Peak Oil and Personal Risk

Ken Cenna compares US energy policy and public opinion to the five stages of grief. We’re in denial, Ken argues, and the rest of the steps will follow.

I tend to agree with him and the host of other peak-oil pundits. The world will go through massive changes in the next few decades. But don’t listen to us freaks, kooks, economists, and conspiracy-theorists. Listen to the GAO whose 2007 report, “Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production”, uses some pretty strong language to describe the peak oil risk.

The prospect of a peak in oil production presents problems of global proportion whose consequences will depend critically on our preparedness. The consequences would be most dire if a peak occurred soon, without warning, and were followed by a sharp decline in oil production because alternative energy sources, particularly for transportation, are not yet available in large quantities. Such a peak would require sharp reductions in oil consumption, and the competition for increasingly scarce energy would drive up prices, possibly to unprecedented levels, causing severe economic damage. While these consequences would be felt globally, the United States, as the largest consumer of oil and one of the nations most heavily dependent on oil for transportation, may be especially vulnerable among the industrialized nations of the world.

Price of Oil 07-2008

Price of Oil 07-2008

Don’t get me started on the use of the word prospect there.

Here’s the rub. You don’t have to believe in peak oil (or the five stages of grief) to take seriously the conclusions of the GAO report. A sharp increase in the demand for oil would create a similar effect to a sharp decrease in supply. Whichever side of the cost-push or demand-pull inflation argument you fall on, the outcome is the same regardless of the cause: “severe economic damage.”

Even if the current surge in prices is only the upswing of a bubble–take a look at how many years the last bubble lasted and extrapolate.

Shortly after high school I gave up on any idealistic notions of fixing the problems of anyone or anything beyond myself and what’s mine–I’m barely good at my own problems, so it’s far beyond me to tackle more. (Okay, that doesn’t stop me from giving my opinion, but that’s not the point.) The “prospect” of “severe economic damage” begs the question, what can I do to protect myself and my interests in this scenario? How do I increase my “preparedness”?

It’s a problem I’ll be (and have been) working on for a while. My current thought is to examine the question through risk management. More on that soon.

But for now, I’m going to quote the GAO report once more to give us all something to chew on.

In the United States, alternative transportation technologies have limited potential to mitigate the consequences of a peak and decline in oil production, at least in the near term, because they face many challenges that will take time and effort to overcome. If the peak and decline in oil production occur before these technologies are advanced enough to substantially offset the decline, the consequences could be severe.

The technologies we examined currently supply the equivalent of only about 1 percent of U.S. annual consumption of petroleum products, and DOE projects that even under optimistic scenarios, these technologies could displace only the equivalent of about 4 percent of annual projected U.S. consumption by around 2015.

Oil Prices 1861 2007.svg

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2 Responses to Peak Oil and Personal Risk

  1. Hans says:

    Nicely written. It’s a tough question as to what one person can actually do. Not many people can erect a wind turbine and buy an electric car on their own. Luckily, the EU & Japan are taking this more seriously, so we can look towards their development (and profiting) of better electric/electric hybrid cars for us to buy so we can drive 40 miles each way to work thus “maintaining” the American Dream. Heck given the Chinese’s race towards installing massive Wind Turbine projects, they will soon have better hybrid/electric technology, so at that point they will be able to completely saturate the US market with EVERY product we consume.

    I hope we move past denial quickly, b/c this country cannot survive with a completely Service oriented employment base.

  2. Pingback: The Hirsch Report and “Social Costs” « mghicks

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