Perhaps it’s the unseasonable chill that has settled over Britain and shows no sign of abating but there’s a decidedly gloomy feeling in the air. Something doesn’t feel quite right; indeed it’s all gone a bit Twilight Zone of late.
I’d hazard a guess that the eerie feeling is the initial and ongoing onset of cognitive dissonance that is growing in the damp basement of the nation’s consciousness. It’s that uneasy feeling that all is not well and that all is not going to be well, despite how many times the politicians and techno optimists tell us everything is on track.
And that’s just the small minority of people who take a passing interest in current affairs. The majority, whose days are filled with TV entertainment shows, sports and other diversions, must really be wondering what the hell is happening and why they are suddenly finding their options for living a normal life constrained ever more with every passing month. It must be the government’s fault.
But this is what peak oil looks like. It’s what peak oilers have been saying it would look like for years if not decades. In fact, we are following the script to a tee, which makes it all the scarier because we know what is coming next. We can tick off the following as ‘happened already’:
- Global liquids (excluding ethanol etc.) plateauing and supply remaining constrained despite growing demand
- Which in turn led to a huge hike in oil prices that has stayed with us
- Thus causing a permanent state of close to zero growth or shrinkage in the major industrialised nations
- And a shortage of food in much of the Middle East, leading to riots and revolutions
- Followed by a desperate scramble for unconventional fossil fuels, such as shale gas, tight oil and deep sea oil
Furthermore, we were told to expect politicians to do anything to restore the expected growth paradigm, and that all of their efforts would be in vain because of their collective failure to recognise energy inputs as a limiting factor for economic success. We can certainly tick that one off the list as well.
So what’s next in the peak oil recipe book of How to Make a Global Disaster of Epic Proportions? Well, almost certainly we can expect to see the wheels come off the global financial system. The 2008 ‘credit crunch’ was just the first distant rumbling noise of an approaching storm, and what happened in Cyprus last week was the first violent flash of lightning as that storm makes landfall. Depositors now face losing 60% of their bank deposits in what looks like a smash and grab by the troika of the IMF, the EU and the ECB. I’d be surprised if many of them saw anything at all of their deposits back. Europe is so phenomenally broke that to ‘fix’ the debt would require some several hundred trillion dollars. Reality check: the entire world economy is only about 70 trillion dollars measured in annual GDP.
Those on the inside know the scale of the problem and we are now seeing the first part of the great deleveraging. For the past hundred years or so we have seen a giant credit bubble grow – the biggest credit bubble in the history of the world. There is now something like 99 units of phantom ‘money’ for every unit of value. Those in the know are quietly getting rid of their soon-to-be-worthless paper wealth and using it to buy up tangible wealth in the form of solid productive enterprises, land, minerals and gold. Empires in waiting are quietly disposing of their US debt and buying up precious metals, and the average man in the street thinks the fact that the US stock market is rising means that everything is doing fine (just don’t look at the trading volumes, which tell another story).
Why is finance important? Because, as Nicole Foss tirelessly points out at The Automatic Earth, finance is the operating system of the global economy. If it crashes, then nothing but a complete system reboot will restore the economy. Indeed, when it does crash we will see economies freeze up, like has happened in Cyprus. Forget a 1 or 2 percent drop in GDP, we’re looking at anything up to 50% wiped off the value of the economy in short order.
The history of humankind is a history of snatching. First it was just basic land snatching from one another. Slavery was a form of snatching other people’s energy and using it to get useful products and money from the land we had snatched. Then we discovered oil, giving us the chance to snatch energy that had taken millions of years to form. This in turn allowed the creation of the biggest credit bubble in history, which is a form of inter-temporal snatching i.e. appropriating wealth in the form of debt from our descendants. Now that the inter-temporal wealth bubble is collapsing in on itself the clever snatchers who know that the game is up are busy appropriating productive assets with the idea of leaving the rest of us out in the cold to freeze.
We didn’t mind the snatchers as long as the game was on the up. We were quite happy to buy shares and over-priced property and take out private pensions. But now that the game has been thrown into reverse we are losing our trust in the institutions that rely on trust to function. Banks, corporations, regional and national governments. And as the trust erodes (prior to an all-out stampede when a critical mass of people catch on) these centres of power will do whatever it takes to maintain the concentrated core at the expense of the periphery. Once that happens panic will set in as people suddenly realise that they are actually on the periphery, and an unholy scramble for ‘safety’ starts- although by then it will be too late.
In the meantime we are fed an illusory series of bubbles, which rise into the air before our eyes, shimmering beautifully. A bubble in this sense is an apparition of wealth that convinces us of its value. It rises up, expanding as it does so, getting bigger and bigger as people inflate it with their wealth. It’s a law of physics that an expanding bubble will always burst and a law of human nature that some people will always insist that this isn’t true. That’s what our economies are doing these days. In the absence of creating real value they are instead merely blowing bubbles for reasons of political expediency and the enrichment of financiers extracting wealth from the suckers among us.
