Entries Tagged 'Economy' ↓

Those of you who follow me know that I have recently ceased making posts urging large-scale reform. The reasons for that are fairly simple, but they involve a psychological hurdle to get over.

I have been communicating with James Howard Kunstler, John Michael Greer, and David Holmgren, all of whom I have interviewed, about a Wise Action Plan. The goal was for us to agree on this Plan and then publicly pronounce it in an effort to get some sensible action on peak oil and climate change. Initially, I urged a response that included a revitalization of rail, large-scale wind or solar farms, and other actions that require the federal government to take a strong leadership role.

While the others generally agreed such actions would be a good idea, especially if they have been started 20 or more years ago, two of the three thought they were a waste of time. They had two reasons for this:

1. It’s too late. We needed to be getting off oil while we still had a surplus. Now that we’ve hit peak oil, diverting any oil to build solar panels means there is less for cars or crops.
2. They ain’t gonna. What politician is going to do that, barring an emergency situation? (Emergency is here defined as rioting, fuel rationing, or other severe measures.)

To be fair to our politicians, it’s hard to get elected telling people their lifestyle is going to change drastically, including many of them giving up their cars. The problem is partly cultural; we want what we want, and we’re going to keep electing politicians who give it to us until that is no longer possible.

And to be brutally honest, most of us have bought into the idea of unending growth and improvement, that the market will find solutions to concerns like oil depletion, and that if it were really that bad, somebody would do something.

At that point, we will be well into the emergency.

It has been difficult for me to give up on the idea of leadership from above. I ran federally as a Green Party of Canada candidate last go-round, but wouldn’t do it again. Even in the fantastic unlikelihood that the Greens got a majority next election, they could not do what needs to be done. Still too many people will resist change, and this resistance will be encouraged and financed – by vested interests.

Think Globally, Act Locally

As a result, I’ve gone local. Leadership is going to have to come from the grassroots, from us, from those who understand the reality and are willing to take some action. I believe that every village, town, city, and region should create a Transition Initiative to get off oil.

This is acting locally, and it is vitally important for your survival. Local resilience is ‘in,’ and for good reason. When oil prices go up, imports of everything – including food – are going to get more expensive and harder to get. If you’re already shopping at the farmer’s market, for example, you have helped support a local farmer who will now support you as options in the supermarkets get scarcer and pricier.

This is my new Wise Action Plan:

1. Start or join a Transition Initiative in your area.
2. Reskill.
3. Develop personal self-reliance, which includes everything from starting a garden to insulating your house.

If we’re lucky and good, these local movements will take off, multiply like viruses, and infect the planet. These local movements will bond together and require their governments to do the right thing – to protect us. They will do this not by lobbying or influence-peddling, but by sheer strength of numbers.

I’m reading Joseph Stiglitz’ Freefall: America, Free Markets, and the Sinking of the World Economy, and he has mentioned several times that the most recent banking crisis was far from the first. In fact, it seems bankers have a history of creating financial disasters; I am old enough to remember the U.S. Savings and Loan crisis, caused by crooked bankers and enabled by crooked politicians, and Stiglitz mentions that there have been many such crises around the world.

It shouldn’t be any surprise that bankers routinely cause financial crises. While Stiglitz cites reality to back up the need for strict oversight of bankers, basic common sense should yield the same conclusion, for two reasons:

• Bankers deal with money – a lot of it. That is going to attract greedy and unethical people.
• Bankers make their money using other people’s money.

Given the immediate and enormous impact money has on our lives, large sums of money will act like a magnet for greedy people, especially those who want something for nothing. And what better way to get something for nothing than by gambling with other people’s money, where you get a huge profit if you win and there is no negative consequence if you lose? The only way to do better than that is outright theft, a la Berbie Madoff, but so far there are still consequences in that field.

The two reasons previously mentioned mean there is a great deal of moral hazard in the banking industry, and while many bankers will be responsible and trustworthy (with sufficient oversight), it only takes a few to thoroughly corrupt the whole system. Those few, of course, will make the most money and therefore will have the resources to buy politicians to remove barriers to making even more money – and more risk. As it becomes easier and easier to get rich quick in the banking industry, more and more unscrupulous people will drive out responsible bankers and sensible laws…until the result is a crisis.

By that point, of course, they have bought enough influence to ensure a bailout for themselves and no oversight that might cramp their style going forward.

This is why banking is best when boring.

I can’t say precisely when, so by “soon” I mean within two years at most. My reasoning is below; I’d be curious to hear feedback.

