Archive for March 28th, 2008

Dissecting the Long Emergency

Sharon March 28th, 2008

If there is one thing Jim Kunstler deserves all the props in the world for, it is his naming and describing the complex, sweeping and all-encompassing crisis we’re facing.  He called the combination of energy, climate and financial crisis “The Long Emergency” and I think that’s turning out to be just about right.  As a prophet, Kunstler is looking pretty accurate in some respects (I’m still kind of skeptical about the Asian pirates marauding across the northwest coast, but maybe I’m wrong ;-) .

I’ve been getting emails from people asking me whether the present crisis is “just” financial and whether/how peak oil and climate change are factors.  And this is a fascinating question – because, honestly, it is awfully hard to sort them out.  In fact, it is really all one crisis – I call it (perhaps not as eloquently as Kunstler) the crisis Ourobouros, the great worm that encircles the globe, and does not realize that he is devouring his own tail – it is impossible to entirely find the beginning or end.  But we can take a stab at it.

 I thought for my own edification, and perhaps for others, it might be worth trying to sort out how all three segments of our present situation are working together, and what parts of the hard times facing us are tied into more than one segment of the crisis.  I make no claims that I can provide a perfect explanation, or that I won’t miss some links, but if nothing else, it is an interesting way for me to clarify my own thought.  So I’m going to list present problems one by one, and describe how (if at all) they are tied into each element – financial crisis, climate change, peak oil.  I’ll try and figure out whether what we’re seeing is a cause or effect, and just how closely related they are.  I doubt I’ll even come close to articulating the whole picture – that sounds like a book in itself, and one for someone more knowledgeable than I.  But here goes nothing:

Crisis # 1: Rising Food Prices

Relationship to Climate Change: Super Direct. Climate change is a direct cause of rising food prices, particularly the rise in wheat prices.  Wheat crops were heavily affected by drought in Australia, the Middle East and the Mediterranean.  Aquifer depletion in China, along with reduced rainfall is also affecting wheat crops.  Massive growth in  biofuel production, was in part motivated by the (completely erroneous) assumption that biofuels would produce fewer greenhouse gasses than fossil fuels.  Climate instability is also a primary motivator as nations become more concerned with feeding themselves, and restrain exports or raise tariffs, as when Russia raised wheat tariffs and Egypt and India announced they will largely stop exporting rice.

Relationship to Peak Oil: Super Direct. Peak oil is a direct cause of rising food prices.  Biofuels are only a feasible project in a world of declining oil availability – their Energy Returned over Energy Invested is simply too small to make any sense when you’ve got plenty of oil and natural gas.  The mistaken belief that we can keep all the cars going and our basic lifestyle intact has led to a rush to biofuels that has helped driving prices of staples, meat, eggs, milk and other foods up by 50%. In addition, rising fertilizer prices (because of rising prices for natural gas and rising prices for rock phosphates) are also driving food prices up, as are the costs of transporting industrial food over long distances. 

Relationship to Financial CrisisDirect. The financial crisis is in part a result of rising food prices.  Over this winter, we saw more and more people using their holiday gift cards and store credits for groceries – food prices are rising so quickly that they are cutting heavily into consumer spending, which is a substantial part of the economy.   Food price rises have slightly slowed growth in countries whose wealth has been propping up the US economy. This is somewhat speculative, but rising food prices are probably an underlying force fueling the collapse in housing values – the reality is that basic needs like food and housing must both be met, and when you are paying more for one, you can pay less for another.  I’ve written about the relationship between housing and food prices here.

Crisis #2: The Housing Collapse

Relationship to Climate Change: Tenuous.  So far, sea levels haven’t risen enough, and climate change hasn’t been a large enough factor to really motivate large numbers of people to relocate.  Some farmers in Australia, and a few others are starting to see the writing on the wall, but mass migration in the rich world has not yet affected property values.  So far, people are still looking at any given disaster as short term thing.  I don’t expect that to last.  In the long term, climate change will probably dramatically alter housing patterns, and cause some markets simply to collapse.

Relationship to Peak Oil: Substantive.  I’m going out on a limb here, because I’ve seen no research suggesting this to be true, but while the majority of the housing collapse is based on the fact that we had ridiculously overinflated housing prices to begin with, I think that it is also the case that rising energy prices for home heating, cooling, food and other things have begun to eat into not just people’s ability to pay a large chunk of their income towards a mortgage, but also into their belief in housing as a refuge from difficulty.  It isn’t an accident that the housing boom really took off in the US shortly after 9/11, when people turned inwards, hiding from the outside world. Again,  I’m speculating, but I think the outside world has penetrated, and the idea that a home could be a form of protection is wearing off in the face of skyrocketing costs. Also, as energy prices rise, local governments are less able to maintain services -we have seen this with school bus and plowing declines – and thus become lower value regions, although the latter is a tertiary effect.

Relationship to Financial Collapse: Absolutely Direct.  In this case, it operates as both a cause and an effect.  The housing boom and the use of inflated house values to borrow was the cause of the bubble, and the collapse of housing prices is, if there is a single root cause, the cause of the crisis.  But it is also an effect of drying up credit – the less there is to borrow, the smaller the chance people will buy.    The more foreclosed and devalued properties there are, the less reason to buy a new house.  It is vicious circle, and it looks like it has a lot longer to go.

