04/06/2005: Prognostications: Hope you enjoyed it, because it's all downhill from here....
Over at River City Mud Company, autoegocrat muses on a sentence from a recent Alan Greenspan speech:
The experience of the past fifty years--and indeed much longer than that--affirms that market forces play the key role in conserving scarce energy resources, directing those resources to their most highly valued uses.The title of his post: " The Invisible Hand Closes Into a Fist". Pretty good metaphor. Given my more immature orientation I'd have titled it "The Invisible Hand Gives Us The Upraised Middle Finger" (or if I was feeling my Latinist oats, or wanting to annoy Karen, I'd have replaced "Upraised Middle Finger" with "Digitus Impedicus" (I was pleased to see that a google search unearthed that one, though if you're following the link be aware that you'll have to do a "find" for "digitus" in order to jump to the post in question)). But the ultimate point is the same: if we allocate scarce fuel resources by means of the market, it means that the haves are driving (and flying, travelling, and doing all those other things that fuel makes possible) while the rest of us are walking (or riding bikes, horses, and other fuel efficient means of transport). Quoth the autoegocrat:
Federal Reserve Chairman Alan Greenspan 4/5/2005
Anyone over thirty remembers what life was like the last time "market forces played a key role in conserving scarce energy resources." I was just a toddler during the fuel crisis of the 1970's, but I have heard enough about it to know that it wasn't much fun for anyone, unless you happened to be a Saudi oil magnate.Well, let Old Uncle Len sit back and tell you one of his Old Geezer stories. I wasn't a toddler during The Great Oil Crisis of the '70s. I turned 16 in July of 1973, and like most 16 year olds I got my driver's license within a few days of That Momentous Date. The Great Oil Shortage hit not very long after that. I remember The Fun We Had Then: lines at gas stations extending for blocks. The "rationing" by license plate (even numbered plates gas up Monday, Wednesday and Friday, odd numbers Tuesday, Thursday, and Saturday). I remember the price of gas going over a buck a gallon then. It wasn't the good old days, that's for shure.
Except maybe compared to today. I live 2.5 miles from my work, and I drive a VW Jetta. The bottom line is that, unless I'm travelling out of town by car for a weekend, I have to refuel maybe once a month (I could probably stretch it to a month and a half if I want to risk driving on vapors). So I hadn't gassed up in several weeks when I pulled up to the pump Monday.
Gas prices were $2.11/gallon for regular (and keep in mind gas is still pretty cheap round these parts; I shudder to think what the price must be on the coasts...). That's the most I've ever paid for gas in any location-not-in-California (I think I paid close to three bucks a gallon to gas up a rental car while on a business trip to the Bay Area once).
Now, if you want to slide into what many (including myself, in a sober moment) might view as paranoiac ravings, well just continue below the fold....
If you read and believe James Howard Kunstler (one of autoegocrat's commenters dropped us this link), things are going to get worse. A lot worse:
It has been very hard for Americans -- lost in dark raptures of nonstop infotainment, recreational shopping and compulsive motoring -- to make sense of the gathering forces that will fundamentally alter the terms of everyday life in our technological society. Even after the terrorist attacks of 9/11, America is still sleepwalking into the future. I call this coming time the Long Emergency.Mull over that concept carefully. Very carefully. Think about what it means for a second. Or longer. I'll wait for you.
Most immediately we face the end of the cheap-fossil-fuel era. It is no exaggeration to state that reliable supplies of cheap oil and natural gas underlie everything we identify as the necessities of modern life -- not to mention all of its comforts and luxuries: central heating, air conditioning, cars, airplanes, electric lights, inexpensive clothing, recorded music, movies, hip-replacement surgery, national defense -- you name it.
The few Americans who are even aware that there is a gathering global-energy predicament usually misunderstand the core of the argument. That argument states that we don't have to run out of oil to start having severe problems with industrial civilization and its dependent systems. We only have to slip over the all-time production peak and begin a slide down the arc of steady depletion.
