Posted: Mon Apr 04, 2005 10:40 pm Post subject: The Best of MonteQuest: A Peak Oil Issues Introduction
I have received numerous requests to post a collection of my initial topic posts as an introduction to the scope and breadth of the peak oil debate. Here is that collection; and while the thread is locked, I have provided links to the active threads for those who wish to follow or add to the discussion. While I don't claim to have the definitive word on the peak oil debate, I do feel I have touched on issues that others have not. I write to stimulate thought, and to try to explain the parameters and natural laws which must govern the debate as we discuss solutions and consider the alternatives to our imminent energy decline.
Many of our members best threads must be looked for, as they were written and posted some time ago. I encourage guests and new members to search our data base for topics of interest, and to review the varied works of our members. This will give you an idea of the topics already discussed so you can avoid starting a duplicate thread.
MonteQuest
Senior Moderator for Peakoil.com _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Last edited by MonteQuest on Mon Nov 14, 2005 8:34 am; edited 5 times in total
The passing of the Age of Oil as we have known it, like the passing of any large idea, will have its recognizable effects, both immediately and over time. One reason we pay so little close attention to the sphere of energy production is that it has always been there and many of us presumed it always would be. As it disappears, its primal importance will be much clearer--in the same way that some people think they have put their parents out of their lives only to learn differently when the day comes to bury them.
There is a sadness, or a shame really, of realizing how much more we could have done. We, all of us in the overly-developed countries, have participated in something of a binge, most of a hundred years of seemingly limitless prosperity and ease. We may have had some idea that it was a bit of a binge and that the earth couldn't really support it for long, but aside from the easy tradeoffs, we didn't do much to stop it. We sure didn't turn our lives around to stop it, and we don't want to change. This tidal force of biology continues to drive us even when we know (as no lemming can) that we are seriously screwing up. I think our shame is the result of knowing we have so cavalierly defaced and marred the earth in the process, and most assuredly compromised the future of the generations to follow. The Indian never trusted the "White Man," as he appeared to the Indian as quite presumptuous; a quality they never fathomed. How could anyone presume to improve upon Nature, much less, out live it?
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"The white man seeks to conquer nature, to bend it to his will and to use it wastefully until it’s all gone and then he simply moves on, leaving the waste behind him and looking for new places to take. The whole white race is a monster who is always hungry and what he eats is land."
--Chiksika, elder brother of Tecumseh, March 19, 1779
Of course all white men are not like that, but enough of them were that the Indian could not know differently. If the mass of man can think of a plausible, or even implausible reason to discount peak-oil, he will. When Ronald Reagan ran for president against Carter in 1980, he made his shrillest attacks on the notion that we were living in an "age of limits." The energy crisis of the 1970's was interesting; for a brief moment it actually unnerved us. But our tentative move towards alternative energies has always been half-hearted. By 1987 Americans alone had spent more than a hundred million dollars on leaf blowers to blow leaves rather than rake them. Even though the shadows are lengthening, to the over-leveraged, debt-encrusted China-Mart shoppers, it somehow still seems like "morning in America." _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Last edited by MonteQuest on Thu Nov 10, 2005 10:18 pm; edited 3 times in total
Predicting the future can be an express ticket to the Hall of Fools, but here's my best shot based upon a lot of reading and just common sense. What the public certainly doesn't understand about the world energy situation is that we don't have to run out of oil and gas for life to turn upside down in this country. All you have to do is squeeze the supply, jerk the price, and all the systems and sub-systems we depend on will de-stabilize creating a domino effect that will clatter its way through our entire economy. I don't believe you have to be a cynic or a "pessimist" to recognize this. It would appear patently obvious. For those who question that assumption, I invite you to read my posts on this subject.
Since our economy at any given moment consists of sixty million people scurrying to the next "blue light special" to buy goods on credit made by people 12,000 miles away, we can expect some pretty far-reaching consequences. From what I have read, we are going to have to give up suburbia, Wal-Mart, and industrial agriculture. We will have to live locally in a way that does not require us to drive cars all the time. We will have to grow more of our own food closer to home. Small-town America will find themselves miles away from essential goods and looking forlornly over their shoulders in the direction of where Charley's Hardware store used to be before Wal-Mart came to town. There will be an extravaganza of default and repossession of homes and property such as the world has never seen before. With the recent easy and low credit access, people have been induced to trade in the equity value of their homes for lump sums of cash to buy SUV's and other "toys." We can assume that some of them are already in trouble with credit card debt. Connect the dots.
