Hasta la vista!

In my post, Changing Gears, I communicated my decision to address the practical aspects of dealing with the arrival of peak oil and its repercussions.

As I often say, we have no sure way of knowing exactly how this thing is going to play itself out. For years we have been speculating about what post-peak life might actually be like – that was all we could do – but we are now “in it” and so I ask: What can we do? Once again I am using the excellent work of  Gail Tverberg as the principal source of information to begin this list of practical suggestions. (More suggestions to come…):

1. -Visit family and friends now, especially those who live far away. This could be much more difficult to do in the not-too-distant future and here’s why: The recent history of the airline industry reveals its vulnerability to oil price shocks. Just in the US over the last few years, the industry has seen losses in excess of $60 billion, while at the same time eliminating more than 180,000 jobs. Last year the industry had to deal with a 20% increase in fuel costs and the companies survived by reinventing the rules of the game – to the detriment of their customers, the passengers. The new rules are simple: Fly less and charge more. The companies of the industry have trimmed down their flight schedules, opting for higher occupancy per flight, while fares over the past year have risen more than 15%. In addition, many services that were traditionally included in the price of the ticket are now being charged separately (and their not cheap!): checking luggage – sometimes even the 1st bag – now costs $30 and up, changes in flight itineraries have merciless consequences and penalties, not to mention snacks and drinks while on board…

And now oil prices are in the midst of another push upward…another step toward the $100 per barrel mark. But on this occasion the airlines have little wriggle room left…What else (in terms of cost) can they pass on to the unsuspecting passenger? What else can they charge him/her for to make a little cash?? It is reasonable to think therefore that future (imminent) price spikes and supply hiccups will provoke significant and permanent changes in air travel and that our cross-country hopscotching days are numbered. So book that trip you’ve been putting off and go see your mom while you can!

2. – Buy a hybrid car now. Soon, when the repercussions of peak oil are more evident and the situation is more serious, it will be much more difficult and expensive to get your hands on one of these cars. You may ask why I am not recommending an electric car? As  Antonio Turiel argues quite convincingly in his blog The Oil crash, the future of the electric car is very much up in the air… I therefore recommend a hybrid – at least during this transition period.

3. – Buy a bicycle to use as an alternate means of transportation whenever you can. Its very likely that the bicycle will, once again, become an important part of everyday life. There is an organization called  peopleforbikes.org that is trying to promote the use of bikes and their pledge is follows:  “I am for bikes. I’m for long rides and short rides. I’m for commuting to work, weekend rides, racing, riding to school, or just a quick spin around the block. I believe that no matter how I ride, biking makes me happy and is great for my health, my community and the environment we all share. That is why I am pledging my name in support of a better future for bicycling—one that is safe and fun for everyone. By uniting my voice with a million others, I believe that we can make our world a better place to ride.”

According to  Gail Tverberg, editor at TOD and author at ourfiniteworld.com, one of the issues that seems to be driving the change is the fact that the peak oil in conventional oil production is more and more in the rear view mirror. Because of this, we are getting increasingly close to the situation where serious disruptions may start taking place. In addition, it is becoming more and more certain that there is no way of fixing the situation that will allow us to maintain our current lifestyles… Writing more and more about what may be ahead, when this situation may be quite bleak, alienates a lot of readers and may lead to rash actions by a few – and that is not the idea…

So I’ll be changing the gears of this blog and begin to address the subject in more practical terms: Peak oil is here, so what should we do?

Merry Christmas! Happy New year! Congratulations!! We’re saved!! We have found the solution to all our problems…It only requires a small investment of time on your part this New Year’s Eve…and if we do this all together, I’m sure it will work.

All you have to do is listen and learn the magic incantation called “Hocus Pocus” (by the group Focus.) As you’ll see, the words are easy to learn and if we all chant it at the same time on New Year’s Eve, exactly at 00:00,  this peak oil crisis thing and all of its repercussions will disappear instantly. [IMPORTANT!: review the video carefully since its essential to gesticulate and whistle correctly...]

If you don’t feel confident about this solution, perhaps  the magical solution recently published in EL PAIS will be more convincing to you: Una revolución a todo gas – Los nuevos hallazgos disparan las reservas y cambian las reglas del mercado. I must admit I prefer the Hocus Pocus option. It seems that just when the rest of the industry stakeholders began to doubt the panacea effects of non-conventional gas, EL PAIS discovered it and guess what?…¡Abracadabra!

Irony aside, there is no doubt that non-conventional gas represents  an enormous business and investment opportunity and (apparently) will not accelerate the rate of decline down the ride side of the curve.  But if we consider the ratio of energy return on energy invested (EROEI) vs the ratio of cheap oil (the basic building block of the current world economy) and the environmental impact of harvesting non-conventional gas, we’ll quickly see that it is not the magical solution after all. For a closer look at the subject, I recommend a read through Antonio Turiel’s latest blog post at The Oil Crash.

PS – to maximize the power our “hocus pocus” incantation, the more we are, the better…Pass it along.

Below, excerpts from the FAO website:

In the latest edition of its Food Outlook report, the agency also issued a warning to the international community to prepare for harder times ahead unless production of major food crops increases significantly in 2011.

Food import bills for the world’s poorest countries are predicted to rise 11 percent in 2010 and by 20 percent for low-income food-deficit countries.

This means, by passing a trillion dollars, the global import food bill will likely rise to a level not seen since food prices peaked at record levels in 2008.

Today I am feeling “antsy” (as my mother used to say) – I just want to get going. I want to get on with it…whatever the hell “it” is. Of course I am not physically or mentally ready to go anywhere, nor is anyone else for that matter. And maybe that’s what’s really bothering me. I mean, there is more than enough detailed information being provided by a long list of credible, high-profile sources. So, what the hell are we all doing sitting here??!!

Recently a new source – (new for me anyway) – spoke with crystal clarity at ASPO about peak oil and the days ahead. He’s a guy with credentials out the wazzoo: Former Director of the CIA, US Secretary of Defense and US Secretary of Energy (yes, all rolled up in the the same guy!) – James Schlesinger. He pulls no punches “…like the inhabitants of Pompeii, who ignored the neighboring volcano Vesuvius until it detonated, the world ignores peak oil at its peril.”

These are not the words of an annoying alarmist who latches on to a tiny bit of information, then starts yelling “the sky is falling in!” (a little knowledge is a dangerous thing!)  No, once again, these were the soft spoken words of an intelligent man with life-long access to relevant information and who has a clear view of the reality of our situation in the context of peak oil. So why do we turn a deaf ear and continue to ignore the churning rumble of this volcano? Most especially, why is there no leadership whatsoever on this issue?

It would be easy enough to blame our leaders. It would be easy enough to think that they are a bunch of gutless, spineless clods who are afraid to stand up and lead. It would be easy to think that there are no true public servants with a real interest in what’s best for the people, regardless of the consequences to their own personal & political ambitions. But to simply blame our leaders would be cowardly, over-simplistic and mistaken. The real responsibility is ours.

When we stop and think about it, we quickly understand the irony of modern political leadership: Our leaders are in fact followers. They follow the vote, the opinion poll. They follow the interests of the constituency. They follow the script and the agenda set by whoever has the clout to keep them in place. And that – at least is part – is the electorate. You and I folks….if only we were informed enough to set an intelligible agenda for them to follow.

This realization is a downer. It would be a lot easier to blame a relatively small bunch of leaders (and maybe even convince a couple of them to try something heroic and herculean), than to educate the masses, to raise their level of awareness so that they, in turn , call their leaders to task.

So yeah, I’m antsy as hell to get going, to roll up my sleeves. But what should I do? Appeal to the leaders to make a move? Organize programs to raise the level of awareness of the masses? Or concentrate on my own resilience and join a transition movement?

Now let’s imagine the same scene again, only this time, instead of 18, there will be 47 of us eating! If we keep the same ratio as before, we’d have 31 cooks to prepare the food, but no, this time its all going to be done by 2 people. …For the love of God, don’t let the gas fail on either of the 2!!

There are now 47 million of us living in Spain, all of whom are precariously balanced on an inverted pyramid. A handful of farmers feed all of us*, everyday. And they do their magic thanks to the cheap oil that fuels their gigantic tractors, comprises their pesticides and fertilizers and mobilizes the trucks and boats that bring the fruits of their labor to our tables. Price spikes or supply interruptions of these petroleum derivatives could really do a job on us.

So, don’t you think it would be worth getting well informed about peak oil and its potential repercussions? To evaluate our level of resilience? Or even to plan a bit in terms of risk management or mitigation strategies?

- – - – - – - – - – - – - – - – - – - – - – - – - – - – -

*(NB: Yes, I know that in addition to the handful of Spanish farmers we also rely on handfuls of other farmers from countries even further away…This is of no consolation since the distance between us exacerbates the effects of possible price spikes and supply interruptions. )

**The sources of the data from the table above are: wiki Spain agri, e-ciencia Spain población, wiki Spain demogr

The source of the above information is the Spanish  Ministerio de Fomento. I have not yet found the data for August and September, but I can assure you that it doesn’t get better.

Each time you swing by the gas station to fill up your tank (here in Spain), it will cost you at least 15% more than last year. Yeah, that hurts! But the pain associated with the act of filling up your tank, is fleeting – lasting about 7 to 10 minutes at your local gas station each week, then briefly again at the end of the month when you receive the VISA bill. But the biggest problem is this: You are going to pay that gas hike for a lot of others too. Literally every single thing you see and touch from this instant until you go to sleep tonight, and everything you want or need to buy tomorrow or this week or next month, is directly affected by the price at the nozzle (or more specifically by the price of oil…) And its going to keep going up.

Have a look for yourself:  What do you have on your desk or around you right now? Here at my desk, I have a printer, a few note books, bic pens, a few bottles of water, eye glasses, a desk lamp, telephone, the remains of an apple and a pear… I don’t think that even one single item is from here (Colmenar Viejo, the town where I live), or even from Madrid for that matter. Everything, absolutely everything has come from somewhere else, and in many cases from very far away – “made in China!” The price for transportation is on the rise for everyone and everything and represents a growing percentage of the total cost of sales for any item or service. You can be sure that whatever it costs to send or bring these items to your table will be past on to you. (Note – I am only factoring in the transportation costs and I’m not considering the growing cost of products that actually have oil as a central component such as: plastics, fertilizers & pesticides for agriculture, pharmaceuticals, etc…)

Since October of 2009 the price at the pump has risen by 15% for your petrol and for the petrol used to  transport of all of the things you buy. That’s not chicken scratch.

