What ‘Peak Oil’ means, and how you can benefit
Posted on 20 November 2010
We don’t know how you feel about it, but personally, we struggle with the concept of Peak Oil. The concept itself is easy to understand – basically, Peak Oil refers to the maximum extraction rate of oil after which, oil being a finite resource, the rate of extraction declines.
What we struggle with then, is not the concept itself, but the consequences it implies for me, for you, for us all. As we’ll see below, our industrialised societies are oil-junkies. But try preventing an addict to get his drug by dramatically decreasing his supply in a short amount of time and you’ll rapidly see the effect: tensions at best, hostility at worst.
As we said, the concept of Peak Oil is easy to understand, but the dramatic effects it carries with it are just too daunting to be able to fully comprehend them. The first problem is that major experts on the subject agree to say that the Peak Oil is just about to happen – or has just happened… Basically, most figures tend to put the fateful date somewhere between 2004 and 2014. In other words – now.
The second problem is that in our industrialised societies, almost everything is either based on oil, manufactured with oil components or needs oil to function. Whether it’s your computer, your phone, your clothes, your tools and appliances, your hygiene stuff, your furniture, your house, even your food (production methods are now such that 95 per cent of all the food we eat in the world today is oil-dependent) have had oil involved in their manufacturing and/or chemical processes! Yep, oil is not only used to move your car, but also as synthetic fibres which can be woven into curtains and carpets; as fertilisers and pesticides, as candles, milk cartons, polishes, detergents, canned goods (food additives), hair dyes, make-up, nail polishes, lipsticks, synthetic shoes, many drugs including the over-the-counter pain relievers, and of course, all stuff made of plastic. It’s also used to heat your home, fuel your occasional plane, asphalt your roads, etc… It’s ubiquitous.
So, from there on, imagine a world without oil. We’re not talking about a long term hypothetical future, but in your lifetime. This, precisely, is what we struggle with when it comes to the Peak Oil concept. We cannot begin to fathom the implications of it, even if so many experts are nearly unanimous in their concerns. Indeed, it seems certain that within a few years, the effects of oil peak will begin to be felt as for the first time in history the amount of available energy in the world begins to decline.
In order to make sense of all of this, let’s try to decipher it point by point. After all, mankind has been through a hell of bad times already, and human ingenuity has always managed to found a way out. Right?
Few questions for you then.
. Is there really a Peak Oil?
We’re no expert on the issue, but we believe there is a body of corroborating evidence that says so. In September 2010, the UK Energy Secretary Chris Huhne expressed his worries that “Oil price could double in return to 1970s style shocks”. The same month, a report, authored by the German armed forces and leaked on the internet, warned of a potentially drastic oil crisis. It notably warns of “shifts in the global balance of power, of the formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of the total collapse of the markets and of serious political and economic crises.” In June 2010, the leading insurance company Lloyds published in conjunction with the respectable Chatham House think-tank a report, stating that “we are heading towards a global oil supply crunch and price spike.” Both in 2008 and 2010, the US armed forces warned in their bi-annual Joint Operating Environment report that “by 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day.” It adds that “while it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India.” Last, the International Energy Agency (the agency tasked with figuring out how much oil is left in the ground and hardly a radical body), first acknowledged Peak Oil in its 2006 World Energy Outlook.
As Dr. Schlesinger, former Chairman of the Atomic Energy Commission (1971-73), Director of the CIA and US Secretary of Energy summarised, “the peak oil debate is over: the ‘peakists’ have won the intellectual argument.”
So, yes, the end is, in fact, in sight. The debate amongst peak oil analysts has now shifted from when, to at what rate, the world will decline after we move off the current plateau in production.
To this, we need to add that while the natural decline may be steady in an ideal world, our use is not. The decreasing oil production has to be paralleled with its increasing global demand (think China’s growth). So although the world is not running out of oil, the reserves left are still insufficient to satisfy our oil junky societies.
. But what about discovering new reserves of oil?
You’ve probably heard that oil companies are now drilling in Artic, Antarctic and deep seas. We’ll quote Transition Network who puts it best: “drilling in these locations presents extraordinary technical and other difficulties, and we can be sure they would not be there unless there was nowhere else to go.” In other words, yes there is still some oil to be found, but it’s (very) complex and expensive to obtain. This is the whole point Peak Oil commentators have been making for nearly 50 years: once the peak is reached oil will still be available but only at prohibitive energetic and financial costs. In addition, even these are finite as the International Energy Agency has pointed out.
Well, if they can provide liquid hydrocarbons or bitumen (dense and extremely viscous form of petroleum), both requires more processing to use than crude oil. This in turn increases their cost as crude-oil substitutes, both financially and in terms of their environmental impact (such as land use, waste disposal, water use, waste-water management, greenhouse-gas emissions and air pollution).
. Then what about other natural resources? We can surely use Hydrogen instead?
