free html hit counter Peak Oil Debunked: 414. THE DECLINE OF TRANSOCEANIC TRADE?

Wednesday, August 05, 2009

414. THE DECLINE OF TRANSOCEANIC TRADE?

Recently Jeff Rubin has been talking up the end of globalization due to peak oil:
Jeff Rubin, a former chief economist with CIBC World Markets, told the Georgia Straight that in the coming years, “triple-digit” oil prices will make it far more expensive to ship goods here from Asia.

“Trade is going to become more and more regional than transoceanic,” he predicted.
The following quick calculation shows a serious problem with this viewpoint.

First, some fuel-efficiency statistics:

A tractor-trailer truck averages 90.5 net ton-miles per gallon.
A 100,000 dwt ship averages 1034.4 net ton-miles per gallon.

From Shanghai to Vancouver is about 6000 miles, so it takes about 6 gallons of fuel to move a ton that distance. By truck on land, that same 6 gallons will only move a ton about 543 miles. In addition, the labor costs of trucking are huge compared to shipping, because each truck needs a driver, while a gigantic ship only needs a skeleton crew.

Conclusion: High oil prices will destroy trade between Alberta and Vancouver before it destroys trade between Shanghai and Vancouver.

The relevant metric is not the percentage of fuel costs relative to total transport costs mentioned by Rubin. That ratio is high for shipping precisely because shipping has such low labor costs per ton.

The relevant metric is the comparative values of net ton-miles/gallon of different transport modes.

The reality is that it costs less to ship a container between China and Felixstowe, England than it costs to send it by road from Felixstowe to Scotland. Source

If it will be uneconomic to manufacture goods with low margins, like clothing and consumer products, across the oceans, it will be even more uneconomic to manufacture them within Canada, for exactly the same reason. Moving the products from, say, Vancouver to Alberta or Saskatchewan will take as much fuel (or far more) than moving the same products from China. In addition, you have the problem of high labor costs of trucking and manufacturing in Canada.

It's interesting to note that agitation against globalization and calls for relocalization are more than 300 years old, and arose long before the era of oil, or even coal. For example, English clothing interests were calling for protectionist legislation against cheap fabric imports and loss of jobs to India in the year 1681:
"into India throwsters, weavers, and dyers, and actually set up there a manufacture of silk... importing them ready made and dyed in England is an unspeakable impoverishment of the working people of this kingdom who would otherwise be employed therein and to the ruin of many thousands of families here." (Alfred C. Wood, A History of the Levant Company, p. 104)
Port cities along the pacific rim will continue to thrive, as port cities always have, due to the ease of trade.

If anyone is going to get clobbered by price inflation, it's the people in deeply landlocked rural areas like Saskatchewan. This will be due to: a) the high expense of moving goods to them, and b) the highly dispersed layout of rural communities, where you have to drive 20 miles to the supermarket etc. If you're driving more than 3 miles to the supermarket, that drive itself consumes as much fuel per item as transporting the same items halfway around the world.
by JD

36 Comments:

At Wednesday, August 5, 2009 at 6:07:00 PM PDT, Anonymous DoctorJJ said...

I think it was DB who originally posted about the nuclear powered container ships.

http://nextbigfuture.com/2009/07/nuclear-power-for-commercial-shipping.html

DoctorJJ

 
At Wednesday, August 5, 2009 at 6:17:00 PM PDT, Anonymous anonymr. said...

my quart of strawberries was shipped from coast to coast, california to NY, and only cost $3.85.

think about that next time you hem and haw over a 2,000 mile(or whatever the new inflated stat is) salad.

there are more costs and scarce resources to consider than just oil.

shipping is so efficient we can have goods made half way around the world or across the country and still be cheap. that is a good thing!

let the market work. it will figure where to make the goods based on cost. don't artificially constrain supply because you think goods should only be shipped X amount of miles.

let the market work!

 
At Wednesday, August 5, 2009 at 7:16:00 PM PDT, Blogger Nick G said...

I think this discussion is helpful: http://energyfaq.blogspot.com/2008/09/can-shipping-survive-peak-oil.html

Can we replace oil for shipping?

