Letter: Peak Oil is here. What does this mean for the Coastside?

Letter to the editor

Posted by on Thu, January 5, 2006

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Department of Energy
Non-OPEC oil production has already peaked. Click for a larger image.

For the last 150 years, we have been blessed with a surplus of oil. First it was from wells in the US, but since our domestic wells peaked out in the early ‘70s and are now in decline, we have been importing more and more from a variety of other nations. Some of those nations are not too friendly, especially to the current administration.

As a nation, we now use 25% of the world’s oil production but produce only 2%. We are also importing much of our natural gas.

But just as the US oil fields reached maximum production 35 years ago, it seems that world wide oil production is about to, or has already peaked. The optimistic experts say oil production will peak within the next two decades but an increasing number think it has already peaked. We won’t know for sure for a little while since nations are unwilling to make their production records public. But it really doesn’t matter.

Click "read more" to see the rest of the article, and to discuss the implications of Peak Oil for the Coastside.

Supply and demand economics project a looming crisis. Worldwide oil production will likely flatten out and soon start to decline. Demand, however, is continuing to increase, both here and particularly in Asia. What will that do to oil prices?

The only way to bring demand and supply into balance is to find more oil or suitable substitutes or to reduce demand. It appears unlikely that we will be able to find enough new supplies to replace the oil depletion. No substitutes for oil in the quantities needed are likely. So we will have to both reduce demand and continue the search for substitutes.

How will reducing demand happen? We can ration oil or we can let the market price rise and only those who can afford it will have access, or some combination.

Let’s think about what this means for Coastsiders.

It means a much higher cost for commuting. It means fewer trips over the hill for shopping and entertainment. It means higher costs for all goods that must be imported from afar, especially for high bulk, low value per pound goods like food and sundries. It means higher costs for imported water. It means that each of us will have less money to spend on all the niceties of life.

It also means the end of globalization due to the high cost of transport. Food and other goods will need to be produced locally.

A recent article in the Coastsider brought up the expression "smart growth". I suggest that any form of growth means increasing energy use, and that means increasing our use of fossil fuels. But we are going to be running low on supplies, so I agree that smart growth is an oxymoron. We most likely won’t be having any growth at all within a few years after gasoline goes to $10/gal or higher.

There is no way that we Americans can maintain our current wasteful habits. It just won’t happen. We will need to adjust to a much lower energy consumption lifestyle. If we work hard, we will be able to do this by changes in the efficiency of our energy use, in buildings, transportation, agriculture, etc. It will be a massive change for us all. The longer we wait, the harder the transition will be.

Dennis Paull

References:

 


I believe we’re near the peak.  I have no idea how to plan for it either for the Coastside or personally.

Once we get to the other side and oil prices really start to rise, it’s impossible to anticipate what’s going to happen. I have a great deal of faith in human ingenuity and believe we’ll adapt after a fashion with greater efficiency in power use and generation.  But I have no idea how we’ll deal with the economic problems that spur us to it, not to mention the trade deficit from buying all the oil & gas we’ll still need.

The oil situation is a global problem. Humanity needs to fully embrace alternative fuel sources now. Pollution and the annihilation of our precious natural resources have left us with no other choice. Global warming, the ozone layer, acid rain these are all linked back to oil and how man uses it. Don’t ask Bush for help though because none of these problems exist in his mind.

To be sure, oil stocks are limited—it is a question of “when” not “if.” Everyone agrees on that point. But the answer to that question makes all the difference.

A rapid, large, unplanned for loss of oil production would certainly be a shock to the world with ramifications that are difficult to predict—a very scary situation.

A slightly more gradual decline in oil would make all the difference—not only giving various technologies that were formerly too expensive on the consumption side a chance to reach the market but it would make a large supply of oil that is currently economically out of reach more viable.

