My Thoughts on Surviving Peak Oil

As I write these words in the early spring of 2007, I believe that peak oil has already occurred.  Prior to peak there was an excess pumping capacity (globally) of around 1 million barrels per day (mbpd).  With the total daily consumption at around 85 mbpd this is slightly over 1%.  Thus when oil demand rises by 1%, or oil production declines by 1%, the demand line (which has been increasing at about 1.5% a year) will cross the supply line (max of 86 mbpd?) we will be in for an oil shock. If the economy falters oil consumption will decline, allowing extended time before the shock hits.  Increased oil prices could have the same effect, by reducing demand.  Both these cases will only put off the inevitable for a year or three at most.

At first this oil shock will feel like the two previous ones we have experienced.  But as we get farther from the peak, oil depletion will accelerate, pumping capacity will decline and oil shock may turn into oil crisis.  Whether this crisis develops or not will depend on many variables.  For example, demand will decline as price skyrockets, alternatives will be developed at an increasing rate and production declines may be slow initially.

A crisis will develop if society fails to voluntarily reduce oil consumption (however painfully) faster than supply drops.  If society can reduce oil consumption faster than supply drops, then the price will stay low.  If the two are nearly at par, then the prices will likely rise fairly high ($10/gallon for gas--about what is currently (3/07) paid in Europe.  If there is a slight under supply prices will go high enough so people just can't afford it, and if there is a large under supply prices will go so high that critical services may be shut off (eg power plants using oil; most gas stations will run out; etc).  If the under supply is extreme, then creating alternatives, such as the tar sands or biodiesel (which use a fair amount of energy), may not happen--which will doom society.

Oil fields tend to peak and fall at a wide range of rates.  The largest and best example we have of a country peaking is the United States, which peaked in 1970, and has been declining at about the same rate at which production accelerated prior to 1970.  If this is an example for the globe, then supply will decline at a slow enough rate that we can adapt to it.  If it follows a decline rate similar to the North Sea, society will be in big trouble.  I suspect reality will be between these two rates; there is a lot of untapped little oil patches that are currently un-economical, which will cushion the decline rate.

What can we do to reduce consumption, extend the lifespan of our remaining oil and keep supply above consumption?  The first and most important is reducing personal use.  Since I got serious about it, I have reduced my use of petroleum produces by around 40%.  I have also reduced my business use of oil by around 15%--and hope to reduce it a lot further!  Some things I have tried, or intend to try.

When the Soviet Union broke up, Cuba lost it's primary source of oil.  It survived a 50% drop in oil supply.  This Peak Moment interview talks about it.  If Cuba can survive, I think the United States can do so too!  But it sounds like it was tough...very, very tough.

Mid-summer 2007

I have been regularly reading The Oil Drum, and one of their articles talked about what happens when a country that has been exporting oil reaches peak production and then begins declining.  The article discusses the UK, whose energy production peaked in 1999, and in 6 years they went from a net energy producer to an energy importer.  The reason for the speed the UK went from an exporter to an importer is because their energy needs rose nearly as rapidly as production, so it didn't take long for declining production the intersect rising consumption.

The implications of this are pretty staggering.  If all energy exporting countries are like this, then each one in turn will only have a brief (say 5-10 years) period between the time their oil peaks and they need to begin importing energy.  As the largest energy importer, the US is the most vulnerable to this.  If the remaining countries of the world peak over the next 10 years (ie midpoint = 5 years), and 6 years from then no country (with probably a few exceptions) will be an oil exporter, that means the 60% of oil we import today could decline at over 10% a year.  Add that to the current 2% the US oil production is currently declining and you have an immense problem. 

