Overbuilt market...

"Overbuilt Market creating modern ghost towns"
-View the MSNBC Article here.

Peak oil is a strange phenomenon. One year ago oil at $100 a barrel would have been inconceivable for all but a few commentators. And yet here we are, oil is hovering around $115 a barrel and people are actually celebrating! And so the cycle has begun, with a run up of prices (it was only a month ago that oil hit a high of $147 a barrel), demand destruction, followed by a drop in price...then the inevitable run up of demand as people adjust to the new price regime and the following run up of price. And so on and so forth. IT DOESN'T HAVE TO BE THIS WAY. If we let the market dictate price then it will be this way, and probably much worse. If government were to put a floor on gas prices, then people could actually begin to act like rational consumers instead of following the completely irrational marketplace for global crude.

Back to the headline: The 'Overbuilt' Market of homes. Home builders are going out of business because of increasing costs and decreasing demand for houses built on the periphery of cities.
There's even a website devoted to this: The Home Builder Implode-O-Meter, monitoring the decline and fall of the home building industry.

It makes me wonder what kind of cycles we will start seeing with the fluctuation in the price of oil and gasoline. As gas gets cheaper, will ex-urban houses enjoy a brief renaissance before being crushed once again by the run-up in price? Or will buyers wise up after the second or third boom and bust cycle?

I think what we're probably witnessing is the extreme boom and bust cycle returning to America. Where during the 1980s and 1990s the US enjoyed a relatively stable economy untroubled by massive oil shocks, the economy of the new millennium will not be so lucky. We don't have the global surplus of crude oil to stabilize the world (or local) economies, not like we did in the 1970s.

They Finally get it?

The Mainstream Media (or MSM for those in the know) have been reporting more and more about oil, gas prices and the state of oil production in the world. And yet even as recently as a week ago, MSNBC.com could run a story about the 'end' of the energy 'bubble.' Stories about gas prices, from sources, seemed to miss the crucial detail about supply and demand. China has taken the blame for increased gas prices, even though per capita the average Chinese citizen uses 1/5 of the energy that the average US citizen uses.

Those days are over, on MSNBC.com and at the Washington Post, a new editorial era seems to be upon us: "Global Pressures Forge a New Energy Reality" trumpets the Washington Post. Citing supply and demand factors, as well as the growth of China, the Post makes the bold assertion that gas prices, particularly for those in the US, will not ever retreat back to prices seen in the late 60's or during the decade of the 1990's.

This is not exactly acknowledging peak oil, the author hems and haws in typical DC fashion, but make no mistake the article lays out the current world situation, however, without taking the next step -- that is to try and imagine a world suddenly being deprived of cheap, abundant oil.

I imagine that step has to wait for the markets, that is the short term energy traders, to catch up, and really look a year or two down the line and realize whats coming. I doubt any news organization wants to be blamed for mass panic, but given the government's total inability to do ANYTHING (see Katrina response) a small, tight feeling of panic in everyone's stomach might motivate them to go out and DO SOMETHING.

I think the real lesson here is that we in the Peak Oil community need to continue our focus on research and out reach but realize its no good waiting for others to come around. WE ARE RIGHT, and the debate is officially over. Of course, life intervenes, and theres no way to absolutely know the future -- but if you want to get a good idea of what the next 50 years will look like, then the peaking of resources available to humanity is a good place to start.

When historians look back on this age, they will probably date this century as starting in 2008 -- the first time the world is staring into the abyss. Unlike the 1970s, there is little spare capacity in the world...theres no way out of this one. The age of scarcity is upon the mainstream.

Oil Bubble? Lets not be hasty...

From MSNBC.com:

"Given the market’s inability to spark a larger rally Friday following the week’s big sell-off, is it time to declare the energy bubble over?"

[Full article]

This just shows the shallowness of mainstream reporting -- and that despite the meteoric rise in oil prices over the last 6 months, that "peak oil" still has not truly transformed into a framework or paradigm for the vast majority of people.

It is also a strange thought -- that oil at $130 US a barrel would be thought of as the new bottom for oil. Whereas only a year ago oil at even $100 a barrel would have been counted as a calamity of the highest order.

I can't say where oil is going from here...focusing on the price sometimes diverts from the true issue at hand anyways. But I do know that oil at $130 a barrel is still far too cheap, and to accurately account for the massive amount of work that oil does for us -- and to ensure that our society keeps the transition momentum moving -- oil NEEDS to keep rising in price.

