Despite my thoroughgoing rethink of the last two posts in which I sought to conclude the argument to a single, devastating point about our condition, I then read John Michael Greer's The Archdruid Report and saw that he had made the point that eluded me. In "A Gesture from the Invisible Hand" he provides the linkage between the American debt economy, the financialized post seventies pyramid scheme economy that struggles so today, and the peaking of American oil production. And it only took one word, and two readings, to allow me to see what I wanted to write about those two posts. The word is "capital". Primarily, the behavior of capital and what it might look like as energy scarcity becomes the norm for the world economy. You can read it all here: http://thearchdruidreport.blogspot.com/2009/11/gesture-from-invisible-hand.html. This is not the subject I wish to write about as such but what I want to do dovetails nicely off of what he says.
Greer describes the activity of capital in general terms over the decades after the 1972 peak of oil production in America. He is hypothesizing here, but the behavior of money generally is to find the best return on investment. At this point, a sea change occurred in U.S. investment patterns. Our old friend diminishing return on investment comes into play for reasons that capital understands but does not really acknowledge. As the amount of energy needed to acquire energy grows, the less energy there is available for use in the economy. One effect is for energy to become more expensive in monetary terms, but it also makes the financial returns diminish over time because expensive oil causes economic recession. The effect is a disinvestment in productive capacities and infrastrucure. This is a slow process but it has been occurring upwards of four decades. We are seeing now that the Wall Street banks and the financial sector generally are bigger relative to the whole economy and the oil companies, among other sectors, are shrinking, either elatively or absolutely. Capital flees from these investments and the economy as a whole becomes more paper, less production.
That is a very rough sketch, but it serves to bring up the related topic of oil production globally and what we can expect to happen when the inevitable peak is upon us, which it may already be.
And this brings me to the second aspect of my post: A story in The Guardian of London on Nov. 9 which reports on a whistleblower inside the International Energy Agency making the claim that the United States is pressuring the Agency to inflate it's global oil reserves estimates and lowering the rates at which existing oil fields are depleting. Oof. Now, the statements of a whistleblower can be taken as apocryphal as their motives might not be necessarily to reveal the truth. But it just so happens to echo what outside analysts, generally known as "Peak Oilers" have been insisting to be the case within the IEA for quite some time. In addition to this, the Agency has been steadily lowering it's forecasts for global oil production, one of it's central purview's, in it's annual reports over the last couple of years, seeming to legitimaize Peak Olier claims.
The purported reason for this, the IEA's cover-up of the real supply of oil, is because of it's foreseen impact on the oil markets. According to the whistleblower, the IEA feared panic buying of oil by nations and a return to the prices we saw in 2008. And so they should be afraid, because that is surely what would happen, And the United States, by far the most dependant on cheap oil of any nation (though not by any means the only one), would suffer tremendously as it tries to reflate it's economy in the midst of the worst recession since World War II. It's no mystery what an oil price in the range of what we saw in 2008 would do to the efforts by policymakers to patch up the creaking timbers of the American banking system and consumer driven economy: It would destroy those efforts and launch us into a worse recession than the one we are attempting to emerge from currently.
What all this makes me think is that, absent particular circumstances, capitalism is a frail thing. Markets can flourish in good times, but when it's bad, they tend not to get the job done. Assuming for a moment that what this whistleblower says is true, then it speaks volumes about how desperate the U.S. must be to hush inconvenient data. Perhaps it's faith in the market to find the best solution for any and all problems is not so genuinely felt. Seen in another way, it might be that the U.S. may not like the solution the market provides. It may be that the market economy, with it's deservedly touted capacity to command resources like no other system, is not so well suited to handle a situation in which resources are no longer available to be commanded. The implications are profound. The solution may come in a devastating form.
It cannot be exaggerated how critical oil and the other fossil fuels are to industrial economies (and no, we are not in a post-industrial economy). As of this writing, there is no other viable source of energy we can turn to to run them. There is no shadow means of production powered by something other than fossil fuels. Oil is the supreme fuel. Without it, not much else can happen. If we are indeed, as a species, as a civilization, entering the terminal decline phase of oil, then our options become very limited. Gone will be the sense that the future is full of delicious possibilities for human endeavor. We will have to out of necessity think much smaller and much more realistically about what we collectively face. It will be a time to make painful decisions about what is worth preserving of the things we value. We'll have to engage in the art of the possible and dispense with the childish notion that we can do or have anything we want.
To put an historical label on it, I would describe the transition we face as the Age of Abundance meets the Age of Limits. A lot of grief will follow as people are forced to make do with less. If the actions of the U.S. serve to demonstrate the stages of grief, denial being the first, then what happened in the IEA signals where we are better than anything could.
No comments:
Post a Comment