City of Portland Peak Oil Task Force members

Affiliations are provided for identification purposes and are not intended to represent the formal participation of any agency or organization.

Richard Benner, Metro

Christine Caruso, MCM Architects and Portland Planning Commission

David Cohan, Portland Peak Oil and Northwest Energy Efficiency Alliance

Angela Crowley-Koch, Oregon Chapter of Physicians for Social Responsibility

Lesa Dixon-Gray, Oregon Department of Human Services

Allen Lee, Quantec

Jeanne Longley, Zero Waste Alliance

Bill Scott, Flexcar

Sallie Schullinger-Krause, Oregon Environmental Council

Marcus Simantel, retired farmer

Randy White, Clear Channel Radio   

Rowan Wolf, Portland Community College

 

 

Staff

 

Michael Armstrong, Office of Sustainable Development

Kyle Diesner, Office of Sustainable Development

Steve Dotterrer, Bureau of Planning

Matt Emlen, Office of Sustainable Development

Lavinia Gordon, Office of Transportation

Peter Hurley, Office of Transportation

Andria Jacob, Office of Sustainable Development

John Kaufmann, Oregon Department of Energy

Patty Rueter, Office of Emergency Management

Charlie Stephens

Executive Summary

Introduction: Preparing for Peak Oil

Every day, businesses, government agencies and households around the world plan and make decisions based on the assumption that oil and natural gas will remain plentiful and affordable. In the past few years, powerful evidence has emerged that casts doubt on that assumption and suggests that global production of both oil and natural gas is likely to reach its historic peak soon. This phenomenon is referred to as “peak oil.”  Given both the continuous rise in global demand for these products and the fundamental role they play in all levels of social, economic and geopolitical activities, the consequences of such an event are enormous. This report assesses Portland’s vulnerabilities in the face of wide-ranging changes in global energy markets and provides an initial set of recommendations for addressing that challenge thoughtfully and prudently.

Task Force Created by City Council

In May 2006 Portland City Council adopted Resolution 36407 establishing the Peak Oil Task Force consisting of 12 citizens from a wide variety of backgrounds. The resolution charged the Task Force with examining the potential economic and social consequences of peak oil in Portland and developing recommendations to mitigate the impacts of rising energy costs and declining supplies. Over the past six months, the Task Force held more than 40 meetings and involved more than 80 stakeholders and interested citizens in gathering information.

Impacts and Vulnerabilities: High Fuel Prices Will Change Portland

Fifty years from now, the peak of global oil production will be a distant memory. Predictions for the year oil production will peak range from present day until 2040, with the most common estimates between 2010 and 2020.  Despite the apparent breadth of current projections, even the most optimistic forecasts offer little time to adapt given the very long lead times required to change such things as transportation and building infrastructure. 

Of all the impacts from rising oil prices, the clearest are those on transportation, which will experience profound pressure to shift toward more efficient modes of travel. For personal travel, this means transit, carpooling, walking, bicycling and highly efficient vehicles.  Transportation of freight will become more costly and either decline or shift modes from air and truck to rail and boat.  Population may shift to city centers, and density and mixed-use buildings will increase.

Food is a critical resource, and the American food system has become highly dependent on fossil fuels. Food production and distribution accounts for 17 percent of U.S. energy consumption. Because of this, higher oil and natural gas prices are expected to lead to a decline in the amount and variety of food produced and available locally, even with Portland’s proximity to the agricultural production of the Willamette Valley. Food prices will rise, further straining the ability of low-income households to put food on the table.

Like agriculture, the economy as a whole is expected to experience significant disruption and volatility. Impacts will vary widely by industry and firm, and Portland has strengths in high technology and a relatively diversified transportation system. Portland also enjoys a strong and growing clean energy sector, which is likely to see increased demand.  Nevertheless, many of Portland's industries are dependent on national and global markets, and business start-ups and failures are likely to increase.

Unemployment could be a major economic and social issue. This is of particular concern, since social services are already stretched to their limits.  Vulnerable and marginalized populations are likely to grow and will be the first and hardest hit by rising oil prices. Increasing costs and decreasing incomes will reduce health coverage and further stress the health care system, which is already in crisis.  Heating, maintenance, and monthly housing costs will consume a larger share of household budgets and push people toward lower-quality housing choices at the same time that auto transportation costs increase dramatically. First responders, especially police, are likely to be further taxed as social service agencies struggle to meet demand.

