Adapting the economy to the lack of oil

(Graphics from cover jacket of Greg Greene’s documentary The End of Suburbia).

The awareness of a possible depletion of the world oil reserves of the 70s was useful for many philosophical schools to justify their own moral. For the Malthusians of the Club of Rome, the ideology of growth leads to the end of humankind. Since the industrial civilization can not be modified, then the population must be reduced. But the discovery of new deposits (especially in the North Sea) and the emergence of new and more effective techniques for oil exploitation delayed the advent of difficulties and ridiculed the prophets of misfortunes. Thus, when decision makers are reminded about this issue, the public opinion does not take it into account.

The sources of fossil fuels (coal, oil and gas) are limited and the amount of reserves in the planet is unknown, especially if we consider that the attention certain States get from international institutions and the stock markets depend on the oil capacity they might have. Therefore, they tend to exaggerate the importance of their resources and to exaggerate it even more when their rivals reach similar figures. In short, official figures are false. They don’t show objective balances and they are part of a tricky poker game between States and oil companies. The assessment is even more difficult for there are other kinds of oil. For convenience, only conventional oil, easy to extract and refine, and non conventional oil, whose exploitation is sort of interesting, are distinguished. Economists point out that due to the law of supply and demand, deposits whose exploitation is extremely expensive will be profitable when oil prices are raised. But technicians say whatever the selling prices are, certain deposits will never be exploited because it would take more energy than the produced by the already extracted hydrocarbons. In this case, thermodynamics impose limits to the market law.

Even when the exploitable quantities of non conventional oil are unknown, the experts make their estimates on the amount of conventional oil that is still left and the Lake of Geneva is big enough to store it. This means that if we consider the economic growth and the permanent raise of demand it causes we would exhaust this kind of oil in the next four or five years. Therefore, such a source of energy will definitely be more expensive.

The moment in which the production will be at its peak and after which the oil crisis will begin is known as “Peak Oil”. Several researchers have tried to exactly determine when it will happen. However, in general terms, the concept has no meaning because if you can objectively talk about the “peak” of production for a specific oil well the same thing can not be done in regards with the market. Many deposits have reached their production peak and many have been totally depleted. The concept shows a very well defined reality, though: for the moment, the exploitation of good oil reserves is more expensive and the prices are still raised. Even if prices are fixed, in a short period of time the production will not meet the demand. Then, we’ll have a poor economy.

This element will bring about no major changes on the profits of oil companies which will recover -thanks to the difference in their selling price- what they lose in volume. But there will not be enough fuel for transportation and industry, including food and agriculture. Then, we’ll have to look for and adapt ourselves to other sources of energy. Contrary to what certain expressions suggest, there are no alternative energies to oil but sources of alternative energy: all kinds of energy are equivalent but a plane can not fly with solar panels and fertilizers can not be made with a windmill. In many cases, gas (limited too) will successfully replace oil [1]. This will affect the commercial flow because even when it is easy to transport oil in big ships the same can not be done with methane gas due to the fact that huge volumes of gas must be transported through pipelines. The United States, which has no gas in its own territory or that of its closest neighbors, won’t be able to import this kind of fuel as long as Russia supplies Western Europe, a perspective that means there may be deep changes in the alliances.

What determines the consumption of energy of a country is the lifestyles of its people and not the level of industrial development. The Americans consume twice as much energy as the Europeans use and they mainly use it in transportation. This is the reason why the provisioning of oil has become the great priority of the Bush Administration [2]. Since his arrival at the White House, George W. Bush gave Vice-president Dick Cheney a mandate to direct a serious study and make certain political decisions. It is obvious that Cheney’s team public report was sweetened [3] and there is a direct conflict between the White House and the US Congress on this topic.

According to the slogan of the White House, the Americans’ lifestyles are not negotiable [4]. Consequently, oil must be supplied to the domestic market as long as planes, trucks, automobiles, etc. which use today’s technology, are still in use and new means of transportation must be designed and adapted to other sources of energy which will progressively replace the older ones. Taking into account that the lifetime of a vehicle is about 20 years, the United States will soon be forced to confiscate the remaining conventional oil and part of the non conventional one, not to mention the massive use of oil in agriculture (fertilizers and pesticides) which will be hardly replaced with other techniques.

The lack of preparation of the developed economies for that crisis is evident. The reflections of the ecologist leaders on the stoppage of the individual means of transportation to go to a collective transport are related to the individual ethic, not to politics in general. When sport cars have no gasoline, busses won’t have either. Then, the complete reconstruction of great sectors of the global economy would be necessary. For instance, to produce the components of a specific product in far away countries won’t be profitable anymore. Regarding France, in particular, the relinquishment to fix prices of food products at Paris’ Rungis market, a process that nowadays includes the transportation of all these products to that place from which they are transferred again to the places where they’ll be consumed, would be necessary

Even when we still have some years left before we reach the “peak oil” or, better said, the beginning of shortages, the wars of resources have already begun. By taking control of Afghanistan and installing bases in the neighboring countries [5], the Anglo-Americans have guaranteed an evacuation corridor before massively investing in the exploitation of oil in the Caspian Sea. By colonizing Iraq, they took control of a part of oil reserves in the Gulf and now they are looking at Iran.

After many years, the “Kissinger doctrine” changes its meaning. In the 70s, it was about controlling the access to the natural resources in order to have a pressure tool upon the developed economies and get, from the sources, the biggest amount of commissions. Today, controlling resources means storing not to sell them to the best buyer but to be used by the conqueror. The resources that were a reward in the past are now a booty.

In this context, the only States that will be able to maintain and increase the standard of living will be those with their own sources of energy whether they are natural resources (gas in Qatar, oil in Russia, etc.) or of other kinds (nuclear energy in France). The others will face adaptation crisis, which will only - and possibly - be resolved by means of technological progress.