energy: making sense of peak oil and energy uncertainty by daniel lerch
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8/4/2019 ENERGY: Making Sense of Peak Oil and Energy Uncertainty by Daniel Lerch
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The Post Carbon Reader Series: Energy
Making Sense of Peak Oil
and Energy UncertaintyBy Daniel Lerch
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About the Author
Daniel Lerch is the author of Post Carbon Cities:
Planning for Energy and Climate Uncertainty (2007),the first major guidebook for local governments on
peak oil and global warming. He has delivered presenta-
tions and workshops to elected officials, planners, and
other audiences across the United States, as well as in
Canada, the British Isles, and Spain. Lerch is Program
Director of Post Carbon Institute.
Post Carbon Institute
© 2010
613 4th Street, Suite 208
Santa Rosa, California 95404 USA
This publication is an excerpted chapter from The Post Carbon Reader: Managing the 21st Century’sSustainability Crises, Richard Heinberg and DanielLerch, eds. (Healdsburg, CA: Watershed Media, 2010).For other book excerpts, permission to reprint, and
purchasing visit http://www.postcarbonreader.com.
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For over 65 years we have designed our communities
for oil. We’ve built nearly 47,000 miles of high-speed
Interstate highways, a vast continental network for
fuelling and servicing gasoline-powered vehicles, and
millions upon millions acres of car-dependent suburbs.
This gargantuan legacy of long-term investments has
all been made with the assumption that the petroleum
fuels which make the whole system work will be avail-
able and affordable for the foreseeable future
But global trends of oil supply and demand are chang-ing to such a degree that this assumption is no longer
realistic. Far more than a problem of higher prices at
the pump, the quickly emerging new energy reality
has enormous implications for just about every aspect
of our lives. Forward-thinking households, businesses,
and governments are now rushing to plan for an
unprecedented energy crisis, the first phases of which
we are already experiencing.
What lies behind this 21st century energy crisis? Why
can’t we rely on the market to x a problem that is ulti-mately about supply and demand? To make sense of
what’s going on, we rst need to understand some of the
basics of how we harness and use energy, and the limita-
tions of the various energy resources available to us.
Supply and Demand
Our supply of cheap, easy-to-extract “conventional” oil,
from places like the flat plains of Texas and the des-
erts of Saudi Arabia, is at or near permanent decline1;
the remaining “unconventional” oil, from places like
the tar sands of Canada and the depths of the Gulf of
Mexico, is increasingly difficult to find, extract, and
refine. At the same time, global demand for petro-
leum is sky-high at 85 million barrels per day—twice
as much as in 1969. That’s a lot of oil to keep pouring in to the pipelines to meet “business as usual” needs, let
alone to meet new demand from growing countries like
China and India.
With the conventional oil dwindling and the uncon-
ventional oil that’s replacing it increasingly problem-
atic, there will inevitably come a point at which the
flow of oil from the wells and the refineries wil l simply
be unable to keep up with global demand. The point at
which total global oil production cannot grow any fur-
ther and begins its permanent decline is known as “peakoil,” a term that was hardly known outside the petro-
leum geology field as recently as 2004 but is rapidly
attracting attention and concern. A growing number of
analysts and government agencies are acknowledging
that we will have reached peak oi l by 2015, if we haven’t
reached it already.2
The new energyreality has enormous
implications forjust about everyaspect of our lives.
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A Big Problem
None of this would be a real concern if the product
in question were a market commodity like soybeansor pork bellies: Demand and supply would find a new
equilibrium without fundamentally threatening the
global economy. Oil, however, is unlike any other com-
modity in four important ways.
First, oil is absolutely essential to the most basic func-
tions of the industrialized world. Oil is the key raw
material for gasoline, diesel, jet fuel, home heating
oil, industrial oils, many chemicals, and most plastics.
