Of Crashes, Failures and Bailouts - Round II

UPDATE: Tell your Reps and Senators to vote for this instead: The Genensis Plan. Primary elements:

The solution to the trust issues in our financial system is elegant and it will work.
1. Force all off-balance sheet "assets" back onto the balance sheet, and force the valuation models and identification of individual assets out of Level 3 and into 10Qs and 10Ks. Enact this requirement beginning with the 3Q 2008 reporting period which begins next month.

Total taxpayer cost: $0.00

2. Force all OTC derivatives onto a regulated exchange similar to that used by listed options in the equity markets. This permanently defuses the derivatives time bomb. Give market participants 90 days to get this done; any that are not listed in 90 days are declared void; let the participants sue each other if they can't prove capital adequacy.

Total taxpayer cost: $0.00

3. Force leverage by all institutions to no more than 12:1. The SEC intentionally dropped broker/dealer leverage limits in 2004; prior to that date 12:1 was the limit. Every firm that has failed had double or more the leverage of that former 12:1 limit. Enact this with a six month time limit and require 1/6th of the excess taken down monthly.

Total taxpayer cost: $0.00

And more... read it.

**UPDATE** **UPDATE** **UPDATE**

Denninger on Bailing out Foreign Companies: Real reason for bailout?

(Another website on the same issue.)

I doubt it is THE real reason, but many nations hold US treasuries and they may be threatening to sell them, which would destroy the dollar overnight. It's a real risk, enunciated by the Chinese a few months ago: The so-called Nuclear Option. It is VERY interesting that Paulson says any bill without bailouts for foreigners will be vetoed.

Like Denninger, I ask: Wasn't this supposed to be about helping Americans? What the hell business do we have socializing foreign companies??? I can't even begin to imagine how much debt that means for US taxpayers.

I think it is very instructive that such a pernicious item in the bill is not being covered by the mainstream media.

VOTE NO.

- You're being lied to! -

UPDATE: Excellent comments from Chomsky, via The Oil Drum:

...This wonderful anti-market system designed by self-proclaimed market enthusiasts is now being implemented in the United States, to deal with the very ominous crisis of financial markets. In general, markets have well-known inefficiencies. One is that transactions do not take into account the effect on others who are not party to the transaction. These so-alled "externalities" can be huge. That is particularly so in the case of financial institutions. Their task is to take risks, and if well-managed, to ensure that potential losses to themselves will be covered. To themselves. Under capitalist rules, it is not their business to consider the cost to others if their practices lead to financial crisis, as they regularly do. In economists' terms, risk is underpriced, because systemic risk is not priced into decisions. That leads to repeated crisis, naturally. At that point, we turn to the IMF solution. The costs are transferred to the public, which had nothing to do with the risky choices but is now compelled to pay the costs - in the US, perhaps mounting to about $1 trillion right now. And of course the public has no voice in determining these outcomes, any more than poor peasants have a voice in being subjected to cruel structural adjustment programs.

A basic principle of modern state capitalism is that cost and risk are socialized, while profit is privatized. That principle extends far beyond financial institutions...

UPDATE: New video from Karl Denninger: $700 billion Bailout Watch 9/30.

UPDATE: Senate attaching tax cuts to putlipstick on the pig. don't mind the tax cuts, but they're meaningless in terms of the bailout. This is bribery, pure and simple.

UPDATE: Did you fax or sign/send a petition? Do some checking here. Some good commentary/info, too: http://supportedthebailout.org/

It's Tuesday morning (now night/Wednesday morning) where most of you are, and Thursday - Ooops! Wednesday! They REALLY don't want you to have time to study this! - will bring another attempt to usurp the power of the People of the United States of America and force them to pay for the bills of the nation's richest people. Of course, with most of the wealthy paying literally no taxes, we already are. But this is ridiculous!

There are a few things you need to know:
This bailout was preplanned according to the official White House Spokesman, Tony Fratto:

Fratto insisted that the plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough.

If this possibility was discussed for "weeks and months," why are lawmakers just hearing about it? It is quite normal for there to be behind-closed-door meetings between the Executive Branch and the Legislative. Why present this as an eleventh hour, not-time-for-due-process emergency? The why in a moment. More of the how.

First, we were told - a week ago - if this package wasn't passed immediately, the economy would crash. Where is the crash? Sure, we had a stock market drop of historic proportions, but it wasn't a crash and one third of the losses on Monday happened before the "No" vote. But let's not get distracted: Where is the derailed economy?

Second, not only have we had no crash, not only did they put this package together over "weeks and months", but we find out the Treasury had a secret conference call with Big Money in which they stated... wait for it... the money isn't needed for weeks. To wit:

Greenwald has explosive news:
UPDATE III: Matt Stoller has some important revelations and observations about today's vote -- here. The "private" conference call which Treasury Department officials held with Wall St. analysts (and which bloggers infiltrated) referenced by Stoller is revealed in detail here.

Say what? A private call between Treasury and Wall St.? Um... are THEY voting on the King Henry Paulson Bailout, Socialism and Welfare for Bankers and Financiers Act? No. Hmmm... so just what was said, then? Here's a bit:

1. The tranching is a mere formality...

2. However, they do not plan any action immediately, will wait a couple of weeks... They want to focus their efforts on stronger companies but also made noise about protecting the financial system...

5. The exec comp provisions sound like a joke, They DO NOT affect existing contracts, they affect only contracts entered into during the two years of the authority of this program and then affect only golden parachutes...

But what I really want to know is, why is this call happening at all? The people who created this mess have no business having anything to do with cleaning it up. (This leads to a serious problem with Paulson, Bernanke and Bush, but more on that further down.)

Third, here's what Karl Denninger, one of those predicting this crash for a long time, observed about Monday:

Bernanke ProvedPauslon Plan Bankrupt

Thank God we got a "NO" vote today folks.

No, not because the market tanked.

And no, I was not short up to my eyeballs.

I scalp traded the morning but was out when the blowup came, as I didn't expect it - I really did think the bill would pass, my and many other's efforts to stop it notwithstanding.

No, the real news is found here:

"Sept. 29 (Bloomberg) -- The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The Fed's expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone."

Now let's think about this folks.

The Fed threw $630 billion into the market before the vote, and yet the S&P 500 was down 40 handles anyway, and in fact tanked after the vote.

