A June 6, 2013, article from Reuters is titled, “Lawmakers in new drive to slash Iran’s oil sales to a trickle.” According to it,
U.S. lawmakers are embarking this summer on a campaign to deal a deeper blow to Iran’s diminishing oil exports, and while they are still working out the details, analysts say the ultimate goal could be a near total cut-off.
My concern is that the new sanctions, if they work, will put the United States and Europe in a worse financial position than they were before the sanctions, mostly because of a spike in oil prices.
How much reduction in oil exports are we talking about? According to both the EIA and BP, Iranian oil exports were in the 2.5 million barrels a day range, for most years in the 1992 to 2011 period. In 2012, Iran’s oil exports dropped to 1.7 or 1.8 million barrels a day. Recent data from OPEC suggests Iranian oil exports (crude + products) have recently dropped to about 1.5 million barrels a day in May 2013.
Figure 1. Iranian oil exports, based on BP and on EIA data.
If the ultimate goal is “close to total cut-off,” an obvious question we should be asking ourselves is whether it makes sense to handicap world oil production by close to 2.5 million barrels relative to 2011, or close to 1.5 million barrels relative to May 2013. Oil prices have spiked in the past when there has been an interruption in world oil supply. Why wouldn’t they this time? Furthermore, who are really handicapping: Ourselves or Iran?
Possible Alternative Sources of Oil Supply
I would argue that we do not have adequate sources of backup oil supply. We are operating too “close to the edge” when it comes to world oil capacity.
Saudi Arabia likely has some spare capacity. If we go by how much Saudi Arabia in the recent past has been able to increase its production, its short-term spare capacity would appear to be about 600,000 barrels a day–not nearly enough to offset the decline in Iran’s oil exports. The 600,000 barrels a day is calculated by comparing Saudi Arabia’s highest production for individual months of 2012 of 10.0 million barrels of oil a day with its actual production in May 2013 of 9.4 million barrels a day, according to the OPEC’s Monthly Oil Market Report (MOMR). Saudi Arabia claims to have capacity of 12.5 million barrels a day, but its production in recent years has never been anywhere near its claimed capacity, raising questions about the truthfulness of the claim.
How about exports from Iraq? This is a graph of oil exports from Iraq, based on EIA data.
Figure 2. Iraq oil exports, based on EIA production and consumption data.
Iraq is indeed adding a little bit to world oil exports–about 326,000 barrels a day in oil exports were added in 2012. But the wild fluctuations don’t provide confidence the trend will continue. It is possible to get a rough idea of what future increases in oil exports might amount to. The International Energy Agency (IEA) is targeting 6 million barrels a day of oil extraction for Iraq by 2020. (Dave Summers–also known as Heading Out–isn’t confident even this can be achieved.) Extraction at this level would mean oil exports of about 4.5 million barrels a day in 2020. The expected annual growth in exports from today’s 2.2 million barrels a day of oil exports would be about 283,000 barrels a year, between now and 2020. Even if this rate of increase in oil exports is achieved, it won’t handle the immediate need for close to 1.5 million barrels a day of oil exports if Iranian exports are taken out of the world supply.
How about the supposedly miraculous growth in US oil supplies? If we look at the actual data, we see that the United States is still a major oil importer, even when such sources as “biofuels” are included in the total. (Imports are the gap between the “consumption” and “production” lines.)
Figure 3: US Liquids (oil including natural gas liquids, “refinery expansion” and biofuels) production and consumption, based on data of the EIA.
At the same time, Europe keeps falling behind farther, so it needs increasing amounts of imports.
Figure 4: European Liquids (oil including natural gas liquids, “refinery expansion” and biofuels) production and consumption, based on data of the EIA.
Thus, even if the US’ need for imports is declining, Europe’s need for imports is increasing, as is the need for imports to Asia, including China and India. Losing part of the world’s oil supply makes it harder to get enough imports, without oil prices spiking again.
If Oil Supply Cushion is Less
Suppose that we somehow, miraculously, take Iranian oil exports off-line and find enough substitute supply without oil prices spiking too badly. We know too well from experience that there is the distinct possibility that part of current oil supply will later be taken off-line, for some unplanned reason. This might be another Arab Spring revolution, or perhaps fighting may break out between two oil producers. Or the United States may have a bad hurricane season. So even if oil prices don’t spike immediately, removing what little spare capacity there is, increases the likelihood that oil prices will spike in the future, from some unrelated cause.
Who gets hurt with an oil price spike?
The countries that are most hurt by high oil prices are the big oil importers–the United States, the European Union, and Japan. We can see this with recent experience, shown in Figure 6 below. Oil prices have been high since 2005. These high oil prices have led to a cutback in consumption by oil importers, even as other countries more-or-less sailed along. The countries with lower oil consumption since 2005 are precisely the ones that have had problem with recession. See my post, Peak Oil Demand is Already a Huge Problem.
Figure 5. Oil consumption based on BP’s 2013 Statistical Review of World Energy.
If oil prices rise, more money will be transferred from oil importers to oil exporters. Oil exporters, such as the members of OPEC, will benefit. Of course, Iran itself will not benefit. Oil importing countries that have been having trouble with their debt loads are likely to have even more difficulty, because their citizens are made poorer by high oil prices.
How Badly Do Sanctions Really Hurt Iran?
The sanctions cause Iran to leave its oil in the ground until later. While this hurts the Iranian economy now, the oil will still be there for extraction later. With the fields “rested,” Iran may even be able to increase the amount that can be extracted later. If oil prices are higher later, Iran will get the benefit of the higher prices. The oil supplies of other countries will also be more depleted then, so it will have more of an advantage than it does now.
With all of the sanctions against Iran, the country has been encouraged to ramp up its natural gas production. It has also increased its fleet of natural gas-powered cars, so that it has more such cars than any other country in the world. Iran is also refining more of its oil, making itself less dependent on gasoline imports. Making these changes now makes Iran more self-reliant in the long-run.
A person might think that all of the sanctions to date have significantly reduced the standard of living of a typical Iranian. If this is true, it is not showing up much in the data. Prior to 2012, the economy had grown consistently for two decades. The sanctions led to an estimated decline in real GDP of -1.9% in 2012, according to the CIA World Fact Book. Iran’s per capita use of energy has been rising, and continues to do so, even in 2012. Its per capita energy use is now higher than Italy’s.
Figure 6. Per capita energy consumption for Italy and Iran, based on BP total primary energy consumption from 2013 Statistical Review of World Energy, and EIA population data.
There are obviously any number of other countries that Iran’s energy consumption could be compared to. If we compare Iran’s energy consumption to Israel, Iran’s per capita energy consumption is a little lower.
Figure 7. Per capita energy consumption for Israel and Iran, based on BP total primary energy consumption from 2013 Statistical Review of World Energy, and EIA population data.
Messing with Iran’s Currency
According to Bloomberg News, Useless Rial Is U.S. Goal in New Iran Sanctions, Treasury Says. According to the article:
“The idea is to cause depreciation of the rial and make it unusable in international commerce,” he said. “On July 1 we will have the ability to impose sanctions on any foreign bank that exchanges rial to any other currency or that holds rial-denominated accounts.”
The move is intended to toughen sanctions that so far failed to press the Islamic republic to halt its nuclear program. According to the Treasury, the rial has lost more than two-thirds of its value in the past two years, trading at 36,000 per U.S. dollar as of April 30, compared with 16,000 at the start of 2012.
Interesting! Isn’t devaluing the currency exactly what Japan and all of the countries doing Quantitative Easing have been trying to do, perhaps to a lesser degree? As a result, Iran’s stock market has been soaring. Iran is a country that has two export products that other countries want to buy: oil and natural gas. It has little debt, and in the past has been running a budget surplus. Making more rial to the dollar makes imports to Iran more expensive, but exports more competitive in the world marketplace. This is precisely what other countries have been trying to accomplish.
I am skeptical this rial marginalization will work. Will these changes make any difference, in terms of trade with China and Russia? For that matter, will countries that want to buy natural gas from Iran stop trading with Iran? There are ways around any barriers we put up. The US dollar is the world’s reserve currency, but it is already under pressure in that role. Doesn’t all of this messing with the rial lead to more pressure to move away from the US dollar in its role as a reserve currency? Countries that have products to sell that are in short supply globally can usually find a way to sell them. The countries that seem to have much worse problems are those with nothing that the rest of the world wants to buy–Greece, Spain, etc.
Conclusion
All of this posturing looks like a power struggle between the East and the West. The techniques the West has been using so far haven’t been working all that well. The plan is to step up the same techniques, in the hope they will work better. It is not all that clear that they will–if they work, they may quite possibly backfire, because we are working with world oil supply, in a world where oil supply is still constrained. Reducing world oil supply by the amount of Iran’s oil exports doesn’t help the West at all.
There have been a lot of exaggerated reports, seeming to suggest all is right now with world oil supply. The danger is that US leaders are now starting to believe what they read. Supply is now available, because of high price. Price is high because of the problem of diminishing returns leading to ever higher prices required to make oil extraction profitable for exporters. Demand is now down in the West, because high prices are leading to job loss and recessionary forces there. Pushing the world further in this direction is hardly helpful.
If we are very lucky, the United States’ stepped up sanctions could get Iran to back down on its nuclear weapons program (assuming it has one). But if we are less lucky, we may find ourselves with spiking oil prices. To make things worse, we may see the role of the United States dollar as the world’s reserve currency destabilized. It seems to me that we are playing with fire.
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China Disengaging from Iran:
The Diplomat magazine on 23 March 2013 published an Article: “China’s Trade and Investment in Iran Plummets.” Investment dropped from $3 Billion in 2011 to $400 million in 2012. Trade dropped from $45 Billion to $37 Billion. The article noted that the US sanctions influenced China’s decision to withdraw from developing the South Pars natural gas field.
http://thediplomat.com/china-power/chinas-trade-and-investment-in-iran-plummets/
Interesting. I think part of the problem is described in this paragraph:
I tried to see what other stories had to say. The impression I got was that to some extent, the decision may have been Iran’s. South Pars development seems to be going on with Iranian companies in the lead now. For example, this article says Phases 17, 18 of South Pars to come online by September. The article talks about $80 billion investment in the ultimate project. The amount you quote talks about China’s investment dropping from $3 billion to $400 million. A person might ask how important this investment was to the total project. It is possible that for the problems China was causing, Iran decided they could get along without them.
It would not take strong imagination to anticipate easily bruised egos when Chinese and Persians get together, especially on Persian territory. The Chinese also want to maintain good relations with the GCC states, all Sunni except Iraq, and therefore want to avoid situations that could bind. Getting 1.5 million BBD from Iraq has proven useful, and the Chinese have some additional concessions that they want to develop in Iraq. The Iraq-Iran relationship is very complex; much more convoluted than merely religion clashes. And the Syria violence also affects the region more than we in the West can easily understand. Well, try this: imagine the “Irish troubles” had resulted in 90,000 deaths? And Iran is smack dab in the middle, and responsible for much of that violence.
Good points. China is trying to create close to a world empire. It is hard to get too close to one “outlier,” even if it needs its products.
Iran Essay in The Economist:
Happy Sunday, y’all. Today I collected my weekly supplement of The Economist and was somewhat tickled to note that Gail had published her essay a week earlier. The Economist main essay is somewhat more belligerent, and certainly worth the read: ‘Persian Power – Can Iran Be Stopped?’
http://www.economist.com/news/leaders/21579835-west-should-intervene-syria-many-reasons-one-stem-rise-persian-power-can/print
Scott
What you say also rings very true for Britain: it went from just fist-fights (although the people of one county in the North – miners and factory workers – were known for being quick with knives) to knives, and now shootings.
Drugs is behind much of it, of course. When I first saw a poster in London saying ‘Mothers Against Gun Crime’, I realised how much had gone wrong in only a decade.
As you say, this is grave implications for behaviour in a major financial crisis, if welfare cheques stop coming for a time or food supplies are disrupted. There were very deep class divisions in England during WW2, but on the whole people did pull together to a remarkable extent – I can’t see it happening again, at least here in the cities. Another reason to move out!
Gail is a little too pessimistic about the potential of solar energy and other renewables. Having said that, we are still in a very bad position with world population still growing and rapidly approaching a number of limits to growth.
Some nations with a current high level of development and plenty of wide open sunny and windy spaces and enough “transition resources” (the US and Australia for example) could make a transition to a possible sustainable situation if correct actions are implemented. This is not to say the road to sustainability would not be hard and rocky. It would be. Populations might well have to decline even in the US and Australia.
I would advocate a regional survival strategy. This strategy would recognise that global civilization cannot be sustained or saved but that some level of regional survivability might be possible. The US should be planning for global collapse in many overseas regions. The US survival strategy should be based on the following plans;
1. Cease immigration. The US should announce and implement an end to all immigration.
2. Cap population. The US should announce further measures to stabilise the US population.
3. Cease the attempt to be a world hegemon power and remain a regional hegemon (but retaining a full nuclear deterrant with global reach).
4. Bring a proportion of the US military home to totally seal and guard the Mexican border.
5. Implement policies of industrial and agricultural autarky.
6. This means bring industry back to the US and ensure the US is self-sufficient in all essential requirements.
7. Implement renewable energy on mass scale (The EROEI is not as good as easy conventional oil but it is still workable).
8. Supplement if necessary with a new generation of nuclear power stations with high safety standards and built in geologically stable areas away from dangers of tsunamis and flooding.
9. Forge an agreement with Australia to take all of Australia’s uranium (and possibly thorium) and spare gas exports leaving zero of these materials to go to places like India or China.
10. Remodel the US economy and politics to be less plutocratic and more democratic.
11. Decrease the profit share of the ecomomy and increase the wages share.
12. Increase workers rights, remuneration and implement a new New Deal to repair national infrastructure and remodel the economy as outlined above.
13. Put the savings in retrenching overseas military (mis)adventures into domestic nation building.
14. Put the untilised capacity of plant and labour in the US back to work.
The US (and any sensible advanced nation) needs a survival plan similar to this. In a variant of the lifeboat dilemma, our nations are lifeboats. We help no-one if we let so many clamber aboard that our nations sink. It is natural to look to your own. Placing national interest first is the only realistic Real Politik position. However, national interest of this type should be about saving one’s own nation whilst following, so far as possible, a policy of benign neglect and peaceful non-involvement in other nations’ dilemmas. This policy is actually more humane than excessive foreign interventions. The US cannot save the whole world no matter what it does. It ought to look to saving itself or the better part of itself to the best of its ability and resources.
Hello, I am not sure I agree that the US should shut out people as we are trying to look at the world as a whole, It may be good for those here in the US for a time but the world would still suffer the same. There sure are a lot of bad people out there these days we want to avoid coming in with their crime and drug deals etc from other places. It seems they cannot find honest work these days which is a big problem world wide.
The post I wrote earlier today about my trip outside the USA in early 1990 really woke me up to how crowded other other countries are, I went through Korea and then to the Philippines and I saw power problems, sewer problems or lack of, water problems and not much power to keep things cold as they would like there in those hot climates. Korea was smoky dark and cold, the Philippines was different as I traveled all the way to the southern islands near the equator, the home town of my wife. Very jungle like there compared to Manila. We saw giant snakes crossing the roads etc. But the people and snakes live together there in close proximity. Even though the people were very poor some of the happiest I have met in my life.
The options are probably the whole of the world collapses or most regions collapse and a few regions semi-collapse and achieve a new much lower sustainable level. It is a matter of achieving a least-worst outcome. We need to cease this Western arrogance which consists in believing we can save or help the whole world. We can’t. Indeed, people in the tougher regions will still do better if we leave them alone rather than attempt to “save” them. Read “exploit and attack” for “save” because that it largely what we do when we interefere with other nations.
I am almost finished with the latest JHK podcast which is right on track with the subjects we have been discussing, I almost think Gail and the speaker with JHK have been talking…. Check it out if you have a half hour or so to listen.
http://ec.libsyn.com/p/9/b/4/9b42caada3991c13/KunstlerCast_231.mp3?d13a76d516d9dec20c3d276ce028ed5089ab1ce3dae902ea1d01cf863ed7c9585ab0&c_id=5727802
I think it is a little bit late to talk about controlling immigration now as we have already been infiltrated by these crime groups. The UK really looks like a tough place to live these days too.
Scott
There are many still nice places to live in the UK, but on the whole the worst people in society -the drunks, drug addicts and thieves – are out of control compared to the past: the old social constraints have gone, and whatever they do, they still get their welfare cheques and a house. With only a small % ever getting arrested and convicted, crime pays and society simply doesn’t punish them.
Mostly of course they attack one another, but there is a general state of low-level fear and anxiety these days which was unknown until mass immigration (combined with liberal attitudes to criminals) started: if I visit London I can feel it after being here in my village.
Things happen in the poorer suburbs and inner-cities that would have been impossible to imagine even in the worst days of the 1930’s Depression, when people went hungry: knives, guns. Drug gangs are very extensive, that’s for sure.
The criminal gangs are interesting: a man I employed to do deliveries for me, who is not a racist and married a Turkish girl, told me that in London 9 out of 10 of Turkish businesses are fronts for money-laundering in the drug trade: it makes the few honest Turkish people very ashamed that this has happened. In the town here, the Turks have gradually bought up more and more businesses, every one staffed 100% by Turks: it’s a nice closed business circle. I’m inclined to believe my friend in what he says.
The relevant aspect for this forum is that if things get bad, these gangs already have power-structures in place, are armed, and have lots of cash to bribe officials and the police. In Argentina, such people became very powerful after the Crisis, in the cities, and remain so.
Xabier, Thanks for the interesting description of the state of things. It is interesting to talk to people like you on here that can describe the state of things in places I have not yet been. These are things that we will not learn about in the news media.
Over here (especially in California where we used to live) things have really gone down hill since the 1970’s. Many gangs now and crimes was one of the reasons we left. Places can change for the worse faster than I thought just from what I have seen over the last 40 years it is a whole different world now and not for the better sadly. Oregon also has gangs in the larger cities like Portland.
There are still some nice places in the US too, but the places where I grew up in California are no longer safe communities. Many illegal aliens have moved in. Many countries in the world are overflowing with people and they cross borders changing the places they come to. It is a world overpopulation problem.
When I went to High School the worst crime was fist fights at school. These days there have been murders and stabbings at my old school and now there are gangs in town there.
It has gotten a lot more violent and like you said – today, if we have a financial collapse it concerns me because kind helpful neighborly people of the 1930’s are gone.
I guess all we can do is try to live in the areas that are still safe but the world in general is feeling less safe to me by the year. One thing that is for sure is that nothing stays the same.
