Sunday 7 September 2008

Is oil peaking?

I don't know, but I think that it may be. Of course, the peak oil concept doesn't mean that there isn't going to be any more but that that production has reached its maximum level and that severe consequences will follow.

I recommend listening to this broadcast from the excellent Financial Sense Online. The first half is an interview with James Howard Kunstler. That's followed by Paul Mladjenovic, an Austrian School financial advisor.

Here's Kunstler:

Some regions of the country will do better than others. The sunbelt will suffer in exact proportion to the degree that it prospered artificially during the cheap oil blowout of the late 20th century. I predict that the Southwest will become substantially depopulated, since they will be short of water as well as gasoline and natural gas. I'm not optimistic about the Southeast either, for different reasons. I think it will be subject to substantial levels of violence as the grievances of the formerly middle class boil over and combine with the delusions of Pentecostal Christian extremism.

All regions of the nation will be affected by the vicissitudes of this Long Emergency, but I think New England and the Upper Midwest have somewhat better prospects. I regard them as less likely to fall into lawlessness, anarchy, or despotism, and more likely to salvage the bits and pieces of our best social traditions and keep them in operation at some level.

There is a fair chance that the nation will disaggregate into autonomous regions before the 21st century is over, as a practical matter if not officially. Life will be very local.

These challenges are immense. We will have to rebuild local networks of economic and social relations that we allowed to be systematically dismantled over the past fifty years. In the process, our communities may be able to reconstitute themselves.

Now Kunstler is a bit of a leftist. He sees government solutions that I don't think are right or that would work. But that doesn't mean that there isn't a problem. Whether oil is peaking or not is an empirical matter but solutions are subject to a priori considerations. Libertarianism is a philosophy of private property rights and such rights are inherently conservative, with a small "c" of course. I see no contradiction between libertarianism and solving of any challenge from peak oil; indeed property rights are the only possible way forward.

What I find really interesting is how this would affect Scotland.

At first sight it doesn't look too good. Declining oil production would adversely affect Scotland's finances, whether independent or not. On the other hand an independent Scotland might chose to reduce production so as to conserve an increasingly valuable capital asset. But there are other considerations.

Peak oil is terrible news for airlines (listen to Kunstler) and Scotland is way out on the edge of Europe and even of the UK. Would Edinburgh's financial industry be as robust if air services to London were cut back? And what about tourism?

But there's more isn't there? Here's Kunstler again:

The economy of the mid 21st century may center on agriculture. Not information. Not the digital manipulation of pictures, not services like selling cheeseburgers and entertaining tourists. Farming. Food production. The transition to this will be traumatic, given the destructive land-use practices of our time, and the staggering loss of knowledge. We will be lucky if we can feed ourselves.

From this point of view Scotland comes out quite well. We can certainly feed our population of five million from local production should that become necessary. And water and non-oil energy resources are plentiful. England, especially the South, may be quite another matter.

1 comment:

David Farrer said...

Comment made on previous template:

Neeps and tatties. And fish. But, bugger, we've buggered the fishing. Action required there.

9 September 2008, 17:24:31 GMT+01:00