Blog Update!
For those of you not following me on Facebook, as of the Summer of 2019 I've moved to Central WA, to a tiny mountain town of less than 1,000 people.

I will be covering my exploits here in the Cascades, as I try to further reduce my impact on the environment. With the same attitude, just at a higher altitude!

Wednesday, August 6, 2008

Peak oil primer - what does it all mean?

Peak Oil CampI know a lot of you out there are quite apprehensive about peak oil and what it means for the future. The cost and availability of oil have been all over the news the last few months and we are all witness to the rising oil prices. We'll see something similar with natural gas in the next few years as we hit peak natural gas soon, too.

The short story on this is that there is or will be a decline in availability of easy-access and inexpensive energy sources. This doesn't mean that we will be stepping off a precipice suddenly and there will be NO MORE OIL like, next year, in spite of what you may be reading on other sites and blogs.

On the contrary, what it means is that there will be a decline in production of light, sweet crude oil (we'll call this "easy" oil) and an increase in production of heavy, sour crude oil, oil shale and tar sands (we'll call this "difficult" oil). The whole concept of the term peak means that we've used 50% of the oil known to exist, mainly the easy oil.

The issue with extracting the difficult oil, is that it is, well, more difficult and more costly. There are also issues with more environmental degradation (particularly with the oil shale and tar sands) in extracting the more difficult sources of oil in addition to the massive energy and water inputs required as well. But, all that said, it is oil and it can and will be extracted one way or another as long as it remains profitable.

As the return on investment of oil production goes down you'll see an increase in usage of natural gas and coal and a whole lot more investment in energy alternatives such as wind, solar and geothermal, among other things. And, as the cost of energy goes up, you'll see a lot more innovation in energy efficiencies from manufacturers and conservation from consumers.

We are already seeing this with investments in new energy and in the market as manufacturers try to switch gears to adjust to higher oil costs. Some industries will be hit harder than others, and some may go out of business, but there are plenty of new opportunities to take their place within the new energy economy as well as in the restructuring to more local, community-based businesses.

The worst case scenario with peak oil is that this transition will be bumpy and we'll see some economic fall-out. I'm hoping for a little turbulence (or as my brother would say "light chop") as we slowly ease off petroleum and gear up on alternatives. It all depends on how willing people are to let go of their old habits. And that starts with you.

So, should you be panicking? Well, no, my take on peak oil is far from theskyisfallingweareallgoingtohellinahandbasket reaction. Will it affect our way of living and economy and food supplies? Well, yes, but not in the drastic manner many are purporting. Since it will be more expensive to produce food and manufacture products you will have to modify your behavior. In other words, you'll have to drive less, travel less and use less energy.

What merchandise and services you do buy will most likely be more locally oriented. The massive economies of scale (aka Walmart, chain restaurants and the like) will lessen considerably with higher costs of petroleum since these businesses rely on cheap oil to keep costs low. So, expect a return to local businesses to provide goods and services. Why is this? Mainly due to lesser energy intensive transportation costs.

In my next post on the topic, I'll discuss in more detail some of the issues with over-reacting to peak oil and what you can be doing to limit the impact. So, in the meantime, take a deep breath and try to relax. The world isn't going to end tomorrow or even next year. You've got some time to get a handle on this.


ruchi said...

Crunch, thank you, THANK YOU, THANK YOU for talking about peak oil in a normal, responsible, non-fatalistic manner.

It IS important that we all learn about peak oil and the dangers peak oil poses, but it is just as important that we act calmly and rationally.

And this is why Crunchy is my hero.

The end.

Lee said...

I'm still wondering how hard The Powers That Be will fight to keep the world rolling along in much the same way, long after it has become mindbogglingly obvious that things have to change.

Don't the Chinese have a saying that is more like a curse: "May yo live in interesting times"?

Well, the times sure are getting interesting right now!

Robj98168 said...

