Liam Dann had a very good piece in the Herald the other day about rising commodity prices. Despite insipid growth, prices of food and oil, the fuels of our civilisation are through the roof. The underlying meaning of those high prices is we’re having to devote more of our resources to feeding and fueling ourselves, leaving less for anything else.
Brownlee ignored warnings that his reforms would increase power prices, not lower them as intended. Wholesale power prices have spiked from $50 to $300 per MWH. Exporters have cut production. Residential users are next. With power up and petrol breaking $2 a litre, energy is a handbrake on this supposed economic recovery.
The Commissioner for the Environment says New Zealand’s greenhouse emissions will be 26% above 1990 levels in 2020, compared to the Nats’ promise to cut them by 10-20% – leaving us with a $1b bill. Worse, the IEA shows that even if we and other countries meet our promised cuts its only half of what’s needed to avert disaster.
National Bank has joined NZIER in estimating the economy shrank 0.2% in the September Quarter and all the projections say it’ll go backwards this quarter too. Bill English now admits John Key’s ‘rapid recovery’ isn’t happening. But he insists it’s coming – tomorrow, no, the day after for sure. We’ve just got to keep waiting…
The International Energy Agency’s annual World Energy Outlook forecasts that by 2035 oil will cost $200 a barrel in today’s dollars. That’s not $200 during a price spike, that’s $200 as the new normal. The world entered recession when the price went over $100 in a spike during 2008. A permanent price of $200 a barrel is simply unaffordable.
Economist Jeff Rubin explains that the peak oil crisis is the underlying cause of the global economic crisis and why the economy isn’t shaking itself out of recession as in the past. In the age of peak oil, trade advantages will be overwhelmed by transport costs. The winners will be self-sufficient countries with their own agricultural and manufacturing bases.
In his last column Garth George laments how foods he regularly enjoyed in his childhood (1870s?) are now priced beyond the reach of most New Zealanders. It’s easy to dismiss the complaints of an old man about prices these days but there’s a deeper story: with population growth and resource depletion, there increasingly isn’t enough to go around.
Russel Norman asked Bill English about the economic impacts of coming oil shocks and how transport infrastructure planning takes them into account. I’m not sure which was more surprising: English’s matter-of-fact acknowledgment that peak oil is coming, or his attitude that the government doesn’t need to act because the market will sort things out.
Parliament has published a research paper called The Next Oil Shock. It’s a pretty sober look at the difficulties the world is facing in producing enough oil to meet demand. The conclusions are inescapable: we can’t produce enough oil and a cycle of oil-driven recessions is coming. Are our leaders finally waking up to the impeding crisis of peak oil?
The NZIER survey of business opinion shows that the economy shrank in the September Quarter. The December Quarter was already forecast to be negative and the Christchurch quake will make it worse. So, we’re almost certainly back into recession. That’s going to blow out the government’s debt. The underlying cause is peak oil.
Perpetual growth is the cornerstone of our liberal democratic/capitalist system. It is fundamentally threatened. A double-dip recession is widely expected but most aren’t prepared to acknowledge the underlying problem that isn’t going away.
Despite a textbook response by the world’s major governments to the great recession, US Federal Reserve Chairman Ben Bernanke says the outlook remains ‘unusually uncertain’. The economic players can’t understand why the normal strong recovery hasn’t followed the recession. They don’t understand we have reached the limits to growth.
The textbooks tell us that free trade is good because it means a more efficient use of resources. But the reality is that often the ‘competitive advantage’ one country has in producing a product compared to others isn’t some natural resource or better legal or physical infrastructure that makes business more efficient. Too often, the cheapest countries are the cheapest because they pay their workers the least and don’t protect their environment.
The oil leak in the Gulf of Mexico could be stopped with an underground nuclear blast, a Russian newspaper reports. Excellent idea, what could possibly go wrong? That was sarcasm, by the way.
To avoid cascading sovereign debt crises, countries need economic growth that will boost their tax so they can start getting their books in order. But good economic news sends oil prices up due to the tight supply situation and we’re close to the point where the price of oil tips economies into recession. Is this the limit to growth?
We’re in the middle of another slowly unfolding oil disaster. On April 20 the “Deepwater Horizon”, a British Petroleum oil rig, exploded and sank in the Gulf of Mexico, killing 11 workers and starting what is fast becoming the the largest oil spill in history. It’s an environmental catastrophe. But can we salvage a long term upside?
The US Department of Energy shows a comparison between the world’s likely demand for liquid fuels (including oil) over the next 20 years and the various components that will make up the supply of liquid fuels over that time. The emerging gap is alarming, as “Unidentified Projects†would actually be more accurately described as “unfulfilled demand†– meaning quite literally a demand for oil that will not be able to be met.
Forget wondering when peak oil might happen in the future – the answer to that question is: it’s already happened.
A recent report from the US Joint Forces Command states that “By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day”. Are you planning for a post oil future? Why not?
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