Bubbles might be ephemeral, but when they burst they create real damage in the real world. Industries crash, people lose everything, political careers are cut short and everyone says ‘never again’. We’ll likely witness the bursting of the shale gas bubble pretty soon which, among other things, will spark off an energy panic and case stage two (or perhaps it will be three) of the financial crash.
So contagion is likely to be the order of the day. Europe will contaminate the US (despite an initial flight to the illusory safety of the US dollar), China will struggle to service its infrastructure under the deadweight of its reckless expansion, and everywhere else in the world will bear the brunt of the ensuing chaos. A vast deflationary period will ensue, probably for a century but maybe longer, until economies can reestablish themselves at a lower level of energy throughput and with a lot fewer mouths to support because several billion of us rely on business as usual to ensure adequate food for our survival.
And that’s just the financial problems, which in the long run are actually the least of our worries. Following financial collapse and the inevitable wars that will ensue (Europe is laying down the groundwork for one right now) we’ll be hit with the kind of power shortages that nobody in the 21st century really likes to contemplate. There may well be plenty of oil left but that doesn’t mean you or I will benefit from it. What’s really important is traded oil. Once a country, say Saudi Arabia or Venezuela, falls below a certain threshold of oil production needed to keep the local population happy, the idea of selling it abroad becomes deeply politically unpopular. The only way to then get at that country’s oil is to fabricate a casus belli and invade it. It’ll be a pity that the major economies will likely be too broke to finance such resource wars.
Telescope events again and even the great energy crunch of the next few decades will pale in significance to the great damage we are doing to the environmental commons, with topsoil, the oceans and the climate all being left in a state far less capable of supporting life than they are even now. That is the great gift we will leave our children and their children and so on.
It doesn’t give me any joy to contemplate this, or to say that these predictions are coming true. Indeed, it’s hard enough being a Cassandra when people don’t want to listen. Try telling any of the above to the cornucopian techno optimists and they’ll tell you to perk up a bit and put your faith in the scientists or policy makers or economists. Soon it will all be flying cars and trips to Mars. Indeed, there’s been plenty written in the last couple of weeks on the peak oilosphere about the modern religion of progress, and some of us would do well to acknowledge that we’re probably also trapped by it to some extent. The realization of the trap is perhaps even harder to bear than when one considers our current predicament in any depth.
And that’s another techno trap of our age – the assumption that the universe operates along linear lines. That’s why we put hope in economists who regard monetary and fiscal policy as scientific instruments. Just tweak this knob and this will happen. Pull that lever and that will happen. But that’s not how the real world operates – economies are human constructs and as such they are vulnerable to the vagaries of human irrationality and emotional drivers. Fear and greed are two words conspicuously absent from economics textbooks.
And it’s the same with science. Most people these days erroneously equate science with technology. Thus scientists in labs create the latest iPhones and cures for diabetes. Give them enough time (and money) and they will cure cancer and perfect cold fusion. Just don’t hold your breath while you are waiting.
So what hope is there? Well, it’s not my intention to dish out hopium. For what it’s worth I’ve spent the last week researching shale gas and coal for an article. I had a long phone conversation with Carl Shoupe in Kentucky, who used to be an Appalachian coal miner and now fights big coal in a town where everyone is a) working for the coal industry and b) is being shafted by the same. He says that even in this community some people are starting to twig that blowing up mountains and bulldozing the rubble into valleys wasn’t such a bright idea after all. There’s a bit of hope for you.
And what else? I’ve been out meeting local food producers, including organic farmers, fishermen and various artisanal producers. It’s heartening to see such a thriving network of local foodies, even if it is against a backdrop of continued supermarket expansion and a general lowering of food quality. I have been a bit surprised by the lack of organic food in the shops in the UK – there seems to be far less than when I lived here last in 2000. People, on the whole, seem to be going for the cheapest, junkiest food and the situation seems to be getting worse all the time (the only ‘job creators’ in the news seem to be the big fast food chains and the discount food stores – all of whom are doing very well. Yet another facet of peak oil.) So from now on I’ll be getting my organic foodstuffs delivered in a box once a week from a local farm. It costs more than the local Tesco, but at least it won’t poison me and my family and it’ll provide a bit of extra income for a local farmer.
But even so, if the supermarket trucks stopped rolling tomorrow, how much food would the regional food network where I live be able to supply? 10%? 15%? Who knows. Hopefully it was pay to get to know the people growing the food I eat.
In the meantime I’ve been concentrating of getting some resilience built into my own life. A few fruit and nut trees have gone in at Fox Wood – the start of a forest garden. I’m stocking up on tools and various pieces of equipment while I can. I might even get that poly tunnel set up this year instead of next – there’s no point hanging around. I know it’s not much, but it’s a start, and you’ve gotta start somewhere.