When will oil peak?

Written By: - Date published: 1:54 pm, January 12th, 2009 - 40 comments
Categories: economy, Environment - Tags:

We’ve seen that oil production in oil fields and countries peaks long before the oil actually runs out, and as individual countries go, so must, inevitably go the world. Once the amount of oil the world is capable of producing starts to fall, things are going to get difficult. Our economy is the use of energy to shape the natural world into more ‘useful’ forms – less energy from oil is going to hurt our economies (and finding the energy from elsewhere will not be easy, as we’ll see). But when will the peak happen?

Estimates vary. The father of peak oil, Marion Hubbert, used four models to predict the peak of US oil production. They’re a bit complicated but you can read about them online. He came up with a set of peak years for the US – 1965, 1967, 1969, 1970. It peaked in 1970. Using these models for world production, researchers have produced dates from as early as 2005 to as late as 2018. These are not just random estimates from random people. Here’s a short list of peak estimates from authoritative sources:

Chris Skrebowski, Editor of ‘Petroleum Review’ (2010), Sadad Al Husseini, former head of production and exploration, Saudi Aramco (2008), Energy Watch Group in Germany (2006), French Government (2013), Association for the Study of Peak Oil (2007), Rembrandt Koppelaar, Editor of ‘Oil Watch Monthly’ (2008), Tony Eriksen, Oil stock analyst and Samuel Foucher, oil analyst (2008), Matthew Simmons, Energy investment banker, (2007), T. Boone Pickens, Oil and gas investor (2007), U.S. Army Corps of Engineers (2005-15), Kenneth S. Deffeyes, Princeton professor and retired shell geologist (2005), Sam Sam Bakhtiari, Retired Iranian National Oil Company geologist (2005)

We won’t actually know when oil has peaked until some years later. Right now, we know oil production is falling from an all-time high in July but it is impossible to say whether this is the underlying, geologically inevitable peak or the consequences of the super-spike in oil prices we saw this year. Ultimately, the actual peak date doesn’t matter because economics and politics take charge.

Here’s how David Strahan describes the economics of approaching the peak in his 2006 ‘The Last Oil Shock’:

If oil ever strays any distance into its ‘real’ price range it cannot stay there long because of the economic havoc it would wreak. Rising energy prices stoke both inflation and recession, so the last oil shock may mean a return to the stagflation of the 1970s, only very much worse. Soaring costs, bankruptcies, and unemployment would lead to economic slump and collapsing demand for petroleum. The oil price would then subside but, given the reason, this would be no consolation. If the economy and oil demand were to recover once more, they would soon hit the oil supply ceiling again, which would be falling all the while. The process could happen many times over or simply smear into an extended depression.

And this is exactly what we have seen over the last few years. Oil prices broke record upon record from 2004 on and this sharp increase then turned into a super-spike when speculative moneymen saw the underlying tightness of supply and high demand. The price just kept going up and up until the world economy broke (I’ll look at the relationship between the oil shock and the sub-prime crisis, now credit crisis, in the next post). We’re going to see this cycle continue.

superspike

Another important factor to consider is that it is not in the interests of oil-producing nations to produce as fast as they can. While the Western oil companies, driven by the need for immediate profit, have always pumped as much as possible, and have seen their output peak, state-run oil producers in the Middle East and elsewhere have aimed for maximum value over time. Basically, it’s not in Saudi Arabia’s best interests to pump all it can now to keep prices down only to see its production capacity collapse sharply later. So, the Saudis, despite record oil prices this year, were not pumping full-tilt – they’re happy to keep their oil reserves for later spikes. The effect for the world will be an earlier peak at a lower level.

Also, the peak and its approach will see countries scramble to secure their own supplies. Exporters will be sure to make sure they have oil for their domestic demand first, reducing amount of oil available on the export market. Powers like China and the US have been pursuing their respective merchantalist and military-led strategies to get friendly governments in charge in oil-exporting nations, guaranteeing their preference for supply. All of which doesn’t bode well for a small, oil-importing country isolated in the South Pacific.

We won’t wake up one day to find there isn’t enough petrol for the car. Instead, there will be what the British Chief Scientist called a “corrugated plateau” in production, output falling but bumping up when the global economy recovers only to be hammered again by another price super-spike. But that doesn’t make things better. It can make things worse. Like the frog in a gradually heating pot of water, humans are very poor at dealing with problems that emerge slowly and require counter-measures to be taken long before crisis strikes. We see a super-spike end and relatively low prices return and our tendency is to think ‘problem solved’ even though it is merely a temporary respite, caused by oil prices sparking a global recession. That may lull us into not taking the mitigating actions needed, even as oil production falls. Before we know it, the oil will be running short and we won’t be prepared.

Even if we act now it is too late to avoid any pain. As the US Department of Energy concluded:

“The world has never faced a problem like this before. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal, coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary”.

We can walk into this blindly, or we can get to work now and do what we can to prepare.

40 comments on “When will oil peak? ”

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  1. Clifford J. Wirth 1
    12 January 2009 at 3:42 pm

    Here are the impacts of Peak Oil.

