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Energy Insights:74 Life After the Oil Crash

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74 Life After the Oil Crash


15-09-2007

Dear Reader,  

Civilization as we know it is coming to an end soon. This is not the wacky proclamation of a doomsday cult, apocalypse bible prophecy sect, or conspiracy theory society. Rather, it is the scientific conclusion of the best paid, most widely-respected geologists, physicists,  bankers, and  investors in the world. These are rational, professional, conservative individuals who are absolutely terrified by a phenomenon known as global "Peak Oil."


"Are We 'Running Out'? I Thought
There Was 40 Years of the Stuff Left"


Oil will not just "run out" because all oil production follows a bell curve. This is true whether we're talking about an individual field, a country, or on the planet as a whole. 

Oil is increasingly plentiful on the upslope of the bell curve, increasingly scarce and expensive on the down slope. The peak of the curve coincides with the point at which the endowment of oil has been 50 percent depleted. Once the peak is passed, oil production begins to go down while cost begins to go up.

In practical and considerably oversimplified terms, this means that if 2005 was the year of global Peak Oil, worldwide oil production in the year 2030 will be the same as it was in 1980. However, the world’s population in 2030 will be both much larger (approximately twice) and much more industrialized (oil-dependent) than it was in 1980. Consequently, worldwide demand for oil will outpace worldwide production of oil by a significant margin. As a result, the price will skyrocket, oil-dependant economies will crumble, and resource wars will explode.
 

 

The issue is not one of "running out" so much as it is not having enough to keep our economy running. In this regard, the ramifications of Peak Oil for our civilization are similar to the ramifications of dehydration for the human body. The human body is 70 percent water. The body of a 200 pound man thus holds 140 pounds of water. Because water is so crucial to everything the human body does, the man doesn't need to lose all 140 pounds of water weight before collapsing due to dehydration. A loss of as little as 10-15 pounds of water may be enough to kill him.

In a similar sense, an oil-based economy such as ours doesn't need to deplete its entire reserve of oil before it begins to collapse. A shortfall between demand and supply as little as 10-15 percent is enough to wholly shatter an oil-dependent economy and reduce its citizenry to poverty.

The effects of even a small drop in production can be devastating. For instance, during the 1970s oil shocks, shortfalls in production as small as 5% caused the price of oil to nearly quadruple. The same thing happened in California a few years ago with natural gas: a production drop of less than 5% caused prices to skyrocket by 400%.

Fortunately, those price shocks were only temporary.

The coming oil shocks won't be so short-lived. They represent the onset of a new, permanent condition. Once the decline gets under way, production will drop (conservatively) by 3% per year, every year. War, terrorism, extreme weather and other "above ground" geopolitical factors will likely push the effective decline rate past 10% per year, thus cutting the total supply by 50% in 7 years.  (Source)

These estimate comes from numerous sources, not the least of which is Vice President Dick Cheney himself. In a 1999 speech he gave while still CEO of Halliburton, Cheney stated:

By some estimates, there will be an average of two-percent
annual growth in global oil demand over the years ahead,
along with, conservatively, a three-percent natural decline
in production from existing reserves.That means by 2010 we
will need on the order of anadditional 50 million barrels a
day. 

Cheney's assesement is supported by the estimates of numerous non-political, retired, and now disinterested scientists, many of whom believe global oil production will peak and go into terminal decline within the next five years. Many industry insiders think the decline rate will far higher than Cheney predicted in 1999. Andrew Gould, CEO of the giant oil services firm Schlumberger, for instance, recently explained:

An accurate average decline rate is hard to estimate, but an
overall figure of 8% is not an unreasonable assumption.

(Source)

An 8% yearly decline would cut global oil production by a whopping 50% in under nine years. If a 5% cut in production caused prices to triple in the 1970s, what do you think a 50% cut is going to do?

Other experts are predicting decline rates as high as 10%-to-13%. Some geologists expect  2005  to be the last year of the cheap-oil bonanza, while many estimates coming out of the oil industry indicate "a seemingly unbridgeable supply-demand gap opening up after 2007," which will lead to major fuel shortages and increasingly severe blackouts beginning around 2008-2012. As we slide down the downslope slope of the global oil production curve, we may find ourselves slipping into what some scientists are already calling the coming "post-industrial stone age."
Peak Oil is also called "Hubbert's Peak," named for the Shell geologist Dr. Marion King Hubbert. In 1956, Hubbert accurately predicted that US domestic oil production would peak in 1970. He also predicted global production would peak in 1995, which it would have had the politically created oil shocks of the 1970s not delayed the peak for about 10-15 years.


