Peak Oil: Beyond Optimism and Pessimism

Jim Bliss, 8th June 2005ce

Having long accepted the estimate that total oil and gas production would peak sometime after 2010 (from this online lecture by Colin Campbell) as being the most authoritative, it seems that even his numbers may be a tad optimistic.

On 12th April the news that Saudi Arabia's Gharwar oil field entered decline was made public. This is (and barring an alien invasion, will remain) the single largest news story of the year. Papal deaths, royal marriages and Iraqi or UK elections don't have anything like the same sort of implications.

In the weeks after the news was announced I watched (sometimes a tad obsessively I admit) to see whether it would be picked up by someone other than al-Jazeera.

It was.

It was picked up by Nebraska's "Electric Vehicle World" magazine. And "The Village Voice" mention it in an article about a potential conflict between China and Japan over the right to exploit the South China Sea oilfields.

Aside from EV World and Village Voice (plus a handful of indymedia-type sites), the Gharwar story has not been picked up by anyone at all in the west. The world's largest oil field (by a long way) has just entered permanent decline. This is the oilfield with which Saudi oil ministers have spent 30 years calming the fears of The Market. And whether or not you completely agree with my assessment of the implications, the fact alone surely merits the epithet "news".

If Gharwar is past peak, then chances are so is Saudi Arabia. If Saudi Arabia is past peak, then chances are so is the world.

A month earlier a quite staggering article appeared on the web in the ASPO Newsletter (Link to PDF). ASPO is the Association for the Study of Peak Oil. ASPO is openly an organisation with an agenda, but even those who disagree with that agenda acknowledge that it is made up of serious people with no personal axe to grind, and who are putting forward very well researched information.

This is illustrated by the fact that for some years there has been an ongoing dialogue (some of it in public) between ASPO and the US Department of Energy (DoE), and between ASPO and the US Geological Survey (USGS). This dialogue finally appears to have reached a resolution with the DoE conceding to ASPO's primary points.

In summary, the DoE seems to be saying that the problems posed by the peaking of oil supplies are massively worse than has previously been acknowledged. They suggest that in order to mitigate these problems, a Crash program (and by this they mean a huge focus of political will, resources and time; making it a major priority of our society) needs to be implemented 20 years prior to the peak of oil supply, and if we leave it later we will suffer catastrophic social consequences.

I can't overestimate the significance of this. Ever since I've been involved in the energy resources debate (7 or 8 years now), the DoE has been "the other side". It was they who published the most strenuous of the counter-arguments and denials. They who made world production forecasts based completely upon demand projections.

And now they've admitted that ASPO is correct in its assessment. It's a huge U-Turn. As I say; it should really be front-page news.

Another bit of news that seemed to have slipped below the radar lately is the recent OPEC discussions. They concluded with a press conference given by Kuwaiti Oil Minister Sheikh Ahmad Fahd al-Sabah (also the current OPEC president) who declared that OPEC's target price band for oil of 22-28 dollars a barrel "is effectively dead" and that 32-35 dollars "would be a good price". Venezuela's OPEC delegate is pressing for a price band somewhat higher. A decision will be made at the next OPEC conference.

For those who aren't familiar with the idea of the OPEC target band, it's quite simple. The organisation attempts to calculate how much the average barrel of oil costs to produce. It's impossible to arrive at an exact number for this; there are too many imprecise variables involved; but they do a good job of narrowing it down (as you can imagine, a lot of money depends on the accuracy of that calculation). They then factor in their desired profit (the controversial bit, which I'll come to in a sec) and that's the target price band.

Since the year 2000 the band has been set at 22-28 US dollars per barrel. That means that OPEC believed they could make sufficient profit to satisfy them if oil was sold at that price.

The price band, however, overtly takes no account of geopolitical concerns. The effect of the Iraq war on the oil price, for instance, should not - in the eyes of OPEC - trigger a rise in output to compensate. (Though of course, in practice OPEC often does respond to calls for increases in output even when they believe that the price is being artificially raised by political concerns as opposed to physical supply constraints).

Now, there will be those who point the finger at the scheming cartel who clearly just want to rob the world blind, and who are just using the Iraq war as a pretext to hike prices. But Matt Simmons (Energy advisor to the Bush Administration and Founder/CEO of the energy industry's investment bank) gave an interview and remarked:

‘Over the last year, I have obtained and closely examined more than 100 very technical production reports from Saudi Arabia. What I glean from examining the data is that Saudi Arabia, already a debtor nation, has very likely gone over its Peak. If that is true, then it is a certainty that planet earth has passed its peak of production.’