    With increasing costs for gasoline and diesel, along with declining taxes and declining gasoline tax revenues, states and local governments will eventually have to cut staff and curtail highway maintenance. Eventually, gasoline stations will close, and state and local highway workers won’t be able to get to work. We are facing the collapse of the highways that depend on diesel and gasoline powered trucks for bridge maintenance, culvert cleaning to avoid road washouts, snow plowing, and roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, large transformers, steel for pylons, and high tension cables from great distances. With the highways out, there will be no food coming from far away, and without the power grid virtually nothing modern works, including home heating, pumping of gasoline and diesel, airports, communications, and automated building systems.

    Documented here.
    http://www.peakoilassociates.com/POAnalysis.html
    http://survivingpeakoil.blogspot.com/

  2. tsmithfield 2
    12 January 2009 at 3:56 pm

    Steve,

    Good article. However, I think there is some room for hope.

    I don’t think things are as serious for NZ. For a start, we have huge untapped oil resources. As the oil price goes up, it becomes more viable to tap into these. If we were to become an exporter of oil in the future, then we will not be reliant on overseas oil.

    Secondly, we have vast amounts of coal. There is technology already in use that turns coal into diesel. http://news.nationalgeographic.com/news/2006/04/0418_060418_coal_energy.html
    As the price goes up, this sort of technology becomes more viable.

    Another point is that a lot of car manufactures are now exploring electric car technology etc. So, the world will undoubtably become less reliant on oil for transport, meaning that more is available for other uses. Also, as the price goes up, techologies for recycling plastics etc will become more viable meaning less need of oil in manufacturing.

    After all, the bronze age didn’t end for a lack of bronze.

    Probably our worst fear is that the Americans will blame us for some terrorist activity or another and invade us for the oil.

  3. Felix 3
    12 January 2009 at 4:01 pm

    “If we were to become an exporter of oil in the future, then we will not be reliant on overseas oil.”

    We are currently exporting a lot of dairy. Does that make dairy in NZ more affordable?

    I fail to see how selling our oil on the global market is any different.

    edit: the comment I was replying to has disappeared.

  5. tsmithfield 5
    12 January 2009 at 4:09 pm

    Yeah, why did my previous comment disappear? Something came up telling me it was marked as spam. Can’t understand why. Could someone look into this please.

    Felix “We are currently exporting a lot of dairy. Does that make dairy in NZ more affordable?”

    But at least we have no problem getting dairy. My comment (the ones that disappeared) referred to us being able to get oil for our own use. The scenario that Steve was painting was that some countries may hoard it and we may be left out in the cold.

  6. sweeetdisorder 6
    12 January 2009 at 4:15 pm

    Good God Clifford. J. Wirth, what a positive fellow you are, a true half glass full sort of person. Yeah oil will run out, or at least to a position where it is not the dominant source of fuel anymore. Guess what, another option will take its place and life will carry as as before. I don’t believe this Mad Max type existence as speculated by Cliff here will happen. As history has shown many times, humans are nothing but inventive, and the worst of times tend to bring out the best ideas.

    The high prices we were paying for petrol just a few weeks ago were the result of a speculative bubble, not peak or peaking oil. So, yes, oil will run out some day, but we ain’t all going to go down the the Thunder Dome come Friday night.

  7. J Mex 7
    12 January 2009 at 4:20 pm

    Clifford J Wirth – The impacts of peak oil look spookily similar to the effects of Y2k. You left the bit’s off about planes falling out of the sky, mass starvation and people eating each other, but, much the same.

    Helpful resources for those concerned about y2k can be seen here:

    http://www.countdown.org/y2k/prepare_2000.htm
    http://www.highbeam.com/doc/1G1-21263551.html

    Other previously useful pages are currently offline.

  8. Pascal's bookie 8
    12 January 2009 at 4:32 pm

    tsmithfield:

    ” As the oil price goes up, it becomes more viable to tap into these.”

    “As the price goes up, this sort of technology becomes more viable.”

    I’m just a man in the stand as it were, with a lot of this stuff sailing merrily over my head, but aren’t these sorts of effects of ‘peak oil’ more like symptoms of the problem, than solutions to it?

    The way I see it the problem is not that oil is becoming more scarce, but that the things we use oil for are going to become more expensive.

    The fact that the increased price of oil makes new ‘ways of doing x‘ viable, just means that ‘doing x is now more expensive. Which is the problem. Innit?

    We certainly didn’t run out of bronze, but we replaced it because we found better cheaper alternatives. Once you know how to work iron, why bother making copper alloys? Maybe we’ll find some way of doing all the things that we do with oil in a similar way, but the incentives to do so have always been there.

  9. Tim Ellis 9
    12 January 2009 at 4:38 pm

    This is an interesting topic SP.

    There’s little dispute that oil production will at some stage peak before declining, and that the oil price will increase. A lot of your previous articles have been really on the money in that sense.

    I also agree with Felix that finding new oil reserves in New Zealand won’t mean lower petrol prices here (as we’ve seen in dairy). Certainly in the OPEC states oil prices are much much lower than what we pay here, but that’s because the states heavily subsidises fuel for domestic use. They manipulate international oil prices and cushion their own populations from the effect of that manipulation. OPEC is a cartel and has managed to get away with behaviour that if Fonterra tried likewise with international dairy prices, would see WTO sanctions slapped against New Zealand faster than you can blink. Mrs Clinton talked about taking anti-trust action against OPEC when she was running for the democratic nomination. I suspect a lot of that talk was for domestic political gain. It will be interesting to see if that talk continues while she’s Secretary of State.

