Peak Oil vs The Military-Industrial Complex

I just wanted to point out to my readers an excellent essay just published by Tom Engelhardt on his TomDispatch blog that seamlessly weaves together post-9/11 trends, including militarization of local police departments, NSA surveillance, the war on terror, wealth inequality and the corrosive effects of big money on American politics. Englehardt, who has been a strong antiwar voice since the buildup to the Iraq War, concludes thusly:

In sum, we, the people, are ever less in control of anything. The police are increasingly not “ours,” nor are the NSA and its colleague outfits “our” intelligence agencies, nor are the wars we are fighting “our” wars, nor the elections in which we vote “our” elections. This is a country walking back nothing as it heads into a heavily militarized future. In the process, an everyday American world is being brought into existence that, by past standards, will seem extreme indeed. In other words, in the years to come an ever-less recognizable American way of life will quite expectably be setting in the west. Don’t be shocked.

Shocked? Hardly. In fact, to a point I agree with Engelhardt whole-heartedly--it is utterly hopeless to expect that America will ever willingly change course from its current trajectory. Ah, but that's the one little thing he's missing: willingly. Because sooner or later the ever-militarizing American future is going to run headlong into the increasingly imminent danger presented by Peak Oil (and resource depletion in general) and the somewhat less imminent but still rapidly encroaching danger of environment degradation and climate change. In short, it will be the physical forces of nature rather than politics which will eventually be America's nemesis.

So how long it that going to take? Well, dear reader, if I knew the answer to that question I would immediately abandon this blog, take the money I've saved up over my lifetime and bet the markets accordingly.

In hindsight, we can now say the peaking of conventional crude oil in the middle of the last decade almost caused a worldwide economic heart attack in the fall of 2008 (via electronic bank runs) that was only halted by the bailouts and trillions of phantom dollars being conjured up and injected by the central banks into the world financial system. At the same time, the initial Peak Oil-related explosion in world oil prices caused an all out effort to exploit unconventional oil and gas through the tar sands, fracking and deepwater drilling that had not previously been economically viable. I think it is safe to say that without all that unconventional production, we'd already be well into the backside of Hubbert's Curve and the catastrophic economic collapse many Peak Oilers anticipated back in 2008 would already be well underway.

So where does that leave us? Well, instead of oil being increasingly scarce and gasoline shooting to $10 or more a gallon domestically (as so often breathlessly predicted), we instead have a bizarre situation in which the price of the world's most important resource is now dramatically whipsawing up and down while the central bankers continue to inject their largess into the financial system. Given the insane levels of debt, sovereign and otherwise, all over the world all that is preventing if not collapse at least extreme economic chaos is continued faith in the system. And that faith in the system remains unshakable for the vast majority of the population. Not surprising, really. What other choice do they have?

What we're left with is a horrible situation in which those of us who oppose America's ever more unjust big business, war and empire policies (and, relatedly, abhor the massive destruction being wrought upon the natural environment) are left with the grim realization that the only way those policies will ever be reversed is via a worldwide economic collapse that will ultimately result in the deaths of hundreds of millions if not billions of people. And it WILL be a worldwide collapse--the global economy is far too interconnected to enable any country to escape it once it really gets rolling. The most chilling sights I saw on my cruise were the numerous giant container ship docks we anchored near and the continuous stream of such ships transiting the canal, piled high as they were with all manner of boxed up goods. Seeing that massive volume up close served as a reminder that it is virtually impossible for anyone these days to truly "unplug" from it all.

That said, anyone with any sense should not be actively rooting for economic collapse (though I'll admit I can certainly understand why one might be tempted to do so). But as Tom Engelhardt so conclusively spells out, even without a collapse in the near term future that future is going to be quite grim indeed.


Bonus: "Hubris and greed...let the fossil fuels burn. No way to keep the wings in flight...when the turbine engines don't move"

Where I Stand on Economic Collapse These Days

Well, damn, here it is nearly two full years since my unfortunate enforced break from blogging and the economic collapse that had been one of my favorite subjects hasn't happened yet--nor does it appear to be at all imminent. In fairness to me, back during the epic debates about slow versus fast crash circa 2008-2009 in online Peak Oil forums, particularly the old Life After the Oil Crash forum, I was firmly in the camp with the slow crashers, stating at the time that I thought America (and by extension the modern Western world) would limp along until some time in the middle to late 2020s before the bottom really fell out. I still see no reason to alter that prediction, though I will admit that the oil industry has been far more successful in exploiting so-called "tight" oil fields like Bakken than I ever expected. Thanks largely to oil shale exploitation and fracking, America is right now experiencing an oil "boom" that has the cornucopians confidently predicting that we will soon surpass Saudi Arabia and Russia as the world's top oil producer.

Other Peak Oil writers such as John Michael Greer have done a terrific job of explaining why the fracking industry is just another massive economic bubble waiting to pop and kick the economy in the balls once again. I won't rehash all of their excellent work, other than to point out that if fracking was really going to "save" a highly hydrocarbon dependent economy built on the premise of cheap oil forever, how come gasoline has been priced at well over $3.00 a gallon for several years now?

I mentioned in yesterday's post that the first minute cracks are beginning to appear in the foundation of America's body politic that are indicators of a coming political disintegration such as James Howard Kunstler first suggested in The Long Emergency. And if one casts their gaze overseas, one can see even more evidence that political disintegration is becoming even more of a word wide issue as more and more nation-states, many with artificial borders created by the Western imperial powers in the previous century, are beginning to break down or otherwise fail.

Somalia turned out to leading indicator by collapsing into total anarchy back in the early 1990s. Congo followed suit a few years later with a multisided, internal war starting after it's despicable dictator, Mobutu Sese Seko, fell in 1997 that was so deadly it claimed the lives of millions and has even been referred to as the Great War for Africa. Moving forward, South Sudan finally separated itself from the fanatical Islamic freaks running the show up in Khartoum, only to almost immediately disintegrate into its own nasty little civil war. Ukraine is in flames as ethnic Russian separatists battle that country's puppet NATO government for the right to succeed, and now ISIS has risen up from the wastelands of Syria and Iraq to erase the border between those two countries as it battles for control of both of them. Heck, even Scotland is about to take a vote as to whether to become independent from the UK and as of this writing the outcome is expected to be very close one way or the other.

What every one of these conflicts have in common is that each are fueled by the desire of a whole lot of people to not want to be governed by anyone who is not of the same ethnicity, tribe or religion (or even a different sect within the same religion) as they are. Can't we all just "get along?" that great philosopher and poet, Rodney King, once supposedly asked. Sorry, Rodney, but the answer would appear to be, "fuck no."

For me the most interesting recent development here at home was that public opinion poll a couple of months ago which showed that Americans were at their most politically divided since just before the Civil War (or the War of Northern Aggression for you Southern patriots/separatists out there). Which I know is true, but I nevertheless have to shake my head in amazement at just how successful the power elite's divide-and-conquer strategy has been in this country since Reagan first got elected 34 years ago.

It's quite brilliant, really. For a generation-and-a-half, wages and quality of life in this country have been under relentless assault by a tiny group of billionaires and Wall Street tycoons who use their fortunes and control of the vast media empires to manipulate the election of a combination of rabid Republicans and compliant corporatist Democrats. This unholy cabal has done a brilliant job of manipulating everyone not in their own tax bracket into getting all foaming at the mouth about issues such as gay marriage, the pledge of allegiance, flag burning, abortion, contraception, etc., that they personally couldn't give a flying fuck about just so long as there is no political interference in their efforts to offshore jobs, slash wages, cut benefits and pauperize virtually every American worker but for a small cadre they need to carry out their bidding. Every once in awhile I get the perverse desire to stand up and slowly applaud at the sheer successful audacity of it all.

But it won't last forever. Sooner or later the scum that has risen to take total control of America will begin to lose their grip, mostly because they are so damn greedy that they don't seem to realize that a smarter strategy that would allow the party to last a bit longer would be to temper the looting of the economy ever so slightly and throw a few more crumbs to the lumpen proletariat. Thanks to their mass media lapdogs the idiots are compliantly eating the scraps out of their hands, but what happens when all the idiots have their flat screen teevees repossessed?

Given the above, I'm starting to believe that America may pull itself apart politically even before oil production plummets, although all the NSA spying and militarization of local police departments prove that the elites are going to do everything they can short of sharing the wealth to prevent it from happening. Thus am I standing by my prediction of the mid-to-late 2020s as a likely dates for collapse to really be underway, which would put it happening just after the end of Hillary's second term.

