Three Major Journals Publish Articles on Limited World Oil Supply

In the past month, three major peer-reviewed journals have published articles relating to limited world oil supply:

  1. In Science, Technology is Turning U. S. Oil Around But Not the World’s, by Richard A. Kerr;
  2. In Nature, Climate Policy: Oil’s Tipping Point has Passed, by James Murray and David King; and
  3. In Energy, Oil Supply Limits and the Continuing Financial Crisis, by Gail Tverberg.

The fact that these articles have been published is significant, because articles in the  mainstream press, such as Bloomberg’s recent article, Peak Oil Scare Fades as Shale Deepwater Wells Gush Crude, seem to suggest that our oil problems are past. While the US oil supply situation may be a little better, the world supply situation is still very bad, and oil prices are still very high around the world.

Furthermore, high oil prices tend to have a recessionary effect, and can lead to debt defaults. These issues are described in both the second and third articles above. Thus, there is a substantial chance that high oil prices are contributing to the debt default problem in Europe, and to forecast low world economic growth.

In this post, I briefly describe these articles.

In ScienceTechnology is Turning U. S. Oil Around But Not the World’s, by Richard A. Kerr

This article points out that even the optimistic estimates, such as BP’s recent Energy Outlook to 2030, see little growth in non-OPEC conventional oil production between now and 2030 (Figure 1).

Figure 1. BP oil forecast to 2030, from BP Energy Outlook to 2030

We are thus dependent on growth in OPEC crude oil and in OPEC natural gas liquids, neither of which is assured, given political uncertainties in the Middle East. While technology advances are making possible some new US oil production, this growth is needed to offset declines in existing fields around the world. There is a great temptation by those using new technology to make forecasts using an “overabundance of optimism.” History shows that US oil production has mostly fallen since 1970 (Figure 2).

Figure 2. History of US production of crude oil, in figure created by EIA (similar to, but not the same as, figure shown Science article).

In NatureClimate Policy: Oil’s Tipping Point has Passed, by James Murray and David King

According to the authors:

There is less fossil-fuel production available to us than many people believe. From 2005 onwards, conventional crude-oil production has not risen to match increasing demand. We argue that the oil market has tipped into a new state, similar to a phase transition in physics: production is now ‘inelastic’, unable to respond to rising demand, and this is leading to wild price swings. Other fossil-fuel resources don’t seem capable of making up the difference.

Such major spikes in fuel price can cause economic crises, and contributed to the one the world is recovering from now. The future economy is unlikely to be able to bear what oil prices have in store. Only by moving away from fossil fuels can we both ensure a more robust economic outlook and address the challenges of climate change. This will be a decades-long transformation that needs to start immediately.

The article talks about how high oil prices erode family budgets, and points out that it seems likely that it wasn’t just the ‘credit crunch’ that triggered the 2008 recession. The oil price crunch was also involved.

A call-out from the article summarizes a current problem:

The price of oil is likely to have been a contributor to the euro crisis in southern Europe.

In EnergyOil Supply Limits and the Continuing Financial Crisis, by Gail Tverberg

This is an article I wrote in early 2011, that wasn’t officially published until January 2012. The article can temporarily be downloaded free, as the fifth item down on this list of articles from the January issue.

In this article, I explain why one would expect high oil prices to cause economic disruptions of many types. If consumers are spending more on high-priced oil (and high-priced food, because both costs tend to rise together), they will cut back on discretionary  expenditures, such as going out to restaurants and taking vacations and buying new cars. Workers in affected industries will be laid off.

There will also be indirect impacts. People who have been laid off from work will tend to default on their loans, as will people who are living paycheck to paycheck and find that the cost of commuting has rising, and the cost of food has also risen. Holders of sub-prime mortgages will be disproportionately represented in the group of those with defaults, since they were among the least qualified loan applicants.

