Disposable Energy (left graph) is family disposable income's ability to buy energy, it is crashing similar to the 1973 Oil Embargo. US Peak Oil was in 1970 (right graph). Since 1970 Peak Oil national debt increased in tandem with imported oil.
Unconstitutional, The Federal-Aid Highway Act of 1956 made oil the lifeblood of America's economy creating civilization killers of Peak Oil, Climate Change and Debt. Life and nations based on oil are dying.
"By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day."
"A severe energy crunch is inevitable without a massive expansion of production and refining capacity. While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India. At best, it would lead to periods of harsh economic adjustment. To what extent conservation measures, investments in alternative energy production, and efforts to expand petroleum production from tar sands and shale would mitigate such a period of adjustment is difficult to predict. One should not forget that the Great Depression spawned a number of totalitarian regimes that sought economic prosperity for their nations by ruthless conquest."
"Energy production and distribution infrastructure must see significant new investment if energy demand is to be satisfied at a cost compatible with economic growth and prosperity."
"The discovery rate for new petroleum and gas fields over the past two decades (with the possible exception of Brazil) provides little reason for optimism that future efforts will find major new fields."
During the period eight Presidents declared imported oil a threat to national security, an enemy of the Constitution, Federal policy makers taxed the people and built infrastructure that mandated oil imports increase from 20% to 60%. Violating the Constitution, they created Oil's Potato Famine, a monolithic dependence on a source of energy 60% outside our control.
1. Economic Growth = Energy Growth time Efficiency Growth.
Per Capita energy peaked in 1979. Setting in motion a Mathusian collapse of the economy known as the Olduvai Gorge Theory. Our monolithic dependence on oil is similar to the Ireland's 1840 dependence on a single potato strain.
We have a choice, illustrated in the following two graphs:
Left Graph: 80-90% die-off and a post-industrial agrarian world.
Right Graph: Re-tool infrastructure for transportation, power generation and food production. Change the lifeblood of our economy from oil to ingenuity. Repeat the successful re-tooling of communications infrastructure, allow personal responsibility, free markets and small businesses to innovate:
Victory Gardens - personal responsibility for self-reliance.
JPods and other Performance Standards transportation systems to increase efficiency 10 to 100 times.
Feed-in Tariffs - allowing small businesses to generate and sell electricity to increase efficiency 10 to 100 times.
We can live within a solar budget. We will have twice the per capita energy of the World War II generation and manage it with tooling that is 10 to 100 times more efficient than current centrally planned infrastructure. Consider power and low cost of the Internet and cell phones. No one guessed these improvements would progress so quickly when AT&T was de-monopolized in 1984.
World Oil Production stopped growing in 2005 so economic growth stopped and momentum began to decay. Production peaked in 2008 and will raggedly decline forever in the future; existing oil field depletion rates are greater than planned new oil field developments. Perhaps we are blind to geologically slow moving events, creating a monolithic dependence on a single source of energy such as a variety of potatoes in 1840 Ireland, failure to load lifeboats immediately after the Titanic hit the iceberg and oil today.
Our economy is based on five assumptions that are no longer valid:
Volume: Oil availabiity expanding faster than demand.
Price: Oil priced at $30 a barrel, gas at $1.45 a gallon.
Quality: Net Energy of 20:1, 20 barrels available for every barrel used to get more oil.
Growth: Oil supply will grow to support economic growth.
Debt: What we cannot afford to pay for, we can borrow from the future.
Oil supply stopped growing at 74 mbd and net energy is falling below 10:1, people cannot affort to pay for both their commute to work and their mortgage, debt threatens governments as strong as the European Union. Less energy mandates a contracting economy unless we radically improve efficiency. We can increase efficiency 10 to 100 times but not with centrally planned government monopolies of highways and centralized power grid.
World Crude Oil production is scaled to the timeline in the above graph and since 2002 in the graph below. Between 2005 and 2008 oil prices climbed from $45 to $140 yet production could not increase to exploit the higher prices. New capacity only compensated for depletions.
