"The end of the oil road will not be the end of the world.  Just be the end of the world as we know it."

The end of
the road

This poetic and heartbreaking tale reveals the human tragedy of our misuse of the earth's resources.

Mike Neligh, 2000

Twenty-five miles north west of the small town of Kenai Alaska, at the end of the Kenai Spurr highway, there is a State park. For the intrepid voyager fortunate enough to reach Captain Cook State Park the views are, to put it mildly, magnificent. To the west, across the Cook Inlet, the peaks of the Alaska Range rise, seemingly, strait out of the bay to lofty purple spires approaching fifteen thousand feet. A chain of volcanic peaks stretches from horizon to horizon like a bracelet on the wrist of a giant arm. On the waters of the Cook, a string of oil platforms dots the surface, their flare stacks glowing orange from burning of excess natural gas.        

Among its other attractions, Captain Cook State Park is quite literally the end of the road.  It lies as far west on the continent of North America as it is possible to drive. Beyond the park lies three thousand miles of trackless wilderness, finally stretching to the eastern shores of Siberia. Looking off into the endless expanse of western Alaska one is humbled by the notion that here, civilization ends. Captain Cook State Park is an extraordinary place, but it is also a prophetic place. Standing on the headlands of the park, one can scarcely fail to notice that erosion has claimed the last several yards of the road. The wind, tides, and constant earthquakes for which Alaska is justifiably famous are taking their toll - removing the underpinnings of the road and reclaiming the materials from which it was constructed. In the thirty years since the park was built, the forces of nature have devoured an acre of ground that was once a parking lot. The end of the road is slowly working its way back toward the provinces of the civilization that created it, and there is nothing that can be done to stop it. And while natural forces are slowly erasing the products of humanity at the end of the road, equally corrosive economic forces are conspiring with the laws of nature to eradicate the intricate web of socio-economic structures that the people there have built up over the past three decades.         

If the park is a preview of the future, the City of Kenai is no less. For centuries this little fishing village was the center of society in south central Alaska. When oil was discovered in the Cook Inlet, just west of Kenai it became the focus of attention for the oil industry world-wide. People came from all around the world to drill for oil, refine the oil, and ship the oil to other places. More people came to sell things to the people who came. Like ants drawn to a cookie crumb, they swarmed toward an irresistible scent, and fought it out with each other for their share of the scrap. For a time it seemed to the new residents of Kenai that they had found paradise. But like the roads they built, their economic paradise soon began to crumble. When the construction was completed, many were laid off. When the drilling was completed, many more people left. When oil production began to decline, the shops closed, the jails filled up, and the refineries were abandoned.  Now, the winter snows occasionally collapse the roofs of deserted warehouses; the wind overturns a hastily set mobile home. The ocean and the ice work steadily to eradicate the forsaken docks and piers that once dominated the shore. Vagrants and idle youths set fires in the abandoned refineries that issue plumes of smoke laden with what, God only knows. Once virile construction equipment sits, half buried and stripped of its more valuable parts, like the skeletal remains of some long dead creature resting in a museum of natural history. The forest wages silent war against whatever was built of anything less substantial than concrete – those being left to the winter’s ice to deal with. The few people who remain spend their days calling Juneau or Washington DC to beg for money. Some devise schemes to revive the paradise they see slipping away. They threaten and deride anyone opposing their schemes, and go blindly about the business of prolonging their agony. They cannot see that it is over, there will be no revival.  The oil resource here has peaked and its decline is rapid and inexorable.  For Kenai and its people, the end of the road is within sight, and getting nearer every day.        

This small town in Alaska is only among the first to see the end of the petroleum economy. Kenai, in its oil boomtown iteration, was built to feed an oil based world economy, and when it could no longer offer increasing production, it was abandoned in favor of some other more able place. The world’s oil economy is particularly intolerant of people or communities that do not produce. It has no sympathy for (and no ability to sympathize with) people or places that can not hold up their end.  The more poignant aspect of this is that the oil, and thus the oil economy, cannot last.  Like Kenai, the world will run out of oil to pump.  And like Kenai, the effects of diminishing oil supplies will begin to take their toll long before the oil runs out.  Once oil production peaks and begins to decline, the oil economy will turn on the world as it did on Kenai.         

As it happened to the people of this remote Alaskan village, the problems will begin cropping up sooner than most people think. We have seen previews of this already. The OPEC embargoes of 1973 and 1979 put the US economy in to a debt/inflation spiral that took nearly two decades to recover from. These were temporary, politically contrived events and once the embargoes were lifted, the world economy went on about its business. While the economic damage was severe, the steadily increasing supply of cheap energy made it possible for the world economic system to continue its activities once the political problems were resolved. But the 21st century's supply disruptions and soaring prices will dwarf the OPEC induced shortages of 1973 and 1979. Not only will the shortages be greater in scope, they will have no political solutions - there will be no return to the former high production levels. These are real shortfalls, triggered when approximately half of the world’s supply of crude has been pumped.        

