in keeping with "rant on cars and society" i thought i'd post this. also since theres no car free section and probably never will be i'd like to spark some anti car/car free discussion. its from issue 23 of car busters magazine.

Against the Grain


Surveying oil's decline with industry expert Colin Campbell


by Gandalf Tätting


Dr. Colin Campbell has over 40 years of experience in the oil industry. He earned a PhD in geology from the University of Oxford in 1957, and has worked as a petroleum geologist in the field, as a manager, and as a consultant. He is the founder of the Association for the Study of Peak Oil (ASPO), a trustee of the Oil Depletion Analysis Center (ODAC) in London, and a former affiliate of Petroconsultants (now IHS Energy Group) which maintains the most authoritative database on production and reserves.
****Campbell once likened depletion to an Irish pub. "The glass starts full and ends empty. There are only so many more drinks to closing time. It's the same with oil. We have to find the bar before we can drink what's in it."
****His provocative claim that financial capital was built upon cheap oil and therefore cannot handle the idea of a finite resource, has often led to public clashes with economists.
****In this interview for Car Busters he explains some of the basics of peak oil and gives his opinion on what must be done.

Car Busters: Could you give us an explanation of peak oil?
****When we recognise that oil and gas are finite resources formed far back in the earth's geo- logical past, under now-well-understood, but rarely occurring, processes, it tells us that they are subject to depletion. A further reflection tells us that they have to be found before they can be produced. It is furthermore easy to understand how discovery starts in a new area with the first find, and then rises rapidly to a peak with the larger fields, and eventually declines to final exhaustion. Production has to mirror this discovery pattern after a time lag.
****This would all be entirely self-evident if good data were in the public domain, which is far from the case.
****The best current evidence available suggests that peak production comes in 2005 or 2006. Oil prices are set to go higher as there is virtually no spare capacity left, unless recession kills demand.
****In world terms, the first discoveries were made around 1850, peaked in 1964, and then began declining. It is no surprise therefore that the corresponding peak of production now arrives. After peak comes decline.
****Given the central role of oil in the modern economy we may expect the onset of decline to have a devastating impact. The actual decline is gentle at no more than two to three percent per year, but the perception of it being relentless carries very heavy implications.
****Briefly, as I see it, the situation is as follows:
****The first half of the Age of Oil is coming to an end. It lasted 150 years and saw the rapid expansion of industry, transport, trade, agriculture and financial capital which allowed the population to expand six-fold exactly in parallel with oil production. Of particular importance was the little understood role of financial capital, which is not quite what it seems to be.
****Financial capital was created during the first half of the Age of Oil in several ways.
****First, commercial banks lent more than they had on deposit and charged interest that created money out of thin air, but the system worked because there was confidence that tomorrow's expansion, made possible by cheap oil-based energy, provided collateral for today's debt.
****Second, world trading currencies (previously the pound sterling and now the US dollar) yielded a huge unseen rental that flowed to the issuing countries, the principal benefit of empire.
****Third, the financial system effectively impov- erished the so-called developing world as partic- ular currencies became victims of negative specu- lation on currency markets, which in turn led to "rescues" in the form of dollar loans and liberal- ised policies whereby produce and profit were exported, leaving the country concerned ever more burdened by debt. For example, Ecuador's entire oil revenues are dedicated to servicing for- eign debt, leaving its people worse off than before, despite apparent economic development.
****Fourth, high oil prices are a further source of "capital" that is nothing more than profiteering by governments and companies from shortage, as the cost of production does not significantly change. High prices do not lead to more discov-eries. This defies the normal laws of economics, which are not designed to address physical limits because none have hitherto been experienced on a global scale.
****Soon, the second half of the Age of Oil will dawn. It will be characterised by the decline of oil and all that depends on it, including financial capital because the decline in energy supply will remove the essential confidence that tomorrow's expansion provides collateral for today's debt. This in turn implies that massive amounts of "capital" will have to be removed to match the declining energy supply on which capital ultimately depends for its legitimacy. We speak therefore of a second Great Depression, echoing the events of the early 1930s, but now made even more severe by the huge expansion of unsupportable and unsustainable urban populations.
****At first sight, this sounds like an apocalyptic vision, and no doubt the transition to the second half of the Age of Oil will be a time of great tension and difficulty, but in the longer term the new world that dawns may be a better one. People will again have to live within their communities, relying on the possibilities of their own situations as imposed by nature. Desirable diversity and independence will be encouraged in the most positive manner. People, spared from the current gruesome global competition and conflict, might come to gain a greater respect for themselves, their neighbours and the environment within which nature has ordained them to live.

