The Fraying of Globalism

Abandoned Wal-Mart, Beaver Dam, Wisconsin

Over eight months ago, I made a promise to myself that if I needed to buy any large or significant household item, I would buy it used, as part of my anti-materialist, anti-globalist, environmentally friendly personal commitment. Therefore, a couple of months ago, I bought a concrete weight set on Craigslist. While driving back to my house, I noticed a garage sale in progress, so I stopped, as I was (and still am) looking for a good, inexpensive, sturdy dining table and chairs. Unfortunately, I had found this particular garage sale too late to score a dining table, but they did have a collection of cheap paperback books which I perused before buying a few.

One of the books I bought was The Lexus and the Olive Tree (Thomas L. Friedman, Anchor Books division of Random House, Inc., April 2000). The book purports to examine the impact of globalism (the Lexus is used as a metaphor for this), and the tension between neoclassical, “free-market” economic globalism and the local economies and cultures which it supplants (the olive tree being the metaphor for these local economies and cultures). I tried skimming through it, but found myself in violent disagreement with what I perceived to be its premise: that globalism, even with its disadvantages and side effects on local living, is still a good thing, and that it should be embraced. I believe that the opposite is true: that economic globalism has stripped many local peoples and local cultures of their means of being self-sufficient, and has instead forced most of the world's people into dependence on and slavery to an economic system which actually benefits only a few rich oligarchs. And now the signs suggest that the system is breaking. (If anyone reading this thinks that I have misinterpreted the book's premise, or that the book's author is correct in his premise, feel free to comment. I have to admit that I didn't have the patience to force myself to finish the book.)

There are abundant signs that the globalist system is beginning to run into serious trouble. The globalized model on which most agribusiness is based is a case in point. Things got interesting recently for companies such as Mahatma Rice (owned by Riviana Foods, which in turn is owned by Ebro Puleva, S.A. http://www.riviana.com/who_we_are.html), whose business models depend on growing rice in Third World countries where land and labor is cheap, then shipping it to markets in the First World for sale at an elevated price. Recent crop failures and the escalating cost of food, coupled with a worldwide grain shortage, have induced countries such as India and the Philippines to stop exporting rice. This past winter, the Chinese government ordered a halt to coal exports because of record low temperatures and snowfall. And China may well become a net coal importer this year because of the country's generally increasing need for electric power to support its continued industrialization.

But a prime example of a globalist economic system that may get into trouble very, very soon is the big-box retail chain. This week, on the Oil Drum and Energy Bulletin websites, I found a fascinating article from the Canadian newspaper The Globe and Mail. The article, “High Oil Prices Will Hurt Trade, Report Says (http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20080527.woileconomy0527/business/Business/businessBN/ctv-business),” was cited in at least one other newspaper. It described recent research on the effects of high oil prices on the global economy. The research was performed by chief economist Jeff Rubin and senior economist Benjamin Tal, of CIBC World Markets. Their conclusion was that the high and escalating price of oil was beginning to erase the price advantage enjoyed by businesses who established their manufacturing operations in Third World countries with cheap labor rates and weak environmental regulations and who shipped their finished products to the markets of the First World. A case in point: the cost of shipping a standard 40-foot container from Shanghai to the U.S. East Coast has risen from $3000 in 2000 to $8000 this year.

As the cost of transport rises due to the rising cost of oil, the wage advantage enjoyed by globalist big business is steadily eroded. Messrs Rubin and Tal note that the high cost of shipping effectively imposes a “tariff” of over 9 percent on goods imported into North America from China. This reverses the efforts of multinational corporations over the years to persuade governments of nations to remove tariffs and other legislated trade barriers. Unfortunately for the globalists, there is no way to remove this new and growing “tariff.” If the price of oil rises to $200 per barrel, the effects of trade liberalization policies will be entirely wiped out.