The people who are likely to “win,” after a collapse, aren’t necessarily those with vegetable gardens. They may be the ones with adequate power, who can push themselves toward further power. They will do whatever they can to give themselves and their friends what they need, regardless of what happens to the rest.
Hello Xabier, what would you consider a village, Population wise speaking. How many people live in your village? Our mountain town has about 9000, I am not sure that is a village or big village?
I do know Tad Patzek. We all talk about pretty much the same things, but in a little different way.
Scott
700 people in my village, 3 miles from a biggish town, and 60 miles from London. It’s almost a suburb of the town, but not quite as we are still separated by fields.
Historically, the village had a population of about 200 who worked in the fields and made hats as a cottage industry.
It’s so quiet that I can tell if there is a stranger in town by the sound of their car engine: there are no secrets here.
From the point of view of security, I have a buffer between me and the town if there are riots, lots of neighbours and small enough to know who the bad guys are. Once I get a well dug, I’ll be happier!
Xabier, It does sound like a good place to be, your village. The desperate people from London will have to walk a long way to get you! Hopefully you have a good source of water at your place, like a river or stream or a good well.
Our town is about 9000 in population and which is a bit larger than I like. There is a pretty good sized river going by the town which is about a half mile from here. We have local hydro power from the dam. Even at 9000, most of the locals here know each other and grew up and went to school together. I am still kind of a stranger in town since I have only been here a few years.
Looking at the world markets this morning, again still another leg down on all markets, they are all falling and it started fall fast late last week. More talk about China slowing down today. I do not believe they will be able to end the QE, just look at what happened to the markets when Bernanke just hinted at slowing it down. But if they were to end it, I bet we would have a whopper of a recession or even a depression. It looks like the Fed has painted us into a corner with these programs that have allowed us to live above our means in recent years.
For what it is worth, I think we were already painted into a corner by rising oil prices and reaching limits to growth. The Fed helped postpone the inevitable with its actions. It is increasingly clear that the Fed’s actions are by their nature have to be temporary. So the corner to which we are painted, is becoming increasingly clear.
Hello Gail, Thanks for your response, Painted into the corner is the word of the day, thanks to the Fed and Central Bankers in finance arena. But also in real world, they “the world financial and business powers that be” managed to make another illusion. That illusion is hiding the problem of peak oil and finite resources. So painted into two corners it seems to me. No money and no oil in our future, or, should I say less money and less oil would be a more realistic statement. Peak oil is not on the TV, there is nothing on it. There is mostly discussion on what the Fed may say next though and hoping the Fed will help us.
So one asks ones self – what is the reason to hide the problem from the public? Well, I think there are certain interests with oil/gas lands and refineries and coal trains running etc and they do not want to disturb their cash supply lines. Maybe the oil companies like BP and Exxon know we will have a problem in a few years but for now they can keep making lots of money by not steering us away for the dream of everlasting oil and gas.
It sadly looks like the crime families of the world have control on our companies now.
I think a day will come when they have to tell us, but by then there may be gas lines and there will probably be inquiries why the information was not released sooner and there will be much turmoil then. But by then the lies, will have taken affect, there will be shortages of fuel and finance to build the needed projects to save the billions of people that need food.
But I see this as a slow grind towards higher prices and just harder times, more storms more instability. I think if the world really understood what was happening we would have undertaken this massive project to shift to non oil energy by now. Let’s just watch and see what happens when they catch on to the problem, it could be a very difficult time for us all.
Maybe some of us on this site could be called “Futurist” however, that that is the future I think we may face soon.
The timing is the big question and we have also seen that these situations can go on for many years longer than it looks so we do not know what year the gas lines will come and then it all gets announced to the world about the shortages in things like fuel and food etc.
I wouldn’t blame the oil companies any more than the car companies and the politicians who want to get re-elected.
I think collapse is more complicated than the “higher prices and lines at gas stations” scenario suggests. I expect that we won’t have jobs, so we won’t have money. The banks may be closed, or at most dispensing small amounts at a time. The gas station may not even be open. So we won’t be in lines. We may not even realize that oil has anything at all to do with our problems. They will look financial in nature.
Hello Gail, Interesting, it sounds like you are describing a deflationary depression. I have been studying deflation and inflation trying to figure out which one is more likely. With central bankers printing money Japan has not seen inflation yet and ours is rather subdued in the US as well, I expected to see more inflation by now. It looks like Japan is battling deflation with their printing presses.
But I guess the money goes into bubbles like stock and bond markets and when these bubble collapse it is a deflationary event and I think the money was created is lost as asset values fall. You know there are two camps out there looking at this. There are those in the inflationary camp and those in the deflationary camp. I was expecting an inflationary or hyperinflation with all the money printing, but now I think I am leaning towards deflation and I think we are starting to see it now in world markets.
If prices fall on oil like saw in 2008, producers will not be able to afford to explore for more oil. That happened briefly in 2008-2009, you know rig counts went down and some wells shut in as they did not want to sell their oil for less than cost.
I think that there need to be three camps–increasing, decreasing, and “system breaks.” I personally think the third is most likely. I would not be surprised if people discover there is still money in their bank account, but they can get only, say, $100 week out. I would not be surprised if each country (or perhaps smaller unit, like state) prints its own money. The catch is that it is not interchangeable for anything except goods made locally. Or maybe the electricity goes out, and the bank loses records of who had balances of what amount.
Hello Gail, Yes, some countries that are – say in the Euro Zone – could go back to their own currencies, and abandon the Euro etc, but they would face difficulty with international trades and in getting things like energy and food if they need it from abroad. If one country had all it needs it would do better and for that I would bet on the USA. But we already have our own currency and what will we fall back on (perhaps gold?)
Some countries in the Euro zone could do better but they would be shut off from the good stuff.
It would work well with localized economy which I think is what many of us would like to see, but have to stop and think, just last night I ordered a simple part for my Honda Civic, for example just a timing belt, the car gets me good mileage – but if we had trouble with international trade even this simple part would be hard to come by. So yes, I would like to see shorter supply lines, but we are not able to make many of these parts in our local towns or villages yet so that will make life hard. Many broken down cars, farm machines and less choices at the grocery store if we had to use a local currency if we could no longer get all this stuff from abroad. Something to think about. Going to the village life style means eating perhaps only a few kinds of food and doing without what you cannot make in the village.
Hello Gail that brings up a point, I have had to replace my visa debit card and fight charges that were not mine five times in the last couple of years. I am thinking of going to cash but that is hard as the cards are actually easier in ordering things. I am afraid to use my card online. There is a lot of financial corruption out there which is the big threat too which will eventually bring us all down if we do not stop it and it is getting nothing but worse.
Best Regards
Scott
I agree that if something could be done, it would have to be along the lines you suggest. The United States has a low enough population relative to resources that on a stand-alone basis (or together with, say, Canada and Australia) it might do all right, in theory.
I see a lot of issues with this idea, though:
1. There is no way we could bring supply lines back to the United States to make such essential things as computers and computer-like devices used to control all kinds of equipment and processes. I think we would have problems with everything from lithium batteries to copper wires to rare-earth minerals.
2. Even in an us-them situation, people and businesses will have a hard time supporting this kind of arrangement. Clearly some people will have relatives in other countries. Businesses will be headquartered in some offshore tax haven. Furthermore, they will have operations around the world, and contracts around the world, making them unwilling and virtually unable to change back to a US location.
3. When all is said and done, I would be wiling to bet that very little of the energy for this arrangement would actually come from intermittent renewables. The energy would have to come from sources that we can ourselves provide supply lines for. I don’t see either wind or solar PV very good in this regard. Most of the energy would likely be from fossil fuels and perhaps nuclear.
4. The power is now with the businesses. If the workers are to get more, and less is to go to profits, how does one incentivize investments in this new arrangement?
5. Any new arrangement involves huge fossil fuel investment. This investment has to take place, even before a decline is possible because of a very gradual transfer to the new system. This means that the changeover will require the use of more, rather than less, fossil fuels. Somehow all of this would need to be paid for as well.
6. Current arrangements make use of economies of scale. In making a change such as this, the loss of economies of scale by itself will have a negative effect (although use of newer technology might help offset this.)
Algae Developments. The latest guestimate of production costs of algae fuel (as a diesel) is 50 to 80 cents per liter (Australian). Add shipping and storage and some fees and some profit margins, and it’s fair to propose that the price range be cut approximately in half. Not impossible, and the cost has dropped significantly from 3 years ago.
It seems like there is something of this sort that shows up on a regular basis. Whenever someone does an investigation, they discover:
1. The company is trying to raise funds.
2. The estimate is based on lab results for a small batch.
3. The estimate may very well include only operating costs, and not capital costs, which are likely to be the majority of the costs.
4. At this point, no one has tried scaling up the process, so no one has an idea what difficulties will be encountered in real-world circumstances. If the process is really feasible, the cost may be far higher than initially estimated.
The amount is so far out of line with what anyone has actually achieved, it is unbelievable. The only one I trust when it comes to algae for fuel discussion is Robert Rapier. This is a link to a 2012 article by him that includes some coverage of algae. He shows the following costs estimates from a US Department of Energy report. It sounds to me like these are hoped for future costs, after technology improvements have had a chance to kick in. The base case cost is $17.52 a gallon.
You should also remember that biodiesel from algae is not chemically equivalent to diesel, so can normally substitute for a small percentage of diesel, without problems occurring.
Too bad it cost so much to make the algae diesel. Well, if gas goes to $20 USD in a few years, then the algae diesel may look good. I wonder if we could make enough, sounds really tough and you say we need to mix it with real diesel which I guess it could be used like ethanol but that was a big waste to make although it burns a little cleaner but it so much energy to make it. So you could have pollution and oil being burned to grow corn in the US mid-west to have to sell cleaner burning ethanol in California with the stupid laws they have now. I am not sure how clean burning algae diesel is though I guess Gail could answer that is it cleaner like ethanol?
You may be aware that some research says that corn ethanol, added to gasoline, is a cause of ozone pollution in California.
Biodiesel seems to be pretty good for air emissions, according to this research. The issue would tend to be more whether crops that are planted for biodiesel compete with land for that might be otherwise used to grow food, drive up food prices or lead to the unavailability of food.
Thanks I did not know that, looks like we should abandon ethanol and go with the bio diesel, I just wonder if can make enough, I doubt it.
My impression is that biodiesel takes quite a bit more land than corn ethanol–hence it tends to be more expensive and more disruptive with respect to land needed for food.
One comparison I read a long time ago said that it would be possible to feed a small adult for a year with the number of calories of corn it takes to make ethanol to fill up one SUV.
Hello Gail, Yes I agree, we need the corn for food and should use not the stuff to make ethanol as we cannot eat it. Bio diesel sounds like the better approach to me at least to help mitigate the problem of shortages coming at some point.
Collapse — it will be like camping at first, so we should practice those skills. It is also easy to stock up on some little propane canisters to cook on if you are not in an area with lots of wood.
Think of this like a long camping trip and prepare accordingly. And your trip still may be five years away who knows. That makes it hard to buy and store things that may go bad by then and not needed, well lets just hope we do not have to eat those supplies.
The Bio Diesel, It looks like it will only help right now and will not become a main fuel as there are far to many cars and households out there needing fuel. Ethanol was a big lie.
There are a lot of materials being burned from farming being burned In places that could be composted or made into fuel. But biomass takes huge equipment to move heavy loads of stuff to process and expensive facilities are not yet built.
At home we can also compost the cuttings that are small which are better than burning.
I have a burn pile for some stuff that is not right to compost, but we have another pile for leaves and things and smaller twigs garden cuttings etc.
Biodiesel is to some extent made with left over restaurant cooking oil. This source will go away. Doing this efficiently is probably a challenge, even now. Otherwise, it is for now OK.
If crops are used to make biodiesel, one that is used is “rapeseed”- the crop that is used to make canola oil. It is a cool weather crop, and grows better in Europe than the US. Another crop used is soy beans. Various oil crops from trees are also used.
I am not really an advocate of any of these. The crops tend to use a lot of land. The oil trees are in the warm parts of the world, and are encouraged by European subsidies. They lead to competition for oils that would be used for cooking in poor parts of the world. (European cars over poor consumers in Asia). Often, statements are made that the trees can be grown on marginal land, but that proves false in practice–yields quickly fall off. Subsidies are what drives production. Without subsides, biodiesel from crops rarely makes sense.
The only exception might be biodiesel made on a farm, for use on the same farm. This would be expensive now, but might be used to keep a few machines running.
Scott: I trust you best remember the marvelous aromas. Outdoor Asian markets have unforgettable smells, especially as the sun gets stronger in the morning sky. I can’t wait to get back.
Hi Chris, Yes I sure do remember those sights and smells of those outdoor Asian markets. My American stomach did give me some trouble, but it seem the people there are used to it. I have since gotten used to the smell of smelly dried fish since my Asian wife cooks it all the time!
If one calculates the EROEI of electricity supplied to dwellings using Natural Gas, converted through a combined cycle gas turbine power plant, using the figures from:
Life Cycle Energy Cost of Gas Turbine Power, P.J. Meier and G.L. Kulcinski, Madison, WI,2000
EROEI of Natural Gas source power delivered to a dwelling is 1.2, net of conversion, transmission, and other losses.
In An Empirical Perspective on the Energy Payback Time for Photovoltaic Mocules by Karl E. Knapp and Theresa L. Jester, Solar 2000, Madison, June 2000. the authors investigated the energy and material resources required to construct PV panels. They identified 2742 processes using 2857 materials. At the time mono-crystalline PV panel efficiencies were 13%, with a corresponding power density of 130 w/sq meter.
Broken down as follows:
Materials:
Silicon_________________ 1884_kwh/kwe_______66%
Al Frame________________324_kwh/kwe_______11%
SiC(for sawing)__________239_kwh/kwe________8%
Glass____________________136_kwh/kwe________5%
Cutting Oil(for sawing)___51_kwh/kwe_________1.8%
Solvents_________________58_kwh/kwe_________2%
EVA(plastic backing)_____33_kwh/kwe_________1%
Cutting Wire____________31_kwh/kwe_________1%
with Argon, Etchants, Nitrogen, Quartz, Jbox Set, Carbon, Tedlar at_____0.8-0.2%
and Copper, Silver, Graphite, Solder, Hydrogen at_____________________0.17-0.01%
Materials Total________2856_kwh/kwe
Processing___________2742_kwh/kwe
TOTAL______________5600_kwh/kwe
Given an equator tilted fixed PV panel emplaced at White Co., IN ~ 50 mi north of Purdue University produces 56, 545 kwh/ 40 year life, assuming 0.5%/yr degradation, gives an EROEI, FOB plant of ~10
Efficiency improvements to 21%, with a corresponding energy density of 210 w/sq meter, reduces area by 33% and given the above costs are proportional to area, because Kwe is proportional to area, this alone reduces resource input by 1/3 to 3725 kwh/kwe.
Conversion to proton-induced exfoilation using Twin Creek’s or competing processes for production of 20 micron wafers reduces Silicon from 1884 kwh/kwe to 190 kwh/kwe, eliminates wire sawing altogether, thus doing away with SiC, Cutting Oil, Cutting Wire, and Solvents for washing, which totaled 379 kwh/kwe.
These changes result in only 536 Kwh/kwe of material inputs, simplify processing, reduces processing load to 1238 kwh/kwe for a total of 1774 kwh/kwe.
Lifetime power production remains the same at 56,545 kwh, giving an EROEI, FOB plant of ~32.
As Luis De Silva mentions in his blog, PV shares critical characteristics with the computer industry whose processes it uses, one of which is increasing improvement in performance and efficiencies.
Were PV emplaces per the suggestion of USDOE, on suitable Residential Roofs, using simplified mounting system(s), with MPPT controllers routing DC to the dwelling and to storage, and a grid tie inverter maintained for the purpose of exporting surplus power, at 6kwe/dwelling, the 125 million houses in the US could provide 1,226 Twh/yr. Were all US housing retrofitted up to PassivHaus standard, US housing would consume 2.5 Quads/yr=757 Twh/yr or 28kwh/m2-yr. Since US housing currently consumes 6.6 Quads/yr, this implies a 62% reduction in household demand before credit for PV rooftop power production.
So, we are not talking pie in the sky here, We are discussing conversion of existing housing to a known efficiency standard, using currently available components, and emplacement on the roofs thereof, of 30 sqmeters of PV and one solar hot water heater. This implies mass production of solar hot water heaters, PV panels, panel mountings, controllers, inverters, switchgear, and wiring for the express purpose of converting US housing from 6.6 Quads of demand, into 2 Quads / yr of supply, or a net of 8.6 Quads/yr total demand reduction.
I’m a systems engineer, not an economist, so the next thing I’d do, after vetting the above calculations, is do a material balance, calculate the amount of material required, determine the changes in supply required. However, given Si is the largest material component, it has been shown by myself and others, that one year’s Florida phosphate mining waste is sufficient to supply enough silicon for both the residential and commercial sectors total roof top PV requirements.
I’m expressly looking for someone cognizant with power calculations to vet my calc ulations, and to verify that I’ve correctly abstracted the numbers from the source documents, without error.
Given the model passes that hurdle, it can be used for what-if analysis of various scenarios, and total resource and manpower requirements can be incorporated, then compared to supply.
That’s where I’m going. Not pie in the sky, not unobtainium, just solid power engineering.
A similar strategy involving rooftop PV combined with energy efficiencies, in the commercial and agricultural sectors provides quantifiable benefits.
Thank you Indy, I do not pretend to understand all of your math, but in general, I think it is doable – if not for our broken mismanaged finance political system that neither has the will or the money left.
Rates are starting to rise in the USA and In China there is a big slow down. I think if we had a perfect government that was lovingly guiding us in the right way, we could do something like this.
I was so interested in solar energy I took some college classes in 1980 as I was a concerned young man then after seeing the 1970’s gas shortages first hand.
To answer you, yes – I believe you and it could be done and could be built, but we have so many corrupt governments around the world today and so many powers that are involved with oil that are not interested. I think what will be interesting (and also scary) is what happens when the shortages of oil really hit hard. Perhaps then your theories will be embraced then, but think many writers on this site may believe that will be too late. What will finances look like then? Will there be enough cheap oil left to build this huge project then. I believed back in 1980 that was the time to start and started studying solar then with interest. Special interest (mostly oil) kept the industry from blossoming back then when we had the resources.
This project needs to be built and it could put people to work again – but I think the sad fact is that most of us this site do not feel that it is financially possible given the current circumstances we are facing and the politics, corruption etc.
Looks like we are headed for a depression first and then we will see what can be done.
