Summertime, and the living is easy…

Hi everyone — it's been a long time since I last posted. We had our forum in Foster a couple of months ago and it went reasonably well. South Gippsland Shire councilors kicked in a substantial amount of money to help run it for which I'm very grateful! I was aiming it largely at the people who were on the panel and it may have had some benefit there. But it's all water under the bridge now — I feel personally that the time for consciousness raising is nearly at an end. Now is the time to start work with the new realities in mind!

But I'm having one last go at educating the public and it's a beauty! Stoneleigh (Nicole Foss) from The Automatic Earth is coming to Australia on a lecture tour and we are having her give a talk down here. It will be at the Leongatha (edit in response to comment: Leongatha is in Victoria) Memorial Hall in the Council meeting room on February 21st at 7:30pm (2 Michael Place Leongatha) for those of you in the area. Cost will be $10.00. It will (I suppose) be basically her A Century of Challenges lecture, which is pretty technical and requires at least some economic knowledge, but is very in-depth and far-reaching in its scope. Definitely a must-know for anyone seriously planning for the future at any level. I've just had a meeting with Malcolm McKelvie from Baw Baw Sustainability Network with whom I'm jointly running the talk and we're happy with our arrangements, so it should be a good show!

So what comes next? I'm working three part-time jobs at the moment while I have a think about what business to start. What I'm planning to do at the moment is to run classes for Arduino control systems programming and building. I'm thinking of aiming it principally at local kids (although some adults may be interested too). I want to (a) get a low capital and knowledge intensive start-up business going down here for the brighter locals and (b) find out who the best programmers and solderers are so I can employ 'em! Back when my exhibit building business was operational, John Banikos and I built quite a few things powered by PLCs (programmable logic controllers), mini computers used in industrial processes. The Arduino is a low-cost PLC essentially. There is also an ultra low-cost computer which has just been released — the Raspberry — which I will check out.

I'd really like to get some sort of hackerspace going and try 3-D printing too, but it will have to be one step at a time for a while!

Community forum background information

Our little transition group is going to run a community forum to try and get as many key people in our district to have an understanding of the implications of peak oil for our local economy. Below is the draft of a background document I want to have available for participants. Does anyone have criticisms or suggestions? I'm a bit concerned that the references for economics are a bit thin. If any of you have any good links you think I can use, send them along!

Peak Oil & Finance Briefing Paper for panelists and participants at the Corner Inlet Fuel & Finance Forum, 13th June 2011
Prepared by Lloyd Morcom cornerinlettransition@gmail.com
Transition Corner Inlet District Inc
Partly adapted from “Peak Oil Briefing Paper” by Kate Leslie of Transition Hobsons Bay
which can be found at
https://docs.google.com/document/d/1_vLC_EwqdPIfAFyUdCW20-JLKK9-nB4W9Hqo3gDlv38/edit?hl=en_US&authkey=CLmWzukB&pli=1

Executive Summary
The problem of Peak Oil and credit-based finance
Oil is a non-renewable resource with geological limits to its supply. In the past 150 years, we humans have used around one half of all oil. We are now using four times as much as we are finding.

It is increasingly believed by a range of experts that the peak of extraction may have already occurred between 2006 and 2008. This means that as each year goes by, there will be less oil available. Oil in the cheapest, most accessible reserves was extracted first. The reserves left are more difficult and expensive to access and extract.

Peak oil presents a real challenge to us as a society – oil has become such an integral part of our life that the end of abundant and cheap supply is bound to create serious disruption around the world and not least in South Gippsland. Oil is used in almost all facets of production. As well being a fuel it is the main feedstock for plastics manufacture. Its role in agriculture is crucial. In fact it underpins the stability of our economy.

What is hidden from most of us by the complexity of the world we live in is how our economy has developed into one dependent on an endless supply of cheap energy and oil in particular for its continued existence. Our economy is credit-based and uses fiat money: that is, it uses arbitrary symbols legislated into existence for use in trade and exchange. Most of what we call money has been lent into existence by banks and governments and exists as only as symbols on paper or computer screens. Because it must be repaid with interest, the supply of money continually expands and so must the economy it supports, in order to pay back both principal and interest.

