Time to take notes or suffer the same fate
Sunday, July 22, 2012, 8:44 PM
- Escalating energy costs (direct and indirect) create a vicious cycle in the economy that further hinders growth/recovery
- Overspending and other poor capital allocation decisions by state governments are compounding the problem
- California spends $1 on public transit vs. $10 on automobile-related investment, a gap that energy costs will soon painfully reverse
- Solutions are hard to come by and harder to fund, but without investment, alternative systems won't ever achieve scale
- California's future is increasingly easy to predict; individuals and other state governments better take notes or suffer the same fate
If you have not yet read Part I: Dawn of the Great California Energy Crash, available free to all readers, please click here to read it first.
A key feature in the post-war industrial success of countries like South Korea and Japan, given that they had virtually no domestic energy supplies, was the ability to turn a profit from manufacturing powered by imported energy. This favorable equation relied on three key factors:
- That imported energy remained a cheap input cost compared to the high margin value of exported goods
- That energy producing countries had cheap energy to export
- That purchasers of the exported goods were growing, and were running their own economies on cheap energy
These are the exact same assumptions still being made -- and extrapolated into infinity -- about California's economy.
Are we really to believe that California's GDP can forever deindustrialize, requiring fewer and fewer energy inputs, while growing in profitability, thus providing the capital to access/import energy -- at any price? » Read more