Peak Oil is You

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Page added on July 27, 2011

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Goodbye retail therapy


WHAT enables civilised life and economic growth?

It’s an issue that I was forced to contemplate after listening to a sobering yet insightful lecture by Jeremy Wake­ford, chairperson of the Association for the Study of Peak Oil (Aspo), at a Finwrite conference on financial journalism at Wits University in Johannesburg recently.

Along with the numerous inputs and necessities required to sustain households, companies and countries in the 21st century, a few basic ones come to mind — clean water, reliable electricity supply, various types of infrastructure and fuel.

That precious, finite resource, “black gold” (crude oil), enables much of the production, mobility and comfort we take for granted.

Wakeford, who is currently completing his PhD on the subject, has a simple yet chilling argument. Declining crude-oil supplies and premium prices will spark the unwinding of globalisation, the end of consumerism, a move toward “ruralisation”, an acceleration of recycling (a salvage economy) and depopulation.

We know that the use of fossil fuels comes at a significant cost to the environment.

According to Wakeford, the signs of change are already apparent: financial volatility, climate change, water scarcity, soil degradation and fossil-fuel depletion.

One only needs to examine the recent emergence of “resource nationalism” and the hoarding of “strategic resources” to realise that many countries are acutely aware of the problem and are taking active measures to position themselves for the fallout.

Our decadent lifestyles are essentially fuelled by crude oil and most alternative energy sources require the use of crude oil or other finite energy resources.

As the supply of crude oil dwindles amid rising demand, the likelihood that our civilisation will cross its Rubicon becomes more significant.

The engine of global and domestic economic growth, consumerism, will end, Wakeford argues. In fact, we will cease to be a throwaway society in which we replace goods on a regular basis. Bid farewell to retail therapy.

He describes fossil fuels and petrochemicals, internal combustion engine (ICE) automobiles, nuclear power, airlines, tourism, suburban real estate, throwaway consumer products and industrialised agriculture as “sunset industries”. Bear in mind that these are powerful economic sectors that contribute a great deal toward making civilised life a reality.

“Sunrise industries” include renewable energy (no surprises here), railways, tele­communication, organic food production, aquaculture, reforestation and biomass.

We will see oil production start its downward phase within two to five years and this will be followed by a rapid decline in oil supply.

“There could be about 40 years’ worth of oil left, but that doesn’t take into account a rapid growth in consumption. Oil is a finite resource and we’ve already burnt half of it. Humans hit a once-off jackpot and now this resource is running out. We are also facing diminishing energy returns in relation to energy invested,” says Wakeford, who adds that the marginal cost of oil production is also rising.

One of the major implications of a world without oil is the collapse (or at the very least the fundamental alteration) of the global financial system and the global economy — in the face of fuel shortages, higher inflation, higher interest rates, lower production and economic growth, more frequent recessions — ultimately resulting in a financial crash.

“The financial system is predicated on continuous economic growth. The debt-based money system requires continuous growth as collateral to pay interest.”

Surely the array of alternative energy sources will bale us out?

“Coal supply may peak as early as 2020, and it is a polluting resource. Natural gas will peak too, and it is needed for other energy requirements. In many cases, biofuels are seen as a threat to food and water security. Nuclear power can be risky, as we discovered in the recent Japanese earthquake disaster and mined uranium supply may peak by 2015. The problem is that the energy return on energy invested of most substitutes is lower than oil.”

Does impending doom await us around the corner? I certainly do not believe that declining oil supply will, in a matter of a decade or two, drag humankind back several centuries.

Technological advancements and viable renewable-energy solutions will undoubtedly be developed during our journey toward an oilless society.

The problem is that when one considers that a viable energy return on energy invested needs to be achieved, it could take decades to develop truly viable alternatives on the scale required to keep the economy afloat.

To put it into perspective, consider that Chinese consumers bought about 13,6 million (mostly possessing internal combustion engines requiring fuel made from crude oil) vehicles in 2009 and an estimated 15,5 million in 2010. The figure predicted for 2011 is an astonishing 17 million vehicles, in addition to the existing vehicles on China’s roads.

One uncomfortable fact remains and it relates chiefly to our dependence on crude oil and our lack of action when it comes to implementing a co-ordinated plan for reducing consumption (the recent difficulty in finding consensus among all the major role-players on climate treaties is a key example).

In contemplating the issue, I recently conducted a brief analysis of World Bank statistics on energy consumption by energy source and although some countries (Germany, Japan and France — nuclear plants have assisted the latter two, particularly France) have made significant progress in reducing their reliance on fossil fuels (oil, coal, petroleum and natural-gas products), China, the United States, the United Kingdom and South Africa remain highly dependent on fossil fuels.

In fact, China’s consumption of fossil fuels as a percentage of its total energy consumption skyrocketed from 68,4% in 1981 to 86,9% in 2008, while South Africa’s figure is virtually unchanged from 89,9% in 1981 to 87,2% in 2008. The UK’s consumption of fossil fuels as a percentage of its total energy consumption was 87,4% in 2009 from 94,7% in 1981, while the figure for the U.S. was 84,3% in 2009 from 90,8% in 1981.

Closer to home, the world will meet in Durban to discuss climate change and other issues in about four months’ time. One wonders what decisive and binding outcomes will emerge out of the 17th United Nations Framework Convention on Climate Change.

Like it or not, countries, companies, families and individuals need to wean themselves off this fossil-fuel addiction. But even if we succeed in achieving this, there is still a good chance that our lifestyles will be downgraded in some significant or material way and that is an uncomfortable thought indeed.

the witness

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