Ears On

This one will more than make up for it.

Uh-oh. What happened?

Oil hit $100 a barrel today.

Is that a big deal?

Big enough for me to prepare this Diablog especially for the occasion.

Oh.

Lately I've been wondering if our industry, including my job, is sustainable in the longterm. After all, the electronic goodies I write about--indeed, the whole North American economy, no, make that the global economy--runs on energy. To get a handle on the forthcoming energy crisis, you've got to start with Hubbert's Peak.

Whose peak?

M. King Hubbert was chief geologist of the Shell oil company. In the 1950s he published a paper that attracted widespread ridicule. Until then it was assumed that crude oil was an infinite and inexhaustible resource. Hubbert thought differently. He said that oil production--whether you're talking about a single field, a whole country, or the world--follows a predictable pattern. It's shaped like a bell curve. That became known as Hubbert's Peak.

Sounds like trouble.

It is. As you ascend the curve, oil is easy to get out of the ground. It can be sold cheaply, and on that you can base a whole cheap-oil economy. Till you get to the top of the curve.

What happens then? The oil runs out?

No, it's 50 percent exhausted.

That doesn't seem like cause for alarm. Our oil's only half gone. Soft landing, right?

Not exactly. At the top of Hubbert's Peak, the oil that's easy to get at is more than half gone. As you descend the far side of Hubbert's Peak, it gets harder and harder to extract till drilling becomes uneconomical. The key to that is something called EROEI.

Leroy? I think I knew him in high school.

Trust me, EROEI is no friend of yours. Just as the investment community thinks in terms of ROI, or return on investment, the oil drillers think in terms of EROEI, or energy return on energy invested. It's the same thing, just substitute oil for dollars. At the dawn of the American oil industry, EROEI was at least 20:1 and often better. For every barrel of oil you put in, you got out at least 20 barrels. Nowadays, world oil production has an EROEI of 2:1 or 3:1. That's still a favorable ratio but not as favorable as before. As you begin going down the far side of Hubbert's Peak, at some point in the future, EROEI will hit 1:1.

And at that point, you stop drilling for oil.

Exactly. Because you'd be putting in more energy than you'd be getting out.

OK, I'm scared now.

Hubbert predicted--and this was in 1956, mind you--that U.S. domestic oil production would peak between 1965 and 1970. It peaked in 1970. Hubbert died in the '80s but his descendants, the Peakists, believe world oil production peaked in 2005 or '06.

Oh dear. We're in big trubs now. I suppose you've got some figures to back up your assertions?

The folks at theoildrum.com do a pretty good job of compiling and juxtaposing the latest public data. See their Peak Oil Update. I also skim the headlines and commentary of the daily Drumbeat. That's more or less the heart of the peak-oil conversation.

So how much get-at-able oil is really left in the ground?

It's hard to tell because oil companies tend to lie about that to obtain trading advantages. For instance, if you're an OPEC country, you lie to other OPEC countries so you can set your OPEC production quota as high as possible and lock in those short-term profits. But it's harder to conceal what's flowing into and out of refineries. That's more akin to public knowledge. According to the Peakists, we're at the top of Hubbert's Peak and about to begin the long slide down the other side.

What happens now?

Well, transpose Hubbert's bell curve against the demand curve for oil, which is more or less an ascending line, with much of the recent demand growth coming from countries like China and India. As demand pulls farther and farther away from the top of Hubbert's Peak, the widening disparity causes higher prices for oil and everything derived from it, including gas and aviation fuel. You can't argue with the law of supply and demand.

Check. $100 a barrel. Crikey. And now?

Everything that depends on a plentiful supply of cheap oil slows down or stops. Things that can get by on expensive oil continue, at least for awhile. There are factors that might postpone the inevitable. For instance, rising oil prices might cause demand to collapse as people who can't afford it stop trying to get it. This "demand destruction" might put a big dent in the demand curve. But the supply curve might decline more steeply than current projections too. As oil-producing nations realize that their endowments are running low, even as they themselves consume more, they'll be less likely to export. This is called the export land model. It may ultimately lead to resource wars. You could argue we're in the midst of one already.

