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How to Ensure Peak Oil Doesn't Bring the End of Economic Growth

By Bill James | Mon, 26 November 2012 18:13 | 0

Problem: Life requires energy. Coal and oil are finite. America powered by finite resources is dying. Americans face Oil Famine, the monolithic dependence on a source of energy 50% outside our control. Civilization killers of Peak Oil, Climate Change and Debt are being caused by a century of Federal control of the means of production in power and transportation.

Solution: Self-reliance. Restore power and transportation to free markets so people, not central planners, choose infrastructures.  Repeat the success of restoring free markets to communications in 1984. Our Constitutional duty is to “secure the Blessings of Liberty to ourselves and our Posterity.”

Background: In 1918 communications, power and transportation infrastructures were monopolized/socialized as “natural monopolies.”

Peak Oil v Debt

In 1935 the US had a vibrant distributed energy industry. Approximately 600,000 electric and water windmills had been deployed against the headwinds of WWI and the Great Depression. The Rural Electrification Administration bankrupted these companies and the renewable energy industry collapsed. Had every REA-subsidized utility pole been offered to anyone to add a windmill, we would be awash in wind electricity and Americans would wonder how coal could ever compete with wind.

The Federal-Aid Highway Act of 1956 unconstitutionally funded Interstate highways. Interstates are 1.4% of American roads and carry 25% of car-miles. Interstates caused US cities to sprawl and forced Americans to buy oil and cars to be economically competitive. Oil was institutionalized as the lifeblood of America’s economy in the same year Peak Oil was predicted to be about 1970.

Motor Gasoline Prices v Unemployment Rate

The US actually hit Peak Oil in 1970. National debt increased in tandem with oil imports, from $.37 to $16 trillion. Counting “no-fly missions,” war to defend access to foreign oil has been required continuously since 1990.

Disposable Energy

Life requires energy. There is a high correlation between gasoline prices and unemployment 2 years later. Disposable income per year decreased $4,155/family as gasoline prices increased. More and more families used mortgage payments to buy gas.

Economic Flywheel

GDP is the wrong metric. The foreclosure-triggered 2008 collapse was a surprise because using GDP to govern the economy is like driving your car by looking at snapshots of your rear view mirror. GDP is a periodic assessment of how corporations and government benefit from economic policy in the past.

Federal duty is to defend “unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” People’s pursuit of happiness depends on how much energy their disposable income can buy, the metric Disposable Energy.  This metric started warning of 2008 collapse in 1999. Federal duty is to people, not institutions.

As labor applies Disposable Energy, Economic Work builds momentum into the Economic Flywheel.

As energy becomes less affordable, less work is applied to the flywheel, momentum decays. Government spending adds to GDP and the momentum of the flywheel in the moment. The flywheel experiences drag as inflation, taxes and servicing of government spending and debts reduce disposable income. Keynesian benefits are short, consequences delayed.

Action timeline: Oil and coal are finite. Out duty is to our Posterity. The 2012 drought and Sandy warn of tilting natures balance. The Joint Forces Command warned of oil risks in 2010:

"By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day."

Intent:  Implement actions to accomplish what Thomas Edison identified as practical in 1910:

"Sunshine is spread out thin and so is electricity. Perhaps they are the same, Sunshine is a form of energy, and the winds and the tides are manifestations of energy.”

“Do we use them? Oh, no! We burn up wood and coal, as renters burn up the front fence for fuel. We live like squatters, not as if we owned the property.

“There must surely come a time when heat and power will be stored in unlimited quantities in every community, all gathered by natural forces. Electricity ought to be as cheap as oxygen...."

Specific tasks:
1.    Victory Gardens. Self-reliance begins with the self. Gardens can preempt oil supply shocks from becoming famine. Call on all Americans to plant Victory Gardens.
2.    Enforce the Constitution. End socialism in power and transportation infrastructure. Restore State Sovereignty over infrastructure (Federalist Papers #9, #10, #45).  Restore Federal roll to regulating, not managing commerce. Establish Performance Standards to allow private capital to build infrastructure.
3.    Restore free markets. Capitalize all costs of fossil fuel use into the price of using those fuels. Stop socializing defense costs required to protect access to foreign oil into national debt. Stop socializing pollution risks into weather risks to our Posterity. If these costs cannot be capitalized without economic dislocation, then issue Feed-in Tariffs to level the economics with renewables, acknowledge this is a temporary fix, set a timeline where capitalism can be restored. Adopt Jefferson’s principle of usufruct, to use for profit without harm.
4.    Localize essential manufacturing.
5.    Grade government performance based on Disposable Energy instead of GDP.

JPods contribution is a version of Personal Rapid Transit (PRT or PodCars). JPods approach freight rail efficiency (400+ ton-miles per gallon) with on-demand urban transportation of people, cargo and trash. Solar collectors and windmills integrated into our rail structures gather 5,000 to 30,000 vehicle-miles of power per mile of rail per day. We will privately fund the construction of about 500,000 miles of rail to reduce oil-powered urban transport by 70% by 2020.  More time would be helpful, but Oil Famine sets the timeline.

By. Bill James

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