Did you get a good raise in this same period?

And now, at the OPEC ministerial meeting in Vienna, triple digits begin to weave their way back into the vocabulary. According to Bloomberg’s account of the meeting:

Venezuela and Libya said oil at $100 a barrel will compensate producers for a slide in the dollar without derailing the global economic recovery.

Crude at $90 to $100 won’t “harm” growth, Venezuelan Energy and Oil Minister Rafael Ramirez said as ministers gathered for the Organization of Petroleum Exporting Countries’ meeting in Vienna at which members are likely to keep production quotas unchanged. Shokri Ghanem, chairman of Libya’s National Oil Corp., also called for higher prices even as other nations said they were content with prices at $70 to $85 a barrel.

“No one will hate oil at $100,” Ghanem said. “The weakening dollar is weakening our income.”

And yet, there is reason to think that the dollar will continue to weaken…perhaps even drastically. On several occasions in this blog I have referred to Peter Schiff’s distressing expectations for the dollar. Without getting overly dramatic, it would seem we are in the midst of a squeeze play with oil production at peak (and consequential oil price increase) on one side, and the sorry state of the dollar  “weakening OPEC’s income”  (and consequential oil price increase) on the other. Quite a combination!

To say however that “no one will hate $100 oil” is outrageous. With global and household economies teetering on the edge, it is difficult to say how detrimental $100 oil would be. For me the question is this: can the current global economy withstand those prices without imploding in on itself once again? I doubt that it can. The legs of this broken economy are far weaker than the legs that sustained the pre-July ’08 economy (when oil spiked to $147.) It will not require the same price to bring it tumbling down again. So, what is the new $147?

I close with 3 slides from Gail Tvyberg’s excellent presentation called “We Have Lots of Oil But…” In it she questions the ability of the economy (household or other) to withstand skyrocketing prices. In other words, its not necessary for prices to reach $200 or $300 a barrel to be damaging or even devastating…

“Tonight I want to talk with you about a problem unprecedented in our history. …the greatest challenge [we] will face during our lifetimes. The energy crisis.

It is a problem we will not solve in the next few years, and it is likely to get progressively worse…

We must not be selfish or timid if we hope to have a decent world for our children and grandchildren.

We simply must balance our demand for energy with our rapidly shrinking resources…I will present my energy proposals… these proposals will be unpopular. Some will [require] you make sacrifices.

This difficult effort will be the moral equivalent of war.

I know that some of you may doubt that we face real energy shortages. [There are no] gasoline lines…our homes are warm… But our energy problem is worse tonight than it was …a few weeks ago. And it will get worse every day…

The [cheap] oil and natural gas we rely on…are running out. In spite of increased effort, production has been dropping… Unless profound changes are made to lower oil consumption…[soon] the world will be demanding more oil that it can produce.”

In fact, this is exactly what Jimmy Carter did and said on several occasion, beginning with this speech on April 18, 1977. The US had reached domestic peak oil production just a few years earlier.

Current day peakers, myself included, often complain about the lack of vision on the part of past & present day leaders to see this situation and to plan & act to mitigate. In fact, Carter was one of the first overt peakers. He explained the problem with clarity and made a repeated plea to the people to radically change their lifestyles in preparation for the times ahead. In addition to addressing the nation on numerous occasions with emotional pleas, he even went so far as to lay out a 10 step plan of action. However, both the legislators and citizen behavior failed (miserably) to grasp the significance of his message and ultimately Carter was written off and often ridiculed for his position.

In spite of the ongoing decline in post-peak domestic production – and due to the availability of oil from other parts of the world – during the following decades, the US tendency to consume continued to increase and their dependency on foreign imports increased with it, creating a false sense of normalcy and sustainable prosperity. But Carter’s warnings were not a false alarm and we are now experiencing the first effects global peak oil.

• Keeping the troops focused on their true military mission. The article quotes Ray Mabus, the Navy secretary  as saying “Fossil fuel is the No. 1 thing we import to Afghanistan…and guarding that fuel is keeping the troops from doing what they were sent there to do, to fight or engage local people.”
• Keeping the troops safer, stating that “In Iraq and Afghanistan the huge truck convoys that haul fuel to bases have been sitting ducks for enemy fighters…”
• Reducing the logistical challenges of fuel transport during war. “Fuel destined for American troops in landlocked Afghanistan is shipped to Karachi, Pakistan, where it is loaded on convoys of 50 to 70 vehicles for transport to central bases. Smaller convoys branch out to the forward lines. The Marines’ new goal is to make the more peripheral sites sustain themselves …since solar electricity can be generated right on the battlefield.”

Say, is that a pachyderm meandering over there by the sofa?

Pass it along…

If the challenges that face us on the right side of the curve are as daunting as many expect and if they are unavoidable, then I HOPE  we have the vision to see what’s really important in this life and the courage to begin rejecting what is not. I hope we have the strength to make such a transformation and to sustain it.

Most of all, I hope we never loose hope.

Whether peak oil already occurred in July 2008 or occurs in 2017 is academic. The sobering upshot is the same: “Peak Oil is Now” and, like it or not, the repercussions from the event are likely to be staggering. At this stage we all should be better informed and better prepared.

Charles T. Maxwell is an oil industry heavyweight.  Educated at Princeton University (Jadwin Scholar-Politics) and Oxford, he entered the oil industry in 1957 and worked for Mobil Oil for 11 years in the US, Europe, the Middle East and Africa. In 1968, he joined CJ Lawrence as an oil analyst and was ranked by Institutional Investor as No.1 in his field in 1972, 1974, 1977, and 1981-1986. In addition, since 1984 he has been an active member of an Oxford-based organization comprised of OPEC and oil industry executives from 30 countries who meet twice a year to discuss trends within the energy world.

Maxwell recently appeared in Forbes Magazine with a forecast: Peak Oil is at hand.

• He placed the peak between 2010 -2018, though he does not discard the possibility that it has recently taken place.
• He is forecasting part 2 of the double dip (or in this case double wammy!) and now expects an oil-induced financial crisis to start somewhere in the 2010 to 2015 time-frame. He said that, unlike the recent recession, ‘This will not be six months of hell and then we come out of it.’ Rather, Maxwell expects this financial crisis to last at least 10 or 12 years, as the world goes through a prolonged period of price-induced rationing and a forced energy transition. Higher prices will result in a very difficult transition period in which we are forced to use less because we simply don’t have the money to use the oil that we have historically used. This will be a period of great economic difficulty.
• He does not believe that there is anything in the technology pipeline that can prevent a growing gap between supply and today’s demand.

The time for planning finished when the boat plowed into the iceberg. Even after it occurred, everything carried on as usual for a while as if nothing had happened. Captain Smith, as pleasant as ever, chatted casually with the unsuspecting passengers. And in the end, in an attempt to maintain a sense of calm and “normalcy”, the captain requested that the orchestra play something serene. It was a gesture as absurd as it was noble…

The silence of the leaders before the reality of Peak Oil: Perhaps they (correctly) think that the phase for disciplined planning should have occurred 30 -50 years ago, given the magnitude of the challenge. Perhaps they think that it is not their fault that the previous 2 generations of leaders were more concerned with stimulating economic growth through unbridled consumerism, without considering the consequences. Perhaps they know that the peak has already been reached, the boat mortally wounded and that now, instead of rushing to communicate, plan and execute, its their turn to queue up  “La Macarena“.

Is it a poetic gesture or a pathetic one? In my humble opinion its unacceptable. What do you think?

Stalemate

A strong recession holds oil prices “down”. Yet current prices continue to be much higher/stronger than you’d expect given the poor economic climate. The reason: Peak oil – a loaded gun which strengthens the recession’s grip on the economy.

When the current surplus in oil inventories (prompted by the recession’s lagging demand) begins to diminish, prices will be forced upward. What will be the response of the already beleaguered economy? Or phrased another way, just how strong (crippling) will the recession become to combat skyrocketing prices?…and will it be called a recession or something else?

I spend hours researching the topic nearly every day. There is so much contradicting information available, from “evidenced-based” warnings of  a veritable collapse in development, to claims of enormous technological advances “already developed” and waiting in the wings. Will the standards of living take a quantum leap forward or are we heading back to life as it was a few hundred years ago?

Over the years I have often been accused of being an optimist (and a peace-maker no less!) Today I am, among other things, a peaker. And though I don’t know for sure what life will be like 5, 10 or 30 years from now, I’ve seen that there is opportunity here – and I am not talking about renewables in this case. The opportunity I am referring to is about how we live this very day. Peak oil, and the prospect of its ramifications, forces upon us an opportunity to learn in ways most of us have not afforded ourselves previously:

- For starters, we could begin to understand that our material good fortune is not actually “ours”. It does not belong to us, nor is it necessarily permanent.

- Our material good fortune does not define who we are (inside), and could disappear tomorrow for any number of reasons including peak oil, war, climate change, prolonged & profound economic downturn, natural disasters, etc… If that were to happen, like it or not, you would still be you (albeit a more uncomfortable you!)

- Learn to rediscover ourselves (collectively) by acknowledging our vulnerabilities and recognizing that we have disassociated ourselves from many of the basics that have formed part of the human fabric for thousands of years. Things like:

• milking a cow or goat
• making bread, wine, ale, cheese, etc..
• basic farming/gardening & animal husbandry
• raising chickens (see Gail Tverberg’s article)
• building a wall or structure from stone or timber
• making a fire (without matches or a lighter)
• making basic tools
• weaving (corny video, but very clear example of basics)
• fishing, hunting, trapping
• storytelling (oral tradition), music making (instruments, songs)
• inventing games
• etc. etc. etc…

Regardless of what the future holds, there is enormous value in reacquainting ourselves with the many activities that have historically formed a part of what it means to be human.  Eating bread that you have made with your own hands is amazing! (Forgive my hyperbole for a moment as I say that it is an experience that boarders on being mystical!) Try it with your kids.

Of course all this would be enormously useful if the repercussions of peak oil are as severe as many believe. But I am suggesting that regardless of what you think of peak oil and its repercussions, seize the opportunity to learn and rediscover an important part of who we are.

Laughable, if the implications weren’t so serious.

