Oil Prices 1987-2008
This article is based on a presentation I started giving before the big downturn in the end of 2008. As can be seen in the article, the economic crisis did not surprize me. In fact, I have known for years that it is coming, and even got the timing right (and got the futures profits to prove it – yes, I am one of those people). This was not due to any deep insights into the economy, but to basic understanding of ecology, geology and a bit of history.
This article explains the reasons for this crisis, why the economic downturn is only the beginning of a bigger crisis, and what will likely happen next. The explanation does not include almost any economics, but mainly ecology, geology and a bit of history.
Synopsis:
We live in the Oil Age. Oil and its products are the basis for almost everything we have and for our way of life, including things that seem not to be related to oil.
Oil is becoming depleted, now. Oil is not renewable, and its total amount is finite. It is not that we will wake up one morning and find that there is no more oil. Instead, the rate of oil extraction will decrease, and this decrease starts now.
There are no good alternatives for oil. Even though many things can be used instead of oil, none of them is as good. There is an accurate way to measure how good is any alternative source of energy, and all the known alternatives are less good than oil.
There will be a Great Change in our way of life. It follows that there is going to be a great change in our way of life because we will not be able to base it on oil anymore. Trying to picture this change paints it as a transition between Ages: from the Age of Oil to the Age of Responsibility (to use Obama's phrase).
There are things we can do. Ideas for things that will help us through the Great Change, and insights to inspire more ideas.
After my son visited the museum of prehistory and saw a hand ax from the Stone Age, needles from the Bronze Age and tools from the Iron Age, he asked me "What Age are we in now?" I looked around a little, and said "the Plastic Age". But had thought about it, I would say "the Oil Age": plastic is a product of oil, car fuel and jet fuel is produced from oil, even asphalt is produced from oil.
Almost everything we consume or create contains some element of oil, including things that are not physically made of oil: the cloths we wear, our homes, the entertainment we consume, our health system and even the food we eat. They are all dependent on the oil that drives the production and processing machines, or on the oil used to generate electricity, or on oil used to transport them or their components, or on oil as raw material for some of their components. Therefore the price and availability of all these things is affected by the price and availability of oil.
An apple, for example, is not physically made from oil, but it is dependent on oil:
So even though an apple does not physically contain oil, economically it contains a significant oil component.
And what is true for apples is true for almost everything around us. This is why the price and availability of oil influence every aspect of our lives.
To understand the basic dynamics of oil availability, we turn to the work of geophysicist Marion King Hubbert, who worked at Shell research lab in Houston, Texas. He was ingenious in his ability to describe mathematically the behavior of geophysical systems. One of the subjects he analyzed was the rate of oil discovery, the rate of oil production, and the relation between them. In 1956 he published a paper that mathematically formulated these processes.
Hubbert showed that at first, the amount of oil found every year increases (the red lines – millions of barrel of oil). Then it peaks when the biggest oil fields are discovered (and because they are big, it is relatively easy to find them). After that, the size and number of discoveries goes down. Hubbert showed that because of the way oil is produced, the rate of oil production behaves in a similar way (the black line – thousands of barrels a day): first it goes up, until about half of the oil is pumped out, and then the production rate goes down. This means that the oil production rate starts to decrease when half of the oil is still in the ground.
So if we know when the peak of oil discovery happened, we can calculate the total amount of oil in the ground, and therefore calculate when the peak in oil production will occur.
In 1956, Hubbert calculated the date of peak oil production for the USA (excluding Alaska) will be around 1970. As shown in the graph, the data proved him right.
Three years after the peak, in 1973, the Arab countries declared oil embargo and the US entered a recession, that only ended when it formed close ties with the Saudis and ensured a reliabile supply of oil to offset the decline in US oil production.
Hubbert's formulas can be applied not only to the US, but to any country or region, or even to the world as a whole.
In blue, we can see the annual oil discoveries (in billions of barrels), in green the annual oil production, and in red the annual demand. (This graph is from 2006 – everything later is an estimate.)
Applying Hubberts formulas to this data, yealds a peak in world oil production around 2008. This peak is not aa sharp asthe peak in US oil, but looks more like a steady plateau that goes on for a few years, followed by a moderate decline.
The data for oil production rate show that such a steady plateau since 2005, with only minor fluctuations. That is, we are now in the peak of world oil production. In the future, we can expect a decline in oil production rate.
In contrast, the demand (marked red) only increased, mainly by China and India (until the economic downtown, that will be discussed soon). What happens to the price when the demand goes up and the supply remains fixed or even declines?
First, the price goes up.
But something else happens: The size of price fluctuations increases.
Big price fluctuations are a result of the lack of spare production capacity - they happen when suppliers can just barely satisfy demand, but have no safety margins to offset fluctuations in demand. (For example, when one month China fills its oil reserves before the Olympic games, and the next month it stops factories to avoid air pollution during the games.)
