Powered by cheap oil, the circulatory system of our economy has globalized, expanding populations, wealth, specialization beyond all historical measure. Yet the founding assumption of our success has failed and we are coasting on the momentum of cheap oil. Increasing supply of cheap oil peaked in May 2005. Since that peak gas prices and home foreclosures have skyrocketed as more and more people cannot afford their commute, food and house payments. The evaporation of Bear Stearns indicates the accelerating rate of consequences.

Greater circulatory failure is certain if we do not re-tool transportation more quickly than escalating energy costs drag down the economy. The timeline for action is very short but we can turn this crisis into an opportunity; we can change the lifeblood of our economy from oil to ingenuity. America can reestablish its self-reliance.

If we had the answers, we would have solved the problems; oil prices would be falling; there would be no congestion in rush hour; Peak Oil and Climate Change would be resolved. 

Since we are not solving the problems, we need more and/or different solutions. Start by understanding our current energy sources and uses. Face the brutal facts of our reality. And churn from where we are to where we need to be.

Our current infrastructure the cause of Peak Oil and Climate Change.  We built this infrastructure.  We can build better.  Re-tooling will not be easy or quick. It will take 5 years to get a running start and likely 25-50 years to have a sustainable infrastructure base. CSX Railroad's recent TV ads state they can move a ton 423 miles on a gallon of fuel. By choice urban transport is radically less efficient, using a gallon of gas to move a person 18 miles. We know how to do better; we just don't allow innovation.

According to Lawrence Livermore National Laboratory transportation is 20% efficient at moving vehicles and goods while 80% drives climate change.  Innovations that preempt this waste provide an immediate hope for oil independence and Global Warming.

Brutal Facts

As documented in the book Good to Great, Admiral Stockdale, the leader of American POW’s at the Hanoi Hilton prison camp explained who did not survive the ordeal.  The optimists, those who thought we would be out by Christmas, then Christmas after Christmas passed until they died of a broken heart.  Those that survived the ordeal exhibited what has come to be called the Stockdale paradox; an unwavering faith that in the end we will prevail while confronting the brutal facts of our current reality.

The brutal facts of our current reality:

• Cheap oil is gone forever.  We are coasting on the momentum of a past age.
• Our current infrastructure is the cause of Peak Oil and Global Warming.
• Experts aren’t. Experts in building infrastructure for the age of cheap oil are not experts in re-tooling for decreasing oil availability and increasing costs. 
• The optimists are in control of information.  The US Energy Information Administration (EIA) forecasts and records energy information for policy makers.  EIA’s two-year forecasts were low by 31% in 2002, 48% in 2003 and 60% in 2004
• The optimists restrict action.  Transportation and power generation are controlled by regulatory monopolies.  The regulators are chartered to maintain order. The process of innovation is messy so innovations that can jump fuel efficiency from 18 mpg towards 423 mpg are not allowed.
• We must adapt more quickly than change overtakes us.  Oil double in price in 2007 so we must double efficiency to survive.
• We do not know the answers.  If we did we would have solved the problem.  What we need is a process for creating and testing possible answers.

Churn

Churn is the economic equivalent to evolution; the process of trying a lot of stuff and keeping what works:

• Free market.  Churn requires latitude to experiment without a lengthy permission cycle.
• Innovation.  Individuals try innovations to solve niche problems/opportunities that are within their economic abilities.
• Refine. Some changes are perceived as so much better they excite a cluster of adoption that refines the innovation into commercial potential.
• Scale.  Some changes reach a critical mass and sweep the general population to become the norm.
• Iterate.  Some changes are fads and fade way, some are lasting, and some stay as viable niche solutions.

As oil prices double, our transportation and logistical infrastructure become more brittle.  Our circulatory system has leukemia (Global Warming is killing our planet) and heart attacks (unstable oil prices shocks). Yet we remain hostile to innovations.

Take Morgantown’s PRT (Personal Rapid Transit) system as an example.  In 1974 the US Senate formally asked DOT for solutions to prevent future oil embargoes.  DOT answered in the 1975 Study PB-244854 recommending Automated Guideways and Personal Rapid Transit.  Morgantown became operational in 1975 and has since delivered 110 million injury-free passenger miles.

DOT Study PB-244854 predicted in its report why Morgantown’s innovation would fail to expand beyond Morgantown:

• Federally sponsored R & D has not included a coordinated program for conversion of successful products into operational systems.
• R&D programs [US DOT Urban Mass Transit Administration]... have neglected near-term ... simpler approaches to correct transit problems.
• Institutional failures (rule-followers verse innovators) may hinder implementation.

