Peak Oil: The Germans and British Understand the Outcome

A series of recent reports have been released by both the German and UK governments on the implications of Peak oil.  Jeff Rubin, former chief economist of Canada's CIBC World Markets, discusses both reports in his Globe and Mail blog.  In it he summarizes that the emerging global consensus amongst policy makers and long term government planners is that deficiencies in accessing and utilizing petroleum will lead to severe economic disruptions, social instability, and a collapse of the current global trade arrangements.

Rubin disputes the reassurances made by governments and industry supporters that peak-oil is not a concern.  As I've outlined in previous blog entries (here and here), many persons who have had a close examination of the situation believe that we reached peak-oil in 2005.  The German study states that there is "some probability that peak oil will occur around the year 2010 and that the impact on security is expected to be felt 15 to 30 years later."  Rubin concedes that while we may not have reached "geological peak-oil" from the economic perspective we certainly have.  As global oil prices maxed out at near $150/bbl it became abundantly clear that our current economy and way of life is completely incapable of sustaining these costs.  Furthermore, it is only at these very high levels of crude that many of the untested extraction technologies and difficult to obtain reserves can be made to be profitable.  Hence, in reality, accessible global oil reserves are not growing any further.

Der Spiegel International, outlines a series of potential situations that may arise:

1. Oil will determine power
2. Increasing importance of oil exporters
3. Politics in place of the market
4. Global market failures
5. Relapse into planned economy
6. Global chain reaction
7. Crisis of political legitimacy

Altogether, the implications of this fact are severe.  Rubin summarizes:

The German study paints a bleak picture of the post-peak world: political power quickly shifts from major oil-consuming economies to major oil-producing economies. Less and less oil is traded on the open market, while more and more is traded between nation states, with national oil companies entering into long-term supply agreements that are tied to broader political and military considerations. And military alliances coalesce around the security of energy supply, rather than between countries with shared political or economic principles.

In the UK, the Guardian newspaper also heralds the dangers associated with a post-peak oil world in an article titled "Peak oil alarm revealed by secret official talks."  Previous estimates by the International Energy Agency indicated that there would be "sufficient reserves to meet demand till 2030 as long as investment in new reserves is maintained."  However, major industry players, economic skeptics, and government analysts believe the situation could be considerably less solvent.

But an internal IEA source said: "Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible, but there are fears that panic could spread on the financial markets if the figures were brought down further. And the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources."

Coupled with climate change concerns, which includes the possibility of severe drought, famine, resource scarcity based conflict, and socio-economic collapse everywhere, we are not just talking about a realignment in global powers, but the possibility of wholesale disintegration of human civilization.