IEA predicts oil decline

The Financial Times (UK) has leaked an International Energy Agency (IEA) report that predicts global oil prediction annual declines of between 6.4% and 9.1%. Since the IEA is a truly international organization, and also is not given to pessimistic scenarios, this is indeed alarming.

World will struggle to meet oil demand

By Carola Hoyos and Javier Blas

Published: October 29 2008 02:00 | Last updated: October 29 2008 02:00

Output from the world's oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term de-mand. The effort will become even more acute as prices fall and investment decisions are delayed.

The IEA, the oil watchdog, forecasts that China, India and other developing countries' demand will require investments of $360bn (£230bn) each year until 2030. The agency says even with investment, the annual rate of output decline is 6.4 per cent.

The decline will not necessarily be felt in the next few years because demand is slowing down, but with the expected slowdown in investment the eventual effect will be magnified, oil executives say.....

http://www.ft.com/cms/s/0/0830883c-a55b-11dd-b4f5-000077b07658.html?nclick_check=1


It should be noted that this kind of decline means that the world needs to discover a new Saudi Arabia every few years just to keep up. Given that global oil discoveries peaked in the mid-to-late 1960s, I find it hard to believe that this will happen. What the IEA is essentially saying here is that the age of cheap, readily available petroleum is likely coming to an end.

Also, given the way that industrial economies -- especially the United States -- are highly dependent upon ready supplies of cheap petroleum, it seems that a transitory phase of human civilization is rapidly approaching. Personally, I find it hard to imagine that many of the highly centralized and specialized institutions we have come to take for granted will survive the end of cheap oil. As Chris Martenson says in his "crash course" on economics, energy and the environment, "The next twenty years will be very different from the last twenty years."

It seems the debate over peak oil has largely ended. The new debate has to be one of preparedness and adjustment. I guess I fall on the side of the "pessimists" who do not believe that technology will save us -- after all, technology and energy are actually two different things, in spite of beliefs to the contrary prevalent in our society -- and that our future will be much more localized and offer much less in the way of material comfort.

The Myths of Historical Positivism

We Americans have a rather short collective memory. As I watch the current incarnation of the quadrennial charade we refer to as a Presidential election, I cannot help but be overwhelmed by the way that historical positivism completely overwhelms our cultural narrative -- to the point that it blinds us to the realities that are all around us.

Perhaps some explanation is in order here. When I refer to "positivism," I am referring to the philosophy that grew out of the Enlightenment that discounted metaphysical or spiritual explanations for phenomena of the natural world. Instead, followers of positivism believed that knowledge could only come from sensory experience and the empirical measurement or classification of that experience. While this mode of thought certainly spurred great advances in human society -- the scientific method perhaps greatest among them -- it also later created controversy.

The controversy really took off when social scientists began to apply positivism to their own approaches. It is out of the philosophy of positivism that we gained the myth of "rational actors" so prevalent in classical economics. It also helped spawn Marxism and its dialectical, linear view of history. Essentially, positivists tend to believe that just because certain things have worked out a certain way in the (recent) past, that they will continue to progress that way in the future.

The attitudes of most Americans toward technology provides an excellent example of how this positivist view can distort and even blind us to reality. Technological advancement is a central part of the American story. For all our lives, and those of the preceeding generations, technology has advanced at a dizzying pace, making our lives easier in countless ways. And because this narrative of technology is central to our cultural narrative as Americans, we tend to believe that technological advancement will continue apace well into the future, solving our myriad problems as they pop up before us.

Climate change? Green technology will save us. Peak oil? Renewable energy sources harnessed by new technology will save us. Rapidly growing population and reduced topsoil? Genetically-modified crops and new agricultural technologies will save us. Global war on terror? New military technologies will save us.

However, I believe this represents a very shortsighted and misguided view of the reality of our current situation. History is not linear -- it is more cyclical. I am certain that people living in ancient Rome thought that they had reached the pinnacle of civilization, and the glory that was Rome would continue on forever. Except it didn't. When Rome's complex, centralized organizational structures -- political, economic and military -- began to crack and groan under the weight of its empire, it only took waves of hungry barbarians to bring it to its knees and usher in the Dark Ages. In most ways -- politically, economically, culturally -- Western Europe returned to a state that more closely resembled that before the Roman Empire. Things showed themselves to be much more cyclical than linear.

Of course, nothing I'm saying here is really all that new. Arnold Toynbee advanced these ideas in his magnum opus, A Study of History. The critical theorists of the Frankfurt School (Max Horkheimer, Theodor Adorno, etc.) had similar views of Western culture and society. But these views are decidedly out of the mainstream, especially in American society. To acknowledge their possible veracity would be to call into question the entire narrative of American progress, to suggest that it might not go on forever, to pull the rug out from under the accompanying myth of American exceptionalism -- the idea that America is different and the rules of history do not apply to us.