The term "global oil-production peak" means that a turning point will come when the world produces the most oil it will ever produce in a given year and, after that, yearly production will inexorably decline. It is usually represented graphically in a bell curve. The peak is the top of the curve, the halfway point of the world's all-time total endowment, meaning half the world's oil will be left. That seems like a lot of oil, and it is, but there's a big catch: It's the half that is much more difficult to extract, far more costly to get, of much poorer quality and located mostly in places where the people hate us. A substantial amount of it will never be extracted.
You see, the problem is that The Great Oil Crisis of the '70s was the result of an oil-production peak. Not a global one, but a national one. Quoth Kunstler:
The United States passed its own oil peak -- about 11 million barrels a day -- in 1970, and since then production has dropped steadily. In 2004 it ran just above 5 million barrels a day (we get a tad more from natural-gas condensates). Yet we consume roughly 20 million barrels a day now. That means we have to import about two-thirds of our oil, and the ratio will continue to worsen.Ok.... Something to remember: right after the Great Oil Crisis the U.S. economy basically went into the toilet. Many economists have related that economic decline to what they call "oil shocks"--the increase in the price of oil was a shock to the economy, and helped kick it into recession.
The U.S. peak in 1970 brought on a portentous change in geoeconomic power. Within a few years, foreign producers, chiefly OPEC, were setting the price of oil, and this in turn led to the oil crises of the 1970s. In response, frantic development of non-OPEC oil, especially the North Sea fields of England and Norway, essentially saved the West's ass for about two decades. Since 1999, these fields have entered depletion. Meanwhile, worldwide discovery of new oil has steadily declined to insignificant levels in 2003 and 2004.
Compared to reaching the global oil-production peak, reaching our national oil-production peak was a mere love tap by comparison.
Now we are faced with the global oil-production peak. The best estimates of when this will actually happen have been somewhere between now and 2010. In 2004, however, after demand from burgeoning China and India shot up, and revelations that Shell Oil wildly misstated its reserves, and Saudi Arabia proved incapable of goosing up its production despite promises to do so, the most knowledgeable experts revised their predictions and now concur that 2005 is apt to be the year of all-time global peak production.I'd like to think that Kunstler's scenario is a "gloom and doom" scenario that won't come to pass. But based on what I've seen in my life (The Great Oil Crisis, the economic woes that followed from it, the eventual cutting of our dependence on fossil fuels followed by the return to dependence on them once it seemed like the crisis had been passed--WTF are so many of us driving those Stupid Useless Vehicles?), if anything I think Kunstler's being too optimistic.
It will change everything about how we live.
We will have to accommodate ourselves to fundamentally changed conditions.
No combination of alternative fuels will allow us to run American life the way we have been used to running it, or even a substantial fraction of it. The wonders of steady technological progress achieved through the reign of cheap oil have lulled us into a kind of Jiminy Cricket syndrome, leading many Americans to believe that anything we wish for hard enough will come true. These days, even people who ought to know better are wishing ardently for a seamless transition from fossil fuels to their putative replacements.
You see, oil just doesn't "drive" vehicles and other modes of transportation. There are also a shitload of consumer and other products that rely on petrochemicals for their production. And their prices are going to rise. Oh, boy, are they going to rise.... And Kunstler doesn't really address that issue directly, although there is a hint of that problem in this paragraph:
Before long, the suburbs will fail us in practical terms. We made the ongoing development of housing subdivisions, highway strips, fried-food shacks and shopping malls the basis of our economy, and when we have to stop making more of those things, the bottom will fall out.And will you even recognize the resulting economy:
Most of all, the Long Emergency will require us to make other arrangements for the way we live in the United States. America is in a special predicament due to a set of unfortunate choices we made as a society in the twentieth century. Perhaps the worst was to let our towns and cities rot away and to replace them with suburbia, which had the additional side effect of trashing a lot of the best farmland in America. Suburbia will come to be regarded as the greatest misallocation of resources in the history of the world. It has a tragic destiny. The psychology of previous investment suggests that we will defend our drive-in utopia long after it has become a terrible liability.Suddenly, a return to The Dark Ages doesn't seem so unlikely (maybe that's why the Catholic Church has been so relentlessly re-positioning itself; the Dark Ages were the heyday of the Church's power, and might they just welcome the chance to be Top Dogs again?).