    There are a number of drivers of international oil prices. The state of existing reserves are just one of them. International geopolitics and demand from China and India (particularly in the last ten years) have been the major cause of oil price fluctuations.

    The real issue though is how long before oil runs out and what actions we take to mitigate reduced oil stocks. A year ago a lot of people including the Greens were claiming that oil would rise above $100 a barrel, and would stay there. They said peak oil had already arrived. That just didn’t turn out to be correct.

    There’s a big difference between a technology reaching its natural end of life (oil-based energy, at some point in the future) and panicking about its immediate demise.

    I’m personally quite relaxed about oil stocks running out. I don’t believe that it will happen overnight. I don’t think we have a crisis on our hands. I think it will happen steadily and that new generation will come on-stream to replace current energy needs. There might be some last gasps from OPEC states who will see their muscle diminishing (which will cause the real problems) but I don’t see it causing global riots or major poverty.

  10. Tim Ellis 10
    12 January 2009 at 4:48 pm

    With increasing costs for gasoline and diesel, along with declining taxes and declining gasoline tax revenues, states and local governments will eventually have to cut staff and curtail highway maintenance.

    An interesting idea Clifford but not very realistic. On what basis do you say that gasoline tax revenues decrease?

    Highway maintenance doesn’t have to be paid for by fuel excise. Technology allows states to charge for road use in all sorts of ways, other than fuel excise (which is the most common way for private motorists in New Zealand at the moment). Road user charges pay for road maintenance. So too do road tolls, which are common globally. Even if your argument that roads are being used less, your line doesn’t stack up. Road wear (and maintenance) is a function of road use. If roads are being used less, then they need less maintenance.”

    “Eventually, gasoline stations will close, and state and local highway workers won’t be able to get to work.

    There are plenty of alternative jobs to working in a gas station, even if your premise is correct. It’s relatively unskilled labour. There’s no shortage of demand for unskilled labour in western countries. It’s why factories have been set up in poorer countries for many years, where there is a supply of unskilled labour.

    We are facing the collapse of the highways that depend on diesel and gasoline powered trucks for bridge maintenance, culvert cleaning to avoid road washouts, snow plowing, and roadbed and surface repair.

    When the highways fail, so will the power grid, as highways carry the parts, large transformers, steel for pylons, and high tension cables from great distances. With the highways out, there will be no food coming from far away, and without the power grid virtually nothing modern works, including home heating, pumping of gasoline and diesel, airports, communications, and automated building systems.

    No we’re not, at least not in New Zealand or any country I’ve visited (and I’ve visited many countries). More money is being spent on road building and road maintenance than ever before. Food will still arrive at the supermarkets for people to buy.

  11. Chrisburger 11
    12 January 2009 at 5:13 pm

    The logic of this article is a little on the bunged up side.

    The super-spike of oil (and just about all other commodity) prices in 2008 was the result of excessive liquidity ion the marketplace casued by rapidly increasing savings from developing nations trying to find a wealth storage vehicle.

    Becasue these nations (China, India, the Middle East) didn’t have very mature local financial markets, it founds its way into the western financial system and fuelled the houisng bubble, which began to burst in 2006. Funnily enough, it’s around this time that commodity prices went through the roof. Why? Because all this excess cash had to go somewhere and it went into the trading of futures, most notably, oil, but also metals, grains, dairy etc.

    When the financial crisis hit, liquidity dried up and the price of these futures collapsed.

    So just to emphasise, the super-spike in oil prices has virtually nothing to do with demand and supply. What we should be concerned with is where this money goes when liquidity returns to the financial markets, as it inevitably will. Developing financial markets to accommodate this new wealth is imperative.

    Peak oil had nothing to do with this price spike. If you believe it did and fall for this Strahan guy who SP quotes, then you haven’t got a grasp of the international financial system. Instead, you’re finding causation to suit your wider political objectives.

  12. Chrisburger 12
    12 January 2009 at 5:20 pm

    I tried to post this but when I clicked submit it all just disappeared.

    Anyway, the reason for the price spike is not peak oil, it is the excess of cash in the global financial system (liquidity) as a result of the rapid economic development of developing countries. These savings needed a home (wealth storage) and left their own shores because of undeer-developed of non-existent domestic financial marktes.

    They initially fuelled the housing bubble in the US and other western countries, as Western financial institituions were suddenly awash with cash and needed to lend the money to get a return. Once the bubble began to burst in 2006 (see chart), the money flowed into commodities and the futures market there, causing a super-spike in prices. It wasn’t just oil, but also metals, grains, dairy etc. It was across the board.

    Anyway, once the housing-poison caught up with the financial system, liquidity dried up almost overnight and the price of commodities crashed. It had nothing to do with “peak oil” and those that believe it did are simply wrong. It had everything to do with the global financial system and we should be doing everything we can to develop these markets so they can be wealth storers in the future, otherwise we will get across-the-board commodity price spikes again.

  13. jake 13
    12 January 2009 at 9:22 pm

    Peak oil will come, there is no doubt.

    But every premature shout about it diminishes the value of the idea.

