Thursday, October 29, 2009

The Effects of the Crisis - Part 2


Picture: Our identity as consumers is deeply entrenched. Culture Jamming highlights this by deconstructing, playing with and questioning the things that we usually take for granted.

This is the second part in a set of texts about the losers of the American economical crisis. In the previous text, I laid the foundation to this series of texts and described the connection to oil and peak oil. I also described changing habits among Americans who are not personally hit by the crisis, but who nonetheless have chosen to limit their consumption. In this text I move on to those that do no have the choice to continue consuming as before, but are forced to consume less.

Suddenly they notice that the habit of buying whatever you want whenever you want it - a habit that was taken for granted until recently - is no longer an alternative. In order to be able to give her daughter all the gifts she wanted for Christmas (and these gifts were neither small nor few), the young mother Kristen realized that she had to abstain from the designer jeans she wanted for herself. Personally I struggle to see this as the "sacrifice" it was described as in the article in question. But you get some clues to the perceived importance of belongings when mommy Kristen says: “I want her to be able to look back, and say, ‘Even though they were tough times, my mom was still able to give me stuff.’ ” One can easily get the impression that Kristen confuses "stuff" with "love". Whatever the reasons, this translates into problems for shopping malls and the retail business in the USA.

The tendency that you can no longer get what you want whenever you want it is exemplified on a smaller scale by the coffee franchise Starbucks. They have presented sobering economic results, and have started to close down coffee shops. Where people previously did not think twice about buying a four dollar "Grande Mint Chocolaty Chip Frappuccino® blended creme with Chocolate Whipped Cream", many now abstain from buying at all, or buy their coffee where it is cheaper. Last summer it was announced that 600 of the 12 000 cafés in the US were to be closed (but new coffee shops were opened elsewhere). In the beginning of this year the time had come to close down a further 300 coffee shops (just Manhattan had previously hosted 200 Starbucks coffee shops). In a humorous article in Newsweek, an even closer connection between Starbucks and the global financial crisis is made:

"I propose the Starbucks Theory of International Economics. The higher the concentration of expensive, nautical-themed faux-Italian branded frappuccino joints in a country's financial capital, the more likely the country is to have suffered catastrophic financial losses. [...] My tentative theory: having a significant Starbucks' presence is a pretty significant indicator of the degree of connectedness to the form of highly caffeinated, free-spending capitalism that got us into this mess. [...] The fact that the company [...] felt there was room for dozens of outlets where consumers would pony up lots of euros, liras and rials for expensive drinks, is also a pretty good indicator that excessive financial optimism had entered the bloodstream."

If we move towards the nitty gritty details of everyday life, I already last autumn read about how economically strained families cut down on daycare expenses for their children. If you lose you job, your children might simply have to stay at home until mum or dad finds a new job, and if you involuntarily have your working hours cut down, children might be in daycare for only a few days a week. It is worth mentioning that daycare can be very expensive in the US. According to the National Association of Child Care Resource and Referral Agency, the average cost of daycare is between 3 400 and 10 800 USD per year. I pay around 2000 USD/year for full-time (heavily subsidized) daycare here in Sweden and the cost for the second child is only 500 USD/year. And I pay the maximum amount - if your family income is lower, you get away with paying less...

If you have two or more children in daycare, it's doubtful whether (usually) mum's less well-paid job pays enough to cover the extra expenses that goes with professional work (formal clothes for work, gas, maybe an extra car etc.). ”In every state in the country, the monthly child care bill for two children is higher than median rent payments and as high or higher than a mortgage.” Expensive and pedagogically excellent daycare centers that earlier boasted long waiting lists now see these waiting lists as well as the number of children attending melt away. Some fear that more children will now attend lower-quality daycare that can be described as "parking lots" for children. Also (expensive) private schools have felt the same problems.

We can now also see a trend in the opposite direction, when (highly educated) American women who previously had chosen to stay at home, feel obliged to return to the labor market when their spouses become unemployed, start fearing for unemployment or have their salaries lowered. Alternatively, the value of the family's investments and/or house have now reached a level they don't feel comfortable with. This is to some extent a luxury problem affecting those that earlier had the choice not to work:

"Several studies have found that two different groups of women are likely not to return to work after giving birth: affluent ones and poor ones unable to afford child care."