This has already begun to affect the Chinese steel industry, which is now facing stiff competition in North America from a revitalizing American steel industry. And the Chinese are at a double disadvantage, since they have to pay for the cost of transporting raw materials from other nations to Chinese factories, then pay again to ship finished goods to foreign markets. But steel is just the leading edge of a trend. A time will come when cheap foreign furniture, toys and produce are a thing of the past, as the cost of transport becomes an ever-larger part of the total cost of goods sold in the United States. The near future does not look good for big-box businesses such as Wal-Mart, Cost Plus, Ikea, Home Depot, Fred Meyer, Target and others which have driven local retailers out of business by buying cheaply manufactured goods in bulk from overseas factories and underselling their competition. Nor does the future look good for the poor people who have become dependent on getting cheap foriegn-made goods from these stores. These stores may not be with us very much longer.

Our lives and livelihoods are about to become a good deal more local. Even regional trade may soon begin to break down beyond a certain distance. Another fascinating article I read this week was about the breakdowns already taking place in the long-haul trucking business (“Soaring Fuel Prices Take A Withering Toll on Truckers”, New York Times, 27 May 2008, http://www.nytimes.com/2008/05/27/business/27ship.html?_r=3&oref=slogin&oref=slogin&oref=slogin). According to this article, more than 45,000 big rigs have disappeared from U.S. highways since last year. And air freight carriers are in even worse trouble.

I believe this fraying of globalism will accelerate rapidly over the next several months, rather like a hemp rope being dragged across sharp rocks. If you're an employee or holder of stock in a big-box chain, you may want to start making other arrangements. Learning to do those things that are necessary to re-build local economies is a good place to start. Start learning necessary skills that are easy to apply locally and are useful to society. And it is time now to start doing difficult things, and to get used to doing difficult things on a regular basis, so that when you are forced to do a physically difficult thing, you are not taken by surprise.

This week, where I live, the highest gasoline price I saw was $4.47 for premium unleaded at one station that I pass on my way to and from work. I have seen an almost literal explosion of bicycles on the streets, in spite of our typically rainy weather and the large number of hills. I have also seen middle-aged men commuting on skateboards (I almost took a picture of one). During my commute to work, I have noticed that the bike racks on the buses are increasingly filled to capacity, forcing cyclists like me to ride farther to get to work. Today the driver of the bus I took rode up to the bus stop on a bicycle. A co-worker, inspired by my cycle commuting example, rode into work for the first time in over a decade. He is over 60 years old and slightly overweight, and he rode on a day that turned rainy in the afternoon, and I think that dissuaded him from trying it again.

Rice is available again in the stores, though it is 10 cents per pound more expensive than it was a couple of months ago. Lentils and dry peas are also more expensive. I will be planting more vegetables this weekend. One day, I'll write a post about my gardening adventures (I'm very much a newbie at this).

P.S. If you want to see the CIBC reports referenced in the news articles cited above, here are some links: “The New Inflation,” http://research.cibcwm.com/economic_public/download/smay08.pdf; and “Will Soaring Transport Costs Reverse Globalization?”, http://research.cibcwm.com/economic_public/download/feature1.pdf.

Balaam and the Jawbone of James Dobson

As I have mentioned earlier, the global economic system known as the “official” economy is ruled by leaders who strive to trick or force as many people as possible into dependency on the system while attacking anyone who would seek to create a safety net consisting of alternative systems. Of course, this is done in order to maximize the profits realized by the rulers of the existing official system. And this is being done with desperate zeal even in the face of overwhelming signs that the system is now breaking due to resource peaks and climate change. One of the methods employed by this official system is the takeover and consolidation of ownership of every platform for public speech, as seen in the corporate hijacking of both major political parties in the United States, as well as the massive buyouts of media companies, newspapers, publishing houses and radio/TV stations by a handful of rich interests.

