Santa Rosa, California
MuseLetter 135 / May 2003
The Petroleum Plateau
The realization that modern industrial society is approaching the peak in available net energy to fuel the economy is a powerful shock to one’s entire belief system. It literally changes everything. But once one has a clear mental picture of the grand bell-shaped curve of energy usage in the industrial era, the fine detail within that curve becomes a matter of more than passing interest. A bump on the curve may mean a war, a recession, or a significant change of government policy with immense implications for the lives of millions of people.
The terms “oil production peak” and “peak oil” imply
a sharp demarcation. One naturally envisions a needle-like moment in time: before
the fateful day, oil production wafts ever upward; then, suddenly, the trend
reverses. In a flash, economies crumble and our energy-dependent way of life
is on its way to an inevitable, crashing end.
This, of course, is an oversimplification. The graph of global oil extraction is not taking the form of the classic bell-shaped Hubbert curve, with a slender, rounded peak; instead, it appears more like bumpy mesa—a flat-topped mountain covered with rubble. A steep runup in extraction, lasting until the early 1970s, was followed by a an uneven plateau and will no doubt be followed by a similarly steep decline.
Why the plateau? As I explained in The Party’s Over, oil production is constrained by economic conditions (in an economic downturn, demand for oil falls off), as well as by political events. The recent epidemic of SARS provides an instructive example of how seemingly extraneous events can impact the oil trade: a drop in international travel resulting from fear of the epidemic may be one of the reasons for OPEC’s decision in April to restrict production.
In addition, the shape of the production curve is modified by the increasing
availability of unconventional petroleum sources (including heavy oil, natural
gas plant liquids, and tar sands), as well as new extraction technologies. The
combined effect of all of these factors is to cushion the peak and lengthen
the decline curve.
Political-economic events during the ’70s caused a preliminary oil peak. The following global recession suppressed demand for energy, while efficiency measures (increasing the insulation of homes and office buildings, lowering highway speed limits, etc.) stretched the benefits from temporarily expensive fuels. Oil production and consumption took a brief dive after the 1973 OPEC oil embargo (falling from a peak of 56 million barrels per day in 1974), then began to recover—though on average the growth rate was lower than in previous years. Production reached a new peak of 60 mb/d in 1979. Then, following the 1979 Iranian revolution, production and consumption plummeted again and did not begin to increase until 1984; production did not again match its 1979 levels until 1996. In the four years following that, production of conventional oil inched higher still, to a new peak of nearly 64 mb/d in 2000 (the figure for total petroleum liquids, including non-conventional sources, by then surpassed 76 mb/d).
This historical period—in which conventional oil production has been, when averaged, virtually flat—will probably eventually be seen as the first stage in an energy plateau encompassing the period from 1973 to perhaps 2015 or 2020—nearly a half a century. During this plateau period, production and consumption of conventional oil will be seen to have crested and bottomed several times between the extremes of 64 million barrels per day and 50 mb/d.
We are living in the middle of this historic energy plateau right now. The plateau began because of political and economic events. Soon, probably within two to seven years, geological factors will begin to constrain oil extraction. Even sooner, within the next few months, natural gas depletion will begin to wreak economic havoc in North America. These constraints will intensify and gradually gain hold over the overall world energy supply, so that by 2020 at the very latest, and possibly by 2010, global net energy availability will be on an inexorable downward trend somewhat mirroring the historic upswing of the early 20th century.
The fact that we have arrived at an energy plateau means that two centuries of energy growth are at an end, but the century of decline has not yet begun. We are in a place betwixt and between, neither this nor that. This is a unique period that brings unique opportunities and challenges; it is a temporal terrain whose navigation will determine whether our path down the energy curve is quick and disastrous, or measured and deliberate.
WHAT THE FIGURES SAY
Before exploring those opportunities and challenges we should first reconnoiter
the energy situation as it has developed so far during the plateau period.
