Friday, May 30, 2008

I've got good news and bad news.

Which would you like first? The bad you say? Sure. What the hell.

Here's the bad news: if the peak oil folks are correct, we may well be facing imminent economic meltdown. The way Kenneth Deffeyes puts it:
How big is the problem? Multiplying production (barrels per year) times the oil price (dollars per barrel) gives a total cost in dollars per year. It's an enormous number; tens of trillions of dollars per year. To put a scale on it, the three thin curves on the graph show the oil cost in contrast to the total world domestic product; the annual value the goods and services added up for all the world's countries. The three curves show the oil cost at one percent, two and a half percent, and five percent of the total world economic output. At $130 this morning, we are at six and a half percent.

Oil production obviously cannot consume 100 percent of the world's income. My intuitive, uninformed guess is that it cannot go above 15 percent. If we see oil at $300 per barrel, we will be looking out over the smoldering ruins of the world's economy.
If you look at Matt Savinar's site Peak Oil: Life After the Oil Crash, you'll get an idea of the scope of the problems we might well be facing fairly shortly. One thing to note is just how much of our lives in what passes for Western civilization in the early 21st century is dependent upon petroleum products. One also gets an idea that much of the legislation that has been passed in recent years in the US seems aimed at dealing with the turmoil to come - that national security state that's been developed comes complete with the end of habeas corpus, the building of a vast prison/concentration camp system, fat contracts for Blackwater and other mercenary operations, etc. That's not to mention the ever-present risk of a return to military conscription to provide sufficient bullet stoppers for the War for Oil War on Terra. I digress. Read for yourself if you dare.

Matt also says over at his blog:
So while it is still impossible to answer the question of "How much time is left", we might be able to use the price of oil and gas as some rough indicators of where we're at. We're hovering around $125/barrel and $4/gallon right now and already seeing significant slowdowns in the housing, banking, airline and automotive industries. Shutdowns likely begin around $200/barrel and $8/gallon. At $300/barrel and $12/gallon most everything simply stops.

If prices continue to rise at a pace even roughly resembling the trajectory of the past two years, this gives us 6-to-24 months before total shutdown.

[snip]

Of course, the pace could slow down just as easily as it could accelerate for a whole host of reasons.
So, what is the good news? Glad you asked. Via Matt's blog:
FWIW, I don't think you need to worry about the police state or the KBR camps much past $200/barrel and $8/gallon. At those prices, the economic machinery that simultaneously feeds hundreds of millions and imprisons tens of millions begins to shutdown. At that point, a cessation of food and fuel shipments is, in my opinion, much more likely than are mass round ups and imprisonment.

"But what about the camps that the Third Reich ran even as its economy crumbled?" Unlike World War II Germany, we don't have much of a train system in this country and what we do have is pretty decrepit. Furthermore, the lion's share of the energy used to extract the coal to run the trains and the camps comes from oil-derived fuels. Most of that oil is imported from thousands of miles away. (Even the domestically produced stuff is typically imported from hundreds of miles.) The production, import, and refining infrastructure to do all of this is dependent on extremely complex and highly globalized "just-in-time" networks of commerce, finance and telecommunications that are unlikely to exist in sufficient capacities for very long once oil settles in above $200-$250/barrel.
And y'all thought I was a pessimist. What is clear is that there are some huge changes on the horizon for which there is nearly no preparation. I do think that neoliberalism will become little more than a historical artifact of the late 20th & very early 21st century once that black gold becomes too expensive. As I was saying over a year ago:
The world that my generation is leaving behind for our kids and grandkids will in many ways seem much harsher than the one that we inherited. The thought used to drive me to depths of despair. The older I get though, the more stoic I have become - instead I'm realizing that those who've survived previous collapses find opportunities for finding meaningful existences, and even a measure of happiness. With crisis comes opportunity. I have little choice but to hold out hope that my kids' generation will seize that opportunity to create the beginnings of something beautiful out of the ashes of what we gave them. Hopefully a few of us middle-aged gen-x-ers can live long enough to pass on the lessons we learned of the folly of American Exceptionalism, and of the predatory capitalism that myth enabled. Maybe they'll take those lessons to heart.
Food for thought.

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