Great Ideas may someday hopefully save us. It is sad the much of the science is there but we cannot access it due to finance and corruption and bad politics.
Before we go off the deep end, here.. .
First we verify the numeric relationships are correct.
Then, we can play what-if games to optimize things.
Then we can model implementation strategies, including energy requirements and
material requirements.
Then we can compare the requirements vs spare capacity.
Then we know what will, or will not work.
SO:
I need a sanity check on the numbers.
Can you do the audit? If so, email me direct, so we can organize things.
indy4702@gmail.com
INDY
I cannot check your numbers, nor do I want to.
Front-ended costs are a problem for scaling up. We have to add all of these on to existing costs. In effect we are adding a whole lot of fossil fuel use, if we want to put these in place. We also have to keep our whole system going. LCA does not consider these considerations.
So you are talking pie in the sky. There is no way that we can afford all of the stuff you are asking for, in addition to everything else, on any reasonable scale. Government certainly cannot afford it. Individual homeowners cannot either, without a lot more debt, which they cannot afford.
But the real issue is that the stuff would take a huge amount of resources, in addition to what we are using now.
Sorry Indy, I am not a scientist but, it does look like a pie in the sky to me too right now given the debts and the financial outlooks that you have taken into account. But still have hope I would like to see these projects get built someday, time will tell. We can only hope that the mass will will change the tides towards building these type of things instead disposable goods from factories.
I might also add
1. Quite a lot of homes are not suitable for rooftop solar, with simplified mounts. They have neighboring trees nearby, are shaded by buildings, slant wrong direction, etc.
2. Electrical transmission systems would need adjustment to deal with this amount of solar PV. They are not set up to deal with this kind of return load, for one thing. This is part of the cost/energy need.
3. Need a plan for when solar PV electricity in an area exceeds demand in that area. Just refuse to add it to the grid? Add long distance transmission? Battery or pumped storage for excess? What are the costs and materials involved in this? Timing?
4. Units will need to be cleaned, shoveled of snow, fixed when branches land on them. Also swap out new inverters when old ones wear out.
5. What capacity do we have to make solar PV panels in the US? Would there be a plan to build factories for all of the panels here? (Or import panels made with coal from China?)
6. If you want to retrofit to Passiv Haus Standard, you need to figure out all the material and costs of this (and fossil fuels need to do this). Also if solar hot water is to be added.
I would suggest you look at Germany’s situation, with their solar PV. According to this document, they reached 4% of electric production 2012, after all of their installations.
You may also want to look at the defective panel problem.
Gail
Installing panels made with coal-based electricity in China does indeed seem to sum up the real nature of solar power these days. So few Greens want to acknowledge this uncomfortable fact. And the quality of the panels, made by companies in intense competition, with poor information available to consumers on comparative quality, does seem to be questionable. This is why I haven’t installed yet.
You also pin-point very accurately the economic implications of implementing these alternative power strategies in the short-term: piling yet more expense on the ordinary householder/taxpayer and thereby reducing -together with all the other pressures – the amount of discretionary purchase power, thereby driving our economies still faster to bankruptcy…… The steep decline, and loss, in discretionary purchase power among the mass of people is the single most important fact evident today, undermining all predictions of ‘imminent recovery’.
(With reference to Kyle Bass, mentioned earlier, he seems to pop up on Zero Hedge quite a bit.)
Xabier:
Googling Kyle Bass yields quite an ROI
but I don’t know whether to laugh or cry.
We might think a zillion solar panels are inane
but we’re pursuing more than only fame.
Christopher
He’s no trouble in filling a room,
That super-smart chap, Kyle Bass;
For his guarded prophecies of Doom,
Show that he at least is no Ass!
That’s probably enough verse for now, apologies if I’ve lowered the tone of the blog.
Another issue that is closely related is the fact that pricing of electricity is now by the kWh. In some places, it is possible for a customer to use solar panels simply to reduce his draw of power during sunny days. These might be big commercial customers, or they might be residential customers, especially with solar subsidies.
The electrical company needs to have enough money to pay costs such as electrical line maintenance, maintenance of fossil fuel fired plants, and debt service, most of which do not vary very much with the amount of electricity used by customers. If the amount of funds the electrical company collects declines to too great an extent because of customers opting to produce some of their electricity on their own, there is a chance that the electric company will go bankrupt, and the ability to purchase 24/7 electricity from the electrical company will stop. All a person will have is the intermittent electricity he produces with his own solar panels. Backup batteries either won’t be available very long, or will be out of financial reach of most customers, so lighting in the evening and electrical refrigeration may go away. Ability to support industry with electricity would likely simultaneously disappear, indirectly because of what looked like a Co2 saving, ecologically responsible thing to do. There certainly won’t be enough electricity to charge electric cars. Oops!
Of course, if governments are in good financial shape, they would step in. They are in increasingly bad shape themselves, though.
The fix, of course, is to charge customers for the ability to have 24/7 electrical service. This means that they would get little credit for on and off electricity from solar panels. They would pay the electrical company closer to a fixed charge, regardless of usage.
I think solar panels will help, but in some parts of the world they may need to be in a guarded secure area to keep thieves from stealing them.
I think we could build large solar installations, fenced areas with rows and rows of solar panels especially in the deserts. Some say that water is a problem because the panels have to be cleaned and wash off the dust to keep them working at their best. I believe we could even produce hydrogen at these facilities using the large arrays of panels. We can certainly do much more than we have done to date with solar. And hopefully as fuel gets more pricey as it will, we will begin to build these more and more if we have the financial means.
When I visited Davao City, Philippines where my wife is from in the early 1990’s, it was my first time to for me to visit a so called “third world country”. During the day the power would be off most of the time or brown outs, but you know what else happens when the power goes out aside from no air-conditioning? Well, the water would also shut down for hours at a time. There surely was not as much power around we are used to here in the US. Their markets mostly outside or in sheds, meat fish and vegetables brought in each day laid out on large wooden tables in UN-refrigerated stalls/sheds or open markets in the sun. Most people there buy there food daily instead of shopping food for weeks at a time. When I arrived there I remember it was 5 AM and everybody was out in the markets buying their daily food. The markets were just buzzing with people in the early morning getting their fish etc while it was still fresh. There were some traditional stores where it was refrigerated foods for sale but most villagers could not afford to shop there, so mostly shop in the open markets which is a site to see for sure. Most people on foot or riding small motorcycles and tricycles and what few cars their were were trying to make their way amongst the huge crowd honking their horns to get through.
I was looking at these images of India’s power system and it looks even worse. Here are some pictures from India.
https://www.google.com/search?q=india+electricity+problem&client=firefox-a&hs=hf9&rls=org.mozilla:en-US:official&tbm=isch&tbo=u&source=univ&sa=X&ei=hPHFUamtI7SGiQLixIHgAg&ved=0CFIQsAQ&biw=1200&bih=610
I visited India in October 2012, and electricity was definitely was a problem. We were told that while Mumbai itself has power most of the time, the “suburbs” have it only for part of the day. We had several power outages during the conference in Mumbai–they may have been very local to the site, though.
I visited a village that had intermittent power. The family we visited had a television and a few light bulbs–no refrigerator, and certainly no running water. A television is one way to use intermittent electricity. If they had cell phones, I am sure that charging them would have been another use for the electricity.
Gail
Many companies are now raising their tariffs significantly to compensate for declining usage and number of customers, so it’s very probable that power companies will go the same way -so much infrastructure to maintain as you say. (The decline in size of food portions is, so I am told, very noticeable in London restaurants – again a hidden inflation to help maintain the establishment.)
As for no light at night, I’ve just put down a French book from 1860, in which a former peasant girl marvels at the luxury of people staying up at night and talking by candlelight: ‘If I had been born rich, I suppose I could do it too, but I have to go to bed when the sun sets it’s the only thing that’s natural.’ Back to the future?
In France, it seems the government has ordered the switching off of lights in commercial buildings – I’m not sure how far it goes. We will see more of that I’m sure.
Gail, please let me know if your agree or not, but the normal ways these business arrangements evolve is over time and with the parties responding to the events. We used to say ‘situation on the ground’. It’s not only impossible to know at this time what the possible conditions could be, it’s wrong-headed to consider such calculations as anything but preliminary guestimates, and associated costs plus or minus 20% or so.
Hello Chris, I am just starting to listen to this one now, JHK. It is on our subjects it seems so far.
http://ec.libsyn.com/p/9/b/4/9b42caada3991c13/KunstlerCast_231.mp3?d13a76d516d9dec20c3d276ce028ed5089ab1ce3dae902ea1d01cf863ed7c9585ab0&c_id=5727802
That is my impression too. If the price of oil goes way up or down, it seems quite likely there will be some recognition of that in the payments.
Gain,
If the economy collapses so will the utility companies. Wouldn’t you rather have intermittent power rather than none?
Not enough to buy myself a few panels–something I could quite easily afford.
The panels would indeed let me do a few things. If I had water to pump, they would let me pump the water. If I had a cellphone that otherwise would work, they would let me charge it. They would let me operate a TV (not that I want to watch a TV). They might let me do something like saw wood, if I had an electric saw. They wouldn’t be of much help at night for light, without backup batteries and light bulbs. They wouldn’t be much help with refrigeration, and probably not a lot of help with cooking.
Having the panels up on my house, when no one else does, would set me aside as someone who is somewhat out of the ordinary. If the panels are later truly valuable, I would then become more of a theft target. I might also be more of a target for theft of anything else I have that might be helpful for survival, such as food that I had set aside. If I decide to move, the panels will be one more thing to worry about–how to take down, store, reattach in a proper location, with correct wiring. (I believe that a person doesn’t own goods; the goods “own” you.) Having the panels would encourage me to seek solutions that my neighbors could not afford–pumping water instead of getting it from a nearby stream, for example. This would further increase the likelihood of crime against me.
As a practical matter, I don’t have much I really am concerned about running. Lighting at night would be my big concern, but without batteries (and after not very long, without light bulbs) this wouldn’t happen. Without the grid, the Internet won’t be working, nor will cell phones. When I visited in India, I saw intermittent power in the home (some of it in the evening) used for light bulbs and television.
Light at night would really be good, and I do have solar powered flashlights with batteries. I also have a solar oven. Both of these look like things others would have, so are not things that would call a lot of attention to myself. Even at that, I expect the solar oven may very well be stolen the first week I need to use it.
I really have a hard time seeing any one family doing much better than the community as a whole, unless they are in a position of power with big fences and other security.
Hello Gail, they have those smaller fold out panels that can be put out during the day like the one I linked below. I kind of think of it like camping and get a few of these (I have one) and some marine batteries to charge up and a simple inverter and lots of long cords to run around your place to power small things as needed. You could put these out during the day when the sun comes out and can keep an eye on them while they charge your batteries and the bring them in at night.
I would like to have a say five of these panels and larger bank of batteries for my well pump and I may do that if money allows. With that I could power my well but forget your fridge, they just draw too much power. Freeze dried meats/veggies store for 25 or more years in those cans that they nitrogen in they are about the size of a coffee can. For veggies I like just the air dried in mason jars with oxygen removers and that is how I store dried organic foods from the garden. But you have to dry them really thoroughly.
We store those freeze dried meats and beans and stuff here in our spare room. Anyway these little panels are good for camping too if you need some lights and perhaps run something small. You will also need an inverter. Keep it simple and that way you will not look like the rich guy on the block and be a target. We will all be camping in the beginning of the collapse if it hits suddenly. Not looking forward to seeing all the people in need wandering around though. Even in our mountain town many are dependent on government checks. Well, here are those little panels and you can them them even a bit bigger too if you look around. They fold out maybe not the best quality out there but cheap.
http://www.harborfreight.com/solar-panel-kit-45-watt-68751.html
That is probably about the right size/right price set up, if a person buys something. In the reviews, people talked about buying two sets, and tying them together.
The thing I would probably want to use it to power is a microwave oven for cooking. It doesn’t draw a huge amount of power, the way an oven or burners do. Also, it would be good to power a reasonable light at night.
My real objection to PV panels is in grid-tied arrangements. On their own, they are pretty much OK.
Hello, You may need several batteries to run a microwave unless you want to blow your whole days charge on running one for a five minutes. A standard RV style battery will run a lamp all night and a small tv or computer for few hours. An it will run your microwave for perhaps ten minutes at best.
Russia – China Oil Deal Growing Bigger:
The $70 Billion figure cited earlier is now $270 Billion. The $70 B is merely an up-front downpayment by the Chinese. It appears that the Russians might have to install some pipes across Siberia. http://www.reuters.com/article/2013/06/21/us-rosneft-china-idUSBRE95K08820130621
If China is talking about 300,000 barrels a day for 25 years, $270 billion comes out to close to $100 barrel. It is a huge amount, but if China can lock in exports for itself, and lock out exports to Europe/US, it is ahead on the game. We think of oil as being a globally traded supply. This seems to be going away fairly quickly (provided China’s financial problems do not get in its way).
Securing a supply of oil for 25 years at $100 a barrel may be a very wise strategic move. A white paper done last year for the IMF was trying to improve their forecasting models by including both geologic constraint models as well as technological advances. The authors concluded that real oil prices will double over the next decade.
“While our model is not as pessimistic as the pure geological view, which typically holds that binding resource constraints will lead world oil production onto an inexorable downward trend in the very near future, our prediction of small further increases in world oil production comes at the expense of a near doubling, permanently, of real oil prices over the coming decade. This is uncharted territory for the world economy, which has never experienced such prices for more than a few months.”
http://www.imf.org/external/pubs/ft/wp/2012/wp12109.pdf
When people ask me what the return on our investment of solar panels is I always preface my answer with “At today’s energy prices…” It will be a great investment for China as long as Russia honors the contract. I wonder if the Chinese paid them in dollars?
Hello, Most solar start up companies have really struggled and many have gone bankrupt in the USA, I hope they do better in the future. America still has not embraced it yet and I think the same goes for most of the world. I see a few houses with solar systems – but, mostly they are still used for remote locations. I think we could do much more with this if the will was there and also with Hydro and Geo Thermal.
I see this as timing problem, people will want to build these things at time when finance is tight and resources are thin by not doing it now when we should be. It is going to be the challenge of the future. I think at some point it will take off – but if we can afford it is yet to be seen. Priorities are not in proper order for this happen.
On a side note Jody, here in the Northwest – there is much lumber and logging activity and the compost people here are getting lots of bio mass from the lumber industry and also the farms around here. It is kind of like stuff they have left over and have to get rid of but valuable to our gardens.
If you factor in 25 years of inflation, even at an optimistic 5% this deal is great for China. It locks in a pipeline that they can use after the 25 years or can expand over the 25 years.
It is quite possible that the price has some adjustment factor in it, based on variables that are not discussed in a short article.
Hello Gail, I wanted to ask you, do you think if they opened up all the protected areas for oil drilling including the Arctic do you think we would have an 30 years of oil? With perhaps Hell to pay for the climate changes? In crisis they will drill baby drill wont they?
Gail and Correspondents,
It is not clear that Iran’s potential impact on global oil prices and economic development will be as significant as that of newly discovered African oilfields, in both the East and the West parts of the continent. Angola, Congo and Namibia, Tanzania, Ethiopia and Kenya are now building the oil infrastracture. Angola had growth of 14% for the last few years.
Of course, I’ve been wrong before, but I see Iran as a local nuisance and bully who just wants to keep local pots boiling. They know that every time they threaten Israel they get a good reaction from their followers and the desired reaction from their enemies. Should we just yawn when they talk trash? Maybe. Yes, there are 76 million Iranians, most of them poor, some wealthy and educated. About the same as Turkey? Double Iraq? Different set of considerations, but Iran should not be regarded as much more than a minor political and economic player.
I wouldn’t count on Africa doing all that much. Africa has huge population–over 1 billion–more than North America, Central America, and South America combined. They have increased their oil production a couple of times, and then rising use by population and declining production has led to lower exports. We are in a dip again, with respect to exports. It will take oil use in Africa to keep stability in the region, but that quickly depletes the amount available for export. See this chart by mazamascience (Jon Callahan’s company):
Production is in gray, exports are in green, and consumption is the black line.
Gail,
A number of more recent reports about new discoveries and expanded exploration in the last few years yield a much more attractive picture for African petroleum production. Fox News claims an “Incredible increase’ in oil, gas exploration in East Africa; industry eyes new boom region”. and Fox News is known for its calm, rational assessments without hype.
And I’ve seen many more. We know the Chinese are very active throughout Africa, and in particular, Angola. So they may well have it pretty well tied up by the time our companies are ready to act.
Gail, on June 20, 2013 at 10:04 am you wrote “Our big problem right now is way too many people to live without fossil fuel.”
There are countries that have vast numbers of their populations living without fossil fuels.
These people would welcome a collapse in Western populations and way of life as it would stop the exploitation of the resources in their tribal lands and the extermination of their people.
As examples, removal/killing of people to enable carbon sinks to flourish, destruction of villages to enable mines to proceed and the resulting pollution of rivers killing all life in them.
If a pandemic reduced population enough (and that might be over 90%), these people would be left in peace to continue their way of life if it is still possible.
I am thinking PNG and South American countries with some parts of Africa.
In my country (Australia) it is estimated that 10 billion dollars invested a year for ten years would see enough solar/battery power to do away with the majority of fossil fuel use.
It is deemed to expensive but more than that is given in subsidies of one form or another to the fossil fuel industries every year and the level is increasing.
Use of fossil fuels is often hard to see. Fossil fuel derived fertilizer is used in China and India, and probably quite a number of countries. Medicines are fossil fuel derived. Pipelines for water and sewers are made with fossil fuels. Paving roads requires fossil fuels. Building hydroelectric power requires fossil fuels. School books require fossil fuels. Allowing teachers and students enough time for school, because they are not tied down with chores of raising a family or growing and processing food even seems to require fossil fuels. (Countries could set up programs for a few elite, and also apprentice programs more generally, but widespread education of the masses, including girls, does not come until fossil fuels raise the living standards.)
I think you might be surprised by the amount of fossil fuel used, even in Papua New Guinea and Africa. The fact that populations have rising in these countries in recent years is a good clue that fossil fuel consumption is rising, and permitting population to rise. According to the population figures EIA is using, Papua New Guinea’s population more than doubled between 1980 and 2011 (rising from 2.8 million to 6.2 million). Direct oil usage, according to the EIA, increased from 12 thousand barrels a day in 1980 to 20 thousand barrels a day in 2011. This does not count all of the fossil fuel use in products purchased by or donated to PNG.
Populations in these countries would likely drop back to their pre-fossil fuel populations. The population of Africa in 1820 is estimated to be 74 million in 1820. It is now over 1 billion. The earliest population I have for Papua New Guinea is 1.4 million in 1950. It is now 6.2 million.
