Singapore Peak Oil

Economic growth is all about production and consumption. Economists and politicians love a growing population of consumers because it adds to economic growth. A greying population would slow our growth and so the current 4.6 million on this island is not enough, we need 6.5 million in the coming decades. Now this cycle of growth is vicious and self-perpetuating. In 2030, the government will say 6.5 million of us is not enough, we need 9 million on this island to keep the economy growing. Wash, rinse, repeat.

Spend, spend, spend. Consume, consume, consume. Grow, grow, grow. I remember reading in ChannelNewsAsia last year where SM Goh Chok Tong was encouraging Singaporeans to spend to starve off a recession:

"If all of us go into a power save mode, then the economy will really go into a recession! This is what economists called the Paradox of Thrift. If you have sufficient savings and can afford to spend, you should continue to spend on life's little pleasures.

"Take your family to the movies, shop, dine out at restaurants and hawker centres, go for your regular foot massage, indulge yourself at a spa, take a taxi, donate to charity and so on."

Here's the twist: what are the limits, if any, as to how much we can spend and grow before we turn into an incurable cancerous tumour on this planet? The New Scientist article below addresses this question and our leaders and policymakers would do well to pay attention to this for a truly sustainable Singapore - not the pseudo-sustainable-growth-economy that Mah Bow Tan keeps talking about.

New Scientist
07 August 2009

...According to leading ecologists...few of us realise that the main cause of the current environmental crisis is human nature.

...All we're doing is what all other creatures have ever done to survive, expanding into whatever territory is available and using up whatever resources are available, just like a bacterial culture growing in a Petri dish till all the nutrients are used up. What happens then, of course, is that the bugs then die in a sea of their own waste.

...Epidemiologist Warren Hern of the University of Colorado at Boulder, even likened the expansion of human cities to the growth and spread of cancer, predicting "death" of the Earth in about 2025. He points out that like the accelerated growth of a cancer, the human population has quadrupled in the past 100 years, and at this rate will reach a size in 2025 that leads to global collapse and catastrophe...

...The problem..is that it fails to recognise that the physical resources to fuel this growth are finite. "We're still driven by growing and expanding, so we will use up all the oil, we will use up all the coal, and we will keep going till we fill the Petri dish and pollute ourselves out of existence,"

Full Article: Consumerism is 'eating the future'

Giving subsidies will not cure high prices for food and oil, and neither will a "dynamic economy" as MM Lee indicated. Will more money alone solve our problems? Will more paper dollars guarantee that we can continue to buy food at market prices as MM Lee suggested? Will Vietnam and Thailand sell any rice to us if they have a poor harvest? Can money buy you food that is not available? Can money buy what is not for sale? Instead of a "dynamic economy", we ought to be thinking of how to increase local food production so that we can be more self-sufficient.

MM Lee Kuan Yew is holding on to a fundamental error held by conventional economists:

Error: Economic activity as a function of infinite "money creation", rather than a function of finite "energy stocks" and finite "energy flows". In fact, the economy is 100% dependent on available energy -- it always has been, and it always will be.

Economic students are taught that banks "create" money every time they make a loan, and that the economy is powered by money instead of energy. The juxtaposition of these two data (the first is true, the second is false) leads even Nobel Prize-winning economists to conclude they have discovered a perpetual-motion machine:

"Should we be taking steps to limit the use of these most precious stocks of society's capital so that they will still be available for our grandchildren? . Economists ask, Would future generations benefit more from larger stocks of natural capital such as oil, gas, and coal or from more produced capital such as additional scientists, better laboratories, and libraries linked together by information superhighways? ... in the long run, oil and gas are not essential." [ p. 328, ECONOMICS, Nobel Laureate Paul Samuelson and William Nordhaus; McGraw-Hill, 1998; http://www.amazon.com/exec/obidos/ASIN/0070579474/brainfood.a ]

No person has had a greater influence on the thinking of experts who have become government regulators of the world's oil and gas industries than economist Morris Adelman: "There are plenty of fossil fuels and no limit to potential electrical capacity. It is all a matter of money." [ p. 483, THE ECONOMICS OF PETROLEUM SUPPLY, by M. A. Adelman; MIT, 1993; http://www.amazon.com/exec/obidos/ASIN/0262011387/brainfood.a ]

But of course, economists like Samuelson, Nordhaus, and Adelman are wrong. The First and Second Laws of thermodynamics tells us there is a limit to potential electrical capacity -- it's not all a matter of "money", it's all a matter of "energy".