Sure - long distance land shipping can go by electrified rail, local can go by plug-in hybrid truck, and water shipping can find substitutes for oil.

Substitutes for oil for water shipping? Pshaw, you say.

No, really. Substitutes include greater efficiency, wind, solar, battery power and renewably generated hydrogen.

Efficiency: Fuel consumption per mile is roughly the square of speed, so slowing down saves fuel: lately, with high fuel costs, most container shipping has slowed down 20%, and reduced fuel consumption by roughly a third. For example, Kennebec Captain's ship carries 5,000 cars from Japan to Europe (12,000 miles) and burns 8.5 miles/ton of fuel at 18.5knots, for a total of about 1,400 tons of fuel. At a 10% lower speed of 16.6 kts, the ship burns 21% less fuel (about 300 tons).

and more....

 
At Wednesday, August 5, 2009 at 11:18:00 PM PDT, Anonymous Kevin L. said...

JD, I remember you said you weren't an economist when you responded to my comment on Transition Towns. I'm not either (yet), but from my knowledge of macro and energy economics, your analysis here is absolutely spot-on.

It's funny to read Rubin's analysis of the situation in light of that. For example, he tells us how much the cost of transoceanic shipping rose when the price of oil did, but neglected to say how much the cost of shipping stuff by truck did. And even at those prices, I didn't notice any shortages of 3,000-mile ceasar salads! His biggest gaffe, I think, was when he essentially stated the law of supply and demand didn't apply to peak oil, because "higher prices bring forth more supplies, but that doesn't apply because we don't have more supplies." Who says those supplies have to be oil? It's not like oil is our only energy source. Those new supplies that would be brought forth by higher oil prices are supplies of alternatives - natural gas, wind, solar, nuclear, you name it they've got it.

I think part of Rubin's problem is thinking too much inside the oil box (or drum, as the case may be), and the other part is that unfortunate tendency of lesser-informed or more populist-minded individuals and economists towards local-living economies. They don't seem to understand that relocalization leads to lower standards of living and more poverty. Yet Rubin's still singing that age-old song of the local-living economist: "Run for the farms! Back to the land! Plant the corn and sow the barley!" Rubin may have learned peak oil from Colin Campbell, but with that rhetoric, he might as well have learned it from Kunstler. Local-living economies sound so romantic, at least until the reality of how hard and inefficient they are sets in.

At least Rubin doesn't sound like a doomer, however. Misguided and misinformed, but at least no dieoff garbage. The last thing we need is another Jay Hanson.

 
At Thursday, August 6, 2009 at 3:38:00 AM PDT, Anonymous Anonymous said...

One caveat to this argument ..

Though transoceanic shipping might take place between Shanghai and Vancouver, it is likely that the goods are most likely manufactured in locations like Suzhou (abt 100 mi from Shanghai). Similarly, even goods coming into Vancouver are meant for hinterland depots and reach their final destination by other land-based means of transport.For example, forty per cent of all in-bound shipments to Vancouver are redistributed through Calgary (abt 650 miles from Vancouver). Thus, transoceanic shipping trade has embedded in it, a significant amount of land-based logistics that need to be taken into account for this comparison. I suspect a detailed study will show up a much closer match of costs and fuel consumption as compared to what we are seeing here. In fact, as a guide, door-to-door containerised companies estimate that ocean shipping costs consitute only 25% of their overall operational costs. Comparitively, an overland warehouse-to-warehosue trucking transport practically encompasses all of the logisitics to be compared for this purpose. Thus, a Calgary based demand can still be supplied competitively locally, if fuel costs were to be become the overriding concern. But then again, who can say for sure how all the effects will filter and pan out through the system. The market will find the answer to this if energy costs escalate.. and perhaps violently ...

Ashish S

 
At Thursday, August 6, 2009 at 7:34:00 AM PDT, Anonymous goofy said...

"Local-living economies sound so romantic, at least until the reality of how hard and inefficient they are sets in."

watch any documentary about hippie commune life in the 70s and you'll find it's tough. nothing romantic about it.

those trying to run away from peak oil may actually be making things worse for themselves.

it could be that the further from civilization you are the more isolated you are in a bad way.

it's probably smarter to live near the coasts, a big navigable river and major rail line areas.

