29 April 2008

You have to wonder at the kind of long term thinking that goes on at the ministerial level when the government decided to give the go ahead to develop the two Integrated Resorts.

PM Lee Hsien Loong's decision to go ahead with the IRs in 2005 was based on studies that they would boost Singapore's image as a global city, provide jobs, and fuel economic growth.

Oppositions to the IRs were related to social problems such as compulsive gambling, loan sharks, organised crime, and money laundering - all of which are legitimate and are causes for concern.

The point I want to bring up is no one in Parliament questioned the possibility that tourism may plunge in coming years due to sustained rising oil prices caused by possible long-term supply disruptions. Hence, wherefore the IRs?

Our DPM Prof Jayakumar, a member of the ministerial committee which was responsible for evaluating the IR tenders, acknowledged peak oil in a 2006 speech at the Singapore Energy Conference, so it comes as a surprise that he did not raise any of the oil disruption concerns and how it may affect tourism here.

Land is a valuable resource. According to PM Lee's speech, the size of the Bayfront and Sentosa sites are 12.2 ha and 47 ha respectively. It's an absolute waste to utilize such land to build holiday resorts which in no way contribute to our food and energy security in the face of possible supply disruptions. The land could have been used for Vertical Farms. If the 59.2 ha of IR land were allocated for Vertical Farming instead, it could be possible to feed up to 900,000 people per year, or about 20% of our current population.

It would seem that in the worldview of our ministers and MPs, there are no physical barriers to growth and progress. I believe this underscores a deficiency in systems and resilience thinking among our ministers and MPs. Redundancy and resilience are the keywords here to our future survival and our leaders seem to be oblivious to these terms.

When the frightening reality of peak oil and food shortages sets in, our Integrated Resorts will be labelled Immaterial Resorts.

im·ma·te·ri·al (ĭm'ə-tîr'ē-əl)

  1. Of no importance or relevance; inconsequential or irrelevant.
  2. Having no material body or form.

25 April 2008

Paul Krugman, an American economist and columnist for the NYT, appears to "get it" when it comes to our "Limits to Growth". Do Singapore leaders "get it"? I have much respect for our leaders, but their neoclassical economic growth model is no longer relevant in times like this. What worked well for Singapore in the last 40 years to earn us a "developed nation" status will not help us to be self-sufficient and self-sustaining when it comes to food and energy. We need a paradigm shift in our worldview, even if it means sacrificing economic growth.

Here is Krugman's op-ed which was published in The Straits Times (23 April'08, p.21)


Nine years ago The Economist ran a big story on oil, which was then selling for $10 a barrel. The magazine warned that this might not last. Instead, it suggested, oil might well fall to $5 a barrel.

In any case, The Economist asserted, the world faced “the prospect of cheap, plentiful oil for the foreseeable future.”

Last week, oil hit $117.

It’s not just oil that has defied the complacency of a few years back. Food prices have also soared, as have the prices of basic metals. And the global surge in commodity prices is reviving a question we haven’t heard much since the 1970s: Will limited supplies of natural resources pose an obstacle to future world economic growth?

How you answer this question depends largely on what you believe is driving the rise in resource prices. Broadly speaking, there are three competing views.

The first is that it’s mainly speculation — that investors, looking for high returns at a time of low interest rates, have piled into commodity futures, driving up prices. On this view, someday soon the bubble will burst and high resource prices will go the way of Pets.com.

The second view is that soaring resource prices do, in fact, have a basis in fundamentals — especially rapidly growing demand from newly meat-eating, car-driving Chinese — but that given time we’ll drill more wells, plant more acres, and increased supply will push prices right back down again.

The third view is that the era of cheap resources is over for good — that we’re running out of oil, running out of land to expand food production and generally running out of planet to exploit.

I find myself somewhere between the second and third views.

There are some very smart people — not least, George Soros — who believe that we’re in a commodities bubble (although Mr. Soros says that the bubble is still in its “growth phase”). My problem with this view, however, is this: Where are the inventories?

Normally, speculation drives up commodity prices by promoting hoarding. Yet there’s no sign of resource hoarding in the data: inventories of food and metals are at or near historic lows, while oil inventories are only normal.

