He's a billionaire, he is a friend of George W. Bush and he believes in Peak Oil. Richard Rainwater, who has made fantastic sums investing in panics and crisis points, feels the coming of a massive transition, and he openly worries about the future of mankind.
"Peak oil" theorists posit that global production is at or near its historic ceiling and will begin a long, inexorable decline. They worry that America is not ready for the downturn, for skyrocketing prices and even shortages. Savinar's site's opening line is, "Civilization as we know it is coming to an end." Rainwater has been checking it every morning since September, when his personal anxiety alert level moved to orange. "I can almost pinpoint the date," says Moore. "It was right after he read that book." In August a friend gave Rainwater a copy of The Long Emergency, a dystopic view of the future written by ex-Rolling Stone writer James Kunstler, otherwise known for his passionate dislike of suburbia. Taking peak oil as a given, Kunstler argues that Americans have been "sleepwalking" through the end of a "100-year fossil fuel fiesta." The problem, he points out, is not that the world will run out of oil tomorrow, but rather that the lack of growth in oil production will wreak havoc on a global economic system predicated on perpetual expansion. Kunstler's "long emergency" is a decidedly unpleasant interval during which the world--and Americans in particular--must adapt to a post-oil regime of scarce energy and economic stagnation, a time of likely wars and the disappearance of all-American things like Wal-Mart and cul-de-sac homes 45 minutes by minivan from the office.
It's about time to go over the big picture on this again, because supply worries are only a fraction of the picture.
The problems with the petro-economy are threefold:
The Supply Problem
- There is the bandwidth supply problem - namely, not only is there a limited amount of oil, but there is a limited oil bandwidth, a bandwidth that will peak. This is the first part of "Peak Oil"
- Not only will quantity, in both absolute and bandwidth terms decline, but quality will decline, and reliability of discoveries will decline. We will have to go farther and father and take bigger and bigger risks to find smaller and smaller fields of lower and lower quality oil. This will require more and more expensive infrastructure - platforms, more refineries, coal liquification, superheavy oil extraction, kerogene blasting, tar sand strip mining - to convert this lower and lower stream of carbon based fuels.
- Not only with quality and quantity decline, but diversity of sources will decline. More and more of the oil that is left will be in fewer and fewer hands.
- Global Warming. As humans burn more and more carbon, then the molecules that are produced - Carbon Dioxide, Methane, Nitrous Oxide - raise the global level of surface temperatures. This leads to:
- The Hydrologic Shift - a warmer earth has a different configuration of stable activity of rain and ocean currents. It is water - vapor, liquid and even ice - which stores and moves most of the heat. As water patterns shift, this will exacerbate the effects of temperature change. High storm years like the 2005 Atlantic Hurricane Season will be worse.
- Health effects - it has long been known that the petro-economy produces unhealthy levels of particulates, smog, ozone and other forms of "air pollution". As the mechanization of the world accelerates, these health effects will accelerate.
- Direct dependence on oil for the food supply. Nitrogen based fertilizers and mechanized agriculture supply most of the world's calories.
- Manufacturing dependence on oil. The fact that we can extract far more energy from petroleum than it costs to produce is the source of our current prosperity. Our economy basically takes energy out of the ground and turns it into people running around making themselves happy, or at least too tired to be unhappy.
- Maturity problems. The petroleum economy is mature, it is not producing incremental technological improvements in efficiency. In fact, take out computers (which are a response to high energy costs) and the world is largely where it was 20 years ago in terms of its extractive energy density. This isn't changing any time soon: new generations of motors are far more complex and will take time to bring on line.
- The aggregate of limited bandwidth, maturity and population means that in a continued petroleum economy there is a limited number of people who can be affluent, that number is below the current total world population.
- The aggregate of limited bandwidth, concentration, dependence and maturity means that more and more control of the world's economic system will flow to the holders of surplus oil.
- The aggregate of the Sink and Supply problems means that attempts to get around the supply problem by, for example, nonconventional natural gas, coal and nonconventional oil, will accelerate global warming and its costs. This is a policy bind, where the more one solves the supply problem, the more one creates a sink problem.
- The aggregate of dependence, maturity and concentration means that it is very difficult to get sufficient investment in transitioning the economy until such time as there is a catastrophic meltdown of the economic system, with its attendent resource wars.
That's just the overview, which is why the people on the extreme end of the alarmist spectrum are making dire predictions. They aren't out of line - the last three Europeancentric world conflicts have all had the transition of energy systems as a key component of their continuation. That is, acquisition of energy was a key part of the reason for continued conflict, and the limits of the old energy system - which includes subsistence agriculture - were often a reason for going to war in the first place.
