The Spectre of Peak Oil — Part 2
Peak oil is not the end of the world. It is a subtle, almost barely noticeable phenomenon. It does not mean that we will run out of oil from one day to another, causing all transportation to stop, bringing about famine, chaos, riots and nuclear meltdowns everywhere. We will get there in due time — make no mistake — but not at the time of peak oil supply. Why all the fuss then?
As we have seen in Part 1 of this series, there are several limits to global oil supply. First, Earth has a finite volume. Out of this finite volume there are only so many places where oil can be formed and later found. The largest of these oil reserves have been already identified and tapped, and as they near the end of their useful life we are forced to move towards ever smaller, ever more energy and resource intensive to get deposits, or tapping the source rock itself (think: shale). Beyond that there is very little we can do. We are now actively living up our civilization’s lifetime savings at an exponential rate.
As rich, easy to tap fields — providing prodigious returns on investment — slowly give up the ghost, the age of flexible yet reliable supply comes to an end. The persistent increase in energy and resource demand on drilling the next well and getting the next barrel — as we move on to tap ever trickier deposits — will require an ever higher selling price to balance.
The only problem is, that oil prices above a certain point simply end up killing the host, the economy itself. Despite being such a vital — and irreplaceable — input to the economy, petroleum’s affordability will eventually put a chokehold on its own future. The cost of oil builds into every product you buy — especially food—thereby leaving less and less money in your pocket to spend on other products and travel (both courtesy of petroleum). This process eventually decimates demand for both energy and raw materials, and at the same time limits investments in future oil production by putting a huge question mark over returns.
At a certain point — which we might have already passed — new oil will become too expensive for buyers to buy, and at the same time too costly for producers to extract.
All this is happening in real time in front of our eyes. In fact, we are well into this process since 2005 when conventional oil production peaked and humanity started to resort to ever more exotic forms of supply (fracked ‘shale’ oil, tar sand, or ultra heavy oil from Venezuela) to keep up at least a simulacrum of growth.
Since liquid fuels are indispensable to the economy, their production now gets massive subsidies from other energy resources. Be it drilling rigs powered by hydro-electric plants near the shores of Norway, or energy provided by coal, natural gas and even “renewables” (not to mention mixing biofuels into gasoline) humanity throws everything at the issue of keeping the necessary amount of fuel flowing into the economy. Our situation is so dire that temporarily we might even attempt breaching breakeven levels for subsidizing hydrocarbon production (investing more than a barrel of oil worth of energy into getting a barrel of fuel in return). Think creating fuel from thin air, or nuclear diesel — no kidding.
A decline in net energy, however, does not affect oil alone. The same principles apply to all mineral resources, from coal to natural gas, from uranium to lithium and even copper. As fat easy to access deposits deplete, the next batch will be increasingly more energy intensive to get. Eventually we will reach a point where the energy sources now used to subsidize liquid fuel production will themselves prove to be increasingly uneconomic, and thus cease to be a subsidy. If you consider that liquid fuels feed back into the mining, production and transferring of all forms of energy (yes, including “renewables”, hydro and nuclear, too) you will start to appreciate how this decline in net energy will see our high tech era spiraling down the drain.
Well, it kinda’ sucks being stuck on a finite planet, now isn’t it?
With that all said it is worth keeping in mind though, that peak oil is not a date beyond which we run out of oil, but a day beyond which we are no longer able to “produce” as much as before. Not a sudden apocalypse but the onset of a long decline. Something which can remain invisible for a relatively long period of time, as poorer regions of the world are silently giving up on most of their oil use and return to a much simpler, local, low tech economy one by one.
As the process unfolds large swathes of our civilized populations will be forced to give up on car use and consumption of goods from far away lands. Products of all kinds will become prohibitively expensive, as the cost of mining, manufacturing and transport goes up. Demand for oil will start to decline: not because we want it so, but because we will no longer be able to afford it.
Is there a way out of this mess? Can alternative energy sources pull us out from this hole? Well, as we have seen above, relatively high (unaffordable) oil prices also dampen demand for “renewables” through increasing mining and transportation costs — paradoxically making the energy transition itself impossible. This is a much more general and severe issue than most assume. No matter what technology we dream up, all of them require mining and transportation of raw materials at an immense scale. Now, add in the fact the we simply lack the actual copper and other mineral reserves — in addition to the lack of energy needed to get them — to electrify the world, and you start to see that we have a serious math problem. And if we cannot build (let alone maintain) the necessary alternative infrastructure for the future, it really doesn’t matter how we plan to power it.
