A lot of the delusions that are now rampant in the country all focus on the alternative energy scene. I want to be very clear about this, I am in favor of alternative energy. I think we’re going to do everything we possibly can. But the key to understanding alternative energy is this: First of all, we are going to be disappointed by what it can do for us, and second, it is not going to change the fact that we have to make other arrangements for all the important activities of daily life…

We’re having an incoherent conversation about that in our society right now because of the psychology of previous investment. We’ve invested so much of our wealth and even our identity in the [existing American] way of life that we can’t imagine letting go of it… But the “project of suburbia” is over as a period in our history and the homebuilders are going down and they will not be coming back.

We’re in the process now of losing somewhere between $1.5 and $3 trillion worth of capital. That capital is going to be lost. It went into a black hole and things don’t come out of black holes. We’re not going to have money to lend to people, least of all for mortgages. In fact, the whole idea of mortgage in America may be similar to what happened back in France after the Mississippi bubble. They didn’t even use the word “bank” for 150 years, it was such a toxic word.

And we are facing a huge problem with food. All of the systems of our daily life are going to have to be reformed, whether we like it or not…really. We’re going to have to grow more of our food closer to home. The age of the 3,000-mile Caesar salad is over! We don’t know how much food close to home we are going to have to grow, but at least more than we do now…probably a lot more… This is going to change completely our idea of how we value our rural, so-called undeveloped, land. Right now, we’re still in the frame of mind where undeveloped means undeveloped for suburban crap. But that’s going to be over. From now on it’s going to be land that has needs to be used for agriculture…

But let me step back for a moment, just to give you an idea of the differences between suburban development and urbanism. In suburbia, everything is rigorously and relentlessly segregated from everything else.

You’re not allowed to live near the shopping mall; the school cannot be anywhere near the business. Everything is separated and everybody has to get in the car and go out to the “collector boulevard” then go into the pod, whether it’s the education pod, the business pod, the housing pod and we can’t do that anymore. We can’t afford it, especially from 38 miles outside of Dallas and Minneapolis.

By contrast, traditional urbanism networks of interconnected streets mix use with people living close to the schools, the shopping and the business and it will become self-evident very soon that that is a superior way to live…

We don’t know what the city of the future is going to be like, but I believe our large cities are going to contract substantially, even while they “densify” at their centers… And one of the things we’re going to learn again, as the automobile begins to diminish its presence in our life is how wonderful the composition of the urban block can be, because the center of it is not going to be for parking… We are going to re-learn the design and assembly of human habitat and that too will be a self-organizing process, as we’re compelled to respond to the circumstances of the global energy emergency…

We need a self-image that informs us that we’re confident and that we are competent and that we are capable people. And that’s why one of the first things we have to do is rebuild the railroad systems in America, because it’s the one thing we can do right away that will have the greatest impact on our oil use. It will put thousands and thousands of people to work in all layers and skills. The infrastructure for running it is lying out there rusting in the rain and it’s the one project that we can do right away that will allow us to demonstrate that we can actually do something. We can do a collective project as a nation, as a society, as a people that can actually accomplish something important at this time.

You know…the kids in the college lectures are always asking me if I can give them hope. And the one thing that the college students don’t understand is that they have to become the generators of the hope. They have to generate it themselves within themselves by demonstrating that they are capable people who understand the signals reality is sending to them about the kind of world they are going to be living in the next 20–30 years…

We’ve got to build a different world here in North America now and we don’t have any time to waste. We don’t have time to be crybabies about it. We don’t have time to point fingers. We have too many things to do right away. We’ve got to reform the way we produce our food; we’ve got to change the way we do commerce and trade; we’ve got to change the way we get from point “A” to point “B,” and we have to inhabit the landscape differently and, as far as investors are concerned, we’ve got to find a way to do finance that’s not based on getting something for nothing, because that is what has gotten us into this situation we’re in now.

Regards,
James Howard Kunstler
August 18, 2008

Wasting Resources was originally featured on Whiskey and Gunpowder

Many of us out there who have been involved in commodities trading and analysis have been warning, watching and waiting for the last two-three decades. So it comes as little shock to us that we are in this “crisis” now.

