High Oil Prices are Starting to Affect China and India

Update: Not long after I wrote this post, the EIA revised the oil consumption amounts by country that they had published a few days earlier. The numbers changed substantially for quite a few of the countries outside the US and Europe. While the trend is still to lower growth in oil usage in 2011 and 2012 in China and India than in 2010, the trend is less pronounced.

Furthermore, we now have another set of numbers to check against EIA’s oil consumption amounts. BP released Statistical Review of World Energy 2013 yesterday, June 12. A comparison of annual increases in oil consumption (on a barrels of oil per day basis, not adjusted for population growth) from the three sources is as follows:

Comparison of growth in oil consumption, based on EIA original 2012 numbers, EIA revised 2012 numbers, and BP new Statistical Review of World Energy data. (All amounts based on "barrels per day" consumption.)

Comparison of growth in oil consumption, based on EIA original 2012 numbers, EIA revised 2012 numbers, and BP new Statistical Review of World Energy data. (All amounts based on “barrels per day” consumption.)

There seems to be fairly consistent reporting of oil consumption for major OECD countries, but this is  less the case for non-OECD countries. The lack of stability in reported oil consumption, both between reporting organizations and between reports, suggests that oil consumption numbers have “large error bands” around them. Below is a revised version of my original post.

Revised post. Based on revised EIA data, it appears that at current high oil prices, oil  demand the United States and Europe is being reduced. There are some indications that oil demand in China and India are flattening, but these are preliminary. For those who are wondering how high oil prices need to be, to be “too high,” the answer is, “We are already there, for the United States and Europe. We are getting there for China and India. In fact, continued high oil prices are a big reason behind the recessionary forces we are now seeing around the world.”

China and India, like the United States and most of Europe, are oil importers. Over time, we should expect high oil prices to have an impact on all importers. While the original EIA data suggested that China and India were affected in  2011 and 2012, the impact is much more muted using revised data.

In this post, I also explain why a person might expect a difference in the impact of high oil prices on oil importing countries compared to oil exporting countries.

Figure 1 Rev.. Liquids (including biofuel, etc) consumption for China, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

(Figure 1 Revised). Liquids (including biofuel, etc) consumption for China, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

Figure 2 (Revised). Liquids (including biofuel, etc) consumption for India, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

Figure 2 (Revised). Liquids (including biofuel, etc) consumption for India, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

We can see from Figures 1 and 2 that at $100 per barrel prices, there is a flattening in per capita consumption, particularly for India. Per capita consumption is used in this analysis, because if total oil consumption is rising, but by less than population is increasing, consumption on average is falling.

Some Other Countries with Declining Consumption

There are many other importing countries with sharper drops in consumption than China and India. These declines started in the 2005 to 2007 period, as oil prices rose, and continued as oil prices have remained high. One example is Greece. [Note-European amounts did not change with the revision in EIA oil consumption amounts.]

Figure 3. Liquids (including biofuel, etc) consumption of Greece, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

Figure 3. Liquids (including biofuel, etc) consumption of Greece, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

In fact, all of the PIIGS (Portugal, Ireland, Italy, Greece, and Spain, known for their problems with recession) have shown steep drops in oil consumption:

Figure 4. Per capita oil ("liquids") consumption for countries known as PIIGS, based on EIA data.

Figure 4. Per capita oil (“liquids”) consumption for countries known as PIIGS, based on EIA data.

Europe in total shows a somewhat less steep drop in oil consumption than the PIIGS:

Figure 5. Liquids (oil including biofuel, etc) consumption for Europe, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

Figure 5. Liquids (oil including biofuel, etc) consumption for Europe, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

The US shows a similar drop in consumption to Europe:

Figure 6 Liquids (oil including biofuel, etc) consumption for United States, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

Figure 6. Liquids (oil including biofuel, etc) consumption for United States, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

Where is per capita oil consumption rising?

Oil consumption is rising faster than population in quite a few oil exporting countries. If we look at OPEC in total, we see an increase in per capita oil consumption particularly in 2008 and 2012.

 Figure 7 (Revised). Liquids (oil including biofuel, etc) consumption for OPEC, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

Figure 7 (Revised). Liquids (oil including biofuel, etc) consumption for OPEC, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

According to revised EIA data, the increase in consumption is solely from Saudi Arabia.

Figure 8 (Revised). Liquids (oil including biofuel, etc) consumption for Saudi Arabia, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

Figure 8 (Revised). Liquids (oil including biofuel, etc) consumption for Saudi Arabia, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

For Saudi Arabia, 2012 oil consumption per capita is nearly five times as much as that of Europe. Outside Saudi Arabia, the original EIA data showed a definite upward bump in consumption, both during the 2008 price run-up and corresponding to the higher price in 2011 and 2012. With the revised EIA data, per capita consumption is still shows an upward bump in 2008, but is down in 2011 and 2012. Unfortunately, BP does not put together data in the detail necessary to monitor OPEC oil consumption in total.

Figure 9 (Revised). Liquids (oil including biofuel, etc) consumption for OPEC ex Saudi Arabia, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

Figure 9 (Revised). Liquids (oil including biofuel, etc) consumption for OPEC ex Saudi Arabia, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

One reason why oil exporters might be expected to show higher growth in oil consumption than other countries is because oil is becoming more difficult to extract, and because the easiest to extract oil was extracted first. There are often indirect needs for oil as well, such as desalinization to have sufficient water for a growing population, or a new refinery for difficult-to-refine oil. I talk about these issues in my post, Our Investment Sinkhole Problem.

A second reason why oil exporters often show higher growth in oil consumption is because exporters often provide subsidized prices on oil products, so their citizens do not have to pay the full cost of the product. Thus, their citizens do not really experience the high oil prices that most importers do.

A third reason why oil exporters show higher growth when oil high prices are high has to do with all of the money these exporters receive when they sell high-priced oil. The Economist recently had an article “Saudi Arabia risk: Alert – The next property bubble?” It talks about the huge number of office buildings, schools, low-priced homes, and other building projects underway, thanks to a combination of easy credit availability and lots of oil money. The article indicates that citizens rarely put their new-found wealth into paper investments. Instead, a significant part of their wealth ends up in building projects that require oil use.

Norway is an exporter that does not subsidize oil prices (in fact, it has quite a high tax on oil use in private vehicles). It shows higher per capita oil consumption in the past two years, despite higher world oil prices.

Figure 10. Liquids (oil including biofuel, etc) consumption for Norway, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

Figure 10. Liquids (oil including biofuel, etc) consumption for Norway, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

Brazil is not an oil exporter, but it has been trying to ramp up its production. Its per capita consumption has been slightly rising recently. Earlier EIA data showed more of a rise in Brazil’s consumption.

Figure 11 (Revised). Liquids (oil including biofuel, etc) consumption for Brazil, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

Figure 11 (Revised). Liquids (oil including biofuel, etc) consumption for Brazil, based on data of US EIA, together with Brent oil price in 2012 dollars, based on BP Statistical Review of World Energy updated with EIA data.

In fact, Central and South America in total and the Middle East in total show oil consumption rising faster than population, in 2011 and 2012. These are areas that, in total, are oil exporters.

Some very low oil-use countries, such as Bangladesh, are showing rising per capita oil consumption in 2011 and 2012, even with higher oil prices. This could indicate that some  manufacturing is shifting to even lower cost areas than China and India.

Australia is showing growing per capita oil consumption, perhaps because of oil’s use in resource extraction and transport.

Why would a drop in per capita oil consumption for oil importers matter?

A drop in per capita oil consumption is a likely sign that oil is becoming increasingly unaffordable. We know that oil is used to make and transport goods. If less oil is used, or if oil use is growing less rapidly than in the past, there is a real chance that an economy is slowing.

Figure 12. World growth in energy use, oil use, and GDP (three year averages). Oil and energy use based on BP's 2012 Statistical Review of World Energy. GDP growth based on USDA Economic Research data.

Figure 12. World growth in energy use, oil use, and GDP (three-year averages). Oil and energy use based on BP’s 2012 Statistical Review of World Energy. GDP growth based on USDA Economic Research data.

There are a number of reasons why oil consumption may be down. Fewer goods for sale may be being transported, perhaps because European demand is down. Citizens may be driving less in their free time. Or many young people may be unemployed, and be unable to afford to buy a car or motor scooter. Any of these changes could mean a slowing economy.

Obviously, there are situations in which reduced oil consumption doesn’t mean a slowing economy. A shift from manufacturing to a service economy could lead to lower oil consumption; a shift toward more fuel-efficient cars and trucks could lead to lower oil consumption. But these changes tend to take place slowly over time, not all at once, when oil prices rise.

Another way oil consumption can be reduced is if a country has in the past generated electricity using oil,  and such generation is shifted to another fuel, such as natural gas. This type of change is being made in Greece, but seems unlikely in China and India. Similarly, if homes are heated with oil, sometimes an alternate fuel can be used, reducing oil consumption. China and India aren’t areas where oil has traditionally been used to heat homes, though.

In general, though, sharp reductions in oil consumption in a growing economies, such as China and India, are cause for concern, if one was expecting growth. Are high oil prices stressing the economy?

United States  and European Oil Imports

The US oil consumption pattern looks very much like that of an oil importing nation, under stress from high oil prices. Recently, there has been a lot of publicity about higher US oil production, but this does not really change the situation. If we look at US oil consumption and production (actually “liquids” production and consumption since all kinds of stuff including biofuels are included), we see that the US remains an oil importer. In fact, it is still a long way from becoming an oil exporter. (And, importantly, oil prices aren’t down by much, and high oil prices are our real problem.)

Figure 13: US Liquids (oil including natural gas liquids, “refinery expansion” and biofuels) production and consumption, based on data of the EIA.

The European oil import situation is worse than the United States liquids situation, and no doubt contributes to its current economic problems. A graph of its recent production and consumption is as follows:

Figure 14: European Liquids (oil including natural gas liquids, "refinery expansion" and biofuels) production and consumption, based on data of the EIA.

Figure 14: European Liquids (oil including natural gas liquids, “refinery expansion” and biofuels) production and consumption, based on data of the EIA.

Difference Between Oil Importers and Exporters – Additional thoughts

The cost of extraction varies widely by country and by field within country. In order to provide a large enough quantity of oil in total, the world price of oil has to be high enough to provide an adequate profit for the highest cost producer. Clearly, if every oil company charged the price needed for the highest cost producer, many would be collecting far more than they need for future oil extraction and payment of dividends. Where does all of this extra money go?

To a significant extent, this money is “latched onto” by governments. In the case of oil exporting countries, governments often own oil companies directly. But even if they don’t, governments tax oil extraction at very high rates, to make certain that the government gets the benefit of any extra revenue available. Sometimes Production Sharing Agreements are used. A chart by Barry Rodgers Oil and Gas consulting (Figure 15 below) shows that for many oil exporting countries, the government “take” is 70% to 90% of operating income (that is, net of direct expenses of extraction).

Figure 15. Chart showing "government take" as a percentage of operating income by Barry Rodgers Oil and Gas Consulting.

Figure 15. Chart showing “government take” as a percentage of operating income by Barry Rodgers Oil and Gas Consulting.

Even in the case of the United States, the government take is significant. Barry Rodgers, in an article in the May issue of Oil & Gas Journal, calculates that for tight oil (such as oil from the Bakken), the average government take is $33.29 per barrel. This compares to $19.50 per barrel, for tight oil extracted in Canada. These amounts include payments to state governments as well as the federal government. If extraction costs are low, as in the case of Alaska, the state adjusts its tax accordingly.

Oil importing countries would like the world to have a level playing field with respect to the price of oil. In the real world, this doesn’t happen. Oil exporting countries get huge benefits in the form of the tax they collect from the oil they sell abroad. Often, this tax revenue amounts to 70% or more of a country’s tax budget from all sources. If oil exporters have small populations, they can afford to offer oil at subsidized rates to their own populations. (If they have large populations relative to exports, offering a subsidized price would soon eliminate all exports!)

Economists would like us to believe that many of the differences between oil exporters and oil importers will even out because money spent by oil exporters to purchase goods and services together with purchases of government bonds from oil importers should mostly make their way back to oil importing countries. There are several differences though:

(a) Oil exporting countries can choose to charge their citizens a lower price oil, thus insulating them from the high world oil price, and raising their demand for oil (that is, the amount of oil they can afford). This higher demand allows these countries to increase their oil consumption, even as other countries, subject to higher prices, reduce theirs. Evidence presented in this article suggests that this, in fact, is happening at high prices.

(b) Oil exporting countries need not tax the income of individuals and businesses, or institute value added taxes, because their tax needs are mostly met by the taxes they collect on oil that is exported. This gives them a competitive advantage in making goods from oil or natural gas for international trade.

(c) Since world oil supply is limited, the oil that the oil exporting countries are able to purchase at subsidized prices (even if to build unneeded office buildings in Saudi Arabia) is removed from the world market, further driving up oil prices, and leaving less for other countries to consume.

(d) The money that is spent by oil exporters rarely makes it back to the salaries of individuals in oil importing nations who are faced with buying high-priced oil products. In fact, I have shown that in times of oil prices, Unites States salaries tend to stagnate:

Figure 16. High oil prices are associated with depressed wages. Oil price through 2011 from BP’s 2012 Statistical Review of World Energy, updated to 2012 using EIA data and CPI-Urban from BLS. Average wages calculated by dividing Private Industry wages from US BEA Table 2.1 by US population, and bringing to 2012 cost level using CPI-Urban.

Figure 16. High oil prices are associated with depressed wages. Oil price through 2011 from BP’s 2012 Statistical Review of World Energy, updated to 2012 using EIA data and CPI-Urban from BLS. Average wages calculated by dividing Private Industry wages from US BEA Table 2.1 by US population, and bringing to 2012 cost level using CPI-Urban.

At best, the money makes it back to financial institutions and corporations selling products such as exported grain. The higher demand for grain tends to raise food prices, putting another stress on the economy.

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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259 Responses to High Oil Prices are Starting to Affect China and India

  1. donsailorman says:

    Gail,
    Recently I read from a usually reliable source that global oil consumption per capita peaked in 1979 and has been going down ever since then. Do you know whether or not that statistic is correct? If it is, that number would go a long way toward explaining why median household real disposable income in the U.S. also peaked at about that time.

    • That is right, if you use BP’s oil production numbers and Angus Maddison’s world population figures. Per capita oil production in 2011 is about 78% of the 1979 amount. BP’s oil “consumption” numbers are slightly different, and put 1978 a tiny amount above 1979.