And if I'm wrong and the cancer hasn't yet come back and killed me, you can feel free to drop by here and mock me all you want.


Bonus: "It's shite being Scottish."

Games Governments Play

image: former 1960s hippie chick greets former Khmer Rouge practitioner of genocide

My recent visit to Cambodia rekindled my interest in beleaguered country (even if I did not personally get to witness much of its beleaguerment), and since I got home I've been reading a copy of Cambodia's Curse, a recently published history written by journalist Joel Brinkley. Through hundreds of interviews with Cambodian citizens and politicians as well as westerners who have recently worked in or served in country, Brinkley meticulously details how the Cambodia people have been repeatedly abused and sold out by their own corrupt government and venal national politicians even after the hideously evil Khmer Rouge movement passed into the dustbin of history.

The book's primary focus is on Cambodian Prime Minister Hun Sen (pictured above with Hillary Clinton), a true Machiavellian dictator who has effectively run the country since 1985. Sen was originally an officer in the army of the genocidal Khmer Rouge who defected to Vietnam about a year before the invasion that drove his previous patrons out of power. Installed as a communist Vietnamese puppet in 1985, Sen has somehow managed to survive the withdrawal of the Vietnamese army, the fall of the communist bloc and intractable opposition from anti-communists in the U.S. government to remain in power for more than a quarter of a century. Like most strongmen in charge of the world's poorest countries, Sen and his cronies have dedicated themselves to stealing everything that isn't tied down, including pocketing vast amounts of foreign aid money along with the proceeds from the illegal clear cutting of the country's few remaining hardwood forests. All the while, the vast majority of Cambodians suffer from abject poverty, malnutrition and among the highest rates of infant mortality in the world.

There are a couple of anecdotes in the book that struck me as being particularly relevant to those of us living in the west who have watched as our own governments have become gradually more corrupt and unaccountable to the citizenry. One involves Sen's habit of routinely having his thugs toss live grenades into opposition rallies and then having his police blame the opposition for the attacks claiming that they benefitted politically. The other is Sen's repeated promises to foreign aid donors to pass anti-corruption laws, promises he then conveniently forgets as soon as the aid money comes rolling in, which it always does. Both of these tactics are so ham-handed and obvious that a fifth grader should be able to see through them. And yet Sen's regime continues to do them repeatedly because, guess what, they succeed in achieving his ends.

I wrote in yesterday's post that one of the big mistakes made by many in the peak oil community in the wake of the 2008 oil price spike and subsequent market crash is assuming that governments will not do literally everything they can do to avoid a fast collapse. And while Americans might be tempted to smugly believe that their own government is too "civilized" to ever stoop to tactics like grenading its own citizens in order to maintain power, I would merely ask whether there is any real moral difference between that action and the drone missile campaigns, the assassination of American citizens without trial or the maintenance of a concentration camp in Guantanamo Bay. What is particularly odd is that I was able to purchase my copy of Cambodia's Curse for $8 in a market stall in Siem Reap, despite the book's rigorous lambasting of Sen. That tells me that just like in America, the Cambodian government believes people who actually read and know what is really going in the world are such a tiny isolated minority as to no longer pose a threat worthy of the expense of suppressing them.

To date, most of the actions governments have needed to take in response to the world wide financial crisis have been in the financial arena. There is no reason to expect, however, that more forceful tactics will not be employed as the long emergency drags on. The abuse of Occupy protesters by police around the country serves as a mere hint of what is likely to come in the future. Many in the peak oil community thought that the market crash of 2008 was beginning of the end, whereas I would humbly assert that the response to it was in fact the opening salvo of a dirty war against reality that will be going on for a very long time.


Bonus: "But I found out only two years ago that we don't live in a democracy"

Where the Peak Oil Community Got it Wrong

So, here we are roughly four years after the first huge peak oil-related spike in oil prices helped trigger a major market meltdown and nearly caused the world's banking system to seize up. It was quite a scary time for me personally...not only did it seem like some of the more dire peak oil prophecies of a fast collapse of civilization were about to come to pass, but I had also just suffered a total ACL tear in my left knee and was worried about being crippled just as the crisis was coming to a head.

Flash forward four years later, and not only are corporate profits soaring, but the stock market is back to pre crash levels. There are still many ominous economic storm clouds on the horizon and much of the damage from the crash has been merely papered over, but each time it looks like another crisis is about to unfold our economic overlords pull another rabbit out of their hat and "save" the day. Just how long they can keep it up is anyone's guess, but still the question must be asked by those of us in the peak oil community: how is it that more than four years after world oil prices spiked to $147 dollars a barrel our industrial civilization has thus far managed to weather the storm as well as it has?

Quite obviously, many of the predictions made by members of the peak oil community back in the wake of the 2008 price spike and crash were wrong, even if peak oil theory itself remains valid. It is only by analyzing what we got wrong that we may strive to try and avoid making such erroneous predictions in the future. This list below is by no means intended to be comprehensive, but merely represents some of the predictions made by peak oil analysts four years ago that have turned out to be incorrect.

1). The "bumpy plateau" will be short lived and world oil production will soon go into inexorable decline.

World oil production appeared to hit a peak in the spring of 2005, and despite rapidly rising prices did not increase for the next three years. For peak oil adherents this appeared to be the proof they were looking for that the theory was correct and that the world had entered the "bumpy plateau" period, and indeed now more than seven years later production is still mired near 2005 levels, particularly if we just consider crude oil and not "total liquids."

Where many peak oil commentators got it wrong was in predicting that the plateau would be a short lived phenomenon. The chart above from The Oil Drum was one of the scarier ones floating around during the 2008-2009 time period. The theory behind it was that rapidly declining Energy Returned on Investment (EROI) was going to cause oil production to decline just as rapidly...indeed according to the chart, we should already be seeing a dramatic reduction in world oil supplies. As we all know in hindsight, this has not happened.

A somewhat more sober view from peak oil analyst Tom Whipple predicted that oil production would start to decline in 2014. Whipple still has another year or so to see whether he was correct in that assertion, but it is looking more and more like he is going to miss the mark as well. More recently, Dave Cohen of Decline of the Empire blog has predicted that the plateau will last at least through the end of this current decade, which seems far more likely as producers pull out all of the stops to keep the pumps flowing for as long as possible.

2). Oil prices will soon reach $200, $250, $300 or even more.

Remember all those wild predictions that were made right around the time oil made its first foray into triple digits prices? Ten dollar gasoline seemed to be right around the corner and Mad Max would no doubt come riding over the horizon not long after that. To his credit, peak oil writer Charles Hugh Smith predicted in May 2008 that oil prices spiking to $150 would crash the economy, causing oil prices to crash as well...a mere two months before that actually happened. But even Smith then predicted that oil would shortly resume its relentless upward march towards an unthinkable $1000 a barrel.

It should be obvious by now that what is going to happen instead is that there will continue to be just enough demand destruction at the edges of the world economy to keep oil prices from shooting into the stratosphere. Already in the U.S., for example, the total number of highway miles driven annually has decreased the past four years after rising steadily from 1965-2008. The former members of the working and middle class in America are being squeezed by the bad economy and thus driving less, and the reduced demand is helping to keep prices in check.

3). The American economy is "built to run on $20 oil" and cannot survive high oil and gas prices in the long term.

No doubt this oft-repeated assertion, which assumes that a consumer economy based upon long commutes from the suburbs and people making endless trips to the mall to buy stuff they don't need is unsustainable if they cannot afford to buy gasoline for their cars is true in the abstract, but the fact is that the economy has also proven to be much more resilient to high oil and gas prices than most people in the peak oil community expected. After recovering from the 2008 crash, world oil prices have essentially been hanging around the $100 mark for nearly two years. According to Gas Buddy, the price of a gallon of gasoline in the U.S. has been solidly above $3.00 since December 2010. Conversely, the 2008 spike only sent prices to those levels for about 10 months, and there has been no corresponding crash of the economy as yet this time around.

Clearly, America's consumer economy has learned to adapt and survive on more expensive oil and gasoline. Just as clearly, there is no reason to expect that it won't continue to do so just so long as there are no rapid spikes in future prices. So why did many in the peak oil community get this prediction so wrong? I think it has to do with the assumption that I have made number four on the list below.

4). The government will stand idly by while the economy collapses.

