THE OIL AGE

We live in the Oil age, which gives us a higher degree of prosperity than has ever before been achieved. Our houses, our schools, universities, hospitals and transport systems allow most of us to live better than any king in previous ages. Most of these achievements are due to the use of machines that consume oil. Present day agriculture uses oil to power tractors, enabling less than 2% of the population to be employed in farming, and frees the rest of us to take up other (often previously unheard of) occupations.

Oil allows us to travel both locally and across the world in a manner and in numbers impossible for previous generations. It brings the world's produce to our doorstep and in addition it heats us in winter and is the raw material for many plastics, medicines, pesticides, paint and clothing.

This oil age is likely to last for the very short period of about 200 years. Last year it was estimated that the world had used 820 billion barrels of oil, that the known reserves of oil (mainly in Middle East countries) were about the same. Because the number of new discoveries is falling year by year in spite of heavy drilling, the amount of oil not yet discovered would be less than 180 billion barrels, this totals a trillion barrels - about 40 years worth at present consumption rates.

The USA led production until the 1960s when the Middle East countries became the leaders. There are those who claim that there is a lot more oil to be found but this is not supported by the majority of experts. The history of the American oil fields showed that exploration peaked about 40 years before production peaked in 1970. Likewise world exploration peaked 30 years ago and therefore world production will peak during the next 10 years. Some expect this peak to be sooner and some later but the variations are quite small. Mr. C. J. Campbell spent 45 years studying the subject, wrote two books and made a presentation to a House of Commons All-Party Committee on July 7th 1999. This presentation shows that the geography of oil distribution is well understood, and the likelihood of finding large wells is very remote.

Campbell's scenario suggests that "oil demand will grow at 1.5% a year" (a conservative estimate). "Middle East countries will impose higher prices.....I think there will be a price shock between now and 2001 .... and will probably trigger a stock market crash.
"...As Europe, America and Japan vie for access to Middle East oil, more missiles can be expected. The third world will be badly hit, being unable to afford imports. Agriculture is very dependent on oil"

"It may have a fundamental impact on investment. Up till now the investment community has believed in perpetual growth on which cycles are superimposed. The bottom of each cycle has been higher than its predecessor making capital appreciation the primary goal of investment, but the tensions of the oil shock...the colossal financial transfers to the Middle East, may create a new view.....we may experience a new downward trend...share prices may sink... the main focus will be on yield not growth. Capital will be destroyed.

"The (production) plateau has to come to an end around 2008... Production will then start its inevitable decline at about 3% a year. Increasing shortages will develop, agriculture and transport will be seriously affected. The Global market will come to an end because of high transport costs...

"If by some miracle we could add 500 Gb of reserves, more than half as much as produced so far, - it would delay peak production by only 10 years....." He concluded by saying that we are currently using four barrels of oil for every one barrel of oil that is being discovered."

The first oil well was in Pennsylvania in 1859. From the 1890s when J D Rockefeller I cornered 82% of the American refining industry, the controllers of a few corporations have used political intrigue, assassination, revolution and all out war. The figures and estimates of reserves produced by oil companies are unreliable and misleading. Otherwise reputable companies show the same reserves year after year, clearly impossible in view of their production figures. Companies under-report the size of discoveries and in later years revise upwards the size of their reserves. Because they do not backdate the revision it appears that they have growing reserves. This has misled many analysts. The true position shows that discovery is falling, not rising.

ALTERNATIVES

The figures given so far refer to ordinary oil, the black stuff which flows or is pumped out of wells. There is also shale oil but it is as yet impracticable to extract this oil. There is oil still to be found in deep water and polar regions, and natural gas liquids, none of which are expected to extend production by more than a few years. The cost of extraction may be excessive.

Coal, the original fuel that made the industrial revolution possible, is still with us in large quantities, sufficient for several hundred years plus you can make petrol from it. But it has severe pollution problems and is more expensive than oil.

More modern fuels include Ethanol a type of alcohol distilled from plants, used successfully in Brazil where labour is cheap. In Australia the amount of fuel used to power the tractors would be much the same as the amount of Ethanol produced. Atomic Energy now produces much power in the Northern hemisphere but due to the problems in the disposal of waste atomic materials and the power of public opinion it is unlikely that many new plants will be built.

Sustainable fuels include Water Power which has been developed in past years, so further expansion is limited. Wind Power will be expanded considerably: present units can supply a large village or even a small town but do not compare with the capabilities of oil. Solar Power is at present expensive and variable. Prices will reduce a little and eventually every roof will have its collector. Large solar plants will be built in desert areas close to water supplies. They could electrolyse the water and the hydrogen would be bottled. The hydrogen could be burnt directly with air (oxygen) in a rotary type engine. The exhaust would be water which is non polluting. It is this kind of development which will be essential if we are to overcome, if only partially, the poverty due to the eventual demise of oil.