This takeover of public proclamation is also taking place in the Church, especially in America. I described this process on my other blog, TH in SoC, in the posts dealing with evangelicals and Money, and evangelicals and political Power. For at least three decades, and probably much longer, Christianity in America has been undergoing a re-definition – a rephrasing designed to remove the otherworldly, charitable, anti-materialist elements from it, and to equate Christianity with the mere affirmation of Republican Party goals and ideals, the worship of the free market and unrestrained capitalism, and a rabid patriotism and worship of the triumphs of American history. Under the banner of “God, guts and guns,” the Religious Right has promoted such ideals as rugged individualism, opposition to government “charity” or regulation, racial and national pride, and an ever-rising American standard of living, without regard for how achieving that standard might affect others in the world. The leaders of the evangelical Right have thus attacked anyone who has said that America – or the world at large – is facing problems caused by increasing and excessive consumption, problems which require collective rather than individual solutions, and that one viable solution to such problems is for us in the industrial West – or particularly, in America – to choose to live more simply. Such a statement is met with howls of protest about “socialism” or “subsidizing laziness”, or how the American way of life is not negotiable, or how those making suggestions for less consumption and cooperation rather than competition are “weakening America!”

And so we come to the current debates over climate change. I have to confess that I don't like reading about the latest evidence for man-made global warming, because it tends to scare the living daylights out of me. (For instance, see http://www.telegraph.co.uk/earth/main.jhtml?xml=/earth/2008/05/22/scioceans122.xml) But I am thoroughly convinced of the science behind anthropogenic global climate change, and thoroughly convinced that we need to do something yesterday to stop it. I also see the damage being done to the poor citizens of Third World countries by our Western “free market” policies, which actually guarantee freedom only for the biggest economic players, and which are making more and more Americans poor as well.

Destroying the earth and forcing people into starvation are moral issues, discussed at length in the Bible (for instance, read Exodus 22:21; Psalm 146:9; Jeremiah 22:3; Matthew 25:31-44; Luke 16:19-31, and James 5:1-6). Yet the Religious Right has chosen to define Christianity narrowly in terms of a few issues, and to condemn anyone who speaks of Biblical concerns with larger issues. The Right therefore teaches that in order to be a good Christian, one should oppose homosexuality and abortion, be patriotic, and vote Republican, regardless of Republican Party positions on any other issues. This has the convenient effect of making the Church the defender of large American/European capitalist interests, because such convictions do not threaten the business practices or bottom line of such interests.

Dr. James Dobson of Focus on the Family, and other influential figures in the American Religious Right, have set themselves up as gatekeepers of evangelical thought and policy, the arbiters of what is or is not a legitimate issue for evangelicals to be concerned about. In 2007, James Dobson, with several other prominent evangelical pastors, called on the National Evangelical Association Board to remove its president because of his attention to the issue of global warming. According to Dobson, the issue is not an appropriate focus for evangelicals, who should focus on “…the great moral issues of our time, notably the sanctity of human life, the integrity of marriage and the teaching of sexual abstinence and morality to our children. In their place has come a preoccupation with climate concerns that extend beyond the NAE’s mandate and its own statement of purpose.” (Sources: “Dobson, Others Seek Ouster of NAE Vice President,” Christianity Today, March 2007, http://www.christianitytoday.com/ct/2007/marchweb-only/109-53.0.html; Letter to National Association of Evangelicals, http://www.citizenlink.org/pdfs/NAELetterFinal.pdf). Also, Jerry Falwell claimed that the debate over global warming is a tool of Satan being used to distract churches from their primary focus of preaching the Gospel. When their statements were widely broadcast in the mainstream media there was a predictable and entirely justified backlash, and they seem to have toned down their statements since then.

But it must be asked why Dobson and his cohorts believe that Christians are doing wrong to concern themselves with more issues than just the ones set before them by the leaders of the Right. Why does Dobson believe that defending, maintaining and promoting a lifestyle of continually increasing consumption is a Christian duty? Why is it un-Christian to believe that our excessive consumption is ruining the earth, especially when there is massive evidence to prove this fact? After his letter to the National Association of Evangelicals, Mr. Dobson and his cohorts assumed a low profile, as they saw an awakening to social justice issues among more and more Biblically orthodox evangelicals. But Dobson never abandoned his agenda. Now he and his associates have come up with a new program to protect the overlords of the “official” economy from having to abandon business as usual for the sake of the common good.

