High-Priced Fuel Syndrome

Governments and economists around the world have not figured out that what the world economy is suffering from, to varying degrees, is “high-priced fuel syndrome“.

High-priced fuel syndrome has a number of symptoms:

  • Slow economic growth, or contraction
  • People in discretionary industries laid off from work
  • High unemployment rates
  • Debt defaults (or huge government intervention to prevent debt defaults)
  • Governments in increasingly poor financial condition
  • Declining home and business property values
  • Rising food prices
  • Lower tolerance for immigrants
  • Huge difficulty in funding retirement programs, programs for disabled, and regular pension plans
  • Rising international tensions related to energy supply

The countries with the most problem with high-priced fuel syndrome are the industrialized countries that are big importers of oil. This is the case because oil has been a particularly high-priced fuel in the past few years. Importing high-priced oil adds challenges of its own, since funds used for imported oil flow out of the country.

Figure 1. Historical inflation adjusted oil price per barrel, (Brent equivalent in 2011$), based on amounts shown in BP’s 2012 Statistical Review of World Energy.

While oil is the biggest culprit in high-priced fuel syndrome, high-priced fuels of other sorts can play a role as well. Natural gas is recently high-priced in Europe and Japan, but not the USA. The higher natural gas price contributes to a higher average energy cost level for these countries.  High-priced renewables, such as off-shore wind and solar photovoltaic, can be expected to act in a similar fashion, because they add to the price challenge customers face.

At this point, Europe is hardest-hit by high-priced fuel syndrome. In part this is because Europe is a big importer of both oil and gas,  and both are high-priced. European countries have also encouraged the use of high-priced renewables, adding to their difficulties.

While many people have laughed at the issue of the world “running out of oil” (or natural gas, or some other substitute fuel), it seems to me that they have basically missed the point. There is always lots of fuel in the ground, or available through devices we create that produce “renewable” fuel. The major issue is that the fuel becomes too expensive for the economy to afford.

The United States, Europe, and Japan were industrialized back when fuels were cheap, in the pre-1972 era (Figure 1, above). The cost structure of government welfare programs (such as Social Security, Medicare, unemployment) also assume that the economy will continue as it did with low-priced fuels. Substituting ever more-expensive fuels can be expected to push a country toward economic contraction, reduction in programs that the economy can no longer afford, and the symptoms listed above.

Why We are Encountering Rising Fuel Prices

When companies begin extracting oil (or natural gas, or coal), they start with the easiest, cheapest-to-extract first. In Figure 2, oil (or natural gas or coal) extraction starts at the top of the triangle, and gradually works down the triangle.

Figure 2. Author’s illustration of impacts of declining resource quality.

As we require more and more fuel, we gradually seek out less-desirable sources of fuels. These fuels tend to be slower to extract, and are more expensive for what we get. They are often more polluting as well.

Oil is the fuel that we recently have had a problem with easy-to-extract supply running low. We had a somewhat similar problem in the mid 1970s and early 1980s. At that point there was still plenty of cheap oil left in areas where we had not yet drilled (Alaska, North Sea and Mexico, for example), so the problem was temporary, lasting only until we could drill more oil.

This time, the problem seems to be permanent. The chief executives of oil companies Total and Shell have been quoted as saying, “The days of so-called ‘easy oil’ are over, making it harder to meet demand without complicated and expensive projects.”(Voss, 2007). Examples of such expensive-to-extract oil include deep-water oil and tight oil that must be “fracked”. The fact that the cheap oil is mostly gone is the major reason why oil prices are higher than they were five or ten years ago. If oil prices had not risen, it is likely that the amount of oil extracted each year would be declining.

There are alternative fuels such as ethanol and biodiesel, but they also tend to be expensive.

Natural gas and coal aren’t immediate substitutes for oil. For example, they won’t act as fuels in most of today’s cars, trucks and airplanes. While there are long-term possibilities for substitution, the high-priced fuel syndrome is today’s problem, not a future problem.

Rising Fuel Costs Cause the Economy to Contract

There are a number of ways rising fuel costs can cause the economy to contract. The problem is that consumers’ incomes don’t rise, just because oil prices rise. If consumers are required to pay more for a necessity, they will cut back on discretionary goods and services. A few examples:

Food prices. If oil prices rise, the price of food tends to rise as well, because oil is used in many ways in producing food: cultivation of fields, planting fields, chemical sprays (herbicides, pesticides), transporting soil amendments, harvesting fields, and transporting food to market.

Figure 3. Comparison of Food and Oil Prices. Food Prices indices are as published by the Food and Agriculture Organization (FAO) of the United Nations, available at http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/
Oil prices are monthly average Brent Oil spot prices, as published by the US Energy Information Administration. http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=rbrte&f=m

Low-income customers tend to be disproportionately affected by rising food prices. They especially tend to cut back on discretionary spending, such as buying a car or going out to a restaurant, in order to be able to afford enough food. As a result, workers in discretionary industries are laid off.

Commuting cost. If oil cost rises, the price of auto travel rises. Some auto travel, particularly commuting, is a necessity. Consumers, particularly lower-income consumers, tend to cut back on discretionary spending, such as vacation trips, to afford essential trips.

Businesses. Businesses are affected in multiple ways by rising oil prices. First, businesses in discretionary industries find that their “unit-sales” are down, because customers are spending more on food and commuting, as a result, need to cut back elsewhere. Lower unit-sales are likely to lead to lay-offs.

In many instances, businesses also use oil directly in the products they sell. For example, airlines use jet fuel. If oil prices rise, they have they either face lower profits, or need to raise prices to recoup their higher costs. This type of price increase further stresses customers’ budgets.

Electricity. While the current US problem is oil prices, rising electricity prices would be expected to have a similar effect. Every business today uses electricity in various ways–electric lights, running computers, running elevators, operating tools of various sorts. If electricity costs rise because of higher natural gas prices or because of greater renewable surcharges, it will raise the cost of the product produced.

Businesses again have the choice of raising the price to consumers, or facing declining profits. If they raise prices, they will be less competitive with suppliers from other countries, who may not be facing rising electricity costs, if their source of electricity (perhaps coal or nuclear) is not rising in price as fast.

If electricity prices rise, consumers’ budgets will be stressed in a similar way to the way that they are stressed by rising oil prices. This, too, can be expected to lead to a cutback in discretionary expenditures.

Follow-on effects. Laid-off workers may move in with relatives and cut back on driving to save on costs. This helps reduce demand for both homes and automobiles. With less demand for homes, housing prices may decline, especially in parts of the country with significant layoffs and plentiful housing supply.

Laid-off workers may default on loans, creating financial distress for banks. Even people who still have jobs may find the hours they work reduced, so that their take-home pay is lower. They too may cut back on discretionary expenditures.

