The Oil Drum: Australia/New Zealand

I have been asked to give a short talk about the expected economic impact of an energy downturn. The talk is to be part of public health program called "Converging Environmental Crises: A Teach-in on Energy, Climate Change, Water, Agriculture and Population." I expect that the audience will be university students plus physicians and others in the public health field. The talk will be recorded, and will appear on the internet. I have added some to the talk, since my first draft. These are the PowerPoint slides I show. This is a link to the recorded version of my talk.

Good afternoon. My name is Gail Tverberg. Some of you know me as "Gail the Actuary" on TheOilDrum.com web site. The Oil Drum is a web site about energy and our future.

Today, I will be talking to you about The Expected Economic Impact of an Energy Downturn. If, after this talk, you would like to learn more about peak oil and about resource depletion issues of all types, TheOilDrum.com is a good site to go to for more information.

Let's talk a bit first about the energy downturn. As everyone is aware, the price of gasoline and diesel has been rising recently. The reason the price is rising is because the world's supply of oil cannot keep up with demand.

A few days ago, someone here posted a link to a story about skyrocketing farmland prices in the Midwest. It really made me angry to think about the inflationary chain reaction and the vicious chain of events our politicians have set into motion with these ethanol mandates. It made me even angrier to think that the few who benefit from these policies defend their right to siphon money from the rest of us and into their pockets. (I will be the first to say that surging energy prices are a big component of surging inflation, but with the ethanol mandates we are throwing jet fuel on an already raging fire).

This all started out innocently enough. Oil prices were climbing. Our energy production was shifting to an ever greater extent to countries that are hostile to the U.S.

So, Step 1 in the chain is to propose a solution:

1. The government should subsidize ethanol production to encourage production of home-grown fuels, which will enhance energy security and create jobs in the Midwest.

Archdruids take breaks from time to time, but the peak oil debate does not, and during my recent vacation a lively discussion sprang up on The Oil Drum about the future of agriculture in a postpetroleum world. The point at issue was whether today’s mechanized agriculture will remain in place, or be replaced by a new rural economy of small farms using human and animal labor, as the world skids down the far side of Hubbert’s peak.

Summarizing a vigorous discussion of a complex topic in a few paragraphs is a risky proposition, so I’ll focus here on the two essays that defined the debate, Stuart Staniford’s The Fallacy of Reversibility and Sharon Astyk’s Is Localization Doomed? Staniford argued that those who expected a nonmechanized, small-farm economy in the wake of peak oil were claiming that the history of agriculture over the last century would simply run in reverse, tracking the decline in fossil fuel availability in the same way it tracked the growth in fossil fuel production.

This is Part 2 of my post relating to curriculum for a science peak oil course. It incorporates changes based on many of the comments made below. Part 1 can be found here. A PDF version which contains both Part 1 and Part 2 can be found at this link.

One theme of Part 2 is energy, and why energy is important to our standard of living. I try to compare the energy in oil to the energy in food. To make the comparison more understandable, I convert energy to kilocalories, since most people are familiar with calories in food. I also point out the errors of economists, both in the text and in the discussion questions at the end.

Another theme is the special characteristics of oil, and why oil is valued as a liquid fuel. I think we are sometimes kind of fuzzy in our thinking about substitutes for liquid fuel. We don't think about our built infrastructure, and just assume electricity can be substituted for oil when it really is at best a very long-term alternative. I discuss various alternatives including battery-operated cars, hydrogen, and conservation. The two sections relating to corn ethanol could probably be a post of their own.

I also talk about the impact of oil on prices. I make the point that big increases in petroleum prices are likely, with only a small shortage of oil. I also point our that food prices are likely to increase, partly because of the use of petroleum for food production, and partly because corn for ethanol competes with food for land use.

Over the past week, Stuart Staniford and Sharon Astyk have written thought-provoking essays on the nexus of Peak Oil and relocalization, with Staniford suggesting that peak oil will not result in relocalization of agriculture because the industrialization of agriculture is not practicably reversible, and Astyk rebutting that idea. I think that both essays make important points, but I would like to offer a third perspective: that we have insufficient information to reach a conclusion about when energy scarcity will result in relocalization of agriculture, but that we will likely cross this threshold in the not-too-distant future and should prepare accordingly.

This is a guest post by Sharon Astyk, a very small farmer whom the biofuels companies have yet to offer to buy out, and a writer with two forthcoming books about peak oil and climate change, one (Depletion and Abundance, Fall '08, New Society Publishers) about appropriate responses for families, and the other (A Nation of Farmers, Spring '09, same publisher) about food and agriculture. Her writings can be found at http://casaubonsbook.blogspot.com .

Stuart Staniford's latest opus has taken a shot across the bow at those who advocate Relocalization and de-industrialization. Embedded in his argument is a compelling critique of the prospects of certain parts of the Relocalization analysis. Staniford shows his customary brilliance in analyzing the ways that the biofuels response is likely to overcome impetus towards Relocalization.

But that profound analysis is embedded in a paper that contains some serious errors of reasoning and misrepresentations of the Relocalization movement that I think deserve critique. And his final conclusion, that this should put an end to all hopes of Relocalization deserves some further consideration.

Why Peak Oil Actually Helps Industrial Agriculture

Claas (Caterpillar) Lexion 570 combine harvester in action. Image courtesy: Wikipedia.

First, thanks to all who contributed ideas. You may have an entirely different opinion on the most important energy stories. Feel free to share it. Many of these stories were contributed by various readers. Comments by readers are italicized. If you want to know who wrote what, you can see the entire comment thread here.

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ASPO-6 DVDs / Presentations; Oil Supplies / Prices; Food Prices; Natural Gas / LNG - Qatar; Economics - UK; Coal Prices; Film Review - A Crude Awakening; Peak Oil - South Africa