ONE TOWN SQUARE: at the intersection of peak oil, climate change, and land use

Sharon Astyk has written a boffo piece about the significance of  the IEA’s leaked conclusion that the decline rate of existing fields is 9.1%. I mentioned it here, but Astyk has said it better, with clarity and power. I guess that’s why she’s a famous blogger, and I’m not.

Earlier this week, the Financial Times leaked the International Energy Agency’s figures that show the rate of decline in production of the 400 largest oilfields in the world. They concluded that without massive increased investment, the annual decline will be 9.1%. What’s this mean? Astyk quotes Richard Heinberg:

“Considering regular crude oil only, this means that 6.825 million barrels a day of new production capacity must come on line each year just to keep up with the aggregate natural decline rate in existing oilfields. That’s a new Saudi Arabia every 18 months.”

Astyk points out that not only have we already used up most of the easy oil, we’ve used up most of the best quality oil. Replacing oil with renewable energy sources will itself require oil and money – at the same time both of these are becoming scarcer and more precious.

We’re in a fix. The only point about which I would quibble is her warning that “we’re probably going to have to make do with a lot less.” I would leave out the “probably.” But as she says, “the good news is that that’s not such a bad thing.”

She concludes by demanding we bravely and honestly confront the challenges we face.

“Maybe we won’t have all the energy we want, but we have the courage to live differently.  But before we can meet that challenge, we have to know what we’re facing.”

The six nations that make up the Gulf Cooperation Council (GCC) – Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates – have profited handsomely over the last several decades, trading oil for dollars. The wealth held by GCC millionaires is projected to shoot up by more than 50% to around $3.8 trillion by 2012.

How much of this “wealth” is illusory?  How much of it has disappeared, how much of it will disappear in the ongoing global financial collapse? Keep in mind: the bundling of consumer loans and home mortgages into packages of securities – a process known as securitization – was the biggest U.S. export business of the 21st century. More than $27 trillion of these securities have been sold since 2001, toxic junk that infected financial systems around the world. These are now blowing up. Who knows what they’ll ultimately prove to be worth.

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Seems like everybody’s on board with “drill baby drill” as a way to lower gasoline prices. The only questions are whether any environmental protections at all will be left in place or whether oil companies will have to surrender any of their current tax breaks.

This despite what everybody knows: even under the most optimistic scenario, drilling the OCS will not materially impact oil supplies for a decade or more. The U.S. Energy Information Administration forecasts that these areas might provide 200,000 barrels/day by 2020 – around 2% of our current consumption, or as much as we use every 15 minutes.

Randy Udall and Steve Andrew of ASPO-USA have posted this graphic at The Energy Bulletin:

click to view image

We can see that the areas with by far the most oil are already open to drilling.  Closed areas might hold up to 19 billion barrels of oil, but those barrels are prospective, not “proven.” The history of exploration in even the most promising areas includes a history of disappointment.

As Udall and Andrew caution,

“There’s probably some oil there, somewhere, but it is a decade or more from market. In short, hope is one thing, hype another, and both must be seasoned with a strong dose of reality.”

What oil we do have remaining is much too precious to burn wastefully to move our cars around.

An article in Low-tech Magazine asserts we could reduce global fuel consumption by 75% or even more by simply lowering transportation speeds – today, at minimal cost, and with present technology.

With transportation, air resistance (drag) is the main culprit. Drag increases with the square of speed, and therefore the power needed to push an object through air increases with the cube of the velocity.

Weight is important, too. Faster cars require bigger, heavier engines. It takes more energy to push that additional weight around. Then safety considerations require automobile design features to protect the occupants from the increased forces resulting from higher speeds (remember, force increases with the square of velocity). That adds even more weight.

Speaking of safety, an op-ed in the NYT reminds us that speed is the cause of 30% of all traffic deaths in the United States — about 13,000 people a year, out of the more than 41,000 deaths we accept as business as usual. The piece argues that 30% is a low figure – speed is greatly underreported as a cause of death.

There’s a simple way to save both oil and lives: lower speed limits drastically, and then quit building cars that can exceed the speed limit. The technology to limit car speed has existed for more than 50 years. If all cars were required to have speed limiters, there would be no need or incentive to build cars that were able to go faster than the speed limit.

