False Flag Football?

This blog is, among other things, supposed to be a diary. This post is part diary, part commentary on recent events.

A number of writers have asserted that the recent attempted bombing of a Detroit-bound jetliner by a Nigerian man was a “false flag operation,” that is, an operation executed by agents of the U.S. government posing as agents of another country or of an organization in another country, in order to arouse public opinion in support of military action against another country. Immediately some will see this accusation and start saying “Tinfoil hat!” and “Conspiracy nuts!” But those who make the “false flag” accusation have some good points: first, the bumbling incompetency of the so-called “terrorist”; second, the fact that he immediately announced that he was from Al-Qaeda; and thirdly, the implausible string of breakdowns in security that allowed the man to board the jetliner in the first place.

Also in the news are recent allegations by the U.S. Drug Enforcement Agency that “rebels in Colombia have forged an 'unholy' drug alliance‎” with Al-Qaeda in order to smuggle drugs to the U.S. from Colombia via Venezuela and west Africa. According to the DEA, fiberglass submarines are being loaded with drugs and launched from Venezuela to travel to West Africa, where their cargoes are smuggled by Al-Qaeda to the U.S. This accusation has generated a counter-accusation from Venezuelan President Hugo Chavez that the United States is engaging in false flag operations against his country in order to justify destabilizing it.

Whether you believe the accusations regarding false flags or not, one thing is sure. An increasing number of observers of events are becoming increasingly skeptical of the motives and pronouncements of the U.S. Government and of the mainstream media who are its mouthpiece. Our problem is that we've been spectacularly lied to before, and no one in power has really, truly come clean about the truth. We therefore look to places declared “trouble spots” by the government and the media, and we start asking, “What natural resources or geopolitical advantage is the government really trying to get in those places?” Color us cynical, but then again, once a man's wife has caught him cheating on her, it gets very hard for him to convince her afterward that he's home late because he had to work overtime.

More Commentary On The Nigerian “Terrorist”:

• “Why Wasn't Nigerian Subjected to Full Body Search? | Tikun Olam”

• “Is the Detroit Nigerian "Terrorist" A Patsy?”

• “Nigerian terrorist helps introducing Patriot Act 3.0 - Madsen – RT”

• “Questions mount over attempt to bomb Detroit-bound jetliner”

Iraq: A Good Heist?

A couple of weeks ago I read a bit of the December edition of the Oilwatch Monthly, an oil production newsletter published by Rembrandt Koppelaar, President of ASPO Netherlands. (You can get a PDF download here: “Oilwatch Monthly December 2009”; click on the link I have provided, then click on the link that says, “November 2009 – 1.24 MB – 33 pagina's” in the target page.) I came across a very curious statement under the discussion titled, “The Importance of Iraqi Oil Production,” which I quote as follows:

“European, Russian and Chinese oil companies including Shell, Lukoil, CNPC and BP are having a field day winning auctions to develop big Iraqi oil fields. Shell and Petronas have obtained the right to develop Majnoon with 7 billion barrels of reserves, Lukoil and Statoil the West Qurna 2 field which in total holds 9.75 billion barrels, and Total and Petronas the Halfaya field with 0.5 billion barrels. The only US company that secured a deal is ExxonMobil over the development of West Qurna 1, quite a disappointment given the amount of money the US has invested in Iraq through the Iraqi war...

“As demand is the driver of oil markets, and a continued shrinkage of the economy under a W or L shaped recession is more likely, the development of Iraqi oil is even more important due to its low cost structure. The costs to develop these fields are in the order of 10 to 20 dollars per barrel excluding war subsidies already incurred. Low cost Iraqi oil that ‘floods’ the market bringing oil prices down as supply vastly outmatches demand can give a huge boom to the economy. Albeit temporarily for only about five year as continued declines will eventually outweigh increases, it can create the breathing space to make some swift decisions to add resilience to national economies. In that sense the Iraqi war may not have been fruitless but create a boon for the global economy...”

Note the last sentence: “...the Iraqi war may not have been fruitless but create a boon for the global economy...” Frankly, I choked on this statement. I'd like to present a rather different view of things in today's post.

First, a minor unrelated criticism. For over a year I have been less enthusiastic about accepting the production figures in the Oilwatch Monthly, not because I think Mr. Koppelaar is not competent, but because those figures are based on figures published by the International Energy Agency. Since the middle of 2008, I have suspected the IEA of cooking the books a little to hide the reality of global oil production declines. I still think that 2005 was the year of maximum global oil production.

Secondly, a technical criticism of stated Iraqi reserves. It is common knowledge that many OPEC nations grossly inflated their proven and probable reserve numbers in the 1980's in order to boost their production quotas. Thus Iraq went from declared reserves of 30 billion barrels in 1980 to 100 billion barrels in 1987. (Source: “Oil reserves,” Wikipedia). Lately a figure of 115 billion barrels has been tossed around. It is very possible that such high numbers are a mere fiction.

In making these minor criticisms, I freely admit that I'm not a petroleum geologist or oil industry expert, but an average ordinary guy trying to make sense of things. I'm sure the experts know much more that I do. But on to my third criticism, which has to do with morality. Here I think I can speak with more confidence. The Iraq invasion was not “worth it” from a moral standpoint. Here are my reasons for saying so.

1. All of the “terrorism” and “weapons of mass destruction” excuses for the war have turned out to be false. It has been conclusively proven again and again that both the American and British governments fabricated evidence of Iraqi involvement in terrorism and continued Iraqi attempts to build WMD's, in order to build a case for invading Iraq. (Anyone want a little “yellowcake” to go with your coffee while you're reading this?) Further, no weapons of mass destruction were found after the invasion. None.