Given that the:

1. Price of oil spiked to $147 per barrel in 2008
2. Current oil price is $80, even though we’re in the worst recession since the Great Depression

I reason that:

1. The price of oil remains ~$80 per barrel because demand is keeping it there.
2. The U.S. is in recession with oil at that price, no recovery is coming. We are in a permanent recession.
3. With oil at those prices during a recession – four times that of just a few years ago – indicates we have hit the limits of supply at this price. That is, oil producers cannot pump more to get the price down, even if they wanted to (which most don’t).

However, demand in China continues to grow, and we continue to burn far more oil than we’re finding, so this means another oil price spike is almost certain within two years. The U.S. economy may find a way to recover somewhat, too; perhaps another bubble can be found. And the Americans are starting to drive more, again. That will push demand up.

Demand is going to push on supply, and price is going to go up fast, followed by a crash to a lower level than we are now. We have to reach a level of recession where we are consuming considerably less oil, or are considerably less dependent upon oil.

As we’re not doing anything serious about consuming or being less dependent upon oil, there will be another spike and crash.

Don’t wait for your federal government or even state/provincial government to provide leadership. They will at best respond too late, once we’re mid-crisis or beyond. Make your town a transition town.

Climate change is not a clear and present danger. It is clear to scientists, to those who take the trouble to understand the science, and to those who trust the former or the latter. It is not at all clear to anyone else, and of course the truth and danger are deliberately obscured by paid deniers.

Climate change is also not a present danger, meaning it is not an immediate threat. The longer we put off confronting climate change, the more damage it will do, but the nature of the threat is creeping and exponential. Some changes are occurring right now and many may realise that climate change is a contributory factor, but the danger is distant and remote. Later, as we go up the exponential damage curve, climate change becomes a clear and present danger but it will be too late to stop the worst.

Humanity does face a clear and present danger, however, and combating this crisis will go a long way toward fighting climate change. Environmentalists must not waste this crisis. Despite forty years of environmental activism and some major battles won, the war is all but lost.

If you want to win, it is time to change strategy. The crisis is peak oil, and is dead simple:

1. There is only so much oil;
2. At some point, the peak, we will have used half of all the oil;
3. After that point, there will only be less oil; and
4. Our entire civilisation, especially transportation and food, is dependent upon oil.
5. No substitutes are anywhere near available.

It doesn’t take a genius to realise that unless our need for oil remains less than the supply of oil, the price of oil is going to go up. Way up, given how dependent we are upon it.

From The Oil Drum

After the price of oil spikes, there will be a recession, and the price may come back down. That has been the pattern in recent recessions caused by oil price increases. This time, however, we have passed peak oil and that means the supply is less than it way – which means the price is not going to go down as much as it used to.

We are in a permanent recession as a result of the fact that oil prices are roughly four times what they were a few years ago. Because virtually 100% of our transportation – trucks, trains, planes, ships, and of course cars – runs on oil or its derivatives, the price of transportation has increased. The same effect exists with food, where pesticides are petroleum based, and of course tractors run on diesel. Inflation lately has been driven by these increases in transportation and food costs, and as people have to spend more on necessities like food and transportation, they will have less to spend on other things. This means less consumer demand and therefore a recession.

This recession is permanent and will probably deepen. Just prior to the recession, the price of oil spiked to $147 per barrel, and it is now approximately $80 per barrel. This is four times the price of only a few years ago, when the economy was booming. We are now in the worst recession since the Great Depression. The price of oil is not going down.

How does this recession fit into environmentalism? It is a crisis that will continue until we greatly reduce our demand for oil. Which, coincidentally and interestingly, is also a big part of the cure for climate change.

Climate change warriors need to get behind a plan to get off oil. The peak oil crisis is now, and people will respond. Whether they respond by invading another oil-bearing country, by dissolving into poverty and despair, or by conserving and moving to renewable energy is currently an open question.

Environmentalists, climate warriors, peak oilers, nationalists, and democratic reformers need to pile onto peak oil. The longer we delay, the more damage we suffer from recession, from peak oil, and from climate change. Replacing oil with conservation and renewables makes the nation energy-independent, creates a secure food supply, eliminates oil-induced inflation and recessions, and slashes greenhouse gas emissions.

Peak oil is a clear and present danger to the nation, to our prosperity, and to civilisation, and the protective steps for peak oil will greatly help with climate change. All of us need to join together to combat it.