Note carefully - Paulson's plan was $700 billion, and Bernanke spent $630 billion - almost the entire amount proposed - but failed to fix the problem.

Got it?

Good.

Now do you see what I've been saying?

People, you are being lied to. There is no emergency. They sky is not falling. (Well, it is,but not the way they say it is.) So, why they rush? Does this remind you of anything? Say, the Patriot Act? That sure turned out well: Don't read it, just vote! What was it Fratto said up there? They don't need much timeto think about it?

This legislation will have profound effects on this nation and the world. It is a prime determiner of how deep and how long this recession/depression/collapse will be. And at the end of the day, it's robbing you to pay for Wall Street's bankruptcies. This is socialism on a massive scale. This is nothing more than a flow of money and capital into the hands of the richest, most powerful people in the country. And, as Fratto said, it's no accident. They knew this was coming the entire time they kept saying the economy was "sound" and "fundamentally strong."

- You're being lied to! -

All of this is so complex nobody, and I mean literally nobody, can say how much rotten debt is out there or who has it. Nobody can figure out how to let the market - the God of all on Wall Street, BuCheney and Republicans - solve its own problems, but it's something that can be reviewed and voted on in a day?

- You're being lied to! -

Martial Law, And You're Not Invited
Did you know Pelosi could invoke Martial Law and institute new rules in the House? She did. Normal processes were subverted, meeting not held, Congresspersons not consulted. This bill was made available for a mere 24 hours. That's enough time for our Representatives to read through it, consult their experts, discuss it with their constituents, right? And it's enough time for you, a layperson, to figure it all out and advise your Congressperson how to vote, right?

Wrong. This isn't democracy, especially when these extraordinary actions, as we've already seen above, are based on a false emergency. Yet another lie from this Administration and its henchmen.

- You're being lied to! -

Background Check
Who caused this problem? There were many players, but there a couple of events/actions/choices without which this could not have happened. In reality, it all started with the beginning of fractional banking long, long ago and the duplicitous creation of the Fed in 1913 under cover of night on Christmas Eve. You can learn more about those events here, but those are not our topic just now. We're concerned with more recent events.

First among these was the elimination of the Glass-Steagall Act in 1999.

Now then, let's first examine the nuts and bolts of this law. What this law did was break the figurative wall between banks, brokers, insurance companies and other financial services companies. The Glass Steagall Act, among many things, separated all sorts of financial services and placed careful limits on what sorts of financial services anyone company can perform.

The Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation (FDIC) in the United States and included banking reforms, some of which were designed to control speculation.[citation needed] Some provisions such as Regulation Q that allowed the Federal Reserve to regulate interest rates in savings accounts were repealed by the Depository Institutions Deregulation and Monetary Control Act of 1980. Provisions that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999

As you can see, that wall was broken down with this act.

The stage was set for massive levels of abuse. It has taken less than ten years for that act play a major role in propelling the US into financial chaos. Thank you, Bill Clinton. I used to be a fan.

The next step in creating the current meltdown was the monetary policy of George Bush and Alan Greenspan. Afraid of letting the nation go through recession early in his term, and especially after 9/11, Bush wanted the economy stimulated. Go shopping, he told us. And Greenspan obliged by keeping interest rates so low money was literally essentially free for lenders. No risk was too high when every cent paid in return was pure profit.

Part of the mantra was that everyone should be able to buy a home. Greenspan kept rates so low, virtually anybody could. Just months before beginning to raise rates to slow down the housing bubble he started, he was telling lenders to find ever more creative ways to write mortgages. Incredible, no? Bush did his part by having his administration enforce... pretty much nothing.

With little or no regulation and extremely low interest rates, lenders of all stripes gave home loans to almost anyone who had a job. This was an inherently risky business. Top spread risk and to get the loans off their books so they could write more loans (far more money is earned in the short term by loan fees than by interest earnings), financiers got creative and created an alphabet soup of financial investments (CDOs, SIVs, etc.). They took loans, put them all together in one portfolio and sold them. Investors liked the income from payments and lenders got rid of their balances and their risk. But these things were sold and resold. The values never accurately assigned.

As home prices skyrocketed, a huge, huge new financial market was created, but all out of thin air. As more and more loans failed, these instruments became more toxic. And they failed, and are failing in great numbers because the loans were given to people who could not afford them and because the terms of the loans trapped people with sudden rises in payments. For example, many of the loans were interest only with the payments set to reset after a period of a few years. The new payment is often double or more the payment before. But all those buyers thought they'd be able to refinance. But then the bubble burst, resets started knocking people out of their homes and the economy started sliding.

And here we are.

Foxes in The Hen House
Who is Paulson? He is formerly of GoldmanSachs. Yes, that Goldman Sachs.

Forty years ago there were almost no investment banks, securitised debt or derivatives. The huge increase in global liquidity and credit since the early 1980s has been almost exclusively driven by investment banks through the creation of securitised debt and derivatives, which now represent nearly 90 per cent of total liquidity.

At the beginning of the year there were five major US investment banks - Goldman Sachs, with assets of US$1061 billion (or US$1.06 trillion), Morgan Stanley US$1045 billion, Merrill Lynch US$1020 billion, Lehman Brothers US$689 billion and Bear Stearns US$424 billion.

Bear Stearns and Lehman Brothers have disappeared and Merrill Lynch is being taken over by Bank of America. These companies created a huge amount of toxic securitised debt and derivatives that have plunged in value.

So we now have the former CEO of Goldman Sachs, of one of the creators of the FrankenDebt destroying the financial system, in charge of fixing the problem. But you don't hear this from Paulson. You don't hear it in the mainstream media. But Paulson IS the fox in the hen house. This is an obvious conflict of interest. He should be nowhere near the plan.

And he wants no oversight and no possibility of involvement of the Judicial Branch in this crisis he helped create? He's already bending the rules to bail outer Sterns, etc. How much more so if given carte blanche?

We already mentioned Bush and Greenspan. How about Obama and McCain? Why do they support this? Well, McCain is easy to figure: his wife is filthy rich and he's been a free-market, no regulation guy forever. Ever heard of the Keating Five Savings and Loan scandal? McCain. What about Obama? What happened to his populist beginnings? Read here.

There is so much more we could talk about, but there isn't time. You need to act, and act now, so I'm sending this to you. PLEASE, contact your reps/senators. You can find contact info here:

Let them know you're mad as hell, and you're not going to take it anymore!