2. There are no moral justifications for attacking a country that was not planning or preparing to attack us. Some have attempted to justify the invasion on grounds other than American access to Mideast oil, but these justifications hold no water and are often mere attempts to deflect attention from the real reason for the invasion. I think in particular of how one prominent writer has stated that America invaded Iraq in order to “modify and influence the behavior” of other Arab powers in the region, in addition to sending a message to the Arab world in response to 9/11.

To me, this justification is unrighteous. So, Iraq and Saddam Hussein had nothing to do with terrorism, Al-Qaida or the events of September 11^th, yet we destroyed that country in order to send a message to the rest of the Arab world? How would you like to be punished for a crime committed by someone else? Does that seem fair? Two wrongs do not make a right.

3. I agree with Rembrandt that it is obvious that the Iraq war was all about oil – specifically American access to Iraqi oil (and anything else of value that belonged to the Iraqis). Abundant proof of that is seen in the actions of Lewis Paul Bremer, the governor of Iraq appointed by President Bush in the aftermath of the American invasion. We went to Iraq in order to jack that country – all so that well-fed Americans could continue to drive outlandish, super-sized vehicles wherever they want, as fast as they want.

4. In the process of jacking Iraqi oil, we killed a lot of people. In considering this, some will think only of the American soldiers who died. That's typical of American self-centeredness. But how about all the Iraqis who died? (By some counts, this figure is over one million.) It just hit the news that a Federal judge recently dismissed all charges against five Blackwater operatives who massacred seventeen unarmed Iraqi civilians in 2007.

5. Having stolen our way to Iraqi oil, we have not used our access to that resource in order to buy time for an orderly transition to more sustainable societal arrangements. Instead, we have done our best to keep industrial expansion and the concentration of wealth in rich hands going as smoothly as possible. We are indeed like a heroin junkie who, having just murdered and robbed a victim, is using the money not for rehab, nor even for methadone, but for another fix.

These are difficult times, and we will have to work together to insure that resources are allocated fairly to all the world's people. In times like these, it is dangerous to lose one's moral compass, and even more dangerous to decide that one does not need a moral compass.

The Song Of The Coal Mine Canaries

The Association for the Study of Peak Oil has just released two new videos addressing the present reality of constrained global oil supply. One video is titled, “Acknowledging the Reality of Peak Oil.” Another is titled, “Peak Oil Reality - Production & Depletion Issues.” These videos feature interviews with oil industry experts Chris Skrebowski, Jeremy Leggett, Jeremy Gilbert, and Sadad al-Husseini. Mr. Skrebowski's credentials are impressive, as he is a fellow of the British Energy Institute and an advisor to the British All Party Parliamentary Group on Peak Oil and Gas. Mr. al-Husseini is the recently retired executive vice president for exploration and production for Saudi Aramco, Saudi Arabia's national oil company. Mr. Gilbert is the former chief engineer of British Petroleum. Jeremy Leggett's career began with a background as a geologist.

These people know what they are talking about. In these videos, they don't speak in wildly emotional, intentionally alarmist tones. Yet the things they say should alarm every rational hearer of their words. Their message is basically that world oil supply will likely not grow any further, and is due very shortly to start declining. This decline will be due in part to geology (the exhaustion of existing productive fields), and partly due to the inability of the global financial system to provide capital needed to develop new, extremely challenging reserves (such as ultra-deep water and polar fields, shale and tar sands). Chris Skrebowski estimates that the yearly decline in production from existing fields amounts to 4 million barrels per day. Jeremy Gilbert states that, “...Peak Oil is happening as we speak, or...has happened...”

Meanwhile, the problem of continued American access to refined petroleum products is growing. Over the last few years, an increasing number of American refineries have been shut down due to inadequate profit margins for their owners. What happened initially is that there was a spike in the price of refined petroleum products that began in 2005 due to constrained oil supply. This spike was initially tolerated by American consumers. But as gasoline prices stayed consistently above $3.00 per gallon, the ability of the American consumer to bear this cost was eroded. The spikes and general steady rise in refined petroleum prices from 2005 to 2008 led to the general economic collapse we are seeing today.

That collapse has made it very hard for refiners to charge prices for their products that would lead to acceptable profit margins for them, as a large number of American consumers are no longer willing or even able to pay such prices. This is why industries that depended on cheap motor fuel, from airlines to automakers, and even to drive-in coffee shops and restaurants, all took a substantial hit from 2007 to the end of 2008, and it is why exurban housing developments built far from places of work in 2006 and onward began to wither.

But it is also why refiners based in the United States began losing some serious profits from the latter half of 2007 onward, due to their inability or unwillingness to charge enough for their products to maintain the sort of profit margins they had enjoyed in the years just prior to 2007. To illustrate my point, let's take a price of $3.25 a gallon, typical of the price of unleaded regular gas in the Los Angeles area around say, April 2007. In April of 2007, crude oil cost around $65 a barrel. Now $3.25 a gallon represented the price needed to return a certain percentage of profit to the refiner of the gasoline, after expenses such as plant operations, worker salaries, and the cost of the crude itself were paid. (Independent refiners are required to buy their crude before they can refine it.) If any of these operating costs rose, this would require the refiner to raise his price in order to maintain his profit margins.

