Oil's imminent decline will impact us all

By Ron Forthofer
June 4, 2005

What if the price of a gallon of gas goes to $5 within a few years? What impact would it have on your life? Would you still take vacations by car? Would you be able to afford your commute to work? What would the cost increase in heating and cooling your home do to your budget?

A large jump in the price of oil would also translate into price increases for diverse products such as computers, -iPods, tires, deodorant, eyeglasses and heart valves.

So you think you might be able to afford an increase to $5 without too much suffering. OK, what if the price went to $10 a gallon in a few years? Or, say, in addition to a large price increase, the U.S. instituted a rationing program similar to what we used during World War II. Would you still be able to commute to a job 40 miles from your home? Or, more importantly, would you still have a job given the impact of these price increases on the economy?

Peak oil: These questions may seem strange, but experts are predicting that peak oil - the point when conventional oil extraction from the earth reaches its peak - will occur very soon. Many in the know are claiming that peak oil will occur between 2005 and 2010.

Peak oil does not mean that we have run out of oil but, in the face of rising demand and a shrinking supply, it means that we will be paying much more for oil-based products including gasoline. When demand exceeds supply by even a small amount, say 5 percent, prices skyrocket. And with each additional year, the demand will exceed the supply by even greater amounts, putting more pressure on prices.

The perfect storm: Complicating the situation is the decline in the value of the dollar. If the nations with the largest oil reserves decide to switch to the euro, the dollar will lose even more of its value. Adding more risk is the looming shortfall in worldwide grain production and the loss of topsoil. We also have problems created by global warming and water scarcity hitting at about the same time. All of these conditions add up to create the perfect economic storm that could destroy our lifestyle.

The threat of disaster for modern civilization is real, unlike the fictional threat from Iraqi weapons of mass destruction or the super-hyped threat from a possible small shortfall in Social Security funds in 35 years or so. Yet our political leaders and their economic advisers have failed to act responsibly to prepare our economy for the coming of peak oil and its aftermath, including the strong possibility of wars over resources. The peak oil aftermath, even without the wars, could make the Great Depression look like the good old days.

Denial ain't just a river in Egypt: Some politicians claim that we still have lots of time because oil shale or oil sands will save us. They fail to realize that extracting oil from shale takes more energy to extract the oil than is produced. The return on oil sands is a little better, but neither offers a realistic solution. Others, including the Bush administration, talk about the hydrogen economy, but this is a pipe dream that is decades away from realization.

Immediate steps: As a result of the irresponsibility of our political leaders, we are facing a highly probable catastrophe without a lifeline. We can try to reduce or delay the effect by saving as much oil as possible. One step in this effort is to make our families and communities more self-sufficient by developing and supporting local industries and co-ops. We need to work with city and county authorities to save local farms and to encourage more small organic farms. We must also live more simply and more cooperatively.

We must also pressure Congress to immediately:

• Increase fuel efficiency standards for autos, including SUVs.

• Increase funds for mass transit.

• Continue tax incentives for the purchase of hybrid autos.

• Provide tax rebates to people who purchase solar cells and get off the electric grid.

• Provide tax breaks for renewable energy, energy efficiency and energy conservation.

• Withdraw from the World Trade Organization. Everyone around the world must be able to meet their needs locally as soon as possible because global trade is likely to decrease dramatically.

The above steps won't prevent a catastrophe, but they can somewhat lessen its impact if we act now.