The Long Emergency

One of my favorite writers and lecturers is James Howard Kunstler. The Long Emergency is the title of one of Kunstler’s books, as well as one of his catchphrases, and, boy, is it dead on.

This commodities frenzy, and the related dash by nations to snatch up and secure all sorts of resources, has been a long time coming. It certainly didn’t happen overnight. I can safely say that for the vast majority of my career, commodities have been the poor redheaded stepchildren of the investment world. Two decades ago, when I walked onto the trading floor of the New York Cotton Exchange at the old World Trade Center, the climate was very different from today’s.

Back then, most “mainstream” investment houses looked at the commodity markets as a subculture. Commodities were, basically, another branch of Las Vegas, just without the free buffets, dancing girls and booze. Actually, maybe some of that stuff was available on a daily basis, but it was a lot different then.

I compare it to how Times Square was back in the 1970s and early ‘80s. If you ever visited the Big Apple back then, you know that Times Square was the worst of all things. It was a seedy, grimy, crime center filled with many colorful characters. Let’s just say Times Square was not a place tourists went, unless, of course, they were sex tourists.

Beneath it all, though, was an unpolished gem. The same is true with the resources market.

Respect Is Earned

Fast-forward to today.

Imagine you’re Rip Van Winkle and you go to sleep on 42nd Street back in, say, 1975 (let’s call you “Rip Van Wino”). You wake up in 2008 and see all the porno houses gone, bars shut down, strip clubs a distant memory…and then, suddenly, you are escorted to a homeless shelter because of New York policies on street people near 42nd Street… Welcome to the new world.

In some ways, this is true of the commodity markets, too. When I got involved with commodities in 1988, the exchanges were the low men on the totem pole. The members held all the exchanges privately, and none were traded on the stock exchange. It was a secretive world, and the only way to get a job on the floor was to know somebody. I got my job because my best friend’s brothers owned seats on the floor and gave me a job as a clerk.

Everyone on the trading floor was either related to or knew someone in the biz; it was a very incestuous market. The basic reason was that there was so much money to be made in the market nobody wanted outsiders coming in. It was a shortsighted approach, but it was the rule of law down there. The problem was that the markets stayed small and took only a small percentage of the global investment pie.

As the early 1990s set in, commodities, basically, fell and/or stayed stagnant for much of the decade, except for during the occasional war, such as we had in 1990 and 1991 (oil went wild when Saddam Hussein invaded Kuwait).

The general public focused on stocks and still pooh-poohed commodities. Nobody talked about corn or soybeans at any cocktail parties I went to in 1991. Now it’s different. I must get 15 calls a week inviting me to speak about corn and soybeans at events or on TV. It’s been a paradigm shift from 1989 to 2009.

Bubblicious

The most common question I have gotten on a weekly basis for the last 18 months is “When will the bubble pop?”

My answer is pretty standard: “There is no bubble!”

I am not usually invited back to those cocktail parties, as it scares the guests. The truth is we are not in a bubble. We are in an upward correction propelled by years of denial, stupidity, underinvestment and neglect. The blame falls squarely on several parties.

Wall Street is guilty for not embracing the commodity markets earlier. Wall Street should have allowed commodity prices to reflect the true nature of pent-up demand by making those markets available to its clients. Instead, Wall Street discounted commodities as some form of gambling.

The commodities exchanges and traders are also to blame for not making their markets more transparent, and for also projecting an image of secrecy and mystery.

And I could tell you stories about the underinvestment in basic production over the past couple of decades. Really, what were people thinking? That prices were low, and would stay low forever? Did it ever occur to anyone that all those babies born in the 1970s and 1980s might some day grow up and want food, energy and manufactured goods?

No, this is not a bubble. It’s a coming of age, a big, hard reality check that has been decades in the making. I have seen more activity by Wall Street in the resource markets in the last three years than in the previous 17. And I do not expect that it will ever go back to the way it was. I also don’t expect to see 42nd Street filled with porno and hookers again, either.

Change is often hard to accept. $140 oil, $1,000 gold, $8 corn…this is all the new reality. None of these new price trends are a figment of some rogue speculator’s imagination or the products of evil activity. This is a wake-up call that our growing world is hungry for the limited resources it still has.

The most important thing to remember is that markets, even parabolic bull markets, always correct. Those corrections can be painful if one is overextended or married to one side of the market — in this case, the bull market.

