Oil Prices Lead to Hard Financial Limits

We live in a finite world.  Clearly, a finite world has limits of many kinds. Yet economists and other researchers use models that assume that these limits are unimportant for the foreseeable future. They have certainly not stopped to think that any of these might be very hard limits that are difficult to get around, and furthermore, that we might be reaching them in the next year or two.

What are the hard limits we are reaching? One of the main ones is that at some point, there is a clash between the oil prices importers can afford, and the amount oil exporters require.

Figure 1. Author's view of conflict in required oil prices

Figure 1. Author’s view of conflict in required oil prices

In fact, there can even be a conflict between prices producers in a non-exporting country like the US or Brazil need, and the prices citizens can afford to pay.

Why Oil Exporters Need Ever-Higher Prices

Oil exporters need ever-higher prices, partly because the cost of extraction continues to rise, and partly because oil exporters use taxes from oil to fund public works projects and to keep their many unemployed citizens pacified. The Arab Petroleum Investment House estimates this combined cost for OPEC countries to be increasing by 7% in 2013. Required prices by oil exporters are already in excess of current market prices for some countries, making the situations in these countries less stable. Examples of countries needing higher oil prices than current prices to balance their budgets include Nigeria, Venezuela, Iran, Iraq (APIH report) and Russia (Deutche Bank estimate).

There is evidence that the collapse of the Former Soviet Union in 1991 occurred when oil prices dropped too low. The Soviet Union was an oil exporter, but with the low oil prices, it could not afford to make investments in new productive capacity. It also could not afford to fund government programs. The collapse did not happen immediately, but happened after low prices had sufficient time to erode funding. Ultimately, the central government collapsed, leaving the individual state governments. See my post, How Oil Exporters Reach Financial Collapse.

How do oil importers reach price limits?

According to most economic theory, oil importers should never reach a price limit. If higher prices occur, as they did in the 1970s and early 1980s (Fig. 2), these higher prices should quickly lead to conservation, plus greater oil extraction and the development of substitutes.

Figure 2. World oil price (Brent equivalent) in 2011$,  based on BP 2013 Statistical Review of World Energy data.

Figure 2. World oil price (Brent equivalent) in 2011$, based on BP 2013 Statistical Review of World Energy data.

In fact, in the late 1970s and early 1980s, high oil price did lead to changes of the expected kind. It was possible to replace oil-fired electric power plants with coal-fired power plants or nuclear electric power plants. It was also possible to replace the very large, fuel inefficient cars that US automakers were making with more fuel-efficient cars, including ones that Japanese automakers were already making. In addition, it was possible to quickly bring additional inexpensive oil on-line, such as from Alaska (Figure 3) and the North Sea. The decline in the 48 states production (excluding tight oil) was never really fixed.

Figure 3. US crude oil production, divided into "tight oil", oil from Alaska, and all other, based on EIA data.

Figure 3. US crude oil production, divided into “tight oil,” oil from Alaska, and all other, based on EIA data.

More recently, there has been much less success in increasing world oil supply. Higher oil prices eventually led to some new production, such as US tight oil (green in Fig. 3). But even with the new US tight oil production, world oil supply has not risen very much  (Fig. 4).

Figure 4. Growth in world oil supply, with fitted trend lines, based on BP 2013 Statistical Review of World Energy data.

Figure 4. Growth in world oil supply, with fitted trend lines, based on BP 2013 Statistical Review of World Energy data.

It is not clear how long the current run-up in tight oil production will continue. Current production is enabled by high oil prices, available credit, and low-interest rates. Even these may not be enough: a recent headline says, Shale Grab in U. S. Stalls as Falling Values Repel Buyers.

What happens when oil prices rise, and no additional supply or substitute is available?

Economists tell us that when oil prices rise, and no additional supply or substitute is available, demand destruction occurs. It turns out that demand destruction for oil corresponds to what most people would call “recession. It is as if the economy shrinks to a smaller size, so that less oil is required.

This economic shrinkage takes place in a number of ways. Higher oil prices make oil less affordable for consumers, businesses, and governments. The indirect result of this is job layoffs, because consumers cut back on discretionary items, such as vacation travel and eating out at restaurants. Governments cut back on projects like road repair, laying off workers. Businesses find they need to raise prices of goods they sell, because of the higher prices they pay for oil. The result is that their products are affordable to fewer consumers, again requiring laying off workers. So the net result is job loss, and continued weakness in hiring, such as the US has seen for several years now.

Governments are particularly affected by high oil prices, because with fewer people working, government tax collections are reduced. More people file for benefit programs, such as unemployment or disability coverage, when they cannot find work. This adds to government funding issues. If banks fail, governments may be called to bail them out, also adding to government expenditures.

There have been academic studies showing that high oil prices tend to create recessionary impacts.  James Hamilton has shown that 10 out 11 post-World War II recessions were associated with oil price spikes. He has also shown that oil price changes in the 2005-2008 period were sufficient to lead to the Great Recession (Brookings Paper). I have also written a related academic paper, Oil Supply Limits and the Continuing Financial Crisis.

Because of these issues, if high oil prices remain after a recession, we should expect continued recessionary impacts, such as an inadequate number of jobs for young people and growing government debt. The government can cover up these issues to some extent with ultra low interest rates. In fact, such low interest rates, together with continued deficit spending, seem to be the reasons the US has been in “recovery” since the Great Recession officially ended in June 2009. However, we still find (Fig. 5) that the big oil importing countries (US, UK, and Japan) have much lower GDP growth in recent years than the rest of the world.

Figure 5. Annual percent change in Real GDP by part of the world, based data of the USDA.

Figure 5. Annual percent change in Real GDP by part of the world, based data of the USDA.

These countries also have much less growth in oil consumption than the rest of the world, indicating that when it comes to oil consumption, citizens and businesses of the US, EU and UK are being outbid by businesses and workers elsewhere.

Figure 6. Oil consumption based on BP's 2013 Statistical Review of World Energy.

Figure 6. Oil consumption based on BP’s 2013 Statistical Review of World Energy.

Workers elsewhere may use less oil per person, but because they have jobs, they are able to purchase new scooters and other goods they want. Their employers also use oil to make and ship goods, keeping their demand high.

In the US, EU, and Japan, we continue to lose jobs to automation and to outsourcing to low wages countries. As a result, wages are stagnating, and young people are having a hard time getting jobs, making oil less affordable. If only there were more high-paying jobs.  .  . Of course, in a globalized world using coal as a primary fuel, the goods we would make would be too expensive for the world market.

Related financial limits we are hitting

Oil importers around the world are disguising the effect high oil prices are having on economies, through low interest rates and continually rising debt. In doing this, oil importers are able to keep the price of oil that they can afford high. In other words, using these techniques, oil importers are able to keep the blue “affordable by importers” line high in Figure 1.

At some point, there is a limit to how much the adverse impact can be disguised. The following are several areas where limits are now being reached, that will tend to bring down the “affordable to importers” line in Figure 1.

1. Limits on the amount of governmental debt. In the US, the need to raise the federal deficit cap will come up again as soon and October. There will be pressure to try to reduce spending, to reign in the federal deficit. If the economy were growing faster, the debt limit would be less of an issue. But with continued high oil prices, growth is slowed. Debt limits can be expected to continue to be an issue.

2. Slowing growth, and related debt limits, in developing countries. High oil prices affect importers or all kinds, even developing countries that use less oil as a percentage of their total energy consumption. The slowing growth also makes debt harder to manage. News sources are talking about slowing economic growth in China, India, and Brazil.

A recent WSJ article about China is titled, Debt Drags on China’s Growth. According to the article, interest and principle payments on business and household debt currently absorb around a third of China’s GDP. Some debt is being taken on, just to allow interest on past debt to be paid. These high debt levels may cramp future growth in China.

3. Rising longer-term interest rates, because of scaling back or ending quantitative easing. As noted above, low-interest rates are helping to cover up our current issues of inadequate good-paying jobs and inadequate government revenue. If interest rates rise, the government will need to pay more interest on its own debt, leading to a needed tax increase.

Figure 7. Ten year interest rates based on data of the Board of Governors of the Federal Reserve System.

Figure 7. Ten year interest rates based on data of the Board of Governors of the Federal Reserve System.

Another effect of rising interest rates is that the market value of bonds outstanding will fall. This happens because the price of bonds is adjusted so the new owner will get the current (higher) yield to maturity, instead of the original low yield to maturity. Owners of bonds, such as the Chinese and Japanese, are aware of this, and have started selling their treasuries, before prices fall further. (See Reuters: China, Japan lead record outflow from Treasuries in June.) This type of sale of treasuries tends to raise the yield on treasuries, even before the Federal Reserves actually cuts back its monthly purchase of securities under quantitative easing.

If interest rates on 10-year treasuries rise, mortgage interest rates will rise, cutting back on the number of families who qualify for loans for new or resale homes. Last week there were articles saying, “New home sales plunge 13.4%,” presumably from the amount by which interest rates have risen already. If interest rates rise enough, there may also be a decrease in the value of resale homes, because there will be fewer buyers who can afford  move-up homes, lowering demand for homes.

4. Popping of asset bubbles, as a result of rising interest rates. At least part of the rising value of assets of many types (stocks, homes, farms, oil and gas leases) is likely  to related to the very low-interest rates recently experienced. Bubbles tend to occur, because with  debt earning very low-interest rates, borrowers are anxious to earn higher rates of return, however they can. Investors bid up prices using money borrowed at low-interest rates, in hope of making capital gains later. Of course, if interest rates rise, all of this may “turn around”.

One piece of evidence regarding the effect of rising interest rates on stock market prices, versus falling interest rates, for the period graphed in Figure 7, is the following: During the period 1957 between to 1981, when interest rates were rising, the S&P 500 rose by less than inflation. In contrast, during the period 1981 to 2013 when interest rates were falling, the S&P 500 stock market index averaged a gain of about 5% per year, over and above the inflation rate. The difference is in the direction a person would expect, and is quite large.

The Outlook 

As we reach financial limits of many  kinds, further recession, possibly quite severe, seems likely. Some of the limits are ones we have not encountered before, particularly the one with oil prices being too low for exporters, but too high for importers. This makes the situation particularly frightening. At some point, the clash between the price oil importers can afford and the amount oil exporters need could cause oil production to drop dramatically, over only a few years. Such a drop in oil production would likely have a very adverse impact on economic growth.

If oil limits indeed reduce economic growth, this makes models based on the assumption that the future will look like the past invalid. Instead, we need to expect a very changed world. At some point, we may even reach permanent contraction, as oil limits change the nature of the world economy.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to inadequate supply.
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321 Responses to Oil Prices Lead to Hard Financial Limits

  1. Chris Johnson says:

    Acutely Clear, Gail. Thanks again for presenting these issues so well.
    I checked the Reuter’s article you referenced about June sales of US Treasuries. Begin Quote:
    Comments from Federal Reserve Chairman Ben Bernanke on May 22 that the central bank could reduce its four-year asset buying or quantitative easing (QE) program by September fueled a sell-off in U.S. Treasuries.
    “China’s net selling of U.S. treasury could be a reaction to the possible QE exit,” said a senior economist at the Chinese Academy of Social Sciences (CASS), a top government think-tank.
    Speaking on condition of anonymity, he said China’s currency reserves management had become much more pro-active.
    “Holding too much U.S. debt is not wise at a time when Treasury yields rise and prices fall. On the other hand, the adjustment has been marginal considering China’s massive holdings of U.S. debt, and China cannot dump U.S. debt, which could spook markets and upset the U.S. government,” he said. End Quote.
    I think the bottom line is that all players are nervous and tight. Oil prices appear to be climbing, perhaps spiking (as End of More’s source predicted yesterday).
    It’s interesting, if not actionable, to assess which parties win and which parties lose when the trends change. According to End of More’s source, the motive for very tight oil markets right now was a) Libya production dropping due to increasing ethnic violence, b) Nigera religious violence affecting oil production, c) Iraq descending into Sunni – Shia civil war. And now Syria, which pumps very little, but could quickly explode if US attacks in retaliation for CW attacks.
    On Monday the cost of crude was below $105; on Tuesday it climbed to $112; on Wednesday (today) to $117, with some watchers expecting $125 and even higher.
    Well, even if all that other stuff leaves the future cloudy, we can count on your analysis making it clear.

    • We certainly depend on the Middle East for quite a bit of oil. There are several countries in bad shape for one reason or another–usually oil related, so there is a lot of fighting going on. What will ultimately bring the system down is determined by Liebig’s Law of the Minimum. We just don’t know yet which part of our problem will be the ultimate stumbling block.

      • Chris Johnson says:

        Whew, not a Madison Avenue stunt. Said Law of the Minimum has nothing to do with the size of the whopper just articulated, but with the length of the shortest stave in the barrel.

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  3. Good Evening Gail, thanks for this very interesting and frightening paper. Actually you are right. I am asking myself a question: don’t you think that strong governance countries like China or USA would go on with importing oil, by avoiding market prices on the spot? I mean organizing a trade structure at (nearly) any price to insure oil accessibility (by military procedure) or by purchasing oil fields. I heard from Jeff Rubin, China is ready to invest in Alberta Tar sands to secure oil supply, even China knows perfectly the production costs. In others words, oil will not be traded as a market commodity, but produced at real costs covered by governmental funds. I give you right such solution does not seem sustainable on a long term.

    • It may very well be that some trade will continue, more on a bilateral basis–my grain for your oil, for example, even if some other parts of the system stop working.

