The Stages of Denial – Adjusting to Peak Oil

Posted: May 31st, 2010 by: h-2

Does your head begin to whir? What about that vast pool of oil spreading at hundreds of square miles per day as I type in the Gulf of Mexico? As Dmitri Orlov reminds us, again, the phases of denial go like this:

1. denial—”We are not lost! The ski lodge is just over the next ridge, or the next, or the next…”
2. anger—”We are wasting time! Shut up and keep trotting!”
3. bargaining—”The map must be wrong; either that or someone has dynamited the giant boulder that should be right there…”
4. depression—”We’ll never get there! We’re all going to die out here!” and
5. acceptance—”We are not lost; we are right here, wherever it is. We better find some shelter and start a campfire before it gets dark and cold.”

If you need this made explicit:

1. We’re not running out of oil, we can get plenty from Deepwater, Oil Sands, and assorted other strange sources that are riskier to use than anything we’ve developed before, in one way or another. If those pesky environmentalists would just let us produce all the energy that American ingenuity is capable of, then we’d have no problems at all. Damned liberals.

2. Drill baby Drill, teach those bad Arabs that we don’t need them (ignore that we can only produce, at our currently depressed US consumption of about 19 or 20 million barrels per day (bpd), roughly 50% of our current requirements.) Open Arctic sources to drilling, anything, just so we don’t have to change. Sure, we can vote for change, but forget about actual change, that’s too difficult. Damned neo-cons, damned liberals (pick which, or both).

3. We’re in this now: once we apply the right technologies, and fix the broken oil thing in the Gulf, well then, it will all be OK, and we can commence drilling, driving, and consuming cheap plastic garbage shipped in from China.

4. Gas stations start running out of gasoline, and/or, prices begin to rise again, up and up, increasing steadily at the pump as global oil production begins to enter into permanent and irreversible decline. You remember, that’s what happens when you’ve been using more oil than you’ve been discovering now for over 40 years or so, give or take a few.

Our way of life begins to disintegrate, especially since we did almost nothing besides building more highways and trying to re-ignite stagnant suburban housing development as our housing bubble popped and the economy went into a nosedive in 2008. You remember, the way of life Dick Cheney said was not negotiable. Right, that one. I assume Cheney was/is a really bad business man too.

5. Don’t worry, the younger people out there will do this naturally, the kids will start riding bikes, in fact, riding bikes will become cool. That’s already happening. It’s the older people, and the people who totally locked into the previous failing system of corporate careering and suburban bliss that are going to have the most problem.

What does real change look like? What is acceptance?

All that happens when you dump cars is that you begin to slow down and approach sane normal living speeds. Big deal. That will do you good, nothing is gained by going faster and faster, it’s just spinning the old wheel around and around, you don’t get anywhere, just ask your hamster as he runs round and round in his little wheel in his cage.

Stage 4 is where it gets risky, a lot of people are simply unable to think of these systems as globally restricted, and have grown up with the notion that consumption, especially pointlessly excessive consumption, has any actual value. These people will not adjust well, though again, their kids will, since they will be growing up in reality, not in an idea of reality.

It’s the idea of reality that we carry around with us that is the problem, the one that James Howard Kunstler correctly notes has created a country not worth fighting or dying for. That’s the one that has to provide its soldiers in Iraq with shopping centers filled with franchise stores so they can consume even while allegedly at war, occupying a large foreign OPEC country for no particular reason except inertia.

Don’t blame the oil companies too quickly…

Blowouts, huge spills spreading like cancers across the Gulf of Mexico, which was already filled with toxic by-products of our non-negotiable way of life.

That’s how it goes, we tell ourselves. Better improve the regulations, make better oversight, fix the broken system to make it work normally again. But get this straight, we can’t blame the oil companies for producing what we demand, what we use. That’s like blaming Columbians for producing the cocaine we buy and create a demand for.

Sure we can regulate them better, that goes without saying. And we can disconnect the cozy business/government relationships that exist in the MMS.

And we can force all companies to follow best practices, not cheapest.

But none of that changes for one millisecond the reality that they would not be out there if we weren’t buying the gas and plastic trinkets and other stuff made with petrochemicals in the first place. And they are out there because there is no other there to find oil at, that’s where the last reasonably affordable, and available, stuff is.

And focus on that phrase, last reasonably affordable. That’s the last of the plentiful new supplies. When it’s gone, what’s left will be even harder to extract, more dangerous, more risky, more toxic, and more damaging to the overall ecosystem. Like the tar sands in Canada are now.

So really, that’s about it, when oil hits about 80 a barrel, I’d say that’s about what the global economy can handle without going into convultions, that’s about the production cost per barrel to bring new supplies online. Maybe a bit less, maybe more, depends.

And that’s because we are out of easy to extract oil. The old fields are running out, the new fields are smaller and more complicated and expensive to develop.

The estimates for the BP field that just blew out was about 50 million barrels, that’s about 2.5 days of US consumption. And about 0.6 days global consumption. High price for a few day’s more driving wouldn’t you say?

They’ve worked out that when nations spend more than X% of their GDP on oil, I think it’s about 2-4%, then they will suffer economic failures and disruptions. And when oil goes over about $90 to $100 a barrel, that percentage is hit. That’s why oil has been lingering right at the balance point now since it spiked to $147 then dropped to $30. At $30, they can’t afford new drilling, and start canceling projects already planned.