I think it is important to talk about peak oil in a normal manner.
I don't think we will go to hell in a hand basket, I do however believe there are gonna be alot of surprised folks out there. Hopefully there will be a few of us who have the forethought to buy our elelctric cars, grow our own food, and live responsibly,to show the way.

Anonymous said...

The worst case scenario with peak oil is that this transition will be bumpy and we'll see some economic fall-out.

It may not be TEOTWAWKI for western civilization but there are a lot of quite serious and quite plausible scenarios encapsulated within bumpy and economic fall-out.

Those bumps and that fall-out may well seem like the end of the world if you're the one getting bumped and fallen over.

BTW, great blog. Longtime reader of Sharon, just found you...

Anonymous said...

Hm. In Australia the price of petrol (gas) just dropped 30c per litre, and is supposed to drop another 15c shortly. Why??? I liked it when everyone was getting all nice and scared and thinking about changing their lifestyles!!!

Unknown said...

I agree! I liked it better too when people were thinking really hard about driving, and buying plastic crap and disposable things. All of a sudden I'm not really crazy about the cost of fuel going down to where it was before.

Thanks for demystifying peak oil, Crunchy!

jewishfarmer said...

Ok, I'm going to disagree with you a little bit here. Not in your contention that peak oil is not TEOTWAKI - that I agree with. Nor do I disagree that oil will still exist - although I'm really not sure what website you are talking about that suggests otherwise - the idea oil is simply disappearing is a common misperception about peak oil, but not one I think that is promulgated by most peak oil thinkers. But I do think you are understating its effects.

First, you say that we'll rely more on natural gas. At least in the US, this problematic - a. natural gas in the US is probably past its peak. b. Natural gas in North America is very near its peak. c. Canadians are currently obligated by NAFTA to sell much of their natural gas this way - which means as supplies tighten, this is going to be a political controversy - so the US at least may not be able to rely on natural gas supplies in the long term. LNG - liquid natural gas is extremely expensive to transport. I think right now there is a move to natural gas - but one that will only hasten the supply shock facing us on that issue.

We will certainly see more renewable energies in use - but because these can't be scaled terrifically rapidly, and because the cost of these energies depends on the cost of the fossil fuels used to manufacture them and ship and maintain them, we can expect the cost of renewable energies to rise even as they become competetive - that means that low income people get priced out of the market, because the renewables aren't becoming competetive by getting cheaper so much as they are becoming competetive as the cost of everything else rises - that means electricity, for example, will be more competetive - and for some people, simply too expensive to have or have enough of to meet basic needs.

You mention gains in efficiency - I really recommend Thomas Princen's book _The Logic of Sufficiency_ where he explores the limitations of efficiency as a model for dealing with an energy crisis. It is an excellent book - he observes that efficiency isn't that panacea people think it is - for example, historically our use of energy has become more efficient in specific areas, but we've also constantly expanded our use of that energy. Jeavon's paradox has found that the more efficient we become, the more energy we actually use. Now this isn't a law, and it is possible that we could overcome our history in this manner, but it isn't as inevitable as you seem to suggest, either. That is, just because we use energy more efficiently doesn't mean we will use less of it - or enough less of it. Our current model rations energy by price, which means the poor, who already used less energy, end up using very little, and the rich, who already used the most, get to keep using it.

But the big thing that you don't discuss is economic growth. I think the reason that many peak oil folks are less optimistic than you are is this - oil and natural gas and electricity are the engines of economic growth. And without consistent growth, what we get is not a little bump, but a recession, or even more likely a depression. Growth so far has *always* depended on using more energy and resources - always. So no matter how we refine our usage, if we're going to keep the economy growing, we have to use more and more energy - and since there's no way renewable sources can make up the gap in the long term, we get economic problems - big ones. And those economic problems affect our ability to grow renewables or adapt to our new circumstances.

