Living in an era of Peak Oil: Are you "insured?"

I have decided to post occasional blog entries on what it mean to live in this era of Peak Oil and how to prepare for it. At different times I will look at the issue from perspective of an individual or family, a commuity or neighborhood, and a state or nation. Changes are needed at all levels.

But my approach will be pragmatic: it would be nice to hope that our government will invest billions of new dollars in alternative energy, but that probably won't happen soon...and perhaps until it is too late. Instead I will look at what could be done today.

I am motivated both by the fear of what could happen in our country if we do not take our oil dependency more seriously (e.g. food shortages, economic collapse) and by the vision of a beautiful more balanced world.

Different people have different words for this goal: permaculture, bioregionalism, ending the "tapeworm" economy, relocalization, ecovillages, etc. But they all really point in the same direction.

The more I have thought about, the more I have realized how unique the oil era was. The energy we were able to tap was incredible...and of course limited. Growth and development have occurred at dizzying rates yield many advances, and many problems.

Peak Oil is an opportunity for global reflection and choice. Things cannot contine as they have, so where do we want to go? This is what I will be exploring from my own perspective.

I will talk about everything from:

• what kind of car/vehcile is my best option
• how to organize ourselves into self-supporting neighborhoods and communities
• achieve personal food security
• what towns should do to prepare for gas price spikes
• what the federal government can do

Economists like to talk alot about "shocks" to an economy and how they can throw things out of equilibrium. They are particularly fond of discussing the pitfalls of oil shocks. Well, reaching peak oil is going to greatly increase the number and frequency of shocks like this.

We will not be running out of oil tomorrow, but as demand continues to increase and supply begins to level off, potentially huge spikes in oil prices will begin to happen. Think of the incredible electricity price spikes California had a couple years except extend the impact over the entire globe...and perhaps lasting for months. Oil is used in everything from transportation (gas) , to most products we use on a daily basis (plastics and processing energy), to food (transportation and fertilizers). The impact of these price spikes could be severe.

Imagine living in a city like New York if all the sudden oil prices even temporarily doubled or tripled. Would there be enough food? How many companies would go out of business? How widespread would rioting and looting get? How many billions of dollars would evaporate into thin air? A town like Los Angeles has more land for urban agriculture, but that doesn't help you in the short term if there's no food in the grocery down the street. And getting anything in that city without using a car would be a major challenge because it is so dispersed.

Even if oil prices don't double permanently for another decade, the potential for them spiking that high in the next year or two for a week or more seems pretty likely to me. All it would take is a fairly simple terrorist attack on a processing facility in Saudi Arabia or Nigeria. (Other people have written about these possibilities elsewhere.)

What is our insurance policy?

We have no insurance to deal with this problem. In fact, I don't think anyone could buy (with money) this insurance, or any company that tried to offer it would probably go bankrupt the first time such a spike occurred. Insurance companies work by spreading risk across a broader population. The idea is that only a few people will need their insurance at a given time. But the homeowner insurance companies in Florida and Louisiana know that this model doesn't work in situationsl like this (e.g. Hurricane Katrina). In fact, these homeowners insurance companies are not refusing to issue policies where they once did. Will people take a hint and move somewhere else? Probably not. Who will end up paying for this "insurance"? The federal government will, meaning you and I. Unfortunately, the prepared and careful few will end up paying for the ignorance and stubborness of the many. This cannot continue for long leading to unsupportable federal deficits, bankruptcy, internal strife and chaos. (It doesn't help that our country is already in debt up to its eyes.)

When oil prices spike, they will spike for almost everyone on the planet at the same time. Unless we can find some extraterrestrials to go in on some insurance with us, we will all need the insurance at the same time, which means that it's not something that can be bought. What about oil futures and hedging against this scenario, you say? Unfortunately these derivatives markets are not capable of delivering for everyone in such a case. Instead they will collapse. It will be a like the runs on the banks back in 1929. This is something people like Warren Buffet have warned about for years.

So what can we do? Is there no hope?

Yes, there is hope, but we must begin making preparations now. We must build our "Noah's Arks." Material preparations are the only insurance available to us now. We're not going to be able to buy ourselves out of this problem: the only way out is to prepare for potential problems. Some of these things are simple and easy to do, others require changing where and how we live, what we do with our time, and other similarly major shifts.

At the personal level we need to be thinking about things like:

• Having stored nonperishable food and water enough for a week or two to survive a short but serious gas price spike
• A car that runs on biodiesel or ethanol or electricity in addition to gas
• Solar panels so we can run some of our appliances (and maybe our car)
• Seeds native to our area and the knowledge, tools and space to turn it into food in a pinch
• Relationships with your immediate neighbors so you can support each other
• etc.

I know this may start to sound survivalist. Perhaps we will never need these preparations. But what is YOUR assessment of the potential risk? What could happen to your life if gas doubled or tripled or a week? A month? A year? If gas prices increased by 10 times? Once you have decided for youself what the risk are, and your tolerance for them, you in a position to decide what to do (or not do).

Personally, I am looking forward to this transition. I think the future will be better (more balanced, more sustainable, more healthy) than the past...if we are prepared and can weather the changes in the short term. What scares me is how unprepared we all are and how ugly things could get. I didn't put a gun on my list of necessaries above...but even that may be naive oversight.

On that cheery note, until my next installment! :)