The July 2010 edition of Oilwatch Monthly reports that both crude oil and liquid fuels production continue their slow decline from peak levels. The charts below taken from the report are posted at The Oil Drum.

Oil consumption in the twenty-seven countries of the European Union peaked in 2006 and has since been declining at a rate of 3% per year. Oil consumption in the transport sector in the EU began to decline in 2008, dropping 1.4% from 2007. Oil consumption in road transport fell, offsetting a continuing but slowing rise in air transport consumption.

Usings less oil than the U.S. does not mean the EU is less prosperous than the U.S. EU nations consume only 60% of the oil as the U.S., but  the gross domestic product of the combined 27 EU nations exceeds that of the U.S. by 15%.

Here’s a sobering graph from The Oil Drum: Europe showing that oil exports – oil available for trade on international markets – have been declining since 2005 and that the decline is projected to not only continue, but accelerate.

This decline in oil exports is consistent with the Export Land Model. Consumption within oil producing countries continues to increase even as production lags or falls, leaving less available for export to oil consuming nations.

Luis de Souza writes this situation bodes ill for Europe.

It is hard to envision how Europe will fare in this race for the dwindling international oil market. One thing is for certain: Europe, with its heavy foreign dependence and its now very small internal production, is the Economic block with the most to lose.

But it’s hard to see how the U.S. will fare any better.  At least Europe has an infrastructure of cities and villages that mostly developed prior to the automobile age. Population centers have some semblance of a relationship to the surrounding countryside, a relationship that could conceivably be renewed and strengthened without too much disruption. And Europeans have long been used to high transportation fuel prices. High population densities and high fuel prices are two factors contributing to the survival of viable transportation alternatives in Europe . The U.S. has kept fuel prices low and subsidized sprawl since the end of WWII.  As a result, much of the built environment in the U.S. will prove to be  “stranded investment”, infrastructure whose fate is to be abandoned.

Souza warns that energy scarcities mean the end of  an economics we erroneously believe is the natural order of things.

An unsustainable economic paradigm is coming to an end. If economic recession is the only way for Europe and the OECD to reduce its reliance on fossil fuels, then economic recession is what it will be.

He’s writing of Europe, but what he says applies more generally to the post-WWII enshrinement of growth and free markets. After causing untold damage to human societies and to Earth itself, the wheels are finally coming off and that age is grinding to an end. Walt Whitman Rostow and The Stages of Economic Growth, RIP.

Nobody “official” – no country, no established economic research institute, no international organization (such as the IMF) – appears willing to entertain any notion or to publicly discuss scenarios that don’t plan for a return to stable economic (GDP) growth.

But then there’s the non-establishment Institute for Integrated Economic Research – which is unafraid to think the unthinkable.

The IIER suspects the odds of business-as-usual coming to an end are pretty high.

Nate Hagens at The Oil Drum: Campfire suggests it might be entertaining and perhaps even enlightening to begin asking our politicians, what will you do if growth is over?

This report from Zawya Dow Jones in Riyadh, Saudi Arabia, should give pause:

Saudi Arabia’s King Abdullah has ordered a halt to oil exploration operations to save the hydrocarbon wealth in the world’s top crude exporting nation for future generations, the official Saudi Press Agency, or SPA, reported late Saturday.

“I was heading a cabinet meeting and told them to pray to God the Almighty to give it a long life,” King Abdullah told Saudi scholars studying in Washington, according to SPA.

“I told them that I have ordered a halt to all oil explorations so part of this wealth is left for our sons and successors God willing,” he said.

A senior oil ministry official, who declined to be named, told Zawya Dow Jones the king’s order wasn’t an outright ban but rather meant future exploration activities should be carried out wisely.

Saudi officials have begun to worry about expanding domestic energy use. If current trends continue, Saudi Arabia’s demand will rise to 8.3 million barrels a day of oil equivalent in 2028 from 3.4 million barrels in 2009. Saudi officials are hoping that unspecified “efficiency measures” can cut the projected increase in demand in half.

Saudi Arabia’s cutting back on exploration, coupled with increased domestic demand, is surely bad news for oil exports – and for oil importing countries, including the U.S.

A meta-analysis published recently in the Journal of the American Planning Association finds the most important single factor in minimizing driving is to develop in existing areas of high destination accessibility – like city centers. Going back in time (or back to the future), that would be villages.

