC (Organization of Petroleum Exporting Countries) has warned of oil reaching $200 a barrel (Robertson, 2008). Goldman Sachs has announced that the $200 barrier could be hit any time within the next two years (Foroohar, 2008). Alexey Miller, head of the world’s largest energy company, the Kremlin-owned gas giant Gazprom, has predicted that oil will reach $250 a barrel “in the foreseeable future” (Fortson, 2008). Ferris-Lay (2008) has forecast that the black liquid gold could climb to an incredible $300 a barrel in the foreseeable future. In the slightly longer term we have been warned of an economically lethal price of $380 (Porter, 2005).
On the heels of such predictions, in the months of July and August 2008, oil has fallen from $147 a barrel (11 July) to $115 (8 August), a large drop over four weeks of 22%. However, since 2003, even in a strong upward trend of oil prices, there have been several dips in the price ranging from 10% to 31% (a Paris, 2008). So the latest retreat of 22% should not be so unexpected.
Notwithstanding, many saw this July/August 2008 price retreat as a continuing stable trend to much lower levels and rejoiced over the permanent relief that much cheaper oil would bring. However, Robert Hirsch and his associates stated that as Peak Oil “is approached, liquid fuel prices and price volatility will increase dramatically” (2005). We would be well warned to expect price volatility, with dramatic peaks and troughs, and that even if the oil price significantly retreats at times, this should not lull us into complacency. There have also been several precedents of oil retreating in price over recent decades, only to spring back again into new record price hikes (see graphs in Williams, 2007). The likely overall trend for oil will be aggressive price rises from the underlying causes of low supply and high demand.
But what could halt the effects of dwindling oil supplies’ higher prices due to scarcity? World political and geopolitical events, economic growth and decline, have all influenced the price of oil over the decades as shown in the graph below. If significant levels of recession were to grip the world’s largest economies (for example, USA, EU, China and India), then there could be significant alleviation of the effects of dwindling oil supplies, as the demand for oil would significantly drop. This would mean that the world would not feel the problem of a shortage of oil and high prices for a while, but as the economies pick up to grow again, we would be confronted with the same old problem – less oil supplies, increasing demand, and therefore price hikes to even new records.
In the table below, based on the yearly crude price figures, the peaks and troughs of crude oil prices are shown from 1984 to July 2008. We can see from these figures that significantly increased volatility after 1984 appeared in the third millennium, with a massive increase of a 543% price hike from 2002 to July 2008. Even from the vantage point of historical precedents, we could expect the sudden bolt of a downward trend in crude prices in July/August 2008, to be replaced with price hikes again.
Also, as Hirsch and associates suggested above, volatility in prices is anticipated to increase around the time the world reaches peak oil production, and then subsequent declining production, which appears to be around now – hence violent swings both ways, up and down, are not unexpected. However, this price fluctuation will likely occur within a general trend of dwindling oil supplies leading to increasing scarcity and much higher crude prices.
The graph below illustrates the peaks and troughs of oil prices (with their associated world events) in the ups and downs since 1970, however, it is obvious that the strong general trend since around 2000 is a upward which was increasingly steep since around 2006.
In this paper from an investigation of the causes and the context of the general overall trend of rising oil prices, we will further consider their implications in a post globalization, and post AngloSaxon world, which is fragmenting along civilization fault lines, threatening worldwide civilization clash in a newly configured multipolar world.
History, current changing world circumstances and dwindling energy-resource supplies suggest that the oil-fired industrial age will prove to be short lived. The bell curve below shows the levels of historic and prospective oil production over two millennia. This graph substantiates the assertion that the life expectancy of Industrial Civilization is around 100 years – from 1930 to 2030 (Duncan, 2000; Rempel).
The plentiful supply of cheap oil (increasingly from less developed countries) was the main factor, along with the necessary natural resources and skilled manpower, that produced the miracle of the industrial era, of about 100 years, in the Western more developed countries – particularly in Europe and the United States.
However, the plentiful supply of cheap oil has been short lived. As predicted by Dr. M. King Hubbert’s bell curve method, the peak for oil production in the United States was reached way back in 1970. This “Peak Oil” method began with Hubbert, a Shell Oil geophysicist who determined that when an oil field was half depleted, it had hit peak production and was set for production decline. Not only did he estimate, in 1956, that U.S. oil production would peak around 1970, but also with this method he later predicted the world peak would be between 1995 and 2000 (Anderson, 2008).
