A Critical Look at Peak Oil Catastrophism

The phrase “the end of the world as we know it” has been uttered so often in the last decade that some Peak Oil advocates simply use its acronym, TEOTWAWKI. This awkward shorthand was once employed by Y2k catastrophists, and that heritage alone—the most unnecessary “sky is falling” panic in my lifetime—is enough to make me skeptical of the negativism embraced by many of my fellow Peak Oil believers. Peak Oil is as inevitable as death and taxes. But for every convert that Peak Oil’s doom-and-gloom extremism sweeps up, it alienates plenty of people who might otherwise climb down from their SUVs. Peak-Oil catastrophism’s repetition of doubtful facts and its sometimes muddied thinking betray a lack of critical analysis that discredits the Peak Oil movement. I’d like to delve into some of the errors and half-truths surrounding Peak Oil catastrophism, not as encouragement for those who want to party on blindly into the end of oil, which would be tragic, but as a way of refining and bolstering those arguments around Peak Oil that are valid.

There is no doubt that oil is running out. But to believe that it will surely bring the end of the world, you must believe that:

1. Our demand for oil is unchangeable and is not significantly affected by price.

2. We are so badly addicted to oil that we will watch our civilization collapse rather than change our behavior.

5. Significant oil conservation is not possible in the time frame needed.

4. Even with conservation, demand will be more than oil plus alternatives can possibly meet.

5. Society is so fragile that it cannot withstand large shocks.

These are the significant beliefs needed to be a Peak Oil catastrophist. Each is false. Let’s look at them.

The starting point for most Peak-Oil catastrophism is Hubbert’s curve. M. King Hubbert was a petroleum geologist who published papers in 1956(1) and 1974(2) showing that US and world oil production should follow a simple bell curve. He believed US production would peak around 1970, and world output around 1995, followed by a drop as steep as the rise. He offered no equations and little mathematical basis for his hypothesis, but showed data for the rising side of the US curve.

Hubbert’s US peak prediction was accurate, and the decline initially followed his curve. It has lately deviated significantly (see Figure 1). World production has not followed Hubbert’s curve since the late 1970s (Figure 2). Production levels for other countries have followed Hubbert’s curve in only 8 of 51 cases (Figure 3). (3) Those facts have not bothered the catastrophists, but some theories are so attractive it is hard to abandon them when facts disagree.

Falling Off Hubbert’s Curve

Let’s engage in a little critical thinking about Hubbert’s curve. Domestic oil production began to fall sharply around 1970. Why the steep drop? If we’re blinded by theory, we’d say “because supply dried up” and leave it at that. But a careful thinker must look for other explanations that may have an effect. There are several: A major oil spill off California in 1969, the first Earth Day in 1970, and many other events spawned a rise in environmental consciousness in the 1970s, and soon, public outcry forced the US to block off-shore drilling and other sources of domestic oil because they damaged our environment. The 1973 Arab oil embargo sent prices skyward, and Americans bought small cars and turned down thermostats, squelching demand and thus domestic production. And, the 1960s and 1970s saw both the rise of the multinational corporation and Britain’s retreat from its Middle-Eastern colonies, a combination that encouraged the oil majors to abandon US oilfields and to enormously boost Mideast operations, where regulations were lax, labor cheap, and supplies huge.

Thus the sharp fall in US production, while affected by the depletion of some easy-to-drill domestic deposits, had many other causes. Today, lapsed US oil leases are being bought back by the oil majors, who are developing these deposits with new techniques. Congress has re-authorized off-shore drilling, and US production has stopped falling. We’re not on Hubbert’s curve any more. To think that domestic oil production declined only because the US began to run out of oil in the 1970s is simplistic and ignores a strong drop in demand, while focusing wrongly on a much milder decrease in supply.

Price Dictates Demand

Oil production levels are shaped by more than supply. Price has an enormous effect, and production levels reveal that story. From 1960 to 1973, as oil prices declined, production ramped up by over 6% each year.(4) Then came the Arab oil embargo’s high prices, and production grew only 1.5% per year from 1973 to 1979. The world began to conserve. Prices rose further in 1979, and production growth slowed again, to 0.75% per year and below, where it has remained since. In other words, we cut our annual growth in oil use by 87.5% in about 6 years (1973 to 1979) and kept it down, which shows how malleable, and sensitive to price, oil consumption levels are.

Catastrophists use scary statistics like “if world oil consumption increases by only 5% per year, we’ll use all the world’s oil in 15 years.” Since world consumption has grown only 0.75% per year for 25 years, it is irresponsible to pretend such inflated numbers are likely.