  2. Scott says:

    Thanks Gail, Another educational article and great charts in this one! They tell it all. Looks like oil producing countries like Saudi are really building up fast and clearly using more of their own oil and selling less which continue to drive prices higher. It looks like they are living pretty high on the hog too! I was looking at some pictures on Google Earth looking around Saudi and there sure are some modern shinny cities there much like Dubai.

    In Europe it appears to be the opposite, with their production in decline in their North Sea projects and elsewhere, so goes their economy down along with the production rates.

  3. When the price of a commodity is set where the demand curve crosses the supply curve. Only the losers who can’t afford the commodity say the price is to “high”. The rest of us who purchase the commodity didn’t think the price was to “high”. Otherwise we would not have purchased the commodity in the first place. Say hello to the free market folks. Where we scratch each others eyes out for our own well being.

    Or we could learn how to live together and change the demand curve by regulations which starts by requiring driving 55. Think about it the next time you say the price of oil is to “high”.

    • Unfortunately, driving 55 isn’t enough to fix our problem. Rapidly rising population is part of our problem, as well as a large part of the world that would like to have oil, but don’t.

      • Why do you focus on one part of my comment and than dismiss the complete idea. 55 is the gateway to conservation. If you don’t take the first step you can’t get up the staircase. As I have said before in the past. Gail, you seem to dismiss each small step to fix the problem because in it’s self it’s not he solution. It’s also time to regulate the population.

        Start today with 55 and one child, of course if you talked about real solutions that would upset your theory of collapse.

        If you fail to plan, you plan to fail

        • Dan Hood says:

          Why are you getting upset? Sounds like your’re an individual in denial. Small steps will not “solve” the problem. We’ve already overshot capacity and I agree with Gail, unless you find an alternative to cheap oil, our species will decline over the next 100 years. Gail’s “theory” of collapse is highly probable and highly likely. Obviously it’s very difficult for someone like you to accept as it is for most who tend to have been indoctrinated with blind optimism. Reality is a place most would not dare to venture.

          • “our species will decline over the next 100 years”

            You can manage the problems or you can watch the train wreck and say I told you so. That’s reality !

            • Scott says:

              Hello ChiefEngineer, that is clear the next hundred years will be opposite of the last hundred. All we can do make our little situations better depending on where we live, so I think most of us are moving that direction into survival mode slowly and watching the progress of the “Long Emergency” which is about to unfold yet unknown to most. and I think those of us in the group that can see will have a better chance as we can take some action now while things are still pretty calm compared to what they will be when the word gets out! It much easier to deal with our own needs now, but it is going to get tough for us all – no matter how much we do.

          • “It much easier to deal with our own needs now”

            Scott, this is the kind of thinking that has gotten humans into this mess. The only way to avoid the train wreck is for man to collectively agree on the problems and solutions. But there are some (like oil companies, the GOP and religion) who would rather demonize the only organization that can collectively solve the problems at hand.

            In addition, you don’t know the next 100 years is going to be the opposite of the last 100 years. What we do know is that the future will be different from the past. It could very well be better. Maybe humans will stop polluting their environment and learn to walk again as their means of transportation. Life after oil can be good.

            • Scott says:

              Hello, I did not mean everyone for themselves, but smaller groups like community and neighbors and looking towards the smaller village model even if in a big city people in areas can do things. It just seems like there are far too many of us now to do the villages we desperately need. Depending on where we live we can do a better job about the local thing, growing our own foods and local when possible.

              It has just gotten to be such a big mess and when left the USA and I visited parts of Asia in the early 1990’s, I really saw how dense some parts of the world are with humans. Many people living without proper things needed but since then I have read things have improved somewhat but at a cost of environment and scarce oil and resources. I think the next hundred years will bring in the time of scarcity in many things.

            • Life after oil can be good.

              Not for seven billion of us. Maybe for a much smaller number.

            • Scott says:

              I think the word is Gail, we are at the point where we can only mitigate things, meaning make the best of things depending on our location and available resources.

              Some people may be starving while others are feasting on Abalone. It is going to be uneven and perhaps unfair but uneven slow grind down, a slow collapse, and things may hold together for many more years than it looks like right now.

              I think the only thing we can do is position ourselves into a safe area that we feel we can survive and live and garden with a good climate, which is of course subject to change on short notice.

          • Your correct Gail if you consider the good life all about jumping on a plane or in a fossil fuel burning car every time your heart so pleases. I don’t measure the quality of life by such means.

        • BillT says:

          55 is a joke. Fuel economy is a joke. If your old car got 25 mpg and you could afford to drive 1,000 miles per month, at 50 mpg, you will likely drive more, maybe twice as much because you can. That is the America way. It’s only when you cannot afford to drive at all that it will hit home. That day is fast approaching.

          Regulate the population? OK, start by telling the Pope to reverse his decrees. Then the Mormon Church, and oh yes, the Muslims. Good luck with that one.

          Chief, you need a tuneup if you actually believe that humans are going to change because ‘they should’. We are headed for the trash heap of evolution and in a big hurry. That is, if we don’t use the 16,000+ nukes laying around first. Then it might be instantaneous.

          • Thanks for supplying an excellent example of why education is also important to the cause of saving humanity from itself.

            “We are headed for the trash heap of evolution and in a big hurry”

            Exactly my point. What’s your big rush ? Why can’t you drive 55 ? Why can’t you have only one child ?

            Because it’s all about ME

          • xabier says:

            BillT

            You are very right about people: a few intelligent and aware people who have the option (most are completely caught in the life that society hands them) can make changes in their behaviour now, but most seem to respond only to advertising and propaganda and the ‘if I want to do it I will’ ethos.

            And of course just plain habit.

            For instance, I’m amazed how people are piling into over-valued property in the UK again, when things are so obviously fragile, and maintaining their high -consumption ‘lifestyles’ to the grim death. It’s not the ‘partying before going off to war’ syndrome: it’s just dumb incomprehension and unwillingness to adapt.

            And as for leaving the car in the garage and using a bike (I live near a very bike-friendly city), at least in the summer months, forget it. It’s as likely as decommissioning our huge armament stockpiles.

            The people who say that humans are biologically determined to have no foresight beyond about 6 months to a year seem to be spot on….. We seem programmed to exhaust all resources. And now the developing economies desperately want to live on the same pattern: they are biologically determined to do so once the opportunity arises – energetic resource exploitation is one of our basic characteristics.

          • One thing that history has proven. If there is will, there is a way. Let’s be thankful all our ancestor weren’t self centered quitters.

          • One thing history has proven is if there are resources we will use them until they are depleted or to impractical to use anymore, nothing to do with will. Where there is a will there is definitely a way to destroy our planet.

  4. Note to OFWers.

    Gail’s Energy, Debt and Financial Collapse lecture from the Age of Limits Conference is now UP on Diner Podcasts!

    http://www.doomsteaddiner.org/blog/podcasts/

    No Registration Necessary!

    RE

    • I sent out a Tweet about this. I am not sure what is the best way to make announcements on this site.

      • Quite a few ways to do it Gail. You are not a PLUGGER like me, so you probably do not think in these terms. :)

        One thing you can do since you are your own WP Admin is to add in a Temporary Plug Box either at the beginning or end of the latest Article. Create said plug box as a single cell table, save and drop in wherever you please on your articles. If you do not know how to create said table boxes, you could just add as Text at the beginning or end of articles. After the period of time where such stuff is available on the net, you simply delete the text or Plug Box from the article.

        Plugging is an ART FORM! Besides being a first class Doomer Web Troll, it is one of my main methods for getting out the MESSAGE of DOOM! LOL.

        RE

        • yt75 says:

          Another thing I use quite a bit on other word press blogs and that I kind of miss here is the “recent comments” widget.

          Otherwise yet another great summary and a nice map !
          An important thing regarding major net exporter is also the “resource curse” phenomenon, (not being able to build a value added economy next to the natural resource one), and more or less true even for Norway I think (even if a lot of high tech also linked to gas and oil).

          • Scott says:

            Yes that map that Gail put up was interesting, kind of outlines some war zones, but look at Russia, they are are sitting on most of the oil and gas.

            • Russia adjusts its tax levels monthly, to make certain it gets as much as it can, and still let the companies do the investment they need. There is an export tax as well, I believe, so those who receive exported oil pay more tax.

            • Scott says:

              Gail, I wonder about Russia now that we see they are sitting on that pile of oil and gas, Do we have any information on their depletion rates of major fields, likely not I think as with Saudi?

            • With respect to oil, Russia keeps making comments that they are about at their limit. They can add some NGLs, but not much more oil. I have’t been keeping track of information on depletion rates.

              Natural gas in Russia will need huge investment in pipelines and in development of additional fields. I think that is part of the reason the prices they charge in Europe are as high as they are. They need quite a bit of the rate for adding more infrastructure, to keep the gas coming.

            • Scott says:

              We will have to keep an eye on Russia as they are the energy Elephant in the room.

            • Russian oil exports are surprisingly close to Saudi Arabia’s.

            • Scott says:

              Hi Gail and others, Yes that is true Russia has control of probably the largest chunk of oil and gas and they have been quiet lately. I bet China wishes they owned that too.

            • I understand that China has made a loan to Russia to help them develop some of their oil. So maybe they do own a chunk of it.

          • Regarding recent comments listing, the author of the blog gets a listing sorted in date order. This is helpful for responding to the oldest ones first. It can be confusing, though, if a response doesn’t make it clear what the comment is in response to. I sometimes have to look at the comments in the other order, or do a search on the comments (something else I can do, that I don’t think readers can do), to figure out what a response relates to.

            I haven’t really thought about the “resource curse” problem lately. I know that wages are very high in Norway, for example. This would make it hard to compete with other countries in anything where wages need to be comparable. I understand that hydroelectric is taxed to such a level that it is high priced, just like electricity in other European countries. (I am not sure if that is the case for manufacturers, or if it is just the case for private citizens.) Wages are so high that perhaps it doesn’t matter if electricity prices are high also.

            By the way, per capita oil use in Norway is more than double that for Europe as a whole.

    • Bill says:

      There’s no podcast at that link. Some jive about “monsta of doom” coming Saturday, a logo …

    • New Podcast up on Politics & the Mass Media.

      In this interview with Monsta, Surly discusses his involvement with OWS, the reportage of the MSM, Union and Labor Movements and the future for the next generation inheriting the flotsam of the Age of Oil.

      http://www.doomsteaddiner.org/blog/podcasts/

      RE

    • Note to OFWers.

      Comparison of Natural Childbirth to Industrialized Hospital Childbirth by Blogger Gypsy Mama of The Butterchurn now UP on Diner Podcasts.

      Tomorrow also we will have an interview with Guy McPherson of Nature Bats Last discussing the possibilities of a Near Term Human Extinction.

      http://www.doomsteaddiner.org/blog/podcasts/

      RE

  5. Perk Earl says:

    If importers oil consumption is dropping beyond those factors that could explain a drop aside from oil price, meaning all arrows are headed down towards recession, a slowing world economy, what is holding it up? QE? Every time Bernanke hints at paring back QE the financial markets start a short run on the markets and Ben backs off, saying QE will remain in place for now. The logic on it and I can see it to some degree is the Fed claims it’s not having an inflationary effect, and while it doesn’t and rates stay within reason on bonds, they can keep the printing press humming along. I’m wondering what your take is on this. Thanks, Perk Earl

    • I think the world is slowly stumbling into recession. The printing presses are keeping the stock market up, investment in resale houses up, and prices of farmland up. Investment in resale houses is helping the economy, because the buyers are fixing them up, with the intent of renting them out. The fixing-up process adds jobs, both for labor in the process and for buying new “stuff” to put in the houses. Unfortunately, the whole thing will fall apart at some point. One guess is that the time when falling apart happens is when interest rates begin to rise (when QE stops, or before). Another is when buyers of the houses discover they cannot get adequate rent for the homes they have fixed up, and the housing bubble deflates. Another is when Europe or Japan falls apart. We are in the period where things still sort of “work”.

      • Scott says:

        Yes Gail, for sure the printing presses are holding it all up, but for how long? That will be the question. We bought a rental house in this mountain town, I just hope we can pay it off before the trouble hits because who knows what it will rent for then.

        But I did make sure our main home is paid off and that way, we only have the taxes to pay and if I lose my pension from my old courthouse job, I will not be able to pay a mortgage, so we just have one on the rental,

        Who knows we may have to let that house go back to the mortgagee if “it” hits sooner than later.

        I guess that is the best we can do try to pay off our main home (hard to do these days) and garden and raise animals if you have the right place and are able. So fa,r no farm animals here, just gardens, but I a have chicken coop ready to put out – but I need to build a barn first!

        So all we can do is best we can in our little worlds and watch the big world change.

        • I think I would try to sell the rental property now, unless there is some good reason you need it. It would give you one fewer headache to worry about, and perhaps funds for your barn. If you really want/need extra property, it might make sense to buy some property nearby instead.

          • Scott says:

            Thanks for the advice on selling the rental now to avoid future headache, I will give that some thought. It is only two blocks away kind of like those local lots you bought this is a small house and has a large lot that could grow veggies so I may try to hold onto it for a time and watch. But if things are going down and there will be no renter then may be better to get out now. I guess my future jobless kids and family can live there someday if I can hold onto it. But that is a serious matter to think about.

            I am not sure what to do as many people that have bought property in the last few years. This happens to be a low end property which rents cheap near our home. I was hoping the rent money could help us in our old age if our Government pension goes under, but I guess if that happens there will not much money around. But where will people live? Housing is one of our most basic needs. My hope was that it gets paid off as I only have about 8 years left on that loan and then I could rent it for less as long as I can cover repairs and taxes.

        • xabier says:

          Scott

          It’s people like us in our little worlds who make decent societies: the grand planners just screw it up mostly.

          I like to think of what my Polish friend said about his family keeping their land under Communism, as it was too small to be worth the State taking it, but big enough to feed them much of what they needed. It would also be too small for anyone to want to steal,too. Richer peasant land-owners were made destitute when their land was taken.

          That worked out for them by accident, but it’s a good strategy. Now is a good time to buy all the materials for a homestead, while it is still easy even if it doesn’t get up and running so quickly – who knows what supplies will be like even next year?

      • BC (Before Catatonia) says:

        The annual change of the sum of non-farm employment and wages less the annual change of labor (increasingly machine) productivity (?) vs. the annual change rates of real final sales and real imports:

        http://research.stlouisfed.org/fredgraph.png?g=jge

        Personal savings to GDP:

        http://research.stlouisfed.org/fredgraph.png?g=jgh

        The real annual change rate of the sum of employment and wages after productivity is converging with real final sales and the savings rate to GDP dipping below 2%, implying little or no capacity for further acceleration of consumer spending and real final sales hereafter.

