We’re now forced to go to very inhospitable environments to find more petroleum to feed the world’s voracious appetite. Perhaps the most salient of examples is the horrendous BP Gulf of Mexico oil spill, still gushing as I write this (June 2010). We, the people of industrialized countries, are so desperate to find more oil, that we now do things like go to the Artic, and risk severely damaging not just the Gulf of Mexico, but the pristine Artic National Wildlife Refuge as well. It’s peculiar that this doesn’t seem to strike most people as insane. That we are so dependent on petroleum that we would cause what may well be the most severe ecological disaster in America’s history in order to get more of it for our fix, that doesn’t seem to get many people talking about getting off the stuff. If they do talk about it, many people say things that only reinforce our existing dependency, words such as “drill baby drill.”

Meanwhile, those who would offer a fantasy, about how the peak oil conversation is a just a lot of hot air, they are given great prominence and a high pulpit from which to preach their fantasy. Perhaps most prominent of these are the economists who believe in a world without limits, where every resource has a readily-available substitute, and where every problem will be worked out by “the market.” They disparage conservation efforts with fancy theories like Jevons Paradox, which says that it doesn’t matter much if energy efficiency improves, because people will just use more of the fossil fuel involved. We will regret that we made them the high priests of American society. Meanwhile, the loyal and hard working geologists, environmentalists, and contingency planners that have been sounding the alarm about peak oil are largely ignored. For the most part, there’s not even an attempt to refute the statements of these Paul Revere types — they are simply ignored. So what’s really going on here?

We’re up against the power of denial. This stubbornness and unwillingness to deal with reality is actually quite dysfunctional. If you were a passenger driving in a car with a friend, who was under the influence of a few drinks, and he or she seemed to have fallen asleep at the wheel, would you try to wake them up before the car you were both in crashed into something hard and immobile? Or would you just sit there, remaining silent? The analogy is actually quite apt. We — the people in the developed world who are so very dependent on petroleum — are on a crash course with reality.

Unless we start dealing with this reality immediately, and do so quite intensely, we are going to bring on much more serious repercussions than would have been suffered had we told the truth and promptly dealt with the problem. Some of these severely negative effects are probably unavoidable, given that we have ignored the problem for decades. But we make them still worse, the longer we wait to get out of denial. These repercussions include massive unemployment, a crashing stock market, a crashing real estate market, and widespread bankruptcies. I’m talking about shortages and rationing of motor fuel, blackouts of the electrical grid, and the failure of government to do much of anything about it. I’m talking about still more environmental degradation, shortages of other natural resources, and a surging population whose basic needs are not being met. In some places, widespread hunger, and even starvation, is also likely to result. I’m not making this stuff up, just summarizing what we’re clearly headed for.

Many of us humans tend to deny what’s going on when we don’t like it. We fall into this place of being frozen and paralyzed by our fear. I’m not a psychologist, but I would guess it has something to do with the desire to avoid pain. But the pain of confronting the truth is going to be nothing compared to the pain of the collision just ahead on the road.

The task for us all starts with an end to our preoccupation with our self, with a going beyond our selfishness. We need to stop putting our own feelings (discomfort about what the future will bring, looking foolish, being wrong, whatever) ahead of what’s right, ahead of what needs to be done, ahead of what would be respectful of both nature and future generations. We need to start envisioning what life is going to be like for our children, and our children’s children, if we don’t quickly change the direction in which we are speedily traveling. This visioning process has an official name: scenario analysis. To help us with this effort, there is a large body of research and a large body of experience already available in the contingency planning community. But even those people who are not working in the contingency planning field can and should still prepare their own future scenarios.

It’s time that we started modeling a new type of human being, and here I’m talking about someone who is willing to put their petty selfish feelings aside, someone who is willing to roll up their sleeves and get down to work doing the work that must now be done. I’m talking about a new type of human being, a more evolved human being, someone who deeply gets that we are all in this together. This human being knows that what we do today (such as driving a SUV long distances to commute to a job) has a significant impact not only on themselves, but also on other human beings, on animals, and on nature.

This new human being will also need to admit that there are no shortcuts, that to create a certain result, such as a new economy that is no longer dependent on petroleum, a great deal of serious work must be done. Denial and stubborn refusal to grapple with the truth does not make it go away. Denial of the truth does not mean that the truth is an illusion, it only means that the individual adopting this strategy is ill-prepared and poorly-adapted to the reality of what’s happening. The part of us that thinks we can deal with something by denying it, that is the part that thinks that we can use shortcuts, thinks that we can get away with cutting-corners. That is magical childish thinking, and it’s time for all adults in the industrialized countries to start thinking like, and acting like, responsible adults.

Denial can be tricky, and it does this in an effort to try to maintain its position of prominence in the consciousness of those who have adopted this dysfunctional position. For example, that part of us that likes denial, also likes to color issues in black-or-white (dualistic) terms. For example, either peak oil is a non-issue that we shouldn’t even to talk about, or else we’re all going to die as a result. If today you believe that it’s a non-issue, then you rationalize that you might as well continue your denial. If instead today you believe that everybody is going to die as a result of peak oil, then you can figure “there’s nothing to be done, so why bother worrying about it?” And so you then are back to denial, with perhaps another mask put over the truth. It’s only in grappling with reality, which will be something in between these two extremes, that we can discover what for us would be a right response to peak oil.

It’s time that we all looked at our own personal process surrounding denial of the reality of peak oil, and for that matter, our denial of peak natural resources as well. What part in each one of us has been selfish and unwilling to broaden our perspective to include our impact on other beings and the planet? What part of us has been thinking that we could get away with shortcuts, when we know darn well that we can’t? What part of us has been engaging in mind games, like dualistic thinking, in order to be able to continue with our denial?

To the extent that we can move through these blocks to encountering the truth, in its full impact and implications, to that extent we can start to evolve into the new type of human being that we all potentially are. And by the way, I’m working on it too. For us all, this will require on-going effort to keep confronting the truth as it is revealed. I hope to see you all, the new human beings, after we get through these turbulent times.

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Charles Cresson Wood, MBA, MSE, CISA, CISSP, CISM, is a technology risk management consultant with Post-Petroleum Transportation, in Mendocino, California. His most recent book is “Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action” (see www.kickingthegasoline.com).

In 2009, the Obama administration granted BP a special exemption from a legal requirement that the oil company perform an environmental impact study (EIS) exploring the results of drilling in the Gulf of Mexico with its platform called Deepwater Horizon. According to the Washington Post, the Department of the Interior’s Minerals Management Service (MMS) gave BP a “categorical exclusion” so that it might promptly commence drilling with Deepwater Horizon, even though MMS knew that an EIS had not been completed. The MMS report claims that the ecological consequences of an oil spill could be ignored because such an event was “unlikely,” and besides, “no additional mitigation measures” would be needed in the event of a spill.* We now know that this was a horrendous mistake. Here, as in many other cases, the questions people ask are instrumental in creating the future they manifest.

This cause and effect relationship — between the questions they ask, and future they create — applies to contingency planning in all domains, and on all levels of potential damage. Said differently, successful contingency planning is critically dependent on creating realistic scenarios about what the future might look like. The relationship that many businesses, non-profits, and government agencies have today with Peak Oil is much like the relationship that the MMS had last year with the possibility of a massive oil spill in the Gulf of Mexico. Many organizations are unquestionably aware of very serious oil related problems looming on the horizon, but they have not yet integrated realistic scenarios into their internal contingency planning efforts. As a result, they remain dangerously exposed to very serious losses — including going out of business.