    And I have to add, as Tim has pointed out, that the world is more likely to adjust than collapse when it does loom.

  14. RedLogix 14
    12 January 2009 at 9:23 pm

    Yeah oil will run out, or at least to a position where it is not the dominant source of fuel anymore. Guess what, another option will take its place and life will carry as as before.

    I don’t think we have a crisis on our hands. I think it will happen steadily and that new generation will come on-stream to replace current energy needs.

    Currently about 86% of all human energy use is from fossil fuels (oil/coal/gas). (The balance is from nuclear 6%, biomass 4% and renewables 4%). Fossil fuels are actually just stored energy, that took millions of years to create with no human investment or economic input. All we have done is spend a little extracting them from it’s underground reservoirs. It is in essence a free gift from our planetary past. (And while we are framing this discussion in terms of oil, peak gas is not far behind, and while coal reserves are large increasing their use is dramatically expensive in terms of CO2 emissions.)

    It is very unlikely that nuclear fission power can be increased much more than about 4-5 times it’s present level, but it too is subject to it’s own production peak. Nuclear fusion despite decades of research and billions of dollars, remains as elusive as ever.

    Increasing the biomass fraction is equally problematic. There are many proposals to increase this portion, but already it undesirably competes with food production. Again increasing this fraction 3-5 times seems plausible, but still way short of substituting for falling fossil fuel production.

    That leaves renewables to fill the gap. Of the 4% currently produced, 3% is hydro, which plateaued a long time ago. Most of the good hydro sites are already used. This means that all other renewable sources currently account for less than 1% of all energy production. The reason why it is such a small fraction at present, is that capturing solar energy (directly or indirectly via wind/tides etc) to produce electricity is an expensive process. Essentially we have to start paying to get what we have been extracting for free from the earth until now.

    Ramping up solar renewables from 1% to fill the gap resulting from both increasing total demand AND declining fossil fuels production requires a monstrously huge investment, an investment that is both incredibly expensive and disruptive and demanding of enormous amounts of energy itself.

    There are no other plausible energy that we know of, nor is a sane strategy to assume that human ingenuity will discover something entirely novel and practical in exactly in time to substitute for declining fossil fuel production. The idea that ‘something will turn up’ really is childish magical thinking.

    Our civilisation is like a startup business, one that had the great good fortune to inherit a great wad of capital (fossil fuels) to develop a business based on a sustainable, viable basis (renewables). Unfortunately the startup capital we initially thought was both limitless and free, turns out to be both limited (peak oil) and costly (AGW). Worse still we have frittered about half of it away on junk and trivia, without having much in the way of a real business to show for it.

    And our banker has just called to say that he doesn’t like what he is seeing and has ramped up the interest rate.

    Basically our business either has to start making a future for itself, or be run out of town. The directors have to start concentrating on what is important here.

  15. J Mex 15
    12 January 2009 at 10:05 pm

    “Basically our business either has to start making a future for itself, or be run out of town. The directors have to start concentrating on what is important here.”

    Maybe. Or maybe our business is just about to get hammered by a better, more innovative startup. The same way that the steam innovators turned the then engine of the world into a recreational plaything. Repeat with the combustion engine.

    Oil will become obsolete. But not because we run out.

  16. Pascal's bookie 16
    12 January 2009 at 10:13 pm

    “The idea that ‘something will turn up’ really is childish magical thinking.”

    It looks like the underpants gnomes at work again

    Phase 1: Peak oil
    Phase 2: ?
    Phase 3: Everything is fine!

  17. J Mex 17
    12 January 2009 at 11:42 pm

    Not really. If peak oil is really going to cause the price of oil to rocket, or even increase permanently, then the rewards for an equivilent alternative source of energy are stupendous.

    I have faith in the minds and the greed of those who might tap the tar sands of Alberta, the vast seas of frozen natural gas, the rays of the sun, the energy created by bacteria, the ever present tidal flows or any number of energy sources which become cheaper, more efficient and more viable each day because of people who want to cash in on the next big energy source.

  18. SPC 18
    13 January 2009 at 12:49 am

    The problem is the boom bust nature of oil price peaks creating too much of a risk for those looking at alternatives (as we discovered with synthetic petrol during Think Big). Those doing so will struggle unless their product is competitive (or they can sustain losses) at the floor level the oil price falls back to in any downturn.

    Thus the free world is reliant on some US or EU government decision to subsidise self sufficiency (and or Japan and China etc) programmes – as part of providiing their people with some economic security.

  19. rainman 19
    13 January 2009 at 1:50 am

    J Mex: “I have faith…” in the smart people (to paraphrase).
    So do I, actually, and I’m relatively on the doomer end of the scale. I just don’t have faith that the mythical They will find a solution that will
    – deliver sufficient energy to continue growth as usual,
    – in a form that is easy for us to adapt our infrastructure to,
    – and in a timeframe suitable for us to avoid any seriously adverse effects.

    That would be Faith’s crazy uncle, Unrealistic And Irrational Optimism.

    Compare the process of aging. Great strides have been made over the past centuries in applying technology to increasing longevity. Yet we still all grow, peak in various capabilities, decline, and die. Technology can address the issue, even make some noticeable impact, but can’t change the game.

    Besides, we have not yet evolved the politics for this problem.

