#198: Various Musings

MuseLetter 198 / October 2008
by Richard Heinberg

This month’s issue is a compilation of several recent short writings. The last of these, a set of frequently asked questions about Peak Oil, is a work in progress that will appear in expanded form at www.postcarbon.org.

Lessons from the Soil

It’s hard to learn much or do much about sustainability without getting your hands dirty.

True, global problems of resource depletion and climate change entail some high-level thinking. We need to understand some important numbers—350 parts per million of CO2 (the target necessary to avert catastrophic climate change), 5% production decline rate in existing oilfields (what must be overcome each year to forestall the inevitable peak of global oil output). We need skills in analysis and persuasion. Inevitably, all of this requires much time spent in front of computer screens.

However, while we attend to these technologies and abstractions, we are much more likely to succeed in our ultimate goal of building sustainable culture if we are also grounded in the most basic of activities—obtaining food directly from the Earth.

Reading has taught me a lot. Gardening has taught me as much or more. Often, these lessons tend to be ones that sound trite when put in words: Stay humble; Don’t demand too much too fast; Notice the interconnections; Go slow, but always pay attention and be prepared for rapid-onset opportunities and problems. However, when you garden you don’t just learn these lessons verbally and mentally. You learn them with your whole body.

Leaving food production entirely to others is the essence of full-time division of labor, the origin and vulnerable taproot of civilization. Only in agricultural civilizations has a rigid class system arisen in which the most important decisions are made by people who don’t need to spend any of their time directly contemplating our human dependence on nature. Instead, the managers, accountants, soldiers, and religious functionaries of state societies tend to enclose themselves ever more completely in the language-based solipsistic social matrix that is the source of their power. They pay ever more attention to words, money, and technology; ever less to weather, birds, and insects. And this, ultimately, is why civilizations collapse: the people in charge simply don’t notice that the ecological basis of their society is being undermined.

Sound familiar?

There are lots of good reasons to garden these days—given that food prices are soaring and the nutritional quality of supermarket food diminishes by the year. Those of us who are working on sustainability issues have even more reasons to plant and hoe. We must teach our neighbors the survival skills they will need as fossil fuels dribble away; we must set an example, and help create the gardening networks that will provide food for our communities during the hard times ahead.

But perhaps the best of all reasons to garden is simply our need to stay sane. I mean this in two ways. Yes, the garden is a refuge from a world that often seems to be flying apart. Turn off the television and pick up a trowel: you’ll feel better. But more importantly, if we garden we are more likely to be psychologically balanced people capable of making sane choices. And the world needs people like that at the moment.

(From this month’s edition of The Ecologist)

The Dress Rehearsal Is Over

As oil crosses $100 on its way south, not even a hurricane in the Gulf of Mexico and a statement from OPEC that the cartel will cut production by over 500,000 barrels per day seems capable of halting the bloodletting. In response, the Financial Post features an article (Sept. 11) titled (“Peak Oil peak,”) quoting this writer out of context; compare this with my commentary, which was the source of the quote: Hurricane destroys oil infrastructure; oil price falls). Wasn’t the price of oil supposed to rise endlessly? Wasn’t the world supposed to end by now? What happened? What does it all mean?

First, why did the price of oil rise this summer to nearly $150? On this there is little agreement among the mavens. A new report by hedge fund managers Michael Masters and Adam White (released Sept. 10 by Sens. Byron Dorgan, D-N.D., and Maria Cantwell, D-Wash.) chalks it all up to speculation (Oil speculation blamed for rise in energy prices). Pension funds, college endowments, and other institutional investors bought heavily into commodity index funds earlier this year, and that sent the price of crude to the moon. Recently the same investors have taken their money out of oil futures, and this accounts for petroleum plunging back to earth. Move along, folks, nothing to see here.

But this directly contradicts the findings of an earlier study by the Commodity Futures Trading Commission (CFTC Report on High Oil Prices). That 100-page report concluded that the price run-up was all about supply and demand.

Confused yet?

Then there is the argument spinning through the rumor mill (sorry, no www attribution available on this one) that says the fall in oil prices since the end of July shows support by Wall Street for Republicans as the nation moves toward the November elections. After all, the reasoning goes, JP Morgan controls 40% of the puts and calls in the oil market; add Goldman Sachs and a few other big brokerage houses and there is the potential for manipulation of roughly half the total oil futures market. If gas prices are rising, the electorate will be more likely to want to throw the (Republican) bums out and demand Change™. Wall street likes the favors the Bush administration has doled out over the past few years and wants more of the same. Or so the story goes.

