Geopolitical Feedback-Loops in Peak Oil

[phantom power]

It is quite common to hear experts explain that the current tight oil markets are due to “above-ground factors,” and not a result of a global peaking in oil production. In reality, geological peaking is driving the geopolitical events that constitute the most significant “above-ground factors” such as the chaos in Iraq and Nigeria, the nationalization in Venezuela and Bolivia, etc. Geological peaking spawns positive feedback loops within the geopolitical system. Critically, these loops are not separable from the geological events—they are part of the broader “system” of Peak Oil.

http://www.theoildrum.com/node/3017

[GliderGuider]

1. That's an excellent article.

I have reservations about some of Jeff Vail's stuff, but none about this piece. He's highlighted some key above-ground issues that will affect the oil supply over the next decade or two. For me the two key items are mercantilism and net exports, because both of those directly reduce the amount of oil on the open export market. This will have the effect of driving the market price up very hard, and is probably behind some of the price rise we've already seen.

The other key issue, as was pointed out in one of the comments, is declining EROEI. The production of a million barrels of oil today doesn't give the same net benefit as the production of a million barrels did 40 years ago because more of it has to be reinvested in the production process. As time goes by and the EROEI of everything counted as "oil" declines ever further, this effectively steepens the decline rate.

The same factors will affect natural gas as well, with the added twists that gas pools drain faster than oil and gas lacks oil's fungibility due to trans-oceanic transportation difficulties. So when Peak Gas hits, the downslope will be much steeper than for oil and there will be greater regional disparities (one continent may still be well-supplied as another runs dry).

[hunter]

2. The natural gas situation is especially troublesome as the U.S. dollar declines.

I think there was always an assumption that the U.S. would be able to import LNG.

NIMBY U.S. LNG ports (probably in Mexico) seemed inevitable, but it's not going to happen if the U.S. dollar collapses.

We'll probably be hard pressed to buy nitrogen ferilizers made overseas from natural gas.