All of these fuels are in the process of becoming more expensive, and the various energy alternatives are limited in one way or another in their ability to replace hydrocarbons.

By Lars Schall  12 April, 2010 MMnews

One of the world’s foremost educators on Peak Oil, Richard Heinberg, in an exclusive interview for MMNews: “We are currently seeing the end of economic growth as we have known it.” Further on, he talks about the financial / economic crisis, monetary changes vis-à-vis a shrinking energy supply, and the Century of Declines: “Peak Everything.”

American journalist and writer Richard Heinberg is one of the world's foremost Peak Oil educators. He has taught at New College of California’s Campus for Sustainable living a program on "Culture, Ecology and Sustainable Community" until March 2008 and is a Senior Fellow in Residence of the Post Carbon Institute in Santa Rosa, California. He is the award-winning author of nine books including:

The Party's Over: Oil, War and the Fate of Industrial Societies (2003),

Powerdown: Options and Actions for a Post-Carbon World (2004),

The Oil Depletion Protocol: A Plan to Avert Oil Wars, Terrorism and Economic Collapse (2006),

Peak Everything: Waking Up to the Century of Declines in Earth’s Resources(2007).

His monthly MuseLetter has been published since 1992 and his essays and articles have appeared widely in such journals as The American Prospect, Public Policy Research, Quarterly Review, Z Magazine, Yes!, Resurgence, The Futurist and European Business Review. Moreover, he was featured prominently in documentary films such as “The End of Suburbia” (2004) by Gregory Greene and Barrie Silverthorne (see for more information:www.endofsuburbia.com). With a wry, unflinching approach based on facts and realism, Mr. Heinberg exposes the tenuousness of our current way of life and offers a vision for a truly sustainable future. Since 2002, he has given over three hundred lectures on the subject matter of Peak Oil to a wide variety of audiences. He and his wife Janet Barocco live in Santa Rosa, California

Mr. Heinberg, your most successful book-title to this date is ”The Party’s Over.“ For those of our readers who have never heard of you and that book: What kind of party is it that you were writing about and why do you assume that this festivity and its special features are about to come to an end?

The “party” was humanity’s one-time-only opportunity to fuel economic growth and technological innovation with a bounty of cheap, abundant energy from fossil fuels. The harvesting of oil, coal, and natural gas has inevitably proceeded on a best-first or low-hanging fruit basis. While the Earth still possesses a wealth of unexploited energy resources, the cheapest and easiest-accessed of those resources have by now already been used. All of these fuels are in the process of becoming more expensive, and the various energy alternatives are limited in one way or another in their ability to replace hydrocarbons. That means we are currently seeing the end of economic growth as we have known it. The impacts for transportation, globalization, and world food supplies will be serious indeed.

As a rather critical observer of that party: Do you see significant hints that a growing number of participants realize that “The Last Waltz” is near? Or are you afraid that large parts will continue to dance no matter what?

After over a decade spent in trying to alert policy makers and the general public about this issue, I have concluded that only a small minority have any idea what is in store. The “dance” you speak of is indeed coming to an end, but it appears to most that the problem is purely a financial one, and that once the global economic crisis is sorted out, we will all be able to get back to business as usual. I do not believe that is an option. We have reached a fundamental turning point, foreseen in the “Limits to Growth” study of 1972. For a while, world leaders may be able to redistribute wealth in various ways—most likely from the poor to the rich—in order to make it appear that the global economy is continuing to grow. But I suspect that this will work only for a very few years at most. At some point soon, it will become clear that economies are contracting. And then most people will look for someone to blame. No doubt politicians will oblige by trotting out various scapegoats.

What about the hosts of the party, who pay the band – the so-called elites? They’re aware of the coming situation for a long time, right? What kind of plans do they have in store for themselves and the rest of us in your opinion? As part of the elites, the Central Intelligence Agency for example, which has always entertained close ties to the financial district in New York City,[1] had the Peak Oil problem on its radar screen at least since the late 1970’s.[2] Hence, we can be sure that some influential interests not only knew that this historical watershed event was coming, but also that they had enough time to prepare for it.

Strangely enough, I think most of the “elites” are victims of their own public relations efforts. They have promoted the careers of economists who told them what they wanted to hear—that economic growth is the normal and inevitable state of affairs, and that there are no real limits to growth. Yes, certainly there are analysts in the CIA and the military who understand where this is all heading, but—if the ex-analysts I’ve talked to are typical of their colleagues—they have learned that reports about resource constraints are not welcome, unless they are framed in terms of the contest for geopolitical leverage

At the end of last year, the World Energy Outlook 2009 received a very cautious reception – for example from your side.[3] Why was that and how was it linked to the ongoing discussion about oil reserves? May I also ask you to explain to our readers why the picture related to the latter seems very blur and since when?