Many key industries are wholly dependent on oil in
multiple forms; for example, the modern global food production and distribution system uses oil as a fuel
for farming and transportation, and as a raw material
for agrochemicals. Instability in oil supply and price
has serious potential consequences for virtually all sec-
tors of the global economy, particularly transportation,
agriculture, and manufacturing.
Second, there are currently no viable substitutes for oil
at current rates of consumption. Although alternatives
to oil do exist for many of its uses, they are generally
vastly inferior to oil in their energy content and in the
ease of which they can be extracted, transported, and
turned into a commercially-useable fuel. “Net energy”
or “energy returned on (energy) invested” (EROI)
refers to the ratio between the energy expended to har-
vest an energy source and the amount of energy gained
from that harvest. All alternative fuels have worse
EROIs than conventional oil, and some have such poor
net energy that they are practically useless to manufac-
ture (see Chapter 18). Even other conventional energy
sources—especially coal, natural gas, hydropower, anduranium—face serious constraints as potential replace-
ments for oil as our dominant fuel.3
Third, the modern world’s complex inter-firm and
inter-governmental economic relationships, made up
of movements of raw materials and goods across the
globe, very much depend on the price and availability
of oil being relatively predictable. If the price of oil
becomes very high or very volatile, or both, the global-
ized economy as a whole will face fundamental chal-
lenges.4 Indeed, the threat of peak oil is already creating
change and uncertainty in diverse sectors of the g lobal
economy: As oil prices surged above 15-year highs after
2004, beef prices rose rapidly in part because the high
energy prices (together with new federal subsidies)
spurred farmers to sell more corn to ethanol producers
and less to cattle feed lots—a chain of events that few
predicted.5
More worryingly, during the oil price spikeof 2008 it became apparent that much of the airline
industry simply can’t survive in a world of $110+ oil.6
Finally—and in part a result of the previous three qual-
ities—oil is such an intrinsic part of how our world
works that the “invisible hand of the market” is sim-
ply unable to deal adequately with the threats posed
by peak oil. As a 2005 report on peak oil for the U.S.
Department of Energy observed:
Mitigation will require a minimum of a decade
of intense, expensive effort, because the scale of
liquid fuels mitigation is inherently extremely
large... Intervention by governments will be
required, because the economic and social
implications of oil peaking would otherwise be
chaotic.7
Modern oil projects take a lot of money (billions) and a
lot of time (years) to bring from pre-discovery to liquids
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in the pipeline. As oil prices go up, markets (and oil-
producing countries) respond by putting more money
into exploration and production. But the combination
of the exploration-to-production lag time, the enormous
nancial risks on big unconventional oil projects, imper-
fect information on international oil reserves, and other
factors means that the private sector has not yet seen the
incentives (and indeed, may never see them) to respond
at a sucient scale to the peak oil threat.8
Clearly, peak oil is much, much more than a problem
of higher fuel prices. In Post Carbon Cities, I used the
term “energy uncertainty” to collectively describe the
wide and growing range of economic and social uncer-tainties that are being driven by peak oil. In a similar
way, global warming is driving a wide and growing
range of economic, social, and of course environmen-
tal uncertainties, which I collectively termed “climate
uncertainty.” Energy and climate uncertainty is an
important joint frame for understanding and approach-
ing the these two crises because our responses to one
inevitably affect the other.
What Can Be Done?The private sector is limited in the degree to which
it can respond to energy uncertainty. Governments
have been slow to recognize the problem, and will be
unlikely to respond decisively until economic condi-
tions worsen severely. Although energy uncertainty is
difficult to address even at scale of our largest govern-
ments and businesses, it is essential that public and pri-
vate sector decision-makers be educated rapidly about
the realities of peak oil, and what the possible responses
are. The other chapters in Part Eight (Energy) of this
book provide a basic overview of this information:
Chapter 17 on the remaining fossil fuel resources in
North America, Chapter 18 on the many challenges of
developing alternative energy sources, and Chapter 19
on the ramifications of peak oil for the economy.
