The Crash Course - Chris Martenson [123]
Through all of this, as oil zooms to formerly unimaginable heights, old lessons about energy are relearned. The folly of poorly insulated houses built to face streets, instead of south, is rather painfully revealed, as is the practice of developing exurbs far from food, work, play, and even water. House prices follow new rules, where proximity and energy efficiency replace “grand entryway” and “granite countertops” as the coveted, desirable, must-have features. Houses with active and passive solar designs command premiums as monthly energy bills are prominently factored into the cash-flow streams of buyers alongside principal, interest, taxes, and insurance. The resulting acronym changes the popular pronunciation for this stream of payments from “pity” (PITI) to “piety” (PIETI).
The Midwest of the United States, long an importer of diesel and a nearly complete exporter of ethanol, rapidly increases its local use of ethanol, creating a regional energy advantage rivaling that enjoyed by the Gulf Coast and Alaska. Not surprisingly, the regions with controllable access to energy fare far better economically than other regions, but those with both food and fuel do the best of all.
Localities everywhere discover the importance of having local control over as many of the key staples of life as possible. Land-use zoning laws are rapidly amended to protect local land suitable for crops. Eminent domain is utilized to support the rapid reintroduction of certain parcels back into local production.
As with any economic shock that creates shortages, this energy shock changes perceptions and behaviors profoundly. When the dust finally settles, it’s clear that the old economy has shattered, a consumer culture has been replaced by a culture of thrift, and a new set of values with careful stewardship at their core has emerged.
Scenario 3: The Undulating Plateau
Framing: One reasonable prediction of how the economy and oil prices might respond to Peak Oil can be described as an “undulating plateau.” Under this scenario, oil prices and economic activity run counter to each other, creating a jagged see-saw pattern over time.
After wallowing about in the early part of the twenty-teens, the world economy finally responds to money printing and takes off. It moves grudgingly at first, but then faster and faster, as the global economy feeds off low oil prices, which cratered during the prior period of economic weakness. Naturally this economic resurgence causes oil demand to spike, but supplies of oil are somewhat pinched due to several years of underinvestment in field discovery and maintenance. The shortages, while not overly severe, serve to cause relatively large jumps in the price of oil, which unfortunately puts a crimp in the economic recovery. The “undulating plateau” goes through its first complete cycle.
Falling economic activity once again leads to a decline in the price of oil, which in turn sparks another economic recovery a bit later on. On this next leg up, the economy, again benefitting from reduced oil prices, dusts itself off and gets going again. However, this time the world has slightly less total oil production capacity than before, due to the combined effects of depletion in existing fields and a lack of investment in new and existing oil fields. Because there’s slightly less oil in each succeeding leg of the cycle, the economy can neither attain nor exceed its prior heights, as the energy simply isn’t there. This dynamic is represented in Figure 25.1, where we see that the economy rebounds to a lower and lower height on each leg of the cycle as it cycles back and forth across slowly declining oil supplies.
Figure 25.1 The Undulating Plateau: Falling Down The Staircase
Image: Jeanine Dargis
But even as economic activity slowly trips down a stairwell, oil prices are doing the exact opposite, as seen in Figure 25.2. Oil prices make a series of “higher highs” on each leg of the cycle (as well as “higher lows”). The swings in the price of oil