A new internal working paper for the International Monetary Fund acknowledges physical constraints for oil production (peak oil) and foresees higher oil prices with negative impacts on economic growth. Although this working paper does not reflect official IMF policy, the fact that this institution is working on it confirms that the peak oil reality is starting to hit the financial elites of this world. Now the next step is recognising that this new reality will lead to a “post-growth” society and what this will mean for future global governance.
Read the full working paper “The Future of Oil: Geology versus Technology”.
On her blog Our Finite World, Gail Tverberg does an excellent analysis of this important working paper and comments on its weaknesses.
Three top financial news sites this week report on the reality of peak oil: The Economist, the Financial Times and French Le Figaro.
At Economonitor, Edward Harrison compares the three articles and explains the difference between hard peak and soft peak and the upcoming "chaotic energy transition".
Read the referenced articles also:
- The Economist: Feeling peaky.The economic impact of high oil prices
- Financial Times: Peak oil goes mainstream (again)
- Le Figaro: Controverse sur les estimations des réserves pétrolières
“Sub-Saharan states need to move to renewable energy sources as $15bn in aid is outstripped by $18bn in oil imports, says IEA…” (Source: The Guardian)
But not only Africa is affected by high oil prices. Europe will suffer competitiveness loss as a result of oil dependence. "…for every $1 that countries do not spend on cleaner fuel, they will have to spend $4.3 within the next two decades to make up, for their reliance on fossil fuels". EU oil bill is more than 550bn per year, the "equivalent of a Greek crisis – very year".
Excellent article in Time on the future of oil. Unconventional oil – although not complety making up for declining conventional oil production – will lead to higher energy prices and will ultimately cook the planet.
And still political decisionmakers keep denying this very obvious reality. What is worse? Climate deniers or politicians in the pocket of the fossil fuel industry?
“… the new supplies are for the most part more expensive than traditional oil from places like the Middle East—sometimes significantly so. They are often dirtier, with a greater risk of more devastating spills and accidents. The decline of major conventional oil fields—coupled with the rapidly rising demand from countries like China and India—means the spare production capacity that once cushioned prices is melting away, ushering in an era of volatile market swings. And there’s climate change—burning all this leftover oil could lock the world into dangerous warming. “I’m less concerned about the absolute disappearance of fossil fuels than about the environmental consequences of pursuing what’s left,” says Michael Klare, an energy expert and the author of The Race for What’s Left.”
Slowly but surely world leaders (Christine Lagarde) and top media commentators (Martin Wolf in the FT) are recognising that high oil prices as a result of supply-demand tensions and geopolitical fears (Iran) are becoming a major obstacle to new economic growth in the West.
Is there hope that finally political and economic elites will start preparing for the post-growth economy? The world’s addiction to oil and fossil fuels is not only threatening the planet’s climate but is also killing off growth and prosperity. There was never more urgency to start the phasing out of the oil (and easy growth) economy.
“The gas leak from French oil company Total’s Elgin oil field in the U.K. North Sea could turn into a lengthy problem for the company, not unlike the challenge BP faced shutting down its leaking well in the Gulf of Mexico two years ago”. (Source: Wall Street Journal blog )
How many "extreme energy" accidents will it take before policymakers understand it is time to prepare for the end of the fossil fuel age.
“The good news is that other societies have proved that you can have things like good health, an education for your children, enough food, strong community, support networks for the vulnerable, the pleasures of home and family – all during periods of decline from one level to another. We know that this is possible – so our central project becomes ensuring that it is feasible for us, that we can offer our children something worth having, even if we have less.”
Interesting analysis by Sharon Astyk in the Energy Bulletin. Very valid questions on the size and quality of our future collapse. Not "Mad Max" but Iceland? But is it realistic? I guess there is a need for much more serious analysis of what economic, social and ecological collapse (which is where we are heading) will mean for democracy, solidarity, our institutions, interpersonal relationships, culture, religion etc.
"When the new Italian Prime Minister, Mr. Mario Monti, gave his acceptance speech to the Italian Senate before Christmas, he used the word "growth" 28 times and the word "energy" – well, zero times. Why would this supposed technocrat neglect even to mention the biophysical basis of the world’s economy? Energy, after all, is at the heart of industrial growth society: industrial production, our cities, our transport systems, our buildings and infrastructure, food and water flows, the internet – they all critically depend on oil and gas." (Source: Energy Bulletin)
Brilliant analysis of the energy myopia of our growth theocrats and the implications of energy scarcity on the future of cities. Also includes some serious inconvenient challenges for the theocrats of renewable energy.
A few more interesting quotes from this must-read article:
“Mr Monti and Mr Obama are better described as theocrats, than technocrats. Their principal job is to keep us in thrall to a myth: an economy that expands to infinity in a finite world.”
“Mainstream renewable energy strategies suffer from an existential flaw. They take rising global energy ‘needs’ as a given; calculate the quantity of renewable energy sources needed to meet them; and then hand the job of implementation over to governments and the market.”
“Expensive and heavy energy arrays are to be dumped into wilderness areas – such as arid lands in Spain and France, or the deserts of North Africa – on the false assumption that these lands are ‘empty’ or ‘useless’”
“Resource efficiency is not a lifestyle choice. We’ve splurged on energy for 200 years because we could. The growth-at-all-costs economy grew because it could. We drove two ton trucks to collect a pizza because we could.”
“Rather than dream of a global switch to renewables that cannot and will not happen, the wiser course is to focus our creative efforts on low-energy replacements for today’s gas-guzzling support systems. Our focus should be services and infrastructures that require five per cent of the energy throughputs that we are accustomed to now. That’s the energy regime we’re likely to end up with, so why not work on that basis from now on?”
“A new analysis concludes that easily extracted oil peaked in 2005, suggesting that dirtier fossil fuels will be burned and energy prices will rise.” (Source: Scientific American)
This Scientific American article summarises a report in Nature magazine confirming that the age of cheap oil is over and that as a result we live in different times. Will The Anthropocene give way to the Post-Oil, Post-Growth era?
Another interesting quote from this report makes the link between peak cheap oil and the current economic crisis:
“King and Murray [the authors of the report] argue that global economic growth itself may be impossible without a concurrent growth in energy supply (that is, more abundant fossil fuels, to date). "We need to decouple economic growth from fossil-fuel dependence," King adds. "This is not happening due to industrial, infrastructural, political and human behavioral inertia. We are stuck in our ways."
"It seems doubtful at this time that future technologies for exploiting fossil fuels will be able to do much beyond softening the inevitable declines. And, given the known trends and data, it seems foolish to wait for these yet-to-be-invented technologies to appear. That means that leapfrogging now past fossil fuels to renewable energy is not just desirable but probably inescapable. The only question is whether we as a society will do it with a focused plan for a rapid transition or whether the transition will be chaotic and marked by violent swings in the economy as the world lurches from one energy-induced crisis to another." (Source: Energy Bulletin)
Brilliant overview by Kurt Cobb of the reasons why we need to move away from fossil fuels as fast as possible.