We will need to downscale everything, especially agriculture. It will be one of the first systems to fall apart in a world of higher-priced and less reliably available energy, and when it goes down people are really going to suffer. We need to change directions in a big way; from competition to cooperation, and from profitability to sustainability. Think outside the box; try to think of ways to not use more resources.
A lot of jobs and vocational niches are going to vanish--forever. Every "leisure oil use" activity and all their associated industries and jobs will disappear over night. Expect large-scale unemployment and a drastic drop in wages. In China today, $5/hr in a factory is about average. Get used to the idea. In world of greater resource scarcity, the salvage of existing material is going to be a huge business. A lot of the retail of the future will consist of recycled refurbished goods. I can see the railroad system of the US replacing the long-haul trucking system; more efficient and you don't need "tires." We will look back at the 20th century as the "Age of Manufacture."
The biggest question about these massive changes is how much disorder will attend them as nations jockey to contest resources. The downscaling of America is our agenda for survival in the 21st century. It implies a lot of difficult adjustments and even hardship, but we just may find a culture of quality and purpose in a world where a culture of quantity once ruled. Prepare for austerity. We will all be paupers for a while. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Last edited by MonteQuest on Thu Nov 10, 2005 10:15 pm; edited 4 times in total
The universe started with complete order and has been moving toward a more and more disordered state ever since. I find it quite odd that we are willing to see the history of the universe as beginning with a perfect state and moving towards decay and chaos and yet continue to cling to the notion that the history of the earth follows the exact opposite course, i.e., that it is moving from a state of chaos to a progressively more ordered world. How soon we forget that the philosophers of antiquity viewed history in a way that is exactly opposite to how we perceive it. For the Greeks, history was a process of continual degradation. Horace, a Roman, mused that "time depreciates the value of the world." Horace didn't know about the Second law of Thermodynamics, but in this verse he summed up the very essence of the Entropy Law. In Greek mythology, history is represented by a series of five stages, each more degraded and more harsh than the one preceding it. Plato and Aristotle believed that the best social order was one with the least amount of change and growth. Growth did not signal greater value and order, but less. The ideal state was the state that slowed down the growth process of decay as much as possible. Their goal was to hand down to the next generation a world as much preserved from change as possible.
The Christian view of history, which dominated western Europe throughout the middle ages, perceived life in this world as a mere stopover in preparation for the next. They saw history as an ongoing struggle with evil's attempt to sow chaos in a world headed for perfection. The doctrine of original sin precluded the possibility of humanity ever improving its lot in life. To the medieval mind, God controlled every single event. God made history, not people. The human purpose was not to "achieve things" but to seek salvation.
By the middle of the eighteenth century, all the key elements for another paradigm shift in world view were unified. Our current world view is based upon classical, or "Newtonian mechanics" after Sir Isaac Newton and his laws of motion. This is a model of the physics of forces acting upon bodies. Classical mechanics is subdivided into statics (which models objects at rest), kinematics (which models objects in motion), and dynamics (which models subjected to forces). Classical mechanics produces very accurate results within the domain of everyday experience. It is superseded by relativistic mechanics for systems moving at large velocities near the speed of light, quantum mechanics for systems at small distance scales, and relativistic quantum field theory for systems with both properties.
Big thinkers of the time, like Rene Descartes, concluded that the world was one of mathematical precision, not confusion. The Greek view of history was deemed mathematically impossible and therefore false. The Christian world view fared little better. Newton used Descartes mathematics to describe mechanical motion. It was a world view made for machines, not people. It was a short journey from the cold, inert universe made up of pure dead matter in motion to the world of pure materialism. The answer, it was assumed, was to use the principles of mechanics to rearrange the stuff of nature in a way that best advanced the material self-interest of human beings: The more material well-being we amass, the more ordered the world must be getting. Progress, then, is the amassing or ever greater amounts of material abundance which leads to a more ordered world. Science and technology are the tools to get the job done. Reduced to its simplest abstraction, progress is seen as the process by which the "less ordered" natural world is harnessed by people to create a more ordered material environment.
