Will Peak Oil be Ignored in a Crisis?

Oil set new record prices every day last week, in both London and New York. It has settled back a little today, but most analysts see it continuing to rally. Commentators have pointed to the resumption of nuclear processing in Iran and the consequent sabre rattling as a key driver of the price

While tensions over Iran are an obvious threat to a tight market for crude oil (their production represents about 5% of the world’s output) there is a lot more going on besides. A graph published by the IEA tells a story all of its own. As we can see, demand is represented as exceeding supply.



There is an argument going on at econbrowser (when is there not, one wonders) about whether it makes sense to talk about demand exceeding supply. If we assume that living standards are to be kept as they are at present (Thgat is to say, no restrictions on fuel use by imposition) then it is perfectly possible to talk about demand, or need, being in excess of supply.

It’s a bit like saying that in the desert your demand for water exceeds the supply. In both cases demand must be brought to meet supply: In the desert you will eventually die of thirst and supply will actually exceed demand; in the oil market economies will atrophy until an equilibria is met, at a certain price.

But the oil market is very prone to sudden increases in price. While it might seem reasonable to assume that the orderly rise of prices will slowly whittle away demand until they match, all the evidence suggests that we are much more likely to experience periodic crises that result in very large increases in price.

The current run up in price, I believe, heralds the arrival of peak oil. Known rates of depletion, expected decline and the details of future projects all tend to suggest that we may never produce more oil than we do this year.

This will be doubly true if we experience serious political disturbances in one of the large exporters. The risks continue multiplying; Iraq, Iran, Saudi Arabia, Nigeria, the Caspian Basin. All teeter precariously close to chaos.

Here in New Zealand the Ministry of Economic Development released a report today about how to conserve oil in a hurry. It followed on from a report issued by the IEA to member countries on the same subject last year. They were quick to point out that the recommendations were contingency plans and that they didn’t in fact see any looming crises. That’s like acknowledging there’s an elephant in the living room, but denying that he is about to wreck up the place!

In any case, when the public hear the words ‘petrol rationing’ and ‘carless days’ on the radio before breakfast it seems likely that many would think the possibility not at all comforting.

So while we are experiencing demand that is not in fact being met by supply, it will likely be a non-linear, politically precipitated incident that pushes the market to begin demand destruction in earnest.

I think there is a real risk in this for those of us that have and will continue to publicise the concepts behind peak oil.

In the midst of an oil crisis the factors that are going to concern people are not going to be geological realities. People and governments are going to be fixated on what they can do to restore oil supplies. An insistence that we need to face up to oil depletion is not going to go down well. Don’t preach to the addict who's short of his fix. No one will thank you for pointing out that oil was going to run out whatever we do.

And, moreover, we may in fact find that oil depletion follows a path of periodic economic crises punctuated by mild recoveries. It is during these recoveries that the peak oil community will need to steel its resolve.

Peak oil will be the most important point in the long run down the back slope of Hubbert's curve, but we need to be prepared for a bumpy ride, in every sense. An understanding of oil depletion is vital for individuals and groups wishing to navigate the future, but don’t be surprised if the message is lost in the noise.

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Genetics, Disease and Peak Oil: The Race to the Bottom

Does modern medical science encourage the spread of weaknesses in the human population?

It is no secret that modern medicine has allowed many people to survive diseases and conditions that might otherwise have killed them. Does this mean that the genes for these conditions, like diabetes for example, are spreading in the population?

If the genes for potentially lethal conditions have persisted in the human species up to this point, then that indicates that they aren’t totally reliant on medical science. For example, any gene that produces a condition after the prime reproductive age is unlikely to be restrained in any significant way. So the genes for cancers of different types, for example, are prevalent in humans.

But there are many commonplace conditions, carried as recessive alleles, which would, in a less beneficent age, have done away with people before they were able to breed. Allowing those that inherit two copies of a destructive allele to survive only marginally adds to the reproductive success of that particular gene.

Many expectant parents in the western world carry out genetic screening to determine whether their offspring carry genes that will potentially require lifelong treatment, so that they can decide whether to terminate the pregnancy, so you could argue that medical science is helping to eliminate the transmission of certain undesirable genes.

But are any genes being actively reinforced? In other words, what are the selection pressures on the human species that are driving our evolution? We can say one thing for sure – life in much of the world today is less physically demanding than it was in our species’ early history. We do not have to chase down our prey, we do not necessarily have to have good eyesight, and many of us have such ready access to food that we are at risk of killing ourselves by overeating rather than starving.

Are we getting smarter then? It would be extremely difficult to find evidence that intelligent people are more reproductively successful. In fact, you could argue that an intelligent person might look at the state of life on earth and wonder whether it is a good idea to reproduce.

