Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist. - Kenneth Boulding (ca. 1980)

A couple of weeks ago I received yet another email from a friend, encouraging me to participate in a "gas boycott day", or something of that nature. The idea was to refrain from purchasing gasoline for one day, "to send a message to the big oil/gas companies that the price (currently around $2 a gallon in many parts of the country) is too high," and the people are fed up. Needless to say that email ended up being victimized by my notorious "delete" button. It wasn't just because I personally don't drive that often, or that I am a fan of the current methodology used to price crude oil, but because the approach and idea was wrong in so many ways. First, if you have a gasoline-powered vehicle, particularly one that gets poor gas mileage, petroleum (oil) has you in a headlock and ultimately you will come crawling back like a crack-head. Secondly, because oil at the prices that consumers pay at the pump for it in the United States, already mask the human, environmental, and economic cost of obtaining it. Unlike power plants, which are few in number and so easier to regulate, cars are everywhere and the transport sector is a principal source of global emissions of greenhouse gases. But more important than this is that even if you don't own an automobile, America and indeed the entire industrialized world's addiction to petroleum has humanity in a headlock; a headlock that we will soon find out is going to be excruciating to break, though it must be broken if humanity, or even a semblance of it, is to survive.

In 1956, a Shell Oil geologist named M. King Hubbert stood up before a meeting of the American Petroleum Institute and, to the likely horror of his bosses, predicted that oil production in the continental United States would peak and begin to decline starting in the early 1970s. Hubbert's theory was that oil production, when plotted on a chart, is a bell curve. Production rises quickly as big, cheap-to-operate fields open but it flattens out as those fields become depleted, and it declines when new, smaller, more costly fields can't offset the losses. Almost everyone inside and outside the oil industry rejected Hubbert's analysis and as the1960s marked the greatest decade of global oil discovery ever, all but a faithful few simply forgot about Hubbert's forecast. When the 1970's rolled around history proved to be the only body needed to vindicate Hubbert's analysis, as oil production in the continental U.S. peaked, as he had predicted. In recent years, scientists have built on Hubbert's techniques in an effort to discover how close we are to global peak in oil production. Though the estimates vary somewhat based on what starting numbers are used, the general consensus and that of the the UK-based Oil Depletion Analysis Center, estimates the world's original endowment of "conventional" crude oil to have been somewhere between 2000 and 2400-billion barrels (2 to 2.4 trillion).

In a little over a century, a blip on the radar screen of human history, humanity has consumed close to half that total.

The truth is usually greeted in 3 stages: ridicule, followed by denial, and finally, acceptance.

A recent spate of literature and geological data is indicating that we may very soon (as in under five years) be at the period of peak oil production, after which period every ounce of the black substance pulled from the earth will become more expensive in every sense of the word. To clarify, industrialized society won't "run out" of oil tomorrow, or even in 10 years, but the crisis point comes long before you actually run out of oil. Since 1900, world oil production - that is, the number of barrels that can be pumped from the ground - has risen in near-perfect step with world oil demand. Today, demand stands at about 29 billion barrels of oil a year, as does production, but by 2020 demand may well be 45 billion barrels a year and these are with modest increases in demand. In actuality oil demand is climbing even faster than those that had hoped for a distant date for peak oil production projected, mainly because China and India with populations of roughly a billion people, are regretfully beginning to embrace a American-style high-energy industrialism that includes tens of millions of new cars. Secondly, as oil demand is rising, oil discovery rates are falling. The rate at which oil companies are locating new oil fields has been in decline for years, since it's high period in the early the 1960s. Despite astonishing advances in exploration and production technology, the industry is finding just 12 billion new barrels of oil each year and 2003 marked the first year that NO new discoveries were made. Currently we consume about six barrels of oil for every one new barrel discovered. The U.S. Dept. of Energy estimates that the world will require 120 million barrels a day by 2025. To meet that demand we must find the equivalent of 10 new fields the size of the North Sea oil field - which is in serious decline but at one point produced close to 6 million barrels of oil per day - within a decade.

