A while ago, I was gazing out the kitchen window at the lawn guys a couple of houses down. They were doing what probably was the fall's last mowing, along with some seasonal aerating. I'll bet they used up a gallon and a half of gasoline, easy.
It occurred to me that this ritual of American suburbia in five or 10 years will seem as foreign to us as quilting bees, canning season or making tallow candles to beat back the darkness from your unelectrified cabin.
YOU SEE, the jig is almost up for America Uber Alles and the easy life of the middle-class. The oil is running out, and the phenomenon called "peak oil" is just around the corner, maybe no further off than three years hence.After that, global oil production will start to slide several percent per year, all in a world of exploding demand for cheap energy. Needless to say, the effect on an entire economy -- an entire way of life predicated on lots of cars running on lots of gas -- will be devastating and will change forever the way we live.
That's not me saying this. It's this, "this" being an analysis in the British magazine Money Week:
The American middle class consumer though indebted still travels to the fry pits and big box retail stores lining the eight lane highways. And they are still spending money with that good old up tempo American resilience to jolts from the outside world. In spite of the fact that they can no longer use their homes as ATM machines by progressively re-mortgaging when property prices were going up.
Sub-prime crisis or not, the Fed will rescue the system and the American way of life will go on as always, with a few temporary tweaks and household budgetary adjustments... won’t it? After all, didn’t George Bush Snr. forcefully declare at the Earth Summit in 1992 that “the American way of life is not negotiable.” And the centrepiece of that way of life is suburbia and has been for 60 years.
It spawned suburban sprawl and the ‘drive-in utopia’ and enabled millions of people to live a long car drive from their work. The ultimate American story has been and is played out in the suburbs to the delight of the Simpsons scriptwriters and makers of dark movies such as David Lynch.
So is American suburbia screwed? Does it represent, in the words of James Howard Kunstler, admittedly a car hating, new Urbanite iconoclast, “the greatest misallocation of resources in the history of the world’’?
Will much of American suburbia become the “new slums” peopled by the “new and impoverished proletariat”, while others scramble to escape? Are we soon going to be talking about America’s “former middle class”? To quote Sam Goldwyn, it’s a “definite maybe.”
How come? At its root, there’s a simple unvarnished fact. And it’s not about over-stretched borrowers. It’s a crude and brutal fact that the ‘cheap oil fiesta’ is over. And what exactly is the problem? It’s this. Americans remain oblivious to the red light on the fuel gauge, and the long and short of it is that the whole suburban phenomenon was and is built around the car, and the central dogma that oil will remain abundant and cheap for ever and anon. Upon that is predicated the system that has sustained the daily lives of the vast bulk of Americans - the ‘American dream’ - since the late 1940s.
(snip)Instead, we tend to go with those who see the free market price oil price more likely to hit $100 per barrel than $30 and in any case to stay at $70 and above given geopolitics and demand pressures. We are seeing the growth of bi-lateral or multi-lateral neo-mercantilist oil supply deals between the likes of Russia and China, Angola and Nigeria and China, India and Russia, and Venezuela with various consumers. This is leading to shortfalls of supplies available for the rest of the world via the NYMEX and other bourses.
So if the world is indeed heading down the arc of oil depletion, and if geopolitics and neo-mercantilism bring significant insecurities into US oil supplies, the American suburban lifestyle built round the car will start to destabilise and wobble with deep and wide ramifications.
Just ponder this... the average Caesar salad travels 1,500 miles to the supermarket shelf. And those 12,000 mile supply chains of cheap, if increasingly ‘tainted’, Chinese goods will begin to look uneconomic with a $100 per barrel oil price. Indeed at anything much over $70. Moreover, US agriculture, currently being reshaped by the oil-intensive ethanol-from-crops movement, has been consolidated in a very small fraction of the population, and relies on pumping oil-based products – fertilisers and pesticides - into the soil to yield food crops.