I am willing to bet that the statement you made “it is estimated that 10 billion dollars invested a year for ten years would see enough solar/battery power to do away with the majority of fossil fuel use” is based on a very incomplete comparison. I bet what the people making the comparison are doing are comparing something like the cost of battery/solar power for cars, with the amount of gasoline used in cars. They leave out huge pieces–the amount of fossil fuels used in making the battery-powered cars, the amount of fossil fuels to maintain the roads, the amount of fossil fuels used in major segments of the economy that we have no good way of swapping out (making medicines, for example, and even powering long-haul trucks).
Gail, et al Crystal Ball Gazers: In the event the Fed changes policy — interest rates rise, credit is squashed, growth dives and austerity rules — in Europe, Asia and the Americas — what will be the impact on the impending collapse? Will a ‘heaven imposed’ stop of economic growth enable breathing room, or merely invite disaster to arrive sooner?
One effect could be serendipitous: the Europeans and the Asians and the Americans will all be brought (dragged) to the inevitable conclusion that no one country or society can be a super-performer while the rest suffer. In other words, we’re all in this together. Or to misquote a good Hemingway title, “the bell tolls for all of us.” (apologies to Xabier; perhaps we can meet in Grenada for a little tapas and cafecita…).
I am not quite sure what you mean. Economic growth is coming to a halt, and being replaced by collapse, one way or another, indirectly because of limited oil supply and continually rising population. There is a theoretical possibility that China/India and some other countries could stay out of the first round of collapse, and last until a second round of collapse. Some governments can perhaps bring on collapse faster, by government policies that effectively send jobs elsewhere. But if there are financial problems in China too, this may not be the case.
I expect that pretty much the only way “collapse happens” is because of the indirect impacts of all of the actions of central banks, together with high oil prices, too much debt, and all of the problems we have. Thus, it is a financial effect. I really doubt there is any other way it can happen. So, it seems to me that it is by nature “heaven imposed”. It may be that if the financial regulators were less adept, and didn’t think of Quantitative Easing, it would have happened sooner. Unfortunately, I don’t think it makes a whole lot of difference in the final outcome.
It’s a real double bind isn’t it? If the Fed continues with QE they risk having their capital wiped out by an interest rate shock, with the Ponzi consequence of having the US treasury recapitalize them in order to continue buying treasury’s bond issuance! If they stop QE, they risk interest rates going up setting off a deep global recession and cratering financial assets. Clearly they fear the former more than the latter given the recent tapering announcement. These are very bright people. I wonder if there is something else that has gotten them really worried regarding perpetual QE. Maybe they have realized it isn’t working?
I think QE actually has been slightly working–pumping up US housing prices, agricultural real estate prices, and stock market prices, even if not greatly helping the wages of the typical wage-earner. Stopping it, in and of itself, would tend to bring these prices back down, besides allowing longer-term interest rates to rise.
The recent run up in interest rates may be a concern, suggesting that portion of QE is not really working. The recent Chinese announcements are frightening as well. Once one banking system starts to have problems, it can shake up beliefs elsewhere.
Right, Gail and Ravi. Or at least I think you’re right, based on the sequence of recent events. It appears that within days of the Fed report about some retails prices rising slightly, they immediately began changing policy. It cost the Stock Markets dearly late last week. Now what? I think your views, and those of Ravi Nathan are probably correct, right now. But we’ll have to keep close watch.
Looks like QE is reaching limits too. According to this article, the Fed’s somewhat surprising decision to taper comes from the realization that the window for tapering is fast closing. Continued QE would result in the Fed getting locked in to a perpetual adverse feedback loop of higher deficits and increased QE. This understanding is the result of an article by Frederic Mishin, a close and trusted associate of Bernanke which gives it credence. The link to the Mishkin paper is in the article.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9891082/Trade-protectionism-looms-next-as-central-banks-exhaust-QE.html
Thank you, Ravi Nathan. If somebody at the Telegraph wants to know if they have our attention, the answer is yes. What will Krugman say?
Looks like Krugman has not read or ignored the Miiskin paper. His NY Times opinion page article today makes no mention of the reasons for the Fed to taper; only that it is bad idea.
Thanks for the links. The direct link to the Mishkin paper is http://research.chicagobooth.edu/igm/usmpf/download2.aspx . I scanned through the 88 page paper.
Obviously, it assumes that economic growth will continue as in the past. What the paper is looking at is keeping debt from growing relative to GDP. If GDP growth slows, the problem is even worse than modeled in the paper.
I think that slowing world GDP growth is precisely what we are up against in the next few years. Europe with its declining oil/gas supply is certainly headed this way. China and India are not keeping up the growth they had in the recent past, thanks in part to declining demand elsewhere. With declining GDP growth rates, the tendency is for falling tax revenue (or less growth) and more growth in spending, leading to greater deficits, and increasing sovereign debt load relative to GDP.
Backing out of QE will be a huge problem. Interest rates will rise, housing sales will drop again (leading to lower home prices again). The government will be faced with paying more interest on all of its debt. And so forth.
Hello, What a perfect storm brewing, Rising yields, prospects of war, global warming and financial collapse due to over leveraged indebted governments. God help us.
What looks like a perfect storm is all really related to rising population and limited resources.
Gail
And rising population and limited resources are exactly the things which are almost never mentioned or even alluded to – although the demographic problem of Japan is now getting some airing even in strictly financial presentations (eg, recently, by Kyle Bass).
Good Day Xabier:
I’m glad you mentioned the demographic issue. Recent articles I’ve read in The Economist and elsewhere emphasize the impact of demographic changes, not just in Japan, but also in China, India, and Germany. In fact, the Germans are beginning to search for skilled workers in Spain to fill vacancies in Deutschland. It appears they prefer Spaniards over Turks, after decades of growing social problems with their Muslim migrants.
Cheers, Chris
CHINA STORIES:
To Gail and all correspondents on this blog, especially those who might be interested in tracking developments in China and China’s relations with its neighbors. Gail proposed that I provide source data to support assessments I had made. In response, since the number of articles is very large, and are published regularly, daily at a minimum, I would instead offer the names of the publications:
The Atlantic Monthly, Quarts.com (a blog of the Atlantic), The New York Times — especially the China blogs, Reuters, Bloomberg, Foreign Policy, The Diplomat, China Economic Review.
Alternatively, you might just google ‘China Economy’, which will quickly pull up all the pertinent writings current on that day.
Cordially, Chris
Hello Chris, I have been watching this circus with the Federal Reserve this week, just talking about ending QE sending global markets into a tail spin. If they try end it they will quickly find that they are trapped as markets will fall and they will have to do an even Bigger QE to try to pull us out of it. Like lifting a heavier weight each time and harder to push it up.
You know the Federal Reserve is not even part of the US Treasury they are a private bank given far too much power and I would like to see it abolished so the markets will be fair and not manipulation.
There is more news coming out today about China slowing down. It looks like a world wide depression is near, not just a slow down – but a full fledged depression like what Xabier is seeing in Spain.
http://finance.yahoo.com/blogs/daily-ticker/china-slowdown-now-clear-present-danger-154824780.html
One thing about the article you link to. Besides mentioning high interbank lending rates, it mentions total Chinese debt of $23 trillion. The US’ total debt (using Federal Reserve numbers for 3/3/2013) is $57 trillion. China’s 2012 GDP is only about 30% of the US GDP. So if I am making the comparison right, Chinese total debt is 34.5% higher than US debt, relative to GDP.
Perhaps the article meant that Chinese debt was 23 trillion yuan?
Gail, there appear to be a hundred different ways to calculate that stuff. The latest problem I saw was that the US states and municipalities are woefully deficient in putting enough money away to meet their pension commitments.
And then we just got that (spurious?) report that a favorable immigration bill will yield $20 Trillion over 20 years, or some such. How that was figured I have no idea. I think it’s all black magic.
Googling ‘China Debt’ can bring some surprises.
The Chinese people have about as much trust in their government as they do in ours. No, maybe more in ours. So who can get their money out, does so, and everybody in the country understands the impulse. It’s kind of like paying the neighborhood protection taxes in New York: nobody blames you for doing it, even though the effects are bad. In China the little guy always gets the shaft; that’s what history teaches.
But it’s also the one defect that prevents China from making the leap to world leadership. In essence, the Chinese people just don’t want to be bothered.
Christopher
Yes, probably the limit of ambition is to have ‘a dog bubbling in the pot’ (like Henri IV’s chicken for each peasant) ; and for the politicians, to have a measure of global respect and a Chinese regional sphere of influence fully recognised, with lots or profitable investments around the world and secure access to resources.
Whereas the British, French, Spanish, Portuguese, Germans, etc, really did once want to control as much as possible of the globe.
Still, in times of crisis, nationalistic sentiments can be whipped up.
Chris I follow this guy Peter Schiff too and he talks a lot about the problem of having the Fed.
http://finance.yahoo.com/blogs/breakout/fed-trying-reflate-phony-economy-says-peter-schiff-143410259.html
Hi Scott:
Thanks for the good Peter Schiff link. Most entertaining is he and his prompters. Did you notice how many times they mentioned that they had gotten something wrong 2 months ago, or 3 or 6. The fact is they get it wrong all the time. All of them do. Not one of those guys drawing down 250K a year really knows what’s going to happen tomorrow or the next day. Why? Because there are just too many players and they do not all have equal knowledge. So everything they do, all their recommendations, has an element of risk that cannot be evaluated ahead of time. The roulette wheel might be more predictable.
Cheers. Chris
If a country the size and wealth of Iran is determined to build nuclear weapons, only an invasion and occupation can stop them. That will never happen. I suspect they want to have the industrial infrastructure to build nuclear weapons, should they ever feel threatened with invasion, like happened to their neighbor, Iraq. If I were them, I wouldn’t do a nuclear test that would only incentivize my neighbors to get nuclear weapons. I would just have everything ready to do one on short notice to discourage an invasion. Such an invasion would take months to organize and would be easily discovered by Iranian agents, because it would need an enormous quantity of prepositioned military hardware to be successful. Iranians can fight and their army is very large. They might hate their government, but they love their country. Even Pentagon generals have said that an Invasion of Iran would be a big mistake, because it would entail huge casualties.
They test a nuke, and no country would dare invade. Unless they were mad.
And suppose Putin decides to pull up some tankers and transport oil to Russia for resale. Who is going to stop him? China too. Chinese shipyards can build tankers. The Iranians lower the price enough and someone will buy their oil. Both China and Russia can pay in food and goods.
That is a scary thought a ground invasion of Iran, the casualties would be terrible, I do not think the Pentagon would be stupid enough, or would they? If they are after Iran’s big pot of Oil which they just may be, they may do it under the guise of the nuclear weapons.
If it is not the oil, then more likely airstrikes to take out the nuke facility. But look at Iraq today, now China is in there getting the oil too in partnership with the oil companies working there.
http://www.nytimes.com/2013/06/03/world/middleeast/china-reaps-biggest-benefits-of-iraq-oil-boom.html?pagewanted=all&_r=0
Iraq Oil Production Change by year.
Year production change
1980 2,514.00 NA
1981 1,000.00 -60.22 %
1982 1,012.00 1.20 %
1983 1,005.00 -0.69 %
1984 1,209.00 20.30 %
1985 1,433.00 18.53 %
1986 1,690.00 17.93 %
1987 2,079.00 23.02 %
1988 2,685.00 29.15 %
1989 2,897.00 7.90 %
1990 2,040.00 -29.58 %
1991 305.00 -85.05 %
1992 425.00 39.34 %
1993 511.70 20.40 %
1994 552.53 7.98 %
1995 560.00 1.35 %
1996 578.80 3.36 %
1997 1,155.00 99.55 %
1998 2,150.04 86.15 %
1999 2,507.88 16.64 %
2000 2,570.68 2.50 %
2001 2,390.00 -7.03 %
2002 2,023.00 -15.36 %
2003 1,308.25 -35.33 %
2004 2,011.47 53.75 %
2005 1,877.66 -6.65 %
2006 1,995.60 6.28 %
2007 2,086.29 4.54 %
2008 2,375.27 13.85 %
2009 2,390.59 0.65 %
2010 2,399.30 0.36 %
2011 2,625.69 9.44 %
2012 2,983.33 13.62 %
The BP (Big Problem) with Iran getting A-bombs is that it would not end with Iran. If Iran “goes nuclear) then Saudi Arabia and other Arab powers would quickly follow.
China’s close ties with Iraq might help stabilize it as well, if anything can.
China also seems to have close ties with Iran with respect to Iran’s oil. According to the Wikipedia page China_Iran Relations,
We have agreed to protect Saudi Arabia; China seems to have agreed to protect at least part of Iran.
Thanks Gail. That is very interesting. China’s deal with Iran also affects Afghanistan (negatively from Afghanistan’s perspective), Pakistan (positively from China’s and Pakistan’s perspective) and India (negatively from China’s perspective). This provides some background for that comment about India and Japan aligning. The Southeast Asian states will also have roles to play.
China continually claims that it wants a ‘peaceful rise’, but somehow a few firecrackers are falling into the campfire.
Gail
I note you recently gave a presentation at U of Vt. Do you know if they were taped? And if there is some way to see them?
Thanks
Walter
Justin Richie of extraenvironmentalist.com made an audio recording of my talk. I haven’t seen it up on the site yet. I sent him an e-mail inquiring about it. I’ll let you know if I hear anything back.
Edit: I did hear back. He should be done with the audio recording in a few days. I will probably put both the audio recording and the PDF up on Our Finite World.
It would be interesting if more sanctions are put on. Saudi can up output by max 600k a day but what if Russia dropped it’s output by 300k a day and Venezuela did the same and a few other exporters that have been abused/invaded/shock doctrine d by the west did the same? They can profit hugely while we pay much more. Dealing from a military only point of view has some limitations that should be acknowledged. Diplomacy seems to be our last resort now instead of the first.
I expect that most oil exporters need the revenue badly enough that they wouldn’t voluntarily cut their output, but you are right, cutting output to raise prices wouldn’t be that hard to do. Usually, when prices drop, some production (probably the most expensive) goes off line when prices fall. More or less what one would expect.
Hello Gail, I was wanting to ask you about the event in the 1970 that was blamed on Iran for fuel shortages in the USA. What is your opinion on what was behind that, it seems we would have enough fuel in those days in the USA to do without Iran’s oil for a time? Was it all a sham to raise prices?
I remember all the signs on painted card board “No Gas” and as I mentioned an earlier post I worked at a service station and when we did have gas we allowed 8 gallons per car odd and even license plate days too. Cars were lined up to the gas stations 3 blocks long, and we wasted gas just to buy some. I think we say i New York, after the storms recently people instead lined up with cans and not in their cars.
After the crisis eased I remember gas went up from like 75 cents to over a dollar….
What really happened was that US oil extraction reached a peak in 1970, and started to decline in the years following. This made the US much more dependent on imports. If it weren’t for this dependency, the oil embargo that took place in 1973-1974 would have not made much difference.
Regarding the embargo, Wikipedia says:
Hello, Fascinating Gail, I knew they were not telling the truth, they would rather say Iran was at fault than instead of saying we had pumped out Texas. You know Gail I was thinking about the date was driving a car already I had to be sixteen, it was 1976 for the event I remembered I am not sure how long the shortage lingered before I got the job at the gas station
I would say in 1975-1976 because I worked on cars and cannot remember exactly when I got my car, it may have been a bit earlier and but my memory fails me on that. But you know the lie to us on finite energy supplies kind of really got underway then and ever since they have not said a word, just higher and higher prices on energy.
But man, I will tell you – people got grouchy in those gas lines and I fear it would be much worse today. When I lived in California during the recession there fist near fights at the cheaper gas stations that I witnessed if a car came in from the other side to cut someone off waiting to get to a gas pump.
Ken, it’s neither diplomacy nor military might, but fracking that provides the power the USA is using to keep prices down. Moscow, Caracas and several Gulf states want $120 oil. If the US had not added its increased natural gas and petroleum output, the prices would be higher. The question for the USA is whether the USA wants to hurt Russia and Venezuela and unfriendlies elsewhere, or just let them know that we can…
Oh, and BTW, what effect do you think low vs high oil prices have on China? Japan? Europe? Now, after thinking about that, consider what US options should be considered vis-a-vis our allies and others.
Cheers
The only question is will China defend its oil supplier? I suspect it has been doing so for several years now through money feed to appropriate U.S. politicians. The Chinese have been playing geo-politics for 4000 years longer than the Americans.
I certainly have not studied this. China (like a lot of other countries) seems to tolerate quite a high level of bribes of government officials (based on my visit there, a couple of years ago). I could imagine this kind of thinking affecting geopolitics. They don’t have the ships to send everywhere, so would need to use some other approach.
Gail
It would be no surprise to anyone. The British Empire routinely used bribes to influence foreign politicians. Before that, the French did the same: at one point the English King was a paid pensioner of the French King.
The expanding Chinese Empire is developing in almost exactly the same way as the early British Empire (and different to, say, the old Spanish Empire): the old phrase was ‘The Flag follows Trade.’
It’s fascinating to watch, although Chinese propaganda is being deployed to blur the picture: ‘Empire? What empire?!’
I hadn’t thought about it that way.
The Chinese would likely not want to bomb areas that they are depending on for resources. That would likely keep attacks from them down.
The reserve currency has changed several times throughout history. China with its empire would be the likely next candidate, if it can keep up the current trend, and isn’t already reaching limits because of too much debt. You may have seen this article.
Hello, Interesting article about China and how they copied our banking system. Money is getting tighter and harder to borrow in China it seems.
It looks like all the world’s major economies are deeply in debt and reaching limits. Too bad there is no reset button.
Gail
Interesting article,thanks.
It’s very illuminating to see what Chinese people say in comments to blogs and articles: their line is ‘We had the biggest GDP in the world in 1600, so why not again? We don’t have an empire: where are the garrisons, the colonies? There’s nothing to be afraid of, it’s our turn to grow rich now. We don’t conquer, we do deals that are mutually beneficial ‘
But just look at what they are buying up, the deals they are striking with local rulers, which is just how Britain started: ‘informal empire’ is cheaper and more flexible than a Roman-type empire.
