One of the interesting bits of Peak Oil is the end of unlimited rebuilds in disaster areas. When we were a rich nation, we'd rebuild every house on the Atlantic Coast or down in Florida after a hurricane swept through and ruined the place. Insurance money just kept paying out. We could afford it. The govt paid off the insurance companies and the houses got rebuilt, only to be destroyed sometime in the next 3-5 years, once more. This was wasteful, but we were a rich nation then. That is no longer true.

Cities that used to matter get left to rot into ruins. Peak Oil destroyed the housing industry by making commuting too expensive for enough people that the markets collapsed and the Derivatives Bubble burst after all those jobs building overpriced houses stopped. People couldn't use their 2nd mortgage as an ATM anymore, couldn't buy the latest fashionable and inefficient SUV with high markup from Detroit. That ended most autoworker jobs, something we all observed. This collapse had to bail out the COMPANYS but not the employees. They up and left Detroit, which is down half its population or more, and huge regions of it no longer have utilities, including street lights. Crime and murders are really common. Its kind of post apocalyptic, apparently. The pictures out of Detroit show the plants consuming abandoned houses. Trees and vines tearing them apart, exposing them to nature. These places are going to fall down.

Think about Hurricane Katrina and how long it took the Govt to respond. Many cry racism. I do too. The president at the time paid little official attention, but his greatest detractors, like the President of France, ignored race riots for 10 days in Paris and Marseille. Ahem. Lots of guilt to go around. When the hurricanes were over and the flood waters receded, entire neighborhoods of houses are contaminated with raw sewage and rotting wallboard, mold, and completely unlivable. Shoddy contractors took their time fulfilling very specific contracts and milking them for money. Meanwhile, people took their checks and didn't move back. The 9th ward is largely empty. Its a ruin.

Hurricane Sandy destroyed coastal New Jersey. Much of it is still without power or heat, despite it being winter. Many people have already left for good having nothing left to lose. Bulldozers have taken down neighborhoods and condemned houses. Many more are begging the city to condemn their own so they can take a check and leave the ruins behind, move somewhere not destroyed. Somewhere will basic utilities that still work. It doesn't help that there's months of waiting for power transformers because they stopped making them in the First World about 10 years ago. The wait from the company in China? 18-24 months. I suspect that transformers are probably being salvaged from places like Detroit and shipped to New Jersey to fix those problems, but I might be optimistic there. After all, that would make sense. And turning New Jersey from slums into Rich People Mansions requires the blocks to be ruins first for best and cheapest price, maximum profits in the deal.

Someday there will be the Big One in California. In LA or SF. Most of those cities will fall down, and what doesn't fall will have its water pipes broken, worth trillions of dollars to repair. Literally. And years will be required to do it. The Loma Prieta quake in SF in 1989 took 10 years to see the broken water pipes replaced. All of them in that entire region, even 100 miles away, were damaged and cracked by the ground waves. I doubt many but Civil Engineers even knew about it. I did because I was there and paying attention. I SAW the ground waves in that quake. And YES, the streets leaked water in cracks for years afterwards. When that happens, thanks to the end of cheap everything, it is unlikely that repairs will be fast enough to prevent the locals from packing their surviving stuff and leaving. Its also likely that rich people will contract their repairs privately, first, and the poor won't be able to afford those repairs. They'll almost certainly have their water and sewer off for health reasons, since commonly they're put in the same trench next to each other, under the street. So when they crack, the fluids mix and what comes out of the tap... Well, you get the picture. Now imagine the health department and building inspectors do in PRK what they did in Detroit and start shutting down neighborhoods and ordering "mandatory boiling", when we have no way to do that since our natural gas pipes will be ruptured and off too. Ergo, everyone but the rich leave. The neighborhoods get left behind as Ruins, once again.

