Controversy over Peak Oil

NS4053Week 6.1

Peak oil: persistent controversy

Search term 2006 Google hits returned

2012 Google hits returned

2012 Google Scholar hits

Hollywood 197,000,000 158,000,000 558,000

Terrorism 111,000,000 129,000,000 745,000

Nanotechnology 26,600,000 24,900,000 549,000

Global warming 26,500,000 181,000,000 954,000

Peak Oil 4,320,000 42,100,000 1,060,000

Hydrogen economy 1,120,000 3,590,000 203,000

Why pay attention to controversy?

• If peak oil correct, possible security, social, economic consequences.

• If peak oil is believed to be correct, possible policymaking and mass psychological consequences.

• If peak oil is not correct, learn to recognize the argument and understand the debate when it comes across your desk.

What is peak oil debate about?

• Agree that there is a limit to fossil fuels, but what is the problem?

• Debate among geologist, economists, and technologists.– Geologists focus on limits and impact on

society/civilization.– Economists focus on prices and markets.– Technologists focus on innovation.

Peak oil proponents

• Hubbert’s peak (1956): mathematical and geological limits of production.

Predictions on “Peak Oil”

“Peak discovery”

Energy Return on Energy Invested

Cost of extraction

Counterarguments

• Resource pyramid– Disagree with PO proponents about size of

reserves, ERR and URR• Campbell & Co. vs. USGS

• As supplies tighten, markets will price oil higher, leading to:– New sources coming on the market.– Innovation.– Substitutes will reduce demand for oil

New reserves of ERR

Oil price forecasts (IMF 2012)

Implications

• Both sides agree energy prices will get higher.– Disagree on society’s ability to adapt to new

environment.• Oil prices depend on:– Demand– Precautionary demand– Supply– Spare production capacity

Possible impacts of higher energy costs

• Volatility due to low spare production capacity.• Inflationary pressures.• Diversion of investment capital from other

productive enterprises.• Distributional consequences of higher energy

prices within countries and across globe.– Who wins and who loses?

• Uneven distribution across globe of societies’ ability to adapt.

Thinking about the future

• Peak globalization– More expensive transportation– More expensive consumer products

• More expensive food and consumer products.• Increase in urbanization• Increased mass transit• Shift in consumer design and consumer

values?

Case of Food

Thinking about the future based on the past

• Tough to find cases to illuminate key factors.• Past responses to energy scarcity:– Predatory militarism (Japan 1930-45)– Totalitarian retrenchment (North Korea)– Socioeconomic adaptation (Cuba 1990s)– Economic transition (US South post-Civil War)

• What do they tell us about high energy cost future?

Thinking about a high energy cost future?

• Successful energy transition– Some states will win the race to attract investment and capital that

enable them to adapt.• Some states will be less successful at this and will also experience social

adaptation.

• Some states with military capabilities will be tempted to use them to ensure energy sufficiency.

• Some states with authoritarian legacies will see elites pass on the costs of adaptation to masses.

• States with populations that have the least to ‘unlearn’ about high energy use will adapt to having less energy.

• Some states will fail.

Security implications

• States will compete for the capital (to adapt)– Relative gains issue.

• Avoiding and deterring the temptation for military solutions.

• Coping with the consequences of socioeconomic adaptation around the world.

• Mitigating the issues associated with (hopefully rare) cases of state collapse.