DrumBeat: May 23, 2006

Now for some wise words from the readers of The Oil Drum...
Great article from iTulip.com on energy and economics.
Also makes a good primer for those new to depletion/peak oil, and promises to be a continuing series.
Read it here:
Part I:  Too Little Oil or Too Much Money?
Part II: We Can't Repeal the Laws of Thermodynamics
Nice!!
I am currently having a debate elsewhere with somebody who thinks there has been an oil co. conspiracy to stop the renewable energies becoming widespread, and in particular solar energy.

So if anybody has some links regarding the economics of solar PV technology it would be much appreciated!

Hi there,

www.solarbuzz.com

cheers, marotti

Good articles on iTulip.

BTW, Good Morning America is devoting most of the program Wednesday morning to stories on the oil industry.

NEWS BULLETIN ON DRUDGE REPORT--PERSON TO PERSON TRANSMISSION OF BIRD FLU SUSPECTED

http://www.bloomberg.com/apps/news?pid=10000080&sid=aWESsJvt6CFE&refer=asia

The WHO is considering issuing a pandemic alert.

If I read the story correctly, six of the seven victims are dead already.  

After reading this story, my daughter, a graduate student in forensic genetics, said she is going out to stock up on food supplies.

www.who.int/csr/don/2006_05_23/en/index.html
Epidemic and Pandemic Alert and Response (EPR)
Avian influenza - situation in Indonesia - update 14

23 May 2006

The Ministry of Health in Indonesia has confirmed an additional case of human infection with the H5N1 avian influenza virus. The case occurred in a 32-year-old man. He developed symptoms on 15 May and died on 22 May.

The case is part of a family cluster in the Kubu Sembelang village, Karo District, of North Sumatra. The man is the seventh member of an extended family to become infected with the H5N1 virus and the sixth to die. An additional person, who was the first member of the family to fall ill, died of respiratory disease on 4 May. No specimens were taken prior to her burial and the cause of her death cannot be determined. However, as her clinical course was compatible with H5N1 infection, epidemiologists at the outbreak site include this woman as the initial case in the cluster.

The newly confirmed case is a brother of the initial case. Specimens were taken on 21 May and flown the same day to Jakarta. Tests run overnight confirmed his infection. His 10-year-old son died of H5N1 infection on 13 May. The father was closely involved in caring for his son, and this contact is considered a possible source of infection.

Although the investigation is continuing, preliminary findings indicate that three of the confirmed cases spent the night of 29 April in a small room together with the initial case at a time when she was symptomatic and coughing frequently. These cases include the woman's two sons and a second brother, aged 25 years, who is the sole surviving case among infected members of this family. Other infected family members lived in adjacent homes.

All confirmed cases in the cluster can be directly linked to close and prolonged exposure to a patient during a phase of severe illness. Although human-to-human transmission cannot be ruled out, the search for a possible alternative source of exposure is continuing.

Both the Ministry of Health and WHO are concerned about the situation in Kubu Sembelang and have intensified investigation and response activities. Priority is now being given to the search for additional cases of influenza-like illness in other family members, close contacts, and the general community. To date, the investigation has found no evidence of spread within the general community and no evidence that efficient human-to-human transmission has occurred.

Analysis of viruses

Full genetic sequencing of two viruses isolated from cases in this cluster has been completed by WHO H5 reference laboratories in Hong Kong and the USA. Sequencing of all eight gene segments found no evidence of genetic reassortment with human or pig influenza viruses and no evidence of significant mutations. The viruses showed no mutations associated with resistance to the neuraminidase inhibitors, including oseltamivir (Tamiflu).

The human viruses from this cluster are genetically similar to viruses isolated from poultry in North Sumatra during a previous outbreak.

Did you mean to post this on the beak oil website? Doesn't seem relevant here.
Jack,
  I have agreed with everything I've read that you've posted. However if 20% of the population dies and the rest locks themselves up and does not travel for a 2 year pandemic that would affect demand of energy and supply of petroleum products.  It is just as or more relevant than all the economic discussions or war discussions.  Energy pervades our economy and many things change it.

Matt

Well said, Matt.  This is MAJOR news, top story on CNN this morning.
"The World Health Organization says a cluster of bird flu cases in Indonesia may have been caused by human-to-human transmission."
http://edition.cnn.com/2006/WORLD/asiapcf/05/24/indonesia.birdflu/
I heard conspiracy theories from all my friends in Latin America that Avian flu is a plot to sell Tamiflu and vaccines.  I have done quite a bit of research on this since 2005 and spoken to 2 infectious disease specialists at my hospital (they are married) I asked what the plan for the hospital was if this made it stateside and their response was "we drive to north Georgia and stay at our cabin till its over.  Peak Oil is a long drawn out problem but if Avian flu happens international trade and travel will slam to a halt.  

