Peak Oil Doomsters debunked, end of civilization called off

Summary: a brief analysis of Matt Savinar’s Life After the Oil Crash. Are we doomed? Probably not. My title is, of course, fun but absurd. Peak oil is too vast a subject, the range of expert opinion too wide, for any blog post to pose as more than a introduction — showing one perspective of the many possible. Still, I believe this makes a good case for betting that peak oil will not result in depression and war. Please see the conclusion at the end for caveats, and the links at the end for more information.

“Are We ‘Running Out’? I Thought There Was 40 Years of the Stuff Left”

Oil will not just “run out” because all oil production follows a bell curve. This is true whether we’re talking about an individual field, a country, or on the planet as a whole.

Oil is increasingly plentiful on the upslope of the bell curve, increasingly scarce and expensive on the down slope. The peak of the curve coincides with the point at which the endowment of oil has been 50 percent depleted. Once the peak is passed, oil production begins to go down while cost begins to go up.

In practical and considerably oversimplified terms, this means that if 2005 was the year of global Peak Oil, worldwide oil production in the year 2030 will be the same as it was in 1980. However, the world’s population in 2030 will be both much larger (approximately twice) and much more industrialized (oil-dependent) than it was in 1980. Consequently, worldwide demand for oil will outpace worldwide production of oil by a significant margin. As a result, the price will skyrocket, oil dependant economies will crumble, and resource wars will explode.

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. … 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. …

Before booking flights to New Zealand or Tasmania, let’s consider this carefully.

I. These forecasts seem very confident. Are they credible?

Does Savinar subscribe to the Psychic Hotline? Energy forecasts — esp. those warning of Peak Oil — have been notoriously wrong for many decades. Has the future suddenly become clear as glass? Let us parse the third paragraph on this home page.

“In practical and considerably oversimplified terms, this means that if 2005 was the year of global Peak Oil, worldwide oil production in the year 2030 will be the same as it was in 1980.”

It was an evil day for humanity when Johann Carl Friedrich Gauss “invented” the bell curve. It applies to many phenomena, but not to ALL phenomena. There is a strong basis to believe the global production curve will be asymmetric. Just to mention one, the graph should be of “liquid fuels” not oil, as substitutes for petroleum (e.g., biofuels, coal to liquids) were insignificant on the way up – but might be significant on the way down. Also, 2005 may have been but probably was not the peak year (see section II below).

“However, the world’s population in 2030 will be both much larger (approximately twice) and much more industrialized (oil-dependent) than it was in 1980. Consequently, worldwide demand for oil will outpace worldwide production of oil by a significant margin.”

How wonderful that the author understands so much about the technology and economy of 2030. No doubt he is a billionaire, as his technology and biotech bets made in 1986 must have paid off nicely.

“As a result, the price will skyrocket, oil dependant economies will crumble, and resource wars will explode.”

Sounds ominous. Can we see his forecasts for 2008 written in 1986? Did he predict the USSR’s collapse, the two Gulf Wars, the Rise of China, and the economic growth of the past five years (perhaps the fastest global growth since the invention of agriculture)?

The actual experts that I read tend to be more modest in their predictions. In fact, I suspect an inverse correlation between expertise and over-confident rhetoric. For example, Robert Hirsch’s writing sound nothing like this site.

II. Time

Peaking, political or geological, might have already occurred, or might occur during the next ten or twenty years. We do not have the data necessary for more accurate forecasts (e.g., data on Saudi reserves).

Short-term fluctuations are common in the record, so the plateau in oil consumption since 2005 tells us little — especially as we do not know the cause. It might result from …

  1. geological — we cannot bring on new production faster than decline of existing fields
  2. transient — new developments have not yet caught up with rising demand), or
  3. political — Middle Eastern producers can produce more, but choose not to. See these posts: definition of political peaking, and its announcement.

As oil prices have risen over the past five years, the adaptation process has already begun. We just need time. Among the three forms of peaking, Savinar assumes the worst case — a “strong form” of peaking in which a peak occurs soon (before the adaption process has run far), with a short plateau, followed by a rapid decline (he calls a global 3% annual decline rate “conservative”, because many fields have declined at faster rates, which does not take into account the difference between “one field” and “all fields”).

