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Global Energy Demand
Most of what we have heard about the availability and price of oil
since the Big Oil Shortage of the 1970's has revolved around production and the
continual free flow of product from beneath the sands of the Middle East to the
neighborhood pumps in the American suburbs and along the most rural stretch of
Inter-state highway. As we stood in long lines and conspired to be able to get
fuel on an even numbered day with an odd-numbered license plate, i.e. two
vehicles between which one could exchange fuel, or illegally by swapping
plates, it always remained that the supply was not in doubt. Only the delivery
was the uncertainty. In those days, fuel was priced in the range of 25 to 30
Cents per gallon and we sucked it down at the rate of 8 to 10 miles per gallon
through carburetors that dumped fuel down the throat of the engine and spewed a
huge portion of the energy content into the air as exhaust.
In those days the US was the biggest consumer of petroleum fuels.
Petroleum was so plentiful that we amply made everything imaginable out of the
long carbon chain molecules. In 1968 Mr. Robinson confided to Dustin Hoffman,
in the Graduate, that the one word to remember is "plastics. "
Since those days, the 800 million painfully rural and subsistence
level Chinese people have become 1,300 million upwardly mobile Chinese people
who seem to have a new found taste for octane. Their growth can be measured in
annual NYC Units1.
India has likewise grown geometrically to over 1,000 million people
and they are in need of liquid fuel too. The per capita fuel consumption of
these two nations is far less than in the US, but they amply make up for that
in their numbers and the growth of their need.
Just as the global capacity for oil production is peaking, or possibly
reaching a plateau, world demand by emerging populations is growing with no
peak or plateau in sight. Barring some manmade culling event, or one
promulgated by natural forces, the Asian population will continue to grow as
long as food production lets it. Then the contest will be over the means of
production of food before that of energy. No hungry nation will be willing to
distill its grains for liquid fuels when the people need to eat it. Therefore
the future of Ethanol2 is probably highly limited.
In the short term, though, before we fully realize the impacts of biofuels on
the food supply, ever increasing tonnage of grains will be diverted from the
food supply into the fuel supply. Although the demand for fuel keeps rising,
eventually the demand will fall when people are too weak and too few in number
from massive starvation.
As we have seen in decades past, once the Genie is out of the bottle,
it is nearly impossible to get him back in to it. China has embarked on the
road to high energy consumption and it is a one way road. Even if they make
policy that personal autos are the least desirable mode of transport and
continue to build gigantic public transport systems, they still will need to
light, heat and cool massive residential complexes that do not yet exist. Four
to five NYC Units of housing must be built every year just to keep up with the
growing population. Those population centers will need food distribution and
waste collection even if nothing else is done on a daily basis. People at rest
still consume calories and product wastes. Beijing today is a smog-choked city
already and China's growth in fuel demand shows no signs of waning. The
government doesn't appear to be interested in curbing the pollution level at
this early stage of their breakout development.
There are those among us that believe that the US has waged war on two
fronts to secure the access to oil reserves and the means of production for an
addicted nation. Even so, we still count ourselves among the nice guys of the
world. Consider the foreign policy of a nation like China when they decide that
it is in their national interests to secure the remaining fuel supplies for
themselves. There are two ways of obtaining a larger portion of a limited
resource: Outbid your competition and use force to secure the monopoly. The US
usually takes the stance that it can outbid the competition, but will work
behind the scenes to create a conducive environment that favors American
interests. Nations like China have been known to roll out the tanks and troops
to quell domestic civil dissent. Unlike the lone man in Tiananmen Square who
stood in the path of a reluctant tank operator, I would not want to be in the
path of China when it goes on the move to secure its national fuel
For the foreseeable time, China still has ample space on which to
expand with its residential zones. Technologies seem capable of providing the
food and caloric requirements of their burgeoning population. What it cannot do
domestically is satisfy its BTU requirement of a modern urban society. We have
seen in our reluctance to develop alternative sources of energy for our
domestic usage what China sees in its lack of ability to provide for its own
energy usage. Neither of us has moved expeditiously to create a permanent
solution for supplying our respective energy needs. Naomi Klein, in her book
"The Shock Doctrine" presents a compelling argument that America, and China
both, have embarked on a course of action where massive disaster is a new
starting point for a refurbished economy and landscape. That concept also
figures in with another book of mine, "It's All Tuna!" wherein Capitalist
principles reduce the true value of everything in the buying and selling of it.