This is the economic impact of Peak Oil, something somewhat unanticipated. It is an unintended consequence of expensive oil. We're now too poor to keep rebuilding for people who live in stupid places. We expect them to move out and leave the ruins behind as a warning to others. Lots of places are built where they shouldn't be. The levees in the lowlands of the California San Joaquin and Sacramento River delta have farms and houses behind them, despite the design being inherently flawed and failing. Back when California had money, before the Housing Bubble burst, there were plans to fix this, do repairs to delay catastrophe. Those repairs remain unfunded so they aren't happening. Instead the people behind them are warned to get out when there's flood warnings. To stay with friends or family, to evacuate. A repeat of the 9th ward flooding is likely one of these spring thaws, when too much water comes pouring down the mountain and overwhelms the flood control. Those levees are just waiting to erode a little more, to fail and flood hundreds or thousands of homes along the American River, the Sacramento River, any river with levees, basically. Most of the delta is at or slightly below sea level. Flooding from the fresh water snow melt is highly probable. And I'm not even including the fact the levees can be shaken apart by earthquakes. Oh, I just did. Will the Nation pay for water pipes in SF and levees in Sacramento and Stockton? Hell no. Not enough votes to justify it, and California ALWAYS votes Democrat so the govt never does anything to win them. Just take take take. Yep. Someday, Stockton will be submerged ruins, most of the delta orchards will be water bird sanctuary and lakes, and Sacramento will be a series of highland ridges surrounded by lakes where neighborhoods of poor people used to be. It might be 10-20 years from now, but its sort of inevitable unless they actually fill in behind the levees so those places can't flood. And they're not going to do that. It isn't economical.

I wonder if survivors will get Malaria from all the mosquitoes breeding in all that standing water? Or West Nile. Or Meningitis. Or Dengue Hemorrhagic Fever. When will govt stop bothering to do mosquito abatement because its too expensive post oil, focus on treatment and vaccination instead? At what point is epidemic an acceptable cost? Sometime after the ruins settle a little deeper into the ground? These are also costs of peak oil. We learned a long time back that Peak Oil is a massive economic problem, not just one of simple transportation. There's all these side effects. What economic impacts are you seeing from Peak Oil?

Watch Out For The Crazies

Today XKCD had a lovely little cartoon about a forum for perpetual motion machines, still going after 8 years. They're a wonderfully insane subject that crazy people inevitably drift into. Not being interested in them is often a sign of sanity, if you ever wondered about your own mental health. Those places also attract con men and I think that's the origin of the Receding Horizon Problem, those sorts of machines.

The Receding Horizons Problem (RHP) entry is constantly deleted from Wikipedia, probably for political reasons because I can't think of any other which are sane or rational. RHP is taught in Intro to Engineering (ENG 10/101). Engineers are usually sane, but not always. I've met several that were STUPID, but most are smart and sane. Perpetual Motion Machines violate thermodynamics, and nothing can. They're called Laws of Thermodynamics because they can't be broken. They're universally right, always, without error or exception. Crackpots insist that their cheats and errors that ALMOST work before it stops would work if they just had more money to build a bigger one. Sometimes this is a con man planning to take the money and run to Brazil. Sometimes this is a nut with terrible personal history that's driven him insane. There are steam punk mechanical engineers that build perpetual motion machines as a joke, part of their cosplay, complete with hawkers making absurd claims just like in the real world. They know and strongly imply its all hokum, just to make their point about how little some things change. I respect their parody skits and how much fun they have mocking morons.

I have encountered people who insist that Cold Fusion works. It doesn't. Its a battery, at best. If it were actually fusion, the neutrons and gamma rays would kill you. The absence of radiation from a fusion reaction is the most obvious way to tell. The people I've talked to INSISTED it was all a conspiracy to prevent clean energy. I asked if they were running their house on this amazing machine they claimed to have running on their desktop.
"Well, no."
"Why not? Isn't it almost free energy generation that you say will free the world from oil dependency?" I ask.
"Yes! Its a conspiracy," he agrees.
"So why not run your house on it?" I ask.
"Well, umm, gotta go!" he says. Uh huh. So liar or crazy person. I even stopped being friends with the people who were friends and supporters of this nut. They kept insisting he was a brilliant scientist and engineer, but neither he nor any of them had their homes running on his Cold Fusion device. A gizmo that would end their home heating bills and save them thousands a year for three easy payments of $19.95 (plus shipping and handling!). Not much of a friend, was he? Cult leaders do that. Con people, make them brainwashed into supporting them, especially when they're provably wrong. 