This may not have been a specific prediction made by the peak oil community, but in hindsight anyone assuming there would be a fast collapse was also assuming that the governments worldwide would not pull out all of the stops to prevent it. However much we in the peak oil community have derided the massive amounts of federal deficit spending and the Federal Reserve's quantitative easing and zero interest rate policies, the fact is they HAVE stabilized the system. Call such initiatives unsustainable if you will, and you'll get no argument from me on that point, but they have worked to prevent a quick collapse and there is no reason to believe that they will not continue to work for some time yet. It is also undoubtedly no accident that the surveillance state is growing out-of-control just as we are reaching the point where it will be needed to prevent any outbreaks of massive civil unrest.

All of this is not to say that our industrial civilization is not in deep trouble, or that from a damage to the biosphere standpoint it would be better if collapse happened sooner rather than later. It's to say that with about 99% of population totally invested in the current system even if that system is treating them with utter contempt (what I call the REAL 99%), there is zero chance that there will be a demand from the public that the powers that be stop the madness and acknowledge our collective predicament. Even the most dedicated brie-nibbling, Prius-driving, Chardonnay-sipping, NPR-listening, Daily Show-watching, supposedly environmentally conscious Obama supporter would freak out if you told her that saving the world means that her precious snowflake won't be able to attend prep school. However much we may deplore the games being played to keep the party going for as long as possible, we should also acknowledge that as long those in charge can keep enough energy flowing to run the system from whatever sources they need to exploit, the chances that it will all come undone overnight are minuscule at best.


Bonus: "They won't want us to ask them, they are just going to want us to get it for them"

Spoiled Rotten Nation Screams for Socialism to Combat High Gas Prices

Thanks to a recent series of refinery and pipeline mishaps, gas prices are spiking again, and Spoiled Rotten Nation isn't happy about it. In fact, SRN is SO unhappy about having to pay more money at the gas pump that it is demanding government action to correct the problem. The call to arms was issued on Friday by one Patrick DeHaan of Gas Buddy.com:

The day when motorists see such rapid increases in gasoline prices is the day when it should be asked by lawmakers if there is enough spare refining capacity. That day should have been long ago.

The number of refineries have dwindled. Unstable margins have added into the risky future of expanding a refinery. The U.S. can require a certain amount of ethanol to be consumed and produced yearly, prompting hundreds of new ethanol refineries. But oil refineries? Nothing new in decades. Why hasn't the U.S. looked at oil refineries and the lack thereof in the volatile prices? It doesn't matter how much oil prices are or how much ethanol we produce- if we're still subject as a country to sticker shock like we're seeing- what's the point?

As I recall, the requirement of ethanol was supposed to drive us towards energy security. As long as there is conventional gasoline, there's no such thing. As long as we're subject to refinery fires and equipment malfunctions, all is pointless.

We need additional refinery capacity. We saw the direct reason why several times this year- specifically along the West Coast today. It was the Great Lakes region a few weeks ago, it was the West Coast earlier this year. It could have been the East Coast earlier this year when several major refineries were being sold or closed.

The bottom line, politicians, is that it doesn't matter how hard we try to become energy independent. It should start here at home with managing our refineries better, and building new state of the art facilities- just like the ethanol industry has been doing the past decade.

As a motorist, I'm disgusted that we're subject to every problem at a refinery, whether it be a fire, a control board failure, an equipment problem, etc. Let's get the act together. If we don't follow up, it'll cost this country precious GDP as more money goes to the gas pump, diverted from elsewhere in the economy. Wake up, politicians.

Holy shit...alert Michelle Bachmann and let her know that there is an good old fashioned Trotskyite writing for Gas Buddy.

I'm being only half facetious here. Mr. DeHaan is simply falling back on the typical reaction that nearly every American has when they are upset about something: the federal government must DO something...and now. The fact that oil companies are private concerns and that their decisions to build or not build refineries have NOTHING WHATSOEVER to do with government policy (other than the required licensing) nor the "politicians" he is desperately pleading for action from seems not to have crossed his mind.

To make matters worse, DeHaan confuses his demand for something to be done about America's supposed shortage of refining capacity with federal ethanol polices in which an entire industry largely exists because of corn subsidies and federal mandates. The government did not itself build any of the ethanol plants that are now consuming approximately 40% of America's corn crop each year and helping in this recent time of severe drought to drive corn prices into the stratosphere, it merely created the conditions to allow big agribusinesses to profit from the whole boondoggle.

Herein lies the very essence of Spoiled Rotten Nation, petulantly demanding that the government take action to allow its resource depleting and environmentally destructive happy motoring ways to continue indefinitely. It is also a big reason why there cannot be any serious debate about the very dire predicament we find ourselves in as the day of reckoning for our unsustainable "American way of life" approaches. The only redeeming quality in DeHaan's delusional article is that at least he didn't trot out the ridiculous notion sometimes asserted by conservatives that the utterly impotent environmental movement is responsible for preventing the rich and politically connected oil companies from building all the new refineries they'd want to build or drilling any hole anywhere they want were they so inclined.

The fact is, and this would be obvious to Mr. DeHaan if he stopped for a minute and thought this problem through rationally, that if the oil companies thought building new refineries was going to be at all profitable, they would be building them as fast as they could. The fact that they are not doing so tells you all you need to know about the reality of peak oil and whether the industry itself really expects there to be enough oil available in the future to keep the current number of refineries busy, let alone any new ones that they might bring online.

So, Mr. DeHaan, here is a little friendly advice from me to you and SRN: suck it up. Buy a hybrid. Move closer to your job. Take the fucking bus, already. Because it isn't going to get any better from here no matter how much you piss and moan, and there isn't and damn thing the politicians can do to help you.


Bonus: "You can say what you want to say...You can think what you think you want...It doesn't matter anyway...It's not funny anymore"

Why Raising the Retirement Age is No Solution to the Pension Crisis

American International Group Inc. CEO Robert Benmosche created quite a stir last week when he suggested that to alleviate the growing crisis caused by lack of adequate funding for pensions in America and Europe the retirement age needs to be raised to 70 or even 80 years of age. Benmosche’s “reasoning” was that doing so would “make pensions, medical services more affordable” and “keep people working longer and will take that burden off of the youth."

Once again, we see a prominent business “leader” who is spewing nonsensical gibberish because he doesn’t understand that we have entered the Age of Limits. Benmosche’s mistaken assumption is the same one being made by politicians and economists all across the political spectrum—that sooner or later exponential growth is somehow going to return to the western economies and allow us to keep our unsustainable economies functioning as they have indefinitely.

Are pensions and government old age benefit plans like Medicare and Social Security in a dire financial crisis? Certainly. Is supporting the older generations in retirement one of the biggest financial burdens facing young adults these days? Absolutely. But here’s the problem that Benmosche seems completely blind to: if you raise the retirement age and force older adults to work longer, there will be even fewer decent paying jobs available for the younger generations.

I’ve made reference several times before to Laurence J. Kotlikoff and Scott Burns’s prophetic 2004 book, The Coming Generational Storm, in which the authors warned that the shrinking of the ratio between working age adults and retirees was going to cause a long term financial crisis in public and private retirement programs of every type. The book was published during the height of the go-go housing bubble years when for most people the idea of such a looming fiscal crisis was incomprehensible. A mere eight years later, thanks to the financial crisis of 2008 combined with the effects of peak oil and resource depletion, the Category 5 generational storm is coming ashore much faster than even Kotlikoff and Burns anticipated.

In America, the total number of jobs peaked in December 2007 and remains several million below that figure after a couple of years of anemic job growth. Even if the phony “recovery,” propped up by the insane easing and interest rate policies of the Federal Reserve and the unsustainable levels of federal government deficit spending, allows the economy to remain in its current state of aimless malaise and not crash again, it will take America many more years just to get the number of jobs back to where it was four-and-a-half years ago. Moreover, many of the newly created jobs pay far less and have fewer benefits of those that were destroyed during the financial crisis.

In the Age of Limits, raising the retirement age and reducing the number of jobs available for young adults would have a negative ripple effect all through the economy. Most importantly, the younger generation will not be able to afford to buy houses, thus placing even more downward pressure on an already cratering housing market. The young adults also will not be able to afford to buy much in the way of consumer goods, which is really bad news as the basic marketing strategy for most companies is to get consumers hooked on their products when they are young and make money off of them throughout their working lives. Even more ominously, already falling birthrates will become even more depressed as young adults, particularly the college educated, defer marriage and childbirth, meaning that an already critical demographic crisis will be exacerbated and the ratio of those of working age to retirees will fall even more dramatically in the future.