      If many of the oil exporting nations are fighting with each other, indirectly related to oil prices that are too low to keep the governments of these countries propped up, the amount of oil that is available for export may drop dramatically.

      One of the things that is hard to know is whether we start getting “breaks in the system,” in terms of political changes in countries, as the economic systems of oil-importing countries start to contract. If a country has promised way more than it can pay (Social Security, disability, food stamps, unemployment, roads, funding for research, etc), at some point it makes sense to just start over with a new, less-expensive system. Less expensive definitely means fewer programs, but it also could mean a lot of other changes. It could mean a dictator takes over, or it could mean that the government breaks into smaller units (similar to the fall of the Soviet Union). It is these kinds of changes that make the continuity of trading programs (and financial systems) difficult.

  4. BC says:

    I’ve shared these before, but it’s worth repeating to support Gail’s points and for new readers who have not seen the data.

    Real GDP per capita to the CPI- and US$-adj. price of oil and the CPI- and US$-adj. price of oil:

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

    Real GDP per capita and the CPI- and US$-adj. price of oil:

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

    The primary inference is that US real GDP per capita cannot grow with the CPI- and US$-adj. price of oil (2007 = 100) above ~40-50% of today’s price, implying that the US, EU, and Japanese economies will not grow with West Texas crude above $40-$45.

    Peak Oil. Net energy constraints per capita (EROEI). Limits to Growth. Falling oil exports per capita. Repeat until internalized.

    With the price of oil at $110 and at, or above, the levels prior to, and during, the “bananas” (1970s reference for the youngsters) of ’08-’09 and ’80-’82, a cyclical “banana” is a virtual certainty hereafter, only the US gov’t can avoid officially reporting a “banana” by “managing” the reported deflator, inventories, and import prices.

    Yes, we have no “bananas” (1923): http://www.youtube.com/watch?v=yTTrXAE7OPU

    “Two and two are four, except when they are five, or three, and sometimes all three at once.”

    “War is peace. Freedom is slavery. Ignorance is strength.”

    — George Orwell (Eric Blair), “Nineteen Eighty-Four” (1949).

  5. Greg Chadwick says:

    SCP wrote….” don’t you think……countries like China or USA would go on with importing oil, by avoiding market prices…. I mean organizing a trade structure at (nearly) any price to insure oil accessibility (by military procedure)…”

    Perhaps, but by the time we reach that point, it seems that most currencies will be largely worthless and nobody will take them in trade. However, for nations that have something tangible to trade; such as oil, food, or military hardware, currencies could be bypassed in favor of barter.

    Barter has problems, but if the currencies of the world aren’t worth the paper they’re printed on, then barter between nations would be a good way to keep essential goods flowing. At least in the short-term.

    Agreements on a new reserve currency and setting exchange rates would take time. But it will take even longer to prove that the new currencies are stable and restore confidence between trading partners.

    In a collapsing global economy, are you going to take paper, or IOU’s, in exchange for your food or oil?

    The problem is that once trust is lost, it can take a very long time before it’s regained. Probably longer than most of us could go without food or energy.

    • stravinsky7 says:

      I am confused on this point.

      1.) Say grain is “worth” bartering (exporting) oil for.

      2.) Say American-made pottery and hippie clothing are not “worth” bartering (exporting) oil for.

      3.) The market can (and I believe will) capture this by determining grain’s, pottery’s and clothing’s “price”. Given any value for the dollar, grain will more or less approximate the world “price” (with variance for delivery cost/time). Pottery and Hippie clothes will no longer be produced, because they will only “demand” an international “price” where it is not worth it to produce them at?

      Oh, wait, has that already happened?

      Maybe in regards to these examples. (although due to the high coat of labor) Only people who have catabolized their own incomes presently produce pottery or hippie clothes. I guess that the producers of the future will be those who can catholics their own energy inputs sufficiently enough to “profit”.

      Sorry thinking out loud here, and little room to edit on phone.

  6. Your Figure 1 looks a whole lot like Steve from Virginia from Economic Undertow’s “Triangle of Doom”. We did an informal Podcast with Steve the other day (not aired), and overall best case scenario it looks like the costs and affordability lines cross at the end of 2014 latest. This assuming we don’t get a full on War in Syria etc.

    Also we just got up the first of two Podcasts with Nicole Foss of The Automatic Earth on Currency and Finance. Second Part is on Energy, up next week.

    http://www.doomsteaddiner.net/blog/2013/08/28/podcast-nicole-foss-stoneleigh-of-the-automatic-earth-on-currency-issues-part-1/

    RE

  7. Scott says:

    Thanks Gail, Hello everyone, I l liked the graphs as scary as they were in your new one today! The new “situation” from the middle east may soon grow worse and oil has been rising on that news. It looks like so many exporting countries will soon be importers which is huge as we have been studying lately. Also a huge subject – is the debt problems with rising rates that you covered and how if rates rise we will loose value in assets like homes… again like we saw before in 2008. Foreigners are exiting US Bonds. Rates rising will put huge pressure on the derivatives, which is a whole other subject as there are trillions of dollars in those. This surely threatens the US’s World Reserve Currency Status.

    The Fed may continue this QE for years like Japan did, they have to, but inflation is coming or deflation if they back off. There is no way they can refinance all these trillions at higher rates. So I wonder what they are going to do next?

    I mentioned earlier when I wrote to Chris about which countries have the biggest oil supplies that are now subject to war, it was Iran, Syria. But Russia has the most and I do not think we will take them on.
    Best Regards to all.
    Scott

  8. Let’s get real about our finite economic world

    The Republicans in 2001 sold America the idea that tax cuts and the freedom to shop until you drop was America’s future. I can still hear Vice President Dick Cheney saying “Reagan proved deficits don’t matter” (Unless, that is, a Democrat is in the White House). We as a nation could have acted responsibly and set in place demand destruction for oil under our terms in 2001 with higher fuel economy standards and not the market place forcing them on us 6 years later. But Republicans are strong believers in the free market and it’s wild economic ups and downs of the oil industry. Why would anyone after the last 20 years of Republican administrations deficits trust a single word about this countries debt? This country doesn’t have a debt problem, it has a Republican congress and jobs problem (“Governments cut back on projects like road repair, laying off workers” Gail Tverberg). Small minded congress members are trying to force a smaller economy on workers to make this president look bad and hide their own poor debt history.

    Yes, the days of oil so cheap most of you could afford to drive a 6000 pound SUV daily driver are gone. But oil is still cheap. One gallon of gasoline can still do the work of a thousand man hours and becoming more efficient everyday. The only thing holding back todays economy are the cry babies in congress and wasteful who want their SUV tanks.

    If you fail to plan, you plan to fail. The Bush Administration is proof.

    • timl2k11 says:

      “But oil is still cheap.” That is quite true, and scary. Oil can get *much* more expensive.

      • Actually, I think it is just as likely that we can get much poorer–fewer jobs. Oil doesn’t need to get much more expensive. Affordability will go down, either way.

        • xabier says:

          Gail

          Most people cannot actually afford to but the big-ticket consumer items as it is, in the sense of being able to put down all the cash. Friends of mine own a car dealership in a prosperous part of England: when the Credit Crunch hit and many customers couldn’t get finance, the sales dive-bombed. So much so that they now do something else and the dealership is now more of a side-line.

          I suspect that a lot of people in the prosperous West have trouble with the concept of being so poor that you can’t even afford low or moderate prices. Few have experience of this sort of situation: in Britain, even people permanently on welfare have cash for luxuries, cars (bought for cash , not on finance) and modest holidays (if they have children and live in state housing which is cheap). It is all very unreal.

          • One ah-ha moment I had when I visited India is that it would be possible to bring down the cost of car ownership considerably, if we lowered our standards as to what constituted a suitable vehicle.

            Auto-rickshaw in India

            Some of these vehicles are operated in a very overloaded fashion as well, keeping the cost per occupant down. Some run on natural gas.

            In the warmer parts of the world, people need very little to maintain a minimum life style. A little blue tarp over an area almost constitutes housing in India. People sit on the ground (no benches), and sometimes sleep out in the open. Once we start competing with poor warm countries, it is hard to have salaries high enough to cover what we consider necessities in cold countries.

    • It doesn’t matter which party is in power, we no longer can afford to do all of the things you would like to do. The oil price is too high. There is no way that we could collect enough taxes from the employed to pay for the programs.

      • “we no longer can afford to do all of the things you would like to do”

        This has always been true for the last 30, 50,100 or 200 years ago. But yet we built the greatest nation ever. What we can’t afford to do is to not educate our children with the best system in the world, let our infrastructure fall behind, waste energy, start needless wars or advocate for a economic system which doesn’t allow full employment.

        “There is no way that we could collect enough taxes from the employed to pay for the programs”

        Says who? Your Republican congressman ? Let me tell you how to do it. Those 25 million manufacturing jobs that CEO sent to China that no longer pay taxes because the jobs are gone. Tax those high earners who made big bonuses shipping those jobs(CEO’s) at the same income tax rate that was in place after World War 2. We just need another tax increase like the one that was put in place at the beginning of this years which has cut our current deficit in half. Only Republicans say “Can’t” to taxes.

        “The oil price is too high”

        This is just another smoke screen for doing nothing or better known as BAU.

        “It doesn’t matter which party is in power”

        This is just a lie. Look what happened after the Republicans took control in 2001 or 1981. I can’t believe the same person who tries to explain the fall of the Soviet Union on oil prices, can’t see the damage of the Bush 2001 and 2003 tax cuts. Those tax cuts did two terrible things to our economy. First, it put more money in consumers pockets to buy foreign imports instead of the government spending the money inhouse here on Americans and American jobs. Second, instead of the Americans paying the taxes needed, they loaned the money to the government. Democrats fixed Republicans debt mess once in the 90’s and their going to clean up Jr’s. mess this time too without any help from the other side who made it.

        It’s Republican Grover Norquist that is on record as saying ” My goal is to cut government in half in twenty-five years, to get it down to the size where we can drown it in the bathtub”. That’s right Gail, he is talking about your monthly Social Security check after you paid into the system for 40 years. Don’t tell me “it doesn’t matter”.

        • Grey says:

          1) Tone down the attitude – Gail deserves better
          2) most everyone agrees that Bush/Cheney was a total disaster – spend spend spend, tax-cut tax-cut tax-cut
          3). The democrats never met a spending program that they didn’t love – spend spend spend tax tax tax

          neither party is going to change their stripes, and neither philosophy will work

          • I agree. In fact, to get a truly inexpensive government, which is all we can afford in the future, we will need something quite different from what we have now. It is hard to see how we can get there by slow evolution of thought in that direction.

          • xabier says:

            Grey

            I agree, Gail is very a-political. It’s nice to keep political slanging off the site. It has ruined Kunstler’s comment section, and most comment threads on national MSM.

          • Xabier, I had to laugh inside when I read you comment. Let’s ask this this question and apply it. Does a fish know that its nose is wet?

            I find Gail’s comments and post filled with political views. Let me just take the closest one I can find. Which is only inches away on your screen.

            “In fact, to get a truly inexpensive government, which is all we can afford in the future.”

            This statement is straight out of the conservative Republican Tea Party talking points page. Of course if your a conservative Republican most of you wouldn’t even realize it. That’s right, Your fish nose is all wet.

            I would also like to make a second point. If your going to talk about resources and debt but not talk about politics. You my as well be a fish in bowl and talk about being free to swim in the ocean.

        • timl2k11 says:

          “The oil price is too high is just a smoke screen?” Really? So spending over 600 billion more a year on fossil fuels alone is no big deal? Count the price of coal which has also increased and we are spending nearly a trillion dollars a year more on energy. How does that support business as usual?

      • tmsr says:

        I agree completely, even though I am age 55 have no pension and need social security.
        Ed

    • Bicycle Dave says:

      Hi ChiefEngineer,

      Gail’s “Hard Financial Limits” is probably a bit abstract for most people who are primarily interested in their Quality of Life http://en.wikipedia.org/wiki/Quality_of_life or their Well-Being. Some of us are also concerned with the well-being of the planet in general. Financial limits are one factor among many. There’s also the concept of Short vs Long range actions that can be useful to foster well-being.

      Certainly we live on a finite planet and there are finite limits to resources such as oil. And yes, one measure of oil is it’s price and this price may affect our well-being – especially in the short run. But, in the long run it’s quite possible that the depletion of oil need not be catastrophic – it could be a wonderful benefit if humans concentrate on well-being vs needless consumption. And, I agree with you that we have as much of a political problem as an oil problem. I don’t agree with Gail that the character of a political party doesn’t matter – history doesn’t agree with her either.

      Human population overshoot and the culture of over consumption in the so-called “Developed” nations is the real cause of our current and predicted problems affecting our well-being. Oil depletion is simply a symptom of this overarching cause. The ideology of the Democratic party may have some shortcomings, but the Republican party ideology guarantees that we will face very rough times ahead. We desperately need a new generation of humans (especially in the US) who have the necessary critical thinking skills to understand our global problems and set new goals for the way we live on this planet. The Republican agenda of promoting ever greater human population (ie birth control and abortion policies) and ever more consumption without regulation while shrinking the tax base and dumbing down public education – is hardly useful.

