JcConsulting

Good Old Days

Do you remember the good old days — maybe three years or so ago?
Back then, in that halcyon past of 2008, you could worry about the future “just” in terms of Peak Oil.
In the spring and summer of 2008, oil prices raced well over $100 per barrel, toward an eventual high of $147. The rising price for oil fit the then-prevailing Peak Oil model. World crude oil output was fairly flat, due to geological and technical issues. Oil demand was rising, especially in the emerging markets — starting with China, but also in many other up-and-coming nations.
Looking ahead, in 2008, it was possible to forecast declining daily world crude oil output. It looked like market forces would cause oil prices to rise. Energy-based industries would suffer big financial losses (airlines come to mind, but there are many others).
Indeed, just a few years ago, it was safe to say that the world would go to hell in a hand basket, mainly due to “not enough oil.” But you can’t say that any more.
Don’t get me wrong. I think that the world is still going to hell in a hand basket, but the reasons have expanded beyond Peak Oil issues. I’ll explain briefly in this article.
First, let’s back up. After the oil price run-up of mid-2008, there was a price crash in late 2008 and 2009. Oil traded as low as $33 per barrel in early 2009. Oil prices recovered over the next 18 months or so, to the $80– 90 range in 2010. Oil prices were up well over $100 in the spring of 2011. Prices today sit right around $100.
So oil is near or over $100. We may see a correction along the way, but I’m still looking for much higher oil prices ahead. A key driver for oil prices is that the world will experience generally declining overall crude oil output in the future. Just on the oil issue, the fact is that the world is in trouble.
If you want more detail on this last point, here’s a core piece of evidence. Less and less of the world’s daily output of liquid hydrocarbon is raw crude oil. More and more of the world’s daily “oil” supply comes from natural gas liquids (NGLs), meaning hydrocarbon fractions — heavier than methane — that come out of natural gas production.
Without getting too deep into the chemistry of hydrocarbons, the NGL increase is a sure sign that traditional supplies of crude oil are depleting, despite many new discoveries that are still coming on line. The worrisome thing is that most NGLs come from blowing down gas caps after the original oil field depletes.
So looking ahead, oil supply is a problem. But we also have to face the fact that the world has other critical resource-based problems. It’s not just oil, let alone Peak Oil.
We’re looking ahead to a future of multiple problems, crises and conflicts triggered by shrinking access to water, food and many other kinds of minerals.
Our Years of Living Dangerously
Let’s focus on a different form of global disruption that we’ve seen lately. It relates to the price and availability of food. We saw food riots in Pakistan last year, after flooding wiped out vast swaths of agricultural land. Food prices skyrocketed, and that’s IF there was even food to sell. From what I heard, in many parts of Pakistan, life became a nightmare.
Then in the first months of 2011, we saw food riots in Tunisia and Egypt, as well as many other nations throughout the Middle East. The riots began in the same manner as in Pakistan, after a fashion, with food shortages and price increases.
These riots reflect the abject poverty in which people live in many parts of the world. That is, hundreds of millions of people truly hang on by a thread, literally at the edge of biological existence. In regions where many households have an income of as little as $2.00 per day, the change in price for wheat or vegetables by just a few pennies is a matter of life and death.
The Tunisian and Egyptian food riots quickly morphed into government-changing revolutions. There were, of course, other political issues and social factions waiting in the wings. It’s an ancient aspect of human governance that there are always people out there working to toss out the old rulers and install new faces at the top. But in Tunisia and Egypt, for sure, the spark of revolution began at the food market.
Meanwhile, with the fuse to the powder keg now lit, we’re seeing revolt and tumult across much of the rest of the Middle East. There’s a vast swath of uprising, from Syria to Oman, from Morocco and Libya to far-distant Pakistan.
Thus, half way into 2011, it seems like we’ve got our proverbial “year of living dangerously.” And it began with the rising price for food. Thing is, though, we better get used to reading the current headlines. We could very well be living in an era when every year — 2012, 2013, 2014 and beyond —will see ever continuing lower food output due to greatly increased farm costs for production because of fuel. It is now an emergency.
China is quietly purchasing farmland all over the world and food processing plants. One of these plants is rumored to be a possible source of the European e-coli outbreak.
It is now past time to be developing the skills to grow and can, your own food, process meat and eggs. Hint chickens make eggs and meat. If you do not have the resources, you need to begin to develop friends and associates to form small groups or co-op to provide these essential life elements.
I don’t know about you, but if your milk consumption is no more than mine, one milk cow will provide for 3-4 families. Probably have to flip a coin for who keeps it, and you can divide the fertilizer for the garden. Remember 6 months cash for expenses (min), water and food for 2 months would be great.
Of course I have heard F.E.M.A has built large camps around the U.S. just to help out poor folks is a Disaster, rooms are very large with Barbed wire around the outside.

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