New IMF Working Paper Models Impact of Oil Limits on the Economy

The International Monetary Fund (IMF) recently issued a new working paper called “The Future of Oil: Geology versus Technology” (free PDF), which should be of interest to people who are following “peak oil” issues. This is a research paper that is being published to elicit comments and debate; it does not necessarily represent IMF views or policy.

The paper considers two different approaches for modeling future oil supply:

  1. The economic/technological approach, used by the US Energy Information Administration (EIA) and others, and
  2. The geological view, used in peak oil forecasts, such as forecasts made by Colin Campbell and forecasts made using Hubbert Linearization.

The analysis in the IMF Working Paper shows that neither approach has worked perfectly, but in recent years, forecasts of oil supply using the geological view have tended to be closer than those using the economic/technological approach.  Since neither model works perfectly, the new paper takes a middle ground: it sets up a model of oil supply where the amount of oil produced is influenced by a combination of (1) geological depletion and (2) price levels.

This blended model fits recent production amounts and recent price trends far better than traditional models. The forecasts it gives are concerning though.  The new model indicates that (1) oil supply in the future will not rise nearly as rapidly as in the pre-2005 period and (2) oil prices are likely to nearly double in “real” (inflation-adjusted) terms by 2020. The world economy will be in uncharted territory if this happens.

It seems to me that this new model is a real step forward in looking at oil supply and the economy. The model, as it is today, points out a definite problem area (namely, the likelihood of oil high prices, if growth in oil production continues to be constrained below pre-2005 rates of increase). The researchers also raise good questions for further analysis.

At the same time, I am doubtful that the world GDP forecast of the new model is really right–it seems too high. The questions the authors raise point in this direction as well. Below the fold, I discuss the model, its indications, and some shortcomings I see. 

The Two Models

Economic /Technological Approach. With the economic/ technological approach, the assumption is made that high oil prices will encourage substitution and/or new oil production. Because of this, high oil prices are not expected to persist. Instead, the most important consideration in determining future oil supply is the level of future demand. The level of future demand, in turn, is primarily driven by  anticipated GDP growth, since world GDP growth and world oil production growth tend to be highly correlated.

In effect, models of this type assume that whatever oil supply is needed will be available; they don’t consider the possibility that geological considerations may limit oil supply over the long term. As an example of how well these models have worked for prediction, the paper shows a graph of historical EIA forecasts (Figure 1, below).

Figure 1. Graph showing that oil production forecasts by the US Energy Information Administration have been revised downward, year after year, from paper.

Each year, EIA’s forecasts have been adjusted downward, because actual oil supply growth was lower than forecast.

Models Based on the Geological View. The paper considers forecasts of oil supply such as those of Colin Campbell (shown in ASPO-Ireland Newsletters) and forecasts based on Hubbert Linearization to be models based on the Geological View. The paper observes that forecasts of oil supply based on geological view have tended to be too low, but not by as big a margin as those made using the economic/technological approach. As an example, it gives the following graph of changes in forecasts by Colin Campbell.

Figure 2. Colin Campbell Forecasts of Future Oil Supply, from paper.

A review of the two methods by the IMF group indicates that neither works precisely as hoped, but each has some validity. While oil production did not rise as fast as the economic/technological view would predict, higher oil prices have allowed oil production to stay on more or less a plateau after 2005, rather than declining as predicted by geological methods. The new model in the IMF Working Paper combines indications from both points of view, using an approach that allows them to estimate the relative contribution of geological impacts vs higher prices.

How the Two Methods are Combined

The oil supply equation in the new model is set up so that there are two different ways that the forecast oil supply can change. There is a downward tug from oil depletion at the same time that there is an upward tug from oil prices. It is expected that in the short run, high prices will get producers to utilize spare capacity, and over a longer period (estimated at 4 to 6 years), it will get producers to add new capacity. I will not try to explain all the variables and coefficients, but the blended supply equation is

Figure 3. Oil Supply Equation

In the above equation, qt is the quantity of oil produced in year t and Qt is the cumulative quantity produced in year t, so the ratio qt / Qt produces the familiar downward-sloping line one sees in charts used for Hubbert Linearization. The first two terms to the right of the equal sign are the ones based on the geological approach to depletion. The later terms depend on pt, which is price of oil at the time “t”. Adding the  pt terms tends to raise the line at later periods so it does not slope downward as quickly as if depletion were the only factor affecting the relationship.

Growth Rate of GDP

In the model, high oil prices have some impact on GDP, but as we will see in Figure 5, below, not very much. There are two places in modeling GDP where high  oil prices come into play. The first is in the Potential Growth Rate of GDP. According to the paper,

The growth rate of potential world GDP is specified as fluctuating around an exogenous long-run trend, with oil price changes making the fluctuations more severe. Oil prices are allowed to have persistent but not permanent effects on the growth rate of GDP. . . The estimated steady state world potential growth rate of potential GDP equals four percent. The average annual growth rate of real oil prices, which is the growth in oil prices at which the model assumes zero effect of oil prices on output growth, is seven percent. The results indicate that an oil price growth that is higher than that historical average has a small but significant negative effect on the growth rate of potential. [emphasis added]

Interesting–the model assumes real oil price growth of 7% per year has no impact growth rate of GDP. Perhaps this is supposed to be picked up by the second place where high oil prices come into forecasting GDP, called Output Gap. This is an excerpt from what the paper says about Output Gap:

Apart from allowing for an effect of higher oil prices on the growth rate of potential output, the model also allows for the possibility that higher oil prices can cause fluctuations in the amount of excess demand in the economy. . . . Similar to the equation for potential, the coefficient estimates show that high oil prices have a small but significant negative effect on excess demand, and that this effect is highly persistent.

Model Output

When all is said and done, what does the IMF model forecast?

Figure 4. Oil Output Forecast with Error Bands, (in gigabarrels per year), from report.

The forecast for future world oil supply, shown in Figure 4 above, is similar to EIA’s most recent forecast of world oil supply (but lower than earlier EIA estimates). Oil supply is expected to rise a 0.9% per year. An alternate tighter oil supply forecast is given as well.

The forecast for world GDP growth (shown in Figure 5 below) is not too much different from standard estimates, either. The point forecast is about four percent per year.

Figure 5. World GDP (in logs) forecast with error bands, with 2011 world GDP normalized to 1.00, from report.

The thing that is different in this analysis is oil prices (in inflation adjusted dollars). Forecast oil prices are expected to be much higher that what the EIA is estimating.

Figure 6. Oil price forecast with error bands (in 2011 Real $) from report.

The report points out that these high oil prices are a real concern. The report says:

The predicted average annual growth rates of oil output are well below the historical forecasts of EIA, but above the forecasts of proponents of the geological view. . . . However, this projected positive trend in oil production comes at a steep cost, because the model finds that it requires a large increase in the real price of oil, which would have to nearly double over the coming decade to maintain an output expansion that is modest in historical terms. Such prices would far exceed even the highest prices seen in 2008, which according to Hamilton (2009) may have played an important roll in driving the world economy into a deep recession.

Need for Enhancements /Areas of Concern Pointed Out by Authors of Paper

The authors raise of the IMF Working Paper raise the following issues:

1. Impact of high oil prices on GDP growth. The expected impact of a continued rise in oil prices on forecast GDP is small, according to the model as constructed. Perhaps the relationship should be non-linear (convex) instead of linear. More generally, what is the importance of the availability of oil inputs for continued overall GDP growth? The report mentions studies showing the close connection between energy growth and GDP growth, such as by Ayers and Warr.

2. Substitutability for oil. What is the substitutability between oil and other factors of production? Is it reasonable to assume that elasticities of substitution will become greater over time? Or is there a possibility that there are limits to the extent of substitutability of machines and labor for energy?

3. Is there a pain barrier? At some point, does the effect of high oil prices on the economy change, and become much worse?

4. Independence of Technology from Fossil Fuel Availability. Perhaps a reduction in fossil fuel availability will negatively affect the availability of future technology improvements since, for example, it takes fossil fuels to make new more efficient cars. This has not been reflected in the model.

5. Smaller Amounts of “Spare” Oil Capacity Available in the Future. The model reflects amounts of OPEC spare oil production capacity available in the past. In the future, less spare production capacity seems likely.

My Comments on the Paper

The IMF is to be commended on putting together this analysis. To me, the big step forward is that questions about the impact of geological depletion of oil on the economy are starting to be addressed. The fact that the paper also points out the level to which oil prices will need to rise, if oil production is to rise at 0.9% a year between now and 2020, is important as well.

