Peak Oil is You
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Page added on March 17, 2015
Rising energy prices will challenge western way of life
A little-known Ministry of Defence (MoD) report published earlier this year warns that converging global trends will dramatically affect UK economic prosperity through to 2040.
The report says that depletion of cheap conventional “easy oil”, along with shortages of food and water due to climate change and population growth, will sustain rocketing energy prices. Long-term price spikes are likely to lead to a long recession in Western economies, fuelling internal unrest and the rise of nationalist movements.
The report departs significantly from the conservative and relatively optimistic scenarios officially adopted by the British government, as exemplified in the coalition’s new Energy Security Strategy published in November last year by the Department of Energy and Climate Change (Decc).
Peak “easy oil”
The report predicts that “the imminent passing of the point of peak ‘easy oil’ will mean that hydrocarbon-based energy prices will rise significantly out to 2040.” Other factors affecting energy prices include “increasing demand for fossil fuels” due to South Asia’s “industrial rise” and greater “volatility in supply” in the Middle East.
Contradicting the British government’s official position on peak oil – which accepts the International Energy Agency’s (IEA) latest estimate that oil prices will reach “$125/barrel in real terms (over $215/barrel in nominal terms)” – the MoD report projects an exponential escalation in prices, such that “the increasing price of oil… is likely to reach $500 a barrel by 2040” – almost double conventional projections.
This price rise will, however, “drive the development of alternative fuel sources” including tar sands, shale gas, coal, nuclear and renewables.
Rising demand for “resources and energy” from China and India will spur a “‘scramble’ for commodities and resources” as less developed countries’ “resource requirements may go unfulfilled.” There will also be a greater chance of clashes over access to “Middle East resources”, the South China Sea and the Indian Ocean.
Climate crisis
Climate change will significantly compound these challenges, including a wide range of impacts such as “rising sea levels… increased incidents of seasonal floods, heat-waves, storms, and unpredictable farm yields.”
If sea levels rise quicker than anticipated, “millions of people across South Asia (principally in Sri Lanka, Bangladesh and the Maldives) will be displaced, with no opportunity to return to their homes.”
Irregularities in the pattern of monsoon rains are likely to undermine South Asia’s “agricultural and domestic water needs”, while higher temperatures will “increase the range of vector-borne diseases such as malaria”, such that it becomes “prevalent all-year-round.”
Water stress
Water may become a “destabilising factor”, with water stress and scarcity affecting some “2.5 billion people”, and acting as a limiter to economic growth in some South Asian economies, including China by 2030.
Water will be a “defence and security issue” through to 2040, and increasing water demand is also likely to “heighten tensions over shared resources such as the Brahma-Putra Himalayan region and the River Indus”, between China, India, Pakistan and Bangladesh.
Food shortages
The sustainability of food production in such conditions “will also be a key issue for the region, with much of the population dependent on rice crops as a staple.” The report warns that a “rapid loss of some arable land is likely to promote local, then national migration”, which may contribute to unrest.
As agriculture is the single largest contributor to GDP and employment in the region, the report observes that the decline in agricultural output driven by higher temperatures, erratic weather, lower yields, soil erosion and increased pests and weeds, will primarily affect nearly all those who are “close to, or below, the poverty line.”
Demographic time bomb?
Although China and India will incorporate “some measures of sustainable development”, those measures will be limited by the fact that “economic growth will remain the imperative throughout the period.”
Despite their confidence in being able to meet these emerging climate and energy challenges, the sheer scale of the latter – “especially with regard to food and water availability and the sensitivity of the monsoon cycle, may challenge such confidence.”
Under present trends, South Asia will contain “nearly 40% of the world’s population” within the next 30 years. China and India will therefore face “increasing demands” from their “burgeoning populations” requiring “strong levels of sustained economic growth over the period to maintain internal stability.”
Inadequate “social and educational policies” and persistent “inequality and corruption” could turn this demographic dividend into “a ‘demographic time bomb.'”
In fact, the report predicts that due to “rising inequality”, ethnic tensions, strict controls on freedom of speech, and increased access to global communications, “China is likely to experience increased incidents internal of unrest.”
End of growth due to resource price spikes?
But the West faces other parallel challenges:
“The growth of South Asian economies will impact on most western nations, where the way of life for the majority of the populaces may be challenged by rising energy and resource prices, coupled with a relative decline in the value of their national economies…
The economic and industrial rise of China and India will increase the cost and reduce the availability of UK energy supplies. As a resource-importing nation, and with relatively modest fossil fuel reserves, the UK will be affected by increased resource and commodity costs. The UK will increasingly need to compete with China and India in order to secure enduring access to energy.”
