Some people talk about peak energy (or oil) supply. They expect high prices and more demand than supply. Other people talk about energy demand hitting a peak many years from now, perhaps when most of us have electric cars.
Neither of these views is correct. The real situation is that we right now seem to be reaching peak energy demand through low commodity prices. I see evidence of this in the historical energy data recently updated by BP (BP Statistical Review of World Energy 2015).
Growth in world energy consumption is clearly slowing. In fact, growth in energy consumption was only 0.9% in 2014. This is far below the 2.3% growth we would expect, based on recent past patterns. In fact, energy consumption in 2012 and 2013 also grew at lower than the expected 2.3% growth rate (2012 – 1.4%; 2013 – 1.8%).
Figure 1- Resource consumption by part of the world. Canada etc. grouping also includes Norway, Australia, and South Africa. F Soviet Union means Former Soviet Union. Middle East excludes Israel. Based on BP Statistical Review of World Energy 2015 data.
Recently, I wrote that economic growth eventually runs into limits. The symptoms we should expect are similar to the patterns we have been seeing recently (Why We Have an Oversupply of Almost Everything (Oil, labor, capital, etc.)). It seems to me that the patterns in BP’s new data are also of the kind that we would expect to be seeing, if we are hitting limits that are causing low commodity prices.
One of our underlying problems is that energy costs have risen faster than most workers’ wages since 2000. Another underlying problem has to do with globalization. Globalization provides a temporary benefit. In the last 20 years, we greatly ramped up globalization, but we are now losing the temporary benefit globalization brings. We find we again need to deal with the limits of a finite world and the constraints such a world places on growth.
Energy Consumption is Slowing in Many Parts of the World
Many parts of the world are seeing slowing growth in energy consumption. One major example is China.
Figure 2. China’s energy consumption by fuel, based on data of BP Statistical Review of World Energy 2015.
Based on recent patterns in China, we would expect fuel consumption to be increasing by about 7.5% per year. Instead, energy consumption has slowed, with growth amounting to 4.3% in 2012; 3.7% in 2013; and 2.6% in 2014. If China was recently the growth engine of the world, it is now sputtering.
Part of China’s problem is that some of the would-be buyers of its products are not growing. Europe is a well-known example of an area with economic problems. Its consumption of energy products has been slumping since 2006.
Figure 3. European Union Energy Consumption based on BP Statistical Review of World Energy 2015 Data.
I have used the same scale (maximum = 3.5 billion metric tons of oil equivalent) on Figure 3 as I used on Figure 2 so that readers can easily compare the European’s Union’s energy consumption to that of China. When China was added to the World Trade Organization in December 2001, it used only about 60% as much energy as the European Union. In 2014, it used close to twice as much energy (1.85 times as much) as the European Union.
Another area with slumping energy demand is Japan. It consumption has been slumping since 2005. It was already well into a slump before its nuclear problems added to its other problems.
Figure 4. Japan energy consumption by fuel, based on BP Statistical Review of World Energy 2015.
A third area with slumping demand is the Former Soviet Union (FSU). The two major countries within the FSU with slumping demand are Russia and Ukraine.
Figure 5. Former Soviet Union energy consumption by source, based on BP Statistical Review of World Energy Data 2015.
Of course, some of the recent slumping demand of Ukraine and Russia are intended–this is what US sanctions are about. Also, low oil prices hurt the buying power of Russia. This also contributes to its declining demand, and thus its consumption.
The United States is often portrayed as the bright ray of sunshine in a world with problems. Its energy consumption is not growing very briskly either.
Figure 6. United States energy consumption by fuel, based on BP Statistical Review of World Energy 2014.
To a significant extent, the US’s slowing energy consumption is intended–more fuel-efficient cars, more fuel-efficient lighting, and better insulation. But part of this reduction in the growth in energy consumption comes from outsourcing a portion of manufacturing to countries around the world, including China. Regardless of cause, and whether the result was intentional or not, the United States’ consumption is not growing very briskly. Figure 6 shows a small uptick in the US’s energy consumption since 2012. This doesn’t do much to offset slowing growth or outright declines in many other countries around the world.
Slowing Growth in Demand for Almost All Fuels
We can also look at world energy consumption by type of energy product. Here we find that growth in consumption slowed in 2014 for nearly all types of energy.
Figure 7. World energy consumption by part of the world, based on BP Statistical Review of World Energy 2015.
Looking at oil separately (Figure 8), the data indicates that for the world in total, oil consumption grew by 0.8% in 2014. This is lower than in the previous three years (1.1%, 1.2%, and 1.1% growth rates).
Figure 8. Oil consumption by part of the world, based on BP Statistical Review of World Energy 2015.
If oil producers had planned for 2014 oil consumption based on the recent past growth in oil consumption growth, they would have overshot by about 1,484 million tons of oil equivalent (MTOE), or about 324,000 barrels per day. If this entire drop in oil consumption came in the second half of 2014, the overshoot would have been about 648,000 barrels per day during that period. Thus, the mismatch we have recently been seeing between oil consumption and supply appears to be partly related to falling demand, based on BP’s data.
(Note: The “oil” being discussed is inclusive of biofuels and natural gas liquids. I am using MTOE because MTOE puts all fuels on an energy equivalent basis. A barrel is a volume measure. Growth in barrels will be slightly different from that in MTOE because of the changing mix of liquid fuels.)
We can also look at oil consumption for the US, EU, and Japan, compared to all of the rest of the world.
Figure 9. Oil consumption divided between the (a) US, EU, and Japan, and (b) Rest of the World.
While the rest of the world is still increasing its growth in oil consumption, its rate of increase is falling–from 2.3% in 2012, to 1.6% in 2013, to 1.3% in 2014.
Figure 10 showing world coal consumption is truly amazing. Huge growth in coal use took place as globalization spread. Carbon taxes in some countries (but not others) further tended to push manufacturing to coal-intensive manufacturing locations, such as China and India.
Figure 10. World coal consumption by part of the world, based on BP Statistical Review of World Energy 2015.
Looking at the two parts of the world separately (Figure 11), we see that in the last three years, growth in coal consumption outside of US, EU, and Japan, has tapered down. This is similar to the result for world consumption of coal in total (Figure 10).
Figure 11. Coal consumption for the US, EU, and Japan separately from the Rest of the World, based on BP Statistical Review of World Energy data.
Another way of looking at fuels is in a chart that compares consumption of the various fuels side by side (Figure 12).
Figure 12. World energy consumption by fuel, showing each fuel separately, based on BP Statistical Review of World Energy 2015.
Consumption of oil, coal and natural gas are all moving on tracks that are in some sense parallel. In fact, coal and natural gas consumption have recently tapered more than oil consumption. World oil consumption grew by 0.8% in 2014; coal and natural gas consumption each grew by 0.4% in 2014.
The other three fuels are smaller. Hydroelectric had relatively slow growth in 2014. Its growth was only 2.0%, compared to a recent average of as much as 3.5%. Even with this slow growth, it raised hydroelectric energy consumption to 6.8% of world energy supply.
Nuclear electricity grew by 1.8%. This is actually a fairly large percentage gain compared to the recent shrinkage that has been taking place.
Other renewables continued to grow, but not as rapidly as in the past. The growth rate of this grouping was 12.0%, (compared to 22.4% in 2011, 18.1% in 2012, 16.5% in 2013). With the falling percentage growth rate, growth is more or less “linear”–similar amounts were added each year, rather than similar percentages. With recent growth, other renewables amounted to 2.5% of total world energy consumption in 2014.
Falling Consumption Is What We Would Expect with Lower Inflation-Adjusted Prices
People buy goods that they want or need, with one caveat: they don’t buy what they cannot afford. To a significant extent affordability is based on wages (or income levels for governments or businesses). It can also reflect the availability of credit.
We know that commodity prices of many kinds (energy, food, metals of many kinds) have generally been falling, on an inflation adjusted basis, for the past four years. Figure 13 shows a graph prepared by the International Monetary Fund of trends in commodity prices.
Figure 13. Charts prepared by the IMF showing trends in indices of primary commodity prices.
It stands to reason that if prices of commodities are low, while the general trend in the cost of producing these commodities is upward, there will be erosion in the amount of these products that can be profitably produced, and hence, that can be purchased. (This occurs because prices are falling relative to the cost of producing the goods.) If, prior to the drop in prices, consumption of the commodity had been growing rapidly, lower prices are likely to lead to a slower rate of consumption growth. If prices drop further or stay depressed, an absolute drop in consumption may occur.
It seems to me that the lower commodity prices we have been seeing over the past four years (with a recent sharper drop for oil), likely reflect an affordability problem. This affordability problem arises because for most people, wages did not rise when energy prices rose, and the prices of commodities in general rose in the early 2000s.
For a while, the lack of affordability could be masked with a variety of programs: economic stimulus, increasing debt and Quantitative Easing. Eventually these programs reach their limits, and prices begin falling in inflation-adjusted terms. Now we are at a point where prices of oil, coal, natural gas, and uranium are all low in inflation-adjusted terms, discouraging further investment.
Commodity Exporters–Will They Be Next to Be Hit with Lower Consumption?
If the price of a commodity, say oil, is low, this is a problem for a country that exports the commodity. The big issue is likely to be tax revenue. Governments very often get a major share of their tax revenue from taxing the profits of the companies that sell the commodities, such as oil. If the price of oil or other commodity that is exported drops, then it will be difficult for the government to collect enough tax revenue. There may be other effects as well. The company producing the commodity may cut back its production. If this happens, the exporting country is faced with another problem–laid-off workers without jobs. This adds a second need for revenue: to pay benefits to laid-off workers.
Many oil exporters currently subsidize energy and food products for their citizens. If tax revenue is low, the amount of these subsidies is likely to be reduced. With lower subsidies, citizens will buy less, reducing world demand. This reduction in demand will tend to reduce world oil (or other commodity) prices.
Even if subsidies are not involved, lower tax revenue will very often affect the projects an oil exporter can undertake. These projects might include building roads, schools, or hospitals. With fewer projects, world demand for oil and other commodities tends to drop.
The concern I have now is that with low oil prices, and low prices of other commodities, a number of countries will have to cut back their programs, in order to balance government budgets. If this happens, the effect on the world economy could be quite large. To get an idea how large it might be, let’s look again at Figure 1, recopied below.
Notice that the three “layers” in the middle are all countries whose economies are fairly closely tied to commodity exports. Arguably I could have included more countries in this category–for example, other OPEC countries could be included in this grouping. These countries are now in the “Rest of the World” category. Adding more countries to this category would make the portion of world consumption tied to countries depending on commodity exports even greater.
Figure 1- Resource consumption by part of the world. Canada etc. groupng also includes Norway, Australia, and South Africa. F Soviet Union means Former Soviet Union. Middle East excludes Israel. Based on BP Statistical Review of World Energy 2015 data.
My concern is that low commodity prices will prove to be self-perpetuating, because low commodity prices will adversely affect commodity exporters. As these countries try to fix their own problems, their own demand for commodities will drop, and this will affect world commodity prices. The total amount of commodities used by exporters is quite large. It is even larger when oil is considered by itself (see Figure 8 above).
In my view, the collapse of the Soviet Union in 1991 occurred indirectly as a result of low oil prices in the late 1980s. A person can see from Figure 1 how much the energy consumption of the Former Soviet Union fell after 1991. Of course, in such a situation exports may fall more than consumption, leading to a rise in oil prices. Ultimately, the issue becomes whether a world economy can adapt to falling oil supply, caused by the collapse of some oil exporters.
Our World Economy Has No Reverse Gear
None of the issues I raise would be a problem, if our economy had a reverse gear–in other words, if it could shrink as well as grow. There are a number of things that go wrong if an economy tries to shrink:
- Businesses find themselves with more factories than they need. They need to lay off workers and sell buildings. Profits are likely to fall. Loan covenants may be breached. There is little incentive to invest in new factories or stores.
- There are fewer jobs available, in comparison to the number of available workers. Many drop out of the labor force or become unemployed. Wages of non-elite workers tend to stagnate, reflecting the oversupply situation.
- The government finds it necessary to pay more benefits to the unemployed. At the same time, the government’s ability to collect taxes falls, because of the poor condition of businesses and workers.
- Businesses in poor financial condition and workers who have been laid off tend to default on loans. This tends to put banks into poor financial condition.
- The number of elderly and disabled tends to grow, even as the working population stagnates or falls, making the funding of pensions increasingly difficult.
- Resale prices of homes tend to drop because there are not enough buyers.
Many have focused on a single problem area–for example, the requirement that interest be paid on debt–as being the problem preventing the economy from shrinking. It seems to me that this is not the only issue. The problem is much more fundamental. We live in a networked economy; a networked economy has only two directions available to it: (1) growth and (2) recession, which can lead to collapse.
Conclusion
What we seem to be seeing is an end to the boost that globalization gave to the world economy. Thus, world economic growth is slowing, and because of this slowed economic growth, demand for energy products is slowing. This globalization was encouraged by the Kyoto Protocol (1997). The protocol aimed to reduce carbon emissions, but because it inadvertently encouraged globalization, it tended to have the opposite effect. Adding China to the World Trade Organization in 2001 further encouraged globalization. CO2 emissions tended to grow more rapidly after those dates.
Figure 14. World CO2 emissions from fossil fuels, based on data from BP Statistical Review of World Energy 2015.
Now growth in fuel use is slowing around the world. Virtually all types of fuel are affected, as are many parts of the world. The slowing growth is associated with low fuel prices, and thus slowing demand for fuel. This is what we would expect, if the world is running into affordability problems, ultimately related to fuel prices rising faster than wages.
Globalization brings huge advantages, in the form of access to cheap energy products still in the ground. From the point of view of businesses, there is also the possibility of access to cheap labor and access to new markets for selling their goods. For long-industrialized countries, globalization also represents a workaround to inadequate local energy supplies.
The one problem with globalization is that it is not a permanent solution. This happens for several reasons:
- A great deal of debt is needed for the new operations. At some point, this debt starts reaching limits.
- Diminishing returns leads to higher cost of energy products. For example, later coal may need to come from more distant locations, adding to costs.
- Wages in the newly globalized area tend to rise, negating some of the initial benefit of low wages.
- Wages of workers in the area developed prior to globalization tend to fall because of competition with workers from parts of the world getting lower pay.
- Pollution becomes an increasing problem in the newly globalized part of the world. China is especially concerned about this problem.
- Eventually, more than enough factory space is built, and more than enough housing is built.
- Demand for energy products (in terms of what workers around the world can afford) cannot keep up with production, in part because wages of many workers lag thanks to competition with low-paid workers in less-advanced countries.
It seems to me that we are reaching the limits of globalization now. This is why prices of commodities have fallen. With falling prices comes lower production and hence lower total consumption. Many economies are gradually moving into recession–this is what the low prices and falling rates of energy growth really mean.
It is quite possible that at some point in the not too distant future, demand (and prices) will fall further. We then will be dealing with severe worldwide recession.
In my view, low prices and low demand for commodities are what we should expect, as we reach limits of a finite world. There is widespread belief that as we reach limits, prices will rise, and energy products will become scarce. I don’t think that this combination can happen for very long in a networked economy. High energy prices tend to lead to recession, bringing down prices. Low wages and slow growth in debt also tend to bring down prices. A networked economy can work in ways that does not match our intuition; this is why many researchers fail to see understand the nature of the problem we are facing.
“Fossil-fuel supply in Europe: potential restrictions on the horizon”
by Matthieu Auzanneau, 25 Jun 2015
“Beyond today’s geopolitical tensions, the future of oil and gas supplies to the European Union is strongly dependent on significant physical, technical and economic constraints not generally known to policymakers.
Europe is surrounded by energy-producing regions that for years have been confronted with oil and gas outputs which are either declining, or on the verge of decline. This situation has very little to do with so-called “above ground” issues. It is the consequence of a long-foreseen finitude of hydrocarbon reserves.”
Full article: http://www.friendsofeurope.org/greener-europe/fossil-fuel-supply-europe-potential-restrictions-horizon/#.VYvq_5qD-6Q.twitter
Thanks! I agree that the future decline in oil output goes hand and hand with the low oil prices we are seeing now. Matthieu Auzanneau describes some of the issues well. The only place where I might differ with him is at the very end. I think Iraq needs high oil prices to develop its oil reserves (as well as keep peace). Thus, it cannot be counted on for very much in a low price scenario, either.
Hi Gail, I just re-read your latest posting. You may be right in the long term, but the present slowdown is caused by excess debt, especially in the developed countries and China. On pricing dynamics, see the following three links:
http://www.zerohedge.com/news/2015-06-25/these-three-events-will-shatter-liquidity-illusion-trigger-crisis-oecd-says
“Among the triggers the OECD says could spark a “liquidity crisis” are: 1) monetary policy normalization, the return of the EMU debt crisis, 2) a “falling oil price surprise” which could, in the organization’s words “undermine the oil-related and fracking business investment in the US,” 3) and geopolitical turmoil in the Middle East and Eastern Europe.”
http://www.reuters.com/article/2015/06/23/us-column-russell-mining-technology-idUSKBN0P313F20150623
“Rio Tinto has seen a 13 percent decrease in load and haul costs, an 8 percent cut in drilling costs and up to a 15 percent reduction in mining fleet purchases at its iron ore mines in Western Australia, Michael Gollschewski, managing director for Rio Tinto’s Pilbara Mines, wrote in the CEDA report.”
“This is largely true, but what may keep prices low for an extended period is technology-driven cost reductions. If the cost of producing a tonne of iron ore, coal, alumina, nickel, copper, or even agricultural commodities such as wheat, cotton and coffee, can be lowered, it is logical that the price at which it can be sustainably sold will also drop. If the cost of producing a tonne of iron ore in Western Australia is $20 a tonne, and the other costs such as royalties, taxes and transportation add about another $20, the all-in cost is about $40.”
http://wolfstreet.com/2015/06/17/shanghai-china-containerized-freight-index-collapses-top-carriers-maersk-price-war-to-form-global-shipping-oligopoly/
“We are now shipping at an absolute loss. With the bunker-adjustment-factor surcharge at $300 for Asia-Europe, we are losing more than $50 per box.” “Unless by a miracle demand grows, we are up for heavy losses in the next quarter and maybe the rest of 2015.”
“The Shanghai Containerized Freight Index (SCFI) paints an even drearier scenario. Unlike the CCFI, it is composed only of spot rates, not contractual rates, from Shanghai to the rest of the world. And this babe plunged 6.8% last week to 581.25, an all-time low, 42% below where it was during the Financial Crisis, on October 16, 2009, when it was set at 1,000, and down 47% from February.”
“Maersk is deploying its big guns: lots of money and Ultra Large Container Vessels (ULCVs). It just ordered another 11 second-generation “Triple-E” vessels of 19,630 TEU capacity for $1.8 billion, with an option for six more, to be delivered between April 2017 and May 2018, for its Asia-Europe route, Drewry reported. Maersk now has a capacity of about 400,000 TEU on order, or 13% of its fleet. And it will order even more ships, as part of its $15-billion investment program, which central-bank easy-money policies have encouraged it to do.”
“So when Andersen exhorted midsized carriers with a share of 3% to 5% to exit the business, he covered just about all carriers other than the top three. If he gets his wish, it will be one heck of a global oligopoly.”
Iron ore prices :
http://www.reuters.com/article/2015/06/25/us-rinehart-australia-employment-idUSKBN0P50G220150625
“”We felt it was more important for our people to retain their jobs rather than pursue workforce reductions as a cost-saving strategy in response to market conditions,” Barry Fitzgerald, chief executive of Roy Hill Holdings Pty Ltd, said in an email to Reuters.”
Richard
Have you seen these two Q and As on Peak Oil?
Don Stewart
Short, can you provide detail on the processing number? Seems way high.
Processing…….2,053,800
That number came from a 2010 EIA published report. Who actually did the study I don’t known (probably U.T. at Austin). Their determination was that it took 16,300 BTU/$ of finished product, which was increasing by 300 BTU/$ per decade. We calculated the 2012 weighted wholesale price of petroleum products, and came up with an average of $3.03 $/gal. We used $3.00/gal * 16,300* 42 to get 2,053,800 BTU/barrel. This value, along with others, like the price correlation was used to test the model.
The output of the Etp Model for 2012 is a little different:
Extraction……..609,000 BTU/barrel
Processing……2,101,848
Distribution……267,330
Total………….2,978,178 BTU/barrel
or a difference of 1.3%, which is well within the 4.5% margin of error of our study.
The Etp Model, being a thermodynamic analysis, should be expected to produce somewhat different results than a strict empirical study. The empirical studies are, however, important for model verification. We are lucky that organization like the EIA has been able to supply us with many good studies to test against. The EIA, and U. Texas has certainly been worth the tax payers dollars that have been invested into them.
And relative to the value of light tight oil:
As per RBN Energy, 1.2 mb/d of LTO has an API over 50. Our estimate is 1.4. Using that 1.2 mb/d figure 37% of LTO won’t produce any kind of transportation fuel. It is strictly feedstock material:
http://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/images/eneene/sources/petpet/images/refraf1-lrgr-eng.png
From an energy perspective, it takes as much energy (probably more) to extract LTO as it does conventional crude. But, 37% of it never takes part in the energy production process (it has to be used in a combustion process to get energy out of it). If 37% of conventional crude was removed from the process stream that would leave an energy content of 88,200 BTU/gal; something just slightly better than ethanol.
The shale industry has gone out of its way to obfuscate the true merit of LTO. Some simple calculations prove otherwise. This stuff has done nothing to drive the economy except produce a credit crisis for the petroleum industry. Laharrere was correct when he stated that the US would have been better off if it had never got involved in the shale industry!
Short, can you provide detail on the processing number? Seems way high.
Hill is a buffoon. EIA U.S. Fuel Consumed at Refineries.
@Don – Yes. There are some oddities in the calculations. For finished products, 42 gallons of crude becomes 45 gallons of product, according to one source I read. So working in Kj/Kg makes more sense than 16300BTU/$. I’d need to see the source material to make any sensible comment on the figures. I’d expect though that if oil refineries were as inefficent as electricity generation, I’d see cooling towers or something similar.
I’m not sure what you are asking about LTO. I’ll mention that refineries in the UK were designed around North Sea crude production and the motoring public around 1970. When diesel cars became popular, and air traffic grew, the UK had to shut some refineries and import diesel and jet fuel. HTH.
There is refinery gain when long molecules are “cracked” into shorter molecules–in other words, when heavy fuel is made less dense (and thus easier to burn as a fuel such as gasoline or diesel) by the addition of more carbon molecules (as well as a few more hydrogens molecules) derived from natural gas.
Just a note that’s slightly out of context:
From trying to follow Gail’s reasoning, I’m wondering as to the feasibility (in theory) of decoupling nuclear energy from the grid, and using it to make liquid fuel from coal. The coal power could also be a resource for decommissioning nuclear plants in the very most rosy of scenarios…
I think quite a bit of the processing amount is the natural gas used in cracking very heavy oil. This would not be related to the LTO, only to heavy oil.
One potential error in the processing amount could come if the natural gas has been “grossed up” when it shouldn’t be, because amount used in cracking isn’t burned. Another potential source for error would be if processing numbers came from a government report that was already “grossed up” to represent the amount of fuel that was burned to give electricity. If a person didn’t understand the situation, it would be easy to gross up the amount again.
On a different subject, one of my gripes about standard EROEI calculations is they consider only the Extraction Btus, which here are only 20% of the Btus shown. Also, if we really wanted to get all of the energy products required for the process, we would have to add to the total shown here. Somewhere along the line, employees get paid, and they buy oil products with their salaries. Those oil products don’t get counted as being necessary in the EROEI calculation, even though the employees couldn’t drive to work or buy a car without them. Also, the government must maintain roads using oil products. Oil companies pay taxes (partly because of expected wear and tear on roads), but these costs aren’t included in EROEI calculations. Neither are lease payments included, nor are interest payments on debt, nor are dividends paid to stockholders. All of these are needed to make the system operate, and all of the payments can be converted to cash which can be used to buy a mixture of goods, made with oil products. These omissions wouldn’t be a major problem, if all of the extra costs were the same for other products–then EROEI comparisons among products might make sense.
A related issue is that published net energy amounts tend to overstated, because so little of the costs of the system are counted in standard EROEI calculations. It seems a little like counting tops of icebergs, without knowing what is beneath the surface.
Gail
The Etp model is a thermodynamic model of a certain type. It is not a bottom up EROEI study. As BW Hill says in one of his answers to a question, the ETp model gives a certain estimate for 2012 in terms of processing, and he has an independent estimate (probably from the University of Texas) published by the EIA, which is in close agreement. Hill states that we need both the very broad brush ETp model and the bottom up estimates to validate each other.
As I see it, the ETp model projects the costs of producing a barrel of usable oil products for the global market. A second model projects the ability of consumers to pay for the products. The second model is a derivative model from the basic ETp model. The cost of production line and the ability to pay crossed in 2012. Since 2012, the determinant of price has been the ability to pay line. (By the way, Hill has stated that his group understood that the ETp model said something about ability to pay, but they didn’t publish their results right away. He credits some of your statements with prompting him to publish the ability to pay results.)
The ability to pay is not ‘independent’ of the cost of production. The more it costs to produce oil, the lower will be the ability to pay. However, Hill does recognize that the ‘ability to pay’ calculation assumes a static world economy. If the economy begins to evolve in a different direction, then the ability to pay may increase or decrease. For example, if all waste could be taken out of the economy tomorrow, then the ability to pay would increase and the price of oil could increase and production would be higher.
Whatever you know about the problems with traditional EROEI studies are probably not applicable to BW Hills fundamental models. But in addition to the fundamental models, he has a lot of other calculations. For example, his statement that the 50 percent water cut in Ghawar means that the reservoir is 90 percent depleted is NOT derived from the ETp model (so far as I know).
As I have tried to explain repeatedly. I believe his primary goal is to explain the relationships which are leading to oil no longer being a primary source of energy. We would, of course, be better off if we had a good thermodynamic model of all fossil fuels, but we don’t have such a model. Hill has described his work as ‘using a 100 year old modeling technique in a unique way’. There is nothing else like it in terms of oil modeling. Criticizing it for the weaknesses of Charlie Hall’s methods is just off base. It may have its own flaws, but they don’t come from Charlie Hall.
Don Stewart
I’ve been guilty of abusing a figure for ERoEI. “it means just what I choose it to mean, neither more nor less” – “Through the Looking Glass” by Lewis Carroll.
Where use becomes difficult, you have to be honest, to be honest.
There is a Through the looking glass aspect to ERoEI.
I am not sure that you are saying anything different from what I have been saying. I have been talking about a slowdown in the growth in debt as likely being one major cause of our current problems. This, of course, comes when the world is maxed out on debt.
I have been talking about too little of the receipts going back to the worker. Your story about the potential drop in costs in Australian mining is an example of this.
The collapse in containerized shipping prices is exactly what a person expects when demand is too low. There isn’t enough to ship in all of the ships available. I don’t understand the conflict. These are just details about how the drop in demand occurs.
“I don’t understand the conflict. These are just details about how the drop in demand occurs.”
Depending on conditions precedent a drop in demand can cause inflation, deflation, or both. It matters if you are trying to predict what happens next.