Even more alarming is that these predictions are coming not just from doomsayers and concerned environmentalists, but in fact are coming from those inside and close to the industry. The Association for the Study of Peak Oil (ASPO), made up of a group of oil executives, geologists, investment bankers, academics and others has been warning the world of high oil prices, and the ensuing fallout, for some years now. ASPO includes a diverse range of oil industry insiders. These insiders include, people like Ali Bakhtiari, head of strategic planning at Iran's National Oil Company (NOIC), Dr Colin Campbell, a former executive vice president of Total-Fina, and Matthew Simmons, an energy investment banker and adviser to the controversial Bush-Cheney energy plan, whose work on oil reserves has long suggested that many official oil data are either flawed estimates or at worst downright lies. At ASPO's recent conference in Berlin, companies such as BP and Exxon and men such as Fatih Birol, chief economist of the International Energy Agency, began to talk to the proponents of the peak oil theory and while some industry insiders may doubt their theories, there attendance at the conference speaks volumes.

Studies give a wide array of time frames for when oil production will peak but here is a sampling of some of those studying the issue. The aforementioned, Dr. Cambell a retired oil industry geologist predicts, between 2000-2010 and says in fact it may have already begun. Kenneth Deffeyes, professor emeritus in geoscience at Princeton University and author of Hubbert's Peak: The Impending World Oil Shortage, predicts between 2004-2008; Jean Laherrere, retired French oil executive and consultant predicts between 2010-2025; the International Energy Agency predicts between 2010-2020; and lastly the U.S. Energy Information Administration (EIA) predicts between 2021-2112. Immediately the EIA's figures should jump out at one as either very right or very wrong. Taking a closer look, at the EIA's numbers, the earliest peak, in 2021, is achieved with 3 percent annual growth in crude production and relatively low reserves. The latter peak, in 2112, assumes no production growth and big reserves. These are both completely unrealistic scenarios but to find out just how questionable the EIA's predictions are, all we have one has to do is read the fine print in the EIA's Annual Energy Outlook 1998 with Projections to 2020"; on which these projections are partially based. It reads: "These adjustments to the USGS (World Petroleum Assessment 2000) and MMS (Materials Management Service) are based on non-technical considerations that support domestic supply growth to the levels necessary to meet projected demand levels". In other words it is using "Enron-like" accounting methods. Basically the actual estimates of the worlds current and future reserves used to make the predictions were calculated based on what would be needed to actually meet demand, and are not based on what the data available indicates should be expected.

Another reason the why the most optimistic predictions about petroleum's future availability are suspect requires a little insight into the way the oil game currently works. To meet Wall Street expectations, oil/energy companies' sometimes understate or overstate the totals in their reserves, which directly impacts the companies valuations and stock prices. Approximately 4 months ago, in a scandal that rocked the industry, Royal/Dutch Shell lowered the numbers for its proven reserves twice, for a total of more than 20 percent or approximately 4.9 billion barrels, forcing the resignation of the firm's chairman. Getting clarity on reserves is further clouded by figures provided by oil-producing countries with nationalized industries, according to many analysts. Some countries, especially members of the Organization of Petroleum Exporting Countries (OPEC), have raised reserve estimates significantly without explanation or have reported the same reserves several years in a row, apparently failing to deduct ongoing drilling. During the 80s, estimates of OPEC's total reserves inexplicably jumped from 353 to 643 billion barrels, despite the lack of new oil fields or significant improvements in drilling technologies. The Saudis themselves jacked up their stated reserves from 170 to 257 billion barrels.

The industry also suffers badly from a lack of transparency. For instance Saudi Arabia, will not allow any independent third-party observer to examine their reserves, operations and books. Analysts can't even know for sure exactly how much oil the Saudis produce each day so they are reduced to calculating by measuring tanker traffic. Each OPEC member's daily production quota is based on their total reserves and since each country tends to want to pump more and generate greater revenue, they have a history of overstating the estimates of how much oil they actually have. Although the aforementioned, Matthew Simmons is probably seeking to profit from the coming oil crises, he probably sums the situation up best when he states, "I have studied the depletion issue intensely for too long now to have any remaining doubts about the severity of the issue. Not a soul has been able to produce evidence that the depletion issue is not real, nor have I had anyone at any time lay out a credible way that the world could actually add so much supply within such a short period of time. Sadly, there is no factual data to support the 'sense' that the world will be awash in cheap oil and gas forever."

