Now think about every one of those items doubling in cost within a relatively short time frame. The price of comfort is going up, and soon. The eye of the storm is giving way now to the looming squalls of war, social turmoil, economic distress. We don’t feel them here yet, because the banks went on a lending spree for the last six years to keep the economy afloat with cheap home equity money and easy credit. Now that is over, and reality is setting in with the housing crunch, rising foreclosures, tightening lending standards. The first quarter of 2007 showed a tangible down-tic in economic activity, with unemployment starting to creep up ever so slowly as companies begin to tighten their belts. Without access to quick loans any longer, consumers are starting to tighten their belts as well, with April sales the worst in years, and May sluggish as well. It isn’t just the soaring price of gasoline, but the escalating cost of all the things on that list above, food in particular.
America suffers from a kind of myopia where its future is concerned. Like folks in the southeast, they get vague snippets of news now and again that a hurricane is brewing off the coast, but never think it applies to them. Their town hasn’t suffered a hit for over 50 years, so while the warning flags go up and some people take heed to board up their waterfront property and lay in a stock of supplies, most just continue their daily affairs, completely oblivious of the impending danger. A time will come, however, when the certainty of the storm path will become too obvious to ignore. Then some will tune in the news and watch the weather reports of the dark swirling clouds bearing down on our coast, again, never thinking their town, their home, their life will ever be affected. Eventually the “news” will finally sink in: that the party is over, the winds are rising, the skyline darkening and the water is getting high. Then we will get a Katrina like series of events, the panic buying, the forced movement of populations away from threatened areas, the frozen tangle of traffic. The rich will motor away to private estates or vacation homes out of harm’s way, the poor will huddle in inner city stadiums hoping for a bus ride to safety that may never come. Eventually it will be uniformed men, the newly federalized “National Guard,” FEMA security, or perhaps hired mercenaries from Blackwater when things start to get bad. The looting we saw in New Orleans is just a taste of what is to come in cities all across this nation when the “news” finally hits home.
Well here’s the news you may have missed: all the world’s great oil fields are now in decline. That’s right, all of them. The big fields in Mexico, the Gulf States, the North Sea, Kuwait, Iran, and yes, even Saudi Arabia, are now declining. The US Fields have been in decline for since the mid 60s, and Russia is also well past their peak. In short, the oil that fuels the world is now getting very expensive to produce. The best of the “Light Sweet Crude” is mostly gone, and now producers pump heavy crude, with more costly refining requirements. Years ago I realized that the rest of my life is going to be like that black heavy crude. The time when I might think to rest in a comfortable retirement, will likely be the most challenging years I live. And for those following behind my Baby Boom generation, the youth of today who have every expectation of living a life remotely close to the comfort I had, there will be great disillusion, disappointment, and a struggle that Americans have not seen since the Great Depression.
It is interesting that oil production peaks just as the eye gives way to the remainder of the storm. Empires have risen and fallen in the initial swirling arms of this storm. The two world wars and the Great Depression were too much for Great Britain to sustain the power it once projected all across this globe. Britain stopped being “Great” shortly after WWII, and the American Empire took center stage, an industrial powerhouse thriving on the huge oil finds in the period between 1945 and 1965. By the time the Beatles landed in America for a counterattack, the easy life and consumer culture life style was well established in the US. The engine of our economy continued to grow and grow, fed by cheap oil in the calm eye of the storm. After faltering in Viet Nam, American power faced down Soviet Russia to win the cold war. The Russian economy collapsed into a dark abyss, and the free West just kept lighting up the world with its neon signs. As the century came to a close, George Bush senior proclaimed a new era had come, one where American power, so massively expressed in the Gulf War, would dominate. Yet how quickly that power seems to have eclipsed when the reins were handed to his son.
The steady blue line of “Pax Americana,” preeminent after the defeat of the great powers like Imperial Japan, Nazi Germany and eventually Soviet Russia, now wavers into the indigo as we realize we cannot even subdue third or fourth rate nations like Iraq or Afghanistan. Our military might, unquestioned for decades, now seems feeble, its training, equipment and élan frustrated by lightly armed irregular “insurgents” with a determination we have not faced since Marines last fought the Japanese infantry. Men willing to blow themselves up for a cause display a determination and resolve that few Western governments ever muster.
