Is the doomsday peak oil theory realistic?

Question

Hi guys. I've been reading a lot about peak oil and how, pretty soon, oil will be $10/gallon, and basically how civilization will end in countries that depend strongly on oil. Is it possible, for anyone who knows what they are talking about, to relieve my fears of this doomsday scenario??? Or are we all really going to hell?

Answer 1

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."

"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 need 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% per year, every year.

That estimate comes from numerous sources, not the least of which is Vice President Dick Cheney himself. In a 1999 speech he gave while still CEO of Halliburton, Cheney stated:

By some estimates, there will be an average of two-percent annual growth in global oil demand over the years ahead, along with, conservatively, a three-percent natural decline in production from existing reserves. That means by 2010 we will need on the order of anadditional 50 million barrels a day.

Cheney's assesement is supported by the estimates of numerous non-political, retired, and now disinterested scientists, many of whom believe global oil production will peak and go into terminal decline within the next five years. Unfortunately, many of these experts are no where near as optimistic as Dick Cheney was in 1999. Andrew Gould, CEO of the giant oil services firm Schlumberger, for instance, recently explained the global decline rate may be far higher than what Cheney predicted seven years ago:

An accurate average decline rate is hard to estimate, but an overall figure of 8% is not an unreasonable assumption.

An 8% yearly decline would cut global oil production by a whopping 50% in under nine years. If a 5% cut in production caused prices to triple in the 1970s, what do you think a 50% cut is going to do?

Other experts are predicting decline rates as high as 10%-to-13%. Some geologists expect 2005 to be the last year of the cheap-oil bonanza, while many 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. As we slide down the downslope slope of the global oil production curve, we may find ourselves slipping into what some scientists are calling the "post-industrial stone age."

Dr. Richard Duncan: The Peak of World Oil Production and the Road to the Olduvai Gorge
Ultimately, the energy-intensive industrial age may be little more than a blip in the course of human history:

Peak Oil is also called "Hubbert's Peak," named for the Shell geologist Dr. Marion King Hubbert. In 1956, Hubbert accurately predicted that US domestic oil production would peak in 1970. He also predicted global production would peak in 1995, which it would have had the politically created oil shocks of the 1970s not delayed the peak for about 10-15 years.

"Big deal. If gas prices get high, I’ll just drive less. 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:

1. Pesticides are made from oil;

2. Commercial fertilizers are made from ammonia, which is made from natural gas, which will peak about 10 years after oil peaks;

3. With the exception of a few experimental prototypes, all farming implements such as tractors and trailers are constructed and powered using oil;

4. Food storage systems such as refrigerators are manufactured in oil-powered plants, distributed across
oil-powered transportation networks and usually run on electricity, which most often comes from natural gas or coal;

5. In the US, the average piece of food is transported almost 1,500 miles before it gets to your plate. In
Canada, the average piece of food is transported 5,000 miles from where it is produced to where it is consumed.

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.

In addition to transportation, food, water, and modern medicine, mass quantities of oil are required for all plastics, all computers and all high-tech devices.
Some specific examples may help illustrate the degree to which our technological base is dependent on fossil fuels:

1. The construction of an average car consumes the energy equivalent of approximately 20 barrels of oil , which equates to 840 gallons, of oil. Ultimately, the construction of a car will consume an amount of fossil
fuels equivalent to twice the car’s final weight.

2. The production of one gram of microchips consumes 630 grams of fossil fuels. According to the American Chemical Society, the construction of single 32 megabyte DRAM chip requires 3.5 pounds of fossil fuels in addition to 70.5 pounds of water.

3. The construction of the average desktop computer consumes ten times its weight in fossil fuels.

4. The Environmental Literacy Council tells us that due to the "purity and sophistication of materials (needed for) a microchip, . . . the energy used in producing nine or ten computers is enough to produce an automobile."

When considering the role of oil in the production of modern technology, remember that most alternative systems of energy — including solar panels/solar-nanotechnology, windmills, hydrogen fuel cells, biodiesel production facilities, nuclear power plants, etc. — rely on sophisticated technology.

In fact, all electrical devices make use of silver, copper, and/or platinum, each of which is discovered, extracted, transported, and fashioned using oil-powered machinery. For instance, in his book, The Lean Years: Politics of Scarcity, author Richard J. Barnet writes:

To produce a ton of copper requires 112 million BTU's or the equivalent of 17.8 barrels of oil. The energy cost component of aluminum is twenty times higher.

Nuclear energy requires uranium, which is also discovered, extracted, and transported using oil-powered machinery.

Most of the feedstock (soybeans, corn) for biofuels such as biodiesel and ethanol are grown using the high-tech, oil-powered industrial methods of agriculture described above.

In short, the so called "alternatives" to oil are actually "derivatives" of oil. Without an abundant and reliable supply of oil, we have no way of scaling these alternatives to the degree necessary to power the modern world.

"Is the Modern Banking System Entirely Dependent on Cheap Oil?"

Yes.

The global financial system is entirely dependent on a constantly increasing supply of oil and natural gas. The relationship between the supply of oil and natural gas and the workings of the global financial system is arguably the key issue to understanding and dealing with Peak Oil, far more important than alternative sources of energy, energy conservation, or the development of new technologies, all of which are discussed in detail on page two of this site.

