As Cheap Oil Ends, American Standard of Living Will Decline

“Americans are delusional,” began James Howard Kunstler, speaking to the investment conference we are attending here in Vancouver.

“They think they can continue living the way they’ve been living for the last 50 years. They think the key to it is to find a way to keep getting fuel. And Vice President Cheney summed up this line of thinking when he said, ‘the American way of life is non-negotiable.’ The trouble is, Americans may not be willing to negotiate. But if they don’t, they are going to find that someone else is negotiating for them. And that someone else is called reality.”

Kunstler is a good speaker. His vision of the world…and the future…has a certain power and authority to it. He imagines that higher fuel prices will change everything – the suburbs will become unlivable and undesirable…Wal-Mart will be unable to continue stocking its shelves with cheap imports…food will have to be produced locally, not shipped half-way around the world…and people will have to find ways to manufacture locally too.

“Globalisation is not a permanent trend,” he cautions. “It is a consequence of two transient and unstable trends. Currently, the world’s governments are favourable to it…they provide the political stability necessary. And the price of the fuel that transports all this stuff is unsustainably low. Both those trends are going to change.”

Kuntsler is the author of The Long Emergency. What is the long emergency? We’re not sure. We think it is the fact that energy is going up in price…making a lot of arrangements – the aforementioned suburbs, for example – untenable. But, listening to him, we got the impression that he hated big cars and parking lots long before he discovered peak oil. The man has a vision of the way things “ought to be” in America. The rising cost of gasoline is probably just a prop – an argumentum that turns “ought” into “will”. Since the era of cheap oil is coming to a close, he says, Americans will have to stop living in ugly, soul-destroying suburbs; they will have to stop their vulgar consumerism; the moron masses won’t be able to keep driving their commuter tanks either. They’ll have to change, whether they like it or not.

This will come as a rude shock to most people. They’ve come to depend on cheap fuel the way Jonestown depended on Kool-Aid.

But the days of cheap gas are over. Our friend, Byron King, made the same point. North Sea oil went into a decline in 1999. Mexico’s Cantarell field peaked out in 2006. Alaska’s Prudhoe Bay is producing less and less oil every year. But that is happening all over the world. Oil fields are peaking out…and going into double digit declines.

“We’re using it up fast,” says Byron. “In fact, we’ve used up most of America’s oil already. I hope you enjoyed it…I know I did.”

Mexico’s national government gets an incredible 40% of its budget from the Cantarell field. “You think we have a problem with illegal immigration now,” Byron continued. “Just wait until the budget gets cut in half as revenues from oil go down.”

Markets and Money

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors. Founded in 1999, Markets and Money is published in 7 countries with a worldwide readership of almost 1 million people.

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