Dada is the sun, Dada is the egg. Dada is the Police of the Police.

5/19/2005

The end is extremely fucking nigh

This time for real, possibly. I had heard about the 'peak oil' thing before, but hadn't paid much attention to it. But now that I've read a little more about it, I need someone to tell me that this is all nonsense and is not going to happen. Please.
Civilization as we know it is coming to an end soon. This is not the wacky proclamation of a doomsday cult, apocalypse bible prophecy sect, or conspiracy theory society. Rather, it is the scientific conclusion of the best paid, most widely-respected geologists, physicists, and investment bankers in the world. These are rational, professional, conservative individuals who are absolutely terrified by a phenomenon known as global Peak Oil.

Click here for the rest of the bad news.



From Peak Oil: Life After the Oil Crash:

"Are We 'Running Out'? I Thought There Was 40 Years of the Stuff Left"

Oil will not just "run out" because all oil production follows a bell curve. This is true whether we're talking about an individual field, a country, or on the planet as a whole.

Oil is increasingly plentiful on the upslope of the bell curve, increasingly scarce and expensive on the down slope. The peak of the curve coincides with the point at which the endowment of oil has been 50 percent depleted. 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 global 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 (oil-dependent) than it was in 1980. Consequently, worldwide demand for oil will outpace worldwide production of oil by a significant margin. As a result, the price will skyrocket, oil-dependant economies will crumble, and resource wars will explode.

The issue is not one of "running out" so much as it is not having enough to keep our economy running. In this regard, the ramifications of Peak Oil for our civilization are similar to the ramifications of dehydration for the human body. The human body is 70 percent water. The body of a 200 pound man thus holds 140 pounds of water. Because water is so crucial to everything the human body does, the man doesn't need to lose all 140 pounds of water weight before collapsing due to dehydration. A loss of as little as 10-15 pounds of water may be enough to kill him.

In a similar sense, an oil-based economy such as ours doesn't have to deplete its entire reserve of oil before it begins to collapse. A shortfall between demand and supply as little as 10-15 percent is enough to wholly shatter an oil-dependent economy and reduce its citizenry to poverty.

The effects of even a small drop in production can be devastating. For instance, during the 1970s oil shocks, shortfalls in production as small as 5% caused the price of oil to nearly quadruple. The same thing happened in California a few years ago with natural gas: a production drop of less than 5% caused prices to skyrocket by 400%.

Fortunately, those price shocks were only temporary.

The coming oil shocks won't be so short-lived. They represent the onset of a new, permanent condition. Once the decline gets under way, production will drop (conservatively) by 3-6% per year, every year.

Almost all independent estimates from now disinterested scientists indicate global oil production will peak and go into terminal decline within the next five years.

Many geologists expect that 2005 will be the last year of the cheap-oil bonanza, while estimates coming out of the oil industry indicate "a seemingly unbridgeable supply-demand gap opening up after 2007," which will lead to major fuel shortages and increasingly severe blackouts beginning around 2008-2012.

The long-term ramifications of Peak Oil on your way of life are nothing short of mind blowing. As we slide down the downslope slope of the global oil production curve, we may find ourselves slipping into what some scientists are calling a "post-industrial stone age."


"Big deal. If gas prices get high, I’ll just get one of those hybrid cars. Why should I give a damn?"

Because petrochemicals are key components to much more than just the gas in your car. As geologist Dale Allen Pfeiffer points out in his article entitled, “Eating Fossil Fuels,” approximately 10 calories of fossil fuels are required to produce every 1 calorie of food eaten in the US.

The size of this ratio stems from the fact that every step of modern food production is fossil fuel and petrochemical powered ... In short, people gobble oil like two-legged SUVs.

It's not just transportation and agriculture that are entirely dependent on abundant, cheap oil. Modern medicine, water distribution, and national defense are each entirely powered by oil and petroleum derived chemicals.

Most of the consumer goods you buy are made with plastic, which is derived from oil.

All manufacturing processes consume voracious amounts of oil ... Most importantly, the modern banking and international monetary system is entirely dependent on a constantly increasing supply of oil. Since as explained above, all modern economic activity from transportation to food production to manufacturing is dependent on oil supplies, money is really just a symbol for oil.

Consequently, a declining supply of oil must be accompanied by either a declining supply of money or by hyperinflation. In either case, the result for the global banking system is the same: total collapse. This may be what led Stephen Roach, the chief economist for investment bank Morgan Stanley, to recently state, "I fear modern day central banking is on the brink of systemic failure."