Dr. Colin Campbell presents an understandable model of this complex (and often difficult to explain) relationship:

It is becoming evident that the financial and investment community begins to accept the reality of Peak Oil, which ends the first half of the age of 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. The investment community however faces a dilemma. It desires to protect its own fortunes and those of its privileged clients while at the same time is reluctant to take action that might itself trigger the meltdown. It is a closely knit community so that it is hard for one to move without the others becoming aware of his actions.

The scene is set for the Second Great Depression, but the conservatism and outdated mindset of institutional investors, together with the momentum of the massive flows of institutional money they are required to place, may help to diminish the sense of panic that a vision of reality might impose. On the other hand, the very momentum of the flow may cause a greater deluge when the foundations of the dam finally crumble. It is a situation without precedent.

Commentator Robert Wise explains the connection between energy and money as follows:

It's not physics, but it's true: money equals energy. Real, liquid wealth represents usable energy. It can be exchanged for fuel, for work, or for something built by the work of humans or fuel-powered machines. Real cost reflects the energy cost of doing something; real value reflects the energy expended to build something.

Nearly all the work done in the world economy -- all the manufacturing, construction, and transportation -- is done with energy derived from fuel. The actual work done by human muscle power is miniscule by comparison. And, the lion's share of that fuel comes from oil and natural gas, the primary sources of the world's wealth.

In October 2005, the normally conservative London Times acknowledged that the world's wealth may soon evaporate as we enter a technological and economic "Dark Age." In an article entitled "Waiting for the Lights to Go Out" Times reporter Bryan Appleyard wrote the following:

Oil is running out; the climate is changing at a potentially catastrophic rate; wars over scarce resources are brewing; finally, most shocking of all, we don't seem to be having enough ideas about how to fix any of these things.

Almost daily, new evidence is emerging that progress can no longer be taken for granted, that a new Dark Age is lying in wait for ourselves and our children.

. . . growth may be coming to an end. Since our entire financial order — interest rates, pension funds, insurance, stock markets — is predicated on growth, the social and economic consequences may be cataclysmic.

If you want to understand just how cataclysmic these consequences might be, consider the current crisis in the UK as a "preview of coming attractions." On October 23, 2005 the London Telegraph reported:

The Government has admitted that companies across Britain might be forced to close this winter because of fuel shortages. "The balance between supply and demand for energy is uncomfortably tight. I think if we have a colder -than-usual winter given the supply shortages, certain industries could suffer real difficulties." The admission was made after this newspaper revealed that Britain could be paralysed by energy shortages if the winter is colder than average.

The Met Office says there is a 67 per cent likelihood of prolonged cold this year after almost a decade of mild winters. That, coupled with high fuel prices, raises the fear that industry will not be able to cope.

The severe consequences of these relatively small shortfalls between supply and demand (less than 5%) have prompted the UK government to look into draconian energy conservation measures that would be enforced via house-to-house searches by a force of "energy-police."

Parts of the US are facing similarly dire possibilities. In December 2005, US News and World Report published a six-page article documenting some potentially nightmarish scenarios about to descend on the US. According to the normally conservative publication, people in the northeastern US could be facing massive layoffs, rotating blackouts, permanent industrial shutdowns, and catastrophic breakdowns in public services this winter as a result of shortages of heating oil and natural gas.

This is happening despite the fact we are probably at least a few years away from seeing the peak in either oil or natural gas production. You have to ask yourself, "what's going to happen when the 'real problems' start showing up?"

"Are the Banks Aware of This Situation?"

The central ones certainly are. (Those new bankruptcy laws were passed for a reason.) On June 28, 2005, Gary Duncan, the economics editor for the UK based Sunday Times, reported that the Bank of International Settlements (BIS), aka "the central banker's central bank", had issued the following warnings regarding the economic fallout of further rises in the price of oil:

Oil prices may well remain high for a prolonged period of time . . . Further rises — if they materialize — may have more severe consequences than currently anticipated . . .

Everyone needs to commit to some unpleasant compromises now, in order to avoid even more unpleasant
alternatives in the future . . .

Duncan goes on to summarize the bank's report as follows:

The US current account deficit meant that a further slide in the dollar was "almost inevitable", while the BIS sounded a warning that the deficit could yet lead to "a disorderly decline of the dollar, associated turmoil in other financial markets, and even recession."

A bank as crucially important to the world economy and as influential to the markets as the BIS doesn't just casually toss out terms like "unpleasant compromises", "severe consequences", "even more unpleasant alternatives", "turmoil," and "disorderly decline" in relation to the oil markets and the dollar (which is the reserve currency for all oil transactions in the world) unless something very nasty is brewing in the background.

On a similar note, Warren Buffet, the world's second richest man, recently warned of "mega-catastrophic risks" and "investment time bombs" currently threatening the global economy. Add those to a mix of sky-high energy prices, destabilizing resource wars, less than inspiring leadership, a possible currency collapse, more"petrodollar warfare", and well, the picture begins to look pretty grim, pretty quick.

"What Does All of This Mean for Me?"

What all of this means, in short, is that 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.

"Is the Bush Administration Aware of This Situation?"

