Why EIA, IEA, and Randers’ 2052 Energy Forecasts are Wrong

What is the correct way to model the future course of energy and the economy? There are clearly huge amounts of oil, coal, and natural gas in the ground.  With different approaches, researchers can obtain vastly different indications. I will show that the real issue is most researchers are modeling the wrong limit.

Most researchers assume that the limit that they should be concerned with is the amount of oil, coal, and natural gas in the ground. This is the wrong limit. While in theory we will eventually hit this limit, because of the way fossil fuels are integrated into the rest of the economy, we hit financial limits much earlier. These financial limits include lack of investment capital, inability of governments to collect enough taxes to fund their programs, and widespread debt defaults.

One of the things I show in this post is that Economic Growth is a positive feedback loop that is enabled by cheap energy sources. (Economists have postulated that Economic Growth is permanent, and has no connection to energy sources.) Economic Growth turns to economic contraction as the cost of energy extraction (broadly defined) rises. It is the change in this feedback loop that leads to the financial problems mentioned above.  These effects tend to lead to collapse over a period of years (perhaps 10 or 20, we really don’t know), rather than a slow decline which is easily mitigated.

If, indeed, most analysts are concerned about the wrong limit, this has huge implications for energy policy:

1. Climate change models include way too much CO2 from fossil fuels. Lack of investment capital will bring down production of all fossil fuels in only a few years. The amounts of fossil fuels included in climate change models are based on “Demand Model” and “Hubbert Peak Model” estimates of fossil fuel consumption (described in this post), both of which tend to be far too high. This is not to say that the climate isn’t changing, and won’t continue to change. It is just that excessive fossil fuel consumption needs to move much farther down our list of problems contributing to future climate change.

2. It becomes much less clear whether high-priced replacements for fossil fuels are worthwhile. In theory, they might allow a particular economy to have electricity for a while longer after collapse, if the whole system can be kept properly repaired. Offsetting this potential benefit are several drawbacks:  (a) they make the economy with the high-priced replacements less competitive in the world marketplace, (b) they tend to run up debt, increase government spending, and decrease discretionary income of citizens, all limits we are reaching, and (c) they tend to push the economic cycle more quickly toward contraction for the country purchasing the high-priced renewables.

3. A large share of academic writing is premised on a wrong understanding of the real limits we are reaching. Since writers base their analyses on the wrong analyses of previous writers, this leads to a nearly endless supply of misleading or wrong academic papers.

This post is related to a recent post I wrote, The Real Oil Extraction Limit, and How It Affects the Downslope.

Types of Forecasting Models

There are three basic ways of making forecasts regarding future energy supply and related economic growth:

1. “Demand Based” Approaches. In this method, the analyst first decides what future GDP will be, and uses that estimate, together with past relationships, to “work backwards” to figure out how much energy supply will be needed in the future. The expected needed future energy supply is then divided up among various types of fuels, giving more of the growth to types that are favored, and less to other types. Very often, estimates of growth in energy efficiency, growth in “renewables,” and growth in the amount of GDP that can be generated with a given amount of energy supply are included in the model as well.

This method is by far the most common approach for forecasting expected future energy supply, especially at high levels of aggregation. One advantage of this method is that can provide almost any answer the analyst wants. Governments are paying for reports such as the EIA and IEA forecasts, and oil companies are paying for forecasts such as those by BP, Shell, and Exxon-Mobil. Both governments and oil companies prefer reports that say that everything will be fine for the foreseeable future. Demand Based approaches are good for producing such reports.

Another advantage of this approach is that the analysts don’t have to think about pesky details like where all of the investment capital will come from, or how large an   improvement in the ratio of GDP to energy consumption can actually occur. They can simply make assumptions and point out that the forecast won’t come true if the assumptions don’t hold.

2. “Hubbert Peak Model”. This model is based on an interpretation of what M. King Hubbert wrote (for example, Nuclear Energy and the Fossil Fuels, 1956) . The basic premise of this model is that future supply of oil, coal, or gas will tend to drop slowly after 50% (or somewhat more) of the fuel supply potentially available with current technology has been extracted.

In fact, we don’t really know how much oil or coal or natural gas will be extracted in the future–we just know how much looks like it might be extracted, if everything goes well–if there is plenty of investment capital, if the credit system works as planned, and if the government is able to collect enough tax revenue to fund all of its promises, including maintaining roads and offering benefits to the unemployed.

