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Transition Town Hastings: Whatever happened to Peak Oil?

Transition Town Hastings has been rebooted, but what, exactly is a "Transition Town" (TT)? The "transition" in question is the huge economic and social changes associated with an expected deterioration and eventual collapse of the wider global/national economic systems in the wake of Peak Oil. But what is Peak Oil?

Firstly it is important to note that petroleum is the single most important raw material in existence. It's used for transport fuels, heating and electricity generation, and for the production of plastics and a vast array of other synthetic chemicals, including lubricants, paint, pharmaceuticals and the fertilisers and pesticides that allow us to grow enough food to feed 7+ billion people. And it is irreplaceable - without access to a regular supply of affordable oil, civilisation as we know it would surely collapse, which is why it is so geo-politically important.

In 1956, US geologist M. King Hubbert predicted that production of conventional oil in the lower 48 states would peak between 1965 and 1970. His theory was based on the fact that the amount of oil in the ground is limited, that the largest oil fields were the easiest to find - and therefore, on average, found earlier - and that there was a predictable path of development and bell-shaped production curve for any one field or region. He was widely ridiculed, especially by the oil industry.

Production in the lower 48 peaked in 1970, and the effects on the US included the loss of the Vietnam war and effective national bankruptcy. After WWII, the US had imposed a global monetary system whereby the US dollar would be the sole international currency, but that dollars would be convertible into gold. In 1971, with the US teetering on the verge of a default and foreign governments demanding gold for dollars, President Nixon was forced to permanently end this convertibility, ushering in an era of purely "fiat" money (which is itself looking increasingly unstable).

At the turn of the century, Peak Oil theorists were predicting global production would peak around 2010, followed by dramatic price increases and economic collapse. But here we are in 2015, and after a decade of high (but not astronomical) prices, oil is back down to $60 a barrel. So what happened? Was the theory wrong?

The theorists got several things wrong. They seriously underestimated the level of "demand destruction", which basically means people responding to rising prices by choosing to use less of the stuff - especially drivers in the US. They also failed to predict the global monetary/debt crisis that started in 2008. This was an accident waiting to happen, thanks to irresponsible lending by banks and a property price bubble, but it was the rising price of oil in 2008 that triggered the bubble to burst. However, the resulting economic chaos caused a global depression, which further lowered demand for oil, and kept prices under control. These factors bought some time, and the oil industry responded by a massive development of unconventional oil production- especially the environmentally-disastrous Canadian tar sands, and now the US "fracking" boom. It has also led to exploration for oil in increasingly remote and environmentally-sensitive areas, such as the Arctic.

This unconventional oil costs more to get at, but its production is seen as a threat to the market share and power of the sole conventional producer which still has spare capacity: Saudi Arabia. One might have expected the Saudis could have responded to falling prices by cutting production, but they surprised everybody by doing the opposite - causing further drops in the price. Presumably, this strategy is designed to destabilise the unconventional oil industry, which depends on high prices to be profitable. The goal is to make potential investors in unconventional oil projects sufficiently worried about future price fluctuations that they choose to invest in something less risky. And it is working: just look, for example, at the huge hole that falling oil prices have left in the SNP's plans to base an independent Scotland's economic future on harder-to-get-at oil in the North Sea.

So where does this leave us? Unfortunately, despite all the opposition from environmentalists, fracking looks like it is here to stay. It won't, however, last forever. A recent study has suggested that production from fracking in the US will itself peak in 2020, and given that global production from conventional fields is already in decline, we are looking at a peak in total (conventional and unconventional) global production about the same time or soon after.

Peak Oil hasn't gone away. The current period of slightly lower oil prices is a temporary phenomenon and the monetary/economic problems triggered by the last spike in prices have not been fixed. They have merely been hidden by 7 years of "printing" of fiat currency and ultra-low interest rates, in order to re-inflate the property and stock market bubbles that burst in 2008.

