Where would we be without oil?

"Where would we be without oil?" This question is - in so many ways - a non-starter. The most primary reason is that it is based on a high level of conjecture, and is highly non-specific. First of all, does the question assume that petroleum oils (and I'm assuming one means petroleum oils and not vegetable oils) never existed? If this is the assumption, then does coal exist, too? Does the question assume that we ran out of oil very early in our quest for mechanization? Because of these integral problems to the question that leaves such musing only to the realm of alternate historians, I will not focus on that question.

Instead, I will look briefly on the question, "Where will we be after oil?" This question is much more meritorious of consideration because it doesn't assume a different present condition than what we see (or assume we see) today. The impacts of the future are still questionable, highly contingent upon when we "run out" of oil.

My quick consideration of this question - written extemporaneously - considers that we run out when great experts in in the field say we will run out in a letter - a version of which has recently been posted on their website - namely "...Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand." The discussion of "easy-to-access" oil and gas implies that there is always retrievable oil, but it will not be economically viable unless people accept increased cost of extraction or when technology decreases the economic costs of extraction. Therefore, Mr. van der Veer's estimate gives us seven (7) years until we reach "peak oil" based on today's technology and assumed willingness-to-pay.

To put it another way, this is:

• roughly 28 quarters of economic activity,
• almost 2 American presidential terms,
• 3.5 terms of an American representative,
• a year more than 1 term for an American senator,
• at least one election within China's National People's Congress,
  
• potentially two elections of India's House of the People,
  
• one election of India's House of States, and
  
• (for facetiousness-sake only) roughly seven Italian governments.

Why do I make all these pronouncements? Well, as much as many people in the United States might still believe in the prominent role of the United States in setting global oil prices, what is closer to the truth is something different. China and India have increased oil imports dramatically over the past eight years, and OPEC oil production is not so nicely relate-able to oil prices any more. True, the United States has increased its oil consumption along with oil prices. However, if you look at the trajectories of Chinese and Indian oil imports (even only considering 2004 trajectories), the seemingly ever-increasing oil prices on the world market start to make more sense. Again, so what?

The trajectories of China and India indicate a continuing race toward an oil-based economy. This race (with concomitant oil consumption growth rates) will quickly lead these countries into becoming (combined) a greater force on world oil prices than the United States. Already, these countries are approaching non-OPEC countries for oil contracts. By working with non-OPEC countries, production levels set by OPEC will not have a major impact on world oil prices, unless OPEC decide to trade directly with countries (and thereby lose out on the possible profits of selling on a world market with an ever-increasing price for their commodity). This is why India and China are important when considering the course of the next seven years.

The United States already surpassed 20million barrels of oil per day in 2004, indicating in another way what President Bush statement in his 2006 State of the Union address that "America is addicted to oil." Like any addict, coming off a drug is going to be difficult. Very difficult. Can the United States wean itself off oil before the "end of oil"? The United States is faced with a series of problems related to weaning itself off oil in the next seven years.

1. A large percentage of the imported oil is used as energy, with the lion's share of that energy being consumed in transportation.
   
• The planning of many American cities - for too many reasons to explore here - seems to have tacitly assume the extensive use of private motor vehicles, and there is now little possibility of extensive public transportation alternatives.
2. The American citizen cannot easily afford to a purchase of a new vehicle under normal economic conditions, let alone one that the United States finds itself in now (looming recession, loads of home loan foreclosures).
   
3. American motor vehicle companies have spent blood and money lobbying the government to keep fuel economy standards low, and even the recently-increased standards do not fit an adequate time line to meet the seven year projection of Mr. van der Veer.

Taking these problems together, it would appear that a majority of Americans require motor vehicles to survive adequately in today's America (although most citizens live in cities, these cities don't have high-density public transportation systems like NYC or Chicago). The majority of Americans' motor vehicles run on petroleum. The majority of these vehicles are not "fuel efficient" by today's standards, let alone the standards of 2015. The majority of Americans cannot up-and-purchase a new high-efficiency motor vehicle when petroleum prices start to climb through the roof (as we might expect will happen in 2015). This means that, while the fuel economy of the American fleet is getting better, it is likely to take more than seven years before a significant proportion of the United States can afford to purchase a truly fuel-efficient vehicle such that US oil dependence (at least in transportation) will be diminished enough for that same majority of Americans to adequately deal with the transition of fuel type without the economy grinding to a halt.

The actions of the US government in the next seven years will be very critical, since it is through the role of government that a unified plan for the betterment of a country can be made and done in such a manner that it is legally defensible. A country cannot assume the benevolence of any company, since the off-shoring and downsizing movements of the past 10 years have shown that many companies are not civic-minded, nor do they have any legal responsibility to be so. It is up to government to take care of their own country.

Similarly, China and India will have the next seven years to manage the growth trajectories of their own countries. How this will play out, I don't know (I'm not intimately knowledgeable of the situation in India and China). However, I assume that "end-of-oil" is going to be very problematic to both countries' economies, and therefore it is in their own interests to develop contingency plans. Peaceful options include developing alternative energy sources for transportation (to wield that scientific and engineering muscle that supposedly is being developed), radically changing the means of growing capital (thus forcing the world to follow their lead), or investigating more efficient fuel extraction technologies (although this is just playing the Red Queen, and will likely prove futile in the end).

What will happen in the next seven years will be interesting. Hopefully, it will not be as interesting as what will happen when we do end up on the other side of the "Age of Oil." Hopefully, answering "Where will we be after oil?" will be at a location where we will have dodged the bullet. However, in my explanation, I left out African, South American, European and SE Asian politics (let alone the outfall of what will happen to a Middle East that no longer plays a dominant role in global resource politics). Likely the Age of Oil will play out over several decades rather than within one.