With this in mind, I think we need to look at how to decrease our imports by more than 12% a year if we want to avoid an energy crisis.  This is a staggering amount of energy, especially after the first couple of years.  Can we do it?  I think so, especially if we tackle it with forethought.  My own inclinations are:
  1. Tax imported oil at a very high rate.  This will help reduce consumption (if it doesn't, increase taxes more).  Yes, it will hurt (a lot), thus making this policy very hard to implement.  But if we don't hurt some now we may hurt a LOT more later.
  2. Set a goal of reducing use of petroleum and natural gas for electric generation to less than 10% by 2015.  Do this by both allowing huge tax credits for installing coal, wind, solar, geothermal, tidal and other sources plus taxing use of petroleum and natural gas for electrical generation (make the taxes high enough so the target of 10% is met--and if it is not met by 2015 then double it every year after 2015 until it is met).
  3. Have a national sales tax on vehicles that get less than the target mpg.  Make this tax high enough to drastically reduce sales of these vehicles, with large tax credits for those who get vehicles with much better than the target mpg .  Yes, yes, very painful (especially for the auto makers) but if we don't we won't be able to drive those gas guzzlers anyhow--a little pain now is better than a LOT of pain later.  If we want to halve our fuel consumption by 2015 then we need to double our average mileage, say from 30 to 60.  Since there are prototype cars out there that get over 100 mpg (the VW 1 litre gets over 235!!), this should be possible without too much pain.  I would suggest a 20-25% tax on vehicles getting less than 30 mpg in 2008, increase the mileage (and tax if necessary) until the goal of 60 mpg average by 2015 is met. 
  4. Most homes in the US can be heated and cooled with natural systems and extra insulation.  Implement government programs that will promote rapid shift from using fossil fuels to using natural systems.
  5. Forget ethanol from corn.  The numbers don't justify it (why spend 8 barrels of oil to get the equivalent of 10 barrels in ethanol?  All the while sacrificing valuable crop land.)  Cellulose ethanol, yes!  Sugar cane, sure.  Speaking of ethanol, let's do away with those steep taxes on imported ethanol from Brazil (good if the tax is supposed to limit drinking, bad if it limits fuel).  Why tax a resource to death, when it can help our energy crisis?
  6. Develop a crash program to internalize 90% of energy production by 2015 (keeping in mind if we don't do it voluntarily, it may be imposed on us as other countries cease exporting oil).  If you planned on conservation reducing consumption by 30%, this will considerably reduce the needs for alternative energies.
  7. Rather than an economic crisis and possible severe depression, tackle the problem by putting people to work on alternative energies.  ie pour money into the problem: try all solutions, not just a few.  This will require reducing or eliminating most, if not all, other programs.  It will hurt (immensely).  Do it anyhow.
  8. For a specified period of time, suspend EPA regulations and impediments (the goal is to get past the crisis, so probably 10 years).  I realize this will cause pollution to soar, but better a dirty environment than one completely trashed, which is what will occur if we can't develope alternative fuels fast enough.  For example, if we fail to provide the energy resources people need, they will just take it--I could foresee deforestation of the entire US if energy policies fail.
  9. Society (and government) needs to understand that the looming energy crisis is far far greater than the (possible) threat of climate change.  Indeed the climate changes most people talk about will actually help the energy problem by reducing heating needs.  Therefore all policies aimed at limiting CO2 production should be suspended until the crisis is over (but see below).
  10. The eventual goal should be to gain all of our energy from renewable resources.  Over the short term coal will probably become our primary energy source (and coal use should be strongly encouraged, as it is the only remaining energy source which can be rapidly and economically expanded), it should be phased out entirely as soon as feasible (say over the next 40-80 years). 
  11. We had a strong warning in the 1970's that oil was going to peak, when the US oil production peaked.  (I am totally confused by the people who say oil globally won't peak, or will continue production for years to come--we know peak oil does occur, for it DID...how can anyone deny it?  The US production is now down so far we aren't even producing as much oil as we did in the 1950's.)  The oil conservation policies begun (and the lessons learned) in the 1970's and 1980's didn't sink in.  We could have completely been free of all imports today if we had continued to concentrate on energy independence.  Instead we allowed the import of cheap oil to drug us into complaciancy.  We need to assume the worst, for if we assume it will be a mild crisis (or no crisis) and it turns out to be very bad, the damage done to the economy (and society in general) will be very, very bad--perhaps to the point of collapse.  If we plan to loose 100% of imports by 2015 and we are completely wrong, we will have done some damage to the economy but in the long run we'll be better off.  Indeed the US has sufficient energy supplies that we could become an energy exporter if we tackle the problem head-on.  The main problem is converting those energy resources into a form we can utilze.
  12. Converting energy from one form to another requires infrastructure that doesn't currently exist.  For example gas can be made from coal.  To build the required infrastructure takes time.  Currently the process takes 10-15 years to do a major project.  Much of this time is taking up with siting and environmental permitting.  This is far too long if we are in crisis.  Therefor all permitting and obstructions to doing major projects need to be removed, during the crisis period.
Of course I realize most of this won't happen until after the fact, so policies like these are unlikely to be implimented soon enough to prevent the oil shock from entering oil crisis, which will may cascade into a complete energy crisis, with the lack of oil and natural gas impacting every part of the energy picture.  This will require policies that are more draconian if we are to recover.  The key is to recognize the draconian measures are needed soon enough to avoid being engulfed by the crisis.



I continue to be convinced that oil has peaked.  The US Energy Information Agency published data showing that oil production is now down nearly 1% from 2005 (Note: 2007 data includes only up through April):
2005 oil production peak
The real question that remains is this a limitation on pumping, or is it a decline in consumption due to high prices?  Both other peaks (1998 and 2000) precede declines that are clearly consumption driven; this leads to skepticism about oil peaking.  With the majority of the oil producing countries in decline I don't think the remaining countries can increase their production enough to make oil production rise.  I think it will fall from now on, probably at an accelerating rate over the next 2-5 years until the global decline rate is 3-8% annually.



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