Oil “reserves” consist of estimates of the amount of oil that geologists believe can be economically extracted from oilfields that have been discovered, drilled, and mapped. Unfortunately, reserves reporting is not a transparent affair in many countries that have state-controlled oil industries. There is strong evidence to suggest that OPEC nations have systematically and substantially over-estimated their reserves for over two decades.

In 2009, the International Energy Agency (IEA) took a first cautious step in the direction of realism when it published, in its annual World Energy Outlook, an assessment of rates of production decline from the world’s old, giant oilfields, which yield the bulk of the world’s crude oil. On average, there is a net production decline of 4.5 percent per year from existing fields, which means that the world has to develop a Saudi Arabia ’s worth of new production capacity every five years or so just to maintain existing total production volumes. That is an enormous feat, especially given the fact that oil discovery rates have been falling since the early 1960s. New oilfields are sill being found, of course, but typically they are very expensive to locate and exploit, when compared to the oilfields that were being discovered only a decade or two ago.

This debate, that we’ve just mentioned, is continuing right now again on a large scale.[4] Maybe there is, if one wants to, an end to it. During an interview with investigative journalist and book author Mike Ruppert, I’ve asked him a few things about the National Energy Policy Development Group, NEPDG, that was run by then-Vice President Richard Cheney in Spring of 2001. Mr. Ruppert stated:

“Essentially the NEPDG appears to have been set up, almost from the first day of the Bush administration, to find out how much oil was left, who had it, and how it could be obtained (bought or stolen) to support U.S. hegemony, U.S. consumption, and the monetary paradigm. … The fact that the NEPDG records have been kept secret from the American people who paid for it is one of the greatest crimes of all time. Seeing those records now would save a lot of duplicated effort in trying to inventory how much oil there is left. The figures on oil reserves quoted by producing nations and companies are as fraudulent and cooked as the books on mortgages, banking, and even Bernie Madoff. … It was Peak Oil that was driving Dick Cheney's Task Force and nothing else.”[5]
 

Do you agree with Mr. Ruppert in general and in particular on the notion that the secret NEPDG-records could help us to find out “how much oil there is left”?

Since we don’t know what those records contain, we also don’t know if they would help us to know much more about future energy supply options. Certainly if an agency like the IEA were empowered to perform on-the-ground audits of oilfields in all oil exporting countries, we would know much more than we do now.

In another interview, I’ve asked economist James K. Galbraith, who thinks that the Peak Oil scenario “ needs to be taken seriously,” if he agrees that it would be time to make those secret files of the NEPDG public. He answered by saying:

“Yes. I do agree that files of this type should be made public. If there is an argument, which undoubtedly some people will make, for a national security reason not to make them public, then an appropriate procedure, which we have followed in this country in the past, is to appoint a panel of independent outsiders, not previously connected to the government, to review the documents and to make them public unless there is a compelling reason not to, with arguments about what is compelling and not-compelling ultimately resolved by the president himself. That’s a model that has been applied successfully in the past in the United States on a matter of this kind. I think it would be very useful to do it in this and other instances on the conduct of the Bush administration.”[6]

My question for you is: Wouldn’t it be a good goal for the Peak Oil movement in the U.S. and around the globe to come together for a concerted effort to make happen what Mr. Galbraith was talking about? Even if there was only a slim chance to accomplish this goal?

Yes, this would be a worthy goal from a certain standpoint. However, the peak oil “movement” is a highly non-political collection of individuals with little sense of group identity or any history of concerted political action. Even if the effort succeeded, I doubt if much truly new information would be revealed. Many “peak oil” analysts are already extremely well informed on world energy supply issues—much better informed than all but a very few officials at even the highest levels of government, and better informed than most of the members of the National Energy Policy Development Group. So the advantage would not be in finding out some information that is currently being kept secret, it would simply be in seeing public confirmation of certain key bits of information that are seldom discussed in the mainstream media.

Mr. Heinberg, you have stated publicly in 2004 that you have your doubts related to the official narration of the attacks of 9/11. May I ask you if those attacks are in your opinion connected to Peak Oil?

I have no idea. My assertion then and now is simply that the events of 9/11 were not properly investigated. It is certainly tantalizing to imagine what a proper investigation would uncover, but imagine we must—because at this point the likelihood of a re-opening of that case is extremely remote. It is a dead issue.

