The Peak Oil Crisis: Storm of the Century

Written by Tom Whipple
Thursday, 27 December 2007

A “Perfect storm” refers to the simultaneous occurrence of events which, taken individually, would be far less powerful than the result of their chance combination. Such occurrences are rare by their very nature. -- Wikipedia
In recent weeks we have been bombarded with reports of perturbations in the mortgage/liquidity crisis that is creating havoc in the financial world.
The travails of the “financial industry”, as it is called these days, are affecting oil prices at least as much as the normal forces of supply and demand.
Commentary on what is about to befall us is becoming scarier with each passing day. Learned professors are writing in the New York Times that our financial system is in danger of coming unglued. The general thesis is that America’s financial institutions are only capitalized at $1.1 trillion yet they are supporting $11 trillion worth of mortgages. Home prices are going to have to fall by 30-50 percent before most people can afford to buy homes again. When this drop in housing value is over, some 20 million homes will be mortgaged for far more than they are worth and a fair portion is likely to be abandoned. Some think the banking system is in for some very hard times. Others have dubbed the burgeoning financial crisis “peak money.”
But there is more: global warming seems to be causing unprecedented droughts and glacial melting which in turn are leading to lower food production and empty reservoirs and a substantial drop in hydro-electric production around the world.
Welcome to “peak climate,” “peak food,” “peak water,” “peak electricity,” or as some people are putting it, “peak everything.”
Some parts of the world are pumping so much fossil fuel emissions into the air that they can barely breathe. Perhaps they are reaching “peak air?” Then there are worries about the world’s carrying capacity –- “peak people?”
There is no question that a lot of bad things are about to happen –- more or less simultaneously. If some “peaks” we can see looming ahead occur at the same time, they will reinforce each other leading to a far more serious situation than if they occurred decades apart where they could be dealt with separately. Simultaneous shortages of fuel and water in the same area would have serious consequences as large resources would have to be devoted to providing life-sustaining water supplies, putting additional pressure on oil supplies and prices. If the drought in the Southeastern U.S. continues much longer, Atlanta may be the first large city in the U.S. to experience this phenomenon.
Other peak situations cut both ways and may have unforeseen and unintended consequences. Food grain-based biofuels (peak oil vs. peak food) should in theory help to mitigate the peak oil situation but is contributing significantly to peak food and higher food prices. The amount of corn-based ethanol being produced today is making a minimal contribution to keeping down oil prices while resulting in much higher food prices. Increases in fuel and food prices are starting to result in significant inflation which in turn is complicating efforts to deal with peak money.
The timing of the various peaks will have a lot do with how they interact with each other. Serious consequences from global warming (peak climate) is usually thought of as being many years ahead, but if the Georgia drought turns out to be a consequence of global warming then massive economic damage from global warming may be closer than many imagine.
Keeping in mind that as yet unimagined interactions and consequences of the various peaks may arise, at the minute it seems that a major financial crisis and peak oil will set in during the next few years. The interaction of these phenomena will be complicated. At times they will mitigate each other and at times will reinforce the troubles. Currently the consensus of the global market is that as prospects for a recession improve, oil prices deserve to go down based on an eventual drop in demand. In recent weeks, we have seen nearly every governmental attempt to deal with the liquidity crisis in the U.S. and Europe resulting in surges in oil prices in hopes they will be successful.
The interaction of declining oil supplies and a world monetary situation out of control would seem to have the most potential for serious trouble in the immediate future. Newspapers, magazines and the cybersphere are filling with stories by credentialed and knowledgeable people saying that a financial meltdown has already started and that the situation will get much worse in the next year.
Current evidence suggests that at least in the U.S., Europe and China the demand for oil will continue to remain high until completely overwhelmed by economic difficulties. With the world’s population increasing by 76 million each year, the demand for food is unlikely to subside and prices are likely to increase – food-based biofuels production or not.
Thirty years ago when inflation grew and the economies sagged, we called it “stagflation.” This time the term may be too mild to encompass what seems about to happen. Within the next year our liquidity problems, unsatisfied demand for oil, growing food and water shortages, and other consequences of overindulgence appear likely to merge into an unprecedented economic storm. In the midst of this storm, which could continue for years, world oil production is likely to decline forever and the resources to mitigate the storm are likely to become very scarce.
Someday the events we are all going to live through in the next decade may become known as the century’s most perfect storm.