Internationally known and respected petroleum experts, Colin Campbell, Jean Laherrere, Brian Fleay, Roger Blanchard, Richard Duncan, Walter Youngquist, and Albert Bartlett (with various methodologies) all estimated a peak in conventional oil would hit around 2005. Further, the CEOs of Agip and ENI SpA, (Italian oil companies) and ARCO (a BP subsidiary since 2000) also published estimates for peak oil to be reached in 2005. In November 1997, the International Energy Agency (IEA) convened an Oil Conference in Paris. Among the various papers presented, Jean Laherrere and Colin Campbell presented three empirical papers on oil depletion. As a result of this conference, the IEA prepared a paper for the G8 Energy Ministers’ Meeting in Moscow, March 31, 1998. The IEA adopted Laherrere and Campbell’s view, and forecast an imminent peak in conventional oil for 2012. This represents a significant reversal of the IEA position from the no-limits stance of previous years (Hanson, 2001).
Actually by 2006 not only had most countries reached their peak oil production and its subsequent fall-off in production, but overall declining world oil production levels set in, heralding dwindling oil on world markets and shrinking reserves in the ground. The graph below shows this state of affairs with world oil production having peaked in early 2006, and from there we see a trend of continual slow decline, and by 2030 oil production is predicted to drop to 40 mbpd, less than half today’s production (Bowman, 2008). Many other analysts (for example most recently Zittel and Schindler, 2007) give similar analyses for oil supply drop-off beginning around now. This all shows that the general trend for conventional oil production over the last couple of years was one of overall decline. In reality the industry is harbouring pent up forces for permanent steeper production decline to set in.
Various comments are now being heard from insiders – officials – high in the oil industry. Ali Naimi, the Saudi Oil Minister said, “Limited capacity along the entire supply chain is the real source of current global supply tightness and represents the greatest threat to ensuring adequate energy to fuel future economic growth”. Head of Libya’s NOC (National Oil Corporation), Shokri Ghanem admitted that “Very little can be done by anyone, there is not enough spare capacity” (Hoyos, 2008).
Even further, there is not only a problem of falling availability of oil, but at this critical time, the demand for oil supplies is rapidly escalating. Increasingly rapid economic development in several less developed countries around the world (including for example China and India) is producing an insatiable demand for oil and other energy resources. For instance, the “EIA [forecasted] that China’s oil consumption [would] increase by almost half a million barrels per day in 2006, or 38% of the total growth in world oil demand” (2006).
Recently Abdalla Salem El-Badri (2008), the Secretary General of OPEC (Organization of Petroleum Exporting Countries) showed that the demand for energy has had a dramatic fourfold increase since 1960. And forward looking Ramzi Salman (2006) says we can expect a high and increasing demand for oil against low spare oil production, and inadequate refining capacities, along with relatively high prices and volatile markets.
In China alone the daily consumption has increased from 3.4 million barrels per day to 6.7 million barrels, a massive increase of approaching 100 % in the years 1995 to 2004. China alone consumed almost 13% of the world’s total oil production in 2004. Similar trends in oil demand have occurred and are projected for India, although not from the same high base level. Even so China and India together in 2004 consumed a massive amount of about 18% of the world oil supply. The chart below from Stanford (2005) shows the historic continuing increase in demand for oil, in China and India, to fire up their impressive economic development.
It has been estimated that the extra oil supply equivalent to three Saudi Arabias will have to come on tap by 2030 just to keep pace with world demand (Landers, 2007). This extra supply isn’t going to be achieved.
What is the problem?
Abdalla Salem El-Badri (2008) gave an address for the Nicosia Chamber of Commerce. In his address “Oil Outlook and Investment Challenges” he raised some of the problem issues of the international oil sector and pointed out the following:
- Oil supplies are finite and exhaustible
- Development of oil projects is capital intensive with long lead times
- Petroleum projects are facing huge escalating costs
- Energy is crucial for sustainable economic development
- Many factors affect the supply of oil, some of which are:
- Refinery bottlenecks [due to overstretched and inadequate refining capacity]
- Geopolitical problems
Actually these are all steep problems for the oil sector to surmount, as we reach global exhaustion point for extractable oil. The necessary investments to boost production, to keep pace with demand, have not been made, and he highlights that such investment requires huge sums of money and long lead times. However, as El-Badri points out, energy is crucial for maintaining economic development. The problem is that plentiful supply of cheap oil is dwindling, causing price rises, because of limited crude availability and refineries that are already working at full tilt. Not to mention the serious geopolitical problems unfolding around the world.
The world may be confronting a problem of gigantic magnitude as the global demand for oil escalates at a time when the production levels are sagging. And an incredible 54 of 65 largest oil producing countries in the world have passed their production peak, and some of them decades ago (Aleklett, 2005).
