Peak Oil – “The Debate is Over”

NOTE: Images in this archived article have been removed.

It’s been a long time coming, but the uber-significant Peak Oil issue has finally started to infiltrate the corridors of power. What they’ll do with this information remains to be seen….

There is no reason for optimism. — Dr. James Schlesinger (former Secretary of Defence and the U.S.’s first Secretary of Energy)

I made mention recently of the leaked German Military Peak Oil study (German PDF here, key points summarised in English here) which looked at the Peak Oil issue from a national security standpoint. Now the New Zealand government has created their own study — releasing it publicly, rather than forcing some conscientious and concerned person to have to sneak it out the back door.

The summary findings of the study are almost word-for-word with what I wrote a long time ago (here and here for example).

Although there remain large reserves of oil which can be extracted, the world’s daily capacity to extract oil cannot keep increasing indefinitely. A point will be reached where it is not economically and physically feasible to replace the declining production from existing wells and add new production fast enough for total production capacity to increase. Projections from the IEA and other groups have this occurring, at least temporarily, as soon as 2012.

The difference between the global capacity to produce oil and global demand is the supply buffer. When the supply buffer is large, oil prices will be low. When the supply buffer shrinks – due to demand rising faster than production capacity or production capacity falling – prices will rise as markets add in the risk that supply will not be available to meet demand at any given point in time.

When a supply crunch forces oil prices beyond a certain point, the cost of oil forces consumers and businesses to cut other spending, inducing a recession. The recession destroys demand for oil, allowing prices to drop. Major international organisations are warning of another supply crunch as soon as 2012.

The world may be entering an era defined by relatively short periods of economic growth terminating in oil price spikes and recession.

New Zealand is not immune to the consequences of this situation. In fact, its dependency on bulk exports and tourism makes New Zealand very vulnerable to oil shocks. — The Next Oil Shock? Parliamentary Library Research Paper (emphasis added)

What we’re talking about is, quite simply, perpetual recession:

There is a risk that the world economy may be at the start of a cycle of supply crunches leading to price spikes and recessions, followed by recoveries leading to supply crunches. — The Next Oil Shock? Parliamentary Library Research Paper

With its humble military base, I can’t see New Zealand attacking Nigeria or Venezuela, so considering transition to a steady state, post-carbon economy could (should) be on the cards.

The New Zealand study brings similar findings as a UK study from earlier in the year — The Oil Crunch – a wake-up call for the UK economy — except with updated data it’s moved the forcasted crunch forward from 2015 to 2012, which I personally believe to be a far more realistic timeframe.

The fuel that lubricates the wheels of modern life, and that supports a population that’s multiplied fourfold since its discovery, is now becoming increasingly uneconomic to mine and we’re now looking in geological nooks and crannies we would never have considered even 15 years ago. This black gold has been with us for the entire lifetimes of all living today, and our dependence on it has grown radically with every decade. It is estimated that at present rates of development and consumption we would, if it was available, use as much oil in the next 25 years as we’ve used in the last 160 — somewhere around 1 to 1.3 trillion barrels. With the EROEI (Energy Returned on Energy Invested) for oil mining (I can’t help but wonder if we’d be in this mess if we’d called it ‘mining’ from the start, instead of the disingenuous term ‘production’) far lower today than in previous generations and increasingly unviable you can be sure our economies will collapse before we’ll get anywhere near close to sucking up those kind of quantities.

Some of the world’s largest economies also happen to be the biggest oil importers (think the U.S., China, UK, Germany, France, Japan, etc.). The global economic knock-on effects of these guys effectively trying to out-bid each other for supplies of crude will be immense — particularly when oil and gas exporting nations realise the need to stockpile reserves to soften their own fall into a post-carbon world.

Saudi Arabia has stopped exploration missions of new oil fields to save the wealth and pass it on to future generations, King Abdullah, Custodian of the Two Holy Mosques, said here Thursday. — SaudiGazette.com.sa

If you happen to live in a nation with neither a powerful economy nor its own oil reserves, your country will left by the wayside as the business as usual mentality urges those nations still able to to persevere on into darkness. Perhaps being ‘left by the wayside’ has some consolation, however, in that if you happened to, instead, live in a country with oil, don’t be surprised to see your people labelled as terrorists and your borders invaded. The only encouraging thing in this regard is that wars are terrifically oil-dependent and thus will be uber-expensive. The EROEI ratio for war will, as we descend the peak oil summit, become even more absurd than it is today.

Just to be clear — a 2008 type price spike, when repeated in today’s seriously weakened economic situation, will cause significant social trauma. And, people are increasingly realising, there will be no end to this trauma. It will be ongoing, and relentless, and all constructive efforts to rebuild society along sustainable lines will be hampered by limited resources, limited capital, social unrest and collapsing social infrastructure. It’s time for lucid people worldwide to ensure these things are in the minutes of council meetings where they live.

Not only have we been taking finite supplies of oil for granted but we just do not realise how difficult it will be to live without it. None of us lived pre-oil — we’re far removed from the horse and cart, subsistence farming age that was the foundation of civilisation before — but we may well live post-oil. Most of us are spoilt, soft, individualistic and highly trained for a world that was, and that will never be again.

Consider where you reside, and what your village/town/city will look like with 20, or 40, or 60% unemployment, or worse. Consider the vulnerabilities of supply lines to your town. Consider your housing needs, and what it will mean if you cannot make rental or mortgage payments. And remember, in our current system — where perpetual growth economics is regarded as the only game worth playing — people without money are outsiders. If you cannot consume, you have no value in this system. As people fall off the edge of economic activity, the game will continue with a decreasing pool of wealthy players: oligarchs, corporate feudalists, mafia — whatever you want to call them. Governments may bail out big industry, but they won’t come to your rescue. This is evidenced by the suburbs of foreclosed homes in the U.S. — some being ‘retrieved’ by nature while their former residents struggle in tenements, trailers or their cars.

I’ve been sharing these things on the internet for more than four years, and others have for far longer — yet governments are ponderous and pathetic even to see and understand these issues, let alone do something about it. As many of you know, Cuba’s ‘Special Period‘ is a microcosm of what we can expect, to varying degrees of severity, to occur. The same holds true of the panic and economic turmoil of the 1970s OPEC embargo era. Along the lines of what Castro did in the early 1990s, ideally governments would today enact policies that incentivise transition, and that make sustainable primary production of all human needs (food, water, shelter, clothing, etc.) the most financially attractive endeavours to be trained for and involved in. However, while we should be agitating for holistic, future-minded leadership, a reliance/trust in centralised decision-making reactions to these realities would be misplaced. At present all industry-owned government seems to know to do is try to maintain the status quo — beating the impossibly dead horse of economic growth that only exacerbates the pressure on oil supplies. Despite acknowledgements that we’re entering an era of acute energy shortages, the world’s leaders do not seem capable of considering anything else.

We must learn how to observe, plan and work together to find peaceful, tangible solutions, and now. It seems to me that mankind will now, right now, either learn lessons of humble, objective cooperation and voluntary simplicity, or we’ll all go up in smoke in a final every man for himself free-for-all over the dregs of the world’s remaining stores of energy, food and land — and while we’re doing that we’ll move to the most destructive ’sources’ of liquid fuels there is (tar sands, coal to liquids, biofuels, shale oil….).

The first thing you can do to secure your own future is to share this information.

I’ll leave you to ponder these things as you watch the following talks from the ASPO 2010 Peak Oil Conference held between October 7-9, 2010 in Washington: