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Controversy over Peak Oil

Controversy over Peak Oil . NS4053 Week 6.1. Peak oil: persistent controversy. Why pay attention to controversy?. If peak oil correct, possible security, social, economic consequences. If peak oil is believed to be correct, possible policymaking and mass psychological consequences.

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Controversy over Peak Oil

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  1. Controversy over Peak Oil NS4053 Week 6.1

  2. Peak oil: persistent controversy

  3. Why pay attention to controversy? • If peak oil correct, possible security, social, economic consequences. • If peak oil is believed to be correct, possible policymaking and mass psychological consequences. • If peak oil is not correct, learn to recognize the argument and understand the debate when it comes across your desk.

  4. What is peak oil debate about? • Agree that there is a limit to fossil fuels, but what is the problem? • Debate among geologist, economists, and technologists. • Geologists focus on limits and impact on society/civilization. • Economists focus on prices and markets. • Technologists focus on innovation.

  5. Peak oil proponents • Hubbert’s peak (1956): mathematical and geological limits of production.

  6. Predictions on “Peak Oil”

  7. “Peak discovery”

  8. Energy Return on Energy Invested

  9. Cost of extraction

  10. Counterarguments • Resource pyramid • Disagree with PO proponents about size of reserves, ERR and URR • Campbell & Co. vs. USGS • As supplies tighten, markets will price oil higher, leading to: • New sources coming on the market. • Innovation. • Substitutes will reduce demand for oil

  11. New reserves of ERR

  12. Oil price forecasts (IMF 2012)

  13. Implications • Both sides agree energy prices will get higher. • Disagree on society’s ability to adapt to new environment. • Oil prices depend on: • Demand • Precautionary demand • Supply • Spare production capacity

  14. Possible impacts of higher energy costs • Volatility due to low spare production capacity. • Inflationary pressures. • Diversion of investment capital from other productive enterprises. • Distributional consequences of higher energy prices within countries and across globe. • Who wins and who loses? • Uneven distribution across globe of societies’ ability to adapt.

  15. Thinking about the future • Peak globalization • More expensive transportation • More expensive consumer products • More expensive food and consumer products. • Increase in urbanization • Increased mass transit • Shift in consumer design and consumer values?

  16. Case of Food

  17. Thinking about the future based on the past • Tough to find cases to illuminate key factors. • Past responses to energy scarcity: • Predatory militarism (Japan 1930-45) • Totalitarian retrenchment (North Korea) • Socioeconomic adaptation (Cuba 1990s) • Economic transition (US South post-Civil War) • What do they tell us about high energy cost future?

  18. Thinking about a high energy cost future? • Successful energy transition • Some states will win the race to attract investment and capital that enable them to adapt. • Some states will be less successful at this and will also experience social adaptation. • Some states with military capabilities will be tempted to use them to ensure energy sufficiency. • Some states with authoritarian legacies will see elites pass on the costs of adaptation to masses. • States with populations that have the least to ‘unlearn’ about high energy use will adapt to having less energy. • Some states will fail.

  19. Security implications • States will compete for the capital (to adapt) • Relative gains issue. • Avoiding and deterring the temptation for military solutions. • Coping with the consequences of socioeconomic adaptation around the world. • Mitigating the issues associated with (hopefully rare) cases of state collapse.

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