Even though ascertaining the amount of oil reserves yet remaining is problematic, based on the latest credible figures there are about 1.3 trillion barrels of proven (recoverable) oil reserves worldwide (EIA 2007). The math speaks for itself – with present consumption rates of around 80 mbpd, given the amount of oil reserves, mankind will reach total exhaustion for oil in 45 years (unless more recoverable oil is found in useful quantities). If the rising levels of oil consumption were factored in, due to increasing economic development that would mean the exhaustion point could be reached within 25 years. Of course the dwindling supplies, we already begin to see, herald this looming exhaustion point. It is important to note here that economic, political and social conditions will likely worsen to critical levels as oil supplies dwindle, long before we reach oil’s end.
However, the level of proven recoverable reserves is problematic. Many OPEC countries have been announcing reserve numbers which are very strange. Either their reported reserves remain the same year after year – suggesting that new discoveries exactly match production, or they have suddenly increased their reported reserves by unfeasibly large amounts. This data is not so odd if we realise that OPEC takes into account a country’s reserves when fixing production quotas – the more oil you say you have, the more you’re allowed to extract and sell.
Further, oil reserves are often used as collateral for loans – for example, the $50 billion loan from the USA to Mexico in December 1994 when the Mexican Peso fell dramatically. At this time the Mexican Central Bank’s international reserves fell from $29 billion to $5 billion. To stave off further collapse of the Mexican economy, President Clinton signed a $50 billion “Emergency Stabilization Package” loan to the Mexican government in January 1995. The collateral for the loan was Mexico’s pledge of revenues from its future petroleum exports.
Another problem with compiling data on reserves is that there are very flexible definitions of the different types of oil involved when recording known oil reserves or predicting the amount of oil yet to be discovered. It is important in any reporting, that the amounts of reserves yet to be extracted or discovered, are clearly separated into the different types of oil. Unfortunately, the compilers of reports may not always be so meticulous on this issue. The broad definitions of oil types are:
- Conventional oil (around 95% of all oil to date)
- Unconventional oil:
- Oil sands
- Shale oil
- Oil not recoverable with present technology – for example too deep
These distinctions are important, because the global economy has been based on cheap pumpable petroleum which comes exclusively from conventional oil. Oil type has important implications for the required technology, the final cost of the product, and even the likelihood that it will ever be recovered.
No one really knows how much unconventional oil may yet be discovered. However, it will likely fall under one of the following categories: impossible to extract; or due to difficult extraction circumstances, not worth it because of low or negative net energy gain; or not extractable with present technology at today’s prices. It is important to note that any future more developed technology needed to extract this “available” oil, is likely to be astronomical in cost by today’s standards. It is therefore misleading not to consider these resources completely separate from conventional oil (The Hubbert Peak for World Oil, 2003). Finally, while anticipating any such oil as a theoretical possibility for future use is not illogical, it is still indeed a long shot, and somewhat against the odds, and definitely would involve a long lead time of 10 to 15 years or so.
As Kerr and Service (2005) argue it is not IF there will be a problem with inadequate oil supply but WHEN. They suggest that there is little disagreement that the world will soon be running short of oil. The debate is over how soon. Global demand for oil has been rising at 1% or 2% each year. We are now sucking almost 1000 barrels of oil from the ground every single second, and future percentage rises in the global demand could escalate as attempts are made to universalize economic development.
So can the earth’s oil reserves sustain such extraction levels? Even though the estimates of unknown oil reserves are controversial and problematic, there have been no large oil-field finds since the 1960s. And many believe that the declared “known” oil reserves coming out of some countries (especially OPEC) are actually way overstated (Simmons, 2005; Tverberg, 2008). The graph (Aleklett, 2005) below shows, over 10-year average clusters, the dwindling discovery levels of known reserves has been collapsing over recent decades, and has led us to this very time when present and future demand continues to escalate. (Each decade begins with the year shown, and for example, the average yearly finds for the 1960s is approaching 50 gbpy over a ten year period.) No wonder the threat of short supply is borne out by decreasing supply of oil since 2006 in the face of escalating demand (Bowman, 2008).