Introduction: Preparing for Peak Oil

Every day, businesses, government agencies and households around the world plan and make decisions based on the assumption that oil and natural gas will remain plentiful and affordable. In the past few years, powerful evidence has emerged that casts doubt on that assumption and suggests that both oil and natural gas production are likely to begin to decline significantly. This phenomenon is known as “peak oil.”[1] Given the fundamental role of oil and natural gas in all levels of social, economic, and geopolitical activities, the consequences of such a change are enormous. Portland City Council created the Peak Oil Task Force by resolution to investigate the implications for Portland of a future in which oil and natural gas production is declining, prices are rising, and supply is subject to periodic volatility. The resolution charged the Task Force with addressing these issues and presenting findings and recommendations to the City Council.

The starting point for the Task Force is well summarized in the introduction to the February 2005 United States Department of Energy (U.S. D.O.E.) report, Peaking of World Oil Production: Impacts, Mitigation, & Risk Management:

The Earth’s endowment of oil is finite and demand for oil continues to increase with time.  Accordingly, geologists know that at some future date, conventional oil supply will no longer be capable of satisfying world demand.  At that point world conventional oil production will have peaked and begin to decline.[2] 

While there is a wide range of opinions on when the peak will occur, many experts predict global oil production will peak within five years, and few anticipate a peak later than 2020. For purposes of the Task Force these debates about when the peak will occur are largely irrelevant. Fossil fuel consumption patterns cannot be substantially altered without changing the transportation and building infrastructure. Since these change slowly, action is required now even if peak production is 10 or more years away. Again, the U.S. D.O.E. report is instructive: 

Mitigation will require an intense effort over decades.  This inescapable conclusion is based on the time required to replace vast numbers of liquid fuel consuming vehicles and the time required to build a substantial number of substitute fuel production facilities. . . . There will be no quick fixes.  Even crash programs will require more than a decade to yield substantial relief.

Development of alternative liquid fuels will help, but no credible authority believes that a significant portion of petroleum transportation fuels can be replaced by alternatives in the short term or that they can make up the whole gap, even in the long term.
 

To avoid unnecessary confusion and debate in the reading of this report, a crucial point of understanding is that peak oil does not imply that the world is physically running out of oil or natural gas in the immediate future. Generally, the peak of production is expected to occur at the point at which about half the resource has been used, meaning that half still remains. The crucial concern is that, while production is approaching its peak, demand for oil is rising rapidly. The inevitable collision between escalating demand and a plateau and decline in production will bring sweeping economic consequences. 

The oil and natural gas we have already used were relatively cheap to obtain. Many of the existing oil fields are known to be in decline, and the remaining supplies are deeper, under water, in more extreme climatic locations and/or in politically unstable regions. All these conditions place upward pressure on production costs. Following from this, even current production levels cannot be maintained without massive, risky investments in new production that will directly increase costs. Even in a static situation, therefore, either production will fall or costs—and then prices—will rise. Unfortunately, the situation is not static. Greatly exacerbating the increasing cost of production is rapidly increasing global demand resulting from accelerating industrialization, particularly in China and India, both of which have extremely large populations. Current production capacity exceeds demand by only a few percent, and that margin is steadily shrinking. As in any market where production costs are rising, demand is rising, and supply and demand are closely matched, basic economic theory holds that:  

1)    Long-term prices will rise;

2)    Short-term prices will be more volatile, with spikes and drops occurring at an increasing rate; and

3)    Supplies will become less reliable because even small disturbances at any point in the production or delivery chains will lead to immediate shortages for consumers.

The scenario that the Task Force addressed assumed all of these outcomes would occur.  The Task Force focused its efforts, however, on the impacts of gradually increasing long-term prices because the longer timeframe allows for the development and implementation of meaningful long-term policy recommendations. While the Task Force fully believes oil and natural gas supplies will likely be punctuated by sudden disruptions and price hikes that will trigger periodic emergencies, it also recognizes that it has less to add in this arena, as the consequences will be similar to other types of emergencies which are already addressed by agencies such as the Portland Office of Emergency Management.