So what is the solution to all of this? The only way we could even hope to address this crisis is if everyone—young, old and middle aged—recognizes that we have entered the Age of Limits and that we all need to lower our expectations and greatly reduce our level of consumption and energy usage. At this time, however, I see no evidence that such a realization is ever going to take hold among any more than a very tiny fraction of the population. As a result of this lack of awareness and refusal to acknowledge reality, the generational storm is going to continue to increase in ferocity, and by the time it finally passes decades from now it will have completely washed away our unsustainable fossil fuel based way of life.

Crumbling Infrastructure Porn: Drivers Pay "Secret" Road Tax In $15 Billion For Car Repair

The days of Happy Motoring, as Jim Kunstler is fond of calling it, may be drawing to a close. Here is Bloomberg with the details:

Gil Giro doesn’t need a license plate to tell where a car is from -- he just looks underneath the chassis.

“Every time we see a car that comes in from the district, you can see that its suspension is torn up,” said Giro, the owner of Gili’s Automotive in Rockville, Maryland, outside Washington. “It’s almost like the vehicle has been driven off- road.”

The nation’s capital isn’t alone in offering motorists teeth-rattling rides as U.S. lawmakers tussle over how to pay the bill for mending battered roads. Mechanics such as Giro say they see the hidden tax car owners pay every day in torn tires, misaligned front ends and bent axles.

Drivers won’t get relief anytime soon.

The U.S. Highway Trust Fund, which helps pay for road and transit projects in Washington and all 50 states, has been bailed out by Congress three times since 2008 for a total of $34.5 billion. The gasoline tax that supports the fund hasn’t been raised in 19 years, and with the cost of materials such as steel and asphalt on the rise, the fund is expected to have a deficit of about $10 billion this year.

Car owners already are shelling out far more than that to repair damage done to their vehicles by America’s ruined streets and highways, industry and academic researchers say.

Motorists pay $67 billion annually for increased fuel consumption, body dents, worn tires and premature wear wrought by pitted roads, according to The Road Information Program, a Washington-based research group. The group’s board includes representatives from construction-equipment makers Caterpillar Inc. (CAT) and Deere & Co. (DE), as well as Vulcan Materials Co. (VMC), a Birmingham, Alabama-based asphalt and concrete producer.

That works out to $324 per licensed driver, says Frank Moretti, TRIP’s director of policy and research. The figure is an average of all vehicles and can vary widely between cars and large commercial trucks, which are prone to costlier damage, he says.

Karim Chatti, a professor of civil and environmental engineering at Michigan State University in East Lansing, estimates that damage linked to poor roads probably runs between $15 to $25 billion annually for car owners, not including tire damage and fuel-efficiency costs.

As a denizen of the DC-area, I can attest to how crappy the roads are around here. And this is happening in a part of the country where local tax revenues are still fairly robust because of federal government spending. I can't imagine what it must be like in some of the less well off locales. It's now a race to see what will destroy our automobile-centric economy first, high oil and gasoline prices, or our crumbling highways.


Bonus: Some Drivin'n'Cryin' seemed appropriate here

The REAL Lesson From Obama's "Keystone Cave-In"

Last Friday, in the wake of President Hopey-Changey abruptly changing course on the Keystone Pipeline project, Rolling Stone political writer Jeff Goodell wrote a piece called, "Lessons from Obama's Keystone Cave-In," which was particularly notable because it demonstrated yet again that if you don't understand the dire implications of peak oil you are hardly going to learn the right lessons from any energy-related decision made by our so-called "leaders." Just for the heck of it, I thought I'd go through the four lessons listed by Goodell and offer a rebuttal for each of them:

1. "All of the above" = "Drill, Baby, Drill"
Obama talks a good game about developing "green" energy sources, but here he is, doubling down on oil. Although this speech was clearly political theater, I expected him to appease anti-pipeline activists by using his visit to Cushing – the belly of the fossil-fuel beast – to remind Big Oil that not only has he promised to yank away $4 billion in subsidies, but that oil is, as he said the other day, "the fuel of the past." Ha! Instead, Obama offered up a speech that would make Sarah Palin proud, reminding us how, over the last three years, "I’ve directed my administration to open up millions of acres for gas and oil exploration across 23 different states. We’re opening up more than 75 percent of our potential oil resources offshore." And he crowed: "We are drilling all over the place now." And as for pipelines, he bragged that "we’ve added enough new oil and gas pipelines to encircle the earth." Climate blogger Joe Romm rightly called the address "Obama's worst speech ever."

Okay, so Obama seemingly contradicted himself in two different speeches before two different audiences. That happens all the time with politicians. So which time do you suppose he was lying? The time he mouthed an empty platitude about oil being "the fuel of the past," or when he started bragging about his administration's pro-drilling record?

As the old saying goes, Money Talks and Bullshit Walks. In this case, the latter example was money while the former was the bullshit.

2. If Obama gets re-elected, the northern half of the Keystone pipeline is going to get built.
He did not say this explicitly in his speech yesterday, but the political code is perfectly clear. Obama is essentially endorsing tar sands oil production, with all the environmental wreckage it causes, as well as dooming the Midwest to more pipeline spills. It also means that investment dollars will now flow to boosting the production capacity of the tar sands operations, which in turn will pump up the industry's political clout even more. In effect, there’s no stopping the tar sands now. The dirty bitumen is gonna get dug up and refined and piped down to the Gulf and slimed across the world.

It should have been perfectly obvious even before Obama gave his speech that the whole damn pipeline was eventually going to be approved. All along, he was just trying to run the clock out until after the 2012 election and hoping there wasn't another spike in gasoline prices to force his hand before he was safe from ever facing the voters again. Well, the spike happened as you might have noticed, and Obama quickly realized there were more votes to be lost from being seen by Spoiled Rotten Nation to be standing in the way of America accessing another major source of oil (even if it will do nothing to bring down prices in the short term) than he will likely lose in support from environmentalists. Speaking of which:

3. Enviros have no muscle.
When the State Department last year decided to block the pipeline at least temporarily, enviros cheered. Frances Beinecke, president of the Natural Resources Defense Council, called it "a victory of truth over misinformation," and writer/activist Bill McKibben said "it isn’t just the right call, it’s the brave call." But that bravery wilted quickly in the face of high gas prices and Republican attacks, lame as they have been (the pipeline will have no measureable impact on gas prices in America today, tomorrow, or ever). The unmistakable subtext of this speech was: Tough shit, Frances and Bill and all your earnest followers. Are you really gonna vote for Romney in November?

Of course environmentalists won't be voting for Romney, and that is exactly why Obama was able to make the political calculation I outlined in my response to lesson 2. Yeah, a lot of environmentalists might stay home in November, or they might choose to throw away their votes by casting them for the Green Party, but they WON'T be voting for Romney and that will blunt any political effect their protest might have. Some of them will no doubt even cave in and vote for Hopey-Changey anyway, using the totally self-defeating lesser of two evils "logic."

The real lesson on this point ought to be obvious. The environmentalists, as well as those who believe in economic justice and those who are opposed to America's big business, war and empire foreign policy, DO NOT LIVE IN A DEMOCRACY. In a democracy you have real choices at the ballot box. As non-elite Americans living in a full blown corporatocracy, we most assuredly do not have any choice on issues of real importance that affect the economy or our future other than to throw our votes away on third party candidates who stand zero chance of ever being elected.

4. Obama is still wimping out on climate change.
Duh. But people had hopes. During the 2008 campaign, Obama talked about slowing the rising seas and putting a price on carbon pollution. After the election, he hired John Holdren as science advisor and Steven Chu to run to the Department of Energy, both of whom understand the dangers of climate change as well as anyone. Didn’t help. Today, despite the fact that global carbon pollution is accelerating and extreme weather is becoming the norm (it’s a sad but revealing irony that, as Brad Johnson points out, Cushing has been ground zero for climate disasters in the U.S.), Obama won’t even mention the words "climate" or "global warming," much less demonstrate any leadership on the single most dangerous threat that civilization has ever faced. Instead, he has shifted the conversation to energy independence. That may be a worthy goal, but if it’s pursued without regard to the risks of climate change, it will only increase the danger of future catastrophes.

Obama most certainly is "wimping out" on climate change. Why? Because he is a product of a system that is completely dependent upon never ending economic growth for its very survival, and curtailing the burning of fossil fuels would destroy that system pretty quickly. Obama would have to be politically suicidal NOT to wimp out on climate change, and the world only very rarely ever sees the likes of Mikhail Gorbachev achieving high political office.

