How is an oil shortage like a missing cup of flour?

If I bake a batch of cookies and the recipe calls for two cups of flour, but I have only one, it is pretty clear that I can’t bake a full batch of cookies. All I can make is half a batch. I will end up with half of the sugar, and half of the eggs, and half of the shortening that I originally planned to use left over.

Liebig’s Law of the Minimum applies in situations like this. In agriculture, it says that growth is controlled not by total resources available, but by the one in scarcest supply. If a baker does not have enough of one necessary ingredient,  he will have to make a smaller batch. I wonder if it isn’t a little like this with oil and the economy.

Oil seems to me to be a necessary “ingredient” in our economy. If for some reason oil is not available (perhaps because the buyer cannot afford it), then to some extent other “ingredients” in the economy, like human labor and new houses and stores in shopping malls, are less-needed as well. That is why as oil consumption decreases, there are so many lay-offs, and the effect multiplies and affects all areas of the economy, even housing prices and demand for business property.

If worldwide oil price is on the high side (like it is now), customers are faced with a choice–should they buy the full amount of high-priced oil, or should they cut back in some way. For example, a state transportation department might find that asphalt (an oil product) is high priced. They might decide to buy less and fix fewer roads. If they do this, they won’t need as many workers to spread the asphalt, so they may lay off some workers. With less demand, refineries that make the asphalt won’t need to process as much oil, so some of the older refineries can be closed, and their workers laid off.

The laid off workers will have less money to spend, so they will cut back–go out to restaurants less, take fewer trips, and wait longer between haircuts. And of course, there will be little need to build new refineries, or to buy new trucks for spreading asphalt, so these changes will impact workers in the construction business and in the manufacturing of trucks. A laid off worker may miss mortgage payments, and this will trickle through the economy in other ways. Housing prices may drop from lack of demand because some workers have lost their jobs, and because foreclosed houses are on the market at low prices.

In some cases, there may be the possibility of substitution–in this example, switching to concrete or gravel roads instead. But even in this case, there might be layoffs–less need for refineries, for example. Also, spreading gravel might take fewer workers. Concrete roads might last longer, and therefore affect employment in years to come.

Let’s take another example. If oil prices rise, airlines will need to raise their prices to cover the cost of fuel. Because of  higher prices, businesses can be expected to cut back on travel, and less-wealthy vacation travelers may stay home. The reduction in travel can be expected to lead to layoffs in the airline industry. There will be less demand for new airplanes (unless an inventor can truly figure out a way to make a more fuel-efficient airplane!), and less demand for workers who build the airplanes. Fewer travelers will pass through the airport, so airport restaurants and shops are likely to lay off workers.

As a third example, if oil prices rise, grocery stores will raise the price of the food they sell because oil is used in food production and transport, and stores will need to pass the higher costs through to the customer. While customers are likely to “trade down” to the less-expensive items offered, in total, they are still likely to spend more on groceries than in the past. To compensate, customers can be expected to cut back on their discretionary expenditures elsewhere. A few may even miss mortgage payments.

How can this problem of layoffs, debt defaults, and falling housing prices be avoided when oil prices rise? I am not sure that it can be.

If a government has a huge amount of money for oil subsidies, perhaps it can subsidize oil prices, so the effect isn’t felt throughout the economy. Usually, it is only the oil exporters who can afford such subsidies.

Or a government can make a rule that companies can’t lay off workers, no matter how much demand drops. Unfortunately, such a rule is likely to result in many bankrupt companies. If they continue making goods few can afford, they will end up with a lot of excess inventory as well.

Or governments can try to cap oil prices. But now we are running short of oil that can be extracted from the ground at low cost, so capping prices has the perverse effect of reducing supply. Governments can also raise taxes on oil companies, but to some extent this also has the effect of reducing supply. The fields that had marginal profitability before the tax hike are likely to be closed.

