Fuel Prices….

[goodcompanion]

@Simple Living 23239 wrote:

If fuel prices stay elevated and/or rise to the $5.00/gal range, would that not force the general public to buy things local? And in that end, would it still be feasible for foreign industry to import all the things that are imported now? Would this bring local business more opportunity to gain market share? Less shipping of produce and meats over 3000miles, even to complete other countries? It would seem that local CO-OPs, farmers markets, and local crafts people would all benefit. And with people using less fuel, there would be less dependence on foreign energy products. I guess what I am trying to say is a huge price increase in fuel might not be as bad as CNN (communist news network) FOX, and the rest of the fear mongers would lead you to believe. In the long run, maybe even a good thing.

Gordon

This topic is never far from my thoughts. I think that on the whole, producers and businesses who use little petroleum in their production will suffer less than those who are very dependent. Also, regions where settlement is dense enough for business to be conducted without lots of travel will probably suffer less than regions that are very spread out; regions where the economy is based entirely on commuting will fare the worst.

But I doubt there’s much to celebrate in rising fuel costs, even for the purist animal-power farmer who uses 100% animal power, weaves their own wool, and smiths their own spare parts. Rising fuel costs would still increase the financial burden of all your customers and vendors. Unless food and other goods produced by animal power or by hand reach the marketplace at a lower cost than the petroleum-produced alternative, producers are still in a hell of a bind. Fewer and fewer people will be able to pay a premium for food produced in a certain way.

In 2008 local producers did witness a little bump relative to the rest of the economy, at least in my area, but I don’t really count that. It seems that for every individual who made a move to buy more locally in 2008 there was another who moved to buy less locally, cheaper and in greater bulk from a box store to trim their costs. Of all conventional retailers, box stores did best in 2008.

As we saw in 2008, commodity costs will mirror rising fuel costs. Maybe ultimately commodity costs will soar beyond the production costs of small-scale animal power/artisan producers (such costs will probably rise as well but at a slower rate than conventional production, being less-directly affected by gas prices). Not until we reach this critical point will the economic dynamics of farming really change.

And given the billions alive in the world and the millions in this country who are so impoverished that they simply cannot do without low-cost food or fuel, reaching this theoretical point where the little guy/gal and their horse has an economic advantage entails worldwide calamity of unimaginable proportions. As much as I for one would like an economic advantage over conventional producers, I don’t wish for that. I feel it’s inevitable, but I hope it comes slowly enough for constructive civic responses to at least have a chance to mitigate the consequences, at least for some.

But for the 3 or 4 billion people alive today who would not be alive in the first place were it not for the haber-bosch process, there is no imaginable constructive civic response. Not even a drastic worldwide re-adoption of animal power, permaculture, urban rooftop gardens, whatever. The numbers don’t add up.

[Simple Living]

@goodcompanion 23295 wrote:

But for the 3 or 4 billion people alive today who would not be alive in the first place were it not for the haber-bosch process, there is no imaginable constructive civic response. Not even a drastic worldwide re-adoption of animal power, permaculture, urban rooftop gardens, whatever. The numbers don’t add up.

Erik, I agree with your thoughts as well. I guess my post was more of the romantic dream type, but as you point out that type of result would only serve to be a nightmare.
My wife and I have had the “what if” conversation where oil ceased to be a viable option. Power plants stopped production and transportation (boat, train, and truck) stopped running. Would WE have the knowledge, skills, tools, and equipment to survive? Who would you align with? Neighbors? Family? Friends? What kind of mass exodus would there be from the cities. People just looking to survive and feed their family. How would you protect what is yours? What would be the method of payment? Barter only? Sorry, my thoughts tend to wander being cooped up in the winter. I don’t have the option of winter “work” for the horses so I tend to dream a bit too much.

Here’s to a Happy and Prosperous New Year to all!!

Gordon

[bivol]

it’s surprising how little people need to get by when they need to. OK, there would be DRASTIC cuts in resources and change way of life, but hey, as long as it keeps people alive, they’re gonna do it to survive.

now, this sounds really harsh, but in a crisis, it’s every nation for itself. and US and europe are pretty good of, for now.

