The peak oil balloon, it may appear, is finally going up. Not only have we seen obvious signs like the highest oil price rise in history on June 6 (coincidentally the anniversary of D-Day which began the liberation of Europe in the Second World War), but Gordon Brown, accidental Prime Minister of a former oil exporting (1980-2005) country, may also be one of the unlikely envoys of truth.

At the end of May, in the UK Guardian newspaper, a left-leaning organ that the right-listing New Labour normally avoids like the plague, Brown says in no uncertain terms that the world is in trouble – we are "facing the third great oil shock", and it is now time to find alternatives to oil. "We must all act together" is the headline. A noble sentiment indeed. This is a most generous 'all', because it includes the OPEC cartel, who are no doubt thrilled to be called upon in this way, notwithstanding the fact that calling someone a nasty name ('cartel') is an unusual method of procuring favours from them.

In case the term 'balloon goes up' is unfamiliar, it derives from the First World War, when it was found that sending a balloon up was a good way of signaling over a long distance so that everyone could get synchronized in whatever it was they were trying to do. This was before text messaging and Facebook of course. I should admit that the purpose of this synchronization was not swimming or dancing but the launching of an artillery barrage, but that was not the balloon’s fault.

If the peak oil balloon really is going up, we should expect to see world leaders, politicians, business chiefs and the mainstream media in general realizing and admitting that something new is happening. Years of dismissing the rising oil price as part of the normal economic cycle should now suddenly give way to an understanding that cheap oil is dead. We should also see business leaders and the UN begin to grapple with the implications of a permanently declining oil supply.

When this happens, it might well be called the tipping point. And like the balloon going up, it really ought to be a trigger too. If we really are at these new points, which surely will be looked back on as extraordinary moments in history, it might be instructive to consider the nature of such changes and look for some of the signs that we are indeed tipping, triggering or ballooning.

A tipping point is the moment when a large change takes place as the result of a seemingly small change. What is often actually happening is that a long period of incremental change has brought us to a threshold, so that one further small change of the same type then suddenly causes a big shift. The metaphor refers to the plank on a fulcrum like a teeter-totter or a see-saw.

Metaphors and analogies can be both useful and misleading, but one thing that we won’t be doing is tipping the see-saw back the other way once we really start going into energy decline. It is quite possible that there will be self-reinforcing mechanisms which will tend to speed the decline up though there will also be tremendous efforts to slow the decline down. There will doubtless be some surprises in both directions and firm predictions will be hard to make with any certainty.

But are we really at the tipping point for peak oil? Well, yes, no and maybe.

It is true that the mainstream media are certainly in a lather about oil prices. On Friday, 6 June 2008, oil ended at $138.54, after leaping nearly $11 in one day, on the back of a $5 hike the previous day. Speculators were blamed by many, but this explanation is rather weak in any longer timeframe since if one buys an oil future then in the end it will be delivered to you unless you sell it to someone else. Ultimately that 'someone else' must be a refinery, since crude oil is virtually useless to anyone else.

The highest jump (0.5%) in U.S. unemployment figures for 22 years to 5.5% (exactly what it was this time four years ago – another U.S. election year1) has also been blamed for the oil leap, though it is a curious driver: higher unemployment should mean that the U.S. economy will weaken so that it will reduce demand which should in turn reduce the price of oil (the U.S consumes just under a quarter of all oil produced); but with the mess that the US economy is in, ironically a weaker economy also pushes the price up. Some mishtake, shurely?

In fact it is all quite logical: higher unemployment constrains the US Federal Reserve from raising interest rates (higher rates equals yet more unemployment), which means that the dollar weakens against the euro (and often against gold), which raises oil prices, since oil is priced is dollars, which are consequently worth less to those living outside the dollar zone, which includes most oil exporters. Two things make matters worse for the dollar: the Europeans are seriously considering raising their interest rates and the market is betting that the Fed won’t raise interest rates before the US presidential election (on November 4th).
One of the things that has greatly excited Americans lately is the glow derived from understanding European culture much better. It is not that there has been a sudden desire to listen to Wagner and Ravel, but rather that the average price of petrol or gasoline has just risen above $4 a gallon for the first time in U.S. history. This is causing Americans to drive less for perhaps the first time ever without there being a direct military trigger.