What most people miss is the fact that the world economy is a Complex Adaptive System, and energy supply is part of this system. If there are diminishing returns with respect to energy supply–evidenced by the rising cost of extraction and distribution–then this will affect the economy in many ways simultaneously. The limit we are reaching is not that oil (or coal or natural gas) extraction will run out; it is that economic system will at some point seize up, and rapidly contract. The Hubbert Peak Method shows how much fuel might be extracted in each future year if the economy doesn’t seize up because of financial problems. The estimate produced by the Hubbert Peak Method removes some of the upward bias of the Demand Model approach, but it still tends to give forecasts that are higher than we can really expect. 

3. Modeling How the Economy Actually Works. This approach is much more labor-intensive than the other two approaches, but is the only one that can be expected to give an answer that is in the right ballpark of being correct with respect to future economic growth and energy consumption. Of course, observing signs of oncoming collapse can also give an indication that we are nearing collapse.

The only study to date modeling how long the economy can grow without seizing up is the one documented in the 1972 book The Limits to Growth, by D. Meadows et al. This analysis has proven to be surprisingly predictive. Several analyses, including this one by Charles Hall and John Day, have shown that the world economy is fairly close to “on track” with the base scenario shown in that book (Figure 1). If the world economy continues to follow this course shown, collapse would appear to be not more than 10 or 20 years away, as can be seen from Figure 1, below.

Figure 1. Base scenario from 1972 Limits to Growth, printed using today's graphics by Charles Hall and John Day in "Revisiting Limits to Growth After Peak Oil" http://www.esf.edu/efb/hall/2009-05Hall0327.pdf

Figure 1. Base scenario from 1972 Limits to Growth, printed using today’s graphics by Charles Hall and John Day in “Revisiting Limits to Growth After Peak Oil” http://www.esf.edu/efb/hall/2009-05Hall0327.pdf

One of the findings of the 1972  Limits to Growth analysis is that lack of investment capital is expected to be a significant part of what brings the system down. (There are other issues as well, including excessive pollution and ultimately lack of food.) According to the book (p. 125):

The industrial capital stock grows to a level that requires an enormous input of resources. In the very process of that growth it depletes a large fraction of the resource reserves available. As resource prices rise and mines are depleted, more and more capital must be used for obtaining resources, leaving less to be invested for future growth. Finally investment cannot keep up with depreciation, and the industrial base collapses, taking with it the service and agricultural systems, which have become dependent on industrial inputs (such as fertilizers, pesticides, hospital laboratories, computers, and especially energy for mechanization).

Jorgen Randers’ 2052: A Global Forecast for the Next Forty Years 

In 2012, the same organization that sponsored the original Limits to Growth study sponsored a new study, commemorating the 40th anniversary of the original report. A person might expect that the new study would follow similar or updated methodology to the 1972 report, but the approach is in fact quite different. (See my post, Why I Don’t Believe Randers’ Limits to Growth Forecast to 2052.)

The model in Jorgen Randers’ 2052: A Global Forecast for the Next Forty Years appears to be a Demand Based approach that perhaps uses a Hubbert Peak Model on the fossil fuel portion of the analysis. One telling detail is the fact that Randers mentions in the Acknowledgements Section only one person who worked on the model (apart from himself). There he thanks “My old friend Ulrich Goluke, for creating the quantitative foundation (statistical data, spreadsheets, and other models) for this forecast.” Ulrich Goluke’s biography suggests that he is able to prepare a Demand Model spreadsheet. It would be hard to believe that he that he could have substituted for the team of 17 researchers who put together the original Limits to Growth analysis.

The Need to Add to the Original Limits to Growth Analysis

The original Limits to Growth analysis was primarily concerned with quantities of items such as resources, pollution, population, and food. It did not get into financial aspects to any significant extent, except where flows of resources indicated a problem–namely in providing investment capital. One thing the model did not include at all was debt.

In the sections that follow, I show a model of how some parts of the economy that weren’t specifically modeled in the 1972 study work. If the economy works in the way described, it gives some insights as to why collapse may be ahead.

