Dijaya Ever Think?

Ya know, these here United States are one big crazy mixed up family. Think about it. And, traditionally, this is part of our charm (not to mention our successes). The old melting pot it real - even if it isn't all evenly stirred and not all the bits and pieces melt at the same temperature.

But now days, we are a country divided. Some of this seems like cultural payback for the civil war. Many of the same interests (the South, Racism and Classism, Rights versus Responsibilities), that led to that conflict, are in the drivers seat today. However, painting a bigger picture might ignore a simpler explanation: the simple dialectic swings of power between different interests in society over time.

One parallel that I have too little expertise to prove, seems nonetheless interesting to me. In grammar school, we were taught that large southern land-holders tended to work their land until it was depleted and them move on to new ground. Later came subsistence farmers who did much the same, except that they couldn't move on.

Somewhere (my impression is that it started in the mid-Atlantic states and stretched North), practices shifted. Land was treated as being more precious and was more likely to enjoy simple programs like crop-rotation and laying fallow. Certainly in New England, with the need to remove trees and stones before planting, the cost to move to new fertile soil would be high. There seems also, in puritan religion, more of an emphasis on being good stewards of God's bounties than in other religions.

Today, we see the administration moving to leverage the disaster of Katrina into an excuse to drill the ANWAR in Northern Alaska. This has been a goal of these folks since they took office - and like invading Iraq, it's a dumb issue looking for emotional cover to become policy. Katrina may be that cover, so its important to consider conservation and conservatism. These terms do not, by the way, have to be mutually exclusive regardless of the wingnuts.

ANWAR supposedly has enough oil to supply all of the needs in the US for 6 months. That is at once a lot and not very much oil. We consume a lot of oil in 6 months, but if it only lasts 6 months - where does that get us? The later is not a rhetorical question, rather it should be the heart of the conversation.

TIME OUT: I believe ANWAR should never be drilled in the interest of protecting wildlife and biodiversity - but that is not what this rant is about.

TIME IN: We have a short-term and long-term problems with oil prices and supplies. BTW: oil is a good example of the failure of market theory to explain market behavior. When rising prices don't cause production to expand to capacity (various oil crises we faced in the '70s and '80), or when production expands to prevent or counteract price increases - the market is operating on drivers other than achieving supply/demand parity.

Anyhow, short-term we see historically high gas prices, prices which have negative consequences on the overall economy as people are forced to reapportion their spending to cover the rising price of fuel. Consequently, these people aren't spending as much in other sectors of the economy, and people dependent on those other sectors are being harmed economically. Meanwhile, the oil producers may see higher profits, but the benefits of these profits aren't apparently trickling down into the economy in ways that offset the harm done to the other sectors.

Notice, none of this spoke of inflation, deflation, recession, or even my old favorite: stagflation. People aren't going to buy as many car, homes, boats, etc - and folks working in those industries will be hurt. Over time, the economy may sort itself out - or not. But there is a real short-term problem for many people in this country.

The Saudi's insist that overall crude supplies are fine, and policies have been implemented to facilitation the importation of more finished petroleum products to offset the lost production (extraction and refining) capacity from the Gulf. But overall, prices of gasoline (at least here in Chicago) are hovering around $3/gal depending on the grade.

We also have a long term problem, one that our policy makers have shied away from. That is the Oil Peak: soon, the global oil capacity will begin to go down every month and every year. As this happens, we must expect constantly rising prices. In fact, prices will probably rise faster than the capacity goes down - at least in countries such as ours. In less developed countries, the need for oil is much diminished. The average person can't afford and doesn't use oil in any significant manner.

In the United States, oil demand is relatively inelastic. We don't have good methods for reducing our use of oil. Much of our manufacturing has moved offshore - so efficiency improvements in manufacturing can't contribute much. We live in a travel society. Food (think of how much food nationally comes from California) and other products (what can you buy at a Wal-mart that isn't made in China?) that we acquire and use daily are typically not produced locally.

Moreover, they aren't purchased locally. Take for example the grocery store. It used to be, at least in a cities, that there was a grocery story on every other corner. Not anymore. The suburban grocery store, complete with large parking lots, long ago invaded the city and largely eliminated the corner store. The parking lots are important because the larger store needs to be supported by a broader geographic customer base - that is we travel to shop. In order to save money, many of us now go to a big-box (K-mart, Costco, etc) store for groceries. This often means driving even further than to the traditional suburban grocery store.