Though we are largely unaware of it, much of the way we think, act, and feel can be traced back to the fragments woven together into the historical paradigms of our not too distant past. I find it quite ironic indeed that only now as the fabric is starting to fray and unravel is it possible to really see the stuff we and our modern world are made of. The mechanical world view is losing ground every day as the energy base upon which it was nourished declines. If there is a history to look back on post-peak, future generations will shake their heads in disbelief at the 300 years we call the machine or modern age, for they will be living under an entirely new world paradigm. They will call our Machine Age, the Age of Illusion. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Last edited by MonteQuest on Mon Dec 12, 2005 8:23 pm; edited 5 times in total
The Great Depression, which began in late 1929 and lasted for about a decade, was the worst economic downturn in U.S. history, and one which spread to virtually all of the industrialized world. The coming Grand Depression will be no less far-reaching. The "roaring twenties" was an era when our country prospered tremendously, much like we have done over the last few years. And, like then, it was all due to wild speculation and inflated assets. In the 1920's, the U.S. came to rely upon two things in order for the economy to remain on an even keel: credit sales, and luxury spending and investment from the rich. Same thing today. Our consumer spending is not funded by an increase in income wages, but by an illusionary equity in our homes. In other words, all the inflation has gone into real estate prices. Prices have reached levels that make no sense in terms of traditional patterns and rules of thumb for valuation. A range of evidence suggests that at the market peak in September 1929, something like forty percent of stock market values were pure air: prices above fundamental values for no reason other than that a wide cross-section of investors thought that the stock market would go up because it had gone up. Now, real estate investors think the same thing of the housing market.
In particular, the FED's efforts to lower interest rates have caused an asset bubble to form around real estate. People tend to over-invest when interest rates are low and when interest rates are raised to stave off the inevitable inflation, the bubble pops. That process is under way as I write this. Throughout the years preceding the Stock Market crash of 1929, the Fed did just that. The Fed set below market interest rates and low reserve requirements that all favored easy credit. The money supply actual increased by about 60% during this time. The phrase "buying on margin" entered the American vocabulary at this time as more and more Americans over-extended themselves to take advantage of the soaring stock market. Today, it is the housing market, and to some extent the stock market again. It was in 1929 that the Fed realized that it could not sustain its current policy. When it started to raise interest rates, the whole house of cards collapsed. The FED is starting to raise interest rates now for the same reason--to cool off consumer spending/speculation and reel in the trade deficit.
One of our members, somethingtosay, suggested I "interview and learn from the people that lived and survived the great Depression of the 30's. Report back to this Web site on the wisdom they learned the hard way." Some of the following is from some old-timers I talked with recently, and the rest from interviews posted on the Internet. I will let the following quotes speak for themselves. It is a chilling account.
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Well, everybody went on relief, and everyone raised a big garden. We raised everything from peas to potatoes and onions, and the extra vegetables we had we sold to people who didn't raise one. We lived off that garden for some time, and it was a big help. Once a month they'd give commodities out. You'd get dried beans, pound of bacon, pound of butter, dried milk, and sugar, and depending on how big your family was, was how much you got; and since we had the cow, we would trade the dried milk for coffee to people who didn't like coffee. That was supposed to last you a whole month, but that was government surplus, and they'd have a place that they dished that out; and I tell you we were so poor we had a gas stove, but we didn't even have the money to hook it up. We also had an icebox and couldn't even afford ten cents a day to put ice in it. When my son was born I'd mix his formula and put it down in the well on the rope and every time I had to feed him I would pull the rope up and get the bottle, but we had no refrigeration and everything we needed refrigerated went across the street to my mom and dad's place. When the war started in 1941, a lot of jobs were left vacant when the men left for war, so unemployment virtually disappeared after that.
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Gas was sparse, so when me and a group of buddies would drive down a hill, we'd turn off the car so we wouldn't waste gas.
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Seemed to have just enough food to eat...no leftovers...had to eat everything on our plate. Things we take for granted now, such as water and heat in our homes was something precious in the depression. All farmers had to can food for winter and they ate out of gardens in the summer on a farm, there was no money and the people had to eat from gardens
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It has affected me all my life. It made a lot of people learn how to conserve. My dad could not find work so we went to live on the farm with my dad's parents. We had no money so when we needed something we had to "make do" or do without.
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The city was affected more than rural areas. We always had food and wood from the farm, but city people had very little food or wood. They had to collect coal that dropped from the trains. Lived on a farm and had plenty to eat because we grew everything moved from town to live in Smithfield MO on a farm so that they could grow crops and have food to eat.