 
At Thursday, August 6, 2009 at 10:17:00 AM PDT, Anonymous Anonymous said...

And luckily for rural areas like Saskatchewan, Alberta etc, most of the population is clustered near the trans canada railroad, which transports millions of tons of wheat to the coasts every year by rail freight.

Likewise, in the US there is still a substantial amount of freight travels by rail and rural areas are generally within reasonable reach of railroads (certainly within 100 miles range) due to the greater density of railroads in the US.

This, combined with the possibilities of nuclear powered or nat gas powered ocean freight (not to mention the old favorite: coal powered steamers) means that the transportation fuel mix might shift away from diesel, but transportation volumes (especially in freight) are unlikely to change much and in fact, will probably grow.

Conclusion?

I expect a (brief - maybe 10 years at max) period where the personal transit market undergoes a temporary shift towards mass transit and the long distance personal discretionary travel drops. But by the time my kids are in college, things will be pretty much as they are today but with different energy sources.


DB

 
At Thursday, August 6, 2009 at 10:43:00 AM PDT, Anonymous Anonymous said...

Ashish,

Though the analysis you presented may be correct averaged out globally, I doubt it's correct for North America.
Using Vancouver to Calgary (and then Saskatchewan) as an example: even if only 25% of the cost of containerized shipping is ocean freight, I suspect that another 25% (at least) is rail freight and the rest is local delivery.
The reason being the trans canada railroad which runs right through the middle of calgary and right through the wheat belt in Saskatchewan. Canada in particular is sitting pretty in terms of the continuation of long distance trade in the face of very high oil prices.

What's interesting is when you start to look at US analogues of Vancouver - Calgary - Saskachewan.

My guess is a good example would be Los Angeles Port to Phoenix to Albuquerque to Wichita,Kansas.
The relevant question here would be this: what percentage of freight along this corridor (i.e. wheat transport corridor) goes by rail?
I suspect it's probably similar to that of the original example and thus at least in the case of food it's likely that peak oil will have a limited effect even in the hinterlands of rural regions.

So I did a little digging. Go into google maps and go down to enough detail to be able to see non interstate highways. You'll also be able to see the railroad network.

What did I find?
I found an extensive railroad network that does in fact go from Wichita Kansas through rural areas (though often shadowing highways) back through Albuquerque, through Las Vegas (!) and then on to Los Angeles.

Seems that what we will in fact see is substitution: greater volumes of freight are GUARANTEED to move by rail.

We're not going to see a drop in trans oceanic freight at all. We're going to see a different ground transportation mix for freight and personal transportation.

DB

 
At Thursday, August 6, 2009 at 6:39:00 PM PDT, Anonymous ByRail said...

Warren Buffet seems to agree. He bought a major share of the Burlington railroad.

 
At Thursday, August 6, 2009 at 7:38:00 PM PDT, Anonymous anonymr. said...

G.M. Announces Buick Plug-in Hybrid S.U.V.
http://wheels.blogs.nytimes.com/2009/08/06/gm-announces-buick-plug-in-hybrid-suv/

RUN DOOMERS!

 
At Friday, August 7, 2009 at 4:46:00 AM PDT, Blogger bc said...

The "relocalizaton" meme popular with doomers has always been a red flag for me, since I knew that shipping is an efficient transport method and overland transport is largely inefficient, except for rail.

As JD points out, higher oil prices are likely to increase globalization, not decrease it.

Historically, the efficiency of shipping has always been true, even in Roman times. It was cheaper to ship grain from Egypt than it was to transport it by land to Italy from continental sources.

The game changer was rail transport, the English Industrial Revolution was seriously hampered by lack of an efficient overland transport system.

So if you have shipping and rail transport, there is no reason for civilisation to collapse. Cities near the coast should continue to thrive, but it may mean inland rural communities will suffer. This opposite to the idea doomers have that people should move out of the cities to a rural homestead. While rural life may provide a higher quality of life regardless, it is not going to be a better place to live due to peak oil.

