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In 2008 when UK retailer Woolworths went bankrupt I observed to a friend, who happens to be an actress, that the defining visual that would instantly anchor any piece of UK film or stage creative work in the desired time would be whether the retailer’s stores in a High Street scene were seen to be open, shuttered, or long abandoned and a distant memory. Of all the rumbling and crashes of that long, grey economic winter that seemed the stomach punch to the British soul. The British may miss their middle class tea shops and wince at record losses posted by BA, but its the death of 99p clearance chains like Woolworths that cut deep.

I am reminded of this today as General Motors files for protection under Chapter 11 bankruptcy laws. America will suck in its collective breath over Merrill Lynch, AIG, a £50,000,000,000 Ponzi scheme and many, many more. But I suspect that it is GM’s humbling that will most of all define the long stumble for the USA, and also provide the clearest indication yet that when all this blows by, the way ahead looks quite different from the view so far. GM will eventually emerge out of Chapter 11 in a new form: GM-II and it will be that manufacturer that will bring to market future products, under a much diminished brand set.

GM’s management failings are many, and a vehicle strategy that was utterly tied to a dependency on cheap oil and little consideration toward pollution was by no means the single largest problem the company had. However a product set that was finally proven to be unfit for the market direction might well have arguably been the final nail in the coffin. Even with all the effort the company has belatedly have put toward their Chevy Volt project a launch date is still the other side of 2009, and that surely doesn’t count any delays incurring from dealing with the Chapter 11 restructuring. Toyota’s Prius will by then be a generation three product with established brand credentials and millions of miles of road use behind them to iron out problems. Not to mention having generated a Yen or two of revenue for Toyota along the way.

Even once GM-II, Ford and Chrylser manage a half decent volume manufactured domestic hybrid, HPEV, or PEV vehicle, they face market challenges for some time. The lack of demand for SUV and similar vehicles is of course one of the market realities that has brought GM to their current state, so we can take the existence of the market’s undesirability for such vehicles as a given. In the short term that has dealt a blow to GM, in the long term there is also a problem of there being a massive stock of existing gas guzzlers already on the road that are depreciating at over the odds rates as people don’t want them either.

Imagine it’s 2010, Mom and Dad have just rolled up in their spanking new GM Volt. They’re proud of the low emissions, they’re proud to buy American, they’re happy they saved money due to federal tax breaks designed to encourage purchasing and use of a low emissions vehicle, oil is at $85 a barrel so the pump price for gasoline is more than they would want to pay anyway. So what are they going to buy for their newly licensed 17 year old kid, Johnny? Well they’re not going to want to buy a second hand SUV, the gas would be a hole in the wallet and the emissions will make little Johnny very unpopular on the hottest dating circuit in town: eco-babes.com. They can’t afford to buy him a brand new Volt of his own (much as they’d like to) - bonuses at work still aren’t what they used to be and redundancies are always on the cards, and there’s a million competitors still out there on the jobs market ready to step in any day. The answer is perhaps a second hand hybrid or HPEV. And that’s going to be a Toyota or bust. So Toyota gets the ongoing parts business, a slice of the services pie, the potential for an upgrade-sell later to an established driver, and meanwhile the value for their second hand vehicles is likely to be strong. GM-II et al, merely face the image of their unvalued old SUV’s being encouraged off the road entirely through a vehicle scrappage scheme similar to the UK’s scheme (see www.vehicle-manufacturers-name.co.uk/scrappage. For example www.fiat.uk/scrappage

GM’s failings therefore serve as testimony to how far many companies have missed the mark as they’ve set their strategies over the last decade, exhibiting an almost feral avoidance of consideration to the needs of the market come a time of rising concern on emissions, together with an end to cheap energy. The transformational nature of such factors is clearly not to be underestimated, while the challenge of effectively dealing with them is multidisciplinary to an almost unprecedented degree. Governing through such transition effectively will bring potential catastrophic market failure if done extremely poorly, allow an organisation to limp through if done middlingly, and place an organisation in a strong to winning market position for the opportunities that lie ahead in a “green economy” if done well. Green, or eco-governance therefore is not simply a trendy turn of phrase, it is a movement that will eventually come define the winners of the green economy.

The concept of “peak oil” remains a touch too uncomfortable for most. Too close to being “big conspiracy”, too far from the everyday, and the implications too far reaching for the idea to sit comfortably in the repertoire of the polite dinner party conversationalist. Religion, politics, and peak oil to be avoided at all costs - best to stick to something safe and controversial like whether its OK or not to build a duck house at the taxpayer’s expense.

