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Part I: Peak Oil and the

Ramifications for Industrial Civilization

I have designed the following passages with somebody new to the issue of oil depletion in mind.  If you would like more in depth explanations, with graphs, charts and the like, please consult The Oil Age Is Over:  What to Expect as the World Runs Out of Cheap Oil, 2005-2050.

What is "Peak Oil"?

All oil production follows a bell curve, whether in an individual field or on the planet as a whole. On the upslope of the curve, production costs are significantly lower than on the downslope when extra effort (expense) is required to extract oil from reservoirs that are emptying out. Put simply: oil is plentiful and cheap on the upslope, scarce and expensive on the downslope. The peak of the curve coincides with the point at which the world's endowment of oil has been 50% depleted. “Peak Oil” is the industry term for the top of the curve. Once the peak is passed, oil production begins to go down while cost begins to go up.

In practical and considerably oversimplified terms, this means that if 2000 was the year of Peak Oil, worldwide oil production in the year 2020 will be the same as it was in 1980. However, the world's population in 2020 will be both much larger (approximately twice) and much more industrialized than it was in 1980. Consequently, worldwide demand for oil will outpace worldwide production of oil by a significant margin.

The more demand for oil exceeds production of oil, the higher the price goes. Ultimately, the question is not “When will we run out of oil?” but rather, “When will we run out of cheap oil?”

Click here for more information on oil production curves.

When will Peak Oil occur?

The most wildly optimistic estimates indicate 2020-2035 will be the year in which worldwide oil production peaks. Generally, these estimates come from government agencies such as the United States Geological Survey, oil companies, or economists who do not grasp the dynamics of resource depletion. Even if the optimists are correct, we will be scraping the bottom of the oil barrel within the lifetimes of most of those who are middle-aged today.

A more realistic estimate is between the years 2004-2010.  Unfortunately, we won't know we hit the peak until 3-4 years after the fact. Even on the upslope of the curve, oil production varies a bit from year to year. It is possible that worldwide oil production peaked in the year 2000 as production has dipped every year since. The energy industry has quietly acknowledged the seriousness of the situation. For instance, in an article recently posted on the Exxon-Mobil Exploration homepage, company president Jon Thompson stated:

By 2015, we will need to find, develop and produce a volume of new oil and gas that is equal to eight out of every 10 barrels being produced today. In addition, the cost associated with providing this additional oil and gas is expected to be considerably more than what the industry is now spending.

Equally daunting is the fact that many of the most promising prospects are far from major markets — some in regions that lack even basic infrastructure. Others are in extreme climates, such as the Arctic, that present extraordinary technical challenges.

If Mr. Thompson is that frank in an article posted on the Exxon-Mobil Webpage, one wonders what he says behind closed doors. The Saudis are no less frank than Mr. Thompson when discussing the imminent end of the oil age. They have a saying that goes, "My father rode a camel. I drive a car. My son flies a jet airplane. His son will ride a camel."

Big deal. If gas prices get high, I'll just carpool or get one of those hybrid cars. Why should I be concerned?

Almost every current human endeavor — from transportation, to manufacturing, to electricity, to plastics, and especially food and water production — is inextricably intertwined with oil and natural gas supplies. 

A. Oil and Food Production

In the US, approximately 10 calories of fossil fuels are required to produce 1 calorie of food.  If packaging and shipping are factored into the equation, that ratio is raised considerably. This disparity is made possible by an abundance of cheap oil. Most pesticides are petroleum- (oil) based, and all commercial fertilizers are ammonia- based. Ammonia is produced from natural gas, a fossil fuel subject to a depletion profile similar to that of oil. Oil has allowed for farming implements such as tractors, food storage systems such as refrigerators, and food transport systems such as trucks. Oil-based agriculture is primarily responsible for the world's population exploding from 1 billion at the middle of the 19th century to 6.3 billion at the turn of the 21st. As oil production went up, so did food production. As food production went up, so did the population. As the population went up, the demand for food went up, which increased the demand for oil.

Within a few years of Peak Oil occurring, the price of food will skyrocket as the cost of producing, storing, transporting, and packaging it will soar.

For more on oil and food production, read the following articles when you get the chance:

1.  "Eating Fossil Fuels" by Dale Allen Pfeiffer

2.  "The Oil We Eat" by Richard Manning

B. Oil and Water Supply

Oil is also needed to deliver almost all of our fresh water. Oil is used to construct and maintain aqueducts, dams, sewers, wells, as well as to pump the water that comes out of our faucets. As with food, the cost of fresh water will soar as the cost of oil soars.

C. Oil and Health Care

Oil is also largely responsible for the advances in medicine that have been made in the last 150 years. Oil allowed for the mass production of pharmaceutical drugs, surgical equipment and the development of health care infrastructure such as hospitals, ambulances, roads, etc. . . .

D. Oil and Everything Else

Oil is also required for nearly every consumer item, sewage disposal, garbage disposal, street/park maintenance, police, fire services, and national defense. Thus, the aftermath of Peak Oil will extend far beyond how much you will pay for gas. Simply stated, you can expect: economic collapse, war, widespread starvation, and a mass die-off of the world’s population.

What do you mean by "die-off"?

Exactly what it sounds like. It is estimated that the world's population will contract to between 500 million and 2 billion during the Oil Crash. (Current world population: 6.4 billion)

Are you serious? That's as much as 90% of our current population. How could that many people perish? Where does that estimate come from?

That estimate comes from biologists who have studied what happens to every species when it depletes a key resource in its environment. Two notable examples are explained below:

Example A: Bacteria

Bacteria in a Petri dish will grow exponentially until they run out of resources, at which point their population will crash. Only one generation prior to the crash, the bacteria will have used up half the resources available to them. To the bacteria, there will be no hint of a problem until they starve to death. Before that happens, the bacteria will begin cannibalizing each other in last-ditch efforts to survive.

