Post Peak Oil - Anarchy and Riots in the Streets

Was sent this and do not know the author. If you know let me know so I can give the person proper credit. The content should be of interest to everyone as we watch the oil prices skyrocket.

I do not believe we are running out of oil. The US is believed to have stored 'reserves' but this I believe would largely be for military purposes when push comes to shove. It won't be for your SUV. That is for sure.

Peak Oil is really about available cheap supply getting to a market totally dependent on it for virtually everything. Read on...


Dear Reader,

Civilization as we know it is coming to an end soon. This is not the wacky proclamation of a doomsday cult, apocalypse bible prophecy sect, or conspiracy theory society. Rather, it is the scientific conclusion of the best paid, most widely-respected geologists, physicists, bankers, and investors in the world. These are rational, professional, conservative individuals who are absolutely terrified by a phenomenon known as global "Peak Oil."

Peak Oil is also called "Hubbert's Peak," named for the Shell geologist Dr. Marion King Hubbert. In 1956, Hubbert accurately predicted that US domestic oil production would peak in 1970. Source#1 Source #2 He also predicted global production would peak around the year 2000, which it would have had the politically created oil shocks of the 1970s not delayed it for about 5-10 years.

A mere 15% shortfall in oil production will spike oil prices by 550%

Robert Hirsch on CNBC: Gasoline will soon be $12-to-$15 per gallon

"Big deal. If gas prices get high, I’ll just drive less. Why should I give a damn?"

Because petrochemicals are key components to much more than just the gas in your car. As of the year 2002, approximately 10 calories of fossil fuels are required to produce every 1 calorie of food eaten in the US. Source The size of this ratio stems from the fact that every step of modern food production is fossil fuel and petrochemical powered:

Pesticides and agro-chemicals are made from oil;

Commercial fertilizers are made from ammonia, which is made from natural gas, which is also peaking in the near future. Source

Most farming implements such as tractors and trailers are constructed and powered using oil-derived fuels.

Food storage systems such as refrigerators are manufactured in oil-powered plants, distributed using oil-powered transportation networks and usually run on electricity, which most often comes from natural gas or coal. Like oil and natural gas, coal too is peaking in the near future. Source

In the US, the average piece of food is transported almost 1,500 miles before it gets to your plate. Source In Canada, the average piece of food is transported 5,000 miles from where it is produced to where it is consumed. Source

A recent article published by CNN documented just how much fossil fuel energy is used to produce our food. Emphasis added:

In the U.S., up to 20 percent of the country's fossil fuel consumption goes
into the food chain which points out that fossil fuel use by the food system
in the developed world "often rivals that of automobiles". To feed an
average family of four in the developed world uses up the equivalent
of 930 gallons of gasoline a year - just shy of the 1,070 gallons that
same family would use up each year to power their cars. Source

According to the Organic Trade Association, the production of one pair of regular cotton jeans takes three-quarters of a pound of fertilizers and pesticides. Source

In short, people gobble fossil fuels like two-legged SUVs.

Why our food is so dependent on oil

Will the end of oil be the end of the end of food?

How will we grow food after Peak Oil?

Hungering for natural gas

"Are all forms of modern technology actually petroleum products?"

Yes.

It's not just transportation and agriculture that are entirely dependent on abundant, cheap oil. Modern medicine, water distribution, and national defense are each entirely powered by oil and petroleum derived chemicals.

In addition to transportation, food, water, and modern medicine, mass quantities of oil are required for all plastics, all computers and all high-tech devices. Some specific examples may help illustrate the degree to which our technological base is dependent on fossil fuels:

Automobiles:

The construction of an average car consumes the energy equivalent of approximately 20 barrels (840 gallons) of oil. Source Ultimately, the construction of a car will consume an amount of fossil fuels equivalent to twice the car’s final weight. Source

It's also worth noting that the construction of an average car consumes almost 120,000 gallons of fresh water. Source Fresh water is also rapidly depleting and happens to be absolutely essential to the petroleum refining process as each gallon of gasoline requires almost two gallons of fresh water for refining. Source

Computers:

