the wrong sort of oil

Iran has just imposed petrol rationing, which has led to riots in one of the world's largest oil-producing nations. There's a Peak Oil story behind this somewhere. Although Iran produces enormous qualtities of oil it does not refine it so it exports crude and imports petrol. Anyone familiar with Peak Oil is aware that new oil refineries are as rare as hen's teeth, and the reason is obvious. It's not economic to build new capacity for a resource that is rapidly depleting. There are better ways of spending money! The oil-producers realise that shortages in the market will simply increase the price they get - why waste billions building refineries that will never recoup their costs? Keep supply tight and the price will rise. The demand for petrol is very inelastic like most 'distress' purchases, consumers will find the extra - even if it cuts other spending in the wider economy.

Meanwhile Iran suffers severe unrest because it's not prepared to let price determine demand. It could be argued that rationing is actually fairer, even if the Iranian people think otherwise! Ironically it is perhaps the Iranians who are the first major victims of Peak Oil.

Expect rationing in the UK within 3 to 5 years.

narrow gauge pointer to future development

We're all going to need many many more railways in the future, but what form will they take? As the roads vanish under weeds we'll still need to move around, perhaps not as much as we do now, but goods will need to come into and out of towns, some people will still work some distance from their homes and hopefully there'll still be enough surplus income for most of us to continue to have holidays.

The rail network will no doubt expand back up to its pre-Beeching levels, but that will still leave large swathes of the country rail-less, because rail development was actually cut short in the early years of the twentieth century by the economic oddity of cheap oil. The most likely solution will be community light railways, many of which will probably be more successful (and certainly cheaper to construct and run) if of narrow gauge.

Switzerland has a superb network of (mainly) metre-gauge routes that reach the places the standard gauge lines can't. Very few Swiss lines have closed, and those that have were mainly for misguided political reasons taken before Peak Oil was a major issue. In fact in the past few years several new lines have been opened, often at huge expense. The Swiss are some considerable way further along the sustainable development curve than us!

So, if you're looking for a Peak-Oil-Proof investment why not look at railway construction companies or rolling-stock manufacturers. I particularly fancy Parry People Movers, not yet a quoted plc but likely to become one as demand for their product soars. Keep checking the business press for developments, as the best time to get your money into these areas is right at the start!

madness

Unfortunately we had to drive to Hampshire on business today. Part of the route is along the A34 and we were amazed by the number of car transporters we passed. What on earth are we thinking of? There is no reason at all for these to block our roads, waste oil and add to climate change. These could all have been carried on ONE train as they were obviously heading towards Southampton, probably for export. And they were all 4x4s!

Is anyone actually listening to the messages the Earth's now telling us? Why are bulk movements like this still being handled on roads,
and what idiots are buying them?

And why tie up valuable human resources in all these lorries? Couldn't these drivers be far better employed on the railways or in production?

It's 2007. Sometimes I have to pinch myself, we seem to be living in the distant past.

EU jokers

EU admits having no plan for 'peak oil' crisis 9th Feb 2006
Commission shrugs off looming oil shortage as 'just a theory'

The EU's energy commissioner Andris Piebalgs has admitted he has no plan to deal with rapidly rising oil and gas prices in the face of shrinking supply and booming demand.

In a response to a parliamentary question put by Green Party MEP Caroline Lucas, he shrugs off the so-called 'Peak Oil' scenario as 'no more than a theory'.

Ho hum. Like Climate Change I suppose? How can we plan for a future economy if our so-called 'leaders' are this fucking stupid??

Whatever Peak Oil is, it's never been 'just a theory'. Oil is running out, demand is increasing and there's no viable replacement.

No doubt Mr Piebalgs will be driving a 4x4 years after the rest of us have moved into protected communities getting around by horse, bike and steam train ...

switching to rail

These horrific scenes were on the A37 in Pensford a few days ago. They outline very clearly why our roads are such a dsiaster area. Ironically not 200 metres to the right there is an abandoned section of railway, moronically closed in 1968 due to flood damage, even though the road suffered just as much if not more.

The problem with roads is that they are a cheap 'solution' to carrying traffic. But they carry everything - pedestrians, cyclists, horse riders, milk floats, tractors, lorries, emergency vehicles, fast cars, old bastards stuck in first gear. So everything sinks to the lowest common denominator and travels at the speed of the slowest.

And could even the most idiotic car-fan argue that the above scenes are acceptable? This is a small village with houses on the road, why should people have to suffer this?

But what has this got to do with economics I hear you ask? Well the above represents inefficiency, pollution, diminution of quality of life. These are all economic minuses.

Think back 50 years. Most of the freight would have travelled by rail. So would most of the passengers in cars. Everything was delivered efficiently because there were no delays. Pollution was less. Villages were quiet. The quality of life was far superior. Cheap oil has done this, the end of cheap oil will end it.

The solution is to create traffic paths for each sort of flow. Pedestrians, bikes and horseriders can use dedicated ways between towns and villages, freight can all be switched to a massively expanded rail network, cars (at least for a few more years) can enjoy fast and near-empty roads. We all win, nobody loses.

Does anyone else agree, particularly with the rail freight idea? Oh yes, none other than Warren Buffet, the second richest person in the world and a genius investor. He's just invested $4.4 billion in three US train companies. There's been a 25% increase in rail transport volumes in the US since 2002. Old style 'trucking', using lorries, is in retreat. The reason? Rising fuel prices. (Source Money Week 20/04/07 p8). We're already seeing Peak Oil effects changing the way freight is carried, where the US leads the UK follows. But why not go one better and force the switch now, in tandem with a massive rail construction programme? Invest in new lines, new freight terminals, private sidings into every business ... and alongside create a network of light railways that can take products into just about every corner of the UK at low cost and efficiently, with no pollution along the way? Impossible? Hardly, the US and much of continental Europe did it 80 years ago.

ho hum ...

The poor Chinese. Saddled with a loser hippy political system since 1949 they're now jumping on the capitalism bandwagon just as the fuel to run capitalism - oil - runs out. Okay, the successor political system will be free-market and localised, but it's only those of us that have been brought up with capitalism that will survive to thrive in it. Meanwhile the Chinese still get it wrong. Latest plans, in addition to opening one coal-fired power station every WEEK (Peak Coal anyone?), include opening 108 new AIRPORTS (LOL!) by 2010. How big a waste of resources is that? How are the Chinese ever going to be able to run aeroplanes when oil runs out? With coal? What a joke ...

Don't invest in China. They are the world's first one-day superpower!

the end of ...

This is a trailer of the film 'The End of Suburbia', which looks at the possible effects on the US's sprawling suburbs of Peak Oil.

There's a dystopian stream in Peak Oil thought that perhaps doesn't give enough weight to human ingenuity and is also a nod in the direction of Hollywood!

As economists we need to be ahead of the game and look at all predictions, no matter how much they conflict with our own. That modern oil-based civilization is teetering on the edge of extinction is not in doubt any more than is human-induced climate change, but what the precise effects over time will be is indeterminable, but slightly more predictable with the more information we have, and the more time that passes.