If you look hard enough between the lines, there is the tacit recognition that peak oil may well be upon us (see the feeble growth foreseen for the remainder of this decade.) This is a gradual concession that probably provides way to little, way too late. Additionally, the growth beyond 2020 once again takes the shape of all previous “cornucopian forecasts”.

So, what to do with such information? As depicted by Fred Magyar on TOD, maybe there is a useful extrapolation here!?!

The disaster of the rig Deepwater Horizon in the Gulf of Mexico could not come at a worse time for the oil industry. This environmental disaster whose effects are not yet fully understood comes just a month after the Obama administration announced the expansion of exploration and extraction of oil in the U.S. mainland. This disaster has multiple readings, and all bring some light to the state of world oil trade and its likely evolution.

The exploration and extraction in deep and ultra deep waters is one of the new frontiers that the oil industry has been obliged to transfer to the depletion of onshore fields. If we could drill for oil on land, drilling two miles deep, why drill offshore, under a water depth of one mile and ten miles beneath the rocks? The oilfields of the Gulf of Mexico have failed to stop the irreversible decline of oil extraction in the United States since 1970, but have helped reduce oil imports from other countries, which in 2007  represented 22% of total extraction.

Globally,  marine oil production represented 6% of production in 2007. The marine deposits are an opportunity for industry, especially in areas such as Brazil, Angola, Nigeria and the U.S., accounting for 70% of all offshore oil reserves in the world (between 160 and 300 000 million barrels or ten years of global consumption at current rates). An opportunity not without risk.

The exploration and extraction in the so-called ultra-deep waters (over 1,500 meters deep) is subject to the challenge of high temperatures and pressures, nearly plastic behavior of salt lyers  more than three kilometers deep, to the presence of natural gas at high pressure, and the use of complex robotic mechanisms built to order. If the extraction of oil is itself a technical feat, the depth and the marine environment make things even more complicated, as evidenced by the accident involving the rig leased by British Petroleum.

On April 20, 2010 an explosion in the Deepwater Horizon caused a fire that killed 11 workers and the sinking of the ship two days later. The accident occurred while they were building, more than a mile down, a concrete structure that connects the drill pipe with the pipelines that bring oil to the surface – where the natural gas, sea water and sand are separated from the oil. Although no one knows the exact cause of the accident, there is speculation that an unexpected reaction of cement injection caused the rise of a large amount of natural gas up the pipeline, provoking the fire on  the surface.

It is estimated that every day 5,000 barrels of oil are discharged into the sea. By way of comparison, the Exxon Valdez spill was a total of 271,000 barrels, so if the leak continues for 50 days it would equal the catastrophic spill off Alaska in 1989. Recent efforts to build a dome to contain the spill  have failed and now the safest solution is to drill an adjacent well to intercept the flow of oil and seal it with cement. But this will take about 90 days and meanwhile the leak endangers ecosystems and local economies.

The oil industry, especially private companies, is facing higher costs and a higher degree of difficulty in the execution of projects, as fewer deposits of conventional, easy to extract oil are discovered. They need to invent new extraction techniques, tailored to each circumstance. Given the extreme conditions in which they have to work, the results are sometimes disastrous such as the Deepwater Horizon. However, not even the oil from ultra-deep water will be sufficient to halt the decline in reserves. Is it worth running such enormous human and environmental risks to string along our addiction to oil?

So its also difficult for me to know where to situate one of the proposed alternatives…the one that says “Nuke it!” Yes, you are reading it right and it was one of the earlier suggestions of the crisis, anticipating that this particular leak was going to be especially difficult to stop. The weeks go by, other attempts fail, the nuke option remains discreetly in the background.

As oil-price.net reports: Soviet Russia used controlled nuclear explosions to contain oil spills, on at least five different occasions.

The science is to drill a hole near the leak, set off the explosion and then seal off the leak-used in the soviet for an oil spill in the desert. If it is rocky surface the explosion would shift the rock which then squeezes the funnel of the well. The first underground nuclear explosion was done in Urt-Bulak in 1966 to control burning gas wells. The success ratio is quite high with only one of them failing to prevent a spill in Kharkov region in 1972.

There is an analogy between using nukes to stop the oil leak and using Chemotherapy on a cancer patient. Chemo nearly kills the patient in order to kill all cancerous cells. Yet it is the best known way to stop cancer. The same goes with using nukes underwater. Like chemo it is drastic yet has a 80% success rate, better than anything else.

Some analysts are against the use of nuclear explosions on fear of the effects on the environment. But the world has already done underwater testing of nuclear devices and if there was a huge environmental disaster as a result of it, we’d have known by now. Indeed, Commandant Cousteau, renowned biologist led numerous dives following French underwater nuclear explosions in the Mururoa atoll and noted very little impact on sea life.

Using nukes to stop the leak is the most ecological alternative. Stopping the leak before too much oil leak is the key, speed is of the essence. Nukes would allow this to be resolved in a matter of days. This would save thousands of miles of shoreline, millions of animals by not allowing this toxic sludge to contaminate the shore.

One of the main issues with using nukes is public opinion. Even though it’s the most ecological alternative, nukes have a huge public stigma hard to overcome, mostly due to ignorance. Nuclear bombs are not intended to be used for peaceful, ecological purposes and educating the public on this possibility is an uphill battle.

This technology was used by the Russians, the USA’s sworn enemy at the peak of the cold war. Never mind the relatively high success rate of 80%, no politician in his right mind would sell a Russian solution to the public.

Of course, BP does not have nukes. The US military does, of which the Army Corps of Engineers would probably have to design a plan to use them on the leak. The United States has about 5,113 nuclear war heads, as revealed by Pentagon according to the Strategic Arms Reduction purpose. So, why not use them for peaceful purpose for once?

A few excerpts from Kris De Decker’s recent article “The status quo of electric cars: better batteries, same range”

Then and now: 100 miles

If today’s supporters of EV’s would dig into the specifications and the sales brochures of early 20th century electric “horseless carriages”, their enthusiasm would quickly disappear. Fast-charged batteries (to 80% capacity in 10 minutes), automated battery swapping stations, public charging poles, load balancing, the entire business plan of Better Place, in-wheel motors, regenerative braking: it was all there in the late 1800s or the early 1900s. It did not help. Most surprisingly, however, is the seemingly non-existent progress of battery technology…

The Nissan Leaf and the Mitsubishi i-MiEV, two electric cars to be introduced on the market in 2010, have exactly the same range as the 1908 Fritchle Model A Victoria: 100 miles (160 kilometres) on a single charge. The “100-mile Fritchle” was a progressive engineering feat for its time, but it was not the only early electric that boasted a 100 mile range…

The first electric cars (1894 – 1900) had a range of 20 to 40 miles (32 to 64 kilometres), still better than the 20 km “range” of a horse. The average second generation EV (1901 – 1910) already boasted a mileage of 50 to 80 miles (80 to 130 km). The third generation of early electric cars (1911-1920), including larger vehicles that could seat 5 people comfortably, could travel 75 to more than 100 miles (120 to more than 160 km) on a single charge – and this is still the range of electric cars today.

100 miles = upper limit

In fact, the range of the Nissan Leaf or the Mitsubishi i-MiEV may be far worse than that of the 1908 Fritchle. The range of the latter was (officially) recorded during an 1800 mile (2,900 km) race over a period of 21 driving days in the winter of 1908. The stock vehicle was driven in varied weather, terrain and road conditions (often bad and muddy roads). The average range on a single charge was 90 miles, the maximum range recorded was 108 miles.

The range of the Mitsibushi i-MiEV and the Nissan Leaf was tested in a very different manner. On rollers instead of on actual roads, and in a protected environment, but that’s not all. Both manufacturers advertise the US “EPA city” range, a test that supposes a 22 minutes drive cycle at an average speed of 19.59 mph (31.5 km/h), including one acceleration to 40 mph (64 km/h) during no more than 100 seconds.

In fairness, the demands on the modern electric car are much higher and play a role in the limited range outputs. But, given our predicament in the face of peak oil and its repercussions, perhaps we ought to cut ourselves some slack and consider lowering the bar (albeit temporarily) in terms of comforts & extras…or be contented with a vehicle that may be more suitable to the relocalization that many believe is just around the bend.

So as my mantra goes:

If you are a business, industry or political leader, get informed!… (we can help.) If you are a concerned citizen, employee or group member , encourage leaders to get informed, then do the same yourself! Only by being informed will we be able to act/react in an insightful and decisive manner.

While some cities and their leaders begin to undertake the urgent task of getting informed, we have at the other end of the spectrum an interesting group of doers who undertook the task years ago: Let me introduce you to the Transition Communities.

As described on the web of the Transition Network, a transition initiative is a community-led response to the pressures of climate change, fossil fuel depletion and increasingly, economic contraction. There are thousands of initiatives around the world starting their journey to answer this crucial question:

“for all those aspects of life that this community needs in order to sustain itself and thrive, how do we significantly rebuild resilience (to mitigate the effects of Peak Oil and economic contraction) …”

The community self-organizes to respond in four phases.

First, the small initiating group starts a program of awareness raising and hooking up with existing groups. They articulate the rationale for adopting/adapting a transition approach and show the creative responses that the community might embark upon.

Second, as the group becomes larger, it self-organizes in groups in all the key areas such as food, transport, energy, housing, education, textiles etc, and creates practical projects in response to that big question (such as community supported agriculture, car clubs, local currencies, neighborhood carbon reduction clubs, urban orchards, re-skilling classes). Most Transition Initiatives are in this phase.

Third, when the initiative is sufficiently competent with these concepts and practices, it embarks on an EDAP (Energy Descent Action Plan) process. This is a community-visioned and community-designed 15-20 year plan that creates a coordinated range of projects in all these key areas, with the aim of bringing the community to a sufficiently resilient and low CO2-emitting state. A small handful of Transition Initiatives have embarked on this phase.

Fourth, they begin implementing the EDAP, sharing successes and failures with other Transition Initiatives that are traveling the same path.

Most of these communities are willing to say that they don’t know for certain if their initiatives will work successfully in the face of peak oil and its repercussions. But there is a general sense of determination driven by cautious optimism and satisfaction for having taken action. The spirit behind them is this: governments have so far been slow to get informed and take action, individual efforts will not add up to achieve the necessary critical mass. But communities might just be enough and just in time…

If you are involved in a transition initiative, I’d love to hear from you!

