Land of Make Believe

October 10, 2005
     For the moment, it's back to business-as-usual for Easy-motoring Nation.
     Yet 73 percent of oil from the Gulf of Mexico remains "shut in" or unavailable because of hurricane damage, and about 63 percent of natural gas production. Prior to the hurricanes, 24 percent of the nation's non-imported supply of crude came from the gulf. There are also eight refineries still shut down representing 2.1 million barrels a day of refined product capacity (900,000 barrels a day of gasoline, 500,000 of diesel and heating fuel, and 200,000 of jet fuel).

    For the past month, the European Union has been sending two million barrels of crude a day to the US out of its own emergency reserves. The original deal was made in the brief lull between Katrina and Rita. It took a while for those tankers to get here. The EU imports over 15 million barrels of oil a day itself, somewhat more than the US did in pre-hurricane times.

   The Federal government has loaned the oil companies crude from the Strategic Petroleum Reserve. The SPR contained 700 million barrels of crude when the hurricanes hit. The US uses 20 million barrels of oil a day, of which we produce altogether about seven million barrels ourselves. It is unclear how much oil is coming out of it now, but the last time a president tapped the SPR (Clinton) one million barrels a day were released.

    These actions have beaten down the price of crude oil on the various futures markets. At the same time, gasoline pump prices have leveled off from the refinery squeeze. I doubt that the motoring public is driving a whole lot less. The commutes haven't magically gotten any shorter out in Dallas and Denver over the past month. The national fleet of SUVs has not been changed out either.

     What's happening, therefore is that we have entered an eerie hiatus. Some band-aids have been applied to our oil and natural gas supply injuries and the bleeding seems to have stopped. But the truth is that our energy supplies are badly compromised and at the worst time of the year -- just as we slide into the home heating season. Here in the northeast, we have barely had to turn on the furnaces yet, but that will change in a week or two.

     In the background of this scene, the global oil production peak lurks -- meaning that there does not seem to be any surplus production capacity anywhere in the world, including OPEC's big gun, Saudi Arabia. So all we have here in America is a temporary appearance of normality. When the furnaces go on, the WalMart aisles will be empty. If there is any reduction in car trips, it will be because Americans are making fewer visits to the Big Box stores. There will also be fewer trips out to visit the model homes in the new subdivisions.

     Another unpleasant truth about the situation is that the US public wants to pretend that everything is okay as much as its leaders do. The public is not so much being misled as demanding that its leaders in government, business, and the news media continue a game of make-believe -- that we can still run a cheap oil economy without cheap oil.

Comments

[nicholas paredes]

Much of the immediate pain can be dissipated through conservation, though you are correct in that sutsaining the scenario indefinitely is impractical. This weekend, I was reading that public transportation is up and that if 10% of the transportation needs were met by these modes, the savings would be dramatic. The problem, well aware to those of us without cars, is that it is difficult to get far by this method. Most of the country is still sprawl.

The winter will be rough on those with houses requiring heavy energy expenditures.

[steve duncan]

To riff on Cheney, this administration wants Americans to treat acting on reality as a personal virtue and not a life necessity. Nothing bad has ever happened to Bush because of real life events. He's been insulated, bailed out or excused from every failure, transgression, ineptitude or act of willful negligence he's committed. Why shouldn't the rest of populace enjoy the same pass?

[kd]

I listened to a discussion the other night in which one person proposed that, like the WalMart, more & more retail & grocery stores will stay open more hours, many 24/7. Another person said no, when the looming energy drought hits, we'll go back to stores closing doors at 9 pm, & staying closed on Sundays. They just won't be able to afford to stay open 24/7 any more. Not only will lighting, heating & cooling bills be too high, there won't be as much sales activity, nor will they be able to afford wages for a large staff.

*

PS:

http://www.monoculartimes.co.uk/architexts/carculture_1.shtml

[Sean]

Perhaps Wal-Mart hasn't heard about natural gas prices, as when I was there yesterday it was hot enough to melt chocolate. This on a not-so-chilly morning. The ruddy-faced cashiers had to keep fans (set on "high") aimed in their faces to keep from fainting. The entire time I wondered how much a single day's heating bill would be for this particular store.