    RedLogix – good analogy.

  20. J Mex 20
    13 January 2009 at 9:28 am

    Kind of rainman. I actually have faith in the greedy people.

    Your analogy regarding ageing is deeply flawed. If you and I were having this argument 200 years ago, we would be discussing horses as a means of transportation and wood, wax and peat as the means of energy and lighting. Would you then be saying that technology can’t change the game? – repeat with coal, steam, oil and nuclear.

    It is technology that completely changes the game. 100 years ago, you and I would be communicating via letters sent by ship. Those letters, when they arrived months later, would no doubt contain your concerns that the easy coal had all been reached and it was all downhill from here.

    Today most of the world is communicating instantly via a medium that literally did not exist 20 years ago. That technology may only allow you to live 50% longer than you would if you had been born 100 years ago, but it does allow you to communicate and travel an order of magnitude faster.

  21. c*mmie mutant traitor 21
    13 January 2009 at 10:40 am

    And what if horses had all died out from a virulent plague 400 years ago? Would that have resulted in the amazingly rapid early invention and massive scale construction of steam engines and associated machinery in time to avert mass starvation from the loss of horses’ contribution to farming and transport? Or would it have been the worst disaster since the black death?

  22. Matthew Pilott 22
    13 January 2009 at 11:27 am

    c*mmie mutant traitor: what a way to destroy an analogy. I like it very much.

    What every single ‘person of faith’ in technology fails to recognise is that when iron replaced bronze, or the ICE replaced the steam engine, we weren’t running out of steam (or bronze). Over decades or centuries, technology replaced an older technology, but there was no external imperative, other than our natural drive for better technology (or war). there was nothing stopping us from using the old technology.

    That is the problem of peak oil, and you all miss it entirely.

    Miss that point, my friends, and your analogies and faith are misplaced, misguided and deeply, deeply flawed.

  23. Joanna 23
    13 January 2009 at 11:49 am

    For all those people out there who think technological adavnces will “save us” (and I happen to cautiously be one of them) I hope you voted for a government that will increase funding for the researchers doing this work and not scrap the R&D tax credit. if not – sorry but innovation doesn’t come cheap and if we don’t develop some of our own here in NZ what on earth makes you think we will be able to afford the licenses for technology overseas when it becomes crucial?

  24. J Mex 24
    13 January 2009 at 12:24 pm

    And what if horses had all died out from a virulent plague 400 years ago

    Then Oxen and Donkeys might have become the engine of the world. The camel breeders would probably be in for a windfall. Sea trade routes would be as important as ever. And polo would be a slower paced game until racing donkeys were bred. I also suspect that those who managed to live happy lives without their culture ever laying eyes on a horse would carry on as normal.

    This is a fun game. Your turn. What would happen a meteor wiped out all the humans 400 years ago. Or what if humans never invented the wheel?

    I know that Matthew Pilott is excited about your analogy but it isn’t even close to Peak oil. Peak oil doesn’t mean oil has dissapeared (like the terrible tragedy that befell your horses), it means oil production at current levels can’t keep up with demand and is likely to get more expensive over the next 20 or 30 or 50 years as the imbalance continues. That means at least a couple of things happen. a) Alternatives become more profitable – e.g the vast oil sands of alberta, tidal, hydrogen, frozen natural gas etc. And b) existing supplies of liquid oil (i.e all the wells that are currently being drilled and capped) become viable and profitable. c) People ditch their V8’s in favour of Prius’

    Your horse thought experiment is the same as all the store of oil being vaporized by a metor. What would happen then? Probably some mad max scenario. But that is not what is happening with oil. The old technology continues to work, it is just more expensive.

    You are correct about the external imperitive Matthew – The amazing thing is that throughout our history, most of the great leaps forward have happened not because of neccessity (the automobile wasn’t invented because our beasts of burden were dying out or because trains were legislated out of existence). This only stengthens my argument rather than weakening it. The advances were made because someone wanted to do something a better way, or saw an opportunity to make money out of it. The new technology was invented WITHOUT the old technology getting more expensive for the user. If peak oil causes the old technology to get more expensive then the external imperitive (read: the opportunity to make a pantload of money for an alternative) only adds to the impetus.

  25. Draco T Bastard 25
    13 January 2009 at 2:16 pm

    You know – reading columns like this one proves to me that there really are people who believe in magic. People who think that you can get something out of nothing. People who think that there the normal cost price for everything is zero.

    As conventional oil peaks and declines the cost of usable energy goes up making unconventional sources economically viable. This doesn’t mean that there’s going to be an adequate supply of energy. If there was then the price wouldn’t go up. Quite a large amount of modern life is going to become nonviable. We’ll no longer be able to grow our economy and increase wealth because the energy needed to do so won’t be there.

  26. SPC 26
    13 January 2009 at 3:19 pm

    Draco

    There may be a constraint on the economy because of a limit on supply of energy, or it may be a constraint on the economy through more of it being premised on the work of supplying energy to rest of it. Either way, the end of a cheap (non renewable energy source) energy is going to negatively impact on growth.

    As I tried to point out earlier, it is going to be commercially difficult for private capital investors to develop new technology alternatives while the oil price boom bust cycle continues. And the continuance of that cycle is the best economic analysis of this matter.

