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Running on empty

Adam Porter

It is going to get messy. That is if the former industry executives, geologists and statisticians in the Association for the Study of Peak Oil (ASPO) are correct, and oil reserves have started their decline.

It will change the way we live. Oil is the main ingredient in petrochemicals, and petrochemicals are everywhere. They make plastics and polyester: the clothes we wear, the carpets we walk on, frames for our computers, seats to sit on, bottles to drink from and band-aids to salve our wounds. What will replace them – who will be able to afford them – as the price of oil starts to rise?

What will we make future J-Lo CDs out of when all the originals are scratched? More importantly, who will pay to drive them to the shops? In fact, who will have the money left to have a van? But then, it is not just future J-Los who should be worried. No such luck.

Oil shortages and price rises will affect every emerging and traditional industry. Oil powers their machinery and lubricates their engines. Materials need to be transported. Companies need working folk to make them, who need to run a car, who need to get on the train, who need to buy electricity to heat their house, who need to buy food, that is packaged in plastic, which is made from... you get the drift.

The consequences of oil depletion will be profound. But let us be clear. As the graph of global oil production approaches its peak no-one doubts oil prices will start to rise. When the peak is reached and oil begins its decline, prices will rise even faster. This isn’t about the ‘end of oil’ as it is often portrayed; it is the beginning of the end of oil. And that is going to be bad enough.

But of course there are counter-arguments. First, from the oil industry the idea that ‘technology will save us’. Unfortunately, all the giant and super-giant fields have been discovered. As one would expect, they were found first because they are the biggest. The discovery of oil fields peaked in the 1960s. Since then it has declined steadily. That means that, despite the advances of technology, new fields cannot be found except in, say, super-deep water around South America, where it is increasingly expensive to extract.

'The super–rich won't care about petrol being 10 or 20 dollars a gallon. The extreme poor who live on a dollar a day or less have never had access to energy. But everyone else...?' Ali Bakhtiari (head of corporate planning at the Iranian State Oil Company)

Only as the crisis emerges, only as the price of oil starts to rise, will small and tiny fields become economically viable. Why extract them now at a large cost-per-barrel, when you can wait until the crisis starts, when they will have extra value?

Free-market economics are, as one might expect, exacerbating the problem. As deregulation occurred oil became quicker and cheaper to extract, prices fell and consumption rose. This sped up the advance towards the peak in production. If one had a global-energy market that was governed by planning and rationing – about as far away from the ‘free market’ as one could hope to be – then the increase in consumption would have been weighed against replacement technologies: ‘alternative’ energy sources. This never happened. Those with the market power were hardly going to allow it: it would not have been in their interests to sell less oil and make less money.

At the same time, ‘alternatives’ are presently inadequate. True, they are proficient energy producers. But they should have been invested in 50 years ago. Take hydrogen, wind and solar power. Their cells and turbines are produced from plastic and metals, made from or with the help of oil. Who will pay for them as they become more expensive to make because oil has started its decline? With what will they be lubricated? How will they be transported to the windy site? Then again, who can pay to have a van… you see where we are going.

Low-tax, high-consuming nations may be the most challenged. Iran for instance. In Iran the price of gasoline is eight US cents a litre – so cheap it is widely wasted. Indeed, Iran wastes so much and sells to the public at such a cheap price that more production only spurs consumption. So, amazingly, for the last three years Iran has actually had to start importing petrol from Saudi Arabia: $900 million in 2001, $1.2 billion in 2002 and – as predicted by the Iranian State Oil Company – $1.5 billion in 2003. Those are the basics of reaching production peaks. Get it, waste it, fail to ration it, pay for it. Big time.

In straightforward terms, oil price increases will brutally damage air travel. Indeed, they will fundamentally change transport in general. Every single internal combustion engine, every single turbo engine, every single turbine will find its running costs dramatically increased. You want to replace them? With what? How long will it take? Will you just replace the ones in rich countries? Who will replace all the cars in China and India? And America? Who will pay increased prices for electricity? Who will pay the increased costs for delivering state services like health and transport? We can only guess.

Time to fit solar panels on the roof. Time to sell the car and buy a bike. Absolutely time to get rid of the plastic bags.

Kicking the oil–habit The oil party's over–time to clean up the mess

‘We must face the prospect of changing our basic ways of living. This change will either be made on our own initiative in a planned way, or forced on us with chaos and suffering by the inexorable laws of nature.’ Former US President Jimmy Carter (1976)

Many changes can be made to minimize the consequences of declining oil reserves. Here are just a few:

Further reading: Richard Heinberg, The party’s over – oil, war and the fate of industrial societies (Clairview, 2003); ‘The Big Switch – climate change solutions’ (the New Internationalist *NI 357* June 2003).

Adam Porter is a freelance journalist living in France.

After oil peaks, world oil production will slow down, and unless demand declines dramatically, price will continuously rise and supply disruptions will occur. Views vary in the Association for the Study of Peak Oil about when this will happen. Some say 2010: others say the peak has already been reached.

Dr Colin J Campbell

(former Executive Vice President, TotalFinaElf) ‘Telling the truth in the oil industry? Oh [he laughs] that was very hard. Most of the time, well, no, you couldn’t. Remember this is a game dominated by a small number of very, very greedy men. It was a big game. And I’m not revealing all the corruption, I don’t have the time! (he laughs again).’

Ali Bakhtiari

(head of corporate planning at the Iranian State Oil Company) ‘Depletion is not a problem of tomorrow, it is today. And right now there are no solutions. The run-up to depletion has already started. The two major signs are the volatility of natural gas prices and of course the instability and war in the Middle East. Currently 11 Middle East countries hold 42 per cent of the world’s reserves. America now has troops in Iraq and Saudi and Kuwait; and central command is in Qatar. It has the fleet in Bahrain, troops in Afghanistan, Uzbekistan, Georgia, Jordan, Djibouti, Kazakhstan and of course always in Turkey. Where don’t they have troops? As global reserves decline, the Middle East becomes more important. But even God has his limits, and we have reached them.’

Professor Kenneth Deffeyes

(Princeton University) ‘The loudest warnings about the predicted peak of world oil production came from a firm in Geneva, Switzerland, called Petroconsultants, which until recently maintained a huge private database to which the rest of us had no access. I suspect that OPEC countries know that a global shortage may only be a few years away, and if they can trickle out just enough oil to keep the world economies functioning until that glorious day, then they can market their remaining crude at mind-boggling prices. Our grandchildren will ask someday: “All those lovely organic molecules, and you just burned it?” Sorry, we burned it.’

Matthew Simmons

(head of the energy investment bank Simmons & Co International) ‘I am an advisor to the Bush Administration. Although I’m not sure they are listening. What I basically told them is that we had some looming energy problems: that we were barrelling into a really nasty energy crisis. We need a new energy. But I just don’t know if there is one.’