Oil is like a wild animal.  Whoever captures it has it.

- J Paul Getty
 

by Matt Savinar

[Excerpts]

"Big deal.  If gas prices get high, I’ll just get one of those hybrid cars.  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.  The size of this ratio stems from the fact that every step of modern food production is fossil fuel and petrochemical powered:

1. Pesticides are made from oil;
2. Commercial fertilizers are made from ammonia, which is made from natural gas, which is also about to peak.
3. Farming implements such as tractors and trailers are constructed and powered using oil;
4. Food distribution networks are entirely dependant on oil.  For instance, if you live in the US, the average piece of food is transported 1,500 miles before it gets to your plate.  If you live in Canada, that number is 5,000 miles.

In short, people gobble oil like two-legged SUVs.

It's not just transportation and agriculture that are entirely dependent on abundant, cheap oil.  Modern medicine, water distribution, and national defence are each entirely powered by oil and petroleum derived chemicals.  Most of the consumer goods you buy are made with plastic, which is derived from oil.  All manufacturing processes consume voracious amounts of oil.  For instance, the average car - including hybrids - consumes the energy contained in 25 - 50 barrels (or about 1,200 - 2,400 gallons) of oil during its construction, while the average computer consumes 10 times its weight in fossil fuels during its construction.  All electrical devices - including solar panels and windmills - make use of silver, copper, and/or platinum, all of which are discovered, extracted, transported, and fashioned using oil-powered machinery.

Nuclear energy requires uranium, which is also discovered, extracted, and transported using oil-powered machinery.  Nuclear power plants also consume a tremendous amount of oil during their initial construction and continued maintenance.  Most importantly, the modern banking and international monetary system is entirely dependent on a constantly increasing supply of oil.  Since as explained above, all modern economic activity from transportation to food production to manufacturing is dependent on oil supplies, money is really just a symbol for oil.

Consequently, a declining supply of oil must be accompanied by either a declining supply of money or by hyperinflation.  In either case, the result for the global banking system is the same: total collapse.  This may be what led Stephen Roach, the chief economist for investment bank Morgan Stanley, to recently state, "I fear modern day central banking is on the brink of systemic failure."

How is the Oil Industry Reacting to Peak Oil?

If you want to know the harsh truth about the future of oil, simply look at the actions of the oil industry.  As a recent article in MIT's Technology Review points out:

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, US 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 a bit silly when one considers how much money and political influence the oil industry has compared to the environmental movement.  If the oil companies wanted to build new refineries, they certainly have the money and political clout (H Bush in the White House 1980 - 1992, W Bush from 2000 - 2008) to get them built.  The real reason no new refineries have been built for almost 30 years has more do with simple good business practices than the efforts of environmentalists.  No oil company worth its salt is going to seek to build new refineries when they know there is going to be less and less oil to refine.

In addition to lowering their investments in oil exploration and production, oil companies have been merging as though the industry is living on borrowed time:

What do you think could possibly be motivating these companies to take such drastic actions?  You don't have to contemplate too much, as recent disclosures from oil industry insiders indicate we are indeed "damn close to peaking" while industry analysts are now concluding that large oil companies believe Peak Oil is at our doorstep.  In March 2005, the energy analysts at John C Herold Incorporated - the firm that that foretold Enron's demise - confirmed industry rumours that we are on the verge of an unprecedented crisis.

Is the Bush Administration Aware of Peak Oil?

Yes.  In late 1999, Dick Cheney stated:

By some estimates, there will be an average of 2% annual growth in global oil demand over the years ahead, along with, conservatively, a 3% 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 unable to produce much more than 80 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.  A report commissioned by Cheney and released in April 2001 was no less disturbing:

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."  One of George W Bush’s energy advisors, energy investment banker Matthew Simmons, has spoken at length about the impending crisis.  Simmons is a self-described "lifelong Republican."  His investment bank, Simmons and Company International, is considered the most reputable and reliable energy investment bank in the world.  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 2 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.  With oil prices at $182 per barrel, gas prices would likely rise to $7.00 per gallon.  But Simmons predictions are downright tame compared to what other analysts in the world of investment banking are preparing themselves for.  For instance, in April 2005, French investment bank Ixis-CIB warned, "crude oil prices could touch $380 a barrel by 2015."