The most recent oil price shocks came in the 1970's, when at one point oil reached the modern day equivalent of $80 a barrel. These price shocks were mainly political, driven by full scale Arab-Israeli military conflicts, the subsequent oil embargo, and the 1979 Iranian revolution, but more importantly, they were temporary. When world oil production truly peaks, and begins a permanent decline, the effect will be staggering and crippling. Prices will not come back down which will likely induce an extended and ugly, recession and the way of life based on the constant access to cheap and plentiful oil will come down like a house of cards. This change will probably hit the United States the hardest but the entire global economy will be brought to it's knees, as oil currently provides 40% of all energy and better than 90% of all transportation fuel. Though Americans make up only 5 percent of the world's total population, we consume more than one-quarter of the world's fuel/energy.

Assuming the bad news is true there are probably a bunch of environmentalists and other "planet minded" people smirking right now, considering the tenuous state of the industrialized world's profit-driven, wasteful, and gluttonous way of life. The thinking being that since humanity couldn't seem to make the necessary changes to have a sustainable future and healthy environment when it had a chance, soon humanity will have no choice. But like mama used to say, "everybody's laughing until somebody gets hurt!" Precisely because of the failure of those in power to take action or admit that action even needs to be taken, in addition to the failure of the masses to force action or understand the seriousness of the situation before them, the period of transition from a cheap-oil economy to a low-energy localized economy will be more than a little uncomfortable, and characterized by environmental degradation. In addition, many of the things we've come to take for granted simply will become prohibitively expensive or simply unavailable. For instance, by being refined or chemically transformed into the world's fuels of choice (i.e. gasoline, jet fuel, diesel fuel, home heating oil,) petroleum is also behind much of the world's electricity. Other products produced from petroleum include plastic, much of the world's lubricants, organic chemicals, fertilizers, pesticides, medicines, synthetic fibers, and some paints just to name a few.

A Banquet of Consequences

The areas people will probably feel the crunch first, especially in the U.S. are in the areas of transportation and farming (which will also effect industrial manufacturing and retail trade). In the February 2004 issue of Harper's Magazine in an essay titled "The Oil We Eat, Richard Manning author of Against the Grain: How Agriculture Has Hijacked Civilization", details how cheap-oil, subsidy dependent, and inefficient American farming has become. In the early 1960s wheat, rice, and corn plant breeders began relying heavily on farming techniques based on excessive irrigation with water, heavy use of fossil fuels, and chemical fertilizers, especially nitrogen. This period of time is referred to as "The Green Revolution", although it applied almost exclusively to wheat, rice, and corn. As Manning points out, the techniques led to significantly increased yields for the crops it applied to and played a major roll in the world's population increase, but it also played a major roll in serious pollution (chemical fertilizer runoff) and over-farming (to the point where the only way to keep land producing is to use increasing amounts of chemicals), as well as the takeover of the world's farming system by giant transnational corporations.

According to The Land Institute based in Salina, Kansas, in 1940 the average farm in the United States produced 2.3 calories of food energy for every calorie of fossil energy it used. In 1974 (the last year in which anyone looked closely at this issue), that ratio was 1:1. According to the calculations of David Pimentel, an expert on food and energy at Cornell University, if all of the world ate the way the United States eats, humanity would exhaust all known global fossil-fuel reserves in just over seven years, though some of his detractors say he may be off by up to 30% (9-10 years). To illustrate how this is possible one need only examine America's biggest crops. Corn in grain corn form, is hardly edible and serves as a raw material for an industry that manufactures food substitutes (check the labels and try finding a product without "high fructose corn syrup"); you can't eat unprocessed wheat or hay (processed or unprocessed); and we rarely eat unprocessed soybeans. Yet as Manning remarks, "these four crops cover 82 percent of American cropland. Agriculture in this country is not about food; it's about commodities that require the outlay of still more energy to become food…..the grinding, milling, wetting, drying, and baking of a breakfast cereal requires about four calories of energy for every calorie of food energy it produces. A two-pound bag of breakfast cereal burns the energy of a half-gallon of gasoline in its making…..That number does not include the fuel used in transporting the food from the factory to a store near you, or the fuel used by millions of people driving to thousands of super discount stores on the edge of town". 

