On Monday, September 29, the Wall Street Journal (WSJ) published a story called “Why Peak Oil Predictions Haven’t Come True.” The story is written as if there are only two possible outcomes:
- The Peak Oil version of what to expect from oil limits is correct, or
- Diminishing Returns can and are being put off by technological progress–the view of the WSJ.
It seems to me, though, that a third outcome is not only possible, but is what is actually happening.
3. Diminishing returns from oil limits are already beginning to hit, but the impacts and the expected shape of the down slope are quite different from those forecast by most Peak Oilers.
Area of Confusion
In many people’s way of thinking, the economy is separate from resources and the extraction of those resources. If we believe economists, the economy can grow indefinitely, with or without the use of resources. Clearly, with this view, the price of these resources doesn’t matter very much. If one kind of resource becomes more expensive, we can substitute other resources, once the scarce resource becomes sufficiently high-priced that the alternative makes financial sense. Incomes can rise arbitrarily high–all it takes is for each of us to pay the other higher wages. And we can fix any problem with the financial system with more money printing and more debt.
This wrong version of how our economy works has been handed down through the academic world, through our system of peer review, with each academic researcher following in the tracks of previous academic researchers. As long as new researchers follow the same wrong thinking as previous researchers, their articles will be published. Economists were especially involved in putting together this wrong world-view, but politicians helped as well. They liked the outcomes of the models the economists produced, since it made it look like the politicians, with the help of economists, were all-powerful. All the politicians needed to do was tweak the financial system, and the world economy would grow forever. There was not even a need for resources!
Peak Oilers’ Involvement
The Peak Oilers walked into a situation with this wrong world view, and started trying to fix pieces of it. One piece that was clearly wrong as the relationship between resources and the economy. Resources, especially energy resources, are needed to make any of the goods and services we buy. If those resources started reaching diminishing returns, it would be harder for the economy to grow. The economy might even shrink. Dr. Charles Hall, recently retired professor from SUNY-ESF, came up with one measure of diminishing returns–falling Energy Returned on Energy Invested (EROEI).
How would shrinkage occur? For this, Peak Oilers turned to the work of M. King Hubbert, who worked in an area of geology. He wrote about how supply of a resource might be expected to decline with diminishing returns.
Hubbert was not concerned about what effect diminishing returns would have on the economy–presumably because that was not his area of specialization. He avoided the issue by only modeling the special case where no economic impact could be expected–the special case where a perfect substitute could be found and be put in place, in advance of the decline caused by diminishing returns.
Figure 1. Figure from Hubbert’s 1956 paper, Nuclear Energy and the Fossil Fuels.
In the example shown above, Hubbert assumes cheap nuclear would take over, before the decline in fossil fuels started. Hubbert even talked about making cheap liquid fuels using the very abundant nuclear resources, so that the system could continue as before.
In this special case, Hubbert suggested that the decline in resources might follow a symmetric curve, slowly declining in a pattern similar to its original rise in consumption, since this is the pattern that often occurs in extracting a resource in nature. Many Peak Oilers seem to believe that this pattern will happen in the more general case, where no perfect substitute is available, as well. A perfect substitute would need to be cheap, abundant, and involve essentially no cost of transition.
In the special case Hubbert modeled, Hubbert indicated that production would start to decline when approximately 50% of reserves had been exhausted. Peak Oilers often used this approach or variations on it (so called “Hubbert Linearization“), to forecast future production, and to determine dates when oil production would “peak.” Of course, as technology improved, additional oil became accessible, raising reserves. Also, as prices rose, resources that had never been economically extractible became extractible. Production continued beyond forecast peak dates, again and again.
Peak Oilers got at least part of the story right–the fact that we are in fact reaching diminishing returns with respect to oil. For this they should be commended. What they didn’t figure out is, however, is (1) how the energy-economy system really works, and (2) which pieces of the system can be expected to break first. This issue is not really the Peak Oilers fault–it is the result of starting with a very bad model of the economy and not understanding which pieces of that model needed to be fixed.
How the Economic System Really Works
We are dealing with a networked economy, one that is self-organized over time. I would represent it as a hollow network, built up of businesses, consumers, and governments.
Figure 2. Dome constructed using Leonardo Sticks
This economic system uses energy of various kinds plus resources of many kinds to make goods and services. There are many parts to the system, including laws, taxes, and international trade. The system gradually changes and expands, with new laws replacing old ones, new customers replacing old ones, and new products replacing old ones. Growth in the number of consumers tends to lead to a need for more goods and services of all kinds.
An important part of the economy is the financial system. It connects one part of the system with another and almost magically signals when shortages are occurring, so that more of a missing product can be made, or substitutes can be developed.
Debt is part of the system as well. With increasing debt, it is possible to make use of profits that will be earned in the future, or income that will be earned in the future, to fund current investments (such as factories) and current purchases (such as cars, homes, and advanced education). This approach works fine if an economy is growing sufficiently. The additional demand created through the use of debt tends to raise the prices of commodities like oil, metals, and water, giving an economic incentive for companies to extract these items and use them in products they make.
The economy really can’t shrink to any significant extent, for several reasons:
- With rising population, there is a need for more goods and services. There is also a need for more jobs. A growing networked economy provides increasing numbers of both jobs and goods and services. A shrinking economy leads to lay-offs and fewer goods and services produced. It looks like recession.
- The networked economy automatically deletes obsolete products and re-optimizes to produce the goods needed now. For example, buggy whip manufacturers are pretty rare today. Thus, we can’t quickly go back to using horse and buggy, even if should we want to, if oil becomes scarce. There aren’t enough horses and buggies, and there aren’t enough services for cleaning up horse manure.
- The use of debt for financing depends on ever-rising future output. If the economy does shrink, or even stops growing as quickly as in the past, there tends to be a problem with debt defaults.
- If debt does start shrinking, prices of commodities like oil, gold, and even food tend to drop (similar to the situation we are seeing now). These lower prices discourage investment in creating these commodities. Ultimately, they lead to lower production and job layoffs. If deflation occurs, debt can become very difficult to repay.
Under what conditions can the economy grow? Clearly adding more people to the economy adds to growth. This can be done by adding more babies who live to maturity. It can also be done by globalization–adding groups of people who had previously only made goods and services for each other in limited quantity. As these groups get connected to the wider economy, their older, simpler ways of doing things tend to be replaced by more productive activities (involving more technology and more use of energy) and greater international trade. Of course, at some point, the number of new people who can be connected to the global economy gets to be pretty small. Growth in the world economy lessens, simply because of lessened ability to add “underdeveloped” countries to the networked economy.
Besides adding more people, it is also possible to make individual citizens “better off” by making workers more efficient at producing goods and services. Most people think of greater productivity as happening through technological changes, but to me, it really represents a combination of technological changes, plus a combination of inexpensive resources of various kinds. This combination often includes low-cost fossil fuels; abundant, cheap water supply; fertile soil; and easy to extract metal ores. Having these available makes possible the development of new tools (like new agricultural equipment, sewing machines, and vehicles), so that workers can become more productive.
Diminishing returns are what tend to “mess up” this per capita growth. With diminishing returns, fossil fuels become more expensive to extract. Water often needs to be obtained by desalination, or by much deeper wells. Soil needs more amendments, to be as fertile as in the past. Metal ores contain less and less ore, so more extraneous material needs to be extracted with the metal, and separated out. If population grows as well, there is a need for more agricultural output per acre, leading to a need for more technologically advanced techniques. Working around diminishing returns tends to make many kinds of goods and services more expensive, relative to wages.
Rising commodity prices would not be a problem, if wages would rise at the same time as the price of goods and services. The problem, though, is that in some sense diminishing returns makes workers less efficient. This happens because of the need to work around problems (such as digging deeper wells and removing more extraneous material from ores). For many years, technological changes may offset the effects of diminishing returns, but at some point, technological gains can no longer keep up. When this happens, instead of wages rising, they tend to stagnate, or even decline. Figure 3 shows that per capita wages have tended to grow in the United States when oil was below about $40 or $50 barrel, but have tended to stagnate when prices are above that level.
Figure 3. Average wages in 2012$ compared to Brent oil price, also in 2012$. Average wages are total wages based on BEA data adjusted by the CPI-Urban, divided total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.
What Effects Should We Be Expecting from Diminishing Returns With Respect to Oil Supply?
There are several expected effects of diminishing returns:
- Rising cost of extraction for oil and for other commodities subject to diminishing returns.
- Stagnating or falling wages of all except the most elite workers.
- Ultra low interest rates to try to make goods more affordable for workers stressed by stagnating wages and high prices.
- Rising governmental debt, in an attempt to stimulate the economy and in order to provide programs for the many workers without good-paying jobs.
- Increasing concern about debt defaults, as the amount of debt outstanding becomes increasingly absurd relative to wages of workers, and as all of the stimulus debt runs its course, in countries such as China.
- A two-way problem with the price of oil. On one side is recession, when oil prices rise to unaffordable levels. Economist James Hamilton has shown that 10 out of 11 post-World War II recessions were associated with oil price spikes. He has also shown that there is good reason to expect that the Great Recession was related to the run-up in oil prices prior to 2007. I have written a related paper–Oil Supply Limits and the Continuing Financial Crisis.
- The second problem with the price of oil is the reverse–price of oil too low relative to the cost of extraction, because wages are not high enough to permit workers to afford the full cost of goods made with high-priced oil. This is really a problem with inadequate affordability (called inadequate demand by economists).
- Eventual collapse of whole system.
There have been many studies of collapses of past economies. These collapses tended to occur when the economies hit diminishing returns after a long period of growth. The problems were often similar to ones we are seeing today: stagnating wages of common workers and growing debt. There were more and more demands on governments to fix the problems of workers, but governments found it increasingly difficult to collect enough taxes for all the needed programs.
Eventually, the economic systems have tended to collapse, over a period of years. The shape of resource use in collapses was definitely not symmetric. Figure 4 shows my view of the typical shape of the collapses in non-fossil fuel economies, based on the work of Peter Turchin and Surgey Nefedof.
Figure 4. Shape of typical Secular Cycle, based on work of Peter Turchin and Sergey Nefedov in Secular Cycles.
In my view, the date of the drop in oil supply will be determined by what appear to on-lookers to be financial problems. One possible cause is that the oil price will be too low for producers (a condition that is occurring now). Governments will find it unpopular to raise oil prices, but at the same time, will be powerless to stop the adverse impacts the fall in price has on world oil supply.
Falling oil prices have especially adverse effects on oil exporters, because they depend on revenues from oil to fund their programs. We are already seeing this now, with the increased warfare in the Middle East, Russia’s increased belligerence, and the problems of Venezuela. These issues will tend to reduce globalization, leading to less world growth, and a greater tendency for the world economy to shrink.
Unfortunately, there are no obvious ways of fixing our problems. High-priced substitutes for oil (that is, substitutes costing more than $40 or $50 barrel) are likely to have as adverse an impact on the economy as high-priced oil. The idea that energy prices can rise and the economy can adapt to them is based on wishful thinking.
Our networked economy cannot shrink; it tends to break instead. Even well-intentioned attempts to reduce oil usage are likely to backfire because they tend to reduce oil prices and have other unintended effects. Furthermore, a use of oil that one person would consider frivolous (such as a vacation in Greece) represents a needed job to another person.
Should Peak Oilers Be Blamed for Missing the “Real” Oil Limits Story?
No! Peak oilers have made an important contribution, in calling the general problem of diminishing returns in oil supply to our attention. One of their big difficulties was that they started out working with a story of the economy that was very distorted. They understood how to fix parts of the story, but fixing the whole story was beyond their ability. The following chart shows a summary of some ways their views and my views differ:
Figure 5. Author’s summary of some differences in views.
One of the areas that Peak Oilers tended to miss was the fact that an oil substitute needs to be a perfect substitute–that is, be available in huge quantity, cheaply, without major substitution costs–in order not to adversely affect the economy and in order to permit the slow decline rate suggested by Hubbert’s models. Otherwise, the problems with diminishing returns remain, leading to declining wages and rising costs of making goods and services.
One temptation for Peak Oilers has been to jump on the academic bandwagon, looking for substitutes for oil. As long as Peak Oilers don’t make too many demands on substitutes–only EROEI comparisons–wind and solar PV look like they have promise. But once a person realizes that our true need is to keep a networked economy growing, it becomes clear that such “solutions” are woefully inadequate. We need a way of overcoming diminishing returns to keep the whole system operating. In other words, we need a way to make wages rise and the price of finished goods fall relative to wages; there is no chance that wind and solar PV are going to do this for us. We have a much more basic problem than “new renewables” can solve. If we can’t figure out a solution, our economy is likely to reach what looks like financial collapse in the near term. Of course, the real reason is diminishing returns from oil, and from other resources as well.
http://www.usatoday.com/story/money/markets/2014/10/07/stocks-tuesday/16845959/
Stocks plunge: Dow drops more than 200 points
Dow at 12:27 pst at –235.75
Wall Street is reacting to more negative economic data out of the eurozone, specifically continued softness in Germany, the region’s biggest economy. Industrial production fell 4% in August compared to July, which was worse than the -1.5% drop forecast by Wall Street.
Additional to the above reasons the recent trend in the stock market correcting down fits with my hypothesis that oil traders (reducing oil price recently by 20%) were ‘anticipating’ a correcting stock market due to QE winding down, to end in late October. QE ending is also being pointed to as concern for oil traders as it reduces capex available for oil projects like deep offshore and tight oil fracking.
As oil prices tank, new era of abundance seen dawning
(Reuters) – As oil production swells, demand falters and prices slide, the global oil market appears on the verge of a pivotal shift from an era of scarcity to one of abundance.
Oil prices have fallen as much as 20 percent since June, despite a host of rising supply risks, leading more investors and traders to consider whether 2015 is the year in which the U.S. shale oil boom finally tips the world into surplus.
While the plunge has rekindled speculation that the Organization of the Petroleum Exporting Countries (OPEC) may need to cut output for the first time in six years when it meets next month, some analysts are looking much further ahead.
They say a long-anticipated fundamental shift in the market may now be under way, ending a four-year stretch when $100-plus prices were the norm, and opening a new era in which OPEC restraint once again becomes paramount.
The signs are everywhere: U.S. oil imports are shrinking much faster than expected while oil production climbs to a thirty-year high. Chinese economic growth, and therefore oil demand growth, is slowing. Even output in trouble spots like Libya and Iraq is rising after years of insurrection-led losses.
What is happening in oil markets “finally represent the rebalancing and the impact of this tremendous surge in U.S. oil production,” says Daniel Yergin, Vice Chairman of IHS and one of the world’s foremost oil historians.
The fact that oil prices are falling despite continued turmoil in much of the Middle East and sanctions on Russia “is a milestone, a marker of change.”
Some analysts say it is too early to tell if the latest fall in prices is any different from previous declines, such as in 2012 and 2013, when events such as civil war in Libya and sanctions on Iran spurred sharp rebounds.
A spurt in economic growth in Europe or another supply disruption could again push prices higher in the short term, but risks appear increasingly skewed lower.
Last week analysts at Credit Suisse cut their 2016 Brent oil price forecast to $93 a barrel, the second-lowest among analysts polled by Reuters. The consensus for that year was over $101 a barrel. The bank pegged 2017 at $88 a barrel as North American output growth “overwhelms” global demand.
Some oil traders agree. Long-dated futures for 2017 and beyond, which had for months held firm despite the slump in immediate prices, finally fell last week. Global benchmark Brent crude for November fell 5 percent last week, hitting its lowest in over two years.
The implications of such a shift extend well beyond OPEC. It would likely accelerate shifts in the global balance of power, with consumer nations such as the United States becoming less dependent on producers like Russia or Iran.
END OF AN ERA
For most of the past decade, the oil market has been defined by shortage. Prior to 2008, years of underinvestment, roaring demand from Asia and fears of a looming “Peak Oil” fueled the price rally, and OPEC members have struggled to keep up with demand. Oil soared to nearly $150 a barrel by mid-2008.
Then, the financial crisis sent prices into a tailspin, forcing OPEC to make two sharp cuts – as it turns out, its last formal measures for at least six years. With demand stunted and U.S. shale breakthrough, the “Peak Oil” theme faded giving way to hope for abundance.
Yet oil prices held resolutely above $100 a barrel, with each potential downturn eventually thwarted.
In 2011, it was the breakdown in OPEC member Libya that fueled gains, cutting supplies by as much as 1.5 million barrels per day (bpd); later that year and in 2012, it was U.S. and European sanctions on Iran that choked off some of supply. Last summer it was Libya again as violence flared anew.
TEST FOR OPEC…AND SHALE PRODUCERS
The same could happen again next year. Growing tensions with Russia are putting supplies from the world’s No. 2 producer at risk. Talks with Iran over a nuclear deal could sour, prompting calls to ratchet up sanctions. Yet the odds for another rebound are growing longer.
“The fire drill may be real this time,” says Daniel Sternoff at Medley Global Advisors.
Now, either OPEC agrees to put a floor under prices in the short-term, or a prolonged period of lower prices starts to curb long-term investment or revive demand growth, he says.
The price downturn is not only testing OPEC’s resolve but also the durability of the U.S. shale revolution, which has added 1 million bpd to U.S. output in each of the past 3 years.
It is far from clear when, or whether, OPEC will intervene. Sharp cuts in Saudi Arabia’s oil sale price to Asian customers on Wednesday suggested that the world’s largest oil producer will accept lower prices to maintain market share.
Bob McNally, a White House adviser to former President George W. Bush and now president of the Rapidan Group energy consultancy, said after a recent trip to Saudi Arabia that OPEC producers might wait for U.S. output cuts rather than cut production themselves. While some in OPEC are starting to call for cuts, core Gulf members are betting winter demand will revive the market.
That may change if oil prices slide another $10 or so. Not only will that squeeze budgets from Caracas to Moscow, but U.S. drillers would probably curb activity in the event of a “sustained pullback” below $80 a barrel, analysts at Baird Energy wrote in a report on Monday.
“US shale oil after all is not just the newest and biggest source of supply, but also high cost and most responsive to oil prices,” said McNally. “North Dakota and Texas have effectively joined OPEC, though they may not have realized it yet.”
Demand must certainly be waning as growth sputters across the world… can anyone find evidence that supply is increasing… or is there simply a glut do to demand destruction? I suspect the later as I have not heard of any large new sources of oil + we know conventional oil peaked in 05 and continues to drop….
Of course the big problem is that dropping oil prices kill exploration + threaten to tip shale and tar sands over…
However the average person working in finance will of course not ask the above questions and will find this article as soothing as a lullabye is to a baby…
Which is good — the last think we want is for people to ask hard questions.
More excellence! Counter cyclical is the way to go for the immediate future.
“IMF goes back to the future with gloomy talk of secular stagnation
The IMF has slashed its forecast for global economic growth.”
http://www.theguardian.com/business/2014/oct/07/imf-gloom-global-economy-growth-secular-stagnation
“IMF says economic growth may never return to pre-crisis levels”
http://www.theguardian.com/business/2014/oct/07/imf-economic-growth-forecasts-downgraded-crisis
But it doesn’t occur to them to mention energy.
Thanks for this Adam. This confirms what I posted below the Reuters story…. lack of growth = glut of oil = price crash
And herein lies the problem with lower oil prices….
Why ConocoPhillips’ Stock Plunged 13% From Its 2014 Peak
Live by the oil price, die by the oil price:
After ConocoPhillips decided to part ways with this transportation and pipeline business segments with the spinoff of Phillips 66, one side effect has been that the company is much more dependent on the price of oil to be successful. With the other components of the business in place, it could shield itself from weak oil prices because this led to cheap feedstock for its refineries. Today, though, any major swings in price can mean huge differences in profitability. According to the company’s fiscal year 2013 earnings report, a $1 change in the price of a barrel of oil can have as much as a $90 million impact on annualized net income for the company.
http://www.fool.com/investing/general/2014/10/06/why-conocophillips-stock-plunged-13-from-its-2014.aspx
Amusing how some will be cheering the news of lower oil prices… and they will celebrate by filling up the SUV and taking a long drive to nowhere… oh well.. let them enjoy it will they can … we are so far past the point of no return that it really does not matter what anyone does…
Heck we are so stuffed why don’t we just pump toxin chemicals into the ground and poison our water to get the dregs of the oil fields out!!! What’s that…. say again…. we are already doing that you say…. it’s called fracking…
Oh yes… silly me!
Excellent!
Who ever could imagine energy would be connected?
Love your comment: ” There are not enough services for cleaning up horse manure.” Well put Gail. If this could be remedied I think we would be a long way to solving our problems of dealing with so many false ideologies.
I will be leaving for Spain later today. I may not be able to comment much in the next few days while I am traveling.
Gail, is it possible to post the conference on YouTube? I’m sure many would like to see it.
I can ask the organizer what plans for recording the conference have been made.
Thanks and understanding Spanish helps ! 🙂
I understand the conference is being recorded and will be posted. There are people with very professional cameras walking around, so I expect this will be done well. I understand that there is also a plan to post all of the presentations online. I will provide information on this when I find out more.