That is, of course, possible — but not, as Savinar implies, certain. Even that scenario would not mean the end of civilization, just severe economic pain during the ten or twenty year-long adaption process, for the reasons discussed below.

III. The magic of prices

Savinar assumes that rising prices will wreck civilization, with no other effects. Changing prices are information in motion for a free market economy, signaling changes in the environment and forcing people act. The author ignore these mechanisms.

A. Substitute other things for energy. Convenience (car pool or buses instead of driving alone to work or play). Higher cost goods from local suppliers for cheaper but distant goods. Substitute rail for truck transport. Local vacations for trips to Disneyland, Las Vegas, or Europe. Light clothing for air conditioning; sweaters for heating. Tele-conferencing for meetings.

B. Make investments (capital expenditures) to increase energy energy efficiency. Insulation. More efficient motors. Hybrid cars.

C. Make investments to substitute other forms of energy for petroleum. Replace gasoline and diesel vehicles with electric cars, trucks, farm vehicles. Solar panels replace diesel generators. Electricity and water can replace natural gas in the production of fertilizer. Convert coal to liquid fuel.

D. Innovation: higher prices spark innovation, both new ways to do things and new technology.

As stated above, all these things take time.

IV. Energy efficiency

Savinar assumes that reduced oil consumption means less economic activity. History shows this is not necessarily true. Oil prices rose from $1.80 in 1970 to $36.83 in 1980 (Arabian Light oil price, as posted at Ras Tanura). Reacting to that, global oil consumption peaked in 1979 at 66,048 million barrels/day, then dropped by 14% through 1983 — reaching the 1979 peak again only after 14 years, in 1993 (see the BP Statistical Review for details). During that period the global economy (GDP) increased at roughly 3%, slightly below the post-WWII average (using IMF data). A fourteen percent decline in consumption!

At $120, oil prices are up 6x from the 1990’s average. Almost certainly that price shock has created substantial efforst to change energy use, whose results might have not yet appeared in the data. But they will appear, I suspect. Sooner than people expect.

V. The global effect of high oil prices

Unlike the author’s implied assumption, money spent to buy oil does not disappear. Oil producers invest or spend it. Hence rising oil prices shift wealth and income around the globe, not destroy it. To the extent that oil producers save more than oil consumers, this has a net slowing effect on the economy. But nothing like the Armageddon described in doomsters’ forecasts. This reduced growth in GDP slows the growth in demand for oil. If prices rise so that real global GDP slows to 2%/year (very roughly), oil demand no longer increases. If oil prices rocket high enough, global GDP will actually fall (historically a rare event, except during wars).

To put this in perspective, oil prices have risen from their 1990’s average of $20 (West Texas Intermediate) to $120 during a period of record or near-record (depending on whose numbers are used) growth in global GDP.

Why have rising oil prices not wrecked the global economy? The consensus five years ago was that every $10 increase in oil prices slashed at least 1/2% off real global GDP growth. Answer: energy consumption per dollar of GDP has declined — a lot. In 1950 the US used almost 20 British Thermal Units (BTU) to produce $1 of GDP. In 1970 it was 17.44 BTU. Today it takes 8.78 BTU. (From The Gartman Letter, 7 May 2008, based on data from the EIA and Dr. Mark Perry of the University of Michigan)

This is not because we “no longer make things.” US manufacturing as a % GDP has been flatish for a generation.

Conclusion

Much of this post is over-simplified for brevity and suitability for a general audience. Also, I may have incorrectly represented Matt Savinar’s assumptions. On the whole, however, I hope this post shows the weak and speculative basis of “end of civilization” and “die-off” scenarios about Peak Oil. Given all this, I find this discouraging: (from Savinar’s “about” page)

LifeAftertheOilCrash.net, averages 15,000 visits and 50,000 page view per day. It is assigned reading at multiple university courses around the world.

Unfortunately there is an information shortage about Peak Oil. There is too-little good research (Hirsch and his peers are grossly underfunded), and even less reliable information for the public. Neither is a good indicator of our readiness for peak oil.