This negative energy equation is made even worse when we look at large scale commercial meat production in the U.S. As Manning points out, "80% of the grain the United States produces goes to livestock. Seventy-eight percent of all of our beef comes from feed lots, where the cattle eat grain, mostly corn and wheat. So do most of our hogs and chickens….It takes thirty-five calories of fossil fuel to make a calorie of beef this way; sixty-eight to make one calorie of pork…"..and all of this is "federally subsidized to the tune of $15 billion a year, two thirds of which goes directly to only two crops, corn and wheat." Sadly, instead of recognizing this doomed and dangerous approach to farming, developing countries are following, or being forced to follow, this model. As a possibility of what to expect as a result of the developing petroleum situation, social critic and author, James Howard Kunstler, offers some insight, "The whole Archer Daniels Midland model of turning oil into corn into Taco Bell-that whole complex, that system, is really going to be over, ….We're going to be forced to grow more of our food locally and return to a kind of agriculture that really hasn't been practiced here in a long time. A lot of the land that has only had value as suburban development in the past 30 or 40 years is going to have to be reassigned." Kunstler foresees a serious re-organization of our whole system of retail trade and economy, marked by "the demise of Wal-Mart style, big box, national chains" since their profit margins depend on "merchandise made by factories 12,000 miles away" and this won't function in a world of $100-plus barrels of oil.

Shortly after the invention of the automobile, around the turn of the 20th century, car manufacturers (i.e. General Motors, Ford, Chrysler), joined with oil (John D. Rockefeller's Standard Oil) and tire makers to pressured the government to subsidize the automotive industry to the tune of what today, would be hundreds of billion's of dollars, in the form of appropriations for road construction. Many European cities responded to the automobile differently and continued investing in trains, trolleys, subways, and other forms of public transportation. This approach could have take hold in the U.S., which until the middle of the 20th century maintained many train and streetcar systems. However in 1932 General Motors (GM) through a company it created called United Cities Motor Transit (UMCT) began buying streetcar lines in numerous towns and replacing them with diesel burning buses. As Richard Heinberg notes in his book "The Party's Over: Oil, War, and the Fate of Industrial Societies", "in 1936, GM, Firestone (tires), and Standard Oil of California formed National City Lines which expanded the UMCT operation, buying and dismantling the trolley systems in Los Angeles and other major cities. By 1956, 45 cities had been relieved of their electric rail systems. The bus services that replaced them were, in many instances, poorly designed and run, leaving the private auto as the transportation mode of choice or necessity for the great majority of Americans."

"The We must face the prospect of changing our basic ways of living. This change will either be made on our own initiative in a planned way, or forced on us with chaos and suffering by the inexorable laws of nature.  - Jimmy Carter (1976)

While there are a number of existing energy alternatives to conventional oil, including natural gas, coal, nuclear, solar, wind, hydroelectric, and hydrogen, all of them combined won't be able to replace conventional oil if we continue our current patterns of over-consumption (based on resource drain, an Asian needs 10 thousand square meters worth of resources to survive, an American 1150 thousand), and worst then that, we are decades behind in building the infrastructure to support many of the alternatives (For the short list of the energy alternatives click here). The only way to address the coming energy crunch will be through conservation, a major scaling back of our energy usage and population, significant reorganization of our society, and massive redirections of funds towards research and building infrastructure for renewable, sustainable, and cleaner energy sources. But even if we started yesterday we are in all likelihood well passed the point where the coming energy transition could done with a acceptable amount of pain and suffering.

