by Richard Heinberg
For the past two years (since the publication of “The End of Cheap Oil” by Colin Campbell and Jean Laherrere in the March, 1998 Scientific American) I’ ve been tracking discussion in the press about the imminent end of the petroleum era (see MuseLetter issues #81 and 91). Until quite recently there s been remarkably little to report. This fact in itself is remarkable. Industrial civilization runs on oil, and the emerging consensus among independent experts is that world production of oil will peak sometime between the years 2005 and 2010, with steep price increases and shortages following shortly thereafter. This should be disturbing and important news,worthy of hundreds of banner-headline articles in the world’s newspapers. But for months I’ve looked in vain to find any mention of the subject whatever (other than the article just cited) in mainstream publications. Then last month a bit of news began to surface. The May issue of Popular Science featured an article titled “Hydrogen on Wheels,” with a sidebar by William G. Phillips subtitled, “Are We Really Running Out of Oil?” “Suffering from sticker shock at the gas pump?,” asks Phillips.
“Don’t expect a reprieve anytime soon.” The author continues:
Though the most recent increase in U.S. gasoline prices was the result of a decrease in oil production among the 11 OPEC (Organization of Petroleum Exporting Countries) members, the world will be facing a much bigger issue over the next 10 years, one that will keep prices inflated: We’re running out of oil. Really.
Though the general public — having been warned about the depletion of our oil reserves for decades — is taking an “I’ll believe it when I see it” attitude, the facts are a little unnerving. Today, the world finds one new barrel of oil for every four it consumes. World oil discoveries peaked in the 1960s… More than 90 percent of today’s oil comes from fields discovered more than 20 years ago — and most of the fields uncovered over the past decade have been extremely small. The consensus in the industry is that, based oncurrent reserves, anticipated discoveries, and today’s rate of demand, theworld will run out of its most precious resource in 2050.
At the very end of this one-page sidebar is a graph of oil production (real and projected) from 1930 to 2090. I reproduce the essentials of it here. I happened to notice the article while browsing through magazines in a Denver airport newsstand while waiting for a flight. As I stood contemplating the curve of the graph, I couldn’t help but think, This is the shape of global industrial and economic collapse. From 2010 to 2020 production drops by over half. The likely implication: In fifteen or twenty years there will be virtually no air transport — since you currently can’t runairliners on anything but refined oil, and a 50% decrease in oil supply will almost certainly translate to price hikes in the hundreds or thousands of percent (for some idea of the correlation between supply shortfalls and likely price increases, recall that the price of crude tripled within the past 18 months, from $10 to $30 a barrel, on the basis of a mere 3% decline in production; thus $50-a-gallon gasoline by 2010 is hardly inconceivable). How many people will be packing themselves onto Boeing 747s if a New York-to-Los Angeles fare rises to, say, $10,000? Probably only a few rich executives. As I stood in the cavernous airport I imagined it filled not with busy travelers, but with hordes of squatters.
Try a similar exercise: Go to the center of a city. Any size city will do. Find a place to sit and spend twenty minutes looking at the graph and then looking around you. What will this place be like with half as much oil available? A quarter?
The point bears emphasizing: Oil is the lifeblood of modern industrial society. For each calorie of solar energy contained in every bite of food we eat, there are ten calories of energy derived from oil — by way of agricultural chemicals, farm machinery, transportation to market, refrigeration, and packaging. In effect, we eat oil. Forty percent of all the energy captured by humans on the planet comes from oil. Most of the rest comes more directly from the Sun (by way of wood and food crops), or from natural gas (which is also being depleted quickly, with a global production peak perhaps only 25 years away), coal (whose environmental costs are enormous), and hydroelectricity. Oil’s share, while not a majority, is critical to transportation and agriculture, and it is for all practical purposes irreplaceable by any other energy source any time soon (more on that below).
This is surely the biggest news story of the past few decades. Here, buried in a sidebar in a single magazine, is clear evidence that industrial society is about to hit a wall. Within a mere decade or two we are likely to see not only the collapse of the airline industry but the virtual end of global commerce and a crisis in industrial agriculture as well.
