Map of life expectancy at birth from Global Education Project.

Thursday, November 01, 2007

I think we're all Bozos on this bus

Here is the CEO of the French oil company Total:

In an unusually stark prediction for the head of one of the world’s biggest oil companies, Christophe de Margerie, CEO of the French group, said it would be difficult to reach even 100m barrels a day.

The International Energy Agency, the rich countries’ watchdog, in its “business as usual” projections, has said oil supply will reach 116m barrels a day by 2030, up from about 85m b/d today. The US government has a similar forecast of 118m b/d in 2030, including a relatively small contribution from biofuels.

Mr de Margerie, however, said while forecasts could always change, “100m barrels [per day] . . . is now in my view an optimistic case”.He added: “It is not my view: it is the industry view, or the view of those who like to speak clearly, honestly, and not . . . just try to please people.”

If 100m bpd is the optimistic case, then the most likely case is that peak oil is approximately now. Note who is saying this. Note also that discussion of this issue is marked by pervasive confusion. Many commentators counter that the problem is not a lack of adequate reserves from which additional petroleum can be extracted*, but rather a failure so far to make the immense investments necessary to exploit new reserves. But this is to entirely miss the point, which is not that we are running out of oil, but that what remains is more difficult and expensive to find and extract than what we have already consumed. Therefore, in the future current quantities of petroleum can only be provided at an ever higher price. Since people have only finite wealth and income, they will have to consume less of it. It is also the case that making the trillions of dollars of new investment needed to extract more petroleum will take time, and so before new reserves come on line, old ones will be further depleted. Hence Hubbard's peak. Therefore the argument that the reserves are there, we just need to spend more to get at them, is not a counterargument at all. It is precisely the problem.

This also dooms the argument that peak oil is not really a big problem because we can substitute petroleum equivalents from tar sands and oil shale. Extracting these resources is much more expensive than drilling for ordinary crude oil -- in environmental as well as monetary terms, by the way. So once again, consuming these resources can happen only at a higher, and ever rising price. You can even call them petroleum, if you want; we still have the same Hubbard's peak.

So what will happen? Will civilization collapse? Will Ted Kaczynski's dream come true? I doubt it. For one thing, as the polyannas never tire of telling us, petroleum represents a smaller percentage of economic output than it did during previous oil price shocks. We have become somewhat more energy efficient, and that trend will continue, perhaps strongly enough to enable us to keep our material well-being above water for quite a while. It's even likely that demand growth will moderate and the price may dip back down a bit, for a while. Who knows, maybe cold fusion will pan out after all and we'll all be saved.

But, more likely than not, it's gonna be a bummer. It already is. The price of home heating oil is up 25% from last year, which puts many families, already living from paycheck to paycheck, in deep trouble. If they're just hanging on making their mortgage payments, this will be the killing blow. U.S. workers, who haven't seen a significant increase in their real income for decades, are going to see an actual decline in their standard of living. It's going to make everything more expensive, especially basic needs -- food and clothing. That's really going to hurt the people in the poorest countries. What will be the political consequences, here and abroad?

And geopolitically, as petroleum stocks decline, what remains becomes a greater and greater prize. Hence, war and stuff like that. That particular bummer is already happening too. And, the massive investment in petroleum exploration and extraction is going to mean less investment in all the other stuff we desperately need to be doing.

But is declining petroleum extraction good news for the environment? Au contraire. It will drive more coal burning, and the environmental damage attendant on coal mining; conversion of coal to liquids, adding yet one more layer of environmental damage and even greater carbon emissions; more of the very nasty and destructive process of mining tar sand and oil shale; more and more drilling for oil in environmentally sensitive places; substitution of food crops for biomass crops. And meanwhile, we'll keep burning almost as much petroleum as we do now, with only a very slow decline, which will come far too late to have any meaningful impact on climate change even it isn't overwhelmed by those countervailing forces.

So I'm sorry Atrios. Kunstler may be over the top, but this is more than a mere annoyance. It's a big problem, with even more ramifications than I have taken the time and space to mention. It's really gonna hurt. Is my timing a little off? Is the big hurt coming in 8 years instead of next year? Maybe. So we should spend those years living in a fool's paradise?

* The conventional term is "produce," but of course that is wrong. Humans cannot produce petroleum; they can only use up what is already there.

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