Now in July 2008, the cost of crude oil was $147 a barrel. If refiners had felt the liberty to raise their prices to cover the full impact of this increase in cost of their raw material, the price of regular unleaded gasoline should have been around $7 a gallon. What happened instead is that gas prices rose to less than $4.50 a gallon in most of the United States. This meant that refiners were subsidizing American mobility by sacrificing their profit margins.

This sort of thing could not go on forever. The predictable result has been the shrinkage of American refining capacity, as smaller independent refiners have been driven out of business and larger refiners have begun to consolidate, selling off or closing plants in order to reduce excess capacity and cut operating costs. It has also led to an increase in American imports, not only of oil, but of refined products such as gasoline, diesel fuel and aviation fuel.

And it has led to a tightening of refined product supply and an increased likelihood of shortages in the near future. Gail Tverberg, an actuary and oil industry analyst, recently posted an online article titled, “As Refineries Close, New Stresses are Added to the System.” In her article, she describes how refinery shutdowns in the Northeast are causing one of the major pipelines on the eastern seaboard to be used at maximum capacity in order to maintain adequate flows of gasoline from Gulf Coast refineries. She notes that while there seems to be adequate gasoline supply at present, the system does appear to be nearly at its limit, and thus extremely vulnerable to disruption.

So it appears that the US (or at least parts of it) could be in a major bind at some time in the near future, and that this is due not only to our reliance on imports from a falling global oil supply, but to the outsourcing and shutdown of an increasing portion of our own refining capacity. What has been the U.S. response to this? “Cash for clunkers” and the bailout of GM and Chrysler, who have rewarded us for our involuntary generosity, not by building rail rolling stock or reviving our passenger rail system, but by continuing to build gargantuan monster trucks ans SUV's, and muscle cars like the new Chevy Camaro – a car that will easily do 0 to 60 in a few days once the oil runs out and you have to get a crew of young, strong bucks to push it up to the top of a hill to get it rolling. Sometimes I think we'd be better off if we had chimpanzees running the Federal government.

Meanwhile, if you live on the East Coast and you are reading this, I'd like to ask a favor. It seems that disruptions in petroleum supply are not widely reported in the mainstream media. This became apparent during Hurricanes Gustave and Ike, and I expect that it will be the same story if there are future petroleum supply disruptions. Since you all live in areas whose delivery systems may be nearly overstressed right now, you may find yourselves facing gasoline shortages again. If that happens, please let the rest of us know so that we can have an informed assessment of our national petroleum supply situation. Feel free to leave a comment on my blog, if you'd like. If on the West Coast or elsewhere I notice similar shortages unfolding, I will be sure to publicize them on this blog.

For Further Reading

• “Valero to shut down Del. refinery”

• “Valero posts steep loss on shutdown costs, margins – MarketWatch”

• “Dismantling the U.S. refining sector MarketWatch First Take”

• “Bloomberg news: Sunoco, Valero Shut Plants as Fuel Glut Beats Winter (Update2),” (http://www.bloomberg.com/apps/news?pid=20601087&sid=aZfIACtKTlSk)

A Year Of Consequences

There has been much to chew on recently for those who have been following the discussion of limits to global oil production. The latest round of news started with the widely publicized news that two unidentified whistleblowers from the International Energy Agency were accusing the agency of painting a much more optimistic picture of remaining petroleum reserves than is warranted by the facts. According to the whistleblowers, it was pressure from the United States that induced the IEA to make misleading and false statements, in order to prevent “panic” or the emergence of threats to American access to the world's oil supplies.

This was followed by a statement from Professor Kjell Aleklett of Uppsala University in Sweden, in which he flatly stated that the IEA prediction of 105 million barrels per day by 2030 is “unrealistic.” In Mr. Aleklett's view, global petroleum production is more likely to be 75 million barrels a day in 2030. The salient point of the Uppsala forecast is that in their view, global oil production has already passed its peak, and will decline from here onward.

An increasing number of independent analysts, academics and oil industry insiders is saying the same thing – that the world has passed Peak Oil and that we are now living in the twilight of the petroleum age. More and more “coal mine canaries” are singing from the same sheet of music. The only matter of debate among these experts is whether the decline will be gentle and lengthy, or whether it will be drastic and sudden.

I'm not an oil industry expert or a geologist. But I have always been partial to the Oil Report of the German Energy Watch Group. Part of my preference has been that this report contained some pretty drastic near-term predictions, and thus it would be easy to see fairly soon whether the Energy Watch Group was on the right track. Their salient prediction was that global petroleum liquids production (consisting of the sum of conventional crude, natural gas liquids, “oil” from tar sands, and biofuels) would shrink from around 85 million barrels per day in 2007 to around 58 million barrels per day by 2020. This is a fairly steep decline, and if the Oil Report is correct, we should begin to see the proof fairly soon.

Now another analyst has generated a report containing similarly drastic predictions. Tony Erickson, a volunteer analyst at the website The Oil Drum, has just posted his latest “World Oil Production Forecast - Update November 2009‎.” His key points are that crude oil production (excluding biofuels) has already peaked, and that global oil production will decline by 2.2 million barrels per day each year between now and the end of 2012. Thus the German Energy Watch Group has been joined by another voice predicting a drastic near-term drop in global oil production.

If Mr. Erickson is correct, this means that by the end of 2010, the world will be producing 2.2 million barrels per day less than it is producing now. Due to the critical role of oil and petroleum products in the global economy, this means the very real probability that the global economy will shrink involuntarily and uncontrollably. Many things that people in the First World are used to having will become much more expensive and/or unavailable. 2010 may well be the year of another oil price superspike. Thinking of the implications for the fragile global economy may wreck your sleep tonight.