Indeed, Dennis’s chart, which appears to support the premise that doomsday is upon us was actually prepared to demonstate that the time has come to invest in developing the oil-shale depoits in Colorado. Though labeled as coming from the Department of Energy (DOE) it originates in a consultant’s report to DOE. There is more than a hint of self-interest in this report (consultant: AOC, see http://aocpetro.com/  Report, see: http://www.evworld.com/library/Oil_Shale_Stategic_Significant.pdf  Figure 7 is the one Dennis borrowed).

The chart, as it states, does not include production from OPEC nations nor nations made up from the former Soviet Union (FSU), a large oil-producing region. These areas are generally expected to *increase* production in the near term, making that sudden drop on the right side of the graph much more gradual.

The bottom line is that there is little credible evidence that the oil peak is upon us now or has already passed. There is plenty of eveidence that it is coming within the next twenty years, with a gradual decline following the peak. We’ve got a serious problem but our way of life is not coming to an end quite yet.

Or is it? Consider this: Dennis is right that higher gas prices will mean fewer over-the-hill trips…but that will also mean that it will suddenly be economically viable to put a Target or Wal-Mart here on the coast—all those shoppers who now want to shop on the coast to avoid gasoline expense. I saw plenty of Wal-Marts in small towns in a recent cross-country driving trip. You say “no way, not here” but just wait until it costs you $20 to go over-the-hill—there will be petitions to demand that Wal-Mart build a store!

‘None of these problems exist in his mind’

I don’t think thats a true statement, I pretty much think the man is incompetent but one thing his staff understands is that treaties and agreements that cover multiple nations only HURT ours since we are the only ones that are impacted by them.  Much better to go one to one with nations and create agreements that work for both parties rather then just serving to make the US even LESS competitive. Environmentalists take this as ‘he doesnt care’ but another perspective is that the current administration views the world as it is, not as it ‘should’ be and acts within those parameters.

The funny thing is that the ‘anti-globalization’ crowd hates the fact that we don’t have global treaties and is overly concerned with the well-being of other nations. As an anti-globalist shouldn’t they be concerned with the fate of the US and our competitiveness? I know I am, I live here. I get that what happens to other nations impacts us but lets be smart about what impacts we choose and what are forced upon us. Lets make smart treaties rather then give in to the will of other nations who understand the following fact:

Environmentalism is a reflection of economics and economics is a constant state of stuggle, a war if you will. What we lose someone else gains and the rest of the world is concious of that but the US based environmentalists are in some Kumbayaa fantasy where we all hold hands for the greater good of humanity. That won’t happen, what we give up someone else will take, bottom line.

Beyond that, market forces will prevail, they always do. The best thing that can happen for alternative sources is peak oil and high prices.

Bring it on. I personally do not believe peak oil has been reached, we’re just at an inflection point for alternative production strategies.

I recommend the book ‘The Prize’ by Joseph Stanislaw. Its a long read but it gives a different perspective on the cycles of oil exploration, production and panic and what happens in these sorts of situations. Any true peak oil advocate should read this but they rarely do, so much easier to read a website and agree passionately.

Where we are today is not new in its features, only new in its amplitude which I agree is significant but far from perilous.

Ok flame away.

Ahhh—“The Prize”—what a great book (by Daniel Yergin and Joseph Stanislaw, by the way). Yergin has been vocal recently trying to make the point that oil hasn’t peaked yet.

But the book is a great one. PBS made a multi-part series out of it, though I haven’t seen it.

I even once had an intern who I turned on to “The Prize.” A few years later (and degrees from MIT and Oxford later, too) he gets his first job at Yergin’s CERA (Cambridge Energy Research Associates). Still has his copy.

—Darin

Bush has said that ‘Global warming is just hot air’, go figure. Anyway check this link out:

http://www.salon.com/tech/feature/2004/06/28/california_global_warming/index_np.html

On Transition from Orgy/Globalization and Imported energy etc

These are GOOD transitions for us, they will allow new technologies to mature much more rapidly now that they are profitable. The market can work when it is allowed to and the true costs of our energy production is passed on to us.

