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As James Kunstler so eloquently says:

The Peak Oil story was never about running out of oil. It was about the collapse of complex systems in a world economy faced by the prospect of no further oil-fueled growth. It was something of a shock to many that the first complex system to fail would be banking, but the process is obvious: no more growth means no more ability to pay interest on credit… end of story, as Tony Soprano used to say.
The last desperate act of the banking system in the face of Peak Oil’s no-more-growth equation was to engineer species of tradable securities that could produce wealth out of thin air rather than productive activity.

This was the alphabet soup of algorithm-derived frauds with vague and confounding names such as credit default swaps (CDSs), collateralized debt obligations (CDOs), structured investment vehicles (SIVs), and, of course, the basic filler, mortgage backed securities. The banking system is now choking to death on these delicacies.”

Peak Oil Basics

What is Peak Oil?

The term Peak Oil refers to the maximum rate of the production of oil in any area – from a single oilfield, to a region or country, or more commonly the total global oil output, recognising oil is a finite natural resource, subject to depletion.

Generally, most discussions refer to peak oil in the context of the total global oil output, so the term usually refers to the point in time when oil production will be (or was) at its peak for the world as a whole.

The US has already had its domestic oil production peak event in 1970 (as was accurately predicted by Hubbert in 1956 based on straighforward analysis of reserves, production volumes and consumption rates). Essentially global peak oil is the result of a given field, country or region hitting their own peaks, which they always do (many already have).

When will Peak Oil occur?

The consensus ranges between 2005-2008 i.e it has already happened to 2020, the IEA’s ( International Energy Authority) estimate in early 2009.

Production figures indicated the approx 84 million barrels per day of oil field derived oil (i.e. excluding agricultural methanol) produced during 2005-2008 is the peak production there ever will be. (The US used  approx. 24 million barrels per day before the 2008 crash.)

Note: the IEA’s forecast for 2009 is for total oil production to fall by 6.7%, which suggests peak oil has already occurred.

You can Google “peak oil” and find a whole range of sites of the subject, including:

• www.peakoil.net
  • operated by ASPO: The Association for the Study of Peak Oil & Gas
• www.theoildrum.com
• www.lifeaftertheoilcrash.net -
  • operated by Matt Simmons a reknowned commentator

Then there’s a range of sites essentially saying “what’s the problem”, the hydrogen car / methanol from weeds / palm oil / gerbils on steroids / choose a new technology will fill the gap.

So What’s The Big Deal With Peak Oil?

The key point to understand with peak oil is that modern, western civilisation is almost completely dependent on oil in 2 ways:

1. The cheap, portable and high density energy provided by oil e.g. for transportation, heating and power generation

and

2. It’s value as a raw material (e.g. for plastics, lubricants, fertilizers, pharmaceuticals and a myriad of other products).

Fighting Over A Declining Resource

Whereas oil availability will soon start declining, world population and consumption is increasing. This means the impact of a reduction in oil availability will be greater, because more people will be competing for their share of a dwindling resource.

Historically, this situation has always led to wars, for example Iraq.

Ironically, as the availability of oil declines, the ability of nations to wage wars over it will progressively reduce (modern warfare is very oil intensive). Also, as oil supplies continue to reduce, our ability to repair and rebuild after war will diminish (take a look at an average construction site to see how dependent it is on oil).

Anyway, because oil is such a valuable and essential material in industrial society, shortages will have a massive impact on the economy and society as a whole. Almost everything we accept as normal is dependent upon cheap and freely available oil. When the oil stops, society stops.

Oil is ridiculously cheap given its value to society and yet we waste it so profligately.

Suggested Actions:

1. Peak oil and the resultant “energy descent” is likely to arrive soon now, but don’t just take what’s here as gospel, do your own research and find out for yourself what the impact of peak oil will be.
2. Plan for how you can cope with less fuel, or very expensive fuel. If you have to drive a long to get anywhere from where you live, life could get very dificult when oil gets scarce.
3. Consider locations where public transport is available, especially rail.
4. Learn about growing your own food (modern agriculture is hugely dependent upon oil)