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

Energy Information Agency data shows U.S. liquid fuels consumption declined by 810,000 bbl/d (4.2 percent) to 18.7 million bbl/d in 2009, the fourth consecutive annual decline. That’s 10% off the peak in consumption of 20.8 million bbl/d in 2005.

As energy analyst Jeff Rubin points out, the U.S. will never regain pre-recession peak levels of oil consumption – and ditto for oil consumption in Canada, Western Europe, Japan, or anywhere else in the OECD economies.

But don’t expect oil prices to go down. Rubin says:

Back in the 1990s, that kind of demand contraction in the OECD would have foretold a big decline in oil prices, since those countries accounted for almost three quarters of global oil demand. Today, they account for barely half, and tomorrow they will account for even less.

In a world where oil supplies have most likely peaked, global oil consumption has become a zero-sum game:

As China moves from consuming 8 million barrels a day to 10 million barrels, and OPEC ramps up its own daily consumption from 10.5 million to 12 million barrels, somehow, somewhere else in the world, there must be a corresponding decline in oil consumption. That somewhere else just happens to be the U.S. market and the oil markets of the other OECD economies.

Automobile sales in the U.S. have also peaked, never to regain former levels. Calculated Risk reports estimated car sales for February 2010 at 10.4 million SAAR (seasonally adjusted annual rate).

The current level of sales are very low – far below the 17 million that were sold each year between 1999 and 2007 – and are still below the lowest point for the ‘90/’91 recession (even with a larger population).

All of our land use and transportation planning assumes that vehicle travel will continue to grow at historic rates. Based on those assumptions, reducing the historic rate of increase would require heroic efforts; reducing per capita vehicle miles traveled (VTM), even more.  Reducing overall VTM significantly enough to achieve even the modest emissions reductions goals that are currently on the table would be a Sisyphean task, especiallyif population were to continue to increase as projected.

Given the new reality of dwindling fuel supplies and collapsing vehicle sales, it may be wiser to devote our planning efforts to figuring out how people can live and get around in communities with far less fuel and far fewer vehicles. The new reality is, the era of car-dominated communities is drawing to a close.

Dr. Dennis Meadows, one of the authors of Limits to Growth, gave a talk in Davos, Switzerland in September 2009 at the World Resources Forum. Gail Tverberg at The Oil Drum has posted an “approximate” transcript.

Here’s the takeaway thought. Climate change and energy scarcity – the two greatest challenges of our time, perhaps in human history – are symptoms. The problem is physical growth, continued population expansion, continued increase in material standards of living, in a world that has finite limits.

Meadows points out the probability of the problem of physical growth being addressed is 100%. What cannot be known is whether it will be addressed voluntarily or involuntarily. Collapse – meaning that material standards of living, peace, trust in the government, and other things fall, out of control – is a possibility:

The same thing with collapse. I know that the current growth in population and in material use cannot continue–absolutely, with 100% probability, that it is going to stop. When? How? How seriously? We have no scientific way to make predictions.

The longer we wait to do social measures, like birth control, or voluntary simplicity, the more likely it will be that physical measures will cause this decline.

A post by Zoe MacIntosh at Heatingoil.com contains a couple of graphs that beautifully illustrate Jeffry Brown’s Export Land Model – which posits that it’s global oil exports that really matter, not global oil production.

First, here’s Brown’s classic graph.

As domestic consumption continues to rise after oil production peaks, exports quickly decline to zero.

Now take a look at a real-world example: Great Britain.

Wikipedia has graphs of other examples of countries where oil exports are seeing accelerated declines due to rising domestic consumption: Indonesia, Egypt, Malaysia, Mexico. The implications for oil importing nations are ominous as ever more oil exporting nations hit peak and begin to decline.

The Wikipedia article argues that Great Britain doesn’t fit the model because domestic consumption has remained essentially unchanged for the last 20 years rather than rising. Changing the slope of the domestic consumption line in the Export Land Model graph from rising to flat does, of course, make a difference for exports. But ultimately the results are similarly stark for exports – level domestic consumption, or even domestic consumption that declines less rapidly than domestic production, means that soon there’s no excess oil left to export. The only difference is how “soon” soon is. Despite flat domestic consumption, Great Britain has now shifted from an oil exporter to an oil importer, sucking supplies from the rest of the world rather than adding to world supplies.

