ClubOrlov: Peak Oil is History

There’s a pretty somber essay posted this week about the world’s future in post-oil economy. What makes it particularly somber is that it starts with the observation that Peak Oil occurred about 5 years ago (when all the data shows a peak in global oil production):

[N]ow does seem to be an auspicious moment to hold forth with a new piece of Peak Oil theory, because this is the year when, for the first time, just about everyone is ready to admit that Peak Oil is real, in essence, though some are not quite ready to call it by that name. Just five years ago everyone from government officials to oil company executives treated Peak Oil theory as the work of a lunatic fringe, but now that conventional world oil production peaked in 2005, and all liquids world production peaked in 2008, everyone is ready to concede that there are serious problems with growing the global oil supply. And although some people still feel skittish about using the term Peak Oil (and a few experts still insist that the peak must be referred to as “an undulating plateau,” which, if anything, is a graceful turn of phrase) the differences of opinion now largely stem from a refusal to accept the terminology of Peak Oil rather than the substance of peaking global oil production. This is, of course, quite understandable: it is awkward to suddenly jump from shouting “Peak Oil is bunk!” to shouting “Peak Oil is history!” in a single bound. Such acrobatics are only safe if you happen to be a politician or an economist.

Given this, Orlov discusses the fantasy that we will experience a smooth collapse (unlike the bumpy rise) and goes on to starkly give us in the oil-economy nations two choices: import more oil or collapse.

“Some might argue that there is a third choice: start using less oil right away. However, in practice this turns out to be equivalent to Choice Number 2. Using less oil involves making some radical, often technologically challenging, politically unpopular, and therefore expensive and time-consuming changes. These may be as technologically advanced (and unrealistic) as replacing the current motor vehicle fleet with electric battery-powered vehicles and a large number of nuclear power plants to recharge their batteries, or as simple (and quite realistic) as moving to a place that is within walking or bicycling distance from your work, growing most of your own food in a kitchen garden and a chicken coop, and so on. But whatever these steps are, they all require a certain amount of preparation and expense, and a time of crisis (such as when oil supplies suddenly run short) is a notoriously difficult time to launch into long-range planning activities. By the time the crisis arrives, either a country has already prepared as much as it could or wanted to (thereby delaying the onset of collapse) or it has not, bringing the crisis on sooner, and making it more severe. The oft-cited Hirsch Report states that it would take twenty years to prepare for Peak Oil in order to avoid a severe and prolonged shortage of transportation fuels, and so, given that the peak was back in 2005, we now have minus five years left to lollygag before we have to start preparing. According to Hirsch et al., we have failed to prepare already.

Some might also wonder why a shortage of oil should automatically trigger a collapse. It turns out that, in an industrialized economy, a drop in oil consumption precipitates a proportional drop in overall economic activity. Oil is the feedstock used to make the vast majority of transportation fuels—which are used to move products and deliver services throughout the economy. In the US in particular, there is a very strong correlation between GDP and motor vehicle miles traveled. Thus, the US economy can be said to run on oil, in a rather direct and immediate way: less oil implies a smaller economy. At what point does the economy shrink so much that it can no longer meet its own maintenance requirements? In order to continue functioning, all sorts of infrastructure, plant and equipment must be maintained and replaced in a timely manner, or it stops functioning. Once that point is reached, economic activity becomes constrained not just by the availability of transportation fuels, but also by the availability of serviceable equipment. At some point the economy shrinks so much as to invalidate the financial assumptions on which it is based, making it impossible to continue importing oil on credit. Once that point is reached, the amount of transportation fuels available is no longer limited just by the availability of oil, but also constrained by the inability to finance oil imports. “

Read the full article here.

Sam Norton (an Anglican priest who’s written on this subject from a theological viewpoint) has his thoughts on this essay posted here. He’s less pessimistic about the future than Orlov. But he’s writing from Britain, where they have a functioning passenger train system, smaller commutes and houses that are built on a more human scale. (I live in Phoenix, with 60+ mile commutes to work, 4,500 sq feet styrofoam houses and a 20 mile long light rail system that the new state legislature seems to think is a boondoggle.)

Happy Thursday.

Author: Nick Knisely

Episcopal bishop, dad, astronomer, erstwhile dancer...