Posted June 8,
2006: Peak oil is described as the point where oil
production stops rising and begins its inevitable long-term
decline. In the face of fast-growing demand, this means rising
oil prices. But even if oil production growth simply slows
or plateaus, the resulting tightening in supplies will still
drive the price of oil upward, albeit less rapidly.
Few countries are planning a reduction in their use of oil.
Even though peak oil may be imminent, most countries are counting
on much higher oil consumption in the decades ahead, building
automobile assembly plants, roads, highways, parking lots
and suburban housing developments as though cheap oil will
last forever. New airliners are being delivered with the expectation
that air travel and freight will expand indefinitely. Yet
in a world of declining oil production, no country can use
more oil except at the expense of others.
Some segments of the global economy will be affected more
than others simply because some are more oil-intensive. Among
these are the automobile, food and airline industries. Cities
and suburbs will also evolve as oil supplies tighten.
Stresses within the U.S. auto industry were already evident
before oil prices started climbing in mid-2004. Now General
Motors and Ford, both trapped with their heavy reliance on
sales of gas-hogging sport utility vehicles, have seen Standard
and Poor’s lower their credit ratings, reducing their
corporate bonds to junk bond status. Although it is the troubled
automobile manufacturers that appear in the headlines as oil
prices rise, their affiliated industries will also be affected,
including auto parts and tire manufacturers.
Two-way impact on food
The food sector will be affected in two ways. Food will
become more costly as higher oil prices drive up production
costs. As oil costs rise, diets will be altered as people
move down the food chain and as they consume more local, seasonally
produced food. Diets will thus become more closely attuned
to local products and more seasonal in nature.
At the same time, rising oil prices will also be drawing
agricultural resources into the production of fuel crops,
either ethanol or biodiesel. Higher oil prices are thus setting
up competition between affluent motorists and low-income food
consumers for food resources, presenting the world with a
complex new ethical issue.
Airlines, both passenger travel and freight, will continue
to suffer as jet fuel prices climb, simply because fuel is
their biggest operating expense. Although industry projections
show air passenger travel growing by some 5 percent a year
for the next decade, this seems highly unlikely. Cheap airfares
may soon become history.
Air freight may be hit even harder, perhaps leading to an
absolute decline. One of the early casualties of rising oil
prices could be the use of jumbo jets to transport fresh produce
from the southern hemisphere to industrial countries during
the northern winter. The price of fresh produce out of season
may simply become prohibitive.
During the century of cheap oil, an enormous automobile infrastructure
was built in industrial countries that requires large amounts
of energy to maintain. The United States, for example, has
2.6 million miles of paved roads, covered mostly with asphalt,
and 1.4 million miles of unpaved roads to maintain even if
world oil production is falling.
Modern cities are also a product of the oil age. From the
first cities, which took shape in Mesopotamia some 6,000 years
ago, until 1900, urbanization was a slow, barely perceptible
process. When the last century began, there were only a few
cities with a million people. Today there are more than 400
such cities, 20 of them with 10 million or more residents.
The metabolism of cities depends on concentrating vast amounts
of food and materials and then disposing of garbage and human
waste. With the limited range and capacity of horse-drawn
wagons, it was difficult to create large cities. Trucks running
on cheap oil changed all that.
As cities grow ever larger and as nearby landfills reach
capacity, garbage must be hauled longer distances to disposal
sites. With oil prices rising and available landfills receding
ever further from the city, the cost of garbage disposal also
rises. At some point, many throwaway products may be priced
out of existence.
Suburbs facing hardest hit
Cities will be hard hit by the coming decline in oil production,
but suburbs will be hit even harder. People living in poorly
designed suburbs not only depend on importing everything,
they are also often isolated geographically from their jobs
and shops. They must drive for virtually everything they need,
even to get a loaf of bread or a quart of milk.
Suburbs have created a commuter culture, with the daily roundtrip
commute taking, on average, close to an hour a day in the
United States. While Europe’s cities were largely mature
before the onslaught of the automobile, those in the United
States, a much younger country, were shaped by the car. While
city limits are usually rather clearly defined in Europe,
and while Europeans only reluctantly convert productive farmland
into housing developments, Americans have few qualms about
this because cropland was long seen as a surplus commodity.
This unsightly, aesthetically incongruous sprawl of suburbs
and strip malls is not limited to the United States. It is
found in Latin America, in Southeast Asia, and increasingly
in China. Flying from Shanghai to Beijing provides a good
view of the sprawl of buildings, including homes and factories,
that is following the new roads and highways. This is in sharp
contrast to the tightly built villages that shaped residential
land use for millennia in China.
Shopping malls and huge discount stores, symbolized in the
public mind by Wal-Mart, were all subsidized by artificially
cheap oil. Isolated by high oil prices, suburbs may prove
to be ecologically and economically unsustainable.
In the coming energy transition, there will be winners and
Countries that fail to plan ahead, that lag in investing
in more oil-efficient technologies and new energy sources,
may experience a decline in living standards. The inability
of national governments to manage the energy transition could
lead to a failure of confidence in leaders and to failed states.
National political leaders seem reluctant to face the coming
downturn in oil and to plan for it even though it will almost
certainly become one of the great fault lines in the history
of civilization. Trends now taken for granted, such as urbanization
and globalization, could be reversed almost overnight as oil
becomes scarce and costly.
Developing countries will be hit doubly hard as still-expanding
populations combine with a shrinking oil supply to steadily
reduce oil use per person. Such a decline could quickly translate
into a fall in living standards. If the United States, the
world’s largest oil consumer and importer, can sharply
reduce its use of oil, it can buy the world time for a smoother
transition to the post-petroleum era.