Imagine how our cities and countryside might be transformed if cars could go no faster than, say, 25 mph. Streets would be much safer for bicyclists and pedestrians. Sprawling suburban and exurban patterns of development would look much less attractive as commute times would be longer. The distribution systems for goods and services would begin to be recrafted to accommodate a different, more neighborhood-centered model of mobility. Inter-city travel would be shifted to trains, buses, or other systems. Neighborhood stores would pop up, as it wouldn’t be quite so convenient to drive to the nearest Wal-Mart. Rural communities would be reborn as service centers for surrounding farms. We might eventually find that we need our cars less and less.

Naa. Let’s just invade another country for their oil.

We’ve pretty much arrived at the point where the reality of climate change is no longer denied. We’re getting to the point where we recognize the imperative to arrest global warming and the greenhouse gas emissions that cause it.

And we’ve pretty much settled on two alternative approaches to slowing and then reversing the growth in emissions: 1) cap-and-trade schemes (such as the WCI), and 2) carbon taxes. Given the political aversion to any tax increases, all of our political efforts, both domestically and internationally, are now going into devising cap-and-trade schemes.

Both carbon trading and carbon tax solutions are market based. They assume that markets offer the best and most efficient tools to accomplish public policy objectives. But is this true? Are markets the only or even the most effective tools we have?

John Michael Greer in a new post at The Archdruid Report points out that societies are guided by myths – cultural narratives – which are so deeply embedded that we are blind to them. The myth of the market is one of these. The ideology of the market is so deeply embedded in our consciousness that we are not even aware it’s a myth.

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Today the Energy Information Administration reported:

“Preliminary data indicates that global consumption rose by roughly 500,000 barrels per day (bbl/d) during the first half of 2008 compared with year-earlier levels, as a 1.3-million bbl/d rise in consumption outside of the Organization for Economic Cooperation and Development (OECD) was partially countered by an 800,000 bbl/d drop in U.S. consumption compared with year-earlier levels. The decline in U.S. consumption in the first half of 2008, reflecting slower economic growth and the impact of high prices, was the largest half-year consumption decline in volume terms in the last 26 years, when, in the first half of 1982, consumption dropped by nearly 800,000 bbl/d . . .

“During the first 5 months of 2008, [U.S.] petroleum consumption fell by an average of almost 900,000 bbl/d from the same period in 2007. During June and July, the year-over-year declines narrowed to just over 400,000 bbl/d.”

The Wall Street Journal reports that the reduction in consumption is at least partly due to Americans driving less:

“Consumers are buying fewer sport-utility vehicles and more energy-saving washing machines. Some trucking companies have rejiggered their engines to max out at lower speeds. Gridlock is easing in California. Americans drove 966 million fewer miles in May than they did a year earlier, a 3.7% decline, according to the Transportation Department.”

The Federal Highway Administration says Americans continued to drive less in June, reporting that vehicle-miles traveled fell 4.7% from a year earlier. Driving has declined now for eight straight months. The decline is most evident in rural travel, which has fallen by 4% – compared to the 1.2% decline in urban miles traveled – since the trend began last November. The U.S. Department of Transportation complains the world as we know it is coming to an end: “We can’t afford to continue pinning our transportation network’s future to the gas tax.”

Oil has slipped 23% from a record $147.27 on July 11 – but prices are still 58% higher than a year earlier. Bloomberg reports that some analysts expect oil prices to test the $110 level as demand lags and July saw OPEC set an all-time production record. But will Americans backslide if prices fail to resume their rise?

But then there’s this wild card: what if OPEC dumps the dollar? Such a development  now seems more possible and even immanent than ever before, as long-time petrodollar supporters like Saudi Arabia fail to offer even token rebuttal when Iranian President Mahmoud Ahmadinejad and Venezuela’s Hugo Chavez threaten that OPEC might switch dollar reserves to the euro. Ahmadinejad recently referred to the U.S. dollar as “a worthless piece of paper”- and the Saudis remained silent.

If U.S. dollars were no longer required for oil purchases, the demand for dollars would plunge, sending the greenback into a freefall. An end of the petrodollar regime could result in dramatically higher U.S. oil prices as the dollar falls.

Crude oil briefly jumped past $147 a barrel Friday. Light, sweet crude for August delivery hit an all-time high of $147.27 a barrel. Brent crude, which usually trades at a discount to the New York contracts, reached a record $147.50 in London.

