Sunday Star Times Business section. Laugh, Cry or Encourage?

It’s all there in the Sunday Star Times, Business section. Just in bits. It reminds me of my old meccano set – a box full of stuff, not resembling the crane on the cover….

They looked ( Garry Sheeran ) at energy, at least from a potential-investment view. He did, even with that slant, manage to highlight the most noteworthy para, a quote from ‘one of NZ’s most experienced commodity traders, Robert Holroyd:  “Things (commodities) will go through the roof if nothing is done to tackle population growth. It’s a problem so big it defies belief”.

Quitr right. We have arrived at the point Malthus and the Club of Rome said we would. Where the article failed, was in accepting the ‘tout’, that any immediate lack of oil  supply would be because of a lack of investment. On the back page (World Markets – Running scared of the raging bull) we have a little quote from one Jim Rodgers (a ‘famed commodity bull’) “….they haven’t changed the fact that there hasn’t been a new large oilfield found in 40 years”……

He’s right. The investment theorists are wrong. Global oil discoveries peaked in 1964, and the fall-off rate since is both steep, and irreversable. Folk fail to grasp the relativity thing – the North Sea oilfields would, on their own, power the planet for 4 months. Our Southern Basin? Two months. Same with the discovery off Brazil. And remember the North Sea is down to 20% now, Brent Crude is an anachronism… The view of an economist would be that the price will go up with scarcity, and that that will either change behaviour, or hasten the finding of a substitite. The problem this time, is that population growth, and the per-capita demand growth, has run into a bulk demand for energy, WHICH CANNOT BE ASSUAGED BY ANY KNOWN MEANS. Period. Sorry, teachers of economics, your theory was a short-lived one, only applicable to the period of extraction, in fact, to the first-half period of exponential increase in extraction. The “rapid rise in commodities’ should surprise nobody, and is now permanent in a finite world. I guess you could anticipate a change in behaviour……

The key commodity though,  is oil. Work requires energy, an immutable thermodynamic law. Which means that trying to ascertain the forward price of oil, in increasing demand and decreasing supply, you have to understand (think: Boolian algebra) that it is the essential underwriter of all other activities. They can’t hold up if it fails. The yin gets yanged, which then yins…. Which is why Kenneth Deffeyeyes, in his 1999 book  Beyond the Hubbert Peak, pointed out that oil prices would ramp, and we would be “looking out over the smoking ruins of the world economy”. We are. Bailouts were a one-off, and will never be repaid.

Other energy sources are neither as transportable (you can’t carry as many kilowatts in a convenient tank) nor as versatile (nuclear only makes electricity, which doesn’t drive tractors ).

The problem is that we have one chance here, as a species. We have only gotten to the level we have, essentially within 200 years, via energy (ex solar, coal was trees, oil was biota) which has been stored over millenia, and which we are roughly half-way through consuming. Given our exponential increase in rate of consumption, the other half goes in 18-50 years, depending on the resource.

Two problems with this:

1.  If we don’t use the oil, to lubricate the change to another energy source, we will never get back to where we are – the opportunity to do so will have been consumed.

2.  The supply from here on (and people like me have been saying this since the mid-‘seventies) will get less, even in the face of increasing demand.

Which creates a couple of spin-off sub-problems.

1. The planet cannot support it’s present population, let alone more. Best estimates (some of us have thought our way down this track – even while the growth parrots parroted) suggest 2 billion at subsistence level, 1 billion at our current level, from our present 7 billion. It’s going to be ugly.

2. The above means that comments like those of Rod Oram, Jenny Ruth and Tim Hunter, have to be re-written. No economic system based on growth (and how else does one underwrite the profit charged in the last round, if not by increasing the size of the next) can continue beyond peak energy supply.

This means that local food, local water, local energy and local health, have to be priorities more important than exports. Sure, we are in debt, but unless it is done with guns, debt will fail as a system, very soon. The ‘stimulus injections’, will never be repaid – there simply isn’t the the energy/time to do it. If you want to quantify the debt at the point of the ultimate crash, think of environmental degradation, including extraction of one-off resources, and you’ll be on the right track. For what it’s worth, if you’ll pardon the pun.

Commodity prices – for a while – will rise, but the effect here will be that we are shut-out early in the game. (no guns) This means a problem with roading (bitumen, fuel) construction (concrete, fuel) transport (fuel) agriculture (fuel, fertiliser) food (plastic containers, transport, processing) infrastructure (alkathene pipes, fuel) and all the oil-based items like adhesives, textiles, floor-coverings…..

It gets worst quickly now. The traditionally accepted Hubbert Curve, is optimistic in it’s right-hand half. The reason is EROEI, and visitors here or to the The Oil Drum will understand ‘Energy Return on Energy Invested. Simply, if it take a barrel of oil to drive the machinery to produce a barrel of oil, you get no energy to use. All useful energy sources have to have rate-of-return substantially better than 1:1. We have picked the low-hanging fruit, in oil terms – the closest to the surface, the most pressured, the easiest-to-refine. From here on in, it gets deeper, sourer, more technically difficult – even as the supply dwindles. Further, if exporting countries continue to grow their internal demand even as their internal supply reduces (think Indonesia, Mexico, Norway), the amount available to importing countried drops faster than the global supply rate does.

New Zealand, then has to get self-sufficient in food and water, self-sufficient in energy (and renewable energy at that, no other lasts) and put in place a regime of zero population growth, and a way of trading in a reducing paradigm. Rudd is on to the other thing – We ougth to be armed- it will come to that.

The Jenny Ruth bit about wind farms, changes when you only have one shot to get sustainable. Conventional valuations simply go out the window. Kind of : “Your money or your life?” “Um, hang on, let me think about that”. Yeah right…

So too, Hunter’s piece on electricity charges – without assessing the displaced loading from oil (where possible), and having an intelligent stab at picturing the state of society in a reduced-oil world, the projections of individual costs are not worth discussing. Somewhat like discussing tomorrow’s  deckchairs hireage-rates on the Titanic.

It was all there. Just a bit more investigation, a bit more correlation, and they would have had the most epoch-making piece of reportage in New Zealand, ever. As it presented, only those already up to speed would have cut-and-pasted the fragments into the basic argument. What a pity.

The only answer is solar energy, and urgently. Hydro and wind are, of course, solar-derived. So, over too long a time to talk of renewal, were coal and oil. We needed to be going there, yesterdecade. What a pity. Whay a pity.

I hope they (the business folk at the SST) put it all together. I’ve got other things to do, and they get paid to do it.

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