But humans are smarter than bacteria, right? You would think so, but the facts seem to indicate otherwise. The first commercial oil well was drilled in 1859. At that time, the world's population was about 1 billion. Less than 150 years later, our population has exploded to 6.4 billion. In that time, we have used up half the world's recoverable oil. Of the half that's left, most will be very expensive to extract. If the experts are correct, we are less than one generation away from a crash. Yet to most of us, there appears to be no hint of a problem. One generation away from our demise, we are as clueless as bacteria in a Petri dish.

Example B: Easter Island

Over the course of history, many human populations have suffered from die-offs. The die-off most analogous to our current situation is the one that took place on Easter Island during the early 18th century. Easter Island was discovered by western civilization in 1722 when Dutch explorer Jacob Roggeveen landed on the island. At the time, Roggeveen described the island as a wasteland. The islanders he encountered led a particularly primitive existence, even by 18th-century standards. The island had no firewood, few species of plant life, and no native animals larger than insects. The islanders possessed no wheels, no draft animals, few tools, and only 3-4 flimsy, leaky canoes.

Despite the barren existence, Easter Island was populated with huge, elaborately constructed, stone statues. Roggeveen and his crew were completely perplexed by these statues, as it was clear whoever built them had tools, resources, and organizational skills far more advanced than the islanders they encountered. What happened to these people?

According to archeologists, Easter Island was first colonized by Polynesians sometime around the year 500 AD. At the time, the island was a pristine paradise with lush forests. Under these conditions, the island's population grew to as much as 20,000. During this population bloom, the islanders used wood from the forest trees to power virtually every aspect of a highly complex society. They used the wood for fuel, canoes, houses, and; of course, for transporting the huge statues. With each passing year, the islanders had to cut down more and more trees as the statues became larger and larger.

As the trees disappeared, the islanders ran out of timber and rope to transport and erect their statues; springs and streams dried up, and wood was no longer available for fires. The food supply was also diminished as land birds, large sea snails, and many seabirds disappeared. As timber for building seagoing canoes vanished, fish catches declined and porpoises disappeared from the dinner table. With the food supply greatly diminished, the islanders resorted to cannibalism to sustain themselves. The practice became so common that the islanders would insult each other by saying, “The meat of your mother sticks between my teeth.”

Before long, local chaos replaced centralized government, and a warrior class took over from the hereditary chiefs. By around 1700, the population began to crash toward between one-quarter and one-tenth of its former number. People took to living in caves for protection against their enemies and the statues were torn down in clan warfare.  Once the home of a highly complex society, Easter Island had turned into an atoll of the barbaric.

As UCLA Medical School Professor Jared Diamond has explained:

Easter Island looks like a metaphor for us today. The islanders were isolated in the middle of the ocean with nobody to turn for help, with nowhere to flee once the island collapsed. In the same way today, one can look at Planet Earth in the middle of the galaxy, and if we too get into trouble, there's no way we can flee, and no people to whom we can turn for help out there in the galaxy.

I still can't imagine that number of deaths. It's just too ghastly to imagine. Only 10% of us are going to make it? How can that possibly be?

I know how you feel. This is all very difficult to handle, both emotionally and intellectually. As former UK environmental minister Michael Meacher recently stated, in an issue of Financial Times, “It's hard to envisage the effects of a radically reduced oil supply on a modern economy or society. The implications are mind-blowing.”  Perhaps the following explanation, while considerably over-simplified, will help illustrate the future we are marching towards.

As explained above, worldwide oil production follows a bell curve. Thus, if the year 2000 was the year of peak production, then oil production in the year 2025 will be about the same as it was in the year 1975. The population in the year 2025 is projected to be roughly 8 billion.  The population in 1975 was roughly 4 billion.  Since oil production essentially equals food production, this means that we will have 8 billion people on the planet but only enough food for 4 billion.

With that in mind, visualize the following situation: you, me, and six other people were locked in a room, with only enough food for four of us. At least four of us will die from starvation. Another one or two will likely die as we all fight each other for what little food we have. That's what will happen if we are fighting with just our fists. Give each of us weapons, and you can imagine what that room will look like when we’re done with each other.

Clearly, we have a real problem, but you're describing the worst-case scenario, right?

I'm describing the most likely scenario. The worst-case scenario is extinction, as the wars that will accompany the worldwide oil shortage will likely be the most horrific and widespread that humanity has ever experienced.

Where are you getting this information from? Who else is talking about Peak Oil? What type of backgrounds do they have? How do I know they’re credible, not crazy?

When you are done with this site, I encourage you to do a Google search for “Peak Oil.” You will find, much to your dismay as well as my own, that everything you read in this site is supported by an analysis of hard facts reported by highly respected sources. Some of the more notable sources are described below. As you will see, this is not the usual “end of the world/the sky is falling” crowd.

In fact, the most troublesome aspect of Peak Oil is there seems to be a correlation between an individual's credibility and scientific background and the degree to which they are concerned (even terrified) by the ramifications of Peak Oil:

A.  Dr. David Goodstein: Professor of Physics and Vice Provost of Cal Tech University

ABC News interview with Goodstein

B.  Matthew Simmons: Investment Banker, Energy Advisor to George Bush, Member of Dick Cheney's Energy Task Force

August 2003 interview with Simmons

Simmons' complete February 2004 Power Point Presentation on Peak Oil

Complete Index of Simmons' essays on Peak Oil and related issues

Video and Transcript of an Interview with Matt Simmons

C.  Dr. Colin Campbell: Former Exploration Geologist for Texaco, Chief Geologist for Ecuador, and Founder of the Association for the Study of Peak Oil and Gas

Over 35 Newsletters on Peak Oil by Dr. Campbell

Over 15 Articles on Peak Oil by Dr. Campbell

Video and Transcript of an Interview with Dr. Campbell

D.  Articles from Mainstream News Publications

*Over 50 Articles From Publications Such as The San Francisco Chronicle, The Los Angeles Times, Barons, New York Times, Newsweek, The Financial Times, The Washington Post, Business Week, etc. (click on "Articles")

Are you only getting this information from "left wing" sources?

