[Paleopsych] Richard Heinberg: The Likely Impact of Global Oil Peak on the United States

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Richard Heinberg: The Likely Impact of Global Oil Peak on the United States

20 May 2005

 	In Brief: Speech Delivered by Richard Heinberg at the ASPO
Conference 2005 in Lisbon, Portugal

Throughout most of the late 19th and early 20th centuries the US was the
world's foremost oil producing and exporting nation; it was also the
first important producing nation to pass its all-time oil production
peak, which occurred in 1971. Thus America is emblematic for
understanding world oil history and the approaching global extraction
peak.

While each nation will be impacted differently by global oil peak, the
types of effects that are likely to be seen in the US can be
extrapolated elsewhere; however, effects in this instance will be more
pronounced because of America's extreme and arguably unmatched economic
dependence on petroleum.

America's original endowment of oil is estimated at somewhat less than
200 billion barrels, of which 170 billion (or about 90 percent) has been
extracted (ASPO, 2002). Current production of conventional oil,
including offshore areas and Alaska, is about 5.5 million barrels per
day; non-conventional sources yield a little more than 2 million barrels
per day. Present US consumption stands at 20 million barrels per day;
imports account for nearly 60% of usage. (EIA, 2005) The US has the
highest per-capita consumption of oil of any large country, and is the
world's foremost oil user and importer. Well over 97% of US
transportation energy comes from petroleum, and Americans are the most
mobile people on the planet: there are more autos in the country than
there are licensed drivers-about 210 million total. Americans drive an
average of12,000 miles yearly at an average fuel efficiency of 20.8
miles per gallon (3.2 kilometers per liter) (EPA, 2005).

Petroleum dependency has been systematically encouraged through suburban
design and the lack of public transportation alternatives to the private
automobile. The peak of per capita public transportation usage occurred
in the 1940s; following this, the nation invested hundreds of billions
of dollars in its Interstate Highway System, effectively a subsidy to
the auto and oil companies; simultaneously, it invested heavily in
civilian air transport while systematically dismantling its interurban
rail and urban light rail systems.

The US was also the center of modern agricultural developments-the
widespread deployment of petrochemical fertilizers, pesticides,
herbicides, and powered farm machinery-that have made the nation's food
system overwhelmingly oil-dependent.

Oil currently accounts for 40 percent of total US energy usage, making
it the nation's primary energy source. Domestic production of natural
gas, the nation's second most important energy source, is also in
decline. The US has large domestic coal reserves; however quality is
highly variable and a recent Hubbert curve analysis suggests a domestic
production peak in as few as 20 years (Vaux, 2004). The nation derives 8
percent of its energy from nuclear power; that amount could be increased
substantially, but the cost would be enormous and the development time
would be considerable. Only 6percent of US energy production is from
renewable sources, most of that being hydroelectricity and the burning
of biomass, with solar, wind, tidal, and wave energy combined
contributing less than one quarter of one percent.

All of this is well known. What is less often discussed is the challenge
that will be presented by global oil peak.

The US was able to make up for its domestic oil peak by means of four
primary strategies:

* Importing more oil from other nations,

* Relying on the US dollar denomination of global oil sales to bolster
the value of the dollar and therefore to make imports artificially
cheap,

* Using military power to defend access to oil-producing regions and to
enforce stability in those regions,

* Partial efforts to increase energy efficiency.

When global oil production peaks some of these strategies will likely
begin to fail.

Imports will become more expensive, in both absolute and relative terms.
Of course, prices for oil itself will be much higher, but so will prices
for nearly everything else (due to rising energy costs for manufacturing
and transportation); thus consumer purchasing power will be strained,
making higher fuel costs harder to absorb. At the same time, the
continuing declining relative value of the dollar measured against other
currencies will add to the real cost of fuel.

The prevalent denomination of oil sales in US dollars may cease, due to
the dollar's declining value, which is due to bloated US trade deficits,
which are themselves at least partly attributable to the high rate of US
oil imports. If oil does come to be sold more frequently for other
currencies, this will merely add to the downward pressure on the
dollar's value, creating a reinforcing feedback loop.

America's military strategy in Iraq-which appears to be part of a larger
design to dominate oil-producing regions globally-is already
significantly challenged by armed resistance in that country. Attempts
by the US to pursue a similar military strategy in other countries are
likely to be resisted not only by the people of those countries but also
by other nations averse to the notion of a unipolar world. China,
Russia, India, Venezuela, and Iran appear to be engaging in economic and
in some cases military alliances in an effort to counterbalance US
hegemony in the Middle East, Central Asia, and Latin America, with the
future of Africa also in dispute.

Meanwhile the consequences of America's lack of vigor and thoroughness
in pursuing energy efficiency and conservation domestically over the
past two decades will hamper its ability to adapt to a low-energy
future. Already Germany, Spain, Netherlands, and Japan have leapt far
ahead of the US in per-capita production of solar and wind power. The US
may find itself needing to invest heavily in new energy infrastructure
at a time when its economy will be hard pressed to maintain emergency
services for its increasingly unemployed and desperate population. The
nation's relative success in its energy transition will thus hinge on
whether the global peak occurs sooner (2005) or later (the extremely
unlikely date of 2020), and whether leaders accept the energy transition
as their immediate top priority and make maximum use of whatever time is
left, or continue to postpone the effort (Hirsch et al., 2005).

In the more likely case that peak occurs soon and few efforts at
transition are made prior to the event, there will be profound economic
impacts (Hirsch et al., 2005). Within years, the average American will
have less opportunity, purchasing power, and mobility.

Food will cost more and consumer choices will be severely constrained.
Life expectancy may decline markedly, and America's cities will likely
fall into decay.

While US policy makers have squandered opportunities to avert such
scenarios, even after the peak they will still face important choices,
and their decisions will continue to be fateful both for US citizens and
for the rest of the world.

With regard to foreign policy, decision makers must choose whether to
seek military solutions to what is essentially an economic problem. If
they pursue militarism, this could set loose a chain of violence
throughout western Asia, Africa, and South America. The ultimate
consequences are frightening to contemplate.

With regard to domestic policy, decision makers must choose whether and
how to intervene in the economy. Economic contraction will occur,
whether planned and coordinated or forced and improvised. If the
government takes a hands-off approach, the suffering of the citizenry
will be acute and will eventually lead to organized protests on a
massive scale. Yet if the government chooses active
strategies-rationing, creating employment in the agricultural sector,
subsidizing alternatives, and mandating radical conservation
measures-its efforts will still be subject to harsh criticism. Hence in
either case it is likely that decision makers will respond by curtailing
civil rights and expanding police powers.

If the 20th century saw America's economic and geopolitical ascendancy,
the 21st will almost certainly see its decline. The problems created for
the US by peak oil will no doubt eventually be solved; however, the
process will entail profound changes at every level of American society.

Sources:

ASPO Newsletter #23, November 2002 www.peakoil.ie/newsletters

EIA (Energy Information Administration) web site, www.eia.doe.gov/

EPA (Environmental Protection Agency) web site,
www.epa.gov/otaq/trends.htm

Hirsch, Robert L., et al., "Peaking of World Oil Production: Impacts,
Mitigation, & Risk Management" (SAIC, March 2005),
www.energybulletin.net/4789.html

Vaux, Gregson, "The Peak in US Coal Production" (FTW, 2004).