Robert Hirsch - Peak oil means peak economy

[Strelnikov_]

And that was the good news.

The part about the futility of using military force to obtain supplies (aka steal the oil) was particularly interesting.


When global oil production peaks, the economy is likely to shrink in direct proportion to dwindling fuel supplies, says Dr. Robert Hirsch of the thinktank SAIC.

Speaking at the Association for the Study of Peak Oil conference in Houston, he also warned that as peak approaches, producer countries including OPEC and Russia are likely to husband their reserves for future generations and limit exports, potentially sharpening the decline in oil available to importing nations.

Dr Hirsch is the author of a groundbreaking report for the US Department of Energy which highlighted the long lead-times and other limitations of purely supply-side responses to peak oil. In an interview with lastoilshock.com on the sidelines of the Houston conference, he went on to argue that fuel rationing will be an essential part of any policy response, and predicted that such measures would be introduced even in the United States.

http://www.davidstrahan.com/blog/?p=63

http://www.davidstrahan.com/audio/robert-hirsch-18.10.07.mp3 (.mp3)

[losthills]

1. I don't agree that "peak oil means peak economy."

I think that rising oil prices create as many opportunities as they do problems.

We need to get off the oil wagon anyway, to combat global warming. As oil prices rise, alternatives become econamically attractive. As alternatives become widespread, their cost goes down. A lot of sad sheiks and oil company executives haunt the bars of Bahrain crying in their beers. The world goes on....

[terisan]

2. Agreed. Oil should not be used as fuel & it has been almost the death of planet.

[Bigmack]

3. The problem is....

as things stand now, it takes lots and lots of oil to manufacture stuff to replace the oil economy and the infrastructure we have is totally dependent on oil. Replacing that infrastructure will take a long, long, long, time. We just don't have the alternatives in place.

Example: Producing, transporting, installing, and maintaining solar and wind power units takes huge amounts of oil.

I think we've gotta try... a Manhattan Project for energy... but I think we're using thimbles to bail the leaky boat.

I see little cause for optimism.

[Kolesar]

5. Photovoltaic panels have a positive energy return after one year

Although I would not say that is a panacea

[NickB79]

7. But solar panels don't replace oil, they replace natural gas

And widespread production of electric or even plug-in hybrid cars is still a good decade away. By then, those solar panels will be needed to replace the declining natural gas output, rather than extravagances like driving.

[jimlup]

6. Agreed!

Yes, I think you've gotten it essentially correct here. I'm discouraged and don't have a lot of reasons for optimism. The short sightedness of various sectors of our society are now reaping their short sighted rewards but that won't last too much longer IMO.

[Boomer]

11. People always miss that part of the equation

Cheap, plentiful energy in the form of oil is so woven into our economic structure and infrastructure that too many people don't recognize how difficult it's going to be to replace. As you pointed out, all the "replacements" for current energy sources require a high energy source to produce and distribute.

The sun has been around since our species was born, yet only now have we developed the technology to harness that energy source. Why now? Because the highly complex manufacturing/technology base we are now exploiting requires a cheap plentiful energy source to produce and maintain itself.

Take away the cheap energy and our technology development comes to a screeching halt, then begins to recede. And as we abandon pieces of it, the whole will begin to collapse.

People are going to be very surprised to find out just how quickly a complex society can fall to pieces, and how quickly a population can lose the tech knowledge we all take for granted.

[NickB79]

8. What alternatives to oil as a transportation fuel are scalable?

For example, the US used 20% of it's corn crop this past year to produce approximately 5 billion gallons of ethanol. Doing a little math with the knowledge there are 42 gallons per standard barrel of oil, 5 billion gallons of ethanol converts to 119 million barrels of oil equivalent.

To put that in perspective, the US uses 21 million barrels of oil PER DAY.

We use 20% of our annual corn crop to produce 6 DAYS worth of fuel for the US motor fleet?

[depakid]

9. Wrong

No system can grow without increasing energy resources. Period.

That applies to economic systems just as it does ecological ones.

[GliderGuider]

4. It seems the big story as ASPO this year is the net export problem

For a country like the USA that imports 2/3 of its oil, a sharp drop in exports would be terrible economic news. Recall that the 1973 oil embargo resulted in the loss of less than 4% of the global supply, and triggered a global depression. If net export losses hit the USA rapidly and there is little time for adaptation, the same thing could easily happen.

[Strelnikov_]

10. And rightfully so.

First started thinking about the export issue a few years ago during the first Iran drumbeat. I was trying to educate myself on the resources the Gulf region produces.

Little less than 25% of current production (67% reserves is the real prize). Bad.

However, Gulf production represents nearly 50% of the worlds export market. Really bad, for a country that consumes ~30% of said market.

Interesting what Hirsch said about exporters reducing production to save for the future. Makes sense, human nature (survival instinct).