If economic growth is curtailed by a shortage of energy, particularly oil, our economic system could collapse, as credit lent will be impossible to repay with interest and so banks would be unable to lend. This is what is currently happening more or less in slow motion to the world economy. The crises in Europe (Greece, Ireland, Portugal and Spain are all teetering on the edge of defaulting on their debts) and in the USA (with its enormous unfunded budget deficit to cover social security, health care and the military) are caused by an ongoing rapid increase in debt which is becoming increasingly clear will never be repaid. Currently governments have been coerced into using taxpayer funds to give financial backing to banks but this creates a political crisis which will blow up at some stage.

Australia seems to be a long way from these kinds of problems at the moment but our seeming invulnerability is an illusion and we could find ourselves dragged into them should these international crises affect our trade, which would rapidly reveal the fragility of our own finance and banking system.

Resources for understanding the problem: Peak Oil
There are two key concepts to grasp with Peak Oil. One is the “Hubbert curve”, the bell-shaped graph that shows how a resource of any kind is exploited, with a rising level of production to a peak and then an (often symmetrical) decline. The other concept is the idea of EROEI: “energy returned on energy invested”. This shows how expensive — in energy terms — an energy resource is to exploit. For example, the first oil wells in the nineteenth century produced more than one hundred times the energy value than it took to drill and develop them. Recent offshore oil fields on the other hand have a ratio of energy returned on energy invested of nearer to ten-to-one.

ABC Catalyst video on the problem of Peak Oil
http://www.youtube.com/watch?v=RaNz3qS5WAo

A good primer by Gail Tverberg who writes at The Oil Drum
http://www.theoildrum.com/node/3726

One in video format by another Oil Drum commentator, André Angelantoni
http://www.postpeakliving.com/preparing-post-peak-life

Australia’s CSIRO has put out a study called the Future Fuels Forum
http://www.csiro.au/science/FutureFuelsForum.html

An explanation of EROEI at Wikipedia
http://en.wikipedia.org/wiki/EROEI

An explanation the the Hubbert curve also at Wikipedia
http://en.wikipedia.org/wiki/Hubbert_curve

A longer discussion of EROEI at The Oil Drum
http://www.theoildrum.com/node/7786

Raw figures on the world situation from the Energy Export Databrowser
http://mazamascience.com/OilExport/

Another useful subsidiary concept is the “Export Land Model” based on work by geologist Jeffrey Brown. To quote from the Wikipedia article on it, “It models the decline in oil exports that result when an exporting nation experiences both a peak in oil production and an increase in domestic oil consumption. In such cases, exports decline at a far faster rate than the decline in oil production alone.”

The Wikipedia article can be found at
http://en.wikipedia.org/wiki/Export_Land_Model

A discussion of how it affects Australia can be found here
http://anz.theoildrum.com/node/3657

A longer technical exploration of the Export Land Model is here
http://www.theoildrum.com/node/7007

Resources for understanding the problem: the economy
It is more difficult to find an objective, all-encompassing explanation of the economic situation. There are many commentators who can give valuable insights but most have a limited view or are fixated what they believe to be the particular cause. But anyway, here are some links.

Chris Martenson has a comprehensive though necessarily US based view of the economy. His Crash Course is well worth a look for an explanation of the causes of the current big downturn: click on “Watch the Crash Course” on the top left of the web page.
http://www.chrismartenson.com/

An amusing stick-figure explanation of the crisis, again US based
http://cravensbrothers.com/cboutlook/

Steve Keen is an Australian economist and the author of “Debunking Economics”. He has been shouting “The emperor has no clothes” at those economists who see a return to business-as-usual soon. He is best at explaining the housing bubble, which is so important as a cause of the huge increase in debt which has driven demand in Australia. When the bubble pops, as it’s starting to do now, demand (= spending) will fall precipitously. Couple that with the grim outlook for local manufacturing and the erosion of retail sales because of online purchases, both caused by the high Australian dollar, and we have a very nasty outlook for the economy especially if our exports falter. This is a video presentation by Steve Keen with Powerpoint slides.
http://www.debtdeflation.com/blogs/2011/03/20/mortgage-finance-association-of-australia-talk/

