Tag Archives: The Long Emergency

Column: Oil prices will force changes

The StarPhoenixToday’s column in The StarPhoenix

Former CIBC economist Jeff Rubin was one of the first to say that oil would hit $100 a barrel, back when it was around $20. Now he is suggesting it could go to $200 in the next short while unless there’s another global recession.

While many call for more drilling and oil exploration, the world simply doesn’t have the capacity to keep up with demand.

Despite requests from U.S. presidents, OPEC has not been able to meet the supply demands. High oil prices don’t just impact us at the pump, but the previous price of $147 a barrel brought global economic growth to a halt and contributed to a banking collapse felt worldwide.

As prices climb, Barack Obama has authorized a 60-million barrel drawdown from the U.S. Strategic Petroleum Reserve.

He blames Libya, but it’s much more than that. If it were that simple, releasing oil from the reserve would make sense, just as it did after hurricanes Katrina and Ike.

This time the problem is that oil prices were higher than $100 before the fighting started in Libya, and global demand was already in excess of a record 87 million barrels a day. The fact is the world is running low on oil and we haven’t been able to find the capacity to meet the demand. The U.S. military recently expressed concerns that we could see a precipitous decline in worldwide production by 2015. England is looking at gas rationing as soon as 2020.

Despite what some write, the planet isn’t out of oil; we have just taken all the easy-to-get-at oil.

From now on, we will be spending more to reach harder-to-get oil while depleting reserves elsewhere.

A perfect example is the Alberta oilsands, which were not feasible at $20 but now are attracting billions in investments. Yes, we have reserves, but they are expensive to extract.

The good news is that Canada is a global exporter of crude oil. Like many other Canadian provinces throughout history, Alberta’s willingness to scar its natural landscape in the pursuit of resources will ensure there is significant oil for us for years to come. The bad news is that we both sell crude at world market prices, and 60 per cent goes to the United States.

Under NAFTA rules we can increase production; we just can’t stop shipping to the U.S. what’s already agreed upon. In other words, we export the bitumen, give the profits to foreign investors and then get to purchase the refined products. I am not sure that was thought out particularly well.

Saskatchewan has oil reserves – not enough to get invited to OPEC, but more than a billion barrels in the ground in active wells. But the proceeds are sold at market rates, so the scarcity in the world supply will mean tougher times for Saskatchewan residents even if it’s our own oil we are buying.

How much tougher? It affects different demographics differently. For some it will mean no more cheap golf weekends in Las Vegas. For others it means that they can’t put food on their plate or drive to work.

In 2008 Saskatoon saw rents skyrocket and food prices increase significantly. The shelter where I work has a food program largely paid for by the provincial government. It was designed to help families who had more month than they had pay check. In 2007, it served around 40,000 meals a year. In 2008, that number doubled. In 2009 and since then, it has served more than 100,000 meals a year.

A lot of the problem was high rent, but much of it was rising food prices. People kept saying apologetically, "I just can’t make it anymore." That was at $140 a barrel. What’s it going to be like at $200 a barrel?

Every city in North America is in this situation. Designed and conceptualized when fuel was cheap, we built this city to drive in. Circle Drive surrounds us (kind of); Idylwyld, 22nd Street and Eighth Street cut through us.

We have several functioning bridges at any given time. In some ways, at the moment when it feels like we got the answers right, oil and energy prices could change the picture fundamentally.

The good news is that we aren’t the first city that has had to face a reinvention moment. The bad news is not many handled it correctly.

Some more reading if you are interested

Christmas Gift Guide: Gifts for Really Smart People | 2009 Edition

You need a gift for someone smart, someone who wants to know about everything – what happened, how it works, why it all got started. Fortunately, the globally curious have a lot of hobbies which makes them kind of easy to shop for, even if you don’t always remember to sleep and eat.  Below are some ideas for the smart people in your life.  If you are looking for something not so elitist, check out my other Christmas Gift Guides.

Sangean WR-11 AM/FM Table Top Radio :: CBC Radio and NPR sounds so much more profound coming from a wooden radio.  Speaking from personal experience, there is something about sitting around a radio on a hot summer day, sipping iced tea, while reading a good magazine.

Lomographic Holga Starter Kit :: You could get them a DSLR but they already have a digital camera they like.  You could try and get them something a little different and get them a Lomo camera.

