How much longer can Industry survive in its present form?

[Magnus]

Hello,

I?m new to Powerswitch but have been reading about Peak Oil for over a year now. It is only a gut feeling, but I can see the consequences of PO becoming more dramatic in 2006, and would love to chat with some sane individuals. There is only so much eye rolling and smirking one can put up with when the subject of Peak Oil comes up.

I work in the pharmaceutical industry and was chatting with one of our new starters about why he wanted a job with GSK. He replied that he thought there was a good chance the UK was heading into a recession in the next few years and that GSK would be one of the safest (i.e. job security) companies to work for. I don?t think GSK would qualify as a ?canary in the mine shaft? type of company but he has got me wondering just how safe the pharmaceutical industry is.

From an insiders point of view the amount of waste is horrifying, especially plastic. Raw materials are shipped in from all over the world; the chemical plants, which used to make the raw ingredients for drugs in the UK, have closed down years ago. The amount of energy usage is also large given that the site is run on a 24/7 basis. However as long as all these things are available and can be bought I?m sure GSK will be OK in the short term at least.
I?ve noticed the production side of GSK is surprisingly dependent on specialist engineering firms to produce a lot of technical equipment, including spare parts for machines. The company does not keep a large stock of spare parts and surprisingly often an entire line can be shut down for want of a small widget!
I?m really not sure exactly where GSK?s Achilles Heel lies but I can see many potential cracks in a company like GSK and there is only so long you can throw money at something. Another crack is the constant increase in complexity in regards to computer systems and the introduction of bar codes and RF scanners to keep track of all stock movements. Should these go badly wrong nobody would know what to do. We are so tied up in validated methods of working according to US and EU regulations it is far from easy to switch to a simpler less computerised way of working.

It?s been interesting to see that many of the site corridor lights have been fitted with movement sensors and there is at least a half hearted effort to save energy even if these only consist of slogans on notice boards.

Just for the hell of it I decided to email the Site director about how GSK was preparing for the ?big freeze? this winter and Peak Oil in the long term. On the first question he said he thought the government would give GSK priority over other industries for energy supply because of the nature of the business (saving lives). On the second he sidestepped the question by hinting Peak Oil was just a replay of the high prices of the 1970?s and not to worry, at least yet.

I would be fascinated to hear from anyone in a specific industry or business who can see cracks appearing, which may soon threaten jobs and the economy.

Magnus

[EmptyBee]

Hi Magnus, and welcome.

Personally I don't see any significant impacts in my work yet, in fact there are regulatory pressures to be increase energy inefficiency.

I think that considering we're living in a globalised economy the big picture is probably more significant than anecdotal evidence of crisis in the plastic toy industry or whatever.

From the Fortune 500:
(The World's biggest companies revenues and their profits in millions of dollars)

• Revenues/Profits ($millions):
  
  1 Wal-Mart Stores: 287,989.0/10,267.0
  2 BP: 285,059.0/15,371.0
  3 Exxon Mobil: 270,772.0/25,330.0
  4 Royal Dutch/Shell Group: 268,690.0/18,183.0
  5 General Motors: 193,517.0/2,805.0
  6 DaimlerChrysler: 176,687.5/3,067.1
  7 Toyota Motor: 172,616.3/10,898.2
  8 Ford Motor: 172,233.0/3,487.0
  9 General Electric: 152,866.0/16,819.0
  10 Total: 152,609.5/11,955.0
  11 Chevron: 147,967.0/13,328.0

From http://www.fortune.com/fortune/global50 ... ,1,00.html

5 of the top 11 are oil companies. 3 of these oil companies are also among the biggest profiters/profiteers this year. Toyota (makers of the hybrid Prius) are the most profitable of the auto manufacturers there. General Motors' puny $2.8 billion profit has promoted plans for rationalisation; shutting down a dozen facilities in the US.

Biggest Money losers:

1. Viacom - MTV, Paramount CBS among others...
2. Vodafone - 3G not going according to plan - the CEO is expected to resign
3. AT&T - US telecommunications
4. Delta Airlines
5. UFJ Holdings - Japanese bankers

It's interesting to note that if you buy into the hype that we're turning into 'information economies' the biggest losers doesn't exactly bear that out - the top 3 losers are all in communications or the 'information' industry you might call it. Then there's the second largest airline in the world which declared bankruptcy this year...