        One suspects that the principal technocrats and opinion shapers (shape-shifters) in the employ of the administration, banks, and Fed will have to skillfully “manage” the GDP deflator, inventory, and import figures to avoid reporting an annualized contraction for real GDP per capita for the rest of the year.

        CONfidence management is an important function of the imperial corporate-state’s consent-manufacturing mandate/imperative.

        Ah, but we all know (?) it’s a Grand Illusion (apologies for the misspelling and missing or incorrect punctuation for the lyrics, but, hey, it’s the Web and many no longer know to know to care about such things):

        https://www.box.com/s/z1sveu89chuxcpvk3gg3

        And it’s been a 30- to 40-year Grand Illusion for the blue- (and pink-, white-, an no-) collar men and women based on increasing debt to wages and GDP, deindustrialization, financialization, offshoring of value-added labor product, and cheap imports.

        R-evolution calling? Apparently not in this life, brothers and sisters . . .

        Peace . . . of mind . . . ???

        Yes, after all, we can take consolation in the fact that we are ultimately just temporarily more complexly self-organized constituents of (star)dust and billion-year-old carbon . . . waiting for a gust of wind to send us on our way . . . back to fertilizer for Nature’s garden.

      • xabier says:

        Gail

        Regarding property, in Britain(as you know an immensely indebted economy) the exertions of the government and Bank of England are maintaining the illusion that all is well, by keeping up nominal property values in most regions, but in fact in real terms British property has fallen about 38% since 2007.

        It’s a wonderful conjuring trick. But every show ends, and the curtains close as the audience get back to reality…..

        And yet new buyers are now getting active again due to low interest rates on mortgages and government subsidies to buy. These people will be blown out of the water once rates go up: many are warning of this, but nothing will deter the government.

        And hot money is seeking safety from global turbulence in prime property in London, distorting the whole market: it’s actually noticeable that the segment of the property market traditionally attractive to native buyers in the upper middle class -nice family houses in the country near London -is really suffering, which says everything about the real UK economy. The Scottish housing market is dead as a a dodo, totally, except agricultural land.

        • Thanks for your update.

          As I understand the situation, interest rates on property in the UK are nearly always adjustable after the fact. This means that what you say is right–buyers are exposed to the possibility that they will not be able to pay higher interest rates, and will default later on.

          In the US, quite a few home mortgages are on a fixed rate basis. Thus, it is the lender who has the interest rate exposure, not the buyer. But in the US, there are still a few who are exposed to higher interest rates–new buyers, home buyers with variable interest rates, and most commercial buyers who borrow from banks (stores, churches). Interest rates on these loans are often adjusted every five years, so the hit isn’t necessarily immediate.

          • xabier says:

            Gail

            The unfortunate thing is that in Britain, rentals are so very high in the better parst of the country that ordinary people who are not aware of the dangers (and the MSM does not inform them) are tempted into low-rate mortgages – now with government subsidies and guarantees for certain categories – which are really very risky. But they will save in the short-term over rentals.

            And this is the Government’s big answer to the economic Crisis!

            It was appropriate in the 1930’s, when lots of quite good developments were built, but clearly not today given macro-economic conditions and the extreme indebtednes of the UK, both public and private.

            It illustrates the irrationality of many solutions pursued by governments, and the extent to which they can become the prisoners and dupes of lobbies, in this case the construction lobby (who argue from the ‘multiplier effect’ of construction investment).

          • Will says:

            Gail,

            Home owners, even with fixed price mortgages, are very exposed to interest rates: higher interest rates lead to far fewer potential buyers as loans become more expensive, decreasing the financial value of their property. I keep trying to help my friends understand that this dynamic makes home values and bond values react to interest rate movements similarly. Thus, the best thing to do is buy a home with cash when rates are high, not with a mortgage when rates are low. Of course, that assumes society is relatively stable around you.

            If I ever buy again, I will buy property that has value beyond shelter+financial: providing substantial garden space, water access, and other non-financial value that I actually utilize.

            I really enjoyed your talks at Age of Limits. I regret that I didn’t get to meet you and tell you that in person.

            Will

            • Thanks for writing. You are right, about higher interest rates exposing owners to fewer potential buyers. I expect that rising interest rates would lead to lower home prices for that reason.

              Glad you liked my talk. I see that my Energy, Debt and Financial Collapse talk is still up at the Doomstead Diner.

  6. John Dunn says:

    Like many here, I have tried to encompass in my thinking, the ramifications of a variety of variables in this fossil fuel dilemma. It is almost an impossible task. I have often thought that it is similar to visualising the faders on the mixing desk of a music studio. Each fader represents a variable into the final sound mix. And each fader is pushed higher, or pulled to a zero position depending on economic, political, social and global circumstances. I have listed just a very few of the ‘ faders’, and no doubt others can add many more? But when you grasp the sheer enormity of the possibilities, of the ‘final mix’, it is no wonder that none of us can identify, the when, the where, and the how, of that descent, as it unfolds?

    Annual decline in oil production
    Increase in bio fuels use
    Fraking production levels
    Increasingly lower quality of fuels extracted
    Increasingly lower quality of other ores and resources
    Differing refinery needs of various crude oil extracts
    EROEI (thermodynamic), limiting feedback loops
    Financially (investment), limiting feedback loops.
    Export Land Model
    Price of Oil per barrel, and willingness or ability to pay
    Devaluation of dollar
    Crude bought in other currencies (including gold)
    Technology benefits, to increase efficiency of processes and use less energy
    Individual personal reduction in energy use
    Shift of energy use from, say, oil to gas or electric for a variety of processes and transportation.
    Population increase
    Energy shift through demographics ( older society )
    The shift from agriculture to manufacturing
    The shift from manufacturing to services
    Population shift from villages to cities
    Climate shift, changing energy use needs
    Immediate culture shifts due to oil scarcity ( Cuba effect )
    Infrastructure degradation and replacement needs
    Value shift of trade, in things that matter, such as oil, food, clothing, rather than flat screen TV’s and cell phones.
    Currency devaluations
    Financial implosion, globally
    World health determinants, ( loss of antibiotic performance, pandemics, fertility)
    National protection and security, and the energy costs of providing this
    ……………………
    ………………………
    And the last fader on the mixing desk ~~~ Black Swan events !

    Gail’s sharp and considered articles, point to the way to how many of these sub routines, are likely functioning, but the sheer number of variables, and the probable resultant ‘final mix’ maker me realise, that it is no wonder that we are all searching for answers in the dark, as to how this is going to pan out?

    • Modelling future economic outcomes seems as complex as climate modelling given the no of different inputs. History is so much easier although we are entering our very own historic era- and have front row seats.

      history offers patterns rather than outcomes and it is all fascinating. the explosion of the web is an area that was not predicted in quite the same way as it has turned out. I found a 1966 book [Impossible Possibilities- I think] that predicts genetic engineering and the internet and mobile communication although the prediction was high minded and expected scientists to share data and ‘network’ from small hand held devices. Industry on the otherhand is pretty reactionary- in the age of pirated digital music the choice was to defend the CD and it took an age for Apple itunes to adapt. Old power generators likewise are threatened by home production but rather than embrace solar [with all its limitations] the seek to delay.

      A friend went off to Afghanistan for a month or so- trained to avoid kidnapping and potential terrorism the real threat was freak flooding and a traffic jam is a dodgy tunnel at altitude [apparently 100s have died in suffocation events]

      So black swans have my vote- good and bad- the need for smooth bore [non exploding cannon] lathe transformed the industrial revolution to make mobile efficient steam engines. The Iran hostage rescue may have scuppered our chance for transition [another term for Carter may have heralded a renewable revolution]. Maybe pollinators will take a serious hit in the US or Europe leading to a global food crisis. QE drove up the price of wheat and oil and spurred the Arab Spring as the poor hit the streets.

    • I think the ah-ha moment comes when one looks at how collapses have taken place in the past. They take place because with fewer resources per person, average wages are low. In particular, wages of the common worker are especially low. Governments have locked themselves into providing services for an increasingly impoverished work force. There is no way they can collect enough taxes.

      Increase in biofuels use and other high cost “solutions” just make the situation worse. What is really needed is a way to fund high-cost government, because with high oil prices, everything costs more. (Also, fewer have good-paying jobs.)

      It is really too late for most of these things to make any difference. Population increase just goes on, making resources per capita lower.

      • xabier says:

        Gail

        One can only concur: Western Europe is certainly locked into high-cost government and welfare/ pension provision which is now unaffordable, even if the medical sector is more under control than in the USA.

        Even extensive cut-backs are only slowing the rate of growth in the cost of providing services, not cutting the actual cost proportionately. Less developed societies with less government would seem to have an advantage in this respect, as they are not in the position of digging an ever-deeper grave for themselves.

        Many interesting questions arise: for instance, if in Spain some 50 to 70% of the young are going to be unemployed, what is really the point of expensive State provision of education (which is of low quality anyway)? And yet small-scale agriculture is collapsing, so these fit young people can’t take refuge on the land, using their main capital which is their labour, and the flourishing economies like Germany (to simplify, they have problems too) only want a small number of the best, and they must speak German well.

        A sudden return of real prosperity based on abundant resources and cheaper energy just does not seem to be on the cards in Europe, to say the least…..

    • Scott says:

      John that is a thoughtful long list you put together and I wish it looked better. I think all those have crossed my mind at some point too. I guess most of us are starting to think it just looks too big to turn around this ship and all we can do is take measures to mitigate these things as the change will be thrust upon the world.

  7. curious that India and China are now so developed that Africans and Bangladeshies are now the people able to buy small amounts of oil at the higher price. The 30%+ reduction in Irish oil consumption is surprisingly huge although I wonder if it compares to the pre boom years and the amount of emigration.

    Saudi and other oil producers are the interesting area- with unrestrained population growth and cheap energy [to compensate for lack of water etc] the level of consumption [according to an oildrum post] looks to intersect with exports around 2030. This is 17 years away! If oil prices fall due to falling demand then expensive recovery and heavy oils won’t be exploited leading to much the same result. Already exports are falling- although I had to hunt around for graph to see the level of decline [more info on this Gail would be welcome] but it matters not if declining production is driven by domestic demand or depletion.

    A topic that has been touched on but not fully explored is when exporters start to conserve for their own futures.

    • John Dunn says:

      “A topic that has been touched on but not fully explored is when exporters start to conserve for their own futures.”
      This makes perfect sense on so many levels. Unfortunately, capitalism means that energy extracted today, will be sold (relatively) cheaply, at today’s market price, for the benefit of today’s economic wellbeing (gratification?), and ‘to hell’ with tomorrow.
      That inability to consider tomorrow, will be likely our downfall.

      • tmsr says:

        The owning class is not stupid. They sell now and deposit the profits outside their failing home country. When the folks at home are starving they will be living high elsewhere.

        Ed Pell

        • xabier says:

          tmsr

          To illustrate that, just look at the super-prime property market in London – hot money from all over the world seeking safety.

          Very different from the old feudal and-owning class, the best of whom did at least look after their lands and have a kind of loyalty to them, though of course they would invade and burn the lands of enemies.

          Greece, and Spain to some extent, seems to be classic examples of utter disregard for one’s own country and it’s long-term interests.

      • In the UK people complain that the gold reserve was sold off before it reached it heady peak today! and there is regret the North Sea [which I never realised was such a huge find] was depleted when oil was $30 as opposed to the $100-120 now.

        So it seems unlikely that Saudi is flat lining production to conserve. I would go with the analysts that suggest they are running to stand still.

        • I am afraid you are right that Saudi is running to stand still. They need the additional production coming online from Manifa, to offset declines in production elsewhere.

        • Scott says:

          Well lets hope that Saudi is hold some oil back as they seem to need it too.

    • yt75 says:

      “looks to intersect with exports around 2030. ” for me westexas (forgot his real name) “export land model” projections are very interesting to point out the increase in Saudis domestic consumption and flatlining production, but these “linear” projections won’t pan out that way for sure, either collapse on both “sides” or a balance will be found as Saudis import almost all their food for instance.

      • Scott says:

        I was just looking at this on Saudi Food Production. they have the energy but need lots of desalination and fertilizer. Water is surely a problem. Desalination does not seem feasible for farming as vast amounts of water is needed in deserts. I think they have a problem there.

        http://en.wikipedia.org/wiki/Agriculture_in_Saudi_Arabia

        • yt75 says:

          Yes I think Saudi Arabia in fact backed off from some big Agriculture projects they had some years ago that didn’t really worked out (and were producing at higher price than the market). But tap water in KSA is already around 70% desalinized water (using oil or gas for the process energy) which is truly amazing when you think about it.

        • I think Saudi Arabia has decided to stop trying to grow their own wheat, for these reasons. (I would have to look up the end date.) The definitely have a problem.

          • The ‘achievement’ of Saudi water extraction is astounding with underground reserves of 400 km3 [the size of Lake Erie] sucked dry in 4 decades. Appropriate as I believe [conformation would be great, Gail!] it is the same volume of oil ever extracted.

            interactive link- http://environment.nationalgeographic.com/environment/freshwater/saudi-arabia-water-use//

            So home food production is over- are the great land grab in Africa begins. All of which requires more revenue, more production but the question of a recession- reduced oil demand and falling prices means expensive enhanced recovery stops being cost effective- I am beginning to understand where Gail is coming from!

            • Scott says:

              Sounds like lots of dry cups with straws sucking oil and water in Saudi. But there are also many areas in California and Europe facing the same underground water shortages and at the same time energy getting too expensive for a massive desalination on the scale that would allow farming in these dry lands. It seems like we used up the gift of water and energy very fast and the world wars kind of took the top off of things and sped up the process.

              Looks like again as I said personal and neighborhood mitigation measures are our best bet if we cannot change the politics and fast. There is little news or no news out there in the mainstream media warning us of this coming crisis in water and fuels.

            • You draw on a very good point- for some of us there is the possibility to build in some insulating factors- solar panels, local food, local economy etc- however this is in stark contrast to people in countries dependent on the state. In Saudi water and agriculture are things in absolute state control. This leads to power being centralised: true democracy is not just a vote- it is also empowerment in how you lead your life.

          • Ert says:

            Saudi Arabia will stop in 2016 [1] but they are still producing [2], even where big exporters for some time. What a giant miss investment and (water) resource plundering!

            [1] http://www.arabnews.com/node/448070
            [2] http://www.indexmundi.com/agriculture/?country=sa&commodity=wheat&graph=production

            • Scott says:

              I think if I lived in Saudi or a place like it, I would be moving out now as they are very hot and dry and facing water shortages soon.

            • Thanks! I remember the announcement with respect to stopping wheat growing had some lead time involved.