The money supply is not constrained by the laws of matter-energy (ecosystem/biosphere) within which our economy must operate. When the physical constraints of our production are reached, the disparity between our monetary and physical system will manifest itself as price inflation, which is what we are witnessing today.

It is lamentable that our leaders do not recognize the errors of the conventional economic system, which explains why I will continue to be pessimistic about our future until there is a fundamental shift in their worldview. They are still trapped in their old mindsets and change will not come easily as they were taught and trained to think "economically" instead of "thermodynamically". Modern economics is not based on scientific laws.

MM Lee: Because with a good currency, 'however much the price of rice goes up, or meat, or whatever, we will not go hungry'.

Modern industrial agriculture is highly dependent on high energy inputs. When oil production begins its irreversible decline, large-scale agricultural outputs will follow suit. In view of the recent news that several countries have curb their grain exports, do you think food exporting nations will sell any food to us if they are unable to satisfy their citizens' stomachs?

The keywords to our future survival are "self-sufficiency" and "redundancy". It may not be economical to produce our own food and to ramp up solar energy production now, but these steps will increase our resilience in times of food and oil disruptions which look increasingly likely each passing day. Unfortunately, redundancy is often at odds with economic efficiency - a "sacred cow" in the Singapore context. When it comes to food and energy production, being "economical" and "efficient" increase our vulnerability to external shocks.

MM Lee's typical "money-will-solve-all problems" thinking is best summed up by Richard Heinberg who was writing hypothetically from the future:

The economists had been operating on the basis of their own religion - an absolute, unshakable faith in the Market-as-God and in supply-and-demand. They figured that if oil started to run out, the price would rise, offering incentives for research into alternatives. But the economists never bothered to think this through. If they had, they would have realized that the revamping of society's entire energy infrastructure would take decades, while the price signal from resource shortages would come at the exact moment some hypothetical replacement would be needed. Moreover, they should have realized that there was no substitute capable of fully replacing the energy resources they had come to rely on.

The economists could think only in terms of money; basic necessities like water and energy only showed up in their calculations in terms of dollar cost, which made them functionally interchangeable with everything else that could be priced -- oranges, airliners, diamonds, baseball cards, whatever. But, in the last analysis, basic resources weren't interchangeable with other economic goods at all: you couldn't drink baseball cards, no matter how big or valuable your collection, once the water ran out. Nor could you eat dollars, if nobody had food to sell. And so, after a certain point, people started to lose faith in their money. And as they did, they realized that faith had been the only thing that made money worth anything in the first place. Currencies just collapsed, first in one country, then in another. There was inflation, deflation, barter, and thievery of every imaginable kind as matters sorted themselves out.

In the era when I was born, commentators used to liken the global economy to a casino. A few folks were making trillions of dollars, euros, and yen trading in currencies, companies, and commodity futures. None of these people were actually doing anything useful; they were just laying down their bets and, in many cases, raking in colossal winnings. If you followed the economic chain, you'd see that all of that money was coming out of ordinary people's pockets...but that's another story. Anyway: all of that economic activity depended on energy, on global transportation and communication, and on faith in the currencies. Early in the 21st century, the global casino went bust. Gradually, a new metaphor became operational. We went from global casino to village flea market.

With less energy available each year, and with unstable currencies plaguing transactions, manufacturing and transportation shrank in scale. It didn't matter how little Nike paid its workers in Indonesia: once shipping became prohibitively expensive, profits from the globalization of its operations vanished. But Nike couldn't just start up factories back in the States again; all of those factories had been closed decades earlier. The same with all the other clothing manufacturers, electronics manufacturers, and so on. All of that local manufacturing infrastructure had been destroyed to make way for globalization, for cheaper goods, for bigger corporate profits. And now, to recreate that infrastructure would require a huge financial and energy investment ---- just when money and energy were in ever shorter supply. (Peak Everything, pp. 175-177)

http://www.straitstimes.com/Free/Story/STIStory_241154.html

OIL and food prices are at record highs and look set to stay that way.

At the same time, there are Singaporeans who want subsidies for a range of items, from rice to bus fares.

But Minister Mentor Lee Kuan Yew made clear yesterday that subsidies are no way to solve problems caused by rising costs.

He argued that subsidies reduced the incentive for people to be competitive - which is what is needed to keep the economy growing in order to better pay for costlier essential items:

'As long as we have a dynamic economy, we can solve our problems. Subsidies cannot solve them.