Americans in the upper middle age (the Baby Boom generation) also start to worry that they don't have enough to live comfortably for 20 years after they retire. According to the Center for Retirement Research, a pensioner needs approximately 75% of his earlier income to continue to live at the same standard of living:

"while lower-income workers face a worrisome retirement reality all their own, middle- and upper-middle class workers likely face the biggest living-standard shock. That's because lower-income people can replace a good chunk of their preretirement income with Social Security, and high-income people generally have enough personal savings. But middle-class workers may see their relatively comfortable life change drastically come retirement."

None of the "traditional" ways to save money for retirement - all of them different models of investments in a growth economy - have managed to withstand the crisis. On average, the investments of the middle class have lost 40% of their value. Those who now have seen almost half their savings disappear feel betrayed by brokers, banks, funds, stock analysts, auditors, the financial authorities, the central bank and CEO's.

In the last two years, the age at which Americans expect to retire has increased with two years, and at a time when they should be free from debt and plan for lower incomes, many find themselves heavily in debt. The wealth that the elderly have is often tied to the house they live in - a house that has lost in value and today is hard to sell. Even elderly who already had retired, now find themselves at work again: "here they are, many in their 60s, 70s and beyond, desperate to find work so they can keep a roof over their heads and food on the table."

The sceptical reader might ask: 'but haven't stocks gained in value this year?'. Shouldn't this compensate for the earlier losses? Unfortunately the answer is 'no', especially for elderly who are currently living on their savings:

"Sure, the S&P 500's almost 35% rebound since March is good news, but it's not enough to make savers whole. From its peak in Oct. 2007 through this March, the S&P 500 lost almost 49%. Shave 49% off a $100,000 investment and you'll need a 96% gain just to get back to even. Younger savers can overcome that hit with time, but it's a lot tougher for people close to retirement, and nigh impossible for retirees forced to pull money out to live on".

I touched upon the new frugality and the changed attitudes towards spending money in the previous text and I return to the topic here. Many people have been letting the things they buy communicate taste, interests and values. Carolyn Baker discusses this in a text about shopping, consumerism and identity:

”buying and consuming have become part of the national culture and offer people an identity - the identity of a consumer, which -many will now be forced to abandon. Additionally […] people have come to believe that they are what they buy, and the more expensive and coveted brand or product makes a statement about who one is. […] for some, the inability to consume may be creating a fundamental existential crisis in terms of losing one's identity. "

The economical crisis undermines a life style built on spending money. To be forced to shed expensive habits and having to buy less is painful for some, and has been compared to drug withdrawal. At the same time, individuals who change their habits and take control over their economy step by step notice that they stand on a new and more stable ground and may feel a new confidence - even if they are on a materially lower level than before. It is also likely that the longer and more lasting the economical crisis, the deeper and more lasting will the (psychological) effects be for years and decades to come

Psychologists have noticed that traumas can cause changes in behavior, and the deeper the trauma, the bigger the changes. A near-death experience often makes people fundamentally change their attitude towards the importance of material success compared to personal development and relations. If you lose your job during a short-span economical downturn, it is easy to regard this as an isolated and random event with little connection to habits, attitudes and values. But to the extent that many now go through "economical near-death experiences", this might lead to a fundamental shift of values in many people. Half of all Americans now feel that they would have economical problems within one month after losing their job, and this is an uncomfortable feeling that is difficult to forget once it has taken root. Especially in combination with knowledge that this has already happened to friends, neighbors or relatives.

Some go one step further and become "economic survivalists". I now make a short diversion and return to the topic of last week; people who voluntarily cut down their expenses and choose a lower economical standard rather than being forced to do it (against their will). Nonetheless, I think the examples below are interesting since some of the proposed measures are still unthinkable for most people, but might very well become necessary for increasing numbers of individuals in the future.

The Wojtowicz family in Michigan “disconnected the satellite TV and radio, ditched their dishwasher and a big truck and started buying clothes at resale shops. ’As long as we can keep decreasing our bills, we can keep making less money’ ” says daddy Wojtowicz. His job as truck driver previously took him away from home for weeks on end, and when the salary started to shrink, the family decided to drastically change their lifestyle. Since then, they have bought pigs and chickens, and they plan to start growing food and to buy a wood stove. They have less money today and live more frugally, but are rewarded with more time together and they feel safer and sleep better at night.

In spite of their frugal lifestyle, they are outperformed by Jim Merkel, author of the book Radical Simplicity and the website Since Jim consciously makes sure he earns less than 5000 USD per year, he doesn't have to pay any income tax. In spite of the fact that 400 USD per month sounds like a very moderate amount of money, more than half of the world's population get by on a tenth of that sum, or 40 USD per month...