Quality or Net Enery is deteriorating badly. These graphs show the energy available relative to how much energy it takes to get more energy.
Unfortunately the officail government agencies have been criminally inaccury in their forecasts.
A major reason for this inaccuracy is IEA and EIA assume oil will materialize from oil "fields yet to be developed" and "fields yet to be found". In a rare moment of honesty, they even published this in IEA's 2010 World Energy Outlook:
Economies, national defense, life, depends on oil "fields yet to be developed" and "fields yet to be found".
Oil discoveries have been dropping since 1964, yet suddenly new discoveries on the scale of several Saudi Arabia's are to be found as if oil companies have not been searching for oil.
Oil fields take 6-10 years to develop, yet the forecast has "fields yet to be discovered" shipping within 5 years. Apparently, these fields will be discovered with the wells already drilled and ready to ship.
Capital to exploit oil fields will be unrestrained and disconnected from current debt crisis.
Despite $biillions have been lost in attempts to develop oil shale, theses fields will be developed in record time.
Oil prices will be disconnected from the declining Net Energies.
My recommendations, plant a garden and buy guns. If policy makers continue to use this advice, energy costs will be unaffordable, gasoline outages will be chronic and the food system will following the banking system into collapse.
The oil supply stopped growing in May 2005 and the economy started losing momentum. Shortly thereafter, gas prices started climbing. More and more people were forced to choose between paying for their commute and the home.
This DOE graph (not updated since 2004) is a great illustration of interaction between oil and paychecks. The dark blue line is steadily increasing disposable income. The red line is oil prices. The gap in the 1990's allowed people to risk their life's savings to buy a house. Since oil supplies stopped growing in May 2005, prices shot up to squeeze more and more people into foreclosure.
The $2,000 a year decrease in disposable income between 2000-2006 matches climbing foreclosures. Click on graphic to right to see cost by city.
Jeff Rubin, Chief Economist at CIBC World Markets, recently reported on this decay of economic momentum: Four of the last five global recessions were caused by huge spikes in oil prices and the world economy is coming off the mother of all spikes. Over the past expansion, real oil prices rose over 500%, twice the climb in real oil prices that produced the two biggest recessions in the post-war era: the 1974 recession and the double-dip recession in 1980 and 1982. If oil shocks half the size of the recent one caused the worst recessions in the last fifty years, they're a pretty obvious explanation for the recessions in oil-dependent Japan and Euroland earlier in the year. From where the US economy currently stands, vehicle sales have a much bigger downside than housing starts.
Most of the world's major economies are importers. World Oil Exports measure energy available to drive economies:
2005 were 46.342 mbpd
2006 were 45.838 mbpd, down 1.10%, 504 mbpd or 184 million barrels below 2005
2007 were 44.832 mbpd, down 2.24%, 1,509.7 mbpd or 551 million barrels below 2005
2008 looks like 43.8 mbpd, looking like a drop of at least 8% per year after 2010.
735 million barrels deficit in 2006-2007 and growing
604 million barrels deficit (about) was caused by the 1973 Oil Embargo
Efficiency must gain at least three times per year to counter oil price / supply decrease per year; fortunately that is possible. PRT and Advanced Renewable Tariffs are a start in the process of changing the lifeblood of our economy from oil to ingenuity.
3. Comparing the Economy to the Titanic
1956 Hubbert warned of Peak Oil.
1970 US domestic Peak Oil
1973 Oil Embargo, fragile infrastructure
Impact and Hull breach
2002-2007, 5-fold increase in the price of oil.
May 2005 Peak C&C's followed by 30 months of declining plateau.
Breach of water-tight inner compartments
Oil hits $220 a barrel (guess)
Sink, lifeboat or swim
4. We have known this would happen for half a century, but central planning and subsidies distorted people's perception and how we cause markets to adapt. Aware of daily feedings, the turkey is comfortably unaware of Thanksgiving; people are unaware Peak Oil. Unstable oil prices were our last warning. Oil will be back to $100 by summer. By 2012 our third largest supplier, Mexico will deplete below their domestic consumption. Mexico's fields are depleting at 8.9% per year.