Per-capita energy use is cited by some catastrophists, such as geologist Richard C. Duncan,(5) as a measure of our plight. They note, correctly, that per-capita use has begun to drop world-wide, and they leap to the conclusion that this can only mean we’re headed back to the Stone Age: Less oil per person must be just like less food or money per person, so civilization is going to end, this sloppy thinking goes. However, US oil consumption per capita has declined substantially since 1979 and we’ve got more toys than ever. From 1979 to 2003, our economy grew by more than 100% and population by 30%, but US oil use only rose by 9%, or 0.25% per year. Per capita oil use declines not just due to supply tightening, but more importantly because we now use vastly less energy to get the same results—a major, very positive reason ignored by catastrophists. The lesson, again: Don’t stop thinking at the first explanation that comes to mind.

In 1973, US cars averaged 13 miles per gallon (mpg). In the wake of price increases, mpg shot up to 24 by 1981, a near-doubling in 8 years.(6) Prices have been steady or lower since then, and average mpg has been unchanged (there’s that tight link between price and consumption again). Higher prices reduce demand, and they spur us to make more efficient use of oil, further slowing demand. That double damping of demand can buy a lot of time to retool.

We currently have technology that can double or quadruple gas mileage, and as prices rise, we’ll use it broadly and consumption will drop, stretching out the right side of Hubbert’s curve substantially. We’ve already shifted the curve in the US, by doubling gas mileage and slowing our increase in oil use from 6% a year to 0.25%. And most of the developed world has conserved better than we have.

The following statement, typical of that on many Peak-Oil web sites, reveals a sad lack of economic knowledge: “[Hubbert] also predicted global production would peak in 1995, which it would have had the politically created oil shocks of the 1970s not delayed the peak for about 10-15 years.”(7) But that’s precisely the point: Price increases dramatically reduce demand, and extend the number of years of oil reserves left. And high prices don’t just make us look for alternatives; overall energy use declines as we conserve. The right side of Hubbert’s curve gets longer each year.

Thus beliefs one and two above, that prices don’t affect consumption, and that we’d rather watch civilization collapse than change our habits, aren’t true.

A Just-in-Time Species

Humans are activated by crisis, and often do little until it arrives. We waffle and deny as a bad situation builds, such as during Hitler’s repeated aggression in Europe in the late 1930s. Then we pass a trigger point and leap into all-out efforts; we are galvanized into war or its equivalent. Look at aircraft production in World War Two: In 1939, the US built 180 airplanes per month.(8) In 1940 we made 1600 each month, and by 1944, 8000. That’s a 4500% increase in 5 years. I’ve not heard any White House statements about “the war on oil dependence,” but when they come, I am certain we’ll make a similar effort, even if it is one of learning to make less rather than more.

Warnings about Peak Oil abound, but catastrophe enthusiasts believe that since few are heeding the warnings now, society won’t do anything until it’s too late, and will collapse. Yet already, the major oil companies are running full-page ads about Peak Oil. Ford is hyping hybrid cars, sales of which are skyrocketing. General Motors’ Washington spokesperson says we must move away from petroleum. Toyota is lobbying lawmakers to make energy independence and multiple energy sources an election issue. SUV sales are way down. We are already reacting, and each bit of conservation now buys us more time in the future. Hubbert’s curve is broadening.

Though we have slowed the growth of oil consumption, we still consume more each year. Can we consume less? And how much would consumption need to drop to avoid disaster? Here are some numbers.

In 1965, world oil production was 12 billion barrels. It may peak soon at 30 billion. Estimates project that in 2040, production will have slipped to 12 billion barrels—back to 1965 levels. To descend to that point would require a drop in consumption of 2.2% per year for 35 years. Can we do this? I think so. From 1973 to 1975, and again from 1979 to 1983, consumption fell by roughly this much per year. When prices fell, consumption rose again. For a glimpse of the future, note that when gasoline prices briefly spiked 30% due to Hurricane Katrina, US usage dropped 6% over two weeks. Saving 2.2% each year is well within reach.

Price and demand are tightly linked. We change our behavior dramatically when prices rise. Those are basic facts that Peak-Oil catastrophism ignores. China and India may be industrializing, but they are doing so into an era of expensive oil. Their relatively low per-capita income means most people there cannot afford much oil. This will make economizing and conservation unavoidable, and these countries’ attempt to mimic Western profligacy may simply be choked off as their own demand forces prices to rise.

Can we conserve enough to make a difference? Energy consultants such as Amory Lovins point out that as much as 90% of the resources and energy used by manufacturers and power plants are wasted. The cheapest way to make more oil available is to insulate, use lighter materials, and otherwise conserve. Simply doubling gas mileage would reduce oil consumption by 25%, shifting Hubbert’s curve far to the right in a single action. We could easily reduce oil use by 50% with no change in our standard of living, just by simple conservation. And 70-80% reductions are well within reach.