Some of the issues I see that aren’t addressed in the paper:

1. Factors underlying world long term growth rate, other than energy. It would seem to me that there are a number of factors which have permitted long term world economic growth, over and above the economic growth enabled by fossil fuels. Some of the following seem to be diminishing in importance, so perhaps the forecast of a 4% world GDP growth rate going forward is too high, apart from oil supply issues:

a. Trend Toward Globalization. The trend toward globalization has allowed greater synergies to occur, and thus has contributed to world GDP growth. The trend toward globalization started over 4,000 years ago, with trade from northwest India to the Mediterranean region (Chew). In recent years, we seem to be  approaching a maximum level of world globalization. In fact, higher price of oil has been raised as an issue cutting back on trade of bulky, low valued items (Rubin). Higher cost of oil may also have an adverse impact of commercial airline flights for international companies to oversee their distant operations, because the costs of these flights is now supported by a large number of international tourists, and this international tourist trade may dry up. Thus, the trend toward globalization that has been supporting world GDP growth in the past may not persist, and may even reverse.

b. Growth in Education. Part of what has supported world GDP growth is likely growth in education, since literate workers are better able to use technology. There is evidence that the advanced economies are now plateauing in terms of educational level of new workers, relative to the existing work force. Even less advanced economies, such as China, are showing much higher levels of literacy. (See this post). To the extent that educational levels are reaching a plateau, the “boost” to historical GDP rates that came from this factor can be expected to be lessened.

c. Growth in Debt. GDP growth is enabled by debt growth. Consumers are able to purchase more goods and services, with increased levels of debt; businesses are able to increase their investment in new plants and equipment through more debt; and governments are able to undertake the development of new construction, roads, and other development, through the addition of more debt. But we seem to be reaching limits on debt growth. Theory also suggests that higher levels of debt are enabled by higher economic growth rates (Tverberg). Governments have been aware that increased borrowing can be used to pump up economic growth, but limits are being reached on the amount of debt that can be added. To the extent that debt fails to grow as quickly in the future as it has in the past, this can be expected to have an adverse impact on world GDP growth rates.

d. Quantitative Easing and Extraordinarily Low Interest Rates. An argument can be made that GDP growth of advanced economies in recent years has been held up by quantitative easing and extraordinarily low interest rates. These would seem to be a temporary fixes that cannot be continued long-term. If this is the case, world GDP rates can be expected to be lower in the future, regardless of oil supply growth.

2. Limits on Substitutability of Other Fossil Fuels for Oil. The paper does not address the issue of whether there are limits of substitutability of other fossil fuels for oil. Stationary (as opposed to transportation) uses of oil have been substituting away from oil for years. There are millions of vehicles and other machines that use oil currently in operation. There will be a high cost in replacing these before the end of their normal lifetimes. Also, significant fossil fuels will be required for making vehicles and supporting infrastructure that use another fossil fuel source.

3. Limits on Capital Available for New Investment in Substitutes for Oil, and in New Oil Production. In recent years, we have made heavy use of debt financing for new investment. Government subsidies have also been used. To the extent that debt financing and government subsidies are less available, less investment can be expected in the future.

4. Impact of High Oil Prices on Diverse Parts of the Economy, Not Reflected in the Model. For example, prices of homes may be affected by high oil prices. People with less discretionary income are less likely to “trade up” to a more expensive homes, so high oil prices seem to be one of the reasons for the decline in home prices (Tverberg). Lower home prices affect ability of homeowners to borrow against the value of their homes for new purchases, so affect GDP, apart from oil price’s direct impact on the number of new homes built.

5. Which comes first: Oil Growth or Economic Growth? The assumption in the model is that GDP growth drives oil growth. While this is true, it is to some extent a “chicken” and “egg” situation. Perhaps the availability of inexpensive oil and other fossil fuels is one of the main drivers of economic growth (in addition to the other drivers I mention in the subparts of Item 1 above). Perhaps the cycle is started by the availability of cheap fossil fuels for industrial use and continued by the increased demand to which this growth gives rise.

* * *

I appreciate the work that has been done by the IMF in putting together this model and look forward to seeing further enhancements to the model. The work that has been done and the questions that are being raised are important ones.

I expect that commenters to this post will be able to point out other plusses and minuses of the model. The report itself is very interesting. Again, it can be found at The Future of Oil: Geology versus Technology.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to inadequate supply.
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119 Responses to New IMF Working Paper Models Impact of Oil Limits on the Economy

  1. La Curée says:

    The IMF is a tool of TPTB.
    I’m not going to commend them for anything.
    No intention of reading the .pdf.
    Still thanks for posting it up, personally I am getting a bit past caring, the globalists agenda steamrollers onward on so many fronts now.
    On the BBC today we have farting dinosaurs producing equivalent methane to the entire efforts of cows and man today.;¬)
    This just happens to coincide with huge NEW venting of methane reported in the Arctic due to global warming and marginalised by TPTB tame scientist in testimony to the UK parliament a few weeks ago ignoring the world acknowledged expert in Arctic ice science a Cambridge don.
    One thing is for sure the 99% are going to be a lot poorer by 2020 and the 1% will be richer
    They only have one agenda stay in control by setting the agenda.
    This is a classic psychological warfare technique i.e. you can only fight a battle (tactics) defined by our rules so we can be sure of winning the war (strategy).
    A few points they control the reporting of production, Campbell only had access to the insider info because he wrote the definitive report for the oil industry after writing his analysis we can be certain they have done their best to muddy the data he gets access to.
    Production of crude oil has failed to increase significantly, they have simply added condensate and refinery gains to barrels of production in addition to how much plain fibbing they thing will be easy to hide.

  2. sponia says:

    Thanks for a timely and interesting post, and the thoughtful analysis. It seems that more and more world experts are being forced to admit some of the facts of our situation, not just the IMF. I still don’t think their projections are believable, but they are trying to add in more real world factors to their models, so that is a step down the correct path anyway. Please include the math next time too. I am learning things I should have mastered years ago because I have a need to understand things I didn’t used to care about. It makes a difference, when the answers are something that matters to you.

    • There is a limit to how much math I can include. If nothing else, I am not equipped to write alphas and betas and other scientific notation (although I suppose I could figure out how). I have also discovered there is a real problem with “my eyes glaze over,” when posts look too technical.

      • sponia says:

        Perhaps so. Still, I find an explanation of how the models are constructed mathematically, with a simple (enough for me to understand) explanation of how the ideas are molded into equations helps me understand what is being expressed. Any help at all in this area is particularly appreciated.

  3. eastex says:

    Great post Gail. I have been reading some of your recent work, and this one is the most noteworthy!

    So, after a person recognizes that there is a total quantifiable amount of oil in place, A.K.A. a finite amount, we are really getting somewhere. And, if that person can admit that a significant amount of that original oil in place has been consumed, we can talk about these minute details of the undulating plateau. This new “bended” forecast is a bit of smoke and mirrors, which attempts to show that a small possible gain in production during the plateau years is proof of growth into the foreseeable future. Notice the time scale on that last chart goes way out to 2020, a whopping 8 years. Then what?

    All that can possible happen is that the world economy can afford a small increment of price elevation, to squeeze the production plateau a bit longer. What happens as a larger percentage of the oil production is based on tar sand and fracking costs? People assume that the price fluctuations will resemble the recent past, where an economic recession pushed out the marginal (expensive) oil, and we had a sizable drop in price. But, the future is not a linear projection of the past, but rather a curve. And all that is left to debate about is the size and shape of that curve.

  4. reverseengineerre says:

    I will cross post this one on the Diner.


  5. Pingback: New IMF Working Paper Models Impact of Oil Limits on the Economy | Doomstead Diner

  6. Ikonoclast says:

    During the BP’s Gulf of Mexico oil spill in 2010, I watched (as did many others) documentary footage of people in the Gulf region being interveiwed about the spill. They almost invariably blamed BP bitterly and often threw in as well blame of government and the lack of regulatory oversight. In the background, one could see their V8 cars, SUVs and pick-up trucks. Along the wharves, one could see their substantial fishing boats no doubt powered by large marine diesel engines. Whilst not exonerating BP, its suppliers or the governments state and federal, one must note that the real responsibility for all of oil’s tragedies really belongs to all of us.

    The twin tragedies are these. Firstly, pollution of the commons to the extent that we are wrecking the climate and other biosphere systems. The second tragedy is that oil use has enabled us to ratchet population and production up to unsustainable levels from which they must inevitably collapse. What we really need to ask ourselves is this. Why was our system so unresponsive to both natural warning signs and empirical warnings from the best accredited scientists around the globe?

    It is my view that the entire system is “to blame”. We who made it or acquiesced are thus really responsible. The system needs to be named. It is capitalism that has caused this disaster; a system to designed to grow indefinitely, to stimulate greed beyond need, to ignore scientific and ecological warnings and to disrepect and ransack the natural world.

    The collapse of modern civilization and production will be concomittantly the collapse of capitalism and proof perfect that capitalism is a maladaptive system, harmful to human kind and nature. The business as usual approach by the powers that be is only ensuring the coming disaster will be even more devastating than otherwise. One wonders how late in the piece all of us (the people and the powers) shall realise that a global emergency is upon us?

    Yet, even at this late stage nothing substantial has changed in common public discourse outside of intellectual circles. The media continue to supply us with the circus of popular entertainment (food, football and fetishes) while plying us with advertisements to consume ever more consumer junk, cars, travel and many other indulgences.

    I really do wonder what will happen when the common people realise the party is over? The realisation will come, I hazard a guess, with major and continuous petrol (gasoline) shortages. Fancy V8s will sit in the home garage useless. Many will not be able to commute to work. Many will not have work as the industries that depend on petrol will be in partial or continuous shutdown mode. Food shortages, riots, civil insurrection and permanent martial law cannot be far behind.

    The US has already geared its laws for permanent martial law. Unfortunately western capitalism and its pale but still recognisable democracy will be followed by a kind of corporate, oligarchic dictatorship overlaid by martial law. The question then will be this. Will popular revolt be able to overthrow this system for something better or will oligarchic dictatorship backed by modern technologic power (albeit crumbling) maintain its hegemony for some time? And what lies on the other side of that? Semi-anarchic warlordism or a new and better democratic socialism? it’s hard to be hopeful.