Despite the gloom and doom of a faltering economy, oil's rise has been slow enough to allow people to transition their habits, their mindsets and their spending. Problems will arise if oil skyrockets in price -- a sustained, even rise in price is the best case scenario for anyone who 'believes' in peak oil.

Recovery is 6 months away...

I'm getting sick of reading quotes like these:

'Despite the negative [economic] numbers, "the worst of the hemorrhaging is behind us" and a modest recovery is likely to take shape next year, said Bernard Baumohl, managing director of the Economic Outlook Group.'


Full Article

This is the fiction we are sold, that recovery is looming on the horizon even as more and more signs point to unsustainable exploitation of natural resources, to declining energy supplies and ultimately to a period of sustained economic decline.

The problem of course is that stories like these lull us into a trance of thinking that recovery, like so many times in the past, is just over the horizon.

Its time to face the music. Its time to stop kidding ourselves and accept that economic decline rather than growth will indelibly mark the 21rst century, but that 'growth' and 'decline' are relative terms. If we keep our head about us, we can redefine growth. Growth means having more time in our lives instead of less. Growth means physical strength rather than obesity. Growth means re-discovering a spiritual connection. Growth means accepting natural limits of ecology, of nature and of human ingenuity instead of denying those things.

But growth requires humility in the face of limits, and articles like the one that appeared at www.msnbc.com do not guide us towards humility rather they lead us down the dangerous path of illusion and delusion.

Let's accept whats coming and stop accepting without comment those viewpoints who would try and pacify our will to change.

MSNBC: fuel costs shape Suburbs

In the past two days I've read an article each on CNN.com and MSNBC.com about how gas prices are affecting the 'American Dream' aka the alleged desire that every American has to live in a far-flung suburb and spend the better part of two hours ferrying from home to job to social outings.

Its never been my dream, and even people I talk to who live in the suburbs rarely express some fondness for spending so much time locked in automobiles. More often then not, it was about economics, plain and simple. The inexpensive houses were located far from the city center, and driving 20 miles one way to commute was not a big deal when gas was less than a dollar a gallon. Even now, such commutes are pinching consumer spending but have yet to force many people out of their homes.

Yet the economics are changing, and so are the behaviors of those looking to buy homes. From MSNBC.com:

Real estate agents, transportation officials and industry surveys indicate that home buyers are placing more importance on cutting their gas bills and commute times than they have since the oil shocks of the 1970s.

Full article here

Honestly I've been praying for the death of the suburbs for as long as I can remember. I realize a need still exists for affordable housing, and that much investment will be lost due to the devaluation of inexcusably far-flung suburbs, but honestly, isn't it about time that people start concentrating around downtowns and around rail stations. Unfortunately most of the homeowners who will be hurt by the suburban housing downturn were part of a system that was bigger than them: that was designed to grant risky loans in exchange for the illusion of infinite growth and ever-growing housing values.

It will certainly be interesting as it dawns on Americans that endless freeways, sprawling suburbs and 2 hour commutes are a piss poor investment at best, and at worst a ruinous mal-appropriation of resources. James Howard Kunstler calls the American suburbs "the biggest misallocation of resources in human history".

Peak Lending?

"Until mortgage lending picks up again, the housing market will have a hard time getting back on its feet. But until home prices stop falling, lenders are going to remain leery about writing a mortgage on an asset that is still losing value."

And thats the entire problem with our economy

From this article on MSNBC.com:

Can anyone see the problem here? Our entire economy depends on GROWTH. Not stagnation, not contraction, but growth. Can our economy grow in a sustainable manner, especially without growth in energy usage? I seriously doubt it.

Why US housing is losing value is a tough question to answer. I would imagine (and I'm no expert) that falling wages and a depressed economy have something to do with it, in addition to the increasing price of EVERYTHING else (via inflation or just plain supply and demand as with gasoline).

I think the question on everyone's mind is, what is the US housing stock worth without transportation to get to it? The answer is undoubtedly 'mostly worthless' except for a small core of communities with walking and biking access to essentials.