In the real world, applied sciences make money if what they're applied to has value. A free home power generator that is cheap to build, requires no maintenance but distilled water once a month, costs nothing to operate, and makes free power? Very valuable. A billion-dollar idea worth mass producing. Of course, that would require it to work. Peak oil and the loss of cheap energy has no easy answers. Cold Fusion is just a solid state perpetual motion machine, with the same BS claims used on spinning flywheels running generators going into a "magic box" which is always sealed and proprietary and contains a car battery that's charged up to keep the hoax going longer. There is no such thing as a free lunch.

Many of us have been involved with Peak Oil study since before the Oil Price spike in 2007-8. Some of us even have a background in geology, economics, or engineering. We know the facts. Many of us made predictions about WHEN the spike would hit and how high the price of oil would go, but most of us also underestimated the consequences to the world economy on demand, and demand destruction turned out to be considerably worse than anticipated. I thought we'd end up paying big bucks for a gallon of gasoline. It really hasn't been like that, not really. The doubling of price was enough to kill the housing boom, burst that bubble. That killed the derivatives scam, which destroyed the stock and bonds markets, which hurt the dollar currency and turned us into an inflationary machine with ever-expanding money supply. Both presidents were responsible for this mess. Clinton too.

We might even blame Reagan, who embraced Deficit Spending and convinced our population that a Rising Tide Would Lift All Boats. Actually, the rising tide bought BMWs and said "screw it!" to the rest of the boats stuck in the mud. That lack of investment in small businesses is what lead to this cruel world of multinational corporations that only care about their stock price and profitability because that's how their executives get paid. They don't care about the imbalance or how it insured their kids would never make as much money. Like the entitled Spanish aristocracy presiding over a broken Spain after the disastrous invasion of Britain, their precious Armada sunk by storms in the Channel, we got handed a broken economy which is provably destructive to workers, families, and the future in general.

And the population voted for Socialism in the last election. That was crazy. Many of you applaud that, thinking that Socialism is best for everyone, whether they want it or not. I think you're fools if you do. I think the population needs jobs, universal employment. Mostly in manufacturing because anyone can do that, regardless of education. Instead, most of the unemployed are either underemployed and angry about it or in education hoping there will be a job by the time they come out with huge student loan debt, which is the next financial crisis coming and might be the one to break us. Going to school for a degree, gambling there will be a good paying job afterwards is merely delaying the inevitable, and might lead to suicide. Doing that is crazy. We're not supposed to admit that socialist countries have really high suicide rates (Greece!) because you just can't get ahead no matter how hard you try, but that doesn't matter if you're not paying any attention. Socialism is giving up on democracy. Its giving up on trying.

If America were socialist we'd be no better than Mexico. Our water and sewer would fall apart, we'd see people sick and dying from cholera again. The lights would go out because its nobody's job to keep them on, and why bother, right? You'd end up shivering in the cold. No amount of education will fix that indifference. Socialism is all about ignoring progress and responsibility and managing the die-off. Eventually, even you will be unnecessary. Then its your turn to kneel in the ditch in front of the firing squad. That's the big danger of cult-mentality trust. The crazies running the world today are megalomaniacs who deny reality. This is why we don't have fuel rationing, why our currency is inflating daily, why our food costs more and more, why our healthcare is nationalizing and lowering in quality, why there's no enough flu shots and they're no longer free, why there's $3.30/gal gasoline and the roads are falling apart because those fuel taxes are being spent on social programs instead of the road repairs they're supposed to, and why, most importantly, all the jobs are in China and India. We screwed ourselves. Its our fault. We voted for greed and laziness and easy money. Not to protect our kids from the future we can't prevent. We voted for crazy.

