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Rock and a hard place

Written By: - Date published: 11:49 am, May 11th, 2012 - 20 comments
Categories: economy, energy - Tags:

The world is in a second mini-recession/stall since the Great Recession began in 2008. As in 2010, we’ve seen oil prices ramp up and growth peter out. Now, because growth/oil demand is down, oil prices have dropped back a little. But the moment the economy shows mild signs of life, they’ll be back up again. Short periods of weak growth, oil price shocks, recessions – sounds like the cycle peak oil economists have predicted for years.

And before anyone says ‘well, we’ll just frack our way out of this problem’ or ‘electric cars to the rescue’ understand this: those are expensive energy sources (and also limited in their scalability). The problem we’re facing is not that we’re running out of energy but that we’re running out of energy that is cheap enough to burn and maintain the superstructure of our economy. Put another way, the ‘cost’ of an energy source is the energy that needs to be expended in accessing it – as we replace exhausted easy energy sources with ones that use a higher percentage of their energy potential to be accessed, the amount left for ‘everything else’, the economy, shrinks.

Only rising energy use efficiency or, more accurately, the fact there are so many low-hanging fruit of extravagant, low-value energy use that can be cut is allowing some moderate growth in the space between oil price shocks.

This isn’t an apocalypse, like that dinosaur John Armstrong, said yesterday. It’s a new challenge and it requires a new outlook that doesn’t assume growth is natural, inevitable, and the be all and end all of our society.


20 comments on “Rock and a hard place”

  1. Lanthanide 1

    At the moment there’s a lot of demand from Japan since they shut down their nuclear power. I saw a number of something like 500,000 barrels of oil per day demand just for this.

    • Colonial Viper 1.1

      That’s about right; and it is also why the Japanese Government asked the US to be exempted from the embargo of Iranian oil. The Japanese nation risks being energy starved and even a 5% reduction of oil supplies would be a disaster for their economy.

      • Reagan Cline 1.1.1

        Does the embargo apply to the recently publicised agreement for China to buy Iranian oil with renminbi ?

  2. Agreed James and Central and Local Government need to realise that it is an issue for now, not something that you can put off for a decade or two.

    It should be at the forefront of every regional or national transport strategy as a threat.  Regrettably many strategies do not even mention it.

    • ad 2.1

      Of course we could all do more, but let’s take that car-happy wonderland Auckland for an example. All the trains are going fully electric in 2013-14- and it’s taking a couple of years just to get all those masts and wires in place, let alone build the trains.

      There’s a comprehensive review of all bus routes coming up this year, which will make buses a whole lot more accessable to a lot more of Auckland.

      In some of the difficult stretches of Auckland, like say Remuera Road and Lincoln Road, there are already designs well advanced for putting in bus lanes in which cars travel only if they have three people in them.

      I am not proposing that anyone be grateful, but things are underway in Auckland that have never been this comprehensive or effective in their efficiency drive.

      Regrettably, this is never going to be Melbourne.

      Just a question: have we really truly tested the elasticity of fuel demand since the 1979-1981 oil shocks?

    • Pete 2.2

      Local government may already be looking into it. Down here in Dunedin the council commissioned the Peak Oil Vulnerability Analysis Report (PDF).

      The consultants recommend that Dunedin should work on five objectives to enhance adaptive capacity, social, economic and cultural wellbeing, while requiring significantly less expenditure on transport fuel:
      *Plan to reduce oil consumption by 50% by 2050
      *Transition Dunedin’s urban form with central city lifestyle development, and urban villages, accessed by 100km of safe bikeways and pedestrian zones and served by public transport.
      *Build an electric trolley bus system using efficient modern technology made in New Zealand.
      *Improve Dunedin’s average vehicle fleet efficiency to 5 litres per 100km by 2030.
      *Audit and track fuel use in all sectors, organisations and households and develop action plans.

      I would imagine Wellington under Celia Wade-Brown is exploring similar paths. What matters is whether these are genuine plans rather than just greenwashing.

      • McFlock 2.2.1

        Given the council just got another $2mil of six-month operating shortfall from the stadium, I’d call it greenwashing.

        • Pete

          Between the new waterfront hotel/apartment complex announced today and the discussion of suburban development in this week’s Star, they might be moving towards the “central city lifestyle development and urban village” model. You’ll recall they also announced a couple of months ago that they plan to look at the one-way system. If they plan it right, they can have a gradual transition rather than a radical revolution.

  3. Bill 3

    “…it requires a new outlook that doesn’t assume growth is natural, inevitable, and the be all and end all of our society.”

    And so your post-market economy suggestion is…?

    • Dr Terry 3.1

      Yes, you might well quote and question the awful Armstrong statement, Bill. What does he believe is the “be all and end all” of culture and society? I would love to hear his answer (something better, I hope, than trite words like “new challenge”, “new outlook”). Apparently society can get along fine with no growth (economic, psychological, educational, spiritual, – even oil). Let’s just settle for happy stagnation!

  4. maffoo 4

    I know, lets sell the only means we have of making fossil-fuel-free energy !! that’ll help !

  5. captain hook 5

    fait ccompli.
    we are moving into a new reality.
    woo hoo.

  6. Liberal Realist 6

    EROEI = Usable Acquired Energy / Energy Expended.
    ^It’s a simple equation, too bad our politicians can’t grasp it.

  7. Georgecom 7

    Good news for the economy, price of oil is easing. Bad news for motorists, so is the dollar. So I am not expecting to see the price of oil slip much in the next little while, if it goes down at all. I do wonder however how motorists will feel if it edges up around $2.40 or more if the dollars slips below 70 c US.

  8. johnm 8

    Richard Heinberg :

    “Visualize life without gasoline. You might as well start doing so now, at least in imagination; soon enough, this will no longer be an exercise. Already prices are high and volatile. Next we’ll see international conflicts that shut down big portions of the global oil trade for weeks or months at a time. Strategic reserves will be tapped. The government will commandeer supplies for the military and police. One way or another, you’ll be using much less gasoline than you do today. How will your food be grown and transported? How will you get around? Will your job still exist? How will your community function?”

    Link: http://www.postcarbon.org/blog-post/840439-visualize-gasoline

    The end of the oil age has been happening since Peak Oil in 2005 and the Financial Collapse of 2008.
    We are at the end of growth too obviously how will we share a contracting pie? With greater inequality or more sharing?

  9. jack 9

    There are other sources of energy. Water being one of them but the oil cartels will do anything
    to keep that technology away from the pubic. Google Stan Meyers. He is one of many pioneers who had a deep desire to make us less dependent on oil. Took him 20 years to break the water
    molecule down and get more energy than what he put in..He thought he was a patriot.. He’s dead. Also, Google Nicola Tesla. His one aim in life was to make electricity free to everyone.. Yet, no one has heard of him. The father of AC current.

    The oil cartels rule the world. We’re at their mercy. Simple fact. You don’t have to like it but you
    can’t do anything about it. On the positive side shipping might be too expensive and local manufacturs will be back in business. More jobs.

  10. Even the IMF have woken up to peak oil see following for reference

    and Muldoon was right – think big was necessary – just not in 1980



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