ONE TOWN SQUARE: at the intersection of peak oil, climate change, and land use

Despite continuing global economic weakness, crude oil prices continue to bounce around within the $112-115 range (Brent) and around the $100 level (WTI). Crude remains down a bit from highs reached a few weeks ago, as for the moment the slowdown in global growth is masking the inability of oil producers to boost the global supply of crude oil.

The latest EIA data show new global production records for both crude and all liquids. Sam Foucher asks at The Oil Drum, how much faith can we put in EIA data? Foucher points to another data source – the public database JODI – which shows production significantly lower than the EIA, and notes the way the production data are collected vastly differ between the EIA and JODI.

Jodi is a voluntary activity. Participating countries complete a standard data table (see table on page 2) every month for the two most recent months (M-1 and M-2) and submit it to the Jodi partner organisation(s) of which it is a member. The respective organisation compiles the data and forwards it to the IEF Secretariat which is responsible for the JodiOil World Database.

Foucher shows that, using JODI data where available and EIA data where JODI data are not available, the earlier record highs in both crude and all liquids production still stand.

Foucher asserts the EIA does not itself collect international production data, but rather pays a private company (IHS) for the data. I could not find a discussion of data sources on the EIA website, and am awaiting a response to an inquiry about their sources.

Global oil production data are less than perfect or certain. Jodi data are incomplete and, where available, self-reported. EIA data appear to be from a black box. Both should be taken with a pinch of salt. It’s a shame that Peakoil Nederland is no longer publishing Oilwatch Monthly – July 2010 seems to have been the last issue. A valuable service Oilwatch Monthly provided was to track the enegy content of liquid fuels produced, as volume of liquids is not the same as useful energy. For example, conversion to BTUs shows that actual available energy worldwide in January 2010 was 3.3% lower than liquids statistics counted in barrels would suggest. And nobody is tracking liquid fuels production in terms of net energy, accounting for the decrease in EROEI over time as the easy oil is depleted.

Regardless of whether the world is seeing new record highs of oil production, high oil prices are already prompting people to make big changes in their lives. More than half of Americans say they have made changes to their lifestyle, according to a new Gallup poll. The most common adjustment: driving less.

The Federal Highway Administration reports that vehicle miles traveled (VMT) in March were down 1.4% compared to March 2010 – and VMT for the year are now down 0.1% from last year. VMT in Oregon were down 4.1% from a year ago. So far, the decline is not as severe as in 2008. But as seen in this chart posted at Calculated Risk, the decline began at a lower level.

Calculated Risk also reports truck tonnage fell 0.7 Percent in April – and has not shown any overall growth in over seven years.

A new survey of real-estate professionals suggests driving less is causing Americans to rethink where they’re living, about shorter driving distances and being closer to shops and services.

The migration to the suburbs has stumbled as fuel prices soar and as levels of unemployment in suburbs remain about twice the level of unemployed in cities. New home sales overall have collapsed and remain at record lows. The Census Bureau reports 32 thousand new homes were sold (not seasonally adjusted) in April 2011, tying the record low for the month of April.

The Census Bureau breaks out sales data by region (Northeast, Midwest, South, and West), not by state – so from the data, we can’t tell what’s going on in Oregon. But in the West as a whole, April new home sales have fallen from an average of over 20,000 units a year in the 20-year period 1991-2010 to 8,000 units a year. New home sales are only 40% that of the 20-year average, and only 24% of the 33,000 units in the peak years 2004 and 2005.

In Oregon, expansions of urban growth boundaries are based on historical trends. Currently around the state, a flurry of requests for expansions are being considered. There’s just about zero current need for additional new homes, and future housing needs will not reflect past needs in number of units,or in size, type, or location. Expanding urban growth boundaries to accommodate desired growth will prove pushing on a string. It’s a good bet that most of the land to be newly slated for future growth will forever remain undeveloped.

Here’s a major way that the way we develop and use land has contributed to global warming.

click to view image

This graphic is from a post by Nate Hagens at The Oil Drum titled “A Long Term Solution to Our Financial Crisis: The Other Forms of Capital.”

