Why fixing energy policy is so difficult

Everyone would like to fix the US energy policy, but doing so is almost impossible, in my view, primarily because we need to be planning for a much bigger change than most people can even imagine.

It seems to me that our international financial system is at this point, inching closer and closer to collapse. It needs growth to operate. Now that world oil supplies are virtually flat (and China and India and oil exporters are getting more of the oil), the financial system can’t get enough growth momentum. The US has applied various sleight of hand techniques to try to cover this problem (see my post What’s Behind US Budget Problems?), but at some time in the not too distant future, the techniques are going to stop working, and there is going to be a major financial crash, with debt defaults. This could happen when QE2 ends, or maybe QE3, QE4, or QE5. The timing may vary by country, with some countries holding out for a while longer.

The reason I point this out is because after such a crash, as far as I can see, everything is going to go downhill quickly. This is a graph of my view of one such scenario of oil supplies, if a country that imports all its oil undergoes such a collapse:

Figure 1. Type of drop in oil consumption that could occur, if a country gets shut out from buying oil because of debt problems.

The point is that the oil consumption goes down very quickly, not over a period of many years, because the decline in supply is determined by something quite different from what oil is in the ground–it is determined by ability to pay for the oil. A potential buyer can be cut off very quickly, if its credit is no good. We have gotten used to the idea of being able to keep running a tab, but at some point, this whole process is likely to come to a halt–something that can’t go on forever, won’t. Some international trade may continue, especially when a country has goods to trade for oil (rather than an IOU), but the level of free trade we have now can’t be expected to continue indefinitely.

The problem I see with a collapse scenario is that a plan that uses less oil and tries to make it go farther really isn’t helpful. Thus, a gas tax, or cap-and-trade, or fuel-efficient cars, or more fossil fuel extenders like wind and solar PV really aren’t helpful. Instead, we need to put our effort into figuring out how we would get along without fossil fuels and nuclear, rather than get along with less. Arguably, we may have some supply for a while, but if we do, we need to use it to help with the transition, not to expect such supply to continue forever. This is the big problem I have with energy policies and transition plans–they assume we are planning for a slow decline, when it is likely that we will not have such a decline.

In the case of an oil producer rather than an oil importer, perhaps the situation is better, but even here, there is a question of how much will continue to be produced, if there is major political upheaval. We know that the USSR broke up at the time of its collapse. There would seem to be a substantial chance of that happening elsewhere.

Everyone would like to add new and more complex systems to help–for example, more wind with upgraded transmission systems, smart grids, and electric cars. As nice as these might seem, the new systems become more and more complex, and more dependent on everything working together exactly correctly. As we lose ability to import spare parts, they will become very difficult to maintain, and will likely collapse within a few years. While they seem appealing, I don’t think they will add very much for very long.

Moving to a new system will require a lot of other changes:

1. A different financial system, that is not dependent on debt and growth.
2. More even distribution of incomes. With much less wealth, it won’t make sense for a few to have such a disproportionate share.
3. More even distribution of land. Without fossil fuels, it will not be possible to farm nearly as large plots. This also goes with more even distribution of wealth.

Changes such as these would be very difficult to make within our current structure. But without making such changes as well, it is hard to see that the new system would work.

In a post a while ago, I explained some of the things that seem to me to need to be done. I called the post, What President Obama Should Have Said Regarding Energy Policy. I don’t know that there is a real way that we can make major changes, without actually hitting a financial wall first. Perhaps a few people can work on such changes, and implement their own local versions of them.

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.
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70 Responses to Why fixing energy policy is so difficult

  1. Gail,
    It is a fact that conventional oil has peaked, that ecological degradation will continue and that a major financial world crisis is a matter of time.
    But even when all the above take place, and they would, I do not see how that would lead to a total collapse to the extent that , say the US, would consume zero oil as per your graph. The US does supply afterall almost half of its oil needs and could possibly supply more.

    • weaseldog says:

      In 2009, it looks like the USA produced about 28% of the oil it uses.

      18.69 million bbl/day

      5.361 million bbl/day

      You’re assuming that Americans can buy the oil produced in the USA if they have no money. The oil in the USA doesn’t belong to Americans. It belongs to international oil corporations.

      Another scenario is that under austerity measures, the US is required to export all of it’s oil to cover it’s debts.

      Things can change. The US could nationalize it’s oil industry. But Americans will be rallied by the media to fight this, as it would be advertised to be socialism.

      • I think you really have to compare consumption to total liquids production, not oil production–since it includes biofuels and propane and other things that we don’t consider oil. On that basis, the US produces close to half of what it consumes.

        We don’t have a calculation on an energy equivalent basis. That is probably somewhere in between. We produce a disproportionate share of the low-energy stuff. Some of what we take credit for is the expansion in volume that occurs when we refine other people’s oil in this country. If the imports go away, so does the refinery volume.

      • marty says:

        There are steps before out and out nationalization. For instance the Russian closing the exportation of wheat. One consequence was that it lowered the price of the wheat in Russia due to less bidders, it also discouraged farmers for planting as much wheat as the previous year…..

    • I intended my graph to be for a country that imports all of its oil. The US might do better.

      If there is a problem with paying employees (because of the collapsed financial system), or with obtaining replacement parts, I could see oil production could go down pretty quickly in this country too.

