Prosperity, Politics and Peak Oil

For the United States, peak oil production happened in 1970. Global peak oil is the current reality. World oil production has been flat (within a few percent) for six years now, while the price of oil has doubled and doubled again. Because oil exporting countries consume more, the amount of oil available on the world export market has decreased over this time. The United States is using less oil because it has to, not because of a sudden passion for conservation.

Up to date charts and numbers are available at http://scitizen.com/future-energies/time-to-worry-world-oil-production-finishes-six-years-of-no-growth_a-14-3714.html and at other internet sites. Googling "peak oil" will bring up more references than any one person can possibly read.

The essential fact is that, after the peak, the trend for the foreseeable future is declining supplies, as it has been for some years now. Our adjustments are just beginning. Once we are ten or fifteen years past the global peak, it should be possible to identify the exact year and perhaps the exact month of the peak. By that time, we will be far deeper into the consequences of decline, and charting the historical peak with precision will be of little practical interest.

Peak oil is about oil; black liquid that comes out of the ground when an oil well is working. People interested in denying the peak and in confusing the issue try to count as oil a number of things which are not oil, but from which liquid fuels can be made, as "unconventional oil." Many academics who study peak oil have gone along with this approach. In my opinion, they are wrong to do so.

"Heavy oil," which has to heated or dissolved in a solvent or both in order to be extracted from the ground, is counted as oil by some studies. Synthetic crude, created from bitumen separated from tar sands by mining, heating and solvents, is counted as "unconventional oil," though bitumen is not oil. "Shale oil," created from kerogen which must be separated from shale rock, is also counted as "unconventional oil." Biofuel - mostly ethanol made from corn or sugar cane - is counted as part of "all liquids" production, though corn and cane and ethanol are most certainly not oil. Natural gas and coal, though we all know these are not oil, can in desperate circumstances, be processed into liquid fuels, and there are active proposals to do this as regular oil increasingly declines.

The trouble with all these non-oil sources for liquid fuel is that processing them into fuel takes substantially more energy than processing oil into fuel. Alternative liquid fuels don't just bring less net energy to the society. They cost more to produce, and they generally cause more environmental damage.

It is true that with more deep-sea drilling, we can expect more disasters like BP in the Gulf of Mexico. We might say that oil is catching up to alternatives on both types of cost.

Many politicians are willing to relax or abandon environmental regulations in order to get the economy growing again. Doing this will succeed in intensifying damage to the environment, but it will not result in an increased supply of liquid fuel and it will not result in restoring growth.

Peak oil is why the price of liquid fuels and the price of every commodity that uses fuels for production and distribution is creeping up during this Great Recession. It's why those sectors of the economy that depend on liquid fuels - vehicle production, airlines, construction, vacation resorts, industrial farming and so on - cannot grow but instead are contracting. This causes plenty of financial problems, but it is not fundamentally a financial problem. It is a shortage of liquid fuels, a shortage in which higher prices are not producing more supply.

There is a reasonable argument that peak oil is a fundamental cause for the Great Recession, though failure of the global financial system is certainly the more immediately visible cause. Without getting into a pointless argument about the "real" cause, we might be able to agree that financial frauds and failures contribute to economic contraction, and peak oil also contributes, as does overpopulation and environmental degradation.

No possible change in financial regulation or political policy will create more oil in the ground or unburn oil that is already burnt. Practically every political candidate has some scheme for getting the economy growing again, for restoring the prosperity of our recent past. To the extent that past prosperity was based on the availability of plenty of cheap liquid fuel to run and expand industrial transportation of all sorts, none of the plans for restoring prosperity will work. Abundance of cheap fuels is gone forever.

On the downslope of the oil depletion curve, many companies can still profit by shutting down operations and laying off workers. In Michigan, we have experienced this for decades. The rest of the country is generally behind Michigan in this painful development. Here, we know directly that none of the plans for industrial renaissance have flowered for more than a season. Efforts to revive the economy from the top down have failed the 99% so often that we should expect continued failure from more subsidies benefiting the 1%.

We should realize that local, state and national governments need to look to the general welfare in times of economic growth AND in times of economic contraction. Growth and prosperity make taking care of the general welfare easier. Unfortunately, we don't have growth and prosperity, and all the plans to recreate it are not working. Governments at every level need to refocus their efforts into taking care of the general welfare from the bottom up.

Art Myatt