The faster we prepare, the easier the transition will be to peak oil. Other nations already have strong programs in motion to prepare for peak oil. We are among the world’s laggards. Civilization will continue even if America falters as a result of peak oil, just as it survived the fall of the Spanish Empire. We have the ability to adapt, but so far lack the will and awareness of the need. Over-dramatizations like “life after the crash” are part of the problem, in my opinion, not part of the solution. They are too easily dismissed, and unfortunately the awareness of peak oil often gets dismissed with them. Equally unfortunate, their facile certainty about the future discourages the need for research and modeling about our energy resources and consumption — necessary to efficiently marshal and apply resources for rapid mitigation programs.

No matter how well and rapidly we prepare, bad things might still happen. Civilization, indeed human life itself, depends on Fate. Soon and fast collapse of oil production, super-bug pandemics, larger asteroid or comet impact, massive climate changes, eruption of a super-volcano, or a supernova exploding within 50 light years … the number of high impact – low probability scenarios is legion. But we live our lives in defiance of these things, not in fear of them.


Originally posted in Fabius Maximus and reproduced here with the author’s permission.

20 Responses to "Peak Oil Doomsters debunked, end of civilization called off"

  1. Michael in Cincinnati, Ohio   May 14, 2008 at 10:07 am

    Geeze, how I love the voice of moderation and reason! Great article, right in line with My Religion** and it’s against My Religion to Move too far to either the Ridiculous Right or Loonie Left. Balanced Perspective is mindfully healthy, while Extreme Perspective is both Unbalanced and Mindfully Ill.**No proselytes please! Create your own religion using Thomas Paine’s "Common Sense" as a helpful guide.

  2. Guest   May 14, 2008 at 10:26 pm

    I this the Peak of Peak Oil debunking?

  3. Guest   May 15, 2008 at 1:33 pm

    Very good analysis. If there is no Peak Oil what explains the high price of oil? Fundamentals, a bubble, easy money in the US and a weak dollar? what are your views?

  4. Anonymous   May 15, 2008 at 3:34 pm

    Commendable points in this article. Not mentioned was that the LATOC site also advertises for survival supplies, freeze-dried foods, etc. If a potential consumer is too comfortable with the news, he or she may be less inclined to buy. In other words, if you buy the doom and gloom, you may buy the products. This is not so different from television news, come to think of it. Obviously, no one can predict future events with any degree of certainty. If you inductively reason your way through what has happened with various oil fields over time (as Mr. Simmons has done in his Twilight in the Desert), you will observe a roughly 40-year lag between the time a field went online and began its decline. These are geophysical facts. A treatment of peak oil that is not histrionic is indeed welcome.

  5. Francisco Almeida   May 15, 2008 at 5:48 pm

    Great article, peak oil debunked.Simply put, it’s just the old demand-n-supply thing moving da human creativity. Higher prices bring innovation towards other solutions. That simple, full stop.However, while considering a vast array of new ways, the MAIN conundrum in this field – kept as top secret subject – was blatantly ignored in this article.It’s the dubiously idea – quietly instilled in Western minds – that oil is a LIMITED resource, strongly defied by top-rank russian geologists through their "Abiotic Petroleum Origin Theory", vastly accepted AND APPLIED both in Russia and Ukraine; which is of course ignore by Western media, considering that it deadly hits oil company’s obscene profits.http://www.gasresources.net/Introduction.htmCoincidently, since they started to apply this theory principles, russian oil and gas reserves went 8 to 10 fold larger.Benjamin Disraeli, 1st Earl of Beaconsfield, British Empire Prime Minister (1804-1881), quoted:- … " There are three kinds of lies: lies, damned lies, and statistics". .

  6. Expat   May 15, 2008 at 11:06 pm

    How does your snotty little rant debunk Peak Oil. You dismiss his arguments on the basis that he did not pick the 2007 winner of the Kentucky Derby. You are intellectually dishonest and arrogant. Nyah, nyah, nyah.The point of Peak Oil is not the destruction of life, the universe and everything. Peak Oil claims that we are consuming more than we are finding, meaning that we are the downward slope of supply. Of course we won’t run out overnight, but running out we seem to be. Don’t believe me? Listen to the CEO’s of the largest oil companies.If we innovate, improve efficiency and develop alternative energy sources we can move the peak forward again or sustain the plateau. What realistic alternatives are there right now? And I mean economical, not merely technologically feasible.Until we change our consumption patterns, Peak Oil exists. The same as Peak Drinking Water. And Peak Clean Air. And Peak Fish Stocks. Etc., etc., etc.If you want to debunk Peak Oil, feel free, but don’t write a bunch of drivel, insult someone and claim "Mission Accomplished". It’s childish and pointless.

