Liquid Fuels and Heating Oil Crises
The U.S. is highly dependent on oil for transportation, food production, industry, manufacturing, and residential and institutional heating. Oil is unique in providing gasoline and diesel, which are relatively inexpensive and portable. Oil also provides heating for many of the nation’s homes, institutions, and businesses. Despite advances in battery technology, battery powered tractors/combines and trucks do not provide a range that is practical. The so-called electric economy is not even in a planning stage of development. There are no alternatives that will replace oil.
Peak Oil is the term given for the point of maximum global production of oil, after which oil production will decline over a period of years until all recoverable oil is depleted. Peak Oil is a geological reality that is recognized by the National Academy of Sciences, National Academy of Engineering, General Accountability Office, Congressional Research Service, Army Corps of Engineers, and the National Petroleum Council.
Future oil production from off shore locations, Brazil, the Arctic, and the Gulf of Mexico etc., as well as future oil discoveries, will not provide enough new production to offset declining production in the largest oil fields.
In 2005, the U.S. Department of Energy released a Peak Oil study, “Peaking of World Oil Production: Impacts, Mitigation and Risk Management.” This report warns that
“as peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking. Unfortunately nothing like the kind of efforts envisaged has yet begun.”
The report concludes that
“the world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions were gradual and evolutionary. Oil peaking will be abrupt and revolutionary.”
In 2007, the Government Accountability Office (GAO), with the assistance of a panel of 13 scientists of the National Academy of Sciences, published a study on Peak Oil, “Crude Oil: Uncertainty about the Future Oil Supply Makes it Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production.” The study concludes:
“Because development and widespread adoption of technologies to displace oil will take time and effort, an imminent peak and sharp decline in oil production could have severe consequences. The technologies we examined [ethanol, biodiesel, biomass gas-to-liquid, coal gas-to-liquid, and hydrogen] currently supply the equivalent of only about 1% of U.S. annual consumption of petroleum products, and DOE [Department of Energy] projects that even under optimistic scenarios, these technologies could displace only the equivalent of about 4% of annual projected U.S. consumption by around 2015. If the decline in oil production exceeded the ability of alternative technologies to displace oil, energy consumption would be constricted, and as consumers competed for increasingly scarce oil resources, oil prices would sharply increase.
In this respect, the consequences could initially resemble those of past oil supply shocks, which have been associated with significant economic damage. For example, disruptions in oil supply associated with the Arab oil embargo of 1973-74 and the Iranian Revolution of 1978-79 caused unprecedented increases in oil prices and were associated with worldwide recessions. In addition, a number of studies we reviewed indicate that most of the U.S. recessions in the post-World War II era were preceded by oil supply shocks and the associated sudden rise in oil prices.
Ultimately, however, the consequences of a peak and permanent decline in oil production could be even more prolonged and severe than those of past oil supply shocks. Because the decline would be neither temporary nor reversible, the effects would continue until alternative transportation technologies to displace oil became available in sufficient quantities at comparable costs. Furthermore, because oil production could decline even more each year following a peak, the amount that would have to be replaced by alternatives could also increase year by year.”
A 2007 study by the Congressional Research Service, “Ethanol and Biofuels: Agriculture, Infrastructure and Market Constraints Related to Expanded Production” concludes:
“While recent proposals have set the goal of significantly expanding biofuel supply in the coming decades, questions remain about the ability of the U.S. biofuel industry to meet rapidly increasing demand. Current U.S. biofuel supply relies almost exclusively on ethanol produced from Midwest corn. In 2006, 17% of the U.S. corn crop was used for ethanol production. To meet some of the higher ethanol production goals would require more corn than the United States currently produces, if all of the envisioned ethanol was made from corn.
Due to the concerns with significant expansion in corn-based ethanol supply, interest has grown in expanding the market for biodiesel produced from soybeans and other oil crops. However, a significant increase in U.S. biofuels would likely require a movement away from food and grain crops. Other biofuel feedstock sources, including cellulosic biomass, are promising, but technological barriers make their future uncertain.
Issues facing the U.S. biofuels industry include potential agricultural “feedstock” supplies, and the associated market and environmental effects of a major shift in U.S. agricultural production; the energy supply needed to grow feedstocks and process them into fuel; and barriers to expanded infrastructure needed to deliver more and more biofuels to the market. There are limits to the amount of biofuels that can be produced and questions about the net energy and environmental benefits they would provide.