    There are always new technology options, but the higher cost (stagflation) and the reluctance of investors to commit to them sufficiently prior to permanent shortages which guarantee profits means only government can ensure economic security (continued energy supply) in the transition to a post oil world.

  27. Matthew Pilott 27
    13 January 2009 at 4:23 pm

    You are correct about the external imperitive Matthew – The amazing thing is that throughout our history, most of the great leaps forward have happened not because of neccessity (the automobile wasn’t invented because our beasts of burden were dying out or because trains were legislated out of existence). This only stengthens my argument rather than weakening it.

    Jmex, that doesn’t strengthen your argument – the argument here is that some technology that is (for all intents and purposes to our eyes) magical will come along and save us. Think about Redlogix’s stats – what could start to replace 84% of our energy resource and the multi-trillion dollar infrastructure desgined to utilise it?

    You believe that because these advances happen unpredictably makes it more likely that it will happen now that there’s a necessity – I’m afraid I disagree. Fleming would be as equally likely to have discovered Penicillin when it was in reality, as he would have been if there was a further iteration of the black plague to make it all the more necessary.

    If the leaps and bounds are, by nature, unpredictable, then banking on one because we want and desperately need one strikes me as a futile and naive attitude.

    You calmly state the outcomes of peak oil in A, B and C, but I’d call those the understatements of the topic thus far. You forgot the increasing warfare over resources, and the painful economic contraction/stagflation that is looking better than even odds. Or, to summarise, the fundamental change in pretty much everything we do.

    Fervently wishing for an advance that no respectable bookie would give you odds on isn’t much help I’m afraid.

    CMTs analogy wasn’t far off – but for the pedant let’s revise it to ‘a plague that severely reduced the viability of horses’ offspring to the point where the number of horses couldn’t keep up with demand for their labour in an extremely short space of time, relative to their use’. Still doesn’t mean that some bloke or lass would have been able to whip up a model-T 200 years earlier, no matter how much they needed a replacement.

    P.S if we’d never invented the wheel, all our tyres would be square, but the roads would be severly corrugated to give you a smooth ride. Easy…

  28. rainman 28
    13 January 2009 at 7:17 pm

    J Mex: Your analogy regarding ageing is deeply flawed.

    Um, why?

    If you and I were having this argument 200 years ago, …. Would you then be saying that technology can’t change the game?

    But I’m not saying technology can’t change the game, it might. There is just no reason that this has to occur, and I’ve shown a trivial and somewhat silly example of a human problem where it does not. Your argument appears to be that not only will a technofix happen, it always does. (“Problem? Just add Greed and some clever bugger will invent a New and Better Way!” Sorry.)

    Uh, maybe. But you have a long way to go to prove that this is even likely in this case. Hint: because it has happened before is not necessary and sufficient proof that it will again, let alone that it always will.

    (Yeah, yeah, I know: I’m saying proof and you’re saying faith, but it’s been a long day and you know where I’m heading with this).

    To put my example another way: if all it takes is greed, then why don’t we have renewable bodies (mechanically, on a total body basis, I mean) and uploaded minds, yielding effective immortality? The inventor of that would make a metric shitload of cash – a huge incentive. And it’s (arguably) desirable and would make life better and all – who doesn’t want to live forever? Now I’m not saying it will never happen, or that it can’t happen, but that, on the balance of probabilities and considering the current tech, it probably isn’t going to be available in my lifetime, so I won’t plan assuming that it will.

    We may find the wonder energy source in time to save the day and preserve our happy-go-motoring lifestyle, and Jim Kunstler calls it. But we may not. The issue is which is more likely, in the real world, and what we should do to manage the risk.

    And we humans are very very bad at that.

  29. Dr.Strangelove 29
    13 January 2009 at 9:05 pm

    For those who may be interested ..

    Deffeyes, Kenneth, (2005). “Beyond Oil: The View from Hubbert’s Peak”. Hill and Wang.

    Kenneth Deffeyes has been a geologist at BP where he met Hubbert, and Professor of Geology at Oregon and Columbia Universities.

    In his opinion, peak oil occured late 2005 or early 2006. He presents Hubberts analysis in plain english and has an infectious sense of humour.

    Strahan, David, (2007). “The Last Oil Shock: A Survival Guide to the Imminent Extinction of Petroleum Man”. John Murray.

    A more recent journalistic take on much of the material put forward by Deffeyes.

    Darley, Julian, (2004). “High Noon for Natural Gas”. Chelsea Green Publishing Co.

    Julian Darley convincingly demonstrates in this important book, that the long-range future for gas is
    equally as bleak as that for oil, especially in north america. See

    https://www.greenbooks.co.uk/Media/AIs/HighNoonNaturalGasMediaAI.pdf

    Ruppert, M.C., (2004). “Crossing the Rubicon: The Decline of the American Empire at the End of the Age of Oil”.

    One of the most concise accounts of the effect of peak oil on geopolitics.

    “Australia’s future oil supply and alternative transport fuels”, (2007). Standing Committee on Rural and Regional Affairs and Transport, Department of the Senate, Parliament House, Canberra.

    All, bar the last, can be found in Wellington Central Library.

  30. c*mmie mutant traitor 30
    14 January 2009 at 11:31 am

    Then Oxen and Donkeys might have become the engine of the world.