For readers who are interested in studying the data for themselves, excellent sources are readily available. I recommend the web site of the Energy Information Administration (a division of the US Department of Energy),
The picture that emerges from such a study clearly confirms the fact of the
plateau, but contains many layers of complex detail.
Since economic activity requires work, and since energy is the capacity to perform work, energy is therefore necessary for economic growth. Thus it should be no surprise that the oil plateau represents a period of slower economic growth as compared with the preceding decades of increasing energy abundance. Between 1950 and 1973, economic growth averaged between 2.1% for the US and 7.4% for Japan, per annum, for the G7 countries; whereas since 1973 economic growth has averaged 0.6% for the US and 2.6% for Japan. For mainstream economists, the “post-1973 productivity slowdown” is, in the words of UC Berkeley economist J. Bradford deLong, “a mystery.” But it is a mystery explained almost instantly when one beholds a graph of total or per-capita energy usage from 1900 to the present.
But this is still not the whole picture. During the 1900 to 1973 period, standards of living (as measured by GDP per capita) rose across the board, in rich and poor countries alike—though of course at differing rates and with intermittent peaks and valleys. During the plateau period (1973 to present), living standards in other industrialized countries (Europe, Japan) largely caught up with those in the US. But during this same period, economic inequality between the richest countries on one hand, and the poorest on the other, and between high-income and low-income groups within the populations of important countries such as the US, has increased markedly. Thus the levels of growth achieved during this recent time, anemic though they may be, have been achieved at least partly by simply shifting wealth from the poor to the rich.
Let us look at this disparity in energy terms. While oil is in many respects our most important energy resource, it is not the only one. During the past thirty years, total global energy use (from sources including coal, natural gas, nuclear, and hydro power) has grown, though—as mentioned earlier—at a rate slower than that prior to 1973. Currently there is a dramatic disparity in per-capita energy use between the more- and less-industrialized nations: an amount of energy equivalent to 8076 kilos of oil was used per capita per year by Americans in 1997, versus 479 for India. It is interesting to note that the figures for Japan and the European countries are about half those for the US (4084 for Japan, 2839 for Italy). Only Canada, among the industrial nations (at 7930), has a per-capita appetite for energy approaching that of the US. But through greater efficiency, the Europeans and Japanese are able to achieve a standard of living comparable to that of North Americans.
Adding population growth to the equation overlays still another helpful level of detail. Since 1973, the world’s population has grown from fewer than 4 billion to roughly 6.3 billion, and most of that growth has taken place in the poorer countries, which are of course the ones that use less energy on a per capita basis. Recall that oil production stood at 56 million barrels per day in 1974, and that today production of conventional oil is in the vicinity of 60 mb/d. Clearly population growth has far outstripped growth in production of conventional oil.
Indeed, global per capita consumption of oil has shrunk, on average, by over one percent per year since 1979. But again, that average figure hides the increasing level of energy inequity, which only becomes apparent when one examines the figures nation-by-nation. Between 1991 and 2000, total energy use increased in the US by 17.3%, but in the rest of the world by only 9.9%. During this same decade global population grew by nearly 800 million, or roughly 15%, while population in the US grew by only 10%. Thus people in the US were increasing their energy use per capita, while those in the rest of the world were, on average, decreasing theirs noticeably. China is the only less-industrialized country that is significantly growing its per-capita energy use.
Still another important level of detail concerns non-conventional oil sources—heavy oil, polar oil, deepwater oil, tar sands, and natural gas liquids—which are typically more expensive to produce than is conventional oil. In the early 1970s, these sources made up an insignificant part of the total global oil market, but today they account for nearly twenty percent of total oil produced. The EIA gives current oil production at about 76 mb/d, of which nearly 15 mb/d is from non-conventional sources. A consumption curve that takes these sources into account shows oil production growing more steeply from 1984 on, as compared to a graph of conventional oil only, though even the EIA figures for combined conventional and non-conventional oil reveal flat or negative growth since 2000.
