Peak Oil is Here

[4dsc]

http://www.wealthdaily.net/article.php?id=374&pub=wd

Nothing to worry about.. Go about your business...

The world’s most respected journal of economics has now officially acknowledged the advent of peak oil, validating (finally!) what we’ve been saying for years.

In a July 19 article, the venerable Economist cut straight to the point:

“The world is consuming more oil than it is producing.”--The Economist, July 14-20 print edition.

Now there would appear to be a certain degree of confusion over exactly what is meant by “Peak Oil.”

According to Wikipedia.com:

“In the context of models of the depletion of resources, notably Hubbert peak theory, peak oil is the date when the peak of the world’s petroleum (crude oil) production rate is reached. After this date the rate of production will by definition enter terminal decline. According to the Hubbert model, production will follow a roughly symmetrical bell-shaped curve.”

Some observers such as Kenneth S. Deffeyes, Matthew Simmons, and James Howard Kunstler believe that because of the high dependence of most modern industrial transport, agricultural and industrial systems on inexpensive oil, the post-peak production decline and possible resulting severe price increases will have negative implications for the global economy.



Talk about understatement!

Predictions as to what exactly these negative effects will be vary greatly.

More optimistic outlooks, delaying the peak of production to the 2020s or 2030s and assuming that major investments in alternatives occur before the crisis, show the price at first escalating and then retreating as other types of fuel sources are used as transport fuels and fuel substitution in general occurs.

[Javaman]

1. The question now is:

How fast to we descend down the slope?

slow...

quick...

or

freight train to hell.

Given all we know and how (at least) the U.S. likes to live large and how China and India are on the living large rocket, I'm betting on the freight train to hell.

When if ever in the course of civilization has anyone ever prepared for anything other than war?

[phantom power]

2. The recent data suggest somewhere between "quick" and "freight train to hell"

[amandabeech]

3. Maybe that should be "highway to hell."

I'm of the "a lot faster than we can cope with unless we get on the stick NOW" school.

[4dsc]

5. A better question perhaps

would be when will the American public find out about it??

[phantom power]

6. At this point, I have to conclude "when we're ready to listen."

Considering that Mexico and OPEC are now doing just about everything but drawing us all a diagram on Fox News. I mean, Mexico fucking announced an ETA for the end of their exports last week.

[happyslug]

8. Roughly the same as the increase...

It has taken us over 140 years to get to this point, it will probably take us 150 years to get to Zero. Basically if peak occurred in 2005 (As some people believe), then WORLD WIDE OIL USAGE WILL DROP to 1970 LEVELS BY 2040. Please note this is PRODUCTION levels I am talking about. Who gets the remaining oil will be determined by who has the cash to pay for it. For example, in 1970 the US used a greater percentage of world wide oil then it does now, will these new users (China, India etc) drop they use of oil so that the US can use the same percentage as in 1970? I do NOT think so (And increase European use has to be added to the mix).

My point is the MOST radical change in the price of oil will occur whenever oil production DROPS below the plateau it has been on since about 2000. You will have INCREASED DEMAND and DECREASED SUPPLY. Something will have to give, and that will be determined by price. THe real issue is who gives up their use of oil first? It has to be a sizable population that are PRESENTLY USING OIL but at a marginal level. Most people will think this means the third world, but I doubt it. For example third worlders use very little Oil themselves. Thus they can not give up its use, for they use none. On the other hand the NATIONS that make up the third world use oil, but for industry and export as while as getting supplies to their people. While this is for poor people who can NOT afford oil, it is cheaper then any other means of these poor people getting items they need. Thus the Truck Drivers in the Third world will pay the high price of oil to get supplies to their customers. The poor of the Third World will gladly pay $5-10 a Gallon for fuel so they can get their supplies. They will continue to pay the price until it raises so high that other means of transport become competitive (Horses, Camels, humans etc). Thus I do NOT see oil demand dropping in the third world first.

The Second world (The former Soviet Union and its Satellites) use a lot more cars, but have access to older technology (Trains etc). Cars are a luxury. that, while more common than in the days of the Soviet union, are no where near the number in the US or Western Europe. The same with Europe, while Car use is high you can survive, and be middle class, in both areas without a car. I see car usage drop but not enough to affect price. The high tax on Gasoline most Country's adopt was to discourage automobile use AND to provide money to subsides other means of transport.

On the other hand, the US has since the 1950s abandoned almost all forms of Public Transportation. The US assumes not only its rich and Middle Class have cars, but so does it working poor. In the US, unlike the rest of the world, our lowest class of people MUST HAVE ACCESS DIRECTLY TO OIL JUST TO KEEP THEIR JOBS.