    It takes them about four years to reach maturity, and there’s a limit to how quickly you could breed them. It would take decades to breed enough to replace the former population of horses, unless you’re proposing they develop large scale accelerated aging clone plants with medieval technology; what happens in the mean time? And if we’re using oxen as an analogy for tar sands etc, then the plague will eventually mutate to kill off other draught animals.

    Sea trade routes would be as important as ever.

    Not if people have no practical way to get their goods to the ports. Or to get the raw materials to make the goods. Or food to eat while working, and to provision the ships.

    I also suspect that those who managed to live happy lives without their culture ever laying eyes on a horse would carry on as normal.

    Just as cultures who don’t use oil will continue to manage after the peak. Unfortunately our culture isn’t one of them.

    oil production at current levels can’t keep up with demand and is likely to get more expensive

    Expensive isn’t the issue; we won’t be able to get as much oil as we need at any price, and the amount available is going to keep dropping.

  31. George.com 31
    14 January 2009 at 9:44 pm

    Seems we have here two polemics of “all will fall apart” and “technology and greedy bastards will miraculously save us”. My pick is somewhere in the middle. The world may not slip back 300 years in development however those who think all will be sweetness and light will be in for a rude dose of reality. The world will adapt to repeated oil shocks but it will be an uncomfortable and bumpy adaption. New technologies may be available now or shortly that have the potential to alleviate some of the gaps in oil production. However, there are economies of scale to consider and, more importantly, infrastructure development. Changing over a national infrastructure in short time is not easy nor cheap. During the period peak oil is hitting do not expect easy economic times either. There may not be nice large surpluses we can siphon off to use for introducing new technology. A good case study to examine: Cuba. They had their oil shock when the USSR collapsed. Their oil supply was cut off in a period of months. The economy crashed and went through a hell of an unheavel. people adapted and the economy slowly recovered. But, people went through misery and hell before things started to come right. Even now the country still shows scars of their oil shock. It is not sufficient to directly extrapolate the Cuban experience to the rest of the world. It does give us some pointers however.

  32. George.com 32
    14 January 2009 at 9:52 pm

    Whoops, one thing I forgot. The energy and raw materials needed to construct the alternative energy sources, infrastructure and consumer products that run on the alternatives. Apart from probable economic down turn, curtailing the finance available for alternative energy, we will also be experiencing some energy crunch, curtailing the amount of energy we can expend in developing the alternatives. We may be trying to restructure our national/global energy demands during a ‘perfect storm’ of financial and energy recession. Oh well, we can stick our fingers in our ears and convince outselves a magic wand will appear to usher us all in to a post oil nirvana.

  33. George.com 33
    14 January 2009 at 11:44 pm

    These 2 resources also make interesting reading. They suggest the decline of
    the Soviet Union was down to internal peak oil. That is, peak oil led to
    economic down turn which collapsed the USSR.

    http://www.hubbertpeak.com/reynolds/SovietDecline.htm
    http://www.cge.uevora.pt/aspo2005/abscom/Abstract_Lisbon_Kolodziej.pdf

    “To suggest that the break of the Soviet Union caused the decline in oil
    production would be like saying the energy crises in the US caused the US
    oil production decline. Incentive to produce oil, even if on the black
    market, always existed. Most likely within the conflicting statistics, the
    period of the break of the Soviet Union was an oil crisis period. We know
    that the West went through two severe oil crises, which the Soviet Union and
    Eastern Europe never felt. It was only a matter of time for them finally to
    have their own oil crisis. They simply insulated themselves from it for
    awhile. The fact remains that former Soviet oil production by 1992 was 20%
    less than Soviet and Eastern Europe oil consumption in 1988. Furthermore,
    incredibly, oil production in the Soviet Union declined before consumption,
    which makes a cause and effect scenario of an economic crisis causing an oil
    production decline impossible. The more likely cause and effect scenario is
    an oil crisis caused by scarcity leading to an economic down turn and
    eventual consumption reduction. This means that these economies were forced
    into an oil crisis. They had to reduce oil use. However, with vastly higher
    oil prices, actual former Soviet and Eastern European oil consumption
    declined by about 50% from 1988 to 1995.”

  34. Dr.Strangelove 34
    15 January 2009 at 1:33 pm

    As much as I regret to differ from my esteemed colleague “George.com”, the following may be of interest (adapted from “Beyond Oil” by Kenneth Deffeyes, p. 11-12).

    Who gets the credit for causing the collapse of the Soviet Union ?

    1. Ronald Reagan, for promoting Star Wars
    2. The Pope, for being Polish
    3. Gorbachev, for allowing dissension
    4. the KGB, for being bad guys
    5. Saudi Aramco, for lowering oil prices ?

    The Soviet Union, up to 1985, was exporting two million barrels of oil a day. The hard currency from oil allowed the Soviets to import items in short supply, from electronics to soap. At that time, Soviet oil production was larger than Saudi production by a factor of three, but Saudi Aramco had much lower production costs. Saudi Aramco resorted to a familiar tactic: a price war. They flooded the world with oil and drove the world price of crude oil below the Soviet cost of production and transportation. The severe shortages that developed within the Soviet bloc are history. After six years without hard currency, the Soviet Union collapsed. Control of the world’s dominant energy source carries enormous power.

