The Day the Gas Dried Up

“You know what’s worse than a slow computer?” a professor in Texas once asked his class. “No computer.” He was telling the class about his son who was complaining that his processor wouldn’t go fast enough. Now many Americans are complaining that gasoline prices are too high as they crest the astronomical price of four dollars a gallon. They might spare a thought for the Scottish who would be grateful to pay $8.30 a gallon, if only they could get it. For rationing and actual dry gas stations have arrived in what was once an early engine of the Industrial Revolution and later a major oil exporter, while the government warns against the spectre of panic buying and hoarding.

As Shell tries to scoop up the oil leaking from rebel attacks on a pipeline in Nigeria and a strike at Exxon combines to reduce Nigerian oil output by half, the price of oil is pushed to a record high of a few cents of $120 a barrel. The UN meanwhile is setting up a task force to tackle the ‘global food crisis’, in an attempt to avert "social unrest on an unprecedented scale". These all signs of a growing sense that the globalized system of heavy dependence on cheap fossil fuels is getting into trouble.

But surely not in the land of glens, golf and whiskey? Is Scotland really ‘running out of petrol’ as we Brits call gasoline, and is the British economy about to grind to a halt as a result? No. The events in Scotland at least are short term, and on the face of it can be explained by factors other than geology. A union strike about pensions closed Grangemouth, Scotland’s only refinery, for a couple of days. The refinery is connected to the giant Forties pipeline that brings oil and gas in from the declining fields of the North Sea. Shutting down a refinery is a rather difficult operation and starting it up again is not only difficult but can also be dangerous. It is also a slow process. So it may be some time before North Sea oil and gas is flowing back into Scotland.

Arrangements have been made for petroleum products such gasoline and diesel to be brought in from other places, and this is not the middle of winter, so natural gas demand is not at a premium. And it was only a few gas stations that either ran dry or were rationing drivers to $40 of fuel per visit – which at $8.30 a gallon would give a large family SUV less then 100 miles range.

Scotland will no doubt soon be back online and things will be back to normal. Or so it will seem. But this may yet be a portent of how the decline of petroleum may unfold in the industrialized world – not smoothly or predictably, or with gently rising prices, but with sudden supply shocks, administered from unexpected places, such as Scots striking over pensions or a fire at a single refinery. When a long and complex supply chain is stretched to too tight, it doesn’t take much to break it.

Compounding and indeed sometimes creating the unlikely spot shortages seen in Scotland, home to one of the world’s largest finds of oil in half a century, are the unfortunate phenomena of panic buying and hoarding. Hoarding makes some sense, at least at the individual level, but panic buying is still poorly understood. Indeed, there have been tests on ‘sophisticated’ operators – like economists – and even when they know what is going on, they still engage in panic buying. When you suddenly have millions of people trying to obtain a vital and scarce resource such as gasoline or rice – or money, you have the recipe for a lot of trouble, such as rioting, military intervention or banking collapses. All of this happened before, and some of it is happening now, hence the UN food task force.

There are lots of lessons that one might take from these shortages happening in both industrial and less industrialized parts of the world. There are some economists for example who say that all these failures are the result of under-investment in oil exploration and drilling or lack of research dollars for genetically modified patty pans, while others ironically say that there is too much investment in oil and gas - but in stocks not actually production and this is causing the huge price bubble we now see. But slowly the various contradictory investment messages will lose steam, as the scale of 'under-investment' becomes apparent - in some cases a thousand times less than supposedly required and the oil bubble refuses to burst.

The deeper lesson is that unfortunately many of our systems, both of thinking and supply, require multiple serious shocks before they begin to respond by considering change at an infrastructural level. From one point of view, this is actually sensible since we do want to safeguard our food and water supplies for instance, but when we are really undergoing an epochal shift, that inertia becomes dangerous and tends to block change. If this speculative and not very cheerful analysis has any validity, then it may yet be useful in this way: considering the very possibility of 'necessary serial shocks' may reduce the number of serious shocks necessary for systemic change to be brought forward. Furthermore, we may be able to begin to plan earlier and test those plans in more environments than might be possible if many supply chains are broken later on.

So as the Texan computer professor was implying, it would be much better to respond positively and creatively to the system slowing down than wait till parts of it stop altogether, but we have to see the slowing as the ending of a whole way of doing things rather than just another dip in the business as usual cycle. Climate change has turned that perception corner, but peak oil still has some way to go.

All those involved in getting the word out about the real reasons for oil problems should take heart and redouble efforts now, since this high price spurt is the best window of educational opportunity since Hurricanes Katrina and Rita. One day we may get to a stage where major change can be considered before a catastrophe strikes, but in the meantime if many more people begin to learn why fuel and food shortages are becoming endemic, that may prevent misery and create possibilities.