Economic Growth Arises from a Favorable Feedback Loop

Economic growth seems to arise from a favorable feedback loop. While it is beyond the scope of this post to show the detail of the feedback loops, I illustrate some causal relationships in Figure 2, below.

Figure 2. Author's representation of how economic growth occurs in today's economy.

Figure 2. Author’s representation of how economic growth occurs in today’s economy.

This model above is intended to reflect the situation from, say, 1800 to 2000. The situation was somewhat different before the use of fossil fuels, when far less economic growth took place. Furthermore,  as we will see later in this post, the model changes again to reflect the impact of diminishing returns as the cost of energy production increases in recent years and in the future.

The critical variables that allow economic growth to take place are (1) cheap energy available from the ground, such as coal, oil, or natural gas–if cheap renewables were available, these would work as well (2) technology that allows us to put this cheap energy to work to make goods and services, and (3) a way to pay for the new goods and services.

Debt. In this model, debt plays a significant role. This happens because fossil fuels allow a huge “step up” in the quality of goods and services, and debt provides a way to bridge this gap. For example, with fossil fuels, we have electric light bulbs, metal machines in factories, and farm machinery, all of which vastly improve efficiency. The ability to pay for the new fuel and the new devices using the fuel, is much greater after the new devices using the fuel are put in place.  The way around this problem is simple: debt.

The use of debt becomes important at many points in the economy. Increased debt can theoretically help (a) the companies doing the energy extraction, (b) the companies building factories to create the new goods and services, and (c) the end consumers, since all of these benefit greatly from the services that cheap fossil fuels provide, and can better pay afterward than before.

Government debt, such as debt used to finance World War II, can also be used to start and maintain the cycle. John Maynard Keynes noticed this phenomenon, and recommended using an increase in government debt to stimulate the economy, if it was not growing adequately. The detail he was unaware of is the fact that the debt only works in the context of cheap energy supplies being available to make use of this debt, enabling growth.

How the Causal Relationships Work.  The loop starts with the combination of a cheap-to-exploit energy resource, technology that would use this resource, and debt that allows those would like to gain access to the resources to have the benefit of them, before they are actually able to pay cash for them.

This combination allows goods to be produced which initially may not be very cheap. Over time, new methods are tried, allowing technology to improve. Consumers are able to buy increasing amounts of goods and services, both because of their own increased productivity (enabled by fossil fuels and new technology) tends to raise their wages, and because the improving technology lowers the cost of goods. Government services are expanded as tax revenue per capita increases higher than gold or diamonds export. Infrastructure such as roads are expanded making the economy more efficient.

In this context, profits of companies grow, allowing reinvestment. Investment is also enabled by increasing debt. This allows the cycle to start over again, with better technology and more infrastructure in place. Each time fuels are extracted, the cost of extraction tends to ramp up a notch, making the needed selling price higher. But as long as the cost of extraction remains low, the economy tends to grow, and the standard of living tends to rise.

Overview. One way of explaining the tendency toward economic growth is that a cheap-to-extract fossil rule has an extremely high return on investment. This very high return enables benefits to all: workers receive higher wages; businesses receive higher profits; and governments receive both higher tax revenue and the ability to build new roads and other infrastructure cheaply.

Another way of describing the tendency toward economic growth is to say that the value to society of the (cheap) energy product is far greater than its cost of extraction.  This difference provides a benefit which flows through to many parts of the economy. Economists do not recognize that this situation can happen, but it seems to be a major source of economic growth. 

The Spoiler: Diminishing Returns 

The problem with energy extraction is that we extract the inexpensive-to-extract energy sources first. Eventually these sources get depleted, and we need to move on to more expensive-to-extract energy sources. I illustrate this situation with a triangle that has a dotted line at the bottom.

Figure 3. Resource triangle, with dotted line indicating uncertain financial cut-off.

Figure 3. Resource triangle, with dotted line indicating uncertain financial cut-off.

Businesses start by extracting the cheapest to extract resources, found at the top of the triangle. As these resources deplete, they move on to the more expensive to extract resources, further down in the triangle. Looking downward, it always looks like there are more resources available–it is just that they are more expensive to extract. This is why reported reserves tend to increase over time, even as supplies are depleted. The limit is a financial limit, illustrated by a dotted line, which is why virtually no one can figure out when the limit will actually arrive.