So ride the wave of change, of course. Be flexible, buy on the corrections, sell for profits on the overdone rallies and vice versa. Go short when clear tops have been made (although I grant it can be hard to determine the exact top).

There is no trail of breadcrumbs to follow on Wall Street, but that’s why you have me to help guide you. As long as grains don’t go up too much more, I should be able to supply you with a good trail to follow for many years to come, whether commodities are in rally mode or consolidation.

Yours for resource profits,
Kevin Kerr
July 16, 2008

P.S.: So if you agree that high prices are here to stay, that means there is definitely money to be made in commodities markets. But how exactly do you begin? It’s definitely a tough world out there, and the guys that have been in forever will try to keep the new guys out. That’s why I’m offering you a guest pass into this market that will help you earn more than enough money to help you keep pace with these rising prices.

Commodities Market was originally featured on Whiskey and Gunpowder

One of the Last Outposts

The premise of World Made by Hand, James Kunstler’s new book, is apocalyptic. For a variety of reasons related to Peak Oil and economic collapse, American civilization simply broke down. The wheels just fell off. The economy collapsed. Commerce broke down. The entire social construct of over 200 years vanished.

The small, 19th Century town of Union Grove, New York was a lost backwater during the buildout of modern American suburbia. But in post-Peak Oil America, Union Grove became one of the last remaining outposts of some small measure of stability. But what sort of stability?

In Kunstler’s vision, Union Grove is a futuristic, yet in many respects colonial, frontier society. But Union Grove is no Fort Apache. Indeed Union Grove is isolated, and that is its saving feature. It is so small that few bother to go there. Like Ireland during the Dark Ages, it is too remote and isolated for the barbarians to want to conquer. And that suits the locals just fine.

The contact between Union Grove and the outside world comes through the occasional traveler, or via water-borne commerce down the Hudson River with the city of Albany — or what’s left of it, which makes for a scary couple of chapters.

And what is left of civil society in Union Grove is a ragtag group of citizens who barter with each other over goods they’ve ransacked from the ruins and landfills of 20th Century America. People live in utter simplicity, farming as best they can and living off the land.

A New Form of Social Construct

But life in Union Grove is far from primitive. There are houses with fairly tight roofs. There are brick ovens and fresh-baked bread. There is a small-scale hydropower system that both channels running water and delivers a modicum of electricity. There’s a sawmill, and metal-forging operation. And there is a modest-scale farming, dairy and poultry operation staffed by a new sort of laboring class that resembles serfs of old.

Serfs? Kunstler offers a quick summary of social regression in a low-energy community:

“All the (Union Grove) trustees were men, no women and no plain laborers. As the world changed, we reverted to social divisions that we’d thought were obsolete. The egalitarian pretenses of the high-octane decades had dissolved and nobody even debated it anymore, including the women of our town. A plain majority of the townspeople were laborers now, whatever in life they had been before. Nobody called them peasants, but in effect that’s what they’d become. That’s just the way things were.”

Indeed, in previous days there were ample amounts of cheap energy. Cheap energy was, both literally and figuratively, a great force for social mobility, and political harmony. And over time the social-enabling process of cheap energy became second-nature. Using energy released by ancient deposits of coal and oil, the U.S. built much of its 20th Century social construct.

But in World Made by Hand, Kunstler asks us to reconsider the entire concept of our social arrangement in the vanishing light of a low-energy existence. There is no “Americans with Disabilities Act” in Union Grove. Indeed, most Americans with disabilities have died off.

The new world is hard, if not harsh. The old world of niceness has vanished. The society that has taken its place offers a living example that is reminiscent of the Old Testament.

The implications of this can shock the unprepared mind. But don’t blame Kunstler, who merely poses the questions and invites the reader to extrapolate the answers.

The Aesthetic Sense

Kunstler explores another key issue of post-Peak Oil modernity as well. Can people recover a sense of aesthetics in the low-energy world of the future? In Kunstler’s book, Union Grove is cut-off from its larger past, as both part of a great nation and as part of a mass-culture.

