House of Cards On Fire - Lehman Bros and the Dow

For the last year and a half I have been a serious, wide-awake student of the impending worldwide energy shortage and its likely impacts. My education began in earnest in January or February of 2007, when the truth about Peak Oil hit me like a two-by-four upside the head. Since then, I've heard a lot of predictions about the sorts of oil price and financial market impacts that the world and the United States were likely to experience.

Seeing predictions come true is for me a surreal experience. When oil first traded for over ninety dollars a barrel last November, I remember going outside the office one day at lunch, sitting on a park bench, and saying "Oh, wow!" to myself over and over. Today is another surreal time, an astonished, "Oh, snap!" time. Banks have been failing in earnest ever since August or September 2007, the failures growing larger and larger each time. Now Lehman Brothers has failed. Merrill Lynch was sold to Bank of America under emergency conditions. The Dow lost over 500 points. My co-workers were so distracted that they hardly got anything done. Several of them, who have heard my rants and warnings regarding Peak Oil and its likely impacts, stopped me in the hall or stopped by my desk to talk, to wonder, in some cases to ask worried questions.

There's more to come. Chevron is warning of potentially severe gasoline supply disruptions in the United States over the next few weeks as a result of Hurricane Ike (http://www.nytimes.com/2008/09/15/business/15oil.html?_r=1&ref=us&oref=slogin). Other oil company executives are calling for gas rationing (http://www.washtimes.com/news/2008/sep/15/gas-rationing-needed-former-oil-executive-says/). The action over the next few weeks should heat up considerably.

It is almost too late, but now is the time to make such preparations as you can for what may be a very lean future, if you haven't started already. Now is also the time for Christians to show themselves to be prudent and wise and people of integrity, ready to lend a helping hand to those in need. There will soon be lots of people in need.

By the way, if you care at all about social justice, please read my recent post, “Money and Filthy Hands.” Especially if you live in Oregon. Please.

Money and Filthy Hands

In my last post, “Uncle Sam's Vital Signs,” I wrote that Southern California is a ruined place, ruined by the land use, economic and development policies of an elite whose sole aim is to make money without regard for the effects of the means used to make that money. I also wrote that this elite is trying to make money from the rest of the country by making the rest of the country like Southern California. But some of the ruinous policies enacted by the members of this elite extend throughout California as a whole.

One particular example is the steady push by conservative politicians and political groups to criminalize ever-larger areas of public behavior, and to mandate ever-harsher sentences and penalties for behavior deemed to be criminal. This has led to explosive growth in the number of prison inmates in California, as well as explosive growth in the number of California prisons. And last year, California began signing contracts with private prison corporations to house inmates – something that has not happened since the mid-1800's. (Source: “Increase In Inmates Opens Door To Private Prisons,” Los Angeles Times, 24 August 2007, http://articles.latimes.com/2007/aug/24/business/fi-prisons24)

The huge cost of enforcing the many “get tough on crime” initiatives passed in California is a well-known drain on the state budget ($10.4 billion in Gov. Schwarzenegger's most recent proposed budget, or 7.6% of the total). It is also well-known that the fastest-growing segment of the California prison population consists of non-violent offenders. California's correctional system is groaning under the weight of its large number of inmates, and even prison guard and correctional officer unions are now agreeing with critics of the system that it is time to reduce the prison population by implementing rehabilitative alternatives such as drug treatment and counseling for non-violent offenders.

These issues, as well as mistreatment of prisoners in private prisons and the use of prisoners as low-wage “slave labor” were covered in a recent Mother Jones Magazine article, as well as two previous posts in this blog, The Well Run Dry, titled, “Pages Of Your Book On Fire” and “The Replacement Of Petroleum Slaves.” The Times article cited above states that private prisons are now being used by over thirty states, and are extensively used by the Federal government. Other sources note that prison guard unions and private prison corporations are sponsors, lobbyists or donors to campaigns for stiffening penalties for criminal behavior, and for expanding the definition of what constitutes criminal behavior. After all, if it's easy to lock people up, that's good for business! (Sources: “Families To Amend California's Three Strikes, http://www.facts1.com/reasons/money.htm#Prison; “Slavery and Involuntary Servitude,” Don Bacon, Lew Rockwell, http://www.lewrockwell.com/orig9/bacon1.html; “10 Reasons to Oppose Plans for More Prisons,” New American Media, 11 August 2006, http://news.ncmonline.com/news/view_article.html?article_id=fa9cfec4e8d2984c1776d6ee4d3700c9; “Privatizing Prisons,” Center for Policy Alternatives, http://www.cfpa.org/issues/issue.cfm/issue/PrivatizingPrisons.xml)

It may be that the madness which infected California over the last two decades is playing itself out. But if one moves north just one state, one can find people trying the same tricks in order to make a profit for themselves. Two such people are Kevin Mannix and Loren Parks, who have introduced Measure 61(previously Measure 40 according to one source), a “Get Tough On Crime” measure on the November 2008 Oregon ballot. Measure 61 would significantly increase mandatory sentences for those convicted of “major crimes” as defined in the initiative. Some of the crimes on this list are definitely major. But some are nonviolent, and it is the nonviolent portion – especially the drug crimes and crimes against property – which would likely swell Oregon's prison roster. Those who oppose Measure 61 point out that Oregon already has stiff minimum sentencing guidelines for violent crimes, and that Measure 61 would add nothing new except to increase the severity of punishment of nonviolent criminals.