[Mauricio Babilonia]

Another good post Jim, but I take issue with the statement that "the national fleet of SUVs has not been changed out [...]." While this may technically be true, SUV sales are off by about 50 percent from last year. I think overall car sales are down too, but I haven't been able to confirm that.

Not that it makes that much difference. The highways are still full of 18-wheelers that get about 3 or 4 miles per gallon, and there is no comprehensive energy conservation plan anywhere in sight.

One of the few bright spots is that bicycle sales are at near-record levels. Not just Lance wannabe bikes, but city and utility bikes too. After using a bicycle as my primary means of transportation for fifteen years, it finally feels like I have some company. The energy conservation personal virtue is far more evident when economic self interest is at stake.

[Dave]

Trying to awaken the sweet sleep of dreamland's residents is not a welcome action. I'm trying with our City Council and our Mayor's Office but so far I have only found the chair of the City Council to have watched the End of Suburbia. My next strategy is to prepare the report from Heinberg's Museletter on Peak Oil and Food Supply presented at conference in Ireland this past year for the Council and Mayor's Office. I serve as the Director of Public Education for our County's Green Party as well as I have been a Sierra Club Activist/Environmental Advocate for many, many years. I say this because the local politico's know of my prior efforts so it lends a certain cred to my presentations. This is what is needed in my view. Local actons to alert the units of local governance and nearby citizen groupings. The higher ups will begin to notice which is all we can ask for from those types. By that I mean those invested in assuring the masses that all is normal and stable when as we know it assuredly is not.

[Jorge]

Jim:

Thanks a lot for putting it all together for us few who are trying to keep our heads above the white noise of brainwashing daily blather. We need more people to understand that the slip in oil prices is related to the releases from the IEA and our SPR, not to any changes in the fundamental imbalances between supply and demand. This is going to be very difficult considering that the official line from the talking heads and industry wonks is that an oil glut is in the making and prices are bound to continue falling. Me, I haven't seen anyting anywhere that persuades me that China and India have stopped purchasing oil or that a new Ghawar was discovered.

But try telling that to the guys on Fox News and CNN.

Jorge

ps To Mauricio Babilonia: nice choice. Nothing more appropriate than taking one of Garcia Marquez's characters for your postings. I do believe that magical realism and the current blather on the airwaves about oil and our economy are pretty much the same thing.

[Thad Beier]

Jim,

Thanks for the monday-morning dose of reality -- it always gets my day off to a good start.

It really does appear that people are driving less in the last month or so that prices started to approach reasonable levels. Reports that I've seen say that driving was down about 2% year-on-year last month. Given that the population increases at least a percent or so a year, per capita driving might have been down 3% or more.

This give us our first real glimpse of the elasticity of the gasoline market. If the prices go up $1.50 a gallon, per-capita driving falls 3%. If, as you suggest, the supply is likely to fall by 20% or so over the short term from immediate hurricane-related causes, then we should expect the price to go up to $10.00/gallon.

We'll see, and very soon indeed, if that is the case.

On another note, I was trying to convince my 15-year-old daughter that politics will affect her life dramatically. Unsuccessfully, I may add. I suppose I've been too sheltering, a natural paternal feeling but one that we probably don't have time for.

Thad Beier

[steve duncan]

kd, most retailers wouldn't realize significant savings in terms of energy by closing nights or Sunday. Many products can be sensitive to fluxuations in temperature and either heat or A/C would have to be maintained close to open hour temperatures regardless. Lighting may be diminished but due to security concerns but because of janitorial staff and night time stockers it wouldn't be entirely shut off. I've been in major retailers during third shift and manpower is typically drastically reduced, negating wage savings when compared to just locking the doors. Speaking of locking the doors, if you choose that now you have to wire the facility with an intricate security system, dealing with every window, dock, door and other entry possibility. A monitoring company must be contracted with and you still will want on site security and parking/dock lighting at all times. Limiting hours is a net negative to the bottom line of many retailers.