The one thing that may be a small problem is the fact that the conference is partly in English and partly in Spanish, with simultaneous translation. I don’t know whether the simultaneous translation has been recorded. Also, the slides are only in one language or another, so you have to do some translation yourself. The speakers in English are Mikael Hook, David Hughes (by video-conference–don’t know if this will save well on video), Kjell Aleklett, Ugo Bardi, and myself. I understand that group with a panel discussion on resource limits of ores and their impacts (Gorka Bueno, Carlos de Castro, and Alicia Valero Delgado) will give a panel discussion tomorrow in English as well, even though their first language is Spanish.
Off topic. Old satelite dishs covered with foil make a pretty good solar cooker. They wont cook a lot about 12 oz liquid but they are shake and bake.
Hi Gail,
In terms of failed peakoiler predictions it seems to me that it might be fruitful the consider the problem of predicting the future in the first place. Most predictions about the future fail. Why should the peakoilers be any different?
I believe the problem is the human foible of misinterpreting the knowledge content of correlations, even those that are clearly cause and effect. To start with the extant reality is nominalistic, “The world is a continuous, complex, single event”, Leonard B. Meyer. The human mind is a device that imposes heuristic categories on the experienced world, to navigate it of course. “Where attention is focused reality is created.”, Leland Kaiser. We have learned to create variables and make valid statistical correlations. This is science. It works pretty well for mechanics 101. Thus we have bridges. But the future is a Borgian universe of outcomes that will have categories that don’t even exist yet, either in reality or in the human mind. Thus predicting specific outcomes in very complex systems has a background very low probability of success.
The BAU people are not unreasonably taking refuge in a kind of epistemological Chesterton’s fence—“Hey, the fact that humanity has actually muddled through to the current time is a stronger argument for more of the same than somebody’s particular vision of the future, especially when those people are repeatedly wrong in their predictions.”
Some predictions are actually quite easy to make and be correct on…
One of them is that when you live on a finite planet with finite resources — and you have a system that requires eternal growth – or it collapses — then one can quite accurately predict that this system is going to collapse.
The difficulty is in predicting exactly when
It is imposible to predict a chaotic event. However if we know the constraining limits and their trend we can put boundaries to it. For example collapse has a very big probability of taking place before 2025, because the evolution of the fiscal break-even price for OPEC can be extrapolated to $185/b on that year (Natixis data http://www.ogfj.com/articles/2014/04/fiscal-break-even-oil-prices-for-major-opec-members.html ). If world GDP growth keeps at around 1.2%, $185/b at 2025 will be an oil shock crisis-inducing price equivalent to the $145/b of 2008. So by 2025 or before, it will be impossible to have an oil price that is at the same time viable for the producers and the economy and therefore both will come down. For this not to happen oil should not continue becoming more expensive to extract.
OPEC fiscal break-even prices are lower than other producers so we probably don’t have that much in terms of upper limit. Of course lower limit could be tomorrow, but in any case I am not too bothered in making plans for longer than 10 years. Yep, no worries for retirement, pension, long term investments…
Javier
https://www.beaconreader.com/mason-inman/the-original-shale-gas-field-is-tanking
Gail I have been a long term reader and have never commented before. So, before I offer a criticism let me say this truly one of your best posts. I always felt the concept of diminishing returns was underutilized in economics. I think it has also been said, by others, that the whole human story, so far, could be understood in large measure as being one of increasing capacity to network.
My criticism focus on your little foray into the field of geopolitics. Yes, would it not be splendid if your model could be directly and simply applied to such a complex arena of human behavior as global interstate rivalry. When ever I read a phase like “We are already seeing now”… followed by the naming of a foreign power targeted by our national government my crap detector goes off. You know Gail they get plenty else wrong in the WSJ and the NY Times for that matter. I have taken a good look at the evidence, as to who is the aggressor, in the present ongoing crisis in Eastern Europe and have come to to a different conclusion then you, with your model, and the whole MSM of the Western world have reached. I am joined in this by a number of experts, in geo and area political studies, plus a sizable percentage of the non-Western media.
But, perhaps we can save your model? So my question to you is: does your model allow the supreme power, that guarantees and presides over our global networked economy, more than reactive power? Could it be that the USA in concert with its closest “allies” could act, or even more to the point, proactively and belligerently defend its present position? If your model does not allow for such behavior by, to use an old-fashioned word, an imperial power, such as America, then I would say it is a useless geopolitical model.
In times of trouble, countries have always turned to war. I suppose this option still holds now, if as you say, the United States decided it had the power to do it, and wanted to put itself ahead. I am wondering, though, what exactly could be accomplished. If the US tries to kill off large numbers of people, it will likely need to use huge numbers of nuclear bombs, and will make climate a mess, besides adding a lot of radiation and disturbing supply lines for making anything complex, like computers.
The US already has more than its share of cropland, and has quite a bit of oil, coal and natural gas. But starting a war–any war–is a diversion, and a reason to borrow more money and get unemployed young people off the street. We now have the war against ebola, too.
I dont know whats more scary nuclear war or this mosh pit. 🙂
Wow, my favourite band from my youth times. Thanks for reminding me. I have all their albums somewhere, need to relisten ::)
Yes, The Dead Kennedys were indeed awesome!
The problem with the peak oil theory, as you state, is getting people to see the nuances. The WSJ is a financial journal, not an engineering journal. They think you change the world by simply adding more money. When Ronal reagan said there was plenty of oil in 1979, he was literally correct. There was at least 6 million barrels of excess capacity in just Saudi Arabia. All these mega fields, Ghawar, Bolivar Coastal, Canterell, all cam eonline at about the same time.
My company as well as Schlumberger between 1982 and 1988 shut in entire fields. We shut in everything south of Shedgum in Saudi Arabia, most of safaniyah offshore, All of safaniyah inland, and most of the smaller fields.
“Markets” are restrictive in nature. Free trade was like adding helium to a balloon. By 2002, countries that couldn’t have dreamed of being importers, like China, India and dozens o smaller asian countries, were running deficits in oil. To be sure, we have been able to find more oil, but if you swiss cheese the world your gonna find oil. The problem is, is it economic.
Riht now, what’s causing the surge in US oil is the surge in Fed induced mal investment. The losses from this phase will be staggering.
Thanks for your view from “the oil patch.”
“Right now, what’s causing the surge in US oil is the surge in Fed induced mal investment. The losses from this phase will be staggering.”
Spot on.
Someone asked previously if the Fed would ever get directly involved if oil became uneconomical to extract.
They already have
Hi Gail,
For years your blog has been enlightening to me and a favourite read together with Charles Hugh Smith’s.
If anything I think you are being too prudent in your analysis of what may come. Perhaps you feel the responsibility of writing for a large audience.
Making predictions is difficult, specially about the future, but one thing is certain: the human species behaviour does not come from intelligence, analysis and planning, but from the drive to remove obstacles to a better being. Therefore we are going to march happily towards the cliff of peak oil as lemmings without doing anything until it is too late and we see the rocks below.
Peak oil took place on Thanksgivings 2005 ¿Remember Deffeyes? Blessed tight oil for disguising it so the world at large doesn’t know yet. Even though the change of slope in oil production gave us the 2008 crisis through an oil price shock.
The day of reckoning comes when the markets discover what we already know, that oil production is going down FOREVER (oil exports are already going down forever). In nanoseconds the algos will trigger massive sell outs in every stock market in the world. The crash will only be stopped by the closure of markets. You see, nobody invests in de-growth, and that is what we will have for over 95% of the companies in the world. Then we will see massive companies closures and lay-offs. Then countries defaults. How is Greece going to pay its debt within a perpetually shrinking economy? After Greece comes half of the world with debts over 100% GDP. Every country will take care of itself and the EU will fall apart. Then the international oil market will dry. Net exporters will export less and only to privileged partners through bilateral agreements, the issue not being money but protection or exchange for food, technology, etc. Some nations that are already getting less oil like the PIIGS and Japan, will get almost none and will collapse almost completely. Given globalization, their collapse will bring about everybody else’s collapse. A monetary crisis is almost certain to take place also, but it is hard to predict in which form. A collapsed world will get very few oil pumped out and distributed, so massive hunger will soon follow as agriculture is so dependent on oil, and many countries are producing crops for export instead of food. Of course we will all be grounded, as air companies will be one of the first casualties. We are already seeing the rising extremism, both left and right, in crisis-beaten Europe. That will go over the roof everywhere, and democracy will be substituted by more or less authoritarian regimes that will resort to nationalization, rationing and planned economy. Let’s hope that wars are limited although the military will always get whatever oil is left.
Humankind will have taken the first step (the second for the developed world, that took the first in 2008) of its irreversible descent into a postindustrial civilization and in the way it will shed 90% of earth’s population.
That’s the best case scenario, of course. In the worst we go extinct. After all we still have those nukes with their tanks full of fuel.
This is not just one person’s opinion. I am taking the Bundeswehr Transformation Center report a little bit farther. I found out that the German military came to the same conclusions before me.
You’re right Gail that people don’t get the economy. Most think that a reduction in 30% in the fuel available will correspondingly reduce the economy at most in a 30%, probably less. But the economy fluctuates within a narrow band of stability as it is a very complex entity. If you push it outside that band it will come down crashing. It crashes very fast and once it does, it comes back very slowly only if things improve. With diminishing oil, things will not improve much.
In a way we are privileged as we have first row seats to the Final Judgement. Unfortunately we have been found lacking in prudence and good sense.
Thanks for your interesting comment. It is hard for people to understand that 30% reduction in fuel economy will crash the economy–they just don’t seen how the economy works as an interlinked structure.
I also liked your comment:
Javier — that’s a pretty good general summary of what is going to happen. The specifics are less easy to predict of course…
Holy radioactive shiiiiitake mushrooms! in other words, awesome post Javier 🙂
Javier, excellent post. I wonder if it will be possible for places like the US and Ukraine to trade their corn and wheat for oil. You mention privileged trading partners and bi-lateral agreements. I can see these many little side arrangements quickly replacing global trade. Regional blocs that continually shift and realign as each privileged nations seeks temporary advantage.
Bilateral trade does seem like it will be longer-lasting than the free-wheeling system we have now.
On EROEI—it takes 50 oilwells in Iraq, to produce 1 million barrels of oil in a day.
And in places like Bakken? 2500 wells to produce the same amount.
That is the measure of our crisis.
The measure of our crisis can be best summarized by a number of quotes that compare action to words:
http://www.quotegarden.com/action.html
Even Adolf gets into the action: “Trust only movement. Life happens at the level of events, not of words. Trust movement.”
I enjoy reading Gail’s essays, and of course, all the good comments, but the discussions are really a bit silly. The truth is staring us directly in the face; all one has to do is realize that actual US/EU action, not disguised policy directives/explanations, is based on nothing more than leveraging military power to extract energy supplies.
Once you know that simple calculus, then everything else logically follows as events fall neatly into place. Ironically, we really should be praying to doG to protect “our” troops. The day these operations finally end is when we in the West will be begin to taste the bitter harvest.
True. Although it doesn’t make things any more palatable.
Hence I have no problem with this being an extinction event… everything else on the planet will be better off without us… not that this matters…
Hence I have no problem with this being an extinction event… everything else on the planet will be better off without us… not that this matters…
Agreed. Although, extinction events are not really comprehensible anyway. None of us have ever experienced one in it’s late stages, nor will we ever, and should we ever be unfortunate enough to, we would almost certainly be oblivious to the fact personally.
In the end, I don’t know much what to make of our current situation than anyone else. And I think it’s that very frustration – there simply is no solution to our current situation! – that keeps all of us posting on boards like this. That and the fact that the voices of denial are as hysterical as they are deafening these days. I seriously doubt that cognitive dissonance of this magnitude has ever been experienced at a global level ever before. I think we’re experiencing it now.
“That and the fact that the voices of denial are as hysterical as they are deafening these days. I seriously doubt that cognitive dissonance of this magnitude has ever been experienced at a global level ever before. I think we’re experiencing it now.”
Absolutely.
And as expected – when anyone attempts to poke a hole in the stout defenses with some cold hard facts — the response is anger.
What’s the stage after anger? i think depression? Then acceptance?
I pretty much went right to the acceptance part …. well actually there was a bit of a twilight type period — a bit of a disorientation …. I moment of surreality …. when I realized that holy shit — there is not way out of this…. that there was no cutting this Gordian Knot….
There is a fine line between acceptance and devastating depression.
I think that the reason we all continue to post on this blog site is because it gives many of us a sense of community. Even if we are scattered and isolated across the planet: Bali, Alaska, England, Spain, Germany, Norway…, hearing all of your voices makes each of us individually feel less alone. The foreknowledge of what is coming is a pretty heavy psycological burden and one that makes us feel very lonely. Unfortunately, our digital community is only as resilient as the internet.
I feel like I am a member of an ultra secret society. Like a heretic….
Can be come up with a secret sign — something that we can use to identify each other in public — so that we don’t get burned at the stake.
I am not sure how we keep the internet alive. I suppose keeping central electricity going is an important pre-requisite.
I can’t add anything to this
http://www.reuters.com/article/2014/10/06/us-investment-author-financialpanics-idUSKCN0HV12720141006
No—there won’t always be money
Money represents a token of energy. ie, I work for you, you give me a token which I then exchange for the results of someone else’s labour–a loaf of bread, a piece of furniture–
The same token can be passed hand t o hand thousands of times, all in exchange for energy products. But without surplus energy, the token itself is worthless.
Money only appeared when farming allowed excess energy (food) to accumulate.
Imagine being marooned on a desert island, youre starving to death, then suddenly you find a treasure chest full of gold—you still starve to death because you need energy input to stay alive. Money will never supply that.
Yes, so it is!
Perfectly stated!
The only thing the dollar really has going for it at this point is that it’s the figurative “last man standing.” Which is the one genuine value that all of our profligate military spending has had. In enforcing the dollar’s economic hegemony. Without that, the US is a a mere banana republic without bananas.
James, David Graeber has a book called Debt: the first 5000 years. He says several times that money cannot exist without the use of force. He says money (gold given to the troops and required as taxes to everyone else) was created as a mean to manage a stable army, not just mercenaries.
Gail must be a pacifist, given she advocates running a tab
I’m working from memory, so I’m a little hazy on the details.
Around 4000BC money was a cubic foot of grain, as a single standard unit of exchange.
Then, because silver was scarce, the temples standardised tokens of silver to buy barley to help manage their monopoly on silver production. It also allowed farmers to drink beer and to pay for it later (with barley).
The coercion part comes about because money production usually includes seignorage and the profits would go to the counterfeiter and the nation state, by definition, has to maintain its monopoly. So, external money can usually circulate freely, because the market sets the exchange rate. No force needed there.
Last men standing ; physical gold + silver?
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“The second problem with the price of oil is the reverse–price of oil too low relative to the cost of extraction, because wages are not high enough to permit workers to afford the full cost of goods made with high-priced oil. This is really a problem with inadequate affordability (called inadequate demand by economists).”
Or as I like to call it — “there is absolutely massive demand for Ferrari’s … but …” syndrome.
The networked economy automatically deletes obsolete products and re-optimizes to produce the goods needed now. For example, buggy whip manufacturers are pretty rare today. Thus, we can’t quickly go back to using horse and buggy, even if should we want to, if oil becomes scarce. There aren’t enough horses and buggies, and there aren’t enough services for cleaning up horse manure.
A brilliant observation … innovation does not easily go backwards…
and people ignore the fact that a horse needs 2 acres of grazing for its energy source
Horses will get et rather quick
Good point. We wouldn’t want to underestimate the damage that billions of starving people can do.
yup—thats a problem too
The manure observation wasn’t really original. I heard a luncheon speaker at an actuarial meeting talking about the huge manure problem prior to street cars in major cities. (I forget the exact topic–something like unexpected reasons for major changes.) Apparently, the manure problem was a big impetus in making the change away from horses for transportation.
there are archived photos somewhere showing piles of it in us cities 6 ft high and running the length of streets
That is one damn big horse!
I had the good/misfortune to be transitioning in my professional life to a financial data analyst in the mid-90s just as 2nd generation electronic data (Excel spreadsheets) were first supplanting 1st generation computer generated paper products (old dot matrix printed reports on folded, carbon paper stacked paper). In my naivety, I remember having long discussions with the old-timers of the time (who were themselves barely coping even at that point) about how there would be no turning back from there. How little did we know!
Thanks for another enlightening article Gail
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Reblogged this on Foodnstuff and commented:
I’m reblogging this because Gail Tverberg is a systems thinker and most people don’t think in terms of interconnected systems. Systems collapse (human systems that is), for the reasons she outlines in the post. An intelligent young person (are there any?), with many years to live ahead, would do well to study this and similar posts. Business as usual is over and there’s little use in planning a future life as if it was going to continue. It’s impossible to accurately predict the future, but certain things are a given: we’ve built a whole way of life around a finite, non-renewable energy source (fossil fuels) and they are going to run out (or become simply unaffordable), sooner rather than later. Renewables such as wind and solar won’t cut the mustard, because they can’t be scaled up cheaply, abundantly or with no financial or energy costs of transition or resource constraints. And at present, fossil fuels are implicated in all stages of their production, installation and maintenance (think: can you make a wind turbine in a factory powered by wind turbines, install it and maintain it using vehicles and machinery powered by wind?).
Read Gail and check her blog regularly and think about your future and how you might build resilience into your life in the face of economic, social and environmental collapse. Because it’s underway now.
An intelligent young person (are there any?), with many years to live ahead, would do well to study this and similar posts. Business as usual is over and there’s little use in planning a future life as if it was going to continue. It’s impossible to accurately predict the future, but certain things are a given: we’ve built a whole way of life around a finite, non-renewable energy source (fossil fuels) and they are going to run out (or become simply unaffordable), sooner rather than later.
There’s a particular satisfaction in realizing that it’s the “best and the brightest”; i.e., the young Ivy league, mostly Wall St bound hot shots who will be handicapped the most in grasping these facts. Their legacy bound familial ties will ensure that most “go down valiantly with the ship,” or otherwise. Of course most are doubly trapped by their status as “true believers” as well, so it will be doubly entertaining listening to their mental acrobatics in justifying why it’s truly “different this time,” right up to the inevitable realization that it’s most certainly not. Recent and ongoing comparisons of our current times to the pre WW-I times a century ago in many of the “doomer” blogs of late are particularly apropos. The similarities are eerie and inescapable, and the current zeitgeist practically screams it for anyone who is not totally deaf to hear. And yet…
It does appear there is a correlation between high end degrees from top institutions and denial about what is happening. As you point out they have massive investments both intellectual and economic in BAU — they cannot fathom a world without it.
My dream would be to work out how to survive this in some sort of bubble world (e.g. a remote island with a nice climate and abundant food and water with very few people) and observe the CNBs boys turn pale as ghosts … oh how I would LOVE to see Jack Welch do a guest spot screeching away trying to inspire the troops by telling them capitalism will beat this!!! – we can beat this!!! – never give up!!! —- then as the Dow is plummeting down down down … and Mark Haines is rolling in his grave … and then the studio fades to black — forever….
And a million gold bars to be a fly in the wall of the trading rooms of all the banks in Geneva, and London… and NY … and Hong Kong … watching these donkeys sink to the floor in disbelief…
Oh that would be priceless! Don’t ya think?
In the meantime I continue the search for the bubble world… if I find it I will post the details on FW exclusively 🙂
Paul I have been reading your comments for about a year now and I have to say you sound like the biggest coward I have ever heard….Yes a coward…they are the ones who are the loudest and talk the most…grow a pair Paul and shut the hell up….and get a hold of yourself for crying out loud…Yes you are going to die maybe sooner than you planned….I have been warning about this outcome for a long time when you were out Whoring for money and now you have had the creature comforts of life, having everyone do your labour for you…yes I know for a short time in your life you actually worked when you were 15 blah…blah ..blah…just shut up for a while and let others comment for a change….You remind me of the soccer mom in the United States who is so angry she can’t drive her SUV anymore…
He’s giving me the shits too. Trying to dominate the discussion all day long with a repetitive refrain. Time for him to take a walk in the sun and forget about the keyboard. He has opinions which stack up but belting everyone about the ears constantly with them is a good way to turn folks off.
Cheers, David Barnes, Sydney.
Lets keep this cool. If someone ( Paul or anyone else ) bothers you just skip reading that person’s comments. See the XKCD below
Someone is wrong on the Internet
I have been grinding away (at one point 16 hours a day 7 days a week) employing dozens of people who count on me to feed their families – or as you call it whoring… yes I have been whoring for nearly two decades now.
And I have been forcing these people to do my labour — of course beating them with a whip like the coward I am…
And what exactly have you been doing with your life John?
Or shall I assume you are a complete and utter failure — one of those types who lays around all day harping about how everyone else had all the breaks? Poor me — if only ______ (fill in the blank).
How fantastic that you knew what was coming so long ago — what utter genius it was to work that out… you know … finite world and all…. you are a bit late to the party — Malthus told us that 2 centuries ago….
You have the floor — feel free to enlighten me with more of your brilliant insights.
Lol. Paul, you’re Gail’s blog ‘enfant terrible’.
I believe Paul is our group conscience. Sometimes exhausting, but always required to not to loose moral archors. I would suggest the others to discuss the contents, not the form. Paul doesn’t have to be saint to make moral judgements. There is an old psychotherapists saying: the roadsign is not heading in the direction it leads to.
Lets cool the rhetoric and keep things civil. If Paul ( or anyone else ) bothers you. just skip that person’s comments.
Somebody is wrong on the Internet
I agree.
I like the cartoon also.
Gail, in your graphs you often show a steep drop-off in prosperity at the year 2015. Do you still believe this to be the case?
