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The Slope of Dysfunction
by Dmitry Orlov
27 June 2009
Editor's note: Culture Change has made the claim for almost two decades
that collapse of the whole petroleum infrastructure and the economy was closer
than any other known oil-industry analysis suggested. For example, we have
politely corrected Dr. Colin Cambell's claim that the "second half of the Age of
Oil" was going to be the result of peak oil. Now, Dmitry Orlov has made the most
clear case yet that petrocollapse is rather imminent. - Jan Lundberg
Perhaps you have heard of the Peak Oil theory? Most people have by now,
even the people whose job used to involve denying the possibility that global
crude oil production would peak any time soon. Now that everybody seems a bit
more comfortable with the idea, perhaps it is time to reexamine it. Is the
scenario Peak Oil theoreticians paint indeed realistic, or is it firmly grounded
in wishful thinking?



Here is a typical, slightly outdated Peak Oil chart. I chose it because it
looks pretty and conveys the typical Peak Oil message, which is that global
crude oil (and natural gas condensate) production will rise to a lofty peak
sometime soon, and then drift down gently, over several decades, until, by the
year 2050 or some other distant date, less than half as much oil will be
produced globally. Since this would still be a very impressive number, and since
we have decades to adjust to living with half as much oil, this would not
necessarily pose a major problem. Some combination of new energy from wind,
solar, biomass and nuclear sources, coupled with efficiency improvements such as
light rail and electric cars, better-insulated buildings and so on, would allow
us to plug up the gap.

Peak Oil theorists base their calculations on data from the many
oil-producing provinces that have already peaked, such as the United States,
which peaked in 1970. The majority of oil-producing provinces and countries are
past peak now, providing the theorists with a wealth of precise data. But they
seem to have overlooked one little detail, which, I believe, is rather
important. What do countries do when they reach their peak and can no longer
supply themselves with sufficient quantities of oil from their depleting
domestic sources? They turn to imports, of course. They can do so if their local
peak comes before the global peak; they cannot do so if it comes after. This
makes local peaks poor analogies for the global peak.

And what happens if a country cannot import oil to make up for the
production deficit? It just so happens that we have a convenient example of just
such a scenario unfolding: post-Soviet oil production after the collapse of the
USSR. There, production declined 43% between 1987 and 1996. The decline was
arrested and reversed by the introduction of foreign investment and technology
(Source: Marek Kolodziej and Doug Reynolds, ASPO Workshop, Lisbon, Portugal, May
19. 2005).



Note how just around the time of the collapse oil production goes into
free-fall, which is only arrested in mid-1990s. Had the Former Soviet Union
remained economically isolated, the free-fall would have continued. Kolodziej
and Reynolds drew some interesting conclusions based on these data. Firstly, the
crash in oil production preceded collapse in USSR's Gross Domestic Product. The
lag time between the two, and the severity of the collapse are clear enough to
ascribe causality: to say that the oil crash caused the economic collapse. On
the other hand, coal and natural gas production, which also crashed, did so
after the GDP collapsed, again, with a significant enough lag time to say with
confidence that it was economic collapse that caused coal and gas production to
crash.

What actually happens to an economy and a society under such
circumstances? With oil in short supply, industrial production plummets, the
economy stalls, there is a financial crisis because of debts going bad, followed
by a commercial crisis because of falling demand and lack of credit, followed by
political collapse caused by dwindling government revenues, followed by social
collapse as unemployment rises and crime becomes rampant. After a while of this,
the idea of you and your friends going out to the oil field and pumping some
more oil starts to seem rather odd, and so oil production heads to zero.

The global oil peak is different from all the little localized peaks in
that the planet as a whole cannot import its way out of an oil shortage,
resulting in a global economic collapse. The economic collapse will, in turn,
cause global oil production to crash even faster, extinguishing the industrial
economy.

It seems possible that certain countries which are currently oil exporters
might be able to keep the oil flowing, provided they have nationalized their oil
production and are sufficiently authoritarian and militarized to quell any
unrest. But modern oil production is a technically complicated business (the
easy-to-get-at oil is all gone) while the field service equipment and parts
delivery system is fully globalized and exceedingly complex. Shocks to any part
of the global economy are very likely to disrupt the whole before too long.
Nevertheless, it seems likely that some countries will be able to keep their
military supplied with fuel, until enough of their equipment wears out.

What, then, of our canonical Peak Oil scenario, which is that global crude
oil (and natural gas condensate) production will rise to a lofty peak sometime
soon, and then gently waft down, over several decades, until, by the year 2050
or some other distant date, less than half as much oil will be produced
globally? Ever eager to present a hopeful vision, I will say here and now that I
believe this scenario to be entirely plausible... but it requires alien
intervention. As Russian oil production was saved by foreigners, so Earthling
oil production must be be saved by aliens from outer space. Here's an updated
Peak Oil slide:



Although we have absolutely zero data on which to base this assumption, we
must assume that oil production throughout the rest of the universe has not
peaked yet. Further, we must assume that interstellar vessels will deliver this
oil to Earth in a timely manner, making up for any planetary production
shortfall before Earth's economy collapses. Further, since Earth has few
resources to trade for this oil, let us assume that the aliens will be happy to
give us their oil in exchange for a truly excellent recipe for brioche à tête
which (for reasons we should find intuitively obvious) no-one in the rest of the
universe has been able to perfect.

* * * * *

The above article came from Dmitry Orlov's blogsite Club Orlov, dated June
25, 2009. He has written several articles for Culture Change and the Sail
Transport Network. Use our Search mechanism to find them!




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