Reply #39: What "Peak Oil" really is

[Dogmudgeon]

First of all, it's a kind of journalistic cliche these days. "Peak Oil" implies that the peak will arrive soon, and the rest of history will be AFTER Peak Oil.

There's a common misconception that it means that the oil "runs out" all of the sudden. It doesn't. It means that oil will become progressively more expensive until the laws of physics themselves make it uneconomical to burn it for energy. If it takes 10 calories of heat energy to recover 9 calories' worth of burnable oil, why do it?

This is expressible as an equation called EROEI -- Energy Return On Energy Investment. Even now, oil has a decent EROEI; in 30 years, if and when EROEI drops below 1.0, the energy oil industry is through. (Using oil for plastics production will probably remain profitable if less lucrative.)

All the scenarios reviewed for the future of the oil economy are based on estimated growth of oil reserves. Unfortunately, there have been only three significant oil finds since 1970 -- Prudhoe Bay (Alaska), the North Sea, and the South Caspian Basin (including Iraq). And even those oil fields are much smaller than the ones discovered under Arabia.

Industry was hoping against hope that the Iraq bonanza would top out at 3 billion barrels, with 1.5 billion recoverable. It now looks more like 500 million and 300 million, respectively.

Sure, there are other forms of energy. In America, about 35% of our energy is from geothermal, hydroelectric, and nuclear. And we only use about 15%, tops, for domestic energy. So won't that get us through?

No, it won't. Because the world economy is based on an energy consumption growth of 2.5 to 3.0% per year; when it drops below that, the economy sinks and then crashes. This is a by-product of our current practice of capitalism. All wealth is derived from growth, so without growth, wealth evaporates. Without the prospect of future profits being assures, no investments are made. A depression results. Well, if we get to the point where we don't have enough energy to maintain that 2.5% growth rate, the bottom will drop out.

But we'll still have energy for our homes, right? But if you don't have a home, you're out of luck. And do you think you'll be carried when you can't make the rent or mortgage payment? No, in this world, the capitalists would just as soon throw everyone out into the wilderness as take a loss on a property. No energy growth, no jobs, no ability to pay bills, and the whole world goes into receivership to a class of people who will themselves die out within weeks of having no income.

This isn't just idle apocalyptic speculation -- it has happened before to other great empires. Maybe not with petroleum, but when the source of economic growth was shut off, the empires died. Why do you think Rome fell? Because the Romans were having too many orgies? No, it was the increasing organization of the Teutonic and Celtic peoples to the north. No easy expansion, no cheap labor, no inflow of tribute, and Rome collapsed in several painful stages.

It's easy to compare the end of the oil economy with the Y2K panic, but they're not the same thing. The Y2K panic was from a single point in time, based on a unique series of events that were avoided. The post-oil collapse will be based on millions of small economies ceasing to exist, and it will take place over a 10-100 year period.

We can avoid that breakdown, too, but I fear that we won't. It will take, at a minimum, a massive program to develop cheap photovoltaic power AND cheaper, SAFER nuclear energy. Something like a supersized Manhattan Project. And I think we won't do it. I hope I'm wrong, but I think we're sunk.

Survival means that we will have to institute some kind of super-socialism. And that's not going to go over well at all. Developing the new energy sources will take capitalization, which means taxation, but in a contracting economy, the tax revenues won't be there. It will be a mess until/unless we go to a command economy. Not just Socialism, but a kind of need-driven Fascism. A Nanny State with a cat-of-nine-tails.

The option? A major effort, staring NOW, to develop alternative energy sources, AND a political initiative to provide for people in times of severe economic disaster.

They'll cost money.

How quickly do think anything will be done without either a large number of dead blonde-haired little girls, or the prospect of a foreign flag being hoisted on American soil?

Yes, I'm pessimistic.

--bkl