Analysis of these statistics suggests that the plateau period that began in
the early 1970s is divisible into sectors.
First, there are temporal sectors, or stages.
• The first stage of the plateau (1974–1984) was characterized
by limits to energy growth issuing from political events, and the increasing
reliance by the US upon oil imports. Efforts toward increased energy conservation
• The second stage (1984–1990) was a time of Cold War and the fraying of the Soviet empire. Oil prices fell, and some efforts toward energy conservation were abandoned. The world economy began a partial recovery from the oil shocks of the 1970s, though at a lower overall rate of growth.
• The third stage (1990—2000) corresponds with the era of economic globalization, in which the industrial system was restructured to shift production to areas with lower labor cost, and to guarantee industrialized nations’ access to resources elsewhere through global trade agreements. Total energy use continued to grow, primarily in the US and in industrialized or industrializing East Asian countries, still at a slower rate than the pre-1973 years.
• The fourth stage (2000–present) represents a period of increasing economic constraints due partly to the gradual appearance of actual resource limits (the peak in production of North Sea oil and of the non-OPEC countries in aggregate), to political and geopolitical events (the ascendancy of the neoconservatives in the US; 9/11 and its aftermath; the Afghanistan and Iraq invasions); and to diminishing returns from the strategy of corporate globalization. This period is also characterized by increasing reliance on more expensive non-conventional petroleum sources
• The fifth stage will begin when it is clear that geological limits are constraining economic activity and will continue to do so despite any and all efforts. The first sign of stage five will likely come next year with natural gas shortages in North America.
Then, on a separate axis, one can visualize four economic sectors within the plateau:
• The US and Canada, with per-capita rates of energy usage roughly twice
those of other industrialized nations (8076 and 7930 kilograms of oil-equivalent
energy used per capita per year in 1997, respectively);
• Europe and Japan (range: Spain, 2729 to Finland, 6435);
• The less-industrialized world, with per-capita rates of energy use less than one-quarter to about one-half those of most European countries (range: Bangladesh, 197 to Brazil, 1051);
• OPEC nations, whose per-capita energy use ranges between those of sectors two and three (Indonesia, 693 to Kuwait, 8936—the latter consumption figure surpassing that of the US). This sector itself thus needs to be subdivided into “rich OPEC” (Kuwait and Saudi Arabia) and “poor OPEC” (Indonesia, Nigeria, Iran, Iraq, Algeria, and Venezuela).
NAVIGATING THE PLATEAU
History might have been different. If the oil crises of the 1970s had not occurred, the global use of global oil might have conformed more closely to the classic Hubbert bell curve. The peak of the curve for oil extraction would have come and gone in the 1990s, and we might now be in the midst of social and economic chaos.
The fact that we are in a plateau period that began nearly three decades ago and that may continue, in some form, for another decade or even two means that we may have some room for maneuvering. However, there is no guarantee that we will make constructive use of this borrowed time. Just as humans became accustomed to the age of rapid energy growth (1800-1973) and assumed that it would last forever, many people have become accustomed to life on the plateau and assume that it, too, will persist indefinitely. Humans seem genetically hardwired to react to problems on only a relatively immediate basis. Ones that take years or decades to manifest require us to exercise faculties of analysis and response that are poorly developed in most citizens, and indeed in most of our social and economic institutions and their managers.
Nevertheless the plateau period is a time of fateful choice. It is possible—likely, in fact—that we will collectively fail to recognize the nature of our dilemma, and will hence suffer the consequences. However, it is theoretically possible for us to foresee those consequences and plan for a difficult but survivable transition to a lower-energy regime.
In lectures, I’ve taken to describing these two paths as Plan A and Plan B—or Plan War and Plan Powerdown.
