Thirty Serious Reasons Why Organizations Must Get Off Petroleum Now
August 13, 2008
By Charles Cresson Wood
Don’t get me wrong — I am very concerned about global warming and climate change. In the long run, that’s one of the most serious challenges that humans face as a species. But in the short run, the world is no longer able to produce petroleum in sufficient volume to satisfy its demand. Soon it will not be able to produce petroleum in sufficient volume to satisfy its needs.
Reflecting this, a majority of the world’s major oil producing countries now see that their production is in decline. These post-peak producers include the United Kingdom, Norway, Denmark, Venezuela, Mexico, Nigeria, Canada and the United States. Likewise, the world’s discovery of new fields peaked in 1965, and it generally lags production by about 40 years. That means that total world production will decline sometime soon, if it has not already.
What’s more, the price of crude oil has risen 95% over the last year, and this reveals that worldwide supply can no longer keep up with worldwide demand. Peak oil and its impacts will seriously affect us much sooner than climate change will, although the sooner we stop burning fossil fuels, the soon we take care of both of these very serious problems.
Although global warming gets a lot of press these days, the major media are strangely silent about peak oil. In a culture that makes it a habit to be short-term in its focus, it is astounding that more Americans are not seriously concerned about peak oil. In this brief piece, I list 30 reasons why we all must immediately start to transition away from petroleum. Although a great deal of transition-related work remains to be done, we now have eleven commercially available alternative fuels that can stand-in for petroleum. Although it looks as though all-electric cars are going to be the long-term winner, depending on the circumstances, a wide variety of other alternatives may be appropriate, at least as transition fuels. The other options include ethanol, butanol, di-methyl ether, bio-diesel, straight vegetable oil, bio-methane, natural gas, propane, hydrogen and synthetic liquid fuel.
Don’t take my word for any of this. Look it up on the web or ask the retired expert geologists who used to work for the oil companies, such as Dr. Colin J. Campbell. Read some books such as Richard Heinberg’s The Party’s Over, or Dale Allen Pfeiffer’s The End Of The Oil Age. When you really see the big picture, you will no doubt agree with me that a reorientation away from petroleum, towards renewables, is absolutely required, and it is required now.
By making the transition away from petroleum-based fuels, organizations can or will:
1. Respond to the increasing publicity about, and moral pressure favoring, the adoption of alternatives to petroleum. In the process, they will note that staff morale and public support can be augmented when an organization shows that it is in fact acting in an ecologically-responsible way.
2. Reduce and mitigate the adverse environmental impacts related to the use of oil. These impacts including air pollution from refineries, poisoning of flora and fauna when oil is produced in wilderness areas, and damages done by oil spills on land as well as in the sea. Note that burning fossil fuels contributes about 80% of the worldwide emissions of carbon dioxide.
3. Benefit from government incentives, such as loans, subsidies, and special tax credits. Organizations should expect that these incentives will become not only more common, but also considerably more compelling in the years ahead. The current U.S. alternative fuel vehicle tax credit of up to $4,000/vehicle is an example.
4. Exploit new business opportunities in alternative energy. Many progressive companies, such as General Electric and Siemens, see the transition away from oil as a significant business opportunity. These companies have invested a great deal of money in the development of new products and services to support this transition.
5. Take advantage of the marketing opportunities afforded to those organizations that paint themselves as green. Polls show that consumers are willing to pay considerably more for products and services that are indeed better for the environment.
6. Go beyond the massive spin campaign now underway to obfuscate the peak oil message. Countries such as Saudi Arabia conceal the real numbers about their available petroleum reserves and there is ample evidence that many producing countries are over-estimating these reserves. It is time for organizations to go beyond the “we need to study this” or “the jury is still out” phase, and time for organizations to enter the “begin transitioning right now” phase.
7. Show real thought leadership and catapult the organization into a position of public prominence. The U.S. government is clearly resisting change when it comes to transitioning away from oil, in fact there is ample evidence of gridlock in Washington on these issues. As a result, individuals, communities, and organizations need to all initiate their own plans for the transition away from petroleum.
8. Prepare for government-dictated mandatory changeovers to alternative energy sources, and away from petroleum. Recent research indicates that the world has, at most, thirty years to get the gasoline completely out of cars, and to otherwise stop burning fossil fuels. So while there are no current laws or regulations that require a complete conversion to new transportation technologies, for certain types of organizations, there are already partial mandatory conversion laws and regulations in place (in the U.S., one such law is the National Energy Policy Act of 1992).