Further, rapid expansion of biofuel production may have many unintended and undesirable consequences for agricultural commodity costs, fossil energy use, and environmental degradation. As policies are implemented to promote ever-increasing use of biofuels, the goal of replacing petroleum use with agricultural products must be weighed against these other potential consequences.”
An independent scientific energy research organization, Energy Watch Group, concludes in a 2008 report, “Peak Oil Could Trigger Meltdown of Society:”
"By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil [including natural gas and coal], nuclear, or alternative energy sources in this time frame."
Independent studies (reviewed in the Peak Oil Report by Clifford J. Wirth) conclude that Peak Oil production will occur (or has occurred) between 2005 to 2010 (projected year for peak in parentheses), as follows:
- Association for the Study of Peak Oil (2007)
- Rembrandt Koppelaar, Editor of “Oil Watch Monthly” (2008 to 2010)
- Tony Eriksen, Oil stock analyst (2008)
- Matthew Simmons, Energy investment banker, (2007)
- T. Boone Pickens, Oil and gas investor (2007)
- U.S. Army Corps of Engineers (2005)
- Kenneth S. Deffeyes, Princeton professor and retired shell Geologist (2005)
- Sam Sam Bakhtiari, Retired Iranian National Oil Company geologist (2005)
- Chris Skrebowski, Editor of “Petroleum Review” (2010)
- Sadad Al Husseini, former head of production and exploration, Saudi Aramco (2008)
- Energy Watch Group in Germany (2006)
Independent studies conclude that global crude oil production will now decline from 74 million barrels per day to 60 million barrels per day by 2015. During the same time, demand will increase. Oil supplies will be even tighter for the U.S. As oil producing nations consume more and more oil domestically they will export less and less. Because demand is high in China, India, the Middle East, and other oil producing nations, once global oil production begins to decline, demand will always be higher than supply. Because the U.S. represents one fourth of global oil demand, whatever oil we conserve will be consumed elsewhere. Thus, conservation in the U.S. will not slow oil depletion rates significantly.
With increasing costs for gasoline and diesel, along with declining taxes and declining gasoline tax revenues, state and local governments will eventually have to cut staff and curtail highway maintenance. Eventually, gasoline stations will close, and state and local highway workers won’t be able to get to work. We are facing the collapse of the highways that depend on diesel and gasoline powered trucks for bridge maintenance, culvert cleaning to avoid road washouts, snow plowing, and roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, large transformers, steel for pylons, and high tension cables from great distances. With the highways out, there will be no food coming from far away, and without the power grid virtually nothing modern works, including home heating, pumping of gasoline and diesel, airports, communications, and automated building systems.
Although the GAO recommended that the DOE provide a risk management study for Peak Oil, no such study has been published. No federal or state agency provides any planning for Peak Oil impacts.
Although Peak Oil has been discussed briefly in a few popular sources (such as Fortune Magazine, BusinessWeek, The Times (London), The Wall Street Journal, MoneyWeek, Scientific American, and the Wikipedia Encyclopedia), television and public radio have avoided coverage of Peak Oil. Consequently, the public and most leaders are not aware of Peak Oil.
Problems Facing the Towns and Cities
Local governments face the following problems from Peak Oil impacts: (1) declining revenues due to declining property values and declining family incomes; (2) increasing costs for gasoline, diesel, and heating oil; (3) inflation in the costs of equipment, materials, products, services, and electric power; (4) increasing unemployment and homelessness; (5) increasing crime; and (6) resource constraints in providing basic services, social services, and emergency services. As needs and problems expand the resources available to state and local governments will shrink.
What Can Towns and Cities Do?
Town and city managers should promptly inform elected and other appointed officials at the local level (including county boards and school boards) about the Peak Oil issue. Forwarding them this article would be one way to do this, and this article could be used to focus discussions on Peak Oil planning. All government officials should be informed so that they can begin planning and so that they are able to respond to questions from constituents and the press about what their government is doing to plan for Peak Oil impacts.
