Monday, August 07, 2006

Peak Oil Pique

I read a lot of nuclear-apocalyptic sci-fi as a kid, and even had to give lessons on Alas, Babylon when I taught high-school English, so I’ve read many variants of this scene:

CHARACTER ONE: Full-scale nuclear war is horrible. And I never saw it coming! The events that finally led to the destruction of our world seemed no different from the thousand other events that could have led to Armageddon, but didn’t.

CHARACTER TWO: (gravely) Yes. The tragedy of our era is that we faced so many potential crises we became inured to the real one.

In Alas, Babylon, the final hours before the nuclear war were filled with special-alert radio bulletins like “Soviet ships are heading toward the Med” and “the Kremlin calls this an act of provocation” — pretty much the same news bulletins I heard every day of my life until the Berlin Wall went down. None of them started a nuclear war. They could have led to Armageddon, but they didn’t.

There’s plenty of ominous things on the horizon nowadays, too. Israel, Iraq, Iran, North Korea, China, the economy, the environment — any of them could lead to disaster. Who knows whether or not they will? There’s not much I can do either way. Besides, my long-term worry isn’t even on that list. Get this: I think there really is something to that Peak Oil business.

Here’s a couple of Peak Oil sites. I link to them with great reluctance, because if Peak Oil were Christianity its Web designers would be Pentecostal Fundamentalists who speak in tongues and go to church three times a week. I’m more of a Peak Oil Episcopalian, who attends services on Easter and Christmas Eve and drinks a lot of bourbon beforehand to make the sermon tolerable. Being associated with fundamentalists embarrasses me. And with Peak Oil, the fundamentalists are all anybody hears about.

Those sites I linked to — yeah, they’ve got some good information, if you can find it in the fog of ninety percent of humanity dropping dead, technology disappearing, and civilization regressing to the Dark Ages. That’s the fundamentalist version. Episcopalian doctrine merely states that gasoline will get expensive enough to seriously hurt our economy, but that doesn’t make for an exciting website so we don’t have much of a Net presence.

I don’t like to talk about Peak Oil. The fundamentalists call me an airhead optimist, while the naysayers think I’m one of those paranoid apocalypse guys I myself made fun of in previous posts. So I’d hardly even mention it, except I found this bit of news coming out of Iran:

Iran warned Britain and the US yesterday that the international community could face a new oil crisis if the United Nations security council imposes sanctions on Tehran over its alleged attempt to acquire a nuclear weapons-making capability.
Speaking in Tehran, Ali Larijani, the country's chief nuclear negotiator and head of the supreme national security council, said Iran would be reluctant to cut its oil exports. "We do not want to use the oil weapon. It is them who would impose it upon us." But Mr Larijani added that if the west did decide on sanctions, "we will react in a way that would be painful for them ... Do not force us to do something that will make people shiver in the cold."

This might be the seemingly insignificant event that leads to Armageddon (at least economically), or another one of those events that could lead to it, but won’t. Considering how hot this summer’s been I’m not too worried about shivering in the cold, but I wonder: how much higher can oil prices go before they start to hurt us?

EDIT: Changed "immured" to "inured" after Mediageek pointed out the error. Don't blog when you're tired, people.


Anonymous Sandy said...

I was sure you were going to link to this story about a BP shutting down production in Alaska because a pipeline was found to be corroded. This actually sent prices higher, which indicates supply and demand are pretty tightly balanced right now.

Iran is not the world's biggest producer, and I think oil prices probably already include a fair amount of discounting of their supply given how wacky they are. But prices will probably rise if things get more tense over there--witness the increases from Lebanon and Israel, two non-producers in the region, going to war.

That being said, since gasoline is only now barely approaching historic highs once inflation is taken into account, I am not unduly worried about an apocalypse. I think you'd come off more Episcopal if you didn't start a post about it with a meditation on nuclear war. ;)

Other factors that cause me not to lose sleep at night about an oil shortage as a threat to the Western way of life: the economy is less energy-intensive now than in 1977 and uses far less oil per dollar of GDP. We can also do a lot more electronically than we do--meetings rarely need to take place in person anymore. It will suck for convention towns, but it might be a boon for towns with IT companies.