In the new world, Union Grove is not subject to any outside dictates of contemporary standards — whatever those may be. So any aesthetic sense now has to come from within. In other words the days of the mass-culture, of aesthetics being handed-down and blessed — if not jammed down one’s throat — by the likes of Oprah or Martha Stewart (let alone the architects on retainer with McDonalds or Midas Muffler) are over.

The simple lawn of Kunstler’s narrator Robert, for example, is a raised-bed garden. Yet it may as well have been designed by Palladio, if not the ancient Imhotep. “It was geometrical, a cruciform pattern, the beds transected on the diagonal as well, with brick paths carefully laid. With our many material privations, it was not possible to live without beauty anymore.”

The Personal Life — the Pursuit of Happiness

In Kunstler’s Union Grove, life is local. It has to be. And for this reason alone, people actually know how to party. They get together for local festivals, at which people eat real barbecue — something of a rarity and delicacy in a low-energy society.

Lacking the boom-boom tools of sound amplification, old-fashioned folk music emanates from simple instruments and sincere voices. People get drunk, smoke pot (cannabis plant grows wild) and make eyes at each other — all of which leads to some interesting hookups in a world where people are a diminishing and endangered species.

And in Union Grove there is even intellectual opportunity. There are books to read, although a limited selection of titles. In one short scene, for example (and Kunstler at his best in his use of micro-detail) the narrator ponders the meaning of Inside the Third Reich by Albert Speer, architect and Minister of Armaments under Adolph Hitler. Really. Kunstler chose to highlight Albert Speer, of all people. It’s brilliant.

Things Can Get Worse — and They Do

At the end of the world, though, things can still get worse. A fundamentalist sect rolls into Union Grove and begins to assert a creeping, if not creepy, sort of control. In one instance, the sect members confront townspeople on the street and force them to cut their shaggy beards. It’s sort of a post-Peak Oil version of the modern PETA activists hurling blood-balloons at people who wear fur coats.

Yet the religious sect offers an angle to Kunstler’s story that is nothing if not intriguing. Most of the sect members are decent folk with important mechanical skills. And some are warriors. That is, some former soldiers are tough-as-nails and well-worth having on your side in a fight. And Kunstler’s narrator Robert gets into a fight or two in this book.

On a higher plane, Kunstler has devised a scene that is just astonishing. It actually leaves the reader wondering if God has truly channeled divine powers through one sect-member in particular. You’ll have to read the book and make your own call on that one.

A Fall from a Great Height, if Not from Greatness

Let’s stop right here. Kunstler’s book was published in March, when oil was selling near $100 per barrel. Now a few months later oil is well over $145 per barrel.

What a difference four months and $45 dollars makes. High cost oil burners are already confronting disaster. Airlines are crashing financially, and we are on the way to “Silent Spring” by next year. Trucking is breaking down under the strain of $5 diesel, while American motorists are going broke with gasoline over $4 per gallon.

So since Kunstler’s book hit the shelves, we are further away from the past we know. And we will probably never go back. And we are much closer to a future that is yet unknown. Sad to say, we may arrive there sooner than we expect.

All of which is why World Made by Hand is an important book, as well as a pleasure to read. Kunstler’s book is thoughtful. And it will push you to the edge of your comfort zone. The book is harsh, without being nightmarish. It is cautionary, without being overly judgmental. And Kunstler’s book even offers glimmers of hope.

Kunstler’s writing style is careful, in a way that is reminiscent of fine work of F. Scott Fitzgerald. No, World Made by Hand is not exactly The Great Gatsby. But like Fitzgerald, Kunstler tells a summer tale and writes with grace, elegance and astonishing attention to detail.

Through it all, as with the protagonist Nick in Gatsby, Kunstler’s narrator Robert relates the story of a fall from a great height, if not from greatness. At one point in World Made by Hand, the narrator Robert recalls how he used to fly from coast to coast — Boston to Los Angeles — as a matter of routine, with his old job at the software company.

In the days of old Robert flew so high, and moved so far. But his paradise is lost. He has been cast down to where he now dwells, near the Zip Code for Pandemonium. Robert is challenged just to journey forty miles or so, down a failing road to Albany where people might kill him for his shoes.

How far has Robert traveled in his life? And how far has he been brought down? Now in Union Grove — and fortunately for him — Robert is surviving. He is a troubled man, living a post-apocalyptic life in a low energy world. His daily existence is filled with dark shadows of a lost past. And you finish the book wondering if you will one day be so lucky.