If the government wants to keep employment up, somehow it needs to find less expensive alternatives to oil, so as to stop this vicious cycle of higher oil prices sending the economy into a tail-spin. Higher priced substitutes are not helpful–they just make the situation worse! This is why most of the alternatives now under consideration are dead ends, unless the costs can be brought way down, say to $50 or $60 barrel. Even electric cars need to be inexpensive, to really help the economy.

Too many people don’t really understand where the economy is running into trouble, and are proposing solutions that can’t fix the problem. Our real problem is that the economy cannot afford high-priced oil; it is not that there is too little (high-priced) oil in the ground.

We have always assumed that we can have cheap and available ingredients for our societal “recipe” for how our current economy functions. Now this assumption is coming into question.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
This entry was posted in Alternatives to Oil, Financial Implications and tagged , . Bookmark the permalink.

28 Responses to How is an oil shortage like a missing cup of flour?

  1. We’ve strayed away from the cup of flour, but interesting how the public debate is starting to turn away from the hard science towards psychological and spiritual factors. Why, when the scietific evidence and climate chaos is becoming so clear, do we not respond as we should when confronted by imminent global crisis?

    My own view is that monotheistic religion allowed us to assume a status above that of nature and it is thus religiosity that has caused much of our dilemma. But, on the flip side, a purely mechanistic view of nature is equally destructive.

    To date the concept of Gaia has been used as a means of pointing to a spirituality that is in keeping with sustainability and I think it is true that people can develop a spiritual dimension in their lives that is not necessarily the same as orthodox religious belief.

    I don’t think any thought process or ideology should be rejected. For those who profess a religious belief, enough that that belief system takes on new dimensions.

    It’s worth looking at this link regarding the historic overlap between religious belief systems and sustainability:

  2. Bicycle Dave says:

    Hi Gail, re: religion discussion

    I totally agree with you about the value of ancient myths and learning from them. I really enjoy ancient mythology. My concern is with the belief that it is “true” that a supernatural world exists – this corrupts the whole concept of what we accept as “truth” and leads to many misconceptions about the natural world.

    I also agree with your thoughts about how the planet can get along just fine without us – perhaps most all life as we know it today.

    But, I’m conflicted about the notion of ‘what we ought to do” – and I suspect you are also 🙂 as I noticed you commented elsewhere “The question is how we can transform ourselves to whatever new structure is needed, in an orderly way”. So, my list is just a few thoughts about what might be useful for that new structure – I don’t pretend to know all the answers. I follow discussions like yours because I’m really not sure if there is much we can do – but, I do have grandchildren and it feels lousy to just sit back and let them inherit this mess.

    • Umberto says:

      Hi Dave, Hello Gail,
      I replied to a post further up, but cannot find it. Obviously I am not familiar with this side.


      • I have a hyper-active spam filter. It puts a lot of comments into a queue for me to approve, if for some reason it is unhappy with them. Somehow, both of your comments ended up in my “review queue”. The spam filter does tend to get rid of bad comments, so I guess it is somewhat helpful.

  3. Bicycle Dave says:

    Hi Gail,

    I read your blog on a fairly regular basis because I think you do a very good job of analyzing the symptoms of the overarching problems facing humanity. I also find the commentary to be very informative – many very smart folks seem to follow your blog.

    However, (isn’t there always a “however” :-)) I suggest that there are deeper root causes of the problem and therefore the kinds of “solutions” that folks like us should be advocating. Note that I rate the chances of really effective solutions, being implemented in a timely in a timely fashion, as being pretty low. However, tilting at windmills as we may be doing, I suggest that we should make every effort to identify the actual root causes, talk about some appropriate goals, and propose some potentially viable solutions.

    The basic outline of the problem is super simple – humans are in “overshoot” (and everyone reading this blog understands the term completely). The goal is equally simple: adjust our population and consumption profile to come into balance with the resources of the planet. The solutions maybe a bit more difficult, but they are not rocket science. Condoms are effective. Nobody needs 3+ children. Nobody needs a Cadillac Escalade – or any modern car. Nobody needs a 100 ft yacht. Nobody needs to make a billion dollars a year. There are all kinds of things that are unnecessary to live a wonderful life. And not all technology is bad either. Advances in Medicine, communications, computers, food, shelter, materials and many tools could have great value in a balanced world. None of the potential solutions are beyond the ability of humans to understand and implement successfully.

