Sharon May 7th, 2008
So I spent almost $2000 today - to fill up our oil tank. We heat primarily with wood, but use oil as a back-up system to keep the pipes from freezing, and occasionally on days when we’re going to be out for an extended period. Our hot water is also heated with oil. For whatever reason, most oil heat in the US is in the Northeast, mostly in towns beyond gas lines like mine. I suspect today’s purchase may well be the last tank of heating oil we ever buy.
Now at our comparatively low rate of use I can expect 400 gallons of oil (at $4.13 gallon) to last us at least three years. Could we do without it entirely? Absolutely - but it is a nice cushion - I’m fond of the occasional hot shower, and it means on occasional busy days when we’re out, we don’t have bank the stove for extended periods (and thus create more particulate emissions). It acts as insurance so that the pipes don’t freeze when we’re away. And it means my mother doesn’t have to dress up like the Michelin man to sleep in the back bedrooms the stove doesn’t reach when she’s visiting in the winter. Although at these prices, Mom might have to suck it up, or we’ll move a futon in near the stove.
Since I don’t think oil prices are going down anytime soon, and various sources in the know including OPEC and Goldman-Sachs are predicting $200 barrel oil by the end of this year, this actually doesn’t look like a bad deal. And as I said, there’s a good chance this is our last tank.
The combination of laying out such a huge sum and Gail the Actuary’s latest article on the frailties of the electric grid got me thinking more about an article I wrote a couple of years ago. In “It isn’t Gridcrash that Makes the Lights Go Out.” In it, I argued that most of us should prepare for life without electricity, not because of a fear of the loss of the grid (although certainly that’s a possibility as Gail point out) but because of a real likelihood that we may not be able to afford the electric bill. Unfortunately, I think this prediction is more true now than it was when I wrote the original essay.
Looking at my 2K oil bill, I can forsee what is going to happen to large numbers of my neighbors around their oil and gas bills. It started this winter. Around here, the minimum oil deliveries are 100-125 gallons - it isn’t worth their while to haul out the truck to give you 25 gallons. But as 100 gallons starts to cost 300 or 350 dollars, it becomes less and less likely that low income families can come up with that amount, much less fill a large oil tank.
And most of them don’t see a tank lasting 2 years - the average American household in my region (where our record low is -30) uses almost 600 gallons a year. By fall, if oil prices continue to rise (and there’s no evidence whatsoever that demand will fall, and a good bit of evidence that producers can’t produce more), which seems extremely likely, heating oil is likely to rise to between $5 and $6 per gallon. That would make even a bridge delivery of 100 gallons cost much of the monthly paycheck for a working class family. Hell, it would pretty much all of our discretionary income. And since most families use about $100 a month, that’s going to be a big deal. Already, 16% of all Americans plan to use their tax rebates to pay utility bills. Stephen B. reports over at ROE2 that 10% of all National Grid customers are presently more than 3 months behind on electric bills, and natural gas is in similar shape.
What that means is that the 8% of Americans who heat with oil are likely to be casting around for options to allow them to both eat and keep tolerably warm. That probably means electric space heaters and wood heat. But with wood up at $250 a cord or more in many areas, electric prices rising steadily as well, and capacity tight, tens of thousands of new high demand electric heaters are likely to present problems - both for the private users and for the electric infrastructure as a whole. As Gail Tverberg’s article suggests, particularly in areas like the Northeast corridor where the grid is already vulnerable, the addition of these loads may represent a real threat to grid stability. Any modernization or added capacity will likely bring prices higher.
The cost of natural gas has also risen over the last few years, with mild winters helping to keep this from entering a crisis situation. But North American gas is already past its peak according to Julian Darley, author of _High Noon for Natural Gas_, and over the coming years, there are likely to be sharp price rises and competition with Canadians, who, not unreasonably, would like to use their gas for home heating too. Trade requirements now have Canada selling most of its natural gas to the US - but one cold winter in which Canadian needs can’t be met is likely to lead to a change in that situation - and if Americans have to rely on their own natural gas, prices will be vastly higher and supply much lower. It is also worth noting the vast rise in proposed new natural gas electric generating plants - we are building our electric capacity based on gas supplies that aren’t terribly secure.
Meanwhile, as people turn to other utilities, replacing their oil bills with natural gas or electric bills, the number of people who are struggle to get by is set to rise for a whole host of reasons - higher food prices, rising unemployment, the stripping of benefits from jobs, rising medical costs for aging baby boomers - the whole shebang. And that means less ability to pay new bills. And that means indebtedness to utility companies. And that means shut offs. This is likely to be especially acute in cold climate areas, but the American South uses more energy than the North does, and is generally poorer, so this is pretty much an equal opportunity problem, with different periods of seasonal crisis.
Getting shut off is easy. Getting put back on is hard - there are hefty fees from your utility company. Some places charge interest on overdue accounts. There are a whole host of ways that once you are in the hole, it is very, very hard to climb out. Many of us will get into the hole, and some will come out, while others will be stuck there.
