Peak Oil’s Aftermath

Because Houston, Texas in many respects is the “Oil Capitol of the World,” it is particularly important for us to understand that we are approaching “peak oil” production worldwide. This means that sometime in the next 5 years the annual production will hit an all time high and decline after that, no matter what resources are put into exploration and extraction. Predictions that the oil would run out have been around for decades. What makes the current predictions credible is that a model has actually come true. In 1956, M. King Hubbert, a geophysicist at Shell Oil predicted that the production in the 48 contiguous states would hit a maximum in the 1965-1970 period. Nearly everyone scoffed at the time but felt a more sober mood when maximum production hit in 1971. Predictions based on Hubbert’s calculations call for a worldwide peak probably by 2010. See for a broad explanation of peak oil.



Humanity has found and extracted “the low lying fruit”, the easily accessible low sulfur sweet crude oil. Most of the new oil production will be high sulfur crude and will start being derived from more expensive tar sands and shale.



Many experts believe that stated reserves, especially from Oil Producing and Exporting Countries [OPEC], are significantly overstated. Because OPEC makes its production allocations among member countries based on declared total reserves, there is a self-interested bias to fudge oil reserves numbers upward. There is no independent verification of crude oil reserves. Houston investment banker Matthew Simmons in his book, Twilight in the Desert, determined that Saudi Arabia’s reserves are overstated.



Political instability is also a factor in peak oil production. Fragile conditions prevail in Saudi Arabia, a brutally repressive police state, with shearing contradictions of having a corrupt royal family spending fortunes on palaces, yachts, and limousines along with a fundamentalist Muslim society. The Saudi oil wealth has indirectly funded terrorist networks. Even if the fundamentalists overthrow the regime with the oil infrastructure intact, the new government would likely deliberately reduce production because they would not need the income that is currently necessary to support the high living ruling class.



Richard Smalley, Nobel Laureate, at Rice University, calls for an Apollo type program for alternative energy research. More nuclear power, solar power, wind power, geothermal, conservation, biomass and all the rest will not be enough to address the projected energy shortfall. In many alternative technologies, costs will have to be reduced by a factor of 100 to 1,000 to meet future energy needs. He has called for a massive investment in nanotechnology.



The U.S. government already heavily subsidizes the petrochemical and nuclear power industries through tax breaks and exemptions. For example, few Americans are aware of the Price Anderson Act, which sets a limit of $7 billion per nuclear accident. The law requires the nuclear power industry to obtain liability insurance for the first $7 billion and the taxpayer picks up the rest. Spent nuclear fuel contains hundreds of exotic and radioactive toxins with half-life in the tens of thousands of years. Nuclear power and coal development would increase our environmental difficulties. Obviously the national government will end up paying much of the long term nuclear waste disposal costs.



What happens after peak oil hits? John Howard Kunstler in his book, The Long Emergency: Surviving the Converging Catastrophes of the Twenty-First Century, paints a grim picture of downsizing, the deterioration of our cities, the slumification of our suburbs and formation of smaller regional governments, reminiscent of the breakdown of the Soviet Union and the Roman Empire, the “end of industrial growth, falling standards of living, economic desperation, declining food production and domestic political strife.”



As the cheap oil runs out, import substitution will be the driving force. Agricultural and manufactured products will be produced close to home by increasingly labor-intensive methods. Air travel, freeway construction, junk food, bottled water will all but disappear. The public will only support what is obviously effective. Pork barrel political schemes, that turn subsidized corn into fuel, will disappear.



Complex systems such as our income tax law, pesticide-intense agri-business, the transnational corporations and globalization will collapse. Corporate power with its influence to affect favorable tax breaks and buy the politicians will diminish. The U.S. Income Tax Code is complex because of corporate power to lighten the burden on itself and increase it for everyone else.



Building design will reflect the need to achieve heating and cooling through insulation, window glazing and tree shading. The United States Green Building Council’s Leadership in Energy and Environmental Design (LEED) will become a minimum standard for lowering operating costs rather than an environmental luxury.



There will be some benefits to the end of cheap oil. There will be less pollution and global warming. With smart leadership from our political, commercial, social and religious communities, humanity can live with less of the “stuff”, gadgets and junk that we quickly throw away. People would not put in as many hours on the job. Seattle Times writer Robert Kaiser spent three weeks in Finland and asked, “Why can’t we be more like Finland?” Finland’s schools from kindergarten to medical school are free. They invest 7 percent of their gross domestic product to health care while the U.S. Invest about 15 percent. They consume less and live in smaller homes. Their per capita national income is about 30 percent lower than ours. Finns pay about half their income in taxes while the Americans pay about 30 percent. Finns and many Europeans have a higher quality of life than Americans. Our American difficulty will come in kicking our addiction to goods and services that we can easily do without.