These organizations are, by default, waiting to see what type of losses will ensue, waiting to see how painful and expensive these losses will become. Perhaps then they will be compelled to take action to do something about Peak Oil? As the massive oil spill in the Gulf of Mexico so clearly shows, this is a very dangerous and ill-advised strategy. Instead of waiting to see what will happen next, we should all be asking ourselves: “How horrendous, how destructive, and how ultimately-suicidal does the evidence have to be before we all agree that the age of cheap oil is over?”

It’s one thing to be preparing contingency plans for a future scenario that has a very remote possibility of happening, perhaps an airplane crashing into the headquarters building of an organization in question. It’s another thing entirely to plan for something big that we know definitively will happen, and will happen within the next five to ten years. Peak Oil is a certainty — the only open question from a probabilistic standpoint is: “When, over the next few years, will serious adverse impacts will be experienced?” Many organizations are driving completely blind because they haven’t seriously analyzed these things, so management at these organizations now has no idea how serious the adverse impacts will be. These organizations are in effect guaranteeing that the problems will be a whole lot worse than they need to be, because they haven’t yet gotten their act together to transition to other energy sources, to prepare contingency plans, and to take similar steps enabling them to weather the metaphorical storms ahead.

Likewise, it’s generally acceptable (from a standard of due care standpoint) if an organization doesn’t do contingency planning for relatively-low-negative-impact scenarios, such as an isolated incident of violence in the workplace. It’s an entirely different matter if an organization fails to do planning for a high-negative-impact scenario, such as a massive oil spill that threatens to decimate the economy in a major portion of the country, and that threatens to make thousands of animal species extinct. Similar to the massive oil spill in the Gulf of Mexico, Peak Oil involves many high-negative-impact scenarios that absolutely must be anticipated and planned for. These high-negative-impact scenarios include massive unemployment because the petroleum-dependent system on which we depend can no longer be maintained in the wake of petroleum wars, embargos, shortages, rationing, terrorism, and high prices. Other Peak Oil related scenarios include bankruptcy of critical suppliers and major customers, because they can no longer profitably participate in an energy infrastructure based on low-cost petroleum fuels. Airlines and long-distance trucking firms are now acting as canaries in the mine — their recent mergers and bankruptcies have been caused by the prominent position that petroleum-based fuels play in their cost structures.

In an age where so many decisions are dictated by the numbers, it is surprising that so many organizations still fail to do Peak Oil related contingency planning. In fact, it is illogical NOT to do this type of planning, and the numbers prove this position. Many organizations do contingency planning for low-negative-impact events like an isolated case of workplace violence. And many organizations do contingency planning for very-low-probability events like an airplane crashing into a building. But these same organizations are often at the same time failing to plan for the high-negative-impact, and virtually certain, impacts of Peak Oil. For the detailed mathematical calculations substantiating this analysis, see my blog post on this topic (http://kickingthegasoline.com/contingency-planning/the-irrationality-of-not-preparing-contingency-plans-for-peak-oil/).

The construction of future scenarios is dependent on asking the right questions. The questions we ask will inform the scenarios we construct, and the extent to which they are realistic or not. Many of us have been asking old-fashioned and ill-informed questions, and as a result, the contingency planning scenarios that we have created are most unlikely to come to pass. For example, asking the same questions about deep water oil drilling that one asks about shallow water drilling, that approach has been shown to be ill-advised, dangerous, and obsolete.

Among the old-fashioned and ill-informed questions that we have been asking is this favorite of politicians: “How can we sustain economic growth and expansion?” Efforts to sustain economic growth and expansion with fossil fuels will only create more hardship, more damage to the environment, and more straining to keep things going when we can no longer do that. Fossil fuel production, in fact production of the vast majority of non-renewable natural resources, is peaking if it is not already on the down-slope (its status depends on the resource you are talking about). This means that fossil fuels and non-renewable natural resources will be much more expensive in the future, that is if they are available at all. Efforts to keep our current petroleum-dependent economy going with these non-renewable resources will only cause more damage and pain. The horrendous spill of oil in the Gulf of Mexico is just one of many examples showing that we cannot keep going with this same approach. A much more empowering question is instead: “How can we meet basic human needs, and how can we continue our basic business activities, and how can we reduce our adverse impact on the environment (climate change for example), when there is much less energy available, and when the energy that is available will be commanding a much higher price?”

Another ill-informed and old-fashioned question that many people are still asking is: “In the wake of energy shortages and high prices, how can we maintain the globalized transportation and distribution system that we currently employ?” Continuing to ask this question will likewise only make life painful, exceedingly difficult, and ultimately impossible to sustain. The upcoming high energy prices, and intermittent shortages of energy, mean that the production, transportation and consumption of goods will be done, in the near future, on a much more localized basis. It will soon be neither economically viable, nor ecologically sustainable, to continue our current globalized transportation and distribution system. A much more empowering question to instead be asking is: “How can we produce essential goods and services locally so we don’t need to rely on the fossil-fuel-dependent globalized transportation and distribution systems?”

Yet another ill-informed and old-fashioned question many of us have been asking is: “How are we going to replace all the fossil fuel energy we currently use with renewable energy systems?” The fact is that fossil fuels, particularly petroleum, are incredibly dense and packed full of energy, and there is no good renewable energy system that we know of which can fully replace them. In other words, we can’t help but have our standard of living adversely impacted in a big way by declining energy availability and escalating energy prices. We must instead be talking about energy descent, or using much less energy than we have been using. A much more empowering and realistic question to be asking therefore is: “Given that we will have much less energy to consume in the years ahead, and given that what energy we do consume will probably be much more expensive, how can we retool local businesses so that they are ecologically sustainable, and resilient in the wake of the many changes that they will be going through?”

As it turns out, there are a significant number of old-fashioned and ill-advised questions that we have been asking, questions that are dangerously distorting our anticipated future scenarios. It is only through realistic questions that that we can create credible scenarios, and through these realistic scenarios, then go on to create truly responsive contingency plans. Businesses, non-profits, and government agencies need to seriously scrutinize the questions they have been asking, need to seriously question the validity of the assumptions they have been making, and need to deeply understand that the future will not be just more “business as usual.” With appreciation to Rob Hopkins, the founder of the Transition Towns movement, this author signs off with a request to all businesses, non-profits, and government agencies: please start asking the right questions.

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Charles Cresson Wood is a technology risk management consultant with Post-Petroleum Transportation, in Mendocino, California. He is also the author of the book entitled Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action (see www.kickingthegasoline.com).

* For purposes of this discussion, let’s ignore reports that government regulators falsified safety inspection reports, were awarded bonuses for rushing oil-drilling permits, and approved the final permit for BP’s catastrophic drilling operation in fewer than 10 minutes.

Yes of course there are very powerful entrenched business interests that wish to keep us addicted to petroleum as long as possible, so as to eke out the maximum profit they can. There are likewise other structural rigidities, organizational disfunctionalities, and bureaucratic perversions that block our leaders from properly responding to the threats that peak oil presents. I will not write of those here. These can all be handled on relatively short order, after we successfully deal with the problems in human nature that block us from responding as we should. If these structural problems are fixed but the problems in human nature remain, then we will see that still no action is taken. I don’t pretend to have the entire answer here — just four ideas about what keeps our leaders stuck — the same four ideas that keep us all from being effective leaders in this transition movement.