On Treaties : Kyoto was ridiculous and never sustainable. It ignored up and coming 3rd world polluters and only focused on the western industrialized economies that are already under assault from cheap production in these nations. Kyoto would have only served to further handicap the western nations while allowing the 3rd world to continue to grow and pollute for their economic benefit. Stratfor has a great series of articles on Kyoto, I suggest it as required reading on the topic if your interested in geopolitics and how Kyoto plays there. My opinion is that the current administration did the right thing here.

On Kumbayaa Environmentalism - We are the only ones playing the game. The rest of the world is waiting for us to give up so they can take for themselves. We can change the rules, but we’ll be the only ones that follow them. We need to keep this in mind as we try to survive, this is a topic that no self-respecting environmentalist will address and they lose credibility for it.

For a great example of this sort of real-politic look what Blair did with his EU farm rebate last month. Rather then giving back to ‘all’ he formed a coalition of the new member states and rebated THEIR portion of it. This allows Britain to maintain competitiveness with the old EU and not continue to subsidize the old school EU farm subsidies while still being sensitive to the issues of the poorer nations.

Its this sort of one to one deal making that can change things. Had Britain just given back its rebate it would have been consumed by France etc for no tangible benefit. This is the model for the future and I think we can change the rules in these one to one engagements but the concept of Global Change is naive at best IMHO.

Barry brings up the trade deficit. I find this crucial. We currently finance our trade deficit but selling our bonds to foreigners, mostly central banks. What will happen when these banks decide not to buy our bonds? The answer will be higher costs for foreign goods, which will mean a lower standard of living for US consumers since almost all our grocery and hardware stores sell mainly Asian made goods.

We have exported our manufacturing to foreign lands. Our main domestic prodict is debt. Our government spends more than it takes in. So do our consumers. The numbers are staggering. Our debt goes up by $1,000,000,000,000. per year.

Does anyone have a plan to pay that debt back? Who will do it? Our kids and grandkids maybe, but that would mean their having income in excess of their spending. Any chance of that?

Americans are in for some big surprises, sooner rather than later. So what can you do?

Try to use less energy. Travel less. Buy less of what you don’t really need anyway. Buy a hybrid only when your current car gives up. Put some form of alternative energy collector on your home and business. Support and encourage your government agencies when they install solar systems on existing buildings and incorporate passive solar designs into new construction.

Start a vegetable garden. It will be vastly more energy efficient than buying your fruits and vegies from South America or other remote places.

Re-discover handicrafts. You can make a lot of what you would otherwise buy at great energy expense. All the rest of the people in the world do it. Why not here?

Dennis Paull
Half Moon Bay

Darin suggest that there is oil that is currently too expensive to extract but will be produced when prices go up. That is very true but there is also a different ‘expense’ that needs to be considered. That is EROEI, Energy Return on Energy Invested.

A hundred years ago, one could invest 1 barrel of oil in building a well, pipelines and refineries and get 100 barrels worth of energy out. The EROEI was 100. Today, oil is harder to find, harder to extract and in many cases, of lower grade. We get an EROEI of 20 to 30, still not bad.

But the oil sands in Colorado and Canada have an EROEI of less than 2. That means that it takes almost as much energy to produce the oil as you get back. As soon as the EROEI reaches 1, it makes no sense to produce that energy NO MATTER WHAT THE PRICE OF OIL IS. Yeah, the oil may be there but it isn’t worth the effort to get it out.

Except for the use of truly waste products, the EROEI for bio-fuels is pretty low. Using modern agricultural methods, producing fuel from corn, for example, results in less energy than it takes to produce. In other words, the EROEI is less than one.

It’s pretty hard to gauge the lifecycle cost of nuclear energy since we haven’t figuered out what to do with the wastes generated. We also don’t know how much harder to get new supplies of U238 for use as nuclear fuel. In general, the EROEI is lower than for petroleum.

Dennis Paull