Goodell then concludes his piece with this:

In any crass political calculation, drilling for oil will always win more votes than putting a price on carbon. But if I recall what I was taught in fifth-grade American government class, we elect presidents to do more than crass political calculations. Obama wants to be thought of as the president who freed us from foreign oil. But if he doesn’t show some political courage, he may well be remembered as the president who cooked the planet.

Excuse me for being so blunt, but what a childish statement. I don't know how old Mr. Goodell is, but the last president I can recall who didn't make every single decision based upon "crass political calculation" was Jimmy Carter, and we all know how well that worked out for him.

So many environmentalists just refuse to get it into their heads that humanity has painted itself into the tightest of corners. Beginning in earnest about a century ago, we tapped into the greatest energy resource nature could have possibly bestowed upon us. Instead of wisely managing that very nonrenewable resource, we exploited it as quickly as we could and allowed our population to expand in a very short time to well beyond what the planet can possibly sustain when that resource runs out, even if the resulting environmental damage from burning that resource wasn't also a hugely negative factor.

Not only America, but all of humanity is barreling towards the cliff at breakneck speed, and it is likely already too late to put on the breaks. "Leaders" like Obama have been put into place by his billionaire backers in order to pull the wool over the eyes of the masses and keep the game going for as long as possible. That is the real lesson to be learned from Obama's Keystone cave-in, and accepting it is the key to becoming part of the reality-based community.


Bonus: "I believe before the world ever got that bad, I'd be on my knees a-crying"

Spoiled Rotten Nation Not Sure Who To Blame For High Gas Prices

This is a good companion piece to my post the other day about a recent public opinion survey on energy issues that demonstrated how clueless the public really is. Spoiled Rotten Nation doesn't understand why gas prices are skyrocketing, and Spoiled Rotten Nation is plenty pissed off about it. Spoiled Rotten Nation just does not know who should get the blame, as this story from Yahoo Finance points out:

Families canceling vacations. Fishermen watching their profits burn up along with their boats' gasoline. Drivers buying only a few gallons of gas at a time because they can't afford to fill the tank.

From all corners of the country, Americans are irritated these days by record-high fuel prices that have soared above $4 a gallon in some states and could top $5 by summer. And the cost is becoming a political issue just as the presidential campaign kicks into high gear.

Some blame President Barack Obama. Some just cite "the government," while others believe it's the work of big, greedy oil companies. No matter who is responsible, almost everyone seems to want the government to do something, even if people aren't sure what, exactly, it should or can do.

A Gallup poll this month found 85 percent of U.S. adults believe the president and Congress "should take immediate actions to try to control the rising price of gas." An Associated Press-GfK poll last month showed 71 percent believe gas prices are a "very" or "extremely" important matter.

Once again, we see how meaningless public opinion polls are in regards to energy issues. It may come as a shock to 85% of the American public, but there isn't fuck all the president and Congress can realistically DO to reduce gasoline prices. The COULD repeal the federal excise tax on gasoline, which would lower the price by a whopping 18.4 cents per gallon. State legislatures, which the president and Congress do not control, could also help out by repealing all state gasoline taxes, which vary by state but average around another 18 cents per gallon. And that is the grand total of what the government could do, lower the price of a gallon of gas by less than 10% in the short term.

But then, guess what? There goes all of that tax revenue governments at all levels are expecting will help pay to build and maintain roads and highways along with running public transportation. Let America go a year or so without any road or highway repairs, and let's see how quickly the entire transportation grid collapses.

But Spoiled Rotten Nation doesn't want to hear it:

"When I go out to change the prices, they honk their horns and yell at me," said Siroub whose station's cheapest grade of gas, regular unleaded, was selling for $4.44 a gallon earlier this week. "The other day one person even gave me the finger."

Boy, you gotta love the visual image of an enraged driver flipping the bird to a gas station manager because he is forced to raise his prices just to stay in business. What is that fucker going to be like when gas finally does rise to $5.00 or $6.00 a gallon or ever more? Worse yet, what will he be like when gasoline starts to become unavailable at any price? Something tells me he isn't going to handle it too well.

The last guy they interviewed for the article does make an accurate statement in the middle of his cluelessness:

Shrimpers in Louisiana and lobstermen in Maine complain that high fuel prices are cutting into their profits. Craig Rogers, who burns through 50 gallons of gas a day tending his lobster traps along Maine's rocky coast, blames commodities traders, though he questions whether politicians are doing enough. He said politicians are too well off to really grasp what ordinary people are going through.

"They can say they feel for us, they can say they understand us, but when you have that kind of money, there's no way you can truly understand what we're feeling," he said.

No, Mr. Roberts, they don't understand what you are feeling. More importantly, they don't give a shit even if they may act like they do. But even if they did give a shit, there really is very little they can do. Yes, they've been lying to you about our energy predicament for 30 years, ever since Ronald Reagan defeated Jimmy Carter after the latter tried to tell the country the truth about peak oil. You and everyone else who is now whining about high gasoline prices didn't want to hear it then, and now you're all butt hurt about it.

As the saying from the old Fram oil filter commercial used to go: "You cay pay me now, or you can pay me later." Well, later has arrived and now reality has showed up at the door of Spoiled Rotten Nation waiving a huge bill in its hand, and it isn't going to go away until it gets satisfaction.


Bonus: How fitting is it that this commercial came out in 1981?

Startup Company Converts Plastic To Oil

I'm always wary of any energy related story put forth by National Propaganda Radio, but this NPR article on a company that has apparently figured out a feasible way to make oil from plastic waste is interesting:

Only 7 percent of plastic waste in the United States is recycled each year, according to the Environmental Protection Agency. A startup company in Niagara Falls says it can increase that amount and reduce the country's dependence on foreign oil at the same time.

It all starts with a machine known as the Plastic-Eating Monster. Thousands of pounds of shredded milk jugs, water bottles and grocery bags tumble into a large tank, where they're melted together and vaporized. This waste comes from landfills and dumps from all over the United States.

"Basically, they've been mining their piles for us and sending them here," says John Bordynuik, who heads his namesake company, JBI Inc. He invented a process that converts plastic into oil by rearranging its hydrocarbon chains.

So how much does the process cost?

Each barrel of oil costs about $10 to produce. JBI can sell it for around $100 through a national distributor. The young company is already producing a few thousand gallons of oil a day. It has signed lucrative deals to set up operations next to companies with large volumes of plastic waste.

So what's the bottom line here?

"We don't make a synthetic 'other' product that has problems," he says. "We make an in-spec fuel like everyone else. If anything, the word 'alternative' has a stigma attached to it, more so because of prior attempts."

If JBI has its way, plastics will become a significant source of domestic fuel that reduces the U.S. dependence on foreign oil. But just how "green" is JBI's recycling, when it produces a fossil fuel that pollutes just like any other?

"To enter themselves into this industry, I think that they've all bought into the idea of producing a fuel," says Carson Maxted of Resource Recycling, the plastic recycling industry's trade journal.

Maxted says he's not sure whether converting plastic to oil can be considered recycling, or even environmentally friendly. But he says JBI's methods can co-exist, and even complement, current recycling practices.

"They're getting value from something that would otherwise go to the landfill," he says, "because the plastics most of them are looking for, the plastics that are not easily recycled, they're of low quality or mixed-plastic types, or they're dirty — things that wouldn't be accepted into a recycler."

And because there's no lack of waste-plastic supply, and no lack of demand for oil, Maxted says the technology has the potential to transform both industries.

Some issues that were not addressed by the article that I wish they would have covered are: exactly how much plastic does it take to make a barrel of oil? Are there significant environmental impacts to be considered should this technology become widely used? How does the energy density of a barrel of this oil compare with a barrel of crude oil? How scale-able is this technology, really?

On the one hand, it is gratifying to see that someone may have successfully figured out a way to put those mountains of plastic garbage to good use. On the other hand, the fact that we are considering mining our own landfills to get more oil just shows how desperate we really are. It will be interesting to see if this company continues to be successful whether this process becomes touted by the media as the latest great technology that is going to "save" our happy suburban, consumerist lifestyles. If so, it will become yet another pipe dream pumped out by the Hologram to keep the masses thinking that everything is going to be just fine.


Bonus: "Everything is going to be all right...rock-a-bye"

Public Opinion Poll on Energy Issues Shows How Clueless The Public Really Is

It really is true, as comedian Doug Stanhope has asserted, that a majority of Americans will express their opinion about an issue even when they have no basis of knowledge for which to even form an opinion. That point was driven home in a recent article from UPI entitled, “Poll: Alternative Energy Loses Support.” Why the pollsters even bother polling on an issue so technically complex that no more than a small percentage of the population is well informed enough to provide meaningful answers is a whole separate topic. Instead, I thought I would go through and pick the results of this particular poll apart point by point.

