When our car’s odometer shows us two or three zeros in a row, we tend for a short time to think about its welfare over the long term, not just how much gas is left in the tank. How well have we been maintaining it, what is its life expectancy now, what are the probabilities of major problems? Then, usually, we go back to sticking the key in the ignition and filling the tank.
When changing the calendar shows us a zero in the year’s designation, something similar happens, or should. We tend to review, briefly, the longer-term trends in the country, in our health, in our prospects. Such a review in 2010 brings us face to face with the imminence of a catastrophic global event: peak oil.
The subject of peak oil has been cussed and discussed for so long, and has been the subject of such stupendous volumes of corporate propaganda from the oil companies and their associates, that when it’s brought up we tend to shrug. Don’t. This thing is going to take a serious bite out of our behinds sooner rather than later. In fact, this could be the year, and this almost certainly is the decade. I’ll get to the evidence, but first a word of background.
The term “peak oil” refers to the time at which the world’s ability to bring oil to market has reached a plateau and has begun to decline, and is exceeded by world demand. Now, if you watch television on Sunday you may believe the nice Exxon lady when she says we’re discovering all kinds of new oil and we’re developing all kinds of new technology to get more oil from existing fields. What she does not tell you is that all the new discoveries and capabilities (some of which are highly speculative, but put that aside) are not replacing the steady loss of production from all the world’s major fields. The United States, for example, used to be the world’s leading oil producer, but peaked in 1970 and now squeezes out mere droplets by comparison.
No problem for us because we just bought what we needed from Arabia, etc. But what happens when Arabia, etc. cannot fill the orders? There are persistent rumors that Saudi Arabia’s Ghawar field, the largest in the world, has peaked. Understand, this is not about running out of oil, which no one is going to do for a long while. (Except for Yemen, which is a failing state today simply because everybody knows it is about to run out of oil and there is nothing else to sustain it.) The survival of the governments of most countries in the world depends on a ready supply of cheap oil. This is as true in Iran and Russia as it is in the United States. When the oil orders cannot be filled any more, even after prices have skyrocketed to previously unheard-of levels, allocations will be made for other reasons, for example whose army is closest to the seller.
It is extremely difficult to get through the fog that drapes the production, refining and sale of oil products. Current prices of gas at the pump, or of crude oil at the refinery, and their trends, tell us nothing about the underlying reality (although long-term trends are revealing). That is because the prices react to the daily bets of billions of dollars in the futures markets, made by people having nothing to do with the production or sale of oil products, who simply belly up to the felt-covered table and gamble with other people’s money on tomorrow’s price. Moreover, the oil-producing countries hold as state secrets the details of the size of their reserves and the health of their fields, the better to manipulate prices.
The trends, as measured outside the oil companies, are uniformly ominous. From 2003 to 2006, world demand for oil increased 10%, mainly because of growth in China, to 85 billion gallons per day. Production just managed to keep pace, but with increasing difficulty, so that crude prices that had hovered around $20 a barrel in 2003 reached $147 per barrel in July 2008. The global financial meltdown interrupted these trends, but growth in China and the U.S. is now lurching back to the upside. Demand is expected to grow another 10% in the next few years, and responsible analysts — i.e., those who do not work for Exxon — see no chance that such a demand can be fully met.
The International Energy Agency has been warning recently about peak oil, but according to an agency official turned whistle blower (quoted in The Guardian of London), the IEA’s official projections of oil production have sugar-coated the situation: “Many inside the organization believe that maintaining oil supplies at even 90 million to 95 million barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further.”
Despite studies by the United States Departments of Defense, Energy, and Homeland Security demonstrating that the effects of peak oil pose a real and present danger to the survival of the United States and its people, nothing is being done by the government to prepare for the imminent reality. (Congressman Roscoe Bartlett of Maryland has been citing these studies and railing at the government from the well of the House for years, speaking to an empty chamber and an indifferent nation.)
If the country was a car, it would be overheating, stripping its gears, leaking oil and belching smoke and flames. The driver? Listening to the radio and pumping the accelerator.
[For more information, check out the web page of the Association for the Study of Peak Oil & Gas, or see my book Brace for Impact]