Join News Letter

Iraq War

Peak Oil

Climate Change

US Imperialism











Gujarat Pogrom



India Elections



Submission Policy

Contact Us

Fill out your
e-mail address
to receive our newsletter!




Peak oil, Business As Usual,
And Katrina

By Bill Henderson

05 September, 2005

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.

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.











Search Our Archive

Our Site