Peak conventional oil adversely impacts the economy
By Drs. Robert & Sonia Vogl
President and Vice President, Illinois Renewable Energy Association
Our economy was built on cheap fossil fuels, which supported our economic and technological progress. As sources of conventional low-cost oil are depleted, we have turned to unconventional sources with higher extraction costs. With current oil prices around $80 to $85 per barrel, it has been estimated that new tar sands oil requires $95 per barrel to be extracted. If the oil is not extracted, prices could still rise, as competition for the existing oil would intensify.
Energy economist Douglas Reynolds believes our economic malaise is a result of a decrease in energy supplies. He notes that the United States has a vast global military presence that we are unable to pay for, a decreasing standard of living, increased concentration of wealth, and a continuous energy crisis that began in 1973. He sees our budget deficit rooted in the oil crisis, and that our government is printing more money to keep the economy from collapsing.
Gail Tverberg reminds us that higher oil prices damage the economies and increases unemployment in countries reliant on imported energy, such as Japan, the European Union and the United States. History suggests oil prices may have to fall below $40 per barrel for substantial increases in employment.
Higher oil prices allow exporting countries to maintain their economies and job opportunities. Saudi Arabia announced they were willing to accept lower prices for their oil to maintain market share by eliminating energy suppliers with higher production costs. Yet, prior to the announcement, they had cut production, which would cause prices to rise, so their intent is not clear.
Tverberg cites a recent Apicorp report that only two OPEC (Organization of the Petroleum Exporting Countries) members, Qatar and Kuwait, can break even with oil prices between $80 and $85 per barrel. She suggests the global economy needs to be redesigned to operate on much less oil.
The recent claims of new oil and natural gas abundance in the United States along with the fall in energy prices has created a sense that we no longer need to be concerned about the economic impacts of a decline in peak conventional oil.
Energy analyst Nate Hagens is also concerned about the impact of peak oil on our economy. While he supports the move toward solar energy, he remains concerned that the implications of peak oil include a lower standard of living. He believes that endless economic growth on a finite planet is impossible, and that the peaking of oil marks the beginning of the end of such growth.
If we are faced with the end of growth, there are numerous alarming possibilities based on how the global society reacts to it. While we as individuals have little impact on global events, we can take actions to make our lives more sustainable. Hagens suggests we surround ourselves with people of similar values and work with them toward a cleaner world on a personal, local and regional level. By modeling the behavior we believe in, we are in a position to share our knowledge and skills to assist others in reaching similar goals.
Drs. Robert and Sonia Vogl are founders and officers of the Illinois Renewable Energy Association (IREA) and coordinate the annual Renewable Energy and Sustainable Lifestyle Fair. E-mail firstname.lastname@example.org.
From the Oct. 29-Nov. 4, 2014, issue