POLICY: Peak Oil and Healthcare by Dan Bednarz, Ph.D

Dan Bednarz from Energy & Healthcare Consultants in Pittsburgh, PA is pretty concerned that you health care types don’t seem to be concerned about Peak Oil. What you say, you’ve never heard of Peak Oil? Better read this then!

America’s healthcare predicament will be resolved in the context of the worldwide energy emergency idiomatically known as “peak oil.” In short, the era of cheap, abundant fossil fuels is entering its twilight and medicine -- virtually cut-off from this awareness—is exposed to the consequences. Like any other system healthcare requires energy and resources to function; fossil fuels, especially petroleum, provide both.

A brief explanation of the geology of peak oil is needed.

In the spring of 1956 petroleum geologist M. King Hubbert presented his peak oil hypothesis to a convention of his peers. He told them that production of light (low viscosity), sweet (low in sulfur compounds) crude oil in the lower 48 states, at that time rising exponentially, would peak and then enter into irreversible decline around 1971. Although he was preeminent in his field, most of his colleagues dismissed or ridiculed his forecast. In 1972 his prediction was confirmed. Hubbert also said: “it appears that the culmination [i.e., peak] of world production [of petroleum and natural gas] should occur within about half a century.” Fifty years later, with production ostensibly unable to surpass 85 million barrels per day, we may be riding “Hubbert’s Peak.” We will not know definitively about peak oil until we are past it. Think of it this way: in Hank Aaron’s final years his home run production was: 47 (his peak), 34, 40, 20, 12, and 10.

A majority of Americans consistently tells opinion pollsters that healthcare is a right; yet this majority simultaneously cringes at the countervailing ideas of rationing and being denied the right to choose their doctors. Accordingly, the administrative, legal and fiscal structure of American healthcare represents a pastiche of regulatory and free-market incentives addressing: 1.) controlling costs, which are driven by technological innovations, malpractice and liability insurance, rising energy and petroleum-based equipment prices; and inefficiencies, waste and fraud; 2.) coverage for 45 million uninsured citizens and several million more who are underinsured; and 3.) needed improvements in quality on an absolute basis as well as relative to other industrial nations. Reviewers of healthcare reform concede the failure of incrementalism and the imperviousness of the system to genuine improvement and, therefore, call for fundamental change, which the coming energy crisis –an unexpected and inescapable exogenous event-- will produce. Parallel to peak oil, our nation’s ability and willingness to perpetuate current financing of medicine is threatened by growing foreign trade and budget deficits, deteriorating national

infrastructure, and the costs of war. The especial significance of peak oil, however, is that, in addition to posing a fiscal risk, it threatens the structure of healthcare simply because medical facilities consume large amounts of fossil fuel for climate control, to operate equipment, and in their vast array of medical and ancillary products –most disposable after one use, manufactured overseas and shipped here with (formerly) cheap fossil fuels. Therefore, as oil and natural gas become scarce, the ramifications will be observed first in higher prices, then in shortages of medical and health goods and products, and finally in the ability to operate large medical infrastructure and to operate medical technology.

Medical leaders face an inevitable choice between leading the reform of healthcare and succumbing to the pandemonium that will be unleashed by peak oil. The classic risk management dilemma is to know when the cost-benefit ratio of inaction outweighs that of mitigation. To many in healthcare peak oil will appear an absurd or fringe concern because surely, they reason, government, science and the market will solve the energy problem just in time with no impact on medicine. Unfortunately this is not occurring. This unaddressed danger presents healthcare with an opportunity to lead society --and gain indispensable public support-- in peak oil public policy making. The alternatives, which revolve around “Letting George do it” strategies of the free-rider, postpone and worsen the eventual reckoning with the energy issue.

The Hirsch Report, released by the Department of Energy in 2005, notes that if we are at or near peak oil, we shall soon begin to face economic turmoil that will require a decade or more to recover from –once suitable and scalable energy replacements are developed. All things considered, government pays for over 50% of all medical treatment. Would the state continue to support the current inflationary medical system during an extended economic crisis? This is the point at which the healthcare system will come under intense scrutiny and extant political/economic coalitions will begin to fall apart as Harold Lasswell's classic question, “Who gets what, when, where and how?” is asked of the healthcare industry.
What's more, unlike during the Great Depression, the jobless will not forgo medical treatment, especially for children. And the employed, who also will be economically distressed, also will assert their “right” to healthcare and demand that the state “do something.” Presently, Congress and the president have approval ratings well below 50%. A federal government seeking to both preserve its legitimacy and slim chance for solvency might respond by nationalizing healthcare and also shifting funds from treatment to prevention.
Public health, not clinical medicine, is the foundation of a healthy population; yet even in the wake of the infrastructure deficiencies exposed post-September 11 the public health system remains over burdened and under funded. This disparity between treatment and prevention is another suppressed pressure to nationalize medicine. Additionally, employers, especially the Big Three domestic automakers, will welcome the relief nationalization provides from spiraling health insurance outlays because this one action could save them from or defer bankruptcy.

Finally, the Baby Boomers, a demographic cohort twice the size of the preceding generation, are beginning to retire and will annually consume twice as many medical resources as they do today. The duty of upper echelon leaders is to creatively align their organizations with the obdurate realities of the external environment; otherwise their organizations decline or fail. Healthcare is responsible for 16% or more of the nation’s GDP, giving it latent power to become a “Good Citizen” and promote the inevitable transition to non-fossil energy. This same share of GDP can easily become an indictment of profligacy in tumultuous economic times.

Healthcare cannot stand pat; it is too important, too costly, consumes too many resources, and is too big a target for populist anger and discontent. Further, it has at best only ephemeral public good will. It will be cast as part of the solution or part of the problem when the reality and chaos of peak oil take hold of the nation’s collective consciousness.

Therefore, what can medical leaders do? In brief: 

Exhibit leadership by citing peak oil as a direct health threat to the public; couple this to a call for an authentic national energy policy.

• Realize that healthcare will have to rethink energy and devise protocols for its conservation on a fundamental scale.


• Establish collaborations with public health based on the themes of 1) “A Gospel of Energy” --that is, educate the public about energy; and 2) extend the scope of preventive medicine so as to reduce the expenditures of treatment medicine.


• Suspend some traditional competitive rivalries among medical institutions to view the end of the fossil fuel era as a Herculean matrix of risks facing the entire ecology of the healthcare industry.

Despite the enormity of the threat, only a few leaders, the “conceptual blockbusters”, will be able to both recognize and act on the implications of the coming energy transition. Although they initially will face resistant and robotic “institutional thinking”, they are the ones whom medical historians will discuss with approbation.