Measure 61 also enhances penalties prescribed under Measure 11, another measure sponsored by Kevin Mannix, which established mandatory minimum sentences for various violent crimes, and which was ratified in 1994. However, Measure 11 was made to apply to every defendant from the age of fifteen years and older, and does not allow reduction of prison time for good behavior. Thus a high school kid who got into a fight could wind up in prison for five years if convicted of second-degree assault. Twenty-eight percent of Oregon's present prison population consists of Measure 11 offenders. (Source: http://ballotpedia.org/wiki/index.php/Oregon_Ballot_Measure_61_(2008)) Measure 11 has cost the state of Oregon significantly, and Measure 61 would cost between $450 million and $2 billion to implement, according to various estimates (http://www.oregonlive.com/politics/index.ssf/2008/08/mannix_prison_measure_would_co.html). There are no provisions in Measure 61 for counseling or drug treatment programs.

I fully believe that violent crime is a serious matter, and should be appropriately punished. But it is interesting to note that a 2008 Oregon Department of Health Services study found that violent crime, drug use and property crime in Oregon have been decreasing from 2000 to 2005 (http://www.oregon.gov/DHS/addiction/ad/main.shtml; http://www.oregonmeasure11.com/portland-reports-low-crime-rate.html). It is also interesting to note that in the 1990's, while Kevin Mannix was a member of the Oregon legislature, he invited Nike to move its manufacturing operations from Indonesia to Oregon in order to take advantage of the cost savings of using prison labor (“Are There No Prisons?”, http://www.afn.org/~govern/Prisons.html). Kevin Mannix has sought to funnel large amounts of money to correctional employees over the years (http://ballotpedia.org/wiki/index.php/Oregon_Ballot_Measure_61_(2008)#cite_note-increase-6). In fact, a Web search of Kevin Mannix will reveal a large number of questionable ballot initiatives backed by him.

Meanwhile, there are some very good state-funded education programs which are of interest and of great use to those Oregonians who are preparing for a post-Peak world – yet these programs are now shrinking due to budget cuts. One such program is the Oregon State University Master Gardeners' education program, which gives students a fairly advanced education in organic food gardening. Another program is the Oregon State University Family Food Educators/Master Food Preservers education program, which provides research and education on storing vegetables and fruits, vegetable harvesting, emergency preparedness, drying food and herbs, canning, pickling and much more. Yet programs like these, and services like mass transit and expansion of bicycle lanes and bike safety programs, may soon wind up being sacrificed in order to satisfy what is an emerging “corrections-industrial complex” in our society – yet another example of the raiding of public resources established for the public good, in order to satisfy the greed of corporatists.

And speaking of corporate raiding, it seems that Bolivia is now experiencing a great deal of civil unrest, due to the opposition of rich land and resource owners in that country to the redistributive reforms of President Evo Morales. Bolivia is rich in natural gas, and as the world runs out of cheap, easily available light sweet crude oil and begins to rely more on heavy and sour crudes, refineries are using more and more natural gas to refine that heavy sour crude. President Morales has resisted efforts by global corporations and Western governments to remove barriers to “free trade” and foreign ownership of Bolivian assets.

So it is interesting that this week, President Morales kicked the U.S. ambassador to Bolivia out of the country, accusing him of instigating a revolt against the elected government of Bolivia. There is evidence to back up this accusation, including the fact that the ambassador recently met with some of the rich resource owners who are opposed to Morales, and a news article which suggests that the violent protests against the Morales government may have been funded by the U.S. government, which earlier this year asked Peace Corps students to spy on the Bolivian government. It is also interesting to note that Evo Morales is the nation's first indigenous Native American president, and that the rich resource owners protesting against him are white. (Sources: “Bolivia Expels US Ambassador Philip Goldberg,” The Telegraph, 12 September 2008, http://www.telegraph.co.uk/news/worldnews/southamerica/bolivia/2801579/Bolivia-expels-US-ambassador-Philip-Goldberg.html; “U.S. Should Disclose Its Funding of Opposition Groups In Bolivia and Other Latin American Countries,” Center for Economic And Policy Research, 12 September 2008, http://www.cepr.net/index.php/press-releases/press-releases/u.s.-should-disclose-its-funding-of-opposition-groups-in-bolivia-and-other-latin-american-countries)

Bolivia may soon join the long list of countries jacked by the rich Anglo elites in the West, particularly those of the United States, who have discovered that the Mideast is not such a temptingly easy target as they may have thought in 2001 or 2002. All this so that we in the USA can continue to drive as fast as we please, in vehicles as large as we like, stuffing our appetites which have been swollen to ginormous size by steroidal advertising.

These things are a shame. Truly, “the love of money is root of all the evils” (1 Timothy 6:10).

