In so far as it epitomizes everything that is grotesquely out of whack with American living arrangements, Houston was the perfect place for the big “peak oil” conference of the year. The 500 or so attending—geologists, oil industry execs, economists, academics, alt. fuel freaks, and freelance journalists like myself—were marooned for four days in a convention center Hilton, in a district devoid of the least urban amenity, amid a wasteland of surface parking. You couldn’t buy a stick of gum within a mile of the hotel and venturing out on foot in the 90-degree heat would have been like re-enacting the Bataan Death March. The pharaonic grandiosity of the convention center next door—the size of three aircraft carriers and resembling one architecturally—was a baleful reminder of the floundering leviathan that government has become in the face of a crisis like peak oil.
As it happened, representatives of government and the mainstream media were conspicuously absent from this conference devoted to the crucial resource needed to run places like Houston—and, incidentally, industrial civilization. Clearly, the nation is having a hard time paying attention to its energy predicament.
My own theory as to why this is so goes something like this: having poured our collective wealth into an infrastructure for daily life based on incessant motoring—suburbia and all its accessories—we have become hostages to a pernicious psychology of previous investment. We cannot face the awful fact that our way of life really has no future in the coming age of energy scarcities. Thus there is little coherent public conversation about it. This leaves those working on peak-oil issues consigned unfairly to the intellectual margins—with Sasquatch hunters and UFO abductees—while the nation ignores a wide range of ominous signals and parties on.
For those who have been distracted by the mainstream news diet headlining Britney Spears and the toilet communication techniques of Sen. Larry Craig, a précis on peak oil may be in order. Peak oil is shorthand for the geologic fact that oil is a finite resource and that credible signs indicate we have passed the world’s all-time oil production high point, with rather dire implications for how we live. Viewed through an admittedly short-range rearview mirror, the numbers suggest that July 2006 was the peak, at just over 86 million barrels a day (m/b/d). Since then, world production has fallen to the 84 m/b/d range. Meanwhile, world demand has risen to about 86 m/b/d and is widely predicted to reach 88 m/b/d next year. In short, the demand line has now crossed the production line, and the trend is almost certain to continue—with potential for oscillation as economies wobble in response to high oil prices and regional scarcities.
Crucial to understanding the peak-oil problem is that it is not strictly about the world running out of oil. It is about what happens as the world slides down the slippery slope of depletion. There will always be oil. But quite a bit of it will never be extracted for one reason or another—unfavorable geography, deep water, armed conflict. The quality of the world’s oil supply is already trending firmly away from once abundant light-and-sweet crudes to the leftover heavy-and-sour crudes, which are harder to refine and yield less gasoline. All these pieces of the plot are subject additionally to “above-the-ground” geopolitical factors that will determine who gets how much of whatever is left.
I hasten to add that peak-oil theory—indeed oil geology itself—contradicts the popular wishful idea that the earth contains a creamy nougat center of oil that is continuously replenishing old fields. This is just not consistent with reality, and the broad circulation of the fantasy is a symptom of our desperation and cluelessness. In fact, much of the world’s production has relied on a handful of “super-giant” fields, such as Ghawar in Saudi Arabia and Cantarell in Mexico, which account for about 60 percent of their countries’ total production. There is absolutely no evidence that the super-giants—which also include China’s Daqing and Kuwait’s Burgan—are being replenished. They are playing out largely because the latest and greatest technology for oil recovery has had the paradoxical effect of draining the existing fields more efficiently. The same is true of the North Sea and Alaska’s Prudhoe Bay. It is also important to know that worldwide discovery of oil peaked back in the 1960s and has been in such steep decline lately that that we are now offsetting only a tiny fraction of yearly depletion.