High oil prices can also be expect to affect housing prices. In part, this occurs because people who spend more on necessities (commuting and food) are less likely to want to buy a move-up home. As a result, there will be a cut-back in demand for homes, and thus in resale prices. Also, at the time that oil prices rose in the 2004-2006 period, the Federal Reserve raised interest rates in an attempt to try to bring oil prices back down. These higher interest rates also tended to reduce demand for move-up homes. I also show that the timing in the drop in US home values matches with what a person would expect, if it were high oil prices, and actions taken by the Federal Reserve in response to high oil prices, that were really behind the drop in home prices.

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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77 Responses to Three Major Journals Publish Articles on Limited World Oil Supply

  1. Pingback: Three Major Journals Publish Articles on Limited World Oil Supply | Our Finite World « Secularity

  2. Eric Doherty says:

    Nice summary! This kind of work is essential for making the necessary transition / system change; it provides the ‘why’ and ‘when’ for the how – things like the Transportation Transformation and System Change

  3. Lawrence Rupp says:

    “Do Kerr, Murray, or King have any history with the peak oil crowd, or can we take this as evidence that the message is getting through to a wider group of researchers and authors?”

    Kerr has been writing this kind of article on oil in SCIENCE for years. He usually gives a somewhat “balanced” view. This perhaps his most “Peakish” article.

  4. Owen says:

    Re: oil’s impact on the near term financial stresses.

    Greece has no domestic oil production of significance. Their burn rate (consumption) is 400K bpd at Brent pricing. 400K X 365 X $115 (Brent pricing) = $16.8 billion drained out of the country each year. This is down about 10% from 2007 pre global economic smash.

    Greek GDP $312 billion (2011 est). That’s **5.4% of GDP drained out of the country each year**.

    In contrast, US oil imports are 11.5 mbpd X 365 X $115 (Brent pricing) = $482 billion / year drained out. US GDP = $15,000 Billion. **3.2% of GDP drained out each year**.

    Examining Italy, the big kahuna of EU financial devastation. Their consumption is 1.3 mbpd (X 365 X $115) –> $5.5 billion/yr drained out . GDP $2,000 billion. **2.7%** (Eurostat is questioning the GDP measure)

  5. Angry West Coast Liberal says:

    Social Justice is the only way. Eat the rich! Grow our population more so there will be more poor!

  6. Andrew of the Bay Area says:

    Fear not, fellow folks! Today on BusinessInsider, Henry Blodget (you know, the guy who pumped stocks and almost went to jail for it in the late 1990s, early 2000s) told us all that anyone investing in Gold is stupid and instead, as Warren Buffett has done and said, we should put our money back into the stock market…your know, that thing being propped up by money created out of thin-air by the Central Banks (specifically the Fed). Oh, and if you invest in Gold you are also a misanthrope by nature (Thanks Joe Weisenthal).

    Don’t you love the media? They will certainly make sure that anything you see with your own two eyes that is obviously true is ridiculed and mocked. Of course, my Gold seems to be doing fairly well since I bought in the $100s. Fiat currency is death. Death of corrupt empires as we now are.

    • I will have to admit Business Insider isn’t really mainstream. But a person takes what comes along.

      • Andrew of the Bay Area says:

        Just to be clear, I never meant to discredit your writings that appear there or insult you in any way. Blodget just seems like an opportunist who has no interest in truth and Warren Buffett to me, a Midwesterner by birth, seems like a fraud and a hack. I am not convinced he has any clue what is going on and that most of his investment successes are from just investing conservatively in down times and lucking out with solid recoveries that raised asset prices.

        You, Gail, are a breathe of fresh air in your honest and lack of financial interest in your writings in general. I appreciate that people like you still exist and it gives me hope that we as a human race have a future outside of the political, financial and extreme selfishness that has evolved in this country. I think if you aren’t a bit of a misanthrope these days you aren’t paying attention.