      • I agree that the linear projections won’t work out. For one thing, how will 26 million+ Saudis buy food and other necessities, if oil exports are very much lower than today? Prices can’t rise too much, because then they would push importers into collapse. Collapse happens on one side or the other, or both, fairly quickly.

    • Countries that only use a bit often use it for such “important’ purposes that they can afford it, even when more wealthy nations cannot. Oil to make medicines, or to create the only paved road, my be truly worthwhile, while a second or third car for a family is not.

      I am not convinced that exporters ever start to conserve for their own futures. For one thing, they need the benefits the oil that they can extract can provide today. For another, I do not see that a “controlled downslope” is possible. If it would be possible to extract a steady amount of oil (as Saudi Arabia is more or less doing, and some other countries are doing, this might make sense. This would stretch out the oil as much as possible. The problem on the downslope is that things tend to fall apart badly. It is hard for me to see that running the existing economy with less oil works. A railroad or airline has the same overhead as before, so fewer trips becomes a problem. Refineries need to be kept in good repair, regardless of how little oil is processed. There need to be supervisory personnel who know how to handle problems, even if a little oil is produced. Road and pipelines need to be kept repaired, as before. All of the essential uses tend to take most of the oil supply, making it hard to cut back, and keep the system operating for long.

      • Scott says:

        Yes, I think the message here is that exporting countries will soon wish they themselves could import More Oil for their fast growing needs. This could be a source of great tensions in the world in the not too distant future.

        This is all aside from the paper currency and markets that threaten financial problems due to corrupt markets and financial derivatives and complex financing instruments, flash trading and manipulations on the markets. But all else seems okay for now, as trucks are running and goods are getting delivered to local stores. It just seems to me that a dark cloud looms out there on these issues.

      • The Chinese need to pay off the population in return for state control- the car market is taking off and happy workers don’t riot in the street. So how does China solve this issue?

        Does it massively subsidies coal to oil and there by ensure their once huge coal stocks disappear even faster? Is the end of exponential growth? Is the only recourse if their economy goes into stagnation a distraction like war?

        Chinese leader are not to be envied- the future as always will be interesting.

  8. Ed Pell says:

    Regardless of how much new oil America produces it will only serve the people who own the oil wells. Since 99.99% of Americans do not own oil wells it will do us no good. Oil is a global product sold globally.

    • Actually, to the extent the oil is drilled by oil companies, and results in dividend payments by those companies, it will help common citizens. Oil company stocks tend to be held by pension funds, because they are “safe” large company stocks that pay dividends. If oil companies have problems or do well, to a significant extent it is pension plans that will be affected.

  9. Gail, How much of the resistance to paying high energy prices is habit and how much is inevitable? I am asking because I have no idea.

    • A lot of people live paycheck to paycheck. If one purchase rises in price, they have to cut back somewhere else.

      A lot of resistance to paying high oil prices is brought on by people not having jobs. If young people cannot find a job, or can only find a part-time minimum wage job, they likely will not buy a car. As a result, they will not buy gasoline for the car. And their purchase of a car (even if used) will not add to the need to build a new car for someone.

      So in my view, very little of the resistance to high oil prices is habit. It has to do with how much money people have to spend. There are a few wealthy people who can simply decide to retire, and use much less oil, but for most people, using oil is very much tied to jobs and wages the person is earning (or not earning).

  10. Richard Steinberger says:

    Gail – I notice that in China, the oil consumption is about 2.5 BBL/person-year in 2012. In the PIIGS countries, it varies from about 8 – 11 BBL/person-year, and in the US, it’s about 22 BBL/person-year. So am I right in assuming that the Chinese economy can grow quite well, assuming no wars or economic collapses in the consumer good importing companies, because its consumption is so relatively low right now? For example, if China were to double its oil consumption, that would still put it at about half the PIIGS level. So China could be (hypothetically speaking) growing like gangbusters, but still be at just over half the level of Greece.

    Whereas if the US consumption dropped down 10%, that would put it at about the level of Norway, a country in pretty good economic shape. But a 10% drop for the US would probably mean a major recession.

    Looks like there’s no realistic way down from an existing level of oil consumption that does not involve economic chaos. Certainly no voluntary way down unless replacement energy sources cost the same or less – not a realistic scenario. So involuntary reduced energy consumption, probably starting this decade and lasting the next several decades, would seem to be our destiny. If only we could have some unconstrained national conversations that led to national strategies as to how to respond… But we don’t do that, at least in the US, because that would be socialism… Maybe we’ll get desperate enough to try it, or else we’re going to fragment.

    • There are certainly a lot of Chinese people who do not have all of the goods that people in the West have, like refrigerators and cars. If China followed the same growth pattern that South Korea or Japan followed, certainly it would grow to consume a huge amount more oil. The question is, “Where would this oil come from?” I know Steve Kopits has done some calculations, and come to the conclusion that world oil demand should be expected to grow far faster than the IEA has projected (assuming oil price is not a limit) because of the likely growing demand of China and India.

      It is very hard for a country that is at a given level to drop down in its consumption of oil, because the whole system has evolved to handle the current way of doing things. For example, in Norway, most people have shorter distances to travel than the US, and (I believe) the system is set up for quite a bit of public transit. The US is a much larger country, and less densely populated. Our houses and jobs are set up assuming that most people commute by cars. While some change toward public transit would be possible, it would take years and considerable investment.

      A more likely situation leading to reduced oil usage involves loss of a huge number of jobs. This would be a huge problem. Our current system is not set up to “shrink”.

      • xabier says:

        Where I live in Britain, getting to work, shopping, seeing relations, are all very problematic without a car, even though the distances are small compared to the US, and the public transport not that bad. If ordinary people couldn’t run their cars on a daily basis, there would be huge problems in this region, which is a high-tech hub and hosts a prestigious global-level university. The university itself has the potential to become a kind of state of its own though, which is interesting to watch develop, and that could function quite well on the basis of trains and bicycles……

  11. kiwichick says:

    couple of points

    China invested approx. 30 %of all renewable energy investments across the G20 in 2012

    a JV developing a phosphate deposit off the coast of Namibia recently offered Australian shareholders a 300% premium for their shares. I sold mine, as have most shareholders
    The purchaser was one of the other partners, a company based in a Middle east oil exporting country
    a Population Stabilization Incentive could incourage women to delay the birth of their first child and instead complete their tertiary education and start working towards their financial independence

    • China is ‘hurting” in the long range energy area. I was co-author on a paper in Energy Policy called, An analysis of China’s coal supply and its impact on China’s future economic growth. My Chinese co-authors found information on all of the other sources of energy besides coal, and concluded that China would need everything it could get. Especially with its pollution and water supply problems, an alternative (or addition to) coal is welcomed.

      We definitely need population stabilization. it is a touchy subject, though.

      • The paper looks really interesting- is there a free copy?
        From the abstract you quote the 240 [or something high] for all coal which seems out of date or at least optimistic with actual reserves estimated at 70 to 90 [excluding lignite]. The projections also seem conservative given that production has leapt to 4 billion tons and growth would need to be 3% rather than the crazy 10%+. so 7% growth doubles production/depletion in 2023.

        Clearly such production is unlikely given other constraints such as the easiest and best has already been mined, water limits and that a state planned economy they just can’t run out.
        And coal is restricted in it being exported- the millions of tons from Australia and the US is not the billions required- a bit like trying to feed Gulliver in Lilliput.

  12. the mention of Norway reminds me of a visit which was stupidly expensive for me but in relative terms most prices were much the same for average waged Norwegians- that is for buying power of Norwegians- they are also wealthy when they travel to Britain and this disparity is because they export more than they import. The US has an issue with it being the oil currency which separates it from other nations- do you get what I mean? I am no expert so do correct me where I’m going wrong.

    China owns a lot of dollars and it has to spend them somewhere- for oil exporters their vault of dollars is a win win for the US or at least was in that all that wealth bought US goods. Iran resented the dollar and I believe switched to Euros. Is there the possibility that China will do deals in Yuan. That way it buys with domestic and relative currency and the oil exporters recycle the money back with purchasers- oil has been the key to the strength of the dollar as an international trading currency. As a lender they are in the bizarre position of lending back to the west causing balance of trade issues which will ultimately devalue the Euro/$/£ yet essential to keep the west buying iphones. So is having a vault of western currency a good investment? Is it better they spend it on oil which will at least ensure the contract as state controlled government with an aspiring people who put up with it only on the return of guaranteed rising living standards?

    • Scott says:

      It seems China owns half of most countries these days, they just bought up the largest pork producer in the USA. They really do own so much now.

    • You are right about all of the inflow of currency to the Norwegians making them better off and better able to afford the high prices there. (My husband and I will be visiting Norway in July–I will get to see the high prices in person then.)

      I am sure that given the choice, China would just as soon cut the US out of the world oil market. That would leave a lot more oil for them. But switching from the dollar to other trading currencies comes slowly. It is hard to see that a vault of western IOUs is a good deal for China, but it is probably better than not selling iPhones and other products.

    • Christopher Johnson says:

      Jules: I’ve been watching carefully and am pleased to informal all parties that China hasn’t changed a whole lot in the last week or so, despite all the good intentions. Their best markets have pretty well shuttered however, so growth is expected to drop a lot — as in 3 to 5%. Nobody wants to admit it yet (certainly the Reuters reporters don’t want to lose their licenses and will continue relaying stats dictated by the commissars…), but that’s the realistic range.
      The major point is that China’s got more troubles than a Cajun paddling his boat full of alligators. A few extra bucks in the pocket might not last too long. But it’s also important to maintain images, especially when today you appear to be king of the hill; who knows what tomorrow might bring?

      Cheers

  13. Reblogged this on Southern Energy and Resilience and commented:
    High oil prices are reducing demand around the world. This is happening at a time when energy companies need the capital from their historically high sales to continue their expansion in exploration and extraction of new reserves. As the large reserves they have depended upon for decades start to decline in production, they now have to work harder for less oil, literally ‘running to stand still’.
    A result of the above trend will be ever higher prices (as a long term trend), and reduced availability.
    In NZ, on the periphery of some very long supply chains, we need to be aware that this change is coming, and accept that the appropriate response is to reduce our dependence on oil as a matter of national urgency.

    • Scott says:

      It is very clear we need to shorten our supply lines and do with less.

    • Thanks! Good comment.

      • Scott says:

        I think we have established that we have lots of coal beyond oil and gas, but do we really want to burn it. At this point, do we take mitigation measures or work to save the system, A new liquid fuel that would run in our existing pipelines of metal that are so precious and are in place perhaps to mitigate means “coal to liquid fuel” that can be burned in existing cars and trucks etc.. Otherwise Mitigate means to grow your own food and hard times. Is there a process to turn coal into a liquid that is clean as gas? We may have to burn it as much as we do not like it.

        We have talked a lot about what can be afforded and it does not seem we are in a financial position to tear down everything and rebuild a new hydrogen system for example, so what can we do with our current delivery system, it appears it is all we have and can afford.

        • donsailorman says:

          Coal can be turned into perfectly good gasoline or diesel fuel. During World War II Germany fueled most of its massive war machine on gasoline and diesel made from coal. Today, in South Africa, Sasol turns huge amounts of coal into large amounts of liquid fuel. Apparently, Sasol is profitable. Not long ago the first big CTL plant started production in the U.S.

          I think that after the fracking boom busts, CTL will be the “next big thing.”

          • CTL s still more expensive than $100 oil – I think it has to head towards the $140 pb price and stay there and the last time that happened the credit crisis happened. Having found adjusted figures [set at 2011 $ and accounting for inflation] the price of oil stayed at $30 for 50 years only to quadruple in the 00s. As Gail has pointed out our entire economy is built on $30 oil- the ability to adjust to higher prices seems to be causing more problems than simply declining supplies.

            China, however is a state which can have a single vision policy. Coal has been deflated in value to fuel growth making its use rather inefficient. At current rates of growth i.e. 4 billion tons this year- 8 billions tons in 10 years- a modest 7%- their optimistic reserves of 70-90 billion tons get completely consumed in 20 years. It could deflate coal and produce CTL cheaper than buying oil but this would just mean the end of coal sooner.

            Unlike the capitalist West China likes to plan the future at least 5 years ahead.

            • Scott says:

              I could not afford an electric car, so I got the a small older 1998, 4 cylinder Honda Civic that gets 40 MPG. The best I could do for $3000 USD. They could build the electric car cheap if they wanted to but the once again the special interest groups are in the way.

              I think first we have to break the special interest lobby groups that surround the Washington Beltway and other such places in other countries, as they are the ones pushing us into collapse.

            • We have decided that we can afford vehicles that protect occupants against most any kind of injury. This means that they have to be bigger and heavier than they otherwise would be. If we had laws similar to India, we would have a lot more accidents, but vehicle costs would likely be lower. (I am not sure how much lower electric car costs would be. I wonder if trying to make more electric cars would cause costs to escalate, because we would need to use higher costs sources for lithium and rare earth minerals.)

          • CTL takes quite a bit of front end investment and requires a lot of water. I expect there will be interest in it, but it will be slow to ramp up because of those issues.

          • Ert says:

            In the war Germany had basically no other option to further support its war machine – and market price didn’t matter. Today the US also supports a military that is far to big – which also does not make any economic ‘market’ sense.

            But the Hitler regime had a very cool trick (by Hjamar Schacht – a kind of smart Super-Benny) to cover all its financial expansion with a genial trickery: http://en.wikipedia.org/wiki/MEFO. Unfortunately most of the references I have regarding MEFO are in German – but by reading the English Wikipedia entry one should get an idea what Benny and Drahgi still can do :-)

        • With our current financial problems, I think most of the hydrocarbons under the earth, including most coal, is beyond our financial reach. We need a complete system (including oil and electricity and a financial system) to get out and very large quantity of coal. While it is possible to do some simple extraction without modern systems, the amount would drop off hugely, and the problem of coal emissions would nearly entirely disappear. The users of coal would be people who live fairly close to the coal, because inland coal is hard to ship.

          • Scott says:

            Hello Gail, well what you said there is that we are basically heading back in time without a horse or wagon etc.

          • Scott says:

            One More comment on this Gail, I do blame the special interest lobbies and large corporate systems as their greed has brought us to this point, we had the money to do it and the money fell into weak hands. These groups have the ability to keep us steered in wrong direction too long such as oil and coal and they have ignored the possibilities to change because it threatened their business and financial interests. Sounds like greed to me but that will continue as that is the system we thrive on for now,.

            We could have built a new system with the technologies we have been studying and perhaps more yet still not known to us. I still believe that there may be even something else better than Thorium out there and Hydrogen that has not been yet shared with us publicly.

            We have looked an many answers that could be done, like Thorium and hydrogen, but when a game is on and there is money being made as is the oil game now, the players will not cash in their hand until they play it all out. The Oil people will milk this for all the money they can get.