Uncle Sam's Vital Signs

The questions surrounding Peak Oil and the other resource peaks the world is now facing tend to fall into three general categories:

1. When will we start running significantly short of Resource X (oil, clean water, NPK fertilizer, etc)?

2. What role does Resource X play in maintaining the present lifestyle of advanced industrial civilization?

3. What will happen to society as available supplies of Resource X start to shrink?

Among those who have studied these questions and written about them for a long time, there are many who are saying that the world is experiencing significant resource peaks now, that the resources which are now beginning to decline play a key role in maintaining modern advanced civilization, and that catastrophic changes will result as available supplies of these resources start to shrink. Several of these writers (known as “fast-crash” theorists) point to the American financial troubles and the run-up in oil prices, both of which began in the last half of 2007 and which continue to the present, as proof that big changes are imminent, and that societal collapse is just around the corner. Others say that while there will be big changes, and that they may happen suddenly, society as a whole will experience a more gradual decline that lasts for decades at the very least.

I think something big (or several “somethings big”) is about to happen. Our way of life is unsustainable, and our political and financial systems are built on an unjust and unhealthy foundation. All around there are signs that our present system is beginning to break. But I am reminded of Jackie Gleason, an American entertainer whose lifestyle was an almost exact opposite of what most doctors recommend, yet who didn't die until he was 71 years old. How fast will things unravel? If you're asking me, I will be the first to admit that I don't know. But this last Labor Day weekend, I was obliged to travel to visit relatives in Southern California, and since I chose to drive there and back, it seemed to be a good opportunity to see firsthand the effects of some of the trends I have been following.

I got on the road rather late – around 1 PM on Friday, to be exact. That wasn't a smart move, since it made for a long night of driving. I kept myself focused by listening to the radio, but in listening I noticed just how dumb radio and mass media have become. As they have increasingly become mere tools of a corporatocracy, mere vehicles for presenting ads to hook consumers, radio and TV and other media organs have ceased to say anything really meaningful. Even when the night grew late and I was fumbling for classic rock stations to keep me focused, it occurred to me that the selection of “classic rock” songs that actually get airplay nowadays has become quite narrow. That list generally does not include any of the politically dangerous songs from the 1960's and 1970's; instead, it's mere head-smashing noise designed to appeal to teeny-boppers – things like “School's Out Forever” by Alice Cooper or songs by Van Halen and Bachman Turner Overdrive, along with rock songs of more recent vintage like “Hit Me With Your Best Shot”.

I stopped at the gas station shown below once I crossed into California. I have written before that I believe the oil markets are being gamed by several powerful interests in order to hide possibly faltering world oil production, but someone must have forgotten to invite the owners of this station to play the game. The sign speaks for itself.

I rolled into Buena Park around 5 AM on Saturday (Ouch!), and tried to check into my hotel. But because my bank card was from a small Oregon bank, the hotel computer would not accept it. I spent a couple of frantic hours searching for an ATM from which I could withdraw enough money to pay the room reservation, then spent another hour or so trying to convince the hotel staff that yes, I could be trusted to occupy a room in their hotel without smoking in the room or smashing things, oh, and by the way, would you please take my cash since my card doesn't seem to work? I finally got to sleep around 9:30 AM.

I slept for only a few hours, since I was supposed to meet my mother later and we were to visit my sister, then go out to dinner. In the time before our meeting I wanted to see a bit of my old stomping grounds, just to see what changes, if any, had taken place since I moved away. I drove through a bit of Anaheim and Fullerton among other places. In the picture below is a local example of the fallout from the present mortgage and financial crisis. The yellow sign in front says "Bank Owned."

It is by no means an isolated example. If you go to www.trulia.com and look up single family homes for less than $200,000 in north Orange County, the majority of properties listed are in foreclosure. I think this is typical of many working-class neighborhoods in Southern California.

Moving on to upscale “custom homes” (or McMansions), I'll tell you the story of a plot of ground near the intersection of Lincoln Avenue and Holder Street in Buena Park. In 2006, when I began bicycle commuting from my home to an engineering office in Cypress, this plot had been a strawberry field with a fruit stand. But I guess adverse agricultural economic conditions combined with the lure of cashing in on the real estate boom caused the owner to sell to a developer of “custom homes” who tried growing houses on that plot, starting in 2007. It was a bad time for such a move. Though I failed to snap a picture of that plot, I can tell you that this past weekend I saw a number of unfinished houses there – evidence perhaps of hard times for the builder.

Dinner with my mom provided an opportunity for a stimulating conversation which began when she asked if I would ever move back to Southern California. My answer, “Never!”, led into a discussion of Peak Oil and the general unsustainability of Southern California. We talked about mass transit, since my mom regularly rides the bus. I had noticed that the OCTA has been buying new double-decker natural-gas powered buses. My mom informed me that while the buses were quite nice, it was still hard to get anywhere in Orange County by bus, that the buses did not run frequently enough to be convenient, that the drivers were frequently rude, and that while the OCTA had long ago promised to install security cameras on their buses, no cameras had actually been installed.

This is a shame which is not limited solely to mass transit in Southern California. If global oil supplies have peaked as stated in last year's German Energy Watch Group report, then mass transit systems will become a vital resource in urban areas. It is therefore critical to make mass transit safe, comfortable and pleasant to use, in order to wean people away from the breaking system of automotive transport. But Orange County has a right-wing Republican heritage and consequently tends to despise government-supported social welfare systems like mass transit. One thing my mom mentioned is that the buses are now packed with people – not just kids and immigrant workers, but professionals fleeing high gas prices.