Those who have been right all along say NO! and HELL NO!

Rubini

Peter Schiff

Bailout cure worse than disease
By Peter Schiff

...Though the government and Wall Street assure us that these bold moves will save the housing market, and the economy as a whole, from collapse, the reality is that the solution is far worse than the problem. As painful as the failure of Freddie and Fannie would have been, bailing them out will hurt even more. In other words, it's not the disease that will kill us but the cure.
...By taking all of the risks out of mortgage lending (provided of course that the loans are conforming), the government is telling lenders not to worry about the loans they make because if borrowers do not repay, the government will.

...As a result of this bailout bill, the share of mortgages owned or insured by Freddie and Fannie will likely swell from near 50% today to over 80% within a year or two, turning a $5 trillion problem into a $10 trillion fiasco...

The grim reality is that trillions of dollars were borrowed and spent that will never be repaid.

...CNBC once nicknamed me "Dr Doom", but compared with what I see coming now, they should have then called me "Dr Sunshine". Take a look at a presentation I made back in November 2006... (Click here to watch the video on YouTube. )

Every real estate prediction I made at that conference, which was considered outrageous at the time by those in attendance, has already come true. As confident as I was then about this impending crisis, I am even more confident now that the government has just thrown gasoline onto the fire

(Copyright 2008 Euro Pacific Capital.)

Karl Denninger - Website Forums YouTube Channel

The Automatic Earth

Debt Rattle 9/30/08

The real world drama, the one not made for TV, certainly carries a lot more tragedy. We are living in the days of falling records, which will in time lead to the days of falling people.

As Wall Street fell more than it ever has in history, US home prices kept on plunging at an uncharted pace. But that’s all just a side show compared to what happens in money markets. Lending rates are surging to new highs so fast it’s time to get dizzy. It makes no difference anymore that central banks unleashed another $620 billion into the black hole, credit is utterly frozen.

For comparison, stock markets lost $1.2 trillion yesterday. Do you need a better proof that what goes in the House over $700 billion is posturing, and bad drama posing as reality TV? Money and credit is leaking out of the world economy so fast you'd need a Paulson plan every single day to keep it cranking along.

Every penny available is hoarded by banks trying to save their butts. You will next see central banks cutting interest rates as if the pit is indeed bottomless. That is an attempt at creating another carry trade. And no, that will not have any effect either. They can not make banks lend to each other who have far more debts than whatever portion of that $620 billion, or the next and the next after that, it is that they can get their hands on. They are gone, drowning in a sea of losing bets, and all the lifeboats left are leaking. Bad.

Here’s where the B-movie remake of the great Greeks meets the theatre of the absurd:

”House Republican conservatives are likely to keep pressing for a mandatory insurance program they initially proposed for mortgage-backed securities. They may also try to force the Securities and Exchange Commission to suspend mark-to-market accounting and require bank regulators to assess the real value of the troubled assets...”

If you still need a translation of that: the real value of the troubled assets is zero. And the real market has already marked it there.

PS Allow me to add something to that: The Real Markets have marked the "troubled assets" down to zero. They're just waiting for the assets to come out of their hiding places. And what we see happening now, is that the real markets are losing patience. They will increasingly start forcing the troubled assets out of their dark holes. And while I am not the only voice talking about this, I think it's still poorly understood: this poses a very serious concern that the economic system, as it exists today, will collapse in its entirety. $700 billion is just one tenth of one percent of the estimated $700 trillion in outstanding derivatives. It's like owing $100, and offering a dime as full and final payment.

There are others.... but I don't have time. My favorite, of course,is...

Me!

(Kidding. Everything I know on this subject has come from those linked, and still others not specifically mentioned or linked here,including a lot of excellent info from The Oil Drum, linked to the right.)

Can they save the economy? No. - January 7, 2008

The Crash - January 8, 2008

;)

It's time for Americans to reassert their ownership of this nation. WE are America. Not the conglomerates, not the politicians. WE are America.

Tell them to vote NO!

Go get 'em.

Of Crashes, Failures and Bailouts

It is important not to stop applying pressure now. Paulson, Bernanke and BuCheney WILL be trying again. Personally, I'd let the chips fall where they may, but I know that scares the bejeezus out of everyone, and likely won't allow rationality to overcome fear. So, if you must support a plan, please look at Karl Denninger's plan linked below and here for your convenience.

If you really are not up on any of this stuff, and I know most if us are not (I have slowly become generally aware only over the last 18 months. It is still dense stuff and I only understand enough to get the gist and have a fairly clear sense of the implications), do yourself a favor and go to YouTube or any video site and/or google Peter Schiff, Karl Denninger, Nouriel Rubini, Dennis Kucinich and Ron Paul. See what they have to say. Of course, there are links to some of them below, but I am talking about really educating yourself. You should/can also visit The Automatic Earth and The Oil Drum, both linked to the right.

Cheers

The following are two e-mails I sent out to family and friends regarding the Monday Sept. 30, 2008, vote in the House of Representatives on the King Henry Paulson Bailout, Socialism and Welfare for Bankers and Financiers Act.

Hello,

Sorry to contact you like this, but this is vital. This morning, everything changes one way or another.

We must stop this bailout. Our "leaders" are acting in a way that Mussolini would be proud of. It was he who defined Fascism as the partnership of business and government. How amazing, in the most horrible sense, that the United States government is now exactly what Mussolini considered to be the ideal?

Worst of all, this "bail out" (better stated as welfare and socialism for the rich - didn't they just make it nearly impossible for us to declare bankruptcy?) is nothing but 1. a huge transfer of wealth to the richest and 2. the bankrupting of America. Were the scumbags who created this held to account, not one penny of taxpayer money would go this. And not one penny should.

1. The larger banks are and will be buying the smaller banks. More and more money in fewer and fewer hands. Then, they keep all the profits they've gotten up to now AND all future profits and give the debt... to you and I. Literally. Over and over. This will not stop at $500,000,000,000 or $700,000,000,000. It won't stop till it is many times that much. Because it can't. There is too much debt out there. The debt in these damned "vehicles" alone is hundreds of trillions. That's right HUNDREDS of TRILLIONS. And housing? Did you know there are additional resets coming in the next three years? We haven't even hit the peak. So, if this bailout is supposed to save us from the abyss, why doesn't it deal with those? Those resets means the banks are going to be right back with their hands out for another $700,000,000,000 over and over and over.