In the same month, two other relevant articles appeared. (Three articles may not seem like much, but compared to the near-blackout since March 1998, this is a veritable blizzard of reportage.) The American Petroleum Geologist Explorer carried a piece titled “Bulls and Bears Duel Over Supply,” by David Brown; and The New Republic featured the essay “Opportunity Cost: Hooray for Expensive Oil!”, by Gregg Easterbrook, in its May 15 issue.
Both of these articles covered similar ground, informing readers how petroleum geologist M. King Hubbert, in the 1950s, formulated the principle that oil production from any given reservoir will peak almost exactly when that reservoir is half depleted. The evidence accumulated since then has repeatedly confirmed Hubbert’s theory. Oil production in the US peaked in 1970, only a year later than Hubbert predicted it would, and has been on the decline ever since.
This is how Colin Campbell, a retired Texaco geologist and the most respected oil-supply pessimist, summarized the situation in a recent letter to the New York Times:
Discovery peaked in the US-48 in 1930 and the corresponding peak of production followed about 40 years later. Discovery peaked in the North Sea in 1973 and it now faces the corresponding peak of production. The same pattern is being enacted around the world.
It takes no feat of intellect to understand the pattern; the problem is to insert the right numbers. The industry has… misled many analysts into thinking that more is being discovered than is the case. Several opec countries announced huge overnight upward reserve revisions in the late 1980s as they vied with each other for quota based on reserves. Then there is the problem of what to measure — where to draw the boundary between conventional oil and non-conventional oil and how to treat liquids derived from gas. Lax definitions and reporting practices laid down a thick smoke screen.
If we could blow it away, we would find that discovery peaked in the 1960s, despite all the technology, new knowledge, and a worldwide search aimed at finding the largest remaining fields. About one trillion barrels of conventional oil are yet-to-produce, half of which lie in just five Middle East countries. Their share of world production was 38% at the time of the first Oil Shock in 1973, but fell to 18% in 1985 as new provinces in Alaska, the North Sea and elsewhere, which had already been found before the shock, started to deliver flush production. Opec share has been rising since to about 30% today, but this time it is set to continue to rise as there are no major new provinces in sight. At a certain point, this growing share translates into another price shock. It will be different from earlier shocks because it is driven by the resource base itself and the immutable physics of the reservoir and not by politics. The discovery peak of the 1960s means a global production peak around 2005.
There is little disagreement that the halfway point in world oil supplies is coming soon, nor that the entire world will be almost completely out of liquid petroleum by the end of this century. When the halfway point in global oil production is reached, the supply will begin to diminish and the price will increase — probably quite rapidly (since demand continues to rise, currently by about 2.5 percent per year).
The Explorer article, while titled as if it were a debate between oil optimists and pessimists, actually presented almost solely the evidence on the side of the Bears. The New Republic piece by Easterbrook (who could fairly be characterized as the American Corporate Establishment’s pet environmentalist) argued that the inevitable steep increases in oil prices will be good for us, as they will encourage the use of alternative fuels — including atomic energy.
I’ll discuss Easterbrook’s ideas more below. But first, what about the Bulls — those who assure us that we’re not running out of oil? On what do they base their optimism?
Most of the oil optimists are economists working for oil companies. There are exceptions, however, such as economist Michael Lynch of the Massachusetts Institute of Technology, who notes that today’s (reported) reserves are larger than those in 1973, when the first oil crunch hit. Lynch and colleagues remind us that new discoveries are always being made — such as the huge recent finds in the Caspian Sea — and that there are other large fields already known and waiting to be tapped, as is the case with environmentally sensitive offshore Alaskan fields. Better technology will help us recover oil in existing wells more efficiently. And the more expensive oil becomes, the more incentive there will be to look for it. New digital, satellite-linked seismic equipment can produce accurate three-dimensional maps of oil fields in hours. This means more oil for every well drilled.