[Chuck Taylor]

I appreciate your candor. For another candid view from the heart of the oil patch, I would encourage people to go to www. simmonsco-intl.com. This is Matt Simmons site. Simmons wrote, "Twilight in the Deseet: The Coming Saudi Oil Shock and the World Economy". His most recent speech on September 27 is titled, Today's Eenergy Reality: We are in a Deep Hole." Some more disturbing information from soneone who knows.

[ross]

Right you are Mauricio. SUV sales have collapsed, and I don't think they are recovering, ever. Ssuburban McMansions, the SUVs of real estate, are next, and as kd added in last week's thread, McMalls will soon follow as terminal casualties of the onset of PO.

I agree with Jim that this is a temporary respite before the next inevitable price spikes in fuel costs come. If oil drops under $60 dollars a barrel it will be an immense gift. Furthermore, if PO arrives in a little over a month as Ken Deffeyes has predicted, that would have to rank as the call of the last one hundred years, if not longer. Of course we won't know if he is right or wrong until about '07 or so.

[Deb]

"What's happening, therefore is that we have entered an eerie hiatus. Some band-aids have been applied to our oil and natural gas supply injuries and the bleeding seems to have stopped."

I think that psychologically, people notice consistently linear trends. If gas goes from 2.50 to 2.75 to 3.00, people notice (whether they'll act, of course, is an open question).

But if gas goes up, then down a bit, then up a bit, people don't notice as much. So now gas has gone down a bit and people think "crisis over."

I think the oily boys in control understand mass psychology much better than we think they do. This oscillation in prices is not a natural byproduct of market forces but an intentional manipulation meant to distract people from the fact that the long term trend is still ONWARD AND UPWARD.

[steve duncan]

ross, would a sub-$60 oil price be a "gift" if it forestalls treating energy consumption with the seriousness it deserves?

[Jorge]

Deb:

You've highlighted the crucially important area of mass psychology. I'm a new arrival at the PO discussion. I hadn't heard of PO six months ago. When I first started reading about PO I went into a depressive state for a few weeks. Who in their sound mind wants to hear about the soon to come demise of a whole way of life? Who wants to learn that, if urgent measures aren't taken by sound leaders, the inevitable will also become extremely painful? I've got three young kids, ya know?A very first natural reaction is to hide your head in the sand and pray your butt's OK.

If the numbed and distracted masses ever caught on to the implications of PO there would be a massive, unstoppable, potentially revolutionary, political earthquake shaking this nation to its foundations. Deb is right when she points out that media manipulation is an integral part of a strategy designed to keep things going for oil, banking, and political interests.

The truly sad part is that they don't even have to be that good (which, by the way, they are). The overspent and overfed masses are desperate to hear that everything is going to be OK. Big Oil and confreres are more than happy to accommodate.

Let's see how much longer this lull in oil prices goes before the negative dynamical imbalance between supply and demand reasserts itself. We'll then see how much reality is needed--and allowed to shine through--to shake people out of their incredibly persistent non-reality slumber.

[ross]

Steve, in my view, TPTB are not treating PO and Global Warming with anything like the seriousness and urgency that are warranted. As such, a few dollars reduction in the price of light sweet crude will not, in my view, make an already woefully inadequate condition appreciably worse; but it will allow individuals and perhaps small groups to make their own neccessary adjustments with less difficulty.

[Barry]

Jorge -
noticed your use of the word 'dynamical' in regards to imbalance and thought, "How appropriate!" One doesn't often hear it outside of the field of non-linear systems studies and chaos theory. Are you familiar with any of that body of work?
My ex-wife and I were charter members of the Society for Chaos Theory in the Social Sciences way back in '94 when the group had its inaugural meeting at the APA convention in San Fran. Since then, I've had the opportunity to look at 'markets,' and the P.O. phenomena under similar lights and find disturbing trends - i.e., the 'oscillations' and 'period doubling' that precede the onset of chaotic regimes. I have no firm hypothesis nor do I feel comfortable with projecting any concrete dates/events but I'd be interested to hear from others who've taken the same approach and see if they, too, feel that we're very near an abrupt change in system stability and dynamics.
And, I concur that it takes a heck of a lot to shake people from their 'sleepwalk.' In many ways, it seems more like the lethargic state following a hypnotic session when no instruction is given to awake 'refreshed.' Perhaps we've all really been mesmerized by the 'crap' that spews from our media outlets.

