Saturday, May 20, 2006
How I learned to start worrying and love the PO Bomb
Here's a personal story of my discovery of peak oil . . . . If you want to use this also in some way at your site, welcome to it.
A Personal Peak Oil Discovery Process
John Rawlins, Bellingham Washington
I recall reading a Scientific American article in 1998 about world oil supply. Colin Campbell and Jean Leherrere predicted that the world oil extraction rate would increase until around 2005-2010, then peak and quickly enter decline, with decline rates of a few percent per year. That seemed interesting but not all that worrying to a 58 year old semi-retired nuclear physicist teaching astronomy and physics in a community college in northwest Washington state. I posted their graphs on my office door and occasionally discussed the topic with students. But I didn't really get it. Just having less gasoline for transportation is the least of our worries. So I basically did nothing to begin getting ready for the cursed event until more recently. Now, in May 2006, world oil extraction seems to be peaking, gasoline prices are rising even before the summer driving season, the next hurricane season starts soon, geopolitical nightmares are developing in many oil-producing regions, and my wife and I feel unprepared for (and worried about) collapse.
In my previous career with Westinghouse Hanford Company in eastern Washington, I spent a few very frustrating years in the early 1990s working on U.S. energy policy issues. In the end I was convinced that our democratic form of government is totally unable to formulate a wise, technically coherent, long-lasting national energy policy. Fifteen years later, my worst fears are being realized, and my faith in any government "solution" is at absolute zero for this country. We consume far too much energy, and two-thirds of what we consume depends on fuels that are no longer reliable: oil and natural gas. Of these, oil is the most fundamental: almost everything that moves uses an oil derivative for fuel.
In the fall of 2003 our investment advisor noted that our portfolio was heavy in big oil stocks and she suggested we review our situation and think about changing our investment profile. I visited a local bookstore and browsed for recent books on oil and just happened to buy Richard Heinberg's book "The Party's Over." What a surprise reading that was during the December 2003 holiday break! His thesis: world oil extraction would soon peak, and everything in our life would change because everything depends to some extent on oil, the economy would disintegrate, and chaos would likely envelop the world of all who depend on oil. Furthermore, he claimed that alternatives to oil would prove insufficient by a large margin. In a state of semi-shock I began reading everything I could find on the subject.
First I looked for predictions about oil supply from retired, independent oil geologists and read a book by Ken Deffeyes, who worked with M.K. Hubbert. Hubbert developed a method for predicting oil extraction time profiles, given a few decades of extraction and discovery experience. I then read similar treatments by other retired oil geologists and found that to first order they were in agreement with the original predictions I'd seen from Campbell and Leherrere in 1998. My worry factor increased because I was unable to conclude how to protect our investments from this oil-depleted future.
My next major discovery was the food connection, which I suspected could be a problem. The dean at our college sent me a Harpers Magazine article about the "oil we eat," which argued that our food production since the green revolution has become at least 90% correlated with and dependent on oil and natural gas. A more detailed analysis by Dale Allen Pfeiffer confirmed this conclusion. So now I had to find out about the natural gas situation, another unhappy story. Soon I found a book by Julian Darley called "High Noon for Natural Gas," which warned that gas extraction in North America was about to peak (it did), and that prices would rise and decline could be rapid (they did, and it is). He further warned that world extraction rates would peak soon after oil peaked. In that case increasing U.S. imports of natural gas in the form of Liquified Natural Gas (LNG) would not be a rescue option for long, and a poor investment in any case.
About this time I began teaching an introductory physics/energy course at the college, and the course focuses on the peak oil problem and potential adaptations. During that teaching process, I became convinced that Heinberg and others were absolutely correct in asserting that no combination of alternatives to oil could come anywhere close to replacing oil at present use levels. That includes coal to liquids, natural gas, oil shale, methane hydrates, hydrogen, ethanol, bio-diesel, and nuclear/wind/solar-based electric (including compressed air) cars comparable in size with today's subcompacts. The required adaptation time (2-3 decades) is quite simply not available. This is a scary conclusion for a technocrat like me.
Finally I found a book about investing viewed through the lens of peak oil, by Stephen and Donna Leeb. The Leebs reiterated all the peak oil predictions I'd stumbled on and recommended investing in a variety of stocks, mostly related to energy. We rather quickly loaded up even more heavily in energy and mining stocks and eliminated stocks from our portfolio that we thought would not do well in a world of high oil and gas prices and never- ending inflation. With that issue finally settled we began to do things to get ready for a future of permanent shortage.