The Wolf Is At The Door

Merrick, 2nd July 2004ce

The imminent peak of oil production and the end of our way of life

Do you remember global freezing?

In the 1970s predictions were bandied about of a dramatic and imminent cooling of the earth. Life as we knew it was about to end. There were scientists who could back it all up being given space to explain, and getting taken seriously.

There have seemingly always been these millennialist ideas, members of every generation wanting to assert their importance by declaring that these are the last days. Latterly these ideas have spread from religion to environmentalism, and there have been a staggering array of doom-claims arrayed before us.

Having grown so tired of claims that the sky is falling, we start to dismiss all notions of imminent collapse of the essentials of our civilisation. The doomsayers have cried wolf too many times before.

We’d do well to remember the conclusion of the story of the child who cried wolf – that one day, the wolf does indeed come, but the cries are ignored.

Stories of what happens when oil runs out have been around for a long time. Thing is, oil isn’t going to run out for many decades to come, quite possibly centuries. The oil running out is not the problem, because we are not depending on there just being some oil. We are dependent on there being cheap and plentiful oil.

How much oil is left isn’t clear. Anyone who gives you a precise figure is mistaken or lying. But we do have clear perameters on estimates. These show that the peak of global production will come in the next twenty years, probably in the next ten. After that, production will go into decline, forever. Before long, demand will outstrip supply.

When the optimists claim there’s twenty years to go, firstly remember that’s still well within the lifetime of most people reading this. And secondly, remember that it’s in the producers interests to overestimate the amount that’s left, so it’s probably sooner.

When the peak happens, prices for oil products will rise dramatically. ‘Oil products’ isn’t just the petrol for your car. It’s the raw material and the energy that makes and distributes everything from paints to soaps, and every piece of plastic you’ve ever seen. Look up from the screen now and see just how much plastic there is.

So when the price of oil goes up, so does the price of everything else. This rise in prices will coincide with the severe contraction of many industries. Tourism, food, aviation, freight haulage, agri-chemicals, public transport, everyone from the farmer to the postie will be directly affected, and many will see their jobs disappear. Just at the time when things cost more, so we’ll have less wages with which to buy.

The last five recessions were preceded by just such a rise in the price of oil. They will be dwarfed by the recession that follows the rise that will never fall.

But isn’t there some alternative fuel source to replace it? In short, no. Most other fuel sources don’t have mobility and versatility of oil – try to imagine a coal-powered bus or a nuclear car and you get the idea. When renewable sources of electricity cannot even power a decent minority of our current electric consumption, where would we find the extra to power our vehicles too?

Oil is a vast wealth of organic molecules, millions of years of life absorbing energy from the sun, distilled into this unique liquid. Non-fossil fuels simply don’t have the power.

And all that ignores the other uses of oil integral to our lives, especially for the most fundamental product of all, food. The cheap high yields we rely on are only possible because modern agriculture is essentially a method of turning fossil fuels into food. Oil and coal power the planting, harvesting and processing machinery, oil is the pesticide that protects the crop, oil and gas are the fertiliser that actually become the food, oil is the transport that brings it to us and the plastic that keeps it fresh. When the cheap plentiful oil goes, our whole way of life goes.

Isn’t this a good thing? Surely we need to consume less fossil fuels anyway?

If the cheap-oil economy were ended for environmental reasons it would be a good thing. But it will be ended for economic reasons, and so amongst the starvation and social ruin it will lead to more pollution, not less. In terms of oil’s effect on climate change, it makes a negligible difference. The same oil will be consumed, just over a slightly longer time and only by those who can pay more. Worse, currently uneconomic and far more polluting forms of oil will become viable. Desperate for more oil, the will to drill anywhere such as the Alaskan National Wildlife Refuge will be irresistible. All around the world, trees will be cut down and used as fuel.

Isn’t this just another eco-armageddon myth?

Firstly, we have to face a simple truth – the cheap plentiful oil has to run out sometime. In times of water drought people see the parched mud where the reservoirs used to be and then they respond to appeals to consume less. If only oil were in open reservoirs for all to see. If we could see the level dropping year after year, knowing that unlike water the oil could never be replaced, we’d not question ‘if’ but ‘when’.

Secondly, unlike other complex issues that theorise with unpredictable factors, oil depletion is straightforward: we're using it at an ever increasing rate from an ever decreasing pool. All the major oilfields have been found; the rate of new discoveries peaked in the 1960s. We use 4-6 times as much as we find, and the gap is widening; we are using ever more, whilse the finds are smaller and less frequent. Demand will in all probability exceed supply within ten years.

It is in the interests of the oil companies and political leaders to deny the problem and to give as generous as possible an estimate for how much oil is left. Yet – and here is where this issue parts company from global freezing and other scare-stories from the past – the oil companies and politicians are in agreement with the conservationists on this.

It’s just that the mainstream media don’t think it’s newsworthy.