2. The US debt can never be repaid already, and here we are getting ready to double it, triple it... Do you really believe the people holding our debt will just sit on it forever? They will not.

You worry not bailing out the obscenely wealthy and the non-taxes-paying corporations will mean depression. It will. But to bail them out will equal depression and collapse because there will be too little left in the hands of you and me. The government will be so burdened it will have zero chance of dealing with the additional time bombs of energy decline and climate change, let alone have any hope of pursuing public works projects and such to pull us out of the depression.

You must understand that to allow this will mean the destruction of the economic and political system of the US. Too much power already rests with the Executive Branch, and now we are to have them holding our mortgages and having carte blanche over our financial systems? God help us...

Please view all of the following, then contact your representatives and senators. Tell them they will never get your vote again. Tell them a vote against this is a vote for the Constitution, while a vote for is a vote for the final corporate overthrow of our financial and political systems.


http://market-ticker.denninger.net/archives/594-MAKE-THIS-VIRAL-STOP-THE-BAILOUT!-SAVE-AMERICA!.html

Here is a plan for Main Street and America, not Wall Street:

http://market-ticker.denninger.net/archives/593-CONGRESS-STOP-AND-THINK!.html

Here's an analysis of the final bill before Congress:

http://www.youtube.com/watch?v=Z8tTVA5EXag

Here's Dennis Kucinich on the bail out:

http://www.youtube.com/watch?v=Feyu2Db2QuU

http://www.youtube.com/watch?v=lJ2gnXu7ezA

There's much more, but let me leave you with this: Did you know they had been planning this for MONTHS?

http://www.youtube.com/watch?v=JjRiEVuzTYw

Please, act. NOW.

The second e-mail:

If you don't know who Nouriel Roubini is, you should: he's one of the many who have been predicting a crash for years. (That's right, this is a surprise only to those not paying attention... some of them intentionally...)

http://www.rgemonitor.com/roubini-monitor/253801/the_us_and_global_financial_crisis_is_becoming_much_more_severe_in_spite_of_the_treasury_rescue_plan_the_risk_of_a_total_systemic_meltdown_is_now_as_high_as_ever

...if this run accelerates - as it may now - a total meltdown of the US financial 0system could occur. We are thus now in a generalized panic mode and back to the risk of a systemic meltdown of the entire financial system. And US and foreign policy authorities seem to be clueless about what needs to be done next.

Before that he said:

http://www.rgemonitor.com/roubini-monitor/253783/is_purchasing_700_billion_of_toxic_assets_the_best_way_to_recapitalize_the_financial_system_no_it_is_rather_a_disgrace_and_rip-off_benefitting_only_the_shareholders_and_unsecured_creditors_of_banks

...the Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown. It is pathetic that Congress did not consult any of the many professional economists that have presented - many on the RGE Monitor Finance blog forum - alternative plans that were more fair and efficient and less costly ways to resolve this crisis. This is again a case of privatizing the gains and socializing the losses; a bailout and socialism for the rich, the well-connected and Wall Street. And it is a scandal that even Congressional Democrats have fallen for this Treasury scam that does little to resolve the debt burden of millions of distressed home owners.

And another who has been predicting this collapse is Peter Schiff. Here he is in 2006:

http://www.youtube.com/watch?v=LfascZSTU4o

Q: Just how bad do you think [the recession] is going to be?

PS: I think it's going to be pretty bad. ...whether it starts in '07 or '08 is immaterial, and I also think it's going to last not just for quarters, but for years...

Peter Schiff on 9/26/08:
http://www.europac.net/externalframeset.asp?from=home&id=14136

Sadly, Americans now appear willing to abandon their economic heritage at the first sting of financial pain.

Although passage does seem inevitable, it is nevertheless the wrong thing to do...

The bottom line is that there is no way to resolve our economic problems without a severe recession, and our politicians need to level with the public. As a nation, we gambled on the alluring riches of real estate and we lost. The price must be paid. Contrary to the Bush Administration rhetoric, the fundamentals of our economy are not sound. If they were, we would not be in this mess. Recessions are meant to restore balance, purge excess, and liquidate mal-investments. On that score we have a lot of work to do...

In the end it is impossible for the American economy to be rebuilt on a sounder foundation of savings and production without a lot of economic pain. Government efforts to reinforce the shaky foundation of borrowing and consuming will result in the entire structure falling down around us.

It may be too late, but contact your reps/senators. If they vote for this, vote them out. It's time we had 535 Mr. Smith's (Mr Smith Goes to Washington) on Capitol Hill.

Peak Oil a Theory No More

UPDATE 9/30/08:
Demand destruction is starting to have some impact. The price of oil has fallen substantially, to the point that the price may be artificially low, hovering around $100. The reasons have certainly to do with an overshoot in prices at $147/barrel and the rise in the dollar over recent weeks, but demand destruction plays its role. US crude oil consumption has dropped by upwards of 1million b/d over the previous year,taking some of the edge off demand. The puzzler, however, is world consumption is not yet in negative territory due to demand in Asia, particularly Chindia and every high rises in consumption in many OPEC nations, where gas (petrol) prices are subsidized. Additional downward pressure comes from the holiday seasons - more driving - ending and people getting back into normal routines. That is, the price decline is partly seasonal.

The takeaway is that demand is moderating due to demand destruction in some countries due to high prices, putting some downward pressure on prices, and, theoretically, oil production.

We need to remember, however, that it was only a year ago that $100 oil was considered a death knell for the world economy. The price rise to $147 has made $100 oil seem cheap by comparison. That is a mistake we cannot afford. The same pressure still applies to the economy, now even more weakened by the continuing chaos in the financial sector. This chaos will only continue and grow worse over time. The mortgage defaults have not even peaked yet and housing prices in the U.S. probably have another 15% to 30% - or more - to go till they bottom out. Mortgage defaults will continue through 2011. We're maybe 1/3 of the way through what is supposedly the cause of all this chaos. What this means is the price of oil truly is exacerbating the problem as people are paying much more for fuel and energy now than even a year ago, even with the price correction.

So, don't let the "low" price of oil fool you. It is still a very big drain on the world economy, it is not stopping the growth in demand on the global level, and is an indicator that Peak Oil is still with us. Even global demand destruction can only put off the inevitable. this brings us back to the events of today.

