Aaron Wissner (valuesystem) wrote,

Peak Oil, Inflation & the Impacts on Families

Below is a local newspaper article about me, Aaron Wissner. This is a strong article because of its on-target nature. It quickly summarizes, and then greatly expands on the earlier Wall Street Journal story. It is also an outstanding piece on which to write some good explaination on the concepts of peak oil and shortage.
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Wall Street Journal interviews Wayland teacher about ‘peak oil’

The Allegan County News
Wednesday, February 6, 2008
By Ryan Lewis

WAYLAND — Wayland Union Middle School teacher Aaron Wissner wants to get the word out that energy is about to get very expensive — a Wall Street Journal article would do nicely.

That’s exactly what he got recently. The business publication sent reporter Neil King Jr. out to Wissner’s Middleville home for three days of interviews.

King arrived on Saturday, Jan. 12, to meet Wissner at a local pizza restaurant with about a dozen others concerned with what they view as a looming oil shortage.

The shorthand term for this is “peak oil.” Wissner can point to research online that explains why he believes oil production has reached its peak; supply will now begin to decline. With demand for that oil staying the same or increasing over time, prices for that decreasing supply of oil will skyrocket.

“Ten years ago, oil was $10 per barrel,” Wissner said. “World oil production is now about 84.5 million barrels a day. We’ve been stuck at that for over three years. Now a barrel of oil is up over $90—it even got to $100 (briefly).

“There are enough oil geologists saying that it’s safe to say that we might have reached our peak production.”

Those high oil prices trickle down to many aspects of modern life. This is something his students at Wayland Union Middle School are already learning.

On Day 3 of his Wall Street Journal interview, Wissner brought King into his first couple of classes.

“I did a lesson on peak oil,” Wissner said. “I interviewed the kids to demonstrate how easy it was to pick up the concept.”

He asked his students what effect the high oil prices will have on farmers in Allegan County.

“I remember one student who said that his father and grandfather were both farmers,” Wissner said. “Fuel prices were cutting into their earnings.”

That, coupled with poor rainfall, put the family into the red.

“He said that if things continue, the changes would force his family out of business. It’s going to have a real impact on the farmers,” Wissner said.

Wissner knows from his math background and his reading about economics that high fuel prices drive a lot of other costs up — everything from food to travel will take hits. He also does not believe advances in technology alone will be able to soften the blow of these sharp price increases.

He may not be able to prevent an oil shortage, but he has committed to help others prepare for the future.

He’s founded a non-profit group called Local Future.

According to the Web site, “Members of Local Future…take the initiative to increase independence for themselves and their communities. Their shared value system of truth, compassion, understanding, sustainability, renewal and community guides their actions toward a vision of a prosperous local future.”

Wissner hopes to replicate similar groups in the Wayland, Grand Rapids and Caledonia areas.

Its next event will be Saturday, Feb. 9, at 6:30 p.m. at the Thornapple Township EMS Building, 128 High St. in Middleville, for one showing of the documentary movie “The End of Suburbia: Oil Depletion and the Collapse of the American Dream.”

It is also organizing “The International Conference on Peak Oil and Climate Change: Paths to Sustainability” at Calvin College for May 30 to June 1.

To find out more about Local Future, visit www.localfuture.org.

The Wall Street Journal article was printed in the Jan. 26 issue and may be viewed at that newspaper’s online archives.

...

Original Article at The Allegan County News
As Republished at The Energy Bulletin



Comments by Aaron Wissner

This article is extremely well written by local reporter Ryan Lewis. He gets to the point quickly, and then brings it down to the local level. This is the best example of an accurate and clear follow up article to the Wall Street Journal peak oil story. Lewis does a great job of providing information about the upcoming events. The best part may be the response from the 8th grader whose father and grandfather are farmers, and how Lewis tied that into a general concept of long-term inflation.

As with any story, no matter how well written, there is always room for clarification. I’ve found that writing the clarifications has been useful; both for my own thinking process, and for readers, because it fills in gaps, and clears up uncertainties.

…energy is about to get very expensive …” – The trick here is that it is not 100% certain that oil prices will be higher (on average) this year over last year. The reason is because a global downturn in the economy could cause a reduction in demand for oil such that the demand falls faster than the supply. In this case, the price of oil may “retreat”, perhaps even back into the $50 dollar range. I’m not sure how likely this scenario is, and recession is not a good thing for most people. Plus, even with a recession, the oil exporting countries, and OPEC, could restrict their exports to match the decline in demand, in order to maintain the current price level. It is a complex situation, and there are certainly more factors that come into play (oil futures players, geopolitics, weather & climate, etc).

If there is not a recession, the price will go up, because demand will continue to increase, and without a commensurate increase in supply, that is the only possibility in our global market. Global oil supply has not increased from an average of 84.5 million barrels per day for nearly four years. What can be predicted, with a fair amount of certainty, is the long term trend, which is that oil will get more expensive, decade after decade, simply because the supply will be decreasing year after year, while our demand for oil continues to remain high. (See this one minute video for the economics behind this.)

…looming oil shortage.” – Here is a similar concept, the idea of “shortage”. In the global marketplace, there is never an actual shortage, so long as the supply lines are open, weather is good, and everything is working as it should be. Hurricane Katrina showed that we could have shortages due to an interruption in the supply line, even when the actual production of oil is fine. Perhaps the word shortage should be reserved for such events, but it is unlikely that most people will restrict the term to that single use.

In our market place, even if oil extraction dropped by 50% over the next decade, we might not have shortage. There would certainly be higher prices and probably recessions during those ten years, but it would be likely that everyone that could afford oil would get it. This could seem like a shortage to those who could no longer afford to fill up their gas tank, or buy imported food, so from a certain point of view, it would be a shortage. It could be thought of as a shortage of $50 oil, or $100 oil, or $2 gasoline, or $3 gasoline. In peak oil articles, this is referred to as "The End of Cheap Oil". What would still be there would be the $1,000 a barrel oil and the $25 a gallon gasoline. (These are made up numbers, not a prediction, see below.) So “shortage” is an interesting concept, but one which takes a bit of thinking to really understand.

…prices… will skyrocket.” – This depends on the state of the global economy. If demand decreases faster than supply, then prices may go down, or at least level off. Decreasing demand implies recession. If global demand remains the same, or continues to grow, then yes, the price trend will be increasing.

Will prices “skyrocket”? I think the oil shocks of the 70’s give us an idea of what sort of impacts might occur… great political pressure to do something, possible rationing at the pump, a high inflation rate, loss of jobs and growing unemployment, "back to the land" movements, etc. There is probably a limit, during any given year, of the highest price that an economy can bare for fuel (given a functioning market economy). I don’t think the USA, for example, could ever triple the gasoline price in one year, the impacts to the economy would be so great, before that level were ever reached, and so much demand would be “destroyed”, that the price simply could not go that high. Of course, this is talking constant dollars. With a high inflation rate, anything could happen. We’ve seen in other countries that have fallen into the hyperinflationary trap, and we are not immune.

Overall, this story by Ryan Lewis is right on target. It exposes the point of the matter, helps to “raise the alarm”, and has the potential of getting people and families thinking about what the future holds. If we had more top quality local peak oil reports like this one, we would be making good progress towards educating the public, and preparing for an honest change toward real local sustainable solutions.



Additional Reading

For additional reading on peak oil, the Wall Street Journal article, and my thoughts and actions on the issues of sustainability, I invite you to visit my full online journal at:

valuesystem.livejournal.com

Thank you for reading!
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