Falling Consumption Is What We Would Expect with Lower Inflation-Adjusted Prices
So demand (consumption) curves are upward sloping. That’s a new kind of economics. Does the obverse hold? Supply curves are downward sloping.
If the inflation adjusted price of a dozen eggs declines, the quantity demanded for a dozen eggs declines. I don’t think so.
It does when incomes are falling.
http://graphics8.nytimes.com/images/2013/03/28/business/economy/economix-28income/economix-28income-blog480.jpg
Think again….
And when people don’t have jobs (as in they have no munny… and are living off food stamps or under a bridge)
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/01/LFP%20Participation.jpg
I added a few more words to explain what is happening. As prices fall (because of reduced demand), less fossil fuels are extracted, and thus, less are available for purchase. The lower prices correspond to lower demand and relatively lower output–perhaps slower growth, rather than out and out decline, because of the time-lag lag involved in the feed-back.
In a sense, it is the short-term situation. Less demand, so lower price. At the lower price, less is for sale, so consumption drops.
Off Topic but interesting
http://www.cnbc.com/id/102763253
How come the workers don’t use their knowledge to drill for and then sell the oil?
There would have to be a pretty co-ordinated group of them with strong financial backing to figure out where to drill new infill wells and contract for drilling rigs to drill the wells. They would also need to pay required amounts to leaseholders, pay taxes, and file regulatory reports.
If the only issue was keeping a few bobbing head wells going, it seems like a company could maintain them with only a handful of employees.
Mondragon comes to mind.
https://en.wikipedia.org/wiki/Mondrag%C3%B3n
Pretty much for the same reasons that the workers at BMW don’t use their knowledge and go off on their own and build cars…..
This is one reason it is hard to leave and pick up again.
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This is evidence that humans are not much different than rats
Auto Loans In “Untested” Territory Blackstone Warns As Subprime ABS Sales Accelerate
Demand for automobile debt in the U.S. is enabling lenders to make longer loans to people with spotty credit, stoking concern that car shoppers are being lulled into debt loads they won’t be able to sustain.
http://www.zerohedge.com/news/2015-06-24/auto-loans-untested-territory-blackstone-warns-subprime-abs-sales-accelerate
So… basically you are broke…. but you see an ad on the TEE VEE that says it doesn’t matter if you are up to your ears in debt and on the verge of bankruptcy…. just call us and you can purchase that pimp mobile that you always wanted…
And what do the rats do? They race down to the dealer and sign on the dotted line… in record numbers…
Perhaps lemmings is a better metaphor… right over the cliff we go….
But of course subprime is better than no prime… because if people don’t buy cars — we go off the cliff sooner…
As it says, “This cannot and will not end well.”
Years ago, I had knew someone with financial problems who would go buy a new car on credit, when her old car had problems, because it was hard to get a loan to fix problems on the existing car, and even harder to pay back both loans at once. I have to believe some other people are doing the same thing–keep a car until it develops major problems, then try to move to another car. That method is going to leave lenders with a lot of big loans outstanding on cars that are not running well. Also, it is not clear that buying a new car the next time will work as well.
My approach is keep a detailed logbook and do most of the maintenance of our vehicles myself. I read somewhere that UPS kept their trucks going as long as they did with regular maintenance, so I adopted the same strategy. That’s also how Disneyland and Disneyworld keep their rides going day after day. Regular maintenance. One thing to do is take your automatic transmission vehicle in for a cleaning and new fluids every 40k miles. I also change the oil and replace the oil filter every 3k miles. What happens is you get a good look each time at the other systems that need fluids and ck. the battery terminals, air filter, etc. There’s no reason not to get 250-350k miles on a decent vehicle. I got 380K on a 280ZX and sold it running perfectly. I’ve got 150k on my truck – it looks and runs like new. The Mazda has 115k and it’s like new also.
Get a small booklet and start putting down mileage and work done on the vehicle, like tire rotation, lube job, any and everything that happens to it, mark down the mileage. Ck. the manual for maintenance intervals and make sure they get done. I read somewhere most people only get 40% of the potential mileage on a vehicle due to poor maintenance. That’s a stat to take note of. It also helps if you sell it because people can see you took maintenance seriously.
Cars as many prodcuts nowadays are sons of programed obsolescence, they are not intended to last nor be fixed but discarded.
The author is wrong.
Throw a World War into the equation- that should easily consume a good portion, say 25%, of world energy output.
Then factor an estimated 25% reduction of said world output in two or three years.
Gluts ALWAYS precede heavy shortages.
We will be facing a monstrous commodity shock over the next 25 years, with the bulk of the trauma in the coming 48 months.
It’s time to stack up the barrels of diesel and bags of rice.
Um…. wouldn’t a World War involve nuclear weapons?
“Then factor an estimated 25% reduction of said world output in two or three years”
Then factor in a collapse of global GDP by 20% — because GDP is 1:1 correlated with the burning of fossil fuels —- we all get to be Greece 🙂
If only the world were as simple as you make it out to be….
Things could indeed turn around badly, in terms of what we can actually get. It might not be from a world war; it might be from banks that are not operating properly.
I am not sure that workers will really be able to afford the goods they want to buy. They may not have jobs. But they will still want to have them. So if readers want to stockpile some things, I won’t object. There could be temporary outages that the stockpile would help a person though, if nothing else. I am doubtful that it makes sense to put away huge stockpiles. It will make you are target for those wanting to steal for themselves.
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Economy is growing for the right people, not so for the rest of the world.
All the resources are now being concentrated into the hands of those who can utilize it the best and bring the world to the promised land.
Demand destruction because of lower income is inevitable in the new economy.
Billions who cannot adapt to the new reality will perish, while those who survive will enjoy lifestyles which will make today’s richest people cannot imagine.
It is the classic Social Darwinism at best.
Dear Gail and Finite Worlders
Here is a nice post from Charles Hugh Smith on the subject of the lack of a pathway to shrinking, in most organizations…Don Stewart
http://www.oftwominds.com/blogjune15/collapse-contraction6-15.html
The company I am working for now just got “activist investors”. The message do more with less and do it now or we will cut up the company and sell off the pieces. At a time when the product is moving to China and profits will fall like a rock.
“The message do more with less and do it now or we will cut up the company and sell off the pieces.”
Got news for you. Thy are going to do it anyway. If your good at backstabbing you might make the cuts for a couple years.
“Systems with no conceptual or practical pathway to contraction and reduced complexity/fixed costs are more at risk of collapse than systems with institutional pathways for successful reductions in debt, credit, income, fixed costs and complexity.
How many institutions have proven pathways for becoming smaller, leaner, and flatter in organizational structure? Very few, as the default setting for the past 60 years has been expansion and more of everything. Less of everything does not compute.”
And this is what’s SO frustrating. It makes so much sense (to me) to contract. (Or at least to plan for it.) It promises so much inspiration to creativity. But all one generally hears is why it can’t be done. 🙂
It sound like he thinks the way I do–or reads my posts.
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Thanks Gail for presenting these charts.
The question seems to be when will there be a peak in world economic activity?
In a good background discussion of ‘sectoral balances’ and where money does or does not create ‘demand’, Steve Keen says of one of 3 alternative options open to the Non-Bank Private Sector (NBPS), when this sector can afford less: quote: “[thirdly] … by generating an increasing amount of economic activity from a shrinking amount of money. … We can rule out [this] third option: it just doesn’t happen.” http://www.forbes.com/sites/stevekeen/2015/06/18/are-surpluses-normal/2/
Actually Steve Keen is talking about the government sector choosing to be in surplus or deficit, and whether or not government is spending all those taxes back into the NBPS. But he has raised other questions in my mind. It occurs to me that accumulation of ‘super wealth’ by oligarchs and others of the top income-slice might act the same way. This ‘top-slice’ could be acting similarly to a government, thus essentially ‘over-taxing’ the rest of the NBPS mass without then returning ‘the money’ to the economy? The ‘wealthy’ sector extracts money but does not generate enough widespread and well-paid employment, and thus reduces demand? While our ‘advanced’ economies were growing fast enough at well over 2% pa then imbalance did not matter either for government or for the wealthy sector. But that was happening in what Keen calls the ‘Happy Days’ 1954 to 1973, when it just so happened the Petroleum Age boomed on cheap oil.
Just a thought.
Phil
The economy seems to have a fundamental need for more debt (or money–the two are not much different). This need for debt seems to be higher now than back in the days when growth came from burning cheap oil, namely 1954-1973. Then, oil cost less that $20 barrel, even in today’s dollars. Back then, it was a lot easier to finance operations on cash flow. Productivity was growing enough that workers could afford to buy the products the economy made. So the need for debt was a lot less, then. We need debt now, to give the illusion of growth, since debt props up commodity prices, and makes goods easier to purchase.
The questions is, “Where do we get it all of this debt/money from?” I think that is what Steve Keen is talking about.
I am not sure that the super wealthy can act like the government sector issuing debt, and returning jobs in returns. To me, the super wealthy seem more like pension funds, holding all kinds of securities issued by others. They are not really creating more debt and more jobs. They are simply talking some of their own high earnings, and storing it away in financial securities of various types. Thus they are making a “home” for debt securities, but they are not creating jobs with it themselves. An article I read earlier today http://eml.berkeley.edu//~saez/saez-UStopincomes-2012.pdf characterized the wealthy today as mostly receiving their wealth from high wages. No doubt they are also getting some income from capital gains, based on pumped up stock prices. But they really don’t create jobs with the bonds and stocks they hold.
It seems to me that it has to be businesses and governments that create jobs. They seem to do most of the borrowing as well. With US citizens increasingly turning to renting rather than buying, and property related debt related to their apartment homes will stay out of the household sector, instead appearing as bank loans or commercial bonds.
Thanks for the link Gail.
I think your reply makes the point I was trying not so successfully to make!
I was trying to suggest that very high income (and wealth) sector is significantly large to actuall suck money out of the productive economy which might have created jobs. According to your link this seems to have been going on increasingly in the US since the 1970s. And most recently: “The top 1% has captured 95% of the income gains in first 3 years of the recover.”
best
Phil
http://www.thestar.com/business/2015/06/24/ford-motor-launching-car-sharing-pilot-program.html
So Ford is starting a program in the US and London where if you can’t afford your car payments they’ll rent out your car. Ha !
I suppose this will help them sell more cars in total??? Maybe if people can afford Fords this way, but not other cars.
This Zero Hedge article backs up what Gail was saying in her recent Blog that when people are squeezed they don’t have money to spend on other things.
http://www.zerohedge.com/news/2015-06-24/mystery-missing-inflation-solved-record-number-us-renters-cant-afford-housing
According to the report, for American renters 2013 marked another year with a record-high number of cost burdened households – those paying more than 30 percent of income for housing. In the United States, 20.7 million renter households (49.0 percent) were cost burdened in 2013.
It gets worse: a whopping 11.2 million, or more than a quarter of all renter households, had “severe cost burdens, paying more than half of income for housing.”
Another excerpt from the ZH article:
“It gets worse: a whopping 11.2 million, or more than a quarter of all renter households, had “severe cost burdens, paying more than half of income for housing.” The median US renter household earned $32,700 in 2013 and spent $900 per month on housing costs. Renter housing costs are gross rents, which include contract rents and utilities.
In other words, the reason why American consumers are caught in a state of near-permanent spending depression is simple: almost half of all renters can barely afford to splurge as they are spending 30% of their income just to cover rent, a number which surges to more than half of all income for a quarter of all renting households!”
In government calculations about poverty it is assumed 1/3 for housing, 1/3 for food and 1/3 for everything else.
This is the very nice (free) Harvard report on which the Zerohedge article is based. http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/jchs-sonhr-2015-full.pdf It has lots of nice charts and graphs, for those who like that kind of thing.
I am sorry but there will be a lot of street peoples in the near future.
Most of them will end up like the hungry Bengalis of 1943.
Dear Gail and Finite Worlders
Building on what Dennis Meadows and Gail said, may I offer a generalization of our current situation?
I propose that we are reaching thermodynamic limits because our ability to do work is stagnant or declining. (Skip Laitner thinks we should be collecting comprehensive statistics, but none exist at the present time.) Decline in ability to do work can result when a single, essential ingredient is missing or scarce, such as oil. In the short term, plentiful coal is not a substitute for missing oil.
If thermodynamics indeed poses a limit, what sorts of behaviors can we expect to see? If we turn to Systems Science, we find the concept of Dissipative Systems which are stable Far From Equilibrium, and the concept of Entropy. The Dissipative System can be identified because it has a structure which contains components which are ‘not formed under thermodynamic control’. For example, the proteins of life are not the most stable arrangement of the various amino acids. It takes a continuous supply of energy coming into the system to maintain a ‘far from equilibrium’ structure. The proteins of life are constructed by what we think of as the natural world, with energy supplied by the sun and adaptations such as photosynthesis. As a Dissipative System adds (or subtracts) energy flow, new (emergent) structures appear, while old structures may disappear. We can think of a human economy and society at any time in the last few hundred years as a Far From Equilibrium system which is dependent not only on the natural world system of solar energy, but also adaptations such as wood burning and the burning of fossil fuels.
Assume that we are looking at a 1990s social and economic structure similar to that which existed in the United States. Two notable things have happened in the US since the turn of the new century:
First, our ability to do work with energy from fossil fuels has declined (I think). I would make oil the primary suspect.
Second, certain technologies have advanced. I will note communications and robotics, in particular.
Since the work which can be performed by fossil fuels has declined, then we know that new structures which require less work MUST displace old structures which require more work. Therefore, turmoil is the new Normal.
But the advances in technology offer novel emergent structural possibilities….we won’t necessarily go back to the 1970s or any other arbitrary point in the past. For example, magazines and television and physical movie theaters may be replaced by communications methods which were not possible in the 1990s. If we think of magazines and televisions as fundamentally ways to get advertisements to the public, then new forms such as social media and the targeting permitted by Big Data may destroy the old forms of advertising.
What can we conclude about the impact of the two events which I have identified as characteristic of the 21st century?
First, an American worker is an energy hog. It takes a lot of income, and hence a lot of energy, to sustain an American worker in ‘the 1990s style’. Since the available work from energy is declining, reducing human labor will be a high priority for entrepreneurs. The entrepreneurs can shop the world for labor, or else turn to automation, or outsource work to the target audience using social media. Gail has covered the ‘shop the world’ angle very well. Let me explore the other two angles a little bit.
I was in a coffee shop on Sunday and a man came in with an interesting 3D form made out of metal. It was a piece of art. It turned out that he was meeting a potential investor in his process at the coffee shop. He said that the traditional rule of thumb was that labor would be three times the material cost for producing such an object, but computer control and laser cutters have reversed that ratio. The materials are now 3X the labor cost. It also turned out that metals are cheaper than plastics for his process. I don’t know if his business venture will be successful, but you can see that the advances in automation have eliminated most of the human element, other than design on a computer.
Social Media and Big Data combine to undermine the traditional, fairly labor intensive, methods of advertising using television. Now, the users of social media self-identify themselves to Big Data algorithms, and advertisements are delivered to clearly delineated market segments. So, in a sense, the target of the ad is doing the work which was formerly done by advertising agencies and television production studios.
In these two examples, we can see that our culture is changing in the direction of ‘not so far from equilibrium’ emergent structures. But, as Charles Hugh Smith points out frequently, many important sectors of the economy have figured out how to build defenses against the sorts of disruptions that are working their way through other, less defensible, segments. For example, it still requires a doctor’s approval to get a lab test done in my state. The citizen is not trusted to read a book which explains why elevated chronic inflammation is dangerous, and order a test for such inflammation himself. The citizen is required to pay for a doctor’s visit, and probably a consultation with the doctor to read the test, as well. And the hospital charge for the test may be several multiples of what a competitive lab would charge.
I submit that the dynamics I have sketched out here are not good news for workers. Wages will tend to be driven down, particularly in high wage countries. Workers in ‘unprotected’ segments of the economy will suffer the most.
What about the price of commodities? I think it is true that most workers historically used work from primary energy sources such as fossil fuels to supplement their own muscles and intelligence. The products could be sold (within a company or to end users) because the worker was doing something that created value which could not easily be created by someone else. For example, a longshoreman had certain skills required for loading boats. But those skills are no longer valuable (in the volume they once were) with the dominance of container ships and container shipping. If workers are paid less, such that their ability to afford to use fossil fuels to ‘consume like an American’ diminishes, then the price of the fossil fuels will decline as demand falls.
Nate Hagens observes that humans burn fossil fuels to create objects which we believe will favorably manipulate our neurotransmitters and hormones. But if we lose the ability to burn the quantity of fossil fuels we burn today, then methods which more directly manipulate neurotransmitters and hormones may become much more common. I submit that social media are a low cost way to manipulate neurotransmitters and hormones, from the consumers point of view. Other possibilities include more drug use, and possibly more mental dysfunction, where people create a mental environment which makes them feel better. The resurgence of fundamentalism may well be connected to the ‘mental dysfunction’ method of adaptation.
If the thermodynamic returns on fossil fuels approach zero, then society will move further back down the curve, and work will once again be powered by the sun and photosynthesis and the structures will be much closer to equilibrium. The move back down the curve can take various shapes, from catastrophic collapse to planned degrowth. If thermodynamic limits are close, then I doubt that a stable ‘steady state economy’ could evolve rapidly enough. It would take me too far afield to speculate on all the paths down the curve.
What we can predict with some confidence is that people will try to choose alternatives which make sense to them at the time. The new theories of drug addiction assume that the rat in the cage or the soldier in Vietnam choose drugs because of the cage the rat and the soldier perceive that they are in. Those who choose sugary foods are usually trying to manipulate their neurotransmitters and hormones to make themselves feel better. The husband who abuses his wife is likewise trying to make himself feel better. So…it all depends on the cage we perceive that we are caught inside.
Don Stewart
Don,
1) you must be a great typist
2) that is what life is the use of an energy flow to stay above the background level of complexity
3) no matter how efficient we are we need to control the number of people
So far, we have dealt with the cost of high population density by using more energy and more efficiency. The time is approaching when we will deal with high population by lowering the population. Of course the parasitic rent takers will fight that approach tooth and nail.
Can we capture the excess energy in Don’s key strokes and plug that into the grid to kick the can a little further? I’ll volunteer as well if it helps buy a few more months
🙂
Whenever I examine our predicament from a thermodynamic standpoint, it all starts to feels weirdly like a trap…
As civilization reaches its denouement, technological complexity goes into overdrive to compensate for dwindling net energy, simultaneously pampering us humans and narrowing down our skill set as we are forced into ever more specialised roles. Dwindling net energy also requires us to work harder and harder to make ends meet, so that our attention becomes ever more focussed on our tiny niches and we have no spare time to look up and take stock of the big picture – suddenly, BAM! It collapses almost overnight and we find our pampered, highly specialised selves in a world to which we are lethally unsuited. Are we being fattened up for the kill?!
Harry Gibbs
http://www.zerohedge.com/news/2015-06-24/mystery-missing-inflation-solved-record-number-us-renters-cant-afford-housing
I find this map intriguing and fun to play with. You can find cities with high incomes and super high rents, with many distressed renters. You can find poor cities with low rents and many distressed renters. You can find some pretty well to do cities with average rents and thus fewer distressed renters. You can find some very untrendy but fairly well to do towns with pretty high incomes and low rents and few distressed renters (Andrews, TX; Garden City, KS; Rock Springs, WY).
For the country as a whole, people are turning to rentals as their financial situation deteriorates. But, even with ZIRP, monthly rentals keep increasing. While one might blame it all on zoning or some other scapegoat, it is hard not to think that thermodynamic limits are behind the overall trend. It is certainly not lack of money available to builders.
Don Stewart
This is the central crux of the issue, the intractable problem all life forms face, one that intellectuals from each generation have identified and discussed at length: Hobbes, Malthus, Marx, even Lewis Carrol. (You described the actions of his Red Queen perfectly.)
There are a couple of options available once you realize the truth. Engineers tend to get frustrated; fantasists imagine all sorts of cataclysm. However, the pragmatist recognizes those who hold power will do anything to retain power. So, it’s merely an exercise in answering the riddle “what would Satan do?”.
There isn’t a solution, nor has there ever been one. There is only the here & now to enjoy as one is best able. In order to maximize one’s enjoyment in the present, it’s critical to understand how the world actually operates, and not get hung up on wishful thinking.
The game has changed.
The world is going for a Type I Kardashev civ.
Old laws no longer apply now.
Like this?
I will agree that people will try to choose alternative which make sense to them at the time.
Regarding, “Since the work which can be performed by fossil fuels has declined, then we know that new structures which require less work MUST displace old structures which require more work. Therefore, turmoil is the new Normal.”
I agree that turmoil is the new Normal. I think you mean “new structures which require less energy must replace old structures that require more energy.” I think of humans as being the structures that would be replaced. They might be replaced by smaller humans that required less food to sustain themselves. Or they might be replaced by plants, that could use our waste.
Within the context of the economy, I have a hard time seeing a requirement that structures that use less work (or energy) will replace old structures, unless you mean that people who cannot afford cars will walk or take public transportation. We don’t have any assurance that “new structures” will arise in any reasonable time frame, or will satisfy our current standards. Certainly, if Uber is cheaper, people will use it. But it depends on governments being in place to repair streets and provide police. It is not a long-lasting solution; it is a temporary band-aid.
Gail
I was using the US in the 1990s as the baseline. What I am pointing out is that we would not necessarily regress to the 1970s or the 1950s or 1800 or 8000BC as thermodynamics force new emergent structures to appear. The most extreme ‘new structure’ would be, from the human perspective, as you point out, the disappearance of humans and the emergence of a very different ecosystem.
Less extreme versions of ‘new structures’ would likely reflect some of the technological innovations which have happened since the turn of the century. Also, I think, more direct manipulation of neurotransmitters and hormones…which was a feature of the dystopian novels of 60 years ago.
A different and perhaps more interesting question is whether we could construct a reasonable human civilization, using today’s technology, which extended the life of fossil fuels but also resulted in more favorable expression of neurotransmitters and hormones. That would be a science fiction book, I think.
Don Stewart
Don,
I believe that you and B9K9 are the two electrodes tapping the Intelectual potential of Gail’s hypothesis. You – the cynical optimist; he – the optimistic cynic.The rest of us are mere resistance that reduces the force of argument while doing the work of information sorting.
However, the actual human potential to rewire the System is more difficult to diagram. The System does depend in part on evolving intellectual structures. But the System inertia ultimately overwhelms our contributions. Its like trying to kick the ground to add momentum to a car travelling at 60 mph.
Our problem is that its hard to know whether the ground on which we roll is tilted slightly or substantially uphill. If we throw off riders at the wrong time, we will lose momentum needed to extend the climb.
It is the discussion of slope and mass here on OFW that now concerns most of us. That is how we improve the System — how we reject the Null hypothesis. This information may be taught – nor is it proprietary like money. (And do not make the mistake of dreaming that power depends upon property. What Satan would do is not what Jesus would do…) IQ is not as important as free distribution of information, much like your point about the doctors retaining the power to heal long after the knowledge of how to do so has become part of the public trust
“A different and perhaps more interesting question is whether we could construct a reasonable human civilization, using today’s technology, which extended the life of fossil fuels but also resulted in more favorable expression of neurotransmitters and hormones.”
Very near term-loss of human habitat is a concern of many who follow Guy McPherson.
Extending the life of FFs would be a challenge for “today’s” and yesterday’s technology, and might require ways to deal with that loss (if possible). While today’s technology might move many people’s neurotransmitters and hormones, their ability to move these might be overrated. I’m much more moved by old technology, for one. And the new and old technologies don’t seem to fit together well. Passing thoughts…,
PS: Old technology is less dependent of FFs also.
Dear Artleads
Your statement that old technology uses less fossil fuels.
Depends on how far back, which technology. There is no doubt in my mind that cell phones have reduced the use of fossil fuels in some circumstances. I was watching a French movie from around 1960 last evening, and noticing how they were traveling a lot to do things which they would now do with a cell phone.
The area I live in has no water transportation, since we are above a ‘fall line’, near the headwaters of the small streams. Before the railroads, transportation here was very difficult. It is possible to rebuild the radically local economy which poor transportation dictates, but it takes a while and will be perceived as a collapse. Having enough fossil fuels for some transportation of basic needs would be very helpful.
Don Stewart
Found it
https://iwpr.net/global-voices/armenians-shocked-electricity-price-rise
raised to 10 cents per KWHr day and 7 cents per KWHr night. In other words exactly the same rate I pay in New York State.
Reading it seems major customers like the water company are not paying their electric bill. I guess if they did it would raise water rates.
@Don Stewart says “(with respect to FB, LSD, etc) may be discovering ways to move the neurotransmitters and hormones without moving so much material.”
Now we’re finally getting somewhere; that somewhere being no different from the traditional ‘bread & circuses’ utilized for millenia by the PTB to keep the masses off the streets. Add some high calorie GMA foodstuffs to keep everyone happily fed, and who needs production & consumption?
Once you realize the entire game is nothing more than control of the money supply, then it simply becomes a function of “how” to maintain that control, not the actual mechanics of what the ants are doing on a day-to-day basis. 500 years ago, control meant mining the new world for gold backed money; now, of course, it’s debt/credit creation, management & control.
Which also gets us back to why people think deflation will be allowed to occur. In a default, the process enters the bankruptcy arena. If you were a creditor, why wouldn’t you devalue up to 99.99% in order to maintain the validity of the debt encumbrance? And besides, which creditors actually hold the notes? Anybody with brains quickly offloads the instruments, while investing the outsized profits gained from such an exorbitant privilege into real assets.
While I know Gail’s focus is on limits to growth, she has enough forward thinkers lurking/posting to make this an interesting point of discussion which isn’t really being addressed elsewhere. Again, it all comes down to control of money: how does the present money system transition away from its dependence on actual physical growth in a finite world, to one that is virtually limitless in order to continue driving credit values towards infinity?
NYC is a fine example of a built housing stock that is being used and run down over the course of 100+ years. Apartment buildings in central Manhattan are disgusting but they are 100% paid off.
How long can we ride the existing stock of housing, roads, factories, etc.? Yes, bread and drugs work wonders but we still need to maintain water supply, sewage processing, some roads for food and clothes, electrical system, transmission lines, heating and/or air conditioning. Agenda 21 can corral the people into small concrete boxes in cities and lower the per head costs but not to zero.
I think the NYC housing stock is “better” than Havana’s. (But I haven’t been to NYC in some time.) Compared to many other parts of the planet, NYC buildings might still be pure luxury. Gee, if only their shabby condition were the worst problem we had to face!…
You have it exactly backwards.
“Permit me to issue and control the money of a nation, and I care not who makes its laws!”
Money represents energy.
No energy (and there will be no energy post collapse) – so there will be no money – so there will be no control (beyond perhaps local warlords)
[That assumes we don’t extinct ourselves when 7 billion people begin the food riots… or the spent fuel ponds by some miracle do not blow sky high… We are almost certainly going to be wiped out but let’s play the what if game anyway]
Get ready to toss all of this into the dustbin:
“I care not what puppet is placed on the throne of England to rule the Empire, … The man that controls Britain’s money supply controls the British Empire. And I control the money supply.” Nathan Rothschild
“Once a nation parts with the control of its currency and credit, it matters not who makes the nation’s laws. … Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.” — Mackenzie King, Canadian Prime Minister 1935-1948.
