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TOD Local Open Thread: Any Hope of a Buyer's Strike?
Posted by Glenn on June 12, 2008 - 6:30pm in The Oil Drum: Local
Topic: Demand/Consumption
Tags: buyer strike, demand, demand destruction, supply [list all tags]
More long term, price induced demand destruction will take hold and people are making better decisions factoring in oil price - they are buying smaller cars and not snapping up McMansions in the hinterland, but with oil near $140/barrel right now what's the short term answer?
The secret answer to curbing high oil prices in a supply constrained world that no one seems to be talking about is for buyers to go on strike. And no, I'm not talking about a meaningless "Don't fill up on this day" but keep driving.
My back of the envelope estimate is that if there were a concerted effort by the major economies (hello G8 ministers meeting in Japan) to have demand pulled back sharply (10-15%) over the Summer, we could see oil prices go down fairly rapidly.
What prospects do people think there is of it? Would it be politically feasible? How much would demand need to decline to make a substantial impact of oil prices?
Fascinating idea, but it would ultimately be a game of chicken. Would the United States work to reduce demand if China did nothing, for example? Or what if all nations agreed to reduce demand, but some only made half-hearted attempts? Or the central government wasn't strong enough to prevent corrupt local officials from undercutting the policy?
Finally, if we did all of these things and were able to successfully bring the price down, would there not be a strong urge for people to try to backslide into old behaviors?
The other day I saw someone say this in regards to boycotts: I suggest you just don't buy gas for a month, then for a year. If enough people did that it would really work.
Good question ericy - here's some responses to consider.
I think this could be done hand in hand with multilateral trade & security agreements. If a country did not participate or made meaningless gestures, the rest of the group would have to threaten to do something meaningful like increase trade tariffs or kick them out of whatever regional defense network they belong to. But the idea is that solidarity is paramount. If that's not possible, then it's back to laissez-faire market demand destruction - messy, inequitable, social upheaval - in other words, the perfect environment for dictators and demagogues. We need to have proactive leadership now to head off the more ominous scenarios later.
To fight the power of a cartel, you have to think like a union. We hang together or hang separately. Plus, by reducing your net consumption of oil you are improving your balance of trade, holding down inflation, which at these prices is a real risk.
The idea is to start to put into place the societal behaviors that will reduce consumption in a more orderly and equitable way that maintain the social fabric. Some of these short term measures would be done on an "emergency basis" at first but they might gain popularity as they make people less dependent on oil and can be supplemented by more long term investments in efficiency in buildings and increases in gas mileage on newer cars.
China is busy building new airports for their growing middle class and the increasing number of tourists.
http://www.chinahighlights.com/china-flights/china-airport/
Well put Glenn.
Working in favour of cooperation is the fact that fighting climate change and addressing oil shortages actually go together quite nicely. Net importers have many incentives to reduce their imports, including the huge one of energy security. The trick is to make oil expensive locally but at the same time protect the poor and keep the money from flowing, in the form of scarcity rent, to the producing countries.
Peter Barnes has developed a great approach called Sky Trust; an Irish think tank has a similar approach called Cap and Share. These are what the world needs.
One of their strengths is that it isn't all or nothing... individual nations or regions can start, and others can join them or not down the road. The Irish government, I understand, is seriously considering this. It is the ultimate buyers' strike. Although their focus is on climate, they have written about peak oil and how a cap and share approach would keep energy scarcity from, in their words, crucifying the poor.
http://www.capandshare.org/
Yes - that's about what I had in mind. thanks
I've heard this kind of system justified on Georgist grounds. http://en.wikipedia.org/wiki/Georgism
The time we need to carry out these things is actually not that much longer than a modern war so I would think that straight out rationing should be the starting point. Introducing some trading makes some sense if it is done at the level of the individual. Tradable Energy Quotas (TEQs) have been discussed here: http://www.theoildrum.com/story/2006/8/4/163554/8625
and the US DOE rationing plan includes a ration white market. Cap-and-Trade though tends to benefit legacy polluters and I think it needs to be avoided.
Chris
Sounds like a grass-roots "powerdown" solution. Great idea!
I was doing the calculations this morning and if I really committed to it, I could go 80 days on a tank of gasoline (thats teleworking and taking the bus). I already go 3-4 weeks on a tank (16 gallons) of gas as it is. Before I started taking the bus in August 2005 and carpooling, it was a tank of gasoline every week.