    If you accept the above statement, then the big question is why humanity is unable to act in its own best interest? Cynics will suggest that this is just human nature at work and self destruction is inevitable – it is simply the way we evolved. We will have our day in the sun and then fade away like every other species that ruled the earth for awhile. Earth will recover from us and move on. Maybe so. But, what kind of change could actually chart a more optimistic future?

    I submit that the root cause has must less to do with fossil fuel depletion and much more to do with “Memes” Concepts/beliefs of religion, war, economic systems, etc. that are passed from generation to generation and conspire to cloud our ability to see the world realistically. Generally speaking, humans have a collective intellectual disability – some very big blind spots.

    Our most fundamental goal should not be to use less oil (worthy as this may be) – our most fundamental goal should be to free our minds to really understand Homo Sapiens’s existence on a finite planet. We don’t need so much to find a replacement for oil as we do a replacement for “afterlife”, “meaning”, “soul”, “god”, “honor”, “glory”, “exceptionalism”, “patriotism”, and a whole bunch of other things that infect our minds.

    Maybe it is just tilting at windmills, but I suggest supporting organizations that are aligned with the basic goal: Population Connection, Americans United for Separation of Church and State, Council for Secular Humanism, any organization that truly supports the Scientific Method or unbiased methods of educating children, gender equality, etc. At a more militant level, I think we should speak out every time we heard a public figure say something like “god bless America” – just think of the ignorance loaded into that saying.

    • John B says:

      Maybe one of the biggest memes is that the world does not revolve around the USA.

      There are other beings on this planet besides Americans, and the constant focus on US centric organizations / solutions diminishes the contributions of others.


      • Bicycle Dave says:

        Hi JB,

        Yes, very much agree – when I mentioned “exceptionalism” I really meant “American Exceptionalism”. As I worked and cycled in various parts of the world, I developed a real sense of humility that supports your comment.

    • I am not sure I would quite go that far. It is hard for people to believe that a good God would allow what appears to be happening to happen. And the Bible doesn’t seem to describe such a happening. All of this makes it very difficult to reconcile beliefs in the Bible with what seems to be happening.

      I think the Bible (and the religious writings of other groups) can give very useful advice on how to live now (be content with what you have, share with others, do unto others as you would have them do unto you). Churches can also provide a useful way of connecting with others, and get people to think about what is truly important in life. So I think they can be a net positive.

      • Bicycle Dave says:

        Hi Gail,

        First, I wish to say how much I appreciate your skill and insight in writings here and on TOD. I read your blog because I value your work and encourage you to forge onward. I’m thankful for a forum that fills in the gaps after the TOD reorganization. Analysis of fossil fuel depletion is very important – it is also very important to understand why this is happening and how we might deal with it. I’m also hopeful that you might at least entertain an idea that strikes at the core of your belief system.
        In your article “We can’t take ‘it’ with us”, you mentioned:

        My background is fairly religious. I graduated from a Lutheran college (St. Olaf College).

        You also said:

        I think religions–not just Christianity–tend to pass down the wisdom of prior generations, and we would do well to learn from such religions. But I also think we need to disregard what no longer seems relevant.

        And, you mentioned several examples of such wisdom. I would simply point out that written history is full of useful wisdom that comes from non-religious folks also – I suggest that the belief in a supernatural dimension is not a prerequisite for imparting wisdom.

        St Olaf College is in southern Minnesota. I grew up in northern Minnesota in a very religious community. I even spent a bit of time down the road from Northfield at Saint John’s School of Theology-Seminary near St. Cloud. I don’t share your fond memories of religion – much to the contrary. So, it may well be that we are predisposed to vastly different worldviews. I’m firmly in the camp of Sam Harris, Richard Dawkins, Christopher Hitchens, Chris Hedges and similar authors who see the danger in belief systems that are centered upon a supernatural world – a world that most certainly does not exist.