Hydrogen is often considered as the new oil. But several experts have stated that hydrogen cars, and an entire economy based on hydrogen-generated energy will not happen before several decades, roughly 40 years. Even so, it wouldn’t actually replace oil, for the simple reason that hydrogen is said to be only a carrier of energy (like electricity), not a primary energy source (like coal). Said otherwise, energy would still have to come from somewhere. At present, most hydrogen is created from natural gas which is itself likely to peak in production a few years after oil…
. Ok so what about coal then?
On the short term, it is likely that there will be a boom for coal. But that’s exactly what is it about: short-term. Not only coal already accounts for roughly 20 percent of global greenhouse gas emissions (it also has many more adverse environmental effects…), but global peak coal production may occur sometime around 2025. In addition, it shares with oil that the good quality coal is already in short supply. No kiddin’.
. What about natural gas, surely it can replace oil for a bit?
Well, if natural gas proves extremely versatile and useful like oil does, it also is a non-renewable energy. In 2002, R.W. Bentley predicted a global “decline in conventional gas production from about 2020.” There probably is a reason why some people talk of the coming ‘Peak everything’ phase…
In addition and, as the editor of The Final Energy Crisis explains, even if “for consumers of cheap energy, gas is the “replacement fuel”, with many advantages: these include the belief that gas, because of its ‘near limitless abundance’ can only be cheap, is an ‘environment friendly’ energy source. […] The claimed ‘environment friendly’ nature of natural gas, especially in relation to climate change, is contradicted by the huge loss rate relative to delivered and burned gas: at least 9% of world gas goes straight into the sky, unburned, where it acts as a very powerful green house gas.” This doesn’t account for other environmental impacts such as ground water contamination during the extraction process… As the author further explains, “What is important is the triad oil-gas-electricity which unlike coal are all highly interdependent. If one part of this three-leg stool falls away, the stool falls.”
For more information, you can also watch the excellent documentary GasLand (you’ll find it here).
. That’s a bit depressing. What about nuclear energy then?
Although nuclear power produces around 11% of the world’s energy needs, we would need ultimately thousands more nuclear power stations to replace the energy we get from oil and this would require an enormous capital investment – and energy investment. In addition, nuclear power is generated using Uranium, another non-renewable resource. Some authors say that the peak has already occurred in the 1980s or that a second peak may occur sometime around 2035. The OECD World Nuclear Agency jointly with the International Atomic Energy Agency, stated in 2004 that “questions remain as to whether uranium resources can be developed within the timeframe required to meet future uranium demand.” (“Uranium Resources 2003: Resources, Production and Demand”. Report from the OECD World Nuclear Agency and International Atomic Energy Agency. 2008-03). In all cases and as the German readers of the blog know all too well, nuclear power produces radioactive wastes that no one wants in his/her backyard. Especially since they last, not for decades, but centuries. And we’re not even here mentioning the lamentable record of the nuclear industry when it comes to safety. Chernobyl being only the tip of the (melting…) iceberg. So nuclear power, no thank you.
. Ok, so let’s invest heavily in renewable energies!?
Yes, that’s an excellent idea – but that won’t be enough to replace oil. Sorry, it’s a bit blunt, but is grounded on the fact that the trick is not to find a source of energy to replace oil, but to change our lifestyle. However you turn around the problem, you cannot escape from such conclusion.
Here again, we’ll use some material from the Transition Network:
“It takes a while to really let it sink in the truly extraordinary properties of oil which make it effectively irreplaceable by any combination of alternatives. Apart from uranium, oil has the greatest energy density of any other substance known. One way to understand this is the Energy Return on Energy Invested (EROEI) ratio for any given energy source. In the 1930s, for every unit of energy invested in getting oil, the return was 30 times as much, and in the case of some oil wells in Louisiana, the ratio was a high as 100:1. Currently, oil is yielding an EROEI of about 8:1 and this will only decline as the remaining reserves become increasingly difficult to obtain. Still, this is far higher a return than anything else – solar photovoltaic cells have apparently yet to break even and all alternatives currently require oil in their manufacture and maintenance, be it high quality steel in windmills or simply keeping the service roads and vehicles going. Bio diesel would require perhaps all the available agricultural land just to supply petrol at the pumps, but when you consider that it takes 80-90 barrels of oil just to manufacture a car, it becomes clear that alternatives will come nowhere near to making up the shortfall.”
. Why has this happened? Why aren’t our governments saying anything about it?
You occasionally hear of the concept in the media, but given its gravity one wonders why governments actually don’t talk more of it. As we see it, the reasons are essentially twofold: political and financial.
Firstly, put yourself in the shoes of a politician. As you’ve probably noticed, your main concern is (re)election. For this, you need popular and financial support. Apart from a (very) charismatic leader, we don’t see the average politician being elected by proposing “vote for me so that I stop economic growth and force you to change your lifestyle.” In addition, we need to count on the lobbies that have their own interests in continuing business as usual (as a reminder we’ve already written a post about it).