      The point is that we can’t count on our supply being equal to the slow decline in oil production. It could be quite a bit faster.

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  3. santaluciae says:

    As you are going to Spain soon take a good look around and remember that Spain imports all of its oil, gas and coal.
    And it is ruined, with 21.3% unemployment.
    So it is a perfect example of your graph.
    mazama has a good graph of Spain’s imports of oil, so if it drops way below the figure for 1985 and by so near a date as 2014 disaster and perhaps civil war is at hand.

    • I really made my graph, in preparation for my trip to Spain, as you say. I don’t know about civil war. When there is not enough to go around, fighting is more likely to be a problem.

    • So, Gail’s graph applies to nations that do not have appreciable endemic oil supplies, and so are reliant on imports for most of their needs.

      I got to thinking, okay which are these nations?

      On my (very rough) guessimetry, approximately 20 nations currently have a surfeit of supply over demand and so are net exporters, at least for the time being.

      Perhaps another 20 nations may be in a position to currently produce most of their demand from endemic oil sources.

      Okay, that’s 40 nations accounted for out of a total of 200 nations.

      If those rough sums are correct that leaves about 160 nations that are very reliant on imported oil supplies. Some of these may be lucky to possess strategic resources and so may be able to wangle an oil trade benefit even in a supply constraint situation. But that still leaves the majority of nations having a very bleak prognosis, including some big economies, like Spain and Japan.

      Here in Australia we are so fossil fuel rich that the prevailing sentiment is that we can hold out for a very long time, through fuel switching and so forth. But I wonder what happens when, say, 50 nations go through the floor, like Greece and Ireland and Portugal have done.

      Conversely, can the 40 or so lucky nations manage to maintain a closed loop viable economy whilst dozens of poor countries go into collapse? My limited economic expertise intuits that it is not possible. There must be a certain tipping point such that when 50 dominoes fall a chain reaction takes them all out. I may be wrong on that count but I do think we need to think systemically of a global system, precariously held together, rather than think about the opportunities and prognoses applying to any one individual nation.

  4. Ed Pell says:

    Back to the original topic. It is so hard to make good energy policy because it costs so much to build a new energy system. At a time when the US has little industrial base. True we do produce a majority of the worlds financial (debt) products but it is hard to translate that into steel and turbines. On a PPP basis the US is already smaller than China when it comes to industrial production. So I expect China will have an easier time of designing and implementing an energy policy. Likewise for Dubai.

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  6. Ed Pell says:

    Gail, yes the financial sector needs to be added. Weaseldog, I mean renewables like hydro power, trees for building material and firewood, and any good EROEI things like CSP and bad EROEI things like PV and wind turbines. I think it does include some soil renewal and pollution processing already.

  7. Martin Gugino says:

    The link, at the end of the article, to “What President Obama…” has an extra “//http” at the end. Easy enough to fix in the address bar if one notices it, but you might want to correct that.

  8. Ikonoclast says:

    Views on our future course seem to fall into the following categories;

    1. Endless Growth and Business as usual (Or “She’ll be right, mate.” in Aussie slang.)
    2. Limits exist but they are not near and we can adjust in time.
    3. Limits are near but we can adjust by reducing wasteful consumption.
    4. Limits are near (or here) and we will adjust albeit with great difficulty.
    5. Limits are here and a decline or crash is inevitable.

    I probably belong to group 5 but I do not see a global crash happening as precipitously as Gail appears to see it happening. Some poorly placed countries or regions may however collapse precipitously. I suspect that a long grinding decline of about 20 to 40 years will be the case. However, if conflict breaks out (which I admit is quite likely) then the global decline will be much more precipitous.

    If humanity reaches the year 2100 with about 1 to 2 billion people alive and living a passable existence in a world and climate not completely wrecked… then I think that is about the best outcome we could hope for.

    • Bicycle Dave says:

      Hi Ikonoclast,

      Your categories seem reasonable and I tend to agree with your conclusion. And, I can assure you that my agreement plus a $5 bill is guaranteed to get you a good cup of coffee at Starbucks. However, (there is always a “however” here 🙂 what is the evidence for a 20-40 year descent?

      Barring some catastrophic natural event (monster volcano), pandemic, WWIII, etc. what are the most likely scenarios to support this prediction?

      Gail makes the argument that instability of global, debt-based, fiat monetary systems could greatly escalate the unraveling of commerce and lead to depression era consequences – or worse. Others, like Greer, foresee the descent taking nearly a 100 years.

      The time-range for collapse that Gail suggests does not seem to allow for some level of ingenuity/inventiveness – at least in reaction to the first signs of imminent collapse. But, I’d be hard pressed to debate this point.

      I think authors like Greer (who see longer time frames) make flawed comparisons to previous breakdowns of civilizations – this is the first time humanity has been faced with the current scope of population and resource issues.

      So, if 10 years is too soon and 100 years is not likely – then, how do we support 20-40 years except by this rather weak process of elimination?

      It would be interesting to see a very comprehensive computer model that took into consideration all the known macro variables that could influence collapse scenarios – with the ability to tweak the values of the variables. I’m not suggesting a magical crystal ball, but just something to get into the ballpark. It seems like this would be more useful than a lot of the speculation that most of us like to engage in. Maybe someone has done this?