Hand in hand with the DoE and Gharwar announcements, it is clear to me that the rise in target band tells us two things. One (the less significant) is that OPEC has lost faith in the strength of the dollar. The second is that OPEC is sending the world a coded message.

We're running out of oil.

Peak oil and me

My attempts to publicise the dangers of a global peak in oil production stretch all the way back to my first letters to politicians on the subject in early 1997. In the eight years since then, my opinions on the implications of oil peaking have remained largely unchanged, yet have gone from being lunatic fringe stuff to being the mainstream view. What has not changed, however, is the hostility with which those views are met by a significant majority of people.

Statistically speaking, I am due to live another 40 years. During that time, I will witness the complete collapse of free-market capitalism. The project of globalisation will fail, and the consumer culture within which recent generations have been raised will end. A massive reduction in living standards, unlike any other readjustment in history, will be experienced by 99% of us living in the industrialised world. A hundred thousand things that we all take for granted today will have ceased to exist by the time I reach my allotted lifespan. This will happen. And it is perhaps unsurprising that this pronouncement was not joyously embraced by the people I informed of it.

First let me point out that the problem we face is a Physical Systems problem. It's not an economic problem, despite the insistence of certain kooks who claim that The Market can find a solution to anything. By 1998 large US corporations were giving me tens of millions of dollars of their Physical Systems and telling me to optimise them (now there's a euphemism for closing factories if ever I heard one!). It was said that I was a bit of an expert in the field.

If there's one thing that makes industrial engineering a satisfying profession, it's the presence of right and wrong answers. Inevitabilities and absolutes. If a vehicle fleet is burning X litres of fuel per day and I calculate that moving the locations of three distribution centres, and eliminating two others will reduce X by a third, then I'm either going to be right or wrong when the plan is implemented. And if I gather enough data beforehand, and ensure that I analyse it in the correct manner, then I can guarantee being right, near-as-dammit, even before implementation. Because it all comes down to mathematics, and understanding exactly how mathematics can be applied to the physical world. Einstein may once have said "as far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality"; but as far as engineering is concerned, you can trust maths to be near-as-dammit accurate.

Strange to think though, that all over the world there are engineers who - when pressed - would admit to near-as-dammit accuracy. That may not reassure you all that much, next time you get into a plane or drive over a suspension bridge. But it's the way of things.

The politics of pessimism

But the private project with which I was becoming increasingly obsessed was far larger than saving a couple of companies in the midwest (which, incidentally, I succeeded in doing before going completely apeshit). Initially I held a secret hope of being The Great Man who discovered the solution to the crisis... who saved the world. And indeed, some who knew me then may still recall the evangelical zeal with which I argued the case for a largescale increase in biomass; replacing fossil oils with plant oils.

However, by the end of 1998 the full implications of peak oil finally began to sink in. My inability to create a biomass model capable of being scaled up provided me with one of my many Road to Damascus moments and I quit the grindstone to be depressed for a while.

Here in 2005, it's almost impossible to find someone, who knows what they're talking about, who doesn't agree that we are approaching a singular discontinuity in human affairs. The US Dept of Energy, the International Energy Agency, ExxonMobil, the Saudi oil minister, everyone who has conducted serious research into the matter. All are now on board; and the biggest wild-eyed optimist of the lot (Saudi Aramco) tell us not to worry, as the problem is still 30 to 50 years away; a position which looks increasingly absurd as the facts emerge, but even if true, is still only reassuring if our generation doesn't give a damn about the next lot.

Nobody disagrees that a problem is approaching to which there is no solution beyond accepting the naturally imposed limits of the physical system within which we live. Nobody disagrees. Except the economists. But they're idiots. Claiming that if people want a commodity badly enough then other people will find a way to supply it even if the raw materials no longer exist. If we all wanted a pet dodo the Market would supply us.

So as the years passed, people stopped arguing the facts with me. What's the point when it's possible to demonstrate them on an etch-a-sketch? Instead they found another way to ignore the implications. They insisted that what I was saying couldn't possibly be true because it was pessimistic. Or at least, that's what their complaints boiled down to. And at the back of my mind, I felt a creeping doubt. Maybe they're right. I was clearly suffering from depression (due to a combination of overwork, stress and a youth spent consuming anything rumoured to be psychoactive), and that was bound to colour my views.