What concerns fewer North American drivers is the price of diesel. In many parts of America, this is now above $5. We know that Europeans would love to pay such low prices for petrol and diesel, but the two diverse continents do have one thing in common - the price of diesel has shot up much faster than petrol, and since diesel powers so much of the freight network in so many countries, this really should be a cause for anxiety everywhere.

In Europe, it is not just trucks and lorries that use diesel, but many passenger cars too. Currently over half of all new cars are diesel. So diesel hitting $10 a gallon in Europe is starting to cause personal behavior change in motorists in Europe as well as in the United States, where gasoline consumption has actually been falling markedly since late 2007.

Two other major causes of the price leap were literally just words, showing how powerful rhetoric really is – rhetoric being the art of persuasion, in some ways perhaps the most important tool in human life.
On this newly historic June 6th, a well known banking house, Morgan Stanley, opined that oil would hit $150 by July 4th, which few will need reminding is US Independence Day. I suspect that the irony of hitting a new milestone in oil dependence on that day was not lost on the troubled bank. Why should a few words from a bank make any difference? It turns out that several of the larger financial houses have quite a good record in predicting general oil price rises, and it is very likely that the market was responding in part to this forecast.

Finally, perhaps the most powerful overt driver of the historic price leap was generally the least mentioned, namely the potential for an attack on Iran’s nuclear installations by Israel. Media reports varied rather wildly, but there is no doubt that a storm erupted when Israel’s transport minister said in an interview that "If Iran continues its nuclear arms program — we will attack it." The Israeli government backed away from the statement, which was apparently the minister’s personal opinion, but the Israelis did bomb an unfinished Iraqi nuclear reactor in 1981, so such threats are not to be taken lightly. This might be shaking the cage (mainly inside Washington DC) rather than real sabre rattling, but it certainly had a powerful effect.

So all in all, it is evident that oil is getting plenty of attention.
However, with the honourable exception of a good article in Canada’s Macleans magazine, very few of the mainstream media that I looked at had any mention of the geological fundamentals, even some of the most realistic business media, such as the radio programme Marketplace. Once the mainstream media – particularly television news 'shows' – and global leaders talk of peak oil and decline the way they now do about greenhouse gases (such as CO2) causing global warming, then we can be more sure that we are really at the tipping point, and possibly ready for the trigger. When that balloon goes up we must be ready to synchronise an enormous effort to adapt to a world that one day rather soon will be playing musical oil chairs. That musical appears to have begun: the consumption of petroleum has actually been falling in the United States since 2005. But it is not clear that we have reached our 'causal CO2 moment' yet for global petroleum supply.

So this is what I mean by yes, no and maybe: Yes, oil is in the news and people are getting anxious about it, but No, we are not yet at the peak oil tipping point, because the real and 'fundamental' underlying cause of the growing energy crisis is hardly ever mentioned. Maybe however we have entered the peak-oil-tipping-point plateau, from which we shall more easily be able view the peak oil balloon when eventually it does go up good and proper.