One facet of the “Global War on Terror” that resulted from those attacks, is the U.S. invasion of Iraq. What has this invasion to do with oil, or more specifically: with the competitive relationship between the US-dollar vs the Euro? Was there a threat looming for the so-called “Petrodollar System” that was established during the early 1970’s?

There was some speculation at the time of the invasion that part of the motive was to protect the U.S. dollar, which is the currency used in nearly all international oil sales. Saddam Hussein had been threatening to abandon the use of the dollar, and some saw this as a mortal threat to global dollar hegemony. In retrospect, I’m not sure that analysis holds up, though I agreed with it at the time. While the level of U.S. debt is such that one might expect other nations to be looking for some alternative to the dollar for international transactions, the reality is that there is no good candidate at the moment.

I suspect that there were complex motives for the invasion of Iraq. It is strange that even today, seven years later, we must speculate on this question. The public still has not been told the real reasons for one of the longest and most expensive wars in recent history.

What would happen to the US economy if the “Petrodollar System” would collapse? Do you see signs that this arrangement to the advantage of US-American consumerism could come to an end rather sooner than later?

At some point the dollar will indeed fail as a currency. Whether this failure comes about as a result of oil exporters dumping the dollar, or simply because of problems inherent to the U.S. economy remains to be seen. And it is impossible to know whether that moment is a few months or many years ahead of us. I suspect that we will see some serious problems with the dollar well before 2020. Certainly every effort will be made to keep the current world monetary system working as long as possible, but the problems just keep accumulating. The result may be a rather sudden re-adjustment in which enormous amounts of apparent wealth simply disappear, and global trade comes to a nearly complete halt, at least temporarily.

In the past, you have said that the worst thing that could happen is a financial / economic crisis at the exact same time when we’re about to enter the Peak Oil phase. Well, obviously this seems to be the case now. Why has this been a nightmarish outlook for you? And do you think that this financial / economic crisis, which remains mysterious and enigmatic to most people, will usher in on a global scale what Robert Kennedy once called “the mindless menace of violence”? If you agree on that, isn’t that the result not of this crisis alone, but also because people are not told the truth about its long-lasting character in an honest way?

The reason it’s bad for both an energy crisis and a financial crisis to occur together is that each makes the other harder to address. Without adequate credit and investment capital, how will we build renewable energy infrastructure to replace our current fossil-fuel-dependent transport and electricity systems? And without cheap energy, how can we dig ourselves out of a financial crisis?

As you point out, both are indeed happening now, and this should be no surprise given the inherent linkages between energy prices and the health of the economy. Will we see global violence as a result? Of course I hope the answer is “no,” but the likelihood of war would be substantially reduced if the general public had a better idea of why their standard of living is eroding. Since politicians don’t really understand what is happening, I suppose they can be somewhat excused for not telling their constituents. But that means, once again, that the most likely response will be a hunt for scapegoats.

Now that we’ve already touched the subject “money”: What has the financial crisis and the ongoing recession to do with the monetary system and debt-based growth? Is there a tricky part involved - just as Mike Ruppert characterized it this way during the above mentioned interview:

a)The current global economic paradigm -- governed by fractional reserve banking, fiat currency, and compound interest (debt-based growth) -- is inherently and by definition a pyramid scheme. Money is useless without energy. One cannot eat a dollar bill or crumble it up and throw it in his gas tank. Each of the trillions of dollars created out of thin air since the fall of 2008 is a commitment to expend energy that cannot and will not ever be there.

b) There can be no "recovery", no return to growth (which is what the economic paradigm demands), without energy.[8]
 

Yes, I agree with Mike Ruppert on this. If the world is to return to stability, an entirely new economic system, based on a new and different form of money, will be required. The world still has willing workers and consumers, and enormous productive capacity in the forms of factories, soils, and recyclable materials. But without a functioning monetary system, there will be no means of connecting production with consumption. Our current money system requires constant growth so as to enable repayment of the interest on the debts that created the money to begin with, so it cannot function well in the context of general resource scarcity and economic contraction.

How does a new monetary system need to look like vis-à-vis Peak Oil?

There are many possibilities for alternatives, including tradable energy vouchers.

Is it this monetary change that has to take place that constitutes the “Heart of Darkness” so to speak when it comes to the problem that the elites and the mainstream media are “too fearful to publicise peak oil reality”?[9]

I don’t think reality is that conspiratorial. Certainly there are some deep, dark conspiracies out there, but with regard to peak oil my belief is that, for the most part, the elites genuinely do not understand the situation or its implications.

