Keeping Your Eye on the “Peak Oil Ball”

While walking the dog early in the morning, I usually look at news headlines, primarily using the New York Times free iPhone app.

One article caught my eye early today, OPEC Orders Cut in Oil Production. It started out with, “The OPEC cartel said Friday that it would reduce its oil production by at least 1.5 million barrels a day to stem what it called “a dramatic collapse” in oil prices as the world economy slows down and oil demand shrinks” and then continues to point out how many countries have set social program and other country revenue-based spending on much higher per-barrel prices, and so there is a tremendous incentive to cut production in order to increase prices.

Though it’s clear OPEC members are trying to find a way to get prices back up, it’ll probably take quite awhile. Can’t we just revel in the good news that demand is shrinking and that gas prices are falling at the pump, airfares are already dropping, shipping costs will probably go down, and that we can breathe a sigh of relief?

Then a fleeting thought ran through my mind, one that I fear many might have and will fall back into old behaviors and go ahead and buy that new gas-guzzling SUV or low mileage car (or make other short-term decisions), “Oh great…maybe I didn’t have to buy that Prius after all!” and then remembered this MinnPost article I’d read in August along with this tremendous Potential Energy podcast in September (both on peak oil), coupled with one of THE most comprehensive, objective and sobering programs I’ve watched in a long, long time: PBS’ Frontline show called “HEAT” (you can watch the entire show online and it’s worth the investment of your time).

In that MinnPost article, the writer explains the predicament we’re in with the help of energy expert Matthew Simmons:

Along with others, Simmons has been warning about peak oil for two decades, but he’s not the first. M. King Hubbert, a geophysicist with Shell Oil, accurately predicted in 1956 that U.S. oil would peak by 1970. That’s when the United States went from being a producing nation to being one that today imports 70 percent of the oil it consumes.
 
Unlike climate change theorists, who rely on data and modeling, “peak oil” advocates rely on known production data that in every case shows a bell-curve history of discovery to increasing production to decreasing production to exhaustion. Taken together, the data from all oil production sites, along with such other information as the ratio of dry-hole to successful-hole drilling and economic growth rates, have helped geoscientists develop “peak” scenarios that are broadly accepted.

So should we be more focused on peak oil (and running out of it) or climate change?

Contrarians argue that we’re NOT in a peak oil situation since, for the most part, true reserves globally are unknown since these figures are state secrets. They then trot out data about huge assumed reserves. Even peak oil proponents believe the reserves figures are not accurate since OPEC countries have agreed among themselves to quotas that are proportional
to their Proven Reserves. In other words, they have an incentive to inflate their numbers so they can ship more crude oil and make more money.

Who cares if we’re running out, have enough for the next 50 years, if we’re still spewing carbon into the air and fundamentally changing out climate?

I connected all of these dots along with my own post on Schwans in southern Minnesota who, after facing the oil shock of the late 1970’s, kept their eye on the ball strategically and are now in a fabulous position with trucks that run on liquid propane for  (NOTE: though natural gas releases less greenhouse gas, it’s more dangerous to deal with as it needs to be compressed in order to be feasible in a truck).

The company leaders are now looking like absolute geniuses with the strategic decision they made over 30 years ago. Though Schwans is not at zero emissions and still spewing some carbon into the air, liquid propane is still cleaner than any alternatives that could power huge trucks filled with frozen foods.

Today, the company pays roughly $2 a gallon for propane and gets a government tax break for using a low emissions fuel. More than 5,000 Schwan’s trucks nationwide run on propane.

How much are they saving? They estimate about $35 million in fuel costs alone in 2007.

My point with this post is how quickly you (and even I, a guy who prides himself on being “Mr. Strategic”) can take our eye off the ball and perhaps consider (or make) choices that will come back to haunt us later…even if that later is, as some experts predict, perhaps a year or more away before big spikes in demand for oil cause gas prices to once again increase dramatically.

With enough evidence that we’re past the peak in oil production and experiencing accelerating climate change due to human introduction of carbon into the atmosphere, do you really need to wait until we’re close to collapse or environmental calamity?

Keep your eye on this ball, get behind ‘green’ and alternative energy initiatives, make smart ‘strategic’ decisions on what you buy, and think about ways that you can position yourself for what most people know is the inevitable.

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1 Comment

  1. John on October 26, 2008 at 3:23 pm

    When are we going to realize that the Oil Companies are waggisg us like a dogs tail? I do not believe we as Americans must bow to the whims of “Big Oil”. What right do they have to control production in relation to demand? To me that is price fixing and market manipulation. Look at recent history; Oil price goes up from say $65 per barrel to $125 per barrel, (double). Retail gas price in the US goes from $1.25 per gal to $4.00 per gal.(more that triple).

    Oil Price falls from $125, per barrel to $75 per barrel (loss of approx 40% drop) Retail gas prices do go down but ! ! ! ! ! from $4.00 per gal to $2.75 per gal.
    The price went up over-night the price came down over a period of two or three weeks.
    Now retail gas is about $2.75 a gal. and the way the price fixing has been going on they have us thinking we are getting it at bargain prices. And we actually believe it. (If it were in proper perspective; todays retail gas price should be about $1.40 per Gal).

    I do believe the tail is wagging the dog here. “We The People” have just been to complacent for too long and it makes me sick.



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