Only there are some interesting indicators pointing to the fact that in many ways, we’re already beyond the peak point. Here’s a list of indicators, which can be handily printed off, kept to hand, and ticked off the list as each occurs:

- the price of oil increases by a significant margin in a short period of time. Say, doubles within the space of 6 months. Its important that such price increases are not aberrations related to factors such as short term political instability in a producing country, or a war, extreme weather event, buy-side price manipulation and so on.
- the target price talked up by the various oil ministers of the major producers is even higher still, with the justification being that such a relatively high price is required “in order to fund the required infrastructural investments necessary to maintain supply”.
- the target price that OPEC et al aim for is within the range deemed by the USA’s Department of Commerce to be dampening (all other things being equal) on the US economy. Indeed, in this 2006 study the Department predicted significant downward GDP pressures, unemployment, and a slowdown in manufacturing sector output resulting from oil prices in the $70 to $80 range.
- vehicle manufacturers that have ignored fuel efficiency in their ranges struggle to sell their models as consumers become more sensitive to oil price.
- major oil consuming businesses like airlines post significantly poor results citing high oil prices as a major catalyst for their poor trading results.

So lets compare that to today’s reality:
- oil price has doubled so far in 2009 and is currently in the high $60 pbl range (hitting a $66 high Friday last)
- the target price is in the $70 to $80 range. OPEC Secretary-General Abdullah al-Badri has called for oil to hit that range by the end of 2009. Other OPEC ministers, including Ali al-Naimi of Saudi Arabia saying “the world was ready to cope with oil at $75-$80 and that it could reach that level before the end of the year.”
- GM has shed $50B of shareholder value in the last decade and will roll into Chapter 11 bankruptcy faster and more predictably than a Chevy Tahoe drinks Texas Tea.
- British Airways as one example posted a “worst ever loss” of £401M after being hit with a fuel bill just shy of£3B. The weak pound and the drop in passenger numbers as a result of trimmed travel budgets (itself a result of the recession) didn’t help at all. In the lead up to the loss it was reported that “Costs far outstripped revenues of just under £9bn due to high fuel prices”

So this is what it looks like - we’ll know where at the point of peak oil not when the unaudited reserves of Ghawar are finally shown to be a sham, but rather when the economic indicators “downstream” of the depletion point exhibit the market behaviours associated with sensitivity to the resulting high oil prices. Because at that point the level of actual reserves is somewhat academic, and we’re dealing with the reality of the actual price point.

Interestingly, the Department of Commerce itself states that “Over the long-run it is possible for the economy to adjust to the higher prices of energy imports by improving its energy efficiency, finding alternative sources of energy, or searching out additional supplies of energy. ”

So the bright lining is that investment in alternative energy sources, and also in fuel consumption efficiency ought to be accelerating.

Microsoft’s January 22nd announcement of relatively poor financial performance, together with the news of the first job cuts for the firm in its 34-year history has added to the gloom already felt on Wall Street. At least the Seattle giant has no retail stores trading under its own brand name. The sight of a once shiny, beige “Microsoft Windows Store” standing meekly shuttered in between a closed Whittards and a Woolworths might please the occasional passing alliterative MacFan but frankly we could do without the extra empty real estate.

Before assuming however that Microsoft is just the latest to be infected by the dreaded Downturn virus (a nasty worm that exploits unpatched Securities Exchange Commission holes, deletes wealth and then spreads rapidly through the banking system), it is worth considering a few other facts.

Microsoft’s January 22nd announcement stated “Client revenue declined 8% as a result of PC market weakness and a continued shift to lower priced netbooks”. While for Balmer and Co. the movement toward netbooks might have proven to be an unfortunate trend it is worth reminding ourselves that it is one that is neither wholly unexpected nor is it necessarily undesirable.

All throughout 2008 enterprises looked at their IT estates in light of worsening economic conditions, and also with a newly minted concern for the electricity consumption of the desktop and server environment. In common with our Industry Analyst peers, Quocirca has regularly pointed toward the need for a re-examination of the hardware choices in the office environment, especially in light of emerging computing architectures such as SaaS and Cloud.