The Task Force acknowledges the possibility of a scenario in which the impacts are so severe that society will deteriorate severely, leading to rampant unemployment, hunger, crime and violence. While such a collapse is not out of the realm of possibility, the Task Force felt it would not be constructive to focus on it because, by its very definition, such a situation implies that government is able to respond in an extremely limited way. The transition the Task Force chose to focus on is meant to mitigate the likelihood of such a collapse and to provide some ability to respond to a collapse, should one occur.

During six months of careful study, consultation and dialogue, the Task Force investigated the types of impacts that Portland may experience as a result of changes in the global supply and demand for oil and natural gas. This document briefly reviews the process the Task Force followed in developing this report, explores in detail the impacts peak oil is anticipated to lead to, and makes recommendations to City Council for responding to those impacts.  This report is intended to assess Portland’s vulnerabilities in the face of wide-ranging changes in global energy markets and to provide an initial set of recommendations for addressing that challenge thoughtfully and prudently.

Task Force Process

In May 2006 Portland City Council adopted Resolution 36407 establishing the Peak Oil Task Force. In the resolution, City Council charged the Task Force with four key tasks:

1)    Review information on the issues of peak oil and natural gas production and the related economic and social consequences;

2)    Seek community and business input on the impacts and proposed solutions;

3)    Develop recommendations to City Council on strategies the City of Portland can take to mitigate the impacts of declining energy supplies in areas including, but not limited to: transportation, business and home energy use, water, food security, health care, communications, land use planning, and wastewater treatment; and

4)    Propose methods of educating the public about peak oil in order to create positive behavior change among businesses and residents that reduces dependence on fossil fuels.

The resolution also instructed the Offices of Sustainable Development, Transportation, and Emergency Management and the Bureau of Planning to provide staff support to the Task Force.  In addition, the Oregon Department of Energy agreed to provide technical assistance on energy and policy issues.

Commissioner Dan Saltzman appointed 12 members to the Peak Oil Task Force in July 2006.  At its first meeting, the Task Force established four subcommittees to examine peak oil from several perspectives, which, while overlapping, were also intended to produce distinct insights.  The four subcommittees were:

1)    Land Use and Transportation

2)    Food and Agriculture

3)    Public and Social Services (including education, health, social services, utilities and public safety)

4)    Economic Change

Each Task Force member participated in at least one subcommittee, and about 10 members of the public also participated regularly in subcommittee meetings.  Each subcommittee identified a set of relevant issue areas and stakeholders, experts and other resources to consult. After the initial organizational meetings, subcommittee meetings typically involved a discussion with one or more stakeholders or experts, including local and state agencies, major regional employers, health care providers, developers, food retailers, human service agencies and economists, among many others. From July through December 2006, the full Task Force met every two weeks, with each subcommittee convening at least once between meetings of the Task Force.  Collectively, the Task Force held more than 40 subcommittee meetings and involved 80 stakeholders.  An additional 40 citizens participated in at least one Task Force or subcommittee meeting, with most taking part in multiple meetings.

Task Force subcommittees generally directed their efforts first toward gathering relevant background information and context; second, toward exploring likely impacts of peak oil on their focus areas; and third, toward developing recommendations to address the anticipated impacts.  Subcommittees reported their preliminary findings and proposals to the full Task Force, where they were reviewed and discussed.  After the four subcommittees produced their preliminary impacts and recommendations, a fifth subcommittee was formed to develop recommendations for how best to inform and engage the public and encourage behavior change.  In addition, Task Force members identified several umbrella issues and recommendations that were added to those developed by subcommittees.

A draft report was released on January 18, 2007 with comments accepted through February 12. Feedback was received in the following forms:

·      44 individuals provided comments using an online comment form

·      7 organizations submitted letters:  

o      Cascade Policy Institute

o      Multnomah County Health Department

o      Northwest Natural Gas

o      Oregon Department of Transportation

o      Oregon Electric Vehicle Association

o      Western States Petroleum Association

o      Portland Office of Emergency Management

·      30-40 people attended one of two public forums

·      Briefings were conducted for several groups:

o      Staff from City Commissioners’ offices

o      Food Policy Council

o      Metro

o      Planning Commission  

o      Sustainable Development Commission

After the close of the comment period, the Task Force met to review input received and determined changes for its final report.