Humankind can follow Plan War merely by continuing on its present course, planning for further growth even as the necessary resource basis for that growth is depleted. Given that some societies use energy resources at a higher rate than others do, that resources are not evenly distributed geographically, and that military power is also unevenly distributed among nations, the eventual results are not difficult to predict. As national leaders become aware of resource constraints, those with the most military power will be likely to use that power to ensure their country’s unequal access to resources through enforced control of resource-rich regions. Energies and monies that could potentially be invested in conservation and transition will instead be soaked up by competition and military confrontation. Given the weapons available, the ultimate result could be horrific indeed.
Plan Powerdown, in contrast, will require the political will, on the part of leaders, to persuade national populations to change their priorities in fundamental ways. International efforts toward conservation and cooperation will be needed in order to identify and reduce non-essential energy uses. Alternative energy sources that are not currently competitive with fossil fuels would have to be subsidized, and the use of fossil fuels taxed to encourage their conservation. Economic processes would need to be localized and downsized.
One of the greatest challenges of Plan Powerdown would be to sustain levels of effort for decades, even during periods when no immediate emergency is apparent. During such times, people will be motivated to view partial solutions as being complete—to see every promising technical innovation as a means to return to energy gluttony. People would be tempted, in other words, to imagine that there is a Plan C—a Plan Snooze, we might call it, as it would in effect be a rationale to enable the populace to sleep fitfully until it is simply too late to do anything to avoid the worst consequences of the energy decline. There are already many available avenues toward the pursuit of Plan Snooze.
The April issue of Discover magazine featured an article titled “Anything into Oil,” describing a newly developed process—thermal depolymerization—which can efficiently transform many kinds of agricultural and industrial waste into a highly usable form of synthetic petroleum. Readers of the article could easily get the impression that thermal depolymerization will solve our oil and energy problems.
Of course, the reality is not so simple. Thermal depolymerization is a process that will help an industrial society’s energy efficiency as that society gradually loses power due to oil depletion. It is great news, but not a true solution.
Why not? Whatever comes out of the process will inevitably carry less useful energy than what went into the process (this is necessitated by the laws of thermodynamics). True, what goes in is likely to be stuff that, for the most part, would otherwise just end up in a landfill, so there is an overall gain in energy efficiency for the society. However, most of that “waste” input (including plastics, tires, and turkey guts) is stuff produced using high-grade energy from fossil fuels (e.g., tractors burning diesel fuel, plastics made and transported using oil). Thus as there is less “virgin” petroleum available to do work in society, there will be less “waste” available to be transformed into depolymerized oil. The latter will help slow the depletion process (again, there will greater energy efficiency for the society), but over the long haul it cannot overcome the downward momentum of overall net energy availability.
Now, as I have already said, thermal depolymerization is potentially a good thing. It could help us find our way peacefully down the energy-resource depletion curve. However, if the process is advertised—and assumed to be—a means to maintain business as usual, it could in effect not be a good thing at all. Much the same could be said of hydrogen fuel cells, cold fusion, tar sands, and dozens of other recent or potential energy innovations, as well as “sustainable development” and the various business greenwashing initiatives. Whether they are useful strategies or mere distractions preventing us from grasping the essential nature of our dilemma and undertaking the hard choices associated with Plan Powerdown will depend on the way they are perceived. And that in turn will depend on attitudes fostered by political and economic leaders of the society.
Why is it so important that people be disabused of rosy hopes for Plan Snooze? Everyone loves an optimist, after all, and nothing smothers investment and commerce like talk of doom and gloom. Yet with each passing year, the adoption of Plan Powerdown carries ever-greater political and social costs. It has an expiration date. If transition efforts are undertaken when societies are still relatively well off, the work (or pain, depending on how one looks at it) can be spread around more easily. There are still surpluses that can be channeled in new directions. The longer we wait, the more of us there are to take care of, the fewer surpluses are available, and the fewer are our options.
This is not the case with Plan War. Bitter competition for remaining resources can erupt at any time; indeed, all concerned will have to exert considerable effort to avoid this path even if they have ostensibly signed on to Plan Powerdown.