Merkel lives in a 20 m2 large cottage in Vermont and he eats mostly organic food that he has grown himself. He is no lunatic, but a conscientious person who in his "earlier life" worked as an engineer selling weapon systems, but who step by step and over a longer period chose to live the consequences of his convictions. The article about him is well worth reading. Merkel is rational but extreme and the economical crisis has completely passed him by (since he has voluntarily decoupled from the mainstream global economic system). Merkel is a survivor who surely would survive on eating bark from trees in the forest, but in spite of having gone further than 99.99% of all westerners, there are many interesting thoughts in his life philosophy and in his way of living.

This text has been about those who are forced to change their habits and lower their standard and expenses. In part three of this series of articles, I will write about those who have it worse and who have been hit more directly by the economical crisis.

I almost forgot to mention the queen of simple living, Sharon Astyk. A portrait of her in the New York Times is a good introduction before you take on her blog (which I subscribed to). A quote from NY Times:

"Others may see [her and her family] as colorful eccentrics, people with admirable intentions who have arrived at a way of life close to zealotry [...] Ms. Astyk has heard such talk but says her neighbors’ attitudes have softened as energy prices have risen. “People have moved gradually from ‘Sharon is a fruitcake’ to ‘Sharon is a fruitcake who might make some sense,’ " :-)

This text was originally published in Swedish on October 3, 2009.

Wednesday, October 14, 2009

The Effects of the Crisis - Part 1


Wise men argue whether the present economical crisis is a recession or a depression, and it has earlier been discussed whether the crisis will be V-shaped (with a quick recovery), U-shaped (with a slower recovery) or L-shaped (with no recovery). Some calculate the average losses over the entire population, and find that the effects have not been so hard, and that we in hindsight will remember this crisis as nothing more than a dip in a rising curve. But no matter how you you look at it - massive job cuts and the lack of new jobs can ruin many people's lives. Even so, I can not (from a Swedish perspective) recall reading many articles from this point of view: about (many) single individuals, whose lives have taken a turn for the worse in the wake of the crisis.

Also American reports often remain silent about the millions of newly poor that follow in the wake of the crisis. As we all know, being poor is much worse in the USA than in Europe in general or in Sweden in particular due to the less fine-meshed social security net. Personally I notice this lack of understanding when I speak to intelligent people without crisis awareness, who think everything is pretty OK now "when its so cheap to hire a craftsman".

To raise awareness about the bottomless abyss that has opened below the feet of many Americans, I hereby begin writing a set of texts about the losers of the crisis - a growing underclass - that is all too often dismissed and made invisible. We have the concepts and cultural frameworks to easily accept and understand stories about skillfull "upstarts", who climb the social ladder, working their way from the factory floor to the corporate boardroom, or becoming the first person in their family to achieve a university degree and "become someone". But we don't have the same clear framework to understand downward mobility, and the stories about individuals who due to stupidity, less fortunate choices or pure bad luck find themselves out in the cold, economically and socially.

There are two connections between this subject and peak oil. The first connection is that many say there is a link between the current crisis, the increasing oil price between 2002 and 2007 (from $20 to $100/barrel), and the astronomical peak in the oil price last summer ($147/barrel). According to some, the economical crisis is nothing less than a consequence of this long prelude and its finale when the energy prices hit the roof last year. The second connection is that when we find ourselves in the downward slope beyond the oil peak (which might happen now or any time within ten years), large numbers of the population will suffer materially, and then suffer again. The effects of the current crisis might thus either be the first stage in an enduring and deep(ening) economical crisis, or a full dress rehearsal for a future possible crisis. In the words of the peak oil writer Richard Heinberg from the documentary film "Oil, Smoke & Mirrors":

''...yet people won't be talking about the oil peak. They'll be talking about the unemployment figures. They'll be talking about the high price of food. They'll be talking about the fact that you can't get on an airliner and travel any more because the airline industry has collapsed, there are only a few carriers still in business and tickets are astronomically expensive. They'll be talking about the latest war or terrorist incidents. They will have completely lost sight of the one event that caused all of those effects.''

