“‘All the latest projections, at least up to 2020, do not require anything higher’ than the existing capacity target, oil minister Ali Naimi tells Argus. ‘Unless we see really genuine demand, we have to pause right now and see what happens,’ he says.”

Here is an article describing the technical challenges involved: “Brazil Oil Trapped by 500-Degree Heat, Salt Barrier“, Bloomberg (28 April 2008) — Excerpt:

Pumping oil from the Brazilian finds, parts of which are 32,000 feet (10,000 meters) below the ocean’s surface, will require boring almost twice as far down as the world’s deepest producing offshore well. … Similar drilling by Exxon and Chevron Corp. in the Gulf of Mexico cost $180 million to $200 million for each well. … Exxon Mobil abandoned a Gulf project that would have been the deepest well after pressure and heat shut down the venture in August 2006.

To take just one of your comments, and not essentially to prove a point per se: “UN meeting to address food crisis“, BBC News (28 APril 2008)

The weakening dollar and the increasing costs of production, mainly due to the rising fuel prices and not just oil, but domestic fuels such as gas and electricity, are leading the world to a worse place, not a better one. The global picture, when one looks at it objectively, is gloomy..

As for oppression? perhaps oppression was too strong a word, but the essence is the same, take China in Tibet or the current troubles in North East Africa of Zimbabwe, all oppression of a fashion, and none good, in my opinion, for the world as a whole.

“I have written that we are entering a period of global structural change, as the post-WWII geopolitical regime changes. The rise of 4GW, end of the US hegemony, Peak Oil, major demographic changes … we face new challenges. That is life, always. It does not mean things will get worse.”

I agree completely, however good the prospects are the rich, (or the less poor), the world is made up of billions of people, rich, comfortable, struggling and poor, and the latter, (perhaps the latter two), are already finding life difficult. Is it ‘fair’ that a world that has enough to provide for all would rather let the poorest die off so ‘I can have more’?
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Fabius Maximus replies: A post goes up later today (tomorrow GMT) about the food crisis. There are no signs of food shortages, except from hoarding. Rising energy costs are responsible for only a fraction of the rise in food prices, and common factors are driving them both up. It is called inflation, and often appears during or at the end of periods of rapid economic growth.
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“Is it ‘fair’ that a world that has enough to provide for all would rather let the poorest die off so ‘I can have more’?”
Again, I consider this wildly overstated. The global poor have experienced great improvement in their economic conditions around the world during the past 10 years — for those living in functioning states. That does not include many in, for example, Africa.
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We do not know how to help people living in failed states, wrecked by war (often genocidal), oppresive governments (and their suicidal economic policies). Both our moral codes and the nature of 4GW prevent colonization (even benign, to help them). External aid provides only a band-aid. Suggestions? Our desire to help does not mean that the means to do so exist. Sending them checks is a tried and failed method (many of the poorest states have recieved the most aid).

Ok, you can get off on somethng like Vlads daily gloat: http://www.exile.ru/blog/list.php?CATEGORY_ID=222

But the bottom line? We are all in this world together and we have to fix things together. Balance is the key. If we are all really, really smart we could actually all get get rich together … nah won’t happen.

Bang, people started moving back to the inner city areas. Gentrification happened. Houses renovated. Prices shot up. In more recent times huge amounts of apartment blocks have been built right in (and very nearby) the city. Following suite we now see supermarkets springing up in the city business district to support them!

Yes, people change. The whole inner city change happened because of just 2, relatively short, oil shocks. What do you think is going to happen with a permanent price change?

Some odd ball things will happen as well. We are starting to get growth in some regional centres as well. Take an example, I have a friend who commutes by train from Geelong every day. He walks to the train station, gets a train and it takes him right into the city where he walks to work. He actually has an easier (and cheaper) transit than some people who live geographically much closer in a suburb with no trains or trams and who have to sit in what could be best described as a slow moving car park every day to get to work.

Even in the 70’s I could go to areas in Glasgow and there would be virtually no cars parked, because people just didn’t have them. In China, even in the 80’s bicycles ruled.

Just because we have changed in one direction doesn’t mean we cannot change in the other.

People are changing behaviour now. The trains are totally packed as less people drive to work. A recent survey showed that AUS$1.75 per litre was the point where a majority would stop using their cars for commuting. We’re at $1.50 now (which hasn’t stopped some idiots proposing even more tollways, what for, as historical monuments).

