Reaching Oil Limits – New Paradigms are Needed

I have written in recent posts that oil limits are more complex than what many have imagined. They aren’t just a lack of a liquid fuel; they are inability to compete in a global economy that is based on use of cheaper fuel (coal) and a lower standard of living. Oil prices that are too low for oil exporting nations are a problem, just as oil prices that are too high are a problem for oil importing nations.

Debt limits are also closely tied to oil supply limits. It is actually debt limits, such as those we seem to be reaching right now, that may bring the whole system to a screeching stop. (See my posts How Resource Limits Lead to Financial CollapseHow Oil Exporters Reach Financial Collapse, Peak Oil Demand is Already a Huge Problem, and Low Oil Prices Lead to Economic Peak Oil.)

We have many Main Street Media (MSM) paradigms that mischaracterize our current predicament. But we also have what I would call Green paradigms, that aren’t really right either, because they don’t recognize the true state of our predicament. What we need now is new set of paradigms. Let’s look at a few common beliefs.

Inadequate Oil Supply Paradigm

As I stated above, indications that oil supply is a problem are confusing. MSM seems to believe, “If the US can be oil independent, our oil supply problems are solved.” If a person believes the goofy models our economists have put together, this is perhaps true, but this is not true in the real world.

Without a huge, huge increase in US oil production (far more than is being proposed), being “oil independent” simply means that we are unable to compete in the world market for buying oil exports. US oil consumption ends up dropping, and we end up on the edge of recession, or actually in recession. Oil exports instead go to the countries that have lower manufacturing costs (that is, use oil more sparingly).  See Figure 1 below. In fact, even some of the oil products that are created by US refineries end up going to users in other countries, because it is businesses in other countries that are making many of today’s goods, and it is these businesses and the workers they hire who can  afford to buy products like gasoline for their cars or diesel for their irrigation pumps.

Figure 1. Oil consumption by part of the world, based on EIA data. 2012 world consumption data estimated based on world "all liquids" production amounts.

Figure 1. Oil consumption by part of the world, based on EIA data. 2012 world consumption data estimated based on world “all liquids” production amounts.

The Green version of this paradigm seems to be, “If world oil supply is rising, everything is fine.” This is related to the idea that our problem is “peak oil” production caused by geological depletion, and if we haven’t hit peak oil production, everything is more or less OK. In fact, the limit we are reaching is an economic limit, that comes far before world oil supply begins to decline for geological reasons. See my post, Low Oil Prices Lead to Economic Peak Oil.

The real paradigm is, “Limited oil supply leads to financial collapse.” This is true for both oil exporters and for oil importer. For oil importers, the problem occurs because they cannot import enough oil, and oil is needed for critical parts of the economy. The belief by economists that substitution will take place is not happening in the quantity and at the price level (very low) that it needs to happen at, to keep the economy expanding as it has in the past.

Limited oil supply first leads to high oil prices, as it did in the 2004 to 2008 period; then it leads to government financial distress, as governments try to deal with less employment and lower tax revenue. By the time oil prices start falling because of the poor condition of oil importers, we are well on our way down the slippery slope to financial collapse.

Growth Paradigm

The MSM version of this paradigm is, “Growth can be expected to continue forever.” A corollary to this is, “The economy can be expected to return to robust growth, soon.”

In a finite world, this paradigm is obviously untrue.  At some point, we start reaching limits of various kinds, such as fresh water limits and the inability to extract an adequate supply of oil cheaply.

Economists base their models on the assumption that the economy only needs labor and capital; it doesn’t need specific resources such as fresh water and energy of the proper type. Unfortunately, substitutability among resources is not very good, and price is all-important. In the real world, growth slows as resources become more expensive to extract.

The Green version of the growth paradigm seems to be, “We can have a steady state economy forever.” Unfortunately, this is just as untrue as the “Growth can be expected to continue to forever.” Even to maintain a steady state economy requires far more cheap-to-extract oil resources than the earth really has. (US shale oil resources, which are the new hope for oil growth, can only grow if oil prices are sufficiently high.)