Quocirca’s advice continues to be that corporations should look to sweat the hardware assets already deployed if you are simply looking to defer the expense of replacement. Extending the life of the existing desktop estate also allows enterprises to focus further on best-practice asset management of the IT assets they have. It is becoming mainstream for enterprises to not only focus on effective remote management of the software stack across the office environment, but also active management of the power state of the devices. The financial savings resulting from turning off and sleeping existing desktop machines can be substantial – not to mention the very real benefit of lowered GHG emissions that comes with reducing electricity consumption.

In environmental terms, there is certainly an argument to be made that newer machines are computationally more powerful and less power hungry than older models. However as the embodied CO2 and ecological footprint of neither the existing machine nor the potential replacement model is easily and accurately calculated, it is difficult to say whether there is a net environmental benefit in replacing an existing equipment or otherwise. As long as the existing desktop kit is relatively young, then active power management of the device estate will probably yield as much benefit in electricity savings as implementing newer devices, while completely avoiding the environmental burden of the embodied footprint inherent in rolling out a newer fleet.

If you do wish to replace the desktop hardware, power consumption of the hardware during its lifetime needs to be a consideration in the selection. A PC/Laptop on every desk might have been an incredibly lucrative market for Microsoft’s OS/Office combination but its suitability is questionable in terms of consumed computing power out for every watt of electricity in. Netbooks generally use less electricity in the use phase. Being less capable than PC/laptops they are inherently also simpler devices, and it is possible (though not necessarily guaranteed) that the embodied carbon footprint of the device will be less than a fully featured alternative.

Meanwhile, it has been fairly common advice from industry watchers that enterprises should reconsider whether they will continue to need a computationally powerful, and power hungry desktop machine estate at all. Sure, a newer like-for-like device is almost certainly more powerful than the old, but do you need the extra horsepower? If a significant proportion of your application environment is today (or is planned to be) web based then traditional PC/laptop hardware is perhaps a poor choice.

Newer computing architectures shift the major processing demands back away from the desktop. The increasing desire for computing mobility, so well served during the last decade by laptops, is arguably better served today through storage of data in the cloud from where it can be accessed via a browser from whichever device suits wherever you are and whatever you’re doing.

From a security point of view, the large attack surface of a traditional desktop (or laptop) device has also continued to present an expensive and complex set of problems for enterprises. A blocked service might be a shut down service, but an absent service is one that is utterly closed off to potential attack. It may be better therefore to implement a desktop environment that doesn’t need so many software services to be patched/filtered/blocked, thus reducing the attack surface straight out of the box.

Netbooks are, as Microsoft seems to have discovered to their loss, a natural candidate for consideration to meet all these needs. The corporation’s disappointing financial results paired with their willingness to place some of the blame on the rise of such devices speaks volumes about the company’s weak position vis-à-vis having an effective strategy as computing requirements change. Difficult trading conditions during the lead up to the (now official) recession have certainly played a part. However it is arguable that the macro economic factors have merely been the accelerant that has flared an existing fire rather than being a new conflagration burning through Microsoft’s wealth.

Welcome to today…now where does Microsoft go from here?

Sometime in the next one thousand, four hundred and fifty eight days its all going to get really ugly. There will be no single day of reckoning, but rather a wave of reckonings - somewhere around 303,824,640 of them. According to no less an authority than the CIA 303,824,640 was the USA population back in mid 2008, though there have been a few burials and births since then so perhaps this piece of intelligence, like so many others from the CIA should be taken with just a pinch of salt.

Arguably more than a few have already tipped into the realisation of just what is in store for them should the newly elected US President, Barack Hussein Obama II actually bring into reality the promise of a low carbon economy. Most however are still dazed by the spectacle of the inauguration to give it real thought. Carrying on his shoulders the hope of so many Americans (and no small number of the majority of the world’s population i.e. the rest of us) that he can steer the USA away from its socially, morally, and physically destructive ways, President Obama cocoons many from the reality of what those changes might mean for them. When they’re told, or when they find that they can’t do today what they could do yesterday, stand well clear ladies and gentleman of the spinning fan blades.

The Obama/Biden administration is the first to unequivocally state that anthropogenic global warming (AGW) is reality, and that it represents a major risk for the survival of life. While there have arguably been many missed opportunities to say more on the subject during the 2007/2008 election cycle and during the limbo days since the election it is worth quoting again from the Vice Presidential debate of 2008:

“MODERATOR: Senator (Biden), what is true and what is false about the causes (of global warming)?
BIDEN: Well, I think it is manmade. I think it’s clearly manmade. And, look, this probably explains the biggest fundamental difference between John McCain and Barack Obama and Sarah Palin and Joe Biden — Governor Palin and Joe Biden. If you don’t understand what the cause is, it’s virtually impossible to come up with a solution. We know what the cause is. The cause is manmade. That’s the cause. That’s why the polar icecap is melting.”