Erik, i wouldn’t be too afraid of mass starvation, because it is rather inplausable this would happen, at least in case of US or Europe. and this is because there is, simply, enough space to produce food.

besides, when it comes fuel shortages, we’ve seen it all here before, in the 90-is in serbia under sanctions. then, food was still produced and there was no famine, even if the agriculture was mostly mechanized and industrialized till then. we LOL ed at the fact that serbians under sanctions still ate better quality food, and more, than we ate without sanctions.
simple fact: people will get by.

every time people NEED to do something to survive, they WILL do it, and survive. Serbia, romania, cuba, all these countries are proof.

the worst prospect would be if the central government would collapse. if it doesn’t, it’ll be OK.

Gordon, i understand your potential worries, but i’d like to say:”don’t worry!”
even if the exodus would take place, i think there would still be enough land to accomodate people, like leasing family sized plots now huge farms in great plains. it goes without saying that in case of a serious fuel shortage those big companies would also have no fuel for machinery, so it’d be wiser to share that land to people who will, in dire need, have to learn to till it. but food is food.
and if there would be spare fuel for that vital industrial branch, and thereby also enough vital foodstuffs, maybe there will be food rationing in the cities, to make the exodus more gradual and controled.
rationing happened before,a dn there is no reason not to reintroduce it again in dire need.

[Rod]

Hi Bivol

Great perspectives from someone who has been their. Thanks for your input into this dialogue which has many of us overly concerned.
I grew up very poor (in money) in an era when the great depression was still a recent memory. We had no car, no vacations, no new clothes, no TVs, made our toast on the kitchen stove top, made our own soap, patched our clothes, did our on shoe repair, lived out of our gardens, had an ice box, heated with coal, and used hand me down bicycles for transportation. It works, we had a good life and came through it whole.
I think it could be like that again and we will find ways to survive.

[jac]

Just a thought … but I personally dont think a major disaster like fuel running out would do our horses any favours !!!! sure we that can hitch a team would be ok but if society had to revert to animal traction I fear a lot of people would be using draft animals that didnt even like animals… it happened before on Scottish farms because the horse jobs paid the best and my grandfather often said he saw a lot of hamfisted men loose their temper and spoil a good team.. same thing must have happened in towns. We use horses/oxen because we have the CHOICE.. if fuel suddenly isnt an option then a whole line of folks would get a horse and cause mayhem. Personally I think the fuel prices will just keep creeping up and folks will cut corners by shopping for the cheapest.. which I fear will be produced under even more intense systems than we have now..
John

[goodcompanion]

@jac 23319 wrote:

Personally I think the fuel prices will just keep creeping up and folks will cut corners by shopping for the cheapest.. which I fear will be produced under even more intense systems than we have now..
John

Yes, for the majority perhaps. Corporate food is very skilled at pitching itself as the best and only option. Did you know Walmart sells “local” produce? What a joke! But still most people are so uneducated about their food that they buy into it with a sense of relief–it’s not only economical to carry on as if nothing was the matter, it’s actually meritorious! And isn’t it great that Monsanto is getting serious about “sustainability?” After all, feeding the earth’s multitudes is way too important to entrust to crusty loopy reactionaries…..

I prefer to block all that out. I feel hope for the small practitioner lies in the growing body of people who see the writing on the wall and will use their resources to support farmers in their backyard who are doing the right thing for the right reasons.

[jac]

Erik we have the “local” hype over here too.. At 1st glance it sounds great that these guys are buying local produce but as far as I can see all they are doing is creating “beef clubs” or whatever the produce is. They would be happy if the auction markets were to stop all together and that.. in my opinion.. would be a disaster !!!. We have tomatos in a store here in the summer that are grown not 5 miles from the shop and sold in the co-op… after they have traveled 250 miles to the manchester depot to be re packaged and sent 250 miles back again… if indeed it is the same tomatos.. which from a sustainable point of view it would be better if they wernt… crazy old world…
John

[blue80]

George, I think too that fuel prices will go up and stay up. From what I have been told:

1/U.S. dollar has been the global tier for commodity trades, and that has given the U.S. an edge on cheap fuel through OPEC. As the U.S. dollar is devalued and used less in global exchange, the U.S. advantage and subsidized fuel goes away

2/Emerging markets in asia/china are showing an insatiable lust for oil/energy. I was told no matter if all of us quit using our vehicles, fuel prices wouldn’t go down, as the growing demand is with the billion or so people planning to buy a car and heat their structures with fossil fuels in the next decade.