So oil will have to increase much more quickly over a much shorter period of time for the economy not to adjust.

If you're looking for a miracle, to use the religious metaphor, in that oil will become scarcer relative to demand and prices will rise and there will be zero shocks to the economy or local adjustments that make life suck for some, you'll not find that from me. If you're looking for prophesy of how we will get from oil to the next thing, with nice signs and portents to let you measure progress to rapture, you'll not get that either.

But similarly I doubt anything much worse than the economy of the late 70s/early 80s will take place from oil adjustments alone. I'd first worry about panic regulation in the face of climate change, a natural disaster wiping out Tokyo or Seattle, or bird flu panic halting global trade. I think those are real possibilities and I'm not sure how we could avoid a nasty downturn for each.

9:28 PM  
Blogger rhhardin said...

Economically, all that happens is that stuff that was economic becomes uneconomic and other stuff that was uneconomic becomes economic.

So we wind up doing different stuff, unless a vast program of taxation and subsidies are instituted to prevent changing.

As to oil, we're effectively handing the Middle East weapons in return for their nifty oil, which strategically maybe is not a good idea.

The war on terror aims to reform the Middle East politics instead of stopping using their only economic product ; this having the moral advantage of actually helping them as well.

What started the war was the realization that nutwads are getting fairly threatening weapons, and hence the 9/11 idea that henceforth the US will not coinhabit the globe with 8th century governments.

3:33 AM  
Anonymous Anonymous said...

What the previous two commenters said.... but wanted to add my two cents worth as well.

I work for a leading company that makes very specialized tools to get oil out of the ground under difficult circumstances, which is pretty much all the circumstances we have right now. I went to a class on the oil industry a few years ago, and someone in the class brought up Peak Oil. The teacher laughed, nodded sagely, and gave us this thumbnail analysis:

"True: We are running out of oil.
False: We will run out of oil."

Strange as that sounds, it's very true. There is only a limited amount of oil that we have the capability to extract right now and make pay. But there is far more petroleum in the earth than you think, probably so much that it would satisfy any reasonable dream of "enough" oil.

Every year our scientists and engineers find new ways of getting that oil out, ways that weren't there before or couldn't be made profitable. Multiply that by ten to a hundred more companies right here in Houston, all competing to get more of what's there.

At present prices, it's now become profitable to exploit the oil shale of Canada. The province of Alberta is now the new Texas. That shale was considered unprofitable just a few short years ago, but it has vast amounts of oil locked up in it. We're OK at present prices, and our technologies are making it less expensive to get that oil, now that the prospect of a decent profit motivates us to try harder. As we get better at it, prices may drop. It's not totally out of the question.

Even if Peak Oil was spot on, and we were going to extract every drop of petroleum out of the earth in--what? thirty years? I forget--we would still not run out. Oil would simply get more and more expensive until people would basically stop buying it.

(The Harris Poll, incidentally, has taken to asking a question at the end of all their panel surveys about how much the oil price would have to rise before the respondent would consider cutting back on driving. As a telecommuter and city dweller, I reached that point about seventy cents ago.)

5:45 AM  
Blogger Jennifer said...

Just to clarify, Anonymous, I have no fear that we will "run out" of oil. Even the PO fundamentalists know that won't happen. What I'm worried about is gas getting too expensive to sustain our easy-motoring economy. What percentage of Americans live 30 or more miles away from their jobs? If continuing to live in such homes became unaffordable, how many more residents could our cities and small towns afford to absorb? Meanwhile, what percentage of our national wealth is tied up in suburban homes that may become close to worthless in the near future?

If one guy goes bankrupt and loses his home, that's his problem. If 99 percent of Americans go bankrupt and lose their homes, that's a national problem. I don't know where exactly you draw the line between "one guy" and "99 percent of Americans," but I think PO will make us land on the wrong side of that line.

Even worse is that our economy is already heading for a bad spot independent of oil. With this housing bubble, you saw lots of people using bizarre exotic home mortgages to buy more house than they could afford, and now that their adjustable-rate mortgages are going up the foreclosure rate is, too. And I'm sure you've seen the appalling debt statistics for Americans as well.