      • Jan Steinman says:

        It would be interesting to see a very comprehensive computer model that took into consideration all the known macro variables that could influence collapse scenarios – with the ability to tweak the values of the variables. I’m not suggesting a magical crystal ball, but just something to get into the ballpark. It seems like this would be more useful than a lot of the speculation that most of us like to engage in. Maybe someone has done this?

        Are you aware of the WORLD3 model, used in the Club of Rome report, “Limits to Growth?”

        Dana Meadows reprised the model in ~1992 in the follow-up book, “Beyond the Limits,” and came up with the same conclusions.

        They used to distribute the FORTRAN code freely. Don’t know the current status.

        They made multiple runs with different tweaks, but I think they mostly put a crash before 2030.

        • Ed Pell says:

          There is a free simulation program Vensim PLE that includes a copy of the World3 model as one of their examples. It works fine.

          If you look at the World3 model it turns out to be simple. There are only four output “industrial output”, “service output”, “food output”, “number of people”. If one wants to make a version with say three regions “developed” (US, EU, Japan), “developing” (India, China, Russia) and “The Rest”. You have to decide how these four output flow between the three regions. What equation to use to control them.

          Also missing is “renewable resources” which do exist and are used and would moderate the population decline for steady state at least a little.

          • One thing missing in the models is the health of the financial system. If you start having declines in output, and there is debt (which is not modeled), it seems like there will be increasing debt defaults, and ultimately the system will fail. Also, we now use debt for capital. Once there are financing problems, it seems like there will be serious difficulties getting capital for investing in anything.

        • weaseldog says:

          Ed, what renewables are you referring to? Are you referring to renewables that don’t rely on fossil fuel powered industrial civilization, or those that require it?

        • weaseldog says:

          I think that the financial reasons that Gail outlines, will be feeding back into the energy industry.

          Because our hunger for consumption will keep increasingly exponentially while our supplies dwindle exponentially renewables are going to see cascading failures.

          Trees aren’t as renewable as you might think. The Romans denuded the countryside for hundreds of miles, where old growth forests fill with towering oaks used to stand.

          Once the world population is down to 500 million, then I think things will start getting better.

        • Jan Steinman says:

          weaseldog wrote “Trees aren’t as renewable as you might think.”

          The difference is that trees can be renewable, unlike anything we dig or pump from the ground.

          I agree that it is a slippery slope. The Romans are but one example. Before them, the Greeks and Phoenicians decimated their forests to make war ships. Meanwhile, the British Isles were denuded, and sheep were introduced, which to this day is suppressing forest growth, which I’m sure they’ll regret. And we all know about Easter Island.

          Our rule-of-thumb is “one cord per acre per year” is a sustainable yield for most temperate forests.

      • marty says:

        While 1st world collapse might not be as easily seen possibly third world might. South Africa’s economic neighbors: swaziland, mozambique, namibia, botswana are having problems to the extent that they relied on cheap imported food, American charities, investments, and SA economic integration and props.

        According to the USDA predictions from December, the US would end up with 17 days of corn inventory in september assuming bumper crops of wheat and corn. Looking at the Texas and Oklahoma winter wheat crops (18% of the US) they are gone due to extreme drought, and from pennsylvania to the red river valley you have a three week delay so far in planting spring wheat, and a little less for soybeans and corn. No one around me has those crops in the ground, and with another week of rain forecast, i’m two weeks out from planting (minimally).

        I suspect starvation will grow dramatically in Swaziland this year, and potentially trigger a revolution, there are other places like this. Without starvation there have been statements about the ME revolutions having a food factor.

        Now consider Mexico, NAFTA killed their maize farmers, their cash flow is dieing from trailing off of their oil pumping, and they are running a drug insurgency there. I just advised for the closing of a facility that had been a major American investment for decades just south of Brownsville due to anarchy (marines in fire fights with local cartel irregular forces).

        Mexico is a near failed state (NA’s pakistan), more expensive food and fuel is not going to make it less so. How that affects Arizona, Texas, and New Mexico is a whole other discussion.

  9. Owen says:

    I don’t know what is wrong with the software here. Reply links seem to get shut off of threads.

    Nuclear winter was completely discredited just before Sagan died. He injected his political positions into scholarly evaluation of evidence. The data said that the entire combined US and Soviet inventories of nuclear weapons of the late 1980s would not be sufficient to elevate dust particles to the altitudes necessary for long durations aloft at a level of density (remember, as altitude increases the surface area of the spheroid shell geometrically becomes more and more enormous sterradian-wise) necessary to create the winter effects. He lived long enough for his peers to castigate him for that.

    And let me point out that the inventories in the 1980s were much larger than today. Far fewer now, and many of those are targetted as airburts, with no dust elevating potential.

    Wringing hands at the horror of it all is inevitable, but inaccurate data has no place in the evaluation.

    • marty says:

      owen, the climate models that they now use are very different then the ones, they used in the 80’s. You’ll also notice I said “cities” which is different than the targetting of the 80’s. A scenario in current usage is a pakistan/india conflagaration, they have sufficient nukes, and sufficient burnable materials in the cities to put the midwest below freezing for 2+ years.

      The key is the burnable materials of the cities.

      • Owen says:

        I will look into this. The operative parameters in the modeling that discredited nuclear winter was the requirement for dust at altitude. Ground burning ash settles. It isn’t in the air long enough to cool anything.

