R.Heinberg: How Will The Middle East Hold Up?

EnviroEngr

Soft_Landing:

One of the aspects of peak oil that interests me the most is how the Middle East will hold up. In the initial phases of peak, higher prices should mean a temporary windfall for oil supplying countries. However, once the first peak related recession sets in (and the concomitant destruction of demand), this poses an extreme problem for those countries that derive a large portion of their income from oil revenue. In particular, for those countries that are past their peak of oil production, they may well be equally past their peak of revenue (and this is to totally ignore per capita revenue).

If surplus capacity appears tight now, one can assume it will only be moreso during the playing out of peak. Just as the world can ill afford the disruption of even small flows of oil now - the market reacts strongly to every little piece of news - we must expect that during a peak plateau, this sensitivity would be even greater. Thus, the world has a great interest in maintaining the stability of all oil producing regions once peak plateau is upon us.

Now considering a proactive program of powerdown, or a worldwide adoption of the Uppsala protocol, this problem remains (i.e. revenue to oil exporting countries declines throughout the powerdown process). There is clearly a sizable risk of large scale supply disruption, and this risk will increase as a powerdown progresses. So the question is this:

Can you imagine any feasible alternative income sources for Saudi Arabia, Kuwait, etc., that might supplement their income throughout a powerdown? Do you imagine foreign aid could be used to fill this gap?

How can countries that derive much of their income from oil survive a gradual powerdown? How can the rest of world act to reduce the risk of regime failure in oil exporting regions throughout a proactive (or otherwise) powerdown?

Is the concept of voluntary powerdown and the Uppsala Protocol not then fundamentally flawed?

----- ----- -----

Richard's Reply:

First of all, I should make clear what is only implied in my book Powerdown: that my prescription for a coherent, coordinated global response to the decline of availability of fossil fuels is essentially a thought experiment. I wanted, not to demonstrate how easily such a project could be accomplished (as Amory Lovins attempts to do in his new book Winning the Oil End Game), but rather to show how difficult it would be. Clearly, I was unable to catalog the full extent of the difficulties. As I say in the later chapters of the book, the overwhelming likelihood is that humankind will be unable to mount a coordinated peaceful response, and industrial civilization will descend into a chaotic, violent collapse. Hence the chapter on Building Lifeboats.

However, if we are to do the thought experiment fairly, we should explore the possibilities for a cooperative Powerdown in good faith.

The Uppsala Accord (also called the Rimini Accord) has as one of its objectives “to avoid profiteering from shortages.” It says nothing about maintaining current prices, however. As exporters export less, and importers import less, the resource will become more scarce and valuable. With international agreements in place, it may be possible to avert the whipsawing of prices that would destroy the economies of both energy importing and exporting nations. But as less oil changes hands, prices could nevertheless increase substantially, if gradually. Thus, for exporters (like Saudi Arabia), revenues would decline, but not necessarily precipitously. Under the Protocol, both importers and exporters would have to figure out for themselves how to wean themselves from petroleum and revenues generated from it. This would not be easy for anyone; the sole incentive would be the inescapable fact that the alternative would be violent, chaotic collapse.

So what could Saudi Arabia (let us take just one example) do as the oil revenue declined? That’s not a simple question to answer. But it is a question with which the country will be faced whether or not it chooses to cooperate with the Accord. Foreign aid is not a likely solution.

If I were the Saudi king in the years ahead, after signing on to the Uppsala Accord I would immediately implement a draconian birth-control policy. I would put the royal family on a tight budget and use the money saved to institute a universal training program teaching people bioregionally appropriate cooperative survival skills. And I would build factories to make advanced low-cost nanotech dye-based PV and solar-thermal collectors. I would probably be assassinated before I got very far, but that’s what I would try to do.