Giving Thanks For Oil and OPEC
When you sit down for your Thanksgiving meal this week, don't forget to thank the oil. No, not the extra extra virgin olive oil or the polyunsaturated high omega 3 vegetable oil, but the crude -- the dead dino, fossilized pond scum, ancient sunlight, rock oil -- aka, petroleum.
Remember as you give thanks for the bountiful Earth, that back of the bread lies the oil. We should acknowledge that our food production system and every other aspect of our lives are utterly dependent on fossil fuels. We should also remember that before World War II, this was not the case. We may even have relatives who remember those days. We should take a look at the children sitting around the table. They will not live in a world of cheap, abundant oil. Give thanks for that too.
Why should we give thanks that the future holds no cheap oil? There are several reasons, but the first is that cheap oil has fueled a 50-year-long party in the industrialized West that has left us with an unsustainable economy that is wrecking the planet. The recent awareness of global warming is beginning to put a damper on our out-of-control binge, but not fast enough to slow the heating of the planet. Rising oil prices will force a cutback in consumption. Rising oil prices will also chill the fantasy of endless growth and force us to confront the reality of planetary limits.
For several years now, "voices from the wilderness" have been gathering with louder volume to warn about the coming peak in world oil production. In 2005, petroleum geologist Kenneth Deffeyes predicted that the world output of crude oil would peak on Thanksgiving Day 2005, but he and other petroleum industry "outsiders" have been dismissed as "fringe" elements.
Not any longer. Over the past month, a number of oil industry insiders have made statements confirming that the annual growth in oil production has stopped. On Monday, November 19, The Wall Street Journal ran a front page story titled "Oil Officials See Limit Looming on Production." While the article emphasized opinions that tied flat oil-production curves to what they call "above ground" limits having to do with available drilling rigs, security concerns and the like, there is plenty of evidence that the underlying geology of oil is imposing absolute limits on the amount that can be produced.
Some oil industry executives seem to concur. The article quoted ConocoPhillips CEO James Mulva on the likelihood of meeting the projected demand of 120 million barrels a day by 2030: "I don't think we are going to see the supply going over 100 million barrels a day. Where is all that going to come from?" In a Business Week article, Mulva said that his company was considering diversifying into renewable energy. "We may not be able to do in the next 100 years what we did in the past 100 years," Mulva said. "So we have to ask ourselves how we can transform from just an oil and gas company into an energy company."
Meanwhile, sustainability analyst Lester Brown released an update last week titled, "Is World Oil Production Peaking?" Brown ran through the figures: "After climbing from 82.90 million barrels per day (mb/d) in 2004 to 84.15 mb/d in 2005, output only increased to 84.80 mb/d in 2006 and then declined to 84.62 mb/d during the first 10 months of 2007." Absent a big production increase from OPEC, the numbers indicate that the peak in world oil production may have already occurred in 2006, not far off from Kenneth Deffeye's prediction.
OPEC met last weekend in a summit -- only the third summit involving heads of state since the group was founded in 1960. U.S. Energy Secretary Samuel Bodman called on OPEC to raise production to alleviate high oil prices, but OPEC Secretary General Abdalla Salem el-Badri's response was, " ... frankly we don't see that we should add more oil."
Lester Brown says that despite claims from Saudi Arabia that they can produce more oil, Saudi output so far this year is down six percent from last year. Many analysts are now saying that OPEC can no longer increase production enough to bring oil prices down. All they can do is make prices go up by further constricting supply.
Besides throwing cold water on the idea of production increases, OPEC leaders also broached the subject of dropping the US dollar as the default currency for oil payments. And Venezuelan President Hugo Chavez proposed that OPEC should become more strategic in using its oil to benefit the world's poor.