Even the remaining best endowed oil countries have reserves that will soon begin to decline to critical levels. Oil is largely now around the Persian Gulf. In 2006 more than 30% of the world’s extracted oil emanated from the Persian Gulf (BP, 2007). It seems the only major oil producers with significant readily extractable reserves of oil left, that will not on average decline in production levels for around another 15 years, are these states of the Persian Gulf – all of them are members of OPEC:
- Abu Dhabi
- Saudi Arabia
The future overall shortfall for world oil supply is rather daunting. From around now we can see that the dwindling supply of oil increasingly fails to meet the demand (IEA 2005; USEIA 2005; USEIA 2006). And the graph below suggests increasingly massive oil shortfalls in the next few years, beginning around now.
Actually the facts for oil are:
- Declining world production
- Increasing world demand
- Escalating prices trend
- No guarantee of declared oil reserves, as the levels may be very overstated, or of finding any more significant, as yet unknown, oil fields.
The undersupply of extractable oil may cause a rapid threatening economic decline any time now or in the next few years, and extractable oil may be largely exhausted within the next twenty years.
As we have already seen, at the present time extraction facilities for producing crude are working at about full capacity, and there is no room for any significant increase in the output levels of refineries either. And even if there was the extra refining capacity, there are not the transport facilities around the world to carry any significant increase in the oil and petrochemical payload.
This all means that the world is facing a critical crunch point – and very soon. The eagerly anticipated economic development of the less developed countries will be stymied by lack of adequate cheap oil supplies, and the more developed countries will be hindered in any future economic development by dwindling and increasingly expensive oil. This could mean there will be no winners in the world for economic development as the West declines and the poorer countries falter and remain less developed.
Duncan (2000; 2006) invoking the Olduvai theory shows that the world energy production per capita has been declining since way back in 1979, and he further argues that by 2012 a catastrophic energy per capita drop off will set in. He forecasts the dramatic and extremely debilitating effects this will have as countries fail to produce electricity, and their civilizations’ economic development is crippled, and literally collapses back into the dark ages.
How is the oil shortfall a problem?
The exact nature of the problem is that not only do we have dwindling supplies in the face of growing demand leading to escalating prices, but also eventually we will stop extracting oil from the ground altogether when the net energy return is not worth it. For example, when the oil is so deep or difficult to extract, that it takes one barrel of oil to extract say one or two barrels (or even worse), it is obvious that there is no net gain worth the effort. Actually oil becomes unavailable and “exhausted” before there is no oil left – the “exhaustion” point is when it is no longer worth it to spend the energy to get so little back.
However, the following quote highlights that there are no easy oil substitutes:
Alternative energy sources have their problematic issues. Nuclear fission supporters have never found a noncontroversial solution for disposing of long-lived radioactive wastes, and concerns over liability and capital costs are scaring utility companies off. Renewable energy sources are diffuse, making it difficult and expensive to corral enough power from them at cheap prices (Kerr and Service, 2005).
As an example of the absolute inability of alternative energy to replace the present energy production level of oil, Odum (1996) cites the case of solar energy with the fact that “the USA is presently using fossil fuels more than 100 times greater than the total absorption of solar radiation across the entire USA”. Further, calculations show that the production and installation of solar photovoltaic cells consume twice as much energy as they produce. So even if all the energy produced was put back into production, then one could build only half as many cells each generation – obviously solar cell technology is not sustainable (Hanson, 2001). Actually, even though not generally realised, such failing net energy figures apply to various alternatives to conventional oil. Many energy technologies that we think are sustainable, are not really.
In reality, no other energy source can be comprehensively substituted for cheap readily available oil. Any use of alternative energy fuels can only partly and minimally make up for the looming oil supply shortfall. No other transportable and versatile energy resource is as energy dense as oil. Nuclear energy, not only is dangerous because of the possibility of industrial accident or terrorism, but it can only minimally fill the gap for a few short decades, before it is spent, and the unwieldy hazardous waste problem will be left with us for thousands of years. Other alternative fuel technologies have serious shortcomings or limitations which are formidable challenges to overcome.
However, it is conceivable that through the use of a mix of carefully chosen and fully developed alternative energy sources, along with significant changes in societal organization and behaviour, mankind could live in a totally satisfying and even enriching, yet much less fuel hungry civilization.
The following points (adapted from PeakEngineer, 2007) help towards a distillation of the current status quo concerning alternative energy and oil production:
- Within the lifetime of our industrial civilization extractable oil is dwindling and finite
- As the demand for oil exceeds supply some nations may go without
- Petroleum products have highest energy density
- Critical economic repercussions will accrue from the rising energy prices
- Alternative energy sources have lower net energy and are more expensive per energy unit
- Replacing oil based infrastructures has a long lead time, and involves high expenditure and energy consumption
These points in themselves may not be insurmountable problems, but are still a massive challenge for any sizeable transition to alternative fuels. So alternative fuels may be workable to some limited extent, but would require global sacrifice and cooperation on a permanent basis, to a degree that would revolutionize and simplify our lifestyle and so require much less energy. There is nothing to suggest that is possible in the foreseeable future.