A boycott on oil for a limited time will bring prices down for a limited time only.
So you might choose to reduce oil consumption permanently. If you can achieve 3-4% reduction per year - this yould be a big achievement already. However this is about the same magnitude as the decline in global oil production. Hence you might end up with no price change - which would not be a failure but a great success. I do not think you can do anything to bring prices down permanently - you can only slow down the price increases.
Global treaties to save the world are not easy to negotiate. The Kyoto and subsequent treaties about stopping global warming have been opposed by the US government. Similar to peak oil you cannot stop or reverse global warming - you just can try to slow it down to a certain level.
On the other hand the abolition of CFCs proves that global actions are possible.
The time of cheap oil and gas is over - not even subsidies can change that permanently. You might remember today as the good old days where gas was only 4 bucks a gallon.
It is not clear to me that OPEC will benefit from a continuation of the current steady oil price increases. Eventually the world's economy is going to be seriously damaged, and a global financial collapse is not in OPEC's interest. The best option for extending BAU operation of the global economy for a period of time will be a global cooperative oil trade (i.e. rationing) involving both producers and consumers. However, the goal of prolonging BAU by such a method only makes sense if you think that electrification of transportation or some other technological innovation is going to ride to the rescue in a decade or so and allow the stock market to go on rising for many decades into the future. My best engineering judgment tells me that such an arrival of the technological cavalry is unlikely, and that the OECD nations are going to have to accept economic contraction. I am not saying that it is impossible for some combination of renewable/nuclear energy to help cushion the effect of the decline of fossil fuel supplies; I belive that they can do so. However, I believe we need to create an economic system in which it is not the goal of all major economic players to get richer forever. Abandoning this goal will require far more radical changes than energy conservation.
I constantly hear engineers like yourself saying they don't think the electrification of transportation is possible, even in a decade.
Then I see all these media releases about new batteries, new technologies, new fuel sources and I can't help but think one of them has got to take hold.
The lithium ion batteries are a great option, no? Two days ago a fellow TODer pointed me to a company that makes ethanol out of algea secretions, another promising endeavour, they are planning on building a 100,000 gallon a year plant if I remember correctly as a pilot project which can be explanded to a great degree.
With all of our ingenuity behind this, what is your reasoning for the failure of all of these options? (not just the two I mentioned)
Thanks, I look forward to finding this out as it is a question I ask myself daily.
It's a matter of time and money. Replacing the vehicle fleet with electrics is not something that happens over night, nor is it cheap. Batteries are getting better, but go buy a 12V 100 amp-hour lithium ion battery. You'll see why lead-acid batteries are going to be around for a long time. Your algal ethanol plant is so tiny that it isn't worth talking about. 100k barrels/year (rather than gallons) is worth a glance and 100k barrels/day is genuinely interesting, but nothing like that is on the horizon.
Although many options will be put into practice and help mitigate the problem, mitigation does not mean solve.
"I see all these media releases about new batteries, new technologies, new fuel sources and I can't help but think one of them has got to take hold."
They will, it just takes a while. For instance, the Chevy Volt will take another 2 years to start manufacturing, and another 2 years to ramp up to real volumes (100,000 per year). A lot of companies are competing to produce PHEVs (plug-in hybrids) and EVs, but it will take a little while.
It won't take forever to make a difference - 50% of vehicle miles are driven by vehicles less than 6 years old - but it won't be tomorrow.
From what I see teh US culture would not allow it. The land of the free has taken on a meaning that I'm sure was never intended by the founding fathers. Free to do whatever you damn well feel like regardless of the impact of your behaviour on anyone else. No US President or congress is going to tell the people that tehy have to stop buying gasoline for the greater good.
People dont want to do "less"
That is masochism, and only masochists enjoy it.
SOOOO... what we need is positive messaging.
START bicycling
start walking
get to know your neighbors and carpool
petition our oil+auto companies to rebuild the streetcars and railroads they tried so hard to destroy, or we will nationalize them and their (oil's) windfall profits
start your own victory gardens
start planning our cities better, so we can walk/bike/train everywhere as Asians and Europeans do.
Or simply walk everywhere, as Africans do.
hooray.
high prices are the only thing which will bring about overall positive changes.
it's worked in amsterdam and paris. see below.
Paris:
http://www.commoncurrent.com/notes/2008/06/bike-share-the-future-of-carb...