So peak oil causes both an increase in oil price, and an increase in price volatility. How does that affect us?
Since the price and availability of oil influence almost everything in our life, peak oil affects us in many areas:
Rising prices and volatility. Consumer products become more expensive, because rising costs of production, transportation, cooling, etc. Moreover, producers have to safeguard against fluctuations in the price of oil, and the simplest way to do that is to raise the price.
Actually, not everything becomes more expensive: labor does not since shortage in oil does not cause shortage in peopl. So while products become more expensive, wages stay the same. We simply have to consume less.
Depression. What happens when people buy less? Recession. If the recession is deep enough, it is called depression. And since the cause for this recession lies in the foundation of our economy, we are facing a long depression. We have already seen banks collapse, automotive companies go bankrupt, and many other sectors having troubles too.
Shortages. But it is not only about money: some of the things we consume come from abroad, even from across the world. Imported products are be subjected to greater fluctuations in their availability, since it is influenced by more factors. This means that there my be periods when some products will simply not be available.
Political unrest. Historically, economical problems lead to political unrest. As early as 2007 there were demonstrations in Egypt and other countries due to the food shortages, and 2008 saw were demonstrations even in Europe. In Burma, monks went for the streets when oil became so expensive that people could not afford to go to work. It is likely that we will see more political unrest as the crisis continues to unfold.
Resource wars. The threat of political unrest, can be expected to drive governments to take control of resources to ensure supplies for their people. It is no coincidence that US has soldiers in Iraq, the country with the fourth largest oil reserves (after Saudi Arabia, Canada and Iran).
Inconsistent responses. With such turbulent conditions, people might go for quick solutions without carefully considering their true cost and side-effects. Like, for example, the decision in Europe and in the USA to subsidize biofuels made from corn and soy, which later turned out to bother those people who need corn and soy for eating and who resent their food being taken in order to fuel cars.
Had we started trying on solutions 30 years ago, in the oil crisis of the seventies, we would have had enough time to experiment and find what works and what does not. Why did we miss that opportunity? Why did we ignore that coming crisis is and failed to prepare in advance?
The answer is that we were made to believe lies. We were told that there is enough oil for centuries. Five years ago this false statement was the common wisdom.
But what was this statement based on?
OPEC (the Organization of Petroleum Exporting Countries) was established to control the oil supply and ensure oil exporters get a fair price. Each OPEC member country limits its oil exports to a set quota, so that the total amount of oil in the market is limited, and the price of oil does not drop too low.
To determine the quota for each country, a simple method was chosen: the greater a country's oil reserves - the bigger its quota.
And how are the oil reserves determined? For this OPEC chose another simple yet interesting method: A country's reseves are determined by that country's own report of its reserves.
This means that the income of each OPEC member is determined by what it says its reserves are.
The graph above shows the reserves of OPEC members, as reported by them each year:
In 1983 Iraq said its reserves suddenly grew by 30% (without making any new oil discoveries).
Two years later, Kuwait decided that it wants more (also without making any new oil discoveries).
Three years later, the rest of the OPEC countries joined in and aligned with Kuwait and Iraq.
And then, in 1990, even Saudi Arabia – the elephant in OPEC's livingroom – gave up and upgraded its reported reserves.
Thus, the methods for setting OPEC quotas led us to believe that the world's oil reserves are bigger than they really are.
Another factor that misled us is the odd math of the American and International Energy Agencies. These agencies publish estimates of future oil production. However, their estimates were based solely on their assessment of the demand for oil, without taking into account supply limits. This is only reasonable if you believe the economic myth that when there is enough demand - supply will appear out of thin air. Even if this holds true for hamburgers and reality TV shows, it doesn't describe the flow of finite resources like oil.
Therefore, anyone who relied on the official estimates of OPEC, the EIA and the IEA, was misled.
Only in 2008 the International Energy Agency decided for the first time to calculate the future oil production of the all known oil fields. After careful and comprehensive calculations, they arrived at the results shown below.
I have copied here the slide from the IEA's own presentation. In blue, it shows the expected oil production from existing fields. In light blue, it shows the amount of oil that needs to be discovered in the near future to avoid shortages. Note the red comment below the graph: in order to avoid oil shortage we must find new oil fields in the total amount of 6 times the oil fields of Saudi Arabia in the next 22 years.
But as Hubbert showed, not only will we not find 6 Saudi Arabias, we will not find even one. Therefore, according the calculations of International Energy Agency, we are going to have oil shortages.
How come no one got alarmed from this report? The report was very long and most of it dealt with global warming issues. The part about the missing oil was well concealed and the 6 missing Saudi Arabias are marked in the graph with a calm light blue instead of alarming red. (I can imagine a subversive researcher sneaking to the computer in the night before publication, and adding the red comment below the graph without anyone noticing it...)