Impact on Governments

Governments suffering from high-priced energy syndrome can expect a number of negative impacts:

  1. Laid-off workers expect to collect unemployment benefits. If there are other kinds of benefits that they might collect under some other program (disability, retirement, low-income assistance), they will want them as well.
  2. If citizens are working fewer hours or laid off, the amount of taxes they pay is lower.
  3. Banks and other industries are likely to need bailing out, as borrowers default on loans.
  4. The government will be faced with direct increases in costs, because the government uses oil to fuel its autos and jets.
  5. The government will face increasing costs on products it buys that use oil, such as asphalt for highway projects.
  6. Local governments may face reduced tax revenue because of declining home and business property values.

Figure 4 below shows US Federal Government Income and Outlays, in recent years:

Figure 4. US Government Income and Outlay, based on historical tables from the White House Office of Management and Budget (Table 1.1). *2012 is estimated. http://www.whitehouse.gov/omb/budget/Historicals

It is clear from Figure 4 that income had dropped at the same time outlay has risen. Even though the crisis is supposedly past, there is still a huge gap between income and outlays. Outlays in recent years are higher than would be expected based on pre 2005 trends, while revenues are lower than would be expected. Revenue would need to be more than 50% higher, to match outgo, for 2009 through 2012 fiscal years.

The amounts shown in Figure 4 are consolidated, so include programs such as Social Security and Medicare, besides “on budget” spending. How many readers could afford to contribute 50% more than they currently pay for the sum of (Federal Income Taxes + Social Security + Medicare funding)? If the government were to actually raise taxes this much, there would be a huge new round of lay-offs, because consumers would find their after-tax income much reduced, leading to even more cuts in discretionary spending.

Needless to say, the US government will do everything in its power to cover up its problems. In a later section, we will discuss how this huge deficit is being hidden.

Note that the only years during which US Federal Government income exceeded outgo in Figure 4 are 1998 through 2001. These years approximately coincide with the time period when historical oil prices were at the lowest level in recent years (Figure 5, below).

Figure 5. Historical average annual oil prices, (“Brent” or equivalent) in 2011$, from BP’s 2012 Statistical Review of World Energy.

Impacts of the Oil Price Increase in 2006 – 2008 Period

While most people now don’t think of oil prices in 2006 as being high, according to Figure 5, oil prices already had more than doubled from 2002 levels by 2006. If we look back at the financial situation in 2006-2007, we see impacts very similar to what we would expect from rising oil prices.

Sub-prime borrowers began to default as early as 2006 (Bernanke, 2007). As mentioned earlier, it was people who were on the “edge” financially who were most at risk of defaults on home loans. Sub-prime borrowers would seem to be on the “edge” financially and thus were particularly as risk, because they lacked the financial qualifications to obtain “prime” interest rates.

Figure 6. S&P/ Case-Shiller 20 City Home Price Data, using seasonally adjusted data. June 2006 is the peak month. Data from http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff–p-us—-

Home prices started to drop in 2006 as well (Figure 6, above), and they haven’t been able to recover yet. We don’t think of homes as being discretionary spending items, but people can’t move into more expensive homes unless their incomes are rising. First-time buyers will also tend to put off purchases, if their financial situation is tight. The construction industry was one of the industries to face large lay-offs.

Defaults on loans caused considerable problems in the financial industry. “Short sales” (in which the sales price of a home is insufficient to pay off the remaining mortgage because the price of a home has fallen) also caused losses to the financial industry. The financial system was not set up with the idea that there may be a systemic problem of this sort. As a result, many banks found themselves in financial difficulty and needed governmental bailouts.

Other industries, such as auto manufacturing and insurance, also required bailouts. These patterns are precisely what one might expect from rising oil prices.

I make arguments similar to these in Oil Supply Limits and the Continuing Financial Crisis. James Hamilton (2009) has shown that the rise in oil prices alone were sufficient to bring on recession in the 2007-2008 recession.

One other important factor also affecting the 2006 to 2008 period was target interest rates. The Federal Reserve Open Market Committee (FOMC) raised interest rates during the 2004 to 2006 period (Figure 7, below).

Figure 7. Intended Federal Funds Interest Rates, as set by the Federal Reserve Open Market Committee http://www.federalreserve.gov/monetarypolicy/openmarket.htm

The basic idea in manipulating interest rates is that low interest rates are supposed to increase economic activity, because low interest rates make it less expensive to buy a car, using a loan, or to take out a home improvement loan. They also make it less expensive for businesses to finance expansion with a loan. Higher interest rates are supposed to decrease economic activity, because of the opposite impact.

Ludlum (2009) reviewed the minutes of the Federal Reserve Open Market Committee (FOMC). The FOMC noticed rising energy and food prices as early as December 9, 2003. It wasn’t until June 2004, though, that the FOMC first raised interest rates, in an attempt to “damp down” demand for oil. The committee’s view (not stated in the minutes, but implied by rising interest rates) was that the rapid expansion of the US economy was leading to rising oil and food prices. The expectation was that raising interest rates would damp down US demand for oil, and bring inflationary pressures affecting oil prices under control. The FOMC continued to raise interest rates by 0.25% at each of its meetings (the minutes repeatedly comment about rising energy and food prices), until the target interest rate reached 5.25% in June 2006). The FOMC did not start bringing interest rates down again until September 2007.

If the problem were really rising US demand for oil, this approach might have worked. In fact, the real issue was rising oil demand elsewhere, especially China, India and other Asian countries. China had joined the World Trade Organization in December 2001, and was ramping up its exports starting in 2002 and 2003. It also didn’t help that world oil supply was not rising very quickly, so rising demand led to rising oil prices.

Figure 8. Oil Consumption for Selected Areas, based on BP’s 2012 Statistical Review of World Energy

The combination of higher interest rates and rising oil prices provided a “double whammy” to the US economy, helping push the US economy into recession. Europe and Japan also experienced major recession. The parts of the world with rapidly growing oil consumption generally did not experience recession.

The Growing Economy Problem

At least part of the reason for the High-Priced Fuel Syndrome is the fact that with all of the world’s debt, there is a need for growth to continue indefinitely. In a growing economy, it is as if we can always “borrow from the future,” because the future is always bigger and better than the past. We start running into huge problems if this is not true.

Figure 9. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

Part of the problem is that repaying loans is difficult in a shrinking economy (Figure 9), because less funds are “left over” after loan repayment. If we think of the situation as a government whose revenues start declining, we can understand what the problem is with repaying debt, plus interest on that debt. (Arguably inflation could play a role for a while, but lenders soon would catch on, and require higher interest to compensate for inflation.)

As long as the economy grows each year (and government revenue is higher), it makes sense for the government (and many others) to keep borrowing.  But if the economy starts shrinking, we have a serious issue, because the government not only needs to stop borrowing more, but it also has to face the prospect of repaying what it already owes.

The situation is not too different for individual borrowers and for businesses. For individual borrowers, the risk is of being laid off from work, and not being able to find new job. For businesses, it is the risk of fewer buyers for their products, and because of this, less revenue in the future. With less revenue, fixed costs become a larger and larger share of total revenue, making it harder to repay debt.

Thus, in a shrinking (or even a flat) economy, debt defaults become more and more of a problem. Banks find themselves in more and more financial difficulty. This is basically the issue referred to earlier, with respect to high oil prices causing loan defaults.

