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Mike Neligh, 2000
Twenty-five miles north west of the small town of Kenai Alaska, at the
end of the Kenai Spurr highway, there is a State park. For the intrepid
voyager fortunate enough to reach Captain Cook State Park the views are,
to put it mildly, magnificent. To the west, across the Cook Inlet, the
peaks of the Alaska Range rise, seemingly, strait out of the bay to
lofty purple spires approaching fifteen thousand feet. A chain of
volcanic peaks stretches from horizon to horizon like a bracelet on the
wrist of a giant arm. On the waters of the Cook, a string of oil
platforms dots the surface, their flare stacks glowing orange from
burning of excess natural gas.
Among its other attractions, Captain Cook State Park is quite literally
the end of the road. It
lies as far west on the continent of North America as it is possible to
drive. Beyond the park lies three thousand miles of trackless
wilderness, finally stretching to the eastern shores of Siberia. Looking
off into the endless expanse of western Alaska one is humbled by the
notion that here, civilization ends. Captain Cook State Park is an
extraordinary place, but it is also a prophetic place. Standing on the
headlands of the park, one can scarcely fail to notice that erosion has
claimed the last several yards of the road. The wind, tides, and
constant earthquakes for which Alaska is justifiably famous are taking
their toll - removing the underpinnings of the road and reclaiming the
materials from which it was constructed. In the thirty years since the
park was built, the forces of nature have devoured an acre of ground that
was once a parking lot. The end of the road is slowly working its way
back toward the provinces of the civilization that created it, and there
is nothing that can be done to stop it. And while natural forces are
slowly erasing the products of humanity at the end of the road, equally
corrosive economic forces are conspiring with the laws of nature to
eradicate the intricate web of socio-economic structures that the people
there have built up over the past three decades.
If the park is a preview of the future, the City of Kenai is no less.
For centuries this little fishing village was the center of society in
south central Alaska. When oil was discovered in the Cook Inlet, just
west of Kenai it became the focus of attention for the oil industry
world-wide. People came from all around the world to drill for oil,
refine the oil, and ship the oil to other places. More people came to
sell things to the people who came. Like ants drawn to a cookie crumb,
they swarmed toward an irresistible scent, and fought it out with each
other for their share of the scrap. For a time it seemed to the new
residents of Kenai that they had found paradise. But like the roads they
built, their economic paradise soon began to crumble. When the
construction was completed, many were laid off. When the drilling was
completed, many more people left. When oil production began to decline,
the shops closed, the jails filled up, and the refineries were
abandoned. Now, the winter
snows occasionally collapse the roofs of deserted warehouses; the wind
overturns a hastily set mobile home. The ocean and the ice work steadily
to eradicate the forsaken docks and piers that once dominated the shore.
Vagrants and idle youths set fires in the abandoned refineries that
issue plumes of smoke laden with what, God only knows. Once virile
construction equipment sits, half buried and stripped of its more
valuable parts, like the skeletal remains of some long dead creature
resting in a museum of natural history. The forest wages silent war
against whatever was built of anything less substantial than concrete
– those being left to the winter’s ice to deal with. The few people
who remain spend their days calling Juneau or Washington DC to beg for
money. Some devise schemes to revive the paradise they see slipping
away. They threaten and deride anyone opposing their schemes, and go
blindly about the business of prolonging their agony. They cannot see
that it is over, there will be no revival.
The oil resource here has peaked and its decline is rapid and
inexorable. For Kenai and
its people, the end of the road is within sight, and getting nearer
every day.
This small town in Alaska is only among the first to see the end of the
petroleum economy. Kenai, in its oil boomtown iteration, was built to
feed an oil based world economy, and when it could no longer offer
increasing production, it was abandoned in favor of some other more able
place. The world’s oil economy is particularly intolerant of people or
communities that do not produce. It has no sympathy for (and no ability
to sympathize with) people or places that can not hold up their end.
