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Ireland among "most vulnerable" to peak oil.

9 Apr 2010

The Irish Times

It is hard to overstate the extent to which our daily lives are subsidised by cheap, plentiful oil, writes JOHN GIBBONS

HERE'S A conundrum: restarting global economic growth will, by definition, push up energy costs. Rising energy costs will in turn choke off that economic recovery, leading to a fall in energy prices. Try to restart growth again, and the brick wall of energy costs magically reappears. Repeat ad infinitum.

It is hard to overstate the extent to which our daily lives are subsidised by cheap, plentiful oil. Every 24 hours, Ireland burns around 200,000 barrels. That's the daily equivalent of the muscle power of 2.4 million men, each working for a full year.

Our entire way of life depends on abundant, inexpensive oil. This era is now drawing to a close. Five years ago, the Hirsch report published by the US department of energy concluded that the world has "never faced a problem" as difficult as peak oil, adding that: "without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary". Oil peaking will be, it warned, "abrupt and revolutionary".

The advent of peak oil is, by definition, the end of decades of relentless economic growth, since this dramatic phase in human history has been entirely predicated on ready access to vast amounts of cheap energy.

A recent report from Feasta, the Irish-based Foundation for the Economics of Sustainability, gazes into the murky crystal ball of life beyond peak oil. Their document, Tipping Point , concludes that since humanity is entirely dependent on vast and expanding energy inputs, "there is a high probability that our integrated and globalised civilisation is on the cusp of a rapid and near-term collapse".

As energy flows begin to reduce, Feasta argues, this will trigger a domino effect, as one crisis reinforces another in a rapid downward spiral. The financial crash of September 2008 (triggered at least in part by record oil prices) was a portent of an energy-constrained future.

While oil is the black blood of industrial civilisation, credit is its oxygen. "In a growing economy, debt and interest can be repaid," said report author, David Korowicz. "In a declining economy, not even the principal can be repaid." The effect, he argues, is the inevitable disappearance of credit. Once it becomes apparent that most of the world's debt can never be repaid, cash, bonds and shares plummet in value, and the banking system crashes. The ensuing financial chaos triggers drastic reductions in international trade, thus deepening the depression.

A globalised economic system would be crippled by a collapse of the financial markets, since the confidence that underpins transnational trade would evaporate. Businesses and nations will only trade with others if they have a high confidence of being paid something of value. Where does that leave a resource-poor island like Ireland, with precious little to trade?

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