        So, getting back to your comment to me:

        Churches can also provide a useful way of connecting with others, and get people to think about what is truly important in life. So I think they can be a net positive.

        I could not disagree more. I view churches as a way to divide a community – I wish they all could be converted into secular community centers. As for what is “truly important in life” – my observation is that most of them preach “salvation” as the most important thing. In other words, life on this planet is far less important than the “deal” you get after death in some kind of mythical world. Even your first example of wisdom was “O give thanks to the LORD, for he is good: for his mercy endures for ever. – Psalm 107:1”. How is this useful for dealing with issues in the natural world – the only world that can be proven to actually exist?

        However, my fundamental problem with the great majority of religious belief systems is their insistence that a supernatural world actually exists. Even people who wink and nod at this concept are giving tacit approval to the billions of people who really believe this nonsense. A person who “believes” that this world exists is explicitly saying that the existence of this world is “true”. Such a person has fundamentally compromised their ability to understand how to judge something to be true or false. Sam Harris expounds upon this in his book: The End of Faith: Religion, Terror, and the Future of Reason. As regards the most basic issues of human existence, I suggest that it is very difficult to pursue what is true and false if a person has been programmed from infancy to hold beliefs that have no rational proof of being true. I think that our seemingly inexplicable denial of “limits to growth” is easily explained when viewed from the perspective of someone who believes:

        On the last day of creation, God said, “Let us make man in our image, in our likeness” (Genesis 1:26). Thus, He finished His work with a “personal touch.” God formed man from the dust and gave him life by sharing His own breath (Genesis 2:7). Accordingly, man is unique among all God’s creations, having both a material body and an immaterial soul/spirit.

        I think it might be a lot less harmful if most people became disciples of Pastafarianism:

        To the Kansas State Board of Education: “I think we can all look forward to the time when these three theories are given equal time in our science classrooms across the country, and eventually the world; One third time for Intelligent Design, one third time for Flying Spaghetti Monsterism, and one third time for logical conjecture based on overwhelming observable evidence.”—Bobby Henderson[7]

        Gail, I don’t expect to change your thinking about religion (I can’t even get my wife to change her mind about this), but I do think it is important to offer a counterpoint to the conventional acceptance of supernatural beliefs. Perhaps the odd person will be motivated to read works by the authors mentioned above.

        You have written:

        Eventually, I expect that collapse is likely.

        I suspect that most religious beliefs make this more likely. I will change my mind when the major religions of the world start to preach a strong message of birth control and population reduction, gender equality, true environmental respect, demand an end to our car culture, protest the burning of coal, demonize excessive consumption, mobilize against the extinction of other species, set a goal of 340 ppm of carbon in the atmosphere, and a host of other actions that are vastly more rational than salvation.

        • I don’t think all religions fit in the same basket.

          There are churches that believe the Bible is literally true, and there are churches that believe that ancient people wrote down the myths of their day, and these myths need to be read in the context of myths from the same time-period, written by other people (say Babylonians). I come from a background that believes the latter.

          I think it is easy to get the idea that we know all the answers (birth control and population reduction, gender equality, true environmental respect, demand an end to our car culture, protest the burning of coal, demonize excessive consumption, mobilize against the extinction of other species, and the rest of your list), but I am not entirely certain that we do. Our big problem now is overpopulation, but it is late now to try to do much about the issue, if we are running headlong into peak oil limits. With too many people, no matter how environmentally “respectful” we want to be, we will still do harm to the planet. The planet is set up to handle these stresses though–it goes through periodic changes in temperature–it was about time for an ice age, but perhaps we will get heat instead–and cleans out most of the inhabitants. So the earth will be OK, no matter how badly we misbehave. New species will evolve to replace the ones that were lost. Humans may be one of the species that goes extinct; we don’t know. Unfortunately, we don’t have much to say about it.