Obama gave further nod to the road ahead when, in his inauguration speech he said:
“And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to the suffering outside our borders, nor can we consume the world’s resources without regard to effect. For the world has changed, and we must change with it.”

On those scores the Obama/Biden ticket would have got my vote (had I been entitled to one), though in fairness to my Inner Sceptic I should hasten to add that action is what will make the difference not words. And it is that action which brings me back to my original thesis: its going to get real ugly some time during the next four years.

Of those three hundred and three odd million American people there are very few who really get what those words might mean to them and their daily lives. It is one thing to hear the words, it is another to listen to them, it is yet another thing to internalise them and absorb the implications. The challenge ahead no longer lies with convincing a nation’s leader of the reality of AGW, the challenge ahead lies in bringing the citizenry of that country along the same road. I suspect that for most, it is today somewhat akin to the cynical exercise of going to Church on Sundays. Being inspired by the rhetoric of the preacher, washing out the stains of a few sinful acts in the confessional, praying with heartfelt earnestness for the redemption of those who have lost the way on the true path…and then going right back to the same shit way of living by Sunday evening.

So sometime during the next four years, those 303,824,640 or so people are going to find that navigating the road ahead involves their participation. The problem hasn’t been solved by a newly elected President dropping one sentence into his inauguration speech. The problem won’t be solved the by Washington twiddling a knob or two on the economic and social control panels that mysteriously manages (or not) the ebbs of flows of the macro economic maelstrom. Nor will it be solved by changing a light bulb or two, turning down the thermostat a degree, and manufacturing the same old stuff in the same old way but with a nod toward any resulting device having a better energy efficiency than last year’s model.

Obama’s implementation of his campaign words will instead involve changes in the running of every day American life. And seeing as so many other countries are followers and imitators of that social and economic model a lot of other lives too. Yours. Mine. Your neighbours. Your parents and your friends. What we drive, whether we drive. Where we holiday and how we get there. What we eat, how that food is grown and where it is grown - and therefore when it is available. Where and how we design our communities and buildings. How we define success and freedom and how we reward it. What our expectations for economic and social growth are. Which businesses make sense. Which businesses need to be deliberately shut down. These are just a few of the smaller questions that we must address as we enact change.

Some of them have undoubtedly already twigged. A largish number who perhaps already have one of these plastered on the back of their Chevy Suburban. Any slick talkin’ Dem-o-crat who tries to wrestle the keys for their Chevy from their clenched fist and swap it for the electronic keyfob for a shiny new Prius (or even a Chevy Volt) is probably going to find themselves staring down the barrel of a constitutionally legal firearm. These people are going to resist with every braincell, every dollar, every decision, and perhaps even with their physical might any effort to have them change their day to day way of life.

There are to be counted also the relatively small number of people who already truly understand the personal implications of dealing with AGW. They have proactively made personal decisions, and have set themselves on a course somewhat different to the day to day path followed by mainstream. They are the Eco-Amish. They already walk. They already eat a little differently. They already holiday locally. They already teach their children that unbridled economic expansion derived from profligate consumption of fossil fuels might well be mainstream, but it is also a truly dangerous thing.

Then there are the rest of them. To quote the newly elected President - change is coming. What worries me isn’t whether the newly installed US administration says and believes those words, it is whether the everyman understands the truth of those same words. And most importantly, whether the everyman accepts the change to them that delivering on those words means.

Hang on for the ride, this is where it gets really interesting.

What a slippery and exciting ride its been during 2008 for oil prices. Just a few months ago the world was feeling dizzy from the heady fumes of $147 a barrel oil and petrol sniffing was becoming so expensive a habit it almost had the necessary exclusivity to become widespread among the rich and well heeled. Even the most loyal of Chelsea Tractor drivers began to be dazzled by the hypnotically spinning numbers at the petrol bowser as they filled their tank. “Peak oil” made it from the vocabulary of the conspiracy theorists to the business pages of the broadsheets and dire predictions were made regarding the availability and cost of fuel supplies. But just in time for Santa to refuel the sleigh, New York Crude has fallen to below $34 a barrel, lower than any time in the last four years.

