Peak Oil - Ok what is it and why should I give a toss?

So what is Peak Oil ? 

In 1956 an American geophysicist Marion King Hubbert argued that US (and hence the world) oil production followed a bell shaped curve. Starting with plentiful oil reserves that cost relatively little to extract, production volume would then reach a peak when approximately half the oil reserves had been extracted and after this oil reserves would dwindle with the cost of oil production increasing until the cost of its extraction reached uneconomic levels. 

While no one is arguing with Hubbert there is some debate over when oil production will actually peak. Hubbert predicted that production of oil from conventional sources would peak in the United Sates between 1965 and 1970, and worldwide within "about half a century" from the announcement of his findings (around 2006). Other predictions have oil production peaking somewhere between 2005 and 2025. 

Obviously the amount of oil that can be produced depends on how much oil exists. While some people believe there is oil to be found under the Arctic or Antarctic most experts believe that the rate of oil discoveries peaked in 1962 and that we have found all (or nearly all) of the Earth's economically viable oil reserves. The variation in the predicted date of peak oil production is due in part to the difficulty of accurately establishing the world's oil reserves. Many people believe some countries (especially Saudi Arabia) are overstating their reserves and since most of the remaining economic reserves are located in the Middle East and Africa getting access to reliable data is proving to be difficult.

This means that the accuracy of any date for peak oil will only be determined after the event. What we do know is that United States oil production peaked in 1971 (very close the Hubbert's prediction) and that world oil production has been essentially flat since 2005. So indications are we either have peaked ,or are very close to it.

So why is it important?

I think we all have an idea that Australian society is oil dependant, but most of us don't realise the extent of the dependence. Have a look around you almost everything in your home was transported by planes, trucks, trains, ships and so on. All of these vehicles run on oil. Think about all your favourite toys (computer, CDs, DVDs and so on) these were made using oil. You probably live miles from your job and social activities. All of us drive around (often on our own) in cars that are not fuel efficient on roads made from oil. Think about your diet, it takes 1500 litres of oil to feed an Australian for a year and 500 litres of that is used in the production of fertilisers and pesticides. When was your last overseas or interstate holiday? Sea and Air travel on the scale we now enjoy is the result of cheap oil. 

Just to make things more interesting world demand for oil has increased dramatically. Not only is the world's population increasing but countries (such as China and India) with large sections of the world's population that previously used little oil are rapidly aping our way of life and becoming major consumers. As an example it was reported recently that 1000 new cars hit the streets of Beijing every day. 

So the amount of oil available for use will peak (or has peaked), the cost of extracting what's left is going to increase and our consumption of oil is going through the roof. We are in what experts are calling the end of the era of cheap oil. This comes as no surprise to me. When I started work I paid 18 cents a litre for petrol I now pay $1.38 a litre so we have had increasing oil prices for all of my working life, but it will get worse and get worse much more quickly. 

So is this the end of the world ?

We won't actually run out of oil, it will just become so expensive no one can afford to extract it. I don't subscribe to the doomsday scenario that would have us living in some sort of post industrial stone age (remember the Mad Max movies ? yes I know they were a disaster in themselves but I mean the society they depicted). However, there will be a lot of impacts, the difficulty is in predicting their extent. I haven't listed them all but the impacts that come immediately to mind are:

Massive disruption to transportation. 

While all transportation will become more expensive some means of transportation could disappear. Some land based forms of transport (eg trains and buses) can be made to run on hydrogen or electricity but there are real problems in taking these alternative sources and turning them into economically viable options. As an example much has been made of the use of hydrogen. However producing hydrogen based engines is very expensive, there are no hydrogen filling stations and it is inherently inefficient. More importantly there is no available substitute for aviation fuel. Yep that's right none. Air travel as we know it could be a thing of the past. Can you imagine returning to the age of sail or the introduction of commercial balloon flights?

Big increases in the cost of our basic lifestyle. 

As the cost of oil increases everything you consume will increase in price and these price rises will escalate. Australia already spends more than it earns. People have large mortgages and we owe more on our credit cards than ever before thanks to historically low interest rates and a prolonged shopping binge. So everything we eat, wear and use will become more expensive and this will fuel inflation. Currently the Reserve Bank uses increases in interest rates to prevent inflation from reaching what they believe to be unacceptable levels. This will result in people losing their homes as the cost of their mortgage becomes unmanageable. In fact house repossessions and bankruptcies have already started to increase in number.

As people's incomes decrease so will their spending and this will result in increased unemployment. Those of you working in the travel industry are already on the chopping block as no one will be going on holidays. if you work in a factory that makes luxuries or work in a shop that sells them you are probably going to be out of a job. If it comes down to choosing between putting food on the table or buying the latest plasma you know what is going to happen. 

The deterioration of basic government services.

All the important national services are oil dependent. Health, defence and the police are all critical services that will become increasingly expensive. We have already discussed the impact on aircraft so being transported long distances for specialist or emergency treatment will be very difficult or impossible (no more emergency helicopters or flying doctor service). Many of the drugs we use now require relatively large amounts of oil in their manufacture and distribution. 

Hard decisions will have to be made about which people or situations are given access to these increasing expensive services. The police may simply not be willing or able to get to you in some circumstances such as a break in or assault, they may be too busy on politician protection. So at the same time as people are becoming poorer the welfare and security services they see as their 'right' will be decreasing.

Increased difficulty in managing our relations with other countries. 

Australia has its own oil reserves but we already import oil and the amount we import will increase. This will make us venerable to political pressure from oil rich countries. As an example we might find that we have to sell our other natural resources at very low prices to oil rich countries or face an oil embargo. Most experts believe violent conflict will increase as countries battle for access to dwindling oil reserves.

So what do we do?

Ah well for that you have to wait for another article ..... stay tuned