A Protocol for Oil Depletion?

In his recent book, The Oil Depletion Protocol:A Plan to Avert Oil Wars, Terrorism and Economic Collapse, Richard Heinberg proposes a new international accord to prepare for eventual (if not immediate) peak oil production. Developed from conversations with energy expert Colin Campbell, the “Oil Depletion Protocol” would ask nations to voluntarily reduce their oil production and imports along a pro-rated, developing-country friendly, consistent formula.

Beyond one’s immediate reaction to its crippling idealism, deeper analysis into the proposed protocol finds a bonafide, methodical approach to countering the possible devastating effects of peak oil. In all the literature I’ve examined, the depletion protocol is perhaps the most compelling and forward-looking idea for management of dwindling petroleum resources.

It abandons the idea of price controls to limit consumption – which only benefits the rich and furthers energy inequity. It also discards the idea of consumer-based oil quotas – which penalize those who have a higher than average demand for energy. Rather, it takes a more systemic approach of setting standards on national consumption and encouraging reduced imports. The approach here is sound, as it places greater responsiblity on states to institute policies industry-wide and to make considerations for both industry and individuals.

The proposed protocol builds on the example of previous international accords, such as the Montreal Protocol of the 1980s and the Kyoto Protocol of the 1990s. It sets definitions for what is considered “oil”, enforcement mechanisms, and a formula for calculating depletion. In addition, it proposes an effort for implementation of emissions reduction standards in tandem with oil supply controls. In addition, the protocol allows for increased consumption rates for developing countries in the early years so not to severely limit their economic growth.

Even the detractors of the protocol must admit that it is a noble effort. If the fears of peak oil are indeed true, we should all be looking for solutions like this to “avert oil wars, terrorism and economic collapse.” However, the proposed protocol is not ready for trial in the real world, as huge economic and geopolitical issues stand in its way.

Perhaps the most prominent of its shortcomings is a failure to recognize the realities of the global oil economy. It is the least transparent of the resource markets, run more like the mafia than anything else. It maintains a loose interpretation of international law (trade, labour, you name it), with no effective oversight body. The protocol requires regular and accurate accounting of all oil – a prerequisite for saying whether imports have increased or decreased from year to year. The world’s oil giant, Saudi Arabia, purposely does not maintain inventories of its oil resources, often manipulating export statistics through its SOE Saudi Aramco to either encourage investment or show the West how dependent it is on the Persian kingdom.

Beyond transparency, it makes the large assumption that prices for conventional oil will remain steady, as hydrocarbons and other alternatives come on stream. The attraction to the most inexpensive oil, sweet light crude, will never diminish even in the face of other options. Our systems already work on it; our cars already run off it; and for the forseeable future, it will remain inexpensive in comparison. With the protocol in place, there will be decreased supply. This in effect is a price control, for the cost of this source of petroleum will increase for as long as there is a cheap, viable, and easily accomodatable energy alternative. These costs will be absorbed by the consumer as industry and government will be occupied with funding research projects for alternatives, along with building new fuelling stations, engines, and infrastructure.

Personally, my largest contention with the proposal is its lack of governing mechanisms. Heinberg suggests that such a protocol would require a small, professional secretariat with “the power to do the things required of it.” This is just not feasible – such an endeavour would require more than just monitors. Pitting states against states over the most contested resource on the planet will only encourage conflict. A dispute settlement mechanism, with a tribunal must be an essential component. Oil is so easily politicized – institutional arrangements must eclipse national governments. An Organization for Oil Depletion would be needed to shepherd the reduction of oil matched with a mandated increase in renewable, low-emission, alternative energies.

The prime example of this need is the inability of the Kyoto Protocol to make a real difference. Based on the same principles, the depletion protocol is doomed to make the same mistakes if it does not include strong governance mechanisms. Nations will easily agree to distant targets without any real enforced commitments. The logic also follows that countries intrinsic to oil depletion (the US, China, Russia) will never agree to these targets – especially if there is not a way to ensure that other parties to the protocol will follow suit. The idealism of the protocol shines through the lack of attention to governance mechanisms. That is not to say it is misplaced, not at all – whether peak oil is a concern or not, it is about time nations cooperate to reduce our mutual dependence on petroleum.

Sadly, this idea will never evolve beyond the hypothetical. There does not exist the political will in the nations required to make such a protocol a reality. Even if there were, there are a number of stumbling blocks to effective management of an international accord which limits access to the world’s most desired commidity.

Beyond the set of shortcomings I’ve identified here, the book (and the proposal it advances) is absolutely worth the read. Heinberg is an internationally respected energy commentator, and a contributor to the innovative Association for the Study of Peak Oil and Gas. A protocol on oil depletion should not be abandoned, rather it should be strengthened with real institutional clout, with effective dispute and settlement mechanisms, and matched with the mandated introduction of low-emission alternative fuels.