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African Americans suffered more than whites, since their jobs were often taken away from them and given to whites.
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Every tear I saw my mother shed was over the lack of money. All we seemed to do was to, literally, count the pennies in the house among all of us. We fought over money almost all the time, my mother would go into a panic if she could not account for every penny. Not one cent was ever foolishly spent and not one cent ever went for anything that was not vital to life. The memory that I retain to this day (77 years old) is that of my parents crying, singularly and together, about money! I remember one dinner where my mother, myself and my brothers and sister sat down to a meal. The meal consisted of 3 boiled potatoes and one slice of white bread which we divided up amongst us. I noticed my mother was not eating and I asked her why she was not eating. She answered that she was on a diet. When I was about 50 years of age it hit me that she had not been on a diet but was giving up what there was to us!
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When I talk about the essentials of life I mean just that. The list is easy to put together and here it is:
Rent, food, but no ice cream, candy, baked goods; only the essentials, electricity, gas for the stove, clothing, medicine—and that was it. We walked everywhere and I do mean everywhere. If a trip was less than 5 miles we would walk it.
There are five things that seem to be predominating in all that I have read about the Great Depression:
1) There was not one single private or public institution that was up to the task of coping with the depression.
2) The United States suffered more than any country in the world since we were the most industrialized.
3) People had to grow much of their own food in gardens.
4) There was a mass exodus to the country to live with farm relatives.
5) Money was seldom seen.
Are we headed there once again as peak oil/gas inhibits our ability to grow the economy, provide new jobs, and feed--clothe--house the new comers? Even without peak oil, this seems to be in the cards. And without an abundance of cheap energy to grow our way out of it, the forecast for the future is ominous. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Last edited by MonteQuest on Thu Nov 10, 2005 10:22 pm; edited 2 times in total
How had the U.S. government come up so quickly with such a comprehensive and coordinated response to the attack of 9/11? How had they decided within hours that an extended "War on Terrorism"was the appropriate action? Why was the current administration willing to expend so much domestic and international political capital in order to pursue the Iraq war? The administration most likely was able to respond so quickly--because it simply had to pull the plans off the shelf.
Since I joined this site, I have observed that the focus on Iraq and the oil there has overshadowed the true reason for the war...that the continued strength of the dollar is in question.
For the past half-century, the U.S. dollar has been the international currency of account for nearly all nations, and it is the currency with which all oil-importing nations must pay for their fuel from the Organization of Petroleum Exporting Countries (OPEC). For U.S. geo-strategists, the prevention of an OPEC switch from dollars to euros must therefore seem paramount. An invasion and occupation of Iraq would effectively give the U.S. a voting seat in OPEC while placing new American bases within hours' striking distance of Saudi Arabia, Iran, and several other key OPEC countries.
For much of Saddam Hussein's regime, possession of U.S. dollars was a crime punishable by the amputation of a hand. But nowadays the greenback is the hottest item in Baghdad. Since the U.S. led war in Iraq, dollars, either looted from banks or handed out by U.S. administrators, have flooded the currency market. The $100 bill, or the "waraqa," Arabic for paper, has become the preferred trade tool in the city of 5.5 million. "Iraqis see the military in the streets, and they go to shops where many goods are priced in dollars. They can't help but wonder if the dollar will be the main currency," said Dr. Yosra al-Samarai, professor of finance at Baghdad University. Their most frequent complaint is the lack of dinars, which haven't been printed since Saddam's fall.
Here is a well-documented and lengthy article that explains my point great detail. If there is to be a sudden change in world economics, it will happen around the strength of the dollar and oil production.
If the dollar were to cease being the world's reserve currency, all of that would change overnight. So, in a nutshell, it is not about oil, but about which currency "the euro or the dollar" is used to buy and sell oil. President Bush did promise to protect the American way of life. This is what he meant. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Last edited by MonteQuest on Thu Nov 10, 2005 10:25 pm; edited 1 time in total
My background is that of National Park Ranger, ecologist, environmentalist, and desert naturalist. I have studied, photographed, and written about complex ecosystems for many years. I have seen a lot of debate about the post-peak world and how there will or will not be a die-off of the population. As we all know, we are about to enter an era in which each year, less net energy will be available to humankind, regardless of our efforts or choices. Energy is not the only factor, however; the operative principle in determining the carrying capacity of an ecosystem is known as Liebig's Law, which states that whatever necessity is least abundant, relative to per-capita requirements, sets the environment's limit for the population of any given species.