As I have mentioned on other occasions, this blog, in addition to being a source of information about peak oil, should also be a place to share ideas that foment learning, hope and opportunity in the face of the challenge before us. From Ling comes another excellent example…Zurich

A few years ago, Zurich’s Institute of Technology came up with an ambitious plan: reduce the energy consumption of each citizen to 2,000 watts, while maintaining the standard of living. The current average is 6,000 watts in Europe and 12,000 in the USA, while in Africa, consumption is aroudn 500 watts per person.

While the figure of 2,000 watts is for energy used by each individual, this is truly a collective challange, since it is calculated by dividing total energy expenditure among the entire population. Everyone has a part to play.

And although the movement has followers all over the world, Zurich is leading the charge by adopting it as legislation. Thus the city is promoting the construction of buildings that are truly efficient, encouraging compact designs which optimise natural light and the use of recycled materials. The Swiss city has a number of green measures in place, in both the private and public domain. For example, municipal facilities only buy appliances that are listed as energy efficient, while private developers are joining an incentive scheme: when new buildings are constructed with fewer parking spaces, the property owners receive annual vouchers for public transport.

Several decades ago, the great North American writer and urban theorist Jane Jacobs reminded us that economies are driven by cities, not countries or states. This is also the assertion of French economist and writer Jacque Attali, in his book A Brief History of the Future…So, in light of the current state of affairs (& economies), all eyes are on the cities and those who lead their development.

It is hardly surprising then, that a fierce debate about the future of cities is emerging and that some cities are spending their time and resources on reinvention. The most successful cities are intelligent, with a social conscience, sensitive to the environment while cultivating talent and creativity. They are cities that have understood how to combine technological innovation and design with use of services, designed by and for the citizen, incorporating energy and economic sustainability. Think multifunctional street furniture, fed by solar energy, mobility systems that motivate the use bicycles and car sharing, educational models that connect each neighborhood’s schools with companies in that same area, or environments that favor knowledge exchange among communities of different origins.

The leaders of these cities are not cowboys, but informed risk takers who are keen on advancing a forward-thinking agenda and anxious to act in the face of today’s show stopper, peak oil.

In spite of the very trying times of the current world economy, the price of oil is relatively high (these days high 70′s- low 80`s and bouncing around quite a bit…a few days ago it was heading for $90.) If any truly “encouraging” signs or indexes about economic recovery appear on the horizon, the price of oil will surge upward. And if that happens, will the debilitated national & household economies, in spite of their hopefulness, be able to bear the weight of the repercussions of even higher oil prices? [go back to paragraph 1].

The price of oil and the economy seem to be holding each other in check…sort of. True, we are not seeing the $150 oil prices that many feared. But the explanation just might be that the weakened economy simply cannot bear it. It already “broke” once at $147, and since then, anything over $85 seems to keep to shake the systems and the markets until they back off again.

The drag in the markets this week are being attributed to renewed fears about debt. The discouraging news had the logical downward effect on oil prices. Phrased this way, it would seem that oil is receiving the impact, not causing it. But it will be helpful to understand the enormous and direct relationship between oil commerce ->inflation->debt -> confidence -> the economy…

Spittelau plant (Vienna, Austria)

Recognizing peak oil will serve as a catalyst for generating ideas and transforming them into concrete actions. I have talked on several occasions on this blog about Jeremy Rifkin and his ideas on distributed energy and the third industrial revolution. This seems like a brilliant concept and I ask myself: Which of the current European leaders will have the vision to recognize peak oil and the courage to act on it in a decisive manner?  Will anyone take charge to lead this necessary third industrial revolution?

While we wait for the answers to these questions, I must admit that there are interesting ideas that have already become a reality. For example, the Spittelau plant in Vienna, Austria, as described in The Green Issue of Ling magazine:

“We are the model to follow”, announces Michael Häupl, mayor of Vienna. This is no idle boast. City officials from all over the world are flocking to the Austrian capital to study its cutting-edge hear generation system – based on the idea that wast is, in fact, a useful resource.

The rubbish collected in the city is transported to incineration plants, where the heat generated from burning is captured and returned to the city. As waste is destroyed, so heat and hot water are created – and the CO₂ emissions from this process are much lower than those created by traditional energy sources, such as electricity, gas or coal.

Impressive figures prove the effectiveness of this method. Every year almost a million tons of rubbish provide heating for 300,000 Viennese homes. The same network also supplies heat to government buildings, schools, museums, hotels and up to 6,000 companies.

The next challenge is already under way – a similar network for generating cold air, demand for which will be similar to that for heating within the next two decades. If all goes according to plan, this system will use only a tenth of the energy used by conventional air conditioning facilities, meaning another substantial saving.

Peak Oil demands leadership that is Informed, Insightful & Decisive (I²D).  This post is about Informed Leadership. It is the 1st in a series of 3 posts on I²D Leadership.

I start with 3 questions for political, business and industry leaders: Does peak oil represent a threat? Is the event of peak oil and its repercussions imminent or a long way off? Will the effects of peak oil be devastating or insignificant?

According to an ongoing survey at Sullivan Advisory, less than 10% of interviewed leaders and executives felt they could do a 3 minute presentation on peak oil. Our proposal to leaders therefore is the following:

1º – Take a few minutes to see a brief introduction (video) about peak oil.

2º – Get a deeper understanding of peak oil through organization of an informative session/workday for the leader and his closest advisers.

3º – Commission an evaluation of peak oil and its potential implications for your city or organization (oil resilience & vulnerability)

4º – Establish a task force to develop mitigation strategies and/or contingency plans.

Places and organizations that have already done their homework include:

Southern California (pobl 17,5 millón)
San Francisco, CA (pobl 1 M)
Minnesota (5M)
Connecticut (3M)
Denver, CO (0,6M)
Cleveland,OH (0,6 M)
Pórtland, OR (0,5 M)
Austin, TX (1,5M)
Bisbane, Australia (2 M)
Marybirnong, Australia (65K)
Darebin, Australia (65K)
Hamilton, Canada (0,6 M)
Bristol, UK (0,5 M )
Nottingham, UK (0,2 M)
Merrrickvill, UK (75K)
Munich, Germany (1 M) – in progr
Geneva, Switzerland – in progr
Uppsala, Sweden (130K)

Teo, A Coruña – Spain (17k) – in progr

(The list is not comprehensive and continues to grow…)

Carrying out these measures, (at least the first 2), will allow leaders to assure their stakeholders and constituents  that they are adequately informed on the subject and therefore capable of evaluating the level of risk posed by peak oil.

1. Do our business, industry and local political leaders know about peak oil? If not, we should demand at least that much of them. Information is readily available on the net and firms like Sullivan Advisory offer information sessions, evaluations and contingency planning for peak oil.
2. Are there comparable alternative energy sources with the capacity to replace the declining availability of cheap oil? (…keeping in mind that as the availability of cheap oil begins to diminish, demand will continue to rise in “emerging markets”, better described as awakening giants such as China, India and Brazil.)
3. Will these alternative energy sources serve to prevent the enormous energy-induced crisis foreseen by many? Or will it be about mitigation and minimizing pain?
4. Will there be resource wars? Or phrased another way, will we go to war to preserve our standard of living? There are those who believe we already have in Iraq.

Here is a very quick stab at the answers…as I see it:

1. No. Our business, industry and local political leaders do not know about peak oil and yes, we should demand that they inform themselves.
2. No. Currently there is no comparable substitute for the decline in cheap oil. Nevertheless, alternative technologies that do currently exist and need massive ramping up, can help to mitigate the problem. Alternative energy sources—solar, wind, hydrogen, geothermal, biomass,, fuel cells—and the development of renewable energy resources have already proven themselves to be clean, efficient sources of energy. The Union of Concerned Scientists notes that 100 square miles of solar panels in Nevada would provide 100% of US electricity. Even back in 1991, the US Department of Energy published a National Wind Resource Inventory in which it noted that three states—Kansas, North Dakota and Texas—could produce enough wind energy to satisfy US electricity needs. Denmark gets about 20% of its electricity from wind turbines, while Spain’s total solar power already exceeded 3 GW at the end of 2009.
3. No. Unless there is a surprise appearance of a yet unknown energy resource giant, or a huge breakthrough in coordinated initiatives such as Rifkin’s distributed energy through smart grids, alternative energies will not prevent a significant energy crisis. They can however help to mitigate the effects and depth of that crisis.
4. Yes. We undoubtedly already have engaged in resources wars related to peak oil.

Gates Says U.S. Lacks Policy to Curb Iran’s Nuclear Drive

By DAVID E. SANGER and THOM SHANKER

WASHINGTON — Defense Secretary Robert M. Gates has warned in a secret three-page memorandum to top White House officials that the United States does not have an effective long-range policy for dealing with Iran’s steady progress toward nuclear capability, according to government officials familiar with the document.

Several officials said the highly classified analysis, written in January to President Obama’s national security adviser, Gen. James L. Jones, came in the midst of an intensifying effort inside the Pentagon, the White House and the intelligence agencies to develop new options for Mr. Obama. They include a set of military alternatives, still under development, to be considered should diplomacy and sanctions fail to force Iran to change course.

Officials familiar with the memo’s contents would describe only portions dealing with strategy and policy, and not sections that apparently dealt with secret operations against Iran, or how to deal with Persian Gulf allies.

One senior official, who like others spoke on the condition of anonymity because of the sensitive nature of the memo, described the document as “a wake-up call.” But White House officials dispute that view, insisting that for 15 months they had been conducting detailed planning for many possible outcomes regarding Iran’s nuclear program.

In an interview on Friday, General Jones declined to speak about the memorandum. But he said: “On Iran, we are doing what we said we were going to do. The fact that we don’t announce publicly our entire strategy for the world to see doesn’t mean we don’t have a strategy that anticipates the full range of contingencies — we do.”

But in his memo, Mr. Gates wrote of a variety of concerns, including the absence of an effective strategy should Iran choose the course that many government and outside analysts consider likely: Iran could assemble all the major parts it needs for a nuclear weapon — fuel, designs and detonators — but stop just short of assembling a fully operational weapon.

In that case, Iran could remain a signatory of the Nuclear Nonproliferation Treaty while becoming what strategists call a “virtual” nuclear weapons state.

