SchNEWS | From Transition Town workshops to the city slickers at the Financial Times (to over-excited pieces in ill-researched journals like SchNEWS), there’s been more and more interest in ‘Peak Oil’. Perhaps it’s got something to do with the price of a barrel reaching $140+ (down to a mere $115ish at the mo), and more noticeably for most, petrol at the pumps is at record highs. Not to mention UK power companies pushing the burden on to punters with up to 35% price increases.

So, is the reality of scarce energy really beginning to hit home? Is the oil now running out?
The basic premise is what’s known as Hubbert’s Peak. Oil, a finite commodity with an ever expanding demand, will reach its halfway point somewhere in the early 2000s (now) and from then on will irreversibly decline. Hubbert developed his theory in the 1950s when he predicted that America’s domestic oil would peak by the mid 70s. In the mid-80s they realised he was right. Since then others have taken his predictions and expanded them to fit the whole globe, where the consensus has been for a peak in the first decade of the 21st century.

Scary stuff, and not just for gas guzzling SUV drivers but for all of us; it’s oil that fuels the equipment that sows and reaps our crops (and makes the pesticides to slowly kill us with blemish-free uniform produce) and oil that fuels the trucks that drive the food to our shops. Add to this plastics, fertilisers, and all the other by products it becomes easy to predict apocalypse if the pumps ever run dry (see SchNEWS 499).

Something like this actually happened not so long ago, back in the ‘90s, in that wacky dictatorship called North Korea. The industrialised and oil dependent nation found itself without petroleum after its sole provider – the Soviet Union – collapsed. The result was that, far from western eyes, over a million people died as the infrastructure collapsed. And, so warns the Peak Oil doomsayers, this could happen on a global scale.


All of this has some anarcho-primitivists jumping with glee at the prospect of the imminent collapse of earth-raping industrial capitalist society. But, before you stock up on tinned goods, shotgun cartridges and bottled water, here’s a few things to consider:

Firstly, there’s no oil shortage. This may come as a bit of a surprise to all those who’ve been watching the prices rise and rise. As the Saudis recently pointed out to outgoing President Bush – pumping more oil won’t lower the price. Actually, there’s a glut of oil in the supply markets. The Iranians (one of the oil nations pumping under their maximum capacity) have tankers full of the stuff that they just can’t shift because no one wants it. What’s lacking is refining capacity.

While oil use in the US has increased 35% in the last 30 years, no new refineries have been built to keep up with demand. The ability to turn oil into petrol, diesel, aviation fuel etc is massively underdeveloped by the oil corporations, who generally like to keep refining to ‘safe’ (i.e. Western and friendly) countries. By artificially creating a bottleneck in the amount of usable oil, the price just goes up and up, leading to massive profits for the oil business as this nice little scam can keep functioning. Exxon Mobil made profits of $11.8 bn in the last quarter alone, and the other big five oil companies are making similarly obscene dosh. The scam has worked pretty well so far.

The predictions of world oil reserves are based on proven, reachable oil. This is a tricky concept because, as it turns out, there’s a whole lot of ‘unproven’ marginal oil that’s already making its way on to world markets. The most known about of these are the tar sands of Alberta, Canada. Until very recently (when the technology became economical on a large scale) these were considered ‘unproven,’ yet a lot of these are now making their way to the US (and world) oil markets.

The tars sands, also known as bitumen, are a very dirty form of oil, one that’s very expensive, polluting and energy hungry to exploit and process. It takes the equivalent of one barrel of oil to extract six barrels of oil from the tar sands. They also happen to be located in an area of unspoilt natural wilderness, but hey, what profitable minerals aren’t these days? Canada’s tar sands contain an amount of oil in excess of that under Saudi Arabia’s sands. And exploiting them is fast becoming its most profitable activity.

Venezuela has similar deposits of bitumen in Orinoco, and significantly larger than Canada’s. They’re estimated at around 260 million barrels (i.e. another Saudi Arabia) on top of the 80 million or so of ordinary oil. They’re easier to exploit than Canada’s and are barely touched. It’s no wonder that the US has got such a keen interest in the actions of Venezuelan President, Hugo the Chavmeister. Industry experts had been saying that these areas will become among the world’s future energy heartlands, but that until oil was worth over $40 per barrel it was too expensive to develop. Oil’s now worth over $100 and will be so for some time to come, so go figure.


A real danger of Peak Oil, or rather, the fear of peak oil, is that it risks handing states and corporations even more planet-wrecking power. If people believe the oil is running out, then pressure from consumers and businesses alike is to find more at any cost. This is already being written into the US election strategy of the republicans, where John McCain is promoting drilling in the Arctic Circle as a way out of the energy ‘crisis’.

