Looming Peak Oil Crisis Means Economic Growth of the Past is not Possible

One has to go back to the 1930's to find a time when so much of civilization was in turmoil at once. The 30's ended with World War II, tens of millions dead, and much of the industrialized world in ruins. It is not hard to argue that the array of economic, geopolitical, and climatological problems currently facing the world add up to an even more serious threat than a handful of hyper-aggressive nation-states did 75 years ago. Our current problems – faltering economies, an out-of-control atmosphere, increasing social unrest, and political gridlock in many parts of the world – add up to a very bleak outlook ahead.

Here in America, there is much denial. With weathermen telling of new disasters every day, the annual budget deficit stuck at $1.5 trillion, unemployment increasing every week and not even a hint of rational solutions to these problems anywhere in sight, we are moving towards the November elections in a dead heat. As the Rockies burn, the corn-belt fries, the east coast melts, and the southwest broils, we continue to pump out greenhouse gases as the only way to keep ourselves employed and our economies growing. Our media continues to craft stories telling us that the weather has been bad before and that there is still no "firm" evidence that the aberrant weather is caused by the burning of fossil fuels.

In Europe and Asia, things are not much better. This summer Europe is having floods instead of drought, but that won't last long and in another year or so their crops will be frying too. A growing number of Europeans are starting to realize that perhaps the new Union has gotten itself into such a big mess that conjuring up loans for bankrupt governments and financial institutions isn't much of a solution. Getting 27 countries to agree on real political union and accepting the debts of others is unlikely to be doable in the time required. Japan's economy seems to be tanking and China seems headed for a bout of deflation as there will soon be few trading partners left to buy their prodigious output of stuff in ever increasing amounts.

To wrap up the gloom and doom, it is clear the Middle East is sinking into a quagmire. The Syrian uprising seems destined to drag on interminably; Egypt is starting to simmer again; and the sabre rattling accompanying the Iranian nuclear standoff is on the rise. The EU boycott of Iranian oil exports is now in full effect and unless the Iranians throw in the towel or can find some clever ways around the sanctions, their economy is headed for the pits. The Israelis continue to insist that sanctions never work and that a dose of strategic bombing is the only sure way to prevent nuclear Armageddon in the region.

So where does our oil crisis fit into all of this? First, ignore the stories that have been filling the media of late as to how there is no longer an American energy crisis. The stories say that the genius of American industry has figured out how to frack so much oil and gas out of North Dakota and other shale deposits that the US will soon be energy independent and exporting the stuff all over the world. Needless to say, numerous people who understand the numbers have torn this cornucopian drivel to shreds as most of these stories ignore or gloss over the 3 or 4 million b/d of new production that must be found each year to offset the declines from existing fields amongst other fallacious logic.

Fracked tight oil from shale deposits will slow the rate of decline in global oil production a bit but will never offset the loss of production from the world's giant oil fields currently underway and likely to accelerate. The problems of fracking and difficulty and expense of producing oil and gas from fracked wells that run dry far more quickly than conventional wells simply will not produce enough oil to run civilization as we know it today. We must look for other solutions and the quicker the better for unless there is record-breaking depression in the offing and the Middle East is settled peaceably, we are only a few years away from much higher oil prices and even scarcity.

For much of the past year global oil prices have been caught between threats of potential and in a few cases actual supply disruptions, and the generally slackening economic growth -- especially in Europe but also in the US and Asia. Lost in this is the recognition that oil prices, which have been close to or above $100 a barrel for the past 18 months or roughly five times the selling price of oil ten years ago is doing to the OECD economies. While gasoline prices have fallen considerably in the last two months, largely due to the Iranians agreeing to resume talks about their nuclear program, great damage has and is continuing to be done to most industrial economies by the high price of energy. Few politicians are willing to discuss in public the toll that $100 oil is taking, and will continue to take, on the prospects for economic growth and increasing employment.

At some point, and that day is not far away, it will be recognized that the economic growth as we have come to know it in recent years is no longer possible and the search for other lifestyles will begin in earnest. Some may even come to understand that the peak oil crisis may already be all around us and we are simply not recognizing it for what it is.

By. Tom Whipple