Running a real-time test of peak oil theory
October 13th, 2009 by Jim JustThose in the peak oil community – including this blog – have long been predicting that peak oil implies the end of economic growth as we have come to know it.
Global oil production has been on a plateau since late 2004 and – at least for the moment – appears to have peaked as of July 2008. As Sadad al Husseini has said, the economics of oil have broken down:
It’s not a matter of you throw a little money and you get a lot of oil; it’s now you throw a lot of money and you get a little oil.
In a speech at the 2009 ASOP International Conference in Denver, Richard Heinberg reiterates the economic consequences and points out they were predicted by the peakists:
As we all know, the global economy began contracting last year—though that’s just a nice, abstract way to put it. Industrial production fell. Corporations downsized or disappeared. Fifty trillion dollars in global capital vaporized in stock market crashes, bankruptcies, foreclosures, and defaults. Millions of people lost employment and housing. Globalization went into reverse.
Also, in 2008 the oil price spiked 50 percent higher, in inflation-adjusted terms, than at any point in previous history. It would be an enormous oversimplification to say that the oil price spike “caused” the world recession, but the fact that the price spike and the economic crisis occurred at the same time is hardly meaningless coincidence.
In effect, we are seeing a vindication of what many of us have been predicting for a long time.
Fossil fuel depletion is not the only physical barrier that we’re bumping up against. The climate change impacts that are beginning to be felt and a score of other indices of environmental decline show that energy limitations are only one of a number of limits to growth. As Dan Allen would put in Obama’s mouth:
We cannot have infinite wants on a finite planet. These were childish wishes.
Even after the crash, nobody is questioning the reality of our previous prosperity. The crisis was not sufficient to shake the current system; if anything, the grip has been tightened. We all seem to still be hoping that everything can return to the way it was. The dominance of the finance sector on the economy and our politics has not changed. We have poured trillions into propping up a growth-dependent financial system, when we desperately needed to instead begin building a social, political, and economic system that would allow to live as gracefully as possible while the human economy shrinks as a subset of the ecology.
Peak oil theory in its broadest formulation predicts that resource depletion means that growth is no longer possible. Global warming (and other “sink” impacts) mean that continued growth isn’t even desirable, as it would lead to catastrophic ecological collapse. We’re in the middle of a real-time test of both theories.