Humans are being called to evolve, being pushed to be much more than we have been in the past. We are for example being called to let go of our pre-occupation with ourselves, let go of our selfishness, let go of our focus on being consumers, get out of our illusion of each being an entity separate and apart. We are each being called to see ourselves as an integral part of a much larger system. We are being called to responsibly interact with and care for that much larger system (you could call this system “nature”). Capitalism has, though advertising, encouraged us to indulge our greed, our pride, our belief that we are better than others, and our belief in separation from others. Although it has successfully sold many products and services, this worldview is not in truth. Our technology has become so powerful, and the damage that we are doing with this technology has become so serious, that we must move into this more responsible worldview if we are to prevent ourselves from not only killing ourselves, but killing everything else on the planet.

Another aspect of human nature, that is blocking our leaders from taking appropriate action, is our desire to remain children. We all would like to be taken care of by a benign and powerful authority. We would love for the government to fix this peak oil problem for us. We have been told that government is going to fix so many of our problems, and as a result many of us have become hypnotized into believing that this will also happen with peak oil. In our desire to remain children, is an unwillingness to take the initiative, an unwillingness to be a responsible adult, an unwillingness to do the hard but necessary work ourselves. Instead, this child in us wants life to be easy, carefree, fun, but alas, this peak oil preparation, this conversion to alternative energy process, that looks to be none those things. It is also the child in all of us that is lazy, that is just waiting, waiting until a parent comes to take care of this problem. This childish attitude has to change soon if we are going to have even a modicum of success with our transition efforts away from petroleum.

Still another aspect of this problem involves our personal relationship to change. Nature and life is attempting to restore a balance in the world, and that is why for example the weather is changing in response to climate change. The peak oil crisis is a reflection of the fact that we have denied, ignored, procrastinated and resisted this transition away from oil for far too long. Because we did not make the change voluntarily when we should have (after the oil embargo in the 1970s), we are now going to be forced to make the transition, only this time it is going to be a whole lot more painful, expensive, and difficult that it needs to be. Our personal relationship with change must be modified so that we look for the truth, so that we honor the truth, so that we seek to handle problems expeditiously before they become full-blown crises. To wait until a crisis takes place, and then take action: that is no longer a viable way to do business (the Washington military-economic establishment often operates this way). This wait-until-a-crisis-takes-place approach is needlessly damaging to the environment, to the populace, to the economy, and to other aspects of our world. We must understand that life involves frequent change, that change is absolutely necessary in order to maintain health, balance and harmony. We must live with the fact that life, by its very nature, involves both movement and change.

One more aspect of human nature that has adversely contributed to the peak oil crisis is the fact that humans tend to ignore long-term trends, even if they are potentially catastrophic in nature. Instead, we pay attention to the short-term pain that is bothering us (such as the Greek government’s deficit spending, problems rolling over Greek government bonds, and the related threat to the Euro as a currency). In the grand scheme of things, it matters little if the Greek government goes bankrupt. Likewise, it matters little, in the grand scheme of things, if the centralized European government, and the Euro as a currency, both cease to exist. In contrast, it matters a great deal that we are on track for millions, perhaps billions, of people to die of starvation because the petroleum-dependent system that has for decades brought them their food is no longer functional. It matters a great deal that we are killing the planet due to our continued addiction to fossil fuels (pesticide toxics pollution, hormone disrupting plastics, climate change, etc.). We must reprioritize what our leaders pay attention to, and if they refuse, we must replace them with leaders who can in fact lead with a truthful and balanced set of priorities.

So the question is: How can we get our leaders to focus on what is important? More specifically, how can we get them to seriously get into action with the transition away from oil? To begin, I suggest that each of us must make the shift. Each of us must personally evolve ourselves, so that we can then be the kind of people we want our leaders to be. This is to say that we must get out of our selfishness and be responsible for our personal impact on the planet. We must be willing to roll up our sleeves and do the hard work, we must be willing to be responsible adults here; we must stop waiting for others to handle these problems for us. We must also alter our relationship with change, so that we take constructive action based on the information available to us, so that we no longer wait until a full-blown crisis is upon us. We must also look out into the future, beyond the short-term; we must see the long-term consequences of our actions, and then take these consequences seriously. As the indigenous peoples of America say, we must acknowledge our “responsibility to the seventh generation.”

When we change ourselves, then we are in a position to change our leaders, and then we are also in a position to positively influence those around us. As Mohandas Ghandi said: “Be the change that you want to see in the world.” In our understanding of the great personal development challenge that the peak oil transition presents, in that are the seeds of a more evolved human being. For us to step into this place, for us to make it real, we must not keep our new consciousness to ourselves. We must take it out into the world.

The polite, patient and reasonable approach has not worked. The world cannot wait any longer. It is clear that our leaders are hopelessly stuck in a quagmire. It is time for mass teach-ins, widespread letters to the editor, mass letter writing campaigns to politicians, new government-independent movement organizing web sites, gigantic public demonstrations, mass Internet signature collections, politician impeachment hearings, alternative political parties, product boycotts, strikes, lawsuits, and other legal (but in-your-face big-time attention getting) expressions of public opinion. These and other measures must clearly communicate to our leaders that they must reorient their priorities, they must express these new priorities publicly, they must take the necessary steps to transition away from petroleum, and they must do all these things right away.

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Charles Cresson Wood, MBA, MSE, is a technology risk management consultant with Post-Petroleum Transportation, in Mendocino, California. He is the author of the book entitled Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action (www.kickingthegasoline.com).

Most articles appearing in business newspapers and magazines implicitly assume that economic growth will continue in the years ahead. This assumption is widely held by economists, but is based on a fundamental misconception about limited resources. This doctrine holds that the free market (whatever that is, because we do not have a truly free market anywhere in the world today) will find a way to resolve all problems, and will then efficiently allocate goods and services. This flawed doctrine assumes that resources are perfectly substitutable for one another. For example, if we run short on petroleum, then we’ll simply use coal-to-liquids instead.

As a technology risk management consultant who has for decades specialized in the ways that the market does not adequately resolve significant technical problems — such as personal privacy — I offer a few data points. Many people are already intuitively getting that the old-fashioned “growth forever” viewpoint is unsustainable. The new reality is grounded in the numbers not from economists and politicians, but from geologists, engineers, and scientists.

The pace of economic growth that we experienced over the last few decades will markedly slow and later decline because the production of 50 important non-renewable resources has already peaked in the US, and is now in decline. These resources include bauxite, copper, iron ore, tin, zinc, magnesium, phosphate rock, and potassium. They also critically include petroleum. Future economic growth is dependent on the abundant and relatively inexpensive energy to which we have been accustomed. According to the US Energy Information Administration, worldwide conventional petroleum production hit a plateau, around 74 million barrels per day, and has not markedly increased since 2005. Note that the price ran up to $147/barrel in July 2008. In spite of this much higher price, producers were unable to bring more oil to market. This contradicts a mantra of classical economists, who insist more petroleum will be brought to market if the price increases.

Yes, tar sands, oil shale, and other types of unconventional oil are ramping up their production, but the supply provided thereby will not be able to adequately compensate for the markedly declining supplies of petroleum. There are several reasons for this — most important is the fact that future oil production will be at a very much higher cost than production has been in the past. Thus the cost to produce one barrel of oil via tar sands, is much higher than it has been to produce one barrel via traditional drilled oil wells. Shell reports the energy required to produce one barrel of oil from tar sands requires one third of what is returned thereby. In other words, 1 Btu invested returns about 3 Btus in oil. Meanwhile, for each 1 Btu invested, many traditional oil wells are now returning 10 Btus. But even this is way down from the conventional oil equation in which 1 Btu invested got 100 Btus in return, a situation common half a century ago. So in the future there will be a natural tax on each barrel produced and this tax will increase over time. At some point, even though great volumes of oil may still remain in the ground, it just won’t make economic sense to extract that oil.

