Looking into the Crystal Ball: Predictions for 2013

I’ll start off with the easy stuff, continuations of trends already in progress.

1. Young people turn urban.  The under 30 crowd will continue to flock to urban areas, eschew car purchases, bicycle in ever-larger numbers, as well as walk, take transit and use a car sharing service from time to time.  This means in 2043, 50-somethings will be in much better health than they are today.

2. Oldsters turn urban. Boomers between the ages of 50 and 70 will downsize, abandon suburbia and head for urban areas where there is more to do and less lawn to mow. They will bring their cars with them and then be grouchy they can’t park anywhere.

3. Housing prices uneven. Housing in urban areas on the US coasts will appreciate slightly on average while housing in distant suburbs of the same cities will continue to lose value.

Up, up, up

4. Some difficult trends continue. As in 2012, in 2013 food stamp use will again increase in the US, the average price for a gallon of gas in will again be higher than the previous year, the Gini Index measure of inequality will again rise in the US, and median real household income will again decline.

5. Turmoil in the Middle East and North Africa. (Not a hard call!) Specifically, there will be turmoil in countries that have recently transformed or are in the process of transforming from net oil exporter to net oil importer. The exporter to importer transition creates upheaval not only because an important source of revenue dries up but also because precious hard currency now has to buy energy imports, wreaking even more havoc with balance of payments. Middle East and North African countries likely to encounter turmoil (or more turmoil) are Egypt, Syria, Yemen, and Tunisia. Other countries that might experience turbulence are Argentina, Uzbekistan, Indonesia, Malaysia, Vietnam, and the United Kingdom. Might even see a little upheaval in Denmark.

2012 was painful enough

6. Serious oil import pain.  These countries will drop oil imports by more than 5% in 2013: Greece, Portugal, Spain, Italy, Ireland, UK, Poland, Hungary, Bulgaria, and Syria. This will largely be due to painful economic necessity and occur through drops in passenger miles traveled rather than through investment in energy-efficient mass transit. The countries in the graph above already dropped by 5% or more in 2012.

7. Moderate oil import discomfort. These countries will drop oil consumption by 1 to 5%: USA, Belgium, Netherlands, Finland, Sweden, Austria, Germany, and France. In most of these countries (except the US), wasteful oil use has already been curtailed so consumption will drop primarily through increased investment in and use of public transportation. This will improve the economic performance of these countries. In the US oil consumption will drop through greater vehicle efficiency, fewer miles traveled, and a moderate amount of increased public transit use. To achieve the transportation efficiency of most European countries, US oil consumption will eventually have to drop in half, and miles traveled by private vehicles will eventually have to drop two-thirds. This will happen, but not next year.

8. Still on the upswing. Countries that will increase consumption by more than 1%:  Canada, Australia, South Korea, Japan, Mexico, Turkey, Vietnam, India, Brazil, Thailand, Argentina, Iraq, Venezuela, Libya, Saudi Arabia, Qatar, Iran, Jordan, Turkmenistan. Most of these countries are oil producers who have long subsidized oil sales to placate their populations. (Once a country subsidizes anything, removing the subsidy is difficult.) Some countries, such as Turkey, Brazil, Vietnam and Thailand, are still expanding economically, have a lot of population, have historically used very little oil, and get a lot of economic return from even small additional amounts of oil used.

9. Solar booming in some places. California will continue to outpace the rest of the US in rate of solar PV installation. Germany will continue to outpace both California and the US for same.

10. The US will not run a balanced budget in 2013. A hamster could predict this.

11. The Federal Reserve will continue to monetize US government debt. The hamster’s sister could predict this.

12. The US economy will continue to slowly contract as households with at least one member unemployed will “insource” domestic tasks rather than purchase/hire them for pay. Outsourcing of shopping, cooking, gardening, sewing, laundry and childcare, which caused apparent economic expansion when women entered the work force in volumes in the 80s and 90s, will become again part of the domestic, uncounted, economy. (The amount of real work done, however, won’t change.)