The PTB (owners of the Fed) are furiously digging their paddles into the river trying to keep BAU going because they know that once the canoe goes over the falls the canoe will be smashed into a million pieces…. they will smashed on the rocks below or drowned….
If they believe otherwise then why didn’t they just let the economy unravel in 2008 – like they did in 1929…. and pick up the pieces and start over again — as they have many times in the past.
Because they know — this time is different. There will be no pieces to pick up
Not sure why I’m getting the money dictum quoted back at me – perhaps it’s my writing style, since that’s the point I was trying to make. Anyway, I’ve been very consistent with a basic observation of how the world works, including the IQ levels necessary to either understand or engineer the system. To recap in general order:
115 – know something is not right, that the stories are false
125 – have a good working knowledge, have discarded public lies
135 – have it completely figured out, no longer care about moral issues, busy front-running
145+ engineer the very essence of the system itself – make the policy decisions, enforce the mechanism
Paul, I put it to you this way: while everyone posting here is in the 125-135 range, not one of us is an owner of the Fed or otherwise privy to the decision making process. Are we to assume that they don’t understand what is occurring, that the information Gail reports or that is contained in the reports you cite are not known to them? Are we to expect they are going to let the very system that gives them power to fail, to just walk away?
I’m sorry, but that’s not how they operate. The puzzle is actually quite simple: how to generate credit growth and thus control money supply, cost (ie rates) and asset values in the face of declining real wealth production. Figure out what they know and are implementing **right now**, and you can enjoy being rich (and maybe powerful).
Your envy and fervent wish for the system to come crashing down is clouding your judgment. In order for fantasy to be substituted for reality, only a few things need to occur:
– endorphins satisfied in the form of psychotropic drugs or other mental stimulation, real or imagined;
– fresh water in, sewage out;
– electrical grid/radio/cell network operational;
– high calorie GMOs
– core energy supplied to keep minimal baseline infrastructure in place to support above.
We must recognize this is the direction they are taking. They are not stupid – they know what we know, but are already working ways to mitigate the impact and keep the system going. Wishing & praying for their downfall is a waste of time. Why not aspire to their ranks?
B9K9
I appreciate your post. You put your finger on an aspect that we often also largely ignore or simply miss. It certainly IS known to policy makers and those in authority have far more information and intelligent interpretation than all but the leaders of the largest corporations that devote resources to such dynamics. It does not mean of course that they will craft, or are trying to implement, a plan that would benefit the society in a way that many citizens would or would hope would be the case. So called continuity of government, minimal disruption…riots and generalized unrest…are the core concern perhaps. How many perish in such a construct in various scenarios that surely, certainly are being run are also certainly a closely guarded secret…such as in Japan after the meltdown, releasing information deemed a ‘state secret’ became a treasonable act for elected officials, i.e., solitary confinement or death sentence.
Yes of course – they have all the information.
We on FW are by comparison stumbling around in the dark with Gail leading us by a rope…
She is like the one-eyed Queen in the land of the blind… she gives us glimpses of what is likely going on behind the curtain … nothing more…
The OOTF will know exactly how much oil the Saudis have left… exactly what the situation is with shale…
They will have modeled the impacts/consequences of QE ZIRP, subprime, and other stimulus measures…
They will know the REAL unemployment numbers – the REAL monthly job numbers – the REAL inflation rate and so on…
We never get to see any of this.
But just because they have all the information does not mean they can save themselves.
They will know what the REAL situation is with the spent fuel ponds. They will know what is LIKELY to happen when 7 billion people have no grocery stores….
They will know if we are facing an extinction event.
I think that watching what they are doing tells a lot about what they are thinking:
1. they are doing absolutely everything possible to keep BAU going as long as possible
2. they appear to have zero concern about driving us higher up the mountain so that the crash will be even more destructive
3. they do not seem to have any plan for the future — there is not attempt to repair any of the damaged soils so we can grow food — they are just balls to the wall on everything — running the engine as hard as possible even though they can see blue smoke coming out the exhaust pipe
4. all they seem to be doing to prepare for the moment of truth is to get the military ready for riots and chaos – they would know that this is a futile gesture because martial law can only hold as long as the bullets and gasoline hold out — so this is just another in a long line of kicks at the can — it is the last kick at the can — because when martial law fails the barbarians will be at the gates.
Conclusion: the OOTF are fighting for their very survival. They know they will ultimately lose the battle. But they will claw and scratch and bite — to their very last breath — to stay alive.
I fear your description is very likely to show how it plays out. The BAU will go on until it can’t, but it will not be for lack of trying.
They might win. All the world’s brains are on their side.
Besides the other side can’t pay the geniuses enough money to soothe their egos
“We must recognize this is the direction they are taking. They are not stupid”
——————————————————————————————————————–
Nomi Prins has a different opinion to that. She did an interview with Eric King and said just the opposite that TPTB don’t know what they’re doing and they don’t have a clue and are just faking it. She was referring to the Banks since they now run the Govt’s of the world.
http://kingworldnews.com/nomi-prins-6-20-15/
“Nomi Prins, Keynote Speaker Who Addressed The Fed, IMF And World Bank, Warns There Is No Saving This Global Financial System”
That assertion is demonstrably false – we can prove it by using the most elementary thought experiment: if you controlled a toll road, would you care if a hiker, horseback rider or automobile paid the access fee?
The answer of course is you wouldn’t care one bit. The key is the control of strategic resources, vital choke points, etc, not the means nor methods of utilization. For those who control the very essence of money through its issuance, valuation and exchange, why would they care if the economy was agrarian, industrial or technological?
The only important directive is that credit expands so as to avoid crippling deflation. Deflation = death; therefor, any measure that falls just short of death, but still ensures continuity of government, becomes a viable option. Hence, the idea being floated of survivable nuclear war (for protected elites in their bunkers of course).
The state can (easily) survive conventional war, rationing, price controls, travel restrictions, media propaganda, etc in an inflationary/de-valuation environment. What they cannot survive as easily is the destruction of the very money system that affords them the ability to finance the security state via military and police proxies.
It’s all quite simple if you just step back and look at the big picture. Will the state voluntarily abdicate? No, of course not. So, what steps must necessarily take place in order to ensure its survival? Don’t get stuck on moralistic ideas of the greater good, aggregate net benefit, consent of the governed, freedom, liberty, etc – that’s all pap fed to the masses to keep them docile.
Just focus on the power principle.
Are you suggesting that there will continue to be a global economy with centralized control post collapse?
If so I do not see that as being any more possible than it was 5000 years ago.
Energy – specifically oil – is what allows the owners of the Fed to run the world. Post collapse – assuming anyone survives — I see a very primitive, localized economy – with violent men competing to be kings…
I see the post collapse world as primitive and eternally steady state — there will never be much in the way of ‘progress’ because the energy to drive innovation has been burned up
I continue to sense that you – like Kulm – are underestimating what is coming — and that you are assuming that we can look to history to guide us. I think you are both wrong. This time is different.
Exactly.
The state won’t die.
There will be a global economy with sailing ships if the fossil fuels run out.
I appreciate KWN however it is first and formost a site for hawking mining stocks. Secondary it is a site for hawking bullion. grain of salt
If you follow the time line of this crisis which started well before the 2008 melt down … and look at the policies of the OOTF (owners of the Fed = PTB — or Ooooh-tuff) … we can see that they along with their advising think tanks… have done an absolutely brilliant job of keeping us alive this long…
I don’t think there is an argument that can be made to convince me that they are not aware of the disease we are fighting….
They make mistakes in their policy responses… but they are constantly tweaking things to compensate…
Where most of these ‘experts’ (Stockman, Roberts, Schiff, Ron Paul…) go wrong when they say the OOTF are confused… or stupid… or have lost the plot — is that they fail to understand why the OOTF are doing what they are doing….
They cannot bring themselves to accept the fact that the world as we know it is about to end —and that the OOTF are doing everything they possibly can to delay the moment of truth.
If they knew what many of us know — they’d be applauding the OOTF….
http://blackville.nbed.nb.ca/sites/blackville.nbed.nb.ca/files/bravo.gif
good post!
See my earlier comments re OOTF.
As for my judgment being clouded by my desires… I think you are confusing me with Jan and a few others who want BAU to end asap.
As I have stated I am having a torrid lustful affair with BAU… she is the sexiest of mistresses… she offers me a list of wonders too numerous to post here…
If she were to leave me I would be distraught… I am not sure I could go on …. BAU is my everything … without her I am not whole….
My judgment of what is coming and what the implications are for OOTF are based on the cold hard facts
(and I think your judgment is being clouded by your normalcy bias — your desire to see a reset of some form of BAU)
No energy > no OOTF
They will starve and die within weeks of the collapse — or be done in by the spent fuel ponds within months…. or because they are most likely physically weak men… the local war lords wherever they live … will seize their hordes of champagne and caviar … after putting bullets in their heads … or put them to work shining their boots…
These sorts of fellows will not do well in the post collapse world (I can imagine Nat as my butler… and George as my court jester)
http://www.thetimes.co.uk/tto/multimedia/archive/00383/120140727__383240c.jpg
https://maaadddog.files.wordpress.com/2009/02/george-soros1.jpg
We are in 99% agreement, except with your central thesis that FFs are necessary for the maintenance of the global money power. You believe that since there isn’t any indication BAU is being modified or prepared for termination, that is sufficient proof there isn’t an(y) alternative.
As a self-styled koombaya slayer and fan of logical analysis, you should know full well that absence of evidence is NOT evidence of absence. Again, let me suggest you step back for a moment, pretend you’re in the 145 range, and have been tasked with designing a credit-money system that would still function (strike that, thrive) in a environment of real declining wealth/production.
How much core energy would be required to maintain nuke facilities? How much to keep waterways flowing, sewage treated, light/power (net/radio/cell) operational? I would suggest it’s not really much more than 5+-% of current global energy usage perhaps.
How will you counter this argument? With the very type of wishful thinking you abhor? If you can admit to yourself that the human project can be cycled down to a bare minimum, but essential endorphins and calories could still delivered to keep the masses sated, what then would be the catalyst for change?
The thing is…
When the global economy collapses —- BAU goes — and along with it all the technologies that allowed us to extract oil.
So I fail to see how we will extract any oil post collapse — the easy stuff is gone — what is left requires computers, high-tech rigs, supply chains etc etc etc…
The financial system — a key pillar of BAU — is based on cheap energy — it was built upon the excess energy that we realized when returns were 100:1….
I can see no way to rebuild this system. The system is already collapsing because we are running out of cheap to extract oil.
So how do we get a second act when a) the easy oil is gone and b) the system that allowed us to extract oil has collapsed?
When collapse hits — BAU is done — the elites are done — and we will revert (if anyone survives) to living very primitively.
Gail – any thoughts on this?
It is hard to see a way to rebuild the system. We are having a hard time keeping what we have today repaired.
Virtually all of the countries that have industrialized have used coal as a base–Europe, US, and now China. It was (and probably still is) very high EROEI, but some of this high EROEI gets lost when long-distance transport costs get added. Now even coal supplies are becoming harder to extract, and need to be shipped further. We have discovered how bad the pollution problems are as well.
I expect if we were to re-industrialize at all, it would have to be on a coal basis (or perhaps a little hydroelectric that still works). Coal might be used to heat metals to try to recycle them, for some products we might be able to use.
Apart from this, about all that we would have would be things that haven’t yet fallen apart. I expect in the first 20 years, we will still have some things left: clothing, shoes, roads, pipelines that somewhat work (especially gravity-fed systems), houses. Long-term, it seems like things will end up pretty primitive.
Time machine
BAU continues and Highway Eddy makes his escape back to Hong Kong from NZ
The air pollution in Hong Kong is the main reason I left… and it’s gotten worse since then. No intention of returning full time regardless of how this plays out. Will maintain the remotest of bases in the remotest of places — and venture out on more adventures for as long as this holds together … I’m considering Uzbekistan in August…
Gee, Highway Eddy, sounds like you do have it very difficult, much more than the Nearings ever faced! I mean, scouting around the world in the remotest of places and establishing safe havens to assure your very survival. In between a few “cushy” days in Hong Kong until the air drives you away. You know what, I believe you have a new “reality” TEE VEE show to entertain the Sheeple. What can we call it, I wonder?
The ball is in your court.
I’m not so different than the Nearings — I was out cutting wood all morning then loaded it on to the back of my TRUCK and then stacked it to cure behind the barn…
I took a HOT SHOWER afterwards and turned on the ELECTRIC lights… I put my dirty clothes into the WASHING MACHINE…
The main difference is that I would never go to Florida for a winter vacation — I prefer more adventurous destinations… I am really keen to get on a JET PLANE and go to Uzbekistan…
I suspect that I will find a lot of people in that country who can only dream of living like the Nearings…
If you want role models you should consider people who are living somewhat close to sustainable lifestyles…
The Nearings are a terrible example…
See Highway, You ARE part of the PROBLEM and not the solution
Perhaps you may try this
https://m.youtube.com/watch?v=kdbGqJtHWQg
But Pee Wee Eddy wants another adventure.
Yes I AM part of the problem.
And so are YOU. And so were the NEARINGS.
Anyone who partakes in the glories of BAU — is PART of the problem.
So unless you or anyone else is living completely unplugged from BAU — and I mean completely — you can’t even have a shovel —- then accusing others of being the problem — would make one the King of Hypocrites…
http://www.nlc.tv/Websites/nlc2011/images/Portsmouth/hypocrite.jpg
You are one ignorant arrogant individual. I believe Gail and Jan tolerate tour rants because of the links you provide. Other than that your mindset is a total NEGATIVE.
I am certain you did not even read Living the Good Life or Making of a Radical.
Mr. Toxic Negative
Now why would I want to read a book about a concrete pouring, pick-up truck driving, electricity using, Florida vacationing person who believes that if we all lived like him we’d save the planet?
I’d rather read something from the uber-asshole Donald Trump telling me how great he is — because at least he’d not be a hypocrite…
As to why I am tolerated here even though I am so damned ‘negative’…. well in case you hadn’t noticed… most of my views are right in line with those expressed by the author of this blog…
Either you don’t understand the articles — or don’t read them and skip to the comments section where you can post more Nearing worship….
I suspect the author must tire of having to endlessly address the ridiculous claims that are posted here … that she would love to just once blurt out ‘how many bloody times do I have to explain this before you people get it!!!!’
She can’t/shouldn’t do that.
But I can.
I am still wondering how you reconcile the fact that the Nearings were fully plugged into BAU.
So what they grew organic food and did some of the work by hand.
What’s the big deal?
What exactly is it that they accomplished?
.Highway Eddy just repeats his negative boring chants over and over.
Which reminds me
https://m.youtube.com/watch?v=KuStsFW4EmQ
Why waste comment reply on this one?
No reason whatever to do so.
As one other commentator pointed Highway Eddy mistakingly believes he “owns” this blog.
I wish he heeded the advice to start his own doomed blog and leave us alone.
Why?
We already HEARD so many times before.
Some of us don’t really aspire to their ranks. More “stuff” doesn’t really add very much, certainly not for very long.
Armenia is having protests about the cost of electricity. Not one news source see fit to give the cost of electricity in Armenia. Any informed OFWers know the cost of electricity in Armenia? Thanks.
tmsr=EdPell
The key factor is the falling average EROEI of human civilization energy sources, which are today mostly composed of non-renewable hydrocarbons.
This fundamentally implies that there is less and less energy available to do something else than energy production.
Hence, human civilization has essentially been in a “death spiral” ever since the average EROEI of its energy sources has peaked (when was that?) and has started falling increasingly faster.
As you slide along that falling EROEI curve, a critical threshold will eventually be hit and a brutal non-linear phase change type response will take down the entire system’s level of complexity and will readjust it to a simpler state requiring a much lower, yet relatively stable, energy consumption level.
If you translate this system’s energy “phase change” in terms of human socio-economics you get civilization collapse and a great deal of human suffering. But as you may know, at least five previous extinction events of Earth’s life system have already been identified throughout its history along with numerous human civilization collapses.
I agree with you Gail that human civilization today desperately needs new “cheap” energy sources. But in terms of physics, you are essentially saying that human civilization needs new “high EROEI” energy sources essentially to take up the currently falling average EROEI of human civilization energy sources.
Most people tend to frame the current issues in terms of economics (instead of physics) without realizing that economics, in its current state, is not an intellectual discipline that follows the scientific method, as Charles Hall has so rightly mentioned.
Hence “economics” – with its collection of non-scientific “Mumbo Jumbo” principles mostly inspired and evolved to suit a collection of very private specific interests – is not an appropriate tool to truly identify the full scale of human civilization’s “energy problem”, its potential consequences and its potential solutions. In other words, in its present state, economics is more a quasi-religious set of non-verified assertions than a science based on the fundamental principles of the scientific method.
Economics is unfortunaltely a tool used by TPTB to mostly orient human civilization development in a direction set to suit their interests. Needless to say that economics is also used to mask very real and potentially mortal problems from Main Street, essentially for control purposes.
For example, if from the onstart Joe SixPack had kept his eyes and brain focussed on the evolution of the average EROEI of human civilization energy sources, he would have known quite some time ago that this average had peaked and that, if something was not done by TPTB to correct the slide down, he was heading for a painful extinction event.
Instead, Joe SixPack’s attention was “drowned” by a combination of cheap drink, TV varieties, sports and a set of elastic economic principles and reports that essentially told him there was no problem until he found, after having lost his job, that energy was no longer “cheap” and that a few people had uttered the expression “peak oil”.
Hence, using economics as a primary analytical tool to assess critical energy problems is unfortunaltely equivalent to putting on one’s head the same type of device that a horse wears to insure that he walks in the direction that his rider wants him to go…
The poor beast will not see much until it is too late to do anything…
I’m not sure that how humans behave system-wide can’t function as an energy source. Unless there’s some proof that human society is only capable of self-destructive myopia (as with Joe Sixpack) and not capable of self-interest-oriented long term thinking as to how/why to organize and systematize EVERYTHING.
“Economics is unfortunaltely a tool used by TPTB to mostly orient human civilization development in a direction set to suit their interests. Needless to say that economics is also used to mask very real and potentially mortal problems from Main Street, essentially for control purposes.”
This is what I would have thought too, but I’m way over my head here.
“As you slide along that falling EROEI curve, a critical threshold will eventually be hit and a brutal non-linear phase change type response will take down the entire system’s level of complexity and will readjust it to a simpler state requiring a much lower, yet relatively stable, energy consumption level.”
The thing is…. we need BAU to extract the high hanging fruit that remains … and as we are seeing that is not possible …and our modern industrial civilization is collapsing….
So when we collapse we will have no energy at all – not just a lower stable supply.
If we cannot extract it now we will definitely not be able to post crash.
If anyone survives this then at most they would be burning the forests for heating and cooking – that could be considered lower, stable energy consumption (assuming 7B people do not burn down the entire wood stock of the planet)…
Such a society would be very primitive…. and it would remain very primitive …. because the resources that allowed us to ‘progress’ to where we are now — are gone. That was a one-off windfall….
In fact it’s worse than that – the falling net energy has first to be spent on maintaining vital infrastructure, and only then can the remainder be used for more production. You can cheat on maintenance for a while, but then falling bridges and exploding nuclear power plants cause even more problems, needing even more energy to fix.
Once the electricity goes off, ATMs, EFTPOS, bank security, TV, radio, phones, internet, reticulated water and sewerage all go off, and shopping grinds to a halt. We experience this here after major cyclones – we are totally helpless without outside support.
Indeed, As we get a more complex society so maintenance needs to expand and get more costly to do. So we spend more and more of a diminishing energy input leaving less and less to spend on everything else society requires. That can’t end well!
Red lining the engine… seeing blue smoke out the back side….
Surprisingly, the clever stuff is relatively inexpensive to maintain. Just keeping things clean and flowing, fixing leaks, and cutting back trees from power-lines can hurt more if you do not spend the money on them. Engineers and Architects are pretty good at deciding what maintenance is essential, but managers hope that someone else will get the blame when it goes wrong.
Yep. Steady maintenance seems to be key. I think we need to ditch the cosmetic stuff completely, and just focus on the practical.
And while I have no idea how it would get enacted, I believe that strict rationing of oil will be required to keep “essential” function working indefinitely. Perhaps mildly (humanely) coerced cheap labor could also keep a strategic amount of electricity and pumped water going indefinitely too. When I say only for the basics, I mean shockingly Spartan. If some of us can augment the Spartan regime through local cooperation and ingenuity, so much the better.
John,
I agree with most of what you say, but unfortunately the end of cheap energy is not our only problem.
Even if we happened to find a substitute for conventional oil or other new high EROI energy source (which won’t happen), we’d have to face other limits, such as:
– overpopulation
– soil depletion
– depletion of mineral ores
– increasing levels of pollution (all kinds, some unsustainable)
– global warming (disturbed climate, sea rise, ocean acidification, …)
– loss of biodiversity
– race against pathogen microbes
– …? (sure I’m missing some other ones)
Many of these limits are interlinked, which mean we’d have to fix all problems at once. Of course, that is impossibe, even with a new energy source (which, due to entropy generation, would likely worsen some problems while trying to fix other parts), not to mention that some of the above mentioned parameters are no longer under our control, as we have probably triggered feedback loops with unknown effects and consequences on the whole system.
We’re not Masters of the Universe, just playing God and burning down the house.
Yes. Climate change and nuclear apocalypse (not necessarily caused by war) seem, especially, to be beyond remedy. But I think most of the other parts of the system could be addressed through radical change of behavior, including the wise rationing of remaining fossil fuels. So I see it as a need to correct all the sub systems that are amenable to correction, and then try, against all rationality, to address the top two.
Climate Change:
– Plant so many trees that you can’t see the ground from a plane.
– Radically ration the amount of GHG that can be released.
Nuclear Catastrophe:
– Focus as much or more on radical planning for eternal maintenance as on decommissioning nuclear plants. Maintenance might well be within the realm of affordability and time constraints.
– If possible, decouple nuclear power from other parts of the grid, so as to contain and limit its harmful potential.
– Apply nuclear energy to work which can be done in the vicinity of plants, and whose stoppage won’t bring down the rest of the system.
I also agree that it’s the whole system in its entirety, and not discreet parts of it, that needs to change.
Arleads,
do you think your suggestions (or similar proposals) will be seriously discussed during COP 21 conference to be held in Paris this fall?
Why don’t they talk about really important topics?
1. they know it’s too late
2. they have some hidden plan
3. they don’t have a clue of what’s happening
My bets are on 1. for the PTB, and 3. for the politicians.
I can’t see how any plan (2.) could work in the long run. But I’m not aware of the plan, so…?
IF anything I wrote was on the money, somebody with influence could use it as they saw fit. That’s how I see the blogosphere…planting seeds, or worse, just throwing them along the shoulder as we drive past. I have no expectations for COP 21. Blogs like this are decent places to share ideas, and if I were among the elite, I’d check them out. Apart from that, it takes the unexpected–like the encyclical, perhaps?–to move the needle. Or so it seems to me.
Correction: I expect the encyclical will have an influence on COP 21. Not determinative, but something that is amenable to further influence from an engaged public…or to further surprises?
The elites have think tanks with the best minds who have access to all the information — who model various outcomes… who recommend policies to delay the collapse…
I don’t think they need to visit blogs like this to get ideas… we offer nothing …
Although when they get truly desperate they may latch onto my Koombaya meme … everyone needs a bit of hope eh…
The elites are obviously very stupid. Or is it, very unwise? Even if also very clever and short-sighted.
Stefeun, there is “a plan”. In fact, in certain circles it is referred to as “The Plan” or Fortress Europa or the Transatlantic Federation. The objective set out by the Rockefeller-Rothschild int’l banking syndicate’s principal owners in the 1960s-70s was to merge the US and Canada with the UK, EZ, Japan, Oz, and Kiwiland into a single currency (SDR-based basket of currencies as the new int’l reserve currency), single regulatory, taxing, and customs regime, unified military command, and the IMF to become the reserve clearing bank for the BIS as the central bank of central banks, subordinating other central banks.
These same enlightened types have no doubt about Peak Oil, population overshoot, the effects of climate change, and “Limits to Growth”, and, as a result, they expect mass die-off of the human ape species beginning no later than the 2030s, beginning in Africa and South Asia first.
Each successive crisis provides the int’l syndicate’s owners the justification to consolidate power increasingly to the syndicate in such a way that there eventually emerges a kind of inter-continental, bankster-run, rentier-socialist, militarist-imperialist corporate-state owned by the top 0.001-1%.
So, I would submit that 1, 2, and 3 from your list are all correct, except that a few well-placed politicians and Established technocrats are the principal facilitators of “The Plan”, therefore, there are anything but “clueless”.
Thus, whenever there is an election, political, financial, or social crisis, or war, and technocrats and politicians convene, the first question should always be, What do the banksters want? Whatever it is, they usually get it, and whatever “it” is most often comes at a prohibitive cost to everyone else.
I am not clear as to how creating a new currency would make any difference (maybe it would kick the can a little further???) when the problem is not one of money — rather it is one of running out of energy that can be extracted at a low enough price to allow the economy to grow
Can you give us some links which explain this “plan”?
We really do need a plan. It would of course not be generally known for fear of premature panic.
But without a plan there will only be chaos and that need not be necessary.
Today’s politicians are not up to any such task, so the Army will be brought in to implement any plan.
BC,
sure we need the banksters to run our current system, but IMO they just operate the system, they don’t create any wealth.
Money helps move the problems in time and space, but as soon as the money can no longer buy anything it becomes worthless. Sorry for the tautology, I mean the real wealth is the energy and “stuff” made with it, not the money.
You cannot ration the remaining fossil fuels…
Reducing the burning of fossil fuels means growth stops and goes into reverse… that means the economy collapses…
And that means the fossil fuels that are in the ground at that time — will remain in the ground… because they require the full force of BAU (finance, technology etc…) to extract them.
When the economy collapses – BAU collapses
This is the biggie http://www.zerohedge.com/news/2015-04-07/california-microcosm-impending-global-water-crisis
I saw an ad from someone yesterday about some hoped-for treatment that would allow people to live forever. Imagine what that would do to our overpopulation problem!
Yes Gail,
I had same reaction while listening a researcher tell they hoped being about to find out about the “secret” of the naked mole-rat, that has an exceptional longevity (see https://en.m.wikipedia.org/wiki/Naked_mole-rat#Longevity). The guy was saying that if ever they found a simple “key” (some gene, I guess), it may very well allow, overnight, (some? rich?) humans to live up to 600 years!!
Then I thought that concerned people would have to eat anyway.
So I’m afraid it wouldn’t change anything.
My view:
1. EROEI, as it is actually calculated, does not match up well with the physics. EROEI is too narrowly defined, as it is used in academic settings.
2. Civilizations have collapsed since the beginning of time, for reasons that are not captured by the narrowly defined EROEI calculations. A person needs to study diminishing returns more broadly to understand what is happening.
“EROEI is too narrowly defined, as it is used in academic settings.”
How can (or CAN) this be remedied? Here, especially.
