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What Happened When The Oil Ran Out

(This story/scenario was written as part of the preparation for the visioning exercise for Bowen In Transition, the local Bowen Island, BC chapter of the Transition Initiative, which is helping communities all over the world to prepare for the threat of energy, economic, and ecological collapse, and to transition to a post-cheap-oil, post-global-industrial-economy, post-stable-climate future. The visioning exercise is a collective collaboration to imagine how these crises will affect the local community, and what could be done now and in the near future to prepare for and adapt to these crises and increase local resilience. I’ve written this story because I think there’s a risk that those in my community may significantly underestimate the severity of the challenges the world will soon face, and hence how much work we need to do on our little (4 mile-by-5 mile, 3800 people, three miles west of Greater Vancouver) island to be ready, and to change. They will likely find my scenario too pessimistic, too dire for their liking. We’ll see I guess. I’m not prescribing solutions here, especially as the crises become more complex and start cascading into each other: This is the work that our Visioning Team, and then the Transition Working Groups, will have to do. I’ve therefore left the story unfinished, and if we want it to have a happy ending, I think we’ve got our work cut out for us.)

At first we hardly noticed the changes. The price of gasoline went up, but we were used to that. It hit $1.50 and then $2 a litre. Because of the Canadian taxes and the American subsidies, at this point Canadians started flocking across to border to buy it for only US$5.50 per gallon, $1.50 less than what we were paying in Canada.

The Americans then started the first rationing — those with Canadian licence plates were restricted to just four gallons per purchase. It was a bit ironic, considering how much oil was flowing from the accursed Alberta Tar Sands into the US. They were, in a sense, restricting us from buying back our own oil!

We had always expected that the government would just let “the market” deal with the Peak Oil problem. We were told that if there was a shortage, prices would rise, which would both reduce demand and encourage innovation to find new sources for oil, and new alternatives.

But “the market” didn’t help at all. The demand for oil proved to be inelastic, and the rise in prices hardly dinted demand at all. After all, most of us just filed our expense reports with our employers, who reimbursed us for our gasoline costs and then wrote the soaring costs off as a tax deduction. And the low price for oil in the first decade of the 21st century had so suppressed the profitability of new oil exploration, that when the prices skyrocketed all that happened was that governments, short-term thinkers to a fault, yielded to the pressure from corporations (and taxpayers) to deregulate and increase subsidies to Big Coal and Big Nuclear and indemnify them from environmental laws. The “green” alternatives — solar, wind, biothermal — turned out, as George Monbiot had warned in Heat, not to be plentiful enough, no matter what the price, to have much impact on the growing oil shortage.

So we were a bit surprised when the government, despite the howls from corporations and citizens alike, began to introduce rationing. Some of us remembered 1973 and 1979, when, due to constraints of supply from the Middle East, the refineries ran out of oil and gasoline stations, unable to get it at any price, simply shut their doors, regularly, sometimes for weeks at a time. There were long lineups for gas then, but at least we could buy it when we waited long enough, and the price wasn’t too bad either. Heating oil subsidies, back then, were increased to ensure no one froze in the winter.

The first stage of the new 21st century government rationing was a bit like that. We were restricted to how much gasoline we could buy per day, and on which days of the month we could buy it. Tax credits to compensate residents for the doubling of heating oil costs were introduced.

But this time, that wasn’t enough. This time, the drop in oil production and availability wasn’t temporary or political, it was real, an economic fact. The huge surge in Asian demand had pushed OPEC countries to force as much oil as possible out of exhausted wells, and accelerated the collapse of supply when the big wells just ran out, and the technology to find new, more expensive oil supplies proved to be both prohibitively expensive and horrifically environmentally dangerous.

The second stage of government rationing was much more severe. Rationing coupons, like those used in wars and depressions, were printed, and they applied not only to oil but also to selected high-energy-consuming products (some foods, clothing, and household products and most pharmaceuticals, electronics, furniture, appliances, and cosmetics), to all forms of transportation and energy consumption, and to all imported goods, since these required lots of oil to bring to market (NAFTA, already faltering, was an early casualty of Stage 2 rationing).

Given the fierce anti-government sentiment of the time, especially in the US, and the propensity of rich North Americans for buying their way out of (or around) inconvenient regulations, complex avoidance schemes thrived, and a huge black market for these products arose. Much of the outrage over the rationing resulted not from the rationing itself, but from the fact that governments were unable to enforce it equitably. Gasoline pumps had slow-release valves and cutoff timers installed. Thermostats had maximums and minimums set, and rations on daily energy use per household, after which energy was simply cut off for six-hour periods. Mandatory per-employee business travel limits were imposed, along with a 100% surtax on airplane travel.