So if we are now in the peak of oil production, maybe we will be able to replace oil with other sources of energy?
To weigh the alternatives for oil, we need to measure not only the energy produced, but also the cost of its production.
Hubbert showed that oil production reaches a peak and then declines. Meanwhile, as the cheap and easy oil runs out, drilling for oil becomes harder and more expensive. It may require injecting water to float the oil up, or digging deep under the sea floor, or pumping lower quality oil which is harder to refine, and so on.
Measuring the cost of oil production in dollars is misleading, since the value of the dollar is affected by many factors unrelated to oil. There is a better way to measure the cost of oil production: By the amount of energy required for production. This allows to calculate the energy-return on energy-investment, or EROEI.
The EROEI is similar to financial ROI: if I have invested in something 100 Euro, and got later 200 Euro, I have gained double the investment. That is, the return on investment is 2 to 1, or ROI=2.
The same calculation can be done with energy: if I have spent one day digging a shallow hole, and suddenly oil pours out in commercial quantities - a few thousands of calories got a lot of energy in return.
EROEI = |
energy produced |
| energy required for production |
The higher the EROEI, the better the energy source. When the EROEI is close to 1, production loses its cost-effectiveness.
In the past, when oil poured out from random holes in the desert, its EROEI was 100. I.e., for each calorie invested in digging, storage, equipment and transportation, we got 100 calories of usable fuel.
But when we need to build offshore platforms miles away and drill down miles below below the sea floor, the EROEI drops to 10.
Even worse sources are oil sands (EROEI of 1.5-6) and oil shale (EROEI of 0.7-13).
As we run out of high EROEI oil, we turn to lower quality and harder to get oil.
Now that we understand how to measure the value of energy sources by their EROEI, we can turn our attention to the possible alternatives for oil.
The table shows non-renewable energy sources, their EROEI, and the year of their expected production peak.
Clearly, gas is the best option. Its energetic return is similar to that of oil, and it is less polluting. Gas can be used both for electricity and as car fuel (or to make hydrogen fuel, but this is problematic in too many ways to include in this article). On the other hand, gas is difficult to transport between continents, and therefore we mostly rely on regional supply.
Gas is also non-renewable, like oil. And like oil, its production follows a similar curve: first growth, then a peak, and then decline. However, it is harder to estimate the total amount of gas reserves, and therefore it is harder to predict its production peak. Some researchers say peak gas happened last year, while others say it is decades away. In any case, as oil becomes more expensive, the demand for gas grows, and therefore its price rises too.
Next we look at coal. Coal was used long before oil, and it will probably remain available long after oil. The estimates for peak coal differ as much as those for peak gas. To complicate matters, there are different kinds of coal and different qualities. But generally it seems that there are still large coal reserves. But although coal may seem a possible solution to peak oil, at least in the near future, it actually causes other problems: coal is extremely polluting – it causes smog, respiratory diseases, acidic rain and, of course, global warming. If we substitute oil fo coal, we might be able to run factories, but we will have to worry about much worse things.
So let's turn to nuclear energy. Nuclear energy companies tout it as a clean and unlimited energy source. But it is neither clean nor unlimited: It uses uranium which is non-reneable just like oil and gas. When will uranium peak?
If we look at the numbers for uranium production, we see that it reached its peak in 1980, but this might be due to a fall in demand and not to a real supply peak. Currently, uranium supply does not meet demand, so it is possible that we are now peak uranium or past it. But even if there are other reasons for this, uranium will peak ke any other non-renewable source.
As an aside, I should mention that even if the peak uranium is far in the future, there are still several other problems with nuclear energy which disqualify it in my opinion:
What about green energy?
The table shows established renewable energy sources (I omitted speculative sources as it difficult to measure their real-life effectiveness and EROEI). For energy sources, the table shows its EROEI and the total amount of power it can theoretically supply relative to today's global power consumption – numbers bigger than 1 mean that theoretically the source can supply more energy than the entire global population consumes.
We can see that renewable energy sources generally have moderate EROEI. But the real problem is availability. Not all of us live next to the waterfalls of Norway or the hot springs of Iceland, with their steady stream of energy and good EROEI. Hydro-electric power can feed only tenth of the world energy consumption, while geo-thermal sources can produce only one hundredth.
Wind and sun, however, are abundant, and can theoretically supply much more power than the global consumption.
The problem with wind and sun is the low EROEI, and the fact that they are not available everywhere and in any time. And yet, my friend who lives in Tanzania told me that two hours of electricity a day is much better than nothing. Therefore, I support putting solar panels on every roof and wind turbines wherever sensible.