Our system of keeping record of the costs of production is, in effect, a way of counting all of the energy costs, even the hidden ones that go to the government in the form of taxes. We talk about money being a marker for embedded energy. This is why I talk about the cost of production as being important. I think that this is what we should be looking at, not EROEI. We can then compare cost of production to the market prices.
With respect to the EROEI approximation, Charlie Hall back in the 1970s thought he could get a close enough approximation by just adding up the quantities of fossil fuel energy used “at the wellhead”. Even this is a big headache to try to calculate. (It does keep a lot of graduate students busy, though.) I think we are kidding ourselves if we think graduate students really can do the counting correctly on a broader basis.
Charlie Hall and his students have proposed adding more pieces, to get all of the way to the equivalent of the distributed cost to the consumer (but still leaving out taxes, dividends, interest payments, lease payments, corporate overhead, and probably other things). I presume that the EROEI calculation would still have the problem of treating all kinds of fuels equally, based on their energy equivalent. This is a problem because natural gas and coal are about 1/10 the cost of oil. Using them to create a liquid fuel may be a perfectly reasonable strategy for extending our liquid fuel supply. Even if oil is an energy sink, it doesn’t really matter, if we have a lot of very cheap fuels we can use in its extraction.
“I presume that the EROEI calculation would still have the problem of treating all kinds of fuels equally, based on their energy equivalent. This is a problem because natural gas and coal are about 1/10 the cost of oil. Using them to create a liquid fuel may be a perfectly reasonable strategy for extending our liquid fuel supply. Even if oil is an energy sink, it doesn’t really matter, if we have a lot of very cheap fuels we can use in its extraction.”
With apologies for my kindergarten-level understanding–using coal to excavate oil would be cost effective, but that is not how the system works?
I believe coal mining is deadly for many communities and environments, but that fracking for gas, which causes earthquakes, is even worse. So coal could well be the best of a bad lot?
We end up with two side-by-side “cost” systems:
1. The one computed in dollars, based on input costs.
2. The one computed on an EROEI basis.
What happens is that the two side by side cost systems give high-cost fuel makers two chances to “prove” their fuel is a good choice–(1) what it costs to make the fuel, and (2) what the EROEI based-calculation says. The EROEI-based calculation often gives a misleadingly optimistic indication, because it leaves out so much from the calculation.
Anything that gives an excuse for more development, including the use of more “renewables,” leads to more fossil fuel use, and more of the problems with coal and natural gas use. In theory, that could change over the long run, but I don’t think it has so far.
In the EROEI calculations, coal is treated the same as oil in the calculations. Thus, if an energy product uses much coal in its production, the EROEI will look low, but the cost calculation may very well turn out favorably. This is also true if much natural gas is used in creating an energy product. On the other hand, a process that uses a lot of high-priced oil to produce a new energy product (say intermittent wind energy) will not be penalized in the EROEI calculation for the high cost of oil used in the process. Instead, the EROEI will look favorable, even though the cost estimate comes out badly. As long as those working with the estimates have two choices (EROEI if its calculation turns out well, cost if it turns out better), those wishing to profit from the alternative energy product can pick the better-sounding calculation to justify investment in their proposed alternative energy type.
Gail said: “EROEI as it is actually calculated, does not match up well with the physics”.
What does that mean?
At least with EROEI the scientific method is there to cross-check any proposed data or method of calculation.
With “Voodoo Economics”, such as that of Chicago School Economics, the scientific method has never been used to check anything and you consequently end up with a set of wild faith based assertions, such as “the invisible hand of the market”, that very few dared to question until after the “free market adepts” had used their credo to wildly deregulate the financial system to the point where it had essentially become a giant “casino” – so disconnected from the risks related to basic energy realities – that it triggered the global 2008 financial debacle.
Charles Hall clearly demontrated – in particulaar in his remarkable book “Energy and the Wealth of Nations” – the extent of the scientific “shallowness” of all the “neo-classical” economic “principles” that were, not so long ago, considered as the “Bible” of contemporary economics. Those “principles” are so disconnected from the known scientifically checked realites of our world that they can only be considered as “Voodoo Economics”.
Hence, if an issue essential to the very survival of human civilization has to be assessed, such as the energy issue, it is highly preferable to use an analytical instrument that includes rigorous scientific verification than one using a set of criteria essentially designed to “please private interests” and help them to legally “rob” Main Street…
I am well aware of Charles Hall’s book, “Energy and the Wealth of Nations.” In fact, I wrote an article about it, as a way of advertising it, at his request. http://ourfiniteworld.com/2012/04/13/two-energy-books-of-interest/
Regarding the problems with the EROEI calculation, in some sense our economic system is all about energy–payments for past energy expended and amounts paid to people, allowing them to buy products made with future energy expenditures. The system contains a wide range of types of energy: human energy, animal energy, free energy from the sun, coal, oil, natural gas, hydroelectric electricity, nuclear electricity, etc. The government can especially distort financial assets with its policies, but discounting this problem (affecting mostly account balances that haven’t been spent), the calculations of costs of production reflect the marketplace value put on the various types of energy included in the system.
Hall has come up with an alternative system of counting energy products in the system. The rules are sort of as follows:
1. Only count energy used “at the well-head” in the initial production. Ignore indirect energy usage, and energy used later in the process. This would include energy required for refining and transporting oil and energy needed for balancing intermittent renewables. It would exclude the cost of the many huge pipelines needed to transmit natural gas, and the LNG infrastructure.
2. Ignore human energy, even though humans earn money, and use this to buy energy products.
3. Count only fossil fuel energy in the calculation, or varying with the researcher, include fossil fuels plus some or all of renewable energy in the calculation. Typically, burning sugar cane residue for making electricity would typically not be included as energy consumed.
4. In the real world, oil is valued at about 10 times the value of coal and natural gas, on a Btu basis. In EROEI, this value difference goes away. All fossil fuels are valued at the same level. Renewables may have no cost whatsoever.
5. There are a huge number of problems that come up in the actual calculation: How should co-products be valued? For example, ethanol is made simultaneously with feed for animals. Oil and natural gas are often produced from the same well. When a person is working with dollar values, how does a person adjust for wide swings in prices? Where are boundaries on the calculation drawn? Do you include the energy going into making the building and machines? Do you include the energy going into the factory that went into making the building and machines? If a particular machine is fully depreciated, is it OK to just ignore its fossil fuel energy component? Is it OK to ignore processes that are not present all of the time (irrigation for corn for biofuels, possible future explosions and clean up efforts for nuclear energy, etc.) Do you use pro-forma value of the amount of wind-energy that a wind turbine is supposed to produce, or do you actually see how it performs at the particular location (often a whole lot lower)?
As a practical matter, different researchers come up with very different answers when trying to calculate EROEI for the same fuel. Even if the same researcher does the calculation, there is no real reason to think that the direct well-head cost will be the same percentage of total energy costs for one fuel as it is for the next fuel. The EROEI calculation process becomes a “second path” whereby a high-priced energy substitute can claim its worth. If someone can find someone to calculate a sufficiently high EROEI for a high-priced energy substitute, this can be used as justification for asking for subsidies.
I think of the situation as sort of like measuring the size of icebergs by only looking at the top of the iceberg. The amount floating below the surface varies a lot, however, so even when we are done with the laborious calculation, it doesn’t tell us a whole lot, especially for comparing one energy type to another. Maybe, if we could do it right, it might tell us about the world average EROEI situation over time. What tends to happen though, it that the world mix of fuels tends to rebalance away from the high-priced, low EROEI fuels. This is the reason why Greece (whose economy is very oil dependent) is having difficulty right now. Coal’s EROEI (properly measured, but ignoring its pollution issues) has always been the highest of the various fuels. That is why it is a popular fuel.
If we think about the historical situation, in the pre-fossil fuel situation, we were working with EROEIs of mostly infinity, at least the way the calculations ignoring human labor are done. Since human labor counts for nothing, picking up sticks to burn them has an energy return on investment of infinity. Planting crops by hand, and harvesting them also has an infinite return.
All of our attempts to use fossil fuels are thus steps down from these infinite EROEIs. I personally cannot see any reason why a particular threshold would be a show stopper. For example, using coal to make an oil substitute, if coal is a whole lot cheaper, might make sense. This might imply an EROEI of less than 1:1.
All of the focus on this rather strange calculation takes time and effort away from looking at other things. The concept sounds like it belongs with motherhood and apple pie in terms of how wonderful it is; it is the details that trip it up.
Dear Gail and Stefeun
The list of problems with EROEI models are the ‘intractable problems’ which led BW Hill and his group to turn to a thermodynamic model. Here is one comment in a Q and A session which I linked to earlier:
‘It appears to me that while the entropy balance analysis utilizing appropriately defined control volumes is a standard applied method in chemical/process engineering, it may not be widely understood or appreciated in non engineering fields. Even I as a (retired) chemical engineer had to revisit my undergraduate text (Process Heat Transfer by Kern) to refresh my understanding.
My view is your study is the next logical step beyond the ERoEI analysis which, even though it is not trivial to complete, has not delivered the insight of the Etp Model.’
The results of the thermodynamic model are about as gloomy as you might wish to find. Here is a quote from BW Hill, from the same Q and A session:
‘Internal combustion engines are the primary user of petroleum products. Their efficiency has increased very little over the last 85 years. Even though designs have improved, reductions in compression ratios to reduces emissions have counter balanced that trend. The world has been balancing environmental issues with petroleum usage issues since day one. The other concern is that we probably just don’t have the time, or money to make major changes in how we use petroleum. The best advise to the individual that I can give is to get ready for a very low petroleum usage world. Attempt to substitute, or discontinue use of many of the things that you think you must absolutely have to have. Many of them will no longer be available in the very near future. A second home in the Keys will soon become an anachronism. The day is not far away when you will be ready to trade it for one good meal.’
Please note that I am not defending the details of Hill’s model. The model may be a good representation of reality or a bad representation of reality. But to dismiss it as ‘just another EROEI study’ is, I think, to do it a disservice. Which may have repercussions on those who refuse to look.
Don Stewart
Sorry Don,
I cannot answer you because I haven’t digged deep enough into the logic of the ETP model to have a clear opinion about it.
And I don’t think I’ve ever made any comment about BW Hill’s work (except maybe try to give a theoretical explanation for the 50% threshold not long ago).
@Don – There is a simpler way of explaining this.
If you crunch the numbers in BP’s 2015 data, and say that, for example, the maximum sustainable price for oil is $100 per barrel, there are only $475GBarrels available below that cost. Allow a few years for that fact to be widely recognised, and for 110GB to be consumed, and the remaining 365GB can be accounted for by exponential decay of all the wells currently in production.
No need to complicate these things.
richard
there still is the ‘declining affordability’ issue. IF Hill is correct that 77 dollars is the maximum price in 2015, and then going down steadily, some of the oil which is currently counted as reserves will never be produced, as water cuts rise.
Of course, this is all very murky. Will global financial capitalism simply collapse when some smart investors figure it all out? Are lifting costs and processing costs really as high as Hill says they are? Will the National Oil Companies starve their citizens in order to keep producing oil at a loss (as Hill suggests they might)? And so on and so forth.
Don Stewart
@Don – That’s over 1000GB of reserves that can never be exploited. At $4 per barrel over US$4Tn of collateral “evaporates” from the financial system.
As for affordability, prices have to drop very low for a producing well to be shut in. Affordability is only relevant for new wells. BTW, in this model, GDP drops at 10 percent per year for as long as oil and GDP are correlated.
richard
when the water cut gets high enough, production can stop regardless of oil price. I remember seeing that Exxon sold some high water cut wells to a company which specializes in stripping the last bit of oil out. But the company shut down the wells as prices fell.
Other than Hill’s very macro projections, I haven’t seen any studies on ‘nearly depleted’ wells. I think everyone assumes that prices will resume their upward march. Few people can contemplate steadily falling prices.
Don Stewart
Don Stewart
@Don – I am more focussed on flows than prices. I *think* you may have a large oil field in Saudi Arabia in mind when discussing water problems. I’d be interested to hear how much oil you think will be flowing from Saudi Arabia, in say, ten years from today – assuming no new wells are drilled.
richard
I’m not a reservoir expert, so my guess about Ghawar would be worth nothing to anyone.
I do understand that the Saudis are drilling infill wells at the present time.
IF Hill is correct about the price of oil in ten years time, then my guess would be that the Saudis would be getting very little oil out of Ghawar. Among other things, I think the Kingdom would have dissolved into chaos.
Don Stewart
@Don – This 2007 report suggests that there may not be much life left in Ghawar.
http://www.321energy.com/editorials/staniford/staniford051807.html
It would not be too much of an exaggeration to say that this part of the ME is where our remaing oil will be sourced. Trouble for them is trouble for the rest of us.
I had already guessed that getting a handle on reserves and flows would be challenging, but if that can be done, much of the rest of the unknowns will fall into place.
“For example, using coal to make an oil substitute, if coal is a whole lot cheaper, might make sense. This might imply an EROEI of less than 1:1.”
This is interesting. I live in an old coal town. There is low-quality coal just under the surface and high-level coal in deep, abandoned mines. I keep asking around if there is some less-than-deadly (or affordable) way to use our coal, but nobody’s thinking about this.
Gail said: “I personally cannot see any reason why a particular threshold would be a show stopper. For example, using coal to make an oil substitute, if coal is a whole lot cheaper, might make sense. This might imply an EROEI of less than 1:1.”
This simple statement tells a lot about how the current economic system can distort physical reality to the point where decision makers can be enticed to make costly long term investment decisions that will ensure the ultimate demise of human civilization…
And that is why it is so important to develop a coherent reliable, scientifically verifyable, methodology to unambiguously measure the average EROEI of human civilization energy sources and its evolution.
Coming up with this data is of course more complex than measuring the EROEI at wellhead of a conventional oil reservoir but physical sciences do provide technical knowledge that can be used to develop reliable estimates.
Charles Hall et al have followed that route, which of course leads to the production of highly strategic data… because, as you can easily imagine, the average EROEI of energy sources can be derived for individual countries and of course can be compared. Projections for the future can also be made, based on a number of hypothesis related to available energy sources. Even further, socio-economic and geopolitical consequences can be inferred for countries and even for regions within given countries.
No wonder that TPTB do not want Joe SixPack to get access to those figures. He might just be able to figure out what the New World Map – not to say New World Order – will look like just a few years down the road. Much better to keep the “old chap” secured by an ever changing maze of elastic economic dogmas that will keep him confused about where he is going until the very last moment. After all, someone has to keep working on the sinking ship while others finish their drinks en route for the remaining few lifeboats.
There are huge differences in types of energy products–how energy dense, how portable, how they can be used in our built infrastructure. Natural gas may be in some ways like oil, but it is a whole lot harder to transport. It requires a lot of built infrastructure. For years, it was treated primarily as a waste product. In fact, in the Bakken it was still being treated as a waste product just recently–legislation had to be enacted forcing companies to start putting in the expensive pipelines needed to gather the gas.
The amount of energy theoretically available at extraction is only one piece of information. It the energy cannot be used at that particular location, and it will require a huge expenditure (and much more use of energy) to transport and store the energy product, that is important as well.
“The amount of energy theoretically available at extraction is only one piece of information. It the energy cannot be used at that particular location, and it will require a huge expenditure (and much more use of energy) to transport and store the energy product, that is important as well.”
This is helping toward systemic and comprehensive thinking.
“[E]conomics is more a quasi-religious set of non-verified assertions than a science based on the fundamental principles of the scientific method.
Economics is unfortunaltely a tool used by TPTB to mostly orient human civilization development in a direction set to suit their interests. Needless to say that economics is also used to mask very real and potentially mortal problems from Main Street, essentially for control purposes.”
Well said. Bravo.
I agree. A lot of well known people have characterised Economics as “a faith based cult”
Having discovered Modern Monetary Theory, the faith base is cut away and the plain facts emerge into daylight. I can recommend it be studied if understanding macroeconomics is of interest. It’s called a theory, but it isn’t per se. It’s factual. It’s what actually happens today with money and finance;
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
Excellent post as always? In light of all the above, it should be quite an interesting election silly season coming our way here in the US, as candidates of all political stripes let their mouths write checks that they’ll never be able to cash should they have the “good fortune” to actually get elected. Gonna be a lot of disappointment in our fair land just a few years down the road, and we’re not exactly a bastion of rosy contentment right now either!
I have a hard time getting excited about any political party–too much selling of something that can’t really happen.
“There is only one party in the United States, the Property Party … and it has two right wings: Republican and Democrat.” — Gore Vidal
The latest passage of the TPP trade treaty in the US Congress only proves this point. When I looked at comments on articles in the New York Times and the very right wing National Review, they were almost 100% negative to the treaty, but it passed anyway.
What amazes me is that after seeing what Mr Hope and Change has done since he took office…. is that anyone would even bother to vote every again
If this is not evidence that a higher power is running the show and that the president and the political parties do the bidding of OOTF and not the people… then I don’t know what would have to happen to convince the sheeple….
But of course the sheeple like the matrix… they don’t want the truth because they can’t handle it
http://logopond.com/logos/a17679f8d0493adf888bf5002a2db27a.png
Gail thanks for another great well researched article and clear thinking – not much of that going on today- in a confusing economy if you just look at one or two or ten parameters the big background is as you put it low demand increases lower demand
Bloomberg New Energy Finance has a 2015 study projecting the energy use and generation to 2040.
Bloomberg also states that the unemployment rate in the US is just over 5%….
I see a free executive summary is available here. http://www.bloomberg.com/company/new-energy-outlook/ This report only looks at electric power. The ad says,
“By 2040, the world’s power-generating capacity mix will have transformed: from today’s system composed of two-thirds fossil fuels to one with 60% from zero-emission energy sources. Renewables will command just under 60% of the 9,786GW of new generating capacity and two-thirds of the $12.2 trillion of investment.”
Where are we getting the $12.2 trillion of investment, and the huge amount of fossil fuels this implies? Is there any chance this investment will make electricity a lot cheaper (which is what we need, if it is to help our job situation)?
“Where are we getting the $12.2 trillion of investment, and the huge amount of fossil fuels this implies? Is there any chance this investment will make electricity a lot cheaper (which is what we need, if it is to help our job situation)?”
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1kUz
Indeed, Gail. See the link above for capital formation to final sales and labor’s (earned income’s) share of GDP. Wall St. and Fortune 25-100 CEOs have succeeded since the 1970s-80s in deindustrializing, decapitalizing, deskilling, and financializing the US economy to the point that the physical capital and human labor stock of the US economy is incapable of a peak-cyclical rate of real final sales per capita faster than ~0%.
Moreover, electricity consumption per capita is at the levels of the late 1990s to early 2000s and no signs of acceleration. Where is the economic justification to dramatically expand capacity of “renewables” under conditions of no growth of demand per capita for nearly 20 years?
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1koj
http://www.cbo.gov/sites/default/files/cbofiles/attachments/49892-Outlook2015.pdf
And this is consistent with the secular trend for potential real GDP per capita decelerating to below 1% (near 0% vs. 2.1% for the long-term average rate), whereas the CBO forecasts a 2.5% rate and 1.8% real per capita.
The retirement of baby boomers is by itself a huge stress on an essentially pay-as-you-go system. Add to that proposed rising interest rates and a shortage of oil (or rather a shortage of jobs that will afford people to buy products made with oil) we have a major problem. Then try to overlay that with a new more expensive electricity system, when the system isn’t growing and doesn’t need to meet future demand. Someone is kidding themselves.
Here in South Florida peak demand
Broward College is planning staff cuts and tuition increases to help offset declining demand.
BROWARD NEWS
The college, which served about 68,000 students in the past year, is expecting a 5 percent drop in demand for classes this fall. Officials say the total number of Broward College students will likely be the same, but the college expects those students to take fewer classes. That means less money from the state and fewer tuition dollars, President David Armstrong said.
And Governor slashing the state budget
TALLAHASSEE — Moving with surprising speed and secrecy, Florida Gov. Rick Scott vetoed $461 million from the state budget Tuesday, enraging fellow Republicans for wiping out their priorities with the stroke of a pen Following a tense session in which he fought senators in his own party, Scott bludgeoned their projects just four days after the end of a three-week special legislative session. He denied that he was getting even with them.
http://www.tampabay.com/news/politics/stateroundup/gov-rick-scott-signs-state-budget-in-private-with-little-notice/2234704
Thanks! I am sure that you have read that a federal court has ruled in favor of making private colleges prove that their students can find jobs and get loan money. http://www.usnews.com/news/politics/articles/2015/06/23/federal-court-upholds-rules-aimed-at-for-profit-industry A person wonders what will happen to chiropractic schools, and in fact most of the private schools.
If private schools must prove that their degrees are worthwhile, it may start people realizing that many public school degrees are not very helpful either. Fewer students: fewer jobs for teachers, janitors, food preparation workers, etc.
Pingback: BP Data Suggests We Are Reaching Peak Energy Demand | Olduvai.caOlduvai.ca
This article by a friend of Gails, Erasmo Calzadilla, posted Havana Times
http://www.havanatimes.org/?p=112116
Does Latin America have the fuel needed to reach such an ambitious goal? Might this not be another “white lie”, of the kind used by leaders to prevent riots and keep investors in orbit?
Graph 2 was prepared by Mazama Science on the basis of data supplied by British Petroleum.
Black gold production in the region has been stagnant for about a decade. Large discoveries are conspicuously absent and mature wells have been spitting out nothing by mud. The definitive fall will begin soon, if it hasn’t already
s a business, fracking has failed in most countries where it was used, and not precisely because of harassment by ecologists. The United States was able to take on the immense and risky initial investment, but less “fortunate” countries, even those that have juicy and technically adequate reserves, haven’t had the same success
n Latin America, Argentina and Mexico, people opened their hearts to fracking (it is said fracking is carried out under the table in Venezuela), but the results to date have been unimpressive.
Not even the International Energy Agency (which highly praised the virtues of hydraulic fracturing methods) sees much future in it. Its most recent report (WEO 2014) makes this evident.
Thanks for the link.
BP data shows only the larger countries separately, so does not break out countries such as Cuba or North Korea or most of the African countries. To get a complete breakdown, a person has to wait for the compilation of the US Energy Information Administration. It tends to be a couple of years behind, though, especially for coal and some of the other fuels that are harder to get.
Hi Gail,
China entered the world trade organization in 2001, not 2011.
Very interesting article. It corroborates the intuition I
expressed here.
I have begun to make subversive posts to the Toulouse School of Economics
debate forum. Someone from this blog pointed out some errors in my post but
it had already been published when I tried to correct it.
Cheers
Thanks–I fixed the typo. Thanks too for the link to your article.
It may be that subversive posts will get through to this economics group. There seems to be such a reverence for old peer reviewed material that no one can consider the possibility that basic ideas are wrong.
Thank you Gail for your hard work in putting up, updating and analysing all those figures.
I think it clearly shows that our consumer economy is demand-driven (rather: affordability-driven) and is meeting problems when the cost of energy products rises, due to that we’re getting closer to the limits of our finite world. Some unpleasant outcomes can be hidden or postponed for a while, but not forever.
Another feedback is induced by the slowing growth and operated by the “financial pump”, it’s the growing inequalities, which in turn increases a lot the instability of the system (not to mention the shameful increase in suffering of lower to middle class people).
Dennis Meadows recently put it in a quite simple way:
“When you don’t have conventional (inexpensive) energy sources like oil, you cannot sustain the kind of economic growth rates that we have seen in the past. As a practical matter, then, there is now very little real wealth generation. Most of the economic activity these days consists of those who have more power getting richer by taking away from those with less. This is why we see widening gaps between rich and poor.”
http://www.greattransition.org/publication/growing-growing-gone
“When you don’t have conventional (inexpensive) energy sources like oil, you cannot sustain the kind of economic growth rates that we have seen in the past. As a practical matter, then, there is now very little real wealth generation. Most of the economic activity these days consists of those who have more power getting richer by taking away from those with less. This is why we see widening gaps between rich and poor.”–Dennis Meadows
Thanks! That is a good quote. I hadn’t thought about the rich taking money away from the poor–only the creation of artificial wealth by our banking gurus, and this going to the very wealthy.
“From 2009 to 2012, average real income per family grew modestly by 6.0% (Table 1) but the gains were very uneven. Top 1% incomes grew by 31.4% while bottom 99% incomes grew only by 0.4%. Hence, the top 1% captured 95% of the income gains in the first two years of the recovery.”
From (see mid-p.4 and table 1): http://eml.berkeley.edu//~saez/saez-UStopincomes-2012.pdf
I can’t find the exact ref (Piketty? other..?), but I know I read that for slightly extended percentile (top 5% or top 10%) and over a bit longer period since GFC, and perhaps not US only,
this “captured percentage” was higher than 100% (even more than 110%, iirc).
I agree that is a good link. He says more data is available from a spreadsheet, which is linked.
Great link!
Link provided by Don a few days ago.
Thanks Gail for this very helpful analysis. Two minor typos, although your intended versions were quite clear in context: under Fig3, China’s WTO accession was in 2001 not 2011, and under Fig8, US EU & Japan rather than EU EU.
Thanks! Fixed them.
Nothing to add, I just want to see new comments in my email.
Gail, as usual very nice to read your work. On the other hand, don’t you think your “demand slowing down” view is based on fragile grounds? Especially for oil, you are looking at 2012/13/14 and those 3 years a) follow a vast economic crisis b) incorporate persistently high oil prices, dampening demand. What I would like to ask you is, what’s your view now we seem to have entered a phase of an oversupply and lowl/affordable oil price for at least a couple of years? Will there be a bounce back to the old growth path, at least in some parts of the world? It surely seems so, if you look at how oil demand has grown in Q1 this year, especially in Asia, US (gasoline) etc. What’s your take on this potential rebound?
I suppose that there is a potential for a rebound with low prices in parts of the world. I don’t see the gap between supply and demand going down much so far, however. I know that a recent EIA STEO analysis indicated that there was nearly a 3 million barrel per day gap between supply and demand in May 2015. This is hardly moving in the right direction. Art Berman graphs the reported balance in a recent post. http://www.artberman.com/for-oil-price-bad-is-the-new-good/
Part of the problem is the low prices on all kinds of goods–coal, natural gas, steel, many metals, food products. We have low demand everywhere. Trying to fix this widespread a problem is impossible.
FB is more overvalued than Exxon because the world’s smart money is on FB, Uber, and companies like that.
Exxon is not sexy anymore.
FB’s run may be ephemeral, but all the trillions of money have to go to somewhere. The money will not simply disappear.
FB may fade away but by then something similar to it would have attracted billions of dollars.
https://marketrealist.imgix.net/uploads/2015/06/USO-ETF-22-June-2015.png?w=660&fit=max&auto=format
How long does oil need to stay at that relatively low price before we see growth kick back in?
I would assume there would have been a snap back within a couple of months… we are not seeing it… in fact growth is trending downwards…
Dear Gail
You saiid:
“A great deal of debt is needed for the new operations. At some point, this debt starts reaching limits.”
The great question is: Why?
Intuitively, I also think tha debt have a limit, but we speak about fiat money, and there is no limit in a fiat concept…
Kuntsler had some interesting thoughts on this the other day:
http://kunstler.com/clusterfuck-nation/history-in-free-verse/
I like Kunstler’s comment,
“The European Union and its wing-men at the European Central Bank (ECB) and the International Monetary Fund (IMF) can only pretend to kick that fabled can down the road because it has turned into a cement-filled 50-gallon drum.”
