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Alberta oil sands, for example, use large amounts of water to push oil out of sand, and the thick oil produced by this process is significantly higher in carbon content than the light, sweet crude imported from the Middle East.

By Daniel Tencer   September 02, 2010     Raw Story

Peak oil has happened or will happen some time around this year, and its consequences could threaten the continued survival of democratic governments, says a secret Germany military report that was leaked online.

According to Der Spiegel, the report from a think-tank inside the German military warns that shrinking global oil supplies will threaten the world's economic foundations and possibly lead to mass-scale upheaval within the next 15 to 30 years.

International trade would suffer as the cost of transporting goods across oceans would soar, resulting in "shortages in the supply of vital goods," the report states, as translated by Der Spiegel.

The result would be the collapse of the industrial supply chain. "In the medium term the global economic system and every market-oriented national economy would collapse," the report states.

That collapse could, in turn, cause many countries to abandon free markets principles, the report states. Deals would be struck between oil-exporting and oil-importing countries that would fix prices and remove large amounts of oil from the global market place.

"The proportion of oil traded on the global, freely accessible oil market will diminish as more oil is traded through bi-national contracts," the report states.

That would prompt some governments to abandon free market economics altogether, the report suggests. With peak oil causing "partial or complete failure of markets ... [a] conceivable alternative would be government rationing and the allocation of important goods or the setting of production schedules and other short-term coercive measures to replace market-based mechanisms in times of crisis."

But the report also warns that the economic crisis caused by shrinking oil supplies and skyrocketing prices could be seen by the general public as a failure of market economics as a whole -- and with it, the political institutions that created those economic systems.

Public anger at the existing system would create "room for ideological and extremist alternatives to existing forms of government." Populations would fragment along political lines and "in extreme cases" this could "lead to open conflict."

Peak oil -- which refers to the moment when the world's production of oil begins to shrink -- is a controversial concept, but few doubt the basic logic underlying it: That eventually the world's finite supply of oil will run out, and nations will have to turn to other sources of energy, or face economic disaster.

With the report, Germany joins the growing ranks of Western governments apparently alarmed by the prospect of peak oil.

Last Sunday, the UK Observer reported that Britain's Department of Energy and Climate Change is refusing to release documents related to peak oil, even though, as the Observer noted, previously released documents argue the veil of secrecy around the issue is probably "not good."

The UK government is reportedly canvassing leading scientists and industrialists for their advice on how to build a contingency plan for peak oil.

And earlier this year, a report from the US Joint Forces Command stated that "by 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day."

The report continued, "While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India."

Not everyone agrees that peak oil is a reality -- at least not yet. Detractors point out that predictions of peak oil have been made since the 1950s, and the date for it was originally pegged at around 1995. But the discovery of new oil fields and the development of new technologies for oil extraction mean that oil production has continued unabated in new oil fields even as traditional oil supplies run dry.

Peak oil skeptics argue that rising oil prices are responsible for the continuing supply of oil -- as oil gets more expensive, extracting it from difficult places becomes more profitable. Some argue this process could continue for decades.

But environmentalists point out that these new alternative methods of extracting oil are more environmentally harmful than traditional methods. Producers in the Alberta oil sands, for example, use large amounts of water to push oil out of sand, and the thick oil produced by this process is significantly higher in carbon content than the light, sweet crude imported from the Middle East.

With peak oil causing "partial or complete failure of markets ... [a] conceivable alternative would be government rationing and the allocation of important goods or the setting of production schedules and other short-term coercive measures to replace market-based mechanisms in times of crisis."

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