Crude awakening
Can we survive peak oil?
Oil is not everybody’s preferred topic of small talk. It tends to make the eyes glaze over. But the consequences of a terminal shortage are horrific, and should worry us all.
At a conference earlier this yearLord Ron Oxburgh, former non-executive chairman of Shell UK, said: “We may be sleepwalking into a problem which is actually going to be very serious.” By the time we are fully aware, he added, it may be too late to do anything about it.
At the same event, the annual conference of the Association for the Study of Peak Oil in Cork, the former US Energy Secretary Dr James Schlesinger said oil industry executives now privately concede that the world faces an imminent oil production peak – a point at which demand will permanently overtake supply, and prices shoot up and up.
Schlesinger, also formerly Defence Secretary and CIA Director, said it is very difficult for politicians to break this news to the people. “To have real movement, the public has to be hit over the head with a two-by-four.”
Without plentiful cheap oil, motor and air transport become unviable. Our financial system, premised on endless growth, is incapable of addressing new, shrinking economic conditions. And when you remove artificial fertilizers made from fossil fuels, the earth can support only 1bn or so people – so we seem to be heading for mass starvation.
These issues are comprehensively examined in a documentary film, A Crude Awakening, out this month. It largely comprises straight interviews with sober economists, geologists, professors of physics and politics, and a former acting secretary general of OPEC. But the impact is profoundly shocking.
One interviewee, Matthew Savinar, is asked if we face something like the challenge President Kennedy presented in the early 1960s – to get a man on the moon in ten years. “The problem we’re facing is more like colonising Pluto,” Savinar replies. “If JFK said we’re going to have a hundred thousand people living in three-bed houses on Pluto in ten years, then obviously we would not have been able to accomplish it.”
Later in the film, a physics professor at Stanford is asked, “Are my grandchildren ever going to fly in an aeroplane?” A gripping question, he replies. “And I think the answer is probably no.”
The film grimly demolishes the case for many wished-for alternatives to fossil fuels.
To replace today’s 10 terawatts of fossil-derived energy with nuclear power would require 10,000 of the biggest nuclear installations and the world stocks of uranium 235 would be exhausted in less than two decades.
Hydrogen is unlikely to develop because users won’t invest in it till there’s an infrastructure, and the infrastructure won’t be built if users aren’t there.
Biomass is inefficient: it takes more energy from fossil fuels to create ethanol than you get out at the end. And if the entire world’s available land were given over to producing ethanol to supply just the 1.5 billion people living in rich countries, it would still only meet 15% of current consumption.
Wind and solar are intermittent and unlikely ever to produce the amounts we enjoy now.
Economic consequences of peak oil promise to be severe. Richard Douthwaite, of the Foundation for the Economics of Stability, says our debt-based financial system needs replacing fast, before it collapses as loans become unrepayable.
“Our particular money-creation system – in which banks lend money into existence on the expectation of growth – is like a pair of spectacles which give short term economic issues such prominence that they obscure our vision of the future. So it is hard to get sufficient political momentum to make sharp, uncomfortable changes to counter the slow-growing, high-impact threats we are facing, such as climate change, loss of fertile soil, dropping water tables, shrinking biodiversity and human population growth.
“It is imperative that we use our remaining fossil fuels as capital rather than income, investing it in projects which rapidly increase our renewable energy capacity. At the same time, we have to gradually redesign our settlements, retrofit our buildings, transform our agriculture, and contain our population in order to substantially reduce total energy demand. These objectives cannot be achieved in conditions of resource wars, famine and insecurity.”
“There isn’t a company quoted on the stock exchange,” argues Colin Campbell, founder of Aspo, “that doesn’t tacitly assume a ‘business as usual’ supply of cheap oil. When that isn’t there any more it means that virtually every company is overvalued, and as the financial community recognises this that might trigger some kind of overreaction and stock market collapse. I think it’s very likely. I wouldn’t be surprised if it doesn’t trigger another great depression comparable to the 1930s, if not worse.
Population is key, agrees Campbell. “At the time of Christ there were about 300m people on the planet, which doubled by the time coal came on, and then came oil and the population went up six times. In the absence of fossil fuels how many people can we support?”
The film’s director, Basil Gelpke, is a TV news reporter by background who assures me that as a journalist he comes across a lot of “good stories” and is not easily impressed. “Also, I’m not really a Green person. I’m rather conservative and I like our way of life.” But after reading about Peak Oil in a paper from an Australian hedge fund, he felt compelled to find out more. After all, he has two children. “I felt there was a terrible threat out there. I went through the usual stages of being depressed by it and nobody wanting to listen to me.”
