There are so many challenges facing us as a result of Peak Oil and related issues that it is easy to miss something important. ASPO-USA asked more than 50 leaders on Peak Oil to share what they felt was the most critical issue we’ve all been missing, the thing every one of us should be talking about – but aren’t. The answers were eye-opening, and have started a discussion that continues. Over the next three weeks, in place of a traditional commentary, Peak Oil Review will run a range of perspectives on this issue – from geologists to food experts, from social critics to scientists – what are we missing? Where should we be putting more attention, more resources? All of us miss things – but between so many working minds, we have a better chance of covering the expansive ground that we have to address. We thank all of our contributors for expanding our vision!
– Sharon Astyk, Tom Whipple, and ASPO-USA
“All of us have a vision of what a (more) sustainable future might look like. But the choreography and timing of events that may get us there are probably conflated. Going forward, Peak Oil will be a constraint, but not a driver of events. More pressing is the disruption risk from our institutions continuing to use fatally flawed assumptions:
1) That energy is substitutable in quantity and quality, 2) That debt is a neutral transfer between parties (I shorten to 2 for brevity).
Private/public debt additions ~ bringing consumption forward in time ~ made up for limits to growth from the 1970s until 2008. Since then government has created over 20% of GDP “out of thin air” (large budget deficits and growth of FED balance sheet). Now, with fiscal stimulus a dead end, central banks have two choices: watch the economy collapse to a state far worse than its pre-QE1 outset, or continue on the path of QE…^n. This will end badly and with consequences not well understood or prepared for.
The risks point to a large shrinkage of financial claims (what we think we own on paper), either via increased government involvement squeezing out functioning markets, or by markets abandoning currencies in a terminus of faith in an abstraction. The resulting supply chain disruptions to a world now used to globalized just-in-time inventory input/component replacements are something that will require focused top down response in combination with individuals psychologically preparing for less, potentially significantly less. I would guess the most under-discussed perspective among peak oilers is the possibility of $20 oil for a decade or longer (after disruption, not before). For in a financial reset/supply chain disrupted scenario, fuel might be one of the few things this country has in plenty.
Basically, though it’s counter-intuitive, we don’t have an energy shortage but a longage of expectations. This is actually good news, but it requires a shift in perception, objectives, and actions. Ergo, before we are able to create and implement what a better future looks like, we likely first have an appointment with the digital, financial reaper, and will have to deal with the social stability and logistical issues that accompany a large reduction in what we thought we had.”
Nate Hagens has a PhD in Natural Resources from the University of Vermont and a MBA from the University of Chicago He writes at the energy discussion portal, The Oil Drum and is on the Boards of Post Carbon Institute and Institute for Integrated Economic Research. His research focuses on ‘net energy’ and environmental externalities on the energy supply side, and the evolutionary drivers of human conspicuous consumption on the demand side.
“I expect that the roller coaster ride in commodities will continue. At the upper end of the spectrum, consumers continue to pay unaffordable prices for oil until they are out of money because the alternative is to be stranded. At the lower end of the spectrum, oil is just so much toxic waste that cannot be sold at any price because there is no industrial economy left to sell it into. Wild oscillations between the two extremes appear likely. Disruptions will have less and less to do with financial considerations, and will be dominated by events such as Libya going off-line, Japan switching from nuclear to oil and gas for electricity generation, and Russia deciding against gasoline exports.
Various parts of the world will see stepwise decreases in the availability of fossil fuels and go dark, eventually permanently. Commentators in the (unsustainably) developed countries will continue to banter about fictional entities such as “the market” and “the economy” and will only wake up once their computer screens go dark. How quickly these events unfold will, in the final analysis, make no difference whatsoever. -Suffice it to say that the time to make meaningful lifestyle changes and drastic reductions in energy use is not yet over.”
Dmitry Orlov was born in Leningrad and immigrated to the United States at the age of 12. He was an eyewitness to the Soviet collapse over several extended visits to his Russian homeland between the late eighties and mid-nineties. He is an engineer with a BS in Computer Engineering and an MA in Applied Linguistics. His latest book is the revised and updated 2nd edition of “Reinventing Collapse.” He writes a blog called ClubOrlov.
“Historically, the US economy has fallen into recession when oil consumption has exceeded 4% of GDP. Recently, oil consumption has averaged 5-6% of GDP. Will this be enough to drive the country into recession? If so, it could do in the next few months. Or perhaps the country will see a “soft landing”, as the US economy sloughs oil consumption faster than prices are increasing. Or perhaps we just get used to higher prices. Both of these could happen-there’s just no historical precedent for it.”
Steven Kopits is the Managing Director of Douglas Westwood LLC (USA), New York affiliate. He has more than 20 years experience in strategic management consulting and investment banking. He has raised capital for oil and gas technologies companies, assisted oil majors in acquisition and disposal projects, and assisted power companies with plant acquisition and divestiture due diligence.
“I think, in the endless stupid ‘debate’ about whether climate change is happening or not, we’re missing the dangerous reality that it’s happening extremely fast. This speed, greater than we thought even a few years ago, is limiting our window for reaction and closing off certain possibilities. Rate of change should probably be the issue we obsess about for a while.”