The more poignant aspect of this is that the oil, and thus the
oil economy, cannot last. Like
Kenai, the world will run out of oil to pump.
And like Kenai, the effects of diminishing oil supplies will
begin to take their toll long before the oil runs out.
Once oil production peaks and begins to decline, the oil economy
will turn on the world as it did on Kenai.
As it happened to the people of this remote Alaskan village, the
problems will begin cropping up sooner than most people think. We have
seen previews of this already. The OPEC embargoes of 1973 and 1979 put
the US economy in to a debt/inflation spiral that took nearly two
decades to recover from. These were temporary, politically contrived
events and once the embargoes were lifted, the world economy went on
about its business. While the economic damage was severe, the steadily
increasing supply of cheap energy made it possible for the world
economic system to continue its activities once the political problems
were resolved. But the 21st century's supply disruptions and soaring
prices will dwarf the OPEC induced shortages of 1973 and 1979. Not only
will the shortages be greater in scope, they will have no political
solutions - there will be no return to the former high production
levels. These are real shortfalls, triggered when approximately half of
the world’s supply of crude has been pumped.
Once the midway point of the crude oil resource is reached, production
will begin a steady decline, mirroring the rise in production during the
consumption of the first half of earth’s crude. The technicalities and
proof of why this is true are beyond the scope of this article but the
simple explanation is that the more oil is pumped out of a field, the
harder it is to pump out what remains. This is compounded by the fact
that aging oil fields are drying up four times faster than new ones are
being discovered and developed.
Moreover, the cheap and easy oil is gone. New discoveries are more
remote, deeper, and contained in less inviting geologic formations. A
comparison of Middle East, and Alaskan North Slope fields illustrates
this problem in monetary terms. The Middle East fields were discovered
in the late forties and early fifties. Production costs from those
fields are approximately six dollars per barrel, in 1999 dollars.
In contrast, the Alaskan North Slope fields, discovered in 1970
require a wholesale price of $10.50 per barrel to meet the cost of
production. Production costs for North Sea oil deposits are roughly the
same as those for the North Slope. Some of the smaller, and more
recently discovered fields have production costs of fifteen dollars a
barrel. (Ivanovich)
A common view among economists is that the price of oil has a limited
effect on the economies of western nations. They contend that during the
past thirty years increases in industrial efficiency and increased
productivity have made these economies less susceptible to oil price
shocks than in the past. While this contention may be technically
correct, the practical effects of increased efficiency and productivity
are far less certain. According to Federal Reserve Board Chairman Allen
Greenspan, “An increase in the overall rate of inflation in 1999 was
mainly a result of higher energy prices.” (U.S. House) This assertion
seems to have been borne out over the past year. During the period from
March 1999 to March 2000 the price of crude oil on world markets rose
from a low of just under ten dollars per barrel to a high of just over
thirty-four dollars per barrel. During that same time, the Dow Jones
Industrial Average went ostensibly flat; it was at just over eleven
thousand at the end of March, 1999 and just over eleven thousand at the
beginning of April, 2000. The increases in crude oil cost put an end to
seven straight years of ten percent or higher annual growth in this
critical economic index.
Oil price fluctuations of the March 1999 to March 2000 period signaled a
significant event in the history of the world’s oil based economies.
These historic low prices were the first tangible signal of the peak in
world production. One of the fundamental tenets of economics is the Law
of Supply and Demand. According to this dictum, the cost of a good is at
its lowest when the supply of the good is at its peak. The low prices of
spring 1999 were as low as oil prices can go. If prices had fallen any
further, production from the North Sea, and the Alaskan North Slope
would have become economically untenable, causing a cessation of
production from those fields. The North Sea and North Slope account for
approximately twenty percent of the worlds’ total production. If those
fields had been shut down, the resulting shortages would have quickly
forced prices back up. From this we can infer that world price bottomed
out and production peaked economically in 1999. This economic peak is
the beginning of a period of relatively wild fluctuations brought on by
the world’s economic system struggling to balance the competing
demands of high production, and increasing costs. It is a struggle that
the system will ultimately lose. Once
the physical peak happens and physical production begins to decline,
there will be no way to maintain any form of price stability. Prices
will begin to spiral upward, out of sight.