Let’s get started, shall we?

Support for development of fuel sources such as wind and solar power has diminished in the United States during the past year, a survey found.

The March 7-11 poll, conducted by the Pew Research Center for People & the Press, found 52 percent of those responding indicated support for alternative fuel was more important than increasing oil, coal and natural gas production, while 39 percent indicated expanding exploration of coal, oil and gas was the more important of the two choices.

Although a majority went for alternative fuels, support for solar, wind and hydrogen power was not as popular as it had been in March 2011, when 63 percent indicated that was their favorite choice, while 29 percent chose coal, oil and gas exploration.

Respondents who identified themselves as Republicans were more apt to have changed their preferences -- with 33 percent indicated support for alternative energy sources, down from 47 percent in 2011.

Do I really need to waste the pixels pointing out that asking people whether they “support” development of alternative energy versus whether they “support” increased oil, coal and natural gas production is laughably meaningless? The question makes it sound as if all forms of energy are interchangeable and unlimited, and how we power our lives is merely a matter of the choices we collectively make.

On the one hand, you can “support” solar and wind power all you want, but that doesn’t mean either form of energy will ever be a viable replacement for fossil fuels and enable you and your descendents to live your suburbanized, consumerist lifestyle in perpetuity. The fact is that while both do have their uses and COULD be a part of voluntarily powered down future if America was willing to be sensible about its energy predicament, neither is going to allow us to continue on with business as usual once fossil fuels deplete to the point where they are too expensive to keep supporting our modern industrialized civilization.

On the flip side, you can “support” increasing the production of oil, coal and natural gas; and while you are at it you might as well try holding your breath until Santa Claus brings you a new Lexus for Christmas. The world supply of all three is FINITE. That means there is only so much of it that can EVER be produced. What’s more, most of the easy and cheap to extract stuff is already gone and what’s left is going to be ever more costly and difficult to produce. Child-like wishing for more isn’t going to change geology.

Let's move on:

The survey found "as in the past ... there continues to be broad public support for an array of policies aimed at addressing the nation's energy supply."

Nearly 80 percent overall indicated support for improving fuel efficiency in cars, while nearly 70 percent indicated support for federal research for alternative energy sources. Sixty-five percent indicated support for improved rail, bus and subway systems.

Sure, no doubt there is “broad public support” for all of that stuff. You know why? Because it doesn’t cost the respondents anything to answer the questions in a public opinion survey.

Once you start moving beyond feel good concepts and into how all of those policies are going to be PAID FOR it becomes a different equation altogether. Try asking, “Would you be willing to pay an annual $1,000 carbon tax to support the federal research for alternative energy sources and for improved rail, bus and subway systems?” or “Should federal government funds be used for public transportation INSTEAD OF building more roads and highways?” and I’ll guarantee you the poll results would be drastically different.

Once again, the choices are presented in a vacuum, as if each one does not carry considerable costs and consequences. This is exactly the kind of thinking that created Spoiled Rotten Nation, and a citizenry that just cannot understand how the government can’t seem to do everything they want it to do without raising their taxes and/or running massive budget deficits. We want alternative energy research, AND public transportation, AND more roads and highways to reduce traffic congestion, BUT we don’t want to pay for any of it.

But they saved the very best part for last:

Concerning the controversial method of mining called fracking, 37 percent indicated they have only heard a little about it and 37 percent, indicated they have never heard of it. Only 25 percent indicated they had heard a lot about it.

A majority -- 52 percent -- indicated support for fracking, a figure held up mostly by Republicans, 73 percent of whom indicated they supported fracking, compared to 33 percent of Democrats.

You gotta love the willingness of so many to support something they know very little or nothing about. Despite the fact that only a quarter of the population has by its own admission any real idea what fracking is, more than half claim to support it. And that 25% constituting the at least reasonably well informed doesn’t include people like me who know a lot about fracking but are opposed to it because we know what the dangers are. The more appropriate question to ask here would be, “Would you support fracking even if it meant there was a good chance that your drinking water might be poisoned or that a resulting earthquake might damage your home?” That at least might get a few of the respondents thinking, yet another resource which is in very short supply these days.


Bonus: I've posted this video before, but it is too funny not to repeat

Direct Air Abruptly Cancels All Flights

Hat tip to reader Redd Dogg for alerting me to this story.

Let's consider a hypothetical scenario for a moment. You run an airline. It's a costly business and profit margins are low. Say it is getting to be your busiest season when passengers are really depending on you. What's the first thing you should make sure you do?

If you said, "pay the fucking fuel bill," you win a cookie.

Here is The Columbus Dispatch with the story:

Discount airline Direct Air is suspending all flights for two months after it abruptly cancelled its schedule at the height of spring break.

The airline’s shutdown following its apparent failure to pay a fuel bill left stranded passengers wondering how and when they’ll get home.

You would think that not being able to afford to buy fuel for your airplanes and leaving all of your passengers stranded would be pretty much the end of your airline as a going concern. But no...this is merely a temporary setback. Direct Air will be back. They promise:

Direct Air, based in Myrtle Beach, S.C., says it will not fly until May 15. Ticket holders were told to contact their credit card companies for refunds.

Direct Air’s Ed Warneck told The Sun News newspaper that the airline missed a fuel payment and the fuel supplier cut it off. So it had to ground its fleet.

The airline serves 17 cities in the Midwest, East and South. It is unclear how many travelers were affected.

Given how oil prices have been exploding lately, the cost of jet fuel will certainly drop and be much more affordable by then. So make sure you book those Memorial Day tickets now. Because an airline would NEVER sell a ticket and then not deliver on its promise. Perish the thought.


Bonus: Bill tells a funny airplane story

Feds Reject Large Loan Application From "Green" Police Car Maker

Looks like the effects of the Solyndra scandal are rippling outward...which I consider to be a good thing as it will prevent more taxpayer money from being wasted on "green energy" boondoggles. Here is the USA Today with the story:

The dream of a purpose-built, fuel-efficient police car may be in jeopardy. The Energy Department has denied the application of an Indiana start-up for a $310 million loan that would have created its advanced police car.

Carbon Motors is pushing a police pursuit car it calls the E7. It says it has over 20,000 reservations from more than 500 law enforcement agencies in all 50 U.S. states, in addition to interest overseas. It says the car's creation would have resulted in 1,550 direct jobs.

Carbon has been waiting for years for the loan under the same program that provoked the outcry about the loan to solar-panel provider Solyndra. That company's financial problems provoked a Republican outcry about wasteful spending by the Obama administration.

Finally, someone is actually watching over the till and not just throwing hundreds of millions of dollars in federal loan guarantees around willy-nilly. But of course, that isn't how the company sees it:

An "outraged" Carbon, in a statement, blames DOE for bowing to election-year political pressure in not granting the loan.

"It is clear that this was a political decision in a highly charged, election-year environment," said William Santana Li, chairman and chief executive officer, Carbon Motors. "Carbon Motors simply appears to be the last victim of this political gamesmanship."

Other start-ups that were waiting for DOE loans have also failed. Bright Automotive, which was going to make a fuel-efficient van, just announced it can no longer stay in business without the loan. Aptera, a Southern California-based start-up, failed earlier this year and won't make its unusual pod-like electric car.

So when exactly did American businesspeople become such a group of whiny ass little titty babies? If your electric police car idea was so fucking great, Mr. Li, I would gather that banks would be lining up to loan you the money for it without the federal government having to backstop them. The fact that they aren't speaks volumes in my opinion. In case you haven't noticed, we've got a trillion dollar plus federal deficit to contain, and this is as good a place to start containing it as any.


Bonus: Dedicated to Carbon Motors Chairman and CEO William Santana Li, a song by The Babys. Maybe he can stop looking for a handout, pull himself up by his own bootstraps and get back on his feet again

So What Happens If Gasoline Hits $5.00 A Gallon This Summer?

You gotta love the mainstream media. For months now the drumbeat has been about how the economic recovery in the U.S. is picking up steam, even though the only two indicators which are in agreement with that assertion are stocks and jobs, both of with are being relentless manipulated by the Federal Reserve and the Bureau of Labor Lying Statistics respectively. Nevertheless, despite the persistant propaganda designed to get the consumers suckers back into the malls and spending freely again, the media just can't resist the temptation to goose its ratings/readership/page views by doing a little scaremongering over rising gasoline prices. Numerous stories have appeared in the last week breathlessly proclaiming that gasoline prices will hit $5.00 a gallon by this summer.