There are still more energy sources to be used. Many types of Fuel Cells have been developed. Some already run buses in Europe but they are still expensive. Geothermal Energy, Tide Power must be added to the list. Of all the power sources oil has the greatest amount of energy and has been available cheaply - it simply flows out of the ground. Refineries are not cheap but so much oil flows through that the cost per litre of product is still low. But this is only the case when oil is plentiful, as soon as the supply is reduced the price must go up.

THE END OF THE GLOBALISED ECONOMY

Alternative fuels even when fully developed are unlikely to provide as much energy as oil does now and the cost will be much higher. While oil and gas may last another 50 years we must expect the price to go considerably above $30 per barrel in two or three years. In ten years time the price will be so high that many of us will not be able to afford it. The price of travel, particularly world travel, must go up, and countries dependent on tourism will be seriously affected. The cost of transporting goods around the world will become so high that local production will become the norm. It will no longer be possible for corporations to threaten to go off shore as the transport costs will exceed any difference in labor costs.

This means that the economic rationalist global economy is doomed and many of us will raise a cheer because we have experienced in the last three decades many cut-backs in jobs and uncertainty about our present jobs. Many part-time jobs have been created but you can't build a home and a family on a part time job. Our governments have had to sell up our assets and cut back health and education services to make ends meet. Our democracy has been eroded by the power of the Transnational Company. The rich are richer and the poor poorer because of economic rationalism, politics and those great reservoirs of oil which have been depleted to half of their original capacity.

However we should not cheer too loudly because the problems we will face will be difficult. The gradual loss of oil will mean that we all shall be more poverty stricken than we were. It will mean that State and local governments will become more important. World policeman and the United Nations, not very good now, will become powerless. No large country will want to use their vanishing supply of oil to keep some far off country in order. It will be easier for dictators and bandits to take over small States. Our financial systems will be in ruins because they were designed to work in growth situations.

WHAT TO DO ABOUT IT

There are many people working hard right now solving the problems of alternative energy. They are inventing new fuel cells, better solar collectors etc.. It should be clear that we need to create an alternative renewable energy system within a few years to take over from oil so the oil that is left will last longer and be put to more valuable uses. But there is insufficient investment taking place in alternative energy because there is uncertainty as to which system will bring the best results, and there is still money to be made from oil.

The present economic system will not change, Banks and financiers will be too busy making money out of oil. It is only when the increasing price of oil causes stock market crashes, will they realize that their systems are in need of reform. This may well be too late so it is up to us ordinary folk to educate everyone we come in contact with.

Starting with the cashier at the petrol bowser - "That's 50 litres less in the well !" Then at the local motor show - "This car is bigger and more powerful than last years, it will use more petrol at a higher price. Do you have a good bubble car?" Then you should try the public transport, take a trip to town, if you have criticisms, sheet them home. If it was a good service, give public praise. More of us will travel by public transport in future. To everybody - "The bycycle will make you fitter!" Visit your local representatives, State and Federal. Ask them "what is being done about alternative energy? If private enterprise won't do it how about public service?" Then if you meet anybody even remotely connected with finance or banking ask them "How is your organisation going to cope with a contracting economy? Do you know of any suitable reform to our money systems?" Many reforms have been suggested but they have all been scorned by orthodox financiers. One such method was used 180 years ago, known as the Gurnsey Experiment, with great success but to day they are a tax haven, i.e. they make their money out of other countries wealth.

You need to examine your local community to see how they will cope. Local firms now going broke due to globalisation need your support - they will be needed when global competition becomes uneconomic. Perhaps they can be mothballed.

The railway is the most economical form of transport, currently eclipsed by diesel trucks, disused rail tracks have been taken up. We should ensure that the route is kept clear of other developments so the lines can be re-laid.

Finally we must insist on world education. A world split into small states subject to desolation by warlords needs much more education than currently exists.

The Australian Veteran's Vietnam Reconstruction Group went back to Vietnam and rebuilt a school. They need our support. We should also find other places where schools can be built.

Governments which spend less on education than they did a few years ago should be subjected to severe pressure, or help, to change their ways.

The World Bank and the WTO must be told to arrange their loans so that Third World countries never reduce their expenditure on education. The USA and others should be told to pay up their UN dues and to ask that this be channelled into World education.

Failure may mean a new dark age for humanity and our great grandchildren (if there are any) will say "How could they have been so greedy? So improvident? So bloody stupid?......" and we will be very, very sorry.

Dick Clifford.

First published S.A.Humanist Post June 2000. Now 5 years old the above is still accurate. For my latest effort go to  REALITY CHECK What we are doing to this world, What the world will do to us.

LINKS - When will the Joy Ride End? written for Americans.

          Oil Supply: The Crunch has Arrived!! By Brian J Fleay, a recent (March 2000) analysis.

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