Until we meet again…
Byron W. King
July 14, 2008

P.S.: Kunstler’s fictional story is certainly enough to scare us. Imagining a world where Peak Oil has ravaged our current lifestyle is just the incentive we need to start coming up with a solution now. That’s where the oil vacuum comes in. This new invention is one of the best innovations of the past decade and could easily be a big part in the Peak Oil solution.

“World Made by Hand” Book Review was originally featured on Whiskey and Gunpowder

The book begins innocently enough. Two men are fishing in a stream near an old railroad bed. They are talking, enjoying each other’s company. It is “sometime in the not-too-distant future.” And thus does a story unfold over a couple of summer months. The only hint that something is amiss comes when the narrator states that he “couldn’t remember a lovelier evening before or after our world changed.”

The world changed? Then the two fishermen gather their belongings and walk back to town. They are walking, of course, because there are no motorized vehicles. In this world there is no oil. But the lack of oil is just the beginning of this summer’s tale.

Welcome to Union Grove, Where there is No Oil

No, this is not a story about how the world has “run out” of oil. In the big scheme of things, the world will never run out of oil. The Peak Oil concept means a lot of things to a lot of people. But one thing that Peak Oil does NOT premise is that the world will “run out” of oil.

The key idea of Peak Oil is that output of crude oil will reach some maximum level on a global scale. Then world oil output will decline over time. (We may already be there.) There will be oil, but not enough to go around in amounts that people and nations desire. “Not enough” is not the same as “run out.”

In the future there will be oil — plenty of it, perhaps — in some parts of the world. And there will be very little oil, or none, in other parts of the world. And that’s the problem.

Which gets to the point of James Kunstler’s marvelous new book. In the “not-too-distant future” you won’t find oil in the small, upstate town of Union Grove, New York. Union Grove is an isolated, low-energy hamlet. For Union Grove, the Oil Age is over. And in this futuristic setting, Kunstler plays out a prophecy that may be closer than you suspect.

Quite an Apocalypse — And Quite the Post-Apocalyptic Novel

Kunstler’s novel falls within a genre called post-apocalyptic literature. The author’s premise is that there will be an apocalypse. Bad things will befall mankind. Lots of people will die. And some people will survive. This is the survivors’ story.

So in a literary sense, World Made by Hand is similar to some famous Cold War-era novels set in a post-nuclear-war world, such as On the Beach or Level 7. Kunstler is writing fiction about survival and survivors, describing what might happen.

A fictional world creates a new set of boundaries. Some things are not plausible in our “real” world. But good fiction makes possible events and reactions that might not otherwise occur. Within fiction, some events take on a new form of logic or plausibility.

But to be convincing, we have to trust the author or the narrator. With enough trust, we can accept a story based on the narrator’s perspective. The narrator becomes our eyes and ears. So the narrator must come across as reliable.

In World Made by Hand, Kunstler’s narrator “Robert” — a former executive at a software company, turned carpenter — mixes science and technology with well-established economic and political trends. You can believe what is happening in this book because so much of it seems rooted in what you already know to be so.

Overall, Kunstler paints a grim picture of the future. Oil or no, life goes on. It’s like the oil-scarce world of Mad Max, but without the madness. All of life’s emotions are still there, but in different proportions than what we’ve come to expect in our well-energized time. Really, on occasion life is tender in the future. It’s even sweet. In some scenes this book tells a story that is funny. Yes, you are allowed to laugh as you read this book.

The Grim Part

Let’s discuss the grim part. What sort of apocalypse occurs? Well, Kunstler never just hits you in the face with it. Like a grand master, he plays his cards subtly. Kunstler offers you only enough information at any point for you to feel the chill winds of a terrible disaster.

In one exchange of dialogue between the narrator and a young man, the youngster grits his teeth and shakes his head at the current plight all around him. And then the young man refers bitterly to the older fellow being part of “the generation that wrecked the world.” What happened, you wonder? Don’t worry. You’ll find out.

Throughout the book, Kunstler tosses out clues. For example, Kunstler spells out how in the past, worldwide demand for oil far outstripped the available supply. So prices for oil began to skyrocket. People became desperate and did desperate things. Sound familiar?