Maybe, to misquote and modify Randy Newman: “if he were alive today, Thomas Jefferson would be rotating in his grave.” Assuming that in some degree or other, the era of American suburbia is ending, at a speed yet to be determined, America will be forced to recalibrate itself to some degree. This could yield a lot of opportunities amidst the turmoil. For example, in general terms, ‘the local’ supplier will bulk larger vs ‘the distant’. There will a ‘made here’ and ‘still made here’ placards reflecting more home grown businesses, and not just restaurants and beauty parlours but textile and auto-parts manufacturers among others. More small towns will be developed and built.
OF WHAT I'VE BEEN READING lately, the above is the rosy view from a Brit who has more faith in American ingenuity than I do. A more prevalent view among those warning that "peak oil" is nigh, is that the economic upheaval brought by the increasing scarcity -- and costliness -- of the lifeblood of Leviathan America may bring about a situation where it's every man for himself, that "state of nature" described by English philosopher Thomas Hobbes in his masterwork, Leviathan.And, according to Hobbes, life in the state of nature is "solitary, poor, nasty, brutish, and short."
Count Georgetown political theorist Patrick Deneen among the pessimists:
I think there is a growing possibility of severe social and personal pain and dislocation, of societal upheaval and even political chaos. These are not conditions that we have ever experienced and seem implausible, even incredible. But, the bleak scenario we may face is not because human beings - and Americans especially - can't live this better way of life, but because we have organized our lives in ways that make any such easy transition implausible if not impossible.
There are obvious ways in which this is so: take, for instance, the example of banking. The modern capitalist system is built on the health of a banking system. The health of a banking system rests most deeply upon a foundation of economic growth: no one would lend out money at modest interest if they believed first, that there was great risk of default, and second, if the money returned in the future (even with interest) was worth less than money in the present. Our banking system hums along in the backdrop of economic growth; in a backdrop of economic contraction, the banking system would become dysfunctional. Some bankers might succeed by making good bets on individuals, but the systemic backstop that the future will be brighter than the present would disappear (this is the same principle by which we do better betting on the market than necessarily on individual stocks; we can afford to have some losers in our portfolios in the backdrop of a rising market. Just as a rising market makes everyone look like financial geniuses, so too a growing economy makes our high-finance Hampton banker boys look brilliant).
Beyond such specific examples, however, there is a deeper cause for concern which is tied most fundamentally to the very plausibility of the modern liberal system. Modern liberal society is premised on growth - constant, unrelenting growth. Liberal democracies have always and everywhere come under severe stress, and very often have disintegrated under conditions of prolonged economic contraction. Much of modern history records not the stability and "normality" or naturalness of liberal democracy, but its profound fragility. America has come to believe that liberal democracy is its birthright, even that it is the natural condition of mankind. There is much evidence to contradict this belief: liberal democracy has in most cases been a difficult political arrangement to maintain, perhaps above all because it requires belief in its fundamental justness from the populace. In the absence of the prospects of limitless growth, the populace of many liberal democracies have rejected the justness of liberal democracy, and their societies have unravelled, at times descending into conflict, civil war and chaos.
Why should this be so? In a nutshell, liberal democracy contains an internal contradiction: liberalism is a political theory of basic economic inequality; democracy is premised upon the belief in political equality. Democracy exerts an egalitarian pressure upon liberalism, to which liberalism must offer some compensation. The earliest theorists of liberalism understood well that they were commending a theory of economic inequality: in the justly famous Chapter 5 of the Second Treatise on Government, John Locke argued that liberal society allowed and even encouraged increasing economic differentiation between the "industrious and rational" and the "quarrelsome and contentious." Advanced liberal societies permitted the exacerbation of the position between these two sorts of humans: the rights of liberal society required defense of the State, above all, to prevent the assault on wealthy "estates" (or property) by the larger "quarrelsome and contentious" classes. Locke foresaw the potential of proto-Marxist temptations among the poor to deprive the wealthy of property. In the end, the promise of State protection of property was not sufficient: liberal society cannot last if there is a persistent desire on the part of the lower classes to encroach on rights of property. A repressive (Western) liberalism has generally not proven successful.
