Peak oil and climate change in the Kentucky League of Cities Magazine

I know, cause I wrote the cover story (I did not pick the headline)

Here’s the article

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We’ve been told relentlessly over the last few years that the future is global and that if our cities are going to survive they need economic strategies for playing on a global stage.  I think many of us scratch our heads and wonder at the fate of all of Kentucky’s communities if that was the price of economic success.  How are we going to do it?

But what if that isn’t going to be the case?  What if our future isn’t global at all, but local?

This article will discuss two new realities that will show a future is coming where Kentucky cities will be more important than ever, where good jobs can be regained, and where we can adapt positively to some momentous changes.

The future is local for Kentucky.

The new realities concern energy and the environment. Combined, they will lead to the end of economic globalization as we’ve known it and the emergence of re-localization. I’ll take each in its turn and show how each will positively affect Kentucky cities.

We’ll begin with energy, and energy begins with oil.   Oil powers our entire economy and way of life.  Mining coal for example requires oil to power the digging equipment and the trucks and trains that transport it to power plants.  Even something as basic a eating does not happen without a great deal of oil being involved.  All the plastics that surround us start with oil.  It can’t be overstated:  our whole way of life right now is oil.

For the last 150 years, oil has been relatively cheap, but something dramatic happened in 2008:  the price of oil hit $147 a barrel.  Was it a coincidence that this happened at the same time that the world’s financial system began imploding?  Many economists don’t think so.  Expensive oil creates recessions; our economy is only geared for cheap energy. Unfortunately as we’ve seen recently, oil is only getting more expensive.

The reason for this is that the world has reached peak oil. Peak oil does not mean we’re running out of oil.  Rather, oil is finite and like any finite thing, once half of it is used, there’s less of it the rest of the way. What we are running out of is the oil that is easy to get and therefore cheap. As the chief economist for the International Energy Agency recently said, “the era of cheap oil is over.”

Why was BP drilling one mile below the ocean’s surface and three miles below the earth’s crust when the Deepwater disaster occurred?  Simple – that’s where the remaining oil is.  They and the other oil giants would love to be drilling on land at shallow depths. But all that easy oil is already gone.

The U.S. itself past peak oil in 1970.  Until then we supplied all of our own needs, and until the 1950s we were the largest oil exporter in the world.  Yet even as our own supplies declined, we chose to continue using more oil than ever.  We began importing, mostly from countries that were never our friends.  We now import nearly two-thirds of all the oil we use.

A myth persists that somehow the U.S. could be “energy independent” again if only we could drill more oil wells here.  The truth is that we could drill on every square inch of land in the U.S., to whatever detriment to the environment, and still never come close to providing the amount of oil we use each day at present.

Here’s an example.  Proponents of “Drill Baby Drill” tout the huge reserves in the currently off-limits and ecologically fragile Arctic National Wildlife Refuge in Alaska (ANWR).  It is estimated that between six and sixteen billion barrels of oil may be found there.   This is the largest untapped area in the U.S.  This sounds like a lot, yet here’s where reality must intervene.  At the U.S.’s current consumption of twenty million barrels per day, we could drill there and if we could recover all sixteen billion barrels, we’d get a grand total of 800 days worth of oil.

So it’s not like that we just choose to import oil from foreign places, or that environmental regulation is holding us back, or that if we simply decided to politically, we could use our own resources to make up the difference. We can never drill our way to energy independence. Yes, technology will help us recover some oil, but it is expensive and cannot reverse the laws of physics.  If we are going to be energy independent, we’ll have to use less oil.

So, we’re out of the easy to get stuff which will cause prices to increase as oil drilling gets more expensive. At the same time, we’re also witnessing exploding demand in emerging countries. In India, Tata has introduced a $2,500 car, which will put driving within reach of potentially hundreds of millions of people.  China is now the world’s largest car market.  Even Saudi Arabia is using more and more of its own oil production every year.

This is all basic economics:  more demand on a finite supply will result in increased prices.

This fact has begun to loom large to many organizations.  The U.S. Military, the world’s largest user of oil, has recently said that peak oil is a top concern. Toyota has acknowledged that peak oil will force it to change its business model.   The U.S. Energy Agency also recognizes the severity of the peak oil challenge. In 2009, they presented a graph that shows conventional oil peaking no later than 2012 and that “unidentified projects” are the only source of increasing supply.

Among the many things peak oil will do is make food more expensive.  We’re already seeing the effects here and around the world.  Our agricultural base is highly dependent on cheap oil: most Americans won’t eat today but for a huge amount of oil used in farm machinery, transportation, processing and packaging.  Consumer goods will also get more expensive, everything from golf balls to toilet seats to computers to ladies’ makeup. And energy especially will be more expensive. Remember, even coal doesn’t create energy without oil being used first.

But one good thing expensive oil will do to help Kentucky’s cities is this:  it will reconfigure economic geography.  Distance will cost a great deal in the post peak oil world.

The global economy is about moving things from where they can be made the cheapest to where they can be sold for the most money.  Cheap oil made this economic model possible. But wage and regulatory advantages will be lost as transport costs skyrocket, removing the competitive advantage that many countries now have. Peak oil means that we will make the things we need closer to home.