I got over eight hours of sleep on Saturday night (which felt very good) and prepared to roll out on Sunday. I drove to the house of a neighbor I had known for a long time, and got caught up on neighborhood news, then headed away – down the incredibly wide streets, utterly devoted to cars and inhospitable to any other form of transport, including bicycles – and hit the 5 Freeway northbound a little after 10:30 AM.

The drive north was a repeat of Friday's drive, complete with listening to classic rock (punctuated by a few minor league baseball broadcasts) until I got to the city of Elk Grove. Elk Grove intrigued me because the city had been the subject of an article in the British newspaper The Guardian, titled, “There Goes The Neighborhood: Mortgage Crisis Sees Suburbs Slump” (http://www.guardian.co.uk/business/2008/apr/28/us.subprime). Indeed, the Guardian had published a series of articles about the possible looming decline of American power and prestige in the face of declining energy supplies and an unraveling economy. Because Elk Grove had managed to make the headlines, I decided to stop and have a look myself.

Pulling off the 5 Freeway, I rolled up to a gas station/mini mart and went inside. “Excuse me,” I said to the woman behind the counter, “I have a question. I am the author of a blog which deals with energy and financial issues, and I heard something about how the present financial crisis has hit Elk Grove. Can you direct me to some housing developments or shopping centers whose builders have stopped building because of the present financial situation?”

The woman looked at me as if I had just come from Mars, giggled, and said something about “I don't know anything about all that.” But another customer overheard my question and directed me to a few places where I might find what I was interested in seeing. So off I went down Elk Grove Boulevard. Along the way, I saw a trail of these signs:

Following the signs led me to this house:

Inside the house I met Joey Satariano, a RE/MAX realtor who was very happy to have his picture taken. He acknowledged that business had dropped off in recent months, yet he remained enthusiastic about future prospects. He was offering a “Tier 1 list” and a “Tier 2 list” of repossessed homes to interested buyers. He also told me where I could find some unfinished housing developments.

Moving on from there, I drove a bit further down Elk Grove Boulevard. But long before I came to the places described by Joey, I spotted a cluster of homes with tar paper and stacked shingles on unfinished roofs, so I turned aside to have a look. I found a very large development consisting of a decorative wall surrounding a number of undeveloped lots. If you look in the pictures, you will see that some lots have nothing more than conduit and cable sticking up in the air for utility connection to future houses.

There was a model home office close by, so I went inside and talked to one of the sales agents. She was a pleasant, attractive lady, but she seemed to be a bit stressed by my questions. I found out that her company, Reynen Bardis, had been forced to halt building more homes due to lack of funds, and was simply trying to sell off its model home stock. Their brochure listed homes ranging from 1936 square feet to 2951 square feet, at prices ranging from $370,900 to $449,990. But I noticed that someone had written in (perhaps) desperate handwriting, “MAKE AN OFFER!” at the top of the price list.

Adjacent to this development was a development owned by Taylor Morrison Builders. It too had unfinished houses on partially finished streets. I talked with a couple who had recently bought a finished home on a street with both finished and unfinished houses. The husband, a large, burly letter carrier, seemed genuinely surprised that the city of Elk Grove should have attracted international attention due to the mortgage crisis. “If you want to see the foreclosure capital of California, you should go to Stockton!” he kept saying, with great enthusiasm.

He and his wife informed me that Taylor Morrison seems actually to be doing rather well. Part of this may be due to the fact that they are a multinational corporation and can spread losses around so that they don't hurt so much. They are also cutting back on building in Elk Grove, but they are building “on demand” – that is, they sell houses to prospective buyers (based on architectural renderings, perhaps), then they build the houses they have sold.

Both the letter carrier and his wife have jobs that are two freeway hours away from Elk Grove, yet they value living where they do because of the school system and the neighborhood. I asked them where they thought gas prices were going, and whether there was any sort of mass transit system to service their neighborhood. They both acknowledged that gas prices in the long term were likely to rise, and that while there were plans to expand rail service to Elk Grove, it might take a while.

Soon it was time for me to go. I had spent over an hour in Elk Grove, and it was now around 6:30 PM. I still had nine hours of driving ahead of me.

So there you have it – my extremely cursory attempt to take Uncle Sam's vital signs, to see how fast our various diseases are progressing, to discern whether they are as immediately life-threatening as some say. It seems obvious that we are in trouble generally, though some places feel the trouble less than others. When I think of Southern California, it seems to me to be a ruined place, ruined by the land use, development and economic policies of an elite whose sole aim was to make a lot of money without regard to the effects of the means used to make that money. And now this elite is trying to make money from the rest of the country by making the rest of the country like Southern California. Will things hold together long enough for them to succeed? Time will tell.

Meanwhile, although Hurricane Gustav did not do very much damage to oil refining and extraction infrastructure in the Gulf of Mexico, it did do extensive damage to the electrical grid in the Gulf states. This will have the effect of removing over a million barrels per day of petroleum products from American markets for a few weeks. Things could get interesting.