[kd]

Thanks, Steve, for your insight concerning the comments I heard about the future of retail shops.
Do you think more retailers will move toward longer WalMart hours?

[The Liberal Avenger]

Hey Jim!

I'm glad that you're back.

I want to see you posting here every day, damnit.

[jorge]

Barry:

I know only enough to follow--at a distance--those who really know about it. I was exposed to chaos theory during a management course that briefly mentioned the use of chaos theory to predict growing non- or under-performance in highly complex organizations. That has given me enough insight to somewhat understand the non-linear behavior of our highly unstable globalized economy, of which the highly unstable energy markets are only fractals. I do understand enough of the theory to visualize the unpredictable non-linear effect that the unstable state of the energy markets will have on our unstable globalized economy. Not exactly the butterfly effect given that energy supports the whole thing.

I do find your mention about the oscillations and period doubling intriguing. Could you delve deeper in this with concrete examples when you find a chance?

Cheers.

[Deb]

Jorge: Who in their sound mind wants to hear about the soon to come demise of a whole way of life?

This is an important component of the mass deception. We'd all prefer if peak oil weren't true. Even those of us who believe it's coming and won't shed tears over the demise of Uncle Sam can't be happy about the end of the world as we know it. As Jim notes in Long Emergency, we've all grown up on an oil-fueled lifestyle which is equivalent to having a thousand slaves at our disposal.

This combination:

a. hope it isn't true
b. conflicting/inconsistent info in the media

is a recipe for denial. We're on the Titanic, but until the water is up to our nostrils, we'll pretend it's just a broken pipe.

[gene]

I wish so much that the average Joe sixpack could stop his dinking and football watching long enough to pay attention to all the incrediable changes currently taking place on planet earth. Peak Oil crisis when I first discovered it (by accident) shock me to say the least. Further internet research of PO and other related subjects has solidified the ideal that we are now exsisting in a virtual reality soon to be shut down, permanently.

[ross]

Hey Barry,

Have you investigated George Ure's site? He has a fractalist (a resident of sorts) named Gary Lammert come on quite frequently to discuss what the fractals have to say about the stock market. Let's just say that based on the fractals Mr. Lammert is looking for something rather "chaotic" to develop imminently. He sees the retrace off the stock market lows from late '02 early '03 as over.

[EastCoastShock]

Some extremely good news:

http://cnu.org/news/index.cfm?formAction=press_release_item&press_release_id=68&CFID=11818893&CFTOKEN=84907948

Looks like the New Urbanists, under Duany, will be in charge of rebuilding much of the devastated area in Mississippi. Too bad this is being pushed by a Republican governor. It looks like the GOP is way ahead of us on this one.

[jorge]

Deb:

"This combination:
a. hope it isn't true
b. conflicting/inconsistent info in the media
is a recipe for denial".

Seems to me it's more like a recipe for disaster. Today at lunch I mentioned the issue of high oil and gas prices and everybody around said "Well, at least now oil is going lower and we will be OK", and some of them started to mention some talking head who predicted that oil will drop as Saudi starts pumping more to "stabilize" the market.

So there you have it. Popular belief still maintains that:

a. The situation is a short term crisis.
b. It's caused by OPEC's price gouging.
c. OPEC can reverse by pumping more oil.

Can you spell cognitive dissonance?

Cheers

[Andy R]

East Coast,
Why the lamentation over a Republican governor embracing New Urbanism?

Whatever his other shortcomings, it sounds like he trying to do the right thing with a once in a lifetime opportunity.

Maybe Barbour can do for the Republican executive branch what folks like Roscoe Bartlett are doing for the legislative - regaining some credibility with the people.

It can't be all bad...