Paying for Social Security and Medicare benefits is another area where growth makes a big difference. If an economy is growing, there is always a growing population of young workers to pay for benefits to the elderly. If the number of workers shrinks relative to the retired population because of high unemployment or few children, funding becomes a problem. This is yet another area where we have been counting on growth to continue indefinitely, to keep the model functioning as planned.

Recent Government Cover Up of High-Priced Fuel Syndrome

We noted above that the Federal Reserve raised interest rates in the 2004 to 2006 period, in an apparent attempt to damp down oil demand. Starting in September 2007, the FOMC took the opposite tack. Instead of raising interest rates, they brought them down, bringing them as close to zero as they could by late 2008. See Figure 7, above. The intent of this move was to stimulate the economy, by making borrowing less expensive.

Then the Federal Reserve decided to go further, and take up what it called Quantitative Easing, which is what other people call “printing money”—buying the government’s own debt, and some related debt.  Target interest rates affected only short-term debt. Through the use of Quantitative Easing, it hoped to lower longer-term interest rates, as well, and thus provide even more of the low-interest rate benefit to potential borrowers. The United Kingdom and the Eurozone are taking a somewhat similar approach.

A major reason for Quantitative Easing (besides the stated business reasons for decreasing interest rates) seems to be lowering the amount of interest payments that the government itself would need to pay. This would help reduce the big gap between governmental outgo and income (Figure 4, above).

A second reason for Quantitative Easing is that it was a way of enabling the huge amount of deficit spending taking place. Without Quantitative Easing, the government would have had to go, “hat in hand”, to the world market, asking for additional loans. There might be a possibility of not all of the loans being sold, or of higher interest rates being required. By buying back a large share of the US’s own debt, it was able to make certain that interest rates would stay low, and that there would be an adequate market for the debt.

Impacts of Government Cover-up

One problem with artificially low interest rates is that the interest rates, in effect, steal from one segment of society, and use it to subsidize a different segment of the economy. The segment of the economy that is “stolen from” consists of pension plans, and people who would otherwise be saving their money, perhaps for retirement, and would benefit from interest income. Part of the reason that pension plans are having so much difficulty with funding now is because of artificially low interest rates. Pensions plans will need to be bailed out, or contributions will need to be much higher, if the system continues with artificially low interest rates.

Another even more major problem is that without a return to growth, there is no nice way to end the low interest rate/Quantitative Easing policy. One possibility is that at some point, the dollar will drop relative to other currencies, and the price of imported oil will become even higher. This will make the situation worse.

Somehow the situation must be resolved. One possibility is that the government will greatly reduce benefits and raise taxes, so as to balance its budget. Alternatively, there could be a major governmental change, perhaps leading to a totally new governmental structure and different currencies. It is possible that there will be hyperinflation, or some type of break in international trade. Countries may trade more with trusted partners, or may require collateral for trade.

Impact of High-Priced Fuel Syndrome on Exporters

This post has mostly been about the impact of High-Price Fuel Syndrome on energy importers, such as the United States, Europe, and Japan. The situation isn’t quite as bad for energy exporters, but they are not completely spared.

Energy exporters are usually in a better position financially than importers, because they collect funds from the oil or other type of high priced energy they sell. These funds can be used to fund government programs. If the energy exporter is fortunate to still have some “cheap to extract” oil left, the energy exporter can perhaps subsidize oil prices for its own people. This approach works much better when population is relatively small, such as Saudi Arabia, than when population is large, such as Russia, because with subsidy, internal use tends to rise, and exports decline.

Even when a country is an energy exporter, high oil prices or other high energy prices can be a problem. One issue is that those who benefit from high oil prices (oil companies, oil workers, local economies, governments that tax oil production) are not the same as the economy in general. For example, if oil prices are high, the major producing areas, such as Alberta, Canada can benefit, even as the rest of Canada behaves much like an oil importer, with job losses.

Another issue is the one illustrated in Figure 3, that of food prices tending to rise as oil prices rise. The Middle East is an oil exporter, but a food importer. If food prices rise at the same time as oil prices, the government finds it necessary to cushion this cost increase for the poor. To do this, they must raise food subsidies, or increase the level of payments to those who are unemployed. Making these changes quickly is not necessarily easy. There is considerable evidence that the 2011 “Arab Spring” uprisings were related to high food prices (Lagi, 2011).

So even for oil exporters, high oil prices may lead to problems.

In Summary

In summary, we are running short of cheap energy, especially cheap oil. High priced oil (or high priced energy of any type) tends to slow down the economy, leading to economic contraction. Our financial system is not made for contraction. Ben Bernanke and others have used artificially low interest rates and Quantitative Easing to try to cover up our current problems, but this is not a long-term solution. At some point, the underlying problems will become evident, and some type of discontinuity will take place. The economic situation will change from one of growth to decline.

Our system of benefits and taxes to pay for those benefits is based on the cost structure that was possible with cheap energy, and the growth that was possible with cheap energy. Very major changes will be needed, if government outgo is to made to match income. Basic programs such as  unemployment, Medicare, and Social Security will either have to be reduced, or taxes raised substantially. Maintenance of huge amounts of infrastructure (such as roads, water and sewer pipelines, electricity transmission lines, and schools) can be expected to be increasingly expensive as well.

It is not clear exactly how the current situation will play out, but a return to cheap energy and robust economic growth seems very unlikely. A more likely outcome is a serious discontinuity, with affected countries much poorer afterward.

References: 

Bernanke, B. S., The Subprime Mortgage Market, Speech at the Federal Reserve Bank of Chicago’s 43rd Annual Conference on Bank Structure and Competition, May 17, 2007. Available at http://www.federalreserve.gov/newsevents/speech/bernanke20070517a.htm

Hamilton JH. Causes and consequences of the oil shock of 2007-08. Brook-
ings Papers on Economic Activity
:215e61. Accessible at http://www.brookings.edu/~/media/Files/Programs/ES/BPEA/2009_spring_bpea_papers/2009a_bpea_hamilton.pdf; Spring 2009.

Lagi M., Bertrand, K., and Bar-Yam, Y. The Food Crises and Political Instability in North Africa and the Middle East, Complex Systems Institute, 2012 Available at http://arxiv.org/pdf/1108.2455v1.pdf

Ludlum, S. Further Evidence of the Influence of Energy on the US Economy – Part 2, The Oil Drum, April 23, 2009. Available at http://www.theoildrum.com/node/5326

Tverberg, G. Oil Supply Limits and the Continuing Financial Crisis, Energy, 2012, 37 (27-34).

Voss S. and Patel, T. Total, Shell Executives Say ‘Easy Oil’ Is Gone (Update 1), Bloomberg, April 5, 2007 Available at http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aH57.uZe.sAI

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 inadequate supply.
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192 Responses to High-Priced Fuel Syndrome

  1. Pingback: High-Priced Fuel Syndrome | Our Finite World | kakoluri.com

  2. Mel Tisdale says:

    The worrying aspect with this report is that it is highly likely that it is correct and that governments simply are not aware of the realities surrounding our fuel supply and its relationship to economic growth. They can’t face up to something that they don’t realise exists.

