Jeff Rubin: Oil and the End of Globalization - ASPO-USA
Posted by Gail the Actuary on November 8, 2010 - 10:15am
One of the keynote speakers at the recent ASPO-USA conference was Jeff Rubin, former Chief Economist with CIBC World Market. Rubin talked about why he believes high oil prices caused the recent recession. He also talked about how high oil prices are likely to vastly reduce globalization. He views this as a positive situation, because he expects this will change supply curves in such a way as to make American-made products more competitive. He believes that we will find our new smaller world much more livable and sustainable.
The video can be viewed at ASPO.TV. A transcript can be found below the fold.
You know, knowing the nature of the disease is usually an essential first step to finding a cure. And so too, it is with a recession. Knowing the true nature of a recession goes a long way in helping us to avoid falling into another one. Particularly when the recession we are just coming out of happens to be the deepest global post-war recession on record.
Conventional wisdom, as espoused by central bankers, finance ministers, and the pundits that you watch on TV would have you believe that the recession that we are still feeling here in America, and, indeed, throughout the world, was all about a financial crisis, whose roots lie in the failed sub-prime mortgage market in the United States. In other words, a whole bunch of boarded up, repossessed unsalable houses and depressed property markets in places like Cleveland, all financed with easy credit and subprime mortgages, hit financial markets like some toxic hydrogen bomb, and then all of a sudden, a property market crash in the United States, somehow morphed into a deep, global recession.
Gee, I never knew that Cleveland was that big. No one has to tell me about the impact of the subprime mortgage market on financial markets. Why do you think I am an author now? But there is a big difference between blowing up the bonus pools of investment banks, and blowing up Wall Street, and what happened.
If you are wondering why risk-averse institutions like the bank that I used to work for had to write down almost $10 billion of assets of things called Collateralized Debt Obligations that were funded by pools of subprime mortgages, the reason is pretty simple: they were rated AAA, which meant that rating agencies assigned the risk of default with the same probability that the US Treasury would default. What the banks lost sight of is how rating agencies get paid. Rating agencies don't get paid by investors; they get paid by issuers. In Economics, we call this moral hazard problem. In investment banking, we call it, "Shit happens."
It is easy to see how sub-prime mortgages blew up Wall Street; it is a little more challenging to see it as the author of the global recession. Why were there economies that had no sub-prime mortgages that experienced even deeper recessions than the United States? Why did those economies go into recession even before the US economy went into recession? Maybe, just maybe, there was something more important going on--more important to the global economy than Wall Street or sub-prime mortgages, like $147 barrel oil, for example. If we know anything about watching the global economy in the last 40 years, we know this: feed it cheap oil, and it runs very smoothly. All of the sudden, give it expensive oil, and it stops in its tracks.
Every major recession in the post-war period has oil's fingerprints all over it. The 1973 first oil shock led to what was then the deepest post-war recession, at the time. The second OPEC oil shock led to no less than two recessions: 1979 and 1982. And then when Saddam Hussein invaded Kuwait, and left half of its oil fields on fire, and oil spiked to the then unheard-of price of $40 barrel, lo and behold, the industrialized world again fell into recession.
Gee, I wonder what happened to oil prices before this recession. It seems to me that oil prices went from about $30 barrel, at the beginning of 2004, to almost $150 barrel by 2008. Even in real terms, that is, inflation-adjusted, that price increase was over double the price increase of either the first or the second OPEC oil shock. If they had led to devastating recessions, why would not the biggest oil shock of them all, be the obvious culprit for what has been the deepest recession to date?
There are many ways in which oil shocks create global recessions. First, the transfer of income. When oil went from $30 barrel, to about $147 barrel, over $1 trillion of income was transferred from the industrialized oil consuming world to OPEC. Now, that was not neutral for the economy, because the savings rates from which money was coming from, like the United States, was virtually 0%, meaning that consumers spent everything they made. And where the money was going to, places like Saudi Arabia, or Kuwait, or the United Arab Emirates, had savings rates of almost as high as 50%, so it certainly was not demand neutral.
High price also create recessions by crowding out non-energy expenditures. Two years ago, when gasoline cost us $4 gallon, low-income Americans were paying more to fill their tanks than they were to fill their stomachs.
But by far, the most important mechanism, the most important path, by which oil prices cause recession is through their impact on inflation, and their impact on interest rates.
There is no shortage of people to blame for the subprime mortgage crisis. We could start with fraudulent mortgage companies that approved mortgages, then quickly sold them to financial institutions. We can blame financial institutions who played Russian roulette with depositors money, and of course we can blame rating agencies who assigned AAA ratings to this. And we can blame regulators, who were asleep at the wheel, like the Securities Exchange Commission, who were either blind or indifferent to Wall Street's systemic risk to subprime mortgages.
However, the real culprit behind subprime mortgages was the very low cost of capital and 0% interest rates. All the greed in the world could not do what the Fed's easy money made possible. The subprime mortgage rates were created by interest rates and the subprime mortgage market was pricked by interest rates. Everybody would agree with that. What people don't seem to ask is, "Just why did interest rates go from 1% to 5.5% from 2004 to 2006?"
Well, any central banker, even Alan Greenspan, will acknowledge that your borrowing cost is a mirror image of your inflation rate. We had 1% federal funds' rate in 2004, because we had a 1% inflation rate. All of the sudden, in 2006, inflation was over 5.5%, the highest it had been in America, since, coincidentally, 1991, when we just happened to have the last oil shock. All of the sudden, money wasn't free any more. All of the sudden, you weren't getting credit cards in the mail any more that you never applied for. And all of the sudden, people who held negative amortization sub-prime mortgage rates had to start paying 7% or 8%.
Well, if interest rates hadn't risen, that wouldn't have occurred. Why did inflation move up? Virtually all of the increase in inflation came from one component of the US consumer price index basket--the energy component. By the end of 2006, energy inflation was running at 35%, because of one price: the price of oil. The price of oil went from $30 barrel, which incidentally, every oil analyst at the time said it was going to stay at that level, to over $70 barrel. If oil had stayed at $30 barrel, inflation would never have spiked; neither would have interest rates. All of those good folk in Cleveland would probably still be there, in their homes financed by 0% interest rate sub-prime mortgages. Lehman Brothers and Bear Stearns would probably still exist, and I'd probably still be the chief economist at CIBC.
But that is not what happened. Why did oil prices go up to $147 barrel? Somewhere where virtually every economist said it could not go. Well, there were two reasons that economists said that oil prices could not get into triple digit range, and that was the cherished principles of supply and demand. First, the theory of the upward sloping supply curve--higher oil prices would bring new supply, just like it did after the OPEC oil shocks, where oil gushed from Prudhoe Bay and the North Sea. And not only did that break OPEC's strangle-hold on the market, but sent oil prices tumbling down.
Unfortunately, as you all know, there are no more Prudhoe Bays or North Seas to come on tap. Yes, there are tar sands, and theres is deep water, and the upward sloping supply curve did bring new sources of supply, but only at prices that we at the end couldn't afford to burn.
What about the cherished principle of demand? Would not triple digit oil prices quash demand? Well, it did, in certain places. It did in the United States. It did in Canada. It did in Japan. It did in Western Europe. Fifteen years ago, if those economies suddenly cut back their appetite for oil, oil prices would have fallen, because 15 years ago, those countries would have accounted for almost three-quarters of world oil consumption. Today, they account for barely half. Tomorrow, they will account for less than half. It wasn't the US consumer that drove oil demand to $147 barrel in the last cycle, and it certainly won't be the American consumer that drives a barrel of oil to $147 and higher in the next cycle. We have already seen peak demand, in this economy, and in the economy of the other industrialized countries.
Where do you think oil demand has been growing the strongest? Many of you will probably be saying China, and indeed it has. It's grown from around 2 million barrels a day, to about 9 million barrels a day. But I know a place where the demand for oil is growing even faster than in China. And it is the same place your politicians have told you your supply is coming from in the future. Last year, OPEC and two non-cartel producers, Mexico and Russia, consumed 14 million barrels a day. That is almost two Chinas.
What makes OPEC so thirsty for its own fuel? Well, if you ever filled your tank up in Caracas, you would get some sense of it. It is 20 cents a gallon. And if you go to Riad, in Saudi Arabia, it is a little bit more-it's 40 cents a gallon. And it's 40 cents a gallon, whether oil costs $20 barrel, or whether oil costs $150 barrel.
If you think drivers have a good deal in OPEC countries, they don't have anything as good a deal as power users. What's the coolest thing to do in Dubai? Ski, of course. I love skiing; I'm Canadian. But going skiing in an area where it's hot enough to fry an egg on the pavement uses up a whole lot of energy. In fact, one day at Ski Dubai uses the equivalent energy that a North American would consume in a month's worth of driving. So the question isn't really how much productive capacity that OPEC has. How much export capacity is the real question, and every year that is less and less, because every year, more and more is consumed at home.
Now, it's their oil and gas, and if they want to consume their oil and gas going skiing in one of the hottest deserts in the world, that is their right. All I'm saying is, chances are, your future oil supply ain't coming from OPEC, and chances are, it ain't going to be cheap.
Now sure, oil prices fell to $40 barrel during the recession. And for many folk, that was evidence enough that it never had any business being in triple digit range in the first place. But what a lot of those folk forget is that in the last recession, world oil demand actually fell. It fell for the first time since 1983. Such was the severity that the recession was.
Peak oil is not a problem if the economy that it is powering is shrinking. Peak oil is only a problem if the economy we are in is starting to grow. The first thing you know about an economic recovery is that economies start burning more oil. The next thing you know about an economic recovery is that oil prices start rising. Where is oil trading today? It is trading at over $80 barrel. With the exception of Germany and Canada, every other economy in the G7 is still miles below the level of GDP that they were at before the recession began.
And yet, where oil is trading today, turn the clock back to three years ago, and that would have been a world all-time record high. Now, it is where oil trades in the shadow of the deepest global post-war recession. Where do you think oil prices are going?
I will tell you where I think oil prices are going. Even in this most anemic of economic recoveries, we are going to see triple digit oil prices. We are not going to see triple digit oil prices in 10 to 15 years. And it is certainly not clear to me that the global economy is better able to handle that than in 2008. Now, a lot of people will say, "Jeff, economic history tells us that scarcity is the mother of invention. Give us 10 to 15 years of adjustment, and we will develop alternate technology, so we won't be carbon-dependent."
And they are right. Give us 10 to 15 years, and we will solve this on the supply side. But as I say, our rendezvous with triple digit oil prices is not in 10 or 15 years; it is in 10 or 15 months. So instead of trying to turn cow-shit into high octane fuel, we are going to have to learn to get off the road, and that is just what happened. In 2009, there were 4 million fewer cars on the road than there were the year before. In the next ten years, 40 million North Americans will be taking the exit lanes. The question is, "Will there be a bus to get on?" Instead of giving $40 billon to General Motors, what we should have done is spend $40 billion on public transit, so there would be a bus to get on.
In a world of triple digit oil prices, all of the sudden the economy's speed limit changes. And that is one of the problems that we have here in America, is that we don't recognize that our economy's speed limit has changed. What the economy could grow at when oil was $20 to $30 barrel is a whole different speed limit than what the US economy can grow at when oil is $80 to $150 barrel.
And that is something that I don't think the Administration recognizes. Because what President Obama cannot bring is cheap oil. He can get expensive oil. We can build a pipeline from the Canadian tar sands down to the Gulf refineries, and we can get oil. But in order to get the kind of oil that will be required, that will require the triple digit oil prices that we can't afford to pay. But trying to pump-prime the economy with fiscal stimulus is not a substitute for cheap oil. It won't make the economy grow any faster. It will just make the deficit that much bigger.
Worse than that, triple digit oil prices will not only take millions off the road, it will send our economy right back into recession, unless of course, the economy changes. We can't do a whole lot about triple digit oil prices. That is where the supply curve lies. And if you doubt that, just look at the Canadian tar sands. Like sure, there is 170 billion barrels of it there, and there is 500 billion barrels in the Orinoco heavy oil belt, but that is not the issue. Depletion is not just the geological concept, it is more fundamentally an economic concept. Because if the cost of extracting that oil from the tar is greater than we can afford to burn, it doesn't matter how many billion barrels of oil there are in the tar sands.
So how do we adapt? How do we grow in an economy of triple digit oil prices? We change the nature of our economy. In a world of triple-digit oil prices, distance costs money. The global economy, where we produce one thing at one end of the world, to be sold at the other end of the world, doesn't make any economic sense, because in too many cases, what will be penny-wise, will soon become pound-foolish. The wage "arb", what we save on wages, we will more than squander on bunker fuel.
Take the steel industry, for example. Just before the recent recession, some very curious things were happening in the US market. When oil prices got to be over $100 barrel, all of the sudden, Chinese steel exports to the US fell at double-digit rates. And all of the sudden, US steel production was up. And all of the sudden, US Steel Corp., which was one of the biggest dogs in the market, all of the sudden its share price doubled.
What was going on? I'll tell you what was going on. For the first time in 20 years, it was cheaper to make steel in the United States than to import it from China. Why? Consider what China has to do to send you steel. First, it has to ship iron ore from Brazil, across the Pacific Ocean, turn it into steel, which is itself a very energy-intensive process, then ship it back, across the Pacific Ocean, to you. At $20 barrel, that works. At $100 barrel, that doesn't work. It added on $60 to $70 dollars, to the cost of a ton of hot-rolled steel. How much labor time do you think there is in making steel these days? One and a half to two hours. The transit costs all of a sudden exceeded the labor costs. Who would dream that triple digit oil prices would breathe new life into our hollowed-out Rust Belt? But in a world where distance costs money, that is exactly what is going to happen.
Take food. Last year, China exported $6 billion of food to America, everything from apples to frozen chicken wings, bringing a whole new meaning to having your Chinese food delivered. Steel doesn't have to be refrigerated. Hopefully, frozen chicken wings do. What do you think powers that refrigeration unit? Bunker fuel! The same thing that is powering the boat. The world of triple digit oil prices--it won't matter that farm labor is cheaper in China than in the United States, because the cost of bringing those frozen chicken wings to us will be too expensive.
it's not like we are going to stop using steel in America, and it is certainly not like we are going to stop eating. What we are going to have to do is make our own steel. What we are going to have to do is grow more of our own food. Unfortunately, much of our agricultural land has been paved over with suburban sprawl. Just as triple digit oil prices will breathe new life into our hollowed out Rust Belt, triple digit oil prices will turn those far-flung suburbs and exurbs back into the farmland they were, thirty to forty years ago. The very same economic forces that gutted our manufacturing sector, that paved over our farm land, when oil was cheap and abundant, and transport costs were incidental, those same economic forces will do the opposite in a world of triple digit oil prices. And that is not determined by government, and that is not determined by ideological preference, and that is not determined by our willingness or unwillingness to reduce our carbon trail. That is just Economics 100.
Triple digit oil price is going to change cost-curves. And when it changes cost curves, it is going to change economic geography at the same time. I know that the world of triple digit oil prices has been the domain of the apocalypse. For many people, the advent of peak oil and triple digit oil price means the end of our economy. For some, civilization as we know it. I don't share that pessimism. I don't share that outlook. I'm an economist. I believe in the power of prices.
Sure, if we continue to want to get our frozen chicken wings from half-way around the world, where labor is cheap, if we want to get our steel from half way around the world, if we want to commute back and forth eighty miles to work in our SUVs, peak oil won't just be a recession, peak oil will be peak GDP, and that will be apocalyptic. But as I say, I am an economist, and I believe in the power of prices. I believe we are going to change. I believe that we are not going to end up importing food from half-way around the world, or steel from half-way around the world. I don't think we are committed, irrevocably, to suburban sprawl.
And we might just find that that new smaller world around the corner is a whole lot more livable, and a whole lot more sustainable, than the big "oily" one we are about to leave behind.
Thank you very much.
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I really can't find a single thing here to argue with (aside from minor nitpicks). Good choice, Gail.
I think with respect to causing the recession, Jeff Rubin adds somewhat more to the reasoning than what we had found.
But in some places, we have more detail backing up the case. Steve from Virginia found the direct link between higher oil prices (meaning higher inflation rates) and the higher rates the Fed decided to charge. See this link.
How do we grow in an economy of triple digit oil prices? We change the nature of our economy.
I have to disagree strenuously with Mr. Rubin, who is revealing his conceptual framework and assumptions based in Economics with this statement above. How do we grow in a post-oil economy?
The simple answer is, we don't.
We (in the US) could bump up carpooling for our commute to more than the 9.2% it's at now. That'd save Lord knows how much gasoline. Wouldn't save the economy? True, might lead to its redistribution a bit. I think of peak oil as a Singularity - a point beyond which we can't see. US citizens might cheerfully resort to these more efficient means of transport, and keep the economy chugging along in the process. Or they might demand that US forces seize Saudi oil fields. Or they might just gripe about what idiots they've elected, while listening to them posture.
Will be interesting to see this next price shock, seeing as how it will have no apparent catalyst, unless some of those rogue speculators will get more of the blame.
Would it save the economy? I dunno. The various "more efficient means of transport" tend to waste great gouts of time. That might impact the some of the many discretionary sectors of the economy adversely. (In addition, I could also see "civil society" taking a real beating if it's going to take forever to get to meetings and the like.)
If fuel prices double, buy a Prius (which will reduce fuel consumption by 50%). If Priuses are suddenly back-ordered (because everyone else has the same idea), put in your order and carpool with one other person (which will reduce fuel consumption by 50%) until it comes.
If they double again, put in an order for a plug-in upgrade, and carpool in your Prius with one other person until it comes.
If they double again, put in an order for a Volt and carpool in your plug-in Prius with one other person until it comes.
If they double a fourth time(!), rinse and repeat with a Leaf.
Now you're in debt for $80,000. What do you do?
"Now you're in debt for $80,000. What do you do?"
Get a medal from Krugman and Bernanke? or at least a certificate in a handsome plastic frame.
Sell the Prius and Volt for much higher prices than you paid for them, which means the Leaf is almost free.
Don't forget how Prius values (especially used ones) shot up when oil went over $100/barrel.
Or just don't live so far away from your main destinations.
250 million hybrids and electric cars won't change the fact six decades of public and private resources have been invested in building our cities to consume an exorbitant amount of energy to conduct the simple act of transporting human beings. In terms of net energy per passenger, public transit has it over any type of car by orders of magnitude, and transit vehicles powered by vastly more efficient electric motors (hopefully from clean power sources) is even better.
The urban land use models alone have resulted in tremendous waste (agriculture to asphalt/sprawl). Though hybrids and electric cars may be of some assistance to individuals and families in bridging an inevitable energy shortfall, they won't be worth fig skins in the necessary redesign of our cities over the next century.
Well said, Salish.
The individually-owned, highway speed-capable car period is coming to an end for the middle class. It might take a few decades. In the meantime, we will see scores of motorcycles, scooters and other conveyances that aren't comprised of 2.5 tons of plastic and steel just to move a few pounds of humans.
2.5 tons of plastic and steel just to move a few pounds of humans.
Apparently you haven't spent much time around the deep South or Midwest lately. The average American is well north of a "few pounds".
Could you please post some links with data to validate this? I'm not saying you're necessarily wrong, but there are critics who have published assertions to the contrary: http://www.amazon.com/Best-Laid-Plans-Government-Planning-Pocketbook/dp/...
(And before you point it out, yes I know this guy writes for the Cato Institute, but that doesn't automatically mean he's wrong on every point :-)).
If you want to see the economics on a high-efficiency renewable-energy light rail transit system, there's a classic study at http://www.calgarytransit.com/pdf/Calgary_CTrain_Effective_Capital_Utili...
It is useful in the American context because it evaluates the Calgary LRT system, and Calgary is much like your average western US city in terms of layout, demographics, and lifestyle. It looks like a half-scale version of Denver. If something works well in Calgary, it will almost certainly work in Denver.
The trouble with publications like The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future is that they can be counted on to skew the data to match their preconceptions of what the American Way of Life should look like. Since I'm Canadian, this can be counted on to p*ss me off because I have ridden on transit systems that actually work, in cities that are very similar to US ones, and know that the authors are lying to Americans who don't know any better. You can always compare Calgary to Denver, Vancouver to Seattle, or Toronto to (shudder) Detroit if you want to see how things would have turned out under a different government.
The economics of automobiles versus public transit are very different if your government doesn't subsidize roads and penalize public transit like the US government does. The US has bet the farm on the private automobile, and I'm afraid it's turning into a losing bet. It will get worse, much worse.
The Calgary system is great, but it only carries 3% of passenger-miles.
That's much better than US rail, which only carries .7% of US pax-miles, but it's a very, very far cry from an overall solution to our oil problems.
The Calgary system is great, but it only carries 3% of passenger-miles.
Where did you get that idea? While Calgary is a very car-oriented city, it isn't that car-oriented.
The counts of people reporting 'mode of transportation to work' for Calgary in the 2006 census (Canada does a census every 5 years) are the following:
Car, truck, van, as driver: 364,090
Car, truck, van, as passenger: 40,870
Public transit: 90,415
Walked or bicycled: 37,535
All other modes: 5,485
I count that as 18% taking transit, 68% driving, 8% riding as passengers in cars, and 7% walking or bicycling.
However, the Calgary transit system carries over 42% of the daily downtown trips. See: http://www.calgarytransit.com/pdf/Calgary_CTrain_Effective_Capital_Utili...
Calgary has more office space than some cities four times as big, crammed into an area which is only half a square mile. It's heavily Manhattanized. The downtown core would not work without public transit. There's not enough street space and not enough parking for all the workers to drive to work. The two-track light rail system moves the passenger equivalent of 16 lanes of freeway in and out of the downtown core during rush hour without a great deal of fuss and bother, and also serves as a downtown people-mover. There's no room for 16 lanes of freeways.
They planned to build a subway, and in fact there's a short section of subway and an underground station in place in the downtown core, mothballed and ready to go when they need it. I've been under the streets and seen it. However, they discovered you really don't need to go the subway route until you get to be much, much bigger than 1 million people.
For the downtown core, the proportion walking, bicycling, or taking transit probably exceeds the number driving, and as the city grows the transit ridership increases - every time they build a skyscraper, they wipe out a parking lot, and parking rates go up.
Where did you get that idea?
The 90,415 using Public transit account for 16.8% of the total. But, the total is only 49% of the metro population; commuting is only 50% of all pax-miles; and rail is perhaps 2/3 of all mass transit. That gives a % of the total of about 2.8%.
Here's another approach:
The C-train has about 270K boardings per day, at 11.3 km each, 5.5 days per week, which equals 870M pax-miles per year. According to the US Dept of Transportation, the average US'er drives about 25,000 km year, and I believe the average Canadian drives a bit more. Calgary has about 1.1M people, so that's a minimum of 27.5B km per year. That gives 3.2% of all pax-km.
Again, I think the Calgary rail system is great, and I like rail. Heck, I do most of my travel on electric rail. It's definitely the best way to travel. Unfortunately, it's only .7% of ground pax-miles in the US, and it's probably 1% of overall Canadian pax-miles, and that's not going to change any time soon.
Nick, just where did you get your US DOT VMT per capita from?
Heres mine, from the DOT's Bureau of Transportation Statistics (http://www.bts.gov/publications/state_transportation_statistics/state_tr...)