In short, the crisis predicted by the Peak Oil theorists - the "transition" of the Transition Town movement - is still on its way. It has merely been delayed for a decade or so by a global depression, a temporary boom in environmentally-catastrophic unconventional production and the implementation of "fantasy economics". The result (and the true purpose) of that fantasy economic system is to transfer as much wealth as possible into the hands of the already-wealthy, before the harsh realities of peak oil start to hit home in the 2020s. And I haven't even mentioned climate change, population overshoot, deforestation, soil depletion, collapse of fishery stocks and all the rest of inter-linked crises our civilisation is on a collision course with. The "migrant crisis" making so many headlines at the moment is not a temporary blip: it is the start of something much bigger and far worse.

Are you ready for what is to come? The time to start preparing, for yourself, your family, your community and your town, is now.

Transition Town Hastings can be found online at http://www.transitiontownhastings.org.uk/ and on facebook at https://www.facebook.com/groups/3181364 ... 0/?fref=ts

emordnilap wrote: A minor niggle for me is the use of the words 'theory' and 'theorists'. The peak of extraction a finite resource at some point cannot be a theory. But it's your article.

adam2 wrote:I would also remove the reference to oil being used for electricity production.
Only a tiny, and falling, percentage of UK grid electricity comes from oil, less than 1%.
Natural gas, coal, nuclear, and increasingly wind are the main sources of UK electricity.

We do import a fair bit of electricity, but not from countries that burn significant oil for electricity production.

It might be worth adding that although natural gas can often be used in place of oil, that natural gas is subject to broadly similar as constraints as is oil. North sea natural gas peaked some years ago.

If space permits it might be worth adding that oil is still being discovered, but that the rate of new discoveries is much less than consumption.
(this would counter the argument that more oil exploration will solve our problems)

Little John wrote:Outstanding UE.

That's a fine and concise summery of where we are

In short, the crisis predicted by the Peak Oil theorists - the "transition" of the Transition Town movement - is still on its way. It has merely been delayed for a decade or so by a global depression, a temporary boom in environmentally-catastrophic unconventional production and the implementation of "fantasy economics". The result (and the true purpose) of that fantasy economic system is to transfer as much wealth as possible into the hands of the already-wealthy, before the harsh realities of peak oil start to hit home in the 2020s. And I haven't even mentioned climate change, population overshoot, deforestation, soil depletion, collapse of fishery stocks and all the rest of inter-linked crises our civilisation is on a collision course with. The "migrant crisis" making so many headlines at the moment is not a temporary blip: it is the start of something much bigger and far worse.

Are you ready for what is to come? The time to start preparing, for yourself, your family, your community and your town, is now.

emordnilap wrote:
Shame it has to come at the end.

Transition Town Hastings: Whatever happened to Peak Oil?

Transition Town Hastings has been rebooted, but what, exactly, is a "Transition Town"? The "transition" in question is the huge economic and social changes associated with an expected deterioration and eventual collapse of global/national economic systems in the wake of Peak Oil. But what is Peak Oil?

Firstly it is important to note that for the modern world, petroleum is the most important natural resource bar none. It is of key importance as fuel for transportation, and as the raw material for the production of all plastics and a vast array of other synthetic chemicals, including lubricants, paint, pharmaceuticals and the fertilisers and pesticides that make it possible to grow enough food to feed 7+ billion people. It is irreplaceable; without access to a regular supply of affordable oil, civilisation as we know it cannot continue.

In 1956, US geologist M. King Hubbert predicted that production of oil in the lower 48 states would peak between 1965 and 1970. His analysis was based on the fact that the amount of oil in the ground is finite, that the largest oil fields are the easiest to find - and therefore, on average, found earlier - and that there is a predictable path of development and a bell-shaped production curve for any one field or region. He was widely ridiculed, especially by the oil industry.

