Wednesday, June 29, 2011

Snake Oil

Barack Obama's recent decision to release reserve petroleum was one of those head-scratching moments in modern history.  Reaction to it is almost as puzzling, since it seems to mostly depend on one's political viewpoint -- on one hand, those who support Obama politically are applauding the decision, saying it will put pressure on Iran and stabilize oil prices.  Those who don't support him have mocked the decision, pointing out that it was around one day's worth of consumption for the United States, and are chanting "drill, baby, drill!"

Unfortunately, regardless of the fantasy world of most commentators, prices are predictably starting to climb again and the reality of four-dollar-a- gallon gasoline is going to be here before much longer, maybe even before the 4th of July "travel holiday" again (it's up around 25 cents here over the last day or so).  In neither political case, either, does the reality of Peak Oil come up in any of the discussions, so we're still -- as a nation and a civilization -- living in what is looking to be a permanent state of denial.  Even if we opened up previously off-limits in America to drilling (who doesn't want to go to the beach and see oil rigs lining the horizon? -- much nicer than dolphins, waves and seabirds to look at), it would still not make up for where would need to be at to make prices drop significantly.

Apparently, that same permanent state of denial is also extending to the economy and money.  America, politically speaking, is becoming a superpower-sized version of a gambling addict who has already sold most of his worldly possessions to keep playing, and is now borrowing money from one loan shark to pay back to another, so bad are his debts.  All it would take is for one of our creditors to decide to eat their debt and put cement overshoes on us, and the game is over.  Talk of "across the board cuts" makes for good sound bites and lively political discussions among the vapidorati in the old and new media, but has as much chance of happening as I do of flapping my arms and flying.

So, just between Peak Oil and Megadebt, our future in America doesn't look so hot.  As oil grows scarcer and more expensive, it will go to nations who can offer oil exporting nations something of value in return.  Fiat currency is destined to crash, leaving only currencies which are backed by mineral wealth (or some other commodity) as means of exchange.  Since our own currency is built on a smile and a handshake, and is no longer built on anything with at least some physical presence (gold), America is going to sooner or later be turned away at the door when try to buy oil, and $4 a gallon on that day is going to seem like twenty-five cents a gallon does to us now.  We can try to take it by force, but I tend to think that the spectre of scorched earth in the form of burning oil wells would probably throw cold water on that with immediacy and there will be a token trickle released to at least allow Air Force One to fly around to whatever few airfields are left open by then.

I imagine that Barack Obama did what he thought he could at this point -- try to deflate prices a little, hope for the best, that maybe the various oil producing nations would do a little soul-searching and decide to act charitably in the interest of good will and love, or something along those lines.  However, like the larger economy, this is just where reality meets the road.  We have hit the iceberg and are taking on water too fast to stay afloat, we've gone off the cliff and are like the coyote in those brief seconds before gravity catches up to him, we're like the person with terminal cancer who gets coffee enemas because they think they can beat it, pick your own metaphor. 

The haunting scene, early in the Road Warrior, where Max is collecting gasoline from a wrecked car into a pan comes to mind.  It's only a little bit, maybe half a gallon or a gallon, but it's enough to get by another day.  That is where we are now, on a national scale, with releasing reserves in the hopes of driving prices down enough to let the economy creak along a little longer.


  1. I guess it is time to start looking for more advanced solutions for private transport, like hybrid engines and most of all a harsh regulation on cars that consume more than a gallon per 100 km. That would imply smaller cars, the whole car manufacturing industry rethinking itself. How can it be done? By state imposition and programs, just like the infamous quinquiennal programs of Soviet descend - or perhaps more suitable nowadays German objectives. Another example could be new homes. Impose new construction licenses to respect full autonomous off-grid energy production by photovoltaic. Germany has an interesting regulation on the matter and has developed an excellent industry sector with reliable ties with China.

  2. Markus,

    I think the problem we have now is that it's too little, too late. Back in the 20th century, two things happened -- the deliberate destruction of mass transit by GM and the returning GIs who insisted on having their own quarter acre out in the suburbs -- that forever changed the structure and distribution of population in America.

    Even if we passed laws at this point to force people into smaller cars, we would have to face the problem that there is a sprawling infrastructure needed to support it, itself become less and less well maintained.

    The difference between us and the Romans? Their roads are still around.

    People as a whole need to rethink what they value and why they value it. Is there sense in living 30-40 miles away from where you work? Or having to travel for half an hour to get to a store? All the while sitting in traffic? I don't think these assumption are ever examined, unfortunately, and probably won't be until gas is $8 a gallon and people realize that living in the suburbs is nearly akin to being stranded on a desert island.