Why rebuilding USA will be so difficult

One of the prime assumptions of the elegant technological solution is that we would use the rest of easily obtainable oil to power the conversion to a post-petroleum age.

So now we have frittered away so much time that we now have entered what is probably a post peak-oil scenario where any time there is the merest hint of a economic recovery, oil prices spike and choke off the recovery.  And then there is the problem that we took deindustrialization to such extremes, we are no longer capable of building a post-petroleum infrastructure.

Even The Government Admits Oil Prices Could Trigger The Next Recession

Liz Peek, The Fiscal Times | Jan. 12, 2011

No less an authority than Donald Trump is fed up with our dependence on OPEC oil.

In a recent interview hinting at a possible presidential bid, the real estate tycoon rages that “OPEC is setting the price of oil and ripping the lifeblood out of this country.”

Mr. Trump is not the only one concerned about our ongoing vulnerability to volatile oil prices. More ominously, the Chief Economist of the International Energy Agency (IEA) is warning that rising outlays for imported oil among OECD countries could trip up the global recovery.

Faith Birol has reported that the cost of crude imports soared by $200 billion to $790 billion during 2010.

This increase, stemming from higher prices and demand, equates to a 0.5% cut in income – a hefty penalty when the developed world is still struggling to regain its footing. Dr. Birol said “Oil prices are entering a dangerous zone for the global economy.”

With crude quotes hovering around $90 per barrel again, this threat is taking center stage. There is no question that oil price rises bring on recessions. A 2006 paper from the U.S. Energy Information Agency said, “most of the major economic downturns in the United States, Europe, and the Asia Pacific region since the 1970s have been preceded by sudden increases in crude oil prices.” The agency goes on to note that the cause and effect was less visible in the last decade, when “average world crude prices…increased by more than $30 per barrel…yet U.S. economic activity has remained robust, growing by approximately 2.8 percent per year from 2001 through 2004.” They had no idea what lay ahead.

Some observers have suggested that the recent financial crisis had its roots in a jump in oil prices. James Hamilton of UC San Diego produced a report in 2009 saying that higher oil prices in 2007-2008 impacted domestic spending and auto purchases to such an extent that “in the absence of those declines, it is unlikely that we would have characterized the period 2007:Q4 to 2008:Q3 as one of economic recession for the U.S.” In other words, the Great Recession may have stemmed from a sharp jump in the average cost of imported oil, which rose from $59.05 per barrel in 2006 to $92.57 in 2008 – and not from a collapse in the value of subprime mortgages. more

And what must be the ultimate historical irony, the Chinese are thinking about building the railroads in USA--again! On this time as investors and not coolie labor.

China eyes state rail plan

Profit and prestige are seen in building, operating the system.

By TIM SHEEHAN

The Fresno Bee  Friday, January 14, 2011

FRESNO -- In the 19th century, laborers from China helped build railroads spanning California and linking the U.S. coasts. In the 21st century, the Chinese may be back -- not for backbreaking labor, but with financial and technological muscle.

The People's Republic of China has more miles of track for high-speed trains than any country in the world, but California has none.

The Chinese want in on the state's fledgling high-speed rail project. They're eager to help bankroll and build the system and, eventually, provide the trains to operate on the tracks.

China's not alone. Eight nations have agreements with the California High-Speed Rail Authority to share information about high-speed rail -- and each wants a piece of California's business.

"Other countries want to be a part of this because they know high-speed rail can be profitable," said Jeffrey Barker, the authority's deputy executive director. "Their ultimate interest is operating the system."

Experts suggest that China's economic might -- and government-backed companies -- give it an advantage.

"China is cash-flush, and its highly subsidized industries are bankrolled with surplus government funds," said Usha Haley, a professor of international business at Massey University in New Zealand and an expert on China's worldwide business strategies. "They're investing in infrastructure around the world ... and if they're bidding in an open-bid process, China will get that bid." more