    Perhaps the next 50 years will be just too chaotic and with too many imponderables to allow for any predictions at all. I mean other than the fact that it will be brutal, chaotic, terrible and the world’s population will collapse precipitously to perhaps one tenth of the peak.

    • Leo Smith says:

      I think a 10:1 collapse in population is on the cards with no oil replacement.

      But as I said elsewhere, nuclear energy has the potential to hold up most of a somewhat transformed civilization and about existing numbers.

      (BTW, when you worry about nuclear fuel, first educate yourself – fissionable material is many orders of magnitude more abundant than fissile material : fissile material is simply the ‘ignition source’. We don’t bother to recycle even that because current uranium prices are so low ..In the same way we used to flare gas from oil wells.. And the same economics led to the cancellation of breeder reactors. All of which can be used at a somewhat higher fuel cost to extract far more energy out of vast reserves of fissionable (ass opposed to fissile) materials Finally fusion reactions can in the limit use deuterium which is massively abundant although a practical fusion reactor is some way away. )

    • I am not sure capitalism bears more than a small part of the blame.

      Humans, from the time they became human, have been taking more than their fair share of resources. This started with the use of fire. This allowed us to cook food, and to burn down trees. Once we could cook food, we were able to eat food we couldn’t eat previously. With better nutrition, babies were spaced closer, leading to one of the population pressures (unless infanticide was practiced). With tools (and the use of fire), we were able to kill off whole species.

      This was the situation, before there was any financial system. It only got worse as we went to farming (in order to deal with the problem of too many humans, relative to food available as hunter gatherers). The story has progressed, pretty much every culture throughout the ages. Some were a little better (China, for example), but the pattern, even without capitalism was overuse of resources.

      Capitalism of course encouraged use of resources, and availability of debt financing took away capital limits.

      • reverseengineerre says:

        Ag and Metal smelting are what mainly accelerated resource depletion. Just burning wood for cooking did not deforest the globe. You just don;t need to burn that much wood to cook a meal. To smelt Iron out of ore though, it takes a LOT of wood.

        HGs who used Fire existed for 10s of thousands of years with no appreciable loss of forest. It grows faster than you burn it for just the purpose of cooking. Its only once you start with energy intensive things like Glass making and Metal Smelting that you burn wood faster than it grows. So then you start burning Peat bogs, then you mine coal, then you pump the Oil for these tasks.

        Paleolithic technology is likely quite sustainable tech on an energy level. It also likely can be supplemented with some basic energy harvesting of wind and water power, and possibly even geothermal though that would be a stretch I think.

        Far as Capitalism goes, its main contribution to the mess was to vastly accelerate resource depletion and also to effectively enslave most of the world via debt and control of the monetary system by the Elite. With just Ag, we still likely would have exhausted resources, but it would have taken a lot longer. Capitalism is the top level of systems that gotta go here, but there are many layers beneath that which also gotta go, along with a significant portion of the global population of Homo Sapiens. The monetary system which supports Capitalism gotta go, Banksters, CPAs, Lawyers and Actuaries gotta go, most current forms of Ag cultivation gotta go, and above all, the Illuminati Gotta GO here. Knock it ALL down, start again under better principles without Money, and Homo Sapiens can last a long time here before the Sun goes Red Giant. Keep the Money around, we’ll go the way of the Dinosaur inside a century.


        • Leo Smith says:

          Even firewood can exhaust woodland. It is all down to the population density.
          I burnt about two – three mature trees – trees that take 60 years to grow – this winter. Id say around 5 for a whole year with cooking, too.. so I need a 300 tree wood to be ‘sustainable’ . This is quite a lot of land. And where must my pig graze and my vegetables be grown?

          I could have smelted a lot of iron on the fires. while I was keeping warm of course.

          In Britain it was ships and construction that exhausted came back somewhat after iron ships began to be developed.

          • reverseengineerre says:

            Population density of course is the final arbiter here, although your practices determine how much firewood you use. Inuit use very little firewood, even though they live in the coldest climate Homo Sapiens settled. Tundra doesn’t have a lot around to burn.

            Anyhow, to achieve a sustainable system, you have to knock down the population AND use best practices which were sustainable over 10s of thousands of years. Also, you may have some time to wait here before the earth recovers from the overshoot and locust plague of humanity, so an undershoot is pretty likely in the aftermath. There may be only small pockets left where homo sapiens can survive if the climate is altered sufficiently. We might bottleneck like it was after Toba went ballistic, and leave only 10,000 Human Souls or 1000 breeding pairs on the planet.

            Or maybe we go the way of the Dinosaur.


        • I expect that the need for land to grow crops was one of the reasons for deforestation.

          Also, some deforestation apparently started much earlier, with the hunter-gatherers. I am not certain of precisely the cause–burning trees to force animals used for food out, or accidental burning of trees, or upsetting the ecosystem in ways that killed off trees, but the destruction of forests started even earlier than farming.

          • Joe Clarkson says:

            Gayle, you are correct that fires that “destroyed” large areas of forest predated even ancient agriculture, but you are confused about the reasons why. Simply put, mature forest canopies might as well be deserts as far as humans are concerned. Virtually all of the photosynthetic productivity is far above the forest floor and out of reach for anyone living underneath.

            In the Pacific Northwest, Native Americans actively managed huge areas of forest by regular application of fire. These fires, in conjunction with natural fires caused by lightning, created an ecosystem that was much more productive of the kinds of animal and plant resources needed by the people living in the area.

            In many parts of the world, but especially in tropical locations, fire is used to clear forest areas for temporary gardens.

            And for those who settle forested areas with the intention of farming, the first thing that must be done is remove trees from the land that is to be farmed.

            These examples show that while wood is a valuable fuel resource, mature forests can support far fewer people than a mix of forested and open land. Indeed, it would be far easier to start with open farmland and grow any necessary fuel wood, than convert a forest to farmland. Just removing the stumps after the trees are removed requires herculean effort.

            • I can agree with you that large tree canopies don’t support a lot of humans. Maybe humans can get a few acorns that with a lot of work can be converted to food, but as often as not, they cannot.

              The question, though, is whether humans should be remaking ecosystems to their own liking. The ecosystems, without our intervention, are sustainable. With humans’ intervention, ecosystems are not sustainable for more than perhaps 2000 years (often much shorter), until they need to collapse and regenerate. Tilling the soil, by itself, leads to erosion in excess of natural levels. Humans’ intervention affects the climate, and distributes pollution (such as mercury) in ways that affect ecosystems everywhere.

    • David Harney says:

      Hi Ikonoclast,

      My usual thanks to Gail for another great article, but also thanks to Ikonoclast for his comment that has led to a spirited sub-thread. This is my thought on this “big picture” discussion:

      Pre-agriculture (say for about a few hundred thousand years and ending about 13K yrs ago), humans of various types (including us) ebbed and flowed with climate/geology changes, various adaptations, population pressures, and no small amount of good or bad luck. Sometimes life was “short and brutish” and other times/places pretty long and comfortable. Population pressure was eased by expansion and thwarted by the realities of Mother Nature. Fire or not, tools or not, impacts on some species or not, the simple fact is that human type creatures were not a threat to the biosphere of the planet or faced any kind of extinction event due to their own behaviors . Jared Diamond points to self induced collapse scenarios, but overall we lived or died at the hands of the environment – not the other way around as is the case today. For the most part, for many thousands of years, we were just an incidental part of nature with a relatively modest population level.

      Post-ag, everything changed (regardless of why agriculture was adopted). Without the advent of agriculture that permitted settled communities, we would have never grown to 7B humans – we would have starved or cheerfully killed excess population that infringed upon our hunting/gathering grounds – just live wolves and chimps do. Maybe the total dispersed world population would be a couple of billion – probably a lot less, and we would not have the ability to destroy the biosphere as we are doing today. We would just not have sufficient numbers or technology to do the job.

      However, once we settled, we sowed the seeds for today’s religious, political, and economic systems to grow and flourish. It is all about power and control. Instead of clans of early humans exercising power and control over a hunting range, the most clever ones among us figured out how to control the flow of stuff from the hills and fields to their own personal dwelling and table. Control required power over the minds of other men (women included). Humans have loved the idea of slavery for many thousands of years. But, to manage slaves requires the management of slave masters and soldiers. This was the really clever part – getting 100:1 or better fellow humans to obey your commands. There is no evidence that early humans in HG clans operated this way – much to the contrary, the evidence is for a very cooperative type of arrangement – or at least, fairly leaderless. Even today, we are learning that wolves are much more cooperative than the domineering model that has been in vogue for years.

      Richard Dawkins writes extensively about memes and how they originate and affect our behaviors. It is my contention that our predicament is hopeless unless we (collectively) understand the nature and power of memes. And memes are a heck of lot easier to understand than the technical details of genes. Today’s belief systems in a supernatural realm, in the growth paradigm, in the free-enterprise notion, in the industrial model, the developed nation idea, nationalism, and even motherhood and apple pie – all of these belief systems need to be critiqued to their core. Striking out at capitalism, for example, is not particularly helpful unless we understand how it evolved and fits into the bigger picture.

      All of these memes together lead us to a condition where we both accept our mind control structures and simultaneously believe the biggest myth of all: that the current model of a “human” has some special relationship to the planet that is not shared with any other creatures – that it is our “exceptionalism” that grants us some kind of divine right to exploit all other components of the planet for our comfort and pleasure – with no real worry about the consequences. Breaking this mind control does not seem to be forthcoming.

