Peak oil in unindustrialized countries is starting now

As I noted the other day, non-industrialized countries are effectively battling peak oil right now, regardless of whether the world has hit the peak or not. For these countries, access to oil at current prices is prohibitive, and it's affecting every aspect of their societies.

Big Gav points us to an in-depth article about the energy situation in Guatemala. It's not at all pretty (in fact, it wasn't pretty even when oil was cheap), but Gav also makes the observation that "this article (like Matt Simmons yesterday) notes that some third world countries may adapt better as they don't have so far to fall."

I got slammed on the old site when I dared to suggest that we might think of Cuba as a model for how to deal with peak oil (the comments are still there even though haloscan says 0). I still think that we might have something to learn from unindustrialized countries—practices that could be put in place not only if the crisis gets bad enough, but in order to cushion the fall (urban farming would be a start). I don't hope that someday we turn into an impoverished, crime-ridden society like Guatemala, but I also don't think we can deny that we who are on the top now only have longer to fall should the worst case scenario come true.

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"...this article (like Matt Simmons yesterday) notes that some third world countries may adapt better as they don't have so far to fall."

Having spent some months in Guatemala and Nicaragua (both in rural and urban settings), I would doubt this in these cases at least.  

In the rural settings, many people are dependent on cash crops to provide a small amount of cash to buy food.  (I watched a woman drying a bag of wormy beans in the sun.  This was supposed last about 6 weeks for here family. The cash was derived from picking coffee for day wages--one bean at a time.)  When the coffee prices began to plummet due to the World Bank destabilizing the coffee market by funding coffee plantations in Viet Nam, these compasinos were fleeing into the cities.  Their way of surviving is very much influenced by the global economy.  

Cities are densely populated and rely on fuel to transport food into the urban areas.  I would be very worried if fuel would become more than just expensive but also scarce.

The spectre of starvation would be very real in Nicaragua and Guatemala should fuel become scarce.  

Let's not even talk about what global warming has planned for them.

In sum, Simmons' is overly optimistic about the effects of peak oil on third world countries.  Population densities would exceed the carry capacities of man of the places I have seen.  Extrapolating to cities like Mexico City, etc. would not bode well for the populations under severe peak oil conditions.

I agree with Yosemite Sam is the short and perhaps medium term, but feel that 5 years out the picture may be quite different.

Globalization is essentially a conveyor belt transferring high-value calories, protein, energy and money from the global South to the industrialized North.

With peak oil comes the end of the cheap transportation that makes globalization on it's current scale possible. The end of globalization means the end of the maquiladora and of export agribusiness in the South, which will bring massive hunger and deprivation in the short term.

However, the people of Central America have a tool readily at hand to remedy the situation: revolution, land appropriation and redistribution. With an urban population much of which still has agricultural skills, with a revolutionary government willing to seize the fields, and with the Yanqui gunboats running short of gas, it would not surprise me to see much of Latin America survive energy descent in better shape than North America.

Whoever wins the coming civil wars, there are still a lot of mouths to feed. Gas, fertilizer, etc. have made that possible.  I fear there will be a lot of starvation.

Referring to earlier references to Cuba is a special case in that it has had decades to gradually make a transition to partial post-carbon society.  We can't take comfort that since Cuba did it, so can we--unless of course we got VERY serious about the coming crisis.

I would hardly call a 50% reduction in oil imports over a three year period gradual.  See The Agricultural Crisis in Cuba for details.
Wow!  Nice link.  No, not too gradual.
I have to agree.  I spent some time in Guatemala and El Salvador just as things were cooling down in 1993.  There is not much of a margin for economic hardship with these people.  Even if there is land reform, the transition is going to be uglier than anything we saw in the 80s.  

I tend to think that things will be bad in the U.S., but far worse in the South.  

However, talking of the US.

If the Devil himself wanted to design a perfect trap for attracting morons, he couldn't have done better than this season's New York International Auto Show at the Jacob Javits Center.