The construction of the average desktop computer consumes ten times its weight in fossil fuels. Source

Microchips:

The production of one gram of microchips consumes 630 grams of fossil fuels. According to the American Chemical Society, the construction of single 32 megabyte DRAM chip requires 3.5 pounds of fossil fuels in addition to 70.5 pounds of water. Source

The Environmental Literacy Council tells us that due to the "purity and sophistication of materials (needed for) a microchip, . . . the energy used in producing nine or ten computers is enough to produce an automobile." Source

In his book "The Nine Nations of North America", author Joel Garreau explains in graphic detail just how much energy it takes to fashion a typical microprocessor:

. . . microchips are not made one by one. They are printed in a batch on
a silicon wafer, say, four inches in diameter. Each time a layer of stuff is
printed on this silicon wafer, the wafer must be treated so the stuff you've
laid on will stay there. This process is achieved through the application of
monumental quantities of energy. In effect, as each layer of the circuit is
laid on, the whole wafer is "baked" at temperatures sometimes high
enough to reach the outer limits of technology. Source

The Internet:

Contrary to popular belief, the internet consumes tremendous amounts of energy. Author John Michael Greer explains:

The explosive spread of the internet, finally, was also a product of the era
of ultracheap energy. The hardware of the internet, with its worldwide
connections, its vast server farms, and its billions of interlinked home and
business computers, probably counts as the largest infrastructure project
ever created and deployed in a two decade period in history. The sheer
amount of energy that's been been invested to create and sustain the
internet beggars the imagination. Source

Recent estimates indicate the infrastructure necessary to support the internet consumes 10% of all the electricity produced in the United States. Source The overwhelming majority of this electricity is produced using coal or natural gas, both of which, as explained momentarily, are also near their global production peaks. Source #1 Source #2 Source #3 Source #4 Source #5

Concrete, Asphalt, Highways, and Modern Cities:

It is hard to precisely quantify how much energy is necessary to construct and maintain a modern city. Some of NASA's recent images of cities, however, hint that the volumes energy invested in modern cities is almost unfathomably prodigious. Consider, for instance, the following NASA image of Los Angeles:

Image of Los Angeles, courtesy of NASA's Visible Earth Site

When studying the above image, keep in mind that the manufacturing of one ton of cement requires 4.7 million BTUs of energy, which is the amount contained in about 45 gallons of oil or 420 pounds of coal. Source

"What about alternative energy systems like solar panels and wind turbines? Are they also manufactured using petroleum and petroleum derived resources?"

Yes.

When considering the role of oil in the production of modern technology, remember that most alternative systems of energy ­ including solar panels/solar-nanotechnology, windmills, hydrogen fuel cells, biodiesel production facilities, nuclear power plants, etc. all rely on sophisticated technology and energy-intensive forms of metallurgy.

In fact, all electrical devices make use of silver, copper, aluminum and platinum, each of which is discovered, extracted, and fashioned using oil or natural gas powered machinery. For instance, in his book, The Lean Years: Politics of Scarcity, author Richard J. Barnet writes:

To produce a ton of copper requires 112 million BTU's or the equal of 17.8
barrels of oil. The energy cost component of aluminum is 20 times higher.

Author Joel Garreau, in the same chapter of his book "The Nine Nations of North America" that was cited above, explains how energy-intensive the manufacture of aluminum is:

The manufacturing of aluminum requires inexpensive energy as its most
important raw material. It takes twelve times as much power to create a
pound of aluminum as it does to make a pound of iron. A good sized
aluminum plant uses as much power as a city of 175,000 people. Source

Nuclear energy requires uranium, which is also discovered, extracted, and transported using oil powered machinery.

For more information on metals shortages and energy production, see:

Scarcity of aluminum, copper threaten solar installations

Scarcity of highly refined silicon threatens solar industry

Dwindling supply of rare metals imperils innovation

World running out of platinum, common elements

Global shortage of metals looming
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Most of the feedstock (soybeans, corn) for biofuels such as biodiesel and ethanol are grown using the high-tech, oil-powered industrial methods of agriculture described above.