Somehow, I suspect that environmental degradation, resource depletion and social problems, will catch up with China, but on the whole, I’m not into predictions. A land so vast can hold many surprises even for its own people…
You may wish to run a google search on “China + String of Pearls.” The PRC has entered into agreements to lease and develop port facilities in the Indian Ocean and elsewhere, including new ports in Sri Lanka, Burma, Pakistan and perhaps in Africa. Their perspective appears to be based on historical precedents. For example, they talk about piping oil from Burma up 6,000 feet to Kunming, in Yunnan Province; and from Karachi up through Pakistan and over the Hindu Kush (16,000 – 20,000 feet?) and then into Tibet and western China. (One wonders if they think pumping uphill is free…)
The port facilities they are erecting are immense in Colombo and elsewhere.
Thanks! I see that not everyone is happy about the String of Pearls. According to this recent article, India, Japan join hands to break China’s ‘string of pearls’.
I guess if you have enough oil to use, you can do anything. I wonder, though, if their financial problems will slow down this endeavor.
Several recent articles in respectable journals and newspapers indicate that China’s ‘growth pattern’ has been severely altered. The books apparently don’t balance, and they got too far down the road on too many projects before they realized that the assets and the liabilities don’t add up. Knowledgeable observers are unsure when and how hard the axes will fall, but the ‘expanding empire’ will have to wait.
Some pessimists claim that the finances of each of China’s 36 provinces and independent cities are somewhat dodgier than in Greece. One knowledgeable Chinese provincial authority recently said all budget data is ‘jellyfish’, ie, 99% water. It could get bad soon.
But the 300 billionaires and several thousand millionaires that China crowned last year have all pretty well gotten their money out of the country already. Which is also why China has not yet put together a social security program or health care for the elderly: the proceeds from all that commercial activity over the last 30 years was supposed to be used to get those programs started. Ooops, it seems the money had a mind of its own…
You know what worries me Chris? China really traded in their environment for some fast cash.
Kind of reminds me of this old song, I will paste in the lyrics below. — Scott
So, so you think you can tell
Heaven from Hell,
Blue sky’s from pain.
Can you tell a green field
From a cold steel rail?
A smile from a veil?
Do you think you can tell?
And did they get you to trade
Your heroes for ghosts?
Hot ashes for trees?
Hot air for a cool breeze?
Cold comfort for change?
And did you exchange
A walk on part in the war
For a lead role in a cage?
How I wish, how I wish you were here.
We’re just two lost souls
Swimming in a fish bowl,
Year after year,
Running over the same old ground.
And how we found
The same old fears.
Wish you were here.
If it were just China it would be bad enough. The whole world is destroying it’s birth right for a few pennies and to keep this insane orgy going.
I expect that the reason why the savings rate in China in the past several years has been as high as it has been is partly because (1) there is no Social Security, so it makes sense to try to save for retirement, and (2) with one child families, there is a realization that the family’s only child will probably not be able to provide for his parents in retirement. I believe that these savings were used as a base for the massive investment that was done, and that is part of the reason that China has been able to “ramp up” as quickly as it has. (There has also been a lot of debt used as well.) Now, it seems like there is a real possibility that some of the money these people set aside for retirement has likely been spent on projects that do not really pay back a return. Some of it may have been used as backing for loans that have gone sour. If there is bad accounting, it has hidden these problems.
There is also the problem that with one-child families, the work force will drop in future years, making it difficult to fund a Social Security program on a pay-as-you go basis (even if there were plenty of coal and oil), because the number of young people is too low, relative to the elderly. If fossil fuels are in decline as well, this will lead to a very major problem.
If things are as bad as you say accounting-wise, I expect there will be some very unhappy Chinese people. I can almost believe it is true, partly because of (1) the amazing ramp-up in recent years in China, (2) the amount of debt that seems to be behind it, and (3) the tolerance for funny accounting/bribes that there seems to be in China.
Do you have articles in English that you can link to?
Gail, I am getting to be a little bit older myself, but it kind of looks like a world that needs to shed many of it’s older population. You are scaring me now. But just look at Japan and China with its one child policy, the hard facts are that they have to get through this generation first a tough time when there are not enough young people to work while they have many old people to take care of.
Christopher
I agree on all that: we can see what the Chinese leadership would like to do (become a global superpower), but somehow one suspects that for all the above reasons -financial, demographic, resource constriction – they won’t be getting there.
To Gail and tmsr:
China has joined the international anti-piracy effort off the Somali coast. It is the one effort China has made (that I know about, anyway) in ‘international security’, and was a welcome step.
It appears that the Chinese want to be able to reap the benefits of being a respected, ‘white hat’ in Dodge City, and they have gradually increased their participation with UN and regional operations, such as in Liberia. Of course, much of their efforts in Africa have been aimed at gaining access to natural resources, including high quality and exotic timber (which they have already stripped from most old growth rainforests elsewhere), minerals and petroleum. But now they are even beginning to buy farmland in Africa to grow products for consumption in China. Something about pollution…
I agree that holding down piracy off the Somali coast would be a step ahead.
I have heard about China buying land in Africa. This article seems to suggest it is not doing very much to export crops to China, though. Most of what is being grown is for use in Africa–an example being to feed Chinese workers in oil-fields in Sudan/south Sudan. The main reason for lack of exports:
Well, maybe I’ve got it wrong. What you said would make sense: the Chinese are putting in lots of roads in Africa — and generally doing a mediocre to lousy job of it: inadequate drainage, etc., has caused numerous roads to fail within a few years. And a few buildings have collapsed, including a soccer stadium, I think. And some of my African contacts roll their eyes when discussing the Chinese financial aggressiveness.
I’ve seen other articles about Chinese agriculture abroad that talk about supplementing domestic agriculture with produce from overseas, due to soil and water pollution, and China’s increasingly limited water resources. Also, the boom in urban construction has not only made local party leaders rich, but paved over lots of rice paddies.
FYI, China plan to build numerous nuclear reactor and also to construct desalination plants up the coast, as well a lots of pipes. The situation is very grim, — they recently disclosed the existence of ‘cancer villages’ — many of them — where people a transferred when diagnosed with incurable disease.
The Africa article I linked was just a recent one I saw. If there is an easy way to get the food to China, I am sure they would do it.
If China has a secure supply of oil from Saudi Arabia and Iran they are in good shape. If the global-bank block wishes to enhance their position relative to China destroying Iran would do it. The global-bankers also fear the “bad” example Iran provides to workers. Iran supports and develops the country for the benefit of the citizens of Iran.
You may very well be right. Imagine, a country developing itself for the benefit of citizens of Iran.
You just hit on something Ed, China may and some other big countries may not like us (Including Israel) attacking Iran and we really could be facing something larger than we wish to see. China and Russia have surely staked their claims to those pools of light sweet crude oil there.
Ed
My impression of the Iranian reality -from talking to Iranians – is very different from that: it is run entirely in the interests of a ruthless dictatorship who live in luxury: they enjoy the very luxuries that the top people had under the Shah (my friend’s family are part of this.)
Opposition means torture and death. This has in fact been the historical reality in nearly every country in recorded history, until very recently: it would be surprising if Iran were any different.
In Iran, it si extreme. Cross them, and government thugs can kill you on the street, just like that – this is no exaggeration. Just come up on a motorbike, and beat you to death. The US might be engaged in demonising Iran, for its own purposes, but the reality is not particularly nice.
It might be that the life of the masses is more equal than in, say, the US or Britain, but it’s not a place I’d be happy to live in! Like Franco’s Spain, the reform will likely only come from moderate people within the elite, not from the people. I cannot see US military intervention improving things, to say the least…..
Jabier:
Thanks for your posting, above. Your intell matches what I have heard. Iran is a thugocracy and a kleptocracy. The thugs run the religious, security, military, education, industrial and transport sectors. I have met with Iranians when in Abu Dhabi; we were generally shocked at the arrogant ease with which they claimed power to do as they will, and appalled at the implications. Franco’s Spain, Stalin’s Russia, Hitler’s Germany: none of those have much on the Iranian thugs.
Hello, Honestly I am just as uncomfortable with North Korea and Pakistan having these bombs as Iran, so it looks like the cat is out of the bag, I think now we have to wait and see who wants to blow one off first and then deal with them, there are too many powers already to zero in on one country like Iran, that is why I think they want their oil by the way they are behaving with the sanctions.
Ed, China’s need for oil is expected to keep growing, as Chinese buyers now purchase more new cars per year than even the USA. The Chinese are buying oil wherever they can, and have begun to invest in newly discovered oilfields in Africa. Also, they purchase 1.5 million BBD. Earlier this year the new Chinese president made Moscow his first visit, the purpose: to sign an oil deal. They’ve got a big problem, however, in that their exports have dried up in the past few months (Europe and the USA aren’t buying as much junk), so they can’t really afford more oil or anything else.
Well, the Chinese certainly have been “Busy Bees” buying up most of the world’s last resources for sale and using the USD and their currency while the getting is good. I think the event we had back in the 1970’s here in the US was as we had to change gears to importing from being a domestic exporter. We cannot all be importers and that is how we are coming into our Long Emergency as now we can even see in the data that soon middle east countries will need their own oil and gas.
To Ed Pell: Good timing. Mr. Putin just announced that Russia will be signing an $80 Billion oil deal with China. http://www.reuters.com/article/2013/06/20/us-russia-oil-china-idUSBRE95J0NR20130620
as I’ve pointed out before, the ultimate shortage of oil will be brought about by fighting over it, but ‘wars’ assume many forms. While Iranians are now presented as the bad guys in all this, it is important to remember that Iranian oil along with the rest of the Gulf region has been the focus of western political manoevering since the 30s.
Any reader sufficiently interested should read up on the coup that the British instigated to oust Mossadeq when he had the effrontery to nationalise Iranian oil in the 50s. The overall consensus then, and pretty much now, was that the oil producers should remain as third world states, while supplying the first world means of support to the west. This is why oil is being fought over. If everyone has only their fair share of it, then we are all reduced to a mean level (in every sense). The industrial powers of the west cannot allow this to happen, so we have wars or sanctions. The point of either is the same, to reduce the economies of the producers to the point where they can only sell their oil, and not use much of it.
With this in mind, it’s no wonder the Arabs are seriously pissed off at the ‘infidels’ who steal their oil.
Iran, with its big population, is definitely in a place where using the oil is a risk to maintaining exports. With the prodding of the West, Iran has switched to emphasizing natural gas for cars–something that is less than ideal, but sort of OK.
Given how things seem to work out, I can see why oil producers in all of the lesser-developed countries would be seriously pissed off at the West. Iran has the “nerve” to be doing fairly well for itself, despite all of our meddling.
Gail, I believe I did not see any mention of Iranian refining capacity in your opening write-up. In fact, they have none, and must import refined products. The US and its allies have prevented the transfer of technology.
Throughout this blog there have been many references to Iran’s ‘normality’, and a fair amount of sympathy for the Iranian people. It’s unfortunate that so many otherwise well-informed people have not been paying close attention to Iran over the last 30 years.
Among other things, the Iranian call that terrorists attack the West, particularly the USA and its allies, should give pause. They are most certainly not our friends, and in fact want to do more nice things like 9/11.
They have threatened on several occasions to sink ships in the Strait of Hormuz to prevent passage of laden oil-tankers. In fact, the US Navy has several anti-tank ships in the local fleet as well as ‘wrecker’ ships to open the Strait quickly in the event they actually do try to plug it up.
In the event you wish to study this a little more, merely query ‘Iran threats’ for starters.
Hello, we have been talking a bit about the event that started in the early mid 1970’s and perhaps lasted until about 1976 and Gail provided a time of gas shortages in the USA. The charts show the USA peaked and perhaps during this time the real shortage occurred because the USA for the first time had to find a way to buy and secure oil from outside it’s border from abroad.
Since those days the oil rich country to our north actually provides more oil and gas than any other source I have read, that is Canada. I think Canada was really mostly a wilderness in the Early 1970’s mostly not yet explored for oil and gas etc.
Iran definitely has refining capacity. I don’t have up-to-date figures on it. This article from 2009 says:
This EIA report says:
In my post, I linked to a May 2013 article about refining. It says (among other things)
So at this point, it sounds like Iran may even be a net gasoline exporter. Where did you get the idea that they have no refining capacity? (Iran’s oil consumption in 2012 was 1,971,000 barrels of oil equivalent in 2012, which is an increase of about 5% from its consumption of 1,878,000 barrels in 2011, according to BP. The sanctions didn’t seem to stand in the way of Iran increasing its consumption.)
I tend to ask questions about things that everyone “believes” to be true, whether or not they have done any research.
This is out tonight on China.
http://finance.yahoo.com/news/china-june-flash-hsbc-pmi-014855604.html
THanks! I saw a WSJ story related to that article, but not that article.
Must be one of those old wives tales. I’m pleased to be corrected. And I’ll take a look at previous reports I’ve seen that might be in error.
When I see reports that the senate voted 99-0 in favor of anti-Iran legislation, I am suspicious that a lot of people voted based on old wives tales. If Iran is, in fact, a net exporter of refined oil products (as well as crude oil), then a falling rial would seem to mean that they are getting more and more rials for every barrel they export. If internal inflation is pretty benign (because they mostly trade in internal goods), then the sanctions are pretty much upside-down. A falling rial means that Iran can get the same amount of currency (or goods in leu of currency) for a smaller and smaller amount of oil exported. Am I missing something?
Hello, You know Gail, I just do not see Iran being much worse than some other countries in the middle east that have Nuclear warheads. It has been said they have not attacked another country in 300 years. I think there is fear that they will provide the bombs to other factions in the middle east like Hezbollah. But there are also other countries in the region that are questionable like Pakistan that have the bomb and given Iran’s close friendship and with the oil being traded to places like Russia, North Korea and China I really would be surprised if they did not already possess some of these weapons.
I think Israel is at the heart of the issue and I think they fear Hezbollah for sure, and they have gotten the US on their bandwagon, but we also are looking at one of the largest last pools of oil sitting in Iran and I think the US would like to take it over.
Earlier I posted about the Iraq war and how China is in there getting lots of oil now, but did they send troops when there was the war? Will they send troops to Iran? I do not think so, but they may be there waiting to come in and pump the oil when the war is over. I am no military expert. But I believe, unfortunately, this war may be different if we have a ground invasion in Iran and I think it will surely be much worse than Iraq and it could lead to nuclear strikes.
Re: Iran’s Refining Capacity
My mistake. A 2006 Washington Post article, ‘Plenty of OIl But Few Refineries’ (http://www.washingtonpost.com/wp-dyn/content/article/2006/05/31/AR2006053101464.html), quoted an Iranian oil official bemoaning the decreased capacity and fear that the US Government would block purchase of replacement equipment. However, the Iranians managed to import ample replacement parts and increased their refinery capacity.
Looks Like China just may take Iran, not by war but – with finance – if war does not break out.
Hello, this is on a different subject, Alaska, it is melting more than usual.
http://science.nbcnews.com/_news/2013/06/19/19044003-see-alaska-all-of-it-in-beautiful-space-image?lite
Scott,
It may seem to be “off subject” but it’s really at the heart of this entire issue. Burning fossil fuels has produced a serious blow back with the climate and the article you referred to points out nicely (if one can use that word in a disaster context?) the consequences. Thanks for the article.
Ed
Scott, I concur with Edward Kerr, below. And it’s not just melting the ice that would be bad, but unfreezing huge tonnage of methane hydrate could be an actual disaster, as in evaporating into the atmosphere and maybe igniting.
The political pull of the Israeli lobby is a major reason that US lawmakers slam Iran. There’s nothing lose and everything to gain, versus the exact opposite for voting otherwise.
End of More
I suppose one can say no more than that one cannot expect a comfortable and easy life based on oil, and also demand that one’s government has clean hands…….
In the old Arab chronicles, they called my Basque ancestors ‘barbarians’ and subjected them to slave-raiding expeditions, and decorated the walls of their cities with the heads of the defeated. That’s what you do to people on the fringes of a Empire.
the Arab slave traders were regular visitors to UK southern coasts too in the 16th C
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Quite true, they caused trouble on the seas until the early 19th century.
My view of the Arabs, Persians, Turks, Kurds etc, is more or less: ‘ what goes around comes around.’ When the boot was on their foot, they kicked hard. I have little pity for them.
Today, the Arabs and Turks complain about the interference of the West and Israel as the cause of all their troubles: a hundred years ago, it was the Turkish Empire (fellow muslims) they hated and blamed for their woes.
The weak tend to take refuge in conspiracy theories, but really they are only dreaming of being powerful enough to push others around again. The heyday of the Arabs was the 9th century, they’d better get used to the idea of historical cycles – as had the West as we go down……
Iraq and Iran. Both now courted assiduously by the Chinese. A recent article talked about China taking 1.5 Million Barrels per day from Iraq. Some crotchety neocons thought the US should have cordoned it off and claimed it in payment of war debts… That’ll work just great. But not to worry, China also want to get more Iranian oil without upsetting the international sanctions. (Of course, they might be getting Iranian oil from some other routes…
The National Intelligence Estimate (NIE) about Iran’s straying into the dark gray area of enrichment was mentioned, but not discussed in detail. Anyone who claims to know what is really going on in Natanz and other sites shouldn’t be talking on this blog, but to someone who might be able to do something useful with the information.
The fundamental difference between the Iranians and some of the others in that neighborhood is that the Persians have been conquering their neighbors for at least two millenia. They think it’s their right, and that they are the smartest, strongest empire in the area, and that Arabs are still fundamentally their slaves. BTW, Iranians love to play ‘chicken’. They don’t mind losing, but can never turn down a match. Every man an alpha monkey.
Most Iranians are Shia, so they come down against the Saudis and Gulf States (except Bahrain, which has Sunni rulers but a majority Shia population. All that stuff is a big continuing problem. Just think how it would be if we never called off the Crusades, or the 30 Years War had continued for several hundred. I sure hope we get over our oil addiction soon, so we won’t be forced to deal with such.
Yes, let them join the long list of others that have bombs pointing at us. And, yes not to downplay the danger, but there are so many now why should we fuss over one new one. It looks like the fist one to “shoot” is subject to attention.
Please forgive my typos, when I write late at night, I meant to say that the “first one” to shoot off a nuclear bomb will get our attention.
A couple of thoughts come to mind. One is whether China has atomic bombs. They seem to have everything else–certainly lots of nuclear reactors built or planned. I would think that they would be a greater threat than Iran, if there were not enough to go around. They would want to keep the Middle East intact so that they could get the oil. It is less clear about not bothering major competitors.
Back in Old Testament days, the conquerers (relative to Israel) seemed to be the Assyrians and the Babylonians. Those people seemed to come from modern-day Iraq rather than Iran. But with the Middle East being a cradle of civilization, the area has had overpopulation pressures for thousands of years. There has been a history of everyone fighting everyone else–those close at hand as well as those coming from a distance. Persia seems to have been more successful than most in this regard in “more recent” periods. If we look at Middle Eastern population by country, the most populous country by far is Iran, with 79 million in 2011, according to the EIA. Iraq is second with 30 million. Saudi Arabia is third with 26 million. Yemen is fourth with 24 million (ouch–practically no resources). Syria is fifth with 22.5 million. Israel has only 7 million. So at least part of the problem is fear (maybe correctly) of the “big guy” on the block.