The more prosaic explanation for the price spike: oil demand was rising, supply wasn’t, so the price went up. When the price got high enough, it (along with the credit crisis) caused the US (and world) economy to go into recession. That has seriously undercut demand for oil.

One thing we can be sure of: price matters; when the market speaks, people listen. During the weeks when petroleum was breaking a record nearly every day, there was unprecedented discussion of the Peak Oil concept in financial journals, both print and online. What’s more significant, people started driving less. Hummers sat on car lots, unsold. Airline companies and auto manufacturers teetered on the verge of bankruptcy. In short, people woke up to the profound vulnerability implied by having based their economy, and by extension their very lives, on an impossibility—the extraction of a non-renewable resource at ever-increasing rates.

As the oil price fell, eyelids drooped.

But the price spike of early 2008 was merely a dress rehearsal. The fall in oil demand gives the world a moment to catch its breath before the inevitable price-ratcheting process starts up again. Meanwhile, at $100 or so, the price of oil is still 50 per cent higher than last year and 10 times the level of a decade ago.

When the next supply crunch comes, we could well see prices of $200, $250, or $300. But again, the rise won’t be steady and unending; we will again see a spike followed by a plunge—this time maybe back to $150.

Meanwhile, will oil at $100 be an occasion for sleepwalking or strategic regrouping? For policy makers, this is a time to think clearly about long-term measures to reduce demand pro-actively and support the development of renewable energy sources. For citizens, it is an opportunity to make the effort to change habits, buy a smaller car, and get involved in community Peak Oil prep work. For those of us who have been involved in such work for several years, this is the hour to prepare for the inevitable tsunami, when journalists will call us day and night struggling to understand the concepts, and when city governments, businesses, and national politicians will plead for advice on how to cope. We’d better be ready.

The world has had an unmistakable wake-up call from the global oil alarm clock; merely to press the snooze button would waste what may be our last opportunity to act before necessity makes us react in ways that are less than optimal.

(published September 11 on www.postcarbon.org)

Interview with French monthly La Décroissance (“The Degrowth”) on the occasion of the publication of The Party’s Over in French (“La Fête est finie”)

Q: “The party is over,” but who was at the party?

In one sense, the “party” was attended primarily by the peoples of the industrialized world who benefited disproportionately from access to cheap fuel and all that it made possible. Americans and Europeans drove cars and shopped at supermarkets, while people in less industrialized countries often experienced a reduction in quality of life as a result of globalization, pollution, and the other consequences of cheap oil. In another sense, the “party” was a species-wide phenomenon, in that cheap fuel enabled an unprecedented expansion of population and resource extraction. So I suppose one could say that, while some were consuming the wine and caviar and others were serving it (and receiving slave wages), we all were involved in the party in one way or another and our fates are entwined with it.

Q: How was this book received in the US and why such a long time for a French translation?

The book was published in North America by an independent publisher, New Society. Within the independent publishing world, the book was a big success and created something of a phenomenon: I was invited to give at least 300 lectures plus dozens more radio and television interviews. I still receive emails almost daily from people who say that reading my book changed their entire view of the world. However, books published by small, independent presses typically receive almost no notice in mainstream journals, and so the vast majority of Americans have never heard of my book and have never seen its cover in a bookstore.

I have been happy to see translations in German, Italian, Arabic, Korean, Spanish, and now French. Of course, every author likes to see her or his work widely distributed around the world, but translation rights must be sought by publishers.

Q: Oil price has brought a beginning of change in habits, in the rich countries. Do you think that could…soften the shock?

Yes, to a certain extent. The first wave of oil price increases (which we have just seen) has had the effect of destroying considerable discretionary demand. People make fewer unnecessary car trips, for example. However, the next wave of price hikes will hit harder, because most of the easiest, cheapest, and fastest efficiency measures will already have been exhausted. Thus it is important that planning begin now for fundamental infrastructure changes to reduce oil demand on a broader scale. These changes–to our transport and food systems, primarily–will require time and investment. Without foresight and planning, the impacts of high oil prices will increasingly strike at the very foundations of our economy and way of life.

Q: Why the oil price did drop by 50 dollars? Is there a link with the Elections in US?

