A surprising variety of knowledgeable people are worrying about peak oil: Petrobras, for example, the Brazilian state oil company. The International Energy Agency. Sir Richard Branson, founder of the Virgin Group. The City of Bloomington, Indiana. The chairperson of Total Oil.
Will peak oil happen this year? In five years? Or ten? OPEC says there is nothing to worry about. But according to Richard Heinberg of the Post Carbon Institute, non-OPEC world oil production peaked six years ago. That, in turn, had a lot to do with the current (recent?) economic crisis. For the past half-century, oil price hikes have always been followed by recession. The 2004 oil production peak was quickly followed by a surge in oil prices, topping out at $145/barrel in 2007. What happened to the economy in 2008?
Heinberg predicts that we’re in for a lot more of this, with reams of statistics to back him up. He says that the oil industry is now stuck in a “Goldilocks dilemma”:
- The oil price needed for development of new oil production capacity is $60 to $70/barrel, and rising; but
- The oil price likely to trigger recession is about 4% of the economy, currently $80/ barrel, and
- Peak oil will make oil prices highly erratic, but rising over time.
- Oil closed above $81 again this week.
Thus, Heinberg predicts a very challenging economic future for the oil-dependent, jerking in and out of recession as oil prices soar and plunge. Developing countries will produce more oil, but use more of it at home. He expects the economics of other fossil fuels to be much the same, despite the current glut of natural gas. Even coal is tied to the price of oil, because 70% of the delivered price of coal is the cost of transport, typically fueled with diesel.
What will peak oil change? Like many others, Heinberg predicts the end of:
- cheap air travel;
- cheap food; and
- endless growth in GDP.
On the other hand, Heinberg believes that getting serious about peak oil (and other limits to growth) can give us an opportunity for better lives: less stuff, but more community; fewer plastic tomatoes in January, but better local, seasonal food; less travel, more happiness. He’s a big fan of serious encouragement for renewable energy, such as our Green Energy Act, and calls on all of us to become more resilient.
Besides, if we had another hundred years of oil, we’d probably burn it all, and then what would happen to climate change?