Saturday, October 24, 2009

The Next Phugoid Cycle

Over the last couple of weeks, the price of oil rose from the low $70's to over $81 a barrel before settling to $80.50 a barrel today. For those like me who have begun to follow the present energy predicament of our society, this is an interesting development. A few questions arise – are we on the cusp of another oil price superspike like the one we experienced last year? What factors are behind the present rise in oil price? Is it due simply to “speculation”? Or to expectations of economic “recovery”? Or to rising consumption in the developing world? Or is it due to flat or falling supply? Or is it due to a combination of these?

For my money, I'll go with constrained supply as the predominant factor. Some Web writers have talked of huge inventories of oil in storage, and have stated their view that petroleum prices can't stay this high for much longer, and must soon collapse. There is some reason for such a belief; U.S. commercial crude inventories have remained consistently above the average range for the last several months. However, it is also true that U.S. commercial inventories have remained relatively flat when averaged over the last several months, and that for most of this time, EIA Weekly Reports have shown drawdowns in inventory. I still believe that the German Energy Watch Group's Oil Report is the best picture we have of our oil situation – namely, that we are past peak, and that from here on, oil will become more expensive and less available.

So what does this mean for us? Our last price spike was the event that pushed the global official economy undeniably into crash mode. According to most of the mainstream figures in the media and in government, the official economy is beginning to “recover” from its crash. But as economic activity recovers, and oil demand with it, the price of oil will again rise to economy-threatening levels. There is one important difference between this time and the last spike: that spike caused a lot of damage to an economy that seemed on the surface to be healthy. This next spike will add further damage to an economy that is very obviously damaged. What will the new damage look like? I think we'll all find out shortly. But I think that the standard of living of many of us is about to take another major hit. Our official economy is like an airliner that has lost all its hydraulic systems and has entered into a cycle of oscillations up and down, trending generally downward. The end won't be pretty.

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On a (very) loosely related note, I am in Los Angeles this week on a business trip. I have noticed a few curious things. First, there seems to be an emerging bicycle culture here. I remember how risky things were when I worked downtown in 2005 and commuted by bike. I tried riding like a motorist, just like many bike commuter experts recommended, and was met with very obvious hostility. Now it seems that Angelinos are more accommodating toward bikers. Maybe last year's gas price spike has something to do with it. L.A. has even painted some bike lanes in the downtown district.

Fixies” (single-speed bikes) seem to be especially popular here, and there are groups of people who get together to ride late at night. But there are more than a few fools here as well: I saw at least three people riding the wrong way on one-way streets, sometimes at night with no lights, and all without helmets. I have also seen downtown “public safety officers” riding Smith and Wesson bicycles. (I'll bet you didn't know that Smith and Wesson made bikes. Neither did I until this week.)

One other thing I've seen is the unhealthy pervasiveness of television in So. Cal. I was still living here when supermarkets like Albertson's started installing flat screen TV's at the checkout counters. But someone convinced gas station owners to install TV's at their pumps. You go up to one of these pumps to get gas, and the TV starts talking to you, saying something like, “Research has determined that advertising in public places can generate big bucks for your business...” The last time I encountered one of these talking gas pumps, I felt like yelling, “Shut up! Shut up! SHUT UP!” I saw the most egregious example of invasive TV this week: the Los Angeles MTA has installed TV's on their buses. So hungry are advertisers to brainwash us that they can't leave us alone anywhere. (L.A. isn't the only city to be afflicted thus; see this:, and Demise of Contemplative Space)

I've got just one thing to say to TriMet: you'd better not. If you ever install a TV on any of your buses or MAX trains, I will find out who is responsible for this and have you tarred and feathered.


ha1ku said...

It's encouraging to hear news about the change in cycling culture in Los Angeles. Hopefully as the media shares more images of people on bikes, the mind-share will expand. For L.A., I suppose all they need to do is publish more photos of Hollywood people riding around.

TH in SoC said...

Hey there, ha1ku, thanks for the comment. Southern California is beginning to wake up in small ways. The last time I visited family, one of my relatives was saying that a radio station had interviewed some people who wanted to start a business farming suburban backyards. In other parts of the country, that is now rather commonplace.