Of interest with regard to the recession is of course the oil price spike of 2008. Global Portfolio Strategist Marshall Auerback stated in an interview with me that even though “recessionary pressures were already ‘baked in the cake’ well before the oil price spike”, that this was “the straw that broke the came 's back, or the ‘icing on the cake.’”[10] That given, I would like to get your reading of that oil price spike. Do you agree with James Hamilton’s analysis given in “Causes and Consequences of the Oil Shock of 2007-08”?[11]

Yes, I discussed Hamilton’s analysis at some length in my essay “Temporary Recession or the End of Growth?” http://heinberg.wordpress.com/ There’s no point trying to paraphrase that article here; if readers are interested, they can read it. I think it’s a pretty good summary of the situation.

Critique on the Peak Oil scenario comes from all kinds of sides. Among them are the advocates of the abiogenic petroleum origins. What is your response to those critiques – for example related to the doubts that the common theory of fossil fuels was never scientifically proven?

I have also published an essay on this subject, titled “The Abiotic Oil Controversy” . To summarize: there may indeed be some interesting points for further research regarding the origins of some of Earth’s hydrocarbons. But that research is unlikely to have immediate practical implications for the supply of oil or natural gas. These fuels are found only in sedimentary basins, and those basins have already been identified by geologists using every tool from pick and compass to seismic surveys to satellite imaging. Moreover, oil and gas wells are observed to deplete, and are not observed to replenish themselves in an economically significant way over humanly observable time scales. The very few exceptions to these general statements have been studied by geologists and explained in terms of local anomalies.

Another thing one can hear quite often is that Peak Oil authors / educators like you are spokesmen for big oil interests. Does this make sense to you? Why should the oil and automobile industry be interested in propagating a “Peak Oil myth”?

If I’m secretly on the payroll of an oil company, then somebody forgot to let me in on the secret. A few of the oil companies are delicately admitting some of the main elements of the peak oil thesis. Other oil companies heatedly deny any possibility of supply problems and call people like me very nasty names. Some of the auto companies, such as Toyota, understand peak oil and speak of it openly. But I don’t see any public relations advantage whatsoever in some supposed cynical plot to promulgate a “peak oil myth.” I’ve been studying this subject for over a decade and have interviewed dozens of people inside and outside of these industries, including scientists, managers, economists, and public relations officers, and have seen no evidence whatsoever of such a plot. Instead I see general ignorance and denial. Those within the industry who do understand peak oil tend to be scientists, though there are exceptions. Scientists often do rather poorly at following instructions with regard to fabricating myths. They have an annoying habit of seeking out data, analyzing it, and thinking for themselves.

Mr. Heinberg, we seem to face huge problems with Climate Change, Overpopulation and the depletion of natural resources in general, not only hydro carbons. Climate Change is discussed worldwide – so let the both of us concentrate on the other two points. Where the whole problem of Peak Oil is getting real ugly is the whole issue of Overpopulation. Without oil there would never have been the possibility to let the world population rise to 6.5 billion human beings. Therefore, the outlook of Peak Oil is that now that we have all those humans on Planet Earth, the oil that supports them declines. Two questions: how do you cope with the knowledge you have about that day in, day out? And don’t you fear that mankind is about to lose the last rest of dignity that was leftover after the barbaric events of the 20th Century?

How do I cope with the knowledge? Well, it’s distressing, but one learns to cope. As we age, we are forced to cope with the knowledge of our own mortality. Our relatives and friends start dying. It’s depressing, but we go on. What would be really depressing would be to have knowledge about imminent global crises but to have no way of influencing the situation. In fact, there is a great deal that still can be done to lessen impacts on humanity and the natural world, and as we engage in that kind of activity it tends to help us psychologically.

Another major problem that we face is the depletion of natural resources in general – you sum it up best by giving your book on this subject the title: “Peak Everything.”[12]In that book you mention that:

“in the course of the present century we will see an end to growth and a commencement of decline in all of these parameters:
Population,
Grain production (total and per capita),
Uranium production,
Climate stability,
Fresh water availability per capita,
Arable land in agricultural production,
Wild fish harvests,
Yearly extraction of some metals and minerals (including copper, platinum, silver, gold and zinc).”[13]

Can you tell us how we humans can survive this especially seen under the focus of Liebig’s Law (or the Law of the Minimum)?

As I say in the book, we must reduce the scale of the human project—our population and our consumption rates (the latter especially in the industrialized nations). That means redesigning our economic and food systems, re-localizing and down-sizing them, until they can be maintained with renewable resources harvested at sustainable rates.