That shows the average VMT per capita, for 2005 to be all of 10, 087 miles (16,270km)
If we assume Canada is 10% less than US, an cities are 90% of average (rural people drive more), then Calgary would be 13,140km per capita.per year.
Now, Calgary transit gets 270k boardings per day x 6 days (it is still well used on weekends) x 11.3 for 0.95bn km, or 950km/capita/yr. Dividding this into 13140 we get 7.2%, so your estimate misses by more than half. Actually, your US estimate misses by at least a third, as you are using 15,000miles instead of 10,000 (the 15,00 is the average per vehicle, not per capita).
More importantly, the VMT avoided by rail is city driving, often peak hour, which are the least fuel efficient VMT you can get, so the fuel saving is closer to 10%.
The avoided miles seems depressing low, but consider for those using transit (135,000 people/day) the 22.5km/day is 7000km/year, so it is half the average VMT. The LRT system can;t be all things to all people, but for those that choose to use it, it is a great thing, s it is for the host city.
And we have not included other modes of transit (buses and school buses) add these in and the transit VMT per capita rises even more.
And, of course, transit oriented cities tend to have higher density and lower commute distances in the first place. The ultimate indicator then becomes the transport energy per capita, and the graph in my post below illustrates very clearly just how far behind the game America is.
Changing the vehicles from ICE to EV just uses a more efficient energy for an inherently inefficient system - Atlanta will still be a high transport energy city!
where did you get your US DOT VMT per capita from?
In 2008 there were 4,872M passenger miles by highway, 583.5M by air, 53.7M by Transit, and 6.2 by Intercity/Amtrak rail: http://www.bts.gov/publications/national_transportation_statistics/html/...
The total of all of those is 5,515M passenger miles. The US population was 303.2M, so that gives us 18,191 pax-mile per capita, or 29.3km per capita. I was being conservative by leaving out air travel, but heck, that probably should be included, right? And, we see that the total rail miles were 36M, for about .7% of total pax-miles.
the average VMT per capita, for 2005 to be all of 10,087 miles
That's a little old. More importantly, that's VMT, not pax-miles. It looks like the average passengers per light vehicle is about 1.5, which is more than I previously thought.
If we assume Canada is 10% less than US
I'd assume more. Several Canadian cities have good transit, Canada is very spread out: IIRC Canada uses more significantly more fuel per person.
an cities are 90% of average (rural people drive more)
Part of the what I'm trying to point out is that we can't just look at cities: we have to look at the whole area of which the city is a part.
transit oriented cities tend to have higher density and lower commute distances in the first place
Sure. But, creating that density is a long-term project, and the housing in it will always be much more expensive.
The LRT system can;t be all things to all people, but for those that choose to use it, it is a great thing, s it is for the host city.
That all I've been saying.
No, no. You can't fudge the numbers that way. The Stats Canada numbers are for 100% of the metropolitan population, you can't assume that none of the non-commuting travel is by transit (because a lot of it is by public transit), and you can't restrict "transit" to rail-only transit. Calgary Transit routinely uses bus rapid transit to build traffic on low-volume routes, and then builds a light-rail line when the volume gets high enough to build tracks.
The Stats Canada numbers are for 100% of the metropolitan population
But, they only total less than 540k, which is less than half of the metro population: "In 2009, Calgary's metropolitan population was estimated at 1,230,248, raising its rank to fourth-largest CMA in Canada" http://en.wikipedia.org/wiki/Calgary
The metro population that is further out will have much lower rates of rail utilization.
you can't assume that none of the non-commuting travel is by transit (because a lot of it is by public transit)
The percentage will be much smaller.
you can't restrict "transit" to rail-only transit.
You have to do so, if you want to have an accurate snapshot of the current situation. Yes, BRT helps pave the way for rail, but that's a separate analysis.
they only total less than 540k, which is less than half of the metro population:
The statistics I quoted was for the number of people who commute to work in the Calgary metropolitan area. Yes, it's true. Less than half the population goes to work, while the rest do homework, go to school, or play with their toys.
Now, when someone says something like "The Calgary system is great, but it only carries 3% of passenger-miles.", I routinely pull up some data and do a quick sanity check on it. At http://www.apta.com/resources/statistics/Documents/Ridership/2010_q2_rid... you can find the latest ridership numbers for Calgary Transit. It says the average light rail ridership is 268,500 rides per average weekday - in a city with a population of about a million. So, right away I can see that it is a lot more than 3% of the population taking the train on any given weekday.
Less than half the population goes to work, while the rest do homework, go to school, or play with their toys.
Yes, and they do a fair amount of travel - almost none of it on the train.
the average light rail ridership is 268,500 rides per average weekday - in a city with a population of about a million. So, right away I can see that it is a lot more than 3% of the population taking the train on any given weekday.
First, those are one-way rides.
2nd, the population is 1.2M.
3rd, we're just talking commuting, which is only about 1/3 of all travel in Calgary. After all, commuting is mostly a 5 day, 230 day per year thing, and those people at home are out and about.
So, take that 268.5k number, and divide by half to get the number of daily round-trips: 134.1k (about 1/4 of the commuters, which is pretty good). Divide that by 1.2M, and we get 11.2% of the population takes the train on a weekday.
Divide by 3, and we get 3.7% of all travel.
Here's another source:
"According to the General Social Survey of time use, the proportion of workers in Canada who used the bus or subway to get to and from work remained steady at about 12% between 1992 and 2005. In large urban areas, where service is more accessible to commuters, this proportion was higher—20% of workers in Canada’s six largest metropolitan areas used the bus or subway for part or all of their commute in 1992 and 2005."
So, across Canada, 12% of commuting is by mass transit. If 2/3 of that is rail, then 8% is by rail. If commuting is 1/3 of all travel, then about 3% of all travel is via urban rail.
http://www.statcan.gc.ca/pub/16-201-x/2006000/9515-eng.htm
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"Canada's passenger rail services represent a thin shadow of the network that prevailed into the 1950s. Although rail used to be the choice of the cost-conscious longer-distance traveller, it has been unable to match transcontinental air fares for two decades. Now, VIA has great difficulty trying to match air fares on its moderate-distance service between central Canada and the Maritimes. This is a market that rail is bound to lose.
With air's greater speed and lower labour cost per passenger-kilometre, it is difficult to envisage this trend being reversed. For example, the Montreal-Halifax service might be successfully recast as a tourist experience or as local services competing with bus for travellers within the Maritimes and within Quebec, but it is unlikely that it will again become a force in the Montreal-Maritimes intercity market. Similar conclusions could be drawn for the western transcontinental service.
...The Royal Commission on National Passenger Transportation (set up mainly to resolve the future of passenger rail) concluded in 1992 that rail's system-wide cost per passenger-kilometre is three times that for private cars and more than four times the total social cost of intercity bus — even when estimates of the social cost of accidents and environmental damage, along with infrastructure costs, are included.
http://www.reviewcta-examenltc.gc.ca/english/pages/final/ch11e.htm
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So, Calgary has a great system for commuters. It does better than the US, though not as well as Europe, where 7% of all travel is via rail.
But, it's very far from being a primary solution to the problems Peak Oil will cause for passenger transportation. That can only be done by HEV/EREV/EVs.
Again, you're making a lot of unjustified assumptions which skew the data. For one thing, I don't think the pre-schoolers count for much in the travel total. However, a big discrepancy is students - for one thing the Calgary school boards distribute passes to students to get to school, and - another big discrepancy - the University of Calgary is on the system and it has 30,000 students.
Because the university students are reverse-flow commuters (they are going north while the downtown commuters are going south and fill seats that would otherwise be empty), Calgary Transit gives them a deep discount on passes. As a former student who used to walk three miles (both ways uphill into a blizzard) to save bus fare, I can appreciate the attraction of cheap fares. The trains are standing-room-only in both directions during rush hour. They go into the downtown core full of commuters, and they leave the downtown core full of students, or vise versa. There's no chance of getting a seat during rush hour unless you board at the first station on the line (or the second station going the reverse direction, a common trick).
But, to get down to basics, what I did was to demonstrate the numbers you gave were not in the right range. I don't know where you got them, but they are wrong. Using creative arithmetic will not make them right. Quoting studies about VIA rail don't help because VIA rail doesn't go anywhere near Calgary (a source of political dissension, the Wild Riled West screwed by the federal government again, but let's not get into that).
There's the crux of the problem. According to my calculations, HEV/EREV/EVs are not going to work. People will not be able to afford them when TSHTF. So, what's your second choice? (Mine of course, would be light rail, and of course I know that works.) The default solution is having everyone live in a cardboard box and push their shopping cart down the freeway to the food bank once a week, but I think we can all agree that is less than ideal.
used to walk three miles (both ways uphill into a blizzard)
Me too! Barefoot!
what I did was to demonstrate the numbers you gave were not in the right range.
Well, no. You showed that about 1/4 of commuting in Calgary happens by train. But, again:
"According to the General Social Survey of time use, the proportion of workers in Canada who used the bus or subway to get to and from work remained steady at about 12% between 1992 and 2005."
So, Calgary is higher than the rest of Canada. Across the country, 12% of commuting is by mass transit. If 2/3 of that is rail, then 8% is by rail. If commuting is 1/3 of all travel, then about 3% of all travel is via urban rail.
http://www.statcan.gc.ca/pub/16-201-x/2006000/9515-eng.htm
Here's another source for the distribution of all Canadian passenger-miles. Divided by 33.3M population, we get:
km per cap
Cars and light trucks 13,904
air 2,712
Intercity bus (trips x 11 km) 3
Urban transit (trips x 11 km) 342
rail 43
Total 17,003
Percentages:
Cars and light trucks 81.8%
air 15.9%
Intercity bus (trips x 11 km) 0.0%
Urban transit (trips x 11 km) 2.0%
rail 0.3%
http://www.statcan.gc.ca/pub/16-201-x/2006000/4113926-eng.htm
According to my calculations, HEV/EREV/EVs are not going to work. People will not be able to afford them when TSHTF.
If we can't afford HEV/EREV/EVs, we can't afford anything. HEV/EREV/EVs are much faster to roll out than rail, and cheaper to operate than buses. Again, rail only provides .7% of US transportation, and about 3% of Canadian transportation, so a lot of buildout would be needed, which would take a very long time. Half or more of all housing would have to be demolished and rebuilt (in expensive, dense urban areas), for rail to be a primary solution.
HEV/EREV/EVs are in fact no more expensive than ICE vehicles, over their lifecycle. See http://energyfaq.blogspot.com/2010/10/are-electric-vehicles-cost-effecti...
Wow! I asked for the data, and got it --in spades!
Thanks, Nick, for pointing out (so meticulously) that rail and high density TOD is not the miracle answer to all our post-peak prayers. It will probably continue to be a (small) part of the overall transportation mix, but not necessarily a major part.
rail and high density TOD is not the miracle answer to all our post-peak prayers. It will probably continue to be a (small) part of the overall transportation mix, but not necessarily a major part.
There are no miracle answers - I think that is the hardest pill for the politicians to swallow. Any/all answers are going to involve some expense/inconvenience. That is why we have gravitated to oil based transport to date - it has been, overall, the least expensive and most convenient.
As for the transportation mix, there are three sides of this coin - how the mix will change, and how the size of the mix will reduce, and the efficiency of parts of that mix.
For the proportions of the mix, I think it's safe to bet the personal vehicle will be the preferred means, but also the most expensive, and will only decrease as a proportion of total. Ditto for road freight miles.
For the size of the mix, transport by all modes except rail will likely continue to decrease.
For the energy efficiency of the mix, all modes will likely continue to increase. someone who trades the SUV for a Leaf, does not change the size or proportion of the transport mix, but they sure improve the energy efficiency.
Because of the way the US operates, passenger rail will not be a big part of it's future - France builds much more miles of passenger rail each year, because they choose too. To date, America has chosen cars, and they will only be pried from their cold dead hands.
The transport graph I provided below gives great example of cities designed for energy efficiency, and those not so designed (Atlanta, Houston). Changing the design of those cities is a Herculean task, and the preference is to change the types of cars those people drive, though that is proving equally difficult.
There are a variety of "options", which are not mutually exclusive, but there are certainly no miracle answers to Peak Oil - that is probably the one thing you would get everyone on this forum to agree to!
There are no miracle answers - I think that is the hardest pill for the politicians to swallow. Any/all answers are going to involve some expense/inconvenience. That is why we have gravitated to oil based transport to date - it has been, overall, the least expensive and most convenient.
In the short term, that's certainly true. But, it won't be the case in the medium term.
EREVs like the Volt will have Total Cost of Ownership that is equal or less than a comparable ICE vehicle. Combine that with better performance, less noise, less maintenance, and it really is close to a no compromise solution. It's true that the costs of ownership will be slightly more front-loaded, but that's a small problem. Really. TCO will still be equal or lower, even accounting for the time value of money, and the shift isn't that large.
Why didn't they conquer the light vehicle market a long time ago? A little bit because they weren't needed: ICE vehicles seemed good enough. A little bit because oil and car companies suppressed them. Somewhat because there were market barriers to entry, due to the capital expense of R&D. More because we've recognized that oil is more costly than it used to be, due to pollution and supply security concerns. Mostly because batteries and power electronics have gotten better.
the personal vehicle will be the preferred means, but also the most expensive
As best I can tell, personal vehicles are cheaper to operate than mass transit systems for the majority of travel away from high density corridors, as long as you don't include the cost of the self-service driver. It seems clear to me that many people resent the attention they have to pay to driving. I certainly do - I greatly prefer rail as a way to travel. OTOH, most people don't want pay for the privilege of having a transit "chauffeur".
Ditto for road freight miles.
I think freight will move from trucks to rail pretty strongly, in the medium term. It will take a while to convince rail operators that high oil prices are here to stay, and that they should make the necessary investments.
Because of the way the US operates, passenger rail will not be a big part of it's future - France builds much more miles of passenger rail each year, because they choose too. To date, America has chosen cars, and they will only be pried from their cold dead hands.
Well, it's a national preference. The French will take the TGV from Paris to Marseilles at 250 km/h while enjoying a cheap but respectable Vin de Pays, and Americans will have their cars pried from their cold, dead hands. It's their respective choices.
I really need to get back to my interactive French course. I've been neglecting it while I wasted time here trying to convince Americans they needed to rethink their priorities.
The TGV is a very nice way to travel, and I commend the French for it. Of course, it uses far more power, and is rather more expensive, than slower trains, (or an EV/EREV) - Alan Drake doesn't like it.
Meanwhile, France is pushing EV's hard: http://gas2.org/2010/05/05/french-government-will-order-50000-electric-v...
It's no coincidence that the Leaf is being produced by Nissan/Renault.
If we can't afford HEV/EREV/EVs, we can't afford anything.
Yes, I would say that is probably correct.
Half or more of all housing would have to be demolished and rebuilt (in expensive, dense urban areas), for rail to be a primary solution.
Yes, I would agree with that, too.
However, I don't think that means you will buy HEV/EREV/EVs. I think it means you will have to demolish and rebuild half of your housing.
But, on the brighter side, you don't really have to demolish the houses. They will eventually fall down of their own accord. I base that on my experience wandering around ghost towns. I find it quite fascinating, particularly trying to figure why they built them in the first place, and why they abandoned them later.
Yes, I would say that is probably correct.
Well, how did you calculate that? Did you read the article I linked to?
Yes, I would agree with that, too.
That's far, far more expensive than HEV/EREV/EVs. Far more. And, much slower.
230M EREVs, at $30k each, is $6.9T. An all EREV fleet could reduce all personal transportation oil consumption by 100% (assuming 90% electric, 10% ethanol).
50M homes, at 200k each, is $10T. That doesn't include the cost of building or operating the transit systems, and it would reduce transportation oil consumption by only 50%, based on NYC. An all rail system might reduce it by 100%, but it would be far more expensive than a rail/bus system, and it would provide far less mobility than the current system.
Here is the sort of analysis you are looking for;
http://www.internationaltransportforum.org/2009/pdf/AUS_UrbPlanning_Kenw...
These guys have been analysing city transport modes and energy for years. I have reproduced one of their graphs and tables here for your viewing pleasure; (data is from 1995, but the trends will be the same)
And a table that gives the explicit energy per passenger miles for all modes of transport; (ANZ = Aust + NZ, WEU = western Europe, HIA = High Incomes Asian cities like Tokyo, Singapore)
I will draw your attention to the sixth line "energy use per private passenger km", which ranges from 2.3 to 3.8 MJ/p.km
Now compare to the transit lines, and in particular "energy use per light passenger km", which for Canada is just 0.25 MJ/p.km. (The Asian cities win with 0.19MJ/p.km)
It is fully one order of magnitude less, and represents a combination of energy efficient electric rail, and good utilisation. If that person drove a Nissan Leaf, they would need to get (3.6/0.25*0.62) = 9.2miles per kWh - double the reported mileage for the Leaf (100mi on 22kWh).
So, clearly, a well designed and utilised light rail system can be VERY energy efficient. Add in the energy efficiencies from not building so many lanes of road, and it gets even better.
For a ICE vehicle, to match this, it needs to travel 9.2 miles on one kWh of motive energy. There are 35kWh in a gallon of gasoline, so the car needs to get 310mpg to match Canadian light rail! Most cars in city driving get 20-30 mpg, so that is 10-15 times more energy consumed than light rail.
The fact that many cities, especially American ones, have inefficient rail systems says more about the way they are designed and operated - usually overbuilt and under utilised.
Calgary's LRT system is an example of how to do it right, and cheap.
If that person drove a Nissan Leaf, they would need to get (3.6/0.25*0.62) = 9.2miles per kWh
Two thoughts. First, it would only take 2 people in the Leaf to match that efficiency - on the whole, carpooling with just one other person is probably about as inconvenient as mass transit. Also, the average passenner to vehicle ratio is already 1.5, so you have to factor that in.
More importantly, achieving that last bit of efficiency is really, really unimportant. The cost of wind power for that vehicle, for it's lifetime is a onetime investment of $1,500. Given that EVs can charge 100% at night and use 50% of wind power output that occurs at night, they actually support the installation of 2x as much wind as they need. That makes them extremely good for CO2 emissions!
Two thoughts. First, it would only take 2 people in the Leaf to match that efficiency - on the whole, carpooling with just one other person is probably about as inconvenient as mass transit. Also, the average passenner to vehicle ratio is already 1.5, so you have to factor that in.
Actually, for commuting, the average passenger top vehicle ratio is 1.2, so you can de-rate to 7.83 miles/kWh, still well above the milage for the leaf. If you can get it to average 2 people per car, then you are down to the actual mileage of 4.6miles/kWh. But commuting vehicle occupancy has been decreasing for decades, and going electric is not going to get it up to 1.5, where it has never been in the past.
Figure 8.2
Average Vehicle Occupancy by Trip Purpose 1977 NPTS and 2009 NHTS
Trip Purpose
Home to Other Family or Social and All
Year Work Shopping Personal Business Recreation Purposes
1977 1.3 2.1 2.0 2.4 1.9
2009 1.2 1.8 1.7 2.2 1.7
Sources:
U.S. Department of Transportation, Federal Highway Administration, 1990 Nationwide
Personal Transportation Survey: Summary of Travel Trends, FHWA-PL-92027,
Washington, DC, March 1992, Figure 6. Data from 2009 NHTS were generated
from the Internet site nhts.ornl.gov, February 2010. (Additional
resources: www.fhwa.dot.gov, nhts.ornl.gov)
So clearly, the average passenger to vehicle ratio is not a good indicator of commuting vehicle occupancy
To take 2 people in a Leaf is an idealised scenario - lets compare that to an idealised scenario for rail - like the Calgary system.
Calgary trains use 3.5kWh per km of travel (source http://www.calgarytransit.com/html/technical_information.html), or 5.65 kWh/mile, or 0.18 miles/kWh.
That train can (and does) carry 200 people, so the energy per pax mile is then 5.65/200=0.0283kWh/pax-mile, or 0.102MJ/pax mile.
For the Leaf to get that, with one occupant, it must get 35 miles/kWh, with two people, 17.5miles/kWh, three people 12, and with four people 9, and at five people, 7kWh. I have not seen driving results for a Leaf with five people, but I'll bet it is a lot less than the average of 5miles/kWh
But using an idealised carpool-heavy average of 1.5 people, the Leaf will need 24 miles/kWh, five times better than what it does get.
More importantly, achieving that last bit of efficiency is really, really unimportant. For light rail, you are correct, it is not really that important. But for an EV it is VERY important, because less efficiency means more batteries and/or less range. so for an EV to be effective, it must be highly efficient and optimised, and a train does not. This is reflected in the relative prices of the vehicles - Calgary has 114 trains, at $3m each, and carries 135,000 people per day, so the capital cost is $2500 per pax/per day. For the Leaf, at $33k and 1.2 people, it is $ 27k/pax/day, and even at 1.5people,it is $22k
You could summarise it by saying that trains highly optimise the people carried per vehicle, per day, for low electric complexity. EV's have high electric complexity for low people per vehicle per day - that is the price for the autonomy of being both wireless and trackless.
the average passenger top vehicle ratio is 1.2
Thanks for finding that. That's what I thought too, until recently, but I couldn't refind the number.
The problem: In 2008 there were 4,872M passenger miles by highway, 583.5M by air, 53.7M by Transit, and 6.2 by Intercity/Amtrak rail, according to http://www.bts.gov/publications/national_transportation_statistics/html/... , and there were less than 3B vehicle miles, according to https://www.bts.gov/publications/national_transportation_statistics/html....
So, that gives us well over 1.5 passengers per vehicle.
The source for the 1.2 number is from a survey, so I suspect that's the incorrect one.
That train can (and does) carry 200 people
Yes, but what is the average? You've got night, weekend, and deadhead trips to account for. That's inherent to mass transit, and must be included in the calculations.
chieving that last bit of efficiency is really, really unimportant... But for an EV it is VERY important
It's certainly a key parameter for range. OTOH, what I was getting at was the larger concern of dealing with PO or AGW.
Calgary has 114 trains, at $3m each, and carries 135,000 people per day, so the capital cost is $2500 per pax/per day.
I think that's a little too narrow. Rail requires track and operators, as well as bus/trolley feeders. Labor (operator/drivers, mostly) are the single biggest cost for mass transit, by quite a margin. OTOH, car driving is self-service, so that cost isn't included. Perhaps it should be, but it isn't.
@ HARM Nov 10, 5:37 pm
"In terms of net energy per passenger, public transit has it over any type of car by orders of magnitude, and transit vehicles powered by vastly more efficient electric motors (hopefully from clean power sources) is even better."
Could you please post some links with data to validate this? I'm not saying you're necessarily wrong, but there are critics who have published assertions to the contrary: http://www.amazon.com/Best-Laid-Plans-Government-Planning-Pocketbook/dp/...
(And before you point it out, yes I know this guy writes for the Cato Institute, but that doesn't automatically mean he's wrong on every point :-)).
= = = = = = = = = =
Some links below as requested. However, common sense tells us that a bus (let alone an electric trolley) even just half full of people consumes less energy per capita than the same number of people transported by average-sized cars. I would say that with even three people per car, and half the cars being EVs or hybrids, but don't have the time to do the math at present. I'm also interested in the energy and land use implications of car dependency on cities.