3/Environmental regs are becoming more and more restrictive, and costly. The gulf oil blowout accelerated this. Unfortunately, the market is no longer supply and demand, rather the speculation of supply and demand. You see it all over the news. Based on “reports” the stacked market changes…

4/Trucking regs are becoming more and more restrictive, and about 1/2 of the bridges in the states need repaired apparently. These costs pass down to the consumer….

I am with you on debt, we think about resizing too…No fun being a slave to the lender, making decisions based on the bills you have to pay, instead of what work is worth doing. But my problems are largely self inflicted.:o Hopefully now that I know better, I will do better;)

[goodcompanion]

@blue80 23329 wrote:

George, I think too that fuel prices will go up and stay up. From what I have been told:

1/U.S. dollar has been the global tier for commodity trades, and that has given the U.S. an edge on cheap fuel through OPEC. As the U.S. dollar is devalued and used less in global exchange, the U.S. advantage and subsidized fuel goes away

2/Emerging markets in asia/china are showing an insatiable lust for oil/energy. I was told no matter if all of us quit using our vehicles, fuel prices wouldn’t go down, as the growing demand is with the billion or so people planning to buy a car and heat their structures with fossil fuels in the next decade.

3/Environmental regs are becoming more and more restrictive, and costly. The gulf oil blowout accelerated this. Unfortunately, the market is no longer supply and demand, rather the speculation of supply and demand. You see it all over the news. Based on “reports” the stacked market changes…

4/Trucking regs are becoming more and more restrictive, and about 1/2 of the bridges in the states need repaired apparently. These costs pass down to the consumer….

Wouldn’t be a bit surprised. Frankly the two-year reprieve in fuel costs has resulted in breathing room I had not expected. Now that I understand the dynamics a little better, I imagine that we will probably go though a few cycles of stagnation leading to reduced demand leading to cheaper fuel then a partial recovery cut off by rising energy costs and then back to stagnation. But each time the partial recovery is likely to be less pronounced, and the rise in energy costs greater.

[Anonymous]

I to believe that we at the end of 2011 will have $4/gal gas there are signs around us if we choose to read them listen to them and prepare we will be ok. I seen a video on ireland ag having a conference on rising fuel prices and what to do they predicted early in 2010 that that was a peak time and fuels will rise at about 2% a yr til it is to costly to produce then people will go to alternatives.
We all have known this time would come but we chose to say not in my era or life time they will take care of it later. We better wake up and prepare horse power is one way, carpooling, bicycling and whatever you have.

I also think as a local producer we need to start thinking that yes we use to be able to get $3/lb for tomatoes because they were homegrown but like someone said people dont always think local they think affordable so to keep things level veg/meat producers to survive I think go to grass feed beef. Natural compost in our garden yes more work but it is better for you and taste better.

One last thing sorry for the rant but I will graduate this yr with a degree in applied science/ alternative energy- wind and solar. There is alot of things we are never told or they stretch the truth alot. Beware it will get harder buy a good bicycle or do like I do I drive a horse and cart yes its slower but you get to think about things you never do zooming around in a car and you think twice as in why you need to go there also.

[goodcompanion]

Well, this is starting to read like a Peak Oil forum! Bundles of cheer, all of us….

But I would hope that there is a fundemental difference between this conversation and your basic “doomer” conversation: that however great the challenges, that animal power practitioners have something to do in these times for the betterment of the land and our fellow humans. For most people, most of the psychic shock in a crisis seems to come as , “This can’t be happening. What do I do now?”

I am grateful that I have something to do.

