Your oil wake up call…(file under ignore)

Almost no one has the slightest grasp of the oil crunch that will hit them probably within one decade. When it does it will literally mean the end of the world as we know it. Here is an outline of what recent publications are telling us. Nobody will of course take any notice.

It is gradually becoming understood that the amount of oil reserves and increases in them due to for instance fracking is of little significance; what matters is their EROI. If you found a vast amount of oil, but to deliver a barrel of it you would need to use as much energy as there is in a barrel of oil then there would be no point drilling the field. When oil was first discovered the Energy Return on Energy Invested in producing it was over 100/1, but Murphy (2013) estimates that by 2000 the global figure was about 30, and a decade later it was around 17. These approximate figures are widely quoted and accepted although not precise or settled. In other words oil is rapidly getting scarcer and more difficult to find and produce. Thus they are having to go to deep water sources (ER of 10 according to Murphy), and to develop unconventional sources such as tar sands (ER of 4 according to Ahmed), and shale (Murphy estimates an ER of 1.5, and Ahmed reports 2.8 for the oil and gas average.)

As a result the capital expenditure on oil discovery, development and production is skyrocketing but achieving little or no increase in production.Heinberg and Fridley (2016, Fig 1.1) show that capital expenditure trebled in a decade, while production fell dramatically. This rapid acceleration in costs is widely noted, including by Johnson (2010) and Clarke (2017).

Why can't we keep getting the quantities we want just by paying more for each barrel? Because the price of the oil in a barrel cannot be greater than the economic value the use of the barrel of oil creates.

Ahmed (2016) refers to a British government report that "…the decline in EROI has meant that an increasing amount of the energy we extract is having to be diverted back into getting new energy out, leaving less for other social investments … This means that the global economic slowdown is directly related to the declining resource quality of fossil fuels."

Everything depends on how rapidly EROI is deteriorating. Various people, such as Hall, Ballogh and Murphy (2009), and Weisbach et al. (2013) do not think a modern society can tolerate an ER under 6 – 10. If this is so, how long have we got if the global figure has fallen from 30 to 18 in about a decade?

Several analysts claim that because of the deteriorating resource quality and rising production costs the companies must be paid $100 a barrel to survive. But oil is currently selling for c. $50/barrel. Clarke details how the companies are carrying very large debt and many are going bankrupt; "The global oil industry is in deep trouble."

Why haven't we noticed? Very likely for the same reason we haven't noticed the other signs of terminal decay… because we don't want to. We have taken on astronomical levels of debt to keep the economy going. In 1994 the ratio of global debt to GDP was just over 2; it is now about 6, much higher than before the GFC, and continuing to climb. Everybody knows this cannot go on for much longer. Debt is lending on the expectation that the loan will be repaid plus interest, but that can only be done if there is growth in the real economy, in the value of goods and services produced and sold …but the real economy (as distinct from the financial sector) has been stagnant or deteriorating for years.

The only way huge debt bubbles are resolved is via catastrophic implosion. A point comes where the financial sector realizes that its (recklessly speculative) loans are not going to be repaid, so they stop lending and call in bad debts … and the credit the real economy needs is cut, so the economy collapses, further reducing capacity to pay debts, in a spiral of positive feedback that next time will deliver the mother of all GFCs.

There is now considerable effort going into working out the relationships between these factors, i.e., deteriorating energy EROI, economic stagnation, and debt. The situation is not at all clear. Some see EROI as already being the direct and major cause of a terminal economic breakdown, others think at present more important causal factors are increasing inequality, ecological costs, aging populations and slowing productivity. Whatever the actual causal mix is, it is difficult to avoid the conclusion that within at best a decade deteriorating EROI is going to be a major cause of enormous disruption.