The rapid expansion of modern industrial economies has been enabled by relatively inexpensive energy, most notably petroleum. China isn’t striking a bunch of long-term deals with worldwide oil producers without reason. Petroleum now provides about 50% of America’s energy, so increasing scarcity and increasing prices are going to have a giant economy-wide impact. For example, the globalization trend will soon yield to a localization trend, in large part because transportation will be so much more expensive.

Meanwhile most business models don’t take these changing realities into consideration. The airline industry looks like it will be an early casualty of this trend. Air travel in the years ahead will be reserved, for the most part, for the very wealthy, the politicians and the military. Likewise, air freight will become increasingly expensive, and many current air freight shipments will instead go by boat and rail (the latter two having markedly lower costs per mile). It is no wonder that Warren Buffet has invested so much money to buy Burlington Northern Railroad! He seems to appreciate the trends and some of their implications. But does your business? It’s time for all business people to seriously question whether the business model their organization uses is viable in light of this new energy supply reality.

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Charles Cresson Wood is a technology risk management consultant with Post-Petroleum Transportation in Mendocino, California. He is the author of “Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action.” He specializes in the strategic planning, risk assessment, and contingency planning related to both peak oil and climate change.

The public has known about the threat of markedly diminished oil supplies since 1956. Over the last 50 years, the notion of more limited future supplies of oil has been fiercely debated in public forums, and now the data clearly shows which side was right. Now we see that there is no longer any dispute, now we see that we are on a plateau, where we are unable to increase world oil production, regardless of the price that this oil fetches in the marketplace. To verify the correctness of these statements, direct your browser to the web site of the conservative US Government agency called the Energy Information Administration. In spreadsheets of the world oil production numbers, you will see that world oil supply has been about 74 million barrels per day since 2005. Note that this production did not markedly change, even though the price spiked up to $147/barrel in July 2008. A variety of high-credibility scientifically researched reports discuss the seriousness of our current situation, our position at the peak of world oil production. For example, you might reference “Peaking Of World Oil Production: Impacts, Mitigation, & Risk Management” by Robert L. Hirsch et al, and “Global Oil Depletion — An Assessment of the Evidence For Near-Term Peak in Global Oil Production” by the UK’s Energy Research Centre.

With all the credible evidence that peak oil is real, not a “theory” as some would have us believe, why is it that organizations such as the Federal government have steadfastly refused to draw up contingency plans to deal with the impacts of peak oil? There is no doubt that, as a society, we have dragged our feet way too long, and because it takes years to change many elements of our energy infrastructure, many of the desirable transitions to alternative energy cannot now be achieved. So now we are forced to do the best we can, now we must deal with the repercussions of our extensive dependence on petroleum (fully 50% of America’s energy comes from petroleum). At the same time, that same vital substance will soon get very expensive, will get increasingly scarce, and the delivery systems for providing it will become increasingly unreliable. So at the very least, we should get real, and do a risk assessment and figure out how we will be affected, and then draw up situation-specific contingency plans. To refuse to undertake this important activity is illogical, as the numbers provided below clearly indicate.

Let’s compare the peak oil situation to three scenarios for which most large organizations have already prepared contingency plans: (1) a widespread flu pandemic, (2) a serious incident of workplace violence, and (3) a fire in a work related building. The calculations shown below are rough-and-ready, use a back-of-the-envelope style, and are intended only to make the point asserted in the title of this article. These calculations provide a numerical indication that our society’s commonly held perception about the risks related to peak oil is dangerously out of kilter with reality. To be more specific, these three planned-for threats are one to two orders of magnitude less likely than peak oil, and they will cause one to one hundred orders of magnitude less damage than peak oil.

According to Risk Management Solutions (RMS), a consulting firm specializing in catastrophe risks, when it comes to a H5N1 (avian flu) pandemic worse than the 1918 pandemic, occurring this year (2009), the probability is 20%. They estimate that the mortality rate in the 1918 influenza pandemic was 0.67 percent in the USA. While losing 1% of an organization’s staff would be inconvenient and difficult, cross-training and backup staffing, combined with procedural documentation, should allow other staff members to successfully get the work done. Of course, in such a scenario many people are sickened but don’t die, and their absence from the workplace could also cause an adverse effect. According to the Centers for Disease Control and Prevention, the 1918 pandemic involved some 20% of the population getting sick. While productivity in most organizations would definitely take a major hit, and many people would choose to work from home rather than risk exposure on public transportation or in other public places, an absence from work of a few weeks would in most cases not have any serious long-term impact on organizational profits, financial viability, or ability to serve a mission. So this threat, one that has not occurred over the last 90 years, has a relatively low probability of happening, but when it does occur, the impact will be significant, but short-term in nature, and most likely the impacts will be manageable.

In terms of a serious incident of workplace violence, let’s look at the statistics from the US Department of Labor Statistics. Let’s focus on the most serious of these incidents involving homicide of workers. According the 2003 Training Manual published by the International Foundation for Protection Officers, for even the most dangerous occupations such as taxicab drivers, the annual rate of workplace homicide is only 3.5 for every 100,000 workers. That’s roughly 0.0035 percent of the workers… pretty unlikely. Rates were significantly lower for other occupations such as retail clerks. Of course, nonfatal workplace violence can result in serious injury and psychological trauma. According to the Bureau of Justice Statistics, in the late 1990s (the most recent years for which data are available), some 1.8 million workdays per year were lost across the USA as a result of nonfatal acts of violence. According to the Teamster’s Union, this time away from work represents some $55 million per year of lost wages. That sounds like a large number, but maybe not when you consider that the actively working population of the USA in 1995 was 87.2 million people. You can calculate that these people worked roughly 50 weeks a year, five days a week, or a total of 21.8 billion days per year. So we’re talking roughly 0.0083 percent of workers losing any workdays due to any type of reported workplace violence. So this threat has a very low probability and when it does occur, the impact is restricted to a relatively small number of people. Certainly an incident of workplace violence is traumatic and upsetting for those directly involved, but for the vast majority of workers at the same firm where such an incident occurred, it’s relatively easy to get back to work after such an incident. The dollar impact of workplace violence is significant in its broader implications, and is estimated at $13.5 million in medical costs, according to Carmen A. Paludi writing in her book Understanding Workplace Violence. Yet this number pales in comparison to (and is less than 0.007 percent of) total employer contributions to medical insurance plans nationwide, which were estimated at $200 billion by the National Federation of Independent Businesses (NFIB).

Last on our list of exemplary threats is a fire in a work related building. According to data from the National Fire Protection Association (NFPA), most deaths are caused by smoke inhalation, not by burns. While many people fear death by fire, perhaps imagining death in a crowded theater, the deadliest fires are those that engulf whole forests or cities, or that take place in a confined areas like a steamship or an airplane, or in industrial settings such as a mine or chemical plant. NFPA says that four out of five fire-related deaths occur among civilians in the home. In 2007, US fire departments responded to 399,000 home structure fires, which means that there were about 100,000 fires in workplaces (ignoring other public places to be conservative). NFPA says that, in the USA, some 2,865 people died in home fires in 2007, and so by implication approximately 716 died in workplace fires in 2007 (using the same ratio between home and work). During the same year, some 13,600 injuries occurred due to home fires, and this means that, using the same ratio, there were roughly 3,400 injuries in work related fires. Property damage from the home fires in 2007 was estimated at $7.4 billion, so property damage from work related fires very roughly in the vicinity of $1.85 billion per year (approximately $544,000 per workplace fire). If we use the US Census Bureau estimate of the total US population in 2007, of about 301 million people, we see that an individual has a chance of dying in a work related fire of roughly 0.00023 percent, and a chance of being injured in a work related fire of 0.00112 percent. Thus the chances of individuals dieing or being injured in a work related fire are very low, but if a fire occurs, the damage to property can be quite significant. Since the working environment may also be damaged by fire, and normal work activities may thus be unable to proceed, it is prudent to have a contingency plan for this type of threat.