      In the short run, we need to reverse conditions of poverty, poor education, mass incarceration (especially of minorities), poor nutrition, homelessness, etc – in order to provide the kind of educational opportunity that promises to nurture those critical thinking skills. Gail’s analysis of the oil is something that should be routinely taught in grade schools (sans her politics); Richard Dawkins meme theory should also be taught in grade school, as should robust courses in evolution, global warming, Jared Diamond’s “Collapse”, ecology, etc – all without interference from religious minded school boards. Scientific Method needs to replace any ideological agendas in school curriculum. Real history and humanities instead of simplistic standardized testing. Etc.

      Taxation (or distribution of wealth) for these programs is only an issue if you ignore common sense and a little history. Republican ideology has contributed to the kind of Income inequality that prevents the US from effectively dealing with these issues. Income inequity is a tremendous short term issue if we have any hope of dealing with the longer run http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States.

      I recall some 40 years ago all the predictions that our constantly increasing productivity (automation, et al) would make something like a 30 hour work week the norm or even 20 hrs with full employment for all – and retirement at 50 would be commonplace. We would all probably stay (debt free) in excellent public funded schools until about 25 years of age (to get high-tech skills), work for 25 years and then retire. Pundits worried about what we would do with all of our leisure time! Hardly anyone in our very democratic country envisioned that the spoils of productivity (and then globalization) would only flow to the top 5% or so – leaving the rest of us to even longer work weeks or very low wage part-time jobs with no health care or other benefits.

      Ideologies (political, religious, and economic) have consequences just as much as depleting physical resources. Homo sapiens do have the capability to behave better than yeast.

      • These ideas are abstract for some people, unfortunately. Unfortunately, the “old solutions” don’t really work. We are dealing with a situation where there truly won’t be enough to go around. There won’t possibly be any way to tax workers to pay for the benefits needed for the many non-workers. (Taxing businesses might be more helpful, but many of them have escaped offshore.)

        My post Human Population Overshoot-What Went Wrong? explains some of the issues, but it, too, is abstract.

        • Bicycle Dave says:

          Gail,

          My “solutions” are hardly “old solutions” and most people find them to be fairly radical. I’ve commented before on ways to humanely deal with population overshoot; curtail consumption; and stop believing in all sorts of myths and delusions that prevent any effective action. But, any solutions are irrelevant without a broad, realistic understanding of the causes of our problems and some general agreement on goals. Solutions tend to present themselves pretty naturally after these two steps.

          Although I value your analysis of oil, I disagree with many of your conclusions regarding the implications of this analysis. Perhaps your dour predictions will come true, perhaps as ChiefEngineer suggests these are self fulfilling prophecies. You seem to be convinced that oil scarcity is going to be a prime cause of an impending collapse of some degree and because there is no effective substitution for oil there are no effective ways to prevent some very nasty consequences. Maybe it will work out that way. However, I view the “oil problem” to be a symptom of larger issues and prefer to think about ways to avoid catastrophe for my grandchildren by broadening the discussion beyond oil.

          • timl2k11 says:

            “I….prefer to think about ways to avoid catastrophe for my grandchildren by broadening the discussion beyond oil” And therein lies the rub. You view is distorted by fears of what the future is going to look like for your grandchildren. JMO.

      • Hi Dave,

        You say tomato I say tomato, no no no. Let me try again. You say abstract, I say time to make up actuarially economic non-sense. Better known in figure #1 as the OOPS graft. I must have been sick that day it was explained in my economics class. Of course one stops producing in the OPPS zone, that’s the way supply and demand work. When your price becomes to high, buyers will substitute. That’s the beauty of the free market. At some point everyone will sell their fossil fuel vehicles and buy a bike. There is a lesson to be learned by The Oil Drum when you run out of quality material.

        Please register me in the quality of life and concerned with the well-being of the planet in general camp. If you base your quality of life off of being able to drive fossil fuel vehicles at 80 mph you are probably a doomer or doomed. At our current cost of oil, the forces of substitution are in play and I wouldn’t be surprised by 2030 the world stops producing oil based fossil fuel personal transportation vehicles. California is leading the world once again and this the direction. The doomers will be the last to the table. I believe life will be better when we stop cooking ourselves with fossil fuels and remove most of the energy requirements out of transportation. Part of doing that will come from slowing down our need for speed.

        Funny you mentioned 40 years ago. It was at that time, I was fresh out of high school and I remember saying to my father how I thought about the future. I believed our jobs where going to be pushing buttons on machines. He laughed and thought I was crazy. I’ve spent the last 20 years in front of a computer selling insurance.

        To close, I would like to say your post is about the most enlightening comment I have read here at Gail’s place in a long time. Most likely it will be the depletion of oil that saves humans from themselves.

        • xabier says:

          Probably more likely that resource depletion and unavailability/affordability leads to violent unrest, extreme politics and Dictatorship. Large numbers of very poor and hopeless people are being created as we write; look at Spain, Greece, Portugal. Large masses of newly-poor urbanised people produce nasty politics as sure as night follows day.

          A total survelliance state is already in place, ready to be used for good or ill.

          But the Nazis got a long way without that in the 1930’s, just by beating people up in the street. Stalin didn’t need drones or anything sophisticated. Every dictator will find willing helpers. Fear descends very quickly once a few killings and disappearances have taken place, far quicker than many imagine.

          We can all bicycle to the Party Rallies, for sure: I’m not sure it will be an improvement!

        • Some things don’t have substitutes. There is no substitute for fresh water. There is no substitute for food. If we are driving today’s vehicles, the only thing that will make them run is gasoline or diesel of the required type. Sometimes a percentage of biofuels can be added, but this is generally subject to limits. Expensive fuel is a very poor substitute for cheap fuel. It makes people cut back on other purchases, and the economy contract.

          • Hello Gail,

            I’m glad you commented on this and as you might have guessed. I totally disagree with your examples and statement. Let me start by saying that substitutes are never exactly the same as the original, otherwise they wouldn’t really be substitutes.

            Let’s start with gasoline and diesel because this is the resource your blog is primarily focused on. These fuels are primarily used for transportation. So in substituting our goal here is all about getting from point A to B. Here is a short list of substitutes that came to my mind right a way.

            Time
            Electricity (solar, wind, coal, natural gas, nuclear)
            Natural gas
            Human power (bicycle, walking)

            Time- with our current vehicle infrastructure which is in place today. About 50 mile per hour on our highways is the most efficient speed for fuel consumption. Here time is a substitute and as far as money is concerned a very cheap one for most of us.

            Electricity- You can walk to your local Nissan, Chevrolet or Mitsubishi dealer today and buy a electric car. Well, let me rephrase that. You can here in California. Are the performances and cost of the electric vehicle exactly the same? Let’s just say the jury is still out on that question and lets give this industry some more time.

            Natural gas- Here we have an excellent replacement for diesel in the trucking industry. The technology is already in the works and within 5 years your going to see it on the road, actually it already is. It could easily replace 2 million barrels of diesel a day here in the United States within 10 years.

            Human power- I know where you are in Atlanta this doesn’t seem like much of a substitute because of the poor infrastructure planning. But here in California, I could manage without a car if I needed too. My quality of life wouldn’t drop very much, but some convenience would.

            Fresh water- This resource is really a special one and a lot different than oil. It’s really more about energy and infrastructure. There is plenty of fresh water in the world. It’s more about having it where and when one wants it. But here in Southern California this is a major concern. Our sanitation district recycles and replenishes our local aquifer. That’s a substitute. A water saving shower heads and 1.28 gallon toilets are substitutes. Drought resistant landscaping is a substitute.

            Food- I’m really don’t understand why you mentioned food or how you’re viewing it. There are all kinds of substitutes that could be done in this category. You could substitute an apple for an orange. One grain for a more productive grain. Or you could substitute grain for meat and become ten times more efficient. Here is one that one that a lot of your blogger should relate to very easily. You could substitute an apple or orange bought at your local supermarket with a fruit tree from Home Depot.

            “Expensive fuel is a very poor substitute for cheap fuel. It makes people cut back on other purchases, and the economy contract.”

            This comment isn’t true either. Actually what your doing when you purchase “Expensive
            oil” is transferring labor and materials from one industry to another. It doesn’t mean the economy is contracting. It just means 10 barrels of expensive oil is more important to you than lets say a 60″ flat screen TV and 10 barrels of cheap oil. There is labor and materials in both purchases. Actually, I would argue that purchasing 10 barrels of domestic expensive oil would stimulate the American economy more than a Chinese imported flat screen TV. Unless, the Chinese import 10 barrels of expensive American oil in exchange.

            What really come to my mind after reading your comment is that you need to think out side the box or other than BAU. Which is ironic because most Doomer websites complain about those who don’t realize our on going problem and act like BAU.

            Peace and I’m going to repeat one of my most favorite statements.

            If you fail to plan, you plan to fail.

  9. Don Stewart says:

    Dear Gail
    Relative to the ‘oil exporting’ status of countries such as Syria, Egypt, and Yemen. As you point out, these countries are importing oil when they buy food from the rest of the world.

    I have seen statistics on water consumption which factor in the embedded water in products brought into some political jurisdiction. For example, the amount of water required to grow the food imported into New York City every day is calculated. So New York City turns out to have a huge deficit in terms of water. The food growing areas obviously have a surplus of water, which they turn into food, and export to places such as New York City.

    In principle, I see no reason that someone could not do at least a back of the envelope estimate for a country such as Egypt–but in terms of oil. Put an oil cost on the food they import and deduct that from any surplus in crude oil production minus domestic consumption. I am pretty sure it would show that Egypt is currently running a significant deficit in terms of oil.

    Since Saudi Arabia has given up growing wheat for domestic consumption, I assume such a chart would significantly reduce Saudi’s ‘net exports’ of oil. It might be a sobering exercise. I imagine Sandra Postel could point you in the right direction, if this is an interesting exercise.

    Don Stewart

  10. Dan Delara says:

    “There is evidence that the collapse of the Former Soviet Union in 1991 occurred when oil prices dropped too low. The Soviet Union was an oil exporter, but with the low oil prices, it could not afford to make investments in new productive capacity”

    Your kidding right ? The Soviet Union fought the worst war in history and didn’t collapse. It’s ability to export is a plus even when prices are weak. With thinking like this every country in the world who imports oil should have already collapsed.

    Gail, I also noticed how you cooked the books on figure #4. Your .7 line starts early compared to all the other lines. In year 74-75, 80-84 & 92 you don’t count the down years, but in 08-09 you do count the down years. Very misleading.

    • The collapse of the Former Soviet Union certainly coincided with low oil prices. Once prices rose, it was able to increase production again. Wars don’t have the same force that an economic price cut-off do.

      Former Soviet Union Oil Production and Price

      The 07 to 12 period does indeed include the recent recession. What is striking though, is how much effect the recent recession had on the big oil importers, and how little effect it had elsewhere. This is a graph of China’s energy consumption.

      China's energy consumption by source

    • Chris Johnson says:

      Hi Dan:
      I’m not sure, but I think Gail is not repeat not attaching the USSR collapse to one single event or influence. At least I’d hope she wouldn’t. There were many factors that had coalesced and suddenly gained momentum that the teams of Russia watchers in the west were all surprised. The same corruptions and cracking facades suddenly devastated that state’s control, and the black market economy had already become the one that mattered. The USSR of 1988 was a far cry from the spirited fighter of 1944.

      • Of course, all major occurrences have more than one factor involved in making the situation happen. The fact that we ignore the effect oil and other energy products on the economy means that we come up with all kinds of supposed reasons for happenings that are really secondary. We read these explanations so often that we assume that they tell the real story. A country that is broke, because its main source of revenue is gone, acts very differently than one that is in financial balance.

        • xabier says:

          Gail

          You are completely right in this: scan the MSM discussions about unemployment, productivity, debt, and all the pressing political, economic and social problems of our time, and references to energy reserves, useable supplies and their cost, are hardly in evidence. The same can be said for over-population. The consequence is a wholly distorted picture.

    • Danilo Bertocchi says:

      Actually, i just met russian delegates at global energy systems in Edimburgh end of June 2013. Regarding natural gas, Russia is willing to keep the prices high allowing them to finance further infrastructure, even gas prices are dropping.

      • I think Russia needs high natural gas prices, to cover the cost of new pipelines and investment in new fields, plus to contribute taxes to help pay for Russia’s general expenses.

    • wornsmooth says:

      Dan,
      Gail is spot on regarding oil price and the collapse of the USSR. Oil was the Soviets number one cash crop.
      There were 3 major developments during the 1980’s that dropped oil prices (which were a huge boon to western economies (especially USA and UK) and a huge hit to the USSR)
      1. Bringing Alaska north slope oil into production
      2.Huge increase in North Sea oil
      3.Huge increase in OPEC production due to tying production levels to “proven reserves”
      (was George Bush SR. involved in this change, using his close ties to the Saudi Royal family, the Saudi’s being the most muscle in OPEC decisions…I don’t know, but i Have my suspicions)
      The corollary of number 3 is that while the Saudi’s et al had spare capacity to increase extraction rates to make up for the lower prices, the Soviets had no spare capacity. The only thing they could do during the second half of the 80’s decade is watch their income of foriegn currency plummet.
      In short, oil prices may have been the number one cause of the collapse of the Soviet economy. Even if it doesn’t deserve top billing as the cause, it was aprofoundly significant factor

      • yt75 says:

        “was George Bush SR. involved in this change, using his close ties to the Saudi Royal family, the Saudi’s being the most muscle in OPEC decisions…I don’t know, but i Have my suspicions”
        I think this can be considered as an historical fact now, even though more Reagan than Bush Sr (US domestic oil industry got hit really bad by it) , see for instance :

  11. Edwin Pell says:

    Gail, you said we will get poorer. The world will get richer as production is shifted from high cost producers like the U.S. to low cost producers like Indonesia, Brazil, etc. So, yes, we here in the U.S. a country planned and built for a bygone age of cheap energy will be losers but the world as a whole will do OK.