A shrinking oil supply, walking hand in hand with a faltering flow of minerals is a death knell for the consumer economy. The long decline will leave us with an ever shrinking market of high end goods targeted towards the rich, leaving little to none for the poor and the working class. As the process continues to unfold during the decades ahead — first slowly then at an ever faster pace — expect an avalanche of bankruptcies, mass unemployment, a collapse of services, riots and all what usually comes with political upheaval. (What has happened to Sri Lanka during the recent years is a case in point.)
Gated communities with all the high tech one can imagine will continue to remain an escape hatch for the rich, while the rest of the population will have no other choice than to try and make a living from manual labor, growing food and making simple, low tech products for local use. For those who could still afford it, “renewables” will temporarily provide at least some energy to access the internet, power some appliances or pumping some water from a well. Since the basis of a global economy and trade will simply vanish with an ever lower oil production, replacing defunct wind turbines, solar panels and batteries will first become challenging, then all but impossible. (You can have a glimpse on how this might play out by listening to the story of Joslin Faith Kehdy from Lebanon — a country well ahead most of us into a post petroleum world. A fascinating account to say the least…)
In the Western world all this will be seen as a result of a series of economic crises, a financial market crash, a lack of liquidity, bad policies, evil dictators, people coming from far abroad, you name it. Everything but the real underlying cause: a faltering energy return on investment and resource depletion. Consequently governments will try to solve the “problem” by throwing an unprecedented amount of money at it, restricting competition (as well as what’s left from democracy itself), or by lowering environmental standards in ‘sacrifice zones’ in order to get the last batch of resources. All this will achieve though is a further increase in inflation, political upheaval, pollution and climate change, until consumption finally brakes down and another wave of bankruptcies ushers in.
Globalization and unfettered trade — i.e., dependence on distant “elsewheres” for food and many other resources — will no longer be possible in the emerging resource and climate-constrained world. This is not entirely a bad thing. Globalization is a driver of overshoot — so-called free trade, particularly in the past half-century, greatly accelerated resource (over)exploitation and pollution, and facilitated population growth. It follows that adaptive eco-economies be more eco-centric local economies. Agriculture and essential light manufacturing — e.g., food processing, textiles, clothing, furniture, tools — will all be relocalized providing ample meaningful employment. There will be a resurgence of personal skills and pride in workmanship. As an immediate additional benefit, when citizens become acutely aware of their dependence on local ecosystems they become more actively concerned about the health and integrity of those systems. A sense of conscious participation in one’s eco-niche is not possible if the relevant ecosystems are half a planet away.
It is very important to understand that it was the use of fossil fuels in general and oil in particular which has enabled us to massively overshoot the carrying capacity of Earth, and pollute Nature beyond any tolerable level. Their use has ushered in climate change and wreaked havoc on entire ecosystems. But it was the advent of oil which has fueled (and keeps fueling to this very day) all the mining, as well as all intercontinental transportation of resources and products. It has enabled industrial agriculture to grow a previously unprecedented amount of food by giving us the power of diesel, as well as fertilizers and pesticides. It’s unfettered use has eventually lead to an even drawdown of all raw materials and Nature alike, and left us with a massive predicament. With a relentlessly falling amount of oil production though, the chickens will come home to roost.
Humanity will soon have to come to terms with losing what Catton called ‘phantom carrying capacity’, and an end to human overshoot. Can this be a peaceful affair? One could argue that due to rapidly falling fertility rates, the rising cost of raising children, death’s of despair and with a massive generation of baby boomers leaving the scene this process could remain manageable, but it is too early to tell. The combined effects of an increasingly inadequate supply of oil together with global temperatures soaring past 1.5°C by 2030 then 2°C by 2040 (with an additional degree coming from the removal of the ‘aerosol masking effect’) could easily accelerate civilizational decline beyond all imagination. Complex systems, like ecosystems or the world economy, has multiple tipping points beyond which things can easily get completely out of control.
One thing seems to be sure: by the time the last oil well runs out, no one will give a damn. Driving a car will be a distant memory in the past by then, as well as shopping for plastic gadgets in a supermarket or ordering something from the internet. The coming decline of oil extraction will force humanity to return to a one-planet living and wean itself off from its addiction to technology (presuming, that there will be still a planet with a viable ecosystem to inhabit by then.) The ensuing civilizational decline in the following decades after peak oil will eerily resemble a radical tapering-off cure, but as in the case of dropping any severe addiction, there is no guarantee for survival.
Until next time,
For those pointing towards the sky rambling about “ we will mine asteroids then” I have stark reminder to serve: we need resources fast and by the millions of tons. Where to get the technology (not to mention the rocket fuel) to achieve this? Peak oil is not something happening far into the future, but an event unfolding right here right now... (This is not to mention the fact, that the ecological disaster (brought about by overconsumption, growth and pollution) would just get infinitely worse by importing even more stuff to this tiny planet.)