  7. Cipi604   May 16, 2008 at 10:59 am

    The problem with conservation or increasing efficiency is that the decline is too big/too fast and never ending to save us all. When exporting countries are not exporting anymore (Indonesia, Mexic, etc) … what do you do then ?! We are missing LIQUID fuels not energy, therefor game over my friends. Peak oil 100%!

  8. Guest   May 16, 2008 at 12:50 pm

    While LATOC does offer a very gloomy outlook on peak oil, It does provide links to very interesting articles about the subject. It is a much safer bet to prepare for the worst and hope for the best. It is utterly foolish to think that we are indestructable and take our lifestyles for granted. Many people have been killed and die of starvation so that we may live our lifestyle. Many thanks to Matt Savinar for the LATOC website because without his website (and others like it) the above article would not have been written. I certainly do not want to take a "business as usual" approach to a potentially harmful event and Matt Savinar’s Doom and Gloom approach gets people thinking about the potential. Hell, it pissed you off enough to write this article!!!

  9. PCoyle   May 16, 2008 at 1:18 pm

    Unless you believe that $40 oil, or even $100 oil, is going to make a prolonged comeback soon, it looks like we’ve travelled well into the higher foothills of Peak Oil. And don’t forget that just to run Planet Earth Inc. as it is today for another 30 years, even if we don’t add a single car, plane, ship, MP3 player, etc, will take as much oil or its equivalent as the total pumped and consumed since 1850 (a trillion barrels). Yesterday I was at a conference in the south of England where businesses talked about plans for the next few years. A farmer talked about her farm shop. They are sourcing and selling locally; reducing food miles; minimising dependence on fossil fuels; reducing waste. They know that the end of cheap oil will profoundly affect their lives, their customers and their area. The next speaker outlined the great plans the region is making to benefit from the 2012 Olympics (they’re hosting the water sports nearby). Huge amounts of energy will be spent on building roads and facilities and flying tens of thousands of participants around the world. Energy that’s just expected to turn up from somewhere because we need it to because that’s how the endless growth paradigm works. But, already, airlines are going bust and people are using their cars less because of the high price of oil. Small farmer vs. globalised business and sport? I know which I would bet on for a successful transition. You’ll know we’ve hit Peak Oil if the London 2012 Olympics look more like London 1948 than Beijing 2008…Big business is smart enough to adapt to a lower-energy future. The question is, is it smart enough to admit that it needs to?

  10. Spiv   May 18, 2008 at 9:17 pm

    Any decent intro to the subject of Peak Oil will fully describe how the inventory of crude resources is distorted in nearly every location in the world that has significant reserves, for a variety of reasons.So determining Peak Oil is guesswork backed up by inteiigence gathering of the most difficult variety.Suffice to say that the easy-to-reach reserves have been more than 50% tapped out, hence the declines in production from areas such as Saudi arabia.

  11. Anonymous   May 19, 2008 at 5:12 am

    "“However, the world’s population in 2030 will be both much larger (approximately twice) and much more industrialized (oil-dependent) than it was in 1980. Consequently, worldwide demand for oil will outpace worldwide production of oil by a significant margin.”How wonderful that the author understands so much about the technology and economy of 2030. No doubt he is a billionaire, as his technology and biotech bets made in 1986 must have paid off nicely."-It was at this point that I pretty much came to the conclusion that yours was not going to be so much of a valid argument as a Peak-Oil basher.The reason? You seem to place a lot of emphasis on GDP rising but very little on the trends that make it rise -the rise of population, the rise of global capitalism and with it Industrialisation. Where is you argument that these trends will stop? Where is your argument that population growth will slow down? That China, Russia, India and Brazil will not continue their breakneck Industrialization/Modernisation? That these countries -so far behind the US- will continue an upward curve in their consumption of global resources for so long only consummed by America?Instead you took the course of bashing him for not ‘being a billionaire’?! Sad.Nick.