Being more dependent on oil and gas than any other nation on earth, the United States is in grave jeopardy. If we had to rely on resources, north slope and all, that we actually own, we could only run the cars and trucks for about three years. The fact is, we are dependent on foreign resources, particularly oil, to keep our nation lit up and running. That’s why we have created a vast network of military bases all over the world--not for the sake of freedom and democracy, but to keep watch on “American Interests,” which are natural resources that belong to other nations. It is no mystery that most are now clustered in the Middle East, around the last large reserves of oil and gas, and around nations we don’t like there.
We are now seeing the end of US imperial power as the cost of our fuel continues to rise. In just eight years under Bush and Cheney, the US has experienced a staggering diminishment of its power. Our military is over stretched and unable to secure the peace in Iraq, our industrial base has been largely dismantled and shipped overseas, our trade imbalance continues to rise, along with our national debt, and our nation now requires a flood of cheap consumer goods from Asia to keep the stores open, not to mention the $2 billion dollars we borrow each day from China, Japan, and South Korea so we can service the interest on that debt. The strength of our dollar continues to erode against other world currencies, so the products we buy with it, mostly manufactured overseas now, will be more costly as well.
All the nations of the earth will soon face the realities of diminishing energy supplies, but like those coastal residents getting news of a storm, there have been tremendous differences in how they are preparing themselves to meet this challenge. While the United States has squandered its national treasure, broken its military, and expended the last of our national credibility in a futile attempt to secure the oil and gas of Iraq, (and check the rising power of Iran), China has been going about the globe booking business and signing lucrative economic deals to secure its future. China has made overtures to Iran, Venezuela, and a host of African nations, all aimed at gaining access to much needed fuel supplies in exchange for easy finance and economic assistance. Wal Mart insists on falling prices, so US merchants look to cheap manufacturing and labor in China to fill their orders. Dollars move from the US to China in droves, and then China lends the money to Nigeria to secure access to oil and gas—all without resort to political blustering, military threats, covert operations, adventurism, or outright war. (This time it is America, the world’s leading democracy, launching all the preemptive wars to secure its energy needs—and don’t even think 9/11, as Iraq had nothing whatsoever to do with that attack). With four times our annual economic growth in recent years, and four times our population, China is positioning itself to become the world’s next great power—if she can find a way to secure enough oil, gas and fresh water to keep all those newly consuming citizens alive in the next century.
Europe has taken another tack, preferring a more realistic and sustainable life style at home, diplomacy in international affairs, and greater reliance on alternative fuels. Fuel prices have been well over $4.50 a gallon in Europe for a decade, and there is a much more mature rail and rapid transit system there, so people drive less. France gets over 70% of its energy from nuclear power. Germany is the world’s leading user of wind power. Britain, once secure with its now declining North Sea oil developments, has decided to hold our coat in the fight for what remains of the oil in the Middle East.
So when I think of it, the greatest years of America have been lived out during the span of my life—all in the eye of the storm. It remains to be seen if we, as individuals and as a nation, can rise to meet the challenges that lie ahead for us now. It doesn’t look like we’ve made much of a start. A lot of hope is placed in “alternative energy” research, but this is not something our nation is really taking seriously. The daily budget for the war in Iraq, for example, (about $300 million /day), exceeds the entire annual budget for the U.S. Department of Energy’s National Renewable Energy Laboratory.
How will we continue to run all the diesel trucks and cars as the fuel slowly runs out? The very question contains the seed of it’s own undoing, because we can’t continue running all the cars and trucks on our clogged freeways. The will ‘o the wisp of bio diesel, ethanol, battery operated cars, hydrogen fuel cells, will not do anywhere near the energy work now provided by gasoline—at least not with the cars and trucks we use today. But that may change. Volkswagen made an incredible announcement this week—a car that can achieve between 200 and 300 miles per gallon!
“The head of the Volkswagen Group’s supervisory board Ferdinand Piech has hinted that there are plans within VW for a super-economical small car capable of traveling 100 kilometers (62 miles) on just one liter of fuel, the equivalent of an astounding 282.5mpg.” Hear that Ford? Chrysler? GM? When will you get it through your heads that the last thing we need on the road in America is another nifty SUV? The best American cars boast a measly 30mpg, with foreign hybrids getting twice that at 60mpg.--all still well below what is technically possible, if the VW story has merit. Coincidentally, the auto related announcement this same week from the US was the opening of a time capsule the good citizens of Tulsa created in 1957 as a message to us folks here in the 21st century. 50 years later, look what rolled out, a 1957 Plymouth, a perfectly preserved monument to the era of cheap oil, when cars were big, heavy, ugly, and guzzled gas with extremely inefficient engines--a bit like our 21st century SUVs that still represent about 40% of all vehicles on the road. How little we have learned! As the calm, oil rich eye of the hurricane begins to give way, we’re still building cars like cheap gasoline will always be with us.
