Sally Odland, a former geologist and project manager, has worked in mineral exploration, oil & gas exploration, environmental remediation, and exhibit design. She wrote this article below (in italics) for The Day, a newspaper in New London, Connecticut, and here I have interjected some comments as they relate to Hawai‘i.
“Who’d have thought we’d already be nostalgic for $80 oil? Only five years ago, a barrel of crude oil was trading comfortably at $25-$30, where it had for 15 years. Today the same barrel fetches $90-something, and it’s anyone’s bet whether oil will break $100 before Christmas. That’s a 300% price increase in five years, 50% in the last year alone. Credible energy analysts predict $200 to $300 oil in the next few years. No wonder the Feds removed energy costs from the core inflation index!”
In the last few weeks Matson announced a rate hike for its seagoing cargo arriving from the West Coast; Aloha Airlines announced a rate hike of 5 cents per pound for its air cargo; Young Brothers barge company announced a rate hike for interisland freight, and HELCO, our electric utility, announced a rate hike as well. Yesterday, while participating at the Kino‘ole Street farmers market, I was told, unofficially, that UHS will be increasing its fertilizer prices significantly. We know from past experience that the cost of plastic and other supplies rises with oil prices, but lags as inventories clear out. This means that Hawai‘i farmers’ production costs will be rising. Imported food costs will also start rising as high oil prices work their way through the system.
Our alternate energy Farm Loan Bill will help to stabilize some of the Hawai‘i farmer’s costs and help them become competitive.
“Our fundamental assumptions about the continuing availability of cheap oil to fuel the American lifestyle are being tested. Last year the topic of peak oil—the idea that the world is approaching a maximum limit to oil production—was virtually taboo in polite company and business journals.
This November, however, the Wall Street Journal ran a Page One piece: “Oil Officials See Limit Looming on Production.” If that’s not the definition of peak oil, I’m not sure what is.”
Sunday’s New York Times says that some of the world’s largest oil exporters will no longer export in five to ten years because their own growing economies will use more oil products domestically.
Last week in a landmark speech, Fatih Birol, Head Economist for the International Energy Agency (IEA), was asked the following question, in response to oil-producing countries’ assertions that they would be able to produce an extra 25 million barrels per day. (Note: Until this point, the IEA was notoriously optimistic.)
The question: “Where will the projected extra 25 mb/d oil production come from?”
His response: “If the supply turns out to be less than this, we are in serious trouble. If these projects do not come online, the wheels will fall off our energy system.”
Yes, those were his exact words.
I am the only one from Hawai‘i who attended the Association for the Study of Peak Oil (ASPO) conference held in Houston in October. (ASPO is a non-partisan organization with 25 national chapters worldwide). At that time, the mainstream media had largely ignored the world oil supply shortage. Since then, in just the last few weeks, the topic is starting to make headlines in many papers and has become mainstream. All who were at the conference knew how serious the situation was. Now, maybe we can start to deal with the problem.
“For practical purposes, the exact date of “peak” (or more likely “plateau”) oil—whether 2005, 2012 or 2030 as the optimists predict—is immaterial; we have already rolled over to a sellers’ market.
Oil production has been essentially flat—about 85 million barrels a day—for the past two years, despite soaring prices. Strong demand growth in India and China was accommodated only because poorer African and Asian countries were priced out of the market. There is a growing realization that it’s not going to be cheap or easy to grow either capacity or production much beyond the present rates.”
We know that the world population has increased in parallel to oil production. This is because oil allowed cheap food to be produced. More food equals more people. Now that the oil supply is starting to become short, food will also become short. And people who cannot afford it may not get the food they need.
Here in Hawai‘i we import more than 80 percent of the food we eat. We need to start now in order to produce enough food for all of our people here in Hawai‘i.
“It doesn’t take a crystal ball to predict higher energy prices, greater volatility and periodic supply shortfalls on the 1- to 5-year horizon. Spare oil production capacity is sorely lacking, making the system vulnerable to supply and price shock. This specter is reason enough for families, businesses and local governments to start planning—now!—to dramatically reduce their exposure. We need conservation, but we also need emergency preparedness plans for dealing with the very real potential of disruptions to fuel and heating oil delivery.”
I am starting to meet more and more people who are doing things now to protect themselves against an uncertain future. One person at the farmers market told me he bought his parents five acres so they could become self-sufficient in terms of food production. He was a manager of a fertilizer company!
Hawaiians have always felt that self-sufficiency was no big deal. For them, it is a given that shipping will sooner or later be interrupted. They can remember when their grandparents were self-sufficient. People back then had a few animals, a taro patch and some ulu trees and they traded. To Hawaiians, it is not difficult—it is a lifestyle.