    • timl2k11 says:

      I think the production shift you refer to has largely already occurred. Less cheap energy definitely equals poorer world overall, unless there is a great die off, perhaps.

    • The amount of oil is increasing very little. As we get poorer, we can afford less oil of what the world produces. Even if oil price stays up, and production continues, the rest of the world will not necessarily do very well. They will hit debt limits, just like we have, for example.

      If in fact the price of oil drops sharply, then world oil production will drop significantly. In such a case, everyone will do worse.

      Ultimately, it is clear that everyone will do badly. The question is whether the world economy will hold together well enough that some countries with high coal usage can get all right along without the high oil users for a while. It seems like China and some countries in Africa may do less badly than the big oil users for a while, but I don’t know how long. We do live in a finite world.

      • Edwin Pell says:

        I bet when tight gas and oil fail in the US the US will realize it has 5000 giga tons of coal in Alaska.

        • They will probably realize as well that Alaska is a long way from the rest of the United States. Unless the coal is easily mineable and near good transportation (traditionally rivers and the ocean), it is likely to stay in the ground. We won’t have the money/oil/credit to build the infrastructure to get the new coal out, and transported to where it needs to be.

  12. timl2k11 says:

    Thanks for another clear and concise article Gail. What amazes me is the number of scientists, who are completely clueless about our energy problem. They talk about technology as if it will ceaselessly advance conquering every problem that nature throws our way and allowing for unceasing progress in their particular field. None seem to see the link between modern scientific progress and energy. Carl Sagan never mentioned energy. Neil DeGrasse-Tysin doesn’t. None of the science popularizers, many of whom I greatly admire, do.

    • I am astounded at the number of people who look at the answer to the wrong question, because they don’t understand the bigger picture. This answer gets repeated endlessly in the news media, as if it is answering a useful question.

      For example, if we are going to have today’s society for very long, we need to keep the electric grid operating as long as possible. What is the limiting factor on the operation of the electric grid? I would argue economics (which is in turn driven by resource depletion). Really, it is Liebig’s Law of the Minimum that leads to the end of the electric grid, and it is hard to see what in particular is the problem. One thought is that when too many people are unemployed, they will not be able to pay enough for electrical service, and the electric grid will cease to function, because the electric company has a lot of fixed overhead that it needs to pay. Another related thought is that the cost of maintenance of the electric grid will rise too high, because of storms, the fact that much of it is very old, and because of attempts to add new intermittent electricity. Another thought is the government’s ability to fund repairs for storm damage will drop too low, and prevent storm-related repairs. Another thought is that replacement parts for the electric transmission grid will become unavailable.

      The question when one adds solar electricity to the grid is how much it adds to the life expectancy of the grid. I would argue that it adds zero to the life of the grid, and probably reduces the life expectancy of the grid. Theoretically, the amount by which one should reimburse a person who adds 1 kWh of electricity from solar panels to the electric grid is equal to the savings that the utility gets by reducing its production of electricity by 1kWh. All fixed costs will remain the same (and perhaps will increase, if one has to ramp natural gas and coal units up and down more often), so this savings is likely to be about equal to the cost of natural gas or coal or uranium to produce 1 kWh of electricity. The amount of credit that utilities are giving for electricity from solar panels is far in excess of this amount. This mismatch weakens the financial strength of the electrical grid.

      If the economy is crashing in the near term, CO2 savings becomes a very different issue as well.

      • timl2k11 says:

        I think TED (www.ted.com) sorely needs to you to give a talk. Their motto is “Ideas Worth Spreading”. However, they seem to have a positivist bias, or intent. They might not be very intrerested in “Ideas That No One Wants To Hear” regardless of how factual and important your ideas about our resource limits are. The TED audience needs a cold splash of water to the face (i.e dose of reality) to wake them up from ther collective coma.

        • There seem to be an awfully lot of sites that want to offer a “happy” view of the future, no matter how unrealistic. Or who want to sell the product their donors make or distribute (solar panels, wind turbines, electric cars, “green” dish cleaner, etc.)

          • Scott says:

            Hello Gail and Others, Leo Smith, which writes on this site and I think we are lucky to have him. Thank Leo for forwarding that link I am surely a fan of your work. The article was brilliant. Points out that the UK needs 46 new nuclear plants if we like it or not. He pictures a wired world were many people stay home and telecommute, electric cars deliver packages from the internet.

            You covered all the bases Leo especially towards the end about the big road blocks in government.

            We could do so much more if they, the governments of the world were more honest about the predicament and if were not in the way.

            Mel, if you are out there? You would like the PDF. I spent some time reading it and it long but excellent.

            These things do give me hope, I just wonder if we can actually build these things needed given that we are facing a financial collapse. Well, that is yet to be seen. But I see no movement in this direction what so ever right now, most growth in the US is fossil fuel based. So here is the PDF re-posted again and I think this brings up many topics that we can talk about here. Will financial collapse prevent us from building this new world energy system? That is the big question it seems to me.

            http://www.templar.co.uk/downloads/Beyond_Fossil_Fuels.pdf

            Kind Regards to all,

            Scott

            • It takes a lot of fossil fuels and cash to build 46 new nuclear plants. This is hard to do, when UK oil production continues to drop. The UK has a big financial industry. With low economic growth, this industry is at risk.

          • Don Stewart says:

            Gail
            The book Thinking in Numbers by Daniel Tammet has a chapter about Invisible Cities–cities which were imagined but frequently never built. One such city was designed by the Italian architect Filarete, who had a colorful history including the alleged theft of the head of John the Baptist. He designed the city of Sforzinda.

            ‘Like spokes in a vast wheel, eight straight roads led from the walls to the city center. The roads were studded with small piazzas, surrounded by shops and markets….What is this strange building to which every street in the city addresses itself? Filarete called it the ‘House of Vice and Virtue’. Every floor housed a different class of of activity. A brothel, on the ground floor, would entertain the majority of the building’s callers. Alcoholic drinks and games could be had on the floors immediately above. Ascending further, a university and lecture halls offered its few visitors instruction. An (astronomical) observatory topped them all.’

            I’ll observe that in those days of the renaissance, the top floor was the cheapest because there weren’t any elevators.

            It may give you some comfort to contemplate that not much has changed since the renaissance. Wisdom still resides in the cheap seats, while most people flock to the fleshpots and mindless distraction.

            Don Stewart

            • In China, many of the new residential buildings have been built without elevators. I was told that the residential buildings such as those shown in the photo below have no elevators, so that some residents have to walk up 10 or more stories. I am sure there is no air conditioning for those stairways. Air conditioning in China seems to be window air conditioning, even in most commercial buildings.

              Buildings along the Yangtze river in China.

              The above image is of buildings in Qutang, in an area where the level of the Yangtze river had been raised by a new dam. Former farmers were relocated to high rise buildings. The picture is not very clear, because it was misty near the river. The break in the sign is from one of the many landslides that affects the area. Needless to say, the bottom story apartments are preferred over the top story apartments.

          • timl2k11 says:

            That is an excellent line there at the end Don about wisdom. I sometimes wonder, are we who stubbornly seek truth confined to isolation in a world of people who want to run from it? Noam Chomsky referred to the “brainwashing under freedom” that occurs in western democracies.

      • BC says:

        Precisely, Gail.

        http://www.eia.gov/totalenergy/data/monthly/query/mer_data_excel.asp?table=T07.06

        http://www.eia.gov/electricity/monthly/xls/table_1_01_a.xlsx

        Note that US electricity consumption per capita is where it was in ’96-’97 and negative since the early ’00s, even as solar and wind capacity has been added at a rapid rate since the mid- to late ’00s, growing at a compounding doubling time of 30 months vs. no growth of electricity consumption per capita.

        Incremental capacity has grown so rapidly and fixed costs increasing such that some utilities are now pushing back against further expansion of solar and wind capacity.

        I suspect that we have seen the peak rate of change of increase of growth of renewable capacity, and now the fixed costs of infrastructure vs. no growth of electricity consumption will be prohibitive to further growth of renewables.

        • I sometimes think that economists don’t get farther than the equations they learned in college classes. Someone has to pay for all of this stuff. If customers pay more for electricity, it works just like paying more for oil. It tends to reduce other spending. It also makes businesses less competitive with places where electricity costs are less. I ran across this Forbes article on the electricity situation in Germany recently: German Green Energy Bluster Running Out of Wind.

          • timl2k11 says:

            I don’t think most students get farther than whatever they learn in college class. Thinking for yourself is not something that is taught, which is why I dropped out (at least that’s how I like to think about it). Thinking for yourself often gets you in trouble since you realize a lot if what you a re being taught is B.S.

            • Casualty actuarial work is still pretty much outside the university system. The approach is closer to an apprenticeship program, with self-study exams. The series of exams often takes 10 years to pass. The pass rate on the examinations is very low–about 35%, among people who were generally B+ or higher students in college and graduate school. In company work, the interest is in original solutions to the problem at hand–not on reliance on some peer-reveiwed paper.

              The lack of connection to the university system means that peer-reviewed papers are’t terribly highly valued (although they are available). It also means that experience is valued more highly than degrees. Degrees from Ivy League schools have no special value, for example. The society requires that members keep up on continuing education. Quite a bit of that continuing education is attending (fairly long) talks by people like me, on issues that members choose to bring to the attention of other members in the group. That is how I can give talks of 45 to 60 minutes or more to actuarial groups.

              Academic groups on the other hand tend to have a few invited talks, that are fairly long, while they cram in a large number of paper presentations in slots that 20 minute or less in length. In one of these slots, it is hard to say very much.

          • Are you making the case Actuaries do a decent job of analyzing Risk Gail? Given the track record of Actuaries in the Insurance Biz, you cannot say they are much better than Economists. Present company excepted of course. LOL.

            RE

            • The various parts of the actuarial profession are fairly separate. I am not much involved with pensions, for example, except from a distance, and can see that the assumptions are a lot more optimistic than I would make, given what I know about the oil situation.

              When jobs are rated in the US, actuaries often come up near the top, in terms of salary relative to working conditions and job-related risks. (No one dies, if you make a mistake, for example.) Staying out of the university system has had many benefits. For one thing, limiting the number who pass exams limits the number of people who can call themselves actuaries. This tends to hold up salaries.

            • The various parts of the actuarial profession are fairly separate. I am not much involved with pensions, for example, except from a distance, and can see that the assumptions are a lot more optimistic than I would make, given what I know about the oil situation.

              When jobs are rated in the US, actuaries often come up near the top, in terms of salary relative to working conditions and job-related risks. (No one dies, if you make a mistake, for example.) Staying out of the university system has had many benefits. For one thing, limiting the number who pass exams limits the number of people who can call themselves actuaries. This tends to hold up salaries.

  13. Leo Smith says:

    Hmm.
    Cue back of envelope calculation…ol is generally concerted into energy of the electrical or mechanical kind and at – lets say – around an average 40% efficiency and there are in fact about 1.7MWh of energy in a barrel.

    so 680 kWh of usable energy is in one barrel. So the raw cost of a unit of electricity derived from oil (neglecting plant cost and other O&M issues) is (at $100 per barrel), about $0.147c per KWh.

    Which shows why we don’t use oil to generate electricity any more for sure. Not sure about US prices but the raw cost of electricity is about $0.08c for coal, $0.09c for gas, and $0.10c for nuclear.

    And this is the point I want to make: Already electricity production has zero oil content in Europe. And probably the USA. Gas and coal are the real workhorses in both continents, with nuclear (when its allowed to operate) being close in terms of price performance ( or cheaper when regulations favour it).

    (all the low hanging hydro power sites have been plucked so although its a significant component, its not a usable technology to develop to replace any others).

    I.e. the sorts of transformations to alternative energy sources where its no big deal to change have ALREADY taken place.

    A second point to make is that even if renewable energy did work and was cheap (it isn’t: generally its in the $0.25-$0.50c per unit bracket overall) it wouldn’t make a red cent of difference to petroleum demand, because that is in general NOT being used to generate electrical power in the first place…it is overwhelmingly going into off grid mobile power sources. I.e. being burnt in internal combustion engines of one sort or another.

    So its very important to make a distinction between ‘oil’ – in massive demand and currently irreplaceable – and other ‘fossil fuels’ – overall less in demand, in adequate supply and a lot cheaper.

    Transport CAN run off gas. so that is perhaps a temporary stopgap we will see in years to come.

    But unless lithium-air batteries come good, the end of cheap oil means the end of cheap motoring. (For some of us, that era has already ended :-))

    WE can reduce transport-miles to a large extent by cutting down our out ‘discretionary’ trips. No more casual leaping in the car to do 5 miles to a supermarket, no more ‘school runs’ where the kids can take a bus or walk…no more commuting when an advanced internet means you can work at home..BUT there is a minimum of transport required to get food and other consumables into cities…

    ..and railways don’t always cut the mustard either, in terms of speed, convenience and cost.
    So that is in fact where the changes are going to impact the most.

    – We have alternatives to oil in primary energy production that are as cheap or cheaper than oil, in coal. gas and nuclear, and the latter is under no resource limits yet whatsoever. Neither, in the US, is coal.

    – We have very few alternatives to diesel or gasoline in transport.

