The End of Cheap Energy

In an interview recently with the New York Times, Mr. Nobuo Tanaka, the executive director of the International Energy Agency (IEA) had this to say:

"The cost of energy, the cost of electricity is going to get higher and higher no matter what. This is a difficult political reality we have to accept. The age of cheap energy is over."

In addition, Charles Maxwell of Weeden & Co, a very well-regarded energy analyst, in an interview piece with Forbes magazine, expects peak oil production to occur between 2015 and 2020:

"A bind is clearly coming. We think that the peak in production will actually occur in the period 2015 to 2020. And if I had to pick a particular year, I might use 2017 or 2018. That would suggest that around 2015, we will hit a near-plateau of production around the world, and we will hold it for maybe four or five years. On the other side of that plateau, production will begin slowly moving down. By 2020, we should be headed in a downward direction for oil output in the world each year instead of an upward direction, as we are today."

So it looks to me like the voices of Peak Oil are increasingly getting heard in the mainstream media.

Unfortunately for Singapore, there does not appear to be any discussions about how to mitigate the risks arising from more expensive and less available energy. One typical response that I get is this - "Don't worry, as our farsighted government should have some plans to deal with this contingency. It's just that they have not disclosed anything to avoid causing panic". Given that we import 100% of our energy needs, such complacency is most unfortunate.

I would suggest that as individuals, we take a look at the way we are currently using energy in our daily living and find ways to economise as well as to look for feasible alternatives. The latter is challenging given that most of us live in HDB flats and are thus constrained in terms of producing our own energy. That said, we should still keep trying to look for solutions, especially considering the possible downside risks in a peak oil situation.

Translation of the German military's report on peak oil

As noted in an earlier post, the German military has commissioned a report on the impact of peak oil which has been leaked to the media. A translation of the major points of the report from German into English is now available here from Robert Rapier's R-Squared Energy Blog.

Rising global unemployment

According to a joint report by the International Monetary Fund (IMF) and the International Labour Organisation (ILO), 30 million jobs had been lost since the start of the global economic crisis in 2007/08, as reported in this article. Furthermore, with global unemployment reaching 210 million people, long-term unemployment in the richer economies have become very high. Given that consumption is such an important component of GDP in developed countries, one can easily argue that without any meaningful recovery in jobs growth, economic growth in these countries would be tepid at best.

Back home here, we can see this increased concern about economic prospects reflected in the recent debate on immigration after the Prime Minister's National Day Rally speech, which despite attempts by the government to soothe nerves shows no sign of abating. While we have (still) have a relatively strong stock market and a booming property market (not always a good thing!), the middle-class here is increasingly worried about its long-term economic prospects, and this is not helped by what is perceived as unbalanced economic policies. There is, it seems to me, a disconnect between what the markets are saying and what the people are recognising as their reality. Who is right?

Backlash against foreign agriculture investments

The Telegraph UK has an article today about the backlash in Third World countries against investments in farmland by foreign businesses and investment funds. Due to growing populations, increases in demand for meat and slowing growth in output, many richer nations have been busy trying to secure land for the growing of crops for export back to their own people. And given that the recipients of such investments are often poor countries where people do not have enough to feed themselves, the backlash against such investments are understandable. Furthermore, if global food supplies come under more strain, as I believe they will, the chorus of protectionist voices will grow even greater for the safeguarding of food for 'our own people' in many countries.

For Singaporeans, this is not a time for an economic debate on whether free trade is better or otherwise. Like it or not, we are dependent on imported food and this makes us vulnerable to the political reality that protectionism will always rise up in times of economic distress. We need to be aware of this thread and to prepare accordingly. Perhaps it is time for us to consider urban agriculture as a means of supplementing our food supplies.

The Growing Food Crisis

John Xenakis of the site Generational Dynamics has provided a new article on the food shortage situation that we are now facing on a global basis. The following excerpt from the article was an important insight for me:

My own rough estimate is that food production grows by 0.96% per year, while population growth exceeds 1.72% per year (since 1950), and is 2-4% in some countries. (However, the United States population has been growing around 0.92% per year.)

To bring the amount of food per capita back to 1950 levels would require the elimination of some two billion people. That's why I've been using the figure two billion as the estimated number of deaths that will occur in the coming Clash of Civilizations world war. This result is mathematically unstoppable, despite the protestations of politicians and college professors who seek money, in the name of fighting starvation and poverty, for their committees, their pet projects, and their personal bank accounts.

At present, the possibility of food shortages has not entered into the mainstream consciousness of Singaporean society. While we can all help to raise awareness at the individual level by talking to our family members, friends and colleagues, it is also important that we start working on steps like food storage and urban agriculture so as to increase our available food supplies.

Also important is to be conscious that we as a country waste a lot of food, judging from the amount of uneaten food that I have observed at food courts. A big step in helping to improve the food shortage situation would be to waste less, which is far more energy-efficient than to try to convert waste food into usable fuel for cars!

The Germans are worried about Peak Oil

Following a series of high-level reports issued around the world by various groups, it appears that the Germany armed forces is the last to indicate some concern about Peak Oil. In an article found in Der Spiegel's English online website, it was reported that a German military think-tank has warned of the potential for very drastic consequences as the effects of Peak Oil are felt around the world.

The central points of the reports are as follows:

• Oil will determine power
• Increasing importance of oil exporters
• Politics replacing free markets
• Failure of the market mechanism for oil
• Relapse into a planned economy
• Global chain reactions
• Crises of political legitimacy in various countries

From a Singaporean perspective, this has a great due to concern us as we import 100% of the energy we need to run our modern economy. Over time, I will explore the implications of Peak Oil for Singapore and for our own individual lives.

Stay tuned!

Preparing for higher food prices

Based on anecdotal evidence from my mother's trips to the supermarket and wet market, food prices have been increasing recently.

At the macro level, various disasters in Russia, Pakistan and other parts of the world have resulted in lower crop output, and food availability on the global markets is further exacerbated by the recent Russian decision to ban wheat exports until late 2011. On a longer term basis, that there are increasing worries about global food supplies can be seen in the intense M&A battles over top-quality fertiliser companies, such as the Rio Tinto bid for PotashCorp of Canada.

Given the likelihood of pressure on global food supplies, it would be prudent for us to practise food storage at home. The habit of buying and keeping extra food can help to lower our food costs over the longer term, as it allows us to plan our purchases when items are put on sale by the supermarket chains. Of course, storing food implies having a system for tracking expiry dates so that we consume the items on a timely basis, and rotate them periodically, buying new supplies to replenish the stock levels.

Besides food storage, for those who are so inclined, growing a small set of food crops can also be done, even if one is living in an HDB flat. For more information, one can visit the Green Culture Singapore forum, where enthusiasts provide tips for growing food in small areas.

By doing what are within our means, we can hopefully ameliorate some of the effects of the coming food crunch and help protect our families to some extent.