by Chip Haynes
Clearwater, Florida
February, 2011--So Uncle Chippie and The Lovely JoAnn were off to dinner the other night with their neighbors, and on the drive out, the gentleman proceeded to inform me that the current sort of spikette in oil and gas prices was the result of, and I quote here, "Wall Street Speculators". I mentioned the on-going constrained supply problems in the global oil market, but he would have none of it. It was them dad-blamed Wall Street Speculators which, contrary to anything Dave Barry might tell you, really is a dumb name for a rock band.
The truth of the matter is, of course, always a bit more complicated, and since the gentleman was paying for dinner, I did not press the point, nor did I offer that, of the two of us, I was the guy that wrote a book on the subject. (A free meal is a free meal, after all.) Still, he was sort of right, in an odd way: The "price of oil" that you see listed every day is, in fact, the contract price being bid (and accepted) at that moment on a 1000 barrel minimum delivery of crude oil next month. (Except for the last week of the month, when you're bidding on a delivery for the month after next month.) So yes, these bids are speculations. That is, the buyers bid what they bid because they expect the non-contract/spot price for oil next month to be higher than their bid. (If it ain't, they lose money 'cause they over bid.) In that regard, they are bidding low. No one runs up the price of anything any more than they have to. Remember: The price of oil is set by the buyers, not the sellers. And the dinner was very nice, thank you for asking.
So are we seeing a sort of rerun of the winter of 2007/08 when oil first hit $100 a barrel early that January? Oil is holding up over $90 right now (I'm writing this on December 27th, 2010), and this should be the off season for oil demand. In the summer of 2008, oil hit a record $145.11 a barrel, and gas in America topped $4.00 a gallon. (Still dirt cheap by European standards.) Will Americans see $4 gas again this summer? Some folks are predicting $5 gas in 2012, but that's too far away. I want to see what happens this spring, as the northern hemisphere warms back up and people figure out where their cars got buried in the snow drifts this week. Let's see what happens to the price of oil as we creep up on Memorial Day weekend the end of May--the traditional start of the North American Driving Season (yeah, "N.A.D.S.") that runs from Memorial Day through Labor Day weekend in early September.
Now, Americans have notoriously short memories (I say that in case you forgot), and we cry and whine and buy small cars the moment gas prices go up--and then go nuts buying SUVs the moment the stuff drops back down. We're also late to every war, but don't let's go there right now. Focus! Oil. Gas. Right now, gas is topping $3 a gallon, and every time it does, I notice people start to drive mean. Not more conservatively or cautiously, to save fuel, but quite the opposite: Drivers get aggressive and scary. As viewed from the seat of my bicycle, this is not a good thing. I am not looking forward to whatever happens next, even when viewed from the relative safety of the sidewalk, behind a tree.
At some point, maybe this year, we are going to have to publicly admit that we have a problem. We, not just us crazy, madcap Americans, but everyone on The Big Blue Marble, are going to have to come to terms with peak oil and all that it means to our lives. That means higher gas prices, higher food prices and a whole lot of higher everything. At some point, in the years ahead, those high prices are going to transform into scarcity, and things, options, will go away. The airline industry is at the very top of that list. High gas prices are annoying. No food is worse. Worse than no heat, even. So don't complain about the price of gas. Things could be worse--and will be, eventually.
So what are you going to do about it? How are you going to adapt to higher prices and the possibility of scarcity in the years ahead? Keeping in mind that we might have a bad year this year and a better year next, but the overall trend will still be towards sucky-poo in the long run. So what are you going to do? Here's the short list:
- Get out of debt. Totally. No matter what. Here's why: After holding a nice, comfortable government job for over 20 years, I got laid off last year. I had to make sure I got the balance of the home improvement loan paid off post-haste to insure that I still had a home. At this point, I owe no one anything. Make it so.
- How oil-proof is your job? Be honest. Very few are. What happens when that well runs dry? Have a back-up plan. Know what you're going to do if you have to do it. If you live far north (like, north of I-10), you might want to consider moving someplace further south, where winter won't actually kill you. Jimmy Buffett says everyone has a cousin in Miami. You might want to give them a call. I'm just saying. South, and on the coast, is going to beat the snot out of north and in the middle when push comes to shove. Don't say you weren't warned. And you'll love it here. Really.
- If you do not have a bicycle--a practical bicycle--buy one. Right now. (OK, next weekend.) Get something you can haul groceries with. Get used to riding it around town. Be comfortable on it. Be the cyclist you should have been all along--that you will be soon anyway. As I've been known to say: "You don't have to go fast and you don't have to go far--you just have to go." Get yourself a decent bicycle from a real bicycle shop. You'll be glad you did.
- Understand that your life is going to change. Get accustomed to getting by with less. Of everything. Figure it out. Oil powers our lives, every aspect of our lives. As it gets expensive, so does everything else. As it goes away, so does everything else. Read "60 Days Next Year". There ya go. That's how it could start. That quick, that weird. The more I read in the news, the more I'm sure that's mighty close to how it's going to go. Read everything you can about peak oil--even all the nutjobs and wackos. (And yeah, I do wonder if I should lump myself in there with them.) Read. Be informed. This year (2011) is shaping up to be a really wild ride. Say, you don't suppose the Mayans were off by one, do you?
Chip Haynes is the author of The Practical Cyclist (New Society Publishers, 2009), Wearing Smaller Shoes, living light on the big blue marble (New Society Publishers, 2009) and Peak of the Devil, 100 questions and answers about peak oil (Satya House Publications, 2010)
