A Tough Oil World

[David MacLeod]

Back in 2008, the price of gas and oil was steadily climbing, and there was some openness in the community about the idea of "peak oil."  A task force to study the issue was unanimously supported by both the city and county councils. 

As the task force was going about its work, the economic crisis hit, and the price of oil dropped.  As prices declined, so did the level of concern about the peaking of world oil production.  Few connected the dots to realize that high oil prices played a part in triggering the economic crisis.  Yes, obviously there were other factors staring us in the face, but economists like James Hamilton made a very good case demonstrating the role of oil prices in economic setbacks.  Even peak oil pioneer Colin Campbell had warned us years before that in a peak oil situation, high oil prices will have negative effects on the economy, which would cause the price to decline...only to reach ever new higher levels when the economy started to recover, and then the cycle would repeat. 

So high prices are back - what now?  Interestingly, Hamilton has recently posted that he doesn't see the current high prices negatively affecting the recovery. He writes: "Although the prices of oil and gasoline have risen significantly from their values in October, they are still not back to the levels we saw last spring or in the summer of 2008. There is a good deal of statistical evidence that an oil price increase that does no more than reverse an earlier decline has a much more limited effect on the economy than if the price of oil surges to a new all-time high."

On the other hand, Michael Klare, expert on resource wars, has a new book out ( The Race for What’s Left: The Global Scramble for the World’s Last ...), and a new article that I think does a great job of summing up the current situation in regards to world oil production.  The article was published in this week's Cascadia Weekly under the title "Why High Gas Prices Are Here to Stay" (to which I'd quibble, noting the expected up and down prices mentioned above...but in the long term the price moves inexorably upward).

A Tough-Oil World
Why Twenty-First Century Oil Will Break the Bank -- and the Planet
By Michael T. Klare

Oil prices are now higher than they have ever been -- except for a few frenzied moments before the global economic meltdown of 2008. Many immediate factors are contributing to this surge, including Iran’s threats to block oil shipping in the Persian Gulf, fears of a new Middle Eastern war, and turmoil in energy-rich Nigeria. Some of these pressures could ease in the months ahead, providing temporary relief at the gas pump.  But the principal cause of higher prices -- a fundamental shift in the structure of the oil industry -- cannot be reversed, and so oil prices are destined to remain high for a long time to come.

In energy terms, we are now entering a world whose grim nature has yet to be fully grasped.  This pivotal shift has been brought about by the disappearance of relatively accessible and inexpensive petroleum -- “easy oil,” in the parlance of industry analysts; in other words, the kind of oil that powered a staggering expansion of global wealth over the past 65 years and the creation of endless car-oriented suburban communities. This oil is now nearly gone.

The world still harbors large reserves of petroleum, but these are of the hard-to-reach, hard-to-refine, “tough oil” variety. From now on, every barrel we consume will be more costly to extract, more costly to refine -- and so more expensive at the gas pump...

Read the rest of the article here