By the way, these energy sources can be used directly, without converting them first to electricity. For example:
good house design can use the sun for indoor lighting and heating, and wind for cooling.
Solar water heaters are very energy efficient.
There are even also solar ovens for cooking.
The ground can be used for air conditioning by cycling air into it and back to the building.
Water and wind can be used to mobilize mills as was done in the past.
And of course wind can be used to sail sea vessels.
But none of these things fuel cars. For this liquid fuel is needed.
In the end of the table, two energy sources made from plants are shown: ethanol – a kind of alcohol – can replace car fuel, and biodiesel – made from plant oil – can replace diesel. These sources can be used without large changes to the existing infrastructure, without special cars, without stations for battery replacement, or any other expensive investment.
But today's commercial ethanol and biodiesel are problematic. First of all, their EROEI is very low (unless you live in Brazil and have plenty of sugar canes). Worse, the use of corn and soy for fuel comes at the expense of their usage as food. In other words, fueling your car with ethanol indirectly contributes to raising the price of tortillas in Mexico.
Still, biofuels research is still in its early stages, and maybe in five to ten years we will have biofuels with higher EROEI from plants that grow where no food can be grown.
So renewable energy sources can give us good reasons for hope, even if they are not as good as oil (energetically speaking).
How hopeful should we be? The graph on the right gives some indication.
So there is magic bullet of energy in the near future. We are facing a Great Change.
What will change in our lives, and how will we live after this change? I will present several models of this Great Change, starting with big picture models and proceeding to more detailed views and closer time periods.
In 1972, a group of researchers created a computerized model of the world, to understand what the future might look like. They ran their world simulation again and again, each time using different values for the energy production, agriculture yields, individual pollution, etc. They found that whatever values they use, the underlying dynamics remains the same: growth in population and resource use (the yellow line) untill it crosses the carrying capacity of the earth (the red line), followed by decline in the carrying capacity and collapse of the population. Different values may affected the timing of collapse, its severity, and even its cause (for one set of values the cause may be a shortage in water, for others it may be pollution or energy shortages). However, changing the values did not change the underlying dynamics of population overshoot followed by collapse. It is simply impossible to increase the load on the earth indefinitely causing a collapse.
The collapse is not caused only by exhaustion of non-renewable resources like oil, fertilizers or metals (some of which may be peaking soon, especially phosphate and rare metals used in electronics, solar panels and batteries). The collapse is also caused by over-exploitation of renewable resources beyond their ability to renew: salination of of underground water and depletion of aquifers, accumulation of pollutants and greenhouse gasses, erosion of topsoil, excessive deforestation, and destruction of animal populations (like the bees, bats, amphibians and, of course, fish).
This dynamic of overshoot and collapse is known not only in ecology, but even in food processing: fermentation happens when yeast eat sugar and multiply, till all the sugar is exhausted and the yeast die.
Are we doomed to the fate of yeast? Or are we able to choose a different path?
What can we do different, and how will our actions affect the dynamic of limits to growth?
David Holmgren, co-founder of Permaculture, has a good analysis of the possible dynamics in the future. I recommend reading the detailed analysis on his site FutureScenarios.org, which also includes analysis of the climate crisis. Holmgren identifies four general scenarios:
1. Collapse dynamics like described in the Limits to Growth world model. Jared Diamond, In his book Collapse, analyses civilizations that experienced such a collapse and others who faced similar challenges and managed to avoid it. So it is certainly possible to avoid collapse. Moreover, history shows that collapse dynamics tend to happen to societies that are relatively isolated (like Easter Island), while societies that are more connected usually go through a slower decline (like the decline of the Roman Empire or the declines in China's long history). Our societies today are very well connected, and we can use spare capacity in one place to offset shortages in another. So even though a fast collapse is possible, it is not inevitable, and probably not likely.
2. The possibility of unexpected technology appearing suddenly to supply large amounts of energy, like in the science fiction stories with space travel and food appearing on demand. This is not completely impossible, but it is too unprobable to rely on.
3. Replacing fossil fuels with green technologies. I am, of course, in favor of investment in renewable energy, but as was shown above, it will not allow us to maintain our current levels of consumption simply because its EROEI and availability cannot meet our current consumption. In addition, replacing the energy infrastructure would require huge amounts of resources (both fossil fules and minerals) and accelerate their depletion. For example, batteries for electric cars require lithium, which is non-renewable. Solar cells use rare metals such as cadmium and indium which are non-renewable. So green technologies are a good investment, but cannot change the basic dynamics of our society.
4. Gradual decline in consumption, and a transition to a sustainable way of life. This is not a collapse, but a gradual decline, that could take as long as hundreds of years (like the decline of the Roman Empire). In my opinion, this is the most reasonable scenario, and if we prepare, we can transition humanely and minimize hardships.