    If it is true that they are genuinely unaware, then it is perhaps worth my repeating the suggestion that we need to examine just how we govern ourselves. Looking at what feels like a whole host of blog posts, the general feeling seems to be that we are on the verge of some financial cataclysm. Perhaps our lords and masters really are fully aware of the fuel situation relative to growth and are just waiting for a certain presidetial election to be over and done with before breaking the bad news to us all. Let’s face it, there cannot be a lot of can left to kick down the road after all the miles it has already been kicked along, so something has to happen soon. Perhaps our governments will get a new can to kick down the road some more, but I doubt that there is much road left to kick it down..

    • Its odd yes, but it almost seems like world leaders are quite oblivious to the facts around energy supply, particularly in oil. In Norway we have hardly noticed the economic problems both USA and Europe have had lately, mainly because we benefited from the increased oil price. But whats plain obvious is that Norway produces about half the amount of oil we did 10 years ago and looking at current fields we are in for another halving of current production in 10 years (offset by a new field coming into production). I dont really see this being discussed in mainstream media here at all – but they do like to print in large letters “BIG NEW OIL FIND FOR STATOIL” – whereupon I have to laugh when I do the long division and realise the whole new find would last a week with the currents world consumption. Its really about time for some facts on the table to inform people about the current state of things and that we cant pretend it will keep up like this for much longer or its going to crash really badly.

      Just like Albert Bartlett say, very little things about the world is linear, but rather exponensial, and as Chris Martenson likes to exemplify with his stadium, we can go from half full to full (or empty with regards to oil and other resources) within a very short time. This scares me a bit because the instability in the economies is very likely a hint of things to come while its hard to predict when and how it will unfold. An economic crash will ofc limit globalism and oil consumption quickly, resulting in cheaper energy again, and we get this “bumpy ride down” as many have described here and other peak oil forums.

      I just wonder if we are able to adapt fast enough to this ride down or if media and governments will still keep feeding us false signals about the future in the belief that it will go back to what it was again. I’d rather have an honest brutal message than being told lies or hopes.

      • Mel Tisdale says:

        It is a pity that Chris Martenson’s Crash Course is not distributed to all and sundry, especially to our politicians.

      • No government wants to let its people know something embarrassing. The rise in oil prices has helped cover up the decline so far. I suppose politicians are hoping this will continue (and engineering miracles will occur as well). Perhaps the problem will just go away by itself, or the next elected official can handle it.

  3. Ikonoclast says:

    “Change comes slowly, if at all, to the Shire.” – Bilbo Baggins.

    I wonder how much of Millenarianism has at its roots a nostalgia for the bucolic idyll as the model for future utopia? However, it seems pretty clear we are heading for one type or other of dystopia or at least a dystopian transition.

    The bleakest possibility is a general breakdown of global civilization as energy and materials run out. Even some lower level of civilization seems unlikely to be sustainable in this scenario. For example, it seems we could not even return to the “wood” age, an age when wood was the main fuel (along with its derivative charcoal) and wood was also the main construction material. Most of the great forests of the world are long gone.

    The best possibility is that some kind of transition to a renewable fuels (mainly solar) and rnewable materials economy is energetically possible. Many technological and social advances could be retained under this scenario. However, it is pretty clear that a population of 7 billion plus could not be supported (due to already existent damage from over-shoot) and that maybe 1 billion or 2 billion might be more realistic under this scenario; that is a leaned-down, but still advanced and sustainable civilization. However, it would take a lot of starvation, war and grief over about 50 to 100 years to lean down to this level. Could civilization survive such an avalanche of cataclysms even if the end goal of advanced sustainability was technically feasible?

    I for one am impatient for the real changes to begin. There is nothing worse than sitting at the end of a decaying civilization knowing that business as usual is simply a recipe for accelerating collapse not avoiding it. I want something new to arise but also naturally fear it.

    “And what rough beast, its hour come round at last,
    Slouches towards Bethlehem to be born? ” – W. B. Yeats.

    • I would just as soon put the changes off as long as possible. I don’t know how they will work out, but my guess is that they will get progressively worse over time.

      We can’t really go back to what worked before, because we lack the systems that we had in place (one room schools people could walk to, small windmills to pump water, vehicles to run on unpaved roads, etc.) as well as a huge number of draft animals. Going from a system that works, to a broken system, is likely to rank as one of our major problems.

      • Leo Smith says:

        I too favour not trying to stop changes but playing them out as slowly as is feasible. Rapid change destroys where slow change forces adaptation.

        Oddly enough I think that many things will in fact revert naturally to ‘the way they were;’ where that works. I can see that happening here – more locally produced food less imported. Less use of cars. I’ve just put on a woollen rather than turned on the heating🙂

        And as I keep saying, there in no reason we should be short of reasonably affordable electrical power as long as we don’t go with renewables.

        The bigger issues are transport fuel and social disorder as standard of living decreases are enforced – by governments or simply by lack of paid employment.

        And the possibility of the return of infectious diseases with no real way to combat them left.

        • The ravages of infectious diseases will probably never return to the levels before sanitation, provided we remember the lessons learned in the last two centuries, cleanliness and vaccination.

          Reading between the lines, the discontinuity mentioned by Gail in the summary is a
          die-off, since food production rates are propped up by fossil fuels, and population equals food. Is that fair?

          If so, then the only way to avert a discontinuity in population under conditions of contraction of the food supply is to contract the population to match the food supply. Naturally this is easier said than done. The usual response is “you first.” But the population will decline one way or another, through starvation and social unrest, or though effective family planning. I suppose we should choose the latter!

          I believe the real underlying issue is population, yet we so often fail to meet it head-on. Instead we focus on energy, the economy, and keeping food production high. Do you agree?

          • You talk about remembering the lessons of the last two centuries: cleanliness and vaccination.

            Cleanliness has a lot to do with commercial water purification systems and sewage treatment center. Neither of these is sustainable for very long. If nothing else, we need to start recycling human wastes as fertilizer, and this tends to lead to more problems with introducing microbes into the food and water supply. Dmitry Orlov has remarked about how cleanliness declined following the collapse of the Former Soviet Union. I forget where I read this–perhaps in his book Reinventing Collapse: The Soviet Experience and American Prospects.

            Vaccination requires a long chain of fossil fuel inputs as well. For example, usually eggs are used, and the vaccine that is prepared must be refrigerated and transported. Making the syringes requires fossil fuels, and the nurses going to work requires fossil fuels. A nurse involved with international immunizations whom I talked to recently told me that there was a drop off in immunizations in the Former Soviet Union after its fall. An article I found says something similar:

            Immunization rates in the Soviet Union were high and herd immunity was achieved for most vaccine preventable diseases. However, there were significant gaps in the coverage through the 1990s. The collapse of the Soviet Union led to the collapse of the supply chain for vaccinations and restricted access to care as underfunded health care providers started having to charge patients out of pocket – even for routine procedures such as vaccinations. Poor access meant lower uptake, particularly for booster doses. The ruptured supply chain meant that vaccines were not always available and where they were they had often been stored incorrectly – this can significantly limit their efficacy. Immunization rates subsequently recovered, but a cohort of older children were left unprotected.

