PEAK OIL AND THE FATE OF HUMANITY Chapter 8 – Consequences of the Oil Decline Robert Bériault

1. PEAK OIL AND THE FATE OF HUMANITY Chapter 8 – Consequences of the Oil Decline Robert Bériault

2. So what’s going to happen when oil starts to decline?

3. Looking at the future: Nobody can read the future. However, there are some outcomes we can deduce from logical analysis of known elements. The following are not predictions of the future. They are instead, an estimate of the probabilities of the likely outcomes. Rationing chip In Chapter 9 we will look at what might be different if Canadians decide to take action in the face of limits to growth.

4. Estimated oil production after the peak There might be a plateau near the peak then, according to the Hubbert model, oil is estimated to decline at 3% per year. Oil decline Adapted from: “The Peak of World Oil Production and the Road to the Olduvai Gorge”, Richard C. Duncan

5. It’s not enough to keep the oil production flat. Demand is increasing at about 2% per year. If we add the 3% decline in production… …then every year there will be 5% less oil than necessary for a growing economy – 40% less in a decade!

6. Looking at the future: Lets extrapolate from the 1973 oil embargo. I remember, when the price of oil more than doubled within a few weeks, it kick-started a spiral of inflation. Rationing chip

7. And then in 1980 when oil peaked at $94 a barrel in today’s dollars… …and mortgage rates jumped to 21%, I remember the hardship friends and neighbours suffered when they lost their houses. Rationing chip

8. Rationing chip So here are some of the likely results of the oil decline: • Obviously the price of crude oil will go up • It’s quite likely that within a few years of the oil peak we’ll be paying $3 to $5 a litre for gasoline • And considering the importance of gasoline, we will probably think that rationing is an equitable way of allocating the shrinking resource.

9. Cotton The high price of oil will affect costs of commodities.

10. Manufacturing will take a double whammy: The increased cost of materials and of energy will take a bite out of manufacturers’ profits. Bankruptcies are a likely consequence

11. When companies go bankrupt, their workers will lose their jobs. How will we solve the problem of unemployment lines?

12. How will homeowners afford to heat their houses? Actually, rents might go down. Not much comfort if you have no job, though. How will the unemployed pay their rent?

13. Two factors will make all goods harder to get: 1- Canada will have little manufacturing industry left because of our policy of outsourcing to third world countries. 2- Transportation will be much more expensive. Empty store shelves might become the norm.

14. Everything will be more expensive: It will be more expensive to extract coal, to build new power plants and to build renewable energy plants. Even day-to-day maintenance will be more expensive. We will probably have to cope with rotating power failures.

15. Parts and equipment: Replacement parts will likely be difficult to get. All forms of energy required to run a city with its complex equipment will also be more expensive. With less tax money, municipal services will suffer continual neglect.

16. If you want a preview of what Canada might endure, look at Cuba: For reasons related to politics, the water utilities in Cuba have deteriorated to the point that many homes no longer have running water. Cuban drawing water to take home Barrel of water in Cuban kitchen

17. Security: With unemployment becoming increasingly commonplace, there will be more desperate people and this will generate more crime. Security will be a big concern.

18. Security will be a big concern: With increasing unemployment, poverty and disillusionment there will be more clashes with the authorities .

19. Suburbs will take a hit: For more on this subject see the film: “The End of Suburbia”. Driving will become very expensive. The suburbs are built such that they cannot exist without the automobile. People will want to sell their suburban houses to buy in the city core. But they’ll be holding title to highly devalued property. http://www.endofsuburbia.com/

20. We’ll have to forego luxuries for necessities: Consumers will have to spend a large proportion of their take-home salary just to pay for their gas and utilities. Latte GPS navigation systems Trips to Florida Restaurant meals Motorboats

21. The providers of luxuries will engage in layoffs. And those industries will go down the drain!

22. Once oil prices reach a certain level, demand will start to subside. And when oil use subsides, there’s good reason to think this means: The end of economic growth!!!

23. Let’s go back to this graph from Exxon Mobil The green portion is the production from existing fields. The red portion represents what we have to find just to keep up with demand. Finding this quantity is unlikely in view of the arguments presented earlier on oil discoveries.

24. So what’s going to happen when economic decline follows oil decline?

25. Here’s a doomsday scenario: One day, after several years of decline, investors might realize that the economic downturn is due to declining oil supply and not the other way around.

26. Doomsday scenario: They’ll know things could only get worse next year.

27. Doomsday scenario: The realization that there is no way of making a return on investment could drive money away from the stock market. $$$ $$$ $$$

28. Doomsday scenario: Will the banks lend money if there is no expectation of a return?

29. Doomsday scenario: The entire economic system could collapse. We might see a return of the Great Depression. Permanently.

30. Do you think these troubles will start soon?

31. I don’t know… I’m betting that for a couple of decades following the peak we’ll have a fluctuating economy. It might resemble the inflationary period of the 1980s with worsening recessions followed by partial recoveries.

32. Maybe if we can inform enough Canadians so they realize what Peak Oil is all about, that we’ll move the government to take appropriate action. Then we could live well, but at a much reduced standard of living. But who knows? -- bad things could happen within my lifetime or maybe only during my children’s lifetimes, after I’m gone.

33. Do you really think that doomsday scenario could take place?

34. In my opinion, that will depend on whether or not you and I can involve a critical mass of people so we can influence the social choices that will be necessary.

35. Don’t get discouraged. There are many actions Canadians can take to mitigate the effects of oil depletion. See Chapter 9. Click icon for Chapter choice