In the Church Executive magazine article dated 16 May 2008 (http://www.churchexecutive.com/news.asp?N_ID=1278), there is an article titled, “Christians Launch Campaign Against Global Warming Hype.” It appears that James Dobson, along with Tony Perkins of the Family Research Council, radio host Janet Parshall, and U.S. Senator James Inhofe, have launched a national campaign to gather one million signatures for a statement that says “Christians must not believe in all the hype about global warming.” The statement is titled, “We Get It!”

According to the article, the backers of the statement seek to inform Christians about the “Biblical” perspective on the environment and the poor, while questioning the science used to prove anthropogenic global warming. One of the statement's backers, Dr. Barrett Duke, vice president of the Southern Baptist Convention's Ethics and Religious Liberty commission, asked, “How can you create policies on uncertain science? How can you say what it is that needs to be done when you don't really know and you don't really have real consensus on the state of the problem or what is causing the problem?”

But these people go beyond questioning the science behind climate change. They have seen that evangelicals – especially younger evangelicals – are increasingly becoming concerned about issues of social justice and the environment, and are abandoning the leaders of the Religious Right as irrelevant and clueless. Therefore these leaders are repackaging their message, talking about all the “harm” that will come to citizens of Third World countries if mandatory caps on carbon emissions are placed on the global economy. They issue dire warnings about premature deaths, starvation, diseases and harm to the human economy in America and abroad, if big businesses are forced to reduce CO2 emissions. Such a message strongly implies that big business and neoclassical free market capitalism controlled by Western multinationals is a good thing for all the world's people.

It's just too bad that the people spewing this nonsense haven't talked to such figures as Vandana Shiva, an Indian activist who is fighting to protect her people from multinational agribusiness corporations who are taking land away from poor Indian farmers. It's just too bad that James Dobson and Tony Perkins didn't check their facts by talking to some of the people at OXFAM before they opened their mouths. It's too bad that Senator Inhofe doesn't listen to Deconstructing Dinner, or that he didn't talk to Dr. James Hanson of NASA. Oh well, maybe these guys don't have links to these valuable sources of information, so here they are: http://www.oxfam.org/en/ for OXFAM; http://kootenaycoopradio.com/deconstructingdinner/ for Deconstructing Dinner; and http://www.navdanya.org/ for information on Vandana Shiva. Oh, and I have many more sources if these people need them. These sources will all tell how “wonderful” these Western multinationals have been for the people of the Third World, and for the rest of us as well.

The most amazing statement in the Church Executive article, though is this one: “Signers of the declaration said while they do acknowledge, in varying degrees, that global warming is real and humans are partly to blame for the earth’s warming, they believe that for the most part the heating of the earth is due to the natural warming and cooling cycle of the planet.” Even if it were true that global warming is due to natural climate cycles, they acknowledge that humans are partly to blame. Then they excuse themselves from any need to reduce human impacts based on their belief that the main driver of warming is natural cycles. This is as stupid as saying, “Forest fires are mostly caused by lightning. Therefore, I am not hurting anything if I play with matches in this dry meadow!”

The We Get It campaigners are taking their show on the road, having “begun a national outreach to pastors, people in the pews, African-American and Hispanic church leaders, youth, artists, homeschoolers, evangelical scientists, congressional and state policy-makers, and other Christian leaders in their effort to gather one million signatures for their declaration on the environment and poverty.” If they come to my town, I'm letting them know in advance that I won't be signing their declaration. In my opinion, Dobson, Perkins and the rest of them are like the prophet Balaam in the Book of Numbers – preachers whose message is based on who will give them the most money. Balaam was blessed with a donkey whom God used to talk some sense into him, but Dobson does not appear to be similarly blessed. It seems instead that just as the jawbone of an ass was used to kill many people in Biblical times (Judges 15:15-16, King James Version), a few jawbones are being used by the rich today to do harm.

