"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. 1. Pesticides are made from oil; 2. Commercial fertilizers are made from ammonia, which is 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 miles from where it is produced to where it is consumed. 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 equates to 840 gallons, of oil. Ultimately, the construction of a car will consume an amount of fossil 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 pounds of water. 3. The construction of the average desktop computer 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.
(Note: alternatives to oil are discussed in depth on Page Two)
"Is the Modern Banking System
Entirely Dependent on Cheap Oil?"
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. 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. 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 . . . 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. (Note: to read the full text of the bank's report, click here.) 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?"
"Is the Bush Administration
Aware of This Situation?"
Of course they are.
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.
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." (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.) 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. 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 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.
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. You can read the full congressional record of Representative Bartlett's presentation by clicking here. You can view a video of Bartlett recommending the article you are now reading to Resources for the Future, an extremely influential DC think tank, by clicking here. 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. 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 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 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.
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; 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?
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 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.
"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.
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?"
Oil Discovery: (3 Year Average, Past and Projected)
. . . 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.
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.
"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.
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 3.Global production of conventional oil has essentially plateaued since the year 2000. 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 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?"
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.
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. 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. 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.
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.
Topics Covered on Page Two Include: Abiotic Oil Theory, Drilling in ANWR, Laws of Supply and Demand/Market Forces, Alternative Energy, Solar, Wind, Geothermal, Wave, Hydrogen, Nuclear, Coal, Ethanol, Biodiesel, Thermal Depolymerization, Solar-Nanotechnology, Space-Based Solar Arrays, Hybrid Vehicles, Conservation and Energy Efficiency, Jevon's Paradox, Wars in Iraq, Iran, Syria, and Venezuela, the Military Draft, Possible Solutions and Ways to Prepare