Oil, Gas, and Electric Power: Some Issues for 2010
Posted by Gail the Actuary on January 19, 2010 - 10:24am
Oil & Gas Journal invited me to write a 750 word editorial for Oil & Gas US Magazine, talking about 2010 could mean for the oil and gas and electric power industries. The article was published yesterday (here), and I thought I would repeat it for Oil Drum readers.
Oil, Gas and Electric Power: Some Issues for 2010
Continued Recession
It seems to me that the current recession is very much energy-related, and is likely to continue. The recession is occurring because the current US “system” (individual homes, private cars, many imports) was built for cheap ($20 barrel) oil and gas, and cannot function well using expensive oil and gas.
I expect that the recession will experience some ups and downs, but will generally be worse by the end of 2010. Government revenues will continue to decline, making it increasingly difficult to support subsidies for renewables and to provide funding guarantees for nuclear and wind.
Underlying the continued recession is a basic issue: people’s incomes are relatively fixed. If people are required to pay more for gasoline, home heating, and electric power (which most consider necessities), they will have less for repaying debt and less for discretionary spending. If the cost of necessities go up—even as a result of something most consider relatively good—such as an increased proportion of renewables—it will increase the tendency toward worse recession.
With continued recession, debt defaults are likely to become more and more of an issue. While debt defaults are likely to come mostly from sectors other than oil and gas and electric power (such as commercial real estate and credit card debt), the fall-out in terms of reduced credit availability is likely to affect all.
Most economists will continue to miss the connection between energy costs and recession and will continue to forecast recovery around the corner. Their models are based on the assumption that the economy can continue to grow pretty much as in the past—but if we are faced with higher fuel costs because cheap energy sources have to a significant extent been exhausted, this really isn’t the case.
Fluctuating Oil and Gas Prices
While many are forecasting higher oil and gas prices, I am doubtful that higher prices will hold for very long because of the inability of people’s incomes to cover the higher prices. Parts of the world that use much less oil and gas per capita may be able to sustain higher prices with less recessionary impact, but ultimately, all will be affected.
I see a high cost of oil production (or of any type of energy production) as a marker for low “energy return on energy invested” (EROEI). It seems to me that we should be cautious about substituting higher cost energy sources for lower cost energy sources, because doing so will tend to raise the cost to the consumer and lead to greater recessionary impacts.
Continued Pressure to Reduce Emissions, Particularly CO2
While I doubt that the Waxman-Markey bill can pass this year, I expect that the EPA and individual states, such as California, will continue to exert pressure to reduce emissions. To the extent that these actions are effective, I expect the results will be recessionary.
Peak Demand for Energy Supply of All Types
Recently, we have been hearing about “Peak Demand”. I think Peak Demand is a possibility—if not in the next year, in the slightly longer term. The way Peak Demand is likely to play out is through increased recession and continued reduction in credit availability. Difficulty with international trade may also enter the picture.
While some are painting “Peak Demand” as a good thing, I see it as a problem, since it is likely to be accomplished through declining standards of living. Peak demand may, in fact, be inevitable because our current standard of living cannot be supported if oil and gas prices rise to too high a level—people will spend too much of their incomes on necessities, and will not have enough left over for new homes, new cars, and all of the other things that have enabled economic growth in the past.
Some expect energy efficiency to play a major role in peak demand. I expect its role to be quite minor because of the huge amount of investment and long timeframe required to make a major change, such as increasing passenger auto fleet efficiency by 20 mpg.
To Summarize
1. Demand for oil, natural gas, and electricity is likely to fall over the next few years, because of increased recession and decreased credit availability.
2. Subsidies for renewables and nuclear are likely to decline, as governments find themselves more and more financially stretched.
3. Even with (1) and (2), there may be pressure to reduce emissions and thus fossil fuel use.
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"1. Demand for oil, natural gas, and electricity is likely to fall over the next few years, because of increased recession and decreased credit availability."
Do you mean globally or just referring to the US? There is a continued growth of energy demand in many other places China, India, etc.).
I am really talking about the US, when I am talking about the drop in demand, but I think this is true of quite a lot of the developed world.
In total, it seems like there may be some saw-tooth upward progression of demand, but then dropping again, as price causes credit contraction. Even China may run into this, although not quite at the same time as countries using a higher amount per capita.
Perhaps you should have clarified since in bullet point (2) below you seem to refer to a global scale when you refer to "governments". :)
There are a lot of countries in the world that will see falling demand and falling tax dollars. I expect the countries countering the trend will be pretty unusual.
That was not my point. In 1. you don't refer to specific countries in 2. you refer to many countries in general so perhaps one has the impression that in 1. your reference is global and not specific to the US as you clarified earlier to me. Thats all. :)
Gail,
On the issue of demand peak, this is a fascination of mine, that being how does an economy based on fossil fuel as it's driving energy source for a century begin to back away from it without great economic dislocation? We are leaving aside the peak supply problem, and only dealing with how to begin the process of disengaging mass and growing consumption of fossil fuels, whether the crude oil and coal is out there or not (and given the carbon release issue, it is these two which would ideally be disengaged first.
Peak demand for oil and possibly coal should be here in the advanced nations and coming globally sooner than most folks can imagine. In many nations these two high carbon fuels are becoming all but illegal anyway. This will certainly be the case in much of the "green party" Euro nations, and Europe feels it has more to lose from rising sea level and global warming that any other continent.
But natural gas and electricity face a different future. All indications are that there is still a world of potential consumers out there needed energy, and natural gas is cleaner and in most of the world apparently more abundant for the foreseeable future. It is possible that we are seeing another new "dash to gas" worldwide.
Electricity is not an energy supply but a distribution method of energy. Here is the big IF: IF we assume the modern world will survive, and that the developing nations will keep developing, we are entering the electric age. It is the only way possible to distribute the amount of power needed by the industries and people of the earth. Electrification of transportation is coming. Electrification of agricultural production is coming. Electronic robots in industries, hospitals, hotels, country clubs, golf courses and households is coming.
When we speak of peak demand for oil and coal, that is absolutely unavoidable. We can do it the easy way or we can do it the hard way, but it will happen. Natural gas will have it's high noon later...but if electricity demand peaks for any long period, then I can join the catastrophist doomer neo-primitivists and start learning to make some hand tools out of stone.
RC
I came to exactly the same conclusion 3 years ago. The era of the heat engine is ending. Thanks for summarizing it so well.
This is why hybrid electrics are important. They are the transition step for transportation. Once electricity is the medium to do work you just have to figure out the best way to make it locally. Currently Coal, Oil, NG and Hydro account for most through centralized production. But we could decentralize and use solar, wind, cellulose, or even cow poop. Once you know electricity is what you need, people will be inventive in how to capture it cheaply if they can't buy it cheaply.
Also agree with you that if we need X amount of electricity to run the world and we can only make 0.8 X we are in trouble.
I am afraid the amount we can make with so-called renewable energy is a lot less than 0.8X. Also, we need good oil supplies (and probably a functioning electricity network) in order to make solar PV and wind turbines at all. So calling them "renewable" is a stretch--they are just an attempted way of making fossil fuels go farther.
Gail,
I agree it is mathematically impossible to generate an electric energy supply equal to the current Fossil fuel energy we use. This is especially true if we compare things on a btu basis.
But I think the question is often framed wrong. That is - "It currently takes the burning of XXX btus to do the work we want and/or genertae the electricity we need. Therefore to do the equivalent work with electricity we need to produce XXX btu equivalent of electricity, which is not feasable."
I disagree with this logic. It is classic thinking in the box (heat engine box) when we all know solutions lie outside the box. It also is a specious argument that you need YYY amount of electrical energy to generate XXX amount of heat btus which is the only way to convert to fossil energy equivalents. Who, specifically, wants those "heat" btus in an electric driven world?
The question needs to be framed "What is the megaJoules of elctricity needed to keep society functioning well and still develop scientific breakthroughs? Knowing that amount, how can this electric supply be generated or captured?"
Electric motive engines are more efficient for many applications than heat engines. Therefore it is not certain that we will need the same btu's as current to do equal work on the transportation front. We also use btu heat inneficiently in many applications such as dwellings and industrial processes because historically btu's have been cheap via fossil fuel.
There are some applications where heat is required or the energy density of liquid is required but I submit this is a small percentage of the total fossil fuel used. Most fossil fuel is burned to turn a shaft to do work, either direct drive or conversion to electricity via generators. That is an inneficient use of btus, on the order of <35% unless I am mistaken. I know it is that low in transportation which is 50% of the oil energy use in the US.
It does not logically follow that an electric society must waste that many btus, as heat, to do the same work and provide the same standard of living.
At the same time it does not logically follow that just because we move away from heat engines we can automatically maintain the same standard of living with electric. There is no data either way yet to answer this question. We haven't tried to run the world mostly without heat engines so no one knows if it can be done. I will submit that many people who go off the grid basically abandone the heat engine except for very limied emergency uses so there is hope in that direction. There is no hope in clinging to a fossil fuel/heat engine approach.
I derived the equation that shifting inter-city freight from truck to electrified rail trades 20 BTUs of diesel for 1 BTU of electricity.
One can get that 1 BTU VERY easily buy reducing household use of electricity (cutting in half is quite easy for average American household). Closing some shopping malls and Big Box stores is another way to get this power.
I studied Switzerland during WW II when they had a seven year, 100% oil embargo (and a small amount of coal that they traded with the Germans for). Total energy use declined and almost all of their energy was hydroelectricity and wood. For seven years. The military got the bulk of what oil was in storage (with Nazis completely surrounding you, VERY understandable).
Living standards declined for a number of reasons (very little trade, military mobilization, few raw materials as well as much less energy) but they continued a civil society, a Western industrial democracy.
So I would respond that a close approximation has been made to a society running without heat engines (but wood heat).
Alan
Alan/NC, good points both.
On the future electric economy, on e thing I have noticed is that most of the "renewable" energy options (other than biomass) produce electricity, rather than a liquid or solid fuel. And biomass can be converted to electricity more efficiently than it can be to a liquid fuel. So, by extension, a more electric economy CAN be a more renewable. I emphasis the "can" because this is dependent upon making transportation primarily electric, which is is a challenge.
The Switzerland example is an interesting one, and they have the advantage of being a relatively small country, but it shows it can be done. A similar situation occurred in Bosnia during the NATO blockade/air campaign in the 90's. I think this is referred to in Jeff Rubin's book. People found a way to adapt, and go about (most of) their business. The city, devoid of vehicles, apparently was very quiet, peaceful, and relaxing, if you ignored the fact that there was a war going on. In both cases, they made their economy a less transport dependent one, something else that Jef Rubin expects in the future.
Ultimately, we can and will find ways to adapt, it just that change scares people, and scares politician's even more. The best examples of societal change/innovation almost always seem to be related to war (or natural disasters), as that is when you give up luxuries and focus on all the available resources on survival, and that is a powerful incentive to innovate.
Paul - I agree with you and Alan in a general sense. But the wall I keep bumping into is how much of our labor force is dependent on a livelyhood from our "mobility" (for lack of a better term). Particulaly individual mobility. Perhaps we could mimic the Swiss to some degree. But they didn't have a huge segment of their population dependent upon making a living from our conspicuous consumption. I agree many of us could adapt (and even enjoy some of the changes). But what do we do with the X tens of millions who loose their incomes as we become more efficient? If you understand a Malasian monkey trap you get my point: if we don't let go of the nut (reduce employment) we can't free ourselves from the coconut (high energy consumption). As I mentioned elsewhere: I see reactions...not solutions. At least not solutions that won't equate to 10's of millions unemployed. We are in an inescapable trap of our own design IMHO.
But I'll gladly embrace any proposition that can solve the two problems simultaneously.
We cannot burn oil that does not exist.
Keeping our hand tightly gripped on BAU results in massive unemployment and the USA developing a 3rd World economy. Lots existing built up areas likely abandoned.
What I propose is a viable alternative.
Think 1950 to 1970 in reverse (when we sacrificed downtowns and inner cities for sprawl).
Best Hopes for working towards A solution,
Alan
PS: Read the paper I sent you. More details there.
Well, we already have millions of unemployed that we don't know what to do with, so there's part 1 of your scenario. And if we can;t find work them, then what do we do with the additional transport job losses (and "transport can mean everything from car mechanics to waitresses at roadhouses)
Overall, I agree with your scenario. Unemployed people can't keep the consumer economy going, and further ratcheting back the economy, through reduced transport and less luxury spending, reduces employment further.
Whoever can come up with an acceptable solution, should be President.
BUt in the absence of a planned solution, the economy will inevitably start shifting itself towards a lower transport one, as Jeff Rubin predicts.
The change won't be painless, and there is no guarantee that it keeps everyone employed. Most industries that were labour intensive are now highly mechanized, from farming to factories, and can't (easily) go back to the WWII style army of workers, though that is exactly what is required.