The Invention of Air by Steven Johnson :: I blogged about it before and this is a great book out the life and work of Joseph Priestley, the Yorkshire dissenting theologian and chemist, who then went on to emigrate to America and advised the creators of the new republic—Thomas Jefferson, most notably—on how best to run their country.

This is an intelligent retelling of a rather well-known story, that of Joseph Priestley, the Yorkshire dissenting theologian and chemist, and then went on to emigrate to America and advised the creators of the new republic—Thomas Jefferson, most notably—on how best to run their country.

The Long Emergency by Howard Kunstler :: Kunstler has a remarkable look at what peak oil will mean for western society.  Don’t take my word for it, check out this interview in The Morning News and this article over at Rolling Stone before you buy a couple of copies of this book, one for the person you are shopping for, one for yourself, and one to lend to your friends.

Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization by Jeff Rubin :: This is another fascinating look at what the future will look like with higher oil prices.  Globalization is powered by cheap oil and without cheap oil, our world, economy, and the way we live is going to go through a massive transition.  While a lot of books about economics can be dry and hard to get through.  Both the Long Emergency and Why Your World are both very accessible, interesting, and very well written.  They will also make for some fascinating discussion over the breakfast table on Boxing Day.

The BLDGBLOG Book by Geoff Manaugh :: What a wonderful book.  It’s not just a book about architecture, it’s a book that reimagines what urban spaces can become.  The book is more than just text, it is full of fantastic diagrams, graphics, draws, and unbelievable photographs.  I read it once for the content and then read it again and just soaked in the photos and graphics – they are that good.

The Lost Massey Lectures: Recovered Classics from Five Great Thinkers by Martin Luther King Jr., John Kenneth Galbraith, Jane Jacobs, and Paul Goodman.  In case the person you are shopping for has read those, check out, More Lost Massey Lectures: Recovered Classics from Five Great Thinkers

Speaking of great thinkers, if your loved one hasn’t read A Heretics Guide to Eternity by Spencer Burke and Barry Taylor yet, they really need to.  Spencer and Barry received a lot of criticism from some people who were threatened by their ideas but the book offers up an important voice to the conversation about salvation, eternity, and the church.  Plus if the person you are shopping for is really that smart, they can handle new ideas.

While I am a fan of paper, have you thought of giving the gift of ebooks with a Amazon Kindle?  It’s only 10.2 ounces, lighter than a typical paperback.  It downloads books in Under 60 Seconds over the 3G Wireless network.  Despite that, you have no annual contracts, no monthly fees, and no hunting for Wi-Fi hotspots.  It’s battery can run for one week.  You still have to pay per download in Canada but at least we can get it here now.

If you don’t think they want a Kindle, how about Sony’s Digital Touch Reader? By supporting both industry standard formats, ePub and PDF, you can access books at Sony’s eBookstore, check out books from public libraries, access over 500,000 free public domain titles from Google, as well as sharing sites, online aggregators and personal publishers (Internet access is required).

Chess for Three? You heard me right, a three person chess game.  This unique hexagon shaped board is designed for three players putting a new twist on a beloved classic. No new rules; still the same chess you know and love! Set includes board and 3 different colored chess pieces.

Your own personal card cataloging system :: It seems like book thieves are everywhere these days. Even your closest friends will try to keep your rare, out-of-print novels if you don’t keep an eye on them. And no one really wants to pay $60 for another one. Thankfully, there now is a solution to your book-losing woes. The Personal Library Kit provides everything you need for keeping track of books, and an eye on those shameful book thieves.  Of course card cataloging your books is only half the battle, keeping them organized is the second half.  Sure you could use LibraryThing but check out this old school way of keeping your cards organized.

The Complete Collection of National Geographic :: Sure Wikipedia is great but there are things covered in old National Geographics that Wikipedia has never even heard of.  While you are at it, have you considered getting a subscription to magazines like The Walrus, The Atlantic, or the New Yorker?  How about Architectural Digest, New York Times weekend edition, or something else that will feed their mind and inspire great discussions over coffee?

Mark was given a copy of Planet Earth: The Complete Series by the Reimers for Christmas and he loves it.  Not only does Mark love it but so do Wendy and I.  Its a series we will watch again and again and harkens back to the days of Mutual of Omaha’s Wild Kingdom where the entire family gathered around the television to take in the sites and sounds of animals we came to learn a lot about.