1^. The Unemployment Level in May 2008 was 8,487,000 according to the U.S. Department of Labor Bureau of Labor Statistics – see http://postcarbon.org/us-unemployment-level-1998-may2008

As U.S. gasoline prices crest the astronomical price of four dollars a gallon, many Americans are complaining that prices are too high to bear. They might spare a thought for the Scottish who would be grateful to pay $8.30 a gallon, if only they could get it... Full article

‘Fasten your seat belts, it’s going to be a bumpy night’. It looks like
the severe food problems long predicted by some agriculture, climate
and peak analysts are arriving more or less on cue, with tragic
results. Some of the problems are more obviously connected to the
growing energy crisis, some apparently not. But the underlying drivers
of all the problems are energy and population, and that means there is
something the West can do about it, provided we make the right
connexions between our dinner plates, the gas pump and the plight of
the global poor. More

In a startling and some say brilliant dash of technological ingenuity, major airlines are discussing converting aircraft - which they can no longer afford to fly thanks to peak oil and unfair safety checks - into railway trains. Trains, they note after careful analysis, don't have to worry about taking off and landing, and crucially, can have a buffet car in the middle which passengers walk to on their own legs, which results in labour saving efficiency gains, and helps passengers stay fitter by exercising. Richard Branson applauds the move, and has offered to buy and convert some of the planes that failed carriers like Oasis, Aloha, ATA, Skybus, Champion, Southwest, American and Alitalia won't be needing any more.

British train operators plan to run the sleek and fashionable 'airtrains' on fermented apple juice and cow manure, acknowledging that industrial biofuels have been ill conceived and caused untold environmental harm. American companies are considering following the British example but are having trouble finding enough Chinese steel to make new railroads to replace the ones they ripped up after the Second World War in order to save the public the bother of having a choice of transport options.

And now back to Planet Earth. Anyone who has caught more than two minutes of news in the last ten days one might think that it is obvious that airlines are not having a very good time - half a dozen carriers have ceased existence in that time, and more than a thousand planes have been grounded amid safety fears. It is possible that the increasing number of safety scandals are a result of falling staffing levels, as well as desperation to avoid any extra costs - such as maintenance. But astonishingly enough, some Canadian analysts sound as if they are about to embark on a new dot com boom:

"Despite the demise of Oasis Hong Kong Airlines Ltd. this week, the air transportation industry is flying into rosier skies, the Conference Board of Canada states in a report released Thursday".

It gushes on to say

"After several years of strong demand growth, record load factors, and a largely modern fleet of aircraft, it should be boom times for the Canadian airline industry," the report said.

All those who wonder what level of carbon dioxide or what price of oil it will take to shake off the euphoria that grips mainstream thinking will have to go on waiting to find out it would seem. We have had $100 oil and we are told that we already over 30 parts per million past a safe-ish level of carbon dioxide.

We apparently do not respond to these relatively slowly changing factors. We took notice of Hurricanes Katrina and Rita, at least for a while. And they are still are in Louisiana. Will we wait for the next round of Katrinas or is there some other way we can begin systemic change?

In an area of California just north of San Francisco, where Post Carbon Institute is based, some residents rejected a modest proposal in 2006 to build a short railway to divert some of the traffic on Highway 101. The old railroad that used to run up much of the near coast in picturesque Marin, Sonoma and Mendocino counties lies rusting and useless even as the freeway just yards away is immobilised by traffic and fumes.

In every country we need to be deciding to spend our oil and money in ways that will build a society that can run reasonably well without oil, but there are not enough signs that is happening yet. One thing appears increasingly obvious - at least some citizens, some non-governmental groups, some politicians, and some important sectors of the economy will need to work together to begin to achieve systemic change. That's quite hard to imagine at times, but it is easier to imagine than calling for all sectors to collaborate. And at least that offers us the possibility of finding those that do want to begin the process of rethinking, rebuilding and relocalizing the supply chains that bring so much of what we need or at least think we need.

US oil price recently had a close encounter of third kind: the price nearly reached three digits (eg $100) on November 7. This has occasioned a flurry (but not a tsunami) of articles attempting to explain why the price is so 'high'. The neo-conservative Heritage Foundations offers: "Tensions between Turkey and the Kurds of Iraq, production problems in Mexico, activity among Nigerian rebels, Iranian saber rattling, an intemperate outburst from Venezuela’s Hugo Chavez" and we can add refinery problems, storms off Norway, continued unsporting demand growth from China (used to make the stuff we buy), Middle East security issues, speculation, dollar decline (partly fuelled by oil price rise), and falling stocks.