One somewhat minor point: When I say, “Cheapest to extract resources,” I am referring to broadly defined costs. What businesses want is resources that produce goods and services most cheaply for the consumer. Thus, they are really concerned about cheapest total cost, considering the entire chain that goes all the way to the consumer, including refining and transportation. The costs would include energy used in extraction, labor costs, transportation costs, taxes, and the cost of debt. It probably should include the cost of mitigating pollution effects as well.

A major problem is that as the cost of energy extraction grows, the favorable gap between the cost of extraction and the benefit to society (as mentioned in the previous section) shrinks. There are many ways that this problem manifests itself in the economy. Figure 4 shows a list of such problem with respect to higher oil prices:

Figure 4. Image by author listing some of the problems created by rising oil prices.

Figure 4. Image by author listing some of the problems created by rising oil prices.

One indirect impact of these issues is that there are more layoffs and fewer new job opportunities. If we calculate average wages by taking (total US wages) and dividing by (total US population), we see that during periods of high oil prices, wages tend not to grow, as they had in periods when oil prices were lower–just as we would expect (Figure 5, below).

Figure 5. Average US wages compared to oil price, both in 2012$. US Wages are from Bureau of Labor Statistics Table 2.1, adjusted to 2012 using CPI-Urban inflation. Oil prices are Brent equivalent in 2012$, from BP’s 2013 Statistical Review of World Energy.

Figure 5. Average US wages compared to oil price, both in 2012$. US Wages are from Bureau of Labor Statistics Table 2.1, adjusted to 2012 using CPI-Urban inflation. Oil prices are Brent equivalent in 2012$, from BP’s 2013 Statistical Review of World Energy.

Another issue is that it is not just the price of oil that rises. The price of natural gas rises as well. We have not felt this in the United States, because demand has kept the price down below the price of shale gas extraction. The cost of coal, delivered to its destination, has risen because transport uses oil, and transport costs are a significant share of total costs. The cost of base metals has also risen since 2002, because oil is used in metal extraction. Food prices in general have tended to rise as well, because oil is used in production and transport of food. When wages are close to flat, and the cost of many goods are rising, workers find that their paychecks are increasingly squeezed.

While costs of making goods in the US are rising, and paychecks are stagnating, an increasing amount of goods are imported from areas around the world where energy costs  and wage costs are lower. This helps keep the cost of consumer goods down, but it makes the problem of lack of jobs for US workers worse.

With all of these things happening, the government has more and more problems with its funding. Expenditures continue to rise, but taxes flatten, as the government tries to help the economy grow by not raising taxes to match expenditures (Figure 5, below).

Figure 6. Based on Table 2.1 and Table 3.1 of Bureau of Economic Analysis data. Government spending includes Federal, State, and Local programs.

Figure 6. Based on Table 2.1 and Table 3.1 of Bureau of Economic Analysis data. Government spending includes Federal, State, and Local programs.

Government expenditures can be thought of as expenditures out of the surpluses of the economy. As indicated previously, these are to a significant extent possible because of the favorable difference between the cost of extracting fossil fuels and the benefit those fossil fuels provide to the economy. As the use of fossil fuels has grown over the years, these government services have grown. In recent years, the presence of more unemployed workers has driven a need for more government services.

Since the early 2000s, government revenues have flattened. The lack of revenue, together with the ever-rising government spending, is what is driving continued big deficits. The danger is that this difference cannot be fixed, without huge cuts to programs that people are depending on, like unemployment insurance, Social Security and Medicare.

How the Economic Growth Loop Changes to Contraction

In my view, what causes a shift to contraction is a shift to higher energy costs. With higher energy costs, there is less surplus between the cost of extraction (broadly defined) and the benefit to society. Because of the smaller surplus, the parts of the economy that use this surplus, such as government spending, must shrink. Causal relationships gradually shift from the ones shown in Figure 2 above, to the ones shown in Figure 7 below.

Figure 7. Higher energy cost leads to unfavorable feedback loop. (Illustration by author.)

Figure 7. Higher energy cost leads to unfavorable feedback loop. (Illustration by author.)

We gradually find that all the great things we had learned to enjoy–inexpensive roads and other infrastructure, cheap goods, rising wages, and rising government serves–start going away. We increasingly find consumers maxed out on debt. We also find companies (especially energy companies) reporting lower profits, so they have more trouble investing in new energy extraction. The government cannot collect enough taxes for all of its services, so finds itself needing to keep raising its own debt levels.