Government "stimulus projects" like roads, bridges etc use lots of money, materials and equipment, but not many people. It is time for some opposite thinking, for projects that use lots of people and not much equipment, but that sounds like China, not America.
Of course, in time past, countries/empires that had lots of underemployed people (men) would got to war with someone - reduces the excess population, and if you win you get more land/resources - but hardly an acceptable solution today...
Rockman/Alan/Paul
We all see the issue from a similar angle - what will people do when we move away from fossil fuel.
I think Paul is closest to my vision when he says:
"It is time for some opposite thinking, for projects that use lots of people and not much equipment"
The key is to use people to make durable goods that are required rather than just desired.
My tweak on this is that more people will be directly involved in making/capturing energy or the things that make or capture energy or things that directly impact our survivability. A much larger % of society will be involved with manufacturing in general and fewer will be doing "make work/transactional jobs". This will be required to maintain our high standard of living when not working and stave to off entropy which we do now with fossil fuels.
I think currently many people in the US do a job that is not really needed, but there is no room for them in the real durable goods/energy/food economy because we are so reliant on cheap energy so as to be human labor efficient. We have created many super specialized, rediculous jobs (such as full time dog groomers) because there are not enough meaningful jobs to go around.
NC,
Couldn't agree more about the dog groomers, and the "required v desired" goods.
The number of people doing work of little real economic value is amazing. I think our current recession will shake a lot of this out, as the dog groomer customers finally realise they don't need to spend their (increasingly scarce) money on that.
As you point out, it's hard to plug people back into manufacturing jobs, as manufacturing has become so equipment (and energy) intensive.
But there must be a way to do it.
I think there will be some tough adjustments, as people have to start taking the dirty jobs that they have previously shunned. Sorting recyclables is not sexy, but currently we just ship it to China and let them do it.
Not everyone can be involved in redistributing wealth - it has to be generated first.
Perhaps, ultimately, if we can't find jobs for all these people, the answer is less people...
Repair and upgrades will take an increasing share of the workforce. Household appliances, homes & businesses, city infrastructure and more.
Not enough, but not trivial either.
Alan
I posted my predictions for 2010 a couple of weeks ago. I am predicting that the big story for 2010 for energy is going to be the big projects that do NOT go forward, because the economics are not right or the financing can't be swung.
Every single oil optimist, from Yergin and Lynch on down, is assuming that every megaproject that can theoretically be done will be done. They won't, because the money won't be there.
Thus, 2010 will be seen in retrospect mainly as having set the groundwork for really serious supply shortfalls in the years ahead.
China has lots of money, and growing demand for oil. Not good news for America (or Europe), but isn't it possible / likely that China will buy into / finance these megaprojects as a way of securing further future supply for themselves?
After all, it's not in their interests to just watch oil supply dry up any sooner than can be avoided.
likely that China will buy into / finance these megaprojects as a way of securing further future supply for themselves?
They certainly realized that they can benefit from the US wind resources:
http://online.wsj.com/article/SB125683832677216475.html
But Chinese wind power installations will probably still surpass US wind power installations:
http://english.peopledaily.com.cn/90001/90781/90879/6763396.html
WNC Observer,
I think you are likely right, on 2010 being the year when projects don't go forward.
It seemed like there were 20 other subjects one could talk about, but not in 750 words.
I think there is also a possibility of international debt defaults (Greece, Ireland, etc.) that may start affecting the international system.
1991-1998 average demand growth for the world = 1.40%. 2000-2008 = 1.34%. Spare capacity is the 800 bbl elephant in the room, I don't think even a cornucopian would be nutzoid to pretend otherwise, and we're facing Noughts redux in this matter, even with gangbusters out of Iraq and Brazil and tar sands and I don't know what else.
Oil sands development has slowed down considerably because of the lower oil prices and the meltdown in the global financial system. This will cause a problem when demand goes up because the oil sands plants can't be expanded on a whim. It takes years of planning and billions of dollars to do it.
However, it looks like the Alberta government will take advantage of this slowdown to put a lid on future oil sands development. The uncontrolled expansion of the last few years badly overheated the economy and inflated costs considerably. The environmental issues are also a concern. The new Alberta Energy Minister is talking about imposing regulations that will result in a much slower rate of development in future oil booms. Oil companies will have to take a number and wait their turn to expand their operations, regardless of demand growth.
Alberta is also talking about "diversifying" its sales. That means they want to sell oil to China. Currently 99% of exports go to the US, but the public ramblings of American politicians and environmentalists about "dirty oil" have caused them to lose confidence about their future access to US markets (notably California), They want to insure themselves against that by sending more of it to markets where people won't quibble about how it is produced, or impose restrictions on the type of oil refineries can buy.
None of this bodes well for American consumers. Canada is now by far the largest oil supplier to the US, and one of the very few oil producers capable of increasing production if it wants to. Increases in production will be slower than in the past, and the oil might go to China rather than the US.
If you look at it, Canada's oil sands oil production isn't all that much--you would just think it is, from the amount of publicity it gets in our press. The rapid growth you talk about is rapid growth from a low base. The only reason we can get imports from Canada is because Canada has other sources of oil as well. If the other sources of oil--particularly its imports stop dropping off, they have less to send us (unless Eastern Canada comes up short.)
Even with my estimate of what might be possible with an oil sands ramp up, my view is that Canada's oil available for export is not likely to increase in future years, because of declines in their other sources of oil.
The oil Canada would send to us would come down to the US Midwest--an area that otherwise would be at the "end of the pipeline", so is vulnerable to disruption. I wouldn't blame Canada for wanting to sell their oil to China--and if exports by rail are done, it would be relatively easy to do.
The exports will be done by a new pipeline across central BC to Kitimat, ostensibly to allow exports to the West Coast (California) and other markets (China). Pipeline will be just under 400,000 bbl/day. This has been an on again off again project, but is now on again.
The CAlifornia refineries would be a good market as they are used to refining heavy California oil.
Kitimat is also the site for a proposed LNG import terminal
CN is upgrading the rail link to Fort Mac, and has some spare capacity on their line to Prince Rupert, but I think the pipeline will win out.
At what point will Canada cease being a U.S. trading partner and become a target of petroleum conquest?
That is a very good question.
I would say, that if the Alaska natural gas pipeline ever gets built (which will run through Canada), then that point becomes much closer, as the US will need to "guarantee the security" of that pipeline.
I would put it as equally likely for Canada to be a target of "water conquest" as for petroleum, but both are relatively low likelihood, as the US can probably ensure secure access to both these resources without war.
- continued and more trade is just such an easier option for both countries, that Canada will become like the 52nd state.
In reality though, Canada is more dependent on the US than the other way around, so the conquest will be (already is?) by economic means.
Another cogent article by Gail and I often find myself in agreement with her views. However, below is a request for clarification and a couple of disagreements.
Re: "1. Demand for oil, natural gas, and electricity is likely to fall over the next few years, because of increased recession and decreased credit availability."
To suggest that 'demand' and 'global demand' are synonymous is no different than assuming 'demand' and 'US demand' are so. Yet, after pondering the word-choice of the article, it seemed US-centric and puzzlingly to me because I honestly was not sure what Gail meant by 'demand.' That may be worth clarifying? In my view, 2010 will see record demand for oil on a global scale, primarily because China's demand for petrochemical products will exceed any drops in Europe and the US.
As for attempts to reduce emissions being viewed as being probably 'recessionary,' I do not think it must be so and see no reason to make this claim. Consider the vast waste of the military-industrial complex. More than 60 percent of all tax revenues now slide into that monstrously-unproductive, bloody slough. Is that necessary? Historical and bureaucratic trends appear to 'overdetermine' our future, allowing no choices, only the slothful, mechanical unwinding of an empire rotten with corruption. Is this necessary? No. In my view, the military-industrial complex *is* recessionary and destructive to the overall health of the economy. Unfortunately, powerful lobbyists--and the ever-growing, never-frustrated needs of the military--continue to warp the rails leading to our collective train's suicidal derailment while the economic sector profiting from war increases as other options are never given a chance. Is this necessary? No. These are the matters of public policy.
In a healthy democracy, we would have choices. The irony, of course, is that we do not have a healthy democracy but a sick plutocracy. On the up side, it has always been the optimist's role to suggest that ordinary people can 'wake up' and demand changes in public policy and economy. In the end, true hope comes from that simple possibility that will only arise after most of us can finally say, "We have nothing more to lose."
One possibility worth considering is that deflation may be the first stage in a larger economic process that ultimately leads to hyperinflation. The whole point of laying out 'predictions' is to examine the possibilities that lie outside of our recent past experience. Under what circumstances does deflation 'whiplash' into hyperinflation? If that shift occurs, we will all look back and struggle to understand how we were blindsided--again--by obvious, inexorable processes.
Stiv
You are right that there will be differences among countries in drops in demand. China will at some point run into difficulties, but it might be at a later date than other countries.
I think how the demand situation will play out will depend very much on how the international credit situation will play out. If there are serious disruptions (because of, for example, bankruptcies of some major countries), demand might well be lower than we now expect. If Heading Out is right in his post from a few days ago, we could see increased demand hitting limits again soon, but I still think we will likely be bouncing back down again, as credit contractions start countering higher price.
Mark Faber says we have 5-10 years until there has to be a currency reform
http://marcfaberchannel.blogspot.com/
While U.S. petroleum demand may have peaked...
And U.S. military spending may neccesarily be peaking due to budget constraints...
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/25/AR200903...
China's military industrial complex is growing exponentially. Will this be recessionary for them? I doubt they'll continue their expansion with renewables.
China can continue to grow only if there is enough trade worldwide to support that growth. Most pundits I've read cite the Asian market and China's own domestic market as supporting this growth after the US falls off as a major trade partner. Seems to me equally likely at this point that the whole world economy may fall off at some point, dragged down by US and Europe (especially UK) recessions and by global high price for energy.
Until China develops its own demand for consumer products: namely, 1.3 billion Chinese. At that point, they no longer need us.
Yes, ET, I could easily imagine that scenario--whole world economy may fall off at some point. However, as you say, many 'pundits' believe China's growth may have decoupled from the US market--perhaps less so from Europe's--only, as you say, to be dragged down, in total, by the economies of US, Europe, UK, etc. Nevertheless, it seems like the US is moving horizontally in many respects at present--oil demand, credit debacle stasis (or perhaps I've been duped by the pundits), military spending up 4% for 2010 at a brisk %534+ billion --http://homelandsecuritynewswire.com/2010-us-defense-budget-creates-winners-and-losers-- (not including sundry military expenditures, secret programs, etc.), and so on. I think we've seen the worst of the recession for the next three years. Why? Persistence of habits of ordinary people and the slowness of corporations and governments to re-prioritize--particularly the most pathological, malevolent, largest sectors of the economy.
In short, China rules. It's growing power will dwarf the US and Europe. The game has changed. The US is on the bench. China's internal market is potentially vast, precisely, as others have noted, because of their financial conservatism--the machine still runs on 'savings'--how quaint. They still have the power of domestic consumption...
The next three years belong to China. The economy moves horizontally and the price of oil goes up to $100 during 2010. Or Goldman-Sachs has gone long and I'm just a dupe to their self-fulfilling prophecy.
China's 'internal market' will still require vast amounts of resources to even bring it up to 10% of US rates of consumption. It will, to say the least, be interesting to see how the world economy reacts to the demands of China (and India).
I think China is reaching limits though--fresh water is an issue; pollution is an issue; adequate electricity is an issue. The government now talks about cutting back on debt availability--that may be what has fueled at least some of the recent expansion. From WSJ:
China to Control Credit Growth
If China's recent growth turns out to be a bubble, that could have negative consequences for the world.
Sometimes I think military programs are jobs programs. Someone here pointed out that increased military can often be financed through debt. If that is the case, a country has a convenient jobs plan for their young men (and a few women) that would otherwise not find work, that is financed by outsiders. If the military somehow manages to grab resources of other countries, I suppose the military actually would pay for itself. Otherwise, it is hard to see that it adds much benefit other than job creation.
I've never thought about it in these terms specifically but if we could mostly keep our troops home and have a more basic rather than cutting edge military, it might not actually turn out to be an economic plus, but it might not be that big a burden , either.
I have known several youngsters both male and female that left for the army as near basket cases in terms of being responsible self supporting citizens who came back home with an adult world view and useful skills of several sorts that enabled them to get jobs they had no hope of getting otherwise.
A peaceful peace time military can accomplish a lot of good things while training it's men-for instance it can clear roads after a hurricane, evacuate sick and injured people when ordinary transport is not available, etc.
OFM, I am one of those. I really doubt I could have worked my way through university had I not spent three years soldiering. Not everyone benefits from the experience but it made an adult out of me. That was back in the days of the draft. You either had a plan for you life or they would give you one.
Lucky me I was in Germany when Viet Nam became an issue.
I've often thought that the military and the space program created very high level jobs for scientists, engineers, technicians and "project staff" that might otherwise be very hard pressed to find rewarding work with such urgency, high pay and status.