Local governments should establish a Peak Oil committee in their government to provide advice regarding Peak Oil risk management and contingency planning. This committee should concentrate on what the town or city can do to address the problems that the town or city faces. The Peak Oil committee should establish a state wide means of communicating with other local governments in the state. One suggestion is to establish a free Google blog for discussions and announcements, and every local government and citizen advisory committee can be authorized to add to this blog. Local libraries should be involved in this effort so that they can order relevant books and hold local community discussions.
Local government officials should also establish a Peak Oil citizen advisory committee that can advise the public and town/city government, as well as inform state government and congressional leaders. Because Peak Oil is a very controversial and emotional issue, it is wise that an independent blue ribbon committee of citizens advise the media, the public, and local and state governments about Peak Oil problems and plans. The selection of members to this committee is critical. People with general knowledge and community service experience are preferable to those who might want to work to solve national energy problems, instead of focusing on the problems facing the town, city, county, and state. There is also a tendency to focus on energy conservation to plan for Peak Oil. Conservation of individual and local government resources is important, especially if it saves town resources, but local conservation is not a solution to most problems that communities face. Similarly, there is a tendency to focus on ways of generating energy, such as purchasing expensive solar panels or wind turbines. In general, these are not solutions. When the power grid fails, local electric power is not very useful, and it will be useful only as long as storage batteries last. A focus on risk management and contingency planning must be maintained.
Some Ideas for Risk Management and Contingency Planning
- Studying Peak Oil impacts carefully will enable sensible risk management and contingency planning. The Peak Oil Report provides an excellent review of Peak Oil impacts.
- Develop contingency plans for a power grid failure, which can occur at anytime (the possibility of a power grid failure is discussed in the Peak Oil Report in the section “Multiple Crises and a Gridlock of Crises” toward the end of the report).
- Plan for government revenue reductions.
- Guard financial resources.
- Review the capital budget for possible cuts. For example, some state and local governments are widening highways, although traffic on these highways will decline in the future.
- Plan ahead for very expensive oil and natural gas in the future. For example, many town or city offices may have to reduce operations to 3 or 4 days a week to cut costs in heating and transportation. Public schools use much heating oil (or natural gas) and diesel for transportation. Should the school calendar be adjusted to avoid the most expensive months: December, January, and February? Should classes meet 3 or 4 days a week? These changes require action by state board of education and changes in union contracts, etc. This example shows that government officials and the public need to be informed about Peak Oil now so that they can plan ahead. The pressure for changes in the school calendar would have to come from the local level, as there are no signs that state governments are planning for Peak Oil impacts.
- Plans should be made for reductions in the personnel budget, as choices will have to be made between reductions-in-force and across the board reductions-in-pay.
- Develop an extensive library of books that will provide useful technology for after the time when the power grid has failed permanently. Although this time is years away, these books could be sold out quickly following a national energy related emergency, and then the books may not be available later. An example: penicillin is not difficult to make, if you know how; but if you don’t know, it would be very difficult to invent the process for making penicillin.
- Certain hand tools should be purchased and stored in quantities. Today they are inexpensive and plentiful, but in the future, they won’t be available, for example: 2 man wood saws, bow saws, and axes.
Where to Go for More Information
There are very few good sources of information for governments concerning Peak Oil planning, but Surviving Peak Oil blog is a portal to relevant websites and blogs. Town and cities will have to create their own plans to prepare for Peak Oil impacts. A Peak Oil blog for town governments (mentioned above) is a good way to share information. Also, local and state governments across the nation can add their plans and ideas to the Wiki Site for “Peak Oil Preparation:”
Everyone is welcome to email or call me if they have questions or want comments on plans. I also provide presentations on these topics. My email address and telephone number can be included in any web posting of this article.
clifford dot wirth at yahoo dot com
Telephone USA: (603) 668-4207
Surviving Peak Oil blog
About the Author
Cliff Wirth holds a Master of Public Administration degree (MPA) and a Ph.D. in Policy Analysis. He taught in three MPA programs, including the MPA program at the University of New Hampshire from 1981 to 2008, where he directed the MPA program for many years and implemented the extension MPA program in Manchester, NH in 1999. He has worked closely with hundreds of local, state, and federal officials on many projects. A number of his former students are current town and city managers in New Hampshire, Vermont, Maine, and Massachusetts.