I think we are very close to the edge. I am only plotting five year intervals on some of these charts, so 2015 could really mean, for example, 2016.
It is hard to see how things can stay together much longer. But everything unravels slowly. It may be that somehow the US stays together a while longer than Europe and Japan, thanks to “King Dollar.” All of these things are happening for the first time, so we don’t know precisely how things will play out.
This article fits in nicely with Gail’s current blog.
“The Link Between Oil and the US Dollar”
http://www.dailyreckoning.com.au/link-between-oil-us-dollar/2014/10/06/
“But now, there’s a lot more going on. The sharp drop in oil prices is symptomatic of some major movements of capital across the globe. It’s all about the end of the US Federal Reserve’s quantitative easing (QE) program.”
Rodster, from your linked article is the above quote. Capitol for things like financing fracking is tightening as the stimulus wanes.
Fascinating that one of the results of diminishing returns is we will be separated from the very energy source we require for growth, by dropping oil price, nixing many non-conventional plays.
That is an extremely good article. Thanks for the link. The thing that I missed is the role of the end of QE in causing all of this. According to the article, a big reason for all of the changes in currencies has to do with the end of QE.
Of course, I talked about QE being put in place in 2008, with one major purpose of holding up the price of oil. See my article The connection between oil prices, debt levels, and interest rates. So I should have expected that the removal of QE would have the opposite effect. But I was confused about the “Belgium” issues, and the fact that US interest rates were lower rather than higher. I had not realized precisely how the change in liquidity being pumped into world markets could affect the level of the dollar, and indirectly oil prices.
a little off topic.
We are told by many collapse gurus.
“This time its different’
Then in the next breath
“in the end they will print us into hyperinflation, they always do, this time will be no different”
This is not Zimbabwe this is not Wiemar this is every government on the planet at the end of industrial civilization.
There are more debt instruments than assets to back them.
This is every asset in the world.
Are they really going to take action that demonstrates that resources are finite fiat is infinite ala hyperinflation?
I dont know and I dont think anyone outside of the few who makes these decisions does either.
This is not Zimbabwe this is not Wiemar this is every government on the planet at the end of industrial civilization.
There are more debt instruments than assets to back them.
This is every asset in the world.
No truer words ever spoken. We have arrived at the end of the ponzi of all ponzis. This time really will be different, in scope at least, if not in kind. And the few making the decisions are no smarter than Bernie Madoff was. Yes, they constructed a larger and more elaborate subterfuge that more people were invested in and thus had no choice but to continue to support, but the game’s exactly the same: today’s profits for the few at the expense of tomorrow’s debt burden for the many until the punch runs out. Another failed “perpetual motion machine” of sorts for the greedy and the naive that turned out, like they always do, to be too good to be true. Sigh!
It won’t be brutal for those who know how to band together with a small group and learn to grow food. There are many indigenous peoples that are very long lived and healthy doing just that. Of course, the citizens of entertainment nation here may have an issue. It is all about the choices you are making now, and the choices you will make once this predicament forces change.
I doubt many people would adjust very well to a life that involved working hard in the fields – no luxuries including the medical care they are used to.
Some people on this forum (including me when I am on my tiny farm) pretend that we are living as we will post SHTF. But we are kidding ourselves – we all use electricity, we all use vehicles, we all use money, we use the roads, we go to doctors, we use medicine and even though we might grow much of our own food we still shop in the grocery stores — we are plugged into BAU nearly as much as everyone else.
There is not a single person on this site who is living a life even remotely close to what a person in a tribe in a very remote location completely untouched by BAU lives like.
I have seen it on treks in Irian Jaya and Ethiopia — it is not pleasant – even for those who were born into it.
I’ve thrown this challenge out before – nobody takes it – try living without electricity and petrol for a week. That will give you a taste of what is coming
Both my partner and I lived without electricity and automobiles back in the 1970’s. Me in Minnesota, she in Vermont. We can do so again, when the need arises. The point is not to drop out entirely, but rather to transition down. We have reduced our carbon footprint dramatically and live a better life.
Did you drive on a road during that period? Use banking? Buy anything in a shop? Visit a doctor? Attend school? Ride on a bus or any other mass transit? Where did you get your food? If you grew it yourself did you use a shovel – how did you water the crop – how did you fertilize it? Did you cook the food over a fire? Did you own a bicycle?
The point is that you will be forced to drop out entirely. Because none of what you take for granted will be available. When the oil stops BAU stops – in its entirety.
The roads will not be maintained and will turn into rutted potholed tracks. There will be public transit (I recommend buying bicycles now – they will not be available). There will be no shop or restaurant where you buy food. You will have to grow your own food. Cooking would be on a fire. You will have to chop your own wood. You will be lucky if there is a doctor in your community because there will be no medical facilities as we know them. There will be no modern medicines available. There will be no Walmart. etchetera etchetera…
This is not Little House and the Prairie that is coming our way — this is a fusion of primitive man with Mad Max.
One last thing — when you dabbled off grid — were there 7 billion people starving and rioting demanding that the government feed them? Were there people killing and eating dogs and cats and everything that moved – including humans?
Other than the potential problems with nuclear fool that needs to be cooled for decades… the biggest problem I see going forward is:
– our food is produced with fossil fuel chemical inputs
– our food is transported using oil
– the soil will not produce anything if denied these inputs for at least a year (likely 3-5 years)
– to repair the soil requires composted materials – composting takes many months in most climates to be ready to use
What do 7B+ people in eat in the meantime? (dogs, cats, horses, rats, humans?)
Weren’t the 60’s so quaint? A candle… a jar of peanut butter … a loaf or two of Wonderbread… some tabs of acid… a handful of joints… and free love!
This ain’t Woodstock – and this ain’t Little House….
I like to refer to it as:
The End.
Your hyperbole just muddies the issue. Collapse is not about waking up one morning and finding that the world has magically transformed itself into the 16th century. For one thing, there is a lot of embedded energy lying about in “things.” These “things” can be reused. To paraphrase Greer contra Kunstler, “It will be a Long Descent rather than a “Long Emergency.”
You are so hyped up on negativity you cannot see solutions. Meanwhile I have my hands in the soil every day, growing food that has an EROI of 3.5:1, compared to industrial agriculture with an EROI of 1:10. In other words, I am 35 times more efficient than my neighbors. Who will have food when gas is $8.00 a gallon? I will AND I will have plenty to give away or trade to my community. You will just have your blowhard negativity.
1600’s? Nah – more like prehistory/Mad Max…. if only we could rewind to the 1600’s!
I am not hyped on negativity – I am hyped up on reality.
Actually I am not hyped on it — I am daunted by what lies ahead. I am fearful.
As Gail has eloquently explained (time and time again) – and I will paraphrase here — when the SHTF the oil will stop. I 1000% agree with her on this. And it will stop on a dime – because oil cannot flow without a fully functioning global economy. Feel free to dispute that but keep in mind one of the main premises of this site is that the oil stops… to you better be well armed to defend whatever you say.
Just because you ‘think it won’t’ does not cut it. That is what I refer to as the Koombaya Syndrome… i.e. if the facts are against your argument you pull out your drum and bang on it while signing Koombaya my lord… Koombaya….
This is not the place for that. Only the facts please.
So let’s move forward. Imagine what would happen if the financial system collapsed this week.
I have already explained what would happen… let’s revisit that dystopian shock to the system:
– grocery stores empty never to be refilled
– sewage goes untreated (see cholera etc…)
– clean water is unavailable (pumping stations turn off)
– electricity stops – forever
– forget out any medical care
– 7 billion people will be out in the cold – no food, no electricity, no gasoline – no help
Get angry with me if you like — many people have – it’s one of those phases people go through when faced with a traumatic situation – so I expect it.
It is great that you are doing something to prepare for this — I am too – but when I actually think about what is coming I am under no illusions — I am likely to wish I had gone down in the first wave….
Again – try turning off the power and using no gasoline for a week – or even a few days…. that would be like dipping a toe in the water with regards to what things will look like post collapse.
Of course nobody wants to do that — because it would crash their matrix….
Oil is not going to be $8.00 a gallon. The problem will be unavailable resources, not high priced resources. Your shovel will continue to work (for a few years), but you will not be able to find oil or replacement parts for your vehicles and your devices you use to till the soil. Being efficient is not helpful, if parts of the supply chain are missing.
The sustainability movement has been largely built on “using less”–driving a Prius, for example, with the idea that we are headed for high prices and scarcity. Instead, it is likely to be an issue of breaking supply lines and financial problems. One problem that it is likely is that organic fancy lettuce and herbs raised on organic farms cannot be sold for profit. If the farm had concentrated on growing potatoes and some greens for themselves and their workers, using shovels and amendments available in the area, the farms might have been sustainable. But most are aiming for a model of selling high-priced goods to the rest of the world, and this model has much less chance of working. Perhaps some alert farms can quickly change their model.
Perhaps the road downward can start out slowly, however. For example, roads deteriorate over time, so they are not all gone immediately. It is less clear about the path of banks. Do they fail, without being replaced? If so, businesses desiring to pay employees have a big problem.
Paul; Walter has a plan. It may have flaws but they are not structural.
His plan incorporates growing food.
His plan incorporates community
Those two aspects alone put his plan in the upper 99 percentile.
Im sure there are other aspects of his plan that he cares not to elaborate on.
He has not stated he is sure of success.
If what we think is coming does come few will survive. The people who do might be the ones we least expect to. Perhaps none will survive. Its very hard to prepare for the end of industrial civilization.
Walter has taken his best shot. Its all anyone can do. Surely you can not take objection to that. I see no reference in his statements that refer to the various forms of magic such government, money, or specialness as a species that are clearly the result of fossil fuel.
Paul does this man deserve your comments?
I am simply pointing out that people are massively underestimating what is coming.
People seem to think that living in a camper van in the 60’s or sowing a field of vegetables — all the while remaining completely plugged into BAU is what the future looks like.
And I am calling that vision hog wash (or using the official label – The Koombaya Syndrome)
I am not here to read feel good stories.
If I wanted those I would open the MSM or the other feel good blogs out there.
I deal in facts and probabilities. As do most others on this site.
I also have a plan — probably not dissimilar to Walter’s and Jan’s and InAlaska’s….
But I am constantly re-evaluating my plan because I am constantly re-evaluating the post collapse situation looks like.
And one of the big influences on my evaluation comes from Gail’s articles…. she has forcefully argued that oil is not going to be available … nor are any other energy sources expect wood and perhaps some coal in a few places.
So I can either ignore Gail – or argue with Gail — or agree with Gail. I choose to agree – because I am certain she is correct. I have not seen a single argument of quality that can convince me that she is wrong — that oil will continue to be extracted and refined post collapse.
So assuming she is right — should I just sit on a plan that involves the assumptions that BAU will continue — but at a lower level – that oil will be available but at a higher price?
If that were the case then I may as well be piling into gold — because fiat currencies would die – gold never dies… it is always the last man standing. So long as I have gold to hell with the veg garden – I will be able to buy a 1000 hectares of organic farm land post collapse.
But because I deal in facts and logic — and I reject the Koombaya Syndrome — I do not go whistling past the graveyard like many on this forum are doing — I try to make decisions based on the available evidence – and I change my plan based on the evidence.
The evidence can be confronting — I pointed out half a dozen dire implications that are 99.9% certain when the oil stops. And I am adjusting plans based on those and other implications.
Rather than these comments I have posted being construed as negativity I would suggest they be taken as positive criticisms…. as opportunities for those who are making plans to look more deeply at their plans.
If those plans rely heavily on BAU i.e. that the oil will still flow — then rather than digging into a position and being angry with me for pointing out the flaws in these plans… perhaps these comments should be seen as a wake up call… a call to action… a call to revise the plans.
But of course acknowledging the short-comings of one’s plans — self-examining shall we say — is not what anyone wants to do. Because if one does that then one is forced to conclude that the post collapse world looks far more nasty and brutish than was anticipated.
That there really is no viable plan. That one may wish one had made no plan whatsoever and simply went down with the ship with everyone else — rather than floating around on a piece of lumber — teeth chattering — suffering — waiting to die.
I note that Gail has indicated she is making no plans whatsoever.
For those who prefer not to whistle past the graveyard and not be confronted with cold hard facts — Chris Martenson does a good job of lifting people’s spirits — over there they will tell you that fusion will save the world — that we can all turn organic and live like Little House on the Prairie with veg gardens and hand crafted log cabins…. he will puff you full of hopium (for an annual fee of course).
But if you choose to remain on this site — and the Koombaya Syndrome detector goes off — be prepared for some confrontation — and be prepared to defend your statements.
Because that is what this site is all about — seeking out truths — I have learned many truths from following this blog — both from the author and the many wise contributors.
Multiple strategies. Preppers get it up to a point, but you need connections with the land when your bags of rice and canned beans run out. You will also have to have strategies when you run out of bullets. Silver is better than gold because it is smaller in scale. Of course you should be saving seed each year too. Oh, and learn to live without meat. It’s not that hard. By the way, do you have a bicycle and a couple of spare tubes etc.? Or how about being able to walk to town. Can you get to your nearest navigable waterway? Do you have a canoe or kayak or fishing boat you can row? Blah, blah, blah. You can spend all the time you want arguing and researching and “preparing,” but if you don’t have your hands in the soil every day, you are not serious.
Agreed. There is a whole lot to be done. It would be a lot easier if we had a future “system” in place that allowed trading goods over a distance and saving up grain for a rainy (or too dry) day. When each family is close to “on its own,” the obstacles seem almost insurmountable.
Correctomundo Gail in regards to a “system” in place before collapse. This is why I started two farmers markets and helped with a third. Farmers markets are as old as agriculture, but supermarkets are dependent on fossil fuels. There are plentiful solutions like this in my two books, “The Laws of Physics Are On My Side” (2013) and “Hints for Managing Collapse” (2014).
We also have to think about training. Most people are under the delusion they can pick up the techniques and strategies for growing their food at the last moment. They think, “How hard can it be?” This is a fatal mistake. There is a lot more going on in working the soil than people realize. My people have been farmers every generation for over 400 years. I learn new things every day and the on-the-ground changes due to climate change stare me in the face every day. What I do is train people who come out to volunteer. I also load them up with food, almost always much more food than they actually earned by their labor. Plus they learn something. You cannot get this in the classroom. You have to get it on your hands and knees in the field.
When you grow your own food you are creating capital – AND it is not extractive if you are building the soil. [Extractive capital sources are fossil fuels, mining, logging, and farming IF you are mining the soil like industrial ag.] When I create capital I can do whatever I want with it. I can sell it, I can give it away, I can trade it. I can even put it back into the soil either here or on a different plot of land. Creating capital with sustainable agriculture is how capital is created from the ground up. If you want to get out of the zero-sum trap, you must create capital. The only way to do that is with TRULY sustainable agriculture, where your inputs are less than your outputs. [The only objective measure of sustainability.] Ben Franklin said this a long time ago.
Good on you for doing this Walter. I am not sure why governments would not be somehow encouraging more of this sort of thing — in a subtle way… they are doing absolutely nothing…
It makes me wonder if they know something that we don’t… perhaps related to the thousands of spent nuclear fuel ponds…. If that is the case I would really like to know — because it would make life a whole lot simpler.
My smallish attempts at gardening have left me wondering how sustainable I reasonably can make this. Tilling the soil tends to lead to erosion. Thus a person needs to use perennial crops. Irrigating the soil (except by river overflow) tends to lead to salt build-up.
I can see that my current soil is deficient in any regards–quantity, for one thing (a few inches over bedrock). I haven’t and a soil analysis done, but I would be willing to bet it is deficient in some regards. Admittedly, a person can get an analysis done, and using the analysis, it is possible to figure out what amendments need to added. I would expect needed elements include carbon, sulfur, calcium, and phosphorous, among other things. Then a person can order amendments to be delivered that supplement the soil (using the fossil fuel system). But is this really a realistic way of solving our problems? It seems like a very temporary solution, unless I can make certain that I don’t lose these and other necessary elements.
Also, if I am going to work within natural limits, using perennials, I am likely to need a lot of land. How do I go about obtaining this? How many can we reasonably feed, if we keep our population density low enough that this approach works indefinitely?
Dear Gail
I suggest that if you are really interested in testing the limits of what you can do on your own land, that you consider two options.
First, listen to this conversation with Helen Atthowe, who has had many decades of experience both as a homesteader and as a farmer:
http://www.richsoil.com/permaculture/299-podcast-033-helen-atthowe-soil/
I do not think that Helen will convince you that you can grow crops with bedrock only two inches under bad clay. But if you listen carefully, and understand some of the dynamics they are discussing, you will learn that carbon and nitrogen are generally the limiting nutrients. (Water is always important, as well). Helen believes that a farm which sells produce and does not recycle the waste (including humanure) is destined to fail unless it imports fertility. Which leads us around to consider the solutions outlined in Azby Brown’s study of Edo Japan.
If you want to test the limited of what you can do in a typical suburb which is throwing away lots and lots of carbon and nitrogen every day, then consider Raised Bed Keyhole Gardens as invented by Deb Tolman. I have referred you to her before. You can find a YouTube if you search on ‘Deb Tolman Central Texas Gardener’. For her DVD, find Deb’s website and order her DVD.
For ideas about what to grow in a raised bed keyhole garden, check out David Kennedy’s wonderful new book Eat Your Greens: The Surprising Power of Home Grown Leaf Crops.
Or…give up and do nothing.
Don Stewart
Carbon and nitrogen may be the limiting nutrients for what will grow, but our bodies seem to need some nutrients that plants seem to be able to get along without. Sulfur seems to be one of these. In this way, Liebig’s Law of the Minimum doesn’t quite seem to work. (Or perhaps I am not understanding this quite right–maybe it is only some plants that need sulfur, like onions and garlic).
I was talking to someone last week who pointed out that when trucks were using high-sulfur diesel, there was never a problem with inadequate sulfur in the soil. Now that we have switched to cleaner burning low-sulfur diesel, farmers are more likely to need to add sulfur to the soil.
Gail
As I have tried to make clear. Nutrient replenishment is quite a different chore depending on whether one is gardening or farming. If one is gardening, then simply returning everything, including one’s own urine, to the garden recycles the nutrients (with some escaping nitrogen–which is where nitrogen fixing bacteria become important.)
If one is farming and selling nutrients off the farm, and they are not recovered, then one is eventually going to run out of nutrients. Edo Japan solved that problem…but we in the West don’t want to consider those solutions. My guess is that we will consider them when our backs are against the wall.
At the present time, with half the food we produce being wasted, the frugal gardener can get plenty of nutrients from spendthrift neighbors. Which is why, today, you can build quite nice raised keyhole bed gardens on bedrock and bad clay.
Don Stewart
Spot on Don!
It seems like if you start out deficient in sulfur, you will still be deficient in sulfur, even if in your garden you recycle all of the nutrients.
I am afraid I don’t have as much confidence in my ability to get nutrients from spendthrift neighbors. If I understand that they should be recycling their nutrients, don’t I have an obligation to tell them that?
I’d be more concerned with starving neighbours wanting a piece of my gardening action… and using guns to make their point…
7B+ people — very little food. A recipe for Apocalypto…
Gail
If you are deficient in sulfur, then you may need to add some sulfur. On the other hand, growing some dynamic accumulators (such as vetch) may well bring enough nutrients up from deep in the soil to solve the problem. In addition, the issue of ‘plant available’ vs ‘minerals in the soil’ is muddled. If you have a vigorous soil food web, then that food web can make more of the minerals which are there, but inert, available to plants.
That is one of the reasons I suggested you listen to Helen Atthowe, because in her extensive experience the smaller nutrients really aren’t usually a problem. But you have to understand that Helen’s methods are just about diametrically opposite those of a conventional big-Ag farmer.
Deb Tolman finds that adding green plant material (food scraps or plant trimmings) plus manure plus cardboard and other sources of carbon is sufficient to start an excellent raised bed garden. In the garden Deb built here in North Carolina, we got a big plastic bag of food refuse from the local grocery store. They put the refuse into a bag in their freezer, and they give it away. All those discarded peppers and zucchini and lettuce and pumpkins and turnips go into the garden and bring in the nutrients which are in the food. So the garden is starting with both the smaller nutrients plus the big bangers: nitrogen and carbon. The carbon is the food for the soil food web, which mobilizes and makes available the nutrients the plants need.
Yesterday was ‘dry trash’ pickup day, sorted into ‘recyclables’ and stuff like plastic. I could have walked down my block and picked up 300 pounds of good carbon rich trash. Today was ‘garden clippings’ day. I could have picked up 400 pounds of this nitrogen rich trash. If I don’t take it, it goes to the landfill where it makes methane.
Right now, urban areas generate an obscene amount of organic ‘trash’. If your ethical principles require that you mount your soapbox and explain to people that they need to put all that good organic minor nutrients and nitrogen and carbon right back into their soil….well, you might have a future as a Permaculture Evangelist if you ever get tired of the Peak Debt and Peak Oil circuit.
I happily liberate the organic material I need from what is destined for the landfill.