Meanwhile the biggest profits:

1. Exxon Mobil
2. Royal Dutch/Shell Group
3. Citigroup
4. General Electric
5. BP

A slowdown in the housing industry, which lacks any really significant corporate players could be responsible for hundreds of thousands of job losses in the next few years in the states. Imagine what would happen if the global housing bubble actually burst, or even suffered a significant 'correction'. Consider that this has been the major source of growth in wealth amongst individuals in recent years and been responsible for something like 40% (IIRC) of job creation in the supposedly recovering US economy; expanding what Jim Kunstler calls the 'biggest misallocation of resources in the history of the world'. The servicing of suburbia is of course the province of the World's biggest corporation: Wal-Mart. I think the fate of Wal-Mart is obviously very much tied up to the fate of the housing industry and the health of the globalised economy.

In short it looks like it's a good time to be into energy efficiency and energy production but not so much in finding new ways to consume energy.

In the long run though I can't see a very healthy future for any economy that depends upon cheap energy.

I was struck by the relevance of much of what was discussed in the excellent documentary The Corporation.

"I'm drawing the metaphor of the early attempts to fly. The man going off the end of a very high cliff in his airplane with the wings flapping, and the guy is flapping the wings and the air is in his face, and this poor fool thinks he is flying, but in fact he's in free fall and he just doesn't know it yet because the ground is so far away. But of course the craft is doomed to crash. That's the way our civilisation is. The very high cliff represent the virtually unlimited resources we seemed to have when we began this journey. The craft isn't flying because it's not built according the the laws of aerodynamics and is subject to the law of gravity. Our civilisation is not flying because it's not built according to the laws of aerodynamics for civilisations that would fly. And of course the ground is still a long way away, but some people have seen that ground rushing up sooner than the rest of us have. The visionaries have seen it and have told us it's coming." Ray Anderson (CEO of Interface)

The visionaries Ray Anderson was talking about were climate scientists and ecologists, but they could be extended to include the 'visionaries' predicting Peak Oil. Our civilisation is predicated on sustained economic growth. Sustained economic growth isn't sustainable.

[isenhand]

and would love to chat with some sane individuals.

None of those here. Given that sanity and insanity is defined by the majority and the majority believe oil is an infinite resource and you can maintain infinite growth with finite resources. I don?t think anyone believes that here so by definition we are all insane.

I would be fascinated to hear from anyone in a specific industry or business who can see cracks appearing, which may soon threaten jobs and the economy.

Magnus

I can only say from my limited experience with software in Sweden that things were going nicely till the hurricane. The company I was working for was expanding new orders were coming in and then it all died and most people either left the company or have been made redundant this autumn / winter. Not sure if that was all to do with the oil prices or poor management helping out.

As to how long can industry continue as it is? Well, I wouldn?t predict the future but it could continue for quite some time. Things may even get better in th short term as a result of PO so it could continue for our life times. On the other hand, we may already be seeing the decline of industry as we know it.

[biffvernon]

One of the industries that is most directly dependant on fuel price is glass making. Most of the big firms, Pilkington in UK, St Gobain in France, Guardian in US, have added a 'fuel surcharge' to their prices. SInce they seem to be doing this in concert there have been various investigations by anti-competition authorities including the EU. My glass supplier has just told me that they are passing on the costs in the form of a 10% price rise in January.

[Magnus]

EmptyBee wrote:

Imagine what would happen if the global housing bubble actually burst, or even suffered a significant correction.

I always keep half an eye on the US news reports on Matt Savinar?s site for my daily dose of pessimism and it doesn?t look too far off now. I agree with you that the bigger picture gives a more reliable view of the global economy but it is interesting to hear from people in industry. I would love to hear from someone who worked at Hemel Hemstead. Michael Rupert suggested it was no coincidence there had been a few explosions at refineries and fuel depots in 2005. His theory being there was no significant return on investment to build more, yet increasing demand has put a strain on the existing sites. There has been pressure to cut corners with regards to safety checks, and routine maintenance shutdowns. I wonder if this is true in the case of Hemel Hemstead?

EmptyBee wrote:

Our civilisation is predicated on sustained economic growth. Sustained economic growth isn't sustainable.

Absolutely, it is such a simple idea, perhaps much too simple for many people to grasp. It was Albert Bartlett who really nailed this one home for me. He has a wonderful quote which always raises a few eyebrows: ?The single greatest shortcoming of the human race is the inability to understand the exponential function.? Just in case you haven?t heard him lecture and would like to here are some links:
http://www.globalpublicmedia.com/lectures/461
http://www.globalpublicmedia.com/interviews/596
I enjoyed the film the corporation and especially the quote by Ray Anderson at the end. I keep wondering how soon it will be before we hit the ground?