Watch those interview with Bush's Energy Advisor, Matt Simmons.  Simmons describes himself as a "lifetime Republican" and a big fan of George W. Bush. 

Peak Oil was not on my radar screen till I realized that both Matt Simmons and Michael Moore are both extraordinarily concerned about this situation.

Anytime an avowed leftist and liberal icon like Michael Moore is in complete agreement with a member of the Bush administration, it's safe to say the shit has hit the fan.

Is it possible that we have already hit Peak Oil and are now in the first stages of the Oil Crash?

Yes. Ample evidence exists that we are already crashing:

A. Declining Oil Production

In May 2003, at the Paris Peak Oil Conference, Princeton Professor Kenneth Deffeyes, author of Hubbert's Peak: The Impending World Oil Shortage, explained that Peak Oil actually arrived in 2000 by noting that production has actually been declining since that time. 

It is likely that we are now in the "Petroleum Plateau", which is the top part of the bell curve that is almost flat. We will begin going down the downslope of the curve at some point between 2005-2020.  Unfortunately, it's likely to be sooner than later.

B. Drastically Revised Estimates of Oil & Natural Gas Reserves

In October 2003, CNN International reported that a research team from Sweden's University of Uppsala has discovered worldwide oil reserves are as much as 80% less than previously thought, that worldwide oil production will peak within the next 10 years, and once production peaks, gas prices will reach disastrous levels.  In January 2004, shares of major oil companies fell after Royal Dutch/Shell Group shocked investors by slashing its "proven" reserves 20 percent, raising concerns others may also have improperly booked reserves.   A month later, energy company El Paso Corporation announced it had cut its proven natural gas reserves estimate by 41 percent.

C. High Oil and Gas Prices

In March 2004, the price of oil hit $38 a barrel, the highest since 1991. The average nationwide price of a gallon of gasoline in America reached a record high of $1.77 this month.  In some parts of the country (San Francisco, CA.), gas has already hit $2.40 a gallon. Many analysts are predicting gas prices will exceed $3.50 a gallon by the summer of 2004.

D. High Unemployment

You can think of "Peak Oil Production" as a synonym for "Peak Job Creation." As of December 2003, the "adjusted" unemployment, which has been squeezed out of as much meaning as conceivably possible, still hovers in the 6% range. However, if you factor in the quality of employment, then the real numbers are closer to 12%-15%. We need to create over 250,000 new jobs per month just to keep up with population growth. Creating new jobs is essentially impossible now that oil production is peaking. Without an excess supply of energy, the economy cannot grow, and the necessary number of decent paying jobs cannot be consistently created.

From time to time, there will be months such as March 2004, when a healthy number of jobs are created. These months, however, will not happen consistently, ever again.

E. Blackouts

The rolling blackouts experienced in California during fall of 2000, the massive East Coast blackout of August 2003 and the various other massive blackouts that occurred throughout the world during late summer of 2003 are simply a sign of things to come.

F. Reduced Food and Chemical Production

World grain production has dropped every year since 1996-1997.   World wheat production has dropped every year since 1997-1998.  Recent food price hikes in China could be the sign of a coming world food crisis brought on by global warming and increasingly scarce water supplies among major grain producers.   Last year in the US, a quarter of the US fertilizer factories shut down permanently, and another quarter were idled until prices settled back following a spike in natural gas prices.

(Source: Richard Heinberg, "Oil and Gas Update", Museletter Number 142, January 2004)

G. Conclusion

If you were to look at any one of these pieces of evidence in isolation, it would not tell you much about the situation the world is in. However, when you look at all of them together in the context of Peak Oil, the fact that we are already crashing becomes obvious.

If you want to watch the crash as it unfolds, just check Breaking News.

What about the oil in the Arctic National Wildlife Preserve (ANWR)? If the environmentalists got out of the way, couldn't we just drill for oil there?

At current rates of oil consumption, the ANWR contains enough oil to power the US for only six months.  The fact that it is being touted as a "huge" source of oil underscores how serious our problem really is.

What about the oil under the Caspian Sea? I heard there was a massive amount of oil underneath it.

As recently as September 2001, the Caspian Sea was thought to be the oil find of the century. By December 2002, however, just after US troops took Afghanistan, British Petroleum announced disappointing Caspian drilling results. The "oil find of the century" was little more than a drop in the ocean. Instead of earlier predictions of oil reserves above 200 billion barrels, the US State Department announced, "Caspian oil represents 4% of world reserves. It will never dominate the world's markets." 

Furthermore, the area has the potential for wars and disruptions that could make the Persian Gulf look tame by comparison. Unstable countries surround the Caspian, including Russia, Kazakhstan, Turkmenistan, Uzbekistan, Iran, and Azerbaijan. Proposed pipelines to carry the oil run through hotspots such as Afghanistan, Pakistan, Turkey, China, Russia, Ukraine, Bulgaria, and Kyrgyzstan. Meanwhile, the region is isolated and unforgiving, so the expenses associated with drilling would be enormous.

Despite these monumental obstacles, oil is becoming so scarce that even the disappointingly modest amounts located in the Caspian Sea will remain extremely important from a geopolitical standpoint.

What about so-called "non-conventional" sources of oil? Doesn't Canada have an enormous amount of this type of oil?

So called "non-conventional" oil, such as the oil sands found in Canada and Venezuela, is incapable of replacing conventional oil for the following reasons:

1.  Non-conventional oil has a very poor Energy Profit Ratio and is extremely difficult to produce.  It takes about 2 barrels of oil in energy investment to produce 3 barrels of oil equivalent from those resources.   The cost of Canadian non-conventional oil projects is so high that in May 2003, the oil industry publication Rigzone suggested, "President Bush, known for his religious faith, should be praying nightly that Petro-Canada and other oil sands players find ways to cut their costs and boost US energy security."  