Impacts and Vulnerabilities

Oil and gas are finite resources, and their production will indisputably peak.  Fifty years from now, the actual peak of global oil production will be a distant memory. Despite the apparent breadth of current projections of the peak year of oil production—predictions range from now until 2040, with the most common estimates between 2010 and 2020—even the most optimistic projections offer little time to adapt, given the vast public and private infrastructure built in anticipation of inexpensive fossil fuels for decades to come. The Task Force concluded that the peak is likely to occur sooner rather than later, but the actual timing has only a modest effect on the magnitude and urgency of the overall issue. (Appendix 1 summarizes issues relating to the timing of the peak.)
Several events occurred during the Task Force’s work, however, that could be interpreted to suggest that peak oil is well off in the future and that any action can be delayed. In fact, a close examination of these developments confirms the need to take urgent action and helps make clear why the range of predictions is a relatively minor issue.

First, in September 2006 media reports announced a “new” oil field in the Gulf of Mexico. While large by today’s standards, it is small by historical standards, and its existence has been known for years. If the early estimates are confirmed by further drilling, the field represents only one to six months worth of oil at current levels of world consumption and would have no noticeable effect in delaying the peak. In addition, the field is located in a hurricane-prone area under 7,000 feet of water and another 20,000 feet below the ground, which will adversely affect costs and production.  

Second, Cambridge Energy Research Associates, a major economic consulting firm, released a report in November 2006 with the most optimistic forecast yet of ultimately recoverable reserves, proposing that world oil production will not peak before 2030. The estimate has come under heavy criticism, and the Task Force sees no reason to reverse its opinion of the seriousness of the problem or its recommendations. Even if this forecast does turn out to be accurate, it does not eliminate the problem, but only postpones it briefly, providing much-needed time to take preventive and mitigating actions. Taking no action in the near term increases the likelihood of an emergency situation in the future. The impacts of delaying action and being wrong are far more damaging than the impacts of preparing now and being wrong. In fact, the impacts of waiting until 2030 to respond will make the inevitable adjustment even more difficult, since the economy will have become still more dependent on fossil fuels in the meantime. It is only prudent to begin to plan and prepare now; if indeed the optimistic estimate proves correct, Portland would be unwise to squander the good fortune of a grace period.

Third, oil prices declined from a high of $79 per barrel in July and August to $58 per barrel in October; correspondingly, gasoline prices dropped from about $3.00 per gallon to $2.25, and predictions circulated on the internet and elsewhere that gasoline could drop to as low as $1.15 per gallon. Short-term fluctuations can be misleading, however, and it is the long-term trends that are key.  Crude oil prices averaged about $15 per barrel from 1986 to 1999, with an annual average value of $20 per barrel in 1990 leading up to the first Gulf War and an annual average low of $10 per barrel in 1998 as a result of the East Asian financial crisis. Prices averaged about $25 per barrel from 2000 to 2003 and climbed to almost $37 per barrel in 2004, $51 per barrel in 2005, and $62 per barrel through November 2006. From 2000 to 2005, crude oil prices rose an average of 14 percent annually.

Several other forces may also create conditions that look and act much like peak oil and provide further grounds for action:

• Geopolitical events affect production of fossil fuels. Most of the remaining oil and natural gas is in nations that are either unstable or hostile to the U.S., and both voluntary production cuts and war-related disruptions have and will continue to limit productive capacity or output.
• The production and use of fossil fuels may have to decline rapidly to reduce carbon emissions in response to global warming.
• Economic pressure to reduce U.S. use of fossil fuels may arise if the value of the dollar declines significantly. The U.S. currently uses a disproportionate share of the world’s oil and natural gas, but as the dollar declines in value the effective rise in oil prices will put pressure on the U.S. economy to reduce oil purchases. This could happen if U.S. debt is called in or nations begin to conduct more oil transactions in currencies other than U.S. dollars.[3]

 

Summary of Impacts

A key charge of the Task Force was to assess the local impacts of peak oil and natural gas. Recommendations can then be developed to respond to the anticipated impacts. In turn, the severity of the impacts depends on how well the community prepares

Carrying Capacity

The human carrying capacity of the planet has been dramatically increased by the use of fossil fuels. Fossil fuels meant humans no longer had to rely on animal power or “current” solar energy in the form of wind, hydro and biomass energy. Instead, humans harnessed the stored solar energy captured by plants and converted to fossil fuels by geologic pressures over millions of years. Fossil fuels allowed a dramatic increase in humans’ ability to provide shelter and produce and transport food and other products to spur a growing economy and population.

