Peak Oil, reloaded…

 

A year ago I first wrote about ‘Peak Oil’ – the fact that one day, later or perhaps rather sooner, the world will begin to feel the perils of the inevitable downhill part of the global oil extraction curve.

 

For beginners: Since the amount of fossil fuels in the earth is not unlimited, one day we will come to the point at which the second half of these oil deposits refuses to jump out of the ground at the rate we were used to. It is widely assumed that, as we pass this 'peak oil' production date, the global oil production will fall at rate of several percentage points annually, slowly choking the energy supply to much of our transport, food production, and other needs. This depletion curve has been confirmed with many older oil deposits in the world so far. The North Sea oil production for example is now falling with over 10% annually, making the UK a net oil importer once more.

 

A year ago I invited to a screening of the documentary 'The End of Suburbia', which Jeannette Fitzsimmons introduced to us at the Hauraki House. Much has happened since then: More and more geologists and oil experts are now calculating that this peak oil time is imminent and some believe that it already happened last year. And indeed, the annual oil output of the world has not increased since 2004, despite the fact that by now we are willing to pay over US$60 per barrel.

 

According to latest news this month, the world's second largest oil field in Mexico has peaked last year and is now in steep decline, and so is the output of Kuwait. And the world's larges oil field in Saudi Arabia seems to be unable to raise production and according to some experts the water content drawn up there is reaching 50% (up from 30% last year).

 

Now even the oil companies themselves have joined the chorus of those who are sounding alarm. Chevron’s CEO published a two page advertising appeal last September, asking the public to join them in finding a solution to the end of the era of cheap oil.

 

A report drawn up by the US-Army and obtained under the US Freedom of Information Act draws a bleak picture too. The US-Army concludes that peak oil is imminent and wonders how to fuel their energy hungry operations in the future. They confirm that going nuclear is of limited use as the world's Uranium deposits are running low as well and are to become scarce in just two decades from now.

 

What does all this mean for us? For the moment the industrial nations of the developed world have seemingly adapted to the new price level of around US$60 for oil and some have even increased their consumption last year (USA +2.5%). Some developing nations have increased their consumption markedly: China had a massive increase in oil imports of almost 70% in January 2006 over the same time last year. However, as the world's oil production in total has not increased, where did these individual increases in consumption come from? Well, they came from the oil that the impoverished 3^rd world can no longer afford to import at the current price level! Many countries in the 3^rd world have state-subsidized fuels so that their people can afford the necessary energy for their most pressing needs. But much of that will have to go, as these countries can no longer afford to pay the hefty bill for their oil imports.

 

So as we still trundle along the highway with a slight grudge about the current fuel price we should spare a thought for those, whose peak oil days have already come and gone, as the net energy available to their economies is in decline today. Where will the billions of dollars come from to invest into their post-oil energy supplies and what will they be? Who is next in the house of cards?

 

New Zealand, with no significant oil production of its own and a few gas wells sputtering on their last years, and with luckily no army to go and pinch the stuff in the Middle East, is perhaps not far from the front now. Our ability to import Oil will depend on our country’s ability to export – tourism and bulk agricultural products, which are both very negatively affected by rising transport cost.

 

And just like the poor nations in the world are already past their own 'peak oil' days, so are the poor in the wealthy nations. With the price of fuel going up and up, many families will look back to the last years as the peak of their personal energy consumption - ever! Peak oil is a global problem and also a very personal one as the cost of energy is sorting the have-lots from the have-nots.

 

So what will happen at $100 or $200 a barrel of oil? Do we have any clue what it will mean when a ride to Auckland will cost $100 each way in petrol in a compact car? Is there enough time of the good old life left to invest in the technology that will bridge the gap to the post fossil fuel era? Is there any such technology? Or will the economic decline that comes with dwindling energy supplies eventually rip the rug from under our feet with no chance to avoid a slide into the Stone Age? Horse breeding anybody?

 

Seriously, this is no matter of kidding around. I am convinced that the first half of this century will see the end of Oil as the source of energy for humankind and perhaps the most tumultuous shifts in our way of life ever. And unless we make decisive investments into an alternative lifestyle today, we will not have the economic strength to do so soon. Sure, we still have coal for a while. But if we switched to replace all our current oil needs with coal, then even coal will not outlast the next generation and besides, with coal based energy being a lot harder on our atmosphere, we will keep on wrecking our climate ever faster.

 

So perhaps go through your attic and dust of your copy of 'Limits to Growth' by the Club of Rome, published in the late 60ies. This much derided prediction now seems to be coming true after all - perhaps a decade or two late - and it seems, that back then it would have been a bigger achievement for mankind to take a serious look at the global fuel meter than to take steps on the moon. Now humankind seems stuck, not unlike the proverbial cat, up the mythical tree of endless growth and expansion with no easy way down.

 

Thomas Everth