Economic vulnerability to Peak Oil

Abstract

Peak Oil, which refers to the maximum possible global oil production rate, is increasingly gaining attention in both science and policy discourses. However, little is known about how this phenomenon will impact economies, despite its apparent imminence and potential dangers. In this paper, we construct a vulnerability map of the U.S. economy, combining two approaches for analyzing economic systems, i.e. input–output analysis and social network analysis (applied to economic data). Our approach reveals the relative importance of individual economic sectors, and how vulnerable they are to oil price shocks. As such, our dual-analysis helps identify which sectors, due to their strategic position, could put the entire U.S. economy at risk from Peak Oil. For the U.S., such sectors would include Iron Mills, Fertilizer Production and Transport by Air. Our findings thus provide early warnings to downstream companies about potential ‘trouble’ in their supply chain, and inform policy action for Peak Oil. Although our analysis is embedded in a Peak Oil narrative, it is just as valid and useful in the context of developing a climate roadmap toward a low carbon economy.