        I’m pretty sure the early 90s military studies of the smoke from the oil wells sat afire by Hussein confirmed the nuclear winter rebuttal studies. There was a mistaken application of English to the photos. “Dispersion”. The plumes “dispersed” with distance from the fire. That proved untrue or unlikely. The material settles.

        It’s a valid topic, though, but there just is no question at all that decades of horror filled literature has hugely corrupted dispassionate thought about nuclear weapons. The blast radii are only a few miles. A 50 kiloton device in Los Angeles does not kill the entire US population, even with prevailing westerlies. In fact, it’s popular to sensationalize cancer deaths from radiation, but it’s valid to evaluate or phrase all that as “a very few years of life expectancy lost” rather than “killed”.

        Case in point, Mr. Tsutomu Yamaguchi. He is the only man recognized as having survived both the Hiroshima and Nagasaki bombings. He lived in Nagasaki and was in Hiroshima on business when it got nuked. He was treated for wounds and returned home on a train just in time to get nuked there. He died in 2010 of stomach cancer at the age of 93.

        • marty says:

          i agreed that things were very overstated in the past, i remember the UDel paper that I read as a reasonable peer reviewed analysis. I think though that point source (even if a lot of them) scenario with the IRAQ wells does not equate to the square miles of fires with a super heated initial plume followed by the fire storm of consumption of all the materials and people in greater metro Bombay and all the other cities.

  10. Ed Pell says:

    Who will provide 24/7 security for the urban gardens so that folks who did not do the work do not harvest the produce?

    • Ed Pell says:

      You might want to watch the movie “The Ballad of Narayama” directed by Shôhei Imamura for one possible solution to this problem.

    • This has been one of my questions. It raises the question of whether it is really possible for a handful to “save” themselves, while others don’t have enough to eat. It would seem like the ones who will succeed are ones who eat food others reject (ground acorns, insects, etc.).

    • Jb says:

      People who have invested their energy in an urban garden will surely have incentive to protect it from deer and other unwelcome visitors. In my urban location, I can imagine several neighbors with adjacent yards taking down the chain link fences between them (shock!) and working to secure a common garden space. Another idea would be roof top gardens where access is easily controlled. Parks and media strips would be more challenging. Perhaps a guard or ‘garden watcher’ could be employed, payment by the bushel. Guerilla gardening is a concept that I think has merit as well.

  11. Jb says:

    “More even distribution of incomes”

    My guess is that the majority of us will have an ‘even distribution of income’ when companies who are dependent on cheap oil inputs start to vanish en-masse. That number is going to be close to zero.

    With regards to distribution of farm land, let’s hope we don’t see what’s happened in Africa where farmers were murdered or the land confiscated and given to people who lack the knowledge. I’d like to see urban parks and highway medians converted into plots for individual families.

    I see this happening quickly over a few years, like an avalanche. ‘Doing without,’ which was common during the Great Depression and WWII, is the default option for the vast majority of us.

    Thanks, Gail.

    • Ed Pell says:

      Farming without fossil fuel is hard hard work. Few will want it.

      • gus says:

        Then they’ll starve.

        Actually, it’s NOT that hard, if your goal is simply to feed your family. In fact, growing food by hand is fun, especially if there’s a bunch of you collaborating. If you plan well, you can do that on an acre or two, an area that is easily workable by hand tools in less time than most of us now spend at our jobs. It’s hard when you’re trying to produce a large surplus to sell and/or are trying to meet the ream of ridiculous regulations that now exist (ones targeted at huge firms, but unfairly applied to small ones).

        Jb noted, I’d like to see urban parks and highway medians converted into plots for individual families.
        Me, too, and I suspect that will happen by plan or by “accident” as things deteriorate. It’s already happening in Detroit, and San Francisco recently approved allowing agriculture in every zoning district. It’s amazing how much land is simply wasted right now growing monocultures of lawn grass. Likewise, I wouldn’t be surprised to see some side streets being ripped up to provide garden space in urban areas — we have FAR too much paved space now.

        • weaseldog says:

          Without fossil fuels, irrigation will be impossible in much of the currently productive land we have now. Water tables are being depleted.

          And in may parts of the country where water tables can be accessed by muscle power, fracking is making the water too polluted to use for irrigation.

          There’s a reason that agricultural civilizations congregated near river and lakes.

        • Jan Steinman says:

          weaseldog wrote: “Without fossil fuels, irrigation will be impossible in much of the currently productive land we have now.”

          Check out Gene Logsdon’s latest blog, Archeology, not agriculture, in which he describes ancient irrigation techniques.

          Still, your point is well taken. We have a lot of re-learning to do.

      • Jan Steinman says:

        I agree with Gus. And “wanting” to farm will have little to do with it when people can’t afford supermarket food any longer.

        Last year was one of the most difficult years of my life. We came within days of losing our farm — and most of our life savings. And yet, we managed to produce, in gross measure, enough food for ourselves, plus extra to sell — all while having enough extra time to deal with realtors, lawyers, and hours a day “wasted” on-line!

        You can start now, when you have the luxury of making mistakes, or you can start later, when a mistake might be your last meal. But I think almost everyone should do whatever they can to produce as much of their own food as they can.