According to several officials, the memorandum also calls for new thinking about how the United States might contain Iran’s power if it decided to produce a weapon, and how to deal with the possibility that fuel or weapons could be obtained by one of the terrorist groups Iran has supported, which officials said they considered to be a less-likely possibility.

Mr. Gates has never mentioned the memo in public. His spokesman, Geoff Morrell, declined to comment on specifics in the document, but issued a statement on Saturday saying, “The secretary believes the president and his national security team have spent an extraordinary amount of time and effort considering and preparing for the full range of contingencies with respect to Iran.”

Pressed on the administration’s ambiguous phrases until now about how close the United States was willing to allow Iran’s program to proceed, a senior administration official described last week in somewhat clearer terms that there was a line Iran would not be permitted to cross.

The official said that the United States would ensure that Iran would not “acquire a nuclear capability,” a step Tehran could get to well before it developed a sophisticated weapon. “That includes the ability to have a breakout,” he said, using the term nuclear specialists apply to a country that suddenly renounces the nonproliferation treaty and uses its technology to build a small arsenal.

Nearly two weeks ago, Mr. Obama, in an interview with The New York Times, was asked about whether he saw a difference between a nuclear-capable Iran and one that had a fully developed weapon. “I’m not going to parse that right now,” he said. But he noted that North Korea was considered a nuclear-capable state until it threw out inspectors and, as he said, “became a self-professed nuclear state.”

Mr. Gates has alluded to his concern that intelligence agencies might miss signals that Iran was taking the final steps toward producing a weapon. Last Sunday on the NBC News program “Meet the Press,” he said: “If their policy is to go to the threshold but not assemble a nuclear weapon, how do you tell that they have not assembled? I don’t actually know how you would verify that.” But he cautioned that Iran had run into production difficulties, and he said, “It’s going slow — slower than they anticipated, but they are moving in that direction.”

Mr. Gates has taken a crucial role in formulating the administration’s strategy, and he has been known over his career to issue stark warnings against the possibility of strategic surprise.

Some officials said his memo should be viewed in that light: as a warning to a relatively new president that the United States was not adequately prepared.

He wrote the memo after Iran had let pass a 2009 deadline set by Mr. Obama to respond to his offers of diplomatic engagement.

Both that process and efforts to bring new sanctions against Iran have struggled. Administration officials had hoped that the revelation by Mr. Obama in September that Iran was building a new uranium enrichment plant inside a mountain near Qum would galvanize other nations against Iran, but the reaction was muted. The next three months were spent in what proved to be fruitless diplomatic talks with Iran over a plan to swap much of its low-enriched uranium for fuel for a medical reactor in Tehran. By the time Mr. Gates wrote his memo, those negotiations had collapsed.

Mr. Gates’s memo appears to reflect concerns in the Pentagon and the military that the White House did not have a well prepared series of alternatives in place in case all the diplomatic steps finally failed. Separately, Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, wrote a “chairman’s guidance” to his staff in December conveying a sense of urgency about contingency planning. He cautioned that a military attack would have “limited results,” but he did not convey any warnings about policy shortcomings.

“Should the president call for military options, we must have them ready,” the admiral wrote.

Administration officials testifying before a Senate committee last week made it clear that those preparations were under way. So did General Jones. “The president has made it clear from the beginning of this administration that we need to be prepared for every possible contingency,” he said in the interview. “That is what we have done from day one, while successfully building a coalition of nations to isolate Iran and pressure it to live up to its obligations.”

At the same hearing before the Senate Armed Services Committee, Lt. Gen. Ronald L. Burgess Jr., director of the Defense Intelligence Agency, and Gen. James E. Cartwright, the vice chairman of the Joint Chiefs of Staff and one of the military’s most experienced officers on nuclear matters, said that Iran could produce bomb-grade fuel for at least one nuclear weapon within a year, but that it would probably need two to five years to manufacture a workable atomic bomb.

The administration has been stepping up efforts to contain the influence of Iran and counter its missiles, including placing Patriot anti-missile batteries, mostly operated by Americans, in several states around the Persian Gulf. The Pentagon also is moving ahead with a plan for regional missile defense that reconfigures architecture inherited from the Bush administration to more rapidly field interceptors on land and at sea.

I don’t know, maybe its me…

As I explained in “Investment Themes for the Next Decade,” the new normal will be  cycles of bumping our heads against the supply ceiling, falling dazed to the floor, rising back to our knees, then finally standing… only to bump our heads against the ceiling once more.

Scooters Will Kill SUVs

Two interesting news stories crossed the wire this week, which portend badly for the world’s #1 net importer, the U.S.

The first was a Reuters report that the last quarter of 2009 had “wiped out” the equity of Mexican state oil monopoly Pemex, leaving it $1.4 billion in the negative. Falling crude output, falling refining margins and a burgeoning dependency of the state on its revenues had squeezed it to death.

Not only did the report offer further confirmation that the oil export crisis has arrived, but it also confirmed my growing suspicion that the oil production everyone has assumed will come online in five to ten years might, in fact, fail to materialize. Negative equity companies have a hard time raising capital for new exploration.

The second was a Bloomberg report that Saudi Arabia had agreed to double its oil exports to India, to some 866,000 barrels per day. India indicated separately that its onshore production of oil may peak this year.

This adds to the pressure on Saudi Arabia’s exports, whose oil shipments to China have been growing at a rate of 11%-12% per year and now stand at roughly 1 million barrels per day (mbpd). China has eclipsed the U.S. as the primary bidder for Saudi oil, while U.S. imports from the Persian nation have fallen to a 22-year low.

The last two years have seen the marginal buyers of oil shift decisively to the non-OECD countries. A gallon of fuel delivers so much value in China and India (think peasants on scooters), that even at $120 a barrel, remarkable economic growth rates are possible.

In major oil exporting countries like Saudi Arabia and Venezuela — where subsidized gasoline still sells for under 25 cents a gallon — the appetite for fuel grows steadily every year with little thought given to efficiency.

It’s a different story in the U.S. For debt-laden consumers, an extra $50 or $75 to fill up the tank on an SUV every week sharply reduced discretionary income and starved the economy of its most fundamental driver: consumer demand.

The Real Meaning of Peak Demand

The most promising effort I’ve seen to quantify the role of efficiency in peak demand was a report in October of last year by Paul Sankey of Deutsche Bank entitled, “The Peak Oil Market.” My initial excitement quickly gave way to disappointment as dug into it, however, as I realized that its confident assertions were unsupported by the data.

I applauded the effort enthusiastically — and I hope to see more serious work along the same lines — but it fell far short of proving that energy transition can be accomplished under the status quo of economic growth, let alone its optimistic twist on “The end is nigh for the age of oil.”

The fact is that peak demand in the OECD is not merely a function of efficiency gains and biofuels substitution, aided by a temporary recession…

Instead, peak demand will be the result of a permanent state of increasing depression in which non-OECD countries not only more than make up for the loss of OECD demand, but outbid them for the marginal barrel.

As we enter the post-peak phase of global oil supply sometime around 2012-2014, the price that heavily import-dependent countries like the U.S. would have to pay for that marginal barrel will become increasingly intolerable. In a weakened economy, $100 a barrel (or less) could be the new $120.

The true import of peak oil, therefore, may not be sustained high prices, but economic shrinkage. Demand will be destroyed long before oil gets to $200 a barrel, but it will not be destroyed by improved efficiency.

From where we stand today, it’s hard to make an argument for economic recovery. Persistently high unemployment rates, broken state and federal balance sheets, and an inflationary depression will continue to cut into petroleum demand.

We spent the last several decades offshoring the fundamental value-adding sectors like energy production and manufacturing, and now our FIRE economy — finance, insurance, and real estate — rests entirely on real value created elsewhere.

The reason is simple: Energy is the only real currency.

Every dollar of fiat currency or GDP was ultimately derived from cheap energy. Trying to print your way out of energy decline is like prescribing ever-higher doses of aspirin for a headache caused by a brain tumor. Yet those at the levers of monetary policy are, by all appearances, completely ignorant (or in willful denial) of this fundamental fact.

The vogue prescription for the sovereign debtors at greatest risk of default (see a Top 10 list) is “austerity measures.” The theory is that a period of belt-tightening will stanch the fiscal bleeding until economic recovery puts everyone into the black again.

Yet, if primary energy supply is declining, and the rising star of developing economies is inexorably cutting into the supply available to developed and indebted economies, then there can be no recovery.

I have joked on Twitter that I’m expecting an “M-shaped recovery,” where we’re now on the second hump. A more accurate image is slow strangulation.

Two Questions for Recoveryistas

Those who would argue for economic recovery must answer two intractable questions.

The first is: Where will the energy come from, as more of the world’s net exporters become net importers?

Britain, Argentina, Indonesia, and others have become net importers in recent years. Mexico and Columbia are expected to follow suit within a decade. Clearly, we can’t all be net energy importers.

There is also the obstinate fact that aggregate net energy — the energy you get in return for investing energy in its production — has been dropping steadily. Oil net energy dropped from 100 in the early 1930s to 11 or less today. Net energy for natural gas is now in decline. We don’t have adequate data to know yet, but coal’s net energy is probably in decline too. Meanwhile, the net energy of all substitutes is low: wind, 18; solar, 6.8; nuclear, 5-15; all biofuels, under 2.

It is not surprising that a study of the Herold database (Gagnon, Hall, and Brinker, 2009) showed the amount of oil and gas produced per dollar spent declined between 1999 and 2006.

The second question is: If the creeping infection of sovereign default continues to spread to more countries, where will the money come from to bail them out?

The answer has been, and continues to be, more aspirin. Without more cheap energy, monetary tactics to play the game into overtime will not only be futile, they will only draw us closer to the edge of the net energy cliff.

All of which begs a final question: If the answers are transition to renewables, and rebuilding our infrastructure for high efficiency, then where will the money and energy to do it all come from? And lastly, how long will it hold out?

Without cheap energy to fuel the growth that is hoped to pay off the accumulated debt, austerity will become an everyday reality — not a short-term fix. A reality that slowly sinks in for the rest of our lives, as net importers become progressively poorer.

The peak demand argument is a good one… but not for the nice reasons.

Often, when people begin to investigate the subject a bit more and begin to understand the potential seriousness of the situation they ask: What can be done? Is there a solution? And there’s no simple answer to that question I’m afraid. Suffice to say that there is clearly no simple solution.

But  part of the purpose of this blog is to look beyond the disquieting implications of the situation toward potential opportunities for real change, real learning and hope – So let’s get started!