The January 2010 Oilwatch Monthly is now available from Peakoil Nederland.

I fount the following charts particularly thought provoking.

First, here’s a history of all liquids production from 1938 through the 2008 peak.

You can’t really see a peak at that scale – and besides, the chart ends at 2008, so production after that year doesn’t show up. Here’s a closer look at the period before and after the July 2008 peak.

It looks pretty noisy, but except for the spike in 2008 production looks to have plateaued. Now take a look at the energy content of the fuels produced.

It’s clear that as far as energy content goes, we’ve been on a plateau since mid-2004. And increasingly, we’re relying on unconventional liquids (heavy and extra heavy oil, oil shale, oil sands, natural gas liquids, lease condensates, gas-to-liquids, coal-to-liquids,and biofuels) rather than crude oil to maintain both total production and energy content.

As the energy content of unconventional is less than that of crude, we’re running harder and harder just to keep in place. It’s the Red Queen’s race:

“Well, in our country,” said Alice, still panting a little, “you’d generally get to somewhere else — if you run very fast for a long time, as we’ve been doing.”

“A slow sort of country!” said the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”

In the U.K., the Industry Taskforce on Peak Oil and Energy Security has released a new report warning of an impending energy famine for some oil importing nations.

The report, titled “The Oil Crunch: Securing the UK’s energy future,” includes two opinions on oil-supply risk, one from Peak Oil Consulting (Chris Skrebowski) and the other from Royal Dutch Shell (Dr. Robert Faulkner). The optimistic opinion (from Royal Dutch Shell) sees global supply of oil flattening by 2015. Skrebowski’s analysis points to a peak in global oil production in the period 2011-2013.  Both agree that the age of “easy oil” is over.

The problem addressed by the task force was laid out by Matt Simmons in a recent presentation:

• Current production base will fall to 25 MM B/D by 2030.
• To keep supply flat (at ~85 mbd) we need to add equivalent of four new Saudi Arabias.
• To modestly grow 5 MM B/D, we need two more Saudi Arabias.
• None of this is remotely possible.

The report imagines three possible future scenarios:

The risk from premature peak oil can be thought of, globally, in terms of three qualitative scenarios. In a “plateau” scenario, like the one Shell foresees, global production will flatten around 2015 and remain on a plateau into the 2020s, propped up by expanding volumes of unconventional oil production because of the decline of conventional oil production. In a “descent” scenario, global production falls steadily as oilfield flows from newer projects fail to replace capacity declines from depletion in older existing fields. In a “collapse” scenario, the steady fall of the “descent” scenario is steepened appreciably by a serial collapse of production in some – possibly many – of the aged supergiant and giant fields that provide so much global production today. On balance, having reviewed the state of play in global oil production, the taskforce considers that the “descent” scenario is a highly probable global outcome. We also fear that a “collapse” scenario is possible.

While we are able to get away with denying the urgency of the climate crisis for a few more decades before reality smacks us in the face, we won’t have that luxury with the energy crisis:

The speed with which the UK would need to mobilise for a “descent” peak oil scenario, much less a “collapse” scenario, exceeds anything that has yet been considered in the climate-change policy-response arena.

The energy crisis means bye-bye to the “economy” as we’ve come to think of it over the last century. Survival will be the new challenge.

The stark implications of our addiction to fossil fuels and their impending depletion are eloquently voiced by David Hayes:

It took me a long while to admit to myself the conclusion I now draw from all this: that the civilisation we currently take for granted is coming to a stuttering end, that we are unequipped to prevent it, and that it is probably too late to prevent the worst of what climate change, peak oil and ecological destruction will throw at us. I suspect that the great challenge of the 21st century will not be building a great, “sustainable” civilisation to lead us to the stars, but coming to terms with decline, materially and existentially, as the fossil-fuelled bubble bursts and leaves us adjusting to a harsher reality.

Sergio Gabrielli, CEO of Petrobras (a Brazilian multinational energy company headquartered in Rio de Janeiro), says global oil production (including biofuels) will peak in 2010 due to oil capacity additions from new projects being unable to offset world oil decline rates.

Gabrielli points out in his presentation that the world will need to produce oil from new sources equivalent to one Saudi Arabia every two years to offset future world oil decline rates – which he sees at about 5% per year.