      • Don Millman says:

        There is strong evidence to support the hypothesis that forced a shift from hunting and gathering to horticulture (gardens–long before the plow was invented) was due to two inventions: The spear thrower and the bow and arrow. With these two improvements to hunting technology, most of the big game animals were killed off in just a few hundred years, and the amount of meat that men could bring home declined rapidly.

        Women did the gathering, which typically provided about seventy or seventy-five percent of the calories of a hunting and gathering clan. As population increased, the rewards of gathering dimininished. Hence the women took up gardening. In all or almost all horticultural societies, women did the great majority of work in the gardens. Many horticultural societies were matrilineal and matrilocal.

        For more on this topic, see HUMAN SOCIETIES: AN INTRODUCTION TO MACROSOCIOLOGY, Eighth edition, McGraw-Hill College, 1999, by Nolan and Lenski.

        • Sounds like another good book to look at. According to Amazon, they are now up to an 11th edition.

          • Don Millman says:

            I do not think the edition matters. I reviewed and helped with the revision of the edition I mentioned, and you’ll find my name at the top of the endorsements. It is a truly excellent book and available cheap in any edition except the current one. (Why buy a new book, when old books are so cheap?)

        • David Harney says:

          Hi Don,

          Thanks for the book recommendation, just put it on my wish list.

          The hypothesis you cite certainly sounds reasonable and I’m sure you’re far more knowledgeable than me in this area. However, I’d suggest two considerations: in the period I mentioned there were many variations of humans and their scenarios were particular to the place and time where they played out (one size does not fit all). I recently finished reading “The Humans Who Went Extinct” and one takeaway was the great variety of scenarios experienced by our ancestors. My second, and major point, is the fundamental cultural change that occurred around 10 to 13K years ago when agriculture was really gaining traction and permitting the establishment of permanent or near-permanent settlements that supported thousands of people. I haven’t read about any such large settlements occurring (or at least surviving to contemporary times) say 20 to 100K years ago. My point is that these large settlements were a fundamental paradigm change that eventually paved the way for the kinds of religious, political and economic systems that exist today. This point is explained much better in the book: Pandora’s Seed (although, admittedly, the book has it flaws).

          I’m suggesting that a clear understand of the why and how we have today’s control mechanisms should include a much broader study than the last couple thousand years or so of history recorded in writings – the fossil recordings have much to teach us also. I gather from your book recommendation that you would agree.

          • Don Millman says:

            The first large permanent settlements and the first complex societies were based on horticulture–not agriculture. For example, in both ancient Egypt and ancient China there were complex horticultuaral societies for at least a thousand years befor plow agriculture–at approximately the same time in both societies.

            With horticulture come the possibilities of kings and standing armies because of a concentration of wealth in those who collected taxes from the great masses of people who were gardeners.

            • Leo Smith says:

              I am not so sure.

              agriculture – herding and slash and burn farming – precededed hotriculture – which ties you to a piece of land – by some millenia, in almost every society.

              The natural progression is from hunter gatherer to more hinter if the right species exist, and then to the concept of herding, to keep the right species handy, and then gathering becomes horticulture, esepcially to feed the animals in winter.

              But its very location specific. On very thin soils and semi desert its very hazardous to herd. Nomadic hunters or very nomadic herders work better, and there is little chance to develop hortculture. Viz the Mongols, Iniut and so on…all places where there is precious little edible vegetable matter exccept for herd beasts. The concept of ownership does not extend very much to land – only cattle sheep etc. And fixed dwellings do not make sense either.

              Farming in the sense of planting to grow, is more suited to temperate and sub tropical climes with plenty of water and a decent growing season. Which is why we associate it with population explosions and citfication in the Mesopotamian areas – now largely desert as a result :-).

              And a natural rise in a class or caste system, as its handy to get the conquered slaves to do the backbreaking, life destroying labour, and hence the rise of hierarchies and structures to control it.

              And if there are no slaves, to breed a lower caste population whose job it becomes to tend the fields, and generate a mythology whereby their hard work will all be paid back after death in some karmic wheel or post mortem paradise.

              Whether you ragrad thios as a pinnacle of civilisation, or a perpetual prison sentence to most of the human race, is of course a matter of which caste you align with.

            • By coincidence, someone today told me that several of the major religions rose around the same time-frame–presumably about the time peoples were moving from hunter-gatherer to farmers. That would seem to fit in with what you are saying.

            • Don Millman says:

              There is an extremely high correlation betwen kind of economy and kind of religion. For example, you only get monotheism in herding societies such as the ancient Israelites or societies based on plow agriculture. For more on this fascinating topic, buy a cheap copy on of the book I earlier cited by Nolan and Lenski. Some of the earlier editions are better than the current one because over the years there has been relentless pressure by publishers and editors on the textbook authors to “dumb them down” so as to increase sales and profits.

          • I agree based on what reading I have done, about not having cities in the hunter-gatherer days. Agriculture definitely moved things up a by a big step, in terms of how many people could be supported in cities.

            Don has given us a distinction between horticulture and agriculture. I imagine there is a horticulture permitted smaller towns than agriculture. As trade was added, this would seem to allow the size of the city to go up further.

          • David Harney says:

            Hi Leo,

            And if there are no slaves, to breed a lower caste population whose job it becomes to tend the fields, and generate a mythology whereby their hard work will all be paid back after death in some karmic wheel or post mortem paradise.

            Well said! A simple, profound statement that should be understandable for nearly all humans. Unfortunately, 90+ % of the world’s population has no clue regarding this obvious observation.

            • donsailorman says:

              I always think of you as Bicycle Dave. Also, I’ll bet you still have those two 10 Speed English-made Ralaigh bycycles in your attic, and I think about them from time to time. Currently I ride my three-speed Brompton folding bike that I bought in England in 2001 for only 600 pounds sterling, and then I got a 100 pound refund on the VAT when I brought it back to the U.S. I ride it everywhere, and when I travel by air it folds up into its smallest form and fits in a large suitcase. So, wherever I go, my bike goes to. I’m 72 years old now, but my sense of balance is good, and I think I can keep riding on two wheels until the age of 80. By then it will be time for a recumbant or semirecumant trike.

  7. reverseengineerre says:

    It is my view that the entire system is “to blame”. We who made it or acquiesced are thus really responsible. The system needs to be named. It is capitalism that has caused this disaster; a system to designed to grow indefinitely, to stimulate greed beyond need, to ignore scientific and ecological warnings and to disrepect and ransack the natural world.-Ikonoclast

    Pretty much spot on analysis, except for the fact “we” did not make it or acqueisce to it, it was forced on the population through numerous wars and control over the monetary system by a very few people There has never been willingness or consent here, just coersion through a huge skew in the power distribution across societies and within the civilization itself.

    You might try reading “Timing Matters” over in the Diner.


    • Don Millman says:

      Capitalism is not the only economic system that causes destruction of econsystems and horrible pollution. For example, the Soviet Union and the communist eastern European countries were far worse polluters than any capitalist country. For a specific example, look at the contrast in the pollution and in care of the environment in West Germany (one of the most capitalist countries in the world) and East Germany.

      Note that communism promised continual increasing in living standards for workers–even more emphatically than any capitalist country did.

      • Leo Smith says:

        Yes. Its not about capitalism, as much as short ‘time span of discretion’-ism, as it were…

        When decision are made with no thought for the overall consequences and for short term motives with no real thought for the future, you have a sort of slash and burn exploitation that means you leave a trail of destruction in your wake: that is very much the ‘pioneering’ way and when it runs out of fresh forest to slash and burn, careful husbandry pays off better over a long term.

        Its my justification for an aristocracy, in fact, that when they have sat in the same plot of land for 500 years, its more a question of stewardship than ownership, and more about long term benefits than short term – after all, its not as though you could take up a new position in some upwardly mobile career path – you were at the top already, and keeping things sweet was the game.

        Its the argument for individual ownership and responsibility and away from the corporate managerial class – who only care for their careers, not for what they manage except as a source of income.

        It gets worse with communism – communism is corporatism with every element of individual responsibility and ownership removed.

        This kind of corporatism and short term thinking is excactly why we had a financial crash.

        In the case of the US it dies with the mom and pop stores. Its the elmination of the property owning middle and upper classes that is at the heart of both corporatism and socialism for the same reason – they threaten the domination of vast powerful institutions – in one case its the corporation – in the other it’s the state.

        The problem is, in an artisan and mercantile economy, they are also its life blood.

        • Don Millman says:

          IMO, the fundamental problem is the tragedy of the commons. See especially “Exploring New Ethics for Survival: The Voyage of the Spaceship Beagle” by Garrett Hardin, Pelican books 1973 and available very cheap used from

          In this book Hardin presents a unique solution to the tragedy of the commons: Mutual coercion, mutually agreed upon. For more, read the book.

          • Leo Smith says:

            The tragedy of the commons happens when no one cares about the commons: One MP here said thast he wqas xconsidering putting wind frams on his fram estate. Omn refelection he decided not to, because although profitable, he remained totally unconvinced that the ecological gains were worth the scocial and ecological damage. It weas his decsion NOT to pollute his local commons for his profit.

            OTOH a big corporation has a duty to do that just for its shareholders.
            Thats why we have to have environmental regulation.

