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138 comments on DrumBeat: December 23, 2006

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Roger on December 23, 2006 - 9:40am Permalink | Subthread | Comments top
I want to start a discussion on what possible responses there will be to the phase 1, right after the oil peak.

I think that things will change according to the nessecity.
We will drive as long as we can drive. There will be discussion about how to conserve, but I think conservation will just happen where it can be done and where it is needed. Just like what is now happening in the third world where country after country is shutting down.

I don't believe in a masterplan put in place by the government to make the transition happening. The forces needed are simply to big and to costly.

The only master plan is letting oil, gas and NG prices rise to the level that demand destrution balances suply and demand again.

The efforts to migitate future energy shocks are so huge and ask for so much sacrifices years before it is actually needed, that any politician who will ask this from the civilians will be put out of office right away.
So things will be done when the need is there, not any sooner.

What do you think?

Roger from The Netherlands.

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oilmanbob on December 23, 2006 - 9:59am Permalink | Subthread | Parent | Comments top
Roger from the Netherlands, Unfortunately, you may be right. Politicians necessarily act on problems where ther is a ray of hope of a resolution before the next election, a rather unfortunate price we pay for living in republics. Only a lame duck or an out-of-power has been can address those issues,, and he (or she) will be ignored and marginalized. As examples, look at Al Gore on global warming or Jimmy Carter on world peace. They are emenently reasonable, even statesmen, but they are like contagious plague carriers to the national political parties of the United States.
  We have a country to huge that no one can expect to act much different and still be in the ploitical process. Maybe the size of the Netherlands makes statesman-like behaviour possible. The antceint Greeks thought democracy was impossible in any polis with more than about 5,000 citizens, and I'm not seeing much to change my opinion.  
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klee on December 23, 2006 - 11:40am Permalink | Subthread | Parent | Comments top
However, leaders can appear to address extraordinary crises using extraordinary means.  Few would have predicted in the 1920s that the basically conservative US  would reformulate itself to address inequality by providing a social safety net and come to accept the role of government as a mediator between citizens and business interests.  Given the challenge of the Great Depression and a leader with the intellect and political skill to lead the nation through that challenge, the US transformed itself and successfully emerged from both the depression and the challenge of fascism.

If there is to be a government based response to Peak Oil, it will require an extraordinary leader like FDR to sell the ide to both the public and elites.

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Roger on December 23, 2006 - 12:42pm Permalink | Subthread | Parent | Comments top
Yes I agree. In Phase II some redistribution of wealth has to be carried out. Otherwise large outbreaks of violant riots will occur.

But I think that this will only happen when we are a couple of years on the downslope. In the mean time it is wise to get out of debt, get your house and youself in goof shape and buy some gold (not a paper gold-option, but some real krugerrands)

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klee on December 23, 2006 - 1:28pm Permalink | Subthread | Parent | Comments top
I was speaking less to the redistribution of wealth than to the need for leadership.  To address a monumental problem such as peak oil someone needs to 1) recognize the problem and its potential impact; 2) communicate the problem to the populace in an effective way; 3)propose a viable solution (which at this point is not prevention but adaptation and mitigation); 4) mobilize the populace to achieve that solution; and 5) deal with the "Powers That Be" backlash of attempting to preserve the status quo by discrediting the articulation of the problem and proposed solution.  It is a tall order and I don't really see anyone on the horizon who could fill it.

Al Gore has recognized the problem (and most likely has the knowledge of the system to assist in implementation.)  However, he ,like all empiricists, believes that if he just lays out the evidence people will see what the problem is and what they need to do about it.  Unfortunately, as we have seen that is not necessarily the case (see Number 5 above)

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odograph on December 23, 2006 - 10:12am Permalink | Subthread | Parent | Comments top
We have a small response in the US, driven by our current "high" prices.  I know they are low in comparison to Europe, but they've moved a few people.

As I say, a small response:

According to Ford, the full-size SUV category shrunk to 800,000 units in 2005, from a 2003 high of more than 1,000,000. That's 20 percent less high-profit hardware hitting the highways in just 24 months, including the biggest-of-the-big Ford Excursion, which was pastured a year ago.

http://www.herald-mail.com/?module=displaystory&story_id=154713&format=html

Pushed by the Toyota Yaris, Honda Fit and Nissan Versa -- small, front-wheel-drive, fuel-efficient subcompacts introduced this year -- the low-price end of the small-car market is up 42.2% through November, compared with a year ago, industry tracker Autodata says.

http://www.freep.com/apps/pbcs.dll/article?AID=/20061221/BUSINESS01/612210378

I can only think that such things will accelerate if and when "peak oil" becomes apparent to the average consumer.

... if you are an arch-cynic, that's the kind of thing you just didn't expect to happen ... yet.

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Roger on December 23, 2006 - 10:23am Permalink | Subthread | Parent | Comments top
Exactly, people will respons on the crisis by conserving;
-more efficient vehicals
-cutting car trips

Thing is, there will be a lot of losers in the proces.
Just like the African countries that power down first, it wiil also be the poor individuals in the US and Europe that will power down first.

