The Oil Drum

I've seen a number of comments, both at TheOilDrum and elsewhere, suggesting that the US is now less susceptible to supply disruptions because we have reduced our demand for oil by several hundred thousand barrels per day over the past year. In general, I get the sense that people think we can insulate ourselves from supply disruptions, from our dependence on potentially unreliable foreign sources of oil, by improving our efficiency and eliminating "unnecessary" oil consumption. In my opinion, this is backward. In this post, I will argue that, because the demand that is destroyed first in a free market is the demand that is easiest to eliminate, the resulting consumptive system is more inelastic, more brittle, and more susceptible to systemic shock from supply disruption. I will approach this argument by outlining what makes a system either resilient or brittle and why market-driven demand destruction creates a more brittle system. I will conclude with a few thoughts on how we can increase the resiliency of our energy-driven economy in a future environment of declining energy supplies.

The situation in the credit markets continues to worsen as a sudden attack of risk aversion rapidly dries up liquidity. And this is before the resetting of adjustable rate mortgages (ARMs) begins in earnest - to the tune of $50 billion - in October. Watch this space.

On the Canadian energy scene, Shell pumps $27 billion into the oil sands, even as oil patch profitability falls. Abu Dhabi wants to invest in Canadian power plants, and there are plans for BC to host an LNG terminal. Wind power grows rapidly in Ontario and Quebec, making a few enemies along the way. In BC they ask: should public transit be free?

On the climate front, water is the issue - too little and too much. Finally, in the tug-of-war between efficiency and resilience, efficiency has the upper hand, but what price will we pay for allowing our life support system to become brittle?

Going With The Flow?

You may remember that our definition of household cash is as broad as can be. We include all household "banking products", per se, but also include all household holdings of bonds, inclusive of Treasuries, Agencies, corporates, muni's and mortgage backed paper. Implicitly, we are assuming bond holdings could be converted to cash at a moments notice. So what follows is simply total household cash less total household liabilities over the last six decades.

Below is a guest post by Dan Miner, organizer of the Peak Oil NYC group about a new report he wrote for NYC Sierra Club and Beyond Oil NYC.

As Oil Drum readers know, getting our communities to even acknowledge the reality of fuel depletion, let alone prepare for it, is a huge communications challenge. The Sierra Club NYC Group Energy Report offers an indirect approach that can be applied in any municipality, at any level of energy literacy.

While climate change awareness has increased dramatically this year, it is still widely believed that the climate impacts of our oil addiction lie far in the future, preventing a public consensus of urgency. Without that, the bold political action we need today is impossible. The stated primary goal of the report is to deal with potentially imminent national energy security risks at local levels, while also using those conventionally accepted issues to speed up the schedule for climate change response.

Thomas Homer-Dixon has written an interdisciplinary tour-de-force integrating the many challenges facing industrial civilization into an elegant conceptual framework. That framework – catagenesis – applies an understanding of natural cycles of growth, breakdown and renewal to the present and the future of our global society. Our prevailing complacency is based on trust in our science to give us the knowledge, our markets to give us the incentives, our democracy to give us the social resources and our brains to give us the ingenuity necessary to solve our increasingly complex problems. However, that blind trust may be misplaced given the array of tectonic stresses facing our civilization and raising the risk of synchronous failure.