Other factors like mixed-use, street and intersection design, and block size prove to be less important than destination accessibility. Still, these factors are more important than mere density. Density is less important than land-use mix and having shops, schools, and workplaces near to where people live.

Not surprisingly, driving is found to have energy and climate implications:

The transportation outcomes . . .  vehicle miles traveled (VMT) and vehicle trips (VT), are critically linked to traffic safety, air quality, energy consumption, climate change, and other social costs of automobile use.

Figuring out a way to drive less – much, much less – is key to coming to grips with peak oil and to arresting global warming before we reach a tipping point beyond which Earth’s climate will spin out of control, resulting in an Eaarth we no longer recognize and which is no longer fit for human habitation.

The free-access analysis, Travel and the Built Environment, was authored by Reid Ewingab of the University of Utah’s Urban Land Institute; and Robert Cerverocde, University of California (Berkeley) Transportation Center, Institute of Urban and Regional Development.

Here’s the abstract:

Problem: Localities and states are turning to land planning and urban design for help in reducing automobile use and related social and environmental costs. The effects of such strategies on travel demand have not been generalized in recent years from the multitude of available studies.

Purpose: We conducted a meta-analysis of the built environment-travel literature existing at the end of 2009 in order to draw generalizable conclusions for practice. We aimed to quantify effect sizes, update earlier work, include additional outcome measures, and address the methodological issue of self-selection.

Methods: We computed elasticities for individual studies and pooled them to produce weighted averages.

Results and conclusions: Travel variables are generally inelastic with respect to change in measures of the built environment. Of the environmental variables considered here, none has a weighted average travel elasticity of absolute magnitude greater than 0.39, and most are much less. Still, the combined effect of several such variables on travel could be quite large. Consistent with prior work, we find that vehicle miles traveled (VMT) is most strongly related to measures of accessibility to destinations and secondarily to street network design variables. Walking is most strongly related to measures of land use diversity, intersection density, and the number of destinations within walking distance. Bus and train use are equally related to proximity to transit and street network design variables, with land use diversity a secondary factor. Surprisingly, we find population and job densities to be only weakly associated with travel behavior once these other variables are controlled.

Takeaway for practice: The elasticities we derived in this meta-analysis may be used to adjust outputs of travel or activity models that are otherwise insensitive to variation in the built environment, or be used in sketch planning applications ranging from climate action plans to health impact assessments. However, because sample sizes are small, and very few studies control for residential preferences and attitudes, we cannot say that planners should generalize broadly from our results. While these elasticities are as accurate as currently possible, they should be understood to contain unknown error and have unknown confidence intervals. They provide a base, and as more built-environment/travel studies appear in the planning literature, these elasticities should be updated and refined.

The Federal Highway Administration reports travel on all roads and streets was up 1.2% (3.1 billion vehicle miles) for April 2010 as compared with April 2009.

Cumulative travel for 2010 is down 0.2% (-1.6 billion vehicle miles). Calculated Risk has posted this chart.

Are we seeing a Hubbert’s Peak for VMT? Peak VMT logically would be a consequence of peak oil, as vehicle travel is almost totally dependent on oil.

Travel in the western states rose considerably less than the rest of the country – only 0.3%.

One implication of peak VMT is that we won’t be needing all of the road infrastructure that is currently being planned, based on the assumption that traffic will continue to increase into the future as it has in the past. Peak VMT means we’ll likely be stranded with excess capacity. Continuing to squander billions on new bridge and highway capacity will prove to be a tragic misallocation of precious land and scarce resources.

Shirin Wertime has a must-read article at Culture Change that poses the question: what will happen to our food system as fossil fuels become increasingly scarce and expensive? The following is my summary of some of the highlights.

Today’s agri-food systems are almost entirely dependent on fossil fuel energy for everything from food production to transportation to food preparation and storage. The structure of agriculture production, aided and abetted by government policies, has spurred the expansion of farm specialization and consolidation, monocultures, the delocalization of agricultural production, and the adoption of industrial farming practices. The increase in globalized food production, which has come at the expense of local production, is sustainable only as long as cheap energy supplies can subsidize the transportation of goods across long distances. It will take deep-rooted structural and institutional changes as well as lifestyle changes on the part of individuals, their governments, and societies to transition to a more sustainable, non-petroleum based food system which oil depletion and rising costs will inexorably force on us.

