The world economy today is hooked on fossil fuels: oil, gas and coal.

Capitalism and the modern world have been built on the cheap and plentiful energy provided by fossils fuels. But what will happen when this finite resource runs out? Bill Hopwood looks at this crucial question.

Peak Oil

This dependency cannot last. All these fuels were formed millions of year ago and once used up cannot be replaced.

This reliance on fossil fuels has largely developed in the last 200 years. Before then most energy was renewable – animal and human muscle, wood, some wind and water power. The harnessing of new sources of energy, especially coal, about 250 years ago was crucial to the industrial revolution and all that followed. Oil became a major fuel about 100 years ago and with it came the explosion in global transport – automobiles, trucks, steam ships and airplanes. In the last 50 years, natural gas has been added to the fossil fuels, mainly replacing coal and its products in heating, electricity generation and industry.

Of course, most of the energy that humans depend on still comes from the sun, to keep the planet and us warm, to power plant growth for food, fibres, wood and other uses. However, the sun’s direct energy is free and therefore does not enter the market place. Fossil fuels account for nearly all (85%) of tradable energy. Of this, coal accounts for 25%, natural gas for 20% and oil for 40%. Oil also provides the energy for 90% of all transport. The remaining energy is from nuclear, 7%, hydro, 7%, and other renewables, 1%.

But not only is the world dependent on these limited fuels, it depends on these sources being cheap. Until the recent price rises, gasoline in the USA was cheaper than bottled water.

In most of the advanced capitalist world we eat oil. Food could be produced with virtually no energy input other than that of free sunlight. However, food production in much of the world is so dependent on massive inputs of fossil fuels that many foods take more energy to produce than is contained in them. Irrigation, fertilisers, pesticides, mechanised ploughing and harvesting of crops, all rely on cheap energy. Then the food is processed and transported, often over thousands of miles.

The same dependency on cheap energy is revealed when transport, housing or manufacturing are considered. The modern global economy is totally dependent on cheap transport, and shipping raw materials and manufactured goods across the planet requires energy. The life of people in most of Europe and North America is based on long journeys from home, to work, to shop, and for leisure – all based on cheap energy. The dramatic growth of the use of plastics in all walks of life depends on cheap fossil fuels both as the raw material and to transport them around the world.

Oil supply limits

As fossil fuels are finite, at some stage they will run out and the present energy uses and patterns will inevitably end. In reality, the world will not use the last lump of coal, the last drop of oil or the last puff of natural gas. Long before the end of fossil fuels is reached they will become so difficult to extract that they will be too expensive to use and will take more energy to extract than they release. Realistically, the issue is not when will the world run out of fossil fuels, but when will the plentiful and cheap energy end and what will be the impact?

There is growing concern and debate around what is called ‘peak oil’. This is the point at which the production of oil reaches the maximum, whether in a single field, a country or globally. After the peak, which usually occurs when about half of the available oil has been extracted, there is a longish tail, often lasting decades, of declining production (see figure 1). Also there is a trend for there to be a delay of several decades from the peak of discovery to the peak of extraction due to the time it takes to establish and build up extraction.

Globally, it is believed that the world is close to the peak for oil. Discoveries of new oil fields have been in decline for 40 years and, as most of the world has been explored, it is unlikely that any new super-large fields will be found. In general, the biggest fields are the easiest to find so new finds are more likely to be smaller. The world is now using four times more oil than new sources are being found. There are conflicting views but the general consensus is that the peak for conventional oil is likely in the next decade.

The supply of oil can be extended for a decade or so from the peak based on present production, new extraction techniques, using more-difficult-to-reach sources (such as from the Arctic and deep ocean) and using tar sands. However, all these take more energy to produce, so have a lower net energy gain, cost more to extract and result in significantly more environmental damage. Natural gas can also be used as substitute for oil and could delay the peak for a decade or so.

The problems for the world economy begin long before the absolute end of oil is reached. Reaching the peak, rather than the last few drops, will begin a major crisis as demand for oil begins to outstrip supplies, prices increase and pressure for long-term oil security increases.

If the present rate of oil extraction continues it would be virtually used up within 30-40 years. However, there are two conflicting pressures on oil production. Demand for oil has been growing recently at 3% per year, mainly due to growing transportation in the global economy, increasing travel in the advanced capitalist world, and increasing energy use in countries such as China and India. While demand is increasing, once the world nears peak oil output it is likely to decline, as the remaining portion of oil is more difficult to extract. These contradictory trends will lead to a gap between supply and demand. According to classical economics, higher prices should lead to an increase in supply. The problem with oil is there is no supply to increase. Classical economics largely ignored the natural world and the environment

The approach of peak oil will push oil prices up and produce greater instability. The present high price of oil, due to rising demand, instability and fear about the future in the Middle East and the limitation of production, is likely to be here to stay. As the impacts of peak oil bite, oil prices overall may go even higher.

As the west is hooked, a secure supply of oil, and to a lesser extent natural gas, is vital to the economy. There are already conflicts over oil supplies and these are likely to increase. Most of the major reserves are in the Middle East, Gulf and Central Asia. A key reason for the two wars with Iraq was the USA’s need for oil. It is not too far-fetched to see the conflict with Iran as also being over oil as much as nuclear development. It is possible to imagine the political struggles between the USA, Russia and China in Central Asia developing into armed conflict over oil between their regional client states.