But he’s made the film, which has won awards at film festivals and is going on general release. People will listen now, surely?
“I imagine that it’s not going to get into the multiplexes,” says his colleague, producer Ray McCormack. “Mainly we will be in art house and community cinemas.”
I don’t usually do this for filmmakers, but after I’ve finished talking to McCormack and Gelpke, I send emails to an assortment of local political parties and green lobby groups, suggesting they lobby local cinemas to show the film. I advise you to do the same.
The first reply I get back is from a strenuously committed environmentalist: “To be honest I think this is a red herring. We are nowhere near peak oil – as the current unseemly scramble for Arctic mineral wealth shows. Climate Change will kick in way before peak oil. Sorry.”
Just as climate change attracts furious denials, so does peak oil. Their most common argument is this: that higher oil prices will make it more affordable to drill less accessible deposits, so there’s no problem after all. But that overlooks an important point: oil isn’t like other commodities. At some point it will take more than a barrel of oil’s worth of energy to drill for a barrel of oil, so the job won’t be worth doing however high the oil price.
Is that moment coming soon?
In 2004, BP’s Lord Browne proclaimed, “We have to demonstrate that there has been no shortage of oil, and that there is no shortage of oil, and that there never need be a shortage… there is no reason why there should be any shortfall in the foreseeable future.”
But in the same year, Shell’s then chairman, Sir Philip Watts, told investors the company had over estimated reserves by 20 per cent. Internal emails were requisitioned by lawyers which made it clear the chairman and others had known about the problem for some time and deliberately lied about it. They face criminal prosecution in the US.
Since then, the former oil industry geologist Jeremy Leggett has shown in his book, Half Gone, that the annual BP Statistical Review of World Energy relies substantially on third-party material; and states, in small print, that the figures shown do not necessarily meet US Securities and Exchange Commission definitions and guidelines for determining proved reserves. “They don’t even believe the figures they are publishing!” writes Leggett. “And this is an energy bible used by researchers the world over.”
As for Opec countries, Leggett points out that the size of their stated reserves has remained the same each year for a decade – indicating that the amount they have discovered each year has precisely matched the amount they produced over that period. You don’t need a PhD in maths to think this extraordinarily implausible.
The known facts are these: the amount of oil discovered each year has been shrinking for four decades. The last time we discovered more oil than we consumed was 25 years ago; today, for every barrel we discover annually, we consume three. Production is already in terminal decline in 60 of the world’s 98 oil-producing countries, maybe more.
The world’s two largest oilfields, which once contained more than 80bn barrels each, were discovered in 1938 and 1948. Since then, discoveries have been tiny by comparison, and rare. In 2000 there were 16 discoveries of 500m barrels or bigger. In 2001 there were nine. In 2002 there were just two and in 2003 there were none.
Who would drill in the Arctic if oil was abundant elsewhere? When former Shell executives, and American energy secretaries start addressing Aspo, that itself is a rather doomy signal.
When I first heard of peak oil, more than two years ago, I wondered why the government was doing nothing to raise the issue. In the film, Campbell offers an answer: “There is little hope of politicians taking the lead. It’s much easier for them to react to crisis when it happens.”
All the same, after watching A Crude Awakening I decided to phone the Bank of England, the Treasury, various government departments, the CBI, the Association of British Insurers and oil companies to ask if they had any policies in place to deal with Peak Oil.
The answer, in several instances: “How do you spell that?”
The Treasury referred me to the Department for Business, Enterprise and Regulatory Reform (“This is not a treasury matter.”) DEBERR said it predicts no problems “for the foreseeable future”. Ultimately, a spokesman said, the world may never run out of oil because “new forms of energy may come through to fuel transportation and so on”. (He didn’t elaborate.) The Bank of England politely explained that they have no policy. The CBI mused that the issue fell between its economics team and another covering business and the environment. The ABI sent me a report it had commissioned on the long-term global impacts of climate change: this didn’t mention the word “oil” anywhere.
One oil company was willing to talk to me but only on a totally off-the-record basis. This nervous precaution is telling, particularly since what I was told was freely available on the internet.
But a BP spokesman scoffed: “Why should we have a policy on Peak Oil? Peak Oil is just a brand, a consultancy, a bunch of academics going round making money selling books and talking at conferences.”
I didn’t find this convincing, but to be sure I decided to find out how much money the retired geologists and economists and others in the Association for the Study of Peak Oil are paid. I learned that one of the best known individuals recently accepted just £200 for a speech. Is that a lot? Brendan Barns, of the leading public speaking agency Speakers for Business, says £200 would not cover most people’s travel expenses. “It’s a paltry amount. What would you get from any professional, a lawyer or an accountant, for £200? Nothing. For BP to say they’re doing this for the money is laughable.”