Farming itself has become the least profitable and least energy intensive segment of the entire economy of agriculture. Only one-fifth of the energy that goes into our mouths is actually used for growing food. The rest goes to transport, processing, packaging, marketing, and food preparation and storage. Farmers end up with only 10% of the total food dollar, while 25% pays for farm inputs and 65% goes for transportation, processing and marketing. A century ago, farmers ended up with closer to 40% of the food dollar and most farm inputs were produced by the farmers themselves by using draft animal power, storing seeds, and using animal manure for fertilizer.

As oil declines, industrial agriculture in its current form will become impossible. It will prove increasingly difficult to feed the world with diminishing fertile land and water resources. The current structure of power relations and resource control in the United States prevents the widespread move away from fossil fuel based agriculture and transition to localized, sustainable agriculture. Without a change in the status quo, small local and sustainable producers cannot compete against fossil fuel subsidized agribusiness. But the reality is that the present agricultural system cannot be maintained for much longer. Decreasing oil production and rising oil prices will effectively bankrupt the American agri-food system. Without petroleum and all of its benefits, there will be little choice but to revert to a system of local, organic production and consumption.

Peak oil will turn our entire world upside down. There will be a return to localized, small-scale photosynthesis-based, appropriate-tech agricultural production and an end to the domination of economic and power structures that place profit above all else.

Now, I can buy all of this except the last part of the last sentence. I’ll believe in the end of avarice only when I see it.

The June 2010 edition of Oilwatch Monthly is now available at Peakoil Nederland.

Rembrandt at The Oil Drum: Europe has posted this chart from the report showing pretty clearly that crude oil production has peaked.

The only thing that is keeping global liquids production more or less on a plateau is growing production of unconventional oil – heavy and extra heavy oil, oil shale, oil sands, natural gas liquids, lease condensates, gas-to-liquids, coal-to-liquids, and biofuels.

The recently released BP Statistical Review of World Energy reports a sharp fall in demand for oil and natural gas worldwide in 2009 – not surprising, given the global economic crisis. World energy consumption fell by 1.1% in 2009, the first decline since 1982. This decline in consumption was led by OECD countries, which saw a 5% decline in consumption in 2009. Emerging countries led by China and India grew energy consumption by 2.7%, but this was not enough to overcome the drop in the OECD.

Supply and demand are but two sides of the same coin – as one rises or falls, so must the other.

You know peak oil has gone mainstream when insurance companies are saying the environmental and economic costs of fossil fuels are simply too high to justify on-going investments. But that’s a consequence of the disaster in the Gulf.

Jeff Rubin has recently pointed out the real legacy of Three Mile Island wasn’t the event itself, which happened back in 1979, but rather what happened (or more precisely didn’t happen) over the course of the next 40 years in the United States. Literally overnight, the near-meltdown of the reactor core changed public acceptance of nuclear power plants. No company in the U.S. has built a new one since.

BP’s Deepwater Horizon event may prove to have similar consequences. A major new report from insurance giant Lloyd’s and UK think tank Chatham House argues that a rapid shift towards low carbon energy sources represents the only way of tackling the energy industry’s soaring risk profile.

Commenting on the report, titled Sustainable Energy Security: Strategic Risks and Opportunities for Business, Lloyd’s chief executive Richard Ward, said that the environmental and economic costs of fossil fuels are simply too high to justify on-going investments.

The current generation of business leaders need to rethink their approach to energy risks or be left behind as energy becomes less reliable and more expensive. We need a long-term plan to reduce consumption and diversify our energy sources.

“Peakers” have toiled for decades now to raise awareness of the precariousness of our predicament, working towards the moment when the rest of the world would finally realize that you can’t extract an infinite amount of oil from a finite planet. The moment of awareness that oil supplies are finite will be followed by dawning awareness of the implications of peak oil, to our economy and our way of life.  As seers such as John Michael Greer and James Kunstler have been saying repeatedly, the technological, economic, and social arrangements predicated on endless supplies of cheap oil might soon turn out to be “a good deal less clever than they seemed”.

It is beginning to look like the first moment of awareness has finally arrived. The second moment of awareness can’t be far behind.

Oxford researcher Jörg Friedrichs in a new article asks, what is likely to happen if peak oil occurs?

