Energy Descent and the New Reality

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.

Supply v. Demand: a graphical depiction...

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.


12 Responses

  1. Just what I have been considering. I am one of the lucky ones in that at my age I own my home and it is large enough for an extended family but I don’t have funds to put in solar panels etc…maybe one of my children can do that in the future. For the time being I am trying to educate my children about what their future might be like, how to grow vegetables, live frugal lives and do crafts like sewing. I don’t despair. Thanks for the opportunity to discuss these issues.

  2. “…We cannot control this. We cannot “solve” this problem –mostly because its not a problem, its reality. …”

    You’ve nailed it bang on. I get accused of being a doomer when I talk about these things, as though denying it will make it go away. I don’t even feel depressed about how things inevitably will go – it just is. And really, now, how many humans that have ever lived didn’t have very, very difficult circumstances to contend with?

  3. Nice post. I watched the intro at Chris Martenson’s page, and it looks like he must have some interesting material there. I’ll check it out more later.

    His “Steps to Resilience” remind me of the Riot for Austerity / 90% Reduction group.

  4. The irony of my situation is that I have a 9-acre farm for sale, with good livestock fencing, a pole barn, a pond, and lots of energy efficiency improvements, and I can’t get any interest at $234,000.

    We are in the process of going “all in” – new job, new house, new metal roof, new wood stove, new (old) high-mpg diesel car, all in a location with lots of sustainability-minded people and organizations. I’ve bet my whole retirement on what I see coming over the next decade.

    But with two mortgages in a falling housing market, it’s a high stakes game. And for now at least, it precludes me from doing a lot of the things I want to do. I’m amazed we’ve gotten as far as we have as quickly as we have with this whole upheaval. But I’m dying to do more.

    And here I am, hoping for somebody on a similar path to buy our old place and pick up where we left off. (Which begs the question, why didn’t we stay put? But this comment is long enough without that long story…)

    • Edson, if there were a way for me to transfer my income 300 miles east and/or get equity back in my home I would snatch that property up in a heartbeat.

      Some similar properties are beginning to appear here, but financing will be impossible and even if it were, taking on a 50% larger mortgage when we are racing with the banks to pay off ours is not desirable.

      I wish you the best and will continue to funnel any interested parties your way.

  5. Rob,
    I wasn’t trying to pull the tail on the proverbial dog…. but an excellent post. I like all of what you have to say and would like to add that the challenge is for all of us. Of course you know this. We need to slowly and systematically shed the paradigm of the “old way” (out of control consumption that created “growth) and create a new paradigm of growth built on growing efficiency. A race to the bottom of consumption. Admittedly, I’m not up to speed on the many facets/technical details of the environmental community, yet I support their thinking. In fact, this post (and others you have made) have motivated more to get up to speed so I can get my 3 young boys moving in the right direction, so they can be more resilient.
    The jury is still out on my farm and its success….thanks for the plug, however. I, too, carry the baggage of a pre-peak world and want to shun it as quickly as possible. This is the albatross around all of our necks.
    I think its guys like you and I that need to LEAD by example, take theory and make it reality and show the masses which direction we need to go. Don’t buy into the reality that 5 acres is $$$$$, move to where the land is cheap and plentiful. We are in this dilemma now, not being owners but lessee’s in an area of gold plated property. Its an unsettling feeling knowing what the future brings……

  6. I love your blog, but I have to disagree a bit.

    The truth is that not all of us can do it. At least not now. I know a lot of people who have been out of work for a long, long time. They’re in pretty desperate straits, and can only deal with right now.

    I also know a lot of people who have gotten burned out trying to transition too fast, and in too isolated a fashion.

    The truth is, we can’t do it alone and can’t do it all immediately. We need to sustain ourselves even as we move towards sustainability as fast as we can but not faster. Figuring out gardening, preserving food, eating local, getting work and home to be nearby each other, building a community, and moving to post-oil is too much otherwise.

    This is a long</em emergency, not a short one. This is a marathon, not a sprint.

    Personally, I needed to scale back the pace of my transition efforts. I'm going to focus on food cooking and preservation next year, and buy more local produce rather than grow the full 1800+ sq ft. Last year too much rotted in the garden before I could even harvest it to donate it. I couldn't properly analyze and learn from my garden experiments. We didn't connect with enough other people to share what we know, benefit from their knowledge and skills, and help each other out.

    My wife and I each work two jobs to pay the bills. We have two kids and our last is on the way. We're going to get there, but not immediately, not alone, and not by burning ourselves out.

    Your blog is a great way to share knowledge and grow community. I appreciate it a great deal. Please keep it up.

    • EWAA – I will definitely concede the point that there are millions that have already been swept up in the first waves of this crisis. I have very little answer to them other than to fall back on the need to provide for those that have less as a design consideration for our systems -there will need to be facets built in for labor:food/resources exchange there *will* need to be facets built into our re-localized enterprises to *create* jobs. The permaculture principle of “surplus” is not just for fruiting shrubs.

      I write from the perspective of those that are still in “middle class” America and looking at transitioning, as that is where I am and what I know. I have some back up plans for when/if I am unemployed, lose the house, and need to feed the kids in a society with little safety net, but I do not write about those things. They are desperate measures that I do not need to implement yet, and will be inadequate at best when/if I do need them.

      In the mean time I plant a row for the hungry, remain open to bartering for my surplus produce and/or have a very flexible pricing scale. The only real long term solution to this will be to work to create local enterprises that may be able to support some of my community with both income and resources in the not too distant future.
      A good post on this very subject came from Rob Hopkins today if you care to check it out:

      Those whom still have the means to create surplus will continue to literally have a moral imperative to use it for societal good.

      As far as burnout goes, I am perhaps the worst person to model yourself after – it is real, and it must be considered. We feel the need to do EVERYTHING, but that is a destructive urge that is counterproductive. Sustainability often focuses on renewable energy, but we need to remember to foster sustainable mental and physical energy as well.

  7. The thing that makes this all less stressful to me is how you sum this up: “ 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.”

    Right on!

  8. Hey Rob, one of your best posts ever.You remain both realistic and inspiring. The projects you have been writing about for the last year or so are truly motivating and essential to the future we all face. Keep doing what you are doing, it makes it less lonely knowing that I am not alone trying to adjust to a future that is rapidly changing. Cheers!

  9. May I wish you everywhere a better year in 2011?
    In the UK the price of pump gasoline has just passed the £1.40 mark. That is per LITRE.
    Heavy taxation has always been the cash cow for UK Government.
    VAT has gone up to 20 percent.
    A 40 mile commute is fairly typical.
    So Cheer Up. Things could be Worse.

  10. […] philosophy employ so few, or even be necessary at all? And then Rob at Onestraw was blogging about the new reality and what our future might look like as we deal with the increasing cost of oil and petroleum goods, […]

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