What will happen to that carrying capacity when its underlying driver is no longer available? Fossil fuels are the most productive resources known, and any combination of alternatives will be less productive. All known alternatives have a lower “energy return on energy invested” than oil and natural gas—i.e., producing alternatives requires more energy than producing oil and natural gas, leaving less net energy gain with which to do other work. As a result, it is unlikely that alternatives will fully replace oil and natural gas in the quantities they are currently used. This will have wide-ranging impacts and force broad changes in Portland’s future.

Historical Experience

The energy crises of the 1970s offer insight into the kind of effects that may occur when production of oil and natural gas peak. The Arab oil embargo of 1973 cut world oil production by 6 to 7 percent. Prices rose 50 percent in October 1973 and doubled in January 1974. As a result, annual U.S. gross national product growth fell from 4 percent in 1960-73 to 1.8 percent in 1973-82;  productivity growth dropped from 2.5 percent in 1966 to less than 1 percent in 1979; unemployment rose from 4.8 percent in 1972 to 8.3 percent by 1975; inflation was 8.8 percent for the 1970s; and inflation-adjusted take-home pay declined 6 percent from 1973 to 1979. The impacts defied conventional economic theories which assumed an inverse relationship between inflation and unemployment.  In the 1970s the two rose in tandem, giving rise to the term “stagflation.”

Cuba experienced an event similar to peak oil when it lost half its oil imports after the collapse of the Soviet Union in 1990. Imports and exports both fell by about 80 percent, and gross domestic product dropped by more than one third.  Transportation, industry and electricity production experienced major disruptions. Agricultural production dropped drastically, and because of the U.S. embargo and reduced production and trade, Cuba was unable to import enough food. As a result, the average daily caloric intake in Cuba dropped by one-third. In response, Cubans strengthened community networks to find alternative ways of growing food and providing essential services. While instructive of the potential impacts that withdrawal of a critical resource like oil can have on a society, Cuba’s level of energy use was much lower to begin with and its mix of business and industry was very different from Portland’s, as is their political structure.

Direct and Indirect Effects

The three main functions that will be directly affected by peak oil and natural gas are transportation, heating of buildings and industrial activities that use oil or natural gas. These direct effects produce indirect or ripple effects throughout the economy. For example, the availability and cost of food could be significantly affected because of increased costs for transportation, processing and fertilizer, all of which depend on oil or natural gas. As production and transportation of industrial goods become more costly, employment, wages and purchasing power may all be adversely impacted; this, in turn, will have feedback effects on what goods and services are provided, as well as the number of people needing public assistance of some type. In many cases these indirect impacts can be more significant than direct impacts. Understanding the impacts on Portland requires an examination of these interdependencies.

Structure of Impact Analysis

As noted above, the Task Force identified four broad areas that would capture the majority of impacts: Economic Change, Transportation and Land Use, Food and Agriculture, and Public and Social Services. Housing was also identified as a major area, but it had individual components that could be addressed within several of the other categories.



For each of the four categories, the Task Force first identified how direct provision of products and services would be affected. To capture the indirect impacts as well, the Task Force explored how demand for the product or service would be affected and how upstream suppliers of materials or other services would be affected. In many cases a business may not use much energy directly and may therefore appear to be relatively insulated against even dramatic energy cost increases.  However, getting material from suppliers who do depend more on oil or natural gas to produce or transport their product could be problematic. Moreover, consumer demand for most products and services will weaken if and purchasing power erodes due to rising unemployment rises or declining income.

The Task Force identified three possible scenarios associated with peak oil and natural gas.

Scenario 1—Long-Term Transition: The impacts of peak oil are potentially severe, but the decline in supplies and the rise in prices will occur at a fairly gradual pace, allowing time to plan for and potentially mitigate some impacts of peak oil. To provide a sense of scale, this scenario contemplates that the U.S. reduces its fossil fuel use by 50 percent over the 20 years following the peak, even as population continues to increase. While other fuel sources will be developed, they will not be sufficient to meet current levels of demand, particularly for transportation fuels.