Finding and bring to production the needed magnitudes of new oil simply not going to happen. Even managing to maintain historically observes decline rates may prove to be a challenge. Take Nigeria, for example. As the world teeters at the edge of economic and political collapse,  Nigeria seems to be going over the edge. Nigeria, which in 2008 produced over two million barrels of sweet crude a day and today provides 9% of U.S. oil imports, could vanish as an oil exporter, virtually overnight. Despite its enormous reserves, Venezuela is looking none to stable as a producer and exporter, either.

Chris Nelder takes a close look at Mexico, Venezuela, and Saudi Arabia and warns the oil export crisis has arrived – we just haven’t felt it yet:

[W]hen oil prices rise again, the pain will be far greater for the U.S. than it is for our top suppliers. Next time, the spear of declining oil exports will puncture a lung.

If the gap between demand and supply shown in the chart above cannot be filled with new supply, the only alternative is for prices to increase to reduce demand to equal supply: “demand destruction.”  That means economic shrinkage rather than growth, and a consequent financial crisis of epic proportions. consequence we are going to find it harder to extract other energy and mineral resources. As George Mobus points out in a post at The Oil Drum, our net energy is already in decline and that is at the root of the global economic problems we are seeing. You cannot have a growing economy when the basis of all economic wealth production is in decline.

The economic tremblings we’ve seen over the last couple of years may prove to be mere foreshocks. No matter how many trillions we throw at the problem, all the king’s horses and all the king’s men won’t be able to put Humpty Dumpty back together again.

Rather than try to save the irretrievably lost, we’ll have to accommodate ourselves to the new reality:

We can only start simplifying our societies and giving up the many discretionary expenditures of energy that we currently enjoy without much thought. We can learn to once again live on real-time solar influx via our food raising systems. And even then we are talking about an ability to support only a small fraction of the current population. Ironically the simplification of society involves the increasing complexity of individual lives. What this means in practice is that each individual must start to become more of a generalist in terms of the functions that support life. Everyone will have to become a food grower! Believe it or not that isn’t simple! Knowing how to grow your own nutrients is actually quite complicated and will demand a whole new set of cognitive skills.

For the environment, peak oil and economic collapse offers a glimmer of hope. For example, oil accounts for 43% of our CO2 emissions from energy use. Consequent economic collapse will mean that a lot of coal plants in the works will never get built, and maybe even we’ll see existing plants begin to wither away.

In 2009, cars scrapped in the U.S. exceeded new car sales  for the first time since World War II, shrinking the U.S. vehicle fleet from the all-time high of 250 million to 246 million.

The 14 million cars scrapped exceeded the 10 million new cars sold, shrinking the U.S. fleet by 4 million, or nearly 2% in one year. The U.S. fleet has apparently peaked and started to decline.

Lester Brown at Treehugger identifies “market saturation” as the dominant factor. The United States now has 246 million registered motor vehicles and 209 million licensed drivers – nearly 5 vehicles for every 4 drivers.

Brown points to Japan as an example. In Japan, annual car sales peaked 1990 and have since shrunk by 21%.

Mish Shedlock looks at the data and asks, what about boomer demographics and teenage driving?

The massive wave of boomer retirement is about to hit. Many boomers will go from two cars to one, or from two new cars to one new car and an “emergency” clunker.

As for teens, parents can no longer afford to buy cars for their kids. And with teenage unemployment at the highest rate in history, teens can no longer afford to buy their own cars.

Peak oil, peak autos.  What’s next?

Architect and urban planner Andres Duany blames peak oil and global warming on the American lifestyle:

Seth Bauer at the Huffington Post quotes Duany:

It’s where we live, the size of our houses, the distances we drive for work, commerce, play–everything.

And goes on to summarize Duany’s rant:

And it’s all a vicious circle. The reason our houses are so big (and inefficient), he says, is because we have eliminated a healthy civic life. We build homes with giant foyers because we have no public squares. We need media rooms because it’s not easy or pleasant to drive to a multiplex theater, cross a parking lot through an ocean of cars, and pay a fortune for popcorn. We build bars in our basements because there are no neighborhood pubs. We have giant refrigerators and ever-growing storage needs because shopping is both far away and unpleasant (hello, Costco). The result? We heat and air-condition unused rooms in oversized unpleasant houses. And because our home bars and foyers are empty and our media experiences private, we’re lonely, to boot.

But the American lifestyle is really just a symptom of a larger disease – if not industrialization itself, certainly the ideology of growth that it has spawned.