The Second Law of Thermo Dynamics states that whenever energy is converted from one form to another, there is an energy loss in the form of heat. This is the law of entropy as well, which is a measure of the amount of energy no longer practically capable of conversion to work. Entropy within an isolated system inevitably increases over time. Since it takes work to create and maintain order within a system, the entropy law tells us that, in the battle between order and chaos, it is chaos that ultimately wins. Look at a child's bedroom and the chaotic disarray that happens overnight. It takes more energy to put that room back in order than it did to mess it up. The only truly isolated system we know of is the universe. But there are two other system types: open and closed. The earth is an example of a closed system. It exchanges energy with the universe, but not matter, save the occasional meteorite. Since it is a closed system it's environment is always being degraded by entropy, but the thermodynamic equilibrium with space is maintained by the input of solar radiation.
Living organisms, on the other hand, are an example of an open system, where both matter and energy are exchanged. It is because of this exchange that living systems can afford to create and sustain order. Take that usable source of energy away and they soon die. This is true of human societies and technologies as well. Human societies can increase their level of order by increasing their energy flow-through; but by doing so they increase the entropy (random movement towards disorder) within the open system. The energy available in an ecosystem is one of the most important factors in determining its "carrying capacity," which is the maximum population that can be supported on an on-going basis. This brings us back to Leibig's Law. The limiting factor for any population may change over time. Nature prefers stable arrangements that entail self-limitation, recycling, and cooperation. Energy subsidies as the results of disturbed environments (mining, oil, coal, LNG, extraction) or colonization (invading Iraq) provide giddy moments of extravagance for the species, but crashes and die-offs usually follow. Balance eventually returns.
Man has increased his energy flow-through in many ways: colonization, tool use, specialization, globalization(trade), and the use of nature's stock of non-renewable resources: coal, oil, natural gas, and uranium. This last strategy has been the most successful in increasing the carrying capacity of the environment. The human population did not reach 1 billion until 1820; so in 184 years, it has increased six-fold. If we were to add up the total energy consumption that keeps us in the life-style we are accustomed to, compared to the energy a human body can produce, we find that every American has the equivalent of 50 "energy slaves"working for us 24 hours a day. Far-out, you say! It has its costs: ecological destruction, pollution, climate change, and an every increasing dependency on sun-light carbon that went underground millions of years ago, which is not a part of the earth's closed carbon cycle system.
Please note this caveat:
If the availability of these "fossil fuels" were to decline significantly without our having found effective replacements, then the global human carrying capacity could plummet perhaps even below its pre-industrial levels.
Nature has feedback loops that keep its populations in check. We have found ways to circumvent most of them: medicines to combat disease, increased production of food, and the exploitation of non-renewable energy sources. In the closed system of earth, energy is limited to renewables, but since we have opened the treasure chests of earth-bound goodies, we have been able to keep entropy in check.
When there is lots of food-energy made available through the exploitation of a heretofore unavailable resource, a population blooms. Obviously, it can't go on forever, eventually there will be more population than there is food-energy to support it. Over the long-term, nature will strike a balance between the numbers of a given species and the available food. However, the momentum of population increase may lead the population to what is referred to as "overshoot, " and exceed the carrying capacity of their environment.
This thread's premise assumes that we are, indeed, in "overshoot."
Here's where peak-oil and Liebig's Law comes in. Since the proliferating, ever-energy-hungry population may consume the energy(the least abundant limiting factor) faster than it can be produced, the population may actually reduce their carrying capacity even as their numbers and energy consumption is increasing. If this occurs, the population will not simply gradually diminish until balance is achieved: instead, it will rapidly crash--that is, die-off. As we are not bacteria in a petri dish competing for sugar, the rate of decline of our extraction of fossil fuels will determine the rate and magnitude of this crash.
At this point, depending on how seriously the human population has altered it's carrying capacity(as a die-off usually decimates the species environment), we will either adapt or we could die out altogether if alternative food-energy sources are not found and the environment restored. We wouldn't be the first large mammal or human to do so. If we reduce our consumption of energy(powerdown) so that we could meet demand with renewables, then we just might stabilize at a lower population level over time, by attrition, with minimal tragic die-off.
