Yesterday a nice article about Morgan’s vision for Cycle 9 was published in UNC’s Faculty/Staff newsletter. It discussed some of the motivations behind why we got Cycle 9 going. The one thing that was perhaps a bit inaccurate was its focus on climate change as a reason that I founded Cycle 9. While I think that anthropogenic climate change is likely real and likely a problem that we as a society will have to face, it was a much more immediate issue that caused me to co-found Cycle9: Peak Oil. Peak oil theory says that at some point the world will have used up half of all its oil, and at that time, the remaining half will be harder to access and more expensive. There is now a consensus that the world is already past peak (estimates vary, some say 2005, some 2008, but it is clear we’ve been on a bumpy plateau).
What does this mean?
– That soon (6 months to 3 years), the accelerating reduction in oil supplies will catch up with the reduction in oil demand.
– When that happens, prices are likely to skyrocket
– Countries are likely to start competing seriously over oil. Imagine the US competing with China for scarcer oil. Not a good scenario for us.
– The problem is actually made worse by the current economy, because many projects for oil development are being shelved as uneconomical when oil is < $50 per barrel. That means the decline will be even faster in the next few years.
The real problem I see is that the current, low gas prices have lulled people into a false sense of security. I have run into so many people that seem to think these prices are here to stay, “until the economy recovers.” This shows some fundamental misunderstandings about the nature of our oil supply, and the reasons why oil is presently “sort of” cheap. Note that if oil were truly cheap, we’d be back at $10 oil – but we aren’t there, we’re at $50 – a value that just 6 years ago would have been seen as quite high. But I digress – it only takes a small oversupply of a product to cause prices to fall. And so what if we are 1-2 million barrels per day over supplied? If production is declining at only 3% per year (most estimates are closer to 6% once we fall off the plateau), that little bit of oversupply will be eaten up in less than a year. The only way the oversupply can continue is if the economy continues to crash at a rate that is comparable to the reduction in oil supply. That would be an unprecedented rate of decline for any modern economy.
The other thing many people don’t seem to realize about oil prices is that oil on the international market is priced in dollars. For the past 6 months, we’ve benefited because the dollar has strengthened, due to lots of folks buying treasury bills as a safe investment. But just in the past week or so, there are signs that things are headed the other way. Among other things, larger than predicted federal budget deficits, along with the Federal Reserve’s recent announcement that it is monetizing unprecedented levels of debt (> 1$Trillion worth) are things that will be very likely to weaken the dollar. As the dollar weakens, oil prices will rise. And there are grumblings internationally about getting away from the dollar altogether. If that happens, the dollar cost of oil is likely to be much higher.
Fortunately, there seem to be some folks who realize this – we are still selling bikes and electric motor kits to folks who realize that we have to change our ways of everyday transportation. But, I’m afraid there are many people who don’t realize that there is this tsunami headed our way, and that the longer that gas prices stay low, the worse it will be when it hits. I know many people are optimists, who think some techno-fix will solve the problem. But, given that we are already past the peak in world oil, the promised techno-fixes aren’t deployed in time. Some people have talked about the potential for electric cars to solve the problem. Electric cars are great, and there are quite a few people doing their own conversions now. But even if 10,000’s of people do that, it is a miniscule drop in the bucket.
I don’t want to sound like a pessimist – I’m not. I’m a realist, who realizes that some difficult times are headed our way, but I think we can change and adapt. However, that will require people changing their thinking. And it has become clear to me that, while some people are already changing their thinking, most are not. Most are “waiting for something to happen.” That concerns me, because imagine waiting and waiting, then suddenly one day you can’t buy gas for any price, because it is rationed for essential uses like farming or trucking? If things get to that point, it is too late to easily do something proactive about it (like moving closer to work, getting a bike, etc)
People often don’t like hard truths like that. It must be some inbuilt defense mechanism, to avoid the obvious when it is staring us in the face. It was similar with the financial crash. Two years ago, after doing a lot of reading about our economy and the housing bubble, I realized we were headed for a big economic crash. I warned a lot of people I know about it, trying to convince them to get their retirement savings out of stocks and into something safer. But most people ignored the warnings. I have had several people come back to me and say “I wish I had listened to you.” I don’t feel gleeful at all about that, it is very sad that friends and relatives have lost retirement savings in this debacle.
But the thing is, if (or I should say, when) oil supplies start to seriously crash, the damage could be much worse to the unprepared.
And that’s why I co-founded Cycle 9. To show people that there are alternatives, that exist right now, that can drastically reduce oil consumption for day-to-day trips. We don’t have to wait for the Holy Grail to arrive. But we do have to change our way of thinking to realize that the solutions were at hand all along.