At this point our only good fortune is the terrible world economy has prevented a fuel price spike from going higher. Sure, we'll all be unemployed soon, but that's okay right? After all, the farmers will feed us for free because we voted for them to, thanks to Socialism! Oh wait. What if the farmers stop working? What if they export the food like Bennetton did in Argentina a decade ago? People starved, despite their insistence on voting for Socialism. It didn't save them at all. Will that happen here? Only time will tell. I won't make timing predictions because I've never been good at that. Stuff happens that delays things, or unanticipated things make it all a bit worse but in a way you didn't expect. Prediction is bad like that. The Oil IS running out. What we've got left is expensive and lower quality. It costs more. Its not available for everyone. Demand destruction has become the defining factor of the end of cheap oil. And isn't that just Crazy?


Oil Down $3.50/bbl on Spain Fears, DOW down 100.

That's right, Spain. Spain owes something like $1.4 Trillion in derivatives and the bank bailout is utterly capable of dropping the entire EU into decades of poverty. Not weeks, months or years. Decades. It seems that the bad ideas of inflating ARM mortgages that were so popular in California a decade ago really took off for British tourists wanting to buy vacation condos in Spain. So they did the same horrible mistakes, invested in inflating price housing, and the bubble burst in Spain. All that inverted value, all that collapse. Just because its warmer in Spain than Britain and back then, flights were cheap. Everything has changed in the last 6 years so the values aren't coming back and any bailout of Greece, which is worth 1/4th as much as Spain, is just small potatoes. And how sad is that?

The end result is the collapse is still ongoing. When investors get reminded of Spain, the pain comes again. They call this mess "contagion" and that's an appropriate word. Its like financial plague, and the result is terrifying. Of course, if you keep your head firmly lodged up your rectum you don't care, but then you're probably not reading this either so couldn't tell either way.

Bad Predictions

Six or seven years ago, most of us were pretty active on this Community following the rise in oil prices. When the price swiftly rose to $147/bbl and gasoline was $4.50/gal, Peak Oil was mainstream news and the sky was the limit. I'm just as guilty as everyone else here proclaiming rationing and panic hoarding of fuel and food and we devolved subthreads about survivalism and what to buy for the pantry and what firearms are appropriate for urban vs rural collapse states, and whether to flee for the boonies today or next week.

We were all wrong. I was wrong. The extremely unlikely happened. The price went back down. Here's some examples of predictions that failed.
  • Ras Tanura hasn't been blown up.
  • The Arabs are still pumping oil.
  • Gasoline is expensive but not rationed. People still commute to work by car.
  • Aircraft still carry passengers and more than one airline is still operating daily.
  • Iran isn't actually at war with the USA.
  • The Israelis aren't a glowing radioactive glass cinder on the Eastern Med.
  • Egypt isn't a happy democracy.
  • The USA is still occupying Iraq and Afghanistan despite the economic costs.
  • Electric cars are selling or leasing to upper middle class people with money.
  • Poor people drive used cars and are not taking up motorcycles or scooters for their fuel economy.
  • Mass transit isn't really very effective or affordable and there aren't many streetcar lines at all. Even Portland had to give up Fareless Square.
Really, we got a lot wrong. The election in the USA won't change much. Its possible that the EU bankers will compromise just enough to get rich without destroying the European Union or driving out the debtor nations (HIPIGS) into Default. The EU may actually hang together. That would shock me, but the last 6 years have shocked me. Humans seem to prefer to be Frogs in the Pot of Slowly Boiling Water. I guess it's easier to pretend the New Normal is A-OK! than to admit things are getting worse. Stupid humans.

Threats of Violence in Middle East Drives Oil to $92/bbl.