How we will "adapt" remains to be seen, but unless we find a new treasure chest of an heretofore unexploited energy-food resource equal to oil and other fossil fuels, we will be subject to the rebalancing and limiting forces of Liebig's Law.
And even if we find the requisite energy, water, climate change, loss of biodiversity, or soil fertility may be the next limiting factor that lowers our carrying capacity.
No species is immune to Liebig's Law. The party is over, the beer is gone, and the harsh light of morning is in our eyes. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Last edited by MonteQuest on Thu Nov 10, 2005 10:27 pm; edited 3 times in total
"Houston, we have a problem." The world's present industrial civilization is saddled with a dilemma: how can a debt-based monetary system based upon infinite growth in a finite world deal with resource depletion? Quote me and answer that question with your reply.
On another thread, nero wrote: "The belief that the current monetary system is incompatible with a declining energy resource is not an essential component of the peak oil thesis." It's not? I care to differ. It's part and parcel. The steady state economy into which we are being inexorably forced by oil and other fossil fuel depletion means the end of the current money system. The following is a quote from a summary of a seminar taught at MIT by M. King Hubbert in 1981:
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"The world's present industrial civilization is handicapped by the coexistence of two universal, overlapping, and incompatible intellectual systems: the accumulated knowledge of the last four centuries of the properties and interrelationships of matter and energy; and the associated monetary culture which has evolved from folkways of prehistoric origin. The first of these two systems has been responsible for the spectacular rise, principally during the last two centuries, of the present industrial system and is essential for its continuance. The second, an inheritance from the prescientific past, operates by rules of its own having little in common with those of the matter-energy system. Nevertheless, the monetary system, by means of a loose coupling, exercises a general control over the matter-energy system upon which it is superimposed. Despite their inherent incompatibilities, these two systems during the last two centuries have had one fundamental characteristic in common, namely exponential growth, which has made a reasonably stable coexistence possible. But, for various reasons, it is impossible for the matter-energy system to sustain exponential growth for more than a few tens of doublings, and this phase is by now almost over. The monetary system has no such constraints, and, according to one of its most fundamental rules, it must continue to grow by compound interest. "
Richard Heinberg, in The Party's Over, wrote: "Hubbert thus believed that society, if it is to avoid chaos during the energy decline, must give up its antiquated, debt-and-interest-based monetary system and adopt a system of accounts based on matter-energy--an inherently ecological system that would acknowledge the finite nature of essential resources."
Our system of fractional reserve banking suffers from an inherent instability that increases over time; because at the base, fractional reserve banking is a kind of Ponzi or pyramid scheme. As long as there is economic growth the pyramid stands, but if not, it collapses like a house of cards. Under our current economic system, Hubbert wrote that the maintenance of a constant price level in a non-growing industrial system implies either an interest rate of zero or continuous inflation. However you spin it, there is no price component for resource depletion. What if the supply of oil cannot increase forever, but the demand for more oil continues to grow? The conclusion is simple: The house of cards comes down. Who is going to loan money at zero interest? _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Last edited by MonteQuest on Thu Nov 10, 2005 10:29 pm; edited 2 times in total
In the research for a book I just finished, I came across this website. In reviewing the many posts and the different threads of discussion, I see a decline scenario that no one seems to have broached as yet. I will call it the Peak Oil Perfect Storm. While "peak oil" in of itself seems to be a harbinger of disaster, they are many other factors at play that I feel will exacerbate our ability to forestall a hard-landing. Here are some of the things I see:
First: With the lowest interest rates in 40 years, huge deficit spending, and a huge tax cut, we are still having a great difficulty finding economic growth pre-peak. M-3 credit card money supply is at a high only seen after the 1987 crash. June alone had a 20% increase in the trade deficit to 55.8 billion dollars. We may not have any real growth from here on out, regardless of peak oil.
Second: In 2001, a study by then Secretary of the Treasury, Paul O'Neill, projected future "entitlement" expenditures (Social Security, Medicare, Veterans benefits, government retirement, etc) would exceed revenues by $44 trillion dollars. It estimates that closing the gap would require the equivalent of an immediate and permanent 69 percent across-the-board income tax increase, or a 45 percent cut in Social Security and Medicare.