In America, many of us may have to make sudden, drastic adjustments for which most of us have not been forewarned, and which most would have rationalized away even had they known. Whereas some European nations like Germany and the Netherlands will be structurally more suited to a world of lower energy (think bicycles and mass transit, just for starters), we may find ourselves scrounging for hastily thrown-together means of adaptation. Better make sure your bike has a good lock.

Some might say that predictions like these are unnecessarily “alarmist” or even “apocalyptic.” Maybe so, maybe not. We won't have long to wait to find out. As Wallace Stevens once wrote, “Let be be the finale of seem...”

A Room Full Of Liars

It's been the talk of the blogosphere lately that there's been a lot of lyin' coming from the US Federal government. Of course, that's nothing new, and should surprise no one. Some very reputable have cited errors and outright fabrications regarding “official” unemployment figures from the Bureau of Labor Statistics, as well as lies surrounding the true effect of the various stimulus packages.

I want to focus on the unearthing of another set of lies, regarding world oil reserves and production. Yesterday, the Guardian, a British newspaper, ran an article titled, Key oil figures were distorted by US pressure, says whistleblower. According to two anonymous senior officials at the International Energy Agency, it seems that recent IEA World Energy Outlook reports have been distorted in order to present a more optimistic picture of remaining oil reserves and production figures than is warranted by the facts. This distortion is alleged to be due to pressure from the United States government, which wanted to suppress information that might damage financial markets. The pressuring of the IEA came from the Bush administration.

I'm not going to launch into a long denunciation of the IEA or of the US government in this post, although they certainly deserve it. I simply want to point out a pertinent suspicion: namely, that if the IEA has fudged remaining reserve figures, they have also probably been fudging monthly production numbers as well.

This is a suspicion which several Peak Oil watchers voiced in 2008, as oil spiked to $147 a barrel, even though IEA monthly figures seemed to indicate that global oil production was still increasing. I never was able to swallow that story. My reasoning is as follows: in 2007, global “petroleum liquids” production was around 85 million barrels a day. In the summer of 2007 the IEA announced that the world would need an extra 1.5 million barrels a day in order to avoid shortages and price spikes.

Now basic economics tells us that the price of a commodity is determined by the balance between supply and demand. When demand goes up, creating scarcity, the price also goes up until demand is limited by the higher price and supply and demand are again in balance at the higher price. Now, the global economy required a growth rate of around 2 to 3 percent per year in order for debt-based arrangements to hold together. Since energy is a foundational component of this economy, that means that energy supply needed to grow at the same rate in order to support the global economy. Oil is one of the main sources of energy for modern society, meaning that the oil supply also had to grow at a certain rate in order to support the economy without disruption.

The funny thing is that, according to the IEA, global “liquids” supply grew from 85 million barrels a day in the summer of 2007 to 88 million barrels a day in July 2008, which was the high point of the oil price spike. Yet if global supply had actually grown in step with global demand, the price should probably not have spiked at all, and certainly should not have spiked as much as it did. Something's fishy about the 88 million barrel per day number.

And that (along with the other lies we've been hearing about over the last few days) illustrates a further point. As our economic and energy situations continue to deteriorate, the masters of our present systems will present an increasingly distorted picture of our situation, a story that is increasingly disconnected from reality. They will do this so that they can maintain as much control and guard as much of their revenue streams as possible. Those who want to find out the truth about our situation will have to be good detectives. Those who don't care, who prefer to live disconnected from reality, will increasingly be surprised by the nasty intrusion of reality into their daily lives.

As for me, I'm a lot more inclined to believe the Oil report of the German Energy Watch Group, which says that global oil production has already peaked.

Make Them Buy Brioche!

Come now, you rich, weep and howl for your miseries that are coming on you. Your riches are corrupted and your garments are moth-eaten. Your gold and your silver are corroded, and their corrosion will be for a testimony against you, and will eat your flesh like fire. You have laid up your treasure in the last days. Behold, the wages of the laborers who mowed your fields, which you have kept back by fraud, cry out, and the cries of those who reaped have entered into the ears of the Lord of Armies. You have lived delicately on the earth, and have taken your pleasure. You have nourished your hearts as in a day of slaughter. You have condemned, you have murdered the righteous one. He doesn't resist you.

– James 5:1-6, World English Bible (a public domain translation)

As I recently stated on this blog, the global “official” economy is tracing out a “phugoid cycle” of collapse driven by the increasing price fluctuations and scarcity of one key resource: crude oil. This process of this collapse threatens the notional wealth of all who are invested in this economy, and especially the wealth of the rich masters of this economy. It should be obvious by now that the governments of the West, and especially the US Government, are therefore being used to prop up the notional wealth of their richest citizens.

But in understanding the actions and strategies of these governments, we need to see just what “wealth” these governments are trying to salvage. What does the notional wealth of the rich actually consist of?

In the West, a large portion of that notional wealth consists of legally binding obligations placed by the rich minority on the vast poor majority. These obligations have value as generators of revenue streams which enable a small elite class to enjoy a lavish and leisurely lifestyle through the labors of their poorer fellows. Examples of this include the following:

• “Intellectual property” the copyrights of which are held as tradeable property, for things like software, published books and entertainment media like music and movies;

• “Market share,” secured by large enterprises driving competitors out of business;

• Monopoly arrangements, which are the ultimate end of increasing market share;

• Most importantly, interest-bearing debts owed by the poor to rich creditors, and by the rich to each other;

• And lastly, fees charged by insurers in exchange for a promise to cover the costs of financially catastrophic events.