In short, the so called "alternatives" to oil are actually "derivatives" of oil. Analyst John Michael Greer offers the following rather lucid explanation of this often over-looked relationship:
The issue is not one of "running out" so much as it is not having enough to keep our economy running. In this regard, the ramifications of Peak Oil for our civilization are similar to the ramifications of dehydration for the human body. The human body is 70 percent water. The body of a 200 pound man thus holds 140 pounds of water. Because water is so crucial to everything the human body does, the man doesn't need to lose all 140 pounds of water weight before collapsing due to dehydration. A loss of as little as 10-15 pounds of water may be enough to kill him.

In a similar sense, an oil based economy such as ours doesn't need to deplete its entire reserve of oil before it begins to collapse. A shortfall between demand and supply as little as 10 to 15 percent is enough to wholly shatter an oil-dependent economy and reduce its citizenry to poverty.

The effects of even a small drop in production can be devastating. For instance, during the 1970s oil shocks, shortfalls in production as small as 5% caused the price of oil to nearly quadruple. The same thing happened in California a few years ago with natural gas: a production drop of less than 5% caused prices to skyrocket by 400%.

Fortunately, those price shocks were only temporary.

The coming oil shocks won't be so short lived. They represent the onset of a new, permanent condition. Once the decline gets under way, production will drop (conservatively) by 3% per year, every year. War, terrorism, extreme weather and other "above ground" geopolitical factors will likely push the effective decline rate past 10% per year, thus cutting the total supply by 50% in 7 years. Source

These estimate comes from numerous sources, not the least of which is Vice President Dick Cheney himself. In a 1999 speech he gave while still CEO of Halliburton, Cheney stated:

By some estimates, there will be an average of two-percent annual growth
in global oil demand over the years ahead, along with, conservatively, a
three-percent natural decline in production from existing reserves. That
means by 2010 we will need n additional 50 million barrels per day. Source
Cheney's assesement is supported by the estimates of numerous non-political, retired, and now disinterested scientists, many of whom believe global oil production will peak and go into terminal decline within the next five years, if it hasn't already. Source

Many industry insiders think the decline rate will far higher than Cheney anticipated in 1999. Andrew Gould, CEO of the giant oil services firm Schlumberger, for instance, recently stated that "An accurate average decline rate of 8% is not an unreasonable assumption." Source Some industry analysts are anticipating decline rates as high as 13% per year. Source A 13% yearly decline rate would cause gobal production to drop by 75% in less than 11 years.

If a 5% drop in production caused prices to triple in the 1970s, what do you think a 50% or 75% drop is going to do?

Estimates coming out of the oil industry indicate that this drop in production has already begun. Source The consequences of this are almost unimaginable. As we slide down the downslope slope of the global oil production curve, we may find ourselves slipping into something best described as a "post industrial stone age." Source

Some people believe that no new refineries have been built due to the efforts of environmentalists. This belief is silly when one considers how much money and political influence the oil industry has compared to the environmental movement. Do you really think Ronald Reagan and George H. Bush were going to let a bunch of pesky environmentalists get in the way of oil refineries being built if the oil companies had really wanted to build them?

The real reason no new refineries have been built for almost 30 years is simple: any oil company that wants to stay profitable isn't going to invest in new refineries when they know there is going to be less and less oil to refine.

In addition to lowering their investments in oil exploration and refinery expansion, oil companies have been merging as though the industry is living on borrowed time:

December 1998: BP and Amoco merge;

April 1999: BP-Amoco and Arco agree to merge;

December 1999: Exxon and Mobil merge;

October 2000: Chevron and Texaco agree to merge;

November 2001: Phillips and Conoco agree to merge;

September 2002: Shell acquires Penzoil-Quaker State;

February 2003: Frontier Oil and Holly agree to merge;

March 2004: Marathon acquires 40% of Ashland;

April 2004: Westport Resources acquires Kerr-McGee;

July 2004: Analysts suggest BP and Shell merge;

April 2005: Chevron-Texaco and Unocal merge;

June 2005: Royal Dutch and Shell merge;

July 2005: China begins trying to acquire Unocal

June 2006: Andarko proposes buying Kerr McGee

July 2007: BP-Shell "Mega Merger" rumored

While many people believe talk of a global oil shortage is simply a conspiracy by "Big Oil" to drive up the prices and create "artificial scarcity," the rash of mergers listed above tells a different story. Mergers and acquisitions are the corporate world's version of cannibalism. When any industry begins to contract/collapse, the larger and more powerful companies will cannibalize/seize the assets of the smaller, weaker companies.

