What Does Barack Know About Peak Oil?

By James Howard Kunstler, Kunstler.com. Posted December 2, 2008.

Note: In this adapted essay from his site, James Howard Kunstler asks what Barack Obama and his team really know about our energy predicament?

 ... For instance, does Mr. O know that global oil production appears to have peaked at around 85 million barrels a day, with poor prospects of ever getting beyond that? This single naked fact has broad ramifications, above all, whether we can continue to think in terms of industrial "growth" as the benchmark for economic health. There are many interpretations of the current financial fiasco. Some of them are based on long-term technical wave theories. A more down-to-earth view suggests the shock of peak oil -- though it doesn't exclude wave theories.

Does Mr. O know that world oil discovery has fallen to insignificant levels after peaking long ago in the 1960s? Does he know we are finding no more super-giant oil fields on the scale of Arabia's Ghawar or Mexico's Cantarell, which have supplied most of the world's oil for the past 40 years and are now running down? Does he know that you can't produce oil that hasn't been discovered? Does Mr. O know that virtually all the oil-producing nations have entered production decline? Surely someone has whispered in his ear about the IEA's projection that global oil production would fall 9.1 percent in the coming year?

Does Mr. O know that oil exports have been trending to decline at a steeper rate than oil depletion? That is, the exporting nations are losing their ability to send oil to the importers (like us) at a rate mathematically greater than the run-down in their production. They are using more of their own oil even while their production is going down. For example, Mexico is depleting overall at more than 9 percent a year (with the Cantarell field alone running down at more than 15 percent annually). Does he know Mexico's net exports are crashing? Mexico has been our No. 3 leading source of imports. In a very few years, they will not be able to send us any oil. A deluded American public has no idea that this is happening. Will Mr. O explain it to them?

Does Mr. O know that the "old major" oil companies (Exxon-Mobil, Texaco, Shell, et al.) produce less than 10 percent of the world's oil now -- the other 90 percent coming from the foreign nationals -- and that blaming them for the situation is a waste of time? The foreign national companies are changing the landscape of the oil markets. They're making special contracts with "favored customers" rather than just putting their oil up for auction on the futures markets. One thing you can infer from this is that we're entering a period of national oil hoarding based on coming scarcity. The futures markets were based on relative abundance, and they will not operate very well in a climate of scarcity. Consider that the U.S.A will probably not be among the "favored customers" for several oil-producing nations. Figure that in with the coming loss of imports from Mexico (and Venezuela and Nigeria).

Does Mr. O know that the current drop in oil prices (due to massive financial deleveraging) has resulted in the cancellation or postponement of the very oil production projects that were hoped to offset the coming depletions? It's not worth it for an oil enterprise (private or foreign) to drill in deep water or venture into arctic regions when oil is priced at $50 a barrel -- if it costs $80 to get the stuff out of the ground. It's not worth digging up tar sands in Canada at that price. This halt in activity is going to boomerang back on the United States in a year or so, with depletions ongoing everywhere and no new oil to take its place. Does Mr. O know that we're just as likely to see shortages as a resuming rise in oil prices here in the U.S. during his coming term?

Does Mr. O know that the current re-inflation program being run by the Treasury and the Federal Reserve is so egregious that it may lead to loss of the dollar's legitimacy, to the renunciation of dollar holdings by other nations, to the down-rating of U.S. Treasury debt instruments, and finally to an inability of the United States to purchase foreign oil -- which comprises two-thirds of all the oil we use every day?

Does Mr. O know that we are not going to run the U.S. automobile and truck fleet on any combination of alt.fuels? Continuing it by other means is a fantasy that will only disappoint us. The motoring era is coming to an end. Heroic investments in highway infrastructure to create jobs will be a tragic waste of our dwindling capital. The pressure for Mr. O to make these misinvestments will be enormous, perhaps insurmountable. There are probably not a thousand people in the nation who agree with what I am saying -- meaning the consensus to keep the cars running at all costs overwhelms reality at the moment. Does Mr. O's concept of "change" include the possibility that we may have to live very differently in this society?

Chances are, if Mr. O knows any of these things, he might be crucified in the polls and the media by acknowledging them. The only "change" that America really wants to hear about is evicting George Bush from the White House. They're sick of him and all the disturbances he has caused in their financial affairs. But beyond that, the American public is deathly afraid of the kind of changes we actually face -- such as, the end of consumer culture, the gross loss of value in suburban real estate (which forms the bulk of the middle class's private wealth), the prospect of food and fuel scarcities, the need to re-localize our lives, the need to physically shape up to stop the costly and unnecessary drain on our medical resources, to grow more of our own food, to work harder at things that actually matter, and to save whatever we can for a difficult future.

If Mr. O introduces any of these themes into the national discourse, the public and the media and the bloggers will all dump on him for failing to prop up the wild party that American life became in recent decades.

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