  12. Fabius Maxmus   May 21, 2008 at 12:29 am

    A number of the comments (pro and con) are apparently made by folks who read neither the title nor the article. It says "peak oil doomsters debunked", not "peak oil debunked."Unless the believers in abiogenic oil are correct, peak oil is inevitable. The consequences for our economy could be severe, lasting for a generation or so. Rapid, massive, and effective preparation can prepare us for this transition. Hard work, starting with data collection, analysis, and planning — then execution.Niether complanency nor despair helps at all.

  13. Anonymous   June 17, 2008 at 5:32 pm

    CHANGErnChange Happens And New Growth Emerges.rnrnI saw a show on TV. Discovery or Natgeo and it pushed me to do more research on-line. Since that show a couple of months ago, I have been basically obsessed with "Peak Oil", "Survival Sites", "Food Storage" and all that misery that comes with a lack of faith in humanity, nature, and God.rnrnI’m not particularly religious, a survival nut, or an idiot that lives my life without paying attention to the world….rnrnI’m a person that just realized that NO ONE knows for sure what the future will hold. So let’s just stay calm, prepare but don’t panic or hoard. Stay informed but don’t let it stop you from living your life.

  14. Anonymous   March 26, 2009 at 2:04 am

    you’re all stupid

    • Anonymous   April 6, 2009 at 2:05 pm

      i agree wit this person who left this comment

  15. Guest   March 26, 2009 at 2:12 am

    He’s not debunking peak oil itself, in fact he specifically acknowledges that oil production will one day peak and begin to decline, and this is just common sense. What he is doing is debunking the idea that peak oil will necessarily cause the end of industrial civilisation, which is wrong and stupid, like all of you.A few things off the top of my head -oil is not the only source of energy around.The internal combustion engine is not the only way to move goods around on an industrial scale.Electric vehicles do not necessarily need batteries.Solar, wind, hot dry rock geothermal http://en.wikipedia.org/wiki/Enhanced_Geothermal_Systemyou are all wrong and stupid.

  16. Anonymous   April 6, 2009 at 7:36 am

    This argument is sad attempt at reasuring people that an obsolete way of life will carry us into an age the techno-prophets have foretold.The adaption to a fossil fuel independent society is increasingly becoming harder, every day more sustainable farmland is lost to unsustainable farming methods, those living in first world countries are becoming increasingly anti-social, dependence on petroleum based medicine increases every year, communities becoming completley dependent on trade (repeat of the Pitcairn Islands polynesian tradgedy),minerals are being stripped from arable land, ecosystem which support Earths recycling systems (air, water, earth, biomass, ect.) are being fundamentally undermined.In spite of all this how is growth being continued, the answer is oil, oil is our life support system on a planet which has not been able to support us sustainably since the late 1980s.I beg of people to refrain from making peak oil only about filling up a wasteful car tank or running wasteful aplliances. Our world is in chronic poverty only a third of world can feed itself properly, as fertilisers and petrol run tractors become uneconomical how can the starving masses survive. Biofuel is killing indirectly thousands of third worlders by burning staple foods, yet people still feel good when they buy ethanol contaminated petrol.Solar power, Hydro, Nuclear, Wave, Wind and Hydrogen are pathetic gizmos for harnessing energy compaired to fossil fuels. All, all of the above destroy the biosphere which we depend on as a species for our longterm survival thus nullifying the their labelling as sustainable.I do not fear for my future but I fear for the billions who cannot afford any economic contraction. Many will die if we first worlders can not deal with peak oil, maybe not our neighbours or family but millions of thrid worlders will die. I who have been born in the 19990s will certainly live to see events unfold but those born before me will determine these event.note: As may be seen I have not nit-picked over miniscule facts or statistic (if you enjoy that sought of information google search any claim I have made), the comments I have made may not be considered properly in context by some but I justify that sometimes we need to get some perspective on an issue.

  17. Anonymous   April 6, 2009 at 2:03 pm

    lame

  18. Anonymous   April 9, 2009 at 12:53 pm

    this is a big issue for the world we should try to fix it!! we SHOULD ♥ OUR WORLD!!!!!!!!!!

  19. mei   April 30, 2013 at 6:51 pm

    i think this was a very ecucational piece thenks