    It might also be worth noting that Bill Casey, Reagan’s head of CIA, had previously been head of the Securities and Exchange Commission (among other accomplishments) where he had something of a reputation as a ‘fixer’.

  35. George.com 35
    16 January 2009 at 12:50 am

    Robert Ayres had the following comments (below) on the matter.

    There is the suggestion that the US used oil as an economic weapon against the USSR. The interesting thing however is the link to assumptions about when Soviet oil production might peak. There were pressures on the USSR to increase production (US designed perhaps). There are demands today to increase oil, at least until very recently. The Soviets could keep up with increased demand for a period it seems but at a point, according to the work cited above, reached a peak oil scenario. Relatively quickly thereafter things started to fall apart (Wasn’t Reagan clever, Russia people have done sooooo much better following the collapse of the USSR, eh. Well, haven’t they? Um, maybe, perhaps????).

    It seems that the CIA took Hubbert’s methodology seriously and applied it to the USSR (Anonymous 1977). This report predicted that Soviet oil production would peak in the early 1980’s. In fact there were two peaks, the first in 1983, at 12.5 million barrels per day and the second in 1988 at 12.6 barrels per day. Since then production has declined steadily. It seems likely that the Reagan administration, which took office in 1981, bearing in mind the economic havoc produced when US production peaked in 1981, followed by the Arab oil embargo and the “oil crisis” of 1973-74 and the deep recession that followed, decided to use the “oil weapon” to destabilize the USSR. Reagan embarked on a major military buildup, putting the Soviet Union under pressure to keep up. Meanwhile, declining prices after 1981 forced the USSR to pump more oil to supply its clients in Eastern Europe and to sell in world markets for hard currency. Then in 1985 Regan persuaded Saudi Arabia to flood the world markets with cheap oil. Again, the USSR had to increase
    output to earn hard currency. This led to the second peak in 1988. Two years later the USSR imploded (Heinberg 2004) pp 40-41.
    http://www.cge.uevora.pt/aspo2005/abscom/ASPO2005_Ayres.pdf

    [lprent: The system thinks that you’re spam because you put in raw links. Either login and use the link tool in the wsiwyg comment editor. Or read this about linking cleanly. Please don’t submit multiple times. We get around to cleaning them out eventually and releasing to the public.]

  36. Dr.Strangelove 36
    16 January 2009 at 5:09 pm

    “when US production peaked in 1981,”

    .. I think that should read 1971.

    Apart from which I see no disagreement.

    Cheers.

  37. SBlount 37
    17 January 2009 at 1:24 am

    LS9 is a San Francisco company that has commercialized a strain of E. Coli that excretes crude oil. They are currently producing a barrel a week for US$50 and currently would need an installation the size of Chicago to supply the US energy requirements (Although I can picture portable units where you can throw a banana skin in the back of the DeLorean and drive to work). If successfully scaled, this technology would solve global warming and peak oil.

    Yet again it looks another likely win to the ‘even though I don’t know how, it will be solved’ brigade, who currently have a 100% record over the catastrophists throughout history.

  38. RedLogix 38
    17 January 2009 at 8:53 am

    SBlount,

    LS9 (and any of a number of similar ventures) are all just indirect solar energy harvesters.

    The energy source for the diesel they make is NOT the clever bug they have developed… but the photosynthesis taking place in the sugar cane that is their current feed stock. Their website neatly skirts around the issue of how MUCH sugar cane, and how much fertile land would be required to grow it.

    This is simply a variation (albeit an elegant one) on the biofuels solution… the uncontrolled implementation of which is ALREADY been fingered for pushing up food prices world wide.

    Yes it looks promising and yes it could well be part of the solution, but no it is not the magic wand it’s promoters are implying it is.

  39. SBlount 39
    17 January 2009 at 4:21 pm

    Agreed redlogix,

    All energy sources are ultimately indirect solar energy (except maybe geological ones). I believe the Earth receives as much solar energy every day as we have used throughout civilization, we just need the technology to use it.

    The advantage of this method is that being bacteria, it can be fueled by any biological product (the banana skins are a serious fuel option and I would expect biological waste to contain a significant amount of our energy requirements). It doesn’t grow in the soil so can be grown in labs. The other advantage is that because it produces crude oil, it is a good store of energy and the technologies to use it already exist.

    I don’t know that it will be a magic wand either and like all technologies will undergo efficiency improvments.

    I have mentioned it as an example of the unheard of technology solutions that will appear in response to peak oil and global warming. There will be others we can’t imagine.

  40. RedLogix 40
    17 January 2009 at 5:48 pm

    The advantage of this method is that being bacteria, it can be fueled by any biological product.

    At the moment they are using sugar cane as the feedstock which is chemically and energetically a very favourable starting point. They have yet to demonstrate ANY ability to use the far more difficult cellulose plant component that would allow them to utilise agricultural byproduct waste streams. That would be a vital step to large scale production.

    Anyone who has been involved in this kind of industrialisation of bioferementation processes knows just how tricky they can be to optimise and operate on an efficient productive basis.

    LS9 is just one of a number of promising ideas of it’s type, but don’t underestimate the challenge of taking them from a lab based proof of concept demo, to full scale production.

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