For learning purposes, I am posting on Jeremy Rifkin’s idea of the 3rd Industrial/Communication Revolution – not because I share his harsh views of tomorrow (I’m not sure about the possible origins of climate change), or because I completely buy his proposed ideas (are they viable?) – but because he puts forward a specific proposal – and that in itself is positive and constructive. His proposal may or may not be valid on its own, it might on the other hand be the catalyst for the development of some other idea . . . but its an example of what we need to do: Brainstorm and propose concrete ideas for immediate testing and implementation.

Have a look at Jeremy Rifkin’s video (on the EanVandaag site, but in English) which is an overview of his vision of things to come and how to confront them.

A few thoughts: Rifkin paints a very dismal view of the short term (next 20-30 years) due largely to the accelerated impact of Climate Change. As unpopular as it may be, I am still not certain that the change is driven primarily by human behavior and our CO2 emissions. Radical climate changes seem to be a part of the earth’s history. In fact, Rifkin himself references previous radical climate changes from several million years ago and their impacts (for example the trapped CO2 under the frost in Siberia, which used to be green grasslands before a sudden freezing occurred…and the “time bomb” that this represents when that current frost melts and the CO2 levels explode upward.) But Rifkin seems to present the argument that, if we can move immediately to alternative non-carbon-based energy sources, then we can stop the march of the change and slip through the window of disaster into the the new economy.

Whatever is actually causing the accelerated change (man-made or other) and the visibly accelerated impact on glacier melts & polar caps etc, it seems unlikely that it will all come abruptly to a halt the day we switch to alternatives. Call it a hunch…

Nevertheless, we do need to get beyond our complete dependence on cheap oil (the basic building block of our current global economy) – because it is a finite resource that appears to have reached or even past its peak. This fact alone warrants the most urgent call to action. Enter Jeremy Rifkin…

Video summary. Rifkin expresses the following:

• We are in an unprecedented time in human history with the convergence of 3 crisis “the perfect storm”:

1. Global financial meltdown – this is not a Wall Street crisis or a banking crisis or a deregulation crisis (those are the results). It is a crisis largely about the long-created, devastating US debt, now at 15 trillion dollars. The country is way beyond broke and will no longer be able to sustain the false notion of globalization where America’s legendary purchasing power makes it all happen.  We are also at the tail end of the 2nd industrial revolution with outdated technology and infrastructure resulting in failing productivity.
2. Energy crisis – we have built an economy that is entirely dependent on cheap oil and the days of cheap oil are gone, having past the curve of Hubberts peak. The entire global financial system cracked when oil spiked, eventually reaching $147 a barrel and the corresponding chain of inflation was factored into to every facet of production and consumption. “The machine stopped” , halting both supply and demand – a potentially mortal condition for the economy. The event served to clearly demarcate the limits of globalization and the stress limits of the world economy.
3. Real-time climate change (& its effects on agriculture and food supply) – the process has greatly accelerated because of the effects of previously unaccounted for “feedback loops”. The potential effects of a 3-6ºC rise in temperature are enormous: The arctic is expected to have open waters in the next 20 years (a 1st in 3 million years) and a great number of species will be at risk of extinction within this century, including our own…even now there are over 1 billion people at risk of starvation in the world according to UN official figures.

• To combat this unprecedented situation Rifkin proposes an immediate reinvention of the world’s current economic model by leveraging & exploiting the synergy between the current Communication Revolution and the needed Energy Revolution. He cites that similar experiences/revolutions have occurred in the past:
  • Mesopotamia development of hydraulic [energy] agriculture which leveraged cuneiform/writing communication
  • Steam technology’s impact on mass printing, which impacted schooling and literacy, which accelerated again the development of technology
  • oil’s development in conjunction with telephone, cinema, tv and mass/global communication
• Specifically, Rifkin envisions an energy revolution where:
  • all structures and buildings around the world (including homes, office buildings, factories etc) become energy production facilities, abandoning their reliance on oil & gas and taking advantage of the ubiquitous, renewable energy sources such as wind, solar, geothermal, garbage/waste, moving waters etc to generate their own energy.
  • Hydrogen will play a central role in the storage of this energy
  • Excess energy will be readily available and distributed through a smart grid identical to the way the internet currently works. Just as millions of computers around the world currently generate and share files directly peer-to-peer through an open system , buildings will produce and distribute energy in the same way.

In his model, Rifkin is not only putting forward the idea of an alternative energy source, he is putting forward a new paradigm in the distribution of resource and independence (and therefore, in the distribution of wealth!) – much in the way that Muhammad Yunus did with his micro-credits. The atomized production and distribution energy that he proposes may or may not be technically viable – I am not an expert on hydrogen as an exploitable/storable/distributable energy source or  – but the underlying idea would be an extraordinary (mind-boggling) breakthrough, not only for the current energy challenge, but for the cause of people in underdeveloped nations around the globe.

When I first set it up, I was surprised how few alerts came through. Sure, I knew that peak oil was still not a widely covered story on mainstream press, but the volume of media attention in the form of news stories seemed exceedingly small. I thought that maybe I’d “done it wrong” or that the computer needed a tap on the side like we used to do with the old television sets when the horizontal lines would be creeping up over the screen, first slowly, then faster and faster until the screen cleared. But in spite of my encouraging taps on the side of the iMac the frequency of the news alerts on peak oil stayed low.

The last 6-8 weeks have been different.  Not just in number but in the “quality” of the coverage. Richard Branson’s recent declarations and report (together with a who’s who of UK business leaders) recognizing the reality of peak oil and calling for urgent recognition and action on behalf of the government was widely covered across much of the mainstream media – and was only one of several high impact stories covered in the last week or two. And as I read the article below in last week’s The Wall Street Journal, I kept  thinking about  the scene in the classic comedy The Three Amigos, when Lucky Day (Steve Martin) gets shot down off his horse – with REAL BULLETS – during their “show” for El Guapo. In his shock and dismay, through tears he can hardly contain, all he can say to his gobsmacked sidekicks is  “Its real!”

Below are excerpts from last week’s WSJ article on peak oil:

“As Europe’s leaders gather in Brussels today, they have only one crisis in mind: the debts that threaten the stability of the European Union. They are unlikely to be in any mood to listen to warnings about a different crisis that is looming and that could cause massive disruption…

A shortage of oil could be a real problem for the world within a fairly short period of time….Against the gloomy economic backdrop that Europe currently provides, siren voices shrieking that a potential energy crisis is imminent and could be worse than the credit crunch are liable to be dismissed as scaremongers. Since they are led by Sir Richard Branson, whose Virgin group runs an energy-guzzling airline, and include Brian Souter, who runs Stagecoach, another energy-hungry transport business, they are also at risk of being seen as self-interested scaremongers.

But the work of the Industry Taskforce on Peak Oil and Energy Security shouldn’t be disparagingly dismissed. Its arguments are well founded and lead it to the conclusion that, while the global downturn may have delayed it by a couple of years, peak oil—the point at which global production reaches its maximum—is no more than five years away. Governments and corporations need to use the intervening years to speed up the development of and move toward other energy sources and increased energy efficiency.

In the first report from the task force, Lord Ron Oxburgh, a former chairman of Shell, wrote that “It is pretty clear that there is not much chance of finding any significant quantity of new cheap oil. Any new or unconventional oil is going to be expensive.” He went on to quote King Abdullah of Saudi Arabia commenting on a new oil find: “Leave it in the ground…our children need it.”

It may be that the oil companies are keeping some giant secrets from us but that seems unlikely….Where that would take oil prices, who can tell? In recent times they have been extremely volatile, hitting $147 a barrel in July 2008, plummeting to $32 at the end of that year and hovering between $70 and $80 since August last year.

At these levels, it is economic for some of the oil that is harder to get at to be extracted from deepwater developments such as the Gulf of Mexico or the Canadian tar sands. A higher price might encourage more of this difficult production.

But a higher oil price brings with it dangerous knock-on effects for oil-dependent economies with little in the way of their own oil resources. Europe has reason to be concerned. According to Philip Dilley, the chairman of Arup, the consulting engineers: “We must plan for a world in which oil prices are likely to be both higher and more volatile and where oil prices have the potential to destabilize economic, political and social activity.”

Yet even if the gloomsters should turn out to be wrong, the core of their message surely deserves attention. Governments should be doing all in their power to encourage developments that lessen oil dependency. That will also enhance their energy security for, as Russia’s Vladimir Putin has demonstrated with use of the on/off switch on the pipeline to Ukraine, it can be uncomfortable being dependent on other countries for energy….governments need to wake up to the urgency [of the situation]…

Some dubious emails and slightly dodgy dossiers have cast a new, and unflattering, light on the global-warming debate, raising the risk of a return to the belief that we can go on consuming oil with impunity. Being a “climate-change denier” is in danger of becoming almost fashionable. But whatever the risk to the climate, scarce and expensive oil would be a threat to established economies.

We need alternatives.”

So is there anything out there that could potentially threaten the amazing progress made in this all-important field?  More specifically, what threat does peak oil pose to health care and modern medicine?

In a previous post, I stressed the importance of evaluating peak oil as a potential risk management scenario. If very little has been done in terms of evaluating peak oil risk in business and industry, its ironic (incredible in fact) to think that even less has been done in the area of health care. It’s a bit like listening to the ominous crackles and rales of a persistent cough over a long period of time, without having a look at the lungs (an X-ray) to evaluate if there might actually be something seriously wrong.  Dr. Dan Bednarz’s site healthafteroil.com has been one of the only consistent sources of information on this subject. Others sources such as peakoilmedicine.com have disappeared (last post dated 29 May 2008) – while the pharmaceutical industry, National Health Systems around the world and other health care stakeholders have done little to explore peak oil and its potential repercussions.

Like other industries, modern medicine and health care is completely reliant on growing availability of cheap oil. As evidenced in Bednarz’s research, petrochemicals are required…

“to manufacture analgesics, antihistamines, antibiotics, antibacterials, rectal suppositories, cough syrups, lubricants, creams, ointments, salves, and many gels. Processed plastics made with oil are used in heart valves and a large number of other implants and prosthetics as well as other esoteric medical equipment. Petrochemicals are used in radiological dyes and films, intravenous tubing, syringes, and oxygen masks.

In all but rare instances, fossil fuels heat and cool buildings and supply electricity to all corners of the installations designed for patient care as well as medical research & development facilities.