The last energy transition is not reassuring - in the late 19th and early 20th century, internal combustion began to replace steam power. The coal economy of that time could not keep very many people in affluence - though it could keep more people in affluence, and many more people alive than the previous mechanical water/wave economy. The 1899-1918 period saw a series of conflicts which could be labelled "the last of the rock wars" - the last wars over access to coal and gold, the two key commodities in the coal age. Coal ran the economy, and gold measured the economy. Since wealth was created by digging rocks out of the ground and turning them into things, gold was a good measure of the flow of raw value into the society, and therefore a good incentive to productivity.
The first world war made it clear that the rock economy was doomed. The great war machine of that economy - the battleship - was both useless - naval power was indecisive at Jutland and in sufficient to force a landing at Gallipoli - and awe inspiringly expensive in gold terms. It bankrupted major industrial nations, whose economies could not support the war machines that their economies required to have in existence.
Even during the war, the First Lord of the Admiralty was looking forward, and found it in oil. The British fleet could not cruise, because he had been behind the drive to make it a petroleum fleet, and there wasn't enough oil for it. After the war, Winston Churchill set about finding the oil to run the ships that held together the empire. On land, the "taxi cab army" saved France, proving that mechanized transport was valuable in war. But the petroleum age would develop its signature weapons - again at the behest of Churchill - in the form of the tank and in the form of the fighter plane, which he would champion later.
The tank is a creature of combustion - diesel or petroleum. In the 1930's Nazi Germany, and Adolf Hitler in particular, placed their faith in a petroleum military, and a petroleum economy. There was only one problem: Germany did not have access to sufficient petroleum, and "synfuels" as we would now call them, were prohibitively expensive to produce. So war was inevitable. After they had cannibalized much of the stored wealth of the coal economy - by liqudating the people who held it and stealing their money - the Nazi's aimed for the oil fields of Southern Russia, and came to their end at Stalingrad, the city that was the key point for holding these resources.
The pattern was noted by Wavell at the time "it is about oil, ships and planes: oil to fight the war, ships to move the oil, planes to protect the ships, and oil to run the ships and the planes. Since we (the allies) have the oil, the ships and the planes, we will eventually win." Thus he regarded the middle east as a key theatre, since that is where Hitler could have gained access to enough oil to sustain his war effort.
This transition then resulted in a series of escalating conflicts, and global conflict with pauses from 1914-1952, when the last of the boundaries from World War II was settled by main force in Korea. The total deaths run well over 150 million from the wars, rise of totalitarian states designed to control the flow of mechanized economies, and assorted famines and atrocities. It created a billion years of human misery. An amount of suffering lived, laid end to end, that would stretch backwards into the age where life was not much more than squirming slime.
One of the reasons people are complacent now is because of the survivor's illusion - that is, we are made it, or are the descendants of people who made it. One reason for the centrality of the Holocaust experience is that it disrupts this illusion - the Jews who escaped Europe are people who made it, but who saw their friends, fathers, mothers, relatives - not make it. There are at the boundary between the quick and the dead.
The question is "where are we?" After all, by the mid 19th century, even as the coal economy was getting established, the misery that it created, the limits on its expansion, and the dangers of allowing "decadence" to knock the few off the top of the perch, were well known. Dozens of figures - from Marx to Wagner - warned of what came at the end of that historical age: conflaguration. They were right, merely not for a long time. It would, in fact, take 60 years for these warnings to begin coming to pass. And the longer they took, the more they were disregarded. Up to the very day that "The Great War" broke out, the prevalent view was that economic and political inter-relatedness made war unthinkable.
I recount this not to make a prediction of a half century of resource wars, or a "third Thirty Years War" to use a Churchillism - he referred to 1914-1945 as "the second thirty years war" - but instead to underline the very simple and empirical observation that cataclysmic transitions occur, that one has occured in living memory, and the echos from it ended only in 1989 with the collapse of the USSR. Only now are China and India embracing the mechanized economy.
We often refer to "industrialization" but this misses the revolutionary nature of mechanization - engines small enough to replace individual people - down to the size of lawn mowers. Mechanization is the source of the "liberation" which the modern era feels, and the source of the huge surplus in society which we take for granted. This surplus allows sexual freedom, personal freedom and political freedom. People can, literally "vote with their feet" to find better places.
If there is a limit on mechanization, then there is a limit on affluence. There are "ins" and "outs". People who live outside of the mechanized economy struggle along on the surplus, and the rigidity, of the rock economy, or even worse, of the subsistence economy that it replaced.
Since petroleum puts a limit on mechanization, and our economic expectations - our money system, our financial system and our political promises made - rest on the continual expansion of the mechanized economy - something has to give. Either the environment gives out as we over sink, the sources give out as we over consume, or the promises give out - and we have to slash living standard so that everyone can get a piece of the mechanized economy's dwindling surplus.