(snip)
People will not gladly or easily accept sure knowledge of a future of decrease. The idea that we will gradually and easily slip into a "better future" in which the stock market continuously loses value; in which our houses grow less valuable year after year; in which our purchasing power, via our dollar, buys less every passing day; in which our children can expect to make less money, to have a "less successful" future than previous generations; in which we will have to adjust our expectations to accept work of a more manual nature, for less money, and with less leisure - that we will go gladly into that "better life" without a tumultuous political upheaval and a vicious fight over the valuable scraps that remain is implausible if not pure fantasy and dangerous wishful thinking.
OY. If only Deneen were an ill-informed crank making this stuff up out of whole cloth, which he isn't.
As a matter of fact, one of the leading experts on "peak oil" two years ago sounded alarm bells in Washington. But instead of sounding the alarm bells with the American public and industry, our leaders already had taken another tack in 2003 -- invade the country with the world's third-largest oil reserves.
And that may well be exactly why we're in the Iraq quagmire today. But more on that later.
British journalist David Strahan interviewed Dr. Robert Hirsch, author of the 2005 paper Peaking of World Oil Production: Impacts, Mitigation, and Risk Management -- written at the behest of the Energy Department and commonly known as the Hirsch Report -- about his findings:
When global oil production peaks, the economy is likely to shrink in direct proportion to dwindling fuel supplies, says Dr Robert Hirsch of the think tank SAIC.
Speaking at the Association for the Study of Peak Oil conference in Houston, he also warned that as peak approaches, producer countries including OPEC and Russia are likely to husband their reserves for future generations and limit exports, potentially sharpening the decline in oil available to importing nations.
And, of course, we get back to Iraq. You know, the country with the world's third-largest oil reserves -- greatly undertapped oil reserves, thanks to the sanctions against Saddam Hussein's regime. Again, here's some of an article by Strahan, the British journalist:
But despite the oil majors’ undoubted interest and influence, the decision to attack was not taken in the boardroom. Iraq was indeed all about oil, but in a sense that transcends the interests of individual corporations – however large.
The elephant in the drawing rooms of both the White House and No 10 was the fact that global oil production is likely to ‘peak’ and fall into terminal decline within about a decade - the inevitable result of 40 years of dwindling oil discoveries and ever-rising consumption. Oil production is already on the slide in 60 of the world’s 98 oil producing countries - including the US and Britain. Dr Michael Smith of the oil consultancy Energyfiles forecasts another 14 will join the descent during the next ten years. Aggregate oil production in the OECD has been falling since 1997, and all major forecasters – including noted optimists such as the International Energy Agency and Exxon Mobil - expect output for the entire world except OPEC to peak by the middle of the next decade. From then on everything depends on the cartel, but unfortunately there is growing evidence that its members have been exaggerating the size of their reserves for decades, and that their output could also falter soon.
As I report in The Last Oil Shock, the international oil consultancy PFC Energy briefed Dick Cheney in 2005 that on a more realistic assessment of OPEC’s reserves, its production could peak by 2015. That would tip global output into terminal decline, almost certainly bringing soaring oil prices, deep recession and worse. A report published by the US Department of Energy, also in 2005, concluded that without a crash programme of mitigation 20 years before the event, the economic and social impacts of the oil peak would be “unprecedented”. The evidence suggests that these fears were already weighing heavily with Cheney, Bush and Blair.
In a world of looming oil shortage, Iraq represented a unique opportunity. With 115 billion barrels Iraq had the world’s third biggest reserves, and after years of war and sanctions they were also the most underexploited. In the late 1990s Iraqi oil production averaged about 2 million barrels per day, but with the necessary investment its reserves could support three times that output. Not only were sanctions stopping Iraqi production from growing, but also actively damaging the country’s petroleum geology by denying the national oil company access to essential chemicals and equipment. In one of a series of reports to the Security Council, UN specialist inspectors warned in January 2000 that sanctions had already caused irreversible damage to Iraq’s reservoirs, and would continue to lead to “the permanent loss of huge reserves of oil”. But sanctions could not be lifted with Saddam still in place, so if Iraq’s oil was to help defer the onset of global decline, the monster so long supported by the West would have to go.
