this article is a big deal...

Thanks to JD for pointing out the story in the Guardian today regarding comments by Colin Campbell of ODAC to a bunch of Swiss financiers.

"The one thing that international bankers don't want to hear is that the second Great Depression may be round the corner. But last week, a group of ultra-conservative Swiss financiers asked a retired English petroleum geologist living in Ireland to tell them about the beginning of the end of the oil age.

They called Colin Campbell, who helped to found the London-based Oil Depletion Analysis Centre because he is an industry man through and through, has no financial agenda and has spent most of a lifetime on the front line of oil exploration on three continents. He was chief geologist for Amoco, a vice-president of Fina, and has worked for BP, Texaco, Shell, ChevronTexaco and Exxon in a dozen different countries."

(I'll try to have a more extensive news wrap-up and linkfest tonight. I am on the committees of folks in two thesis defenses this week, and then there's a dissertation defense tomorrow. UGH!)

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A lot of bloggers who should really know better are seriously head-in-the-sand on the coming crisis. If I read one more debate over whether it's better to solve this problem through CAFE standards or through smart urban planning, I'm going to throw up.

For a while, I was imagining (hoping for) a slow, manageable slide. Then I remembered that oil is traded on the commodities markets. The price shock is going to be sudden and brutal, because everyone who's trading is just itching to see when peak oil is going to happen; as soon as they see even a hint of permanent production decline, they're all going to pay any price to hoard the stuff. It will happen almost instantly.

The price of gasoline jumping by a factor of 4 or 5 is unthinkable in the United States. And anyone who believes otherwise is simply unable to comprehend the workings of complex syxtems.

Meanwhile, the stock market will react, naturally, by punishing the most oil-dependent companies (large retail chains), which will hasten their slide into oblivion. I can't even imagine the economic consequences of every national retail chain shutting its doors, or contracting to a tenth of its former size, but the unemployment alone will be unprecedented in the U.S. (even in the Depression it was only 20%).

But the biggest problem, as I see it, is food. Our system of food production and delivery will have to be dismantled and rethought at every level. No more petrolem-based fertilizers; what will replace them? No more gasoline-powered machines; what will replace them? Also, most crops in this country aren't edible; they're grown in order to be made into something else; that's several extra steps, all requiring cheap energy. And how will food be packaged, without plastic? It can be packaged and grown locally with, say, paper, but not to be transported 1,500 miles. And how will it be transported, when shipping will be 5 times as expensive?

People who believe that this will be a slightly-bumpy-but-mostly-orderly transition are either unwilling or afraid to think everything through.

I am not sure that the transition will be quite that brutal. Remember we had a similar scale event back when the oil taps were closed in the Middle East back in the 1970's. Now the economy has changed a bit since then, but I think that the shock will be of the same sort of magnitude. The real change will come as folk understand that it is both real and long term. It will change, as you say, a lot of the relative economics, of who does what where. Unfortunately for such a transition to work there has to be some planning and foresight.

Look, I've never hoped for anything more than I hope that I'm wrong about this.

"Unfortunately for such a transition to work there has to be some planning and foresight." Oil Drum

Agreed, but it doesn't appear to be happening in the U.S. currently. I've followed the energy blogs for a few months now, and the conclusion I"ve reached about the replacement of fuel for transportation is that hydrogen will play a big part (at a very high cost, mind you). But for this to happen, it will require a massive increase in the electrical generation capacity, which to me means nuclear power plants. There are 104 nukes in the U.S. today, the last one built was in the 1970's. I've seen estimates that suggest we will need 300-400 new power plants to generate sufficient capacity for a hydrogen replacement approach. These plants require about 7 years from planning to utilization, if the will is there. However, there seems to be a serious aversion to even thinking about this, so clearly we are at least 10 years away (and probably much longer) from connecting new plants to the grid.

So, I agree completely that planning and foresight are needed NOW, but where is it? Where is the leadership from our politicos? Every now and again they rise up on their hind legs and bellow about maintaining the American way of life (ie. cheap gas) but where is the planning and foresight?

We are in the early phases of a long-term recession/depression which will last at least 10 years and probably decades longer. Our standards of living must erode significantly. That's the warning message I keep pounding out on my keyboard with the hope that some will take heed. The wealthy will adapt ok, but the middle classes and poor will suffer enormous harm.

Thank you for your excellent work.