9. Limit the likely future damage caused by government fuel rationing. They should expect that there will soon be rationing because even conservative organizations like the International Energy Agency (IEA) have developed plans to impose rationing via the authority of the United Nations.
10. Avoid restrictions in the petroleum-based fuel supply created by government-imposed price controls. In an effort to look as though they are doing something about the rapidly increasing price of petroleum-based fuels, many governments will impose price controls, as Richard Nixon did on oil in the 1970s. But the record is clear that these price controls do not work — they in fact create shortages.
11. Avoid a black market in petroleum-based fuels and the related government corruption. Government interventions (price controls, rationing, etc.) in the oil market will become increasingly common in the years ahead. The real-world experience in countries, such as Nigeria, shows that fuel adulteration, political bribes for favors, and related corruption problems will soon follow.
12. Prepare for a new business environment where energy is scarce. Reflecting the difficulties that we as a species are having when it comes to transitioning to renewable energy systems, over the next decade, the total amount of available energy, on a per capita basis, is likely to be considerably lower than it is today. In large measure this is because the available quantities of fossil fuels will be considerably reduced. Politician claims about the “American way of life being non-negotiable” don’t in any way change this fact of life.
13. Recognize that conversion will take years of sustained and dedicated effort. Warnings about peaking world oil supply were issued more than 30 years ago, so we have had plenty of time to prepare. Unfortunately, very little has been done, and we are now in an oil crisis. Nonetheless, it still takes years to establish the new technologies, the new infrastructures, the new habits, and the new economic systems needed to fully support and exploit alternatives.
14. Begin to recreate themselves so that they are truly independent from oil, so that they open up new and previously unappreciated options. Oil is now used, in one way or another, in just about every industrial product produced (such as paints, carpets, detergents, food additives, fertilizers, and pesticides). Organizations are more likely to see and create new possibilities, such as organic and natural products, when they move away from their dependency on oil.
15. Formally acknowledge just how many of their internal costs have been oil dependent. An examination of the income statements for many organizations over the last several years will indicate that fuel has been a relatively minor and immaterial cost. But this will dramatically change in the years ahead, as the airlines and trucking firms are already coming to appreciate.
16. Lower the future cost of goods sold and/or future overhead costs. By moving to alternatives, organizations can at least partially unhook themselves from the direct correlation between the increase in the price of oil and the increase in the price of other goods. For example, studies show that a 33% increase in the price of oil translates to a 0.6% to 0.9% increase in the consumer price of food.
17. Insulate themselves from volatile oil prices caused by increasing political involvement in the oil market. Uncertain future supplies of petroleum are making prices for oil volatile, and we can expect that this volatility will get worse in the near future. This volatility will be made worse by the maneuvers of certain governments, such as that of Russia, as they attempt to gain greater power and influence using their energy resources as weapons.
18. Insulate themselves from volatile oil prices caused by speculators participating in the oil market. While speculators have recently been blamed for the run-up in the price of oil, the presence of speculators is really only a reflection of the widespread belief that there is major money to be made in the futures market and similar commodities exchanges. While speculators may be able to change the price of oil in the short run, in the long run they are not able to affect the market price, because they do not change the underlying supply and demand. Organizations transitioning away from oil can thus eliminate the need to be in competition with speculators for a dwindling supply of oil.
19. Expect that real oil prices will significantly increase because governments will add new taxes, and eliminate the existing subsidies that have encouraged the consumption of oil. While many countries, such as Iran and the United States, have subsidized both the oil industry and consumers using oil, as global supplies become tighter in the years ahead, governments will change their policies to discourage the consumption of oil. These same organizations will thus avoid having to pay the much higher cost of future petroleum-based fuels. Note that a full-costing analysis recently done by Milton Copulos at the National Defense Council Foundation indicated that the true cost of American gasoline is now US $8/gallon (this includes government subsidies, the cost of the war in Iraq, etc.).
20. Anticipate that government attempts to buffer the volatility in the oil market will diminish and soon cease. Many governments such as China and the U.S. have invested in “strategic petroleum reserves” to help buffer their domestic markets against oil shocks in the world market, but these and related approaches will soon become too costly and as a result they will be abandoned. The world is facing a shortage of certain raw materials, such as oil, and no measure of government meddling can protect consumers of oil from that fact.