Most of my family believes that the US government has purposely limited oil production in the US. They think that if the government developed all these fields they are supposedly sitting on, we would have enough to last for many lifetimes. I really think they overestimate our government and underestimate the scope of the problem.
Has Simmons comments on developing countries got anything to do with this announcement- maybe he too is heading for the hills to grow mung beans :)

Energy guru Simmons steps down as CEO
Copyright 2005 Houston Chronicle

Matthew Simmons, energy market rabble-rouser and author of Twilight in
the Desert: The Coming Saudi Oil Shock and the World Economy , is
stepping down as chief of the investment bank he founded in 1974.

Michael Frazier, who joined Simmons & Company International in 1992 and
became president in 2001, will take the helm of the company's day-to-day

Simmons will stay on as chairman and remain involved in shaping the
firm's strategies.

Maybe, or maybe he's just spending too much time traipsing around the country preaching PO to be able to run his company effectively....(not that I'm criticizing)
This is my first post on this site. I've read Simmons book, and agree with his analysis, but you guys are nuts.

What Simmons says is the decline is gradual, and the effects range from a recessin to a depressionBut, now to extrapolate to world wide hunger. That's just stupid. Simmons says, there is a certain level of oil that can be produced, for all practical purposes, forever. Sure, this amount may be up to 50% less than today (and more expensive), which has huge consequences on our way of life and economy, but you guys need to take a pill.  

The world is not ending, I repeat the world is not ending. Now, go back to your daily lives.

We have to figure out a way to do that because if we go to war, it will actually be the worst war we've ever fought. And if we don't address the problem, we will be in an energy war. What I find interesting is I actually think we can solve this problem, but I also think if we ignore it, you can't create a scenario that is too awful.
--Matt Simmons, August 18th, 2005.
The world is not ending, just about to change in a very radical way.
In recent days, signs of economic and social stress caused by high oil prices in Latin America -- now being felt most prominently in the Caribbean and Central America -- have multiplied. Gasoline prices in all Central American countries are above $4 per gallon -- more than many Central Americans earn in a day.

Given the relative poverty of these countries, the high price of fuel constitutes a heavy economic burden on governments trying to subsidize fuel prices and on individuals forced to pay fuel prices. With no relief in sight, the economic and political impact of oil prices is likely to get worse -- and even become the primary regional issue in the months ahead.

The pressure drove Central American leaders to visit Colombia on Sept. 13 to examine its industry for using ethanol as an alternative energy source to petroleum products. And on Sept. 14, Brazilian President Luiz Inacio "Lula" da Silva invited the group to visit Brazil to do the same. These visits constitute the first high-level considerations by Central American leaders of the need to find alternative energy sources for their petroleum-dependent economies as they face increasing problems at home in coping with persistently high oil prices.

In the most extreme example of price-related unrest to date, a proposed 19.7 percent gasoline price hike by the Honduran government along with restrictions aimed at curbing gasoline consumption prompted taxi and bus drivers in the capital to protest, forcing the government to reduce the price increase to 9.9 percent. And on Sept. 9, the first widespread civil unrest to hit the country in years occurred as protesters blocked roads and demonstrated nationwide against energy price increases. With presidential and congressional elections scheduled for November, energy prices are likely to dominate the campaign -- and how voters cast their ballots.

Other Central American nations are facing the exact same problem, and are heading in the exact same direction. The dependence of Central American countries on power plants fired by petroleum products such as oil, gasoline and diesel further compounds the problem posed by high fuel costs. For example, Honduras depends on petroleum fuels for close to half of its power generation, Guatemala generates 60 percent of its power from gasoline-fired plants and Nicaragua gets 85 percent of its electricity from oil-powered plants. Consequently, power rationing is becoming increasingly likely, something which will further inhibit economic activity and increase social unrest.