You would think that someone would quickly spot the inherent contradiction here. After all, every recession since the 1970s has been preceded by a spike in oil and gas prices. But, surprisingly, you would be wrong about that, as shown by an article which appeared over the weekend on MSNBC.com. The title, "8 Reasons Why Gas Will Hit $5 a Gallon This Year," seems straightforward enough, but let's take a closer look at their supposed "expert" analysis. Here are the reasons from the article listed in order, followed by my commentary:

1. Strait of Hormuz
About 20 percent of the crude oil produced in the world is shipped through the Strait of Hormuz, and Iran has threatened to shut down shipping traffic through the Strait. At its narrowest, the passage is 30 miles wide, so there is a realistic case that a conflict could close it. Iran has already been isolated as a trade partner by U.S. and EU sanctions. The regime in the country has made a number of threats about what it might do if its “national interests” were threatened. If Iran follows through with its threats, the period the passage is closed could be very brief if the U.S. Navy, which has a carrier group in the region, moves to reopen the lane. But it is not clear that the American government would make that decision without the open support of allies or the United Nations. A closure of the passage, or any escalation that would make a closure more likely, will drive oil prices higher -- and by extension, gasoline prices.

No argument there. Tensions involving this key oil transportation checkpoint are certainly putting speculative upward pressure on prices. Let's move on.

2. Iran
Iran contributes to a second problem in terms of global oil supply well beyond that of its ability to interrupt supply. Because of the embargo against the nation due to nuclear weapons violations, the U.S. has pressured large oil importers such as Japan to act to isolate Iran by cutting their imports. This puts Japan in a position in which it has to tap even tighter global supply. Japan apparently has agreed to cut its Iranian crude imports by 20 percent. But as the world’s third largest oil importer, Japan indeed will have to get its oil somewhere other than Iran -- which will put more pressure on current production.

Not sure I agree with this one. The sanctions against Iran are laughably self-defeating given that China and India have shown no inclination to join the embargo against Iranian oil, and as long as Persian oil is being bought somewhere, there should not be any corresponding increase in world oil prices as that just means those two countries will buy less elsewhere.

3. Refiners raising prices
Most of the oil refined on the east coast of the U.S. is Brent crude, a type of oil produced from the North Sea. The price of Brent -- more than $124 a barrel -- is almost $16 higher than the price of West Texas Intermediate (WTI) crude, the amount most people read about in the media. But because Brent has replaced WTI as the global price benchmark, U.S. refiners set prices for gasoline and other products as if Brent were the only grade of crude used. That allows refiners with access to cheaper WTI to make larger profits.

However, when the prices converge, as happened in the final two months of 2011, WTI refiners lose their edge -- and their hefty profits. “Refiners were losing money in November and December. You can only lose money for so long,” John Felmy, chief economist for the American Petroleum Institute, recently said. Many large refineries are owned by public companies that do not have much appetite for posting ongoing losses. To avoid losses, refiners will have to increase gasoline prices.

Can't quibble with this one in light of the recent refinery shut downs in Pennsylvania and New Jersey, which certainly wouldn't have happened if they were turning big profits.

4. Other geopolitical risks
Iran does not present the only geopolitical challenge to oil production. In Nigeria, which is the 14th largest producer of oil in the world, Islamic terrorist group Boko Haram has continued to attack Christian areas of the country. The Nigerian Army has reacted by attacking Islamists. Militants have continued to attack pipelines, apparently in a move to disrupt the government.

This segment went on to mention Venezuela and other unstable Middle Eastern countries, but I've left that part out for brevity's sake. Again, no argument here.

5. The EU may save itself
For now, Greece has been bailed out again -- a move that should buoy confidence in the region and encourage demand for oil. Even with the Greek bailout, however, the eurozone is not out of the woods as nations continue to implement austerity measures to protect against the risk of default on sovereign debt.

Also edited down for brevity's sake. Can the EU muddle through for another year? Well, it pretty much muddled all the way through last year, so it certainly is possible.

But here is where things suddenly begin to go completely off track and way out into la-la land:

6. U.S. economic recovery
An improved U.S. economy means higher oil prices. U.S. GDP, employment and even housing have all staged unexpected improvements in recent months. Many economists now peg a 2012 GDP increase at more than 2 percent. The new White House budget assumes growth of 3 percent by 2013. An average of more than 100,000 jobs has been created in each of the past six months. And an extension of payroll tax cuts through the end of this year may further aid the employment recovery. An extension of unemployment benefits means that hundreds of thousands of American who would have no income, will have at least enough to consume basic goods and services. The argument that Americans now drive less is not a powerful one for gas and oil demand when a healthy economy also means more consumption of oil for business, petrochemicals and jet fuel. Demand for oil-based products across the entire economy will pick up with any recovery.

Even if you buy the recovery propaganda, how can any rational observer of the economy not realize what will happen to the American consumer well before gas prices hit $5.00 a gallon? Is 2008 really that far in the past that it has been completely forgotten? That year, gas prices topped out in July at a national average of $4.11, and the shock to the system was so traumatic that it helped trigger a deflationary crash across the financial sector. By January of 2009, gas prices bottomed out at $1.61 (figures courtesy of the chart above from Gas Buddy.com). Yet we're supposed to believe that prices shooting towards $5.00 wouldn't cause an even worse economic shock this time around?

But wait, it gets even more absurd:

7. Summer
In the U.S., summer vacation driving has historically boosted demand for gasoline. Over the past three or so years, however, that boost has been small, if present at all. In 2011, U.S. traffic volume decreased year-over-year in every month except January and February. But that was last year. So long as the U.S. economy continues to improve, more drivers will be on the road this summer.

Right here we see the blind spot of every economic commentator who uses the raw jobs figures to back up the claim of economic recovery. Are there more jobs now than there were a year ago? Undoubtedly. Are most of those newly created jobs the kind of stable, good paying positions which would allow their holders to take a couple of weeks off this summer and take the family out for a long driving vacation? Unlikely. It seems like many of those who get paid to write articles like this one in the mainstream media think that everyone who has a job is as comfortable and well off as they are.

8. Supply risk
In December 2011, OPEC members produced nearly 31 million barrels a day, cutting the cartel’s spare capacity capability from 3.18 million barrels per day to 2.85 million. Saudi Arabia accounts for 2.15 million of those daily barrels of spare capacity.

Again, edited down for brevity. Maybe Saudi Arabia has that spare capacity. Maybe it doesn't. No one outside the desert kingdom really knows for sure. But at least the article ends on a more sensible note.

To sum up, there are a lot of very good reasons to believe that oil and gas prices are going to rise higher in the coming months, but reasons six and seven listed above are absolutely laughable in their absurdity. The fact that they were included in an otherwise relatively astute analysis shows just how powerful the propaganda spewed forth by the Hologram really is.

What will happen if gas prices hit a nationwide average of $5.00 a gallon this summer? Personally, I think that absent a war with Iran we're not going to find out. Because while the economic free fall we experienced in late 2008 and early 2009 was halted by the enormous increase in federal deficit spending and the loose monetary policies of the Federal Reserve, the economy is far too fragile withstand prices surging to that level. Almost certainly, another financial market crash will short circuit the rise in gas prices well before they reach those lofty heights, at least for this year.


Bonus: "Putting out the fire with gasoline"

Yet Another Oil Refinery is Shutting Down

On January 27th of this year, I posted a story about a ConocoPhillips oil refinery in New Jersey shutting down. Well, now comes word that a Sunoco refinery near Philadelphia is also closing up shop. Here is NBC 10 Philadelphia with the details:

Officials at a Sunoco refinery near Philadelphia say about 100 employees are being laid off at the end of the week.

The workers at the company's Marcus Hook plant in Delaware County were given layoff notices saying Friday would be their last day, reports the Delaware County Daily Times.

Sunoco spokesman Thomas Golembeski said Tuesday that the hourly employees were told not to return because the first phase of the plant decommissioning process has been completed. But he says the workers will be paid their wages through the end of the month.

Sunoco said last year that it would idle the refinery and lay off about 490 employees because of deteriorating market conditions. Another Sunoco refinery in Philadelphia is expected to close by July if a buyer isn't found.

And all the politicos can do is whine about it:

Pennsylvania politicians urged Sunoco CEO Brian MacDonald to find a buyer for the facilities.