 
At Friday, August 7, 2009 at 7:41:00 AM PDT, Anonymous HalfEmpty said...

it's probably smarter to live near the coasts, a big navigable river and major rail line areas.

Been that way for a long time now.

:)

 
At Friday, August 7, 2009 at 8:01:00 AM PDT, Anonymous DoctorJJ said...

Looks like transoceanic transport will live past peak oil. We already know rail will. Now looks like local delivery will keep on going too.

http://www.navistar.com/portal/site/NavistarDotCom/menuitem.619df6dcb5f969c3a1f344ae931010a0/?vgnextoid=44869ed3d4686110VgnVCM10000085d0eb0aRCRD#

DoctorJJ

 
At Friday, August 7, 2009 at 9:52:00 AM PDT, Anonymous goofy said...

remember too ships can just slow down to save fuel or use sail power!

Sail-powered cargo ship test results in: It cut fuel by 20 percent
http://news.cnet.com/8301-11128_3-9898347-54.html

you can bet that if things got really bad we could go back to using in some measure good old sailing ships.

Languedoc wines to be shipped under sail to save carbon
http://www.energy-daily.com/reports/Languedoc_wines_to_be_shipped_under_sail_to_save_carbon_999.html

 
At Friday, August 7, 2009 at 2:50:00 PM PDT, Anonymous Anonymous said...

"Looks like transoceanic transport will live past peak oil. We already know rail will. Now looks like local delivery will keep on going too."

I've been thinking this since I first read about the Smith Electric Vehicles medium duty 17.5 ton delivery trucks in England with 100 mile range and top speed 65 mph.

When I read about them I concluded that peak oil downgrades to a cat 2 hurricane rather than a cat 4.

With the news that we have a couple generations worth of shale gas, it seems likely that our big rig trucks will be converted to natural gas along with many metro bus fleets.

With the breathing room that our huge new supplies of natural gas give us, it seems likely that we can get the cost/range factor of batteries down to the point where we meet current performance (e.g. being able to drive 50 miles per hour for 10 hours straight) sometime in the next ten years.

At that point we have a fully electric substitute for our current transportation mix, with lower fuel costs due to greater efficiency, much lower total cost of ownership due to lower maintenance requirements as well as greatly reduced emissions.

Although in the meantime, there are likely to be much higher gas prices for the average driver and many will give up and switch to mass transit instead, it seems likely that within 20 years it will seem like peak oil, contrary to being doom, may be about to spark off the greatest boom in the history of Earth, because China and India will be able to have modern transportation infrastructures.

Not just anti-doom but peak oil as a wonderful thing. The doomers will *LOVE* that concept. LOL.

DB

 
At Friday, August 7, 2009 at 9:10:00 PM PDT, Anonymous SavinarSucks said...

you can bet that if things got really bad we could go back to using in some measure good old sailing ships.

Watch out for peak wind.

 
At Saturday, August 8, 2009 at 3:22:00 AM PDT, Anonymous Anonymous said...

"If it will be uneconomic to manufacture goods with low margins, like clothing and consumer products, across the oceans, it will be even more uneconomic to manufacture them within Canada, for exactly the same reason"

I think you're better off talking about low value per kg or litre, rather than low margins. After all, expensive high tech equipment which weighs very little can still have low margins, and cheap bulk products can have high.

As an aside, during the Roman era, cheap bulk goods like grain was shipped en masse from the all over the Empire (Sicily, Carthage, Egypt etc) to Rome itself. So seaborne long distance bulk trading works eminently even when energy costs were as immensely high as during the age of sail.

/Starvid

 
At Saturday, August 8, 2009 at 12:36:00 PM PDT, Blogger Black Lizard said...

JD,

I think you've misunderstood Rubin. The true comparison is transoceanic trade vs. 'local' oceanic trade plus inland waterways and rail.

Trucks are toast except for very short haul. They fall out of the equation.

'Local' for him is often the same continent. i.e. He expects a revival of Mexican manufacturing for US markets.

In addition, if you read between the lines, he's expecting OECD wages to fall which hurts transoceanic trade.

