Tuesday, March 8, 2011

Gas is up, what's next?

Interesting times. Libya, a country that supplies about 2% of the world's oil goes off-line, and gas prices spike. Are supplies really that tight?

Well . . . not exactly. Economies have been growing a bit at the same time oil production has been pretty flat, so yeah, it could be putting some stress on the system. When crude oil goes up and gas at the pump goes up the next day, it's a scam. It takes some time for the expensive oil to be transported, refined, and distributed. The oil companies are ripping off drivers. Reason enough to get mad, but it's only a small part of the story.

Markets may not be the best indicator of actual conditions. There's a huge emotional fear factor involved. We aren't paying for the loss of Libyan oil as much as we are paying for what might happen.

The elephant in the room is Saudi Arabia. The kingdom is making statements not to worry, they'll increase pumping to make up for any shortfalls. Could they really do it? Probably not. Matt Simmons, before he passed, made solid arguments that Saudi Arabia is already maxed out. They can't really pump more even if they wanted to. Their major oil fields are in decline. Since actual production figures are a state secret, they can say they are pumping more with official evidence one way or the other. Matt's book, "Twilight in the Desert," pierces the veil of secrecy.

Even if they are in decline, they are still a huge producer. The world's economies need Saudi oil. The world can absorb a certain amount of decline. Think of it on personal terms. Say you had to use 2% less energy as you did last year. Probably wouldn't be too hard to do. 10% wouldn't be too unreasonable to achieve, if you really had to. Eliminate some unnecessary trips. Turn the thermostat down a few degrees, and you are there.

Losing Libya's 2% isn't a crisis. Saudi Arabia's gently slow decline isn't either. However, what if Saudi Arabia experienced the turmoil of its neighbors? Picture riots in the streets and oil ports on fire. Take the world's big producer off-line and it's curtains for the world's economies.

Western democracies talk about human rights, voting, and freedom. My guess is that they are secretly hoping the Saudis are able to keep Saudi Arabia safe for monarchy. As long as the oil flows, the West really doesn't care how oppressive the Saudis are.

It might even work, for a while. Eventually, however, this house of cards will come down. The princes could lose control to a popular revolt. Even if they don't, oil resources are continually in decline.

Sure, reducing oil usage a few percentage points isn't that hard, but what if you must reduce year after year after year? Life just gets progressively harder and harder.

We can ignore the problem. After all, oil prices will go up and down. As oil goes up, economies crash, then the world uses less oil. Since demand goes down, the price of oil will drop. Economies will recover some -until supplies become tight again and we crash once more. It's easy to focus on the recoveries and say everything is just fine. However, it's a downward spiral. Each "recovery" won't be a big as the one before.

We can bet some technological fix will happen. It could, but is it worth risking your life on it? Should we perhaps consider the powers that be have a vested interest in keeping the status quo as long as possible? Politicians wouldn't hide problems just to get elected, now would they? Businesses wouldn't put money and short term gains ahead of people's welfare?

So . . . what do we do? Do we wait for someone else to solve the problems or do we live like they'll screw it up. Remember how effective the government was after hurricane Katrina? That's when the economy was humming along and government was strong. Katrina was a limited and regional problem. The impact of a major oil producer shutting down will be global.

Maybe changing the way we live is the only sane thing to do. Assume fuel will get more expensive and scarcer. Start living with that in mind. Doing a long commute by car? That won't last? Dependent on cheap food grown and transported by cheap oil? Maybe some food independence would be wise. Heat your house with oil? Plan to live a lot more independent of major systems, and you'll stand a better chance.

Gas prices going up may be temporary, (or not), but the underlying problems won't go away.



  1. Obama had it right in one area.

    CHANGE !!!!!!!

    The status quo will not work for the future.

    All the technology is here right now. We just don't have the will to change.

    All those super "Patriot" types just want to fall back to what was. Nice to dream huh.

    The power of the stars awaits us, it will be our destiny if we are ever brave enough to reach out and try....

  2. It's a new world out there, but few have twigged to it yet. We won't and can't go back. (unless all the way to the stone age) Knowledge is out there on alternative ways of living.

    If we could reach out to the rest of the solar system, we'd have massive resources at our disposal. It's just a matter of finding a good way of getting out of this pesky gravity well.