Peak Oil - A
Seismic Shift
By Jeff Berg
09 November, 2004
Countercurrents.org
Our
ignorance is not so vast as our failure to use what we know.
Marion King Hubbert
In
1956 a geologist by the name of Marion King Hubbert created a data model
that projected that the U.S. would hit peak oil production in 1970.
Outside of the field of geology no one of course had any idea of his
name or what peak oil meant. Inside the field of geology he was considered
at first a harebrained crackpot by many and within the oil industry,
he worked for Shell Oil at the time, his scientific reputation and career
were almost destroyed. But lo and behold fourteen years later the U.S.
did in fact hit its peak in terms of oil production. (9.5 million barrels
a day) Though the peak, naturally enough, was not recognized as the
peak until a few years later when terminal decline set in. (Something
the Saudis took advantage of in 1973 by octupling the price of
oil.) Obviously the accuracy of this prediction created quite a stir
within the geological community not to mention the interest that it
created for the insiders of the oil industry. For as you might suspect
oil men value accurate geological predictions rather highly. I imagine
the conversation between some Texas oil magnate and the reputedly crusty
Hubbert going something like this: TOM: "So Hubbert that was a
pretty good trick. How'd you do it?" MKH: "As is always true
of the best science it was quite simple. I used the history of fields
that have been tapped and extrapolated from that data set an essentially
Bell shaped curve in terms of the extraction life of rock oil geological
deposits in the Lower 48." TOM: "Come again? MKH: "I
figured the future would be much like the past and I was right."
TOM: "Oh. Why didn't you say so in the first place?"
Ever since 1970
the combined production of the lower 48 states has been dropping year
after year. (about 2.5% p/a) At this point all fields in the lower 48
are more than 85% depleted and the zero point could come as soon as
2010. What will also come as a surprise to many is that Alaska too is
in terminal decline and the only thing the drilling of the ANWR will
do is speed the depletion rate. As to natural gas supplies, in North
America at least, current depletion rates are quickly driving up the
price of this oil substitute.
Few people seem
to recall that the U.S. was the Saudi Arabia of the world at one time
producing more oil than any other country. At the beginning of the last
century the U.S. was the greatest oil exporter in the world. 7 out of
8 barrels of oil used in the first and second world wars were U.S. oil
barrels. The sale and use of oil is in large part how the U.S. became
so rich and powerful. For decades the U.S. was the largest creditor
nation in the world. U.S. money, "sound as the dollar", flooded
into countries all over the world as investment capital and at home
it allowed the U.S. to fund the greatest investment in pure research,
technological advancement and military power that the world has ever
seen.
How things have
changed. Today the U.S. is both the largest importer of oil in the world
as well as by far the largest debtor nation in the world. These two
facts being not at all coincidental. It is very difficult for anyone
to fully grasp the enormity of what "by far" means in the
case of U.S. debt but let me try to give you an idea. The U.S. national
debt is 7 trillion dollars,13 trillion if you add State, municipal and
consumer debt and 18 trillion if the Bush economic 'plan' is fully enacted.
The entirety of the third world's debt is just about two trillion dollars.
In other words the U.S. debt is many times the size of a debt that has
been large enough to choke the economic life out of two-thirds of the
world's people. Many of whom are being forced to try and get by on $1
a day. To give an idea of what $1 a day means. If you had been paid
$1 a day since the time of the birth of Jesus you would not yet have
earned your first million. ($731,953 as of this sentence, and now back
to our peak oil story.)
M. King Hubbert's
other great crystal ball gazing science parlour prediction (how it was
portrayed and dismissed at the time) was to look at the worlds
rock oil geological history: 'petro' meaning rock hence petroleum, and
project from that data basis when the world would hit peak oil production.
What he came up with was a peak occurring somewhere around the mid to
late 1990s. It turns out he was off by a little. Though it must
be said that if it had not been for the oil shocks and subsequent conservation
efforts there is every possibility that his model would have held. The
best estimates today according to Colin Campbell, Mathew Simmons, Richard
Heinberg, Julian Darley, Michael Ruppert, Paul Erlich, and others, indicate
peak oil will be upon us by next year or by no later than 2010. (If
it is not already here. Time will tell.) This takes on added importance
given the fact that world demand is likely to outstrip world supply
by the end of 2004 even if we have not hit peak. It is also of no small
import to note that for countries lacking American dollars, the currency
currently denominated by OPEC as the only one with which one can buy
their oil, demand long ago exceeded supply.
Now a lot of people
say, "But I've heard that we've got oil for another hundred years."
and in a sense they are right. Yes, if we still have people around with
technology, and it still makes economic sense to do so, we will still
be pulling oil out of the ground a hundred or so years from now. That
is unfortunately not at all the issue. People have a tendency to see
oil depletion, when they think about it at all, like they do their gas
tank. With your car you can be going along at a 100 klicks and right
up until the moment when you actually run out of gas you can keep going
along very much like there is no impending problem. The simplest rebut
to this is of course that the world economy is not your car as much
as the car industry would like you to think otherwise. The central problem,
and it is a huge one, arises as a result of how closely economic growth
is tied to oil and gas and not any oil and gas but inexpensive oil and
gas. This leads directly to the even greater problem that the stability
of our monetary system, fractional reserve banking, and hence our very
societies is predicated on economic growth. Compounding this enormously
destabilizing fact is the added problem that many of the safety nets
that were put in place after the crash of 1929 to compensate for poor
growth have largely been taken away over the last twenty five years.