My own suspicion is that local fresh food agriculture will be revived more by a growing pool of cheap local labour than by a high Baltic Dry. But the latter will play a role in cities surrounded by quality farmland (which many are).

 
At Saturday, August 8, 2009 at 12:43:00 PM PDT, Blogger Black Lizard said...

I would add that I think there will be a big global grain market for ages to come. Thus the bulk of human caloric intake may never be local again except for hillbillies squatting in the woods far from rail/water.

 
At Sunday, August 9, 2009 at 11:35:00 AM PDT, Anonymous Benny "Boom, No Doom" Cole said...

As noted by other posters, rail is efficient, and would probably benefit from higher oil prices. But, even in a scenario in which oil becomes very scarce, one should remember that the trans-Siberian railway is electric.
And nobody has mounted a convincing argument that we will forget how to build nuke plants, or that wind and solar plants won't work. Of course, we appear to have centuries left of coal and natural gas, and probably even oil (including biofuels, CTLs, GTLs).
Indeed, I am beginning to suspect we are on the cusp of another 20-year-boom.
Never before have there been so many engineers and scientists, and they are being minted every year. Never before has there been so much funding, both private sector and governmental, of research and development. The venture capital community is much larger than before.
There are teams of smart people working on lithium batteries not just in the United States, but in the US, Europe, China and Japan.
This reality applies to many other sectors as well. I suspect we will see technical and scientific advancements in the next two decades at an accelerated pace (instant transfer of info by Internet plays a role).
I suspect the global economy would have not stopped growing at all, except for some incredibly bad lending policies, and an inherently feeble financial system. Remember, our farms, factories, infrastructure, schools etc are all in place. This downturn is us being afraid of phantoms. Nobody bombed global factories, no plague wiped out farms. This is entirely a factional crisis, in a sense.
If Obama wants to leave a legacy, it should be a very sturdy, in not flashy, financial system.
In any event, the recession is about over, and the next very long growth cycle will commence. Buy assets now.
And watch out if lithium batteries improve anymore. Between natural gas and PHEVs, OPEC may find it has lost most of its market in another couple decades.

 
At Sunday, August 9, 2009 at 4:11:00 PM PDT, Anonymous Anonymous said...

"Trucks are toast except for very short haul. They fall out of the equation."

No chance. That will only be true if for some bizzarre reason the two hundred year supply of natural gas suddenly becomes inaccessible for gas-to-liquids and CNG converted big rig trucks.

Even then, if by some bizarre accident that *does* happen, we have right *now* medium duty 17.5 ton electric trucks with a 100 mile range and 65mph top speed. Not too shabby for version 1.0.

On the drawing board right now are batteries with energy density up to 20 times that being currently used. Even if that doesn't pan out, all we need for the truck based paradigm to pan out is 5 times or 2 times with a network of battery swap stations.

I'll go out on a limb here and make a prediction: In 2020 the interstates will STILL be used by long distance trucks carrying at least a third of today's freight, either nat gas powered or electric powered.

DB

 
At Sunday, August 9, 2009 at 5:44:00 PM PDT, Anonymous goofy said...

"Between natural gas and PHEVs"

and don't forget electric! we may have electric cars far sooner than we imagine.

 
At Sunday, August 9, 2009 at 6:53:00 PM PDT, Blogger Black Lizard said...

Anon wrote:

"I'll go out on a limb here and make a prediction: In 2020 the interstates will STILL be used by long distance trucks carrying at least a third of today's freight, either nat gas powered or electric powered."

So, 2/3 vanishes in a decade? That's what I call burnt toast. I suspect it will take longer than that. So we are on the same page.

In other news from the Financial Times (energy costs not specifically mentioned):

Crisis and climate force supply chain shift

Manufacturers are abandoning global supply chains for regional ones in a big shift brought about by the financial crisis and climate change concerns, according to executives and analysts.

Companies are increasingly looking closer to home for their components, meaning that for their US or European operations they are more likely to use Mexico and eastern Europe than China, as previously.

 
At Sunday, August 9, 2009 at 9:00:00 PM PDT, Blogger tahoevalleylines said...

