This is the second in a series on Survivalism and Prepping for a vandweller. The first question I have to address is “What are you Prepping for?” The simple answer is I am prepping for continuing and increasing high oil prices (and the economic problems that will go along with them) as a result of Peak Oil. Let me warn you this is a very complex subject and I am barely covering the surface of it here. There is much more I can’t include because you would all fall asleep!
What Is, and Is Not, Peak Oil?
All of my ideas of Peak Oil began with the book “The Long Emergency” by James Howard Kunstler. But since reading that book I have devoured everything I can about the subject. It just so happens that last month there was an outstanding article published about it in The Guardian, a large UK newspaper. It was so well written that I’m including a number of quotes from it in this post (I’ve added the emphasis in each quote). What makes it even more powerful is that it’s about a speech and paper given by a former British Petroleum geologist who warned that the age of cheap oil is long gone, bringing with it the danger of “continuous recession” and increased risk of conflict and hunger. Dr. Richard G. Miller worked for BP from 1985 until he retired in 2008 and was the geologist who prepared annual in-house projections of future oil supply for BP from 2000 to 2007. So he is a highly respected oil-industry insider and not some wacko with crazy ideas. BP trusted him to predict future oil supplies, that make him worth listening to!! The article is titled: “Former BP geologist: peak oil is here and it will ‘break economies’.” You can find the whole article here: http://www.theguardian.com/environment/earth-insight/2013/dec/23/british-petroleum-geologist-peak-oil-break-economy-recession
You can buy the book from Amazon here: The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Cent
The idea behind Peak Oil is very simple: there is a limited supply of oil stored in the ground and for any given geologic area there is a time when oil production from its fields will peak and from then on it will decrease. Let’s look at the United States as an example of that. The graph below is the historic record of oil production in the United States: it has a very obvious peak! As demand for oil increased through the 20th century our production of it increased to meet that demand. But then something very odd happens in 1970, oil production peaks and then goes into a steady decline. It has never returned to the level of 1970 even though our demand for oil has steadily increased. It’s very obvious that Peak Oil happened in the United States in 1970. There is no question that the same thing is inevitable in every country in the world. Quite simply, there is no doubt that there is a limited amount of oil in the ground and at some point we will have extracted all the cheap, easy to get to oil, leaving less oil and the harder to get out oil.
So the first thing everyone says is that, “We will just keep finding more oil and so there won’t be any real problems. There is lots of shale oil and oil in the tar sands” That is wishful thinking! Look at what happened in the US. After we hit Peak Oil in 1970 we found this huge amount of oil in Alaska, we found lots of oil off the coast (and started doing off-shore drilling to extract it) and now we are fracking for oil. And yet we are still producing much less now than we did in 1970. What that means is that the rate of decline is greater than the rate of discovery. That pattern WILL be reproduced everywhere in the world eventually. The BP geologist says
“We need new production equal to a new Saudi Arabia every 3 to 4 years to maintain and grow supply… New discoveries have not matched consumption since 1986. We are drawing down on our reserves….
Many oil experts believe the world has reached Peak Oil in the last few years and that the exact same graph we see in the US will be played out on a global scale with the Peak having occurred around 2010. And the fact that oil prices have gone up so much and haven’t come down, and the world is in a global recession that will not end, certainly backs up that idea. That is exactly what you would expect to see when the world reaches Peak Oil. BP geologist Dr. Miller said:
“The oil price has risen almost continuously since 2004 to date, starting at $30… it has since climbed to $110 and held there. The price rise brought a lot of new exploration and development, but these new fields have not actually increased production by very much, due to the decline of older fields. This is compatible with the idea that we are pretty much at peak today. This recession is what peak feels like.”
That is just what happened in the United States in 1970. We fell into a recession we couldn’t shake, oil prices shot up and we had shortages. At that time Saudi Arabia stepped in and greatly increased production making up for what we were lacking and that solved the shortages, brought the prices back down and eventually the recession ended.
Notice that has not happened today!! Why not? Why doesn’t Saudi Arabia (and all of the OPEC nations) step in and increase production thus decreasing prices and pulling the world out of a global recession. You may be thinking “Why would they, look at how much money they are making with these high prices? Because they are smart people and they know that if they drive the global economy into a deep and long lasting recession no one will be buying any oil. They need healthy economies to have customers to sell their oil to, and they know it. In fact, they have promised to increase production and save our economies several times, and they have not done it. Why? Because Saudi Arabia and the other OPEC nations are already at Peak Oil, and they physically can not increase oil production even though they want to and need to!! BP geologist Dr. Miller states:
“Crude oil production is heavily concentrated in a small number of countries and a small number of giant fields, with approximately 100 fields producing one half of global supply, 25 producing one quarter and a single field (Ghawar in Saudi Arabia) producing approximately 7%. Most of these giant fields are relatively old, many are well past their peak of production, most of the rest seem likely to enter decline within the next decade or so and few new giant fields are expected to be found.”
Did you catch that? Let me repeat it: 82% of the world’s oil comes from 126 giant fields. And 32% of the world’s oil is produced by just 26 fields. As those fields decline (and they all either are declining now or will be soon) we will NOT find enough new oil to replace them. So all the oil we gain by fracking or from tar sands is a tiny drop in the global supply and means nothing.