  7. La Curee says:

    Hi Gail
    Perhaps TPTB are trying to cover themselves and retain the confidence of the plebs as we are approaching some sort of price and so demand destruction peak.
    Twice might be too much for even the self deluding public.
    We might already be there:
    An Essex oil refinery which collapsed into administration is only operating at 30% capacity amid continued concerns about job losses, it has been claimed.

    Watch out the watchers seem to active again, several of us have had problems in the last week or so and Harvey has been hacked again, they accessed his PC to get on to the blog, the ‘gift from Harvey’ don’t click on it obviously!

    I think I may even have had a visit from two improbably muscular average height swarthy types who I have never met before commenting on my love of money, they were in the queue for my bus (a high roller I am :=) ) when they came at me from opposing sides and had a fictional conversation over me that ended with the comment described and knocking one of their clenched fists together in front of my face.
    They didn’t board the bus…

    • There seem to be more articles and news stories about the high price of oil now. It is a problem, especially on the coasts.

      • La Curee says:

        Yes, I mostly communicate with ‘mericans online as I like the segment of the population that is open and well educated in the UK that is an oxymoron.
        A few things annoy me like your daft spelling and using the WTI price as though it is either the world standard or approximates to the cost of oil products in the USA.
        I imagine the greater costs on the coasts reflects the exposure to the world market rather than the captive Canadian exporters?
        The BBC even get in on the act occasionally from a psycho war standpoint WTI $100 perhaps TPTB use futures to manipulate the differential.
        TPTB certainly did the same when silver got close to the psychologically important $50

        • La Curee says:

          * ‘The BBC even get in on the act occasionally from a psycho war standpoint WTI less than $100 is easier to accept than Brent greater than $100 perhaps TPTB use futures to manipulate the differential.’
          WordPress doesn’t like greater than or less than signs! 🙂

        • A while back, I looked at the relationship between WTI and Brent, and also the relationship to gasoline prices. This is the post I wrote then: Pipeline changes to fix WTI/Brent spread are likely to add new problems. The cheaper refined products from WTI crude (as well as Canadian crude and other crude that followed the price of WTI) tended to stay more in the middle of the country.

          Prices on the coasts stayed higher, because their crude was from foreign sources, which tended to follow Brent prices. Now some of the East Coast refineries have closed, because they could not compete with the cheaper products using WTI crude as a base. This has further exacerbated the problem of higher prices on the East Coast.

  8. The part of the equation I have the most problems with in terms of Oil Pricing is at the Demand Destruction end, which never seems to be adequately modelled.

    Accessing Oil is part of a Credit Scheme which the Dollar plays the most major role in as World Reserve Currency. Steve on Economic Undertow has done some good modelling to show the “Hard Dollar” relationship between Crude and the Dollar. For the Collar as a Credit Instrument goes though, the problem is not so much in its Creation, which can be done virtually instantaneously and infinitely at the click of a mouse button, but rather in its Distribution which comes through various levels of the credit distribution system below the wholesalers of debt, the TBTF Banks/Primary Dealers.

    In a world where “Good Credit Risks” shrinks, the TBTF don’t distribute out the Dollars, and at least presently it appears contraction of Credit is proceeding along faster than contraction of supplies of cheap Oil.

    The highest priced Oil at low EROEI will get shut in first with credit contraction, but if credit contraction proceeds at a fast enough pace, then there actually is still quite a bit of still cheap oil out there. Put it this way, if the Greeks, Italians and Spaniards lose access to credit in the form of Dollars, they wil pretty much drop off the map in terms of Oil Consumption. Similarly, once the Chinese lose those markets to sell to, much of their Oil consumption also drops off the map.

    Obviously, there is a whole lot of Waste going on in the system right now which may be purged as the result of Demand Destruction. Simple idea is obviously Carpooling and taking half the cars off the road from the get go. That could be done without that much dislocation to the overall society, although the reduction in consumption there kills a lot of jobs in the aftermarket Auto industry. Assuming however you did purge a significant percentage of wastage, how long does remaining cheap Oil last here?

