ReelThoughts: January 17, 2010

"Saving the World at $10 Per Gallon"

Commentary by James Berardinelli

Do we stand at the brink of an abyss? Could it be that all of the disaster movies invading theaters are closer to reality than anyone might like to expect? When humanity's end comes, could it be from something as seemingly minor as the absence of a black, sludge-like liquid that is pumped from beneath Earth's crust? I don't worry about asteroid strikes, nuclear war, or global warming. I also don't worry too much about terrorism. To me, the real source of concern is all the more alarming because so few people are acknowledging it: oil. Specifically, the fact that it's a dwindling resource and its demand is increasing. You don't have to be a mathematician to conclude that's not a good thing. Simple laws of supply and demand indicate that prices will go up and up and up. Price controls, if imposed, will only worsen the problem. Remember the gas shortages of the '70s and '80s? Remember sitting in two-hour lines hoping the flag would still be green or yellow by the time your turn at the pump arrived? If it happens again, it will be worse… much worse.

Economists are eagerly embracing the potential of a recovery, and I suppose that's the right thing to do. Perception may not equal reality, but it can influence it. I'm convinced the doom-and-gloom media coverage of the recession-that-was-nearly-a-depression in 2008 worsened things. Maybe optimism will brighten the outlook for the moment. People seem to be ignoring the elephant in the room, however. At my local gas station, the price of regular unleaded on Christmas Day was $2.43 per gallon. Today, it stands at $2.64 per gallon. A penny-per-day increase is not a good trend, especially during a time of the year when gas prices generally hold steady or drop. But the price of oil is rising, overseas consumption is recovering along with the global economy, and it won't be long before we're looking at expensive gas. A 50 cent jump between now and Memorial Day is not unreasonable, but it may be conservative. A major spike in gas will have one of two consequences: (1) it will severely curtail discretionary spending (with the extra dollars going to filling up the tank and purchase more expensive necessities), or (2) it will cause a double-dip recession which will curtail demand and send prices tumbling again, at least temporarily. The idea that we're going to be able to hold gas prices in the $2.xx to $3.xx range is a fairy tale. Yes, it was $1.xx for a very long time but the world is different now. The United States is competing against an entire world for oil and gas consumption, which we weren't really doing in the '70s, '80s, and '90s.

But this isn't even the worst of it. The recent documentary, Collapse, which is little more than a 75-minute interview with Peak Oil conspiracy theorist Michael Ruppert, is full of the kind of end-of-the-world alarmism one would expect from someone with Ruppert's flair for the melodramatic. But, buried beneath the Chicken Little rhetoric are some inescapable facts. First and foremost of these is that oil is a finite resource; we are using it more than ever for applications as varied as manufacturing, heating, and fuel; and we will run out. The multi-trillion dollar question is: when? Is it a problem for our great-grandchildren, our grandchildren, our children, or us?

No one knows the answer because the amounts of oil beneath the ground are closely guarded secrets. The Saudis know how much they have left, but they aren't telling. Ruppert takes the view that we have already used up more than half the available supplies, but that's speculation. According to him, a crisis is imminent. More conservative estimates indicate the tank won't start running dry until around the middle of the century, but that comes with a caveat that demand has reached a steady state, which is unlikely. It will almost certainly continue to increase. Double the rate of usage, and the time remaining to the crisis point is halved.

I'm not going to argue time lines. Suffice it to say that an oil crunch is coming. It could be in as little as a couple years or as many as 40, but there's a good chance that anyone age 40 or younger today will be alive when it happens. And if it sneaks upon the world unawares, all the calamitous possibilities Ruppert speaks about will become reality. Economies and governments will collapse. Starvation and disease will become rampant. Resource wars will break out. And life as we know it will never be the same. Ruppert makes a compelling argument that the "oil age" has allowed the planet's population to expand from millions to billions. In a world without oil, a reversal would be thinkable (and perhaps inevitable).

Currently, we do not have a technology to replace oil fully, but solar, nuclear, electrical, etc. can be used to reduce our dependency upon it. Every little bit helps. Halve consumption and the length of time between now and the crisis doubles. For argument's sake, say we have 30 years of oil left. If we can achieve a world-wide 50% reduction in oil consumption via alternative fuel means and conservation, the date of the disaster shifts from 2040 to 2070. That gives us a lot of extra time to (a) develop long-term contingency plans, (b) perfect technologies that can further reduce our need for oil, and (c) figure out ways to reduce the costs associated with obtaining oil from "difficult" sources (oil shale, for example, which is plentiful). But we need to be proactive. The Head in the Sand mentality, which is currently in vogue (especially among economists), is not a solution.