Transport and Urban Planning for the Post Petroleum Era, J. Kenworthy (2001)
http://www.naturaledgeproject.net/documents/kenworthytransportpostpetrol... +
http://www.naturaledgeproject.net/Documents/KenworthyTransportGreenhouse...
p. 20 graph, Private and Public Transport Energy Use in World Cities, 1995
"An average US city of 400,000 uses as much energy in private transport as a Chinese city of 10 million people."
The Broader Connection between Public Transportation, Energy Conservation and Greenhouse Gas Reduction (2008)
http://www.apta.com/resources/reportsandpublications/Documents/land_use.pdf
"By reducing vehicle miles traveled, public transportation reduces energy use in the transportation sector and emissions. The total energy saved, less the energy used by
public transportation and adding fuel savings from reduced congestion, is equivalent to 4.2 billion gallons of gasoline."
Table 3. Total Energy Savings Due to Public Transportation
Equivalent Gallons Gasoline per Year(billions
Total Effect (Primary and Secondary)of Transit on Reducing Energy Used 5.19
Less Energy Used by Transit (1.38)
Plus Savings Resulting from Transit Effect on Congestion Reduction 0.34
Total Energy Savings Due to Transit Availability 4.16
Public Transportation saves Energy and Helps Our Environment (2009, brochure for technophobes)
http://www.apta.com/gap/policyresearch/Documents/facts_environment_09.pdf
Electric Buses: Green Public Transport or THE Public Transport? (posted in 2009, Enviro News & Business)
http://www.enviro-news.com/article/electric_buses_green_public_transport...
They are also promoting electromagnetic inductive charging for wireless operation. Not to be outdone, so is
Bombardier for its Flexity trams: http://www.bombardier.com/en/transportation/sustainability/technology/pr...
Hope the above helps.
Thanks for posting the many links (may take a while to go through them all).
While I understand that is *seems* common-sensical to assume that, "a bus (let alone an electric trolley) even just half full of people consumes less energy per capita than the same number of people transported by average-sized cars", the data does not necessarily support this assumption. The devil is in the details, as some forms of public transit are much more efficient than others (commuter rail vs. diesel-powered buses), just as some cars are much more efficient than others (Prius vs. an H3).
http://www.templetons.com/brad/transit-myth.html
Surprisingly, public transit does not always beat the much maligned car. Should the average U.S. consumer ever decide to ditch gas-guzzling SUVs and trucks in favor of fuel-efficient hybrids, that relationship could potentially even reverse.
Harm, you are right about the bus, it is not always better.
I had seen Brad's blog before - the dissappointing data on US rail transport really shows how inefficient, and often under utilised, those systems are.
The Calgary system shows how efficient it can be, to a level that cars, even EV's can;t match, but for reasons I don;t really understand, not many cities folly Calgary's model.
On of the side benefits of transit, even buses, is that it makes car travel more efficient, by taking all those cars off the roads, and in the case of Calgary, avoiding building roads and parking spaces.
I think the real conclusion is that any city transport system, even a car based one, *can* be highly efficient, but most are not, for a variety of reasons.
The Euro cities partly solve this problem by being more dense, and minimising the transport distances needed in the first place - Houston could hardly be accused of the same thing!
The Calgary system shows how efficient it can be, to a level that cars, even EV's can;t match, but for reasons I don;t really understand, not many cities folly Calgary's model.
Actually they are using Calgary as a model. There have been a couple of dozen LRT systems built in the US that follow the same parameters, and obviously they are trying to achieve the same results.
The biggest problem in the US is government policies. They are still subsidizing freeways and automobile manufacturers even though they know their oil production peaked and started to decline 40 years ago.
It's much like the Easter Islanders continuing to build statues even though they know their civilization is collapsing. They think if they continue to build more and more statues, the fact that they have used up all of their trees will somehow be solved.
I think that their efforts in trying to fix their transportation problems will work out about as well as the Eastern Islanders did by building more statues.
Not that this is a problem for Canadians. We'll just sell more oil to them and continue to do our own thing.
Great photos RMG!
There are actually mountains in the backdrop of LA,, but chances of ever getting a photo like that of them are nil!
I do like the Easter Island analogy, the US will continue to build more freeways.
The thing is, even changing to an all EV fleet, which will certainly reduce oil usage, will not reduce traffic on iota - life in LA or any big city will be just as insufferable as it is today, with slightly cleaner air and fewer gas stations. Other than that, being stuck in an EV traffic jam will be just as frustrating and time wasting as an ICE one.
Much as I don;t like the French, I have to give them credit for doing things with style. Here, I can;t even get a beer on the BC Ferry to Vancouver!
The Calgary system shows how efficient it can be, to a level that cars, even EV's can;t match
But does that analysis of Calgary's system look the overall power consumption divided by overall pax-km, or does it just look at peak? Does it include the necessary supporting feeder buses?
Nick, we can lok at ideal cases and real; world cases, as long as we compare the same
For the C-train, the annual electricity consumption is 40,000MWh. For 130,000 people for six days x seven miles each way, that is 570million pax-miles. That is 0.07kWh/pax mile (0.02MJ/pax-mile). The EV, using 0.2kWh/mile (5 miles/kWh) needs to carry three people, on average, to match that.
Calgary transit does not break out the bus figures, so we have to make some educated guesses.
My first educated guess is that, from observation, the buses are well used, and run at least half full, even in off peak times.
My second educated guess, is that, as soon as they are widely available, Calgary will go to hybrid buses, which will bring the energy consumption per pax-mile lower still.
Since the buses are mainly used as feeders, we can assume short pax miles per trip. IF we assume all of the 130,000 daily passengers have a 2 mile bus ride, each way, we would have 520,000 pax miles on bus, each day. How much fuel is used? Assuming 15 pax/bus (average for all bus trips) and 5mpg for the bus, we get 75 pax-miles per gallon, so 7000 gal/diesel per day (and 35,000 daily bus-miles!).
75 paxmpg is 75/125 pax-miles/MJ, or 0.6MJ/pax mile, or 0.17kWh/mile, for bus.
We said each passenger does four miles per day on bus, so that is 0.68kWh of fuel energy, plus then 14*0.07kWh= 0.98, for a total of 1.66 kWh per passenger, and they did 4 miles on bus and 7 each way on train, for 18 miles. This comes to 0.09kWh per pax mile. So the EV, using 0,2kWh per mile, needs to have 2.2 occupants, on average, to get the same energy consumption.
Put a hybrid (or even electric) bus into the picture and the energy use drops even more.
The real advantage, of course, is to get off oil and onto electricity - then it's a question of which is the better electric mode - transit or EV. While we can and will debate that question, the real world answer will come over this decade.
Are you sure about the 40MWh per year?
According to http://www.calgarytransit.com/html/technical_information.html , the system paid $4.8M in 2008 for power, which would be $.12/kWh, which seems about 2x high for a government, wholesale buyer. $.06/kWh would give us .14kWh per mile.
Regarding buses:
15 passengers on average seems quite high. Don't forget, we have deadhead trips, and night and weekend. A really useful system, one that even begins to compete with personal vehicles, will go 24 hours.
5 MPG for local feeder buses is also a bit high. I think 3.5 would be more realistic. A hybrid bus might get 5.
Now, if we take these assumptions of 15 pax and 5MPG, then we get 75 pax-miles per gallon. Diesel has about 39kWh/gallon, so that's about 4 pax-miles/kWh, or .25kWh per pax-mile. So, even with these very transit-favorable assumptions, the average of rail and bus is (4x .25 + 14 x .14)/18 = .165, or about the same as an EV (.25/1.5 pax = .167).
And, we're still using much more oil than an EV, even if we assume that everyone uses mass transit for all of their needs, a highly unrealistic assumption.
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More importantly, even if mass transit used no oil, and 50% as electricity as EVs, it wouldn't really matter.
Again, achieving a little more efficiency is really, really unimportant. The cost of wind power for an EREV/EV, for it's lifetime is a onetime investment of only $1,500. Given that EVs can charge 100% at night and use the 50% of wind power output that occurs off-peak, they actually support the installation of 2x as much wind as they need. That makes them extremely good for CO2 emissions!
Rail, on the other hand, occurs during the day. The evening rush hour coincides with the daily peak. That means that rail uses very expensive peaking power, which is difficult to provide with wind, solar or nuclear. CSP solar would work reasonably well, but it's 2x more expensive than wind, and not the best thing for Canada.
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Again, I like electric rail. I use it for the majority of my travel. It's a very nice way to travel, and it will increase the efficiency of FF consumption a little. I thinks it should be greatly expanded.
I just think it's not a primary solution to our PO, FF and AGW problems. That's the territory for HEV/EREV/EVs.
Nick, can;t find my reference, 2007 was actually 39000 MWh, I rounded to 40.. It was about 26,000 in 2001 when they started the Ride the Wind program.
electricity is expensive (relatively to other Cdn provinces) in Alberta because there is little hydro - it is mostly coal. Wind, of course, is more expensive still. Industrial rates are around 8-9c/kWh, so 12c for the wind is not out of the question, though I think it is closer to about 10.
So, even with these very transit-favorable assumptions, the average of rail and bus is (4x .25 + 14 x .14)/18 = .165, or about the same as an EV (.25/1.5 pax = .167).
where did you get 0.14kWh/pax-mile from for the train?
From my post above;
For the C-train, the annual electricity consumption is 40,000MWh. For 130,000 people for six days x seven miles each way, that is 570million pax-miles. That is 0.07kWh/pax mile (0.02MJ/pax-mile).
So the total train portion of their day, is 14 miles x 0.07=0.98kWh
Now add that to the 1kWh for the bus, and we have 2kWh for 18 miles, or 9 pax miles per kWh
And keep in mind, if we can do EV's, we can do E-buses.
.
I am of the opinion that cities are better, more liveable places when there is more transit and less cars. That also happens to reduce oil usage, but quality of lifestyle is much better, in my opinion.
Ev's etc the primary solution to peak oil? Well, that remains to be seen, but if they are, they have a lot of work to do to make that happen.
I think we will ultimately need to live less transport intensive lives, which I think is not a bad thing.
It was about 26,000 in 2001 when they started the Ride the Wind program.
Is the rail 100% powered by wind? Could that 26MWh be just the wind portion?
electricity is expensive (relatively to other Cdn provinces) in Alberta because there is little hydro - it is mostly coal.
That's surprising - coal should be cheap. The US is 46% coal, and industrial power is $.05-.06.
12c for the wind is not out of the question
EVs would charge at night, using "surplus" wind power, at much cheaper rates, and providing support for wind power in general.
where did you get 0.14kWh/pax-mile from for the train?
I doubled the .07 number, under the assumption that the $4.8M figure was for $.06/kWh power.
9 pax miles per kWh
So, .11kWh per mile, about 2/3 that of EVs. Or, a one-time cost of about $500 per EV. That's perhaps 1/3 of a cent per lifetime mileage.
More importantly, EVs would be powered by the surplus night time wind generation, so even if EVs needed 50% more power, they'd still be much cheaper overall to power. Plus, they'd provide demand for that surplus power, which wind generation really needs.
if we can do EV's, we can do E-buses.
But that would be much harder, because their daily mileage would be higher. You might need to do caternary, and you'd still have to use peak power.
I am of the opinion that cities are better, more liveable places when there is more transit and less cars. That also happens to reduce oil usage, but quality of lifestyle is much better, in my opinion.
I agree!
Ev's etc the primary solution to peak oil? Well, that remains to be seen, but if they are, they have a lot of work to do to make that happen.
Yes, they need to ramp up production.
I think we will ultimately need to live less transport intensive lives
Not because of energy limits, though. We have lots of cheap wind.
NAOM,
I'm not sure what you're asking.
My first reference to 50% was related to the fact that buses use fuel. In theory, one could have a mass transit system that just used rail. That would be much more expensive than a rail/bus combination.
The 2nd reference to 50% was about the fact that wind farms produce very, very roughly half of their output during high demand periods, and the other half during periods where more electrical generation isn't really needed. In that situation, EVs and wind farms are synergistic: the wind farms produce power when EVs need it, and the EVs absorb wind power that would otherwise be not really needed.
Ah, I knew it couldn't last.
All this is supposed to happen for more than just a few people while the world is deleveraging from the greatest asset bubble that's ever been blown?
Nick, when are you going to start taking that into account? (Rhetorical question because by this time I think I know the answer.)
All this is supposed to happen for more than just a few people while the world is deleveraging from the greatest asset bubble that's ever been blown?
Sure. We're deleveraging right now, and car sales are rising.
Nick, when are you going to start taking that into account?
Well, I'll know how to do that when someone does a quantitative analysis showing just what leverage levels "should" be. How do we know? Do we just look at a chart, and say "boy, that looks high!"?
Debt levels vary depending on one's economic model. For instance, in a renter society, debt is low: one class owns the property, another rents it. In a owner society, debt is high, but the cash flows are very similar. The risk is the same, but it has moved to different places, and is counted differently. So, if renters become owners, is that somehow riskier or less sustainable?
Yes, they bottomed out, along with the recession, and have been rising since. A classic business cycle.
Debt is increasing to finance the increasing car sales. That is one reason that real GDP growth is still positive. Debt is also financing the inventory buildup in the third quarter. Seventy percent of the growth in real GDP during the third quarter of 2010--almost all of it financed by increasing the flow of credit.
Debt is increasing to finance the increasing car sales....Debt is also financing the inventory buildup in the third quarter.
How much is it increasing? Is it increasing out of proportion? What's our source for the data?
The data are not yet available. GDP data always comes in before the numbers composing GDP are published. For that matter, the first revision to third quarter GDP is not yet available and probably won't be until late this month or December.
As I said elsewhere, the Bureau of Labor Statistics is understaffed, seriously understaffed, so there are longer and longer waits for reports.
I have the distinct sense that the business community is happy to starve the statistical arms of government, in order to make regulation more difficult.
+1 on idea of PO = singularity
A close friend of mine has been an avid Sci-Fi reader for 40+ years. He said that of the thousands of stories he has read, many predicted that humans would visit the moon, and many were prescient with regard to television, but he said he could not think of one that predicted that man landing on the moon would be watched live on television.
PO is not the only game in town and I think there will be a confluence of events over the next decade that makes the future (at least for me) very murky.
KLR,
"Or they might demand that US forces seize Saudi oil fields."
That is more realistic than meets the eye at first blush.
There is evidence that it has already happened, albeit not to Saudi Arabia.
The problem they are trying to fix has to do with public acknowledgement in the U.S.
They are experimenting with ways to get out of the closet on this, but it is a long term project, and difficult to measure success.
Post-oil is too strong - it will really be post cheap oil. Whether the economy will grow will partly depend on how much we pay for oil. For now, the US economy may stall from around $100 - $120. If OPEC really has spare capacity presumably they will increase production to prevent $100 oil. If some of the pundits are correct the spare capacity may disappear in a couple of years. At that point triple digit oil prices may be here to stay. Eventually - say 10 to 20 years - alternatives to oil may be produced in enough quantities so as to cap how high oil prices can go. Nobody will pay $150/barrel for oil if they can buy liquid fuel from coal at $100/barrel. People will choose a ng or electric car that costs 10 cents a mile for fuel over a gas car that costs 30 cents a mile for fuel. It's not really the end of oil in our lifetimes - it's the end of cheap oil.
Mr Rubin did not talk about growth. He talked about economic contraction, and changing the principles of the entire system. These will be forced upon us.
According to Case-Schiller report, Cleveland's housing index in August 2010 stood at 104.23, down 15% from its peak of 123.26 in February of 2006.
I don't think that Cleveland is the problem, compared with, for example, Phoenix which was at 107.35, down 54% from its peak of 228.35 in May of 2006. If you bought your "get rich quick with no money down in real estate tapes" and got out at the right time, there was much more money to be made in Phoenix. And a lot more mortgages underwater there now.
Overall I could not agree more. That manufacturing and food production must move back are dead on. If I had the money I think investing in a cannery would be appropriate.
I do not see any direct correlation between oil prices and the greed in the housing finance. The irresponsible manner in which loans were made is not an energy issue per se.
That growth could not continue in the face of increasing energy costs I would agree with. That growth is necessary to repay loans I would agree with as well. That these loans were made as a last ditch effort to 'grow' the financial sector seem obvious to me.
I see the divergent point as thus; banks found a way to not have any skin in the mortgage game. Their greed overtook any sense of prudence, if not actual outright criminal intent. Seriously 'no document' loans? What perversion of fiscal sanity does that fall under? I see PO and finance as intertwined in time, intensified, but not causative.
The layout for the prospects of re-localizing is definitely a positive. Given time to "adjust" this is about the most positive outlook I have read in a long time.
D - I agree about the lack of a direct correlation. But indirectly there seems to be a common link: the govt's desire to spur "economic growth" despite a lack of fundamentals. The banks might have been "greedy" but they followed the rules not only set out by the govt but followed the govt mandate to push the subprime. Looking back it's easy to see how much of our "economic expansion" was based upon the housing bubble. It allowed the generation of trillions of dollars out of thin air. How else was the economy to expand? Expansion of manufacturing? Not likely given the continued flow of this sector overseas. The service industries, especially the non-essential ones (how many Starbucks do we really need)? To a degree perhaps but when disposal income dropped as energy ate up more of America's paycheck this component of the economy quickly became disposable. Though not directly related to the crippling blow high energy prices had on the economy it does highlight the lack of other options we had for growth. And that's the indirect affect: high energy prices depleted the revenue stream from the non-essential service sector and repayment capabilities of all those marginal home loans. Sorta of like having a disease that doesn't kill you but the complication do you in eventually.
I agree that the decline in globalization might allow us an opportunity. But will we have the capex to exploit the situation? Expanding domestic production of essential products would be great but who's going to write that check? Steel mills and other manufacturing facilities aren't cheap. We'll also need a workforce more geared to blue collar activities than "business administartion" and legal briefs. The stimulus money the feds are throwing at the problem might employ folks repairing roads, building bridges, higher some more cops and teachers, ect. As helpful as that might be to local govts it doesn't get new plants built that can employ folks for decades and provide a real expanded base to the economy. OTOH it's great to try to expand medical access to as much of the population as possible. But the bulk of that expansion will be funded by business revenue that can't flow in two direction at once: expand social benefits or expand business. Difficult to see how it can do both given the current state of the economy. In a year or two those stimulus jobs will be gone when the stimulus money runs out. Gov't stimulus can help in the short run but it's no more sustainable than any of the other false growth plans that have been inacted over the decades IMHO.
I think you are right in that the availability of capital is going to be the limiting factor. This is exactly what Dennis Meadows of "Limits to Growth" fame has said he expects to be the limiting factor, in general.
Of course, capital is really tied back to net energy (especially if it is not borrowed capital). If net energy falls drastically, it is hard to have enough for capital for replacement of declining fossil fuel production, plus building of new factories.
16,635 stores in 49 countries. Wonder how much it costs to open one...
Looking back it's easy to see how much of our "economic expansion" was based upon the housing bubble. It allowed the generation of trillions of dollars out of thin air.
The housing bubble wasn't "thin air" - it was real homes, built by real developers. The problem: we built more homes than we needed, because low interest rates misallocated capital to the interest-rate-sensitive housing industry.
"The housing bubble wasn't "thin air" - it was real homes, built by real developers."
Existing homes went way up in price as well. That was pretty thin-airish.
Yes, but the home price inflation wasn't counted in GDP - what the previous comment called "economic expansion".
It's called Mortgage Equity Withdrawl (MEW). Lots of people refinanced with cash out or took out Home Equity Lines of Credit.
That's not income, it's a transfer of wealth. It's not counted in GDP. Sure, when people borrow they can consume more, but the actual production that's counted in GDP is different from consumption. US'ers may owe more to others, but that's different.
My point: US GDP grew during the bubble years, and that GDP was real production, not "thin air".
MEW did add to GDP. I think the graph says it all. GDP growth would have been flat since 2001 without MEW.
http://www.calculatedriskblog.com/2007/01/mews-impact-on-2007.html
MEW may have been used to help create demand for GDP growth (whether it was the best way to do it is another question), but that's different.
Again, GDP is real production: people building houses, assembling cars, providing services, etc. The housing bubble was mostly real construction workers building real (but partly unneeded) housing.
During the bubble years real GDP increased, but it was based on an annual double-digit increase in debt. With real GDP growing around 3% or even 5% there is no way to sustain annual double-digit increases in debt. The crashdown was inevitable, and we have lost more in declinging real GDP during recent years than we ever gained during the bubble.
Relying on memory now, I may be off a bit, but my recollection is that real GDP per capita is now at 1998 levels.
Thus the bubble was a huge policy error, mainly created by excessively easy money created by the Fed.
my recollection is that real GDP per capita is now at 1998 levels.
Current GDP is at 1st quarter 2007 levels.
Not on a per capita basis. We've had population growth of approximately 1% per year. Thus the number that is meaningful is per capita real GDP.
But, how does pop growth relate to the "realness" of GDP growth?
Because GDP = Consumption + Investment + Government Spending + Exports
If you have more people but real GDP stays the same, then consumption (and to some extent standard of living) goes down for the average person.
I got the 1998 date from "The Wall Street Journal," and I think it is right.
If you have more people but real GDP stays the same, then consumption (and to some extent standard of living) goes down for the average person.
Sure. Nevertheless, I don't see how that relates to your original suggestion, that the GDP growth over the last 10 years somehow isn't "real". Just because a certain level of growth is desirable to keep ahead of population growth isn't really relevant to that.
I never said the GDP growth was not real. What I said was that the appropriate measure is per capita real GDP; that is the measure used by economists to compare different countries and also to compare different time periods within the same country.
Yes, but why is that important? The original comment was: "we have lost more in declinging real GDP during recent years than we ever gained during the bubble."
"Real GDP"??
In any case, here's inflation adjusted GDP:
1998 10,283.5
1999 10,779.8
2000 11,226.0
2001 11,347.2
2002 11,553.0
2003 11,840.7
2004 12,263.8
2005 12,638.4
2006 12,976.2
2007 13,254.1
2008 13,312.2
2009 12,987.4 26.3%
GDP is 26% higher. Even adjusting for population growth (which doesn't really make sense) it's still well above 1998.
But how much of that GPD is debt?
If you can chart it I would like to see the personal debt graph above with the inflation adjusted GDP numbers you just provided.
My comment is what is 'real' about real GDP. Was it earned and paid for? Or was it borrowed? Shifted forward in time consumption based on ever expanding debt might be 'real' but clearly and resoundingly un-sustainable.
how much of that GPD is debt?
None of it. Debt is an asset or liability, GDP is productive output.
Now, consumption can be higher than production, and the difference can be made up by borrowing. So, I think you're thinking of consumption, not production. I'm talking about Gross Domestic Production.
GDP - Gross domestic product (NOT PRODUCTION).
GDP= private consumption+gross investment+government spending +(exports-imports)
http://en.wikipedia.org/wiki/Gross_domestic_product
Yes. GDP (Gross domestic product) measures domestic production. Product and production are synonyms, and I provided the more familiar synonym to clarify what it means.
Which is what that equation is intended to equal: production can be consumed privately, publically, invested, or exported. Imports are subtracted: they're not domestic production, even though they're consumed domestically.
OK Let me try one more time and be more clear. It may appear that I thought 'debt' is a portion of the GDP formula. Clearly it is not.
What I'm trying to get at is this; how much of GDP was financed.