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But there is a far more worrying aspect of your oil situation than that to do with EROI. Nafeez Ahmed has just published an extremely important analysis of the desperate and alarming situation that the Middle East oil producing countries are in, entitled Failing States, Collapsing Systems, (2016). He confronts us with the following basic points:

• In several countries oil production has peaked, and energy return on oil production is falling. Thus their oil export income is being reduced.
• In recent decades populations have exploded, due primarily to decades of abundant income from oil exports. The 1960 – 2014 multiples for Yemen, Saudi Arabia, Iraq, Nigeria, Egypt, India and China have been 5.5, 4.6, 5.3, 4.2, 3.4, 3.0 and 2.1 respectively.
• There has been accelerating deterioration in land, water and food resources. If water use per capita is under 1,700 m³ p.a. there is water stress. The amounts for the above countries, (…and the % fall since 1960), are Yemen, 86 m³ (71% fall), Saudi Arabia 98 m³ (82% fall), Iraq 998 m³ (88% fall), Nigeria 1,245 m³ (73% fall), Egypt 20 m³ (70% fall). Climate change will make these numbers worse.
• So, more and more of the falling oil income now has to go into importing food.
• Increasing amounts of oil are having to go into other domestic uses, reducing the amounts available for export to the big oil consuming countries.
• In many of the big exporting countries these trends are likely to more or less eliminate oil exports in a decade or so, including Saudi Arabia.
• These mostly desert countries have nothing else to earn export income from except sand.
• Falling oil income means that governments can provide less for their people, so they have to cut subsidies and raise food and energy prices.
• These conditions are producing increasing discontent with government, civil unrest, and conflict between tribes over scarce water and land. Religious and sectarian conflicts are fuelled. Unemployed, desperate and hungry farmers and youth have little option but to join extremist groups such as ISIS where at least they are fed. Our media ignore the bio-physical conditions generating conflicts, refugee and oppression by regimes, giving the impression that the troubles are only due to religious fanatics.
• The IMF makes the situation worse. Failing states appeal for economic assistance and are confronted with the standard recipe; increased loans on top of already impossible debt, given on condition that they gear their economies to paying the loans back plus interest, imposing "austerity", privatizing and selling off assets.
• Local elite authoritarianism and corruption make things worse. Rulers need to crack down on disruption and to force the belt tightening through. The rich will not allow their privileges to be reduced in order to support reallocation of resources to mass need. The dominant capitalist ideology weighs against "interfering with market forces", i.e., with the freedom for the rich to "develop" what is most profitable to themselves.
• Thus there is a vicious positive feedback downward spiral, to which it would seem there can be no escape, because it is basically due to the oil running out in a context of too many people and too few land and water resources.
• There will at least be major knock on effects on the global economy and the rich (oil-consuming) countries, probably within a decade. It is quite likely that the global economy will collapse as the capacity to import oil will be greatly reduced. When the fragility of the global financial system is added (… remember, debt now 6 times GDP), instantaneous chaotic breakdown is very likely.
• Nothing can be done about this situation. It is the result of ignoring fifty years of warnings about the limits to growth.

So the noose tightens, around the brainless taken for granted ideology that drives consumer-capitalist society and that cannot be even thought about, let alone dealt with. We are far beyond the levels of production and consumption that can be sustained or that all people could ever rise to. We haven't noticed because the grossly unjust global economy delivers most of the world's dwindling resource wealth to the few who live in rich countries. Well the party is now getting close to being over. You don't much like this message …well have a go at proving that it's mistaken. Nar, better to just ignore as before.

If the foregoing account is more or less right, then there is only one conceivable way out. That is to face up to transition to lifestyles and systems that enable a good quality of life for all on extremely low per capita resource use rates, with no interest in getting richer or pursuing economic growth. There is no other way to defuse the problems now threatening to eliminate us, the resource depletion, the ecological destruction, the deprivation of several billion in the Third World, the resource wars and the deterioration in our quality of life. Such a "Simpler Way" is easily designed, and built…if that's what you want to do. (See thesimplerway.info/) Many in Voluntary Simplicity, Eco-village and Transition Towns movements have moved a long way towards it. Your chances of getting through to it are very poor, but the only sensible option is to join these movements.

Is the mainstream working on the problem, is the mainstream worried about the problem, does the mainstream even recognize the problem … I checked the Sydney Daily Telegraph yesterday; 20% of the space was given to sport.