Politicians and economists around the globe are focused on one thing: economic growth. When “the economy” falters, all efforts are towards returning the global economy to a path of growth. As Chris Martenson says in a piece titled Copenhagen & Economic Growth – You Can’t Have Both at the Energy Bulletin:

We need more jobs, we are told; we need economic growth, we need more people consuming more things.  Growth is the ever-constant word on politicians’ lips.  Official actions amounting to tens of trillions of dollars speak to the fact that this is, in fact, our number-one global priority.

Martenson is spot on in pointing out that any solution to global warming requires that carbon emissions be reduced by a vast amount over the next few decades. But economic growth and reduced emissions are mutually exclusive.  You can’t have both.

Even if we can’t muster the moral fortitude do do anything to avert catastrophic global warming, we still may fail in our desperate efforts to maintain economic growth. The primary implication of peak oil is that the era of economic growth is over. The current recession is very much energy-related. The whole concept of recession as a temporary period where growth is briefly interrupted within a long-term trend of economic growth is likely to become irrelevant in a world where oil is becoming ever more expensive to extract and oil supplies are decreasing.

We’re seeing a feedback loop develop with oil eerily similar to the feedback loops operating in the global warming context. The global financial crisis has resulted in oil investment shrinking by 20%, which in turn will result in less oil and more expensive oil in the future, causing more financial turmoil in an ever-worsening downward spiral.

We already are seeing the future beginning to emerge. As the election results in Massachusetts show, that future will hold ugly surprises.

In overwhelmingly approving the report of its Peak Oil Task Force, the Bloomington (Indiana) City Council,  has endorsed a truly revolutionary idea:

Recognize the need for, and the inevitability of, a steady state economy – one that is not predicated on ever-greater amounts of energy and materials throughput, but recognizes the limits of the biosphere.

The Task Force report – Redefining Prosperity: Energy Descent and Community Resilience - calls for a reduction in community oil consumption by 5% per year in an effort to realize a 50 percent decrease in consumption in just 14 years. The targeted rate of decrease in oil consumption is along the lines laid out by the oil depletion protocol.

Suggested strategies for achieving the reduced fuel consumption goals include:

• Explore new energy sources, greater efficiencies and conservation opportunities for the following energy-intensive municipal services: water and wastewater treatment; law enforcement and fire protection; heating and cooling municipal buildings; and trash removal and recycling. Immediate attention should be given to off-grid water production to meet minimum community needs.
• Promote economic relocalization. Our community’s reliance on a steady supply of inexpensive goods from as far as halfway around the world makes us vulnerable to a decline in inexpensive oil and/or shortages. Producing and processing more goods within the community fosters greater security in a post-peak world while strengthening the local economy.
• Intensify the City’s emerging focus on form-based development, so that residents can easily live within walking distance of daily needs, such as grocery stores, schools and pharmacies.
• Increase home energy conservation and aim to retrofit 5 percent of housing per year.
• Establish community cooperative rideshare programs.
• Advocate for greater local, state and federal funding for public transit.
• Accelerate local food production by training more urban farmers and removing legal, institutional and cultural barriers to farming within the city.
• Plant edible landscapes throughout the city.

The Task Force’s vision is for a city where “most residents live within walking distance of daily needs; most of the food required to feed residents is grown within Monroe County; residents can easily and conveniently get where they need to go on bike, foot or public transit; most of the community’s housing stock is retrofit for energy efficiency; and local government provides high-quality services to its residents while using less fossil fuel energy.”

That actually sounds pretty good, doesn’t it? A post-peak world need not be dismal.

Dr. Dennis Meadows, one of the authors of “Limits to Growth” and its subsequent updates, has a powerpoint presentation and podcast of a recent talk available at the Population Institute site.

Most interesting is his view that the end of growth does not come directly from depletion, but indirectly from rising capital expenditures as the costs of exploiting resource sources and dealing with saturating sinks rise exponentially. And as he points out, that’s what we’re beginning to see already:

Most people assume that the major global difficulties would occur after the end to growth.

This is not correct.

The globe’s population would experience the most stress prior to the peak, as pressures mount high enough to neutralize the enormous political, demographic, and economic forces that now sustain growth.

We are in the early phases of that period now.

