Monday, December 31, 2007

2008: Pause

Time, once again, to engage in my annual predictions and prognostication. This year The Economist has unofficially endorsed my brand of futurology--relatively short term and thematically focused. But first, as usual, a review of how my 2007 predictions panned out:

I didn't get Iraq right--I predicted that the draw-down would begin, whereas in reality there was a "surge." I guess I'm still able to underestimate the incompetence of the Democratic Party. Mental note not to make that mistake again. I won't discuss my thoughts on the surge (e.g. the arming of the Sunni tribes for the future clash with the Shi'a establishment over oil revenues after the inevitable US withdrawal) now, but suffice to say I didn't get it right in '07. For what it's worth, I did get the "no war" call on Iran right.

I'll give myself kudos, however, for nailing the oil prediction. I said that oil would break 90 and flirt with 100, and that "peak oil" would officially break into the mainstream media. Right on all counts, not that I claim any kind of secret formula--it was just an "educated" guess based on what I see as obvious trends. The only area you could quibble was with my prediction that Russian oil production would fall--that isn't entirely clear.

I generally missed the credit crunch and was mildly wrong on housing woes and the Euro. And I overstated the problems facing Mexico--while there were some worrying pipeline attacks, the economy didn't "collapse" as I had predicted. So my 2007 predictions were poor with the notable exception of oil prices. Will this result in an overly cautious outlook for 2008? Yes and no. Yes in the sense that, considering that I fundamentally agree with the long term predictions of the "end is nigh" crowd, I think 2008 will fail to meet their expectations by far (hopes?). No in the sense that, given my fundamental agreement with "them" on the long term direction of our planet, I'm firmly bucking the trend of expecting immediate economic collapse followed by mass starvation by calling for the appearance of normalcy. Emphasis on appearance.

So what will 2008 hold? Let me consult my crystal ball...

Oil Prices: we'll break $100 firmly at some point, but won't hit any sky-high territory in '08 (that looks to be in '09, but now I'm breaking The Economists' rule of only predicting one year out). I think that we'll essentially plateau in production--maybe a small fall or small gain globally--and that increased demand in India and China will be met with efficiency efforts that clear off the low hanging fruit. Basically, I think we'll set ourselves up for a fall by doing the easy efficiency measures (but none of the tough and ultimately necessary ones) and pat ourselves roundly on the backs as production doesn't drop off a cliff and prices don't spike. This, of course, leaves only the hard and slow-to-pay-off efficiency measures remaining just in time for significant global production spikes and "export land" effects to really bring trouble in '09.

Iran & Iraq: slow news year. No troop draw-down of any significance (though possibly something symbolic in August-September time frame to give the appearance of "victory"). No war with Iran. No uptick in violence--in fact, the surge will continue "working" (as long as you define working as laying the groundwork for future bloody civil war).

The most significant story of the year: the economy won't crash. What the hell, I'll go out on a limb--we won't even have a "recession" as officially defined. On an earnest note, there is a lot more resiliency in the American and Global economies than is often accounted for, and there are many "low hanging fruit" measures to stave off the energy and credit wolves for another year. And if those real measures are too politically difficult, there is plenty of appetite for the fiction that the economy is resilient and recovering, as well as people in power who will benefit from the appearance of normalcy through the '08 elections. I'm not talking about Bilderberger/Bavarian Illuminati fairy dust, but rather simple and obvious things that can be done by the current Bush administration to ensure that it doesn't appear that a Republican administration is bad for the economy. So this time next year we'll still be listening with rapt attention to news reports tallying the Christmas shopping season and the resiliency of the American consumer. Unlike oil prices, I don't see this economic stability as a temporary reprieve before we go off the cliff. I think that media and public perception of our economy, as well as our actual economy itself, is already a matter of fiction and wizardry. This wizardry can continue, unabated, for quite some time. I agree with Ran Prieur's version of the "slow crash." That is, we're already crashing. This is what collapse looks like. The middle class gradually shrinks, the value of our pensions and investments gradually declines, things get gradually less affordable--and if it is executed properly this all happens just below the rate at which it reaches the public consciousness. A really sharp cliff in oil production could change this, but I think if we do our realistic best at mitigation efforts in energy use, this, too, will keep just under the "crisis radar." Diesel prices equivalent to $300/barrel oil haven't stemmed the commuting or truck transport industry in Europe, so I don't see why $300/barrel oil by 2010 or 2012 won't be anything more than another contributor to the slow crash. We are evolutionarily adapted to recognize and respond to surprise, short-duration crises, but we aren't evolved to be very good at even recognizing the slow, gradual ones that are visible at a distance.

One more thing--Rudy will win the 2008 presidential election. Why did I pick him? He's the worst possible result that I can think of, so it seems a nice balancing point the the appearance of optimism elsewhere in this post. Besides, none of the candidates will address the fundamental causes of the slow crash, so does it really matter in the long term? IF there was a candidate who could maximize our mitigation efforts, and IF there was a candidate who could slow the slow crash as much as possible, it still only seems that the result would be to push off the matter of dealing with the slow crash on later generations. My ultimate prediction is that we will never deal with our fundamental problems en mass, but rather will let them deal with us.

Sunday, December 30, 2007

Observations on a Germany Road Trip

Just back from a trip to Germany, so here are a few observations in the areas of energy, environment, and society. These thoughts compare Germany with America, as well as Germany with itself--at least from the perspective of an American who has visited on average one or two weeks a year for the past 30 years, sometimes as a tourist, sometimes as a student, sometimes spending Summers with my Grandparents in Berlin when I was younger (which probably distorts my view with a fair amount of fantasy).