The US is a predecessor - a country that precedes us - and the situation and the consequences of the economical crisis are at this point many times worse there than here in Sweden. These texts will therefore be strongly America-centric. The ambition is to open up the eyes of those who do not know what is currently happening in "the richest country in the world", and hopefully urge for humble reflection about what this might mean. Could the same thing happen in Sweden? The US is also interesting as there is a great and heartshrieking discrepancy between the current reality and many Americans' view of their own country. Regarding this self-perception Göran Rosenberg writes in the last issue of the Swedish magazine Axess (September 2009):

"The American idea is broadly an idea of a society called America, inhabited by the happiest among people - the Americans, who are convinced that only in America can Man fully realize his innate right to life, freedom and search of happiness. The American idea is the idea of an exceptional society, created on an exceptional place under exceptional circumstances (if not by divine intervention) and with an exceptional role to play in the world."

But various texts and articles from this proud country now indicate that it is slowly crumbling from within. If the foundation is stable enough, and the carrying walls manage to carry the weight, maybe this is not such a big problem? Maybe more people will live in poverty, but this might not necessarily herald any major consequences for the majority population? Even if this is the case I would now like to direct the attention to those who have fallen and might find it difficult to rise even in the most optimistic scenarios of economic recovery. The storytelling technique I use in this set of articles is similar to Dante's descent into the circles of hell, thus I will begin with describing milder effects of the crisis (worsening economy, new patterns of consumption, increased prudence), and step by step move ahead to those worst affected that now are moving toward, or already live in, complete misery.

If we begin with new patterns of behavior that hardly provoke anyone, prudence and a new kind of prudent thinking is currently gaining ground after a 15, or maybe 40 years long shopping spree. It is no secret that uninhibited Americans during a long time have been shopping away, and bought ever bigger homes to make room for new clothes and stuff. Savings have been low, and consumption has been fueled by borrowed money, often with the increasing value of the own house as "security". Household debts have increased from 60% of the household income to 130% in 25 years (between 1982 and 2007). At the same time it is the households' consumption that has maintained the American economy, representing almost 70% of the US GNP:

”This shift back to thrift may seem to be a healthy change for a consumer class known for spending more than it earns, but there is a downside: American businesses have become so dependent on consumer spending that any pullback sends ripples through the economy.”

We all know what has happened since the housing bubble inflated. Today many Americans have been forced to leave their homes when they couldn't pay the mortgages for their loans. Among those who still live in their own homes, 25% live in houses with "underwater mortgages" - houses that are currently worth less than the loans on these houses - after ten straight quarters of sinking house prices. In addition house prices are expected to sink further - approximately half of all American homes may be over-indebted two years from now.

What this means is that many people are "prisoners" in their homes, and can not sell them without losing money or become indebted. The alternative is to walk away from the house, as most American loans, in contrast to Swedish, are tied to the house, not to the person. One must however calculate that the credit score will plummet, and that several "normal" economical transactions thereafter become complicated (renting an apartment, renting or borrowing money to buy a car, getting a mobile phone etc...). The bottom line is: American houses have changed from being piggy banks to albatrosses around the neck of the American house owners, and continued grand scale consumption based on the house as security is out of the question from now on

What to do? Well, the radical (?) act is to not live above one's expenses and to save money instead of spending them. Many Americans who have not been personally been affected by the economical downturn and still have plenty of money, have now started to change their patterns of consumption into less spending.

”With the economy in shambles and so many people losing their jobs and homes, it is no longer considered cool to brag about possessions and purchases. For many during a deepening recession, conspicuous consumption is out and frugality is the new black.”

Others get feelings of guilt from consuming stuff that they don't need: “The shift appears to be driven, at least in part, by a sense that the economic crisis is a long overdue catharsis; it's the jolt we needed to reverse a multitude of bad financial habits and destructive attitudes developed over many years.”

These changed habits are visible in many ways. When the mother of two and secretary Kelly needed new boots, her choice was between buying a new pair for 200 dollars or taking an old pair to the shoemaker. Her first visit ever at the shoemaker's was initially hard to swallow, but was eventually an eye-opener.

”For a fashion-conscious woman, the thought of recycling clothing hurt her pride a bit. "I walked in with my tail between my legs," she says. "It was something, initially, I was not proud of." Then she saw the price: $16. And the work: the boots looked as good as new.”

All of a sudden many Americans "discover" that it is possible to repair the things you already own instead of buying new things. Professionals who repair goods (car and bicycle mechanics, watchmakers, tailors, TV- and white goods repairs) have noticed a hike in demand for their services. Among those who both sell new and repair old goods (for example tailors who sew clothes and repair old ones) the trend is also clear; new sales diminish while repairs increase. To clip (the ubiquitous) coupons in newspapers has also increased in popularity in the last couple of years after having lost popularity during 15 years, and skillfull coupon-clippers can lower food costs with up to 50%.