Meanwhile, where I live, gas is solidly over $4 a gallon for all grades at several stations in the area. Even Arco is now selling unleaded premium for over $4. I was in the bike shop today getting my bike checked out and saw several people talking about commuting and high prices. The cost of commuting is on everyone's mind. “For Sale” and “For Rent” signs are starting to multiply from East Portland all the way to Lake Oswego. The City of Vallejo, California just declared bankruptcy. This week I did an informal “brown bag talk” at work during lunch on the subject of Peak Oil. Around nine or ten people showed up, and most of them stayed awake while I was talking :). I'm starting to see fewer new monster trucks on the road. Grocery prices are rising, but I now have six fava bean plants in my garden, along with 15 or 20 lentils, some garlic, a few onions, one potato plant and several sunflower sprouts. I'll be busy planting more this weekend...

Consequences of Peak Oil

I began this blog with a definition of Hubbert’s Peak, namely, the maximum rate at which a resource can be extracted and used by a technological society. I mentioned Peak Oil as the most famous example of Hubbert’s Peak, and mentioned that while we in the industrialized West have enjoyed a fantastically high standard of living compared to the rest of the world, there are signs that the party’s over.

When thinking about what it means that this party’s over, there are implications which are obvious to most people. The impact of Peak Oil on personal transportation is one such consideration. Read the news or talk to acquaintances and you’ll hear all about how gasoline is getting insanely expensive. Many people are now trying to trade in their big, expensive luxury SUV’s and monster trucks for something smaller and more economical. In fact, a large number of SUV owners have seen the value of their vehicles drop steeply within the last year, precisely because these vehicles are so expensive to operate. These owners are finding out that they owe more on their SUV’s than the vehicles are worth. (Sources: “Being ‘Upside Down’ and Other Car Loan Hazards,” National Public Radio, 1 May 2008, http://www.npr.org/templates/story/story.php?storyId=90077688; “Economic Woes Dent Luxury Market, The Detroit News, 30 April 2008, http://www.detnews.com/apps/pbcs.dll/article?AID=/20080430/OPINION03/804300309) There are also regular interviews with the man/woman on the street filling up at a gas station, and news stories about how escalating costs of driving are hitting the poor especially hard. Over the last three months, the stories have taken a more ominous turn, with headlines about how high fuel costs are affecting trucking operations and airlines.

But cheap long-distance personal transportation is only one aspect of daily life that is now being threatened by Peak Oil. There are other aspects to consider – aspects which go far beyond the obvious. Crude oil has become the mainstay of the global economy. For instance, the use of petroleum for transport extends far beyond transporting commuters, tourists and soccer children. Because petroleum used to be cheap, and because petroleum yields a large amount of energy per unit volume, engines and vehicles which are fueled by petroleum have become the basis of our global economy. Petroleum has become the basis for cheaply selling clothes made in a factory in the Third World, or food grown on an industrial agribusiness plantation, or freight delivered by air. Without cheap and reliable supplies of crude, there would be no easy way to transport goods through the 10,000+ mile supply chains from the factories of China to the outlet stores located in the United States and other wealthy nations. Now that crude oil and petroleum products are becoming painfully expensive, the cost of big-box store items is also rising, because of increased costs of transporting goods to big-box stores. Meanwhile, the big global economic players have destroyed local economies and local producers of goods, by underselling them, so that there is no safety net on which to fall back in many parts of the world.

Food production is another thing being affected by Peak Oil, since modern globalist industrialized agriculture depends on petroleum-powered machinery, as well as petrochemical-based fertilizers and herbicides. Now that diesel fuel and petrochemicals are becoming more expensive, the cost of food is also rising. Of course, this is also due to crop failures caused by global climate change, as well as the evil choice the West has made to turn food into motor fuel, but that’s the subject of another post. And petrochemicals such as plastics are also becoming more expensive as a result of dwindling supplies of oil.