One reason debt reaches limits has to do with debt servicing, and the constraints that puts on future spending. For individuals and businesses, this is clearly a limit. An individual with a huge amount of student loans cannot afford to take out a mortgage as well, for example.
For governments, part of the problem is convention–studies have shown that above certain ratios to GDP, countries tend not to do well financially. Another issue is the increasingly large chunk of the budget that must be devoted to interest payments, unless the interest rate for borrowing is zero.
A major issue is that in the real world, all we really have is the goods and services that can be created this year, plus an inventory of previous goods that is rapidly depreciating. Adding more debt doesn’t really change this fact. If, going forward, we reach a situation where the amount of goods and services we add each year is declining, we have a major problem. We cannot even offset depreciation on our existing inventory of goods. Money and other forms of debt can somewhat reallocate what is available, but if very little is available, that is a fundamental problem.
With decreasing affordable demand, we are reaching a situation where less and less of the raw materials needed to make goods and services is available. This is a problem.
Yes, Gail.
To the point, total net annual flows to the US financial sector now equal total US annual GDP output. That is to say, all value-added output of the US economy is pledged to, and therefore claimed by, the financial sector and the top 0.001-1% owners of the rentier claims from wages, profits, and gov’t receipts for social goods.
This supports my description (not disparaging) that the US is a militarist-imperialist, rentier-socialist corporate-state, with all of the net gains from (un)economic activity going to the rentier top 0.001-1%.
“Why?” – to quote Davis McWilliams “Private Debt so enormous that default is the only option” – todays consumer is encouraged to consume to the point where his income equals his debt payments. In olden times, he becomes a slave of his creditors. The ultimate wealth transfer from the poor to the already rich.
I wonder if a contrarian POV might not be appropriate for consumers, assuming that their debts will eventually be unpayable, and their bank accounts likewise, unredeemable. If there’s a serious run on the money supply, being cash poor and liability/asset rich may be the winning position, once again assuming that creditors are so swamped in bad debt that they simply give up on collecting it, and the state likewise gives up on enforcing/punishing it. I have a friend (an extremely knowledgeable and well-grounded fellow in all respects) that subscribes to that theory, and believes that leveraging to the hilt, especially just prior to a crash if it’s foreseeable, is the smartest way to go.
I agree with your friend – nobody will be collecting…. I leverage our buy in New Zealand because I expect the bank who loaned me the money will not exist in the near term… so I’d rather use what will soon be wall paper to pay for our place (I am hedged with some PM .. just in case…)
But then … I also do not believe that assets will have any value post collapse…. stocks, bonds, property etc… will be worthless…
I am also assuming we get an extinction event — or an event that might as well be because if anyone survives they’ll be living like savages… the only assets of value in such a world would be weapons and ammunition, stored food, and tools that could be used in producing food.
Don’t worry about property — there will be millions of acres of property available — but unfortunately most of it will have ruined soil because it was farmed using industrial inputs….
Agreed. All of which flies in the face of conventional “doomer” advice. Trouble is, there could be interim steps of many years or even decades where debt defaults are enforced, so it’s always a game of trying to anticipate that which is for the most part completely unforeseeable. But I personally think that the current economy has only 5-10 years left in it at most, as the residual pressures from 2008 have been steadily building ever since. Everyone is currently falsely assured by the sky high DJI, when in fact it represents little more than the rapidly rising fever of a terminal patient about to expire. It won’t be pretty this time.
how did you get into new zealand? u have to have $10mil+ to get in at your age.
It’s like this…
I burned my passport … and purchased this boat for $1000 from a fisherman in Bali
http://c8.alamy.com/comp/BM6J8N/traditional-outrigger-fishing-boat-in-sanur-bali-indonesia-BM6J8N.jpg
Then I set sail for New Zealand… the coast guard intercepted me … I told them that I was a refugee escaping political persecution in Indonesia ..
The minister of immigration then granted me residency status on these grounds.
And la voila… c’est toot. G’day – eh….
A person can pretty well make the case for borrowing to the hilt. Of course, many of the goods you buy might not do you any good anyhow. I have never gone that route myself. The worries don’t seem to make up for any theoretical benefit.
I should also have mentioned Japan. Their government debt is so great that if interest rates were to rise by about two percent, their entire tax revenue could not pay the interest.
Please understand that Sovereign Debt is not spent money needing to be repaid. It is the sum of all the treasury securities held in the central bank. Treasury securities are money parked as savings accounts in the names of the bond holders and thus are sue to be repaid to the bond holders at maturity. This is why it seems like debt. However the bond sums themselves do not get spent, so at maturity they are simply repaid to the investors [or rolled over] with a change over to relisting them back into the investors reserve accounts at the CB. Bonds are not raised to spend money. Central banks do not use such money as they can pay directly for any expenditure required without borrowing. They most certainly don’t need private money at interest. Bonds are used to restrict the excess reserves in the private sector, a way to control inflation. Etc. Japan could, with keystrokes, wipe its sovereign debt figures to zero.
I believe that is called “default.” Or if you are suggesting something else, then inflation rates, and interest rates should rise.
Sorry, Nothing I wrote here relates to default. If there is a credit crisis point it comes at the Minsky moment, when debt repayments cannot keep up with rising debt. The government cannot “print money”. It spends by creating deposits in the private banking system. The Fed does not control the amount of money in circulation as that has been outsourced to the commercial banks. However the CB can influence the money supply to control inflation pressures. Bonds are one way of doing that, as is setting the interest rate.
“The Fed does not control the amount of money in circulation as that has been outsourced to the commercial banks.”
The Fed controls those banks — it controls all corporations — it controls all countries — it controls all people.
How does it do that?
it is a PRIVATELY owned entity that has been given the right to print the global reserve currency and lend it out at interest
Imagine that — having the right to print money and make money off of that money!!!
https://www.youtube.com/watch?v=iwDDswGsJ60
But money is not the issue — money is simply the tool that gives the Fed ultimate power.
Want to take down a country? Screw with their bond market.
See Berlusconi — mafia king pin billionaire — tossed out on his ass over night when he tried to defy the ECB (which is controlled by the Fed) and replaced by a former Goldman Sachs minion…
Everyone — and I mean everyone –ultimately dances to the Fed’s tune.
Only an idiot opposes the Fed — because the Fed rewards those who play ball handsomely — there is no upside to trying to change the rules… better to get along live large…
“I care not what puppet is placed on the throne of England to rule the Empire, … The man that controls Britain’s money supply controls the British Empire. And I control the money supply.” Nathan Rothschild
“Once a nation parts with the control of its currency and credit, it matters not who makes the nation’s laws. … Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.” Mackenzie King, Canadian Prime Minister 1935-1948.
Sorry, “Fast Eddy” it’s wrong. The Federal Reserve has a board overseeing it made up no doubt by bankers. But so does Australia’s RBA. etc. It’s not unique but they all answer to Treasury and back to the government. Treasury tells the central bank to credit/pay whomever Treasury chooses. They are not a law unto themselves. They manage interest rate targets and the reserve accounts kept there. They manage interbank lending also with an eye on inflation control. The money is all in the private sector and the Fed has no control over that supply, but seeks to manage it with its debt instruments etc.
Of course the owners of the Fed would have you believe the Fed is a quasi-government ministry getting marching orders from the president, congress and the senate.
In reality it is the other way around… these institutions are the front men for the real decision makers
And the beauty of this structure is that when the people become upset with decisions they can blow off steam by voting out the government that they believe was responsible for the unacceptable decisions. Rinse repeat rinse repeat (and the ignorant sheeple believe they have democracy!)
And that keeps the hordes from showing up to the castle gates with pitchforks… like I said — this is a brilliant scheme.
Is Obama any different than Bush? Of course not — because he is the front man — the OOTF (owners of the Fed or Ooooh – Tuff) – tell the president what to say and do. The president is little more than an actor.
“Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”
– The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s
Read More http://www.globalresearch.ca/who-owns-the-federal-reserve/10489
Let’s revisit these statements – one made in the 1700’s… one made a couple centuries later:
“I care not what puppet is placed on the throne of England to rule the Empire, … The man that controls Britain’s money supply controls the British Empire. And I control the money supply.” Nathan Rothschild
“Once a nation parts with the control of its currency and credit, it matters not who makes the nation’s laws. … Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.” — Mackenzie King, Canadian Prime Minister 1935-1948.
Why would anyone thing things have changed since these statements were made?
The money lenders run the show — and they have for a very very long time.
Yeah, I’ve seen all that too. It doesn’t affect the day to day operations which is what I was answering.
If you are interested try this version of the super elite control theory;
https://www.youtube.com/watch?v=BAgtmtMtPJY
There are many more, but its a good one;
Michael Hudson chimes in as well;
http://www.informationclearinghouse.info/article39034.htm
Hi John,
Do you have the direct link for The Council on Foreign Relations video you posted?
It’s in the video I posted before. But here it is again;
It’s my only link to it.
https://www.youtube.com/watch?v=BAgtmtMtPJY
Here’s more, another good one;
I just looked again at the second link. It is out of date regarding money creation, Fractional reserve lending has not been practiced for years but the arabic scholar’s point of view is interesting.
@ John – you may be confusing Sovereign Debt with Quantitative Easing. QE is a subsidy to the banking sector to prevent insolvency. Sovereign Debt is accumulated deficit spending.
I am not confused about QE vs Sovereign debt. QE is a stimulus put in place when interest rates are too low to raise economic activity. The government offers to buy non performing assets from the commercial banking sector. It does not finance government spending.
It removes money from the economy which drives up the value of the dollar. By passing on non performing assets to the Government, banks can improve their capital position and are able to lend more freely. Not that they are actually doing that lately!
The scope of QE is vastly beyond that …
QE/ZIRP drives the subprime markets for autos, houses etc… this cash also makes shale possible… it is also tapped by corporations to be used as buy backs… it keeps interest rates low so that cities and states are able to service debts….
Basically without these two policies there would be no economy…. it would have imploded in 2008.
Since China and Russia are unloading US debt one has to wonder who or what is funding the massive deficits in the US? Who is buying the Treasuries? Impossible to say but I would not be surprised if QE is involved….
Japan is doing that http://www.project-syndicate.org/commentary/japan-monetization-government-debt-by-adair-turner-2015-03
My responses are not meant to be a comprehensive dissertation on QE.
John – I suggest you skip the first part about Peter Schiff – Steve Keen has a good explanation on how QE/Central banking works.
Thanks, John. I’ll figure this out.
I just updated the graph below, with the EIA world crude oil extraction figure for 2014:
http://davecoop.net/senecagraph.gif
All I know is, its blue FUNCTION line takes a slowly-increasingly-steep dive, from last New Year’s Eve, onward — not what the future may hold.
Matt Mushalik’s graphs at http://crudeoilpeak.info/latest-graphs suggest to me that world HEAVY crude oil extraction peaked in about 2012, & that the recent sharp peak is largely from “light” crude oil from US “fracking” (which isn’t so good for getting things like diesel or kerosene, for jet fuel).
Forgot to add the link to the page, above: http://davecoop.net/seneca.htm
Thanks for the link. I’ll have a go at integrating that function, based on a start at 1900, to bring this into a comparison with the Hill’s Group graphs.
integral function approx 210*(x-2065)*e^(.04(x-2040)) -128
Or 1387M barrels to go … and counting
Woops – that was barrels*years. the correct figure is 365.25 times larger, or 507GBarrels.
One thing I have noticed is that gasoline prices are very high relative to diesel prices here. This is opposite of what I would expect, if we now have a surplus of very light oil, that can be made into gasoline but not diesel.
A couple of explanations come to mind:
(1) I have heard about refinery issues, but not investigated them. These may be affecting gasoline prices. There are other things as well–ethanol mandate related costs, for example. Gasoline costs tend to be high in summer, because of mandates regarding composition so as to keep evaporation emissions as low as possible.
(2) Diesel is disproportionately used by businesses in trucks, trains, and other mechanical equipment. Also cars in Europe often use diesel. If there is a slowdown in these uses, but gasoline is still in demand, this could provide the pattern we are seeing. I know a while back I was reading that in China, gasoline demand continued to grow, even as there was a big slowdown n diesel usage. Diesel is traded internationally, so what we see is an international price.
D. Cooper, that oil production graph shows actual oil production with red dots, but the blue line is predictive. For those following peak oil, that peak has shifted to the right over the years and could still shift even farther out into the future. That’s the thing that stands out to me, i.e. how the peak oil process is taking longer than most thought it would. So that blue line may be correct or it may do some more shape shifting.
But this phenomenon of our minds projecting events on shorter periods of time than what actually occurs, will surely play out with the world economy. One aspect of this is TPTB will continually by way of the Fed and wall street keep the game going for those that can remain in the game. Already many people are living with their parents and I am sure many families have combined into one home to save money. How far that process of whittling down the economy by the disenfranchised simply and quietly sequestering into the shadows can go on before they gather together for major rioting that brings down the system is anyone’s guess. But people are apparently quite good at taking it so to speak. They just accept their new less affluent lifestyle as their own failure, partly because what they see on TV is all these other people that are doing so well. They don’t understand there is an underlying problem of a net energy decline that is behind their dropping standard of living.
Bingo, Stilgar, and it’s no accident.
I fully expect the US to eventually resemble multi-generational household and social arrangements reminiscent of the 18th and 19th centuries in the US, and similar to Latin America, Asia, and Africa today.
Note, however, that there are advantages to those extended families who “get it”, who act in anticipation of the mass-social trend, and who thus benefit from the process of pooling resources, reducing the cost of living per capita and per household.
Consider that the typical household spends 45-55% of disposable income on housing and auto transportation (52-62% if “illth” care costs are included). Reduce the cost per capita of housing and auto transport by 2-3 times or more, and one can double or triple one’s purchasing power per capita by doubling or tripling up for housing and transportation.
This is a no-brainer for those who stop self-identifying with the unrealistic, unsustainable of what has become the standard for the “American Way of Life”, which is now prohibitively costly.
Yeah, I know Bearman – I was reading about those very high percentage of renters income going to rent. Too many renters due to a huge drop in home ownership, or a better way to put it would be to say its a landlord’s market. Very disturbing how 70 million people in the US have no savings. Any kind of sharp economic contraction and many will become disenfranchised from their housing. Stacy on Max Keiser’s show refers to renters as the new rentier class.
In May China’s coal production was 8.1% lower than year earlier. In January-May period it was 7.6% lower.
I think the reason for that drop is that the Chinese have usurped my idea and they are breeding solar panels with windmills — so are no longer using energy in the manufacture of renewable energy….
Either that or they are growing solar panels on trees….
Or it could be that China is lying about their growth figures
You can bet a leg for the last option…
Which is an indication that lower priced oil is not reviving growth…
Of course in the past when oil prices spiked recessions followed… which lead to a price drop and a restart of growth…
This time is different.
Not only is that not happening (even with trillions of ongoing stimulus) — but this time the production costs are far higher than the sale price of a barrel of oil.
Oh boy oh boy — is this time very very different. Apocalyptically different…..
Thanks! I have seen several articles earlier this year, also pointing to lower coal production.
And this March article from the FT quotes one Shi Zhenglei, an iron ore analyst at Mysteel, as saying that about half of China’s estimated 1,500 iron mines will be forced to close this year, leading to up to 30% loss of capacity. Their iron imports have also been dropping dramatically. In May, China imported 70.87 million tonnes of ore, 11.6% less than April and 8.4% lower than May 2014. These kinds of figures are hardly indicative of 7% GDP growth.
http://www.ft.com/cms/s/0/132ba452-d465-11e4-9bfe-00144feab7de.html#axzz3duluXXuJ
And equally alarming:
“Heavily indebted local governments seeking to refinance expensive debt have issued more than 600 billion yuan ($96.7 billion) of municipal bonds in the past month – more than in all of 2014.”
http://www.ifre.com/explosive-muni-issuance-threatens-pboc-easing-efforts/21204682.article
Wow! It isn’t clear the debt problem is under control.
Thanks! I know that China has a lot of small coal mines, and many of them have problems of various types–unsafe, polluting, high cost. If the loss of capacity turns out to be 30%, there would be a need to suddenly ramp up coal imports from other places, for example Inner Mongolia. At one point, there was expectation that such a ramp-up would occur. With low coal prices, I doubt work has been done in that direction, however.
I can’t provide a link to this news, because it requires registration. But if You want to regiter, then it’s here: http://en.sxcoal.com/520/122320/DataShow.html
I thought China had plans of importing more Coal from Australia, increasing their reserves of ready to sell coal, probably waiting for coal prices to rise just like Arabs do with oil, to adjust prices in the global market and ease the burden they have put on their environment or even maybe to have cheap energy when other countries hit scarcity…
If China does not buy coal from Australia that is good news for cutting carbon emissions and bad news for Australian economy, at leats for the prosperous mining sector in the short term.
Can you provide a reference for that comment.
Of course burning less coal means less carbon in the sky — however fossil fuel burning correlates 1:1 with economic activity … so if fossil fuel burning reduces (and nothing picks up the slack — some other energy source or efficiencies in energy use) then we’ll very quickly have zero carbon emissions.
Because reduced energy consumption = recession — which if left unchecked results in a deflationary death spiral and economic collapse
With falling prices comes lower total consumption.
I know that you claim this statement is true despite it being so counter-intuitive, but I still think you have the cart before the horse. There are time lags in the supply demand dynamic which may be giving the illusion of reverse causality. There may be other economic reasons why oil consumption will continue to fall, but a lower price is not one of them. Other things being equal, lower prices will stimulate demand. If other things are not equal, it is incumbent on you to show why they are not, separate from the effect of the last several years of very high oil prices.
I think my brain is on that one too, “it keeps telling me low prices will foster demand finding the point of equilibrium for marginal returns” off course there is the “Finite” factor.
As for low prices humm… I can only use the little knowledge I have and logic but don’t think I have the arguments to explain the role of prices the only clue is the affordability problem…
We have two different values:
(1) Cost of production, which is rising.
(2) Price, which is falling in inflation-adjusted terms.
Let’s think about this–in the short term, if price is falling relative to the cost of production, then less of the goods will be produced, and less will be purchased.
Over the longer term, economists postulate that “demand will rise” or “substitutes will be found” but this is just wishful thinking, in my opinion. If demand had nothing to do with affordability, and substitutes had nothing to do with limitations of nature, the statement might be right.
Thank you very much Gail that is very clear, and thanks for for your research and willingess to share it with us.
By the way if developed countries are slowing their energy consumption before developing ones, I believe wealth could be redistributed while developing countries begin the decline as well. that could be a false missinterpretation of new rising superpowers like the BRICKs I really hope they do not seek to waste that breif growth on military, just before joining the first world nation in the spiral.
BRICS *
Indeed, Gail.
Note that US “oil” production is down 40% PER CAPITA since 1970, and down 25% per capita since the secondary absolute peak in oil production in 1985. The shale boom/bubble has made hardly a blip in the long-term decline in US oil production per capita.
And today the 5-year cost of oil to extract that next marginal bbl of oil is ~$95-$100/bbl vs. $20-$35/bbl at the 1970 and 1985 peaks. But the US economy cannot grow in real terms per capita with the price of oil above $40.
Then compare that cost of extraction to that of the Saudis and Russia.
Moreover, note that world net exports of oil (see Jeffrey Brown’s exemplary work on net exports and the export land model or ELM) per capita are declining steadily, which is reflective of the end of growth of “trade” AND real GDP per capita since 2007-08, which in turn is a function of contraction of US and Japanese foreign direct investment (FDI) in China-Asia.
Growth of real GDP and oil production/consumption per capita ended in 2007-08, which is consistent with the World3’s BAU model for the “Limits to Growth”.
There’s no substitute for oil …. but we can substitute things like pink slime for meat…. and when that becomes unaffordable I can imagine we could see a campaign out of Madison Avenue along these lines:
Introducing New and Improved Alpo for HUMANS!
‘You’ve seen how your hungry dog chomps through a can of delicious Alpo — that’s because it just tastes so good! Well now you and your family can enjoy the same awesome taste of Alpo when you purchase our new and improved Alpo for humans…. The same great taste with all the nutrition of our famous dog foods – in stores now!’
http://farm1.static.flickr.com/185/440466720_12fe096ce2_m.jpg
Out of curiosity in my teens, I tried a tiny bit of dog food and immediately gagged. It’s really awful stuff and not just the taste, the texture – yech! I think dogs get around this by eating it in big gulps.
Oh … but this will be more refined that the regular dog food…
But you’d still never want to eat it on its own — because it is too rich in nutrients and meaty flavour…
Rather it would be served on crackers as canapes (with sprigs of grass and bark) — or you could mix it into a shepherds pie….
Martha Stewart has been engaged by Alpo to come up with some simple recipes that use Alpo for Humans
In the case of oil, there has never in the past several years been “less of the goods produced”. World oil supply has been rising since the financial crisis of 2008, even though the sales price has been falling relative to the cost of production. Your assertion that “if price is falling relative to the cost of production, then less of the goods will be produced” is not true. As long as the marginal producer can make a profit from new investment in oil production, production will increase even though profit margins are declining (“price is falling relative to the cost of production”) and more will be purchased. The fact that the marginal producer can still make a profit means that the market is supply-constrained and more product can be sold.
Remember that in the several years prior to 2008, oil prices were increasing far faster than the relative cost of production. After the financial crisis, which sent oil prices on a roller coaster plunge, prices climbed right back to their maxima, inducing the marginal producers from the shale sector and tar sands to produce like crazy. Even though the cost of production kept on increasing, most producers around the world kept their output as high as possible. They were making very large profits from unprecedented margins . It then took four and a half years for production to increase to the point that the world market was over-supplied, at which point the price of oil began falling rapidly. The market switched from being supply-constrained to demand-constrained.
It has taken over eight months of falling oil prices to affect production by the shale industry. The reason? Profit margins finally diminished to the point that investment in new production was no longer profitable; or at least the raising of large amounts of capital for new production was no longer possible.
As the cost of oil production keeps climbing, there is a constant tension between what the purchaser can afford and the amount the producer can supply at a profit. If the cost of production exceeds the price that anyone can pay, no oil will be produced. We aren’t even close to that point yet. We may be closer to the point where the cost of production is so high that a profitable oil price becomes unaffordable to enough purchasers that production does decline from the recent maximum (if we have even seen that yet). We won’t know whether we are past peak oil production until oil sales prices reach a new maximum and production fails to surpass the previous peak. My guess is that a new maximum sales price is only a year or two away at most. Shale production declines so rapidly that we could shift back to a supply-constrained market very quickly.
Even though prices fell and production dropped in 2008-2009, prices then rose right back to their previous highs and production also increased to new highs. Falling prices are no proof that falling oil production will never increase again. This peak may be the peak, but falling prices don’t tell us that. Absent any other-than-price-related effects on demand (war or epidemics for example) only record high prices and reduced production (from previous highs) can indicate that we are permanently past peak.
A few articles that will get you up to speed on the situation:
THE END OF CHEAP OIL Global production of conventional oil will begin to decline sooner than most people think, probably within 10 years Feb 14, 1998 |By Colin J. Campbell and Jean H. Laherrre http://www.scientificamerican.com/article/the-end-of-cheap-oil/
HOW HIGH OIL PRICES WILL PERMANENTLY CAP ECONOMIC GROWTH For most of the last century, cheap oil powered global economic growth. But in the last decade, the price of oil has quadrupled, and that shift will permanently shackle the growth potential of the world’s economies. http://www.bloomberg.com/news/articles/2012-09-23/how-high-oil-prices-will-permanently-cap-economic-growth
BUT WE NEED HIGH OIL PRICES: Marginal oil production costs are heading towards $100/barrel http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/
THE PERFECT STORM (see p. 59 onwards)
The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy. But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel. http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf
Dear Joe Clarkson,
the stimulation of the prices with the debt creation means that the bubble is being overinflated. No, the peak production will not be marked by high prices. The picture is distorted by the debt creation. It will be similar to the situation when the Soviet Union pumped the more and more costly oil while going deeply into debt when the oil prices could not go up.
The low prices of today are the result of subsidies in the form of the debt creation at the side of the producers. The same way as the low prices for the consumers of the food are the result of subsidies by the states. The consumers had been indebted before the producers. The peak production will be achieved when the maximum debt limits are reached – consumers and producers combined. Then the system implodes and the production goes down.
We live in the world that has been going into debt for decades: first citizens (consumers) and then the states (companies). The debt allowed us to consume more than we could afford. When we reach the limits of the debt creation, our real affordability collapses the bubble and thus brings everything like prices, consumption, production etc. down.
Isn’t that what is called a “Minsky Moment”?
When the interest payments are worth more than the asset itself.
I think normally that would be correct — but what is different this time is that the central banks are attempting to defy gravity …. so long as that is policy what should happen immediately gets delayed…
By all rights the stock markets should collapsing globally — the only thing stopping that is central bank money being used to prop them up….
Many countries, cities, states, provinces, munis are insolvent and without QE ZIRP would declare bankruptcy (Meredith Whitney was RIGHT — her only flaw was failing to understand that OOTF would do anything to delay this outcome)
The fuse is primed… a nuclear explosion will rip the global economy to pieces when it’s lit…
Aloha MG,
I never said that the peak of oil production would be when prices were high, rather that we would only know that the peak was past when prices were high and production was still not as much as when prices were last high. As Ron Patterson (at peakoilbarrel.com) has said many times, the peak will most likely happen when there is an oil ‘glut’ and prices are starting to fall in response. This year could indeed be the year for the peak, but we can’t be sure until oil prices go back up. Gail seems to think that they never will. We shall see.
I do agree that our current low prices are due to over-production stimulated by the availability of cheap debt. Numerous articles have been written about the fact that few, if any, of oil’s marginal producers in the shale industry are cash flow positive. It seems to me that their production and business plans are another example of hope triumphing over experience. It will be interesting to see if shale production ever vigorously resumes again after this low oil price shakeout. Even if prices do return to the $100 plus range, shale producers may not find it so easy to borrow money again after bankruptcies sweep the industry. Again, we shall see.
The ability to put together “models” of what experience will look like over, say, 40 years, with optimistic estimates and nearly all of the profits on the later years has helped this along. The gullibility of auditors has as well. I expect that it is possible to somewhat “shop” the system. Find out who has signed off on optimistic estimates for competitors, and get them to sign off on optimistic estimates for you as well. There is huge pressure on consultants of any kind to write reports saying what its client wants. (I was in consulting for a lot of years myself.)
As you say, Gail, our intuition as to how things will go is wrong. I am in no doubt we are in deflation and have been since the GFC. Everything you say here reinforces that. It will never reverse. No more “Good times” let alone booms in our future! The energy crunch is here to stay. But is not only that but the policies of the super wealthy elite who are making the corporate world overtake national governments. Arnold Toynbee said decades ago [1931]”We must wrest this.. political force called sovereignty out of the clutches of the masses”. Well, with the TTP and TTIP this reality gets ever closer. But it is a deadly trap. It is supported by the credit boom and increases our consumption well beyond what we really need, considering consumption should decline in a recession. What we see around us today right across the world is conspicuous consumption writ large. It is a sign of decadence, an end of civilization typical scenario. In the end the corporate world accelerates the decline. The end of our civilization is brought forward.