The circumstances of the Long Emergency will require us to downscale and re-scale virtually everything we do and how we do it, from the kind of communities we physically inhabit to the way we grow our food to the way we work and trade the products of our work. Our lives will become profoundly and intensely local. Daily life will be far less about mobility and much more about staying where you are. Anything organized on the large scale, whether it is government or a corporate business enterprise such as Wal-Mart, will wither as the cheap energy props that support bigness fall away. The turbulence of the Long Emergency will produce a lot of economic losers, and many of these will be members of an angry and aggrieved former middle class.
Food production is going to be an enormous problem in the Long Emergency. As industrial agriculture fails due to a scarcity of oil- and gas-based inputs, we will certainly have to grow more of our food closer to where we live, and do it on a smaller scale. The American economy of the mid-twenty-first century may actually center on agriculture, not information, not high tech, not "services" like real estate sales or hawking cheeseburgers to tourists. Farming. This is no doubt a startling, radical idea, and it raises extremely difficult questions about the reallocation of land and the nature of work. The relentless subdividing of land in the late twentieth century has destroyed the contiguity and integrity of the rural landscape in most places. The process of readjustment is apt to be disorderly and improvisational. Food production will necessarily be much more labor-intensive than it has been for decades. We can anticipate the re-formation of a native-born American farm-laboring class. It will be composed largely of the aforementioned economic losers who had to relinquish their grip on the American dream. These masses of disentitled people may enter into quasi-feudal social relations with those who own land in exchange for food and physical security. But their sense of grievance will remain fresh, and if mistreated they may simply seize that land.
As if the economic effects wouldn't be enough, there's also the potential for oil wars. And we're not just talking about Dumbya's Mess In Mesopotamia:
The upshot of all this is that we are entering a historical period of potentially great instability, turbulence and hardship. Obviously, geopolitical maneuvering around the world's richest energy regions has already led to war and promises more international military conflict. Since the Middle East contains two-thirds of the world's remaining oil supplies, the U.S. has attempted desperately to stabilize the region by, in effect, opening a big police station in Iraq. The intent was not just to secure Iraq's oil but to modify and influence the behavior of neighboring states around the Persian Gulf, especially Iran and Saudi Arabia. The results have been far from entirely positive, and our future prospects in that part of the world are not something we can feel altogether confident about.Sounds like fun, eh?
And then there is the issue of China, which, in 2004, became the world's second-greatest consumer of oil, surpassing Japan. China's surging industrial growth has made it increasingly dependent on the imports we are counting on. If China wanted to, it could easily walk into some of these places -- the Middle East, former Soviet republics in central Asia -- and extend its hegemony by force. Is America prepared to contest for this oil in an Asian land war with the Chinese army? I doubt it. Nor can the U.S. military occupy regions of the Eastern Hemisphere indefinitely, or hope to secure either the terrain or the oil infrastructure of one distant, unfriendly country after another. A likely scenario is that the U.S. could exhaust and bankrupt itself trying to do this, and be forced to withdraw back into our own hemisphere, having lost access to most of the world's remaining oil in the process.
We know that our national leaders are hardly uninformed about this predicament. President George W. Bush has been briefed on the dangers of the oil-peak situation as long ago as before the 2000 election and repeatedly since then. In March, the Department of Energy released a report that officially acknowledges for the first time that peak oil is for real and states plainly that "the world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary."
I can hardly wait....
Len on 04.06.05 @ 01:17 PM CST