Oil and natural gas prices would trend upward, though with significant price rises and dips. Price drops may last for as much as a year or more at a time and may give the impression that there is no problem or that the problem has been addressed. However, dips are to be expected, in part because previous price increases dampened consumption, whether by energy users conserving, substituting other inputs, going out of business, or moving their facilities. However, supply will continue to fall and consumption may increase because of temporarily lower prices, forcing prices to climb again. Each time prices drop they will not drop as low as the previous cycle, and when they rise they typically will rise higher than the previous cycle, producing a gradual upwards ratchet on prices.

Scenario 2—Oil Shocks: The long-term decline of world oil and natural gas supplies is punctuated by sudden disruptions and price hikes, triggering periodic sustained emergencies. Long-term impacts would be similar to the Long-Term Transition described above, but would require additional preparations to deal with the sudden dislocations that could persist for months or years.

Scenario 3—Disintegration:  Whether sudden or gradual, the impacts become so severe that the social fabric begins to disintegrate. Unemployment, hunger, crime and violence are rampant, with socially catastrophic competition for scarce resources, including food, shelter and energy. A Disintegration Scenario could arise from failure of multiple global systems—financial, currency or trade, for example—and would force governments to dedicate an overwhelming share of their resources to basic human needs.

The scenarios are not mutually exclusive but are distinguished by the speed and the severity of the impacts. The Task Force focused its efforts on the Long-Term Transition scenario with the intent that its recommendations would reduce the likelihood of the severe disruption of the Disintegration scenario.

Impacts may manifest as economic problems

Impacts stemming from peak oil and natural gas may be difficult to recognize. The impacts will strongly resemble current economic and social problems, though they will be deeper and more persistent, and the tendency will be to treat them similarly to more traditional economic problems. However, since the source of the problem is rooted not just in economic policies but in physical constraints on a fundamental input into economic productivity, the problems will be more systemic and less susceptible to conventional economic analysis and remedies.

 

		s e v e r i t y   o f   i m p a c t s
		less  severe	more severe
S P E E D     O F     I M P A C T s	gradual  slide (steady or bumpy)	Long-Term Transition (focus of Task Force efforts) Long-term planning, policies, programs	Disintegration Limited ability to respond.     Task Force recommendations are meant to help avoid this scenario.
	rapid decline punctuated by sudden shocks	Oil Shocks Emergency Management Plan

 

Impacts on Transportation and Land Use (T)

Of all the impacts of peak oil, the clearest are those on transportation, particularly use of the automobile. Transportation accounts for almost 40 percent of the energy used in Oregon, and 95 percent of the energy used for transportation is oil. With rare exceptions, cars, trucks, buses, planes, boats and trains all use petroleum-based fuels, and about 85 percent of all petroleum is used for transportation.

Peak oil has direct, major implications for movement of freight, movement of people and migration of populations into or out of an area. These, in turn, will have secondary but major impacts on land use patterns. Cheap transportation fuel after World War II strongly influenced land use patterns and roads, and buildings and roads are durable features of the landscape that are difficult and slow to change.

Impacts on Food and Agriculture (F)

Food is a critical resource, and the American food system has become highly dependent on fossil fuels in recent decades. Energy flow into agriculture has increased several-fold since World War II, and productivity of American agriculture has increased 82 percent since 1960. The “Green Revolution,” fueled by fossil-fuel-based fertilizers, has increased calories available per person almost 20 percent worldwide. The food system now accounts for about 17 percent of the energy used in the U.S., the equivalent of about 400 gallons of oil per person annually. This includes the energy used to produce (e.g., fertilizers, irrigation, tractors and other farm equipment), transport, process and distribute the food. The production of nitrogen fertilizer, for example, requires natural gas, and there is no practical substitute currently available. As natural gas prices rise, use of nitrogen fertilizers will likely decrease, resulting in a reduction in world food production of as much as 60 percent. Moreover, food routinely travels thousands of miles to reach our tables. An estimated 5 to 10 calories of energy are typically used to produce one calorie of processed food.[4] In a very real sense, we are eating fossil fuels.