BP, by contrast, makes billions of pounds in profits each year. It’s not hard to see which side has the greater financial stake in this argument.
As Leggett puts it, “Where would you bet your pension in this dispute?”
Although government, and the national political leaders, have ignored the coming problem, backbench MPs and peers have started working together to promote discussion.
John Hemming, the Lib Dem MP for Birmingham Yardley, chairs the all party parliamentary committee on peak oil and gas. In July, Hemming called on the government to review it’s policies in the light of The International Energy Agency shifting its prediction as to when oil production will peak – just five years from now. Previously, the IEA predicted a peak in 2030.
Sir David King responded. “I am personally not convinced that focusing on the “peak oil” concept is the most helpful approach. The challenge I believe lies in framing policies and in advancing the technologies that will enable the fossil fuel resources to be utilised effectively, economically and sustainably.”
But how can fossil fuels, by definition a finite resource, be used “sustainably”. You either use them, or you don’t.
“I thanked him for his written response,” Hemming tells me. “It was a load of bollocks but I thanked him.
“There is an assumption that somehow you can magic up something that overcomes the laws of physics. As a physics graduate I would always assume that the laws of physics will beat the laws of economics.
“Peak oil is the elephant in the room. You can never be 100 per cent certain when this will happen, only that it will happen. The basic point that you have to discover oil before you can produce it, and we’re not discovering it.”
Hemming presents a surprisingly rosy picture of the transition from oil.
“At the moment we are fantastically inefficient,” he says. “There will soon be a serious economic advantage in being efficient. The whole idea of growing food in Scotland and sending it to Hereford to store it before sending it to Scotland – that’s a non-starter.”
He predicts that people will start reusing bottles and washing them: the old-fashioned milkman will come back into service across the country.
“Quality of life is not about consumption. You can have a very good quality of life without using so much energy. It can even be a happier life.”
But isn’t he being a little too optimistic? Agriculture as practiced by mainstream farmers uses 10 calories from fossil fuels, as fertiliser and in transport costs, to produce a single calorie in food. Without oil and gas, how can we possibly keep up food supplies? Already worldwide grain production, per head, has started to fall. And bio fuels are encroaching on valuable crop land.
A report commissioned by the US Department of Energy and published without fanfare – in effect, buried – in 2005, warned: “The problem of the peaking of world conventional oil production is unlike any yet faced by modern industrial society. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.”
On the net, increasing numbers of people have started to upload survival plans, which on first reading strike an almost comically bleak note. But on second and third reading many of their prognostications seem reasonable and logical.
On one, headed Twilight of the Modern World, the author advises: “The important thing to remember is that our present society will not continue for much longer. Some trades such as plumbing and mechanics will be useful now and in the future. But lawyers will be (even more) useless when law and order breaks down.”
The world is full of jobs like a shop cashier which do not pay much and afford no useful skills, he adds. People in such jobs should save as much money as they can and spend time in libraries learning about mechanics, first aid, self defence, sailing, horse riding, fishing, plumbing and carpentry.
Additionally they should start insulating their homes, growing their own food, and stocking up on essentials. (“Think how much candles will cost when the power cuts begin.”)
Peak oil and climate change are two sides of the same coin. One is about what comes out of your exhaust, the other concerns the stuff you pump into your tank. A shortage of the latter, I suspect, will energise more ordinary people to take action than an excess of the former. Mercifully, solutions to one usually help to fix the other – so long as we don’t all rush to replace oil by burning coal, which is horribly polluting.
“Peak oil leaves us with no option but to move to a more sustainable, renewable-energy-fuelled economy,” says Douthwaite. “Getting there requires taking a running jump over a yawning chasm. There are no stepping stones. The world on the other side will be very different. Radical changes are required. Making small improvements to a failing system, rather than revamping it entirely, just will not work.”
Some people think that nothing will work. One is Gregory Greene, director of another peak oil documentary, The End of Suburbia. “It looks as if we are pretty, ah, fucked,” he said in a recent interview.
Campbell, the godfather of peak oil and founder of Aspo, is less certain. “We are facing some kind of unprecedented, unparalleled situation,” he says, “and that explains why it is so difficult to accept it. We identify a species called Hydrocarbon Man: his days are definitely numbered. Whether mankind, or homo sapiens as a species, will carry on living some different, simple way – that’s another question.”
9 November 07