Of course they are.

As mentioned previously, Dick Cheney made the following statement in late 1999:

By some estimates, there will be an average of two-percent annual growth in global oil demand over the years ahead, along with, conservatively, a three-percent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional 50 million barrels a day.

To put Cheney’s statement in perspective, remember that the oil producing nations of the world are currently pumping at full capacity but are struggling to produce much more than 84 million barrels per day. Cheney’s statement was a tacit admission of the severity and imminence of Peak Oil as the possibility of the world raising its production by such a huge amount is borderline ridiculous.

A report commissioned by Cheney and released in April 2001 was no less disturbing: The most significant difference between now and a decade ago is the extraordinarily rapid erosion of spare capacities at critical segments of energy chains. Today, shortfalls appear to be endemic. Among the most extraordinary of these
losses of spare capacity is in the oil arena.

Not surprisingly, George W. Bush has echoed Dick Cheney’s sentiments. In May 2001, Bush stated, "What people need to hear loud and clear is that we’re running out of energy in America."

One of George W. Bush's energy advisors, energy investment banker Matthew Simmons, has spoken at length about the impending crisis.

(Note: Although he has advised Bush/Cheney, Simmons considers himself strongly non-partisan on energy issues. His writings are highly regarded amongst the energy and banking community for their grounding in nonpartisan, heavily documented, and virtually infallible research & analysis.)

Simmons' investment bank, Simmons and Company International, is considered the most reputable and reliable energy investment bank in the world.

Given Simmons' background, what he has to say about the situation is truly terrifying. For instance, in an August 2003 interview with From the Wilderness publisher Michael Ruppert, Simmons was asked if it was time for Peak Oil to become part of the public policy debate. He responded:

It is past time. As I have said, the experts and politicians have no Plan B to fall back on. If energy peaks, particularly while 5 of the world’s 6.5 billion people have little or no use of modern energy, it will be a tremendous jolt to our economic well-being and to our health — greater than anyone could ever imagine.

When asked if there is a solution to the impending natural gas crisis, Simmons responded: I don’t think there is one. The solution is to pray. Under the best of circumstances, if all prayers are answered there will
be no crisis for maybe two years. After that it’s a certainty.

In May 2004, Simmons explained that in order for demand to be appropriately controlled, the price of oil would have to reach $182 per barrel. Simmons explained that with oil prices at $182 per barrel, gas prices would likely rise to $7.00 per gallon.

Simmons predictions are downright tame compared to what other analysts in the world of investment banking are preparing themselves for. For instance, in April 2005, French investment bank Ixis-CIB warned, "crude oil prices could touch $380 a barrel by 2015."

If you want to ponder just how devastating oil prices in the $200-$400/barrel range will be for the US economy, consider the fact that one of Osama Bin-Laden's primary goals has been to force oil prices into the $200 range.

Oil prices that far north of $100/barrel would almost certainly trigger massive, last-ditch global resource wars as the industrialized nations of the world scramble to grab what little of the black stuff is remaining. This may explain why the director of the Selective Service recently recommended the military draft be expanded to include both genders, ages 18-to-35.

A March 2005 report prepared for the US Department of Energy confirmed dire warnings of the investment banking community. Entitled "The Mitigation of the Peaking of World Oil Production," the report observed:

Without timely mitigation, world supply/demand balance will be achieved through massive demand destruction (shortages), accompanied by huge oil price increases, both of which would create a long period of significant economic hardship worldwide.

Waiting until world conventional oil production peaks before initiating crash program mitigation leaves the world with a significant liquid fuel deficit for two decades or longer.

The report went on to say:

The problems associated with world oil production peaking will not be temporary, and past 'energy crisis' experience will provide relatively little guidance. The challenge of oil peaking deserves immediate, serious attention, if risks are to be fully understood and mitigation begun on a timely basis.

. . . the world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary.

Previous energy transitions were gradual and evolutionary.

Oil peaking will be abrupt and revolutionary.

As one commentator recently observed, the reason our leaders are acting like desperados is because we have a desperate situation on our hands.

If you've been wondering why the Bush administration has been spending money, cutting social programs, and starting wars like there's no tomorrow, now you have your answer: as far as they are concerned, there is no tomorrow.

From a purely Machiavellian standpoint, they are probably correct in their thinking.

"How Do I Know This Isn't Just Fear- Mongering by Loony-Environmentalists?"

If you think what you are reading on this page is the product of a loony-left nut, consider what Representative Roscoe Bartlett (Republican, Maryland) has had to say in speeches to Congress or what billionaire investor Richard Rainwater has had to say in the pages of Fortune Magazine.

On March 14, 2005 Bartlett gave an extremely thorough presentation to Congress about the frightening ramifications of Peak Oil. During his presentation Representative Bartlett, who may be the most conservative member of Congress, quoted from this site extensively, citing the author (Matt Savinar) by name on numerous occasions, while employing several analogies and examples originally published on this site.

On April 19, 2005 Representative Bartlett was interviewed on national television. Again, he referenced the article you are now reading:

One of the writers on this, by the way, starts his article by saying, 'Dear Reader, Civilization as we know it will end soon.' Now your first impulse is to put down the article. This guy's a nut. But if you don't put it down and read through the article, you're hard-pressed to argue with his conclusions.