These are the primary assets of many of the world's rich people, and some of these rich have no real assets beside these legally binding, revenue generating obligations.

These legally binding obligations are valuable only as long as the poor are either willing or able to honor them. The trouble for the rich is that from 1980 onward, real wages for the working class have been either stagnant or declining, while the things purchased by the working class have gotten steadily more expensive. Some of these things, such as college education and health care, were turned by their providers into “cash cows” whose price appreciated at a rate that far exceeded the rate of inflation. In order therefore to maintain economic activity and to protect their revenue streams, the rich providers of goods and services were obliged to offer these things on credit, forcing the poor consumers of these things to take on ever more debt until there was no way that most members of the working class could ever become debt-free during their lifetimes.

This arrangement worked as long as the members of the working class were able to pay the interest on their debts, the royalties on the intellectual property they consumed, and the fees on the insurance on which they relied. But from 2005 to the present, that ability to pay all of these obligations was eroded – first, by the spike in oil prices caused by constrained supply, and then by the explosion in costs of everything that depended on oil for its manufacture or delivery. This threatened to render many of the assets of the rich worthless, because those assets consisted of contracts between the rich and the working class in which the working class promised to pay a certain amount per year to the rich, and now the poor were no longer able to make their payments.

The truth is that a large number of working class people in the First World, and especially in the U.S. are now flat broke. They have lost incomes, they have defaulted on loans, they are no longer able to pay for insurance, their stuff has been repossessed, they can't afford cable or new flat-screen TVs and they have no spare change to purchase “intellectual property” like DVD's or music. Their obligations owed to the rich are now worthless, because they will probably never be paid. But there is a further threat to the “assets” of the rich: namely, that an increasing number of working-class people are waking up to what's being done to them by the rich, and are trying to create alternatives to dependence on the rich. This threatens such assets as the revenue generated by market share dominance or monopoly arrangements.

The government bailouts of banks and investment firms are an attempt to re-inflate the assets of the rich, by turning the vast mass of working-class taxpayers into collateral for loans that are now worthless, and to repair the revenue streams of the rich via government confiscation of the labors of the poor. The government has also been employed to criminalize certain alternatives to dependence on the rich, such as the recent “food safety” laws that place huge regulatory burdens on small organic farmers. But as economic activity continues to contract and revenues continue to fall, the rich and their stooges in government are desperately trying to take confiscation to a new level.

This seems to be the motive behind nearly all of the public discussion by the mainstream media and by politicians regarding health care reform in America. Our problem is that most Americans can't afford health care anymore without insurance (it cost less than $100 to have a baby in 1950; it costs $6,000 to $14,000 today), and most Americans can't even afford health insurance premiums anymore, as these premiums are already exorbitant and are continuing to rocket upward. Yet instead of talking about genuine health care reform (as in making health care universally available at a price people can afford), the public debate has been framed as a discussion of health insurance reform. This deliberately misses the point, and is nothing more than a ploy to protect two cash cow “industries” (the private insurance “industry” and the health care industry) and the notional wealth of their owners.

The response of the Congress and the medical/insurance lobby to the health care crisis has been to say, “What? Most Americans don't have access to health care? Then make them buy insurance!” The bill crafted by Senator Baucus and others is a case in point, as it would force all Americans to buy private health insurance or face an IRS tax penalty. This is as dumb as a bag full of rocks. If most Americans can't afford health care, how are they going to afford ever-more-costly health insurance? Will the Federal Government force the people I see next to freeway offramps and sleeping under bridges to buy health insurance?

“Ah,” some will say, “but these bills don't place that requirement on the poorest Americans.” However, placing that requirement on people who are already teetering on the edge of poverty will drive many of them over the edge. If people own the places where they live, or own some other asset like a car, yet can't afford thousands of dollars a year for private health insurance, will the Government seize their assets? Why are the Feds trying to fatten the profits of bloated businesses like Aetna and United Healthcare at our expense?

In continuing to impose ever-greater burdens on the poor and the working class, the United States has come to resemble France under Louis XVI, and the history of the U.S. from 1980 to the present has come to resemble the history of France under Louis XVI and his immediate predecessor. During that time, France had a huge national debt, caused by the wars and foreign adventures of the monarchy, as well as the lavish lifestyles of the monarchs. The French debt was so huge that no other European power was willing to loan money to the French monarchy. France also had a system of heavy and unequal taxation, in which the lowest members of society shouldered the heaviest tax burden, while the nobility paid little or nothing. Then there was the unwillingness of anyone in the French government to reform the systems of power and economy to make them more just and equitable. Lastly, there was the contraction of the French economy due to resource scarcity (crop failures and famine) in the 1780's, in which the poor suffered greatly while the rich maintained their exploitation of the poor in order to continue a lifestyle of conspicuous consumption.

The presence of these factors, combined with the lack of any avenue of escape for the French peasantry, led to the French Revolution. The friction that caused that explosion is exemplified by a saying attributed to Marie Antoinette, who is reputed to have heard that the peasantry could no longer afford wheat to make bread, and who said, “Then let them eat cake!” (“Cake” here is literally, “brioche.”)