Kunstler makes passing reference to a war in the Middle East. But Kunstler never goes into detail. He doesn’t have to, really. The details are not critical to this story line. But you learn that during the war, things got out of hand. There was immense loss of life, and most of an American army never came home.

On this last point, Kunstler is not just economical in his use of words. Indeed, he’s downright parsimonious. But with just a quick bit of dialogue, Kunstler puts a chill into your spine if not the fear of God in your heart. With a fraction of a sentence, it’s as if you are reading The Peloponnesian War, where Thucydides describes the loss of the Athenian army in Sicily. “Everything was destroyed,” wrote Thucydides, “and few out of many returned home. Such were the events.”

Kunstler mentions in passing two horrific acts of terrorism. The bad guys (guess who?) managed to set off two nuclear weapons on U.S. soil, obliterating Los Angeles and Washington, DC. Within a short time national commerce broke down. Communications disintegrated. The economy crashed. The capital city of the U.S. moved to Minneapolis. Any semblance of control by a central government just vanished.

But post-disintegration, the U.S. did not become some sort of Libertarian Eden. It was certainly not a place that Dr. Ron Paul would recognize. Indeed, if nothing else the nation could have used some public health control.

There is just a single, short sentence in Kunstler’s novel that refers to a pandemic of “Mexican flu.” Uh-oh. This one disease apparently spread like wildfire and killed off scores of millions of people in the U.S. alone.

For those readers of an Earth First-sort of bent, if not the “deep environmentalists” out there, it’s your wish come true. Finally, a population crash. Whew! It’s as if you died and went to heaven. Except in Kunstler’s book it may well have been a large number of the environmentalists who died and went to heaven. They sure don’t live in Union Grove.

Within Kunstler’s deft narrative, things in post-Peak Oil America just fell apart. The center did not hold. Food supplies dwindled. The power grid broke down. Health care stopped functioning. Roads and highways quickly become impassable due to lack of maintenance, as well as marauding bandits. People starved. Population centers contracted, most in a catastrophic fashion.

And then there were ethnic and racial tensions — small-scale civil war, really. People migrated from one marginally inhabitable part of North America to another. Along the way they stole and fought over whatever booty they could loot and snatch.

In World Made by Hand, Kunstler answers the question posed by Rodney King in 1992 during the Los Angeles riots. “Can’t we all just get along?” Well, no. Not in an unraveling land of rapidly diminishing resources. It’s the same continent, but a different world.

There is a profoundly discouraging message embedded here. For almost everyone in this post-apocalyptic future, life in the U.S. has become, as the saying goes, “a bitch.” And you know what happens next.

Until we meet again…
Byron W. King
July 10, 2008

P.S.: I’ll return shortly with part two of this review. But until then, if you haven’t taken the time to really consider the effects of Peak Oil and how we’ll soon be reaching the realities painted in Kunstler’s book, you’d better start. We’re right now seeing how our lack of oil is impacting our daily lives. The only problem is, we still have a long way to go before it’s all over. Cheap oil may well be a thing of the past.

“World Made by Hand” Book Review was originally featured on Whiskey and Gunpowder

These are not your daddy’s or granddaddy’s floods. These are 500-year floods, events not seen before non-Indian people started living out on that stretch of the North American prairie. The vast majority of homeowners in Eastern Iowa did not have flood insurance because the likelihood of being affected above the 500-year-line was so miniscule — their insurance agents actually advised them against getting it.

The personal ruin out there will be comprehensive and profound, a wet version of the 1930s Dust Bowl, with families facing total loss and perhaps migrating elsewhere in the nation because they have no home to go back to.

Iowa in 2008 will be an even slower-motion disaster than Hurricane Katrina in 2005. Beyond the troubles of 25,000 people who have lost all their material possessions is a world whose grain reserves stand at record lows. The crop losses in Iowa will aggravate what is already a pretty dire situation. So far, the U.S. public has experienced the world grain situation mainly in higher supermarket prices.

Cheap corn is behind the magic of the American processed food industry — all those pizza pockets and juicy-juice boxes that frantic Americans resort to because they have no time between two jobs and family-chauffeur duties to actually cook (note: reheating is not cooking).