Someone recently asked me if I knew how expensive sheets are. I admitted that I have no idea. He told me that they purchased a few recently because sheets are made from petroleum products and prices will only go higher. My mom complains about how high canned goods and rice prices are. I know this is just the start. Prices will go much higher. It will be a challenging transition period. I worry that the farmers who are least able to pass on price increases may become discouraged and quit farming.
In order to prepare ourselves for a future of uncertainty, Hamakua Springs Country Farms is planning to make biodiesel on a small scale. In case there are supply disruptions, we don’t want to wait in gas lines.
“In the longer term—the next 20 to 30 years—we will have no choice but to transition to a reduced petroleum economy. There are compelling reasons why it makes sense to start doing that NOW, rather than waiting until we are 100% certain we’ve passed the point of maximum oil output:
Long lead times for large capital investments. It takes at least 15-30 years to bring revolutionary ideas from research and development to widespread usage. It takes similar time to plan, permit and build major infrastructure—like mass transit or new energy plants, LNG terminals, etc.”
(Garbage to energy?)
“Competition for scarce resources will drive up the future price of raw materials: The building blocks of progress—fossil fuel energy, metals, land—are more abundant and cheaper now than they will be in the future.
Resource nationalism means that certain strategic materials may not be available for import—at any price—in the not-too-distant future. We should reconsider the future value of energy, raw materials, farmland and water.”
We should consider what might happen if oil shipments to Hawai‘i are disrupted. It makes one wonder if we should not be producing our electricity from geothermal, wind, solar, hydro, the ocean, etc., all of which are available naturally here in Hawai‘i, and concentrate on using liquid fuels for transportation.
Why should we be relying on liquid fuels for electricity? Liquid fuels are not natural resources. If we do this, we cannot give Hawai‘i’s small businesses the competitive advantage derived from our natural resources. For example, if we relied on geothermal for most of our electricity, wouldn’t we have a competitive advantage over certain products imported from the mainland that rely heavily on oil for manufacturing? To the extent we could export those items we could still have a complex vibrant society as the dollars would circulate in Hawai‘i rather than being sent away.
On our farm, we are shifting direction. We will use hydro and solar to power electric motors, and replace as many internal combustion engines as possible. For example, we will use electric forklifts instead of diesel. We will use biodiesel primarily for our delivery trucks. It is important that the food we produce is transported dependably and on time.
Unconventional oil won’t bail us out: Canadian tar sands and U.S. oil shale resources may “rival Saudi Arabia,” but they can’t scale up production to match. Oil shales will be lucky to produce 100,000 barrels/day—a 7-minute supply at current U.S. consumption rates—by 2020. Doubling tar sands production to 4 million barrels/day by 2020 (if possible) won’t even offset depletion of existing oil production.
Other parts of the country use oil, natural gas, nuclear power and hydro for their electricity generation. In Hawai‘i, we use mostly imported oil. HECO is running TV ads saying that they are starting to use renewable energy. But renewable energy by itself does nothing for our energy costs. We are hoping the utility can figure out how to translate our free Hawaiian energy sources into cheaper electricity.
The impacts of Peak Oil will be hardest felt at the local and state level. The solution lies in revitalizing local manufacturing, farming and business around the emerging reality of constrained fossil fuel supplies. Peak Oil gives us the opportunity to strengthen and rebuild our local economies and to restore forgotten American—and Hawaiian—values such as ingenuity, resourcefulness and community.
Older people I talk to all say how good it was in the old days. Then, the sugar plantation towns all had company stores, theaters, bakeries, pool halls, boxing teams, etc. There were even medical clinics and transportation back and forth. The plantations must have done something right, as the older people have fond memories of those times.
Before that, the Hawaiians had a thriving sustainable society based on the aloha spirit—and it worked very well.
I think it is important to empower individuals. The farm loan alternative energy bill we are introducing into the legislature will empower individual farmers. Instead of relying only on industrial-sized power plants, there must be ways to incentivize individuals, and especially farmers, to generate electricity at strategic times to inject into the electric grid.
Large-scale bioenergy farming may be economical where there is flat ground and where the infrastructure is in place. But for many, taking the direct route by generating electricity and getting a check from the electric utility makes more sense than growing palm trees, fertilizing, harvesting, hauling, squeezing and shipping the juice to refineries and then getting a check. Incentivizing and empowering individuals helps to spread risk. Long supply chains and just-in-time inventories have made us vulnerable.
NASA incorporates multiple redundancies before they send astronauts into space. We, too, should spread our risks.
Sally Odland currently administers a division of research geophysicists at Lamont Doherty Earth Observatory of Columbia
University. Sally holds advanced degrees in Geology and Business
Administration. Her MBA dissertation, “Strategic Choices for Managing the Transition from Peak Oil to a Reduced Petroleum Economy” is online here. She serves as a volunteer Board Member of the Association for the Study of Peak Oil (ASPO-USA).