It is also interesting to notice that one of the biggest obstacles to overcome are psychological barriers regarding "what kind of person you are". Once Kelly visits the shoemaker for the first time and is pleased with the results, it might well happen that the habit takes root and remains, even if the country's economical situation later improves. A shoemaker comments and says that two years of recession can create new habits and that it is a vitamin injection that can sustain him for another 10-15 years. Enough people have already seen or felt the effects of the economic downturn themselves, so that habits and fundamental values might be changed profoundly for a long time after a possible economical recovery.

(Comment: I habitually write "a potential economical recovery" where the original article instead simply refers to "the economical recovery" or "once the economy gets rolling again". I think it is fascinating how quickly many instinctively presume that a recovery is automatically waiting around the corner. The thinking seems to be that "the stock market has "always" risen over time before, and it will therefore do it again". The idea is that stocks gaining value over time as some kind of irresistible natural force, or even a natural law similar to the law of gravity. As the sun rises in the east, so will stocks increase their value over time.)

An area where great cuts in spending could be made is clothes. Both "thrift stores" that sell used ("pre-owned" :-) clothes, and more fashionable second hand stores that might sell a month-old blouse at the third of the prize are increasingly popular in the US. Regarding clothes, there are obviously a lot of excesses to cut from. Have you ever seen how big an American "walk-in-closet" can be? You can easily fit your home office in there. Or your visiting relatives. According to a UK survey, half of all clothes, shoes and accessories that British women bought the previous year had never been used. Every British woman used on average almost £500 on buying clothes that had never been used, and every tenth piece of clothing went straight into the dustbin. Fascinating but also slightly scary is the fact that 90 millions mobile phones are laying unused in British drawers. (That is 1,5 mobile phones for each man, woman and child in the UK.)

This text has been about habits among those that are not really pressed to save money, but who today do so anyway. In part two of this set of articles I will write about those who have bigger problems and are simply forced to change their habits and cut expenses.

While starting to write about the effects of the crisis I have realized that this will be my tour de force so far in my blogging career. Earlier sets have consisted of two or three interlinked texts, this set will be at least six articles long. This is the first example of what will for sure happen many times again, since I have now kept my eyes open and gathered clues and links about specific peak oil-related topics during weeks or even months.

This text was originally published in Swedish on September 27, 2009.

Thursday, October 8, 2009

Transportation free of charge

.Picture: Ryanair ad, offering to sell us 1 million airline tickts for 79 SEK or less (10 dollars or less) from Stockholm to a variety of European cities. The price corresponds to the cost of two (so-called) meals at McDonalds.

In the previous text I wrote, I suggested that we could - at least from a historical perspective - for all practical purposes regard energy as free or charge in today's society. As a special case of this it thus follows that also transportation is free of charge. That is the topic of this text, but it is written from a completely different perspective compared to the previous text, because the inspiration comes from a book about designing virtual worlds!

In medieval times, it was expensive to transport goods around Europe. Wine was a drink for peasants in France, but if you transported the wine to Scotland, it suddenly became a drink only for wealthy nobles. The cost of transporting wine the - to us - fairly modest distance from France to Scotland was so high that wine after such a trip immediately became a drink for only the very richest of persons. In medieval times, most products were simply not worth transporting for any longer distances and were instead produced and consumed locally. Also moving you own self (to travel) was "expensive" in terms of time, money and effort. It is not a coincidence that the French word for work, "travailler" has the same root as the English word "travel". To travel was time consuming, laborious and expensive.

In a virtual world (such as Second Life or World of Warcraft), there are no logical obstacles that stops you from immediately transporting goods or yourself from one end of the (virtual) world to the other. Actually, there is no physical "world" there in the first place, but rather just a large database that keeps track graphics and points of view, of where everything is and what is behind the next (virtual) hill. In some virtual worlds it is thus possible to immediately teleport yourself (and your possessions) from and to wherever, but most worlds are designed in such a way so as to impose artificial restrictions that make travel a little bit more time-consuming and laborious. Without distances that take (some) time to overcome, the geography of the virtual world would "collapse" and everything would be next-door to everything else. It then becomes rather pointless for the designers of the virtual world to spend time designing roads that will never be traversed and stunning vistas that will never be admired by anyone. There are also other (predominantly negative) implications of absence of (virtual) distances and geography that most desingers choose to avoid or restrict when designing virtual worlds. My point here though is that teleportation is technically feasible and argubly the most "natural" way to move in a virtual world, and that all travel and transportation could be free in such a world (immediate and at no cost).