Secondly, and perhaps most importantly, a major impediment for governments to be vocal about it is that any admission of the Peak Oil and its potentially catastrophic consequences will provoke an immediate market crash. As Matt Savinar, author of the well-respected Life After the Oil Crash puts it “the relationship between the supply of oil and natural gas and the workings of the global financial system is arguably the key issue to dealing with Peak Oil, as robust and smoothly function global capital markets must exist in order to power an orderly (or semi-orderly) transition process. In short, the global financial system is entirely dependent on a constantly increasing supply of oil and natural gas.” From there on, you don’t really see the White House explaining that the business strategies of most industries of the world are actually based upon a myth, that of indefinite cheap oil.
In November 2009, the Guardian newspaper reported that two insiders at the International Energy Agency informed the paper that the agency has intentionally been covering up this crisis for fear of setting off a panic: “The world is much closer to running out of oil than official estimates admit, according to a whistle-blower at the International Energy Agency who claims [the agency] has been deliberately underplaying a looming shortage for fear of triggering panic buying. […] Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further.”
Given the tremendous consequences of the Peak Oil, we actually wonder how, as individuals, politicians can live with the idea that, by remaining silent, they are aggravating the problems. It’s an understatement to say that the concept of Peak Oil should have been introduced to the public well before now…
. So what are you saying? Are we doomed?
No, we’re not saying that. Although humankind has already lost precious time when it comes to diminishing the negative environmental impact of its lifestyle, there are still many things to do – as you can see in the answer to the next question.
The consequences of Peak Oil are enormous. So enormous that they are actually difficult to grasp. Be reassured though, our future is not all doom and gloom (we’ll write in a coming post about possible future scenarios), but we need to get serious about it. That’s where you too have a responsibility in ensuring that the transition to a post-oil society goes as smoothly as realistically possible… As we wrote here, that is possible. Just do it…
Meanwhile, be sure that rapacious people will try to benefit from the coming oil scarcity. As the newspaper Telegraph has written in a paper titled Oil price to double – how private investors can profit, “with oil tipped to rise sharply again, we look at how to gain from another shock.”
. What do we have to do from now on? And how can we benefit?
Well, first of all, think about the consequences that the Peak Oil will have on you if nothing changes. It’s a big thing to swallow – and on our side, we are still processing it. Keep in mind however that Peak Oil is not just a fantasy created by negative thinking. It is a geological reality.
Having said that, don’t take all what’s written here for granted, do your own research. We hope you come to more positive conclusions than we did. We’re however confident that you’ll join the growing crowd of those who want to transitionning to something different. As we recalled in another post, the defining idea of the next decade is ‘enough’.
Using electric cars, switching off unused electrical appliances and installing efficient light bulbs have real impact on the demand side of the oil issue. But that’s only applying a band aid without actually treating the injury. What is more important is to understand that Peak Oil is a systemic issue, and as such its consequences need to be tackled holistically. Individually and collectively, we need to rethink the ways we produce food, conduct commerce and trade, travel, occupy the land, acquire and spend capital, in other words the way we organise our societies and the values that frame them.
Now is a golden opportunity to ask these deeper questions about the kind of society we want to live in. There is abundant evidence that simply more growth, more money and more energy will not bring us a higher quality of life or more fulfilment.
In parallel, and at our level, the best thing to do is to reorganise our everyday activities. As Gandhi said, be the change you want to see.
There are things we can all do right now to move towards a sustainable world. Invest in alternative technologies, reduce dependency on the electricity grid, cycle or walk rather than drive, try to create work nearer to where you live, make efforts to provide more of your basic needs of shelter, heating and food production closer to home and within your own communities. There are already many initiatives around the world trying to create locally self-reliant communities. One method is that proposed by permaculture – a system of design that models human settlements on natural processes and attempts to find benign and sustainable ways to harvest the suns energy to meet our needs.
Here are two sketches that demonstrate how permaculture can be a useful tool to explain and design human systems (borrowed from Graham Burnett’s Permaculture, A Beginner’s Guide)
The main changes we need to effect are a move away from global industrialised dynamics towards local economies that value and preserve their own stores of natural capital – such as local food supplies, traditional skills, trees and woodlands, the practices of good land use and urban design.
You’ll also find here an excellent – and positive – overview of what a post-growth economy could look like.
To finish, let us restate that if Peak Oil presents an enormous challenge to us all, our future depends largely on the way we respond now. A different future is not only necessary, it is also possible.
UPDATE: while this post is rather daunting, we certainly don’t want to contribute in the “apocalyptic cult” that some say exists around the concept of Peak Oil. So please tell us what you think – and do prove us wrong!
In addition to the links included in the post, the following sources were extensively used. We do encourage you to check them out:
“Worldchanging, a User’s Guide for the 21st Century”, edited by Alex Steffen, Abrams, 2006.