Like most of us, I am quite sensitive to the price of fuel and watch its movements with keen interest, and it has not been disappointing of late. We set a new record for the price of pump gasoline in December last week at $2.93, and have proceeded to break it 4 times since then and we currently sit at $2.98 for the average price across the US. That is noteworthy, especially considering that this is up 14% from last December, and higher than it was the December before we hit $4+ in the Summer of 2008 and all hell broke loose in our economy soon after.
Oil IS our economy. It is what makes global trade at this scale possible and why it makes “sense” to ship raw materials from Africa to SE Asia for processing and then to the US for final sale, grain from the Ukraine to be fed to cattle in Brazil to end up in $.89 cheeseburgers in the US, and the 1500 mile side salad. That fact – that Oil is Everything – means that watching the price of crude, or just the pump, is rather important for predicting when the next recession, or rather the deepening of the current one, will hit. Since we hit Peak Oil in 2006 the New Reality is that energy economics are now ruthlessly driven by supply and demand. Now that we are Post Peak, there is no significant means of mitigating price by upping supply to meet demand; when demand increases, price MUST follow suit soon after as supply is fixed and slowly diminishing.
What became painfully clear to us all, is that there is a price ceiling that our economy is able to support. In 2008 it was somewhere near $110/bbl or $4/gln of gasoline. Beyond that point oil/gas pushed the expense side of doing business too far (and had the psychological impact of drastically reducing consumer spending) and we smacked into a New Reality that energy was perhaps more expensive than we could afford; that we couldn’t afford to do *everything* we wanted as a global community.
And then we learned another reality about our current economy. GROWTH is IMPERATIVE. Chris Martenson in his Crash Course will explain this far better than I can, but in long and short the rate of our economic growth MUST EXCEED the interest that is due on everything we, as a global society, “own”. As soon as the economy fails to grow faster than the interest that is due on the all the zillions of loans –from credit cards to government bonds– there is literally NOT ENOUGH MONEY to pay the banks and massive foreclosures begin to happen. This is also why we continually here that 1-2% growth “isn’t enough”. Check your car/mortgage/credit card bill for your interest rate if you wonder why not.
So everyone alive has know nothing but the fact that Oil IS the Economy, and that the Economy MUST grow. But there is no more cheap oil, and the Economy CAN’T grow – at least not until it bottoms and the Peak is a lofty mountain indeed. The Old Reality is over. Welcome to the New One. The next century or so will be dominated by series after series of recessions, which will relax the demand pressure on the price of energy enough to allow a brief “recovery”. But as soon as the economy recovers enough it will inevitably hit the energy price ceiling (which is now lower than the last one due to all the bankruptcies that occurred in the last recession which lowered the overall size of the economy by destroying “wealth”) and we will enter a new recession. This is the economic reality of Energy Descent: series after series of recessions interspersed with brief “recoveries”.
This is why I watch the price of fuel with so much more interest than I did 3 years ago. Our current “recovery”, which is really just a slowing of the bleeding rather than healing, is inherently short lived and the price of Crude at its current mid $80’s and climbing does not bode well for the length of this reprieve.
We cannot control this. We cannot “solve” this problem –mostly because its not a problem, its reality. That means we must react to our situation and find personal solutions to the IMPACTS of the New Reality on our lives.
This will mean many things, and the they will be very different to many people. Tom recently commented with a challenge that went something like “cut the theory and prove it with your checkbook” ; i.e. try to see if the ideas are economically viable by earning my living through their implementation. Tom runs a successful CSA in North Carolina and is well along his way towards resiliency assuming he isn’t running a mortgage and depending unsustainably on inputs. Its a fair question, but as a “challenge” it is also arrogant and insensitive to the New Reality, and in that arrogance which runs the strong risk of demoralizing rather than inspiring. There is no more cheap credit to buy land (5 acre farmettes are still running $350,000 hereabouts – add $10,000 for each additional acre), there are likely mountains of debt that were accumulated in the Old Reality forcing a much higher income threshold to maintain principal and interest payments, and hundreds of other economic and social facets of our individual situations that makes “proving” our ideas by forcing them to support our families a false challenge.
The fact is that the New Reality will do that for all of us. The rub of the next few decades will be: can we re-adapt fast enough (using theories, hunches, untried ideas, and examples from those around us) to reduce our dependency on the Old Reality at least as fast as it is replaced by the New Reality. Can we offset our energy needs as fast as their costs rise beyond our ability to pay for them; can we grow increasing amounts of food as fast as their price increases beyond our ability to afford them. Can we find additional incomes in cottage economies (or career changes in the case of those lucky enough to be in a situation like Tom) and reduce our expenses fast enough to keep our homes, pay down our debts, reskill, and retool?
In many ways it can feel like a race – can we pay off the mortgage before I lose my job, etc? The impact of the Recession Rollercoaster will in many ways be limited to our connection and dependance on the system. With a 40 mile commute, traditional mortgage, and no wood stove or PV cells, I am far more dependent on the Old Reality and its cheap energy, than if I am able to relocalize my income, truly own my home, and add more than a bit of self reliance to my household.
The coming, hell CURRENT, crisis will be mitigated in so much as we are able to innovate and implement individual organic solutions to the changes that are being forced upon us by the New Reality. The changes may come faster than I can adapt to them – I could lose my job this year and become one of the millions of long term unemployed and my permaculture orchard will be for naught. But, knowing that, I can take strong, bold steps to limit my exposure and control the variables I can. We can ALL do this. And my suspicion, based on the experience of the past 4 years, is that in adding that control back to our lives, in living in closer touch with reality, we will find more value in what really matters most and very likely increase our personal happiness in direct proportion to our reduced adherence to the Old Reality.
It will be wicked hard, there will certainly be moments of dread, but we can do this.
Be the Change.
Filed under: Energy Descent