THERE SEEMS TO BE SOME TRAIN TALK HERE SO HERE IS SOME MORE

Jim Kunstler, master of bleak, offers rehab of railways as one of his Plan B requisites. Jim's a fixture now, and has gotten a lot of people looking at the need for rethinking profligate consumption. "The Long Emergency" looks at the human element in energy crises; the missteps and self-serving policies of governments will have an effect on energy units per capita, moreso than what is actually at hand. Resource Nationalism is an example of how regimes of producing nations can damp down oil exports with deleterious effects. Expect to see more of this as prices get closer to $100/barrel.

My interest is the railway mode, see two modest articles in Association For The Study Of Peak Oil & Gas: Newsletter 42, article 374 ; Newsletter 89, article 1037.

I am not ready to bet my grandchildren's lives on sufficient trucking to maintain the present food chain and distribution arrangement. Even with best case limited annual depletion rate, (not withstanding IEA's Fatih Birol's sobering report last week), there are simply too many manmade perils lurking in the wings. Add to that, weather or other natural events that impact motor fuel.

The US Army/Guard Railway Operating And Maintenance Battalions are gone now; they should be re-commissioned. The railway logistics units are low profile entre' for program of rehabbing the branchline rail network. New paradigm branch rail network would be linked to renewables generation expansion, focused on victuals and necessities of life distribution and close-to-market warehouing, with truck interface.

Pacific Electric railway methodology offers easy study: day passenger, night provisions, perishables & general cargo. Oil Interregnum version would add newer rail mode improvements like container and associated handling, electrification and a concept named "Retail Railway".

Christopher C. Swan, in book "ELECTRIC WATER", presents compendium of off-the-shelf tech for renewable generation and local service mobility. The term "Retail Railway" is descriptive of the best attributes of the Interurban Electric Rail lines of the first half of the 20th Century, when America was a Lending not a Borrowing Nation, and Energy Independent. Caps intended.

The military railway units are subject of a short book from James A. Van Fleet, "Rail Transport And The Winning Of Wars" AAR 1956. Anyone wishing to to so, may call the Association Of American Railroads librarian (202-639-2100) and ask for copy. Van Fleet's prescient prose includes warnings of homeland attack(s), Natural disaster mitigation with rail assets, and cautions us on the folly of reliance on imported motor fuel.

Military rail units would sponsor rebuilding the most critical agricultural branchlines at inception of program, step aside for private operators as job reached turnkey. On to the next one, always ready to back-up the private companies for disaster recovery. Sorely missed in Katrina recovery, an area criss-crossed with dormant rail branchlines.

The USA has about 3050 Counties in the 50 states. All the states have some standard gauge railway in operation, even Hawaii. Adding to existing rail infrastructure is a natural evolution toward greater energy independence. Learn the territory; see the US Rail Map Atlas volume for your respective locale, from spv.co.uk and share with nearby County Planning Bureaus.

American Regional Railroad Association is an organization well fitted to the program of expanding local railway re-connect. Begin Parallel Bar Therapy at your convenience...

 
At Monday, August 10, 2009 at 4:03:00 AM PDT, Anonymous Menno said...

Hi, I am new here. Let me introduce myself: I represent a small organisation in France, national member of a European agrotourism network, and I am interested in ways to bring people to the countryside in order to stay in touch with the reality of farming and nature thereby supporting ecological farmers.

The problem is that many natural resources are currently not or not well managed because they lost their economic value, like marginal, isolated agricultural land/forests etc. I agree with most posts on this blog that do not see a return to local economy as a viable future route to take as cheap oil will diminish. I do think that for economically deprived people, especially unemployed people, it can represent an opportunity that has not not well developed yet, like for example communal gardens etc.

The comment that I wanted to make on the last article of JD is that he is making a comparison between shipping and truck transport that doesn't hold.

China - Felixstowe by ship
with
Uk - Scotland by truck

To be more correct you have to compare
China - Scotland
with
Uk - Scotland

The question is if it would be cheaper that the ship container can be shipped directly from China to the end destination, than to transport it from a place somewhere in the UK, let's say London to Scotland. This is ofcourse never the case. There is always truck transport involved. The ship container must be loaded on a truck or train and than transported further, probably as far as the truck load produced in the UK.