This will mean a return to Kentucky of many jobs we thought we’d never see again.  New opportunities as well will emerge in fields such as bio-fuels, oil recovery technology, batteries, and alternative mobility, even old-fashioned agriculture.  A world where distance is expensive is good for Kentucky’s cities.

The other new reality concerns our environment and climate.  And yes, Kentucky coal has a future.  We’ll get to that.

Despite slanted “news” stories casting doubt upon it, the reality of carbon-caused climate change is accepted by a great majority of scientists.  And just as importantly, top businesses accept it too.

Louisville-based YUM foods, the world’s largest restaurant corporation, has stated in a recent report that “climate change is one of the most important issues now facing the world.“  To reduce its impact on the climate, Walmart has a goal of powering its entire global operation with renewable energy. Toyota has announced that it “accepts the broad scientific consensus that climate change is occurring and will continue unless there are significant and coordinated global efforts to slow the growth of man-made greenhouse gas emissions.”

Each of these companies does business in Kentucky. In fact, seven of the top ten employers across the state have climate protection policies.  Further, five Fortune 500 companies headquartered in Kentucky also have aggressive climate policies. Together these companies employ thousands of Kentuckians at good wages.

It’s not just here.  Many of the world’s largest corporations are working to create a better, low carbon future.  The World Business Council for Sustainable Development is a CEO-led, global association of some 200 companies representing auto, oil and energy companies, and consumer companies.  They issued a report in 2010 – A Vision for A Sustainable Future – that “recognizes that a global price on carbon is a key step to ensuring a sustainable and prosperous future.”

This global price will benefit those countries with stronger environmental standards, and hurt those without.   It must be stressed that we cannot do it unilaterally.  Every country must play by the same rules. Only the U.S. is strong enough to make it happen. By leading on global carbon limits, we can win back jobs and investments that belong in this country, help stabilize the environment, and enhance national security.  By creating a uniform price for carbon globally, the playing field will be leveled.  To quote economist and author Jeff Rubin, “This isn’t tree hugging environmentalism, but plain old profit maximization.”

Following this strategy nationally, we will see for the first time that raising the environmental bar will create jobs at home rather than sending them away and Kentucky cities will benefit greatly. It will mean a broad base of jobs will return.  It will also mean an increase in new jobs in clean energy, which is a permanent and anchored industry – and Kentucky coal will be a part of it.

Right now China has built a large advantage in the clean energy sector using some of the dirtiest factories on earth.  When polluters are required to pay the true price of carbon, we, who use carbon more efficiently, can ramp up our own clean energy sector.  We can use our own carbon – Kentucky coal –  as the transition fuel to a clean energy economy.  Kentucky’s coal can power the factories where renewable energy generators like windmills and solar panels are made, increasing good jobs and the state’s economic base.   And we will have these energy generators after the coal is gone.

Don’t let anyone tell you that Kentucky isn’t windy enough or sunny enough for renewable energy.

The U.S. Department of Energy estimates that Kentucky has enough wind energy to power millions of homes without fossil fuels or emissions. And solar utilization is highest in places like Germany, which has much less sunlight than we have here.  Renewables will work here.   They already are.

A new era is dawning.  The path we thought we were on has morphed.  Instead of taking us into a global future where so much seemed largely out of our control, we are actually witnessing a return to the importance of our local communities.   It’s an amazing transformation.

If we do it right with this chance we’ve been given, we can help our nation become energy independent and secure.  We can unleash the natural human tendency to create things of value and more people can share in prosperity.  We can eat better and become healthier.  We can become liberated from shady economic forces that rarely have our communities’ best interests at heart.  And we can help our planet – which is really only a way of saying that we will be helping our children.

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There are a few important things that cities can be doing right now to gain stride with these new realities.

  1. Put local first in every decision made in your community by supporting locally produced food, energy, products and services, businesses, investments, arts and local media.
  2. Build a place based economy.  Work to only create jobs that cannot be outsourced and that use local materials and talents to create an economy that will last.
  3. Reskill our workforce .  We need technology training suitable for 21st century manufacturing certainly, but in our lower energy future, other skills will be vital as well.  All things food related  – food, growing, storing, preparing.   We need to support energy engineers and entrepreneurs – from biofuel makers to battery testers to efficiency experts.  We must value round timber builders and potters and chimney sweeps.  Education will have to change; the notion of everyone going off to college to get a liberal arts degree will disappear.
  4. Foster Local markets. Create  places and networks for local people to sell the things they’ve added value to.
  5. Increase local self-reliance and resilience.  Safeguard local food and water supply, protect floodways, create local renewable energy, increase energy efficiency, husband local resources of soil, timber, minerals.
  6. Improve your place.  Plant trees and flowers, create parks, put art on display, fix neglected infrastructure, clean up – give people proof that we are planning to stay
  7. Encourage alternative transportation – make it easy and safe for people to get around your city on foot and bike.  Encourage local shared transportation.
  8. Let land use happen.   Houses are more than that these days.  They are factories, home offices,  mail rooms, warehouses,  and communications centers.  Small businesses should not be segregated by zoning from where people live to encourage walking and biking;  we shouldn’t have to use a gallon of gas to get a gallon of milk.
  9. Strengthen your community.  Host more fun communal events.  This doesn’t have to be expensive – people love gathering together! And cherish one another – EVERYONE in your community has a stake in making it the best it can be – everyone.
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