I would love to see the graph I mentioned above. It looks like the curves match (roughly).
I think what you should really concerned about is US net import consumption, financed by foreign debt. That's about 5% of US consumption. About half of that is oil, and the other half is dominated by Asian mercantile exporters, especially China.
Those exporters are taking debt in return for their exports. Some of that is going into reserves, and might conceivably not be a problem because they'll stay there. OTOH, the resulting currency imbalances are harming US manufacturing, and the debt service will have to be paid.
We'd solve 50% of the problem by kicking our oil import habit.
Nick - I'm a little late to the chat in case I'm missing a point. According to the link I posted above 1998 Real GDP (in 2005 dollars) was 10.28 In 2009 it was 12.99. So that is a 26% increase. But it's also 200% higher than it was in 1970. Perhaps missed some of the chat but isn't the significant point being that GDP, regardless of the specific metric, has gone flat over the last several year? But I agree with you: the building boom did add real GDP growth. But is that the important issue or is it that this real GDP growth was based on an economic stimulus (cheap and poorly risked loans) that couldn't maintain itself? The gov't could issue new money tomorrow and allow everyone in the country to get a new mortgage at 1% if the gov't requires no proven ability to repay those loans. I'm certain the GDP would shoot through the roof if they did so. But would anyone consider this to be a sound policy? I would hope not.
That was a point I made a few days ago: IMHO it's good for the govt to step in during bad economic times and inject money into the system to spur GDP growth. There is a price to pay for such actions but there's usually a net gain. But that wasn't what happened AFAIK. The GDP was given a big boost during relatively good times to make for even better times. But that same policy appears to have led to the housing industry bust (and all the collateral damage it brought with it). Add that to the GDP growth killer of higher oil prices and we are where we are today. The govt has used up much of its "ammo" up during the good times and now has little choice but to create trillions out of thin air to attempt to just keep GDP flat. And so far even that doesn't appear to working. Maybe we need another couple of years to see if the efforts will work. But IMHO the best we should hope for is to keep GDP from continuing a downward slope. And I'm not sure I would bet lunch on that happening. There are huge factors, such as energy prices, out there which the gov't has no control over.
I agree. The US borrowed too much during good times, and used up much of it's fiscal ammunition. As best I can tell, the US is relying too much on borrowing (much of that from the US wealthy), and too little on taxes and spending.
It's also, of course, borrowing too much from oil exporters. It needs to kick the oil habit ASAP.
It also seems to be suffering from the Dutch disease, based on export of US dollars as a reserve currency.
As best I can tell, the US is relying too much on borrowing (much of that from the US wealthy), and too little on taxes and spending.
Actually, it is relying too much on borrowing from foreigners, particularly Chinese and Japanese. The foreigners are starting to have doubts about lending more money, so now the US government is relying on printing money (called "quantitative easing" in bureaucratic bafflegab) to fill the gaps. This will probably work out as well as financing government by printing money has worked in other countries, which is to say: extremely badly.
It's also, of course, borrowing too much from oil exporters. It needs to kick the oil habit ASAP.
The oil exporters aren't really lending money to the US any more. They like to have their savings in more reliable investments. Gold seems to be extremely popular. The Chinese are still lending money, but their credit rating companies are starting to get antsy and are downgrading US debt, so I wouldn't count on them bailing out the US government much longer.
It also seems to be suffering from the Dutch disease,
The US can only dream of suffering from the Dutch disease. It is suffering from a disease of its own invention, one with much worse side-effects.
it is relying too much on borrowing from foreigners, particularly Chinese and Japanese.
No question that's also true.
The foreigners are starting to have doubts about lending more money
A few, but realistically, where else can they go? The EU doesn't look so stable lately. The bid to cover ratio for t-bills is still looking pretty good, and t-bill prices are certainly staying high.
the US government is relying on printing money
Don't forget about the velocity problem: credit is only part of the money supply if someone is actually spending it.
The oil exporters aren't really lending money to the US any more. They like to have their savings in more reliable investments.
Where?
Gold seems to be extremely popular.
There's a limited supply, so really all ME investors can do with gold is create a price-bubble. That's a guaranteed way to lose money.
The Chinese are still lending money, but their credit rating companies are starting to get antsy and are downgrading US debt
Have you seen a link for that? I wasn't aware that Chinese credit rating companies were important players.
Besides, how are the Chinese going to suppress the yuan if they don't buy recycle it into dollar-denominated vehicles?
realistically, where else can they go?
Away from the US and Europe. I have shares in everything from oil sands to potash to uranium, and the Chinese seem to be kicking the tires on all of it. I think they're trying to divest out of US securities.
I wasn't aware that Chinese credit rating companies were important players.
They aren't very important. They're just getting nervous. See: Chinese bond agency cuts U.S. debt rating
how are the Chinese going to suppress the yuan if they don't buy recycle it into dollar-denominated vehicles?
They're probably not going to be able to suppress the yuan, but they'll most likely recycle their US dollars into Canadian and Australian assets, among others. The US government, however, is probably going to do a really good job of suppressing the US dollar.
That reminds me - I have some US dollar travelers checks I should unload while they're still worth something...
They're probably not going to be able to suppress the yuan
That would be a very, very big deal. Their suppression of the Yuan has been the basis for much of their economic growth in the last 10 years. If that changes in any substantial way, it would be very, very big news. If you're right, you should be able to make a lot of money trading currencies. Are you doing that??
The Dutch Disease refers mainly to the results of year after year of high income flowing from North Sea oil and gas.
The Dutch Disease may have been coined because of that, but it's a much older phenomenon.
The earliest example I know of is extremely relevant: the Spanish used gold from the New World to debase the gold standard, and make themselves rich. As a result, the economy looked good, but it was declining. This is very comparable to the Dollar being exported for other countries' reserves.
http://en.wikipedia.org/wiki/Dutch_disease
In economics "real" means "adjusted for inflation." That is all it means. Adjustment is made using the GDP deflator, which is a much more accurate measure of inflation than is the Consumer Price Index.
Ah. Of course.
Adjusting for population growth makes a lot of very good sense. However, my memory may have slipped; it rarely does, but it happens. The 1998 figure may have been real Disposable Income per capita, which is an important statistic and one I often look at. I should get used to relying on the Internet for data but have always been a pen and paper and paper journal type of guy. Unfortunately, the public library across the street doesn't have much good economic data in it, but they do subscribe to the "Wall Street Journal," which I read from time to time.
Adjusting for population growth makes a lot of very good sense.
Absolutely, in the right context. For instance, if we want to compare affluence across countries. OTOH, if we want to analyze the strength and causes of economic growth, it's less useful.
Don - here's that dandy little link for pulling out all the GDP data. http://www.measuringworth.com/datasets/usgdp/result.php
Good lord Nick and I agree on something!
The End is truly nigh.
;-)
Rockman-
I do think they are intertwined; PO and finance. Going forward I would agree with you on finance being a very limiting factor toward any mitigation, revitalizing or restructuring. There are already to many unfunded commitments be it SS, pensions, Medicare, Medicaid, public employee retirements, etc. the list is longer than the bank balances. So someone will have to do without, or a lot of someones doing without. A decline in the standard of living is very likely in the US due to either finance or PO as the net effect on personal finances is nearly identical. With less discretionary money I could see first that 'important' things are repaired instead of being replaced for as long as possible. I see more dented cars and trucks on the road than I remember already.
You are right on that money cannot flow two directions at the same time. At this edge most everyone is going to be unhappy, with many unfundable programs. How long can we continue to borrow money to pay unemployment claims is what first comes to mind.
The adjustment doesn't look easy or pretty. The realization that this is a hard, long term change has not been realized by most imho.
Sure money can flow in two - or more - directions at the same time. If money keeps flowing the economy - broadly speaking - is fine. The economy is fundamentally an ecological system. The more complex the ecology, the more life it can support. A complex ecology means multi-dimensional, multi-directional flows.
What caused the crash was in part a monoculture on Wall Street - everyone making the same bet for the same reasons at the same time. The economic ecology was the poorer because there was little dissident thinking, and because the creatures of "government regulation" had all been pushed away - remove the predators, and the prey suffers greatly in fitness.
This is not to say the oil shock aspect is not a true narrative too. Events were overdetermined. Even moderately complex ecological systems produce a plethora of overdetermined events.
Speaking of which, if oil shocks restore manufacturing in the rust belt, everybody and their horse is going to be taking credit for it. It will be the "triumph" of protectionism, of internationalism, of progressivism, of conservatism.... And it will solve a totally difficult problem - the utter uncompetitiveness of an uncolleged industrial workforce in a "flat" world.
I should have been more clear. It is obvious that money can go many directions at the same time, in the broadest sense. Just not the same money. If I spend it on gas I don't have it to spend on something else.
D - Sure but isn't a large part of every biz sector dependent upon some degree of debt? I completely agree with you: adjustments won't be easy or pretty. In the past govt intervention has helped when we hit a bump in the road. But I think we've used up too much of govt's ability to improve our lives during relatively good times. It was a big boost to our two-party system to use those efforts to buy votes. And now, when that ability is greatly needed to save us from some potentially serious bad times (like 15%+ unemployment) the govt ability to boost the economy is falling short of the negative influences IMHO.
'no document' loans?
They had a legitimate purpose for a long time. If you're a realtor, your income can vary a great deal. If you have 50% equity in your home, you're still a good risk.
We got in trouble when "no-doc" loans were abused by lenders who 1) did away with equity requirements and 2) encouraged borrowers to lie about their income.
Weren't no-doc mortgages also useful in lending to undocumented alien homebuyers, especially in California and Arizona?
I haven't heard of that.
To clarify: "no-doc" means only that income isn't documented. The rest of the application process is/was the same.
One of my last clients was a senior VP in the mortgage section of Wells Fargo. This was Dec 2006. Housing prices were dropping and problems in the market were evident. I had sold my mother's house over a year previously.
I asked him why WF was still writing so much dangerous mortgage paper. His answer; " We have to do it because everyone else is doing it and we won't be left behind. "
I asked him what would happen if the real estate market blew up. He replied; " We have laid off all the risk to others ."
I wondered at that time who was taking that risk. Now I know
I'm sure there are a few. After all any warm body who could sign a mortgage application was actively sought out. This wasn't driven by government edicts to make houses available to the less financially fit members of society, it was driven by the greed for application and processes fees. The financial elite, claimed the risk was well in hand, so why should a mere banker or loan officer worry, just write as many loans as you possibly can to maximize your fee income.
I think it is a bit of an over-generalization to assert that triple-digit oil prices will spell the end of globalization. It would be more accurate to say that we will see a reduction in the importation of bulk products of relatively low value per unit weight, such as common carbon steel from China or pulp wood going from Canada to Japan.
A modern giant container ship or bulk carrier is extremely energy-efficient in terms of fuel consumption per ton-mile. So oil could go to $200/bbl and we will probably still see the importation of high value-per-weight items such as consumer electronics, power tools, and the like.
Plus, off-shoring is not just about making stuff overseas and importing them back here. It's also about things like moving mail-order call centers to India, the incremental energy cost of which is, for all intents and purposes, nil. Furthermore, the purpose of many US companies moving offshore is not just to be able to import cheap stuff back home, but rather to establish a presence in growing foreign markets to compensate for their shrinking presence in the US market. (A good example is a major chemical company like DuPont, whose strategy over the last several decades has been to get a higher percentage of is revenue from overseas markets.) Then there is the tax environment, which is a very complicated subject on which I am not qualified to comment but one which plays an important role.
So, while transportation costs, as related to the price of oil, is certainly a major factor in the attractiveness of globalization for US corporations, it is certainly not the only factor. I have a hard time picturing all this manufacturing (in terms of dollar value) coming back home to roost if the price of oil goes up to a price in the low 100s. Certainly some will, but most probably won't.
Perhaps a more important factor in the future of globalization could be nascent labor movements in these low-wage countries. I picture the labor situation in them as akin to what it was like in the US during the late 1800s and early 1900s, when labor started to assert itself. The logical endpoint for this could be a sort of global wage scale, one lower than current US wages but higher than Third-World wages. If this leveling of the cost of labor takes place, then and only then will the incremental cost of shipping really kill globalization.
At some point it may make economic sense for cargo ships to use natural gas. Another factor for ships - slowing down saves a lot of fuel.
I doubt ships will ever use natural gas. It would have to be liquefied first, adding to the cost. Even then the cryogenic tanks would take up a lot of space. A return to coal would make more sense. But not a lot more sense. ;-)
Ron P.
LNG carriers are increasingly numerous, and logically enough these have used LNG boil-off as fuel for some time. In Scandinavia and Germany there is a lot of recent interest in LNG fuelling for ferries etc. See http://www.ngvaeurope.eu/article-in-the-february-issue-of-the-gvr-use-of..., for examples.
Nuclear
Unlikely to be LNG. Cargo ships are as much limited by volume as by weight. They're also very efficient for the amount of cargo they can carry. If you only look at the price of energy inputs, oil can get a lot more expensive before cheap imported goods become unaffordable.
It's more likely to have some other discontinuity in the supply chain. Container ships are part of a big, complex, all-your-eggs-in-one-basket system with lots of single points of failure.
I agree Joule. High priced tech items like flat screen TVs and such will still be able to be manufactured in Japan or other places and be shipped here a lot cheaper than they can be built here. Even clothes can be manufactured in India and China and shipped here cheaper than they could be locally made even if oil went to $200 a barrel.
Of course steel is an entirely different matter, especially if the oar has to be shipped from South America to China, then the finished steel shipped to North America.
Automobiles? I guess they are on the margin. Anyway most foreign automobiles are made in the USA. I suppose most of the parts are shipped in though.
But the main thing I got from the video was that he thinks the recession was caused by the high price of oil. Of course there were other mitigating factors but I agree with him, high oil prices and the flattening of production was the primary cause of the recession.
Now I cannot agree here. There is no way we could get all the countries of the world to agree to that.
Ron P.
Darwinian -
For there to be a global wage scale (or at least a substantial narrowing of the wage gap between East and West) countries don't have to agree on anything. It can happen naturally.
If there is a free and open global market for say toasters, then eventually the price of equivalent toasters from country to country will tend to fall into a relatively narrow band (excluding the effects of currency exchange rates, which is whole other can of worms). So too, if labor in low-wage countries acquired the right to collective bargaining and if that labor is still in high demand, then that labor would be in a good bargaining position to raise wages. The opposite had been happening in the US, thus bring US wages down. Therefore, it would appear that there are forces at work to cause labor rates to eventually converge. Good if you're an Indian or Chinese; bad if you're an American or European.
In reality there will never be an official global wage scale, but rather a narrowing band of wage rates that could make importation from East to West less attractive in years to come.
> it would appear that there are forces at work to cause labor rates to eventually converge.
I've been wondering about this. What we're seeing now is the result of about 400 million poor-country workers (the ones with at least some high-school education) becoming able to compete directly with rich-country workers over the course of two decades.
There are many, many more--billions--in Central Asia, the Arab world, and Africa, (leaving aside the 600 million poor rural people in India) who cannot yet compete because they don't have access to education or capital (computers etc). As poor countries get richer, we can expect that to change. These workers will come on the market.
It seems to me that there will be downward pressure on rich-country wages for decades to come, as long as shipping is cheap enough and borders stay open. The convergence will be a bit one-sided.
Poor countries are not going to get richer. Higher prices and decreased production of fossil fuels is going to make everybody poorer. For example, China's growth has been fueled by cheap coal and relatively cheap oil. As oil and coal and natural gas all become more expensive and less available, real GDP will go down for all countries. For example, many of the poorest countries are dependent on foreign aid. With rich countries becoming less rich, my guess is that foreign aid will go down a lot.
To make matters worse, the poorest countries all have high birth rates, and so long as death rates remain low they will have rapid population growth, which decreases per captita GDP. With rising prices for kerosene, more and more trees will be cut down for heat and for cooking, and this deforestation will cause worsening soil erosion, thus lowering the amount of food that can be produced. Then death rates go up due to undernutrition and malnutrition.
The idea that poor countries were going to develop into richer countries belongs to the era of cheap oil. The rising price and eventually the falling production of oil means that undevelopment--not economic development--is in the future of poor countries.
I'd have to agree.
Most of the poor people in the poor countries bred instead of getting rich. Only now are they stopping to breed. But it's too late.
Not that it matters much, the rich countries are broke and will be affected by the die off as well. However I suspect that a greater percentage of people in the rich countries will make it through the bottleneck, and with more valuable assets.
I fully expect in the coming years to hear increasingly more stories about mass upheavals in poor countries. And you can't expect the rich world, up to their eyeballs in debt owed to the financiers, to be able to do much.
China's growth has been fueled by cheap coal and relatively cheap oil.
China's growth has been fueled by cheap labor, rising education levels, and the realization by their leaders that market economy systems can produce far superior economic growth to command economies. The Chinese aren't counting on cheap oil or cheap oil and are busy putting alternative energy sources in place.
the poorest countries all have high birth rates, and so long as death rates remain low they will have rapid population growth
The fertility rates in ALL countries in East Asia, including the poorest, are now below replacement levels, and populations will start to decline in a few decades. Most of the countries in South Asia, including some of the poorest, also have fertility rates below the replacement level. Many developing countries are now net food exporters despite their large populations.
The major exceptions to sub-replacement fertility levels are in Africa and the Middle East. These are the countries which will be short of food in future - but mostly because of economic failures, not lack of resources.
http://www.dallasnews.com/sharedcontent/dws/dn/opinion/points/stories/DN...
A new look at an aging world
A very good article and by far more differentiated than the - here very commen - population-bomb outcrying.
this + dysgenetics + peak ressources + FIAT-money = time bomb
I'm from east germany (south-west Saxony) and i know what an aging and shrinking population means. Seeing you're home country die off is not as nice as some here suggest. See one more tree (we have allready much here in the ore mountains) growing doesen't make things better when you don't see children on the streets any more. But maybe whe are luky when everything falls appart, my gradparants have allready a big garden, growing much off their food...
Good Lord, do we have another "birth-dearther" here?
Last time I checked, the world was (still) setting new records for population, adding roughly 70 million additional souls per year. Perhaps East Germany isn't, but that probably has a little more to do with post-Cold War/reunification migration patterns than anything. Yes, many Western industrialized nations are starting to see a drop below replacement population levels (finally), but this is something to be cheered, not lamented --and hopefully emulated by poorer nations with sky-high birth rates!
The poor countries of East Asia are not the poorest in the world; most of the poorest countries in the world are in Africa, and they all have birth rates much higher than death rates. Name one country among the poorest twenty in the world that does not have a population growth based on birth rates exceeding death rates.
To a large extent, the very poorest nations remain poor because of population growth. Higher fossil fuel prices will mean higher food prices; death rates will begin increasing as food becomes increasingly scarce and expensive.
Note that with the trivial exception of a few oil-exporting countries all the rich countries in the world have zero or negative rates of natural increase in population.
No - especially not in sub-sahara africa. At least not the primary factor. When this would be true, no nation could have become rich because the overhelming majority had high population growth when the economic growth levelled off.
They (especially Africa) remain poor because of very different factors:
- low overall IQ levels because off genetic factors and bad pregnancy nutrition + bad public school system + no book / illiteracy + cognitive skills doesen't matter in africa'n societies + ...
- cultural bias
- geograpic and natural disadvantages: bad soil + malaria + water scarity
- AIDS (which is of course interlinked with point 1)
- civil war / bad government
- ...
- ...
- high fertillity / population growth
First, I question whether sub-Saharan peoples have a lower I.Q. than other races because of genetic factors. I think there is no evidence whatsoever to support that generalization, and considerable evidence (e.g. the I.Q. of Black people in the West Indies) to contradict it.
By far the most important factor that has made sub-Saharan Africa poorer now than it was twenty years ago is rapid population growth.
AIDs and malaria and other tropical diseases certainly have inhibited economic development, no question about it.
Notoriously bad governments have also been major causes of continuing and worsening poverty in Africa. But rapid population growth despite already being in overshoot is the 800 pound gorilla when it comes to explaining lack of economic development in sub-Saharan Africa.
Wherever you question this or not doesen't chance the strong empirical effidence of this correlation.
http://en.wikipedia.org/wiki/Nations_and_intelligence
http://en.wikipedia.org/wiki/IQ_and_Global_Inequality
Simply "i have a political correct whish" - thinking. I did not say that there are no differences in different subgroups of blacks. At least black is only a colour of the skin - nothing else. For example there higland Ehtopians or by fare better scoring than the Negroides in central sub-sahara africa (e.g Demogratic Repuplic of Congo). The West Indies are are very mixed statue and not real black Negroides. There are other "groups" with very low overall IQ's which are not black of course, e.g. Roma and their sup-group if the Sinti in Europe, Ausralian Aborigines,...
In the end, it doesen't even matter if the low cognitive cabability of African Blacks are at some degree genetic determined or completely determined by the enviroment. The problem stays the same! Low cognitive cabability --> high fertility, high mortality, illitaracy, AIDA, cicil war, bad covernment, ...
This is the 800 pound gorilla, because it has so many feedback loops, including high fertillity, illiteracy, bad habits (Health, AIDS), bad covernment, ...
The low overall cognitive capability of some groups + culturel bias is the reason that they don't start do develop - opposite to China, India, ... which all had very high population growth in the past. It is also the reason the fertility levels stay high, AIDA spreads and many other factors.
Belive it or not, it doesen't chance anything.
Based on what evidence we have, the Chinese genetic basis for I.Q. is higher than that of English or German peoples. Why then did the industrial revolution happen in Europe instead of China. China stagnated for more than 2,000 years, despite the superiority of Chinese genetic intelligence.
Black Jamaicans and other Blacks in the West Indies are overwhelmingly Negroid with very small admixtures of of other races. Their I.Q. scores resemble those of Europeans. Barbados and Trinidad have especially high average I.Q., if my memory is correct. This is conclusive evidence that there is no genetic basis for inferiority of intelligence among the Negroid peoples who were the ancestors of the slaves that came to the West Indies. I don't have any good data for Cuba, but my recollection is that black Cubans have about the same intelligence score as white Cubans.
I care not a fig for political correctness, but I do know a lot about human genetics and also a lot about sociology.
The poorest country with a sub-replacement level fertility rate is Myanmar (Burma), the 163rd richest country in the world with a GDP per capita of $1,197 (right behind Haiti, see List of countries by GDP per capita ) and a fertility rate of 1.89 children per woman (see List of countries by fertility rate ). The replacement level fertility rate generally considered around 2.1 children per woman.
Some other not-terribly rich countries with sub-replacement level birth rates are:
Azerbaijan, Albania, Sri Lanka, Suriname, Vietnam, North Korea, Uzbekistan, Seychelles, Brunei, Kazakhstan, Lebanon, Palau, Mauritius, Algeria, Trinidad and Tobago, Tunisia, Iran, Barbados, Thailand, Cuba, Malta, Georgia, Croatia, Bulgaria, Romania, Serbia, Armenia, and China.
About about 42% of the world population lives in nations with sub-replacement fertility. Only a few countries in Africa and the Middle East fall into that category, though, and none of them are in Sub-Saharan Africa.
However, note that Africa has lots of farmland per capita compared to East Asia. Many of countries with high birth rates are also major oil exporters, and these will not be negatively affected by oil shortages. The problem is not lack of farmland or other resources, but lack of political will, and lack of education.