The government can kind of “paper over” its difficulties with growing debt levels for a while, by using Quantitative Easing (QE). QE has the effect of making the interest the US must pay on its own debt lower. It makes the cost of business investment in new plants and equipment (including shale oil drilling) cheaper. It also helps stretch the incomes of increasingly impoverished workers by allowing monthly payments on homes and cars to be lower than they would otherwise would be.

The Party Ends With a Thud 

Most readers can deduce that a shift from a growing economy to a shrinking economy is not a pleasant situation. It has all of the makings of collapse.

One of the big problems is debt defaults, as it becomes increasingly impossible to repay debt with interest. This creates conflict between borrowers and lenders. Debt defaults are also likely to cause huge problems for banks, insurance companies, and pension plans, because of the impact on their balance sheets. Some institutions may close.

To the extent new credit is cut off, the lack of credit cuts off new investment in energy extraction, in buying new cars and trucks, and in almost everything else. Such a cut-off in credit is likely to increase job layoffs and to lead to yet more defaults. Lack of investment in new energy extraction causes oil supply to fall quickly–far more quickly than standard “decline” models  would suggest.

Businesses that in the past found that they could benefit from “economies of scale” as they grew find that fixed costs stay the same, even as sales shrink. This means that they either need to raise prices to cover their higher per-unit costs, or lose money.

Governments find that they need to cut government services to balance their budgets.  Discontent grows among citizens as those who lose their benefits become very unhappy. Discord grows among political parties, because no one can agree how to cut programs equitably.

We don’t know how this will end, but we do know that the Former Soviet Union collapsed into its constituent parts when fossil fuel surpluses were reduced, prior to 1991. Egypt and Syria both have had civil unrest as their oil exports ended. Clearly very large government changes are possible, as surpluses disappear.

This list of potential impacts could be expanded endlessly, but I will spare readers from a more comprehensive list.

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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455 Responses to Why EIA, IEA, and Randers’ 2052 Energy Forecasts are Wrong

  1. Christian says:

    The funniest thing is my later’s post aproach is… capitalistic!

  2. Pingback: Another Week in the Ecological Crisis, January 19, 2014 – A Few Things Ill Considered

  3. Don Stewart says:

    Dear All

    I would like to interject a very few thoughts into the discussion about David Holmgren’s recent article on Brown Tech. If you haven’t followed it, a good entry point is here in Resilience.org today:

    You can read the articles by David and all those who have weighed in, which will take you a while. I suggest that you read David’s article, which has been placed at the top of the page at Resilence today, plus take a look at Kurt Cobb’s article which is over on the right hand side of the page, and then look at Albert Bates diagram, which you can find at his blog:

    Recently I was listening to the audio from a session that Darren Doherty from Australia did for ranchers in California. One of the things that struck me was that the tight web of water use regulations in California don’t even permit these ranchers to improve the infiltration rate of water into their soil. I suppose the authorities in California are willing to sacrifice topsoil to water lawns in Los Angeles. Darren had some clever ways to circumvent the regulations (tilting roads in such a way that you maximize water retention, etc.), but what I really learned is that these ranchers are NOT living in a free country anymore. If we look at Toby Hemenways’ essay on The Last Nomads and the Culture of Fear, we find the natives who fought Custer at Little Big Horn described as ‘the freest people in the world’. Nobody would describe those California ranchers as ‘free’.

    Darren mentioned in his talk the maximum dimensions that a house in Australia can be before it has to comply with a boat load of regulations. So…if you are willing to live in a minimum sized house, you can do what you need to do. In my county, those dimension are twelve feet by twelve feet.

    Tad Patzek has an interesting article

    If you are a cog in a machine you are not ‘free’.

    My point here is that people who are still relatively free, such as Albert Bates in rural Tennessee and David Holmgren in rural Australia are going to see different possibilities and different limitations than someone like Rob Hopkins in densely populated and highly regulated Britain. Holmgren can contemplate many ways to do without the Industrial Machine that Tad Patzek describes, while Rob Hopkins is going to struggle for a little wiggle room.