2.  The environmental costs are horrendous and the process uses a tremendous amount of  fresh water and also natural gas, both of which are in limited supply.

3.  Although non-conventional oil is quite abundant, its rate of extraction is far too slow to meet the huge global energy demand  Dr. Colin Campbell estimates that combined Canadian and Venezuelan output of non-conventional oil will be 2.8 million barrels per day (mbd) in 2005, 3.6 mbd in 2012, and 4.6 mbd in 2020.  These are drops in the bucket, given today’s consumption of 75 mbd, which is expected to increase to 120 mbd by 2020.

I just read an article that states that known oil reserves keep growing. What do you have to say about that?

That article is most likely citing data from sources that are about as reliable as an Enron accounting team.

A. United States Geological Survey (USGS) and Energy Information Agency (EIA) "Cooking the Books"

In recent years, the USGS and the EIA have revised their estimates of oil reserves upwards. This has led many observers and commentators to believe that the possibility of severe oil shortages is a thing of the past.

While USGS and EIA reports on past production are largely reliable, their predictions for the future are largely propaganda. They admit this themselves. For instance, after recently revising oil supply projections upward, the EIA stated, "These adjustments to the estimates are based on non-technical considerations that support domestic supply growth to the levels necessary to meet projected demand levels."

In other words, they predict how much they think we're going to use, and then tell us, "Guess what, nothing to worry about — that is how much we've got!"

B. Certainly OPEC Wouldn't Cook the Books?!

The USGS and the EIA aren't the only parties guilty of "cooking the books." For instance, during the late 1980s, several OPEC countries drastically increased their reported oil reserves with no corresponding major oil discoveries. Why was this? The reason is that an individual OPEC member’s quotas are proportional to their proven reserves. Since the larger the quota, the more money they can earn, this obviously gave them a strong incentive to 'adjust' their figures.  As Dr. Campbell and Jean Laherrere have explained, "such reserve growth is an illusion."

Is it possible that there is still more oil left to be discovered?

Almost certainly not.  According to a recent report from the Colorado School of Mines entitled The World's Giant Oilfields, the world's 120 largest oilfields produce almost 50% of the world's crude oil supply. The fourteen largest account for over 20%. The average age of these 14 largest fields is 43.5 years."  The reserves in the world's super-giant and giant oilfields are dwindling at an average rate of 4-6 percent a year.  The study concludes that "most of the world's true giants were found decades ago."

Matthew Simmons has stated succinctly, "All the big deposits have been found and exploited. There aren’t going to be any dramatic new discoveries, and the discovery trends have made this abundantly clear."  On a similar note, according to Dr. David Goodstein, "Better to believe in the Tooth Fairy than the possibility of any more large oil discoveries." 

(Source: Dr. David Goodstein, Out of Gas, p. 35)

Is it possible that things might get better before they get worse?

Yes. Once an oil find is made, it takes about 5 years for production to come online. As stated in the previous question, the last remotely decent year for oil finds was 2000. This means the last decent year for new production to come online will be about 2005. By 2008-2010, those projects will be in decline.

I heard that some scientist has a theory that fossil fuels actually renew themselves. If that's true, wouldn't it cast doubt on the validity of Peak Oil?

The scientist you speak of is a man by the name of Dr. Thomas Gold. In his 1999 book, The Deep Hot Biosphere, he proposes a theory that oil comes from deep in the Earth’s crust, left over from some primordial event in the formation of the Earth, when hydrocarbons were formed.  If his theory were true, it would mean that fossil fuels are actually renewable resources.

Unfortunately, his theory has been proven to be false, time and time again. As Steve Drury, who reviewed Gold's book for Geological Magazine, puts it:

Any Earth scientist will take a perverse delight in reading the book, because it is entertaining stuff, but even a beginner will see the gaping holes where Gold has deftly avoided the vast bulk of mundane evidence regarding our planet's hydrocarbons.

When asked about the validity of theories such as Gold's, Dr. Colin Campbell responded:

Oil sometimes does occur in fractured or weathered crystalline rocks, which may have led people to accept this theory, but in all cases there is an easy explanation of lateral migration from normal sources. Isotopic evidence provides a clear link to the organic origins. No one in the industry gives the slightest credence to these theories: after drilling for 150 years they know a bit about it. Another misleading idea is about oilfields being refilled. Some are, but the oil simply is leaking in from a deeper accumulation.

Finally, the deep-earth hypothesis has a fatal flaw: If oil were, indeed, formed under intense heat and pressure in the center of the Earth, it would tend to disintegrate as it rose from the regions of high temperature and pressure to the benign, cooler, low-pressure world closer to the Earth's surface.

(Source: Lita Epstein, The Politics of Oil, p. 22)

Didn't the Club of Rome make this exact same prediction back in the 70s?

In 1972, the Club of Rome (COR) shocked the world with a study titled The Limits to Growth, which concluded that:

1.  If the population continued to grow and industrialize as it had been, society would run out of renewable resources by the year 2072. A mass die-off would ensue.

2.  Even if the supply of resources was magically doubled, a collapse would occur as a result of pollution. 

Often, whenever somebody makes an "end of the world"-type prediction, they are derided as a "Club of Romer." This is extremely unfortunate, as it appears the COR turned out to be correct. Says who? None other than Matthew Simmons, who stated in 2000, "In hindsight, The COR turned out to be right. We simply wasted 30 important years by ignoring this work."

We had oil problems back in the 1970s. How is this any different?

The oil shortages of the 1970s were the results of political events. The coming oil shortage is the result of geologic reality. You can negotiate with politicians. You can threaten, blockade, or invade Middle East regimes. You can't do any of that to the Earth.

