ENERGY: Making Sense of Peak Oil and Energy Uncertainty by Daniel Lerch

8/4/2019 ENERGY: Making Sense of Peak Oil and Energy Uncertainty by Daniel Lerch

http://slidepdf.com/reader/full/energy-making-sense-of-peak-oil-and-energy-uncertainty-by-daniel-lerch 1/7

The Post Carbon Reader Series: Energy

Making Sense of Peak Oil

and Energy UncertaintyBy Daniel Lerch



About the Author

Daniel Lerch is the author of Post Carbon Cities:

Planning for Energy and Climate Uncertainty (2007),the first major guidebook for local governments on

peak oil and global warming. He has delivered presenta-

tions and workshops to elected officials, planners, and

other audiences across the United States, as well as in

Canada, the British Isles, and Spain. Lerch is Program

Director of Post Carbon Institute.

Post Carbon Institute

© 2010

613 4th Street, Suite 208

Santa Rosa, California 95404 USA

This publication is an excerpted chapter from The Post Carbon Reader: Managing the 21st Century’sSustainability Crises, Richard Heinberg and DanielLerch, eds. (Healdsburg, CA: Watershed Media, 2010).For other book excerpts, permission to reprint, and

purchasing visit http://www.postcarbonreader.com.

http://www.postcarbonreader.com/

http://www.postcarbonreader.com/



MA SESE O PEA OL AD EER UCERTAT

1 TE POST CARBO READER SERES

For over 65 years we have designed our communities

for oil. We’ve built nearly 47,000 miles of high-speed

Interstate highways, a vast continental network for

fuelling and servicing gasoline-powered vehicles, and

millions upon millions acres of car-dependent suburbs.

This gargantuan legacy of long-term investments has

all been made with the assumption that the petroleum

fuels which make the whole system work will be avail-

able and affordable for the foreseeable future

But global trends of oil supply and demand are chang-ing to such a degree that this assumption is no longer

realistic. Far more than a problem of higher prices at

the pump, the quickly emerging new energy reality

has enormous implications for just about every aspect

of our lives. Forward-thinking households, businesses,

and governments are now rushing to plan for an

unprecedented energy crisis, the first phases of which

we are already experiencing.

What lies behind this 21st century energy crisis? Why

can’t we rely on the market to x a problem that is ulti-mately about supply and demand? To make sense of

what’s going on, we rst need to understand some of the

basics of how we harness and use energy, and the limita-

tions of the various energy resources available to us.

Supply and Demand

Our supply of cheap, easy-to-extract “conventional” oil,

from places like the flat plains of Texas and the des-

erts of Saudi Arabia, is at or near permanent decline1;

the remaining “unconventional” oil, from places like

the tar sands of Canada and the depths of the Gulf of

Mexico, is increasingly difficult to find, extract, and

refine. At the same time, global demand for petro-

leum is sky-high at 85 million barrels per day—twice

as much as in 1969. That’s a lot of oil to keep pouring in to the pipelines to meet “business as usual” needs, let

alone to meet new demand from growing countries like

China and India.

With the conventional oil dwindling and the uncon-

ventional oil that’s replacing it increasingly problem-

atic, there will inevitably come a point at which the

flow of oil from the wells and the refineries wil l simply

be unable to keep up with global demand. The point at

which total global oil production cannot grow any fur-

ther and begins its permanent decline is known as “peakoil,” a term that was hardly known outside the petro-

leum geology field as recently as 2004 but is rapidly

attracting attention and concern. A growing number of

analysts and government agencies are acknowledging

that we will have reached peak oi l by 2015, if we haven’t

reached it already.2

The new energyreality has enormous

implications forjust about everyaspect of our lives.





A Big Problem

None of this would be a real concern if the product

in question were a market commodity like soybeansor pork bellies: Demand and supply would find a new

equilibrium without fundamentally threatening the

global economy. Oil, however, is unlike any other com-

modity in four important ways.

First, oil is absolutely essential to the most basic func-

tions of the industrialized world. Oil is the key raw

material for gasoline, diesel, jet fuel, home heating

oil, industrial oils, many chemicals, and most plastics.

Many key industries are wholly dependent on oil in

multiple forms; for example, the modern global food production and distribution system uses oil as a fuel

for farming and transportation, and as a raw material

for agrochemicals. Instability in oil supply and price

has serious potential consequences for virtually all sec-

tors of the global economy, particularly transportation,

agriculture, and manufacturing.