Over the last two weeks, we drove about 1600 kilometers through Bavaria, in southern Germany. While most of Europe, and Germany in particular, is known for its efficient and high-speed rail service, there was no shortage of trucks on the road. Even with diesel fuel at $7.25/gallon, the freeways were completely jammed with trucks--much more so than America, and much more so than the Germany that I remember on previous road trips since reunification (significant because it made the German highway system a transit point, rather than lying on an edge of Western Europe). The trucks were an even mix of long haul--delivering goods from Romania and Poland through Germany to Netherlands, France, etc., and domestic freight shipment. I guess this surprised me to some degree--I expected the combination of high diesel prices (prices have always been "high" in Europe, but they're much higher now than they were several years ago there just like in America), excellent rail alternatives, and a greater "green" consciousness to lead to the opposite result. Not so.

Other than trucks, there was also no shortage of personal cars on the roads. That isn't particularly interesting, but it is always interesting to see the various "high-mile-per-gallon" cars available in Europe that just aren't sold in the US. VW's Lupo CDI (a smaller version of a VW Golf, mostly) gets 70 miles to the gallon. There are lots of similar high mileage cars available--and they are widely driven. Mercedes makes one (the "A" series), BMW makes one (the "1") series, as does VW, Peugeot, Renault, Citroen, Fiat, etc. Maybe the Mercedes A series is for sale in the US, but I don't think any of the rest are. I think part of the reason is that, in the US, brands don't like to occupy the full spectrum from super-economy to super-luxury, so companies like BMW, Mercedes, and increasingly VW don't want to even offer the super-economy models in the US. Whatever it is, it seemed clear to me that there is no excuse for not having high MPG cars available for sale in the US. On the flip side of this issue, while there are virtually no SUVs on the roads in Europe (you do see some Land Rovers), the number of "cross-overs" seems to have increased dramatically--cars like the BMW X5. Also, there are at least as many high-end (e.g. non very fuel efficient) Mercedes, BMW 7-series, etc. on the road in Europe as there are SUVs in the US. It seems that Europeans just get by with their 7-Series station wagon (which doesn't seem to carry any negative connotations) instead of an Escalade. I guess not having 5 kids helps there--I saw quite a few two child couples, but by far more one child couples and virtually no 3+ child families. Good in one sense, but doom for their ponzi-scheme pension plans.

Another area that I felt my observations bucked the accepted wisdom was in the area of suburban development. There are no (or very little) US-style, suburban mass developments in Germany, but I think that is for lack of huge parcels of undeveloped land. Instead, their development seems to be gradually spreading out along the roadways. Increasingly, Germans shop at "einkaufzentrums" (shopping centers) that are outside town and require a car to get to. Increasingly they work in industrial parks or office centers that are also outside town--more and more, it seems that the stereotypical walking to the store and work is challenging in Germany. It's still certainly more feasible than in the US (by far for most people), but it is getting harder, and even with the rising price of oil, people don't seem to be valuing this in their living/working/shopping choices. While TOD (transit-oriented development) is all the rage (well, somewhat the rage) in US cities today, it seems to be fading in Germany. I even (*Gasp*) saw a huge, faux-Bavarian (this was in Bavaria) "outlet mall" complex (yes, called "outlet mall") along the A7 autobahn nearly Wurtzburg. I'm sure there are many reasons for this, and my observations may be an unrepresentative sampling, but I can't help but wonder if the general European policy of using high fuel taxes as a buffer on price volatility isn't exacerbating this effect to some degree?

Overall, I felt that while it was clear that Germany is currently much more energy efficient than the US, the trend seems to be moving towards greater efficiency in the US much more aggressively than in Germany--in fact, it was my impression that Germany is moving away from efficiency in all areas other than installed solar, though this is certainly only a rough impression and in no way an exhaustive (or even objective) survey. More than anything else, this seemed to be true in the area of built-environment. Current US energy inefficiency is largely the result in our massive sunk capital expenditure in suburbia and an auto-oriented lifestyle. But, we seem to be moving away from this slowly, or at least making some efforts to moderate it. Germany seemed to be putting most of their current capital flow into investments that will calcify an increasingly energy INefficient economy. I have a sneaking suspicion that I've got this all wrong, as it runs so counter to conventional wisdom, but it was my distinct impression...

On a positive note, I saw more new solar installations in Bavaria than I've ever seen in my life. I saw several large Photovoltaic farms near Landsberg--several acres of PV panels each. There must be some serious tax credits for PV, because every little village has many--maybe one in four or one in five houses--with large PV setups (several KW installed) or solar hot water setups. Lots of barns have huge (as in 20-50 installed Kilowatts) panel arrays on them. I think that the last time I drove through Bavaria was 2002, and this certainly struck me as an entirely new development in those past 5 years. There were also many massive wind turbines randomly scattering the countryside, but I remember those clearly from previous visits so wasn't really struck by the change.

The only other observation that I think I'll throw in (only half tongue-in-cheek) is my ongoing conspiracy theory that Germans (and Europeans in general) secretly sit at home behind drawn curtains drinking several bottles of water and eating green vegetables every day, such that they can maintain the public appearance of minimal fluid intake and a diet consisting entirely of refined carbohydrates (and potatoes), meat, and alcohol. Hmmmm...