[jac]

This is definaitly the wrong forum for the “doomsayers”… way too much hope on here !!!!
John

[OldKat]

@blue80 23329 wrote:

George, I think too that fuel prices will go up and stay up. From what I have been told:

1/U.S. dollar has been the global tier for commodity trades, and that has given the U.S. an edge on cheap fuel through OPEC. As the U.S. dollar is devalued and used less in global exchange, the U.S. advantage and subsidized fuel goes away

2/Emerging markets in asia/china are showing an insatiable lust for oil/energy. I was told no matter if all of us quit using our vehicles, fuel prices wouldn’t go down, as the growing demand is with the billion or so people planning to buy a car and heat their structures with fossil fuels in the next decade.

3/Environmental regs are becoming more and more restrictive, and costly. The gulf oil blowout accelerated this. Unfortunately, the market is no longer supply and demand, rather the speculation of supply and demand. You see it all over the news. Based on “reports” the stacked market changes…

4/Trucking regs are becoming more and more restrictive, and about 1/2 of the bridges in the states need repaired apparently. These costs pass down to the consumer….

I am with you on debt, we think about resizing too…No fun being a slave to the lender, making decisions based on the bills you have to pay, instead of what work is worth doing. But my problems are largely self inflicted.:o Hopefully now that I know better, I will do better;)

I had a discussion with one of our analysts yesterday about gasoline prices. I work for a large diversified energy firm & AJ is one of our analysts that track energy costs on a micro and macro level for the company. His take was pretty much in agreement with what you posted, with a few modifications.

A few other thougts from my vantage point. Something that gets glossed over in most discussion is that the weak dollar is a product of our own governments reckless spending. As we print money, like Charmin prints toilet paper, to “monetize” the debt each new batch makes the sum total in circulation worth incrementally less. Simple economic fact. Our government is destroying our way of life with debt. I also heard recently that Russia and China are doing everything within their power to cause our dollar to not be used as the benchmark in trading, as you mentioned above. Yet there are people that insist that China is our friend. They are NOT our friend and we are crazy to think they are.

I disagree with the concept that the markets are no longer driven by supply and demand, but rather by the speculation of supply and demand. There is simply no basis for this idea. The energy markets are an EXTREMELY efficient set of markets; there is virtually NOTHING of any significance that happens to the supply side or the demand side that isn’t factored into pricing almost immediately. Is this speculation? No, it is market intelligence pure and simple. At one time I worked on the trading floor of what was then the largest producer and marketer of natural gas in the country. I had a portolio of supply to manage, almost entirely in the GOM (Gulf of Mexico). I use to watch the markets chase natural gas prices up and down & got really interested in what kind of change in supply it took to generate a strong upward or downward price tic. I assumed that it would probably take a shortfall or an oversupply of something on the order of 15 to 20% to see prices move. After about 2 or 3 years of closely monitoring this situation I came up with another number. Guess what? It was closer to 2.5 to 3%. With that in mind, there is NO WAY every American driver could swear off gasoline without sharply impacted the price. Of course there is also NO WAY every American is going to forgo gasoline. The good news is that if we each reduced our fuel use by 10% or so we could dramatically impact crude prices, which would impact gasoline prices in turn. Why, because the US is such a large consumer of the stuff that a 10% reduction in use would translate into a sizeable reduction in the worldwide demand.

I have other thoughts as well, but this post is already reaching novella length so I’ll stop here. I’ll leave you with this though… don’t believe much of anything you see in the “popular” press about energy matters. As I close in on finishing up my 30th year in the energy sector I can look back and count on ONE hand the number of times that I have seen a story in the media about anything related to energy that was forthright, unbiased and accurate. At times I have seen stories in the press where I had FIRST HAND KNOWLEDGE of the issues at hand, yet when I read the story I could hardly recognize it as the same situation. Not covering for the enrgy industry, that is just the way it is.