Oil pessimists acknowledge that all of this is true. But look at the figures: The world currently is consuming 26 billion barrels of oil each year but discovering only 6 billion. New technology will help, but it won’t significantly change the basic production curve. Petroleum geologist Joseph Riga is quoted in the Popular Science piece as saying, “We have a reasonable idea of where to find oil, and there just aren’t that many areas left to explore. If technology is going to save us, it will be because it breaks our dependency,” not because it locates endless new reserves.
News stories about discoveries in the Caspian Sea are often written in such a way as to give readers the impression that the world will enjoy decades of fresh supply. In response, an oil-pessimist newsgroup, www.runningonempty.org, offers its readers a news headline “Russian oil giant Lukoil discovers 2.2 billion barrels of oil in the Caspian Sea” then asks, “In [terms of] global oil consumption, how long will this last?” Possible answers: 3.5 weeks, 3.5 months, 3.5 years, or 3.5 decades. The right answer turns out to be closest to 3.5 weeks: The world consumes about 26 billion barrels of oil a year, and climbing. At that rate, 2.2 billion barrels will last less than a month.
In economic terms, that still represents a huge potential profit. And so the Caspian Sea is and will be for the foreseeable future a significant focus of geopolitical maneuvering (the Spring/Summer issue of Covert Action Quarterly carries an article discussing the existing and planned pipeline routes and their global implications: expect more American attempts at rapprochement with Iran, and more wars in the region). But even the most optimistic forecasts roughly 200 billion barrels of recoverable oil for the entire Caspian area represent only a delay of a few months in the world peak, once production schedules are factored in. America’s so-called ‘strategic reserve’ holds a 52-day supply of oil, and any new discoveries in Alaska will, like the Caspian finds, merely delay the production peak by weeks or months. In general, the oil optimists have a lot in common with (and in some cases are the same people as) the industry boosters who have been telling us that global warming is all in our imaginations. Gregg Easterbrook hardly a foe of the energy establishment concludes his survey of the supply question by noting that
Much in the optimist/pessimist debate turns on what we know versus what we do. Herds of elephants [giant oil wells] may await in the deep water, and future technical advances may give us access to oil whose extraction is now prohibitively expensive. It’s possible we’ll have decades and decades of more low-cost oil. But there’s no evidence of that only faith in human ingenuity. The prudent wager is based on what is known. And, based on what is known, the era of cheap oil looks as if it is drawing to a close.
Which brings us to Easterbrook’s main point. Environmentalists have been arguing for decades that we should reduce our dependence on polluting, nonrenewable oil and switch to alternative energy sources like photovoltaics, wind, fuel cells, hydrogen, and microhydro. Cheap oil has removed the economic incentive for society to make that prudent transition. If oil becomes scarce, won’t that merely usher in a “green” era of conservation and alternative fuels? Won’t that be a blessing?
It will indeed, if we can survive the switch. As Easterbrook puts it: “the end of cheap oil is not only likely; it may be a good thing, so long as it doesn’t take society by surprise.” But as he himself shows, it will take us by surprise. Ever since Ronald Reagan junked the solar panels Jimmy Carter installed on the White House roof, America has been systematically subsidizing and promoting oil while ignoring research in alternatives. The reality is, virtually no one is prepared for a new and prolonged oil crisis. The Popular Science article shows a similar disconnect between the facts it portrays and the cheery message it promotes. “Will… alternatives be ready in time?”, asks Phillips. Happily, his answer is, “It looks promising. We’re not going to run out of oil abruptly come 2050, because the rate of production will slow… In addition, there are large worldwide amounts of coal, tar sands, and oil shales (rocks containing oil) from which oil could be recovered. Crude won’t disappear completely anytime in the foreseeable future, but it will get much more expensive.” This on the same page as a graph showing oil supply plummeting precipitously soon after production peaks only ten years from now.