I would expect what happened today to add to demand destruction and start to spread that on a more global basis. I don't expect demand to actually decrease just yet, but the growth in demand should slow further with demand starting to retreat in the not-too-distant future as the global recession/depression takes hold. Great! Less fossil fuels being used means lower prices and a reduction in GHGs, right?

No and maybe. While demand may start falling globally, it may not keep pace with decline in oil production in older fields, and the rising consumption in OPEC and other oil producing nations will reduce exports. What does this mean? For oil net importing nations, Peak Oil is already here,or is just around the corner.

Briefly, old fields fall in their production over time as the oil in the fields is pumped out and the pressure drops to the point that only a small fraction of the peak production can still be extracted, and that only with massive inputs of effort, money, energy and technology. Since a majority of oil produced int he world comes from a very small number of the total fields on the planet, and those fields are all old and in or near decline, the decline rate is accelerating. Dick Cheney, may he roast in hell, stated the decline rate was 3%/yr. in 1999. Up until the last 6 to 8 months, the IEA held the decline rate to be 4.5%/yr. The current popular number is 5.2%, and even that is in question. The IEA will be releasing their most recent estimate in November, and it may be over 6%. We'll see.

This decline rate means we need a minimum of nearly 4 million barrels a day of new oil production each year. We're not getting it. The difference is being made up by unconventional oil (tar sands, etc), natural gas, etc., but oil itself has been flat since 2005. (Even with prices so high? Aren't they motivated to pump more? Yes. They can't.) So, our decline in consumption is not even meeting the need created by decline. Demand will have to fall by 4mb/d to avoid Peak Oil. That may happen, but not tomorrow. But even then, it wouldhave to keep falling because oil production will keep falling, and the rate is expected to accelerate as it already has been doing. 3%, 4.5%, 5.2%.... What's next? Don't know, but at 6% we need to produce or conserve 4.4 million more barrels a day each year just to keep even.

Then there's the net exports problem, well stated by the Export Land Model. This model says oil producing countries tend to have increasing demand at home which reduces exports over time. When the nation in question starts to decline in oil production, the problem only worsens, leading to exports declining at twice or three times the decline rate for that nation. This is a BIG DEAL.

Essentially, it means that oil importing nations like the US are facing Peak Oil now even though world production (of all petroleum liquids) is not falling. (Crude production is flat or falling, remember.) That decline rate, instead of being 5.2% or 6% ends up being the equivalent of 10% or more.

So... think about a world with oil falling at 10% a year. Then think about the financial storm we are now fully into. then think about climate Change and the need to, and cost of, ameliorating that... then add in food and water scarcity...

Don't get complacent. We are just getting started.


Original post:

But, then, it never was. Peak oil production (Peak Oil), or peak any commodity, is a material fact. In this case, a geological fact. There are limits to resources that the Earth holds and limits to how quickly we can produce them. That Peak Oil has arrived is not necessarily news to anyone who has followed what is called "Peak Oil," but it is important because it sets the point in time where the conversation can shift from

A: Peak Oil is REAL!
B: No it ISN'T
A: Yes, it IS!
B: No, it ISN'T!

to

A: Nyah, nyah, nyah, nyah, nyah!
B: Your momma!
A: I told you! I told you! I told you! I told you!
B: You suck! Shut up.

In fact, much as it is now possible to just tune out the lies (Exxon and BuCheney administration 1 2 3 4) and bogus science (Exxon 1 2 3 and BuCheney Administration 1 2) about climate change, we can now just point to the data and return the conversation to solving the problem, leaving Peak Oil denialists babbling to themselves in the corner and chewing mindlessly on their SUV and foreclosed McMansion keys. 1 2 3 4

HISTORY
Let me get to the point. World oil production has hinged on production from the Kingdom of Saudi Arabia (SA) since the first oil crisis in 1973. The primary reasons are two: At the time, the US was the world's largest producer of crude oil and SA was the third largest producer - and had the largest (conventional) crude oil reserves. In 1973 OPEC at that time produced 56% of the World's crude. 1 When they turned off the spigot, it was a serious problem. Historically, SA wanted the price of oil to be at equilibrium between making money and staving off competition. When prices have gotten too high, they have produced more oil. For example, during the 1979 "oil crisis," Iran shut in production, but SA took up the slack and fairly quickly added a million barrels per day (mb/d).

The developed world drastically cut their oil consumption because of the oil crises of 1973 and 1979. Alternative energy, conservation, nuclear, etc., were developing, CAFE standards were rising, Americans started buying economical little cars from Japan - even though they weren't sure about the quality. Jimmy Carter even put solar panels on the White House.

So, SA flooded the market. Additionally, in the late '70's Prudhoe Bay was finally ramping up production and the North Sea began producing in earnest. But the key point is, when they wanted to, they could ramp up production and did. So, in the late '80's and in the '90's we had a flood of oil and prices ranging between $10 and $30 a barrel - too low for alternatives to be developed causing many programs to shut down... and Ronald Reagan had taken the solar panels off the White House.

TODAY
How, then, are prices so high today? Why are alternatives being developed all over Hell's Half Acre? Why do the OPEC nations not only put up with, but invest in alternative "oil" and other energy sources? They can no longer produce at will. I can point you to a number of resources, one of which is a link to the right to comments and claims by Sadat al Husseini, a former head of production at ARAMCO. But the real secret gun, or, more accurately, shot heard round the world (only because people actually LISTENED to this one while ignoring many before it), was a recent article in Business Week. It reiterated what al Husseini had already said: the KSA would never produce more than 12.5 million barrels of oil a day (mb/d). Actually, Business Week (BW) said 12.0. The key to taking the BW article seriously is the source. It purports to have received inside info from a current high ranking employee. al Husseini, you see, is a former employee, thus it was possible to dismiss him as disgruntled. So, the open secret is now just common knowledge: SA can't give much more than it already is.

Why This Is Important
There is a very good discussion of this article by Dave Cohen of ASPO USA, but let me repeat some things he says and add a bit here and there of my own. That is, let me simplify.

1. Oil production = economic development
2. Oil production = food production
3. Oil production = a large percentage of transporation
4. Renewables do not = oil production and are unlikely to take up the slack quickly enough to avoid major economic and social disruptions.