        • Umberto says:

          Hi Dave, hello Gail,

          I am following Gail’s writings now for many years (TOD) and enjoy what she had/has to say about PO. And I noticed how the discussions about mitigating efforts to be taken be individuals have changed over this time!
          Therefore it was not a surprise that the discussion here on Gail’s own blog turned to belief systems and the impact these may have on mitigating PO.

          I tend to agree with you Dave on many things, on others, especially your conclusion I strongly disagree.

          Without a major change in the basic beliefs there can not be any meaningful longtime changes. History shows that very clear. Our societies are the result of centuries of raising children in all the different belief systems there are – worldwide. As much as Agnostics, Atheists, Evolutionists, etc. deny that their actions are based on a belief system, it never the less is (according to some, “Evolution” is the main religion these days). Their world view was/is shaped by things they read/heard or talked about.

          Now, if you accept this point of view as generally correct, than the next question will automatically be: What kind of society will evolve after PO passes and the bits and pieces are piked up again? IMHO, the same as we have today. Maybe with different energy usages, less people, etc. but over time the same kind of thinking – greed, misaligned equalities, misgivings, etc – will show itself with everything it entails – fighting, war, etc. The cycle would never end!

          There is only one solution to this conundrum.

          All Religions and there thinking has to go, worldwide!

          I do agree agree with you (in that you disagreed with Gail) that religion is “not” a unifying force for humanity. It never was. History 101 proofs that more than enough.
          Just think for a moment: What was religion always used for? To influence people for the benefit of the “Influencing Class”. Why should that change after PO?

          One of the commenter’s at TOD stated not to long ago:

          If this would be true, than that God would automatically condemn 95% of the world population, because for the US to have their lifestyle it is necessary to keep these 95% in poverty! Would be interesting to know how such a God would justify this action!
          It obviously would not fit the description the Bible gives about the true God (and Logos would be his Son and not God himself)

          Where I do not agree with you, is about the wisdom coming from other humans. You state:
          “…I’m firmly in the camp of Sam Harris, Richard Dawkins, Christopher Hitchens, Chris Hedges and similar authors…”

          These people are not free from influences themselves!

          You quote the Bible on occasion. So you must have a copy. May I direct your attention to the following verses: “Jeremiah 10:23” and “1. Corinthians 3:19”.

          On an other occasion I stated this on TOD:

          all dividing religion is gone
          > all greedy companies are gone
          > all corrupt politicians are gone

          and than try to solve the problems of PO! ==> Piece o’cake!”>

          And this is the reason why I am firmly convinced that the message off the Bible is the only hope we as humans have for a future. But – there it is again! – , not how the thousands of so called Christian Religions and groups interpret the Holy Scriptures!

          There is much more to it than meets the eye (famous saying, is it not?). The Bible is only a guide, although a perfect one. Like a map. You have to look at the big picture how and where the map is guiding you, without neglecting the details. But if you focus to close on a map (by using a magnifying Glass to see the pixels on the dot of an intersection you can easily lose your bearing)

          Unfortunately people don’t want to hear some “Inconvenient Truth”. The Bible clearly states how they would have to change! Therefore I am afraid what the Bible predicts regarding a resetting of the population will come to pass.

          Please read: Psalm 37:10,11 and Micah 4:3,4


  4. Gail, the cake flour analogy is really good. I guess we need to think of liquid fuels rather than oil specifically, most transport technology can be tweaked to take other fuels.

    Here in Australia there seems to be an attitude that we can avoid running short of the main ingredient by doing coal-to-liquid fuels conversion (Australia has vast quantities of coal, lots of it being exported to China at the moment).

    One doesn’t have to be too smart to know that no country can survive in isolation from the planet’s economy, but there are sure to be desperate measured put in place to displace oil with either liquid or gaseous fuels that can fuel existing transport systems for a very long time. I guess it is sheer volume that would need to be delivered plus the price of such alternatives that would kill the economy anyway.

    If there’s not enough wheaten flour to bake the cake, well there’s always soy flour. Not my argument, but it’s one that sits comfortably in the brains of those who appear to run the world.