    For argument’s purposes, say you got a 50% decrease in Oil Consumption as a result of credit contraction? At this point, you probably could fulfill Global Oil requirements with just Legacy Oil fields still producing Oil at $20/bl or so. Yu could then have enough Cheap Gasd to keep running a shrunken form of the same economy a while longer.

    The problem of course is that shrinking the economy in this way puts more people out of work, reducing credit avbailability and depressing aset prices still further in a deflationary spiral. That might be balanced out though therough Goobermint Intervention with the creation of Jobs in various sectors involved in building a more sustainable economy based on renewable resources.

    As I see it right now, Demand Destruction leads Oil Resource Depletion. Collapsing Oil based economies are going to put a negative price pressure on Oil production, resultant in an overall shrinkage, but not an immediate collapse of this type of economy. The key in keeping the system running at reduced levels is in making enough Credit avbailable that still some Oil can be moved through the economy. The other key is in maintaining enough FAITH in the Credit system to do that, which rapidly is disappearing here so does not seem too likely to last more than another couple of years, but ya never know. Its already lasted a good 4 years longer than I thought it would initially. Faith dies hard when it comes to Money everyone depends on.


    • Robin Datta says:

      How easily demand is destroyed or rebounds depends on the elasticity of demand. A demand for movie tickets can go down and up relatively easily compared to food. The demand for food does not really go down until the “consumers” die of starvation. Then it may take a generation to rebound. Curtailing driving habits or business activities can bring down gasoline demand in a flexible manner, but shuttering a business or trading in for a smaller car may bring down demand in a manner that does not allow for a prompt rebound. The deeper and longer the demand destruction, the less and slower the rebound. 

      • That is a good point.

        • Jan Steinman says:

          “The demand for food does not really go down until the “consumers” die of starvation.”

          I don’t really agree with this. There is a lot of hidden “fat” in the system that can be cut, and it can be vastly more oil-efficient. I think the food situation is closer to the driving situation you cite.

          It’s not a binary situation, in which one only “eats petroleum” or dies of starvation. When petro-food becomes too expensive, more people will turn to gardens and local farmers.

          We have been taking ourselves out of the industrial food system for several years. We now produce more than we consume. Granted, not everyone can be in this situation, but most office workers have seen the basket of zucchinis in the lunch room with the “FREE” sign on them. There is a lot of under-utilized local food production capacity out there.

          Life will become more local in general. Along with driving less, demand destruction will occur as people eat closer to home, rather than enjoying 1,500-mile salads, as they do today.

          • Robin Datta says:

            There is a lot of hidden “fat” in the system that can be cut, and it can be vastly more oil-efficient.

            That type of demand is elastic demand. 

      • In countries where people live on $2/day, food demand is inelastic. In a country where the average person spends $50/week on premium foods, the demand is VERY elastic. You can drop from Steak to Chicken to Rice and Beans. You can start to supplement your diet with off the grid foodstuffs like fishing.

        Oil demand is very elastic in the industrialized countries, just the collapse of the economy based on it loses a lot of jobs. You have to intentionally replace one type of economy with another. Only Da Goobermint can do that.


        • Jan Steinman says:

          “In countries where people live on $2/day, food demand is inelastic.”

          I think this is based on a North American bias.

          I’d invite you check out the film, Schooling the World, The White Man’s Last Burden, in which the film makers describe how self-sustaining third-world people have been “educated” into the cities and off their subsistence farms.

          Granted, fossil sunlight has allowed human biomass to expand into overshoot in all countries, I still think that those in the third world may have an easier time of it, because they are not as far from the land as we in the west are. Going from $2 a day for food to $0 a day for food might be easier for many in the third world to accomplish than going from $20/day to $4/day will be for most of us in industrialized nations.