[goodcompanion]

@OldKat 23381 wrote:

I disagree with the concept that the markets are no longer driven by supply and demand, but rather by the speculation of supply and demand. There is simply no basis for this idea. The energy markets are an EXTREMELY efficient set of markets; there is virtually NOTHING of any significance that happens to the supply side or the demand side that isn’t factored into pricing almost immediately. Is this speculation? No, it is market intelligence pure and simple. At one time I worked on the trading floor of what was then the largest producer and marketer of natural gas in the country. I had a portolio of supply to manage, almost entirely in the GOM (Gulf of Mexico). I use to watch the markets chase natural gas prices up and down & got really interested in what kind of change in supply it took to generate a strong upward or downward price tic. I assumed that it would probably take a shortfall or an oversupply of something on the order of 15 to 20% to see prices move. After about 2 or 3 years of closely monitoring this situation I came up with another number. Guess what? It was closer to 2.5 to 3%. With that in mind, there is NO WAY every American driver could swear off gasoline without sharply impacted the price. Of course there is also NO WAY every American is going to forgo gasoline. The good news is that if we each reduced our fuel use by 10% or so we could dramatically impact crude prices, which would impact gasoline prices in turn. Why, because the US is such a large consumer of the stuff that a 10% reduction in use would translate into a sizeable reduction in the worldwide demand.

Interesting inside perspective. I remember when gas was pushing $4 the scapegoat was “speculation.” The media and the public found it easier to blame speculators and even gas station operators rather than face the fact that in this case market forces were doing exactly what they are supposed to. But in the face of popular anger, even Bush was supposedly considering measures to curb “speculation” in the oil sector! Seemed to me at the time that it was just too many buyers competing for a limited supply of product, no matter how I looked at it.

[near horse]

OldKat –

In the first part of your post you say ” had a discussion with one of our analysts yesterday about gasoline prices. I work for a large diversified energy firm & AJ is one of our analysts that track energy costs on a micro and macro level for the company. His take was pretty much in agreement with what you posted, with a few modifications.” The “you” referred to is blue80 who had 4 points – one which said supply and demand aren’t driving the market but speculation IS and a second which said that if all of us quit driving IT STILL wouldn’t change the price of fuel. Do you agree or not agree with blue80 (and apparently your analyst)?

Plus, I don’t see how: 1) you can tell the difference between real demand and speculative demand – they both apply the same pressures to supply and do the same thing to prices.

So, speculators ARE also market forces. Speculators create a demand not based on their current needs but based on what may happen in the future (like the futures market). That perceived increase in demand causes a run up in price because it looks like supply can’t meet demand – get out (sell) before the market drops and you’ve made a tidy sum. And on who’s dime? The average working class stiff who is caught in the system and has to drive to work, buy goods that are transported using fuels etc and foots the bill of higher prices on his fixed salary. BTW – there was good evidence that the last price spike in 08 was highly influenced by speculators (Merrill Lynch was one big player if I recall).

I also don’t understand why the 2-3% changes in supply/demand causing prices to move was a revelation – 2 to 3% still represents tens of billions of dollars (at least).

The other factor not addressed AND really the initiator of this “oil price alarm” is reducing output so as to raise prices (as OPEC announced recently).

After seeing and experiencing firsthand how despicable and low down the oil industry can and will go to get their way, I can’t help but have great disdain for them. Here in Idaho we just got railroaded by our own Dept of Transportation in conjunction with Conoco Phillips and Exxon Mobil – now we get to have giant oil field equipment headed for the Alberta oilsands trashing one of the most scenic highways in the country (and they’ll be so wide as to touch the fog line on each side of the road). These clowns managed to trample on tribal rights (at least 50 miles is on Nez Perce land) as well as those of the local citizenry – the oil companies’ needs take precedent. BTW – there will be no new jobs created from this and the trucking company is not even a US company.

It’s funny that many think that this will get things right and force people to use less fuel – the impact of outrageous fuel prices will hurt the US citizenry more than “credit default swaps” ever did. We, as a society, have designed and built an infrastructure based on cheap fuel and switching to something else SIMILARLY PRICED and available can’t happen overnight without hurting a lot of innocent people while making fortunes for a few. Yah, I’m pissed.

[Author]

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