Discussions on Peak Oil (yes, I had a look at Matt Mushalik's critique) usually fail to mention the microeconomics of energy. The fact is that there is a supply curve and there is a demand curve. On the supply side, there are many alternative sources of hydrocarbons capable of supplying oil for many decades yet - if the price is right.

References to Peak Oil generally only consider the sweet easily won crudes that have formed the bulk of supply. These crudes might represent only 30% of the oil contained in a reservoir. Some of the balance can be recovered using more expensive secondary and tertiary recovery techniques.

There are ample hydrocarbon resources available as tar sands, oil shales, shale gas, and coal, all of which can be converted to petroleum. In each case the technology is complex, and the plants are capital intensive. Given too that there are often environmental concerns, the real issue becomes financing.

These projects generally require access to debt. However, to access debt, the projects need to demonstrate the capacity to service debt. The big problem has been the volatility of the oil price. For example, in the late 90s, when projects such as these were developed, the oil price dropped to as low as US$10 per bbl which decimated the financials.

These projects need a contracted price of, say, US$100 per bbl for, say, a 20 year financing life. If such contracts were available for suitably credentially projects, I am sure that you would be amazed at the supply that would emerge. In fact, one outcome would be oversupply, which would push oil prices down.

The other aspect seldom discussed is the demand curve. Any traveller to Europe knows that the response there to high petrol prices has been to develop cars (and lorries) that are far more fuel efficient than the cars used, for example, in the US.

I think you can relax about Peak Oil. If current prices can be locked in to financing contracts for new projects for 20 years, I think that you will find ample supply emerging.

Cameron a very thoughtful article.

I completed a Permaculture Design Course in 2008, a wonderful and enlightening process.

My current 13 acres of old farm land is being transformed into a food forest and those surrounding me are all working toward similar ends.

'They' will continue to 'Business as Usual' mantra until the end, working to be the last man (or in this case government/nation) standing, but for what benefit or gain, a very sad saga to watch unfold.

Permaculture is a different way at looking at life, the environment and those (including plants and animals) that we share it with on a finite planet coughing through the early stages of industrial collapse.

Permaculture in terms of it being a way to produce food, is indeed
a great system. I think it should be promoted in the third world.

However its highly labour intensive and so its not going to produce
food to feed the masses which live in the cities, in the first world.
They want their food cheap.

Given that around the world, the masses are still flocking to the
cities and that we're increasing population by a quarter of a million
a day, eventually its highly likely that the wheels will for
off the cart, but so be it. People need pain to learn.

The notion that humankind is moving down an ever-better road has once again been overthrown in the 21st century. No honest person could look around at the current chaos and corruption on Earth and still argue that humanity continues to travel down the road of perpetual improvement. The tradition I am talking about began in the 19th and early 20th centuries, and has its roots in the Enlightenment. Whether they know it or not, nearly everybody excluding some "reactionary" elements of our society, is firmly ensconced within the Progress myth. It's just like the air you breathe.

People today believe in the magical ability of free markets, democratic governments and technology to make our lives better, to achieve the greatest prosperity and comfort for the greatest number.

Except for a few atavistic throwbacks and Luddites, everybody is a Keynesian now. Or an Austrian, or a Libertarian, or whatever. These distinctions make little difference. All these people are "liberals" in the grandest, philosophical sense of this hallowed tradition. Without exception, these groups believe in continual "improvement" of the human condition, whether they emphasise markets over government or vice versa. Again, such distinctions make little difference, for everybody is swimming in the same water. Technology is universally hailed as humankind's continuing and ultimate saviour. Gross Domestic Product is a precise measurement of our progress. If GDP goes up, everyone rejoices. If it goes down, we vow to try harder. No one questions these assumptions, despite ultimately trivial political differences about how to grow GDP.

Progress is illusory, and all we've achieved could be lost in a heartbeat if things go badly in the future, which they almost certainly will.

The author has at least one thing right. Cultures do have dominant narratives - understandings of how things are and how they should be, that strongly influence behaviour and belief for good or ill.

For a dominant narrative to survive, it has to work. That means it has to fit the evidence and experience of its culture. And the dominant narrative this article tries to attack, does work. The evidence that economic growth can be sustained is there in the experience of industrialised countries in the past 200-300 years and our everyday observation. So is the evidence that markets adjust to scarcity and price signals (how many of us nowadays light our homes with whale oil?).

For every dominant narrative, there are 1,001 contrarian narratives that proclaim prophetic insights that the deluded and self-interested dominant narrative lacks. These share common patterns - self-importance, exceptionalism (only a selective group appreciates the truth), selective evidence making, and fanaticism. Fascism, maxism, and the more extreme versions of environmentalism share these characteristics. Almost all of these turn out to be wrong, and my guess is the narrative that peak oil spells the end of growth and prosperity is wrong too.

