Peak oil, Business
As Usual,
And Katrina
By Bill Henderson
05 September, 2005
Countercurrents.org
The world's capital
stock doesn't turnover over night. Those who bought SUVs made a big
capital investment. In the short-run, they have to pay up to reap any
benefit from that investment. The composition of the US auto fleet changes
slowly, and that same is true globally. Moreover, Detroit now makes
a lot of SUVs, and it cannot suddenly shift to making hybrids. Capital
investment and sunk costs and the like. So it is giving the SUVs away
at cost, more or less - further delaying the shift in the composition
of the US fleet. http://www.rgemonitor.com/blog/setser/97473/
Where are we now?
Whining about the
price of gas? There are more pressing issues but I suppose it is realistic
for Americans, my fellow Canucks and most of us in the developed world
to focus on the price at the pumps. Morning radio here, even CBC, has
people phoning in with lowest price sightings. Our ability to perceive
the outside world has been shaped over millennia by events close to
hand, events close to the bone, so we shouldn't be surprised.
For example, Cindy
Sheehan has reinvigorated the anti-war movement in the States. Rationally
more than a hundred thousand Iraqis are dead, many hundreds of thousands
mutilated and traumatized and, even more importantly, the war has made
the world a much more dangerous - nuclear war dangerous - place for
everybody on the planet - but realistically Americans are always going
to be most concerned with the body bags coming home.
The lesson of Vietnam
that Cheney and Rumsfeld learned was that you can kill several million
'Gooks' but you better learn how to wage war with next to zero body
bags coming home. Got the war right, but this first step in the peak
oil endgame and containing China is unraveling because mothers like
the brave Ms. Sheehan don't want to pay the cost of the blown occupation.
So, in the bigger
picture, where are we?
Most oil producing
countries have peaked: America, Norway, Venezuela, UK, Indonesia, Iran,
etc.
Most of the major
oil companies have peaked: Chevron's production in the second quarter
of 05 is down 6% from last year, for example; Exxon 5%; Shell 3%; Conoco
3%; and total 1%. Major oil company production has been falling for
several years and several companies have had to substantially reduce
estimates of reserves.
The world's supply
of sweet light crude has recently peaked. Matthew Simmons detailed investigation
of Saudi Arabian oil production strongly suggests that the mother of
all oil producers might have peaked or worse, might have even greatly
exacerbated depletion in an effort to over produce. Global oil production
will soon (if it has not already) peak.
Rising oil prices
will stimulate investments in efficiency and alternative fuels. Yes,
but it will take a much more massive undertaking then even rebuilding
New Orleans to make suburbia efficient. Alternative fuel development
languished for wasted decades at less than one percent of fossil fuel
development. And the definitive report from the US government's own
energy agency suggests that it will take at least a decade to even begin
the turnaround to a post fossil fuel economy.
There's lots of
oil and market mechanisms - a corrective reaction through higher prices
and demand destruction - will pull America and the global economy through.
Markets can't create
oil and the hopeful optimists totally dismiss the scale of needed change.
(And the world's more than 10,000 years old - fundamentalist faith can't
shield you forever from waking to the reality of a much, much bigger
universe.)
Lots of oil remaining
yes - but blind faith will just increase the steepness of the decline
if unrealistic and wasteful demand continues.
And it will because
for at least several decades it has been a financial fudge to ship raw
materials across oceans and finished products back again; for people
who should have known better to buy great big trucks and SUVs, 3000
mile salads, 5000 sq ft houses with double or triple garages, fly all
over the place on a whim and all of the other attributes of a way of
life that isn't negotiable.
Markets have failed
for decades to properly price and allocate fossil fuels: for only one
increasingly important example, where were the costs of global warming
quantified and paid in the prices set by the Texas Railroad Commission
or latterly by OPEC?
Many Third World
countries are already being priced out of oil at $60 a barrel with the
mother of all famines on the horizon, but there's still going to be
a big party at the Stupor Bowl; the already obese are still stuffing
themselves with chicken and steak produced by factory farming that turns
oil into food; the trucks and SUVs just keep getting bigger and bigger,
sold to the little pinheads advertisers have brainwashed to buy all
this stuff.
Philosopher Peter
Singer has made a strong case that our ethical family is now global:
we have pushed ethical consideration to first include the tribe, then
the broader religion, then everyone in our nation state, and now because
of globalization to our global village. (Don't tell Tom Friedman - he
doesn't want to know.) Singer makes this case in his book ONE WORLD
and in sketch form on the net in his essay the Drowning
Child and the Expanding Circle.
James Howard's depiction
of rising prices drowning
economies like a rising tide should sound the alarm (but, realistically,
probably won't). Gas prices in Eritrea, Indonesia or the Philipines
don't figure on American radar but they should. A right wing targeted
Hugo Chavez has offered cheap oil to poor Americans as he has to Latin
American countries that otherwise would be drowned by rising prices.
New Orleans is sinking.
The average American, North American, family has learned to spend somewhere
near 10% more than it earns every year and bankruptcies are skyrocketing.
Hopefully, Katrina isn't the trigger this time; hopefully, this brutal
kick to the American sewage system won't lead to housing and other bubbles
bursting all over America and then globally. Hopefully, rapidly increasing
gas prices won't trigger a chain reaction of just in time non-deliveries,
foreclosures, personal and civic strife, panic and looting. But it is
going to happen sooner or later.
We should expect
an angry outcry from truckers and airlines, farmers and seniors: everybody
who will be pinched badly by rising gas prices and should expect attempts
to force governments to increasingly subsidize transportation or at
least reduce gas taxes. Totally wrong way to go but, realistically,
to be expected.
We should expect
Europe, Canada and Japan to send oil and gasoline to incredibly wasteful
America but not to Eritrea or Bangladesh.
We should expect that those in control of government and the economy
will resist all reasonable attempts to introduce non-market regulation
to conserve oil and planning to hasten a post oil economy.
There is a bigger
picture here: EO Wilson's Bottleneck, Bill Catton Jrs OVERSHOOT, the
once and forever end of oil. There is a dawning appreciation of what
good government should be but isn't, and how close we are all to chaos
and cruel inhumanity when calamity strikes, and the importance of strong
institutions and the rule of law.
But, like peak oil
and Iraq, most of us will only awaken to reality in the wake of the
storm surge.
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