It is possible that the handlers of Wall Street investment funds specializing in oil futures trades favor the Republican party and therefore are seeking to lower the price of oil prior to the election. But I have no solid evidence for this and therefore only state it as a possibility. Most analysts agree that the main reason for the price collapse was a fall in world demand for oil, which has resulted from the economic turmoil caused by record high energy prices along with the unfolding credit and financial crisis. In the long run the end of cheap oil will have far deeper and more lasting effects than the unwinding of leveraged mortgage-backed derivatives, even though today the newspaper headlines are dominated by stories about bank failures. Unfortunately, however, over the short term the financial crisis will make it much harder to address the energy crisis due to the drying up of investment capital.

Don’t Panic; Prepare!

The financial sky is falling. Hey, that’s not my opinion; it’s news straight from the front pages of the Wall Street Journal and New York Times. America’s top mortgage companies and investment banks, and the world’s biggest insurer have either already gone bankrupt or are in the process of doing so.

For someone who wrote a book titled “The Party’s Over,” this might seem like a propitious moment to shock readers into greater depths of fear and apprehension. After all, we’re only witnessing the doom of the financial world now; we have yet to see the collapse of the transport and food infrastructure, which is merely fluttering at the moment as the result of high oil prices. When the inevitable and imminent decline in world oil production really starts to bite, the support structure of normalcy will truly come unglued.

Okay, so let’s all have a good scream now: AAAAAIIIEEEEEEGGGGGHHHHHHH!!!!!!!

Good. Now that that’s out of our systems, let’s reflect. Panic helps no one. We have a diminishing amount of time in which to work within a system that still has some semblance of stability. We should take advantage of every remaining moment. Now is the time for careful, methodical action. Chances are, the scaffolding will not come crashing down at once; this will be an extended process lasting many years, perhaps even decades (if John Michael Greer is right in his new book, “The Long Descent”). Nevertheless, certain things will almost certainly become more difficult as “normal life” becomes a fading memory.

Calmly explain to family and friends what’s happening (too many people using too much too fast, inevitable depletion of resources, and economic consequences of same) and urge them to take the situation seriously and start reducing their exposure (Garden! Home energy audit! Bicycle! Smaller car!). Get your money out of risky banks and investments and put it to work in your local community (go to www.solari.com for advice in this regard). If you haven’t done so already, get to know your neighbors and make connections with others in your community who have similar concerns.

When we’re panicked, we tend to think only of our own immediate safety. But now is the time to be thinking of community resilience—because that’s what our long-term prospects really depend on.

Of the well-to-do, in particular, few were gravely disturbed in 1930. Many of them had been grievously hurt in the Panic, but they had tried to laugh off their losses, to grin at the jokes about brokers and speculators which were going the rounds. As 1930 wore on, they were aware of the depression chiefly as something that made business slow and uncertain and did terrible things to the prices of securities. To business men in “Middletown,” a representative small mid-Western city, until 1932 “the Depression was mainly something they read about in the newspapers”–despite the fact that by 1930 every fourth factory worker in the city had lost his job… When the substantial and well-informed citizens who belonged to the National Economic League were polled in January, 1930, as to what they considered the “paramount problems of the United States of 1930,” their vote put the following problems at the head of the list: 1. Administration of Justice; 2. Prohibition; 3. Lawlessness, Disrespect for Law; 4. Crime; 5. Law Enforcement; 6. World Peace—and they put Unemployment down in eighteenth place.

—Frederick Lewis Allen, Since Yesterday

A Few Peak Oil FAQs

1. People have forecast the end of oil many times before. They were wrong every time. Why should anyone take Peak Oil theorists seriously now?

Supply problems with oil are inevitable eventually, since petroleum is a non-renewable, depleting resource. All experts, if pressed, acknowledge that world oil production will reach a peak and decline. Therefore Peak Oil is only a question of when, not if.

So it is perfectly reasonable to investigate the question of when supply problems are likely to appear. Indeed, it would be foolish not to do so.

Like every scientific investigation, the study of oil depletion is typified by a learning curve. In the early days of the oil industry, the data were sketchy and the methods of gathering and analyzing it were—well, crude. As time passed, the analytical tools became more sophisticated and the data pool more robust. Early speculation about oil depletion that was made prior to the 1950s occurred during a period when world discoveries of oil were still increasing. An accurate global peaking forecast was simply not possible then.

M. King Hubbert, perhaps the greatest geophysicist of the last century, did pioneering work in helping elucidate the process of oilfield depletion, and in 1956 correctly forecast that the peak of US oil production would occur around 1970. This was possible largely because US oil discoveries had been declining since 1930 and the US was further along the depletion curve than the world as a whole.

