Monday, May 30, 2005



Peak oil

Kevin Drum has an interesting post on this subjecting, citing an ExxonMobil report that oil production in non-OPEC countries will peak in the very near future. The upshot is that all future demand growth for oil (which ExxonMobil underestimates) will have to come from OPEC (i.e. the Middle East and Venezuela). Given that OPEC reportedly has very little spare capacity (they're pumping as fast as they can pump), this means that we're likely to see significant price rises as demand begins to exceed supply.

Unlike some, I don't believe this spells the end of civilisation as we know it. However, the end of cheap oil is going to mean change - and fairly significant change at that. On a personal level, driving cars will become much more expensive - meaning that we will need to either get far more fuel efficient vehicles, start using public transport more heavily, or live closer to where we work. International air travel, which relies totally on hydrocarbons, will become more expensive as well, and the age of the cheap holiday or business trip will probably end. We will, in other words, become more local, more tied to one place, and we won't have much of a choice about it.

On a global level, the changes will be far more mixed. Price rises will probably not mean energy crises - the world has been moving away from burning oil for electricity in favour of coal and natural gas since the first oil shock. But higher transport costs will tilt the balance between our current globalised economy and local production. It won't spell a universal end to international trade in physical goods - bulk non-perishables will be relatively unaffected - but the rising cost of airfreight may make the shipment of some types of good simply uneconomic. Companies, and possibly even economies, will fail as a result. And as a country which depends on agricultural exports to make our way in the world, we may very well be one of them.

(On the plus side, it won't all be bad. Increased localisation may reverse the trend of company HQ's relocating across the Tasman, and will almost certainly result in businesses and branch offices returning to our suburbs and small towns. Which should cushion the economic impact somewhat...)

What can we do about this? Pretty much nothing. It will happen; the only question is the timing. The best we can do is plan now to reduce its impact, while hoping for economicly viable fusion power...

5 comments:

The most interesting aspect of Peak Oil to me is the correlation between the geographical interests of the Empire and oil producing nations:
Iraq, Iran, Saudi Arabia, Venezuela, the 'stans inc Afghanistan (for a pipeline) -North Korea being about the only exception - if they've got oil the US is big on creating amenable regimes, by force if necessary.
I recommend Mike Ruppert's "Crossing the Rubicon" (and fromthewilderness.com) - if you can get past the urge to pitch it at the conspiracy bin, it makes for rational, if difficult, reading.

Posted by Huskynut : 5/31/2005 11:40:00 AM

On the question of the impact of Peak Oil, I'm not as sanguine as I/S. Consider:
- so OK, we need more fuel efficient vehicles. The parts for each of which need to be transported, assembled, delivered mostly by oil-powered means.
- what is the average age of vehicles currently on the roads? So how long (and how costly) will it be to replace with more fuel-efficient ones?
- Kevin Drum (and many others) point out oil production is currently 'tapped out'. Yet China increased it's vehicle fleet by *50%* last year. Concurrently, India is becoming more affluent, and demand in 1st world nations continues to increase. All of which requires energy not just for vehicles, but for electricity generation for the myriad of consumer-uses that affluent societies continue to discover.
- the timescale to build a new refinery capable of producing high-quality auto fuel is quoted as high as 7 years! With demand increasing at the current rate, how can production be ramped up quickly enough, even if the oil-wells could sustain it?
So OK, the world is not going to end, but I expect the impact of Peak Oil to be potentially very large, and quite possibly large enough to cause international frictions sufficient to lead to war. Remember, the US has a leader who has stated "the American way of life is not negotiable"...

Posted by Huskynut : 5/31/2005 12:18:00 PM

A sanguine view would be saying "the market will sort it all out". And it will, if left to itself - it will just be less pleasant. I'd far prefer the government used regulation and state purchasing to drive the market in the right direction, before we need to.

I agree on the problems of ramping up supply - we will probably be facing a supply crunch fairly shortly, not because the resources aren't available, but because they can't be extracted and processed fast enough. And this may very well lead to... tension. And all we can do is hang on and hope for the best, while trying to make sure we don't suffer too much because of it.

Posted by Idiot/Savant : 5/31/2005 01:10:00 PM

And while we're waiting for Peak Oil to hit, the government is ignoring public transport, building more roads, and trying to make trade deals with countries whose economies are likely to go down the toilet.

Posted by Commie Mutant Traitor : 5/31/2005 07:56:00 PM

You've forgotten the other petroleum product that plays a not insignificant part in our consumer society - plastics.

Posted by David : 5/31/2005 11:37:00 PM