            So the fact that we understand the connection doesn’t necessarily mean that we can maintain these two items. They are just too embedded in our current energy system.

  4. Pingback: Report: ‘High-priced fuel syndrome’ the undiagnosed cause of the ailing global economy | India Crusher Manufacturer

  5. tulkas says:

    Hi Gail.
    I diagree with your currency vision, so sometimes you should think different (it seems you are not used to think in €, Y, £, …):
    “One possibility is that at some point, the dollar will drop relative to other currencies, and the price of imported oil will become even higher. This will make the situation worse.”

    The oil is paid in USD all over the world; the twenty years war is a clear evidence that US will not permit to any oil producer to trade oil in other currencies, except for those that have a nuke bomb, of course.

    The situation will change when the USA will have to purchase other currencies to buy oil. That time your sentece will be right, but we will be here no more.

    Thank you for your great ideas you share with us.
    Best Regards

  6. Pingback: High-Priced Fuel Syndrome « Transition Brockville

  7. Pingback: LA Jewelry District» Blog Archive » Report: ‘High-priced fuel syndrome’ the undiagnosed cause of the ailing global economy

  8. Prof Ken says:

    “As long as the economy grows each year (and government revenue is higher), it makes sense for the government (and many others) to keep borrowing. But if the economy starts shrinking, we have a serious issue, because the government not only needs to stop borrowing more, but it also has to face the prospect of repaying what it already owes”.

    Gail this is simply not a correct reflection of how a modern fiat currency system works. With the exclusion of the EU, no sovereign issuer of currency (ie a government) in a floating exchange rate system is ever revenue constrained. They do not “borrow” from the rest of the world and have to repay it sometime in the future and they definitely do not have to balance their budget. The Fed doesn’t actually “print” anything when it initiates QE. The Fed simply electronically swaps an asset with the private sector. In most cases it swaps deposits with an interest bearing asset. Your statement that “without Quantitative Easing, the government would have had to go, “hat in hand”, to the world market, asking for additional loans” is just simply not correct. Again this is a total myth that the US government borrows money from the rest of the world to fund expenditure.

    Your assessment of “Impacts of Government Cover-up” is again simply not factually correct. The topic of how a modern monetary system works is extremely complex but I do not wish to elaborate further here as I do not wish to detract from the overall theme and correct conclusions of the paper that increasingly reduced supply of cheap fossils fuels will greatly impact economic activity for all countries in future.
    In regard to the your work on global energy demand and supply, excellent as always.

    • We live in a finite world. If economic growth could continue indefinitely, what you say might be true. Or if people were really, really stupid. At some point the system can’t work, whether economists believe that or not.

      • philsharris says:

        Gail
        I agree with your conclusions.
        The 2010 report by the UK Royal Society of Engineers (see link by another contributor here), talks about the necessity of “demand reduction” to meet UK 2050 targets of reduced fossil fuel use. Whether this target is achieved ‘voluntarily’ or by force of circumstance is a moot point here. We must presume, in my opinion, similar although not perhaps extreme reduction in the USA. US could still hypothetically produce perhaps by 2050 a quantity of energy still a large fraction of that produced now (coal, NG). Regarding US oil production there is likely to be a considerable ‘fat-tail’ of oil production augmented with Canadian imports. We are still talking of a significant fraction of the 6Mbo/day US produces just now. This ‘continuing’ oil (and coal/N) will of course come with increasing cost to the US economy, as you rightly point out. Therefore, regarding especially oil, it is difficult to think that in 30 or so years USA will be using as much energy as used today, or even half the oil it uses now. (The USA still has very long term hypothetical access to some continuing NG, at a cost of course. I note BTW plans to reverse a trend and build a large nitrogen fertilizer plant in N Dakota near the NG, reversing the trend of recent decades.)

        The big question as I think you rightly point out, remains whether inevitable ‘demand reduction’ can sustain enough viable business to keep sufficient wheels turning for an industrially underpinned urban population, or whether the current economic structure is actually a ‘package deal’ and will take a sudden decline in the face of reduced demand. (It seems possible to envisage a deflationary-type regression into multiple bankruptcies and a collapse in the means for forward construction, and even a failure of necessary maintenance.) I actually see, though, the USA in terms of basic resources capable hypotheticallyof maintaining significant industrial underpinning for many decades yet.

        Goodness knows, however, whether or not I sketch ‘the boundary conditions’ correctly, let alone a realistic outcome for USA suffering a collapse say in its global outreach or ’empire’!
        very best
        Phil
        best

        Phil

        • Thanks, Phil.

          THe United States is at least theoretically better off than a lot of the world. Its population is lower compared to the amount of arable land and compared to fossil fuel resources. If any country can sustain a reasonably large percentage of its existing population, it seems like the United States would be in a place to do so.

          But as you say, this question is whether this is a “package deal”. We really need a high tech society to maintain a lot of the things in their current form–oil production, natural gas production, food production, making of metals from ore, making of computers. I think the government of the US is one of the most vulnerable points in the package deal. If it goes by the wayside, it will be hard for groupings of states to “make it” on their own. But we don’t know for sure.

          • If the temperature rises by much more over the coming years, even arable land in USA is threatened, or at least an unstable source for food production. I think perhaps many countries will be in for a double whammy if the climate predictions we see now are real. Remember the polar ice melting was worse than the UN’s most pessimistic estimates, and very few models they publish take into account possible self-amplifying effects of heating and the release of methane from the permafrost.

            I believe a possible scenario might be that climate change might affect the economy more immediately than the reduced access to fossil fuels in the near future. But it all depends on how cyclic variations has affected these latest trends in global heating. Serious weather change will at least hit economies pretty badly if it continues to escalate, so lets hope its not as bad as some of the models show.

            Actually from what I have read, northern countries like Canada and Norway (where I live) might get much better conditions for growing food, although in my parts we will also see way more rain (its already over 230 days of rain a year here, and we get more every year).

      • Prof Ken says:

        Gail
        Im not debating the issue of a finite world with finite resources. I am simply alerting you to the fact that your understanding and resulting interpretation relating to government monetary policy, is not correct. Im sure you may wonder who this person who thinks he knows it all, but when the chairman of the Federal Reserve, Dr Bernanke tells you exactly the same thing 3 days later it is probably worth sitting up and taking note.I quote from his speech yesterday;

        “By buying securities, are you “monetizing the debt”–printing money for the government to use–and will that inevitably lead to higher inflation? No, that’s not what is happening, and that will not happen. Monetizing the debt means using money creation as a permanent source of financing for government spending. In contrast, we are acquiring Treasury securities on the open market and only on a temporary basis, with the goal of supporting the economic recovery through lower interest rates”

        While I am sure that you may find it shocking that your government is not bankrupt and “printing money through QE” etc etc with a clearer understanding of fiat currency systems and how they actually work you may wish to go back and review some of your scenarios you have detailed and how they can potentially play out post peak. That I would certainly find extremely interesting.
        BTW I am not an economist I am an engineer

        • Don Stewart says:

          Dear Gail and Prof Ken
          Here is what I understand:
          1. The Treasury has no way to engage in deficit spending unless it is able to sell bonds. At the present time, much Treasury debt is being sold to the Federal Reserve which prints money in order to buy the Treasury debt. If the Federal Reserve was not buying the debt, then the Treasury would, indeed, have to go ‘hat in hand’ to the world to get the money.

