All anyone has to do is breathe the word, “Iran” these days and the station employees run out and change price on the big sign. Due to the uncertainty of the consequences of Western reactions to Iranian nuclear brinkmanship, gas prices are forecast to hit as high as $5 a gallon nationally this summer and the speculation is already threatening the economic “recovery“.
Wait…hold on…how could energy prices be related to our economic health? That’s crazy talk.
Hey, I’ve got an idea – I really think it’s in our best interests to propose a surface transportation bill that’s really just an end run for the auto lobby and Big Oil, undoing everything we’ve done to prioritize moving PEOPLE instead of CARS and make even us more dependent on the cheap energy that’s never coming back! BRILLIANT!
But wait, how can such small fluctuations in supply influence global prices? Demand hasn’t been this low in 15 years!
Few of us understand Peak Oil. The Wall Street Journal, Forbes, Businessweek, et al have each done their part to relieve shareholder concerns and lay to rest this nutjob conspiracy that we’re “running out of oil.” They do this by quoting economists and by not letting actual geologists anywhere near their writers. No shit. Of course’re not running out of oil.
We’re running out of CHEAP OIL.
And while normally, slack demand should lower prices, this is an indicator there’s not a glut and even now the supply balance is tenuous. Our political leadership is making a fatal mistake in refusing to deal with this fact and are doing their damnedest to take us with them. Peak Oil is based on three factors:
- what it will cost to extract new found oil – the Alberta Tar Sands, Brazilian deep ocean wells, etc are uneconomical at <$90/barrel selling price
- what the effects of near or above triple digit oil are on demand - 2008′s all time record of $147/barrel crashed to a fifth of that in less than 4 months
- what the combined effects of 1. and 2. will have on our current supply chains
2008 was also the last year global production increased. Synthetic oil doesn’t count because it’s a net energy loss. Take that away from the industry figures and you’ll see. It’s no mystery. Growth is over. Without increasing supply you can’t increase GDP since every unit of the latter requires a unit off the former. Without growth, there’s no economy – or at least as we’ve defined it since the beginning of industrial age.
We are seeing the effects of Peak Oil not as gas lines or fuel riots – not yet anyway – but as shortages of capital in the system and the resultant ramp-up of rhetorical class war as the have-nots get more vocal and the entitled seek to hold on to creature comforts. It’s why the banks aren’t lending and are hording all they can get from the Fed as yet another round of quantitative easing appears on the horizon.
Two paragraphs from James Howard Kunstler’s weekly rant yesterday bear quoting here:
…in the last hours of the cheap oil economy, the forty year miracle of the Sunbelt boom dwindles and a fear of approaching darkness grips the people there like a rumor of Satan. The long boom that took them from an agricultural backwater of barefoot peasantry to a miracle world of Sonic Drive-ins, perpetual air-conditioning, WalMarts, and creation museums is turning back in the other direction and they fear losing all that comfort, convenience, and spectacle. Since they don’t understand where it came from, they conclude that it was all a God-given endowment conferred upon them for their exceptional specialness as Americans, and so only the forces of evil could conspire to take it all away.
Neither party can articulate the current reality, which is that we have to reorganize civilization pretty drastically. I’ve reviewed that agenda many times in this space and it largely amounts to rebuilding local economies at a smaller and finer scale.
Both parties seem to think they can save the economy and the United States by bailing out the automakers and by putting us to work drilling and by making highways – and forcing us to drive on them by making driving the only choice there is.
If the radical environmentalists who oppose domestic drilling were really all that was standing in between us and an economic recovery, who really believes that ANY presidential administration would be siding with them – especially our current one who benefited so heavily from contributions from the financial sector. The only reason I can see for Obama postponing the Keystone Pipeline is because there is no guarantee it’s going to stay full. If the coming price spikes once-again slay demand and throw us back into recession/depression, the project could be an albatross.
The only oil we’ll have access to is the oil we can’t afford.
I feel we’re rapidly approaching an event horizon where the rhetorical shots become real ones. Kunstler continued:
If neither party can frame an agenda consistent with that reality, then we’ll have to get there without them, probably after a very rough period when the pretending still lingers in the air like a bad odor and no reality-based consensus is able to form, no agreement about what we should do. That’s the period when a lot of things fall apart and people get hurt. These are the choices we’re making right now.