A Dicey Time For A Road Trip

We live in interesting times. I am about to experience some very interesting times this weekend, because I am traveling a thousand miles to visit relatives in Southern California. And I am traveling by car. Some may ask why a man who believes that the worldwide peak of oil production is happening now would choose to travel by car – a man who is the author of a blog with a title like “The Well Run Dry.”

I would have liked very much to travel by train – after all, it may well be the most environmentally friendly way to go. But President Bush has bled our nation's passenger rail system nearly dry. An Amtrak trip would take over 29 hours. I suppose I could have flown, but airlines have been getting squeezed hard in recent months by high fuel prices, and have been implementing many cutbacks in order to maintain some semblance of profitability. I fear that the CEO's and boards of directors who are responsible for airline profits may have extended their cutbacks even to such things as aircraft maintenance. I don't want to find out firsthand that my suspicion is right. By the way, if any of you are planning to travel by air this weekend, here's some comforting reading: “Airline Removes Life Vests To Save Weight, Fuel,” Associated Press, 28 August 2008, http://www.msnbc.msn.com/id/26440567/.

In my last post, I mentioned my suspicion that world daily petroleum production figures published by the International Energy Agency and the United States Energy Information Administration are perhaps being artificially inflated, and that world petroleum production may now be faltering. I also mentioned news articles coming from Saudi Arabia which indicate that the Saudi oil industry may be shorting Saudi citizens in order to give the appearance that Saudi Arabia is producing more oil than it actually is. Well, there has been more interesting news out of Saudi Arabia this week – yet another article quoting a Saudi Aramco official denying that there are any shortages of fuel. Of course, the official's actual words were, “The Company has not reduced quotas to authorized clients.” (Zawya, 25 August 2008, http://www.zawya.com/Story.cfm/sidZAWYA20080825044210/secIndustries/pagOil%20&%20Gas) Are some clients unauthorized? Are these unauthorized clients the ones who can't find diesel fuel?

Speaking of shortages, there are reports of fuel terminals in North and South Dakota and Minnesota running dry. North Dakota has experienced spot shortages in late summer and early fall for at least two years in a row. (Minneapolis Star-Tribune, 27 August 2008, http://www.startribune.com/local/27550659.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aU7EaDiaMDCiUT). And this week's EIA Weekly Petroleum Inventory shows U.S. commercial crude oil and refined petroleum stocks continuing to drop.

It also seems that our ever-vigilant and very talented U.S. spy/intelligence agencies have detected a possible link between Venezuela and the Islamic group Hezbollah. Apparently, U.S. government spokesmen believe that Hezbollah is using Venezuelan sites for terrorist training and targeting South American Jews, and that Iran is backing Hezbollah activities in Venezuela. It must only be a strange coincidence that both Venezuela and Iran have oil, and that the U.S. is very hungry for oil... (“Hezbollah Presence In Venezuela Feared,” Los Angeles Times, 27 August 2008, http://www.latimes.com/news/nationworld/world/la-fg-venezterror27-2008aug27,0,3877203.story)

Lastly, there is a powerful and increasingly dangerous hurricane bearing down on the Gulf of Mexico, with at least three other storms behind it. It is quite possible that Hurricane Gustav could rival Katrina in destructiveness, and could destroy or damage many offshore oil platforms and onshore Gulf Coast refineries. If that happens, fuel prices in the US may well skyrocket, and North Dakota will by no means be alone in experiencing fuel shortages.

All in all, it's quite a time to be undertaking a road trip. I hope I make it to Southern California and back. If I see anything interesting along the lines of our present national difficulties, I may take a few pictures for my next post. Stay safe this weekend.

A Safety Net Of Alternative Systems - Skills and Time

First, a bit of news. I mentioned in my last post that I believe that the world oil supply situation is being gamed by major players to mask the reality of constrained oil supplies. I had also previously mentioned that after Saudi Arabia's recent promise to increase oil production, a news story surfaced that stated that certain regions in the north of Saudi Arabia were running low on diesel and refined petroleum products for consumers, even though the Saudi Aramco, the state-owned oil corporation, denied that shortages were occurring. This implied that the Saudis were boosting their “official” production figures by shorting some of their own citizens, in order to have more oil to export, since they probably could not raise production.

On Monday, 18 August 2008, another story was published confirming that shortages were actually occurring, and featuring hasty explanations for the shortages from Saudi Aramco officials. Check it out at http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentID=2008081814716.

This is more evidence that world petroleum production may be past peak and in decline, and that reporting of production numbers is being deliberately fudged. I expect that we will be seeing more news stories of fuel and petroleum product shortages appearing in surprising places like Saudi Arabia as time passes.

I want to talk a bit more about the sort of adjustments that may help to prepare for life on the downside of Hubbert's Peak. Again, I do not claim to be an expert, nor a terribly deep or original thinker (though I think some of the ideas presented in today's post may be new to readers). As I mentioned last week, the first step is to fully acknowledge and admit to oneself that a drastic change is coming, and that life is about to get a lot harder. Part of the preparation for such a change is to be willing to learn to do without many of the conveniences that cheap energy, cheap consumer goods and cheap credit have brought to us.

