Sunday, April 27, 2008

The age after peak oil

There was a noticeable rush at our local petrol station yesterday. This is strange really as the Grangemouth oil refinery strike, if it does have an effect will be in Scotland and northern England.

It is also strange as petrol is now around £1.10 a litre (perilously close to the long predicted £5 a gallon). Therefore a fill up of the tank feels like a serious investment !

However as the fuel blockade of 2000 shows petrol supply is similar to the banking system. There is not enough to supply everyone if they all demand petrol/money at once and if they do the system fails. For this see the fuel blockade of 2000 and Northern Rock's collapse last year.

Therefore a few extra people probably filled up yesterday to be on the safe side. However it doesn't seem to have (yet) developed into a major crisis. While the Grangemouth refinery supplies around half of the UK's fuel, importing from Europe is relatively easy particularly with a bit of notice provided over this strike.

Additionally pictures of queuing motorists outside petrol stations have been noticeably absent from the BBC and other news providers although a few tabloids have shown the photos reminiscent of 2000. There is no real sense of panic so far.

What this episode does do, is serve as a reminder that we really seem to be entering an age of "peak oil" (the theory that oil production will hit a peak after which it will enter a terminal decline). The FT recently carried a story that even Russia may be entering an age of peak oil,
although maybe due to poor infrastructure than oil actually running out just yet.

There is certainly no sign that oil will fall in price to any great extent. One of the differences between many western countries and new economic powers such as China and India is that while trendy westerners may be quite happy to use bikes more, no self-respecting Chinese entrepeneur wants to be seen in anything other than an expensive car. Therefore in the areas of real economic growth demand for oil will only continue to rise on present trends. .

One assumes that this can only push the price higher and then eventually oil may start to run out altogether.

There probably should be a lot more thought given to what happens when the commodity that is supporting 7 billion people in their current lifestyle runs out. Of course some would rightly point out that the world managed without oil production little more than 100 years ago. The only difference was that there were far fewer people and most of those were a lot poorer than the average today.

The end of oil, could be a far bigger issue than terrorism or the arguments over global warming. Without visiting the latter issue in this post, it is fair to say that the planet is probably quite capable of "saving" itself over the long term. Whether humanity could save itself in the age after peak oil remains to be seen.

Below is a rather artistic interpretation of that age from a major car maker. At present I don't think there are grounds to see it would be this simple or this pleasant. The age after peak oil could all get rather messy and difficult, to say the least.

I would be happy to be proved wrong on this but I am starting to be concerned about the age after peak oil.

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