Peak Oil Matters – Awareness of Peak Oil Matters More

Peak oil is that point in time at which we have burned half or all the available oil. After this time, there is progressively less oil, it is harder to get, and the price trends up – likely with nasty, recession-causing price spikes. However, the realization that the oil supply is running down is even more important, because with this awareness will come some significant changes in behaviour.

Oil exporters (Dealers)

Oil exporting nations waking up to the fact that the world oil supply is diminishing, and acknowledging the reality that their own country’s supply has peaked, are almost certain to reduce exports. To do otherwise would be suicidal in most cases. Let’s take Saudi Arabia as an example:

• Population: 28 million
• Oil: 90% of exports and 75% of government revenue
• Country: mostly desert; only 2% arable

This is not a recipe for domestic tranquillity when the oil revenues stop, or even drop. Less revenue means less services, like roads and hospitals and pensions, and that will make the masses restive. It also means fewer imports, and for a country that has far too many people living in the desert, a shortage of food imports will quickly make the masses violent.

Saudi Arabia is an oil exporter. As acceptance of the idea of peak oil sets in, whether that date is now or simply soon, exporters know that:

• They must get off oil themselves or their economy will collapse, people will starve and/or riot, imports will stop, and they will go back to being nomads in the desert. If they survive the riots.
• Oil is only going to go up in price. Repeat that, and think about what it means: Oil is only going to go up in price. That means that every barrel you sell now could have been sold for more – maybe a lot more – within a few years. So what’s the rush to pump it and ship it?

I should point out that this is a predicament, not a problem for Saudi Arabia and many other countries; there is not necessarily a solution. They may have overpopulated their country to the point that they are reliant upon imports for necessities like food and even water. Once they have no more oil to export, the following are likely outcomes but hardly “solutions”:

1. Mass starvation down to a level that the land can support (a die-back)
2. Mass exodus into neighbouring countries, destabilising them
3. Wars for access to water and arable land
4. All of the above

Responses to the Peak Oil Predicament for Exporters

Leaders, as intentionally obtuse as they have been about peak oil, once they ‘get it’ they will work to ensure that they are protected. It is important to think about it from this point of view, as it is the closest to the actual motivation felt by leaders. Their primary motivation will not be you or your lifestyle. They will want to protect (and continue enhancing) their position, power, and money, and that of their cronies. If you are fortunate, your Dear Leader will choose a way that also helps the masses. They have some options:

• Massive force and a police state to keep the masses in check, as the Soviet Union, North Korea, and any number of other dictatorships have done or currently do.
• “Ethnic cleansing,” or any other excuse to reduce the population and provide a target for people’s anger.
• Continue subsidising an unsustainable lifestyle until it all comes crashing down – people are starving and/or rioting, parts of the country are seceding, the centre has lost all credibility. This happened to the U.S.S.R. and has happened to many empires. It is predicted for the United States on its current course.
• Use remaining oil to build a non-oil-dependent, regionally sustainable economy. So far, only the Scandinavian countries are serious about this, although Germany and some of the other European countries, and Brazil are heading in that direction.

The first three options make oil supply unstable. The final option means there will simply be less oil available for export.

Oil importers (Junkies)

Oil importing nations waking up to the reality of oil shortages and price increases are going to be in a world of hurt. The current recession is very likely permanent, and another oil spike will only deepen it. Let’s take the United States as an example:

• Consumes 25% of the global oil supply; possesses only 3% of world oil reserves
• Imports 60% of its oil needs
• Every economic recession in the past 40 years has been preceded by a significant increase in oil prices
• More than 40% of total U.S. energy demands and almost 100% of transportation fuels are oil-based

Any crimp in the oil supply, or any significant increase in prices, and the U.S. is in recession. Industrial-scale farming is also wholly dependent upon oil, so oil price increases mean food price increases. I have previously suggested that the current recession is permanent because the price of oil does not appear to be returning to levels of recent years; it is now ~$80 per barrel versus the $20 per barrel it had been for many years before, even though we are in the worst recession since the Great Depression.

The United States is an oil importer, and as the idea of peak oil becomes accepted, importers know that:

• They must reduce their dependence upon oil very rapidly or their economies will suffer severe setbacks
• Food and transportation prices will increase, leading to poorer and unhappier people
• Oil is going to go up in price from this point forward, and this will only cause further economic contraction

As for exporters, this is a predicament: there are responses but not really solutions. The solution was to ‘get off oil’ starting 20 years ago, but that path was not taken. Leaders will know that people are going to be very angry as living standards decline. They will be looking for someone and/or something to blame, and U.S. leaders from Congressmen to oil company executives will be likely targets.

As oil prices spike and wreck oil-dependent economies, some possible outcomes are:

1. Mass starvation down to a level that the land can support (a die-back)
2. Population decline as recent immigrants leave
3. Wars for access to oil
4. Breakup of the nation into smaller, more self-reliant pieces
5. All of the above

The first is unlikely but not impossible. The second and third are happening now in the U.S., and the fourth, once unimaginable, now seems at least possible given the division within the country – and hard times haven’t even hit yet.

Responses to the Peak Oil Predicament for Importers

Importers can either reduce imports or find a way to keep the oil coming regardless of declining supply. The most recent U.S. overthrow of Iraq was arguably an attempt to keep the oil flowing; certainly the U.S. has overthrown governments in the past to keep the oil flowing. The United States has a large military presence in the Middle East for just that purpose.

Importers, interestingly, also have the same possible responses to peak oil as exporters:

• Massive force and a police state to keep the masses in check, as the Soviet Union, North Korea, and any number of other dictatorships have done or currently do.
• “Ethnic cleansing,” or any other excuse to reduce the population and provide a target for people’s anger.
• Continue subsidising an unsustainable lifestyle until it all comes crashing down – people are starving and/or rioting, parts of the country are seceding, the centre has lost all credibility. This happened to the U.S.S.R. and has happened to many empires. It is predicted for the United States on its current course.
• Use remaining oil to build a non-oil-dependent, regionally sustainable economy. So far, only the Scandinavian countries are serious about this, although Germany and some of the other European countries, and Brazil are heading in that direction.

The first three options don’t “solve” anything, at least not for you and I. Unfortunately, many ‘democracies’ have put in place laws that allow the federal government great power in the event of an “emergency,” especially anything that can be defined as “terrorism.” My friend recently had a rude awakening about this when the police showed up at his door to ask about an email he had sent that mentioned blockading the Canadian tar sands; how they got the email they would not say.

The final option is not being pursued or even seriously considered in countries like the United States, as the third option is flogged to death. This makes the first two options more likely in the long run.

Awareness is a Powerful Thing

We do not have to actually hit the ‘peak’ of oil for the previously mentioned things to start happening. All that has to happen is for enough people – especially those in power – to realise peak oil is coming and what it will mean.

The responses to oil supply concerns so far by importers have destabilised world peace and the world economy. There is no reason to believe that the current crop of world leaders will take serious action to ‘get off oil,’ making a crash progressively more likely.