Hello, Yes Gail, it sure sounds like those countries populations are very vulnerable with their ancient cities and little resources aside from oil.
Gail, yes China has both nuclear weapons and the global delivery systems for them. China has a more capable system than Israel, Pakistan, India, North Korea, France, and England. Maybe even better than Russia but that is not clear.
Yemen has some fish (ouch indeed).
That is sort of what I was guessing about China. Yemen is an absolute disaster. This is graph of Yemen’s oil production and consumption.
Hello, that does not look good for Yemen, I do think the middle east is not the place to be.
Syria is another problem state.
So is Egypt.
After a a very short time, a person starts seeing a pattern. Also see, How Oil Exporters Reach Financial Collapse
Thank you Gail, I think we are getting the picture. This does look like an uneven collapse hitting places like the middle east first before perhaps Europe and the US later. You know people that live in places with lots of green trees, animals to hunt and abundant water will really have a better environment for a time I believe. How long I do not know, I guess it depends on if we keep those nuclear bombs from being tossed around.
Nuclear weapons and delivery systems feature prominently in the arsenals of Russia, China, England, France, and the USA. Israel reputedly has developed a number of weapons estimated to be in the range of 20 to 50, of various tonnage. India and Pakistan joined the club — illegally and flouting the rules, but since they weren’t penalized, the toothless UN just once again demonstrated its inadequacy. Their inventory count is not known to this observer. South Africa (during Apartheid) conducted one nuclear weapon test. Iraq’s earlier efforts, and those of Syria about 8 years ago transitioned to Israeli Air Force bombing practice (Israel’s so small they don’t have enough room to get all the training they need so occasionally expand their areas). North Korea, of course, has cobbled together some stuff, and it might even be a real nuke, although some doubts persist. (I’m not an expert on such things, but have heard that the North Korean bomb may not be a full-up nuke, but would sure get your attention…)
Iran, of course, wants to have the credit and credibility, even though owning nuclear weapons would be considered a sin. Or so says the Ayatollah.
The Sunni-Shia divide plays a very significant role here. If Iran gets nukes, Saudi will immediately try to arm itself. Turkey may also go nuclear. Then Egypt. Where does the proliferation stop? Once in that feeding frenzy things can get very messy.
Similar considerations emerge in East Asia: If North Korea continues to taunt the USA, Japan could well go nuclear, for self defense. Then South Korea. Now China and the USA lose their hegemony. Is that good or bad? You decide.
The world has lived since 1945 with nukes but without using them. But there were more than a few times that the peace could easily have been shattered.
Thanks for the update. Getting nukes for everyone doesn’t sound like a good idea. They would provide even a faster way to reduce world population than a pandemic. There are too many unstable governments, wanting to make a name for themselves. If a country has internal problems, picking a war with others to try to obtain some of their resources is a time-tested way of covering up the problem. This approach also has the hope of getting more resources.
Hello, You know Chris, I think the group is focused on the right issue with us examining the middle east and especially Iran. Forgive my typos, sometimes I write late at night when I am tired or with glass of wine.. In a fair world no country should be allowed to have a gun (Nuke Bomb) pointed at another, but it seems some feel entitled to do so. I am no more fearful of Iran which has not started a war in hundreds of years having such bombs than Pakistan. It is kind of like trying to keep the latest cell phones out of kid’s hands. For all we know Iran which is a pretty wealthy country in the region with all of it’s oil money could have bought several bombs years ago when the Soviet Union collapsed. Our governments are using propaganda and to me Iran having one of these or Pakistan which had them is no different to me. Other countries we may not be aware of may have them too. Has anyone noticed how secretive the governments of the world have become in recent years? So, you know – who knows what who has anymore these days!
I guess the term “going after weapons of Mass Destruction” can really be the code word for oil and Iran has a very nice share, probably the largest next to Russia and I do not think we are going to want to take them on, so we may see more of these smaller countries getting hammered by the military industrial complex and the war machines like we saw in Iraq.
My son served a tour of duty in Iraq in the US Marine Corp. He wanted to join at age 17 and that age he did not really understand what he was doing and world was up to but he now has had a glimpse of all of this and he has told me a bit about it. He is now working as a mechanic in Washington State and expecting a baby. But he does not really want to be part of that anymore now that he sees it. As a parent it was very hard for me to have my son in Iraq during the war.
It is good that our group focuses some attention on the middle east. There has been much written about it and even in the Bible and Nostradamus about the fire starting in the East. It is a region of turmoil and we in the west are partly to blame with our grand military machines. I can see it is a massive resource grab under a false name like destroying the weapons.
In summary, I hope the people of the US and Europe can take the reins back from those that control our war machines and finance arms of our governments as they need to be reined in.
Scott
I’m glad your son returned safe. The State takes the best ideals of the young and patriotic and betrays them. His reaction is just like that of the veterans of WW1: they volunteered to ‘Save Little Belgium’ from the Germans, and grew disgusted when they realised the British Empire was also using the war to gain more territory and wealth. They felt they had been lied to.
Now I see that the US and Britain are trying to use the deployment of chemical weapons in Syria as a reason for arming the rebels there: same process at work as in Iraq with the WMD’s.
The Age of Lies. I prefer the Romans: they just said that they wanted resources and land, and took it – no nonsense about it. And they did bring order and good government, which has not been the case in Iraq!
Hello Xabier, The US military in Iraq worked almost side by side of private contractors over there like Black Water and they were paying those guys like five times as much money to be over there.
Not exactly good for morale. My son said the middle east is not a place where humans should live after his return from Iraq.
Also, a lot of money was wasted over there like the money that had been intended for rebuilding projects, I think I remember a whole pallet of $100 bills went missing too. Talking about corruption and fraud.
I imagine global warming will make hot places like the middle east even more miserable.
Not a miserable as all the ‘depleted uranium’ that we spewed all over the place.
Christopher
The nuclear issue makes me think of the old story: ‘Help, there’s a monkey running around and it’s got a sharp knife in its hands!!’ ‘Just a monkey and not a human being? Don’t worry….’
Gracias Xabier, magnifico.
To you and Scott, however, and to anyone else who consider Iran to be merely a mild niusance, I feel an obligation to wave a red flag: the mindset of the Persian leaders and the people has not changed very much for thousands of years. They are aggressive politically and economically, and will meddle maliciously wherever they think they can get away with it. Their favorite objectives are forwarding the cause of Shia Islam at the expense of the Sunni.
That doesn’t mean that Iran is likely to wage war with its neighbors; what it does mean is that Iran is likely to try to mess in everybody’s soup kitchen in the entire neighborhood. Syria’s Assad is totally dependent on Iran. The Hizbollah (or Hezbollah) of Lebanon are Shia, and totally funded by Iran. The anti-Sunni Shia of Bahrain are all supported by Iran.
Why? Because Iran wants Shia to win the greatest on-going struggle in the world for the last 1,200 years: the fight between the Shia and the Sunni. If you don’t understand that in your bones, then you will not understand what is really happening over there, in Syria and Lebanon, Saudi Arabia, Jordan, Egypt, and Israel.
It’s kind of like the US and NATO vs the USSR and communism for the last 1,000 years. They truly hate each other and will do anything they can to have a thumb stuck in their enemy’s eye.
So if Iran gets nukes, everything changes: everybody else will want nukes, and the Iranians will be temped to let some of their ‘non-state’ players (ie, terrorists) try to get a nuke or three or ten into some vulnerable place(s), or do other nasty stuff. As long as it’s somebody else who has to put their butt on the line, the Iranians will be delighted to fund the operation.
We had some Iranians in pilot training in the early 70s, and we got to know them a bit. All rich kids with rich daddies. I also got to know some of the maintenance guys from not-rich families. Iran was suffering all the dislocations developing societies experience. The Shah tried to make the changes happen too fast, and the country blew up in his face.
I must admit that I am conflicted about the coming Collapse. On balance, it would be better for the collapse to begin sooner and be more gradual. If we stave it off and initiate one last round of economic growth and a final orgy of fossil fuel use then the collapse after that will be more precipitous and disastrous. Better to collapse more gradually and have chances (some of us) to adapt progressively in the process.
I don’t think we really have an option between “sooner and more gradual” and “later and more precipitous and disastrous”. I think things will fall apart, in the way that they do, at essentially the same speed, regardless. Taking a bird’s eye view from outside the earth, the falling-apart might be slow, but from the perspective of an individual person, the breaks might be precipitous. For example, an individual might lose his job, and no longer be able to afford very much. Then government programs will start to disappear, forcing this person to move in with friends or relatives, or leaving him homeless. Eventually, the local electrical utility might go out of business, because too many people are in a similar situation, and cannot afford electricity. I expect collapse will look like Greece or Syria, only worse.
I personally would vote for putting off collapse as long as possible.
Gail
That’s how I see it: little ‘collapses’ for the individuals and families, – terrible in their effects of course – coalescing into a societal collapse.
Ideally, we might need a very steady, strong increase in mortality and lowering of life-expectancy, – easing pressure on resources and welfare – while broadly maintaining the structures of society. Population collapse but not a collapse of the whole society would be conceivable and perhaps not unwelcome.
The role of pandemics in this would be interesting to examine.
Historically, I think pandemics have played a big role in collapses. With populations weakened, susceptibility to disease increases. If there are not a lot of resources to go around, the die-off of part of the population leaves more for others.
I was reading the book, The Merchant of Prato by Iris Origo. It is based on historical documents, and describes the life of the Italian merchant Francesco di Marco Datini (1335-1410). Datini was orphaned as a child, when his parent died of plague. Two siblings also died, leaving only him and his brother. I expect that the dying off of a great many people helped Datini, partly because of the inheritance he received (from a house and property that his father had) and partly because of less competition in the trades.
Low population relative to resources is really a big advantage, something we don’t think about today, because fossil fuels have given us so many advantages.
Gail
Glad you read that wonderful book, it’s so full of real information from the past: real lives, real bourgeois capitalism in the life of Dattini who started off without that much, just enough to get going.
It’s not just that we don’t think about the population/resources issue,as you say, we also act as if it were not an issue at all: I’ve just been reading about China planning on moving hundreds of millions of subsistence farmers to the cities, so they can become consumers, rather than rural non-consumers. And what will they be consuming? As the econmists tell us, it will be magicked up by the new demand……
Similarly, the British government has recently imported huge numbers of low-skilled people to provide cheap labour and balance out the demographic crisis here: no thought about resources and sustainability of the high density population. Now, it’s not the Yemen, but…..
I am really not convinced by those who see the Chinese government as super-astute, arch-strategists who take the right long-term view: the Cultural Revolution showed they can be as vulnerable to manias and insanity as any other cultural group. And now they are fully infected with the money-mania.
Only the world’s militaries seem to be taking a long-term view, and they are clearly planning for disasters related to resource scarcity and climate change. Part of this is justifying their existence, of course, but it would make sense to all of us here.
One impression I got in China from the few I met in China who were in high positions is that they were reading the same publications that people in the US and elsewhere in the world were. So the discussion was about how fracking would make a huge difference, and natural gas was the fuel of the future. Also, they talked about the problems the big electric company was having getting a high enough price for electricity in 2011, because of price controls.
The population issue is a big one. Importing lots of low wage people looks attractive. We seem to have the same issue coming up in this country. The big report today was Immigration Law Seen Cutting Billions from Deficit. If there are not enough jobs for the number of potential workers now, I have a hard time seeing how this will help. (We could also raise the Social Security age–with the effect of redistributing what jobs are available.) We need more jobs, not more workers.
The long term view is a difficult one for governments to understand.
I’ve thought about a pandemic and in some ways I think it would be a painful but better path to collapse than our current one where the world powers continue trying to prop up our existing economic system, and everyone is fighting over resources.
A pandemic can come on instantly, and there would be no choice but to respond. People would be forced to join together to fight a contagious disease as opposed each other (although quarantines can get nasty when they are imposed on you). It is possible that some governments could use small nuclear warheads to obliterate infected populations in an effort to contain them (as depicted in that Dustin Hoffman movie). It would be global so every country would be too busy dealing with it to think about a campaign to take over another countries resources.
If the die off was catastrophic our global economy would crash, and people would be finally forced to figure out how to live on local and regional resources. It would be painful, but then nothing about collapse will be pleasant at this point. The result would be a greatly reduced usage of fossil fuels, a greatly reduced population, less wasting of the infrastructure we have already built (as compared to civil or national wars), and it the reduced carbon emissions might just prevent catastrophic melting of the arctic and the disastrous release of methane.
You realize of course, young lady, that the arctic melting and it’s consequential methane release ship has already sailed and a pandemic would only decrease the number of people who would live to die another way.
I think the easiest way to explain the way I see global warming – is much like the seasons of the year, sometimes in the early summer, when the sun is highest in the sky and beaming down – it is not yet the hottest month yet although the sun is at the highest point. But by Late August and September are the hottest months in the Northern Hemisphere. The seasons are like a heavy ball that is rolling and it overshoots and hits a bit delayed. My point is the giant ball of global warming is already a large heavy ball rolling kind of like a locomotive on the tracks, or a heavy boat at see, the next couple of hundred years are most likely already baked in the cake sort to speak and not much we can to slow it.
In summary I think global warming will continue for centuries even if stopped burning oil today.
I know that James Kunstler in his post-peak oil novel World Made by Hand assumes that a pandemic has greatly reduced population.
Our big problem right now is way too many people to live without fossil fuels. I suppose that if a pandemic reduced population enough (and that might be over 90%), the rest of population could pick up the pieces. It is not clear to me, though, that such a die-off would lead to elimination of fossil fuel usage. The pressure of population would be gone, but there would still be a mixture of the skills and current infrastructure that allows fossil fuel extraction. If the die-off were great enough, there might even be the possibility of future growth, allowing a new ramp-up in debt-based extraction.
Edward,
Wow, I haven’t been called a young lady for a decade or more, ever since I developed substantial gray hair. It felt kind of nice actually. 🙂 Reminded me of one of my professors in college.
Yes, I agree with you that the “ship has already sailed”. I have a BS in earth science and I read the literature on climate change. But I don’t believe we fully understand the earth as a system nor can we rule out the effects of a dramatic decrease in CO2 emissions. Or perhaps the consequences of a few hundred million or even a few billion people burning wood and releasing soot into the air. Or a volcanic eruption. Or one of many other processes that we have yet to discover about how the earth regulates its own temperature.
Jody,
We actually do know how the earth regulates it’s temperature. Regulates, in this sense, is an anthropomorphic term as what we are talking about is how the earth responds to the physics of atmospheric chemistry. There are, in my opinion (based on my studies) three factors that are responsible for the brief respite in surface temperature increases. Geo-engineering, heat being absorbed by the ocean and the fact that the Sun has gone to sleep. NASA actually fears that we are entering a Maunder type long term solar minimum. (would be a good thing in my mind)
Humans, throwing more reflective particulates into the atmosphere, might also slow down warming but not ocean acidification. I have been looking at the physics that led to the Permian Extinction event and we have set the same ball rolling. Financial collapse is all but assured so I’m thinking that we are soon to be toast. What saddens me most is that few are prepared or even aware that a Leviathan is barreling down on us all.
If we are prepared, what are we going to do? Move to Canada/Russia/Minnesota/Norway?
I moved back to Minnesota in 1970 after receiving advice that a new ice age would bury the state under glaciers. Now we have global warming to contend with. How are we going to keep out the riff-raff if we have a mild climate?
Gail,
I understand your point and agree that things look grim. However, in the short term what being prepared means to me is having the ability to, at least, provide oneself enough calories to stay alive as long as possible. I realize, as I am personally impacted by it, that few people have the financial resources to be energy and food independent but one can plant a garden in many cases. I think that those with the resources should consider building greenhouses that will allow some food to be produced even when the climate cannot be relied upon to be relatively stable.
Doing a little research into the causes of the coming situation will help people understand what’s happening and why. Being able to maintain a clear mind in a time of troubles is a small part of being prepared. Becoming a climate refugee is not likely to be much of an option.
Storing a lot of food is, like coal and oil, a finite resource. Being able to produce food during unstable times is, IMHO, the best plan. All may be futile but not trying is a poor option. Even a small percentage is better than o%.
With warm regards,
Edward
Dear Edward Kerr,
What do you think would happen in a situation where industrial agriculture collapsed and fields became overrun by rapid growing scrub trees? How much CO2 do you think this could soak up? I grant you that corn and soybeans soak up a lot while they are growing but they are out of the field within a relatively short time and the fields remain bare. In addition, they are rather shallow-rooted plants and can’t sequester as much carbon in the soil as deep rooted plants. I think it’s been established that a meadow of mixed plantings results in the highest level of carbon sequestered in the soil, and that young forests take up more carbon than older stable forests.
Do you think Arctic warming has crossed a tipping point and become self-reinforcing?
Jody
Hello Jody, (not liking what will happen to us) but I think (if we were here to see it) we would be amazed how fast things would come back in the natural world with out as many of us and these farm lands returning to scrub brush and then forest later. I believe that also the oceans would be teaming once again with fish in a decade or two or so which is a very short time on the big clock.
Ick! Pandemic would be (will be) very horrible. Depending on how far and how fast the population falls, a great deal of culture and knowledge will be lost. Humans will not be cleansed and emerge into a better world after enormous suffering. Our descendents will be regular people trying to get by just like now (if they are lucky and we leave them a livable world)
A agree that keeping the knowledge level is going to be a huge problem. Everything I can see says that the vast majority of education has been enabled by fossil fuels. (Public schooling, especially for girls, does not seem to become available until an economy has quite a high level of external energy–usually fossil fuels available to it. If we have less fossil fuels per person, we are likely going to cut back in many areas. Education and research are two of them. Without the Internet and computers, it will be difficult to keep a lot of the knowledge we have gained.
I think your analysis is thorough and pointed, and understandable to the lay public. While nobody can see the future, I think you’ve made your case far better than the voluminous sanctions, documents, policies, and statements our ‘leaders.’ Miracles regarding the materialization of infinite cheap energy don’t really happen, and ‘sanctions’ are not an effective form of negotiations; who would’ve guessed?
Thanks for your vote of support. I try to look at things from a little different perspective than others.
