While one logical response would be to move manufacturing back closer to the point of sale, another would be to develop shipping methods that are less reliant or don't rely on oil. Maybe that means even bigger superfreighters in order to consolidate shipping and use less oil (though I can't tell you if that is actually more efficient; this article suggests that it might be: http://www.manbw.com/files/news/filesof4672/P9028.pdf). However, higher oil prices might lead to a search for cheaper ways of propulsion. Hydrogen fuel cells should presumably work just as well on ships as in cars (and would not have the same space or weight constraints), and very efficient solar cells might not be bad. Another interesting idea is going back to where it all started: wind power. Sails are generally unpopular for a variety of reasons, including the deck space they take that would otherwise have been devoted to containers, but huge kites seem like an interesting technology. I believe I also read a science magazine in the US making a brief mention of it sometime within the last year, but unable to find the article, a quick Google search turned up these two sites:

http://www.dcss.org/speedsl/Trans_Sailcraft.html

http://www.archi-me-des.de/archimedes_architecture_media_design/archimedes_work/hands_on/archimedes_kites/index.html

I have studied Peak Oil, on and off, for the past two years, and it will -- almost -- certainly become a major problem in the next 5 to 10 years. The numbers do add up and I suspect some production (and reserve) numbers may have been inflated by the usual suspects.

However, Peak Oil won't be the End of the World as we know it: I believe it will be a major Oil Shock, with all the predictable economic suffering and hardship. The worst thing that could happen to the World Economy today would be what I call the trifecta: Peak Oil triggering a massive recession, a major natural disaster (such as a huge Bird Flu epidemic) and a 9/11-scale terrorist attack on the United States. That would probably sink the global economy to levels never seen before, and make 1929 seem like a walk in the park. But that's another story.

What I believe will happen is this: major economic hardship triggered by Peak Oil, to the point that oil may be rationed and /or be available only to food producers, emergency responders, public transportation and military forces. But also enormous government investments -- an energy Manhattan Project -- in energy efficiency, renewable fuels (wind, solar, geothermal) as well as alternative sources of Oil such as bio-diesel, that you mentioned in a previous entry.

Nuclear energy may be a player, but probably only as a stop-gap measure. Airlines will probably go bust one after the other, and isolated communities, dependent on cars and roads for everything will probably be in a lot of trouble, unless they also happen to have a railroad connection.

The interesting thing is that Europe will probably be much better off than the United States on Peak Oil, since mass transportation (everything from buses to subways, all the way to high-speed trains) are used -- and accepted -- a lot more than in the United States. The other interesting point is that, like the Rocky Mountain Institute and others point out, the number one resource we will be left with will be energy efficiency. The developed nations already have the technology to save up to 90% of the energy they consume -- Peak Oil may be the kick in the pants we need to start the energy efficiency economy and stop global warming as an added bonus.

For instance, huge nuclear-powered ships could still cross the Pacific Ocean between the US West Coast and the coast of China and Japan. In the long terms, high-tech clipper ships could probably do the same, with solar-powered engines and normal sails combined to reach acceptable speeds. Solar-powered Blimps could provide a (slower) replacements for airplanes, with the added benefit of carrying a lot more cargo and passengers, in a more comfortable manner than today's economy class. Local production (I loved your Mexico example) will probably become the norm, and cushion the worst effect of globalization on blue-collar workers.

Conclusion? It will be painful. VERY painful. But civilization will probably survive (sorry, Mr Kunstler!) and become a lot more interesting -- and a lot less frantic -- than it is today.

Can you imagine what will happen with Hawaii if oil prices get very high? There's no way to get people or goods to them right now without using considerable fuel. I've been working in Hawaii since October and am amazed that no one over there is discussing this (except for the native Hawaiian we met tending a tarrow patch who complained that the Hawaiian islands used to be self-sustaining, but now import 95% if their food.)

Hi Andrew,

Obviously increasing fuel costs will make transportation of goods more expensive. However, it doesn't necessarily follow that global trade will be impacted versus local trade. Why? Fuel consumption per ton of goods transported is significantly lower on a huge ocean-going freighter than a truck. Also I suspect bunker diesel used in ships is (as a bottom-of-the barrel petroleum product) less subject to swings in the price of a barrel of light sweet crude - that price is meaningful for the products derived from it (gasoline) but less so for other products. I don't think the price of road tar is spiking.

But that's all speculation. Here's some data. I recently got transportation quotes for a shipment from manufacturers in China shipping out of Hong Kong to Oakland, versus a truck from Minneapolis to Oakland. The 40' container - with customs duties and taxes - costs $2000. The 53' truck trailer costs $3125. That is, 35% more expensive (taking into account the volume difference) to move goods domestically than across the Pacific Rim.

Fascinating, isn't it?

Great column.

Thanks,

Carl

Much appreciated. I'll keep following up on that...