Africa lacks arable land. Except for South Africa and Zimbabwe, most African soils are not suitable for plow agriculture. In most of Africa most of the people are horticulturists, i.e. gardeners. It takes a lot of labor and does not yield much food per acre compared to good arable land, which we still have in abundance in the U.S.
Indeed, the U.S. has been blessed with resources. Africa has been cursed with its resources, colonialism and abysmal governments since colonialism ended.
"In reality there will never be an official global wage scale, but rather a narrowing band of wage rates..."
If people in the third world start making as much income as people in the U.S., then they are going to start consuming as much. So a combination of peak oil with the rest of the world consuming oil like the U.S. does will have a very bad result.
I thought the oar was made from oak had to be shipped from Scandinavia first >;^)
"The logical endpoint for this could be a sort of global wage scale, one lower than current US wages but higher than Third-World wages. If this leveling of the cost of labor takes place, then and only then will the incremental cost of shipping really kill globalization."
I agree. Buying cheap products while also exporting jobs to lower wage countries is not sustainable long term - never was, this is where we are now.
The pendulum swings...
joule - Along those same lines: shipping costs will not be the same for everyone. I can't quantify the affect but China's has been tying up long term energy supplies for over a decade. This provides them not only access but protects them to a large degree from energy inflation. A day may come when oil is selling for $120/bbl but their Angolan production is being delivered to the Chinese at a considerably lower price. Just read that 1/3 of all o&g acquisitions during the last year (around $24 billion) were done by the Chinese. Again, I can't quantify their leverage but a day may come where China can ship products for much less than other countries because their energy costs (thanks to being a producer to some degree) will be significantly less.
Nothing I've seen about China's acquisitions of oil interests suggests that they've locked in fixed prices. It looks to me like they'll be buying oil at prices that float with spot market prices like everybody else.
I'd say they're simply investing to make sure that they don't get locked out by someone else.
Have you seen any evidence otherwise?
Nick - Exactly: China doesn't have a locked in price on that crude. There is no sales price period. I'm not taking about oil China has contracted on some long term purchase basis. As far as I know (and I probably don't know everything) the Chinese share of oil from their Angolan concession isn't sold to the Chinese on any basis. It belongs to them. Other than transport costs back to China they pay nothing for the oil. This is typical of most foreign oil concessions. When I was drilling wells in Equatorial Guinea for ExxonMobil they were shipping 2 million bbls of oil per week to the EU. XOM wasn't paying EG one penny for that oil...it belonged to them via their investments in EG. Part of the production stream belonged to the EG gov't and that portion was sold on the open market. That 2 million bbl/week that XOM owned didn't show up on the market. The only way it could be purchased would be to buy it directly from XOM. No one can buy that portion of the EG or Angolan production from their gov't because it doesn't belong to those govt's. Just like you car, oil has a title and it can only be sold on the open market by the legal transfer of that title. And I believe most, if not all, of China's Angolan oil is titled to them. China didn't pay $24 billion over the last 12 months just for a right of first refusal on future sales...they bought the oil in the ground. No different than when I drill a well in Texas: I pay the mineral owner his royalty but the oil/NG belongs to me...I pay no one for that production. When the Brazil company Petrobras produces oil from our federal offshore leases that oil belongs to them...not the federal gov't (excluding the royality share, of course). They can sell it to who every they want. The only restriction is that oil produced from federal lease cannot be shipped out of the US without gov't permission. With the possible exception of Brazil, I don't know of any other country with such a restriction.
The deal the Chinese have with Venezuela is more along the lines of what you're describing: long term purchase contracts. That was why Hugo nationalized Vz oil fields: to take away title of the oil from the expat companies that developed it. It's also why Vz is suffering from a lack of oil investments: no company is going to invest billions on the hope Hugo doesn't change the rules again. Maybe some future Angolan politician might try the same trick on the Chinese. But I doubt it would work very well. ExxonMobil doesn't have a million man army they can land on the beaches of Angola. China does.
hmmm. The Chinese are investing directly in Angola, but contracting with Venezuela.
Where else are they investing directly?
Nick - They don't tend to advertise their activities too much. I think they got a lot tied up in the "stans" but I've got no details. They just bought into the Eagleford play in S Texas thru Chesapeake. Even though they can't ship that oil out of the US they can do swaps: they'll sell their US oil to a domestic operator who'll buy a like amount for the Chinese in, say Asia. That oil might be in the free market or maybe tied up in contracts. I think they loaned a big chunk of cash to Brazil (Petrobras) in return for either a fixed contract or a right of first refusal. Not as good as direct ownership but still allows a good bit of leverage. The Chinese also have another advantage over US companies: not only is it not illegal for Chinese companies to brib local politicians (unlike US corporations), it's considered just a normal part of business and they often carry it as a budget item.
Just my personal guess but when PO starts seriously hurting the globe I don't expect China and the US will be competitors as much as they will be the two big bullies on the block. Both will be capable of military as well as economic leverage. I throw out the term MADOR: Mutually Assured Distribution Of Resources (similar to th MAD protocol of the Cold War). The Chinese, IMHO, if they have to choose starving the US of energy or the rest of the globe they'll side with us. After all, through our bonds, they are the biggest owner of the US right after the American people. If the US completely collapses the Chinese lose trillions of $'s.
Two thoughts:
1 - if you're sure oil prices are going to go up, and you have a lot of export earnings that need a place for investment, oil is certainly a good, rational place. It doesn't require a mercantilist/nationalistic motive to explain.
2 - if the market price for oil rises, providing domestic consumers with below-market-price oil is a very bad idea, as it misallocates resources. Better to allow domestic prices to float with the market, and allow markets to work. This is similar to the problems we see in Venezuela and KSA, where oil and gas are wasted and underdeveloped domestically. Fortunately, China is gradually seeing the wisdom of free markets, and reducing price controls and subsidies.
Where else are they investing directly?
Canada. The Chinese are buying up billions of dollars worth of oil sands assets.
"The Chinese are buying up billions of dollars worth of oil sands assets."
= = =
China may have to assist the governments of Canada and British Columbia get the landlocked oilsands product to the ocean at Kitimat B.C. where supertankers can carry it off to Asia.
The immediate hurdles include very significant resistance by several aboriginal groups whose vast traditional territories the twin pipelines (one for exported synthetic crude, the other for imported condensate) must pass through (under the latest legal decisions First Nations must be consulted with on all resource issues that take place in their traditional lands), a rigorous environmental assessment by the feds (historically less rigorous than by the BC government) that covers not only about 1,400 km of extremely mountainous terrain, but also some of the last remaining pristine temporate rainforest marine fiord landscapes in the world.
The industry is responding with much PR about double-hulled tankers with two giant tug escorts up the long Douglas Channel, and the positive economic impact. But all it takes is one collision with an island or one of the thousands of reefs in the area (http://www.cbc.ca/canada/british-columbia/story/2007/03/26/bc-ferry.html) or with one of hundreds of cruise ships that cross Douglas Channel at right angles to access Grenville Channel for an unmitigated disaster to unfold.
Just one.
Of course you realize that some people speculate that the second and fourth officers on watch on the BC ferry that ran head on into an island clearly marked on the charts "lost situational awareness" because they were engaged in a close personal "debriefing" encounter on the chart table.
The fact that they turned off the radar because its intense green glow annoyed them also suggests that they were not primarily concerned with navigational issues.
And the fact that the person on the wheel didn't know how to turn off the autopilot suggests a bit more training would be in order.
This is just a personal opinion, of course. I personally have never lost situational awareness on night watch. That occurred later after we broke out the rum in the galley.
Yes, I'm aware of all that, and also of the conjecture that the two people who evidently went down with the ship were stuck in the elevator when the power went out. The entire aboriginal village of Hartley Bay was mobilized through the night to rescue about 100 people who were brought back to the village long house / community centre, fed and warmed up. The tragedy would have been far worse had the incident occurred in summer when 400-700 people would have been on board, depending on the day.
My point is that human error causes bad things, not the least being the Queen of the North and Exxon Valdez, and can never be completely eliminated. The chances that some kind of error, human or technical, increase exponentially when you add hundreds of supertanker trips both ways in a narrow channel with several cross channels, one of them heavily travelled year round with commercial marine traffic, and which increases by hundreds more trips by very large cruise ships chugging their way between Vancouver, Seattle and Alaska each summer season.
Who yields to whom at the narrow, right-angled Grenville and Douglas channel crossing surrounded by mountain ranges, a fully-loaded supertanker or the Diamond Princess with 3,500 passengers? It's hard to imagine the scale of the calamity that would evolve from a collision between such vessels. Even with a fully digitised control centre, some pretty extensive calculations and detailed plotted radar trajectories need to be made for each ship perhaps over 100 kilometres away from that confluence.
ROCKMAN -
I think you're onto something that doesn't get enough attention: the possibility that an open and transparent oil market will be slowly replaced by bilateral energy/security arrangements in which large amounts of oil changes hands at something other than open market prices. Powerful country X says to weak but oil-rich country Y, "You give us a bargain price for your oil, and we'll help defend you from the predations of powerful country Z". Of course, powerful country Z will not be happy with this arrangement, so this type of thing lays the groundwork for dangerous resource wars that will end badly for everyone.
joule - I've told you about my horrible experiences in Equatorial Guinea. I often think how easy it would be for the US to export democracy to the EG people. We wouldn't have to fire one shot. And I'm not being sarcastic. It would be a truly moral exercise (the EG people truly need saving from their madman dictator). At the same time I'm sure the new EG gov't would be the biggest US cheerleader on the planet...really. But as a result if all that oil is diverted from the EU to the US, at far market price of course, the EU would be more than a little ticked off. About all the EU might do then is export democracy to Nigeria. And that would likely be a very ugly exercise.
"At the same time I'm sure the new EG gov't would be the biggest US cheerleader on the planet...really."
I'm sure that the people of EG need saving from their current dictator, but I really question the ability of our government to choose a worthy successor gov't. Remind me of our most recent nation building success. Karzai? Mohammad Reza Pahlavi? Augusto Pinochet? Who?
Geek - I agree with your doubts. OTOH I don’t think we could do much worse. The vast majority of the population is starving to death despite the fact that EG is one of the richest nations per capita on the planet. If we stole 90% of their oil but distributed the rest to the population their lives would improve to a level I doubt few Egians even fantasize about. But we could let them have 100% of the revenue and we would still come out way ahead by just having call on the oil at market value.
And an extra bonus: the world, except for the EU of course, would praise us for the effort. The EU loves to flaunt their high moral character but everyone in the EU knows what life is like for the folks in EG and that doesn’t stop them from sending billions to el presidente. The same leader who stopped the malaria spraying program the first el presidente (his uncle who he killed in a coup) started when they gained their freedom from Spain. Easier to control the population if they are chronically ill, ya know.
Hi Rockman
re: Your experiences in EG. Do you mind providing a link (save me some work) and/or writing up - it might make a good firsthand (first person) article.
Aniya - If you're mostly interested in the ugly side of EG (there really isn't much positive to say) just search “Amnesty International Equatorial Guinea”. Many links there. You’ll find a lot of anecdotes including much detail on an attempted invasion of EG by a group of mercenaries about 8 years ago. Oddly enough the ring leader was Margaret Thatcher’s son.
I had little direct contact with the Egian folks. Mostly just the hands that worked offshore with me. I would be escorted from the airport to the ExxonMobil camp (protected by two runs of barbed wire and security guards) and then shuttled to the chopper base. But the locals didn’t talk to expats as a rule. There were always gov’t "inspectors" around. There was a rumor that any citizen talking local politics with an expat could expect very harsh treatment. Most of the stories I picked up were from other expats. El President was very paranoid. After the failed invasion he had the domestic fishing fleet destroyed because he was afraid it might be used in another invasion attempt. Thus 500,000 folks living on an island are protein starved. As a result they’ve developed a taste for giant (size of a baseball) jungle snails.
If you’re a movie buff find “Dogs of War”. Not a bad view of EG even though the movies was made before the homicidal maniac took over. I know my comments might make me sound like some right wing nut. But if folks knew the situation in EG it's comparable to observing a 6'2" hulk beating the crap out of a 5 yo child. No matter the circumstances you just can't justify not stepping in. The EU has a reason: don't endanger the oil flow. I can't explain why the US wouldn't get involved especially since we could turn it into an economic advantage as well as a justified humanity cause. But the again, we sat back and watched 100's of thousands of African slaughtered and, like the rest of the world, did nothing.
I know virtually nothing about EG but some entities did try once of course in the bungled 2004 Equatorial Guinea coup d'état attempt
According to the EIA, the USA is the biggest single importer of EG oil
Thanks Tow. When I was there virtually all the oil and the new LNG exports were going to the EU. Our EG imports may be one more reason for the US to not rock the boat.
Yes, Thank you UT and also Rockman,
This is (of course) horrible beyond words. I think most industrial consumers think only in terms of some rather benign transaction, money/(credit card) in, gasoline out. But there it is. Creating the situation that requires outside intervention.
re: "El President was very paranoid."
Understandable.
And losing his humanity as a result.
Aniya - From the few facts I have El Presidente never had much humanity to lose in the first place. Again, don't have much more than word of mouth rumors but EG suffers from the same tribal mentality other nations do. If you're not part of his tribal click your life is less than worthless. As far as the limited amount of factual data out there, I recall about a year or so ago a journalist went to EG as a tourist and tried to document life there. He has caught, supposedly rough up by the not-so-secret police and put on the next plane out. He might have been Swiss. Other than the one report I've seen nothing else.
I'm not much for fighting other people's fights. In my egocentric youth...sure I was. But now I feel if folks don't want to fight (and possibly die) for their freedom then they deserve what they get. But the EG people or so disadvantaged it's hard to blame them. No weapons, no communication systems, barely enough food to survive from day to day. It would be so easy for any power, even some small country, to park a mainline warship within easy sight of El Presidente on this very small island nation and offer him a choice: catch the next plane out or die. As I understand TPTB in EG is an extended family of around 200. No doubt there are tens' of billions of $'s sitting in some foreign bank (probably Swiss) El Presidente has stashed away so I'm pretty sure he would jump at the free plane ride. They have virtually no army. The police enforce the law mostly with the edge of a machete. With El Presidente gone I'm sure the military/police would be more than willing to sign with the next set of TPTB.
This is just an old fantasy for me. All those months sitting offshore watching this volcanic island just 15 miles away it wasn't difficult to see the possibilities. I also watched an oil processing ship flare 25 million cubic feet of NG everyday...about $40 million/year. The operator offered to lay a pipeline to shore at their expense and give the NG to the country for free. El Presidente didn't see the need. He would have to build a distribution system for the people so why bother. Some days the smoke cloud from the flare would extend from horizon to horizon. The world argues about global warming and there's EG and Nigeria (at night I could watch dozens of their flares from my rig) flaring NG equivalent to many millions of autos. A huge disconnect.
This exact situation is offered in the German military peak oil study.
http://www.theoildrum.com/node/6912
http://www.spiegel.de/international/germany/0,1518,715138-2,00.html
"A modern giant container ship or bulk carrier is extremely energy-efficient in terms of fuel consumption per ton-mile."
And even more so if they reduce speed with the existing ships, and they will save even more if they design the next generation to go slower from the beginning.
There were a lot of cargoes that were cost effective in the days of the clipper ships. That's the worst case boundary. A slow-speed marine diesel could push a clipper hull pretty easily. Sail when the wind is helpful, run the diesel when not. A cat-ketch rig, except with 5 to 7 masts and roller furling wouldn't need much for a crew.
These container ships have slowed down and are now on speed parity with ............. clippers!
NAOM
These container ships have slowed down and are now on speed parity with ............. clippers!
Yes, they could go back to clipper ships, if oil became too expensive. They would need some whopping big sails, but not being constrained by the strength of wood masts and canvas sails, I think they could make them as big as they needed to.
More likely they would go nuclear.
Schooners with five or more masts are more efficient than clippers. Clippers do not do well when you have to sail against the wind; schooners do much better sailing to windward and are not much slower than clippers going downwind. On a beam reach they are about the same.
The story of Hardwick Vt. and its emergent local food system is an interesting story. In the book The Town that Food Saved, one of the entrepreneurial farmers is quoted as saying that during the 2008 energy price spike, locally grown greens and vegetables were cheaper or comparable in bringing food in from California.
Of course, in a climate like Vermont's, those local greens and veggies are available at reasonable prices for only a short time each year. I doubt that California exports will cease anytime soon...
I agree with most of what Rubin says here, but I think he is overoptimistic on the power of prices to help us make a relatively quick and fairly easy transition away from oil and other fossil fuels. He imples that GDP growth can continue with oil at over $100 a barrel, after a transition from oil has been made. I doubt that. As oil, then natural gas and coal peak, energy is going to get more expensive, and there will be less of it. In other words, I think the most likely scenario is a continual decline in real GDP, probably in a stairstep pattern, and probably a long decline as described in THE LONG DESCENT by John Michael Greer.
Because Rubin has been educated as an economist, he sees the power of the price system to help economies to adjust to change. What I suspect he does not see is the lack of good substitutes for fossil fuels. In my opinion, GDP growth or decline will be linked to the amounts of energy available and the cost of this energy. Give us cheap oil (and natural gas and coal), and GDP will grow. Give us expensive fossil fuels, and the economy will decline.
Now the link between GDP growth rates and the price of energy is not absolute; it is not 1:1. To the extent that we can conserve energy and increase the efficiency with which we use energy, we might be able to maintain a steady GDP even with declining production of oil, coal, and natural gas. Rubin believes the price system is both powerful and fast-acting. I agree that the price system is powerful, but to make a transition from one energy source to another historically has taken roughly fifty years. We do not have fifty years to make a transition from oil and other fossil fuels; any sucsessful transition would have to be much faster than that.
On the big point that globalization is about to be reversed, Rubin is entirely correct.
to make a transition from one energy source to another historically has taken roughly fifty years.
The transition from kerosen to electricity for illumination took roughly 30 years. The US transition away from oil-fired generation took very roughly 20 years. The transition away from home-heating oil was also faster than 50 years (though uneven).
Other, very slow transitions are not a good guide to the future. For instance, the transition from coal could be very slow, because there was no pressure - it was a trade up, not a replacement of a scarce resource.
And, unfortunately, we have more than 50 years worth of things we can burn for electricity. Fortunately, it doesn't look like we will. For instance, coal consumption in the US dropped 9% last year, about half of that due to loss of market share.
The transition from heating with wood to heating with coal took a lot more than fifty years. Electrification of the U.S. from small beginnings in the late nineteenth century to finishing rural electrification during the Great Depression took at least forty years.
If we mobilized all our resources as we did in World War II with the single objective of getting off fossil fuels as fast as possible, the transition would still take at least twenty years, and probably longer than that. Unfortunately, we are not close to mobilizing our still very considerable resources to make the transition away from fossil fuels. I'm not saying a successful transition away from fossil fuels cannot be done, I'm saying that it will not be done. We'll pursue BAU much too long.
The price system (a free market), powerful as it is, simply is not up to dealing with a change as big as the transition away from fossil fuels. Rubin would deny this point, but I think he is profoundly mistaken in his optimism.
Yes, that is why collapse is based on the fundamental idea that no one can voluntarily give ground.....scientists can't suddenly become organic farmers (can't compete with real farmers who use modern ag. methods). Everyone is locked into their professional bandwidth and changes only occur on the margins. Only when the situation can't be maintained any longer, then do people change. Because no one is willing to say, "OK I'll change". No one can afford to do that. Someone else will step in a take their good job. And they will be left out. It is an emergent system so it can't collapse in an ordered fashion.
The transition from heating with wood to heating with coal took a lot more than fifty years. Electrification of the U.S. from small beginnings in the late nineteenth century to finishing rural electrification during the Great Depression took at least forty years.
Sure. These involved an enormous amount of infrastructure. On the other hand, EV/EREV/HEVs are manufactured on the same assembly lines as ICE vehicles, and most drivers in the US have access to an electrical plug where they park.
If we mobilized all our resources as we did in World War II with the single objective of getting off fossil fuels as fast as possible, the transition would still take at least twenty years, and probably longer than that.
It would be much easier than that. A transition to EVs requires only a change within the automotive industry for roughly 75% of drivers.
I'm not saying a successful transition away from fossil fuels cannot be done, I'm saying that it will not be done.
It won't be fast enough to prevent climate change, but it will certainly be fast enough to keep the lights on. Again, unfortunately, we have more than 50 years worth of things we can burn for electricity. And, again, it doesn't look like we will. For instance, coal consumption in the US dropped 9% last year, about half of that due to loss of market share.
Rubin is well aware of the lack of substitutes - in his book he devotes quite some space to why some proposed substitiutes (wind, solar, biofuels) simply can;t make up the gap from oil.
His central thesis is that oil is such a better transportation energy source than anything else, that we can't replace it, and we will have to get by with less (not none) transport. And this will involve some economic restructuring, and as, always, there will be winners and losers.
Rubin is still correct that the price system is powerful and fast acting - if buyers have alternatives that represent better value, they will take them.. The problem is, there aren't better value alternatives for the buyers. How many people can buy an electirc car today? Because of its high price, it is scarcely better value. It is the technology development that takes decades.
Diesel engines developed for 50yrs before railroads really embraced them. At the and of WW2, all locomotives were steam, even though the diesel engine had been around for 50yrs, but it finally developed to the point of being competitive. Within a decade, all American locomotives were diesel. Even then, it cost more in fuel to run a diesel than a steam loco, but the downtime and maintenance of steam locos was their first disadvantage. Then the railroads realised you could couple multiple diesel locos, and still have just one or two drivers. Operationally, it was a much better option, that they did not have previously. It cost more in fuel then (and still does today) but the advantages were well worth it.
Now, industries are faced with going backwards, for example. to return to coal powered locos, because it is cheaper, and accept the operational disadvantages that come with it.
And there is the painful reality. Until now, every new energy/transport technology has been an improvement over the previous one - it is a tough pill to swallow to give up the best one (oil) and go to a lesser one, because that is all you can afford.
That is why there is such disproportionate hope for EV's and a "battery breakthrough", so there will be a step forward, not back.
But Rubin is saying that, in the absence of a black swan event like a miracle battery, we will have no choice but to go backwards, to a less transport world - i.e. a smaller one.
That doesn't mean we give up electricity, telecommunications, internet and all sorts of other modern conveniences, just transport. And that is not the end of the world - just a different one.
Change is scary - that's why everyone wants to keep BAU
How many people can buy an electirc car today? Because of its high price, it is scarcely better value.
Paul, I thought we agreed that a Nissan Leaf has the same Total Cost of Ownership as a Toyota Corolla?
That is why I said "scarcely" better value. It is line ball, and in some cases it will be better, and in some it will not. BUT, there is not an overwhelming financial advantage, unless oil prices double and EV purchase prices do not.
For most business, and people, there needs to be a compelling reason to change. For the early adopters, it is the desire for change it self, but for the middle majority, there needs to a be a reason. Right now, there isn't, and many are concerned that if they go all in, and oil/energy prices do not increase, then they have done their money. I have seen examples of exactly this - you can spend too much on energy conservation - if the costs exceed the benefits, then you are going backwards, and, in some cases, broke.