Ambulances and helicopter life flights depend on petroleum, as do personnel who travel to and from medical workplaces in motor vehicles. Supplies and equipment are shipped—often from overseas—in petroleum-powered carriers.”

The list of products, services and procedures that demonstrate health care’s reliance on fossil fuels goes on and on. There is a rapidly growing consensus that the current global financial crisis is the result of peak oil more than Wall Street (as Tom Therramus points out in his recent article on oil-price.net) Consequently, there are additional implications on health posed by the crisis’ corresponding economic decline and mass unemployment – not to mention the health-related repercussions of social unrest or even geopolitical upheaval as resource wars, like the one in Iraq, increase in likelihood, magnitude and number.

So what can be done?  First of all, the (overdue) homework needs to be done by creating awareness within the leadership ranks of the sector and subsequently by evaluating peak oil and its potential risks to health care at the industry and institutional levels. This analysis should include a review of health care’s overall oil-resilience to decreasing supply and/or price shocks similar to, or greater than those seen in July 2008 ($147/barrel.) The entire sector and its stakeholders should do some honest soul-searching about the sustainable levels of health care to aim for in a post-peak world. Benchmarking also needs to be done to identify previous experiences around the world that may shed light on how to confront the potential challenges presented by peak oil. And to this point, learning may come from surprising places – Cuba, for example.

In his article for the International Journal of Cuban Studies, Stuart Jeffery pointed out that,

“Cuba is one country that has successfully managed an energy descent similar to that required by peak oil. The Special Period in Cuba in the early 1990s saw oil imports fall by almost 50% yet it retained its position as having first world health care and first world public health outcomes. Their infant mortality rate is comparable with the UK and better than the US. With life expectancy at birth around 75 years for men and 79 for women …Cuba has managed a health service that could easily have been brought to its knees by the oil shortages. There is clearly much to learn from Cuba for countries that want to have a health service in a post peak oil world.”

On the other hand, Cuba does not resemble Europe or northern United States in terms of size or cold weather patterns, so even its most basic energy needs for things like transport and heating fuels are fundamentally different, making it a tentative model at best – and it is also not the point of this post to propose a Cuban-type health care system. Rather it is a wake-up call to action, though the hour is late indeed. Without adequate evaluation of peak oil and contingency planning we are leaving ourselves unnecessarily exposed to a crude prognosis for health care development: To reach the zenith of oil production is to reach the zenith of health care…from there, is it a flat line?

“The global economy has grown (until now) because the availability of cheap oil has grown…until now.”

It cannot be overstated: Our current economy is based, in large part, on the availability of abundant and growing quantities of cheap oil.

By cheap I am referring not only to its price per barrel, but more importantly, to the energy return on energy invested (EROEI) – in other words, how many units of energy will you harvest from every unit of energy invested? Having built our current world economy with easy-energy ratios of 1:20 (the low-hanging fruit), the remaining reserves, which are abundant, present more difficult and marginal ratios in the order of 1:4 or 2:3 – as in the case of the famous tar sands of Canada. The descent down the right slope of the production bell curve will not only affect direct fuel costs at the pump or in our home heating furnaces, it will also have an impact on every other aspect of modern life – from food to entertainment, healthcare to foxhole religion, and all the related industries & businesses in between!

The next several posts on this blog will address the effects of peak oil on different aspects of modern life, such as: healthcare, business, food & agriculture, politics, the arts, religion & spirituality – to name a few.

Although debated and denied frequently, a massive shortfall in oil production is coming faster than many are willing to admit… Interestingly, very few people know that world oil production is nearing its all-time peak, and today’s [price] per barrel may seem like a bargain a few years from now. Production in more than 54 of the 65 most important oil-producing countries has already gone into decline, with the Middle East predicted to follow soon. The implications of having less oil tomorrow than we have today are far reaching with a global crisis certain to follow. Energy-intensive industries like commercial aviation will suffer first, followed by other industries, national economies, and the global economy. Ultimately, oil shortages will severely limit the world’s ability to sustain its population as food production relies heavily on fossil fuels. This is not a conspiracy theory or bible prophecy. Rather, it is the scientific conclusion of the most widely respected and conservative geologists, physicists, and economists. There have been no significant discoveries of new oil since 2002. Oil is now being consumed four times faster than it is being discovered, and the situation is becoming critical. It is a problem without a remedy and it is the most pivotal challenge facing modern civilization

THE AIRLINE INDUSTRY

Oil provides 40 percent of all primary energy, and approximately 90 percent of our transportation energy. For most airlines, fuel it is the second largest expense category behind labor. As a direct result of the dramatic increases in oil prices, the cost of jet fuel more than doubled [between 2004 and 2005 alone]. The profitability of airlines was already under extreme pressure because of increased competition, overcapacity and lower yields. Furthermore, terrorist attacks have had a negative effects on demand in general and on specific routes, while the cost of security has also soared. Once again, the aviation industry is suffering.

[Soon] extraction from wells will be physically unable to meet global demand. Prices will soar, fueled by market-based panic, further hurting the airline industry. In addition, high oil prices will decrease consumer’s disposable income and dampen demand. The number of cash-strapped airlines will increase. The weaker airlines without hedging contracts, that somehow managed to survive in the short term, are doomed to collapse. In addition, higher fuel costs will dilute the competitive advantage that the low cost carriers have. The reason for this is that as fuel cost’s share of total cost increases, the relative share of all other operating expenses decreases, weakening the low cost advantages that these airline have traditionally based their model on. Another possible effect may be a relative increase in short haul travel, at the expense of long haul. The most successful airlines will most likely be the flag carriers from the Middle-East as this region will benefit from the high oil prices, allowing these airlines to go from strength to strength. Emirates have ordered 45 of the new giant new Airbus A380’s, which is key element in the company’s future growth, while experts believe that many Arab airlines will place more orders of Airbus and Boeing in the coming few years.

In a worst-case scenario, the long-term future for aviation is disastrous. As oil prices continue to rise, the world economy will be confronted with a major shock that will stunt economic growth and increase inflation. The chief economist of Morgan Stanley recently predicted that we have a 90 percent chance of facing “economic Armageddon.” During the transition period to a post oil era, there may be massive disruptions to transportation as the global decline of oil deepens. There will be social unrest and a strong reduction of business and government activity and very serious unemployment. Eventually, a large proportion of the demand for air travel will be almost completely destroyed, with the risk of the aviation adventure going out of business, with the exception of perhaps a handful of airlines. Once again, air travel will be reserved for the rich and for government business and the world will become a larger place again.

Solutions Must be Grounded in Science:
If we want to have at least a shot at changing this gloom-and-doom future scenario, it is vital that we fully understand the problem. It is what some call “an outside context problem”—so far from our normal realm of experience that we are collectively having a hard time processing it. The decline of oil is a certainty and is guaranteed by the natural laws that govern our physical world, and nothing in science, technology or engineering can prevent it. The world needs to prepare for a post-oil era and make huge commitments and sacrifices to avoid a deep crisis. With the little time that we have left, we need a well-orchestrated and large-scale intervention by governments from around the world to conserve the underlying fossil fuel base required to develop and implement sustainable energy sources capable of running countries like the United States—or even a substantial fraction of it—the way we are running them now. With a dwindling energy base, we may simply lack the tools and time to replace a fluid so cheap, abundant and versatile.

The traditional view of economists that the ever-insightful market will solve all problems is a fallacy. The supreme goal in all countries to raise incomes, living standards, and the GDP as much as possible, constantly and without any notion of a limit, is unattainable. On current trends, a country like China will be requiring 99 million barrels of oil per day by 2031, while total world production today is only 84 million barrels. Even present levels of production and consumption are grossly unsustainable with a shrinking energy base. The theory that economic stimulus will spur discoveries, and the market will maintain equilibrium, ignores the serious technical limitations of various replacement technologies. Furthermore, it assumes that the supply side can respond quickly in the short term, ignoring the long lead times required for any new oil projects and alternative energy projects to go online (up to 10 years) while disregarding the huge cost involved in modifying the trillion-dollar global infrastructure that was predicated on consistently low oil prices (aviation included). Finally, fundamental economic theory fails to address the laws of physics and thermodynamics. For example, looking at energy equations, to extract oil from the highly glorified tar sands takes two units of energy to produce three units and its net energy value is therefore marginal. In the early days of oil discovery, this ratio used to be 1:20. There will always be large deposits of oil left in the earth that would simply require more energy to extract than they yield regardless of the market price.

We must move quickly towards global regulations that will restrict economic growth and consumption of fossil fuels to allow the transition to a post-oil era to be as painless as possible. At present, it is impossible to get people or governments to even address this issue. However, to avert a future that is so drastically dislocated from the present, we must realign our thinking with our goal and take radical actions on a global scale.

Risk Management, like Sustainability has become one of the buzz phrases and hot topics in business and management in general. According to wiki:

Risk is defined in ISO31000 as the effect of uncertainty on objectives (whether positive or negative). Risk Management can therefore be considered the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risks can come from uncertainty in financial markets, project failures, legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attacks from an adversary…

The strategies to manage risk include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk.

By definition, risk management involves the methodical identification and analysis of events that may or may not happen. The responsibility of present and future business leaders – as well as industry and government leaders of course – is to ensure the sustainability of the endeavors they oversee. So, should peak oil be considered a risk management scenario?  During a recent discussion on the topic, the dean of one of America’s most prestigious business schools [who asked to remain anonymous], said:

“…leaders should bring somebody in to their organizations right away to talk to them about this…if only to say they’ve had a thorough look at the subject and dismiss it. This is something that must appear on the radar screen and be addressed.”

Then, after study and analysis they can either write it off as an acceptable risk or act accordingly to minimize its effects…or even monopolize on the opportunities that may arise as a result it.

There is evidence that at least some federal governments have identified (and have begun addressing) peak oil as a significant risk management scenario, however they may be choosing to keep a low profile about their recognition and handling of the subject for the sake of order and national security. The actions of China represent an exception and indicate that they are adopting an openly aggressive strategy by gobbling up resources at every turn. China has been building its crude oil reserves, completing 102 million storage facilities while at the same time, nailing down 11^th hour deals in late December with both Iraq and Venezuela. Another indication of China’s sense of purpose (and urgency) include an oil pipeline linking Russia’s far east to China’s northeast, set to start operation by the end of 2010. The pipeline would transport 15 million tons of crude oil annually. In short, China is unabashedly leading the way in terms of resource acquisition as a means to mitigate the effects of peak oil and the subsequent decline in supply.

