At $75 a barrel, the age of cheap oil is over, and its consequences are about to unfold upon us all. So hang on to your seats! I wrote about "Peak Oil" in an earlier posting so entitled, explaining the analysis by the pre-eminent petroleum geologist M. King Hubbert which indicated that the peak in production from an oil-field should occur about forty years after the peak in discovery of new wells. Despite Hubbert's detractors at the time, his prediction proved spot-on (to within a year) for U.S. oil production in the late 1960's. If Peak Oil is applicable to other fields, e.g. in Saudi, where the peak in discovery occurred in the early 1970's, we must be approaching "Peak Oil" production any time now, especially with more efficient drilling and extraction technologies introduced in the last decade or so, and I have spoken to some in the oil industry who are of the opinion that it is already with us.
Once the peak is past - the half-way point at which according to Hubbert about half the oil originally present is left in the field - production then falls with a consequent rise in the price of oil, and hence the cost of everything that depends on it, either as a raw manufacturing material or as a fuel, or both, i.e. everything we rely upon, including food, most of which is grown using chemical fertilizers made from gas or oil. World "Peak Gas" is expected to come later, probably between 2050 and 2100, depending on how fast we use it up.
In a recent interview on Radio 4, the U.K. Chancellor of the Exchequer, Gordon Brown has spoken of a "moral duty" to fight climate change (echoing the urgent words of the Archbishop of Canterbury), meaning that we should burn less carbon-based fuel, especially oil and gas, to limit global CO2 emissions. This, along with the plain limit in quantity of a unique and precious resource that is available, would auger on the side of cutting back our profligate use of it. However, if we are sliding over the peak and onto the downward span where production falls and oil becomes more expensive, an economic driver might be expected to apply a brake on the rising demand and even to send it into reverse. Mr Brown has opposed calls for higher taxes to be imposed on fuels since he feels that overall economic needs must be balanced against environmental requirements, and he has warned that global economic stability could be compromised by rising fuel costs.
Mr Brown explained that the record high of $75 a barrel could be attributed to the growing demand for oil to fire the developing economies of China and India. He stressed further that it is the poorest nations who will suffer from the effects of climate change, and that individuals have a personal responsibility toward them. Mr Brown believes that the correct course is to freeze fuel duty in an effort to restrain oil prices into check. Meanwhile, motorists were warned to brace themselves for petrol costs of £5 a gallon in the U.K., but the AA (Automobile Association, not Alcoholics Anonymous) has urged them not to panic-buy fuel as this will make the problem of supply even worse. The £5 gallon is a predicted consequence of oil process hitting the $100 a barrel threshold; however, it would bring in an additional £8 billion to the treasury from the North Sea oil revenues alone. Since oil prices have roughly trebled during the past three years, establishing both stability and sustainablilty of supply is superlative; yet the resource is not sustainable.
The aviation industry is not exempt from the fall-out of rising fuel costs and British Airways have recently increased the fuel surcharge for long-haul flights by £10 to £60 per passenger. The hiked-up prices can be put down to fears over security in the supply of fuel, ranging from the impact of hurricanes on the oil fields off the eastern coast of the United States (e.g. the Gulf of Mexico, which has lost 300,000 barrels worth from the market) to political issues in the Middle East including a reduced supply from Iran if there is military action imposed upon this nation by the West.
If a supply crisis were to occur, petrol rationing and the use of military convoys to distribute fuel would be imposed. In other words, "The Army" would be put in charge of the whole fuel distribution network of garage forcourts, petrol tankers, oil-refinaries and oil-tankers. Mr Brown has asked the G-7 countries to unite in finding a solution to the volatility in oil prices by stabilising supplies of oil and to develop alternative sources of energy. Ironically, he also urged a boost in oil production which surely will drag the world more rapidly down the down-side of Hubbert's Peak and is a short-term solution at best, if it is a solution at all.
On first reading, a call on the World Bank to invest in developing a financial framework (whatever that means in truth?) so that developing countries - mainly China, India and Brazil - might provide for their (rising!) energy demands using low carbon emitting sources sounds like a good idea, but we come back once more to a sheer density of energy production which is probably impossible to meet by renewables, at least on the enormity of the scale required. The whole show is simply unsustainable, and the G-7 nations should put their heads together to revamp global society into a less energy consuming and sustainable means: this would be a serious commitment both to global CO2 emissions and surviving beyond "Peak Oil".