If the dollars and cents of oil production were the only problem, the
world economy might be able to struggle on for thirty or forty years
more or less as it is, but there is a more fundamental problem
associated with new oil discoveries. While there is a generally obvious
economic cost associated with oil production, there is a less obvious
thermodynamic cost that accrues from the production of oil. Economists
predict that when oil prices rise sufficiently, the less efficient
fields will become viable. This is only partly true – true to the
extent that some fields are, at present, only inefficient in economic
terms. But thermodynamic limits of oil production don’t allow for that
kind of ideological reasoning; when an oil field is beyond the
thermodynamic pale, no amount of money will allow for production from
that field. The thermodynamic limit relates to the energy cost of
producing oil, not the monetary cost. It reflects the energy value of
the oil produced minus the energy cost of producing the oil. The noted
British geologist Ted Trainer says,
“Beyond 2005, the energy required to find and extract a barrel
of oil will exceed the energy contained in the barrel.”(Trainer 34)
If it takes more energy to produce a barrel of oil than the
energy contained in that barrel of oil – that barrel of oil can not be
produced. This is an issue that economists do not understand, and
consequently, never address. However, it is a defining aspect of the
role that oil will play from now on; the thermodynamic laws apply no
matter how high the “dollar price” of energy goes.
Even if the economic and thermodynamic problems could be magically
overcome, there is one last issue for which there is no solution at all
– short of the passage of a two or three hundred million years. There
is not much oil left to find. The geology of earth’s lithosphere has,
over the past forty years, become reasonably well-defined. Only
particular geologic structures are capable of bearing oil deposits and
the vast majority of those structures have been thoroughly explored;
only a few extremely remote regions have escaped examination. The highly
regarded geophysicist L.F Ivanhoe recently explained, “It is commonly
overlooked by economists and the general public that crude oil must be
discovered before it can be produced.” (Ivanhoe )
Also, during the last ten years new oil discoveries have become
increasingly rare.
Many people are of the opinion that technical advances will enable the
oil industry to postpone the looming peak in oil production for decades.
This notion not only drives the current economy, but it also sets a
political tone that prevents the development of projects that could
lessen the impact of declining oil production. This shortsightedness is
related by author, and geophysicist R. A.Kerr,
“Optimists see at least several decades more of unfettered world
oil production--but a growing number of realists conclude that world
oil production is nearing its all-time peak, perhaps within 10 years.
The optimists, mostly economists, believe that new oil discoveries and
enhanced recovery from old fields will delay the world peak beyond
2040. The opposition, mostly geologists, argue otherwise.” (Kerr
1129)
A general consensus is developing among geologists that oil production
at current levels can not be maintained beyond 2010. Even if new oil
fields are developed, they will serve at best to delay briefly, the
decline in production. According to Richard C. Duncan, author of The
World Petroleum Life-cycle:
"Can new oil production delay the world oil peak?" Our
answer is,
'Yes, new production brought on-stream well before the
2006 base-line peak can delay it, but only by a few days per billion
barrels of new production.' However, even large increments of new
production brought on-stream after the peak are not likely to have any
effect whatsoever on delaying the base-line world oil peak.”
(Duncan)
With perhaps twenty billion barrels left to be discovered, it is easy to
see why the production will soon peak. To be sure, there is oil that has
been discovered, and that can be produced, but even that amounts to
perhaps another sixty billion barrels. By fully developing all remaining
sources (something that is probably not politically feasible) the peak
of production might be extended by as much as a few years.
Even a cursory survey of the economic developments of the past century
and a half reveal the strong connection between oil and economic growth.