Write Back

Hi Bryan,

A suggestion. Perhaps instead of the current focused trend on developing so many buildings (hopefully not to the level of certain horribly styled cities as found in many parts of the world, with skyscrapers restricting views and being an eyesore), it would be good to keep the landmark heritage buildings in Wellington as well as gardens (like Christchurch has had the foresight to do), instead of overdeveloping Nature which contributes to the ecological imbalance. Plus not everyone wants to live in small confined apartments as as been suggested by certain people.

If someone is sincere about climate change and protection of the environment, instead of just giving lip service, people who enjoy gardens and their home environments should be respected too, instead of reading (I think in the last Capital Times) "that most people nowadays prefer apartment living". No so.

Another suggestion that is perhaps easy to resolve is to readjust the clocks of the city. One in particular, on Courtenay Place opposite Reading Cinema, has been constantly 30-40 minutes late for quite some time now. Also, if such clocks could match the clock of transport services like bus and trains, that would be fantastic. We had the unfortunate experience recently of missing the bus, because the bus arrived 10 min sooner than it was due (at Reading Cinemas), and there was no more buses on that direct line. A story worth telling, as the driver was found later on, parked elsewhere and playing with his telephone,(in our view in a hurry to go home on a week-end).

We'd love to use our bicycles, but unfortunately are too high on a hill for the return to the suburb. We also think there should be more buses coming by (at an average of 10 to 15 min instead of every hour during the day), especially on the 22 and 23 route.Well, this is the talk this time. I'm sure there may be more later.

Sorry you didn't get the top job, but thankfully you are still a city councillor.

Have a wonderful Xmas season and till later.

Jo Board Member

http://www.radioheritage.net/

Simone Weil (1909-1943)

Simone Weil (1909-1943)

The French thinker, political activist, and religious mystic Simone Weil (1909-1943) was known for the intensity of her commitments and the breadth and depth of her analysis of numerous aspects of modern civilization.

Simone Weil was born in Paris on February 3, 1909, the second child of an assimilated Jewish family. She received a superb education in the French lycées and the Ecole Normale Supérieure. A brilliant and unusual student, she was admired by some of her teachers and held in awe by some of her peers, while others mocked her for her radical political opinions and the intensity of her convictions. Her political activism and life-long interest in work and in the working class began in her student years.

Following the completion of her Ecole Normale studies in 1931 she taught philosophy for several years in various provincial girls' Iycées. These were years of severe economic depression and great political upheaval in Europe, and Weil's interest in the worker and her passionate concern for social justice led her to devote all of her time outside of teaching to political activism in the French trade-union (syndicalist) movement. She taught classes for workingmen, took part in meetings and demonstrations, and wrote for a variety of leftist periodicals.

At first she shared her comrades' belief in the imminence of a proletarian revolution; soon, however, both her experience within the revolutionary Left and her observation of the international political situation led her to conclude that what had developed in the 1930s was different from anything Marx had expected, that there were no premonitory signs of the proletarian revolution, and that a new oppressive class was emerging - the managerial bureaucracy. Though she was an admirer of Marx, she became a trenchant critic of Marxism, which she accused of being a dogma rather than a scientific method of social analysis. In the last half of 1934 she wrote a lengthy essay called "Oppression and Liberty" in which she summed up the inadequacies of Marxism, attempted her own analysis of the mechanism of social oppression, and sketched a theoretical picture of a free society.