Petroleum, coal and natural gas are also used to supply power for generating electricity. In the Third World especially, diesel generators are used to supply prime power for the local power grid as well as mission-critical installations like telephone switching facilities and hospitals. But world supplies of diesel fuel are now extremely tight, since diesel is also the main component of home heating oil and jet fuel, and is the main fuel source for many cars in Europe. Some sources are predicting a worldwide shortage of diesel fuel as soon as this year (“Looming Diesel Shortage Could Mean Trouble,” Mining Weekly, 9 May 2008, http://www.miningweekly.com/article.php?a_id=131856, “World Power Crunch Tightening Diesel Market,” Reuters Africa, 29 April 2008, http://africa.reuters.com/business/news/usnBAN949650.html, “The Peak Oil Crisis: Diesel,” Tom Whipple, Falls Church News-Press, 15 May 2008, http://www.fcnp.com/national_commentary/the_peak_oil_crisis_diesel_20080515.html).

A shortage or spike in the price of diesel fuel also impacts the cost of raw materials, especially those that are mined, since these are almost always mined using diesel-powered machinery. This is one reason why coal recently became very expensive – coal, an energy source to which many have looked as an alternative. Unfortunately, nations are now having increasing difficulty getting coal. This is not only due to the rising cost of extracting it, but to its increasing scarceness (Source: “Arch Coal CEO Sees Worldwide Coal Shortage,” Reuters, 7 April 2008, http://www.cnbc.com/id/23998647/; “Coal: Resources and Future Production,” Energy Watch Group, March 2007, http://www.energywatchgroup.org/fileadmin/global/pdf/EWG_Report_Coal_10-07-2007ms.pdf)

Now, just as the German government has recently commissioned studies on the availability of supply of various energy sources, the administration of President George Bush also commissioned a few studies focusing directly on the subject of Peak Oil. These studies addressed the timing, likely effects, and recommended strategies to deal with a worldwide peak in global oil production. These studies are as follows:

1. “Peaking of World Oil Production: Impacts, Mitigation and Risk Management” (also known as the Hirsch Report), Department of Energy, February 2005
2. “Energy Trends and Their Implications for U.S. Army Installations,” U.S. Army Corps of Engineers, September 2005
3. “Economic Impacts of U.S. Liquid Fuel Mitigation Options,” (DOE-NETL-2006/1237) (Hirsch Report #2), Department of Energy, July 2006
4. “Crude Oil – Uncertainty About Future Oil Supply Makes It Important to Develop A Strategy for Addressing a Peak and Decline in Oil Production” 9GAO-07-283), March 2007

Though these studies were commissioned from 2005 onward, there is anecdotal evidence that the Bush administration knew about Peak Oil much sooner. These studies all spoke of the seriousness of the threat posed by Peak Oil. The Hirsch Reports particularly warned of the massive social disruption that would likely result in the United States if the world experienced an oil production peak without having made timely preparation. And just what did our public servant and protector of the common good, our President, do with these studies? Surely he alerted the American public and frankly and openly told us what we were up against, didn’t he?

For a year and a half after the completion of the Hirsh report, it was not released by the United States government, and was only available for viewing on a high school website, whose webmaster eventually removed it. Finally a nonprofit citizen media advocacy group known as Project Censored obtained the Hirsch report and posted it for the world to see in July 2005. (Source: “Where is the Hirsch Report?”, Global Public Media, 24 July 2005, http://globalpublicmedia.com/articles/441) Only after this action did the government begin to post these studies and to speak in any public way about coming oil supply problems.

This failure of our government to warn us of an impending crisis is disturbing, though not surprising. On my blog, TH in SoC, in the post titled, “The Sins of the Right,” I wrote the following: “For most people, modern daily life is regulated by the present visible global economic system, also called the “official economy” by such agencies as the International Monetary Fund, or IMF. It is a system which was conceived and grew in the industrialized West, and the societies dominated by Western culture – Europe, the United States, and the wealthier nations of the British Commonwealth, such as Australia and New Zealand. For these nations, this system has produced a standard of living far above anything experienced by the majority of the world’s populations. The corporatist leaders and oligarchs who rule this system have been very successful in swaying governments to do their will. They have rallied political parties around them to promote and enforce policies favorable to big business. And they have recruited religious leaders to legitimize their activities and to sell their policies to the general public.