A couple of observations need updating in your text. Fractional reserve banking has been superceded some years ago. It is now credit creation theory that applies. Commercial banks don’t lend out even a dollar of their reserves, they just create credit deposits based on the banks total worth. From this it follows that when the federal government wants to stop too much lending commerce, therefore inflation, they “sell” securities. The funds paid are thus withdrawn from the economy and sit, earning good interest, in savings accounts in the FRB. The bond amount is never spent, so at maturity the sum is recredited to the investors or rolled over. QE policies do the opposite hoping to stimulate demand, except it’s not working as the banks are discovering many erstwhile customers are not good prospects. Another sign of deflation.
Regarding the misery this deflation will cause, also implied in your article, the revenue shortfall from taxation is not a problem per se. Federal governments do not collect taxes to pay for even 1 dollar of expenditure, so pensions and all welfare payments can continue to be met. Tax is used to extinguish excess spending, another way the Fed can control the money supply.
The ability to spend into the economy is not a problem for central banks. they can never go broke in their own currency. This is not generally understood, but it will be a life saver for the population as poverty and unemployment ramp up in the future. Paying everyone a stipend will allow everyone to buy necessities and get medical care for as long as the society survives. It will slow down panics and chaos from overtaking us.
We need a decent plan to manage this. We don’t have one, and that is the scary bit!
Thanks for your observation on fractional reserve banking. I knew it really wasn’t used any more, but didn’t update the analogy. Perhaps I should say that people plane the payment of interest on debt. That may be where the discussion has moved now.
Regarding TTP and TTIP, it would be helpful if you write out acronyms. I was thinking you meant TPP (Trans Pacific Partnership Free Trade Agreement) and TTIP (Transatlantic Trade and Investment Partnership). If so, you misspelled TTP.
As I noted in my response to another comment, the real issue is goods and services that money and debt can buy. No matter how much money and debt is created, if the underlying goods and services aren’t there, we have a major problem. Debt creation can to some extent pump up the price of commodities–I have mentioned this many times as being important in enabling the extraction of fossil fuels. But apart from this role, all debt and money can do is simply reallocate what we have. If the “size of the pie” is shrinking, we will have to deal with it somehow.
I think this intro is key — particularly the first 11 words….
THE PERFECT STORM (see p. 59 onwards)
The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy.
But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel.
http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf
Tim Morgan has another blog now which is worth following; surplusenergyeconomics.wordpress.com
Thanks Gail, The world of finance is filled to overflowing with misinformation. It’s left to a few who “get” it. I am doing my damnedness to “get” it but it’s easy to be mistaken.
I did a typo on TPP, apologies, I thought the readership would know well those trade deals!
The interest on sovereign debt is not at all related to taxpayer money. Taxpayer money is money extinguished from the accounts .It doesn’t get used at all in the central bank books.
All T-securities in the CB are actually savings accounts, paying interest to investors, but no spending of the bond sum is involved. When the bonds mature the bond sum is returned to the investor. I.e., it’s not a debt. As I already said above.
I wonder if it matters that it does or does not reflect the sum of real goods and services? It all seems to end up in the hands of the 0.1% and is devoid of any Trickle Down effect. It’s kind of off in fairyland. The only downside, for all of us, is that it uses, wastes, resources when it gets spent into the economy and that speeds up the machine driving us to extinction. As long as the money is just sitting in accounts in banks the effect is nil.
“With falling prices comes lower total consumption.” Gail, wouldn’t falling prices increase consumption as backed up by figure 1? However, I suppose it depends on whether we are looking at developing (rest of the world) or developed countries like the US, EU and Japan.
What I see here is a tale of two cities, so to speak. Developed countries are relying more on developing countries for products, because they can produce them cheaper due to much lower wages. This shifts energy usage and jobs from the developed to the developing countries, yet the overall energy consumption worldwide is still rising.
The only problem as I see it, is rising costs of new oil production vs. what the world economy can afford. Right now many oil producers are scaling back new drilling efforts which will show up in a few years as lower supply. Then the question becomes; can oil price elevate sufficiently to warrant renewed exploration/ new production? That will be the tale of the tape regarding diminishing returns.
For now although there have been all these desperate fiscal efforts to kick the can down the road, it seems as though the economy (at least here in CA) is going full on again with roads and stores full of people. Everybody we know have lots of business. I kept thinking there was going to be another drop down like what happened in 08/09 but it seems more like BAU is up and going just fine. Maybe I over doomed it and should from now on adopt a more half full optimistic attitude.
“it seems as though the economy (at least here in CA) is going full on again with roads and stores full of people. Everybody we know have lots of business.”
I think anecdotal snap shots don’t paint a very accurate picture… for instance businesses that cater to the 1% are doing very well….
However overall:
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/12-overflow/20141229_GDP2015.jpg
“I think anecdotal snap shots don’t paint a very accurate picture… for instance businesses that cater to the 1% are doing very well….”
I tend to agree. If you look at Washington DC things look great but leave the area and go to another part of Maryland and it’s a night and day difference.
Even with lower prices we are seeing GDP slowing dramatically — US just printed -0.2… Canada negative 0.7…. China is dropping quickly and probably barely growing now….
Oil has been priced at under $70 for quite a few months now — and we are not seeing a snap back in growth (commodity prices across the board remain very low)
Let’s go bigger picture here…
Marginal oil production costs are heading towards $100/barrel http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/
The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth. http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/
Steven Kopits from Douglas-Westwood said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programmes. Nearly half of the industry needs more than $120,” he said http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11024845/Oil-and-gas-company-debt-soars-to-danger-levels-to-cover-shortfall-in-cash.html
So the reduced price of oil is not stimulating growth as expected…. that’s because the middle class has been wiped out — their incomes are down dramatically — many have lost their jobs — most are up to their ears in debt — many are fearful of losing their jobs….
And on the other hand the low price of oil means the industry is mostly insolvent…. the share prices of oil companies should by all rights collapse under these conditions — because the low price of oil bankrupts them — and high priced oil means nobody can afford their products…
Didn’t Art Berman say Exxon was acting like a company in liquidation…
Who in their right mind would invest in an industry that has those prospects?
I see the invisible hand of the Fed at work here :
http://theeconomiccollapseblog.com/wp-content/uploads/2014/12/Energy-Stocks-Zero-Hedge-425×225.jpg
If the cost of production is rising, and the price a consumer is willing to pay is falling, I think that we can all agree that consumption will decrease.
I think that there are underlying presuppositions that we have that are false. These include:
(1) Prices will rise to match the cost of extraction, plus a reasonable profit, for the marginal producer. This is not true if wages depend on the use of the product, and these are falling.
(2) If the cost of production rises, cheaper substitutes will be found. (Not likely!) (Actually, this should read, “If price rises”, not “If the cost of production rises.” If price rises, then another expectation is that this will stimulate more production. Our problem is that price isn’t rising though.
This is a profound point. Since 2011-12, the US has consumed 50-75% of shale production in order to increase shale production by 50% (and nearly 100% since 2008-09) at an average 5-year price of ~$100 unprofitably.
http://www.thehillsgroup.org/
http://www.thehillsgroup.org/depletion2_018.htm
The energy cost of energy extraction of costlier, lower-quality crude oil substitutes is now prohibitive and sustained only by increasing debt in the shale sector to pay interest and dividends, which has been increasingly funded by bank commercial and industrial (C&I) lending over the period.
Private equity and hedge funds have jumped into the game since the oil price crash, expecting the price of oil to rebound to $70-$80. I expect not, which implies that they don’t understand the dynamics of Peak Oil, “Limits to Growth”, and “secular stagnation”.
P.S. As always, Gail, thanks for your exemplary work.
BC, I think we still need to wait and see how shale oil plays out. It’s too early to know for sure that oil price will not rise again high enough to initiate more shale activity. There could be subsequent peaks, albeit not maybe as high as the most recent one. The world economy is still a works in progress as Fig. 1 shows energy usage worldwide is still rising. Let’s see where it goes.
Assuming my assumption that the PTB control the price of oil… that they forced the price to $100+ specifically to enable the shale ‘revolution’ — which encouraged massive investment and the drilling of many thousands of wells… which we know peak within a couple of years of the start of production…
I am thinking the shale gig is over… basically we got as many straws in the ground as possible in as short at time as possible and now we are sucking on these straws like an obese family of 4 who each jam a straw into a super sized coke trying to get as big a share as possible…
I wonder if there is any point in ramping oil prices to 100+ again — will we drill even more holes at that price? Perhaps not .. or not enough to make a difference…
If that is the case then may as well leave the price of oil where it is — because it puts less stress on the camel’s back….
If our problem were just low oil prices, and not low commodity prices in general, low wages, and low investment returns, I would have more sympathy for the “oil price will rise again” scenario. If oil price does rise, I expect the rise will not be very high (well under $130 barrel), and not for very long. It won’t stimulate much shale drilling.
Thank you! Too many people don’t realize how many assumptions are wound together inside models they take for granted, like the standard supply and demand curves.
Dear Gail and Finite Worlders
See story that Facebook now has a market capitalization higher than Wal-Mart.
http://money.cnn.com/2015/06/23/investing/facebook-walmart-market-value/
Wal-Mart epitomizes the traditional end product of a system which utilizes commodities to sell consumer goods to customers in local stores. I don’t know exactly what Facebook does, but it doesn’t involve much in the way of commodities and there are no local stores..
Do you think that the world is passing into some new phase, which perhaps we don’t yet understand?
Don Stewart
FB sells advertising…. as does Google….
And a lot of the clicks to ads on FB are fraud http://www.forbes.com/sites/roberthof/2012/08/08/stung-by-click-fraud-allegations-facebook-reveals-how-its-fighting-back/ http://thesocialmediamonthly.com/startup-ceo-alleges-massive-click-fraud-on-facebook/(they could stop this fraud in its tracks by simply allowing only one click per IP address to register in a certain period… but they of course don’t because they get paid per click)
I don’t think anyone is missing a big picture here — this is just another massive bubble in a world of massive bubbles….
Maybe we have learned to substitute views of Facebook for food? Not too likely, IMO.
Gail
Remember Nate Hagens’ chain: burn fossil fuels to make products we think will move our neurotransmitters and hormones? What may be happening is: spend a lot of time on Facebook to pretty directly move neurotransmitters and hormones.
I read recently that there is renewed research interest in LSD. Some indications of medical uses, and maybe all the supposed harms were overblown. LSD would be equivalent to Facebook in Hagens’ chain.
Facebook, per se, (not the products people might buy as a result of advertisements) is not very energy intensive, I would think. LSD would not be very energy intensive either.
My supposition is that, with the felt inability by many people to afford big purchases such as cars and houses and exotic vacations, they may be discovering ways to move the neurotransmitters and hormones without moving so much material.
Don Stewart
Good point, Don,
the danger is that a person can forget basic needs.
It’s known that with heroin you never feel hungry, but there also have been cases where video-game addicts forgot their baby in the next room, unattended for days, and others who died before their screen from unnoticed starvation and a sort of nervous breakdown.
I think the best way to prevent such dramatic drifts is to enhance social interaction (not the way we seem to be taking, generally speaking).
Stefeun
There is a TED talk with a fellow talking about the new theories of addiction. The old theories were based on experiments such as putting solitary rats in a dreary cage and offering them either drug laced water or plain water. The rats overwhelmingly preferred the drug laced water.
But contrary evidence came out of the Vietnam war, and other places. A high percentage of the US soldiers used heroin in Vietnam. But when they returned to normal life in the US, a large majority never touched heroin again.
The conclusion is that people are making the best decision they can, given the circumstances. Take a social rat and isolate it and put it in a cage where doing things is impossible, and the right choice is the drugged water. Take a teenager off the street in a comfortable suburb in the US and put them down in a nasty war in Vietnam, and the sensible choice is heroin. But put that teenager back on the street in the comfortable suburb, with good job prospects, and the sensible choice no longer involves heroin.
What is the sensible choice for young people today who have access to cheap social media, but few good job prospects and not much chance of starting a stable family?
If social media fails, I suspect it will be because advertisers figure out that trying to sell to young people who have little money is not a good idea. Maybe investors will figure out that Wal-Mart may be a better investment than Facebook. Or maybe, as the CEO of Wal-Mart says, ‘we can’t survive if we keep doing what we have been doing’. And then he launches into his hymn to Silicon Valley. I don’t have a crystal ball.
Don Stewart
Is there a conflict between and economic system based on stuff and one based on behavior?
Turning off the power for a weekend (that would work better with a lot of moving around of ideas) would excite those ‘neurotransmitters and hormones’ if the experience could be seen as a camping excursion.
What if everybody confined to the Black Hole of Calcutta had formed a ring, with each person taking a breath for the count of three at the single air hole? Would that have moved something that enabled some to survive?
Isn’t an economic system based on stuff the reason for our impending demise? If so, why is it so hard to think of an economic system in different terms?
The reason it is so hard to thing of an economic system on different terms is because people need “stuff”- food, potable water, protection from cold and heat, and a way to earn a living to either make these things themselves, or a way to buy them. We have evolved a huge networked system that has as its base people’s needs. There are also some “wants,” but supplying the “wants” is what gives jobs for much of the rest of the population. We can’t simply move on to a smaller “needs only” system.
Excellent points.
We all want ‘stuff’ — even Scott Nearing — even people living in remote villages.
And stuff = energy — we cannot grow stuff on trees.
So any system that is going to fulfill these needs requires a system that allows us to extract energy … it does not matter what the system we use is … so long as it get energy out of the ground at a reasonable ratio of energy in vs out.
The problem is not the system — the problem is that the system has been very efficient and we have burned through the easy to get energy very quickly… and now we will have to wait hundreds of millions of years for more of it….
“Is there a conflict between and economic system based on stuff and one based on behavior?”
I’m not sure that one rules out the other. We have what we have. An economy based on stuff. We all need or desperately want the stuff. We can’t change our way of life on a dime. Energy went into making it what it is, and there is no reasonable way to upend it. However, both our energy source and the system in which it’s embedded present us with the prospect of extinction. By all reasonable accounts, it’s too late to forestall extinction, but it is the nature of life to keep living if and as long as it can. What can be done?
Some believe climate change can be made less drastic by planting many more trees. Futile, perhaps, but no more so than any other prospect. Planting many more trees does not stand in opposition to jobs or to buying stuff, but it’s a fairly rational thing to do in the face of crisis.
There are a great many more behavior change society can make in the face of impending extinction and a system for which there is no alternative. I mentioned the Black Hole of Calcutta, with a single air hole and an imprisoned crowd that all suffocated. Maybe a behavior change by the victims would have helped. Maybe not. I propose that organization is a source of energy, even when it doesn’t spew carbon into the air. Stupid, thoughtless, desperate behavior is generally not helpful in a crisis.
But what’s the alternative anyway? Suicide? Sit here and talk? The low hanging fruit of fossil fuels might all be gone, but the low hanging fruit of behavioral change to stretch out what we have already has not even been touched.
If we extinct ourselves with our behaviour then so what?
Plenty of species go extinct. I don’t see what the big deal is if humans no longer exist.
In fact the rest of the species will stand and applaud once the most rapacious animal that ever existed is gone.
We truly are a nasty bit of DNA aren’t we…
http://blackville.nbed.nb.ca/sites/blackville.nbed.nb.ca/files/bravo.gif
“If we extinct ourselves with our behaviour then so what?”
Speaking just for me, given all my hideous and cruel deeds, I can’t see much reason why *I* should not go extinct. But were I to do so, how do I know that anything else (of whatever kind or species) would remain existent?
Artleads,
“Is there a conflict between and economic system based on stuff and one based on behavior?”
Well, the latter can work, and does, in certain conditions with well-defined boundaries and solid rules. Unfortunately it’s not scalable.
In our reality, the advantage always goes to the cheaters, wether in growth or degrowth phase.
In growth, to those who manage to take over the surplus generated by the work of others (no need to give examples, I’m sure many come to mind).
In degrowth, to those who manage to keep hold of more power than they’re supposed to, ie more than all others. For example, imagine a group of people who are willing to get rid of all their weapons and guns; they should give them to destruction at same pace, but at the end of the process, if one of the guys has kept a colt hidden, he can then claim to be the king.
Maybe this is the reason why our leaders are all sociopaths.
I was thinking more of things like rationing of scarce resources by small-group local management organizations.
The problem with Facebook and all of our other technology is that it depends on the whole system we have today. Take away the electric grid, or take away any other major part of it (such as a working banking system), and we lose Facebook too.
Does that mean that all the cows and pigs I just bought on Farmville with real money — will no longer exist?
Key point! Economic collapse doesn’t automatically mean the end of food production. Except for the crucial inputs of nitrogen, potassium, and phosphorus that have become too reliant on fossil fuels. We should be preparing to replace the systems for these essentials, like returning our sewage to ag lands instead of dumping it into the ocean. IMO, we can keep producing enough food to get by in many places if emergency systems are set up for production and distribution. Not easy, but necessary in order to survive peak oil and a deep global depression.
How do you get sewage to ag lands without electricity (and pumps)
How do you grow food using raw sewage?
Most land in most countries is framed using petrochemical inputs + irrigation.
California is a perfect example – the soil will grow nothing without continued petrochemical inputs — without electricity to drive the pumps.
We absolutely will not be able to grow any food on virtually all the land that is currently under cultivation.
And for land that is not under cultivation e.g. your lawn — assuming the soil is reasonably ok — you are looking at months to get a crop — assuming you have seeds — assuming it is not winter — assuming there will be water available.
There a many many holes in the ‘we can feed ourselves’ post collapse.
That is supreme wishful thinking — this statement does not stand up to even the lightest scrutiny
The famine to end all famines is what is coming
If we have to we’ll move sewage back to the land by hand and horse. Sewage composts. Your statements “We absolutely will not be able to grow any food on virtually all the land that is currently under cultivation—the soil will grow nothing without continued petrochemical inputs” are absurd. Do you really know nothing about agronomy? The land was producing food before the fossil fuel political-economy and will continue to do so after. I do not deny that there will be hard times–including famines and other horrors in many places (because there are too many of us, especially in dense cities), but to make such absolute and absolutely negative statements that are counter to our knowledge of how the world works is ridiculous. I think you enjoy the prospect of Hell on Earth. What is your problem?
FE comments regarding the soil are regarding the fact that petro fertilizer leaves the soil incapable of producing the food for some time after they stop. Its like a hydroponics farm when the nutrients leave. It takes three years for the soils to recover there ability to compost and grow food the old way. And produce they will! Enough for a quarter billion billion people. What will people eat in those three years? Hmmm I wonder.
FE may well be emotionally attracted to collapse. You may well be emotionally resistant to collapse.
Just because I reject cognitive dissonance and point out what is pretty much obvious to those who do not live in Koombaya land (where CG is King) does not mean I have an emotional attraction to collapse.
My positions have evolved over recent years as I have searched for the grail otherwise know has ‘how the hell does one survive this Apocalypse’
And none of the ‘solutions’ I have thought of — or others have put forward — stand up to deep analysis.
I could drone on and on about all the wrenches in the wheel works from violence to disease to starvation to spend fuel ponds exploding….. those are all pretty much 100% certain…
But people will deploy their King CG — and ignore all of these…. because they are not things you can test or observe (until the time comes)
What really hits home is my suggestion to turn off the power for a weekend (I wrote a little story about how the power went off for 5 hours when I was living in Bali …. it was an experience that for me drove home the futility of my efforts to try to survive the coming collapse — it made me question whether or not I even wanted to survive the collapse — it exposed how reliant I was on BAU and how I would be very unhappy to live without BAU)
Of course nobody is taking me up on this — because this is a test than can carry out pre-collapse.
And they are frightened by what lurks behind the curtain.
Turning off the power would give them a glimpse of the beast that is waiting there…. this snarling snapping monster….
I’ve had a look at the beast during those 5 hours in Bali… I’ve also seen the beast when I was in the middle of the Cairo riots… wandering through the tent cities of post quake Haiti… in the eerily dark and carless streets of Jakarta during the Asian financial crisis… in a remote village in Irian Jaya completely unplugged from BAU and no more than enduring….
He is a frightening son of a bitch. He brings misery and hunger and cold and disease and suffering.
No …. I have no emotional attraction to the beast…. I’d like to keep him behind that curtain forever…
But he’s coming … you can bet your bottom dollar on that….
And those who put forward these ‘solutions’ do so because they are afraid… afraid for themselves… for their friends… for their families… and they will grasp at anything that offers a different outcome.
King Cognitive Dissonance keeps them sane — keeps them from fear — keeps them from despair
You cannot grow anything on land that has been farmed using fertilizers and pesticides derived from petroleum and natural gas. The numbers I have seen indicate 98% of all farmland is farmed using these inputs (that is part of the Green Revolution)
Sorry if the facts get in the way – but those are the facts.
poohbear49: My wife says I am emotionally attracted to collapse! She was pleased to see the shoe on the other foot when I told her of my exchange with Fast Eddy. I am most decidedly not emotionally resistant to collapse any more than any one who is scared sh/tless who has a clue about reality. But I can also tell you that people in a neoliberal driven, oligarch owned, BAU boom town (Seattle) do not hear limits to growth arguments very well, let alone the extreme doomer perspective like Fast Eddy swims in. I am deeply engaged in political activism in my community with a major goal of educating people about the need to acknowledge the limits to growth and the need to prepare for the extremely difficult times that are certainly coming. I need to maintain perspective (and diplomacy) or I will not be effective.
If you’re statement about a three year gap in productivity is accurate (please post some references), it merely adds to the urgency to work on transition. Cf. https://news.wsu.edu/2015/06/01/organic-agriculture-more-profitable-to-farmers/ And I further challenge your assumption on how many people can be supported without petrochemicals. Many many calories are lost in the transformance (in the HT Odum sense) from veg to cow. And population could be driven down without war or famine in a matter of decades if fertility dropped.
IMO, the issue is not what scenario we are individually emotionally attracted to; the issue is what we are doing individually and as members of a community to ease the transition away from a fossil fuel driven, capitalist, neoliberal (or worse) political economy. We should be working for those goals while we develop the science and scenarios. The latter should inform those goals, not freeze us into perpetual doomsayers “emotionally attracted to collapse.” How depressing is that?
p.s. Re: emotions: Humans are clearly emotional creatures, especially in their decision making. If I’ve learned one thing from being politically active, it’s that the rational argument does not often win on its merits. If you don’t have a compelling narrative—a story, or a myth—to go along with the best available science or the anti-fascist democratic position, you are lost before you open your mouth.
Feel free to list the solutions to our problem.
Best if you do this in point form… as it will make it easier for me to quickly tear them apart.
There are no solutions — a new cheap energy source simply means we run out of something else (water…)
If we stop or slow burning fossil fuels then growth stops — we get a deflationary death spiral — the economy collapses — and we likely go extinct.
This is the problem I have with the Green Brigade — they despise BAU (yet they partake in it big time) — and they have not a single viable solution that would allow a change in direction
Pretty please don’t tell me the answer is renewable energy ….
FE: Same question I asked poohbear: You said “You cannot grow anything on land that has been farmed using fertilizers and pesticides derived from petroleum and natural gas.” Provide some citations please. There are a number of programs (e.g., Rodale, state depts of ag) to guide farmers in transitioning to organic methods. How can that be possible if what you claim is accurate? Please stop making statements of 100% certainty without posting some credible support for the assertion; rarely is anything so black and white.
I’ve posted comprehensive research on this topic previously — you can either read through past articles or do the research yourself http://www.google.com
Or you can just ask any organic farmer if he thinks that he can grow a crop in land that has been farmed industrially.
I bought land in Canada a few years ago and had one of the trainers of an organic farming institute assist — one of her first comments was ‘we need to make sure to identify land that has never been farmed industrially — because it will take years before it will support a crop’
I’d suggest that you are the one who needs to back up your assertions before you post them.
You risk looking very foolish here…
“Humans are clearly emotional creatures, especially in their decision making. If I’ve learned one thing from being politically active, it’s that the rational argument does not often win on its merits. If you don’t have a compelling narrative—a story, or a myth—to go along with the best available science or the anti-fascist democratic position, you are lost before you open your mouth.”
Thank you for your detailed response. I appreciate your communication. I agree with you 100% in terms of interacting day to day in society- doom is not popular. Acknowledging finite resources evokes strong emotions because it disassemble peoples paradigms of assigning importance. I dont participate in any organization political or otherwise anymore. The reason is I regard such organizations purpose as methods toward positive change. My feeling is if the participants are unable to face the obvious truth of finite resources let alone discuss appropriate action there is no chance for positive change. Instead I try to find ways of appropriate action myself and I help other individuals whose actions I find appropriate. I regard organizations as burdensome.
The people I am close with are all doomsters. What I have found is it doesnt matter the type of doom. . What matters is that there is no basic unresolved emotional conflict in the relationship I enjoy the company of non doomsters very much but I understand the difference in beliefs renders us incompatible for any close relationship. Its very easy to determine someones orientation in this matter. Nine times out of ten you can tell where they are going to be coming from just from what they are invested in. If you communicate facts that disassemble those investments you will create adversaries – so I dont. Not my job.
P-bear/FE: wordpress doesn’t see fit to send me notices when new posts or responses are put up (I’ve been trying to figure out why). So I have to come back when I have a few free minutes…
PB: Thanks for response. Regarding your comment on “organizations,” they come in all sizes. E.g., my wife and I led the creation of an urban garden on a (very rare) vacant lot in our neighborhood (www.seattle.gov/neighborhoods/p-patch-community-gardening/p-patch-list/hazel-heights). It is run as an “organization” to make sure public space and amenities are taken care of and to resolve conflicts. The question of whether they “believe” or even have a clue about limits and impending likely collapse rarely comes up; it’s irrelevant to them. But not to me. I have determined it to be “my job” to educate as many people as possible. It’s less frustrating than not.
FE: I will not look for your prior citations on the subject; if you want to have someone to understand your position (I am always ready to learn) you would have the courtesy to post a URL or two. Takes five minutes. I do notice that you backed away from never (“cannot grow anything”) to “it will take years.”
I took longer than five minutes to dig around on how long it takes to transition from petro-ag to sustainable. “Organic” has to stand in for “sustainable” since it’s the focus of most research and policy. Typical figure I came across is three years. An expert I consulted said “3 to 5” based on his research, and concurred organic is not necessarily sustainable, but it’s far better.
PB asks the appropriate question: in the event of instantaneous collapse, “What will people eat in those three years?” I suggest the Bible provides the answer; I am not a “believer” let alone a “thumper” but it’s full of great stories and myths. Genesis 41. I’m not saying there can be enough for everyone (yes, there are too many people) or that we’ll even do as suggested (yes, humans are basically short sighted and prefer ignore-ance), but I’ll not stop working to make it so until I’m dead.
I have never said you can never grow crops in soil that was previously farmed with petrochemical inputs.
I have purchased two pieces of farmland in the past few years.
Both times I engaged local, scientifically trained organic farmers to assess the land
Both of them insisted that we make sure (through soil tests) that the soil has not been farmed using petrochemical inputs (urea is the nastiest and the one used on virtually all farmland around the world) …
Because if so… the land will not support a crop without a minimum of 3 years of intensive organic inputs… because these chemicals kill all life in the soil….