Caribbean nations are feeling the pinch, too. On Sept. 12, the Dominican Republic announced emergency restrictions on gasoline consumption in an effort to reduce demand, and Jamaica already has seen mass protests as a result of fuel price increases. Thirteen Caribbean nations signed a deal with Venezuela establishing the PetroCaribe initiative, in which Caracas will sell 200,000 barrels of oil per day at market prices, but in the form of a loan that the Caribbean buyers will be able to repay over 25 years at 1 percent interest. Even with this assistance, in the long term these countries at best will be racking up enormous amounts of debt that will worsen their overall financial standing. In the worst case, they will increase their debt loads and become unable to pay even reduced energy bills. In either case, they likely will face more trouble in the near term.

South America is starting to show the strain as well. Paraguayan state energy firm Petroleos Paraguayos recently said it is operating at a loss because of the need to fund fuel subsidies, and Suriname's public transportation system was brought to a halt Sept. 12 by drivers protesting a government decision to nearly double gasoline and diesel prices. The Chilean government, already facing a significant natural gas shortage due to an interruption of exports from Argentina, recently announced a 10-month subsidy program to cap gasoline at $5.27 per gallon, saying that without the cap, prices would have hit $6.37 in August. Santiago is being forced to use revenues from copper sales to fund the subsidy.

With no relief in the form of significantly lower oil prices seemingly in sight, the fuel-price problem should only get worse in the months ahead for those Latin American countries that are net importers of oil.

In contrast, for leading exporters such as Venezuela, Bolivia, Brazil and Mexico, energy prices are filling state coffers to the brim. This is resulting in a seeming separation of the region into, quite literally, the haves and have-nots with respect to oil. Venezuelan President Hugo Chavez in particular is taking advantage of the desperation of his neighbors to trade cheap oil for increasing political influence in the region. And every country that signs a preferential oil deal with Chavez represents another blow to U.S. influence in the region -- influence that already has declined precipitously. Further eroding that influence is a key goal of Chavez's foreign policy, and the impact of high oil prices is playing perfectly into his hands.

With the exception of Brazil, however, the region's main energy producers are all actively driving their energy sectors into the ground -- risking their good fortune and threatening their future stability. Venezuela's Petroleos de Venezuela and Mexico's Petroleos Mexicanos are in considerable financial trouble thanks to heavy tax burdens, low investment, restrictive regulations and generally poor resource management.

Moreover, gas and oil production in Bolivia, and now Ecuador, has proven to be highly vulnerable to the political activism of their large population of peasants and impoverished indigenous peoples. Argentina, with the region's third-largest natural gas reserves, is so poorly managing the sector that it had to cut off exports to Chile and increase imports from Bolivia just to keep its own lights on.

If these countries are unable to improve their political and regulatory environments to allow for the proper management of state energy companies and the reserves they control, which is unlikely, regional energy output probably will begin to decline, possibly as early as 2007. Argentina's natural gas output already is declining.

A perfect-storm scenario would see oil prices remaining high with output falling in Venezuela, Mexico, Bolivia, Ecuador, Argentina and Colombia -- the last of which is scheduled to become a net oil importer in a few years despite relatively good resource management. The result would be a regional energy crisis of catastrophic economic, social and political proportions. Such a scenario is not beyond the realm of possibility given present circumstances. Nonetheless, circumstances can change -- especially as regards the price of oil. So a perfect storm cannot be said to be imminent just yet.

What is likely is that in the next few months, however, Latin America will see increasing economic distress and social unrest as oil prices continue to punish energy importers in the region, further separating those with energy resources from those without. With a barrage of national legislative or presidential elections approaching in the region between now and the end of 2006 -- including races in, among other key nations, Argentina, Honduras, Chile, Bolivia, Costa Rica, Colombia, Mexico, Nicaragua and many Caribbean nations -- energy issues could subject the region to a bumpy ride.

Nice post.  What's the source of this?
It is from stratfor. I don't give links because you have to be a subscriber to have access.
Yes, this is it. For the US, a 20% cut in oil consumption would just mean returning to '70s - '80s lifestyles - not so bad. Decreasing oil supply will affect mostly (but not only) the transport sector. But in in the other part of the world - for those 5 billion people there - it will affect their whole economy. They have not much leisure driving to cut.

Besides those 5 billion people are expecting or at least hoping to raise their living standards and someday reach the level of the developed countries. Some, like the Chinese, are trying this right now. Peaking oil production would crush these hopes for ever. This is one of its deepest going effects.

