It never fail to amaze me that we are still discussing the “threat” of global climate change, supposedly caused by our emission of greenhouse gases. Even if the issue of anthropogenic climate change is real, it is the “wrong” problem discuss.
Fortunately, the pressure to reduce dependence on fossil fuel exerted by the climate change movement coincides with what is the most important question for the survival of our civilization the next 50 years – namely the impending energy crisis, a.k.a. peak oil.
As the oil production starts to decline in a few years, if it hasn’t already, the impact on society will be tremendous. We use oil or oil derivatives for almost everything. From personal transportation to production and transport of goods, including food.
The oil cannot easily be replaced with existing technology and alternative energy sources either. The idea of a battery driven tractor for example is silly. Switching to ethanol or some other bio-fuel is also not feasible as there are hardly enough crop and wood production in the world to adequately meet the need at its current level, and it’s not a sustainable path.
The end of oil means the end of cheap, plentiful energy, and its a pity we have not used it more wisely. Never before have man had access to such enormous reserves of concentrated and readily available energy. Great achievements has been reached, but the creation of an energy sustainable society is not one of them.
Now we are faced with perhaps the greatest change in the history of mankind. We are used to a certain way of life and to the access to cheap plentiful energy. However, this will soon change. As oil production drops off we are likely to see steep rises in oil prices, and the rest of the market goods will soon follow.
Most likely we will initially see hyperinflation and a substantial depression in GDP. All aspects of modern society will slow down: production, construction and travel. I would predict that in 10-15 years we will see a 500% – 1000% inflation in prices, if not more. Imagine a liter of gas (benzine) costing 12 euro. Imagine the new small car costing 100 000 euro.
And then this is the best case scenario. In fact we don’t know what will happen when our most important energy source runs out. It might as well lead to breakdown of society, with wars fought over the last remaining drops of oil, eventually resulting in the end of civilization as we know it.
I understand that peak oil is accurate and that we are now past the point of peak oil. I think many of the current events have to do with this senerio and it won’t be long before the main stream media and population wake up and understand what is going on. For me and my family, we are preparing for the next era.
Any discussion about peak oil and oil prices over the next decade must include an attempt to quantify emerging economy demand as an important driver at the margin. Here is a simple thought experiment using Chinese demand to give some idea of the magnitude of the supply issues we face:
- China moves from 3 bbls/person/year to the South Korean per capita consumption level of 17 bbls/person/year
- Transition takes 30 years
- No peak in global production
In next 10 years we must find 44 million BOPD. If you superimpose peak production on top of this demand profile using the following parameters oil prices would increase approximately 250% in real terms over next 10 years:
- Oil demand elasticity of -0.3
- Current production 84 million BOPD, current price US$ 80
- Peak production 100 million BOPD
- Post peak decline rate of 3-4%
If you want to try the model for yourself using your own assumptions it can be found at Petrocapita Income Trust:
http://www.petrocapita.com/index.php?option=com_content&view=article&id=128&Itemid=86