A March 2005 report prepared for the US Department of Energy confirmed dire warnings of the investment banking community.  Entitled "The Mitigation of the Peaking of World Oil Production," the report observed:

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 2 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.

As one commentator recently observed, the reason our leaders are acting like desperados is because we have a desperate situation on our hands.  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...

What About all the Various Alternatives to Oil? Can't we Find Replacements?

Many politicians and economists insist that there are alternatives to oil and that we can "invent our way out of this."  Physicists and geologists tell us an entirely different story.  The politicians and economists are selling us 30-year old economic and political fantasies, while the physicists and geologists are telling us scientific and mathematical truth.  Rather than accept the high-tech myths proposed by the politicians and economists, its time for you to start asking critical questions about the so called "alternatives to oil" and facing some hard truths about energy.  While there are many technologically viable alternatives to oil, there are none (or combination thereof) that can supply us with anywhere near the amount of net-energy required by our modern monetary system and industrial infrastructure.

People tend to think of alternatives to oil as somehow independent from oil.  In reality, the alternatives to oil are more accurately described as "derivatives of oil."  It takes massive amounts of oil and other scarce resources to locate and mine the raw materials (silver, copper, platinum, uranium, et cetera) necessary to build solar panels, windmills, and nuclear power plants.  It takes more oil to construct these alternatives and even more oil to distribute them, maintain them, and adapt current infrastructure to run on them.  Each of the alternatives is besieged by numerous fundamental physical shortcomings that have, thus far, received little attention.

While there are some promising technological advancements in solar-nanotechnology, even Dr Richard Smalley, the scientist at the forefront of these technologies, admits we need a series of "miracles" to prevent a total collapse of industrial civilisation.  In the February 2005 issue of Discover Magazine, Dr Smalley gave the following prognosis:

There will be inflation as billions of people compete for insufficient resources.  There will be famine.  There will be terrorism and war.

He went on to say that it will take "presidential leadership" to inspire us to pursue technologies that might alleviate this crisis.  In other words, the chances of technology saving you from the coming economic collapse are about the same as the chances of another virgin-birth taking place.  For you or any other "average" person to expect high-tech solutions to save you from the economic effects of Peak Oil is akin to a person living in sub-Saharan Africa to expect high-tech medical treatments to save their community from the effects of AIDS.  These treatments are only available and affordable for super-wealthy people like Magic Johnson, not the average people in Africa.

Likewise, many of the recent technological advancements in energy production and efficiency may be available and affordable to extraordinarily wealthy people or agencies like the Department of Defense, but they aren't going to be available or affordable to you.  It may be a tough pill to swallow, but adaptation for 6 - 7 million super-wealthy people does not equal survival for 6 - 7 billion not-so-wealthy people.

Do World Governments Have Plans to Deal With This?

Absolutely.  The US government has been aware of Peak Oil since at least 1977 and has been actively planning for this crisis for over 30 years.  Three decades of careful, plotting analysis has yielded a comprehensive, sophisticated, and multi-faceted plan in which military force will be used to secure and control the globe's energy resources.  This plan is simplistically, but not altogether inaccurately - known as "Go to War to Get Oil."  This strategy was publicly announced in April 2001, when a report commissioned by Dick Cheney was released.  According to the report, entitled Strategic Energy Policy Challenges For The 21st Century, the US is facing the biggest energy crisis in history and that the crisis requires "a reassessment of the role of energy in American foreign policy."  That's a diplomatic way of saying we are going to be fighting oil wars for a very long time.

James Woolsey, the former Director of the CIA, practically admitted as much at a recent conference on renewable energy:

I fear we're going to be at war for decades, not years...  Ultimately we will win it, but one major component of that war is oil.

The war in Iraq, which has been 23 years in the making, is just the beginning of a worldwide war that "will not end in our lifetime."  The reason our leaders are telling us the "war on terror will last 50 years" and that the US engagement in the Middle East is now a "generational commitment" is two-fold:

1. All the countries accused of harbouring terrorists - Iraq, Iran, Syria,West Africa, Saudi Arabia - also happen to harbor large oil reserves.
2. Within 40 - 50 years, even these countries will see their oil reserves almost entirely depleted.  At that point, the "war on terror" will come to an end.