The problem isn't just that people will have to use less - we're already seeing that the poor have to use barely any at all, not enough to meet basic needs, because the system of supports depends on cheap energy too. And we're also already seeing more and more people getting poorer. I think for many people who succeed in remaining middle class, which may include quite a few people at your blog and mine, peak oil may really simply be a bunch of bumps to be overcome. But for the people who are poor now or become poor, I think this is a little overoptimistic - because they are headed into something that I think can't be described as a bump. And how many of us become poor - well that depends on how policy makers respond (yup, there's something you want your kids getting to eat to depend on) and a host of other factors.

I think peak oil isn't that big a deal if you are fortunate. The problem is that I wouldn't recommend betting on good fortune.


Anonymous said...

I just saw McCain jabbering about off shore drilling. That is very scary to me. Is it true that Obama has changed his mind on off-shore drilling? I live in Huntington Beach, CA and I'd hate to see my coastline filled with oil rigs. I plan on researching this issue, b/c there is so much I don't understand. Great post, Crunchy, as usual :-]
Thank you for making me think about real issues everyday!!!

Green Bean said...

And this is all a good thing, ultimately. Less emissions. More community. More exercise. Less junk food. Etc. Etc.

Though I do agree with Daharja. How long will those in power struggle to keep the ole party rocking.

Farmer's Daughter said...

Thanks for writing the primer to catch some folks up. What I'm really looking forward to hearing from you is what we can do to prepare ourselves to deal with it. Renewable energies? Alternative transportation? Right now, the best we're doing is storing food (although not like Sharon does!) and chopping wood.

Connie said...

How choppy the water is, depends on where you sit on the boat.

That is, the whole climate change, economy thing and peak oil are all tied together.

If you have reserves and awareness, a garden, some skills, then there will be some chop.

The trouble comes in where we all take a step down from our socio economic group. Not what anyone hopes for but survivable for upper and middle class.

The poor taking a step down in socio economic class however is scary.

Jan said...

Well, that's the first time I was able to understand what the heck is going on as well as what is going to happen. Thanks for the simple explanation.

Anonymous said...

Way to tackle peak oil, CC! I think it's going to be a bumpy ride, and that climate change is also going to play a big part in that ride. (Why do we always use the term 'ride' - this isn't going to be a ride on some amusement park, eh?)

I agree with Sharon, that it is going to be much more difficult for the less privileged. Certainly my family felt it when we lived in a rural setting for a year - and we were able to get out of that setting before it got too bad. Others are not so lucky. Already, high gas prices are affecting poor, rural areas hardest. Climate change, too, will affect poorer areas of the world hardest.

So not only must we all prepare our families for a different world, but we must change our everyday thinking to include helping others less fortunate. I'm not even sure how to do that, except to help prepare our communities as a whole, to become involved in national and worldwide political decisions, and if we are so lucky to have money to share, we should put money toward organizations working to help prepare other parts of the world.

Anonymous said...

It means we are screwed screwed screwed! Get good at bicycle repair!

- T

Stephanie said...

Thank you for this primer! I have been extremely confused on this whole "peak oil" thing, and this makes much more sense than anything else I've read.

Plus, what Arduous said. The calm and rational part really helps me understand it better and not get bogged down by worry.

Bobbi said...

I read through the entire list of comments and you guys are a bright group. I agree. Let's continue to discuss the energy issue.

I think Obama gets it, though I am concerned about his switch to offshore drilling. I know what it's like to walk the Santa Barbara, CA beaches and get tar on my feet from the oil rigs offshore.

But in his energy speech he said the world as we know it will change. But we can pull together and become the 'can do' nation that we used to be. I liked that. We're looking for leadership and vision. It's about education. The more we who are really interested can learn, the better we'll be at getting the word out. Looking forward to your next energy post.

Anonymous said...