          We are a hundred years removed from $0/day living, versus the single generation that divides most third-worlders from the land. I can’t put my fingers on a reference, but I recall a study in which 90% of Us school children could come up with no better answer than “the supermarket” when asked, “Where does food come from?” They have a lot more learning to do than the third-worlder whose parents were subsistence farmers.

          • I’m not arguing that people who live close to subsistence lives might be able to return to this type of life quicker. They probably can, assuming they are not living in Calcutta and actually have land they could return to.

            The argument is about the easticity of food demand, which is much larger in Industrialized countries where there is so much waste. Anybody can take their food budget down by 50% from $50/week to $25/week and not starve. You can’t take your food budget down from $2 to $1 and not starve unless you can replace it with off the grid food production.


    • I think part of the issue is that “waste” in the system equates to someone’s job. For example, if I carpool, I drive may car less, and have less need for a new battery, or car tires, or a new car. This leads to fewer jobs.

      I don’t think that governments really will have the possibility of adding more jobs, because of the problem of more layoffs adversely affecting their finances (less taxes, more need for stimulus, more need for unemployment related benefits).

      I don’t think it is really possible to keep enough credit going in the system. If a company sees no need for expansion, it will not borrow, and instead will pay down existing debt. Governments can try to keep borrowing, but they are already hitting a wall. The wall for those that have not yet hit it is not too far away.

      • As long as Da Goobermint loans money to itself it can create credit indefinitely. Who really ever had the trillions already loaned out here? It’s just entries in a ledger. Da Goobermint can also wipe out and repudiate odious debt with the stroke of a pen. The real issue here is those in control of the monetary system won’t let them do that. Those folks aren’t working at Da Fed, they work at the BIS.


        • But other countries don’t need to accept our money. Or the value of the dollar could drop.

          • They do so long as they are staring down the barrel of a very big gun.

            Also, there isn’t a readily available substitute that is any better, so when you say the dollar will drop in value, drop in respect to what? To Gold? Since gold isn’t a frequently used commodity, it doesn’t really matter what that trades at. Its the dollar’s value relative to other currencies, and they all blow chunks.

            The dollar is pegged by its proxy status for Oil, and by the fact militarily speaking the MIC owns the Saudis. It only loses relative value when the Saudis won’t take it, and that won’t happen for some time yet. Like after the Chinese sink the whole 7th Fleet with a bunch of cheap missiles built by suicidal workers at Foxconn.


        • Robin Datta says:

          Every dollar manufactured by the uS government is a claim to resources or products, eithernow or in the future (debt). With both the stocks of resources and products shrinking, more dollars chasing the same stocks will mean that each dollar will fetch fewer resources and products, gun or no gun.

          • REVERSE ENGINEER says:

            Only if the dollars get distributed. Dollars sitting in reserves aren’t chasing goods and services. They’re there to keep liquidity as deflating assets are rendered illiquid. It’s an accounting trick but does not drop more dollars into the real economy. Some of it goes into speculation, but eventually burns up in speculative losses.


    • Bicycle Dave says:

      Hi RE, Robin, Jan, Gail,

      I think this thread brings forth some useful possibilities to consider. As most of you know, I have difficulty accepting the proposition that an imminent lethal collapse is a foregone conclusion. RE has also suggested that we are actually looking at a variety of potential scenarios and the extent of their probabilities of realization. For my part, the most valuable aspect of this forum is the exploration of these potential scenarios/probabilities/timelines and the clues that lend credence to the one that is most likely to be unfolding. I doubt we have many followers here who are still hoping for some BAU miracle for decades to come – they are too busy watching the Exxon commercials on TV. But, I think there are some of us here who see many shades-of-grey in the crystal ball.

