2005: The Year of Global Oil Production Peak?
By now anyone that listens to the news or reads a paper ought to know what Peak Oil means. The Green Party, primed by Jeanette Fitzsimons ''Picnic for the Planet Speech'' intends making it an election issue. This is sure to improve the Greens profile as the party of real intelligence if not of realpolitik, thus relegating ACT as they loll about in political wastelands hopelessly clinging to misguided ideologue that belongs in the 1990s – The National party ought to heed this herald to changing attitudes.
A doomsday for neo-classic economics approaches as the absurdity of supply side solutions (or lack thereof) to this approaching energy crisis “tsunami” become apparent. Aside from Malthusian demand destruction there simply are no supply side solutions. Oil has increased in price by about 350% since 1999 when it was around US$10bbl. The emerging crisis is completely unlike previous politically induced episodes of the 70s caused by embargoes and the Iranian crisis. This time mild mannered economists will come face to face with the stiletto point of geological depletion.
On the supply side we are seeing depletion rates increasing with North Sea oil and gas leading the way. On the demand side recent 20-something year peaks in oil price is only matched by the unprecedented demand as China, India, Turkey, Brazil and a swath of other nations race to industrialise. Car fleets throughout the EU nations, Australasia and Northern America continue to increase in number with larger capacity engines more popular.
Although the term “sustainable” means just about whatever you want it to mean these days one thing is certain: sustainable oil production is a fantasy only equated by the absurdity of the runaway consumption model. New Zealand’s so called “booming” economy, that is the out of control trade deficit, mortgage and credit creation spiralling out of control propped up by an inflated dollar and a consumer/housing bubble is almost certain to totter this year. Continuing oil supply concerns and the consequent per barrel increases will only contribute to monetary inflation. Further rising interest rates are sure to mangle domestic punters who are heavily geared on over-priced residential properties. The same consumers over-extended on their Visa gold cards will suffer miserably as oil-energy prices continue to rumble upwards seemingly out of control throughout the economy.
Everything from interest rates to the supermarket bill will go up. The denial, or continued false belief that this bullish market will sort itself out will be apparent as increasingly pointless suburban sprawl continues, millions on equally pointless roading is spent and ship loads of imported V8 4WD’s roll of the Wellington wharves to satisfy the ego’s of our economies obese consumers.
The first thing knowledge of peak oil ought to instruct us is to think about what the prospects are for a country that spends way more than it produces. The credit-card-fed/mortgage orgy will not be sustainable once the hand-brake of late 80s like interest rates bite as oil prices go through the canopy.
Andrew McKillop (Energy Economist) predicts global oil supply will fail to meet demand within 2-3 years. Colin Campbell and the ASPO (Association for Peak Oil) predicts peak year of 2007. Structural under-supply issues are almost certain to manifest themselves from about now onwards. Supply jitters will ensure continued price spikes moving upwards with occasional shorter downward trends. The Governments belief that oil will sometime move back toward US$20 per barrel will never be confirmed.
Kenneth Deffeyes and Jim Kunstler are amongst commentators predicting peak this year (2005). Jeanette Fitzsimons is predicting about 10 years from now. Contrastingly the International “don’t scare the horses” Energy Agency is predicting 2037 but this figure assumes we will discover an amount of oil in the order of 4 or more Saudi Arabias over the next decade or so. A laughable fantasy worthy of all contempt it deserves. Ironically an economic slump will buy some time.
This year is an election year in New Zealand. Each and every one of us ought to think about the maxim “buy an SUV! It’s great for the economy.” The days of munching on Quarter-Pounders and frys whilst driving between the Warehouse and suburbs in your Ford Explorer are drawing to a close. The traditional old political parties of New Zealand hiding behind their flawed economic ideologies are increasingly irrelevant, peak oil will usher in a new realpolitik a very new reality, one where “endless economic growth” is a but a sour memory of the good old days.