Meadows’ presentation finishes up with a chart showing CO2 emissions as a function of four factors:

1. Number of people.
2. Number of units of capital per person, which is a surrogate for living standards.
3. The amount of energy required to build and operate that capital.
4. The fraction of that energy that comes from non-fossil sources.

Meadows points out the key to our climate change predicament lies in reversing population and consumption growth. If we can’t change those, technology can at best only prolong the agony.

Gail the Actuary at The Oil Drum transcribes his finishing words:

So far, our concern about climate change had manifested itself through efforts to improve efficiency and to implement alternative energy sources–the so-called technology options. I will just close by pointing out that as long as we ignore demographic and cultural issues, the growth in the first two factors will continue to offset all of the improvement we make in factors 3 and 4. And so until we can understand how to begin reducing the growth in the first two factors, climate change is a foregone conclusion.

Richard Heinberg also has his presentation posted at the same site. Heinberg focuses on how peak oil and the consequent end of growth led to the financial crisis, one that will not be resolved in the way to which we have become accustomed. The end of growth means we have entered a new era.

Even as the climate change talks begin today in Copenhagen and as EPA Administrator Lisa Jackson announces the U.S. will begin regulating greenhouses gases regardless of what the House and Senate do, some are warning: what we are considering doing, won’t be enough.

Consider that economic infrastructure now being installed around the globe is locking in future increases in fossil fuel consumption. Take China, for example.

In 2008, less than nine million cars were sold in China. In 2009, car sales will rise to between 12 and 13 million. By 2015, car sales are expected to reach 16 million – an increase of 44% over 2008 levels. The cumulative increase in cars on the road in China cannot do other than increase future demand for oil, as gasoline and diesel.

At the beginning of 2006, China had an estimated 350 gigawatts of coal-fired capacity in operation. An additional 600 gigawatts of coal-fired capacity (net of retirements) is projected to be brought on line in China by 2030 – an increase of 42% over 2006 levels.

Not to pick on China. The U.S. is responsible for 29% of carbon dioxide emissions over past 150 years, triple China’s share. But assigning blame for greenhouse gas emissions is irrelevant to crafting a solution to the climate change crisis.

Even while a new study published in Nature Geoscience (abstract here) reports that over the long term Earth’s temperature may be 30-50% more sensitive to atmospheric carbon dioxide than has previously been estimated, the decade of the 2000s will go down as the warmest on record – and climatologists warn warmer weather is on the way.

In a speech to delegates at Copenhagen, IPCC head Rajendra Pachauri went down the list of impacts from global warming, some of which we are already beginning to see:

• More heat waves and heavy rainfall events
• Increase in tropical cyclone intensity
• Disappearance of Arctic sea ice
• Decrease in water resources in semi-arid areas, such as the Mediterranean Basin, western United States, southern Africa and north-eastern Brazil
• Elimination of the Greenland ice sheet and a resulting contribution to sea level rise of about 7 meters
• Species threatened with extinction
• Greater stress on water resources from population growth and economic and land use change, including urbanization
• Significant future increase in heavy rainfall in many regions, with greater flood risk, while other regions dry up
• More than two billion people will live in areas threatened by flood
• Increasing threat to low-lying island nations and coastal cities and deltas from rising seas Seas are already rising because of melting glaciers and icesheets as well as expansion of the oceans as they warm

The good news may be that the scenarios spun out by the IPCC are fantasies when it comes to potential future fossil fuel consumption. The fossil fuels – oil, gas, and coal – simply will not be physically available to generate the greenhouse gas emissions projected in the several IPCC scenarios. Even the IEA, in its recently released World Energy Outlook 2009, is admitting its projections of future energy availability are nothing more than “faith based”, conceding the majority of oil production in 2030 will be coming from “fields yet to be developed or found” and that “output at existing fields . . . will drop by almost two-thirds by 2030.”

The bad news is, the science keeps getting increasingly gloomy. Every new study seems to report that Earth’s climate is more sensitive than previously believed and that “tipping points” are fast approaching, if not already exceeded.

And the good news is pretty dismal, for business-as-usual. If peak production of fossil fuels is near enough to ensure that climate catastrophe will not occur no matter what emissions policies we adopt, that in turn means that our energy policies are hopeless when it comes to transitioning to a social and economic system based on renewable energy resources that in any way resembles the industrial society we have come to think of as normal and desirable.

