Great analysis by Kunstler

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Damnthematrix's picture
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Great analysis by Kunstler

Does Mr. O Know?

      A lot of readers are twanging on me for refraining to castigate
President-elect Obama for deeds yet undone. They're discouraged by the
advisors and cabinet sectetaries he's picked, ostensibly because the
crew coming in are Washington "insiders," meaning they can't possibly
see or do things differently.
     My own starting point for this
is the belief that in the years just ahead any sociopolitical entity
organized at the giant scale will flounder -- this includes everything
from the federal government to global corporations to factory farms to
centralized high schools to national retail chains. So even expecting
Mr. Obama's government to act effectively may be asking too much in a
situation that will require mostly local action.
The meta-situation will be the overall decline of energy
resources and the necessary downscaling of our activities. We are
obviously in a transitional period between the old profligate energy
economy and the new economy of relative scarcity. We have no idea how
disorderly this transition will be, but there is certainly potential
for tremendous instability in daily life.
For a while, perhaps, the federal government may retain some
ability to affect the way things go, or give the appearance of doing
so. This raises the issue of what Mr. Obama and his team really know
about our energy predicament. The president-elect has made some noises
-- recently on the 60 Minutes
show -- that he understands something about the current price
dislocations in the oil markets resulting from the larger financial
turmoil. He alluded to the public's erroneous notion that current
low-ish oil prices mean the oil problem is over. But does the incoming
president know some of the following details?
For instance, does Mr. O know that global oil production appears
to have peaked at around 85 million barrels a day, with poor prospects
of ever getting beyond that? This single naked fact has broad
ramifications, above all whether we can continue to think in terms of
industrial "growth" as the benchmark for economic health. There are
many interpretations of the current financial fiasco. Some of them are
based on long-term technical wave theories. A more down-to-earth view
suggests the shock of peak oil -- though it doesn't exclude wave
Does Mr. O know that world oil discovery has fallen to
insignificant levels after peaking long ago in the 1960s. Does he know
we are finding no more super-giant oil fields on the scale of Arabia's
Ghawar or Mexico's Cantarell, which have supplied most of the world's
oil for the past forty years and are now running down? Does he know
that you can't produce oil that hasn't been discovered?  Does Mr. O
know that virtually all the oil-producing nations have entered
production decline. Surely someone has whispered in his ear about the
IEA's projection that global oil production would fall 9.1 percent in
the coming year.
Does Mr. O know that oil exports have been trending to decline at
a steeper rate than oil depletion? That is, the exporting nations are
losing their ability to send oil to the importers (like us) at a rate
mathematically greater than the run-down in their production.They are
using more of their own oil even while their production is going down.
For example, Mexico is depleting overall at more than 9 percent a year
(with the Cantarell field alone running down at more than 15 percent
annually). Does he know Mexico's net exports are crashing? Mexico has
been our number three leading source of imports. In a very few years
they will not be able to send us any oil. A deluded American public has
no idea that this is happening. Will Mr. O explain it to them?
Does Mr. O know that the "old major" oil companies (Exxon-Mobil,
Texaco, Shell, et al) produce less than 10 percent of the world's oil
now -- the other 90 percent coming from the foreign nationals -- and
that blaming them for the situation is a waste of time. The foreign
national companies are changing the landscape of the oil markets.
They're making special contracts with "favored customers" rather than
just putting their oil up for auction on the futures markets. One thing
you can infer from this is that we're entering a period of national oil
hoarding based on coming scarcity. The futures markets were based on
relative abundance, and they will not operate very well in a climate of
scarcity. Consider that the USA will probably not be among the "favored
customers" for several oil producing nations. Figure that in with the
coming loss of imports from Mexico (and Venezuela and Nigeria).
Does Mr. O know that the current drop in oil prices (due to
massive financial deleveraging) has resulted in the cancellation or
postponment of the very oil production projects that were hoped to
offset the coming depletions? It's not worth it for an oil enterprise
(private or foreign) to drill in deepwater or venture into arctic
regions when oil is priced at $50-a-barrel -- if it costs $80 to get
the stuff out of the ground. It's not worth digging up tar sands in
Canada at that price. This halt in activity is going to boomerang back
on the US in a year or so, with depletions ongoing everywhere and no
new oil to take its place. Does Mr. O know that we're just as likely to
see shortages as a resuming rise in oil prices here in the US during
his coming term?
Does Mr. O know that the current re-inflation program being run by
the Treasury and the Federal Reserve is so egregious that it may lead
to loss of the dollar's legitimacy, to the renunciation of dollar
holdings by other nations, to the down-rating of US Treasury debt
instruments, and finally to an inability of the US to purchase foreign
oil -- which comprises two-thirds of all the oil we use every day?
Does Mr. O know that we are not going to run the US automobile and
truck fleet on any combination of alt.fuels? Continuing it by other
means is a fantasy that will only disappoint us. The motoring era is
coming to an end. Heroic investments in highway infrastructure to
create jobs will be a tragic waste of our dwindling capital. The
pressure for Mr. O to make these misinvestments will be enormous,
perhaps insurmountable. There are probably not a thousand people in the
US who agree with what I am saying -- meaning the consensus to keep the
cars running at all costs overwhelms reality at the moment. Does Mr.
O's concept of "change" include the possibility that we may have to
live very differently in this society?
Chances are, if Mr. O knows any of these things he might be
crucified in the polls and the media by acknowledging them. The only
"change" that America really wants to hear about is evicting George
Bush from the White House. They're sick of him and all the disturbance
he has caused in their financial affairs. But beyond that, the American
public is deathly afraid of the kind of changes we actually face --
such as, the end of consumer culture, the gross loss of value in
suburban real estate (which forms the bulk of the middle class's
private wealth), the prospect of food and fuel scarcities, the need
to re-localize our lives, the need to physically shape up to stop the costly and
unnecessary drain on our medical resources, to grow more of our own
food, to work harder at things that actually matter, and to save
whatever we can for a difficult future.
If Mr. O introduces any of these themes into the national
discourse, the public and the media and the bloggers will all dump on
him for failing to prop up the wild party that American life became in
recent decades.

