In the movie Matrix, Neo is given a choice of two pills each of which will control his future in a different way. One was easy and one was hard. We have that same choice today. We can take the broad path and continue with business as usual or we can take the narrow path and endure the hardships of being ridiculed and maligned.
The Financial Times announced a new report from an organization called the UK Peak Oil Task Force. The report is called "The Oil Crunch" and is obviously a play on words similar to the Credit Crunch we are currently exiting.
The unusual thing about this group is the number of major players signing up to spread the word. Richard Branson, founder of Virgin Airline. Sir Richard Branson warns that the coming Oil Crunch will be even more serious than the credit crunch. However, this time we have a chance to prepare. The challenge according to Branson is to use this time well.
The message of the report, which is directed to UK government and business leaders is "Don't let the oil crunch catch us unexpectedly like the credit crunch did." Sir Richard is no stranger to confrontation or sensationalism and has never hid from the spotlight. His recent conversion to Peak Oil could be seen as a positive and a negative. On the positive side many people who would never listen to a retired geologist might listen to Branson. On the negative side many will hear it from Branson and based on his prior escapades believe it is just another attempt to grab some headlines.
Other members of the UKPOTF include Ian Marchant, CEO of Scottish and Southern Energy Group and Brian Souter, CEO of Stagecoach. Those names don't mean much to those of us in the U.S. but in the UK they are very high profile.
The spokesman for the group, Jeremy Leggett, said through their regular contacts with the government there are some officials who are ready to break ranks with companies like Exxon, BP and Saudi Aramco who are thought to refrain from talking about Peak Oil in order to avoid drawing fire from governments and consumers. Whenever oil prices rise the public believes it is big oil that caused the price to rise.
There are more companies breaking ranks and heading over to the peak oil side. The CEO of Total did it at the Davos meeting. He warned that the world will struggle to produce even 10% above current levels. Chris Skrebowski, an oil consultant who worked on the report, pointed out that once the demand returns to pre recession levels the excess oil supplies will be consumed rather quickly, possibly as soon as 2012-2013. Oil prices will spike significantly imperiling economic growth and causing economic disaster.
The subject of Peak Oil disappeared from public view when prices plummeted from $147 to $35 but nothing really changed on the production front. Last November the organization responsible for mixing up the kool aid the developed world had been drinking for the last ten years suddenly changed the recipe. In 2005 the IEA was predicting production would climb to 120 million barrels per day by 2030. That dropped to 116 mbpd in 2008 and then 105 mbpd in 2009. An IEA source came out of the closet in November and said the 120 mbpd was always nonsense and was floated to pacify government interests. Not only was the 120 mbpd number fiction then, the 105 mbpd number floated in 2009 is also fiction according to the IEA source. When questioned about the real number the IEA head Fatih Birol acknowledged they don't really know what the number is BUT it is less than 100 mbpd. I believe the IEA is taking heat from the 26 countries they serve and they may want to ease off on the drastic revisions for a year or two in order to keep governments happy.
Basically nobody in government today wants to tell their citizens that gasoline prices could be $6-$8 a gallon in 2-3 years because it will rile the public and they will kill the messenger by voting the assumed idiot out of office. Everybody in office hopes the problem will continue sliding farther into the future so they can collect as much money and power as possible before they leave office. Hopefully for them that will be the latest possible date before peak oil arrives.
If you are reading this commentary, Like Neo in the movie the Matrix, you have a choice, take the blue pill and believe what you want to believe or take the red pill and you will be exposed to the reality of the world we live in. Peak Oil is the red pill and the reality of the coming crunch.
You choose which you want to believe. If you are in a plane at 40,000 feet that suddenly loses all power you can choose to not believe in gravity for several minutes but eventually, as the ground races toward you, that belief would be severely tested and painfully proven wrong. You can choose not to believe Peak Oil but it won't change the geologic facts. Plan now or suffer later. Your choice.