We cannot avoid the reality that any possible solution to our energy and climate predicament requires that we invent an entirely new economic model, one that doesn’t strive for or depend on economic growth but instead is based on the ecological principle that we must learn to find happiness within limits imposed by the natural systems within which we all live.

Unfortunately, economic growth remains the official ideology at Copenhagen. How to continue on that path is the agenda.

Falling oil production in Mexico is having grave impacts, in Mexico and around the globe.

Mexico’s oil output is expected to continue to decline sharply next year as state-owned Petroleos Mexicanos enters a sixth year of falling production. Total Mexican production has tumbled by 850,000 barrels a day as of October 2009 since peaking at 3.45 million barrels in December 2003.

Mexican oil output. Source: Barclays Capital

Analysts at Barclays Capital expect this year’s decline to be slightly less bad than last year’s:

For the year to date, Mexican oil output is down 6.3%. While this represents a deceleration compared to the 8.9% fall recorded in 2008, it is still a much faster pace of decline than that averaged since the start of the Mexican oil production downtrend in 2005.

But forecast that next year the decline rate will once again increase:

We expect Mexican oil output to continue to decline sharply, and we forecast the pace of fall to average 8.9% in 2010.

Plunging output from Mexico’s once-great Cantarell is the big problem. Production at Cantarell peaked at 2.1 million barrels per day in 2003 and has since declined precipitously.  In September 2009, daily production at Cantarell fell 39% from a year earlier to 573,760 barrels. Mexico could become a net oil importer as soon as 2015.

Falling oil production means big budget problems for Mexico’s government. Pemex has in the past provided over 1/3 of public-sector revenue. As income from oil drops, Mexico’s finance ministry fears tax revenues will also drop, to account for only about 10% of the country’s economy as compared to the 17.5% in 2008. With rampant evasion and dependence on dwindling oil revenue to fund the government, the government is now tapping 58% of Pemex’s total revenue. You can’t milk a shriveling cash cow forever.

Bumping up against the limits of global oil production has global implications. Jeff Rubin, for nearly 20 years the chief economist of CIBC World Markets, has warned the traditional laws of supply and demand are no longer working for oil, one of the global economy’s most basic and essential commodities. These terrific graphs from Stuart Staniford’s new blog Early Warning illustrate the point:

Oil price versus US crude production 1900-2009

Spot oil price versus Saudi Arabian oil supply, 2001-2009

Spot oil price versus Russian oil supply, 2001-2009

Rubin argues the subprime mortgage crisis was not the cause of the recession, but was a symptom of a much bigger problem – an energy shock – and cautions:

It was oil prices that brought about the last recession, and unless we make some major changes to the way we live, it’ll be oil prices that bring about the next recession as well.

The oil-linked financial crisis extends far beyond the borders of the U.S. Gail Tverberg and Kjell Aleklett both observe that the Dubai World meltdown, like the housing market meltdown in the US, is symptomatic of a financial system dependent on  economic growth, which in turn is based on the assumption that oil will continue to be plentiful and cheap.

Stuart Staniford has posted this chart at his blog Early Warning.

You ask, why is this interesting? Staniford in an earlier post argued that if global oil supply was flat, and if the developing regions of the world continue to grow at the rate of the last five years, then developed country oil consumption would have to decline at 4% per year. Consequently, oil efficiency would have to increase at 4% a year if OECD economies were not to shrink – and to increase by even more if economic growth is to continue in the future as it has in the past.

The situation is even more challenging if global oil production begins to actually decline.

The real significance of the concept of peak oil lies in the economic consequences – the question of exactly when global oil production peaks is in itself not particularly interesting or important. What we need to be thinking about and planning for is adopting to a different kind of economic and political environment as global oil supplies – and more importantly oil supplies available for export – become  increasingly constrained and then inevitably begin to fall.

The implications for transportation planning are stark – but transportation planners are mostly oblivious to or dismissive of the concept of peak oil. With 97 percent of U.S. transportation energy based on petroleum, oil is the lifeblood of America’s economy. Staniford points out that when it comes to transportation fuel economy, improvements are not happening nearly as fast as we will need going forward

Transportation planning is based on projecting demand into the future. Will the oil required to fuel those projections be there? Transportation planning that fails to take peak oil considerations into account is disconnected from reality.

Jeff Vail at The Oil Drum has a blog post pointing out two things that must be kept in mind as we think about transitioning away from fossil fuels.