People and their needs are reduced to a profit center that makes wealth people
So here is where the PIC3 enters the
picture. Chinese growth in energy demand is coming from two sectors: the new
population that never existed before and from the new found affluence of the
existing population which is now demanding a larger share of the energy budget.
Next year there will be about 26 million more people in China. And in ten
years, about 250 million more. That number is almost 1 USPE4. International diplomacy is not the strong suit
of the Peoples Republic of China (or for the USA for that matter.)
Afghanistan is strategically situated between China and the Middle
East. Iraq is likewise situated. Only Iran is left sitting in the middle of
that broad territory. With the US military firmly entrenched in those nations
for at least the next decade, China would be loathed to trespass in order to
move troops and materials into the Middle East to soften the business
environment there and possibly settle the Israeli disruption of international
wellbeing. This is not to say that Israel is a troublemaker, but its existence
does lead to the continued world instability due to Muslim distaste for it
being situated in the heart of its proclaimed holy land.
With the US military positioned in Afghanistan and Iraq, China has a
very long march through a half dozen former Republics of the Soviet Union and
around the Caspian Sea to arrive at the border of Israel. Likewise the Red Sea
is well saturated with the US Navy from the Horn of Africa to the Suez Canal.
The only sea-based access for China into the Middle East is around South Africa
and in to the Mediterranean via Gibraltar, a trek of several weeks duration.
China would not like to confront the US on the way to the Middle East but would
have little resistance from Persian or Arabian sovereigns along the way if they
were destined for an overrun of Israel. With the US fortuitously ensconced in
their path, China would not even begin the move.
No one wants a nuclear exchange over this issue, so eggshells and
onion paper will be strewn in the way. Missiles and bombs will not irradiate
Israel nor extricate the Hebrews from that land. Only an overwhelming force of
manpower can drive them out or deport them after successfully occupying every
corner and crossroads. China is the only nation with the singular will to
undertake such an endeavor and the available personnel to muster the millions
of uniformed soldiers to carryout the operation. And whereas the Bush
Administration and the American war machine believed that we would be greeted
as liberators by Iraqi civilians, the Chinese actually would be welcome as
people passing through and leaving only footprints and tire tracks as they
Israel has been most fortunate in its short and tumultuous history.
They have trained their soldiers well and have groomed their relationship with
America so as to be a well equipped military. Their 1967 six day war during
which they took on most of the Arab world showed that although they were
geographically small, they were tenacious fighters. But their successes on the
battlefield are only accomplished in the role of the little brother on the
elementary school playground. No one dares hit him back too hard lest the big
brother pound the crap out of you. In this role, America, emboldens Israel and
give them the gumption to fight all comers.
So even today, as this chapter of the PIC is being drafted, Israel and
Lebanon are clinching once more over the posturing of capturing each other's
soldiers and operatives to hold them as bargaining pawns. Meanwhile Israel
bombs Beirut Airport and embargos their seaport for alleged "Acts of War" and
Lebanon shoots missiles into the Port of Haifa alleging that Israel is
committing "general acts of war." And the price of Crude climbs once again to
record highs. But with America stretched very thinly, troops will not be forth
coming in aid of the Israelis. The US must take care to not enflame any more of
the smoldering Arab world. But as a self-righteous Israel exercises it right to
defend itself in the manner it sees as fit, the remainder of the world sees yet
another round of terrorism mounting and another hit on its economic base as
fuel cost rise again. When I undertook to write this book and the manuscript
was in its first draft, the price of crude was $42, (see the chapter on the
Exxon Valdez in It's All Tuna!) During the second draft revision, it was
hovering at about $120. As another benchmark, when George W. Bush assumed the
Presidency, oil was trading at about $20.
The PIC clearly states that there is nothing in the long run that can
be done to avoid the ultimate collapse, there are many courses of action that
we can take to forestall the complete collapse and live to fight another day.
So even while the oil producing world is disintegrating into political and
religious chaos, the Western World fails to develop alternatives which will be
viable when the lynchpin is pulled and the global economy comes crashing down
Financial planners constantly remind us to diversify our portfolios to
maximize the return while minimizing the overall risks. Even Stephen Hawking,
the eminent physicist, has stated that humankind must migrate from this planet
only, and colonize some other terra firma lest we become extinct in our one
home. We must divide our eggs for two or more baskets. But the point here is
that there is absolute certainty that petroleum is not going to last forever.
Our collapse-causing mistake is in underestimating how soon that day will
Part two of that error is the assumption that the formula is linear.