Now let us turn to the peak oil threat, about which we have no historical statistics, because something like this has never happened before (no doubt that’s a problem when it comes to people believing that it will happen, or that it has happened already). There is no doubt about it, peak oil is going to happen. So we are dealing with a 100% probability (maybe you are a hold-out and you still believe the issue is when). A report by Chris Nelder posted on the Energy Bulletin web site, archived 20 October 2009, summarizes various sessions at the Association For the Study of Peak Oil (ASPO-USA) conference held in Denver in 2009. He indicates that most experts now believe we have already reached peak world production, in 2005, as indicated earlier in this article. He goes on to indicate that depletion rates are now estimated to be between 5.0% and 5.5% per year. That’s right, total worldwide oil production is expected to decline 5.0-5.5% per year. This decline rate is expected to accelerate to 6.5% per year by 2014. These estimates are more or less in line with official estimates publicly acknowledged by the International Energy Agency (IEA). According to petroleum geologist Chris Skrebowski, to lose this much oil in a single year would be equivalent to the loss of 4 million barrels per day (mbpd), which is somewhat like the sum of all the biofuels, all the tar sands, and all the heavy oil now produced. Or, seen another way, it is like losing the entire North Sea’s oil in 14 months. It will be a huge challenge for the world to adapt to such rapidly declining fuel supplies. So from a probabilistic standpoint, there is no arguing with the actual oil production statistics, they show that it’s happening — it’s real and it’s happening now.

In terms of the impacts of peak oil, each and every organization is going to have to calculate these consequences themselves (they vary based on business model, products and services produced, types of technology deployed, etc.). A business impact analysis (BIA) is a standard and recommended approach to contingency planning where we look at “what if” scenarios. For example, if gasoline was $10/gallon, what would that do the ability of workers to commute by personal car or truck? Similarly, if petro-diesel fuel was $10/gallon, what would that do to the organization’s shipping costs, and how would that eat into profits if the firm was unable to increase prices? Through this type of an analysis, every organization is going to need to come to terms with the impacts of peak oil, which are going to be pervasive, and are going to be hitting us all very hard. There will, for instance, be short-term impacts, such as shortages of petroleum that cause manufacturing plants to shut down. And there will be long- term impacts, which result from feedback loops as the short-term impacts work their way through the economy. One example of the latter would be significant inflation for goods that are made with the aid of petroleum including food, clothing, building materials, and pharmaceuticals.

Just to get a rough sense for what we’re up against, consider the research of Steven Kopits, Managing Director of the UK based energy consulting firm Douglas-Westwood. His calculations indicate that whenever the price of oil exceeds 4% of the US Gross Domestic Product (GDP), and that currently is about $80/barrel, it triggers a recession. Recession followed the high oil prices experienced after the 1973-74 Arab oil embargo, the Iranian Revolution of 1978, the Iran-Iraq War of 1980, and the First Persian Gulf War of 1990. Recession also occurred after the oil price shock of July 2008. While there were certainly other influential causes of the recession of 2008, the research of University of California economics professor James D. Hamilton confirms that of Koptis, indicating that high oil prices are a greatly-under-appreciated cause of the most recent recession. If these calculations are even roughly on target, the so-called “green shoots” indicative of the growing economy will soon be trampled by rising oil prices. We will be locked into a cycle of higher oil prices causing recessions, which in turn will lower consumption, which will then lower oil prices, which will lead to less oil exploration, which then restrict the supply of oil, which then causes the price of oil to rise again, and around we go (until we get off of petroleum). So economically we are talking about the macroeconomic loss of billions, if not trillions of dollars, because we are locked into this petroleum-dependent spiraling down cycle.

At individual firms, using the change in corporate profits reported in the State of Texas as a rough indicator of corporate profits nationwide, we see that profits decreased 18% in the one-year period ending in July 2009. For a large business such as IBM, which reported pre-tax annual profits of $16.7 billion in fiscal 2008, a drop of 18% in profits amounts to $3.0 billion dollars. On a personal level, this reduction in business activity, occurring since the recession began in December 2007, according to the Bureau of Labor Statistics, has resulted in the loss of 7.2 million jobs nationwide. While some of this unemployment is probably due to problems with derivatives and mortgages, this number nonetheless provides an order of magnitude sense for the unemployment that peak oil can, and probably will, cause. So, relative to the minor and short-lived consequences of the three other threats described herein, peak oil is going to have a gigantic and long-lasting impact, not just for organizations, but also for families and individuals.

So, we see that three major risks cited here (flu pandemic, workplace violence, and workplace building fire) for which organizations spend a lot of money doing contingency planning are far less of a threat than peak oil is. This is true from both a probability standpoint and from a total dollar impact standpoint. Yet, surprisingly, most organizations are still not seriously engaged in peak oil contingency planning. Clearly we have a pressing need for people’s perceptions about the risk of peak oil to change. One way that the reader can do this with the managers at his or her place of employment is to make reference to the numbers. The author invites the reader to make use of the numbers contained herein as a starting point for these discussions.

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Charles Cresson Wood, MBA, MSE, CISM, CISSP, CISA, is a technology risk management consultant with Post-Petroleum Transportation in Mendocino, California. He focuses on the strategic planning, risk assessment and contingency planning issues related to peak oil and climate change. His most recent book is entitled “Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action” (see www.kickingthegasoline.com). Working in the technology risk management field for 30 years, he is the author of over 330 articles and seven other books. His speaking and consulting work with 120+ organizations has taken him to 20 different countries around the world.

By Charles Cresson Wood

Many decision makers in business and government continue to erroneously believe that peak oil is a “theory” that will not substantially affect them or their organizations, at least not any time in the near future. Accordingly, they continue to drag their feet when it comes to adjusting to the new reality of declining petroleum supplies. This behavior is not only dangerous, it is likely to make the process of adjusting to the peak oil situation much more painful, expensive, and difficult than it needs to be.

Petroleum is America’s most important fossil fuel energy source. Fully 50% of the energy consumed in the United States comes from petroleum. Virtually every modern business process in America today is supported by petroleum. A short list of the products manufactured with petroleum include: pharmaceuticals, clothing like shoes and panty hose, fertilizer for food, foodstuffs like bubble gum, office supplies like elastic bands, cosmetics like lip stick, packaging like plastic bags, household items like wax paper, and sports equipment like golf balls. The most important products made from petroleum are gasoline and petro-diesel, and these are used to manufacture, distribute, service, recycle, and dispose of virtually all products. Of course these two fuels are also used by virtually 99% of people when they drive their cars and trucks to and from work. Most importantly, the peak oil problem is a problem involving declining supplies and increasing prices for liquid transportation fuels.