"With so many jobs on the line and the risk of higher fuel prices for consumers across the northeast, Sunoco and ConocoPhillips must be held accountable for the impact refinery closures would have on the region," said Sen. Bob Casey (D-Pa.) in a letter sent Wednesday. "We need these companies to be more transparent with workers and the public as they contemplate decisions that could have very damaging impacts not only on the local communities but on the entire northeast."

What a pathetic, pandering little worm. Do you really think these refineries are closing because the companies are deliberately being mean, Senator Casey? Or that they wouldn't sell the refineries if they could actually find buyers for them? They're shutting these refineries down because they can no longer turn a profit with them, for whatever reason. The implications of that fact ought to be as clear as they are dire. And you'd be much better off telling your constituents the truth instead of continuing to blow smoke up their asses.


Bonus: Bad boy that he was, Pennsylvania would still likely be better off with the fictional Senator Bob Roberts

"There's No Tomorrow" - Outstanding Animated Peak Oil Movie

I assume that most of my regular readership has at least a basic understanding of peak oil, and the dire long term implications it has for our modern industrialized situation. The problem with explaining peak oil to the layperson has always been the difficulty in reducing the concept to easy sound bites, something it is far easier for the deniers to do.

Peak oil does NOT mean that the world is, "running out of oil," for example, but that it is in fact running out of CHEAP oil. And while the latter does not mean an imminent overnight economic collapse, it DOES mean the end of real economic growth as we know it. Without all of the debt games being played by Western governments and central banks, the permanent end of economic growth and the beginning of a long era of permanent economic contraction would already be evident to all but the most hopelessly thickheaded.

In the spirit of attempting to disseminate the word about peak oil as widely as possible in an easily understandable manner, here is a link to a brand new animated peak oil film, entitled There's No Tomorrow, by professional animator Dermot O'Connor. I strongly urge everyone who reads this to watch this video and spread the word about it. An astonishing seven years in the making, it is a true labor of love that shows through in every frame.

The Yahoo version of the movie is posted below, but first I wanted to be sure to provide a direct link to the film's website: Incubate Pictures. Also, if you would like to express your appreciation directly to the filmmaker himself, you can sign on to the Hubbert's Arm peak oil discussion forum at this link: Llamedos, where both he and I are longstanding members.

Is Globalization Now Blunting the Effects of Peak Oil?

Mish Shedlock of the Global Economic Trend Analysis blog posted a reader letter on Monday that included the chart above as well as some rather startling facts about the current trends in gasoline consumption in the United States:

As I have been telling you recently, there is some unprecedented data coming out in petroleum distillates, and they slap me in the face and tell me we have some very bad economic trends going on, totally out of line with such things as the hopium market - I mean stock market.

This past week I actually had to reformat my graphs as the drop off peak exceeded my bottom number for reporting off peak - a drop of ALMOST 4,000,000 BARRELS PER DAY off the peak usage in our past for this week of the year.

The letter goes on:

An amazing thing to note is that in two out of the last three weeks gasoline usage has dropped below 8,000,000 barrels per day.

The last time usage fell that low was the week of September 21, 2001! And you know what that week was! Prior to that you have to go back to 1996 to have a time period truly consistently below 8,000. We have done it two out of the last three weeks.

Mish himself then rather blandly concludes:

A mild winter can explain part of the drop in petroleum usage (heating oil), but it does not explain the declines in gasoline usage or the overall trends.

Back on September 23rd of last year, in my post "Fear and Loathing in the Auto Industry: The Flacks Can’t See What’s Right in Front of Their Eyes," I highlighted a story about how annual American automobile sales remain mired more than four million below their peak in 2000, even after recovering over two million from the depths of the Great Recession. Moreover, with gas prices having remained above $3.00 a gallon for more than a year now, sales of smaller and higher mileage vehicles have increased as a percentage of the number of vehicles purchased. Additionally, back on November 21st of last year, in my post, "Peak Vehicle Miles Travelled Shows the True State of America's Economy," I highlighted a story about how for the first time since at least the 1960s, U.S. total vehicle miles traveled have dropped during the past four years.

Clearly, the explanation for less gasoline being used is that there are fewer cars now on the road driving fewer miles at a higher average of fuel efficiency. Greater efficiency, of course, is a good thing for the economy. The fewer miles travelled, however, not so much. Because so few Americans have access to adequate public transportation options, and those options are also being cut back and becoming more expensive as I have demonstrated in several previous posts, fewer vehicles miles travelled can only mean less real economic activity in a car centric society such as ours.

But wait, I hear you protesting. What about last Friday’s fantastic jobs report from the Bureau of Labor Lying Statistics? Wasn’t that an indicator of how we have finally turned the corner and are on the road to a full economic recovery? You gloom and doom peak oil pundits were saying all during last year that the return of world oil prices to triple digit territory was going to trigger another recession, yet it obviously hasn’t happened. So what gives?

Well, the flippant answer to that question is that it isn’t 2008 anymore. By that I mean it is now apparent that the global economy underwent a major adjustment the past four years and that $100-a-barrel oil is the new $30. That’s not to say the global financial market crash of 2008, the loss of seven million American jobs, the bailouts of the big banks and Wall Street and the various stimulus programs were not PAINFUL. They certainly were. But as things stand nearly four years later the adjustment is largely complete. The weaker banks, retail chains and other businesses have largely died off, and those that remain are so far better able to weather the storm of higher energy costs, even if many of them have seen the size of their operations reduced.

That’s all well and good, Bill. But what about the fact that the more dire predictions you peak oil types made back in 2008 that oil prices would top $200 or $300 a barrel by now haven’t come true? Clearly, you and numerous others in the movement owe us all an explanation for how you blew that call so badly.

The answer to that question, of course, is right there in those gasoline usage figures. Demand destruction globally, but in the United States in particular as the world’s largest oil consumer, has thus far prevented peak oil’s upward pressure on prices from getting completely out of control. Note, however, that the figure of four million barrels per day less usage almost perfectly mirrors the amount of reserve oil production capacity supposedly possessed by the world’s swing producer, Saudi Arabia. It’s pretty clear that had American demand not been reduced so dramatically, we would again be bumping up against the limits of world production capacity like we were in 2008 and $200 oil and $7.00 a gallon gasoline (at least) would already be a reality.

So what you’re saying is that if America continues along our current path towards economic recovery, and jobs continue to be created at the rate they apparently were in January, that we will soon see demand increase to the point where we’ll again be facing the prospect of $200 oil?

Not necessarily. Even if you take the BLS jobs numbers at face value and ignore the rise in structural unemployment resulting from people “exiting the job market,” there is still the thorny little problem of how the actual net number of jobs can increase so robustly even as the gasoline usage figures above have been dropping so dramatically. Those two data points seem on the surface to stand in direct contradiction to one another.

My theory is that what we are seeing here is globalization, which used to be a driver for increased oil usage and thus higher prices, now serving to actually blunt the price of oil and gasoline. Demand continues to rise in the world’s new factory economies like China and India, of course, but at a rate largely offset by the demand decline in consumer economies like the U.S.

I’ve posted countless stories on this blog in recent months containing news articles showing that, despite higher energy costs, the relentless offshoring of good paying American jobs to the lower wage factory economies is continuing at a rapid pace. Moreover, the wages and benefits for those jobs that do remain are being decimated more rapidly than they already were before the financial crash due to the amount of surplus labor we now have. The new normal in America is that the average person is poorer than they used to be, which means they have less money to be able to afford to buy cars and to drive them as often, especially at the current elevated gasoline price levels.

These effects of globalization on the prosperity of America’s working and middle classes will likely continue to place downward pressure on oil and gasoline prices even as the average barrel of oil itself gradually becomes more and more expensive to produce as the traditional supergiant oil fields deplete and “tight” oil sources (oil sands, oil shale, deepwater) struggle to replace the lost production. As long as we remain mired on the so-called “bumpy plateau” at or near the all time peak of world oil production first achieved in 2005, the globalized economic system will likely continue to limp along unless abruptly disrupted by a geopolitical crisis such as a Middle East war.

Eventually, of course, even without the advent of a major resource war, oil supplies will begin to decline and oil prices will rise to a level above that which can continue to sustain an economic model which dictates that products be made wherever in the world it is cheapest to make them and then shipped everywhere else. Globalization is doomed in the long run, and eventually we will all be returning to localized economies whether we wish to or not. This we know for certain. It just won’t happen as quickly as many in the peak oil community were expecting it to happen.