On May 12, 2005 Representative Bartlett gave another presentation about Peak Oil on the floor of the House of Representatives, stating that this website "galvanized" him. On July 19, 2005 he had the following to say:

Mr. Speaker, if you go to your computer this evening and do a Google search for peak oil, you will find there a large assortment of articles and comments. Like every issue, you will find a few people who are on the extreme, but there will be a lot of mainstream observations there.

One of the articles that you will find there was written by Matt Savinar. Matt Savinar is not a technical person. He is a lawyer, a good one, and he does what lawyers do. He goes to the sources and builds his case.

Matt Savinar could be correct when he said, "Dear Reader, civilization as we know it is coming to an end soon.'' I would encourage you, Mr. Speaker, to pull up his article and read it. It is really very sobering.

In subsequent speeches, Representative Bartlett read large excerpts of this site verbatim into the official US Congressional record.

According to the December 26, 2005 issue of Fortune Magazine, Richard Rainwater, a multi-billionaire investor and friend of George W. Bush, reads this site regularly. In an article entitled "Energy Prophet of Doom" Fortune reporter Oliver Ryan writes:

"Rainwater," the voice on the phone announces. "Now, type L-A-T-O-C into Yahoo, and scroll down to the seventh item."

Rainwater doesn't use e-mail. Rather, he uses rapid-fire phone calls to spread the gospel he discovers every morning on the web. One day it might be the decline of arable land in Malaysia. The next it could be the Olduvai theory of per capita energy consumption. "L-A-T-O-C" stands for LifeAfterTheOilCrash.net, a blog edited by Matt Savinar, 27, of Santa Rosa, Calif.

The article goes on to quote Rainwater as saying:

The world as we know it is unwinding with respect to Social Security, pensions, Medicare. We're going to have dramatically increased taxes in the U.S. I believe we're going into a world where there's going to be more hostility. More people are going to be asking, 'Why did God do this to us?'

Whatever God they worship. Alfred Sloan said it a long time ago at General Motors, that we're giving these things during good times. What happens in bad times? We're going to have to take them back, and then everybody will riot. And he's right.

Apparently, Richard Rainwater and Alfred Sloan aren't the only people expecting large scale civil unrest in the foreseeable future. In January 2006, the Department of Homeland Security gave Halliiburton subsidiary Kellog, Brown, & Root a $400 million dollar contract to build vast new domestic detention camps. While the camps are ostensibly being built to house and process an "emergency influx of immigrants", one can't help but suspect they will be used to house domestic citizens who respond to the economic fallout of declining oil production by taking to the streets.

"How is the Oil Industry Reacting to This?"

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 silly when one considers how much money and political influence the oil industry has compared to the environmental movement. You really think Ronald Reagan and George H. Bush were going to let a bunch of pesky environmentalists get in the way of oil refineries being built if the oil companies had wanted to build them?

The real reason no new refineries have been built for almost 30 years is simple: any oil company that wants to stay profitable isn't going to invest in 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 refinery expansion, 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 and Shell merge;

April 2005: Chevron-Texaco and Unocal merge;

June 2005: Royal Dutch and Shell merge;

July 2005: China begins trying to acquire Unocal

While many people believe talk of a global oil shortage is simply a conspiracy by "Big Oil" to drive up the prices and create "artificial scarcity," the rash of mergers listed above tells a different story. Mergers and acquisitions are the corporate world's version of cannibalism. When any industry begins to contract/collapse, the larger and more powerful companies will cannibalize/seize the assets of the smaller, weaker companies.

(Note: for recent examples of this phenomenon outside the oil industry, see the airline and automobile industries.)

If you suspect the oil companies are conspiring amongst themselves to create artificial scarcity and thereby artificially raise prices, ask yourself the following questions:

1. Are the actions of the oil companies the actions of friendly rivals who are conspiring amongst each other to drive up prices and keep the petroleum game going?

or

2. Are the actions of the oil companies the actions of rival corporate desperados who, fully aware that their
source of income is rapidly dwindling, are now preying upon each other in a game of "last man standing"?

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

As the Bulletin of Atomic Scientists recently observed, even ExxonMobil is now "sounding the silent Peak Oil alarm." In their 2005 report entitled, "The Outlook for Energy", ExxonMobil suggests that increased demand be met first through greater fuel efficiency. The fact that ExxonMobil - one of the largest oil companies in the world - is now recommending increased fuel efficiency should tell you how imminent a crisis is at this point.

Equally alarming is the fact that Chevron has now started a surprisingly candid campaign to publicly address these issues. While the campaign fails to mention "Peak Oil" or explain how a drastically reduced oil supply will affect the average person, it does acknowledge that, while it took 125 years to burn through the first trillion barrels of oil, it will only take 30 years to burn through the next trillion.

"How Do I Know Peak Oil Isn't Big Oil Propaganda That is Being Used To Create Artificial Scarcity & Justify Gouging Us at the Pump?"