Let me make it clear that no one is saying we are going to run out of oil anytime soon, because we aren’t, there is still plenty of oil in the ground. What is very clear though is that we have already reached, or very soon will reach the point where total global production starts to decline. In a Capitalist world like ours, when supply decreases and demand increases prices must go up! And they will continue to go up as long as supply is limited.
Energy Return On Energy Investment (EROEI)
There is another reason prices must continue to go up and we will remain in a continuous recession and that is because of a scientific formula know as Energy Return On Energy Investment (EROEI). It is formula that calculates how much energy you must invest to get a certain amount of energy back. Probably it’s oldest uses was by hunters who had to decide if pursuing an animal was worth the calories they would burn. So if you had to chase ten rabbits with a rock in your hand and only killed one in ten you quickly realized you were investing a lot of calories of energy chasing the rabbits and not getting many calories back. Maybe you burned 10,000 calories, and only got back 1000 from that one rabbit. Keep doing that and you will be a dead hunter! For more info on EROEI, go to this page: http://en.wikipedia.org/wiki/Energy_returned_on_energy_invested
With oil there is a formula that says you invest a certain number of barrel of oils to get the oil out of the ground and you get a certain number of barrels for that investment. In 1900 when we first started industrial use of, oil, it literally was lying on the surface of the ground and you could scoop it up with a bucket!. The EROEI was 100 to 1; for every barrel you burned, you got 100 barrels of oil. In 1970 the EROEI in the US was 30, in 2005 it was 14.5 and today it is 11 and declining. That means we burn 1 barrel of oil to get 11 barrels of oil out of the ground. As the EROEI decreases (a smaller number) the price of oil MUST go up. Logically, as the number gets smaller (it gets closer to 1-1) we will simply stop exploring and drilling for oil and leave it in the ground. If you burn one barrel of oil to get one out of the ground, nobody will do it!!
The bottom line is we have already got all the cheap, easy oil out of the ground and now we are going after the hard to get and expensive oil. And the environmental damage we are doing to get that oil out of the ground will also dramatically increase. Here is a table from the Wikipedia page of the EROEI of various different energy forms. I’ve highlighted some you should notice.
So What? Why Should I Care About Peak Oil?
Economies are just like sharks, they must be moving forward or they will die. Every economy in the world depends on growth to survive. When an economy stops growing it can survive stagnation for a little while, but not for long. But a growing economy requires an abundance of cheap oil to run its machinery. That’s why we had such a huge economic boom in the late 80s and 90s, we were swimming in cheap oil! But as world production slowed and prices surged our economies slowed down. With the added burden of the housing collapse in 2008 and the recession that came with it the world was thrown into a global recession that we can’t shake.
At the end of the post I have a chart of the price of oil for the years 1983-2000. If you were alive and remember those days, the price of oil closely reflects the US economy. In the early 80s we had terrible inflation and recession when the price of oil was almost $30 a barrel. But in the 1990s we had boom years when the economy was amazingly strong and wonderful. During those years the price of oil was less than half that much. In 1998 at the peak of the “Clinton” economy, the price of oil was $11 a barrel!!!! We all give President Clinton the credit for that economy when in fact it was due entirely to the price of oil, and no President has any real control over the price of oil . Oil was so cheap then because the huge fields in the North Sea were fully on line and Alaska’s North Slope was still fairly strong at the same time. Both of them are in steady decline now.
While we are nowhere near running out of oil, the global production of oil will decrease year-after-year—just like what happened in the US in 1970. That inevitably leads to shortages, again, just like we had in 1970. But this time no one in the world will be able to increase production to pull us out of those shortages. They will just keep getting worse. The price of oil must continue to increase with that decline in production—the laws of supply and demand require it. But as the supply decreases, growing economies will demand more, and if they can’t get it they will stop growing. That will lead to continuous recession. BP Geologist DR. Miller makes this prediction for our future:
“In the US, high oil prices correlate with recessions … the economy declines as money is sucked into buying fuel instead of other goods and services… A shortage of oil will affect everything in the economy. I expect more famine, more drought, more resource wars and a steady inflation in the energy cost of all commodities.“
Here is what I see the world looking like for the near future and it is what I am preparing for:
- Continuous, ongoing recession.
- Continuing high unemployment.
- Gas prices will keep going up.
- Increasing inflation.
- No real growth in the economy.
- Inflation in the price of food.
That’s the way things have been for the last 5 years and does anyone see any reason that it should change for the better? Unfortunately, that is the good news. Civilization can’t go on for very long like that. After the fall of the Roman Empire the world quietly slipped into the Dark Ages, but today we have perfected the art of death and destruction and I don’t think there is going to be any going gently into that long good night—there is going to be a lot of raging against it!! In my lifetime, or certainly in the lives of my children, I expect to see:
- Serious wars over oil and water. Maybe even World Wars.
- Massive and global recurrences of the Great Depressions
- Dustbowls just like the 1930s.
- Mass starvation.
- Economic collapse.
- Government collapse.
I believe in a hundred years civilization will have collapsed and the man with a plow horse will literally be king.