Bill McKibben is the author of a dozen books about the environment, beginning with The End of Nature in 1989, which is regarded as the first book for a general audience on climate change. His latest book is “Eaarth.” He is a founder of the grassroots climate campaign 350.org, which has coordinated 15,000 rallies in 189 countries since 2009.
“Although this is the underlying point of all the work on the environmental/resource/collapse issues, I believe this question: “Knowing what we know, why aren’t we as a society seriously preparing for our real future?” and this follow up “And what can be done to correct this?” needs far more consideration. All the information in the world will be meaningless if we fail to act on it.
I am particularly concerned about how this failure will impact the poor. In America, at least, it is the poor who will most likely continue to get hit first and hardest by this lack of preparation. After forty years of working with low income people, I have concluded that the only two qualities that distinguish the poor from everyone else are bad luck and poor planning. (Poor planning seems to be both a cause and a consequence of poverty.) All other traits seem to be distributed quite equally across the economic spectrum except for high moral character, where the poor have a slight lead over the general population. (An actual research finding.)
So many of the programs and services that assist the poor are really largely designed to help in planning, whether called case management, budget counseling, job and career development, homelessness prevention or community organizing. They don’t do much for bad luck, but can be a very effective antidote to poor planning, while providing some tangible relief from poverty’s hardships. So now, when the preparation for harder times ahead requires more planning assistance for the poor than ever, another face of the imminent collapse, bankrupt governments, is threatening to severely cut those very programs that low income families need most, like community action agencies. This too is a little discussed but important reality as the ranks of America’s poor reach 45 million and is growing fast.”
Peter Kilde is the executive director of West CAP in Wisconsin. Mr. Kilde also serves on the national Community Action Partnership Board where he chairs the Strategic Initiatives Task Force and directs the ongoing Peak Oil in Poor America project.
“Concerns about substantially higher crude oil prices in 2011 are probably unwarranted based on fundamentals. The recent increase in oil price to $110/barrel for WTI and $120/barrel for Brent was only partly based on fundamentals of supply, demand and inventories. Oil is a commodity and low confidence in currencies, equities and U.S. Treasury bonds pushed investors toward hard assets like oil. The recent sell-off in commodities led by silver was an adjustment back to near-equilibrium levels of $100 and $110 per barrel for WTI and Brent, respectively.
I expect that these relative levels will represent the average price for 2011. I anticipate that the average price for 2012 may be as high as $115/$125 if non-OECD demand is maintained. This does not preclude variability and price shocks as high as $120/barrel WTI or more in response to unanticipated events like more unrest in the Middle East. As Cushing, Oklahoma take-away capacity increases over the next year, the disparity between WTI and Brent should diminish.
Demand destruction is a powerful counter-balance to factors that move prices higher. With gasoline prices around $4.00, consumers will drive and travel less, and transportation is by far the largest component of oil use. I also anticipate continued economic weakness or deterioration despite ongoing efforts to paint a prettier face on the recovery by governments. This will further decrease demand and possibly deepen the recession.
It is doubtful that the U.S. Administration will be able to continue aggressive devaluation of U.S. currency with Republicans in charge of the House of Representatives. This is not meant as a U.S.- centric observation, but there is a strong inverse correlation between the strength of the U.S. dollar and global oil price. I also believe that the Middle Eastern risk premium has been incorporated into present prices. The wild card, of course, is if unrest spreads to the Gulf nations. Then, all bets are off on oil price.”
Art Berman is an ASPO-USA Board Member. He is currently a geological consultant and principal with Labyrinth Consulting Services, based in Houston, Texas. He specializes in prospect and play evaluation, reserve assessment, risk evaluation, subsurface geological and geophysical interpretation, and database management. His expertise on the technical and economic challenges facing the natural gas industry, especially regarding shale gas and other unconventional sources, is regularly consulted by industry analysts and investors. Mr. Berman is a regular contributor to The Oil Drum and other energy-focused publications, and a frequent guest commentator for broadcast and print media outlets.
“Many of the rights we take for granted in an energy-rich age are really products of that energy, not of the political process. For example, the right to travel means nothing if you cannot afford to do it. The right to consume as many resources as one can get one’s hands on is a product of a resource-rich age. Such rights may have little meaning for most people in a resource-impoverished future. Our natural inclination is to extrapolate our current forms of democratic governance into the future and assume more or less the same scope of action for the individual under that system. If central governments remain robust–not a given based on current trends–then their policies in an age of declining resources will, of necessity, restrict more and more our presumed “freedoms” that are tied to consumption.
If more localized governance becomes the norm–as I expect–then we face the possibility of small, local elites seizing the reins of power–with no countervailing higher central authority to challenge or temper that power by enforcing general standards such as Constitutional protections. This stands in contrast to the more participatory governance that many hope for in a locally governed world. The difference from one town to the next may be as great as the difference between the corrupt and oppressive local elites of the pre-civil rights South and the “good government” ethos of Northern cities in the heyday of America’s Progressive Era.”
Kurt Cobb is the author of Prelude, a peak oil novel, and a columnist for the Paris-based science news site Scitizen. His work has appeared on Energy Bulletin, The Oil Drum, Common Dreams, and many other sites. He writes a blog called “Resource Insights.”