Probably few saw this meltdown coming. We have come to view human progress as a given, and an ever growing economy and living standard as an entitlement.
Certainly, the US and world economy has proven to be less robust than the most ardent skeptics would have thought, outside perhaps the peak oil group. Current talk is of green shoots and the V-shaped recovery. However, the next wave of trouble is likely to be the commercial sector, with apartment and office leasing under pressure from the highest jobless rate in 26 years.(2) Who will be around to buy up these assets?
Congress is initiating a commission to determine the causes of the crisis, which already seem to stem from the regulatory lapses of a freewheeling era as well as risk build-up from perpetual and unstemmed exuberance.
The economic costs so far are $1.4 trillion in financial industry losses, $700 billion in U.S. taxpayer cash infusions and loans to businesses, and $37 trillion in destroyed world stock market value since October 2007.(3)
One factor that seems to be overlooked is the run up of oil prices in the face of worldwide demand. Our nation was built on a model of cheap oil, having been the Saudi Arabia of the world until the 1950s, when the OPEC nation took over the world leading oil exporter. The US crisis precipitated the world economic crisis. The world economy runs on oil, and high prices seem to take the wind out of the proverbial sails.
That run up culminated on July 11, 2008, when the price of a barrel of oil hit a record $147.27 in daily trading. That same month, world crude oil production achieved a record 74.8 million barrels per day.
Prior to that record, during the period from 2005 to 2008, though oil’s price steadily rose, production remained essentially flat. Though new sources of oil were coming on line, they barely made up for production declines in the older fields due to depletion.
In the wake of the following crisis, both prices and production fell as demand for oil collapsed. Since then, up to $150 billion of investments in oil production capacity have evaporated. Apparently, oil companies and oil producing nations can afford to expand or at least maintain production around 75 million barrels per day, collectively, but the world economy cannot afford oil at $150 a barrel.(4)
What’s all this? I thought we didn’t have to worry about oil until 2050. Its a problem for the grandkids to figure out, right?
In November, 2008, the International Energy Agency (IEA) issued a turnabout in its World Energy Outlook. This, from a generally conservative agency.
The opening paragraph:
The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable – environmentally, economically, socially. But that can – and must – be altered; there’s still time to change the road we’re on. It is not an exaggeration to claim that the future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply. What is needed is nothing short of an energy revolution.
In preparing this report, the IEA performed a comprehensive study of 800 of the world’s largest oil fields. It concluded that without massive investment in discovery and drilling, the current world oil production will decline by over 9% per year.
To use another source, on May 4 of this year, Raymond James Associates, a brokerage specializing in energy investments, issued a report stating, “With OPEC oil production apparently having peaked in 1Q08, and non-OPEC even earlier in 2007, peak oil on a worldwide basis seems to have taken place in early 2008.” This conclusion is being echoed by numerous other analysts.
There seems to be a widespread tendency to discount oil’s value to humanity. We treat it like a commodity, right next to pork bellies, which are, in fact, renewable. Oh, we say, we’ll just go back to horses. We’ll just to go to electric cars. Or, someone will think of something.
Let’s address these three points, as they are ubiquitous.
Firstly, we could not grow enough hay to feed that many horses, at least not without clearing the remainder of the nation’s or world’s forests. Already, one third of the planet’s forests have been cleared, resulting in about half of anthropogenic (man-made) carbon dioxide emissions, which by the way is a green-house gas.
Secondly, in a collapsed world economy, we would not all be able to afford electric vehicles, and if we could, the dilapidated electrical grid could not support the new load without browning out or collapsing.
Thirdly, this is capitalism, unless as Newsweek has stated on a cover, that we are all socialists now. So if someone could think of something so brilliant that it could usurp the laws of physics and thermodynamics, they would patent it and make trillions overnight. Besides, I think socialism requires its practitioners to possess at least some feeling of well being towards the other members of a society, so right off, we would suck at it, rather badly; whereas in capitalism, its all been chalked up to “just business.”
Oil under girds the world economy, and was primarily responsible for our population growth and prosperity.
In essence, we have been too successful for our own good. Like a lottery winner, we don’t know when to stop.
In the case of world population, scientists estimate a sustainable number to be between one and two billion. Sustainability should be thought of as a mode in which resources are not being used up at a rate faster than they are renewed, resulting in a subsequent population crash.
Current population is now almost 7 billion, which is 3 and a half times the upper limit of a sustainable number. To use another analogy, the capacity of a Honda Odyssey is 8 people (with 3 point seat belts for all, actually). Would we pack 28 people into an Odyssey? Do we believe that would that be wise? Hey, all 27 of you…pack in!!! We’re going bar hopping!!!
The results of our short-term thinking are becoming obvious, although we were warned repeatedly in the 70s (in a lot of ways, the hippies and vegetarians have been right all along).
We are running out of oil. Our oceans are over-fished and acidified from excess atmospheric carbon dioxide uptake. Our forests are being pulled down, reduced to scorched earth and cattle fields. Our little experiment of loading the atmosphere with 150 million year old carbon is resulting in a warming and changing climate. The plants and animals that we share this planet with are dying off at 1000 times the historical background extinction rate, caught between over-fishing, over-hunting, land use change and climate change. Monsanto is playing God with genetics, then suing farmers for stealing when the wind blows Monsanto’s transgenic seed’s pollen into that farmer’s neighboring field, infecting the hapless farmer’s organic canola plants. Oh, Joy! And the model of modern industrial agribusiness is playing a significant role in the destruction of planet Earth. It goes on and on and on….this is the tragedy of the commons, on a planetary scale. Everyone is responsible, and no one person is responsible…an intractable problem.
Certainly corporations aren’t responsible… they are only doing what we designed them to do. We should not act surprised or indignant. Would a scorpion change its character? That would not be logical.
As Americans and as a species, we need to develop some degree of awareness of these issues. There is oblivious and then there’s oblivion.
We need a world free of Monsanto s.(5) Its either corporations or humanity.
Show me a garden, that’s bursting into life.(6) It is likely that we will still need to eat in the imminent collapsed world economy.
We face an uncertain future, one we should at least be aware of and then approach with some degree of resolution. After all, Lenny Bruce is not afraid.
(1)R.E.M. – Document album
(2)U.S. Office Vacancies Near 4-Year High on Job Losses, Reis Says – Bloomberg
(3)U.S. House Approves Panel to Probe Causes of Financial Crisis – Bloomberg
(4)Richard Heinberg – http://postcarbon.org/peak-oil-day
(5)Combat Monsanto – http://www.combat-monsanto.co.uk/
(6)Snow Patrol – Chasing Cars