Peak oil hasten happened yet. Let's DRILL in America everywhere and encourage the use of other energy alternatives. Nothing exits today that will replace oil.
We need new inventions that will take advantage of solar energy. Nuclear power is needed as is wind & Hydrogen. But in the meantime, Let's DRILL.

Anonymous said...

I just saw a news piece linked in about The Bakken Formation in North Dakota. Seems they've found oil in them plains in Stanley, North Dakota. While it might have been just another one of those media hype jobs, the hype "background research" said that there is more oil there then was or is under Texas. And they're already drilling and pulling out oil in Stanley. That would be good news to hold off any Artic or Off-Shore drilling, because it appears the folks in ND want to drill there. How this find will contribute to everyone in US falling back to their old ways, well...we can all guess and observe.

Erika said...

I was nervous that your presentation of peak oil was going to side a bit more towards TEOTWAWKI... and, for me, I'm thankful that you presented it in a way that doesn't make me want to cry when I'm done reading. I know that peak oil is a huge problem, considering the way we live now, and I really hope we can find alternatives, I just get really nervous when people start talking about peak oil being a massive, speedy shift/TEOTWAWKI - I don't like the rug pulled out from under me!

Thanks again for all the thoughtful, well written blogging you've been providing!

jewishfarmer said...

Personally, I'm fatalistic, not about peak oil but about offshore drilling. We're going to do it, we're going to toast ANWR - this is just the consequence of peak oil - we're going to do whatever we have to to extract more oil. But Bakken and offshore drilling are not going to make major mitigation impacts - Bakken is tremendously energy intensive - it isn't just a matter of drilling - and it won't lower energy prices because it only makes any sense to drill in Bakken if energy prices are extremely high. The same thing is true with the deep water offshore sites.

Meanwhile, it takes at least a decade to produce any of that oil - so you may see your oil prices drop from 450 dollars a barrel to 425 when that comes, but it isn't going to give anyone the same lifestyle they were used to.


Samantha said...

I am going to have to disagree with you regarding this:

"The massive economies of scale (aka Walmart, chain restaurants and the like) will lessen considerably with higher costs of petroleum since these businesses rely on cheap oil to keep costs low. So, expect a return to local businesses to provide goods and services."

You argue that it's going to affect huge businesses far more than your average Joe, in which I think you are very wrong. This country relies upon its big businesses to maintain, and keep the economy stable. What do you think is going to happen when these big businesses start losing money and crying to the government? Do you honestly believe the government is going to say, "tough luck"? If so, you're going to have a huge shock coming to you.

What's actually going to happen when these big businesses start feeling the pinch is the the government will start handing them subsidies to keep their costs as low as ever, so that they can still operate at the same levels as in years past. These subsidies, which the government will start handing out like crazy, are going to come from the tax payers, as they always do. That means that in addition to having to pay more for everything, you'll also have far higher taxes to contend with, so that places like WalMart and McDonald's can keep their prices down.

This sort of thing is historical fact, the US loves to protect its industries in any possible way, and often through huge subsidies. I mean, look at animal agriculture. If meat was priced at it's true cost it would be like $23.00/lb for even the crappiest cuts.

Anonymous said...

Well Crunchy, you made me feel a little better about Peak Oil until I read some of these comments. At least you are trying to clear up the issue for those of us who are just learning about it. I am looking forward to your thoughts on how to prepare. But, I also can't imagine the major oil companies not trying to find alternative sources for their own greedy reasons. Since oil is going out the window, you would think they would be working like mad on other ways to keep their fortunes growing. Or at least I hope that is what they are doing behind the scenes....

Anonymous said...

Fantastic summary. I have been verging on depressed of late, pondering the end of the world as we know it. This post has made me feel a little more hopeful.
I know that it sounds like I am putting my head in the sand, emu like, but when ever I take on board what some of the blogs have to say, re peak oil, I go in to complete denial and refuse to read anything about it for weeks. Your take on it actually encourages me to become pro-active, rather than diving into despair and yelling at people a lot...