The military as a 'job program'? Surely you jest? And one sick training it is!
The military has long been theorized as a way of spending money supporting military contractors, precisely without any 'productive' end.
As a college instructor, I can tell you that many vets have gone back to school to attempt to get the very training they were promised if they did useless, unproductive work for the military.
Very few come back as mechanics who did not enlist as such, etc. No, they go in as plumbers, mechanics, etc.--are you not aware of this fact? I am speaking only from my anecdotal experience of knowing many vets. Some stats on this would be interesting, but it's getting late for me to do the research.
Ghung:
That was disturbing news about China's military growth, but nothing, of course compared percentage-to-percentage to the US military spending fiasco. China will never catch up to the US military madness and do not need to. They can pull the plug on the US in non-military ways. The US cannot attack China. The US can only block China's access to raw materials (Afghanistan), but so far, that Cheneyesque plan has flopped. Meanwhile, China is probably, like the US, militarily concerned with smaller conflicts such as the off-shore oil dispute with the militarily feeble Japanese. Hence, their need to show up the Japanese and lesser rivals, not the US.
As to the US military expenditure at 'peak'--I would say, "Clearly, No." You are mistaken. The official (and narrowly defined) US military budget increased 4% for fiscal 2010. Overall, it has nearly doubled since Bush took office. Nothing else does so well here in 'the land of the slaves and home of the cowards' as the military/mercenary sector. They are a country unto themselves.
Stiv
Stiv,
Thanks for the response. My take is this:
China's efficiency in military expenditures is perhaps 3 to 1 over the U.S., maybe higher. I'm sure they get a lot more bang for their buck.
While China's aspirations seem regional, the U.S. has intrests there that require us to counter to some extent.
China will spend enough to keep us spending. They are aware that our military spending is borrowed money and see us in the same situation that we had the Soviet Union in during the '80s cold war, including our involvement in Afganistan and the ME. If their balance of trade/debt shifts away from the U.S., the game will change, and they will be ready for whatever comes next. It won't be long before we won't have the (conventional) capacity to counter any Chinese aggression towards Taiwan, S.Korea, Japan perhaps.
The Bush era of expanding military budgets, made possible by 9-11, perceived threat, fear, and faux-patriotism, is running its course. It won't be long before TPTB will loose the political will and backing to continue current levels of spending. That's when there will be a new class of unemployed Americans: Vets returning from service. While the overall impact may be minimal, the perception won't be, in an environment of too few jobs. With the inevitable increase in energy costs, things in the U.S. may look a lot like post Viet Nam 1970's, with drastic cuts in military funding and capabilities. Post-service entitlements will be huge. So you're right. The Chinese don't need to out-spend us. Slow growth will suffice.
I see a time when China, despite any "bubbles" the economists may see, will dominate much of the planet without firing a shot. Their history of empire is much longer than ours.
Hi stiv,
Good comment - and your quote above: how can this mental strangle hold be broken? What kind of events could lead to sanity?
I was drafted as a young man and really resented being grabbed off the street and pushed into the army. But, I also benefited with education and home buying benefits. I suspect that a truly universal draft (focused only on actual defense) would put a real damper on many of our military adventures.
Dave --
You're absolutely right. My Nixon-voting, Republican mother flipped on Vietnam the day we were watching on the TV and my draft lottery number came up 34.
If Congressmen, Senators, and bloviating pundits had to look their kids in the eye and send them to the 'stans, we'd suddenly find that we were a hell of a lot less interested in that part of the world. We have been breaking the backs (and hearts) (and minds) of the kids who joined to serve, or to get a job, or an education, or some security, and have been sent on 2, 3, or 4 tours into combat zones. And it's even worse that we've decided the National Guard is just another bunch of volunteer fodder for the war zone.
The draft ain't gonna happen, but it might keep us all more honest about what we get into.
Agreed--having a draft would bring the meaning of the wars home to the many voters who don't much care, as long as it is a some of "other people's kids" who are fighting the war. Most signing up are only high school grads, often with less than stellar grades.
U.S. Treasury fails to refinance ~$3 trillion in short term debt for FY 2010.
U.S. Treasury can not finance $1.5 trillion to $2 trillion in new debt for FY 2010.
Rating agencies downgrade the rating for U.S. Treasuries.
The petrodollar is abandoned.
U.S. Congress & Executive continue to bailout and stimulate everything in sight while spending without boundary hoping for an economic recovery that never arrives.
Government allows reckless financial shenanigans to continue.
The Fed continues to monetize the U.S. debt like a junkie.
World population continues increasing exponentially while critical resources deplete.
More war.
A black swan or two.
Basically keep doing what we are already doing.
Ha! Good outline Bluelight. Now if we can flush it out a bit. Oh, but the thought of it is so depressing. For me, I've been trying to understand the 'tipping point' and relating it to chaos theory. I've always expected inflation, but the credit contraction (largely) trumped all other factors. If the credit contraction reverses, never mind how, the board is flipped.
Depressing yes, then again, think of the money to be made! If there is any truth to the notion that the housing crisis was both the child and fortune the same financial institutions... then, I suppose we better count on it and get ready to reverse all assumptions about 'winners' and 'losers' in the new economy?
Excellent editorial Gail. You did touch on the EROEI issue but I'm not sure the issue is clear. Putting the blame on price of FFs is not really getting at the cause of the disease as much as just one of the symptoms. The real causal force here is that because of decreasing EROEI the net energy available to the economy has been decelerating, and most likely has peaked as much as thirty years ago. Essentially everything that we have seen in terms of shifts in global economics, and especially in the frantic attempts to make new debt look like it is contributing to GDP, is a result of diminishing work in the real economy. The prices of FFs reflect the diminishing net energy. The reliance on debt financing in the form of borrowing from the future (vs. borrowing from savings) is a last ditch effort to keep the ball rolling.
When you said:
I would have said that this stuff was built WITH cheap fossil fuels, esp. oil. Trying to build the same or even bigger stuff with scarcer energy resources is a nearly impossible task. It is only made possible in the US because of the good name of the US Treasury (and in China, as someone has pointed out, they are still operating on savings, but that won't last for long). We've had to borrow from every conceivable place and time in order to maintain the illusion of growth in a time when net energy has peaked and is starting to decline. Note that net energy appears to peak prior to the peak of gross production (e.g. peak oil as we conventionally think of it here).
I expect everything you said will come to pass. But I do think understanding the deeper cause is important. Price is a function of supply, but not of gross energy, of net energy. And if we are at peak oil now, that means we already passed peak net which is why we are seeing the financial system implode.
Question Everything
George
I think you are right that I probably should have said that our infrastructure was built with cheap energy. One of our problems now is the huge cost of maintaining what we have (with our lower net energy). This isn't being done very well, and will eventually lead to more bridges collapsing and more problems with our electrical transmission.
I agree that net energy might have been a better way to frame the issue, but it is difficult to do that in 750 words for an audience that isn't thinking in those terms. I agree with pretty much everything you say about the causal force being declining net energy, and increasing debt being a latch ditch effort to keep the ball rolling.
I didn't want to go as far as saying whether or not the whole system would come unwound in 2010. Clearly the system is unstable, and can't stick together in its current form indefinitely. It seems like some changes are likely, in the not too distant future.
A nice summary of one piece of our rubik's cube but misses the bigger picture required to properly understand and respond to our predicament. Our species is in overshoot by about 40% and the trend is in the wrong direction. Reduced consumption is a good thing as it will reduce the impending pain that will be forced on us by biophysical laws. Until we understand this bigger picture all remediation activities will be for nought.
"Our species is in overshoot by about 40%...."
40% !?
"40%?" Optimist!
This came from looking at arable land required to support one person in the absence of cheap FF inputs versus available land.
See a recent seminar titled "Population Growth and Rising Consumption: What's Sustainable?" for details.
You can get the videos here:
http://www.populationinstitute.org/external/podcasts/itunes.xml
And the accompanying presentations here:
http://populationinstitute.org/newsroom/events/view/5
Other indicators supporting overshoot include peak energy and minerals, declining fresh water and fish stocks, and rising CO2.
Another interesting way to estimate overshoot is based on Odum and Barrett's Fundamentals of Ecology. Imagine an S-shaped population growth curve similar to the growth side of the oil peak. At the top of this curve is the undulating plateau of maximum carrying capacity. However, optimal carrying capacity, or sustainable capacity, is about half that, identified at the inflection point where growth goes from convex to concave in shape.
Further, if we take the oil production (or supply or demand curve) to stand as a proxy for the human population curve, our global optimum carrying capacity is back around 1967. Population was then 3.5B, oil consumption about half what it is today. So we're over by about 90% from that metric. New Orleans, Banda Aceh, Port au Prince, Burma, Bangladesh, Taiwan, Kandahar, Chechnya, Darfur, Baghdad, etc. are perhaps practice scenarios for larger troubles ahead.
You left out a zero...
You are right, but overshoot is a hard issue to address. The Oil and Gas folks are asking about additional posts--I didn't want to start out with something too controversial. I'll have to keep it in mind.
Yeah, never mind that the ship is taking on water and is starting to list badly to one side. We probably shouldn't discuss something as controversial as the fact that we don't have enough lifeboats for everyone. Lets talk about how we'd like to rearrange the chairs on deck. After all, we wouldn't want to rock the boat now, would we?!
Even better, we can ask the band to strike up a tune and then we can all play musical chairs.
Maybe I've just been watching too much coverage of the disaster in Haiti :-(
Then again there are occasional flashes in the pan which allow me some optimism...I just read this article.
http://www.cnn.com/2010/OPINION/01/19/piccard.solar.powered.flight/index...
I'm not optimistic so much about the technological success it discusses, as I am about it showing that the thought process necessary for paradigm shift, while often times stifled, still manages to occasionally triumph over those that say it has to be this way because it always has been and they can't imagine anything different.
Living in Britain, a country that was going through its population overshoot 150 years ago, it is difficult to not be aware of the realities of 'population overshoot'. In Britain; we only went through the demographic transition to low birthrate per woman in the 20thC. The inevitable and similar global 'overshoot' that has occured alongside the increasing roll-out of the industrial project makes our Anglo/American model look completely impossible on a world scale, however one envisages any future scenarios.
Perhaps we should do the following thought experiment? :) If for the sake of argument you were to remove the existing US 300M population then you would not do not much for global population, but if the result was to release 25% of the current daily consumption of global resources and just about that same percentage daily amount of of oil/NG, then the effect could be to delay peak energy by decades and buy time for the global industrial project to remodel to something more realistic, and perhaps even sustainable.
Sure its not going to happen that way, and if it did a lot of people round the world would have to give up the idea of taking up meat-eating and personal motor transport, and foreign travel, but maybe they will be forced to give up these things anyway?
(Britain of course goes the way of the USA but from a lower level. Can the world afford us?)
Phil
If I were on the other side of the world, and looking for a country to squeeze out, the US would be the one, for just the reasons you mention. It seems like someone mentioned that before, but I had forgotten about it.
2010 could be titanic for the energy sector if a carbon tax or even cap and trade got adopted into law.
It would be clear that an unprecedented rebuild(on the scale of a wartime stimulus) of the energy sector would be required. Otherwise investors will leave their money collecting low interest or unproductively churning in the yo-yo stock market and the politicians will fret endlessly over the deficit (and creating ZERO jobs).
A carbon tax would be a disaster, since 12,000 mile supply lines are still possible and unless we tax China through tariffs, it will only serve as a subsidy for foreign imports. If we tax both through taxes and tariffs it will simply raise costs for consumers. If everything increased by a certain amount would it even reduce carbon emissions or would it only create inflation?
A carbon tax is a user's tax. Would you buy gasoline with $1 a gallon in carbon tax on it? Of course you would, but you'd also buy a more efficient car or consider a natural gas car, etc.
It is the complete oppose of inflationary because it reduces demand and puts downward pressure on oil prices.
It is true that by reducing oil prices it will allow China to buy more oil--which is bad for them.
I'm not sure if it'd actually reduce total emissions. Would it not create a manifestation of Jeavons paradox? If I drive a smaller vehicle because fuel is expensive, wouldn't the fossil fuels ultimately still be burnt some place else? Would it not just free up oil that could be burnt in emerging markets?
Most of the rest of the OECD gets large amounts of revenue (1/3rd average from vague memory) from their Value Added Tax and gasoline taxes. Both raise prices at the check-out/pump. Yet their economies function well with inflation not usually an issue.
For most people a reduction in payroll taxes and Medicare premiums would balance out their personal finances.
Yes, adjustments need to be made to tariffs (and rebate taxes on goods exported to non-carbon taxing nations) and this objection can be resolved.
And I support phased in taxes (small increases each month or quarter for a number of years#) to give people and the economy time to adjust.
Best Hopes for high Carbon and Fuel taxes,
Alan
# For example, on gasoline, no increase for 9 months, then 3 cents/gallon/month (with quarterly inflation adjustments) for 20 years.