While pumping capacity may remain a constant, global demand is growing
geometrically. We are still near the minimum point on the parabolic curve of
consumption but the square function will quickly move us to a place on the
curve where growth is far more rapid. While we can reliably predict the
production numbers, and we can project the consumption demand, we cannot
predict when a strategic disruption of distribution will takedown the critical
percentage of the flow that makes the whole economic engine grind to a stop. We
have seen in the first months of 2008 that Nigerian rebels have disrupted
overland oil transport through Nigeria by bombing the pipelines four times.
Each time they do so, the global price ratchets up a few percentage points.
We have seen how a critical relay can collapse the national electrical
grid. We daily see how a simple motor vehicle collision can stop rush hour
traffic dead on the road. We have seen how one man can stop a convoy of tanks
by bravely standing in the path of the first one. One of the biggest
contributors to imminent collapse is hubris. The belief that there is ample
time to solve the problem is a fool's paradise. Likewise, one may be well
justified in retaliating with all available resources, but will the outcome be
more than was desired when the action was undertaken? One can fight fire with
fire, but sometimes the fire turns into a conflagration beyond the control of
the planners. This is the essence of the PIC.
The Bush Administration undertook to wage war in two tinderbox nations
at a time when the entire region was itching for a reason to call to arms. As
Karl Marx so clearly identified, the seeds of revolution are already in the
people, all we need to do is ignite it. George Bush has lit the fire that has
gotten out of hand and consumes a large portion of the Middle East and its
environs. Newt Gringrich has connected the dots, as we are like to say in this
post-911 world, and declared that we are now fighting World War III. Even
though it is presently only his hope that we are fighting such a noble cause,
it will not take much of an Easterly Wind to fan smoldering emotions into an
all consuming flame. Economist, Milton Friedman, would be proud of this
Republican Administration for its willingness to touch off the flames that
eventually will burn out leaving fertile ground for the private-enterprise
rebuilding of a major part of the world. The Corporati grin at the toppling of
a wide swath of civilization like the tablets in the Domino Model where the
pieces are well aligned and primed for the fall. Trouble arises when they get
the pieces falling and they do not stop until far too many of them are down.
Then it takes far too long to reset the field.
If everyone would mind their own business and sit out the worst of it,
we could avoid the larger destruction that will follow if everyone gets into
the act. It will be difficult for large powers to withhold their militaries
when they see the possible loss of access to resources, such as China with
Middle-Eastern Oil. Or the United State for the same Middle-eastern oil.
The idea of securing a piece of territory or political control over
resources can be seen in the vying chronicles of the motives of the Soviets and
the Allies during WWII. Russian high school level textbooks asserted to Russian
children that "the USA delayed opening a second front against Germany until it
was certain that the Russian Army would be victorious." We, it seems, only
wanted to preserve a piece of Europe for ourselves. That sentiment is vastly
similar to what we said about them, even though they were first attacked and
invaded by Nazi divisions before the tide turned and Germany fell to Allied
forces. Truth be told, each faction exacted its toll on the resources of
Germany and together defeated them.
Israel's fight, although probably justified, could also lead to far
wider fighting, of which they will be a minor player. Just as with the US and
Iran and North Korea, we must be very careful to not bring all out warfare to
those countries, even though we could. It would be very easy to lob a few
bunker-busters into Pyongyang, while the world is watching Lebanon and the rest
of the world duke it out a hemisphere away. It would be just one for "good
measure." The US would not even have to follow through there. Just hit it and
leave. Other nations already have such a longing with their long standing
The warring factions in Iraq all seek to control a larger portion of
the geology it order to have a greater influence in the affairs of the country.
Shia and Sunni and Kurd all seek to have access to a greater portion of the
spoils. For them it is a war about oil too. No faction wants to be marginalized
when it come to the division of revenues from the sale of petroleum. If it was
solely for the establishment of freedom of religious practice, they could all
agree to a partitioning of the nation into three geographic provinces where
each would have sole governance.
But it is about oil, and there are huge thirsty nations all wanting to
make sure that a friendly faction controls the fields and assures the delivery
1 New York City units or equivalents. Each NYC Unit equals 7 Million
2 At least as
produced from edible grains.
3 Principle of Imminent Collapse. States that everything in our world
(the Universe) is on the edge of collapse and all it takes is a nudge to make
4 United States Population
Equivalent = 292 Million or about 300 million in rounder numbers
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Posted: 2008 16:21
Posted: 2008 16:21
Posted: 2008 16:21
Posted: 2008 16:21