Consequently, the report argues that the “western ‘way of life'” – associated with “a wide variety of consumer choice and relatively cheap energy” – will be “increasingly challenged as lifestyles follow GDP levels and ‘normalise’ across the globe.”
Within the US and UK, the bulk of the populations will be affected by:
“… rising energy and resource prices, and the declining availability of finance to sustain discretionary spending. In such a context, this could lead to periods of sustained recession in the West, causing increasingly protectionist policies to be adopted.”
“Internal unrest”
This could occur even as growth continues in South Asia, with global GDP per capita overall levelling off to “equilibrate”, culminating in “the stalling and subsequent decline of many western economies.” This will result in:
“long periods of recession and rising disaffection within the UK population… This could subsequently lead to increased incidents of internal unrest, a rise of nationalistic groups and a demand for protectionist economic and defence policies.”
Corporate stakeholders
The report, titled Regional Survey: South Asia out to 2040, was published by the MoD’s Development, Concepts and Doctrine Centre (DCDC) as part of its Strategic Trends Programme in January. The DCDC is an MoD think tank within the Defence Academy site at Shrivenham.
The report utilised the input of a range of government agencies and departments, including the MoD’s Strategy Unit, the Defence Science and Technology Laboratory, the Cabinet Office, and the Foreign Office – as well as two private institutions, Standard Chartered Bank and Now & Next. Decc is notably missing from the list of contributors.
Standard Chartered has a chequered history replete with scandals and “ethical lapses”. Two years ago, an Ecologist investigation alleged that a coal power plant project in India financed by Standard Chartered among others, had “displaced poor communities and will lead to the destruction of forests.”
The project was slated to receive carbon credits under the UN’s controversial Clean Development Mechanism. Standard Chartered is now heavily invested in South Asia.
Now and Next is the website of a future trend analysis publication, What’s Next, which includes among its clients General Electric, KPMG, McDonalds, and Shell.
Privatisation of power
Although the document sets out reasons to believe the UK is well-positioned to “adapt” to these converging trends, and perhaps even benefit from them, the overall vision heralds the recognition that of a rapidly shifting global landscape.
The report concedes that the “‘relative’ decline of the West is likely to lead to a new power framework where alliances are constantly reassessed and negotiated.” This will also see “the declining influence of existing international institutions such as NATO and the UN Security Council.”
In this context, the report predicts an accelerating coalescence between nation states and global capital, noting that:
“The line between government, and private industry protection of intellectual property of key technologies for security and wealth creation, may become increasingly blurred… [as] blueprints, patents and formulas will be increasingly seen as the foundations of wealth generation.”
The report echoes themes highlighted in a previous MoD global trends study, which warned in 2010:
“Pressure on resources, climate change, population increases and the changing distribution of power are likely to result in increased instability and likelihood of armed conflict.”
If anything, this year’s DCDC study reveals not just the latest strategic thinking informing British security policy behind the scenes, but also the undoubtedly grim consequences of continuing business as usual.
23 Comments on "Rising energy prices will challenge western way of life"
Plantagenet on Tue, 17th Mar 2015 7:38 am
Sounds like the MoD predicted everything except what is actually happening——-an oil glut and much LOWER commodity prices
paulo1 on Tue, 17th Mar 2015 7:54 am
hey Plant,
Did you get a stamp made up for your comments? Where did you get it and how much did it cost? How does it interface with your keyboard?
ghung on Tue, 17th Mar 2015 8:26 am
Yeah, Plant. I guess June 2013 was too early to predict your oil glut. BTW: I’ve been teaching my sister’s parrot to say “oil glut! oil glut!”, just for fun.
Plantagenet on Tue, 17th Mar 2015 9:04 am
@ghung
It isn’t my oil glut. It’s the world’s oil glut.
Get it now?
GregT on Tue, 17th Mar 2015 9:28 am
Love your new avatar lil planter! Much more fitting than your old one.
Cheers
shortonoil on Tue, 17th Mar 2015 9:39 am
The report predicts that “the imminent passing of the point of peak ‘easy oil’ will mean that hydrocarbon-based energy prices will rise significantly out to 2040.”
If the present price of oil is maintained at least a third of the world’s production will eventually be shut-in. High cost production sources such as shale, bitumen, ultra deep water, and high sulfur extra heavy will no longer be economical to produce. The present situation hardly supports the comment above.
Traditional logic assumes that as low cost production sources are extracted, what will be remaining will be higher production cost sources, and thus the price will increase. This simple chain of thought fails to incorporate the impact that depletion has on serviceability. Depletion continuously reduces the quantity of resource that is usable by the end consumer. As the serviceability of petroleum declines its value to the economy declines, and the price goes down. That is what is presently happening to oil.
