Unless you’ve been living under a rock recently, you’ve probably heard the term “Peak Oil” being bandied about.
If you have been living under a rock, you’ll still have noticed the price of petrol sky rocketing. I haven’t sat down and done some extrapolation, but I’m guessing easily NZD$2.00/L by Christmas, and $5.00 by same time 2008 – possibly more. That oil will hit $100 a barrel by the end of the decade is a damn near certainty.
What happens after that is a little less certain. Currently, there’s two extreme view points. The optimistic one is that the first world, and eventually the second and third world will continue to live in our air-con’d-commuting-one-tonne-vehicles-to-work mode for the rest of the foreseeable future until we discover fusion and we all get our air cars.
At the the other end, is the cynics who are damned sure that we’re going to run of all recoverable oil by about say, 2010 – give or take a few years. The vision of the future here is that we’ll all be forced back to an agrarian existence, and that very likely, someones going to nuke someone over the little precious black gold remaining, and from there, it’s back to the stone age.
In truth, I think it’s somewhere in the middle. It’s pretty obvious that we’re using oil way too fast. It should be fairly obvious that abiotic oil, if it does exist, clearly isn’t going to supply the world with enough oil for six billion people to burn it like the Americans* do. But even if that were possible, it’s pretty obvious that pumping that much CO2 into the air just isn’t a good idea.
The irony is that the thing that arguably got us into the mess in the first place, will, given enough time, pull us out again; Greed, and it’s all-grown-up son, capitalism.
As we come over the peak of an oil field, we start to spend more and more energy to extract a unit of energy from the ground. In economic terms, this is known as an increasing marginal cost. As a result, on a global scale, when significant percentage – say, more than half – of the oil fields in the world hit this peak, the price of oil starts to go up quite markedly. Sound familiar? However, because oil production is an excellent example of macro-economics, we get to see supply and demand in action – and this is where the unknown comes in.
If demand for oil proves to be completely inelastic, that is – we all keep consuming roughly the same amount regardless of the price, then we will run out, and me and my bretheren will take my Primera and go MadMax styles for a while.
If the the demand for oil is relatively elastic – we might just pull our collective asses out of the frying pan and through the fire. Elastic demand means that as the price goes up, we consume less.
As a basic example, a very inelastic good is food. Up to the limits of our income, we will continue to buy food. Conversely, iPods are a very elastically demanded good. If the price of iPods goes up, purchases will drop rapidly.
At a guess, oil is probably somewhere between the two. We need oil to power a large chunk of our society, but at the same time, there’s a lot of inefficiencies and unnecessary use in the system. Assume**, for the sake of argument, that the bulk of oil production is used directly in transportation by motor vehicles. As the price goes up, discretionary use of oil will go down. Things like Wendy’s missions to Auckland, and ‘going for a drive’, will be the first to go. Alongside will be the obvious car pooling options. My flatmate and I work in the same building, so it makes sense to carpool. As the weather’s cleared up, we’ve started to walk to work. Next, people with the same destination or origin will start to carpool. As the price starts to skyrocket, courier companies will start to quote things like ‘when there’s enough deliveries in your area’, and biking will become more common than driving. Telecommuting will doubtless becomes far more common. I already see more people taking the bus.
International trade will be high on the list of things to suffer. It will no longer be economic for China to manufacture clothes and other low price items for the first world, since the sheer cost of moving jeans across oceans will make to much more economically viable to fabricate them here. In New Zealand, expect to see many more wool clothes and, depending on the result of the legislative battles, hemp. Don’t expect to own much in the way of polyester clothing beyond 2010. Trade is unlikely to die out completely. We’ve been trading for centuries with nothing but wind and muscle power, and computer chips pack of lot of value per mass.
As the price of oil goes up, and oil power becomes unviable, local communities and cities will start to turn to what ever solutions they can find. Although modern communications will mean that technical knowledge can flow fairly easily, the increasing effective trade distance will break mono-cultures that once spanned thousands of kilometers into pieces, and we’ll start to care less and less about the culture of the guy at the other end of the continent.
How long will this take? It depends on two variables. How much oil we have left. How fast we consume it, and how fast the worlds population and it’s leaders react to these changes. I wish you all the best.
* Depending on who you ask, the USA consumes somewhere between 25% and 35% of the worlds oil supply.
** I’m very aware this is not true.
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