21. Prepare for carbon taxes intended to reduce greenhouse gases and deal with climate change. Western Europe is currently setting an example for the rest of the world in terms of adopting laws and regulations to discourage carbon dioxide emissions. The approaches found there (including cap-and-trade systems) are likely to be found in many other countries in the years ahead. So organizations that have adopted certain alternatives, such as electric vehicles, will be well prepared for these new laws and regulations.
22. Set their organizations free from the traditional link between economic growth and inexpensive oil. The recent economic growth of both China and India has been inextricably tied-up with, and enabled by, the availability of relatively inexpensive fossil fuels. But in the future, when these fuels are much more expensive, economic growth will still be possible when renewable alternatives are employed.
23. Achieve freedom from the oil supply problems occasioned by the super-sensitivity of the oil market to small disruptions. The oil embargo against the United States in 1973 provided an example of how a relatively small reduction in the supply of oil can cause a profound impact, and although the world has changed since then, the panic and impact associated with such disruptions will still be quite serious. For example, Dr. Henry Kissinger called this oil embargo “the most threatening event for the world’s developed economies since World War II.”
24. Obtain freedom from oil supply problems caused by trouble in the complex oil transportation network. The routes taken to deliver oil from producing country to consuming country are often long and complex, and because the buffers in the system are now so small, relatively small disruptions in that highly tuned system, perhaps caused by terrorist incidents, can cause serious supply disruptions for the consumers of oil.
25. Avoid damage from fuel supply interruptions caused by resource wars. Research by Professor Michael T. Klare indicates that the cause of recent wars and violent conflicts has in many cases been competition for resources, often petroleum. Without question, the struggle for control over these scarce and valuable materials will worsen in the years ahead.
26. Obtain freedom from supply shortages caused by the long time it takes to build new oil production facilities. Many oil producers have been under-investing in infrastructure in the recent years. It can take five years or more before new wells are able to produce oil. This means that even if there are vast and economically accessible reserves of oil locked under the ground or ocean, it will still be many years before this oil can be brought to market.
27. Limit fossil fuel supply interruptions occasioned by refinery upgrade problems. The further we go beyond the world peak in supply, the more undesirable the quality of the oil will be (tar sands are a good example). This is because the most desirable oil was produced first because it was more easily obtained, less expensive to process, etc. The less desirable oil produced in the years ahead requires that refineries be retooled so that they can process heavier oil, oil containing more sulfur, and the like. Delays associated with this retooling may lead to local shortages.
28. Avoid having to scramble at the same time that nearly everyone else is scrambling to transition to alternatives. By transitioning now, organizations can take advantage of commercially-available alternative energy products and services, rather than coping with delays when everyone else is attempting to transition at the same time (when an even more severe petroleum crisis occurs).
29. Off-load gas guzzlers and other petroleum-dependent equipment while there is still a market for these machines. At a certain point, the decline in the availability of petroleum will be quite rapid, especially for those consumers in oil-importing countries. Those consumers who get rid of their gas guzzlers and related equipment now will at least receive some money for these machines, while they may receive nothing after the rapid decline takes place.
30. Help to assure that their workforces are able to get to work. As gasoline and petro-diesel prices soar in the years ahead, the poorest segment of an organization’s work force may be forced to quit their jobs because they can no longer afford to commute long distances from remote suburbs. So an organization that helps its workers transition to alternatives (including public transportation) will then be more likely to retain these same workers in the years ahead. Reflecting this, a recent Business Week survey indicated 26% of workers were considering quitting their jobs to get a better commute, and 65% thought that their employers should step-up and take the lead in dealing with this problem.
So if your organization isn’t already seriously planning for its transition away from petroleum-based fuels, talk to your department manager about it, talk to your firm’s Chief Operations Manager about it, talk to the organization’s Contingency Planning Manager about it and/or start an employee brown-bag discussion about it. Within your community, write your legislators, meet with your city council representatives, mention it to your neighbors and otherwise help to shift people’s consciousness so that they will soon move away from petroleum. The first step is widespread awareness that this transition must in fact take place now; the resulting actions will follow naturally from that awareness.
Charles Cresson Wood is an alternative fuels management consultant with Post-Petroleum Transportation, in Sausalito, California. His latest book is Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action. For more information about the book, as well as a mechanism to contact him, go to www.kickingthegasoline.com.
A different version of this article appeared on 11 August 2008 in Renewable Energy World; http://www.renewableenergyworld.com/rea/news/reinsider/story?id=53247.