Unlike Europe where people can NOT have a car, or if they have a car it is a luxury, in the US you have to have a car just to keep a job (There are exceptions to this Rule New York City is the biggest example, but these exceptions are just that, exceptions to the General Rule). Most Americans have to have a car to see a Doctor because we are so car oriented.

Thus the first large group of people who will be priced out of their use of oil will be the Working poor of the US. It is quite large, uses a lot of oil, and poorly paid. I did a calculation a few years ago and basically it came out that once the price of oil per gallon nears you income per hour, you can no longer afford to buy gasoline to go to work. Roughly the calculation goes with way:

1. At $5 a gallon (minimum wag e is now $7.15 per gallon but I did this calculation at $5 a gallon) a person earns $10,000 a year (Given a 40 hour work week, 52 weeks in a year, that is 2080 hours per year, for ease of calculation I use 2000 hours per year times 5 which comes to $10,000 per year).

2. If the person is in public housing 30% of his or her income MUST go to pay his or her rent. Thus $3000 per year goes to rent (and private rental units are higher).

3. If one eats 3 meals a day for 365 days that comes to 1095 meals per year, for ease of calculation lets assume 1100 meals. The federal Government says you can eat at $2 per meal so you are looking at $2200 in meals per year.

4. Insurance for a car plus maintenance on the car is another $1000 a year.

5. Taxes, Social Security (7%), local wage taxes (in may areas 2%) and State Income taxes (2% in my area even for poor people), comes to 11% or $1100 in taxes out worker has to pay.

All told, Rent of $3000, food of $2200, Taxes of $1100 and $1000 in car insurance and Maintenance comes to $7300 out of the $10,000, leaving just $2700 for gasoline.

A typical car gets 20mpg, a typical drivers drives about 15,000 miles per year. Thus a typical car uses 750 Gallons per year. At $3 a gallon that is $2250 per year. At $4 a gallon that is $3000 a year, or $300 more than our minimum wage earner earns per year.

Now most people earn more than $7.15 per year, which provides additional funds for fuel. Many minimal wage workers rides public transportation or even walk to work. but most have to drive for the jobs are in the Suburbs and the poor live in the Inner Cities (Job Growth since the 1950s has been increasing in suburbs NOT the inner cities, one of the reason the working poor need a car to get to work). While the increase in the Minimal wage helps the working poor, I have heard of suburban stores having problems hiring people do to the high price of gasoline (and the tendency for most retail stores only to hire people part time, so the worker has to drive more to earn less). If the price gets to $5 a gallon I foresee problems, at $7 an hour people may have to quit working (i.e. can no longer pay the rent, pay taxes, pay insurance, maintain the car and feed themselves AND pay for gasoline).

Thus my point the big increase in gasoline will STOP once it exceeds the US minimum wage, do more to a drop in demand as the poor can no longer afford gasoline. This pattern will continue over the next 150 years as people's income starts to equal the price of fuel and more and more people stop buying oil (Through each drop in demand will be smaller and smaller). Thus while before we run out of oil, the price will stabilized but at a much higher price then we can even image today, but the first big increase in oil will be stopped as people US minimum age workers stop buying oil.

Over time this drop in demand may even permit the price of oil to DROP, but only if the drop does NOT increase the demand for the oil. Other groups I foresee dropping oil during the period of the Increase in the price of oil will be taxi-drivers (already marginal), pizza delivery and other automotive jobs that can be replaced by someone walking or riding a bicycle.

At the same time as the above is occurring you will see what I like to call the "Moped Generation". The Moped Generation will be those people who opt for mopeds of other high mileage vehicles to get from home to work. A moped (under 100 cc in size) can get over 100mpg, that is FIVE TIME what the average car gets today (and better than even the Prius). I expect the Moped to be "improved" by installing an automatic engine cut off when the engine is NOT needed (going downhill or waiting for the light to change). Like the VW Lupo, the Improved Moped will turn on again when the operator hits the gas (The VW Lupo, not sold in the US, was the first, and I believe only car, capable of going 100 kilometers on a liter of Gasoline, something the Prius can NOT even come close, the Lupo did this by carefully reducing the fuel the car use by stopping the engines when no needed ANd reducing the engine for reduced performance to increase fuel economy). I foresee Mopeds adopting Lupo type technology so to improve fuel mileage even greater then what Mopeds gets now.