Don Stewart
More false assumptions. 1) You can be sustainable at even the micro scale (kitchen garden) up to about 2 acres per person. 2) Tilling the soil per se does not lead to erosion. It is how you do it that gives you either negative or positive results. 3) It does not logically follow that you need perennial crops. They have their uses and I use them extensively, but dismissing annuals is a big mistake. 4) Irrigating the soil does indeed lead to salt buildup over time but it is the scale of your water use that is important, not whether you irrigate at all. For example, I use one-eighth of what industrial farmers use. My apples also have more nutrients per ounce than irrigated apples because I don’t irrigate them and they are not pumped up with water. 5) Your soil problem is not a problem at all. You just have to build soil. So far, there are only two people I know of who say this – me and Albert Bates. There are multiple ways to do this. 6) You do NOT need a lot of land. Last year I grew 8400 pounds of food on 70 crops at a value of $28,000 with only 1000 hours of labor and 11.50 gallons of gasoline. This was 1.8 million kilocalories, enough to feed 2 people – and done as a part-time job.
The numbers and the expertise are out there. The most fervent hope that ALL desk jockeys and middle-class Americans should have is that you have a small-scale farmer in your neighborhood that you can make your ally .
I suggest you read, Dirt: The Erosion of Civilizations by David Montgomery. Don Stewart recommended it. There are impacts that are not obvious over a 10 or 20 year period, but over longer period (say 1000 years) lead to collapse.
Also, if you used 11.50 gallons of gasoline, you also used devices of various sorts. You likely used roads to take your produce to market, and a vehicle for that purpose. You may have used electricity for storing your produce in a refrigerator. None of this is very sustainable.
A big problem. Few now have enough knowledge to garden and it gets fewer every day as populations move into cities and lose the skills. When populations crash [no doubt about that] the most resilient and those least reliant on modern technology will do better.
As cities empty, the buildings will degrade and like Detroit, be replaced with open space and then gardens. There will be a lot of toxins, but some plants [like sunflowers] are good for phytofiltration and after 3 crops the ground can be used for growing food again.
None of it will be simple or easy.
And when nobody else is doing this and you have your little garden…. odds are they will be at your door with a gun taking what you have….
I have a cabin (in the woods) that has no electricity, water, or bathroom. Have stayed there for weeks at a time (during hunting season), with no discomfort whatsoever. Matter-of-fact, these are always peaceful experiences. If it wasn’t for my master the government (plus my past now stupid mistakes), forcing me to pay, I’d be quite happy in such a circumstance.
My opinion is most people can live fine without the conveniences, and might live longer and healthier without the stress and pollution..
Here is a result of my city backyard garden, anyone can do this: https://www.youtube.com/watch?v=hSnPiBIn4ps
Here is permaculture design I am working in to the land up at the cabin: https://www.youtube.com/playlist?list=PLDCRYtmkDsX-XF0F4vPZrYv3m6TbmBZ3_
Living in the cabin works fine for a while, until other folks discover what you have. Or until roads to town, and gas to get to town, become unavailable. I expect you would have a hard time living off your hunting and permaculture in the woods. You would at some point need outside “stuff.” If you have it too good, other folks will join in the hunting as well, reducing the number of animals to be hunted.
“Living in the cabin works fine for a while, until other folks discover what you have. Or until roads to town, and gas to get to town, become unavailable. I expect you would have a hard time living off your hunting and permaculture in the woods. You would at some point need outside “stuff.” If you have it too good, other folks will join in the hunting as well, reducing the number of animals to be hunted.”
All anyone can do is try their best. For me trying my best includes not discarding compassion for survival. Every plan will fail on some level. Then its time to get back on it and modify or abandon the plan.
Yes there are flaws to each and every plan. The problem posed is a difficult one. there will be failures. If one chooses to simply abandon life when BAU ends make no preparations I support that decision. I expect there will me a lot of mind changing when that moment comes and there will be some wishing for preparation.
The man above knows a piece of land. He walks it . I hope he appreciates its beauty; that the land gives us everything.
When I walk I try to feel it. I try to let the land permeate me.
You could do worse in a plan to know a piece of the ecosystem we call the planet. If nothing else going out with a relationship to the planet is not a bad way to go in my opinion.
Nearly everyone on this thread seems to be operating from a false paradigm. You are not going to wake up one morning and discover that all the gas stations are closed up, all the supermarkets shuttered, and there are armed bandits coming down the road on bicycles to take all your possessions. The timeline will be variable, depending on where you are. Ergo, if you have community connections already, you have a longer timeline; in other words a longer glide path.
Reducing your consumption and building connections with other people (especially those growing food) will soften the landing in the event of a financial meltdown, nuclear war, or natural catastrophe. Spinning out scenarios that only focus on the most dire consequences is absurd, unrealistic and childish. As one who has been living with this kind of thinking for 45 years already, my advice to you all is, “Get a grip. Then do something positive to provide for you and yours.”
The paradigm is not false.
Can you explain to me how oil keeps pumping when the global economy collapses?
Can you explain to me how we feed 7.2B people without oil?
Walter — you are whistling past the graveyard….
Paul – You are making the same false argument so beloved of the rightwing whackos here in Whatcom County, Washington. You take a rather benign position and spin it out into a logical absurdity and then stand back and say, “Harrumph! See! You don’t know what you are talking about!”
Try reading your history books again and pay special attention to any number of collapse scenarios, Rome or the Maya for example. The timeline spans many generations. In our world, where things go faster, the timeline will be faster. However, you are not going to wake up one morning and be cut off from all sources of energy and food. Really, get a grip.
As for feeding 7.2 billion people – we won’t be able to. There will be a significant die-off. In my books, I work from the assumption of an 80% net die-off from approximately 2030 to 2100. However, it could also start around 2020. Does this mean you just consume, consume, consume until you cannot any more. That way lies madness. As I often say, “Make friends with a farmer.”
We are on the same page on the die-off.
But what about oil?
Can you explain how it keeps coming out of the ground when the global economy collapses?
You are aware that oil is an extremely high tech business — long gone are the days of this https://www.youtube.com/watch?v=ihKdqk_WJOI
The low hanging fruit is gone — what is left requires computers and other very sophisticated gear… which would require a fully functioning global economy…
As discussed to the point of vomiting … you cannot simply put a gun to the head of the oil workers and tell them to pump the oil out…. because that would mean you have to put a gun to the head of the people who supply the rigs, and computers, and pipes, and spare parts… from all over the world…
When the economy crashes. The oil will stop flowing.
Feel free to explain how I am wrong.
Simply comparing me to right wing whackos and saying that you think I am wrong without providing any facts to rebut what I have said…. that puts you dangerously close to people like the right wing whackos who reject science, logic and facts…
With respect to the other collapses you mention — you are forgetting — this time is different.
When Rome collapsed we had not even begun to tap the earth’s energy riches. A very bright future lay ahead in terms of standards of living….
But this time is different — because we have used up all the easy to get at energy.
In fact we will be worse off than the Romans or any other previous civilization because a) we have used up most of the energy and b) we have not the slightest clue how to live like a Roman – we don’t even know how to live like the people in Little House on the Prairie.
Correctomundo, this time is different. However, it won’t be instant collapse. Orlov talks about five stages of collapse. Tverberg and others have correctly assessed that the financial sector will collapse first. However, this does NOT mean that the world stops. That is just nonsense. It is likely that oil supplies will be severely curtailed rather than just stop. There will be priorities on who gets the last dregs of oil by the gubbmint. This will mean the usual bribes and graft. In other words, the political system will collapse after the financial sector.
The world infrastructure is a very complicated system with a lot of embedded energy lying about. Think in terms of frozen calories. There is a lot of “stuff” than can re-purposed. People will make do with what they can as long as they can. Think in terms of London during the Blitz rather than some godawful disaster movie.
Frozen energy. Embedded energy.
What do you mean by this?
Do you mean we feed plastic bags into the furnaces to create electricity when coal and gas are no longer available?
How do you keep the oil rigs and refineries operating? There are thousands of parts involved — made in various places around the world in a just in time supply chain.
When one key part busts how do you repair the machine?
Even if you could keep the machinery operating how do you move the finished product to where it is needed? You need the full force of BAU to do that
You seem to think complexity is a good thing — you may want to read Tainter — or better still have a read of this – from page 56 http://www.feasta.org/wp-content/uploads/2012/06/Trade-Off1.pdf
Complexity is a weakness… because it means that when one key part of the system breaks — the whole thing collapses — and very quickly.
Simplicity is best — but unfortunately simplicity is not a word that can be used to describe how we extract, refine and transport oil.
The only simplistic thing I see here is your explanation of how oil can continue to flow — when the financial system has collapsed…
The only frozen calories that I can see being available to keep the beast that is BAU operating at all – would be the reserves that have been stored in anticipation of what is coming. And those will go to the military so that the kings can stay in their castles awhile longer…
Of course there are still a fair number of trees that are storing up calories that we could use…
Embedded energy, embodied energy, and “frozen” calories are all the same. Embedded energy is the amount of energy it takes to make a product. For example, it takes energy to make a tractor – to mine the iron, make the steel, tap the rubber trees for tires, mine the ore for copper wires, etc. All modern analyses of energy consumption take this into account. Howard Odum coined the term “embodied” energy when he tried to make a case for human energy (measured in joules or kilocalories) being somehow different than fossil fuel energy (measured in joules or kilocalories). Of course this is nonsense, which is why Howard Odum was relegated to the dustbin of history. [I have gone around and around on this topic with his daughter Mary Odum, so don’t even think about restarting that nonsense.] A measurement is a measurement. End of story.
In the 1980’s, Odumites started using embedded energy because they got tired of correcting everybody. For the same reason I use kilocalories in my work instead of Calories (capital C) or “nutritional” calories or “large” calories. There is a long history of confusion in terms. You can read more about the history of calories and other measurement in my first book “The Laws of Physics Are On My Side” (2013). Frozen calories are just a convenient soundbite. “See that table? It’s an example of frozen calories. Once it is made it still exists as a resource that can used. If you find a table, you don’t have to make one. In the same sense of conserving energy by acknowledging the energy that has already been expended, the greenest buildings are the ones already built.” Blah, blah, blah.
The advantage of embedded energy is that it provides another dimension. For example, David Pimentel estimated the energy needed to produce an acre of corn as 412,146 kilocalories for the machinery (including combines to harvest the corn as well as tractors and implements to till and cultivate) and 406,073 for the diesel to run the machinery. The embedded energy for the machinery was first calculated in total and then prorated over 10 years. (Pimentel, David, Alison Marklein, Megan A. Toth, Marissa N. Karpoff, Gillian S. Paul, Robert McCormack, Joanna Kyriazis and Tim Krueger, “Food Versus Biofuels: Environmental and Economic Costs, Human Ecology, Vol. 37, No. 1, February 2009.) In other words, the diesel to run the machinery is only 98.5% as much as the embedded energy to make the machinery. Of course, this allows industrial ag to flummox you by ignoring the significant energy cost of all those machines that industrial farmers rely upon. However, people like me who use manual labor and tillers only have about 3% of the embedded energy in machinery as industrial farmers. This is the edge that makes us sustainable. Tractor farmers are not sustainable. I am.
You really should look into this kind of thing. Right now you are in Stage 2 – Anger – of Kubler-Ross’ five stages of grief. The next stage – Bargaining – is where most “greenies” and east coast liberals are stuck. Once you get to Stage 5 – Acceptance – then you can start working on solutions.
Oh, and if you think I favor complexity, you haven’t been paying attention. For a quite comprehensive critique of Tainter, check out my book mentioned above. His analysis is quite brilliant, but there are nuances you are missing.
Of course a person can farm a field without a tractor — take a trip into a place like Irian Jaya — they are doing it — subsistence farming is the term — it is a brutal life.
My point is that when the collapse comes the oil will stop. And the world will crash into disease, starvation and death. You have done nothing to convince me otherwise.
As for the stages — I went directly to acceptance. No anger – no depression – no bargaining… like a diamond bullet between the eyes — I suddenly had an epiphany that there was no way out of this.
Do not confuse my apocalyptic vision of what post collapse looks like with anger — it is nothing of the sort — it is a product of cold hard logic — and common sense.
Disease. Starvation. Death. The collapse of civilization will be the mother of all nightmares.
You have agreed that up to 80% of 7.2B people will perish —- I think even more will die. We are talking about billions dying — think about what that will look like…. and for those that survive life will be a living hell.
Try disconnecting from BAU for a week — just to get a whiff of what life will be like.
Paul – apocalyptic vision.
Walter – Post-apocalyptic solutions.
You might want to consider the contribution of postmodernism. It is not just a hip way for academics to keep their tenure. It actually deconstructs the modern narrative to get at “who actually has the power.” That is why postmodern agriculture looks like what I do. It creates wealth from the soil without extraction. When my stepdaughter gets the farm, she will get soil that is more fertile than when we moved here, as well as perennials and volunteer crops.
Primary economy – Wealth extracted from nature. The usual suspects are mining, logging, fossil fuels, and industrial farming. The exception is sustainable farming.
Secondary economy – The zero-sum game. Someone loses when someone wins.
Tertiary economy – Wealth created from thin air. Banks, governments, the Fed, the ECB, etc.
Analogy: We were digging a 5,000-year-old site in Colstrip, Montana one time and the stone tools were made of porcelanite, a crappy shale/clay that can be fired and made into serviceable tools. Not good tools, but serviceable tools. These were the only lithics at the site, even though there were plentiful deposits of Knife River Flint about 100 miles away. In other words, there were no trade networks 5,000 years ago in this area of the High Plains. In the same vein, without trade networks, our post-apocalyptic lifestyles will be severely restrained UNLESS we have trade.
Ergo, 1) build community and 2) grow something you can trade.
Thanks for your discussion of this embedded energy. I agree that it is a huge issue. Also, that the amount of embedded energy is much larger than most people would ever guess.
One issue is that the amount of embedded energy keeps rising, as does the depreciation each year. Thus, the amount of replacement energy required keeps rising.
Another issue is a calculation issue. Where does one set boundaries? This is the same issue as with the calculation of EROEI. How many steps back in the calculations do we go–the machine to make the machine to make the machine? In Saudi Arabia, we need to keep building more desalination plants, for the population. To me, this should be a part of EROEI calculations.
We always need to have a government in place whether we are manufacturing a plate or extracting a barrel of oil. Do we somehow include the cost of this government (and the roads, schools, jails, and laws this requires)? A school book can be thought of as the energy cost of the paper, ink, and binding, or can be thought of in terms of the energy required so that workers could be freed up from working in the field so that the book could be written and students could read it. I believe Odum’s “transformity” calculations were based on this view of the world.
In Saudi Arabia, they have more people than they need, living off of oil-derived welfare. These people have no work ethic, so they import foreign workers. How to put this into EROEI calculations is beyond me.
Perhaps Ukraine following the Soviet collapse, and North Korea following the Soviet collapse give some idea. They are not very nice though.
Of course, the disruption caused by the lack of Russian oil was only temporary. We wouldn’t have the floor on oil availability that they did.
Now, we need to keep the banks, electricity, and oil going to have BAU. There are probably a few other things as well, including enough cheap credit that international trade can go on, and we can continue to make computers and I-phones. I would not count on all of those things lasting until 2030, much less 2100. We have a severe brittleness issue. Also, way too many people relative to non-fossil fuel resources.
Ah, but it won’t be business as usual, will it? Since we won’t know how it will play out, we have to be flexible in our actions, so we can utilize opportunities as they come up. Think of alternative scenarios, based on history. For example, breakdown of empire means the rise of regional polities (Tainter). As states break down, the other three basic forms of human social organization will increase in importance – bands, tribes, and chiefdoms. This is right out of Anthropology 101. [And it would behoove most of the people on this forum to take a refresher course at a community college. A lot of their nonsense would dissipate.] Since we have no crystal balls, it is to our advantage to be flexible enough to adapt. Ergo, build community, create new wealth from the soil, consume less, etc.
If you can run your local economy on local resources, local economies work pretty well. But if you require high-tech devices using minerals from around the world (such as computers, cell phones, wind turbines, solar PV, today’s vehicles), then you are up a creek, without a paddle. There are local resources available, but a lot of them have been depleted to the point where modern equipment is needed to make use of low grade ores.
A big issue is getting enough energy for heat with local materials. This is especially an issue in cold climates trying to do industrial work. Using trees is likely to lead to deforestation. Even recycling metals requires heat, and the result tends not to be very pure.
We can have local economies, but they may need to be pretty low level economies.
Dear Gail,
Have you read “Energy and the Wealth of Nations” written by Charles Hall and economist Kent Klitgaard?
It clearly demonstrates how the current dysmal principles of economics, in particular those issued by the so-called Chicago school, do not sustain the test of real science.
Hence the picture of reality, currently available to the “plebeians” through the “religion” of economics, looks more like an anaestetic fairy tale than the brutal phase change that the human civilization rocket is about to experience when its engine runs out of power, by lack of fuel, before reaching orbit.
If one wants to attempt to understand when and how a “phase change” happens at the scale of a civilization, one needs to look at markers which are much more rigorous than those delivered by current economics. One such key markers is NET energy. In that regard, the EROEI concept helps.
Trigger events of various nature also need to be looked into. Fat tail events can and do occur. In that regard, economics has proved beyond any reasonable doubt that it can mask very real risks long enough for the Titanic to hit an obvious berg…
Hence, only a comprehensive multidisciplinary approach can lead to a realistic understanding of where humanity collectively stands. Physics and geopolitics cannot be ignored.
As for economics, one has to be honest enough to admit that – after the 2007-2008 “events” – its principles simply have to be rewritten from almost scratch.
There’s not going to be a re-write. When the con is finished, the culprits skedaddle outta Dodge. But, it served its purpose: it provided a cover of legitimacy to mask institutional criminal fraud. As a bonus, it even hooked people like you to consider the field worthy of debate – to contest ideas – when there really isn’t any there, there.
But let us consider how effective economics was in delivering an imprimatur of authority for governmental and financial policy. $Trillions have been siphoned from productive enterprise to support a global parasite class. Now, that might be worthy of study, but alas, in the future, stories of our “modern times” will be subject to an oral tradition where legends tend to grow over time.
You got it right. However, when this networked world collapses the confiscated wealth will go with it. All the greed will likely not buy much. The Roman elite learned this very fast as did other expired civilizations. My money is on this being the last civilization and no one will read about it.
Railway lines… apartments… bonds… stocks… etc… will be worthless…
And anyone who has piled into huge amounts of ag land believing ownership of the means of food production will keep them on the top of the pile — well they are in for a surprise… because either the people will seize it… or there will be so few people remaining that land will be there for the taking…
“My money is on this being the last civilization and no one will read about it.”
Yes – because we have plucked and gorged on all the low hanging fruit — the resources required for civilization are gone — even with the full force of BAU we are barely able to get at the energy that remains… so when this all collapses say goodbye ever returning to anything that even remotely resembles this.
I stand by my prediction – the future will look like something between the period of prehistoric man and Mad Max…
I have written a post about Energy and the Wealth of Nations. I know both Charlie Hall and Kent Klitgaard. I am quite familiar with their work.
Although the “plebeians” are constantly presented with the “fairy tale” world view derived from Chicago School economics, TPTB keep a close eye on the critical “net fuel gauge” and what that implies for their ability to continue to exercise power.
Needless to say that if the hypnotic effect of Chicago School economics was to somehow weaken, the “plebeians” might start asking if there is enough net energy left (technically and economically extractable) to honor the massive amounts of money owed all over the planet.
After all, money is basically an IOU ultimately payable in goods and/or services, which somehow have to be manufactured or delivered using available net energy.
If they were to wake up from their economics driven “hypnotic transe”, the “plebeians” might ask for an independent expert assessment of how much net energy still can be delivered from remaining positive EROEI world fossil fuel reserves and from other positive EROEI sources of energy. They might even have this revolution inducing vision that the remaining net energy is far from being sufficient to translate into goods or services the existing mass of IOUs floating around the financial system, at least not at the purchasing power level that they expect… The “plebeians” might also discover that, even if all the above mentioned monetary IOUs were to somehow be vaporized by the Great Mandrake, the remaining available net energy is far from being enough to sustain human civilization – on its current ballistic trajectory – through the rest of the current century.
Hence, to prevent the unfortunate consequences of an unexpected “plebeian” wake-up, one has to realistically suspect that TPTB have – up their sleeve – a few Plan B scenarios whereby they remain in control of a “phase changed” human civilization that would be sustainable for a longer period, at least in terms of remaining positive EROEI planetary energy reserves.
In that regard, it might be entertaining for Gail and others to elaborate on those potential Plan B scenarios…
I do not see a Plan B.
There is only one plan – cheap energy. Without it the PTB are helpless… there power is based on one thing — cheap energy.
And we can see that they are helpless and without a Plan B because of the desperate measures they are taking to try to keep BAU afloat…. they know that when the collapse comes — they are over
“I do not see a Plan B.” Lester Brown has written several books about Plan B. He admits that implementing such a plan would take a greater mobilization than World War II. Ergo, it is not going to happen. In my book, “The Laws of Physics Are On My Side” (2013), I delineate Plan A, business as usual, Plan B – Lester Brown’s plan, Plan C, from Patrick Murphy’s book of the same name, and Plan D – dieoff. Plans A & B lead to the default Plan D. The only viable alternative is Plan C – build community. You would do well to dip into Murphy’s book and then start working on your own alternatives.