1. Net energy declines faster than gross energy. As the easiest and best resources were exploited first, the remaining fossil fuel resources are increasingly expensive in terms of both money and energy to exploit. It’s taking more and more in both energy and money to get each unit of energy out.

2. Even as net energy is declining more rapidly than gross energy, more of that shrinking supply of energy will have to be diverted to building alternative energy infrastructure. The energy investments needed to put in place the generating and distribution networks for renewable energy sources such as wind and solar have to be up-front. This means there will be even less energy left over for all other uses.

The longer we wait to begin building that replacement infrastructure – and the less the life-cycle EROEIs of renewable sources prove to be – the bigger the pickle we’ll be in.

This isn’t exactly news. The Hirsch Report reached the same conclusion back in 2005, warning that beginning a crash mitigation program 20 years before peaking would be necessary to make a more-or-less seamless transition. But it helps to be reminded.

The bad news is, we’ve now probably seen the peak in global oil production and the beginnings of any mitigation program, crash or otherwise, is still nowhere in sight.

The November 2009 OilWatch Monthy is now available. The report says the world may experience a couple years of oil glut, especially if the current economic weakness continues. But expect to hit peak oil production capacity by the middle of the next decade.

In the coming years to 2012 higher additions to OPEC capacity are to be expected, based on current projects, in comparison to increases between 2004 and 2008. Hence if decline continues at the same rate as before, OPEC capacity will increase significantly. If at the same time demand increases only at a sluggish rate, a glut of capacity lasting beyond a couple of years occurs, driving down oil prices to near OPEC production cost levels. The end result may be that we hit peak oil production capacity somewhere early to mid next decade because of ensuing underinvestment, but that the effects will only become apparent several years after capacity peak due to low economic growth.

Peak oil production capacity has little to do with actual production.  For the moment, the July 2008 peak in both crude and all-liquids production still stands.

These graphs from the report are posted by Rembrandt at The Oil Drum: Europe.

Not many years from now, there will be a huge uproar over who missed the coming of peak oil.

That’s what Tom Whipple predicts in an article in the Falls Church News-Press.

The oil price spike of July 2008 has faded from memory.  There is no whisper from government officials that energy may have something to do with our current economic difficulties. The fact that oil prices are once again approaching the $80 range doesn’t even merit mention. It’s just free markets at work.

Last week the UK Guardian broke a story on how the International Energy Agency (IEA), under pressure from the U.S., has been manipulating its forecasts. The EIA has been deliberately underplaying a looming shortage for fear of triggering panic buying.

The end of cheap energy could well mean the end of industrial civilization. Studies such as the Hirsch Report – sponsored by an agency of the U.S. government – long ago concluded it will cost trillions of dollars and take decades to effect a transition from oil to some other form of energy to keep civilization running in a recognizable form. The longer we put off getting to work, the less chance of making a successful transition. But from the political classes, there’s no sense of urgency or even awareness that we’ve got a problem.

Why are we so reluctant to confront the reality of impending energy shortages? Chris Nelder blames it on our blind faith in free markets.

We don’t need no stinking plans. Panic buying and hoarding — pshaw! We’re going to do the job the free market way, through voluntary demand reduction and switching fuels! Remember how the financial markets worked so much better after the Phil Gramm era of deregulation?

If a supply interruption event should happen, and farmers can’t get fuel to plant their crops when the seasons dictate. . . well, the resulting food shortages and price spikes will simply have to be the cost of doing business in a free market system. And if oil and gas companies, airlines, trucking companies, farmers (and, well, just about everybody), can’t swing with increasingly frequent fuel price spikes and crashes — then I guess we don’t need them.

Nelder calls for nationalizing the grid and preparing plans for fuel rationing, ASAP.

John Michael Greer takes a more relaxed approach. He sees industrial civilization as beyond saving – but complex societies have overshot their resource bases and declined in the past, and the world hasn’t come to an end. What has consistently happened is that centralized economic arrangements fell apart. That’s likely to happen again. Relocalization needs to happen.

When centralized economic arrangements fall apart,

long distance trade declines sharply, and the vast majority of what we now call consumer goods get made at home, or very close to home.

When civilizations come unglued, . . . [r]oads are no longer maintained, harbors silt up, bandits infest the countryside, migrant nations invade and carve out chunks of territory for their own, and so on. Centralization stops being profitable, because the indirect subsidies that make it profitable aren’t there any more.