This could lead to a seriously deadly irony: The warnings of Peak Oil by environmentalists could lead to the erosion of the public’s psychological barriers protecting the few remaining areas of wilderness left. There’s oil in unknown (but quite possibly huge) quantities in Greenland, as well as plenty in Alaska, where the Bush junta has already green-lighted the destructive process of exploring and exploiting. The Russians have laid their claim to their chunk of the Arctic Circle too, with an eye to expansion for more oil.

And, in a genuinely insane piece of economic logic, as global warming melts the Arctic’s frozen seas, the previously unreachable oil reserves that lay under the ice become more exploitable, and, as they are burned, yet more undersea oil becomes available. Or if that runs out there’s always the Antarctic…

And if these reserves still don’t prove to be quite enough to satisfy demand, there’s always ole king coal. China, main producers of the world’s plastic consumer tat, is rich in coal but virtually empty of large oil deposits.

To keep their economy expanding at its current pace they are building two coal fired power stations a week. However, they need oil as well for their cars and trucks (and tanks). As oil’s expensive and foreign suppliers can be notoriously unreliable (they haven’t as yet turned to Amercian-style invasion of oil producers) what they really crave is a domestic source of oil, which they don’t have.

Or at least didn’t, until they turned to the combined wisdom of the Nazis and the apartheid-era South Africans. Both the Nazis during the war and the South Africans during sanctions found it hard to import oil. Luckily for them a German scientist found a way to turn coal into synthetic oil, known as the Fischer-Tropsch Synthesis. It’s a very energy hungry process (of course) and needless to say massively polluting (obviously) but it does mean that, even if oil is tricky to get hold of, you can just magic some out of coal – kind of like a very dirty alchemy that’s bad for the planet.

China has already constructed its first huge synthetic oil refinery in Chinese Mongolia.


The current cost of oil, often mistaken as a indicator of its scarcity, is actually driven by far more complex forces.

As a commodity like any other, it’s traded on the international markets via brokers. In recent years the power of the cartel that set the price of oil, OPEC, has been significantly reduced, and now it’s the speculators that call the shots on its price (more or less – OPEC still caries a lot of weight, but it’s a player now rather than the whole game). That means that, as long as the price of oil is rising, speculators will push the price even higher.

It’s estimated that as much as 60% of the price of today’s oil is pure speculation. To give an example of the logic of nonsense capitalism: Today oil is worth, say $125 a barrel. As the price is going up, you, a speculator, figure that if you buy some at that price today, you can sell it in a week or two for $135. Because you’re buying oil, other speculators have more confidence the price will continue upwards, so they’re happy to pay $130 after you.

This continues until no one who actually needs to use oil for their cars, homes or businesses etc. can even afford to refill their zippo lighters, at which point the entire economy crashes, taking the price of oil with it.

In fact, herein lies one of the central flaws in the theory of peak oil – supply and demand: that fundamental essential of capitalism. If the price of oil goes up as its demand goes up (and its availability goes down) then at some point it will be too expensive for oil based industrial capitalism to afford. At that point we enter a new depression/recession. Businesses collapse, people can’t afford to run their cars, factories grind to a halt and so on. The effect of a depression means that, with the entire economy in free fall, the demand for oil drops. As the demand drops so does its price, until at some point people can afford to buy it again, and, hurrah, capitalism reasserts itself (albeit in a leaner, less carbon-heavy form).


The truth is that the oil has already peaked for Western multinationals. In the 70s, major Western oil giants controlled over half the world’s oil, they now only own 13%. As Arjun Murti, an energy analyst at Goldman Sachs puts it: “What we have now is geopolitical peak oil.

There’s plenty of oil left, but it’s all in either politically unstable / US-unfriendly states (Iraq, Iran, Russia) or difficult and expensive to get at (the Arctic, Canadian tar sands). These alternative sources of fossil fuels could keep us going well into the future, past our lifetimes and maybe even that of our grandchildren. The problem is: exactly that. The effect of burning a trillion tons of coal and perhaps a trillion barrels of oil is that the planet will burn up faster than a petrol-soaked moth near a candle. The Intergovernmental Panel on Climate Change (the world’s leading authority) predict a global temperature rise of at least 3°C by 2050, with further predictions that CO² and climate temperatures will rise and rise.

Mother nature has been steadily locking away excess carbon under the ground for the last three billion years in order to maintain a steady, liveable temperature for all of us life-forms. Suddenly, us wayward children have begun reversing the process, sticking it back in the air. In the process we’re experimenting with the atmosphere on an unprecedented scale, causing massive changes to the climate and biosphere, driving many species to extinction on a par with the extinction of the dinosaurs.

The real problem isn’t that we’re going to run out of fossil fuels. The problem is what happens when we don’t…