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odograph on December 23, 2006 - 10:29am Permalink | Subthread | Parent | Comments top
There is going to be a tension between efficiency and conservation, certainly.  And even efficiency will benefit some (looks like the Japanese car makers) and hurt others (Detroit).

Ah well, I'm out for the weekend.   Merry Christmas to all ...

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Roger on December 23, 2006 - 10:44am Permalink | Subthread | Parent | Comments top
In the Netherlands (one of the richest countries of the world), last year there was a sharp increase of households who got cut off from nat. gas, electricity and even water.

The main reason for this is the energy price increase (up 80% since 2000) people cannot afford to pay anymore.

Powering down in the mists of plenty!

Is this happening in the US also?

Roger from the Netherlands

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BOP on December 23, 2006 - 11:16am Permalink | Subthread | Parent | Comments top
Roger:

I am in Canada and was unaware of the degree of current impact of recent price changes in your country. I know of nothing similar here.


With regards your comments on GHG and AGW I believe you are being much too complacent. There is growing evidence that the environment may be more sensitive to forcing then was first believed. GHG continue to increase at a rate greater then that encountered in any prior historical natural record; the potential for positive feedbacks resulting in a further acceleration of AGW is high.


The IPCC is due to issue an updated report early in the coming year. I would strongly urge reading the text of the IPCC report. The press does a very poor job of communicating the issues.


I would also observe that statements along the lines of "we cannot afford the required response to mitigate AGW as this would devastate the [local, national, global] economy" simply underscore the degree to which our current economic system is unsustainable. To put it bluntly, we cannot afford our current western lifestyle. Both PO and AGW are in the process of teaching us the truth of that fact.


Cheers! And best wishes of the season.

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Leanan on December 23, 2006 - 11:53am Permalink | Subthread | Parent | Comments top
Wow. I'm surprised. They allow people to be cut off?

I don't think I've ever heard of anyone being cut off from water in the U.S.  I don't know what happens if you don't pay your bill, but I imagine it would be considered a health issue to not have water.

Power and natural gas can be cut off, but generally not in winter.  What happens is people who can't pay rack up huge bills in the winter - so big they can't pay them in summer.  So they get cut off in the summer, and the next winter they struggle to heat their homes.

It's apparently pretty common for people to try to heat their homes by turning on the oven and leaving the door open.  (Which is not safe.)  Also to run the shower with all hot water (since often, hot water is included in the rent, while electricity isn't).

We have programs to help the poor with winter heating costs, but there's not enough funding for them.  Hence states' eager acceptance of Chavez's cheap oil charity, even when they hate his politics.

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Roger on December 23, 2006 - 12:26pm Permalink | Subthread | Parent | Comments top
Oh yes, they do allow that. This year over 20.000 households where cut off. On a population of 16 milion and say an average household of 3 people that's about 0.4% of all households. That is not a lot, but it is rising fast.

My wive is a social worker and the stories she sees unfolding in the poor families are heartbreaking...  children starting to smell because there is no running water to wash with... people who burned their house down because they tried to stay warm with a wood fire inside...

This is just the beginning!

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Leanan on December 23, 2006 - 12:37pm Permalink | Subthread | Parent | Comments top
I'm really astounded.  I guess the rumors of Europe being a giant, cradle-to-grave welfare state are greatly exaggerated.
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Roger on December 23, 2006 - 12:51pm Permalink | Subthread | Parent | Comments top
The welfare state in Europe is something that is disappearing quite fast. There are a multiple of reasons for this (in random order):

-Depletion of oil and N.gas fields in Europe
-Increasing imports of energy from outside Europe
-Large amounts of immigrants from the former Russian states and Africa
-The aging of the total polulation
-The introducton of the Euro

Remember the large riots in France this year?

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PaulS on December 23, 2006 - 2:13pm Permalink | Subthread | Parent | Comments top
And let's not forget another biggie - that overweening sense of entitlement that is sometimes falsely regarded as quintessentially and uniquely American. For example, plenty of Europeans want les trente-cinq (the 35 hours) for themselves. On the other hand, most also demand the limitless "right" to the fruits of somebody else's  soixante-cinq (65 hours) in order to provide themselves with many, many things. Such as ultra-super-deluxe luxury medical care and marvelous but fantastically expensive TGV networks.

This sort of thing is unsustainable regardless of the size of the energy supply or of the economy itself, so in accordance with Stein's law, and consistent with the post, it isn't being sustained. So I have to guess that in the end, and putting it crudely, if people demand trainloads of this, plenty of that, and boatloads of the other thing, then there's little choice but to also demand that they turn off the TV, drag their bottoms out of the couch, and work for it.

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JustZisGuy on December 23, 2006 - 3:36pm Permalink | Subthread | Parent | Comments top

marvelous but fantastically expensive TGV networks.

Unlike that marvelous and fantastically cheap highway network in the U.S., which has paid for itself and is generating a profit to this day?