Jeff Rubin makes a good case for just the opposite:
http://www.environmentalleader.com/2010/01/15/jeff-rubin-at-the-business...
Yep!
I think it would be good to avoid the vague notion of a 'carbon tax' and consider James Hanson's 'fee and dividend' scheme:
http://ecoworldly.com/2009/12/25/reducing-carbon-cap-and-trade-or-fee-an...
Sorry for the lazy absence of html.
Stiv
We need an import tariff to compensate for lack of pollution control in developing countries industrial plants that puts US and other developed nations at a competitive disadvantage.
I would agree. Anything that just pushes pollution offshore is not helpful.
My guess is that a carbon tax would be so low that it would have virtually no benefit, but it would still cause significant disruption. It probably would send more carbon intensive industries (refining ?) over seas.
I don't think that we have the resources now for an unprecedented rebuild. We would end up with a huge deficit. The jobs that would be gained would be more than offset by losses elsewhere. The net energy of the new sources is just too low to justify the huge investment at this time.
We do have the resources for a dramatic rebuild. It just requires diverting resources from BAU.
Give me a half dozen AIG bailouts and 15 years and I could transform the economy.
We are MASSIVE consumers. Just reduce US retail space by half (still 500% more/capita than 1950) and use that energy, labor, construction materials for something of value and a lot could be done.
Best Hopes for Seeing the Obvious,
Alan
Give me a big fat gasoline and diesel tax and I'll eliminate middle class income taxes, restructrue transportation, lower the price of oil and reduce the trade deficit.
Where can I sign up?
Gail,
Sweden has a carbon tax of 150 US$ per and the price of petrol is 7 US$ per gallon. As a result Sweden has a and a fairly healty economy and yearly CO2 release per capita of 5 ton compared to 20 ton in US. I believe slowly increasing taxes on fossile fuel in the US would lead to
- lower budget deficit
- better balance of trade
- lower income taxes
- lower oil prices on the market
- postponed peak oil
- incentive for car producers, industry and public to waste less
- bettter EROEI for ethanol production
- less dependence on OPEC countries and Russia
- improvement of the possibilities for peace
- less money to terrorism
- less global warming
It would have been a lot better if we had done these things 10 or 20 years ago. I think it is basically too late now to postpone peak oil.
While I agree it wouldn't postpone peak oil (especially if it's in the past), or stop climate change, there are a lot of other things he listed there that it probably would do. Like a better balance of trade, higher efficiancy (esp in end user useage), and my favorite, start a transition (back) to higher density cities which can be electrified over time.
You keep saying we don't have the resources to build out new infrastructure... can you expand on this? It is a sweeping statement not to have explanation. Are you assuming that we continue to spend all resources on BAU while also building out in new directions? If that is your model, it is seriously flawed.
It isn't a question of resources. It's a question of priorities, short-term profits and will. Of course, if you categorize these things as "resources", then I take back my first statement.
$1 per gallon = $100 per ton of CO2= an additional 10 cents per kwh.
A 20 mpg car running 12000 miles per year would cost
an extra $600 per year.
$1 to Gasoline about +$100 billion dollars per year.
An average residential electric bill of ~$100 per month would double. Over 130 million homes that's $150
billion dollars per year.
Over 15 years we could replace CO2 emitting coal thermal plants with CCS coal. Coal is 40% of CO2 emissions, to be reduced by 90%. We could also build a huge amount of wind for additional CO2 savings.
Transport fuel is 33% of CO2 emissions.
Convert 5 million vehicles per year to CNG/LNG over 30 years; 5 million x $20000 per vehicle = $100 billion. That would reduce transport CO2 emissions by 30%--and with natural gas of course there are no oil refineries.
Once you pass the carbon tax you pay as you go.
Will we export industries/jobs?
We don't have the manufacturing base we used to have.
We're already post-industrial.
CCS is longer than 15 years away, in my opinion. I expect It will be very expensive to implement on any scale, assuming it is perfected.
That's just groundless skepticism, Gail.
Vattenfall expects CCS will be commercial in Germany in 2010 based on their 30 MW pilot plant opened in 2008.
The gas will be piped to an old nearby natural gas field. They are designing new plants in Germany and Denmark.
http://www.vattenfall.com/en/ccs/file/2-20091214-163732.pdf
Vattenfall states that at $30 per ton of CO2 the electricity will cost 2.3 cents per kwh for commercial plants.
http://www.vattenfall.com/en/ccs/common-misunderstandings-abou.htm
Nobody wants to be forced to build CCS coal plants unless they have to.
The reason we need CCS-coal is to get the maximum reduction in CO2 emissions.
The alternative is to simply replace coal plants with CCGT. At 7000 cu ft of NG per MW, it would take 14 Tcf of natural gas. Converting from coal to natural gas CCGT would reduce CO2 emission over 60%. However, I doubt that US natural gas production can be boosted from 22 Tcf to 35 Tcf. OTOH, US coal reserves are the largest in the world.
If we run out of natural gas we can always synthesize natural gas from coal and sequester the CO2 as they have done at Dakota Gasification since 2000.
http://www.dakotagas.com/About_Us/index.html
Sorry majorian, but this is definitely not true. Even according to the source you cite Vattenfall expects that it will be commercial in *2020* - and they even call this "ambitious".
In fact many doubt that 2020 is realistic and some think that a start 2030 is more probable - much too late to reach the emission targets.
(Vattenfall's pilot plant is nothing but a tiny research project, with almost no sequestration effect. And it is heavily subsidized by public monies, e.g. from the EU.)
And the "2.3 cents per kwh" are nothing but the company's target. I doubt that it will ever be achieved. Cost estimates (which I remember from IEA, IPCC etc.) for early CCS projects are rather in the range of $150...200, which makes them far from competitive without subsidies. And even the costs of mature CCS projects are expected to double the electricity production price (according to several studies, e.g. from the German Environmental Ministry).
And in fact you are right with your CCGT idea: These studies showed that modern gas plants with combined heat and power use have about the same costs and climate effect. Furthermore we may bet that in 2020...2030 also electricity from most renewables is competitive to fossil powered plants.
So why waste money in experimenting with CCS if we won't need it?
2010 was a typo and not important.
Vattenfall does say 2020 for commercial. A 385 MW demonstration plant at Janschwalde, Germany will be ready in 2015.
Of course, Vattenfall must be lying...dreaming of endless subsidies...hallucinating.
Oh, I love folks who obviously have no technical knowledge whatsoever assfarting at will.
Thank you for your opinion.
Sorry majorian, but this is definitely not true. Even according to the source you cite the Dakota Gasification plant is uneconomic and is not sequestering carbon. The plant was built for $2.1 Billion, sold to a private enterprise for $1 and half of ongoing revenue ($19M/year average over 20 years). The plant sells half of its CO2 for increased CO2 production in the form of oil. The other half is vented.
From your quoted source:
Yet nobody has copied the 26 year old plant. Great idea, lousy delivery, try again.
Cold Camel
Cold Camel, you must be the kind of person who has caused us to be so completely unprepared for Peak Oil.
The $2.1 billion dollar Great Plains Synfuel plant, built from 1980-1984 was originally intended to produce synthetic natural gas from lignite which it does very well producing 58 bcf of synthetic gas per year(0.3% of US natural gas use).
Reagan hated the Synfuels Corporation as a symbol of government interference in private enterprise and started killing it off only a year after it started operating in 1984.
http://en.wikipedia.org/wiki/Synthetic_Liquid_Fuels_Program
In 1988, Reagan's DOE which ran Great Plains Synfuel consortium refused a request by the contractors for federal assistance on $1.5 billion dollar debt and the plant was sold to Basin Electric with the government receiving payments for the sale of natural gas which have totaled $1.1 billion dollars so far.
http://www.dakotagas.com/News_Center/News_Releases/DOE_receives_$57_million_payme.html
Reagan's free market ideology just killed off most government energy programs before they could actually do anything with the exception of Great Plains Gasification.
As to the fact that 50% of the CO2 is not sequestered, that only shows that it is not currently economical to capture and sequester CO2, which is why we need as carbon tax. The technology however is completely proven.
Bottom line--if you want to capture and sequester CO2 you're going to have to pay for it.
A 1 GW coal fired power plant will require the continuous geo-sequestration of 150 kb/d of liquid CO2. Do some simple math and you quickly realize how gigantic that job is. And that at a time when the oil industry is struggling to fight decline in existing oil fields. Many environmental issues are unsolved. Imagine they want to inject CO2 in your backyard. If CO2 escapes it is heavier than air and accumulates in valleys. Concentrations >5% cause health problems and 8% loss of consciousness.
http://en.wikipedia.org/wiki/Carbon_dioxide
People will resist it just like nuclear power.
A 1 GW coal plant would produce 24000 tons of CO2 per day. The Dakota gasification pipeline sends 8000 tons of CO2 per day some 205 miles to the Weyburn oilfield thru a 12" pipeline. So you might have a 24" pipe instead.
There are many CO2 pipelines in the US now used in EOR.
Weyburn has been judged at very low risk of leakage by experts.
Ordinary LWRs are safe, though they produce a lot of waste. Breeders are inherently unsafe.
The question with nuclear power is how much uranium can be supplied long term. The US has very little uranium deposits but lots of coal.
If everyone wants to use uranium, the world will run out very fast.
Nuclear reactors produce plutonium and plutonium goes into bombs which people are justifiably afraid of.
Fear of leaking CO2 pipeline is less rational than fear of leaking natural gas pipelines which do blow up.
Well, Americans really seem to be experts in wasting energy.
My household does not even consume 80 kWh of electricity per month and we could very easily afford a monthly electric bill of $200 if we had to.
Someone has to invent cheap rent and cheap health care. Now this would give us all a break. Who cares about price of electricity that is just wasted in households who refuse to use efficient appliances, efficient light bulbs, connectors strips etc.?
Not even one single AIG bailout.
I don't think that we have the resources now for an unprecedented rebuild.
Gail, it is NOT unprecedented. Several precedents exist for the USA.
In just twenty years we trashed virtually EVERY prime commercial property# and many well built, well located neighborhoods##
# called "downtowns"
## called "inner cities"
Years roughly 1950 to 1970.
In just twenty years we built subways in all of our major cities and streetcars in 500 cities, towns and villages PLUS extensive interurban systems in quite a few states.
Years 1897 to 1916 (when we had 3% to 4% of todays GDP and 1/3rd the population.
If we could do it in 1897, there is no logic in your claim that we do not have the resources today to do it.
Best Hopes for History,
Alan
And at the same time that we built the amazing electric street railway system we had the highest economic growth rate in our history.
We have somehow forgotten this entire transportation infrastructure. There were only a few books ever written about it and hardly any of the infrasturcture scholars mention it. The old photos are truly fascinating.
Electric street railways still have enemies like The Cato Institute who publish anti-mass transportation literature.
"The Electric Interurban Railways in America" by Hilton and Due is a great read about the intercity systems, that went beyond the street railways. They were busy inventing the technology as they went along, from things as basic as trying to figure out whether to use AC or DC.
The financing scams were amazing. Sell interurban stock. Hire a construction company owned by the interurban owners. Pay yourself to build the road. Go bankrupt, wipe out the stockholders. Reorganize, sell stock to another bunch of optimists, and pay yourself to run the road.
A couple of things did them in. First, in many cases they paralleled the local steam railroads and skimmed the local passenger traffic. This, unfortunately, turned out to be the least profitable railroad service and they were happy to lose it. Second, of course, was Henry Ford, followed by the Good Roads movement, which got the Model Ts out of the mud at taxpayer's expense, but gave no subsidies to rails. Third, of course, was the Depression, which cut traffic and bankrupted the ones that were left.
Sorry to ramble. Despite all this, I'm a big interurban fan and wish they were back so I could take a nap on the way to work instead of cursing at traffic jams.
Alan --
Thanks for your perspective. You keep bringing us back to what we CAN do instead of what we can't.
Best Hopes for Re-discovering Political Will.
-- waterplanner
What we do lack is the imagination of how to do things differently. That plus the ever present drumbeat of "we can't do things any other way because this is how we've always done it" Frustrating to say the least.
Gail, you are right, and (possibly) wrong here:
"My guess is that a carbon tax would be so low that it would have virtually no benefit, but it would still cause significant disruption. It probably would send more carbon intensive industries (refining ?) over seas."
In British Columbia we have a small carbon tax, which had to be so low as to not cause "pain at the pumps " (i.e. cause an election loss) and it achieves nothing.
In my opinion, the only way a carbon tax will be successful is if it is:
1. high enough to cause "pain at the pumps", which to me is at least $5/gal. It needs to be high enough that you go out of your way to avoid paying it, rather than just resigning yourself to paying it. I have no problem with paying each an every person an equivalent rebate/dividend, as long as the price is high you will still to reduce usage. Problem is, it is politically unacceptable here (but not in Europe)
2 Applied equally to all imported goods, and credited on exported goods. This is the basis of Jeff Rubin's argument, that it would then rescue local manufacturing, which I rather agree with. When the high carbon tax costs negate cheap labour, you might as well make it locally.