But another part of preparation involves acquiring things that really are valuable in preparing for this new way of life. Those two things are time and education. The aim of this “education” should be to equip oneself with new skills that are useful in a time of economic decay and uncertainty, the skills of self-reliance and learning to be a maker or provider of things or services that are essential. In short, if our present official system is breaking, we must take time to learn to build alternative systems. Portfolios of skills will vary from person to person, depending on what each person thinks our energy-depleted future will look like.

Some believe that a world of declining oil production and increasing climate change will descend quickly into chaos, that civilization will end abruptly and soon, and that we will all suddenly be thrown back into a primitive, lawless existence like characters in a science fiction movie. (This scenario looks a lot like what some people were predicting regarding the Y2K computer issue.) Others believe that we will simply slide gradually into a worldwide depression that simply keeps getting worse each year. Yet others say that advanced society, especially the West, and particularly the United States, will follow a trajectory of decline similar to that of the decline of the Roman Empire, and that the whole decline will last several centuries.

I'll be the first to admit that I don't know which of these scenarios is most likely. A lot depends on the rapidity with which oil and other resource production declines, as well as the rapidity with which the Earth's climate is disrupted by manmade changes. However, I do think that the United States at least is in for some very disruptive events over the next few years, events which will drastically diminish our power and wealth as a nation and force us to live within our means. When that happens, we will see how much our means are reduced because we squandered those means.

I think things may be better for a while in the rest of the West, namely Europe, Canada, Australia and New Zealand. But I believe that worldwide oil production will decline rapidly each year, causing disruptions in other Western nations. And Asian economies will be disrupted by the collapse of globalism as their customers evaporate. The only nations that may do well for a time will be the nations that are now net exporters of petroleum. But these conclusions don't even begin to take into account the shortages of resources other than oil which are now appearing.

Since I can't tell how far or how fast the impending changes will go, I have decided to hedge my bets a little. I haven't quit my day job to go back to nature. But I am trying to acquire the skills which I believe would be useful in the coming uncertain times. One obvious skill is growing vegetables. This year I learned quite a bit about growing things in the Pacific Northwest. One must be much more careful about some things here than one would need to be in Southern California, because here we have seasons. Last winter, I attended a one day workshop in yarn-spinning. I was the only male in the class, and almost no one got it when I explained why I was there ;). I found out that spinning is a lot harder than it looks! This weekend I will attend a class on making solar ovens and a class on home food preservation.

And I am beginning to form a systematic approach to picking what skills I should learn. In my mind, those skills should fall into three groups: first, learning to be self-sufficient as much as possible; secondly, learning to make things from scratch or fix things that wear out; and third, learning basic service skills to meet special human needs. Skills in the first group involve what used to be called “home economics.” Skills in the second group would be useful if cheap imported manufactured goods suddenly became unavailable. Skills in the third group might include everything from the obvious choices of frontier health care to such things as transportation by sailboat or long-distance communication via simple radio sets. I think a person who is known to have such skills will be more highly valued by his neighbors when things get difficult, and may have an easier time than someone who is unskilled. And there are craft and hobby clubs and enthusiasts who are happy to teach these skills now, even though many of them are still viewed as no more than a hobby.

But learning such skills, even as mere hobbies, takes time. Time is one thing that in short supply for many Americans, saddled with debt as they are and working long hours just to keep ahead of the bill collectors. This is why I believe that a key to adjusting to the times now coming upon us is to get out of debt. The best way to get out of debt is to lower one's desires until they are in line with one's income, rather than being sucked by advertising into hyper-consumption. Once a person is debt-free, he discovers a shocking secret: that the 40-plus hour workweek is not mandatory. This frees up a great deal of extra time to pursue things other than a job.

And it is something that is possible even for career professionals. I first heard about part-time professional engineers in 2004, when I met a woman who was married with children and who had negotiated a deal with her employer for a part-time week with the same benefits as a full-time employee. I think only her vacation time was reduced. Now it is true that she had proven herself to be a valuable, knowledgeable asset to the company, which is why they were willing to negotiate such a deal with her. But when I switched jobs, I met a few other people, both men and women, who had been able to work out deals with their employers for part-time professional positions (some companies call these “modified full-time” positions).

This year, I took the plunge and asked to be placed on part-time professional status. It has been an interesting experience so far: while at work, I am usually in overdrive because I am trying to do 40 hours' work in the space of 30 hours, but I can also do work on the bus/train rides between work and the point where I begin my bike commute home. And I have two and a half extra hours for myself each evening. I realize that the arrangement will work only so long as I show my employers that they are getting extra value for their dollar with this arrangement. I'll keep you posted on how it's going.

In short, Hubbert's Peak means that the present global system known as the “official economy” is in danger. Therefore, to adapt, we must each begin the work of building up safety nets of alternative systems. But this takes time. A key to adapting, therefore, is for people to reduce their dependence on the official system by reducing their debt load as much as possible so that they may have time for the learning of alternative skills.