On Sunday Secretary of the Treasury Henry M. Paulson, Jr. announced that the U.S. government would bail out the two mortgage market giants Fannie Mae and Freddie Mac, stating:

“Our economy and our markets will not recover until the bulk of this housing correction is behind us.”

Jim Kunstler asks a good question: why do the big deals always happen over the weekends?

Nouriel Roubini says the ultimate costs of the bailout will be enormous:

“[T]he eventual losses for the government from this bailout could be as high as $200 to $300 billion . . . This is a huge figure on top of the other trillion dollar plus of fiscal costs of bailing out the financial system that will occur once the current systemic financial and banking crisis takes its full toll. . .

“This is a form of privatization of profits and socialization of losses; it is socialism and corporate welfare for the rich, well connected and Wall Street.“

It’s now been made perfectly clear that the U.S. government is committed to maintaining our suburban sprawl-building economy at all costs. As Kunstler has repeatedly warned, this means we’ll continue to pour what remaining wealth we have down the rat hole of an economy dedicated to building a living arrangement with no future.

The end of cheap oil catalyzed the housing collapse and has led to our current, unprecedented financial crisis.

Paulson is suffering fro a delusion. The housing market is not coming back – ever – at least in the form that we knew it. The suburban project is over. American wealth, the post-WWII American dream, the American empire, was built on cheap and abundant oil, and American oil at that. The deal we made with the Saudis substituted the petrodollar for American oil, for thirty years. But now the fat years are gone.

Kunstler rightly points out that we’re not yet ready to let go of the old reality. We’re still in denial.

“The fantasy-du-jour among both political parties is that we can become “energy independent.” By this they mean we can keep on living the way we do by means other than oil. This is just not true. We have to make profound changes in everything we do from the way we inhabit the landscape to the way we produce our food. Lately, the only change we’ve shown any interest in is changing what our cars run on. But that is not going to rescue us, not even a little. Our inability to talk about anything else except the cars will drag us down into poverty and turmoil.”

Our state of denial isn’t limited to the domestic front. We’re equally in denial on the global front. Our post-WWII status as the world’s preeminent power was a reflection of our oil wealth and industrial might, both of which have eroded precipitously. We built and maintain a far-flung empire of military bases. According to Pentagon records, we have 761 active military “sites” abroad.

Our infrastructure of empire, like our infrastructure of suburbia, is an infrastructure we can no longer afford, that saps rather than supports what wealth remains.

Nouriel Roubini argues that the creditors and bondholders of Fannie Mae and Freddie Mac shouldn’t be bailed out by taxpayers – and in the process explains how U.S. policy over the last decades has subsidized the suburban and exurban sprawl and the McMansions that are at the root of our energy and global warming crises.:

“. . . the existence of GSEs and the implicit subsidy that they provide to the housing sector and mortgage market is a major part of the overall U.S. subsidization of housing capital that will eventually lead to the bankruptcy of the U.S. economy. For the last 70 years investment in housing – the most unproductive form of accumulation of capital – has been heavily subsidized in 100 different ways in the U.S.: tax benefits, tax-deductibility of interest on mortgages, use of the FHA, massive role of Fannie and Freddie, role of the Federal Home Loan Bank system, and a host of other legislative and regulatory measures. . .

“And these MacMansions and the broader sprawl of suburbian/exurban housing are now worth much less – in NPV terms – not only because of the housing bust and the fall in home prices but also because: a) the high oil and energy prices makes it outrageously expensive to heat those excessively big homes; b) households living in suburbian and exurban homes that are far from centers of work, business and production that are not served by public transportation are burdened with transportation costs that are becoming unsustainable given the high price of gasoline. So on top of the housing bust that will reduce home values by an average of 30% relative to peak high oil/energy prices make the same large homes in the far boonies of suburbia/exurbia worth even less – probably another 10% down – because of the cost of heating palatial MacMansions and because of the cost of traveling dozens of miles to get to work in gas guzzling SUVs. Thus, it is time to stop this destruction of national income and wealth that a cockamamie decades long policy of subsidizing the accumulation of wasteful and unproductive housing capital has caused.”