    Here is the point I would make about Kurt Cobb’s essay. It is in response to an article in the New York Times claiming that humans have so mastered biology and chemistry and physics that the only limitations are social sciences, e.g., live peacefully with each other. If you delve into the various studies that Kurt references, you will find that the addition of synthetic nitrogen fertilizer destroys soil fertility. Now I suppose that the Times article will just assume that sterile soil pumped up with plenty of fertilizers is enough to grow an infinite amount of food. I imagine that Albert and David would regard you as insane for having that opinion.

    If you are of the opinion that fertile soil is important, and that the rotational use of animals and perennial grasses are essential to maintaining fertile soils, then you see limitations on population density that are invisible to the writer of the Times article.

    Finally, just a comment about why Albert might have left Gail off his chart. As near as I can summarize her position, I think Gail believes we are quickly headed back to the Stone Age, and the people trying to do something to change our course are wasting their time. In fact, we are going to be worse off than Stone Age humans because we will be subjected to nuclear waste we won’t be able to deal with. So she doesn’t belong on the chart, unless Albert could add an additional dimension. If one perceives that nothing can be done, either because of the hard limits of human nature or the hard limits of physical constraints, then all the sturm und drang is just a waste of time.

    Don Stewart

    • I think we are going to have to take each day as it comes. Different people will try different things. Perhaps some of them will work, at least temporarily. But long term, I really have doubts as to how much difference sustainability efforts are really going to make. Once Humpty Dumpty falls down and breaks into 1 million pieces, I don’t see how we put Humpty Dumpty back together.

      Most of the others are talking about “If we do _____, then things will be better.” I am not really convinced we have a whole lot of control over the situation. Maybe some wealthy readers have the opportunity to move to an area where they can grow crops, and perhaps can even improve the soil. I don’t have a problem with this. Maybe it will work for a time–it is worth a try. Government are not rich enough to buy up huge tracts of land, and do anything on such a basis. So it pretty much has to be individuals, working with their own wealth, trying to make a difference.

      Each analyst has to specialize in what they are good at. Looking at farming techniques is out of my area of specialization. I can only tell you where your reasoning seems to miss apparent pitfalls–like neighbors without food, and a lack of security.

    • Paul says:

      Thanks for the links Don – some tremendous wisdom there.

  4. Don Stewart says:

    Dear All
    There have been numerous comments about the likely behavior of people as the Industrial System begins to collapse. I would like to suggest that we look at the history of life to get some clues. The following quotes are from Revolutions That Made the Earth by Lenton and Watson. Pages 38 and following:

    ‘All animals, and also plants and many fungi, are multicellular, made up of trillions of cells (about 10 trillion in humans) which act in supremely close cooperation, mostly using chemical signalling mechanisms to coordinate their actions. The adoption of multi-cellular habit has enabled a huge increase in the complexity of size and form of living things….It is worth pausing for a moment to consider what a wonderful thing it is to be multi-cellular. Those ten trillion or so cells in your body can be any of about two hundred distinct cell types, each with its own role in the body. All of them ‘know’ precisely where and when they can and must grow and divide, where and when they cannot and must not, and when they must commit suicide to end their lives….

    The cell itself is also a community…’organelles’, different kinds of internal structures bounded by membranes that separate them from the cytoplasm in which they reside…mitochondria…are critical in producing the energy that the cell requires, by the carefully controlled burning with oxygen of molecules derived from the organism’s food…ancestrally, some of these organelles were derived from free-living bacteria…chloroplasts in plants are also descended from free-living bacteria…Though they retain some of their own genes, both mitochondria and chloroplasts have transferred many important genes to the cell nucleus. They now rely on the cell to supply most of their needs, so they can no longer survive outside the host cell.

    transitions in which simpler structures combine to make more complex ones such that entities which were previously able to reproduce independently before the transition can only replicate as part of a larger unit after it.’

