Destroying demand

People keep asking me why the price of oil has fallen from its recent spike to nearly $150/barrel. Trust me, I’m not responsible for the price decrease. Or the preceding price increase, for that matter.
I’m surprised, too. I didn’t buy oil futures, and yet the price of oil fell.

I suspect the decline results from several factors, including a strengthened U.S. currency (although that’s probably more effect than cause), a mild climatic forecast for the northeastern U.S., a mild hurricane season, especially in the Gulf of Mexico, and — most importantly, in my opinion — demand destruction.
Americans finally stopped driving so much. Turns out we are capable of combining trips after all. We don’t need to make five separate trips when we drive to Wal-Mart, Sam’s Club, Costco, the post office, and the grocery store. Cash-strapped Americans have even discovered that they can buy more than one item at each location, thereby making fewer monthly trips to each destination. The collapse of the housing industry, and the associated inability of Americans to “trade up” to a larger suburban home, has exacerbated the destruction in demand.
I underestimated the impact of high gasoline prices on our behavior. I thought $5 gas would be necessary to produce the type of impact we’re seeing at only $4. Demand destruction is so severe it’s overwhelming events in the former Soviet Union, where chess-master Putin is spoiling U.S. attempts to extract oil by going around Russia. Along the way, Putin has demonstrated exactly how impotent the U.S. has become on the world stage.
Remember when $3 gas was a national outrage? Now it’s become our national goal.
I’m guessing oil and gasoline prices will remain “low” through early November. This country still consumes about a quarter of the world’s oil, largely in the transportation sector. The summer driving season is coming to a close, and it was a bust for most lower- and middle-income Americans because they could hardly afford to take a vacation. But China and India aren’t going away, and the world remains one disaster away from $200 oil (and the associated $6 or $8 gasoline, along with severe disruptions in supply). We might trigger the disaster (by talking smack in the Middle East, for example), or perhaps it will be a “natural” one (e.g., a tropical storm, the intensity of which undoubtedly has been influenced by our consumption of fossil fuels).
All bets are off after the “election.” For starters, the current administration will have no incentive to maintain the “status quo” in support of McCain’s candidacy. And, in the wake of his selection by Diebold, TPTB, or the Supreme Court, either candidate is likely to ratchet up the ongoing expression of increasingly stupid ideas about foreign policy, converting food to fuel, or similarly “bolstering” the “economy.” Any one of these events likely will cause the price of oil to rise, and I doubt only one of them occurs.
But I could be wrong. The ever-deepening, peak oil-induced recession just might keep destroying demand for a year or more. Such an event would stave off the Greatest Depression by a few months, maybe even years (if the economists are lucky … and the capitalists … and if the majority of cultures and species on planet Earth are correspondingly unlucky). Regardless how long we can keep the current game going, we’re squarely within the period of declining resources, and we’re all going to have to make other arrangements in the months and years ahead.
About those arrangements: In anticipation of Marguerite Daisy’s comment about reaching a larger audience, and in response to a friend’s constant harassment along the same lines, I submitted an essay to Orion magazine for consideration in their Making Other Arrangements section. It’s pasted below for your amusement. Call it a self-indulgent tragicomedy in 500 words, the limit imposed by Orion.
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Living in Two Worlds
by Guy R. McPherson
Living in two worlds is the most stressful thing I’ve ever done. During the week, I occupy the fantasy world of American Empire, teaching classes at a major research university and conducting research on fire ecology and conservation biology. On weekends, I strive to learn skills that will serve me and my community well during the coming post-petroleum era.
As an ecologist, I have been thinking and writing about limits to growth for my entire career. After careful study, I have concluded that the expensive energy associated with passing the world oil peak spells the end of civilization. I strongly suspect the next U.S. president will preside over the smoldering ashes of the world economy. As a conservation biologist and compassionate human being, I understand that this is truly good news: Peak oil will save thousands of species and hundreds of cultures from extinction at the hand of western civilization. In addition, peak oil might save our own species from extinction by forcing us, finally, to reduce carbon emissions and therefore stop us from frying the planet beyond the point of human habitation. In case it doesn’t, my post-carbon landing pad is located in the mountainous area deemed by climate-change scientists least likely to be negatively impacted by regional climate change.
When I set aside my academic hat and return to myself as a selfish human animal — the community to which we all belong, as guaranteed by natural selection — I am terrified about the potential for chaos to descend upon my community. I am scared about my inability to grow my own food, secure my own water, and maintain my sense of humor when my bank fails and my car is permanently out of gas. I am scared, in other words, about the unimaginable suffering likely to result from increasingly scarce supplies of cheap oil, the lifeblood of civilization. Daily reminders let me know that life in the ivory tower is damned poor preparation for post-carbon living.
I remain hopeful we will power down with the tranquility of Buddhist monks. But I’ve studied enough anthropology to know the odds are not in our favor. So my post-carbon community is small, rural, and isolated, a far cry from the million-strong city I inhabit during the week. Nearly everybody in the community is aware of the looming threats of peak oil and runaway climate change, and most have been making other arrangements for years. Many have adopted off-the-grid living, and have cashed out of the American monetary system. They grow their food cooperatively, hunt and gather other sources of nutrition, barter for other goods, and work to build durable structures and a durable community.
I’ve no doubt these arrangements are necessary. Will they prove sufficient, for my community and me? Although deep doubt overwhelms my optimistic nature in the darkness of most nights, I believe we must act as if they will be sufficient.
Acting and living “as if” is a powerful approach to improving the human condition. It enables quick identification of the obstacles to improvement. It is the route to social change often espoused by contrarians and social critics (not to mention Buddhists). Rosa Parks sat on the bus “as if” doing so were right. And, of course, it was. The example provides inspiration, hope, and a way forward.