Do you fear that some people in powerful positions become increasingly “trigger happy” – that is to say, that they will try to get us involved in a major war as a Last Exit Strategy?

I don’t see major war as an “exit strategy”; if it happens, it will likely be simply a failure of politics—an expression of the inability of leaders to solve the worsening problems that are confronting them.

To sum our interview up, Mr. Heinberg: We’re about to enter extremely interesting, stormy times. They have a lot of danger in store for us. On the other hand, isn’t it true that the coming 20 – 30 years will be a great opportunity to totally re-evaluate who we are and what is really important to us?

Absolutely. Every crisis is an opportunity, and we will be presented with the greatest array of opportunities in history. Survival will require us to evolve quickly, and to change our thinking, our habits, and our expectations. If we do these things, it is just possible that the society that emerges in the process will be far more stable, interesting, and beautiful than the one we see around us today.

Thank you very much for taking your time, Mr. Heinberg!

My pleasure, thank you!

SOURCES:

[1] compare Michael C. Ruppert: “Crossing the Rubicon. The Decline of the American Empire at the End of the Age of Oil”, New Society Publishers, Gabriola Island, 2004, page 53 – 57, and Peter Dale Scott: “The Road to 9/11. Wealth, Empire, and the Future of America”, University of California Press Berkeley, 2007, page 11 –
14.

[2] compare Richard Heinberg: “ Smoking Gun: The CIA's Interest in Peak Oil“, published at From the Wilderness on August 15, 2003 under:

www.fromthewilderness.com/free/ww3/081503_cia_russ_oil.html

[3] see Richard Heinberg: “ Just Tell Us The Truth”, published
November 10, 2009 under:

www.postcarbon.org/blog-post/44016-just-tell-us-the-truth

and Lars Schall: “Hat die Welt Peak Oil erreicht?”, published at MMNews on November 12, 2009 under:

http://www.mmnews.de/index.php/200911124199/MM-News/Hat-die-Welt-Peak-Oil-erreicht.html

[4] compare Rowena Mason: “ Oil reserves 'exaggerated by one third'”, published at The Telegraph on March 22, 2010 under:

http://www.telegraph.co.uk

and Vincent Fernando: “U.S. Government Exposes Its Own Oil Supply And Demand Data To Be Completely Flawed”, published at Business Insider on March 22, 2010 under:

http://www.businessinsider.com

[5] Lars Schall: “The Sinking Titanic”, Interview with Michael C. Ruppert, published at Energy Bulletin on May 22, 2009 under: www.energybulletin.net/node/48990

[6] Lars Schall: ”There Is No Return To Self-Sustaining Growth“, Interview with James K. Galbraith, published at New Deal 2.0 on February 2, 2010 under:

http://www.newdeal20.org

[7] compare Richard Heinberg: “Powerdown. Options and Actions for a Post-Carbon World “, New Society Publishers, Gabriola Island, 2004, page 70–71.

[8]see footnote 5.

[9]see Madeleine Bunting: “Too fearful to publicise peak oil reality”, published at The Guardian on November 10, 2009 under: http://www.guardian.co.uk

[10] Lars Schall: “Many Years Of Economic Stagnation”, Interview with Marshall Auerback, published at Energy Bulletin on September 9, 2009 under: www.energybulletin.net/node/50067

[11]James D. Hamilton: “Causes and Consequences of the Oil Shock of 2007-08.” ABSTRACT: “This paper explores similarities and differences between the run-up of oil prices in 2007- 08 and earlier oil price shocks, looking at what caused the price increase and what effects it had on the economy. Whereas historical oil price shocks were primarily caused by physical disruptions of supply, the price run-up of 2007-08 was caused by strong demand confronting stagnating world production. Although the causes were different, the consequences for the economy appear to have been very similar to those observed in earlier episodes, with significant effects on overall consumption spending and purchases of domestic automobiles in particular. In the absence of those declines, it is unlikely that we would have characterized the period 2007:Q4 to 2008:Q3 as one of economic recession for the U.S. The experience of 2007-08 should thus be added to the list of recessions to which oil prices appear to have made a material contribution.” James D. Hamilton : “Causes and Consequences of the Oil Shock of 2007-08“, Department of Economics, UC San Diego, published February 3, 2009, Revised: April 27, 2009, at:

http://www.brooking.edu/
 

[12] Richard Heinberg: “Peak Everything. Waking Up to the Century of Decline in Earth’s Resources“, Clairview Books, Forest Row, 2007.