(Note: for recent examples of this phenomenon outside the oil industry, see the airline and automobile industries.)

The Big Oil companies have also been (quitely) buying back their own stock at an alarming rate. According to an Bloomberg News article dated October 1st, 2007:

As mentioned previously, this is exactly what happened during the oil shocks of the 1970s - shortfalls in supply as little as 5% drove the price of oil up near 400%. Demand did not fall until the world was mired in the most severe economic slowdown since the Great Depression. The only thing that alleviated the economic crisis was the discovery of the world's last few "elephant" sized oil fields in the North Sea and Alaska as well as increased production from nations like Venezuela and Saudi Arabia. Once global oil production peaks (if it hasn't already) turning to new sources of supply won't be an option.

As affordable oil is necessary to power any serious attempt at an a switchover to alternative sources of energy, these extreme prices will severely hamstring if not - completely cripple - the ability of the market to handle these problems. The economic fallout from high prices will almost certainly geopolitical tensions (i.e. war) thereby futher hampering the development of large-scale alternative sources of energy. Worse still, in a global environment characterized by massive energy-wars, the bulk of the world's financial capital is likely to be disproportionately invested in weapons technologies over alternative energy technologies.

For more information, see:

Big Banks preparing for Peak Oil by investing in weapons-makers

The markets begin facing Peak Oil

Our highly-efficient economy is highly-susceptible to catastrophe

Fundamental errors of free market ideology in regards to energy

It is becoming evident that the financial and investment community begins to accept the reality of Peak Oil, which ends the first half of the age of oil. They accept that banks created capital during this epoch by lending more than they had on deposit, being confident that tomorrow’s expansion, fuelled by cheap oil-based energy, was adequate collateral for today’s debt. The decline of oil, the principal driver of economic growth, undermines the validity of that collateral which in turn erodes the valuation of most entities quoted on Stock Exchanges. Source
Commentator Robert Wise explains the connection between energy and money as follows:
It's not physics, but it's true: money equals energy. Real, liquid wealth represents usable energy. It can be exchanged for fuel, for work, or for something built by the work of humans or fuel-powered machines. Real cost reflects the energy cost of doing something; real value reflects the energy expended to build something.

Nearly all the work done in the world economy, all the manufacturing, construction, and transportation, is done with energy derived from fuel. The actual work done by human muscle power is miniscule by comparison. And, the lion's share of that fuel comes from oil and natural gas, the primary sources of the world's wealth. Source
In October 2005, the normally conservative London Times acknowledged that the world's wealth may soon evaporate as we enter a technological and economic "Dark Age." In an article entitled "Waiting for the Lights to Go Out" Times columnist Bryan Appleyard reported:
Oil is running out; the climate is changing at a potentially catastrophic rate; wars over scarce resources are brewing; finally, most shocking of all, we don't seem to be having enough ideas about how to fix any of these things.

Almost daily, new evidence is emerging that progress can no longer be taken for granted, that a new Dark Age is lying in wait for ourselves and our children . . . growth may be coming to an end. Since our entire financial order from interest rates, pension funds, insurance, to stock markets is predicated on growth, the social and economic consequences may be cataclysmic. Source
If you want to understand just how cataclysmic these consequences might be, consider the current crisis in the UK as a "preview of coming attractions." The London Telegraph recently reported:
The Government has admitted that companies across Britain might be forced to close this winter because of fuel shortages. "The balance between supply and demand for energy is uncomfortably tight. I think if we have a colder -than-usual winter given the supply shortages, certain industries could suffer real difficulties." The admission was made after this newspaper revealed that Britain could be paralysed by energy shortages if the winter is colder than average.