I know the commute would be horrible unless you lived in New York City but a membership at Paragraph would be a lot of fun.

Christmas Gift Ideas and Gift GuidesIf I missed anything or if my suggestion made you think I was absolutely crazy, let me know in the comments. You can access the current edition and previous years list of Christmas gift guides here.

The collapse of farming

James Howard Kunstler is predicting that farming could be the next industry to go down

The net effect of the failures in banking is that a lot of people have less money than they expected they would have a year ago. This is bad enough, given our habits and practices of modern life. But what happens when farming collapses? The prospect for that is closer than most of us might realize. The way we produce our food has been organized at a scale that has ruinous consequences, not least its addiction to capital. Now that banking is in collapse, capital will be extremely scarce. Nobody in the cities reads farm news, or listens to farm reports on the radio. Guess what, though: we are entering the planting season. It will be interesting to learn how many farmers "out there" in the Cheez Doodle belt are not able to secure loans for this year’s crop.

My guess is that the disorder in agriculture will be pretty severe this year, especially since some of the world’s most productive places — California, northern China, Argentina, the Australian grain belt — are caught in extremes of drought on top of capital shortages. If the US government is going to try to make remedial policy for anything, it better start with agriculture, to promote local, smaller-scaled farming using methods that are much less dependent on oil byproducts and capital injections.

This will, of course, require a re-allocation of lands suitable for growing food. Our real estate market mechanisms could conceivably enable this to happen, but not without a coherent consensus that it is imperative to do so. If agri-business as currently practiced doesn’t founder on capital shortages, it will surely collapse on disruptions in the oil markets. President Obama at least made a start in the right direction by proposing to eliminate further subsidies to farmers above the $250,000 level. But the situation is really more acute. Surely the US Department of Agriculture already knows about it, but the public may not be interested until the shelves in the Piggly-Wiggly are bare — and then, of course, they’ll go apeshit.

I don’t know if I agree with him and maybe it is the context I am in that governments would allow crops to go unseeded because banks won’t give farmers operating loans.  Nothing would bring bank nationalization on quicker than banks choosing stock price over people going hungry. While I like Kunstler enough to have read almost every book he has written, I tend to think he underestimates our ability to overcome.  Then again I watch more than 10 minutes of CNBC and listen to the talking heads and I wonder if he might know what he is talking about.

More Americans worried about staying warm this winter

It’s a weird time.  The United States may be the most powerful country ever but here we a story about how Americans are worried about how to stay warm this winter.

After she spent the end of last winter shivering in her Belle Vernon, Pa., mobile home, Cindy Cross sought help this summer at a county assistance office. But the 47-year-old nurses’ assistant was told that her $617 take-home pay every two weeks is above the state’s threshold, which is about $15,600 a year before taxes for a single adult.

The approach of winter brings more anxiety. A minimum kerosene shipment of 75 gallons would cost more than half of her paycheck, most of which is already burned by the gas, insurance and monthly payment for the car she needs for the 20-mile trip to work.

By March, she could no longer afford a fill-up, so she bought an electric space heater and spent some nights at a 24-hour McDonald’s.

"I’m basically just asking, asking around, seeing what are my options for this winter," Cross said. "It might come down to the fact that I might leave this mobile home."

I am a little more sensitive to this but when was the last time that North American’s on mass had a hard time keeping warm and seating?  The 30s?  How many people will have to freeze to death before it becomes a priority.

Shipping costs crimping globalization

The New York Times has a good article about how shipping costs are changing production patterns.  I think the article misses the point that this could mean that many of the goods that we take for granted as being cheap are going to cost us more and more over time.  It isn’t just the shipping costs oil effects but almost everything we manufacture today.  While there is a small trend towards localization again, that also means that North American wages are going to have to be factored in.

The cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade, according to a recent study of transportation costs. Big container ships, the pack mules of the 21st-century economy, have shaved their top speed by nearly 20 percent to save on fuel costs, substantially slowing shipping times.

The study, published in May by the Canadian investment bank CIBC World Markets, calculates that the recent surge in shipping costs is on average the equivalent of a 9 percent tariff on trade. “The cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today,” the report concluded, and as a result “has effectively offset all the trade liberalization efforts of the last three decades.”

If I was a low end importer of goods like Dollarama or even Wal-Mart, I would be worried right now.