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NG prices are frightening, but there is at least one feasible approach if there is the political will: federal or state govts can subsidize heating fuel costs, as has been done in various programmes for a long time. In an unregulated market you can't control the price, but you can control what at least some vulnerable people pay. Most folks will just have to get by somehow. Don't forget, NG also fuels all of the peak capacity electric generation capacity, so it will bite there as well.
As for getting creative on how to avoid recession or worse: no flash ideas here. I think all the usual tools have already been used, and I'm not sure there is much ammunition left. There is an extraordinary amount of fiscal stimulus around: low interest rates (still), tax cuts in place, huge government spending, hurricane reconstruction efforts starting that will help offset the blows the storms dealt, even a war or two. If a downturn comes (and there has been a recession every time there has been a sharp run-up in oil prices), I'm not sure there is a lot of real action that can be taken except to hunker down.
To make it all worse, both the federal budget deficit and the trade deficit are totally out of control. In essence, both the government and the economy are borrowing enormous sums just to keep going. If this gets worse, and it looks like it will, the US dollar will have to fall, making the cost of all imports (both oil and Wal-mart varieties) rise, thereby fueling larger deficits. It could become a self-sustaining meltdown, like the Arctic.
I don't want the US economy to tank, but the fundamentals have been grossly mismanaged for a long time. I think 70's style stagflation may well reoccur, and I can't see a quick, easy, or creative way around it.
Ora Pro Nobis -- from the Latin meaning "pray for us".
cheers, Dave
A growing economy by definition requires more energy - its really that simple.
Therefore, unless the energy supply situation 2005 - 2006 improves dramatically, a recession will occur due to high energy prices, or will be forced to happen using high prices. There really is no other alternative.
One could have an economy where folks trade jokes and folk stories with one another.
Take a look at:
http://en.wikipedia.org/wiki/Economics
There are sectors of economic life where energy consumption decreases with growth. Take for example, the transition in the electronics industry from vacuum tubes to highly integrated transistor circuits. Vacuum tubes wasted great amounts of energy in heating their electrodes.
The point I am making is that the overall economy, and certainly the U.S. economy and all similar 'western' economies, are inextricably tied to the availability of increasing amoungs of energy. Less energy = less potential growth.
That's today's picture and has been the picture since the industrial revolution. The picture is not going to change overnight, no matter how many jokes we tell.
Can we substitute energy and reduce dependence? Sure, but it will take time, much time, and time we may not have.
Extend this problem to less developed countries - those transitional economies are actually in a worse pickle, particularly those that are importers of oil. They use more energy (oil) per GDP $ than we do, although one might argue that its use is concentrated more on basic needs than our use is, except to the extent where developing economies energy use is directed towards fueling the west's insatiable desire for replacable coloured covers for our cell phones, et al.
A growing economy needs to produce more. If it can squeeze greater production out of less energy, that's still growth.
You can twist the figures around and make it seem like we live in a golden age where more GDP output occurs with less energy, and that would be true.
But more GDP output with less energy is not the same thing as using less energy. There has not been a single case in my lifetime where the economy has expanded without energy consumption expanding. I expect this is a truism dating back to the dawn of time... some laws simply can not be refuted. It takes energy to produce; the more you produce, the more energy you utilize.
It doesn't matter how efficient we become - at least not in the short term, because we can't become highly efficient overnight - increased economic growth will require more energy.
Now... off what baseline are we measuring? I suggest we've nothing to pick from, except when we reach peak production world wide, we'll then have a convenient measuring post i.e. when world wide economies next start growing, post-peak, we'll have been successful in the transition.
Clearly if the peak is tomorrow, this will be a long time coming. If the peak is a decade or two away, we've got a chance to mitigate potential world wide disaster.
There's no point in putting a fine point on definitions when we have decades of economic output to look at and in every case where economic expansion ruled, energy use went up. Turning that ship around will not happen over night; I question if it can even happen in a decade.
Note that only some kinds of energy are in short supply at the moment, and we can raise efficiency of some things easily. We can boost the amount of e.g. wind power with a relatively short lead time, freeing coal and gas for other uses. We can insulate and cut heating energy with no loss in utility. We can stop buying Explorers and Tacomas and buy Focuses and Civics instead; at a 17-year vehicle lifespan and a bias of miles driven toward newer vehicles, doubling fleet MPG means cutting motor fuel use by perhaps 4% per year.
Oil is the biggie here; consider the amount of low-hanging fruit in transportation.Consider my concept, then: instead of burning gasoline in engines at 17% efficiency, build cars as plug-in hybrids. Efficiency under engine power goes up by a third, and 80% of their driving is done on grid power; direct fuel consumption falls by 85%. The remaining energy (about the same 80%, due to losses) is met by burning oil in 70% combined-cycle powerplants at 55% efficiency and 30% simple-cycle gas turbine powerplants at 40% efficiency. Total relative oil consumption is:- 15% of baseline used directly.
- 17.3% in the CC plants.
- 10.6% in the simple-cycle plants.
Total: 42.9% of baseline. If you get 30% of the additional grid power from non-petroleum sources like coal, wind or solar, this falls to 34.5%.Things look almost absurdly rosy if you postulate cogenerating furnaces to generate electricity during the heating season. There are a lot of things we could do that we are not. Yet.
Embarking on a plan like this would lead directly to economic growth because the money that would have gone to the oil-producing countries would go instead to the battery makers, gas-turbine manufacturers, and other uses inside the industrialized countries (including our own).
Solutions will only be worked on if a problem is perceived to be there, and I'm not convinced that the political leadership around the world is convinced that we face now, or in the next X years, anything more than a speed bump.
People need to feel more pain before they will really demand action; after all, most everyone dumped their Mazda's for Ford Explorers and big vans over the past 30 years... ;-)
Contrast this with the government paying a piece of every natural gas or heating oil bill. This punishes folk that conserve (because they might not have a bill, but still pay taxes).
If tax heating fuel like crazy, but handout money (ie. cash) to everyone to offset the tax, we encourage conservation without punishing the poor.
There might be some market distortion is such a scheme, but I'll leave that to someone more expert than myself to explain. It certainly isn't obvious to me.