Let's look at a graph of population and energy usage. Pay attention to the green zone. That is the amount of population a pre-fossil fuels world supported and likely would have supported to this day. What developments would we have now that we could also have had without fossil fuels? Cars? Skyscrapers? Food shipped in from all over the world? Cell phones? No. It is an inescapable reality that the world we have created is a direct result of cheap, seemingly abundant, energy.



Look at this graph of global fossil fuels use and economic growth. It's a pretty good match, don't you think? Common sense tells us that without the cheap energy provided by first coal, then oil, we would not have been able to develop as we have. (At least, those of us in the OECD.) Our infrastructure road and cars), the food to feed so many (fertilizers) and even everyday items (look around your house and try to think of something that has no petroleum involved in its production or transport) all rely on oil. Even at $140 a barrel oil is about 16.75 cents a cup or $3 a gallon. You can't get a cup of coffee for anywhere near 17 cents. (h/t Matt Simmons.)

Now look at another graph of the U.S. Energy Information Agency's (EIA) former projected global discoveries of oil world production and actual production. There is a huge difference between the projected and actual. Why? Well, OPEC can produce ad nauseum and we'll keep discovering at the same rate as always! Simple! Sure, simple as in idiotic. All the EIA had to do was look at a graph of past discoveries to know they were blowing smoke up their own arses. So, if we are not discovering more oil at the same rate we once did, how can we expect to keep producing it at the same rate? We can't. Now we have the proof we need to prove this without further debate or argument. If SA is at their limit, the world is at its limit, just as Matt Simmons has been saying.

Take a look at a graphical illustration of the problem. Even though this graph is a couple years out of date, it still accurately reflects the problem. There have been some new discoveries - there always are - but none that are going to change the future because they are too small. Look at all that space under the black line. That's draining world reserves at a rapid rate. Perhaps you've heard of 30 billion barrels found off Brazil? Even if every barrel were recoverable (they aren't) and they could be gotten out in one year (instead of 30 to 50), it would still only give enough oil for the world to use for.... one year. And that's the biggest find in decades.

The assumption has been that OPEC, and SA in particular, could produce at will and would cover future demand growth. Why? Just because. That's right. because they had, it was reasoned, they always would. That was a false assumption. To be fair, one reason the USGS and others bought this lie was because of surious reserves growth in OPEC in the 1980's. Oil reserves in the Middle East/OPEC were doubled over night. Political and economic considerations created the necessary lie. Sadat al Husseini essentially confirmed this by telling us last October that oil reserves were overstated by some 300,000,000,000 barrels. Interestingly, this matches up with the spurious increases in reserves in the 80's.

You say, "So? Who cares? They're pumping enough oil now. Two or three mb/d more from SA sure sounds like a lot to me!!" Except it isn't. As many had suspected, the declining production from older fields is accelerating. Assumed to be 4% a year just one year ago, now the International Energy Agency (IEA) says it is at 5.2% a year. If current all liquids (oil, gas, tar sands, etc.) production is 86.5 mb/d, then we are losing 4.5 mb/d each year. That's almost as much as the US produces and half of what SA produces. Basically, we would have to find, and start producing oil from, a field equal to the biggest field ever found (Ghawar in SA) every year just to keep production flat. As already discussed, that's not happening.

"B-b-b-but there are other places to drill! Other countries to produce!" Yup. And you already know how that turns out. Go back to the graph. Why that decline rate is speeding up? The US - once the world's largest oil producer at over 11 mb/d - has been declining since 1970, less a small bump from Alaskan oil. The North Sea, the largest complex of oil found and developed in many decades has been in decline since around 1999. Mexico, also one of the top ten, has been declining since 2004. Russia, the Number 2 oil producer in the world, started their second decline (their real peak was at the time of the break up of the USSR, which caused a huge decline in production that had recovered until recently) late in 2007. There are no other massive producers, and there won't be.

How can we say there will be no more megaproducers? Imagine a hay stack. In the haystack are 10 basketballs, 100 tennis balls and 1000 marbles. Which are you going to find first? Second? Last? Yes, you will certainly find some of the tennis balls and marbles before you find all the basketballs, but you just as certainly will find all the basketballs before you find all the tennis balls, and all the tennis balls before you find all the marbles. Oil is the same. We're down to a few tennis balls and a bunch of marbles.

And that is why SA peaking by 2011 (their stated goal to reach 12.5 mb/d) is important. That rising production cannot be replaced. We have reached the end of the road with regard to oil production. It has reached or will reach its absolute peak between now and 2012.

What It All Means
As you can see, the peak is nigh, but renewables are decades from being able to replace them 100%. (Keep in mind there are some things only a substance like oil can do. Some things we have and/or do today will be going the way of the Dodo.) The pinnacle of oil production means the end of the world as you know it. A new world will have to rise in its place, or this one will simply die out. Solar is too expensive and not nearly widespread enough. Do you have it? I don't. What percentage of roofs do you see with panels? The percentage is small overall.

What about wind? Those big wind farms? Don't want them around? How about a mini system buzzing in your yard? There are only 105,000,000 households in the US. Surely we can build that many windmills in just three years! Uh... right? Right?! (Sorry, no.)

I know! I know! Ooooh! Pick meeee!!! Biofuels!! Sure. OK. We're making about 23 million barrels a year in the US. We need 31.5 billion barrels a day to replace world oil demand. Good luck with that.

"Hey, what about nuclear," says the heckler in the back. Nuclear, schmuclear, I say. At around 12 billion a pop, building the 1,000 we need in the US and the 10,000 we need around the world is just not doable. And it's not just money, there are steel shortages, there's only one producer of containment vessels who can build something like four a year. Etc.

Time is a problem.

Luckily, the things we do (except for food being turned into biofuels and raising food prices through the roof) for Climate Change are basically the same that we need to do for Peak Oil: reduce, reuse, recycle, localize.

Now that you know peak oil is here, let's not be shy about discussing solutions. Watch for my future posts. Hopefully the next won't be several months coming! In the meantime, look at my TEOTWAWKI and Build Out posts. And don't forget: A Perfect Storm Cometh. Remember to factor in the economic crisis (Can we afford the solution?) and Climate Change (Can we handle all three at the same time?) when thinking about all this.