          2. Bernanke claims that the Fed is not creating inflation. Yet the empirical evidence shows that they are. Medical and college costs have risen steeply–and no one can imagine that they would be doing so without the support of the federal government. And the only reason the federal government can continue to pour money into them is because the Fed is buying the Treasury debt. See:
          http://www.oftwominds.com/blogoct12/govt-inflation10-12.html

          3. Another serious issue with what the Fed is doing is the encouragement of mal-investment. For example, the Fed is enabling not only increasing expenditures on dubious health care and college education, but also dubious investments in yet more highways and housing and real assets in general. Whether stocks will necessarily benefit is doubtful:
          http://www.oftwominds.com/blogsept12/QE-stocks9-12.html

          4. It is true (as everyone knew during the Depression of the 30s) that unemployment is a disaster for all concerned. It destroys lives and it deprives society of whatever the unemployed might have produced. The ‘brokenness’ of our system of governance is illustrated by the poverty of our solutions for unemployment. The best we can come up with is to put them to work producing more roads and houses and going to college and working in pharmacies dispensing pills.

          5. Bernanke claims that the Fed will have no problems ‘unwinding’ all their purchases. Yet, if you buy into the Finite World scenario at all, it seems unlikely that the Treasury is going to be in a position to repurchase all those bonds from the Fed and pay market rates of interest in our lifetime. Zero Hedge had a story within the last day or two about the failure of Venture Capital to make money over the last decade or so. Perhaps Venture Capital can’t make money because we really do live in a Finite World. And in a Finite World, why would the US Government be any smarter than Venture Capital?

          Not an economist either, by the way…Don Stewart

  9. Ikonoclast says:

    Calculations of full energy input costs (total embodied energy) in manufactured products and plant, including power generating plant, are very complex. It is little wonder that we have continuous disagreement on this blog about questions surrounding the viability, non-viability, safety and sustainability of solar power, wind power and nuclear power (the main non-fossil power sources).

    If only we could agree on a national framework to;

    (1.) Require ALL energy generation and fuels prospecting to occur with zero subsidies i.e. at real cost.
    (2.) Require ALL energy generation and fuel storage to meet equivalent safety standards and carry insurance cover on that basis.
    (3.) Require ALL energy generation and fuel storage to meet equivalent negative externality cost standards.

    I realise the above would be impossible to achieve perfectly, though point 1 should have no technical obstacles, only political obstacles. Points 2 and 3 would require assumptions and compromises but when eventually hammered out (based on science so far as possible) the resultant framework would be considerably better than no attempt to cover these issues at all.

    Once the above were achieved, we could leave it to the market to develop the best, most feaible and most cost-effective energy solutions. So I am saying we don’t necessrily have to solve the argument on complex energy input modelling, if only we politically and economically implement the above points. An undistorted market could then solve the problem for us as far as it might be solvable.

    I am not an across-the-board advocate of free market solutions for every one of society’s issues but I do favour the free, undistorted market solution for the power issue. Using this market solution makes sense as power is a ubiquitous requirement for all other processes. Power as exergy (energy available for useful work) is a single product in essence and thus directly comparable and able to be put into direct competition regardless of source. This is true even though there are differences in fuel types, engine types and in the handling and delivery of various fuels. Un-subsidised fuel and power formats as different as coal, oil, gas and electric power could still compete on un-subsidised cost alone in the transport sector, for example.

    • It seems like it is really hard to define what is a subsidized price and what is not.

      Governments get their money from taxes. Now that businesses that are “portable” can move anywhere, they have gotten their tax rates down very low, because they can go to low tax domicile countries. This leaves countries with only individual citizens and “non-portable” businesses to tax. Oil, gas, coal, and mining in general are all non-portable, so end up being high on the list of businesses that are taxed. Lots of businesses (insurance included) can escape taxes, leaving the non-portable businesses to pick up their share. If other businesses paid their share, it would make the tax situation easier.

    • If alternative power production was not funded partially by subsidies there wouldnt be any alternative power production of any considerable size. Most humans and economic thinking is just plain dumb with 100% focus on max profit. That is what the free market is bringing us, the cheapest bad quality energy and goods. Unless the governing powers are able to tell what to expect from the “free market” by regulations and subsidies, the only alternative is a “good dictator” who command their people to only manufacture clean energies. I am afraid we are kinda short of those leaders, so subsidies and “hints” is the only way for us to even provide a foundation for the development of clean energies. The only way we can influence this is by voting and electing leaders who want clean energies, after all most western lifestyle countries do live in Democracy. But the general public doesn’t seem to want green energies, as most people are indeed dumb and just want the cheapest stuff they can afford. So we will for a long time have a minority voting for candidates that fight for a change, and a majority wanting status quo (preferably one who can bring cheaper gas on the table). Free will and the free market will bring the planet to its knees, and the only change happens when it all collapses is what I think. But I hope sites like this, the oildrum, even guys like Kunstler can shake people out of their shells although the only feedback I get for the moment is “doomer this and doomer that”. What people dont understand is that I dont “want doom”, I want to prevent it – or at least take measures to limit the height of our fall.

      • Leo Smith says:

        “Most humans and economic thinking is just plain dumb with 100% focus on max profit. That is what the free market is bringing us, the cheapest bad quality energy and goods.”

        Indeed. And so the easiest thing to do if you want to ensure those bad quality energy and goods don’t get overtaken by a possible competitor and that ‘most humans’ becomes ‘all humans’ is forget about selling them a million times over to the public: All you have to do is ell them once, to a president, and he makes it law that those shoddy inefficient goods are what everyone HAS to buy!

        Welcome to Enrons renewable Energy plan B.

        Actually the free market only brings cheapest bad quality goods to people who are stupid enough to buy them. Politics that enforces state educated stupidity with dumb self assurance and puts money in the pockets of those with no power of discrimination guarantees a marketplace full of shoddy bling, and I-Bling.

        Civilisations don’t collapse because people are too stupid and lazy to run them, they collapse when people are so stupid and lazy they can’t even recognise who CAN run them and nor will they pay them, to do it.

        • Yes indeed, but I guess all people are born with a free will and we are taught by a system and the media what is expected from us. So far this teaching has been about “fulfilling yourself” and consume, consume, consume. Take a trip into any store with magazines and the shelves are just packed with teachings about self-indulgence. The educational system is somewhat neutral and is truly trying to teach us facts about the world, but it does not really tell us that what we are doing now is wrong. Basically history teaches us how we got here, but does not judge whether it was bad or not in the defence of national identity, blah, blah. If people truly are to learn something they have to look at the whole planet as the society they live in and have a responsibility towards, not a place to snap a picture with your latest iBling and post on facebook to strengthen their egos.

