Archive for the 'oil' Category

Time For a Check In?

Sharon June 8th, 2008

So oil went up $11 on Friday, while the stock market dropped 3%.  Unemployment is up, and reports of a recovery are greatly exaggerated.  And most importantly, the word bubble is started to get scraped off the oil price jump:

But many analysts say that fundamentals, not speculation, are driving prices.

I don’t know how else to say it, this is not a bubble,” Jan Stuart, global oil economist at UBS, said. “I think this is real. There is a whole bunch of commercial buyers out there who are spooked and are buying. You are an airline, right now, you’re scared. I don’t see who would buy at these prices unless they need to.”

Jeffrey Harris, the chief economist at the Commodity Futures Trading Commission, who was speaking before a Senate committee last month, said he saw no evidence of a speculative bubble in commodities. Instead, Mr. Harris pointed to a confluence of trends that has contributed to the oil price rally, including a weak dollar, strong energy demand from emerging economies, and political tensions in oil-producing countries.

“Simply put, the economic data shows that overall commodity price levels, including agricultural commodity and energy futures prices, are being driven by powerful fundamental economic forces and the laws of supply and demand,” Mr. Harris said. “Together these fundamental economic factors have formed a ‘perfect storm’ that is causing significant upward pressures on futures prices across the board.”

Who’d a thunk it?  You mean peak oil is a real thing?  Shocked.  Shocked, I say!  Note that this is the New York Times, not me ;-). 

But more seriously, let’s be blunt, even for the best prepared of all of us, this sucks badly.  All of us are feeling the scraping at our budgets, at least a little, and I know that some people are really hurting.  So I thought it would be worth doing an update on how this is looking in your neck of the woods?  How’s your family doing?  What you are seeing in your neighborhood that you haven’t seen before?

The New York State Budget strips the Universities pretty badly, so Eric is losing a lot of sleep about his job.  Now we made the choices we did pretty consciously - he doesn’t have tenure.  He’s been offered tenure track jobs at smaller Universities (he wants to teach, not do bench science), but turned them down because our long term estimate was that all of them were more likely to either dump him before he got tenure or go under completely if the economy tanked.  Eric teaches one of the largest classes at his University - 1/4-1/3 of all SUNY Albany students go through is class, so he makes the University literally millions of dollars a semester, and they pay him about half what they’d pay a similarly qualified research scientist.  Our bet was that Eric will look like a good deal to the University.  We may lose that bet - of course, we could lose the other way around.  But it is tough on him, because he loves, loves, loves his work. 

Otherwise, we’re not hurting too much, although we may have to cut back on stocking up a little.  We’re lucky - Eric’s off for the summer and so we’re hoping to go to driving only two or at most three days a week, and of course with the garden kicking in, and a reserve of stored food mostly bought at lower prices, we can economize.  The problem, of course is that I’m reluctant to dig into stores right now, since I think times are only going to get tougher all around. 

Lots of new gardens popping up around here, and lots more people asking me serious questions about energy and the economy.  The place I’ve gotten some plastic buckets from is saying they’re going to have to start charging me, and that’s ok - their costs are going up too.  A fair bit of economic strain among folks I know.  But mostly, a lot of hoping and praying that things will get better while there’s still a little hope of fixing the worst. 

 How about you?


Break Up with Your Utility Companies - or Get Dumped!

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.   


We Regret to Inform You…

Sharon April 22nd, 2008

When climate change and peak oil thinkers run out of other things to worry about, there’s always the endless, inevitable debates about whether we are facing a “fast crash” or a “slow grind.”  And I admit, I’m worried about my fellow environmentalists - because I think they are about to lose their favorite distraction.  When no one was looking, we got an answer.  Fast crash wins.  And we’re in it now.

Wait a minute, you argue - that’s not right.  If we were in a fast crash we’d be well on our way to living in a Kunstler novel.  But we’ve still got cars, we’ve got food, things are slowing down, but at worst this looks like a slow grind - but the crazy lady at the blog is saying fast crash?!?!?

Before you argue with me (and you are both welcome and encouraged to), I’d like to post something a bit out of my usual style - it is simply a description of what has happened with food and energy in the last year - that’s all it is.  Then tell me what you think - because it wasn’t until I began to write this introduction to the present food situation that I suddenly was struck by the fact that even a fast crash doesn’t always look fast when you live it - new normals arise and it turns out we assimilate faster than we panic.

So here we are - the “We regret to inform you that what you have imagined to be “civilization” is now falling apart” post.  See if it strikes you the way it struck me. 