      • Les D. says:

        If things get as bad as they look like they might, eating without farming may be a problem. Even fewer will want to go without eating.

  12. Ed Pell says:

    Debt is not an unsolvable issue. We can always repudiate all debt. The problem is we are used to living beyond our means. At least the government at all levels is used to living beyond its means. I myself have zero debt. For the federal government to live within its means it would have to cancel the military, federal pensions, medicare, and medicaid and repudiate the debt. If it cut ag, labor, doe, and some other departments it could afford some military. As I feel I do not benefit from any of these I will be happy to see the day the federal government lives within its means.

    • I think the problem is that our systems depend on debt. Banks would go out of business if other debts were canceled, so your bank account balance would be $0. The value of your pension fund would go to $0. Your homeowners and health policies insurance policies would disappear. There is a question as to whether companies would even be able to pay their employees in any reasonable way. Everything is interconnected.

  13. Ed Pell says:

    All animal population are stable over time. Yes there is some up and down variation over time but the average number is constant. This applies to all animals in a system with fixed finite resources. We, humans, have had a fun run the last 200 years but this is the century when we will return to normal. When population will become stable or decline. Who fails to successfully reproduce and who succeeds is called natural selection. It is evolution in action. From an natural selection point of view the Chinese and Indians are winning the evolutionary contest. The EU, Japan and US are loosing.

    As for the free market the Chinese and Indians work hard for little the Americans work little and expect much. The free market can be egalitarian those who work hard get some reward and those who work little get frozen out. The free market does not care about nationality or religion or politics.

    Where I see this going if the oil producers stop taking dollars for oil. The US will use its military to take the oil from Venezuela, Nigeria and Canada. The US will have to life within that supply. I have doubts that the US has the ability to take middle east oil. So all it has done in the middle east is to insure a free market in middle east oil. Which is agreeable to China and Russia and the EU. If the US military had to face active resistance from these three militaries I doubt the middle east wars would have an EROEI greater than one.

    As to who gets the reduced wealth in America I think it will be the same steep pyramid of distribution. How the poor, say bottom 30%, who have traditionally been keep passive with welfare will be dealt with I can not guess.

    • gus says:

      Not necessarily. Evolution isn’t just about numbers of offspring, it’s about how well they can adapt to changing circumstances. We face changes humanity has never seen before — at least, not since our Australopithecus & early Homo relatives went extinct. Some promise a lingering effect regardless of where on Earth you are — thousands of toxic chemicals already released, hundreds of nuclear & hazardous waste sites just waiting for the power grid to fail and a big storm to hit, large areas of fertile farmland paved over &/or rapidly desertifying and therefore hard to farm without modern technology, etc.
      The “free market” has never been truly egalitarian b/c it disproportionately rewards certain kinds of work (ones that promote further consumption), while penalizing the ones that have the least negative impact on society or Earth. Thus, it is highly unlikely to survive the oil collapse. As long as we avoid global nuclear war, Homo sapiens as a whole probably will, in much smaller numbers, probably with a selective benefit for those who rapidly relearn (or never forgot) the importance of sharing practical skills and resources on a very local level.
      In many respects, that tends to favor some of the poor — those who are smart, adaptable and, as Dmitri Orlov observed in Russia, willing to be semi-criminal under the radar screen. (The lazy, regardless of current social status or wealth, won’t live long, nor will those too tied to conventional ways of doing things.) At the “lower” levels of society, many of the barter-like arrangements we’ll need already exist — as the Clash once sang, “The truth is always known by guttersnipes.”

      • Jan Steinman says:

        those who are smart, adaptable and, as Dmitri Orlov observed in Russia, willing to be semi-criminal under the radar screen [tend to be favoured]

        Keep in mind that “semi-criminal” need not involve wronging others nor breaking moral or ethical dictates.

        One who distributes raw goat milk in Canada is engaging in criminal activity that is arguably a net societal benefit. The same could be said of building natural housing without a building permit, which would cost many times as much for non-conventional techniques. Or distributing zero-energy preserved fruit juice (hard cider) without an alcohol license.

        A lot of societal regulations make criminals of people who are practicing time-honoured cultural traditions. If it takes the end of civilization to do away with building inspectors, bring it on! 🙂

    • weaseldog says:

      For the wealthy, calling the shots in US foriegn policy, wouldn’t they be better off just moving to a place where oil can still be diverted for their own uses, and letting the US continue it’s slide?

      As the US becomes more impoverished, it will become fertile ground for military recruiting. The people in place that make money from this, might like to see the US become dirt poor, because this drives jingoism, and makes the citizenry more likely to sacrifice and work hard for crumbs, to keep our owners living in luxury.

      Look how well this strategy is working with the Tea Party. We have a growing population of Americans that want to end domestic spending. They want to end public education. They are doing this because the bankers that destroyed Argentina are running the same PR campaigns in the US that they ran in Argentina. Once they abolish SS, Medicare, Medicaid and loot the pensions, they’ll loot the 401ks and IRAs. They did it in Argentina to save the Stock Market. They’ll do it in the US for the same reason. And still they’ll back the Tea Party. They’ll even have the Tea Party preaches hate against the bankers, while teaching it’s members to support austerity policies designed to benefit the bankers.

