Estimates may differ as to when peak oil will occur, with optimistic references to new discoveries, particularly in Africa. According to UNCTAD, new oil production capacity is expected to grow from 2006 to 2011 by 11.7 million barrels with only 3.8 million barrels accounted for by existing OPEC countries. But many commentators suggest that the estimates of existing reserves have been greatly exaggerated and that even after allowing for new discoveries, peak oil will be with us much sooner than anticipated.
The UNCTAD report provides a similar picture for other raw materials that play a vital role in every facet of modern society including copper, nickel and bauxite. During 2003-04, for example, there was a large and unanticipated increase in demand for these minerals fuelled, partly, by China’s resource-intensive growth path, which accounted for 66% of the growth in demand for copper and 25% for nickel. (China is now responsible for 22% of total world demand for copper and 16% for nickel.) In other words, exponential growth is leading to an accelerating rate of depletion as predicted in the Limits to Growth model, especially as new deposits are not being found in sufficient quantities:
The failure of exploration to turn up new monster deposits…has resulted in a
growing perception that finding and developing very large projects in the
future is going to be much more challenging than in the past. Most of the low
hanging fruit appears to have gone.
Here we reach the crucial issue in terms of the relationship between resource depletion, peak production, increased demand and climate change. The depletion of non-renewable resources coupled with the increased difficulty of extraction; the growth in the demand for the harvest of renewable resources such as food and water; and the filling in of sinks that were historically the basis for carbon capture, are raising the amount of energy and capital required to maintain the quantity and quality of material flows for globalised production and distribution.
The Depletion Crisis 2008-2010
Western economies have already experienced the first depletion crisis in the recession of 2008/09. Over a twelve month period from July 2007 to July 2008, oil prices increased by 80% in real terms, driven by increased demand and concerns over security of supply to reach a record high of $147 dollars a barrel. As a result, consumption spending declined, especially in the motor vehicles and parts sector with
further impacts across the economy.
It was these concerns over future growth prospects that undermined confidence, leading to a withdrawal of capital that exposed the speculative orgy at the heart of the financial services sector. So the recession’s severity was not, as normally depicted, simply the result of financial meltdown triggered by the sub-prime mortgage crisis and the accumulated ‘toxic’ debt, but the combination of dependency on external supplies of non-renewable energy and exposure to the volatility of financial markets.
Western governments were compelled to intervene on a truly extraordinary scale in what was a desperate attempt to prevent a full-scale economic depression. Various mechanisms have been used including loans to, and shareholdings in the major banks, alongside quantitative easing of the money supply in order to provide increased liquidity and demand in the economy. Financial support was also given directly to the manufacturing sector, particularly to the motor industry, in loans and through incentives for the purchase of new cars. |
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The level of government intervention is reflected in the national debt which had increased in the UK to £800 billion by the middle of 2009 and $10,000 billion in the USA. These figures will increase over the short-term because of falling tax revenues and further loans.
Perhaps central governments were left with little option, given that the historical analogy most often used was the failure to maintain confidence in the financial sector during the Wall Street Crisis in 1929 that led to the Great Depression. But the fact remains that the economy is still in serious trouble, with high levels of unemployment and only a weak form of recovery. Pressure is growing to drastically cut public expenditure and, therefore, many public services. However, the hope and expectation remains that trend growth will be restored and that increased tax revenues will begin to reduce the deficit, bringing public expenditures back into balance over the medium term.
Yet the crisis of resource depletion can only get worse. Paradoxically, it was the impact of the 2008/09 international recession when oil prices fell to below $80 dollars a barrel during the first half of 2009 that helped stimulate the partial recovery generated through government intervention. But this was, and could only ever be a temporary respite as long as the globalised capitalist system was dependent on finite energy resources to fuel economic growth.
The pattern will be crushingly familiar, with increased demand for oil leading to higher prices as the ‘recovery’ takes hold. This, combined with the legacy of massive government debts and an international financial system still geared to speculative investments can only result in a further and deeper recession, or full-scale depression.
So the comparison with the 1920s and early 1930s, while understandable, is profoundly mistaken since it presupposes a stable supply of non-renewable resource to underpin economic growth. The reality is quite the opposite with exponential demand for finite resources leading to the most serious crisis ever faced by modern human society.
Civilization Collapse 2010-?
Not to put too fine a point on it, this is a recipe for civilisation collapse. Several examples exist of prosperous and complex societies that have over-extended their material base and fallen into decline. Ancient Rome is perhaps the most obvious. Acknowledged to be one of the greatest imperial powers in history, it became the centre of an extraordinary trading infrastructure, drawing in a population of over a million to the capital, and importing food and other raw materials in ever increasing quantities. This was the era of its unparalleled achievements - the vast network of roads, aqueducts and viaducts that allowed for the growth in trade and agricultural production on which the imperial system depended.
But the burden of supporting this extensive physical infrastructure alongside its standing army, colonial outposts, etc, proved increasingly difficult to maintain. Energy demand outstripped the empire’s carrying capacity and a vicious cycle of government debt and tax increases led to crisis, including the abandonment of farms across the empire. By the fourth century, much of what we consider the greatest legacy of Roman civilisation was now its greatest liability, leaving it exposed to invasion and collapse. |