Let us assume that these two models represent two extremes. At one end we have Europe in medieval times (very expensive transportation and travel) and at the other end we have a creation of imagination, a thought experiment that we call virtual worlds (free transportation and travel). The question is if travel and transportation today is more similar to medieval Europe or to virtual worlds? The answer is obviously that we are a lot closer to virtual worlds where travel and transportation could be completely free but for various game design reasons happens to instead cost (some).

Today we ship goods around the globe in staggering volumes without this increasing the price of the product to any significant degree. Where a factory is located on Earth in the era of globalization has little to do with transportation costs. The actual transportation of a barrel of oil from the Middle East to Europe or the United States contributes only with a price increase of a single dollars per barrel (and last year the price of that barrel fluctuated roughly between 50 and 150 dollars).

Furthermore, Ryaniar (see picture above) will fly me to 35 destinations from Stockholm and the ticket to almost two thirds of these destinations (in a dozen different European countries) costed 10 dollars or less last Christmas (including taxes and charges)! Is it physically possible to push prices lower? Have transportation and travel ever been as cheap as today? The answer to both questions is “no”, simply for the reason that 10 dollars for an airline ticket is so close to free that it makes no difference compared to a price of 5 or 3 dollars. Will transportation and travel continue to be this cheap in days to come? Well, no, of course not.

If we raise our eyes and adopt a historical perspective that extends a few hundred years back in time (before we found oil, before we started using large quantities of coal and before the industrial revolution began) we can again conclude that energy in modern society for all practical purposes has been, and still is free of charge. It thus follows that also transportation and travel is free today (at least from a historical perspective).

In what other society or era has it been possible for the least affluent members of a society to spend an evening babysitting or to rake leaves from someone’s lawn and use (part of) the proceeds to jump on a plane from Stockholm to Prague or Dublin? A one-way trip with Ryanair to these and some other destinations had a price tag of less than 3 dollars (30 SEK) last year before Christmas! Isn’t the world upside down when what I need in order to cook a dinner at home costs more than a flight to Berlin? The 16-year-old girl next door put a note in our mailbox the other day offering her services as a babysitter for an hourly rate of 8.50 dollars during weekends...

It’s not that I begrudge "poor" Swedes the opportunity to travel abroad, it's just that I think the situation is not stable or sustainable in the long run. If oil (and thus fuel and thus transportation) is no longer free, but instead begins to Cost Big Time - say, “only” three or four times more than today - the airline industry would crash and burn in every way possible except literally.

As more than 80% of the energy we use on Earth comes from non-renewable fossil fuels, what will happen when we during this century will have to gradually adapt step by step to making do with the energy that is created and re-created each year with the sun as the source (sun, waves, wind, hydro, biofuels)? The reasoning above and in the previous text give some clues as to the type of changes that lie ahead of us this century, and that will most probably start to reshape our lives already during the next decade...

PS. Should I take the opportunity to travel now while it is still inexpensive or should I refrain?

This text was originally published in Swedish on December 6, 2008.

Wednesday, October 7, 2009

Energy free of charge

A little more than 50 years ago, Lewis Strauss, chairman of the U.S. Atomic Energy Commission, proclaimed that the promise that nuclear power brings is that "It is not too much to expect that our children will enjoy in their homes electrical energy too cheap to meter". The phrase "too cheap to meter" occasionally pops up when an accusing finger points at that phrase as proof that nuclear power has not fulfilled what it promised, or more generally, that new technology is always hyped and that the hopes of techo-optimists are not to be trusted. The idea I explore here is instead that energy for all practical purposes has been and still is free of charge (but that this of course will change radically when peak oil becomes apparent to everyone).

By some calculations based on local Swedish conditions (Flygare and Isacson, 1999), 19 days of manual harvesting - hard physical work 200 years ago - has been replaced by an hour of driving a tractor today. We have in similar ways replaced the vast majority of physical labor by humans or animals - days of toil and sweat moving rocks, logs or merchandise - with the energy contained in one gallon of petrol or diesel. The most common use of petrol today is of course to quickly move hundreds of millions of big heavy metal containers - with (usually) one person inside each - back and forth, back and forth. The average Swedish car weighed more than 1 400 kilos in 2007 according to statistics from the Swedish Institute for Transport and Communications, SIKA.