            So my point is they are going to play out most of the easy oil and run us into a huge debt pile and then leave and that is going to be the beginning of the Long Emergency which is pretty much already underway but not yet seen.

            Things are going to get tough when folks see it and get scared. The oil people will milk us dry and then leave, or will be start building something in time or will time run out?

            I guess time running out means that we have to go back to the old days without what they had things needed, there is not enough land to support a horse for every family now. So your point about massive change ahead seems clear.

            .

    • Christopher Johnson says:

      Southernenergyandresillience:

      Some potentially interesting petroleum discoveries recently trumpeted in your neck of the ocean. Any impact?

  14. Ed Pell says:

    Unemployment could hurt the economy if the unemployed learn to make goods and services for themselves. If you are unemployed do you hire someone to clean your furnace or do you watch a youtube video on how to do it and then do it your self?

    • I am not sure cleaning furnaces would be first on many people’s list. I expect they would do something that they could earn money from–sell “protection” to local businesses, for example, or recycle building materials from unoccupied buildings. These tasks wouldn’t necessarily be legal.

  15. Don Stewart says:

    Gail

    Thinking about the rational thing for China and India to do…if they believed you on the fate of the OECD countries.

    Since the mid-1980s, China has pursued a policy of very high savings and capital investment in order to build the factories which export so much stuff to the OECD countries. China has amassed a very large number of dollars and Euros by running a trade surplus. But now, as the OECD economies contract in real terms (witness the fall in oil consumption), exports simply cannot grow rapidly any longer. Your scenario would involve a significant contraction in Chinese exports to the OECD countries.

    What makes sense is to behave much like the United States did after the Civil War. Erect trade barriers which inhibit the international flow of goods and money to and from the OECD countries.

    Chinese consumption of oil per capita is still quite low relative to the OECD countries–and particularly the United States. Let’s assume The Law of Diminishing Returns. The first barrel of oil per capita yields a high return, while the 30th barrel inevitably yields a lower return. That means that China still has a lot of opportunities to invest high priced oil in highly productive endeavors financed by barrels 3 to 10. While the OECD countries are mostly faced with pruning back on the barrels from 10 to 30. Chinese growth prospects will be more stable if they insulate themselves from the gyrations in the OECD. There is no reason to restrict trade with similarly situated countries, but trading and becoming dependent on collapsing countries should be avoided.

    I don’t think the Chinese or the Indians will actually think this way. The last I heard, China expressed new interest in the US sponsored Pacific free trade zone. If they believed you, I don’t think they would touch it with a ten foot pole.

    Don Stewart
    PS China is so dependent on exports at this point, that it may be very late in the game for them to build a stable domestic market which is growing steadily.

    • Christopher Johnson says:

      Don,

      Good observations and questions. I just posted a little insight about China: their problems are immense and unlikely to diminish in the near future. In fact, since their exports cannot re expected to recover until Europe and North America are ready to buy more of their stuff, then they don’t have much to look forward to, other than fixing their messes. India’s more open political system has provided voluble democracy and gridlock that the US congress would appreciate.

    • It is an interesting idea. Cutting off trade with the US would cause the US to collapse (even more than otherwise). I expect the problem that would occur is that there are certain things that China gets from the US (perhaps parts for previously imported machinery, or grain products such as wheat), that would be hard to get elsewhere, especially in emergency situations. Losing these imports would get to be a problem. And of course the US debt that China now holds would become worthless more quickly.

      I am not sure what would happen to the price of oil. It might be that it would drop too low, causing problems.

      I expect that baby steps in the direction of protectionism would be safer.

      • Don Stewart says:

        Gail
        I suspect that China could get along without the US pretty easily. See the graph below. With China’s strong investments in Africa, I imagine that the agricultural imports could rather easily be replaced. Investments in the US (such as the acquisition of Smithfield) would, of course, be jeopardized.

        Lots of people say that the Chinese leadership is simply idiotic or corrupt and so does things like build ‘ghost cities’. I don’t know. If they and other developing countries with low oil consumption are smart, it seems to me they would want to isolate themselves from the chaos which is engulfing the OECD countries.

        Don Stewart

  16. Yves says:

    Hello. At the beginning of a global downward slope in oil production, I don’t think that the consequences would be too catastrophic for the population. Every country has known recessions, sometimes deep ones and they have recover after. They adapt to the new situation and some mechanisms are unconscious.
    When there is a recession – I remember in the eighties of the preceding century, when I was in my twenties – the unemployment (15% at the time, much more than what it is now) tended to hit disproportionately at the newcommers on the working market, mainly the young and the new immigrants. The result of this at the time was, for the young, that they studied longer and they tended to install themselves in a very urban lifestyle, going to fringe cinemas, switching mates often and not having a house, a car nor a baby. After the hard time passed, most found interesting jobs but they were already a bit old to become fathers or mothers. Nevertheless, many managed to have one child. That ws much less than what we used to have. I’m a French-Canadian and my people had very big families before 1960. The first French settlers multiplied themselves by a factor of 1000 – 10 times every century – before it broke suddenly in 1960. I guess we received some message from our environment or from the economy that Quebec was filled, but the change happened rather peacefully. We drop the Catholic religion and we entered the consumer society. Another transformation that occured during the recession, had to do with a temporary diminution of immigration. This means less people coming from low standard of life countries to a high standard of life country, thus it dampened consumption too or didn’t allow it to rise too much.
    I think that people will switch to electric cars rather smoothly and without big crisis, even if these cars don’t seem to be totally as convenient as the petrol car. They are still more convenient than no car at all and I can live without a car and I am not pushing for a revolution – at least not for cars.
    I wonder if the evolutions you are describing in your site couldn’t be more readily exlpained by the big economic event of the last decades : generalised free trade. It seems that the countries who loose the more with free trade, the formerly industrialised countries, are the ones who push the more for it. The western industries moved to China, and this country sales it’s production to the West. The West bought as much as they could to maintain there former standards of living, and they borowed for that. Now they can’t borow enough to maintain there standard of consommation and pay back a minimal part of their loans. So they cut a little bit their consumption. The Chineses don’t seem to be ready to consume a sufficient part of their production, so the growth of the demand is on the wane.
    I think peoples in the West should fight against free trade agreements. It may be good for the 1% investors, but it is not good for the vast majority of the population.

    • Christopher Johnson says:

      Hello Yves:

      You appear to have a good appreciation of the factors involved. Recommend you take a look at an earlier posting by Gail that addresses trade and globalization.

      http://ourfiniteworld.com/2013/02/22/twelve-reasons-why-globalization-is-a-huge-problem/

    • I agree that free trade is not working out well for the developed countries. Too many jobs are lost, relative to the cheaper imports and probably greater debt.

      I am less confident of things transitioning smoothly than you are. I see electric cars as a problem, because of their high price. Governments cannot afford to subsidize their high cost for the masses. There is also the problem of keeping governments functioning successfully, with long periods of recession. Governments need to cut back greatly on services, because they cannot collect enough taxes. This is very stressful for people who were depending on pensions, unemployment insurance and other programs.

      • Christopher Johnson says:

        Gail, I’m not sure if the antecedent of ‘you’ in your above posting on 9 June was meant to be me, CWJ, but just in case it was, please allow the following regarding electric vehicles. While I agree that the overall development and growth of the technology has been disappointing, there has some progress. Almost 2% of the cars sold last year in the USA were hybrid or electric. That’s not a good number except in the context that it is growing and will reach 5% and then 10% within a decade or so. Is that enough? No. On the other hand, do you know of any reasonably good alternatives?

        • Scott says:

          Hello Chris, I think that falls way short of the number of electric cars needed and I think that we cannot afford to build as many as we need, and that has been Gail’s message, unless we stopped everything else and made it a priority now, which I do not see happening yet. The system we need is not in place so we have a big problem disbelief or us focusing our resources on building the wrong things which seem to be the case. We could really build a better world if we focused these last remaining fossil fuels to build things needed like solar panels.

          Our priorities are still building items that sell like XBoxes and the latest gadgets.

          I am not sure if there has been a poll done, but I bet if you did one, more than 90 Percent of people would believe that there is plenty of gas and oil for at least 50-100 years or more. But even with that knowledge lets say even a 100 years that is something that folks should worry about.

          A hundred or even two hundred years on not long on the big clock of time. I think most of us agree that the world itself and many life forms will be the big survivors, not sure about humans but there will be some that survive I believe, fishes and life will once again come back and the oceans and prairies will come alive with life in only a couple of decades perhaps.

          • Don Stewart says:

            Scott
            Referring to your estimate that most people would say that there is no shortage of oil (and, I suppose, no shortage of credit).

            There was a recent congressional hearing about oil and an industry witness said that there is ‘150 years of natural gas’. The Obama administration has stuffed itself with industry people. The US foreign policy is all about helping corporations by pressuring foreign governments. In short, the Establishment says ‘trust the powers that be and don’t ask questions. It will all work out OK.’

            And when someone does seem to be telling a ‘different truth’, it has too often been wrong. For example, James Hansen was here a couple of winters ago. It was a frigid evening. He joked that everywhere he went to speak it was cold. But he reiterated his message that it was going to get hot. At that time, the notion that the early manifestation of global warming might be extreme weather was just surfacing. He pooh-poohed that idea and said, no, it was going to be hot. He opposed the use of the phrase ‘climate change’ and instead clung to ‘global warming’.

            Well…we have just had a record late date for our first 90 degree F day. Of course, I lost all my peaches to fruit drop because we had a warm winter and a cold, wet spring. For the second year in a row. What conclusion would a farmer who heard Hansen speak 2 years ago draw? Most likely, it would be that the scientists don’t really know what they are talking about. What the farmer sees is instability…or maybe he imputes a change in the ‘normal’ pattern. For example, one long time farmer said that ‘everything changed after the hurricane came through in 1997. we used to have droughts, now we have floods.’ Europe has had cold winters and central Europe is currently having record floods. So what was it about all those warnings of hot and dry?

            In short, the Powers That Be are telling everyone not to worry, and the warnings from scientists have been not very accurate. I understand about the Jet Stream and all that. I understood it several years ago when Dan Allen, a New Jersey high school chemistry teacher, actually looked at the climate record and found that what most characterized the past with high carbon levels was volatility. But the ‘official science’ continued to say that everything, everywhere, was pretty much going to get just a little warmer and a little dryer. Allen was right…big science was wrong.

            When I look at what is actually happening, I don’t have much hope that the general public is going to perceive that there is any crisis that merits a response requiring a change in behavior.

            Don Stewart
            PS I don’t dispute that the recent decline in air temperature is a result of more absorption by the oceans. And that, someday, the oceans may give that surplus energy back into the air. What I am saying is that, to the general public, Science hasn’t told a very convincing, coherent story. It’s only very recently that respectable scientists have begun to talk about stagnant Jet Streams. Do they have it right this time?

          • XBoxes are a whole lot cheaper than cars. Young people still living with parents can afford an Xbox, but not a car.

            I am not convinced that even with a priority we could build enough electric cars. To build all of them would take a huge amount of physical resources – rare earth minerals and minerals for batteries, and many other things pulled out of the ground each year. Somehow, this would need to be paid for as well. I don’t see either the government or individual tax payers having money for these things. Printing more money for these things just makes the debt problem worse.

          • xabier says:

            Scott

            I think we could say that Mankind has proved to be ‘Unfit for Office.’ Maybe it’s time to take our bow….

            When I read in the British press that we have ’10 years of energy from shale’, and they are trying to get people excited about it, I can sense the desperation.

            But the plain truth is, they don’t need to do this propaganda, because the masses are clueless.

            • Scott says:

              Hello, Yes Xabier, that is the part that amazes me, how few really do see the problem of resource scarcity. I have lived here in this little Orgeon town for a few years and have brought up the issue with some acquaintances about peak oil and scarcity and have not found one person yet that is worried. I do have a good friend in California who is very concerned and he reads this site and we have been studying this and other issues for a few years and sending and sharing articles and things on the email. So there is a few of us out there that are worried but we are surely the minority.

        • I think we need cheaper technologies. Maybe electric golf cart level of technology instead of current on-road electric vehicles, so people can afford them.

          Maintaining the roads is just as important, or more important, than having vehicles of any kind. I expect this will be even a higher hurdle than the cost of cars. Somehow, either taxes on vehicle use must be high enough, or there must be a high enough general tax, to cover the cost of road maintenance.

  17. Don Stewart says:

    Dear Gail and Others
    This is a little weekend frivolity. In the last post, I mentioned hand tools. Here is a stunning exhibit from Japan of micron level mastery over a wood plane. The record is a 3 micron shaving.
    Don Stewart

  18. Kris says:

    Hi Gail & Others,

    Recently it seems to be quite clear that there are some over unity energy systems based on cold fusion which are genuine and reproducible, e.g. a link on peakprosperity to a Purdue professor who inspected such a device in a start up in Canada.

    But I was wondering whether such devices if they would be (or would be allowed to be) implemented, would make a difference for us in the predicament we are facing. They would only provide excess heat, which would be good for heating or electrical power generation, but not be a
    replacement for the liquid fuels we will be losing access to. And I gathered from previous articles on this site that electric and fuel cell powered cars aren’t really a viable replacement.

    They also would not change the other problems such as overpopulation and depletion of some other resources.

    So maybe it would be interesting to do thought experiment and start with the assumption that the devices are genuine and will be implemented, and write an article on how this would alter the predictions of the current collapse paradigm (i.e. devolution back to pre-1800 conditions or worse).

    Sincerely,
    Kris

    • I really doubt they would make a difference.

      For one thing, our biggest problem is cheap liquid fuels. The proposed energy source is electricity, which doesn’t get us very close to cheap liquid fuels.

      The other issues are (1)timing and (2) amount of money (and energy) investment required for the new energy source. When a new approach for extracting oil from the ground, on average, it takes 17 years until such a new approach is used wisely. A reason for the slow up-take is once a company has invested in one approach, it will cost money to invest in another. The company will quite likely wait until the time comes to add new production (or replace worn-out equipment) before substituting a new approach, unless the new approach is substantially cheaper than the existing approach. So, at best, it seems like cold fusion would simply help fix the CO2 problem, by finding a system for electricity generation that doesn’t use fossil fuels. If the new method was substantially cheaper than existing methods, it would help the economy.

  19. jim says:

    There is a lot of buzz lately about what was previously termed “cold fusion” ( now more frequently called LENR as in low energy nuclear reactions.). The most recent big news is a test of the so called E-cat, a device created by Italian engineer Andrea Rossi. There is still considerable controversy as to the validity of the test, but it did involve some reputable scientists. Hanno Essen for one. http://en.wikipedia.org/wiki/Hanno_Ess%C3%A9n. One area you are mistaken on; LENR could indeed replace liquid fuels. It would be many times more energy dense than gasoline.