    – We have some alternatives to transport itself. But not enough to not require radical societal transformation in how we do things.

    I think we should ponder that.
    I’ve laid these arguments out in more detail here

    http://www.templar.co.uk/downloads/Beyond_Fossil_Fuels.pdf

    In the end the argument is – has? – moved on from whether or not peak oil is happening or has happened, and indeed beyond the impact of it, to what we can possibly do about it.
    My tentative answer is ‘burn more coal, more gas, and build more nukes’ . That solves the primary energy production conundrum, but it highlights the residual problem,.

    Transport.

    And to make a final point, predictions Gail, are only as good as the assumptions they are based on. Your predictions are based on the inability to replace petroleum as a source of raw energy. As an engineer. I am saying there are alternatives, and they do not suffer the same declining resource base and escalating costs.

    But the biggest problem replacing oil lies in off grid transport. Synthetic road fuel can be made, but its no way competitive with oil until at a wild stab, the $500 a barrel mark.

    However, that is a long way off right now. We have a couple of decades of stagnant growth to endure before the penny drops and people do actually – naturally – start to modify behaviours and work practices to find the natural free market cheapest way of ‘getting the job done’

    Provided of course, that governments don’t interfere to make that way illegal., or artificially tax it out of court. To protect the guilty.

    So I don’t think we are going to see societal collapse – just a long period of very hard times until the established orthodoxies of ‘this is the way to do things’ wither and die starved of petroleum, and the new orthodoxies of ‘but this is how we must do them in the 21st century’ gradually become so blindingly obvious that even politicians can see them.

    Meanwhile, it looks like another war based on essentially oil influence is about to start. Hey ho! Told you so!

    • I have a very hard time seeing how we hold on to our current system, plus produce enough cash for investment in all kinds of changeover technology (natural gas cars and fueling stations, for example), in an economy that is increasingly poorer. I don’t think we have the time to do any kind of changeover. I expect that in not too long, many of the major countries will be like Greece now. A country that is struggling with the basics can’t do much about a changeover to a new energy system.

      • Leo Smith says:

        We seem to have plenty of cash for wars and bank bailouts. And useless renewable energy plant.

        The changeover stuff is just natural replacement. A 40 year transition to what works cost effectively.

        There is and need be no panic. No hurry. Just let the markets do their thing.

        Personally I hardly drive, hardly shop except over the Internet, such work as I still do I do at home. Things cost more so I buy less, that’s all. what wears out and needs replacing is replaced with quality stuff that lasts.

        Many of the changes are almost immediate cost benefits with very little downside. My server was tired out. I built a new one out of low power parts. It will pay for itself in lower energy inside 2 years with a lifetime expectancy of 5….

        I have a two year contract for electricity with a nuclear power company. Shares in a coal power company. Grow a lot of food – not nearly enough to live on, true, but enough to make a difference financially.

        All these little things work. As do building systems for ‘people who work from home’ instead of equipping massive energy inefficient office blocks.

        My wife buys good brand stuff on the Internet, if she doesn’t like it, she sends it back. It costs less in postage than driving to the local town to change it.. She then wears it for a year and sells it on ebay – often at a profit.

        We don’t sent out to be green:we hate greens. We are just responding to circumstance.

        Oil is expensive. Internet is cheap. supermarket food is expensive. Home grown is cheaper. Eating out is expensive. Cooking at home is cheaper.

        Running a business made out of people who work from home saves them commuting costs and you office costs. What is not to like?

        There are monumental amounts of money sloshing round in the pensions funds just looking for a good place to get 5% ROI. No problem if the business case is sound.

        In the end credit is a promise to pay. Would you expect to get paid by a power station company? By a government? by a bank? I’d pick a power station company any day.

        IN the end there is no limit to the amount of credit we can generate, what matters is the value of the cash that comes back in interest payments. And its ability to pay for the next investment.

        The collapse is not of society, but of the CONSUMER society. THAT was the froth on the wave of cheap energy. WE cannot afford to consume material goods and energy beyond what is necessary to live. And that is a hell of a lot less than what we consume now. Esp. in the USA which is possibly the most flagrantly wasteful nation on earth. It could afford to be. I take no moral stance. If it cant, at least 60% of its energy usage is pure waste. That’s a LOT of energy saving potential.
        In that game its way behind Europe and Japan, who both have less resources, higher populations densities and so have already adapted to lower energy ways of doing things.

        The wastage in Europe is the massive state bureaucracy, which the USA isn’t yet burdened with.

        What has to go is the consumer society and the welfare society, both being unaffordable luxuries.

        What will not go unless its game over, is the fundamental infrastructure that keeps people alive. IT may change – it has to change, but given the choice between a new I phone or a sack of potatoes, the potatoes will always take precedence.

        • At some point, we start running into discontinuities–systems that don’t work as they have before, banks that won’t let you take out more than a small amount of money, stores that stop taking credit cards, big layoffs, governments that can’t keep up with the need for funds for all of the unemployed workers. I don’t know how soon that is.

          We should watch Greece, Spain, Cyprus, and perhaps India for how these things unfold. The WSJ reports Cypriots Try Getting by Without Credit. The subtitle is, “Messy bank restructuring as part of bailout has businesses doing their best to operate on cash only basis.”

          Excerpts:

          Weeks go by without Constantinos Mentzis, a tavern owner in Nicosia, stopping by his local bank branch. There is no point, he says, since banks in Cyprus have largely stopped functioning and small business like his are operating on a cash-only basis.

          Now the economy appears to be sinking much faster than the 8.7% contraction that its creditors had forecast for this year.

          Empty storefronts on Nicosia’s commercial streets have multiplied. Unemployment is soaring and tens of thousands of businesses like Mr. Mentzis’s are stuck in uncertainty.

          Manthos Mavromatis, who owns a water-pump company, was hurt when the government hit big deposit holders. One morning in March, he woke up to find that out of his €2 million in deposits at the Bank of Cyprus, he could access only €200,000. Some €950,000 was turned into shares of questionable value in the “new” Bank of Cyprus, the rest was frozen.

        • xabier says:

          Leo

          You raise some very good points, the desire – and need – to economise will certainly be a catalyst for change, but I don’t think you’ve quite grasped the magnitude of deficit spending and debt bubbles: there is NOT a lot of real wealth around. It’s hard to find a good investment, because everything is shrinking.

          And as you wiselyretrench, so someone gets thrown out of work: most people reply on the ‘froth’ spending of consumerism for their livelihood.

          If we returned to the saner world of say 1925 in which the average skilled working man had no car, TV, took no foreign holidays, etc, and just contented himself with feeding, housing and clothing his family, an awful lot of people would be out of work in consequence.

          • Chris Johnson says:

            Xabier and Leo:
            A good article comparing national health care systems (Hong Kong #1) noted that all top flight countries had systems whose working citizens contributed from their wages. What is going to happen when continued economic contraction squeezes the labor market tighter and ever tighter? Leo and his disparate colleagues can coordinate via conference calls and email — I do so with my colleagues all day. But then how do we add / afford the health care premiums when the company refuses to?
            Cordially, Chris

          • I agree with your comment.

            The second part of your comment, that if you retrench, someone else is thrown out of work, is a point that many people miss.

  14. ravinathan says:

    There are some major importers for whom oil is already unaffordable, the case in point being India fast approaching a currency crisis. The falling rupee is having an immediate adverse impact on the country’s oil import bill while the vaunted benefit to exports may be lagged or slow in coming. Paradoxically then, the falling rupee instead of being equilibrating in terms of the trade deficit may actually worsen it at least in the short run. If India, as predicted, turns to the IMF for long term foreign currency loans, it will come with conditions, the least of which will be the elimination of unaffordable fuel energy subsidies that will push inflation even higher than it is. At least the public’s ire would be pointed at the IMF instead of at the government who can claim that their hands are tied. It helps me to remember that Gail’s fig. 1 represents an average. Oil is already unaffordable for many and that may result in unintended consequences as in Egypt’s civil strife. Egypt is kept afloat with loans from Saudi Arabia among others. Can the world afford to keep India with the worlds second largest population afloat?

    • I am afraid that India may indeed be one of the big countries that fails first. It probably depends on how much bailout, under what conditions, it can get.

      It seems like the system in very fragile. They have been trying to lift the population out of poverty, by providing cheap cooking fuels other than dung, by providing fertilizer and irrigation to improve crop yields, and by providing jobs (such as dial-in customer service) to foreign customers, using its electricity. All of these systems depend on being able afford the fuel needed to operate these systems. India’s own oil production has been flat for years, so any increase needs to come from imports. Its gas production is lower in recent years, meaning that staying level requires more imports. Coal production is not keeping up with demand either. The falling rupee is going to mean that imported fuel costs even more.

      • Scott says:

        Hello Gail, I read a story about India and it said they were trading in the money for gold since the inflation is over 10 percent. Looks like a currency crisis. I think they even have to pay a government premium of 8% to get the gold or smuggle it in. In this stage of a currency crisis gold does play a role and I do expect the dollar will fall just like the Rupee eventually and gold will play a roll as a store of value like it is now in India.

        I do agree this is a very large populated country and world cannot really afford to support India. They will surely be paying more for oil/gas and food. Looks like the government is trying to buy more gold to use for collateral and shore up the currency. As far as the USA goes no one really knows how much gold is in Fort Knox, much of it could be gone or leased out. It is a mysterious place and has not been audited for years. I would like to know what is there, but there we go again, there are so many secrets these days when we look at the governments of the world.

        http://www.reuters.com/article/2013/08/29/us-india-economy-gold-idUSBRE97S0IW20130829

        http://goldnews.bullionvault.com/india-gold-082120132

        • In India, it is the government trying to use gold to help their sagging finances. They are trying to buy the gold from citizens. This is something they can perhaps do once or twice, but as a long-term strategy, it is unlikely to work.

          The amount of gold in the US is no doubt much less in proportion to our economy. Gold has been a traditional means of saving in India.

  15. suttonbooks says:

    I have worked in the process industries all of my career (petrochemicals, refining, offshore oil and gas, some pipelines). My concern regarding the data presented above is not just that oil will not be available, but that it will be available only erratically. A modern refinery or chemical plant has a low turndown ratio (80% is typical). This means that if the supply of feedstocks falls to say 60% then it will run into many operability problems and become very energy inefficient. And shutting it down is a major effort that can last days and that poses increased safety and environmental risks. The effect of having a reliable supply of oil has made both economies of scale, steady state operations and Just In Time management feasible.

    But now I can see a world where a facility manager has to address questions such as the following:

    1. The barges that were scheduled to deliver 100,000 barrels of oil today have not arrived, and no one knows where they are. How are we to run the facility? Do we run at low rates or shut down? Or do we trust to luck and keep going at full rates?
    2. A barge has arrived, but the oil is not what we normally get; it is high in sulfur and water but has a lower pour point. Can our current equipment handle this material?
    3. The supply of spare parts for our instrumentation has been disrupted. Two of the safety critical systems do not work and cannot be repaired soon. Do we go ahead and operate anyway?

    My point is that industries such as these can handle reduced rates of feedstock more comfortably than they can handle erratic supplies.

    • Thanks for the background you provide. I was just reading an Exxon-Mobil editorial with respect to a recent outage in California. It sounds like it is almost related. It talks about California being a fuel island, because of California specific requirements. Thus an outage one place can’t be made up elsewhere. In this case,

      An incident at a Southern California Edison substation cut the power that the utility supplies to our refinery in Torrance. To ensure safety, we were forced to suspend refinery operations, which meant suspending production of gasoline and diesel that supplies some of the California market. It compounded a problem already created by a disruption at a Chevron refinery in the Bay area, and by other unrelated problems. The markets responded to the drop in supply by pushing prices upward.

      As there is less and less redundancy in the system, an outage one place can magnify to an outage in other places.

      In early 2011, there was an outage that was both electricity and natural gas related in Texas. I wrote this post about it: Texas Electricity Blackout Enabled by Feedback Loops; Reliance on Competition.

  16. BigPicture says:

    Speaking of leveraging a future of descending curves…deja vu for an increasingly p.o.’d Putin
    http://www.businessweek.com/articles/2013-08-29/can-vladimir-putin-survive-americas-energy-boom#p3

    • Thanks! That is a great article. Russia needs ever-rising prices to extract its oil, natural gas, and coal. It can’t get them, and that is a major problem.

      While the argument given is competition from other producers, it is just as much that buyers can’t afford them. Rising energy prices cut back on economic growth. Europe discovers that the lowest quality of coal is cheaper than natural gas, so uses it, cutting back on its demand.

      • xabier says:

        In Britain, people have become very dependant on gas- powered central heating: they won’t want to go back to dirty old coal fires, and the work they involve – in fact, many houses have no fireplaces. Putin can squeeze and squeeze and squeeze……particularly given the collapse of North Sea production.

        • Scott says:

          Hello Xabier, It looks like we will be burning that so called ” Big Lump of Coal” as I recall Gail called it… during the years ahead and that will extend things for a time at a cost to the environment it seem to me. Because of the coal reserves we have some more time but we need to find a better way to process into cleaner fuels since it looks like we are scared of nuclear. Nuclear will lag behind coal in the next 20 or 30 years. If we have that long before things really get tough. A gas shortage of Petrol could really shake people up and start things changing fast like it did in the 1970’s but that was a brief shortage and prolonged shortage could really light a fire under the R and D some of these things we have talked about including nuclear.