'I read the newspapers and the simplest thing is to write and say, subsidise. Rice, oil, bus fares, even putting seat belts on school buses. That is the surest way to go downhill.

'Multiple subsidies have led to a welfare system that has trapped Europe in slow growth. Europe's welfare systems have lowered incentives for people to strive and to excel.'

Speaking to 6,000 constituents at the Tanjong Pagar GRC Family Day at the Queenstown Stadium, he dwelt on why the problem of rising costs is here to stay and how Singapore plans to deal with it.

He noted that the consumption of oil had risen, with few new oil discoveries. And as once-poor countries like China and India prospered, they needed fuel to make goods to export.

The world's population, now over six billion, is forecast to hit nine billion by 2050. But climate change is drying up agricultural areas.

'What are we going to do? We can see the signals,' he said.

'We can't grow tapioca, or corn; we can't compete in making Nike shoes or sewing gowns. We have to move up to more complicated jobs and services.

'We have to earn enough money by working hard and smart in manufacturing and services to pay market prices for food, rice, wheat, maize, vegetables, fruits, fish, meats, chicken and eggs.'

Because with a good currency, 'however much the price of rice goes up, or meat, or whatever, we will not go hungry'.

Singapore had to remain a competitive society to generate growth.

'The Government must ensure that everyone has the highest-paid job he is qualified to do. If his salary is below the minimum for a decent life, the Government will top up with Workfare,' he said, referring to the national income supplement for low-wage workers.

And if people know the cost of what they consume or use, they will spend their money 'more to (their) benefit', he said, instead of over-using or abusing subsidised items which they did not know the real cost of.

Mr Lee said neighbouring countries now had to grapple with the economically-necessary task of cutting fuel subsidies. In Indonesia, for example, there were riots.

But he noted that opposition leaders there also encouraged demonstrations over the cuts and rising food prices to weaken the chances of President Susilo Bambang Yudhoyono winning re-election next year.

'In Malaysia, determined efforts by former PM Mahathir to unseat PM Abdullah Badawi have not weakened his (Abdullah's) hold on the reins of power because he commands a decisive majority in Parliament, just short of two-thirds,' he added.

'But not to upset the electorate, his government has not reduced the subsidy on oil.

'Of our other neighbours, Thailand faces the danger of another coup. In the Philippines, charges of corruption hover over President Gloria Arroyo, damaging for investors and the economy.'

Citing recent natural disasters in Myanmar, he said Singapore had 'no earthquakes, no tsunamis, no typhoons because of our favourable geographic location'.

'Let us be grateful that we have long-term stability and therefore continuing high-value investments and good growth,' he said.

'In five years, we will have a more lively and beautiful city.'

He was also confident that other big cities in Asean - Bangkok, Kuala Lumpur, Jakarta, Manila, Ho Chi Minh and Hanoi - would flourish with the advent of the Asean free trade area and other free trade pacts.

MM Lee then apologised to the audience for not being able to speak too long last night, as he had a 'bad throat' and is scheduled to take the stand in court today.

The hearing is to assess damages that Singapore Democratic Party chief Chee Soon Juan, his sister and the party have to pay for defaming Mr Lee and Prime Minister Lee Hsien Loong in 2006.

'I've got to save part of my voice to let him cross-examine me,' Mr Lee said. 'Of course, in the course of the cross-examination, I have a few things to say.'

http://www.channelnewsasia.com/stories/singaporelocalnews/view/349929/1/.html
http://www.todayonline.com/articles/255800.asp

Our world now faces challenging ecological and environmental problems (peak oil, climate change, energy security, food inflation, loss of biodiversity, wildlife extinctions, overpopulation). From what I have been reading, our government's solutions to these problems are more growth: 1) allow the population to increase to keep us economically competitive; 2) keep the economy growing and strong so that we become richer, and with our riches we can solve these problems.

Excerpts from a speech by PM Lee Hsien Loong at NTUC May Day Rally, 1 May 2008:

http://app.sprinter.gov.sg/data/pr/20080501991.htm

So, this is the way to grow our economy, create more jobs and more opportunities and improve the lives of all our workers and when I say all our workers, that means all of them. Not just the highly qualified and educated ones, but all collars, from cleaners and security guards, to technical and professional staff. Not just young workers but all ages, from new job entrants to mid-career and mature workers and not just local workers but all nationalities, from Singaporeans to others who are here, to work here and to help us reach our goals for Singapore.