13. Some will do better than others. US cities that offer attractive alternatives to fossil fuel-powered transportation—safe routes to walk and bike, electrified trams, metros and buses—will be have stronger economies in 2013 than those that don’t because less consumer spending will immediately leave their economies. (The exceptions will be cities directly involved in the gas and/or oil business.)

  

Somewhat dicier calls:

1. Greece or Germany will leave the Euro. (One or the other.) If Greece goes, likely Spain will leave as well. 

2.   Oil exports from Mexico plus Venezuela will decrease as much as oil exports from Canada increase.

3. US consumption of oil and coal will drop by 5%. US consumption of natural gas will increase by 4%. 

4.  Each region of the US will have a period of gasoline supply troubles, either due to weather, other natural disaster, or refinery capacity. These incidents will cause shortages or gasoline prices at the pump above $5/gallon. 

5.   Japan’s economy will come apart at the seams, in no small part due to having to import fossil fuels to meet a large portion of their energy needs. (But this doesn’t mean their society will follow suit, seam-wise.) 

6.   China’s economy will flatline, going neither down nor up in 2013, although with their population, this means running pretty fast just to stay in same place. 2014 is a question mark. China's smog and pollution issues will grow so dire that they will actually not increase coal consumption in 2013. 

7.  If the Middle East remains stable, US oil production will plateau in 2013 due to high production drop off rate of tight oil wells (oil production in North Dakota.) US production of natural gas will drop due to reduction in natural gas well drilling and sharp well depletion rates. 

8.  If the Middle East becomes chaotic enough to disrupt oil production (possibly due to high worldwide grain prices resulting from US Midwest drought and/or US corn ethanol production), oil prices will sky rocket.  This will cause oil that is currently uneconomic to drill and pump in the US to suddenly become economic. In that scenario, US oil production would increase while overall US oil consumption would drop. 

9. The deduction homeowners can take off their taxes for mortgage interest will be reduced (possibly just for upper incomes) or dropped altogether. 

10.  Fearing political backlash, Congress will still refuse to raise the gas tax or even index it to inflation. Instead, road repair and maintenance will continue to be paid for with debt. Individual states, however, will begin to raise state gas taxes in 2013. 

11. The Midwest drought will raise the price of ethanol so much that everyone except corn farmers will curse the mandated 10% ethanol content in gasoline. The amount of corn going into ethanol will also raise the price of animal feed which will raise the price of meat and dairy. However, if high grain prices actually cause revolutions in oil-producing countries, ethanol may again seem cheap in comparison to oil.

Medium term, the items below can’t continue because we will no longer be able to afford the squandering of resources and/or absorb the harm inflicted. One way or another they’ll be gone/kaput by 2018, but they may still wreak havoc in 2013: 

1.   US spending 18% of GDP on health care.  (Other wealthy countries spend 11.5%)
2.   US spending 5% of GDP on military. (Other wealthy countries spend 1.5%)
3.   US debt 106% of GDP
4.   Ethanol 
5.  War on drugs 
6.   $1 trillion dollars in student debt
7.   One third of Americans obese  
8.   11% of US adults diabetic 
9.     Internal combustion engines (due to gross inefficiency--over 75% of energy input lost) 
10. High fructose corn syrup 
11. Coal-burning power plants 
12.  Freight shipment by methods other than water or rail (and perhaps electric truck for the last few miles.) 
13. Average of 845 square feet of living space per person in the US. 
14. Over-use of air conditioning and air conditioning of the outdoors

The above mean these parts of the economy will shrink/diminish over the next five years: health care, prisons, brick and mortar college education, military, corn farming, coal mining, diesel trucking, airfreight, air transport, road building.

These areas will expand/increase over the next five years: farming of all products other than corn, on-line education, renewable energy, electrical power grid expansion and upgrade, rail and transit construction and maintenance, rail and transit operation, rail freight, bicycles, electric bicycles, energy-efficient housing, energy efficiency retrofits, housing near transit/in urban settings.