Second, there are currently no viable substitutes for oil

at current rates of consumption. Although alternatives

to oil do exist for many of its uses, they are generally

vastly inferior to oil in their energy content and in the

ease of which they can be extracted, transported, and

turned into a commercially-useable fuel. “Net energy”

or “energy returned on (energy) invested” (EROI)

refers to the ratio between the energy expended to har-

vest an energy source and the amount of energy gained

from that harvest. All alternative fuels have worse

EROIs than conventional oil, and some have such poor

net energy that they are practically useless to manufac-

ture (see Chapter 18). Even other conventional energy

sources—especially coal, natural gas, hydropower, anduranium—face serious constraints as potential replace-

ments for oil as our dominant fuel.3

Third, the modern world’s complex inter-firm and

inter-governmental economic relationships, made up

of movements of raw materials and goods across the

globe, very much depend on the price and availability

of oil being relatively predictable. If the price of oil

becomes very high or very volatile, or both, the global-

ized economy as a whole will face fundamental chal-

lenges.4 Indeed, the threat of peak oil is already creating

change and uncertainty in diverse sectors of the g lobal

economy: As oil prices surged above 15-year highs after

2004, beef prices rose rapidly in part because the high

energy prices (together with new federal subsidies)

spurred farmers to sell more corn to ethanol producers

and less to cattle feed lots—a chain of events that few

predicted.5

More worryingly, during the oil price spikeof 2008 it became apparent that much of the airline

industry simply can’t survive in a world of $110+ oil.6

Finally—and in part a result of the previous three qual-

ities—oil is such an intrinsic part of how our world

works that the “invisible hand of the market” is sim-

ply unable to deal adequately with the threats posed

by peak oil. As a 2005 report on peak oil for the U.S.

Department of Energy observed:

Mitigation will require a minimum of a decade

of intense, expensive effort, because the scale of

liquid fuels mitigation is inherently extremely

large... Intervention by governments will be

required, because the economic and social

implications of oil peaking would otherwise be

chaotic.7

Modern oil projects take a lot of money (billions) and a

lot of time (years) to bring from pre-discovery to liquids





in the pipeline. As oil prices go up, markets (and oil-

producing countries) respond by putting more money

into exploration and production. But the combination

of the exploration-to-production lag time, the enormous

nancial risks on big unconventional oil projects, imper-

fect information on international oil reserves, and other

factors means that the private sector has not yet seen the

incentives (and indeed, may never see them) to respond

at a sucient scale to the peak oil threat.8

Clearly, peak oil is much, much more than a problem

of higher fuel prices. In Post Carbon Cities, I used the

term “energy uncertainty” to collectively describe the

wide and growing range of economic and social uncer-tainties that are being driven by peak oil. In a similar

way, global warming is driving a wide and growing

range of economic, social, and of course environmen-

tal uncertainties, which I collectively termed “climate

uncertainty.” Energy and climate uncertainty is an

important joint frame for understanding and approach-

ing the these two crises because our responses to one

inevitably affect the other.

What Can Be Done?The private sector is limited in the degree to which

it can respond to energy uncertainty. Governments

have been slow to recognize the problem, and will be

unlikely to respond decisively until economic condi-

tions worsen severely. Although energy uncertainty is

difficult to address even at scale of our largest govern-

ments and businesses, it is essential that public and pri-

vate sector decision-makers be educated rapidly about

the realities of peak oil, and what the possible responses

are. The other chapters in Part Eight (Energy) of this

book provide a basic overview of this information:

Chapter 17 on the remaining fossil fuel resources in

North America, Chapter 18 on the many challenges of

developing alternative energy sources, and Chapter 19

on the ramifications of peak oil for the economy.

Portions of this chapter originally appeared in Daniel

Lerch, “Post Carbon Cities: Planning for Energy and

Climate Uncertainty,” (Sebastopol, CA: Post Carbon

Press, 2007).





Endnotes1 lobal discoveries of conventional oil peaked in the 1960s

and are uniformly expected to continue declining, thus

the future of conventional oil production is relatively

straightforward to forecast. ndeed, practically all analysts

(including the major oil companies) agree that conventional

oil production will be in permanent decline by 2015 at the

latest.

