Monday, July 25, 2005

Peak Oil Rationing

Peak Oil Rationing

Now we see the Falls Church News-Press (a very influential local newspaper from an affluent Washington, DC suburb) do some very hard-edged reporting on Peak Oil issues. This is the second time FTW has reprinted a News-Press story in a month. This is a local paper for the spot where the senior policy makers, intelligence officials and many high-ranking military personnel live and raise their families. They want a local paper that prepares them and that's what they've got. They get "authentic journalism" of sorts.

Contrary to this story's spin however, this plan has more loopholes for black market profiteering, arbitrage and manipulation than a colander has for draining spaghetti. The profit potential here is far greater than it would be with, for example, tax credits and subsidies for renewables. Once again, we're back to the infamous quotation: "It may not be profitable to slow decline." Or, as Catherine Austin Fitts says, "They make money on the way up and they make money on the way down."

On the other hand, mandatory and enforced rationing might be the only way to penetrate a very thick American skull. We do reveal a bovine nature on occasion.

So I think it's time we all put rationing (serious rationing) on our schedule of upcoming events.

When? (Sigh). It could be as soon as this winter. I would say, of a certainty, no later than January or February 2007.

Here's the key quotation: -- "A couple of weeks ago, the British press reported that Her Majesty's cabinet is considering a plan to ration energy consumption. The immediate reason for implementing such a system is to reduce the UK 's emission of greenhouse gases as required by the Kyoto Treaty. The plan's authors, however, claim that if the proposal works, it will deal equally well with equitably allocating dwindling energy supplies caused by peak oil."

What the News-Press tells us is that we should just as well expect rationing here. The British might get there first. That would be a great psychological prep. (We must emulate the Brits as they endured "The Blitz" in 1940-41.) But it is also a certainty that the first and most important wild beast which must be tamed in terms of consumption is the United States of America.

The Peak Oil Crisis: Rationing

By Tom Whipple
Falls Church News-Press
July 14 - July 20, 2005 VOL. XV NO. 19

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

It has to come sooner or later. As oil becomes scarcer and scarcer and price rises higher and higher, pressures will grow for a formal allocation system. Rationing will come, if only to calm the havoc at the gas lines and the social upheavals that are bound to occur as long as rationing is only by price.

America 's most recent experience with rationing goes back to World War II. You have to be nearly 70 to remember the little square "A", "B", and "C" stickers affixed to the windshields of ever car. These stickers, when accompanied by a sheet of rationing stamps, allowed one to buy gas. Everybody got an "A" sticker (a whole 4 gallons a month just for the asking). To get a "B" or "C" sticker, one had to appear before a rationing board and make the case their mobility was vital to the war effort or at least the well-being of their fellow citizens.

If one ponders for a few minutes on how a modern rationing system might be structured, it is soon apparent nearly any scheme is full of inequities and would be subject to massive and, no doubt, ingenious fraud- especially when an American's ability to drive his beloved car is at stake. Do you allocate fuel by vehicle? Buy a yard full of clunkers and drive to your heart's content or until you run out of money. Or allocate gasoline by person, by licensed driver, by commute distance, by adjusted gross income? Problems abound everywhere.

Once again our friends in Europe , this time in Britain , appear to be out in front in thinking about this problem. The ostensible British concern, of course, is global warming and the contribution made to this phenomenon by the combustion of fossil fuels. While we Americans, and particularly our government, seem little bothered by the idea that Florida might one day be under water, the British seem much more upset by the notion the melting artic ice cap will set the Gulf Stream to warming someplace other than Northern Europe.

A couple of weeks ago, the British press reported that Her Majesty's cabinet is considering a plan to ration energy consumption. The immediate reason for implementing such a system is to reduce the UK 's emission of greenhouse gases as required by the Kyoto Treaty. The plans authors, however, claim that if the proposal works, it will deal equally well with equitably allocating dwindling energy supplies caused by peak oil.

Given the seriousness with which the British are taking global warming, it is natural that they should put their finest minds to work on the problem. In this case, the Environmental Change Institute at Oxford and the Tyndall Centre for Climate Change Research, a consortium of ten other British Universities. The current proposal has been in development for ten years and, given the organizations involved in its preparation, has obviously been subject to much intellectual rigor. While the details, pros, and cons of the plan fill many pages, the general concept is simple enough to outline here.

The major feature of the allocation system is that it covers all fossil fuels, not just gasoline; and it makes a real effort to be fair to all, by giving consideration to the needs of the poorer folks.

Under the plan, every adult in the country would be given (for free) an annual "Personal Carbon Allowance" (PCA). This allowance would be measured in "carbon units." One carbon unit would be equal to one kilogram of carbon dioxide emitted into the atmosphere when the fuel is burned. Carbon units can be equated easily to gallons of gasoline, heating oil, diesel, or jet fuel, or to pounds of coal, BTUs of natural gas, or KWh of electricity. For example, one gallon of gas would be the equivalent of about nine carbon units. Thus, for every gallon of gas purchased, nine carbon units would be subtracted from your account.

The annual allowance would be the same for all adults, with possibly a smaller allowance for dependent children, and would be tracked on a central electronic system similar to a credit card account. The size of the annual individual allowance would be based on what a government panel believed would be the total amount of fuel available for consumption in a country during the coming year, divided by the number of energy consumers. Whenever one purchased or consumed fuel, such as on an airplane trip, an appropriate deduction would be made from one's PCA account. With oil depletion, of course, the annual carbon allowance would shrink with each successive year.

The next most interesting feature of the plan is the government would also establish an electronic free market to buy and sell carbon units. Thus, those who have no need for their complete annual carbon allowance would be free to sell their excess units for cash at the market price. Those individuals who want and can afford more than their allocated share can buy as much as they want at the going price. Note that above-allocation consumers would not only have to pay for the energy, they would also have to pay for the right to buy the above-allocation energy. Non-residents visiting a country would not be given an annual allowance, but would have to buy the carbon units they use on the open market as they consume energy. Businesses that consume energy would buy their carbon units on the open market and would pass the cost on to the final consumer either money or in cases such as airplane rides as a PCA debit.

The object of all this, of course, is to force people to cut back on their energy use in a systematic way. With full knowledge of the projected costs and allocations of energy, people could make choices between SUVs or bicycles, McMansions or efficiencies, and train or plane rides.

Way below average energy users could make some money under the plan. While the very rich would not be bothered in the slightest, most people would start making energy saving choices in their lifestyles -- smaller cars, better-insulated homes, less air travel. As demand for energy drops in response to conservation measures, then the costs of energy would drop even in an era of oil depletion.

The plan's developers claim that declining amounts of energy will be allocated equitably and with minimum government interference. For, aside from setting up the system and determining the annual carbon ration, the free market would be left to work out the details of oil depletion.


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