Reaching our peak oil supply

November 26, 2007

It cost more than $40 to fill up my Honda Accord last week. That’s a pain, but not one I have to suffer often. Not only does the Honda get good gas mileage, I live close to my downtown job, so I put maybe 6,000 miles a year on the car. The price of oil will have to go up a lot more before my wallet feels the burn – at the gas pump, at least.

But the price of oil affects far more than our daily commutes. Our entire consumer economy is built on the idea that oil will be relatively inexpensive and infinitely available.

A reliable and affordable supply of oil makes globalization possible. Wal-Mart, for example, wouldn’t be able to fill its shelves with consumer goods made for less in overseas factories if not for the ability to ship these products inexpensively. Within our own borders, food is cheap and plentiful in large part because oil is. One reason we’ve built bigger houses – the average house size has doubled since the 1950s – is because we can afford to heat and cool them.

In fact, cheap oil has made development in Dallas and the entire Sunbelt possible.

But what if it’s ending? The authoritative International Energy Agency recently warned that the price of oil would remain high for the foreseeable future because of supply shortages. China and India are developing rapidly and consuming vast amounts of oil.

World supply can barely keep up with demand – a problem the IEA blames primarily on human failures. IEA forecasts that China and India alone will add about 13 million barrels a day to the global demand by 2030.

But the IEA forecasts world oil supply at 116 million barrels a day by 2030, up from 85 million barrels a day now – enough to meet expected demand. Some top oil company CEOs disagree. Christophe de Margerie, chief of the French oil giant Total, said in late October that a supply level of even 100 million barrels a day – barely enough to cover anticipated growth from China and India alone – is “optimistic.”

“It is not my view. It is the industry view, or the view of those who like to speak clearly, honestly and not … just try to please people,” Mr. de Margerie said.

And ConocoPhilips CEO James Mulva told a financial conference earlier this month: “Demand will be going up, but it will be constrained by supply. I don’t think we are going to see the supply going over 100 million barrels a day, and the reason is: Where is all that going to come from?”

That’s the question adherents to peak-oil theory ask. They argue that the world either has or soon will have reached the maximum output level of its oil reserves and that supply can only decline from here on out – even as demand skyrockets.

Though some dismiss them as crude-oil Cassandras, the peak-oilers are not wild-eyed pessimists. Their number includes men like T. Boone Pickens, the Dallas oil tycoon, and Houston’s Matt Simmons, who founded the world’s largest energy investment banking company. They point to hard data indicating that the world is quite simply running out of oil and doing so quickly ( and are two good Web sites compiling peak-oil news, analysis and information).

If they’re right, peak oil poses a far more critical challenge to our civilization than global warming. The modern industrial world cannot function in any recognizable form without cheap and plentiful oil. Stu Hart, a Cornell management professor, warned on public radio recently that “we’re in the midst of the crash of the system” – meaning that absent breakthroughs in the way the world meets its energy needs, we are in for rough times.

What would life after peak oil mean for Dallas and its surrounding suburbs, a metropolis created by the availability of cheap energy?

Cars would be an unaffordable luxury for most, making life in suburbia difficult, perhaps impossible, to sustain. Likewise, air travel and shipping likely would be sharply curtailed as too costly, causing Dallas/Fort Worth International Airport, a major regional economic engine, to slow substantially.

Truck transport, too, would diminish, causing a sharp slowdown in the consumer economy and, crucially, making the kind of grocery-store bounty we now enjoy a thing of the past. And with a general rise in energy costs blasting electric bills into the stratosphere, we may all have to get used to – wait for it – life without air conditioning.

Jeffrey Brown, a Richardson geologist who has been active in the peak-oil debate, advises far-sighted folks to abandon the outlying suburbs and exurbs and move closer to the city center. “The smart money has been moving in,” he said. “The closer you are to job centers, the more stable the property values have been. That will continue.”

Post-peak-oil conditions would reverse globalization, forcing a return to intensely local agriculture and local manufacturing. The stores and services that communities need in order to carry on everyday life would emerge in neighborhoods, as in the pre-automobile era. Cities would empty out, with rural areas and small towns in agriculturally rich areas reviving. Culturally, all Americans would have to undergo a Great Relearning of skills and social habits that our ancestors developed to survive in community.

“My hopeful view is that we’ll be living like we did at the turn of the 20th century, but with computers,” Mr. Brown said. And he’s right: Americans have done this before and can do it again, if scientists don’t come up with a solution before the oil spigot starts to sputter.

But no one should be under the romantic illusion that life would be easy then or that the transition would be smooth. We will be poor. Our sons probably would be sent overseas to fight resource wars. Back home, regions of America where tens of millions of people live will be uninhabitable – especially the Southwest and much of suburbia. The economic contraction and social dislocation will be, in many cases, nothing short of catastrophic and will produce political upheaval. Radical conditions easily could produce radicalism.

Which could explain why so many people aren’t paying attention to peak-oil concerns; we have a financial and emotional investment in the status quo.

As Matt Simmons pointed out at a peak-oil conference in Houston this fall, if global warming predictions prove out, it won’t be a serious crisis for the planet until many decades into the future. If peak-oil fears prove out, the crisis could be upon us in very short order – and indeed may already have begun.

It is possible that we haven’t reached peak oil yet – nobody can say for sure, because governments and oil companies keep much data confidential – but the signs of the times are not encouraging. Now is not the time for survivalist panic or denial-based paralysis.

It is time, however, for discerning people – not only decision-makers, but every one of us – to start talking about and urgently planning for a peak-oil future. It may come sooner, it may come later, but it’s coming.

Rod Dreher is a Dallas Morning News editorial columnist.

Tags: Fossil Fuels, Oil