As the oil runs out, the complex systems we depend on for daily life are certain to falter and, in many cases, fail. By complex systems, I mean, for instance, the way we produce food for the world’s groaning population—relying heavily on oil-and-gas-based fertilizers and pesticides. The list would also include our Big Box mode of commerce, our cars-and-airplanes-only system of transportation, our suburban land-development habits, and our highly centralized secondary school systems utterly dependent on the yellow bus fleets. The finance system is especially susceptible to disruption, since one implication of peak oil is that industrial economies will cease to grow, and the investment paper that represents the expectation of growth will lose its credibility. Of course, the oil markets themselves are a complex system subject to severe disturbance in a post-peak situation of remorseless decline. Instability in any and all of these systems is certain to amplify the failures in the others. One way or another, these failures point ineluctably to a picture of long-term economic contraction, hardship, and political trouble. And despite the sedulous wishing now underway, all reality-based evidence suggests that alternative energy sources will not come close to mitigating our problems with fossil fuels. The public will be gravely disappointed by what things like biofuels, solar, and wind can actually do for us.
The opening speaker at the Houston conference was Robert Hirsch, co-author of the now-famous 2005 report commissioned by the U.S. Department of Energy that, much to the chagrin of the DOE, first told the nation in no uncertain terms that we were heading for a potentially lethal set of disruptions in daily life due to our complacency about oil. Hirsch goes further now, two years on. He reminded the audience that the major private oil companies like Exxon-Mobil, BP, and Shell now account for a mere 5 percent of world production—“the old majors are the new babies”—and that the rest is controlled by national oil companies like Saudi Aramco, Mexico’s Pemex, and Russia’s Kremlin-controlled operations. This, Hirsch said, portends a new era of “resource nationalism” that will starkly alter the way oil is allocated to the importing nations. He predicted a future of “oil export withholding,” panicked markets, and allocation disturbances that would make the 1973 OPEC embargo look like a golden age.
Matthew Simmons, America’s leading oil industry investment banker, didn’t have better news. He asserted that the U.S. is so woefully unprepared that at the first precipitating market upset, the nation is liable to fall into a deadly pattern of “hoarding behavior,” a kind of “bank run on oil stockpiles,” as he put it, which would lead to crippling scarcities as well as much higher prices. The likely outcome would be strict oil and gasoline rationing, which in and of itself would not mitigate the attending hardships. Simmons also reminded the crowd that the equipment now used throughout the oil industry—from drilling rigs to refineries to pipelines—is so uniformly old and decrepit that the oil business could collapse from that problem alone. He went even further and wondered aloud whether we had enough raw resources in iron and copper to rebuild the critical pieces of this system.
And the hits kept coming. Dallas geologist Jeffrey Brown revealed that something previously unrecognized is going on in the oil markets: export rates are dropping more steeply than sheer production decline rates. That is, not only are the exporting nations getting less oil out of the ground, but they are sending an ever decreasing amount of that oil out to world markets, in part because they were using substantially more of their own declining production. The latest numbers show these export rates are dropping so quickly that within five years, the world’s total export capacity could be half what it is now. To complicate matters, these conditions vary from one exporting country to another. Mexico’s depletion rate, for instance, is so steep because of its dying Cantarell field that it could easily go from being America’s number-two source of oil imports (after Canada and before Saudi Arabia) to being completely unable to send us any oil in five years. Now, with America currently importing over two-thirds of all the oil we use, imagine the implications.
These were the highlights, but there were plenty of other things to chew on —the fate of the airline industry (grim), the condition of the U.S. passenger rail system (laughable), the value of the ethanol boom (called “tragic” by Hirsch), the developing picture of scarcities among a range of metals and other resources crucial to industry (dire), and the supernatural indifference of the press and our political leaders to all of these very serious problems.
It was a sublime coincidence of fate and history that throughout the conference, the price of oil surged up through the high-$80 range and briefly touched $90 a barrel on Oct. 19. This only underscored the absence of the mainstream media and the inanity of the ongoing debates between the characters who are running for president, none of whom has ever publicly uttered the phrase “peak oil.”
James Howard Kunstler is the author of The Long Emergency and other books.