    I’ll draw a few conclusions.
    (1) The only reason any of us are here to discuss things is because of a truly staggering amount of cooperation…both within our bodies and between our bodies and other living and non-living things. (If non-living chemicals can be said to cooperate).
    (2) The cooperation within living things was built up bit by bit. Probably a great many ventures ended badly. What we see today is what worked.
    (3) Cooperation requires specialization. We have two hundred different types of cells for a reason. An ‘intentional community’ where nobody has a useful speciality is almost certain to fail.
    (4) Carbon is the exchange medium for almost all biological life. Humans amuse themselves by thinking it is paper money or promises to pay paper money.
    (5) Can cooperation which will be effective at a lower energy level be invented? Or do we have to regress to the level of bacteria and rebuild everything? Or perhaps disappear altogether? I argue that we have to try to invent efficient cooperation at lower energy levels. The alternative is hopelessness, depression, disease, and death. The suite of techniques I describe as ‘biological farming’ are examples to study. Perhaps the transition movement is also worthy of study. Some Ecovillages are worth studying.
    (6) It isn’t really very informative to get hung up on words such as ‘freedom’. Have the mitochondria and chloroplasts been ‘enslaved’, or have they found a cushy environment, relatively safe from the perils of solitary existence? Whichever words you choose, it worked. In a low energy environment, efficiency and carbon to trade will be the keys to survival. Cooperation will be the enabler of efficiency and carbon to trade.

    Don Stewart

    Don Stewart

    • xabier says:


      I suppose we could observe that the collapse of the Soviet industrialised economy left many formerly ‘useful’ and functioning individuals without any useful speciality to contribute in a lower/disrupted energy context.

      And so they lost heart and drank themselves to death. Warning to us all……

      One thing is clear: our politicians are preparing to 1/ Sweep our bank accounts in desperate measures to shore up a failing system, and 2/ Shoot us if we get anxious and fractious.

      It is up to US to make the real plans.

    • Interesting points! I hadn’t realized that carbon was the exchange medium for all biological life.

  5. Stilgar Wilcox says:

    Here’s what I think may be a ‘tell’ (as the term is used in poker) that this end game being played with increasing debt/QE printing is stuck. Right now QE is being tapered, starting this month, Jan., from 85 to 75 billion. The plan as I understand it is to taper 10b a month until it reaches zero and end the QE program. If during the taper process at say 35-45b the asset bubbles start to deflate, unemployment starts to rise, the 10yr. treasury rate rises well above 3% and the Fed in turn decides to stop taper and keep QE at that level, i.e. 35-45b a month, then they will be stuck. It will be a tell that end game is cornered with no way out with time ticking until collapse.

    I point this out because of all the various comments made by Bernanke (soon to be Yellin) of the factors going forward to taper QE and end the program. If those factors change, I would suspect they could stop the taper. We shall see but my prediction is they will get stuck about 1/2 way down to zero.

  6. Don Stewart says:

    Dear Gail
    One more thought about your proposed response to De Souza. Lenton and Watson say, page 48, that ‘Our food energy derives from the one-part-in-a-thousand of the total sunlight falling on the Earth that is captured by green plants through the mechanism of oxygenic photosynthesis’.

    If you are going to argue that it should be illegal for people to capture more of the sunlight to generate electricity, then you have a tough case to make. Illegality is different than simple ‘uneconomic’. Unless you are going to appeal to ‘might makes right’, then you have to show that people should be required by force to abstain from using what appears to be a very abundant source of energy.

    If you are going to argue that people are doing it who are content with interruptible supply, but that action removes the subsidy from them to the people who can’t deal with interruptions (such as oil refineries and other continuous processes), then you have to carry the burden of evidence that ordinary citizens should be required to subsidize oil refineries.

