Mitigation of Peak Oil - Implications of An Unmitigated World Peak

Implications of An Unmitigated World Peak

See also: Hirsch report

According to the Hirsch report prepared for the U.S. Department of Energy in 2005, a global decline in oil production would have serious social and economic implications without due preparation. Initially, an unmitigated peak in oil production would manifest itself as rapidly escalating prices and a worldwide energy crisis. While past oil shortages stemmed from a temporary insufficiency of supply, crossing Hubbert's Peak means that the production of oil continues to decline, so demand must be reduced to meet supply. If alternatives or conservation (orderly demand destruction) are not forthcoming, then disorderly demand destruction will occur, with the possible effect that the many products and services produced with oil become scarcer, leading to lower living standards.

  • Air travel, using roughly 7% of world oil consumption, would be one of the affected services. The energy density of hydrocarbons and the power density of a jet engine are so necessary for aviation that hydrocarbon fuels are nearly impossible to replace with electricity, to an extent beyond any other common mode of transport.
  • A US Army Corps of Engineers report on the military's energy options states
“ The Army and the nation’s heavy use of oil and natural gas is not well coordinated with either the nation’s or the Earth’s resources and upcoming availability. ”
  • Shipping costs
“ On average, a one percent increase in fuel prices leads to a 0.4% increase in total freight rates. Using this rule of thumb, the recent doubling in oil prices has raised averaged freight rates by almost 40%. ”

Shipping costs are particularly relevant to a country like Japan that has greater food miles.

  • Increasing cost of oil for importing countries ultimately reduces those countries' purchase of non-oil goods abroad. The Federal Reserve Bank of San Francisco discusses oil and the US balance of trade:
“ Oil prices have almost quadrupled since the beginning of 2002. For an oil-importing country like the U.S., this has substantially increased the cost of petroleum imports. International trade data suggest that this increase has exacerbated the deterioration of the U.S. trade deficit, especially since the second half of 2004. ”

US indications of economic volatility have manifested themselves in the largest increase in inflation rates in 15 years (Sept. 2005), due mostly to higher energy costs.

  • Significant oil producing countries will have a national purchasing advantage over similar countries with no oil to sell. This can result in larger militaries for oil producers or inflation of the price of whatever commodities they purchase. Saudi Arabia purchased US$40 billion worth of arms from the US between 1990 and 2000.
  • The United States averaged 464 US gallons (1,760 L) of gas per person in 2004. Therefore, increased gasoline cost will likely make gas reducing alternatives increasingly necessary and common for lower income US residents.

Those who feel that much more drastic imminent social and cultural changes will occur from oil shortages are known as doomers.

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