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Peak oil futures: same crisis, different responses

One sentence summary

There would be different responses to a peak oil scenario in different parts of the world, ranging from predatory militarism to authoritarian retrenchment and the mobilization of local resilience.

Abstract

Peak oil theorists predict an impending terminal decline of world oil production, with no adequate alternate resource and technology available to replace oil as the backbone resource of industrial society. Instead of endlessly debating whether peak oil theorists are right or wrong, let us simply ask what would happen if they were right. Based on historical case studies I suggest that there would be different reactions in different parts of the world, ranging from predatory militarism to authoritarian retrenchment and the mobilization of local resilience.

An extended version of this research, complete with detailed references to the relevant literature, is forthcoming with Energy Policy under the title Global energy crunch: how different parts of the world would react to a peak oil scenario (pre-print version freely available).

Peak Oil Futures: Same Crisis, Different Responses

Peak oil theorists predict an impending terminal decline of world oil production, with no adequate alternate resource and technology available to replace oil as the backbone resource of industrial society. Optimists, by contrast, see oil gushing for decades. The debate is still dragging on.[1] But let us bracket for a moment the debate if and when peak oil will happen. Let us instead simply ask what would happen if peak oil theorists were right. How would different parts of the world respond to a peak oil scenario?

For the purposes of this analytical piece, I assume the hypothetical scenario of a 2-5% decline of oil production per year, for about two decades (which is broadly in line with what most peak oil theorists are predicting).[2] No global event comparable to this has ever happened in history. The coal age did not end for a shortage of coal, but if peak oil theorists are right the oil age will end for a shortage of oil.

Nevertheless, events comparable to peak oil have occasionally happened at the national level. From these national events, we can extract the factors on which different reactions to a global peak in oil production would be likely to depend. This does not answer the question when peak oil is due, but it gives reasonable clues about what is at stake on a social and human level if peak oil does occur.

My first two case studies are North Korea and Cuba, where something comparable to peak oil happened in the 1990s. In both cases there was a massive loss of subsidized Soviet oil deliveries. In either country, the availability of oil went down by more than 50% within a couple of years after the end of the Cold War. From the viewpoint of US foreign policy, North Korea and Cuba have often been presented as comparable countries. But they reacted in remarkably different ways to a very similar crisis.

North Korea reacted by a totalitarian retrenchment to maintain elite privileges, irrespective of the cost to the people. The military and state apparatus were kept intact, while industry and agriculture were crumbling in the absence of fuel and fertilizers. This culminated in a terrible famine between 1995 and 1998 that led to the starvation of 600,000 to 1 Million people, or 3 to 5% of the North Korean population. The international community was eventually forced to step in with food aid, thereby unintentionally stabilizing the regime. From the cynical viewpoint of the North Korean regime it all worked out handsomely. While life for North Koreans is more solitary, brutish and nasty than ever, Kim Jong-il and his cronies have managed to stay in power thanks to brutal repression and nuclear blackmail.[3]

Cuba is seen by many observers as a similar Stalinist regime, but there is an important difference. While Pyongyang relies on the atomization of society for political control, Havana on the contrary relies on grassroots organizations at the neighbourhood level. Ever since 1959, the Cuban regime has heavily invested in social cohesion. This was done for the sake of social control rather than empowerment, and ordinary Cubans were not consulted. Nevertheless, the accumulated social capital could be mobilized to weather the “special period” after the loss of Soviet subsidies. People helped each other at the neighbourhood level, and the wastelands of Havana and other cities were utilized for urban gardening. As a result, Cuba did not experience mass starvation despite considerable hardship in the 1990s. [4]

My third case is imperial Japan on the brink of the Pacific War (1941-5). Since the world economic crisis of 1929, Tokyo was committed to a strategy of military expansion into China. The objective was to construct a geo-economic bloc in which Japan could sustain itself as a great power. However, oil was Nippon’s Achilles heel. Japan was almost completely dependent on oil deliveries from California. The only alternative to importing oil from the United States was looting it from the Dutch East Indies and British Borneo. In anticipation of a US oil embargo, Tokyo radicalized its strategy of military predation and decided to attack the East Indies where there were abundant oil resources. To secure its flank and pre-empt a strike by the US Pacific Fleet, Japan famously attacked Pearl Harbor in 1941.[5]

Country

Timing

Problem

Response

North Korea

1990s

Massive loss of access to oil

Totalitarian retrenchment

Cuba

1990s

Massive loss of access to oil

Mobilization of local resilience

Japan

1929-1945

Dependency on imported oil

Predatory militarism

The case studies seem to suggest that countries prone to military solutions may follow a Japanese-style strategy of predatory militarism. Countries with a strong authoritarian tradition may follow a North Korean path of totalitarian retrenchment. Countries with a strong community ethos may embark on a Cuban-style mobilization of local resilience, relying on their people to mitigate the effects of peak oil.

But should we not expect market signals to set incentives for technological innovation? Might there not be an energy transition from oil to some alternative technology or resource? Since energy transitions have happened in the past, most notably from coal to oil, is it not unimaginative and unnecessarily defeatist to discard a similar possibility for the future? In short: could there not be a revolutionary technological breakthrough around the corner that would make oil redundant?[6]

It is far from my intentions to exclude the appearance of a deus ex machina, such as the sudden trove of a few giant oil fields or a revolutionary technological breakthrough. However, an easy upgrade from oil to some superior resource does not appear to be in sight. Time is a serious issue here. Oil exploration and exploitation takes considerable time. The invention and implementation of new technologies takes even more time. What takes most time of all, is socioeconomic adaptation and the formation of “new consciousness”. This can be gleaned from my fourth and final case study: Dixieland.

