Is Peak Oil the End of Civilization?

Think back to the days following 9/11, when all commercial and civilian air traffic was grounded. People were stranded everywhere. Only take it a step further: Take away the trains, the buses, and the rental cars. Imagine every gas station closed, and cars abandoned on the roadside as they too run out. People can't get to work and the nation's businesses can't even declare bankruptcy because there's no way to get to the courthouse to file the papers. The mail stops. Supermarkets are empty because there are no delivery trucks. And then, in a final shriek of terror, the power plants shut down, darkness falls everywhere, water pressure stops, and humanity devolves into a battlefield of hand-to-hand combat over who gets to eat the neighbor's dog.

This is the extremist scenario painted by peak oil advocates. Peak oil refers to the point at which world oil production must start to decline as reserves are emptied and pumps run dry. Oil is a finite resource, and so there's no doubt that at some point, peak oil will occur. The world's appetite for oil continues to grow exponentially, fueled by the explosive growth of most of the world's population in China and India. When the rift between increasing demand and decreasing supply gets to a breaking point, advocates say that the apocalyptic scenario described above must happen.

In some places, peak oil has already happened. In the United States, oil production peaked about 1970, when we produced about 3.4 billion barrels per year. Today we produce about 1.5 billion. The curve has followed the 1956 prediction by American geophysicist M. King Hubbert who described the oil production of any given region over time as a bell curve. This is called Hubbert's curve. Every region in the world has its own separate curve. Some, like the US, are already on the downside. Others, like Canada, which is just beginning to exploit its oil sands, are only just now hitting the steepest climb on the upside. In addition to Canada, the middle east and China are also still climbing their upsides. Russia has just barely tipped past its peak. The most pessimistic estimates for world peak oil say that it's already happened; the most optimistic give us another 30 years before we peak.

Oil production in any given region is not determined simply by physical factors such as the amount of reserves remaining and the technology required to develop it, but also by political and economic pressures. For example, Russia peaked way back in the Soviet days when their economy was falling apart, but their oil industry recovered throughout the 1990's and they've managed to find a second peak. The same could happen in the United States, if continental shelf and rocky mountain reserves were to be developed. They probably won't be, due to political pressures, but it's nice to know that they could be, if things came down to eating your neighbor's dog.

The biggest error made by the peak oil doomsayers is in failing to recognize the adaptive nature of the world economy. When demand goes up and supply goes down, prices go up, and consumers look to alternatives. As alternatives become more popular than the original, prices drop in reaction to the reduced demand, and eventually a marginalized industry disappears. Markets react and adapt. Currently, we have very high gasoline prices. Consumers are reacting by clamoring for alternative fuel vehicles. Many industrial products depend on oil, such as fertilizers, solvents, and plastics to name only a few; and as the price of producing these climbs, industry turns to alternatives. Alternatives become increasingly commoditized and prices come down. Oil becomes less relevant, and eventually nobody will care when reserves finally do run dry.

If consumers and industry failed to react to oil prices that climb astronomically for decades, then yes, it could be possible that we'd have an overnight shutdown of everything and the world would turn into a tumultuous battlefield of cannibalism. But neither consumers nor industry have ever acted this way, don't now, and aren't likely to in the future. Everyone wants to spend less money, and the most expensive options will always be least desirable.

Part of the reason that the doomsayers don't see this is that what's most visible right now is gasoline prices, and the total nonexistence of any viable alternative fuel vehicles. That's our worldview: Expensive gas, diminishing production, no alternatives. But outside of this worldview, some very interesting things are happening. Believe it or not, tremendous research is going on to develop alternative fuel vehicles: Supercapacitor technologies, fuel cells, hydrogen production. Silicon Valley is investing into alternative energy like a bat out of hell. And worldwide, industry is developing alternatives to petroleum based plastic like fructose. Agricultural fertilizers can be made from seawater or atmospheric nitrogen, but they're not in production because the market has not yet reacted that far. Eventually, when the price gap closes, these non-oil based sources may become the inexpensive standards.

What about other resources? Do they peak as well? Yes, they do, at least non-renewable ones do. It's generally believed that we're either just past or right about at the peak of gold production. Some 150,000 tons of gold have been mined throughout history, and the US Geological Survey estimates that there's another 90,000 tons still out there. Considering there's been a constant increase in gold mining efficiency, this all sounds about right. In many countries around the world, gold production has been dropping in recent years as reserves have been tapped out. But, do we need to expect a worldwide panic over gold? Probably not, since it's largely a luxury item and its industrial uses are relatively modest. We expect to see prices rise as supply diminishes, and probably a number of market adjustments until we settle into an eventual equilibrium of old gold being reused to meet demand.

There are other more serious resource peaks. Peak phosphorous, for one. Phosphorous is a crucial ingredient of both synthetic and organic crop fertilizers. And glyophosphate is a principal ingredient in herbicides used in super-high-yield genetically modified food crops. Both have seen dramatic price hikes in recent years as rock phosphate, the source of nearly all industrial phosphorus, is being mined out. If I stopped talking now, this would seem an alarming, terrifying prospect, and you might see doom & gloom websites predicting global disaster the way you do with peak oil. Peak phosphorus is a painful situation for farmers, but it's one that's not insoluble. In the short term, farmers invest in the phosphorus companies, thus offsetting their production costs with dividend income. In the long term, the fertilizer producers continue their research into alternative supplies. High on their list is seawater, which is after all, the eventual depository of all agricultural runoff. This proposal is essentially an accelerated leveraging of nature's existing cycle.

Another peak that we're starting to hear about is peak silicon. In this case, it's not a physical shortage of silicon; it's the engineering limits of what you can do with silicon to make computer chips. Such a peak would mean that the capabilities of computers could no longer grow with our increasing demand on them. The doomsayer pundits could make an argument here too that overnight we'll start each eating other and burning down our cities and running around with babies on pitchforks. But in fact what happens is that the silicon industry fades and the graphene industry rises. Graphene is only one of numerous next-generation computer chip technologies that obsolesce silicon.

Generally, what tends to happen in any industry, is that by the time an existing resource runs out, inventive scientists have already come up with something better. When a production peak looms (be it oil, phosphorus, silicon, or anything), this provides a kick in the pants to accelerate development. Market economies work in such a way that investors are encouraged to fund such development, and the bigger the looming problem, the bigger the investment to meet it.

Mark Twain used to speak nostalgically of the sad disappearance of the riverboat industry. It was killed by steam trains. Steam trains were later killed in turn by diesel electrics. The glory days of rail travel were ended by the advent of airlines. Eventually airliners aren't going to be able to burn jet fuel anymore. What will happen then? Today, I have no idea; much like Mark Twain had no idea that airliners would one day replace his beloved steamboat. To assume that the current state of technology represents the last and final stage of development is a completely ignorant viewpoint. To listen to the doomsayers is to be completely uncritical and unskeptical. I don't know what's around tomorrow's corner, but all the evidence of history tells us that it's probably not a big scary dragon.

By Brian Dunning
Follow @BrianDunning