Depletion studies have advanced considerably since Hubbert made that fateful forecast. Moreover, we now have decades more data for exploration, production, and depletion on which to base analysis and forecasts. World oil discoveries have generally declined since 1964, and the average size of oilfields discovered has also declined.

Therefore there is every reason to assume more accuracy for a global oil depletion analysis produced today than, say, an assertion made in 1900 that oil would run out by 1920. Such early pronouncements typically just extrapolated depletion and production declines from existing oilfields without factoring in future discoveries. Today’s depletion analysis not only factors in discovery trends, but also the contribution of new technologies for exploration and production.

Modified Hubbert analysis successfully predicted oil production peaks not just for the US, but for Britain, Norway, Mexico, Oman, Russia, and other producing countries. Meanwhile, official agencies like the US Department of Energy and the International Energy Agency, which do not employ any version of Hubbert analysis, failed to forecast these peaks and declines. If past success is a criterion, Hubbert analysis is a winner.

However, some depletion analysts base their peaking forecasts not on Hubbert analysis, but on a painstaking process of adding up scores of individual production projects and their likely contributions and start-up dates, and then subtracting production that will be lost year-by-year due to declines from existing fields. Tellingly, these “bottom-up” analysts forecast dates for the world oil production peak that are very close to those forecast by Hubbert analysts—most forecasts from both camps falling within the period from 2008 to 2013.

In short, the “They were wrong then, so they must be wrong now” platitude is illogical and misleading. But that won’t stop yet another oil booster from trotting it out yet again tomorrow, or the day after, or the day after.

Prepare to cringe.

2. I’ve heard that oil is constantly being created in the Earth’s crust, that it’s not made out of dead dinosaurs, and that Peak Oil is a scam. Is there truth to these statements?

There is indeed a theory that oil is abiotic—that is, that it is constantly being replenished from deep within the Earth and is either primordial (left over from the early period of planetary formation) or continually generated by geochemical processes; either way, it was not created through the decomposition of ancient algae blooms (no scientist, by the way, thinks oil comes from dead dinosaurs).

This theory is held by a tiny percentage of the world’s petroleum geologists, most of whom happen to be Russian (there is some history behind this factoid, which relates to how scientific research was politicized during the days of the USSR). Even in Russia, however, most geologists adhere to the mainstream view about how oil was formed.

The bottom line: the abiotic theory may have the potential to explain the existence of hydrocarbons in a few rare instances, but the conventional biotic theory has held up extremely well as a basis for oil exploration and is supported by abundant evidence. All commercially significant accumulations of oil are associated with sedimentary rocks. And the oil can be traced via “biomarkers” back to the organisms from which it originated. Even if some methane being vented from oceanic ridges turns out to have an abiotic origin, this is likely to have little to no commercial implications. The world’s oil and gas fields continue to deplete, and simply drilling deeper isn’t likely to accomplish much. For a longer discussion, see Richard Heinberg on Abiotic Oil, Did you hear that Alaska has more oil than the Middle East?.

3. Isn’t Peak Oil just a conspiracy by the oil companies to boost profits? Journalist Greg Palast says so in his book Armed Madhouse.

It would take many paragraphs to thoroughly debunk this notion, and even then doubts would linger. After all, the oil companies have a track record of distorting and manipulating the public discussion going all the way back to the early days of John D. Rockefeller’s Standard Oil.

The short reply: It’s a different situation now; 90 percent of the world’s oil production is under the control of national oil companies like Saudi Aramco in Saudi Arabia, or Pemex in Mexico—not independent companies like ExxonMobil. Taken together, these national and independent companies are so competitive and have so little in common—and hold so many secrets from one another—that it is highly improbable that they could successfully collaborate in a conspiracy to force up the world oil price. Where’s the actual evidence that they have done this? On the other side, there is abundant publicly available evidence that most of these producers are struggling to keep production up.

For a longer reply—which is directed specifically to Greg Palast’s conspiracy allegations—see An Open Letter to Greg Palast on Peak Oil

4. Could Peak Oil be a conspiracy on the part of OPEC, then, to raise prices?

OPEC controls about 43 percent of world oil production, 40 percent of exports. It is true that OPEC countries have the ability to raise prices be cutting production, and there have been historical instances where the organization has indeed done this.

One might wonder, then, why OPEC doesn’t just force the price up to $200 or $300 a barrel—after all, its member nations rely primarily on oil sales for government income, so there would appear to be every motive for them to maximize their profits.