I think all the (debt funded) resources that had been put into speculative homebuilding for the last decade could have made a big dent in the need for had been used for intelligent transit, rail electrification, etc.. Problem is that these projects are (mostly) government led, and the governments have wanted to avoid megaprojects.
Good article in few words.
It strikes me that this linkage between oil prices and the health of the economy has been a bit overblown, particularly when it's been used to make the assertion that high oil prices were responsible for the recent economic mess in the US. Yes, I'm sure it was a contributing factor, but I think hardly the limiting one, as all sorts of other bad stuff was going on at the time, not the least of which was the collapse of the housing bubble and the general debt meltdown.
To view this on an admittedly simplistic micro scale, let us take a typical American household, that has two cars, a big one and a small one, that collectively get 20 mpg and are driven a total of 20,000 miles per year. As such, this household consumes a nice round 1,000 gallons per year. If the price of gasoline rises from $2.50 to $4.00/gal, the increased cost to our model household is $1,500 per year. Not exactly chump change, but not something that would put them in the poorhouse, either. This cost increase can easily be compensated for merely by eliminating $30 per week of unnecessary spending, such as cutting back on restaurants, movies, CDs, and general fluff. And I think that's what a lot of people have done (including me).
Putting aside the question of balance of payments for the moment, I'm not sure how this really harms the general economy to the extent portrayed, for what we have here is $1,500 extra going to the energy sector and $1,500 less going to the restaurant/entertainment sector and certain other sectors.
Where the real hurting comes in is that if the US is currently importing roughly 60% (?) of its oil, then a not-insignificant fraction of that extra $1,500 is leaving the US. Then of course we have the effect of higher oil prices on transportation costs and the cost of petrochemicals and plastics. How these factors works into the overall state of the economy I am hardly knowledgeable to say, but they do have a way of getting absorbed if the price increase is not too abrupt.
If one wants to talk about major stresses that distort the economy, how about US military/war spending that is pushing close to one trillion dollars per year (i.e., a 2010 defence budget of over $700 billion plus various yet-to-be-requested 'supplementals' to the tune of several hundred billion to keep the military adventures in Iraq and Afghanistan going). As with most of federal spending these days, this nearly one trillion dollars has largely been put on the tab. So, I find it more than a bit disingenuous to claim that we can not afford investment in alternatives at a modest level that is totally dwarfed by current military/war spending.
It really gets down to priorities. And sadly, these don't seem to have changed much at all.
I think the name of Kunstler's blog is a pretty apt description of what you could call the US at present.
Case in point, the absolutely dysfunctional political process...
http://www.colbertnation.com/the-colbert-report-videos/261995/january-18...
"It strikes me that this linkage between oil prices and the health of the economy has been a bit overblown..."
Let's do a little math. My community has 200,000 people, figure 50,000 families.
50,000 x $120 = $6,000,000 dollars lost to the community per month. Of that, given a 5% sales tax, there's $300,000 monthly loss in direct sales tax revenues.
Next, assume the $6,000,000 breaks down: 50% for COG and 50% for wages... you have, at $10/hr, 300,000 hours of lost labor per month. Ramify with lost health benefits and voila... that $30/week/household starts to look like a significant issue.
Gail is correct in believing economists do not model the energy issue well. Energy costs do not relate to substitution theory. These energy costs become capital losses.
Good point, and I would also add that just looking at lost purchasing power is far too narrow a view. People took out risky "subprime" loans on the promise that before they got in trouble with interest rate resets and/or balloon payments they could sell or refinance into a rising market.
Furthermore, the gigantic pyramid of so-called "financial instruments" that was leveraged from that housing debt was also utterly and completely dependent on demand for housing, and by extension house prices, continuing to rise.
Not unlike a ponzi scheme it is absolutely essential for new growth to enable people to either roll over debt or make good on past promises to pay. When the music stops and debts are instead defaulted the confidence of investors is destroyed and the whole thing collapses.
True, the housing market was already starting to turn down in 2007, but it was most likely $4 per gallon gas that killed demand for houses, especially in the far flung "exurbs" where much of the recent building frenzy took place. Subprime borrowers, who were now unable to sell or refinance and with budgets already strained by high energy prices, were forced to default and the rest, as they say, is history.
Cheers,
Jerry
But has it occurred to you that all of these other "bad stuff"s might have been the result of a constricting (net) energy supply? All of the exotic financial instruments that have been increasingly floated for the last several decades, the housing bubble itself, everything that has been essentially inflationary in the money supply has been a futile attempt to gloss over the fact that we are doing less real work. Some of it was shipped overseas to take advantage of cheap foreign labor, in some instances substituting for energy inputs, but most directly displacing energy-expensive American lifestyle requirements - through the wage differentials.
In the end it comes back to energy and its diminishing flows into the global economy. All of the financial illusions of wealth that were created came about as an attempt to compensate for the fact that the real economy had stopped growing many years ago. Coupled with the fact that we in the OECD, or at least in the Western Hemisphere, have been wasting considerable energy on evermore extravagant houses and cars, toys and diversions (discretionary presumably), financed with debt in the form of borrowing from the future (I will be making more money in the years ahead so I can afford to go out on a limb now!) we created an environment in which it just took a small nudge to explode the whole financial illusion of wealth. This has much further to go to play out, as Gail suggests.
What your cursory analysis fails to take into account is the real costs that accrue to all of the items you mentioned as discretionary but more importantly to all the items such as food, clothing and shelter that are not particularly discretionary. Everything will end up costing more, eventually, because of increased energy costs, in turn caused by diminished energy availability. Also, your analysis implies that households can compensate by cutting back as if this were likely a short-term requirement. But if this so-called recession never really ends, and in fact gets worse, there will be additional rounds of cutting spending starting to eat into less discretionary items. And when that happens, demand will start to diminish. That will likely be followed by suppliers squeezing costs to reduce prices while maintaining some margin for profit. That will lead to another round of slightly increasing demand and so on - a bumpy ride down.
Finally, don't forget that in a so-called service economy, the pull back of spending on restaurants etc. means more employees being laid off, more unemployment, meaning they will stop spending. It is a vicious cycle we are in.
I agree with your assessment of getting priorities right. The military bill is totally out of line with respect to absorbing resources in order to achieve an unachievable end, namely the protection of US interests in oil in the middle east. My thoughts on that are that Obama and all other politicians from both sides of the aisle are stuck in 20th century thinking about the future. They think that the Carter Doctrine still applies and are doing what they think is in the best interest of the US vis-a-vis oil supplies. They are, of course, wrong. Much of the money (and the energy it represents) being spent on military efforts should go to new energy infrastructure. This is also true of any additional jobs creation spending from a new (inevitable unless the republicans can stop it) stimulus package. More likely the latter will go to road repairs or even building new roads. Our leaders do not think systemically.
Question Everything
George
George.Mobus -
But the problem isn't limited to gasoline. The price of gasoline tends to follow the trend in oil prices. So to the price of other refined fuels. The differences between diesel and gas price rises and falls is a short-term difference in demand and profit margins. Over an extended time all distillation products will be affected by the price of oil. Chemical feedstock prices will affect many other products that go into consumer products and services.
In your further example, take into account that WalMart also has to pay transportation costs for what it does sell. So eventually the consumer gets hit twice by paying higher prices for necessaries. If Exxon makes more as a result, is this really a zero-sum game for energy? In fact the demand will go down and even Exxon is going to sell less. No, as energy depletes everyone suffers.
I didn't say the housing bubble was driven by gasoline! The housing bubble was fueled by a willingness to loan and to borrow on the theory that everyone would have a job tomorrow and the day after and they would be able to service their debt from their future income. You are right about it being an almost religious belief. Now here is the psychology of it. We got into the habit of thinking we could build bigger houses because we always had done so in the recent past while the growing abundance of energy kept overall energy prices down. There was plenty of excess emergy to go around. So we thought that would go on forever. And we thought that because we would be able to service those bigger loans we could all have bigger houses. We were also willing to pay more for the houses on the theory that the house itself would be worth more in the future. The point is that the monetary measure of house values came to have no relation to the amount of work either the buyer or the home builders could do with the amount of energy available. That is the bubble. The cheapness of the money was completely artificial (thanks to the Fed and Alan Greenspan). Lowering and keeping low the interest rates encouraged people to take out larger loans than they could afford in some cases (sub-primes), though this was by no means the majority of mortgages that are now under water, but what really busted the bubble was that too many mortgagees started losing their jobs leading to a default crises. This is the 'toxic assets' problem. Fuel prices might have contributed in cases where people were still working but had no margin of error (or discretionary income) but I suspect this wasn't the real needle that pricked the balloon. It was the overall decline in real work (and stock brokering isn't real work) and the production of real assets that broke the camel's back.
In any case, my point is that cheap energy led us down a primrose path that couldn't be sustained once the net energy flow started to decelerate. It had made it feasible to get into the habit of borrowing from the future because as long as energy flow was growing, so too was the economy as a whole. Once it stopped growing so too did the real economy. And then all that paper wealth was left without a visible means of support.
You took my comment too narrowly. I didn't attribute the problems to the price of gasoline but to energy in general. And a good surrogate for that is the price of oil. It took a huge spike and gasoline did go to $4.00+ a gallon. Diesel went up too. Oil then came down quickly to $30+ a barrel and gasoline followed. But oil's price has trended upward after that and is today above the point where it cannot but help putting a significant drag on the real economy. I suspect, as do many others that the long run trend is upward still more. The long-run, in this case, is a few years, not decades.
BTW: The price of gasoline and diesel are more representative of net energy availability while oil is representative of gross energy before processing. Since it takes a considerable amount of diesel fuel to extract coal, I expect the pressure will translate into more expensive coal and electricity as well. The EROEI on oil has been declining rapidly with every new non-conventional well (e.g. deep water). At some point the net energy available to the economy will become so constricted that we will have to, perforce, resort to real-time solar inputs to do any kind of work at all. Imagine building nuclear reactors and refining nuclear fuels using solar-produced electricity!
I agree that the increased fuel costs wouldn't break most families, but it might break some small businesses which operate on very tight margins, and when the businesses fold, that affects the families directly. The increased fuel costs don't have to directly impact the business either, it could come farther up the supply chain as the fuel costs are passed along in higher prices. Of course, being over-extended in your mortgage makes things even worse when you get laid off.
Yes, everyone has their tipping point, and the sum of US trends has been toward those tipping points for many years. Manufacturing down, inflation up, real wages down, debt up, etc...
In my own household we were already down to the bone as far as balancing things, then in 2008 my wife's business took a dive and we lost that small income stream. Away goes the second car, the cell phones, the kid's sports, and generally all discretionary spending. Still having the house, the non-producing business, and a reasonable public facade, I'd just say that at least our ladders down have a lot of rungs.
Gail,
In Jeff Rubin's speech at "The business of Climate Change", he talked about the US economy growing as oil prices go up (ie, industries bringing back home manufacturing jobs). How does this fold into your thoughts of 2010 and beyond?
I think the big issue will be finding enough capital. I don't expect debt availability to grow (except for perhaps temporarily) before additional problems, for example with commercial real estate, become apparent. So I think it will be difficult to rebuild.
I also think there is a real possibility of international trade being damaged by credit problems. A lot of things we make now will not be possible without pretty much our current level of international trade--computers, televisions, hybrid cars, cell phones. I think we will see a reduction in our standard of living as those things become more rare, rather then get made locally. We will still be able to make shovels and wheelbarrows locally, though.
I think we will see a reduction in our standard of living as those things become more rare..
"Standard of living" is one of the things that is easy to redefine. If we measure our standard of living by our level of consumption/waste, then I agree. As long as we equate things we want with things we need, we'll have big problems adjusting.
One of the tragedies (and there are many) is that we didn't take steps to prepare for Peak Oil when oil was still relatively cheap (less than $50/bbl). Now we are in a situation where we have to pay for expensive oil to prepare for a post-peak world. Not very bright. But you know the Republican line, the market always knows best [sarcasm].
There is no shortage of capital in the US. There is a lack of investment opportunity, just like in the 1930's. The prominent economist Seymour E. Harris wrote about this at the time.
It was lack of investment opportunity that fueled the bubbles.
Evidence of lack of investment opportunity is everywhere, from the 1970's-80's steel industry closures to today's Ford, GM and Chrysler. Autos are saturated. There is more than one car for every licensed driver in the USA. There are roads to everywhere. There is excess housing, retail, etc. Everyone has multiple televisions, cell phones, and computers. Any of these items can be produced more cheaply overseas.
The best evidence of lack of investment opportunity is over valuation of the stock market, especially of tech stocks, which are the main group of companies expected to have real growth.
Alternate energy is one of the few sensible investment opportunities, but we still need to bring down capital cost.
