Tuesday, December 16, 2014
We'd been debating the merits and challenges of autonomous self-driving vehicles, which segued into conversation about plummeting gas prices.
Somewhere in that free-form conversational cascade I was walloped by the realization that the recent wild drop in prices is an early harbinger of the end of the fossil fuel era.
It's just so damnably counterintuitive. If fuel prices are low, one would assume that its a mark of plenty, of overabundance, of resource more than the market can consume. That's a gusher, we cry, as black gold comes blorting out of the earth, endless and plentiful.
Yay, we proclaim! Good times!
But why, we must ask, are prices so low now? It is tempting to weave some wild conspiracy theory. It's the West and the Saudis conspiring to punish a restive and expansionist Russia. Or maybe it's one of the outputs of the January 19, 2014 annual meeting of the Order Illuminatus, designed to quell an increasingly restive post-industrial populace.
I missed that meeting, but I swear, it was nowhere in the minutes I received by carrier raven.
The reason is rather different, and while it's complex, it's entirely in plain sight.
They are low because humanity has begun aggressively tapping the very last and most demanding points of access for crude.
Tar sands and shale are far more technically challenging, and extraction is both much more polluting and much more expensive. But if oil companies did not pursue those techniques and engage those resources, they wouldn't be in a position to continue business when the deepwater wells and desert fields start running dry. Which they will.
At the same time, traditional methods of accessing oil have continued. It's getting increasingly difficult to access crude using traditional methods. Maintaining current production levels in oil fields is getting harder and harder, demanding more investment and more rigs than ever before just to keep pace. But production continues, as it will right up until the fields begin to run dry. So we have doubled-down old-school drilling and new, more demanding processes, laid one on top of another. Now, in this moment, this duplication of techniques means production is artificially high.
This will not last. Oh, sure, a couple of years, perhaps. Five, maybe ten at the top side. And then, the slide begins, to which industrial society must either adapt or perish. If I live as long as my grandfathers, that time of energy famine will be within my lifetime.
One might think that traditional production methods would have been cut back, reducing supply to maintain price levels and conserve resources, giving us precious extra years to adapt and develop new technologies.
But playing against that has been the increasing focus on efficiency, which coupled with a bump in prices has reduced demand. If prices stayed level, demand might continue to decline. OPEC knows this, and is maintaining production for the sole purpose of putting economic counter pressure on the movement to greater efficiency. Greater efficiency reduces dependence. Reduced dependence reduces near-future profit margins. So...drill baby drill. Baby needs a third Bentley.
It's working, at least for now, as sales of large SUVs and inefficient vehicles have started ticking up. No one ever went broke overestimating the stupidity and shortsightedness of human beings, as the saying goes, and this appears to again be the case.
So we have this hump, this spasm of production and consumption. It is utterly irrational, mindless in the way that short-term profit-driven market economies are mindless.
In five years, things will look very different.