But as I slowly began to recover from depression, I gained a deeper understanding of the psychological issues surrounding the peak oil problem and exactly why people are so hostile to taking it seriously. And I realised that the facts of the problem speak for themselves; that my depression had been at least partly due to my coming to terms with those facts; and that the process of coming to terms is precisely the painful and unpleasant experience that people are rejecting when they react with hostility to my "pessimism".

And with the lifting of my depression, I also realised, finally, that I'm not a pessimist. I was reading an essay of George Orwell's written just prior to the outbreak of World War Two. In the essay he recommended the immediate nationalisation of all industry to swiftly prepare for a war against fascism. The merits of his nationalisation proposal aren't what's important here, but the fact that he was trying to convince society that an urgent collective solution was required to a very serious problem. Orwell saw fascism rising (as did many of course) but was dismayed to find himself dismissed as a pessimist and a communist by those who were convinced of "peace in our time".

Pessimism and optimism are not natural opposites. Rather they are both manifestations of a desire to deny reality. In 1938 a realistic assessment of Europe would acknowledge the great likelihood of war in the near future, and it would not be pessimistic to recommend preparation. The pessimistic position is actually to argue that preparation is pointless because it is a foregone conclusion that fascism will triumph. The optimistic position, in 1938, is that Hitler is going to be satisfied with what he's got up until now, and preparation for a conflict with fascism is completely unnecessary. Both of these are denials of reality. And the realist is derided as a doom-monger by the optimist and as a wild-eyed loon by the pessimist. Both of whom wallow comfortably in their denial.

So it is, that our society must acknowledge the approaching fascist tide. Or rather the 21st century equivalent: unsustainability. The problem we face is simple enough to comprehend... we have built a society which requires X
amount of energy to continue existing. Energy, remember, is defined as "the ability to do work". Very soon though, we'll only have X - y available to us. y represents the energy "lost" to depletion. The trouble with y is that it's going to keep increasing for the next century or so (by about 3% every year according to Dr. Campbell), after which it will level out at a number almost a big as X.

There are plenty of pessimists out there. And at the very depths of my depression, when the full impact of how the second half of my life is likely to pan out sank in, I was one of them. People who throw their hands in the air and insist that there's nothing that can be done. That the planet will experience a human dieoff event likely to see our population drop from 6-8 billion to less than a billion within a generation.

And there are optimists who insist that there's nothing that needs to be done. That technology will save us, or The Market will save us, or Aliens will save us... anything at all that means they can continue to live in denial; to live for as long as possible as an integral part of the consumer system that's making the problem worse. And like blinkered fools in 1938 deriding the warnings of an approaching storm, the optimists of today drown out the realists with mocking scorn.

- "Did you know that the Gharwar oilfield in Saudi Arabia has recently entered production decline?"

- "Jesus Christ Jim! Why not try cheering up, eh? Put a smile on your face, a song in your heart, and a blind faith in the idea that 'someone always fixes the problem'. Then all will be well."

It is, incidentally, a rich irony that the optimism of free-market economics (demand will always generate supply) is relying more and more upon the pessimism of the military-industrial view to sustain it.

The approaching crisis has the potential to destroy all that is good about modern human society (and there's plenty of good out there... from health care to sanitation to recorded music). Unless we take massive steps to mitigate the effects of this crisis; effects which are undeniably going to occur; that the destruction will be near-as-dammit guaranteed. It is the pessimists and the optimists who are maintaining our suicidal status quo.

A person is seen as psychotic when they cease being able to function and maintain their existence within the society in which they find themselves. Similarly, a society can be seen as psychotic when it ceases being able to function and maintain it's existence within the physical environment in which it finds itself. So long as we had access to an ever-increasing pool of energy, our society remained sane. We can't rely on that any more. The rules have changed (or rather, we're finally about to learn them properly) and the denial demonstrated by the optimists is soon to be revealed as the psychosis it truly is.

Steps can be taken to mitigate this problem. Solutions are available which could prevent a great deal of the suffering that threatens to occur. However, until the world stops listening to the psychopaths who preach business as usual, we realists still find ourselves banging our heads against the walls of ignorance, indifference, optimism and pessimism which surround - and prevent us from dealing with - the real problem.

Jim Bliss is a philosopher, writer and (currently non-practising) engineer. He blogs at 'Where There Were No Doors' and acts as a freelance consultant on all manner of stuff. He tries to be a realist, however unpopular that makes him.