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Review of Bundeswehr Report on peak oil: Section 2.2. Tipping Point (Nov. 2010)

We are unable to think about the consequences of Peak Oil via our everyday experiences, and can only draw partial historical parallels. It is accordingly difficult to imagine what kind of impact a gradual withdrawal of one of the most important sources of energy would have on our civilization. Psychological barriers account for the suppression of irrefutable facts and lead to an almost instinctive rejection of in-depth discussion of this difficult issue.

The occurrence of Peak Oil is, however, unavoidable.
- Bundeswehr report on Peak Oil, p. 103

With these words a team of German military analysts has summarized the dilemma which lies before us: the peaking of global oil production is unavoidable, mankind has no prior experience from which to draw, it is difficult for us to even imagine what the impacts could be, and we instinctively avoid dealing with this unprecedented, highly complex dilemma.

These conclusions were presented last year by a team of analysts at the Bundeswehr Transformation Centre, a top-level German military think-tank. Their sobering 125-page report was approved for release by senior Bundeswehr officers in November. An earlier draft (July 2010, 99 pgs) was leaked last summer, so this information has been publicly available (in German) for over 9 months.

Unfortunately, mainstream media, even in Germany, have ignored this report, which ought to have been front-page news around the world. The absence of media interest appears to confirm the very point which the Future Analysis team stated: we reject in-depth discussion of our collective dilemma and there are plenty of reasons why some of us may indeed prefer “suppression of irrefutable facts.”

One obvious barrier to English-speaking journalists has been the absence of a translation. Given the magnitude of the peak oil problem, the quality of this report and the credibility of its authors, one would have thought that some military or civilian agency would have quickly provided an English translation. That has not occurred, so this author has had to rely on the generous efforts of a half-dozen people in four countries in order to obtain translations of certain key sections.

During the next few weeks, reviews of these sections will be posted at Energy Bulletin, accompanied by English translations in PDF.

We begin this series with an examination of Section 2.2. Systemic Risk when Passing the “Tipping Point” (p. 62-67).

The heart of this section is a scenario which focuses largely on “the transmission channels of an oil price shock.” Oil is often described as ‘the life-blood’ of modern society. It is as vital to our globalized economy as water is to the human body. A reduction in supply of only a few percentages could create difficulties throughout the entire system. Further reductions could lead to a complete failure of critical systems.

Short-term pain
During its early stages, an oil supply crunch could prove to be a very difficult situation, albeit one which may prove to be manageable. In the short term, the global economy would probably decline in proportion to the decline in oil supply. The result would be recessions, an increase in the cost of all traded goods, a decline in trade, rising unemployment and for some citizens, an inability to afford necessities such as food.

The Bundeswehr authors point out that such circumstances would place extreme pressures on government budgets. Government revenues could plummet and administrators may be faced with surging demand for welfare services, the need to safeguard food supply chains, and a competing need to fund potential solutions to the energy crisis.

However, the Future Analysis team warns that a progressive decline cannot be managed indefinitely. They point out that economies function within a narrow band of relative stability: although economies can sustain their principal functions despite cyclical fluctuations and the occasional shock, there is the potential for an economic tipping point to be breached. Over-stressed economic systems could suddenly find themselves beyond that band of stability, at which point the entire system could react chaotically. Given the multitude of interconnections within our modern economy, one can readily imagine chain reactions which could destabilize the entire global economic system.

Medium-term collapse
Such contagion is precisely what the Bundeswehr analysts warn against in the second part of their scenario. In bold type, they assert, “In the medium term, the global economic system and every market-based economy would collapse.”

This is a shocking assertion which the analysts justify by explaining both the likely causes and the potential consequences of such a collapse. They point to the importance of certain psycho-social factors such as awareness and trust. As people become aware that the contraction in global oil supply and economic activity is likely to be a prolonged, indefinite reality, there could be an increasing (and to some degree, self-fulfilling) loss of faith in markets, currencies, financial institutions, and the ability of governments to maintain economic and social order.

A series of interrelated potential consequences is then outlined:
- Collapse of the banking system, the stock & financial markets.
- Loss of confidence in currencies.
- Collapse of value-added chains.
- Collapse of monetary systems and international supply chains.
- Extreme increase in unemployment in all modern societies.
- State bankruptcy.
- Collapse of critical infrastructure.
- Famine.

The authors further warn:
The outlined chain of events demonstrates that the energy supply of the economic cycle must be secured and sufficient to facilitate economic growth. A shrinking economy over an indeterminate period presents a highly unstable situation, which would lead to system collapse. The security risks of such a development can hardly be assessed (p. 65).

This bleak scenario is not the product of some book-peddling doomsayer, rather the conclusion of a team of highly reputable military analysts in one of the world’s most progressive industrial societies. Furthermore, this entire document has been subsequently approved for public release by Bundeswehr top brass, which gives additional credibility to the warnings of its Future Analysis team.

The need for public awareness
The Bundeswehr study is particularly worthy of scrutiny by military analysts, emergency planners, politicians and other civic leaders. Educators and the general public also must become aware, since effective, orderly action will require broad public support. The importance of the role of journalists and media in presenting this information can hardly be overstated.

Specifically, people need to be aware of the irony of the peak oil phenomenon: difficulties will start not when we “run out” but rather as we achieve maximum, not minimum, production. The danger is that with the world awash in the greatest volume of oil that mankind has ever enjoyed, it will prove very difficult to convince people that they are simultaneously on the threshold of a problem of unprecedented scale and complexity, for which there is no ready solution.

Awareness is critical both to the problem and to the solution: as people realize the dangers of our collective predicament, there is potential for panic & conflict. There is also a commensurate need for unprecedented co-operation.

Either way, our emerging predicament is itself without precedent, which reminds us of the observation by M. K. Hubbert that we face “a crisis in the evolution of human society. It’s unique to both human and geologic time. It has never happened before and it can’t possibly happen again. You can only use oil once.”

The Bundeswehr Future Analysis team is commended for their comprehensive, realistic analysis. Their superior officers are commended for upholding the Analysis team’s observations and conclusions and for not allowing them to be ‘watered down’ for the unsuspecting public and unprepared politicians.

The original Bundeswehr study is available here.

Thanks to Thomas Homer-Dixon and Manjana Milkoreit for the translation of much of the November 2010 document. Thanks also to Rebecca Lloyd, to Robert Rapier and his anonymous friend, and to “M” in Germany for their work in translating sections of the July 2010 draft version.

The PDF of Section 2.2 is available here.

* Rick Munroe will focus on the Bundeswehr report during his presentation to the World Conference on Disaster Management in Toronto next Monday at 2:40.

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