    • Kris says:

      How could it replace liquid fuels? The heat could give steam…so a car with a steam engine then? Or direct conversion of heat into electricity as Siemens is working on?

      • jim says:

        Yes, heat for steam or (if possible) direct electricity production.

        • Christopher Johnson says:

          Do you know of any group engaged in R&D of steam engines for cars? It will take 10 years or more to design, test, redesign and retest etc. several times before a pre-production prototype can be expected. Now multiply that process by about 10 or 20 to cover a wide range of vehicles, and you can begin to see the degree of commitment that would be needed to fund such a program.

  20. Don Stewart says:

    Dear Gail
    Do you know what this chart is saying, if anything?

    Gasoline retail sales by US refineries is down by 50 percent from a few years ago. If taken at face value, it indicates a collapse in an important physical aspect of the economy (as opposed to whatever QE might be doing to stock and bond prices). I can think of a few confounding factors which are possible:
    1. Maybe refineries are selling more wholesale? Perhaps this is an Exxon refinery selling to Exxon service stations? But maybe more of the gasoline is going to independent outlets?
    2. Maybe a lot of the statistics which purport to show ‘gasoline’ usage are actually showing ‘what is sold as gasoline’ which includes a large amount of ethanol and thus the true gasoline component is weaker than the charts indicate?
    3. Perhaps refineries are selling more product to other countries and this represents only domestic sales?
    4. Maybe the ‘cash for clunkers’ program actually worked?
    5. Maybe sociological changes are eating away at the gasoline market?
    6. Maybe products other than gasoline (such as diesel) are not declining so rapidly and the refiners are producing more diesel and less gasoline?
    7. Maybe this chart is conceived by conspiracy theorists and has no meaning whatsoever?
    8. If the chart is a true indication of what is happening to US refineries, then more will need to close. It becomes clear why US refiners are so desperate to ge the additional business of Canadian tar sands.

    Thanks
    Don Stewart

    • Joe Clarkson says:

      Don,

      The chart is only a reflection of a small part of gasoline consumed in the US, which runs about 340 million gallons per day. It shows only retail sales by refineries, not their production, which is slightly more than consumption due to exported gasoline.

      US gasoline consumption is down slightly, but not all that much. A more relevant chart is found at
      http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MGFUPUS2&f=M

      • Don Stewart says:

        Joe
        Thanks very much!
        Don Stewart

      • Scott says:

        Joe, that chart looked more in line with reality. Last we looked, there are more cars and trucks out there now – more than ever before. Some are more efficient. but they are are all out there in the millions or is it billions of cars? We are using up gas and diesel like crazy.

      • Thanks for figuring this out.

  21. There is a refusal on the part of almost everyone, at least in government and economic circles, to accept that in the 1930s oil delivered 100 barrels worth of (oil) energy for every one barrel’s worth of energy used to extract and distribute it.
    By contrast the same 1 barrel’s worth of ‘input’ energy today delivers a maximum of less than 20 barrels of oil, in the case of the tarsands and shales, that figure drops to only around 4 or 5 to 1.
    That is the stark reality that we all face, that our oil-energy extraction equation is fast approaching parity.
    this is the bottom line for energy based economics, The fact that nation after nation is finding oil unaffordable, seems to be pointing to the fact that we are heading down to that level
    When we reach that level, the amount of oil left in the ground will be irrelevant, and the fact that a wealthy strata of society can ‘afford’ oil will make no difference. Oil production and distribution relies on a fully functioning system of global commerce. When the oil market finally crashes, that system will go down. The tankers and refineries will stop (they are run by ordinary working guys) and no amount of money will sustain your oil fuelled lifestyle.

    • Ert says:

      It is unfortunate that this is not communicatable in most enterprises that define their business targets in growth of produced quantities or revenue percentage and not as a share of the market segment (which can grow or shrink).

      The company I work for has defined first – a volume of product that it wants to produce in the future and a revenue percentage. Here the primary! targets for all layers of management are basically ‘expansion and fast & high return of investment. Issues that point to a stagnation or post-growth economy are even when plausible not in alignment with the core goals. Raising those won’t do you good – as you are the messenger of a bad message….

      This is a tricky situation for every employee and management layer. I think many people find themselves in that situation… kind of a dead lock of personal opinion and believes backed by data and contrary goals of an organisation.

      I think this conflict is a large part of our bigger society and leads to a lot of frustration, then one can not be effective in the bigger picture (in contrast to efficient) if desired external goals and possible options within personal reach do not align.

      • you can sum that up very easily—”shoot the messenger”

      • xabier says:

        ert

        That’s a very good summary of the societal and commercial contradictions that we now face. The mis-alignment between assumptions and likely reality.

        The organisations and structures we have created are in consequence effectively incapable of rational adaptation.

        • admin says:

          Yes, as Nate Hagen puts it: “a longage of expectations”

        • Scott says:

          Hello Xabier, There have been some really good ideas put forth on this site and I wish there was way to see them built into fruition. if we would build some of these things that been discussed we would be on our way to solving this mess.

          However, it seems like most of the world cannot afford them. To build our way out of this one, this time will be harder and more expensive as we have already maxed out our charge cards. But the good news is there is a way if there is the will and if we can rise out of a financial collapse first which will likely kill many with it. I am starting to think something new here, and in looking at the world I see that perhaps part of the world has the means to build our way out of the mess. But I fear many will be left behind, for that reason I think this generation or the next will kind of governed by where they were born as far as their future rates of survival goes.

          Perhaps that strengthens my argument that we will likely see an uneven collapse where some countries will get hit with death starvation and others will control resources.

          On a lighter note, just in case this comes soon I am learning to garden, right now my back porch smells of cut up green and white onions drying in the dehydrator. I will jar this food up and save it for winter soups. Gardening calms the mind and give us time to ponder and get a connection to things are important again.

          Regards to all,

          Scott

          • xabier says:

            Scott

            In the absence of effective and wise governmental planning, I fear you are right and it’s going to a be a Survival Lottery.

            Clearly the banking system is going to blow up before anything else (ie climate change) hits: once one has prepared for that, there’s nothing else to do except chill out and enjoy what the Earth has to offer.

        • Ert says:

          @xabier

          Thanks. And even when the larger organisation gets the big picture – it must still please the banks and the ‘investors’ or ‘shareholders’. If there is no growth perspective – then stock prices go down an refinancing cost go up.

          My company cares certainly a lot about energy, waste and resource efficiency. But these aspects are even from an economic point costs – and if you have a future perspective, then you know that those are part of the rising cost and in some cases they will be difficult to come by in larger quantities.

          At least this is a way of getting these issues into organizations – reduction in wasted energy and resources to get a competitive advantage by saving necessary expenses.

    • I think you and I are saying pretty much the same thing.

      I think the financial system will crash because oil is unaffordable. It will be the fact that the financial system crashes that causes oil price to drop, and makes it impossible to get the rest of the oil out.

  22. Christopher Johnson says:

    Don:

    Confucian societies emphasize technique and reward the most skilled. A flower arranger in the West is paid to get the job done and the product out the door, in Japan the artistry is worth more.
    The sushi chef’s presentation of the food on the plate is essential, etc. You have to experience life in a Confucian society to appreciate these pervasive differences.

    • It seems like even in Confusian societies, there needs to be sufficient money/ surplus energy to allow someone to be paid to provide this presentation. Of course, if it is essentially free (takes the same time as any other approach, and everyone learns some techniques in this regard), maybe this is not an issue.

      • xabier says:

        Gail

        I suspect that you are right: ample cheap labour is the key, and also a high level of skill which leads to very quick production of even very elegant and delicate products. In our modern automated world, we forget what skilled hands can achieve.

        This was also the case in the West: for instance, the painter of illuminated manuscripts, or binder, produced wonderful, delicate work, and enjoyed personal prestige, but was no more highly paid than an ordinary mason or joiner.

        • Scott says:

          Hello Xabier, Many good ideas have been brought up – but it appears to me that the world is restricted due to government regulations and mistaken beliefs holding us back from developing the systems we know how to build, but cannot build due to lack of will or roadblocks due to governments.

          Oil companies are deeply entrenched with lobbyist and the Beltway special interest groups that literally surround Washington DC and pretty much every state capital building. And this is also going on in almost every country too.

          So we may live in the world of bullet trains running though areas where they may run off the tracks due to people pulling up pieces of track and wire to sell for scrap. Kind of reminds me of China’s African pipelines being cut into and people getting fuel and sometimes getting burnt in the process. Clean ups and losses from these thefts will make matters worse for governments and cities.

          I think the point we have to consider is that to build a modern infrastructure certain things of value need to be left out there in place to support structures and systems. Some of the new light bulbs are very efficient but also very expensive and most likely will not be put out in the streets to be stolen. like LED Lights for example.

          Solar panels may need to be put in place to power things, but will they also likely be stolen in many areas and is society going to break down to the point that even a stop sign cannot be out of danger of theft for it’s value?

          I think Gail’s point was clear it harder to put these infrastructures in place and as the price of wire or anything rises they will be all pilfered.

          I have read many news stories here that even the grounding copper wire has been stolen from large power transmission towers. And there have been power outages as a result in Oregon.

          So to have a society we need trust and cooperation and to be able to put these systems in place for everyone’s service people need to understand that it belongs to all of us, but what we have now is ever increasing gangs of thieves, and gangsters. This is tearing apart the fabric of our nations.

          We are missing the element of cooperation and brotherhood to help one another and is perhaps our biggest roadblock to solving this crisis.

          I think our collapse is going to be worsened by these thugs and their behavior. If you cannot put a street light in fear of the metal and light bulbs being stolen, what use it is and what kind of society can you expect?

          We almost need a cage built around most public property like a street light to protect it from thieve. This is not in all areas, not my town yet but it is happening everywhere and agricultural crimes are on the rise too people cannot even leave pipes in the fields or equipment as it get stolen.

          This bad behavior is contributing to our collapse, not just a collapse of resources, but collapse of people’s morals.

          • xabier says:

            Scott

            ‘Morals’ is the wordy you are not meant to use today: you don’t commit crimes. you are ‘marginalised’ and need help. When I think of the working men who half-starved in the 1930’s, and wouldn’t dream of stealing, and see where we are now…..

            As for stealing, it can get so bad that almost nothing can be left in public spaces: an Austrian friend told me when he was working in Bulgaria about 10 years ago, that every cow in a field had to have a boy watching it all the time, and whenever new road signs were put up, they had gone the next morning, taken for scrap.

            Agricultural crime has risen hugely in England: a farmer here won’t risk confronting the thieves, as they are armed with steel bars and shotguns – why risk his life? Fields have been harvested of their hay at night. Gates stolen, etc. Even in town, we have cases of thieves creeping up to houses at night and sawing off metal pipes. Here in my village people are now going right up to houses and stealing from right by the front door: unheard of in the decade I’ve been here.

            In Spain it’s easier to dispose of bodies in the country, being mountainous, so they say some farmers have taken firm action – who’ll miss a few Kosovan thieves?

            Violent theft in Spain is up about 40% in most regions since 2008: very significant, as it indicates desperate thieves.

            • As I put some green metal stakes out by vegetable plants this morning, I though to myself: If people were poorer, they would be stealing these. I know that high fences are common in many poor countries. Also, myths regarding what happens to thieves (illness, etc.).

            • Scott says:

              Hello Gail, Your garden will not even be safe from thieves in time of collapse, that is the reason we store some food in a secure area. I built some screens over some of my raised garden beds to keep the deer from eating, but it occurred to me that I could also screw these down – to make it harder for hungry neighbors from stealing my veggies!

          • It’s not so much morals, as desperation too.
            People will steal to stay alive, it’s something I’ve been forecasting for years now. When resources begin to run down, people will do anything to survive. Here in UK a favourite for metal theft is copper wiring along railway tracks; almost a daily occurrence. on a different but similar note, I notice expensive cuts of meat in supermarkets are now security tagged. As the cost of resources gets higher and supply gets tighter, this will get worse.
            There will come a point when full supermarkets and empty bellies will cause immediate and lasting violence.
            On a personal level Ive taken security measures, 5 years ago when I took some unobtrusive steps in that direction (didnt want to scare the neighbours) I felt foolish. Now I don’t

            • Scott says:

              Yes, I agree, expensive pieces of meat being security tagged, razor blades and things that we are used to buying routinely are now getting pricey and scarce, that sends a message in itself.
              I call this the big squeeze so get ready face security if buy a nice steak or bottle of wine or any expensive item. Costco and Walmart have people reviewing carts as they leave the stores. It just seems like a staircase down, one step at a time, first no more good fish and steak and then we eat beans!

          • I think the bad behavior relates to some people having no other way to get their needs met. They are falling through society’s safety nets. We should think of proposed solutions from the perspective of, “Would they work in Greece?”

  23. Asiawatcher says:

    Thanks for this very useful article. I would question only the following statement:
    “Another way oil consumption can be reduced is if a country has in the past generated electricity using oil, and such generation is shifted to another fuel, such as natural gas. This type of change is being made in Greece, but seems unlikely in China and India.”
    China has been investing heavily in gas pipelines, bringing gas from Central Asia: there are some great maps here –
    http://philebersole.wordpress.com/2013/03/28/the-geography-of-pipelineistan/
    It has also been investing in nuclear and renewables, and its usage of coal has been increasing rapidly as a percentage of the energy mix:

    http://mazamascience.com/OilExport/output_en/Sources_BP_2012_consumption_mtoe_CN_MZM_NONE__.png

    • The reason I didn’t think a switch from oil to natural gas could happen in China and India is because I didn’t think current electricity production was from oil in those countries. (I expected it would be from coal, hydroelectric, or natural gas). I have no doubt that these countries are adding natural gas.

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  26. Vineyard says:

    Gail, in your last article you refered to a FT article about increasing Non-OPEC marginal costs. In the same article it was mentioned that US oil marginal cost jumped from $89 a barrel in 2011 to $114 a barrel in 2012.

    This is way above the current WTI market price. Does this mean that even Shale Oil isn’t profitle anymore in the U.S.? (We already know that NG isn’t.)

    • There seems to be evidence we are moving in the direction where shale oil isn’t profitable. There seems to be considerable variability in wells that have been drilled. Some are in sweet spots; others are in less productive areas. Even within these areas, there is variability in individual wells.

      Some calculations indicate that companies drilling these wells are finding that their cash flow is not very positive, or is actually negative. If it is negative, it is likely to become harder and harder to get money to do drilling in the less profitable areas. It will probably be lack of funding for new drilling that will eventually bring the end. If oil price drops a bit, this will make cash flow more negative, pushing the process along.

