Peak oil - keep your eye on the donut and not the hole

When I was a boy, I was fascinated by Australia's new Chadstone shopping centre. It was the very first modern shopping centre in the southern hemisphere. Better than the escalators; better than everything else, was the Downyflake Donut shop.

The donut machine stood in the window. Embryonic donuts danced and grew in the hot oil as they meandered through the stainless steel maze. That little food processor amused me for hours. It promised a future of limitless possibilities ... a future that I couldn't wait to grow up in and be a part of.

On the wall near the machine a laconic jester stood with donut in hand and these prophetic words:

As you ramble on through life, brother,
Whatever be your goal,
Keep your eye upon the donut,
And not upon the hole.

And there the jester stood for years, until time rubbed him out.

Two thousand years ago, another jester had stated the bleeding obvious. He had some wise things to say about greed, love and anger management. He also seemed to be saying something about the danger of exchanging life's necessities for tokens, then becoming bedazzled by the tokens themselves. Well he was rubbed out too, of course!

Fast forward to 1974, when respected geologist M. K. Hubbert predicted the world's oil supplies would peak around the year 2000 and thereafter decline. By this time the world was flooded with tokens, so no one paid much attention to him. There was no shortage of tokens to go around, so why the fuss? Hubbert was regarded as a jester by the people who played Tiddlywinks all day long with the tokens.

No mystery here. Hubbert was simply keeping his eye upon the donut.

You see, to find and exploit an oil deposit, we need to expend quite a lot of oil energy. Oil is the supreme example of compact energy, so we have all enjoyed the abundance of "spare" energy left over. As the easy stuff is used up, we arrive at the point where we must finally expend a whole barrel of oil to produce a barrel of oil. Approaching this point, rising oil prices simply express the diminishing proportion of "spare" energy left over for distribution.

Once the net energy return is zero, it's over ... no matter how much oil is tantalisingly "still down there". For the same reasons, less accessible or poor quality oil deposits can be very short-lived. At the finish, the price of oil is immaterial. One cent or one million dollars a barrel - it's over.

Yet in these twilight days of easy oil we have economists who are saying to themselves, "If we use one $40 barrel of oil today to produce half a $160 barrel tomorrow, we will have doubled our money - gee, that's good business!"

That simple example shows the gulf that can exist between economic dogma and physical reality. It is not only ridiculous, but adds a dangerous twist to the simple notion that rising oil prices will regulate consumption. Add the holy commandments of corporate profit and we have globalised self-delusion. Figure it out; the fingerprints of Texan oilmen are all over the corpse of Iraq.