About 82,000 Americans 65 or older filed for bankruptcy in 2001, up 244% from 1991, according to the Consumer Bankruptcy Project, a study done at Harvard. Although there is the perception that many older Americans are affluent, 44% of retirees say Social Security was their primary source of income this year, up from 38% in 2000, according to an annual survey by the Employee Benefit Research Institute. The personal savings rate for Americans has dropped to one of its lowest levels ever- .6%, (now, Oct 2005 less than .0% ), lower than during the depths of the Great Depression in 1933.
Seventy-seven million baby-boomers are going to start retiring in five years' time. As they do, the number of retirees in America will double. At the same time the workforce supporting them will grow by a mere 15%. Solving this problem will hurt like hell.
Third: At 5.1% ( 6.2% Feb 2005) (now, 6.5% Oct 2005) of U.S. gross domestic product (GDP) and growing, the current account deficit (CAD) is now even bigger than the federal budget deficit. It's also much larger than it was in the mid-1980s, which was the last time the CAD triggered a big financial crisis. This included a 40% decline in the value of the dollar, a huge spike in U.S. bond yields and the 1987 stock market crash. The only thing standing in the way of a repetition of the 1987 fiasco (or worse) is the continued flow of foreign capital into U.S. assets. With the ever increasing value of the European Union's euro to the dollar, more foreign investors are moving toward investing their money there, rather than in dollars. This trend could well denote great economic turmoil in the financial markets.
Fourth: 65% of today's mortgages are progressive rates--not fixed. As interest rates rise, people are going to lose their homes. For many senior citizens, their only major asset is their home. It becomes a de facto pension. That's a problem if they file for bankruptcy. Although pensions are a protected asset, in most states only a small amount of home equity is protected in bankruptcy. So if the value of the equity exceeds the state exemption, then a person who files for Chapter 7 bankruptcy will lose their home. And now with the new bankruptcy laws, many will not be able to file Chapter 7's, only Chapter 13's. In those cases, they still have to pay their debtors.
Fifth: Water shortages. We are experiencing record droughts in many areas, especially the West. I was a National Park Ranger for many years and worked all along the Colorado River. Lake Powell at full pool is 27 million acre feet (MAF) of water. It is now down to a little over 9 million acre feet.
If it drops much more they will not have enough head pressure to generate electricity. Also, by decree of the Colorado River Compact of 1922, they must release 8.5 MAF each year for the states of CA, AZ, NV, and the treaty agreements with Mexico. The entire economy of the West is tied to this water. And to compound matters, the historical flows have never exceeded 7.5 MAF since the pact was signed in 1922. Same holds true for Lake Mead. And Australia is seeing "peak" water right now.
James Howard Kunstler quote:
Quote:
The water situation in Las Vegas is dire. The city has absolutely no capacity left for expansion under any circumstances. What's more, Lake Mead, the impoundment behind Hoover Dam, is down to historically low levels, dropping a foot per week lately, and may soon fall so low that the turbine intakes on Hoover Dam no longer operate, meaning goodbye electric generating capacity. The Colorado River's flow in 2004 was 70 percent below average, and the region was gripped by a years-long drought. Climatologists agree, in fact, that the desert southwest has actually been enjoying two comparatively wet centuries and is now reverting to a drier cycle. Global warming could make it much worse.
Sixth: Major culture shock. We are less than 5% of the world's population and consume 40-50% of all the resources, while being the most overpopulated country in the world in terms of impact on our environment. We took more than our share and set it up as a standard of living. The three first words out of an American baby's mouth are, dada, mama, and more. In my opinion, we are the most unstable country in the world with regard to being prepared to weather a peak oil crisis.
Couple all this together, and I see the formation of the mother of all storms. Individually, any one of these could be a major crisis, but together they leave us with few options. I am impressed with the caliber of people on this site and I hope I can contribute to some meaningful dialogue. Looking forward to your follow up posts!
Monte _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Last edited by MonteQuest on Thu Nov 10, 2005 10:30 pm; edited 6 times in total
As most of you know, I have posted on a variety of subjects and I continue to struggle to see the "Big Picture" of the post-peak-oil scenario. It is quite elusive. I am beginning to think that the end of the petroleum age will not happen all at once. Collapse is an economizing process in which a society reverts to a level of complexity that is capable of being sustained. Historically, these collapses have typically occurred over a period of decades or centuries. But what is different this time out is the complexity of our society, globalization, and the fact that this "carrying capacity" we have taken for granted is a phantom based upon a non-renewable resource. Still, it could come a lot slower than we think.
