The Oil Drum: Local

This is the post where I try and draw my own conclusions from the Conference. And not recognizing many of the papers in this does not mean that they weren’t important, but rather that from my own perspective that this is what I got most from.

The recurrent word that cropped up, again and again, was Scale. It was an attempt by the speakers to try and convey to their audience the size of the problem that is coming at us, increasingly rapidly. That one word encapsulates the difference between those who talk of the world energy problem in Quads (quadrillion Btu’s), as opposed to those that talk of the solution in terms of kilowatts and Megawatts. (The handy Dashboard on my Mac tells me that a Megawatt is 56,869 Btus/min. A Quad is 1,000,000,000,000,000 Btu.) The current shortages of gasoline are largely brought about by a transient closure of refineries that affects around 1 mbd of oil supply. The time is not far distant when such shortages will become more regular as we compete for supply in a more competitive global market.

The tipping point that seemed still a comfortable distance away three years ago when the American ASPO meetings began in Denver, is now just about here. And the solutions that have been discussed do not approach, as yet, the millions of barrels a day (mbd) of fuel replacement that we may need before long. At the same time, to return to the theme of my own paper, we do not have the educated human resource that we need. Data from my Dean of Enrollment shows that ACT report national high school student interest in engineering was at 14% in 1982. By 1992 it had dropped to 9%. By 2005 it was down to 5%, and has fallen below that since.

How can we cut our energy use for commuting? What methods are working for you? What methods make most sense in our current credit environment? This is mostly an open thread, to give people an opportunity to talk about what is and isn't working for them. If the economy is sputtering, peak oil is around the corner, and hurricane related shortages are becoming more common, these methods are going to more and more important in the days ahead.

Some ideas that have been suggested include:

1. More work at home plans, possibly a few days a week.

It's election time in New Zealand and Finance Minister Michael Cullen has mentioned Peak Oil in a campaign speech he gave on Wednesday, decrying the state of funding for rail transport and declaring "a new era in the rail industry".

Given the energy challenge we face in coming years, the so-called black hole of rail funding looks more like a pot-hole that urgently needs filling.

In 1908 our predecessors built the North Island Main Trunk line because they had a vision for a much more populous New Zealand and for opening up the North Island to settlement and economic development. The Main Trunk justified the faith of the settlers for more than 50 years, before the rise of road and air transport – helped by cheap oil prices – diminished its role as a carrier of both freight and passengers.

Today we have to come to terms with a new set of circumstances – the emerging reality of Peak Oil and the impact rising fuel prices have on our economy. Rail's energy efficiency has a new relevance and a new importance.

I am writing this article from Atlanta, one of the places hardest hit by gasoline shortages. A person can drive for miles without finding an open gas station.

One of the major reasons for gas shortages is that fact that inventories were not very high going into the hurricanes. Then when not one, but two, hurricanes hit, inventories dropped to the level where there wasn't enough to go around. (In fact, the shortages started even before the second hurricane hit.) How could this happen? Isn't there anyone who cares about gasoline inventories?

Sydney Lord Mayor Clover Moore recently addressed the NSW State Parliament on the subject of peak oil (via Energy Bulletin).

Tonight I speak about a serious concern of my constituents about the consequences of peak oil, which will have grave local and global impacts. The term "peak oil" refers to the stage when global oil production peaks and future oil production begins to decline. With the global demand for oil increasing rapidly, production declines are predicted to result in severe petrol price increases as buyers compete for supplies. Given the dependence on oil, including for energy, food, travel and consumer products, disastrous impacts on the global economy are expected. While some say peak oil has already hit and others say it will occur in 2030, it is essential that we prepare. New South Wales and Sydney's over-reliance on petrol makes us extremely vulnerable to impacts, and we must protect current and future generations. Given the consequences of peak oil and the serious threat of global warming leading to climate change, governments have a responsibility to urgently reduce our dependence on fossil fuels.

The world's financial markets are in great turmoil. How do we deal with all of this? Let me tell you my view. Yours may differ.

For those of us who are peak oil aware, we know that the world is finite, so the period of continued compound growth cannot continue. Because of this, we have known that eventually we would start seeing turmoil in financial markets. It should be clear that putting our faith in these markets is crazy, even if this is what financial planners have told us to do. If we have already divorced ourselves from this faith, we are ahead of the game.

Looking at the situation from a historical perspective, we have been privileged to live in the world at a very unusual time--a time when oil was in abundance, and we were able to have conveniences that people a few generations ago wouldn't even have dreamed of. We know that this must come to an end, and that gradually we will get back to a world more like it has been over the millions of years that people have walked the earth.

What is happening now in the financial markets is only a small increment in the step-down process. We can either focus on the amazingly good fortune we have had to date, or focus how bad the change ahead might be. It seems like framing the issue as one of historical good fortune is a better approach.

Last week, Nate Hagens was interviewed by Jason Bradford on the "Reality Report". The radio program is about 47 minutes long, and Nate's interview is the last 40% of it. A link to his interview can be found

The first part of the show is an interview with a woman who has been living without electric power since Hurricane Gustav hit. She talks about how the experience has changed her life, and about her thoughts regarding preparing for future energy shortages. The latter part of the show is an interview with Nate on various subjects related to hurricanes, the credit market, hedge funds, and peak oil. He talks a little about the Fannie and Freddie bailout, and about trying to change people's way of thinking about the future.

Today, the financial markets are struggling with Lehman Brothers' Chapter 11 bankruptcy, AIG's problems, and the sale of Merrill Lynch to Bank of America. There is also the problem of the unwind of the credit-default swaps tied to hundreds of billions of dollars of Fannie and Freddie debt. This thread is intended for folks who want to discuss what is now happening.

Some may be asking how all of this is tied to oil and energy. There are quite a number of relationships: