Peak Everything (2 page)

The name of the game is Managing Contraction. That's what we're in for, and we'd better play it with as much intelligence and compassion as we can summon up. This is one of the reasons I turned to fiction after publishing
The Long Emergency,
with the novel
World Made By Hand
and, in the fall of 2010, its sequel, The
Witch of Hebron
. I wanted to portray vividly a future America which was very different from the place we know, a society that had already gone through a compressive contraction and come out the other side with a heart and a brain.

Richard Heinberg has remained in the trenches of current events, reporting wisely on the greatest story of our time in a series of powerful books, never losing sight of his aspiration to help his fellow citizens navigate through this most perilous historic passage. I'm grateful to be his colleague.

 

— James Howard Kunstler is the author of
The Long Emergency
and
The Geography of Nowhere
, as well as novels
World Made by Hand
and
The Witch of Hebron
(fall 2010). He lives in Saratoga Springs, NY.

In titling this book
Peak Everything
, I was suggesting that humanity has achieved an unsustainable pinnacle of population size and consumption rates, and that the road ahead will be mostly downhill — at least for the next few decades, until humanity has learned to live within Earth's resource limits. I argued that the industrial expansion of the past century or two was mainly due to our rapidly accelerating use of the concentrated energies of cheap fossil fuels; and that as oil, coal and natural gas cease to be cheap and abundant, economic growth will phase into contraction. I further pointed out that world oil production was at, or very nearly at, its peak, and that the imminent decline in extraction rates will be decisive, because global transport is nearly all oil dependent. Finally, I noted that the shift from growth to contraction will impact every aspect of human existence — financial systems, food systems, global trade — at both the macro and micro levels, threatening even our personal psychological coping mechanisms.

Nothing has happened in the past three years to change that outlook — but much has transpired to confirm it.

A good case can now be made that the year 2007, when this book originally appeared, was indeed the year, if not of “peak everything,” then at least of “peak many things.” Since then we have begun a scary descent from the giddy heights of consumption achieved in the early years of this century.

Of course it is simplistic to argue that
everything
has peaked (though
Peak Everything
makes for a better book title than
Some Things Peaking Now, Most Others Soon
). Perhaps the most glaring exception is human population, which continues to grow and is virtually certain to pass the seven billion mark within the next couple of years.

Here's another non-peak: China's economy is still growing rapidly, at the astonishing rate of 8 to 10 percent per year. That means it is more than doubling in size every ten years. Indeed, China consumes more than twice as much coal as it did a decade ago — the same with iron ore and oil. That nation now has four times as many highways as it did, and almost five times as many cars. How long this can go on is anyone's guess. But surely not many more doublings in consumption rates can occur before China has used up its key resources.

For what it's worth, my forecast is for China's continuing boom to be very short-lived. As I argued in my recent book,
Blackout
, there are hard limits to China's coal supplies (the world as a whole will experience peak coal consumption within the next two decades, but China will get there sooner than most other countries because of its extraordinary consumption rate — currently three times that of the US). Since China has no viable short-term alternatives to coal to fuel its industrial machine, by 2020 or so (and possibly much sooner), that country will have joined the rest of the world in a process of economic contraction that will continue until levels of consumption can be maintained by renewable resources harvested at sustainable rates.

World population growth may likewise continue for a shorter period than is commonly believed, if global food production and economic activity peak soon in response to declining energy availability.

In short, the world has changed in a fundamental way in the past three years, and the reverberations will continue for decades to come. Indeed, we have just seen the beginning of an overwhelming transformation of life as we've known it.

Let's look at a few specific factors driving this transformation, starting with limits to world supplies of petroleum.

It is still unclear whether world oil extraction rates have reached their absolute maximum level. As of this writing, the record year for world crude oil production was 2005, and the record month was July 2008. The 2005 to 2008 leveling off of extraction rates occurred in the context of steadily rising oil prices; indeed, in July 2008 oil prices spiked 50 percent higher than the previous inflation-adjusted record, set in the 1970s. As a result of that price spike, the global airline industry went into a tailspin, and the auto industry has been on life support ever since.

The only serious argument that world oil production
could theoretically
continue to grow for more than a very few years is put forward by parties who explain away the evidence of declining discoveries, depleting oilfields and stagnating total production by claiming that it is
demand
for oil that has peaked, not supply — a distinction that hinges on the fact that oil prices these days are so high as to discourage demand. But since high prices for a commodity are usually a sign of scarcity, the “peak demand” argument really amounts to a distinction without a difference.