We are adapting to our environment, but that environment is not one of relentless competition, but rather one of comparative ease. We are living in the heyday of an energy glut, the like of which will never be seen again. We have adapted to this by developing technologies and techniques that support more and more of us through the use of fossil fuel derivatives to grow food, produce medicines and allow transportation.

And this ever burgeoning population does support a larger proportion of people with congenital defects that would have killed them in days gone by, but these may in fact be immaterial in the short run.

Rather than being flung into a situation where we are again tracking antelope on the steppes, we are more likely to face a threat that has always menaced human populations. Microbes.

As I write H5N1 has been found in another Asian country. It is by no means certain that this particular virus will cross the species barrier completely and begin human-to-human transmission. But if it doesn’t, eventually a virus will evolve that does.

In today’s hyper-connected world a virus with the right characteristics of lethality, mode of transmission and incubation period could easily engulf the world, leaving a huge numbers of deaths in its wake.

Viruses have a much more terrifying potential for the human species than the quirks of genetic variability, which would be weeded out by a more strenuous environment. We live under the pretence that we are immune to the ravages of the plague cycle. But nothing could be further from the truth. If anything we have become more susceptible.

One caveat does obtain to this argument however. If we fall off the cliff of energy decline, then we may in fact avoid being caught up in a worldwide pandemic. It is probably more likely that as medicines become less available, air travel less common and people more malnourished, that less widespread but more locally devastating epidemics will predominate.

Look out below! The race to the bottom has started!

Technorati Tags: Genetics Avian Flu Peak Oil Energy Decline

Iran and nuclear power

Does Iran really want to build a Nuclear bomb? As with many of the thornier questions of international politics, it depends who you ask.

Iran, not surprisingly, say they don't, that they only wish to enrich uranium for purposes of constructing electric power plants, something not forbidden to them by international treaties.

The US intelligence agencies think that Iran is 10 years away from building the bomb. The Israelis think they are 3 years away. Far be it from me to criticise the track record of the US intelligence community when it comes to sniffing out illegal weaponry. And the less said about Mossad the better.

The IAEA has found no evidence that Iran is in fact manufacturing weapons-grade fissile material, and the EU3 (Britatin, France and Germany) have stepped into mediate between the Iranians and the Americans. It hasn't been going particularly well.

The crux of the issue is that Iran is determined that they will continue to pursue the peaceful use of nuclear power, and that the EU3 and the Americans are just too suspicious to let them do this.

A terrible strategic risk is being taken here. It is entirely reasonable to expect countries to abide by the nuclear non-proliferation treaty, which Iran is a signatory to, but it is also counterproductive to deny a country a method of producing energy. Not only that, but it is hypocritical of both the US and Israel to criticise countres over nuclear weapons in light of the augmentation of both of their arsenals, declared and undeclared. It is double standards like this that lead to crises.

And what are they really going to do? Any sanctions that may be mooted at the security council would be vetoed by Russia and or China. And why on earth would you attack a country that supplies a large amount of oil to the world market, in a time when the oil market is incredibly tight (although I suppoese that didn't halt an attack on Iraq).

There seems so little honour and logic in this slowly evolving crisis that it suggests that there really is more going on thatn we may be led to believe. Perhaps Iran really does have nuclear weapons? Maybe the US is trying to wag the dog over some other issue?

What if, and this seems most plausible, the whole charade is a game of brinksmanship that is being stoked by gnawing fear about the impending peak in oil. If one more domino falls in the middle east, well pardner, I'ma goin' for ma gun!

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The Saudi Two-Step

With the passsing of King Fahd, the spotlight is on those two long term dance partners, Saudi Arabia and the good ole US of A.

Abdullah, seen here having the ticks removed from his moustache by some flunky, has effectively been running the country since 1995, when Fahd was laid low by a stroke. He took over on the old king's death and his brother Sultan has taken the role of Crown Prince.

Also of note in Saudi politics has been the removal of Prince Bandar from the US ambassadorship (remember him? He was the one who smoked cigars on the white house balcony and was generally regarded as one of the most consumate political fixers of modern times.) He has been replaced by his uncle, Prince Turki bin Faisal, who used to run the Saudi intelligence service and was recently the ambassador to the UK.

So, what can we expect from the reign of Abdullah. Much of the same seems to be the consensus. But is that just wishful thinking? Let's examine the pressures on the mystery kingdom.

Saudi Arabia is going through what is euphimistically referred to as demographic transition. This is code for a steep population increase engendered by falling death rates and high birth rates. Their are huge numbers of young Saudis under the age of 21 (half the population in fact), and more every year. This contrasts sharply with the current rulers. Abdullah is a spritely 82 (don't let the dyed facial hair fool you) and the next two likely successors are of a similar vintage.