          Scott

          • xabier says:

            Hi Scott

            It doesn’t look good here in Europe: most resources exhausted by 200 years of intense industrialization, some countries have some oil and gas still (eg Norway) and hydro-resources, and forestry for heating, but basically Putin in Russia can play Europe on a line – without his gas, Europeans freeze. The Middle East supplies look less and less reliable to say the least!

            Nearly every house in Britain, except in deep rural areas is fixed up for gas central heating, and I know even well-off neighbours with oil-based heating who have had to cut back a lot as the oil price is too high and their business profits fall: just heating the kitchen and one bedroom. For many it’s the end of ‘whole-house heating’. In the UK it’s the damp that kills, not the cold, and you can’t cut back too far without health suffering, although people could move back to warmer clothes and thermals, as they wore until only WW2.

            I’ve fixed up large cast-iron stoves here which can burn absolutely anything and also can be cooked on, with power-cuts having no impact, but few people can do that in modern houses.

            Gail’s statistics for coal use in China are very interesting indeed. It’s going to get used if it’s cheaper, and what Eurpe doesn’t take, Asia will: so then do we all fry from global warming?

            • With financial collapse, our ability to extract and transport coal will drop pretty quickly as well.

              I don’t know what the global warming situation will be–only that the current models assume way too much CO2.

  17. Stilgar Wilcox says:

    Gail, your article here somewhat reflects what an article (linked below) on Nicole Foss’ website by Raul Ilargi Meijer, in which he draws an analogy between hypothermia and what is happening with many countries now in which they are sacrificing the periphery (like frostbite toes) to keep the core healthy.
    http://theautomaticearth.com/Finance/the-global-economy-suffers-from-hypothermia.html

    He predicts India’s efforts to supply hundreds of millions of their citizens with basic food is akin the US’ food stamps program, because it supplies the periphery at a time when the core must be saved. This mirrors the US debate over food stamps and many other programs for the poor as deficits rise. The battle between Obama and Congress will be a battle over O trying to keep in place help for the periphery while Congress seeks greater help for the core.

    • Interesting! Thanks for the link.

      I agree that countries end up sacrificing the periphery, if there isn’t enough to go around.

      I ran into some very interesting (and disturbing) ideas, that I wrote about in February 2012 in a post called, Human population overshoot-what went wrong?

      It turns out that in “K-selected species” in animals, such as dogs and monkeys, hierarchical behavior is one of the ways that nature controls behavior. If there is not enough to go around, there is increased hierarchical behavior, and the ones at the bottom of the hierarchy are starved out. This way, the ones that nature deems most “fit” continue to live. If this pattern had not been followed, everyone would have been weakened, and would eventually die.

      Over the many years, we have developed beliefs/values that tell us the importance of taking care of the poor and disabled. These have been encouraged by rising amounts of energy usage over the ages, which allowed rising population. Now, at this point, we are faced with a hard problem–if we have less to go around, how do we distribute it? If we do what seems to be most “right,” we all starve together. If we force those at the bottom out, at least some get to live longer.

      • Don Stewart says:

        Dear Gail
        You may find Plato’s solution to the population problem interesting. This is also in the book Thinking in Numbers, and is in the same chapter on Invisible Cities.

        Plato believed that the ideal city contained 5,040 families. You will have to read the book to get the logic behind that number.

        So each city needed 164 births per year to sustain the stable population. There were 1193 males heads of families, and thus 1193 potential fathers. Plato believed that one in seven would be fruitful each year, giving 170 births.

        ‘How did Plato count on keeping his ideal city’s number of households in check? He proposed that each inheritance should pass into the hands of a single ‘best-loved’ male heir. Any remaining sons would be distributed among the childless citizens, while the daughters should be married off.

        Large families had no place in Plato’s city. Fecundity would be illegal; any couple producing ‘too many’ children was to be rebuked. The city’s precise limit of 5,040 households was inviolable: all surplus members were to be sent packing’.

        You will find a similar solution in Edo Japan. The great majority of the population was tied to the land. All of the land was allocated to farms or forests or towns. A farm family had to produce enough food to feed not only themselves, but also to pay their taxes. Since the limits to population growth were clearly visible (the spectre of starvation), family size was limited voluntarily through measures including infanticide (the infant was ‘sent back’).

        Problems we thought were solved have a way of coming back around again.

        Don Stewart

        • timl2k11 says:

          “Fecundity would be illegal; any couple producing ‘too many’ children was to be rebuked. The city’s precise limit of 5,040 households was inviolable: all surplus members were to be sent packing’.”
          What a tragedy. We discovered this precious resource in fossil fuels, and as a species we’ve been no smarter than bacterium, ever expanding our population and consumption until the resource is exhausted.

        • xabier says:

          Don

          Plato’s limiting system is similar to the old Spanish/Basque way: eldest son or daughter inherits the farm property, and can reproduce, while the others work as unpaid childless labourers, become monks or nuns, priests, servants in town.

          Or in richer families seek their fortune with their swords as soldiers or become abbots, abesses, canons and bishops, – if they can’t get fixed up a rich wife/husband. Most fortune-hunting soldiers died either in battle or of disease, which used to kill more than the enemy’s swords or bullets.

          Property rights and individual wealth, is a very interesting population regulator.

          And we see in the US and Europe that people who don’t have property/skills/jobs/have been sidelined by globalisation and automation, can just lie back and reproduce as welfare will pick up the tab: in effect, they live like the lucky heirs of the old propertied class – all is paid for. It’s the crushed ‘middle class’ who are now limiting their reproduction because they actually have to pay some bills…….

        • I know other areas used infanticide or deliberate killing off of young adults to keep population down. It is only in recent years when fossil fuels seemed to provide the possibility of infinite increase in productivity per acre, that people stopped worrying about population limits. Also, increased sanitation and better medical care helped bring down deaths, so that more of the babies made it to maturity.

      • xabier says:

        Gail

        Anyone who has dogs will know that if you can take the dog’s food away while it’s eating without it biting you, you have achieved full dominance over the animal The interesting thing is that you can dominate a dog without necessarily making it into a cringing fearful slave. It can be happy in its low position in the hierarchy, and, indeed, love you. And be loved back. It all depends how the boss treats you, and what leverage you have over them…. I respond well to a soulful look and a lick! Some very rich people have been very good to their servants and loved them more than their own kith and kin: others have been bastards. The cruellest hierarchical environment I have ever seen was the modern office: in my book, hard labour breaking stones would be preferable.

        I think we are fast approaching the time when our welfare systems just can’t cope anymore: but at the moment it’s the support of the non-working elderly, rather than the younger unemployed who are comparatively cheap to keep alive, which is the greatest financial burden: healthcare, housing, food, clothing, spending money, etc. The cost is disproportionate and damaging.

        Historically this is completely unprecedented: no society has ever had such a task. The past was brutal: when the Romans conquered a town or tribe, they cut the throats of the elderly, the crippled and the sick unless they had special skills: they killed those young men and women they did not need as soldiers, labourers, or breeders. All very rational: every ancient race did that. Partly as a consequence of our vast wealth, partly in reaction to the horrors of WW2, we spare no effort to keep absolutely everyone alive, but it’s simply too expensive in the long run.

        I do not think this unbalanced situation will last for very long. The ethical predicament will solve itself I suspect: Doctor Poverty and Doctor Disease will do their work and impose their terms on us all.

        • timl2k11 says:

          “The cruelest hierarchical environment I have ever seen was the modern office: in my book, hard labour breaking stones would be preferable.” I can vouch for that.

          • xabier says:

            timl2k11

            I hope you escaped/escape like me!

            The modern office was an eye-opener when I left academia: treachery and plotting; total surveillance; cruel despots; manipulated figureheads; sycophants and slaves; persecution; mental torture; rigged trials; abitrary rules, bonuses and punishments; profound irrationality and distorted statistics………. So why do people fear ‘going back’ to the Middle Ages?

          • timl2k11 says:

            So true!
            I did escape xabier, unfortunately I thought that there must be something wrong with me to not be able to “fit in” and to find the workplace quite barbaric rather than “perfectly normal” as others seemed to think, and for having had to quit for my own sanity. If I knew back then what I know now it would have saved me a lot of mental strife.

          • Ert says:

            @xabier

            Yes, so true. Reduced my work hours but could not describe my changed feeling until now – you nailed it down here in plain English words.

            Thanks.

        • In the past, there were fewer taboos about not attempting to “save” very tiny babies, or children with obvious defects. As I look around among my close relatives, I can see way too many with serious disabilities. I am sure most other families have similar situations. Quite a few of the ones with problems are either not in the workforce, or have low level jobs and are in and out of the workforce.

      • Stilgar Wilcox says:

        Glad you liked the link. Your reply included: “If there is not enough to go around, there is increased hierarchical behavior, and the ones at the bottom of the hierarchy are starved out.”

        It’s always interesting to observe nature to see inherent parallels like that example. In this case, it seems more and more like that will be the scenario as only some percentage of the population will make it through the coming bottleneck. Would make a very interesting post study to know which types of people make it through, i.e. who are the higher hierarchy besides the obvious holders of tangible wealth. I’m sure there will be some surprises.

        • The thought has occurred to me that one strategy toward survival, rather than attempting to grow food oneself, is to try to be at the top of the pyramid, or at least critical to the pyramid. Dmitry Orlov probably has better ideas than I do as to what this would take.

          It seems like he has suggested that the new leaders might be today’s drug lords. I would need to go back and look. I am sure he has mentioned that people providing “protection” become critical to the operation of the new communities. In the Bible, it seems like David in the Old Testament was in the “protection” business.

          I would have to think about the hierarchy some more.

    • Ert says:

      @S. Wilcox

      Also thanks for the link.

      India is toast. 200 Billion USD trade deficit in 2012 (2nd highest after the US). 20 Billion USD domestic oil price subvention, approx 115 Billion USD spend in 2012 on Oil imports (i.e. over a 1/3 of all export revenue). Subsidized food for 800 Million people.

      How will or can India continue this? The currency coffers of the central bank are emptying – less that 18 months left at the current rate. Capital export restrictions already hardened.

      How can or will this continue? They might muzzle through the next 2-3 years – but then this may become critical. If oil prices go up another 50% then India requires 30 Billion of internal subsidy and approx 170 Billion USD to import the oil at current consumption rate. This is not sustainable.

      • India’s own oil supply is flat; its natural gas supply is down from its maximum level. The country would very much like to take care of everyone, even though this is not possible.

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  21. xabier says:

    Peasants’ Revolt!

    Some news from Latin America: peasants (ie small farmers) in Bolivia are in major revolt against the government, leading to large-scale police and military deployments to keep roads open.

    Their grievance is that have been ‘abandoned': more particularly, they are suffering from 1/ very high petrol prices, 2/ high fertilizer costs, which make making a living ever more difficult.

    The are seeking protectionist measures to keep out foreign food imports, and enable them to put up their prices (and hence cover the high fuel and fertilizer costs).

    I imagine those food imports are helping to keep the cities quiet: an interesting dilemma for the government of Bolivia.

    This illustrates well that if your farming is oil and chemical-dependant, the rural food-producing areas of a country may not be the best place to be ata time of rsing costs, at least while globalized food distribution is still operating. (Similarly in Spain, small farming is now a dead-end).

    Now, if globalization collapses and food imports stop, or become irregular, where will the fuel and fertilizer come from to maintain the farming base? How will food get to the cities? Or will it be seized by government to feed those cities, leaving rural areas to half-starve?

    • tmsr says:

      No it will not be seized by the government to feed the cities. It will be seized by the government to feed the government. The army and the politicians and their richest patrons.

    • xabier says:

      Correction: Columbia! A friend is in Bolivia and I got mixed up while typing.

    • Chris Johnson says:

      Xabier:
      Timing is everything! And being able to plan the timing successfully is totally dependent on one’s knowledge of the market and the product’s peculiarities. (I think you know all this, amigo, but I just wanted to get it down as a baseline). Now I think that people such as Don Stewart may have said that that’s what farmers do: put all the pieces together so they can produce and sell their product to hungry consumers. They just have to get the timing right…
      Cheers, Chris.

      • xabier says:

        Chris

        And the weather! Agriculture as a source of income is quite a headache. By the way, have you seen that low-wage workers in Germany are very dissatisfied? The well-intentioned removal of obstacles to hiring has led to people getting trapped in poorly-paid dead-end jobs, but the bigger corporations are happy.

        The fundamental problem in Europe is, of course, the amount of money which the State takes (and so often wastes and abuses with profligate spending) for social security and income tax which is a real headache for smaller businesses, which makes them shy of hiring and so on. All is not rosy in the German garden………

        • I can’t imagine how Europe can provide all of the benefits it claims to.

        • Chris Johnson says:

          Concur with your comments about the weather, which is at least partially related to timing. But no, I did not see the article about low-wage workers in Germany. Were they ethnic German, East European or Turkish? I truly dislike sounding as if I’m a biased or bigoted, but there are some facts that cannot be ignored. One is that the Germans now recognize that their ‘Turkish worker’ policy never led to happy social interaction. And now I guess the Europeans are beginning to scratch their heads about all the Muslims who are eligible to go wherever they wish, so they select the best welfare states…
          The question is whether the Europeans will find their backbones before they’re broken.
          If the people want their grandchildren to be speaking Arabic and worshiping in mosques, then continue current policies.
          And thanks, sir, I will keep a closer eye on Germany. It appears that most / all Europeans are looking at Angela as the redeemer.
          Are any of them really thinking about dis-union? It might be best for at least some.
          Cheers, Chris

    • Thanks for taking note of this. I hadn’t noticed this story. I expect it is one that will be repeated over and over.

