More than a Peek at Peak Oil

Last weekend, The New York Times Magazine cover-featured the subject of peak oil. I've written about it before (though mostly as a reason to provide links), but it's a subject I fear we'll be returning to again and again. You don't have to be a geologist to recognize that oil is a nonrenewable resource. The planet has howevermuch it has, and when it's gone, it's gone. Do we know how much oil we've got? There are a few people who seem to have knowledgeable guesses, but as Peter Maass points out in his NYTimes Magazine piece, those are usually closely guarded state secrets. And in the cases of most of the oil-producing nations, it's very much in their interests to overestimate.

As I understand it, the phrase peak oil refers to the point at which we've extracted more oil from the earth than is left in the earth, the half-way point. We won't necessarily know when we reach it (or if we already have), but it's all downhill from there. We can assume that we'll already have pumped the oil that's easiest to obtain, so the second half will be more difficult and more expensive to extract. In fact, there may be some oil that we're never able to get our hands on.

But there's another factor at play, as well, that reliable old economic concept of supply and demand. Demand for oil around the world just keeps growing and growing. Although we always seem to need more and more oil in these United States, the real expanding markets are in Asia. China and India are coming into their own as economic powers, and they're modernizing by leaps and bounds. Modernizing, in this world at least, means more industry and more cars. For that, they need more power, and for the time being, more power means more oil. So the world is using more and more oil every day, and there's some controversy as to how much more oil the world can produce. Right now we seem to be at or near the top of production capability, but demand isn't going to stabilize. When demand surpasses supply, prices rise accordingly (is this why prices are so high now? Nobody that I've found is quite willing to say). When prices rise, people can't afford the product as easily, so they don't use as much, so demand falls. That's all simple and straightforward in theory, but what happens when we're the ones who can't afford to buy gas for our cars? What does that do to our lifestyle? And it's not just cars, but everything that travels (which excludes nothing, as far as I can see) is affected.

Of course, as our economic textbooks remind us, when demand falls, prices go back down. At that point, everything is OK again, right? No. Even if there's still some flexibility in the level of oil production, there's a limit to it. At that point, demand has to accommodate itself to supply. There's no rising supply to meet rising demand any longer. Matthew Simmons, a former energy advisor to the Bush campaign, is concerned that we don't have as much oil as we believe and discusses that in his book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. Chevron has even admitted the problem in an ad campaign that states baldly, "The era of easy oil is over." Maass talked to Sadad al-Husseini, who recently retired as head of Aramco, the Saudi national oil company. He was far more candid than one might expect (Maass reports that it's rumored he was pushed out of Aramco):

"You look at the globe and ask, 'Where are the big increments?' and there's hardly anything but Saudi Arabia," he said. "The kingdom and [its largest oil field] Ghawar field are not the problem. That misses the whole point. The problem is that [demand goes] from 79 million barrels a day in 2002 to 82.5 in 2003 to 84.5 in 2004. You're leaping by two million to three million a year, and if you have to cover declines, that's another four to five million." In other words, if demand and depletion patterns continue, every year the world will need to open enough fields or wells to pump an additional six to eight million barrels a day--at least two million new barrels a day to meet the rising demand and at least four million to compensate for the declining production of existing fields. "That's like a whole new Saudi Arabia every couple of years," Husseini said. "It can't be done indefinitely. It's not sustainable."

That's only common sense. Whether the crunch comes in one year, ten years, or one hundred, it has to come. And we're doing nothing to prepare. The energy bill that the Prez signed in such a flourish a couple of weeks ago has barely any provisions for lowering oil consumption. Husseini had a response to that, too:

"Everybody is looking at the producers to pull the chestnuts out of the fire, as if it's our job to fix everybody's problems," he told me. "It's not our problem to tell a democratically elected government that you have to do something about your runaway consumers. If your government can't do the job, you can't expect other governments to do it for them."

It's our problem. We're the ones who will suffer if we don't address it.