"Big deal. If gas prices get high, I’ll just  drive less. Why should I give a damn?"


Because petrochemicals are key components to much more than just the gas in your car. As geologist Dale Allen Pfeiffer points out in his article entitled, "Eating Fossil Fuels," approximately 10 calories of fossil fuels are required to produce every 1 calorie of food eaten in the US.

The size of this ratio stems from the fact that every step of modern food production is fossil fuel and petrochemical powered:

Pesticides are made from oil;

Commercial fertilizers are made from ammonia, which is made from natural gas, which will peak about 10 year after oil peaks;

With the exception of a few experimental prototypes, all farming implements such as tractors and trailers are constructed and powered using oil;

Food storage systems such as refrigerators are manufactured in oil-powered plants, distributed across oil-powered transportation networks and  usually run on electricity, which most often comes from natural gas or coal;

In the US, the average piece of food is transported almost 1,500 miles before it gets to your plate. In Canada, the average piece of food is transported 5,000 miles from where it is produced to where it is consumed.

According to the Organic Trade Association, the production of one pair of regular cotton jeans takes three-quarters of a pound of fertilizers and pesticides. (Source)

In short, people gobble oil like two-legged SUVs.

For more information, see:

Will the end of oil be the end of the end of food?

How will we grow food after Peak Oil?


"Are all forms of modern technology actually petroleum products?"


Yes.

It's not just transportation and agriculture that are entirely dependent on abundant, cheap oil. Modern medicine, water distribution, and national defense are each entirely powered by oil and petroleum derived chemicals.

In addition to transportation, food, water,  and modern medicine, mass quantities of oil are required for all plastics, all computers and all high-tech devices. Some specific examples may help illustrate the degree to which our technological base is dependent on fossil fuels:

Automobiles:

The construction of an average car consumes the energy equivalent of approximately 20 barrels of oil, which equates to 840 gallons, of oil. Ultimately, the construction of a car will consume an amount of fossil fuels equivalent to twice the car’s final weight. 

It's also worth nothing that the construction of an average car consumes almost 120,000 gallons of fresh water, which is also rapidly depleting and happens to be crucial to the petroleum refining process. Source

Microchips:

The production of one gram of microchips consumes 630 grams of fossil fuels. According to the American Chemical Society, the construction of single 32 megabyte DRAM chip requires 3.5 pounds of fossil fuels in addition to 70.5 pounds of water. Source

The Environmental Literacy Council tells us that due to the "purity and sophistication of materials (needed for) a microchip, . . . the energy used in producing nine or ten computers is enough to produce an automobile." Source

Computers:

The construction of the average desktop computer consumes ten times its weight in fossil fuels. Source


"What about alternative energy systems like solar panels and wind turbines? Are they also manufactured using petroleum and petroleum derived resources?"


Yes.

When considering the role of oil in the production of modern technology, remember that most alternative systems of energy — including solar panels/solar-nanotechnology, windmills, hydrogen fuel cells, biodiesel production facilities, nuclear power plants, etc. — rely on sophisticated technology.

In fact, all electrical devices make use of silver, copper, and/or platinum, each of which is discovered, extracted, transported, and fashioned using oil-powered machinery.  For instance, in his book, The Lean Years: Politics of Scarcity, author Richard J. Barnet writes:

To produce a ton of copper requires 112 million BTU's or the
equivalent of 17.8 barrels of oil. The energy cost component
of aluminum is twenty times higher.

Nuclear energy requires uranium, which is also discovered, extracted, and transported using oil-powered machinery.

For more information on metals shortages see:

Scarcity of aluminum, copper threaten solar installments

Dwindling supply of fare metals imperils innovation

World faces copper shortage

Most of the feedstock (soybeans, corn) for biofuels such as biodiesel and ethanol are grown using the high-tech, oil-powered industrial methods of agriculture described above.

In short, the so called "alternatives" to oil are actually "derivatives" of oil. Without an abundant and reliable supply of oil, we have no way of scaling these alternatives to the degree necessary to power the modern world.

(Note: alternatives to oil are discussed in depth on Page Two)


"Is the modern banking system entirely dependent on ever-increasing amounts of cheap oil?"


Yes.

The global financial system is entirely dependent on a constantly increasing supply of oil and natural gas. The relationship between the supply of oil and natural gas and the workings of the global financial system is arguably the key issue to understanding and dealing with Peak Oil. In fact this relationship is far more important than alternative sources of energy, energy conservation, or the development of new energy technologies, all of which are discussed in detail on page two of this site.

Dr. Colin Campbell presents an understandable model of this complex (and often difficult to explain) relationship as follows:

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