      Just watch. US Foreign policy is not designed to benefit the USA. Right now, we’re in two wars and starting a third. How much money are you making on them? Unless you’re working the defense industry, the answer is likely that you’ve seen your wages stagnate. Yet, Muslim corporations in the ME are gatting fabulously wealthy on no bid contracts. We cover all of Halliburton’s costs, and Halliburton sells Iraq’s oil, tax free and puts it all into the ME Economy. That money finances the import of new child sex slaves from Thailand, and schools that preach an anti-American ideology. Muslims in the Middle East are making $billions / year, off our fight against global terrorism in Iraq, Afghanistan and Syria. for them, the wars are a business, that must be maintained and nurtured, for us it’s a sacrifice for false ideals.

  14. robert wilson says:

    Back in the 50’s Ayn Rand understood that energy was the ultimate resource and recognized potential limits. She ‘fixed’ the problem by having John Galt invent a static electricity motor – arguably a perpetual motion machine. The Galt motor has been compared to harnessing zero point energy.

    • gus says:

      Of course, such a device doesn’t actually exist, so that’s a moot point. Key parts of Rand’s philosophy — namely, her sociopathic attitude against community responsibility and altruism — would make solving the problems we face from peak oil, climate change, etc., FAR more challenging, if not impossible, because the selfishness she advocates is a big reason we’re IN this mess.
      XRM noted how that manifests: External environmental and human costs are pushed “under the carpet” and the needs of future generations are not taken into account. Worse yet, some people purposely PROMOTE neglecting those things because they make huge short-term profits off them &/or because their warped philosophy/theology isn’t capable of imagining a long future without things being as they are now. Thus a “static energy machine” is the ideal symbol of that ideology — a system in stasis that consumes itself.

  15. step back says:

    1. A different financial system, [one] that is not dependent on debt and growth.


    Every so often I run into something I don’t quite understand.

    High end “financing” would qualify as one of those things.

    My first inclination is to conclude that I must be dumb and there are experts/ pundits far wiser than I who claim to understand all this highfaluting finance talk and therefore, surely they must understand what they are talking about. I certainly don’t.

    On the other hand, I sometimes develop this nagging feeling that “they” don’t know what they are talking about. They are just chirping bird brains who gather together on a high tension electric wire and make parrot calls to each other and to us because they want to feel like they are fluffed feel-good feathers gathered within a welcoming flock of like minded bird brains.

    In so far as I can make sense of the thing, “finance” is about people making promises to people, even if the promises can never be fulfilled. “Debt” is just another word for making a promise (i.e., Trust me, I’ll pay you back with interest tomorrow).

    I can’t see how we can have a “different” finance system, one that does not include debt and the unfulfillable promises made by some people to others.

    • I’m not sure either. Perhaps coins that are traded and not really expandable over time–in fact decline in quantity, as the quantity of goods available declines?

      • Jan Steinman says:

        In “Life, Money, and Illusion,” Mike Nickerson has some good ideas about this.

        In essence, physical capital degrades and must be maintained. So why should “virtual” capital be any different, since (in theory, at least) money is but a symbol for an underlying resource?

        One such idea is a “net worth tax,” in which a percentage of one’s monetary net worth would be paid out each year. This keeps money circulating, and avoids hoarding.

        • Ed Pell says:

          Yes! I have always like the idea of a wealth tax. This will have to apply to corporations also like the Ford Foundation.

      • Jason S says:

        I came across this concept yesterday called “Bitcoin”.



        Of course, if their aren’t computers and cellphone towers, then I guess this won’t work. But a very interesting concept. I’ve read over a year ago that many African nations are doing this because they didn’t have any sort of infrastructure in place and the rapid expansion of cell phone use has allowed for bitcoin currency to take place. Just check your phone to see how much you have!

    • XRM says:

      I suppose it has something to do with our debt-based money system, fractional reserve banking, and creating money out of thin air which has no physical backing to anything in the real world. Infinite growth (about 3% per annum) is required in such a system to keep up with the compounding interest. No growth and the system eventually collapses. External environmental and human costs are pushed “under the carpet” and the needs of future generations are not taken into account.
      “Those who are benefiting the most from the present system deny the facts because to accept them would lead to a major change in their life styles – and they have the wealth and the power to resist such changes. Add to this the millions of people who have been led to believe that economic growth is necessary, and the inertia becomes almost impossible to overcome. Conventional economics has become the religion of the modern world, and to question economic growth has become heresy.”
      or try Chris Martenson’s ‘Crash Course’.

      • step back says:


        I agree with your point of view (PoV).

        “Money” is just one more way that faceless and unaccountable people make vague promises to other people even though there is nothing to back up the veracity of those promises.

        Example: You show up at your local grocery store with a wad full of “money”. Except the shelves are bare. You thought “money” guaranteed you wouldn’t starve. You were wrong. It didn’t guarantee anything. Who are you going to sue? There is nobody standing there to back up the supposed “value” of the wad full of “money” that is bulging in your wallet. It was an illusion all along.

    • Jan Steinman says:

      step back, I don’t think it is “debt,” per se, that is the problem. Rather, it’s “interest,” the notion that little bits of green paper get together in dark places and procreate.

      Until fairly recently, all three of the major Western religions forbade charging interest.