      So, this thread brings forth a couple of interesting thoughts: RE highlights the effect of the PIIGS losing oil purchasing credit/power and the ripple effect involving Chinese exports – all conspiring to reduce oil demand/price but with a negative effect on employment factors and then the ensuing negative feedback loops. This seems to be a modeling exercise that Gail could expound upon. The idea that lower oil price is an indicator of collapse is completely alien to the conventional economic theory that rising prices in a “free market” will ensure adequate supply and foster new technology to reduce production costs – and then we will achieve some kind of happy medium for BAU to hum along – at least for us “preeminent” western folks who “deserve” the lion’s share of world resources. Most conventional economists would see falling oil prices as a harbinger of an improving economy and proof that free markets and technology were doing their job.

      Robin and Jan bring up the food issue and Jan says:

      When petro-food becomes too expensive, more people will turn to gardens and local farmers.

      What bothers me about this thought is the fact that a majority of our 7B population lives in cities and many, many of those cities are in metropolitan areas of 10 to 20 million people living in vertical buildings (dreadful looking things) that have scant potential for any kind of gardening. Yes, I’ve seen all the slick MSM stories about growing food on balconies and abandoned warehouses – but, I’ve yet to see an honest mathematical analysis of how this (along with nearby country side) could actually sustain these cities.

      My overriding concern in trying to understand the potential scenarios is the synergistic effect of FF depletion, GW, mineral depletion, soil erosion, species extinction, ocean acidification, deforestation, etc. How does the footprint of each human impact these even in a minimal consumption model? What is the actual carrying capacity of planet earth assuming intelligent application of our acquired scientific knowledge and a rational lifestyle (sans cars)? Perhaps the answers to these questions are irrelevant given the state of our “overshoot” – but, perhaps future generations would find them useful. As the regulars here know, I think that collective mankind is intellectually crippled by cultural memes that blind us from employing our inherent brainpower to deal with our predicament – but, “hope springs eternal …..” or something like that.

      BTW, RE seems to be very well read and has done a lot of research into the condition of humanity – perhaps in time we can even teach him how to spell “Government” (just kidding).

      • Jan Steinman says:

        “a majority of our 7B population lives in cities… that have scant potential for any kind of gardening.”

        There are examples of how this could work. Havana, Cuba, supplies 50% of its own food, for example.

        Cuba is an example of post-peak life that we ignore to our peril. What seems to have worked there after the fall of the Soviet Union is extreme egalitarianism. Everyone lost weight as they transitioned from petro-agriculture to organic agriculture. Women voluntarily stopped having children during this ~5 year “special period.” Ditch-diggers and doctors, janitors and business executives — they all felt the pain of energy reduction the same.

        Whether any so-called “industrial nation” could practice such egalitarianism is left for the reader to ponder. But I think this is really what the “occupy” movement is all about — even if they don’t realize it yet. If the 1% continue to cling to power and wealth as formerly middle-class people begin to die of starvation, we’ll see violence on the scale of the French Revolution.

        The only thing that gives me some hope comes from my formal studies in ecology. In environments of high trophic availability, competition reigns, but in environments with a scarcity of energy, cooperation dominates. How far does it have to decline before people “get it” and start cooperating?

      • Unlikely you ever get me to spell Goobermint without the Gonzo 😉

        Anyhow, I believe that despite my unconventional writing style, most people can grasp the underlying analysis and the reading I have done to draw out the picture. I’m IRL a very well educated guy in the conventional sense of the word, Ivy league education and all that nonsense. Since the Light Bulb went off for me in my head with the failure of Bear Stearns, I’ve spent virtually every day reading and analyzing the problems as they manifest themselves. So at this point I have a pretty thorough knoweldge base to work from. Its a work in progress though, as it is for all of us. Nobody is really an “expert” in this stuff, we’re all just making our best guesses.

        “Collapse Theory” wasn’t ever a subject I could have majored in while I was at University. I’ve had to bone up on it since finding information wherever I can. Gail’s blog is another very good source for me. Great crew of commenters here also.


