What Lies behind Egypt’s Problems? How do They Affect Others?

We have all been reading about Egypt in the newspapers, and wonder what is behind their problems. Let me offer a few insights.

At least part of Egypt’s problem is the fact that in the past the government has threatened to reduce food subsidies. Now it is planning to hold food subsidies level and raise energy subsidies, but it is not clear that the dollar amount of subsidy will be enough. The government is taking steps to make food and energy affordable for most, but there is worry that the steps being taken will not be enough.

Egypt’s Declining Financial Situation

There is a good reason why one might expect Egypt to start running into problems with energy and food subsidies. Its own financial situation is declining at the same time that the cost of food imports is soaring. If we look at a graph of Egyptian oil imports, exports, and consumption (using a graph from Energy Export Databrowser, which graphs BP Statistical Data), we find that Egypt’s oil use has been rising rapidly, at the same time the amount extracted each year is declining.

Figure 1. Egypt’s oil production, consumption, and exports

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Clean energy won’t save the world!

To listen to President Obama, you would think that clean energy is our next salvation. But clean energy can’t exist on its own. Clean energy options should more properly be called “fossil fuel extenders”. They only work within a system that has fossil fuels.

We can’t make solar PV panels or wind turbines without fossil fuels, and we can’t move them to their new sites and install them without fossil fuels. Many solar panels are made in China, and wind turbines often include overseas components (or are made overseas). If grid tied solar PV is installed without back-up batteries, it won’t work when the grid isn’t working. Continue reading

Should you pay down your debt?

The question of whether a person should pay down debts comes up often, when there are forecasts that suggest unemployment rates and consequently debt defaults will rise dramatically in future years. I know some people say, definitely, “Yes”. I would say, “It depends.”

Clearly, at this point, interest rates you can get in a bank are low, and the long term value of most stocks and bonds is very iffy. So from that point of view, if you have assets that aren’t going to earn much in the future, and a smaller amount of debt, you may want to offset the assets against the debt. But not everyone is in that position. And not all debts are not equally important to pay back. Continue reading

How to prepare for peak oil impacts – Some thoughts from 2007

For a few days, I am working on an academic article. Since I don’t have time to do research and write something new, I thought I would post an article I wrote in 2007 on how to prepare for the impacts of peak oil, together with a few updates for 2011. This article was previously posted on The Oil Drum and was a chapter in what I called a Peak Oil booklet (found here).

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We know that peak oil will be here soon, and we feel like we should be doing something. But what? It is frustrating to know where to start. In this chapter, we will discuss a few ideas about what we as individuals can do.

1. What will the first few years after peak oil be like?

It is hard to know for certain, but a reasonable guess is that the impact will be like a major recession or depression. Many people will be laid off from work.

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Who will pay if there are municipal bond defaults?

I have written quite often saying that rising oil prices can be expect to lead to debt defaults. For a while, some of this was hidden through lower oil prices and stimulus programs, but we are now beginning to see problems arise again, this time in the area of municipal bonds. The question is, “Who ends up holding the bag, if major municipal bond defaults take place?”

“Municipal” bonds include bonds issued by states, as well as bonds issued by cities and by many types of smaller entities, such as hospitals and toll roads. To date, everyone has assumed that there is not much risk of default, and even if there is, someone else will handle it. But if one looks at the long term oil situation, and the problems states and cities are having already, it is pretty clear that the debt default problem is likely to get worse over time, and there is really no one set up to handle the default risk.

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