Peak Oil News: Peak Oil: Prominent Peaker Tells Allies to (Temporarily) Pipe Down

Sunday, November 16, 2008

Peak Oil: Prominent Peaker Tells Allies to (Temporarily) Pipe Down

By Jeffrey Ball

The Journal’s Neil King Jr. reports: Mum’s the Word, Peakniks!

Should the deans of the peak-oil movement give the world a break and shelve their dire warnings of impending supply shortages?

So urges Robert Hirsch, one of the true eminences of the peakist crowd. Hirsch penned a seminal 2005 report for the Energy Department called “Peaking of World Oil Production” that warned of stark consequences as world oil supplies tighten, slamming the world economy. He has since lectured widely on the topic.

But with the world economy now under seige for quite different reasons, Hirsch is urging his cohorts to tone down their bleakness for a while so as not to worsen the damage.

In a memo “To The Peak Oil Community,” Hirsch recommends that the group “minimize its effort to awaken the world to the near-term dangers of world oil supply.”

His rationale is itself plenty grim. “If the realization of peak oil along with its disastrous financial implications was added to the existing mix of troubles, the added trauma could be unthinkable,” he wrote to his colleagues.

Hirsch sent his memo to a Who’s Who of the peak movement, including retired petroleum geologist Colin Campbell; investment banker Matt Simmons; Swedish peak-oil scholar Kjell Aleklett; and Steve Andrews, director of the U.S. Association for the Study of Peak Oil.

But his appeal, sent Thursday, doesn’t seem to be winning much support.

“This is a very risky time to go silent on a problem far deeper and less fixable than the financial mess,” said Simmons, author of the 2005 peakist bible “Twilight in the Desert,” which cast doubt on Saudi Arabia’s abilities to pump evermore oil. “The current price of oil is as lethal to supply as $10-a-barrel oil was a decade ago when we were all petrified about the permanence of the Asian flu that had killed any growth in oil demand.”

For others, the approach of a new administration is another reason to keep banging the drum. “We are too close to peak oil and its impacts to be able to afford making more wrong turns (e.g., ethanol from corn) in energy policy,” said Andrews.

But Hirsch argues that there may be some honor in silence. “In the near term,” he said in his memo, “keeping relatively quiet is likely the better part of valor.”

Here’s the memo in full:


The world is in the midst of the most severe financial crisis in most of our lifetimes. The economic damage that has already been wrought is considerable, and we have yet to see the bottom or the turnaround. Against this background, I suggest that the peak oil community minimize its efforts to awaken the world to the near-term dangers of world oil supply. The motivation is simple: By minimizing our efforts in the near term, we may not add fuel to the economic fires that are already burning so fiercely.

We are all aware of how disoriented governments and business are right now. Our leaders, leaders-to-be, and best minds are disoriented and seeking pathways out of the current morass. The public is in a quiet panic mode — those who were reasonably well off are less well of, and their options for action are limited. Those that have lost their jobs and/or homes are desperate. Businesses and the markets are in what might be called a free fall. If the realization of peak oil along with its disastrous financial implications was added to the existing mix of troubles, the added trauma could be unthinkable.

Like many of you, I’ve devoted my recent efforts to trying to wake the public and governments to the impending horrors of peak oil. As much as that awaking is urgently needed, continuing to press forward now is almost certainly not in the broader interest.

Many may be tempted to directly challenge the recent IEA World Energy Outlook. I am among those who were very disappointed. Pressing those concerns at this time might further the peak oil “cause,” but it could well do much more damage than any of us really intend.

Please keep up your studies and thinking, because helping the world realize the dangers of peak oil is an absolute must. In the near term, keeping relatively quiet is likely the better part of valor.


At 10:20 AM, November 19, 2008, Blogger Jean d'Auriac said...

It is true that leaders, leaders-to-be, and best minds are disoriented by the general crisis combining finance and real economy. But is there a way out of the current morass ? Just consider the three following sets of observations :

1°/ The fast growth our world has generally known from 1945 until about 2003 has been fed by energy generally produced at low cost and sold at low price while remaining able to satisfy a fast growing demand. And leaders of all sorts have governed by perpetuating growth.