The safer business decision, today, is usually to wait an and see what happens. In my business of water and energy conservation, many/most customers are well aware of what can be done, but are not ready to jump in, because either the payback isn't there (yet), or even if it is, they can't get capital to do anything.
I agree.
On the other hand, this is not what Rubin is saying. He's saying that nothing can come close to the value of oil, and that's not true at all.
I think that is still generally true. It is just that in some cases, we will be willing to accept lesser performance from an alternative (e.g. reduced range in EV's), or higher cost for the same thing (drop in biofuels).
But in a lot of other cases, we won;t be able to afford the alternatives, so we will do without, and I think that is true, and we are already seeing that trend. Especially with the teenagers and twenty somethings, who are buying less vehicles and driving less than they ever have. They place a higher priority on their iphone than a car, and if you don't have a job, it is easier to afford the iphone.
The reason for oil being ubiquitous IS that it is the best value. double the cost of it, and some alternatives i.e. biofuels, are viable, but at double the price, many of the oil consuming activities, particularly discretionary/recreational, are not viable, and will not be done - that is what he is saying.
It is just that in some cases, we will be willing to accept lesser performance from an alternative (e.g. reduced range in EV's)
A Volt, in large numbers, won't cost any more than a Leaf: the reduced battery size is an equal tradeoff for the on-board generator.
Similarly, Consumer Reports tells us that a Prius is cost competitive with a comparable pure-ICE vehicle.
HEV/EREV/EVs aren't cheaper than ICE vehicles yet, so they'll probably not grow as quickly as we'd like, but they're not more expensive.
Finally, electric drive trains give much better performance than ICE drive trains, so the transition to EVs will be a step up.
The transition from steam to diesel engines actually came faster than you indicate. There were a few diesel locomotives in use in the U.S. during World War II but steam dominated in 1945. However, the steam locomotives had been very heavily used during World War II, and they all wore out at approximately the same time the first few years after 1945. When steam locomotives wore out, they were invariably replaced by diesel in the mid 1940s. By 1949, I think the steam locomotives were all gone; at least I don't remember seeing one after 1949.
The transition from diesel to electric rail is quite feasible, as Alan Drake has pointed out numermous times.
I think the electric grid will stay up for at least another thirty years.
When trucks don't have diesel to run on, what will they run on? That is why it is so important that Alan's proposals be adopted PDQ.
For political reasons, little investment is being done in improving and electrifying our rail system. Huge sums go to maintaining and building new roads. This summer I saw both a new road and several lanes added to various freeways and other roads in greater metropolitan Minneapolis/St. Paul.
Because of the failure of leadership in both the government and the corporations, I do not believe that we will make a successful transition away from fossil fuels. Our republic has failed, not only in regard to facing the realities of Peak Oil but in many other critical ways. Maybe a dictator will do better; in any case I suspect we'll find that out within ten or fifteen years.
As I understand it, there were still some steam locos made in the late 40's, and they were still in service in the 50's but dwindling. The RR's also relegated the steamers to branch line and switcher use - replacing the most used lines with diesel first as you would expect. Cn rail retired its last steam engine in 1959.
But the exact dates don;t matter - it was a rapid changeout - a good example of a "disruptive" technology (as were the RR's themselves when first developed!)
The transition to electric is feasible, but I remain to be convinced it is worth the cost, for transcontinental anyway. It would be far cheaper, and faster to implement, to co-fuel the locomotives on CNG.
Even then, RR's account for only 1% of US oil consumption - the real trick is to get more railroads and more trains on them.
I agree that it is too bad the governments placed the bets on highways since the 50's - but at the time, RR was old technology, cars were new and exciting and sexy, and individually owned - little wonder the politicians went for highways - it was by far the most popular choice.
Dictatorships went the other way, with lots of trains, because they were centrally controlled. That is why soviet Moscow, which has an excellent passenger train system, held the record for the lowest oil use per capita of any major city in the world.
The problems with railroad are partly self made. The RR companies have done a great job of profitably moving freight, partly becasue they own their lines and any passenger services on their lines do not get priority. Expanding freight capacity can be done, but is very expensive, and few RR's are doing so (BNSF being an exception) Instead, they are squeezing the most out of what they have.
Urban passenger RR has given itself a bad name for being too expensive for the amount of people it moves. This is true, because it often gets built in the most expensive way - everyone wants a cadillac system.
I do agree the transition from fossil fuels will be painful - as long as it is a step back in any way, which I think it has to be, it is resisted by the majority of people, business and government. When you have been eating New York strip loin, it is hard to voluntarily go back to Kraft Dinner.
Carter got run out of office for suggesting just that, and no leader wants to voluntarily go there again - they will wait until they are cornered.
Meanwhile, the command economies, like China and Russia, are embarking on some of the right things. For china, a new passeneger rail line is still a step up, not a step back for people being forced to give up their cars.
My conjecture is that the whole U.S. will be a command economy within the next ten or fifteen years.
Why?
Economic collapse due to falling oil production.
"will be"...?
Just take a look at who got bailed out (and who didn't), who actaully writes the laws (i.e., not "your" representatives), who can routinely break the law with impunity, whose making $$ hand-over-fist, and it's pretty clear we're already living under a kleptocracy. Actually, a well run "command economy" that benefits people aside from the top 2% would be an improvement.
I'd like to do a rough back-of-the-envelope calculation to show that the price of oil has to get REAL bad before the importation of high-value items ceases.
Consider the Emma Maersk, the largest container ship in the world. According to Wiki, it can carry approximately 11,000 equivalent containers, which if rated at a max load of 14 tons per container, is equivalent to about 150,000 tons. Let us now say that the ship is loaded to 85% capacity or about 125,000 tons.
The Emma Maearsk is powered by a 109,000 HP Wartsila diesel capable of driving it at 25 knots. It probably cruises at substantially less than this, say 18 knots. It's fuel consumption is listed as 1,660 gal/hour (though the speed is not listed).
If a trip from some port in China to the west coast of the US is approx 6,000 knots, then it will take 330 hours and will consume about 550,000 gallons of diesel fuel. Even if the price of diesel goes to to $4/gal, the cost of fuel for that trip is about $2,200,000. This works out to be a bit less than $18 per ton of goods delivered.
Now compare that $18 to the value of a ton of PCs or flat-screen TVs and you will see that the cost of the fuel is still very small percentage of the value of the goods imported.
Isn't the issue Liebig's Law of the Minimum? If everything works, except that some necessary link in the chain is broken (bankruptcy of some important player, breakdown of relations between governments of buyer and seller, civil unrest, lack of credit availability, for example), then there is a problem. Hopefully, no such problem arises for a long, long time.
I think that over the next two years we may see large increases in protectionism against imports. Note that other countries are very upset over QE2, because it lowers the value of the dollar in terms of other currencies. That makes our exports cheaper and our imports more expensive, which would help to correct our large balance of trade deficit. Other countries, especially China, perceive QE2 as an attempt by the U.S. to export unemployment. China and other countries have threatened to retaliate. Retaliation can be controls on capital flows, competitive devaluations, or tariffs and quotas on imports.
What happened during the Great Depression was a quickly escalating series of protectionist measures, retalition, then more protectionism followed by massive retaliation. International trade dropped by two-thirds over a period of about two or three years, if memory serves. One of the key triggers to the Great Depression was the Smoot-Hawley tariffs put into place by the United States; some economic historians say that these tariffs were the key element that turned a financial panic into a ten year depression.
So long as unemployment remains high in many countries there is a major threat of quickly escalating protectionist measures. Everybody tries to export their own unemployment, and the result is a crash in international trade. Rising oil prices will eventually diminish international trade, but a surge in protectionist measures can cause globalization to crash quickly.
A mythology has grown up around Smoot-Hawley and the dangers of protectionism,
http://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act
The idea that Smoot Hawley Tariff of 1930 caused the Depression which started with the Crash of 1929 is
illogical(the time machine not having been invented yet) and just a convenient way to blame politicians for the sins of the financial wizards.
The same idea as people blaming the present recession on Barney Frank instead of Wall Street recklessness.
For conservatives, politicians are the irresistable target while Business is a Sacred Cow.
Smoot-Hawley didn't diminish international trade all by itself, but it did set off a round of escalating reataliatory protectionist measures. Growth in international trade during the 1920s was a key element of the prosperity of that decade. Protectionist measures and declining international trade were key elements in deepening and lengthening the Great Depression. I believe most economic historians are agreed on that point.
In other words, to a considerable extent, politicians were indeed responsible for worsening the Great Depression.
In my opinion, the main cause of the Great Depressions was the "real bills" doctrine that ruled the Federal Reserve System. They were worried about inflation--not deflation--and they stood passively by as the money supply crashed down. At least the Bernanke Fed is not making that mistake.
The cause of the Great Depression was an explosion of bad credit and a stock market tech bubble(explosion of consumer inventions) IMO.
The value of US exports was ~5 billion dollars in 1928 out of an 750 billion GDP, less than 1%.
By contrast, in 2008 US exports were 1 trillion out of 12 trillion dollars of GDP.
Europe was still devestated by WWI and debt ridden in the 1920s.
Exports just weren't that important in themselves.
I agree with you that the FED and Hoover didn't provide adequate money but their reason was that 'natural'supply and demand would provide recovery so they should sit on their hands.
Curious how this 1920s faith in 'efficient markets' was echoed by Greenspan's admission in 2008 at his astonishment at the market collapse.
And now we have the same believing dupes back in charge of Congress.
http://www.nytimes.com/2010/11/08/opinion/08krugman.html?_r=2&ref=opinion
The bad credit and greatly inflated amount of credit--especially to buy stocks--caused a financial panic. But as you indicate in your quotes and links above, it was bad policy by the Fed that turned a financial panic into the Great Depression.
In my opinion, the Bernanke Fed is doing way way better than the Fed did in 1929 and the 1930s. At least now the Fed knows that the big risk is a deflationary depression rather than a resurgence of inflation. Indeed, Paul Krugman said the best thing for the Fed to do was to announce a target of 25% inflation over the next five years and then implement policy to create inflation at about 5% per year. Of course, Krugman is a pure Keynesian, and Keynes said, "In the long run, we are all dead." in response to another economist who said a free market would sort things out and get to an equilibrium of low unemployment over time.
It turns out than an economy can have multiple equilibrium points, some of them at high or very high rates of unemployment. Economics is far from perfected as a discipline, but it has advanced a lot since 1930. The Fed in particular has learned a great deal from the mistakes that it has made in the past, as the Bernanke quote suggests.
China's accumulation of foreign reserves is at once equivalent to a tariff and to a subsidy.
It's a tariff because devaluing the Yuan by accumulating foreign reserves adds a cost to importing into China. This added cost accrues buying power to the Chinese government in the form of accumulated foreign reserves. Adding cost to imports which accrues to a government is also known as a tariff.
It's a subsidy to labor intensive industry in that the relative cost of labor is held down because the workers are paid in devalued Yuan. Who is forced to subsidise Chinese export industry? The Chinese worker. Inflation BTW is chronic in China.
Any country that accumulates foreign reserves including our closer friends is guilty of this veiled protectionism.
The US can also play this game. Instead of accumulating foreign reserves, we merely print money to accumulate our own. This devalues our currency, and has drawn the attention of China and others. What's to stop everyone from doing it?
What is to stop debtor countries worldwide from playing the same game creditor countries have been playing all along?
Where does it end?
Ok, I see from further reading that most of what I said was said previously in other posts.
I read TOD using the text only lynx browser, which is kind of like watching a football game with binoculars. It focuses you on the text, but it limits your field of view.
The Smoot-Hawley reference in some of the posts is interesting. It's the first I've heard of it. It seems we're reinacting it via money printing to buy debt. The thing is that game theory wise nobody seems to have a choice, or do they? Why the sudden prisoner's dillemma now that the shit hits the fan? Are we mathematically doomed to repeat the Great Depression? If inflation becomes a problem banks might be ordered to then increase reserves. Which was done according to the wikipedia article on Smoot-Hawley during the Great Depression. Interesting.
I mostly wanted to post a link to this which I just found: http://www.suite101.com/content/us-china-trade-war-favors-the-us-a302078
Autarky seems likely to crop up in a deglobalized world. Autarky is prone to crazies since there is no leverage then to keep them in line. cf. North Korea
Actually no.
The capitalist system is based on Pareto efficiency, i.e. we only support the most 'economically efficient'/profitable alternatives, the rest are abandoned.
http://en.wikipedia.org/wiki/Pareto_efficiency
That in turn leads to a Liebig Law of the minimum. Same kind of stupidity inherent in EROI.
We should be aiming at a balanced system with significant redundancy built in--then Liebig's Law goes away.
We must abandon or significantly modify market delusion economics to avoid short term collapse.
Gail -
Well of course there are a host of other things that can reduce or even kill globalization. Trade wars, hot wars, and financial collapse are certainly capable of doing it. (And as I pointed out in a reply to another post, a convergence of labor rates could also be one factor reducing the attractiveness of off-shoring.)
However, my sole purpose in presenting that little example was to challenge Mr. Rubin's assertion that it will be the price of oil that will kill globalization. As I think I have shown, even if the price of fuel increases substantially, it will still constitute a small percentage of the price of high-value imported products. We will simply have less movement of bulk low-value items of commerce over long distances.
I am hardly a fan of globalization and would like to see much less of it, particularly when it comes to foodstuffs. And this may very well come to pass, as commodity food items tend to be relatively low-value per unit weight or volume.
There has been what could be described as global trade going all the way back to antiquity, but as transportation at the time was very expensive, dangerous, and slow, it was largely restricted to small, high-value things, such as precious metals, jewels, artifacts, spices, silks, and in some cases slaves. As such, there will always be some core level of international trade.
joule:
I just bought a Sony television that cost $900 and weighs 24 pounds. About 83 of those weigh a long ton. So the $18/ton shipping cost would add about $4.60 to the TV, about 0.5%.
I've done a similar calculation, not nearly as good as yours. But I think you are way too conservative. Bunker fuel is nowhere near as expensive as diesel fuel, it is more like crude oil. So the price would be closer to $2.50/gallon at $100/bbl oil.
The calculation I did was based on the price of bulk rice, even then the transportation cost is pretty trivial. I haven't seen the numbers on iron ore. I suppose it could be cheaper than rice in bulk. But Rubin presented no details so I don't know what the numbers actually say. It certainly doesn't matter that the steel making process itself uses energy. That is unrelated to transportation.
I think you are making one mistake. You are assuming that the flat-screen TV will be manufactured in one big single step. That's obviously not the case, on the contrary manufacturing such a complicated final product will probably require a huge number of ship trips for the raw materials as well as the various product parts. Even the coal used for electricity generation in China might be imported from Australia in the coming years. A 2% increase in the shipping costs in a 10 step product production chain does not equal a 2% increase of the final price.
Intresting pictures of the state of Maersk . Ships just resting in Scotland !. Who believes China's export figures if it is cheaper for Maersk to keep these boats tied up and still make the payments on them .These are not old Ships.
http://www.panoramio.com/photo/24609399
Can we replace oil for shipping?
Sure - long distance land shipping can go by electrified rail, local can go by plug-in hybrid truck1, and water shipping can find substitutes for oil.
Substitutes for oil for water shipping? Pshaw, you say.
No, really. Substitutes include greater efficiency, wind, solar, battery power and renewably generated hydrogen.
Efficiency: Fuel consumption per mile is roughly the square of speed, so slowing down saves fuel: in 2008, with high fuel costs, most container shipping slowed down 20%, and reduced fuel consumption by roughly a third. For example, Kennebec Captain's ship carries 5,000 cars from Japan to Europe (12,000 miles) and burns 8.5 miles/ton of fuel at 18.5knots, for a total of about 1,400 tons of fuel. At a 10% lower speed of 16.6 kts, the ship burns 21% less fuel (about 300 tons).
Size brings efficiency: the Emma Maersk uses about 320 tons of fuel per day to carry 220,000 tons of cargo2, while Kennebec Captain's ship uses about 60 tons to carry about 23,000 tons (see here ), so the Emma Maersk uses roughly 60% as much fuel per ton.
Other substantial sources of savings include better hull (I've seen mention of "axe cleaver" designs) and engine design (very large (3 story!)marine diesels can get up to 50% thermodynamic efficiency), and low friction hull coatings (the Emma Mærsk saves about 1.3% with special paint, and bubbles work too).
Container shipping fuel efficiency rose 75% from 1976 to 2007, in an era of very low fuel costs.
Reduction of oil consumption brings a kind of reverse-Jevons efficiency. Currently, some 34% of shipping tonnage worldwide is devoted to transporting oil [source http://www.unctad.org/en/docs/rmt2006_en.pdf , p.16]. If we reduce oil consumption, we reduce the need for shipping. Similarly, world coal trade was about 718Mt in 2003 [source http://www.worldcoal.org/bin/pdf/original_pdf_file/global_coal_market_price(01_06_2009).pdf , p2], at the same time as total world trade was 6,500Mt, so that coal was 11% of world seaborne trade by weight.
Wind: kites mounted on the ship's bow have been shown to provide 10-30% of ship's power - this is cost effective now. See an early article the leading company, Skysails, a followup article showing a commercial implementation, and the Skysails website. These are retrofits: it is likely that far more wind power could be harnessed if the ship were designed to accommodate kite assist (stronger more integrated ship structure to tug upon) rather than merely retrofitted with it.
It's astonishing what can be done with modern materials, computer-aided design, and electronic control systems, to turn the old new again.
2 this figure conflicts with the wikipedia figure - IIRC it came from the Maersk line fact sheet, which is temporarily unavailable.
Continued here: http://energyfaq.blogspot.com/2008/09/can-shipping-survive-peak-oil.html
If the number of ships remains constant, slowing travel means less freight is delivered per unit time. This works nicely if there is reduced demand for the products and a shrinking economy. The manufactures will have fewer widgets to sell which creates deflation. So in a deflating economy the ships can slow down to conserve fuel, but the point is, there is an economic depression with high unemployment. Slowing down does not work if one expects to continue exponential economic growth or maintain steady state. Adding more ships would require more materials, energy and investment during a depression in an energy constrained world.
Slowing down may not work for perishable items, such as food. If the cargo needs refrigeration, the energy consumed for refrigeration increases with the travel time creating some optimal speed.
Slowing down a lot means more space and weight is consumed by supplies for the crew. It also means more wages paid for less cargo delivered. Declining productivity is opposite to the trend observed during the rising edge of peak oil.
The oil price shock of 2008 resulted in decreased demand leaving many container ships idle and orders for new ships canceled.
If the container ships slow down, it means globalization is dying.
Slower speeds are a temporary measure, until other power sources (wind, battery, etc) can be retrofitted or installed in new ships.
Optimization of cargo financing costs, as well as labor and "hotel" fuel costs, restrict speed reduction to lower-value cargo.
A small reduction in speed returns a large reduction in fuel consumption.
It applies only to in-transit time, so the reduction in productivity is smaller than the reduction in speed.
Slower speeds are a temporary measure, until other power sources (wind, battery, etc) can be retrofitted or installed in new ships.
It is a temporary measure, but not because the shipping operators are waiting for alternate technologies. For all the talk about wind assisted ships, there are only two experimental ones out there. Batteries take up space and weight and are of marginal value to a ship. On board wind and solar generation for house loads (reduced generator fuel consumption) does make sense, and the shippers are probably looking at that, but it is a drop in the bucket of ship fuel consumption.
You can rest assured that the shippers have very carefully plotted their speed/time/fuel cost/shipping cost curves, and know when it is better to slow down, (expensive fuel) and how much, and when it is better still to park some of the ships (lack of cargo to be shipped).
When oil was over $100, the airlines started slowing down too - a 2% reduction in speed created a 4% fuel saving. Now, with fuel not as expensive, but less passenger demand, they have parked planes, and fly fewer, more full ones. They are gaming their system every day, as are the shipping companies.
Making a big bet on new technology is a whole different story - they will be very conservative, until there is an overwhelming case, then they will adopt en masse.
We saw that with sail to steam, with steam to diesel, and it will be the same again with diesel to whatever next, IF there is a whatever next.
And nuclear won;t be it - what are the chances of a Liberian flagged, Greek owned nuclear cargo ship being allowed in Puget Sound, or SF Bay, or NY Harbour? The anti's will simply paint it as being the easiest terrorist target ever, and that will be the end of that.
It is a temporary measure, but not because the shipping operators are waiting for alternate technologies. ...Making a big bet on new technology is a whole different story - they will be very conservative, until there is an overwhelming case, then they will adopt en masse.
I agree - it will be a while before the shipping industry makes big changes. OTOH, they don't have to - for a very long time they'll just outbid other uses.
Batteries take up space and weight
I agree.
and are of marginal value to a ship. On board wind and solar generation for house loads (reduced generator fuel consumption) does make sense, and the shippers are probably looking at that, but it is a drop in the bucket of ship fuel consumption.
I'd disagree on that. Did you read my discussion?
I presume you disagree on the batteries, not the solar/wind turbines.
We'll know that large scale batteries are of value when the ships start to use them, and they aren't.
They could be used for ferry type operations - very short trips, but for blue water, what;s the point? The volumetric energy density of a battery is orders of magnitude less than a diesel generator.
Li-ion storage is still $400/kWh, so to store 1Mwh is $400k. That is the same as what can be produced from 200L of fuel oil, worth about $100. That is not a favourable payback
We'll know that large scale batteries are of value when the ships start to use them, and they aren't.
I don't think they're competitive yet with $.60/liter diesel, due to their weight/volume and capital requirements. That's not really the question. The question is, are they competitive with $1+/liter oil?
A liter of oil has about 5 kWhs, after combustion. Let's assume diesel costs $1.25 per liter; 5kWhs for night time I/C consumption costs $.25 at night; 7% interest; and a daily charge. 5 kWhs at 80% DOD gives us $2,500 worth of batteries, with a 10 year cost of $3,483, versus savings of $3,650. Battery costs will fall, and oil prices will rise - those lines will cross soon.
Regarding the wind/PV: I would argue that they can handle much more than "hotel" loads.
I can see the use on on-board batteries for storing on board solar production, because you only need to store a day's worth, so you are looking at hundreds of kWh, not thousands.
But I can;t see the point in a large battery storage for shore power charging as an alternative fuel source - you get one discharge, and that's it for the trip - then they are just wasted space and volume.
For wind/PV, I guess if you had big enough wind turbines, it can add to propulsion power, but for propulsion they are probably better to go to kitesails.
on-board batteries for storing on board solar production
Probably optimal to keep the peak PV capacity at or below maximum engine output - then there's no need for batteries.
you get one discharge, and that's it for the trip
Yes - you'd probably have to shorten trips, if you were primarily reliant on batteries. That would be a return to the days of coal. OTOH, average water transit legs aren't as long as one might think.
For wind...for propulsion they are probably better to go to kitesails.
I agree.
Probably optimal to keep the peak PV capacity at or below maximum engine output - then there's no need for batteries.
I presume you mean less than peak generator output. With the peak engine power in the tens of megawatts, even with 100% deck coverage of PV, you couldn't get more than 1MW. But, assuming you have generator capacity, then it is probably better no to bother with batteries.