The gleeful exclamations of those who continue to wish for a world awash in cheap and plentiful petroleum fuel sources can be heard even over the roar of the newly restarted four barrel Holly V8s. Not for them a future of restrained oil supply, just “business as usual”. Now if only Chrysler and GM weren’t under Congressional and Executive pressure to build girly electric cars, we could all go back to the nirvana that is a multi-tonne SUV’d future.

But is it fair to point to the current crashing of oil prices and assume that we are in fact back to the days of cheap energy? Firstly it is appropriate to recognise that OPEC is committed to a price well above the thirties, albeit they recognise that North of $140 might be good for the hip pocket in the short term, but it is globally economically unsustainable in the long term. The fundamental factors behind oil pricing are the same as any other commodity - the balance of supply and demand. Above $100 a barrel oil prices began to contribute to the economic drag that was already beginning spreading from other factors. Though OPEC made substantial noises that they would increase supply to stabilise the price the reality is that relatively little extra capacity was able to brought online, not helped by the fact that not all members of the cartel wanted to play the game as they were in it for the short term gains.

More influential were the speculators, whose trading created an additional detachment effect that further dulled OPEC’s ability to control prices through altering supply.

What of the future? OPEC’s inability to much increase supply flow actually lends support to the views of industry insiders such as Matthew Simmonds who cast doubts on the accuracy and truthfulness of the claimed remaining reserves of the Saudi (and other major worldwide) fields. The IEA continues to cast doubts on the ability for us to find further significant fields, and despite the “Drill, baby drill” bluster expressed during this year’s US election campaign, the reality is that exploration of new fields offshore of the US or in ANWR make little real difference to global supply levels.

Oil price is also a bit like a piece of elastic. Once stretched, it will never return to the same size again. Now that OPEC has seen that the world will go as far as $140+ before choking, they will not settle for a long term price of less than $50. Even they hear the warning bells ringing from the calls to decouple Western (read: USA) economic growth from Middle Eastern oil. Such efforts will take a decade or more before they are successful, but in the long term OPEC must realise that the days of taking trillions from Western pockets are drawing to a close. Best to suck out as much money while the wallet remains at all open.

OPEC is now attempting to again stabilise the price, this time upward. At an OPEC meeting this month, Saudi Arabian oil minister Ali al-Nuaimi again indicated he thought US$75 per barrel would be “fair and reasonable,” adding that anything lower could lead to more, not less, instability. Ali al-Nuaimi reportedly saying “When oil is priced lower, such as it is now, there will be less investment and less future supply”. We should need no clearer indication that OPEC will cut supply to keep prices high, and furthermore are signalling that any existing field capacity will require difficult, innovative, and increasingly marginally effective (translation: expensive) extraction methods.

Conclusion: The strategic approach is to recognise that the future does indeed require us to migrate off petroleum based energy sources as soon as possible.

James Hansen is the NASA scientist who twenty years ago warned the US Government about the reality of, and the dangers in climate change. In 1988, during what was then a record year of high temperatures (a record repeatedly exceeded since), Hansen testified before Congress and called for urgent action to reduce greenhouse gas (GHG) emissions.

Two decades later Hansen has again appeared before US Congress to say that we have long since passed the “dangerous level” for atmospheric GHG levels. In short, we need to get back to 1988 levels in order to survive. Hansen is a man to be listened to. He is the director of the Goddard Institute of Space Sciences, and has been “popularly” referred to as “the godfather of global warming science” - though his message is by no means popular with many who hear it.

Hansen’s warning underscores the fact that energy efficiency, while being desirable and laudable, is not going to get us to where we need to be. Only transformational change, in societal structure (and therefore living and working lives) will drive GHG levels down to sustainable (and survivable) levels. In the technology industry, a reduced energy usage per computing task is only any good as long as the resultant efficiency is not simply burned doing more “business as usual” computing work. In transport, energy efficient vehicles are only any good if we don’t use them to drive further. The list goes on.

This is the difficult part for us all. Energy efficient light bulbs do not cast a comforting light on the real task facing us. The simple changes are 95% comforting, and only 5% effective. A building that doesn’t need artificial light to be a useful structure is better. Not requiring the building at all is transformational.

As Hansen told The Associated Press; “We’re toast if we don’t get on a very different path. This is the last chance.”