      Do you have any related links?

  22. xabier says:

    Chief Engineer

    It is obvious, I imagine, to even a cretin that which party is ‘in power’ has an effect on policy and hence on the life of citizens, and the way in which this will all play out.

    But it seems to me that both Democrats and Republicans in the US are bought and paid for parties, serving vested interests. Often the very same ones: bankers rule the United States, and Obama serves them quite as much as the Bushes did.

    Of course you can cherry pick a comment of Gail’s or mine or anyone’s and say: ‘Look! A Republican belief!’ Or whatever party you choose. It’s a futile exercise.

    I repeat, Gail’s presentation is not overtly political and I wouldn’t even bother with this blog if it were.

    I’m interested in facts not propaganda, there is more than enough of the latter about.

    But you are, I feel, really missing Gail’s point that we are discussing the fundamentals of the system, and the crisis in that system which is so profound that politics is just a surface event. Pretensions of politicians to change things radically are somewhat fraudulent in this context: they are the captives of their backers ( essentially the same for both Republicans and Democrats) and of past actions and present circumstances.

    This is the long view. It beats, and is more interesting than, party politics, and the naive belief that if only a party ‘of the working man’ were to get into power, all problems would vanish. The Russian Revolution answered that one for us.

    • one of the great lessons of history has always been that whoever grabs power grabs it for himself and his tribe and/or those showing adherence to his ’cause’.
      Those who do not are either killed off or held in subjection

      • xabier says:

        End of More

        Glancing at a new book on the Spanish Civil War I found an incident that would appeal to you, confirming the worst about mankind: Anarchists from town tried to collectivize a village of small-holders (ostensibly on their side). The small-holders organized, and it turned into a battle, which the more heavily-armed Anarchists won, slaughtering 30 small-holders. Not much of a Bright New Dawn, was it?! The Anarchists also ‘collectivized’ thousands of cured hams, which they needed to sell abroad to get foreign exchange (and one assumes eat as well). Not sure if they also killed the ham makers…………

    • Bicycle Dave says:

      Xabier

      we are discussing the fundamentals of the system, and the crisis in that system which is so profound that politics is just a surface event.

      Excellent theory. Given your understanding of history, human nature, and the future course of events for humanity, you could publish a best seller based upon the hypothesis that politics become irrelevant when the depletion of physical resources is threatening a collapse scenario.

      One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors. ~Plato

      • xabier says:

        Bicycle Dave

        And when political participation is, essentially a fraud: whatever party you vote for, the actual policies have been decided anyway by the powers behind the throne? And when hard circumstances – resource constraints and over-population – will decide most policies?
        Some fraud will always come along and tell the masses that they can fix things: like Obama’s ‘better place’…….

        My basic position is not that politics is totally pointless, as you imply – I believe in the struggle for human rights and the rule of law above all else, I am however certainly sceptical about most plans to reorganize the whole of society – and I have no issue with your politics and in fact probably share many of your beliefs, – but that it is not a useful intrusion here, on this blog, and that it is wrong for certain people to beat up on Gail for being ‘political’, and implying she is Right-wing. She is very clearly not so.

        Like most Europeans, I know about real politics, the kind that can get you killed: my grandfather and step-grandfather were almost assassinated by the Fascists in the Spanish Civil War, (sometimes they cut people to pieces bit by bit you know) despite being aristocrats they supported the Republic; my step-grandfather, a shipping owner and government minister in the Basque Republic, losing his business in saving refugees, dying in exile, and my father broke stones and was tortured in military jails for resistance to Fascism.

        Death threats, political trials and ‘disappearances’ have never stopped in Spain, unlike the childish game with cheerleaders that is politics in more peaceful countries. A resurgence of dictatorship is in my opinion not unlikely in Spain and maybe other countries: look at the economies of Greece, Italy, Spain, Portugal ….and it’s spreading. It is this knowledge that informs much of my scepticism, sense of the futility of much political struggle, and awareness of hard reality – which is why I read and try to contribute to Our Finite World.

        The answer to Plato is: ‘Even if you participate in politics, you will most probably be overwhelmed by events, by human nature, and maybe in our case, by Nature itself.’

        • Chris Johnson says:

          Gracias mucho, Xabier. You already knew you have plenty of friends here, now more. I would suggest that your last sentence can apply to things other than politics, of course. Mi madre llame Sanchez, el familia de mi madre es hace 400 anos de Malaga, And I apologize for horrid Spanish.
          Cheers, Chris

  23. Stan says:

    And what if we COULD get everyone to recognize the scope of the problem? ? ?

    So, let’s assume that tomorrow Gail wakes up with a truly genius set of ideas…worthy of Edison, Einstein, Tesla and a handful of economists thrown in. These ideas would do the following:
    1) convince every knowledgeable scientist, economist, researcher and engineer of the validity of all of Gail’s points; and –
    2) Gail & everyone following this blog come up with the perfect set of solutions that would lead the world out of this crisis and into permanent energy supply and distribution.

    Solutions that would cause severe disruption and re-structuring of the energy industry.

    Now my question. Is there any country with a government/political system that could have the slightest chance of implementing these changes? My intuition says that greed-driven capitalism would never forsake short-term profits for long-term stability. What percentage of energy companies have a 100 year business plan? Certainly not commodity traders. Which governments are willing to do the right thing (assuming there is one)and not the lobbying that would surely oppose any efforts such as these?

    Stan.

    • Ert says:

      @stan

      The county to implement this had to be complete dependent on imported energy and no large domestic energy companies profiting from the status quo.

    • might be an idea to separate economists from everybody else when deciding on intelligence levels

      • Scott says:

        Hello End of More, I was wondering what you think of this type of media that is out there these days filling up peoples email in-boxes? MSM at work, they are painting a rosy future for some. We can see fracking was just a blimp on the chart, but not to the extent they are portraying it to be.
        http://www.angelnexus.com/o/web/49666

        Regards,
        Scott

        • thanks for that link Scott, it made great reading.
          Anybody using the word ‘gusher’ linked to shale plays has to be suspect, but I guess most people won’t notice that.
          And if 10 people put drinking straws in a glass, the drink disappears 10 times faster, it doesn’t provide 10 times more to drink. Again, that’s something most people won’t notice
          It’s a really scary concept, that everyone is determined to burn anything and everything right now, in pursuit of short term wealth

    • I agree with you. I think that there is a problem in implementing big changes, even apart form political issues.

      It takes an incredibly long time to implement any kind of change involving factories, vehicles, electrical generation and other long-lived equipment. Basically, if one does not want to bankrupt the system, even in good times one has to wait until these reach the end of their usable lifetime to replace them. Ideally, the replacement should be better than what one had before. We at this point, don’t have anything that approaches “better” from a functionality point of view.

      There is another issue that Tom Murphy has written about, in Galactic Scale Energy. That is that if we keep adding heat (no matter what source, even renewable), we eventually cook the planet. He uses solar panels in his example. According to that post:

      No matter what the technology, a sustained 2.3% energy growth rate would require us to produce as much energy as the entire sun within 1400 years. A word of warning: that power plant is going to run a little warm.

  24. Wim Weber says:

    Dear Ms. Tverberg,
    Thank you very much for your insightful website. It is obvious that our western society is based on cheap energy, and that it is coming to an end.

    Would you have an opnion on how nuclear energy fits in this process ? You wrote that building new nuclear plants is less of option, but what about countries that already have large fractions of their energy supplied by nuclear reactors ? Would they be less prone to the ongoing economic deterioration ?

    • Nuclear reactors produce electricity, which is fine up to a point.
      Unfortunately humanity consumes oil to produce ‘stuff’ on which our entire lifestyle now depends.
      we have pulled off the neat trick of converting oil directly into food. we cannot eat electricity.
      This should be borne in mind when you read of a power plant providing ‘enough energy’ for a million homes, as though one form of energy can replace another. A home may use, say, 2 kw of electrical energy, but consume 10 times that in food and infrastructure support services that are away from the home, but still essential for our existence.

      • Chris Johnson says:

        End of More, thanks. That is a very concise explanation the 2kw vs 10 times as much for a home. Curiously, it might be that homes in urban environments are more efficient than those in suburban / rural settings. But the one might be able to survive while the other won’t.

        • Scott says:

          Hello, Yes Chris there seems to be many ways we can make lots of electricity, but when it comes to Big Rigs and Tractors in the fields and even cars, it is hard to put an extension cord on them because that is what we need.

          So far the batteries are not really that great and I have heard about capacitors but they sound expensive and short in supply. Hydrogen is expensive and difficult, but I still think Hydrogen fuel cells have a place in the future.

          But the real problem is in the short term we do not have anything better to turn to other than gas and diesel. That could very well indeed be our so called bottleneck.

          So I think we have the ability to make lots of electric power, but we do not have the ability to make it portable in the way we need to right now.

          Scott

    • The question about nuclear is a good one. When we needed to reduce oil dependence in the 1970s, nuclear electricity was one of the ways that “worked” to a much greater extent solar panels and wind have today. Nuclear electricity made up 18% of the world’s electricity as recently as 1995. Today, it makes up about 11% of world electricity. This is about about 5 times the amount of electricity currently generated from wind, and about 27 times electricity generated from solar.

      One of the big issues with nuclear is its dependence on oil for continued operation, and for later decommissioning. And there is the issue of storage of the spent fuel–something we haven’t figured out.

      I think that increasingly the cost of building new nuclear power plants will be a problem. These have escalated in recent years (in the developed world, at least), because of concern for prevention of nuclear accidents. Many existing nuclear power plants are near the ends of their expected lifetimes. They need to be replaced with something. The question is “What?”

      World electricity production by source

      • Scott says:

        Hello, As long as these bad stories about nuclear like what happened in Japan keep coming out, it will be harder to get the support to build the nuclear plants we need. So fossil fuel plants may be used to replace nuclear which is not good news. As much as we hate nuclear, we need it.

        http://worldnews.nbcnews.com/_news/2013/09/02/20288594-japan-vows-quick-action-on-fukushima-as-tainted-water-crisis-deepens?lite

      • Chris Johnson says:

        Gail,
        As clear, complete and concise as your last report was, do you think it’s fair to say that the reason even nuclear plants consume oil is due to transportation requirements. I think it might be enlightening to track the expansion of ‘daily miles traveled’ by all methods and then by type, across the decades of last Century. I think we’d all be surprised if transportation did not turn out to be the ‘biggest’ difference.

        • I am not sure it would be possible to track “daily miles traveled”. I was always surprised by all of the running around the Apostle Paul did in the New Testament. I am sure he was an exception. Most people stayed close to home.

          I think it was actually electricity that was in some sense the biggest difference in changing the world. It enabled early transportation, such as railroad and steam engine. Before electricity, many more needed to work on the farm. More recently, oil has mostly taken over transportation.

      • timl2k11 says:

        At least in one case – in Florida – the answer is… nothing. The Crystal River Nuclear power plant was shut down in 2009 after a gap was discovered in the containment dome. The gap was created when workers were drilling a hole in the containment dome to replace steam generators (which were never “supposed” to fail and hence no method for replacing them had been designed). After several unsuccessful repairs the plant was permanently shut down earlier this year. I do wonder if there is any connection to that and the price hikes many nearby utilities are proposing this year?
        http://green.blogs.nytimes.com/2009/11/23/a-nuclear-reactor-shows-its-age/?_r=0
        https://en.wikipedia.org/wiki/Crystal_River_3_Nuclear_Power_Plant

  25. Pingback: UNDERSTANDING LIMITS « The Burning Platform

  26. Edwin Pell says:

    Making nuclear power plant is only expensive if you build a large containment dome. If you are willing to go without the containment it is cheap. If you want to forgo the redundant pumps and controls then just build it submerged in a large lake. As we get poorer we will be willing to take greater risks.

    Certainly if the new reactors without containment are built say 1000 miles away in northern Canada or Southern Mexico most Americans will be willing to take the risk.

    Ed Pell

    • Scott says:

      Interesting Ed, about nuclear power being build without the containment domes, a good point, a great point. I also think we will see a lot of coal getting burned too. As much as we do not desire to use these fuels they seem to be our last resorts aside from some new smaller providers like solar and Geo thermal, but they are far from even providing ten percent of our needs.

      And I think it will buy us some time if we take these drastic measures like you said to build these open plants, I still think we have several generations if huge war does not hit us. But during this time the finite world will become more and more pronounced. Some things will get tougher to get and more expensive and some not available at all. But eventually, we are going to run into a problem for sure with the ever increasing populaces. The oceans are already really depleted of fish and those fish feed much of the world.

      If we cannot make some other fuel from the nuclear power generated electricity like hydrogen which has pretty much been ruled out by this group, then the power cannot be used properly in transport and farm where we need it, So it looks like that is our bottle neck, we can make plenty of electric power, but to make it run our huge transportation system is an entirely different story. If we have enough Natural gas that may keep things going for a time, but after that we will really need to come up with something else and that is no where in sight. Can we even afford to convert our farm tractors and truck now to LNG? or Propane? That sounds very expensive.
      That is hard enough, what about later the next step when we need to electrify or go to something else tougher to change over than gas, tough changes ahead or face collapse. But I think for our lifetime perhaps NG and LNG and Propane can save us for a time and stave of our long emergency that will arrive it seems anyway some day.