Another point I go into in my book is that individuals need to be strong BEFORE they form into groups. This lack of individual strength and expertise is the reason the Transition Movement is failing, for example. Forget Weber, Durkheim, Comte and Marx. Think in terms of Darwinism and don’t get sidetracked by fuzzy concepts like the “meme.” You will have to learn to grow potatoes and beans. You will also have to reduce your currently profligate American lifestyle. Get used to it, or as some wags say, “Collapse now and beat the rush.”
As I have been saying quite a bit lately, “Them dirty hippies was right.”
My Plan B involves exactly that … but I suspect I will not like that Plan when forced to live it… I will likely wish I went down with the ship… it won’t be Little House on the Prairie…
I will readily agree that it is difficult to consider a realistic Plan B scenario that somehow manages to reduce – significantly, rapidly and in an orderly way – the level of human population on the planet.
How to achieve such a result while maintaining a functioning high tech human civilization capable of preventing the +400 planetwide nuclear fission power plants and +1000 radioactive nuclear waste storage sites from blowing-up and contaminating the global environement through trade winds, is the tricky part where creativity will indeed be solicited…
How to prevent WWIII in the process will also require some creative thinking…
Paul, I suspect you are too much curious and will take a look to the other side if the occasion is at hand
Gail,
While in general I agree with your view, I think that the current shale boom has had some effect on the decreasing in oil price (though debt saturation in China could also be a big factor). While shale wells are expensive and poor quality (compared to say spindletop), they may not be the marginal producer, and as such the oil price fall may also be tied in to the fact that they are, to an extent, creating a glut in the US market. Whether or not it’s a glut of oil that people can afford to buy remains to be seen, but shale’s performance is thus far impressive though it may be short lived.
Regardless it would seem that the period of relative oil price stability that we’ve had for the last 4-5 years may well be coming to an end soon. It could very well be that this period represents the ‘eye of the storm’ and that volatility may soon rear it’s head. I don’t know if you saw the 16th Geneva report the other week, but it made for scary reading. One wonders whether the economy could survive another crisis of any sort.
Exactly! Debt is a huge problem, as the Geneva report highlights. I linked to an article about the Geneva report when I mentioned debt in this post. I agree-the Geneva report is scary.
I have come 180 on shale. Without it we would not be on this forum now…
Yes, I think shale has helped push whatever unpleasantness lies around the corner back for a few years, though perhaps at the expense of making it worse.
Based on EIA data, world oil production (broadly defined) was as follows, in million barrels per day:
12-1st half —89.68128717
12-2nd half —89.83083083
13-1st half —89.61196729
13-2nd half —90.69364283
14-1st half —91.10622417
Thus world oil production was essentially flat for the 18 month period including all of 2012 and half of 2013. There is a small increase in world production starting in the second on half of 2014. If the world economy is very weak, I suppose even this small increase in world production could push world prices down. So there may be some truth to shale’s performance helping to push world prices down. Of course, if the world economy were behaving half-way normally, it would be easy to absorb the increase in oil supply. The sanctions against Russia help to push down demand, so this is part of the problem as well.
Thanks for this. It confirms the Reuters article is a complete joke… the price drop has nothing to do with increasing supply and everything to do with a cratering global economy
Gail,
I prefer to use C+C as a measure but it broadly tells the same story. However there is the fact that much of the shale oil is produced within the US, and thus is probably creating the impression of a glut there since it’s not being exported. One wonders how much the media impressions of “saudi america’s” newfound abundance might affect price. How much this feeds back into the world oil price I’m not sure, but it could be a factor, since reflexivity is a very real market dynamic. It’s very hard to pick signal from noise in this respect, as there are presently so many variables which could come into play.
Regardless, I prefer stable oil prices to volatile ones, as does the oil industry! I’m presently taking some defensive moves with my financial arrangements.
Could never get 92
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“What did Zimbabwe have before candles? – they had electricity!” I remember what its like, cars queing for days waiting for a few litres of petrol. Water trickling from taps because too many are tapping into the supply. Standards drop and people revert to a simpler life – they find a way to survive. The problems really start when crime increases to intolerable levels, antibiotics are finally out of stock and cars are used as carts pulled by donkeys or as in Mozambique by people (Shovetodomos). In the USA nobody can imagine living like that because they have had the cheap fuel while the rest of the world had their debt (oil paid for in dollars) – get used to the idea!
Most of us have never been to Africa. My short visit to India a couple of years ago was an eye-opener.
Way back when I was just out of graduate school, I visited Mexico. I rode on a tour bus. Never once did I see a tractor, but I did see quite a few teams of horses plowing. I saw quite a few women washing clothes in streams, and hanging the clothes over bushes to dry.
Hi Gail:
I live in Mexico (Zihuatanejo). You will find it today much like the US, although much safer and without the surveillance and police state atmosphere you live under. You and your spouse are invited to visit and stay in my ocean view suite for a week gratis. Great food gratis too. Just book your air RT flight out of Atlanta via Mexico City to ZIH. I will pick you up upon arrival and bother you little during your stay. You might learn something about how well a very low energy intensive society works why people are much happier here than where you live.
Thanks very much for your offer. I will send you an e-mail.
I’ll post this again — because this gives a glimpse into what life is likely to be like (but much worse as food will not be available) – I found this very disturbing to watch — it presents what it is like to live life without hope… I visited smoky mountain some years ago… a very confronting experience…
http://www.aljazeera.com/programmes/the-slum/2014/08/deliverance-201482883754237240.html
Of course the picture I paint is not the whole truth because other factors also count. Thanks to medicine, well intentioned missionaries and first world guilt, there has been around an 800% population growth during my lifetime, with no significant increase in food production, no employment, limited access to personal debt and incurable corruption resulting in endless warfare in Africa. I also remember a well run colony that had no starvation etc. The problem was it had a white elite and that was not acceptable, only an indigenous, corrupt, explotative one meets the worlds double standards – please I hope nobody brings up the ritualised racist slurs that everyone always falls back on when they run out of arguments. Should I also say it did not meet the world banks ability to easily manipulate – which of course you have talked about. I think the world is insane and don’t expect a recovery any time soon. Now I am on the downhill run I will stick to cleaning my up my own sins as far as I can and move on – I don’t plan to come back.
Great Article yet as always Gail. I agree with most of what you say. You seem to cut the wheat from the chaff when it comes to understanding peak cheap oil and all the ramifications.
However I am more optimistic when it comes to solar. I’m hearing that it is becoming cheaper than fossils fuels now. Similarly that the fossil fuel industry will be the architect to it’s own demise. I believe this will pave the way for unlimited renewable energy to replace fossil fuels completely. There are innovations to solar being made all the time and I believe that solar will become self-perpetuating and major economies of scale and positive feedback loops will enable this industry to flourish.
I am thankful to the fossil fuel industry for their greed and I can see how their business model will become extinct.
Thing is, even if this were possible (and it most certainly isn’t in the actual world in which we live), it would have to be done while oil is still plentiful enough and cheap enough to complete the transition to solar. Which would mean designing, bringing to market cost effectively, and replacing all the earth moving equipment and industrial equipment, all of the transportation infrastructure and vehicles (ships, trains and autos at least, planes are apparently out of luck for the foreseeable future), and all of the manufacturing and power generation facilities and connecting infrastructure in not only the first world, which would have to cannibalize and dispose of all its existing fossil fuel based stuff in the process, but in the developing world as well, which normally adopts the oldest and cheapest technologies available during their transitions. Talk about a tall order! I think you might be a little bit more than just “optimistic” in your support for solar at this point.
I forgot to add, all that “cheap and plentiful” oil that would need to be diverted to support all of that proposed solar ramp up would necessarily mean that the remaining oil left over to support current operations would no longer be so “cheap and plentiful.” Then try applying the logic that “this is necessary to transition to a clean energy future for our children” to the current oil profiteers, climate and peak oil deniers and their assorted fools brigades. In short: IT WON’T HAPPEN!
And at the end of all that, you’d still have an exponentially less energy dense (more diffuse) energy source (by definition, as fossil fuels are little more than stored concentrated sunlight that took millions of years to form) replacing an exponentially more concentrated, portable, and convenient one. Solar is the answer to a question no one’s asking or is even willing to consider at this point. How to provide a modicum of very localized energy for low energy tasks (heating and cooking mostly) in support of a local, low energy existence for a great many! fewer people.
Exactly.
Everything I can see says that wind and solar mostly replace fuels (coal and natural gas) rather than the full cost of electricity, unless one adds all of the backup so that a person can live completely off-grid, with batteries and replacement batteries. The price comparisons that you see are between retail electricity and solar PV, not between solar PV and the cost of coal or natural gas.
The reason that the cost-savings to the electric utilities is so low is because they still have to maintain the electric grid and all the fossil fuel backup. The same staffing for the fossil fuels plants is needed, and these fossil fuels have to ramp up and down more. Grid costs are likely higher, after Solar is added. The electric company still has to send out bills and collect remittances from consumers. So at best, fuel costs are saved. Because of these issues, it is hugely unfair to electric companies to “net meter” solar PV. (It is even unfair to offer them time of day wholesale electricity pricing, because it deprives the fossil fuel companies of the profits they need to keep their operations going. Germany is gradually learning what a mess can be created by unfair pricing schemes.)
The other problem: Our big shortfall right now is cheap oil. Oil is a liquid. Even if we have more electricity, it doesn’t fix our cheap liquid fuel problem.
As has been pointed out numerous times — solar panels don’t grow on trees — oil and particularly coal are needed to mine and refine the materials that go into solar panels.
Solar will not exist without cheap fossil fuels.
As for it’s viability — just recently did solar panels produce more energy than went into making them.
I believe the ration is 1: 1.02…
Oil is somewhere around 1: 12 on average…
Solar would not exist without massive subsidies… because it is a complete and total failure… the only reason governments play this game is to buy the green vote…
If solar made cents then why this? http://reneweconomy.com.au/wp-content/uploads/2014/04/bernstein-energy-supply.jpg
Hi Paul
You are absolutely right:
Let us imagine an alternative energy producing system, wind mills or solar or waves.
They will always be produced under industrial conditions, that means by the electric grid.
Let us imagine that each kwh in the country where this system is manufactured costs 10 USD-cent.
And let us imagine that the system when finished and ready to start production costs 1 million $.
I am convinced that money is just another word for energy, and therefore the new alternative system ‘owes’ 10 million kwh before it starts producing its own electricity.
(I don’t include extra expenses as transportation costs or maintenance costs).
Even repaying its own energy cost is not possible – so a lot of coal will be used in vain to fulfill hopeful green dreams.
Gail – You seem to have put “peak oilers” in a box. This a straw man argument. If it makes you feel any better, high profile academics do this too. For instance Steven Pinker did the same thing with “Blank Slate” (2002). He set up the straw man argument that children are “blank slates” upon which can be written cultural rules, morals, etc. This “tabula rasa” is an old discredited idea and served to advance his standing at Harvard and in the psychology community, but it has been dismissed in anthropology for over 50 years.
I got onto peak oil in 2008, but I have been critical of the American economic system for nearly 50 years. I work on alternatives. There is a lot more nuance about “peak oil” than you indicate.
Great article, superb insights, as usual, but I also object to the tone in the last section, including figure 5, wherein Gail seems a little too eager to join in the bashing of the peak oilers. My impression is that “peak oilers” are a very diverse group, and many generalizations about them are neither accurate nor helpful. I first started thinking about these matters during the 1973 oil crisis and have followed related events carefully ever since. My early analysis was no doubt naive and inadequate but it has continued to evolve and mature and reconcile itself with reality. I suspect this is the case with many others. Peak oilers get credit for recognizing and raising awareness of a critically important issue that most were ignoring. Period. No qualifiers or apologies are really needed that they have been insufficiently clairvoyant.
I thought Gail was very gracious in her assessment of peak oilers… she gave credit where credit is due — and pointed out the flaws…
With respect, I believe you mischaracterize both Gail S. Pinker. The Blank Slate was a critique of anti-hereditarian cultural beliefs that, in fact, got Pinker in hot water amongst the Politically Correct, despite the evidence, so you have the backwards, I believe. Gail’s gentle criticism of peak oil as an theory in itself is that it fails to encompass the complex, emergent aspect of industrial modernity which appears to depend on exponential growth in perpetuity, an obvious impossibility. The problems we see now were foreseen by thinkers 200+ years ago. What was not foreseen was the dramatic effect of science and technology in allowing our overshoot to go on this long. Nor, perhaps, the dysgenic changes that have been allowed by human genius to damage it’s own fabric, further increasing the burden to be borne.
Gail, you are a treasure. Your patience and persistence is a marvel to me. Keep up the superb work!
From the Publishers Weekly blurb on Amazon: “Pinker, a chaired professor of psychology at MIT, attacks the notion that an infant’s mind is a blank slate, arguing instead that human beings have an inherited universal structure shaped by the demands made upon the species for survival, albeit with plenty of room for cultural and individual variation.”
Ahem. Any college freshman who takes Anthropology 101 gets convincing evidence that the “blank slate” has been outmoded for many years. The frosh also gets convincing evidence that infants are instead “hard-wired” by evolution for absorbing culture. IF this is news to Pinker, he must have been asleep during his undergrad days. It sure seems like a straw man argument to me; i.e. there really is no accepted tradition of the blank slate anymore. If I remember correctly, he was criticized roundly in several book reviews for just this straw man argument.
Walter,
As Jabberwocky pointed out above you have the case against Steve Pinker completely back to front. I couldn’t believe it when you persisted with your argument. So much so that I pulled out my copy of the book just to assure myself that the book is a case AGAINST the idea of a blank slate. In fact if you reread your own extract from the blurb you will see that it says that ¨ it attacks the notion that an infant’s mind is a blank slate¨ So much for your argument – perhaps your case against Gail has as much thought and research as your case against Steve Pinker!
Barry – Of COURSE it is an argument against the “blank slate!” Try reading both my posts again. Pinker’s argument is a straw man argument because the blank slate (or tabula rasa) argument isn’t even used anymore. Here is how a straw man argument works. We are not in the era of Aristotle or Locke anymore.
A) Set up a straw man
B) Prove conclusively that the straw man is easy to knock down
C) Revel in your acclaim
I am amused at your naivete.
Your use if a straw man argument is unusual. Usually it means misrepresenting the opponent’s argument and does rely on the audience’s ignorance. An example would be where someone (not Gail of course) said that “peak oilers believe we are going to run out of oil soon!”, and then showed that we have plenty of oil reserves (in the ground). The first part is misrepresentation of their positions.
A straw man argument is not about misrepresenting an opponent’s argument. It is about questioning why there is an argument in the first place. Nobody takes the blank slate position seriously anymore. So why did Pinker write the book? To make money and fulfill his publication requirement.
I agree that there are a lot of nuances with respect to Peak Oilers.
This is a post I wrote a while ago Is Yergin Correct about Oil Supply? (An Opinion the WSJ Did Not Run)
In this post I said,
It is hard to know what to say in a post. If an author had 20,000 words, and readers had infinite time and patience, then one could explain all of these fine points. If an author wants to make a point, sometimes the nuances get left out.
Ms Tverberg I have enjoyed and followed your essays for years now and am convinced you’re on the right track I host an environmental radio show in Sacramento California with interviews of guests weekly – if you could do a phone interview sometime I can record it between 10-1pst on a thursday . I would be honored It would take less than 30 minutes Sincerely Stephen Saffold spsaff@att.net
I answered by email.
Hi, I’m surprised this paper hasn’t been mentioned unless I’ve missed it in the comments. The author does a podcast interview on Ecoshock Radio.
http://www.sustainable.unimelb.edu.au/files/mssi/MSSI-ResearchPaper-4_Turner_2014.pdf
It’s a review of LTG but points to diminishing returns being the problem too.
Thank! Yes, I have seen it. In fact, I started writing a post about it. I found myself criticizing some of Turner’s techniques and assumptions–but decided that served no useful purpose (but this is the first instinct of an analyst–no matter what they read). The other alternative was to write a “Rah-Rah, Turner sees some of the same things I do” post, but it didn’t quite seem like I could justify a whole post of Rah-Rah. So I ended up saying nothing about it. I probably should have at least referred to it. Thanks for mentioning it.
I think you are locked into a concept this economic system is the best system, Gail. Perhaps it is the best system ever for the number of non-productive middleman and deal makers!
I also think a trip to Greece is trivial because it would be more important to put to use these resources in matters more sustainable. Which would also provide a job to the people that would otherwise be catering to the vacationer.
We are certainly locked into this current economic affairs until exhaustion, which in my view is way sooner than later. Then we will all be forced to live within the natural production. Consequently, it is far better to not be reliant on this economy as the growing count of middlemen are.
It is likely to be extremely difficult to transition from our current networked economic system to a new one. A lot of people will likely die in the process.
As humans, we haven’t ever lived within natural production. Most animals get their energy from food they eat. We have been supplementing energy from food with the use of burned biomass since hunter-gatherer days. This burned biomass allowed us to cook our food, and as a consequence develop larger brains and smaller chewing and digestive apparatus. We are now adapted to cooked food. Also, with 7 billion people, we need energy for other purposes–to heat homes in cold areas of the world, to make clothing for us; to make homes for us; to transport food from where it is grown to where we are living; and of course to cook (and refrigerate) our food. With 7 billion people, we pretty much need fossil fuels to keep up with all of this. When we last lived without fossil fuels, there were fewer than 1 billion people.
I don’t agree. there are many scientific designs that mimic the natural processes which we can put to the land that will grow more food, more nutritious food, and end the reliance on fossil fuels. These processes will employ people in its implementation and maintenance. One such system that is proven over the centuries is the chinampa system. Then there are new such methods, some of which would be described in “Permaculture A Designers’ Manual”.
Again, you are dead wrong about your assessment of the importance of fossil fuels. These energies do not power our survival, they power our leisure. Please make a note of this.
“there are many scientific designs that mimic the natural processes which we can put to the land that will grow more food, more nutritious food, and end the reliance on fossil fuels”
Can you elaborate on how we can feed 7+ billion people using natural processes?
My understanding is that fossil fuels have allowed us to produce far more food because all one needed to do was throw some chemical pellets onto the soil and grow another crop…. rather than use natural composting methods which take time….
An Amish farmer told me there is absolutely no way he could farm organically — because banks would not lend to him to buy land if he farmed this way — because if he lost a crop to disease he’d default on the loan.
Organic methods work but will ever feed 7 billion people.
Perhaps you are referring to some other method of food production?
Sure I could elaborate and write a book on the subject. However, there are already many books that exist about how we can feed many more people than the current system can. So i will suggest you type “permculture authors” into a search engine and begin the learning process. Of course, I have already mentioned a book, and you should have already been on it. You can also type geofflawton.com and sign up for the free videos. He he will give you a taste of the information with these short videos.
I can make soil out of compost in eighteen days. Its termed the “Berkeley Method”. Right now I am “growing a compost pile” using the garden leftovers. This current compost pile has so many more elements in it than the dead dirt found on large corporate farms. My home grown food feeds from on my home grown compost and I guarantee it is of magnitude more healthy than the empty calories most other people are eating. Much unlike the large organic farms that truck lifeless elements in from sometimes hundreds of miles away, you are probably thinking about. In terms of annual crops the key idea here is small. Food forests now, are another matter.
The Amish farmer you know probably doesn’t even follow his own bible, in allowing the land to go fallow to heal from his destructive pattern. You go tell him that.
You are right, organic methods as promoted and practiced today will not feed seven billion people. But organic does have a place, as do many other more natural techniques. I mentioned one above, of course, you should have already been on it. It really all depends on climate, area, soil type, slope, ect, as to how you want to mimic the natural process to grow human food by human design.
The real problem is the corporate system does not want you to think you have any other option except them, in all things. Bloggers like Gail need to break out of this black magic spell, or, um, box, they find themselves in describing how and why this current system is a dead end and in the process of failing.
Here i am making compost in my city backyard: https://www.youtube.com/watch?v=VApnP7-DSyc
Well, but the key to all of the above is the recognition that it won’t work for 7B+ people (and counting), which is always the fly in the ointment. Dealing with the fact that a good portion of the people alive today are going to have to die well ahead of their time and not be replaced for anything else to work is always the 800 pound gorilla in any discussion room of possible alternatives.
Right. I don’t imagine we will see a Whole Foods store in Africa anytime soon…
Is that the same book that promotes the myth that organic farming is more profitable than industrial farming ….
But fails to mention that the only reason this is so is because there is a very tiny elite who are willing to pay extravagant prices to not have to eat what the hoi polloi eat?
There is no way in hell that organic farming can feed 7B+ people — because it is simply too expensive to produce in this manner.
This is like saying $300 oil is not a problem…
As anyone knows organic farming is labour intensive — it is not going down to walmart buying some pellets and spray and dropping them onto your garden…
A small team of farmers can crop thousands of acres… you would need many hundreds of employees to do the same using organic methods.
The costs would need to be passed on in the price of food….
Now of course when the world collapses people will be more than happy to have very low paying organic farming jobs — they will likely even work for food…
But again we come back to the problem – we have f^%$#@ up the soil. It takes time to fix the soil.
What will these billions eat during the interim? Grass? Dogs? Cats? Rats? Each other? Babies?
“The Amish farmer you know probably doesn’t even follow his own bible, in allowing the land to go fallow to heal from his destructive pattern. You go tell him that.”
The Amish farmer – like most Amish farmers – have growing families who need land – therefore they need financing — so if they leave land fallow guess what happens?
You got it — they cannot compete on price for land because the farmer who doesn’t go fallow produces more and makes more profit meaning he can out bid the Amish farmer.