The US is clearly on the path of Plan War, and, since the US is the world’s largest energy user, it will inevitably set the pace for the rest of the world. America has the capacity to ensure the destruction of human civilization, and perhaps of all higher life on the planet, or to lead the way toward survival and a return to a sane, more localized, more sustainable mode of human existence.
But of course if Plan Powerdown is politically problematic elsewhere, it is particularly so in the US. In most other countries, higher fuel prices have encouraged efficiency measures in the design of basic social infrastructure. Not so here, where the government subsidizes the sales of SUVs with $20,000 tax breaks.
So: how can the US be brought on board Plan Powerdown?
The simplest solution would be for a change of policy to come from within America itself. However, the neoconservatives in the current administration have taken charge of the executive, legislative, and judicial branches of government. They are also rebuilding the military and intelligence bureaucracies to suit their own ideology (though not without some little-publicized resistance to their efforts). Moreover, there is evidence to suggest that the 2004 national elections will be illegally manipulated via unsupervised computer voting machines. While it is true that there is a division among ruling elites between the neocons on one hand and the internationalist wing of the business community on the other (the latter was much happier with Clinton), the neocons—for all their delusionality about diplomacy and geopolitics—are masters at gaining and maintaining power. Even the internationalist money masters may have difficulty ousting them. Thus there is currently no power base in American society that appears capable of successfully challenging the Plan-War neocons.
The alternative is for an impetus toward change in US policy to come from
abroad. Already people in many nations (especially in Europe and the Arab countries)
are organizing boycotts of US goods. These efforts, if they become widespread,
could have a noticeable impact on the US economy, if not on policy decisions.
Foreign governments abandoning the US dollar as reserve currency in favor of the euro could exert even greater pressure. Early this month, Indonesia announced its intention to switch currencies. The growing movement to abandon the dollar may be the real reason for the Federal Reserve’s decision to deliberately begin devaluing the US currency: they thus make it less of a target and ensure that it will have less distance to fall when it inevitably does tumble.
The American neocon leaders will likely respond combatively. It is foolish to imagine that they can be persuaded to change their stripes, since Plan War is the essence of their worldview. The only hope of changing US policy is thus to bring so much pressure to bear on the system that the neocons become vulnerable to some sort of palace coup. The subsequent installation of an internationalist regime would not be a solution to the world’s problems or to America’s, but it would constitute a necessary step in the path toward Plan Powerdown.
That project is currently not well understood by the government or population
of any country. True, the Europeans feel a need for greater cooperation, while
Third World nations are interested in greater sharing of resources internationally.
But the interests of the more-industrialized and less-industrialized nations
diverge in many respects.
The success of Plan Powerdown will require that citizens of all nations make a clear, unambiguous, and unswerving commitment to reduce (not just stabilize) energy use, and therefore economic activity; to downsize the human population of the planet in the most humane and democratic ways possible; to relocalize commerce; and to rebuild culture and community. Over time, national governments must, in effect, get into the business of making themselves obsolete, as people in localities around the planet develop new governance structures that make sense within a reduced scale of human community.
The more-industrialized nations will have to give up many of their advantages, so that the disparities described in the statistics cited above are systematically lessened; meanwhile less-industrialized nations (including China) will have to forego industrializing. None of this will be simple or easy.
There is not enough time left in the remainder of the petroleum plateau period to implement all of these changes. The most we can hope for is to gain a shared commitment on the part of all nations to move along the path of relocalization and a coordinated energy transition. If we can accomplish that much, we will indeed have cause for celebration. q
Thanks to subscriber Pat Murphy for compiling and calling my attention to statistics cited above from the CIA web site.
Oil production from deep historical perspective, in millions of barrels per year. From a distance, it looks like a sharp peak.
Conventional oil production from a closer perspective: the plateau becomes clearly visible—1974 to the present. In thousands of barrels per day.