We in the U.S. have had avenues of escape from the predations of our rich class, but they are being closed off from us. It would be fairly easy to neutralize the rich non-violently by becoming independent of them. Yet when that avenue is closed off, there no longer remains a safety valve for pent-up citizen rage against the rich who rob us. While history doesn't repeat, it does rhyme, as some bloggers have said. I don't think it's wise right now for anyone in our government to be saying, “Then make them buy brioche!” Not unless you want a nation full of people like Ann Minch.

* * *

P.S. Over the last several months I have been following another website that publishes content related to our present global energy, environmental and economic crises. It has come to my attention that some of the things I have said on this blog are taken up by the writers on that website a few days to a few months after I have said them. This is cool, as diverse people often wind up noticing the same things and commenting on them. What's not so cool is that I have found content on that site that sometimes mirrors almost exactly some of the things I've said, yet there's no attribution given. If I see examples of this again, I think I'll write a blog post titled, “What A Coincidence!”, complete with quotes, excerpts and links.

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.

* * *

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: http://www.commercialalert.org/issues/culture/public-spaces, 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.

Ten Thousand Low Fat French Fries

I am planning some more in-depth analyses for future posts on this blog, and I am also trying to line up some interesting and informative interviews with people in my area who are involved in activities that foster neighborhood and community resilience. However, there is research to be done and there are appointments to be made, so these things won't hit the blogosphere for a while yet. Please stay tuned.

In the meantime, I'll be publishing a few essays and light posts, the ideas for which have been kicking around in my head (and/or on my digital camera) for the last several weeks. Today we'll talk a bit about food.

I have a (fictitious) friend named Jones, who's been trying to battle excessive weight caused by an excessive lifestyle. One of Jones' favorite foods is French fries. In fact, he can put away five hundred Fred's Famous French Fries in one sitting. (Fred's is a (fictitious) fast-food joint a block away from Jones' house.)

Jones' doctor had recently begun to warn him about the dangers of his lifestyle, telling him that he'd better quit his munching and straighten out. But Jones resented his doctor's words, being unwilling to endure the pain of denying his munchies. Because he was a rich man, Jones therefore hired a team of doctors, agronomists, chefs and nutritionists to invent a low-fat French fry that would enable him to munch away without guilt. After several months of intense research, his team finally presented him with a low-fat, low-calorie French fry every bit as decadently salted and flavored as the fries he was accustomed to munching at Fred's.

“Cool!!” Jones exclaimed, after the first bite. “Now I don't have to stop at 500 fries. Now I can munch 10,000!!!”

Jones is a metaphor for the “non-negotiable” American way of life, a symbol of the American attitude toward the call to learn to live on less. And the mindset embodied in Jones' low-fat fries can be seen in vehicles like the all-new Chevy Tahoe hybrid:

The salesman who let me take this picture told me that it gets 20 mpg in the city and 20 mpg on the highway. Impressive! How many miles per gallon does it get when stuck in traffic? When one considers the energy embedded in manufacturing one of these, how much energy does the hybrid technology actually save? By the way, Chevy even has a full-sized hybrid pickup truck!

Maybe someone should tell Jones that eating ten thousand low-fat French fries will kill a man just as surely as eating five hundred regular fries. At least here is an example of an un-hypocritically, honestly sinful regular “French fry”:

(It is also, unfortunately, an example of why Chrysler went bankrupt.)

But look here! Has Peak Oil actually brought us back to this?!

I saw this woman and her horse next to a tire shop while on the way home from work. It seems that her horse trailer had some problems and the mechanics were repairing it. Yet I know that if the mechanics had been unable to fix it, she'd still have had a ride home.

Here, lastly, is a guy who's doing things right...

Airlines And Moral Systems Failure

Soon after returning home from my last trip to Southern California, I got into a short conversation with a married couple who are my next door neighbors about my trip. They too had recently traveled to So. Cal., not for work, but to visit relatives. Whereas they flew there and back, I drove. I think they have come to the conclusion that I'm a slightly peculiar character, so they saw my choice to drive as just one more proof of oddity. When they asked if I would be returning anytime soon, I told them that I wouldn't be going back for a couple of months, and that when I returned, it would only be to visit family. One of them asked, “Are you going to fly this time?” “No way,” I said. “Planes crash!” “So do cars,” they both chuckled.

But in all seriousness, I have given up flying for the time being. It's not because of an “irrational fear of flying.” Rather, as I have said before, it's because during the last oil price super-spike, we all witnessed the death of several airlines and the consolidation and extreme cost-cutting measures of several of the survivors. I also know that the surviving airlines are still being squeezed by rising oil prices and falling revenues caused by the general economic collapse. This is hindering their ability to maximize profits. Knowing how big business operates nowadays, I expect that their cutbacks have extended far beyond such visible things as carry-on luggage charges and elimination of in-flight snacks, and that they have been cutting back on things essential to keeping their planes safe in the sky. I therefore expect that as our economic collapse progresses and oil prices go through further spikes, there will be a significant increase of in-flight safety incidents (including crashes).

Is there any evidence to support such an expectation? I haven't done a rigorous statistical categorization and analysis of airline in-flight incidents over the last few years. Such an analysis, while valuable, would take a significant amount of effort, and I don't have the time right now to undertake such an effort. But it is interesting to note that over the last month and a half, during the time when I drove to Southern California twice, there have been at least five crashes of planes used either for passengers or cargo.