Most people new to the idea of Peak Oil tend focus on finding alternatives to oil, while wholly ignoring the more fundamental issue: the ramifications of Peak Oil on our monetary system.

Due to the intricate relationship between oil supplies and the global financial system, the aftermath of Peak Oil will extend far beyond how much you will pay for gas. If you are focusing solely on the price at the pump, more fuel- efficient forms of transportation, or alternative sources of energy, you aren’t seeing the bigger picture.


"How is the Oil Industry Reacting to Peak Oil?"

If you want to know the harsh truth about the future of oil, simply look at the actions of the oil industry. As a recent article in M.I.T.'s Technology Review points out:

If the actions - rather than the words - of the oil business's major players provide the best gauge of how they see the future, then ponder the following. Crude oil prices have doubled since 2001, but oil companies have increased their budgets for exploring new oil fields by only a small fraction. Likewise, U.S. refineries are working close to capacity, yet no new refinery has been constructed since 1976. And oil tankers are fully booked, but outdated ships are being decommissioned faster than new ones are being built.

Some people believe that no new refineries have been built due to the efforts of environmentalists. This belief is a bit silly when one considers how much money and political influence the oil industry has compared to the environmental movement. If the oil companies wanted to build new refineries, they certainly have the money and political clout to get them built.

The real reason no new refineries have been built for almost 30 years has more do with simple good business practices than the efforts of environmentalists. No oil company worth its salt is going to seek to build new refineries when they know there is going to be less and less oil to refine.

In addition to lowering their investments in oil exploration and production, oil companies have been merging as though the industry is living on borrowed time:

December 1998: BP and Amoco merge;
April 1999: BP-Amoco and Arco agree to merge;
December 1999: Exxon and Mobil merge;
October 2000: Chevron and Texaco agree to merge;
November 2001: Phillips and Conoco agree to merge;
September 2002: Shell acquires Penzoil-Quaker State;
February 2003: Frontier Oil and Holly agree to merge;
March 2004: Marathon acquires 40% of Ashland;
April 2004: Westport Resources acquires Kerr-McGee;
July 2004: Analysts suggest BP-Amoco and Shell merge;
April 2005: Chevron-Texaco and Unocal merge;

What do you think could possibly be motivating these companies to take such drastic actions?

You don't have to contemplate too much, as recent disclosures from oil industry insiders indicate we are indeed "damn close to peaking" while industry analysts are now concluding that large oil companies believe Peak Oil is at our doorstep.

...

"Won't the Market and the Laws of Supply and Demand Address This?"

Not enough to prevent an economic meltdown ... oil is nowhere near as "elastic" as most commodities ... While many analysts claim the market will take care of this for us, they forget that neoclassic economic theory is besieged by several fundamental flaws that will prevent the market from appropriately reacting to Peak Oil until it is too late.

...

The effects of this will be frightening. As former oil industry insider Jan Lundberg recently pointed out:

The scenario I foresee is that market-based panic will, within a few days, drive prices up skyward. And as supplies can no longer slake daily world demand of over 80 million barrels a day, the market will become paralyzed at prices too high for the wheels of commerce and even daily living in "advanced" societies. There may be an event that appears to trigger this final energy crash, but the overall cause will be the huge consumption on a finite planet.

The trucks will no longer pull into Wal-Mart. Or Safeway or other food stores. The freighters bringing packaged techno-toys and whatnot from China will have no fuel. There will be fuel in many places, but hoarding and uncertainty will trigger outages, violence and chaos. For only a short time will the police and military be able to maintain order, if at all.

...

The fact that so many people in the green/environmental movement refuse to acknowledge the fundamental inability of fuels like biodiesel to replace more than a tiny portion of our petroleum consumption underscores why a complete collapse of the petroleum powered world may now be unavoidable. As Dr. Ted Trainer explains in a recent article on the thermodynamic limitations of biomass fuels:

This is why I do not believe consumer-capitalist society can save itself. Not even its "intellectual" classes or green leadership give any sign that this society has the wit or the will to even think about the basic situation we are in. As the above figures make clear, the situation cannot be solved without huge reduction in the volume of production and consumption going on.
...

"So What's Going to Happen to the Economy?"

The US economy is particularly vulnerable to the coming oil shortages. As the most indebted nation in the world, the US is completely dependent on strong economic growth just to pay the interest on its debts. This is as true for individual citizens as it is for corporations and governments. A declining oil/energy supply means the economy can't grow which means individuals, corporations, and governments can't pay off their debts, which means economic anarchy is on the way.

