Guest Post by Thomas McKelvey Cleaver
Here’s another dark cloud that’s no longer out on the horizon, but just a few miles away, close enough to smell the rain and both hear and see the lightning simultaneously, as the first stinging droplets hit your face in the rising wind.
I’ll start by admitting that, when I see some moron with a Ford Explorer or a Chevy Suburban having to choose between saying “fill ‘er up” and putting food on the table for his children, I think to myself “you’ve got what you deserve, buddy.” And then I go fill up the 18 year old Mazda 323 SWMBO and I share, that gets 28mpg in town and close to 40 on the road. Ever since the oil crisis that OPEC foisted on us 32 years ago, good mileage has always been an important point in deciding to buy the various vehicles I have owned since.
Unlike that 1973 crisis, when the embargo inspired by U.S. support of Israel in the Yom Kippur by the Arab members of OPEC created an artificial shortfall, or 1978 when the Iranian revolution caused a second shortfall and long lines at the gas stations, today’s near-shortage is real. Thirty years ago, China wasn’t driving as many SUVs as there are in the United States and Chinese oil companies weren’t buying up the national oil company of Kazakhstan. India hadn’t achieved a sustained modern economy where consumers could afford to buy cars. Now, if demand surges even more than it has, or if political unrest or terrorism pushes a producer offline, there may suddenly not be enough gas to go around.
As Peter Maas puts it in his New York Times Magazine article last Sunday:
Concerns are being voiced by some oil experts that Saudi Arabia and other producers may, in the near future, be unable to meet rising world demand. The producers are not running out of oil, not yet, but their decades-old reservoirs are not as full and geologically spry as they used to be, and they may be incapable of producing, on a daily basis, the increasing volumes of oil that the world requires. “One thing is clear,” warns Chevron, the second-largest American oil company, in a series of new advertisements, “the era of easy oil is over.”
In fact, price-wise, we have been here before. In 1981-83, prices at the pump – adjusted for inflation – were over $3.00 per gallon in today’s dollars. One didn’t see many SUVs around then and people did pay attention to the mileage stickers on the cars they were checking out in the showrooms.
The difference is that today we are close to “Peak Oil.” Thirty years ago, when I was in the process of getting an MPA degree in environmental management, we were reading a book published by The Club of Rome, “The Limits to Growth.” Many people have attacked that book over the years, but I recently ran across my copy and read through it for the first time since the mid-70s. The book predicted that oil production would reach “peak” in the first decades of the 21st Century, which all “responsible authorities” said was baloney back then.
What are we talking about today? “Peak oil.” Coming no later than sometime in the 2020s.
In the past several years, the gap between demand and supply, once considerable, has steadily narrowed, and today is almost negligible. The consequences of an actual shortfall of supply would be immense. If consumption begins to exceed production by even a small amount, the price of a barrel of oil could soar to triple-digit levels. This, in turn, could bring on a global recession, a result of exorbitant prices for transport fuels and for products that rely on petrochemicals — which is to say, almost every product on the market. The impact on the American way of life would be profound: cars cannot be propelled by roof-borne windmills. The suburban and exurban lifestyles, hinged to two-car families and constant trips to work, school and Wal-Mart, might become unaffordable or, if gas rationing is imposed, impossible. Carpools would be the least imposing of many inconveniences; the cost of home heating would soar — assuming, of course, that climate-controlled habitats do not become just a fond memory.
George Bush may well have chosen to go to war in Iraq to gain control of Iraqi oil, or to establish the United States as a regional power in the area of the Caspian Sea, which is claimed to be the next Saudi Arabia for oil, a claim that has not been confirmed. We may have gone to Afghanistan to secure a southern route for Caspian oil. But all of that is speculation. When considering the phenomenon of “peak oil,” there is really only one place to look.
To know the answer, you need to know whether the Saudis, who possess 22 percent of the world’s oil reserves, can increase their country’s output beyond its current limit of 10.5 million barrels a day, and even beyond the 12.5-million-barrel target it has set for 2009. (World consumption is about 84 million barrels a day.) Saudi Arabia is the sole oil superpower. No other producer possesses reserves close to its 263 billion barrels, which is almost twice as much as the runner-up, Iran, with 133 billion barrels. New fields in other countries are discovered now and then, but they tend to offer only small increments. For example, the much-contested and as-yet-unexploited reserves in the Alaska National Wildlife Refuge are believed to amount to about 10 billion barrels, or just a fraction of what the Saudis possess.
Unfortunately, there’s no way to know what Saudi Arabia can do. One cannot inventory oil reservoirs the way one can know the amount of wood in a forest. The Saudis refuse to allow independent audits of their confidential data on reserves and production.
Oil is an industry in which not only is the product hidden from sight but so is reliable information about it. And because we do not know when a supply-demand shortfall might arrive, we do not know when to begin preparing for it, so as to soften its impact; the economic blow may come as a sledgehammer from the darkness.
So, what is the Administration doing? Essentially nothing. The new “energy policy” barely gives a nod to the idea of alternative forms of energy other than the one alternative worse than the current situation – reintroducing nuclear power plant construction. There is no policy favoring an increase in energy efficiency, and the taxation policy enshrined in the law is a disincentive to a car manufacturer to produce hybrid vehicles.
Yesterday’s Los Angeles Times reported the announced higher fuel standards for light trucks, which include SUVs.
“Transportation Secretary Norman Y. Mineta, standing next to pumps at a Mobil station in Los Angeles where premium fuel was selling for $2.99 a gallon, said the plan would raise fuel economy about 8% over four years starting with 2008 models.”
The standards, based on size and broken into six categories, will require smaller vehicles to get better gas mileage, so that by 2001 small SUVs like the Toyota RAV-4 would have to get 28.4 mpg, while the big mutha “urban assault” vehicles like the Chevy Suburban and the Hummers will have to improve their mileage from 20.7 mpg to a whole 21.9 mpg.
“Mineta estimated that the new rules would save about 10 billion gallons over the life of vehicles built between 2008 and 2001… equivalent to about 7% of current U.S. consumption.”
That’s about 45 days of annual consumption, folks.
Government regulators did “the right thing”with their new proposals, said Frederick Webber, chief executive of the Alliance of Automobile Manufacturers… “They could have raised them sky high. The key here is feasibility. Technological feasibility.”
If “technological feasibility” is the problem, perhaps Mr. Webber could track down a 1975 Honda Civic and check it over. Thirty years ago, my Civic 5-speed got 35 mpg in town and 48 mpg on the highway, which would be astounding performance today.
The CVCC engine that car used was based on an airplane engine first designed (here in America) in 1927.
This past February, the United States Department of Energy’s National Energy Technology Laboratory reported:
“Because oil prices have been relatively high for the past decade, oil companies have conducted extensive exploration over that period, but their results have been disappointing… If recent trends hold, there is little reason to expect that exploration success will dramatically improve in the future… The image is one of a world moving from a long period in which reserves additions were much greater than consumption to an era in which annual additions are falling increasingly short of annual consumption. This is but one of a number of trends that suggest the world is fast approaching the inevitable peaking of conventional world oil production… The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.”
As Sheik Ahmed Zaki Yamani, the Saudi oil minister who set off the 1973 oil crisis said back then, “The Stone Age didn’t end for lack of stone, and the oil age will end long before the world runs out of oil.” With a President and administration that suffers from Cranial-Rectal Adhesion Syndrome, we can be sure that oil peaking will not only be abrupt and revolutionary, but far more economically, politically and socially painful than it needed to be.