Behind that magic is an agribusiness model of farming cranked up on the steroids of cheap oil and cheap natural-gas-based fertilizer. Both of these “inputs” have recently entered the realm of the non-cheap. Oil-and-gas-based farming had already reached a crisis stage before the flood of Iowa. Diesel fuel is a dollar-a-gallon higher than gasoline. Natural gas prices have doubled over the past year, sending fertilizer prices way up. American farmers are poorly positioned to reform their practices. All that cheap fossil fuel masks a tremendous decay of skill in husbandry. The farming of the decades ahead will be a lot more complicated than just buying X amount of “inputs” (on credit) to be dumped on a sterile soil growth medium and spread around with giant diesel-powered machines.

Like a lot of other activities in American life these days, agribusiness is unreformable along its current lines. It will take a convulsion to change it, and in that convulsion it will be dragged kicking-and-screaming into a new reality. As that occurs, the U.S. public will have to contend with more than just higher taco chip prices. We’re heading into the Vale of Malthus — Thomas Robert Malthus, the British economist-philosopher who introduced the notion that eventually world population would overtake world food production capacity. Malthus has been scorned and ridiculed in recent decades, as fossil fuel-cranked farming allowed the global population to go vertical. Techno-triumphalist observers who should have known better attributed this to the “green revolution” of bio-engineering. Malthus is back now, along with his outriders: famine, pestilence, and war.

We’re headed, it seems, toward a fall “crunch time,” and that crunching sound will not be of cheese doodles and taco chips consumed on the sofas of America. I think we’re heading into a season of hoarding. As the presidential campaign moves into its final round, Americans may be hard up for both food and gasoline. On the oil scene, the next event on the horizon is not just higher prices but shortages. Chances are they will occur first in the Southeast states because oil exports from Mexico and Venezuela feeding the Gulf of Mexico refineries are down more than 30 percent over 2007.

Perhaps more ominous is the discontent on the trucking scene. Truckers are going broke in droves, unable to carry on their business while getting paid $2,000 for loads that cost them $3,000 to deliver. In Europe last week, enraged truckers paralyzed the food distribution networks of Spain and Portugal. The passivity of U.S. truckers so far has been a striking feature of the general zombification of American life. They might continue to just crawl off one-by-one and die. But it’s also possible that, at some point, they’ll mount a Night-of-the-Living-Dead offensive and take their vengeance out on “the system” that has brought them to ruin. America has only about a three-day supply of food in any of its supermarkets.

The yet-more-ominous thing here is that shortages of food and oil are two fiascos that are pretty clearly predictable for the second half of the year. That’s bad enough without figuring in the “unknowns” that could kick up American hardship a few more notches. The hurricane season just got underway — obscured for the moment by the bigger weather story in Iowa. The fate of the banks is a train wreck still waiting to happen. As it occurs — also heading into the high political and hurricane seasons — we could find ourselves not only a nation wet, hungry, and out-of-gas, but also completely broke. I’m just sorry that Tim Russert will not be here to talk us through it all.

Regards,
James Howard Kunstler
June 27, 2008

Iowa Flooding was originally featured on Whiskey and Gunpowder

Thinking about Basic Materials and Energy

Today the automobile business is vast. It is a global industry that has evolved by leaps and bounds in the 100 years since Henry Ford made his famous remark in 1908 about building “a car for the great multitude.” The worldwide customer base includes at least a billion people — spread over six continents — who have income sufficient to buy a car or small truck. According to figures assembled at the MIT Sloan Automotive Laboratory, there are about 700 million automobiles and light trucks in the world. About 30 percent of those vehicles are in North America.

Every car requires steel, aluminum, copper and lead. Each car requires rubber, plastic, and myriad of other petroleum and natural gas by-products. And there is much else in the long industrial ladder of automobile production. Just think in terms of the energy that goes into processing materials, fabricating parts, building components, assembling a finished product, and all the transportation along the way. In addition to the basic energy and material resources that go into manufacturing an automobile, the sheer number of vehicles reflects a lot of fuel tanks to fill with gasoline and diesel. And this does not even touch on the energy and resources that go into building road systems.