At $80 it works, for now. When it pushes to $90 or $100, things start to crack and fail. This is what peak oil production globally looks like. The economists, who seem dead set on demonstrating that they simply have zero clue about reality at all, kept saying that oil would just go up and up until supply / demand balanced again. But there’s a finite limit to that process, and we’ve already hit it.

A lot of consuming countries, which are for us out of sight, out of mind – Kenya, Bangladesh, Pakistan for example – have already passed this limit (ie, they really can’t afford $80 a barrel oil in the first place). They are the ones who are balancing demand by not buying more. And the USA of course, consuming about 25% of the planet’s total, dropped a few percent of their total as well (mostly I would guess because people are shopping less, and thus, driving less, or not commuting to work because they got laid off), but that’s about as much as we can drop without actually changing our society to get away from car based culture.

So things are going to be precarious for the coming few years, you’ll see more volatility, more tests to find the top prices the market can support, more unpredictability. Then one day, here and there, gas stations will start to run out of oil.

Forget about prices, they aren’t the real indicator. Look at gas/oil availability in the real production / consumption markets.

You may even hear excuses, like, oh, that station just wasn’t economical to run.

Speaking of which, I just remembered, in my neighborhood, 2 stations were closed down over the last year already. Guess they weren’t economical to run….

Don’t go looking for the future when it’s already here, that’s my advice.

2 Responses to “The Stages of Denial – Adjusting to Peak Oil”

  1. Stan Kahn says:

    Back in the 70’s the big problem was not cost of gas but availability. People waited in long lines and stations often ran out. People were allowed to buy gas only 3 days of the week depending on the last number of their license plate. Nixon stepped in to control prices and it was the only time gas was priced in other than .9 cents.

  2. h-1 says:

    Yes, the 70’s were our first chance to change. We decided against change, and you know how it worked out.

    I’m fascinated by two things you’ll run into all the time in most oil supply/peak oil discussions, one is promoted by Matt Simmons (of Twilight in the Desert fame, a really good book by the way to learn how this oil stuff really works), and it’s so wrong I have wanted to email him to ask where his thinking cap is. That point is this: he says, Europeans pay $8 to $10 a gallon and they are fine. He also points out the intrinsic work value contained in a cup of gasoline. Both points are painfully wrong, and really disguise some core realities.

    Europeans do not pay OPEC or Russia $8 to $10, they pay them exactly what we pay them, about $1.50 or $2 a gallon, give or take for oil. Then the state uses the other parts, recycles it into the economy, the local economy that is, not the OPEC one, and uses it for things like making high speed electric rail, new subways, and lots of other things that keep the money and benefit the society. Since Matt is a tried and true Republican, he cannot bring himself to see this side of the equation. You know, all government is bad, and all that, so you most definitely cannot let in examples or examine them closely of good government actions that benefit the overall social body, which is what high gas taxes do.

    I can’t think of how many times I’ve heard him repeat this spiel in interviews or presentations, and I find it astounding that he can’t do the simple math of realizing that when you place a social premium on activities that are long term non-sustainable, and use that premium to promote long term better options, that is not the same as going to the pump, paying BP or EXXON $8 to $10, all of which basically stays in their pockets. Or the OPEC countries, whatever, or whoever, is producing it.

    Recall that even Ross Poirot suggested raising the gas taxes to pay down our deficit, and that was when it was only a tiny fraction of what it is now.

    The core error with this price/value thing is failing to see that oil is already used as the percentage of the economy we can afford to pay. That is, its value is already what we can afford, our system can’t afford to quadruple that to say $300 a barrel, that would require reducing something else in our system to make up the difference. In other words, our system already uses the value contained in oil as a primary raw material, it’s priced in, and if it goes up, something else must be reduced or dropped, the higher oil price will not produce any greater value proportionally, it already does that now, so if the raw material price goes up, that simply means we have less money available for other things. If our country went from spending say 2% of its GDP on oil to 4%, it wouldn’t produce 2x more value, it would produce the same exact value, only it would be more expensive to produce it. Thus an overall economic decline is a virtual certainty as oil inches upwards.

    Countries like India or China that are only now switching to intense oil consumption can price higher raw oil prices into their system since their systems are relatively new and somewhat flexible. If gas goes to $5 a gallon in China, for example, people already drive small cars and scooters, and they aren’t living in suburbs etc. They can bend. Same in India. We can’t, especially not in the USA, and that’s a direct result of decades of refusing to implement realistically high gasoline taxes in order to discourage consumption and encourage alternatives.

    I simply cannot believe that anti tax mania in this country, coupled with the fanatical drive til you drop ideas most Americans hold as gospel truth will be allowed to essentially destroy this country, and make all the other countries smart enough to start putting in rational controls and pricing mechanisms (far removed from the hands of the free market, which really fails to function when you hit actual resource limitations) winners while we look on sadly from the sidelines. I’m not clear on what it is exactly that started making Americans up here consistently vote against their long term interests, it’s weird to watch it happen time after time again. But it’s starting to hurt more and more I’m sad to say, each year we don’t push for gasoline consumption reductions via higher prices and taxes, is one more year we’ve lost in the game, and one year less to start making alternatives before it’s too late.