  5. bart says:

    Hi Gail, I realized that it would be better to leave comments here on your webpage than on Facebook.

    I think the problem with this analysis is that it looks at only one factor in a complex system Yes, it is true that in the short term, higher oil prices will act as you say, promoting higher unemployment. But there are many other things going on in a capitalist, globalized economy — the oil prices are just one factor. There have always been recessions and unemployment in capitalist economies. It’s part of the package. In the last 40 years, though, the system has worked pretty smoothly.

    I think that period of relative peace is coming to an end, with the higher prices for commodities, as well as other factors (rich-poor imbalance, heavy debt loads, overweighting of the financial sector, etc).

    We will see increasing political-economic turmoil, with higher unemployment and the squeeze put on pensions and public spending.

    I think various forms of socialism will reappear as viable movements. Perhaps some sort of Islamic socialism in North Africa and the Mid-east. Peasant-based socialism (aka Maoism) in some Asian countries – e.g. Naxalites in India, Maoists in Nepal, a lurch to the left in Red China. More populist leftists in Latin America.

    Hard to say about Europe and North America. Could go social democratic or fascist. Probably both at the same time.

    These political changes make it hard to extrapolate from present conditions. Ultimately society will be restructured to match realities like the higher cost of energy, and the need to match people with the work that needs to be done.

    My crystal ball is getting cloudy now!

    best, Bart

    • I think each of us needs to explain things the way we see them. Perhaps we can learn from each other.

      It is becoming more apparent that the current structure isn’t working well any more. The question is how we can transform ourselves to whatever new structure is needed, in an orderly way, because sticking with the current system doesn’t seem to be working well.

      I was reading today that the world Food Price Index is at a record level. The Middle East is a big food importer, so it is not surprising that it is pushing how political systems and economies are organized there.

  6. Chester says:

    Liebigs law of the minimum is a biological law that states a population of a particular spp will increase in a particular area (ecosystem) until it reaches the minimum availability of some necessary resource (could be water, could be sunshine could be selenium).

    Now where Liebigs law really bites is when we consider two populations of that same spp inhabiting different areas. In this case each separate population will increase until it reaches the local minimum resource availability (lets call one resource water and the other limiting resource selenium), this population level is the local maximum for that spp. The problem starts when these populations starts trading, one group sends water to the other in exchange for selenium, immediately the local populations can increase beyond the carrying capacity of the area they are in. Overshoot.

    Which of course brings us to crude oil, because trade requires transportation, and abt. 96% of transportation energy is provided by crude oil. Remove crude from the equation and transportation/trade drops massively and populations return to their local levels. Dieoff.

    And there is no replacement for fossil fuels, once that bank balance has gone its over folks.

    This is science, biology, physics and chem, not rocket science just science. And this doesnt even begin to look at so many other aspects of the human condition.

    The issue is not that we are in the shite, the issue is how we got here and why we continue to fail to address the problems we face. And by far the most crucial reason for this of course is because, as a spp, we today base all our decisions on an imaginary standard, money. And while we continue to guage all our actions by way of money we will continue to make the wrong decisions. Money is not connected in any way to the laws that rule life on this planet, money is a measure of human belief that appeals to the most dangerous aspects of the human genome. Anyone ever seen a $ sign in a science equation???

    Its ok though, the monetary system can not run backwards (shrink) so we will get to watch it unravel then those fortunate (will the living envy the dead??) enough to survive will get to try and pick up the pieces.

    • You make some very good points. I have talked particularly about high tech goods (like computers) not being available without a high level of trade. But it is even more than that. Trade allows us to go way into overshoot. And just measuring things in money leads to a lot of bad decisions. Even worse, “Profit” is the number one criterion, but if citizens are going to be able to buy the goods that are produced, wages are important as well.