How will this gradual decline affect society?
To understand the dynamics of the long decline in resource consumption, we turn to the scientific field dealing with this very subject: Ecology. Specifically, the work of ecologist Howard T. Odum.
One of Odum's many research subjects was the way ecological systems respond to different energy inputs. His analysis shows that there is a tradeoff between efficiency (the percent you capture out of the total energy flux) and growth-speed (how fast you capture and use that energy). It turns out that in order to be competitive, a life form needs to hit the right balance between efficiency and growth-speed, and that this balance is at the point of maximum power: when the rate of energy captured is highest. Maximum power is reached when efficiency is 50% – when a life form captures only the easiest half of the enegy flux, and gives up on the rest. This rule is called the maximum power principle.
This may remind you Ohm's law from your electricity studies. The idea is the same, but in the ecological context it happens by natural selection. And like Ohm's law, power is maximal when energy utilization (the parameter which is analogous to electrical resistance) is 50%.
What happens when the energy flux changes? As the flux decreases, life forms that are able to capture the harder-to-get energy will become more competitive. On the other hand, life forms that give up on these energy sources in favor of faster growth will be starved for energy and out-competed. So changing the energy flux in an ecological systems causes the dominant organisms in that system to be replaced by other organisms that are better adapted to the different conditions.
This ecological process of replacement is called succession. When the energy flux (i.e., sunshine) is abundant, the fastest growing weeds thrive. Their growth changes the system and makes less energy available to new plants, and so slower growing bushes start to out-compete the fast growing yet less efficient weeds. The bushes make even more shade and so even less sun energy is available to new plants. So then slower growing trees slowly come to dominate the system. The picture on the right shows such a succession; each phase of succession is dominated by species, which use resources in different ways.
Although human beings are a single species, we are able to live in different life forms, and use resources in different ways – just as if we were different life forms. All we need to do that is to change our way of life, social organization, values, and culture...
Such a great change may seem difficult, but it is not impossible. This is what many Europeans chose to do when they left their countries and settled in the New World. This is what many refugees from numerous wars had to do throughout the history. This is what many of us went through personally, growing up in simple village life and then adapting to the global interconnected culture. We, humans have a unique ability to change our way of life, if we choose to.
We will probably not transition all at once from our current way of life straight to a sustainable level of resource consumption. It may take several generations. The decline of available energy and resources will force us to change our way of life time and again, each time adapting to a lower level of resource consumption – just like ecological succession.
John Michael Greer, author of The Long Descent, identifies three such stages:
Efficient industrial society. A society similar to our own, but where things are not thrown away after one use, and resources are not wasted. It will probably be similar to the world I grew up in: with factories and tractors, but without plenty of cheap toys from China.
Salvage society. A society where it is more cost-effective to mine and fix the remains of the past rather than to create new stuff; where abandoned are repurpose as factories or apartment homes or even stables; even where metals are mined from today's garbage dumps. Historically, such societies appear following the decline of a great empire, and then we find stables built with stones from Roman temples, robbed pyramids and tombs, and prayer books written over the ancient writings of Archimedes (since vellum, mammal skin prepared for writing or printing on, was very expensive).
Ecotechnic society. It is hard to picture today a society that is both ecologically sustainable and technologically advanced beyond our own. But our future descendants will have to find ecological balance, and they will have our current knowledge to build upon.
Obviously, there is overlap between these stages: even today there are people and places that operate efficiently or take advantage of the excess of others. Similarly, in each stage there will be elements from other stages.
The transition between stages is typically not a smooth one, since it requires dismantling existing social structures and institutions and replacing them with new ones. What should we expect from such a transition?
We can find such a transition in our recent history: The collapse of communist USSR and its replacement with current day Russia and the other former soviet states. Dmitry Orlov, author of Reinventing Collapse, personally witnessed that transition and describes its dynamics insightfully.
Here is his synopsis (written long before the start of the downturn) for the five stages of collapse, copied from his blog:
Financial collapse. Faith in "business as usual" is lost. The future is no longer assumed resemble the past in any way that allows risk to be assessed and financial assets to be guaranteed. Financial institutions become insolvent; savings are wiped out, and access to capital is lost.
Commercial collapse. Faith that "the market shall provide" is lost. Money is devalued and/or becomes scarce, commodities are hoarded, import and retail chains break down, and widespread shortages of survival necessities become the norm.
Political collapse. Faith that "the government will take care of you" is lost. As official attempts to mitigate widespread loss of access to commercial sources of survival necessities fail to make a difference, the political establishment loses legitimacy and relevance.
Social collapse. Faith that "your people will take care of you" is lost, as local social institutions, be they charities or other groups that rush in to fill the power vacuum run out of resources or fail through internal conflict.