  8. schoff says:

    A 100% increase by 2020 would translated into a $9-$11 per gallon price for gasoline, and fuel oil for heating in the northeastern US. Assuming the US middle class see no real household income decrease, this would lead me to believe that there would be both contraction in the most distant suburbs to be closer to job sites and services as well as further virtualization in retail, education, entertainment, etc. The private singular commute becomes more and more luxurious.

    • I think that there would be debt defaults, long before 2020. It is not clear how this would cycle through the system. Banks are already doing very poorly, financially. A lot of bankrupt banks would be a real problem.

      • schoff says:

        I agree with you, I was working with the IMF scenario, which appears optimistic. Even with that optimism, there is a huge restructuring for the US. The latest Spanish bank recap is only the beginning. While I focus on food, it is hard to not be concerned with logistics. The $60 terminal delivery of the car is only one issue, assembly the subsystems sourced throught the world is another, national policy can eventually interact there whether iir is India’s subsidy of fuels or Japan’s turning off all it’s nukes. Where did Japan get all the extra LNG? They competed with Pakistan and its unstable grids of power and heat, I’m sure that didn’t help it’s domestic situation of pak.

        Excellent review.

        • You are right. On all of these systems, there are world limits. If one country gets more, another gets less. And then there get to be follow-on effects, like political disruption, and countries possibly breaking up into smaller pieces. It is not just the $60 (or a multiple of this) that it takes to ship the car to its final destination.

  9. Don Stewart says:

    This relates to globalization and transportation costs. My sister worked for an automobile company. They moved assembled cars around the world on ships. I asked how much transportation cost was included in an automobile. This was a few years ago. I think it was something like 60 dollars–on a 15,000 dollar car. So…assume the 60 is now 120, and will increase to 240 dollars by 2020. Is that enough to reverse globalization? I doubt it. Companies will definitely do things which make sense to save transportation money and thus increase profits–but I doubt that walking away from globalization is among them.

    It seems more likely to me that the fracturing of the political landscape (as we see in Greece and Argentina) may lead to new insularity and thus threaten globalization.

    My point is that, as admirable as it may be to try to model everything based on historical relationships, those relationships rely on the assumption that irrational humans will somehow be able to act rationally. As we experience the increased pain of Peak Debt, then it is more likely that the debt will disrupt civil society than that transporation will become unaffordable. I do agree, however, that some sectors such as airlines are particularly vulnerable.

    In short, fasten your seat belts….Don Stewart

    • I agree with you about debt. I also wonder how international companies will oversee their far-flung operations, if passenger airlines are pretty much out of business. Executives would not be willing to take boat rides that lasted weeks or months.

      • Don Stewart says:

        One other possibility I will mention, while noting that you can’t fight a compound price increase of 7 percent per year for very long.

        The Engineers at the auto company were always grumbling that they could build good, cheap cars which were a lot more reliable and would last longer. But the Marketing types wanted Bells and Whistles. Bells and Whistles make everything, including supply chains more complicated and expensive and vulnerable to oil shocks.

        We could see a period of time when ‘back to basics becomes fashionable. Maybe the ghost of Henry Ford (they can have any color they want as long as they want black) will come back to help us.

        Don Stewart

        • schoff says:

          My Polaris ev is more powerful than his T, but doesn’t have the range. It has no amenities except a roof and windshield and a 12v plug. It is my Amish equivalent buggy. Even in the world of the T, but certainly before it, people didn’t expect to go everywhere iin any weather with the comfort of their homes. In PA, towns were 10 miles apart, this was roundtrip range of a horse in a day. Using the Polaris 365 drives footware, coat, and glove selections, just like my Amish neighbors, Can the US go back to the T? Assuming the middle class has the finances, maybe as a second car. You are right about sourcing through lack of complexity, though I haven’t looked at the chips, theolaris could be easily sourced out of north America, if not a couple of states.

        • Maybe we will see a period when back to basics becomes popular. It really depends on how well the “system” stays together.

          I think to some extent I have been influenced in my thinking by some of my elderly relatives, some of whom have passed on. My mother-in-law had certain basic colors (red, black, navy, white), and certain basic styles, that she preferred. As long I bought clothes in those colors, they mixed and matched pretty well.

          In terms of household decorating, I know I picked out a particular set of colors years ago, that sort of go together. If I add things, they are still in that basic color range.

          • Don Stewart says:

            I started to work for the old Bell System in 1960. The corporate culture was very much one of minimizing cost. All the phones were black. To add colors would require that bigger warehouses be built, that more sophisticated inventory control systems would have to be constructed, that you couldn’t just stick a couple of generic phones in the repairman’s truck. The switching systems tended to be almost identical with plug in parts to add capacity. The old Western Electric bought all the supplies and the retail operation got everything from Western Electric.

            The company library still had books about home landscaping which began with the advice to ‘secure a horse and a scoop’.

            It was another world. Maybe we will see some of that again…Don

      • tmsr says:

        Large global corporation maintain their own fleet of airplanes.

        • Leo Smith says:

          Not a deal of use without the Avjet though.

        • Maybe in a some cases, but not in others.

          Working in insurance consulting, we didn’t have fleets of airplanes. Our clients owned insurance companies headquartered in offshore tax havens (Bermuda, Cayman Islands, Barbados), so consultants had to fly to meetings there. The clients generally flew on “regular” planes as well.

          Maybe the president of a company has a jet, but a lot of others are “stuck” flying on commercial flights.

  10. Pingback: why is Greece in trouble? « power of language blog: partnering with reality by JR Fibonacci

  11. jayinhawaii says:

    As always, nice work Gail.

  12. DrSardonicus says:

    Gail.. I have viewed several graphs pertaining to “total liquids” of supply, but feel that these do not tell the whole story. In light of ever-decreasing EROEI, a more accurate appraisal could be to
    sum up the net BTU’s of the raw and refined product (by subtracting extraction/transport/processing losses). After all, those rigs do use a lot of diesel and double-counting ethanol (negative eroei) as “other liquids” is misleading. Ideally, the best litmus of activity would be to sum up net BTU’s per capita (by planet, country, or region).. Has this work been produced before? Cheers, Ron

    • The EIA puts out Btu equivalent data, for the US, and with a very long lag, for the world, but this does not reflect costs of extraction and shipping.

      Ethanol is separated out in EIA numbers. Ethanol is mostly a “natural gas to liquids” operation, in my view. It helps us use our natural gas more quickly.

      I am not aware of information for subtracting out the processing and shipping costs.

      What has happened in recent years is that coal use has skyrocketed, particularly in China and the rest of Asia, as we have outsourced more production there. This use of coal has helped offset the plateaued level of “liquids”.

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  14. La Curée says:

    Gail on trees.
    You are talking without sources about things not in your area of expertise, the Sweet Chestnut forest of Corsica planted by the Genoese centuries ago has an equivalent yield per acre as cereal crops grown without modern supplements.
    Much is no longer harvested to be made into a staple flour but it was and grows on land unsuitable for conventional agriculture.
    Now you are likely to meet huge pigs turned out to feast on the crop before becoming charcuterie.
    D- Gail! :¬)

    • La Curée says:

      Right about now

    • schoff says:

      Chestnuts of course to not grow here in the provinces (US), due to a virus. Though my barn is made out of ancient chestnut trees, well only 200 years old. We still run pigs through the oak forests here in pennsylvania for those who are crunchy hemp belt wearing people like moi. My wife and have on our punch list for this Fall to make flour from the acorns as (her) forefathers did, looks semi difficult (i’m an organic wheat farmer on the side), but there are some recipes we want to try. I’d really like to stay with the grain world of the past say 40,000 years, even with knowledge that Cicero was writing about the depletion of Italian soils only a couple of centuries ago. Lurking in the forests is oh so very declasse teutonic, my ancestors didn’t do too well in animal skins against the grain fed italians once upon a time. :-)

      • La Curée says:

        Yes, that fake down to earth virus is a schmer for a culture, in fact you are more segregated by class and ethnicity than us reprobates in the UK.
        Your continent is the weaker partner to Europe soft and vulnerable just like your wildlife.;¬)
        There are many other tree crops possible, what kills them is the slash and burn mentality of us idiot apes
        That forest in Corsica survived initially because the Genoese overlords protected it and lately due to depopulation.
        What we lack is a leadership with the vision to give the orders and protect a new forest

      • La Curée says:

        I read somwhere that washing the tannins out only works on ‘White Oaks’ one technique mentioned was but them in the toilet cistern for weeks, perhaps a weighted sack in a stream would do the same?
        I’m just a pleb with no land to my name so jealous and out to cause troble probably nothing compared to the what the Native Americans and Mexicans feel :¬)

        • schoff says:

          My readings point to more than white oaks, and i’ve read about the toilet cistern method but i think i’ll pass, i’ve been thinking about gravity and rain water since at the moment we get six inches a month. You can come and infest one of my acres with your British ways, we can brew some mint tea using twigs for fire and pour it into my Spode (an earlier life affectation for tea in good china which will last hundreds of years).

          • La Curée says:

            Thanks ‘schoff’ for the offer coincidentally I have had a similar offer on a grander scale that I am giving some thought.
            Income is the issue, whilst you landowners might enjoy having a well educated hermit on your property to chat with perhaps even gifting a few acres I am used to the pleasures and benefits of an indulgent society. :¬)
            Not to mention the NHS, healthy as a horse now, spend 10 years out of the country, returning home, in the developing political climate I could be asked to pay if free health care still exists of course.
            Then there is the ‘Fucko’ incident to consider should it topple over the UK would be about the best place in the N. Hemisphere to be.
            Not forgetting global warming the models show the UK suffers less than just about anywhere north of the Antarctic.

