It is par for the course that with oil hovering between $70 and $80 per barrel Americans have continued to buy SUVs and trucks at a rapid pace. Politicians don't have constituents screaming at them because gas is $4.00 per gallon, so it is no longer an issue for them. They need to focus on the November elections. It is no time to discuss a difficult issue that requires foresight and honesty. It is no time to tell the American public that oil will be over $200 a barrel within the next 5 years. Anyone who dared mention on CNBC today that oil will be over $200 a barrel would be eviscerated by Bartiromo and Kudlow, who see no crisis looming on the horizon. Politicians, the mainstream media and the American public in general have a breathtakingly myopic view of the world. Despite the obvious facts staring them in the face, Americans believe cheap oil is here to stay. Many seem to think that we are the chosen people and it is their right to have an endless supply of cheap oil, as if the American way of life had been granted by God.
A funny thing happened on our way to permanent prosperity and unlimited cheap oil. The right to prosperity was yanked out from underneath us by the current Greater Depression. The worldwide economic downturn has masked the onset of peak cheap oil.
Therefore, when it hits America with its full fury, it will be a complete surprise to the ignorant masses and the ignorant politicians who run this country. A Gallup Poll in August asked Americans about our most important problems. Where is the concern about future energy supplies? It isn't on the radar screens of Americans. They are probably more worried about whether The Situation will hook up with Snookie on the Jersey Shore reality show.
It is not surprising that the American public, American politicians, and the American media don't see the impending crisis. The organizations that have an interest in looking farther than next week into the future have all concluded that the downside of peak oil will cause chaos throughout the world. The US Military, the German Military, and the UK Department of Energy have all done detailed studies of the situation and come to the same conclusions. Social chaos, economic confusion, trade barriers, conflict, food shortages, riots, and war are in our future.
The U.S. was warned in 2005. Its own Department of Energy commissioned a report by Robert Hirsch to examine peak oil and its potential consequences to the US. The introduction stated:
"The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking."
The main conclusions reached by the experts who worked on this report were:
- World oil peaking is going to happen, and will likely be abrupt. World production of conventional oil will reach a maximum and decline thereafter.
- Oil peaking will adversely affect global economies, particularly the U.S. Over the past century the U.S. economy has been shaped by the availability of low-cost oil. The economic loss to the United States could be measured on a trillion-dollar scale. Aggressive fuel efficiency and substitute fuel production could provide substantial mitigation.
- The problem is liquid fuels for transportation. The lifetimes of transportation equipment are measured in decades. Rapid changeover in transportation equipment is inherently impossible. Motor vehicles, aircraft, trains, and ships have no ready alternative to liquid fuels.
- Mitigation efforts will require substantial time. Waiting until production peaks would leave the world with a liquid fuel deficit for 20 years. Initiating a crash program 10 years before peaking leaves a liquid fuels shortfall of a decade. Initiating a crash program 20 years before peaking could avoid a world liquid fuels shortfall.
- It is a matter of risk management. The peaking of world oil production is a classic risk management problem. Mitigation efforts earlier than required may be premature, if peaking is long delayed. On the other hand, if peaking is soon, failure to initiate mitigation could be extremely damaging.
- Economic upheaval is not inevitable. Without mitigation, the peaking of world oil production will cause major economic upheaval. Given enough lead-time, the problems are soluble with existing technologies. New technologies will help, but on a longer time scale.
The Hirsch Report clearly laid out the problem. It urged immediate action on multiple fronts. It is now 5 years later and absolutely nothing has been done. In the meantime, it has become abundantly clear that worldwide oil production peaked between 2005 and 2010. The Hirsch Report concluded we needed to begin preparing 20 years before peak oil in order to avoid chaos. We are now faced with the worst case scenario.
The US Military issued a Joint Operating Environmen t report earlier this year. They have no political motivation to sugarcoat or present a dire picture. This passage is particularly disturbing:
A severe energy crunch is inevitable without a massive expansion of production and refining capacity. While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India. At best, it would lead to periods of harsh economic adjustment. To what extent conservation measures, investments in alternative energy production, and efforts to expand petroleum production from tar sands and shale would mitigate such a period of adjustment is difficult to predict. One should not forget that the Great Depression spawned a number of totalitarian regimes that sought economic prosperity for their nations by ruthless conquest.
Here is the summary of their analysis:
To generate the energy required worldwide by the 2030s would require us to find an additional 1.4 MBD every year until then.
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