Peak Oil: Life After The Oil Crash

Do read then Halliburton CEO Dick Cheney?s 1999 assessment below, and see how it ties to ?9/11: Connecting The Dots.? US is world?s largest net oil importer at 11.8 million barrels a day, that is nearly as much oil as imported by China, Germany, France, Italy, Spain and India put together (2004 figures).

Oil will not just "run out" because all oil production follows a bell curve. This is true whether we're talking about an individual field, a country, or on the planet as a whole.

Oil is increasingly plentiful on the upslope of the bell curve, increasingly scarce and expensive on the down slope. The peak of the curve coincides with the point at which the endowment of oil has been 50 percent depleted. Once the peak is passed, oil production begins to go down while cost begins to go up.

In practical and considerably oversimplified terms, this means that if 2005 was the year of global Peak Oil, worldwide oil production in the year 2030 will be the same as it was in 1980. However, the world?s population in 2030 will be both much larger (approximately twice) and much more industrialized (oil-dependent) than it was in 1980. Consequently, worldwide demand for oil will outpace worldwide production of oil by a significant margin. As a result, the price will skyrocket, oil dependant economies will crumble, and resource wars will explode.

The issue is not one of "running out" so much as it is not having enough to keep our economy running. In this regard, the ramifications of Peak Oil for our civilization are similar to the ramifications of dehydration for the human body. The human body is 70 percent water. The body of a 200 pound man thus holds 140 pounds of water. Because water is so crucial to everything the human body does, the man doesn't need to lose all 140 pounds of water weight before collapsing due to dehydration. A loss of as little as 10-15 pounds of water may be enough to kill him.

In a similar sense, an oil based economy such as ours doesn't need to deplete its entire reserve of oil before it begins to collapse. A shortfall between demand and supply as little as 10 to 15 percent is enough to wholly shatter an oil-dependent economy and reduce its citizenry to poverty.

The effects of even a small drop in production can be devastating. For instance, during the 1970s oil shocks, shortfalls in production as small as 5% caused the price of oil to nearly quadruple. The same thing happened in California a few years ago with natural gas: a production drop of less than 5% caused prices to skyrocket by 400%.

Fortunately, those price shocks were only temporary.

The coming oil shocks won't be so short lived. They represent the onset of a new, permanent condition. Once the decline gets under way, production will drop (conservatively) by 3% per year, every year. War, terrorism, extreme weather and other "above ground" geopolitical factors will likely push the effective decline rate past 10% per year, thus cutting the total supply by 50% in 7 years.

These estimate comes from numerous sources, not the least of which is Vice President Dick Cheney himself. In a 1999 speech he gave while still CEO of Halliburton, Cheney stated:

?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 an additional 50 million barrels per day.?

Cheney's assessment is supported by the estimates of numerous non-political, retired, and now disinterested scientists, many of whom believe global oil production will peak and go into terminal decline within the next five years. Many industry insiders think the decline rate will far higher than Cheney predicted in 1999. Andrew Gould, CEO of the giant oil services firm Schlumberger, for instance, recently explained:

?An accurate average decline rate is hard to estimate, but an overall figure of 8% is not an unreasonable assumption.?

An 8% yearly decline would cut global oil production by a whopping 50% in under nine years. If a 5% cut in production caused prices to triple in the 1970s, what do you think a 50% cut is going to do?

Other experts are predicting decline rates as high as 10% to 13%. Some geologists now believe 2005 was the last year of the cheap-oil bonanza, while many estimates coming out of the oil industry indicate "a seemingly unbridgeable supply/demand gap opening up after 2007," which will lead to major fuel shortages and increasingly severe blackouts beginning around 2008-2012. As we slide down the down slope of the global oil production curve, we may find ourselves slipping into what some scientists are already calling the coming "post industrial stone age."

Yes, everyone is facing dark days ahead, but different will deal with it differently. Some countries are investing in wind and solar technology, others in electrical vehicles. Many already have a well placed mass transit system.

In the US, however, they haven?t even added any new bus routes. Solution for every problem seems militant. Just order more police squad cars, and get thru it.