If you choose to dispute that then the onus is on you to demonstrate that this advice was wrong … try googling ‘effects of urea on soil’
Or you can choose to remain in a state of ignorance …
That may be the best choice and will probably make you feel better —- because when you begin to understand that when I say there will be 7B+ people and no food post collapse — I am 100% correct.
And that can cause a great deal of mental anguish….
Ignorance truly is bliss….
“I suggest the Bible provides the answer”
And i thought the only purpose for the bible and the koran were to provide flammable materials to get my fire started….
FE–You are skilled at shifting your position (length of time land needs to heal before it can produce food sans petrobased chemicals) and then setting up straw person arguments to knock down when challenged. Instead of engaging rationally or politely or even just diplomatically, you call me ignorant and finish with another non sequitur: “I say there will be 7B+ people and no food post collapse.” Really, not even a can of tuna?
Instead of the Bible, try Moliére: “A learned fool is more a fool than an ignorant fool.”
I’m done; enjoy your grimmitude.
You are apparently new here — I have posted here for some years now — and I have been extremely consistent regarding the soil issues — because I did extensive research on this issue because I was like you at one point — I assumed that we could simply put billions of out of work people into the fields and have them grow food the traditional way — no tractors — no chemicals….
But where we differ is that I am curious (bible thumpers tend not to be because they already have the answers in that book of theirs…) — so I looked into this because I realized this was a potential game changer…
And I have posted my results ad nauseam here…. minimum 3 years of intensive organic inputs.
I have refined this slightly recently to include the problem of irrigation … even if you have your organic plot where does the water come from? If it is from a tap that is fed by an electric pump — I hate to inform you but — you are screwed.
One other game changing issue I have researched extensively is the spent pond issue. That was a tough one — I finally found a Harvard research paper on this — it was the definitive document…
Feel free to ignore that too.
Don’t let me get you down — everything will be fine…. we’ll all grown organic veggies… and sing and dance … and thump drums…and wear head bands …. and be kind to each other….
Kinda like the Rapture — heck who knows… this could be the second coming and we are going to be rescued at the last moment …. (but probably not)
I am pleased to see a new post as new statistics come by. I am not that concerned for Human civilization, which has had its day of exponential growth, and now looks to be attempting its last doubling. Nature needs a break. Economic collapse and consequent mass suffering and later dying is the about only thing that can bring down human greenhouse gas emissions, and slow the sixth mass extinction event. That is what you get when tribal minded nations and corporations are trying to out-grow each other in a constrained system. I live in Australia, a high per capita carbon emissions nation which depends partly on commodity exports of coal and iron ore, and depends on oil for internal transport over large distances, and for agriculture inputs. I hazard the guess that Australia is economically vulnerable, but still lucky with not having massively outgrown its population yet. I speculate as to when does global growth become negative? Within three years? There appears to be other rumors of the “big drop” withing a few years circulating in a few newsletters of investment analysis, who have been reading the tea leaves. I don’t have any signficant investments, or much cash reserves or a current job. Speculation on future value of superannuation retirement investment abounds. My guess is that it is likely to drop too. What happens to the circulating quantities and value of money? Does about $700 trillion of financial paper go up in smoke? Its not quite money, if it cannot pay for high oil extraction costs. All debt depends on promise of monetary value of liquidated nature.
We have a real problem, because what we have is (1) Depreciated goods made in the past, and (2) Goods and services made in the current period. The quantity of money and financial securities of various kinds is huge in relationship to these amounts. As long as the economy continues to grow at least somewhat, we can all pretend that there will be enough goods and services in the future to match up with the value of all of the money and financial securities (including stocks, bonds, bank account values, etc.)
But once the system slows too much, we have a problem. We won’t have enough goods to make necessary repairs on goods made in the past (roads, bridges, houses, schools, etc.). Also, it will be increasingly difficult to divide up the current goods using money and financial securities. For one thing, there will not be enough to go around, in the conventional sense. For another, the workers who make the goods and services have to have priority in getting the goods–otherwise the system will fail. Our current system with huge values of investments for the 1% does not match up with this reality.
I don’t know how this works out, but it is hard to see any way that money and most financial securities will have the value we expect them to have. My guess is that the system will in some sense “break” – bank deposits and other financial securities will cease to have much value. If we can’t protect workers, so that they get enough of what is produced, then we have a major problem, because production will stop and we will have virtually nothing (except depreciated goods) to transfer with money. Many governments have collapsed in the past. I would not rule this out.
If there is a *need* for 100 houses and only 99 are built, the price of all houses increases if sufficient credit is available. Hence governments/banks, such as Japan, provide credit to keep the price of houses from inflating. After a while the government cannot afford to have interest rates rise because they have too much debt. So the Central Bank gets into QE in the hope that things will get fixed. But Firms cannot borrow because their risk is much greater than that of the government and banks restrict lending. So fewer homes get built, and less oil gets purchased.
We either grow or we collapse… well in many countries there is still growth … so collapse is not imminent!
74% of American men are either overweight or Obese (up from 63% in 1994) according to a new report using data from the National Health and Nutrition Examination Survey.
http://www.zerohedge.com/news/2015-06-23/fattening-america-obesity-rates-hit-record-high-doctors-blame-cars-poverty
Looks like this is what “Development” means :-/
Combine that excellent presentation with Dmity Orlov’s excellent overview of world finance,
http://cluborlov.blogspot.hk/2015/06/pop-goes-bubble.html ,
and not forgetting 11 June 2008 when Peak Oil (supply) caused $147 /b, and you can see that Peak Oil (supply) DID cause it all.
Thanks! Dmitry has a lot of good insights in that article. http://cluborlov.blogspot.hk/2015/06/pop-goes-bubble.html
I haven’t been using Shadow Stats statistics, for a variety of reasons–copyrighted data, perhaps it is too radical, would need to pay to subscribe for more detail data. But there may very well be some truth to them. We start reaching a reality then, that all the financial statistics we read are manipulated. When we add to this many people’s concern about the truth underlying Chinese statistics, we start realizing that we really don’t have a very good understanding of where we are at all. Governments just tell us what they want us to believe. Of course, this may very well be true. It doesn’t add to our confidence about the future. So all we can do is add more debt, and hope that things will get better in the future.
One statistic you do not often, or ever, see is the total flow of capital between Nations or Economies. That makes it really difficult to forecast changes.
I thought that’s what “foreign investment” data reflected; flow of capital between countries. Like http://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD and http://www.oecd.org/investment/statistics.htm [data pages are not working as I write this]
No?
Your first link shows US$321Bn flowing into the USA in 2000. It does not say from where, and makes no mention of outflows. This gets complicated quickly.
That is a year when capital was leaving the USA to invest in China, as you know.
I think we may need the 1999 value, and compare the 2000 value to it. Investment could be down, not all the way negative.
You may very well be right.
I like to look at totals. Looking at the World Bank data, the totals I get (missing a few small pieces from the world) are as follows, in trillion:
2005 1.36
2006 1.76
2007 2.43
2008 2.19
2009 1.29
2010 1.77
2011 1.90
2012 1.57
2013 1.75
The foreign investment is part of what pumps up demand. The numbers in 2007 and 2008 are high, as we would expect them to be. 2008 is lower than 2007, since once things “went south” in the middle/end of the year, I am sure investment went south as well.
The drop in foreign net investment in 2012 and 2013 would go with lower commodity prices in these years, and gradually dropping oil prices on an inflation-adjusted basis. 2014 data isn’t available, but I am guessing total net foreign investment is down as well. This is with interest rates at very low levels.
Agreed. Someone must keep track of it, though.
Gail, you are amazing! Thank you. As much as I appreciate the intelligent insight that your analysis provides, unfortunately, I cannot but think that you and many of us completely miss the point!
There is the largest population the earth has ever experienced and, critically, many of that record number are young people. In short, there is a huge unmet DEMAND. A natural desire to improve and typically that drives growth and growth, demand.
However, it should not be so surprising that we have a deflationary spiral. I believe many economists point to the various debt bubbles and the austerity that follows from U.S. housing and on and on…certainly that factor is at work…but is it the main feature of our time? No way.
What has a ‘lid’ on the natural pressure to improve and develop and therefore the demand that should be expressed by the masses, and particularly the young people, in many countries is that meeting that unmet demand requires an entirely NEW ENERGY SYSTEM. And really, with it, an entirely NEW FINANCIAL SYSTEM NOT BASED ON the financial structures of debt consumerism that are closely tied to our 1900s based energy system.
The ‘lid’ obviously operates, increasingly, in two directions. As Jeff Rubin has explained well (and your work underlines), the kind of pricing that gets enough energy out of the ground or from thousands of feet from under the ocean, crashes rather than accelerates ‘modern’ economies. (His book…The End of Growth).
The other direction is much more dire. If we continue to burn fossil fuels -gas included, it is far from a ‘miracle’ if not solidly connecting to a non-combustion fuel source, we incinerate the bio-sphere and even the Chinese need to breathe in the mean time. Have you visited their major cities? of course you have and so you know what they know; we cannot GROW on the back of coal and oil…quite the opposite, we need to reduce GHG levels!
So, what do we have? Still the prospect that we in fact won’t collar GHG in time. All the while poverty, war, famine…slow or no ‘growth’ …even deflation as growth by way of traditional consumption, based, still!, mostly on the energy system of yesterday…simply doesn’t provide a means for the expression of that incredible demand that certainly is available…if we had an energy and financial system that would facilitate it.
JAG
We really need a rapidly growing supply of cheap energy, in order for demand to grow, and for our system to work as we have been used to having it work. Diminishing returns means that this is not possible any more. Thus we are left with the problems we have today.
Really? Please forgive me as I’m a bit out of character trying to be positive. I feel we cannot think about growing demand only to the extent that we cannot conceptualize ‘our system’ working any way but the way it HAS worked. That that really is the problem.
I agree wholeheartedly with one of your main points, the economy has no reverse gear and neither does the world economy as the last several years proves very well…so we either find ways to much more rapidly meet the need of many by using new energy systems (such as hydrogen power to gas and fuel cells ) or slowly and/or more rapidly spiral down including the inhuman consequences for all concerned.
Isn’t “hydrogen power to gas and fuel cells” dependent or codependent on the sort of environmental destruction you speak of? The ever escalating take down of soil, forestry and water?
Stepping back a little and trying to understand more of the blog’s issues:
1) There is no viable alternative to BAU.
2) The economy must grow or else collapse.
—————-
– Can the economy grow while restricting (slowing the growth of) ecocide for the short term?
– Can large-scale purchase of property to create jobs contribute to growth? Jobs could be based largely on human energy–planting trees for wood, etc,–along with a rationed use of scarce fossil fuels for needed low-tech tools and equipment–like shovels and wheelbarrows?
– Can the ‘demand’ enabled by such jobs programs buy small residential units and the ‘basics’ in newly created pedestrian and food-producing hubs?
– Can the worldwide ‘creation’ of such hubs (again through rationed and restrained fossil fuel use and human labor) contribute to economic growth?
– Is less consumption of destructive things find an economically viable alternative by expanding the range of consumption but of of less destructive things?
– Can systems organizing on a global scale work as an growth strategy?
I was just watching David Putman’s TED talk that touched on Insurance Industry alarm over losses from climate change. I think that these kinds of dead ends to the current version of BAU could lead to a more aspiring version of it, one that tries to minimize such losses.
I agree that a lot of the problem is believing that the economy of the future has to be exactly like the current one. Instead of sticking to the principles of growth, the argument gets sidetracked into believing growth can only happen the way it happens now.
But here is a possible big change. The western lifestyle (to some degree) is now aspired to by a global majority. A good half of that majority are poor. The richer of that majority might still desire crap from China and expensive, polluting cars. The poor, on the other hand, are so destitute that they would be glad for any basic improvement to their lot. A bicycle would do. Basic tools would be fine. A plot of land and some instruction how to grow food there might also be welcome. In short, a wide escalation of production and economic activity geared to the poor could be less environmentally destructive while also reducing inequality over what we have today.
If these supposed new energy systems really worked and saved money, we would see lots of them.
Instead, all we see is growth of energy sources that need subsidies. A true cheap energy source would be one that could be taxed at a high rate, and thus support the economy.
That is a point I’ve thought about. Oil is such a phenomenal energy source that even after paying for it’s utility, a person can pay various fees and taxes at the pump and still think it was worth it. In contrast, renewable energy seems to be subsidized at multiple levels, so it lacks residual value altogether, leaving nothing to be taxed for the benefit of society and it’s infrastructure upkeep.
Many problems with ‘renewable energy’ but the two key one is: when you try to store the energy (and you must store it) the energy return (because batteries require a lot of energy to make and don’t last) goes very negative… so you actually use more energy than you produce.
Thus every ‘renewable’ energy initiative that we launch is actually accelerating us towards collapse … because we are wasting energy on making these useless contraptions… and that is not an efficient way of using our declining cheap energy sources…
Instead of burning lignite to make solar panels we should be burning it and using it to directly generate electricity for other uses that keep the hamster running on the wheel.
Can be an entirely renewable cycle…wind/solar energy for electrolysis, hydrogen produced for FC with no combustion. E.ON, one of the largest utilities in the world, is focused I believe in the right place. Why? Most importantly Power to Gas can store energy at scale for long periods! Multi-MW and GW scale, which batteries cannot do (eye popping graphs on this from German think tanks), and is flexible rather than trying to force multiple commercial factors into a ‘one size fits all’ scenario which has not worked quite obviously. the fact is that by the time other storage techs, specifically batteries, can at all be a partial answer…it will be too late. P2G is being tested in Germany now. It is the missing link in a ‘hockey stick’ for solar and wind in as much as nothing else excluding nukes, so far, answers reliably the intermittency problem (when the wind doesn’t blow and the sun doesn’t shine). How much ‘cheaper’ can it be? The sun, wind and hydrogen are ‘free’ and abundant. The fact is, unless its ‘cheap’ by the structural requirements of the system that got us into this disaster…we will always seem to say it is not cheap and needs ‘subsidies’…to paraphrase Einstein, we simply will not get out of this catastrophe using the same thinking that got us so completely wedged into it. Best wishes to all!
I believe in the power of the mind.
What we need to do is get all 7B+ humans to focus their minds on the energy problem…. I volunteer to lead …
Everyone has to wish really really hard that there will be a sudden break-through in a new energy source that currently cannot replace fossil fuels (hydrogen, solar, wind – take your pick) and the world will be saved (at least until the next resource calamity — say California farms run out of water…)
Ok now … get your wish ready …. now turn off the Tee Vee and anything else that might distract you…. and 3,2,1… wish!!!! wish!!!! wish!!!! …………………………………………………………..
“Can be an entirely renewable cycle…wind/solar energy for electrolysis, hydrogen produced for FC with no combustion”
If you could wish the infrastructure into being, the technical difficulties for hydrogen are – in my opinion – insurmountable. Wishing for infrastructure being ineffective this is-my apologies- a pipe dream.. Right now food is oil. Oil is going away. Hydrogen is not used to make fertilizer. Not a single application for hydrogen that is comparable to our use of oil now exists. Very limited substitution may exist theoretically. All you got to do overcome the substantial technical barriers, and then find massive resources that do not exist(depleted) to implement on a global scale. Then you still have not come close to to replacing a fraction of the utility of oil.
Mercedes, BMW, Walmart, Kroger…all have on site hydrogen and are deploying fleets of FC forklifts. These are not tests. They are in production. As are tens of thousands of units powering home in Japan. As is Toyota’s new FC car after parting company with Tesla…not a surprise, VW has also said FC are the future. Your opinion vs. either of the engineering and wide scale deployment capabilities of Toyota or VW not to mention German utilities such as E.ON are questionsble at best. In fact, somebof your more sweeping statements suggest
Can you provide references for the sources of these claims.
I am breeding solar panels with windmills… this could be big competition for me….
“Mercedes, BMW, Walmart, Kroger…all have on site hydrogen and are deploying fleets of FC forklifts.”
This is actually true I stand corrected. They are being used there because they dont kill people from carbon monoxide when used indoors and batteries for electric forklifts are expensive.
https://en.wikipedia.org/wiki/Hydrogen_economy
Some exerpts
“Currently, global hydrogen production is 48% from natural gas, 30% from oil, and 18% from coal; water electrolysis accounts for only 4%”
“Hydrogen has one of the widest explosive/ignition mix range with air of all the gases with few exceptions such as acetylene, silane, and ethylene oxide. That means that whatever the mix proportion between air and hydrogen, a hydrogen leak will most likely lead to an explosion, not a mere flame, when a flame or spark ignites the mixture. ”
Well ignition certainly is not a problem so its got that going for it. 🙂
Those fleets of forklifts- they wont use any hydrogen derived from petroleum right?
It doesn’t work out. Way too much energy required to make metals and transport goods. Hydrogen is not free–it takes energy to separate it from water, and to store it and transport it. Wind energy isn’t free; it takes devices made with a huge amount of energy to capture it and convert it to electricity. Then balancing is needed, so it won’t disrupt the lactic grid. Sun has similar problems to wind.
There is an incredibly high demand for:
https://s-media-cache-ak0.pinimg.com/736x/80/c1/3b/80c13b0a4cc9b2edad8626cbefd5e413.jpg
But….
Exactly!
we’re not talking of wishes (we’d all be living in Wonderland), but of actual tangible demand, that is: AFFORDABILITY.
“It seems to me that the lower commodity prices we have been seeing over the past four years (with a recent sharper drop for oil), likely reflect an affordability problem. This affordability problem arises because for most people, wages did not rise when energy prices rose, and the prices of commodities in general rose in the early 2000s.
For a while, the lack of affordability could be masked with a variety of programs: economic stimulus, increasing debt and Quantitative Easing. Eventually these programs reach their limits, and prices begin falling in inflation-adjusted terms. Now we are at a point where prices of oil, coal, natural gas, and uranium are all low in inflation-adjusted terms, discouraging further investment.”
Giovanni, see also more detailed explantions in http://ourfiniteworld.com/2015/05/06/why-we-have-an-oversupply-of-almost-everything-oil-labor-capital-etc/
it is an unfortunate side issue of our industrial society that we have convinced ourselves that wheels deliver prosperity
whereas in fact it has been prosperity that has allowed us to have wheels for a while.
when the oil-era is over, we will all be back to walking, while a few rich people have horses
twas ever thus
“Wages in the newly globalized area tend to rise, negating some of the initial benefit of low wages.”
To some extent would explain why energy consumption continues to increase — but at a slowing rate …
I think that part of the reason wages have risen, at least in China, is that a huge number of homes have been built. Wages need to be high enough to at least sort of be able to afford to pay for the monthly payment on homes.
To a significant extent, these homes have already been built, so the ongoing energy need is only that for heating/ cooling. The big energy cost is building the apartment in the first place. Once most of the apartments have been built, energy needs and steel needs drop back. In fact, there are likely already too many factories for ongoing concrete and steel needs. Once most of wages have been spent on mortgage payments, there is not much money left for other purchases, so that holds down energy consumption.
Hi Gail,
I’ve been reading your site for nearly a year now and I am very impressed with your work.
I think China has undergone their own industrial revolution since Deng Xiaoping’s market economy reforms were implemented in 1978. For people who don’t know much about China, they would be amazed how much the country has changed in such a relatively short period of time. This period started before I was even born and many have said that the changes in China over the last 37 years are comparable to 100 or so years of development in any Western country when they also going through their own industrial revolutions. At no other time have so many people been lifted from relative poverty. There has never been such a shift in people going from rural economies to the factories – it is like what happened in the UK from the 1700s onwards but amplified by 100.
Of course growth rates of over 10% per annum went hand in hand with these vast increases in production and energy use. This was unsustainable as there was only so many factories, shopping malls, coal plants, ghost cities (?), etc that could be built.
Now China has built up its infrastructure where do they go from there? They obviously want to make sure that their domestic economy and local demand for their products increases substantially and the need to export so many goods to countries that are suffering from lack of demand as you describe is lessened. But is the demand in China there for their own manufactured products? Have they enough people with enough disposable wealth to pay for all these goods that have been exported to the West in the last few decades? I’ve read that out of 1.3 billion people they have around 300 million who you would class as middle class and this is growing substantially annually. Nearly as many people who live in the US. Will this be enough?
Thanks for your comment. I agree with you about China going through its own industrial revolution, incredibly quickly. And, like China and like Britain and the US, it was based on coal. Coal is incredibly useful for this purpose. It is cheap enough, and useful enough, that a country can make the step up out of poverty using it. I seriously doubt any other fuel could be as helpful–except perhaps nuclear, back when it was cheap.
Where does China go from here? If any one country could keep itself going on its own, China would come close. I don’t think the spending power is there though, and China is still dependent on other parts of the world for raw materials of various kinds. China is starting to reach limits of various kinds, particularly pollution limits. Also, it doesn’t have enough fresh water for its needs, and it is reaching diminishing returns on its own coal supplies. Coal needs to be taken from smaller, thinner seems or transported farther, raising its cost.
There is so much interdependence, it seems like at most a few years difference in timing in collapse can happen among countries.
“These projects might include building roads, schools, or hospitals. With fewer projects, world demand for oil and other commodities tends to drop”
And many more jobs are lost/not created…
Exactly! And with fewer jobs, this further adds to the lack of demand.
Thanks for another insightful piece
If two men exist, each on an island separated by shark infested waters, one has a trillion dollar coin and produces no water while the other knows how to produce water and does, who is wealthier?
If I were Larry Page, I would have my engineers scout for a small town and give my engineers card blanch in trying to make it “energy independent” using RE. Part of the task will be to “social engineer” the town folks in forming units under direction of the engineers to: 1) add insulation to produce homes that are less energy wasteful. 2) build solar thermal collectors to heat homes, 3) design and/or retrofit homes for wear less (need less paint, and painting, more durable roofs, etc.), 4) produce and store RE generated electricity.
The idea is to change the mindset to where they are helping each other become more resilient. Solar thermal, besides the collectors, needs heat storage units and a way to distribute that heat to each home. For a home or a trailer with a crawl space, volunteer teams would crawl under each home and lay distribution pipe under the floor joists, reinsulate the underflooring. For a slab home, the flooring would be raised a couple of inches and the pipes laid within that couple of inches.
The challenge comes in not denying it can be done. The challenge comes in trying to figure on how to make it work both on an engineering basis and on a social basis. I have seen where such projects have worked and there are many examples where they have failed. The only thing that they have in common is that people tried.
Eddy, here are a couple of links back at ya:
short version:
http://www.blacklightpower.com/pv_car-video/
long and more interesting version:
In the second link, things gets really heady beginning at 5 minutes. Is it hocus pocus or is he really on to something? I’m not qualified to either say yea or nay let alone the why. If real, what are the pluses? What are the minuses?
On the Black Light Power website, Dr. Mills has 3 text books where he mathematically discusses his theories. Is he a Robert Fulton of Fulton’s Folly fame or a Bernie Madoff?
I would have my engineers scout for a small town and give my engineers card blanch in trying to make it “energy independent”
Pete – good to see you are still with us — I feared for your mental well-being after your koombaya dreams of EV were thrashed so badly…
I was with you on this until you said ‘energy independent’
There is a slight problem with that plan. Where do you get all the components that make up this little koombaya village? Do all the panels and windmills and batteries grow on trees?
Of course all know that things break — and wear out — so where does this energy independent village get all the replacement parts for this system?
And I will assume that the village is going to have cars, and toasters, and Tee Vees, and washers and dryers and lawn mowers… etc. etc etc. Where will these come from?
If they won’t grow on trees then will you be mating sheep with various appliances and creating hybrid animals that can beget said appliances?
That would put the Maytag repairman out of business once and for all eh!
Hi Eddy,
There is a very interesting bit of a TED talk about internet filtering at
https://www.youtube.com/watch?v=p6vM4dhI9I8 Basically, the people controlling the search engines are tailoring the results based upon what **they** perceive the user to be. The fellow was saying that we should be thinking instead of reiterating factoids. We should be conversing instead of calling each other names. We should be identifying problems and looking for solutions. What is possible and practical?
Note that the “energy independent” above is in quotes as opposed to being without quotes. There is a big difference. A town can produce enough PV electricity and generate enough solar heat to be effectively “energy independent”. As an example, I produce enough PV electricity to be “energy independent” during several months of the year. I am **not** energy independent as if I were my own generating island in a suburban sea.
My calculations say that I can be “energy independent” most months of the year with respect to solar produced heat. I am under no illusions that I will have to wear a sweater at various times during the winter and to make sure that my panels are clear of snow. I may have to wait for bright sun on a winter’s day to take a “hot” shower.
Cost is the main problem for a solar thermal installation but it can be ameliorated by doing some of the work myself such as laying pipe. That was what I was trying to get out above but you evidently missed that point. If you get a “town” to do it, one person can become “expert” in removing and storing insulation; another in drilling pipe holes, another in cutting and gluing pipe, etc. One man’s 50 hours of sweat equity is not the same as another man’s sweat equity. I’ve seen it in action and you have to be very tolerant especially if you think you can outdo the other fellow by a 2 to 1 margin. It is one of the reasons some of the communes from the 60’s fell apart. Still, the thought of being cold in the winter can be a driving force for people to change direction. This is where Larry Page and those Google Engineers can step in and see ****if***** they can do it differently.
I see the utilities as being redistributors of PV electricity. I know they are working on battery storage systems and trying various strategies. Either the homeowner can manage on their own or let the utilities manage it themselves for a slight piece of the rate. I see others trying to improve batteries and making them better. I see others trying various combinations of materials and others such as Jeff Dahn devising testing methods to improve the energy density and longevity of batteries. I still see the town needing the grid and the gird needing the town.
With respect to a lawn mower, I mow during the day during the summer and the mower is powered by the sunlight; either directly or indirectly. I use the grid to funnel my electrical excess so you can use it to get on the internet. How about that, conceptually, my electrons powering your computer… Be nice or I won’t send any electrons your way… ;^)))
Oil, natural gas, and coal are not going to disappear over night or over a decade. Iron can be gathered even from peat bogs where it has roughly a 2% composition. Note the iron age started a long time before the first oil well was dug. As Greer points out, we will be salvaging a lot of elements. I expect to see the town dumps harvested for copper, steel, aluminum, glass, various plastics, components for batteries, etc.. The recycle truck comes by regularly to pick up some of these items and there are recycling events for electronics. I expect the later to increase.
Instead of trying to belittle my ideas, how about trying to ask some relevant questions??
When and how did Notre Dame in Paris get its stained glass windows? How was glass made back then? I assume it was before the advent of natural gas, oil and coal usage?
If so, then there was glass manufacturing before the advent of natural gas, oil, and coal, won’t there be glass manufacturing after the above gets too expensive for the common folk? Can the “glass covers” of solar thermal collectors be made out of something other than glass?
Koombaya Eddy Koombaya.
Pete – you have written a lot (perhaps we need to tap into the excess energy of your key strokes to power koombaya land) but you have said absolutely nothing.
Perhaps you could instead try answering the questions I posed.
They are cloaked in mockery … because your idea makes no sense…. but there is a serious aspect to them.
Does this village have a PV orchard? An appliance orchard? Pray tell where all these things will be manufactured in your ‘energy self-sufficient’ village?
