Peak oil analysis site The Oil Drum recently announced it's shutting down operations. Due to a dearth of new content, the management decided to stop publishing new material after July 31, leaving the existing content as a permanent archive.
Naturally this evoked chortles of mirth from the Wall Street Journal. Those dumb old gloom-n-doomers at The Oil Drum, they speculated, were suffering crippling depression from the North American fossil fuels boom in the Bakken shale and the Alberta tar sands. See, these displays of rugged ingenuity were sending peak oil theory the way of phlogiston.
Well, maybe not. According to oil analyst Arthur Berman at Labyrinth Consulting Services, the Bekken shale is a classic example of a bubble economy. Shale oil extraction isn't sustainable or self-financing. It requires massive investor financing to get the wells producing. Returns per well quickly decline, so there's no way to recoup that investment from production.
The average one-year production drop-off from existing wells is 38 percent. Wells more than a few years old have very little output, and most current output is from the most recently drilled wells. The so-called "shale boom" requires not only large-scale financing up-front, but continued drilling just to keep the operation going.
Similarly, Alberta tar sand oil requires massive taxpayer subsidies to be usable. The Keystone XL pipeline, the main projected distribution route for oil from Alberta, is built on stolen land, seized by government through eminent domain, some of it in violation of Indian nations' territorial claims. In Texas and Oklahoma, anti-Keystone protesters are blocking - with their own bodies - construction of this criminal project by oil companies in league with the government.
What's more, tar sands pipelines are exempt from contributing to the Oil Spill Liability Trust Fund. When the Enbridge Line 6B burst near Marshall, Michigan in 2010, polluting the Kalamazoo watershed with millions of gallons of tar sand sludge, the Trust Fund released money to help clean up the mess. But the company responsible never paid a penny into the fund. And oil companies' liability for spills is capped at $75 million in any case.
Fossil fuel from deep offshore wells, shale and tar sands has one thing in common: It's costly and difficult to extract, bottom-of-the-barrel stuff, worth bothering with only because the low-hanging fruit has already been picked. There's a technical term called EROEI - Energy Return on Energy Investment - referring to the number of units of energy it costs to extract a unit of usable energy from any given source. These new sources of oil all have very low energy returns on energy investment. It takes a lot of energy to get just a little more net usable energy at the end of the process.
That means it's only profitable when it's heavily subsidized by taxpayers, extracted from stolen land at government expense. And even then, the total increase in net energy output doesn't equal the oil produced by all those legacy fields in places like Saudi Arabia and Texas that are near exhaustion.
America's 20th-century economy developed largely by adding more and more inputs of artificially cheap resources, guaranteed by the state, rather than by using resources more efficiently. The fossil fuel economy and everything dependent on it - mass production factories supplying distant markets, suburban sprawl, the car culture - was essentially a free rider on this artificial abundance created by the state. And now even the state is realizing that there are limits to its resources.
Meanwhile, a recent IMF study found that simply eliminating government subsidies to fossil fuels would reduce carbon emissions 13 percent worldwide.
That's not even counting subsidies to specific forms of energy consumption, like the U.S. civil aviation system and Interstate Highway System.
If climate change is a real problem - and I believe it is - it's not something the government needs to fix. It's something the government needs to stop causing.