We could also use better housing, not the cheap wooden houses built in the USA that cost too much to maintain, heat and cool. Here on the Gulf Coast we are starting to build houses out of reinforced concrete. They are energy efficient, low maintenance and inexpensive to insure, which can be extremely costly in hurricane areas.
We have the capital and as I said elsewhere, we have the labor. But we will probably end up with social and economic chaos before we get on to building the next economy.
Indeed, any paradigm shift in living standards is sure to manifest itself in "extremist" politics and social unrest. Maybe for a post peak world we should look into becoming law enforcement officers or private military contractors rather than carpenters?
I'm betting the only way that is going to happen is if American workers take significantly less in wages. The energy costs of heavy industry (like steel, etc.) will be much greater as a proportion of manufacturing costs. Something has to give.
Question Everything
George
I might be wrong but I think most of our really heavy industry such as steel making is already very highly automated and utilizes relatively little labor.
it seems to me that the first and only soluton tht comes to most p[eople's minds who are trained in conventional economics is that the solution to every cost problem is lower wages and fewer workers.
This solution works beautifully ,except for the workers involved of course, one industry at a time.
But every time it is implemented , all industry of all types suffers a little bit of market erosion as thier customers in toto necessarily purchase less and less.
Class, can we all say in unison "race to the bottom"?
Of course the msm never understands this because the people in the msm are mostly employed in areas where thier jobs are protected from any direct competition.
And this is the reversal of the process that Henry Ford discovered when he realized that increasing his workers' wages caused the wealth to spread out and increase purchasing power for Model T's, thereby leading to increased production of Model T's and so on. That was easier to do then, as energy was becoming cheaper and more plentiful year after year.
Good point!
Not only was energy becomming cheaper it was also being used more efficiently, with the efficiency of energy to work such as electrical generation powering electric motors, increasing ten fold in the last century. Thermodynamics says that it will be impossible to increase efficiency much in the future.
Materials science can improve "economic work".
Small fantasy of mine. Titanium, aluminum-lithium alloy and carbon fiber rail cars, particularly for passengers. Carry 2 or 3 kg of structure for every kg of meat & luggage.
Alan
Alan,
You are bang on about material improving "economic work", modern aircraft (747, A380) are a perfect example, they couldn't be invented until the titanium alloys came along. Same goes for the gas turbine engines they use.
Check out this link on transport efficiency for some interesting graphs comparing modes;
http://knol.google.com/k/speed-costs-power#
A quote from in there
"This analysis shows that light personal vehicles perform far better than heavy ones. For all payload weight classes, the payload to vehicle mass ratio of the best performers is between three and four."
Think of a 70kg person on 20kg bike, or 60 tons of cargo on a 15 ton B-train.
So you want 1 kg train per 3kg passenger!
Unfortunately, with trains, designers love to make them heavy. If the passenger trains are running on the same rails as freight trains, the collision strength requirements are such that they have to be very heavy. Most urban "light rail" systems are close half a ton per passenger! This excessive weight also means that the rails, bridges, etc all have to be equally strong.
I would love to see future trains built more like roller coasters - they are light, fast, safe, etc Just take out the curves/dips/loops and enclose the cars, and you have an "ultra light rail", and probably much cheaper to build. And we haven't even gone to carbon fibre etc, and probably don't need to.
It can be done, but not in conjunction with existing rail infrastructure. I think we will see some of these alternatives proposed, as conventional "light rail", now pushing $150m/mile, is just too expensive to build in all but the highest density situations.
One of the lessons I learned in engineering is that it is usually chaeper to build a greenfield facility than to modify an existing one. Also, the economic life of a new facility was always longer than a rebuilt one. I believe this principle applies to street railways. Places like Detroit, for example, would not be a wise investment for a new railway project. The right place would be in advance of growth of an entirely new city, like most of Atlanta in the middle of the last century, although Atlanta missed the opportunity and had to use old railway right of ways for heavy rail.
Cities were never planned the way I designed industrial plants. We based everything on ease of material handling access for maintenance. That included railways and roads for receiving bulk materials and shiping products, various cranes, conveyors and mobile equipment for unloading and moving materials onsite.
Also, the economic life of a new facility was always longer than a rebuilt one
I live 3 blocks from a street railway that opened in 1834. When I attended ASPO-Boston, I took a combination street railway-subway that opened in 1898.
I am not sure that I buy your argument.
Cities were never planned the way I designed industrial plants.
Some historic examples exist, but not many in last 80 years.
However, Urban Rail does create it's own development. Transit Orientated Development.
Best Hopes for TOD,
Alan
Alan,
I bet all of those mansions along St. Charles Ave. were built after the railway. Otherwise there would have been no room. How many streetcar lines would have been on Canal Street if there hadn't been room left to install a canal?
The old New Orleans system, of which there are only remnants, was a grid of electric street railways within easy walking distance of the homes in those suburbs. Did those rail lines get built before of after the housing? When they were built there were few if any paved streets, no telephone, electrical lines, or similar obstructions (sewers?, water lines?) to be relocated.
The only modern TOD I am familiar with is Perimeter Center and a few others along the MARTA lines in Atlanta. This is TOD as a retrofit and it is a traffic nightmare with high living and business density. You can take a train to Perimeter Center, but you need a car when you get there. And it is not pedestrian friendly. You can’t easily fix this mess because of the number of expensive modern buildings, I-285, GA400 and the extremely high cost of land.
Part of the problem with the Preimeter is that so many people commute into the area in their cars. There are no rail lines from the suburbs where they live; however, some are planned.
Note: Perimeter Center was built in the 1970's and MARTA rail reached the area in 1996.
http://en.wikipedia.org/wiki/Perimeter_Center
The old New Orleans system was in many ways superior to what we have today. It provided people with an economical means of transportation (and got rid of the horse and carriage traffic jams). But it will be difficult to have a similar system without building the town around it.
Paul --
The best TOD I've seen near me is Arlington County, Virginia, the corner of DC cut off and ceded to VA. Before Metro was built in the 70s and 80s, it was a standard inner suburb, developed mostly in the 40s and 50s, with residential areas and aging shopping districts superseded by malls in the outer suburbs.
The County reduced parking requirements near the 5 Metro stations, gave incentives for density, and now there are pockets of activity and night life in Rosslyn, Courthouse, Clarendon, and Ballston, that grew up with the Metro. Walkable jobs, houses, apartments, and stores.
It *can* be done. It may take a couple of decades.
-- waterplanner, former transitplanner
Safety, economy of operation (i.e. durability) work against enclosed roller coasters or ultra-light rail.
San Fransisco's BART designed with "fresh eyes". They went with light weight vehicles and this resulted in an increase in gauge to 5' to deal with cross winds. 1000 V DC instead of standard 750 V DC (thus specialty electronics but smaller conductors).
There is some debate, but most feel that BART would have been better served without "redesigning the wheel".
France plans to build 1,500 km of tram lines (to a very high aesthetic standard) for just 100 billion euros. US costs are driven by our system of rationing by queue. Little concern for reduced costs, the system is designed to drive costs up.
In general, USA construction costs should be lower than French costs.
Best Hopes for MUCH more Urban Rail,
Alan
OFM --
That's an interesting thing to write on a blog in a medium that is outcompeting newspapers and driving them out of business! And as far as TV, I reckon you can talk to Conan O'Brien about being protected from any direct competition.
Notwithstanding what I just wrote, I agree with you that the upper crust in this society is a heck of a lot more protected than most, TV talking heads and talk radio hosts among them. Used to be that journalists were working stiffs. Doesn't seem that way any more, which gets to the point of your comments. People on the top don't have to worry about the race to the bottom.
You got me on the chin there , Waterplanner.
I should have been a little more specific and pointed out that the characters I referred to are in the higher ranks , and that what they say reflects what thier owners and advertisers WANT said rather cloesly most of the time.
Gail, you assume a BAU economy (and in 750 words I would to).
But the focus of the US economy (more so than any other OECD nation I know of) is on consumption. You fear the reduction of consumption because that is the essence of the US economy. Such consumption driven economies will eventually exhaust their capital and fail in any case.
A different path is to keep US consumption at recessionary levels (or even lower) and shift any growth of the economy into long lived infrastructure that either produces energy or uses it more efficiently.
A family can go on vacation, or buy new low-E windows for their home. Both add to GDP (and Nate can talk about the physic benefits of vacation), but the windows will still be there a generation later.
Or the family can save their $ and invest it in a railroad that announced that it was going to electrify. Again, GDP $ and an asset that will be there 50 years later (approximate renewal cycle). Alternatively, they could invest in a wind farm developer.
Keep the vast majority of consumption at current levels, and hopefully even lower. Let the areas of the economy that depend on such consumption shrink (say reduce US retail space by half) and grow a new economy, more sustainable econopmy in it's place. Bankruptcy's, abandoned subdivisions of McMansions and malls torn down will be part of the transition. It is more fun to play than to work, but the emphasis needs to be placed on working and investing.
A booming "investing" economy will not be nearly as much fun as our recent booming consumption economy, but it will work.
New taxes should be part of the reduction in consumption.
Alan
BTW: Home heating is NOT a fixed cost. One high bill and indoor sweaters come out. And plans for more weatherstripping, insulation, etc. Home heating can easily be done for half the energy we use today.
It just depends on how you define fun.
Much less than half, Alan. And it is neither hard nor expensive.
Fun is walking down the street and enjoying the experience :-)
Other than some work for my cobbler, nothing added to GDP.
I said "easily half" as an understatement. I am aiming for between -80% to -85% in my house with -90% for "heroic" measures later.
Just like reducing US retail space by half (I would like a tax on parking spaces) is an understatement. We could, instead of reducing retail space by half, go back to 1950 levels and reduce space by -90% (shock ! horror ! How did our parents survive !)
Alan
We could convert the mega-malls into efficient living spaces and the parking lots into community gardens. Mine the suburbs for the materials needed and grow things there as well. Use the millions of square feet of roof space for PV. These huge complexes already have sizable connections to the grid, and usually to mass transit as well.
Nate can address both the "physic"al and the psychical benefits of either option, I bet! ;^)
How will the U.S. have any economy if it's too expensive to move around with the present layout of businesses? What happens when all the service sector, discretionary spending shops go out of business? How will the U.S. raise funds to build new infrastructure after the "service" economy is no more? What do we do with our fractional reserve based banking system that relies on growth? Is everyone going to happily, slowly transition to a way of life uses much less energy or will the whole system implode violently like Kunstler suggests? I'm not attempting to be a BAU proponent or cornucopian, but any sort of paradigm shift in living standards tends to have what you'd consider "extremist" results. There will be changes, it is not possible to run what we do today on wind energy and solar, we'll burn coal but liquid fuels will be a serious issue.
The USA can have an economy based upon investment in infrastructure. Destroy much of our existing economy bit by bit and substitute construction of viable infrastructure.
An incomplete list:
Reduce
- tanning salons & nail salons
- fast drive thru food
- Consumer electronics
- Leisure Travel
- Short life expectancy furniture
- Vehicles Mile Traveled in cars & SUVs
- Cars and SUVs
- Clothing bought for fashion (vs. function)
- New McMansions and New Suburbs
Increase
- Wind Turbines
- Solar PV
- Solar Hot water
- HV DC lines
- Pumped Storage
- Electrify Railroads
- Double Track Railroads
- Grade Separate Railroads
- Rail over Rail Bridges
- Urban Rail of all types
- TOD construction of new homes & businesses (smaller ft2, more energy efficient)
- Insulation
- Energy Star appliances
- Better windows & doors in housing not being abandoned
- Gardening
- Repair shops
- Bicycles
- Live Music
- Home "Hobby" Arts & Crafts (some commercial, like retired people I know that make several pieces of furniture/year)
- Replace old water and sewer systems
- "Smart Grid"
- New manufacturing plants
A different economy, yes. But comparable GDP is entirely possible and the "Balance Sheet" will grow instead of shrinking as it has for the last decade.
Think one piece of fine all wood furniture vs five pieces of plastic veneer coated sawdust furniture. Same GDP, but the all wood furniture will last MUCH longer.
Apply that on a larger scale throughout the economy.
Best Hopes,
Alan
There's another set of suggestions that would be pretty straightforward to accomplish in a socialist or communist dictatorship, but more or less impossible in our current political situation.
Not to give you a hard time for good ideas, but it just recalls a conversation I was listening to the other day about how China, by kicking our butts in the global marketplace for so many years now, basically demonstrates that their political model is more effective than ours. They've got a booming economy, massive R & D, and a huge manufacturing sector tooling up for renewable energy.
The problem is political will. With political will, the USA can surpass the Chinese in those areas. We have done it before, we can do it again.
Alan
We could, but I don't see any signs of it. If anything, government seems to get more and more dysfunctional.
Lets hope soon there will be no one to even answer the phone.
Hi daxr,
I don't either - IMHO, the problem is that very, very few people understand the problem. My experience (previous developer of large scale computer software systems) is that the successful implementation of new ways of doing things is directly related to the degree in which the stakeholders really understand the original problem.