If Peak Oil is "Big Oil propaganda" (as some claim), why did Sonoma State University's Project Censored declare it one of the most censored stories of 2003-2004? Surely, if "Peak Oil is Big Oil propaganda", Big Oil would have found a way to get it off the pages of under-funded publications like Project Censored and onto the pages of the mainstream papers and into the 24/7 cable news cycle years ago.

Likewise, if "Peak Oil is a myth propagated by the greedy oil companies to justify high prices", why didn't any of the greedy oil company CEOs offer "the peaking of world oil production" as a partial justification for high gas prices when they testified before Congress about high gas prices?

Yet "Peak Oil" was never mentioned during the hearings by either the executives or the Senators questioning them. Given the obvious importance of the issue, any reasonable person can't help but to ask, "Why the heck not?"

The answer is simple: the true consequences of Peak Oil cannot be acknowledged in such a highly public forum without crashing the financial markets or begging the obvious yet politically-dangerous and "patriotically-incorrect" question:

Is the war in Iraq really a war for the world's last remaining significant sized deposits of oil?"

Although the answer to this question should be obvious, broaching the issue in such a highly public forum would bring more skeletons out of Dick Cheney's energy task force closet than any sane member of the Senate, Republican or Democrat, would ever want to face. (Would you?)

Finally, if Peak Oil was just "Big Oil" propaganda, why is Exxon Mobil (one of the biggest oil companies in the world) spending millions of dollars on its anti-Peak Oil advertising campaign?

What About Chevron's "Will You Join Us Campaign"?

The Chevron campaign, while far more candid than previous industry propaganda (or the propaganda currently put out by Exxon Mobil) still does not come close to conveying the truth about our situation or how it will affect the average person. The campaign is likely an attempt at controlling the parameters of the Peak Oil debate and making sure the public does not panic. The campaign appears geared towards keeping investors' confidence high and public anxiety low by acknowledging the (now obvious) problem but reassuring all interested parties that things are under control. Naturally, Chevron would much rather you learn about Peak Oil from their team of public relations experts (aka "spin miesters") than from this site or others like it.

That's probably why Chevron hired the Madison Avenue public relations firm Young and Rubicom, the same firm that handled the Bush/Cheney 2004 election advertisements, to produce the campaign.

Ironically, it's better for the oil companies that you think you are being gouged than to know the truth. If people knew the truth, they would likely begin drastically curtailing their consumption of oil, which would drive the price down. Consumers are unlikely to take such actions so long as they perceive the current price spikes as just "more of the same old-same old" and are confident about the future. The goal of Chevron's campaign is to maintain this confidence as long as possible.

"Can't We Just Explore More for Oil?"

Global oil discovery peaked in 1962 and has declined to virtually nothing in the past few years. We now consume 6 barrels of oil for every barrel we find.

According to an October 2004 New York Times article entitled "Top Oil Groups Fail to Recoup Exploration Costs:"

. . . the top-10 oil groups spent about $8bn combined on exploration last year, but this only led to commercial discoveries with a net present value of slightly less than $4bn. The previous two years show similar, though less dramatic, shortfalls.

In other words, significant new oil discoveries are so scarce that looking for them is a monetary loser. Consequently, many major oil companies now find themselves unable to replace their rapidly depleting reserves.

Take a look at the above chart. During the 1960s, for instance, we consumed about 6 billion barrels per year while finding about 30-60 billion per year. Given those numbers, it is easy to understand why fears of "running out" were so often dismissed as unfounded.

Unfortunately, those consumption/discovery ratios have nearly reversed themselves in recent years. We now consume close to 30 billion barrels per year but find less than 4 billion per year.

In light of these trends, it should come as little surprise that the energy analysts at John C Herold Inc. - the firm that that foretold Enron's demise - recently confirmed industry rumors that we are on the verge of an unprecedented crisis.

"How Can I Be Sure This Isn't Just More 1970s Doom-and-Gloom?"

The oil shocks of the 1970s were created by political events. In 1973, OPEC cut its production in retaliation for US support of Israel. In 1979, Iran cut its production in hopes of crippling "the great Satan." In both cases, the US was able to turn to other oil producing nations such as Venezuela to alleviate the crisis. Once global production peaks, there won't be anybody to turn to. The crisis will just get worse and worse with each passing year.

The evidence of an imminent peak in global oil production is now overwhelming:

1.Ninety-nine percent of the world's oil comes from 44 oil producing nations. At least 24 of these nations are past their peak and now in terminal decline.

2.The entire world - with the exception of the Middle East peaked in 1997. The US peaked in 1970, Russia in 1987, the UK in 1999. Even Saudi Arabia - the famed "producer for all seasons" may be on the verge of
seeing it production collapse.

3.Global production of conventional oil has essentially plateaued since the year 2000.

As far as "doom-and-gloom" consider what widely respected Deutsche Bank had to say about Peak Oil in a recent report entitled, Energy Prospects After the Petroleum Age:

The end-of-the-fossil-hydrocarbons scenario is not therefore a doom-and-gloom picture painted by pessimistic end-of-the world prophets, but a view of scarcity in the coming years and decades that must be taken seriously.

The Australian Financial Review echoed the sentiments of Deutsche Bank in a January 2005 article entitled, "Staring Down the Barrel of a Crisis":

The world's oil production may be about to reach its peak, forever. Such apocalyptic prophecies often surface in the middle of the northern hemisphere winter. What is unusual is that this time the doomsday scenario has gained serious credibility among respected analysts and commentators.

