It is one of the paradoxes of our age that the most important issue of the
twenty-first century, the one that is going to set a mark in our generation as
well as future generations, is almost completely overlooked by most media, by
politicians, by economists, and by the general population. I speak of Hubbert's
peak — the maximum peak of possible world oil production.
Cheap, abundant oil allowed the rapid development of the world in the twentieth
century, but the situation of shortage in the twenty-first century heralds a
completely different economic framework, since there is no substitute for the
amount of oil now (still) consumed in the world (about 85 million barrels per
day).
The end of the Petroleum Age marks a crucial moment in the destiny of humanity,
– a new historical paradigm. It leads to very complicated issues that
begin today. After the end, nothing will be as it was before – but long
before the end the problem is starting to manifest itself.
Like in mystery novels, there's nothing better than hiding in plain sight. The
Peak oil is plain sight, but seems hidden. Virtually
EVERYTHING
about contemporary history can be explained and understood considering the
Peak oil – today's central issue.
In fact, one can classify all of the world's petroleum producing countries in
two main categories: those who have already reached the peak (the vast
majority, including Mexico) and those who have not yet reached it. The latter
consists of a few countries, mostly small producers in terms of quantity. The
only large producers who have not yet reached the peak are Brazil and Angola.
Many believe (incorrectly) that the issue of Peak oil is the absolute quantity
of oil remaining in the world. This assumption is wrong. The crucial point is
the possible rate of production. The world has reached its maximum possible
rate of production and that cannot be changed. The pseudo solutions touted by
the media, such as non-conventional oils (like the Bakker oil, oil from the
shales of Canada, the deep offshores, the polar liquid biofuels, and general
renewables, etc.) can possibly fill the deficit of conventional oil production
ahead.
The EROEI ratio
In reality, all subsidiary solutions to bridge the deficit of conventional oil
production face a major and insuperable obstacle: the EROEI (Energy Returned On
Energy Inputed) ratio. This is a relentless and unforgiving ratio. It's great
advantage is that it uses purely physical units, putting monetary illusions
aside. For each barrel invested in oil production, a dwindling return is
obtained. In the 1930s, for every barrel invested in its production,
approximately 100 barrels of oil was obtained. Now, this figure is much lower,
averaging 15 barrels. In some cases regarding unconventional oil the ratio is
even worse,
e.g.,
the exploration of oil shales results in about three to four barrels of
production per each invested barrel (not to mention the colossal waste of
natural gas required to produce them).
However, the purpose of this communication is not to expose technical quibbles
related to the Peak oil, but rather to examine its economic, social and
political consequences. For technical matters, one can refer the numerous works
of Colin Campbell, Jean Laherrere, Robert Hirsch and Gail Tverberg, as well as
the texts from ASPO (Association for the Study of Peak Oil).
When it comes to Peak oil, everybody immediately thinks of the geopolitical
aspects of the problem. After all, this is the most evident aspect. Just look
at the successive imperialist aggressions to catch the remaining reserves
around the world, such as the invasion of Iraq, Afghanistan, Libya, the current
threats to Syria and Iran, the creation of a Command for Africa by the U.S.
government, etc. Predatory wars over resources are all over the news, these
days.
These conspicuous aspects are there for all to see. There are also subtler
aspects occurring at this time and whose root cause is the Peak oil. Here's a
random example to illustrate: the recent Egyptian Revolution. It can be argued
that crossing the peak was its underlying cause. When oil production in Egypt
started to decline, export earnings began to diminish. Those earnings provided
a major source of revenue for the Egyptian State Budget. A large part of social
benefits (education, health, etc.) was funded that way and those benefits
gradually began to shrink. That's where the social dissatisfaction started,
finally reaching the big popular uprising known to us all. This example gives
an idea of something that is going on in many parts of the world.
Meanwhile, we can and should generalize going a little beyond the level of
abstraction. One can add that the present broad debt – States,
municipalities, families, and financial and non-financial corporations –
the world's main capitalist countries is caused by the onset of profound
depletion of oil in the world, because the stagnation of growth undermines the
ability to repay.
In
Capital: Critique of Political Economy
(Book III), Marx talked about the law of differential rent of mining
operations. You can see that the exhaustion of easily removable resources
requires seeking the resources that are more difficult to extract (those what
are more remote, ore with less percentage of metal, that present more
difficulties in extraction, etc.) which lowers differential income as well.
Right now the ancient large world fields where the extraction is easy (Gawar,
Cantarell, ...), are past the peak and into decline. As this "old"
oil runs out, it would be necessary to replace it with new fields of
production, smaller and of more difficult extraction. Nevertheless,
world production has been stagnated for several years – despite the high
prices.
To be able to maintain the current levels of production in the future, it
would take colossal investments with more and deeper perforations (deep
offshore, etc.), in increasingly inhospitable places (polar areas, etc.) and
with worse EROEI ratios. Therefore, it's a problem of extraction rate, and not
the size of remaining reserves, which indicates a systemic problem. It should
be noted that we are referring to purely physical realities, casting aside
monetary illusions.
About the reserves (and not the rate of extraction), producing countries are
likely to keep the remaining petroleum in their territory for themselves.
Regardless of the technical and financial capacity to increase the rate of
production, the quantity available for export decreases. Indonesia is a
significant example since it remains in OPEC, from a formal perspective.