      • Scott says:

        Gail, here is an interesting article I came across about the cost to run an electric car in our state.

        http://www.ktvz.com/news/ore-electric-car-owners-pay-96-cents-an-egallon/-/413192/20525818/-/nlj4gsz/-/index.html

        • Thanks! I notice that Oregon is one of the less-expensive states for electricity, so the cost might be somewhat higher is some states.

          • Ert says:

            @Gail

            I don’t knwo the consumption of full electric cars. But vor the VW E-Golf (“Rabbit” in the US) they sait it uses 15,4Kw/h per 100Km (60 miles). That approx. 4€ in Germany which are approx 5,30$. The Diesel Version of the VW Golf need somewhere between 5-6,5L per 100 km (Gas Mileage: 35-40) which are approx. 8€ per 100km at current prices in Germany (5€ or approx. 6,5$ a gallon of Diesel).

            Somehow all this E-Fuzz does not add up. A Coal Plant produces electricity with max. 40% efficiency, then there are losses in the transmission, losses in the AC/DC converter, losses in the Battery while loading, losses in the battery while unloading.

            ALso the Battery has to be produced and recycled. Currently the recycling of lithium is 3 times as (cost/energy) expensive as to buy it fresh from the mine. Lots of other stuff is needed.

            My optionion: Electric cars are only making sense if they pose as a “buffer” capacity for the whole alternative energy network and are loaded with electric power that otherwise is “lost”.

            • The big cost of an electric car is the car itself and the battery (which has to be replaced as some point). In fact, these costs have to be “paid” up front, in terms of the resources extracted from the ground and put into the vehicle. How much use a person gets of the electric vehicle depends on a lot of things–how well roads are maintained, and whether the car can be driven very far, and how versatile it is for alternate uses. Somehow, the cost of the vehicle and replacement batteries should be figured into the real cost per mile. If the cars aren’t driven as many miles as other cars, the cost per mile will be very high.

  27. Don Stewart says:

    Dear Gail and Others
    I see quite a bit of muddled thinking both by myself and others as we try to figure out the best way to survive the trials and tribulations that Gail depicts. I have a suggested analogy for thinking more clearly.

    Let’s suppose we have a tall, pyramidal apartment building (sort of like the Transamerica tower in San Francisco). The highest rents are found on the top floor, with majestic views of the Bay and Marin County and out to sea. The cheapest rents are on the bottom floor, with a lot of traffic noise. But then Gail, dressed like an Old Testament Prophet in ragged clothing, begins to preach on street corners. Her message: Repent Ye Sinners, for the End of High Rise Living is at Hand. Furthermore, she gives some evidence (which is hard to ignore), that the crisis will strike suddenly in the form of a financial crash which will result in the inability to get food and water up to the higher floors in the building. We recall the old saw that ‘it is better to fall out of the first floor window than the 60th floor window’, so we begin to contemplate our options. We presently live on the 30th floor–midway in the building but well above most of the residents of this pyramidal building. Going over to the window (which we can’t open) and looking down to the street far below gives us a chill. We can’t think of any way to escape should the financial crisis strike while we are stuck on this 30th floor.

    We briefly contemplate moving to an apartment on the first floor…but that is too depressing. We would be living with traffic noise and diesel exhaust and police sirens all the time. After a brief period of thinking ‘nothing can be done’, we suddenly conceive the idea of moving to the 3rd floor. Life is a little better on the 3rd floor, and we can imagine breaking the window (sort of like Bruce Willis might do) and floating to the ground with a jury-rigged sail of bedsheet and closet hanger poles. So we would be living in a less desirable, but not terrible, apartment from which we can imagine an escape when the prophesied collapse actually happens.

    (Now I need to interrupt this tale for some scientific research. There existed, in Colombia, three small rivers which flowed into the Orinoco but which did not connect to each other directly. A certain type of fish lived in the three rivers. The females were dull brown, but the males had brilliant spots on their sides–which were quite attractive to the ladies. One of the rivers had predators that loved eating the fish, and were more successful in catching and eating those males with the biggest and brightest spots. In that river, the males had evolved to have muted spots, but still visible to the ladies. Then, one day, the predators appeared in a second river. There was a sudden crash as the predators had a field day hunting down the brilliant males. But a few dully colored males survived and slowly began to evolve more brilliant displays which were more attractive to the ladies. After a few years, the brilliance of the display in the second river was equal to the brilliance in the first river. The last time I heard about this, there still weren’t any predators in the third river and the males there were still stunning.)

    If our man about town moves to the first floor, he will have very little coloration which might be attractive to a female. He may very well live a solitary existence and grieve about his chosen path. But if he moves to the third floor, then all those females on the first 3 floors may confuse his bumbling with sexual allure and make the mistake of marrying him. (Marriage, my wife tells me, is always a mistake for the woman, who lets brilliant spots get the better of her good judgment!)

    And so, the moral of this fable is to move closer to the reality of the first floor, but not necessarily to the first floor itself. So long as one has a credible way to quickly get down to the first floor when the crisis strikes, one can enjoy a better life on the 3rd floor. (If you want to get technical, the best solution may be an apartment on both the 3rd and 1st floors ( e.g. an apartment in Moscow and a dacha in the country), or moving closer to extended family but not into the same house).

    There are some corollaries to the moral. A huge number of people will be trapped on the upper floors. There is nothing much you can do for them. (How to feed 7 billion people is not an actionable question.) Another corollary is that some bad things are bound to happen. Some of the fish which are colored ‘just right’ still get eaten by the predators. A third corollary is that crying over spilled milk is not productive. Lecturing your third floor neighbors about how you used to live on the 30th floor isn’t like to make you popular and win their help when you need it.

    I want to point out that the part about the lades can be read as one’s ability to make one’s way in the capitalistic world which currently exists. Trying to live a strictly independent life isn’t likely to work.

    You all can think of other lessons this fable holds, and also ways in which it might be misleading.

    Don Stewart

    • xabier says:

      Don

      The occupants of Floor 60, who own everything, recruit 10% of the others as enforcers and trustees, and employ the rest to toil up to Floor 60 in gang chains with everything they need. They spend their time looking out at the other Floor 60’s they own in all the other Pyramids, until…………

      • Don Stewart says:

        Dear Xabier
        In a financial collapse, many of the people on the 60th floor will have lost everything they have plus some. Margin debt in the US stock market is at an all time high. So the richest people are those most deeply in debt or dependent on the debt paying ability of others. If the ability to pay debts goes away, the notion of ‘wealth’ will change and the composition of the class of ‘wealthy people’ will change.

        If you have a couple of hours to think about a dystopian society, watch the Japanese movie Sansho the Bailiff. It is a medieval tale from Japan. If you don’t know much about medieval Japan, it is helpful to read a commentary which explains things like the division of power between the Emperor and the Minister of the Right. People made hard choices and there were consequences. No easy answers.

        Don Stewart

    • Don,

      Thanks for your entertaining fable! It has some good points.

      I am afraid that some of those who think they are moving from the 30th floor to the 3rd floor, are really moving to the 10th floor. So they still have a long way to go. From our perspective of the 30th floor, it is hard to see how far we have to move.

      And even of those of us who make it to the third floor, it may be that those who are more native to the first to third floors will still beat us out, when it comes to long-term survival. Those of us from the 30th floor haven’t figured out yet how all the parts fit together–how upbringing of children needs to be different, and how marriage customs need to change, and all the other details of society.

  28. Pete says:

    Any idea what’s the reason behind that recent steep increase of per capita consumption in OPEC and Norway? Is that the declining EROEI? I can’t believe the non-industry consumption is increasing so rapidly overall…

    • EIA recently revised its data. Norway’s data stayed the same, but OPEC’s is less high than it was originally shown (still high). I expect that it takes more oil to get oil, and that is at least part of the problem. That is the declining EROEI issue. Being wealthier, with more oil supply, is probably part of it too. In Saudi Arabia, some oil is being spent on desalinization because the aquifer is depleting. That provides higher priced water, but otherwise its utility to users is no different.

    • Ert says:

      Yes, great one – thanks for the link!

      At the end it is mentioned by the head of ASPO Australia, that from now to 2025 humanity will consume 72% of all fossil fuels (Coal, Oil, Gas…) that humanity ever burned – if current growth projections are base for that calculation.

      He said it is absurd to belief that this will happen.

      If the numbers are somewhere correct – and I belief so, as it is the way with exponential systems – then we are fu**ed within the next 10 years. This by a combination of climate change, resource depletion or energy costs of the whole system, a collapse of the financial system and with it all retirement plans, etc. pp.

      • xabier says:

        ert

        My retirement plan is the grave. I’m a realist. When I want Surrealism, I take a look at the MSM…..

  29. Gail, I found it interesting that since the Great Recession both Europe and the U.S. have each experienced about the same percentage of reduction in oil consumption ( Europe 15% and U.S. 16%). Since Europeans consume about half as much oil as the U.S. its obvious that our lifestyles are different. So it’s curious why oil consumption was reduced by the same percentage. Any thoughts on why or is this just a coincidence?

    There has been much discussion of how we should learn to use less oil.. Although it would be nice if we could “just use less” urban sprawl, poor urban planning, and lack of good public transportation make it difficult to do less driving. Residential sections of cities are not located near retail stores or businesses where we work. Re-engineering our civil infrastructure and changing city planning won’t be accomplished quickly. Replacing our automobiles with more energy efficient ones will take time too.

    Driving 55 may be a small change but it reflects an important change in attitude towards energy consumption. I find that few people really have any idea of how much energy they use, where they use it, or how it is produced. The average American lifestyle has so much energy embedded it in that most people don’t know where to even begin making changes. It seems to me that the first step is learning how we use energy and deciding to use less.

    • xabier says:

      Jody

      I think that in practical terms, it’s ever-increasing and widening poverty in the US and EU which is going to reduce energy consumption, rather than rational changes.

      And I’m afraid all too many people are buying into the shale oil and gas hype, and climate-change scepticism, to see what the real patterns are and respond accordingly.

      Just a quick look at the MSM shows what the masses are being fed, and it’s not Reality…….

      • as in all societies, when poverty reaches a tipping point, mass violence becomes inevitable
        This has sown itself to be so throughout history. It’s impossible to say what that point is of course, but take the USA as a case in point. A rich and seemingly prosperous nation, yet 10/15% of its people are on food aid.
        That aid comes from government ‘surpluses’ but the government itself is having to borrow money to keep itself afloat.
        that is unsustainable long term, and sooner rather than later that money/surplus is going to run out. When it does, you will have 40 million American people unable to get the food they need to stay alive. But conversely, the supermarkets are going to be full of food.
        starving people do not sit patiently outside foodstores.

        • xabier says:

          End of More

          Quite right. It might not mean total revolution though: there are many societies today with a lot of semi-starved, economically insecure, people and quite a high level of background violence -much of Latin America, S.Africa,Pakistan, etc, but the State holds together.

          The wealthy can retreat behind stockades, (and even get the poor hungry fools to vote for them!) the rest just take their chances.

          Certainly, without continued government borrowing and immense welfare schemes, a very significant % of the populations of the US and EU would be naked, homeless and starving: these are the stark facts.

          It’s a dismal prospect.

          But I see from the British Guardian newspaper today that ’10 Billion is No Problem’, and the article says that ‘there is plenty to go around’ : so why are we worrying?!

          • A general observation seems to be that you dont get half a revolution, once it kicks off with seemingly minor grievances, things rapidly get out of hand. right now Greece has gone quiet because they’ve got some more money to pretend they’re solvent, when they’ve burned through that, the riots will kick off again.
            As you correctly observe, constant borrowing is keeping numerous nations afloat with the delusion that money is wealth. in fact money is debt in that instance.
            I don’t think stockades are any use, no gates on any winter palace has withstood the mob so far. We just cannot judge the tipping points.–look at that single incident in Tunis.

            • Scott says:

              Hello, Yes, it does not take much to start a riot. Just look at what a ten cent bus fare increase did in Brazil…

              http://photoblog.nbcnews.com/_news/2013/06/14/18952577-protesters-embrace-to-protect-each-other-from-tear-gas-as-brazil-bus-fare-demo-turns-ugly?lite

            • When I was in Montreal a year or so ago, students were protesting (rioting?) about an increase in tuition. We had to get off one train I was on, and transfer to a bus, because of disruption. In the evening, we saw a police bus for protesters.

            • Scott says:

              Hi Gail, you know that just makes me wonder what will happen if things really get tough, we have seen a ten cent bus fare increase result in tear gas and riots today.

            • Scott says:

              Hello Gail, I was looking at batteries here at the link below, they are pricey. Finance is surely standing in the way of my system right now, I need a bunch of these and lots of panels inverters, it will cost many thousands. But I will try to piece it together. The batteries only last about ten years and then they are needed to be recycled which worries me if we can replace them then.
              I guess we could do more if we could hand each home owner $15000 each to build their system, but that is not going to happen. Maybe some loans will be available and credits which are a touchy issue.

              http://www.altestore.com/store/Deep-Cycle-Batteries/Batteries-Sealed-Gel-Cell/c437/

            • Natural systems don’t work with loans–they work with resources pulled out of the ground at a given point in time. It is only financiers who came up with the idea of loans–something that works in a growing economy.

              Whatever materials are used to make batteries are ones pulled out of the ground within the past few months and assembled into batteries. We can kid ourselves by giving huge amounts of loans to buy batteries, but it just creates more of a fiction. The reason we can’t ramp up battery production greatly is because they are very expensive–require a lot of energy-intensive material. Adding more demand for batteries is likely to make the situation even worse. When the time comes to pay back the cost of the batteries, most people won’t have jobs (unless these batteries were really used to give people jobs) so the loans will never be repaid.

            • Scott says:

              Hi Gail, I guess that kind of shoots down the theory I was thinking of last night about how we could embark upon a huge lending scheme such as student loans to get the solar panel systems in every home. We just do not have the money. I suppose if we stopped fighting wars and used the might of our military industrial complex to build it, then, it could be done. But here we are lacking the political will and foresight. When you have say 95 percent of the people believing everything is fine nothing will get done in this regard sadly until the crisis is upon us and widely seen by all.

            • I am not even sure that there is enough money involved with military spending to fix the problem.

              Also, a lot of military spending is for salaries. I think that part of the reason why war is attractive to congress is because it provides employment for a lot of people who might otherwise be hard to employ–young kids out of high school, people working for military contractors, and people working for companies like Lockheed that make military equipment. Somehow, these people would need to be taken care of (unemployment, food stamps, disability income, retirement income, etc.), even if the US can’t provide jobs for them.

