The Energy Futurist

Three deformations of the apocalypse

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Energy futurist Chris Nelder offers three scenarios for the next five years: the good, the bad, and the likely.

In response to my 2012 outlook last week, a reader requested a five-year outlook that's long on opinion and short on data. As SmartPlanet's resident energy futurist, how could I decline? As that reader suggested, I will offer three scenarios: the bad, the good, and the likely.

The bad: Evil drift

Tough times call for tough men. But at this crucial turning point in history, they are nowhere to be found. The entitled class of pantywaist leeches who command our political and economic institutions spend their time slap-fighting over picayune issues and debating points of style like 18th Century French courtesans, accomplishing nothing, utterly tone-deaf to the cries of the people. (Overheard in the Bastille in the spring of 1789: "These protestors are so disorganized and filthy. What do they want? Can't somebody just clear them from the square?") As it always has in the past, this toxic brew spawns revolution.

The Fed remains committed to pushing printed dollars onto a world already awash liquidity, in hopes that growth will return. But it doesn't. The captains of the financial industry refuse to mark their hallucinated assets to hard assets, because the former exceed the latter, and the people are unable to force a reckoning that would put the economy back on terra firma. The great tide of the global currency wars sucks the sand out from under our feet as it recedes, and we gradually sink deeper into the mire of debt and deflation. Slowly, bit by bit, the Great Contraction tightens around the world.

Rick Santorum is elected president in 2012 on the back of a massive evangelical campaign. The Tea Party retains its hold on the House, and the Democrats retain control of the Senate, ensuring four more years of legislative gridlock. Grover Norquist is appointed to Santorum's cabinet, and embarks on a relentless campaign to shrink the federal government, browbeating the House leadership into radical cuts to social services. These new austerity measures squeeze the economy dry.

Spot shortages of gasoline and food begin to appear, along with ever more frequent failures of infrastructure. Transformers blow up and water mains break once a week in major metropolitan areas. Road transportation becomes increasingly difficult as roads and bridges fall into disrepair, but mass transportation systems are unable to compensate due to power outages and fuel shortages. The veneer of civilization wears thinner, and finally crumbles as complex delivery systems begin to fail.

In the aftermath of the 2012 election, Americans lose their last vestiges of faith in the corrupt, immobile knot of their so-called democratic institutions. Realizing that there are only passengers on this ship, and that no strong hand will take the till to keep us from drifting into the teeth of disaster, they live up to their self-image as anti-government, rugged individualists and take matters into their own hands.

There simply aren't enough National Guard and police to keep the peace, and our military troops remain committed to securing our globalized corporate interests on the far-flung reaches of the American empire. Tax revolts deprive state and local governments of enough revenue to maintain, let alone increase, their police and fire services. Civil order begins to break down.

By 2013, protestors are occupying public spaces permanently. Retail shopping becomes next to impossible, sucking the remaining wind out of economy. Inner-city neighborhoods in poor areas fall under the control of local gangs. Wealthy areas hire private security and throw up fences. Street gun battles become commonplace as local thugs vie for turf. Vigorous black markets in food and fuel bloom like toxic red mushrooms in an early winter rain.

Armed mobs take over Wall Street, and go hunting in the Hamptons. The national banks collapse as it becomes impossible for them to function, leaving only small regional banks. Lloyd Blankfein meets a gory end, hanging by his thumbs from the Brooklyn Bridge. The dollar becomes worthless and gold and silver become the only accepted currencies.

Global oil supply begins to decline in 2014 as the depletion of non-OPEC producers entwines with the collapse of governments across OPEC, keeping prices high even as the global economy contracts and demand falls. Consumers in the West are continually outbid for rapidly falling available net exports by the five billion people of the East. New geopolitical alliances are formed along the shortest energy supply routes, binding Asia to Russia, and India and Pakistan to the Middle East.

By the general election of 2016, the remaining vestiges of American civil society, now desperate for order and stability, elect a hardcore right-wing fascist who promises to "kick ass on those ragheads and make 'em give us their oil." He launches military strikes against Iran and Syria, and re-occupies Iraq. He imposes a harsh domestic police state in an attempt to restore domestic order, imprisoning all dissidents without due process under the legal framework that Barack Obama signed into law on the last day of 2011. Millions of destitute citizens are conscripted to serve in a massively expanded military- prison complex. The governments of Canada, Mexico, and all of Central and Latin America fall under the new authoritarian government of the U.S. in all but name, as it installs friendly puppet regimes.

Global resource wars break out in 2017. The people revolt against the increasing taxes needed to fund the wars and the domestic police state, and Texas secedes from the union, followed by the states of the Pacific Northwest. (Think it can't happen? It already did, in 1941.)

Five years from now revolution, and the dissolution of the American republic, are under way.

The good: Seizing the future

President Obama, having been reelected in 2012, abandons his previous ineffectual tactics of appeasement and finally finds his sac. At the head of a new Democratic majority in both houses of Congress, in which labor threw out the stultified party leadership and brought in a new crop of reformers, he leads the country on a breathtakingly ambitious infrastructure rebuilding program, riding roughshod over all opposition. Over $1 trillion dollars per year are committed via public-private partnerships to transition transportation to rail, rebuild our water and sewage systems, and transition grid power to renewables. Only essential local roads are maintained, and lanes of interstate highway are converted to rail corridors. The power grid is nationalized and upgraded with smart-grid technology. A high-voltage long distance DC transmission grid is built to redistribute wind power from the Plains, solar power from the South and Southwest, geothermal power from the Rockies, and marine power from the coasts. Solar PV becomes the cheapest form of power generation by 2016.