Cultural collapse. Faith in the goodness of humanity is lost. People lose their capacity for "kindness, generosity, consideration, affection, honesty, hospitality, compassion, charity" (Turnbull, The Mountain People). Families disband and compete as individuals for scarce resources. The new motto becomes "May you die today so that I die tomorrow" (Solzhenitsyn, The Gulag Archipelago).
Of course, it is not always necessary to go through all five stages, For example, a government may stop the collapse at stage 2 by supplying basic necessities to its citizens, or the collapse may be stopped at stage 3 if other organizations manage to restore order after the fall of the central government.
The key for stopping the collapse is accepting the fact that reality has changes and the old order cannot be maintained, and instead a new order must be created, supporting a new and different way of life.
What will this new way of life be like? This is hard to predict, but it seems probable that as big and global institutions weaken, smaller and local organizations will gain importance. The smallest and most local human organization is the family, so it stands to reason that the family will become more significant both economically and for basic survival.
This subject is comprehensively analyzed by Sharon Astyk, author of Depletion & Abundance: Life on the New Home Front. She encourages people to invest at home, literally: To ensure that they will have where to live and what to eat when they can't count on the economic system to provide their needs. Because the economic system is apparently much more brittle than we believed.
Some specific points she makes:
Ordinary human poverty. Peak oil will not bring about sudden human extinction or any other apocalyptic scenario. The fact that energy will become less abundant means that we will experience what many people already experience today in other parts of the world and in certain socioeconomic groups: ordinary human poverty. Therefore, it is not the end of the world that we need to prepare for, but life with less material wealth.
Growing food. With less abundant energy, more agricultural workers will be required in order to produce the same amount of food. In her second book, A Nation of Farmers she calculates that about half the population will need participate in food production to some extent.
Processing food. In order to have food all year long and not just in season, the food has to be processed and preserved. Currently this is done in big energy-hungry factories, but as energy becomes less abundant, home food preservation will make more economic sense. Cooking and processing food will not remain a kind of hobby, but an important survival skill.
Connections. Even though self sufficiency is important, no one person can do everything, or handle any possible crisis. Community and family connections are of primary importance, both as a safety net in times of need, and for everyday frugality (e.g., ride sharing or sharing tools). Ursula Le Guin put it well: "To be whole is to be part; True voyage is return."
How will all these changes affect each of us personally? Should we start hoarding canned food and ammunitions?
Geographical differences. "The future is already here - it is just unevenly distributed." (William Gibson) Some of the things described above already happen in different places in the world: There are places where money has lost its value (Zimbabwe), there are countries whose government lost power or is about to lose it, there are people caught in hunger and war. We should not expect all these things to happen at once everywhere. But we should remember that even if we seem safe now, it is wise to look around and realize that we are not immune from these problems only because we don't have them yet.
Personal and social differences.
Even when a country goes through collapse, different people and different groups will experience it differently. Those willing to adapt fair better. In the USSR, the collapse was worst on middle aged men - those who had relatively good careers and high status, and were not willing to start again from the bottom. Millions of people actually dies there from over drinking. But those that were willing to do anything, went through some difficult years but came out of it eventually.
Stable social groups seem to help their members go through turbulent times (e.g., churches, unions, clubs, cooperatives, and other groups. As the formal institutions become dysfunctional, the importance of social relations and groups increases.
In general, collapse means loss of power of the central government, and so local organizations may become more dominant. Additionally, collapse means a decline in societal complexity, and therefore less demand for specialized professions and more demand to basic crafts and services. I.e., less rocket scientists and more tailors, less stock brokers and more electricians.
Uneven trend – sawtooth dynamics. Collapse and decline to not necessarily imply even downward dynamics. There maybe times of relative stability and times of growth and even boom: After a society adapts to a new reality, it can enjoy a period of prosperity while it manages to remain in harmony with the new conditions. Only when it will bump into the hard ecological limits will it go through another descent or collapse. So the way down will probably be series of small collapses, known as "sawtooth" (the green line on the right).
Black swans. Of course we can always expect the unexpected: technological developments, meteor strike, mongolian invasion... This is why one "resilience" recently became a buzzword: it signifies the ability of system to function in the face of unexpected events.
Violence - mostly organized. And now we finally come to canned food and ammunitions. Actually, hoarding canned food for oneself without sharing it with neighbors pretty much guarantees the need for ammunition to protect oneself from the hungry. However, in past crises most of the violence was by organized groups like the police and the army. Places that host several ethnic groups tend to see violence erupt along ethnic lines. So instead of storing ammunition, it seems better to invest in being a part of group that can help its members both in getting food supplies and in mutual protection.
Now that we have a general idea of the great change we face, we can come up with possible things to do to make the transition easier. Even if we can't predict the exact course of events and be completely ready for it, there are still several generally beneficial routes of action.