The abundance of disenfranchised, disillusioned young men has swelled the ranks of extremist groups in the kingdom and throughout the world. Much of the religious framework that supports these firebrands is funded by the royal family or other wealthy Saudis. For years, money has been given to men like Sheikh Osama to fight the good fight for ultra-conservative Islam in places like Afghanistan, and now Iraq.

But the Saudis have had their hands bitten by the monster they created. Since the invasion of Iraq there have been a number of high profile terrorist attacks inside the kingdom, targetting foreigners and the oil industry. There have been accusations that the security forces are sympathetic to the cause of extremists. In some ways it would be more surprising if they weren't.

And, as we all know (I would hope), the oil markets are in a bit of a state at the moment. For the last thirty years Saudi Arabia has been the go-to player in the oil market. They have long held the ace of a significant amount of spare production capacity. But for the last two years, despite rising prices, Saudi Aramco have incremented their production by only a fraction. OPEC announcements of upwards revisions of quotas are now barely even acknowledged by the market.

Investment banker Matthew Simmons has just published a book alleging (and has been telling anyone who will listen for several years now, including Dick Cheney) that the Saudi fields are not in the great shape they had always said they were. His argument has been met with stern rebuffs from Saudi officials, but the debates about Saudi and world oil peak are now hitting the pages of major dailies.

It has become uncomfortably obvious that the United States is cravenly beholden to one of the most repressive and undemocratic regimes in the world. Realpolitik and an insuperable addiction to oil has left America in a terrible strategic position. They are bound to prop up the aging leaders and their corrupt families while trying to gently bring about meaningful change that may lessen the grip of extremist ideologies.

If Simmons is correct and Saudi oil production does soon reach its historical maximum, only to start declining, then this dance will surely become a death grip.

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Energy Decline

On a lighter note...

There I was, happily imagining that this blog would simply be an outlet for my burblings. Then I wake up and find that my hit count has nearly quadrupled over night.

A little digging revealed that my "Y2K vs Peak Oil" post had been listed as the first article on energybulletin.net for the 5th of August. Also, I had been picked up by depression2.tv (ironically the majority of people reading this probably are all too aware of either of these facts). I have frequented both sites in the past, so needless to say it was gratifying to be featured. Thanks to both sites (and anyone else who links here)!

I will keep on posting serious articles, but just for now I thought you might all like this link. Seemingly by accident some anonymous subtitler has achieved the impossible - made the dialogue in Revenge of the Sith entertaining. Enjoy!

Y2K versus Peak Oil

Here’s an interesting link for all you peakniks. The post and the subsequent comments are just the sort of error that I think the majority of the population make currently, and will continue to make when confronted with the reality of energy decline.

The article draws a comparison between the furore over Y2K and the current interest in peak oil. The comparison is erroneous for some very important reasons, which I will try to outline here.

Let’s look first at the nature of both problems, starting with Y2K. The article correctly points out that Y2K was not a hoax as many imagined after the fact. It was a real problem for a large number of computer systems, and one that could have been a pain in the backside for all concerned. But, due to the generally low level of understanding of computer systems the threat was easily blown out of proportion in the public arena, and fed a variety of techno-phobic madness that reflected the zeitgeist of those times.

However, the problem was not insoluble at all. Programmers and systems administrators had very clear methods for dealing with the problems that were forecast. The problem was simply one of a large amount of work in a set period of time. The public hysteria that eventuated was entirely out of proportion to the nature of the problem and the likely effects. I agree with the author that this panic probably did in fact ensure that many of the more drastic scenarios proposed didn’t come about.

So is peak oil a problem of the same type? Will current discussion raise awareness enough that solutions will be found and enacted?

Peak oil is a problem that represents not one problem due to occur at a set date, but a complex of interacting factors likely to influence our lives for the foreseeable future. The problem may appear to be; how do we replace oil with alternatives? But the real question is; how are we going to deal with the transition to a lower quality energy resource?

This is the point that I think makes technological optimists so infuriating in the eyes of those that have seriously looked at the nature of energy resources. It seems a simple enough concept but it is in fact very poorly understood. So I’m going to have a go at explaining it.

The most crucial characteristic of any energy resource is its energy profit ratio, or energy returned on energy invested, hereafter shortened to EROEI. This is a measure of the multiple of energy that one can extract from investing a set amount of energy. For example it may take the equivalent of one barrel of oil to find, pump, refine and distribute ten barrels of oil. The EROEI in this case is 10. Similarly it may take one barrel of oil equivalent (BOE) to produce 8 tenths of a BOE of ethanol, in which case the EROEI would be 0.8.

This idea has been called emergy, or embedded energy by Howard Odum and is absolutely vital in assessing energy resources. It can be difficult to assess, and it does change over time for different resources.