Will alternative energies be ready? Possibly, if we begin the transition thirty years ago. The energy infrastructure of a society cannot be replaced overnight. Conservative estimates suggest that roughly four decades would be needed to redesign and replace the entire current fleet of automobiles and trucks, as well as power plants, heating and cooling equipment, and agricultural systems. That transition would be extremely costly in both monetary and energy terms. It could probably only be financed by the continued availability of inexpensive, abundant, highly concentrated fuels. Which is exactly the problem we’re trying to solve: those cheap, concentrated fuels won’t be available much longer.
Then there’s the question of whether alternative energies will be capable of serving the same functions as oil, even assuming they can be scaled up quickly enough. As I pointed out in MuseLetter #91, alternative fuels are, for the most part, incapable of replacing the highly concentrated energy that petroleum provides. Natural gas could do so, but its production is expected to peak soon after petroleum does. Ethanol is made from crops grown on land that will be increasingly needed for food, and is currently made using cheap petroleum to run the farm equipment. You can’t put coal or oil shale in a gas tank without extremely costly and energy-intensive refining processes, and mining those resources on a large scale takes huge amounts of energy in itself. Hydrogen is a net energy sink (there are no “hydrogen reserves,” and the process of production uses more energy than the burning of the resulting fuel provides). The best hope for the long term is a society based on renewable energy sources such as solar, wind, and hydroelectric power. These are not limitless, but they are inexhaustible. However, they cannot by their very nature be made to substitute for oil on the scale that oil is presently being used. An industrial society based on renewables could never use energy at a per-capita rate even remotely approaching the levels Americans have become accustomed to.
It would be great if Easterbrook were right. But what if the end of chea oil does take society by surprise?
The economic and political implications would be enormous. The U.S. and world population could nearly double in the next 100 years, and this large and growing population probably cannot be sustained without bountiful supplies of oil. Yes, organic agriculture could feed as many people as oil-based agriculture presently does; but as every organic farmer knows, transition time is needed a minimum of five years to fully wean land from dependence on chemicals. Moreover, land reform and local distribution networks would be required to substitute for the global food trade regime on which most nations now rely.
During the past three decades the United States should have been investing heavily in the development of alternative, preferably renewable, energy sources. Instead, the bulk of our federal discretionary dollars has gone and still goes to the Pentagon. The Fiscal Year 2001 budget allocates $305 billion for military expenses and less than $5 billion for energy research and development. At this point, America’s vast investment in military might must be considered primarily as an investment in maintaining by force its“right” to the lion’s share of all energy produced globally from now on. This does not bode well for global peace.
So what might we realistically expect to happen when petroleum begins to dry up?
International oil import costs will climb sharply, increasing global competition for dwindling oil available from five Middle-Eastern countries and the former Soviet Union. National debt will rise, and inflation will also likely follow as money flees the country to oil producers. Money will become scarce (even as the government prints more money to pay overseas energy bills) while interest/mortgage rates will rise. Businesses will go broke paying higher energy costs. Poverty will become pandemic. Pensions for the aging population will be in jeopardy.
Of course, these effects will be modulated somewhat by geography, as has been noted by analyst Graham Zabel (a contributor to www.runningonempty.org).
Of all geographical regions, Europe has the best chance to succeed in the face of the coming oil crisis. Europeans’ per capita energy consumption is already one-third that of North Americans’. Their public transport and rail networks are much better, and their energy policies are more forward thinking, perhaps due to their lack of significant fossil fuel resources. Europe is closer to the natural gas supplies of Russia, the Middle East, North Africa, and the Mediterranean, and access to gas supplies may give Europe a longer time cushion then America to extricate itself from fossil fuels. It will be much easier for people there to function with bicycles and public transport than it will be in suburban America. In Europe, populations have stopped growing and are actually shrinking. Forest cover is expanding. America’s trump cards are wealth and weapons. But America is addicted to energy and consumption and will face a more violent withdrawal. It also has the fastest growing industrialized population.
Of all continents, Africa will be hardest hit. There, populations will fall drastically and society could revert to a high-tech tribalism. Meanwhile the multinationals will rest offshore, draining the continent of its oil and gas while paying the local ruling tribes protection money.