And shopping centres. There comes a breakeven point where it is overall cheaper to go to a more local, probably higher priced, shop rather than drive the distance to a large, probably lower priced shopping centre.

I’m watching the growth of scooters and ever more bicycles being used. These are emerging trends that will continue to grow.

The housing crash has now hit here (10% down in 3 months overall). But I notice that the greatest falls are in the outer suburbs, away from services and public transport, some inner city areas have actually increased in value. Now I live 4km from the city, in walking distance to shops, trains and trams. I hardly have to drive. Whats going to happen when people do their sums and start trying to move closer to trains and trams?

Yes, we love our cars, I love Spitfires - but I can’t afford to buy one! They will hang onto them for a long time, but, they will turn them over far less, use them far less, have only one, go to work on the train or tram, eventually walk to the shops, buy a scooter or bicycle for commuting, vote for Govts that promise better public transport, those who can afford it will buy smaller more efficient cars, etc. Like the past, car use will be saved for special occasions, all your normal day to day transport will be done other ways.

Not all bad, I’m fed up with traffic jams, people will get fitter, pollution will drop, not nessarily a worse life, just different. With modern technology we can live pretty well at a 1960’s oil consumption level. Car workers will become unemployed, but they (provided there is proper planning and incentives put in place) will be employed making trams, buses and trains.

I’ll make a prediction, in 20 years, here in Melbourne, many of the new outer suburbs with Machouses will be empty or full of squatters. Yes people will cram into the city centres (and transport hubs), and will live in smaller houses, flats, etc, and be glad of it and maybe even have a better life.
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Fabius Maximus replies: I strongly agree. One of the interesting aspects of economic history is the continued belief that prices do not matter. The falling US dollar will not increase exports. Rising oil prices will not reduce consumption. It proves wrong every time, although with time lags. Behavior adjust slowly, as people reorder their business and living arrangements. Capital investment flows take even more time to have an effect, but make even larger changes.

As an engineer, I have to disagree with your characterization of WW-II progress. In many technologies, is more analogous to today: we have the inventions of various alternate energy sources (and major ones - coal power and nuclear) already exist in industrial quantities. In WW-II, there was dramatic, rapid improvement in and deployment of radar, aircraft, nuclear technology, electronics, control systems, and others.

The atomic bomb is most amazing - it required the invention of major new technologies (from production of nuclear materials to the weapons themselves), and the creation of large industrial complexes. All of this took about THREE YEARS. That is less than the planning time for the wedges in the Hirsch report.

As for the bad news, if we have not hit peak oil, we will delay significant mitigation until we do, unless oil prices stay high. The reason is the enormous friction on capital energy investment caused by the NIMBY/BANANA phenomenon.

World War II style progress could be mode, but only after a political revolution that removed this problem, which would include abandonment of CO2 emissions reduction. Today, we are mitigating a problem with low impact (anthropogenic global warming) and low certainty, while the oil problem is certain (at some point - hopefully not today) and of dramatic impact.

I guess I am more hopeful in terms of the time to adjust to a liquid fuels crisis, because I think the impact of this crisis will result in a sea change in public opinion and a resulting more rapid mitigation.

Significant quotes from the article:

“For the U.S. to attain a lower level of dependence on liquid fuel imports…, a major paradigm shift will be required in the current approacch to the constructions of capital-intensive energy facilities. ..[legislation allowing bypassing slow permitting processes]. During World War II, facilities of all types were constructed on a scale and schedules that would have previously been incoceivable.”

Coal gassification -> usable fuel $35/bbl
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Fabius Maximus replies: I think you have missed a key point, both of my comments and the Hirsch report on which they are based. Building two atomic bombs is a project several orders of magnitude smaller (a rough guess) than building power plants that generate a terrawatt of electricity. One can be done quickly, the other takes many years.
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The rollout involves building the infrastructure to build the plants, both human and physical infrastructure. That takes time to build the political consensus, marshall the resources, and execute the plan. The Pearl Harbor shock achieved the first immediately, as would arrival of Peak Oil. Unfortunately, that is a worse-case scenario — that we begin preparing only after the onset of Peaking.