Analysts cited continuing tensions in Iran, the falling U.S. dollar, and worries  over possible supply disruptions in Nigeria and Brazil as factors supporting the all-time highs.

Crude oil fell in New York Monday. Bloomberg cited plans by the U.S. Treasury to provide direct loans to support the troubled GSEs Fanny Mae and Freddie Mac. and a strengthening dollar – although how the dollar at $1.5924 per euro can be considered “strengthening” boggles the mind.

An article in the Kansas City Star (reprinted at Truthout) points out how our transportation, land use, and economic policies reshaped the rural landscape in ways that are proving to be dysfunctional in an era of rising gas prices.

“Since the advent of the automobile in the early 20th century, the American rural landscape has been one of spacious land and cheap fuel.

“It was commonplace for people to drive long distances for jobs. In isolated areas, such as western Kansas, the drive could be 100 miles or more. Those commuters may have complained about the time in the car, but seldom about the price of gas.

“Throughout that period, too, many towns had a factory, and mom-and-pop stores lined main streets.

“That has all changed.

“Factories in many towns closed years ago as small companies folded or manufacturers sent jobs overseas. Mom-and-pop stores gave way to Wal-Marts in bigger towns. When those changes occurred, jobs and shopping required trips out of town.

“And now, gas prices are at all-time highs. . .

 ”It is in rural America where lives are being turned upside down.”

High gas prices changes the equation such that commuting no longer makes economic sense. As a consequence, people will be forced to move out of small, rural towns to urban areas where the jobs are. Those consequences are as inexorable here in Oregon as they are in Missouri, Kansas, and Nebraska.

 ”When people move away, towns lose their tax base. . . Then you can’t fix streets . . . you can’t do much of anything. That makes even more people leave.” Pretty soon, won’t be much left in these old towns.”

According to a recent story in The Wall Street Journal (subscription required):

Global Oil—Supply Worries Fuel Debate in Saudi Arabia
Former Officials at Odds Over ‘Peak’ Theory: Crude Hits High
By Neil King, Jr.
The Wall Street Journal
June 27, 2008; Page A1

Sadad al-Husseini and Nansen Saleri raced up the ranks at Saudi Aramco, the world’s most powerful oil
company, working together for years to squeeze more crude from Sadui Arabia’s massive fields. Today,
the two men have staked out opposite sides of a momentous industry debate.

Mr. Husseini, Aramco’s second-in-command until 2004, says the world faces a brute reality of depleting resources and ever rising prices. Mr. Saleri, until recently the company’s oil-resevoir manager, insists that with enough ingenuity and investment, plenty more oil can be found.

With oil prices having doubled over the past year, political leaders, Wall Street investors, commuters, airlines and car makers are all scrambling to divine where prices will head next. The disparity of opinion between two of the most knowledgeable men in the industry shows how much fog hangs over the most basic question of all—whether oil can be unearthed any faster than it currently is.

At the moment, Mr. Husseini’s pessimistic view is clearly ascendant. Even before this year’s surge in oil prices, there were gloomy industry predictions that world oil output would soon hit a ceiling. U.S. benchmark crude hit a record on Thursday, propelled by Libyan threats of possible supply cuts, closing at $139.64 a barrel, up more than threefold since 2004. (Please see related article.)

But Mr. Saleri isn’t alone in dismissing the gloom as misplaced. Optimists, from Exxon Mobil Corp. to U.S. Energy Department, argue that high prices propel companies to innovate and invest more. As supplies rebound, prices will fall from today’s levels.

Global oil production fell for the first time in five years in 2007 and reserves also declined as prices rose to records, BP Plc said today in its annual Statistical Review of World Energy. Global oil production fell by 126 kb/d or 0.2% to 81.5 mb/d in 2007.

Crude oil production data includes crude oil, shale oil, oil sands and NGLs (natural gas liquids – the liquid content of natural gas where this is recovered separately). It excludes liquid fuels from other sources such as biomass and coal derivatives.

Global primary energy consumption grew by 2.4% in 2007, slower than in 2006 but just above the ten-year average of 2.2%. Primary energy comprises commercially traded fuels only. Fuels such as wood, peat and animal waste are excluded since they are documented unreliably in terms of consumption statistics. Also excluded are wind, geothermal and solar power generation.