Automobiles and Energy

The oil shocks of the 1970s — in both price and availability — spurred improvements in auto energy efficiency within the U.S. as well as worldwide. In the U.S., the increase in fuel efficiency was related to rising costs for gasoline, as well as government mandates for higher fuel efficiency dating from the late 1970s. On average over the past 25 years, the typical power train of gasoline-fueled automobiles in the U.S. has improved in efficiency by about one percent per year according to data gathered by MIT. While discrete, one percent improvements may not appear to be much, the compound improvement in the typical U.S. automotive engine over 25 years has been about 30 percent.

There has been even more progress in the fuel efficiency of diesel engines over the past 25 years. Diesel power trains are no longer the sooty, “knock-knock” devices that they were back in the days of disco. Most cars sold today in the European Union (EU), for example, are powered with clean-burning, fuel efficient, smoothly running diesel engines. In fact, the demand for diesel fuel in Europe is such that EU refineries routinely ship surplus gasoline to sell into the North American market. And in North America the relatively low prices for gasoline throughout the 1980s and 1990s discouraged the use of diesel engines.

So there have been significant improvements in automobile power train efficiencies over the past couple of decades. But have these improvements translated into any overall reduction in demand for fuel? No. In 2007 motor fuel consumption in the U.S. was high as it has ever been. (Although according to the American Petroleum Institute, demand for motor fuel may be at a plateau due to price increases at the pump in 2006 and 2007.) In the past 25 years we’ve seen more people driving more cars for more miles. But compounding the fuel issue, the cars that people are buying and driving tend to weigh more and offer higher performance.

The Future of the Automobile

As I’ve said over and over again in Whiskey and Gunpowder, we live in a world of peaking oil output, and of energy and resource scarcity. So the trend lines for fuel usage by automobiles simply cannot continue for much longer. The first, most obvious sign is the rising price for oil and by extension for fuel at the pump. Something has got to give, and the energy markets are sending signals of long-term high prices for motor fuel. Where do we go from here?

Well first, people and policy makers have to realize that there is an energy problem. Everyone has to realize that this is something permanent, going forward. “Peak Oil” will not pass if we ignore it long enough. And no one can solve the problem just by bellyaching about the rising price for gasoline.

It helps to view the age of the automobile — and its future — as a systemic whole. And some social critics are out in front of the broad discussion, with a sharp focus on the automobile and what it has brought us as a society. James Kunstler, for example, author of highly regarded books such as The Geography of Nowhere and The Long Emergency, believes that the car-dependent suburban build-out of the U.S. may be “the greatest misallocation of resources in all of human history.” That is, in an era of expensive energy and scarce resources, a car-dependent culture has no real future and is in fact a hindrance to progress in other directions. That is quite a viewpoint, well-presented by Kunstler in his writing. It’s depressing, but it sure gets your attention.

And criticism of the automobile culture is not confined just to social commentators like Kunstler. Another remarkable indictment comes from no less an automotive insider than Prof. John Heywood, the director of the MIT Sloan Automotive Laboratory. He has stated that “cars may prove to be the worst commodity of all.” According to Prof. Heywood, cars are “responsible for a steady degradation of the ecosystem, from greenhouse emissions to biodiversity loss. What’s worse, even if we improve vehicle efficiency, turn to fuel hybrids or make rapid advances in hydrogen-based fuel technologies, the scale for slowing down the degradation may run to the decades. Turning the curve won’t be easy.”

You can agree or disagree with the broad themes of Jim Kunstler or John Heywood. But there’s no argument with one of Prof. Heywood’s points. Wherever we are going, it will not be easy to “turn the curve.” Looking forward, the oil just is not there to fuel cars in the future in the way that we did it in the past. So a lot of people are going to have to do things differently.

Worldwide, the automobile industry has seen the handwriting on the wall. Fuel is expensive, and is getting more so with each passing year. So the industry has invested tens of billions of dollars in improving engine and power train efficiency. In addition, auto designers are coming up with new ways to eliminate weight and drag. (At higher speeds, up to 70 percent of the energy used to turn the wheels on a car goes just to push the air out of the way of the chassis.) The auto industry is looking towards different sorts of fuels, and moving towards what is called fuel-flexibility.

Hopefully this will lead us to a great new investment in the car of the future.

Until we meet again,
Byron W. King
April 15, 2008

Cars and Energy was originally featured on Whiskey and Gunpowder