Peak oil will affect business and government in many ways: some will have an immediate impact, and some will bring impacts through longer-term feedback loops. In the short run, employees may not be able to get to work because gasoline or petro-diesel may simply not be available (older readers will remember the long lines at gas stations in 1970s, which is when we should have started the serious transition away from petroleum). Some employees, particularly those who make relatively low wages and commute from the remote suburbs, will simply quit their jobs because the high price of fuel will make it uneconomical to keep their current jobs. Shortages, rationing, as well as both foot-dragging and corruption in the government agencies that will oversee liquid fuel distribution, will also most likely lead to a break down of truck-based just-in-time inventory systems, on which so many businesses have come to rely.

In the longer term, to save fuel and thereby save money, many businesses will be supporting more employees as telecommuters rather than workers who show up in the office. Globalization as we know it, where products are shipped all over the world, will also be reversed. Many products will increasingly be made locally and shipped much smaller distances. Already we see evidence of this trend in the increasingly-popular local food movement. Air travel will be severely curtailed and soon become the exclusive privilege of the political ruling class, the military, and the super-rich. Longer-term impacts will also include increasing prices for inputs to most every process, and these increasing prices will have a ripple effect throughout the economy, reducing profit margins, and forcing high-cost organizations that have not yet adjusted to the new post-peak-oil reality out of business.

The question that business decision makers should be wrestling with is not: “Is peak oil a theory?” Instead, they should be asking: “When and how will peak oil affect my personal life, and when and how will it affect my organization?” The data from many credible sources is clear — peak oil is happening now. For example, the conservative Federal government agency called the Energy Information Administration publishes worldwide production statistics for conventional oil. Production has been on a plateau since 2005, at about 74 million barrels per day. The inability to increase production flies in the face of increasing demand from developing countries such as India and China. These statistics underscore the fact that new high-tech technology, such as computer models to locate underground petroleum deposits, is not going to take care of the peak oil problem.

In spite of a dramatic run up in prices in July 2008, up to $147/barrel, the high price of oil has not resulted in more oil coming to market. As the world economy picks up steam, we are now (October 2009) going through another run up in the price of oil — oil prices per barrel have roughly doubled in the last six months. This run up in prices will soon result in another recession, at least in the USA, because the American economic system cannot, the way it is currently configured, deal with very high costs for energy. This run-up-in-oil-prices-and-then-crash-in-recession cycle will continue until we actually move to other sources of energy.

Many people erroneously listen to the economists when they should be listening to the geologists. According to classical theoretical economics, if the price of a commodity increases, then more of it will be brought to market. But this did not happen in July 2008, and it will not happen in the years ahead. This is because oil is a limited resource, and the classical economic theory doesn’t take scarcity into consideration. Thus, the market is not going to take care of oil shortages on its own. The fantasy of a perfectly correcting market mechanism is not going to save us here.

When it comes to peak oil, the Federal government is asleep at the switch, and tied up in knots by the corporate powers that be, those who want to maintain the status quo because they are making so much money under the current way of doing business. It is a sad reflection about how government American-style has failed us, but there is currently no prominent politician willing to rock the boat, no politician who is willing to tell the hard-to-hear truth about peak oil.

Each individual, family, and organization is going to need to orchestrate their own transition away from petroleum. The change will take a long time, because we are so very entrenched in a system that relies to such a great extent on petroleum. There is still a window of opportunity for us to make changes to critical petroleum-dependent systems in areas such as health care, military services, and transportation systems. The less low-cost petroleum that is available in the future, the less surplus resources we will have to help us bring about the transition away from the petroleum-based American way of life. Thus the more we procrastinate with this transition, the more difficult and expensive the transition will be.

I recent wrote an article discussing the reasons why the downward slope of the peak oil curve was going to be a whole lot steeper than many people anticipate. Although I have published a lot in this area, the editor of a well-known and highly-respected contingency planning journal rejected my article saying that: “This is not a contingency planning issue.” I was flabbergasted. It is this myopic and limited-distance way of looking at the world that must be changed soon. Instead, every organization needs to get underway with a risk assessment (aka business impact assessment) to determine how peak oil will affect their operations. Once this organization-specific viewpoint is obtained, organizational managers and planners can move on to preparing contingency plans. At that point organizations can also develop a new set of strategic objectives which, if they play their cards right, could even bring competitive advantage to those organizations who have the foresight to embrace the new peak oil reality and adjust now to the post-petroleum future.

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Charles Cresson Wood, CISA, CISM, CISSP, MBA, MSE, is a technology risk management consultant with Post-Petroleum Transportation, in Mendocino, California. His most recent book is entitled Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action (see www.kickingthegasoline.com).

By Charles Cresson Wood

From many different credible and highly placed sources we are today hearing about the dire energy situation that industrialized civilization faces. Industrialized countries have remained dependent on oil for way too long. As evidence of this consider that fully 50% of the energy consumed in the United States comes from petroleum. Even though the notion of peak oil is now frequently discussed in newspapers, magazines, TV shows, we the industrialized nations are not moving to new sources of energy fast enough to avoid serious and painful adjustment problems. Dr. Fatih Birol, chief economist with the International Energy Administration, accurately summed it up when he recently said: “We must leave oil before it leaves us.”

According to statistics from the United States Energy Information Administration, the worldwide production of conventional oil has been on a plateau for the last several years (about 73 million barrels per day). In spite of a dramatic run up in prices culminating with the price of $147 per barrel in July 2008, producers were unable to bring more oil to market. This fact defies a widely-held but erroneous belief advanced by traditional economists, that producers will bring more oil to market as the price goes up. That of course makes sense if there is an unlimited supply of oil, but as the worldwide production statistics indicate, we seem to have reached peak worldwide production, and it is only down from this point forward. It’s time that the economists started adjusting their theories to incorporate the real world of resource constraints.

Those readers who have some passing familiarity with the concept of peak oil have no doubt seen a picture of the traditional statistical distribution known as a “bell shaped curve.” These bell shaped curves make sense to people, because in a world with finite resources, what goes up, must come down. These symmetrical bell shaped curves are however lulling us into an attitude of complacency, leading us to believe that we have decades to move off of oil. This is just not so, and this article discusses five serious reasons why this erroneous perception needs to promptly be abandoned.

The bell shaped curve customarily applied to peak oil was popularized by the late geophysicist Dr. M. King Hubbert. He predicted the total United States production of oil would peak on or about 1970. His prediction was accurate, and this type of curve did relatively well when it came to describing the total production of oil in the United States. But total world production of oil does not have another source that it can draw upon when worldwide supplies dwindle, as the United States did back in 1970. Social and economic panic and upheaval were avoided when the United States hit its internal peak oil because it could easily purchase additional supplies from the world marketplace. The social and economic upheaval that worldwide peak oil will bring about will be marked by hoarding, stockpiling, speculators cornering the market, long-term contracts pushing spot market buyers out of the market, government corruption, widespread rationing, and a host of other problems. These maneuvers will rapidly remove oil from the marketplace, and the intensifying competition for the remaining supplies will cause the price to rapidly go up.

The second reason why the drop off in world oil supplies will be steeper that the increase was involves exports. A very large percentage of the remaining oil supplies, perhaps half, is controlled by countries in the Persian Gulf (Iran, Iraq, Kuwait, Saudi Arabia, and United Arab Emirates). These countries are rapidly industrializing and in the process, as you might expect, their consumption of oil is rapidly increasing. As their production is declining in the years ahead, an increasing proportion of their production will go to meet domestic needs. This means that a decreasing proportion of their already declining production will be offered for export. At some point, there will be no more exports, as these countries will use all available supplies for internal consumption purposes. Countries such as the United States, that are big importers of oil, stand to be quickly cut off from their oil supplies. Thus the available exports of oil will come to a much more rapid end than total world production of oil, which in turn will be much more rapidly decreasing than the symmetrical bell shaped curve would lead us to believe.