Catastrophists often point to all the other incipient disasters we face besides Peak Oil—global warming, aquifer depletion, soil loss, active volcanoes near cities, killer storms—and say “Take your pick; one of them is bound to get us.” They underestimate the resilience of culture and ecosystems. If we recite the list of disasters just in the US in the last 25 years they seem terrifically daunting: A series of Class 4 and 5 hurricanes, the eruption of Mount St. Helens, years of surging inflation, a stock market crash, two major earthquakes in California, huge floods, September 11, a stolen election or two, multi-state blackouts, the destruction of New Orleans—and yet the US, and the world, stumble along somehow.

Adaptive and Complex

Cultures and ecosystems are incredibly resilient because they are made of large numbers of loosely coupled, compartmentalized sub-systems. One or more compartments—such as a chunk of the power grid—can go down, but in response other components ramp up or down and otherwise adjust, and the whole system re-stabilizes at a new, or often the same, level. Hurricane Katrina illustrates this. We lost up to 30% of our oil and gas production, and a major city, overnight. Petroleum prices spiked, but other compartments in the system compensated, and gasoline prices quickly settled and slipped to below their pre-Katrina levels. Natural gas, more difficult to ship, with many sources still off-line, has not fallen in price since Katrina. If its price stays high, we’ll see conservation measures such as insulation and better windows, and a shift to other fuels, including a demand for more nuclear power (a move I don’t relish but view as inevitable). And we’ll see a drop in natural gas demand, some of which will be made up by other sources, but some will simply disappear due to higher efficiency and an adaptive cultural ecosystem that shifts its emphasis to more effective strategies.

Everything may be connected to everything else, but only loosely. Scenarios of a lock-step march to disaster betray a poor understanding of the complexity, loose linkage, and resilience of global systems.

If oil were to disappear overnight, we’d be in big trouble. But we have 35 years to gradually descend merely to 1965 levels of consumption. Nineteen-sixty-five wasn’t so bad. Even though world population is greater, energy efficiency increases are greater still. We are an adaptable species—it is our hallmark trait—and the world will change much in 35 years. My bet is on the hairless monkey.

Peak-Oil catastrophists have performed an important service by scouting out the worst parts of the terrain ahead, and by being noisy enough to have alerted many complacent people to the possibilities we face if we act stupidly. And my own scenarios aren’t exactly rosy. Even if we conserve, even if China builds more one-cylinder cars and we all have only one child, the end of the oil age is going to be rough. Worldwide depression and soaring unemployment are almost inevitable as oil gets expensive. Yet even that very dark cloud is lined with silver. Depression, by definition, is a shift from economic growth to contraction, and that in itself means less oil consumption. More importantly, a culture addicted to economic growth will find its absence painful at first, but the end of “bigger is better” can leave room for other types of growth where value is not measured in money: cultural, artistic, intellectual, social—all those things that our crude fixation on economics as the centerpiece of life tends to destroy.

High unemployment could be transformed into fewer people making, buying, and needing to earn money for unnecessary widgets; spending less time at jobs they hate; and producing, alone and in community, a larger share of what they actually need—which does not take 40 or more hours a week. It is an opportunity for the role of economics in our lives to shrink, and for an expansion of time for the many things money cannot, or should not, buy.

Humanity has reached the stage, finally, where basic survival is not in doubt for many people. We have not yet grasped that the struggle for survival is essentially over, and we have overshot. Instead of noticing that as a species we no longer need to labor all our waking hours for the basics of food and safe shelter, and to fight off disease and predators, we cannot get off the survival treadmill. So we just keep making more stuff, rather than looking up, taking a breath, and enjoying all the wonders possible from being a conscious, intelligent animal that has mastered survival. Perhaps Peak Oil, and a return to a time when resources are dear and labor is abundant, will remind us that there is much more to life than the manufactured desire to have more toys. Perhaps we can lose our small-minded obsession with getting and spending, and finally grow into maturity as a species.

References

1. Hubbert, M. King, “Nuclear Energy and the Fossil Fuels,” Drilling and Production Practice, 1956.

2. Hubbert, M. King, U.S. Energy Resources, A Review As Of 1972. 1974

3. Campbell, C.J., The Essence of Oil & Gas Depletion, 2003.

4. Oil production numbers from US DOE and Energy Information Administration.

5. Duncan, Richard C., The Peak of World Oil Production and the Road to the Olduvai Gorge. www.hubbertpeak.com/duncan/

6. US EPA.

7. www.lifeaftertheoilcrash.net/

8. American War Library.

Copyright 2006 by Toby Hemenway