These methods may work for a hobby farmer — but they absolutely do not on a large commercial farm.
Do you think the Amish are stupid? That the average farmer is thick as a brick?
Do you not think that if he could produce more food and more profit using organic methods – that he’d not change over immediately?
Or maybe – as I have pointed out (and been roundly criticized by the organic farming gurus) — because once you go industrial you can’t go back — because your land it addicted to chemical inputs?
I leave the organic gurus with some food for thought…. you say we can grow food on this dead soil within one season.
In cooler climates it takes many months to create compost…. the commercial organic farmers I know have literally tonnes of this stuff on the go all the time….
Pray tell where all the organic matter is going to come from to produce a near term crop on the many millions of hectares of industrially farmed land around the world?
Get ready for the famine to end all famines.
“We SHOULD grow – and that is where the economists are right-, by using better craftmanship and science and better regeneration and re-use of resources, but not by shortcutting by one-shot solutions as fossil energy, and not by principles as the biggest takes it all.”
No. Exponential growth is not supported by the natural world.
” better craftmanship and science and better regeneration and re-use of resources”
Thermodynamics. Physics trumps word constructs.
Indeed. Not exponential growth. Maybe controlled growth, as in a good garden. Enough growth to replace bad things. But not “more of everything”.
Some perspective on Growth. Massive growth was possible in non-fossil fuel societies, even before the Agricultural Revolution of the late 18th century and over a prolonged period: in my English village, situated on very heavy clays, there were 35 peasants in the 1080’s, which had risen to 350 by the 1250’s – a extraordinary rate of growth! And all living from the same land. Then it plateaued until the 14th century.
I believe it’s generally accepted that this kind of growth led to an impossible strain on resources, steadily weakening the health of the population -above all inadequate nutrition for the poorest – in preparation for the dramatic reductions of the 14th century precipitated by plague and extensive crop failures, when the population fell by at least 33% according to the records.
From the chronicles, it’s clear that another major factor in very high mortality was the inability to move sufficient -or any – grain by land from areas where crops had produced a surplus, and also the lack of money to buy any imported food if it did arrive (a problem not experienced by the aristocracy of course).
The Growth Religion of the 20th century is of course something else.
We do know that a lot of periods of economic growth were followed by collapses.
Thank you for your post
“they need to feel themselves poor.” Word. Then they can discover it feels good. It feels great. This is art of life. It is sad that most only are able to feel through consumption. What is much more sad is the extinction of other life species that the consumption and exponential growth creates.
“have to instruct them”
Im afraid I can not do this. I have not the energy. Perhaps I lack skill. The consumption model of a modern human is a very strong prevalent component perhaps stronger than the aspect we know as ego. Without it people know not what they are and resistance to this is incredible. Consumption model remains in me. I salute your efforts.
“Consumption model.”
That is indeed a very strong prevalent component.
It may be the root of all this trouble.
In ancient religion, it was recommended that the powerfull should behave modest, and do also their daily work, just like everyone else, in order to make a good example.
In the “ancien Régime” The western people had very very bad examples.
We should have heeded them — then we could have collapsed from a much lower cliff…
Gail,
Great article. You said, “But don’t we ultimately still get back to the problem that it takes “inexpensive” (in terms of resources, people’s time, capital investments) to make goods and services that lead to economic growth?”
Yes, we began this whole growth process 12,000 years ago based on exactly what you mentioned above, inexpensive resources, time & capital. Hunter gatherers/ early agriculturists had ample resources and time and their capital was simple and initially sustainable. Now we have the problem of a very high cost for resources and more time required to produce them unless we allocate additional capital which is itself expensive.
I would like you to expand a bit on how wages are kept stagnant by diminishing returns.
Wgaes represent the worker’s share of “value added.” The value to a society of a barrel of oil, or of a gallon of water is the same, whether it took one worker or ten workers to produce it. As diminishing returns start “biting” it takes more workers to produce a barrel of oil (because it is deeper, or requires fracking) than it did before. It takes more workers to produce a gallon of water, because of the need to build a desalination plant. It takes more workers to extract metal, because of the extra material included in the low-quality ore.
One way of looking at the problem is that with all of these extra workers working in producing commodities like oil, water, and metals, there are fewer workers left who can work in producing the end products we need and want, like cars and computers that require these commodities. The total finished goods and services made by society stops rising, and starts falling. The workers can only share in the end products that are actually made. There is less and less produced per worker in total, considering the growing inefficiency of producing commodities.
Gail,
You are correct about the effect of diminishing returns on wages, but it should be remembered that many other factors can cause wage real wage reduction, even in a growing economy. One of these factors is automation; another is inflation. Automation redistributes “value added” to the owners of the machines; inflation redistributes resources from wage earners to owners of hard assets.
In the long run, even with perfectly ‘fair’ distribution, diminishing returns does indeed diminish the return on capital and labor, meaning everyone gets poorer. The only way around diminishing returns is to utilize only those resources that are renewable, such as photosynthetic output and rainwater, at rates that are a constant fraction of the resource used. Unfortunately, that requires a very low level of technology and population, neither of which appeal to most people.
See Grapes of Wrath – Steinbeck…
Brought forward — too many workers – not enough work = downwards pressure on wages as desperate workers agree to work for less…
Globalization = too many workers
Too many workers = full employment at 20 hour work week = tradeoff of purposeful lives for un-resourceful consumption. Aside from the survival imperative, what is wrong with the equation? The privilege of survival does not come without responsibility.
The way we are doing things, way too much of returns are going to owners of businesses and owners of capital goods. The total return is going down. There is not enough for workers, no matter how it is divided up.
should have said …too many workers can be translated to more people working fewer hours. The tradeoff is more people participating, more time off for family and society, but less resource and therefore economic capacity of wasteful consumption…
Saying “Diminishing Returns” is just another way of saying declining EROEI. There is no difference. Sometimes we reinvent a story so we don’t have to admit we were wrong, this is cognitive dissonance. EROEI is EVERYTHING, it governs all life and systems. Growth is enabled by an excess of EROEI. We had runaway growth with FF’s, now guess what is happening as the energy cost to extract and use them increases.
I think there is a difference between “diminishing returns” and “declining EROEI”. Diminishing returns occurs in many situations, such as rising population relative to arable land. There is no clear EROEI calculation in this situation. EROEI only relates to a piece of the problem.
The way the calculation of EROEI is done also makes it less than a perfect calculation. For example, energy exporters need to keep their people pacified. They need new desalination plants. At no point do these real costs of production make it into the calculation.
The omission of a time element is a problem as well. Having to put in a big up front investment and collecting the output over 20 years provides (as with wind and solar) provides a very different return than digging an oil well and getting the oil out tomorrow. The calculation does not take this into account, though.
The non-equivalence of different types of energy and the huge cost of changeovers are other issues.
The big picture is EROEI. Breaking it down into it’s various components does not mean that it is irrelevant. The energy slaves at first, practically worked for free. That enabled the explosion in populations which in turn increased consumerism and globalization. Globalization was itself a reaction to peaking EROEI.
Now the energy slaves are requiring to be paid….more and more for doing the same and even less work. If the energy slaves don’t get paid enough they begin to go away…..we are in that situation now. EROEI is not just part of the story it is the whole story, everything relates back to that simple premise. Because it is difficult to calculate and is sometimes abstract does not mean EROEI should be dismissed. I understand as an Actuary you need to be able calculate. It is not just your inability to quantify the affects of declining EROEI almost everyone ignores it. It’s a problem that is and has been masked by discounting the future with debt.
EROEI is easy to calculate for a very small business but things change with complexity as a business grows. This does not alter the underlying fact that EROEI is the “be all and end all” of the final calculation. The can may be kicked by various means but in the end if the energy in, in no matter what form is less than necessary, the operation, business or life form will die.
The reason the tar sands weren’t mined why battery cars were not developed, why wind turbines were not considered, why solar panels were not manufactured and the list goes on is because in a growing world of high EROEI they were not feasible. Businesses did not not understand, that is was the concept of EROEI that deemed their development as unprofitable, they would think of it as “diminishing returns”………
In all things relating to our situation and/or predicament you are the most lucid and best writer on the internet by a goodly margin. I would never try and contradict you analysis, mine is simply an observation and in the long run, right or wrong means absolutely nothing.
EROEI is not irrelevant, but the details of the calculations leave quite a few “issues.”
A low EROEI world cannot operate with the current level of complexity. Trying to add more at the low end of the scale is asking for trouble.
If wealth is redistributed from wage earners to the owners of machines and the owners of hard assets, we have a huge problem. We end up with most of the wealth redistributed to the top 1%. This in theory can be fixed by high taxes on businesses and on owners of assets, and huge transfers of wealth to individuals–but what does this accomplish? We have a lot of unemployed individuals getting handouts from the governments, and feeling bad about their contribution to the world. We have the owners of the 1% running around the world, finding new homes for their assets, so as to get the lowest tax rate. The situation is very bad, and hard to fix.
We need to have a situation where nearly every individual can earn enough to provide for himself. Huge and growing disparity of wealth for the reasons you mention are a problem.
“We need to have a situation where nearly every individual can earn enough to provide for himself.”
What is this “earning” that you speak of?
I have a mule named oil.
he pulls my cart
YAH mule
Jane is paid $5 per day to scoop up coal from a surface pile and bring it to a furnace. She can deliver 100 buckets per day.
The surface pile is gone. Jane gets paid $5 per day to scoop coal from another pile that is 1km beneath the surface of the earth. She can deliver 10 buckets per day.
But you forgot about Dick. He’s at home drinking beer. Now Dick has to go to work too for $5.00 per day helping Jane scoop up coal to burn.
LMAO, no he’s at home drinking beer AND trying to keep up with ourfiniteworld posts. I’ve stopped playing world of Warcraft to keep up with this blog…btw thank you everyone for your great posts! *in the background* Honey, where is my IPA?
And why not! Spoken as I pour a rather robust cup full of single malt 🙂
The economists are not the worst in their thinking. In fact, nobody listens to them, so their influence is rather limited. It is the billions of people who don’t think, and continue to consume way too much, that are the main problem.
They do this just because they believe – they were told, litterally every day- that you need stuff, new stuff, newer stuff and newest stuff all the time to solve their problems and to feel happy. I know a lot of people whose goal-in-life is buying houses and refurbishing them, all life long. Others have that with cars. Others are traveling all over the world to “discover” Hotels, Cruise-ships, Bars, etc… They are very happy, every time they can show me their new “real” success.
The worst type, are the ones that are gathering only money – a virtual product-, because they tend to control the businesses and activities we all need to survive.
Every entrepreneur that was “happy” having “enough”, was outcompeted by the ones who want more than everything. This competition was won easy by the use of cheap fossil energy.
We SHOULD grow – and that is where the economists are right-, by using better craftmanship and science and better regeneration and re-use of resources, but not by shortcutting by one-shot solutions as fossil energy, and not by principles as the biggest takes it all.
The government should take care that repair and modernisation of stuff and systems, remains cheaper than new ones. Now they do just the opposite. In fact, the last decades, we forgot how we have to repair. Things are even made impossible to repair.
We do not need a centrally governed economy, but we do need a plan. It is expected that the “biggest” will oppose. So how can we get out of this ?
If we want people to conserve resources and energy, they need to feel themselves poor. That is the beginning. Then, you have to instruct them how to organise their lives so they can enjoy life, without all that excess use of resources.
That may need some generations.
They used to advice the graduating classes to leave the table a little hungry. Unfortunately many to most in our affluent societies cannot delay gratification and panic at hunger’s slightest pang. They sling their rilfes to take up the hunt right after dinner. But I agree 110% with your analysis: Plans and regulation in just the right measure. Gun control goes hand in hand with money control.
In theory, using less sounds like a good idea, but it really doesn’t get us very far, because the economy as it is currently constructed has to grow. (I know this is bizarre!) One problem is that the price of commodities like oil drops too low. Another is that debt defaults become a big problem, leading to bank collapses.
I don’t know how we can reorganize to a different system.
We should severely punish -with taxes, YES WE CAN DO THAT !- the manufacturers of “bad”, unrepairable products. E.g.:
non-standard battery: +10€/Wh.
closed-source electronics/software: +100€ / dgitalIO-point. + 100€ / display + 100€/ serial
uncomplete manuals and documentation: +50% product price.
…..
and give all these resources to technical schools.
Can we also punish all of the cell phone manufactures who change the charging cord with each new iteration of their product? I have a very large drawer full of perfectly good cell phone charging cords that don’t fit anything! Think how much copper and other materials go into making millions and millions of new charge cords each year.
Guvment will save us!
Its Magic!
IMF 2010 resolution to consolidate global finance under a basket of currencies with Special Drawing Rights, SDRs, appropriated under new rules for collateral and credit which account for assets and prior debt?
Our basic problem is diminishing returns, though. The problems with the financial system are just symptoms of the underlying problem of needing an increasing amount of resources (including human labor) just to keep the system operating. Even if we do reorganize, the underlying problems will manifest themselves in the new structure.
The 2010 reforms would definitely be stopgap. The problem is depletion and population. But these problems must be solved cooperatively; and by that I do not mean once solved its back to BAU. The very exercise of going through the global currency remount will teach us all about the importance of planning, reflection and restraint. It would be the first time the world got together to attempt large scale change of the human attitude towards economic behavior. Were the effort to succeed, we would accomplish a radical re-imagining of civilization, abandoning the flawed economics of profit and loss in favor of the economics of sustainability and compassion. We have the information. If only we have the time, eqanimity and resources.
Steven – this sounds a bit ivory tower…. when the oil stops the chaos begins… I doubt we will be getting together and trying to work out where we went wrong…
Might I suggest — people are so underestimating what this situation represents. It is not like WW2 … or the Depression…. this is not something we recover from… this is for all intents and purposes….
The End.
I have considered the possibility…I ACCEPT the possibility. Life is going to be very different, more difficult than we know. And yet whispers of possibility reach me. These whispers drive some to the South Pacific, others to realms of spiritual or existential refuge. Hope dies last, every moment precious.
You got that right!
I really should be in Luang Prabang now — with a pipe of opium…
But my life although aware — does not share that inclination with me — she does not read this blog and she probably does not realize what survival means — and I prefer not to attempt to enlighten her…
I think you two have really arrived at the very crux of our current problem: what do you do if you have arrived at the very crux of an existential problem, and yet, in doing so, have concluded that it is irresolvable? Zen koan much? And thus our current conundrum.
I agree that the financial problems are but a symptom of a greater disease called resource depletion. Any system that replaces the current system will not and cannot restore our natural resources. It will take millions of years to do that. No amount of hand-waving will change that.
Exactly.
I used to rail against consumerism — until I got it through my thick skull that if the world started living as I was trying to — the global economy would collapse…
Not only does the hamster have to keep running — he has to keep increasing his speed…
We all know how that ends…
“Another is that debt defaults become a big problem, leading to bank collapses.”
I do not see that as a problem. That is the logical outcome of bad investment decisions.
The related problem is that there is a choice between unfettered capitalism, and a just and fair society, but that is waay off topic here. I’d suggest the real problem is the removal of risk from reward, and reward from risk. Thus investors can be induced to place their capital into shale gas and shale oil because the preceived risk is lower than a rational analyisis might suggest, and because the rewards from investment in fixed interest securities are at the lowest almost in all recorded history.
I think that this was one of the intended consequences of QE + ZIRP.
http://www.bloomberg.com/news/2014-10-09/ceos-tout-reserves-of-oil-gas-revealed-to-be-less-to-sec.html
“Many of the companies use their own variation of resource potential, often with little explanation of what the number includes, how long it will take to drill or how much it will cost. The average estimate of resource potential was 6.6 times higher than the proved reserves reported to the SEC, the data compiled by Bloomberg News show. ”
And you thought it was the FED’s duty to take the puncbowl away when the party begins to get a little rowdy. /sarc
“Every entrepreneur that was “happy” having “enough”, was outcompeted by the ones who want more than everything. This competition was won easy by the use of cheap fossil energy.”
That’s it in a nutshell, as there really isn’t any such thing as enough in this culture. If an opening, an opportunity exists it creates a vacuum that gets filled extremely fast. Unfortunately that does not bode well for long term planning, so once the cheap energy is gone the opportunities will diminish to eventually racing to a little bit of food to stay alive a little longer.
Exactly. Let’s imagine that in the early 19th century the British, seeing the ecological disasters which would result from the pursuit of the consumption economy, had turned away from industrialisation. Result? They would have been conquered by the first European state to industrialise, their coal resources being the great prize, and the people enslaved. Similarly now, if Europe cuts back on fossil fuel use, then Asia will consume the difference.
Western salvation, for a few decades anyway, could be a matter of positioning (grovelling) near enough Asia’s table to catch a few crumbs….?
Only the Western cultures want more, more, more. The Asian, African, Americas cultures had complex societies for thousand of years but were content to live as their ancestors did. Without the expansionist ideas of Europeans over the last 500 years nothing would have changed in Africa, Asia, or the Americas. As a white man, yes, it’s all my fault.
The Europeans were trying to live in a cold countries with fairly high population levels. They needed help from fossil fuels, so they didn’t burn down all the trees. Once they got fossil fuels, they especially grew, grew, grew. I think debt was a big enabler of this growth. It allowed citizens to buy products made with fossil fuels (like cars and refrigerators) and businesses to build factories, before they had earned profits from selling the items they planned to make. The amount of debt grew and grew, pushing up growth, but also leading to a fairly quick end to the bubble.
Even without debt-field growth, there were quite a lot of civilizations that collapsed in Asia and the Americas–perhaps Africa as well (I don’t know much about Africa), and certainly Australia. The overshoot and collapse situation seems to occur almost everywhere, although some places take longer than others. Rising long-term population is a problem, as is depletion of resources (overhunting, decreasing soil quality with farming). Climate change may play a role as well.
Competitors tend to destroy the outcompeted, or at least they release some bad behaviour against them after victory. So when a socio-economic system want to survive or protect its inhabitants, it continuously has to improve its defense and economic power, in order to be never outcompeted. These improvements are done with growth and energy consumption.
Also Asian history is full of conquest and war. I fear them.
Media culture still has huge impact on peoples minds. It is mainly constructing the infinite growth and competitive consumption paradigm. Media culture is encouraging people to be free individuals and consume like Hollywood superstars. So if you can’t control the media and popular culture industry, cultural change would be quite hard even if Internet has changed things. But. as previously stated, there is no alternative.
Media culture is the Morphine and the Coke of our collective consciousness. It is a constant flow of manipulated information as you state. It is way much stronger and sophisticated than education at schools.
“The networked economy automatically deletes obsolete products and re-optimizes to produce the goods needed now. ”
That may be true for new products, in regards to spare parts my experience differs somewhat. . In the last two decades our spare parts supply chains have been decimated. As profit has taken precedence rather than value metric that evaluates organization and structure of a corporations cost cutting has become the primary method of increasing profits rather than investments in capabilities that create value. Supply chains have been widely deleted. This started with the end user not stocking parts because it did not have to tie up the capital. The spare parts department was eliminated saving that cost and critical parts were shipped in overnight. All was well for a while. This shifted the cost of the supply chain to the manufacturers. They in their turn implemented a strategy where the cost of spare parts was dependent on the time frame. Need it Tomorrow its triple, in a month double, in six months regular price.
The other factor is that supporting spare parts for a product just is not profitable. What is profitable is the end user discarding his old product and buying a new one. As a result we see product support times becoming shorter and shorter and in many cases support is cobbled together and only for big customers even within the claimed support time frame. This elimination of support is just one factor in the severe destruction of value in USA corporate structure. I find it humorous when someone recommends brand x ” Ive had it ten years runs like a champ”. The organization and structure that created that product has been eliminated two , three, four, five times over. Only the brand name remains. Components change constantly. Efforts to maintain component compatibility in this “difficult environment” are akin to a fish trying to stay in the same place in the ocean.
BAU is sick even now.
In this matter Gail you are truly a optimist. 🙂
You are right about spare parts not being stocked for long. Even specialized batteries for devices may not be available. Clearly businesses primary interest is in selling more of the current products.
I wonder what happens to all the wind and solar sold by bankrupt companies. Wind needs lots of replacement parts. Solar may need defective modules replaced. Spare parts are not going to be made by a local hobbyist.
It’s termed “planned obsolescence.”
Replacing a failed device or system only appears to be more profitable than repairing a damaged or worn out part. It is a solution path that most benefits the manufacturing sector; primarily because of its ability to externalize some of the real costs of production, like pollution and waste.
It is the accounting system – civilization’s bookkeeping – that is out of line with reality. We allow these things to happen because of our nearly universal belief that manufacturing employment pays well, that these choices will let us all have good jobs and prosper. It is primarily our social and political valuation process that is out of whack.
We can argue back and forth forever if this view arose spontaneously or if it was promoted by owners of the ‘means of production’. The idea of financial security is however a strong motivator. It always has been, too.
We believe in infinite growth – because we want to believe. The alternative is terrifying, and requires great courage and a strong personal character to face up to and assimilate. Last time I looked, neither one of these were part of the ‘common core’ curriculum.
Your first paragraph makes a good point.
There is another element that is important there: skill. In a factory, the workers know only their part of the product. Nobody of the workers has to know the entire manufacturing. That is cheaper than if every worker has to know everything.