A very worthwhile, interesting and valuable article - well done.

My principal concern is lest the environment be destroyed beyond repair or recovery if the dominant narrative does not soon recognise the reality of the inevitable downward spiral of unbridled consumerism, so that, in grasping for the last figments of a failing system, the human mass falls upon the few remaining wild resources for one last fix before having to embrace sustainable change. How will people really feel and react to the visage of the Canadian tar sands exploitation becoming the universal spectre? Heaven (or sanity) forbid, for, in such a scenario, what would indeed be the purpose of living? For, God would then be dead (or at least extremely depressed), and Man's folly complete.

Herbert Stencil,

There may well be exploitable alternatives to fore-stay peak oil, but is a return to sustainability, to a semblance of the Garden of Eden, such an horrendous prospect as to warrant the risks and inevitable degradation involved in pursuit of those alternatives? Is the current Western way of life so entrancing and so rewarding (for the masses) as to warrant such a pursuit at all costs? It would appear that Man's unbridled ego is the key motivator for such reckless endeavours, and it is this which ultimately threatens to bring humankind to its knees. Shall the meek eventually inherit the Earth? And, shall it then be worth inheriting?

It is surely time the West looked beyond the square and had due regard for the welfare and interests of all the inhabitants of this blue globe, human and non-human alike - for all that makes life worth living is now in the balance.

Saltpetre

“Eden” as a myth is a powerful story of human nature, but as an ideal or story of origins it is one of the most dangerous of the contrarian narratives. It imagines a world of simple natural harmony that biology, palaeontology, geology, archaeology and history tell us never existed.

Our current Western way of life is indeed “entrancing” and “rewarding” compared to other models, past and present – especially for "the masses". This not merely a narrow consumerism which values our quality of life by the quantity of our possessions. Our life expectancy, infant mortality, literacy and education, leisure time and opportunities, personal security, and freedom from hunger, disease, violence, enslavement and unconstrained tyranny make us the most fortunate culture and generation that ever existed, in my opinion.

I agree we should look to the welfare and interests of all the inhabitants of the world. We won’t do that by returning to the stone age.

Rhian,

Your point about our exalted state of being as "....the most fortunate culture and generation that ever existed..." is fine as far as a myopic view is concerned. The fact that our mode of living is unsustainable and that it would take many more earths to accommodate the whole of mankind in our manner doesn't seem to figure in your celebration.

One might have thought that our "development" may have been more than technological in that our advancement might have been ethical as well.

No such luck - we celebrate our good fortune and ease, yet fail to acknowledge our obligation to future generations not to despoil their heritage.

Saltpetre. You might have noticed that I had no comment about the moral and ethical issues you raise. I was just challenging the assumptions about Peak Oil, which I suggest is not the problem that it is painted as - there are solutions to that issue.

The author refers to what he sees as three major problems affecting mankind - "peak oil, climate change or the dysfunctional state of our economic system". I mounted an argument that his assumptions about Peak Oil may not be valid.

I could also have argued that his concerns about climate change, or at least that part of climate change that is "caused" by anthropogenic CO2 emissions (which I would guess is his concern), can also be challenged by examination of the real data. Actually, man IS having major impacts, but primarily (as Dr Roger Pielke Sr argues) by land-use factors (deforestation, industrial agriculture, urbanisation etc) which affect local and regional climate. But few of those concerned seem interested in addressing these issues.

I will leave the "dysfunctional state of the economic system" for another time.

Can I point out though that when your whole thesis is based on three major concerns, two of which can be demonstrated not to be concerns, the logical basis of your argument sort of falls in a heap?

Having said all that, I am a strong supporter of Permaculture and other alternative approaches to agriculture (Pat Coleby, Biodynamics, Charles Waters, Peter Andrews and others).

But Poirot, our development IS ethical. Far fewer people die from violence in the developed West than in underdeveloped nations: there is far more freedom, far more democracy and a much more open and publicly-monitored system of law. All the indicators show that financial growth facilitates the growth of better, more sensible, more humane ways of governing and relating to each other. In terms of producing rational, civilised, kindly human beings, wealth and education beat the pants off cultural indoctrination every time.

If you really think a major economic crash is coming -- and there seems to be no reason to think so -- then that will be a disaster for ethics as well as general well-being, and you should regard it with horror and dread as an apocalypse, not an apotheosis.