The term "energy slave" represents the amount of energy needed to replace the work of a manual laborer. The energy content of a gallon of gasoline is roughly equivalent to the force a person can develop during one month of hard physical work. The implication is that in the western world we all can be said to have many energy slaves working for us 24 hours a day in order to maintain our current high-energy lifestyles.

The average American has according to some estimates a three-digit number of energy slaves and even though we Swedes may not have as many slaves, we still play in the same league. Exact estimates of the number of energy slaves varies widely, but the point of using the concept is to convey an understanding in more human terms of the fact that each one of us - unconsciously and perhaps feeling that we are entitled to - make use of large amounts of energy in order to maintain our modern western lifestyles. In ancient Egypt, 95% of the population was directly employed in agriculture and they managed to (only) generate a surplus of energy (food) that was sufficient for feeding the remaining 5% of the population who were slaves and built the pyramids. In "the bad old times" energy was thus Expensive.

The next step here is to show not only that we today use energy in abundance, but also that this energy is very very cheap. I here borrow from Richard Heinberg who argues that it has been sufficient to work for 20 minutes with a statutory minimum wage in the U.S. in order to afford a gallon of gasoline. Twenty minutes of (probably not very physically demanding) work thus gives us access to energy equivalent to up to 200 hours of hard physical work. Exchanging 20 minutes for 200 hours gives us an exchange ratio of a factor of 600 (and far higher if you have a higher salary)!

It is thus impossible to deny that energy is very cheap today. With a longer historical perspective, energy is so incredibly cheap that it can for all practical purposes be regarded as free in our modern society. It might not feel that way when you pay at the pump or when you get the electricity bill, but it is very much so in a longer historical sense. The only reason the electricity bill hurts is because we use so insanely much of that product. A traditional light bulb of 100 Watts uses as much energy in an hour as (or is on par with what) a man performing hard physical labor (an energy slave) can develop during the same amount of time! If electricity was generated by bodily work, we would need an extra man working for us for each lightbulb we wanted to have lit. Low-energy lightbulbs are of course preferable, but we have at this point not even begun to talk about the costs of keeping the fridge, stove, washing machine or our consumer electronics running, or the costs for heating water for a shower.

Perhaps it is possible to push this argument a little bit further and claim that as long as we as a society can afford to maintain our current lifestyle, energy for all practical purposes remains free. When then would energy start to cost? Well, maybe when:

- we as a society must make difficult choices that may seem radical today.
- we discover that the amount of energy (electricity, gasoline, heating) we can purchase with 25% of our disposable income has shrunk considerably, forcing us to make some hard choices.
- most individuals can no longer afford to own/drive cars
- we no longer can afford a summer cottage or to go on vacation (forget abroad)
- we can not afford to heat or cool our McMansions (and forget the pool)

Living conditions is a hidden “energy thief” that many might not think about even though it costs significant amounts of energy to build, heat and maintain our housing. The average Swede has access to 44 m2 (475 ft2) of dwelling per person - an increase of over 60% since the late 70's. Other more authoritave sources such as Statistics Sweden report figures as high as 55 m2 (600 ft2) per person which would mean that we Swedes have doubled our living space per person in as little as 30 years.

According to Jonas Frycklund, an economist at the pro-industry lobby group Confederation of Swedish Enterprise, the average living space per person in the U.S. is 70 m2 (750 ft2) per person. That figure might be correct but as it so happens, Jonas also thinks that we will live in larger houses and consume more in the future and he confidently looks forward to when "the children of our grandchildren will relax in their pools and with good conscience reflect on the fact that that they do not exert any pressure on the environment."

Sweden has the largest number of single households in the world and Stockholm is the top single-household capital of the world. It is obviously more expensive (and more energy consuming) per person to live by yourself rather than to share a household with others. No less than 47% of all households in Sweden are single households and a further 28% consists of two persons. In one part of central Stockholm, Kungsholmen, 80% (!) of all households are single households (I do not know if a single parent qualifies a "single household"). Is it sustainable to have so many refrigerators and stoves and TVs in so many relatively large and sparsely inhabited apartments? Not in a world where energy is no longer free, because in that world we will have to crowd together and share the cost...