The best argument for the second view, that the resource crunch is real but temporary, is the strong resemblance between what we’re seeing now and the resource crisis of the 1970s.

What Americans mostly remember about the 1970s are soaring oil prices and lines at gas stations. But there was also a severe global food crisis, which caused a lot of pain at the supermarket checkout line — I remember 1974 as the year of Hamburger Helper — and, much more important, helped cause devastating famines in poorer countries.

In retrospect, the commodity boom of 1972-75 was probably the result of rapid world economic growth that outpaced supplies, combined with the effects of bad weather and Middle Eastern conflict. Eventually, the bad luck came to an end, new land was placed under cultivation, new sources of oil were found in the Gulf of Mexico and the North Sea, and resources got cheap again.

But this time may be different: concerns about what happens when an ever-growing world economy pushes up against the limits of a finite planet ring truer now than they did in the 1970s.

For one thing, I don’t expect growth in China to slow sharply anytime soon. That’s a big contrast with what happened in the 1970s, when growth in Japan and Europe, the emerging economies of the time, downshifted — and thereby took a lot of pressure off the world’s resources.

Meanwhile, resources are getting harder to find. Big oil discoveries, in particular, have become few and far between, and in the last few years oil production from new sources has been barely enough to offset declining production from established sources.

And the bad weather hitting agricultural production this time is starting to look more fundamental and permanent than El Niño and La Niña, which disrupted crops 35 years ago. Australia, in particular, is now in the 10th year of a drought that looks more and more like a long-term manifestation of climate change.

Suppose that we really are running up against global limits. What does it mean?

Even if it turns out that we’re really at or near peak world oil production, that doesn’t mean that one day we’ll say, “Oh my God! We just ran out of oil!” and watch civilization collapse into “Mad Max” anarchy.

But rich countries will face steady pressure on their economies from rising resource prices, making it harder to raise their standard of living. And some poor countries will find themselves living dangerously close to the edge — or over it.

Don’t look now, but the good times may have just stopped rolling.


March 8, 2008

Oil prices 'unlikely to rise further'

OIL prices are not likely to go higher, Minister Mentor Lee Kuan Yew said yesterday.

As crude oil prices hit US$105 (S$145) per barrel, MM Lee believes it is not likely to creep further up to US$110.

'The oil suppliers are testing the limits. They believe that China and India now form a new long-term base demand. They may be right,' he said.

'I don't think it can go up US$110, US$120, US$150 and the world economy goes on. Inflation will go through the roof.

'Economies of the West will go down, hyper-inflation in many developing countries. So it will go into reverse. There's no projection right to the end.'

He said there is little Singapore can do as it is a price taker and not a price giver.

'We cannot influence Opec, we cannot influence the price of oil or gas.

'All we can do is to adjust our consumption, minimise the amount of power we use to provide the same unit of either goods or services. That's all we can do. What else can we do?' he said.

But, MM Lee said, people should not be rattled by the increase in price. Instead, they should remain alert and adjust to changes.

'We have remained a vibrant economy because we adjust to the market. Whether we panic or don't panic, I think it would be foolish not to be alert to the changes and to take steps to meet them,' he said.

'If the world economy goes into reverse, we are going to be hit. And it's not just us. China, India, the whole region will be hurt. So, this is a worldwide problem.

'Food prices, oil, gas, it's not specific to Asia or South-east Asia. It's worldwide.'


Dear MM Lee, I have great respect for what you have done for Singapore, but your comments here highlight your ignorance of peak oil. Oil is the foundation of our industrialization. It is oil that powers our world and our lives. If rice is too expensive, you can turn to other staple foods like wheat, corn or potatoes. Now that oil is getting more pricey, what can we turn to? Unfortunately, there are no substitutes that can equal oil in energy density and industrial versatility. Because there are no good alternatives to oil, demand destruction will not come easily. Oil prices hit $120 recently and I believe it will go much higher before demand destruction sets in.

Related Link.