Furthermore, unlike nations in Europe, the US has built it's entire infrastructure and way of life under the assumption oil would always be cheap and plentiful. Since that is no longer the case, the US economy is in even more trouble than the economies of nations like the UK, Germany, Spain, and France.

So even in the best-case scenario, we're looking at an international financial meltdown and a collapse of the value of US dollar so severe that the Great Depression will look like the "good ole days."

That's if we manage to avoid the "economic Armageddon" recently predicted by the chief economist at investment banking giant Morgan Stanley.

The end of cheap oil also means the elimination of Great Depression era social programs such as Social Security and Medicare. Pensions too will soon to be a thing of the past.

On the international front, the financial dislocations wrought by the coming oil shocks will plunge the world into a series of resource wars and "currency insurgencies" unlike anything we can imagine. The international destabilization and devaluing of the US dollar will further exacerbate the economic collapse at home while impeding our physical & financial ability to pump whatever oil is left in the ground and then bring it to the market.

...Put simply, the end of oil may result in the end of America as we know it.

...

"Do World Governments Have Plans to Deal With This?"

Absolutely.

The US government has been aware of Peak Oil since at least 1977 and has been actively planning for this crisis for over 30 years.

Three decades of careful, plotting analysis has yielded a comprehensive, sophisticated, and multi-faceted plan in which military force will be used to secure and control the globe's energy resources. This plan is simplistically, but not altogether inaccurately - known as "Go to War to Get Oil."

This strategy was publicly announced in April 2001, when a report commissioned by Dick Cheney was released. According to the report, entitled Strategic Energy Policy Challenges For The 21st Century, the US is facing the biggest energy crisis in history and that the crisis requires "a reassessment of the role of energy in American foreign policy."

That's a diplomatic way of saying we are going to be fighting oil wars for a very long time.

James Woolsey, the former Director of the CIA, practically admitted as much at a recent conference on renewable energy:

I fear we're going to be at war for decades, not years . . . Ultimately we will win it, but one major component of that war is oil.

The war in Iraq, which has been 23 years in the making, is just the beginning of a worldwide war that "will not end in our lifetime." The reason our leaders are telling us the "war on terror will last 50 years" and that the US engagement in the Middle East is now a "generational commitment" is two-fold:

1. All the countries accused of harboring terrorists - Iraq, Iran, Syria, West Africa, Saudi Arabia - also happen to harbor large oil reserves.

2. Within 40-50 years, even these countries will see their oil reserves almost entirely depleted. At that point, the "war on terror" will come to an end.

While the Middle East countries find themselves targets in the "war on terror", China, Russia, and Latin America find themselves targets in the recently declared and much more expansive "war on tyranny."

Whereas the "war on terror" is really a war for control of the world's oil reserves, this newly declared "war on tyranny" is really a war for control of the world's oil distribution and transportation chokepoints.

China and Russia have taken notice of these declarations and seem to be making preparations to defend themselves.

China has also strengthened it's ties to oil-rich Venezuela while engaging in an undeclared oil-war with long time rival and US ally Japan.

This type of large-scale, long-term warfare will likely require a massive expansion of the military draft. It's probably not a coincidence that the director of the Selective Service recently gave a presentation to Congress in which he recommended the military draft be extended to both genders, ages 18-35.

The strategy - as distasteful as it may be - is characterized by a Machiavellian logic. Given the thermodynamic deficiencies of the alternatives to oil, the complexity of a large scale switch to these new sources of energy, and the wrenching economic and social effects of a declining energy supply, you can see why our leaders view force as the only viable way to deal with the coming crisis.

Of course, the US is not the only nation that needs affordable oil. Not by a long shot. France, Germany, Russia, and China all need it also. While these countries may not be able or willing to directly confront the US on the battlefield, they are more than willing to attack the US financially. The US may have the world's most deadly cluster bombs, but the EU has the world's most valuable currency, and intends to wield it as a strategic economic weapon to offset US firepower.

...


"Is There Any Reason to Remain Optimistic/Hopeful?"

If what you really mean is, "Is there any way technology or the market or brilliant scientists or comprehensive government programs are going to hold things together or solve this for me or allow for business to continue as usual?", the answer is no.

On the other hand, if what you really mean, "Is there any way I can still have a happy, fulfilling life in spite of some clearly grim facts?", the answer is yes, but it's going to require a lot of work, a lot of adjustments, and probably a bit of good fortune on your part.


"What Can I do to Prepare?"

Two things:

1. Inform others;

2. Get as self-sufficient as possible as soon as possible. See the prepare section for more information.

Good luck,

Matt Savinar
Last Revised: 4/19/2005

Blogarama - The Blog Directory Sanity is not statistical.