As far as the US oil supply was concerned, in the 70s there were other 'swing' oil producers like Venezuela who could step in to fill the supply gap. Once worldwide oil production peaks, there won't be any swing producers to fill in the gap.

The "end of the world" is here, once again. So what's new? Y2K was supposed to be the end of the world, and it turned out to be much ado about nothing.

What's new is that this is the real thing. It isn't a fire drill. It isn't paranoid hysteria. It is the real deal.

Peak Oil isn't "Y2K Reloaded." Peak Oil differs from previous “end of the world” scenarios such as Y2K in the following ways:

1. Peak Oil is not an “if” but a “when.” Furthermore, it is not a “when during the next 1,000 years,” but a “when during the next 10 years.”

2. Peak Oil is based on scientific fact, not subjective speculation.  The individuals sounding the alarm are scientists, not psychics.

3. Government and industry began preparing for Y2K a full 5-10 years before the problem was to occur. We are within 10 years of Peak Oil, and we have made no preparations for it.

4. The preparations necessary to deal with Peak Oil will require a complete overhaul of every aspect of our civilization. This is much more complex than fixing a computer bug.

5. Oil is more fundamental to our existence than anything else, even computers. Had the Y2K predictions come true, our civilization would have been knocked back to 1965. With time, we would have recovered. When the oil crash comes, our civilization is going to get knocked back to 1765. We will not recover, as there is no economically available oil left to discover that could help us recover.

How quickly will things collapse?

Many people mistakenly believe that anarchy will set in the moment we pass the peak.  While such a scenario is highly unlikely, things will get dicey early on.

Capitalism is by far the best economic system on the planet.  This doesn't mean it's invincible.  Although a market economy is superior to all other economic models, it has an achilles heel: if it lacks the energy it needs to grow, it collapses very quickly.  Even a 1-2% energy shortfall can have catastrophic effects on an economy that requires growth.

Once we pass the peak, oil production will decline by 1.5-3% per year. Demand, however, will continue to increase by 1.5-3% per year, every year. This equates to an additional 3-6% shortfall every year.

That means 10 years after the peak, we will have between 30-60% less oil than we need. 15 years after the peak, we will have between 45-90% less oil than we need.

Even if, by some miracle, oil production remains at its current level for the next 10 years, we will have between 15-30% less oil than we need by the year 2014, as demand will continue to go up, regardless of what happens to production.

The market won't address this situation until these shortages actually hit.  By then, it will be too late - the economy will be completely devastated.  There will be no money or energy to invest in the modest alternatives we have available.
This inability of the market to resolve this for us is explained in greater depth on Page II and Page III.

To make matters worse, natural gas is set to run out in the next few years, while coal is set to get very expensive. (See Page II)

Go to Part II: Alternatives to Ooil,
Fuels of the Future or Cruel Hoaxes?

Copyright 2003-2004, Mattthew David Savinar

Part II. Alternatives to Oil:
Fuels of the Future or Cruel Hoaxes?

I have designed the following passages with somebody new to the issue of oil depletion in mind.  If you would like more in depth explanations, with graphs, charts and the like, please consult The Oil Age Is Over:  What to Expect as the World Runs Out of Cheap Oil, 2005-2050.

What about alternatives to oil? Can't we just switch to a different source of energy?

Unfortunately, the ability of alternative energy to replace oil is based more in mythology and utopian fantasy than in reality and hard science. Oil accounts for 40% of our current US energy supply.  None of the alternatives to oil can supply anywhere near this much energy, let alone the amount we will need in the future as our population continues to grow and industrialize. When examining alternatives to oil, it is of critical importance that you ask certain questions:

1. Is the alternative easily transportable like oil?

2. Is the alternative energy dense like oil?

3. Is the alternative capable of being adapted for transportation, heating, and the production of fertilizers, plastics, and pesticides?

4. Does the alternative have an Energy Profit Ratio (EPR) comparable to oil? Oil used to have an EPR of 100 to 1. It only took one barrel of oil to extract 100 barrels of oil. This was such a fantastic ratio that oil was practically free energy. In fact, at one point in Texas, water cost more than oil!

Oil's EPR is now down to 10 to 1, which is still pretty good. If a proposed alternative energy source doesn't have an EPR comparable to oil, the amount of good it does us is very limited. Keep these questions in mind as we examine the shortcomings of the oil alternatives in the following questions.

Can't we use coal to replace oil? I know it's dirty and could hurt the environment, but who cares about pollution if the alternative is starving?

Like oil, coal is a fossil fuel. It accounts for 25% of current US energy supply.  Although we have at least 200 years of coal left in the ground, it is unsuitable as a replacement for oil for the following reasons:

1. It is 50% to 200% heavier than oil per energy unit. This makes it much more difficult to transport than oil.

2. Coal mining operations run on oil fuels as do coal-mining machinery and transportation. As oil becomes  more expensive, so will coal.

3. Pollution is also a major problem. A single coal-fired station can produce a million tons of solid waste each year. Burning coal in homes pollutes air with acrid smog containing acid gases and particles.

4. Currently, coal has an EPR of 8 to 1. That ratio used to be 100 to 1. By 2030-2040, that ratio will be 1 to 2. It will take two units of coal to extract one unit of coal. When any resource requires more energy to extract it than it contains, it ceases to be a resource.  Thus, while the Earth may be endowed with a generous supply of coal, by 2030 it will be of little use to us.

What about substituting natural gas for oil?

Like oil and coal, natural gas is a fossil fuel. It accounts for 25% of current US energy supply.  As a replacement for oil, it is unsuitable for the following reasons:

1.  US natural gas production peaked around 1970. By the year 2000, US domestic production was at 1/3 of its peak level. While natural gas can be imported in its liquefied form, the process of liquefying and transporting it is extraordinarily expensive and very dangerous. Demand for natural gas in North America is already outstripping supply, especially as power utilities take the remaining gas to generate electricity.