Crisis #3 – Rising Gas Prices

Relationship to Climate Change: Not Much Yet.  We are going to see a strong relationship in both cause and effect here, but so far, the effect has been small.  So far, the major effects of climate change in oil prices are limited to natural disasters affecting refineries, and growing political conflicts over water that threaten economic relationships.  None of these is terribly acute yet.  However, with discussion of carbon taxes in the works and more and more disasters, water shortages and other problems occurring, we may see supply issues more tied to climate change.  More importantly, gas prices have yet to drive off global demand enough to mitigate climate change.  As prices get higher, more effects should be seen – but probably not enough to mitigate things.

Relationship to Peak Oil: Umm…duh!  Do I really have to explain this one?  Yes, peak oil is the root here.

Relationship to Financial Crisis: Significant, but mostly concealed. Growth requires energy – and quite a lot of it. I won’t go into detail here, since Gail the Actuary has just done a great talk on this subject which you can read here that covers anything I would say better.

Crisis #4 – Failing to Mitigate Climate Change

Relationship to Climate Change: Well, yes.  This one seems like it would be a “duh” but it actually isn’t just that.  Yes, our failure to mitigate climate change is causing climate change.  But we are also failing to mitigate climate change *BECAUSE* of climate change.  That is, the rising number of natural disasters are making us react to climate change more and more, rather than addressing it.  We are spending more and more of our money and energies that we might use to adapt our infrastructure repairing it and fixing the damage of climate change.  Moreover, because climate change is happening much more quickly than anyone expected, we are still basing our mitigation efforts on inadequate information – that is, we’re still talking about 450 or 550 ppm limits, when 350 ppm is probably more like it.  We still don’t get what we even have to do – and that weakens our ability to do it.

Relationship to Peak Oil: Very Direct.  The reality is that all the discussions of what we potentially could do to mitigate climate change depend on large scale economic growth and lots of cheap energy to do the initial build out.  As energy prices rise and shortages start showing up (mostly so far in the Global South, but not entirely), we’re going to use more and more money and energy on mitigation. Diesel supplies, which are required for global trade, build outs, mining and other projects are showing shortages even in the rich world.  Moreover, our warmongering is the direct cause of 10% of all emissions, and that, of course, is about the oil.  James Hansen recently released an analysis suggesting that there isn’t enough oil in the ground to get us to the worst effects of climate change – but that would only work if we didn’t use the coal.  But higher oil and natural gas prices are likely to drive us steadily towards coal.

Relationship to Financial Crisis: Direct.  Despite all the hype, the payback time of most renewable energies is pretty damn long, compared to oil.  So in order to build out renewable energies you lots of liquid credit dripping off the walls and down into various new industries.  We need people who are willing not to get their money back for a good long time.  Guess what – those people are increasingly in short supply.  So expensive, long term renewable solutions are also likely to be in short supply.  On the domestic level, while some energy consumption drop is likely to happen, there are also likely to be short-term losses, for example as people priced out of heating oil in the northeast burn coal, or as people rely on existing gas guzzlers rather than buying more fuel efficient vehicles.  In the long term, a depression will cut consumption, but also adaptation, which will mitigate climate change and increase unhappiness.  Poorer cities and towns will likely end efficiency programs, nations may permit coal plants again to keep the grid going.

Crisis #5 – Increasing World Political Instability

Relationship to Climate Change: Absolutely Direct.  Climate change is likely to be a political disaster – up to 1.5 billion people without access to safe water, some without any water at all.  More than a billion refugees.  Growing hunger.  Political conflict over resources, land and borders of all sorts.  Some of these wars are already popping up – the conflict in the Sudan, for example.  And a fair bit of anger on these issues is likely to be directed (quite correctly) at the Global North, probably especially at the US.  We can also expect more internal conflicts within nations over resources, such as the ones the US is already seeing over water.  Political unrest is also likely to exacerbate climate change, as oil fields and forests are burned in conflicts and the war machine, which already produces 10% of all greenhouse gasses, expands.

Relationship to Peak Oil: Direct…And Getting More So. Well, I won’t belabor Iraq, but that’s probably just the beginning.  For example, Saudi Arabia recently announced it will no longer grow wheat, its primary staple - probably due to climate change.  Rice prices rose by 30% in a single day this week – and almost 2/3 of the world’s population depends on rice as a staple food, in large part due to climate change and biofuel production.  The rising price of corn is already causing tortilla riots, and that’s directly tied to ethanol production. 

Relationship to Financial Crisis: Tenuous…for the Moment. Even if you don’t think that any attack on Iran will be partly motivated by the Republican administration’s desire to distract from the unfolding financial crisis, our political relationship to Russia and China (among others), is clearly being shaped by America’s declining economic situation.  So far things are in the early stages, but it seems like the balance of world power is shifting, and how that will play out, we do not know.  The one good thing one can say about the coming financial crisis is that if the economy crashes enough we will probably leave Iraq fairly quickly.

I’m sure I could come up with a whole host of other crises to discuss, but this at least gets us a start! 

 Shalom,

 Sharon