      • “My overriding concern in trying to understand the potential scenarios is the synergistic effect of FF depletion, GW, mineral depletion, soil erosion, species extinction, ocean acidification, deforestation, etc. How does the footprint of each human impact these even in a minimal consumption model?”]-Bicycle Dave

        So many variables are introduced here that you cannot possibly make any accurate predictions, which of course is what anyone looking for some HOPE in the situation HOPES to do!

        You have to do a reduction to the most probable variants you can make some estimation on first here The climactic problems tend overall to be longer term, as do most of the mineral depletion issues. The Monetary issues are the near term problem, with their concomittant economic and political dislocations. If you cannot resolve those problems, long term mineral depletion questions are irrelevant.

        The very FI’RST thing that must be resolved is debt overhang of the industrial paradigm. Until you resolve that problem, all the rest of them are irrelevant. Debt and a disfunctional monetary system can in and of themselves cause such widespread havoc that all the rest of the considerations are moot points. Debt by itself can force Global Thermonuclear War in some scenarios, regardless of actual extant resources. If we cannot solve the Debt problem, we most certainly cannot solve the climate change problems.

        Frankly, long term, it may not be possible to solve the climate issues anyhow. I personally do not think they are anthropogenic. They appear to me to be part of a much longer cycle the Earth is subject to. If that cycle has reached its end point, an ELE is inevitable no matter what is done here.

        Meanwhile though, you gotta fight the fire that is burning here first. Its the Debt problem and the grand failure of a monetary system in place since at least the time of the Medici. If you can’t solve that problem, your screwed no matter what happens elsewise.


        • Robin Datta says:

          In emergent systems, the behaviour of the system is often extremely difficult to model, because of the plethora of interactions that generate the system. This is seen in biology, in ecosystems (the “economy” being one of them), and is magnified by many orders of magnitude by the convergence of multiple crises such as population overshoot, resource depletion, climate change – you name it.

          The sum of human knowledge can be modelled as the volume of a sphere: the region where we can be aware of our ignorance is the surface area of the sphere. With knowledge increasing by the third power, the appreciation of our ignorance increases by only the second power, resulting in the impression that the unknown is decreasing compared to the known.

          Top-down hieracchies are characteristic of organisational systems which can often be managed well with extensive (=adequate) knowledge of the system.

          In emergent systems, even extensive knowledge may be inadequate, and the same management strategies often run into unexpected consequences.

          Many of these points are brought out in the EconTalk podcast Tales on Antifragility where the host Russ Roberts interviews Nassim Nicholas Taleb on his forthcoming book of that title.

        • You have probably read some of my early posts related to the debt problem and the 2008 problems:

          Peak Oil and the Financial Market: A Forecast for 2008

          Delusions of Finance – Where we are Headed

      • I think that there is a real possibility that low oil prices could reduce world oil production. I also think that a breakdown in the international trade system is possible, if too many things go wrong. We are so far off in the realm of the unknown, that perhaps what a person needs to develop is possible “scenarios,” rather than a model based on known facts.

        There are so many unknowns, it is hard to know where to start. Financial problems are likely to come very soon. A lot of the future depends on how those are resolved.

        I will have to think about your idea.

  9. Bill Simpson says:

    Only if Iraq can achieve their stated goal of producing as much oil as Saudi Arabia, can the peak be delayed beyond the end of this decade. Horizontal drilling will also delay the decline for a few years beyond what would have occurred, had that technology not been invented. It is important to remember that the more small oil fields are found and efficiently depleted using advanced methods now, the faster the oil supply will decline in the future. Once all the little oil fields are found, drilled, and water flooded, there won’t be much oil left on the planet. That will give us less time to adjust to fuel shortages.
    I still think that the economic collapse will occur before the physical oil shortage becomes life threatening. It will be interesting to see if heavy oil and oil shale can be developed at a price that doesn’t wreck the economy. The fastest possible conversion to electric hybrids, pure electrics, and natural gas powered vehicles should begin immediately, so as to conserve petroleum as much as possible for uses for which there is no substitute, like aviation.

