Appendix 3: Peak Oil Scenario

­ The following scenario was developed by the Peak Oil Task Force for use in summarizing the issue to stakeholders who participated in interviews and discussions through the task force process.

Peak Oil Scenario

Our society is dependent on massive quantities of energy.  In particular, oil accounts for about 40 percent of the energy we use, and provides virtually all the fuel to transport people and freight.  Natural gas accounts for another 25 percent of the energy we use, meaning oil and natural gas combined account for about two-thirds of the energy we use.     

However, recent evidence strongly suggests that the world is near the maximum, or “peak,” of oil production, after which supply will begin a long-term decline.  World natural gas production will peak a few years after oil, but evidence indicates that natural gas production in North America (U.S., Canada, Mexico) has already peaked.  As a result, supply will have trouble meeting demand - prices will rise, productivity will decline, and shortfalls may occur.  In addition, it is unlikely that energy efficiency or alternate energy forms will allow us to maintain our prodigious energy use anywhere near current levels. 

This will have profound impacts on society.  In many cases we will have to prepare for the impacts and learn to do things differently.  Some of the mitigation measures may require capital investment or lead times to develop. 

To begin to prepare, we must anticipate what the impacts will be.  The City of Portland has established a Peak Oil Task Force to identify potential impacts so preventive steps can be taken.  Examples of some likely or potential impacts include: 

• Air travel, which is very energy intensive and sensitive to fuel prices, will be one of the first industries to be affected.
• Fertilizer is made from natural gas, pesticides are made from oil.  As oil and natural gas become scarcer and prices rise, agricultural production may decline.  Food will become more expensive, and there may be an increase in hunger.
• Trucking will be one of the first industries to feel the pinch.  However, this could have a ripple effect throughout the economy.  Prices of all goods may rise, and some goods may remain undelivered.  Some industries are critical and will survive the squeeze, others may not.  This will have ripple effects on employment, which could affect homelessness.
• Individual travel will be affected.  Long vacations and other recreational or discretionary trips likely will decline, with economic impacts on those businesses which depend on it.
• Heating costs will increase.  Combined with employment impacts, many people will be squeezed economically.  This could affect some people’s ability to maintain or own a home, and put strain on individuals, families, and communities requiring additional services.

We ask you to think about the effects that rising oil and natural gas prices or declining supplies could have on the business or service your organization provides.  Some specific questions are:

• How will demand for your product or service be affected? 
• How will costs or the ability to produce your product or provide your service be affected?
• Looking up the supply chain, how will your suppliers of raw or finished materials be affected?
• How would these impacts affect your revenues and/or profit margins?  Your employment base?
• What steps do you think your organization will take to respond to continual increases in energy prices or scarcity of supply?  What are some changes or alternatives you could implement?