It’s not often considered that oil is a sociological problem. Or a psychological problem. Society believes it holds a straightforward, sober understanding of oil. But that is certainly not true at all. For most people, oil carries a particular face, like Saudi Oil, or oil from ExxonMobil. Just as with wheat, or coffee, oil is regarded as a substance touched and manipulated by other people. Geology rarely comes into view.
I am not a geologist. But I have learned enough about geology this decade to catch a better glimpse of how society relates to oil. It’s a very emotional relationship. In fact, it may most closely resemble our relationship to food. In the modern world now, very few people are involved in food production. This likely leads to a greater emotional response to food, as most do not relate to food’s underlying realities: butchery, various forms of crop failure, planting, inclement weather, harvesting and shelf life.
Unlike food however oil is not renewable. But societies everywhere treat oil as though, if not renewable, it were plentiful. Considering how many countries have peaked and gone into decline, from the US 35 years ago to the UK just this decade, one wonders what set of mental conditions allows people to never make the obvious connection. Furthermore, it is in the western OECD countries, in the very countries that are most dependent on oil, where the steepest declines in production have been witnessed in the last 35 years, from Norway to the UK to Mexico. So the story of decline is not a state secret in the West.
This is why I believe that Oil remains the biggest story of all. The pending clash between perception and reality, briefly felt when oil rises to very high prices, is going to hit global growth very hard next time around. As I have written previously, supply destruction is now taking place almost as quickly as demand destruction. However, like other large system phenomenon, there is clearly something very human in the way we choose to deal with looming problems. (I would note, for example, how many supposed experts in the field of global finance appear to have been completely caught off guard by the credit bubble and its potential ravages).
Each day now, news crosses the wires of delayed or canceled oil and gas projects. These are the projects that need a higher price of oil, in order to battle the current global decline rate. Or, perhaps they’re projects that have been hit by the credit crunch. This is why I am forecasting a coming change in the next few years, that goes beyond the return of high oil prices. I believe we will see in the next 36 months the long-overdue recognition that the geological limits of oil supply are indeed a problem. And a big story.
-Gregor
