INDEX - FUTURE ID# 0803-14



POSTED: 9 OCTOBER 2008 - 6:30pm HST

The End of Growth

image above: Traders at the Chicago Mertantile Exchange. Photo by Scott Olsen

by Richard Heinberg on 9 October 2008

Several of us who have been watching the world oil production and depletion picture closely for the last few years are now concluding that the world has now seen the highest rate of production ever. Matt Simmons agrees: It’s all downhill from here.

The worldwide financial crisis, and the decline in available energy, mean that we may also have seen the final year of aggregate world economic growth.

This is a breathtaking statement. I found myself uttering it yesterday at a strategy meeting of some environmental and economic justice organizations organized by the International Forum on Globalization; I surprised even myself, and immediately began wondering whether what I had said could possibly by true.

There are obvious objections. Perhaps the wealthy nations could still wring out a few years of growth by increasing global economic inequality. But this is essentially what they did over the past two decades with the strategy of corporate globalization—and that strategy is losing steam because of high transport costs due to Peak Oil.

Perhaps economic growth could still be maintained by smoke and mirrors—in either a good or a bad way. All that would be necessary is a little fiddling with the definition of “growth.” Just look at how the US government has altered its way of defining “inflation” over the years by largely excluding energy and food prices: if the old rules were still in place, the country would be seeing double-digit inflation. The same has happened with “unemployment.” Why not “growth”?

On the other hand, growth really should be redefined. Many organizations have been pressuring governments and official agencies to measure growth not with GDP, but with a mixture of indicators related to public health, education, environmental integrity, and so on (the Genuine Progress Indicator is one suggested alternative scheme). If world governments decided to redefine growth this way, and then actually funded improvements in public services, perhaps growth could indeed continue.

A final objection has to do with regional impacts of the economic crisis. Some would argue that the growth momentum of China is such that it cannot be stopped immediately, and will therefore continue to contribute to overall global growth for the foreseeable future. Others might point out that the oil exporting nations are likely to continue experiencing high rates of growth as prices of fuel eventually resume their stratospheric climb. But will China or Saudi Arabia be able to offset the economic collapse of the US and Europe? And will China be immune for long?
The more I think about it, the more it seems to me that my blurted comment may be right. Growth is gone. Over. Kaput. Finished. Get used to it.

If so, there will be an ocean of consequences. For those in the tiny universe of environmental NGOs, one of the consequences is this: The time for arguing against economic growth may be over. Yes, everyone who understands our human impact on the environment, and the disastrous implications of our economic growth imperative, knows that it is absolutely essential that the world find an alternative to growth; that instead, the human economy must contract to a point that it no longer threatens the viability of ecosystems. This is the essence of sustainability.

But imagine yourself talking to someone who has just lost her job. You tell this person, “You need to voluntarily further reduce your income and standard of living.” How’s that likely to go over?

Effective strategy demands recognition of the opportunities and limits of the unique historical moment. It seems that we have just moved from one historic moment to a very different one. In this situation, it’s more helpful to tell people (including policy makers) how to effectively deal with their immediate problems in a way that is consistent with long-term sustainability. Anything else will be irrelevant at best, extremely unwelcome at worst.

Growth is dead. Let’s make the most of it. A crisis is a terrible thing to waste.



POSTED: 13 SEPTEMBER 2008 - 9:00am HST

The Dress Rehearsal Is Over

image above: Don't reset the snooze alarm!

by Richard Heinberg on 11 September 2008 at

As oil crosses $100 on its way south, not even a hurricane in the Gulf of Mexico and a statement from OPEC that the cartel will cut production by over 500,000 barrels per day seems capable of halting the bloodletting. In response, the Financial Post features an article titled “Peak Oil peak,” quoting this writer out of context; compare this with my commentary, which was the source of the quote).

Wasn’t the price of oil supposed to rise endlessly? Wasn’t the world supposed to end by now? What happened? What does it all mean?