Geologist Walter Youngquist wrote:

"Oil in its various refined derivative forms, such as gasoline, kerosene, and diesel fuel, has a unique combination of many desirable and useful characteristics. These include a current availability in abundance, a currently high net energy recovery, a high energy density, ease of transportation and storage, relative safety, and great versatility in end use. Oil is also useful as more than an energy source. It is the basis for the manufacture of petrochemical products including plastics, medicines, paints, and myriad other useful materials. Finally, the asphalt "bottoms" from refineries have converted millions of miles of muddy trails around the world into paved highways on which transport vehicles fueled by oil run.

Alternative energy sources must be compared with oil in all these various attributes when their substitution for oil is considered. None appears to completely equal oil"

Our neighbour is planning to increase their food production. What is Singapore doing besides diversifying our food imports? I know that Singapore land is limited, but relying almost 100% on food imports is not a good long term solution to possible supply disruptions caused by peak oil, wars, or climate change. Nations are already hoarding food supplies to feed their own populations by curbing exports. What can we do to increase local food production? Here is a possible solution: Vertical Farming.


KUALA LUMPUR — The Malaysian government is planning strategies to boost food production in the hopes of reducing the country's reliance on food imports and controlling inflation, an official said yesterday.
A Cabinet panel led by Prime Minister Abdullah Ahmad Badawi has been set up to tackle rising consumer prices, said Second Finance Minister Nor Mohamed Yakcop. The authorities believe it is crucial for Malaysia to be more self-sufficient in its food output.
"This is because we know that in the long run, inflation related to food products will remain for some time," Mr Nor Mohamed was quoted as saying by national news agency Bernama.
Malaysia's inflation rate accelerated to 2.7 per cent in February compared to 2.3 per cent in January — partly because of rising food prices.
The minister did not say what food products would be targeted. But officials have said in recent weeks that they are worried about rice in the wake of a global surge in the commodity's prices.
The government gives financial aid to rice farmers, who produce about 70 per cent of the country's rice needs. Malaysia imports the rest from its neighbours such as Thailand, Vietnam and Cambodia.
The agriculture ministry has said it needs RM6 billion ($2.57 billion) to cultivate new rice fields and improve infrastructure to boost rice production. — AP

17 April 2008

Since Peak Oil is such an important issue with far reaching consequences, you would expect governments around the world to debate the necessary steps to take to mitigate the difficult circumstances that will befall us.

Are we able to use Google to tell which governments have made serious efforts to study the Peak Oil issue?

I used Google to search for the number of occurrences of the term "peak oil" in several government websites where English is the predominant language and here are the results:

United States - 2040
Australia - 1920
New Zealand - 1380
Canada - 1416 (added all "peak oil" occurrences in the provincial websites)
UK - 864
Singapore -2

Of the two times that "peak oil" was mentioned in the Singapore government websites, one was mentioned in a speech by Deputy Prime Minister Professor S Jayakumar in Nov 2006 at an energy conference. The other in the National Library Board as part of a book's title under "New Arrivals".

The Singapore government is aware of peak oil, but why do they seem to be concealing it from the public? Why are there no published government studies made of peak oil's impact on Singapore? Why is there no discussion of this topic in Parliament and our local newspapers?

15 April 2008

I posted the following comments on a blog post by a Member of Parliament, Dr. Lam Pin Min, concerning soaring rice prices:

I think the Singapore government is doing the right thing in allowing the SGD to rise, but it is not a good long term solution. Singapore and the rest of the world are not addressing the root causes of the food problem: overpopulation, limits to growth and declining availability of fossil fuels. Just as you cannot cure a cancer patient by treating the symptoms, so you cannot solve the current food crisis by addressing only the symptoms - which in this case is price inflation. A stronger SGD may help in the short term, but it does not address the root causes.

First, we need to understand the "perfect storm" that we are about to face. In a presentation by Paul Chefurka: We are facing a perfect storm of 1) Ecological Collapse, driven by the depletion of natural resources and Climate Change; 2) Energy shortages, driven by Peak Oil and Peak Natural Gas; 3) Economic destabilization driven by American debt loads and a complex and unsustainable global financial system.

I shudder every time I hear our ministers encourage more childbirths and their overemphasis on economic growth. Don't they understand our limits to growth? Have they not read the works and warnings by scientists who have been telling us since the 1970s that humanity's unrestrained growth will result in ecological collapse? Don't they get it?