One thing we can say with certainty is that fossil fuels have offered, and still do offer, the best EROEI. Of the fossil fuels oil has been the stand out performer, with natural gas following closely behind. But even these two stars can’t hold their top spot forever. As the amount of liquid and gas in the ground reduces, that remaining gets harder to find and pump. The EROEI consequently drops.

So that in itself is a problem. We are having to work harder to get the energy we need. But maybe we can change to some other form of energy? Given that, at the moment, no other form of energy (not even nuclear power) offers an EROEI as good as fossil fuels, why would we? How on earth are we expected to make our lives easier by using a resource that requires more work to produce the same amount of energy? When the EROEI on fossil fuels drops to the level of other sources of energy the transition becomes possible. But is it that simple? Indulge me while I tell you a tale.

A family live in the middle of a broad plain, on which grow two types of plant. One yields a high-energy fruit that is excellent sustenance but reproduces very slowly. Picking the fruit destroys the plant. The second plant yields fibrous, unpalatable gourds that are much less nutritious. At first the family harvests the high-energy fruit and they prosper. Their numbers swell and they are able to harvest more and more extensively from their home. Over the course of the years they destroy the easiest to reach plants and must now travel further and further to get the high-energy fruit. They start supplementing their diets with the fibrous gourds. Their number increases still further, and the availability of the fruit decreases still. They have to put more and more effort into gathering the gourds. Eventually they have to abandon the fruit and concentrate entirely on the gourds. However the gourds are not nutritious enough to feed all of the family and they start to become malnourished. The harvesting is difficult work and in one particularly hard winter several members of the family starve, followed by more the next year.

So you see the difficulty. Decreasing energy yield colliding with an increasing population is not something that can continue for long. And this is in fact a situation that has occurred often enough in history to be unremarkable (see Collapse by Jared Diamond). The difference is now that it’s not just one family on one plain, but one entire species, on one entire planet.

Now people may say; maybe we will find some energy source that has a better EROEI than fossil fuels. To these people I say, best of luck to you. If you can fearlessly go where generations of technicians, engineers, scientists and others have so far failed to go, then all the better for everyone. I have publicly said that if nuclear fusion does ever become energetically and technically viable then I will throw a big party for all of those that had faith. But my suspicion is that it will forever be a low energy yield operation, not because of the yield of the fusion reaction itself, but because of the enormous engineering difficulties, the solutions to which all entail large energy outlays.

Ideas like biodiesel and fuel cells reflect an unjustified optimism in the benefits of progress and technology. We are bound by the laws of thermodynamics in the ways that we can exploit energy, and as result of that we must face up to the effect this will have on the level of population that we can support. This is especially true since we are more and more reliant on fossil fuel derivatives to keep food production at high levels. Moreover, we need to look at how a decreasing population, not an easy thing to voluntarily bring about, will affect the way we arrange commerce and trade. As I have stated before one of our great difficulties is that our present economic system has no real ability to go backwards, at least not without great pain.

Energy decline and Y2K are two fundamentally different things. Y2K was only ever likely to have a very specific and temporary effect on modern life. It may have highlighted our dependence on modern technology, but it was in no way an apocalyptic event, and despite public hysteria was never going to be. Nor does energy decline have to be, but we need to be aware that it will have far reaching effects. Peak oil advocates hopefully will bring attention to the problem, but the difference is that the ‘solutions’ to the problem they are highlighting are not equivalent to rewriting a few lines of code. Rather that smirking about peak oil I suspect that most people will be too preoccupied with where they are going to get their next meal to worry about whether peak oil was all it was cracked up to be.

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Y2K energy decline

Depletion Protocol: Mission Impossible?

Richard Heinberg's latest Museletter is out. He is pushing the APSO depletion protocol. The details are sound and his argument should be persuasive, but there's just something so shit-uphill-with-a-broken-stick about it all.

It's not that I don't think we should be calling on nations to do something like this - as he and the hirsh report have both made clear, the likely consequences of doing nothing are not to be taken lightly. At the very least we need to take some big strides in the level of oil reserve reporting. As I read somewhere it is only in the oil market that governments rely on trade journals for their figures!

It's just that when I mentally picture the reaction of large impoting countries to a proposal like this, all I can imagine is a cold shoulder. After all, if you were an American politician wouldn't it be absolute anathema to think of voluntarily reducing your oil consumption when you are operating an armed force that is largely devoted to securing that oil for yourself in any case.

Buying into a protocol like this, or taking moves that would threaten economic growth in any serious way (CO2 reduction or currency reform for example), is simply not going to happen. As soon as it is apparent that that is what is going to happen our leaders shut down. And with good reason.

Economics as practised is a one way process. Productive capacity and capital must grow to sustain the edifice of capitalism, and there is no retreat, no reverse gear.

We will go backwards but not voluntarily, methinks.

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