Once the midway point of the crude oil resource is reached, production will begin a steady decline, mirroring the rise in production during the consumption of the first half of earth’s crude. The technicalities and proof of why this is true are beyond the scope of this article but the simple explanation is that the more oil is pumped out of a field, the harder it is to pump out what remains. This is compounded by the fact that aging oil fields are drying up four times faster than new ones are being discovered and developed.        

Moreover, the cheap and easy oil is gone. New discoveries are more remote, deeper, and contained in less inviting geologic formations. A comparison of Middle East, and Alaskan North Slope fields illustrates this problem in monetary terms. The Middle East fields were discovered in the late forties and early fifties. Production costs from those fields are approximately six dollars per barrel, in 1999 dollars.  In contrast, the Alaskan North Slope fields, discovered in 1970 require a wholesale price of $10.50 per barrel to meet the cost of production. Production costs for North Sea oil deposits are roughly the same as those for the North Slope. Some of the smaller, and more recently discovered fields have production costs of fifteen dollars a barrel. (Ivanovich)         

A common view among economists is that the price of oil has a limited effect on the economies of western nations. They contend that during the past thirty years increases in industrial efficiency and increased productivity have made these economies less susceptible to oil price shocks than in the past. While this contention may be technically correct, the practical effects of increased efficiency and productivity are far less certain. According to Federal Reserve Board Chairman Allen Greenspan, “An increase in the overall rate of inflation in 1999 was mainly a result of higher energy prices.” (U.S. House) This assertion seems to have been borne out over the past year. During the period from March 1999 to March 2000 the price of crude oil on world markets rose from a low of just under ten dollars per barrel to a high of just over thirty-four dollars per barrel. During that same time, the Dow Jones Industrial Average went ostensibly flat; it was at just over eleven thousand at the end of March, 1999 and just over eleven thousand at the beginning of April, 2000. The increases in crude oil cost put an end to seven straight years of ten percent or higher annual growth in this critical economic index.          

Oil price fluctuations of the March 1999 to March 2000 period signaled a significant event in the history of the world’s oil based economies. These historic low prices were the first tangible signal of the peak in world production. One of the fundamental tenets of economics is the Law of Supply and Demand. According to this dictum, the cost of a good is at its lowest when the supply of the good is at its peak. The low prices of spring 1999 were as low as oil prices can go. If prices had fallen any further, production from the North Sea, and the Alaskan North Slope would have become economically untenable, causing a cessation of production from those fields. The North Sea and North Slope account for approximately twenty percent of the worlds’ total production. If those fields had been shut down, the resulting shortages would have quickly forced prices back up. From this we can infer that world price bottomed out and production peaked economically in 1999. This economic peak is the beginning of a period of relatively wild fluctuations brought on by the world’s economic system struggling to balance the competing demands of high production, and increasing costs. It is a struggle that the system will ultimately lose.  Once the physical peak happens and physical production begins to decline, there will be no way to maintain any form of price stability. Prices will begin to spiral upward, out of sight.        

If the dollars and cents of oil production were the only problem, the world economy might be able to struggle on for thirty or forty years more or less as it is, but there is a more fundamental problem associated with new oil discoveries. While there is a generally obvious economic cost associated with oil production, there is a less obvious thermodynamic cost that accrues from the production of oil. Economists predict that when oil prices rise sufficiently, the less efficient fields will become viable. This is only partly true – true to the extent that some fields are, at present, only inefficient in economic terms. But thermodynamic limits of oil production don’t allow for that kind of ideological reasoning; when an oil field is beyond the thermodynamic pale, no amount of money will allow for production from that field. The thermodynamic limit relates to the energy cost of producing oil, not the monetary cost. It reflects the energy value of the oil produced minus the energy cost of producing the oil. The noted British geologist Ted Trainer says,  “Beyond 2005, the energy required to find and extract a barrel of oil will exceed the energy contained in the barrel.”(Trainer 34)  If it takes more energy to produce a barrel of oil than the energy contained in that barrel of oil – that barrel of oil can not be produced. This is an issue that economists do not understand, and consequently, never address. However, it is a defining aspect of the role that oil will play from now on; the thermodynamic laws apply no matter how high the “dollar price” of energy goes.         