The Met Office says there is a 67 per cent likelihood of prolonged cold this year after almost a decade of mild winters. That, coupled with high fuel prices, raises the fear that industry will not be able to cope. Source
In May 2007 the London Times published excerpts from a study about the future of Britain's electrical grid. According to the study, fears of a catastrophic energy crisis occuring within the next 10 years can no longer be dismissed as "apoclyptic fantasies", emphasis added:
Across Britain, cities are plunged into darkness. In London, the Underground grinds to a halt, leaving panicked commuters stranded in oppressively hot carriages. In office blocks, lifts stop operating and the air-conditioning shuts down. Employees swelter in stifling conditions.

This is not the postapocalyptic vision of some film-maker, but a realistic scenario as Britain grapples with a looming energy crisis. The statistics are frightening. In only eight years, demand for energy could outstrip supply by 23% at peak times, according to a study by the consultant Logica CMG. The loss to the economy could be £108 billion each year. Source

The severe consequences of these shortfalls have prompted the UK government to look into draconian energy conservation measures that would be enforced via house-to-house searches by a force of "energy-police."

Parts of the US are facing similarly dire possibilities. For example, US News and World Report recently published a six page article documenting the nightmarish scenarios soon to unfold across North America. According to the normally conservative publication, people in the northeastern US could soon be facing massive layoffs, rotating blackouts, permanent industrial shutdowns, and catastrophic breakdowns in public services as a result of shortages of heating oil and natural gas. Source

The age of technological revolution is coming to an end

Pentagon physicist: "We are entering a dark age of innovation"

"What does all of this mean for me?"

What all of this means, in short, is that the aftermath of Peak Oil will extend far beyond how much you will pay for gas. To illustrate: in a July 2006 special report published by the Chicago Tribune, Pullitzer Prize winning journalist Paul Salopek described the consequences of Peak Oil as follows:
. . . the consequences would be unimaginable. Permanent fuel shortages would tip the world into a generations-long economic depression. Millions would lose their jobs as industry implodes. Farm tractors would be idled for lack of fuel, triggering massive famines. Energy wars would flare. And carless suburbanites would trudge to their nearest big box stores, not to buy Chinese made clothing transported cheaply across the globe, but to scavenge glass and copper wire from abandoned buildings. Source
Journalist Jonathan Gatehouse summarized the conclusions of Oxford trained geologist Jeremy Leggett, author of The Empty Tank: Oil, Gas, Hot Air, and the Coming Financial Catastrophe, in a 2006 Macleans article as follows, emphasis added:
. . . when the truth can no longer be obscured, the price will spike, the economy nosedive, and the underpinnings of our civilization will start tumbling like dominos. "The price of houses will collapse. Stock markets will crash. Within a short period, human wealth -- little more than a pile of paper at the best of times, even with the confidence about the future high among traders -- will shrivel." There will be emergency summits, diplomatic initiatives, urgent exploration efforts, but the turmoil will not subside. Thousands of companies will go bankrupt, and millions will be unemployed. "Once affluent cities with street cafés will have queues at soup kitchens and armies of beggars. The crime rate will soar. The earth has always been a dangerous place, but now it will become a tinderbox."

By 2010, predicts Leggett, democracy will be on the run . . . economic hardship will bring out the worst in people. Fascists will rise, feeding on the anger of the newly poor and whipping up support. These new rulers will find the tools of repression -- emergency laws, prison camps, a relaxed attitude toward torture -- already in place, courtesy of the war on terror. And if that scenario isn't nightmarish enough, Leggett predicts that "Big Oversight Number One" -- climate change -- will be simultaneously making its presence felt "with a vengeance." On the heels of their rapid financial ruin, people "will now watch aghast as their food and water supplies dwindle in the face of a climate going awry." Prolonged droughts will spread, decimating harvests. Source

If you are focusing solely on the price at the pump, buying a hybrid car, or getting some of those energy efficient light bulbs, you aren’t seeing the bigger picture.

Heed the Warning Signs - NOW!