Well, the Germans, who recently had the good sense to dump their 50% ownership of Chrysler, are forging ahead with innovation and technology. I have little doubt that the Japanese are also working on similar projects. After all, they make the best cars on the road today in the US, (in my humble opinion). These were the two nations we literally destroyed in WWII, but they seem to have the edge where automotive technology is now concerned. My last Ford Escort averaged one major repair operation per year over the seven years I drove it. I dumped it for a Honda Civic and drove the next 14 years without a single maintenance problem, to say nothing of the 30% better mileage. The sad fact behind these headlines is that American ingenuity, know-how, innovation, seems to be lapsing into indigo as well. The car companies over here are content to milk the SUV cash-cows they crank out. Don’t expect a 300mpg car from Ford or Chrysler any time soon.
Announcements like VWs welcome bombshell give impetus to the hope that technology will rise to the occasion and save us from the resource crunch ahead. But a problem arises when the interests of one corporation tend to collide with another. It’s going to get very profitable for oil companies when gasoline moves upwards of $5 per gallon. I can’t help but recall a line from Syriana. The fictional oil company Connex execs were meeting, all seated at a pristine table beneath a massive series of maps where colored blocks were overlaid to designate oil field development regions of the world. To them the world was nothing more than these colored blocks, things to be licensed, acquired, exploited for profit, irrespective of the political, social or cultural boundaries that defined nations. The interests of the corporation transcended those boundaries, and the Connex CEO was lamenting that some two-bit Emir, (“What the hell is an Emir, anyway?”) had canceled their contract, forcing them to merge with Kileen, who had just secured lucrative rights to the Tengiz in Kazakhstan. Later, a legal representative remarks that Connex-Killen is about to become the most profitable corporation in America, “so long as we don’t start running our automobiles on water, and so long as we still have chaos in the Middle East.”
There are two truths implicit in that casual remark: first that the interests of oil and gas companies do not wish to see innovation in our automobiles, or serious investment in any renewable or replacement fuel technology. It undercuts their current business, and while it would be lovely for American drivers and the world’s environment if we could all have hydrogen fuel celled cars, where the only emission was water vapor, it would be positively horrible for companies like Connex…unless they controlled the development of that replacement technology as well. So don’t think that, in our very real world of corporate infighting, Exxon-Mobile looks with any welcome on the design of a car that can get 300mpg. This global oil giant now exceeds the nation of Kuwait itself in annual oil production! With over $280 billion in profits last year, they invested a hefty $37 billion in stock buybacks and shareholder dividends, while investing zero ($0) in alternative fuel development projects. It is clear to see that they plan no change in their business agenda in the foreseeable future. And secondly, the sad truth is that when chaos abounds in the world, corporations tend to seed themselves like weeds to exploit the turf. Just ask Dick Cheney’s old organization, Halliburton.
When Oil industry expert Matthew Simmonds made the startling announcement that he believed Saudi Arabia’s key oil field was in decline, Mother Jones featured an article where they put the attitude of the connected and wealthy into keen perspective. “... oil tycoon Boone Pickens, chairman of the billion-dollar hedge fund BP Capital Management, is having the time of his life. ("I've never had so much fun?") Over the last five years, he claims, his bet that oil prices would rise has "made him more money... than he earned in the preceding half century hunting for riches in petroleum deposits and companies," and he is predicting that prices will only go higher with much more "pain at the pump." Ah, the good life.” It’s amazing how the wealthy can profit from pain and economic distress as much as they can in boom times. This is the same mentality behind power company employees who cheered as they saw power lines being destroyed in California’s annual fire season. I believe the direct quote was “yeah, burn baby, burn.” All they could see was soaring electricity prices, and subsequent profits, a scenario that played out just before Bush and his cronies were appointed our new government by the supreme court in 2000. This Enron mentality runs all through corporate America, where profit is the end to obtained by any means.
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