The Importance of the Timing of Peak Oil

On 6 August 2008, the United States Energy Information Administration (EIA) released its latest International Petroleum Monthly report, which tallies world oil production for a given month. The latest EIA production figures shown in any given report are usually for a monthly period ending two months before the release date of the report, so this latest issue contains data for May 2008. According to this latest report, world petroleum supply averaged 86.05 million barrels per day in May of this year, which is a new record according to the EIA. World crude plus condensate production during May averaged 74.48 million barrels per day according to the same report, which is again a new record, passing the May 2005 record of 74.266 million barrels per day. In addition, this week OPEC issued its Monthly Oil Market Report, which estimated that world oil supply in July 2008 averaged 87.37 million barrels per day – again, a sign of growing petroleum supply. The release of these figures may be a contributing factor in the continuing slide in the price of oil and petroleum products.

However, some analysts have taken exception to these numbers, asserting that they may be overly optimistic. Gail Tverberg, a member of the Oil Drum staff recently wrote an article which questioned the reliability of initial EIA estimates of world production (“May 2008 EIA Oil Production Record. Will It Too Be Revised Downward?”, http://www.theoildrum.com/node/4386). She pointed out that these initial estimates are usually revised downward by the EIA as time passes, and noted discrepancies between EIA production figures for various countries versus what those countries stated as their actual production. She also pointed out the potential political motivations for the EIA to be less than accurate in telling what is actually going on with oil production. Others have analyzed the discrepancies between the EIA and OPEC numbers for specific countries and have noticed a rather fishy smell (see comments on today's “Drumbeat” section of the Oil Drum website). There is also at least one bit of anecdotal news that indicates that an oil exporting country is shorting its own citizens so that it can send more oil to the US.

I want to suggest (and I am not the only one suggesting this) that the present oil supply and oil market situation is being “gamed” by several powerful key players in order to give the false impression that there is no longer an oil supply “crisis.” This campaign of dishonesty is being aimed chiefly at the West, and specifically at the United States. Why the US? Because the US is still the most powerful nation on earth militarily, and because it is also still the world's most significant economic agent. That supremacy is increasingly resting on a foundation of deception, smoke and mirrors, but while it lasts, the US is a force to be reckoned with.

And this is a Presidential election year. The corporatist powers who actually control the governments of this country know how key a player an American president is in their plans, and will do all they can to install a president who is friendly to their interests. If the American people were to wake up to the actual precariousness of this nation and the magnitude of the mess our leaders have made for us, they might begin to demand the sort of radical changes that would threaten the corporatists.

To a lesser extent, the governments of some of the oil-producing countries are also interested in gaming the system, in order to prevent a large portion of Americans from having to suffer actual petroleum shortages, thus preventing the rise of an American neocon initiative to take over foreign oilfields the way Iraqi fields were seized.

All this means that it is more important than ever to search out the truth about present world oil production, so that we may know what to expect and be prepared to deal with it. I acknowledge a debt of gratitude to Jeffrey J. Brown, a registered Professional Geoscientist in the State of Texas, and to Dr. Samuel Foucher, a long-time oil production analyst. Because of their work and the efforts of others who posted valuable information on the Internet, I went from near-total ignorance of the true nature of our energy predicament to wide-awake alarm within the space of a few months. My awakening had been preceded by growing unease from 2005 to the beginning of 2007, like the unease of a sleep disturbed by an increasingly upset stomach. But it was in the first few months of 2007 that I truly came face to face with the reality of Peak Oil. That awareness has led me to some rather drastic lifestyle adjustments.

But Mr. Brown recently commented that the timing of the worldwide oil production peak is not as important as other issues which we are facing, such as the ongoing and accelerating decline in net world petroleum exports. Here I must respectfully disagree (and I invite him to correct any deficiency in my knowledge, since he knows much more about this than I do). Knowing the timing of the peak and the actual shape of the world oil production profile is very important, because the major controlling figures who run the global “official economy” are closely watching this very issue. I believe that many of them know that Peak Oil will be a severe threat to their status and the continuation of their economic empires, and that they also know that it's in their best financial interests to keep this knowledge from the masses for as long as possible. Therefore, as petroleum supplies become ever more constrained, they will continue to try to game the system, suppressing naturally-occurring market signals regarding supply and demand for as long as it's in their interests to do so. When they finally pull the wool from our eyes, we will surely be confronted by the sight of an economic system that's broken beyond repair for all but the very rich.

So we will need to devise other means for validating whether the world is in fact at or past peak. One bit of data that's still relatively reliable is the EIA Weekly Inventory Report of US commercial crude oil and petroleum product stocks. The EIA Weekly reports for the last three weeks have shown a steady decrease in finished gasoline stocks. This has been due to rising demand caused by lower prices. US crude oil inventories haven't moved from the 295 million barrel range. This seems to show that oil and gasoline prices have fallen because of a perception of reduced demand, and not because of any new supplies. Those who have skills in building complex mathematical models can come up with other means for determining the true state of world oil supply. And we can always look at obvious signs, such as news stories of refinery shutdowns or shortages around the world. Personally, I think we see the beginning of another price spike within the next month. One can't game the system forever. Keep your eyes open!