I would also note two things.  The first is that the general political consensus is that neither the food nor energy crisis will do anything but grow more acute anytime soon - we’re really in the early stages.  And that this only covers the first 4 months of 2008.


In early 2008, the world’s food and energy train came off the rails.  What was startling was that it didn’t happen either gradually or in a linear way - instead, things simply fell apart at an astounding rate, faster than anyone could have predicted without being accused of lunacy.

It started with biofuels and growing meat consumption rates.  They drove the price of staple grains up at astounding rates.  In 2007, overall inflation for food was at 18%, which created  a new class of hungry, but that was just the tip of the iceberg.  In 2008, the month to month inflation was higher than 2007’s annual inflation.  At that rate, the price of food overall was set to double every other year.  Rice, the staple of almost half the world’s population rose 147%, while wheat grew 25% in just one day.  Price rises were inequitable (as was everything else) so while rice prices rose 30% in rich world nations like the US, Haitian rice prices rose 300%.

Haiti was an early canary in the hunger coal mine.  Desperately poor, by early 2008, tens of thousands of impoverished Haitians were priced entirely out of the market for rice and other staples, and were reduced to eating “cookies” made of nutrient rich mud, vegetable shortening and salt to quiet their hunger pangs.  Women stood on the street, offering their children to any reasonably well fed passerby, saying “Please, pick, take one and feed them.”  Thousands of Haitians marched on Port Au Prince, yelling, “We’re hungry.”  And indeed, the Haitian government was complicit, allowing food relief to rot on the wharves. But Haiti was just the start. 

After riots over long bread lines threatened to destabilize Egypt, the Egyptian government set the army to baking bread for the hungry.  Forty nations either stopped exporting grains or raised tariffs to make costs prohibitive.  Food prices rose precipitiously as importing nations began to struggle to meet rising hunger.  The UN warned that 33 nations were in danger of destabilizing, and the list included major powers including Pakistan, Mexico, North Korea India, Egypt and South Africa.   Many of these hold nuclear weapons.

The crisis didn’t stop among the already-poor, however.  An article in The Economist reported that the crisis extended well into the middle class -  Joanna Sheeran, director of the World Food Project  explained, “For the middle classes,…it means cutting out medical care. For those on $2 a day, it means cutting out meat and taking the children out of school. For those on $1 a day, it means cutting out meat and vegetables and eating only cereals. And for those on 50 cents a day, it means total disaster.”  

Up to 100 million people who had managed to raise their incomes above $2 a day found themselves inexorably drawn back to the world poverty level, while millions of those who called themselves “middle class” began, slowly, to realize that they were no such thing.  Reports noted that many of the supposed middle class in rich world nations were actually the working poor who had overextended their credit to keep up appearances.  And the appearances - and credit access - were fraying

In 2007, a major American newspaper reported the growing problem of seasonal malnutrition affecting poor children in the Northern US - the rising price of heating oil meant that lower class families were struggling to put on the table.  Hungry, low weight children were unable to maintain their body temperature in chilly houses, and a vicious circle of illness, hunger and desperation ensued.  Malnutrition bellies began to be regularly seen by pediatricians treating the urban poor in cold climates.

Shortages were a chronic problem in the poor world, but by early spring of 2008, they began to arrive in the rich world - despite Japan’s deep pockets, a shortage of butter and wheat reminded the rich world of its dependence on food import.   Many of the supply problems were due to climate change and energy issues, as Australian dairy farmers struggled with high grain prices and the extended drought that destroyed their pastures. 

Following up on anecdotal reports of limits at bulk warehouse stores, in late April of 2008 rationing went official. Many Costco stores were limiting purchases of flour, rice, cooking oil and other staples to avoid shortages - and the stores tracked purchases electronically to prevent customers from visiting other Costco stores.  This was the first example of food rationing, but probably not the last - at least one financial analyst was predicting corn shortages in the fall of 2008.

The energy train and the food train were inextricably linked, and indeed directly (as the costs of diesel rose rapidly) and indirectly (rising energy costs created the biofuels boom) drove the food crisis.    They were linked in other, complex ways as well - the housing collapse that threatened to plunge Europe and the US into a  major depression was in part due to the high costs of commuting from suburban infrastructure.  Exurban housing collapsed hardest, while housing closer to cities remained desirable - for a while.