5. Documentary on Peak Oil.
This is very well presented documentary on Peak Oil was first aired in 2006. Before the 2005 Peak Oil was clear.
Note governments' complete denial of the need to prepare.
6. Current Peak Production:
Crude oil - All time high crude oil production of 74.30 million b/d reached in May 2005 (EIA)
Total liquids - All time maximum liquids production of 86.13 million b/d reached in July 2006 (EIA & IEA)
Status of the production plateau - Plateau of production for over 2 years, since mid-2005.
7. Paradigm Shift:
Sadad Al-Husseini, former Saudi Aramco Exploration Minster warned of this shift: "There has been a paradigm shift in the energy world whereby oil producers are no longer inclined to rapidly exhaust their resource for the sake of accelerating the misuse of a precious and finite commodity. This sentiment prevails inside and outside of OPEC countries but has yet to be appreciated among the major energy consuming countries of the world."
This paradigm shift exhibited in Sept 2007 when the normally yearly cyclical pricing of gas and oil ruptured from normal and inventories plunged in an effort to compensate. The drop in stock will make the system more susceptible to price shocks. Gas prices lag oil but will likely catch-up at spring planting.
8. Time to react
It has taken 37 years to build the Internet to current level of access. It will take at least as long to re-tool transportation away from oil. By the most optimistic estimate we have 26 years. Peak Oil presentation.
We are not going to run out of oil. We did not run out of oil in the last six years, but it did tripled in price. We are running out of oil that can make gas for less than $6 per gallon.
Pollution indicates poor use of a resource. Economic and environmental stress are synonyms
Road rage, pot holes, air pollution, higher oil prices.
There is a profit in preempting waste.
Existence depends on nature and the grace from which life struggles.
We are responsible to not be the locus of our own demise.
Stewarding the earth is like driving a barge with a 200 year turning radius
Total's CEO, Financial Times, Oct 31, 2007 "The world's capacity to produce oil will fall well short of official forecasts, the chief executive of Total warned on Wednesday. In an unusually stark prediction for the head of one of the world's biggest oil companies, Christophe de Margerie, CEO of the French group, said it would be difficult to reach even 100m barrels a day."
With Peak Oil we are facing the catastrophic failure of the food distribution system.
Farmers are unprepared for unstable fuel prices.
Ethanol is building a false and unsustainable false farm economy.
Most people do not know how to grow a substantial part of their food needs.
Zoning laws prohibit food growth in suburbia.
Between 2002 and 2007 there has been a five-fold increase in the price of oil. That trend will continue until the food distribution system collapses. It is necessary to re-tool transportation before the crisis. The risks are indicated by food miles study.
14. Policies of self-reliance and community economic lifeboats:
Grow 1/3rd of your own food. It will take three to five years to get 50% of people to be competent gardeners to reach that level. This will not save the world but it will
lighten the logistical load
provide a sense that we can save ourselves
provide a sense of community and mutual protection of gardens
provide starvation rations
Feed-in Tariffs. Reliable electricity five hours a day provides hope.
Personal Rapid Transit, PRT. Allow the success of Morgantown to propagate.
Universal state militia service. Secure your community, individuals cannot survive by themselves. Peak Oil is going to be great for world peace and hell on local peace. Competition is the natural state; peace is the enforced absence of war.
Government charge for non-commercial costs of carbon, other emissions, unclean water, etc....
16. On 29th October 2008 at The London Stock Exchange, eight leading UK companies launched a report, The Oil Crunch: Securing the UK's energy future, warning that a peak in cheap, easily available oil production is likely to hit by 2013, posing a grave risk to the UK and world economy. The warning comes from a broad spectrum of industry (Arup, FirstGroup, Foster + Partners, Scottish and Southern Energy, Solarcentury, Stagecoach Group, Virgin Group, Yahoo), known as The Peak Oil Group.