These ideas, as I stated previously, have always been at the heart of the American narrative. However, they took on additional energy in the period following World War II. At the conclusion of that war, Europe and Japan were literally bombed-out shells of their former selves. However, the United States emerged from the war with its infrastructure completely unscathed and over 50% of the entire world's industrial capacity (and a seemingly bottomless supply of oil). This imbalanced state of affairs provided an engine that was used to create more wealth than the world had ever seen before. However, it couldn't last forever -- as Europe and Japan were rebuilt, they gradually began to take some of this share of global production away from the United States.

The only problem with this re-emergence of Europe and Japan was that the historical abberation that was the United States after WWII was seen by many Americans as proof of our exceptionalism. When our share of global industrial production began to decline through the 1960s and 1970s, and we passed our peak of oil production in 1970, we refused to acknowledge these new realities. Instead, in 1980 we turned toward Ronald Reagan's promises of "morning in America. We pushed our economy increasingly toward the financial sector, continued to pump ever-increasing sums of money into our military leviathan, and took an ever-increasing standard of living as our American birthright. Profligacy, not prudence, became the American way. Debt and deficits soared as we effectively charged our future to American Express on every level -- household, municipal and federal -- with a diminishing hope of ever paying it back. As Dick Cheney famously said, "The American way of life is non-negotiable."

The only problem with this kind of outlook is that it completely ignores reality. It ignores the political, economic and ecological limits to our expansion. It ignores the lessons learned from past empires that eventually were ground down by the costs of simply maintaining the status quo. It puts off the inevitable for the next generation to deal with. Many aspects of this Presidential campaign provide stark examples of this phenomenon at work.

One striking area in which this ignorance of reality reveals itself is energy. Both candidates seem to cling to the belief that we can become "energy independent" (the new buzzword of the political season) within 10 years, and neither one of them mentions the word "conservation" in how we are to achieve this aim. Nor do they address the difficulties in maintaining current levels of global oil production. Nor do they address the role of increasing oil consumption by China, India and the rest of the developing world. Nor do they address the inherent predicaments posed by other forms of energy such as reduced energy return on energy invested (ERoEI), storage issues or portability -- all areas in which oil has significant advantages over all other energy sources. It's as if they believe that by simply saying it, they can bring it into being -- just like in Genesis Chapter 1. The writer James Howard Kunstler calls this the "Jiminy Cricket syndrome" -- the idea that if you just wish upon a star, all your dreams will come true.

Another striking area in which this phenomenon reveals itself is military spending and its impact on the federal budget. Neither candidate acknowledges how it is hopeless to balance the federal budget while keeping military spending at it current ridiculously high levels -- estimated at $623 billion for FY 2008, more that the rest of the world combined. This spending, if we include the costs of past wars like long-term veterans' care and interest on the debt, accounts for 41% of the federal budget. For either major-party candidate to pretend that they will somehow balance the budget and reduce the national debt while leaving military spending sacrosanct is patently absurd. Of course, military spending has become the sacred cow of Americanism, in spite of Dwight Eisenhower's warnings about the military-industrial complex (he wanted to call it the military-industrial-congressional complex, but dropped the "congressional") in his farewell address almost 48 years ago, and the fact that our federal government is collapsing under its weight.

I could go on, but I'll stop here before the argument spins any further out of control and instead bring it back together. Let's review a few of these myths of positivism that affect our collective cultural outlook:
- To be an American is to have an ever-increasing standard of living indefinitely into the future, because that's what it has happened in the past.
- Since technological complexity has always increased throughout America's history, it will continue to increase indefinitely into the future (and has no dependence upon energy availability).
- America has always been the world's guarantor of liberty, and does not act in strategic self-interest as other nations do, so we must continue to spend increasing sums on our military and project it to every corner of the globe.
- We have always enjoyed increasing amounts of energy available for our use, so we can expect this situation to continue into the future.
- The Green Revolution in petroleum and chemical-intensive farming staved off the gloomy predictions of Thomas Malthus, so we can expect to continue to feed an ever-growing population without serious difficulty.

What happens when you begin to question these assertions? What happens when you try to look at the deeper reality beneath them? Do they remain prima fascie perceptions of reality? Or do they begin to call into question the most basic assumptions upon which we have constructed our cultural narrative?

I know what my answer is. You can draw your own conclusions.

Comments on the Second Presidential Debate

I avoided watching either the first Presidential debate or the VP debate. I have come to view such things as primarily political theater that is not meant to seriously inform me about the candidates beyond what I already have come to know. However, I did turn in to tonight's debate. Despite the risk to my future sanity, I'm glad I did -- but probably not for the reasons that more traditional political observers might suspect.

