The world economy is hooked on fossil fuels: oil, gas, and coal. This dependency cannot last. All these fuels were formed millions of year ago and once used up cannot be replaced.

This reliance on fossil fuels has largely developed in the last 200 years. Before that, most energy was renewable – animal and human muscle, wood, some wind and water power. The harnessing of new sources of energy, especially coal, about 250 years ago was crucial to the industrial revolution and all that followed.

Oil became a major fuel about 100 years ago and with it came the explosion in global transport – automobiles, trucks, steam ships, and airplanes. In the last 50 years, natural gas has been added to the fossil fuels, mainly replacing coal and its products in heating, electricity generation, and industry.

Of course, most of the energy that humans depend on still comes from the sun, to keep the planet and us warm, to power plant growth for food, fibers, wood, and other uses. However, the sun’s direct energy is free and therefore does not enter the marketplace. Fossil fuels account for nearly all (85%) of tradable energy. Of this, coal accounts for 25%, natural gas for 20%, and oil for 40%. Oil also provides the energy for 90% of all transport. The remaining energy is from nuclear (7%), hydro (7%), and other renewables (1%).

But not only is the world dependent on these limited fuels, it depends on these sources being cheap. Until the recent price increases, gasoline in the U.S. was cheaper than bottled water.

Oil Supply Limits
Fossil fuels are finite. At some stage they will run out and the present energy uses and patterns will inevitably end. In reality, the world will not use the last lump of coal, the last drop of oil, or the last puff of natural gas. The issue is not when will the world run out of fossil fuels, but when will the plentiful and cheap energy end and what will be the impact?

There is growing concern and debate around what is called “peak oil.” This is the point at which the production of oil reaches the maximum, whether in a single field, a country, or globally. After the peak, which usually occurs when about half of the available oil has been extracted, there is a longish tail, often lasting decades, of declining production.

Globally, it is believed that the world is close to the peak for oil. Discoveries of new oil fields have been in decline for 40 years and, as most of the world has been explored, it is unlikely that any new super-large fields will be found. The world is now using four times more oil than new sources are being found. There are conflicting views, but the general consensus is that the peak for conventional oil is likely in the next decade.

The supply of oil can be extended for a decade or so from the peak based on present production, new extraction techniques, using more-difficult-to-reach sources, and using tar sands. However, all these take more energy to produce, so have a lower net energy gain, cost more to extract, and result in significantly more environmental damage. Natural gas can also be used as a substitute for oil and could delay the peak for a decade or so.

The problems for the world economy begin long before the absolute end of oil is reached. Reaching the peak will set off a major crisis as demand for oil begins to outstrip supplies, prices increase, and pressure for long-term oil security increases.

The present high price of oil, due to rising demand, instability, fear about the future in the Middle East, and the limitation of production, is likely to be here to stay. As the impacts of peak oil bite, oil prices overall may go even higher.

A secure supply of oil, and to a lesser extent natural gas, is vital to the economy. There are already conflicts over oil supplies and these are likely to increase. Most of the major reserves are in the Middle East and Central Asia. A key reason for the two wars with Iraq was the U.S.’s need for cheap oil. The political struggles between the U.S., Russia, and China in Central Asia could develop into armed conflict over oil between their regional client states.

In the next 20 to 40 years, if there is no replacement for oil the world would be facing a new depression and, some have suggested, a new “Dark Ages.” Without oil or a cheap replacement, the world would be back to using human and animal power and wood. An industrialized world, and the possibility of decent living standards for ordinary people, needs plentiful energy.

Alarmist
There is a tendency for those who predict doom to exaggerate. There are capitalist commentators who have ridiculed the idea of peak oil and the prophecies of oil wars, depression, and the end of civilization. They believe that the pressure of the market will stimulate ingenuity and technology to find answers.

It is true that the world is awash with energy flooding from the sun and rumbling beneath our feet in the earth itself. However, to harness these in effective and affordable ways is a challenge.

The revival of interest in nuclear power among businesses and governments has probably more to do with concerns about peak oil and the desire to have secure and relativity cheap energy than it has to do with concerns about the environment. After all, nuclear power is full of risks, as the 20-year anniversary of the Chernobyl disaster reminds us. It produces highly toxic waste that lasts for thousands of years and for which there is no safe treatment.

Nuclear power is at best a short-term and misguided response to peak oil and climate change. But the problem will be for the future, so the present decision-makers don’t care.

The U.S. government and much of big business suggest that hydrogen will take the place of oil. However, although hydrogen is a clean fuel, it is not freely available. It is not a source of energy, rather it is a means of storing and carrying energy. To produce hydrogen requires an input of energy, so it is only a solution if the initial energy source is cheap and non-polluting. It is therefore no solution to peak oil or climate change.

Renewable Energy
The alternative to both fossil fuels and nuclear energy is a combination of energy efficiency and renewables that in various ways harnesses the plentiful and free energy from the sun, the tides, and the earth to produce electricity, heating and fuel.

Yet internationally, there is no serious move to renewable energy. Governments continue to highly subsidize fossil fuels and nuclear power, while government and business continue to spend much less on research and investment into renewable energy.

Companies that are based on fossil fuels and nuclear are big business. Oil and gas, auto, road construction, airlines, property developers, and the power supply companies are among the giants of the world. A shift to a renewable-energy, high-energy-efficiency society with well-insulated buildings, a move away from urban sprawl, and a dramatic shift to public and energy-efficient transport would damage many of these companies.

It is likely that in the short term capitalism will go for nuclear and coal in response to peak oil and leave the increased problems to future generations. If there is not a fundamental shift to efficiency and renewable energy, there is a risk of serious energy shortages and energy wars, with the living standards of workers in the advanced capitalist countries facing a fundamental threat.

In theory, capitalism is capable of moving to renewable energy, but there are many barriers due to its priorities and structures, and it is leaving it late. The clocks of both climate change and peak oil are ticking away. Environmental problems, once considered small and local issues, now pose fundamental challenges not just to capitalism but to humanity’s future development.

If capitalism does not solve the energy issues and there is a major collapse in energy supply before capitalism is overthrown, then human society could be thrown backwards. Again, the future is a choice between socialism and barbarism. In addition to the crucial issues of climate change and pollution, peak oil means that socialists need to develop policies to provide affordable energy for the world and campaign for renewable energy.


Some sources of more information
Peak Oil: http://www.peakoil.net/
The Oil Depletion Analysis Centre: http://odac-info.org/
The Solar Economy, Scheer, 2002

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