While the Middle East countries find themselves targets in the "war on terror", China, Russia, and Latin America find themselves targets in the recently declared and much more expansive "war on tyranny."  Whereas the "war on terror" is really a war for control of the world's oil reserves, this newly declared "war on tyranny" is really a war for control of the world's oil distribution and transportation chokepoints.  China and Russia have taken notice of these declarations and seem to be making preparations to defend themselves.  China has also strengthened its ties to oil-rich Venezuela while engaging in an undeclared oil-war with long time rival and US ally Japan.  This type of large-scale, long-term warfare will likely require a massive expansion of the military draft.  It's probably not a coincidence that the director of the Selective Service recently gave a presentation to Congress in which he recommended the military draft be extended to both genders, ages 18 - 35.

The strategy - as distasteful as it may be - is characterised by a Machiavellian logic.  Given the thermodynamic deficiencies of the alternatives to oil, the complexity of a large scale switch to these new sources of energy, and the wrenching economic and social effects of a declining energy supply, you can see why our leaders view force as the only viable way to deal with the coming crisis.  Of course, the US is not the only nation that needs affordable oil - not by a long shot.  France, Germany, Russia, and China all need it also.  While these countries may not be able or willing to directly confront the US on the battlefield, they are more than willing to attack the US financially.  The US may have the world's most deadly cluster bombs, but the EU has the world's most valuable currency, and intends to wield it as a strategic economic weapon to offset US firepower.

Sources: www.lifeaftertheoilcrash.net and page two last revised 19 April 2005

Simulated Oil Meltdown Shows US Economy's Vulnerability

by Kevin G Hall

Washington - Former CIA Director Robert Gates sighs deeply as he pores over reports of growing unrest in Nigeria.  Many Americans can't find the African nation on a map, but Gates knows that it's America's 5th-largest oil supplier and one that provides the light, sweet crude that US refiners prefer.

It's 11 days before Christmas 2005, and the turmoil is preventing about 600,000 barrels of oil per day from reaching the world oil market, which was already drum-tight.  Gates, functioning as the top national security adviser to the president, convenes the Cabinet to discuss the implications of Nigeria's spreading religious and ethnic unrest for America's economy.  Should US troops be sent to restore order?  Should America draw down its strategic oil reserves to stabilize soaring gasoline prices?  Cabinet officials agree that drawing down the reserves might signal weakness.  They recommend that the president simply announce his willingness to do so if necessary.

The economic effects of unrest in faraway Nigeria are immediate.  Crude oil prices soar above $80 a barrel. June's then-record $60 a barrel is a distant memory.  A gallon of unleaded gas now costs $3.31.  Americans shell out $75 to fill a mid-sized SUV.

If all this sounds like a Hollywood drama, it's not.  These scenarios unfolded in a simulated oil shock wave held in Washington.  Two former CIA directors and several other former top policy-makers participated to draw attention to America's need to reduce its dependence on oil, especially foreign oil.

Fast-forward to 19 January 2006.  A blast rips through Saudi Arabia's Haradh natural-gas plant.  Simultaneously, al Qaida terrorists seize a tanker at Alaska's Port of Valdez and crash it, igniting a massive fire that sweeps across oil terminals.  Crude oil spikes to $120 a barrel, and the US economy reels.  Gasoline prices hit $4.74 a gallon.  Gates convenes the Cabinet again.  Members still disagree on whether America should draw down its strategic oil reserves.  Homeland Security chief James Woolsey, who ran the CIA from 1993 to 1995, argues that a special energy czar is needed with broad powers to bypass the bureaucracy and impose offshore oil drilling and construction of refineries.  That won't help now, though, or resolve any short-term issues, counters Gene Sperling, who was President Clinton's national economic adviser.  The energy secretary suggests that relaxing clean-air standards could help refiners squeeze out every last drop of gas.  That makes the interior secretary, former Clinton Environmental Protection Agency chief Carol Browner, bristle.  She blames Detroit for the mess because automakers failed to develop hybrids and other fuel-efficient cars.  The Cabinet can't agree on even the simplest short-term solutions.  There aren't many options beyond encouraging car pools and lowering thermostats.  There's no infrastructure in place to deliver alternative fuels such as ethanol or diesel made from soybeans or waste products.