2. Gas is not suited for existing jet aircraft, ships, vehicles, and equipment for agriculture and other products.

3. Conversion consumes large amounts of energy as well as money.

4. Natural gas also does not provide the huge array of chemical by-products that we depend on oil for.

What about Hydrogen? Even Arnold, who owns 10 Hummers, says he's a proponent of hydrogen fuel cells. Everybody talks about it so much; it must be good, right?

Hydrogen accounts for 0.01% of the US energy supply. As a replacement for oil, it is unsuitable for the following reasons:

1. Hydrogen must be made from coal, oil, natural gas, wood, biomass or even water, but in every instance, it takes more energy to create hydrogen than the hydrogen actually provides. It is therefore an energy “carrier,” not an energy source. 

2. Liquid hydrogen occupies four to eleven times the bulk of equivalent gasoline or diesel.

3. Existing vehicles and aircraft and existing distribution systems are not suited to it.

4. Hydrogen cannot be used to manufacture plastics or fertilizer.

5. The cost of fuel cells is absolutely astronomical and has shown no downtrend.

Hydrogen is such a poor replacement for oil that "Hydrogen Fuel Cells" should be called "Hydrogen Fool Cells." Dr. Jorg Wing, a representative of the auto giant Daimler/Chrysler made this clear at the Paris Peak Oil Conference when he explained that his company did not view hydrogen as a viable alternative to petroleum-based engines. He stated that fuel-cell vehicles would never amount to a significant market share. Hydrogen was ruled out as a solution because of intensive costs of production, inherent energy inefficiencies, lack of infrastructure, and practical difficulties such as the extreme cost and difficulty of storage.

You may be wondering, "But didn't Bush say in the 2003 State of the Union speech that he was giving billions to develop the hydrogen economy?" Yes, he did say that, but he didn't mention that the money was going to fund using nuclear power to get the hydrogen. The limitations of nuclear power are discussed next.

For more on the problems with hydrogen see Fuel Cell Folly

What about Nuclear Power? If we're desperate, we won't have any choice but to use it.

Nuclear power accounts for 8% of US energy production.  As a replacement for oil, it is unsuitable for the following reasons:

1. Nuclear power is extremely expensive. A single reactor costs between 3 and 5 billion dollars, not counting the costs associated with decommissioning, increased costs for scarcer nuclear fuels; increased costs to safeguard nuclear facilities and materials from sabotage, terrorism, and diversion; increased likelihood of major, multi-billion-dollar accidents and their disrupting economic effects.

2. Number of reactors needed in the US: 800-1000. Current number: only 100.

3. Retrofitting current vehicles to run on nuclear-generated electricity would further increase the expenses related to a nuclear solution.

4. Nuclear power cannot be used to produce plastics, pesticides, or fertilizer.

5. Uranium requires energy from oil in order to be mined. As oil gets more expensive, so will nuclear power.

6. All abandoned reactors are radioactive for millennia.

7. A nuclear power plant requires tremendous amounts of oil to construct. When you take into account the amount of energy used to construct a nuclear plant, no plant has ever produced much more energy than it took to construct it. Nuclear power has only existed because the oil used to construct nuclear power plants has been so cheap.

8. Even if we were to overlook these problems, nuclear power is only a short-term solution. Uranium, too, has a Hubbert's peak, and the current known reserves can supply the Earth's energy needs for only 25 years at best.

What about solar power?

Solar power currently supplies .007% of the US energy supply.  As a replacement for oil, it is unsuitable due to the following reasons:

1. Energy from solar power varies constantly with weather or day/night.

2. Not practical for transportation needs. While a handful of small, experimental, solar-powered vehicles have been built, solar power is unsuited for planes, boats, cars, tanks, etc.

3. Solar cannot be adapted to produce pesticides, fertilizer, or plastics.

4. Solar is susceptible to the effects of global climate change, which is projected to greatly intensify in the decades to come.

5. Estimates are that about 20 percent of US land area would be required to support a solar energy system that would supply less than one-half of our current energy consumption. To develop such a system would require phenomenal level of investment and new infrastructure. This land requirement can be expected to diminish arable (food producing), pasture, and forest lands to some extent, with the most critical loss being arable land. 

Despite these limitations, a typical solar water panel array can deliver 50% to 85% of a home’s hot water, though. Recent advancements in solar panel technology suggest that solar's EPR could reach 10, if proper investments are made. Using some of our precious remaining crude oil as fuel for manufacturing solar equipment would be extremely wise.

What about wind power?

Wind power accounts for .007% of US energy supply.   As a replacement for oil, it is unsuitable due to the following reasons:

1. As with solar, energy from wind varies greatly with weather, and is not portable or storable like oil and gas.

2. Wind cannot be adapted to produce pesticides, fertilizer or plastics.

3. Like solar, wind is susceptible to the effects of global climate change.

4. Not appropriate for transportation needs.

Despite these limitations, wind power is the most promising of the various oil alternatives. According to a 1993 study done by the National Renewable Energy Laboratory, wind could generate about 15% of US energy, if proper investments are made.  According to a recent Danish study, wind's EPR could be as high as 50 — by far the highest of any of the available alternatives.  The fact that wind is our most promising alternative indicates that replacing oil is essentially impossible. For instance, in order for wind to be used as hydrogen fuel, the following steps have to be taken:

1. Build the wind farm. This step requires an enormous investment of oil and raw materials, which will become increasingly expensive as oil production drops.

2. Wait for X number of years while the original energy investment is paid back.

3. Construct an infrastructure through which the wind energy can be converted to hydrogen. This requires an enormous investment of oil and raw materials, which will become increasingly expensive as oil production drops.

4. Retrofit our current infrastructure to run on this fuel. This requires an enormous investment of oil and raw materials, both of which will become increasingly expensive as oil production drops.

