June ASPO Newsletter Out  

The latest (very bearish) ASPO newsletter is out, and they now have a much more web-friendly HTML delivery option.

They have a good report ("Peak Oil In Australia") from last months Australian Petroleum Production and Exploration Association conference in Perth, which has some interesting comments from a director of Arc Energy (one of the smaller local producers on the west coast).

Eric Streitberg, Executive Director of ARC Energy a successful small onshore producer, showed a slide of Swenson's post-peak scenarios (www.hubbertpeak.com/scenario.htm). Streitberg's graph showed us just past the peak.

Interestingly, he conducted a straw poll, of the 1,000 or so petroleum professionals present.

"Please put your hand up if you think that we have crossed the Hubbert Peak and we are entering a demand driven pricing era, and hands up those who don't? " Streitberg scored it 50:50 at the time and said "The rest of you who didn't put your hands up had better talk to your management consultants about a course in decision making.

There is also an interesting note on how Russia is inhibiting energy exports, presumably in an attempt to conserve their resources for their own use. Plus a note on the linkage between food production and oil, which may be a little, err, extreme in its conclusion (although the vision of cannibal economists is pretty novel).

The World’s population has grown in parallel with oil production to its present level of 6.4 billion, which is evidently not sustainable. It is hard to avoid the conclusion that this Century will see the population fall to close to pre-Oil Age levels as the oil and water reservoirs are depleted. Oil will be gone in its entirety but the rains will still fall to quench the thirst of the survivors and gradually re-charge the aquifers.

Most governments a driven by the precepts of classical economics which proclaim that supply must always meet demand in a properly functioning open market. They are accordingly unlikely to plan or prepare in any sensible fashion until cannibalism breaks out in their cities. Even that may not break the grip of this outdated mindset, as flat-earth economists will still be able to watch from their balconies pointing out that human flesh turned out to be a happy substitute for beef.

They also include the "Wile E Coyote" dystopian vision for the US economy.

One key to America's future will be: How quickly can we build or rebuild heavy and light rail? And where will we get the money to do it? Railroads are the cheapest transport, the easiest to sustain, and the only solution to a post-automobile America. (For reasons I haven't space to detail, hybrid cars and alternative energy won't cut it, if by "cut it" one means retaining anything like the present standard of living. A massive investment in railroad infrastructure could offer jobs to the unskilled and skilled alike, absorb much of the inevitable population displacement, and create a new social equilibrium 10 or 15 years down the line. Old RR cities like Grand Junction, Colo.; Amarillo, Texas; and Albuquerque, N.M., could become vital centers, offering new lives for the displaced. Railroads are key, but the question is: how to finance them?

There's only one section of our economy that has that kind of money: the military budget. The U.S. now spends more on its military than all other nations combined. A sane transit to a post-automobile America will require a massive shift from military to infrastructure spending. That shift would be supported by our bankers in China and Europe (that is, they would continue to finance our debt) because it's in their interests that we regain economic viability. What's not in their interests is that we remain a military superpower.

And that's where things get really interesting. The question becomes:

Can America face reality? If the government responds to the coming changes by attempting to remain a superpower no matter what, there is no way to underestimate the harm. The numbers speak for themselves. Soon we'll no longer have the resources to remain a military superpower and sustain a livable society that is anything like what we know today. It happened to England; it happened to Russia; it's about to happen to us. England sustained the transformation more or less gracefully; it lost its dominance while retaining its essential character. Russia is still in a period of transformation, but has remained a player thanks to its oil reserves. Europe in general – France, Germany, Italy, and Spain (all world powers in the fairly recent past) – is creating a post-national society, the most experimental form of governance since America's revolution. We have no appreciable oil, and we no longer have a manufacturing base. So what will the United States do? Sanely recognize its declining status and act accordingly, or make one last ignoble stab to retain its position by force?

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