          • schoff says:

            Well if you got caught on this side of the pond when the balloon goes up, come on over. I rented a country home in the cotswolds once upon a time with a few hectares, some sheep and a hermit in a bit of a cottage at the edge of the property who was writing his 10th book. The area was so full of eccentrics that for the first time in my life I felt average and normal (this is without medication). I’m thinking that England can’t feed itself and hasn’t been able to since the 18th? century, so I’d be careful with that dieoff thing, that never looked good in the petri dishes i used to work with.

            • Leo Smith says:

              I believe the pre-industrial population of Britain was about 2-5 million at the time of the Black Death and never exceeded that figure again until the onset of industrialization in the 17th century.

              It is currently an estimated 70 million.

              Remember, it takes wood or coal to even smelt as simple a thing as a harvesting scythe.

              The prospects for a non technological resource stripped massively overpopulated island are bleak.

            • schoff says:

              I think we’re fairly well aware of those messy industrial age things; however, in a grand fall, i wouldn’t be smelting from ore. I’d be melting stop signs to make my scythe, or even maybe cutting them. The interesting aspect of all of this is we have concentrated materials in various places which one could mine, I’m hoping to get rights on the town dump.

            • Leo Smith says:

              Not exactly ‘sustainable’ though, is it?

            • What would it take to make a harvesting scythe out of recycled metal parts–parts of cars or buildings for example?

              It seems like it would still take wood or coal to heat the recycled metal to a point where it would have a sharp enough edge. Using whatever mixture was available would limit the quality of blades a lot, it would seem like.

            • Leo Smith says:

              general scrap iron and steel is not the same as a decent high carbon steel that takes an edge.
              Car leaf springs rubbed on a bit of concrete might make a decent machete. Scythes are rather different as you need a certain balance.. Not a huge amount of wood, but definitely several bags of charcoal to cast and forge. :-)

      • La Curée says:

        Organic is just a variety of business as usual so the cost of fuel will put an end to your little game by the end of the century.

        • schoff says:

          You think it will last that long? My scythe is 100 years old, passed down four generations, and i’m believing it is good for 200+, I tried to get a very good English company to make a duplicate of this provincial variant (it has a “basket”), but while he admired it, they needed 10′s of orders to proceed. I guess I will have to find some peacenik post-teutonic amishman with a straw hat to hand make me one. I’m sure this is an anglo-american oil company conspiracy…..

          • La Curée says:

            The Austrians make some excellent scythes according to my ex FB friend Sue Bullock.

            No doubt you could get one made in Sheffield a few people still have the required skills it would probably cost a weeks work though.
            I bought a carving knife from the one retail outlet in Sheffield for the artisan tool makers 12 years ago.
            Used everyday a steel blade with a wooden handle shows almost no age.
            I asked about sharpening tools and the bloke in the shop said it will be years before you need to sharpen it and it was 4 or 5 – a hand ground cutting edge.

        • The organic I have seen has an awfully lot of fossil fuel inputs. High cost could be a problem; so could interruption of supplies.

          • Leo Smith says:

            “The deserts of North Africa and Mesopotamia are the result of 10,000 years of organic farming” :-)
            The facts are that all modern farming is energy intensive: we trade energy input for better per acre yields and that’s a fact. Organic farming is somewhat better, but not by much.

            Last year organic farming killed more people than atomic power did. No one died from Fukushima fallout. 22 people died from eating beansprouts contaminated with a bacterium found normally in the gut and faces of animals, including humans,..


            I just love facts.

          • schoff says:

            Permaculture designs contain organic components obviously, while it is less clear to me from my readings that North Africa is a result of organic farming and not climate change as well, there is good evidence that Greece and other peoples had to move from grain to olives/wine due to soil destruction. My vineyard in virginia is operating on what was once great soil that Tobacco culture destroyed, and was only good for grazing of beef, until 11 years ago when it became perfect for merlot et al. Here in Pennsylvania (aside from the vineyard) the goal is in fact organic within realistic permaculture. I run a market garden of 2 acres with no well, no water except which i steal from my neighbors roofs, and increasingly reliance on hugelkultur for vegetables. If there is one strategic investment that I would make as an individual for food security, this is it.

            • I had to look up hugelkultur. It is permaculture using waste wood as for composting at bottoms of raised beds. The wood retains moisture during dry periods.

              The issue I see with this is limits on the amount of waste wood available. It is a technique that works for a modest number of people in areas with a lot of trees, but it won’t replace American agriculture. In parts of the world where people are gathering sticks for firewood, as they fall, to burn for cooking, I would expect that the amount of waste wood would be pretty low.

        • schoff says:

          Thanks for the reference. I do love good English tools, unfortunately the Amish walked away from that, though I understand there is someone in the community just taking it up.

  15. Don Stewart says:

    I think we make a mistake if we automatically assume that nothing can be done to improve agriculture–as opposed to going back to agronomy (managing field and forest so as to offer more benefit to humans) or to hunting and gathering (taking what Mother Nature offers with little management by humans). For example, examine this workshop which will happen shortly in Asheville, North Carolina:

    Living Web Farms presents
    a Hands on Workshop
    with Professor Emeritus Dr. Ron Morse of VA Tech
    along with Pat Battle & Jon Nilsson

    Maximizing Profitability with Minimum Till and Biological Synergy
    At Mills River Educational Farm Saturday May 19th, 2012 from 3:30 – 8 PM

    v High Residue Cover Crops – Legume/legume-grass cover crops are the major source of organic nitrogen for organic growers with manure and compost as secondary sources or inoculants.

    v Soil Health – Soil health can be equated with the level of active soil organic matter that can be enhanced–in both quantity (intensity) and quality (multi-functionality, including pest management)–by strip interseeding cover crops on permanent, controlled-traffic beds.

    v Synergistic Supplements – Compost tea and “primed biochar” are key examples of synergistic beneficial microbial supplements that can support or energize natural systems, enabling enhancement of nutrient and water availability and pest management.

    Professor Emeritus, Dr. Ron Morse is a world-recognized specialist in no-till, low-till and organic based fertility systems for vegetable growers. Ron’s specialty is maximizing farm profitability by optimizing the synergy of successional cover crops, specialized small farm equipment, biological inoculants and tillage systems. At times this has meant the Ron has had to invent his own unique equipment which he will demonstrate and show how it works to optimize soil health and yield. As you will see, this system is ideal for fall broccoli production.

    Ron will be joined by 25 year organic grower Pat Battle and Soil Scientist Jon Nilsson who have been working with Ron for years to integrate his vast experience with new biological extracts and substrates that provide long term homes for beneficial soil microorganisms.

    If you have followed some of my previous posts, you will see some familiar themes. For example, the need to keep the land covered rather than bare; the use of specific plant choices to enhance soil fertility; promoting microbial life; minimize tillage and seldom turn the soil over.

    Here is a link to a Rodale Institute article with a sidebar outlining the advantages and disadvantages, as seen from almost 10 years ago.

    My point is that it is always work to arrest the development of land at a point most favorable to humans. But clever people with good intentions can frequently manage to do so with reasonable expenditures of energy. One thinks of the Farmers of Forty Centuries, of Masonobu Fukuoka, the grass fed beef farm I described, and Ron Morse. In short, we need to get about the work rather than wallow in despair.

    Don Stewart

    • ThanKs! There are indeed things that can be done to move upon the chain. They may still require inputs or transportation that isn’t available for the long term, so the question of how long they will work needs to be examined carefully.

  16. Don Stewart says:

    Everyone concerned about food and energy scarcity and what can be done about it should read Albert Bates’ review of Peter Bane’s The Permaculture Handbook–Garden Farming For Town and Country.

    Unfortunately, the book won’t actually be available until mid-July, I understand.

    Don Stewart

  17. Don Stewart says:

    Here is another illustration of what is actually being done today in terms of changing to a more sustainable farming system. I have earlier emphasized that ‘services’ are not only provided by humans, but also by solar powered wild creatures. This workshop addresses that subject.

    Don Stewart

    Habitat Establishment for Multiple Ecological Services
    May 23, 2012
    Center for Environmental Farming Systems, Goldsboro, NC

    This workshop will provide an overview of ecosystem services and practices and programs designed to enhance them. Practices for the farm and home landscapes will be presented. Field demonstrations will focus on establishment and maintenance of habitats to provide life cycle needs of native plants, wildlife, predatory and parasitic insects, and pollinators.

  18. Robin Datta says:

    GDP (the secondary economy) is “produced” from the primary economy (the resource base) by skilfully directed energy streams. “Growth” in GDP is an acceleration in the rate of this production. The products includes the sources of energy, viz. fossil fuels &c. that power the process of production. With declining ERoEI, a larger portion of that power (and the required fossil fuels) will have to be devoted to securing more fossil fuels. Less will be available to “produce” other products. Progression along this trend with declining ERoEI will ultimately result in ALL the power derived from fossil fuels being devoted to the production of ever-diminishing quantities of fossil fuels, and nothing else.

    Before such a situation obtains, the “production” of other essential products with fossil fuel energy will force a progressive drawdown of fossil fuel production feeding back to a drawdown in the “production” of the essential products. Efforts to maintain the production of essential products will leave even less fossil fuels available to produce more fossil fuels. Declining ERoEI will thus force a downward spiral. 