After the Civil War (1861-5), the challenge for the former Confederate States of America was to abandon the slave economy and embark on radical socioeconomic change. This happened under the most favourable conditions. Southerners only had to look north to see industrial capitalism unfolding. They were operating in the same national economy, and the transfer of technology was no serious obstacle. Given the right incentives, it would not have been difficult to attract financial capital from the North. So Dixieland is the “most likely case” where we would expect to see a smooth and successful transition. But alas, the historical record shows slow and painful adaptation: economically well into the 1950s/60s, politically at least until the Civil Rights Act of 1964, and socially in part until the present day.[7]

Dixieland is a cautionary tale for those who predict a smooth transition to a post-oil or even post-fossil world. My previous three case studies suggest the range of likely reactions to a global peak in oil production. There are other possible reactions, such as the mobilization of national sentiment by populist regimes. However, only for the scenarios depicted in my case studies are there easily identifiable historical precedents. It is now possible to harness the case studies for an indicative post-peak future scenario.

The most obvious candidate for a Japanese-style strategy of military predation is the United States.[8] There may be a point when the US will prefer the military stick to diplomatic skirmishes with people like Iran’s Ahmadinejad or Venezuela’s Chavez. Iraq’s Saddam Hussein has already experienced this. Other likely candidates for a military strategy are, although to a lesser extent, China and India. They do not have the ability to project power globally, but they may be tempted to scramble for oil in Central Asia.

North-Korean style totalitarian retrenchment is extremely repulsive to imagine, but we should not forget that even democracies may degenerate into autocracies. Remember Germany, 1933-45? Political elites are sometimes willing to “screw” their populations in order to preserve their own privileges. The ruling elites of certain petro-states, for example in Latin America and Africa, could be among them. There are many countries with an authoritarian or totalitarian past that might be recovered.

Cuban-style mobilization of local resilience is more appealing than totalitarian retrenchment. It may happen in places where industrialization has not yet eclipsed the traditional community ethos. Poor developing countries are more likely candidates for this than rich Western societies where individualism and mass consumerism have deep roots. Highly overpopulated areas may not be able to feed themselves in the absence of fertilizers and food aid, but other poor communities may become self-reliant.

Europe and Japan would be in a quandary because a strategy of rearmament and military predation would not be acceptable to citizens in the decisive phase of geopolitical positioning. Totalitarian retrenchment is hard to imagine because humanism, pluralism and liberalism are deeply rooted in these countries. And a smooth regression to a community-based lifestyle is also hard to imagine because societies in Europe and Japan have long been exposed to individualism, industrialism and mass consumerism. Europe and Japan have accumulated enormous wealth, but it is unclear how much this would help in adapting to peak oil (remember that we are assuming 2-5% decline of oil production every year).

Of course there would also be winners. Thus, oil producing countries in the Middle East are likely to prosper after peak oil. In some cases, ordinary people in these countries may benefit. We may imagine a certain inter-Arab solidarity, with migration flows redirected from an impoverishing Europe to an industrializing Muslim world. Russian elites could also afford distributing the gains from soaring oil prices more equitably. In other petro-states, from Latin America to sub-Saharan Africa, elites would be less likely to distribute a significant part of the national energy wealth to their populations.

Despite the difficulties, coal would become a more important energy source regardless of possible harmful consequences for the climate. This would particularly apply to Asia and Australasia, but also to the United States. By the same token available oil reserves (including “unconventional oil” from oil sands and oil shale) would be exploited regardless of the environmental consequences. There would be further investment in nuclear reactors, as well as relatively expensive forms of renewable energy. However, such investment would be seriously limited by the constraints imposed by economic turmoil.

[1] Kerr, R.A. Splitting the difference between oil pessimists and optimists. Science 326, 1048 (2009).

[2]Robert L. Hirsch. Mitigation of maximum world oil production: shortage scenarios. Energy Policy 36, 881-889 (2008).

[3] Williams, J.H., Von Hippel, D., and Nautilus Team. Fuel and famine: rural energy crisis in the DPRK. Asian Perspective 26, 111-140 (2002).

[4] Taylor, H.L. Inside el Barrio: A Bottom-Up View of Neighbourhood Life in Castro’s Cuba (Kumarian Press, Sterling, VA, 2009).

[5] Barnhart, M.A. Japan Prepares for Total War: The Search for Economic Security, 1919-1941 (Cornell University Press, Ithaca, N.Y., 1987).

[6] Smil, V. Global Catastrophes and Trends: The Next Fifty Years (MIT Press, Cambridge, Mass., 2008); B. Podobnik, Global Energy Shifts: Fostering Sustainability in a Turbulent Age (Temple University Press, Philadelphia, PA, 2006).

[7] Wright, G. Slavery and American Economic Development (Louisiana State University Press, Baton Rouge, 2006); Fitzgerald, M.W. Splendid Failure: Postwar Reconstruction in the American South (Chicago: Dee, 2007).

[8] Klare, M.T. Rising Powers, Shrinking Planet: The New Geopolitics of Energy (Metropolitan Books, New York, 2008).

Editorial Notes: Another version of this article was published on the Oil Drum on May 5. -KS

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