As for a primary fuel source for blue water ships, I just can' see it with batteries, under any circumstances - they would go back to coal first. Anything to avoid shortening the trips - that gets real expensive, real fast
Here's some thoughts on solar:
Ships, trains and planes are outside all of the time, so they'll have a decent capacity factor. Grid tied systems have to deal with Balance of System costs, but a panel in a vehicle should be able to eliminate most costs: it's manufacturing, which is far more efficient than grid-tied systems that require field installation; redundant support structures; and dedicated power electronics. If a vehicle can add a panel for $1 per Wp, and get just 5% capacity factor, it could achieve $.15/kWh.
Let's look at the Emma Mærsk . With a length of 397 metres, and beam of 56 metres, it has a surface area of 22,400 sq m. At 20% efficiency we get about 4.5MW on the ship's deck at peak power. Now, as best I can tell it probably uses about 10MW at 12 knots (very roughly a minimum speed), 20MW at 15 knots, and 65MW (80% of engine rated power) at 25.5 knots (roughly a maximum). So, at minimum speed it could get about 45% of it's power for something close to 20% of the time, for a net of 9%. Now, if we want to increase that we'll need either higher efficiency PV, or more surface area from outriggers or something towed, perhaps using flexible PV. You could add a roof, or you could incentivize 10% of the containers to be roofed with PV - they could power ships, inter-modal rail, inter-modal trucks...
Here' a fun example of a boat that's 100% PV powered, and here's another.
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Anything to avoid shortening the trips - that gets real expensive, real fast
Do you happen to have data on the trade-off? Here's what I've found:
Batteries could provide most of the remaining power needed, to be recharged at frequent port stops, as used to be done with coal (just as they picked up coal 60 years ago - that's why the US wanted the Philippines military bases, and why they're not needed in the oil era). Let's analyze li-ion batteries: assume 20MW engine power at a cruising speed a speed of 15 knots (17.25 mph) or 20MW auxiliary assistance to a higher speed, and a needed port-to-port range of 2,000 miles (a range that was considered extremely good in the era of coal ships - the average length of a full trip is about 4,500 miles (see chart 8 ). That's 116 hours of travel, and 2,310 MW hours needed. At 200whrs per kg, that's 11,594 metric tons. The Emma Maersk has a capacity of 172,990 metric tons, so we'd need about 7% of it's capacity (by weight) to add batteries.
So, li-ion would do. Now it would be more expensive than many alternatives that would be practical in a "captive" fleet like this - many high energy density, much less expensive batteries exist whose charging is very inconvenient, but could be swapped out in an application like this. These include Zinc-air, and others. It should be noted that research continues on batteries with much higher density still, as we see here and here, but existing batteries would suffice.
You won;t get close to 100% coverage, and neither will you get close to 20% capacity factor. The ship is operating in varying latitudes, with more cloud cover than over land areas. You will also add a labour cost for putting the panels on the top of the top containers, and removing them.
I would think 2/3 coverage would be feasible, and 15% capacity factor, at best. When the ship is in port there is minimal production (panels have to be removed from containers). So at sea, you could get 3MW on the world's biggest ship, for 1/6 of the time, an average of 0.5MW.
So, that would be 5% of power, at minimum speed, and 2.5% at 15 knots.
More useful, is that each 5kWh produced, will displace a litre of bunker fuel, so we can work out the value that way. The array will produce 500kWh/hr, or about $100/hr. Assuming average six out of seven days sailing, that is worth $15k/week, or $750k/yr. With an installed cost of $5/W, the array will cost $15m, so that is still a 20yr payback, at oil of over $100/bbl.
For your Li-ion batteries, your 2310 MWh will cost $460million, at $200/kWh. That is one hell of an up front capital cost, and you give up that weight/space.
i don;t have data on the trade off, but consider this, a detour to a port for refuelling increases the total trip distance, involves down time at the dock, possibly a wait for an available dock, and docking fees. Then, you need the electricity. To charge those 2310MWhrs of batteries in 10 hrs needs a 250 MW shore power connection - that is no small amount, and will not be available without some serious electrical infrastructure being built. It is also a huge peak load - not every port can handle that.
Save the batteries for the cars - their ICE engines are much less efficient, and operated in an inefficient manner (city driving). The large marine engines are the most efficient ever made, that burn the lowest quality oil there is, in the most efficient manner (constant speed). They would be last on my list of things to de-oil.
The short run ferries are a totally different story, of course.
Your second boat link lead to just a list of links.
If you want to see how to do a real solar ferry, not just a sexy toy boat like your first link, here it is;
http://www.solarsailor.com.au/
And for stunning example of an electric (not solar) boat, that shows green can also be beautiful, check this out ;
http://www.kenau.nl/home_en.php
Now, for a more practical example of a battery power, consider a car ferry. My local ferry does a 40 minute crossing and has a 20 minute load/unload time, when it could be plugged in for recharging instead of idling the main engines - higher % of idling time than city cycle driving! It's main engine is 6000 hp, but that is because it is an inefficient double ended monuhull - you could build a much more efficient catamaran ferry that needs 1/3 the power.
more cloud cover than over land areas.
Have you seen data on that?
You will also add a labour cost for putting the panels on the top of the top containers, and removing them.
I wouldn't do that: I 'd have a minority of containers with permanent PV installations. They'd power whatever they were on: ships, trains, trucks, etc.
With an installed cost of $5/W
These would be manufactured, modular items. They'd be much cheaper, less than $2/Wp.
Li-ion batteries, your 2310 MWh will cost $460million, at $200/kWh...To charge those 2310MWhrs of batteries in 10 hrs needs a 250 MW shore power connection
First, that cost could be justified by a good payback. 2nd, I expect that costs would go much lower. This is a fleet application, so it could do different things than personal EVs. The cheapest system would be swappable batteries with compatible chemistries, such as zinc-air. Such as system would also eliminate cumbersome shore-to-ship cabling.
Save the batteries for the cars
Sure. For a long time shipping will go for incremental things, like wind retrofits, PV for house loads, and increased efficiency, while outbidding other uses (esp personal transportation).
Your second boat link lead to just a list of links.
Thanks for catching that - I'm afraid that link has died.
If you want to see how to do a real solar ferry...stunning example of an electric
Those are great - I'll use them instead.
Now, for a more practical example of a battery power, consider a car ferry.
That's a very good idea. I was focusing on the general question of the viability of intercontinental trade raised by Rubin, but that makes perfect sense.
From the 2nd site:
"Solar-powered sails the size of a jumbo jet's wings will be fitted to cargo ships, after a Sydney renewable energy company signed a deal with China's biggest shipping line.
The Chatswood-based Solar Sailor group has designed the sails, which can be retro-fitted to existing tankers.
The aluminium sails, 30 metres long and covered with photovolatic panels, harness the wind to cut fuel costs by between 20 and 40 per cent, and use the sun to meet five per cent of a ship's energy needs.
China's COSCO bulk carrier will fit the wings to a tanker ship and a bulker ship under a memorandum of understanding with the Australian company, which demonstrates the technology on a Sydney Harbour cruise boat.
"It's hard to predict a time line but at some point in the future, I can see all ships using solar sails - it's inevitable," said the company's chief executive, Dr Robert Dane.
Once fitted, the sails can pay for themselves in fuel savings within four years, Dr Dane said. They don't require special training to operate, with a computer linked in to a ship's existing navigation system, and sensors automatically angling the sails to catch a breeze and help vessels along."
What is the energy source for recharging the batteries that costs $.05 / kW·hr?
If you want to draw 5 kW·hr / day from these batteries for 10 years, you will need more batteries because their capacity declines as they age. Deep cycling batteries to 20% capacity every day may shorten their lifetime to less than 10 years.
A proper comparison requires a consideration of:
For generator:
* cost of generator
* cost of electronics (AC to DC converter?)
* cost of fuel tank
* cost of maintenance
* cost of diesel fuel
For batteries:
* cost of properly sized battery array
* cost of electronics (battery charger?)
* cost of whatever makes electricity to charge the batteries
* efficiency of batteries (put 6.25 kW·hr in, get 5 kW·hr out)
* cost of maintenance.
The ship owner also needs substantial initial capital because the initial purchase price of the battery system is greater than the generator system. This might be hard to obtain if there is fierce competition between shipping companies for a declining number of products. When your business is shrinking, it is hard to invest in costly new equipment.
What is the energy source for recharging the batteries that costs $.05 / kW·hr?
Wind, nuclear and coal.
Deep cycling batteries to 20% capacity every day may shorten their lifetime to less than 10 years.
The latest li-ion batteries have upwards of 5,000 cycle life. Heck, A123system's iron phosphate can do 5,000 cycles at 100% DOD.
A proper comparison requires a consideration of: For generator
I'm not talking about onboard generators, I'm talking about propulsion.
more later...
Nuclear
While reading this tract, I got to thinking about plant science and the idea that each type of plant requires a particular mix of nutrients in proportions that can be determined by running test plots. Unfortunately, I can't remember who made this discovery, so I can't (yet) reference a Wikipedia article.
The same idea also applies to human nutrition (name of discoverer? Or first promulgator?).
Would someone please help me with these names? (I think each of these ideas is associated with a name, X, in the for "X's Law".)
There is, I think, a list of nutrients for a living economy. (Geek7's Law ??? ;-) For an economy at any given time, there is a nutrient that is limiting growth. Additions of other nutrients do not promote growth. Only addition of the limiting nutrient actually enables growth. I think there is not much known about what are the fundamental economic nutrients. One that is not yet near being limiting is breathable air. But, work on developing such a list has been stunted by the insistence of economists that all things can be replaced by something else, a kind of know-nothing attitude toward all scientific knowledge of the natural world.
Petroleum, or energy, appears to be the currently limiting nutrient. If it were to be found in much greater abundance, then breathable air might become the limiting nutrient. But there are many other candidates for next limiting nutrient, IMHO.
As my first-ever post to TOD, this will probably come across as vague and somewhat naive...but..
It seems to me that that there is more to "Globalization" than just shipping containers and "just-in-time" delivery...Globalization also encompasses an exchange of ideas, an understanding of the global context in which we live, almost a state of mind if you will...
We may not be able to get fresh raspberries from Chile in February but we will still be able connect instantly with people around the World...and the ramifications and implications of that, whilst hard to quantify, will be profound nonetheless...
I don't think true "globalization" will go away with high oil prices....I think the genie is out of the bottle and will extremely hard to put back.
(go easy on me- first post :)
In particular, the circumpolar fiber ring at roughly 50 degrees north latitude will continue to grow in capacity. This connects Europe, Northeast Asia and North America with very high capacity communications.
The other factor is the decreased costs of storing and processing information, which means that the smartest people will have a more equal opportunity to engage in intellectual work no matter where they are located.
Welcome to TOD!
Higher prices for oil is not the only driving force against globalization. In any case, the rising price of jet fuel may have a bigger impact than the rising prices of bunker and diesel fuel for ships.
You are right that instant global communication makes a huge difference. International communications will continue at a high volume for some time to come. But transporting people (in planes) and cargo in ships requires substantial quantities of oil. As the price of oil rises and the quantity produced declines, jet plane travel will become so expensive that it will decline, gradually at first, then faster and faster.
My guess is that trade wars will be the main cause of deglobalization over the next few years. In any case, in not too many years global oil production will be half what it is now. Net exports of oil will decline more rapidly than the decline rate in oil production. It is hard for me to imagine anything like the existing extent of globalization with half as much oil being produced as there is now.
Good thoughts.
This latest attempt at globalization (from about 1980 onwards) is at least as much about trade in services as it is about trade in physical goods.
So yes, you may not be able to get fresh fruit from Chile if air freight becomes uneconomic, but you will still be able to get your x-ray read, or your tax return done, in India -- or, if you happen to live in either Chile or India, you'll still be able to download the latest American music, movies, or books from your home.
The other aspect of this is automation. The simple factory jobs went to China and India because of "free trade", but they won't come back under any circumstances. Witness Foxconn's recent threat to replace its 700,000 workers in China with an automated factory in Taiwan. I didn't see a figure but I'd expect the new factory to employ maybe 10,000 at most. As Stuart Staniford points out, robots work three shifts per day, seven days per week, and don't need holidays. It's just a matter of getting the cost of machine vision low enough.
Gail answered my question without even reading it! Thanks, Gail.
Liebig's Law. not Geek7's Law, can be found in Wikipedia.
I believe that the name you are looking for is William Albrecht, PHD, from the U. of Missouri Agricultural Station. A discussion of his work and the soils studies that are now being called 'New Agriculture' may be found in a terrific new book called 'The Ideal Soil' by Michael Astera. It should appeal to all of the engineers and techies on this site.
Sorry, you will have to Google it, I don't have the link.
Take the steel industry, for example. Just before the recent recession, some very curious things were happening in the US market. When oil prices got to be over $100 barrel, all of the sudden, Chinese steel exports to the US fell at double-digit rates. And all of the sudden, US steel production was up. And all of the sudden, US Steel Corp., which was one of the biggest dogs in the market, all of the sudden its share price doubled. What was going on? I'll tell you what was going on. For the first time in 20 years, it was cheaper to make steel in the United States than to import it from China.
The price of oil is now around $86. That was only exceeded for 11 months: November 2007 to September 2008. The price of US Steel's stock doubled in early 2007, and lately it's fallen back to it's pre-2007 level. It looks to me like these gyrations are more due to a China-demand-induced 2008 bubble in steel (and other commodities, like concrete) prices, than anything related to freight costs.
The answer to that probably lies in looking at total deliveries. Trying to make too mcu sense out of individual stock prices might be a lot like building castles in the sand.
The connection I would make between oil prices and the economic collapse would be to assign the low world-wide interest rates to the concentration of wealth, all of that oil money flowing to the gulf and other kleptocracies created a hugh basket of investment funds that competed for returns.
A lot of the problem was that foreign investors began to lend directly to US consumers, via mortgages/CDO's. And, they were borrowing from the least solvent US consumers!
Now they've mostly returned to sovereign borrowing, which makes much more sense.
I remember that. 2008...
Suddenly, the trash-pickers, the recyclers, were taking steel. They never took steel before.
I remember hearing that it was due to China's demand for steel.
Plywood was skyrocketing, too. We were told it was going to IRAQ. Wasn't that the story floated for cement, too?
And rice! The price shot up. Stores rationed one bag per purchase! In America!!! May-June of 2008:
http://www.fao.org/docrep/011/ai474e/ai474e23.jpg
http://www.fao.org/docrep/011/ai474e/ai474e05.htm
http://www.isivivane.com/kmafrica/files/images/MaizeWheatRicePrice.jpg
http://www.kmafrica.com/group.economic.challenges.food.price.increases
Then, just as suddenly, the trash-pickers lost interest in steel.
http://www.qqq-options-trading.com/images/bl/stock_market_crash_2007_200... Market crash Sept/Oct 2008
https://customers.reuters.com/d/graphics/CN_STLPC0309.gif Chinese steel prices 2007-2009
http://www.reuters.com/article/idUSSEO10366120090401
2010... Now, small trucks cruise the city's alleys. "Take metal", a sign says. Filled with everything; Always an exercise machine or two.
(Piece of fencing pipe in an industrial park: labeled "Made in Saudi Arabia". Blew me away.)
(I get cans of Chinese "Chef Maxwell's" applesauce, applesauce!, here in America, at the pantry-programs. Blows me away.)
Take food. Last year, China exported $6 billion of food to America, everything from apples to frozen chicken wings, bringing a whole new meaning to having your Chinese food delivered. Steel doesn't have to be refrigerated. Hopefully, frozen chicken wings do. What do you think powers that refrigeration unit? Bunker fuel! The same thing that is powering the boat. The world of triple digit oil prices--it won't matter that farm labor is cheaper in China than in the United States, because the cost of bringing those frozen chicken wings to us will be too expensive.
I wonder if Rubin has actually researched this at all. Just a tiny amount of research found this:
"Full size intermodal containers equipped with these "cryogenic" systems can maintain their for the 30 days needed for sea transport.[2] Since they do not require an external power supply, cryogenically refrigerated containers can be stored anywhere on any vessel that can accommodate "dry" (un-refrigerated) ocean freight containers." http://en.wikipedia.org/wiki/Reefer_(container)
It looks to me like the power demands of refrigerated containers aren't that large, and that they can be provided entirely on-shore before the trip, eliminating bunker fuel entirely.
In the old days they used to cut blocks of river ice in the winter, store them under sawdust or straw for the summer, then load them on boats bound for the tropics. The boats would pick up their loads of bananas or whatever, and use the ice to refrigerate the holds on the trip back. A ship can carry a LOT of ice, so they could keep as many bananas as they wanted to as cold as as they needed to as long as necessary to get them to port cities in the US. Delivering bananas inland was tougher.
This was the beginning of the tropic cruise industry. The banana boats would carry passengers to the tropics, and provide them with air conditioning. If they wanted their cabins to be cooler, they would just open up the vents to the banana holds a little wider.
Odds are it would still work just as well as it did in the old days.
This was the beginning of the tropic cruise industry
That's a great story!
It's documented in the book, Banana: The Fate of the Fruit That Changed the World by Dan Koeppel. The book has a disconcerting message though - the yellow banana that we all know and love is in danger of being wiped out by a banana blight: Panama Disease.
The variety of banana that the old ice-cooled banana boats all carried (Gros Michel) was eliminated long ago as a commercial crop by Panama Disease. According to the book, the Cavendish banana is going the same way, and there's no obvious replacement for it.
There are many, MANY types of banana. The problem is more one of commercial monoculture where everyone is growing the same.
NAOM
Ice was used for train passenger-car air-conditioning, too, in the late 1800's-early 1900s. Then came steam air-conditioning!
Steam was blown through an ejector, evacuating vapor from a box containing water, forcing evaporation. An "Old-Knowledge" idea that allows making cold with just heat, water and metal. (Can even make ice)
http://books.google.com/books?id=bz0OBGxRjjcC&pg=PA411&lpg=PA411&dq=pass...
Nick's reefer link:
http://en.wikipedia.org/wiki/Reefer_%28container%29
RockyMtnGuy's Banana book, see page 62: Banana: the fate of the fruit that changed the world By Dan Koeppel
http://books.google.com/books?id=cSoVd-o8PmoC&printsec=frontcover&dq=Ban...
The banana is a berry. The plant is a herb. Supermarket bananas have no seeds because we humans clone them from cuttings. Who knew?
The banana fruits once, when you cut that big bunch of bananas off the plant is finished. In the mean time the plant has been busy pushing out side shoots. These are collected and replanted to start the next plants or even just left which creates a small banana thicket.
NAOM
Thanks NAOM
Shoots, not cuttings
http://www.crfg.org/pubs/ff/banana.html
There are so many things wrong with Rubin's analysis that it is hard to know where to start. Also Gail's supporting post, (I don't recall the author's name) is very iffy. It is a case of interpreting a selected set of data to support an a priori conclusion. I could deconstruct that analysis and support a very different story. The housing bubble peaked by late 2005, and started down by June 2006. After that the drivers began to work the other way, starting with velocity of money. The write downs were triggered by the mark to market rule (Dec 2007 intended to allow mark-ups to keep the bubble going), which was implemented after the peak. Bear Sterns collapsed, because by then there was no market, and they had to write a lot down to zero, and that was before the oil price peak. There was a clear supply/demand issue pushing up prices from late 2004 as oil supply plateaued, and by Q2 2008 the combination of supply demand driven prices and the weak dollar probably set a price of near $110/b in the USA. In Euros oil was not going up the same. The higher prices were pouring money into oil exporting countries, fueling their ability to spend and hold up economic growth. The rest of the oil peak above $110/b was pure speculation, driven by risk money that was pulled rapidly out of housing and had to go somewhere. Oil futures being traded reached 10x the oil actually being bought and sold. Did the oil spike aggravate the crash? Sure. Was it the primary cause? Nonsense. Oil is a very small % of the total economy. It has an impact, especially when it gets scarce, but the effect of price is limited, and if price is ratcheted up gradually, with time to adjust between clicks the economy could adjust to a lot of price rise without collapsing as it did in late 2008. That said, a similar spike in a weakened economy like we have now won't be pleasant.
Much as I like to agree with TOD, in this case I think Murray is right. Even without commodity price spikes, the whole financial ponzi scheme was going to crash spectacularly anyway. In the sense of Rockman, it is true that economic growth below expectations (which might have something to do with energy costs), did create pressure to let the various bubbles expand. But underperformance was nearly inevitable anyway, and it wasn't just government pushing growth by encouraging dodgy financial gimmicks. Most of the pressure to play games came from within the financial industry, governments egging it along was a very minor factor. [Although the refusal to regulate made things a lot worse than would have been the case otherwise]. Also note, it wasn't just a US housing bubble, Spain, Ireland, UK,... also had huge bubbles. Once one big one crashed the shockwaves were severe enough to set off the other tottering bubbles. Clevland isn't a good example of the US bubble, which was concentrated in places like California, Florida, and Nevada. Prices in the heartland for the most part didn't participate in the bubble.
Continually flogging the oil spike caused the great recssion only reduces our credibility for the main message PO, and its coming consequences.
So in reality, LTG played only a minor part in setting off the GR, but will probably play a major role in limiting the recovery.
I strongly recommend that all of you read this Spiegel Online International 6 part report. One thing we Americans don't get enough of is intelligent analyses of our country from the outside. The graphs and photos cut to the bone.
http://www.spiegel.de/international/world/0,1518,726447,00.html
Globalization is a farce. These arguments about the relative costs of shipping flat screen TV from China to the U.S. are meaningless to a family that cannot afford a home/apartment or basic food staples. There are 27 million people unemployed or underemployed in this country. We need to create 100,000 new jobs a month just to keep that number from increasing. Just how many TV's, cars, whatever, do you think these people are going to be buying anyway. A pox on all economists!
Yeah yeah yeah...
America's like a crazy old diseased whore.
But, hey! We're armed.
Very funny. China is the world's largest producer of iron ore at 900 million tons per year, Brazil is second at 380 million tons, Australia (which is a lot closer than Brazil) is second at 370 million tons, India (which borders China) is fourth at 260 million tons, Russia (which borders China) is fifth at 85 million tons. The US is the world's ninth largest producer at 26 million tons, just behind Canada at 27 million tons. See http://minerals.usgs.gov/minerals/pubs/commodity/iron_ore/mcs-2010-feore...
China has no problem getting iron ore close to home. In fact, getting iron ore is a much worse problem for the US than China. The US is the country which needs to ship in that Brazilian iron ore, China can do without it.
I just thought I'd summarize it for people who think that oil shortages are going to be a bigger problem for China than the US. I could mention how China is electrifying its railroads while the US is not, but I'll just leave it there.
Rocky - And China can do a little better importing scap steel. My owner also owns a steel salvage company and most is sent to China. Most ironicly much of the source of our scrap is oil field equipment. Just last year we cut up 10 big offshore oil patch service boats, stacked the pieces onto pallets and shipped it to China at bargain basement prices. One would like to think the US has a domestic market for such material. But it doesn't. The gov't doesn't allow domestic oil to shipped out of the country but all other commodities are fair game AFAIK.
I think Rubin is dead wrong. Wrong about what caused the "recession", which I think is a full-blown Depression, and we're at the beginning of it, not the end, at least in the US, which is struggling with massive structural weaknesses in its economy, which require massive, structural and substantive reforms, not mere fine tuning to remedy; in other words, an agreed, national economic and social concensus, moving hand in hand with real and courageous political leadership; almost everything that's so transparently lacking.