The third reason why world supplies of oil will drop off more rapidly than anticipated involves rapidly developing countries, most notably although certainly not limited to India and China. These countries are working hard to be able to support something like an American lifestyle, including high levels of energy consumption. World oil demand has recently been increasing at about 2% per year, but to fuel the recent economic development of these countries, there will be a markedly increasing worldwide demand for oil. For example, Time magazine reports that China’s oil imports have doubled over the last five years (about 12% compounded each year). Thus the world will soon be drawing down remaining oil supplies at a faster rate than we were drawing down supplies in the recent past. This accelerated demand for, and the accelerated consumption of oil means that the downside slope of the peak oil curve is going to be much steeper than we currently anticipate.

The forth reason why world supplies of oil will decline far more rapidly than we anticipate involves modern technology. We are now able to drill for oil in the Artic, more than 10,000 feet below the sea, and in other inhospitable places that we could not economically drill in some fifty years ago. This fact reflects advancements in modern technology, such as computers to model geological deposits of oil. The fact that we have to go to these inhospitable places to get more oil is another indicator that we’re running out of it. But this impressive new technology allows us to accelerate our extraction of oil, in an effort to meet the accelerating demand mentioned in the last paragraph. Imagine the bell shaped curve except it is going to be pushed out on the upper right side. In other words, we will be producing slightly below peak levels for a brief while, on a plateau of sorts, and this will be a plateau created by this modern technology. Using elementary calculus, which assumes that the area under the curve remains the same, in other words assuming we have only so much oil available in the world, we can readily determine that when this area is pushed out, another area must be pushed in to compensate. Since everything to the left of this current peak moment is history, and therefore cannot be changed, the only thing that can be changed is the height of the curve (production) in the future. Said a different way, by sustaining our high-energy consumption lifestyle, we are prematurely consuming the oil that would otherwise be left for future generations. In other words, the bell shaped curve will in reality look more like a wave moving to the right (through time), and the wave is just about to come crashing down.

The fifth reason why world oil supplies will decline considerably faster than we now generally believe involves the fact that we produced the least expensive oil first. It is simply common sense, that oil producers would initially focus on the removal from the ground of the oil that was easiest to get to, that was the least expensive to refine, that was the easiest to handle, and that was the least expensive to pump. Reflecting this reality, we now see producers mining the “tar sands” of Canada in an effort to cook the oil out of these sands. Not only is this effort tremendously environmentally destructive, but it consumes a great deal of energy in order to produce oil. Thus the cost of producing each barrel of oil is going up. At the same time, the quality of each barrel thereby produced continues to go down. Combining these two trends, we see that the world will reach a point where it is no longer economical to produce any oil. Mind you, this occurs considerably before the point where the world runs out of oil, and so the curve of world oil production does NOT reflect the relationship that individuals have with the gas tank in their cars. We can’t just keep going until we run out. A lot of oil will be left in the ground because it simply won’t make sense to produce it. Certain locations will meet this point sooner than others, but as more and more of locations do reach this point, they will remove themselves from the roster of the remaining oil producers. This in turn will hasten the descent of available oil supplies.

As these five points argue, the day of reckoning is a lot sooner than many of us would like it to be. We do not have decades to transition to alternative energy. It appears as though we have only a few years. We need to get underway with very serious efforts to transition away from petroleum immediately. Government agencies, businesses, non-profit organizations, families, and individuals should all be thinking hard about what their transition to a post-petroleum world looks like, and then promptly get into action with this transition.

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Charles Cresson Wood, MBA, MSE, CISA, CISSP, CISM, is a technology risk management consultant with Post-Petroleum Transportation, based in Mendocino, California. His most recent book is entitled Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action (www.kickingthegasoline.com).

This article appeared in the SecureWorld Expo Newsletter, Fall 2009, Vol. 1, available at www.secureworldexpo.com/articles. It was also referenced in the Energy Bulletin Newswire on 25 September 2009, which is available at www.energybulletin.net/node/50221.

During his first term in office, Ronald Reagan was asked in an interview whether he was going to run for the Presidency again. He said that if he did what needed to be done, there would be no need for a second term. He ran for and won the race for a second term, so by implication he did not achieve what needed to be done. But whatever you think about the sincerity of Regan’s remarks, he expressed an important distinction that seems lost on many politicians, government agency managers, and corporation managers. The distinction is between a leader and a statesman (or stateswoman).

A leader does what needs to be done, and is willing to receive criticism and attack in order to achieve those objectives. A statesman, at least as it is defined here, is not interested in what needs to be done, a statesman is interested only in what people think of him, in negotiating, and in striking deals and compromises. A statesman is rudderless, and buffeted by the changing tides of opinion. This distinction is beautifully depicted in the movie In The Loop (released in 2008). In this movie, the protagonist is driven crazy because everyone around him is a statesman, while he aspires to be a leader. I recommend it for those who have not yet seen it.

As the movie implies, what needs to be done does not get done when statesmen are in charge. That is exactly the situation in the peak oil and climate change areas today. We’re facing one of the most painful and pervasive changes in the technology of modern civilization, and nothing significant is being done. For example recent evidence suggests that nearly every one of the nations that ratified the Kyoto Treaty will fail to meet its targets (and that says nothing of nations like the United States that failed to even ratify the climate change treaty).

There is no more doubt about the legitimacy and reality of both peak oil and climate change — there is plenty of independently verified scientific evidence. What is missing is leadership. The dire and pressing nature of our situation is revealed by the fact that even the most conservative and pro-oil-industry spokespeople are now publicly admitting that something must be done, and be done very quickly.

To take one of many possible examples, consider the recent statements of Fatih Birol, chief economist at the International Energy Agency (IEA). He said that peak oil, and the high oil prices that go along with it, threaten the recovery. He also recently said that, “we have to leave oil before oil leaves us.” In other words, the industrialized world had better wake up now, and had better move away from petroleum with great focus and determination.

Those readers who know about the energy industry, know that IEA has long been a bastion of staid and conservative official positions. In fact it was Dr. Birol, a few years ago, who was indicating that there was a significant amount of time for the world to adjust to peak oil. Why did he change his mind? Because he discovered that rate of production decline in existing worldwide oil fields is now 6.7% — considerably higher than the IEA estimate made in 2007, which predicted this figure would instead be 3.7%. Dr. Birol was willing to tell the truth about what was happening, and take the heat if people were upset about hearing it.

So we come back to the reader’s situation at his or her place of employment. I hear from a number of people that they are afraid to talk about peak oil and climate change with their managers; they are afraid that they will lose their jobs if they rock the boat. I suggest that this fear is exaggerated and ungrounded. If you want to create value for your employer, tell the truth, and take the risk of meeting with a rejection or an unreceptive response. If you urge your manager to seriously investigate this problem, it is not a cause for termination. To the contrary, it shows that you take initiative, it shows that you speak up, it shows that you’re paying attention, and it shows that you care.

So called “yes men” (and by implication “yes women”) are a dime a dozen, because they are essentially servants who simply follow orders. If you want to make yourself more easily replaceable, and therefore more likely to be laid off, don’t show leadership, keep your head down, don’t make waves, and don’t speak up about these important issues. I invite you to seriously consider the implications of broaching these topics with your organization’s management – would it really be so terrible if you were to talk about these things? And if prominent people such as Chevron Chairman & CEO David O’Reilly are now publicly admitting that peak oil is real, doesn’t that give you at least a little bit of additional confidence to press these important issues with your own management?

