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“Think Peak…Act Locally”

August 25, 2012

Many of us are well aware that 50% of the world’s oil has already been consumed while the remainder is being used at an accelerating pace.  This was once called “Peak Oil Theory” and that’s what it was…a theory. But, it is happening and is integral to our daily lives. It’s time for us to come together–individual consumers need to become active by working with organizations within their community and local governments to ensure their local economy is prepared.


Christine LaGarde of the International Monetary Fund predicts oil prices will double within the next decade. The price of fuel affects everything within your local economy. Just think about how much your life would change if the cost of fuel increased beyond $6 per gallon. Not only would your behavior change (e.g., how often you go to the store, how often you use public transportation or carpool, etc.) But, what you buy would also dramatically change. This is, in part, because firms—including your local businesses — have to deal with high fuel prices too. However in their case, the transportation costs get transferred to the buyer – that’s you! On top of it all, the federal government has been slow to respond to this change. This proposition means that it is critical for individuals to engage their local communities and governments in predicting the pending changes in the economy and then take action. We must all work together to create the changes needed to facilitate a smooth transition into, what I hope will be, the next energy revolution. We cannot afford to stand by, and watch the proverbial train pass. We must be part of the process.




The US Energy Information Administration (EIA) notes that 70% of all US oil consumption is for transportation, of which 67% is gas for motor vehicles.  As the price of gas continues to rise, many of us are seeking alternatives. Specifically, we are looking at alternative transportation. Electric cars and hybrid vehicles are becoming increasingly popular. Organizations like universities and private firms are providing incentives for employees to buy electric vehicles. For no fee, they often grant preferred parking with a place to charge the vehicle. This is a great incentive plan. In tandem, public bus transportation systems are increasingly going electric; another fantastic plan. However, all firms and organizations also need to consider energy generation soon.


Let’s put it this way: if 50% of residents in a major city like Washington, DC were to convert to electric vehicles within the next decade, Pepco the local utility, would not be prepared to meet this escalating demand. When there is not enough supply to meet the increased demand, the price of electricity rises dramatically. Firms and organizations would be wise to not only ensure efficiency in electrical equipment (like HVAC units), but also to invest in alternative energy creation on the user end of the supply chain. Many firms are overlooking the future escalation in electricity pricing, and in turn, they are undervaluing the net present value of this type of generation project. 


We recognize that the price of fuel has more than doubled in the past six years – if the trend continues, firms clamoring for the technology late in the game will miss out.  It will be like the “it” toy at Christmas time. Only the first movers will have access to the product, because manufacturing firms won’t be able to keep up with demand. Of course, there are economies of scale that will decrease the cost. But who’s to say that those savings would not be offset by the increase in transportation costs and electrical use at the plant.  Also, it is not yet known when suppliers will catch up with demand. First mover firms will have less exposure to these uncertainties.


To be clear: by no means am I saying that individuals should not buy electric or hybrid cars. In fact, I strongly encourage it. It is quite feasible that with a concerted effort the price of this type of energy can remain low. Consumers can positively impact this by bringing attention to the possibility of energy creation at the user end within their own firms and supporting organizations that employ this technology. Ideally, home owners could also invest in renewable energy. Tankless water heaters are a good start. Unfortunately, the return on investment on wind and solar is highly dependent on region (e.g., wind energy is ideal in areas with average wind speeds of 15 mph, solar is most efficient in regions closer to the equator with minimal cloud coverage), but the technology is changing fast. In fact, Geos Living in Arvada, Colorado is first fossil free community in the United States.




Today, much of our food is transported long distances. Indeed global supply chains for processed food products and ingredients are growing fast. Yet, local farmers markets can be found in most metropolitan communities; and we can actively support them. As a consumer, you can feel good about lowering your carbon footprint and appreciate the health benefits. But, when contrasted to a local grocery store, it is clear to see that over half the space is now dedicated to shelf stable, processed food. Markets reflect consumer demand.  Overall, food is a complex system with a lot of variation in ability to produce by region. For shelf stable food, fuel prices can impact the underlying commodities like soy, corn, and animal products – because of fertilizers, pesticides and transportation of feed and animals. According to the USDA, the price of fuel has already impacted distribution of many commodities. So, we might stay with shelf stable if it’s something like a pasta or rice.  Nonetheless, the food market, much like the Pepco utility example, will experience a great market shift. Companies, like Whole Foods, are capitalizing on promoting “local.” Thus, the rocketing transportation cost will be reflected in the price of any good, including basics like food. Of course, food prices will increase relative to the distance the item must travel, as well as many other factors like crop production rates that year.  All else being equal, the food market will shift away from a prominence on shelf stable food, and move to local food—both fresh and processed.


The negligible transportation costs incurred by local foods make them an attractive alternative, albeit one that needs to ramp up production as well. To naysayers, like Steve Sexton, I would like to point out that there are local farmers already producing much more with much less inputs than traditional farming practices.  For example, current estimates of production rates for Growing Power in Milwaukee, Wisconsin are at 1,000,000 pounds on three acres without pesticides or heat. Another such city defying tradition is Chicago which has booming urban farms that can sell their wares in over 30 farmers markets.  In general, these farms use vertical growing techniques, composting from local restaurants, companion gardening, and rain collection. It is precisely because these growers consider the entire system that they are able to perform so well. However, this demand is currently fueled by altruism and is marginal to the reliance that communities will have on them in the near future. To put it bluntly, most of our local food system is ill-equipped to meet a spike in demand of this proportion.  




Specifically, local governments can:

  • Facilitate relationships on the local level that better serve the community as a whole. For example, colleges and universities are a great resource for research. They can provide the time and brain power to enhance and accelerate the feasibility of local efforts.  The community can utilize a given school’s strengths (e.g., engineering, business, agriculture, etc.) in order to create a plan of action.
  • Identify and assist in the promotion of green firms. Again, through effective relationship building, the government may not have to absorb the cost of the research.
  • Bring green practices and policies into schools. Students are keen to learn these ideas.  The Green Bronx Machine in New York can serve as a working model.
  • Generate community involvement for efforts like edible landscaping and ecotourism. The Incredible Edible campaign created by Tormordon, a town in England, is an excellent example of how to successfully approach this effort.
  • Ensure the safety of urban gardens through a testing program. Again, local governments can support this effort by partnering with community volunteers.
  • Cultivate a community-led initiative with the support of policies and laws that allow roof top bee hives.



The bottom line is this:  we all have a real challenge ahead of us. We have the capability to adapt but we must also have the will to do so.  As consumers, we can enable change through creative networking and incentives; and as citizens by promoting actively thoughtful policies that local government and communities can prepare for these challenging changes.



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