2°/ Such a fast growth has allowed our world to create more and more money on the credit side of the financial system while creating more and more debts on the liability side of investors, in a context usually enabling those investors not only to reimburse their debts (+ interests) but also to make profits and reinvest part of them in such a manner that fast growth could generally be sustained.

3°/ In the course of the last five years, the world annual energy production went past a level beyond which our world has ceased to be able to satisfy a strong growing demand. As a consequence, the energy selling price increased, increased, increased …
At first, nobody took notice, so that growth went on as usual, for a while, moved by its previous momentum, with the help of market deregulation and the blessing of heads of states somehow worried about those increases, yet delighted to observe that growth was still going on.
A lot of projects were undertaken, financed with a high proportion of money-borrowing, carelessly discarding the risks that might suddenly emerge either from energy prices getting very high or from deep economic depression settling in and ending with capital depreciation, over-indebtedness, bankruptcies, projects being aborted before being completed, etc.
But something new suddenly happened last summer : crude oil prices went past a certain threshold beyond which an unexpected backlash was triggered.
Then energy demand and consumer spending got substantially reduced, provoking a sharp decrease of those prices (within just a few months), abruptly slowing growth in some countries and reversing it into recessions in others.
Therefore, as the previously discarded risks materialized, many financial bubbles imploded and a lot of money capitalized in them disappeared.
And now a severe credit crunch has brutally succeeded to former careless lending. Markets have become extremely volatile and unpredictable, compelling states to react, to get out of laissez-faire capitalism and to take emergency measures in order to avoid a premature collapse of the global financial system.
For the time being, nobody can see clearly what the near future will bring about. More losses and bubble implosions are feared, along with high unemployment, disruption of people’s purchasing power, growing social distress, and so on.

By combining the two first sets of observations, we gather that the viability of the present global financial system and its lending-money capability rest basically on the world’s aptitude to increase year after year the annual production of cheap energy (Improving energy efficiency may help for a while and provide some delay ; but its limits will soon be revealed).

From the third set, we understand (on one hand) that our world has probably lost its ability to substantially increase such annual production much above its present level and (on the other hand) that fast growth ceases to be sustainable when energy selling prices get well above a certain threshold.

Besides credible scientists tells us that the average cost of producing energy is expected to rise in the future, reducing the pace of growth and hence the investment capability of the real economy. At some point, economic contraction will become inevitable in the face of rising and relentless energy costs. And it is expected that many shortages will accompany cheap energy shrinking.

Such considerations suggest that the world may have lost forever its ability to keep alive a financial system able to lend substantial amounts of money to many people, whatever reform is undertaken. Therefore, leaders until now accustomed to solve problems by perpetuating growth have suddenly discovered a totally new situation within an newly emerged difficult world about to reach its growth’s ultimate limits. It comes at no surprise, then, that they feel powerless and disoriented. But what Peakoilers say or refrain to say does not matter at all. The present morass comes from objective fundamental causes many of us understand very well, as it was obvious, from the beginning, that growth would sooner or later reach its ultimate limits and that our world would become very different as soon as such limits would be reached. And it seems, now, that we have reached them, or are about to reach them. As somebody has said in some book, the party is over.

At 10:40 AM, November 19, 2008, Blogger micheal said...

"But with the world economy now under seige for quite different reasons..."

The world economy, especially the financial systems, is now under siege precisely because of peak oil, not because of "quite different reasons". What some see as causes [eg U.S. sub-prime mortgages meltdown] for the failures in the financial systems and the concurrent economic stresses are not causes at all but are merely symptoms, early consequences of peak oil.


At 11:51 AM, November 19, 2008, Blogger Jean d'Auriac said...

Your blog is the shortest I have seen, totkomi, but it contains the essential.

I agree with your comment : the financial crisis is there because the production of cheap energy can no longer grow and without growth the present financial system becomes very unstable, and unable to lend money. I do not how a reform of financial mechanisms could change basic facts.

Hope you will survive, as that is your main wish. Good luck !

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