Headless's picture
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Joined: Oct 28 2008
Posts: 363
Re: Great analysis by Kunstler


Of course all you Kunstler fans have seen this:

I think he's brilliant, entertaining, and most importantly, honest--such that Chris would have to censor his posts if he decided to post here. The only weakness Kunstler has is the same one that many people (I) suffer from, that being taking a position and then defending it even though it might be inapplicable and inappropriate in certain circumstances; in his case, his utter disgust with suburbia gets a little stretched when he and Duncan Crary are dissing everything suburban. That said, I wish my rationalizations were as innocuous as his...

The Thursday slam on suburbia:

 His primary site:

Given Kunstler's focus on energy this week, I am reminded of a point that Max Keiser made a week or two ago; to paraphrase, "Countries and entities that can't sell the explosive bonds sold to them by the U.S. are selling oil (futures?) to survive and stay solvent."

 That begs the question: Is oil oversold? A little? A lot? Is it time to buy the DIG? Is the DIG the risky equivalent of the GLD (as some of you have mentioned: perhaps it will fail when it's time to pay the bills if gold rockets).


joe2baba's picture
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Re: Great analysis by Kunstler

so is there something to defend about suburbia?

pir8don's picture
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Re: Great analysis by Kunstler
Damnthematrix wrote:

My own starting point for this
is the belief that in the years just ahead any sociopolitical entity
organized at the giant scale will flounder -- this includes everything
from the federal government to global corporations to factory farms to
centralized high schools to national retail chains. .

Having said this he then goes on to imply the opposite, as if it might matter what Mr O knows.


caroline_culbert's picture
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Re: Great analysis by Kunstler
Nonzeroone wrote:


Of course all you Kunstler fans have seen this:


Great Video!

Doug's picture
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Joined: Oct 1 2008
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Re: Great analysis by Kunstler


The Kunstler clip is entertaining, but he didn't say anything I didn't learn in my urban studies courses in the 70's.  It's an interesting coincidence that he's from Saratoga Springs, a town I lived in for a while back in the 60's, and very near Albany, where I lived and went to college in the 70's.  These are both cities that were originally laid out in the 18th and 19th centuries, and consequently have vibrant downtowns where people enjoy congregating and living.

However, the landscape of most American cities hasn't changed much in the past few decades.  They are still dominated by cars and are, if anything, more hostile to pedestrians and bicyclists.  I haven't seen any significant improvements in mass transit.  The most expensive real estate in most cities is the downtown business district, about half of which is devoted to parking lots and ramps.  This kind of so-called planning seems insane to me, which is why I now live in the country.

The one possibly hopeful effect of the coming energy crunch is that city planners might start thinking in human terms again.

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