Peak oil meets financial meltdown
(Originally published in Tucson Green Times, November 2008)
By Bob Cook
How bad can it get?
While the recent fourth annual Association for the Study of Peak Oil (ASPO) conference held in Sacramento was not planned to include the current global financial meltdown on the agenda. it did heighten the enormous sense of risks we face in the economy going forward. In both cases, it’s the scale of the problem that makes it so dangerous.
Despite the large shadow cast by the debt and credit crisis, the state of future supplies of non-renewable fossil fuels, beginning with oil, continues to present a crisis more ominous than the unprecedented loss of paper. As Matthew Simmons, a leading investment banker for the energy industry, observed, “The current financial crisis is fortunately all about paper assets and liabilities. Over time, they can heal. This, too, shall pass.”
Eager to keep their heads out of the sand were five hundred participants including scientists, industry consultants, planners, petroleum engineers, investors, local government officials, transportation experts, economists, journalists, researchers, community activists, and financial advisors.
The basic peak oil story is that the decline rates of existing oil fields are significantly outpacing new discoveries while rising demand from the growing economies in Asia is outpacing declining demand in Europe and the U.S. Production in the world’s third largest oil field, the Mexican supergiant Cantarell, declined 32% last year.
The approaching production peaks of other fossil fuels and critical minerals and metals were also addressed by speakers. Natural gas production is expected to peak by 2020 and coal between 2025 and 2030 on a global basis. Andy Weissman of Energy Business Watch predicted the doubling and tripling of natural gas and electricity prices within five years causing shocks to the US economy.
Climate change was also discussed as a serious threat but one with fewer near-term impacts. Several speakers noted that while both peak oil and climate change share the goal of large-scale reduction in global fossil fuel energy use, the impacts of peak oil may overwhelm our ability to respond to climate change. Robert Hirsch, a Department of Energy consultant on peak oil said, “When people are hurting badly and losing their jobs and car and don’t know how to survive they’ll be thinking ‘fix this now.’”
David Hughes, a senior scientist from the Canadian Geologic Survey said, “Of the two problems, climate change and energy sustainability, energy sustainability is the nearest and likely most severe and if we can deal with the energy sustainability problem it will take care of the carbon problem by default.”
Peak Oil did receive considerably more press this year as experts and industry leaders became more direct and open about limits to petroleum production. James Schlesinger, former U.S. Energy Secretary, stated this past year that the peak oil debate was over and that “we’re all peakists now.”
At last year’s conference, T. Boone Pickens, the Texas oil billionaire, said that crude oil production has peaked and is headed for long-term decline. This year Pickens is promoting large-scale investments in wind energy to replace coal burning for electricity.
While the financial crisis is being helped by the infusion of trillions of dollars to banks, there is no disaster recovery plan for declining petroleum production and shortages. In conclusion, Simmons warned, “The world is totally at risk with no insurance policy. The Federal Reserve Bank has no energy tool box. It took five months to melt down key financial institutions. Energy markets can unwind even faster.”
To download and view the presentations from the ASPO conference, go to: http://www.aspo-usa.org/aspousa4/proceedings/
Bob Cook is a Co-founder and Core Team member of Sustainable Tucson. He has attended each ASPO conference during the past four years.