Even for the maintenance of my car: mechanical jobs are done by other technicians than the software updates. None of them can service my car alone !
That is the problem with complexity. It takes more and more inputs to keep it running and just staying even causes problems. Auto repair is a perfect example of that. It used to be that any decent American male could look under the hood and at least diagnose the problem, if not outright fix it. Now, plug it into a computer…
“It used to be that any decent American male could look under the hood and at least diagnose the problem, if not outright fix it. Now, plug it into a computer…”
I remember helping my father changing the motor in our car. I have tried looking under the hood in my current car, there is no way I could do what we did 25 years ago.
Excellent comment!
WSJ article was once again an example of western faith in progress. Technology developes forever and oil is going to be replaced just like whale oil was replaced by oil. Believers think necessity is the father of progress and mankind is going to figure out this mess. Amen. Hope they are right. Peak oilers are important actors pushing them forward though. Magic tricks don’t get any better if no one exposes them.
We have a lot of other publications that follow the same path. I cancelled our subscription to Scientific American a while back, for this reason. National Geographic isn’t as bad, but I noticed this month there was an article on the wonders of genetically modified seeds.
The history is a little different – oil did not replace whale oil. Whale oil production peaked in 1845 , 14 years before the first oil in Pennsylvania at which time whaling was in severe decline. Whale oil was replaced by camphene and other liquid fuels such as burning fluid, lard oil, coal oil as well as candles.
The biggest problem we face as we all know is an infinite economic growth model which ties in with fractional reserve banking. That IMO, is the root of the problem. This has created the need to keep the hamster wheel turning faster and faster until the hamster dies.
I would argue, though, that without some approach leading to rising debt, we would not be able to get oil and fossil fuels out of the ground. Prices of commodities would not be high enough.
We have an underlying problem of all species (including humans) reproducing at a higher rate than required to replace themselves. In addition to this, we also have a drive to keep ourselves and our children alive. These issue lead to rising population–an even more basic issue making the hamster wheel turn.
True but on the flip side FRB requires exponential population growth so it compounds the problem.
Dear Gail
‘without rising debt, we would not be able to get oil and fossil fuels out of the ground’.
I would first suggest that the statement is true not only of oil but of many other non-renewable resources, such as metals.
However, if we look deeply into the actual mechanisms of production, we find two distinctly different problems:
(1) Is there any physical mechanism which can repay 100 trillion in debt? And I think the answer is ‘No’. Which leaves us with the requirement that debts be reduced in size by inflation or write-offs or defaults or collapses.
(2) If debts were all incurred to finance productive enterprises, then the question gets more interesting. At the present time, most industrial processes are actually quite wasteful in terms of satisfying human needs. The processes are quite efficient at generating profit, but generating profit is not the same as satisfying needs. For example, industry is super efficient at generating sugary soft drinks, but humans don’t need sugary soft drinks. We may, if we wish, consider that sugary soft drinks are an example of diminishing returns…we would be better off with far less of them.
Most food production occurs during a three month period when sunlight and water are optimally available. If one is imagining what a local food system will have to look like, then one of the critical factors is how food will be preserved, or produced outside the optimal season. Using either strategy, having some fossil fuels and their products (such as gas for cooking and plastic for season extension and irrigation systems) will have a very high value. I would estimate that we would gladly spend 300 dollars per barrel of oil in order to get those fuels and products in order to have food year-round.
If we redesigned the global food production system to minimize fossil fuels used for things such as long distance transportation, production of junk food, use of fuel expensive preservation methods, food waste, and the like, we would have quite a lot of fossil fuels left over to use for essential processes. And we would be willing and able to pay a high price for the fossil fuels and enabling devices such as cook stoves and cooking utensils.
But that ‘solution’ circles us back around to the hundred trillion dollars of debt. A simpler system will generate less GDP, and hence less money to pay off the debts and fund the taxes and provide jobs. There would be more work to be done with the simpler system, but the ‘jobs’ will be either unpaid household labor or co-operative behavior on the part of neighbors, or poorly paid wage work for companies.
I think it is important to keep the ‘real economy’ issues mentally separated from the ‘financial economy’ issues. For one thing, it will help us make more sense of the desperate attempt to generate inflation, and help us understand that governments will do all they can to debase monetary assets. Keeping them separate may also help us devise ‘lifeboat’ strategies.
Don Stewart
Don,
(1) Is there any physical mechanism which can repay 100 trillion in debt? And I think the answer is ‘No’. Which leaves us with the requirement that debts be reduced in size by inflation or write-offs or defaults or collapses.
Who’s going to enforce the cram down on that debt, remembering that all that debt also represents someone else’s income? It wasn’t done in 2008 when we had a realistic chance to do so and the problem’s only grown worse since.
(2) If debts were all incurred to finance productive enterprises, then the question gets more interesting.
Who’s going to define and enforce “productive enterprises. Sugary drinks are designed and sold because manufactures want to sell sugary drinks per se, they’re demanded by consumers because they taste good! Consumer tastes, much like Gail’s explanation of economic contraction, don’t just revert to an earlier state painlessly by decree. Try eliminating the consumer sweetened beverage market tomorrow with the admonishment to “just drink water” and see how far you get!
Likewise, developing “lifeboat strategies” won’t be done in a vacuum either. Ask the people on the Titanic how easy that was. At every point along the descent well meaning people are likely to disagree widely on just what the problems are, never mind the best long term solutions and the immediate tasks at hand to be accomplished in supporting them. What we’ll see over the long term is exactly what we’re seeing right now. Outright panic and denial by many if not most, disinformation and cover up by those who stand to profit the most, and confusion and disagreement about what is to be done by nearly everyone else. Perhaps if we were descending out of a legitimate socialist economy that actually had the well being of the entire society at heart our predicament might be salvageable, but alas, that’s hardly the case. A rapacious, now global, capitalist economy is geared for one thing and one thing only: individual profits, and that is what we will have right up until the bitter end.
Dear James
‘Who is going to enforce the cramdown strategies?’….Well, the Central Banks will do their best to create the inflation which will make the debts magically disappear. Along with the actual physical value of any financial assets you own. It is the easiest way, politically.
As for the lifeboat strategy. I don’t see any governments anywhere developing a reasonable lifeboat strategy. I think that will happen at the individual and family and perhaps small group level. It will be smart to stay as far away from the Titanic as possible.
I think we do need to recognize that some societal decisions could, theoretically, make the descent easier. I don’t see much evidence that societies have the wisdom required.
So, unfortunately, I think that individuals and families and small groups need to prepare for a near complete collapse. But just waiting for collapse is a pretty pointless activity…so taking advantage of whatever the day offers is, perhaps, the best way to live our lives.
Don Stewart
Agreed. Sorry for the harsh tone. Talking about these things, especially while living among the opulence here in the west, always gets my blood boiling.
Whether or not you want to keep the “real economy” issue separated form the “financial economy” issues, the fact remains that you need to actually produce a real economy which will work. It doesn’t matter if 5% of the economy thinks that oil is worth $300 barrel; we cannot run an economy on 5% of the world’s oil production at a cost of $300 barrel, unless we can also figure out how to keep a lot of the rest of the system going–and that will not work on $300 barrel oil. We don’t have a way of picking out 5% of roads, and 5% of pipelines, and 5% of schools to keep in operation. Even if we could (say, with 5% of the people) we would soon discover that the rest of the economy could not support the $300 barrel price.
The idea of $300 oil for a small percentage of the needed uses seems to be an imaginary idea of peak oilers. You would physically have to get together enough folks willing to spend $300 barrel, and then find some particular well site doing extraction, plus whatever is needed in terms of refining and transport to support as well. You would need to support the governments too, so that civil disorder did not disrupt your plans. And if you expected to have this for very long, you would need to support schools for engineers. You would also have to build and repair all of the roads needed for the operation. At some point, you would realize that the reason for the financial system is to permit the real economy to operate with even tiny amounts of oil.
Gail
I think you are wrong that systems cannot shrink. A good example is perhaps provided by the Confederacy in the US. The financial system was destroyed by the Civil War, and land and slave ownership by the wealthy plantation owners was severely disrupted.
When the University of North Carolina re-opened after the war, I believe they had 5 students. It took time to rebuild to the pre-war level. The standard of living was very low for several decades.
I can see the political leaders saying that ‘we can’t operate the South without slaves’. It turned out that they were forced to operate without slaves. It was not a gracious decline, but most people lived through it.
It is true that governmental collapse created a lot of problems. John Muir walked from the Ohio River to the Gulf of Mexico immediately after the war. He slept in cemeteries at night for fear of attack (the locals were superstitious and avoided cemeteries, according to John). Nevertheless, things did get sorted out.
Throwing up one’s hands and saying that ‘there is nothing we can do’ is, I think, not helpful.
Don Strewart
Gail
See
http://www.colorado.edu/ibs/eb/alston/econ4524/readings/South%20After%20the%20Civil%20War-%20Atack%20and%20Passell.pdf
for some statistics and description of how the Confederate states fared after the war ended.
Don Stewart
Of course there can be shrinkage – on a micro scale — it happens all the time – Greece has been shrinking for years now…
But on the macro scale – the global scale — there has been overall growth (due to stimulus of course) while Greece shrinks…
Shrinkage on a global scale – or even in one of the key hub economies (China, US, EU, Japan) for a significant period will tip the entire apple cart over.
There is absolutely no way that civilization as we know it can continue if the the global economy goes into a prolonged recession… this would be a death spiral.
As a bit of a reality check — think about what happens when there is a significant recession — pessimism abounds – jobs are slashed … spending craters
Now imagine if the recessions we experienced in the past were not halted…. imagine if Keynes had not come into favour …
The draconian stimulus programs we are seeing now will eventually start to push on a string … and there will be nothing anyone can do to stop the death spiral…
It be global and it will be final.
Paul
There was global shrinkage when the world left the bronze age and entered the iron age.
Humans survived and eventually thrived.
Don Stewart
This time is different….
They still had billions of joules of energy available … we have burned all of that … what will be left will remain in the ground … because we will have no way to get it out…
We are headed for a very primitive situation …
Paul
The people in the Iron Age had no way to get the energy either.
I am tired of listening to slogan parading as analysis.
Don Stewart
@ Paul: Great comments.
@ Don: Throwing up one’s hands and saying that ‘there is nothing we can do’ is, I think, not helpful. It may not be helpful, but it’s probably inevitable, and it’s also the first step toward acceptance. We’re still stuck in the anger and bargaining stages, and those are arguably even less productive. So to rephrase in a more useful way, perhaps we should admit that there’s nothing to be done about the big picture. Our current (insane) way of life is going to collapse no matter what. What can we do individually to ease our own and local circumstances? The possibilities are endless, but there again, we should not be naive and imagine that some sort of local paradise is attainable either. Life will be brutal, tough, and hard and nearly all of us will die much earlier than we would have otherwise (although that is truly unknowable either way). But that is our future either way.
The thing that was different then was that the South was part of a bigger world system. It could draw on it, in ways that we won’t be able to.
Don,
One must keep in mind when providing examples from recent history of people persevering and making do with less that their existence was still set in a time of overall hope and progress. The entire 19th and 20th centuries, as brutal as the might have been locally for many, were set in times when things were getting steadily better for most, and that dream was alive and shared by most. The difference this time will of course be that all of that will be coming rather ungracefully undone and the myth of progress will be dying. That in itself is perhaps the worst indicator of all: the death of hope in a populace that has been raised on it like a drug for 10-20 generations or more. The idea that not only do you have it bad now, but that it’s only going to get worse from here on out for as far as anyone can imagine. The idea that not only do we need the population to greatly contract on purely rational and practical grounds, but that it would be a cruel punishment to bring kids into such a world in the first place.
Dear James
I was born into the late Depression. My son-in-law says I sound like his father…always talking about how things are getting worse. I think that the generation that lived through the Depression, and their children (like me) are more like the Greeks writing about the lost ‘golden age’.
I frankly don’t know if Millenials tend to view the current time as a step down from the ‘golden age’ of the 1950s to 1970s. I suspect many of them do.
What I remember from childhood is the enormous freedom coupled with scarcity of material resources. What I see now is children who are raised in straight-jackets, but plied with material goods. Not, in my estimation, an advance.
Don Stewart
“but that it would be a cruel punishment to bring kids into such a world in the first place.”
One of the downsides of people who stick their heads in the sand… We have friends who recently announced their first child is on the way … they are of course glowing with joy….
Unless we find some estraterrestrial economy to hang on, it’s hangover
Don, they had iron itself
Dear Christian
There are parallels between the Bronze age people contemplating iron and fossil fuel people contemplating solar and wind which either can’t be stored or is at least expensive to store. Bronze was a very high quality metal…but they ran out of it. Iron was a metal, but of much lower quality.
So the Iron Age people told stories about the magnificence of the (vanished) Bronze Age.
Don Stewart
Steve Austin again this morning, at http://oil-price.net/ — comments?
The drop in oil prices represents an affordability problem. There is likely a cut back in debt in some parts of the world that has not yet become fully obvious to you. I noticed a story saying German Factory Orders Slump Most Since 2009: Economy. This slump is not helping either.
Germany’s high electricity prices are contributing to its problems.
Another terrific article, for which many thanks. Gail, I recall you saying recently that you had experienced a significant increase in your web traffic. Do you have any theories as to what is driving it?
Harry, I think it is a safe bet that many people around the world and especially in the USA/Europe are beginning to catch on to the fact that something is really, really wrong. It was only a little more than a year ago when I for the first time began to sense that something wasn’t quite right, but my focus was on the global economy at the time. Doing searches on the internet for articles/info related to the current state of the global economy quickly brought my attention to the concept of “peak oil” for the first time. From there, I found the old Oil Drum, and from there, I found this forum and many others. I imagine that there are many people following my same basic path, waking up to the fact that this global economy is skating on razor-thin ice with a very hot sun now rising on the horizon. The jig is just about up, people can sense it, and they’re searching frantically to figure out what is going on. That’s my guess on what’s behind the surge in traffic.
Lindon, that would make sense. We’ve been getting a lot of bad new recently – East Asia, China, the EU, including Germany, and emerging markets all slowing down. The IMF has revised overall world growth estimates downwards. And anyone with half a brain-cell and their eyes open in the USA must know that things there aren’t quite as rosy as official figures and the MSM are suggesting.
And then of course we have the falling commodity prices and the revisions to EU GDP figures. Actually I’m surprised there hasn’t been more outcry, or at least curiosity, about the inclusion of shadow economy spending such as drugs and prostitution in those GDP figures…
Also, I think people are starting to hit their own personal limits. There is this general feeling that we are maxed out, working harder and harder to stay afloat, drowning in plastic nonsense from China. The species is exhausted; the biosphere is exhausted. It is only natural that people are starting to ask searching questions.
“And anyone with half a brain-cell and their eyes open in the USA must know that things there aren’t quite as rosy as official figures and the MSM are suggesting.”
Most people just look out the window, see falling gas prices, and figure things are getting better.
Agreed as well!
The Dow Jones Industrial Average dropped 272.52 points today. Yikes!
Imaginary points on imaginary companies traded in imaginary dollars.
Its magic!
Agreed!
Well said sir. For many years as an economics lecturer I would point students to the hockey stick curve on world population as being unsustainable. In the back of my mind though I knew something else was amiss.
On retirement with time to use the internet I found sites such as these and have read many books on the issues discussed here. I suspect many others have had a similar experience retired or not.
The real epiphany for me came one day when I stood on an over pass watching the mad traffic and asked the simple question ” how long can this go on for?
This led to my first exposure to the concept of of peak oil. This should be a mandatory subject taught at every school. But we wouldn’t want to frighten the little dears now would we? Cheers, David Barnes, Sydney.
There has been a long-term trend toward increasing web traffic, probably because my story seems to have reasonable likelihood of being correct–something that is not true of a lot of other theories.
My post, Low Oil Prices: Sign of a Debt Bubble Collapse Leading to the End of Oil Supply? got a lot of readership partly because the timing was right (many people were concerned about low oil prices and a debt bubble) and partly because the title had a lot of words/issues that readers were concerned about. It helped as well that the article was picked up by other news sources.
At TheOilDrum.com we found that there was a lot of variation in the number of readers for individual articles, and this is true on OurFiniteWorld.com as well. Some titles end up quite “high” on common searches, for example. The authors who put the articles together rarely guessed which ones would be most read in advance.
I agree, Gail, you are hitting on the truth, your finger is on the pulse. I particularly like that you addressed Peak oil view vs. Real Situation, with each one of those bullets helping to set the record straight and frame our current energy predicament. Many people are still wrestling with the actual truth. I’m amazed at how many still try to spin it with some way so it really isn’t that big of a problem. I suppose it will go down to the wire and many will still be trying to catch up. I think this latest post is the best so far in defining this untenable situation.
I’m very curious to see where oil price goes from here. We know of the recent 20% price drop, but will that hold or is there still some momentum in the system for price to rise once again above 100 a barrel? I suppose even though we can surmise the dynamics from your posts, it is still difficult to put a thumb on specifics, so we wait and see what happens.
This won’t help:
German Factory Orders Slump 5.7%, Most Since January 2009
http://globaleconomicanalysis.blogspot.co.nz/2014/10/german-factory-orders-slump-57-most.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed:+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29
Why are you worried about the specifics in the first place? Trading on the daily details is a fool’s game, or haven’t you heard?
I disagree, James, as the discussion regarding how things are unfolding has taken many turns, with numerous misguided notions that are being laid to rest in this article, as well coming to an understanding the specifics of how this unfolds. It is not only fascinating but illuminating to anyone interested in the topic. If you’re not interested the specifics, then why read anything about the subject on blogs such as this? If you’ve laid the subject to rest why not spend your time doing something else?
fyi good article
http://e360.yale.edu/feature/a_scarcity_of_rare_metals_is_hindering_green_technologies/2711/
Thanks! I have been aware of this issue, but hadn’t seen that reference. What we are able to do in test tubes is not necessarily scalable to needed real-world levels. There are other places in the world to get rare earth minerals, but if we use reasonable precautions against pollution, the cost will be much higher.
also the embedded energy in the transistors also you need for the inverters the igbt transistors energy intensitive research fabs distribution etc. they also need rare metal but you find rare metal nearly everywhere but processing will be difficult in a post-peak world. i can imagine some low-tech pv tech with wolfram etc. pv is about 100 years old. but no way to go through the climate bottleneck with no energy to produce food etc for so many people. same with 3-d printing or digital cnc all techs with an enourmous energy thirst etc. we are driving with a train to the cliff and everybody thinks he is sitting in the last wagon which will not go off the cliff.
http://www.lowtechmagazine.com/2009/06/embodied-energy-of-digital-technology.html
Gail, I must say that you are a very patient person , as the current narrative “the economy can grow Indefinitely, with Or Without the use of resources” is the constant denial of what you say
Or I keep repeating myself over and over, trying to get the idea across, perhaps to the same people, perhaps to some new ones as well.
“the current narrative the economy can grow Indefinitely, with Or Without the use of resources”
How many times must it be said that the current state of affairs is a con, that BAU is nothing more than a technique of keeping the hamsters running hard on the wheel?
Consider the alternative: the truth. What would happen if everyone knew this was it, that mankind wasn’t on an ever higher trajectory of learning, understanding and development to ultimately reach a Kurzweiling singularity? Rather, we simply blew through 200m years of extremely high density sequestered solar energy in a 200 year orgy of consumption, and without the dogsend of energy slaves, we are no more separate from nature than pigs wallowing in mud?
I’ll tell you what would (and will) happen: all hell will break loose. Consider an 18-25 aged male who (a) is angry he was lied to; (b) is angry that prior generations squandered an invaluable resource, only leaving him a bag of crumbs; (c) knows that there won’t be any institutional process of law remaining.
So, I say, print, print, print! And, lie, lie, lie! Don’t let the sheep wake up; they won’t like it one bit.
These disaffected youth you describe resemble ISIL enlistees…
Yes, a classic the KSA can send its aggressive youth to go kill the neighbors. You are special, you are my chosen, you get food and metals and honor. Keep up the good work kid.
Desperate people resort to desperate measures …. they generally do not gather around the fire and sing koombaya while munching joyfully on bark and grass…
Bullshit! Or US enlistees! Don’t buy the myth!
You have a good point. This “Whoops!” is not one that leaders can reasonably discuss.
Absolutely 100% agree. Keep the despair at bay for as long as possible.
“Consider the alternative: the truth. What would happen if everyone knew this was it, that mankind wasn’t on an ever higher trajectory of learning, understanding and development to ultimately reach a Kurzweiling singularity? Rather, we simply blew through 200m years of extremely high density sequestered solar energy in a 200 year orgy of consumption, and without the dogsend of energy slaves, we are no more separate from nature than pigs wallowing in mud?”
Excellent point, B9K9! Humankind thinks it is so special, when in reality we are clever if given a free legacy of energy dense liquid. But from a planning standpoint it was squandered. I suppose it is in our species nature to just tee off on whatever is available without considering the long term consequences, which of course makes us no more separate from nature than your description.
Granted, the alternative is not even imaginable at this point. But that day’s coming, so like any truly “mature and responsible species” worth the honor, it’s time to brace ourselves for the inevitable and get on with things. Will we? Doesn’t seem likely at this point, but who knows? I would say I wouldn’t bet money on it, but since money’s not likely to be worth anything much longer anyway, what the hey?
I disagree.