    • You are right about small oil fields being depleted faster. The other issue I hadn’t thought about until I read about Bakken (which is small in many respects) is that it is hard to get enough economies of scale to bother building the infrastructure that we have traditionally had–both oil and gas pipelines, to carry oil and gas away, and refineries to process the oil. No one wants to build a refinery nearby if the filed will be depleted in 10 or 15 years; it is not clear that they want to build natural gas gathering lines where individual wells are small. (Much of Bakken natural gas is “flared”.) It is even difficult to get enough oil pipelines built to the Bakken. Who wants to build capacity that may not be used in 10 or 15 years?

  10. Ikonoclast says:

    This story has a point so please stay with me. Recently I saw a particular youtube video of the Japanese tsunami which I had not seen before. What was remarkable about it was the way the tsunami flood (progressing up a large river or inlet) just rose and rose implacably for something like 10 minutes, all the while pouring more and more destructive waters inland. It probably rose inexorably to 15 to 25 meters at least, over a timespan of 8 to 10 minutes, judging by the way it rose over the inlet sea walls.

    Initially, in describing this to someone, I said it wasn’t a wave just a rising flood. Then I thought about it and corrected myself from my basic knoweledge of physics. I said actually it was still a wave, but the wave was on such a big scale (say 20 meters from normal river level to peak and with a wavelength of probably several kilometers) that I could not perceive it as a wave.

    This brings up the more general point (using waves as an example) that with phenomena that are too small or too large to observe (like quantum waves which are too small and we don’t have the right sensory equipment) we don’t see what’s really there. The same point point holds true with phenomena that are too big to observe at least from our current vantage point. We don’t see what’s really there. For example, standing on the earth we cannot observe that it is a large, slightly oblate sphere. It is too large and we are too close ot it.

    I think this applies to the beginning of the collapse (which after all will progress through time and space on earth as a complex wave phenomenon.) We are standing at the beginning of the collapse but we are too close to it and it is too large for us to either (a) perceive it at all (still the case for most people) (b) to perceive it accurately even if we are aware of it. Only by the use of special tools and techniques can we begin to percieve the size of this wave of destruction and its particular power.

    I think the wave has begun. It can be visualized in topographical terms. One way to get an idea of how this “wave” event might propogate around the world might be this. Make a demographic map of the world which indicates by colours within contours how many calories the current regional population survives on, on average. Each contour line would be a calorie count. Create a calculator which relates the world food price index to regional average incomes and calculates how many calories can be be purchased per person. Assume that a maximum of 50% (or some other percentage found to be empirically correct) of income can be spent on food by the poorest people.

    Take projections (and possibilites) for the direction of the world food price index, feed these into the calculator, then feed these results into the calorie contour map. You will be able to visually depict the rising “flood” of starvation as it inundates the world. You will be able to predict the turmoil (riots, civil wars, wars etc.) that will “foam ahead” (as it were) of the flood front. By claibrating the model with real world riots, civil wars and war clusters you will be able to assign probabilities for the next regions to be engulfed by such disturbances.

    Eventually you will be able to develop a kind of “wave propagation” model of how the collapse will overtake earth. Just as we do climate modelling, we could do collapse modelling.

    • Although it might be cool to watch all the colors change or bubbles expand on an interactive, the problem isn’t all that complex in terms of picking out the falling dominoes. Like climate models or a model of a thermonuclear explosion, if you can’t stop the progress, it doesn’t do you much good to know “everything in a 2 mile radius will be Vaporized. Everything in a 30 mile radius will be levelled by the Blast Wave…” yadda yadda.


    • I am afraid you are probably right–it would be possible to model something like that.

      I don’t think we know, though, quite how things would work out (which is probably for the best). A person would probably have to model several different alternatives.

      One possibility is that it would be people with very low incomes around the world that would be affected. Another possibility is that governments will not be able to keep up food stamp and unemployment insurance programs, so that people who now have adequate incomes when these are included would drop down another step.

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