Friday, February 17, 2012

Peak Oil is Here for the OECD

Peak Oil consumption appears to have hit the OECD nations, with consumption down 10% over the past 5 years.

Still, the decline rate is somewhat better than many expected. Ethanol in the U.S., along with increased domestic production, softened the blow somewhat in that country. Europe, for a number of reasons, did not experience a decline, point to point, during the period.

Ethanol is a one off and the increased Oil production both domestically and in Canada are not going to grow at the same level... so if the rate of change remains the same, in 2017 U.S. domestic consumption could very well be below 16 million barrels per day, down 25% in 10 years, peak to trough (and it could be more and it could be less).

That's bad... but it could be a great deal worse. The U.S. trucking model for the distribution of goods will  have to get a great deal more efficient and expensive... but at least it will still be functioning. The volume/tonnage will be lower obviously, but the necessities will still get through.  There is a point though where that simply won't be the case. The U.S. is a BIG place, and big rig trucking is a simple equation - 4 miles per gallon. 1 less gallon of diesel supply = 4 fewer truck miles.

Of course there will be adjustments. Homes in the Northeast, for instance, can be converted to Natural Gas heating from heating oil, and heating oil is close enough to diesel... but that number just isn't that big. No, the adjustments will come in the form of fewer consumer and capital goods being trucked around. Perhaps railroads or waterway shipping will make up for some of it.

But that doesn't stop the inexorable march of depletion. It seems that whatever we thought was normal in 2007 won't be so normal in 2017, 2022, or 2027, which is only 15 years away. Somewhere in the middle of those years, the folks selling us the oil in the first place may decide that it is not in their best interest to keep selling that oil as fast as possible; or perhaps production declines accelerate... the point is is that it appears Peak Oil consumption has hit the U.S. and there isn't much we can do about it. We must  make personal, policy, and economic adjustments. Some will make better decisions than others, and the government's capacities will likely be much diminished... for what its worth, I view that outcome as very, very good news.


Kathy said...

This feels like more of a whimper than a bang which may disappoint some people but works just fine for me. I see a lot of people here in the Northeast moving back to wood but that only works if your home has the infrastructure for it and the cost of a cord of wood is rising along with oil. The bigger issue will be food. Food inflation will hurt most those who can least afford the pain, the elderly and the disabled and the chronically unemployed. That's where the rub will come. Would you want to live in a city and look affluent while many are experiencing true food insecurity for the first time? Me neither.

Greg T. Jeffers said...

Hi Kathy!

I think whimper for now... until it bangs, or bangs not.

Noodling this I am brought back to Orlov's "collapse will come to us one person at a time" assertion... and in the final analysis, it only matters what happens to you.

Still, I suspect that the "rate of change" in the decline of OECD Oil supply will more likely accelerate than not... and I strongly suspect that the political "rate of change" will be somewhat more spectacular.

Greg T. Jeffers said...
This comment has been removed by the author.
Greg T. Jeffers said...

You know... there were lots of crazy people in the Peak Oil community.... and then there were thoughtful people that took action - however you might define "action" - that continue to comment here and at some of the other thinking blogs.

Life will go on, and I think the past 5 years has brought the materialism/consumption model to its knees... and over the next 5 or 10 years that model will be made prostrate. Most of "us" (you and I, PP, Stephen, Tweel, Coal Guy, Dex, and the gang) have already accepted that and have moved on in the direction we think best.

It has been an interesting thing to take in, if I may make use of understatement.

PioneerPreppy said...

The first decline we will notice will be the luxury use. I have already noted a marked decrease in "pleasure drivers" around my place. Four years ago the roads around here were constantly plagued with traffic. These days there is very little.

Smaller trucking companies are another early casualty and I know of a few local ones that have closed their doors.

I think the next phase we may see happening will be the point where transportation becomes so expensive that local food production can once again compete price-wise. If it happens slow enough this maynot be as painful as some have predicted.

Greg T. Jeffers said...


That is the trick of it... it is all about the rate of change. The markets will steer resources to the necessities and away from luxuries (and the marginal performer).

That this process is underway is undeniable. What the rate of change is over the next 5 years is the $64K question.

Things might not be too bad for you, me, and Kathy... we have already made the adjustments... for folks living in NYC (just an example) that cannot sell their condos/coops/houses because of the inevitable contraction in finance... in a city constructed around huge tax revenue from said finance.... and all of that outcome's effects on a great many things... i think this next epoch will be very painful.

Though it may not come down to people starving, the economy, at some point, is going to get hurt, and badly, by this...