      Kind Regards to all,

      Scott

      • The system has to be kept together very well, in order to do the things you are talking about. It is necessary to have the financial system, and electrical system operating, as well as the transportation system, to make LNG or propane work.

        • Scott says:

          Hello Gail, New financial systems have risen out of the ashes many times in history. Any thoughts on that?

          Scott

          • I’m no expert on finance, but taking a broad sweep of history, and laying it over a broad sweep of finance, it seems to me that any ‘new financial system’ has only arisen by stripping out somebody else’s energy resources.
            So you have the slave trade triangle, essentially weapons and iron goods traded from Europe, for the slave muscle of Africa, for the sugar/tobacco of the Americas.
            Or the American push West, draining the resources of the land as they went, Or the British Empire doing the same thing. All converting energy into a new financial system and wealth
            There are lots of other examples, but you get my drift

          • We have been in a long term growth (or at least non-collapse) situation. The financial system needs to match the availability of resources at hand. It is the lack of resources that is as much the problem as anything, in coming up with a new system. The debt part of our current (and long-term) system will not work nearly as well. Neither will the idea that a company can invest in a commercial venture, and have the venture work for 30 or 50 years. Governments will be much poorer, so will not be able to maintain infrastructure we have grown to expect. It is the whole ordering of society that has to change. We normally build “up” to progressively more complex level of organization. I have no idea what happens, when a very complex level of organization no longer works. How do we build a new, lower level of complexity, without the long-term build-up of supporting structures? We will need new, much cheaper, less complex government as well.

            • Scott says:

              Hello Gail and All, I do imagine if we have some sort of major collapse we will awaken to shorter supply line, less choices and fewer goods from afar. And, in addition many with assets will loose much value depending on what kind of asset. Stocks and bonds could be hit very hard as well as some real estate holdings.

              I am kind of surprised lately about the war drums beating in Washington. It seems they are convinced they need to take us to war to keep everything running. That may be true as we have built this “huge military industrial complex” (against my will) but it needs to be fed, it needs a war.
              Although most Americans may oppose war, congress is bought and paid for by corporations these days and is the sad truth that I think most of us know by now.

              I still think good farms with natural running water systems would by my first choice if I had a million dollars to invest in something like that.

              Kind regards,
              Scott

            • Wars provide a lot of jobs for Americans–both directly and indirectly. I expect that enters into these decisions. Maybe it protects our position as “reserve currency” as well. And of course, there are pipeline issues through Syria too.

              At some point, it seems like we would stop moving from war to war to war, but it never stops. Sort of like a kid with a credit card. Another war–I’ll just charge it on my credit card.

    • by that reckoning, I guess Mexicans and Canadians would be happy to have their reactors 1000 miles away in the USA?
      I am assuming though that your comment had your tongue firmly in your cheek

    • You may be right. BUt the operators will still need uranium to run the plants, and that will take fossil fuels for extraction. I am doubtful we will be able to keep the system together well enough to do all of this.

    • You may be right. BUt the operators will still need uranium to run the plants, and that will take fossil fuels for extraction. I am doubtful we will be able to keep the system together well enough to do all of this.

  27. tmsr says:

    Thinking about it nuclear power is dirt cheap if all you want is heat. High heat is needed for efficient electricity generation. But residential heat and moderate heat for many industrial processes require very little structure for a nuclear reactor. A swimming pool some fuel rod and some moderator rod and hand cranked wire and pulley to raise and lower the moderators. It could be built by a work force with little knowledge and simple tools.

    • YOu are getting it down to the point where it might be done, except for the fuel requirement.

    • Chris Johnson says:

      tmsr:
      Improved insulation and geothermal heating systems would reduce US energy costs by about 15-20%. Ditto Europe, rich world Asia, etc. You don’t have to play games with uranium and all its admirers who might have other intentions. The savings are not peanuts, but it’s just part of the solution because all the developing nations in the poor world have people getting rich every day and buying cars like there’s no tomorrow.
      Ultimately the very slow growth of Electric Vehicles will begin to have an impact in 5 to 10 years; but it’s going to be painfully slow.

  28. timl2k11 says:

    Hi Gail. I’ve been watching a few TED talks, and I think it would be good if you could give a presentation. They do focus on “ideas worth spreading” even if the ideas are not very comforting.
    For example, Daniel Dennett talks about how Western ideas threaten Middle East ideals in a clash of memes (much like viruses wiped out Native Americans).
    http://www.ted.com/talks/dan_dennett_on_dangerous_memes.html
    I think TED is quite receptive to ideas that make people (re-)think, and your ideas certainly do. It would be a good way to spread your ideas far and wide, should that intererest you.

  29. Danilo Bertocchi says:

    I am right now in a fast train powered by hydropower electricity, producing 10x CO2 emissions than my own 2.0 liter Diesel engine vehicle. Every 30′, there is a train going in every direction. train drivers are driving 300 miles every days. My trip is 600 km, and costs CHF 89, means $ 94.-. We have softly introduced Carbon taxes in different areas of the local economy. So I do not understand why USA are not introducing a carbon tax and building infrastructure in the country?

    • Dan Delara says:

      American oil company politics, that’s way. Their profits are more important. They have bought the American political system and to many Americans believe it doesn’t matter.

      • Chris Johnson says:

        Right you are, Dan. There is one possible additional factor: many Americans believe that government is just there to rip off the average guy and turn the money over to the politicians, bureaucrats, bankers and other evil creatures barely deserving of existence whose principal motivation is to tax the middle and working class for their benefit. Europeans are much more used to be so treated and just treat it as a cynical part of life.

        • xabier says:

          Chris

          That’s very true: there was some residual respect for the civil service and politicians in Britain until recently, but Tony Blair and his gang did away with that. Corruption hardly causes even the merest hint of a suggestion of a raised eyebrow in Spain, Italy, etc. I think Scandinavia may be different?

    • A carbon tax sends all kinds of production to countries without the carbon taxes. There, they use coal to do what we would do with natural gas and nuclear. Not a good deal on a world basis. We also lose jobs.

      • Scott says:

        Hello Gail, I am going to post this for our friends in the UK and elsewhere, this is a top story in the USA in MSNBC, I am not sure what your top stories show there (Xabier)?
        http://worldnews.nbcnews.com/_news/2013/09/02/20294414-the-fire-is-approaching-assad-says-west-has-no-proof-regime-carried-out-chem-attack?lite

        • xabier says:

          Scott

          I’m attracted by the theory that Obama, or whoever is behind him, doesn’t intend to make Assad fall by attacking him, merely ensure a stalemate between the two sides, weakening both.

          At present, Assad has the edge. This is favourable to Iran, which is something the USA will certainly not look kindly upon.

          Assad is of course correct in saying that the only way to deal with Islamic militants is to kill every last one (there seem to be lots of jihadis from everywhere fighting with the ‘rebels’) : but that would displease those good friends of the USA, the Saudis…..and so it goes round.

          At least in this instance it’s clear that we are looking at a round in the geopolitical game, and morality (use of chemical weapons and punishing it) is a just a pretext.

          • Chris Johnson says:

            Xabier:
            Here are some questions:.
            If the West stands to lose no matter which side wins in Syria, why should the West spend blood and treasure (see Shia – Sunni, Iraq 2012-13).
            If the Shia bloc seeks to maintain equilibrium with its opponent ad infinitum, would a disequilibrium favor the West? I think probably not.
            If external powers of whatever persuasion see the conflicts as commensurate with their objectives, why should they become involved?
            The Chinese sage Laozi called this ‘wu wei’, the art of doing nothing to best achieve your objectives.
            Cheers, Chris

    • Scott says:

      Danilo, just curios where are you from? Our country is full of freeways and to electrify them with wire and rails would be so expensive. I like the idea of these trains, but the USA has gone a different direction unless you are in SF or NY or some other major city with transit. Most of our system is freeways which is a big part of the problem we write about here. Too many freeways, trucks and cars and not enough trains and mass transit and sadly now so little money to build these needed things.

      Scott

      • Our cities are also much more spread out that European cities, making it very difficult to make trains “work,” even if they are built. People need to travel in more or less random directions, rather than downtown. Homes are often on big lots, a long distance from where a train station might be. There often are no sidewalks for people taking the train to walk on, either.

        • xabier says:

          Very different to London, where for the last 100 years the commuters are hauled in to the centre on trains, like cattle to the slaughter each day: some journeys are only 15 minutes by train, with the stations some 5 to 20 minutes away on foot from home. Not a few people endure train commutes of 3 hours, if they want their families to live in country towns: they are mostly the better-paid. European cities are constructed for pedestrianism and train and subway travel.

      • Our cities are also much more spread out that European cities, making it very difficult to make trains “work,” even if they are built. People need to travel in more or less random directions, rather than downtown. Homes are often on big lots, a long distance from where a train station might be. There often are no sidewalks for people taking the train to walk on, either.

        • Scott says:

          Hello Gail, Yes cities in America are so spread out, no chance for a system like Europe has – unless you are in very major city in the USA. Perhaps electric cars are our only hope – If we can afford them – which I am sure you and I may wonder if that is possible?

          To replace the cars of the western world with electric has a huge price tag. Could be done if we could find the money.

          Large trucks need to go with natural gas and trains need to be ramped up, train track lines need to be used to their fullest extent possible. No sign of this yet, but time will tell.

          Scott

          • It takes both time and energy for all of these things.

            In the US, we use trains for freight, and cars for people. In Europe, they use boats and trucks for freight, and trains for people. Neither one has the extra tracks needed to use the railroads for the opposite purpose (except perhaps in a few corridors, where trains are already in use). So any kind of change is more difficult than it looks.

            If we were to make trains for this purpose, what we would want is some very simple, durable, easy to repair trains, that could be made in the US, and that would have parts readily available to repair them, also made in the US. They would lack amenities such as air conditioning, dining cars, Internet access, and fancy doors. I don’t think anyone would even consider such an idea. The only thing under consideration would be bullet trains, imported from China.

            • Scott says:

              Hi Gail, I wonder if we can order soon a bullet train from China – just like my dad bought (not) ordered my Lionel Train toy train set when I was a kid. Just kidding but it is really getting to that point.

              We have to wonder what a bottleneck in energy would look like.

              Scott

  30. Chris Johnson says:

    Here is the ‘Development Goal’ of poor countries: a car in every driveway. China is now the world’s biggest car market. And they’re loving’ it… Enjoy the picture.
    http://www.businessinsider.com/china-could-soon-find-itself-in-traffic-jam-hell-2013-9

    • Scott says:

      I see what you mean Chris, Looks like LA traffic in China for sure. GM is building selling tons of cars there too, like someone said on this blog – we are selling out today for tomorrow. The cars do not run on coal or natural gas, they are building tons of gas cars and diesel trucks etc. Not a good model for what we are seeing coming down the road.

      Scott

      • Chris Johnson says:

        Right on all counts, Scott. And I think it was you who quoted an article a few weeks ago that China is now the biggest importer of petroleum products. And guess what, the story gets even more fun than that, because the military guys in China have stepped forward and are getting their programs plumped up.
        So the question the Chinese are grappling with are how can they prevent a blockade by the US, or Japan or India from preventing the flow of oil? Their answer: they’re going to ship it to a new port, Gwadar, in Pakistan, right outside the Straits of Hormuz, then pipe it over the Hindu Kush into Tibet and Xinjiang. Cool: oil pipes going from sea level to 18,000 feet. Then they’ve got another port being built (almost completed) in Burma, and they’re going to pipe it to Kunming — only about 5,000 feet elevation on this one. Do they have any idea how expensive it is to pipe petroleum uphill? I think they don’t care. Do they have any idea, in the event of a shooting war, how easy it would be to put some holes in those pipes? You see, they know all this, but somebody’s buddies are getting the contracts to build all that stuff, so nobody wants to blow a whistle on it being unrealistic and criminally stupid militarily.

        We in the West can laugh all we want, but we’re just as bad in our own ways. For instance, do you know how much it costs to airlift a gallon of diesel from Charleston, SC to Kabul, Afghanistan, via Europe then Russia? Only about $38.

        Cheers, Chris

        • And with respect to those pipelines, do you know how dependent they are on electricity operating 24/7? If they were sort of flat, maybe it wouldn’t be a big issue, but something has to keep pumping the oil uphill. We know how often there are electrical outages in Pakistan.

          I bring up this issue, because I know we in Atlanta have had trouble getting oil by pipeline when hurricanes have hit, and knocked the power out. We eventually got oil products when they got an oil-powered generator hooked up.

          • Stan says:

            The Wikipedia article about the Fukushimi Reactor fiasco(http://en.wikipedia.org/wiki/Fukushima_Daiichi_nuclear_disaster#1967:_Changing_the_layout_of_the_emergency-cooling_system) says this: “Immediately after the earthquake, the remaining reactors 1–3 shut down automatically and emergency generators came online to power electronics and coolant systems. However, the tsunami following the earthquake quickly flooded the low-lying rooms in which the emergency generators were housed. The flooded generators failed, cutting power to the critical pumps that must continuously circulate coolant water through a Generation II reactor for several days to keep it from melting down after shut down. After the pumps stopped, the reactors overheated.” Amazingly, the possibilty of this happening was raised in 1991, but the owners never adequately addressed the issue.

            So, how bullet proof IS nuclear power when other factors (like oil shortages) start stressing our system?

            Stan.

            • Scott says:

              Hello Stan, it looks like nothing we build on this Earth is fool proof and completely safe especially when power generation is involved. Everything involves some risks.

              Scott

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