charles hugh smith-Peak Oil: Denial Won't Fill Your Tank

	weblog/wEssays archives	home
	Peak Oil: Denial Won't Fill Your Tank (April 12, 2007) *Today is "Financial Titanic Day," when we honor the timeless metaphor offered by the "unsinkable" Titanic.* The financial ship has already struck the iceberg of reckless speculation which has torn a gaping gash below the waterline, dooming the "unsinkable" global economy to the depths of a two-mile deep recession. The first four watertight compartments have been slashed open, and the Plunge Protection Team's massive pumps could keep up with the leaks--but alas, the fifth watertight compartment has been compromised, and even the mighty PPT pumps cannot save the ship from foundering. Today's topic: Peak Oil. Production has peaked but denial rules. The band is still playing on deck even as the ship lists. Just for context, here are gasoline prices I paid in high-tax, refineries-always-offline California: 8/26/02 $1.44/gal 1/31/04 1.65/gal 2/3/05 $1.97/gal today $3.22/gal The price of gasoline has doubled in about 3 years, and risen 50% in 2 years. Does this suggest supply is meeting demand? You know the story, but I'll summarize it: American geologist M. King Hubbert predicted that world oil production would rise to a peak and then fall. He predicted that U.S. production would peak in the early '70s, which turned out to be accurate. World production has now peaked, as the links below document. (see chart above) Most of the world's oil is drawn from super-giant fields. The last super-giant oil field was discovered in the 70s--since then, nada. If you want to understand why, please read Beyond Oil: The View from Hubbert's Peak by geologist Kenneth S. Deffeyes. Global demand for oil is rising and will continue to rise as China and India industrialize and move to an auto-centric urban lifestyle. Alternative sources such as oil shale have been hyped to the stratosphere but are limited. Canada's maximum oil shale production capacity is 2 million barrels a day; the U.S. alone burns 23 million barrels a day--10 times more than all oil shale production. Historically, oil prices are nowhere near their peak; future prices are projected to reach $300/barrel in the not-to-distant future There are no alternatives. If the entire U.S. corn and soybean crops were converted into fuels (a process which requires massive quantities of petroleum for processing and shipping), those bio-fuels would meet less than 10% of U.S. daily demand. Global reserves have been overstated for years. Saudi Arabian reserves are a key example--see Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy for documentation. (recommended by analyst/contributor U. Doran) See links below for additional information. Petroleum isn't just for cars; it's the feedstock for jet fuel, fertilizers, plastics and myriad chemicals. As production declines, a wide array of key industries will be negatively affected. See The Party's Over: Oil, War and the Fate of Industrial Societies for more. Resource Analyst and frequent contributor U. Doran has suggested the following stories for documentation that super-giant fields in Mexico and Saudi Arabia have already peaked and are declining rapidly. interview with Twilight in the Desert author Matt Simmons Saudi Oil Production Declines Further Evidence of Saudi Arabia's Oil Production Decline Further Forensics on Saudi Oil Supply Iran's Long Term Energy Problems There is one alternative which is actually practical: massive development of solar power. This book does an excellent job of outlining how solar electrical generation could cut oil use by half--which would be a darned good start: The Solar Economy: Renewable Energy for a Sustainable Global Future. For more on this subject and a wide array of other topics, please visit my weblog. copyright © 2007 Charles Hugh Smith. All rights reserved in all media. I would be honored if you linked this wEssay to your site, or printed a copy for your own use.
	weblog/wEssays	home