  7. Doug W. says:

    Your example of the asphalt road hit close to home. They were re-paving the rural town road we live on during the summer of 2008 when prices were skyrocketing. Their solution was to pave up the middle of the road leaving a two ft strip of unpaved old road on each edge. They haven’t been back to finish the job. Over time those unpaved edges will likely break up leaving a narrower, less safe paved road in its place. So another potential outcome is for things to re-set at a lower, less satisfactory level.

  8. Keith Akers says:

    Liebig’s law of the minimum is part of the story, but “trophic levels” in the economy is also operative. At the bottom are extractive and agricultural industries that produce raw materials and food, then basic manufacturing industries, then service industries like restaurants. The lowest levels make the upper levels of the economic food chain possible and also control their extent.

    Oil is a necessary ingredient to the economy not just because it is widespread and substitutes are hard to find, but also because it is at the bottom of this economic chain. That is why we cannot just get out of oil and into the restaurant business or all become massage therapists and teachers. These professions in turn rely on oil indirectly because there is a base of life which relies on manufactured goods and food and if this base is eroding, people will devote more resources to putting food on the table and staying warm in the winter, and less to other things which might in other times provide employment alternatives.

  9. John B says:

    I do not like the constant focus on oil. I prefer to refer to it as affordable energy, for that is what the US, er global, economy has been built on. The changes to growth and society will result as energy costs consume a larger portion of the household budget.

    As far as the comment of creating a law to that businesses can not lay off any employees, how about tweaking it so that there is a law that a profitable business can not lay off any employees. Too many rich and profitable businesses continue to lay off employees, simply to meet shareholder demands. It is disgusting.

    Shale gas seems to have captured the attention of so many in the US. Read on it and find out its limitations as well as its excesses. It is not the long term energy solution for America, it is but another short term blight on society that will only feed the pockets of those like T. Boone Pickens. An energy source for the commons is what is required.


    Alberta, Canada

    • Affordable issue is indeed a major issue, and that has been the reason switching away from oil over the years. Oil is easy to transport, and easy to set up, say, diesel powered electricity generation with, but it provides very expensive electricity. Coal is a lot cheaper, and so is natural gas.

      The problem with oil is that we are reaching a price point where it is currently having a serious impact on the economy. It is my belief that oil shortages a major contributing cause to the 2008-2009 recession. In fact, oil price rises seem to be implicated in nearly all of the post World War II recessions. Read my talk I gave in Barcelona in October, called Peak Oil and the Continuing Financial Crisis. You may have to go through several screens to find it. It is listed as the last talk in the digital proceedings. It is also linked here.

  10. Arthur Robey says:

    Thanks Gail.
    You have given me a bullet proof rationalization for why I should buy that Suzuki M50 motorcycle.
    I have to travel to the other side of Australia to work on my big yacht. This machine will cost me $60 per 1000 kms. I’ll bet the airlines cannot match that.
    Especially in the future.

    Let me be uber cynical.
    Bob Mugabe and Stalin try to get rid of the people. Perhaps Bob and Joe were ahead of their time.
    The FED is printing money. Bob was printing money.
    The American medical system, their diet, their gun laws, their obsession with speed, their wars, climate change denial, their general intellectual apathy (and other things, but you get the idea), are designed to kill off their population.
    But here is the biggie.
    The demonstration by the Rossi of practical low energy nuclear reactions has been known for some time. But because of the tight correlation between population and energy use, we have been denied access to it.
    “Their” logic is faultless. First we have the Darwinian event and then the huge per capita energy.

    See you on the other side.

  11. Nicholas says:

    I love the comparison that you make Gail. Quite good.

    Fox Business just interviewed T. Boone Pickens a couple days ago regarding peak oil which can be found here:

    He says the following:
    “I think that we have advanced far enough in Washington that they understand that we have more natural gas in america than any other country in the world. And natural gas will supply transportation fuel markets. Now when you get into wind and solar, that’s not transportation fuel. That’s gonna be power generation. And we don’t use oil for power generation in the united states. So you’re down to one resource, so it’s not a case of your having to study the alternatives. Study the options: you only have one resource that is going to replace oil from OPEC, and that is natural gas.”