In the next 20 to 40 years, if there is no replacement for oil, the world would be facing a new depression and, some have suggested, a new ‘Dark Ages’. Without oil or a cheap replacement the world would be back to using human and animal power and wood. An industrialised world, and the possibility of decent living standards for the masses, needs plentiful energy.

Alarmist

There is A tendency for those who prophesise doom to exaggerate. There are capitalist commentators who have ridiculed the idea of peak oil and the prophecies of oil wars, depression and the end of civilisation. They believe that the pressure of the market will stimulate ingenuity and technology to find answers. It is true that the world is awash with energy flooding from the sun and rumbling beneath our feet in the earth itself. However, to harness these in effective and affordable ways is a challenge.

The revival of interest in nuclear power among business and governments is probably more to do with concerns about peak oil and the desire to have secure and relativity cheap energy than it is to do with concerns about the environment. After all, nuclear power is full of risks, as the 20-year anniversary of the Chernobyl disaster reminds us. It produces highly toxic waste that lasts for thousands of years and for which there is no safe treatment. If the entire chain of nuclear power is examined, including the extraction and treatment of uranium and the construction of power stations, it makes a major contribution to greenhouse gases. It is not carbon free. Also, if the world seriously switched to nuclear power, the supply of usable uranium would only last a few decades and much of it is not in politically secure places. Nuclear power is at best a short-term and misguided response to peak oil and climate change, and probably is an answer worse than the problem. But the problem will be for the future, so the present decision-makers don’t care.

Another likely response to peak oil will be to increase the use of coal, as it is the most plentiful of the fossil fuels and can be processed to produce most of the products that presently come from oil. If it replaced oil and gas supplies, it would probably last until the end of this century. And there are significant environmental impacts, in particular around the release of carbon. Without major developments, coal use would add to climate change.

It has been suggested that hydrogen will take the place of oil. This is a view espoused by the US government and much of big business. However, although hydrogen is a clean fuel, it is not freely available. It is not a source of energy, rather, it is a means of storing and carrying energy. To produce hydrogen requires an input of energy, so it is only a solution if the initial energy source is cheap and non-polluting. It is therefore no solution to peak oil or, by itself, climate change.

Using both nuclear power and coal as replacements for oil would have major environmental impacts and would be only short-term solutions. The world must move to renewable energy if it is to maintain the potential for a civilised world.

Renewables

The alternative to both fossil fuels and nuclear energy is a combination of energy efficiency and renewables which in various ways harnesses the plentiful and free energy from the sun, the tides and the earth to produce electricity, direct heating and provide fuel. Given the choice of fossil fuels that are running out, and cause pollution and climate change, and nuclear which is short term, causes climate change and produces highly toxic waste, or using renewables which are free, do not cause climate change or significant pollution, it would seem there is no contest. Yet internationally there is no serious move to renewable energy. Governments continue to highly subsidise fossil fuels and nuclear power, and they and business continue to spend much less on research and investment into renewables.

Companies that are based on fossil fuels and nuclear are big business. Oil and gas, auto, road construction, airlines, property developers and the power supply companies are among the giants of the world. A shift to a high-energy, high-efficiency society, with well insulted buildings, a move away from urban sprawl, and a dramatic shift to public and energy efficient transport would damage many of these companies. In addition, the supply of renewable energy challenges the power structures of the corporations. Fossil fuels are found in large amounts in relatively few places in the world. Energy is supplied in long supply lines from centralised sources to the users. Energy flows one way and money the other, with the companies in control.

Renewable energy sources, in contrast, are available almost everywhere on the planet. In a renewable energy society, production would include many small sources with households being both suppliers and consumers. These two features would threaten many of the energy corporations. Renewables could meet all of the earth’s energy needs. However, the economics and politics of energy mean that, in the short term, big business and their governments are not seriously going to shift to them.

It is likely that in the short term capitalism will go for nuclear and coal in response to peak oil and leave the increased problems to future generations. If there is not a fundamental shift to efficiency and renewables there is a risk of serious energy shortages and energy wars, with the living standards of the workers in the advanced capitalist countries facing an additional and fundamental threat.

In theory, capitalism is capable of moving to renewable energy, but there are many barriers due to its priorities and structures, and it is leaving it late. The clocks of both climate change and peak oil are ticking away. Environmental problems, once considered small and local issues, now pose fundamental challenges not just to capitalism but to humanity’s future development. If capitalism does not solve the energy issues and there is a major collapse in energy supply before capitalism is overthrown then human society could be thrown backwards. Again, the future is a choice between socialism and barbarism. In addition to the crucial issues of climate change and pollution, peak oil means that socialists need to develop policies to provide affordable energy for the planet and campaign for renewable energy.

Some sources of more information

Depletion Scotland

Peak Oil

The Oil Depletion Analysis Centre

Scheer, 2002, Solar Economy

From Socialism Today, magazine of the Socialist Party, cwi in England and Wales

cwi

Committee for a workers' International publications

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