Production in the lower 48 peaked in 1970, and this, combined with cost of the Vietnam war, pushed the US towards national bankruptcy. After WWII, the US had imposed a global monetary system whereby the dollar would be the sole international currency, but that dollars would be convertible into gold. In 1971, with the US teetering on the verge of default and foreign governments demanding gold for their dollars, President Nixon was forced to permanently end this convertibility, ushering in an era of purely "fiat" money (which is itself looking increasingly unstable). By 1973, the US was at the mercy of OPEC, with serious consequences.

At the turn of the century, Peak Oil theorists were predicting the global peak around 2010, followed by dramatic price increases and economic collapse. But here we are in 2015, and after a decade of high (but not astronomical) prices, oil is back down to $60 a barrel. Was the theory wrong?

Many people seriously underestimated the level of "demand destruction", which basically means people responding to rising prices by choosing (or being forced) to use less of the stuff. They also failed to predict the global monetary/debt crisis that started in 2008. That was an accident waiting to happen, due to irresponsible lending by banks and a property price bubble, but it was the rising oil price in 2008 that burst that bubble. A global depression followed, lowering demand further. These factors bought some time for the oil industry to respond with major development of unconventional production such as the Canadian tar sands and the US "fracking" boom, and the speed of development of this unconventional production was also underestimated. Exploration for oil in increasingly remote and environmentally-sensitive areas, such as the Arctic and deep water ("conventional production" but from unconventional locations), has also expanded.

This unconventional oil (UO) costs more to get at but its production is seen as a threat to the market share and power of the sole conventional producer which still has spare capacity: Saudi Arabia. The Saudis could have responded to falling prices by cutting production, but they surprised everybody by doing the opposite - causing further drops in the price. This is a strategy designed to destabilise the UO industry. The goal is to make potential investors in UO projects sufficiently worried about future price fluctuations that they choose to invest in something less risky. And it is working: just look, for example, at the huge hole that falling oil prices have left in the SNP's plans to base an independent Scotland's economic future on harder-to-get-at oil in the North Sea.

We have now entered a phase that has been called a "Peak Oil Dynamic": unstable oil prices slowly "sawing" upwards. At the high end of their range (over $140 a barrel), UO is profitable, but the global economy is slowly strangled. At the low end (about $60), the economy starts to recover but UO is unprofitable. Both ends of the range will rise over time, while production and consumption falls, and the population continues to grow. The long-term effect will be a decline in investment in increasingly expensive future oil production, and increasing economic, then political, instability.

So where does this leave us? Unfortunately, despite all the opposition from environmentalists, fracking looks like it is here to stay. It won't, however, last forever, and is unlikely to take off in other parts of the world like it has in the US. A recent study has suggested that production from fracking in the US will itself peak in 2020, and given that global production from conventional fields is already in decline, we are looking at a peak in total (conventional and unconventional) global production soon after. Lower oil prices are temporary and the monetary/economic problems triggered by the last spike in prices have not been fixed. They have merely been hidden by seven years of ultra-low interest rates and "printing" fiat currency, re-inflating the burst asset bubbles.

The crisis predicted by the Peak Oil theorists - and the Transition - is still coming. It has just been delayed for a decade or so by a global depression, a temporary boom in environmentally-catastrophic unconventional production and the implementation of fantasy economics. The true purpose of that fantasy economic system is to transfer as much wealth as possible into the hands of the already-wealthy, before the harsh realities of peak oil start to hit home in the 2020s. And I haven't even mentioned climate change, population overshoot, deforestation, soil depletion, collapsing fisheries and all the rest of inter-linked crises our civilisation is on a collision course with. The "migrant crisis" making so many headlines at the moment is not temporary, but the start of something much bigger and far worse.

Are you ready for what is coming? The time to start preparing, for yourself, your family, your community and your town, is now.

Transition Town Hastings can be found online at http://www.transitiontownhastings.org.uk/ and on facebook at https://www.facebook.com/groups/3181364 ... 0/?fref=ts