Memorial Weekend

Austin feels pretty empty this weekend and I never know what to believe: MSNBC claims that gas prices are "testing motorists" but that 31.7 million motorists are traveling for memorial, only slightly lower than last year(32 million in 2007)...but what if we take into account the number of new cars on the road since last year. According to wikipedia, an one year alone, America adds

"...3.69 million [vehicles] each year since 1960 with the largest annual growth between 1998 and 1999 as well as between 2000 and 2001 when the number of motor vehicles in the United States increased by eight million."
-Click here to see the whole article

So if we take into account the number of new vehicles on the road (lets say around 3 million given the sordid state of the economy) then suddenly the statistics quoted by MSNBC don't seem so rosy. I don't really have a solid statistic to back up this idea, but it seems like if we have so many new cars on the road, then those cars should be driving during memorial day. The fact that instead of increasing cars trips that we have declined, speaks to the mass of people who aren't driving for memorial. Good for them!

Indeed anecdotal evidence supports this. People I've talked to this weekend won't even consider a 30 minute drive without taking into consideration high gas prices (and the fact that many Texans drive massive SUVs and Pick up trucks) and want to carpool or simply find arrangements that don't require a long drive.

I think that as gas prices increase that we will notice a refinement of the term "long drive". I know that to some a long drive is anything over 2-3 hours, but if gas is 6 dollars a gallon, suddenly a long drive may become much shorter.

At any rate memorial day in Austin definitely feels like the calm before the storm...the markets are closed in the US, gasoline is steady here at 3.89-3.79 a gallon, and people seem to be adjusting so far to driving less for special occasions.

This is not a big deal though. The real question is whether people will be able to adjust to driving less for work, school, shopping and other essential trips. We'll see on Tuesday...

The Crude Awakening

I've got a secret: I love MSNBC.com, not because I think its got factual information per se, but I think its actually a good gauge of conventional wisdom, and a good way to understand what kind of information the population at large is consuming.

From an article today:
"But the impact of the [gas/oil] price surge already is being widely felt. And if prices go
much higher, the damage to the U.S. economy will be deeper and wider than the fallout from the run-up so far."

We hear it again and again, the mantra about gas prices, gas prices and its something that directly impacts people. From the same article:
"Economists estimate that every additional penny at the pump takes roughly $1 billion out of overall spending. "

Now i don't know if thats true, but think about the scale of gas stations across the US, about how much we drive and fill our tanks...and you can see that it very well could be true. Down the street on Riverside and S. Congress, gas went up 10 cents today. Does that mean, given a price hike across the US, that 10 billion was just taken out of overall US spending? Maybe that over simplistic, but to me the 1 cent = 1 billion less consumer spending is a great way to talk to people about peak oil. Gas prices is a great way to talk to people about peak oil.

We have to realize how peak oil is gathering on the horizon: as a massive economic slowdown. This is how people will experience the first waves of peak oil. And the crazy thing is: we may not have peaked.

So perhaps the peak oil movement needs to start examining how peak oil is affecting people, and tailor our message to address people's concerns. If we are a movement, then we need supporters to actually bring about change. And though talk of statistics and flow rates might be factual, they will never win over large numbers of people.

We need to STOP talking to people's brains, and start talking to their guts. We don't need to lie or engage in hyperbole, since the problem is already here. We simply need to engage people on a level where they will listen, and then allow their interest to propel them to investigate our claims further.

On thing is for sure: the peak oil movement needs to mark May 2008 as a turning point in the long history of humanity's relationship to oil. This marks the beginning of a new era, and probably people will look back and date the start of the 21rst century to this year, since the 21rst century will be characterized by scarcity of resources, and May 2008 was when the industrialized world started to wake from the energy binge that has characterized the last 50 years.....

A barrel of oil just hit $133

At least at the time of this writing, oil has just risen 4 dollars to 133 a barrel. Here in Austin, I-35 is still packed with cars, and everyone is making their plans for memorial day. With the price of oil, I can't imagine a memorial day more weighed down by economic concerns. I've lived through recessions before, but this has a different feeling, like the winnowing of the light before an extended period of decline. But for the most part no one seems terribly concerned, even though gas prices are at record highs. I guess past experience has shown us that the price of gas always goes down, even though I doubt that will be the case in this scenario....

I read MSNBC everyday, and basically the entire top part of the site seems to be dedicated to Peak Oil issues:
-Fed Sees Slower Growth, Higher Unemployment
-American Airlines to start charging 15 dollars for the first checked bag (offset high fuel costs)
-Oil Execs. defend massive profits
-Gas prices kill your budget? Try a bicycle

And yet peak oil is STILL rarely mentioned. Wow. I'm not sure what it will take, but the authors of MSNBC.com are going to have to get out of denial and stop cheerleading and face the harsh reality of an energy-constrained world. Its about time.