5. Deal with enormous political and industrial resistance at each step.

6. Pray that we can repeat this process enough times before economic obstacles and war completely cripple our ability to do so.

You're forgetting about plant-based fuels. Can't we just grow our fuel?

To a certain degree we can, but biomass, ethanol, and biodiesel will never be able to replace fossil fuels for the following reasons:

1. Depending on who you consult, ethanol has an EPR ranging from .7 (making it an energy loser) to 1.7. Methanol, made from wood, clocks in at 2.6, better than ethanol, but still far short of oil.

2. By 2050, the US will only have enough arable land to feed half of its population, not accounting for the effects of oil depletion. In the years to come, there won't be enough land for food, let alone fuel.

3. While a handful of folks have adapted their vehicles to run on biodiesel, this is not a realistic option on a large scale. There is simply not enough biodiesel available in the world to replace even a fraction of the energy we get from oil.

4. Current infrastructure, particularly manufacturing and large-scale transportation is adaptable to plant-based fuels in theory only. In reality, retrofitting our industrial and transportation systems to run on plant fuels would be enormously expensive and comically impractical.

Finally, when evaluating claims about plant-based fuels, be aware of who is providing the data. As Dr. Walter Younquist points out:

Ethanol production survives only by the grace of a subsidy by the US government from taxpayer dollars. Continuing the production of ethanol is purely a device for buying the Midwest US farm vote.

[Not surprisingly] the fact that the company which makes 60% of US ethanol is also one of the largest contributors of campaign money to the Congress – a distressing example of politics overriding logic. 

What about that new technology that can turn anything into oil?

"Thermal Depolymerization" (TD) which can transform many kinds of waste into oil, could help us raise our energy efficiency as we lose power due to oil depletion.  While it could help us ameliorate the crash, it is not a true solution for the following reasons:

1. Like all other forms of alternative energy, we have run out of time to implement it before the crash. Currently, only one TD plant is operational. Thousands of such plants would need to come online before this technology would make even a small difference in our situation.

2. TD is really nothing more than high-tech recycling. Most of the waste input (such as plastics and tires) requires high-grade oil to make it in the first place. 

3. It is unclear what the EPR of oil derived from TD is. How much energy does the TD process require to produce a barrel of oil? If the EPR of oil derived from TD does not approach the EPR of traditional oil, it will not alleviate our problems.

The biggest problem with TD is that it is being advertised as a means to maintain business as usual. Such advertising promotes further consumption, provides us with a dangerously false sense of security, and encourages us to continue thinking that we don't need to make this issue a priority.

What about free energy? Didn't Nikola Tesla invent some machine that produced free energy? Couldn't we just switch to something like that?

While free energy technologies such as Cold Fusion, Vacuum Energy and Zero Point Energy are extremely fascinating, the unfortunate reality is that they are unlikely to help us cope with the oil depletion for several reasons:

1. We currently get absolutely zero percent of our energy from these sources.

2. We currently have no functional prototypes. Were a functional prototype of a free energy device unleashed on the public tomorrow, our oil-and-gas-fueled economy would be plunged into chaos. It is unlikely that such a scenario would be allowed to play itself out.

3. We've already had our experiment with "free energy." With an EPR of 100 to 1, oil was so efficient and cheap an energy source that it practically was free.

4. The development of a "free energy" device would just put off the inevitable. The Earth has a carrying capacity. If we are able to substitute a significant portion of our fossil fuel usage with "free energy", the crash would just come at a later time, when we have depleted a different resource. At that point, our population will be even higher. The higher a population is, the further it has to fall when it depletes a key resource. The further it has to fall, the more momentum it picks up on the way down through war and disease. By encouraging continued population growth, so-called "free energy" could actually make our situation worse.

5. Even if a functional free energy prototype came into existence today, it would take at least 25-50 years to retrofit our multi-trillion-dollar infrastructure for such technology.

Are these alternatives useless then?

No, not at all. Whatever civilization emerges after the crash will likely derive a good deal of their energy from these technologies. All of these alternatives deserve massive investment right now. The problem is that none of them can replace oil, no matter how much we wish they could. All the optimism, ingenuity and desire in the world doesn't change the physics and hard math of energy. Even in the best-case scenario, we will have to accept a drastically reduced standard of living. None of the alternatives can supply us with enough energy to maintain even a modest fraction of our current consumption levels. To survive, we will have to radically change the way we get our food, the way we get to work, what we do for work, the homes we live in, how we plan our families and what we do for recreation. Put simply, a transition to these alternatives will require a complete overhaul of every aspect of modern industrial society. Unfortunately, industrial societies such as ours do not undertake radical changes voluntarily.

For more information on renewable energy, check out this summary by Paul Thompson.

Go to Page III.  Issues of Economy,
Technology and the Ability to Adapt

Part III. Issues of Economy,
Technology and the Ability to Adapt

I have designed the following passages with somebody new to the issue of oil depletion in mind.  If you would like more in depth explanations, with graphs, charts and the like, please consult The Oil Age Is Over:  What to Expect as the World Runs Out of Cheap Oil, 2005-2050.

I don't think there is really anything to worry about. According to classical economics, when one resource becomes scarce, people get motivated to invest in a replacement resource. When the price of oil gets too high, renewable energy will become profitable and companies will begin investing in it.

Classical economic theory works great for goods within an economy. Relying on it to address a severe and prolonged energy shortage, however, is going to prove disastrous.  Classical economics works well so long as the market indicators arrive early enough for people to adapt. In regards to oil, market indicators will likely come too late for us to implement even the modest solutions we have available. Once the price of oil gets high enough that people begin to seriously consider alternatives, those alternatives will become too expensive to implement on a wide scale. Reason: oil is required to develop, manufacture, transport and implement oil alternatives such as solar panels, biomass, and windmills.