[Magnus]

One of the industries that is most directly dependant on fuel price is glass making. Most of the big firms, Pilkington in UK, St Gobain in France, Guardian in US, have added a 'fuel surcharge' to their prices. SInce they seem to be doing this in concert there have been various investigations by anti-competition authorities including the EU. My glass supplier has just told me that they are passing on the costs in the form of a 10% price rise in January.

That's interesting and a little alarming. Post peak I would imagine glass will be vital for localised greenhouse agriculture and very useful for food and medicine storage containers.

[Magnus]

None of those here. Given that sanity and insanity is defined by the majority and the majority believe oil is an infinite resource and you can maintain infinite growth with finite resources. I don?t think anyone believes that here so by definition we are all insane.

Point taken. About as 'insane' as the young child who saw the emperor was wearing no clothes then. Fine by me.

[EmptyBee]

EmptyBee wrote:

Our civilisation is predicated on sustained economic growth. Sustained economic growth isn't sustainable.

Absolutely, it is such a simple idea, perhaps much too simple for many people to grasp. It was Albert Bartlett who really nailed this one home for me. He has a wonderful quote which always raises a few eyebrows: ?The single greatest shortcoming of the human race is the inability to
understand the exponential function.?
...
I enjoyed the film the corporation and especially the quote by Ray Anderson at the end. I keep wondering how soon it will be before we hit the ground?

I agree, Albert Bartlett really opened my eyes on the true meaning of exponential growth, along with Limits to Growth: The 30-year Update.

It was amazing to me how a knowledge as simple as understanding the exponential function opened my eyes to so many problems that are inherently growth related, or related to growth in the wrong areas at least.

It amazes me even further that people we're expected to trust to deliver solutions to these growth related issues - such as Lord Browne of BP express no understanding or appreciation of growth in their public statements.

From the introduction of the BP statistical review of world energy 2004:

At current levels of consumption there are sufficient reserves to meet oil demand for some 40 years and to meet natural gas demand for well over 60 years.

Talking about the life expectancy of resources "at current rates of consumption" is nonsense in this context; doesn't he know that means zero growth?

So yes, thumbs up to Dr. Bartlett.

[biffvernon]

It was amazing to me how a knowledge as simple as understanding the exponential function opened my eyes to so many problems that are inherently growth related, or related to growth in the wrong areas at least.

Curiously, and worryingly, such is our National Curriculum that a pupil can get a Grade A in mathematics GCSE without meeting the phrase 'exponential function, let alone understanding it. Feedback and itteration are other important mathematical concepts completely ignored in British school education.

It amazes me even further that people we're expected to trust to deliver solutions to these growth related issues - such as Lord Browne of BP express no understanding or appreciation of growth in their public statements.

I wonder if Browne's lack of expression of the matter is because he is employed to maximise BP shareholder value in the short and medium term. It's not his job to frighten the horses. Whether this is an ethical position is, of course, another matter. In his book 'Half Gone' Jeremy Leggett seems to suggest that Browne's understanding goes beyond his public statements.

[isenhand]

Curiously, and worryingly, such is our National Curriculum that a pupil can get a Grade A in mathematics GCSE without meeting the phrase 'exponential function, let alone understanding it. Feedback and itteration are other important mathematical concepts completely ignored in British school education.

Hmm ? sounds like you are under the impression that the education system is there to educate people, which it isn?t. Its primary function is the transmission of culture. Make sure everyone believes in and supports the system. To help insure that the masses are not going to be any trouble. The next job of the education system is to equip people with the skills they need to do the work required by industry so they can fit in to their work place, stand in line and do as they are told.

In other words it?s a means to keep people under control not to enlighten them.

I wonder if Browne's lack of expression of the matter is because he is employed to maximise BP shareholder value in the short and medium term.

Not only is he employed to do that he has a legal obligation to do so.