Fast-forward again, to 23 June 2006. Emboldened Saudi insurgents attack foreign oil workers, killing hundreds.  A mass evacuation follows from the world's pivotal oil producer, the one country that could be counted on to boost production during shortages in global supplies.  A take-charge guy with a Texas accent who led the CIA from 1991 to 1993, Gates calls yet another war-room meeting.  Global recession looms.  The world economy turns on cheap oil.  Without foreign oil workers, how will Saudi Arabia meet its production targets and quench the oil thirst of America, China and India?  Oil prices have reached an unthinkable $150 a barrel.  In Philadelphia, Miami and Kansas City, Missouri, gas prices reach $5.74 a gallon.  Now it takes $121 to fill that mid-sized SUV.

You get the picture.  The scenario is intended to show how vulnerable the US and world economies are because of dependence on oil from places where political instability threatens orderly production and distribution.  This year the world is consuming about 84 million barrels of oil a day.  America alone guzzles about 20.8 million barrels a day.  Experts think oil-producing nations have only 1.5 million barrels a day or less of unused production capacity right now.  A disruption anywhere could cause market panic and spiking prices.  That's largely why oil and gasoline prices are so high right now.  Saudi Arabia and other countries are trying to increase production, but that won't help much before next year at the earliest.  Meanwhile, any hiccup in production, delivery or refining could cause disaster.  "A million or a million and a half barrels of oil a day off the market is a very realistic kind of scenario.  You can think of a dozen different countries around the world ... where you can see that happening.  Or even a natural disaster could do that," Gates said in an interview.

Former CIA chief Woolsey described as "relatively mild" the scenarios that the National Commission on Energy Policy and the advocacy group Securing America's Future Energy simulated.  Both groups are pushing for reduced dependence on conventional oil.  "It was striking that by taking such small amounts off the market, you could have such dramatic impact" on world oil prices, said Robbie Diamond, the president of Securing America's Future Energy.  Richard Haass was a top adviser to former Secretary of State Colin Powell until 2003.  The simulation taught him how little influence policy-makers would have in reversing an oil shock wave.  "I think where most of the work has to happen now, both intellectually and politically, is on demand" reduction, Haass said.

Source: www.realcities.com Knight Ridder Newspapers 24 June 2005

End of Oil Could Fuel End of Civilisation as We Know It

by Robert Roy Britt

[Excerpt]

Global trap

Goodstein, author of the book Out of Gas: The End of the Age of Oil (W W Norton & Company) sees a looming world crisis that could fuel war and bring society to its knees.  "We have created a trap for ourselves," Goodstein said.

The US has so far avoided serious consequences from the trap by relying on imports.  The country uses about 7 billion of the 30 billion barrels of oil produced annually around the globe.  And it makes us rich.  Oil consumption equals standard of living, experts agree.  Meanwhile, other countries are beginning to clamour for oil at unprecedented rates, and therein lies the recipe for potential disaster.  China uses a comparatively modest 1.5 billion barrels a year (perhaps 2.4 billion this year) according to some estimates.  India consumes less.  Both countries' economies are becoming increasingly dependent on oil, however.  China's consumption is expected to grow 7.5% per year, and India’s 5.5%, according to the Institute for the Analysis of Global Security.

By 2060, oil production will have to triple just to meet global population growth and maintain current standards of living, said Stanford University geophysicist Amos Nur.  Yet China's own production has been flat since the 1980s and it now imports 40% of what it needs.  "What matters in the short term is, when do we panic?" Nur said.  "In my opinion, the point of panic has already taken place."

It's a behind-the-scenes sort of panic.  The two largest economies on earth - China and the United States - have already incorporated the finite nature of oil into their national security policies, Nur argues, citing policy statements from both governments reflecting the need to secure stability in oil-producing countries and a free flow of the resource.  The war in Iraq, a country second only to politically unstable Saudi Arabia in oil reserves, is another clue, he said.  "There is a huge conflict that might be emerging," Nur said.  Some of the fine points of the various presentations were argued, even resulting in one shouting match over how much oil is in Saudi Arabia.  But none of the roughly 500 scientists in the room voiced disagreement with Nur's view of the potential for war.

If the world is sliding toward global conflict over oil, the skids may be pretty well greased, politically speaking.  Governments do not have the political will to prepare for the end of oil, says Goodstein, the Caltech physicist.  "Civilisation as we know it will come to an end sometime this century, when the fuel runs out," Goodstein said, adding that "I certainly hope my prediction is wrong."