However, the world does not have the oil resources to readily support growing economic development as humans have grown accustomed to or expect with anticipation in the future. And even if the world had the oil resources, the escalating waste and pollution are huge problems, which would make the planet dangerous for life, and eventually virtually uninhabitable.
Geopolitics and world civilization clash
Thwarted economic development, due to escalating demand and the concomitant rising oil prices, will have great geopolitical influences on the emerging world order. There does not appear to be any prompt remedy or ability to alleviate or stave off the imminent shortfall of oil and the dramatic economic and civilizational effects of this scarcity.
A new configuration of the world geopolitical scene may be about to appear in a world of civilization clash. Samuel Huntington (1993; 1996) proposes the idea of an emerging fragmented world. He argues that there is a likely intercultural and inter-religious conflict looming between future world powers, each superpower cohered from within through culture and religion. The new world order will be a multi-polar world. Huntington rejects the idea that the world will continue to acquiesce to Western homogenizing forces of globalization, which many critics suggest have been mounted to serve Western interests, and so displace the interests of both Eastern and Islamic peoples. But we may be about to see these non-Western peoples aggressively pursue their vested interests from the vantage point of their newly emerging international power blocs.
For Huntington civilization can be defined as the broadest level of cultural identity of an individual, ethnic group or nation, or even group of nations. He highlights three major civilizations of influence: Christian Western, Islamic-Arabic, and Chinese.
Based on the concept of civilization clash, the author’s previous papers and forthcoming book (Leigh, 2005; 2006; 2007; 2008b) foresee a looming new post-AngloSaxon and post-globalization world which fragments along civilization fault lines. This new international status quo will likely be made up of a tripartite mix of continent-wide civilization superpowers. A prelude to this newly forming world can be seen now with the Western AngloSaxon nations declining as rampant attempts for globalization have failed them. This Western AngloSaxon decline will make way for the anticipated newly formed continent-wide civilization superpowers which appear to be:
- Christian Europe
- Islamic PanArab nations with non-Arab Islamist Iran
- An Asian conglomerate around the major nation states of Russia, China, Japan (and India)
These superpowers will be unified in diversity; each will be welded together by overarching common faith systems and ethnicity, building on each member nation’s inherent complementary strengths and weaknesses for internal synergies towards the economic and political vitality of the total superpower viability. Of course each superpower will have particular advantages and disadvantages in the new world order. However, each superpower will share common factors – they will have large to huge populations, supported by impressive economies, with significantly powerful militaries, including mass-destruction weapons with biochemical and nuclear capability. Each superpower will be a Titan.
For example, Christian Europe although short on natural resources and relying heavily on imports, has a history of technological development and efficient organization and administration, along with a highly educated population in democratic and relatively free capitalistic society. Europe can supply for export best quality machinery and products. Europe critically needs the continued supply of cheap oil to sustain its already high level of economic development.
Much of the world’s remaining oil is held in the Islamic Arab nations and Iran. Iran in its support of Islamist movements and trends, already has significant influence in Iraq, Syria, Lebanon, Palestine and Egypt. Many other Islamic Arab nations fear the potential for Iran-backed political change or dissidence from their populations against the establishment. Several Islamic Arab nations (potentially to be Iran-backed Islamist), in the Persian Gulf and Africa, have large earnings from exporting their oil. However, these countries generally have physical and social infrastructures that do not put them in the more-developed-country category. And with the unrealized potential for balanced economic development in these countries, there will be a rising demand for their own oil from within as they further develop, somewhat reducing their oil export capacity.
The national constituents of the Asian superpower, except for Russia, are nations which have what may be called mystical eastern religions, in which the meditation process for enlightenment is common across the main Confucian and Indic religions. The four main Asian countries are Russia, China, Japan and India, and again except for Russia, they are not generally well endowed with energy resources and particularly oil.
Combined, they have a huge total population, and the two most populous countries are China and India with massive populations. Also these two countries have not only cheap labour, but also significant pools of educated professionals to fire up their very impressive rate of economic development. Likewise, typical of Asia, several other Asian countries, with increasing adoption of technology in their industries, and cheap labour, can also compete on a world market with high value and low cost exports.