Earlier we discussed the stages of transition, and said the first stage a change towards is less wastefulness and more efficiency. Efficiency is also the most effective change in terms of EROEI: If we measure cost in energy terms, most cost-effective way to get more energy is to spend less energy. For example, better insulation is more cost-effective than air-conditioning that feeds on electricity from solar or wind generation.
The problem with efficiency improvements is that they are not a single solution; every aspect of life in every locality needs rethinking. Still, there are several recurring patterns, like the following:
Non-disposables. It was once common to say "I am not rich enough to buy a cheap pen" because everyone understood that buying a new tool time and time again is much more costly than buying a good tool only once, and using it for years and years. But today even the most complex and expensive electronic gadgets last hardly a few years. We need tools that we can leave for our grandchildren, not tools that will pile up unused in garbage mounds.
Passive solar and climatic building design. This is an entire field of engineering, but some of its patterns are quite simple, like south facing windows with overhangs, or opening air passages. There are many other design techniques that save energy on cooling and heating.
Personal and public transportation. A good public transportation system is more efficient than any hybrid or electric private car. Instead of investing huge suns of money to improve double efficiency, we can invest comparatively minor sums and improve efficiency 50 fold. Alternatively, bikes are extremely cheap, and electric bike or even scooters are much cheaper than cars. So instead of investing in efficient cars, it makes much more sense to invest in infrastructure for public transportation and for personal vehicles like bikes and scooters.
Sustainable agriculture. There are methods of agriculture that use very little non-renewable resources or none at all. They can produce food that is not dependent on the price and availability of oil.
Efficient public services. Public service can leverage efficiency by sharing costs and enabling economies of scale. But this requires the public service to actually work towards efficiency, without unnecessary red tape and without corruption.
Design, planning, and organization. Every thing we design, plan, and organize, need to take efficiency into account. This includes not only our buildings and transportation, but also the systems that keep our society going: the health system, the educational system, security and law enforcement.
Resilience ability of a system to sustain itself in the face of changes, and return to a stable condition following perturbations. Since we know we are facing great changes, we need the systems that sustain us to be resilient; We need water to keep running in the pipes, we need food to keep getting from farm to city, we need law and order and safety, and so on.
Some factors affecting resilience:
Complexity – points of failure.
In systems engineering, it is important to identify points of failure: components that may fail to work and disrupt the operation of the system, the Achilles' heels of the system. A famous example is the O ring in the Space Shuttle. Points of failure make the system less reliable, and so engineers tend to build backups and protections for them. But there is a different approach for handling points of failure: avoid them altogether. Generally speaking, the simpler the system – the less components it contains – the less failure points it has.
So a good thing to do is ensure the systems that sustain us are as simple as possible. This goes against the trend of increasing sophistication, complexity, high technology, and other highly failure prone modes of operation. But this is an important part of the great change we face.
Apropos complexity, the historian Joseph Tainter says the societies solve problems by increasing their complexity, and that every increase in complexity requires more energy to sustain it. And so over the years societal complexity grows until it reaches the point where the society cannot get enough energy to sustain it. When that point is reached, the society collapses and is replaced by simpler societal structures. We now reached the maximum energy for our society, and so we can't "pay" for sustaining any more complexity.
Price – sensitivity to fluctuations.
An simple estimation of complexity and vulnerability to failures is the price. Generally speaking, the more expensive a thing is – the more it is complex and vulnerable to failures. This generalization does not work in every single case; for example an expensive pen may be more resilient than a cheap pen. But an expensive vacuum cleaner has more parts that can fail than a cheap broom. Moreover, changes in many sectors will influence the price and availability of vacuum cleaners and their maintenance costs: the price of electricity, of metals and plastic, economic and political stability in the countries that produce the vacuum cleaners or some of their parts, and so on. But there are very few things that are extreme enough to affect the price and availability of a broom, and practically nothing affects its maintenance.
So in general, cheap systems and tools are preferable to expensive ones. There are exceptions to this generalization, but in most cases the cheaper a system is – the more resilient it is.
Distance – dependency on different places.
The distance from producer to consumer, and especially the number of places products need to go through, lowers their resilience and the resilience of the systems that use them. For example, an appliance imported from China depends on Chinese political and economic situation, on the price and availability of transport from China, on political stability and social order in countries that are on the way, on trade agreements with China and maybe with other countries that the product goes through – great many factors that can fail, become more expensive, or change.
So a resilient systems should use parts and tools the are produced as close as possible to itself.
Centralization – impact of failures.
One of the best known examples for resilience is the Internet, which was designed to withstand an nuclear attack. This resilience was achieved by extreme distribution of all aspects of its structure and operation: every server connected to the network becomes a part of its communications infrastructure. This is why it is difficult to shut it down: even if you manage to shut down a few nodes, other nodes will just route around them.