One particular crash that caught my attention is the loss of Air France Flight 447, an Airbus A330 that fell out of the sky into the Atlantic Ocean on 1 June 2009. According to initial reports, the plane was in international airspace under the watch of Brazilian air traffic control when it flew into a band of thunderstorm activity. As it entered the storm zone, it experienced a rapidly cascading failure of its highly complex, computer-controlled avionics, leaving the pilots with progressively less information about flight attitude and speed, and less ability to control the plane. There came a point when something critical happened, and the plane fell out of the sky.

What's interesting is how independent investigators drew certain initial conclusions from the crash data, how the French corporation Airbus Industrie responded to these conclusions, the French oversight of the debris recovery operation and their inability to find the plane's “black boxes,” and the preliminary conclusions of the French Government's BEA (Bureau d'Enquêtes et d'Analyses pour la Sécurité de l'Aviation Civile), an agency similar to the American FAA.

Initially, the conclusion of many independent investigators was that the plane broke up in midair. The injuries seen on recovered bodies and the fact that many of those bodies were missing clothing, supported this conclusion, as well as the fact that the crash debris field was several miles long and several miles wide. Airbus spokesmen then began to blame the pilots for flying the plane in a way that exceeded its design limitations, secondarily blaming flight sensors for giving the pilots faulty speed and attitude information.

But this provoked further questions about the safety of the heavy reliance of Airbus on composite-fiber components in their aircraft, in places like wings, rudders and other control surfaces. These suspicions were amplified when the nearly intact tail of the plane was found near the extreme end of the debris field, suggesting that it had sheared from the aircraft while in flight. Such incidents had happened before with Airbus aircraft.

The voicing of these suspicions prompted many vehement assurances from Airbus that their airplanes are well-designed, and perfectly safe to fly. In this Airbus was joined by an unlikely ally, namely Boeing, who are in the process of producing a next-generation plane, the 787 Dreamliner, that will be made up of over 50 percent composites.

Why are composites so important to passenger jet manufacturers right now? It boils down to fuel prices. Those who build the lightest jetliners capture the biggest share of the market, because the person who buys and flies those jetliners can carry the most cargo or the largest number of people for the lowest operational cost.

But aircraft manufacturers have reached a point where their craft are so lightly built that they must be outfitted with extremely complex computer-controlled avionics, to prevent pilots from overstressing their aircraft while in flight. Safety margins have been shaved to the minimum, since generous margins would add weight and operational cost.

A word about composites is in order. It is well known that composites tend to delaminate and develop voids when subjected to the cyclic loading and extreme temperature variations experienced by passenger jets. While the military uses composites in many of its most advanced jet aircraft, it is also true that the military subjects its planes to very rigorous maintenance and inspection regimens. This is not true of planes maintained by airlines, whose manufacturers have convinced the operators of these planes that only visual inspection of components is necessary, or at most, a “tap test.” Hardly any airline does more extensive testing, such as ultrasound scans.

In light of these issues with composites, the outcome of the crash investigation by the BEA is quite interesting. In a report issued on 2 July 2009, the BEA concluded that Flight 447 was brought down by undetermined factors, and that it hit the ocean intact, without breaking up first in midair. They also stated that it was at least six hours from Flight 447's last known transmission before an emergency was declared. This directly contradicts the Brazilian government's assertion that it was less than half an hour after the flight's last transmission before Brazilian air traffic control issued an alert. It is also interesting to note how all the major media outlets have regurgitated the BEA report without questioning the contradictions between its conclusions and the earlier conclusions of investigators not connected to Airbus or the French government.

I believe that Flight 447 and the handling of its aftermath is an indicator of the sorts of things we will see as high-value systems and providers of high-value services are stressed and squeezed by oil depletion and economic collapse, and as these providers struggle to maintain profits. Meanwhile, here are some links for you to enjoy (or maybe not, if you have to fly somewhere anytime soon).

For Further Reading...

• http://www.flightglobal.com/articles/2009/07/21/329793/airline-accident-review-for-first-six-months-of-2009.html

• http://www.bloomberg.com/apps/news?pid=20601109&sid=akXFahAbi3mA

• http://www.upi.com/Top_News/2009/07/16/Airplane-crash-trend-troubling/UPI-26451247755941/

• http://www.counterpunch.com/garcia07012009.html

• http://unsilentgeneration.com/2009/07/03/air-france-447-french-coverup/

• http://www.dailymail.co.uk/news/worldnews/article-1192257/Pilot-tells-desperate-battle-cockpit-packed-passenger-plane-4-000ft.html;jsessionid=1AA489E0D51256BF6450F93D69A504AE

• http://www.washingtonpost.com/wp-dyn/content/article/2009/06/30/AR2009063000249.html?wprss=rss_business

• http://www.guardian.co.uk/world/2009/jun/18/airbus-air-france-crash-autopsies

• http://www.cnn.com/2009/WORLD/americas/07/02/air.france.report/index.html

• http://www.usatoday.com/news/world/2009-07-12-csiplane_N.htm

• http://articles.latimes.com/2009/jun/09/business/fi-airlines9

• http://www.concierge.com/cntraveler/blogs/80days/2009/07/is-the-dreamliner-in-real-trouble.html

• And lastly, this: http://articles.latimes.com/2009/jun/14/opinion/oe-garrison14. If you don't read anything else, please read this – it's an eye-opener.

Reckoning A Living Wage

The last few posts of this blog have covered the key role of local businesses and local economies in promoting neighborhoods and communities that are resilient in the face of Peak Oil, climate change and economic collapse. Local businesses that have the greatest chance of early success will be those that make or repair necessary or highly beneficial material goods, or that provide essential or highly beneficial services, for market niches that cannot be easily serviced by the global “official” economy due to incompatibilities of scale. By incompatibilities of scale I mean that these market sectors are small enough and/or scattered enough that they can't be served by the mass-produced, mega-chain store approach that is typical of large-scale businesses. Of course, as economic contraction and collapse proceeds, an ever-expanding number of markets and people will be abandoned by the official economy, leaving more room for the rise of local businesses and local economies.