What we are seeing is the beginning of the end of many American’s relationship to public utilities. As the costs of food and gasoline rise, and as benefits disappear and medical costs overwhelm many families, people are about to come hard against the costs of their fossil fueled lifestyle. At first, this will be the poor, as is already happening - I’ve reported on the “Heat or Eat” crisis several times. But it isn’t just heat - that’s just one canary in the coalmine. The thing is, people struggling to get by tend to pay their bills in rotation, trying never to get far enough behind on any one bill to have a crisis. But that kind of juggling is often disrupted - unforseen expenses always arise - and often there’s a cascade effect, since all the bills are growingly large and somewhat overdue… It doesn’t take much to lose heat and power and gas.
If you listen to the news reports, it sounds as though the economy is stabilizing, like we’re near the bottom. Don’t worry, we’re told. But it is worth noting that almost everything that we’re seeing now represents, at one level or another, the selling off of things that have in the past had value, often at very low prices. Last year, I suggested that the new economy was going to based on bottom feeding - scavenging off the leavings of our prior wealth. I see nothing in the news reports that suggests I was wrong - both the highest levels of finance and the lowest are showing the same things - the repackaging of increasingly worthless assets for sale at pennies on the dollar. There are already reports coming in of people stripping their attics of prized possessions and selling off anything they have, just to pay for basic bills. Pawnshops are doing a booming business. It seems mostly as though the economy is staggering along, but whether you are repackaging worthless commercial assets, worthless luxury vehicles or worthless tvs, they all add up to…worthless in the most literal sense. The days of keeping the bills paid this way are numbered. The days of home equity loans are pretty much over, as almost half of recent homebuyers now have no or negative equity. There’s simply nothing left - and when there’s nothing left and the money doesn’t meet the end of the month, off go the lights, and the heat, and the gas.
For now, it is mostly the working poor leading the way. But it won’t stay that way. Most Americans live beyond their means - statistically, we spend about 5% more than we make. Middle class Americans aren’t going to be able to eat the food bill, the heating bill, the electric bill, the mortage that isn’t worth much… something will have to give. Fuel subsidy programs are already stretched - and a winter’s worth of fuel subsidies available to any household out here is good for about 3 weeks of heating at these prices. Many of us are about to face the reality that we’re not that middle class.
What gives will be different for different people. Some people will leave their homes, and some will consolidate, moving in with family. Lots of people will skip meals - and their kids will go hungry to school. And many will lose the utilities and attempt to compensate - they’ll spend more eating out, because there’s no gas to cook with on the stove, or eat only microwave meals, or things in bags and cold cans of food. A few will get desperate enough to do things like bring in the charcoal grill and asphyxiate themselves. The same goes for heat and light - people will cobble together bad solutions, and some people’s solutions will be bad enough that they do real harm - to themselves, of course, but it won’t be limited to themselves. The fires in urban rentals won’t just destroy the homes of the cold and hungry, but their neighbors too. And the costs of dealing with disaster after disaster will eat up city budgets - there’s no such thing as a crisis without unintended consequences.
As more and more of us can’t afford our relationship with our utility companies, we’re going to break up like we’re on a bad date. And since there’s no money in the budget for the mass reinsulation of 90 million homes, or the subsidizing of fuel and electricity on the scale that Americans use it, we have two choices. We can break up with our utility companies only when we’re massively indebted and when we’ve already sacrificed dinner and home and other security to try and keep the lights on and the heat running, or we can do it wisely, and break up before the crisis gets acute.
That means adapting our homes to live without them. It isn’t easy - but for the 2000 bucks I spent on oil, many people could get the basic framework of non-electric living in place. And we could subsidize these things just as we subsidize solar or wind power - instead of giving people tax breaks for buying pv panels, we could give them tax breaks for buying things to enable them to live without them. Because while PV is great, it is demonstrably far too expensive for anyone struggling to pay their utility bills - and a lot of people who aren’t.
$2000 will get you a wood, corn or pellet stove, two solar powered battery chargers and batteries for flashlights and table lamps, and for your CD player or ipod. It’ll get you cardboard and tinfoil enough to make a solar oven for warm weather, and you can put stew on the back of the stove in winter. Depending on the size of your house and your needs, you might have enough left over for long johns, or a couple of personal battery powered fans. It isn’t ideal, but you’ll have light, heat and food.
Another $40 will get you a tiny washer that you can do easily by hand, but a bucket and plunger will do. If you don’t have water, you’ll need money for a well pump, a cistern, lots of rain barrels or some other water solution - and this will probably cost more. But maybe if money is tight you can work on making the water solution collective - most places around the world have central water, and everyone walks over, chats at the well, and carries their jugs back.
Is $2000 out of the question? Well, how about $300 in long johns, battery chargers, down comforters and a few small electric appliances - a tiny efficient space heater to take the edge off of the room you are in and a microwave to ensure copious hot tea? You can live without heating or cooling - no one has to freeze or die of heat stroke. The simple fact is that we’re not going to be able to afford even these preparations once we get further and further in debt to the purveyors of fossil fuels - the abrupt transfer to the low energy lifestyle, without any preparation, is what I’d like to see everyone avoid.
The grid may or may not be there. There may or may not be imported heating oil, or Canadian natural gas coming through your pipes. Your utilities company may or may not still be in business. But what is almost certain is that the present trajectory means that more and more of us are going to have to reconsider our usage - and many of us aren’t going to be using any at all.