Ams:
http://www.commoncurrent.com/notes/2008/06/europe-dispatch-eu-green-capi...
Exactly. Europe taxes energy consumption, especially motor fuels, and their per capita energy consumption is half of what it is in the US, and they in general have far better mass transit systems than the US.
From above article on commoncurrent.com
Governments now get most of the profits. After nationalization I guess that they will get all. There is no end to greed.
http://www.taxfoundation.org/blog/show/23178.html
There is nothing quite like walking 50 miles for medical care.
http://www.fistulatrust.org/new_centres.html
Hi Robert,
The problem.
Long before I knew what Peak Oil was, I decided I'd live a life without a car. It was due mostly to a spat of accidents I had (none my fault). I sold my car, rented an apartment near downtown and started living car-less (Lived in Waterloo, Canada, POP: 300,000). The transition was difficult at first. I had to do things like "time" out my life..if the bus came at 5 15, you had to be there at 5 15.
After some time I discovered life wasn't really that bad without a car. Over the 6 years I lived without a vehicle, I saved in excess of 30 000 dollars. I worked in IT and managed to travel for work. While co-workers would rent a car, I'd take the train and use city transit (you get some weird looks in HR submitting a bus transfer to recoup your 2.50.
Living without a car was probably the best thing I ever did in my life. I learned that one gets to know their community MUCH better on foot. You live and feel your neighborhood, something you can't do in a car. You also eat better. Fast food restaurants tend to locate where ease of access for cars is priority 1, so when you're living in a walkable neighborhood, you're more likely to sit down and eat & eat healthy. I think I lost something like 40 pounds in the first year of being car free. Vacationing took on a whole new meaning. Travel to a city that was 100 KM's away meant taking a train or bus but I discovered the riches of the city that I'd have never seen in a car.
The only times I needed a car was when I'd travel into the country just for a drive so I would rent one. Getting groceries was a little inconvenient but I learned to shop every few days rather than in massive bulk. This lowered my food costs because nothing went bad. You bought what you could carry home & that pushed me to plan my meals versus eating on the fly.
I've since bought a car that I use for work (oil industry IT consultant). I drive it for a living, but off work, I rarely use it, drive only to the gym and live in an urban neighborhood in Calgary, Canada. It was interesting that the minute I bought a car, all the bad habits returned...eating fast food (gained weight), traveling all over to buy things or just driving aimlessly wasting gas. I no longer save as much as I did before & I'm not sure I'm actually better off. The convenience of a car forces me to demand a higher income to pay for the car.
Perhaps rather than asking people to walk everywhere or ride a bike, we could ask them to think about the benefits of life without a car. When I didn't drive, most people assumed I had been charged with impaired or was just poor or a hippie. We need to change the mindset of automobile ownership and show the positive sides of car free living without getting too "granola bar" in the message. Apparently, the trend in Japan is to live car free...perhaps we should export that to North America.
Rather than saying "stop driving to save the world" how about saying if you stop driving so much, you'll save 10's of thousands of dollars, improve your health & have far less stress you would if you drive. Compare it to smoking where the positives (saved money, better health) probably did alot more than threatening people with the fear of lung cancer.
It shows what is possible when you plan a little bit. I wonder however how mcuh of the infrastructure that we have and the car culture that uses it is being used by those without a car. For exapmle we have a service in Aus called meals-on-wheels which delivers meals to housebound elderly. The deliverys are done by volunteers in their own cars and there is concern about how long this arrangement can keep going with current petrol prices. Even though we may be able to do without cars as individuals, are we still dependent on the wider community that does run them for delivery of many other services that may be hidden from our concious thoughts?
Just had a chat with my neighbor who happens to be an airline pilot and pilot trainer. I had just come home from grocery shopping at the supermarket, I had walked there and back. We chatted about the building around the corner which has been empty since about two years ago when it was foreclosed upon.
Very nice building, excellent location the developer ran out of money, the apartments were supposed to be on sale for a mere $450k for a two bedroom apartment. Well the pigeons are roosting there now.
My neighbor still doesn't get it. Well, his job depends on him not getting it. It's not up to me to break the news to him, so I didn't.
Ride a Bike or Take a Hike!
I agree. It must be a grassroots response. It won't come from government edict, no matter how positive they make it sound.