          I welcome teachings and ideas from people who oppose the current way of living, as evidence is pointing towards our current lifestyles as the cause of the chaos ahead. Media and leaders should talk more about these essentials in life to make more people think out of their “boxes”. For us living in democratic countries there is a way to elect people who does bring out this information and take actions to limit the impacts of our lifestyles. For example, the food industry adds all kinds of chemicals to the food in order for it to “look better” – as consumers we can buy the cheapest stuff which is most likely full of the stuff, or choose better products. But more essentially we can push manufacturers to stop using these chemicals through the government and laws. The problem though is that these are all very painfully slow processes of “evolution” and with regards to the energy crisis and global warming, there is simply not enough time for a handful of people to influence the mass population fast enough or make governments change policies. Especially when you also have to face an increasing number of corporate lawyers and lobbyists carving out paths for their cheap products.

  10. Don Stewart says:

    How To Organize Thinking About The Future and Gail’s Analysis Of Our Predicaments

    Quite frequently I observe that we talk past each other on this blog. For example, if I suggest that solar PV panels might make sense for some people over the next couple of decades, Leo Smith will immediately reply that solar PV panels can’t be manufactured after the Collapse. Someone else may respond that solar PV can make all the energy we could ever want and so no Collapse is necessary unless we are too stupid to deploy a lot of solar PV.

    I would like to offer a particular formulation which I think may help us at least organize our thoughts and responses to each other. I will rely heavily on two recently published books: Resistance, Revolution, Liberation by Charles Hugh Smith and Unlearn, Rewild by Miles Olson.

    I. I would like to start by asking what succession looks like? And Olson gives us a very good description on page 76 and following where he traces the fate of the ecosystem in a gully created by clear-cut logging. The bare land is first colonized by weedy plants such as scotch broom which are replaced in a couple of decades with brambles and alders and those in turn will be replaced by climax forest dominated by cedar and hemlock. And then a catastrophically hot forest fire will sweep through and destroy the climax forest and things will start over again. If we think we see stability, we are failing to truly understand.

    I.A. Are we globalized humans about to experience the equivalent of a hot forest fire which will sweep away our climax forest due to social pathologies, resource scarcity, and financial folly?

    II. How does a society become more complex? Smith, I think, gives us the answer on pages 30 and 31. ‘Ecosystems provide endless examples of the dynamics that affect humanity as well as all other organisms: competition, cooperation, feedback, mutation, adaptation, selection, and diversity.’ And ‘The forces of low-intensity instability (LII)–risk, threat, failure, feedback, fluctuation, variation, volatility, mutation, innovation, experimentation, competition, transparency, natural selection (meritocracy), accountability, consequence, accurate communication of facts and the free exchange of information’

    II. A. As the LII forces operate they select for good organizations and good ideas and competent people which has the effect, in human societies, of increasing complexity and production–within the capacity of the resources available.

    II. B. The LII forces operate over chronological time. As Gail has noted, it takes a couple of decades for new technologies to pervade the petroleum business. I used email about 2 decades before most people had ever heard of it. So it takes time for all the players to organize themselves to actually implement some potential benefit from increased complexity.

    III. Your own prescription for which choices globalized humanity, your particular cultural groups, and your clan and your family and you as an individual should make will depend both on the clarity of your thought and the interaction between your thought processes and your emotional apparatus–but also with what you expect to happen as a result of the predicaments Gail points out.

    III.A. If you think the future will be pretty much Business As Usual, then you will be interested in getting the Debt Engine turning again and either Drill, Baby, Drill or a crash deployment of renewable energy.

    III. B. If you think we face a long, continuous function decline, then you will be looking for incremental changes which can make the transition easier.

    III. C. If you expect a hot forest fire (catastrophic collapse to a very much lower level of complexity), then you will be looking for quite fundamental change.

    IV. The Hot Forest Fire scenario is the most interesting and challenging (not necessarily the most likely). At the most basic level, you must:

    IV. A. Arrange for the survival of your genes through a bottleneck event. In order to get through the collapse, you may need a Dmitry Orlov type tool kit from current technology–with the full understanding that it won’t last forever. (Which is where I put things like solar PV and water filters.)

    IV. B. Smith, page 78: ‘Being both solitary and social, we have two intertwined insecurities. As social beings, we have a profound emotional need to establish and actively renew our standing within the social matrix of marriage, family, group, workplace, and culture. As individual beings with inner states and dialogs, we hunger for an internally coherent framework that bestows meaning on a chaotic world and establishes our identity within that framework. If we fail to establish a rewarding social identity and a framework for making sense of our experience of the world, then our default state is a gnawing, debilitating insecurity that expresses itself as angst, anxiety, depression, and alienation.’

    IV. C. Smith, page 91: ‘All that is presented by the marketing/ State complex as real is actually abstract and illusory, as the sources of authenticity have been derealized and replaced by a monoculture of inauthenticity, consumerism, and State control.

    This derealization manifests in many ways: eating disorders and obesity; difficulty sleeping; trance-like apathy; lack of engagement with real life; inability to maintain meaningful relationships; a life devoid of intimacy, passion, and purpose; reliance on medication and drugs; addictive behaviors and attachments; inability to concentrate; fragmented sense of self; avoidance of responsibility; proclamations of soaring rhetoric for logic; escapism; serial lying; chronic hate, frustration, depression, and anxiety and a generalized sense of emotional hunger, incoherence, imbalance, disquiet, and loss.’

    IV D. So we must, in addition to passing our genes forward, also create a satisfying social and inner life in the new, very much less complex, environment.

    Conclusion: I suggest that this framework can be used to clarify what it is we are talking about.

    • Leo Smith says:

      Y’know Don, I rather liked that post!
      “a monoculture of inauthenticity, consumerism, and State control”

      Yup, that’s renewable energy to a T.🙂

    • It seems like one area of differences in discussion is the scope of changes hoped for. One group is looking particularly at how a small group might be able to move forward, in spite of major changes (forest fire, or not quite that bad). Another group is looking at what governments might do, to try to save the world as a whole, or their country as a whole. This version seems like it would be very difficult to accomplish. Our current predicament is too severe.

      But if we do make changes, even a small residual group will need to be creating a new social structure that works, as you point out. Somehow, they must not repeat the mistakes humans have made to date (defeat of survival of the fittest, without reduction in number of children), or they will reach collapse all over again.

      At some point, there comes a need for a new ecosystem to evolve that uses what was the pollution of this system as one of its building blocks. If we have too much CO2, this might mean that plants will dominate the new ecosystem. Humans may still play a role in the new ecosystem, but a much smaller role.

      • Don Stewart says:

        Gail
        Question Everything agrees with you that ‘our current predicament is too severe’:

        Over the past five years I have seen one after another hopeful optimist realize that all of their optimism hinged on the notion that somehow the leaders would see the truth and we would all get on board with programs to save society. But the rates of decline are catching up. Weather anomalies from global warming/climate change becoming the norm and economic decay spreading and accelerating are overwhelming that optimism.