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Charles Cresson Wood, MBA, MSE, is a sustainability management consultant based in Mendocino, California. He assists organizations with the risk assessment, strategic planning, and contingency planning associated with peak oil and climate change. His most recent book is entitled Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action (see www.kickingthegasoline.com).

By Charles Cresson Wood

The Obama Administration has been desperately trying to prop up and maintain the petroleum-dependent American personal car industry. Unfortunately these efforts are a lost cause, because this way of life (a transportation system primarily based on billions of personal automobiles) is no longer a viable option. It’s ridiculous for America to be spending billions to keep Chrysler and General Motors on life support, when these car companies are going to die soon anyway. These dinosaur companies have very high costs of production, have emphasized the production of the most inefficient vehicles (such as SUVs and the Hummer), and are dangerously out touch with the fact that the world is running out of inexpensive petroleum. If the Administration could only put short-term political considerations aside, if it could only look to the needs of the future, it would probably have spent all this car company bailout money in a very different way. The money would much more productively be spent supporting small new companies offering innovative transportation products that do not depend on petroleum. I’m talking about companies like Aptera, Miles Electric, Venturi, Universal Electric Vehicle Corp., and Zen Motor Company.

It’s time that decision makers admitted that putting band-aids on a dying patient is not going to prolong the life of the patient, or even significantly improve the patient’s painful transition experience. The petroleum-age is over, we are on the downside of peak oil, and it’s time that we admitted it and go on with the transition. It is time to switch to a new way of looking at transportation, time to adopt a new set of transportation models, time to adopt and evolve a new set of transportation technologies, and it is time to switch to a transportation system that is both ecologically and economically sustainable.

While the Obama Administration was swept to victory on last November’s election day based on a platform of change, it has recently been looking very much like a maintainer of the status quo. The Administration still has not come clean with the American public: it still has not told the truth about the real situation when it comes to peak oil. There is no chance that America will be able to make the transition to a post-petroleum economy in an orderly fashion if its leaders won’t even publicly admit the truth about what’s happening today. It gets worse than that. The Administration is in fact causing serious trouble with its efforts to keep the old-fashioned oil-dependent transportation system going.

The trouble comes from three major areas. The first of these involves wasting resources on unnecessary activities. The billions spent on GM and Chrysler need to instead have been spent on activities that create new transportation infrastructure, new transportation technology, and new ways of operating our transportation systems. For example, instead of trying to broker the sale of Chrysler to another company, the Administration should be supporting standardization efforts that facilitate the development of and adoption of new technology. A more specific example of this — and the author is by no means endorsing this approach — is provided by the company called Better Place. This company is pushing a standard for electric car batteries that are interchangeable. Thus an electric car could simply get a ten minute battery replacement, rather than having spend four to eight hours charging up its own battery. Long distance trips via electric vehicles would thereby become more practical and efficient, even though major new breakthroughs in battery technology have not yet arrived. In general, standardization facilitates research and development, and facilitates the introduction and adoption of new products. Standardization also facilitates buyer understanding of new technologies, which in turn accelerates the adoption of new technologies.

The second source of trouble created by the Administration is that by attempting to shore-up old transportation systems, the focus is placed on the maintenance of, and fixing of the old system, when the old system instead needs to be converted or abandoned. If we don’t admit what’s going on, if we don’t start having a public and open conversation about it, it’s exceedingly difficult to effect a transition to new technology. If we don’t create a new way of thinking about our world, that incorporates peak oil, and the peak resource constraints that we face (such as peak metals), then it’s highly unlikely that we are going to be able to responsibly manage the remains of these resources in a manner that successfully moves us in the direction of transition.

In the postponement of this important transition, in the continued focus on the old, we as a society may miss most of, if not all of, the window of opportunity to transition to a truly sustainable transportation system. With this focus on the old system, we are likely to simply keep going with the old system as long as we can, and then crash in a crisis because we cannot, at that point, go on any longer. It remains to be seen what, if any, residual assets we will have at that point in time in order to accomplish this gigantic transition to non-petroleum-based technology.

The third source of trouble is that this approach creates what the insurance industry calls a “moral hazard.” If the government gives money to dead and dying petroleum-dependent car companies, it encourages management at these rescued car companies, and other car companies for that matter as well, to act irresponsibly. By this I mean ignore the future, and fail to transition to new energy technologies. The government thereby gives managers the message that they will be bailed out if they fail to respond adequately to the peak oil crisis. The government thus allows these companies to somehow avoid the discipline of the marketplace, which would otherwise have dictated that GM and Chrysler go out of business.

So consider the recent developments in our economy as markers of the trends that are already set into motion. For example, perhaps the current worldwide recession is a harbinger of a new way of life where we are all required to have a much lower level of economic activity? A variety of economists are already taking positions that the recession was caused by the run up in oil prices occurring in 2008. It would be far more cost-effective, and far less painful, if we would simply downsize and reduce our level of economic activity, rather than attempting to build it back up to unsustainable heights that were only made possible by low-cost and abundant fossil fuels. So instead of resisting the current trends, instead of hoping to reestablish the old order of things, consider whether recent developments are the beginning of new trends. Then evaluate whether you want to fight against these trends, resist them, deny them, or the much easier and recommended alternative: go with them.

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Charles Cresson Wood, MBA, MSE, is a sustainability management consultant based in Mendocino, California. His book entitled Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action provides a step-by-step plan that organizations of all types can use to transition away from petroleum (more information at www.kickingthegasoline.com).

By Charles Cresson Wood

One of the big risks in the financial world, that caused our current banking crisis, was the level of exposure taken on through derivatives. For example, AIG admitted that they did not include certain scenarios in their models about the risks associated with the selling financial instruments such as these. They knew these risks existed, but they didn’t closely examine them, and as a result they didn’t factor them into their decision-making. The bloodbath we are all suffering is the result.

The same problem is found in the information security and business contingency planning fields. In the information security field, we worry about intruder break-ins, the latest zero-day attack, and some new phishing attack used to perpetuate identity theft. Our examination of risk is superficial, and it does not consider what would happen if we don’t have electricity to run a data center for an extended time. Likewise, in the contingency planning area, we worry about workplace violence, a fire in the headquarters building, and a chemical spill that keeps people away from the manufacturing plant. Again, we still fail to come to terms with the systemic risk that underpins everything that we do: the extent to which our economy is dangerously dependent on abundant and low cost energy.

While there are certainly other systemic risks, one of the most serious and unexamined risks that is not getting the attention it deserves is the fact that we are running out of petroleum. The International Energy Agency, a part of the United Nations, wrote a report in October 2008, which indicates that world oil production is now declining at the rate of 9.1% per year. This can’t help but have a profoundly negative impact on business and government. But where are our scenario analyses? Where are our transition plans to alternative energy? Where are our contingency plans, enabling us to deal with rapid increases in the price of petroleum-based fuels, rationing, and intermittent shortages?

It’s time we honestly dealt with the fundamental systemic risk on which the industrialized nations of the world have been built: the fact that we are running out of fossil fuels. People need to know that we do have viable solutions that can be used to deal with this risk, such as 12 different commercially available alternative fuels. It remains to be seen whether we will adopt these technologies before massive structural damage is done to our economy because we insist on remaining in denial about the systemic risk that we face. It is time to brace ourselves for the Bernard Madoff Ponzi scheme equivalent of a meltdown in the energy area.

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Charles Cresson Wood is a technology risk management consultant based in Mendocino, California. His latest book is entitled Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action. More information can be found at www.kickingthegasoline.com.