The program reunites the country politically, restoring full employment and national pride. The principled opposition to federal spending is swept away by a new fervor to retake the high ground of the global economy. The American Restoration Act of 2012 imposes harsh penalties on profits made from foreign operations, while rewarding the repatriation of profits and manufacturing with generous tax breaks. "Made in America" becomes a national slogan again, and is proudly stamped into every nut and bolt.

The surge of domestic rebuilding tilts the global balance of power back toward America, as companies scramble to rebuild manufacturing capacity at home and withdraw from their outposts in Asia. The dollar becomes stronger, and the return of growth allows the Fed to begin withdrawing the trillions of dollars it injected after the crisis of 2008.

Sweeping financial reform legislation is forced through Congress, including a massive transfer of private sector assets to the federal balance sheet. Bondholders are forced to take a 50 percent haircut. New incentives allow all Americans to refinance their homes and personal debt under federal programs at 2 percent interest for 30 years, with the stipulation that they can no longer use credit cards. Banks are once again relegated to the boring historical norm of making loans earning no more than 2 to 3 percent interest, and are forbidden to use leverage or take positions in equities or commodities. The finance sector is forced to shrink from over 8 percent of GDP today to just 2 percent, as it was in the 19th Century, and millions of its workers are forced to find something useful to do.

The "Victory Garden" initiatives of WWII are revived, and everyone plants vegetables in their yards. Those without yards are given plots to farm in public parks. Overbuilt and disused suburbs are demolished, and the land converted to agriculture. Tariffs are imposed on imported food in proportion to how far it traveled to get to the U.S., and agriculture is slowly relocalized across the country, resulting in a two-million-barrel-per-day cut in domestic oil consumption by 2017.

Five years from now, America is on course to be a new economic powerhouse with domestic demand replacing the falling consumption of Asia. The decline of global oil supply pinches the economy, but does not break the skin, as demand is shifted from liquid fuels to domestic renewables. Realizing that she can get by on North American oil supply once the transportation and power transitions are complete, America begins to withdraw its military forces across the globe, ending the drains of military adventures and foreign oil expenditures simultaneously. By the time the global resource wars ensue in 2017, she will stand once again as a prosperous, peaceful, more insular, "shining city on a hill."

The likely: Decline by default

Barack Obama is reelected by default in 2012, since none of the GOP's insane clown posse are deemed both electable, and acceptable to the Tea Party. A broad anti-incumbent electoral revolt completely transforms the leadership of both parties and creates a balance of power in both houses of Congress, creating a brief window of opportunity for real change.

Unfortunately, that opportunity is squandered for a lack of effective vision and leadership. As in all other scenarios, oil still declines starting in 2014, squeezing the economy and stifling growth. The Fed keep printing, but in vain. America is sucked into the deflationary vortex by default.

Oil prices remain just above the pain threshold of ordinary Americans. In response they move to small apartments in converted downtown office buildings. Empty suburbs are abandoned and James Howard Kunstler does a victory dance in the dust of the geography of nowhere, to the applause of no one. Roads and bridges fall into disrepair, forcing the working class to crowd into slow, meandering buses and decrepit light rail systems when they aren't traveling on foot or bicycle. Things work until they don't, and then they are abandoned.

America is drawn by default into the global resource wars starting in 2017, but fails to secure any significant new supply of foreign oil. Available imports from the Middle East begin to fall, prompting a massive drilling and mining campaign across every last inch of America where hydrocarbons may be found, with attendant soaring environmental damage. But solar PV still becomes cheaper than regular grid power, and millions of small rooftop solar systems with battery backup are installed by individuals in self-defense, creating little islands of light in a country plagued by sporadic blackouts.

Unemployment continues to rise until Americans are willing to work for less than the Chinese. Farming is the hot sector for young people entering the workforce, as the finance, insurance and real estate sectors shrink. Millions of Americans move to Canada in search of a better life and a stronger currency. The dollar survives, but it doesn't buy much.

Five years from now, America is crumbling, mumbling and bumbling its way to a smaller, leaner, and more agrarian economy. Its superpower days are fading into history. The republic holds together in name only. The inability of the economy to generate excess revenue starves the federal government of receipts and a gradual, decades-long shift to more regional governance and culture begins.

Postcript

I have offered these fanciful, extreme, and hopefully mildly humorous scenarios to provoke thought, not to draw a map. And if I seem hard on the GOP, it's because of their staunch opposition to energy and transportation transition, which I believe are absolutely necessary to avoid collapse. In reality, the next five years will be replete with surprises—including natural disasters, unprecedented political upheaval, and unimaginable financial hijinks—that may incorporate elements of all these scenarios.

So. . . What's your scenario?

Illustration: "Enchantment's End" (gideon_wright/Flickr)

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Chris Nelder

Columnist (Energy)

Chris Nelder is an energy analyst and consultant who has written about energy and investing for more than a decade. He is the author of two books on energy and investing, Profit from the Peak and Investing in Renewable Energy, and has appeared on BBC TV, Fox Business, CNN national radio, Australian Broadcasting Corp., CBS radio and France 24. He is based in California. Follow him on Twitter. Disclosure