The first issue is to acknowledge how horribly dependent on oil - and cheap oil - our whole "civilisation" is.

We have allowed oil to become vital to virtually everything we do. Ninety per cent of all our transportation, whether by land, air or sea, is fuelled by oil. Ninety-five per cent of all goods in shops involve the use of oil. Ninety-five per cent of all our food products require oil use. Just to farm a single cow and deliver it to market requires six barrels of oil, enough to drive a car from New York to Los Angeles.

This half-century of deepening oil dependency would be difficult to understand even if oil were known to be in endless supply. But what makes the depth of the current global addiction especially bewildering is that, for the entire time we have been sliding into the trap, we have known that oil is in fact in limited supply. At current rates of use, the global tank is going to run too low to fuel the growing demand sooner rather than later this century. This is not a controversial statement. It is just a question of when.

(...)

Our society is in a state of collective denial that has no precedent in history, in terms of its scale and implications.

As the author presents in detail in the article, peak oil, in the best case, is a matter of decades instead of years. which means that, in view of the magnitude of the changes that will be required from us to keep on enjoying the standards of living we have in the West, we should start thinking about it, and planning for it now, even if the most optimistic scenarios for oil play out.

But we aren't.

When I and some of the oil-supply whistleblowers addressed a conference on oil depletion in the formerly oil-rich nation known as Scotland last year, five leaders of the British National Party sat in the audience. They said nothing. They just listened, and learnt, and no doubt reflected that the far right does well in tough times.

The BNP is Britain's hard right party, somewhat equivalent to Le Pen's National Front. Why on earth are they the only political party to care about this issue? Doesn't that tell us everything we need to know?

So here are the facts, again:

Only around 50 super-giant oilfields have ever been found, and the most recent, in 2000, was the first in 25 years: the problematically acidic 9-12 billion barrel Kashagan field in Kazakhstan.

Let us reduce our scale of scrutiny from the super-giant to the merely giant. Half the world's oil lies in its 100 largest fields, and all of these hold 2 billion barrels or more, and almost all of them were discovered more than a quarter of a century ago. Consider the recent record of discoveries of giant oil- and gas-fields of over 500 million barrels of oil or oil equivalent. Half a billion barrels - the definition of a "giant" field - sounds a lot. But since the world is eating up more than 80 million barrels of oil a day at the moment, it is in fact less than a week's global supply. In 2000 there were 16 discoveries of 500 million barrels of oil equivalent or bigger. In 2001 there were nine. In 2002 there were just two. In 2003 there were none.

We are simply NOT FINDING OIL ANYMORE. Furthermore, it's highly likely that the reserves we are counting on in the Middle East are exaggerated:

Dr Mamdouh Salameh, a consultant on oil to the World Bank, agrees there is a 300-billion-barrel exaggeration in Opec's reserves. More recently, a former director of Aramco has said that Saudi Arabia's proved developed reserves stand at 130 billion barrels. An anonymous informer talking to Dr Colin Campbell of the Association for the Study of Peak Oil goes further. His conclusion is that Saudi Arabia would have gone over its peak of production in the last quarter of 2004. This person speaks with front-line inside knowledge. "Saudi has at various times put 19 fields into production," he says. "Of these, eight are 'stars', being highly productive fields that produce around 90 per cent of the country's production. All the others are 'dogs' that have never worked well and probably never will. Recovery rates of up to 50 per cent may be appropriate for the 'stars'. For the 'dogs', 10, 15 or 20 per cent would be more appropriate. Make this adjustment and Saudi has depleted more than 50 per cent of its realistically recoverable reserves."

Leggett has a detailed description of the small print in BP's statistical survey of oil, published yearly, used the world over as the bible for oil numbers, and which points out that BP has, in fact, no idea if the numbers are right or not. And he reminds us of how OPEC members artificially inflated their reserve numbers in the 1980s to boost their quotas, as visible in this graph from the Oil Drum:

With Saudia Arabia producing 3 billion barrels per year, and Kuwait 1 billion per year, you'd expect the numbers to drift down, with ocxcasional bumps upwards as new fields are discovered. Nope, the numbers are absolutely flat, and thus very obviously false. But nobody amongst governments or oil companies ever discusses it...

country after country follows a crude bell curve - like Hubbert's curve - in both discovery and production. Today, more than 60 out of the 65 countries possessing oil have passed their discovery topping points and 49 of them have passed their production topping points. The US has a particularly long gap between the two: 40 years (1930 to 1970). The UK has one of the shortest: 25 years (1974 to 1999). This is because the first discoveries were made much later in the UK, when technology for both exploration and production were more advanced. Growing supplies of British oil didn't last long, though. Britain is now a net oil importer just like the US.

