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The peak oil crisis: the gathering storm

The world is beginning to look a lot like the August of 1914 or perhaps the summer of 1939 all over again. This time instead of the great powers of central Europe dragging the rest of us into a European affair, it seems that nearly every corner of the earth is facing some sort of imminent disaster that could combine into a very unpleasant situation.

In America, where we have been living beyond our means for decades, the time has come to pay the piper. Trillion dollar deficits, rising unemployment, printing of money, $4 gasoline, a weakening dollar and entitlements are combining into a grim outlook for our immediate future. Add to this the toll taken by climate change - unprecedented outbreaks of tornadoes, massive floods, and record droughts - throw in a hurricane or two and we are on the way to serious disruptions.

Politically America is split over what do about all this. Many are simply unwilling to admit that numerous forces are trending towards disaster and keep talking about the return to prosperity. Some favor still more tax cuts until there is little left of government, or increased oil well drilling as the universal balm; some favor Keynesian pump-priming and emissions controls. Still others are totally confused by events that are foreign to the way of life they have known and seek solace in demagogic claims to return the country to growth and prosperity.

The EU too is beset by problems. Although Germany and France seem to have avoided the excesses that are besetting others, most of the EU members, like the U.S., are suffering from living beyond their means. The Union has been bouncing from economic crisis to crisis for months. Regional sources of energy -- coal, oil, and natural gas -- are playing out and the continent will soon be even more dependent on imported energy to keep moving about and the lights on. Germany's and Switzerland's recent decisions to foreswear nuclear power stations only add to the problem.

Despite gloomy prospects for European prosperity, it still looks good to millions from the undeveloped parts of the Eastern Hemisphere who in increasing numbers are risking their lives to make it into the EU where the lights still work. The steadily increasing global population, currently growing by circa 70 million each year, with rising expectations brought about by the communications revolution, is putting an increasing strain on supplies of food, water, and electricity. Shortages of these essentials are becoming increasingly common, and these shortages in turn are leading to increased turmoil and violence. Climate change is taking its toll across the underdeveloped world with droughts and record temperatures being seen across much of the world.


In America, where we have been living beyond our means for decades, the time has come to pay the piper.

For those who can afford air conditioning, the rising temperatures are putting an increasing strain on power stations and the sources of fossil fuel that supply them. Around the world, hydro-power dams are producing well below their rated capacity.

There are some areas of temporary respite. Things in Russia are moving along pretty well with oil production and exports hitting post-Soviet highs and global oil prices are keeping the coffers well filled. There was a little problem with a drought last summer, which took out so much of the crop that Moscow had to stop exporting grain, thereby playing a behind the scenes role in the Egyptian uprising. Moscow is still benefiting from unloading all those peripheral countries that the Czars and the Soviets had taken over a century or so ago.

Still the Russians have their troubles: their oil fields should be going into depletion in the next few years and the remaining separatist groups are still blowing up things in Moscow.

South Asia - Pakistan, India, Nepal and Bangladesh - seem to be suffering the most at the minute. Available power supplies are not sufficient to cope with unusually high temperatures and still keep factories and vital infrastructure such as water pumps running. Even India with 1.2 billion people and an economic growth rate almost as impressive as China's is running into trouble as water and coal supplies are running short. It seems inevitable that economies across southern Asia will be going into decline shortly likely coupled with increasing political turmoil.

Asia is still doing well, except in Japan where tales of its nuclear meltdowns seems to grow worse every day. It is increasingly obvious that the tsunami/nuclear events have dealt Japan a considerable economic blow which even in normal times would take many years for recovery. Given the increasing costs of fossil fuels, all of which must be imported, Japan may be on course to becoming a shadow of its former self.

The other economic power houses of Asia - Korea, Taiwan, and Singapore - are relatively small and have for the most part little or no sources of fossil fuel. Eventually high energy costs will lay them low, but in the interim, they may be bright spots in an otherwise dismal global economy.

Now we get to China, which has enjoyed phenomenal economic growth in recent decades and continues to expand at 9 or 10 percent a year. Although the numbers still look good for another year of rapid economic growth, just below the surface are some serious troubles. The aquifers that supply water to 440 million people living in the north China plain are about to run dry. Beijing is rushing to bring water from the Yangtze basin to the north in an effort that has been likened to diverting the Mississippi River to New York and New England.

At the minute parts of China seem to be simultaneously beset by the worst drought in 100 years and the worst floods in 200. When the serious environmental problems are coupled with the current power crisis, a case can be made that the years of rapid growth in China are nearing an end. The concern for the rest of the world is that Beijing with trillions in foreign currency reserves may begin importing food, oil, and minerals in such quantities that there won't be much left for the rest of us.



Tom Whipple is a retired government analyst and has been following the peak oil issue for several years.

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