One key question for someone seeking to start his own local business is how much to charge for goods produced or services rendered. A big part of this question is for the prospective small businessman to figure out how much income he needs to live on, and this in turn is influenced by the state of the prospective market – that is, how much the businessman's customers are willing and able to pay for the goods and services rendered. The calculation of the businessman's required income can be stated another way: he must calculate what constitutes a living wage for himself and his dependants and employees.

The calculation of a living wage can be influenced by any number of factors. Many people start with a picture of a desired lifestyle, and by means of simple mental arithmetic they come up with the income required for that desired lifestyle. Our uniquely American problem is that almost everyone who watches TV (and a sizable number of people who don't) has been trained to imagine a very lavish lifestyle, and to want an income to match. Most of the celebrities and influential figures in our country are afflicted with this disease, and they will resort to desperate measures when their income doesn't match their desired lifestyle. Names like Donald Trump, Bernie Madoff, and Kim Basinger come to mind.

This diseased state of mind isn't confined to the rich and famous, as events of the last few years have shown how many Americans lived far beyond their means. And this mindset is a hindrance to the correct process of reckoning a living wage. The correct process begins, not by formulating a picture of a desired lifestyle, but by figuring out how much customers are willing and able to pay for the goods and services offered by a prospective local business. If a woman opens a shoe repair shop in a rural town in Kentucky, and hopes to have ten customers a day and gross $50 for each repair job, she's likely to be disappointed if the town's residents are so poor that they can only afford $5 or $10.

I'd like to suggest that those Americans who want to start local businesses should reckon their figure for a living wage downward, because the ability of most people to pay for goods and services is decreasing. This is due to three factors:

1. First, the global economy (and the large-scale American economy) is now contracting, due to constraints in the availability of natural resources necessary to supply the economy. It is becoming more evident that the world has passed the peak in global oil production, and that oil production is now beginning to fall. We have already seen peaks in other resources including metals and rare-earth elements. Peak coal is not far away. The availability of fresh water is also declining, due to overuse of rivers and drought-induced climate change. Some analysts say that the world experienced Peak Phosphorus (especially inorganic phosphates) in the 1980's. (Source: http://phosphorusfutures.net/index.php?option=com_content&task=view&id=16&Itemid=30) Phosphorus is a key ingredient of agricultural fertilizers. Resource constraints and exhaustion mean a shrinking economy, and a shrinking economy means less income for each member of that economy.

2. Second, the concentrated wealth of the United States, as well as the lavishness of the American lifestyle, have been built on a foundation of military conquests, trade agreements and treaties that facilitated the concentration of the world's wealth in this country, and in the hands of the ruling elites of this country. Thus, for instance, the U.S. has only five percent of the world's population, yet uses over 40 percent of the world's oil. Now those complex arrangements of military might and slanted treaties are starting to unravel. Net oil imports to the U.S. have been declining for the last few years as oil rich nations have become wealthier and have begun to use more of their own oil. Foreign nations are becoming much less willing to buy U.S. debt, and are turning away from the U.S. dollar as the world's reserve currency, due in part to the huge debts for which the U.S. government is already liable.

3. The collapse of credit worldwide which precipitated our present economic crisis has also resulted in the loss of access to credit for ordinary people, who are now forced to live within their means. The means of ordinary people are shrinking as companies, stung by failing revenues and their own lack of access to credit, lay off ever larger numbers of employees. The increasing layoffs and downward pressure on living standards are the evidence of a shrinking global economy and shrinking American access to the goods and services provided by that global economy.

A word about point #2 above is in order. Some analysts and “collapse thinkers” have voiced the possibility of a sudden, near-term collapse of the arrangements which underlie the American lifestyle – perhaps through a massive sell-off of foreign-held U.S. debt, or a Federal default on U.S. debt, or a sudden crash in oil production or oil exports. If that happens, there will be a swift and sudden decline in the standard of living of most Americans, since we depend on imported goods for so many things. To cite just one example of the scale of this decline, consider what would happen if the American five percent of the world's population that now uses 40 percent of the world's oil woke up one day to find that they now had access to only five percent of the world's oil. On a per capita basis, this would be roughly equivalent to each American finding out that his or her income had suddenly been cut to one-eighth its former value.

Now a per capita estimate of the effects of such a collapse is necessarily flawed, as wealth is not equally distributed in this country. Nor is access to wealth. In the event of such a crisis, it follows that some people would hardly be affected, while a large number of people would be thrown into grinding poverty. Yet it seems quite likely that whether this happens suddenly or gradually, our nation is moving toward a condition in which we have access only to our fair share of the world's resource base – and that the non-renewable part of that base will be continually shrinking. Under these conditions, the sort of small businesses that survive will be those whose proprietors offer necessary goods and services at an affordable price, and who are able to stay in business because they have scaled their own needs back to a level that's sustainable over the long haul.

Here then are some good questions: Could you live on an income that's one-eighth or less of your present income? If not, what steps could you take to simplify your life so that you could live on a drastically reduced income? How much can the citizens of your locality actually afford for the goods and services you propose to sell them? Are these goods and services really so essential or beneficial that people are likely to buy them?