Famine II

Famine, malnutrition, hunger. I posted in February on problems with world food supplies, prices and possible famine coming as early as this year due to inflationary pressures from oil prices feeding through to costs in food production (97% of the process is petrochemical dependent), not the least of which is the cost of fertilizers, grain and acreage being diverted to biofuels production, and weather-related (Global Warming) reductions in crops produced. All that is still the case. The difference is that the effects were seemingly minor and limited to the very poorest of the poor. That is no longer the case. China, Korea and Japan are all buying up land in other countries to feed their burgeoning populations. Japan has experienced shortages of a few commodities already:

Japan's Hunger

"In the past, Japan was a rich country with a powerful yen that could easily buy cheap imports such as wheat, corn and soybeans," said Mr Shibata, who directs the Marubeni Research Institute in Tokyo. "But with enormous competition from the booming Chinese and Indian economies, that's changed forever. You also need to take into account recent developments, including the damage to crops caused by drought and other disasters in exporting countries like Australia," where the value of wheat exports has tumbled from $3.49 billion to $2.77 billion in the past three years. The situation has been compounded by a surge in demand for bio-fuels such as ethanol, made from maize, encouraging farmers around the world to divert their efforts away from wheat and barley and into maize, further driving up prices.

Arguably Japan's biggest concern, however, is its weakening ability to sustain its population with domestic produce. In 2006 the country's self-sufficiency rate fell to 39%, according to the Agriculture Ministry.

Japan is among the richest nations on Earth. A nation that assumed until recently that it could buy all the food it needed. The rise of China and India has changed that. Food prices are soaring, a wealthier Asia is demanding better food and farmers cannot keep up. In Korea, where they are nearly self-sufficient in rice production, but import 95% of everything else, prices are skyrocketing. Prices went up 3% in Nov. and Dec., 2007, over the previous year. By January, prices were already jumping:

Skyrocketing international prices of oil, gas and grain are making food and household goods more expensive.

"I think I felt better during the 1997 financial crisis," said Yang Young-geun, 53, who has run a Chinese restaurant in southeastern Seoul for 12 years. "It has never felt tougher than today."

As the prices of flour and oil, the main ingredients of jajangmyeon (noodles with black bean paste sauce), have climbed, he said, he no longer makes any profit on the dish.

"The cost of the ingredients to make the noodles has risen from 30 percent to 45 percent of the total cost," Lee said. "After paying salaries to my employees and maintenance costs, I have almost nothing left."

... The 51-year-old owner of a Chinese restaurant in Seocho, southern Seoul, has started selling the noodles at 4,000 won, up 500 won from last year.

"I tried to avoid raising the price by cutting personnel costs, but I could not stand the skyrocketing prices of ingredients anymore," said the female owner, who refused to be named.

"I am afraid to shop these days because the price of everything goes up day by day,"
said Kim Gyeong-soo, a 54-year-old housewife in Jung District, Seoul. "Our family now takes vitamin C instead of eating fruit."

Since then, the things have gone from bad to worse:

The Korean economy is facing a bout of stagflation with lower economic growth at a time of sharply rising prices, a government report said yesterday.

Producer prices rose the fastest in almost 10 years due to increasing costs of crude oil and agricultural products. The announcement came a day after the Bank of Korea said that economic growth will likely be far less than earlier projected.

“Korea’s economy already peaked and is entering a downward phase,” the Ministry of Strategy and Finance said in a report on the overall economy.

Wholesale Prices Make Biggest Jump In Years

Economy goes down, further contraction expected: ministry

Consumer Prices Rose 3.6% Last Month

Around the globe, people are protesting and governments are responding with often counterproductive controls on prices and exports - a new politics of scarcity in which ensuring food supplies is becoming a major challenge for the 21st century.

Damaged by severe weather in producing countries and plundered by a boom in demand from fast-developing nations, global wheat stocks are at 30-year lows. Grain prices have been on the rise for five years, ending decades of inexpensive food.

Drought, a declining dollar, a shift of investment money into commodities and use of farm land to grow biofuel crops have all contributed to food woes. But population growth and the growing wealth of China and other emerging countries are likely to be more enduring factors.

World population is set to hit 9 billion by 2050, and most of the extra 2.5 billion people will live in the developing world. It is in these countries that the population is demanding dairy and meat, which require more land to produce.

"This is an additional setback for the world economy, at a time when we are already going through major turbulence, but the biggest drama is the impact of higher food prices on the poor," Angel Gurría, head of the Organization for Economic Cooperation and Development, said.

A Perfect Storm Cometh... bifurcations... tipping points... complex systems...

In Gurría's native Mexico, tens of thousands took to the streets last year over the cost of tortillas...

Global food prices... rose 35 percent in the year to the end of January, markedly accelerating an upturn that began, gently at first, in 2002. Since then, prices have risen 65 percent.

In 2007 alone... dairy prices rose nearly 80 percent and grain 42 percent.

"The recent rise in global food commodity prices is more than just a short-term blip," the British research group Chatham House said in January.

"Society will have to decide the value to be placed on food," it added...

...A number of governments, including Egypt, Argentina, Kazakhstan and China, have imposed restrictions to limit grain exports and keep more of their food at home.

..."If one country after the other adopts a 'starve-your-neighbor' policy, then eventually you trade smaller shares of total world production of agricultural products, and that in turn makes the prices more volatile," said Joachim von Braun, director general of the International Food Policy Research Institute in Washington.

In Argentina, a government tax on grain led to a strike by farmers that disrupted grain exports.

Vietnam and India, both major rice exporters, announced further curbs on overseas sales Friday, sending rice higher on U.S. futures markets.

...Waves of discontent are already starting to be felt. Violent protests hit Cameroon and Burkina Faso in February. Protesters rallied in Indonesia recently and media reported deaths by starvation. In the Philippines, fast-food chains were urged to cut rice portions to counter a surge in prices.

Trade Minister Kamal Nath of India said Monday that the government was looking to cut duties on food items to rein in rising prices.

In short, the world faces a food crisis and in some places it is already boiling over. Geopolitics will increasingly be affected by shortages and competition for a smaller pool of resources. Let us not forget Japan annexed Korea in 1910 in part to use Korea as a rice bowl. A large portion of Korean rice production was shipped to Japan during the period of occupation. What is to prevent old animosities from rising up a people become hungry, malnourished or even face starvation? A nation like Korea which is pinched between two more powerful neighbors must keep such possibilities in mind. (Not to mention what might happen if the DPRK (North Korea) destabilizes or China decides to have a presence there.)