There are challenges ahead -- the US economy, higher food prices, cost of living, low wage workers and so on -- and there will be more challenges to come. But our approach is working, so we have to persevere and press on, because we are heading in the right direction. Build our tripartite partnerships, educate and train our people, help our industries to innovate, upgrade, build social safety nets to assist needy Singaporeans. Then, however choppy the waters, we can maintain a steady course, sail ahead and secure a brighter future and a better life for all of you and us. Thank you.

I think this is a big mistake. Our leaders don't understand our limits to growth. They do not understand that the neoclassical economic growth model assumptions that we have embraced cannot be sustained with peak oil and a burgeoning world population. If we continue with this growth model, the system will collapse under its own weight.

There is one word that describes our government policies: insane. Insanity is doing the same thing over and over again and expecting different results. Why do I say their policies are insane? Because the cause of our current problems is overgrowth: overpopulation, over-consumption of resources, over-exploitation of planet earth. Will more economic growth solve our problems? If overgrowth is indeed the root cause, then why does the Singapore government continue to insist that "more growth" is the answer to our problems?

Our government needs to consider alternative solutions, and Singaporeans have the right to be aware of such alternatives. The alternative to consider is a Steady State Economy (SSE). I urge our policymakers to consider the SSE as an alternative to a growth economy.

What is a Steady-state economy? It is an economy viewed as a subsystem in dynamic equilibrium with the parent ecosystem/biosphere that sustains it. Quantitative growth is replaced with qualitative development or improvement as the basic goal. (Ecological Economics: Principles and Applications).

This synopsis by Herman Daly is a good explanation of why we need a SSE and how we can go about implementing it. You can read it in full here: http://www.theoildrum.com/node/3941

A failed growth economy and a steady-state economy are not the same thing; they are the very different alternatives we face. The Earth as a whole is approximately a steady state. Neither the surface nor the mass of the earth is growing or shrinking; the inflow of radiant energy to the Earth is equal to the outflow; and material imports from space are roughly equal to exports (both negligible). None of this means that the earth is static—a great deal of qualitative change can happen inside a steady state, and certainly has happened on Earth. The most important change in recent times has been the enormous growth of one subsystem of the Earth, namely the economy, relative to the total system, the ecosphere. This huge shift from an “empty” to a “full” world is truly “something new under the sun” as historian J. R. McNeil calls it in his book of that title. The closer the economy approaches the scale of the whole Earth the more it will have to conform to the physical behavior mode of the Earth. That behavior mode is a steady state—a system that permits qualitative development but not aggregate quantitative growth. Growth is more of the same stuff; development is the same amount of better stuff (or at least different stuff). The remaining natural world no longer is able to provide the sources and sinks for the metabolic throughput necessary to sustain the existing oversized economy—much less a growing one.

Economists have focused too much on the economy’s circulatory system and have neglected to study its digestive tract. Throughput growth means pushing more of the same food through an ever larger digestive tract; development means eating better food and digesting it more thoroughly. Clearly the economy must conform to the rules of a steady state—seek qualitative development, but stop aggregate quantitative growth. GDP increase conflates these two very different things.

We have lived for 200 years in a growth economy. That makes it hard to imagine what a steady-state economy (SSE) would be like, even though for most of our history mankind has lived in an economy in which annual growth was negligible. Some think a SSE would mean freezing in the dark under communist tyranny. Some say that huge improvements in technology (energy efficiency, recycling) are so easy that it will make the adjustment both profitable and fun.

Regardless of whether it will be hard or easy we have to attempt a SSE because we cannot continue growing, and in fact so-called “economic” growth already has become uneconomic. The growth economy is failing. In other words, the quantitative expansion of the economic subsystem increases environmental and social costs faster than production benefits, making us poorer not richer, at least in high consumption countries. Given the laws of diminishing marginal utility and increasing marginal costs this should not have been unexpected. And even new technology sometimes makes it worse. For example, tetraethyl lead provided the benefit of reducing engine knock, but at the cost spreading a toxic heavy metal into the biosphere; chlorofluorocarbons gave us the benefit of a nontoxic propellant and refrigerant, but at the cost of creating a hole in the ozone layer and a resulting increase in ultraviolet radiation. It is hard to know for sure that growth now increases costs faster than benefits since we do not bother to separate costs from benefits in our national accounts. Instead we lump them together as “activity” in the calculation of GDP.

Full article