2 Terry Macalister, “US Military Warns Oil Output May Dip

Causing Massive Shortages by 2015,” The Guardian, April

11, 2010. Richard einberg, “Quacks Like a Duck,” March

29, 2010, http://www.postcarbon.org/blog-post/85699-

quacks-like-a-duck. U ndustry Taskforce on Peak Oil &

Energy Security, “The Oil Crunch: Securing the U’s Energy

uture,” October, 2008, http://www.peakoiltaskforce.net .

3 or an in-depth exploration of the net energy constraints

of both renewable and non-renewable fuels, see Richard

einberg, Searching for a Miracle: ‘Net Energy’ Limits & the

Fate of Industrial Society, (San rancisco: nternational orum

on lobalization, 2009).

4 Robert irsch, et al. “Peaking of World Oil Production:

mpacts, Mitigation, & Risk Management,” (Washington,

D.C.: U.S. Department of Energy, 2005), 4.

5 Andrew arrell, “Ethanol Demand Burns Meat Producers,”

Forbes, March 9, 2007.

6 See “The PL Timeline of Airline Bankruptcies, Mergers,

Acquisitions, and iascos” in oward Lichtman, “The Crashof Commercial Aviation and Telepresence,” September 8,

2008, http://www.telepresenceoptions.com/2008/09/

the_collapse_of_commercial_avi/.

7 Robert irsch, et al. “Peaking of World Oil Production:

mpacts, Mitigation, & Risk Management,” 5.

8 umerous books and studies describe these market-

limiting factors; one recent summary is Phil art and

Chris Skrebowski, “Peak Oil: A Detailed and Transparent

Analysis,” Energy Bulletin, May 30, 2007, http://www.

energybulletin.net/node/30537. or discussion on the more

recent development of price constraints on oil production,

see Richard einberg, “oldilocks and the three fuels,”Reuters Environment orum, ebruary 18, 2010, http://

blogs.reuters.com/environment/2010/02/18/goldilocks-

and-the-three-fuels/.

Photo CreditsPage 2, 280 and US101 interchangecbna topherous.

mages markedc are under a Creative Commons license.

See http://creativecommons.org .

AcknowledgmentsCover art by Mike ing. Design by Sean Mcuire. Layout by

Clare Rhinelander.

http://www.postcarbon.org/blog-post/85699-quacks-like-a-duck


http://www.peakoiltaskforce.net/

http://www.telepresenceoptions.com/2008/09/the_collapse_of_commercial_avi/


http://www.energybulletin.net/node/30537


http://blogs.reuters.com/environment/2010/02/18/goldilocks-and-the-three-fuels/



http://creativecommons.org/

http://creativecommons.org/








http://www.peakoiltaskforce.net/





T : www.p./9780970950062

For a 20% discounT use This source code: 10M9071

(p t t t p tt x.)

T Pt crManaging the 21st Century’s Sustainability Crises

et y richard heinberg daniel lerch

In the 20th century, cheap and abundant energy brought previously

unimaginable advances in health, wealth, and technology, and fed

an explosion in population and consumption. But this growth came

at an incredible cost. Climate change, peak oil, freshwater deple-

tion, species extinction, and a host of economic and social prob-lems now challenge us as never before. The Post Carbon Reader

features articles by some of the world’s most provocative thinkers

on the key drivers shaping this new century, from renewable energy

and urban agriculture to social justice and systems resilience. This

unprecedented collection takes a hard-nosed look at the intercon-

nected threats of our global sustainability quandary—as well as the

most promising responses. The Post Carbon Reader is a valuable

resource for policymakers, college classrooms, and concerned

citizens.

r h is Senior Fellow in Residence at Post Carbon

Institute and the author of nine books, including The Party’s Over

and Peak Everything. d l is the author of Post Carbon

Cities.

Published by Watershed Media

PUBLISHED FALL 2010

544 pages, 6 x 9“, 4 b/w photographs, 26 line illustrations

$21.95 paper 978-0-9709500-6-2

Date post:	07-Apr-2018
Category:	Documents
Upload:	post-carbon-institute
View:	220 times
Download:	0 times

ENERGY: Making Sense of Peak Oil and Energy Uncertainty by Daniel Lerch

Documents