Energy and the Built Environment

Kunstler the Hustler continues his march to the "long emergency" repeating the mantra that the suburbs are held together with subsides, secret zoning and most of all unsustainably low energy prices. I've always thought of hima as the crazy cousin who is fun to have over and listen to his wacky stories every once in a great while but lately he's become shrill and repetitive and increasingly immune to correction.

Rather than Kunstler's prediction of Ottoman Empire in decline, energy prices will collapse back to long term trends not with new capacity but with even a modest drop in demand. Right now the refineries are near capacity but there are massive structural impediments to expanding gapacity. The oil refiners know that the cartel can drop oil to $25 any time they wish so they have to base investment decisions, $10s of billions on that price. THe Us and other 1st world nations impose monster regulations as well. Several OPEC nations are getting into the business "upchain" building refineries themselves and planning to ship finished product instead of crude. Who would go up against that market? Besides when you are a refiner with capacity constrains you can charge more, much more. Regardless of the potential investment returns expanding capacity REDUCES your profitability. Nope, increases in renining capacity are not going to happen beyond the long term trend in demand and based on the economics of $25 oil. We need a demand side solution to this usurious sitituation.

This from a US Army Corps of Engineers report dated Sept 2005 "Domestic production of both oil and natural gas are past their peak and world petroleum production is nearing its peak."

Gee, now where have we heard this before? Oh yes:

* "Hurry, before this wonderful product is depleted from Nature's
laboratory!"--advertisement for "Kier's Rock Oil," 1855

* ". . . the United States [has] enough petroleum to keep its kerosene
lamps burning for only four years . . . "
--Pennsylvania State Geologist Wrigley, 1874

* ". . . although an estimated two-thirds of our reserve is still
in the ground, . . . the peak of [U.S.] production will soon be
passed--possibly within three years."
--David White, Chief Geologist, USGS, 1919

* " . . . it is unsafe to rest in the assurance that plenty of
Petroleum will be found in the future merely because it has been in the
past." --L. Snider and B. Brooks, AAPG Bulletin, 1936

$60 oil has gone on this long because the consuming economies have been so strong that they haven't tipped into recession. That's all. No other reason. None. We aren't "running out of oil" and everyone who says that $60 oil is their evidence of scarcity had damn well better be ready to shout from the rooftops that trillions of barrels will be generated spontaneously should the price revert back to $40 because it is the same argument.