CB: What is the scientific background for peak oil?
****The basic geological controls for oil accumulation were understood in the early days of oil in the 1 century, but petroleum geology has made great strides in refining the understanding. Geo-physical advances have made it possible to map struc- tures far below the surface in great detail, and a geo-chemical breakthrough in the 1980s made it possible to precisely identify the sources of oil, evaluate the conditions necessary and map the effective areas.
****Briefly, the bulk of the world's oil was formed in two short epochs of extreme global warming 90 and 150 million years ago, when algae proliferated in lakes and seas, to be preserved in stagnant rifts formed as the continents moved apart. Once formed, the oil moved upwards to zones of lesser pressure. Some dissipated and was lost at the surface, but some accumulated in structural traps large enough to become oil fields.
****In a similar fashion, gas was formed from plant remains, rather than algae, and from ordinary oil that was over-heated on deep burial. Gas needs a better seal than oil to hold it in the trap, and much was lost over time.
****The production in any oil field declines towards the end of its life, as rising water displaces the oil extracted from the reservoir. Off-shore fields are normally produced at below maximum rate to deliver a long plateau and an abrupt decline to maximise the facilities.

CB: Do you believe that alternative energy sources will take over from oil?
****There is no doubt that so-called renewables from sun, wave, tide and geo-thermal will play an increased relative role in the future, as too, no doubt, will coal and nuclear.
****But it is important to take into account the net energy yield. For example, a nuclear power station incorporates a great deal of oil-based energy: making and transporting the concrete and steel, mining and transporting the uranium (itself available in ever lower concentrations), disposing of waste and, eventually, decommissioning.
****Secondly, the current economy is heavily dependent on cheap oil. So if its high price triggers a recession, demand and the price of oil would fall. If so, these alternatives become much less competitive.
****Never before has a resource as critical as oil declined from depletion without having been naturally replaced by a better substitute. Stone to bronze to iron to steel was a natural progression. But oil to less oil and more expensive and less efficient substitutes is a new phenomenon without historical precedent.

CB: How do the oil companies address this issue?
****Historically the major oil companies reported less reserves than they found. They were subject to strict stock exchange rules that frowned on fraudulent exaggeration, but smiled on under-reporting as prudent manage- ment. As a result they had a stock of unreported reserves, which could be used to cover any temporary setback in their world operations. The reserves were accordingly revised upwards over time, giving a comforting but mis- leading image of steady growth which economists wrongly but understandbly extrapolate ever onward, believing it to be a function of technology.
****But those days are over as the stock of un-reported reserves has been drawn down over the past decade. Most of the major companies obscured the situation by merging (BP-Amoco-Arco, Exxon-Mobil, Chevron-Gulf-Texaco, and Total-Elf-Fina). But Shell, which did not make significant acquisitions, was finally forced to reduce its reserves in the face of declining discovery, which created a financial furore costing the chairman his job.

CB: How do economists view peak oil?
****Economic theory was built during the first half of the Age of Oil, giving the notion that supply and demand would always be in balance in an open market. Economists are not at all prepared to admit to a finite resource, without sight of a better substitute, as it offends the underlying precepts of their calling. They think that the resource is near infinite with production being just a matter of investment, technology and politics.

CB: Which governments are acknowledging this problem and how are they preparing for it?
****Most governments are run on these outdated economic principles and have great difficulty in applying policies designed to meet the reality imposed by nature. In political terms it is easier for them to treat peak oil as an act of God and then try to win votes in reacting to it, than to either study the issue properly or prepare for it.
****Governments have been helped by the International Energy Agency, which has deliberately failed to study the matter properly itself, fearing the consequences of an internal study, and has been happy to publish bland "scenarios" of growing supply, behind which its member governments can hide. It also stresses that these are "business as usual" scenarios and not forecasts.
****But now high prices are forcing the agency to shift its position to try to maintain credibility. It is beginning to admit to supply limits.
****An obvious remedy would be for governments to sign a depletion protocol whereby they would agree to cut production and imports by the world depletion rate (2-3%). High oil prices are simply profiteering from shortage by companies and producing governments, as the cost of extraction has not changed materially.
****Furthermore high prices do not lead to more new discovery and actually encourage companies to produce at lower rates to preserve their resource while making good profits.
****Russia is probably the only government that is now bent on conserving its reserves in the face of depletion and re-nationalising the industry to manage such a critical national asset. The British government, while admitting that its oil and gas will be exhausted by 2020, allows American companies operating under its jurisdiction to export. It follows these outdated economic principles believing in liberalised markets, even if they have to open them at gunpoint as in Iraq.