Given the credentials of those sounding the alarm the loudest, it is extremely unwise for you to causally dismiss this as just more "1970s doom-and gloom."

"What About the Oil Sands in Canada and the Oil Shale in the American West?"

The good news is that we have a massive amount of untapped "non conventional" oil located in the oil sands up in Canada.

The bad news is that, unlike conventional sources of oil, oil derived from these oil sands is extremely financially and energetically intensive to extract. Whereas conventional oil has enjoyed a rate of "energy return on energy invested" (EROEI) of about 30 to 1, the oil sands rate of return hovers around 1.5 to 1.

This means that we would have to expend 20 times as much energy to generate the same amount of oil from the oil sands as we do from conventional sources of oil.

Where to find such a huge amount of capital is largely a moot point because, even with massive improvements in extraction technology, the oil sands in Canada are projected to only produce a paltry 2.2 million barrels per day by 2015. This doesn't even account for any unexpected production decreases or cost overruns, both of which have been endemic to many of the oil sands projects.

More optimistic reports anticipate 4 million barrels per day of oil coming from the oil sands by 2020. Even if the optimists are correct, 4 million barrels per day much oil when you consider our colossal and ever-growing demand in conjunction with the small amount of time we have left before the global peak:

1.We currently need 83.5 million barrels per day.

2.We are projected to need 120 million barrels per day by 2020.

3.We will be losing over 1 million barrels per day of production per year, every year, once we hit the
backside of the global oil production curve.

4.The general consensus among now disinterested scientists is that oil production will peak by 2010 at
the latest.

The huge reserves of oil shale in the American west suffer from similar problems. While Shell Oil has an experimental oil shale program, even Steve Mut - the CEO of their Unconventional Resources Unit - has sounded less than optimistic when questioned about the ability of oil shale to soften the coming crash. According to journalist Stuart Staniford's coverage of a recent conference on Peak Oil:

In response to questions, Steve guesstimated that oil shale production would still be pretty negligible by 2015, but might, if things go really well, get to 5mbpd by 2030.

Disinterested observers are even less optimistic about oil shale. Geologist Dr. Walter Youngquist points out:

The average citizen . . . is led to believe that the United States really has no oil supply problem when oil shales hold "recoverable oil" equal to "more than 64 percent of the world's total proven crude oil reserves." Presumably the United States could tap into this great oil reserve at any time. This is not true at all. All attempts to get this "oil" out of shale have failed economically. Furthermore, the "oil" (and, it is not oil as is crude oil, but this is not stated) may be recoverable but the net energy recovered may not equal the energy used to recover it. If oil is "recovered" but at a net energy loss, the operation is a failure.

This means any attempt to replace conventional oil with oil shale will actually make our situation worse as the project will consume more energy than it will produce, regardless of how high the price goes.

Further problems with oil shale have been documented by economist Professor James Hamilton who writes:

A recent Rand study concluded it will be at least 12 years before oil shale reaches the production growth phase. And that is a technological assessment, not a reference to the environmental review process. If it takes 15 years to get an oil refinery built and approved, despite well known technology and well understood environmental issues, viewing oil shale as something that could make major contributions to world energy supplies in the immediate future seems highly unrealistic.

If you remove the machine's internal inefficiencies, the extra energy is simply reinvested into the petroleum supply side of the machine. The machine then consumes petroleum and spits out garbage at an even faster rate.

The only way to get the machine to consume less petroleum is for whoever owns/operates the machine to press the button that says "slow-down." However, since we are all dependent on the machine for jobs, food, affordable health care, subsidies for alternative forms of energy, etc., nobody is going to lobby the owners/operators of the machine to press the "slow-down" button until it's too late.

Eventually (sooner than later) the petroleum plug will get pulled and the machine's production will sputter before grinding to a halt. At that point, those of us dependent on the machine (which means all of us) will have to fight for whatever scraps it manages to spit out.

To be clear: conservation will benefit you as an individual. If, for instance, you save $100/month on your energy bills, you can roll that money into acquiring skills or resources that will benefit you as we slide down the petroleum-production downslope. But since your $100 savings will result in a net increase in the energy consumed by society as a whole, it will actually cause us to slide down the downslope faster. (Note: for examples of Jevon's Paradox in action in other areas, click here.)

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

The US economy is particularly vulnerable to the coming oil shocks as we consume a greater proportion of the world's oil than any other nation. The unparalleled prosperity experienced in this country during the last 100 years was built entirely on cheap oil. Until the late 19th century, the US economy was primarily agrian in nature. Oil was discovered in 1859 but did not become a truly important industrial fuel until Henry Ford began mass producing automobiles in the early 1900s. The mass production of automobiles became a cornerstone of the US economy while allowing people to move out of the cities and into the suburbs.

The expansion of the suburbs fueled the real estate and housing booms of the 20th century, which in turn fueled the US steel, copper, construction, etc. industries. A system of finance sprung up that facilitated these booms while becoming dependent on them.

The affordability of the individual automobile and petroleum based fuels combined with the growth of the suburbs contributed to the destruction of the US mass transit system.