    Just some thoughts….Don Stewart

  7. Christian says:

    Gail, of course I do not see any socialist revolution at the door, even if wealth concentration is a trend that started some years ago (and will not change under the circumstance of peak oil). More than ever socialism seems to be outdated, and everybody wants just more growth (this “red” girl at Seattle says nothing about PO, neither our “red” Pope). I was rather pointing to a mental revolution, specially to realize that things are not necessarily black or white, that if the financial system falls may be something can replace it, even if casualties are counted by thousands.
    I insist that you in the States have the very habit of historical continuity. Economically: you have had just one national currency, but may be 12 in our case; you have had no serious economical disruptions since a lot of time, excluding the great depression, but we have known this one and at least three others since. Politically: you have never been throught a revolution (Secession was and was not), we have had seven in the XXth century (five coups d’état from the military and two economical coups d’état). In the US you have been choosing a new president every four years, since? (Even if TPTB kills one of them two times each century, as a nation you don’t care so much) And we can continue: how many hours of electricity outage has known NY in its whole history? Not to talk about a war at home.
    It is not that we foresee a nice future, and I wonder if I will have to assist to the death of my son, for instance, and don’t have a clue about how to wheight the balance on this. But I have come to believe that among the blogs about this topic existing around the world you are the most pesimistic ones. Is this rignt? If it is, there is an explanation: you are very used to a predictable future. I wonder if the heads of US military are equally shaped. Because perhaps they are the most qualified to save your lives when the system cracks. Or perhaps not, you know them better than I do. And this is not important just for you. Given the US is still Big Brother and Big gun, and that the world still look at you as a reference, it is important to us too.
    TPTB are still running this world, but will no longer do I guess. This is the most imortant political thing that will happen. How the world will look like? Complete financial collapse may bring complete social collapse. Or may not.
    And Gail we don’t need “to make the whole system work” (I quote you and higlight the “whole”). Neither will we need “new computers”. We will need just food, shelter and some peace and freedom. I’ve never had a credit card. Will I need it now when ressources start falling? International trade could turn barter, direct exchange of goods or goods for metals. And degrow.
    The big miss of Obamacare has been not to look for a cheap way of mantaining people healthy (do you know Cuba ranks just as the US in health issues, but with a system 20 times cheaper?) Of course TPTB would never allow, because of pharmaceutical profits.
    It seems I’m turning red at the end… I don’t know what foreign people may think about my latest post (in spanish anyway), I’ve said it’s capitalistic but i’is a kind of joke. The idea was to push some acquaintances and local politicians not to waste our latest bricks, writing in a capitalistic language they understand.
    Hope being helpfull

  8. Paul says:

    This is perhaps the best interview in history – all parts are worth watching – and it gets better as it goes – in Part 4 that Goldsmith introduces the theories that are particularly relevant to the oil issue (i.e. how globalization was opposed in the developing world because their leadership had observed the destructive power of the infinite growth model).

    This is the first I have heard of Mr Goldsmith – he is indeed a true visionary (although I am sure there are plenty of others who warned that globalization would be the end of us)

  9. Danny says:

    Well this guy died 3 years after this interview, all his wealth could not keep him alive. While I agree with him…… so what! We are already in this problem. But reading some of these apocalyptic responses I am reminded of a cult out here that was called Church Universal Triumphant they moved into bunkers and waited for the world to end. What if you are wrong or what if the collapse is 20 or 40 years away and you have spent your time wringing your hands waiting or maybe you will die tomorrow in a car accident or like this guy you will die 3 years from now. Spending time trying to guess how this falls out is not healthy mentally. We know the current system is screwed but I think the predictions of Billions of people dying by 2040 are a bit premature and maybe off base and quite unproductive. Ted

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  11. Sami Jansson says:

    Gail, have you read Daron Acemoglu & James Robinson (2012) “Why Nations Fail”? The name of the book promises interesting arguments but myself was deeply disappointed. It seems to me to be merely another tribute to neoliberalism. There are some reviews of it freely available and last year it was possible to download the whole book. However, I only read its prologue and a part of its introduction and then I decided that reading further would be waste of time.

    • No I haven’t read “Why Nations Fail.” I looked at a few reviews on Amazon. It may have some worthwhile things in it, but from the examples given, the authors didn’t seem to understand the importance of inexpensive energy. I noticed one reviewer said, “the book can be a bit of a maddening slog in order to find some enjoyable nuggets of information and/or wisdom.”

      Given the number of books I already have that I should read, I will hold off on reading it. It may have some helpful things in it, but I am one who reads books by paging through them and finding charts that look helpful. If I have to slog through a lot of text, I have a hard time reading the book unless it has a lot of good stuff in it.

      • Paul says:

        Why Nations Fail is one of the best books ever written – Jared Diamond was involved (I think as a consultant) and he admits that this book raises a lot of issues that he did not think of in Guns, Germs and Steel.

        It doesn’t go into energy – but it is still a very worthwhile read to get an understanding of why nations fail – but also why they succeed.

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  13. Quitollis says:

    Late night session on OFW…

    Can any of us really call modern industrial multicultural cities “home”? True many of us have never known anything else and what lies outside the cities is often not much better but even so… Home is where one’s own people and culture lie not everyone chucked together in the name of profit and “rights”.

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