          • I also think young men in particularly actually enjoy a riot.

        • If we wait for the “inevitable” it will surely arrive, but humans have great potential for rational thinking and adaptation. I agree that our society’s current momentum appears impossible to deflect from the cliff or the rocks ahead. Perhaps many, many people will choose to ignore reality and wait until situations force them to adapt or die. Violence is the action of last resort. It’s not likely that there will be resources to support 7 billion people. Climatic changes, floods, droughts, heat, storms, wildfires will surely cause massive migrations. The future is anything but predictable.

          But I still prefer to do what I can to make changes towards a higher quality, lower energy consumption lifestyle. I prefer to enjoy a sunset to worrying over high temperatures tomorrow. I prefer to enjoy the company of others rather than argue endless debates. I ignore the media hype by not watching commercial T.V. or daily listening to news.

          An old saying I learned long ago…”Pray to God, but row away from the rocks!” I took this to mean it is good to have faith in a power greater than one’s self, but even better to do what you can when necessities arise.

          • xabier says:

            Jody

            Blue Print for a Sane Life.

            I’d put the % of sane and rational people responding to our situation in practical ways at a very low level, but there’s no need to join them as you rightly point out.

    • An awfully lot of the energy we use is embedded in “stuff” we may not even buy–the roads we drive on, the vehicle we use (car, train, bus, airplane, boat), the Internet we use, the computer we use, or the light bulb we buy. We recognize the gasoline usage of our cars, but this is a relatively small portion of the total. It takes a great deal of energy to build houses, stores, and factories, and to heat, cool, and ventilate existing buildings. Food takes energy to be grown and transported, refrigerated, and cooked.

      Energy efficiency does a little bit in terms of reducing energy usage. Cars today can be bigger and get the same milage that they did years ago. Sometimes, they are not so big, and their milage is better. Refrigerators and air conditioning units now use less energy than than years ago. New light bulbs take more energy to make (= their price is higher), but while they are operating, they use less energy. Better insulation also acts to reduce energy usage.

      Unfortunately, there is also a tie of energy use with income. The job a person has to earn income takes energy; the money the person earns allows a person to buy “stuff.” In general, the more money a person has, the more he/she will buy. Saving money in one area (say, electricity for light bulb use) leaves more to spend on other things. Since practically everything requires energy (with the basics of life requiring relatively more than other things), it is hard to get total energy usage down by much, without reducing the number of people with jobs.

      On a world-wide basis, the total population, and the number with today’s jobs makes a difference as well. Rising world population tends to raise energy usage.

      All of these things make it very difficult to actually reduce energy usage. As a practical matter, a reduction in energy usage takes place primarily when there is recession and job loss. If jobs are transferred to Asia, it reduces energy usage in the country that had the jobs originally, but raises energy usage in Asia. Asian energy usage is mostly coal.

      I am not sure why the change in energy use in Europe and the US are similar. To a significant extent, it has to do with jobs being transferred to Asia. This has happened in both areas.

      • Gail,
        I certainly agree with your comments, once a person begins to look seriously at all the places our society uses energy it becomes extremely difficult to see how to effectively reduce consumption. I liked the list you posted recently of 8 things you can do to respond to energy limits. But I also think lifestyle changes are possible but impossible to force on others so overall have little effect on total energy consumption, especially with the dysfunctional leadership we currently have in government.

        From the things I’ve read about our economic picture, I’d question whether Europe and the U.S. are losing jobs because of out-sourcing to Asia. I think corporations did most of the out-sourcing a decade or more ago, and I wonder if our current flat economic performance may be more because of demand destruction. As mentioned by others, we are overall becoming poorer. Fewer families or young people starting families have as much personal income and it is affecting our ability to purchase stuff. The very wealthy can only support so much economic activity. The monopoly game ends when one person controls all the money.

        While it is true that Americans are still arguing about peak oil and climate change, or are too busy trying to keep their head above water to think about reducing energy consumption, it is possible for a family or a person to make a different in their own energy consumption. This has been something my husband and I have been working on for more than 10 years. We realized that fossil fuels were becoming more expensive and that being non-renewable eventually they will become unavailable. We realized the implications of peak oil and came to the conclusion that this might very well cause our civilization to collapse. As scientists we have long accepted the reality of climate change. The logical question was “what can we do?” Our answer was renewable energy and home food production. The main benefit to these changes is our ability as a family to respond to changing energy and food prices, to possible climate crises, and to eventual decreases in government payments for social security and medicare.

        Yes, renewable energy required significant capital investment, and I agree that this is fast becoming economically unfeasible for many families. But for those of us that can afford it I think now is a good time to do so. I also realize that home food production requires lots of labor (and learning) and not everyone likes to garden. But having the security of food makes a family more resilient in the face of economic and environmental instability.

        This has been a long term commitment for us, so we did what we could afford to do and made time to do. We started by improving energy efficiency in our home; increasing insulation, installing a programmable thermostat, replacing light bulbs, and eventually replacing windows and doors. We kept reinvesting the savings back into more energy efficiency. We installed a wood burning stove in our fire place, which helped reduced propane consumption by 40%.

        Our biggest investment was solar energy. We measured our appliances electric usage and reduced it where possible; stopped using a clothes dryer and dish washer, put our dehumidifier on a timer, installed power strips on electronics, motion activated lights in certain areas. We got electric usage down by more than 35%. We then changed over from a propane furnace and electric air conditioner to a geothermal (ground source heat pump) for heating and cooling our home, and we added two 5 kilowatt solar arrays to help power our home, producing 95% of the energy we need. The elimination of propane from our utility budget made the return on our investment about 15 years at today’s energy prices.

        The current government tax credit of 30% on renewable energy (which lasts until 2016) helped make these changes more affordable. With interest rates at an all-time low and the fact that we had significant equity in our home, we were able to refinance and add the cost of solar and geothermal into a new mortgage that only extended the payoff of our mortgage by five years but kept the same monthly payment. In this way we invested in 25 to 30 years of solar energy to power, heat and cool our home at today’s prices. With a well and septic system we have no monthly bill for water and sewage. We recycle 95% of our household waste (including food waste) and I pay less than $10 a year to drop off a few bags of unrecyclable garbage at the county trash transfer station. We have four very nicely run Good Will stores where I actually prefer to buy recycled clothes.

        For home food production we raise a small flock of chickens for eggs, and have a large vegetable garden, orchard, and greenhouse where I grow food. We eat very little meat and lots of dried beans for protein. I can fruits and vegetables, grow herbs for cooking and medicinal use. Last year we bought a dairy goat. We work at maintaining our health and hope to avoid the medical problems of old age by staying away from doctors as much as possible!

        I started a composting business 9 years ago that has become very important for our community’s sustainability. More and more of my customers are putting in vegetable gardens or are market gardeners. Our community has a large number of farmer’s markets. There seems to be no limit to the things people can do once they decide that they want to change.

        I don’t know exactly how much this is affecting our energy consumption. I would say that our lifestyle compares more with a European one than American. I know living in the country means I have to do more driving, occasionally with a pickup truck, but there are always tradeoffs. I do know life is good and I feel better about the future. Bottom line…how I feel and think about life is more important than what I read in the newspapers. I refuse to let fear inform my decisions.

        • It sounds like you have been working hard to make changes. I am not really in favor of government subsidies for solar PV panels, however. I would be a lot more in favor of such subsidies if:

          1. I thought they would make the electrical system last longer. I think adding PV panels will make the system last a shorter length of time, because they make the system more difficult to manage and more fragile. Thus, investment in these panels probably makes 25 or 30 years of utility-provided electricity less likely.
          2. If the government could afford it. The subsidies are being made with printed dollars. Whether these can continue until 2016 is an open question.
          3. If the system of subsidies for solar panels didn’t effectively transfer money from the poor to the rich. The people who can afford solar panels (or part of the cost of solar panels) are generally well-educated, and better off than the rest of the population. Why this cost should be paid for by the general population is beyond me.
          4. If it were clear that solar panels would be put to good use, once the grid stops working. Maybe they will; maybe they won’t. A lot of people will need to move. Whether people can take the panels with them is an open question, depending on whether they have good transportation and good uses for the panels in the new location. They probably will need to be wired for the new use.

          If people have a good use for solar panels, and want to buy them for their own use, off-grid, I don’t have a problem with this. This is especially the case if the purchase is done without subsidies. But I have a problem with the poor subsidizing the rich.

          • 1. I’m not sure what you mean by “they make the system more difficult to manage and more fragile.” The new charge controllers switch back and forth very easily. If the grid goes down for any reason our system automatically disconnects from the grid. There is no push back that can damage the grid. The technology is very smart compared to older systems where one had to manually switch back and forth. Maybe you know something different?

            One benefit of having home owners with solar panels connected to the grid is that during peak electric demand (the hottest time of the day) it is the sunniest and we are often supplying energy to the grid. This would actually smooth out the demand curve helping utilities to cover peak summer demand without investing in additional capacity. The utility company has to give approval for each system hooked up to the grid so they know how much energy and when it will likely be produced. It won’t fluctuate greatly from year to year and is likely to be operated for decades. I don’t see a management issue.

            2. I think there are worse subsidies than the credit for solar energy. In this case I think the subsidy can help stimulate economic activity and support development and growth of the technology. If no one was buying these systems how can industry afford to produce them? If no one has them installed, how can small businesses afford to train people to install them?

            The subsidy is short term, unlike the Bush tax cuts, energy sector subsidies, or the farm subsidies initiated after the dust bowl. It would be better if the subsidies were only applied to American made solar panels but unfortunately, American companies are struggling or out of business. China is dumping their solar panels on the market at prices less than it costs to manufacture them just to put other companies out of business. If Americans want to be in this business we have to invest in it’s development and that means encouraging people to buy them.

            3. The transfer of wealth from the poor to the rich is a serious problem and it is getting worse. But having been a first generation college graduate who worked her way through school, and having also been a divorced single mother, I’ve lived close to the poverty line for much of my life. I didn’t depend on the government to help me. The best way to get ahead in life and hang on to the “wealth” you earn is to work hard, save money, and invest it in land, your home, or a marketable skill. Granted times are very different now and few young people can work their way through college without debt.

            4. As for making good use of them if the grid stops working…our system has back up batteries so we intended to be able to run it off grid if necessary. We certainly looked at this as a long-term investment and hope we never have to move. We also hope one of our teenage sons will want to some live here and raise his family some day. But if we needed to move the panels and associated equipment are certainly movable.

            • Scott says:

              Hi Jody, Yes that sounds great, but I bet the batteries will go before the panels and will need to replaced. I just wish we could build a 50 year battery. Or we will have to use the old fashioned lead acid batteries. I would like to have a system myself but it is hard to afford, even harder for most in the third world and I think that is part of our coming emergency.

              Sure sounds like you are doing a good job around your place though.

              Regards,
              Scott

            • Thanks! Solar panels are certainly better than a lot of applications. They do produce energy when it is needed. In some cases they can be helpful. I wish they were not produced in China, using polluting technologies, and then subsidized (by the poor paying to help the rich) in this country. You seem to be doing better than most, though.

          • Scott says:

            Yes I think Jody is doing a good job, what else more could we expect given the circumstances. We all still drive our trucks now and then. We also compost here on our property and it helps a great deal.

      • xabier says:

        Gail

        I think the problem that many people are having now is that even when they reduce excessive energy usage for economic reasons, they are now, if in the lower income groups, hitting the barrier of finding it hard to afford basic needs usage as energy costs rise remorselessly: in Britain, the estimate for deaths of people through lack of heating is in the tens of thousands each winter. We will see much more of this.

        • Xabier,
          It is a problem and it will likely get worse and worse. Even before the Great Recession I could see that the longer people waited to make changes the narrower their options would be. When electronic wealth disappears and businesses offer limited goods or services, even the “wealthy” will have few options.

          One of the most difficult realities I believe that we will be faced with as we hit hard limits is that the earth will not be able to support more than a fraction of the people currently alive. During the remainder of this century we are likely to see a massive die off of humanity.

          • Scott says:

            Hello Jody, Yes I think many of us agree on that a collapse is near. I have talking about that I think it may be an uneven collapse hitting some parts of the world first while other areas remain relatively quiet. That is unless major war breaks out. Those areas that are going to get hard first have little food resources or oil wealth I suppose.

          • xabier says:

            Jody

            Fully in agreement with you, you are the kind of positive-thinking person who made America what it once was: I think we now have a brief window of opportunity as more fortunate householders to buy useful stuff and make changes for resilience while the funny money and easy supply situation holds out: soon it will be gone and buying and sourcing will get difficult.

            Personally, I’m assuming huge price rises in basic foodstuffs and energy, and a near-total complete collapse of my current income stream in 5 to 10 years. If it doesn’t happen, I’ll be delighted: if not, I shan’t be surprised.

            But we can see the way things are going in the developed but indebted countries: I know of many people whose turn-over has gone down 30 to 50% since 2008, or have gone bust, and they all had thriving businesses before the Crisis hit.

        • Scott says:

          Xabier, Food is surely getting expensive, but in the USA we are still lucky as in most of the world it take the majority of a salary, we in are feeling pain at just about 25% of our salary going to food for the average worker. I guess that is why we are all learning to garden! Americans may soon pay nearly half of their salaries for food. Europe will be tough too, not enough land and too much population to comfortably support and since you have been telling me you lost a lot of farm land there too. The farm land is now not so nice cheap developments for housing etc.

          • donsailorman says:

            Food is cheap in the U.S., and I think it will continue to be cheap. I spend less on food than I do on entertainment, and my income is modest. Every week I go to the supermarket with my humongous back pack and for forty dollars or so buy my week’s groceries. I eat healthy, too.

          • xabier says:

            Scott

            About farmland: here the University is building a mini-town or apartments for its students, (they’ll be Chinese you can be sure) workers, and some 1,500 homes for sale to the general public, and they are taking out good farmland to do it. It’s about 3 miles out of town. Archaeologists have found, to their surprise, the site of a small Roman town on the exact same spot: this town disappeared in the last Collapse (when what is now the main town collapsed into a village) and has been forgotten for the last 1,000 years or so – but no-one is getting the irony…… I wonder how long it will last. I find it hard to see the fields going.

            • Scott says:

              Hello Xabier, Things were really going fast here until the grand recession hit in 2008, Where I used to live they were building thousands of homes, but then it all kind of shut down when the collapse hit. Yes it is hard to see the farmlands go, the field next to our old home in California was set to become an industrial park along with 1200 new homes and it still is pending since the 2008. But I do see building starting again now at a much slower pace. Not sure what is going to happen if we the next step down like we had in 2008. I am in no hurry to see another one of those, but nest one is out there still looming.

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