The complexity and sophistication of the western economic system was
built on a foundation of oil and it requires a huge leap of faith to
believe that it can be maintained in the face of a substantial and
prolonged decrease in the stability of that foundation. Assuming that a
suitable replacement for oil were available, and assuming that western
economies implemented full-force efforts to employ such alternatives,
the chances for success would be slim, given the lead-times required.
But alternatives are not up to the task. Most experts agree that a
comprehensive exploitation of all forms of alternative energy would
result in the production of only one third of the energy currently
consumed in the US. Only thirteen percent of the US landmass is suitable
for the development of wind turbines. Perhaps forty percent is usable by
solar arrays and the rivers have been damned nearly to their total
capacity. Wind energy is dependant, obviously, on the sporadic nature of
the resource, an while advances have been made in the field, the ability
of wind to provide consistent, wide-spread energy is still very limited.
Photovoltaic energy is still nothing more than a dream. While it does
work, the energy required to produce a photovoltaic cell exceeds the
energy that the cell can recover over any reasonable amount
(dozens of years) of time. Hydro-electric energy is clean and
relatively cheap, but most of the usable dam sites have been used. The
tar sands and oil shales of the US mid west are often touted as a
plentiful future, once the price is high enough, but a critical review
of the physics leads to a different conclusion. Walter Youngquist, of
the Colorado School of Mines writes:
“Perhaps oil shale will eventually find a place in the world
economy, but energy demands of blasting, transport, crushing, heating,
adding hydrogen, and the safe disposal of huge quantities of waste
material are large. There appears to be a positive net energy recovery
from oil shale processing (Penner and Icerman, 1984), but it is low
and does not compare with net energy from conventional oil well
drilling.” (Youngquist 243)
While these “near oil” sources do exist, and may be usable, they do
not offer the advantage of the high net energy that more traditional
sources provide. Oil may indeed be available for alternative sources but
not in the quantities or prices necessary to keep the world economy
functioning at more than a fraction of its present level.
Further, for an alternative energy source to replace oil in a way that
would guarantee a continuation of the present economic systems, it would
have to share substantially all of the qualities of oil. Alternative
forms of energy would need to be inexpensive to exploit, both in
financial and thermodynamic terms.
They would need to be easily stored and transported, and they
would need to have the ability to be easily converted to many types of
products. These are all properties of oil that western economies not
only exploit, but also rely on to a degree that is not commonly
appreciated by the general public. A tank of wind in one’s car is not
particularly useful, and about the only other energy form that wind can
be converted in to is electricity. Electric vehicles are feasible, but
not yet practical (and without huge advances in battery technology may
never be) and the cost of converting the world’s auto fleet to
electricity would be immense. This single cost could be enough to bring
western economies to their knees. And that conversion is only one of
hundreds that will have to be made.
Our relationship with oil is intricate beyond the intuition of most
people. At this juncture in history it is all but impossible to judge
clearly what is an oil effect and what is an oil affect. As USDA archeologists Joseph Tainter states, “Energy has
always been the basis of cultural complexity and it always will be. [T]he
past clarifies potential paths to the future.” (Taintner 34)
Ultimately, the important issue is the degree to which society has
specialized its functions in favor of the consumption of oil. The very
health of the economy depends on our finding, producing and consuming
ever-greater measures of oil. The average American has at their disposal
every day, the amount of energy comparable to the energy available to a
Roman who owned two hundred slaves. (Price 301)
Short of the vast windfall that oil provides us, the world’s
economy would look today very much as it did in the pre-industrial past,
and we would be forced to live as people of those ages lived.
Maintaining current lifestyles with only a small reduction in available
energy would be difficult for most and impossible for some. Living with
the thirty percent reduction in energy that we are likely to see over
the next twenty years will be impossible for most. The people of Kenai
have done their best to alter the local economic and social mechanisms
in a way that would allow them to continue to function as they had
before the oil began to run out. In
the process they have created more problems than they had to begin with.