Ouch. What does that mean for your little factory of toycritic wit and wisdom?

In terms of the audio/video industry, the first things that come to mind are manufacturing, foreign or domestic; raw materials, which like oil are finite resources; transportation, of products and consumers; and the demand for home theater gear, which implies a spacious home, and certainly requires some disposable income. The mortgage crisis is real cause for concern. If the post-1945 surburban buildout is over, the market for home theater gear may well begin shrinking, and with it, the magazine ad revenue that pays my salary.

Our salaries. Your employer must love you. But methinks you're muddying the waters here. A/V products run on electricity. You're talking about oil. I happen to know, having been Al Gored half to death, that home power generation comes mainly from coal, nukes, natural gas, and hydro, with solar and wind power waiting in the wings. Oil is almost irrelevant here.

But what happens when all those electric cars get on the road? That'll put them on the grid too, competing for power with homes, factories, and offices. The grid is not in very good shape to begin with. And among the electricity-generating energy sources you mention, coal is the only proven one we indisputably have a lot of, and you know what that means for climate change. Al Gore's gonna be knocking on your door soon, ready to smack you upside the head with his Nobel Peace Prize. There's an energy crisis ahead, and it will affect everything about the way we live and work. And the annoying thing is, we could easily have avoided it.

How?

Let me give you a timeline. 1945: New zoning laws decree that you put your housing here, and your shopping here, and your schools here, and your offices here, and the only way to bridge the distances between all these pods is the automobile. It literally becomes illegal to build a traditional neighborhood with a traditional main street and apartments over the shops. Walkers and public-transit users become endangered species. 1956: Hubbert describes Hubbert's Peak, the first time anyone's suggested oil may be a finite resource. We build the interstate highway system anyway. 1970: U.S. domestic oil production peaks. 1973: With the U.S. dependent on foreign oil for the first time in history, the OPEC nations stage an oil embargo. It is massively successful, causing lines at the gas pumps. You can buy gas only on odd- or even-numbered days, depending on your license plate. The U.S. economy dives into stagflation, a stubborn combination of stagnation and inflation. People's life savings shrivel, unemployment soars.

I am just old enough to remember that. It was ugly.

Tell me about it. 1977: President Carter gives an address to the nation declaring that we need to achieve energy independence from foreign oil. He's wearing a cardigan and tells us to turn down our thermostats. Speed limits are reset to 55 MPH to save energy. For awhile, people listen, and the growth in our energy use slows. 1980: Carter is voted out of office by a more optimistic sort of person and it's Morning in America. Foreign oil? Bring it on. New fields are exploited in Alaska and the North Sea--and now, having been drilled with the latest and greatest methods, they're peaking, of course. Since then, our energy use has only increased. The words SUV and McMansion have entered the language. This has happened under Democrats as well as Republicans. It's very much a bipartisan disaster. 2005-06: World oil production peaks. 2007: Presidential candidates talk about rising gas prices but don't even mention peak oil. The future looms.

And for the past 30 years we've done nothing while our light sweet crude has ebbed away.

Ours and everyone else's. It drives me crazy to think that between the start of the suburban buildout in 1945 and now, we could have made a major midcourse correction. All the warning bells were going off in the '70s: the U.S. domestic peak, the OPEC embargo, Carter's speech. Ding ding ding. We could have built what is now called a sustainable future. Instead we woke up for a moment, glared at the clock/radio, hit the snooze bar, and went back to sleep. It will take rolling blackouts and spot shortages of gas and fuel oil to wake us up. This is going to be nasty.

So all our HDTVs are about to go dark. Our surround systems will go silent. People will be stranded in their suburban pods, unable to drive to the adjacent pods.

Then again, there are different ways of being realistic. The shock may just lead us to build a better future for ourselves. Let's get to that in a future Diablog. If we make it that far.

Mark Fleischmann is the author of the annually updated book Practical Home Theater and tastemaster of Happy Pig's Hot 100 New York Restaurants.