If electricity generation was as distributed as the Internet, a few trees touching electric cables to have caused a blackout for millions of people. And this applies not only for electricity generation, but to any system: A distributed system of connected nodes is more resilient to local failure than a centralized system.
Criticality – importance of failure.
Not all the systems we use are equally critical. The sewage system, for example, is much more critical than the education system, since a week's disruption in the first may cause life threatening spread of diseases, while disruption in the second is a mere inconvenience. So it makes sense to invest more is the more critical systems – on the national level, the local level, and and the personal level.
Besides electricity and sewage systems, other critical systems include water, food, transportation, and law enforcement. We should try to make all these systems more resilient and more efficient.
One of the most interesting movements in recent years is the re-localization movement. It aims to return production and services back to the local economy: local food production, local consumer products, service from local businesses and not from big multinationals, etc.
Localization is an important contributor to resilience. That is reason enough to engage in re-localization. But it is also important because our ability to influence the system is much greater at the local level than in the national (or even international) level. What the government will not do, may still be implemented by the town counsel, or the local school, or the neighborhood.
There is a global movement of re-localization and preparation for the Great Change, and there is a lot of written material on the subject. For example, the Transition Towns 12 steps program:
For more information and to connect with others, go to:
TransitionTowns.org
relocalize.net/guide
CommunitySolution.org
Let's focus on step 8: reskilling. What will we need to learn in order to transition to a life form that requires less resources? Who can we learn from?
The past. For our first source of knowledge we need not go far: our own past, and that of our parents and grandparents, was less abundant in material resources. Even I still remember going to the watchmaker to fix a watch instead of buying a new one. We can try reviving these crafts, skills and social patterns - both on the personal level and on a wider community and infrastructure level.
The fringe.
Other fertile places to look for knowledge are marginal groups and activities, like the Amish, that may have some customs appropriate for a low energy lifestyle. For example, when Cuba's oil supplies suddenly fell by 90% overnight after the collapse of the USSR, the Cubans found themselves without oil for tractors and trucks. They just weren't able to produce enough food. After several difficult and hungry years, the were able to utilize knowledge from two fringe groups:
1. Some organic agronomists, working in research universities.
2. Ox farmers, who stubbornly continued keeping plow oxen even when it made no economic sense.
And so these two fringe groups kept knowledge that became essential to the entire society when the Cubans had to replace tractors with oxen and chemical fertilizers and pesticides with organic agriculture.
One fringe group in particular deserves our attention: Permaculture. It is a system of knowledge and practice that developed since the late seventies, following the oil shocks of that time (among other reasons). The original motive was to create agricultural methods that will keep the land fertile indefinitely instead of eroding it and losing fertility – Permanent AgriCulture. However, it became apparent quite early that it is impossible to focus only on food production without considering the entire way of life, and so permaculture cam to mean Permanent Culture.
Since the seventies, permaculturists ammassed an immense body of knowledge and skills in all aspects of life. It is a movement that for over 30 years has been developing and finding ways to live sustainably without consuming so much energy and resources. And so many of the things we need to know for living in a post oil world can be learned from permaculture.
The future. Lastly, our usual sources of knowledge are applicable: technological inventions, scientific discoveries, cultural and commercial ventures, innovative designs, and ideas from science fiction literature (I especially recommend Ursula K. Le Guin's excellent Always Coming Home). These things don't have to lead to Star Wars style astronomical resource consumption` they can just as well lead to a low resource consumption – it's just a question of what we choose: burning oil shale, or biodiesel from salt-water algae?
The problem with this is different: Getting new developments to mass use takes long years and a lot of energy: Not everything that works in theory also works in practice, not everything that succeeds in the lab also succeeds in the market, and even if it does – it takes about two decades from initial success to widespread adoption. So it would have been helpful if we would have started developing and using sustainable technologies twenty years ago...
As an example of finding relevant knowledge from these three sources, let's look at the subject of medicine and health. Our health system is based on expensive machinery and on drugs produced in distant factories. What medicine and health knowledge can we use from the past, the fringe, and the future?
The past can teach us about medicinal herbs;
The fringe can provide us low-resource medicinal methods like
the Feldenkrais technique,
the Gokhale method,
or the Paula method;
The future may bring developments in genetics and bio-informatics – areas with amazing scientific advancements.
I suggest you adopt a subject close to your heart, and start thinking of the ways it will need to change in a resource stranded world.
News coverage:
EnergyBulletin.net
Analysis and discussions:
TheOilDrum.com
Practical ideas:
PeakMoment.tv
Movie:
The Power of Community: How Cuba Survived Peak Oil
Books:
NewSociety.com