Climate problems persist and will likely worsen over time. While Australia had a bit of a reprieve from their on-going drought, scientists worry the drought conditions are a long-term, essentially permanent feature of Australia's climate. This is obviously problematic if this loss of production isn't made up elsewhere.

Coupled with the problems of Climate Change damaging food production and Peak Oil transferring food production to fuel production, is this problem of population and wealth, i.e. consumption. That is, the dogma of perpetual growth.

Albert Bartlett (link to the left) warns us of the dangers of never-ending growth.

Build out: The Grid vs. The Household - Towards a Community-based Solution to CC and PO

Originally published on theoildrum.com here in response to this on this thread which all started here. The post has been modified for this space.

The Grid vs. The Household

Some believe we have time before a crash, or, that there will be no crash, but a relatively smooth transition from fossil fuels to renewables. They believe this slow decline in fossil fuels will allow the time needed to build hundreds (the U.S.) and thousands (the world) of nuclear power plants/reactors. However, the assumption there is time and/or there will be no crash is a dangerous one. Failure to prepare to mitigate the effects of a swift decline in energy will almost certainly lead to disaster. We must look at risk.

When we can provide a huge amount of power for a fraction of the cost and time needed to build up our nuclear grid to a level that will protect us from oil production decline, why would we not do it? Nuclear plants take years to build and require very skilled workers that must be trained. In Return to Olduvai they estimate a minimum of 20, and an upper end of 90, new reactors and/or power plants per year. At 5 - 12 billion each. That's up to 12 TRILLION dollars for the U.S. alone. But where is it written the backbone of our power grid must be built before the localized, household-based renewable infrastructure? Why shouldn't they be built concurrently, at least?

My proposal is intentionally localized due to the high degree of certainty (my certainty, not a consensus) that neither the government nor the market will be able to handle this in isolation. You have the perfect example in WWII. Victory gardens weren't just a good idea, they were necessary for continued good nutrition. The same went for resources, which led to rationing and recycling.

My position on global warming is the same. The best thing we can do is build nuclear reactors to displace coal power plants.

How can the best we can do be something that is unsustainable? Nuclear plants will need replacing two or three times a century at a current cost of billions per. The localized grid will, too, but, again, you are looking at a very small fraction of the cost for the same degree of replacement. For the same billions per *one* reactor we can supply a good fraction of the total power generation needed and leave the robust solutions for backbone, greatly reducing the number of large plants we need. If we add to this equation lifestyle changes of reducing, recycling, reusing and localization, all the more so.

I would argue, in fact, that meeting the localization goal is more important because it deals with the real issue: consumption. A massive localization drive could achieve partial energy autonomy for every household in the US within a period of a few years, not decades. It would have the added benefit of *requiring* lifestyle changes with concomitant savings of energy by reducing use via the renewables and behavior changes. However, if we assume we have a 5 - 10 year period before the shit really hits the fan, then the current grid supplies the backbone as the new backbone is built out. Under this scenario, deprivation may be eliminated for some or all over that initial time span.

Additional benefits occur from the localization of the household-based energy build out. In order to achieve this, there will be flexibility needed. Economies of scale interfere if we just assign a few companies to build all the windmills, heat pumps, solar panels, retrofitting materials for homes/apartments/businesses, etc, needed. No, the key to the plan is that it be localized solutions built out by local people wherever possible. This means, for example, the scavenging of materials needed everywhere and anywhere possible, rather than the manufacture of new materials. In the cities, we would likely need to commercialize the process a bit, but hopefully only to the level of resources. I imagine a return to the days of barn raising, but with windmills, etc.

By making this a community-based process where community solutions are customized by the community with assistance from knowledgeable locals or other reference persons/professionals, we instantly integrate the whole system into a localized whole. This might have the added benefit or reducing the need for relocation. A localized solution of this magnitude would save incredible amounts of financial resources. Those resources might be applied to some of the macro level solutions (things other than backbone) that certain communities, such as cities in the southwest dealing with water shortages, might need.

If real net oil production declines of 4% or more a year set in, we will never have the opportunity for [a nuclear and/or BAU grid-type] plan. My plan would have a good chance of succeeding whether those declines come or not. This is simple risk analysis.

I realize a great deal of interest and even fun comes out of the intellectualizing entailed in the intellectual process we are all engaged in at TOD to deal with Peak Oil and Climate Change, but the time for chat and brainy ideas is quickly passing, if it has not already passed us. I hope to encourage people to begin narrowing the conversation to the realities at hand and try to get to some conclusions before the decisions are taken out of our hands by circumstances.

Tom Whipple serves up a similar view of the future. His article doesn't deal with the sequence of events, but does outline a vision of where we may end up, albeit not in a collapse scenario, per se.

The Peak Oil Crisis: Catenaries and Pantographs

As the availability of liquid fuels dwindles, those supplies that remain will be increasingly allocated to uses for which there are no readily available substitutes -- such as powering aircraft and ships. Electric power for land vehicles appears to be the most realistic option for the present...

...For the immediate future only electricity, which can come from conservation of existing power production, nuclear power stations and renewable sources, appears to be the most likely power source for land vehicles.

Powering cars and light trucks with electricity does not seem to be an insurmountable problem provided that one is willing to live with their limitations...

The U.S. currently has some 230 million light vehicles in its fleet... these vehicles are simply going to be abandoned...

...At the rate our natural resources are running out, however, it is doubtful we will be building and selling 100’s of millions of non-fossil fuel cars in the foreseeable future.

...new rail lines would... use diesel-electric power initially... electric-powered railways coupled with short haul electric trucks, busses and cars...

...One idea... was to repower our long-haul trucks with electric engines, some battery capacity, and pantographs to contact overhead wires...

...We already have some 2 million 18-wheelers in America and one would hate to see them scrapped for lack of fuel.

...When affordable liquid fuels dry up, we are going to be left with a lot of vehicles and their infrastructure that will no longer be of use. With a little imagination, time, and money, much of this stranded investment can become useful again. There certainly will be powerful incentives to introduce whatever works.

The abandoned vehicles and infrastructure could instead be intentionally converted, before abandonment in at least some cases, to be used in the build out I outline above.

I agree with Tom:

In its day, the internal combustion engine was a wonderful device that served us well for over a century. That day, however, will soon be over. It is time to start thinking about and planning for alternatives.

Other articles by Tom Whipple can be found here.