Sorry for the sarcasm.  My point is that the TGV network may be expensive to build, but as far as I can tell it makes a profit, so that's hardly an argument against it!

http://www.bbc.co.uk/dna/h2g2/A711785


It is interesting to note that the TGV became one of the few SNCF services to operate at a profit, paying for the construction costs in just ten years.

http://www.findarticles.com/p/articles/mi_m1215/is_n7_v194/ai_14163718


The three TGV lines now in operation--TGV-Sud-Est, TGV-Atlantique, and TGV-Nord--are moving millions of people between France's major population centers with speed, comfort, and convenience--and they're doing it at a profit. The 11-year-old Paris-Lyon TGV-Sud-Est is earning 15% on investment--an ROI that rises to 30%, claims SNCF (French National Railways), when you factor in fuel savings and highway and airway maintenance savings--the French even enter sharply reduced highway fatalities into the equation. Air traffic has all but vanished between France's two largest industrial centers, where center-city-to-center-city travel time is now three hours by plane and two hours by train.

http://findarticles.com/p/articles/mi_m0BQQ/is_6_43/ai_105203013


Emmerich told IRJ in Paris: "Unlike the commuter rail services, grandes lignes is not subsidised.
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slx on December 23, 2006 - 1:28pm Permalink | Subthread | Parent | Comments top
It depends on the country. In Belgium people are entitled to minimum services of electricity (barely enough ampère to run a washing machine, but still).
Squatters have the right to have a connection to the grid etc. - they still have to pay, of course.
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Don Sailorman on December 23, 2006 - 6:40pm Permalink | Subthread | Parent | Comments top
Could it be that utilities in Europe are socialized and government owned and thus able to be nastier to poor people than the privately owned but highly regulated U.S. utility companies? Just a guess.
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oilmanbob on December 23, 2006 - 11:00pm Permalink | Subthread | Parent | Comments top
  Water utilties are mostly public in Texas, although in the last 30 or 40 years they are mostly built be  Municipal Utility Districts rather than directly by a municipality. The MUDs issue bonds and collect taxes as well as fees, but are incorporated separatly from counties or cities. This rather Byzantine arangement allows for maximum feeding at the public trough.
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PaulS on December 23, 2006 - 1:42pm Permalink | Subthread | Parent | Comments top
I'm surprised too but only a little. It causes me to recall that some of our politicians in the USA paint life in Europe as some sort of free ride, at least when they're advocating their pet programs, i.e. advocating more control by themselves over other people. But nothing could be further from the truth - it's not a free ride, just a different ride.
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PaulS on December 23, 2006 - 1:44pm Permalink | Subthread | Parent | Comments top
Oops meant this to go under Leanan's comment.
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Sandor on December 23, 2006 - 12:12pm Permalink | Subthread | Parent | Comments top
After thinking about this for a few years, I come back to the same conclusion.

I do believe the problems are going to really ripple through the financial sector. Seeing the amazing statistics regarding  consumer negative savings rates and debt levels, it would appear that a significant portion of the populus is poorly prepared for rapidly increasing energy costs.

So, once the peak oil is out of the bag, I imagine that many will start to drastically cut back on discetionary items that fuel the economy, and keep people employed.

Look at the auto industry. Ford and GM cannot survive without the sales of SUV's and trucks. Their business model is dependant on those high margin vehicles, for now. From what I remember, about 1 in 5 domestic jobs are tied to auto industry. From manufacturing, subcontractors (Johnson Controls, Dana, etc) all the way to the person selling you the vehicle. Oh, and don't forget the refiners that make gasoline. So about 20 percent employment!

The average person owing 20k on an SUV will have a hard time unloading a highly undesireable vehicle to go buy a hybrid, or Corolla. Will they be able to continue to fill up the SUV? Ford or GM will have to look alot different when the peak oil news breaks, or one of them is going to fail quickly. (Rather than the slow death they are now experiencing)

How about the Marine industry? I would expect that would suffer a huge contraction. This will be one of the first industries to take a big hit.

RV Industry: Ditto the Marine Industry.

Dining out. Mid tier and up will start to suffer. (Chili's, TGI Fridays, etc) This is about the first to go when consumers are pinched. (in this case, rising energy costs)

Housing. The exurbs will be a undesireable place. I see a shift toward consolidation around employment centers. What happens to those institutions holding paper that financed this housing?

IMHO, these are the things that I would expect to suffer in "Phase I". By no means a comprehensive list.

When the consumer starts cutting back, or eliminating the need for the aforementioned items, I would expect unemployment to skyrocket. An unemployed individual does not  pay his bills, let alone buy much other than basic necessities.

Conclusion: A viscous circle of layoffs, foreclosures, failing industries (reliant an discrentionary income), higher taxes, inflation, declining wealth from a depressed stock market and finally bank failures.

Capitalism cannot work without growth. Nothing has been proven yet to provide the energy density and transportability of oil (save nuclear), and that oil has fueled alot of growth.

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oaksmoke on December 23, 2006 - 12:48pm Permalink | Subthread | Parent | Comments top
It's the fraudulent monetary system that is dependent on growth. An economic system based on free markets would not need central banks to control interest rates.
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