A second remark concerns the "regionalisation" or de-globalisation". This process is not necessarily bound to shrinking economic networks towards national level. More regional instead of global can also mean choosing for train transport within Europe instead of shipping from China. This definitely reduces transport costs, as a spokes man of Philips today in Global Economy said:
http://www.ft.com/cms/s/0/65a709ec-850b-11de-9a64-00144feabdc0.html?nclick_check=1

Menno

 
At Monday, August 10, 2009 at 8:22:00 AM PDT, Blogger Ari said...

So, 2/3 vanishes in a decade? That's what I call burnt toast. I suspect it will take longer than that. So we are on the same page.

Black Lizard,

I think you misinterpreted this. The fact is that about half of all freight is currently moved by trains already in the United States.

It's not a huge stretch to imagine that increases more as the cost of diesel necessitates the use of more rail, but it's not a "2/3" reduction by any stretch. It's just a change in how people view the use of trucks for freight.

 
At Monday, August 10, 2009 at 8:45:00 AM PDT, Anonymous Anonymous said...

""I'll go out on a limb here and make a prediction: In 2020 the interstates will STILL be used by long distance trucks carrying at least a third of today's freight, either nat gas powered or electric powered."

So, 2/3 vanishes in a decade? That's what I call burnt toast. I suspect it will take longer than that. So we are on the same page."

That's a worst case scenario and even then, in that case, I expect the other two thirds to be water based or rail-based, NOT vanished.

What I *really* think will happen is this: NO CHANGE in volume of trucking.
The power source will change.


DB

 
At Monday, August 10, 2009 at 2:25:00 PM PDT, Anonymous Anonymous said...

-Off topic-

JD you were called out as a doomer on today's drumbeat! Say it aint so?

ZZ

 
At Monday, August 10, 2009 at 4:17:00 PM PDT, Blogger wchfilms said...

Decline of transoceanic trade is one of the silliest peak oil concepts. Most big cities sprung up on waterways for a reason... water is cheap for transit, and this pattern existed long before oil was used at all.

 
At Monday, August 10, 2009 at 11:14:00 PM PDT, Anonymous Menno said...

Hi wchfilms,

Indeed there is little doubt that sea transport remains very important, but it is also true that some big companies at the moment do choose an alternative because of financial reasons.

See article of Financial Times of 9 August (in Global Economy),

"Manufacturers are abandoning global supply chains for regional ones in a big shift brought about by the financial crisis and climate change concerns, according to executives and analysts.

Companies are increasingly looking closer to home for their components, meaning that for their US or European operations they are more likely to use Mexico and eastern Europe than China, as previously."

http://www.ft.com/cms/s/0/65a709ec-850b-11de-9a64-00144feabdc0.html?nclick_check=1

Example: Philips is replacing its Chinese suppliers by Eastern European ones.

Menno

 
At Monday, August 10, 2009 at 11:26:00 PM PDT, Anonymous Menno said...

One more thing:
Ofcourse for many, mainly primary, products there is no alternative possible: oil, iron, wheat, all bulky stuff. So in volume the trans-oceanic trade will not likely decline soon.
Menno

 
At Monday, August 17, 2009 at 5:38:00 AM PDT, Anonymous Necros said...

It's really funny to see that while more and more people realize the critical situation of the oil trap we foolisly waded into (i.e. using oil for everything and hoping blindly it will last forever), this silly place remains firm in its misguided conclussions.

Sure we can live without oil - but live much more humbly. However, a system based on "perpetual growth" will have to go first - along with debt-based investments, current banking, corporations, etc.

Oh, and I almost forgot - the population will have to go back to 2 billions max, where it was in the pre-oil era.

So, Mr. I-ain't-moving-an-inch-in-my-blind-belief, how do you cope with the current development? Amerika on the verge of bankrupcy, buying its own treasury bonds (just like the snake biting its own tail). Wars in Iraq and Afghanistan failures, debt soaring, unemployment on the rise, social unrest slowly brewing. Isn't this a time to ... reasses your original dogma?