        Question Everything recommends telling the truth. As a humble example of that, consider this post on my local small farm listserve:

        I’ve been following the feed price/egg price discussion closely, and must say as a feed store retailer, the grain prices I’m seeing lately are equally frustrating for me, who wants to sell good quality grain/feed at a good price. From everything I’m hearing from the feed mills I work with, grain prices are not expected to drop significantly any time soon although I’ve at least seen prices stabilize a bit in recent weeks. The midwest drought is partly to blame, but also the futures markets and how they escalate the prices to control demand when supply is short. I would love to buy in local corn from growers in Chatham to offer a cheaper alternative not only to farmers but also deer hunters, but everything I hear is just what you said, Billy, local growers are holding out for as close to the same price as bagged feed/corn right now. And it’s hard to blame them with the cost of inputs, especially conventional inputs (petroleum based fertilizers) are also at an all time high. Even organic inputs like feather meal are at all all time high – cost of inputs to chickens goes up, so do the outputs, even what is considered the waste.

        I have been buying in an increasing number of forages this fall to help growers offset feed prices with some grazing. I think your idea of planting greens is right on target. Rape, smooth kale, and turnip are all reasonably priced, will go a long way, and are well eaten by poultry, hogs, etc. I have all of these at the store as well as the more usual fare like rye, wheat, oats.

        I’d also recommend keeping diatomaceous earth out free choice to keep parasites at bay. Animals will go through much less feed when you’re just feeding them and not their parasites, too, but I know I’m probably preaching to the choir on that one.

        Now let’s unpack that a little. This feed store grain retailer is telling the truth as best she can to her customers. She is making some movements which she thinks may limit the damage to both the growers and to her business. But the methods she recommends don’t have the simplicity of overpowering all the problems with fossil fuel powered grains and commercial feed mixes with medicines mixed in. In other words, the farmer needs to become smarter and behave differently. The chickens are smart enough to eat some diatomaceous earth if they need it to control parasites, the farmer just has to make it available to them. About a year ago Gene Logsdon, the Contrary Farmer, expressed the idea that commercial chicken feeds were just a plot to make money all along and get the farmers dependent on Big Ag. So maybe the rational thing to do is to go back to a system which is physically simpler but requires more human work and more knowledge.

        Would this proposal be catastrophic to anyone? I don’t think so. It means probably fewer chickens and hogs eating more waste products and more planted forage crops. Incidentally, the animal manures can prepare a bed nicely for spring planting. And hogs can be used to turn compost if you use Joel Salatin’s clever methods.

        Will eggs and pork get more expensive? Probably so. But Americans need to eat more leafy greens anyway. The smooth kale the retailer recommends can be used in mesclun mixes or sold as a large leaf. Change? Yes. Catastrophe? No.

        But it DOES require telling intelligent, flexible people the truth.

        Don Stewart

    • Bicycle Dave says:

      Hi Don,

      Thanks for the book review. I found this paragraph to be quite thought provoking:

      ‘Being both solitary and social, we have two intertwined insecurities. As social beings, we have a profound emotional need to establish and actively renew our standing within the social matrix of marriage, family, group, workplace, and culture. As individual beings with inner states and dialogs, we hunger for an internally coherent framework that bestows meaning on a chaotic world and establishes our identity within that framework. If we fail to establish a rewarding social identity and a framework for making sense of our experience of the world, then our default state is a gnawing, debilitating insecurity that expresses itself as angst, anxiety, depression, and alienation.’

      It seems to me that us folks in the US (generally speaking) have neither a social identity or individual framework that bodes well for either individual “well-being” or good long term prospects for our species. I see the dominant traits of our culture as:

      1. We are a car culture – just as the Mongols or Huns were a horse culture. Nearly every aspect of our collective lives are organized around the concept of a personal car. The only exceptions being some big city dwellers. The “Car”, as we currently idolize, is simply not a paradigm that can endure and yet it’s pretty much viewed as “Un-American” to suggest this mode of transportation represents a delusion.

      2. We are a religious culture – according to many studies the US is one of the most religious nations in the world. Macro level problem solving must contend with belief systems that defy rationality and hence make rationality just another competing voice in a chaotic world.

      3. We are “Growth” culture – we celebrate population growth, GDP growth, technology growth, personal wealth growth, etc. Of course, in a Our Finite World, endless growth is a delusion.

      4. We are a “Sex” culture in all sorts of ways except what should be obvious – sex and reproduction are two different things. Instead, here in the US, sex a is marketing tool to bolster consumerism without regard for the natural consequences of engaging in this behavior. Or, sex is used as a political weapon to promote some ideology. Just another delusion that gets in the way of finding societal and individual frameworks that might actually help humanity survive over the long haul.

      Surely this is an incomplete list and there are many cultural traits that are more positive. Our universities are often enclaves of truly enlightened thought, our political system is still far superior to dictatorships, our work ethic and willingness to “play by the rules” is exemplary, our bureaucracies are remarkably free of corruption compared to many other countries, and other admirable traits. However, it doesn’t seem that the positive traits are winning the survival challenge.

      I find it difficult to understand how we might move to societal/individual frameworks that might mitigate what the author describes as the default state. Momentum is a powerful force. There are no counseling centers for delusional cultures.

      • “There are no counseling centers for delusional cultures.” I think that sums up a major part of our problem. The fact that energy use is pretty much invisible keeps the real problem hidden–another part of our problem.

        • Indeed, but the western civilisation can do more to make sure that users of energy are informed of an estimated “total cost” of consumption. We are very good at marking food today with energy, fat, sugar and all. Basically everything we buy or consume should have the same visible markings about energy used to manufacture the product to make people more aware. Whether people choose to act on the information is another matter altogether. But I feel if a home for example had a screen with statistics on electricity use per room/appliance, one would be more educated about what really counts and a little “competitive” feeling about trying to use less power would be immediately visible (and rewarding).

          But very few people see the benefit of knowing these things and make judged choices around energy use, simply because most people don’t believe energy use is a problem and neither do they believe CO2 is a greenhouse gas or that climate change is caused by human activity. Unless we are able to convince people that this is our doing and that only we can undo it, we are in for a serious crash when it dawns on us that the world was indeed finite.

          • Most of our energy use is embedded energy–in the products we buy, rather than the electricity or oil we use. We can mostly see the cost of energy by the price of the product. For example, bottled water is expensive because of the energy used in bottling and shipping the water. Buying an expensive home takes involves the consumption of a huge amount of embedded energy. When we see an electric car has a high cost, we should be able to figure out that there is a lot of embedded energy in the price of the car. In fact, if the higher priced car doesn’t pay for itself in reduced gas prices very quickly, that should tell us something as well. The miles-per-gallon limits are aimed at reducing oil use. It is not immediately obvious whether they reduce total energy use.

    • It’s known as the ‘hole in my bucket’ syndrome.

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