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
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
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
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 losers.
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