Oregon possesses some of the most productive agricultural land in the world. Oregon farmers produce over 225 different crops, fewer than only California and Florida, and agriculture accounts for 10 percent of the state’s economic activity. Eighty percent of Oregon’s agricultural production leaves the state, and one-half of that goes overseas, including 90 percent of Oregon’s wheat production. The Port of Portland is the largest wheat exporter in the U.S., shipping wheat primarily from Oregon, Idaho and Washington overseas. About 60 percent of agricultural goods in the U.S. move by long-haul truck, including most processed foods.

Oregon produces more than enough dairy products, wheat, potatoes, green peas, green beans, sweet corn, onions, pears, cherries and hazelnuts to be self-sufficient, and is close in a number of other products including various fruits, vegetables, nuts and seafood. Nonetheless, an estimated 65 to 75 percent of the food consumed in Oregon is grown out of state. Sixty-two percent of Oregon’s harvested cropland relies on irrigation, and irrigated farms produce 77 percent of the total value of harvested crops.

Much of this bounty is within reach of Portland. The Willamette Valley accounts for more than 60 percent of the value of all crop production in the state, and almost 30 percent of the value of animal production. More than 40 percent of the crops produced are specialty products, such as nursery crops, turf, bulbs, seed stock and Christmas trees.

Food security today is affected more by access to food than production of food. While Oregon is a major agricultural producer, Oregon ranks among the worst in the nation in outright hunger and sixth for food insecurity. More than 650,000 people received emergency food assistance from the Oregon Food Bank network in 2000. In terms of food consumption, about 46 percent of American food dollars are spent in restaurants. About a quarter of our food is wasted, of which about half is edible.

In examining food production, transportation, processing, distribution and preparation, the Task Force identified the following major impacts.

Impacts on Business, Economy and Jobs (E)

Portland’s history is rooted in its location at the confluence of two major rivers and ready access to the ocean and a great agricultural valley. Because of its location, Portland also became the hub of significant rail service. This network allowed Portland to develop as a production and shipping center for heavy and bulk products that can be transported by boat or rail. Portland also enjoys a head start on many other urban areas in terms of energy efficiency, renewable energy, alternative fuels, sustainable design and green building, all of which promise to be growth industries post-peak oil. 

The economy serves to produce and distribute goods and services and to provide people with the income to afford these products and services. Portland’s economy faces two big questions with respect to peak oil:

1) How will businesses remain viable in the face of constricted oil supplies?

2) How can Portland citizens remain employed in high quality jobs?

It is important to emphasize that Portland will not experience peak oil in a vacuum, and local changes will be felt relative to those taking place regionally, nationally and globally. Portland differs in important ways from other cities and regions and holds certain competitive strengths and weaknesses. In examining vulnerabilities in the local economy, Portland’s economy must be considered together with the regional economy, which includes the greater Portland-Vancouver Metropolitan Statistical Area. Major export-oriented sectors of the economy include high technology, nursery stock, metals manufacturing and fabrication, transportation equipment and sports apparel. Other important sectors include construction and real estate, health care, retail and government. 

Peak oil will affect the economy both directly and indirectly. Direct impacts are experienced in the actual operations of a business or industry. This includes fossil fuels used in building energy use, the transportation of goods, and in manufacturing, such as for process heat or as a raw material for chemical or plastic products. Indirect impacts, by contrast, occur upstream with suppliers of raw materials or semi-processed goods, or downstream in consumer demand for products and services. These impacts are more difficult to measure and forecast. While transportation and energy represent only a small portion of many businesses’ costs, indirect impacts stemming from upstream supply problems or consumer demand may often be more significant.

The Task Force considered four key questions for various industry clusters:

1) How will peak oil affect production costs?

2) How will demand for the product or service be affected?

3) How will upstream suppliers of raw materials or semi-processed goods be affected?

4) What reasonable substitutes or alternatives are available to mitigate these effects?

The Task Force also considered the possibility that large shifts in international financial and currency markets could undermine the U.S. economy as a whole, including serious impacts in Portland.  The recent decline in the value of the dollar, the possible shift away from the dollar in international oil transactions, and the complex interrelationships among these and related macro-economic issues merit close attention and further study, which is beyond the scope of the current report. 

Below are potential major impacts the Portland economy may experience.