We began informing people of the imminent price decline almost a year ago, and put up this page 7 months ago:
http://www.thehillsgroup.org/depletion2_022.htm
Because the industry sells oil by the barrel its production is commonly viewed as a volumetric event. This approach does not take into consideration the declining usefulness of petroleum from the affects of depletion. Depletion is reducing the price that the economy can afford to pay for oil, and production will fall accordingly.
http://www.thehillsgroup.org/
penury on Tue, 17th Mar 2015 9:42 am
I think that what this article misses is that this is not a recession, this is the new normal”for now. Next year’s normal will be even less of more things. The great unwind is happening, the cost of oil or other items in ten years will be immaterial very few will be able to afford even the most basic items. If I sound like a “doomer” I am not. However, by reading the tea leaves and consulting the entrails of a chicken I have seen the signs that it is all over for the current lifestyle of the masses.
JuanP on Tue, 17th Mar 2015 9:59 am
Remembering and thinking about how the UK wasted its fossil fuel resources is one of those things that I always free associate with universal human stupidity. The UK has done so much damage around the world that they deserve what’s coming to them more than most of the rest of humanity, myself excluded because I really am one mean MF SOB.
Anyway, the beach is a Turquoise lake and looks like the Bahamas today, and it’s sunny and 78 degrees with a South wind of less than 10mph. I am going drift fishing and freediving offshore with my packraft. Carpe Diem, guys! 😉
Davy on Tue, 17th Mar 2015 11:12 am
Pen, I label myself a doomer but I am really just a normal guy telling it like it is . I cannot stand lies, exaggerations, fakes, denial, cheap imitations, goal seek, drunken redundancies, denied insanity, resentments, prejudices, righteousness, and false god worshipping. I am part of this but I try not to be.
In our discussions I am saying folks this stuff does not add up. Please don’t try to blow smoke up my sphincter. If this was just petty politics I could blow it off. This is survival and death of billions so it must be approached with the utmost urgency. Maybe I am being manic and obsessive but I have come to the table to preach because this is serious stuff that the BAUtopians are not explaining away. Their hopium is hollow. Their substitutions ideas are a joke.
I could go on and on why the conrucopians from the bottom up to the very top are failing miserably and why this is going to be ugly like no one has ever contemplated. This will not be a Hollywood flick this will be down home and personal. We can do something and we must do something. Men must step up to the table and protect the tribe and family. Since we are in a global interconnected world this means cooperation at higher levels than the tribe and family. Time is slipping away. Now is the time for action.
hiruitnguyse on Tue, 17th Mar 2015 11:23 am
Does my orange bean still work?
hiruitnguyse on Tue, 17th Mar 2015 11:23 am
Apparently…..much better than the cheap clipart monsters by everyone else’s name.
steve on Tue, 17th Mar 2015 5:16 pm
Davy I envy your enthusiasm. I wake up some days and feel so frustrated trying to live in this suicidal world. My only hope is that there is a sudden awakening, divine intervention or alien intervention but our crazy human system only allows for mass consumption. I don’t think we have enough time as we will be in the next great depression in exactly 3,2,1 years….All one has to do is look at MSM and see we are now coming to the end game. “should the FED take away the word patience?!!?!?!” people should go back and read past articles in the NYT or other journals and you will see things even clearer///
welch on Tue, 17th Mar 2015 7:03 pm
——*————-*————————>
You. Death. Eternity
Christ…be aware, sure. But if it’s that depressing find some good drugs (if you have to) and enjoy life.
Plantagenet on Tue, 17th Mar 2015 7:22 pm
@welch
Even better, go skiing or go on a hike or get out the bike and go for a ride. Dope is for dopes—-its healthier and better to get out and do something real.
redpill on Tue, 17th Mar 2015 8:07 pm
Hopefully, Mother Nature gives us a bitch-slap that’s damaging enough to wake enough people up without being so brutal that chaos ensues.
Keep the faith, Steve. Don’t let this situation derail you; there have been plenty worse times to be alive on this orb.
Makati1 on Tue, 17th Mar 2015 8:29 pm
redpill, there is no ‘bitch slap’ in mother nature’s arsenal. When she acts it is with impartial finality. WE are the ones determining the end game, because we have ignored her rules. She only has to do as always, live by her rules. The end is already waiting.
When you are taking a slow dose of poison every day and refuse to stop, at some point the dose is lethal. We will not stop because we are what we are, greedy apes with an over sized brain.
I enjoy everyday as I always have. The sunrise is still beautiful, rain is still soothing to listen to and a medium rare, grilled, thick, sirloin steak is still a delicious luxury. I will enjoy them while I can for I know the end is coming. It is coming for all of us. We just do not know the time and place.