Japan, with a highly industrialized developed economy, is a country with impressive education standards and technology in all fields. Russia, with a superpower legacy of both education and technology, is resurgent, enjoying a buoyant economy from energy resource sales. And if present Russian incursions into Georgia forebode future expansion into the Caucasus, Central Asia and Crimea (and beyond), then Russia will be even more established with oil supplies, making it a definite “King of Oil”.
While impressive Asian economic development is beginning to take root and expand, there will be escalating high demand for energy resources in many nations across the Asian continent.
Even though Russia on religious grounds may not seem to fit there, we must remember that Russia, as a huge Eurasian nation, has been rejected as an equal partner by the West, and as it does not fit with the Islamic states, it may have no choice but to re-establish friendly ties and deep cooperation, in economic, political and military matters with its Asian brothers (Arbatova, 2000).
The positioning of the three looming superpowers is interesting as they form a cluster around the Mediterranean and in Asia. This cluster configuration means that they either border each other or are in relatively close proximity, as shown in the following map.
As we have seen the most abundant region for holding the remaining oil in the world is the Persian Gulf. These Persian Gulf countries (Abu Dhabi, Kuwait, Iraq and Saudi Arabia) are best positioned to be able to produce significant amounts of oil (before dwindling supplies set in) for on average the next 15 next years. Influence and good relations with this region for the other superpowers is vital for their continued supplies of oil.
Europe is largely resource deficient and the whole Former Soviet Union region, having reached peak oil production more than thirty years ago, is declining in production. The economies of three of the four major Asian nations – China, Japan and India (excluding Russia) – do not have across-the-board abundance of raw materials and this includes oil deficiency.
Eventually as the non-OPEC countries founder in oil production, OPEC will produce just about all the world’s oil. This will give OPEC, a largely Islamic nations’ cartel, great civilizational power to wield its oil weapon for its own political agenda.
It is important to note another point here, there is not enough oil left in the world to fuel universal economic development – maintaining the present economic development of the more developed Western nations, and at the same time promoting the economic development of the less developed countries is just not possible – oil is dwindling. One side of the economic divide will have to give way – that is for the West to suffer economic (and therefore civilizational) decline, or on the other side, the less developed countries will have to give up their push to economic development and the prospect of civilization greatness in newly formed civilization superpowers. And this will be a bitter pill that no civilization will succumb to and swallow easily.
In 2006 the OPEC states produced 42% of the world’s oil (BP, 2007), and with the majority of states around the world beyond peak oil, this proportion may be set to increase significantly in relatively oil-rich OPEC. El-Badri (2008) comments that OPEC has 77% of the world’s known reserves and this seems to underpin OPEC with a more enduring oil supply than the rest of the world.
It does appear that the Islamic PanArab States, several of them making up most of OPEC, are much more embittered against the Christian West than they are against any other peoples. History would suggest that there could be a looming civilization clash between European Christendom and the Islamic world which would put the Asian superpower in an advantageous position for trade with the OPEC countries, even with preferential treatment including the discounting of oil supplies.
In this vein, the following quote from Salman (2006: 5) suggests that much of the future in developing relations with OPEC, may be outside the developed West (largely of Christendom) and towards the less developed, but high potential countries or blocs including Asia:
Given that developing countries will be responsible for most energy demand growth in the future, and given oil’s high energy concentration [in the Persian Gulf] and mobility, developing countries are the natural future partners of the big reserve holders [in the Gulf] on the producing side. The recent visit of the King of Saudi Arabia to China and India speaks for itself as an example of things to come in the dynamics and changes in the energy scene.
This has huge implications for access to reliable oil supplies at “favoured” prices. It may even be that eventually those states without good relations with the OPEC cartel, will not readily find reliable supplies of oil at any price, as OPEC uses oil as a devastating economic weapon. And as non-OPEC nations have rapidly falling oil supplies to export, OPEC is heading to be the world’s primary supplier – that is of much more than half the worlds dwindling oil in the imminent few years ahead.
In the face of world falling oil supplies, Paul Roberts (2008) says, “we will face a post-oil future – a future that could be marked by recession and even war, as the … big oil importers jockey for access to secure oil resources”. And such conflict, considering the critical international context, could surely involve much of the world, which has a style of economic development addicted to oil (Santorum, 2008).
The predicted trend in the dominance of OPEC is shown in the graph below (Duncan, 2000). Specifically it was correctly forecasted that the world oil production peak would be reached in 2006, and further predicts that around 2008 OPEC will begin to produce more oil than the rest of the world combined. Whenever this actually does happen, it will give these OPEC nations incredible “petropower”. Also it is interesting to note that both sources of oil, OPEC and non-OPEC, are predicted to have falling production, although OPEC is a little better off in this trend.
