By Dan Bertolet April 19, 2010

If you ever find yourself wondering why some folks seem to be so worked up about the need to reshape our cities to be less fossil fuel-dependent and never shut up about how spending billions on car mega-infrastructure like tunnels and bridges is a very bad idea, perhaps the opinion of the U.S. Military might help explain it:

"By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD."

So states the Joint Operating Environment 2010 report from the US Joint Forces Command, published last month. Total output today is 86 MBD (million barrels per day), so that 10 MBD represents a shortfall of 12 percent. Not trivial. In as little as four years from now.

That view is corroborated by U.S. Department of Energy, as reported by Le Monde:

"Glen Sweetnam, who heads the publication of DoEs annual International Energy Outlook, agrees that what he identifies as a possible decline of liquid fuels production between 2011 and 2015 could be the first stage of the 'undulating plateau' which will start 'once maximum world oil production is reached.'"

Here's the picture according to the DoE:

Given the massive reductions in CO2 emissions necessary to preclude catastrophic climate change, the drop in production shown in the graph above represents the path the we actually should be striving to achieve or even surpass. But astonishingly, both the U.S. Military and the DoE advocate that the only solution is to expand oil exploration and production.

If a shortage develops, supply and demand pretty much assures the outcome: The price will rise. Check out how the price of oil has evolved since 1946 (click image to enlarge):

The price of oil was remarkably flat for nearly three decades after World War II, which happens to line up with a period of unprecedented economic growth in the U.S. Since then, the price of oil has gotten a little wacky, and it just so happens that economic growth has been a bit spotty too.

Through the mid-aughts the price of oil rose sharply as the economy expanded across most of the planet and demand for oil rose correspondingly—until the price got so high that it helped drag the world economy into recession. It's not hard to guess where the trend line goes next if the predicted shortfalls come to pass.

Sweetnam's "undulating plateau" is wishful thinking, though I guess that all depends on how you interpret the word undulating. Most analysts predict that the hallmark of peak oil will be wild price swings, which is exactly what happened in 2008. It's a classic feedback loop between demand driven by economic activity, and economic activity squelched by high oil prices.

The bottom line is that the societies most successful at weaning themselves from fossil fuels will be the most economically stable and competitive in the long run. And that's why the goal to push for carbon neutrality in Seattle by 2030 makes so much sense, even if you completely ignore climate change itself.

Any near term shortfalls in oil production, if only temporary, are previews of the inevitable future. The time to start planning for that future is now, and that's going to take tough decisions and visionary leadership. For example, instead of sheepishly accepting that Washington State law prohibits spending gas tax revenue on anything but roads, the real leaders will stand up and fight to change that law.

But hey, not to worry! If we can just solve the immensely important problem of aggressive panhandling in downtown Seattle we'll all be fine.
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