Collapse did not make me a believer, and I find many of Ruppert's claims to be laughably absurd. Absolute belief in doctrines like these requires an almost religious fervor, and Ruppert is only moderately convincing as a preacher. Take what he's saying with a grain of salt, but don't dismiss everything because some of the arguments are impossible to swallow. It's like Al Gore's An Inconvenient Truth (although not as slickly produced). There are problems with Gore's thesis and some of his conclusions are based on dubious "facts," but to reject the movie in total is to ignore some basic, useful information. Issues involving climate change are not as black-and-white as either the proponents or debunkers would argue.

For years, I have perceived the United States' greatest national security issue as its dependency upon fossil fuels. To me, it's a no-brainer. Imagine how much different the world would be if the huge oil reserves in the Middle East were of minimal importance to this country. The more voracious our appetite for oil becomes and the more we have to fight off the likes of China and India for it, the more critical the Middle East becomes.

We need a wake-up call. A couple of years ago, when gas prices crested around $4 per gallon, there was a lot of panicky talk about alternative fuel and conservation. Good for the environment, good for family finances, good for the country. Of course, all that talk stopped when the bottom fell out of the oil market and gas prices tumbled to $1.50 per gallon. It's unlikely we'll ever see that price again. In fact, even $2.50 may be little more than a fond memory in the near future. When gas prices again reach $4, the talk will start re-ignite. But what sustained price will be necessary to prompt action rather than mere talk? How high does gas have to be before the government and industry work in concert to do something about the situation rather than offer lip service? $5 still seems too low. $10 might be the right level.

Yes, $10 gas would be painful, and it would hurt the economy badly. A significant portion of the population would become unable to drive, and those who used cars would do so sparingly. The consequences would be crippling. But it would be a wake-up call like no other and would force us to face the reality of what happens when demand escalates in the face of a dwindling supply. It's insane to believe we can go on as we are. The status quo only has so many years left and the wild swings of gas prices over the past two years show us how fragile that cornerstone of the economy has become. We need real action and real solutions, and we're not going to get either until gas prices become so exorbitant that they threaten the fabric of society. It seems to me that $10 gas might be the means to salvation.

Do I sound a little like Ruppert? Perhaps, although anyone who watches Collapse will recognize that my perspective is considerably more moderate than his. His argument appears to be that, while $10 gas is inevitable, it will come too late. I'm more optimistic. I don't believe we have passed a point of no return, but I accept that real solutions will involve sacrifice and pain. Do Americans have the stomach to do what's necessary? I guess we'll find out.

I don't have an agenda to push. I'm not a "tree hugger." In fact, when it comes to energy consumption, I could be described as a "waster." I'll admit it: I need a push to reform my habits. I need an incentive (negative or positive) to limit my driving. Yes, I have changed many of my incandescent light bulbs to low-energy ones, but not because it reduces my "carbon footprint." I have done it because it saves money and allows me to get more light for less energy. I can now obtain around 1600 lumens (100W equivalent) of light from a socket rated for 60W max because the actual power consumption is 23W. Brighter and cheaper - hard to beat. That's the way to sell conservation: provide people with tangible, immediate results. Or scare them. And if end-of-the-world scenarios aren't frightening enough, try the reality of $10 gas.

To close, let me say a few words about Collapse, which has not received a formal review. Calling it a movie is almost a stretch. It's a simply made production, and offers little more than 75 minutes of Michael Ruppert expounding upon his core thesis of Peak Oil. Some of the points he makes are chilling; many are hyperbolic with little sound backing (although, like most conspiracy theorists, he spins things in such a way that every point seems solid). For what it is, Collapse is an intriguing project, although its lack of balance necessitates that the viewer recognize it's not The Truth, The Whole Truth, And Nothing But The Truth. Still, I recommend it because some of the points are well-considered and it raises the awareness about an issue that lurks like a hidden tumor ready to transform a healthy recovery into a cancerous nightmare. And that's the kind of metaphor with which Ruppert would probably agree.

Trailer for Collapse:

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