Regulatory monopolies should be broken so innovations can churn.

We are facing a choice of adapting or face the collapse of our food, distribution and logistical systems.  We believe, we will adapt and prosper, it will be difficult and we will constantly be pressed by time and emergencies. And in 50 years the cost of transportation will be as relatively expensive as cell phones are today.

Timeline

If our logistical system were the Titanic, here is a comparison of timelines:

• Iceberg warning equates to 1956 Hubbert warned the US would hit domestic Peak Oil in 1970.
• Iceberg sighted equates to 1970 US experienced Peak Oil as predicted by Hubbert.
• Impact and Hull breach equates to 1973 Oil Embargo, fragile infrastructure
• Deck Tilt equates to 2002-2007, 5-fold increase in the price of oil.
• September 2007 the paradigm shifted as demand pressure exceeded supply resilience.  Normal yearly price cycles broke and inventories plummeted trying to compensate.  In early 2007 Sadad Al-Husseini, former Saudi Aramco Exploration Minster of this:  “There has been a paradigm shift in the energy world whereby oil producers are no longer inclined to rapidly exhaust their resource for the sake of accelerating the misuse of a precious and finite commodity. This sentiment prevails inside and outside of OPEC countries but has yet to be appreciated among the major energy consuming countries of the world.”

• Between 2008 and 2012 the full effects of Peak Oil and hoarding will seriously harm logistical capacities.  Peak Oil is already crushing weaker economies.

Demand (black) cannot exceed Supply (red).  Inventories must drops or prices increases to kill demand.  On Dec 31, 2007 oil closed at $96.23, well above the projection that will result in $200 per barrel by 2012.  Trading range in 2008 will likely be $80-140.  If you were on the Titanic, you should be in your lifeboat.  It is another paradox, but if every economic community had a lifeboat, we would not need them. 

To those that delay action, questioning the payback, please ask this question of yourself, “What is the payback of not having a lifeboat when one is needed?”

Specific actions

Fortunately, economic lifeboats can be locally built and many actions are simple.  Unfortunately, most actions take time to ramp up. The quicker communities act the more durable they will be. 

As a measure of actions the following formula structures aspects of logistical durability: 

Logistical Durability = Experience times Energy (sources, quantity and price) times Efficiency (congestion, fuel economy) divided by Population (rate of consumption) divided by Mass (consumption, vehicles, goods and people) 

Following is a breakdown of some actions to enhance logistical durability:

• Experience.  Take the shock out of oil price shocks.
• Self-reliance. Organize your economic community to live within a solar budget.  This will require a per capita energy use similar to an American of the 1920’s.
• Plant a garden.  A typical grocery store basket of food has traveled 1,500 miles.  If you grow a third of your own food, your will be protected from serious supply disruptions.  This also decreases the mass of good required to be moved.
• Practice shortages.  One weekend a month operate live without using your car and note what is possible and not with current infrastructure.
• Organize the community to manage security in a supply shock.
• Energy.  Renewables.  Like any lifeboat, the more self-contained the better.  Solar energy (wind, tides, etc…) adds durability; locally available, with very low operational costs once the infrastructure is installed to harvest.  Germany’s Feed-in Tariffs establishes the world’s most effective and free market management of renewable power generation implementation.
• Efficiency
• Grant rights of way for building automated guide ways.
• Apply Automated Guideways to gain container and rail shipping efficiencies in moving pallets and people.  Example, JPods/CargoPods move 4 people or 1200-pound pallet a mile using 200 watt-hours of power.  Solar collectors, 16% efficient, 6-feet wide mounted over that mile of rail gather 2.5 million watt-hours in a typical day.  That is enough power for 12,500 vehicle-miles.
• Large solar arrays (mounted on automated guide ways) for local generation preempts transmission power lose and powers transportation at the point of collection.
• Congestion relief is perhaps the best measure of efficiency improvement.
• Mass (move less)
• Local economy.  Support farmer’s markets and locally produced products.  If you operate a business, shorten your supply chains.  These actions will also strength local economies and job markets.
• Reduce the mass of transport vehicles with automated guide ways.
• Measure food-miles.
• Population
• Manage development within water and energy resources.
• Make energy and mobility plans part of all development planning.
• World-wide promote women's rights, education and birth control.