My cells are producing electricity. The EROI is positive. The numbers are there. All I see from you is bull shit and mockery — nothing productive.
But Pete… where did your cells come from?
And when the batteries stop working where will you get new ones?
And what do you power with these cells — where did they come from (Walmart right?)
You are absolutely not energy independent. Not even close.
There is also the problem that the manufacture of solar panels generates some incredibly unpleasant by-products such as aerosolized silicon dust, silane gas, sulfur dioxide, trichloroethane and sulfur hexafluoride, the last being the most potent greenhouse gas yet evaluated by the IPCC with a global warming potential of 23,900 times that of CO2 when compared over a 100-year period.
Solar panels are green (ohm) solar panels are green (ohm) ….
As I have pointed out earlier… most people are not much different than rats… they are easily manipulated to produce a desired outcome…. even if you ram the facts down their throats and bash their heads in …. they will continue to tap the lever to get the food…
i wonder how many people in the entire world are not mostly in the matrix? I am beginning to think the number is less than 100….
FE said,
i wonder how many people in the entire world are not mostly in the matrix? I am beginning to think the number is less than 100…
The people in the movie were real.
Hi Harry,
You raise some good points. As a reference, this is a good read and helps to clarify the situation:
http://www.solarindustrymag.com/issues/SI1309/FEAT_05_Hazardous_Materials_Used_In_Silicon_PV_Cell_Production_A_Primer.html
The author of the above study said: “It is imperative that a replacement for sulfur hexafluoride be found, because accidental or fugitive emissions will greatly undermine the reductions in greenhouse gas emissions gained by using solar power.”
It appears that sulfur Hexafluoride is captured. The question becomes what happens to it?
I believe that you could mix it with ground up spent fuel rods rendering them inert – thus killing two birds with one stone.
I am basing this on no facts or research — but I believe therefore it is.
Suspended floors are a problem to insulate. It can be done, but you need to ventilate to keep things dry. You should be better off with insulating slabs cast into concrete. There are issues if you want to embed pipes into that, bit it can be done, similarly for ducting ventilation from outside or ground source heat pumps.
I was thinking of wrapped pipes embedded in concrete. Where would the moisture come from?
On I did not mean to sound snippy.
The “challenge” comes in resisting the allures of more and more techno-triumphalism. TT got us into this mess (and keeps burying us further and further in it), but it damn sure ain’t going to get us out again. Think simple and back down the energy curve that got us here. And unfortunately, A LOT less people too.
The idea that we can engineer our way out of our current dilemma is (and has always been!) the problem, not the solution.
Going back down the curve from whence we came is also problematic. Burning wood for heat has a romantic ring to it but there is not enought wood in our forests for our current population. This is one of the reasons I am looking toward alternatives such as PV and solar thermal. While not ideal, PV and especailly solar thermal are likely to last longer than burning through the wood in our forests.
I can see your point about PV. PV is more complex especially in creating the panels. there are many steps to creating a panel. Even with all the steps, PV efficiency is not very high but my numbers say it can power enough of my household items such as lights and refrigerator that it makes it worthwhile pursuing both in usage and development.
I’ve been impressed with the Voyager spacecraft that have lasted close to 40 years in deep space and are still returning data. My Japaneses transistor radio did not fair as well.
On the other hand, solar thermal panel is rather low tech. A pump is not high tech and thermally activated switches are low tech; similar to the old style thermostats. It can offset or even replace FF useage in warmer climates.
Rapid population decreases are not a pleasant thought nor sight. I’d like to see my kids have better prospect of happy fulfilling lives. It is one of the reasonsI push for PV and solar and the numbers are there but at a relatively low EROI.
Toward the end of WWII, my father was not discharged right away after Germany surrendered. He was told that he might have to go to Japan. I am hopeful that we have enough brain wattage and resources to change the course of history again.
Gail and others paint a bleak picture going forward but I am more hopeful and I know that a lot of progress has been made. There are a lot of funds going into development. A lot of folks can be retrained to build and install solar. It is not cheap but it works; my numbers tell me so.
Time will tell.
How many billions of tonnes of coal would we need to burn to manufacture panels to heat say 3 billion homes warmed by PV?
How many billions of tonnes of coal would we need to burn to directly heat 3 billion homes for eternity?
Roughly the same amount as you would need to manufacture the solar panels and other gear that would be required to do the same – actually probably quite a lot more…
Hi PeterEV,
I have to admire your persistence. Thinking of stocking up becomes problematic if you are overruned by city folk escaping with their last tank of gas. You will feel like the Germans at Stalingrad.
We do not know what will transpire; even in general terms. I have read scenarios of doom and gloom to techno-nervana. Where is Matt Simmons $200/barrel oil? Where is the hyperinflation we are suppose to be experiencing now? Where are the flying cars? Greer thinks this whole process of going from a salvage economy to a sustainable economy will take 200 to 400 years. Like Hubbert’s Curve, the other side to the peak may have even a fatter tail as we substitute alternative ways and means when oil and gas become dear.
We can see that resources are depleting and in some cases, substitutes have been found. I have seen EVs go from 20 mile practical range lead acid conversions to 265 mile top of the line luxury cars with the possibility of triple ranges in the near future. Nissan and Tesla are both planning on near 200 mile range EV in 2017 for $35K making them affordable for middle class buyers.
Today, used Leafs are in the $9k to $15K range where a replacement pack in a few years is about $6K where the savings in fuel and maintenance can be used to buy that replacement. When the 2017 models come out, I expect these shorter range EVs to drop in price. Half of a 85 mile range can afford a person to travel to the countryside to either visit friends or buy or trade for food.
Where I live, 800 miles can take me on a one way trip to Chicago,Detroit, Buffalo, Boston,Miami, and almost to New Orleans and St. Louis. That’s a lot of territory and rail systems. That’s what a triple range Tesla could do and I don’t see it as being that far off. All those cities are now within range using recharging stations.
And within that range, there is a lot of food grown and harvested.
A few years ago, I was really worried. Today, I’m concerned but more about our financial stability. here is an interesting piece from karl Denninger who printed an excerpt for Georgia’s reason for seceding from the Union back in the mid 1800’s. The reason is financially based. The excerpt is highlighted in the middle and goes along with some of what is said here:
http://market-ticker.org/akcs-www?post=230271
If the Federal Gov’t has $18T in debt and collects $3T in taxes, that’s $6 of debt for each dollar of tax collected. Income tax is a little less than half of the amount collected. The rest is medicare, social security, excise, and corporate taxes. So if the Federal Gov’t wanted to redistribute that debt, my portion would be equivalent 50% more of a mortgage I paid off and they wonder why i am not spending???
This should also be read:
https://www.youtube.com/watch?v=p6vM4dhI9I8 as it has implications for frank discussions and data searches.
Allow me to pick you up on one point you made. Taxation is just the opposite of money creation, money destruction. It is now, Federally, a way of reducing excess demand and not a source of government revenue. So the difference between $6T and $18T is irrelevant.
The government has to deficit spend into the economy to make space for the private sector of the economy to have money. [Etc]
Hi John, I read some of your replies below. It appears you know what you are talking about. I thought I might add that banks in the past have issued their own money. Our money says “Federal Reserve Note” and it could have said the “Bank of Lake Woebegone”.
Of the $18T I mentioned above, approximately $12T, from what I have read, can be attributed to fraud or $4 of fraud for every tax dollar collected. Anyone paying more than $62.50 in my state has been “defrauded”. Part of that fraud is based on the repeal of the Glass Steagall Act which had prevented bank from tapping the savings of savers to speculate. As a result, No Doc loans, liar loans, lack of responsibility and accountability by lenders led to the housing bubble of the late 1990’s to the mid 2000’s. This damaged the economy and a number of people lost their homes including one of my neighbors who bought in 2006.
My father sold his condo around 2005. The rate of return was roughly 8% while the average wage was rising at 2%. The fellow who bought the place, flipped it a year later. It went on the market 4 years ago at half the flipped price **and it did not sell**. If the loan had been an FHA loan, the foreclosed amount and costs would have come onto the Federal books as Federal Debt.
The bottom line is that “No one has gone to jail.” Considering the amount of financial contributions to the solons who overturned Glass-Steagall, it seems like the RICO laws could be invoked to prosecute these apparent “bribe takers”. What’s your take on it?
“Considering the amount of financial contributions to the solons who overturned Glass-Steagall, it seems like the RICO laws could be invoked to prosecute these apparent “bribe takers”. What’s your take on it?”
Apparently Glass Stegall had to be repealed because an international treaty required that the USA repeal it, (no link available). It’s them foreigners writing things like the TTP and the TTIP, you just can’t keep these things secret enough.
Or, if that isn’t convincing, would you believe a big boy did it and ran away?
Doesn’t seem like we in charge of our finances anymore. Like someone else paying our bills, spending our money and then balancing our books?
John Doyle wrote:
“Taxation is just the opposite of money creation, money destruction. It is now, Federally, a way of reducing excess demand and not a source of government revenue.
The government has to deficit spend into the economy to make space for the private sector of the economy to have money. ”
I’m pretty sure this is incorrect. All financial services now create credit. When total debt increases, whether it is government, corporate, consumer, it does not matter. More debt = more money supply. Paying down or writing down any kind of debt reduces the supply of money. The money the government collects is just spent right back around, so it does not increase or decrease the money supply.
No Matthew, not the way you describe. It’s more nuanced. MMT explains. Bank credit/money is horizontal, or broad, money. it is double entered and is continually created by loans and destroyed when loans are repaid. It is 97% of the money in circulation at one time.
It is not the money supply itself, which is base or vertical money. There is no double entry. Vertical money comes from commonwealth or federal government deficit spending into the economy. The money supply is the accumulated deficit spending amount.
It is why government budgets should be in deficit, To be in surplus denotes less money in the private sector for production and wages and this is usually understood to be Austerity, leading to recessions and depressions.
Every time we use a credit card we create credit, which is what banks etc do but it’s not a net-credit into the economy.
There are various ways and means for the reserve bank to control/ regulate the money supply; Taxation is a big one, plus buying and selling Securities/bonds plus the internal machinations within the reserve bank itself, the discount window. It relates to the chosen inflation target etc,etc.etc.
How about we look at how it is described by the Bank of England, actual central bankers, rather than MMT theorists:
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf
There is no mention of “horizontal” and “vertical” money. There is paper bills and physical coins made by the mint, but they are not limited to only creating a physical amount based on government debt.
Lending creates deposits. Paying back loans destroys deposits.
Thanks for the BoE link. It agrees with MMT, which means you are just shooting from the lip and haven’t done any research into it! I suggest you do some homework and get up to speed.
“I’m pretty sure this is incorrect.”
Savings and Investment have to balance. If the private sector saves, the government has to “invest,” and vice versa. There are, of course, good investments and bad investments.
Hi PeterEV,
I have seen a chart that predicts the decreasing price of solar PV for the foreseeable future. It’s exciting and implies a future of “clean” and “abundant” energy from the Sun. The biggest problem would seem to be getting dumb people to change their habits and ignorant politicians to finance the infrastructure to build this Tomorrowland a little sooner.
But I don’t think that solar is going to keep reducing in price. And I don’t think that solar provides the “cheap energy largesse” that will support our opulent life-style. Especially for American since we consume about 25% of the world’s energy (see Gail’s reply to my comments – I’ve seen that number several times now, so I think it’s in the ballpark).
Here is my basis for argument:
I suspect that there is a huge story about the huge increase of coal consumption in China (shown in Gail’s Figure 2) related to economic viability of solar PV. China’s is burning there one-time gift of coal to jump-start their economy and exponentially increase their wealth and most likely power.
Here is an article about China’s skyrocketing coal power: http://www.climatecentral.org/blogs/chinas-growing-coal-use-is-worlds-growing-problem-16999
From the article: Coal, the most carbon-intensive of the fossil fuels, accounts for 70 percent of energy used in China today and is responsible for about three quarters of electricity generation.
How much long with the cheap coal last? Gail has talked about this topic.
But my point is that I would expect that the cost of solar to bottom out and increase over time. This is in keeping with raising energy costs (and other factors). I am not an expert on any this, so this is just a conjecture on my part. In a way, solar PV is getting doubly subsidized (1st one-time cheap coal+cheap labor) and again here in the US. If the cost does go up, we will realize that it is an economic dead-end. That is, the massive investment using the last remaining “decade” of relatively cheap energy will have only resulted in an extension of FF.
I share the view that solar will only be an “extension” of fossil fuels age and are not a substitute. I think they will have usefulness in many areas (such as homes), but the continued subsidies to make them economically viable (both here and effectively in China) are red-flags that there is something wrong.
One last point :-)…
There is a difference between a subsidies that allows an infrastructure to be built in place to support an energy regime and subsidies used to make inherently uneconomically products more economically viable. When the latter occurs, the reliance on achieving economies of scale might be a dead-end.
We love energy. It is used to help heat and cool our homes, helps grown our food, and helps us mine the earth’s resources. There is no doubt among any of us here that we are wasting energy and running out of time with the current BAU. We have to change or change will be forced upon us as is happening now.
My analogy is that of the Titanic. If you can slow the sinking, you may have time to build lifeboats or “get rescued”. I see firms like Semprius working on developing a 45% efficient solar cells, I read about Black Light Power and wonder if it is for real (Its being backed by serious money.). I know people are working on better cells, better batteries, and alternatives to our BAU.
My question is what would need to happen to change the curves of Limits to Growth? One of the paradigm changes would be is how we produce our energy. Was an energy evolution taken into consideration? Solar is an obvious choice. PV at 15% efficiency in most USA locales consisting of most of the southern tier of states stretching up into the High Plains and out to the southern part of the West coast can provide enough energy to run most households, recharge an EV, etc. year round.
At 15% efficiency, it falls down in the heating (and cooling) abilities/capabilites. Heating can be derived from solar thermal to the point where the pipes will not likely freeze in winter in the southern tier of states. One program I ran says I can heat my home to reasonable levels for most of the year. The investment is expensive but using sweat equity can reduce that cost.
The changeover will happen if the product/device/method is there. Like radial tires. A few understood the benefit of the tires and sales where low but growing. The word got out. Now we all drive on radial tires except in very few cases.
The solar and battery industries are not standing still. They are working on better products. When they actually arrive is always a matter of conjecture. One of the signs to look for is the adoption of EVs. This will slow the uptake of remaining FF such as gasoline and diesel. EV owners tend to be more receptive to installing PV arrays to pay for their EV recharging. Politics and utilities can get in the way or be of help. But we will see what happens.
Meanwhile we keep our powder dry and our options open.
The original Limits to Growth book came up with a scenario that IIRC “worked” to put collapse off until after 2100. One part of it was to transfer energy use to something deemed more sustainable. I believe that would be was nuclear, although I am not sure it was spelled out in the book as such. Another was to cap population growth at 0 by estimating the number of people who would die each year, and only allowing that many women to have babies in the following year. I expect the result would be less than 1 child per family, in some parts of the world. The plan may have had other efficiency aspects, to keep of the use of resources down.
Of course, they were still dealing with a problem of starting with a fixed amount of resources and increasing effects of diminishing returns. The change was simply an attempt to deplete the resources more slowly, so they would last to 2100.
Here’s another way to deplete the resources more slowly: Keep a large portion of the world living in dire poverty … steal their resources…
Hmmmm…..
Only works until they die of latest epidemic–perhaps pass it on to you.
There are many kinds of diminishing returns. These do tend to raise cost of goods over time. (Whether the affordable price can rise is a different issue–this is why commodity prices are low.)
Coal needs to come from deeper, thinner seams and needs to be transported farther. Pollution becomes a bigger issue, and so scrubbers are added. All of these things add to the cost of coal fired electricity used to make solar panels. There are also other pollutants that become more of a problem, and base materials of the right type come from mines that are also experiencing diminishing returns (deeper seams, lower ore percentages).
Hi Gail,
I think it is going to be interesting to see what happens with the sales of the 2017 EV models from Nissan, Tesla and GM. All 3 are supposed to have ranges near 200 miles. If the uptake in EVs has a corresponding uptake in PV, we may see demand for gasoline and diesel decrease. The added cost would be compensated by cheaper energy and less maintenance. We may become “energy independent” after all but not in the “drill, baby, drill” sense.
I also expect the shorter ranged EVs to decrease in price to where they are competitive with ICE used cars. Used Leafs sell in the $8k to $9K at wholesale. I have seen a 2013 Leaf advertised by a car dealer for $14K.
You raised about what truck drivers do when robotics takes their place. Someone is going to have to offload the trucks. My son was thinking that we will see intermodal frieght where the long haul freight is transferred to short haul trucks where the driver will do the unloading and move the freight per the customer’s request.
Our problem now is inadequate demand for oil. That means we need to sell more oil, not less. Electric cars are not helpful in that effort. We need to sell more SUVs and build more new homes and more new roads, to get demand up.
The prices of used Leafs are miserable because no one wants one. This site lists a lot of 2011 Nissan Leafs for $8 or $9K. In fact, newer ones aren’t a whole lot more.
Hi PeterEV,
My question is what would need to happen to change the curves of Limits to Growth? One of the paradigm changes would be is how we produce our energy. Was an energy evolution taken into consideration?
The LTG folks have said that their world3 model is only applicable to a certain point. It would be incorrect to conclude that even if we are “tracking”, that it will apply beyond any collapse. I just read LTG last month and was surprised that they did come up with a “sustainable” scenario.
We are probably well past the point of meaningful trajectory change. Like at least 50 years. Look at the what Gail said about the Kyoto Protocol 1997 and look at the increase in energy consumption (and CO2 pollution!), especially for coal. Does this look like a society that has any chance of changing?
Look at the bigger picture. The neoclassical economics model with capital, labor, and energy in a industrial economy to produce wealth is not correct.
From Charles A. S. Hall “Energy and the Wealth of Nations: Understanding the Biophysical Economy” , pg. 135 :
and on the same page:
My point is that we have made assumptions about the linear effect that the rising “price” of energy (especially with non-substitutable crude oil). But the reality is that behavior of the system may become undefined once a point of diminishing returns (extraction cost vs price support).
The system is built on cheap energy not total energy. The system is built on debt and has responded by the effects of diminishing returns by exponentially doubling all debt since 2003. I am looking at chart from Economic Research Council:
http://www.ercouncil.org/storage/cotw/ercchart1114.gif
When you talk of an energy evolution, I can tell you see the big picture.
Alturium,
a short comment on the Global Debt chart.
Notice that the Government and the Financial curves are crossing around 2011.
If you look back in 2008, you can see that the Financial curve is flattening, while the Govt one starts increasing..
This fits in with the process as described by Charles Hugh Smith 2 days ago:
“…Then came financialization. Banks could skim the profits from originating loans and offload the risk of default onto towns in Norway, credulous pension funds and other greater fools.
And if a default threatened the bank–for example, Greece in 2011–the bank simply bought political power and shifted the debt onto taxpayers. “The ATMs will stop working,” the bankers threatened their political flunkies in Congress in 2008, and the bought-and-paid-for toadies in Congress and the Federal Reserve obediently shifted trillions of dollars in private liabilities and sketchy debt-based “assets” such as mortgages onto the taxpayers and the Fed balance sheet.”
http://charleshughsmith.blogspot.fr/2015/06/the-global-template-for-collapse.html
Next step is to shift the risk from the taxpayer (vanishing entity) onto bank deposits (hard assets). This seems to be almost acheived, with bail-in procedures.
Charles Hugh Smith is a novice where money is concerned.
Stefeun,
I wish the chart started in 1900. Is “socialized debt” the correct term for that process?
http://blackville.nbed.nb.ca/sites/blackville.nbed.nb.ca/files/bravo.gif
I agree. If you are thinking from the point of saving a single individual (or family), and you think that RE will benefit, and you have a way of purchasing the necessary stuff, I think it is a great idea.
Where I don’t see any point to it is in the situation where the government uses a lot of subsidies to encourage additions to the electric grid. In fact, in the island situation you mention, I would prefer that you use your own funds, not money governments have raised through taxes.
When I do my numbers, I don’t use the any of the State or Federal subsidies in my figures and they still come out positive but with a lot longer payoff period.
The real payoff is when RE can be used to heat a home or power transportation. The longer lasting the RE infrastructure the better. With the Gov’t subsidies, I see the gov’t promoting RE infrastructure. I think the gov’ts recognize the precariousness of our situations and want us to invest in RE.
The development of batteries with higher energy densities and more cycle lives will be a big help.
Unfortunately both Engineers and Civil Servants seem unable to devise ways of ensuring that subsidies work as intended. Too often the subsidy is captured by the financial sector which then subcontracts the renewable energy engineering to others.
I can believe that. I have read too often about Renewable Fuel Credits and other financial instruments that are not behaving as intended.
I’m designing a house, which will be livable habitat for 150 years with some installations going down in sequence. But in 50 years it will be warm and safe.
Any type of solar technology will not last so long. Dead end with solar after 15-20 years. Too much modern technology.
A lot of stone and even brick buildings have lasted many centuries. I assume you are using something along those lines for the outer shell.
What are you using for roofing material?
What are you using to keep warm?
Thermo-Insulation: GlassFoam and PUR foam
Waterproof-insulation: Polyuretane Industrial Spray
Roof: green roof technology
Outer shell: waterproof concrete + copper/stainless steel/aluminium,
stone is durable, but has too many other disadvantages.
Cool.
What are you using to heat the place in the winter?
What disadvantages? There were several Roman Aquaducts still in operation after 2K years or so. I’ve seen water flowing in Sagovia through one. Castles were built during the Middle Ages that are still standing. I’ve toured one of them in Spain that was built by the Moors. Beautiful place. There are many in ruins.
There will be two heating installations – the main pure electric floor heating from PV and emergency heating with wood-stoves and passive hot air distribution.
The whole idea of the house is merger of “passive house” with exceptional insulation properties and wood heating. Nobody has done this before, at least I couldn’t find it the entire Internet.
Stone technology is not suitable for modern buildings for several reasons:
– very heavy material – needs a lot of foundations, which is costly;
– to properly build such a wall it needs to be quite thick, which is not that optimal in regard to glazing, you loose a lot of light or you have to have very big windows, which again is very costly in terms of investment, future security and energy savings.
– thermal capacity of the stone and heat inertia is another problem – overheating in the summer;
– masonry technics with stone is also very costly and it is the weakest link in this type construction.
FWIW Our local castle has walls over a metre thick. Internal temperatures – if left to themselves – are a relatively steady 11C over the year. Much the same temperatures as would be found a metre below ground levels. There’s a reason why castle windows were so small in years prior to double glazing.
Stone is good only when you don’t need light and good ventilation. But these are essential “resources” in modern comfortable house. There are good reasons for this. First is health. In order to have any energy savings you have to maximize day-light input – livable space for once and thermal gain the second. You also need ventilation and circulation of air. The same logic as above. Thermal radiation heats some surface facilitating air circulation.
With 1-meter thick wall you loose most of these qualitites. Poor air circulation equals fungus and mould. A lot of very unhealthy microorganisms. Very bad environment for human specie.
Also the small windows had its purpose in Mid’centuries. They were useful in two aspects: security – you can defend yourself quite easily. Second you loose less heat in the winter. Glass was very energy-hungry industry and the energy came from wood. Only the richest could afford the glass for windows. The rest had just straw or rags.
This idea of good stone wall can’t stand the ground of logic.
Thick masonry walls are very slow in heat transmission and only function seasonally, not daily.
If you have them and they don’t as usual have dampcourses, you need to build a thermal wall inside the structure will low mass ans insulate it so wall moisture will not transmit via contact points to the inner wall. The gap should be ventilated as well, although if the masonry is on a DPC and is capillary resistant that is less important. The inner wall allows much more efficient heating as the walls don’t slow the heat down. The outer wall fends for itself. Build thermal stops around the openings.
Thank you, John.
I’m not going to build the masonry wall, though. Concrete is much better for this purpose.
Concrete is much the same though. If it is precast it will be about 150mm thick. This is suitable for a diurnal range, maybe 10 hours. It’s good in desert locations as the heat of the midday sun warms the house in the much cooler evenings, and vice versa. If you live in a high humidity location, like most of the tropics, then the lightest airiest construction is best. Nowadays with air con being ubiquitous that would change the formula, but then controlling moisture, condensation becomes the main issue.
From your note regarding the air-conditioning, I assume that you mean the current standard of housing. I, on the other hand, design post-collapse habitat. It has very different environmental requirements – no electricity, no maintenance, no FF input. These things limit the material/particular solution choice. In my case concrete is much better. I already posted the reasons for this. Stone masonry can’t stand the competition.
I agree, that the type of construction should be suitable for the particular climate zone. I live in Central Europe and this type has its requirements in terms of temperature with seasonal characteristics, humidity, ground water level, wind, local flora and fauna, etc. I’m not sure about the “lightest airiest construction the best”. Concrete wins in all conditions. It’s the most durable building material people invented at reasonable cost. In the tropics you just need to design for different conditions. Less construction, more space, natural ventilation, etc. Material portfolio should stay the same. Most “noble” materials suit almost all climate types, you see these things in every piece of good architecture around the globe.
Yes, I was talking about “standard” houses not unique ones. Post collapse however concrete will be difficult to use. It requires a lot of big grinding machinery to make powdered cement, which is an extremely fine dust. The Romans didn’t use concrete as we know it so that would have to be examined or rediscovered. They used a volcanic based mix which means copying it would only be local to volcanic areas. It’s not a long term answer but good for a while yet. It’s not cheap because it is very heavy and requires formwork, which is somewhat labour intensive. Then there is the steel reinforcement. Post collapse steel bars will be problematic to source.
It doesn’t win in many conditions but a few ,yes.
John, what I meant was I want to build a house soon and it will be serving next generations. That’s what I mean ‘post-collapse house’. I didn’t mean building such sophisticated structure post-collapse. It would be an impossible madness.
I stubbornly stay with concrete and sustain my opinion about it.
I expect that the availability of stone of the right types would vary by location. If everyone had houses with one meter thick walls, there would be an awfully lot of land covered with buildings, and an awfully lot of stone used in building those buildings. A large share of the population would end up working at the jobs of moving stones and jointing them together.
Exactly. Stone masonry houses are Middle Ages technology. Very complicated, uneconomical and resource-demanding. There are good reasons that from the Renaissance they abbandoned it as wall building material. I guess we all agree, that one day it might be the best option again, though. For now, I prefer concrete.
Kesaro,
You might want to try this link:
http://www.arttec.net/
He has done some interesting work and has a similar setup to what you are describing.
He’s in Maine.
This Guy Mardsen is very resourceful person. A lot of skills.
His idea was mainly to refurbish an old house. Different story. My design is completely different.
His stove solution is very inefficient one.
Thank you for all the work you have done, it is much appreciated by those who are awake.
That is a lot of work you have done! I have used the BP Statistical Review 2015 to analyse Asia’s oil consumption and production:
23/6/2015
Asia’s oil consumption at record high while production peaked in 2010
http://crudeoilpeak.info/asias-oil-consumption-at-record-high-while-production-peaked-in-2010
As you might guess, I have two or three times more charts that I didn’t use.
Of course, production and consumption are linked. I think that prices can’t rise arbitrarily high, so it is low prices that we need to be especially concerned about. They can bring down the system.