“However, there are problems with this present system. First, it is inherently unfair. It promotes the concentration of wealth in the hands of a few individuals by trickery and defrauding of the masses. It relies on unfair and unbalanced trade agreements with Third World nations – agreements which allow for the cheap extraction of raw materials and finished goods from these nations by means of slave labor, in order to sell products at profit in the markets of the First World. It allows big business to maximize profit by externalizing the true cost of doing business onto the poor, as when grossly polluting industrial plants with no environmental controls or oversight are built in poor neighborhoods or poor countries.

“Also, it is becoming increasingly apparent that this present system is unsustainable. The most obvious signs of this unsustainability are peak oil and global climate change, along with other examples of environmental destruction. And there are additional resource peaks which are now becoming apparent. The continuation of global “economic growth” at a certain percentage per year, ad infinitum, is becoming more and more obviously impossible. The “official” global economic system is breaking down bit by bit, piece by piece with each day, and is on its way to a terminal breakdown. However, while the system is still in any way functional, it is dangerous – first, because its masters seek to force as many people as possible into dependence on a breaking system, and secondly, because this system actively opposes anyone who would create a safety net of alternative systems.”

I want to focus on the last two sentences of this last paragraph. The “official” global economy is in fact beginning to break down. Peak Oil is both a sign of one such breakdown and a cause of other cascading breakdowns which will get worse as oil becomes scarcer. But the rulers of our present economic system – both the very rich, and the politicians whom they buy as their slaves – are doing their best to keep us locked into this system, utterly dependent on it, while they seek to destroy any alternatives to it.

I don’t believe the present global economic system can be reformed, nor the political system which exists to legitimize the “official” economy. Yet I believe that it is possible for ordinary people – the small, the poor, the unknowns – to begin to build local systems by which they can preserve something of value when the official system breaks. In future posts I will discuss the ways in which the masters of the official system are trying to force us into dependence on it, and I will talk about building local alternatives to the official system. I will also talk about the steps I am taking personally to build for myself a network of alternatives to the official system.

In the meantime, I leave you with a picture of some alternative transportation for this time of high gas prices. I saw this contraption while I was on my way home from work. The kid who built it told me that it's a "land luge." A pretty clever piece of engineering as long as you don’t kill yourself riding it…

Why I Think We're On the Downside of Hubbert's Peak

I have several reasons. Let me list them in order:

1. In May 2005, global “oil” production (that is, oil defined in the strict sense as crude plus petroleum condensates or C+C) reached a peak of 74,298,000 barrels per day, according to the United States Energy Information Administration (EIA). From that time until January 2008, that record was not exceeded, despite a massive increase in price for crude oil and refined products. According to the EIA, January 2008 saw a new record – but just barely; global C+C production averaged 74,466,000 barrels per day. This is a difference of only 168,000 barrels, or 0.23 percent.

2. There are very good potential explanations for the very small rise in crude oil production observed in January 2008. After all, the International Energy Agency (IEA), along with several national governments, begged OPEC to increase oil production in the summer of 2007. And OPEC agreed in their September meeting to do just that, promising to raise production by 500,000 barrels per day, starting in November. But there were energy observers who doubted that OPEC had sufficient spare production capacity to add significantly to their oil output. Although oil production figures from the EIA indicate increased OPEC production during this last winter, peak oil theorists were skeptical that the production could be maintained for anything longer than a few months. If this proved to be true, the production increase could be explained by the blowing down of gas caps in fields and wells that were nearly depleted, or by the release of crude that was being kept in storage. And in fact, production figures published by the IEA for the months of February 2008 onward show that OPEC production has quietly begun to fall. Also, OPEC has publicly stated that they will not raise production any more than they promised last September.