The Moped generation will be the last gasp of the Suburbs. People living in the Suburbs will embrace the Moped as the way to get to work and keep their suburban homes. I foresee this lasting 20-40 years and then dieing out as the price of gasoline gets to high even for moped use (occasional use after 40 years for people who need to get someplace, but at much higher price then even cars today). The Moped Generation will last a while, but even it will fail and people will fall back to a much more concentrated Urban environment and a more spread out but higher rural population (You will need more workers on the farms as the Farms abandoned Tractors for horses).

My point is that things will change, you will have a rough decade or so, then the moped generation for 40 some years and then the slow return to our Agricultural roots, through it will be a POST-OIL age not a return to the pre-oil age. We will still have the Interstate system, overbuilt but usable for horse travel (if not limited train travel), we will still have electricity, solar, hydro and Nuclear, but none near what we use now. We will till have computers do to the ease it will be to transmit information over the airways as opposed to hauling books everywhere. People need to communicate so satellites will still be launched (with the collection of fuel from biological sources being a prime source for the fuel for the Rockets). It will as different from today as we are from the 1700s, it will be a long rough ride to get there, but it is where we are heading and we should all start working toward that end today.

[hunter]

9. I thought this was an interesting analysis.

I'm not so sure economic collapse can happen in a gradual fashion, it'll probably be more akin to a bridge failure than something gradual. I don't see a "moped generation" happening if there are no jobs to moped to. A house in the suburbs may simply end up with little or no value -- sorta like the fine houses in 1980's urban disaster areas. My wife and I once bought a house for less than the price of a car in such an area, and there were neighborhoods nearby where houses were selling for a dollar if you were brave enough to get along with drug users and gangs. These situations were the direct result of entire industries moving elsewhere.

But maybe if people can figure out how to get enough to eat, the transportation stranded suburbs won't die entirely.

My own most optimistic scenario is a rapid investment in public transportation, especially electric transportation, and the establishment of dense urban centers within existing suburbs.

It won't be pretty at first, especially for abandoned suburban housing, which will mostly be scavenged of copper plumbing, wiring, and other sorts of metal. Even the wood may go if people are cold and keeping themselves warm with fires.

But hopefully, there will be some sort of orderly process about it that doesn't leave people homeless and disenfranchised. If we can first establish a political system that is just then the problems of decreasing oil production will sort themselves out.

[happyslug]

10. My background may be why I think it will take time.

When I was growing up in the 1960s and 1970s My father would take me hunting with him and his friends in rural areas of Pennsylvania. I remember seeing a lot of homes, long abandoned homes along the road. Looking at them you can see they were on their last legs, no one had lived in them for over 30 years, but they were still standing (and I am NOT taking about mansions or well built buildings, I mean the houses built along the Road for people to live in, two stories so a home better than what the poor would live in, but also not for the rich). Most are gone now (it is 30-40 years later) but people do NOT change quickly and resist change if they view the change as bad.

Remember we will be pumping oil for about another 150 years. Less each year, but we will still be pumping and using oil. I do NOT see anyone complete stop using oil until they can no longer afford it. You will have some people, but all that will do is lessen the demand and thus the price.

The Reason I go for the Moped Generation is that people will want to keep their suburban dreams alive. Oil will be high, but still affordable for 60-80 years (Going back to 1940 to 1920 levels of usage). During that period the people will slowly accept that radical changes are needed do to the constant increase in oil prices and people will move closer to their jobs. Stores will move closer to their Customers (We will slowly return to a mid-1800 system of communities). People will look to live where they can bike or walk to their work and to walk and bike to get the things they need. Poorer people will be forced out to the old Suburbs.

Now while I predict a "Moped Generation" they will be a dramatic incease in the price of Oil BEFORE the moped Generation. That increase will cause all types of scares, but once enough people stop using oil, the price of oil will drop like a rock (and then re-start it increase). The drop Will be significant but not as large as the previous increase in price. People, once burned, will avoid falling into the ame spending system, but will want to retain their home. Thus the Moped Generation is NOT something that will occur because anyone wants it, it will occur because I see no other solution to the need for housing, the fact oil will still be available (Though at much lower levels) and that most people will minimize their loss by retaining they jobs AND their home.

Thus the Moped Generation is a product of what will be available over the next 30-40 years. After the Moped Generation people will move even closer to their work, but people will continue to live and to do so they will work. The work will be more manual in nature as the price of oil goes up, but the trip to and from home will also be more manual over time.

[appal_jack]

11. moped generation - interesting concept

I think that my own version of the moped future was on my mind when I recently traded for a 4-wheeler. Now, I'm sure that my new machine (Arctic Cat 700cc EFI) will not meet the efficiency criteria of many at DU, but after considerable thought, I decided it was what I needed. I realize that once oil hits $10 or $15 per gallon, I may only go to town once per week (I live 14 miles outside of town, but it's steep, winding miles), but I can live with that...

