June 25, 2007
Peak Suburbia
I get lots of letters from people in various corners of the nationwho are hysterically disturbed by the continuing spectacle of suburbandevelopment. But instead of joining in their hand-wringing, I reply bystating my serene conviction that we are at the end of the cycle -- andby that I mean the grand meta-cycle of the suburban project as a whole.It's over. Whatever you see out there now is pretty much what we'regoing to be stuck with. The remaining things under construction are thelast twitchings of a dying organism.
It is not an accident that the housing bubble coincided with thephenomenon of Peak Oil. First of all, the housing bubble should moreproperly be called the suburban bubble, because most of the activitycame in the form of "greenfield" housing subdivisions, and included allthe additional crap-o-la accessories required by them -- strip malls,power centers, Outback steak houses, car washes, et cetera. Thesuburban expansion has been based entirely on cheap-and-abundantsupplies of oil. Similarly, it was not an accident that the suburbanproject faltered briefly in the 1970s, when America's oil productionentered its long decline, OPEC seized the moment, and oil prices shotup. Notice that the final suburban blowout occurred after 1990, whenthe North Sea and Prudhoe Bay oil strikes came into full production,disabling OPEC, and a world oil glut finally drove prices as low as tendollars a barrel in 1999. That ushered in the climactic phase ofsuburbia, as represented by things like the standard 4000-square-footToll Brother's McMansion and the heyday of the super-gigantic SUV to gowith it.
The American public has no idea how over all that is. The bottomis falling out under not only the housing market (as in houses up forsale) but on the whole apparatus for delivering future houses, and thecar-oriented crap associated with it. The production home-builders,such as Toll Brothers, Hovanian, Pulte, et cetera are going down andthey will not be coming back. There will be a great deal of wishingthat they might come back, but they won't. Likewise, the commercialbuilders of all the various forms of suburban retail will be waiting to"turn the corner." But they will discover that the wall they have hithas no corner. It's just a wall. For anyone who wonders how much we do notneed anymore retail space in America, have a look at this chart showingthe comparative amount of retail square-footage allotted for citizensof each nation:
Those of you considering the purchase of more WalMart stock, take note.
Some years back, when those watching the oil scene began tocoalesce in their recognition that a worldwide production peak wasimminent and hugely significant, the concept developed that this peakwould take the form of a "bumpy plateau," meaning thatsupply-and-demand would teeter in an uncomfortable relationship for aperiod of time as markets and economies adjusted to the new reality byoscillating from higher prices to "demand destruction" to recession torecovery to higher prices, and so forth. This was expected to go on forquite a while before the world really headed into a slow permanentdecline.
The latest statistical work by Dallas geologist Jeffrey Brown over at The Oil Drum.com,suggests that something else is happening, something that was notanticipated: an imminent oil export crisis. This Export Land Theorystates that exporting nations will have far less oil available forexport than was previously assumed under older models. (Story Here.)The theory states that export rates will drop by a far greaterpercentage than net production decline rates in any given exportingcountry. For example, The UK's portion of the North Sea oil fields maybe showing a nine percent annual decline for the past couple of years.But it's export capacity has declined 60 percent. Something similar isin store for Saudi Arabia, Russia, Mexico, Venezuela -- in short, thewhole cast of characters in the export world. They are all producingless and they are all using more of their own oil, and have less tosend elsewhere.
Brown's math suggests that world oil exports will drop by 50percent within the next five years, certainly enough to trigger asystemic breakdown in market allocation, meaning serious supplyshortages among the importing nations. That's us. We import two-thirdsof all the oil we use.
The implication in all this is that the activities that havebecome "normal" for us during the post World War Two era will veryshortly become untenable. An economy based on suburban expansion andincessant motoring is on the top of the list of supposedly "normal"activities that will not be able to continue. I would maintain thateven if we had 20 years, no combination of bio-fuels and otheralternatives would enable us to keep suburbia running. But this latestwork indicates that we have much less time to adjust.
This new information is consistent with my view that we hadbetter prepare to make other arrangements for living in this country,by which I mean specifically re-localizing, de-globalizing, with anemphasis on local agriculture wherever possible, the emergencyrestoration of passenger railroad service and related modes of publictransit, the rebuilding of local commercial infrastructures, and aradical rethinking of how we inhabit the landscape under New Urbanistlines.
Perhaps the most imminent danger is that the financial markets,which have been driving our insane, hollowed-out economy, will soonrecognize what's in store and implode, creating a crisis of capitalthat will leave us with no ability to make any emergency investments,such as would be required to rebuild the railroad system. The equitymarkets sure blinked last week when two hedge funds based onphony-baloney collateralized debt obligations tanked. The collateralunderlying this load of hallucinated "wealth" is comprised of contractsmade by the insolvent for suburban houses worth far less than the valuestated on the contracts -- with every indication that the real valuewill keep dropping.
In any case, those who keep wringing their hands over thebulldozers leveling the plots of prairie, or cornfield, or desert --those distressed folks can direct their anxiety elsewhere. Worry lesswhether one final strip mall will tilt up out in gloaming, and thinkharder about how you are going to feed yourself and your family in acouple of years when the stupendous motorized moloch of American lifebegins to sputter, and the Cheez Doodle shipments can no longer make itto your supermarket shelves, and all that is "normal" melts into air.