    Then the interviewer asks him just how high gas prices would go if there were disruptions with oil production from Saudi Arabia? Pickens responds by saying that at least 4 dollars is coming but we could end up going to ANY price.

    Apparently what is actually going here is that hydrofracking could possibly be the the only thing that is standing between us and a major depression. Especially if the riots in Egypt continue to spread and shut down our foreign oil supplies.


    • xrm says:

      Hydrofracking…replace the ‘a’ with ‘u’ and that’s what you’ll be doing to our ground water and environment. Watch ‘Gasland’ to see what an absolute environmental nightmare hydrofracking is. I’d like to leave at least something remotely habitable to my children and their descendents.

    • Bill says:

      Wind and solar are highly intermittent sources of power that simply cannot replace the supply offered by burning fossil fuels; there’s no known method of storing the energy to meet modern civilization’s 24/7 load. When fully present, the energy density of renewable energy sources, excluding hydro, which is pretty-well developed, is a fraction of fossil fuels. A good wind site produces no power for the equivalent of 270 days a year, since the windspeed is not within the linear design curve of the turbines. PV solar power output falls to 20% of nameplate at noon when a cloud passes over; CSP or concentrated solar power output falls to zero unless there is full, direct sunlight.

      Frac gas production is far lower than stated (guessed) reserves – locally, we see an 80% decline in production the first year, 30% the second – total producible gas from shale is about 10% of claims made to investors.

      The world was solar powered until 1750 (coal). Oil was commercially exploited in 1859. Life on solar/wind power never supported more than 1 billion people on the planet. The future will be solar powered again. Getting there is not going to involve T Boone’s huckstering his gas and wind interests, it’s going to involve living in 1850.

  12. Hans-Christian Holm says:

    I think the key problems are monoculture and it’s sister globalised specialisation. Both render societies highly vulnerable when conditions change. It applies very much to oil, but to other resources as well. The monocultural dependency on oil makes Liebig’s law apply when it otherwise didn’t have to. When everything depends on oil, everything collapses with oil. Globalisation creates highly specialised societies and amplifies the monocultural effect. Not only does everything depend on oil, but in addition, everything depends on oil in a very limited number of places.

    Without the monocultural dependency, we could switch energy sources when needed. Without the highly specialised societies created by globalisation, we could get energy from elsewhere when it for some reason becomes scarce in one place. (We are already getting energy from elsewhere when it becomes scarce in one place, but it is still restricted to very few places.)

    Without these two constraints, we would have two degrees of freedom. Instead, we are dependent on one energy source which is available only in a handful of places. That is close to zero degrees of freedom, and a recipe for collapse.

    • You are right that globalization and specialization have made a big difference in how we do things.

      A hundred years ago a lot of transportation was by horse, and not everything was electrified. Back then, the amount of oil we used per unit of GDP was low, and, as you say, there was a lot of diversity. But I expect people mostly used coal and animal power. A loss of oil production wouldn’t have made a huge difference back then.

    • marty schoffstall says:

      In economics this is called the law of comparative advantage (CA), it has captured the policies of the entire world under the label of “free trade”. While the focus of the original posting was oil/energy my fears for the entire world are wrapped around agricultural mono-culture based on my experiences in the 3rd world. (though i know energy and agriculture are very intertwined).

      CA has turned many countries agricultural lands historically used for (low energy) self sufficiency into (high energy input) “industrial export agriculture”, or even abandonment to some degree given exports of American and European excess grains. Returning to the old ways is almost impossible due to 15-30 years of loss of knowledge/tools/etc and expectations set by media/politicians.
      It is really ugly for my brothers & sisters in Swaziland.

      Add to this the centralization of seed issues under two companies, the use of a single variety of soy bean throughout north america (at least) and it makes one a believer in collapse, undoubtedly triggered by oil per Gail. I actually wonder if collapse is already here, say in Pakistan where running out of NG means you can’t cook, and running out of electricity means you can’t educate your children, while trading energy for food on a daily basis. And there are other countries there now.

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