We could only be lucky if it is a conspiracy.

Ah, lucky me, I'm already in Georgia. ^_^  Come on up.
No kidding, all this great discussion of global warming and peak oill will suddenly seem pointless if millions are sick, quarantined, and/or panicked.
As long as Jack is posting, I'm happy. No disrespect to Westexas or anybody else. I wish Don Sailorman would post again. For now, there is going to be vicious infighting. We will work this out. In the end, we will be forced to join forces.

There are fewer of us than is immediately apparent. There are about 200 regular posters and another 1000 semi-regular/lurkers/whatever. This is a small bunch. We better be strong. Would anyone like to dispute my numbers? I'd be very interested in hearing other estimates and explanations.

Where is Don Sailorman? I miss that guy.... :(
He's taking a sabatical, to work on a book, or that was the last info I had.
He should be working on a book.
Yes, that is why my alarm bells are NOT going off.

Intense contact may have caused human-human transmission; not the casual contact that spreads flu in our society.

Intense contact would include sex, contact with vomit, kissing, and other similar modes.  Single human-human transmission of avain flu has been recorded before between husband & wife.

Surprised to hear this. Your source, please?
Same here (lack of alarm bells) - I have a friend who is a post-doc in microbiology at Stanford, studies malaria specifically, but he's my go-to guy when a report like this hits...

he said that this wasn't it, no need to order extra MRE's and duct tape yet.... but he explained genetic drift and shift to me as it relates specifically to this virus - and said when "it" happens, it isn't going to be pretty...1918 with jet travel in the mix?

You would expect Toyota to be very aware of PO, right? So why are they going to build 10 new fabs?

Another question: If oil price triples, then driving a car will become 20% more expensive. That's not a lot. Just switching to a smaller (and much cheaper car) will offset more than the additional gas cost. So why are JHK so worked up about the suburbs?

  1. Maybe they're building new plants to build smaller and more efficient cars to soak up the market share from bankrupt Detroit?

  2. You assume that everyone can and will afford to switch cars. I also doubt that statistic.
I analyzed my own situation, and found that I could more easily keep my existing vehicle and absorb gasoline at $7/gal (USD) than I could purchasing a new vehicle that gets twice the mileage, largely thanks to sunk cost and depreciation. I suspect most Americans are in a similar situation.  
So the real question then becomes - how much less can you(and Americans as a whole) afford to drive?
The common answer in 'man on the street' interviews is that folks 'eat out less' to balance their bugets.  That means more money goes to the energy sector, and less to the local small business economy.
Odograph,
   50% of my income is discretionary (beer, books, woodworking tools) I spend all of it every month on that stuff. Now travel twice from Tampa to Houma, LA a month at around 300$ gas, and another $150 during my off time.  If my electric (currently 200/month) and gas double I have no discretionary money but still get back and forth to work.  However, brewers publishers and my local Woodcraft outlet loose income.  At what gas increase is the average discretionary monies (per capita) overcome? I am not even counting an increase in any other product like food.

Matt  

It's interesting, isn't it?  We can guess from our own experience, but in the broad (US, from my perspective) economy, we don't really know how people will behave.

At what gas increase is the average discretionary monies (per capita) overcome?

That's the big question.  And even as people still have lots of discretionary monies, they'll 'feel' the gas pinch and cut back someplace else anyway.

To analyse it you'd have to separate out how much people have been buying on credit, much of it equity from their homes.  In other words, people's true discretionary spending ability may be less than what they've been spending.  I suppose that could mean the spending might stop very quickly.
This is the most perplexing question that I have gone over hundreds of times.  What will people do? What will be thier reaction.  I like all your comments.  I guess once you are "on board" for PO your next set of questions is what should I do and what are others going to do.  I will continue reading...this is good stuff
I would surmise this is a reasonable conclusion. Close to 40% of my income is discretionary, most of that goes for eating out, entertainment (music, dvd's, books), hobbies, travel.

As energy costs rise, they eat up a steadily larger portion of that discretionary income, not just from higher gasoline but secondary inflationary effects from higher energy.
For example, my household electric bill still exceeds my gasoline expense in most months, and it has been rising, too.  Food costs are rising noticibly.  Etc.

Eventually, as the discretionary income of most becomes less and less discretionary, folks start to feel it more and more.
Those with less discretionary income, or "leeway", will be the first to feel the pinch (and some are already). When this group becomes the majority, or at whatever point roughly 1/2 discretionary income becomes discretionary, there will be serious economic problems.

There are "breaking points" in oil demamd IMO.

One is at the individual consumer level.  Can I afford this vacation ? Can I afford to commute from Tampa to work instead of moving closer in ? Should I trade in my Escalade for a Honda Insight ? And a million variants of such decisions.