The trends that were set in motion in the early part of the 20th century are still driving the US economy here in the 21st. The degree to which the US economy is still reliant on cheap-oil dependent industries such as automobile manufacturing and housing construction is evidenced by the following facts:

1. According to the American Automobile Manufacturers Association, one out of every seven jobs in the US is dependent on automobile manufacturing.

2. According to an August 2005 report by Merrill Lynch, half of the new jobs created in the US since 2001 are dependent on housing construction.

Most of the automobile and home purchases in this country are made with interest-bearing loans which, absent a hyperinflationary monetary policy, can only be paid back en masse if the economy grows. The US economy, at least in its current incarnation, can only grow if people can afford to drive more. As researcher Stuart Staniford has shown, a strong causal (if not virtually direct) relationship exists between miles driven and economic growth:

In short, the US has built it's entire infrastructure and way of life under the assumption oil would always be cheap and plentiful.

How Are People Likely to React to This?

As the US economy begins to disintegrate, civil unrest may become increasingly violent and widespread. Each faction of the American body-politic will likely rally around reactionary political demagogues/movements who promise to bring back the good days by eliminating whatever domestic or foreign group(s) they have decided are at fault for the economic and geopolitical unraveling. Liberals will blame "Bush, Big-Oil and the Hard Right Neocons" while conservatives will blame "Bin-Laden, Big-Government, and the Extreme Left Environmentalists." The anticipation of massive unrest may be the real reason why the Department of Homeland Security has contracted with a Halliburton subsidiary to build massive new domestic detenetion camps. In 1985, the authors of Beyond Oil: The Threat to Fuel and Food in the Coming Decades, warned us of such possiblities:

A stagnant or shrinking economy will have a major effect on society’s expectations. With few exceptions, each generation in the United States has become materially better off than the preceding one. This pattern of increasing wealth has become an indelible part of the American Dream; a higher standard of living than our parents is practically a birthright. These expectations are the standard against which actual performance is judged. During times of failed expectations, a society is especially vulnerable to a person or philosophy promising to restore it to its former glory. The fall of the Weimar Germany is probably the best example.

As commentator Robert Freeman pointed out in 2004, the end of oil may result in the end of America as we know it.

"Are Governments Planning For This?"

Absolutely.

The US government has been aware of Peak Oil since at least 1977 when the CIA prepared a report on it. As Professor Richard Heinberg has commented:

The 1977 CIA document shows clear and detailed awareness of oil issues, including depletion, extraction technologies, pipelines, areas of likely new discovery, the quality of existing reserves, and the dynamics of the global oil market. The CIA has obviously been studying oil very carefully for some time and must therefore understand the issue of global oil peak.

In 1982, the State Department released its own report which stated:

. . . world petroleum production will peak in the 1990-2010 interval at 80-105 million barrels per day, with ultimate resources estimated at 2,100 billion barrels.

In short, the US government has been aware of and 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.

Recent statements by Henry Kissinger echo those of Woolsey. In a June 2005 Financial Times article entitled, "Kissinger Warns of Energy Conflict," Kissinger was quoted as saying:

The amount of energy is finite, up to now in relation to demand, and competition for access to energy can become the life and death for many societies.

Kissinger distinguished these energy conflicts from previous conflicts such as the Cold War:

When nuclear weapons spread to 30 or 40 countries and each conducts a calculation, with less experience and different value systems, we will have a world of permanent imminent catastrophe.

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.

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.

"Is There Any Reason to Remain 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?"

What you can or will do to prepare for this situation will depend on your age, health, marital status, geographic location, financial situation and other factors too numerous to mention. The best advice I can offer that applies to the widest number of people is to do the following to the best of your ability:

1. Relocate to an area as least vulnerable to these issues as possible.

2. Reallocate your financial assets so that you are as best positioned to handle these issues as you can realistically hope to be.

3. Relocalize your lifestyle as much as possible so that you are as least dependent on far-flung, petroleum-powered transportation and distribution networks as possible.

4. Strengthen your body so that you are as least dependent on our petroleum-dependent system of health care as possible.

5. Solidify any skills and/or social networks you have that might prove valuable in light of these changes.

6. If you're in shock and what to interact with others about these issues, check out the “Running on Empty 3” YahooGroup.

Understand that being in shock is pretty much "par-for-the course" when it comes to learning about these issues. Trust me when I say it subsides after a while.

7. If you want to discuss personal preparation with others, check out the “Running on Empty 2” YahooGroup and the Planning for the Future Forum on PeakOil.com

8. If you feel the need to tell friends or family, be forewarned that most people don't take too kindly to this
information.

Originally published: January 2004; Last revised: December 2005

Answer 2

Well this is the way I look at it. If they kill you they can't eat you. And if they do who gives a damn.

If you let all this Crap bother you to the point that you can't function, you are already in hell. You are just going to have to pay a little more for gasoline. Or stay home, get a bicycle or a horse. I am not defending oil companies, but the price we are now paying for gasoline Is pretty much in line with every thing else. In l973 gasoline was about 23 cents a gallon so it is now depending on where you live about 10 to 12 times that. So is everything else.