Perk Earl on Wed, 18th Mar 2015 2:53 am
“I cannot stand lies, exaggerations, fakes, denial, cheap imitations, goal seek, drunken redundancies, denied insanity, resentments, prejudices, righteousness, and false god worshipping.”
Because you’re willing to look the monster in the eye, Davy. That’s what gets me too, i.e. why society as a whole, the collective conscious is apparently unable to face hard truths. In this sense, peak oil is like global warming – society just doesn’t want to hear about it because they are too busy going after more of everything.
Every comment, deed, pursuit must be done in the direction of growth, greed, just get us more, bigger, onward. We are all given happy feedback when we are positive, but get bad feedback when we are negative. But how else can a person talk about peak oil when it must include ideas that are negative relative to growth, greed, etc.? Global warming is the same, as it also suggests we need to live a life that is less carbon intensive, but that goes against wanting more, bigger etc.
Those giant tires on massive vehicles to get ore in ever bigger scoops to glean out an ever smaller amount of precious metal per ton is analogous to pursuing more of everything on the grandest scale possible. Humankind is so caught up in driving to the hoop, they never stop to wonder what driving to an ever bigger hoop is doing to the long term chances of continuing that pursuit.
It’s a collective form of insanity, that ignores the minority willing to look the monster in the eye. But hopefully those of us willing to do just that, will be better prepared for the coming soon to a theatre near you, ‘Bottleneck Chaos’.
Davy on Wed, 18th Mar 2015 6:58 am
http://www.bloomberg.com/news/articles/2015-03-17/energy-junk-bond-revival-cut-short-as-7-billion-lost-in-10-days
BobInget on Wed, 18th Mar 2015 9:45 am
Summary of Weekly Petroleum Data for the Week Ending March 13, 2015
U.S. crude oil refinery inputs averaged over 15.4 million barrels per day during the week
ending March 13, 2015, 136,000 barrels per day more than the previous week’s average.
Refineries operated at 88.1% of their operable capacity last week. Gasoline production increased last week, averaging about 9.8 million barrels per day.
Distillate fuel
production increased slightly last week, averaging over 4.8 million barrels per day.
U.S. crude oil imports averaged 7.5 million barrels per day last week, up by 703,000
barrels per day from the previous week. Over the last four weeks, crude oil imports
averaged over 7.2 million barrels per day, 0.6% above the same four-week period last
year. Total motor gasoline imports (including both finished gasoline and gasoline
blending components) last week averaged 664,000 barrels per day. Distillate fuel imports
averaged 226,000 barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum
Reserve) increased by 9.6 million barrels from the previous week. At 458.5 million
barrels, U.S. crude oil inventories are at the highest level for this time of year in at least
the last 80 years. Total motor gasoline inventories decreased by 4.5 million barrels lastweek, but are well above the upper limit of the average range. Both finished gasoline
inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.4 million barrels last week but are in the lower half of the average range for this time of year. Propane/propylene inventories rose 0.5 million
barrels last week and are well above the upper limit of the average range. Total
commercial petroleum inventories increased by 7.1 million barrels last week.
Total products supplied over the last four-week period averaged 19.4 million barrels per
day, up by 4.3% from the same period last year. Over the last four weeks, motor gasoline
product supplied averaged over 8.8 million barrels per day, up by 2.7% from the same
period last year. Distillate fuel product supplied averaged about 4.0 million barrels per day over the last four weeks, up by 5.6% from the same period last year. Jet fuel product supplied is up 7.9% compared to the same four-week period last year.
marmico on Wed, 18th Mar 2015 10:12 am
In 6 weeks, Cushing, OK oil storage tank farms will be filled, and the WTI price will puke. The accountants are weekly excising the blow and hookers disguised as opex from the U.S oil patch.
Now what to do about the WTI-Brent spread so I can get some lower priced gasoline. Friggin’ refinery crack spreads.
Marty on Wed, 18th Mar 2015 12:50 pm
It takes more energy to animate pixels than leave them static. What is the carbon footprint of an animated avatar?
Davy on Wed, 18th Mar 2015 1:17 pm
Marty, you remind me of when the big push a few years ago was to eliminate phantom loads. I remember those days being a time of a grasping for a way to make BAU green. You don’t hear much about phantom loads anymore probably because we have bigger fish to fry these days.
rockman on Thu, 19th Mar 2015 8:34 am
“In 6 weeks, Cushing, OK oil storage tank farms will be filled”. And in 6 weeks total unfilled U oil storage capacity will exceed 150 million bbls. Cushing is the largest single US storage facility in the country. But its capacity represent less than 20% of total US storage capacity.