Israeli tourists in Bulgaria were killed by alleged Iranian backed Hezbollah, resulting in more threatening speeches by Israeli PM Netanyahu. Oil rose to $92/bbl, up nearly $3. OPEC quietly cheers since they have a $95/bbl target and the higher price helps Iran pay for nuclear weapons power. Meanwhile, Greece, Japan, and several other countries are allowed to violate international sanctions against Iran for discount oil. Greece paid in gold. Japan is handling the financing of Yuan-Yen conversion in oil sales for Iran.

Where's Hans Blix and his sternly worded letter now? The only part of this that makes real sense is the Markets are betting that the Middle East is full of violent thugs that threaten the oil supply. History shows that to be true. Its really only a matter of time before Ras Tanura gets damaged, whereupon we get to experience a proper oil supply panic and see the fuel rationing plan turn into reality.

I am so looking forward to this not being the Western world's problem. Someday we'll have to stop and compare the lack of value in the Rat Race powered by Oil paid for in blood vs a slower paced life with fewer appalling luxuries and a bit more elbow grease and legitimate pride to make up the difference. Maybe we'll be on bicycles to do that, but it beats kowtowing to the Arabs, doesn't it?

Oil Rises $7.27/bbl to $85/bbl

DOW was also up 277 points to 12,880. Big day for trading, though the news that sparked it? An empty EU agreement based on Optimism. Oil going up makes sense thanks to a workmen's strike in Norway and the ban on Iranian oil (of which there are numerous exceptions). Any bets as to whether the DOW falls on Monday after some thoughts on rational investing percolate this weekend.

Oil to $84 on OPEC cuts

OPEC has cut production so the price of oil is up and the stock market is too, though it mostly seems to be inflation at work rather than actual improvement in jobs or the world economy. That the Greeks narrowly rejected (narrowly) dumping the Euro has been taken very optimistically by investors. Eventually they'll realize that the Greeks still owe $427B or so and then start doing the math on a bailout that avoids the sort of austerity which will lead to civil war. Oh, and the Greek power companies still haven't paid for their fuel oil so the lights might be going out soon in Athens and the rest of the country. That sort of thing typically causes unrest. The Greek collapse, and the expected Spanish unrest, will be good case studies for the costs of austerity vs bailouts and might be interesting for academic reasons if nothing else. I wonder if unrest in Europe will impact the US presidential election results?

Don't Panic??

Oil is down $3.30/bbl to $83.23. The DJIA is down 274 points which is quite a few. This is the sort of crash you expect from full disaster, the likes of which we have with the end of the EU. Of course, if it drops another 1000 points to 10,000-some then I'd say its really crashed. This is more like a small adjustment. It is really interesting to see the futures markets responding to the Euro crisis, being completely rational about this. They have to be realistic or they lose money, so the futures markets often predict the future reasonably well. It is kinda strange though that the OPEC nations haven't just cut production again to drive the price up once more. That's their traditional response, after all. And gasoline prices remain high in the USA. Normally, a bad Friday panic is followed by a weekend of contemplation and the price will rise again Monday. Normally. It remains to be seen if this new normal ends in that typical way.

Brent Crude Falls $3.74 to $103.54/bbl

Brent crude fell on "surpluses" but mostly due to EU economic collapse and bank runs prompting futures to drop. Futures markets for crude are essentially betting that currency messes associated with Southern Europe dropping the Euro and Defaulting their debts will greatly reduce demand for crude oil, or rather the ability to pay for crude oil anyway. Ironic that post-Memorial Day gasoline price drops make for a rather peculiar record. This being an election year in the USA, and the impact a lot of manipulation of the market by political figures and the capitalist demagogues who own them, means US crude prices similarly dropped $3.20/bbl as well to $87.58. I would not have predicted that, but strengthening of the US dollar is occurring as flight from the Euro continues. Eventually Euros are going to crash.

What will Top Gear be like when there's fuel rationing in the UK and nobody has money for supercars?