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Oil: Where to From Here?
With oil at $137 today, where will it (and we) be tomorrow?
Nicolas van der Leek (Nick)     Print Article 
Published 2008-06-26 08:12 (KST)   
The US Energy Information Administration estimates the price for a barrel of oil between $113 and $186 in 2030. Some other recent estimates put the price at $200 this year or in 2009 and $500 within 5 years. The simple answer is that we just do not know where oil is going.

What we do know is that the majority of "experts" out there, from economists to politicians to bankers, even to people who speak for OPEC, have been taken by surprise by these prices.

There is a small, but growing group who predicted current events many years ago. One of the best commentators of all is James Howard Kunstler (www.kunstler.com), author of The Long Emergency.

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Kunstler also presents fascinating views on what he calls "The End of Suburbia" (available on DVD). He calls suburbia the greatest misallocation of resources in human history. He also criticizes human beings for their delusional psychology, based both on a sense of entitlement and on making investments entirely based on previous investments. In The Long Emergency he cogently argues why we are in for some nasty surprises and an unpleasant collective wake up. That process -- which he calls "The Long Emergency" -- has now gone beyond the first pages of chapter one.

The Prospects for Cities

It is not difficult or complicated to assess the prospects for cities in a world where energy is no longer cheap. European-style designs with three-floor buildings in walkable communities connected by rail networks are likely to be the most successful urban environments. The caveat is obviously the extent to which those communities depend on organic systems beyond these city limits.

At the other extreme are places like Las Vegas, Phoenix and Honolulu. These are large urban centers that would never have been able to survive without constant supplies trucked and flown in from other areas. The larger the urban center, the more difficult it will be to sustain; hence, densely populated megacities will struggle. The top 10 most densely populated cities are:

1. Hong Kong, China
2. Lagos, Nigeria
3. Dhaka, Bangladesh
4. Jakarta, Indonesia
5. Mumbai, India
6. Ahmadabad, India
7. Ho Chi Minh City, Vietnam
8. Shenyang, China
9. Bangalore, India
10. Cairo, Egypt

Others unlikely to have it easy include Taipei (Taiwan), Seoul (South Korea), Shanghai and Beijing (China), Tokyo (Japan), London (UK), New York (USA) and Delhi (India). What is obvious from this list is the overpopulation of urban centers in China, India and Africa.

People living in these areas -- or any other areas with large amounts of skyscrapers (any building beyond five floors) -- will experience difficulties accessing adequate food and water supplies, as shortages (fuel and food) begin to have an impact. The poorer the governments that manage these urban centers, the sooner shortages (and thus conflict) will begin to take effect. Indonesia is a good example.

Simon Radcliffe has recently written that even in fairly well off South Africa, xenophobia attacks are linked directly to oil prices which rapidly rob the poor of the ability to function, even to feed themselves.

Although urban dwellers were attracted to cities by the prospects of jobs, in "The Long Emergency" (a depression scenario) jobs will be scarce and the only growing industries will be in resources (mining, agriculture). Where should people in overcrowded cities go?

The Prospects for Farming

While the human population increased seven fold since 1800, crop production multiplied 10 fold over 200 years. Total grain area harvested actually peaked in 1981 and had declined steadily by 8.7 percent by 2000. Grain acreage per person is also decreasing rapidly. It is estimated that acreage will decline to .18 a. from .28 a., or 35 percent, between now and 2050. This is due to population increase alone. To put into perspective the dire implications: we are struggling to feed the growing human population despite having the use of highly mechanized and highly utilized crop production techniques. In the future there is no guarantee of either mechanization or widespread use of fertilizers or pesticides.

Arable land in the world is no longer increasing. Top soil erosion, leaching, desertification and other consequences of climate change means it is no longer a straightforward process to identify the world's potential breadbaskets.

It is imperative that rural areas receive immediate investments -- in terms of human resources -- to begin activating organic systems in sustainable ways. Many of the under-utilized areas are in Africa, for example, Tanzania, Zambia and Zimbabwe.

The Prospects for Suburbia

It might seem counterintuitive, but the prospects for people based in European-style cities or on farms are better than that in suburbia, and not by a small margin. Suburbia is a caricature of country living with none of the benefits. Are suburban homes plugged into any fruit growing orchards or based near any operative streams? No. In the same way that water has to be piped to homes, food must be conveyed via endless oil-derived trips to the mall. And where do malls get their produce? It is trucked, shipped or flown thousands of miles.

Unfortunately, the carnage we are seeing in property markets is a natural rebalancing. As energy prices tilt upward, the relative value of suburbia, which is predicated on cheap energy (suburbia requires cheap energy to function at all), crashes.

Not only do the prospects for suburbia become compromised, but also the cornucopia of services that have been developed to assist in the project: gardening, construction, interior decoration -- these industries are disappearing along with airlines, truckers, supermarkets, banks and central government type schools.

The Future

The future will be lived more locally, as the world unflattens, and becomes a much bigger, less convenient place. Living locally means buying stuff from around where you live. So no more fishing rods or toilet seats from China. People will have to start learning how to fix things and quit the throwaway disposable culture that persists.

There is likely to be instability and a lack of social order as the number of have-nots increases. Panic is inevitable as more and more people begin to realize that this degeneration is a permanent phase, they will learn the patterns of consequence: that oil price increases today translate to higher fuel prices in the not too distant future.

The Locals Hope and Pray

In South Africa next week we face another 70-cent petrol price hike, despite a 50-cent hike a month earlier. The bad news is the 70-cent hike is not close to reflecting oil prices at current levels. South Africans face at least six more months of devastating increases, from 10 rand a liter to about 16 rand by Christmas. Everyone is hoping by Christmas that the oil price will be lower than $137 a barrel.

People like Jim Kunstler do not expect these prices to come down. Neither do I. The $150 a barrel by Christmas estimate is conservative, and we are not far from $200. Demand destruction cannot happen when we are chronically addicted to a commodity vital in so many ways to everyday life. While there are massive amounts of oil that remain, demand is equally massive, and in fact, demand has peaked, meaning it is slightly greater now than what we are able to extract. Production has peaked, and the top of the slope resembles a long plateau at around 85 million barrels per day. It is unlikely that we will ever see 90. But the magic number "85" needs to stay high. Once this number drops, the fuel price will adjust for a more vertical course.

Expensive energy predicates new living arrangements and lifestyles for virtually everyone.
For more information on the writer, visit www.nickvanderleek.com.
©2008 OhmyNews
Other articles by reporter Nicolas van der Leek

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