So, goods travel long distances to stores, then we travel long distances to stores, and eventually those goods make it to our homes. Without oil, transportation breaks down. So, we can't just stop the travel (hence using gas) without interfering with people eating - in other words our demand is inelastic.

When demand is inelastic and supplies drop, the price curve moves up an accelerating curve. Ouch!!!

It would seem that under these circumstances, a prudent national policy would be to acquire off-shore (that is belonging to other nations) oil now while it is relatively cheap, and use our own oil later when prices are high and access to production is contentious. If you're wondering about that last bit, consider this: when supplies become limited, and not all demand can be met, do you think other nations will sit by idly and let us buy and consume all the world oil? Not likely. And with the growth of other powers in the world - we can't rely on our military to protect our interests.

This is not a condemnation of our military. But the world is a complicated place now that it is global. We have state and non-state actors, with the later being particularly unpredictable. We have nuclear and bio-weapon technology spread around the world among friends and foes alike. We have a China with a population 3X our size, which has largely taken over the world's manufacturing and which is quickly coming up to speed to become the worlds greatest technical innovator. Against this, we can assume that sooner or later we will be out-matched in quality and quantity of weapons.

In the future, the greatest power a nation may be able to bring to bear is the ability to help itself and its allies eliminate their dependence on oil.

Going back to ANWAR, it will not solve our short-term problem. Assume that it will take at least several years to bring it online with significant volume - and by then we're no longer dealing with a short-term problem. But, what role can it serve as a strategic reserve? If we face a long-term problem, wouldn't it be nice to have this reserve available should we find it impractical to any longer import overseas oil? Spend that oil now, and we lose this reserve. Hold this oil back, and we have an ace up our sleeve.

Remember, however, that this reserve can only supply America's energy needs for six months. And, that's at current rates of consumption. Consumption is currently on a rising curve. So, at a future date, we can expect ANWAR to provide us with less than a six month cushion.

That brings us back to our larger problem. We cannot continue to use gas, a rapidly dwindling resource, without consideration for how we replace it in the future. Our first steps must be conservation. We cannot continue to ignore the fuel economy of our cars and trucks. We don't need 'hemi's. We don't need SUVs. We need to conserve. We need to stimulate passenger rail travel. We need to find ways for both ourselves and our goods to travel less.

Just the efforts suggested in the prior paragraph will be very disruptive to our economy and way of living. It is reasonable to suppose that our overall standard of living may go down somewhat. Over the last two decades, we have seen a continued erosion of concern for the poor (working or otherwise). We have seen an increasing concentration of money and power amount a small elite in our country. It seems likely, if overall standards go down, that we will have to reverse these trends. We cannot expect to maintain stability in this country with a large and poorly served underclass. Do we as a people have the vision to see this problem and make this level of change?

What happens after conservation? Well, the oil won't last forever. Nor will our other natural resources. While some are renewable, it is possible to consume them beyond their ability to recover. And other resources are like oil - fixed in amount. And then there's the simple matter of land, of which we have less today because we've poisoned what otherwise was good usable land.

So, we need to employ two strategies: a) find energy replacements for oil; b) reduce demand to sustainable levels for all forms of natural resources. Take a simple thing like water. Water has always been a contentious issue in the West. Over the years, rights have been established (not always fairly), and those with rights use it, everyone else does without. Water is getting to be a bigger issue - much of the country has experience extended drought. We don't know if this is just a statistical anomaly in the weather, or part of the larger global warming we've created. There are clear signals that it may be the later. But, water could become the next oil.

If we can't any longer rely on long distance shipping of most of our food, the Central Valley of California may no longer need so much water, and other areas may need more. But, can this diversion occur? Will water be regarded as property, and subject to property rights. Moreover, will we continue to consider corporations as having more and stronger rights than individuals? If so, the owners of the water may push for unrealistic compensation that further undermines our economy.

But, that's not all. People need a certain amount of water each day. To make sure that we have that available, we need to limit the number of people in our country. Can we? Can we limit immigration? Can we limit procreation? It's hard to say. But, these are some of the questions that arise in a discussion of limited water resources in the face of rising demand.

Conservation & stewardship of our country and our resources will be critical to our survival. Not just as a nation, but as a people. This is the untold story of our time. Politicians, businesses, and religious leaders all tell the people that "...You can have it all..." It's an easy sale, that's what people want to hear. The reality is that we can't have it all. The reality is that no one has it all, and few people even begin to come close. We're so busy chasing dreams and fictions, that we can't even look after our own self interests. Now that's a scary thought.