What is almost invariably missing is any reference to peak oil,though falling stocks is most likely a symptom of peak. Indeed, since the evidence mounts that we have already peaked, it may be time to talk about post-peak or oil decline. We now enter the post carbon age, which will last until either the human species is no more or natures sees fit to bestow new oil deposits under the ground.

The lack of mention of peak oil (or any other reference to supply limits) remains a puzzle to many of us. But to put the question another way around: imagine that suddenly everybody is talking about peak oil in a way that they now do (belatedly) about climate change. What difference would that make? Possibly quite a lot: oil peak and more pointedly the decline of oil supply causes one to re-think the entire provisioning system and all its complex supply chains. If one accepts that oil is now in decline it also lends an extraordinary sense of urgency and scope to analysis and action. One no longer thinks woefully of needing say a 60% cut by 2050 (the very aggressive target of the UK), but rather of getting off fossil fuels altogether starting immediately.

This sounds absurd today, but if oil declines from now on at 4% per year, as may be the case (and it may decline even more quickly) that means that global oil supply will be halved by 2025. It is very unlikely to be a smooth decline and there may troughs of supply which look and feel like short-term or even prolonged shortages.

This implies an emergency transition away from oil (and coal and gas may be far more limited than heretofore thought) and towards reduced consumption and local production of necessities, including energy. Part of this transition will mean a kind of 'shock therapy' in which we subsitute fossil mobility for solar mobility and use muscles where we can and where we can't, we substitute electric motors running on renewable energy. Everything becomes geared to our current solar income, hence solar mobility.

Since so many industrialised places have been built for petroleum mobility, the transition away from that will require substitute motors to some considerable extent. Since there has been far too little investment in battery research, that will be a great challenge. Another challenge and grave danger is that a move to electric motors will just increase demand for coal and nuclear fuels. This has an ominous parallel with the way that industrial biofuels have increased the demand for land, destroying millions of acres of tropical rainforest in the process and pitting food against fuel production.

The electrical transition needs to be a solar transition if it is not to fall into similar traps.

If Fatih Birol, Chief Economist of the IEA (International Energy Agency) is dying to get the word out (about you know what) it doesn't really show here:

Statement on the Current Oil Market Situation

The causes behind current high prices are complex. Many are short term, but there are longer term issues as well, including the concentration of demand in the transportation sector, the growing importance of the developing world in oil demand growth - particularly China and India which are the main focus of the World Energy Outlook 2007. Many of these constraints have implications for upstream and downstream development.

Recent data reflect a tightening of oil market fundamentals, in particular the lowering of OECD stock cover. Stocks provide an important cushion between supply and demand - they add supply-side flexibility, reduce volatility and minimize the incentive for speculation. At current prices the market is signaling that stocks need to be higher – something that is in the power of producers to address.
In the longer-term, there is little doubt that both producers and consumers share the responsibility to ensure more investment in supply and greater effort to improve energy efficiency. IEA member countries are committed to improving energy efficiency and to the promotion of alternative energy sources.

Well, that's really going to clarify things for public and policy makers. Thank goodness for the brave analysis of the IEA.

The answer of course is for the major oil producers to turn on the taps:

"At current prices the market is signalling that stocks need
to be higher, something in the power of producers to address,"
IEA Executive Director Nobuo Tanaka.

But is it really in the power of the producers? Apparently only if there is massive investment on their part. For which there is barely any incentive being offered. However there is at least some sense that demand reduction may have some part to play:

"We hope to see [oil prices] coming down. But [they] will not come down
because we hope so," Birol said, adding that producers would need
to pump more oil and consumers curtail demand.

Curtail demand? Odds, balls and barrels, what a thoroughly seditious thought.

