Survival__ Structuring Prosperity for Yourself and the Nation - Charles George Smith [182]
It's important to recall that markets price on the margins. If the U.S. consumes 20 million barrels of oil a day and the supply drops to 15 million barrels, then no more than 2 MBD can be conserved without dramatic changes to transport and industry. That means there is a shortage of 3 MBD. Though that is only 15% of demand, that shortage could double or even triple prices as those with money or credit frantically raise the bid.
In other words, the supply does not have to drop in half for the price to double; modest drops in supply can cause explosive rises in prices. That is the way the market works: prices are set by marginal supply and demand.
Unfortunately, it takes many years or even decades to increase the supply of energy on a large scale. Biodiesel production is currently about 50,000 gallons a day--a relative drop in the bucket of demand. No amount of magical thinking can ramp up biodiesel production from 50,000 gallons a day to 50 million gallons a day. Due to the shortage of feedstock for biodiesel, that level of production is simply not possible, regardless of what technology or government spending is thrown at it.
So when electricity suddenly becomes "expensive" and solar panels "make sense," you won't be able to buy any at any price or the cost will have leaped to absurd levels due to spiking demand. "When you're thirsty, it's too late to dig a well."
Thus the standard analysis of "price" and "value" is fundamentally flawed. The point at which it "makes sense" to buy and control your own energy production is when "it makes no sense because oil/natural gas/electricity are so cheap." Once they're no longer cheap then you may not be able to afford your own energy production assets--assets which were cheap when they "made no sense" to the conventional financial/consumerist analysts.
The goal of an integrated understanding is to make a realistic assessment of what serves your best interests and what does not serve your best interests, and then act on that awareness. Conventional wisdom should be viewed with extreme skepticism. Do your own research and make your own analysis of costs and benefits, including the value of control.
10. Leverage capital, assets and skills
The word "capital" might evoke large sums of money or large-scale enterprises, but I use it to describe two assets: the means of production, which include tools, manufacturing equipment, software, etc., and surplus money or tradable assets (gold, bartered time and goods, etc.) which can be invested in productive assets.
The scale of capital can be very small. All you need to cultivate a garden is a shovel. Thus the capital required to start growing food is one shovel, some seeds and some compost, much of which can be assembled via labor (time).
With the aid of one 100-pound helper, I built a 12-foot by 16-foot shed in 1978 with a handsaw, a level, a square, a few hammers and nail aprons, a measuring tape, a screwdriver, and a few other hand tools (snapline, etc.) This structure served as living quarters and storage; it is still in use today, some 30 years later. The total capital required--the tools, not the lumber and other building materials--were modest. No power tools were necessary.
The tools required to repair furniture, sagging doors, torn screens, leaky faucets and dozens of other common household projects are also minimal. Even woodworking requires few tools. I have built an entire set of kitchen cabinets with a Skilsaw and some simple jigs--no table saw, cut-off saw, etc. Clamps, a square and a straightedge are all that is necessary to fabricate effective jigs.
Of course some capital equipment is more expensive: welding rigs, log splitters, cranes, etc., all the way up to semiconductor manufacturing plants which cost $2 billion each. Nonetheless, many means of production are modest in cost. Software coding requires little more than a computer and an Internet connection.