    The “price” of fossil fuels reflects the proportion of production that is devoted to the production of fossil fuels. Since it would make no sense to devote all of the energy obtained from fossil fuels to produce more fossil fuels, that will act as a constraint on fossil fuel prices. 

    The only way out of the dilemma is to find energy sources with constant or growing ERoEIs – as figured from scratch, including all fossil fuel inputs.

    • Leo Smith says:

      “The only way out of the dilemma is to find energy sources with constant or growing ERoEIs – as figured from scratch, including all fossil fuel inputs.”

      I only know of one such. Nuclear energy. The fuel is a very small fraction of the costs – its all in O & M and Capex.

      ERoEI is massive.

      • Robin Datta says:
        LFTRs not included in above.

        • Leo Smith says:

          Rather a poor article really. I haven’t time to dissect it in detail, but it looks like ‘an oil mans cursory glance at nuclear power, after having read up the anti nuclear mythology.’

          But three power stations to refine fuel? I don’t thinks so. Its largely a mechanical and chemical process – not like smelting iron, aluminum or lead. Or indeed making cement.
          Reactor fuel in the UK is around 0.1p – 1p contribution to a unit of electricity which is worth in raw oil terms about 5p. So its at LEAST 5:1 and probably better than 50:1 energy to mine/refine

          • The problem is not the amount of uranium used to create a unit of electricity; it is the huge amount of costs/energy that goes into the nuclear power plant to begin with, plus the costs of taking care of spent fuel properly, plus the costs of decommissioning. The costs of building nuclear power plants have escalated so much that I wonder whether early EROEI studies really considered current cost levels. Also, EROEI calculations leave out a lot of things. The cost of capital is one of these things. It makes a big difference if funding must be done on the front end for a very long operation and decommissioning period. If fossil fuels will be needed for decommissioning, and these are not likely to be available, this is a huge problem as well.

            • Leo Smith says:

              well it costs the same to build a 60 year lifetime 85% plus capacity nuclear reactor and decommission it as it does to build a 15 year offshore wind farm , of 30% capacity factor plus its attendant co-operating gas turbines, and leave it rusting in the sea when its no longer profitable.

              There are no easy answers.

              Chernobyl is just being wrapped in concrete. Most of thee adjoining towns are inhabitable now.
              It could be buried if people regarded that as a sane long term solution. (I do)

              But I suggest that you research the numbers yourself. Don’t take my word for it, or listen to the anti-nuclear lobby.

              I will say that after about three years doing that, I came to the conclusion that we don’t have any options BUT nuclear if we want to reduce fossil fuel consumption, or fossil runs out, and even that involves massive and radical changes in the way society works.

              In short: nuclear is not AN option, its the ONLY option left, post fossil.

              That doesn’t make me especially happy. And there are many issues that need to be resolved, but at least they CAN be resolved. The issues with ‘alternative’ energy are intrinsic to the energy source* and can’t be resolved with ‘better technology’ – that was my ultimate conclusion.

              Of all the materials and energies that we have access to, the one that is portable, safe to stockpile in huge quantities and is enough to run most of the civilized world is nuclear energy of one sort or another.

              I would say we have a choice: abandon nuclear and see a new dark age and a reversion to about 10% of current populations or less**, and sink back into barbarism, or rise to the nuclear challenge and move on with post industrial technological society.

              Opinions may differ, but let them be opinions based on understanding the nature of energy and technology and its absolute essentiality in our current society.

              In the UK the total power consumption to keep society alive is around 5kW (125kwh/day) per head total. I believe in the USA it’s around 10kW per head.


              That’s the place to start calculating how many wind driven prayer wheels, or vastly expensive solar panels, and lead acid batteries you need to supply a nation reliably. And the cost and the adverse environmental impact.

              There is no good solution. Nuclear is simply the least worst.

              *essentially low power density, meaning very large structures, and intermittency, meaning even bigger structures which are largely wasted, and the the need to create storage (which no technology exists, even in theory, for, at suitable scales and costs) or use inefficient co-operation with – you guessed it fossil fuel plant! ( Its totally pointless to co-operate intermittent renewables with nuclear. The nuclear is already paid for one assumes, and generates no more carbon no matter how hard its run, so adding renewables to it is pointless. All cost and no benefit.

              ** which is definitely ONE way of ‘reducing carbon emissions’ :-)

            • I agree with you that the numbers for wind and solar don’t work. Too low capacity factors and life expectancies, too much intermittency.

              I am not sure nuclear is a real option either, given our ability to deal with tough situations and the downhill road the world will be on without fossil fuels. I am afraid that even if proper storage is theoretically possible, and proper safety measures theoretically are possible, and proper decommissioning is planned, those things won’t really happen in practice. There is also the issue of the unforeseeable. I know that there has been quite a bit of talk about the possibility of another earthquake causing further damage at Fukushima, including a great deal of radiation leakage. There is also discussion about radiation levels in Japan being much higher than admitted.

              See for example this report, or Arnie Gunderson’s Fukushima videos.

      • With nuclear energy, there needs to be some way of handling spent fuel, and the buildings need to be decommissioned, even without fossil fuel. These things seem to be major impediments to expanding nuclear. If thorium could be made to work, with little waste, it might be a partial solution. (Of course, our society is not all electric either, so it still would be only a partial solution.)

        • Leo Smith says:

          these are perception problems only – spent fuel is either stable and therefirre realtivelo lwo radioactyivity with lomg hald lives in which case it can be reprocessed into new fuel, or its short lived high radioactivity – which merely needs safe storage for a few tens of years.

          Governemnts dont want to face up to these challenges, and that means a myth that ‘there is no solution’ has arisen and been siezed on.

          Decommissionong is really a matter of making sure no one goes near a given place for a long enough time: burying the dismpantled (or otherwise) reactors under soil stops nearly all the emissions that could conceivably be called dangerous.

          We regularly deal with far more deadly wastes far more casually.

          • We are nowhere near balancing the US budget now. Trying to scrape together enough funds for simple things is not easy to do. Just because something can be done, doesn’t mean it will be done.

    • I pretty much agree with you.

      What we really built the United States on was very high EROEI oil, natural gas, and coal. Part of our problems today are related to declining EROEI of those products. What we really need to somehow come up with now (if we plan to maintain our lifestyle–a big if) is new very high EROEI products–but these don’t seem to be available.

  19. Jacob Zunot says:

    From an analytical point of view it is very interesting post. I have read many articles about peak oil, but recently I have found an article Which Resource Will Run Out First?, which argues that we should be more concerned about lack of other materials (as for example rhenium) than about peak oil. Do any of you know any interesting research paper that analyzes the situation around metals used in hi-tech industry?

    • I am afraid I don’t.

      Resource extraction usually uses oil products for earth moving and for transporting of ores, so a shortage of oil could make extraction of many ores more difficult. Some type of fossil fuel is often used in refining as well.

  20. Leo Smith says:

    Now there was one somewhere..that I came across in the Financial Times on rare earth’s at least.

    I am fairly sanguine about metals – Copper can be replaced with aluminum, and we don’t need that many specialized steels or indeed any blasted I phones at all…neodymium can be replaced with Cobalt, …the total market for rare earths is not huge, and as prices rise the mines that were not competitive will restart – I believe one is being pumped out in California, and there is another one in Colorado..

    plus an interesting deposit of rare earths and uranium in Greenland that was mentioned somewhere.

    Its like oil: if the price is right there is a load more of it there if you want it.

    What concerns me more is energy. Because of the ERoEI. That sets the limit not on what’s there, but what can be extracted with a positive energy return. Materials can be recycled..they are not necessarily consumed – and even oil can be synthesized if you need that sort of fuel and only that sort of fuel and are prepared to pay the price in another (and where aircraft are concerned, there seems little realistic alternative to some form of kerosene).

    Without a lot of primary energy the world as we know it comes to a halt: with energy, it may have to radically transform itself, but it survives as a technological society with a medium to high population density.

    The sad fact is that people seem to think that alternative energy sources will be there because they desire them to be: the actual fact is that we don’t have any that are effective and/ or acceptable right now.

    We have maybe 30-50 years of fossil left at spiralling prices: after that there really is only one more to go – nuclear. Andf that is maybe only 1-200 years of fissile material before we have to crack fusion, and buy ourselves a millenium.

    • La Curée says:

      One specific example, but a scan reveals it to be all idiot ape copy and paste fare.
      ‘However, aluminum metal also has its disadvantages such as it generates more heat compared to copper wire because of its high resistivity.’

      • schoff says:

        It is also difficult to make distilled spirits without copper. For small engines like my chain saw and later as a libation to ease the aches of my 50 something body doing firewood.

      • Leo Smith says:

        I am a qualified electrical engineer.
        Amongst other things, and I do not like your tone

        You will find, oddly enough that all grid cables are made of aluminum wound over a steel load bearing cable.

        This is because aluminum is the second best conductor to copper that is cheap enough to be used, and weight for weight, its actually better.

        Copper is the choice for many reasons, but its not mandatory to use it. Aluminum is used in some telephone cabling, nearly all high voltage catenaries, and occasionally for electrical work where weight is important, and the disdvantages of using it can be negated.

        Likewise cobalt (AlNiCo) magnets are not as high flux density as neodymium,. but are cheaper and can take more heat: often a better tradeoff in permanent magnet motors, for example.

