Sunday, December 13, 2009

M1 On Oil

It has been predicted with American geophysicist M. King Hubbert’s model in 1956 that the global petroleum production rates will peak just after year 2000 and has correctly predicted that production of oil from conventional sources would peak in the continental United States around 1970. Though oil is increasingly plentiful on the upslope of the bell curve, it is increasingly scarce and expensive on the down slope. Once the peak is passed, oil production slows and costs begin to accelerate, as seen currently in oil and gas prices. We are currently seeing the effects of the depletion of oil in our quotidian lives not to mention its effect on global warming. The issue is not of “running out” of oil, so much as not acquiring enough to keep global economy running that will lead to a collapse, that even a shortage of 10-15% of an oil dependant country is enough to collapse its economy and reduce its citizens to poverty(1).

Perhaps the most dramatic consequence of oil depletion is of agriculture. Pesticides and agro-chemicals are made from oil, commercial fertilizers are made from ammonia, which is from natural gas that will be peaking in the near future, and most farming tools are power driven by oil-derived fuels. Food shortage will be an outcome as transportation and distribution become expensive. The average transport of food in the U.S. is transported almost 2400 km before it is made available, and in Canada, the average is 8000 km (2). In the future, food prices will skyrocket and for those less fortunate, starvation and famine will take hold even on a global scale.

As well, the concept of suburbia will also be under speculation, as commuters can no longer afford to drive into the city, there will be an overflow of people in the near future looking to move closer to the centre. The growth of the city can also harvest new problems with water scarcity and also with health and sanitation. Presently in the United States, 4% of people do not drive, whether because of low income, being handicapped, or age—this number will likely rise, making driving exclusively for the elite class and most likely will harness resentment amongst the general population(3).

We will see an increase in oil nationalism when countries with the most oil is withholding its resources from the future market and then auctioned off to favoured customer relations with other countries that they want to maintain good relations with. The United States will probably tend to be less favoured amongst some of the oil producing nations. The monopoly of oil can potentially cause major warfare while nations battle over oil, not to mention civil wars that will arise from the shortcomings. Cities and nations will eventually fall apart as the consequences are unimaginable. Permanent fuel shortages would bring the world into a generations-long economic depression as millions become unemployed when industries implode. There will no longer be big box stores, clothing stores, cafes, and postal services—the financial economic downfall will be evident.

The financial community begins to accept the reality of Peak Oil.

"They accept that banks created capital during this epoch by lending more than they had on deposit, being confident that tomorrow’s expansion, fuelled by cheap oil-based energy, was adequate collateral for today’s debt. The decline of oil, the principal driver of economic growth, undermines the validity of that collateral which in turn erodes the valuation of most entities quoted on Stock Exchanges."(4)

When truth can no longer be concealed, prices for daily maintenance of life will escalate abruptly, and the support and infrastructure of our civilization will fall. There will be emergency summits, diplomatic initiatives, urgent exploration efforts, but the turmoil will not subside. Thousands of companies will go bankrupt, and millions will be unemployed. Democracy will be shut out, as economic hardships will bring out the worst in people. “Fascists will rise, feeding on the anger of the newly poor and whipping up support. These new rulers will find the tools of repression—emergency laws, prison camps, a relaxed attitude towards torture—already in place, courtesy of the war on terror” (5). Simultaneously, climate change will work against us, making its presence felt “with a vengeance”, while engulfed in financial ruin, food and water supplies will seize and prolonged droughts will crop up in numbers as harvesting crops decline(6).

Almost daily, we see our personal environments changing, whether with work, climate, commuting, spending—we must progress and take nothing for granted as a new Dark Era is emerging for ourselves and generations to come as growth may be coming to an end. The social and economic consequences are cataclysmic as our entire financial order from interest rates, pension funds, insurance, to stock market is dependant on growth(7). We must find new [renewable] alternatives and new ways of using the resources we already acquired in order to alleviate stress globally and especially oil dependant nations.

Notes:
1. Matt Savinar, “Peak Oil”. Life After the Oil Crash, 27 Oct. 2009

2. Stephen Hesse, “Matters of Survival in a Shattered World,” The Japan Times, 25 Apr. 2005, 1 Nov. 2009,

3. James H. Kunstler, Interviewed by Glen Hiemstra for Futurists.com, May 2008,

4. Colin Campbell, “The Financial Consequences of Peak Oil,” 24 Feb 2004, 1 Nov 2009


5. Jeremy Leggett. The Empty Tank: Oil, Gas, Hot Air, and the Coming Financial Catastrophe. Random House: New York, 2005

6. Jonathon Gatehouse, “When Oil Runs Out,” Macleans, 9 Feb. 2006, 1 Nov. 2009

7. Bryan Appleyard, “Waiting for the Lights to Go Out,” The Times. 16 Oct. 2005, 3 Nov 2009,

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