A Middle Easterner should also be very pessimistic. The region has the second highest population growth rates in the world (after Africa), large numbers of young, educated, underemployed men, few educated women, severe water problems and apart from oil and gas in some cases very few natural resources. Unfortunately, these problems are not so self-contained as Africa’s and they are likely to spill into other regions (mostly because of oil). Latin America’s and Asia’s hopes lie somewhere between those of Europe and America on one hand, and Africa and the Middle East on the other, thoughprobably closer to the latter.
The most sobering view of the post-petroleum world comes from Jay Hansen, the moderator of www.dieoff.org:
The dependence of industrial agriculture on fossil fuels, the declining fertility of the land, and the positive feedbacks imposed by declining net energy will force the economy to divert much more investment into the agriculture and energy sectors as part of a desperate attempt to maintain agricultural output. Government budgets must also decline in real terms as greater and greater fractions of the economy are diverted into the resource sectors.
As resource quality and land fertility continue to fall, society will be forced to allocate more and more capital to the agriculture and resource sectors, otherwise the scarcity of food, materials, and fuels would restrict production still more it’s circular, there is no way to avoid the positive feedback. Ultimately, industrial capacity will decline, rapidly taking with it the service and agricultural sectors, which depend upon industrial inputs.
Constrained by the laws of thermodynamics, the availability of life-supporting resources will go into a permanent, steep decline. In less than 20 years, the self-regulating market system will have “run out of gas” and vanished. With the market system gone, the ruling elites will fall back on the good old-fashioned means of control: a police state. In the U.S. alone, 200 million guns in private ownership guarantee that this police state will quickly devolve into rebellion and anarchy. We’re using up our oil and gas.
Renewables will not fill the gaps left by oil and gas. People will die trying to find food and other resources. Or the Elite will kill some people off, who knows who.
Politicians have no interest in telling anyone. As Michael Vickerman (Executive Director of renew Wisconsin, a nonprofit organization promoting conservation and alternative energies) puts it in a post to www.runningonempty.org, “Of all the issues that George W. Bush and Al Gore would rather not debate during this presidential contest, none ranks higher than energy supply. Both candidates understandably regard energy politics more specifically, petroleum prices as electoral quicksand that can sink a presidential contender faster than you can say Jimmy Carter.”
Economists won’t tell us because they themselves don’t understand what a critical role energy plays in society. For them, it’s merely another resource governed by the all-knowing Market; if prices for any given resource go up, a substitute will appear. For economists, it’s money that makes the world go ‘round.
In the U.S., the largest media operators are GE and Westinghouse (with their nuclear reactors and waste disposal business); Time/Warner (with utilities and coal); and Disney (with petroleum). Much of the news we read or watch on television is manufactured by PR firms rather than discovered by journalists, and it is standard practice these days for a PR firm to send out a fully edited video piece ready to be broadcast (A-roll) together with unedited footage (B-roll) and a script so that television stations can edit these materials together as if they had shot the story themselves. Thus to expect television journalists to independently investigate a sensitive story like this, with so many implications for the energy interests of their networks and sponsors, is hopelessly unrealistic. Anyway, for every independent geologist (i.e., Colin Campbell) who mentions the Hubbert curve, the oil companies can supply five of their own economists who will insist that there is petroleum enough for generations to come. Add to all of this the public’s bemused weariness with apocalyptic and millennial prophecies of all kinds (including Y2K). Result: no one knows, no one cares.
So what to do? Continue to work for all the worthy goals we all already know about including energy conservation, economic equity, and grassroots democracy. But be aware that we are in a moment of grace. Begin building alliances that can help carry us through the tough times ahead. I’ll leave the last word of cautious optimism to Colin Campbell, from his letter to the N.Y. Times:
People are tempted to blame oil companies or Muslims for their plight, but if they were given proper information, they would soon realize that they are not being gouged by anyone. They could then rise to the occasion, both finding solutions for themselves and giving governments the mandate for action. We are not running out of oil but face the transition to a new world in which abundant supplies of cheap oil-based energy can no longer drive the economy. There are many solutions but all have long lead times. The sooner we grasp the nettle the better.