While a global peak of oil production would be a planetary event, reactions would differ in different parts of the world. Globalization has been fueled by cheap and abundant energy, traded as a commodity on a free market. Increasing conflict over scarce energy would undermine the very foundations of the world’s social, economic, and political systems that have developed over the past few centuries.

To answer his question, Friedrichs focuses on oil importing countries, which constitute the vast majority of states. He looked at three historical examples, which suggest three possible “peak oil trajectories” – paths that different countries might take in responding to peak oil:

• Japan and predatory militarism. The specter of future resource shortages had played an important role in shaping Japan’s imperialist strategy ever since the end of World War I. When an American oil embargo became imminent in 1941, Japan preemptively attacked the US Naval Base at Pearl Harbor and radicalized its war of conquest in order to gain access to the rich oil supplies of the East Indies.
• Korea and totalitarian retrenchment. In North Korea after the end of the Cold War, subsidized deliveries of oil and other vital resources from the Soviet Union came to a halt. The “Hermit Kingdom” reacted in a shockingly reckless way. Elite privileges were preserved while hundreds of thousands of North Koreans died from hunger.
• Cuba and socioeconomic adaptation. Cuba, like North Korea, suffered an abrupt end to subsidized deliveries from the Soviet Union. While this plunged Cuba into a deep crisis, there was no mass starvation comparable to North Korea. Instead, Cubans relied on social networks and non-industrial modes of production to cope with energy scarcity and the concomitant shortage of food – and were actively encouraged to do so by the regime in Havana.

Friedrichs dismisses “techno-optimists” who believe the world can transition to other energy sources, citing the example of the American South (which he calls “Dixieland”) after the Civil War. Southerners only had to look to the North of their own country for investment and innovative technologies – yet it took well over a century to make the transition. Moreover, a similar energy ‘‘upgrade’’ does not seem to be available in the event of peak oil.

Freidrichs expects that peak oil will not lead either to immediate collapse or a smooth transition, but rather to painful adaptation processes that may last for a century or more, as people do not give up habits easily.

Friedrichs thinks that countries prone to military solutions may follow a Japanese-style strategy of predatory militarism. Countries with a strong authoritarian tradition may follow a North Korean path of totalitarian retrenchment. Countries with a strong community ethos may embark on a Cuban-style mobilization of local resilience, relying on their people to mitigate the effects of peak oil.

What’s his prognosis for the U.S.? Most likely, predatory militarism. Sounds plausible – after all, the U.S. is by far the most militaristic country on the planet. Exactly how much the U.S. spends on its military adventurism, and the percentage of global spending that represents, depends on what you count. For the 2010 fiscal year, the base budget of the Department of Defense was $533.8 billion. Adding spending on “overseas contingency operations” brings the sum to $663.8 billion. Defense-related expenditures outside of the Department of Defense constitute between $216 billion and $361 billion in additional spending, bringing the total for defense spending to between $880 billion and $1.03 trillion in fiscal year 2010. No matter how you add it up, U.S. “defense” spending far exceeds that of any other country. China, the second largest spender, has an official budget of a paltry $77 billion (some estimate China’s spending on its military is in reality much higher, perhaps in the range of $121 billion). Once-mighty Russia’s military spending plummeted after the collapse of the Soviet Union, and has now dropped to a pitiful $20 billion or so (although DoD swears it’s more like $70 billion). The Stockholm International Peace Research Institute (SIPRI)’s 2009 Year Book on Armaments, Disarmament and International Security pegs global military expenditures for 2008 at $1.464 trillion. SIPRI calculates that U.S. military spending is 41.5% of the world total. Other calculations put the U.S. share as high as 48%.

Does anyone seriously expect that, when faced with soaring energy prices that threaten to cripple its economy, the U.S. would not abandon its free-market rhetoric and use the military that it is paying for? After several generations of individualism and affluence, America will not easily dismantle its military machine and accept the need to rely on communities and revert to a sustainable lifestyle.

Friedrichs ends on a note that he describes as “not cozy”. Even if a mix of substitute fuels were to be found, and if alternate technologies were to be developed in time, this might mitigate the impact of peak oil and postpone the decline of overall world energy consumption – for a while. But there would inevitably be another time, as infinite growth on a finite planet is impossible. At some point, industrial society will start crumbling and free trade will begin to disintegrate.

Friedrichs article, “Global energy crunch: how different parts of the world would react to a peak oil scenario“, is published in the journal Energy Policy 38 (8): 4562-4569  (2010).