Today the world
economy is based on an ideology which exalts the virtue of supply and
demand and in practice at least to an extent this mechanism is allowed
to operate in global trade. What this has meant in the past in terms
of the oil and gas industry is that as long as demand kept rising production
rose to meet that demand. The monkey wrench to this system will come
when the reality of oil supply refuses to cooperate with the demands
of our economic laws. (N.B. "When theory and reality
collide, theory always gets knocked flat. ", or as our mothers
used to say, "If wishes were fishes we'd all cast nets.")
When the world hits peak oil, much less terminal decline, and demand
outstrips supply our economic world order is forever changed. Because
from that point on it will not matter to oil production what our governments
say, what our corporate leaders demand or what laws the economists at
the WTO assure us are as ineluctable as the law of gravity. It took
hundreds of millions of years to make the oil we have now and when there
is no more, well, there is no more, ever. Unless of course were
prepared to be somewhat more patient than we have been historically.
"Well what about technology?" people say. "New drilling
methods, advances in geology?" It is true to say that there have
been major advances in technology and geology. Unfortunately this fact
is immaterial and if anything it is likely to aggravate our problem
because it will only steepen the depletion curve and thereby rob of
us of the very thing we need most, time, to adapt our societies to a
world featuring scarce and expensive oil.
Oil discovery peaked
in the early 1960's and today we now find only one barrel of oil for
every four that we burn. This gap between production and discovery has
only increased for the last 40 years despite significant advances in
geology and drilling technology. "Well then how about renewable
energy sources?" is the natural next question.
To give you an idea
of our level of fossil fuel dependence: Imagine if the U.S. were to
double all of its renewable energy capacity and then double it again.
This would require all of the planning, approval, skilled labour, capital
investment and time necessary to quadruple current renewable energy
supply, a supply which has taken decades to build. There would also
have to be rigorous safeguards put in place so as to ensure that the
time and money that were devoted to this effort actually builds something
productive in the end and doesn't simply through boondoggle and/or theft
become an enormous waste of fiscal and political capital. If the U.S.
managed to do all of these not inconsiderable things at the end of that
time, however long that time may happen to be, the U.S. would have created
enough energy to replace 1% of its current fossil fuel energy needs.
[1]
Essentially what
we are faced with is a situation where our politicians and business
men have bet all of our chips on the ability to grow and 'technology'
our way out of our troubles. As a result what we as a people have been
bet on is a house of cards that is held together almost entirely by
oil's horsepower. A horsepower which today gives the average North American
the equivalent of 300 energy slaves working for them 24/7. As far as
bets go smart is not a word that immediately leaps to mind.
Since the early
80's the United States has led the charge at the OECD to force global
trade into a reliance on 'market forces' and the 'invisible hand of
the market place' in order to regulate trade between North and South.
This led to the creation of the WTO in 1995 in order to enshrine in
international trade rules the free flow of capital and the elimination
of many subsidies and tariffs, foreign ownership laws and other such
barriers to trade. Rules that the U.S. and the richest nations
are strong enough to ignore when it is to their benefit. Poor countries
on the other hand are ruinously penalized if they dare such survival
strategies.
Unsurprisingly since
the enactment of these rules the gap between North and South has widened
enormously to profoundly disturbing effect in the poorest nations. Along
with this trend there has been among politicians and mainstream media
a blind faith unconcerned with fact as to the virtues of smaller
government, 'deregulation' and the 'efficiencies of the market'.
The results of our elites unswerving devotion to the freeing of
trade agenda has been uniform even in the richest countries. i.e.
a rapid movement of wealth to the top 1% of the population. This has
been especially true in the United States of America and Great Britain.
This despite the fact that in that same quarter century Americas
GDP more than doubled and productivity went up by about 45%. Britains
economic performance was not quite as strong over the same period though
the wealth concentration figures are virtually identical. This concentration
of wealth to the wealthiest sectors of society has been the longest
lasting legacy of Reaganism and Thatcherism unless one is of the belief
that the implosion of the Former Soviet Union should also be included
in their list of accomplishments. Wealth concentration as
a social engineering project has also been something that the Bush men
have sought with no small success to accelerate.
Much more importantly,
all the while that these battles were being waged and won by the free
market supply-siders at the expense of social justice, our biggest
problem by far was always that the demand for oil is going to exceed
the supply for oil and economic growth is dependent on said oil. Something
that elementary logic tells us oil men like Cheney, and the Bush men
most certainly knew. As stated earlier, the respect that oil men have
for accurate geology is not difficult to understand. There is also the
equally salient fact that with a similar method to Hubberts,
even
though in detail more sophisticated, the study Global 2000
(commissioned by the US President) predicted in 1980 the date for the
global production peak to be somewhere near the end of the 20th century
[27]. The biggest uncertainty was predicting oil consumption - not forecasting
how much oil still can be found. In fact this study has assessed the
total existing reserves with amazing precision (as we now know with
much greater certainty) - just the development of demand was greatly
overestimated.[2] Something that recent events in India and China
has corrected. (What fools we mortals be.)