TOD comments are often graced with many great solutions - unfortunately, these solutions are of little value if the players involved don't understand the need nor can agree on goals.
Besides lack of ploitical will we have become lazy. The average work week is 33 hours. In 1900 it was 60 hours, falling dramatically during the 1930's depression. But how many of us use those extra hours to do something productive?
The resources for building the next economy exist. We just need to use them.
I think the real issue is that a lot of people can only find part time work. Besides that, salaried workers are often required to work 60 hours a week, but that is not factored into the calculation, I don't think. Without enough energy to keep our current system going, workers are being forced to do more work for less $, whether or not it really shows up in the accounting (or the work is going overseas, or the job is eliminated all together).
Real incomes rose at a steadily pace along with constant productivity gains up until the mid 1960's. There was a stagnation in the 1970's until the PC and fiber optic economy and the internet economies picked up growth slightly, however, real wages started falling. All indications are that we are in secular economic decline, with declining real wages, due mainly to loss of manufacturing jobs (cut in half since 1970), declining domestic oil production and increasing energy costs. (Interestingly, the stagnation coincides with the plateauing of electrical generation efficiency.)
The downward spiral will be difficult to escape. To bring back manufacturing we would have to devalue the dollar 80%. That would put oil at $400/bbl, destroying the automobile industry.
Would using protective tariffs bring back local manufacturing without causing too much price inflation? I can't imagine it'd be too expensive to produce electronics in the U.S. If we wished to export the goods, then we'd have some problems. But if the goods are unique, then they'd have to buy them from here or not at all.
Tariffs end up causing trade wars, which can lead to real wars. Tarfifs are a distortion of reality, covering up a hopelessly uncompetitive situation. The real solution is to make something (or provice services)in exchange for what we are importing. The safest goods and services to provide are those that increase productivity, such as engineering and technology. To be competitive with this we have to be on the cutting edge.
Today's tariffs are in disguise: China has an undervalued currency and the US prints dollars.
Well, first, it would cause price inflation, and second, it wouldn't bring back local manufacturing because the economics are too negative for that to happen. Tariffs reduce the overall efficiency of an economy.
The worst thing, though, is that trading partners would retaliate against it with tariffs of their own, and the final result would be higher prices and lower manufacturing everywhere. This is a variation of a problem in gaming theory called "the prisoner's dilemma."
The negative aspects of tariffs have been found to be such that it is worthwhile for countries to impose unilateral free trade on themselves. A number of countries have done this with positive results, and even China has very low tariff barriers. Multinational free trade is more equitable, though.
And they've done pretty well keeping over a billion people fed, according to some sources:
http://english.sina.com/china/2009/0528/244529.html
But this success is subjective, most Americans would argue.
Apples delivered in the wooden boxes we make right on the farm to local grocery stores and the empties returned.
We have a lot of boxes that my grand parents made in the fifties and we still use them on the farm and for a few deliveries.My guess is that some of these boxes have been used over three hundred times.Each one requires about twelve pounds of rough sawn poplar and a fistful of small nails.
Of course nowadays we have to buy new single use cardboard boxes to ship , each one wieghs about three pounds-but that is highly processed paper and only a few of these paper boxes will be used a second time.I will point out however that if handled gently and kept dry they CAN be used half a dozen times.
I have , er used to have , he died recently, an inlaw who made very nice craft furniture with only a few simple power tools exclusively from local wood.So far as anyone knows , not a single piece of his work has ever been discarded due to failure or loss of appearance.
You could buy a nice china hutch from him for less than you could buy a really pretty one from a mid level to upscale furniture store.The mass produced hutch if used rather than just looked at after fifty years is getting shabby and might bring fifty or a hundred bucks at an estate sale.
One of Uncle Marvin's hutches such as the one in our farm house kitchen is still good as new after fifty years and will barring a fire still be in use another century or to at least.Actually being made out of nice thick red and white oak it might last a thousand years if kept dry.
My Daddy paid Uncle Marvin about two weeks wages for it.
Only a few pieces of his work have ever been sold as they tend to be passed down.Only local people with very little money bought his work originally and he never made more than a piece or two a month,basically working for wages plus materials.
I'm fairly sure that if we put our hutch in an antique shop it would bring well into four figures as a collectible.Of course we would have to spend most of the money to replace it with something mass produced that will be worthless in ANOTHER fifty years.
I myself being a rolling stone and a welder with fabricating skills built wood burning stoves during the early eighties oil crunch-probably somewhere between two and three hundred of them , all by my lonesome.
When a customer asked about the gaurantee I told them as long as you keep it out of the rain its gauranteed.
How long?
As long as you can find me.
(I haven't had to repair one yet.All the money that went into mass produced stoves being shipped, advertised,and retailed went into extra thick steel for my hand mades..)
Floridian--
I agree with you, regarding the questions you ask--these are issues.
I expect too, that we would put a lot of the new infrastructure in the wrong places. We would add solar panels to homes and businesses that end up being abandoned--where there is too little water, or where businesses are no longer need, so there is no employment. If we try to define our map for where we are headed too closely based on where we are now, I expect that we will decide it is not really what we want, even before we finish building half of it.
Solar panels would be the first thing salvaged from Phoenix and Las Vegas.
They may be "out of service" for some months before being remounted somewhere else, but they would not be wasted.
Alan
We would add solar panels to homes and businesses that end up being abandoned
Newer PV-systems come with theft protection such that PV-owners don't need to buy shotguns:
http://www.nytimes.com/2008/09/24/technology/24solar.html?_r=1
http://www.eponline.com/Articles/2009/10/29/Companies-Join-Forces-to-Fig...
If thiefs can manage to steal PV-modules silently at night. A PV-module owner should be able to do the same at day time without having to worry about waking anybody up.
How we look at our well being as a nation is not reflected well in GDP. GDP counts economic bads as well as goods as equal with regards to how well we are doing as a nation.
Big natural disasters like hurricanes, tornadoes, floods, and earthquakes are therefore good for the economy since they release funds tied up in financial investments as we repair the damage. Constructing and placing buildings which can survive natural disasters with minimal damage is not as good as for the economy as completely replacing buildings with duplicates of those just destroyed.
Someone battling cancer is better for the economy than someone who hasn't seen a doctor for several years.
Mountaintop removal is better for the economy than hiking trails where folks can see mother nature at work.
Crime is good for the economy because it leads people to replace stolen goods, seek care for injuries, and buy caskets and cemetery plots.
A home which wastes energy is better for the economy than a well insulated passive solar house that buys little in the way of nat gas and electricity.
Somehow the building of planes the Air Force can't use and ships the Navy doesn't need is better for the economy than more teachers for our children.
Farmers who buy artificial fertilizers and pesticides which kill the good organisms along with the bad are better for the economy than a well managed organic farm.
What is good for Main St is not necessarily good for Wall St and it is way past time we stop focusing on what is good for Wall St but bad for Main St.
Last week I heard that there are more than 6 unemployed people for every job vacancy in the country. Local and state governments are putting more people out of work as I write this even though the need for their services continues to grow. There are tens of millions of buildings in this country which need energy efficiency upgrades. There is the need for massive investment in renewables. For all the work which needs to be done there are not enough unemployed people to fill those jobs. Waiting for the market to create those jobs means that those jobs won't ever happen. Only the federal government can create those jobs either by directly hiring the unemployed to do the work that needs to be done or by hiring Main St businesses to due the job. Many of you are not old enough to remember the pre-Reagan days when the debate was on how the government would be the employer of last resort. It was called the Humphery-Hawkins Bill. It was believed it was better to have a person doing something useful to their communities was better than repeatedly extending unemployment payments or making them homeless and hungry. This was the age of revenue sharing so the services of local and state governments could continue in times of low tax receipts like we have now.
Subsidizing the production of more healthy foods in order to make them less expensive than foods full of sugar, fat, and salt would over the course of time lower bad health care costs. Why is it that low salt foods have increased fat content and low fat foods have more salt? Why is highly processed food less expensive that fresh fruit and veggies?
It seems like we need to redefine "economy" before the economy redefines itself. The economy you (accurately) describe is proving to be unsustainable (but history could have told us that).
This is what you get when you try to run a national economy with only an income statement (and not a full accrual one at that) and no balance sheet. Run a business that way and you'll go bankrupt - as the USA is becomming.
Good point!
An investment economy diverts consumption into "things" that add to our balance sheet. Useful things in a post-Peak Oil world, unlike the bulk of what is on our balance sheet today.
Alan
There is a qualitative difference between the federal government and private enterprises. Private enterprises lack the ability to act with the Federal Reserve by creating fiat money to repay debts. The government and the Fed have a nice arrangement that has worked quite well for nearly a century. The Fed agrees to accept the governments rubber checks and the government accepts the funny money we know as Federal Reserve Notes. Most of the world's people also highly value that funny money and value it even higher than their own local currency. The question needs to be answered how the feds only balanced their budgets only in two years of the last 70 years of 20th century and the American people on average improved their economic well being as the century progressed. A private business needs to show a profit the majority of the time to stay in existence but governments do not.
Hi Thomas,
Good comment, but my question is: how can this be changed?
Assuming that most of us would like to leave our grandchildren with something other than an encounter with the four horsemen, how can this insane GDP mentality be changed? How might it happen that the "common good" (water, air, soil, etc) is properly valued. How might it be that "happiness" becomes more important than greed?
Do we actually need to step over corpses in the street before we understand the problem? Is there actually some way to change our path as we head for the cliff?
Gail,
I agree with your overall analysis, and what about this? Peak Credit Demand.
While I agree that credit availability is and will be an issue, I also think we may experience low credit demand as people instinctively grasp that they cannot take on more and more debt and instead, continue to pay down what debt they have.
We may be seeing the beginning of a grass roots rejection of consumerism and the BAU method of making the American Dream happen though debt expansion. If this is the case, no amount of "pump priming" will put the developed world back on the credit expansion, growth trajectory.
I think peak credit demand is part of what is happening, too. If people aren't sure they are going to have a job next year, their willingness to buy goes down. If they see homes and business properties are decreasing in value, they are not going to run out and get a loan, so they can "invest" and use their home as an ATM. If the credit card company raises an individual's interest rate from 10% to 25%, the individual will likely cut back on the amount he uses the card.
I remember some talk about requiring people to put 20% down when they buy a new home. That would cut out quite a few new home buyers--and cause others to scale down the size of the home they buy.
Thanks Gail for another interesting post. Have been a reader for a while, just registered to add my 5c.
I have seen similar comment on other threads. Just wanted to point out that it might not be such a timeframe as you think. Here in europe, perfectly common and cheap cars made by US companies have much better mpg than you could believe possible if you read just US press reports.
Anything less than 50mpg is thought to be pretty useless. I drive a 6 year old car, gets 44 mpg, and everyone thinks that's terrible. New cars from Ford you would expect 55-60 mpg. Expensive versions get you 65-70 mpg.
These aren't microlight cars - normal things. Obviously the next 20mpg after that really is pretty hard as they've cut the weight down and the aerodynamics are as good as poss by now.
But my point is that they have already designed and are producing these cars - a 20mpg improvement over your current experience could be achieved by simply loading them onto a boat and shipping them west instead of east.
Except at 10M cars per year you're into decades before the bulk of existing cards are replaced.
The best you can hope for is to address the highest-usage apps first....and that means getting people driving trucks to work to drive a small car instead. Good luck with getting that to happen before prices skyrocket.....
A buddy I know owns Lexus, Caddy, and Hummer dealerships. All of his are doing quite well despite the ups and downs of the past year or two. Lexus drivers were rich before and most are still rich now. Caddy drivers are set in their ways. Hummer owners are loyal to a fault.
To him, the notion that Americans will buy little, cheap, high-mileage cars is ludicrous. What $10 gas to a guy whose dropping $60K on a car every two years?
Actually... it's worse than that. If you can squeeze more efficiency out of same # gallons, Jevon's paradox predicts we will just use more. And OPEC countries with gas state subsidized at $.50 or $.25/gallon will just continue squandering it on indoor ski lodges in broiling deserts, islands in the shape of palm trees, etc.
As much as I hate to admit it, until the cost becomes prohibitve for J6P, the rational thing for him to do is to just keep using as much of it as possible... while it lasts.
That is a good point. But it would still take quite a while for the new cars to filter in and replace the old cars. Even if I buy a new car, I am likely to sell my old car to someone else. At 10 million (or fewer) new cars a year, it will take quite a few years to bring the average mileage up much.
I don't think peak oil demand in the US must be associated with a drop in standards of living. I'd like to think that natural gas can be a game changer for the US if we commit to using it as a transportation fuel. Are we not the Saudi Arabia of natural gas? I can envision the US affordably displacing 5/Mbd of oil in five years just by retrofitting existing vehicles and building fuel stations. Besides reducing CO2 emmissions, creating local jobs, improve the tax base, reducing the trade imbalance, I think nat gas utilization could improve our economic competitiveness and standard of living. Peak oil demand might be here (hopefully) but peak natural gas demand could be decades away. I think the story for the year is going to be passage (or failure) of the NAT GAS act of 2009 and the start of millions of small scale individual actions to start transforming the US out of a oil based economy.