Those of you who have read my Peak Oil Perfect Storm thread know there are many factors at play with the state of the world at large. As oil production declines or supply is disrupted by geopolitical events, prices will rise--particularly the prices of that most oil-dependent and essential of commodities--food. That is a given, I believe. Setting aside peak oil for a moment, let us continue on. Since virtually all commodities use petroleum fuel to move from production to consumption, as fuel prices rise whether by market forces or by currency decisions by OPEC to offset the loss in revenue as the dollar declines due to our trade imbalance, all commodity prices must also rise. Whew! What a mouthful! This will create inflation. To curb the inflation, the Fed will raise interest rates. And as the price of food and other essential commodities rise--along with house payments tied to variable rate mortgages--luxuries and dispensable goods and services will drop out of the family budgets and the standard of living will decline and unemployment will rise.
When energy costs escalate, there will be a period in which an emphasis on conservation & energy efficiency will occur. This will be like the early 1980's when the price of oil caused the world to become more energy efficient. Smaller cars were purchased, insulation put into houses and lighting changed to efficient bulbs. That will occur again putting off some of the worst problems and again push the dawn of peak oil into the future. The demand destruction will create a new buffer of energy supply upon which we will try to grow again. The system will initially appear to rebalance. There will be a dash for more fuel-efficient vehicles and equipment. The poor and many of the over-leveraged middle class will not be able to afford the investment or the fuel. The rich will outbid the poor for available supplies of energy and conservation methods. Unemployment will increase. People will lose their homes. There will be a major transfer of wealth from the poor and middle class to the rich, much like what took place in the 1930's. Stagflation will occur where you have an inability to grow the economy in the face of rising inflation and interest rates driven by a declining dollar or a rise in energy prices. And then the cycle repeats. There may come a time when hyperinflation steps in. This will occur when everyone knows everything they buy will be selling at a higher price very soon (within days or weeks); therefore everyone spends the cash as soon as possible to beat the price increases. And all of this can or will occur without peak oil.
So, let's add the reality of peak oil into the mix. Initially it will be denied. There will be much lying and obfuscation. Terrorists and environmentalists will be blamed. The call for more exploration and exploitation of oil and gas will become a media event. The dash for gas will become more frenzied. People will realize nuclear power stations take up to ten years to build. People will also realize wind, waves, solar and other renewables are all pretty marginal and take a lot of energy and time to construct. Air quality will be ignored as coal production and consumption expand once more. Countries, especially the oil producing ones, due to their total dependence on oil revenues, will decide to reserve oil and later gas supplies for their own people. Conservation and energy efficiency will go a long way to cut use and meet new demand, but once the decline really gets under way, liquids production will fall relentlessly by 5%/year. Energy prices will rise remorselessly. Inflation will become endemic and a world depression will descend upon us. Every year, unrelentingly, we will require further efficiencies in our energy use; our slice of the pie will get smaller and smaller. Whole industries will disappear: motor racing, fast food, motels, private boats and airplanes, and all related industries. We will cut and pare and try to grow our way out of it under our current debt-based monetary system (since it is all we have) but it will not happen. People in Third World countries, like Mexico, will do the only human thing, the thing we all would do in their circumstances--try to get into countries they perceive have wealth and jobs and energy. We will see more imperialist adventures, and, it will add to U.S. isolation as we continue down the path of becoming a pariah nation. Like I have said before, it's all about rate and magnitude. But I think the scenario will be a long drawn out affair due to our precarious economic climate which will induce some major demand destruction long before peak oil hits. One caveat; if peak oil is already here, Katy bar the door. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Last edited by MonteQuest on Thu Nov 10, 2005 10:33 pm; edited 3 times in total
Sometimes, I wish the oil would just go ahead and peak. Seriously, let's get it over with. This is like a push-pull love affair that drives you nuts! One day, the news is pro-peak oilers, the next, pro-cornucopians. Making any kind of future plans is a fool's errand, it seems. I have written many posts on this site, but few to the planning forum, as the target keeps moving and I only have a peep sight. Wish I had a high-powered scope, so I could put this thing in my crosshairs.
I think the thing that bothers most of us is the fact that the powers that be do not seem to have a lucid game plan other than hubristic imperial adventures. So, is the answer to peak oil going to be nothing but resour
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