As I reveal in The Last Oil Shock, the CIA was also well aware of Iraq’s unique value, having secretly paid for new maps of its petroleum geology to be drawn as early as 1998. Cheney also knew, fretting publicly about global oil depletion at a speech in London the following year, where he noted that “the Middle East with two thirds of the world’s oil and lowest cost is still where the prize ultimately lies”. Blair too had reason to be anxious about oil: British North Sea output had peaked in 1999 - and has been falling ever since - while the petrol protests of 2000 had made the importance of maintaining the fuel supply excruciatingly obvious.
Of course, taking all of Iraq this time, then occupying it, hasn't worked out so well. Nor has the resulting chaos done much for exploiting those Iraqi oil reserves.
Returning for a moment to the dire predictions of Hirsch, the oil-supply expert, here's Deneen again. Just so that we're perfectly clear on what we might be facing much sooner than we think:
The impact of an ongoing negative growth economy in a society that is premised upon ongoing and permanent growth will be catastrophic. Everything we assume about the future would change. Few jobs, few bank loans, difficulty providing goods and services (including food), shrinking numbers of college educations, the evaporation of our national wealth, declining levels of research and innovation across the board, no retirement accounts, the decline of the middle class and devastation of the lower classes, etc.
In answer to a question whether "peak oil" will occur as a gradual plateau or a sudden and drastic decline, Hirsch points to the high likelihood of increased resource nationalism (a phenomenon we are already witnessing around the world). He notes that private oil companies no longer control petroleum resources; national companies do. As awareness of peak oil spreads, there will first be a further spike in oil prices and a growing inclination of resource-rich nations to hold their remaining oil in reserve for domestic production and in expectation of further rises in price. This response will, of course, only accelerate and deepen the crisis.
Hirsch foresees the likelihood of gas rationing as a reactive answer to our current inability to begin cutting back our consumption. Nature will exact her price, whether we are willing to pay for it significantly now or drastically in the near future. Our techno-optimists tell us that technology will come to the rescue. The nice thing about holding this position is that no one has to act responsibly or like an adult. It was once the case that adults acted with prudence, awaiting not the best case scenario but preparing for the possibility of a worse. Our liberals and conservatives alike tell us that technology will save us, but mark my words, when TSHTF they will be the first to blame someone else: the Saudis, the Iranians, the Russians, Hugo Chavez, you name it. Our impressive military will be called upon to secure our vital national interest, wherever it might happen to be buried. And at that point no one will be able to suggest that perhaps we have ourselves to blame, because we did nothing when intelligent but obtuse people knew what was coming at the end of our wild ride down Sunset Boulevard.
We have gotten what we wished for. It didn't make us happy, nor did it sate our appetite for more, more, more. And now we're going to lose it. All.
Engulf the world in a nuclear fire?
INSTEAD, maybe God's just chastisement of His deeply crooked people will come in with the relative quiet of oil wells slowly going dry. One after another, world without end, amen. Maybe the judgment of the Almighty comes, as it always has, in giving rebellious and willful humanity all the rope it needs -- plus free will.
If and when our Western house of cards comes tumbling down upon us, don't blame God. We could have been less avaricious. We could have lived more simply. We, at any time, just could have cut it out.
We didn't have to be our own hangman. We didn't have to take the rope and make a civilizational noose out of it.
IT'S NOT God's fault. It's ours.
Did you really need that $35,000 SUV? Did you really need two of them? Does your family need to be a three- or four-car family?
Did you really need that 4,500 square-foot house in the exurbs? Did you need to live in the exurbs -- or even the suburbs -- at all? Did I?
Does everybody in the family need two cell phones, a BlackBerry, three iPods and a mega sound system in each car?
Do you need Evian, Aquafina or any other kind of bottled water (and the petroleum needed to make the throwaway plastic bottles it comes in) when the stuff out of the tap is the same two parts hydrogen and one part oxygen?
AND WHAT ABOUT the $250 -- a piece -- you just dropped on Hannah Montana tickets for your two preteen daughters, who really, really didn't need to go to a damn Hannah Montana concert? You'd raise holy hell if your county government imposed a $500-a-year tax on you to build and subsidize convenient, low-cost, energy-efficient mass transit.
Yes, you would.
Well, now the conductor is coming down the aisle, announcing the end of the line. Your fare card is spent. Please exit to the back.
HAT TIP: Crunchy Con
No comments:
Post a Comment