Of course ther is another option. Become debt free. Period. Not with the exception of the mortgage and the car payment, I mean no payments period. It takes sacrifice and hard work but it can be done. This is what you have control over. The rest of the events, what the govt. does, weather, etc. truly you don't have a prayer.

Answer 3

I'm a mineral engineer. Peak oil will happen and we are probably very near, but that will not be doomsday. I won't lie to you and say there are no problems but the work on ethanol from biomass is very important and may well solve the problem for the USA.

Even if that does not work we have abundant coal which we can liquefy and that will get us a few more years into the future so the scientists can continue working on the problem. Some scientists are working to crack the problem of photosynthesis - making complex carbon compounds from sunlight and air. They are not so close yet but it seems very doable eventually. That would really solve the world's enrgy problems.

There will still be a lot of trouble in the world, probably real bad troubles for some, food supplies may not be sufficient to support all the people, but if you live in the USA you will be in about the best place you can be while the world readjusts to the lack of cheap oil.

Lifestyles will change if we do not come up with another cheap source of energy, but that certainly does not mean the end of the world. The population of the world will adjust downwards in all liklihood, there have always been wars and wars may well come again, but the US is a spacious place blessed with a good climate and abundant water.

There may be troubles ahead, but life will go on and it will be good again, we will just have to be less wasteful to enjoy it. The cost of energy will make us adjust and be less wasteful.

Answer 4

Briefly, it depends how stupid people get about it.

Oil at $10/gallon ($420/barrel) would be too expensive for almost every purpose, economies would collapse, and the oil producers would have nobody to sell to.  That situation would obviously be temporary even if the oil producers were dumb enough to make it happen.  Military or terrorist actions or natural disasters which remove enough oil-production capacity could also make that happen, though.  Right now we're paying a premium of several dollars a barrel because of "social unrest" (kidnapping of oil workers) in Nigeria.

There are plenty of ways to make up for the energy we get from oil, but that's an engineering problem.  People don't want to admit they have to do anything, which is a socio-political problem.  Engineering can't fix that; people have to admit that something has to be done before they'll buy (or even allow other people to build) the solutions, so the folks who insist that they should be able to drive their Durangoes and Expeditions and Hummers down the road at 80 MPH are "THE problem" in a very real sense.

If we got busy on this problem 30 years ago when Carter was president and kept with it, we'd have no problem today.  Even 10 years ago would have been good, but Bush cancelled the PNGV (bet you never heard of it before) in 2001.  If we do have an end to civilization because of oil depletion, it will be because we were stupid and tried to fight our way out of it instead of designing and building our way out of it.

Moral of the story:  don't vote for demagogues.

Answer 5

It is possible, but the theory is based on several assumptions.

First that oil is finite. Oil is a byproduct of decomposed life-matter. (Along with methane, and several other things). With an increasing human population comes an increasing supply of life-matter that can repluntish the supply. Instead of soilent green for food we may end up with soilent black for fuel.

Secondly is the assumption that we know of all (or most of) the supply of oil and thus know how much will be available and when that supply will run out.

Third is the assumption of just how much oil can be processed. While that processing MAY be pretty well maxed out now they havn't really taken into acct possible new processing plants.

Additionally there is all the new sources of power and improving of current power producing systems. This will mess with the numbers too.

I have seen the numbers and figures that you are talking about and you need to realize that there are a number of variables that can drastically change that outcome.

Don't freak out just yet. There is still time for humanity and we have a number of other options to replace oil. It is simply a matter of time and technology.

Answer 6

Run out of Oil?

Let the Green House gasses rise too high and cause Global warming?

You are right... doomsday is approaching...

Solar energy is certainly an important supplement to energy.

In general, the Ethanol production might help, as it does in Brazil. But for the USA, it won't help the high price that much. The cost of labor would still be too high to make production feasible until we see $5 per gallon prices.

Let's say that it is a supply and demand run economy... then Solar Energy will simply have to become cheaper very soon.

Answer 7

Hell yes--Overshoot and Dieoff occurs all the time in Nature--all the time! Google it: from mosquitos to red algae blooms to the reindeer of St. Matthews Island--it is a scientific fact. It is now coming up to be the humans' turn. Please read Dieoff.com, TheOilDrum.com and other websites. The human headcount will have to drastically drop by BILLIONS in the next thirty years. Leading writers and scientists have been warning about this for years, but most people will not Powerdown or stop having children. We are genetically designed to continue our march into oblivion as Thermodynamics [Entropy] constantly reduces the resources we need to survive.

Answer 8

I like Billybetters2 answer the most so far, but sticking to the point I think "NO", I think there's no reason to worry about, By the time it runs out assuming it's going to happen, we will have already develop more independent and sustainable ways of producing energy not to mention that one of them is already fully available -the solar cell energy- except that it's price is based on the cost of producing the same amount of energy from hydrocarbons, when this paradigm crumbles you will see more solar cells really cheap and affordable.

Answer 9

We're not necessarily doomed. If we're economical and smart we may be able to eke out the oil with compromise measures like hybrid cars until we come up with something sustainable like a hydrogen economy, nuclear fusion, solar, geothermal, wind, wave and tidal power, a really efficient, cheap, light and environmentally friendly storage battery and biofuels.