Source: www.livescience.com 14 December 2004

See also:

Peak Oil: Welcome to the Media's New Version of Shark Attacks (an external site) - for a balancing view.  "What most of these doomsday scenarios have gotten wrong is the fundamental idea of economics: people respond to incentives.  If the price of a good goes up, people demand less of it, the companies that make it figure out how to make more of it, and everyone tries to figure out how to produce substitutes for it.  Add to that the march of technological innovation (like the green revolution, birth control, et cetera).  The end result: markets figure out how to deal with problems of supply and demand."

Climbing the Energy Ladder

Per capita primary energy consumption grows with income in a similar pattern across countries and time.  Around $15,000 per capita ($1997 PPP) the relationship shifts as less energy-intensive services dominate economic growth.  There are signs of saturation beyond $25,000 and evidence that later developers require less energy.

Source: International Monetary Fund, BP

Sample Oil Prices March 2005

Source: air-inc.com

Oil Price Update May 2007

Source: wired.com graphic by 212box and information from Airinc, Energy Information Administration

Sources of Oil

Includes crude oil imported for storage in the Strategic Petroleum Reserve.

* Formerly Zaire
**Includes Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and United Arab Emirates.

Source: www.eia.doe.gov Petroleum Supply Annual 2004, Volume 1; Table 21

Portugal To Get World's First Commercial Wave Farm

by John Acher

Oslo - A Scottish company will deploy sausage-shaped tubes off Portugal to create the world's first commercial wave power plant, providing electricity to 1,500 homes from 2006, a partner in the Scottish firm said on Friday.  Ocean Power Delivery (OPD) will build the wave farm about five kilometers (3.1 miles) off Portugal's northern coast, near Povoa de Varzim, OPD's Norwegian backer Norsk Hydro said.  OPD will deliver three wave power generation units with capacity of 2.25 megawatts to Portuguese renewable energy group Enersis for 8 million euros ($10.12 million), but the project could be expanded significantly, Norsk Hydro said.

OPD's Pelamis P-750 wage energy converter is an elongated metal unit that looks like a big semi-submerged sausage, with hinged segments that rock with the sea, up and down and side to side, pumping fluid to hydraulic motors that drive generators.  The power produced by the generators is fed into underwater cables and brought to land where it enters the power grid.  A 120-meter (394-foot) long prototype has been tested since February 2004 in the Orkney Islands.  Norsk Hydro, the energy and aluminum group, owns 16% of OPD.

"The farm will... displace more than 6,000 tonnes of CO₂ emissions that would otherwise be produced by conventional hydrocarbon-fueled power plants," Hydro said.  CO₂ is the main gas widely blamed for global warming.  The deal with Enersis includes a letter of intent for a further 30 Palamis wave machines for a total of 20 megawatts before the end of 2006, subject to satisfactory performance by the initial installation, he said.  "If all goes well, many additional sites producing up to a total several hundred MW could be developed along the coast," Hydro added.

"We see this order as just the first step in developing the Portuguese market, which is anticipated to be worth up to €1 billion over the next 10 years," OPD Managing Director Richard Yemm said in the statement.  OPD is also in talks with Scottish Power, which has shown interest in installing a wave farm in the UK, Hydro said.  The European Union requires 22% of electricity consumption to come from renewable energy sources - such as solar, wind and wave - by 2010.  Renewables currently meet about 6% of European demand, Hydro said.

Enersis is a unit of Portuguese cement company Semapa.  Norsk Hydro's partners in Edinburgh-based OPD are investors Sustainable Asset Management, the Carbon Trust and 3i plc.  The firm also has financial support from the UK energy ministry.

($1 = €.7906)

Source: www.reuters.com Friday 20 May 2005

See also:

	Truck Stop/Internet Cafe: Will It Help Prevent the Oil Crash? (the previous page) - After decades of exploration, earth's geology and oil resources are fairly well known.  As fields empty, money helps scrape out hard-to-reach remainders.  210 billion barrels are left to discover and 1000 billion left to extract as indicated by a 40 year decline in oil's discovery.  But money can't create oil that simply isn't there...
	Fuel Cells Are Not Magic Bullets (the following page) - for a look at the potential for a hydrogen economy...
	Energy Options (the page after next) - for a few rational solutions...

For pages on several other natural disasters - including lightning strikes, tornados, hurricanes, volcanoes, floods, global warming and more - as well as some great satellite and tree photos, clicking the "Up" button immediately below takes you to the Table of Contents page for this Environment section.