What?

Peak Oil preducts a reduction in oil production, and unless our dependency on oil drops at the same rate, we will see oil prices soar. This can be such a drastic change that the impact on an economy is devastating and lead to economic instability.

Even if one is aware of Peak Oil, it may not always influence one's actions. After all, we function on free markets on which we compete on price. If we compensate the effects of Peak Oil too early or too enthousiastically we may create an advantage to our competitors. The result of this is that most parties await the moment where sustainable technologies are affordable by themselves. It is a simple a fact that free markets do not optimise from a global perspective, but from a local viewpoint: the here and now is all one sees when making choices.

The solution is straightforward: Make Peak Oil predictable. This can be done by a gradual decrease in the amount of fossil fuels available on a market, at a pace that is well-known for years to come. It is a public task to construct such compensations for the short-sightedness of a free market; after all, it is the kind of thing that benefits us all, but that we would never choose on an individual basis.

It should not be extremely difficult to do this in practice; just take a past year as a basic measurement, and reduce the fossil fuels available on the internal market with a fixed percentage of that amount. When this is 3% it should suffice to stay ahead of Peak Oil, and avoid being subjected to the wild motions of the energy market of the future. Based on these national patterns of consumption of fossil fuels, a government can draw up contracts for delivery of fossil fuels at predefined prices; producers are likely to prefer a predictable rate of consumption over the unpredictable market response to scarce resources.

Why?

We are quickly running out of fossil fuels; we have been finding less new oil than we consume for 40 years, so we can be certain that we are facing a decay in the production of oil. Since the demand is rising, we will experience opposite effects in supply and demand that is bound to drive the price for fossil fuels up. Becoming ever less dependent on fossil fuels is a good survival strategy for countries.

Fossil fuels are often directly related to CO₂ and global warming. All non-fossil fuels are cyclic, meaning that the CO₂ produced when using them will at same later stage be bound for the production of the next batch of non-fossil fuel. The carbon in fossil fuels on the other hand, is mined and --eventually-- burnt and brought into the air as CO₂.

Aside from the finite supply of fossil fuels and their environmental concerns there is a political issue at play; countries that are rich in fossil fuels usually have abundant means to satisfy their citizens, even if their government may not implement trivial things like human rights.

Another social/political issues plays on a country's internal market, namely that soaring prices for energy cause a widening gap between rich and poor parties. Think of volnurable companies (of any size) going bankrupt on account of their energy expenses, or think of the ability to heat the homes of people who are not well to do. The instability that arises from a free market lead to imperfections that a visionary government may wish to avoid!

How?

Peak Oil leads to a reduction in the supply of oil of about 2% to 3% a year, according to leading expert dr. Campbell. To avoid being caught in an over-demanding market, it is advisable to reduce a country's oil supply by at least this percentage. And to affect a switch to sustainable alternatives, it is best to apply the same rate to all forms of fossil fuel at once: oil, natural gas, coal, uranium.

As an example, the Dutch climate goals express that the CO₂ produced in 2020 should be 30% less than in 1990; this can be achieved by reducing the supply of oil by the same percentage. If this stays ahead of Peak Oil by a reduction of 3% a hear then 2010 can start at 100% of the supply of 1990, and gradually decrease the supply until 2044, in which year the dependency of fossil fuels would have dropped to zero.

Global warming must be stopped, and that should be doable when this pace is kept. The global rise in temperature should then stay under 2 degrees Centigrade, which would mean that global warming does not induce more global warming, and cause an avalanche effect that is generally considered irreversible and harmful to our habitats.

The predictable rate of reduced supply makes the effects highly suitable for calculations and planning. Each market player can deduce what the best course of action would be, and because the same situation applies to the market as a whole, there is no risk of giving headway to competitors as a result of mis-estimating the Peak Oil effect. On the contrary, the energy market stabilises and becomes completely rational. Of course there is a need to correct any discrepancies between the internal and external market, to avoid energy-intensive processes being hosted elsewhere, and to avoid that the internal market would be overtaken by products from countries that do not pinch off the supply of fossil fuels.

An extra opportunity to increase stability under this scheme is to allow providers of fossil fuels to sign in on long-term contracts that define how much is being provided in each year, and at what price. It is likely that the prices in such contracts are not defined in terms of national currencies but in terms of weight of gold, a value denomination with a long history of price stability for oil.

As soon as the internal market's supply of fossil fuel is regulated, there will also be a local price for oil. This internal-market price will rise if sustainable alternatives are not employed, and lower if this is done at an unexpected fast rate. Basically, the mechanisms of the free market will ensure a gradual move from fossil fuels to sustainable alternatives at precisely the required pace. The expenses for making such moves would have to be subsidised throughout the period of the move away from fossil fuel, in such a way that the difference is negligible -- for instance, by compensating for the extra costs of using sustainable technology.

Where?

• The viewpoint of the producer of fossil fuels.
• The Dutch climate goals.