        Now that not to say that some rare earths and other elements aren’t irreplaceable.. semiconductor dopants are chosen because they have precisely the correct properties and nothing else will do – but do we need so MANY semiconductors? No. we use them profligately because they ARE cheap.

        So transitioning away from increasingly scarce minerals won’t be simple, but it is at least possible.

  21. Pingback: New IMF Working Paper Models Impact of Oil Limits on the Economy »

  22. Pingback: IMF Working Paper predicts doubling of oil prices in coming decade « 3E Intelligence

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  24. Pingback: IMF zoekt naar olie in een kristallen bol | Sargasso

  25. Steven Kopits says:

    I have run my own set of numbers, and they’re actually not that different than those of the IMF. But a 7% annual increase in price isn’t that much. Remember, from 2003-2008, the oil price was increasing at 25% per year. The IMF’s analysis suggests the oil party is largely over, believe it or not.

    Now, that’s not the interesting part. The interesting part is that the oil project approval threshold price has been rising at 18% per annum for the last several years. My analysis (consistent with the IMF) suggests that the approval threshold in the future will be unable to rise faster than the oil price, that is, 7%.

    What are the implications for oil production? Well, it’s possible that current approval thresholds–$98 Brent for 2012 according to the Barclays Dec. E&P Survey–is high enough for many projects well into the future. This would be the Tierney perspective: There is a much larger resource just beyond the current price level. In this case, a slower growing oil price is no obstacle to increased oil production. What evidence do we have of this assertion? Crude oil production really hasn’t picked up much, so higher oil prices to date have not coincided with higher oil production. The exception is, of course, shale/tight oil production, some of which is quite economical at, say, $80. So the “bigger resource” thesis could be true, if we allow for time lags to bring projects to market, but it doesn’t exactly hit one over the head by contrast with, for example, various types of natural gas opportunities.

    Alternatively, the slower growing oil price could cap oil E&P opportunities, ie, without a rapidly increasing oil price, the oil companies find fewer and fewer projects which meet economic criteria. In this case, we might expect depletion to overtake incremental production–and this in turn would lead to peak oil–a Chris Skrebowski economic peak oil, not a Hubbert geological peak oil. What evidence do we have of this? Well, the crude oil supply stalled out in 2005, and 2011 crude production was only 300 kbpd higher. So price signals seemed largely ineffective during this period. Secondly, we just don’t have a huge backlog of big oil projects rushing to market. It’s not apparent that oil prices will lead to massive increases in oil production based on visible projects. Also, we have a big production miss by Exxon in Q1. In any event, depletion and incremental production seem pretty finely balanced as it is. If future price increases will be less, then there’s a pretty good chance the number of qualifying projects for the oil companies will begin to taper off. This seems the more likely outcome to me, allowing that both above-ground considerations and technology could influence this outcome.

    If so, when does this occur? The current Brent price is $112, the threshold price, $98. In this environment, how much do we think the oil companies will increase their threshold price this year? Unless oil prices recover strongly in H2 (and I don’t think they will), then the threshold might rise to say, $105-107, which is 7-9% higher than last year. Thus, there is a good chance we are on the 7% threshold already. If that’s so, and oil E&P costs continue to rise, then the oil companies will face diminishing opportunities already in 2013. Put another way, we could see economic peak oil as soon as next year.

    • Steve,

      Those are interesting insights. Thanks for sharing them. There are certainly quite a few different ways we could get to a downturn in production. I would agree with you with respect to the oil price for 2012 likely not averaging very high, with all of the financial problems right now. At some point, the lack of rise in oil prices (or perhaps an absolute decrease in prices, due to worldwide recession), seems likely to stifle world oil production.

      • Don Millman says:

        As usual, your economic and financial analysis is 100% correct, and I agree with all your economic and financial prognostications. Perhaps we differ in one part of our view of the financial future over the next five or ten or twenty years. IMHO, when the strain of debt becomes intolerable all the central banks all over the world will greatly and quickly expand the M2 money supply. I expect inflation rates of at least 10% per year, and perhaps higher rates. Note that at a compound rate of growth an inflation rate of 10%/year, the value of the dollar would be cut in half in 7.2 years. Thus the burden of mortage debt, national debt, and student debt could be cut in half in just 7.2 years. We might get hyperinflation, but I think double digit inflation is much more likely in the U.S. over the next twenty years.

        Why will we be unlikely to have hyperinflation in the U.S. over the next ten to twenty years? For one and only one reason: Every single one of the governors of the U.S. Federal Reserve system knows all about hyperinflation–its causes and cures. To a large extent, the Fed has the power not to be pressured by Congress or the President. The Fed does its best to use monetary policy to stabilize the economy. However, the late great economist, Milton Friedman, made a very strong case that by using its own discretion rather than strict rules the Fed has actually had a strongly destabilized the U.S. economy, going back at least to the 1920. Indeed, Friedman wanted to abolish the Fed and in its place do monetary policy strictly according to rules that would tend to
        1. get inflation rates down to about 0% over the years,
        2. prevent inflationary bubbles and subsequent crashes like we have recently seen in real estate.

        I agree with Friedman on this point.

  26. Mark Collet says:

    How the philosopher’s stone transmutes models into unconventional oil:
    Campbell Balance
    Gba Total Conventional Unconventional
    IMF Actual 2010 31 23 9
    IMF Min 2021 31 19 12
    IMF Max 2021 37 19 18

  27. Mark Collet says:

    I’ll try again.
    How the philosopher’s stone transmutes Campbell Fig.3 and IMF model Fig.10 into unconventional oil:
    Gba.(Mbd x 365)…Total…..Conventional……Unconventional
    IMF 2010 Actual…….31……………….23……………………..9
    IMF 2021 Minimum…31……………….19……………………12
    IMF 2021 Maximum..37………………..19……………………18

  28. las artes says:

    To gauge the impact of the recent rise in oil prices, I used a dynamic macroeconomic model of the U.S. economy. By raising oil prices from $95 to $105 in the simulation, we gain an estimate of the broader impacts on the U.S. economy. The results show a relatively small impact. A $10 oil price increase, sustained over four quarters, decreases real GDP growth by 0.2 percentage point. The impact on consumption spending is twice as large: 0.4 percent. Investment growth falls by just 0.2 percent as IT equipment and software aren’t as sensitive to rising oil prices. Higher oil prices would reduce growth in non-oil-producing developing countries such as China and India, cutting U.S. export growth by 0.3 percent. The impact on exports isn’t as large as you might anticipate, since large oil-producing countries (especially Canada and Mexico) eventually import more from the U.S. These impacts are shown in the table below.

  29. Pingback: IMF team warns of global economy entering uncharted territory with US$ 180 a barrel in 2021

  30. donsailorman says:

    I do not know how “donsailorman” came to this website. I use “donsailorman” on, but on I use my genuine name, Don Millman.

    • David Harney says:

      Hi Don,

      Welcome to the mysteries and foibles of WordPress! Whether I’m Bicycle Dave or David Harney seems to depend on the phases of the moon – otherwise I can’t find a correlation.

      I’ve tried to email WordPress about this issue but they have never replied.

      • donsailorman says:

        I tried to make a reply to you here, but some glitch put the comment way upthread after one of your other comments. Perhaps it is a glitch related using my “Don Sailorman” TOD name instead of my genuine one. As long as we have had computers we have had glitches. Probably this statement will be true indefintely into future–as long as we have computers.

        • David Harney says:

          Hi Don,

          Caught the message above – you certainly have a good memory! I was just up in the attic the other day and recalled our conversation about the Raleigh.

          My advice is to switch to a recumbent bike sooner than later. I waited until I was 65; however, by then I had developed some pretty nasty neck issues from too many years on the drop handle bars. My single recumbent is a Volae ( I’ve been riding the Volae for 8 years now and still love the bike. I’ve taken it to Ireland several times and ridden the MS 150 here in Wisconsin every year since I got it. And, this after I was about to give up cycling due to all my aches and pains on a diamond frame bike!

          As you can see from my “Gravatar” thing, my wife and I ride a recumbent trike. Trikes are great and that will be my next step for a single bike if I can no longer manage the Volae. Good to see you younger fellows are still riding your bike :-)

          • donsailorman says:

            Thank you for the link. However, I think I will keep my folding Brompton for now. Why? Because it folds up into a suitcase and you just pay regular luggage rates to take it along on an airplane ticket. Also, it is only eleven years old and has only about 15,000 miles on it. Generally I aim for 25,000 miles on a bike before I replace it with a newer one. My 1985 Schwinn 5 speed heavy Cruiser Bike–the most comfortable bike I have ever owned–had one rebuild around 25,000 miles, and then I kept riding it until roughly 40,000 miles.
            Also I keep my cars going a long time ago. Currently my 1993 Audi station wagon has 244,000 miles on it, and it is in excellent shape. My Audi mechanic (from whom I bought the car back in 2,001) thinks it will very likely go to 350,000 miles with repair bills averaging about $500 per year.

            I get emotionally attached to my favorite bikes and cars and hate to give them up.

            From both good genes and steady leg exercise on bike or on foot I am blessed with unusually strong legs, and I’ve never had any back problems. I can still easily ride for two hours without stopping at my steady 12 m.p.h. pace, then take a break of half an our to an hour and ride back the 24 miles to get home. Much of my stamina comes from still playing singles men’s tennis with players who are much younger than I am.

            I’ll bet this reply comes up under “Don Sailorman.”

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