[jev]

Hi Magnus - I really wouldn't get into the prediction game on PO if I was you! It's just not worth it. No one knows the true figures, either production or reserves, most peak predictions are therefore little more than guesses, there's no real significant supply problems yet (even with the gulf of Mexico shutdown - but this may of course be down to using up stored reserves?), but the market is tight. The only thing we know is that it's going to happen! As for the huge price increases that everyone assumes. There's surely no guarantee of this. The petroleum traders will still have a heck of a lot of oil to sell for a long period of time yet. It is not in their interest to destroy demand by bidding the price up to ridiculous levels, the market will only stand so much. I'm a believer that the prices will rise - they may well jump to new highs and then settle to a new base level as some demand is cut by efficiencies etc, then if the economic circumstances allow prices will rise again and settle on a continuing basis. Matt Simmons has made the point that most people could easily afford to pay a lot more for their fuel, by not buying other non essential items, so who knows what might happen, it's all guesswork! One point I would like to raise however (which has been brought home to me reading some money supply/economics books) which is seldom talked about is the effect the money supply has on price. Most people don't realise that the Federal Reserve (and most central banks) is a private bank that basically invents money when (for example) the US government needs to borrow it and charges the borrower interest on the amount invented. This has the effect of inflating the money supply, which in effect lessens the value of every dollar in circulation at that point. Many economists argue that it is central banks and governments who create inflation as the banks lend money to the governments to pay their bills (as governments are usually too scared to tax their citizens to the level required with existing money). If you follow these economists, their argument is that fundamentally inflation or deflation is caused by a growth or contraction in the money supply, the supply of which is controlled by privately owned central banks and their interest rate policy. The whole system is based on debt and it's the men at the top (the central banks) that we owe it all too. When you realise this it might be more obvious why the US leadership don't seem too bothered about their incredible level of debt. They could easily make this debt far less (in real terms) by flooding the market with dollars, which would create inflation, have a dreadful effect on most peoples lives, but make the men at the top collecting the interest on the money even more powerful and I doubt if they would be too concerned about us plebs who make up most of the human race! This is a very simplistic example, but I would really advise people to look into the money supply issue far more as you begin to realise when you do that we are all at risk of having the rugs pulled from under our feet by the money changers, it's happened many times in the past before, many major historical figures have made scathing remarks about private central banks and how when governments allow these shadowy organisations control over printing currency for interest we are giving up our basic freedoms for debt slavery. There will, I am sure, be some role for monetary policy to play in the economics of post peak oil. Also I'd advise anyone to look into the practices of the world bank/IMF and their similar 'robin hood in reverse' policies before they start singing along with Geldof's and Bono's make poverty history campaign. All these organisations are ultimately about concentrating power and wealth.

[Magnus]

Hi Jev,

I really wouldn't get into the prediction game on PO if I was you! It's just not worth it. No one knows the true figures, either production or reserves, most peak predictions are therefore little more than guesses, there's no real significant supply problems yet (even with the gulf of Mexico shutdown - but this may of course be down to using up stored reserves?), but the market is tight.

You are right of course; there are so many variables its mind boggling. But still those of us with limited resources, who want to prepare for a post peak world in some practical way, have to come up with an educated guess of what the future holds. I sold my house in Calne (Wiltshire) a year ago and invested what little I had left in gold. Prior to reading about peak oil I thought a property which I could rent out and have the mortgage paid in 15 years would make an excellent pension in an uncertain future. Perhaps I was wrong to sell but it was my decision based on the best information I had at the time. Some of us face questions such as do I buy a polly tunnel or greenhouse now or wait a couple of years? The problem being that they may be too expensive in a couple of years. I don?t know the answer but I still have to make a decision which could have consequences.

In a world where the ?men at the top? make the rules and ?us plebs? do the best we can in a rigged game there is a certain satisfaction in trying to understand the underlying reality of things, how things will unfold and take action accordingly(knowing full well we could be wrong).

I?ve often tried to understand to a limited degree the way banking and money works. It does seem like something of a black art where the banks are like a black hole sucking in interest on non existent money and forcing everyone to plunder the earths resources to pay back the interest. The banks do seem to be the institutional heart of what makes our modern culture a cancer on the planet. It is all made possible through a seduction or hypnosis that continual growth is possible and our birthright is to have more and better?I must admit however that I find it hard to conceive of a workable alternative, except for barter system. This is more a reflection of my lack of brain power than anything else. I?m currently working my way through the topic of Why can?t we use money? In the Living in the Future Forum.

Just out of curiosity does anyone know how the Inland Revenue and government would react to an individual who dropped out of the system by working a bit of land they owned and bartering the produce they grew for all their basic needs(food clothing & shelter etc)? It is of course a purely hypothetical question. Their official status would be ?unemployed? I guess.

[isenhand]

Hi Jev,

I really wouldn't get into the prediction game on PO if I was you! It's just not worth it. No one knows the true figures, either production or reserves, most peak predictions are therefore little more than guesses, there's no real significant supply problems yet (even with the gulf of Mexico shutdown - but this may of course be down to using up stored reserves?), but the market is tight.