Sure, it sounds fun to walk and enjoy the great outdoors, but frankly, except for a few regions with mild weather, the outdoors suck. Someone in San Francisco or coastal Los Angeles could comfortably walk outdoors 11 months of the year, but try telling that to someone in Buffalo or Phoenix or Houston. That's why we have cars with air conditioning. I agree as anyone else here about needing to get out of cars, but the problem of weather protection is intractable as long as driving and air conditioning remain affordable. All I can say is, I've lived in New York before. New Yorkers get out and walk in all weather. People will just have to get used to being sweaty and cold and wet and all the other discomforts of the great outdoors.
Even in the worst case (New Orleans in August) walking at 7:30 AM is not too bad. Bicycling is better (more "wind"). And coming home to a shower at 5:30 PM is OK too.
And most public transit is air conditioned today (but not the 1923/24 St. Charles streetcars).
Best Hopes for Non-Oil Transportation,
Alan
I lothe responses like this... Seriously how did people _EVER_ survive before the Auto... AC and OMG central heating... Anybody who thinks like this needs to seriously get a life. Life has been made easy by oil.
Couple of things.
- That wasn't my personal opinion, but ask around and you'll find most people feel that way. Just go to a mall parking lot and see the people circling and waiting for a parking spot a little bit closer to the door. I'll go outside in any weather, and I damn well know how unpleasant it can be. I live in a city with mild weather, but I know the vast majority of North America isn't as fortunate as me. Even then, I've ridden my motorcycle in the local metro area in temps as low as 35F and as high as 115F.
- Sure, people lived in these places before the auto, but check the population rank of the Sunbelt cities, say, before and after the 1950's. Cities like Atlanta and Phoenix would likely never have grown to their present size without A/C and cars. They have tiny urban cores and huge sprawling suburbs where the distances are unwalkable and mostly unbikeable even in good weather. As Kunstler puts it, even the shortest car ride would turn into a Bataan Death March.
The problem with this is most unenlightened people will just give the response "I'd rather not". How do you overcome a response like that? It seems useless trying to convince people who have already decided they won't be convinced. Unfortunately it's the people who understand science the least, so explaining it to them in scientific terms is meaningless to them, they lack the ability to understand the problem, and don't think they can affect the solution.
I think the producers may actually like this. This would allow them to reduce their extraction. If I was Putin or the King, I would like to see my extraction get down to four or five million barrels a day right quick anyway. Enough to cover domestic demand and maybe export one million a day.
Way better than dollars in some bank somewhere these days.
If you could get something like this to semistick for long enough to demonstrate that yes, it is supply and demand. Most of the people don't understand this, and look for scapecoats. So a successful demonstration like this would be very useful. Of course getting enough governments/people to go along is the real issue. Everyone ONLY sees their own consumption as only affecting there own budget. The reality, is that if I choose to consume an extra gallon, I pay the cost of 1 gallon, but every other consumer pays a marginally higher price for the same commodity because of the supply/demand effect. With low price elasticity the total additional price paid by the entire cartel of consumers is many times greater than the price I paid for that gallon. So from the standpoint of the consumer cartel alone (isolated from the producers) the price signal that the consumer sees is several times too small. Taken to its logical conclusion, this would imply that a fairly high consumption tax (presumably with the take redistributed fairly) would maximize efficiency of the consumption cartel.
But, if we look at it in another way, we have a triage situation. Some, or all consumers must be forced to reduce their consumption. Doing nothing, and we have the price mechanism, which as we are seeing can be pretty brutal on consumers. Getting reductions via some other sort of collusive mechanism may be less painful overall (but psychologically horrid for libertarians). Rationing is one such approach. I think most common people would prefer rationing over really high prices. But the size of the psychological/political barrier is very high. This is compounded by the fact, that you got to get a large number of major consuming countries to agree to a common program.
Any ideas on how to make it socially unacceptable to drive a gas guzzler?
How can we equate using fossil fuel with defecating in public?
I can see you've never been to India then.
I see a problem with a fuel tax increase-other tax decrease. It is just taking money out of one pocket and putting it in the other so they can continue buying as much fuel as usual. The tax if raised should be used for energy efficiency programs and renewable energy projects. There are still 100 million households that could use more insulation and new more efficient appliances. I would love to have a ground source heat pump but such a system would cost more than I paid for the house. (There a some real housing bargains to be had in small town Iowa.) I am stuck with a 13 year old car and an 18 year old minivan both of which get only 20-22 mpg. Would love to have a small diesel car but like tens of millions of Americans there is no way I can afford it. My yard is big enough for an algae oil pond so I could produce some of my own fuel. America's working poor are stuck with gas guzzlers many which get even worse mileage than my cars do. If we used the fuel tax increase to scrap the old guzzlers and then subsidize the leasing of American made high mileage cars for low income households enormous amounts fuel would no longer be demanded several years from now. We might even save a 100,000 good paying jobs building these high mileage cars.