US peak demand per capita was many years ago
There's plenty of good argument that we've had a decline in standard of living since. Natural gas isn't really a very good transportation fuel, its been on and off the radar for a long time. If it came down to it, burning NG for electric power production and then powering electric vehicles probably accomplishes the same thing about as efficiently (not that I think its a good idea anyway).
Under the Pickens Plan, NG use would skyrocket and we would hit Peak NG in a decade.
We do not have THAT much NG
BTW, we are not the Saudi Arabia of NG. We burn 18 to 19 million b/day of oil and Saudi only produces 8 million b/day of oil. We burn massive amounts of NG (as we do oil) but we produce about 90% of it.
Until one gets a scale of things, it is hard to grasp just HOW much energy we burn, and waste most of it.
Alan
No. Pickens plan is to replace electricity from natural gas 900 Twh with wind(300 GW maybe?) freeing up about ~6.8 Tcf, with coal as a backup.
6.8 Tcf is ~50 billion gallons of gasoline or about 1/3 of current gasoline consumption. I don't think Pickens would claim to replace all oil as he repeatedly says we need all sources of energy.
The US has about 600 Tcf in reserves and some claim another 600 Tcf in shale gas.
But I also doubt that the US has a whole lot of natural gas left.
But the USA is certainly the King of Coal.
I'm not out to validate the Pickens plan but I think natural gas is a practical way to displace a significant amount of petroleum consumption in the US, quickly and affordably. Besides supporting energy efficienty that's what Obama should make as an energy priority. I don't think CNG was a practical widespread solution three years ago but I believe much more nat gas been found, and deemed economically recoverable since then. And I believe the reserves will be significant higher next year again. We're still finding huge new shale gas basins and greatly expanding boundaries of other huge basins already found. How much nat gas do we have? Is it 600Tcf, 1200Tcf, Colorado School of Mines thinks it may be above 1800Tcf, and I've seen estimates over 2400Tcf. Each of those increments is about 30 years of current US consumption. Is 60 or 90+ years of reserves at current consumption enough time to make one consider that maybe we should use some in place of petroleum. Maybe the trade off is a twenty year reduction in the time you could heat your suburban home with natural gas, although by not utilizing CNG the gasoline required to drive home would have been long gone twenty years before that point was reached.
http://www.mines.edu/Potential-Gas-Committee-reports-unprecedented-incre...
I can only see creating competitor for petroleum a good thing. That's going to help keep our transportation fuel less expensive and supply predictable over the long run, thus keeping our economy stronger. Furthermore I think that there is some infrastructure cross over with CNG and hydrogen for fueling cars so it could assist in that transition too.
As for the Pickens plan, I think distributed electricity production (i.e. solar collectors on your own roof) instead of huge solar and wind farms is a better way to go. They are going to be cheaper and much more politically paletable, albeit slow and gradual (but consistant), largely because of the distribution issues. I think people need to get over the notion that CNG is Pickens plan, thus there is a problem with it.
If the U.S. converts transportation to run on natural gas, it would need to increase its current consumption 70% to 80%. During the build out of NG stations, pipelines and new wells, the price of NG would skyrocket raising the price for heating houses, cooking, electricity, plastic, fertalizer and whatever else NG is used for in industry. The consequent reduction in discretionary spending would cripple the economy. The U.S. would reach peak natural gas during a 20 year conversion leaving its economy dependent on gaseous imports from Canada and expensive LNG imports from abroad. After a few more decades, the world would encounter peak natural gas leaving us with an even bigger problem to solve.
Kicking a can down the road can postpone, but never solves, the problem.
There are some typos in the linked version of the article, for example:
"I see a high cost of oil prices production (and high or of any type of energy production/energy prices in general)"
Link to article: http://www.ngoilgas.com/editors-blog/Oil-Gas-Electric-2010/
I was heartened to see you published in a mainstream publication that my company's executives are more likely to read!
Thanks
Thanks for pointing it out. I can write to them about correcting it at this late date.
You need to distinguish between sectors of consumption to make any broad statements in these matters. The problem is the data covering the last major recession is rather sparse; for the US, beyond gasoline/distillates/jet fuel you only have annual data for a few other products - LPGs, propane/propylene, residual fuel oil. For other nations the information is even more lacking.
Surprisingly after the early 80s recession the US followed an upward trend for consumption of LPGs, only cresting earlier in the Noughts. Residual fuel was largely purged out in the early 80s, beyond bunker fuel and poor quality heating oil. There doesn't seem to be a source for fuel use in electrical generation in other nations - I asked Rembrandt, who is about the #1 go to guy for that sort of arcana. I've written the IEA about obtaining this information. Purging oil consumption in the electrical generation sector saved a lot of oil in the 80s, and could save a lot now. But if you ran the numbers in 1980 you'd see a much more dire picture, which of course was widely bandied about. I came across a column from the mid-80s by Tom Friedman where he remarked about the substantial drop in OECD demand, contrary to forecasts of ruinously robust growth from the final days of the Carter admin.
Other biggy of course is in the transportation sector. It is noteworthy that gasoline demand in the US rebounded in 1988 to 99% of its previous peak, reached in 1978, only to tail off again thereafter for some reason. Most people focus exclusively on vehicle demand, to the detriment of taking in the big picture. I believe there is much in the way of low-hanging fruit to be picked on the demand side out there.
Some low-hanging fruit examples: getting rid of the second car, letting the kids quit sports, and stopping unnecessary driving netted me about a 60% reduction in gasoline use. Commuting to work by bicycle makes another 30%. Insulating windows and turning the heat down to 64 in the day, 54 at night has dropped my NG use by 50% over 2 years ago. Mothballed the spa for 1/3 lower electric bills.
None of the above was convenient, but none of it particularly painful either. Lots of people could do the same, but its the sort of stuff you don't do unless you have to.
I think the problem here is that all work is not equal. Transferring 1500 jobs from the restaurant industry to the oil industry is not the same. There’s a difference between people making computer chips and people making potato chips.
Gail said: "While many are forecasting higher oil and gas prices, I am doubtful that higher prices will hold for very long because of the inability of people’s incomes to cover the higher prices."
You hinted at this last month on a comment you left on my blog. (We were taking bets about if/when oil would once again break the $100 barrier.) In business, when we miss our numbers for a given year, the upside is that it makes it relatively easy to show decent growth the following year because we have lowered the bar. Any signs of economic growth in this case during 2010 would trigger a price hike, especially if we have passed peak (say in July '08)- in obedience to supply & demand. The contrary would mean we are already seeing the definitive halt to growth/development. Do you think this is what has happened?
It is possible we will hit another price peak well over $100 this year, but if we do, I expect the price will drop down again after it is hit, because of more cutbacks in credit availability, and because people can't really afford it. (In some ways it is related to Jevons' paradox. When efficiency goes up, people buy more to keep their total expenditure the same. When price goes up, people buy less to keep their expenditure the same.)
There is at least some possibility price will decline before it hits $100, and so that it never rises that high. I would think that might happen if there is some credit-driven international trade problem that hits fairly early on (perhaps because of bankruptcies of major countries), and reduces demand fairly substantially.
As long as OPEC can act as a swing producer the price of crude oil will not drop below ~$70 / barrel. This is a consequence of OECD countries being past peak production. The only directions for the price are constant or up until something in the economy snaps causing a price collapse. Since OPEC has fresh experience with the oil price shock of 2008, I suspect they will be more aggressive in cutting supply next time to prevent the price from undershooting below ~$70 / barrel. The greed of OPEC will keep the price as high as possible. Principles of a free market will not work in our present oil market until demand intersects with maximum global supply or the OPEC cartel loses unity.
Yesterday JAL filed for bankrupcty. If there is a space alien out there watching us here on the earth, it/she/he can see large clusters of cement and asphalt gradually growing quiet, dark and de-activated. GM, parts of NYC and other big cities, now JAL (massive layoffs and tons of suppliers will be out of business soon), huge swathes of American suburbia, airports.....
The US car fleet went down for the first time in history last year. So the roads are getting emptier too.
The oil that is being saved from shutting down this machine activity is going to food production.
'Cause we gotta eat!
It is a slow process but it`s inexorable.
I guess it`s still in the beginning stages. When the space alien sees the lights in Washington D.C. grow dim....then I suppose it will be time to worry more.
We have some pretty dim lights in Washington D.C. already.:-(
The Human Population, which has been on this planet for a relatively short period and our living standards have always been dependent on a short list of interlocking factors being available per Capita, including the -
1) Energy - available to be deployed and its cost.
2) Food (Quantity & Quality)- Available for consumption.
3) Basic Natural Resources - Available for consumption.
Also into the mix are the vagaries of human nature, including the 7 deadly sins & our capacity for Innovation.
That said, the history of Population Growth was relatively stable (with ups & downs), until a little over 100 years ago when Fossil Fuels (Oil), with the assistance of human Innovation Enabled a transformation of the Global Human society.
Due to the capacity of Fossil Fuels to deploy Energy & raise per capita productivity, humanity has been able to explode the production of Food, acquire the other Natural Resources required, as well as manmade Resources, at such low costs as to Enable the Global Economy & Population to GROW EXPONENTIALLY for over 100 years.
That growth is now stopping!
Put into context, the planet is 4.5 Billion years old, we (humans) have been here for around 100-200,000 years & 150 years ago the first commercial Oil well started production.
It is likely that we have already used more than half of all the Oil that will ever be able the be extracted from the Earth and the second half will be consummed a lot quicker than the first half.
We are now at the point where a continuation of the past Exponential Growth rates in the Global Population & Economic Activity, for any length of time, would deplete Oil Reserves/Production to a point where the Fossil Fuel/Global GDP RATIO would spike beyond control and we would lose control!
Additionally, we (humans globally) have just blown Debt to hell, in a search for a tempoary solutions to a permanent problem and the deleveraging process will take some time.
TYPICAL OF POLITICIANS!!!
So, we (globally) now find ourselves DEEP IN DEBT, with our number 1 economic enabler (Fossil Fuels) already in Supply Decline and about to experience massive price spikes, sending the Energy/GDP ratios into orbit, before finally burning out completely within 50 years.
And, just to bring it all matters to a head, the number 1 Global Economic Growth promoter, Population Growth, has been slowing for 40 years and will shortly turn negative (within 20 years), but not until after the biggest Baby Boom in human history first retires, starting now, then dies, all over the next 20-30 years.
There is a line goes back a while, where the WW2 Japanese pilot is addressed by his wing commander, is given details of their Kamikaze mission and then the wing commender asks if there were any questions?
Are there any F***ing questions, says the Japanese pilot!
Well, we are now in a similar boat (The Titanic), the differences are that the Politicians are not even telling us about the mission, nor are we being given the option of saying " there has to be some better F***ing answers!"
Congratulations, Gail, that you were granted the editorial of Oil & Gas! This shows that "we" are receiving more and more credibility. Having attracted attention in the upstream media will hopefully help to acheive more attention in the mainstream media.
Hi all,
I want to add one thing about the theme "Canada may sell the oil to China, or...."
Canada does not sell the oil to anyone. Canada is the host country to the oil companies who are allowed to develop the resource and sell to their best customers. Host Provinces get royalties, which the feds want to tap into more and more, but as to who gets what is not decided in a Govt. office.
When the US put blocking tariffs on softwood exports to America, many wanted to put the same export fees % on our energy exports. I guess the country could do that if it had a desire for invasion. Some of the oil may go to China, if the market price can be met. It is convenient and cost effective to send it down the mid west pipes, right now. However, many of us regular citizens believe the Govt system in Canada has already been corrupted by the US, and why not, it has happened everywhere else in the world where the US does business? In a nutshell, the oil is ours, but we don't decide what happens to it. If people got mad enough and elected a northern brand of Hugo Chavez as a leader, then nationalization could happen, (yeah right). We would be invaded by whatever means necessary....subversion, and maybe even the military.
The US is our friend and neighbour. All they really have to do is continue playing nice. The worry is that desperate neighbours do desperate things, sometimes. I know many folks who have kept a few guns out of the registry program and sometime talk about the US invading for our water. It is plausible. How do you define invasion? Buy the companies, pay off the politicians, or use an army? For the most part Canada pretty much lies on its back and says come and get it. Then, we put our money in the bank, provide health care to citizens, and wonder how the American tourists can afford to drive such damn big winnebagos on their summer trek to Alaska?....oh yeah, they can't afford it. They just thought they could.
The US now is building a fence between Mexico and itself. They have started a security policy fence on the Canadian border. Right wing nuts still propagate the myth that the 9/11 nuts came through Canada, which they did not. Fences....not a good idea right now. Aren't we all in this, together?
Paulo
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