We didn't need a natural-resource shortage to bring on the first great depression; widespread fiscal irresponsibility was enough on its own. Combine this irresponsibility WITH a resource shortage (or at least a steep price increase in a normally cheap resource) and I do think we're headed for a bad way.

7:33 AM  
Anonymous Anonymous said...

Same anonymous...

I agree; even if oil was free as air, the housing and stock markets would be heading for a bad spot in the road, and we're going to wind up being shaken up in the back of that particular economic pickup truck like a couple of helpless dogs.

That wasn't too Texan a simile for you? ;)

7:55 AM  
Anonymous NoStar said...

Being associated with fundamentalists embarrasses me.

I try not to take things personally, but does this mean you'd rather I not frequent your blog? I am after all a charismatic, fundamentalist and Pentacostal Christian. (Or am I at least partially redeemed by also being a smart assed contrarian libertarian?)

9:28 AM  
Anonymous NoStar said...

If one guy goes bankrupt and loses his home, that's his problem. If 99 percent of Americans go bankrupt and lose their homes, that's a national problem. I don't know where exactly you draw the line between "one guy" and "99 percent of Americans,"

The late University of Washington Economics Professor Dean Worcester
(his posthumously published book "Liberty at Risk" is available free on pdf at once told me
"When my neighbor loses his job, that is an economic downturn. When my wife loses her job, that is a recession. When I lose my job, that is a DEPRESSION!"

PS: I linked "Liberty at Risk" to my name so you don't have to cut and paste.

10:01 AM  
Blogger Jennifer said...

I try not to take things personally, but does this mean you'd rather I not frequent your blog?

Good Lord, NoStar, I hope you meant that as a joke. What I meant was, "As a Peak Oil Episcopalian, I am very embarrassed when people assume I'm a PO fundamentalist."

11:58 AM  
Anonymous A Moose said...

I personally think there will be an escalating cost, and while there will be an economic impact, you'll see at some point people pull their heads out of the sand and realize that nuclear is the only real long term solution that's economically and environmentally viable at the moment. "The Moment" in this case is defined as our current state of technology. This would do two things, first, eliminate dependence upon fossil fuels, or dramatically reduce at least, for general power consumption. Second, it would provide cheap power for fueling things like electric vehicles, which would be the natural alternative to fossil fuel at that we currently have.

Solar boilers would be ok in the south, but don't work well in the north or northeast. Photovoltaics are cost prohibitive also (despite the fact that I have them on the roof, but it's a personal 'green' choice for me). Nuclear is our only real option, and in terms of pollutants, is much much cleaner than any of the other alternatives. As for the spent fuel, glassification provides for stable transport and final disposal, with long term stabilization.

The problem is, how big a speed bump we're going to have on the way from here to there.

12:18 PM  
Blogger Jennifer said...

Moose, your solutions work in regards to electrical generation, but that's not what worries me; it's our transportation infrastructure. Very little of our electricity comes from petroleum anyway; make every drop of oil disappear tomorrow and we'd probably be fine for electricity. Hell, we'll just turn off the lights on the Vegas strip if we have to.

But the overwhelming majority of Americans have lives that will be impossible without their own personal means of transport. Even mass transit wouldn't work as we are now, because we're too spread out. Yes, people could abandon the hypersuburbs and move closer to where they work, but that would lead to the severe economic disruptions I'm worried about.

12:41 PM  
Anonymous mediageek said...

Hate to be a pedantic grammar nazi, but I think you've confused "immure" with "inure."

1:36 PM  
Anonymous A Moose said...

but that would lead to the severe economic disruptions I'm worried about.

A valid worry to have. However, how are we going to get this system back to what it would be absent govt interference without the pain index high enough to get people's attention?

1:37 PM  
Anonymous Anonymous said...

Iran doesn't want to sell us oil? Who cares? They have to sell it to someone. If they won't sell it to us they have to sell it to country "A". Country "A" no longer needs to buy as much oil from country "B" which means they can sell it to us. Supply and demand works it all out for us.

9:04 PM  

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