The Green Revolution of the 1970s was successful due not only to molecular genetics, but also to increased use of pesticides, diesel or gas powered irrigation pumps, and synthetic nitrogen fertilizes - all of which are highly dependent on oil and natural gas. We are unfortunately witnessing a "peak" or decline in the availability of such fossil fuels to which there are no suitable substitutes. How shall modern farmers, who are highly dependent on these resources, grow enough to feed the world in coming years?

Instead of emphasizing economic growth, or should I say Uneconomic growth since such growth only inflates our GDP numbers but not necessarily our well being, our government needs to rethink their priorities and look at how we can become more resilient and sustainable even at the expense of growth. They need to aim for the following:

1) Zero or better still, negative population growth

2) Increase local food production to the point of or near self-sufficiency

3) Increase local energy production to the point of or near self-sufficiency

4) A Steady State Economy

These goals may sound too radical, but I believe it's the only way to ensure our survival and sustainability in the long run. Cuba successfully overcame their oil crisis in the 1990s when they lost 90% of their oil imports after the collapse of the Soviet Union - whom they were so dependent on for oil. It will serve us well to study what they did for this could very well happen to us. In time to come, do not be surprise if such an oil crisis happens to us in a very short period of time because of nationalism and hoarding by oil exporting countries.

Is there anyone in parliament who is perceptive enough to understand these issues? Is there anyone in parliament who is bold enough to bring up these issues and to challenge our flawed assumptions in economics and growth?

I don't wish to sound presumptuous or arrogant, but the following links should be required reading for all our ministers and MPs. I have gone through the links and I am very concerned about our future. These links have altered my fundamental worldview. Frankly, I'm feeling very pessimistic about our survival chances unless we address the above concerns immediately. We don’t have much time left.

Peak Oil Primer

Converging Crisis (PDF)

Youtube lecture on exponential growth and overpopulation

Fossil Fuels and Agriculture

Threats of Peak Oil to the Global Food Supply

The Economist Has No Clothes

Mainstream Economics and the Environmental Crisis

FAQ on Steady State Economy

Peak Oil and Economic Growth

World Scientists' Warning To Humanity (1992)

How Cuba Survived Peak Oil

Cuba's Special Period

Uneconomic Growth

Biophysical Economics

Approaching the world’s environmental problems through the Entropy Law

World Financial Crisis Explained

Conventional economics tells us that commodities move in cycles: when oil is cheap, oil companies scale back on exploration and drilling. When the price of oil goes up, we should expect oil companies to increase their reserves through intensive drilling and exploration. It was not long so long ago that oil was $20/barrel. Today it's about $110/barrel, and yet the Super Oil Majors like Chevron and Exxon have problems replenishing their reserves.

Chevron Corp., the second-largest U.S. oil company behind Exxon-Mobil, will spend $50 million every day in 2008 to expand oil refineries and find new oil reserves, according to the Los Angeles Times. And while it expects its reserves to increase 5% over the next three years, that won't even offset its 7% decline in 2007, which brought its reserves to its lowest point in more than a decade and continued a four-year slide, according to the Toronto Star. "Like most large oil firms," the Star reports, "Chevron has recently struggled to replace production due to project delays, restricted access to new fields and contracts giving a larger share of reserves to host countries at higher oil prices." Indeed, Exxon said last week that it would spend $30 billion on capital and exploration projects every year between 2008 and 2012, up 43% from its 2007 budget, a figure that dwarfs even the most ambitious plans for federal renewable energy spending. The larger picture may be yet more bleak. Peak oil analysts – those who believe demand for oil is exceeding or will exceed supply – have warned that the cheap, sweet crude is just about all accounted for, leaving only hard-to-reach and expensive deposits, like tar sands and oil shale, to exploit. That means every barrel of oil – and every gallon of gasoline, every food item transported by barge, every piece of plastic manufactured with petroleum – will cost more and more as time passes. And, remember, the recent run-up in oil prices – to nearly $110 a barrel Tuesday – has very little to do with this long-term concern, as supplies now are more than adequate to meet demand. Think it's time to invest seriously in next-generation alternative fuels?