You are right of course; there are so many variables its mind boggling. But still those of us with limited resources, who want to prepare for a post peak world in some practical way, have to come up with an educated guess of what the future holds.

Not knowing what the future has in store I would suggest a risk management policy. That is, make a good guess of what possibilities there are for the future and make some flexible plans to handle the possibilities. In the end the scenarios you chose will probably never happen but having the plans in place is still good as what will happen will probably be close to the possible scenarios that you can modify your plans to fit the real situation as it unfolds.

In a world where the ?men at the top? make the rules and ?us plebs? do the best we can in a rigged game there is a certain satisfaction in trying to understand the underlying reality of things, how things will unfold and take action accordingly(knowing full well we could be wrong).

I would rather do something and be wrong than not do anything at all and be right.

I?ve often tried to understand to a limited degree the way banking and money works. It does seem like something of a black art where the banks are like a black hole sucking in interest on non existent money and forcing everyone to plunder the earths resources to pay back the interest. The banks do seem to be the institutional heart of what makes our modern culture a cancer on the planet. It is all made possible through a seduction or hypnosis that continual growth is possible and our birthright is to have more and better?I must admit however that I find it hard to conceive of a workable alternative, except for barter system. This is more a reflection of my lack of brain power than anything else. I?m currently working my way through the topic of Why can?t we use money? In the Living in the Future Forum.

Just think of banks as debt merchants and a loan is a debt to the bank to be paid at a later date. You can always just make debt out of thin air and the banks do. Money is just a certificate to say that the bank will honour the debt so if you have money you have a certificate of debt that you can use to exchange for other goods. Of course, the debts can never be repaid but so long as you don?t tell anyone and we all go along believing it will be then the system works.

Now, every time the bank gives out a loan the put new debt into the system and the system grows. Every time a debt is repaid it disappears from the system. So long as the amount that disappears is the same as that that in generated then the system is in balance but that is not the case. Debt grows, and so does the system.

To me, you can have a sustainable system that has any form of growth in the money system. That means no profit and most likely no loans. What kind of economy would we have then? Personally I think we want to go back to the beginning and ask why ware we using money in the first place? What do we want to gain from it?

I think we can come up with abetter way to regulate the production of goods. I the end the system I like is one based on energy. After all, energy is the common need to all processes and you can not produce more than what you have energy for.

Just out of curiosity does anyone know how the Inland Revenue and government would react to an individual who dropped out of the system by working a bit of land they owned and bartering the produce they grew for all their basic needs(food clothing & shelter etc)? It is of course a purely hypothetical question. Their official status would be ?unemployed? I guess.

If you have no income then you pay no income tax and, as the tax office is just a bureaucracy, it is of no interest to them if you barter or not unless it comes under some tax of gifs etc..

[jev]

Hi Magnus & Isenhand - Very good replies. I wasn't trying to say that we shouldn't try and 'predict' the future! I think those of us who wish to suck in as much knowledge about world affairs as we can, rather than watch Eastenders and read the Sun (if you know what I mean - half the population of the UK offended there!), are in a far better position to apply a 'risk management policy' (as Isenhand states) to likely future scenario's. We are, if you like, already applying a post peak mentality to our minds that 99% of the population wouldn't even have a clue about, this gives us a much more realistic mind set in my opinion. Isenhand is quite right that it is for all of us to do something (and at worst be wrong) with the knowledge we can gain than just sit back and let the system overwelm us. However I take the view that we need to pull together as communities/society rather than 'hide in caves' as atomised individuals or small groups. I was just throwing up the currency argument because the more i've read about the financial side of things the more i've realised that those who print the money have an ability to 'play magician' (to a degree) with an economy. As most people should realise, very few markets are actually anywhere near free - there's vast government spending even in the west, governments intervene in share, currency, commodity markets etc - therefore I predict (!) there will be some weighty unseen plays by governments/central banks in the peak story!

[isenhand]

However I take the view that we need to pull together as communities/society rather than 'hide in caves' as atomised individuals or small groups.


I think that there are a few people who like the community solution and have been working in that direction. Isolated communities would only be a survival stratagem not a final solution so I?m very keen on the idea of linking them together (if you have seen my site). There also needs to be some work towards people in the cities as we can?t all run of the country. Ruralisation is a step in that direction.

I predict (!) there will be some weighty unseen plays by governments/central banks in the peak story![/quote]

Yes