* * *

I want to start talking about preparations for a post-Peak world. I've been meaning to get onto this subject for a long time, but I keep getting distracted by juicy news stories from the oil patch. In my discussion, I intend to move from preparing yourself as a person to preparing your community (at least those closest to you). These thoughts are just what has occurred to me; others have thought much harder and more deeply, and for a longer time on this subject. As I find time, I will post links to some of their writings. One thing I will soon discuss is the use of appropriate technologies for a post-Peak life (i.e., should I buy solar panels? Should I buy a spinning wheel? How about a portable generator? and so on).

The first thing that occurs to me regarding a post-Peak life is facing the near-certainty that you will have to live such a life. Our economy and society have been built on certain assumptions – the assumptions of ever-increasing technological advancement, convenience, comfort, and prosperity.

These assumptions are about to be overturned.

But facing this reality is a very difficult thing to do for many people. One Peak Oil writer has compared the process of facing the threats of Peak Oil and climate change to Elizabeth Kubler-Ross's portrayal of the process of facing death, with its five stages: denial, anger, bargaining, depression and acceptance. Most of America seems to be in the denial stage, as seen in the sales of tabloid magazines at supermarkets, the viewers of reality TV series, and the willingness to listen to corporate media slaves repeating their masters' assertions that everything will be all right. Some people are angry – especially those who have a vested financial or political interest in suppressing the truth of our predicament. But there are also bargainers. I am an engineer and I can tell you that engineers are some of the biggest bargainers around. Their bargaining consists of the unshakable faith that technology will somehow save us from having to live on less, from having to live a more difficult life than we have been used to (Read some issues of the IEEE Spectrum to see what I mean). All I can say is, Dream on!

If one is willing to accept the probability that life is going to get much more difficult, then one can begin to take inventory of all the conveniences he or she enjoys right now due to technology and cheap energy. Then one can begin to make plans for living without some of these conveniences. For instance, living in a time of expensive natural gas or fuel oil might mean learning ways of living without either during the wintertime. Living in a world in which many of your needs must suddenly be supplied by the power of your own muscles is easier if you have prepared beforehand by getting in shape. In other words, the first preparation you can make is to bravely face the future, take inventory of all of its implications, and then begin to harden yourself to be able to cope with it.

Some practical steps might include the following:

1. Learn to commute by bicycle. By commuting I don't mean recreational rides, but rather, going to places you need to visit in order to do necessary weekly activities. Gradually increase the percentage of your commuting per week until it's over 75 percent of your total commuting.

2. Train your body to be comfortable with the thermostat of your house turned down to 60 degrees F or below.

3. Work out regularly to build your strength and endurance. Make your workouts something that you can do at home, without having to drive to a gym.

4. Regularly put yourself into situations in which you must do without your usual comforts. Go camping – in a tent, not in an RV – in all kinds of weather. Learn what works in such situations, and what doesn't. If you feel really adventurous, go bicycle camping, and skip the drive altogether!

5. Learn to live on half of your present income, in the expectation that you may one day be forced to do so.

See if you can add a few suggestions of your own to this list. And tell yourself that you will learn to succeed in facing this challenge. Difficulty does not have to equal hopelessness.

The Numbers Tell The Story, Part 2

Just read this on yesterday's "Drumbeat" section at the Oil Drum website:

Retail Chain Store Closures in 2008:
Ann Taylor closing 117 stores nationwide.

Eddie Bauer to close more stores after closing 27 stores

Cache, a women’s retailer is closing 20 to 23 stores this year.

Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide

Talbots, J. Jill closing stores. ... all 78 of its kids and men's stores plus another 22 underperforming stores.

Gap Inc. closing 85 stores

Foot Locker to close 140 stores

Wickes Furniture is going out of business

Levitz - going out of business... The retailer dates back to 1910.

Zales, Piercing Pagoda plans to close 82 ...followed by closing another 23

Disney Store owner has the right to close 98 stores.

Home Depot store closings 15... It is the first time the ..has ever closed a flagship store.

CompUSA (CLOSED).

Macy's - 9 stores closed

Movie Gallery – video rental company plans to close 400 ...in addition to the 520 locations the video rental

chain closed last fall as part of bankruptcy.

Pacific Sunwear - 153 Demo stores closing

Pep Boys - 33 stores of auto parts supplier closing

Sprint Nextel - 125 retail locations

J. C. Penney, Lowe's and Office Depot are all scaling back

Ethan Allen Interiors: plans to close 12 of 300 stores to cut costs.

Wilsons the Leather Experts – closing 158 stores

Bombay Company: to close all 384 U.S.-based Bombay Company stores.

KB Toys closing 356 stores

Dillard's Inc. will close another six stores this year.

Another item: US Bank Failures in 2008 (so far):
25 January - Douglass National Bank ($58 million in assets)

7 March - Hume Bank ($18.7 million in assets)

9 May - ANB Financial NA ($2.1 billion in assets)

30 May - First Integrity Bank ($54.7 million in assets)

11 July - IndyMac Bancorp ($32.01 billion in assets)

1 August - First Priority Bank ($259 million in assets)

This is only a partial list of failed banks. A more complete list can be found at the FDIC website, http://www.fdic.gov/bank/individual/failed/banklist.html.

The money well seems to be running dry...