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Peak oil and petrochemicals in Taiwan

IEA graph of oil production

There is a major environmental protest in Taipei this afternoon focused on the issue of Taiwan‘s petrochemical industry. It begins at 2pm at the Zhongxiao-Fuxing MRT Station.

Opposition to the petrochemical industry in Taiwan is frequently framed in terms of its impact on the health of workers and nearby residents, climate change or because of the threats it poses to endangered dolphin populations. Another important reason the development of this industry must be stopped is peak oil.

This week a report from the International Energy Agency (IEA) showed that the production of conventional oil peaked in 2006. A graph showing this is above and you can find some initial analysis of the report at The Oil Drum. Earlier this year I wrote a letter to the Taipei Times on the topic of peak oil. I mentioned how the Deepwater Horizon oil spill should wake up the world to the problem of oil dependency. The report from the IEA should ring even louder alarm bells.

I sent the following letter to the Taipei Times on Thursday. It hasn’t been published yet, but I thought it was appropriate to post it on my blog today. (I will update with a link if the Taipei Times publishes the letter.)

The International Energy Agency’s World Energy Outlook 2010 shows that the world’s production of conventional oil peaked in 2006. The spectre of peak oil can no longer be dismissed. Peak oil has already arrived.

Peak oil doesn’t mean running out of oil. It does mean higher oil prices and reduced supply. Its impacts will result in a massive restructuring of the global economy in the next few decades.

Taiwan is almost entirely dependent on imported energy. Despite this Taiwan continues to follow a path of industrial development with no consideration for the dual challenges of peak oil and climate change.

The ongoing expansion of the petrochemical industry in Taiwan is especially shortsighted. This industry consumes 36% of Taiwan’s energy, yet only contributes 4% of Taiwan’s GDP. The economic benefits of planned petrochemical projects are often overstated by investors keen to make a quick dollar. However, the short term profits come at the expense of harm to the environment and human health.

The planned development of the Kuokuang Petrochemical Plant off the coast of Changhua County is an example of this shortsightedness. The plant will be built on the habitat of the critically endangered Taiwan Pink Dolphin. Pollution from the plant will harm the health of people in the area. It will also impact on agriculture and fishing which local communities depend on for their livelihood.

In response to questions about the how the plant will affect the dolphins Premier Wu Den-yih (吳敦義) claimed the dolphins could just go around it. What really needs to turn around is not the dolphins, but the way of thinking of government officials and industrialists.

Taiwan’s government really needs to focus its efforts on adapting to peak oil, not propping up the dinosaur that is the petrochemical industry.

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Comment from Ben Goren
Time 13 November 2010 at 4:41 am

Great post and an excellent letter Dave. Dinosaur indeed.

Comment from mike
Time 14 November 2010 at 6:13 am

No David, what really needs to turn around is the thinking of Taiwanese people who consent to being coerced by government officials and industrialists.

Comment from mike
Time 14 November 2010 at 11:20 am

Some additional criticisms:

1) The chart is based on predictions which are unwarranted, since the information needed concerns all manner of investment decisions that have yet to even take place. That is pseudo-scientific scare-mongering David.

2) Oil production is heavily limited by government regulations in the U.S. and elsewhere, but it is also limited by a lack of investment in refining capacity (which is partly a consequence of government regulation). The Kuokuang plant is just such an investment – and an increase in global refining capacity would all by itself falsify the chart above.

3) The claim that the petrochemical industry contributes only 4% to Taiwan’s GDP is disingenuous. Aside from the problems with GDP as a measure of economic activity, it does not capture the structural importance of petroleum products to Taiwan’s economy. How would people get to work tomorrow if the petrochemical industry was magically abolished overnight? What would GDP look like then?

4) Your claim that Taiwan’s government should “adapt to peak oil” assumes a level of competence and ethical authority that is simply not warranted. The market itself, via the pricing mechanism, will allow people to adapt to peak oil and adopt other forms of energy.

There is no need for government intervention to save us from the threat of peak oil and all you are doing is trying to push what you hope would be a self-fulfilling prophecy.

On the Kuokuang plant, I would be perfectly happy to see it defeated if, in so doing, the protestors would challenge the authority of the government over the principle of private property. But I know that they won’t because of who they are.

And I don’t care if you don’t reply – I want your readers to see the extent of your intellectual integrity.

Comment from David Reid
Time 15 November 2010 at 1:51 am

Mike, the future projections of the chart can easily be dismissed. However, the historical figures of oil production can be taken as fact. The key fact is that production of conventional oil has more or less plateaued since 2005. The Hubbert curve for oil production is well understood and has been observed in oil fields around the world. There are some reasons that perhaps global production will not follow the Hubbert curve, but that oil production will one day peak and then begin to decline is an inescapable fact.

Peak oil is a reality that the world has to deal with. Don’t expect the market to solve the problem. In retrospect it will probably be shown to be an enormous market failure. If measures had been taken several decades to develop alternative systems of energy, then perhaps the crisis of peak oil could have been averted. Now that we have probably already passed peak oil, adaptation will be more difficult.

You would do well to spend some time reading the articles on The Oil Drum to better understand the problem of peak oil. Most of the contributors to that site are not the environmentalists that you despise, but geologists, engineers and economists. They all have expert knowledge of oil production and energy issues. I don’t believe their work should be dismissed as “psuedo-scientific scare-mongering.”

Comment from mike
Time 16 November 2010 at 5:43 pm

David, I do not dismiss peak oil theory out of hand, though the contention that oil production has already peaked strikes me as questionable for several reasons which I will not go into here.

“Don’t expect the market to solve the problem. In retrospect it will probably be shown to be an enormous market failure. If measures had been taken several decades [ago] to develop alternative systems of energy…”

Two questions:

1) How old is the solar panel industry?

2) How many Mw of electricity has, for example, the U.S. Department of Energy actually produced?

“…environmentalists that you despise, but geologists, engineers and economists.”

Don’t you understand yet? I don’t despise environmentalists because they study ecology. I despise them because they presume that their particular “expertise” is sufficient warrant to hold the guns of the State to my head. If they were to lay those guns down and meet me on the premise of voluntary cooperation, then a discussion might be possible. But I do not respect thugs or gangs, however “expert” they may claim to be.

Comment from David Reid
Time 17 November 2010 at 12:28 am

Mike, my understanding of energy issues is better than you give me credit for. I understand there are many limitations associated with solar energy. While efforts should be made to develop renewable energy, the limitations of it need to be acknowledged and understood. People who believe the world’s energy problems can be solved by putting solar panels on the roof and erecting a few wind turbines are seriously deluded.

One of the problems is that shifting to new systems of energy requires massive investments in new infrastructure and long lead times. This investment becomes even more difficult when faced with high energy costs. If the investments had been made in the 1970s and 1980s the transition to renewable energy could be well on its way now. Right now it is increasingly difficult to make these changes. As peak oil expert Richard Heinberg says, “We have to prepare for business as unusual.”

Comment from mike
Time 17 November 2010 at 10:34 am

“ understanding of energy issues is better than you give me credit for.”

Actually, I give you more credit than you realize – my questions were intended to draw your attention to the broader assumptions you rely on in framing the problem of “energy issues”, to wit: investment in some renewables already is several decades old (so if it isn’t the time factor of investment per se that is the chief problem, then…), and the double-barreled nature of government as energy consumer (rather than producer) and restrictor of both supply and investment.

“One of the problems is that shifting to new systems of energy requires massive investments in new infrastructure and long lead times.”

Well that rather depends on what system(s) of energy you have in mind…

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