There are many examples in history where a resource shortage prompted the development of alternative resources. Oil, however, is not just any resource. In our current world, it is the precondition for all other resources, including alternative ones. To illustrate: as of the winter of 2004, a barrel of oil costs $38. It would cost in the range of $100-$250 to get the amount of energy in that barrel of oil from renewable sources.  This means that an energy company won't be motivated to aggressively pursue renewable energy until the cost of oil doubles, triples, or quadruples. At that point, our economy will be close to devastated. Our ability to implement whatever alternatives we can think of will be permanently eliminated. In effect, we will be a lifeless barge of a nation floating on some very rough seas.

In pragmatic terms, this means that if you want your home powered by solar panels or windmills, you had better do it soon. If you don't have these alternatives in place when the lights go out, they're going to stay out.

The “invisible hand of the market” is about to bitch-slap us back to the stone age.

The oil companies are so greedy, they will come up with a solution to keep making money, right?

Expecting the oil companies to save you from the oil crash is about as wise as expecting the tobacco companies to save you from lung cancer. Corporate officers are bound by law to do what is in the best interests of the corporation, so long as their actions are legal. Their legal obligation is to make money for the company, not to save the world, not to serve their country, not to clean up the environment, not to bring glory to God, not to anybody but the corporation. For all intents and purposes, this means it is illegal for an oil executive to aggressively pursue renewable energy. Occasionally, a company will stroll out a "renewable energy" initiative, but this is almost always more for publicity and public relations purposes than it is for profit.

The truth is that you probably don’t want the oil companies to aggressively pursue renewable energy. The profit margin of renewable energy is so poor that if oil companies attempted to pursue it, they would quickly go bankrupt. This would cause a collapse of the stock market, which would result in an economic meltdown.

Furthermore, the oil companies are likely to profit from the initial stages of the crash. How? Simple — say, for example, that in February 2004, it takes $10 to extract and refine a barrel of oil. If a company sells that same barrel in March 2004, they will likely fetch about $38 for it. However, if they wait until the oil crash hits hard, they may be able to sell that same barrel for considerably more.

Expecting the oil companies, the government, or anybody else to solve this problem for us is simply suicidal. You, me, and every other "regular person" needs to be actively engaged in addressing this issue if there is to be any hope for humanity.

I think you are underestimating the human spirit. Humanity always adapts to challenges. We will just adapt to this, too.

Absolutely, we will adapt. Part of that adaptation process will include most of us dying if we don't take massive action right now. Adaptation for millions does not equal survival for billions. The human spirit is capable of some miraculous things. We need a miracle right now, so the human spirit had better get its ass in gear, pronto! Unfortunately, there is no law that says when humanity adapts to a resource shortage, everybody gets to survive. Think of any mass tragedy connected to resources such as oil, land, food, labor (slaves), buffalo, etc. The societies affected usually survive, but in a drastically different and often unrecognizable form.

Just look at Easter Island. The islanders had one of the most socially complex and technologically advanced civilizations for their time and resource base.  They were certainly endowed with as much intelligence and ingenuity as any other group of people.  Yet they were unable to adapt to a critical resource shortage until their population was reduced by 98%.

What if somebody invents some new, miraculous technology or makes some discovery that can replace oil? In fact, I just heard of an inventor who has a device/new resource he claims will replace oil. It sounded pretty promising.

Before you stake your survival on a life raft that you've never even seen, you should ask yourself some questions:

•Is this new technology or discovery easily transportable like oil?

•Is it energy-dense like oil?

•Is it suitable for a variety of uses, including transportation, heating, and the production of fertilizers, plastics and pesticides?

•Can you mass-produce this invention without cheap oil?

•Can you distribute this resource without cheap oil?

•Does it have an EPR comparable to that of oil?

•Is there any infrastructure currently in place to handle this currently nonexistent invention or discovery?

•If this resource or discovery is implemented, how will it affect our transportation, agricultural and industrial systems? Can these systems be retrofitted to handle this new resource or discovery?

•What is the profit margin? Is there a profit margin?

•How long before it can be brought online on a society-wide level?

•Could it be implemented before billions of people die? Or would it be implemented only after that ghastly horror has motivated us to implement it?

•How much oil would it take to develop it? To manufacture it? To transport it? To install it?

•How would vested interests react?

•How much of a shock to the stock market would this invention or discovery create? How many factory farms, auto manufacturers and energy companies would it put out of business?

•Have you considered the fact that the multi-trillion-dollar energy industry has been investing ungodly sums to this end with no success?

•Have you considered that without cheap oil, none of our current technology could have been produced on more than a prototype-experimental scale?

•How does this new technology or resource affect the environment?

You need to ask the tough questions before you stake your life on something that doesn't even exist yet.

We'll think of something. We always do. Necessity is the mother of invention.

Yes, and lots of cheap oil has been the father of invention for 150 years. No invention was mass-produced and no resource was distributed without an abundance of cheap oil.

How will the coming oil shortages affect our banking and monetary system?

This issue seems to be a "blind spot" for many people concerned about the ramifications of Peak Oil. Typically, when addressing Peak Oil, people focus on finding a magic bullet alternative to oil. Even if such a resource existed, it would not solve our problems unless it was implemented in conjunction with a complete overhaul of our monetary system. The reason is simple: the monetary system is really just a reflection of our energy system.

Our monetary system is designed for one thing: growth. For any system to grow, it requires a constantly increasing supply of energy. We had a constantly increasing supply of energy as we moved up the upslope of the oil (energy) production curve. Now, however, we are stuck with a system that requires growth, but we are about to be denied the excess energy needed for that growth. Our monetary system was not designed for this contingency. If it can't grow, it collapses. There is no other alternative.

If the monumental scope of our problem wasn't clear to you already, hopefully it is now. Dealing with the oil crisis requires much more than just finding a replacement for oil. It requires replacing a growth-based monetary system with a steady-state system. This is an undertaking whose mythic proportions cannot be overstated.

Copyright 2003-2004, Mattthew David Savinar