Applying the “Peak Oil Filter”

November 27, 2010. When financial consultant Jim Hansen talks about putting every investment choice through a “peak oil filter,” he means investments not just of money. He advises first investing in yourself and your lifestyle, while thinking about how constrained oil supplies will affect your shelter, your transportation, your work. If you have money to invest, what industries will do better or worse in that scenario?

We taped Jim in his home north of Seattle. He pointed out the big gas-guzzling SUV parked in the driveway — surely not smart choice for when gasoline supplies are constrained! But, he pointed out, it’s only on its fourth tank of gas for the entire year. It is 15 years old and has over 100,000 miles on it: replacing it would mean adding 6 tons of carbon into the atmosphere (carbon embedded in building a new vehicle). The choice he made using his “peak oil filter” is to keep it and use it sparingly (he bikes, uses transit, and has a home office).

I had great fun taping with Jim. He has the kind of big-picture perspective that looks at the bottom line and all the interconnections, with the eye-opening numbers to demonstrate it.

He noted we’re primarily facing a liquid fuels problem, since 80% of transportation uses oil (and mostly for diesel, the industrial fuel). As oil supplies get increasingly constrained, he sees airlines, hotels and other tourist industries shrinking. Conversely, we need to invest in infrastructures like run-of-river hydroelectric power that doesn’t require building dams, and rail which is far more efficient for long-distance transport than trucks.

He’s optimistic that we’ll adapt as we need to. But he’s a realist too, worrying that centralized healthcare centers won’t make much sense when it gets too expensive for people to drive to them.

Look forward to a fast-paced, fascinating conversation with a personable guy whose “peak oil filter” is worth adding to your own life choices. (www.ravennacapitalmanagement.com)