Local and community government – with more manageable sized constituencies – remain largely unaware of the peak oil scenario. Following the lead of Portland, Oregon, several cities have done some homework in evaluating the risk of peak oil and pulling together a plan, including major cities like San Francisco – but they are miserably few considering the number of towns and cities worldwide that ought to be leveraging each other’s risk evaluation and planning methods at least on a small scale or in clusters. This is an unnecessary risk exposure since they could play a key role in creating a responsible level of awareness and developing mitigation measures – IF they deem such actions necessary after a proper risk management analysis.

Business schools, the very institutions where present and future leaders are formed, have also been slow to include peak oil in their many leadership programs about challenging times and sustainability. At a minimum and for the sake of credibility, the topic should appear as a what if leadership challenge in case-studies. There is a particularly high representation of executives/business leaders from certain industries such as healthcare & medicine [pharmaceuticals] in the leading business schools around Europe and the US. Are these leaders and their teachers informing themselves and each other about the peak oil blip currently blinking on the radar screen?  Judging from the on-line syllabi of current Executive Management & Leadership programs, the answer is No. There is no evidence of programs or even case studies that address hypothetical scenarios such as:

• A much more serious natural gas supply disruption than recently took place in Great Britain takes place. (Natural gas is produced with oil, and in some parts of the world, may face disruptions as well.) How might a business plan for such a disruption? As supplies get tighter, the chance of disruptions rises, for both oil and natural gas.
• An acute oil price spike occurs, similar to or greater than the one of July 2008. What are the potential risks and mitigating measures for the aviation and general transport industries?
• The planned technologies to replace oil fail to scale up quickly enough. This seems like at least a possibility, given the high cost of wind, solar, biofuels, and electric cars.  What alternative approaches would business leaders suggest to minimize the effects of  declining supply ? These approaches might be different for different industries, such as healthcare, automotive, and food & agriculture.

These [and other similar] business case scenarios should clearly be among the war games at the B-Schools, the institutions of higher learning whose collective mission is to shape present and future leaders.

The title of the executive leadership program at one of Europe’s most prestigious business schools is – “Creating global leaders capable of taking on the world’s greatest challenges” And I ask…Is the mother of all risk management scenarios included amongst the challenges?

OK, so we have an ongoing debate about the price of a barrel of oil and if (or when) it will break the $100 dollar barrier. If you haven’t already placed your bet, here’s where you can do so.

One of the other really BIG questions is what will the dollar do? The currency has enjoyed a long history of guaranteed utilization around the world as the standard currency of trade in commodities such as oil (see the petrodollar ) – which has served as a veritable escape valve for the currency. Nevertheless the dollar continues to struggle – hovering at or near $1.50 per EURO for the last few months. The recent dramatic run up of gold prices is actually more a reflection of the continued weakening of the dollar, than of a strengthening of the metal itself. In fact many would argue that the 1971 Nixon Shock (decision to move away from the gold standard) marked the beginning of the currency’s decline and that since then the US has arbitrarily printed huge excesses of dollars in detriment to its ultimate value. Moreover, there is a very real possibility that additional oil producing nations will join Iran’s decision to shift away from the dollar as the standard currency of pricing/trade. This would have a devastating effect on the dollar.

Without getting into a discussion about whether or not we’re fans of Peter Schiff (a lone visionary of the current crisis, foreseer of a much darker future for the economy and CEO of Euro Pacific Capital),  he has advocated to his clients a complete disassociation from the dollar before its imminent collapse. Like all future events, it is difficult to prove it with 100% certainty. So as part of our ongoing learning exercise on this blog, I recommend you have a look at a few of the videos below. But also seek out sources that refute his ideas so as to come to your own conclusions.  What I would stress is that we should do all we can to avoid being blindsided by our own ignorance.

So, what do you think?  Will the dollar continue to hobble along? Will it strengthen and regain true stability? Or will it experience a significant devaluation or even collapse? Without steering you in any particular direction I will share some advice that someone offered a group of us not too long ago. He said “Since the long term is looking awfully strange indeed, I would use the short and medium term to prepare for it and what I would do is : buy ETFs like USOil, buy silver & gold (physical coin/bullion) and convert my mortgage from euros to dollars.”

Just so you know, the expected life of this blog will go something like this:

1. Creating the context of our discussion. Several weeks with informative posts about the topic of Peak Oil. For some, this will serve as an introduction to the topic since they may not be familiar with it. For others, this will serve as a reaffirmation of the situation and a “scene setting” exercise to which they are welcome to contribute for the benefit of the group.
2. Creating a dynamic and hopefully constructive workshop and forum where we present and discuss the  Opportunity and Learning that is in fact coinciding with the event of peak oil.

The structure of the blog will be adapted to facilitate these presentations and discussions. For example, new sections such as the RST group (right slope thinkers group  – a think tank to seed & harvest post peak ideas and initiatives) will be created to provide a place for us to reinvent ourselves – or at least make a contribution to that reinvention. Creating and participating in such a forum is, by definition a learning exercise that brings with it opportunities of different sizes and shapes – including new business models and concepts for community living.  To borrow an adapted version of Mahatma Gandhi’s celebrated phrase, “We must become the change we want to see in the world.”

Someone (Anna)  recently sent me her view of life in a post peak oil world. I would like to share her thoughts with you:

Our circle of mobility will necessarily be reduced to a fraction of what it is today. For the most part we will travel distances that we can walk or ride a bike to. And, albeit with some hardship, we will see the rebirth of community interaction and interdependence on one another. If we plan well and with a sense of urgency, our small community will have a source of local energy – some kind of mini-grid using one of the current new technologies (solar, wind…). The scaling up of these alternatives came late and is therefore not a viable option for an entire nation (or world!), but can and should be considered on a smaller community scale. This local source of energy however will be limited in its capacity to produce and difficult at times to maintain. In fact, more than one debate will arise in the community regarding its effectiveness as a utility. In addition, the other fundamentals of life will also be reinvented or reborn: food will be grown locally once again, so farming skills will return to the know-how arsenal of the common man; healthcare such as the practice of medicine and dentistry will be the work of a few highly valued (recruited & coveted) professionals; security will be of enormous importance and will take on a local, confidence-based character such that it will become a part of every community member’s interest and involvement. The trades and handwork skills in general will once again be of utmost importance. Entertainment will be “acoustic” and the exchange of face-to-face conversation will actually make our human interaction healthier in some ways than it has been during the previous digital decades. The family as a unit will also see a rebirth in many ways.

My vision of another time foresees an interruption of the current way of life, but not an interruption of life itself – certainly NOT. We are creatures who are at once averse to change, yet at the same time quite adept at adapting. I agree with your first post Joseph, we must see this as our chance to reinvent ourselves…in fact, there is no other choice.

To be constructive, I would like to make the suggestion that we begin (urgently) organizing and experimenting with these kinds of “new old-fashioned urbanizations” where people in communities actually live together once again and depend on each other for their collective and mutual development. The design and configuration of such a community would be an interesting point of discussion for this group. Yes, there is life after oil and we should go about the task of planning it and testing our models.

Just as Anna has done, I’d love to hear your point of view, your vision of another time…and more importantly your suggestions about how we might best work together as we go about the task of reinventing ourselves.

OK, so let’s get right into the heart of the discussion: The price of oil, as we’ll discuss in certain detail, has immediate and significant effects on our everyday lives. So, how will it evolve?

After reaching its record price of $147 in mid July 2008, oil prices began a steady decline downward for a number of reasons. By mid September ’08 the $100 psychological barrier was broken once again – but this time going in the opposite direction – as the price fell below $100 for the first time in seven months. On October 11 a major setback occurred in the value of global equities, with a barrel of oil falling by 10% to $77.70, which paled compared to what was to follow: a 70 day stretch of free falling so that by Christmas the price was down to $31!

According to the statistics at the Energy Information Administration (EIA), the last day oil was at $100 dollars a barrel was on September 30, 2008. As of today, and in spite of the ongoing shaky economic climate, the price has clawed its way back to  $78.41.

So, here’s my question for you: When will oil break through the $100  mark once again? I am accepting your bets as to when you think we’ll hit this milestone…(that is of course, if you think we will) . Send a comment with the exact date and time that you think/guess we’ll break $100/barrel -the time is just in case there are several of you who coincide on the day.

The Prize: a barrel of oil!!* courtesy of Sullivan Advisory [I highly recommend you read the fine print below!].

So, step right up and place you bets!

*this is the fine print – a barrel of oil of your choosing will look like:

• 4º Extra Virgin Olive OIL [1000mL barrel]
• Cod liver OIL [barrel of 180 tablets]

Have you ever been at an event when you sense that something spectacular is about to happen…and it does?! As extraordinary as it was – as in out of the ordinary and improbable – there was an almost ironic sense that it was as inevitable as it was extraordinary.

Something like that is about to occur.

Now, if you think I’m suggesting it will be like a Hollywood movie where everything suddenly rights itself and everyone lives happily ever after – same comforts, same lifestyle, same level of [un]consciousness and perpetual growth market “cycles”, you’d better think again.

We’re talking about something much bigger than a come-from-behind victory by our favorite team. We’re talking B-I-G like the curve of Jupiter, not a marble or a beach ball. A true paradigm shift the likes of which none of us has ever known. An imperative reinvention of well…, everything! – from the tangibles of technology and the unrealistic, Gekkoesque-business models based on perpetual growth, to the more intangible perceptions of ourselves, our material and spiritual needs and the awareness of those around us.

I was recently reading through some entries in an internet Peak Oil forum. One of the more active discussions was prompted by the title question: “Are you a doomer?” The discussion was lively and for the most part intelligent, with well-presented, data-driven arguments pointing to everything from a last minute rescue by new technologies, to the ultimate escalation of conflict-for-resources complete with a nuclear finale. So then, am I a doomer? As they say here in Spain, “sí, pero no”. As I hope it becomes increasingly clear over the course of this blog, in this first post I declare myself an optimist – convinced that we will come out the other side of this Peak Oil tunnel dramatically different and better off than the way we went in. But make no mistake, I see little way of avoiding the excruciating darkness of the tunnel passage that lies just ahead.