I agree with your analysis. Based on what I’ve been reading in the news over the last 12 months I think the U.S. is walking a dangerous line by pushing these sanctions on Iran. My biggest concern was that it would weaken the status of the dollar as the world’s reserve currency. If we lose this status our ability to borrow money at low rates will disappear and I think most people reading this blog understand the ramifications of this.
However, any military action against Iran would certainly cause oil prices to spike and the global economy to contract, probably much more severely than than in 2007-08. Anyone over 65, on a fixed income, or in danger of losing their job stands at high risk.
But I don’t see any alternative solution other than accepting Iran into the nuclear weapon club. I don’t know if they would be any worse than North Korea or Pakistan in terms of stability. I think this situation is the proverbial “rock and a hard place”. No good solution exists, only a choice between equally bad options.
For those people who believe it is best if we let the system collapse and then pick up the pieces, I wonder how ready you really are for this. It reminds me of rafting on white water rivers. You can hear the muffled roar ahead but you have no idea what is around the bend.
I am afraid you are right.
With respect to the idea of “let the system collapse and then pick up the pieces,” I don’t see that picking up the pieces will come in our lifetimes. If it comes, it likely will come in our children’s or grandchildren’s lifetimes, or even later than that. I think people tend to have too much belief that the collapse will be a small, containable event. Given the damage humans are doing, and our continued tendency toward overcoming natural selection (leading to cancer-like population growth), the collapse might even be an extinction event.
Gail, (you’re just going to have to stop going to conferences….lol)
I recently wondered: If one gave all of the pertinent information to Las Vegas bookies (actuaries of a different stripe) and they were able to understand it, concerning the outcome of the coming collapse, just what odds would they give? Isn’t that, handicapping, what we are all doing here?
Not very good, I expect.
Hello Gail, If it morphs into nuclear war, it could be an extinction event. Otherwise we will have a new beginning and a better world, but sadly many of us have to leave first.
Where I used to live we saw the rise of the Oak worm and they ate all the leaves off the trees, and then they starved to death. But the trees lived.
Looking at today’s markets, we just took a step closer to financial collapse.
Gail, even if it is a global nuclear I do think some humans will survive and crawl out of their underground caves. But let us hope is is not Goldman’s People and the Federal Reserve crawling out of the caves…
LOL!
Gail
The financier Kyle Bass recently pointed out in presentation that as the indicators worsen, the more people tend shut their eyes and clap their hands over their ears, because they simply don’t want to contemplate an immense problem/challenge.
He said that never wants to go to Washington again, to talk to politicians who say ‘What debt crisis?’ and rubs his eyes when he reads the statements made by European politicians about good times being around the corner, ‘the Euro Crisis is over!’ etc. ‘Who are these guys?’ he asked. Indeed, in Europe we do wonder, who are these guys who pretend to be leading us……
When people can’t face very obvious, stark, economic/social facts, they have little chance of facing up to the idea of a global environmental/resource crisis. And as we all know, it can result in a period of deep depression to do so, from which one has to be very tough and pragmatic in mind to emerge, so perhaps they can’t be blamed.
Do you have any links you recommend regarding Kyle Bass presentations?
I can’t believe you all (Gail and commentators) believe the EIA/BP data in the first place. Have you all been brainwashed ? The system collects data from Governments around the world, and where it can’t, it estimates – this is a stated fact. So the data on Iran is only an oil industry estimate and hence open to political gaming. Do you seriously think there is no off-book trade in Iranian oil, given the circumstances ? Do you seriously think that the US Government is telling the truth about Peak Oil ?
It is also disappointing, although less surprising, that all you commentators have been brainwashed over the nuclear issue. Every National Intelligence Estimate since 2007 says that there has been no nuclear weapons program in Iran since 2003, and before then the evidence is only circumstantial. James Clapper admitted as much just recently. Given the spin you see every day from the US Government, even that admission is probably overstating the case.
The rest of the world looks on horrified while you all continue to believe in America’s greatness because it says so on TV.
Dave, you have been sentenced to three hours of Hannity per day ( one TV and two radio ) by the Blog ( better known as the Borg) until you turn that sorry attitude around and become part of the collective. Peace
Iran wants A-bombs. That would be Bad.
Not really, if we all continue to be our sorry BAU selves. We will burn this plant up. If Iran gets the BOMB (sounds a lot like the fear card) and stops the flow of oil. Humans live a few days longer. Works for me.
55
But the “State of Israel” and her Chosen People are under existential threat of annihilation from a nuclear Persia. The US has a divine obligation to defend the “State of Israel” from her enemies wherever they may be. The fearsome, angry, jealous, tribal desert sky god of the Hebrews will not take kindly to the US failing to live up to her moral obligation to defend the “State of Israel” at all costs.
Make no mistake, Israel’s interests are that of the US.
http://www.aipac.org/en/get-involved/donate-now
Please give generously to AIPAC so that their good work can continue to disproportionately influence US mass-media messaging and US foreign policy while inflaming Israel’s growing list of enemies to justify ongoing funding of Israel’s war machine and her “democracy”, as well as the US imperial war efforts abroad.
Together we can ensure that the US-Israel partnership remains strong and Israel’s many enemies are subdued until the Mashiach returns to vanquish Israel’s enemies, restore the Temple, and take his seat on the throne in Jerusalem to rule by halakhah the entire world that is to become Greater Israel.
Ben,
You really believe that crap?! Chosen people? Chosen by whom? The same God that the Muslims worship? So we here in America are to be nothing more than Israels body guard at great expense to us? Just so that the Zionists can continue their delusion. You bitch about the holocaust then treat the Palestinians no better after usurping their land. You really need to take a look in a mirror. And don’t try to dismiss me as some anti-Semite as my wife was Jewish.
I assumed Ben didn’t mean that he believed it–just that there are folks who do.
Gail,
I must have misread his comment then. At times my sarcasm detector malfunctions. But you’re right, there are those with that world view.
Edward
I have a problem with deciding categorically that the United States must support the State of Israel, and her Chosen People, as you might guess. There are some flavors of Christianity that believe this kind of thing, but definitely not all of them. The Palestinians include quite a few Christians. Why shouldn’t Christians support them?
Of course, there are some Jewish readers who have strong feelings in favor of supporting Israel, and I can at least understand why they might have views in this direction.
Somehow, I would like to be “fair” to all, and to discourage war. Maybe that is too idealistic.
Ben, personally I believe the Truman Administration supported the state of Israel in 1948 to bring war to the Middle East until all the oil was gone. It will always be the fuel depot of the SuperPower.
One can only assume that Ben is taking irony to extremes.
If he ( and his wailing wall head banging brethren) really believe that crap then gawd help us,….dayum–I forgot—I’m an atheist
Got you, Edward. 🙂 Gail caught the farce and irony.
ChiefEngineer: “I believe the Truman Administration supported the state of Israel in 1948 to bring war to the Middle East until all the oil was gone.”
Precisely. Anglo-American empire created the “State of Israel” as a kind of imperial garrison state and dumping ground for unwanted European Jews (in its seemingly forbidden to inquire into the issue of why the Jews have been persecuted throughout the centuries, however) to prevent the Soviets from doing the same and co-opting the Arab oil emirates and cutting off the Americans, Brits, and the rest of Europe from the oil in the ME.
http://tinyurl.com/mwo6fbz
http://tinyurl.com/madb3fm
http://tinyurl.com/mqxcctr
The Israeli population has been subjected to doing the dirty work in the ME for Anglo-American oil empire for more than 60 years, creating in the process increasing antagonism with Arabs, Persians, and Muslims generally, becoming a pariah internationally, resulting in the Israeli population living under militarist, fascist-like, police-state conditions for their very survival.
http://tinyurl.com/n6kncby
Jews and non-Jewish westerners are incessantly propagandized by the “Holocaust Industry”, which is a branch of the Israeli intelligent services, along with AIPAC, and their sympathetic allies in the western mass media, the White House, Hollywood, Pentagon, US Congress, Wall St., Ivy League academe, the most influential think tanks, and US and British intelligent services.
It’s not that anyone with credibility would deny the links and the influence; rather, it is forbidden to be said publicly by anyone in a position of authority for fear that it will invite much-needed public exposure and scrutiny of those with the most influence, power, and control over mass-media messaging and fiscal, monetary, and foreign policies of the imperial corporate-state.
Shalom.
I think part of what disturbed me when I read about the new sanctions against Iran was the statement that the legislation had passed 99-0 in the Senate. How many people could have looked closely at what was being presented, if it passed 99-0? Senators never agree on anything, 99-0. Announcement is from AIPAC:
http://www.aipac.org/en/policy-agenda/agenda-display?agendaid=%7BE9465F79-9380-4A00-BAA9-18DB524F23C8%7D
In the House, the legislation has 338 co-sponsors. It passed the House Foreign Affairs Committee unanimously. I don’t think it has yet been voted on in the House.
http://foreignaffairs.house.gov/press-release/chairman-royce-ranking-member-engel-applaud-passage-tough-iran-sanctions-legislation
It is hard to believe that anyone is thinking about the subject very seriously–just hopping on the bandwagon with a measure that seems likely to be popular with voters.
With age comes wisdom. The U.S. will not tolerate a nuclear Iran. Q.E.D.
Hello, there are so many nations that have them pointed at us already And, I think whether we agree with it or not is not an issue. It is kind of like handguns – they all have them anyway and, whether legal or not. I think if someone shoots one off, we have to deal with them, that is the real world we live in today.
What documentary evidence is there to suggest that, as opposed to the documentary evidence that proves otherwise ? Only orchestrated propaganda from CNN, Fox and Murdoch, and of course the USG, which you have swallowed uncritically.
You do know, I suppose, that the US supported Khomeni when he made his triumphant return from exile in Paris, to take over from the previous puppet, The Shah (a brutal dictator that the US imposed on Iran after they overthrew the democratic government of Mossadegh). Once in power, they even helped Khomeni to eliminate the trade union movements, who had done as much as the religionists to overthrow the Shah. It was only when he double-crossed the US that they stopped liking him and started painting his regime as the brutal government that it is.
It always has been about control of the oil. If it was about Freedom and Democracy, the US wouldn’t be friends with Saudi Arabia, Qatar, Bahrain and the rest. If you are happy living in the country with the highest imprisonment rate per capita in the world, and with you democratic freedoms to vote either Democrat or Republican, then good luck to you.
Iran is a theocracy. They hate the West. They are making atomic bombs.
Saudi Arabia is a theocracy too, but that doesn’t stop the US supporting them. The US is completely without moral standards.
Mr. Kimble: You may disagree with US moral standards, and you may consider that the US moral standards may not meet your own personal moral standards, based on history or whatever you wish. But to say that the US is complete without moral standards is a tad hyperbolic. In fact, it’s very wrong and totally wrongheaded.
All countries include a moral dimension along with numerous other considerations in their policy formulation process.
Perhaps you might like to take a course or two in the history of US foreign policy. One thing you will find is that American spokesmen invariable wrap realpolitik objectives and actions in moralistic high talk Which would you like them to jettison, the stuff that appeals to ma and pop in Peoria or the nitty-gritty hard-nosed stuff that keeps us alive.
Or maybe you don’t like Saudi oil, and would just as soon let someone else have it.
Cordially, Chris Johnson
Yes, there is a long list of them, sadly.
The theocrats in Iran hate their own people: a friend of mine is a surgeon from Iran, his descriptions of what happens to you if you step out of line are blood-chilling. These people do it with the name of God on their lips…… and the top people there live the most luxurious lives. All rather like the old Soviet Union in fact.
Fanatic religious adherents are shocking no matter whether they come from Christian, Jewish, or Muslim beliefs. Violence and atrocities against others in the name of religion is extremism in its worst form and can happen anywhere. It reminds me of a rabid dog.
The west has atomic bombs and played a lot of deadly games in the region and with the neighbours of Iran. If another power would do that to Canada, Mexico, Cuba, etc. what the US and its allies do to Iran and its direct neighbours….
The most basic thing to get along is: “One should not treat others in ways that one would not like to be treated”. That is not what US foreign politics are based upon… but this is (in my option) fundamental to get along – globally, locally, within the family and personally.
I expected the US military view is, “Might makes right.”
I haven’t been following this as closely as you, but my impression too, has been that our “friendships” have been all about oil. The Middle East has been hot-spot for as long as I can remember. A person wonders whether all of the allegations made against the “bad guys” are true. It is hard for those of us who are far from the “action” to know precisely what is happening.
Hello, I have been saying that they are really no different than any other country that has the nukes and there are many, why are we barking? Anybody smelling oil?
Hello, We hope not, but really should we be the first to strike if they have not blown one off yet?
I look at BP/EIA data, because it is another way of looking at things. The World Bank only gives GDP data through 2009. There are a variety of numbers “out there,” but a person wonders how good they are. I was surprised that the BP and EIA data came out with numbers as close together as they were. Physical volumes are sometimes easier to count that a rather squishy GDP number.
What do you expect when the world superpower is controlled by tribal neocon fanatics?
America is the true rogue state in the world.
God help us all.
The U.S. is still “a city upon a hill.”
What we do (or do not do) matters.
A nuclear Iran is intolerable.
lol, cute
B.S. U.S. is not a rogue state. U.S. policy is highly responsible.
Europe is in an economic slump. They cannot afford to buy more oil.
“Thus, even if the US’ need for imports is declining, Europe’s need for imports is increasing”
It doesn’t matter if their “need” is increasing, they can’t afford to buy it at any price. The demand will just keep dropping.
Also, note to OFWers, I have both Gail’s lectures from Age of Limits up on the Podcasts page on the Diner. No registration necessary.
http://www.doomsteaddiner.org/blog/podcasts/
RE
Up now on the Diner, Part II of the Podcast with Guy McPherson. Part I available in the PLAGUE! article on the Diner.
http://www.doomsteaddiner.org/blog/2013/06/16/plague/
In this part of the Podcast, Guy discusses his personal History, his experience in Academia and emergence of his philosophy over time.
http://www.doomsteaddiner.org/blog/podcasts/
Podcasts coming in the near future with Surly on Political Empowerment and Gail on Credit and Energy Questions.
RE
Reverse Engineer is interviewing me on Friday afternoon in a podcast that will eventually be aired on Doomstead Diner. Let me know in the next day or so if you have questions that you would like to suggest.
The best thing that could happen and looking forward to $10 a gallon gasoline soon. Three cheers for policies that brings us demand destruction There will be less cars on the road, less carbon in the air, less climate change severe weather, less speeding accidents and it will be safer to ride a bicycle on the road. Sounds like a win, win to me. Sooner or later you will all drive 55 again like it or not. Acceptance is the hardest part of living in a doomer world.
If you fail to plan, you plan to fail.
An American rock anthem (released when the price of oil was $27-$28/bbl and gasoline was $1.20-$1.40/gal):
http://www.youtube.com/watch?v=RvV3nn_de2k
The 10-year change rate of real GDP per capita was 2.3% vs. near 0% today:
https://www.box.com/s/eaf5i10v8lf8xdbrynvv
The sophomoric content of the “music” video reflects the success that still prevails of the larger mass-social messaging to persuade the majority of the American public to rebel against any suggested limits to the auto- and oil-based economic model.
But the price of oil and gasoline is limiting consumption by the bottom 80-90% of households as one would expect, albeit not by choice.
In fact, if one examines the annual change rate of the price of oil at the given oil consumption to GDP, the 2% payroll tax increase against wages and salaries equivalent to 44% of GDP, and the ~2% decline yoy in US gov’t spending at ~23% of GDP, the net effect is akin to the Fed raising rates during previous business cycle peaks.
https://www.box.com/s/bms6q1wjzvcvsv7ums95
https://www.box.com/s/x2uoagl2or7hu49tp6br
Supporting the notion is the fact that the yoy change of real imports is contracting and the 3- and 6-month annualized change rates of ECRI’s USCI is coincidentally in recession territory, implying that US real GDP is decelerating toward contraction as of the beginning of ’13.
https://www.box.com/s/ft5amp4d0rw4dqm8svmc
https://www.box.com/s/i4zmlgp3eirzodk8y5iq
http://research.stlouisfed.org/fredgraph.png?g=jve (annual change rates of Shiller’s real median house price index, real wages, and real GDP)
http://research.stlouisfed.org/fredgraph.png?g=jvf (annual change of real US median house price and real wages per capita)
http://research.stlouisfed.org/fredgraph.png?g=jvg (same for 2007 = 100)
While consumer confidence is higher primarily because house and stock prices are again in echo bubbles (thanks to the banks printing themselves trillions of bank reserves and encouraging unprecedented financial market leverage) and firings are not increasing, the historical precedent suggests that periods during which confidence and complacency are high due to asset prices becoming overvalued vs. fundamentals are counterintuitively the time to be cautious and to anticipate a business cycle contraction for real GDP and stock and house prices.
Of course, no economist or Wall St. shill is paid to warn the public about the risks of recession or stock bear markets.
I support ChiefEngineer’s thinking. The best thing that could happen would be a huge spike in world oil prices followed by collapsing economies all over. The reason this would be “the best thing” is that if a spike/collapse scenario is inevitable, as I believe it is (and I think Gail in her heart-of-hearts believes it is), the sooner it happens the lower the number of people who will be hurt. “Bring it on”, while there is still a chance for a livable world for the survivors.
To those folks who are waiting for a worldwide “war-footing” effort at collapse mitigation intended to minimize the casualties; you are waiting in vain. If our societies haven’t come to grips with the inevitability of resource depletion by now, they never will.
Amen!
Hello Joe, Just thinking if we have an gas shortage… I have lots of fire wood. but have not figured out how to make it power my car yet so guess if there is no gas we will be staying close to home and trading things to hunters bringing meat down from the mountains if we are not able to hunt with them.
Scott
Those deer coming to eat your vegetables sound like easy-shooting (at the right season of course)? In a similar way, here, there are so many rabbits raiding peoples’ gardens that there should always be one for the pot. Easy hunting.
Gas never should have been cheaper than milk(which is renewable). I think that is our biggest mistake.
In the 1970’s we had the Iranian oil embargo blamed for fuel shortages in the USA, I wonder if that was really the cause.
I have been very concerned about Iran for the last couple of years, whether or not they have developed or in process of building nuclear bombs, Israel and the US seem ready to attack any time now. Kind of like Sadam’s weapons of mass destruction it was the perceived notion that they existed or just an excuse to go in and attack. I sure hope they can resolve this with out a war but that does not seem to be way we do things.
If they do attack it likely be Israel using America’s weapons, either way I think US will be in the middle of a big mess if they do attack and possibly WWIII. I suppose that an attack by Israel would be viewed just like an attack from the USA, since they are using our weapons. War with Iran will be our oil crisis as likely shut down the shipping channels not just from Iran but from other middle east countries.