Following is my current leading disaster scenario. Probably will not happen, but it is still possible. So why gamble?

And are you Canucks still going to take dollars for that maple flavored go-juice when TSHTF?

++++++++

All data 2005.

- The Persian Gulf represents nearly 50% of the worlds petroleum export market.

- The vast majority of this resource passes through 8 to 10 major facilities (one facility in KSA alone processes 60% of its petroleum, you know, starts with a ‘A’).

- If Iran is attacked in such a way as to threaten the continuity of the regime, they will use their substantial missile inventory in taking out these facilities (I do not believe they will target Israel, as it would have no strategic purpose, whereas targeting the gulf energy infrastructure would strike a mortal blow against the attacking western economies, in particular the US, as I discuss below).

- The US imports ~ 12.4 Mbbl/dy (60% of total consumption) of petroleum which represents around 29% of the worlds petroleum export market.

- The next largest petroleum importers (Japan 5.2, China 3.1, Germany 2.4, South Korea 2.2, France 1.9) all have substantial dollar reserves and are significant exporters of finished goods. Basically, we will be outbid on much of what remains of the worlds petroleum export market post attack, as these countries use their export capacity in finished goods to purchase petroleum from Russia, Nigeria, Norway, and Venezuela.

- In the weeks following destruction of the Persian Gulf oil export market, the US will probably see 2/3rds of its imports sold to higher bidders, leaving us with about 60% of the petroleum supply we had pre-attack.

- Approx. 42% of US petroleum is used for personal transport, 22% for commercial transport (trucks that carry food to the stores, etc.). I will leave it to the reader as to the impact a nearly overnight loss of 40% of the US petroleum supply will have to the economy (not to mention the impact due to the collapse of the petrodollar system).

- Russia, India and China will take a pass. Russia stands to make a fortune. And if all the gulf petroleum goes off line, they become the worlds sole energy superpower. China and India will dig in (as they consume much less petroleum), weather the storm, and emerge in a position to snap up all those production contracts that will no longer go to US multinationals for rebuilding the gulf.

- In conclusion, Iran is not toothless. We can physically destroy the country of Iran. There is a good chance they can destroy our economy and begin the process of petrocollapse, ultimately leading to the destruction of a greatly weakened US in a few decades.

So, who wins?

He who can destroy a thing, controls a thing - Muah'dib

My life fades, the vision dims, all that remains are memories. I remember a time of chaos. Ruined dreams, this wasted land. But most of all, I remember the Road Warrior. The man we called Max.

To understand who he was you have to go back to another time. When the world was powered by the black fuel, and the deserts sprouted great cities of pipe and steel.

Gone now, swept away. For reasons long forgotten, two mighty warrior tribes went to war, and touched off a blaze which engulfed them all. Without fuel they were nothing. They had built a house of straw. The thundering machines sputtered, and stopped. Their leaders talked, and talked, and talked. But nothing could stem the avalanche. Their world crumbled. The cities exploded. A whirlwind of looting, a firestorm of fear.

Men began to feed on men. On the roads it was a white line nightmare. Only those mobile enough to scavenge, brutal enough to pillage, would survive. The gangs took over the highways, ready to wage war for a tank of juice.

And in this maelstrom of decay, ordinary men were battered and smashed, men like Max, the warrior Max. In the roar of an engine he lost everything. He became a shell of a man, a burnt-out desolate man. A man haunted by the demons in his past. A man who wandered out into the wasteland. And it was here, in this blighted place, that he learned to live again.

Opening Dialog, “The Road Warrior”, 1981

A movie that seems more prescient every day.

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http://www.eia.doe.gov/emeu/international/oiltrade.html

All in Mbbl/dy

Top World Oil Net Exporters, 2005

Saudi Arabia 9.1
Russia 6.7
Norway 2.7
Iran 2.6
United Arab Emirates 2.4
Nigeria 2.3
Kuwait 2.3
Venezuela 2.2
Algeria 1.8
Mexico 1.7
Libya 1.5
Iraq 1.3
Angola 1.2
Kazakhstan 1.1
Qatar 1.0

=====

Above represents 39.9 Mbbl/dy of 42 Mbbl/dy world export market
18.7 Mbbl/dy of above in Persian Gulf region

Top World Oil Net Importers, 2005

United States 12.4
Japan 5.2
China 3.1
Germany 2.4
South Korea 2.2
France 1.9
India 1.7
Italy 1.6
Spain 1.6
Taiwan 1.0


Top World Oil Consumers, 2005 (Domestic production in parans.)

United States 20.7 (8.3 - 40%)
China 6.9 (3.8 - 55%)
Japan 5.4 (0.2 - 4%)
Russia 2.8
Germany 2.6
India 2.6
Canada 2.3
Brazil 2.2
Korea, South 2.2
Mexico 2.1
France 2.0
Saudi Arabia 2.0