Peak Oil and the Olduvai Catastrophe
The Olduvai Theory is about the declining total world energy supplies and the resultant catastrophic consequences. However, Peak Oil is a more confined thesis about oil supply declining due to the looming exhaustion of oil reserves in the ground. So Olduvai addresses all energy sources, but Peak Oil is only about one of the energy sources – oil.
The beginning effects of Olduvai may awaken the superpowers to be vigilant in protecting their economic development with all their might.
The Olduvai Theory
Dr. Richard Duncan, an engineer, in a series of publications has built and proposed The Olduvai Theory (for example 2000; 2005). This theory postulates that the plentiful supply of energy, from various sources, facilitated the economic development of the industrial civilization, beginning around 1930. Obviously this civilization with a high level of agricultural, industrial and commercial production, and machinery and gadgets, and life’s comforts, is highly dependant on reliable supplies of cheap energy.
However, Duncan clearly records that even though total world energy consumption could continue to rise, actual world energy consumed per capita has been on a plateau since 1979. In that sense World Peak Energy (per capita) was reached about 30 years ago. So obviously the growth rate of energy production has not kept its previous more vigorous pace, as it increasingly lags the population growth rate levels.
He continues to outline that around now world energy per capita production will approach a precipitous “cliff” with rapidly falling levels of energy production. He predicts chaos and collapse of societies as a result of this loss of abundant energy. Nations will fail to maintain sufficient levels of electricity production for our economically developed civilization, which is reliant on cheap abundant energy supplies and electricity.
Duncan not only relates electricity production to the reliable availability of all energy sources, but particularly to oil. Frankly this relationship with oil is not presented with strong convincing clarity. He also argues that electricity is the most important end-user energy, and I think most would agree it is a vital energy source for continued economic growth of our industrial civilization.
He further states that massive investment funds of around $15.5 trillion are required worldwide for development and maintenance of public electricity power systems. Considering that massive funds are needed not only for this, but also for other maintenance areas of society (roads and rail, medical, education, water resources, sewer systems and so on), it is likely that the necessary funding for electrical power will not be realized, thus the electricity grids will be increasingly unreliable and prone to even permanent failure.
So the Olduvai Theory mainly records and predicts a rapid decline in world energy production per capita will appear around now. Olduvai also highlights insufficient maintenance and development to electricity infrastructures, at least in some countries. Both these factors of declining energy production and poor maintenance, it is argued, will have serious implications for electricity production.
As previously stated, in many countries around the world, and especially those which developed first to a high level (for example the USA and UK), ageing and neglected infrastructures are about to become a massively expensive problem to be dealt with. Frankly, it is doubtful where many of these countries will find the funds to address this issue effectively, especially considering that the levels of personal, commercial and public debt are at record highs, bankrupting levels in a growing number of nations. So this also has critical implications for the future effectiveness and reliability of the nations’ electricity infrastructures.
The Olduvai and Peak Oil Link
So where is the link between Olduvai and Peak Oil? In this section I will give somewhat a personal view of how I see the relationship playing out in the imminent future of the next few years.
In a previous paper (Leigh, 2008) I made the following comment on the imminent threatening consequences of approaching exhausted oil supplies in the ground:
Without oil to continue to fire up our industrial society we will be without: public electricity, transport, industry’s processed products (food, clothing, packaging, and machinery), communication and computer services. A little bit of brainstorming shows that the society and its systems would come eventually to a standstill. A totally paralyzing set of circumstances with hunger and deprivation on an unprecedented worldwide scale.
But why would this above scenario be so? Oil accounts for a hefty 35% of total world energy supply, but only about 7% of the world’s electricity is produced by oil-fired technology in the power houses. In the table below we see the relative use of energy resources for the production of electricity.
However, we need to appreciate that oil, which makes up about 35% of all our total energy consumption, is vital. We need to consider more deeply. Coal, the biggest single energy source for power houses, could not be mined or transported in any significant amounts, without internal combustion engines to power the technology. So, even the 40% of coal-produced electricity worldwide needs the indirect input of oil to support and maintain the extraction and transport machinery.
In similar and other ways, even the remainder of world electricity of 53%, still directly and indirectly depends on oil as a vital support energy, and as we have seen, oil is in a decline trend amid escalating demand. Further, even nuclear and gas energy, amounting to 35% of the world production of electricity (IEA, 2006), have a heavy reliance on oil power for their primary extraction or haulage. Finally, whatever the energy source used for generating electricity, the power distribution infrastructures are still reliant upon oil for maintenance vehicles and other support services.