Government initiatives - Local
What are governments doing about it? Not much apart from a Federal Senate committee investigation in 2007, although there has been some action at the local government level. Maribyrnong City Council addressed the subject with its Peak Oil Contingency Plan (June 2009)
http://www.maribyrnong.vic.gov.au/Files/Final_PeakOil_25_August_Website.pdf

Darebin City Council has an Adaption Plan (November 2009)
http://www.darebin.vic.gov.au/Files/Adaptation_Plan_Final_November_2009.pdf

In March 2007, Brisbane City Council’s Climate Change and Energy Taskforce released their final report 'A Call For Action'. Brisbane Council adopted some of its recommendations, stating “peak oil is a more recent consideration”.
http://www.brisbane.qld.gov.au/documents/plans_strategies/summary_intro_climate_change_energy_taskforce_report.pdf

Coffs Harbour City Council (NSW) adopted a 'Peak Oil Report and Action Plan' in November 2008.
http://www.coffsharbour.nsw.gov.au/resources/documents/CHCC_Peak_Oil_Report1.pdf

Sunshine Coast Council adopted the Sunshine Coast Climate Change and Peak Oil Strategy 2010-2020 in June 2010

Government initiatives - Federal
The Federal Department of Resources, Energy and Tourism, on behalf of the National Oil Supplies Emergency Committee (NOSEC) examined Australia’s current level of liquid fuel vulnerability and significant trends which may affect this up until 2020.
http://www.ret.gov.au/energy/energy_security/emergency_response/liquid_fuel_emergency/lfe_vulnerability/Pages/lfe_vulnerability.aspx

A Federal Government Senate Committee in 2007 published 'Inquiry into Australia’s Future Oil Supply and Alternative Transport Fuels'. It found Australia should be planning now for the enormous changes that will be needed to move to a less oil dependent future. The final report is here:
http://www.aph.gov.au/senate/committee/rrat_ctte/completed_inquiries/2004-07/oil_supply/report/index.htm


International reports
The UK Secretary for Energy and Climate Change committed in 2011 to establish an “Oil Shock Response Plan”. Reputedly it will address how to protect the economy “if we knew that the oil price would soar to $250 in 2014.” An article on it is here:
http://www.businessgreen.com/bg/news/2072738/exclusive-government-develop-oil-shock-response-plan

The US Military issued a report in 2010 warning that “by 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day.” The report may be accessed here:
http://www.peakoil.net/files/JOE2010.pdf

The German Military think tank tasked with fixing a direction for the German military analysed the implications of peak oil in 2010. The report was leaked. It reportedly warns of “shifts in the global balance of power, of the formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of the "total collapse of the markets" and of serious political and economic crises.” The Spiegel Online report is here:
http://www.spiegel.de/international/germany/0,1518,715138,00.html

Academic studies of social vulnerability
For a limited assessment of local impacts, two academics (Dodson and Sipe) have written a number of papers referencing maps of their “Vulnerability Assessment for Mortgage, Petrol and Inflation Risks and Expenses” (VAMPIRE). I draw your attention to the statement in their 2009 report that there are "increasingly pessimistic assessments emerging about the future security of conventional oil supplies."

2009 publication by implication. Quotes oil prices in mid 2008. No census date referenced. No Melbourne map
http://www.griffith.edu.au/__data/assets/pdf_file/0014/208220/ANZAPS09-Securing-suburbia-buy-Dodson-and-Sipe.pdf

2008 publication. Has Melbourne map on p7. Based on 2001 Census data
http://www.aspo-australia.org.au/References/Bruce/Dodson2008PlannedHouseholdRisk_AustPlanner.pdf


2006 publication. Based on 2001 Census data.
http://www98.griffith.edu.au/dspace/bitstream/10072/12665/1/41353.pdf

Musings on social meaning and direction in a declining culture

I had an interesting experience on Thursday: my friend Fiona, who is a journalist on the local paper, rang me to say I should be at a park halfway between the town where I live and the one in which I grew up by just after twelve, in order to participate in some publicity for a stunt being run by Mercedes. Several cars running on hydrogen fuel cells are being driven round the world and this was to be a refueling stop for them. I turned up to find a great caravan of fuel trucks and support vans, necessary because places where you can top up your tank with hydrogen are pretty thin on the ground in South Gippsland.