      • Ed Pell says:

        Judaism never forbade the charging of interest. It did have a forgiveness of debts every seven years. But then some lawyer realized that individuals can not enforce a debt contract over seven years but the courts can and then the modern world was off to the races.

        • Jan Steinman says:

          Thanks for the clarification, Ed.

          I do recall reading that somewhere, but can’t put my finger on it.

          It might have been in Life, Money, and Illusion, in which Mike Nickerson also talks about “jubilee years” when all debt was forgiven.

      • step back says:

        If you want good laughs, try to catch the following C-SPAN replay (Financial “Literacy”):


        At times I tend to be facetious when stating I don’t understand “high finances”. It’s true and simultaneously not true.

        My focus is on the primitive or most basic aspects of our financial systems. Examples: What is “wealth”? What is “money”? What is “debt”?

        I tend to heavily “discount” the pablum that my college economics professors fed me. For example: “Money” is just an easily liquifiable storage of value. Big big BS on that one. This kind of thinking makes statistics look like an ordinary lie as opposed to something beyond damn lies.

        “Money” is implied debt. Debt is an implied promise about future performances that may not come to be. The house of cards is built on a line that starts with “Trust me/us, I/we will do the following in the future …”.

        • step back says:

          Correction: I got the wrong link
          The Maria Bartiromo party is here, in Part 1:

          Some gems out of what “needs” to be taught to our children:
          (1) I have no idea what you’re talking about (but am too embarrassed to admit it)
          (2) 5:55 minutes in= We build “sustainable” markets
          (3) 9:18= We have created exponential increase in financial “products”
          (4) 13:22= No one makes more “money” than I do
          (5) 25:13= Take the kids to McDonalds … where all the “wealth” is created
          (6) …

    • Ed Pell says:

      Who assumes the risk for a loss is part of the system that has multiple possibilities. In European banking the borrower assumes all the risk and the lender none. That is if I borrow 90% of the price of a house and I put down 10% and latter I have to sell at a loss and loose $20,000 the loss is all mine and the bank is still owned its whole amount. In Muslim banking both parties assume risk. If there is a loss both parties loose. I loose 10% or in this case $2000 and the bank looses 90% in this case $18,000. This is as important a difference as the issue of interest.

  16. Jan Steinman says:

    This is especially cogent, given that China proposes to divest TWO TRILLION DOLLARS in the near future.

    “Warning: objects in mirror are closer than they appear.”

  17. Owen says:

    Comments about what is coming that invoke “nice” and “want” are strewn throughout all discussion. This is not pointed at the XRM guy or I would have hit reply and sub threaded it.

    No, this is, rather a cry for responsible thought. It does not matter what you want. It does not matter what you would like to see. Geology doesn’t care about any one’s preference.

    Responsible thought is that which evaluates probability and recommends courses of action in response. It does not recommend courses of action in response to preference. Geology doesn’t care about preference.

    When there isn’t enough oil to feed the number of people in existence, and one nation is already getting most of the oil which is **minimally** necessary to maintain that nation’s lifestyle and feed its people, You Will Not Get It To Reduce In Order To Improve Someone Else’s Lifestyle, specifically, China. This is a matter of probabilities, not preference. You may want rural America to sacrifice its 10 miles drives to the movie theater so that China can have 5% more people owning cars, but Geology and probabilities doesn’t care what you want.

    What’s going to happen is no such sacrifice is going to be made. If you could make the case with unequivocal truth that Chinese folks STARVE if the US doesn’t make those trips to the theater, then you have a chance. But if you’re going to try “poor Cambodians starve because America won’t stop driving to the movie theater” the response is going to be . . . why doesn’t China cut back to feed those starving Cambodians? And it will be a legitimate question.

    Never, ever, ever, ever confuse probabilities with preference. The shortest distance to oil sufficiency is the path that goes through the route labeled “Forced Depopulation”. That is the most likely response of America to China’s strategy for getting the oil (or rather, denying America the oil) by tying up supply in long term contracts.

    I think most likely everyone can agree on one thing: If Americans are starving and the Chinese are increasing their lifestyle, and the US retains strategic nuclear superiority, then America is not going to go quietly.

    • XRM says:

      This sounds live a view the uber wealthy would espouse. And of course they’ll send the starving, lower class Teenagers of America to fight the Resource Wars. Not many in the lower class are driving to theaters to plunk down an hourly wage to see a Hollywood flick.(movie.http://articles.latimes.com/2011/mar/30/business/la-fi-ct-cinemacon-20110330)

      • Owen says:

        No teenagers will be sent to fight depopulation wars. That’s the whole point of nuclear weapons. They have minimal salary expense for the officers in the silos with their hands on the keys.

        Look, people, 6.8 billion didn’t arrive on the planet because of capitalism and its supposed evils. They got here because food could be transported to them.

        That’s going away, FAST, and the 6.8 billion are going away, FAST. Orchestrating debt and asking Blythe Masters to reduce focus on credit default swaps isn’t going to move calories to mouths if there’s no gasoline.

        There has to be more oil, or there have to be fewer mouths. Poor mouths have the same minimum 2200 calories a day requirement as do rich mouths. Digressing into worship of communism . . . or capitalism . . . isn’t going to address the math.

        Math trumps utopia.

        • Jason S says:

          “Look, people, 6.8 billion didn’t arrive on the planet because of capitalism and its supposed evils. They got here because food could be transported to them.”

