Friday, January 20, 2006

What they don't want you to know about the coming oil crisis

This: What they don't want you to know about the coming oil crisis is perhaps the most important thing you could read to aid understanding the oil and energy problem. The oil and energy problem is very likely going to sink our modern way of life. Why? Because our way of life is utterly dependant on hugely extravagent energy use, facilitated by fossil fuels like oil and gas. Why is this a problem? Because the oil and gas are in limited supply, and relatively soon the oil and gas companies will be unable to supply the demand.

The other day I wrote a posting quoting an oil company economist saying not to worry, market forces will take care of it. Consider this effect of market forces:

Meanwhile, domestic gas bills, which rose by more than a third last year, are expected to rise even higher in the next few months. For many people, such fluctuations have lethal implications. Last winter, there were some 35,000 "excess winter deaths" in the UK, most of them attributable to old people not being able to keep warm enough; and last winter was a relatively mild one.

That's market forces at work. The price rises, people can't afford to stay warm, and 35,000 people die as a result. Yup, sorry about your grandma, but that's just market forces at work.

We have allowed oil to become vital to virtually everything we do. Ninety per cent of all our transportation, whether by land, air or sea, is fuelled by oil. Ninety-five per cent of all goods in shops involve the use of oil. Ninety-five per cent of all our food products require oil use. Just to farm a single cow and deliver it to market requires six barrels of oil, enough to drive a car from New York to Los Angeles. The world consumes more than 80 million barrels of oil a day, 29 billion barrels a year, at the time of writing. This figure is rising fast, as it has done for decades. The almost universal expectation is that it will keep doing so for years to come. The US government assumes that global demand will grow to around 120 million barrels a day, 43 billion barrels a year, by 2025. Few question the feasibility of this requirement, or the oil industry's ability to meet it.

They should, because the oil industry won't come close to producing 120 million barrels a day; nor, for reasons that I will discuss later, is there any prospect of the shortfall being taken up by gas. In other words, the most basic of the foundations of our assumptions of future economic wellbeing is rotten. Our society is in a state of collective denial that has no precedent in history, in terms of its scale and implications.

The article goes on from there to describe America's contribution to this mess. The U.S. domestic oil supply reached its peak output in 1970, and U.S. domestic oil production has only declined since, while U.S. oil demand has only climbed. "Of America's current daily consumption of 20 million barrels, 5 million are imported from the Middle East, where almost two-thirds of the world's oil reserves lie in a region of especially intense and long-lived conflicts. Every day, 15 million barrels pass in tankers through the narrow Straits of Hormuz, in the troubled waters between Saudi Arabia and Iran. " The U.S. could reduce demand by 5 million barrels of oil very easily by requiring an increase in fuel efficiency of only 2.5 gallons per mile. This would be easy for Detroit to achieve, but realistically speaking with President Enron and Vice President Halliburton in office is there a chance of that happening?

The SUV market share in the US was 2 per cent in 1975. By 2003 it was 24 per cent. In consequence, average US vehicle fuel efficiency fell between 1987 and 2001, from 26.2 to 24.4 miles per gallon. This at a time when other countries were producing cars capable of up to 60 miles per gallon.

With this kind of trend, we are literally driving ourselves to oblivion.

The importance to this question lies with how is it going to be solved. No amount of economic free market theory will cover up the fact that what we have is a limited, and declining, resource. We will not have the luxury of waiting 6 million years for oil reserves to recover through geologic mechanisms. Instead, when the oil peaks and begins to run dry, the wars we're seeing now will seem tame in comparison.

If we are to avoid that fate, we must begin working on some alternative way of moving our butts from place to place. And it's not just transportation, it's our food supply. As the article says, agriculture is a huge user of oil if only because the Market Economy has resulted in most cities not having their own food production capacity, and instead relying on the ability to ship food from far remote places. How else can arctic cities have fresh fruit in the dead of winter???

It takes time to develop a new energy technology. A lot of time. Fortunately there are some alternative technologies being worked on, but they are all struggling with limited funding for research. Plus they all are suffering from a playing field shaped by market forces that are strongly favoring the entrenched fossil fuel resources.