Despite their best efforts, nothing was able to replace oil. The Kenai
that they knew was built on oil. It
ran on oil and making it stand on some other social foundation and run
on some other economic fuel proved more than they could manage. Vain
blandishments notwithstanding, nature will yield no more oil that it
has, and no variety of self-flattery will produce any more than hot air.
The longer people hold on to the empty hope that somebody will think of
something, the more disastrous the drive off the end of the road will
be. But science may not be able to think of something, especially given
the extraordinary complexity of oil’s relationship to the world
economy. Politicians continue to dismiss the possibility of a
permanently declining resource. Their training, experience, and
philosophy leave them critically short of the insights necessary to
provide effective leadership where the future of energy is concerned.
Clarifying this point, Jay Hanson recently wrote in ENERGY Magazine:
“Although economists are trained to treat energy just like any other
resource when it comes to ‘supply and demand’, it is manifestly not
like any other resource. Net energy is the pre-condition for all other
resources. The coming peak
in global oil production signals the end of the consumer economy because
nothing can replace conventional oil.”
(Hanson 62)
The experience of Kenai is a version of the future in microcosm. The
world’s oil-based economic and social systems are nearing the end of
the road. There is little chance that either can survive even modest
declines in oil production, and no chance that they can exist in a world
where energy supplies are decreasing at an accelerating rate. There is
only so much oil in the world. We have found ninety percent of the
world’s oil, and used half of what we have found.
Adding to the looming geopolitical crisis, half of what oil
remains lies under the parched sands of three Middle Eastern countries.
“Well before 2010 the world will be vulnerable to 1970s-style
oil shocks.” (Banks 87)
Sometime in the next few years oil production worldwide will
begin to decline. The exact date can not be predicted with any socially
acceptable degree of accuracy, and probably isn’t overly important in
any case. Unlike the case of Kenai, where most of the people simply left
for better economic climes, there won’t be any better place to go. The
world at large did not suffer at Kenai’s distress because it was able
to get its oil elsewhere. But when “elsewhere” is out of oil as
well, the world will have to face the same problems that Kenai faced.
Changing personal habits is never easy. Changing the conduct of an
entire society is an even more imposing task.
But there is a hidden obstacle in the way. The very nature of
petroleum based economics and the political order that sustains it
prohibits any preemptory action. Any suggestions to change basic
practices, to radically conserve dwindling supplies, to support
renewable alternatives, provokes the economic oil monster and frightens
its constituents. That no alternative will afford them a similar level
of comfort all the more convinces them of the imprudence of undertaking
such drastic alterations. But the oil monster is a transitory
affectation and the most imprudent route lies in continuing to blindly
follow the course that it has set for us. We do not have the option of
choosing not to change, for to the extent that we oppose change, nature
itself will find us in default and make the changes in spite of us.
We must change, but change as we now reckon it will not suffice. Past
notions of change relied on our ability to simply move on to greener
pastures. In this world we can always find more of anything if we go far
enough, look hard enough and dig deep enough. But the world at the end
of the oil road is a place where oil and other resources will barely be
available in amounts that keep pace with life’s demands, let alone its
luxuries. We will need a philosophy that teaches, not how to do more
with less, but how to live with less.
We are facing a new paradigm in human existence, and there is no
basis for making informed predictions about the results of the end of
the oil economy. But as noted petroleum geologists Colin J. Campbell and
Jean H. Laherrère put
it; “The world is not
running out of oil, at least not yet. What our society does face, and
soon, is the end of the abundant and cheap oil on which all industrial
nations depend.” (Campbell, Laherrère 94)
The end of the oil road will not be the end of the world.
Just the end of the world as we know it.
Mike Neligh lived in Anchorage, Alaska. He
died of a heart attack just a few weeks after finishing this article.
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