Whistling Past the Gas Station

I started writing about peak oil in this space in 1999; the last time I wrote about it (if I can believe my own search engine) was May 2008. Why so quiet lately?

The recession. In that May 2008 post, I noted that Goldman Sachs was predicting an oil price of $200/barrel in 2010. But that was May 2008 and by Election Day of that year, the economy had solidly tanked, destroying demand for oil along the way. The price of oil today is around $77/barrel. Even Goldman Sachs gets a money question wrong once in a while.

What happens when (if?) the global recession ends and demand rebounds? Lloyd’s of London, the insurance market that has been the world’s leading authority on business risk for the past 300 years this month predicted “catastrophic consequences” for businesses that fail to adequately prepare for the effects of peak oil.

Lloyd’s and the UK’s Royal Institute of International Affairs jointly released the report, “Sustainable energy security: strategic risks and opportunities for business.”
The authors’ main points are:
* Businesses which prepare for and take advantage of the new energy reality will prosper – failure to do so could be catastrophic
* Market dynamics and environmental factors mean business can no longer rely on low cost traditional energy sources
* China and growing Asian economies will play an increasingly important role in global energy security
* We are heading towards a global oil supply crunch and price spike
* Energy infrastructure will become increasingly vulnerable as a result of climate change and operations in harsher environments
* Lack of global regulation on climate change is creating an environment of uncertainty for business, which is damaging investment plans
* To manage increasing energy costs and carbon exposure businesses must reduce fossil fuel consumption
* Business must address energy-related risks to supply chains and the increasing vulnerability of ‘just-in-time’ models
* Investment in renewable energy and ‘intelligent’ infrastructure is booming. This revolution presents huge opportunities for new business partnerships

Of course, there are a number of well-educated and well-paid people who fill the columns of business web sites with ridicule for the notion of peak oil. In the same post that mocks peak oil theory as “religion,” the author takes pains to write of “conventional oil.” “Conventional oil”? You know, the black stuff that’s pumped from the ground (or spews of its own pressure into the Gulf of Mexico).

The very fact that peak oil’s critics refer to “conventional oil” means we’re running out of it. The Bradford oil field, the world’s first, for decades provided all the lubricating oil for cars. Only that field – under northwestern Pennsylvania and southwest New York – had the high viscosity oil engines demand and so when it began to play out 20 years ago, synthetic motor oils had to be developed. The same is now true for “conventional oil.” We can no longer rely on the stuff that comes up as oil, we’re going to have to boil it out of tar sands and drill miles below the ocean floor and beneath arctic ice (while it lasts) for “unconventional oil.”

So, in a sense, everyone’s right. Yes, there’s oil out there to be had, at tremendous hassle and expense and damage to the environment. So yes, we can keep on with our oil-based economy and cheap plastic everything and NASCAR as entertainment – at a price. A price that will get higher and higher. A price of money and ecological havoc and blood spilled across the globe.

Yesterday, the body of the 11th Vermonter killed in the oil wars was returned home for burial. How many more?

© Mark Floegel, 2010

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