3. Both the EIA and the IEA began over two years ago to stop focusing solely on crude oil output, choosing rather to introduce another measure of petroleum production – the concept of “total liquids.” This includes not only crude plus condensates, but also biofuels, natural gas plant liquids, coal turned into liquid fuel, and synthetic petroleum made from tar sands. According to the IEA, world “total liquids” production reached a peak of 86.13 million barrels per day in July 2006. This figure was not exceeded until October 2007. According to the IEA, from October 2007 until February 2008, total liquids production increased from roughly 85 million barrels per day to 87.5 million barrels per day. However, in March 2008, world total liquids production decreased by 100,000 barrels per day.

4. The significance of these IEA total liquids numbers must be discussed. The IEA regularly performs petroleum demand forecasts for the world economy. If you dig into these, you will find the IEA saying things like, “World total liquids demand is expected to grow to XX million barrels per day over the next year.” This simply means that the global industrial economy depends on petroleum in order to run, and that because most economic transactions and policies are based on the assumption that the economy will grow by a certain percentage every year, the supply of petroleum liquids must also grow by a certain percentage every year. If the total liquids supply does not grow as fast as the expectations of economic growth require, or if the total liquids supply remains static or begins to shrink, then the price of petroleum products begins to spike. The funny thing is that the IEA projected world demand for petroleum liquids for January 2008 was around 88 million barrels per day. According to the IEA, the world produced nearly that much petroleum liquid in January 2008. So why then did prices of crude oil and finished products rise from the $65 per barrel range in July 2007 to over $100 per barrel by February? In the minds of many observers, the IEA total liquids numbers are suspect.

5. Crude oil prices continue to rise at an accelerating rate, like a raging fever or a cough spiraling out of control. One result of this is that refineries in the United States are running at far less than capacity, because refinery profits on finished goods are being eaten up by the high cost the refiners must pay for their raw material, which is oil. Some refiners, such as Valero, are starting to sell their US-based refineries and to move their operations offshore.

6. The list of countries whose oil production is past peak and now in decline keeps growing. Russia seems to have joined that list this year (http://www.bloomberg.com/apps/news?pid=20601013&sid=aJGP_74f8HBE&refer=emergingmarkets). Other long-time members of that list include Mexico, Indonesia, Britain, Norway, Venezuela, Iran, and the United States. Indeed, a crude oil supply report published by the German Energy Watch Group in 2007 shows dozens of countries who are past their peak of oil production.

7. That Energy Watch Group report, entitled, “Crude Oil – The Supply Outlook,” can be found at http://www.energywatchgroup.org/fileadmin/global/pdf/EWG_Oil_Exec_Summary_10-2007.pdf. The report was sponsored by the German government, by the way. Don’t read it before bedtime if you want a peaceful night’s sleep, because it concludes that world oil production probably peaked in 2006, and will very shortly begin to decline at a rate of several percent per year, leading to severe economic changes. So far, many of those changes seem to be happening.

What do I expect to see in the months ahead if the world is really past peak? The following things:

1. Continued feverish escalation of crude oil prices.

2. The appearance of spot shortages of fuel even in the First World, including the United States.

3. More refiners moving their operations out of the United States.

4. A general trend for weekly petroleum and finished product inventories to decrease over the next several months, although there may be a few weeks here and there where that does not occur.

5. Increasing signs of strain and breakage of elements of a society built and based on cheap oil – more airline failures, truck transport failures because of cost and lack of availability of diesel fuel, increased difficulty in operating industrial agriculture because of the lack of diesel and of fertilizer and pesticides, etc.

Meanwhile, there are strains appearing very close to home. This week, when I went to the store to buy rice, it was gone. Clean gone – except for a handful of one pound bags. Shortages of basic foods are beginning to appear in the United States. People are being squeezed by a combination of foolish personal choices and astronomical prices. Even in the ritzy areas within a 20 mile radius of my working-class neighborhood, realtors are having to auction off houses. On my way home from work, I saw a cluster of 9 McMansions, each for sale for over $1 million. I had watched them being built last September. Only one of them has sold thus far, and I suspect that it will be a long time before the others sell – for much less than $1 million.

But I leave you with a couple of pictures of one activist’s thoughts on the present crisis. Looks like the sort of art that could have been done by someone like Banksy – except that he would have done it in stencil.