First, I confirmed my suspicions surrounding the debates being little more than political theater. If this debate is to serve as a good picture of the people from whom we have to choose on November 4th, then we're pretty much screwed as a country. On the one hand, we have a charismatic, relatively young candidate who offers next-to-nothing in the way of specifics. On the other hand, we have a candidate from an earlier generation who seems to still have both feet and his gaze firmly planted there, oblivious to the changes in the world around him. Of course, the talking heads will gush about the "exchanges" between the candidates -- but I found the performance to leave me with more questions than before I watched.

The first question of the debate surrounded the financial meltdown of the United States -- the unraveling of the "wealth" created over the past many years that has turned out to be little more than slips of paper without any real value behind them. Obama's answer first blamed the Bush administration, and then talked about the need for "accountability" and "regulation" while completely avoiding any specifics. McCain, however, did go into specifics. The only problem was that when I did the math required of those specifics, I swear I ended up with an imaginary number!

First, McCain spoke of the need for government intervention in the mortgage crisis and stop the downward pressure on real estate values. His proposal was to have the government buy up all of the "bad" mortgages from the holders, and then to renegotiate those mortgages at current market value, which would enable those homeowners to remain in their homes. This proposal would make the U.S. government the #1 mortgage holder in the United States. Since the government would be renegotiating all of these mortgages at a lower cost than what they paid for them, by how much would this be increasing the federal deficit in a short amount of time? Five trillion dollars? Eight trillion? Ten trillion?

In response to that same question, McCain mentioned the crushing deficit that we are passing on to the next generations, and that we must do something about it. Finally, he read directly from the Republican ideological script and proposed across-the-board tax cuts.

To summarize, it is wrong to pass on such a large deficit to our future generations. So, in order to deal with the current financial crisis -- the roots of which lay in the fact that we are a debtor nation on every level -- the government is going to take on trillions more in mortgage debt AND reduce government revenues by cutting taxes. It reminds me of the old "GOTO" function in BASIC programming, with the result being an ever-increasing deficit. The only problem is that this one is not an endless loop -- it has a nasty fall at the end.

But there's an even bigger problem that I have with this approach. It is the investment of the government into private wealth. I'm not against government investment into the economy. However, I'm against government investment or intervention in areas that do not demonstrate a significant common benefit. It demonstrates to me the fruition of John Kenneth Galbraith's assertion in the 1950s that we were a nation of private affluence and public squalor. Every year the American Society of Civil Engineers grades our infrastructure. I can't remember the last year it was higher than a "D". If we're going to invest hundreds of billions (or trillions) of taxpayer dollars, wouldn't it be more prudent to invest it in revitalizing our infrastructure? It would not only create jobs, but provide us with a lasting product with long-term benefits. This approach was used once before -- by FDR with agencies like the Works Progress Administration and the Tennessee Valley Authority. I'm not saying we should copy this effort wholesale, nor that we will necessarily have the capital for it in the future given the current economic outlook, but if we ARE going to spend taxpayer dollars it should be on something that will benefit that great mass of taxpayers.

Barack Obama claimed that we can reduce foreign oil imports within 10 years. For support in this argument, he cited JFK's call to put a man on the moon within that same time frame. He said that at the time of that speech, nobody knew how we would do it, but that we were able to do it. Ipso, facto, this time we should be able to do the same.

What Obama's "argument" (if you want to call it that) fails to acknowledge is that during JFK's time, the United States had two things in abundance that it does not have today -- cheap energy and capital. Also significant, Obama did not once mention the word conservation in any of his statements regarding energy. Finally, his plan demonstrated either an ignorance or an avoidance of the scale upon which any of these new technologies would have to take hold in order to replace fossil fuels. McCain was not any better than Obama in addressing these realities.

Finally, both of these candidates espouse a foreign policy that supposes that the United States is an exception to history (McCain twice referred to us as "the greatest force for good in the history of the world") and still a global hyperpower. Neither is true, based upon the evidence that I have gathered over my studies. The United States intervenes militarily based upon its strategic and economic interest, not its concern for "spreading freedom." Also, the United States is a declining power in almost every sense of the term -- especially on the military and economic fronts.

My personal belief is that we will try to sustain our global "empire" at all costs, to the expense of all else. The imperial beast will devour our treasury and economy. It will tear our "liberties" asunder. It will chew up our current and future generations of young people. But, at some point, it will end as all empires do. Kevin Phillips sees us adjusting to a role much like that of Great Britain after the Second World War. That is a much more attractive option than the other end of the spectrum -- the collapse of the Roman Empire in Western Europe and the beginning of the Dark Ages. If the collapse is ONLY the American Empire, then Phillips may be close to the mark. However, if we are in the midst of a epochal civilization falling -- that of "Western" civilization since the Renaissance, and its accompanying importance of the individual -- then I see much darker times ahead.

Regardless of the long-term problems and predicaments we face, what I saw tonight was two men who seem very ill-equipped to deal with them. They are products of our political intertia, a view into the looking-glass of our national psyche. That inertia presently has us moving further and further away from facing up to and dealing with reality before it deals with us.