Some of the figures presented above can be contested and discussed. There are several factors that you could examine further, for example:

- Exactly how does one define an "energy slave"? Input (energy in terms of food) or output (work you get)? What force can a human being sustainably exert during 8 or 10 or 12 hours of hard physical work?
- How many hours does one month's work consist of? 160 hours (40 hours/week x 4 weeks/month + some holidays) or 320 hours (12 hours/day x 6 days/week)?
- What is the minimum wage (and the average wage) in the US and elsewhere in relation to the price of gasoline (or electricity).

None of this however changes the basic argument proposed above. Energy is from a historical perspective incredibly cheap – for all practical purposes free - and in the long term (beyond the oil peak) practices that we very much take for granted will by necessity be reshaped and altered or altogether disappear. Our challenge is to ensure that “different” does not necessarily and unilaterally mean "worse", but that we can rather find good solutions that can work in a sustainable low-energy society.

After I started to play around with the idea that energy today is free of charge (this text) and that transportation therefore is free or charge too (the following text), I have acquired new conceptual glasses that allow me to see the world in new ways. Media theorist Marshall McLuhan noted that we do not know who discovered water, but we do know that it was not a fish. The point is that it is difficult to see what we swim in, is surrounded by, and take for granted. It is easier to become aware of your own culture and the things taken for granted when you are abroad, when you discover that things work differently there and gain the opportunity to reflect on the differences between here and there.

The same is true for energy and transportation. Our society takes the stable supply of cheap energy for granted to the extent that we are not aware of this fact and have a hard time imagining any alternatives. Only with a provocative claim that "energy is free of charge" - which of course is not true in the literal sense - can we start to think about and recognize the full scope and the implications of what will happen - in all areas - when energy no longer is free, but instead will Cost Big Time.

When I went to IKEA at two p.m. in mid-November last year, I all of a sudden opened my eyes to the fact that there were thousands of lamps along the highway that were already starting to light up. And when I one hour later sat in IKEA's autumn-decorated restaurant, I noticed that I was surrounded by yet more lights in all the windows. It is at times like these that you lean back and ponder. … for example on the fact that the gasoline for driving 25 kilometers back and forth to IKEA only costs a few dollars and that the late lunch at IKEA therefore still was much cheaper than if we would have stayed at home and gone around the corner for a lunch at the neighborhood pub...

Who is today thinking about electricity consumption and the cost of power when we buy a food processor or a DVD player? You and me both, for all practical purposes, treat energy as if it was free of charge. Try to argue against it!

This text was originally published in Swedish on December 2, 2008.

Flygare, Iréne and Isacson, Maths (1999). "Jordbruket i välfärdssamhället: 1945-2000" [Agriculture in Welfare Society: 1945-2000]. Stockholm: Natur & Kultur. (Book 5 in the series "History of Swedish Agriculture").

Friday, October 2, 2009

Welcome to a life after oil

Oil is a finite resource. All the oil that we pump up was formed during two periods 90 and 150 million years ago. Despite this, we burn oil right and left and the global consumption has increased with an average of 2% per year during the last 50 years. But the day will come when we cannot increase production, but will rather see it flatten out or decrease. Some propose that we already are at that point or at the least very near it. Others suggest that we still have decades and trust that "the market" and new technological breakthroughs will solve the energy problem when it starts to get painful.

What is perfectly clear though is that we today pump up and consume oil at 4-6 times the pace we find new, unexploited findings, so sooner or later something has to give. Something else that is perfectly clear is that the price of oil had increased by 700% at last year's peak compared to the price at the beginning of this decade. Today - in the midst of a global economic crisis - the price of oil is "only" 350% higher than at the beginning of the decade. That does not bode good for the future.

It might be the case that our time with oil is a relatively short chapter in the history of mankind. That chapter is 150 years long at this point in time. Perhaps we are at the peak and the decline will be another 150 years long, but in a world that is "addicted to oil", each decrease in production will have unproportionally large consequences in terms of the price of oil. You might just as well get used to the idea of a life after oil. It is exactly that thought this blog explores.

The intention is to write a new blog post (at least) once per week. The texts will be based on articles, books and other sources - including reflections on my own situation and the choices that me and my family make - based on the conviction that the party could soon be over. The texts were not originally written for this blog, but are rather translated (and slightly adapted) from the Swedish-language version of this blog. That blog has been up and running since August 1, 2008, and more than 70 texts have been published there at this point.

Welcome to the blog and to the idea of a life after oil!