Accumulation is inherent to the capitalist production. By its nature, this mode
of production creates a surplus value, which guarantees its survival. The rapid
growth of the twentieth century was primarily due to the existence of an
abundant and inexpensive fuel: oil (similarly to the Industrial Revolution of
the nineteenth century, which resulted from coal). When oil begins to run out a
structural problem emerges: the system “stagnates”, it cannot
"grow". This stagnation explains the phenomena of debt and
financialisation. Debt, because much of the investment made until now relied on
future growth in order to generate funds to be repaid. Financialisation,
because capitalists, in desperate search for profit, tried to get money from
money without real productive activity. One can argue that there lies the
genesis of the crisis unleashed in 2008.
The systemic problem is that 1) past debts relying on future growth would have
to be paid out, and 2) obtaining money from money, without passing through an
intermediate stage of merchandise, can't last forever. Regarding the first
point, the solution is inescapable: debts that can't be paid out won't be.
Creditors don't like these solutions and try solving their problem in other
ways such as the enslavement of countries (Greece, etc.) and indebted classes
(a neo-feudalism in which they would be servants of their debts). This is
what's happening in "old" capitalist countries, such as the United
States, Europe and Japan, now on the road to decay.
For all of this, we find that we are on the verge of telluric upheavals in the
global system. The world as we know it will change in our generation. The short
hundred years of growth (including of population) provided by oil are ending
and that means a breakdown in an irreparable production mode that demands
indefinite accumulation. There are no technological remedies that can fix the
problem. We will have to change paradigms, with a forced energy diet – not
on energy alone, as the petroleum is only one partial aspect of the exhaustion
of planetary resources (uranium, various ores, wood, water itself…). We
must revisit the study of "Limits of Growth", 1972, so vilified by
common economists.
What shall we do?
The first step in solving a problem is to recognize that it exists. So far, the
world remained ignorant of the problem, or worse, in denial. It is a pressing
and urgent task to recognize the reality of Peak oil and bring it to public
attention as the central issue of our time. The Peak oil should permeate the
entire political speech, all social and economic projects – by abandoning
the paradigm of endless resources. However, awareness of the Peak oil remains
restricted to specialized circles, so the necessary discussion within society
is far from generalized. It is also the responsibility of those who – like
us – are concerned and partake in the social and political life.
We need to promote measures that: 1) don't worsen the problem with wasteful
investment projects based on endless resources (new airports, motorways,...),
and 2) alleviate the problem by holding a standard of equitable justice among
countries (whether they produce oil or not) and among different social classes.
The problems associated with the rate of extraction are immediate, but those
relating to the unavoidable depletion of stocks on the planet take longer (40
or 50 years perhaps). We must keep in mind that there are different ways of
moving in the curve of decline. One way is a brutal war over resources, with a
highly unjust distribution of existing appropriation of black gold between
countries and social classes. Another way is a civilized manner where
inevitable problems are minimized.
The civilized manner could be an international agreement modeled on "the
Oil Depletion protocol", written by Dr. J. Collin Campbell (see
http://resistir.info/energia/depletion_protocol_p.html), which establishes the
basis for a transition program (the Portuguese parliament has approved it
formally, but it is ignored by the government). The protocol aims to:
-
Prevent speculative exploitation of scarcity (
profiteering
), so prices per barrel may remain balanced with production costs;
-
Allow poor nations to bear with their imports;
-
Avoid unsettling financial flows, arising from excessive price of oil;
-
Encourage consumers to avoid waste;
-
Encourage the development of alternative energy sources.
We must prepare for an increasingly less energy-intensive world. Today,
countries that have more lucid governments are already taking steps to ease the
transition. Sweden, for example, has an ambitious program to remove oil from
its economy, producing biomethane on a large scale, instead. Australian and
British parliaments formed committees and did studies about the Peak oil and
ways to minimize it. Iran and Pakistan actively encourage the replacement of
refined petroleum in transportation by natural gas vehicles (2.8 million
already exist in each of these countries). India does the same (with already
1.1 million). China and Australia are already using liquefied natural gas (LNG)
in heavy-duty vehicles. Examples such as these could be multiplied.
Most of the world's oil is used in the transport sector and it would be better
to reduce its consumption as much as possible – for the benefit of future
generations, and most immediate pressing uses (fertilizers, pesticides,
plastic, fine chemicals, etc.) – it will be a good idea to start by
replacing refined oil in the transport sector. The most promising fuel is
methane, the main constituent of natural gas. In transportation (trucks,
autobuses, ferries, vessels, etc.) it can be used as compressed (CNG) or
liquefied (LNG). Unlike oil, natural gas' origin can also be non-fossil:
biomethane is a renewable energy produced from waste and does not compete with
food production.
Dear friends:
Our species has lived on this planet without resorting to oil for thousands of
years. If we know how to make the transition, its imminent end doesn't have to
be a tragedy. We must adapt, as we always did, in situations out of our
control. The real tragedy is not the end of petroleum, but capitalism. This way
of production and distribution is preventing the sustainability of our planet.
If we fail to overcome this phase of the post-peak world, predatory wars for
natural resources will intensify, and we'll face an unjust distribution of
wealth. There are several future scenarios possible. It's up to us to fight for
what's fair.