The US dollar is under pressure already as the world reserve currency, the huge deficits and pressure from China.
I do not think that U.S. or Israeli air attack would lead to World War III.
Note that Iraqi possession of weapons of mass destruction was a fiction. Nuclear capability of Iran is a fact.
Has any country ever used nuclear weapons on large civilian populations before? Maybe we should start with them, oh right.
U.S. bombing of Hiroshima and Nagasaki were completely justified. The alternative to atomic bombs was invasion of Japan. This invasion would have resulted in 20 million Japanese deaths due to starvation. Sometimes, A Bombs can be justified.
The alternative to using the atomic bomb was to accept the surrender that Japan had already offered. The allies’ insane policy of “unconditional surrender” probably prolonged the war by over a year at the cost of more millions dead.
“Delenda est Carthago” With necessary changes being made, I agree with Cato the Elder.
Hello, You know Pakistan and N. Korea have “the Bomb” and they have not used it against us yet, About Iran, I do not think they want to use it either. If they had not blown one off yet, then – I believe we should leave them alone and just trade with them, if they are willing to sell us their last oil.
But whether Iran has nuclear weapons is less clear. There seem to be any number of countries with nuclear power, or working in that direction. The World Nuclear Association has country profiles (taking about already built nuclear sites, or planned sites, for the following Eurasian countries: Armenia, Bangladesh, Belarus, Bulgaria, China, Czech Republic, Hungary, India, Iran, Jordan, Kazakhstan, Lithuania, Mongolia, Pakistan, Poland, Romania, Russia, Saudi Arabia, Slovakia, Slovenia, Turkey, Ukraine, United Arab Emirates, and Vietnam. At some point, it seems like having nuclear power is a perfectly “normal” thing for every country to do. It seems like we should be at least equally worried about India and Pakistan having nuclear weapons, or Turkey, with its unrest working on nuclear power. Having all of these nuclear power plants in countries with questionable political stability is a risk in itself.
Nuclear proliferation is a predicament. See “Bulletin of the Atomic Scientists.”
I think nuclear capability of Iran is a “no no.”
I ran across this article on the Bulletin of Atomic Scientist, “Crying Wolf About Iranian Nuclear Bomb. There are no doubt others with different views, but Jacques Hymans back in January 2012 made the following points:
Hello Gail – There is no doubt that they are bringing us closer to war and Iran has been the country to make the war theater happen. Our forces have been surrounding them for years. My message is the that they would rather attack to keep the war machine revved up, so once again, instead of building the needed solar panels – we are burning the precious oil and building bombs.
I still think that the first one to blow one off, is the one to deal with, so I would suggest we stand back and only deal with them if they attack as they really all have the bomb! Nuclear bombs are out there now and even in suitcases.
That was my exact point Gail. Why are we barking about Iran? There are so many countries that have them and we managed to keep them at bay. Just propaganda, to get the oil?
I think countries need Nuclear weapons to avoid being attacked by the US and Allies. Iran has not attacked another country for the last 200 years but they are under constant threat of attack.If Libya had had nukes would we have gone in? if Saddam had had them would we have risked it? We in the west seem to target the little guys we know we can beat and take their resources because it is cheaper than paying them for them.Put in a leader that only takes a small cut of the profits and is willing to starve his people and you have a war plan,Shock Doctrine works great against the weak but a country that can hit back is not good for the profit margin.Imagine an Iran that targeted all of the oil fields in the middle east with tactical nukes although I suppose Russia could already do that or China maybe even Pakistan.Nukes for Defense(passive offence) is the only way to secure your country from looting from western interests.
Actually, Ken, I am afraid that may be a good point. The US is the big guy, who keeps meddling in the Middle East. We have the biggest army in the world. If Iran wants to keep the US away, having nuclear weapons may not be a bad strategy.
Try this experiment some time: Set up Google maps with Iran in the center. Then look around the borders of the country.
http://goo.gl/maps/x1paJ
If you lived here, would you feel safe?
Iran seems to be the best-off financially of the group. Way too much war in general in the area.
You say: “We in the west seem to target the little guys we know we can beat and take their resources because it is cheaper than paying them for them”
Unfortunately, that is not true. Seizing the resources by military force is immensely more expensive than paying for them, because the US military-industrial complexy is one of the most grotesquely inefficient that has ever existed. In 2012, the US spent a total of $434 billion on imported oil. The occupations of Iraq and Afghanistan, plus the utterly useless warships in the Persian Gulf, cost more than twice that. In other words, simply keeping the troops at home (as the Founding Fathers intended when they wrote a constitution that forbade a standing army) would have paid for that oil twice over.
But stop and think about the situation. The huge cost keeps lots of people employed, including a lot of young people who wouldn’t have jobs otherwise. It keeps US companies making and selling munitions in business. Some of their sales go to other countries as well–ones who feel a need to defend themselves. The cost gives the US government an excuse to borrow money, to stimulate the economy. If these were closed down, there would be a lot of unemployed workers who would be unhappy. (At least this is one way of looking at the situation–doesn’t really justify the practice, though.)
Is the world about to wake up to a nightmare?
Well yes it is cheaper just to negotiate to buy the resources, than take them by war, a good point!
But, it is more complicated than that. You have to look at the whole military industrial complex as a whole and how politics etc play into it too. There are many companies that have made money building the war machines and they are benefiting making work for themselves under false pretenses. It puts some to work, but not under the most productive circumstances. So we create jobs and burn up and waste a bunch of oil to make war machines. It seem the world is desperate to find something to put its billions of people to work doing something.
I was saying the other night, if we could put the huge military industrial complex’s mighty power of the world to world to work building a solar system for every dwelling, we could do some good.
I did mention this to Gail in a past post and she replied that she was doubtful that even then we could do it due to finance.
I think we could do quite a bit better though if we directed the world forces away from war and to build things needed like solar systems for the world’s homes.
But Gail you are an Actuary and you know that this system (World Governments) are not going to change and it is geared and being steered in an entirely different direction and they are not going to abandon their plans and start helping us by building solar panels on peoples homes.
It seems like when we wake up it will be too late to much.
What “Iranian oil embargo” are you talking about ?
First oil shock was mainly a consequence of US peak in 1970. The so called “Arab embargo” more or less a non event in an environment where the oil majors and US diplomacy wanted the barrel price to rise anyway.
Second oil schock (1979) is the consequence of Iranian revolution, and Iran oil production collapsed due to the revolution.
Well I worked at a gas station then, and all I can remember is from the 1970’s so called Iranian Embargo, is that there was no gas, I believe they were not honest with us, perhaps a ploy to raise gas prices which happened very soon after.
I would not be surprised to see another such false event soon.
Gail,
You are correct in thinking that the US World Reserve Petro Dollar is at the heart of this mess in Iran. You are also right when you say that we are playing with fire. I suspect that we are all going to get “burnt”. They went after Saddam for wanting to price Iraq’s oil in Euros and they weren’t pleased when Iran sold oil to China for gold. These people could care less about higher fuel prices in the US (they just profit more). It’s about maintaining world hegemony.
In my mind, considering the climate issue, anything that lessens GHG emissions is a good thing. I see all this as the consequence of continuing to rely of fossil fuels long after science told us that it was a bad idea. Regardless of how many barrels a day Iran can deliver to the world (priced in any currency) the decline is underway and, as you know, things are going to get messy.
Regards,
Edward
Kudos Ed. Excellent comment.
Does seem to be more flexibility in oil supply than I had been thinking there was as oil price has been lower than in previous years in spite of much lower Iranian oil exportation. I realize there is a long term problem with sufficient oil supply at low enough prices to spur economic growth, however it seems a meltdown in the Arctic by many estimates to occur in the Summer of 2015-2017 leading to potentially huge releases of tundra bound CO2 and arctic seabed methane will trump oil supply concerns, since there are 4-5 times as much GHG’s held in permafrost and methane deposits as all the CO2 emitted since the industrial revolution. Maybe if given sufficient time we can transition to alternative forms of renewable energy, albeit at a lower economic clip, but not if the weather comes unglued in the short term.
There is a possibility of methane release, and of the weather becoming unglued, but I am afraid I do not see what we can do about it. The issues you talking about are already happening. The people who are most concerned about these issues, like Guy McPherson, say it is already too late.
The only “renewable” energy sources we have right now are add-ons to the current fossil fuel system, that are not available outside a fossil fuel system (except as stand alone panels, for the years until the panels degrade). It is hard to see that increasing these “renewables” will do much to reduce fossil fuel emissions even over a 10 or 20 year timeframe. In recent years, coal has been the world’s fastest growing source of energy. One thing coal is used for is to make solar panels.
Gail,
You are 100% correct. We are going to burn all fossil fuels so long as profit can be made by doing so.
I live in Minnesota and am not averse to global warming.
Paradoxically, global warming could lead to a mini-iceage in North America. Thermohaline current circulation in the Atlantic (which carries heat energy from the tropics to the Arctic) could be impeded or stopped by the massive fresh water release of the thawing of the Arctic. The warming trend reverses in the Arctic temporarily (meaning for thousands of years probably) and you get a mini-iceage.
The movie “The Day Afer Tomorrow” dramatised this event but probably vastly exaggerated the speed of onset. Though some argue that climate shifts can be devastatingly abrupt and violent and that there is some evidence for them happening likem this in the geological past.
From what I’ve read the world weather system cannot turn on a dime, i.e. from warming to ice age that fast. We are after all in a new circumstance in which human activity has raised CO2 levels at an unprecedented speed and the planet’s weather will be adjusting to that new level for many years to come. Sure it’s possible for the THC to redirect, however most experts on climatology expect much more warming for many decades to come before an ice age ensues.
Ikonoclast
Personally, I’m in favour of a new Ice Age. The thought of glaciers rolling over and crushing our squalid and ugly civilization is somehow comforting, and I certainly don’t want to fry!
Economic sanctions are less bad than going to war. IMO, war by the U.S. on the ground in Iran would be an unmitigated disaster. To prevent their building an arsenal of atomic bombs and ballistic missiles we (or the Israelis) could bomb Iran back into the Middle Ages merely by destroying their electric grid and power generating facilities.
Economic sanctions may not work, but military action should truly be a last resort after all else has failed.
Even if Iranian oil exports fall to zero, I do not think that oil prices would rise much because of weak global demand for oil and oil products.
I agree that war by the US on the ground in Iran would be an unmitigated disaster.
Economic sanctions may be the lesser of two evils, but I was hoping those were not the only two option. Even if removing Iranian oil exports does not spike oil prices immediately, it seems like it raises the possibility of later spikes, because something else goes wrong.
A nuclear Iran would be worse than a nuclear North Korea. It is an axiom of U.S. foreign policy that we must not allow Iran to become a nuclear power. The only debate is the means necessary to achieve this objective.
I believe that the US has pursued, and continues to pursue regime change in Iran, for the express purpose of converting Iran back into a client state on Russia’s southern border.
Forgotten, perhaps, is imposition of, and increasing severity of, sanctions against Iran since the Islamic Republic was established.
Sanctions have played into the hands of Khameni and others who want Iran to have a fully integrated, fully self-sufficient economy. They emasculated the Souk, and it’s leaders, who made fortunes importing goods paid for with proceeds of energy sales.
Iran now exports cement, automobiles, train sets, natural gas, petroleum, gasoline, ships, transport aircraft, food stuffs, artillery, platoon level weapons, missiles, and other manufactures.
Iran used natural gas powered vehicles, and rapid expansion of metro systems to alleviate smog in Tehran. Iran builds at least one major Hydro Dam each year.
Iran can always export energy via Iraq and Syria, which is the reason for the civil war in Syria.
Iran, like Cuba, and North Korea, has the temerity to refuse to become a client state, and the US is determined to destroy it.
As you so succinctly state, today’s oil market is fundamentally different from that of the past, with supply not keeping pace with demand, so the loss of 3% of supply will have a dramatic effect on prices.
You do not mention how important high oil prices are to tight oil producers, who are losing money now, and that these sanctions are hoped to support high prices to bail them out, and consequently their bankers, Goldman and BofA among them.
You correctly mention that these consequent high prices will bring the US/EU back into depression. Not mentioned is the consequent social unrest, and likely radicalization of countries. There are riots in Brazil and Turkey now, expect them to spread.
I proposed a “path to a sustainable future” and expressly asked for assistance
in vetting the calculations, which was refused here. Fortunately, other experts filled the gap, and have assured me the numbers work.
This specifically means that conversion of the OECD economies to conform with the following assumptions, leads to a sustainable carbon neutral economy.
Assumptions:
1. All 125 million dwellings are retrofitted to PassivHaus standard
2. All 4.5 million commercial buildings are retrofitted to power consumption no greater than twice that of the Bullit Building in Seattle, WA.
3. 95% of all ton-miles are either on rail or waterborne.
4. Farms produce sufficient plant oils from on farm oilseed plantings to power their tillage and harvest machinery.
5. All local delivery vans are EVs.
6. All commercial aviation ceases to exist.
7. Military fuel consumption is reduced 30%.
8. All industrial energy needs are converted to electricity, to the extent possible.
9. US Agriculture shifts to Organic Methods as advocated by Rodale.
10. All suitable roofs on Dwellings and Commercial buildings are covered with PV.
11. Each of the 2 million farms has on average one – 100 Kwe wind turbine and 50 kwe of PV mounted on roofs.
12. All REMCs upgrade rural distribution lines to 66 KV, agree to wheel excess farm power to the grid, and install NaS batteries in sufficient numbers to meet grid storage needs(batteries installed on pads in sheet metal enclosures at least 30 m from the nearest building).
13. US GeoThermal power increased to the 100 Gwe potential.
14. US Hydro increased to the 200 Gwe potential.
15. 200 Gwe of utility scale wind farms are operational
16. Liquid fuels sufficient to meet non-convertible requirements, are created via a modified Fischer-Tropsch process powered by Renewable Energy, using water and atmospheric CO2, as feed stock.
INDY
Thanks for your comments.
At this point, I have your comments on “moderate before displaying,” because you have a tendency to go on endlessly about your theories, which in my view are not correct. All of the add-ons are very dependent on keeping the current industrial system operating to provide, for example, replacement windows for your Passiv Hauses, and to create and ship liquid fuels created via a modified Fischer-Tropsch process, and to allow farms to produce plant oils on huge acreage (competing with food use). I do not see any possibility that we can do all of the things you are advocating, without huge investment (using fossil fuels) which we do not have available. The result would be even greater use of fossil fuels than we are currently using for at least 20 years, and long-term dependency on maintaining a fossil-fueled system. I therefore do not want these ideas discussed further on this site. They do not make sense to me. Please discuss them elsewhere.
Wow, I really don’t understand. What part of Dr. George’s comments are off limits? The part when he talks about a “path to a sustainable future” or how the United States uses the rest of the world for it’s own interests ? Because this seems to fit the content of this blog a lot more than others who post 25 times per subject and tells stories about seeing UFO’s.
The “path to a sustainable future” starts with 55 MPH speed limits.
If you fail to plan, you plan to fail
The endless repetition of something that cannot work. You say, “If you fail to plan, you plan to fail.” But if you make plans that assume far more available resources than are really available, and far better payback ratios than they really provide, you mislead people with goofy plans that can never work in practice.
Germany has tried to ramp up wind and solar, as much as is possible. This is far less than those with more radical views are suggesting is needed. Yet, Germany looks like it will soon fall on its face, because it has not thought through all the costs, how they will affect the country, and the slow timing involved. According to a June 15 article in the Economist:
” Fifteen out of 24 grid-expansion projects are up to seven years behind schedule.”
“The wind does not blow, nor does the sun shine, all the time. Bulk electricity storage is still in its infancy, and there are not enough mountains for much hydroelectric storage, so Germany still needs a big back-up capacity of conventionally generated power. But because so much renewable power has come on stream, and because it has priority access to the grid, the spot price of electricity has fallen to a level at which modern, clean natural-gas power plants are not viable. Only ageing, dirty brown-coal power stations with low variable costs can compete.”
“The cost of this mess is passed on to electricity users. Household fuel bills have gone up by a quarter over the past three years, to 40-50% above the EU average. And because the contracts guaranteeing renewables prices are set for 20 years, the problem will get worse as more such supplies come on stream. Thomas Vahlenkamp of McKinsey reckons that the cost of the Energiewende will double over the next decade. Rising electricity bills will dampen German consumers’ spending, exactly the opposite of what is needed to rebalance the economy.” There is also a graph showing that the cost of electricity for industrial users has risen to above that for the EU in general, and far above the US’ cost, raising the likelihood that businesses will move their operations elsewhere.
With respect to energy return of variable resources, most EROI analysis omit the problem of variability, so give far too high an indication when comparison to other resources. A recent publication in the journal Energy by Weissbach et al called, Energy intensities, EROIs, and energy payback times of electricity generating power plants says in its abstract:
Biofuels (not discussed in the above article) are very inefficient in other ways. They use huge land area to grow the crops, and often involve pumping water from depleting aquifers. EROI calculations do not consider these costs.
People get the idea that renewables are somehow the savior of the world. In fact, they are only add-ons to our existing fossil fuel system. They do not exist on their own–not even hyrdo-electric. They do not scale well, partly because of their high cost, and partly because of their need for huge amounts of up-front fossil fuel resources, if they are to be scaled.
I wrote an article at The Oil Drum about one impractical version of utopia presented in Scientific American. My post was called, Scientific American’s Path to Sustainability: Let’s Think about the Details.
Hell I have not minded Dr. George’s posts (Sorry Gail) But I see Gail’s point too on the finance aspects of us not being able to build it at this point. And I still have some belief that we may in-fact be able to if we abandoned many things. Dr Wayburn also had something to say but I was unable to really get his message due to the math, I was never good at that. We should be tolerant to others that have their stories, perhaps they have a message we need to hear.
I think Gail sees no money left to build such expensive remedies to this not to mention resources and oil.
Sorry if I made too many posts on this site, but it has been a learning experience.
I am the guy that posted the story of the UFO I saw when I was 16 in 1976 and I am now in my early 50’s and and now retired. There have been many reports of UFO’s in the world. I am sorry if that story was too hard for some to handle but I still stick by it and have hope that there may be an answer out there that we are not are not yet aware of at least in this group. I saw a machine with extreme speed and power that was able to leap and take larger leaps through the sky and leave a ridge top near us and become a star in a matter of a few seconds.
So I brought up the thought about something like the Star Trek Di-Lithium Crystal which is fictional but I am not really sure what I saw back then in 1976, but four of us saw it and I have not kept in touch with those other people but I am sure they remember it as I do.
Scott