Patience, gentle reader. All will be explained.

First, why did the price of oil rise this summer to nearly $150? On this there is little agreement among the mavens. A new report by hedge fund managers Michael Masters and Adam White (released Sept. 10 by Sens. Byron Dorgan, D-N.D., and Maria Cantwell, D-Wash.) chalks it all up to speculation. Pension funds, college endowments, and other institutional investors bought heavily into commodity index funds earlier this year, and that sent the price of crude to the moon. Recently the same investors have taken their money out of oil futures, and this accounts for petroleum plunging back to earth. Move along, folks, nothing to see here.

But this directly contradicts the findings of an earlier study by the Commodity Futures Trading Commission. That 100-page report concluded that the price run-up was all about supply and demand.

Confused yet?

Then there is the argument spinning through the rumor mill (sorry, no www attribution available on this one) that says the fall in oil prices since the end of July shows support by Wall Street for Republicans as the nation moves toward the November elections. After all, the reasoning goes, JP Morgan controls 40% of the puts and calls in the oil market; add Goldman Sachs and a few other big brokerage houses and there is the potential for manipulation of roughly half the total oil futures market.

If gas prices are rising, the electorate will be more likely to want to throw the (Republican) bums out and demand Change™. Wall street likes the favors the Bush administration has doled out over the past few years and wants more of the same. Or so the story goes.

The more prosaic explanation for the price spike: oil demand was rising, supply wasn’t, so the price went up. When the price got high enough, it (along with the credit crisis) caused the US (and world) economy to go into recession. That has seriously undercut demand for oil. Look at the drop in vehicle miles traveled, for example.

One thing we can be sure of: price matters; when the market speaks, people listen. During the weeks when petroleum was breaking a record nearly every day, there was unprecedented discussion of the Peak Oil concept in financial journals, both print and online. What’s more significant, people started driving less. Hummers sat on car lots, unsold. Airline companies and auto manufacturers teetered on the verge of bankruptcy.

In short, people woke up to the profound vulnerability implied by having based their economy, and by extension their very lives, on an impossibility—the extraction of a non-renewable resource at ever-increasing rates.

As the oil price fell, eyelids drooped.

But the price spike of early 2008 was merely a dress rehearsal. The fall in oil demand gives the world a moment to catch its breath before the inevitable price-ratcheting process starts up again. Meanwhile, at $100 or so, the price of oil is still 50 per cent higher than last year and 10 times the level of a decade ago.

When the next supply crunch comes, we could well see prices of $200, $250, or $300. But again, the rise won’t be steady and unending; we will again see a spike followed by a plunge—this time maybe back to $150.

Meanwhile, will oil at $100 be an occasion for sleepwalking or strategic regrouping? For policy makers, this is a time to think clearly about long-term measures to reduce demand pro-actively and support the development of renewable energy sources. For citizens, it is an opportunity to make the effort to change habits, buy a smaller car, and get involved in community Peak Oil prep work.

For those of us who have been involved in such work for several years, this is the hour to prepare for the inevitable tsunami, when journalists will call us day and night struggling to understand the concepts, and when city governments, businesses, and national politicians will plead for advice on how to cope. We’d better be ready.

The world has had an unmistakable wake-up call from the global oil alarm clock; merely to press the snooze button would waste what may be our last opportunity to act before necessity makes us react in ways that are less than optimal.

see also:
Island Breath: The Long Descent
Island Breath: The Long Emergency has begun
Island Breath: Kunstler 2007 Predicition
Island Breath: Kunstler 2006 Observations
Island Breath: Salvage Sociaties
Island Breath: Scarcity Industrialism

Island Breath: Power Down Revisitied 10/17/07
Island Breath: Part 1 - 2050 Introduction
Island Breath: Part 2 - Kauai 2007 to 2029
Island Br
eath: Part 3 - Kauai 2020 to 2050