In the short term one can envision any number of scenarios regarding what will be the immediate consequences of oil depletion, none of them pleasant. The first consequence of course being panic and fear at many levels. And unfortunately you can get people to do almost anything when they're afraid and/or uninformed. The general public likely won't understand what is going on and will think it's simply a conspiracy by oil companies, and their dishonest and demagogic leadership, Presidents, Prime Ministers, et al, will probably lie and offer the public someone or something "evil" to blame rather than admit these are the consequences of their shortsighted profit driven designs. Meanwhile common people will likely experience a serious intensification of what we have already been experiencing, imperialist wars for domination of the world's natural resources. We'll also likely experience an attempt by government to cover the oil shortfall with unsafe, polluting, dead-end, but politically expedient, technologies (coal, nuclear, etc). Eventually, it may come to the point where access to oil is tightly controlled by the government and/or many products made from petroleum are only available to the military. That wouldn't come as much of a surprise considering the U.S. military plays such a crucial roll in securing the source of our addiction today. 

It's no accident that the U.S. is currently occupying Iraq (2nd largest known oil reserves in the world); maintains an intimidating and controlling presence in the Middle East in general; used the events of 9/11 to set up a string of military bases in, and alliances with, countries (Afghanistan and any other "stan" you can think of) throughout the Caspian sea region which is believed to house large and virtually untapped oil and natural gas reserves; and that the US has been dispatching Special Forces troops to oil producing or transporting countries throughout Africa, a region that a December 2001 US National Intelligence Council report, forecast will be responsible for 25% of US oil imports by 2015. They are using the cover of the "drug war" partially to protect oil pipelines in Colombia and fighting a proxy war using right-wing political groups and propaganda to oust Venezuela's (member of OPEC, one of top five petroleum exporters to the U.S.) democratically elected President. Virtually everywhere you look and see the heavy hand of U.S. intervention, you can also find a barrel of crude not too far away.

I suppose the average citizen plays a roll in this too. We aspire to and encourage our children to aspire to a future of over-consumption, full of mansions, suburban sprawl, multiple cars, and waste; a kind of future that in all likelihood will not exist. You didn't have to buy that 10-mile per gallon Hummer or SUV. You didn't have to move way out to that big house in the suburbs and commute 60 miles to and from work each day. Hell, you may not have even needed to buy that car at all. But ultimately, people respond to their circumstances and conform to social norms. It should be the job of visionary and responsible leadership to help point the way to a sustainable future, and if they are too cowardly and weak to do so, at least give the people the information and I believe we would do it ourselves. Unfortunately, U.S. leadership is anything but "visionary and responsible", all one has to do is look at the U.S. governments response to our current dependence of fossil fuels and foreign oil. The most recent overhaul of the U.S. energy policy, courtesy of the Bush-Cheney junta, provides billions in subsidies to the nuclear industry; promotes uranium mining technologies that pollute groundwater; arbitrarily reclassifies nuclear waste so it can be disposed of in facilities not equipped to handle it; gives the fossil fuels industry billions in tax breaks for developing supposed new "clean" technologies that are no less polluting than the old ones; waives and/or seriously weakens the Clean Air, Clean Water and Safe Drinking Water Acts; and opens public lands and seashores to fossil fuel drilling. Even the federal Energy Information Administration has found that under the energy bill's policies US oil imports would increase 82.9 percent by 2025. Yes even with all the "Do Not Enter" and "Dead End" signs those driving the car refuse to change direction, in fact they are hitting the accelerator.

Released: June 20^th, 2004
 

Suggested Websites and Links:

http://www.hubbertpeak.com

http://www.oilcrisis.com

http://www.rmfdevelopment.com

http://www.culturechange.org

http://www.rprogress.org 

http://www.renewableenergy.com

http://www.nrel.gov

http://www.berkeleyfood.org

The views and opinions expressed herein by the author do not necessarily represent the opinions or position of Playahata.com.