Instead one is saddled with a disinterested, weak, incompetent, national leadership that is too busy with factional strife within the confines of the ruling elite, to agree on a rational strategy to save the country from further and arguably irreversable decline with untold consequences for the US and the rest of the world.
Globalization isn't going to end. It'll change character and evolve, but it won't end. It may "end" for some countries, but for others it will increase, because energy consumption, in its various forms, will flow towards the new centres of economic production, as will capital and power.
Having recently returned from an invitation to visit China, what struck me was how incredibly aware the people I talked to were about the substantial challenges facing the world economy going forward, especially in relation to problems relating to energy consumption and the environment.
I found a level of understanding among the Chinese that frankly puts shame on their American contemporaries of a similar economic and political status.
What's characteristic of Chinese culture, and the way they organize the vast society, and have done for centuries, is that once a decision is made, once a course is charted, it's possible to impliment the centralized decision at incredible speed and with incredible effectiveness. This can also mean that really, really, bad dictates from above can have terrible consequences. But that's another story.
Whilst the ruling elite in the US can't really agree on very much at all, and a empire without a decent and rational leadership is doomed in my opinion, in China things on the political level seem to really work. There is an extraordinary national consensus between the ruling elite and the great, overwhelming majority of the population about where they are going, and only having one political faction expressing the will of the elite, is far more efficient than having two that rail at each other and get nothing done, as in the United States.
The Chinese are, from what I saw and heard, aiming to introduce a real green revoltion in China over the next couple of decades. Turning the Chinese economy and society into the most energy efficient economy on the planet. As one official said to me, we've seen the western model and how it's worked over the last three centuries. We can't go down that road, or follow that model because to much energy and resources are wasted and too many costs to society are externalized, costs which come back to bite you in the future. We want to do things differently. Also we believe that the reforms and programmes we are going to introduce are the key to prosperity and stability, and economic success and job creation in the future.
I'd be less pessimistic about the future prospects for the United States economy if the US ruling elite weren't so grossly incompetent and decadent. If the US was still a functioning democracy they'ed be put on trial and sent to camps to be re-educated, Chinese style. It's a pretty drastic solution, but to allow these people to run the US into the ground is unforgivable, a country of lions led by donkeys.
As one Chinese said to me over dinner, the Americans are going to waste trillions over the next decade on these imperialist wars and their collosally expensive aftermath, pissing their wealth and power away for nothing, we, on the other hand are going to spend trillions creating the economic model for the coming century.
China has become the new Japan. Japan had been lauded as a super-fast grower and as a country that would soon overtake the USA. China will have major problems going forward. Peak oil will put a terrible strain on China - lack of cheap oil may make food prices skyrocket. I believe the "miracle of China" will prove to be as overblown as the "miracle of Japan."
Ehm ehm, in China there are 350 millions farmers, most of all are small producers. Even if the situation of food prices goes wild and wilder, there are more possibilities of resilience than in Europe or United States or other "developped countries".
The miracle of the chinese "growth" is that there is no growth without a large soil fertility and/or small farmers' base.
Population size adjusted Japan is at the level of the US, it just does not spend its resources on imperial wars. China is something altogether different. Its GDP will overshadow the US in the next 20 years and it is exerting a lot effort to secure resources around the world. The US is going to have to compete hard with China for influence.
What is "population size adjusted Japan?"
From the CIA World Factbook:
population density of Japan: 126,804,443 / 377,915 = 336 people / km2
population density of USA: 310,232,863 / 9,826,675 = 31.6 people / km2
GDP - per capita (PPP) Japan: $32,700 (2009 est.)
GDP - per capita (PPP) USA: $46,000 (2009 est.)
They do not look comparable to me.
In terms of standard of living the Japanese are considerably better off than Americans. They live longer, almost the longest life expectancies in the world. (The Dutch live the longest.) They have universal health care; the U.S. does not. Their schools are way better than public schools in the U.S. Their infant mortality rates are way lower than those in the U.S. True, they don't have any economic growth, but they do not need any because their population is declining.
They live longer, almost the longest life expectancies in the world...Their infant mortality rates are way lower than those in the U.S.
That relates to Gross Domestic Happiness, but not to GDP.
They have universal health care...Their schools are way better than public schools in the U.S.
These systems are miserable to be in. The health care is very low quality, and the schools are forced marches of memorization.
You have no idea what you are talking about.
That's not a very specific comment. If you think that, say something useful.
In fact, Japanese healthcare is very low quality. The waiting time for care is very long. The Japanese pharmaceutical industry is oriented towards low risk, me-too drugs (like most of the world, they're effectively subsidized by US drug R&D). The Japanese are only healthy because of accidents of history: a low calorie, high quality diet (which they're gradually losing...).
You are clearly arguing from a position of ignorance. I experienced the health care system first hand over many years of living and raising my family in Japan.
The health care is among the best in the world and its freely and readily available to the Japanese people.
You want me to say something useful? How about "shut up"? Stop commenting on topics you obviously know nothing about.
Ah. Interesting.
Well, on the one hand it's certainly possible to have good experiences with a bad system. I've observed and analyzed HMO's in the US, and it's clear to me that they provided substantially inferior service. And yet, a large % of their members were very happy with their experience: routine stuff worked out well, and it was a relatively small minority of customers who were both badly served and knew it. Many times, they didn't get what they needed, and never knew it. That's what happens in a monolithic, highly cost-driven healthcare system: care is sharply limited, and the patients never know.
For instance, I remember the sad story of a woman who had a stroke, and had limited mobility afterward. She should have gotten physical therapy which would have restored her ability to walk. She never would have known what she was missing if a concerned family member hadn't taken her to a specialized (fee-for-service) geriatric assessment practice.
I remember when HMO's were first developed in the 70's: they started with high hopes of combining cost control with long-term thinking on the part of managers, who would be incentivized to provide preventive care which would be both cost-effective and optimize patient health. Instead, US HMO managers have consistently taken a short-term approach which minimized both costs and quality of care.
I've read several articles about Japanese health-care, and it's consistent with my first hand observation and analysis of the similar portions of the US system.
On the other hand, first hand observation is important. Perhaps those articles were wrong - I'll keep an eye out for more info.
What articles? You posted zero evidence to support your conclusion. Zero.
You know nothing of what you are writing about. Not about the school system. Not about the healthcare system.
You aren't fooling anyone.
What articles?
I saw them a while ago. If I have time, I'll look some more.
You posted zero evidence to support your conclusion.
I posted my own observations, just as you did. I also provided some useful context.
You know nothing of what you are writing about.
I realize you're angry, but if you provide more specific info, that would be more useful.
No you didn't. You have no observations. You know nothing about the Japanese health care system or school system. You have never made any observations of either of them.
One reason the Japanese live so much longer than Americans and have infant mortality rates way lower than the U.S. is due to the superiority of their health-care system. I'm surprised that Nick can't figure that out.
One reason the Japanese live so much longer than Americans
Maybe. Or, maybe it's a much lower level of calories, which is very strongly correlated with lifespan. Okinawa, for instance, has the most traditional diet, and has the longest lifespan.
infant mortality rates way lower than the U.S. is due to the superiority of their health-care system.
Or maybe it's a much lower level of comparative poverty. Infant mortality rates in the US for non-minority middle class are comparable to those in Japan.
You have never made any observations of either of them.
Ah. This is true. Nevertheless, I've looked at systems that are somewhat comparable.
The articles I've read certainly may have gotten the Japanese healthcare system wrong - that's not uncommon for US reporting. Why don't you tell us about your experiences?
Nick, Nick, Nick,
Let me explain to you how the US health-care system looks from the point of view of an outsider: It looks like a pile of cr*p.
You can argue about what kind of cr*p it is, and how bad it smells, and whether or not it is steaming, but the fact is that the US health care system costs far more than any other health care system and delivers decidedly inferior results compared to other developed countries. The US is, in fact, the only developed country on the planet without a universal, publicly-funded, health insurance system.
So, when you are comparing the Japanese health care system to the American one, be aware that you are comparing a Toyota Lexus to a Ford Edsel.
I just thought I'd clarify that for the benefit of Americans who may not be aware of what they had. They paid for a Cadillac and got an Edsel.
Let me explain to you how the US health-care system looks from the point of view of an outsider: It looks like a pile of cr*p.
Oh, I understand that's the perception of many outsiders. And I agree, the US's system has many serious flaws. OTOH, that perception is unrealistic.
the US health care system costs far more than any other health care system
No doubt. On the other hand, it's the only system in the world that's putting serious money into R&D. The rest of the world is seriously riding on the US's coattails for drug and device R&D.
delivers decidedly inferior results
That's not really true. The problem: the US has a serious diet problem, and large pockets of poverty. Those are real, large problems, but they're not the fault of the US health system.
See this article:
"Ever come across simplistic commentators who compare health care systems by comparing life expectancies? Most annoying. Many factors determine life expectancy aside from health care systems. Diets, exercise, even weather influence life expectancy. The need to control for these other factors make well done health care system performance comparisons non-trivial. The RAND Corp has taken an interesting approach to comparison of two health care systems: Older Americans who have more chronic diseases than similar aged older English live just as long as their English counterparts on average. This probably shows the higher amount of money spent per American patient really is buying life expectancy benefits."
http://www.futurepundit.com/archives/007620.html
The problem: the US has a serious diet problem, and large pockets of poverty. Those are real, large problems, but they're not the fault of the US health system.
Both those assertions may be true, but it misses the point - there are many people who do not have access to the US health care system. Those who are self employed have to spend as much on health care as they do for housing.
There is certainly health care, but it is rationed by price. Other government services like fire protection, police, taxation (yes, it is a service), roads(in particular) are available to all, for no charge. Most other developed countries do the same for health care, because it makes for healthier people.
I'm pretty sure that the U.S. is the only rich industrialized country than does not have some form of universal health care. Of course the AMA and the HMOs and the medical insurance companies hate the idea of a single-payer system with a passion, and they are powerful special interests blocking change. I doubt the U.S. will ever go to a single-payer system. We are stuck in our current rut of wildly escalating costs and inadequate coverage.
Yes, I think you are stuck in that rut - it is just too politically difficult to change it.
The health care system works well for those who can afford it, and certainly for those who provide it. But that is not the way a public service should be - but it has never been seen as public service in America.
Now, there is the additional factor of taxpayers not wanting to pay for health care for illegal aliens, and rightly so. It is just another reason why that simmering issue will have to be resolved sooner or later.
For some reason, auto insurance has not gotten as out of hand as health insurance - it actually seems competitive, whereas health insurance seems anything but.
And, the US has made it a responsibility for employers to do health insurance - what small business wants to get involved in that?
It is no wonder that companies are offshoring operations - the company I work for looked at setting up an operation in Calif and gave it up quickly when it became apparent that health care costs, would lead to a 60% increase in the cost of employing people!
auto insurance has not gotten as out of hand as health insurance - it actually seems competitive, whereas health insurance seems anything but.
Car repair is infinitely simpler to price and perform, and the maximum costs are much smaller. Heck, people can do their own car repairs!
Plus, auto insurance is really an indemnity kind of thing (meaning that most people rarely have losses), while health insurance really isn't.
It is no wonder that companies are offshoring operations
Ontario now has more car manufacturing than Michigan....
wildly escalating costs
Ask yourself: as agriculture and manufacturing become more labor productive, and become smaller parts of our economy, what should we do? Should we just shorten the work week? Or should we have parts of the economy expand, that we might want more of?
If we want some part of the economy to expand, what would it be? I'd nominate education and health care.
I see healthcare not as a "cost center" to be minimized, but as a "profit center", where the profit isn't in terms of dividends, it's in terms of better health.
as agriculture and manufacturing become more labor productive, and become smaller parts of our economy, what should we do
We should be happy that they produce more while consuming less resources, both human and material and capital
I see healthcare not as a "cost center" to be minimized, but as a "profit center", where the profit isn't in terms of dividends, it's in terms of better health
Perhaps the medical industry might try to emulate agriculture and manufacturing, by trying to achieve more, while using less resources, human, material, and capital.
The approach of how can I provide the care those patient needs without using so many resources, that I compromise care for another patient. Instead, the current approach seems to be "I will spare no expense (because that is how I get paid) in care for this patient." Problem is, it means less is available for other patients.
You also have the problem of "defensive medicine" when the GP will always refer to a specialist for fear of malpractice. The specialist will order every test for the same reason. All the doctors are spending on malpractice insurance, etc. It is easy to see how this game can very quickly increase the cost of care, and use more resources for the same amount of care, for little benefit in actual results of care.
You could argue that this is the best way for that patient, and you are probably right, but when that means other patients are getting nothing because the resources are already tied up, you do not have a net benefit to society, only to the individual who received the care - i.e. who could afford it.
That is the fundamental stumbling block in America - a large group do not want to give the ability to buy unlimited care, even if it means they are effectively outbidding those of lesser means.
And, as with any bidding war, the winners are the sellers - medical staff, suppliers and health insurance companies, who get paid lots more than in other countries.
there are many people who do not have access to the US health care system.
I agree - it's a serious problem. On the other hand, the recent reform really will go a long way towards fixing this problem.
Those who are self employed have to spend as much on health care as they do for housing.
Yes, insurance companies penalize people in small plans. It's a problem.
There is certainly health care, but it is rationed by price.
Most people are in health plans, either fee-for-service, or HMO's. The HMO's are very similar to national health plans. The fee-for-service have a few out of-pocket costs, but they're mostly not that large.
What you're missing: every plan rations somehow. Some do it with price, some do it with waiting times, and some do it administratively, behind the scenes.
There's no question that waiting time is a real problem in many national systems. Waiting time is rarely a problem in the US, except for a few public health systems for the indigent, in places like Chicago and New York. Hip replacements, for instance, can take years in the UK.
The administrative rationing is the sneakiest: many people never realize they didn't get what they needed. It might be physical therapy, it might be a new drug which was deemed too expensive, it might be a device like a pacemaker or an implantable defibrillator.
Bottom line: each national approach has it's virtues and problems. Would I want the US to go to a single-payor system? No, if for no other reason because that would eliminate the drug and device R&D that gets done in the US and nowhere else.
Writerman,
You are quite correct that U.S. leadership is weak, incompetent, and decadent. Nature abhors a weak government just as much as it does a vacuum. The U.S. as a functioning republic is moribund and near death. My guess is that the 2020 presidential election will be the last real election that we have, and after that we will have a series of dictators. There was a lot of discussion on this topic in a Drumbeat of about a weak ago.
Rubin is wrong about many things, you are right there. If peak oil/EROEI/debt finance/population/ecological overshoot/complexity awareness can be grouped into five stages, if you will, Rubin is clearly stage 1 or 2.
But I'm curious about what China intends to do about its major imbalance of boys to girls. Multiple husbands per wife?...though I can't think of any major examples of polyandry. Import Thai or Vietnamese (Or American!) women?
Also, China may be a couple of decades (or even a half century) too late. They will run into the same resource and declining marginal returns problems as everybody else.
In addition, China seems to be following a top down, rather than organic bottom up route to prosperity. Building ugly high rises, trains to nowhere etc. "Build it and they will come." I see no reason why this will work anymore than Bernanke's magic money machine.
So as a casual observer who unlike you has not been to China, I see many problems. I can admit I may be blind and wrong; I recently visited the U.K. and the experience made me more optimistic on their prospects.
It could be that America has gone so down the drain that it's impossible to imagine other parts of the world being proactive about these problems.
BTW ASPO.TV is great, kudos.
I'm curious about what China intends to do about its major imbalance of boys to girls. Multiple husbands per wife?...though I can't think of any major examples of polyandry.
The fact that they have 120 boys born for every 100 girls is going to be something of a problem for them. I don't really think they have considered this at all.
In other areas where there were a shortage of women (e.g. the western US or Australia during their frontier days) the net effect was that men tended heavily toward violence between each other, and treated women like the scarce commodity they were - all women had to do was show up, and if they were halfway attractive, men would propose marriage on the spot. Men who had money often arranged to bring in wives from elsewhere, but other men just stayed bachelors their whole lives.
I have been in areas where polyandry was traditional (e.g. high in the Himalayan mountains, where women would marry two brothers, so they could always have one at home while the other was away herding yaks for six months at a time) but I think the Chinese would have a real problem with it. Their one-child policy kind of ruins the marry-two-brothers concept.
China is also doing what any country with an excess of a commodity (in this case, young men) does - they export it. In Africa, where China is not only buying up oil prospects, but is also buying up farmland, they are sending their young men there to run things. A small proportion of the excess to be sure, but if you are one of the 20 out of the 120, a gov't paid job on the other side of the world doesn't sound too bad.
if the men can;t be out to productive work, then yes, there will be violence, eventually. Unemployed, single, young men, with no hope of getting a job or a woman, have little to lose.
Unemployed, single, young men, with no hope of getting a job or a woman, have little to lose.
I think the Chinese leadership is acutely aware of this - that's one reason they feel so strongly about keeping the economy going strong!
Quite so - wouldn't want those angry young men to turn against the government - like Mao, Castro, Lenin, etc etc
The Chinese have practiced large-scale female infanticide for at least 4,000 years. It was and is an effective means of stabilizing population. The modern Chinese will get along just fine with their sex ratio, because it is traditional in China. Mao broke the tradition by decreeing forced abortions rather than female infanticide, but Mao's ideas are no longer popular in China.
The Chinese have practiced large-scale female infanticide for at least 4,000 years.
Wow. Really?
The modern Chinese will get along just fine with their sex ratio, because it is traditional in China.
None of the discussions I've read have mentioned this - it seems important. Have you seen a reference on this?
Everybody who has studied Chinese culture and history knows that widespread female infanticide was the tradition in China. As recently as the late nineteenth century there would be signs by lakes saying, "Babies cannot be drowned in this lake." So there were particular dumping grounds for the girl babies. During times of famine, all the girl babies would be strangled by midwives (very common) or drowned by the father.
It worked very well to keep their rate of population growth down for 5,000 years.
Everybody who has studied Chinese culture and history
A lot of people have written extensively about current Chinese demographics without mentioning it. You may be right, but if so, why is it missed so widely?
Why female infanticide? Because only women can bear children? People who write about selective abortion seem to assume that it's because males have both the ability to support their elders, and because they tend to stay where they are. That's always seemed a little odd, though, given that childless women can work in farms just as effectively as men, and if they aren't married, they'll stick around. I wonder what the precise feedback is.
It is not difficult to find sources on Chinese culture and history; any university library will have many many books on this topics. Most public libraries do not have much on China. The Internet, with some notable exceptions, doesn't have much in-depth on history or culture of anywhere.
When I was browsing the stacks of the general library at the University of California, Berkeley, I remember at least twelve and maybe as much as twenty feet of books on Chinese history and culture. Then of course, there are the journals, where most of the best research is published.
I can remember when I took a course on the sociology of the family how the Chinese family was used as a case to contrast with the modern American one. Female infanticide in China never stopped, even under Mao's rule, but it did diminish. When female infanticide decreased, then population growth rate increased--hence Mao's one-child per family policy. But that policy was never enforced in rural areas; to this day they are governed more by tradition than by the market or by decrees from Beijing. I doubt that the current high rates of female infanticide are any higher than in the nineteenth century, and they may be lower.
It is hard and sometimes impossible to get accurate demographic data on China. My guess is they don't even know the population now, to within twenty million. It is surprisingly hard to count poeple, and their census is nothing like as good as the one in the U.S.
Hmmm. well, thanks.
I'm not really an incredible, or uncritical, supporter of China. Though I can see it may appear so.
I'm deeply concerned that, their belief in their ability to create a new and sustainable economic model, a form of Chinese Capitalism, or as I'd see it the Chinese version of the Corporate State, is "doomed" too, as the collosal demographic, environmental, economic, and energy consequences of the exponential growth model, may be too big to cure, even for a society like China.
But, compared to the US, the Chinese I met, were accutely aware of the challenges ahead, and the complexities involved in solving them, or attempting to; and they seemed so clear-sighted and honest about both the enormous positive aspects of Capitalism and its obvious drawbacks.
They seemed to see Capitalism without ideological blinkers or economic dogma, raw Capitalism as it is. As a tool, rather than a faith. A system that can be used to develope China, but a system that's under state control.
Of course this is usually how Capitalism works. The state nurtures and protects, it facilitates Capitalism. The state and capitalism work in tandem. But there also has to be a concensus in society about the direction of society and their has to be a social contract between the ruling elite and the people.
Will this great Chinese experiment work? I don't know. I do know that the Chinese ruling elite are determined to radically alter the Chinese economy and steer it in an energy efficient, sustainable, environmentally friendly direction. Their ambition is to create the world's first, truly Green Economy. Whether they succeed, or whether it's possible is a complex and giant subjec to get into. What's important is that they are trying, and have the vision and money, and not least the organizational ability to give it a shot; compare that to the dithering, decadent, degenerate, incompetents, that rule the United States.
"Will this great Chinese experiment work?"
Not for long. They are bound by the same resource limits, the same physical constraints, the same ecological debts that we all are. Reese does a pretty good job of spelling it out:
http://www.desmogblog.com/william-reese-warning-people-earth-video
The percapita land area (if my numbers are correct) in China is about 3/4 of a hectare, so, per Reese, they would need to reduce their population by a factor of ~10. Meantime, they're going to need a lot of imports. Not very sustainable over time.
It's worth noting that many commentators saw Japan in exactly the same way 20-30 years ago: a disciplined, lean, well-directed corporate state.
Where's today's Drumbeat gone? It's vanished. I get
Permission denied
You don't have permission to access the requested content.
if I try to go to the URL directly and it doesn't show up on the front page.
re: "Triple digit oil price is going to change cost-curves."
Wouldn't it have to be the case that the triple digit oil price would have to be sustained for some X length of time? i.e,. in order for the "cost curves" changes to be on-going in such a way as to have the desired result he speaks about?
To get the changes Rubin wants and thinks are likely to happen the key factor would be to get expectations of triple digit oil prices to be sustained. Expectations are based on two different models; adaptive expectations takes into acount past history and weights recent past history most heavily. Rational expectations are based on things that people expect to happen in the future.
When things are stable, adaptive expectations of price levels and particular prices rule.
When things change drastically or quickly or both, then the adaptive expectations model breaks down and expectations are "rational" in the sense that they take account of all known information that might affect future price levels.
There has been a ton of recent (past twenty-five years) research done in both economics and finance (which is a special field of business administration) on expectations and how they are formed and how fast they can change. It should be noted that expectations can change dramatically on a dime--hence the abrupt changes in financial and commodity markets.
I disagree with Jeff on practically everything except that oil will become more scarce. He's smooth and he delivers a palatable message with a ray of sunshine at the end. But he's an economist. gagh! Where's the tar and feathers? We never learn. What a bunch of useless cattle we turn out to be. Whether politics, business, you name it, we always moon over the most charismatic speaker with the best looks and the happiest ending story. Wake up! What the hell is price when you're starving. Money's the biggest joke on this planet. A 1000 trillion in debt, but only 77 trillion in assets. A year and a half is too short to save globalization, but price is going to save us? please.
Perhaps you should read the article, Base, and ignore the video. Better yet, read Rubin's book. No, I am not a shill for Rubinism, and I have no connection whatever to his publisher. But I do recognize a very rare occurance: an economist who knows something about basic physics.