One could just as easily argue that in 1914 the herd thought WWI would be over quickly, and that WWII could be avoided entirely in 1938, while in 1940 a lot of the US still thought we could stay out of it. Just as it thought interest-only mortgages were great in 2006 and no-revenue/no-clue businesses could win in 1999.
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Fabius Maximus replies: You have made one of my points. These “magazine cover” arguements are slippery and subjective. With hindsight we can construct examples showing the herd wrong; I suspect it is difficult or impossible to do so contemporaneously.
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My second point is more telling. What about counter-examples, times when the herd is correct? I suspect a study would show as many or more examples of correct “magazine covers.” Picking a few that support your case is just the material from which “urban legends” are made.
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Real evidence, please.

I think you overstate things a bit by saying, “severe economic pain” is on the way. Please define what you mean by the phrase. I, and I think most of your commenters, take it to mean “a second Great Depression”. If you mean a return to the Seventies, well, they were bad enough– I was a teenager then, so maybe those years weren’t as bad as I thought they were– but we got through them in good enough order. (Getting rid of that moral scold Jimmy Carter in 1980 helped immensely.) Clarifying your meaning of the phrase might reduce the heat-to-light ratio in this comments section.

Also, I think some of your commenters are missing a key point. We don’t live *on* Planet Earth. We live *in* a Solar System composed of nine planets, umpteen moons, a million asteroids, and one very large unshielded fusion reactor called the Sun. And there’s a whole Universe out there somewhere beyond the orbit of Pluto. I don’t think we lack for resources. It’s a fair question to ask how the heck we’re supposed to get out there to take advantage of them, but we’re devising better ways besides flying disintegrating totem-poles all the time– we could even have the first (crude and spindly) elevator to geosynchronous orbit installed around 2020. And as any physicist will tell you, even low Earth orbit is halfway to anywhere in the Universe, the governing principle being the speeds you have to attain to get anywhere at all.

I know that what I just wrote doesn’t have much to do directly with Peak Oil, Fabius. I’m just trying to inject some perspective on the subject. We may not be using oil very much in the year 2100; but then we won’t have to, either. And our descendants will be enjoying a much higher standard of living (however one cares to define that) than we do now.

There may be some rough patches ahead, but we’ll survive with style, I expect.

And in any case, coal and oil are far too valuable as feedstocks for the chemicals industry to ever set a match to. Hurrah for nuclear power!
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Fabius Maximus replies: Who can say what impact Peak Oil might have on the economy? We are talking about an event occuring somewhere between now and 2050, of unknown nature (how long the plateau? will the decline rate be 3% or 8%?). Our current economic structure is only a century old, so we have no experience with such events — so the past if of little help in forecasting.
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Also, it depends on when we start preparations, how long before Peaking. If we start now and Peaking occurs in 2030, the impact will probably be slight. If we do not start until after peaking AND there is no plateau (a “sharp” peak), the impact could be like the 1930’s — a decade-long global depression.
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We are discussing a 21st century event, which might be considered small by 2500 C.E. But it could be very big in the lives of us and our children, and the views of future generations will give us little comfort.
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As I said above, wonderful technology of the future is unlikely to help — any more than jet engines, cruise missiles, and ballistic rockets helped Hitler. These things are dealt with using the tools we have at hand.
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Looking far ahead, I agree with you and have written many posts about this (see this archive).

Singularly, I agree, Peak Oil isn’t Armageddon, but when you consider other global factors you begin to wonder exactly where the world is heading. Wars (or threats of wars), oppression, famine, poverty, global recession (and its coming…), the middle east tensions, etc

I wrote on my blog last evening that the world appears to be imploding on itself, Oil is just ONE factor in a great big list of global problems that are just getting worse, for everybody..
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Fabius Maximus replies: I think this is a bit overstated.
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Poverty? Famine? The past five years have seen global income rise at the greatest rate since the invention of agriculture - as the billions in many emerging nations moved into the modern world.
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In the developed nations the environment has been getting clearner for several decades, resulting in fantastic improvement.
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Wars? Since WWII the world has enjoyed another Long Peace, with only a few local wars.
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Oppresion? How can one look at the past two decades and say oppression has grown worse? The fall of the USSR, liberating Eastern Europe. Elections in Russia and many other emerging nations. Think of Singapore adn Korea in 1950 and today.
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Recesions and tensions — It will be a happy day when you I up and find these are gone from sight. I will be dead and in Heaven. At least, I hope it will be a happy day (there is an alternative scenario).
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I have written that we are entering a period of global structural change, as the post-WWII geopolitical regime changes. The rise of 4GW, end of the US hegemony, Peak Oil, major demographic changes … we face new challenges. That is life, always. It does not mean things will get worse.