The political economy of housing, mortgages and of “privatizing profits and socializing” losses will most likely determine the policy outcome. So much for the “free market.”

An article in the Sacramento Bee describes the new commuter communities of  Plumas Lake and Edgewater:

“. . . model home complexes stand empty inside undeveloped subdivisions. Many finished homes have signs in front windows advertising them as available. Thousands of lots, readied for development during the housing boom with sidewalks, streets, utility lines and street signs, have become fields of weeds.

raises questions about the impact of expensive oil on such far-flung neighborhoods whose futures were tied to a metropolis many miles away:

“Could they become a suburban equivalent of ghost towns? Will they languish for years while awaiting local job growth, more fuel-efficient cars and a vibrant mass transit system? Is this the end of that kind of residential growth?”

For 35 years Oregon fought against rural sprawl. Land use laws discouraged the building of new houses on farm and forest lands – although restrictions were constantly chipped away at, year after year.

Measure 37 opened the floodgates to rural development, creating the opportunity for Oregon’s landscapes to sprout subdivisions like those plaguing California’s. Measure 49 pretty much screened out the subdivision option, but did nothing to foreclose the wave of development of dwellings in 1- to 3-unit increments.

Real estate experts say it will take over a decade to clear the excess built and planned inventory from the Yuba and Sutter County markets. Could it be that Oregon has found an unlikely savior in oil and its potential to make rural areas “decidedly unattractive” to homebuyers? Expensive oil might at least offer a respite.

In One Town Square, we talk a lot about growth, development, transportation, climate change and related issues.

A long list of co-sponsors, headed up by the state Transportation and Growth Management Program, is organizing an all-day conference on Wednesday, June 11, 2008 in Eugene with experts from around the state and nation on some of these topics:

Lane County
MOVING FORWARD TOGETHER™
Expanding Housing, Economic and Transportation Choices

A conference for
REALTORS®, business people, environmentalists,
neighborhood leaders, public officials and staff, and
all other interested people in and around Lane County

Wednesday, June 11, 2008
8:00 a.m. to 4:00 p.m.
Hilton Eugene & Conference Center
66 East 6th Avenue, Eugene, Oregon

Registration is required and space is limited.

The registration fee is $25 through June 6, $35 after June 6. Lunch is included.

Noted regional planner John Fregonese will be the opening speaker, and former Maryland Governor Parris Glendening, who oversaw the implementation of Maryland’s Smart Growth program, will be the closing keynote speaker. Other speakers will include Reid Ewing, a nationally recognized transportation expert and the lead author of Growing Cooler: The Evidence on Urban Development and Climate Change.

You can register online.

How’s your neighborhood holding up to the collapse of the housing market? Check it out on this interactive map of home foreclosures. I don’t know where the data comes from, but it actually identifies individual houses foreclosed, with “list” price and terms – so much a month over 30 years at x %, zero down.

There’s a cluster just around the corner from my house . . . but then out here in the farm land that’s not necessarily a bad thing. Less pressure for even more houses. What’s a poor Measure 37/49 claimant to do, with the housing market saturated and home prices and values dropping?NPR reports that home prices are dropping most in areas with long commutes.

“Economists say home prices are nowhere near hitting bottom. But even in regions that have taken a beating, some neighborhoods remain practically unscathed. And a pattern is emerging as to which neighborhoods those are. The ones with short commutes are faring better than places with long drives into the city. Some analysts see a pause in what has long been inexorable — urban sprawl.”

In most major metropolitan areas, home prices are holding up best, even increasing, in areas close to city centers and public transport – the longer the commute, the steeper the drop in prices.

You can’t really determine how “affordable” housing is unless you consider transportation costs.  Cheap housing at the fringe of a city or in the far-flung suburbs may not prove so cheap after all – especially as gas prices are rising steadily, with no end in sight.

A new  interactive mapping website called the Housing + Transportation Affordability Index shows how much housing costs in neighborhoods in 52 U.S. metropolitan areas – and also how much the total costs come to when transportation expenses are included.

The web tool is a project of the Brookings Institution’s Urban Markets Initiative.