How do most of us get around? The typical answer would be “car” or “minivan/SUV/pickup”. A few will say otherwise. Should we expect this situation to continue unchanged in the future? And why did Bush say “America is addicted to oil” in his 2006 State of the Union speech (and other speeches)?
We’ve talked in the past about projections of crude oil production peak and decline, so were not surprised recently when a German military think tank internal report draft on future petroleum resources was leaked (and confirmed by Der Speigel), which raised disturbing warning flags.
The report identified serious economic risks Germany faces as a result of peak oil, ranging from a long steady decline in income and standard of living, to a volatile, negative market response (“tipping point”) when it becomes obvious that economic growth will have ended. Some of the report’s main points in the tipping point scenario were;
Intuitively, it may seem rather obvious that a phase of slowly declining oil production also leads to a slowly declining economic output, that Peak Oil would simply turn back the level of prosperity for a while, during which time technological solutions could be found. This intuition is deceptive: economies move within a narrow band of relative stability. Within this space, economic fluctuations and other shocks are possible, but the operating principles remain the same and provide a new equilibrium within the system. Outside of this space, however, this system reacts chaotically.
• Banks lose their business base. Cannot pay interest on deposits, because they can not find creditworthy companies.
• Loss of confidence in currencies. The belief in the value-preserving function of money is lost. It only comes to hyper inflation and black markets, then to a barter economy at the local level.
• Collapse of value chains. Labor processes are based on the possibility of trade in precursors. The processing of the necessary transactions without money is extremely difficult.
• Unbound monetary collapse. If currencies lose their value in their country of origin, they are no longer exchangeable for foreign currency. International value chains collapse as well.
• Mass unemployment. Modern societies are composed of specialized labor. Many professions have to deal only with the management of this high degree of complexity and nothing more with the direct production of consumer goods. The expected reduction in the complexity of economies would result in a dramatic increase in unemployment.
• State bankruptcies. In the situation described, state revenues drop precipitously. The possibilities of acquiring new debt are extremely limited.
• Collapse of critical infrastructure. Neither the physical nor the financial resources remain for the maintenance of adequate infrastructures. The problem is compounded by the interdependence between different infrastructure subsystems.
• Famines. Ultimately, it will provide a challenge-to produce food in sufficient quantity and distributed.
A shrinking indefinitely economic performance represents a highly unstable state, the inevitable end to a system collapse. The security risks of such a development can not be assessed.
There is also a recent quote from Dr. Robert Hirsch, who was asked when he thought peak oil would occur;
“In years past, there was considerable uncertainty in my mind about when the decline of world oil production might begin. Recently it became clear to me that it’s going to be sooner rather than later. I believe that the onset of the decline of world oil production is likely in the next two to five years. “
Dr. Hirsch, besides being the lead author of the DoE’s Peak Oil Report, has an extensive energy resource background;
- Manager of Exxon’s synthetic fuels research laboratory
- Manager of Petroleum Exploratory Research at Exxon
- Vice President and Manager of Research and Technical Services for Atlantic Richfield Co. (ARCO) (Oil and gas exploration and production).
- Vice President of the Electric Power Research Institute (EPRI)
- Senior Energy Analyst, RAND
- Assistant Administrator of the U.S. Energy Research and Development Administration (ERDA) responsible for renewables, fusion, geothermal and basic research
- Director of fusion research at the U.S. Atomic Energy Commission and ERDA
So it is clear that life with be dramatically different within the next few years. With unprecedented social and economic changes literally on our doorstep (on top of the current weak economic conditions), what kind of transitions should Loudoun be focusing on for the next 1, 5, and 10+ years? Please offer your comments at the Sustainable Loudoun forum section on Transition.
— Will Stewart