Look at the world consumption statistics and you'll see what those 5 billion people would see: the only way for them to improve their situation and get away from worst poverty is to reallocate the world oil use and increase their relative share of it. From their viewpoint it is not possible to reduce oil consumption proprtionally over the board, the same percentage in the US and in Mali. The demand reduction must happen in those countries that consume most per capita. The rest should still be able to keep their consumption at present levels and, for the poorest ones, even increase it.

In this context it is important to note that most of the remaining oil is not in the rich countries (OECD). There was a time when the US alone supplied 60% of the world oil and the US and British oil companies owned the rest. Now the oil is in the hands of people who belong to that 5 billion majority.

An example: who will win, the US or China, if they compete for scarcer oil in an open market. China can always bid more. It is still 94% energy independent. It has a huge trade surplus. The imported amounts are still small compared to its economy and total energy consumption. The US will lose, but so will Guatemala. OK, yankees can survive but what about the Guatemalans? In any case they cannot get any help from the US any more but must turn to the oil producing Latin American countries. In many ways the world will start turning upside down.

The peaking of oil production will be a very eneven and complex phenomenon. This was the point of this post.    

I am from Brazil and I know that ethanol from sugarcane have a better energy output than ethanol from corn.

Here at Brazil the ethanol use is a viable possiblity, so MAYBE we will have not a so hard transition to post-petroleum era. IMHO the transition will be harder at USA than at Brazil, you have too much SUVs.

By the way, we are trying to develop biodiesel from native trees (species native from amazon rainforest and from Caatinga semi-arid that produce seed sthat are rich at oil) so maybe we don't need use soya beans to make biodiesel (if we are sucessfull at develop these native trees as viable biodiesel producers).

We have federal governement subsides to the consumers buy hybrid cars (gasoline-ethanol). Problably we will have more than 50-60 % our vehicles using ethanol soon. Our governement too want have 15 % our vehicles using natural gas. It is nice to have a serious governement that know that the peak oil is coming.

João Carlos

sorry the bad english, my native language is portuguese.

Perhaps this is not an oil peak  but just a oil spill?
 or not an oil peak ,,, but an oil pique  
and all the riots and protests are just an oil upset?

having seen hills, weathered mountains (eastern US)  and  mountains western US  they and I are not looking forward to the peaks

The impact of higher oil prices are much worse than it is in the post-industrial or industrial countries. The few oil which is used per capita provides some real basic needs, like transport of food, running a water pump for the water supply or electricity supply for any kind of health stations. If there is no more fuel to run this services, then the first victims will be the poorest of the poor.

Here in Europe our life is oil dependent. But this will not become a lethal threat to us. There is of course going to be a shift of lifestyle. We will just have to pay a higher percentage of our incomes for energy and gradually there has to be a shift to more energy efficiency and a strong growth in the field of alternative energy.

Here in Berlin natural gas prices will rise once again by more than 10% this year. Bad for the retailers, because this will reduce consumption. But is this really a pitty?

Here is my list of countries experiencing what may be peak oil-like events:
Nigeria 9/04 no fuel for airplanes, 9/05 unrest from fuel price hikes
Indonesia 6/05 Blackouts in Jakarta 8/05
China 8/05 gas lines 8/05
Panama 8/05
Phillipines 8/05 talk of fuel rationing
Zimbabwe 9/05 major fuel shortages
Tanzania 9/05 imminent acute fuel shortages
Nicaragua 9/05 rolling blackouts, water shortages (pumps off)
Belgium 9/05 strikes to protest fuel costs
Jamaica 9/05 energy protests + deal with Venezuela
Sudan 9/05 jet fuel shortages cause reduced food availability

The stories from which I wrote these short notes were generally in mainstream media.  I should probably add UK due to the recent fuel protests, but maybe that's more political.

I agree with Yosmeite Sam at least to a degree. The third world is less dependent on gasoline for transportation than we. On the other hand they need fertilizers for their Green Revolution crops....