My criteria were:
-able to carry at least three or four people (if one disregards all the warnings & safety jargon in the manual, which will probably be considered less urgent once Peak Oil really hits), and/or pull a small (4x6) trailer loaded with farm produce (I sell vegetables and other farm goods at my local farmers market).
-4wd (I live in a snowy area, and besides, those roads probably won't stay pretty post-Peak.)
-able to travel >40 mph (I'd rather not take an hour to get to town)
-engine braking (hills again)


I would have loved to have been able to get the diesel version of this Arctic Cat, but the extra $2500 it would have cost above the gas was rather prohibitive. That Lombardini diesel is also mighty loud when in a 4-wheeler. But for any bio-dieselers out there with the scratch to spend, the Arctic Cat 700 Diesel might be worth a look.

Now all I need is a set of extra rims with road tires on them, and the DOT to loosen-up about quads on roads, and traveling to town on a liter or two of fuel (haven't tried to estimate mpg on the new machine yet...) should be no problem.

-app

EDIT: After posting this and realizing that I was making assumptions about mileage, I visited a couple of ATV websites. It looks like 4-wheelers only get around 20 mpg!!! :blush: One could probably do better by riding conservatively in 2wd, but it's still not going to come anywhere near moped-mileage. This might be yet another reason to look at the diesel, as I'm sure it has to get at least near 30 mpg. Oh well, trips to town might be even more infrequent post-Peak. Meanwhile, I'll party-on on my screamin' machine (gotta live a little).

[Dogmudgeon]

12. The collapse will NOT happen due to pressure on people, but from die-off

Individuals require much less energy than their jobs do. The collapse, if and when it happens, will be from overshoot in the industrial/financial/agricultural sector, not the residential one.

Actually, I think third-world agriculture will collapse first, initiating a die-off. The earliest part of this die-off will cause massive industrial disruption from the abrupt loss of the third-world labor pool and tank the world economy. There will be plenty of energy resources to support people, but industry and the military will have dibs on it, and you know how that works.

Only when several billion people have died will this super-depression lift.

In spite of all our self-righteous complaining about consumerism and "cheap plastic crap," it is not a big part of the problems we face. Sustaining the economy itself is what causes the biggest draw, and it will be the first part to fail. And the weakest link in the chain is currently in Asia.

Of course, there could be any number of initiating events. But we have been walking a tightrope for several years, and the prospect of disaster is only increasing.

The usual Internet wiseass response is "buckle your seat belts, it's going to be a rough ride!" But I dread the era we are entering. We can't even fix our bridges in this country, let alone build a few hundred nuclear reactors or a million nouveau windmills. How will we be able to cope with an economic Armageddon?

Well, we won't have to. Others will do it for us. The debt will be paid in the blood of the world's poor. And after they are dead, we will weep our crocodile tears by the bucketful.

We will probably say, "It's all from the political corruption in the third world. They were victimized by their own, not us. Now, excuse me, I have to run along and pick up my new green hybrid Lexus."

The kids will get the mopeds.

--p!

[GliderGuider]

13. What about this thought?

Obviously I agree with the coming shape of events. What I'm still wondering about is what the initial fracture points will be. It seems to me there are two likely candidates.

The first one is first-world industry (including China) - dependent as it is on JIT deliveries, long distance shipment of raw materials, parts and finished goods, reliable electrical grids, etc. It strikes me that the whole edifice is too brittle to withstand a sharp shock - like, say, a 3 month interruption of tanker traffic through the Strait of Hormuz.

The second is, as you point out, agriculture, but agriculture in particular parts of the world. Not European or North American agriculture, as they have a lot of slack and discretionary consumption including oil and NG that could be redirected to agriculture if it's required. It's also not Africa. Agriculture there is far less dependent on oil and technology. Agriculture in many places there is barely one long step past what it was in previous centuries.

The places I worry about are India, Pakistan, China and Southeast Asia. In those places agriculture has become much more modernized with all the oil and technology dependence that implies, but their underlying economies don't have the discretionary wiggle room of Europe and North America. Thus their agricultural sectors would seem to be extraordinarily vulnerable to energy disruptions. And if a nation's food supply takes a hit at a time when transportation is getting expensive and other countries' food supplies are also tight, it spells disaster.

[robertpaulsen]

4. K & R!

:kick:

[depakid]

7. It may well be- but

The Economist is NOT a journal. It's a moderate international news magazine.