Portions of this chapter originally appeared in Daniel
Lerch, “Post Carbon Cities: Planning for Energy and
Climate Uncertainty,” (Sebastopol, CA: Post Carbon
Press, 2007).
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Endnotes1 lobal discoveries of conventional oil peaked in the 1960s
and are uniformly expected to continue declining, thus
the future of conventional oil production is relatively
straightforward to forecast. ndeed, practically all analysts
(including the major oil companies) agree that conventional
oil production will be in permanent decline by 2015 at the
latest.
2 Terry Macalister, “US Military Warns Oil Output May Dip
Causing Massive Shortages by 2015,” The Guardian, April
11, 2010. Richard einberg, “Quacks Like a Duck,” March
29, 2010, http://www.postcarbon.org/blog-post/85699-
quacks-like-a-duck. U ndustry Taskforce on Peak Oil &
Energy Security, “The Oil Crunch: Securing the U’s Energy
uture,” October, 2008, http://www.peakoiltaskforce.net .
3 or an in-depth exploration of the net energy constraints
of both renewable and non-renewable fuels, see Richard
einberg, Searching for a Miracle: ‘Net Energy’ Limits & the
Fate of Industrial Society, (San rancisco: nternational orum
on lobalization, 2009).
4 Robert irsch, et al. “Peaking of World Oil Production:
mpacts, Mitigation, & Risk Management,” (Washington,
D.C.: U.S. Department of Energy, 2005), 4.
5 Andrew arrell, “Ethanol Demand Burns Meat Producers,”
Forbes, March 9, 2007.
6 See “The PL Timeline of Airline Bankruptcies, Mergers,
Acquisitions, and iascos” in oward Lichtman, “The Crashof Commercial Aviation and Telepresence,” September 8,
2008, http://www.telepresenceoptions.com/2008/09/
the_collapse_of_commercial_avi/.
7 Robert irsch, et al. “Peaking of World Oil Production:
mpacts, Mitigation, & Risk Management,” 5.
8 umerous books and studies describe these market-
limiting factors; one recent summary is Phil art and
Chris Skrebowski, “Peak Oil: A Detailed and Transparent
Analysis,” Energy Bulletin, May 30, 2007, http://www.
energybulletin.net/node/30537. or discussion on the more
recent development of price constraints on oil production,
see Richard einberg, “oldilocks and the three fuels,”Reuters Environment orum, ebruary 18, 2010, http://
blogs.reuters.com/environment/2010/02/18/goldilocks-
and-the-three-fuels/.
Photo CreditsPage 2, 280 and US101 interchangecbna topherous.
mages markedc are under a Creative Commons license.
See http://creativecommons.org .
AcknowledgmentsCover art by Mike ing. Design by Sean Mcuire. Layout by
Clare Rhinelander.
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T : www.p./9780970950062
For a 20% discounT use This source code: 10M9071
(p t t t p tt x.)
T Pt crManaging the 21st Century’s Sustainability Crises
et y richard heinberg daniel lerch
In the 20th century, cheap and abundant energy brought previously
unimaginable advances in health, wealth, and technology, and fed
an explosion in population and consumption. But this growth came
at an incredible cost. Climate change, peak oil, freshwater deple-
tion, species extinction, and a host of economic and social prob-lems now challenge us as never before. The Post Carbon Reader
features articles by some of the world’s most provocative thinkers
on the key drivers shaping this new century, from renewable energy
and urban agriculture to social justice and systems resilience. This
unprecedented collection takes a hard-nosed look at the intercon-
nected threats of our global sustainability quandary—as well as the
most promising responses. The Post Carbon Reader is a valuable
resource for policymakers, college classrooms, and concerned
citizens.
r h is Senior Fellow in Residence at Post Carbon
Institute and the author of nine books, including The Party’s Over
and Peak Everything. d l is the author of Post Carbon
Cities.
Published by Watershed Media
PUBLISHED FALL 2010
544 pages, 6 x 9“, 4 b/w photographs, 26 line illustrations
$21.95 paper 978-0-9709500-6-2