It’s not that I think the sheeple will respond well, but rather I want to see the catharsis, and to let the chips fall where they may.
If there are those here who are nearing old age and retirement, and your existential anxiety about illness and death is leading to your support of the current system, all I can say is, tough luck. We all face our maker eventually.
Oh … don’t worry … unless you are already on your death bed you will see the end game… one can feel that the money printing is beginning to push on the proverbial string… My money remains on this flaming out in less than 2 years…
Why two years?
I say that because I assumed back in 2010 that the economy would be in crisis within the next year or two. Somehow the ‘magic tricks’ of the central banks and the surge in tight-oil has pushed this point back, is there any reason to think this could not continue for a wee bit longer!?
I’m loath to put a time-frame on anything, I think the over-arching trend will remain the same but I wouldn’t be surprised if we manage to delay ‘paying the piper’ for a bit longer yet.
I put 2 years on it because I understand fracking will likely peak in roughly that time frame — when total oil supply peaks then prices likely get a spike — then a total crash…. and it’s pretty much game over…(note conventional oil peaked in 05 and we must be well round the hump and on the down slope by now)
Also it seems that the economies that were keeping the boat afloat – particularly China – are in rather dire straits… growth is tumbling (see German numbers yesterday — Germany had ridden China’s coat tails for years now so if exports are crashing China is hurting more than we are told)..
Also we see forecasts for global growth looking bleak.
The bazookas have been fired — so I am not sure what central banks can do next to stop a deflationary spiral.
Perhaps they can step on the QE pedal as Japan did with Abenomics and that kicks the can a little more?
I hope so… but if growth continues to stagnate as it currently is … I cannot see how this goes on much past 2016…
Quite the opposite! My old age and impending death lead me to support just the opposite! And I’m “only” 56!
Reblogged this on expressi ab initio and commented:
“In many people’s way of thinking, the economy is separate from resources and the extraction of those resources.”
Dear Gail
I have earlier tried to explain that money in the adequate definition is nothing but energy. This time I will try to elaborate my thoughts and you will see that my arguments very much support your ideas:
All living creatures need an surrounding energy system to keep them alive. In the very early days of mankind we survived with the fruits of the nature – but we did not accumulate foodstuff to a large extent. We lived so to speak from hand to mouth. This situation lasted many thousand years, and it did not change until for approx. 15,000 years ago in the Middle East, where we can see the development of the very early agricultural societies. This evolution changed our lives forever, because after some thousand years of trial and error in farming we eventually succeeded in creating a surplus of goods so that not everyone had to work the land. We began to specialize in different occupations, and I don’t think that I have to mention them all. However, these people could only have their existence with their individual specialization as long as agriculture paid them from its surplus. At that time people for instance new that 1 kg of wheat could pay for 1 hen and 6 hens could pay for 1 pig. And they also knew that a worker for instance should be paid with 1 kg of wheat + 1 hen for one day’s work. They knew that the ‘king’ of needed a lot of different goods to be able to pay his wives, his household, his writer, his soldiers etc. – and now we are in a period of our development history where money was not ‘invented’ so the king had to pay his wives, his household etc. with the goods from the agriculture. But as the society developed an urgent need for an easier way to pay each other became more and more evident. So maybe one can imagine that the king one days said:” Hi folks! I have just invented a thing called money. One money has the same value as 1 kg of wheat. That means that you can give a man 1 money instead of 1 kg of wheat. If you pay him 6 money he can choose if he wants to buy 6 kg of wheat, 3 kg of wheat and 3 hens, or he can choose to buy 1 pig. So from tomorrow we use money instead of goods as payment – but remember! We can only buy all these things because our farmers (agriculture) can produce much more goods (energy) than they can use themselves. If our energy system agriculture fails completely there will be no extra goods (energy surplus) to pass over to us”.
The use of fossils did not change that fact – it only accelerated the volume of money accordingly to the volume of energy . Every article produced by the energy of fossils comes out with a price label on it.
As long as we can expand the amount of net energy (energy minus production costs) there is no problem in granting credits (debt) because then more money (energy) will be available, but if the amount of net energy shrinks the amount of money also shrinks and so will credit (debt). Money is just another word for energy. energy is just another word for money.
I was not writing an article about money. It is hard to mix up too many ideas in one post.
As long as temples or some type of general store is available for trade, there is no real necessity for money. Everyone just brings their goods to trade. The administrator prices goods in some unit–equivalent to N bushels of wheat, for example. Each buyer then “runs a tab.” The buyer gets credit for what he brings to the market, and can leave with an equivalent amount of goods (less the charge the market owner makes for its services).
Yes you are, Gail, because money and energy is the same thing
yes. Each bill has 8 watts intrinsic value when burned for heat.
They are very far from the same thing. Especially fiat currency.
Fiat currency is as understand it ‘ordinary money’ bank notes etc. Let us say that you earn 300,000 $ each year. You use 100,000 to pay for article of whatever type they must be: sugar, car, clothing etc. Behind each article there is a certain amount of energy consumption – I think you agree with me in this matter.
You pay 100,000 $ for services: barber, lawyer , carpenter, dentists ,you mention it … your (and other people’s) money makes it possible for your service providers to buy articles of many different kinds: sugar, car, clothing etc. Behind each article there is a certain amount of energy consumption – I think you agree with med in this matter.
You pay the last 100,000 $ in taxes. The government and other authorities use the money to pay salaries, build roads, infrastructure etc – it all ends up in energy consumption.
In a modern society it is very difficult to find items that eventually do not end up in energy consumption.
Can you mention one?
In the materials trade example, the problem arises when everyone brings the same commodity to market. This could be seen as either a money supply or commodity oversupply problem. At the base level of barter there is little difference. Further, the more local the markets and suppliers, the greater the probability that conditions such as season and seed supplies will homogenize the offerings, defeating the emergence of “money”.
…thus, as energy supplies dwindle, markets become more local and the need for money diminishes (I should have added). This is a positive feedback pushing the rate of collapse back. However, we overlook a third possibility: that humans continue to evolve as social beings; retain the incredible knowledge acquired in the up cycle and use it to increase their efficiency with the resources (and population densities) that remain. In this alternative, it is the peoples ATTITUDE towards money that changes. For example, what if we paid it forward, if instead of giving something back at the end of their lives, the billionaires allowed the energy embodied in their fortunes to flow over all; and instead of spending all on baubles and doodles, the people invested in management practices that restisted the flow of energy towards entropy.
Humans are dissipative structures. Our role is to use energy–to turn resources into garbage.
Many religions foster belief in the view that “more stuff”is not all-important. If we had used resources more slowly in the past, we would not be so close to the edge now. Fixing the problem now seems very difficult to me.
Cohesive versus dissipative is somewhat relative, particularly when cosmology and ontology are invoked. Yes, garbage is the final destination. How fast we get there is debatable. We have been accelerating, and must adjust to a forceful deceleration, that appears certain. But there is always a shred of hope that as the parachutist plummets to earth, her fall will be broken by a cataract of soft evergreen boughs if the forest beneath her was not clearcut.
Life exists between a high energy place and a lower energy place. All other life on earth exists closer to equilibrium than humans at the moment. It too takes high energy and turns it into low energy but it is renewed by natural processes on the same time scale as it is consumed. FFs just let us live on 200 million years of natural production used in 200 years. We will return to equilibrium. Unfortunately, with reduced carrying capacity due to the over use in many ways afforded by FFs.
Fusion would allow burning hydrogen that is the major material in the universe with large energy gain. Fission would allow us to burn thorium accumulated over the last 13 billion years, with good energy gain. Or, we can burn wood if the population is say 10 million people. Not sure where solar fits in.
Agreed. Even before we had fossil fuels, we burned wood. The burring of wood allowed us to burn say, 50 years of stored energy. Even that put us ahead of other species. They were limited to what they could eat in terms of use of stored energy.
Gail,
This is the second time you have made this reference to people being producers of garbage. While this is true in the current context of civilization, it is the basic operating paradigm of nature and what is produced by our consumption (in a purely natural, organic lifestyle) is not garbage, but merely feedstock for the other multitude of organisms that co-exist on this planet.
This view is a shortcoming, IMO that is at the crux of our current misguided thinking. We need to exist within the thermodynamic, and biologic limits of our environment. From this point of view, our waste is not ‘garbage; but rather a resource for other processes. This gets to the point of permaculture as well.
Another great article by the way. Just wanted to point out the issue I had with your interpretation of humans as producers of ‘waste’. Our effluence is only ‘waste’ when we are too many and living unsustainably, (as we are currently).
I don’t think you could consider the toxic substances that we are producing the same as when a cow eats grass and dumps manure onto the ground….
Maybe instead of garbage I should say leftovers, mostly of the non-organic type. For example, CO2 when fossil fuels are burned, also coal ash and mercury. When metals are extracted, there are huge amounts of leftover material remaining.
These are admittedly probably resources for other processes.
The earth cycles from state to state. The new top species will no doubt be ones that thrive with higher CO2 levels and mercury scattered in unlikely places. Most likely plants will be high among the surviving species.
If plants live then great — when we did our nutrients go into the soil and get absorbed by the plants so we live on eternally
I would like to be a thorn in my next life 🙂
Plastic is not merely “garbage” in the conventional sense. It’s the recycling of millions of years of stored sunlight into waste doubly. One in the energy it took to extract and produce it, and two, in the energy it took to “consume” it in a fraction of the time. Here today to protect the primary product it enabled to be shipped and consumed in the first place, gone all too soon tomorrow and consigned to a landfill to represent the obscene waste of the imperial society that produced it in the second. Take a long hard look at your garbage the next time you carry it out and realize that it will be here LONG after you are!
Paul, you already are(;^)
It more Magic! You take the garbage to the curb it disappears. You poop in the toilet it disappears. Most people are completely unaware of the HUGE VOLUME of waste they create. Nor do they care to become aware. MAGIC UBER ALLES
Hi Gail, you wrote: (less the charge the market owner makes for its services). The market owner takes his share of the energy surplus i.e. various sorts of goods – 5000 years ago this surplus could only come from that time’s energy system: agriculture (fishery, foresting). A market owner today will use his money to buy goods (energy consumption), to pay for services of different kinds – and the service providers will do exactly the same thing as other people – buy goods. He also pays taxes. All government very well know how to spend the money: to pay an army of employees, to build schools, roads – all of it ends eventually in energy consumption. In modern developed countries it is hard to find one single item which does not have its origin in energy consumption. It is very important to understand that salaries of whatever kind they must be end up in energy consumption. Money was created, invented, evolved because there was a need of describing energy consumption with a general unity: money
Hi Gail
You have earlier shown a graph where population and oil consumption (or was it energy consumption?) follow the same track. I think that the development in the gross world product shows the same trend. If that is so it will support my assumption that money is just a generic description of energy.
GDP does follow both the growth in oil consumption and energy consumption.
I think were the rest of us are confused is we don’t equate “money” with GDP. If you are saying that energy is needed to make goods and services, I would agree with you. If you would say, “Money is needed to make goods and services,” I probably wouldn’t agree with you.
“Money is needed to make goods and services,” Exactly
So, is money needed or not?
For any kind of supply lines, money is needed. For trade at a distance, money is needed. If all you are doing is a little local trade among farmers, not so much–except that of course, you end up with way too much of some things. A government needs to take over. It probably needs a concept of money for its workings as well.
Hi Gail,
you answered:
If you would say, “Money is needed to make goods and services,” I probably wouldn’t agree with you.
No of course not – money is only a token of energy. Money only describes the energy input in a given item.
Goods can only be made with an input of energy. Nature was our first and only ‘energy machine’ – with this energy machine we were able to create various forms of goods: Let us say that in the beginning there was only two commodities: pigs and wheat -but already then there was a relation between the worth, i.e. energy content, of different goods which all derived from the ‘energy machine’ nature. It took ten times as much energy to ‘make’ a pig as to grow 1 kg of wheat:
You had to pay 10 kg of wheat to get 1 pig. Money was introduced: Then you had to pay ten times as much money for 1 pig as for 1 kg of wheat. But still – both wheat and pig were a product of the energy machine Nature only with different energy content.
This did not change with the use of fossils.
Let’s see if we get 1000 comments on this one too.
Yes, Gail is sponsored by Leonardo sticks (she has even changed her middle name to Leonardo), and when she includes a photo of their sticks in a post, she gets a free stick for every comment made. Anyway, that’s the rumour I heard (I know because I started it). What the manufacturers don’t know is that, come the collapse, Gail intends to burn the sticks as fuel, in order to keep herself and her family warm for years/decades/centuries. Way to go, Gail! Here’s to “Peak Leonardo Sticks”. The sticks do provide the perfect visual metaphor for the perils of complexity, though. 🙂
I should buy a box sometime.
I just love reading about all this. However I try not to worry about it too much.
One thing that has been keeping me awake at night though is how do you pronounce you surname?
Cheers, David Barnes, Sydney.
“One thing that has been keeping me awake at night though is how do you pronounce you surname?”
“Tverberg” is a Norwegian name, and in Norway it’s pronounced using the “Near-open front unrounded vowel” ( http://en.wikipedia.org/wiki/Near-open_front_unrounded_vowel ) for both instances of “e” – “Tværbærg”.
That sounds pretty good! The Norwegians would probably roll the r’s as well, but not in the US.
Reblogged this on Stephen Hinton Consulting and commented:
Gail again proves that actuarial and analytical skills trump journalists in this clear analysis of the situation with the peak of oil production. A must read for all sustainability afficiendos.
I wouldn’t put a lot of faith in conventional financial types adopting that advice.
Gail, I do not see any Russian beligerence.
Indeed, the WSJ is talking rubbish about that too. In reality it wouldn’t make sense for Putin to want to destabilise a country just along the road from Moscow. As if Obama would want to destabilise Canada or Mexico, or London would want to destabilise Scotland.
In reality Nuland and other washingtonocrats deliberately organised destabilisation coup-d’etats in Ukr in order to get control of the fracking fields in East Ukr.
Key factor is the USK military industrial complex which needs more wars like a vampire needs more blood-donors. And everything else can go to hell.
I probably should have said it differently. Russian willingness to defend its interests, even if the result is unpopular with others.
Agree. I see US belligerence — and Russia reacting.
Many intelligent observers see the USA as “colonizing” the whole Middle East, while attempting to weaken the Russia and China.
Less “colonizing,” more “destabilizing.” Colonizing implies social costs, destabilizing implies economic profits.
This post needs to be read hand in hand with Modern Monetary Mechanics, which supercedes the politically correct mainstream macroeconomic policy. Also called Modern Money Theory or MMT.
Every reader should get to know it. The alternative is catastrophically wrong!
Every sovereign government can issue it’s own currency without limits except those chosen voluntarily.
They cannot run out of money [unlike households]. But the fiscal space can be defined as the REAL GOODS and services available for sale in the currency of issue, the “means” available to government to fulfil its socio-economic charter.
MMT does take into account the resources we are talking about on this blog.
See Warren Mosler et al for more detail:
But don’t we ultimately still get back to the problem that it takes “inexpensive” (in terms of resources, people’s time, capital investments) to make goods and services that lead to economic growth?
The problem leading to the lack of economic growth is not a flaw in the monetary system; it is a flaw in the rising real cost of resources. This rising real cost of resources cannot be papered over by any monetary system.
Try reading this simplification of a very complicated problem;
https://www.youtube.com/watch?v=i35uBVeNp6c
There’s plenty more
http://petermartin2001.wordpress.com/2014/08/25/how-to-balance-the-government-budget/
Try reading this simplification of a very complicated problem;
https://www.youtube.com/watch?v=i35uBVeNp6c
There’s plenty more
https://www.youtube.com/watch?v=i35uBVeNp6c
[God knows what happened with the link first up!]
But it’s L Randall Wray on Modern Money
http://petermartin2001.wordpress.com/2014/08/25/how-to-balance-the-government-budget/
The catch, of course, is that all of the dollars the Fed prints don’t have to correspond to resources of any kind. And if resources are here today, they may not be here tomorrow, even if promises are made relating to them.
Modern Money Theory is not a “get out of Jail” card. A sovereign country in its own currency cannot go bankrupt. But credit money can only buy goods for sale, in the fiscal space. The government can finance debt without relying on bondholders etc. Governments can only spend money into existence. They do that via trading bonds [iou’s] back and forth with central banks and private banks. All constraints are self imposed.
Right now the USA is devaluing its currency as fast as it can.
The private banks, via their fractional reserve lending policies are certainly at risk. Their debt levels [notionally, nobody really knows] now are over $710 TRILLION. This is 10x the world’s total GDP! Something like 90% of that is just deals back and forth between themselves. So it’s all pretty weird! And dangerous
I agree. Debt is a problem, if economic growth is slowing. Less goods and services in the future.
a nation’s wealth is directly and specifically linked to and limited by the energy available within its own borders.
The UK was endowed with the coal equivalent of Saudi Arabia’s oil, we used it to build an empire. Now that energy source has gone, and so has our empire. The same is about to happen to the USA.
Energy cannot be produced by printing money, if it was that simple, money would be printed on rolls and dispensed in bathrooms
MMT’s central fallacy is that it never aligns money with actual resources. OF COURSE money is man-made, ephemeral, and thus inexhaustible! Unfortunately, natural resources, which are what we actually live by, aren’t! Funny that!
Perhaps you should take the time to listen to the video!!!
Your response is so far off that only our PM Tony Abbott can look more idiotic.
Real resources fit in the fiscal space, the government cannot buy what is not for sale.
I was recently offered “Resource Revolution: How to Capture the Biggest Business Opportunity in a Century” by Stefan Heck on my Kindle for £0.99. I had a read of the intro and found that he is totally taken in by the wrong version economic model you describe. It’s not even worth 99 pence to me.
It is amazing how many people believe this nonsense. If Economists had had a valid model of the economy before we started reaching limits, it would no longer be valid. The fact that their model was badly flawed to begin with, plus doesn’t address the effect of limits, leads to a disastrously bad model.
That’s where MMT comes in.
Plenty of financial ‘gurus’ are offering paid advice on how to profit from what is coming…
Ludicrous.
Paul:
For sure. But, how about starting a mass burial business for all the bodies that are going to pile when fossil carbon can only support a fraction of the 7.2 billion 🙂
Fantastic idea! Let’s take that public… we can get Cramer (the CNBs jester) to tout the shares and we use the IPO cash to throw a MASSIVE Finite World party…
Gail can arrive on the back of an elephant… we will have the finest champagne and caviar… more celebs than the Academy Awards and American Music Awards combined… one big fat orgy of CONSUMPTION to celebrate the end of 200 years of gluttony!!!!
It would be so appropriate.
Gail could ride in with a couple of ebola victims behind her on the elephant.
Ebola seems to be providing a lot of practice in this regard.
Don’t joke! Give it a few months and Ebola remediation/disposal could be a major growth industry. Think KBR and the like aren’t already considering it?
“Don’t joke” strikes a chord with me, even though James apparently means it in a narrow sense of the “practical.”
The unspeakable and untouchable: the extremity of the suffering we (humanity) faces…compounded by the unrelenting nature of the assault…the fact that to survive such trauma and recover…requires (as a minimum) some absorption…some safety and comfort that can be given only by those who are not similarly traumatized…(these are my thoughts)…
Important that body disposal doesn’t use too much energy.
http://naturallysavvy.com/live/aquification-is-a-greener-cremation
I agree with the gist of all of ourfiniteworld.com posts. A bit hard to wrap my head around how debt might shrink, and commodity prices fall, but I assume this is symptom of economic collapse. Total Debt shrinks maybe because cost to monetise new resource is too much. Would like to see evidence. All extraction requires use of other natural energy resources, as low EROEI bites. Demand fall and commodity price fall. A roller-coaster turbulence.
Global mining industry multi-factor productivity has fallen badly in last decade. Cost of energy too much. Economies of scale depended on cheap energy. Economies of scale necessary because declining resource, smaller grain size, more overburden, more transport costs.
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As usual, a great post Gail.
If one is to heed the argument of Joseph Tainter in his book Collapse of Complex Societies, collapse of the system can be brought on by a variety of issues, not just diminishing returns on cheap fossil fuels, although that may be at the root of our current dilemmas (along with unchecked population growth). What struck me as important in Tainter’s thesis is that collapse can be caused by an unexpected stress surge that could not be overcome by current reserves/surpluses. In other words, having hit diminishing returns in many areas, a stressor that might otherwise have been adequately countered in times past can no longer be dealt with and collapse ensues. There are so many stressors out there right now knocking on our door–from ebola to geopolitics to climate change and on and on–that I can’t help but think one of these will be THE tipping point for the coming collapse of industrial civilisation.
It seems it’s just a matter of time…
Yes, we have a huge number of tipping points that we seem to be headed for. I included one paragraph that mentioned some of the many ways we are reaching diminishing returns.
I didn’t think about the reserves issue. I am not sure that that issue is as directly applicable here. Our economy is very complex. Reserves are mostly applicable to food and oil.
IIRC, Tainter’s “reserves” includes sociopolitical elements as well, such as trust in institutions and overall social cohesion in society, i.e., social capital.
I need to look at Tainter’s book again.
Dimitry Orlov’s Five Stages of Collapse discusses this issue in detail.
Yes you are right, Jared Diamond is expressing similar sorts of stressing factors, as diminishing trades between unfriendly partners, environment overshoot, non-capacity to reconsider core values, etc..