This then is the case for alarmism - if we don't run out of oil, we run out of air. And we run out of both before we run out of people who want into the system. And because our monetary system is based on the ability of people to become affluent mechanized consumers and workers - there isn't enough money on the planet to meet our promises, which rely on expanding the economy indefinitely at over 2% per year.
The techno-sloptimists say "we will just put hydrogen in our cars!" they assume that if we simply replace oil with "alternatives" we will be fine. First many of these alternatives are still running into the sink problem - burning liquidified coal is still burning carbon into the atmosphere. Second many of the alternatives aren't. Hydrogen, even at its most generous, is not a replacement for petroleum. Hydrogen combustion is a transport mechanism, not an energy source. We don't mine hydrogen and get more energy out, and won't until we have hydrogen fusion.
The second problem with technosloptimism is that it fails to account for the costs in a different way: namely the financial systems assumptions about how much future economic activity there is to slice up. If we "alternify" the economy, we spend much higher fractions of GDP on energy. That effort comes out of someplace. If that someplace is future investment, then there is less future. Lest I sound like an unreasonable pessimist, I will point out that the US savings rate has slalomed down since the peak oil event of the 1978-1986 period. People in the US show a demonstrated propensity to sacrifice long term investment to maintain short term consumption of various kinds.
The third response - the first one being denial, and the second one being imperium - is austerity. One hears it in every such discussion. The problem with austerity is that it is both not a Nash Equilibrium - that is, there are actors who can improve their position unilaterally - and it requires massive austerity to work. In fact, one may accurately describe it as "neo-Maoism" after Mao's attempt to build a China without an internal combustion economy.
Neo-Maoism is rhetorically popular because it is conceptually simple: shut it all down, and live on solar, wind and water. The problems here are myriad. First, it doesn't get rid of the problem, second it requires a two billion people slash their standard of living, and move out of the cities, because in a neo-maoist economy, cities are simply not economically sustainable. This sets off a vicious circle - no cities, no innovation, no innovation means that the society stagnates. Not only do things get bad, they stay bad. Then comes the part where they start cutting the hands off of intellectuals.
Am I a prophet of doom? Not really, looking at the technology I see that it is possible to put together a different kind of society, one that does not involve denial, imperialism, technosloptimism or mega-austerity. However it does require a shift in our fundamental ways of doing business. It requires shifts in politics, economics, technology - and art and culture as well. It requires a shift in our monetary system to measure these changes. The view that we can either "swap out" the old technology for new, or that we can just "shut down" the old economy and live without it are not supportable by the numbers. The "Swap out" models all produce too much CO2 for supportable levels of affluence. The "shut down" models all produce too little GDP to sustain current populations. We can only pursue either if someone is willing to pick out a couple of billion people who aren't going to make it to the otherside of the transformation.
Thus the only real option is radical transformation. We can do this in one of the relatively easier ways, or we can do it in one of the much harder ways, after a series of increasing conflicts culminates in the long worried about "World War III". Radical transformation is difficult and painful, because it means that people who expected to get rewards by slam dunk methods aren't going to get them - and if there is anything people don't want to give up, it is no brainer profits. Radical transformation is also uncomfortable, because it means recognizing that the entire artistic capital of an age is, well, antiquated. Those who are well paid by the current system will not want to give up either their privileges, or their uninterupted corridor to power later on. Those who are outside will often not realize that there are painful tradeoffs involved in being inside.
We stand at a cross roads - either the US can make a big bet on the phony fuel economy - get one more half generation out of the petro-economy at the cost of trillions of dollars in wars and capital - or we can decide to radically restructure the economy around telecommunications, electricity, substitution away from carbon and a political system that has the mandate to guide this transformation. One road leads to a war with China, as the supply/sink limits are reached, and the only possible way to mediate them is to fight over them. The other road leads to a generation of political difficulties, and it is unpalatable to many whose idea of life is going from their big house to their big truck to their big job so they can retire in style to the Sun Belt.
But politics is often the choice between the unpalatable and the catastrophic. And the reward for making the change is simple - liberty. Liberty of a kind that no inhabitant of the pyramid world can know, a society with the vast weight of the pyramid is off of a person's back, and we have a freedom to pursue our goals in ways which are as unimaginably unconstrained as the automobile was to the people of the horse and buggy world.
However, first we have to deal with the problem of American Thermidor which is how we convert oil into land, land into money, and use the money to buy more oil. We also have to realize that a shift in the monetary basis is coming and this means a change in constitutional order. We are at the bottom of four great challenges in the 21st century.
The answer is a transformation of society as radical as the modern and post-modern were - and as radical as the victorian was. Everything will be different. Our houses, our transportation, how we make a living, our means of exchange, our sense of ourselves in our political and social context. This change is the important one, because all of the others will be worked through as the result of it.