Nor is there any comfort to be derived from gas. Gasfields deplete very differently from oilfields, gas being much more mobile than oil. It is normal for a gasfield to yield 70-80 per cent of its gas over its production lifetime, whereas an oilfield will typically yield only 35-40 per cent of its oil. Drillers normally set gas production far below the natural production capacity so as to give a long production plateau. But the danger in this is that the end of the production plateau comes abruptly, and without market signals.

(See this earlier diary on natural gas depletion)

So are we doing anything about it?

We are trying to do something here on the internets:

A proposal for a serious energy policy
Building together an effective Dem energy policy (I)
Reenergize America – A Democratic Blueprint (Second Draft)
Energize America—A Democratic Blueprint (Third Draft)
Energize America - A Blueprint for U.S. Energy Security (Fourth Draft)

But in the real world?

The nation that gave the world such landmarks in the annals of democracy as the Marshall Plan is forced by deepening oil dependency into a foreign-policy maze that involves arming some despotic regimes, bombing others, and scrabbling for reasons to make the whole construct hang together.

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The geopolitics of American oil dependency is well summarised by Michael Klare in his recent Blood and Oil. He sees four key trends in US energy behaviour: more imports, increasingly unstable and unfriendly suppliers, escalating risk of anti-American violence and rising competition for diminishing supplies. (...) The point here is that the US can have relationships with governments in unstable countries if it chooses the path of oil dependency, but not easily with their populations.

For the time being, our governments, led by the Cheney clique, seem to be only focusing on grabbing whatever oil's still around, by means which are increasingly at odds with our supposed values, and without any care given to anything beyond the very near future. This is setting the stage for large scale confrontation with other nations like China, India and even Russia which face the exact same problem. Simply put, there soon won't be enough oil around for all.

Chris Skrebowski believes that, from as early as 2007, the volumes of new oil production are likely to fall short of the combined need to replace lost capacity from depleting older fields and to satisfy continued growth in demand. In fact, given the time frames with which offshore oilfields are developed and depleted, it seems certain that there will be nowhere near enough oil to meet the combined forces of depletion and demand between 2008 and 2012. If there were, it would be from projects we would know about today (oil companies liking as they do to boast to their shareholders about every sizeable discovery). Given the inevitable time-lag from discovery to production, there is now no way to plug that gap.

"The perception of looming decline may be worse than the decline itself," Campbell said. "There will be panic. The market overreacts to even small imbalances. Prices are set to soar in the absence of spare capacity until demand is cut by recessions. We will enter a volatile epoch of price shocks and recessions in increasingly vicious circles. A stock-market crash is inevitable."

"If the economic recovery continues," Skrebowski added, "supply will get very tight from 2008 or 2009. Prices will soar. There is very little time and lots of heads are in the sand."

(...)

Early-topper arguments are not on the radar screens of the oil traders and analysts, as things stand. Should that happen, and should the mood of the packs on the trading floors flip to the view that we live no longer in a world of growing supplies of oil, but rather shrinking ones, the price will soar north of $100 a barrel very quickly.

An investor friend of mine has already concluded that this scenario is inevitable. He has switched his investment portfolio to anticipate the moment of "market realisation". This peak panic point, as he calls it, will not be limited to oil traders. The worlds of economics and business routinely assume a future in which oil is in growing and cheap supply.

That last point is a key. We routinely (and blithely) assume that oil will be there. When you buy a plane, when you build a house in a faraway suburb, when you move a factory to China, you are implicitly or explicitly betting on oil prices staying at levels similar to what they are now, i.e. compatible with growth in air travel, two-hour commutes or very long logistical lines. These are 3 pretty obvious examples, but most economic activities require similar assumptions.

Thus the question is: are those in power aware of these assumptions, and worried about the panic and crash should such information become widely available, or are they just clueless?

I'm still betting on the second option. There's just too much ignorance displayed by officials, even when they talk about the topic (for instance, the head of the French public agency for energy efficiency saying that we will soon reach the point when "we consume more oil than we discover"), and too little anticipation on the financial markets. The markets are currently betting on the not-so-low probability of a supply disruption from Iran (tensions), Nigeria (labor or ethnic trouble) or a few other places in a context of temporary tightness of the market (remember that CERA, the best-known consultancy in the business, confidently predicts a "sea of oil" in the second half of this decade).

As to politicians, they would be playing up the possibility of a conflict with Iran if they realised that it may send oil prices to $500 and not just $100 (should Iran reduce its oil production, or worse, "accidentally" close the Straits of Hormuz).

But we are living on borrowed time. In so many ways.