Working against this motive, however, is the realization—which has been a long-held belief within the organization—that prices should not be too high, or several undesirable consequences will ensue. First, high oil prices are likely to trigger a global recession, which would undercut demand for petroleum. Further, if powerful oil importing nations were to perceive OPEC’s profit maximization as a direct economic threat, this could lead to forceful efforts—covert or otherwise—to destabilize OPEC nations, many of which are highly vulnerable to this sort of persuasion. Finally, OPEC economists have for many years held that if oil prices are too high for too long, this will force fundamental economic shifts in petroleum consuming economies: electric cars will appear on the market in large numbers, commuters will ride public transit, and so on.

This raises the question: was the oil price spike of 2006 to 2008 engineered by OPEC, or did OPEC merely benefit from it? Clearly, oil exporting nations benefited financially from rising oil prices. Indeed, as the price rose past historic benchmarks without visible calamitous effects on the world economy, OPEC members were jubilant. Once the price surpassed $100 a barrel and began approaching $150, however, it became clear that the world was in fact experiencing severe economic impacts, and that a shift toward electric cars and other oil conservation measures had been provoked. At this point prices began to fall.

All of this might seem to be good circumstantial evidence for an OPEC plot—except for two things: there is no evidence for collusion to raise prices, and the oil price spike can be explained without recourse to conspiracy.

During the three years from 2005 through mid-2008, OPEC members, rather than sitting on large surplus production capacity, were pumping oil at virtually maximum rates. Everyone expects OPEC to maintain some surplus capacity—that is one of the cartel’s main ostensible functions in the world oil market. But during the three years in question, that surplus capacity amounted (according to most authoritative analysts) to no more than 1.5 million barrels per day—a historically small amount. This fact helped push prices up.

It could be objected that OPEC members have failed to invest sufficiently in recent years in exploration, new technology, and the drilling out of existing oilfields. However, in fact investments have in many cases been large—even unprecedented—by historic standards. The problem is that OPEC members’ giant and supergiant fields are aging, so in order to maintain production growth much greater increments of investment are required now than in the past.

Should OPEC be vilified for failure to satisfy the world’s gluttonous demand for ever larger quantities of a non-renewable, depleting resource? The answer, of course, depends on one’s point of view. But it is perhaps not so difficult to put oneself in the shoes of OPEC member states and imagine why a negative answer to the question might make sense from their perspective.

5. An author named Lindsey Williams says there was a humongous oil discovery on a place called Gull Island near Alaska back in the 1970s, and the oil companies (under orders from the government) just capped the wells to keep oil prices from collapsing, bankrupting the oil companies. How do you know Williams isn’t right?

Williams’s claims have been investigated and found to be worthless. You can find the whole story at The facts have not slowed the legend of Gull Island oil

Here’s a quote from that article:

Three wells were drilled from Gull Island. The drilling results were initially closely held, but now the well data are public.

The first two wells were drilled in 1976 and 1977.

In a response to Stump’s 1981 letter, Alaska Oil and Gas Commissioner Harry Kugler said Gull Island No. 1 well tested 1,144 barrels of oil per day from one underground reservoir, while the Gull Island No. 2 well tested 2,971 barrels of oil per day from other.

“We do not believe the evidence from these two wells indicates a massive new oil find,” Kugler said. More wells would need to be drilled before deciding if it made sense to develop the reservoirs, he said. The third well was drilled in 1992.

Geologist Peter Barker was among those monitoring and interpreting Gull Island No. 1 as it was drilled in 1976. The objective was to test a deep structure north of the huge Prudhoe Bay field, the first North Slope field developed, Barker said recently.

“There was an (oil and gas) trap there, but there wasn’t an economic quantity of oil,” he said.

Ken Bird, of the U.S. Geological Survey and an expert on North Slope geology, recently provided some perspective on the Gull Island drilling.

Since 1980 at least four oil pools, the West Beach, Niakuk, Point McIntyre and North Prudhoe pools, as well as Prudhoe Bay satellites, have been developed in the area immediately around the Gull Island wells, Bird said. The four pools in the immediate Gull Island area are in production: According to Alaska’s Division of Oil and Gas 2007 annual report, Point McIntyre had a cumulative production of 396 million barrels of oil at the end of 2006, with 164 million barrels of remaining reserves. The other three pools are much smaller than Point McIntyre. That compares with Prudhoe Bay’s 11.4 billion barrels of oil already produced and Kuparuk River field’s 2.1 billion barrels.

“Both the geologic evidence and the small area not yet developed into oil fields around the Gull Island wells preclude the possibility of a giant oil accumulation,” Bird said.

You can find more at Did you hear that Alaska has more oil than the Middle East?

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