<When completion is not the endThe Oil DrumI guess this is discourse...? (or Levitt of Freakonomics on today's Maass piece)>

42 comments on The Beginning of the End of Oil?

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Anonymous on August 21, 2005 - 12:09am Permalink | Subthread | Comments top
There are two separate issues (read: problems) within the Peak Oil concept: 1. Oil depletion that give us those nice production peaks and declines for individual oil fields, nations, and for the world as a whole, and; 2. Supply and demand issues where 84 million barrels per day is current supply and 84+ mbd is current demand. Demand has been increasing by 2 million barrels per day each year, so something now has to give. As I see it, we may not reach world peak oil production for a couple more years. Nobody really knows for sure except perhaps T. Boone Pickens. But if current maximum production capacity (supply) is limited to something less than what the world's nations are demanding at a given price point, then the price will rise -- and perhaps quite precipitously when production/delivery interruptions of just a percentage or two of world demand occurs. We're looking at huge price spikes, with large upward spikes and lessor downward relief, due to supply and demand "miscoordination". We're looking at the end of western civilization with true Peak Oil.

A silver lining either way as Wal-Mart is doomed.

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odograph on August 21, 2005 - 8:33am Permalink | Subthread | Parent | Comments top
WalMart should be able to keep their shelves full.  They use efficient forms of transportation, in container ships and tractor trailers.  Throw in some trains and they're sweet.  The other half of the equation is how much money their shoppers have in their pockets, and how far they are willing to drive.

... if you want to name someone for immediate trouble, think of people who rely on AIR transport.  How high does a fed-ex envelope have to go before it becomes a non-starter?  How long before trains again carry the bulk of our mail?

(reading a book about trains now, one footnote was that the dissapearance of the "airmail" stamp came when ALL mail started to go by AIR)

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Anonymous on August 21, 2005 - 7:49pm Permalink | Subthread | Parent | Comments top
It was recently reported (about a week ago) that Wal-Mart's bottom line is being shaken by recent oil price increases. Wal-Mart's profit margins are already razor-thin, they rely on cheap oil (and cheap labor) by shipping their goods farther than anyone else, and they locate all their big box stores close to highways for their own restocking convenience (and because the land is usually cheaper in the boonies), demanding that their customers drive the extra distance. But heck, gas is soooo cheap that nobody cares to do the cost analysis. So you are right, odograph, to mention that higher gas prices will eventually discourage Wal-Mart customers to go the extra distance to save what used to be a couple of bucks on gummy bears and pickles. But I can't fathom your suggestion that energy prices rising quarterly by percentages in the double-digits still leaves Wal-Mart "sweet". Just watch Wal-Mart over the next six months. As they go, so goes America.

And yes, FedEx and UPS will be scrambling to survive as well. But shipping costs are what they are and will be paid. However, Wal-Mart is where Aunt Pearl goes to buy cheap mascara, and when it ain't cheap anymore, Pearl will look elsewhere... or horror of horror, go without. And that's when the American economy goes bust.

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odograph on August 21, 2005 - 8:18pm Permalink | Subthread | Parent | Comments top
I don't want to extend the idea too far, but my basic thinking is that the products with the highest energy content will fall away first.  Thousand mile salads (or whatever they call greens flown across contenients) will go away.  Free range eggs flown to an upscale market will give way to local (is "battery" the right word?) producers.  Air travel will be reduced, probably giving way to more on-line "conferences."  And so on.

My guess (only a guess) is that the shoes or microwave at WalMart actually have a lower energy (specifically oil) content than the shoes or microwave at the corner store.  For one thing, they probably have at least one fewer "hops" in their transit from factory to store.

.. still guessing, I think that in a tight economy, with recession-bound frugal spenders ... WalMart and CostCo will do less buiness than they used to ... but they'll do more than the higher margin guys.

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Anonymous on August 22, 2005 - 3:48am Permalink | Subthread | Parent | Comments top
There have been numerous complaints, for years, in both news commentary and popular music, denouncing 'conspicuous consumption'.  For example, I read once that you could feed the world with what America spends on cosmetics alone. I wonder how many things we can really do without. I mean, do you really need that garlic chopper? That home theater? A second car? The McMansion?

Unfortunately, jobs are created with such consumption. The engineers, die makers, home builders, package designers, and delivery truck drivers, all trade their time making garlic choppers and home theater systems to you, which you trade for by doing something else. And this activity by millions of people creates an enormous variety of products available to us; millions of products, each attempting to distinguish themselves with one feature or another, each trying to fulfill a niche. Every physical need which you might have, and even some which you never knew existed, seems like it can be fulfilled by a product or service found in the global marketplace. Life is easy, routine, painless, and b-o-r-i-n-g for most people in modern industrial America. (Boring except for those moments of terror that are experienced when someone loses a job, goes broke, and suffers real deprivation and hardship.)

The point being that frivolous consumption creates not so frivolous production, which will of course disappear once buying habits change, necessitated by consumers not having enough money in their pockets for frivilous things due to high gas prices, and inflation.

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tommo on August 22, 2005 - 9:05am Permalink | Subthread | Parent | Comments top
Interesting post. And yes frivolous (or any other) consumption does require not so frivolous production. But where does that production occur? More and more it is occuring in China and other cheap labor markets. I'll be curious to see what happens to Mal Wart as transportation costs increase. Or when there's not enough bunker C to fill the freighter that's carrying all those useless plastic items to market.
Ciao.
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Frustrated PR Person on August 23, 2005 - 1:55pm Permalink | Subthread | Parent | Comments top
Which leads ... where? The Chinese making all our stuff find their inventories getting bloated, layoff workers, slow down production. Unemployed city dwellers, unable to buy necessities, start home craft businesses, or try to grow survival gardens. The rural population has been moving into the cities pretty steadily over the past ten or twenty years. Making a living in the rural areas is not going to be that easy here on out, especially for an ex-city dweller!

In the U.S., there will be a huge crop of educated, or semi-educated city folk, hitting the job market en masse. The U.S. still is home to the corporations that guide the manufacture of most products; most of the managerial and support functions occur here - product design, manufacturing process design, logistics, finance, marketing, packaging, and distribution. When the plastic crap from overseas starts getting expensive, many of these people will also be laid off, meaning their buying power drops as well, contributing positive feedback to the equation. Less buying, means less production, which means more layoffs, which means less buying, and the cycle continues.

Of course, those who have steady work might find their situation improve a bit, as prices are pushed down and incredible bargains are offered to entice the rarer and rarer customer. In the coming global depression, the definition of "steady work" might get a little mangled.

These being educated folk getting laid off and fired, they will be in a position to think of socio-political "reforms", to change the rules of the game now that so many are losing. Whether they will be able to act upon their ideas remains to be seen. How far down can they go without upsetting the apple cart? Wherever it is, we're likely to get there, somewhere on the far side of Hubbert's peak.

The tipping point, where revolution or 'reform' is seen as so desirable that people risk their comfort for it, might occur when enough people who are still doing ok during the depression decide to take sides with the portion of the population that isn't, since they see that their situation isn't all that stable, and they are soon in the same boat. If the situation happens to get to be that the majority would do better with a new socio-political paradigm, it's a sure thing.

Meaning that the U.S. would probably drop free-market capitalism in a heartbeat.

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