But abuses abounded, and many citizens openly bragged about how they had skirted the restrictions. In impoverished areas, hidden or inaccessible to government inspectors, illegal gas pumps popped up to exploit the high prices and the desperation of big energy users, and they ignored the rations. Contractors found ways to reset and bypass thermostat restrictions. Counterfeit ration coupons were everywhere. Private airplane and jet owners “forgot” to log passenger information. And with a whisper in the right ear, almost any amount of anything could be purchased, without coupons, from the public used-goods markets that had sprung up (since used goods were exempt) — if one paid enough.

Not surprisingly, it was the poor, the ignorant, the sick, and the honest, who suffered most.

The Stage 1 rationing did not have a major impact on those of us living on Bowen Island, despite our dependence on imports from the mainland for virtually everything we needed to live. There was enough accumulated wealth on the Island to weather the storm. The distance from our Island to the mainland was so small that most of us, even those who commuted to work by car and ferry each day, were not spending all that much on gasoline anyway. And our climate meant that our heating costs, by Canadian standards, were modest and our air conditioning costs negligible.

Stage 2 was a different matter, however.

In addition to rationing all Bowen residents (and visitors) to three round-trip ferry trips per week, Stage 2 effectively doubled the price of the ferry for automobiles, while keeping pedestrian and passenger fares unchanged. It also halved the number of scheduled ferry crossings per week. This was initially cheered by Bowen’s “dark Greens”, but it outraged the 50% of Islanders who commuted daily to the mainland to work, and raised doubts, concerns, and finally protests, that Bowen would end up being abandoned by all except wealthy retirees, because working Islanders simply could not afford to live here anymore.

To our astonishment, while rising supply and drop in demand caused prices for smaller homes and lots on the Island to plummet, losing half their value in two short years, the prices of estate homes and large lots held firm — almost the opposite of what we, in our Official Community Plan, were striving to achieve. We were so small and extraordinary, and the supply of global billionaires looking for idyllic places to retire (and/or launder illegal money) was so large, that the desire for oceanfront mansions on estate lots on our little island never waned.

The businesses on Bowen, faced with an exodus of residents and soaring costs for their products, began to fold. Construction, for years the lifeblood of livelihoods on the island (and of many contractors who worked mainly on the island), came to an almost complete halt. Because so little of Bowen was arable, the soaring price of imported food could not be offset by increased local production. Owners of large (and older, energy-leaking) properties were hard hit by the energy rationing, and many had to shut off parts of their homes over the winter.

A few things helped us cope as the situation deteriorated. The tourist industry stayed healthy, since the two million residents of nearby Greater Vancouver, enjoined from long-distance travel, walked, biked, back-packed and hiked our island in ever-increasing numbers, though most were self-sufficient and bought little during their visits. Much of the smaller-sized property on the island became affordable for the first time in decades. We had sufficient water for our needs, unlike many in the world who relied on importing theirs. We were significantly more physically fit than most North Americans, which helped wean us off our cars as these became unaffordable luxuries, and we had evolved a long-standing culture of generosity. And the exceptional skill, knowledge, imagination and intelligence of Bowen natives was harnessed, largely through the Bowen In Transition initiative, to begin the task of reinventing the Island as a place that was at least somewhat self-sufficient and sustainable, and resilient to whatever was to come next.

Read the full blog post here.

Dave is now probably best known for his weblog How to Save the World, where he writes about understanding how the world really works, and how we might create better ways to live and make a living. Dave is currently VP of the Canadian Institute of Chartered Accountants, where he is responsible for research and thought leadership, and more specifically for helping the accounting profession and entrepreneurs in general become more innovative, resilient and sustainable. Prior to this he worked with Ernst & Young for 27 years in many different capacities as CKO and Global Director of Knowledge Innovation, and as Director of Entrepreneurial Services. Dave speaks and writes prolifically on knowledge management, business innovation, and sustainable entrepreneurship. His first book, Finding the Sweet Spot: A Natural Entrepreneur's Guide to Responsible, Sustainable, Joyful Work, has just been published by Chelsea Green. He lives on a natural wetland on the Oak Ridges Moraine northwest of Toronto.

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