 
At Wednesday, August 19, 2009 at 11:35:00 AM PDT, Blogger Ari said...

Necros,

Sure we can live without oil - but live much more humbly. However, a system based on "perpetual growth" will have to go first - along with debt-based investments, current banking, corporations, etc.

First off, what do you even mean by "debt-based investments?" Because, let's face it, debt ain't goin' anywhere. Not only is debt a very useful tool for financing operations for which capital is scarce, debt has been used as a financial tool since loooong before oil.

In fact, the current banking system, that is the i-bank/retail banking system of today has largely been in place in some fashion since long before oil came along. Modern investment banks were in existence in the 19th century in some form or another. That's because there's always going to be a need for someone to help finance operations for which equity (stock sales) are too expensive, and for which a company cannot hope to save up the capital in the short-run.

Debt, in and of itself, is not bad. Debt used to grow a business can be a powerful, useful tool if used properly. If a company like Toyota wants to finance a new plant, they basically have three choices:

1. Go to an investment bank and get a loan through a bond issue.
2. Issue equity.
3. Spend out of pocket.

Debt, while risky, is relatively cheap. Equity has less risk, but it is expensive. Paying out of pocket can often be impossible, and even when you do it, the opportunity cost is incredibly high.

Finally, I don't really understand how "corporations" are in any way affected by oil. There have been corporations since the middle of the last MILLENNIUM. The notion of incorporating a company is not going to be changed by some resource issues. Corporations are an IDEA. They don't need any specific resource to exist: only legal status.

Oh, and I almost forgot - the population will have to go back to 2 billions max, where it was in the pre-oil era.

Why? Based on what? You make an "argument" without actually arguing it. You state it as if it is some sort of fact, but you present no argumentation or data. It is an assumption on your part that will supposedly happen in the future. That's rather odd.

Amerika on the verge of bankrupcy, buying its own treasury bonds (just like the snake biting its own tail). Wars in Iraq and Afghanistan failures, debt soaring, unemployment on the rise, social unrest slowly brewing. Isn't this a time to ... reasses your original dogma?

Sigh.

First off, the US is hardly "on the verge of bankruptcy."

Anyway, buying bonds is a common fiscal tool:

http://www.bloomberg.com/apps/news?pid=20601080&sid=aCpBlF6C9U1E

That's not strange at all. It makes a lot of sense for the US to be doing it right now in order to keep key rates stable.

Unemployment is an issue, but we have yet to match 1980s unemployment, and are still orders away from 1930s unemployment. I wouldn't get a bunker just yet.

Finally, social unrest? Like... where?

 
At Friday, August 21, 2009 at 2:30:00 PM PDT, Anonymous Anonymous said...

"Modern investment banks were in existence in the 19th century in some form or another. "

The south sea bubble was in the 17th century. Even before the industrial revolution.

It's a common refrain that the current financial system is built on growth and that without growth it will collapse.

Well first of all, it *is* built on growth, but not growth of energy.
Growth of SAVINGS.

A worker decides to save some of her income or does not. Unless you live in a society where ALL goods are perishable, it's quite possible to save some and end up with a surplus.

THAT's how our current financial system works and THAT's how it will continue to work.

It's amazing to me how many bullshit one-liners the doomers trot out one after another.

DB

 
At Sunday, August 23, 2009 at 2:36:00 PM PDT, Anonymous Anonymous of Saskatchewan said...

"If anyone is going to get clobbered by price inflation, it's the people in deeply landlocked rural areas like Saskatchewan."

Considering that Saskatchewan has some of the world's largest uranium deposits, plenty of coal, significant amounts of oil and natural gas, and can easily feed itself without outside assistance I think we'll do just fine, thanks.

 
At Sunday, February 14, 2010 at 4:14:00 AM PST, Anonymous greenJamie said...

DB:

You wrote :"THAT's how our current financial system works and THAT's how it will continue to work.

It's amazing to me how many bullshit one-liners the doomers trot out one after another."


Our current financial system doesn't work and it isn't continuing to work. It amazes me the amount of bullshit you trot out. Twat

 

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