Even if the economic and thermodynamic problems could be magically overcome, there is one last issue for which there is no solution at all – short of the passage of a two or three hundred million years. There is not much oil left to find. The geology of earth’s lithosphere has, over the past forty years, become reasonably well-defined. Only particular geologic structures are capable of bearing oil deposits and the vast majority of those structures have been thoroughly explored; only a few extremely remote regions have escaped examination. The highly regarded geophysicist L.F Ivanhoe recently explained, “It is commonly overlooked by economists and the general public that crude oil must be discovered before it can be produced.” (Ivanhoe )  Also, during the last ten years new oil discoveries have become increasingly rare.         

Many people are of the opinion that technical advances will enable the oil industry to postpone the looming peak in oil production for decades. This notion not only drives the current economy, but it also sets a political tone that prevents the development of projects that could lessen the impact of declining oil production. This shortsightedness is related by author, and geophysicist R. A.Kerr,         

“Optimists see at least several decades more of unfettered world oil production--but a growing number of realists conclude that world oil production is nearing its all-time peak, perhaps within 10 years. The optimists, mostly economists, believe that new oil discoveries and enhanced recovery from old fields will delay the world peak beyond 2040. The opposition, mostly geologists, argue otherwise.” (Kerr 1129)

A general consensus is developing among geologists that oil production at current levels can not be maintained beyond 2010. Even if new oil fields are developed, they will serve at best to delay briefly, the decline in production. According to Richard C. Duncan, author of The World Petroleum Life-cycle:             

"Can new oil production delay the world oil peak?" Our answer is, 'Yes, new production brought on-stream well before the 2006 base-line peak can delay it, but only by a few days per billion barrels of new production.' However, even large increments of new production brought on-stream after the peak are not likely to have any effect whatsoever on delaying the base-line world oil peak.” (Duncan)

With perhaps twenty billion barrels left to be discovered, it is easy to see why the production will soon peak. To be sure, there is oil that has been discovered, and that can be produced, but even that amounts to perhaps another sixty billion barrels. By fully developing all remaining sources (something that is probably not politically feasible) the peak of production might be extended by as much as a few years.           

Even a cursory survey of the economic developments of the past century and a half reveal the strong connection between oil and economic growth. The complexity and sophistication of the western economic system was built on a foundation of oil and it requires a huge leap of faith to believe that it can be maintained in the face of a substantial and prolonged decrease in the stability of that foundation. Assuming that a suitable replacement for oil were available, and assuming that western economies implemented full-force efforts to employ such alternatives, the chances for success would be slim, given the lead-times required. But alternatives are not up to the task. Most experts agree that a comprehensive exploitation of all forms of alternative energy would result in the production of only one third of the energy currently consumed in the US. Only thirteen percent of the US landmass is suitable for the development of wind turbines. Perhaps forty percent is usable by solar arrays and the rivers have been damned nearly to their total capacity. Wind energy is dependant, obviously, on the sporadic nature of the resource, an while advances have been made in the field, the ability of wind to provide consistent, wide-spread energy is still very limited. Photovoltaic energy is still nothing more than a dream. While it does work, the energy required to produce a photovoltaic cell exceeds the energy that the cell can recover over any reasonable amount  (dozens of years) of time. Hydro-electric energy is clean and relatively cheap, but most of the usable dam sites have been used. The tar sands and oil shales of the US mid west are often touted as a plentiful future, once the price is high enough, but a critical review of the physics leads to a different conclusion. Walter Youngquist, of the Colorado School of Mines writes:          

“Perhaps oil shale will eventually find a place in the world economy, but energy demands of blasting, transport, crushing, heating, adding hydrogen, and the safe disposal of huge quantities of waste material are large. There appears to be a positive net energy recovery from oil shale processing (Penner and Icerman, 1984), but it is low and does not compare with net energy from conventional oil well drilling.” (Youngquist 243)

While these “near oil” sources do exist, and may be usable, they do not offer the advantage of the high net energy that more traditional sources provide. Oil may indeed be available for alternative sources but not in the quantities or prices necessary to keep the world economy functioning at more than a fraction of its present level.          

Further, for an alternative energy source to replace oil in a way that would guarantee a continuation of the present economic systems, it would have to share substantially all of the qualities of oil. Alternative forms of energy would need to be inexpensive to exploit, both in financial and thermodynamic terms.  They would need to be easily stored and transported, and they would need to have the ability to be easily converted to many types of products. These are all properties of oil that western economies not only exploit, but also rely on to a degree that is not commonly appreciated by the general public. A tank of wind in one’s car is not particularly useful, and about the only other energy form that wind can be converted in to is electricity. Electric vehicles are feasible, but not yet practical (and without huge advances in battery technology may never be) and the cost of converting the world’s auto fleet to electricity would be immense. This single cost could be enough to bring western economies to their knees. And that conversion is only one of hundreds that will have to be made.           