In other words those
we have entrusted to lead us saw the paradigm shift of peak oil a long
time before 'we the people' and decided that they would enable legislation
for the privatization of as many public resources, utilities and services
as possible before the inevitable fundamental shift took place. This
program continues apace on the U.S. home-front with Social Security
and other 'entitlements' next in line. Entitlements being the U.S. governments
bizarre term for the right of its citizens to life. Today the U.S. government
is being starved of cash to the point of collapse with a strategy reminiscent
of nothing so much as the worst days of David Stockmans voodoo
economics budgetary bafflegab. This time round the recycled Reaganites
of the current administration are arranging a fiscal situation where
the only politically saleable option for much of what government does
and can do will be privatization. To quote CNN, September 24, 2004,
"Congress on Thursday approved a $145.9 billion package of tax
relief to extend three popular middle-class tax cuts, giving President
Bush his fourth major tax victory since taking office." To gain
a proper understanding of just how few people the tax cuts of the last
thirty years have benefited I highly recommend David Cay Johnstons,
Perfectly Legal. Johnston also rightly points out in his
excellently researched work that every nation in history that has lost
control of its tax system has collapsed. Or to quote Herbert Stein of
the Council of Economic Advisors during the Nixon administration, Things
that cant go on forever, dont.
Given the current
U.S. debt situation alone these tax cuts should rightly be considered
mind-bogglingly, if not criminally, reckless. W. has outdone even Carl
Sagan with "trillions and trillions" in tax cuts and with
one more term he will easily pass Ronald Reagan as the President who
ran up the greatest amount of debt in the history of the United States.
No small accomplishment given that Reagan ran up a larger deficit than
all the Presidents before him combined. Given this reality and
the fact that these tax cuts are occurring during a time of war they
take on a whole new meaning. In short: This is an effort that is nothing
less than the deliberate engineering of a fiscal train wreck. The reason
this has been done with the full consent of both parties and houses
in the U.S. is a matter for another time. A discussion that will feature
prominently panicked greed in the face of the ramifications of peak
oil, the crash of 29, the banks, debt based monetary systems, the energy
czars, FDR, and the efforts being made to ensure that there is no new
deal.
All this to say
that the world is about to change radically. Most of us (90%+) on the
continent of North America are set to become much poorer monetarily
and more importantly in terms of energy than we have been at any time
since the great depression and just how poor will ultimately depend
on how fast we grasp and address the reality of our new situation. (let's
hope our track record isn't a perfect indicator of our future choices.)
The implosion of Russia's economy and the resulting population 'die-off',
11 million and counting and a life expectancy dropping to that
of Guatemala[3], is I think a very frightening harbinger. What
'staying the course' will mean for China and India I can only shudder
to think.
The seismic shift
that Peak Oil represents to the way we orient our societies will demand
flexible thinking, an open mind and adaptation to changing circumstances.
Historically these have always been the greatest strengths of our species;
indeed one could even say of them that they were our hallmark. They
will have to be again if we are going to save any of the wonders that
have come about as a result of the oil and information age of the last
century.
If you are interested
in learning more about the coming century, the following links will
take you to sites featuring the best minds in the field of peak oil
and what it is going to mean for us all. And remember, that while foresight
may not like hindsight always be twenty-twenty, being forearmed always
beats being armed unless of course you prefer a kill or be killed world.
I leave you finally
with the words of a good friend of mine, Senor Juan G. Carbonel, Those
who saw 1929 coming managed to protect their assets as well as possible,
those that didnt jumped off buildings.
http://www.postcarbon.org/
Learning to live in a post carbon world.
http://www.globalpublicmedia.com/
Where you can access Dr. Campbell's seminal video lecture.
http://www.geologie.tu-clausthal.de/Campbell/lecture.html
Text and graphs from Campbells lecture.
http://www.museletter.com/
Excellent audio lecture and newsletter by Richard Heinberg
http://www.hubbertpeak.com/hubbert/
Good historical recounting of M. King Hubberts contributions as
well as recent developments with peak oil.
http://www.globalpublicmedia.com/LECTURES/
Marvelous is the only word to describe Julian Darley's oratorical style.
http://www.energybulletin.net/1548.html
A wealth of information and statistics.
http://www.postcarbon.org/eos/interviews.php
The End of Suburbia website. Very infotaining audio lectures.
--------------------------------------------------------------------------------
[1] Richard Heinberg
in the audio lecture
[2] W. Zittel, J.
Schindler, L-B-Systemtechn, October 15, 2004, EnergyBulletin.net
[3] Stan Goff, Full
Spectrum Disorder, 2004 Soft Skull Press, page 203.