While articles like the following appear, there is no problem!
----------
The Guardian, UK, yesterday...
"The world is not running out of oil and can continue to produce hydrocarbons for the next 40 years provided restrictions are lifted on where companies can operate, the head of BP said today.
"The Arctic and currently closed areas off the coast of America should be considered for exploration if rising global energy demand is to be met in future, said chief executive Tony Hayward.
"He insisted that all other forms of energy, whether clean-tech or otherwise, also need to be developed simultaneously while rising carbon emissions could still be curbed.
"'Declining oil production in the OECD highlights the fact that, while resources are not a constraint globally, the resources within reach of private investment by companies like BP are limited,' said Hayward.
"'Political factors, barriers to entry, and high taxes all play a role here. In other words when it comes to producing more oil, the problems are above ground, not below it. They are not geological, but political,' he added.
"Some of the difficulties of access were in nations such as Venezuela, Russia and the Middle East which have adopted clear policies of resource nationalism where the state has grabbed assets previously in the hands of independent oil companies, but Hayward also noted the 92% of the US is off-limits and the Arctic needed opening up.
"The BP boss was talking at the launch of his company's annual statistical review of world energy which showed that world oil consumption grew by 1.1% in 2007, or 1m barrels a day, slightly below the 10-year average, while production fell by 0.2%, or 130,000 barrels a day, the first decline in five years.
"An increasing number of oil industry commentators have put forward the view that "peak oil" has now been reached - or shortly will be - and is responsible for a 40% rise in crude prices this year to record highs of nearly $140 a barrel. BP, though, said today that proved oil reserves at 1.24tn barrels are enough to meet current production for 41 years.
"Hayward also batted aside Opec arguments that the extremely high price of oil could be attributed to financial speculators playing the commodity markets and the slump in the dollar's relative value to other currencies.
"'The defining feature of global energy markets remains high and volatile prices, reflecting a tight balance of supply and demand,' he said, adding that 'I am certainly not a subscriber to peak oil (theories)'."
------------
No doubt PO is an obvious reality - crude oil is finite, I understand this. And I understand that oil-producing nations must look after their own interests first. But who's telling the truth? Surely there's no conspiracy, is there? Surely the head of BP isn't publicly proclaiming a pack of lies?
Is PO with us today or do we have another 40 years to adjust?
As an Average Joe, attempting to (secretly from my wife!) research as much as I can, while trying to raise a family and pay the bills in this BAU world (climate change included), "where we're at" is where I hesitate.
Regards, Matt B from Melbourne, Australia
(Still sitting on all kinds of fences!)
I don't believe in any form of conspiracy. But what is being said here is plainly not true. At least not in any normal sense of the word true.
"BP, though, said today that proved oil reserves at 1.24tn barrels are enough to meet current production for 41 years."
Proved reserves are enough to supply the world for 41 years, IF we can get it all out fast enough and IF our demand stays stable. Neither of those are going to happen. If our demand grows at the current exponential rate, we'll be out within 10 or so years (forgotten the source - a comment on yesterdays drumbeat maybe?)
And the 40 years is not when oil peaks, it's when oil runs out altogether. The peak will be with us much sooner than that!
These aren't necessarily lies, but they are a combination of skewed statistics, clever wording and exaggerations. He may actually believe what he is saying, or he may have been misinformed, or he may be lying outright.
Get off that fence, and get on the Peak Oil boat! It's arriving sooner than you are being led to believe!
Thanks, Luminara. No doubt, as time goes on and the cost of everthing continues upward, I'll come aboard. But, will there be life-vests, a bunch of captains or a mutinous crew that awaits?
Regards, Matt
I don't believe in any form of conspiracy.
Well the US government disagrees with you - as they have laws on the books to charge people with conspiracy.
http://www.usdoj.gov/opa/pr/2006/June/06_crm_401.html
Now you can choose to say 'there are no conspiracies' - but I've asked others who make such claims to explain the above link. Perhaps you can.