King Abdullah of Saudi Arabia disagreed with Chavez, saying, "Oil is an energy for building and prosperity, it shouldn't become a means of conflict." The Saudis would limit the mission of OPEC to providing oil at a stable price to benefit global economic growth. Apart from the troubled times in 1973-74 when Arab states embargoed oil exports to protest America's support for Israel, OPEC has pretty much done what it was asked to by the United States. We should thank OPEC for doing its part to fuel the massive economic expansion of the past 30 years.
But OPEC's founding ideals were not about servicing global capitalism; they were about protecting the interests of third world countries from former colonial powers. One of the founders of OPEC was the Venezuelan economist Perez Alfonzo. Alfonzo believed that Venezuela's oil was a national asset that should be used for the good of the people. He lived modestly himself, walking wherever he could. Toward the end of his life, he wrote, "I am an ecologist first of all. I have always been an ecologist first of all ... . I feel OPEC is a good instrument of the Third World. It has just not been used properly."
Imagine how world economic development might have proceeded if OPEC had done more to ensure that oil was used for third world development and the alleviation of poverty. Instead, we saw phenomena like the oil glut of the 1990's that fueled the fad of giant SUVs. We got Hummers when we could have had hospitals, schools and help for the world's poor.
Now our eyes are being opened. Cheap oil is not infinite. It is not an American birthright. Now we can begin to cope with the consequences. It won't be easy, but it will be real.
Lester Brown reports that the German Energy Watch Group is projecting that oil production will now decline by seven percent a year and fall to 58 million barrels a day by 2020. Brown points out that the United States is more vulnerable to an oil production decline than some other countries: "For example, the United States -- which has long neglected public transportation -- is particularly vulnerable because 88 percent of the US workforce travels to work by car."
Brown, who founded the World Watch Institute in 1974, is like Perez Alfonzo. He has long urged a different path for economic development. To cope with what he calls "a seismic event, marking one of the great fault lines in world economic history," he proposes calling an emergency meeting of the G-8 to coordinate decisive action to reduce oil use. He says, "If governments fail to act quickly and decisively to reduce oil use, oil prices could soar as demand outruns supply, leading to a global recession or -- in a worst-case scenario -- a 1930s-type global depression."
It seems like we might have a choice then: either back to the 70's with gas rationing, speed limits and lowered thermostats, or back to the 30's.
We should be thankful that we have a choice. It may not be the choice we want, but it's the choice we have.
Unfortunately, there are still plenty of voices trying to downplay this message of oil depletion and lull us back to sleep. Last week, NPR did a series of special reports on high oil prices. Smooth tones and heavily modulated language made the listener feel that the troubles were a just a temporary speed bump, certainly no "seismic shift."
The stories seemed to evoke every reason for high prices but a geological limit on supply, from the falling value of the dollar, to Iran, to "excessive demand" from China and India. Listeners were reassured that the high prices would stimulate more production and that prices would eventually fall again. The current high prices were described as "an 'oil bubble,' one that will pop, sooner or later." The unstated message was: "Don't wake up! At least not until after Black Friday, the biggest shopping day of the year! Please give us one more great retail season so the American consumer can continue to fill his/her divinely sanctioned role as the driver of the world economy!
The US Congress has yet to pass an energy bill that would begin to shift investment from the fossil fuel economy to one based on conservation, efficiency and renewable energy. Groups like the American Enterprise Institute, the National Association of Manufacturers, the US Chamber of Commerce and big utilities like Southern Company are lobbying to prevent investment in renewable energy. The American Petroleum Institute even commissioned a study to prove that the renewable energy provisions would cause energy prices to rise.
Democratic Congressional leaders have promised us an energy bill by Christmas. House Speaker Nancy Pelosi says it could be "a nice Christmas present for the American people." But this bill is in danger. Only one thing can ensure a strong energy bill.
Over this Thanksgiving recess, members of Congress must hear from multitudes of clear-headed people who understand that oil production has peaked, that energy prices are going to rise no matter what we do, and that the best choice for the future is to invest the resources we have left in a new renewable energy infrastructure.
That would be something to be truly thankful for.