Poirot

I don’t deny that we have environmental problems, I just think that we can work through them without a return to the dark ages. I also accept that we can’t sustain western lifestyles for all the earth’s population at current consumption patterns, but there’s no reason to believe that current consumption patterns are the only options we will have. The history of economic growth since the industrial revolution is not of doing more of the same, but of economic change through innovation, productivity improvements, capital deepening and substitution of expensive scarce resources with cheaper and more abundant ones. If we continue on this path then everyone’s living standards can be raised sustainably.

I agree there is more to development than economics. Do you not think that western culture’s achievements in the past few centuries represent improvement? Democracy, universal suffrage, abolition of slavery, gender equality, abolition of capital and corporal punishment, free education, welfare for the vulnerable, rule of law …

Jon J is right. Which other contemporary or past culture achieved better outcomes?

Rhian,

All the things you mentioned are a boon for the fortunate West. the flip side, however, is a little more challenging. What happens when trawlers choof consistently along the coast of a third world country and depletes its fish stocks? What of illegal logging and the difficulties of overriding WTO obligations and rules to address it? (see Julie Bishop's article today)

I see what you are saying, and it's all very nice for us to have developed this model for living - but it's often at the expense of people in other situations. Unsustainability is not a negotiable mode of operation. It's a state that eventually leads to the breakdown of systems. All "unchecked" progress leads eventually to this point.

The question for modern industrial man is whether he is capable of tempering his intelligence with wisdom.

Poirot

I support measures to protect fish stocks and prevent illegal logging.

I don’t accept that the prosperity of the West is bought at the price of poverty for the rest.

Again, the evidence shows that living standards in developing countries are improving – life expectancy and infant mortality are falling, absolute poverty rates are decreasing; literacy, access to clean drinking water, calorie consumption, agricultural productivity, and a host of other indicators of human welfare and productivity are getting better.

Things are a long way from where I’d like them to be, and we certainly could do more to support development. But the fact is, our current economic model is the only proven way for poor countries to escape poverty. Until we’re in a position to offer an alternative that actually works better, we have no moral grounds to tell poor countries to stop following our example.

Rhian you state "The history of economic growth since the industrial revolution is not of doing more of the same, but of economic change through innovation, productivity improvements, capital deepening and substitution of expensive scarce resources with cheaper and more abundant ones. If we continue on this path then everyone’s living standards can be raised sustainably."

Economists are merely generalising from their experience: they can point to decades of steady growth in the recent past, and they simply project that experience into the future. Moreover, they have ways to explain why modern market economies are immune to the kinds of limits that constrain natural systems: the two main ones have to do with substitution and efficiency.

Finding substitutes for depleting resources and increasing efficiency are undeniably effective adaptive strategies of market economies. Nevertheless, the question remains as to how long these strategies can continue to work in the real world, which is governed less by economic theories than by the laws of physics. In the real world, some things don’t have substitutes, or the substitutes are too expensive, or don’t work as well, or can’t be produced fast enough. Efficiency follows a law of diminishing returns: the first gains in efficiency are usually cheap, but every further incremental gain tends to cost more, until further gains become prohibitively expensive.

In the end, we can’t outsource more than 100 percent of manufacturing, we can’t transport goods with zero energy, and we can’t enlist the efforts of workers and count on their buying our products while paying them nothing.

Unlike most economists, most physical scientists recognise that growth within any functioning, bounded system has to stop sometime.

Geoff

Economists don’t just assume growth will continue because it happened in the past. There are reasons to expect continued growth. Market forces drive producers to seek cheaper and more effective ways of meeting consumers’ wishes; increasing returns from growth in knowledge (especially as communication technology allows ideas to be exchanged more easily); capital deepening through accumulated infrastructure education, specialisation encouraged by trade; and many other factors. To repeat, growth is not about using more and more of the same stuff in the same way.

New Growth theorist Paul Romer expresses this very well:

“Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. History teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material. Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. Possibilities do not add up. They multiply.”

http://www.econlib.org/library/Enc/EconomicGrowth.html

It may be for a single process or product that efficiency follows a path of diminishing returns. But taking into account new ideas and knowledge, Romer is right – possibilities multiply.

And even you are right, and growth has to stop eventually, there is no reason to think we are at that point now - much less that we should try to make growth stop.

http://www.smh.com.au/environment/conservation/indonesian-court-backs-palm-oil-company-over-orangutans-and-carbon-storage-20120403-1wau2.html

Well this picture kind of says it all and is what kind of disgusts
me about our species. We are going to plunder the last of those
forests in the name of the ever growing human population, no matter
what. Never mind that last few thousand Orangutans, they will just
have to become extinct. All terribly sad really. If our species
eventually destroys itself, I guess we will kind of deserve it.

*The question for modern industrial man is whether he is capable of tempering his intelligence with wisdom.*

Congratulations Poirot, you are a wonderful wordsmith! I've copied
that to my "Quotable Quotes".