The other is at a larger, national scale.  Can the US afford to import 15 million b/day at $73/barrel ?  16 million b/day at $87/barrel ? 16.25 million at $115/barrel ?

An analogy, each one of us could probably spend 3/4 of our aftertax income on imported goods & services if we tried.  Buy and eat imported food, cars, rent only foreign movies, etc.  We could each individually do this with no personal negative effects (except watching too many French films; one being defined as too many) BUT if ALL of us did this, it would break the system.  Our economy could not sustain the increased imports and loss of domestic demand.

When the sum of all of the individual choices add up to more than what the nation can afford, there will be a break at the national level.

Unemployed people drive less, closed factories and businesses use less energy as well.

I see two modalities where US oil demand could be constrained to what the US can afford as a national economy.

A collapse of the dollar and rising domestic energy and everything else imported prices.  And a very bad recession/depression.

Or

Much higher interest rates that cause a strong recession, thereby preserving most of the dollars value and reducing oil demand via recession.  My preference.

The more each of us reduce our individual demand, the less extreme the "break" will need to be at the national level.

Well I work in deep water drilling so my job is secure, but I may need to move to LA to aford to work. That sucks because then I have state tax so I may just move to a cheap apartment in FL panhandle.  Maybe just wait for drilling off the coast of FL (blasphemy) then my situation will be better.
Louisiana can use the incoem tax revenue and economic activity (book sales and woodworking tools included) from you living here.

It is a short hop from New Orleans to Houna :-)

A little actual data:

A new study from the National Retail Federation (NRF) found nearly half of Americans will combat the rising cost of fuel by driving less, while another 37.2 percent will decrease vacation and 36 percent will cut back on dining out, cspnet.com, the website for Convenience Store/Petroleum, reported.

http://www.carwash.com/news.asp?mode=4&N_ID=61677

Looks like restaurants and travel destinations take the hit.

I use 25 gallons/month and I can afford to spend $1000 a month on gasoline before it crimps my spending. I'm fine till igasoline hits $40/gallon. I might not be the average 'man on the street'.
Is $12K/yr spent on gas the most fun you can have for the money?
Actually yes. I'm just saving the money now which is no fun at all.
Well, some ideas then ... instead of $12K for gas:

  • $6K for gas, and $6K on iTunes
  • $6K for gas, and $6k for bicycles
  • $6K for gas, and $6K in time off
  • $6K for gas, and $6K for Habbitat for Humanity
...
I think the decision comes at the margin.  There are people who want/need a new car soon, and maybe accelerate the decision or the choice based on fuel prices.

I doubt many people who have 'committed' and 'bonded' to a current vehicle will break that commitment based on fuel prices.

Hmmm, before I learned of PO I would most likely have bought a Subaru Forester when one of our current, paid-for, cars died. Now, I can't see buying another gasoline-powered car unless both our cars die, and then I'd probably get a used econobox.
That's more "forward looking" than the fuel-price argument I just made. ;-)

If many people thought peak oil and economic uncertainty were right around the corner, they might do likewise.

Putting on my agnostic hat, it becomes a question of how certain we are and how soon this crash is expected.  If the answer is "maybe in the next 10-20 years" some folks might have room for a new car.

Part of my powerdown decision was to get rid of my big BMW V8 and replace it with a used VW Jetta diesel.  Now not only do I have a car that uses less fuel (and biodiesel to boot), but the excess cash freed up by the swap will pay for a couple of years of that fuel.  Oddly enough, my quality of life wan't affected in the least, though I can't say the same for the peole who have to drive behind me :-)

We still have two cars, and I suspect when the other one dies it won't be replaced in a hurry.  Given the amount we drive now, the Jetta will last at least until TEOTWAWKI.

You know, it's posters to TOD that are a bit less likely to be driving Escalades. But think for a moment about the number of people you know that have placed a very sizeable portion of their income into cars that are newer and/or more expensive than they really need. I own a company where all of the employees drive nicer cars than I do. Most of them have salaries of ~$20,000 per year.

How many people to you know that hurry off to buy a new car as soon as they are done paying off the one before. I never stop being shocked when I drive by home after home of people  who don't otherwise seem to have a pot to pee in, but sure enough have that new Dodge Ram SRT-10 Hemi pickup in the driveway. A nice vehicle is a birthright, just like cheap energy.

It's become a "necessity" in the U.S. to be strung out on car payments (not to mention mortgage payments) to the maximum that banks will grant, leaving little room for things like rising gas prices or rising interest rates. A 50% increase in gas prices may not be a great percentage of total vehicle ownership costs, but if you are tapped out to begin with.......

Yes, it's sad but true.  Many of them are leased though, and frankly, if I had an SRT-10 Hemi I'd sure hope it was a lease - at least I wouldn't be stuck with it!

I think people are just suckers for the advertising, and feel they must display their wealth, real or not, by buying the proper automotive plumage.