          Didn’t that food that got transported to them, get transported by a company somewhere who most likely made a profit off it?

          From my understanding, the “green revolution” is what brought the food to the table and allowed the population to explode. Corporations, converted to the production of military machines and weapons, during WWII found themselves with a lot of “product” and no more people to drop them on and looked into ways of using it in the public sector. Ammonium nitrate makes a great bomb, but it also works out pretty well as fertilizer.

          I believe it is silly to ignore the influence that corporations have/had on our current situation. To me, that would be like saying Hitler didn’t kill any jews. Well, Hitler might not have killed any jews personally, but it hardly represents the truth.

        • marty says:

          Sorry I don’t agree that someone is going to (rationally) solve this with nuclear weapons, because the people are in the cities, and it only takes a small number of burning cities (60 i believe) to trigger nuclear winter based on the mashup of the old 60’s studies with the current climate models. Nuclear winter represents a very large downtick on the population of everything from people to groundhogs. One man’s opinion.

          The transporting food angle is a good one, and i personally detest the full outcome of comparative advantage which has taught many people/countries to abandon local agriculture to make soap for the french and be paid in $’s. I’d like to believe that some set of countries could impose agricultural policy which would see a return to local (food) agriculture, before a collapse instead of during one (like the Cubans did). This would take some degree of abrogation of the WTO, but so what.

    • weaseldog says:

      The people that own our country and use it as their private mercenary force, don’t really care if you starve or not.

      While they sit in their lavish compound in some undisclosed location in another country, getting fat on Steak and Caviar, they may be aware that people in the state of Georgia are watching their children die from malnutrition. Will they tell their pet politicians in the USA, to nuke China to get the Chinese to cut production?

      Why should they? They like buying cheap Chinese stuff too. Why would they want to irradiate more of their food and spread nuclear winter. It’s tidier for them to let extra people in the USA die-off to manageable numbers. they don’t have to see it, or smell it. And the Americans that survive will be hardier and stronger workers.

      You have an odd idea that US policy is intended to help American citizens.

      • Ed Pell says:

        Yes exactly. And they do not want to nuke the factories they own in China. They are making good money off those factories.

  18. XRM says:

    “Theoretically, we all gain through global trade as China grows. But with
    limited resources, the faster they grow and the richer they get (and, particularly, the more meat rather than grain that they eat), the more commodity prices rise and the greater the squeeze on the poorer countries and the relatively poor in every country. It’s a gloomy topic. Suffi ce it to say that if we mean to avoid increased starvation and international instability, we will need global ingenuity and generosity on a scale hitherto unheard of.”
    —- Generosity on a scale hitherto unheard of. A rebalance in the consumption levels of the rich and poor within developed nations as well as between developed and underdeveloped nations is needed.

    • weaseldog says:

      I don’t see how we all gain as the Chinese continue to chase exponentially increasing consumption. They are pulling demand forward. When we start running low, we’ll all crash fast.

      There’s an old brain teaser that helps illustrate the problem.

      Say you have a pond with one lily pad on it.
      Every day the number of lily pads doubles.
      On the 100th day, it will be complete covered and the sunlight completely blocked out.
      On what day will it be half covered, with half of the sunlight shining through?

      If you answer correctly, then you’ll understand how quickly it goes from half light, to dark. Likewise, when demand keeps growing, and production is in decline, supply shortages appear quickly and with no warning. Without taking time to plot the relationship and plan, we’re blind to coming crisis. When it comes, there is little in the way of warning signs.

      Our economic system has been doing a fairly good job of rationing by price so far. When supply can’t meet demand, then prices rise rapidly and people and businesses are rationed out of the market by high prices. We’re rapidly approaching the day when shortages will make fuel impossible to buy in various regions, no matter how much you want to pay. Where these shortages will appear will seem mostly random. The market will try to adapt, by shifting resources, but it won’t be able to anticipate where the shortages will occur.

      The USA is big enough, that these shortages should become another boring news item over time. Folks will be driving a lot less and stockpiling fuel when they can.

  19. XRM says:

    Nice to see these views of ‘equitable wealth distribution’ being mentioned in a conversation of an oil scarce future. It would seem that there is no other way around such a discussion, unless you want to allow an apocalyptic vision of the future to continue to develop with mass starvation and the uber-wealthy living behind barbed wire compounds. Certainly it’s not a vision of the future I want. Of course such talk is immediately labeled ‘communist’ or ‘socialist’ by free market libertarian laissez-faire capitalism.

    • Oz says:

      Yowza! That’s a heckuva string of ideologies which don’t necessarily go together!

      I’m pro-libertarian (in the Bookchin sense) and also pro-free market, while being anti-capitalist, and I agree with most of what you said.

      But then, I also see the merits of non-State communism and non-State socialism. Not to mention anarchism and syndicalism.

      What you term “free market libertarian laissez-faire capitalism” is more properly called ‘corporatism’ or ‘fascism’ (i.e. the current politico-economic system in Amerika) – and has little or nothing to do with an actual free market (which simply says economic exchange should be voluntary, and not coerced or based on fraud), nor really with libertarianism or laissez-faire.

      The corporatists like to call themselves capitalists and libertarians and so forth, but that’s disingenuous. They’re fascists plain and simple.

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