In a sensible effort to try to persuade US presidential candidates to turn some attention to energy policy, a group known as SAFE conducted a kind of policy model called 'Oil ShockWave', in which oil has reached $150 a barrel. As relayed by the New York Times, various unpleasant and militaristic policies ensue. One of the rather important things that the high-level policy team fails to come grips with is whether oil has actually peaked and might be in decline, though someone did come dangerously close:

'Much of the discussion echoed the current debate over the run-up in real-world energy prices. “Is this a short-term spike or a long-term economic reality?” Mr. McCurry asked. No one had an answer.'

How about a long term geological reality?

During some Post Carbon discussions with some electric vehicle builders today, we discussed how much easier the (re-)introduction of low energy transport might be if speed limits could be lowered. By low energy transport we mean both muscle and motor-powered vehicles. The following comments from the policy group are revealing:

'Ms. Browner, as the fictional energy secretary, suggested reimposing the national 55-mile-an-hour speed limit. The political advisers rejected that as an “eat your peas” proposal that would not go over well in Congress or with the public.'

Many people remember that a 55mph limit was once the law in America, in response to the 70s oil shocks. Now it would seem that lowering the speed is not option. Yet lowering speed limits and allowing more lightweight, slower speed Neighbourhood Electric Vehicles and spreading what we call SolarCarShare organisations could dramatically reduce petroleum consumption and make smoother the long transition to a world with declining fossil fuels and eventually no fossil fuels.

But how likely is that when people and policy makers believe that energy limits are just a passing fad:

'Surveying the financial markets, which were plunging as oil prices spiked, Mr. Rubin [playing the role of national security adviser] fell back on a favorite phrase as a top Wall Street executive and government official: “Markets go up and markets go down.” '

It's all just cyclic. We'll either find a lot more oil as prices go up or else we'll find some (even better) substitutes. The only catch is that there is no substitute for cheap energy.

Towards the close of ASPO-USA's  rivetting Houston Peak Oil conference, I found myself with the unusual opportunity to ask the Texas legend, T. Boone Pickens, for a few comments on the future oil. Having won his bet that oil would see 80 before he did (he is 79 and oil has already surpassed $90), Pickens thinks that future of petroleum is definitely sloped downwards, yet he is quite sanguine about the future, suggesting that everything will come out alright. See the whole interview here.

This graph of passengers flying shows that though 9/11 slowed things down in America for a while, they soon picked up, despite jet fuel prices ramping skywards.

The other notable parameter is the decline in the number of staff employed. This may in part help explain why air travel has become such an unpleasant affair in the last few years. But not nearly unpleasant enough to dissuade us from doing it evidently!

Two analytical observations leap out: demand to fly is virtually price inelastic - it doesn't seem to be remotely negatively affected by jet fuel cost, in fact it almost appears to be caused by it (which surely is not the case!). Secondly, in order to keep ticket costs down as fuel prices have more than doubled since 2002, staff levels have been cut back to levels last seen in the mid 90s when passenger numbers were about a third less. There is only so much labour that can be cut in a business serving people, so there must come, at some stage, a time when fuel costs really get passed on the consumer. (Ticket price is not shown on this graph - if anyone has these data, please let me know.)

Julian Darley
Post Carbon Institute
2007-06-17

Firefighters are busy Friday morning trying to stop Alberta's biggest forest fire from advancing toward the northern city of Fort McMurray.

The fire has spread over 150 square kilometres, making it the largest one burning in Alberta and the only blaze deemed out of control.

Wind has been blowing the smoke into Fort McMurray for the past 24 hours.

Fire information officer Rob Harris said the smoke hasn't been enough to cause problems, but firefighters are counting on another wind shift to clear the smoke and help them hold the line on the east side of the fire.

"It's going to be a test over the next day because of the winds, but after that it looks like Mother Nature will start working in our favour and start blowing that fire away from town again."