Friday, December 18, 2009

Peak Oil & Sustainable Development

Before the mortgage debacle hit last fall, gas prices were already playing havoc with real estate sales as the old advice to "drive until you can afford a house" took on a different meaning, and suburban/exurban home sales slowed. So, once the economy rights itself, will that earlier trend continue? Seems so.

An October 2008 survey of petroleum geologists found that a whopping 61% believe that Peak Oil has either already occurred or will occur within 10 years. This was reported in the journal of the Society of Exploration Geophysicists.

For those unfamiliar with Peak Oil, it is the point at which global oil production gradually declines, never to return to its former levels. US Domestic oil production peaked in 1972 leading to the first oil crisis, which was mitigated only by the discovery of North Sea oil and a ramp up of our oil imports from the UK and Middle East.

Unlike some "dark green" prognosticators, I don't believe that oil will not just 'run out.' What runs out is the easily extracted oil. What happens is that more and more of the energy being extracted must be used to extract the next barrel. In the 1970s, on average it took a barrel of oil of energy to extract 25-27 barrels of oil from the ground. By the 1990s, this had decayed to where a barrel of oil of energy would extract 14 or so barrels of oil - an almost 50% decrease in the "Energy Return On Investment," or EROI. The new technologies promoted by the oil companies today result in 4-5 barrels of oil extracted for every barrel of oil of energy used. It's a losers' game.

Interestingly, because of this, economists studying Peak Oil anticipate not a steady rise in the price of gas, but a series of increasingly volatile peaks and troughs in gas prices, with higher highs and higher lows, as demand repeatedly probes the supply limits and falls back (with economic slowdowns due to the cost of energy). Last summer's oil price spike was perhaps the first, but certainly not the last.

We had best not become complacent about the price of gas. Sustainable development should focus on energy efficient homes located in walkable or transit-accessible neighborhoods. This is doubly promising since these are precisely the kinds of neighborhoods that have been shown to strengthen communities. And strong communities are the foundation of sustainable development.

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