So I chatted to various characters who were there. The cars came in and were refueled: we were promised a lunch but I had to miss out as I had a meeting to attend. What was striking was the size of the fuel trucks relative to the size of the vehicles. I had heard that hydrogen is a very bulky fuel and this will necessarily constrain any distribution network designed for it: essentially, it means it will work best for a dense concentration of vehicles close to a source of the gas, hence a city. To haul it long distances to outlets way out in the sticks won't work — the amount of fuel the trucks would consume would rapidly approach the amount they were carrying, and there are problems handling it too, due to its ability to leak through the tiniest orifice.

So I drove off musing on all this. The Mercedes people were full of enthusiasm for their project, needless to say, but is this the future of motoring? It could be the future of some motoring no doubt. Mercedes as a corporation may well survive the coming financial holocaust if their accountants are as smart as their engineers. Then they will be in a position to supply the elites in the cities with their clever cars, which have a range vastly greater than electric vehicles. But this is in no way the future of motoring for the masses. Because there can be no future of motoring for the masses.

Dmitri Orlov has just done a post at Club Orlov where he talks of the evolution of this phenomena: to quote…

…short-term political and financial trends point in an altogether different direction [from that of a continuation of the system-as-it-is]: that of the global industrial economy turning boutique. You see, one shoe has already dropped: the level of industrial activity that can be sustained today is already insufficient to provide anywhere near full employment and a reasonable quality of life for vast numbers of people; the solution is to disenfranchise them, to confiscate their savings, to cancel their retirements, to concentrate all of the remaining wealth in as few hands as possible, and to create a boutique economic and financial environment in which the lucky and unscrupulous few can continue to live comfortably…

As I said, if Mercedes plays this right, they may well have a future, providing for those who still have power and the money in the world. But don't be fooled into thinking that "alternative technologies" must necessarily be equitable, as well as "clean".

Good James Howard Kunstler interview & a great primer on the GFC

JHK has only one tune in his repertoire but he plays it damn well. Here's an interview on Terrain.org (a journal of the built and natural environments) where he spins it all out in fine form — lots of quotable bits including this: "We will do what reality compels us to do, not necessarily what our fantasies propose." My sentiments exactly.

My friend Mike sent me a link to a broadcast which gives a background to the current financial crisis — if it puzzles you in any way, give it a listen! It makes very clear the motivations of players at every level. Highly recommended.

The passing of a master

Joe Bageant is dead. He was the chronicler of his people, the rednecks of the American Scots-Irish underclass, whom he loved but for whom he despaired. Read his stuff: Deer Hunting with Jesus: Dispatches from America's Class War and Rainbow Pie.

Australia looking down the Hubbert curve

Here's a part of an interesting post on The Oil Drum.

Australia is next on the list and it appears to have passed peak oil production and as a result, exports have dropped from over 500 kbd in 2007 to just above 300 kbd today. The declines in production are expected to continue.

"The recent start-up of BHP Billiton's Pyrenees oil field and Apache's Van Gogh field - both situated off Western Australia's north-west coast - will provide a boost in the short-term; however, the long-term trend is for production to keep falling," EnergyQuest Chief Executive Officer, Dr Graeme Bethune, said today.(this from April 2010).

Current production is at around 540 kbd, having fallen 40 kbd in 2010.

The decline with a projected drop of 85% in 10 years can be seen from this graph:
Anticipated future Australian production (Geoscience Australia)

At the same time Australian consumption has been steadily rising, and is hovering just below 1 mbd.
Australian oil consumption (Index mundi)

In contrast, Australian natural gas reserves are significant. As with Malaysia it has supplied LNG to Japan, starting in 1989 and has just signed a $41 billion contract for a 20-year supply of LNG from the Gorgon field, taking 2.25 million tons of the anticipated 15 million tons (0.75 Tcf) of annual production anticipated from the field, as overall gas production continues to rise.

Current estimates of Australian natural gas reserves are of over 108 Tcf

Commenter Jedi Welder notes

In the graph above, Australian crude oil production seems to be all but anihilated in just 20 years from peak production. That is a realy big fall. How will they cope with that?

Indeed.