But the critic may retort, “Oh well, oil will be scarce, but it will be directed by government to where it is needed most”. This may seem logical, but I do not foresee that happening easily in our democracies, as national economies begin to reel in the consequences of the unwinding effect of oil at $200 or $300 a barrel and beyond. All of our transport systems are largely dependant on oil. The sum total of the problems could begin to be overwhelming and paralyzing at all levels.
It is also quite possible that economic and political developments could intensify, and therefore exacerbate the effects of Peak Oil. Oil, in drastic undersupply, could be used as a powerful lethal international economic weapon. It may be that some of the oil producing nations will only continue to sell oil for certain currencies, which is already happening, and not accept the US dollar. And also due to vested interests and political agendas, certain nations may not sell oil to some other countries at all. Imagine if your country is one of the countries blackballed by various nations not to supply with oil, nor to accept your nation’s currency for payment. In an increasingly hostile world, verging on trade wars and civilization clash, these could be titanic challenges to overcome.
To illustrate this I would like to cite a present possible, some would say an even likely, scenario. World news is full of the possibility of a military attack into Iran from Israel and the USA. The leadership in Iran, in response, has warned that if there is any significant military action against their nation, they will block the Strait of Hormuz. This narrow strait is one of the world’s most strategic oil chokepoints, at the extreme south of the Persian Gulf. This potential action by Iran would immediately halt 40% of the world’s oil supply which is exported through this Persian Gulf strait (Jahn, 2008). Imagine what that would do to the price of oil ($400 a barrel?), and the international scramble that would ensue, in which nations assert themselves to maintain oil supplies, if they can even get them. Maybe most of us can not even begin to imagine the powerful international forces such an event could unleash!
Where does Olduvai usher us?
It is likely that oil could begin to be much more scarce than many anticipate, and this could be accompanied by unexpected shocking consequences! One of these consequences could be electricity blackouts becoming permanent.
Reflect for a moment – imagine the catastrophic consequences of no electricity: no phones or computers, no industry which is electricity based, no dairy products or processed foods, no refrigeration, no water as the water pumps won’t work, no cars or transport because the petrol pumps won’t work, no schools or universities, no banks which can’t electronically process transactions, no employment, no income – dwindling stocks of everything as society collapses to unprecedented levels of chaos and deprivation (Leigh, 2008).
The Olduvai Theory must surely have its flaws, need development and even expansion to accommodate the present world, and its chronology may need adjusting. However, we may even now be approaching the possibility for such a sequence of critical Olduvian events to appear.
We can be sure that from an Olduvian point of view, the newly emerging superpower blocs will assert their power and influence, in international geopolitics, to avoid the Olduvian catastrophe, once they begin to feel the outer edge of the coming raging storm which threatens their economy and civilization.
Future world scene and conclusion
Many are predicting the USA, in tragic economic decline, is about to plunge from its zenith position as the world’s voracious and massive consumer that has helped keep the world afloat economically. This free-fall (and possibly terminal) descent of the USA will have dramatic repercussions economically, by producing international financial chaos, as the world’s rapacious consumer, and receptacle for world investment, disappears, along with much of the international capital invested there. Such a massive economic catastrophe will rapidly lead to a rocky transition period. The world will be left without a great politically and militarily pre-eminent superpower. Just as nature hates a vacuum so does the political realm, and so newly forming superpowers will vie for advantage and even supremacy in the newly forming world order.
Out of international mayhem, with severe decline of some nations, and the collapse of the international financial system, a newly world-dominant economic and political superpower may arise, with its currency as the international convertible currency of choice.
This superpower, and any other remaining viable superpowers or civilizations, will need the reliable supply of oil, at cheapest possible prices, and it appears OPEC will be the most likely supplier of significant quantities. It remains to be seen whether the two oil-hungry, but oil-deficient civilization superpowers – Europe and the Asian conglomerate – can secure their supply of oil by the soft power of diplomacy, or whether the hard power of military force will be required – as oil is increasingly scarce against escalating demand.
Without a doubt, these oil-hungry superpowers will go to great lengths to maintain oil supplies and so sustain economic development and the viability of their civilizations.
This is an imminent state of affairs and may prove to be a testing ground for how the superpowers will compete for advantage, and how vociferous they can be for each to maintain, and even improve, its level of economic development, civilization greatness and world influence.
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James Leigh, PhD. CGeog. FRGS.
Asst. Professor Cultural Geography
Business School, University of Nicosia, Cyprus
University of Nicosia, Cyprus