The oil situation is dire enough that one might assume it would be dominating headlines daily. Yet, in fact, it garners little attention. That's because the world's ongoing and worsening oil crisis has been obscured by a more dramatic and obvious financial catastrophe. As we all know only too well, Wall Street banks — which had spent the past couple of decades giddily building a quadrillion-dollar house of cards — went into a free-fall swoon in the latter half of 2008 (right after the oil price spike), only to be temporarily rescued with trillions of dollars of government bailouts and guarantees. It was a spine-tingling show — and would have amounted to months of fine entertainment had it not been for the fact that millions of jobs, thousands of small businesses and the economies of several sovereign nations also came tumbling down, and there just weren't enough trillions available to rescue all of them (it obviously pays to be “too big to fail” and to have friends in high places).

The financial aspects of the crisis were so Byzantine, and the cast of players so opulently and impudently villainous, that it was easy to forget the simple truism that all money is, in the end, merely a claim
on resources, energy and labor. A financial system built on staggering amounts of debt and the anticipation of both unending economic growth and absurdly high returns on investments can only work if labor is always getting cheaper and supplies of energy and resources are always growing — and even then, occasional hiccups are to be expected.

But that set of conditions is
so
last century.

While the oil price run-up was hardly the sole cause of the ongoing world economic crisis, it has effectively imposed a limit to any possibility of “recovery:” as soon as economic activity advances, oil prices will again spike, causing yet another financial crunch.

Thus Peak Oil likely represents the first of the limits to growth that will turn a century of economic expansion into decades of contraction. But more constraints are lining up in the wings, ready to make their entrance.

In the original edition of this book, increasing scarcity of non-energy minerals was barely mentioned. In the three years since, the subject has received increasing attention from researchers and journalists. One report, “Increasing Global Nonrenewable Natural Resource Scarcity,” by Chris Clugston (a former corporate executive) deserves a couple of quotes here. Clugston analyzed 57 non-renewable natural resources (NNRs) in terms of production levels and price. He begins his report by pointing out:

So far, so good. But that's changing.

Clugston's conclusion: “We are not about to ‘run out' of any NNR; we are about to run ‘critically short' of many.”

The same message appeared in a prominent article in
New Scientist
magazine on May 23, 2007, “Earth's Natural Wealth: An Audit.” Here's a useful tidbit from that article:

The specifics with regard to supplies of a host of non-renewable resources can be examined easily with a few mouse clicks using the US Minerals Databrowser (
mazamascience.com/Minerals/USGS/
), which features data from the US geological survey.

When presented with evidence of depleting stores of fossil fuels and minerals, some still object: new technology will enable us to continue
increasing the amount of energy available to us. And if we have enough energy, we can solve our other supply problems — we can desalinate ocean water, grow crops in multi-storey greenhouses and breed limitless supplies of fish in captivity. We can capture mineral resources from very low-grade ores. We can mine gold and uranium from ocean water. We can harvest minerals on other planets and ferry them back to Earth. With enough energy, anything is possible!

As an example of what can be done with technology, just consider what has happened in the natural gas industry in the past couple of years: horizontal drilling and “fracking” (fracturing dense gas-bearing rocks with chemicals) have expanded US gas reserves and production rates, at a time when energy pessimists had been forecasting a supply collapse. This “unconventional” gas is more than making up for declines in conventional natural gas.

In fact, the natural gas situation offers an instructive example of what depletion looks like. Depletion of oil, gas, coal and other nonrenewable resources is often wrongly portrayed as “running out,” as though it indicated the complete exhaustion of the substance. What we are really talking about are the inevitable consequences of the tendency of resource extractors to take the low-hanging fruit first, and to leave difficult, expensive, low-quality and environmentally ruinous resources to be extracted later. Unconventional gas is more expensive to produce than conventional gas, and extracting it has worse environmental impacts (due to the need to inject a toxic brew of chemicals underground to break up the rock). The result: “fracking” technology may have enabled the industry to gain access to new sources of gas, but natural gas prices will have to rise significantly to make the business of producing this new gas profitable over the long run — and no one knows how long that “long run” is likely to be, given the rapid depletion rates of most unconventional gas wells.

Geologists and others who routinely deal with mineral ores and fossil fuels commonly speak of a “resource pyramid:” the capstone represents the easily and cheaply extracted portion of the resource; the next layer is the portion of the resource base that can be extracted with more difficulty and expense, and with worse environmental
impacts; while the remaining bulk of the pyramid represents resources unlikely to be extracted under any realistic pricing scenario. The optimist may assume that the entire pyramid will eventually be usable, but this is simply not realistic. We have built a society on the basis of
cheap
energy and materials. At some point, as we move down the layers of the resource pyramid, rising commodity prices and increasing environmental cleanup costs (think Deepwater Horizon) will undercut both demand for resources and economic activity in general. As that happens, we see not just higher prices, but more volatile prices.