When oil giant Shell were recently forced to admit that they’d exaggerated the size of their reserves, the media treated it as yet another boardroom scandal. Rather like the way the British media treat GM food as just another food scare, as an act of point-missing it takes some beating. The big story, we were told, was whether the head of Shell would lose his job. Reports managed to include lines like ‘this means Shell’s reserves will last for 11 years rather than 15’ without any further comment.

The question screaming out to be asked is what happens in 12 years time?

Will Shell and the other oil companies have found more oil by then? A little, but not much, and certainly nothing like enough.

The rest of the people who really know what’s going on concur. Matthew Simmons is CEO of Simmons & Co Investment Bank. He also sits on the National Petroleum Council's Natural Gas Task Force and is an advisor to the Bush administration on energy issues. In an interview with From The Wilderness in August 2003 he said, ‘Peaking of oil and gas will occur, if it has not already happened, and we will never know when the event has happened until we see it 'in our rear view mirrors'.’

Jon Thompson, President of Exxon Mobil Exploration Company, says, ‘By 2015, we will need to find, develop and produce a volume of new oil and gas that is equal to eight out of every 10 barrels being produced today.’

Beyond what we already know about – and believe me, petroleum geologists have been looking very hard – Thompson says we need to find an additional 80% extra and be producing it within ten years! Of course, Mr. Thompson claims that's possible but then, just like the Shell executives who overestimated their reserves, he's got his shareholders to worry about.

Goldman Sachs, on the other hand, don't share Mr. Thompson's optimism.

‘The oil-drilling rig count over the last 12 years has reached bottom. This is not because of low oil price. The oil companies are not going to keep rigs employed to drill dry holes. They know it but are unable and unwilling to admit it. The great merger mania is nothing more than a scaling down of a dying industry in recognition that 90% of global conventional oil has already been found.’ (Goldman Sachs, Energy Weekly, August 11, 1999).

Other oil companies agree. The Chairman of Agip Petroleum, the Italian national oil company: ‘New reserves are failing to keep up with growing output... My forecast is that between 2000 and 2005 the world will be reaching peak.’ (cited by Dr Colin Campbell in his lecture at the Technical University of Clausthal, December 2000).

At that same lecture Dr Campbell, former Executive Vice-President of Fina, states: ‘In short: Conventional oil peaks around 2005, all hydrocarbons around 2010, gas around 2020, gas liquids peak a little after gas, as extraction rates increase. The decline after peak is about 3% a year.’

That soon? The consensus is yes. In January of this year, Kenneth Deffeyes, Professor Emeritus of Petroleum Geology at Princeton University suggested ‘although it is a bit silly, we can now pick a day to celebrate passing the top of the mathematically smooth Hubbert curve: November 24, 2005. It falls right smack dab on top of Thanksgiving Day 2005. It sounds a little sick to observe a gloomy day, but in San Francisco they still observe April 18 as the anniversary of the 1906 earthquake.’

Another Professor Emeritus, Albert Bartlett of the Physics Department at University of Colorado, says ‘My analysis, based on geological estimates of the total world resource of petroleum, suggests that world petroleum production will peak around the year 2004 and thereafter will start its inevitable decline towards zero’.

Even the Bush administration have openly admitted it. On 19th March 2001 Spencer Abraham, Bush’s Secretary of Energy, told the National Energy Summit, 'America faces a major energy supply crisis over the next two decades. The failure to meet this challenge will threaten our nation's economic prosperity, compromise our national security, and literally alter the way we lead our lives.'

Imagine such a thing at other times of controversy, say, when tobacco was linked to cancer. The tobacco industry and many eminent scientists and politicians claimed there was no causal link, and because of the corporate vested interests it took years to have that debate settled. Yet here we are, with the equivalent corporate bosses, their politicians and scientists, all openly agreeing. This really isn’t a ‘sky is falling’ global freezing scare.

The mass media don’t report it, but the preparation, the first tremors are all there, told to us as unrelated stories. The occupation of Iraq (the country with the world’s second largest proven reserves of oil), bringing Gadaffi’s Libya back in from the cold (plenty of oil there too, and after years of sanctions in desperate need of the funds from selling it cheaply to the west).

Another news story is the high price of oil from the producers. The high price is commonly blamed on OPEC refusing to produce more. What’s rarely mentioned is that the new increase in production will swiftly be outpaced by growing demand. They are already producing way above quota and can’t deliver much more, that right now we are more or less at peak production and it’s still not enough.

When the price of oil products gets so very high, we reduce our consumption. The drop in demand makes the price drop, so we increase our consumption. This merry dance of peaks and troughs, each time with a higher prices and lower consumption, is the pattern of the peak being hit. When Iraqi oil comes on stream the price will drop a little, for a while. But these jarring waves of economics will cause bigger and bigger changes, and mark the end of our oil culture.

It’s the end of cheap plentiful oil, starting about now.