While the food crisis in the poor world made headlines, the energy crisis there went almost unnoticed.  <ore and more poorer nations simply could not afford to import oil and other fossil fuels, and began to slowly but steadily lose the benefits of fossil fuels.  Nations suffered shortages of gas, electricity and coal.  Tajikistan, experiencing a record cold winter found itself with inadequate supplies of heating oil and a humanitarian crisis.  South African coal supplies were so short that electricity generation dropped back to intermittency.

Industrial agriculture, described as “the process of turning oil into food” began to struggle to keep yields up to match growing demand.  Yield increases fell back steadily, with more and more investment of energy (and higher costs for poor farmers trying to keep yields up).  Yield increases, which had been at 6% annually from the 1960s through the 1990s fell to 1-2%, against rapidly rising demand.  Climate change threatened to further reduce yields in already stressed poor nations - Bangladesh struggled with repeated climate change linked flooding, the Sahelian African countries with growing drought, China with desertification. 

All future indications were that both food and energy supplies would fail to keep up with demand. Unchecked (the only kind we’ve got) climate change is expected to reduce rice yields by up to 30%, and food production in the already starving Sahel is expected to be reduced by half.  GMOs, touted as a solution, have yet to produce even slightly higher yields.  Arable land is disappearing under growth, while aquifers are heavily depleted - 30% of the world’s grain production comes from irrigated land that is expected to lose its water supply in the next decades.

Meanwhile the costs of fossil fueled agricultural skyrocketed, with Potash rising by 300% in less than a year.  What should have been a boom for farmers was actually the beginning of an increasingly precarious spiral of high prices, high indebtedness and market volatility.  Agricultural indebtedness rose dramatically.

Meanwhile, the ability of nations to transport food supplies began to be called into question.  Early trucker protests were intermittent and largely ineffective, but real predictions of diesel shortages and a shortage of refining capacity made it a real possibility that food might not reach store shelves. 

 And so how does the story end?  If you were reading this in a history book, what ending would you expect to see?  Because just because the crash doesn’t quite read like a post apocalyptic novel doesn’t mean that we aren’t the new Po-Apoc (like Po-Mo, only darker) generation.


The Magic of the Words “Technically Recoverable”

Sharon April 14th, 2008

Bakken Schmakken.  So today they emails started coming in.  A lot them were polite queries “But I just heard…does this mean we don’t have to worry anymore.”  A couple were more aggressive “Peak oil - that’s crazy talk” kind of stuff.  Sigh.

It happens every time we “find” or rather reclassify (yup, they knew there was oil in Bakken before this week)  some oil that is to deep or too tied up in big heavy rocks, or too expensive to get at and start estimating how what is “technically recoverable.”  And I don’t blame the people who email me - they just want to have one less thing to panic about.  Who wouldn’t?  And, after all, the *government* is saying this.

Well, I won’t bother fully debunking the value of the Bakken find, since a writer over at The Star already did.  He covers most of the major ground, pointing out,

Assuming all 4.3 billion barrels could be retrieved, it would represent nine months of oil consumption in the United States.

Canada’s oil sands hold about 177 billion barrels, and Saudi Arabia has an estimated 250 billion barrels, if you can believe the numbers.

Now, let’s consider the nature of the Bakken oil. It doesn’t sit in big underground pools where you can just pop in a metal straw and suck it out. This oil is trapped in layers of shale – a sedimentary rock – up to 3,000 metres deep. Getting at it is expensive and difficult, and certainly damaging to the surrounding landscape and environment.

You thought the oil sands were messy and energy-intensive? Bakken is tough oil. You have to drill down and then horizontally through rock, which has to be fractured to release the oil that is tucked away in small pores.

It will cost dearly to go after Bakken oil, just as Chevron will have to pay a bundle if it hopes to extract the 3 to 15 billion barrels it has discovered in the Gulf of Mexico, kilometres under the water at its “Jack” wells.

The technology exists to get it – at least some of it.

We can also have a manned mission to Mars if we truly wanted to pay for it.”

And that is about the size of things - it isn’t that there is no oil there, it is just that the magic words are “technically recoverable” - that is, this is an articulation of what (maybe, estimates are notoriously overblown) can be achieved by science in a purely technical sense, barring all other constraints.  But those constraints - money, energy to invest, time…those matter.  And just as I’m regularly sent emails about the latest high technology solutions - nanosolar, biodiesel from algae, etc…  the reality is that technically possible does not translate directly to “going to be common.”

I’m not claiming it isn’t possible to do a whole remarkable host of things, or that some really cool technologies won’t improve our lives in the next decades.  But I do think is wise is to recognize when you are being hyped, and told not to worry about something that is eminently worth worrying about.


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! 



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