Our relationship with oil is intricate beyond the intuition of most people. At this juncture in history it is all but impossible to judge clearly what is an oil effect and what is an oil affect.  As USDA archeologists Joseph Tainter states, “Energy has always been the basis of cultural complexity and it always will be. [T]he past clarifies potential paths to the future.” (Taintner 34) Ultimately, the important issue is the degree to which society has specialized its functions in favor of the consumption of oil. The very health of the economy depends on our finding, producing and consuming ever-greater measures of oil. The average American has at their disposal every day, the amount of energy comparable to the energy available to a Roman who owned two hundred slaves. (Price 301)  Short of the vast windfall that oil provides us, the world’s economy would look today very much as it did in the pre-industrial past, and we would be forced to live as people of those ages lived. Maintaining current lifestyles with only a small reduction in available energy would be difficult for most and impossible for some. Living with the thirty percent reduction in energy that we are likely to see over the next twenty years will be impossible for most. The people of Kenai have done their best to alter the local economic and social mechanisms in a way that would allow them to continue to function as they had before the oil began to run out.  In the process they have created more problems than they had to begin with. Despite their best efforts, nothing was able to replace oil. The Kenai that they knew was built on oil.  It ran on oil and making it stand on some other social foundation and run on some other economic fuel proved more than they could manage. Vain blandishments notwithstanding, nature will yield no more oil that it has, and no variety of self-flattery will produce any more than hot air.         

The longer people hold on to the empty hope that somebody will think of something, the more disastrous the drive off the end of the road will be. But science may not be able to think of something, especially given the extraordinary complexity of oil’s relationship to the world economy. Politicians continue to dismiss the possibility of a permanently declining resource. Their training, experience, and philosophy leave them critically short of the insights necessary to provide effective leadership where the future of energy is concerned. Clarifying this point, Jay Hanson recently wrote in ENERGY Magazine: “Although economists are trained to treat energy just like any other resource when it comes to ‘supply and demand’, it is manifestly not like any other resource. Net energy is the pre-condition for all other resources.  The coming peak in global oil production signals the end of the consumer economy because nothing can replace conventional oil.”   (Hanson 62)          

The experience of Kenai is a version of the future in microcosm. The world’s oil-based economic and social systems are nearing the end of the road. There is little chance that either can survive even modest declines in oil production, and no chance that they can exist in a world where energy supplies are decreasing at an accelerating rate. There is only so much oil in the world. We have found ninety percent of the world’s oil, and used half of what we have found.  Adding to the looming geopolitical crisis, half of what oil remains lies under the parched sands of three Middle Eastern countries.  “Well before 2010 the world will be vulnerable to 1970s-style oil shocks.”  (Banks 87)  Sometime in the next few years oil production worldwide will begin to decline. The exact date can not be predicted with any socially acceptable degree of accuracy, and probably isn’t overly important in any case. Unlike the case of Kenai, where most of the people simply left for better economic climes, there won’t be any better place to go. The world at large did not suffer at Kenai’s distress because it was able to get its oil elsewhere. But when “elsewhere” is out of oil as well, the world will have to face the same problems that Kenai faced.          

Changing personal habits is never easy. Changing the conduct of an entire society is an even more imposing task.  But there is a hidden obstacle in the way. The very nature of petroleum based economics and the political order that sustains it prohibits any preemptory action. Any suggestions to change basic practices, to radically conserve dwindling supplies, to support renewable alternatives, provokes the economic oil monster and frightens its constituents. That no alternative will afford them a similar level of comfort all the more convinces them of the imprudence of undertaking such drastic alterations. But the oil monster is a transitory affectation and the most imprudent route lies in continuing to blindly follow the course that it has set for us. We do not have the option of choosing not to change, for to the extent that we oppose change, nature itself will find us in default and make the changes in spite of us.          

We must change, but change as we now reckon it will not suffice. Past notions of change relied on our ability to simply move on to greener pastures. In this world we can always find more of anything if we go far enough, look hard enough and dig deep enough. But the world at the end of the oil road is a place where oil and other resources will barely be available in amounts that keep pace with life’s demands, let alone its luxuries. We will need a philosophy that teaches, not how to do more with less, but how to live with less.  We are facing a new paradigm in human existence, and there is no basis for making informed predictions about the results of the end of the oil economy. But as noted petroleum geologists Colin J. Campbell and Jean H. Laherrère  put it;  “The world is not running out of oil, at least not yet. What our society does face, and soon, is the end of the abundant and cheap oil on which all industrial nations depend.” (Campbell, Laherrère  94)

The end of the oil road will not be the end of the world.  Just the end of the world as we know it. 

Mike Neligh lived in Anchorage, Alaska.  He died of a heart attack just a few weeks after finishing this article.

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