Whatever shape the future might take, marching blithely into it as if it were a continuation of the recent past, failing to plan for easily foreseeable contingencies, is foolish. As Nelder puts it,

Failing to plan is planning to fail.

If we fail to take the initiative to shape our future, the future will surely shape us. And it’s likely to not treat us gently.

Tom Condon writes at the Hartford Courant of an encounter with writer David Owen, who argues in his new book (Green Metropolis: Why Living Smaller, Living Closer, and Driving Less are the Keys to Sustainability) that the end of cheap oil means the end of the road for our “ruinous lifestyle”:

The explosive growth and general prosperity of the past century have been made possible by the prodigious abundance of oil; the problems of the coming century will involve oil’s increasing scarcity and cost.

A couple of news items over the weekend hint that the end of the road may be drawing uncomfortably near.

The first hint of trouble comes from Saudi Arabia, which has contracted with the oil services firm Halliburton to “coax more oil out of largely depleted Ghawar field”:

Halliburton was awarded a five year integrated turnkey contract for Ghawar field. Work will be performed in Uthmaniyah, Haradh, Hawiyah and Shedgum. Halliburton will provide drilling rigs, directional and horizontal drilling tools, logging, cementing, mud engineering, perforation, completion and well construction services. Halliburton will engineer and manage the entire drilling operation. Three to four rigs will drill and complete between 153 and 185 oil and water injection wells.

Analyst Michael Lynch points out that the announcement makes no mention of  Ain Dar, the most prolific but now the most mature part of Ghawar in the extreme northwestern region of the field. Ain Dar has been under pressure maintenance by peripheral water injection for over 40 years. Lynch warns not to expect much more from Ain Dar:

Today, the redevelopment process has gone on so long that future oil production from Ain Dar is speculative.

Lynch also notes that Shedgum, adjacent to Ain Dar on the east, is not much better off. Reservoir quality generally diminishes at Ghawar as you go south, and the best reserves were exploited first. The Saudis are no slouches when it comes to oil field technology. What does it mean when they bring in hired guns?

Today, the entire field still contains a great deal of crude oil but it is much harder to get and the production rates continue to fall off. Halliburton’s mandate will be to deal with higher and higher water cuts, utilize all known new technology to hold rates as high as possible and stimulate wells as required. The total number of wells drilled in Ghawar exceeds one thousand including hundreds of vertical wells that have either been abandoned or converted to horizontals. Now Halliburton will drill even more trying to improve rate and lessen decline.

If it’s true that the best the Saudis are hoping for is to lessen decline at Ghawar, we are indeed approaching the end of the road. As Ghawar goes, so goes Saudi production. As Saudi production goes, so goes global production.

Then there’s the announcement that the Saudis are planning to use more of their own oil to boost petrochemical production. Speaking at the inauguration of phase one of the $10.3 billion Rabigh Refining and Petrochemical (PetroRabigh) complex, Saudi oil minister Ali al-Naimi is quoted as saying:

We are now working on boosting our current capacity of petrochemicals that depend on gas by installing new facilities that rely on liquid hydrocarbons, and merging these facilities with refining capacity assets.

Saudi Arabia has been diversifying away from dependence on crude oil sales. The new facility processes 400,000 barrels per day (bpd) of crude, accounting for 19% of Saudi’s total refining capacity. Phase Two of the project would further expand capacity.

This is right out of the Export Land Model: even as production declines, exports decline even more as the producing countries consume more of their own crude.

Scientific American lays out “A Path to Sustainable Energy by 2030” in its November issue. Gail Tverborg at The Oil Drum takes a skeptical look at the piece. The only conclusion is: the path laid out is a dead end.

Essentially, we would need to change all of the world’s infrastructure to use either electricity or solar or water power directly – by 2030. That means tooling up to replace all of our cars, trucks, boats, airplanes, power plants, etc.; plus rebuilding the electrical transmission system, all within a couple of decades. How realistic a prospect is that, when debt is already at record high levels and the world’s financial structure is teetering and threatening to collapse and would collapse if the faith in infinite economic growth were to falter even a bit?

We simply are not going to replace fossil fuel energy with renewable energy, by 2030 or within any other time frame. Continuing the path of business as usual is simply not possible – and won’t happen, no matter how much we protest that we would prefer that things to continue as they are.