We are very dependent on fossil fuels for making our food supply possible and for our ability to make metals in reasonable quantity. Fossil fuels are also necessary for making concrete and glass in reasonable quantities, and for making modern renewable energy, such as hydroelectric dams, wind turbines, and PV panels. We cannot keep 7 billion people alive without fossil fuels. Perhaps the quantity of fossil fuels consumed can be temporarily reduced from current levels, but with continued population growth, any savings will be quickly offset by additional mouths to feed and by the desire of the poorest segment of the population to have the living standards of the richest.

Unfortunately, the correct version of the paradigm seems to be, “Overshoot and collapse is to be expected.” This is what happens in nature, whenever any species discovers a way to way to increase its energy (food) supply. Yeast, when added to grape juice will multiply, until the yeast have consumed the available sugars and turned them to alcohol. They then die.

The same pattern has happened over and over with historical civilizations. They learned to use a new approach that allowed them to increase food supply (such as clearing land of trees and farming the land, or adding irrigation to an area), but eventually population caught up. Research shows that before collapse, they reached financial limits much as we are reaching now. The symptoms, both then and now, were increasingly great wage disparity between the rich and the working class, and governments that needed ever-higher taxes to fund their operations.

Eventually a Crisis period hit these historical civilizations, typically lasting 20 to 50 years. Workers rebelled against the higher taxes, and more government changes took place. Governments fought wars to get more resources, with many killed in battle. Epidemics became more of a problem, because of the weakened condition of workers who could no longer afford an adequate diet. Eventually the population was greatly reduced, sometimes to zero. A new civilization did not rise again for many years.

Figure 2. One possible future path of future real (that is, inflation-adjusted) GDP, under an overshoot and collapse scenario.

Figure 2. One possible future path of future real (that is, inflation-adjusted) GDP, under an overshoot and collapse scenario.

It seems to me that unfortunately overshoot and collapse is the model to expect. It is not a model anyone would like to have happen, so there is great opposition when the idea is suggested. Overshoot and collapse is very similar to the model described in the 1972 book Limits to Growth by Donella Meadows and others.

Role of Economics, Science, and Technology Paradigm

The MSM paradigm seems to be, “Economics and the businesses that make up the economy can solve all problems.” Growth will continue. New technology will solve all problems. We don’t need religion any more, because we now understand what makes people happy: More stuff! As long as the economy can give people more stuff, people will be satisfied and happy. Economics even can allow us to find “green” solutions that will solve environmental problems with win-win solutions (assuming you believe MSM).

The Green version of the paradigm seems to be, “Science and technology can solve all problems, and can properly alert us to future problems.” Again, we don’t need religion, because here we can put our faith in science to solve all of our problems.

I am not sure the Green version of the paradigm is any more accurate than the MSM media version. Science is not good at figuring out turning points. It is very easy to miss interactions that are outside the realm of science, and more in the realm of economics–for example, the fact high-priced oil is not an adequate substitute for cheap-to-extract oil, and it is the lack of cheap oil that is causing a major portion of today’s problem.

It is also very easy to put together climate change models that are based on far too high assumptions of the amount of fossil fuels that will be burned in the future, because economic interactions are missed. If debt collapse brings down the economy, it will bring down all fossil fuels at once, meaning that the vast majority of what we think of as reserves today will stay in the ground forever. A debt collapse will also affect renewables, by cutting off production of new renewables, and by making maintenance of existing systems more difficult.

The real paradigm should be, “Neither science and technology, nor economics can solve the problems of humans. We have instincts similar to those of other species to reproduce in far greater numbers than needed for survival, and to utilize all resources available to us. This leads us toward overshoot and collapse scenarios, even though we have great knowledge.

Because of our propensity toward overshoot and collapse scenarios, humans have a real need for a “moral compass” to tell us what is right and wrong. If there is no longer enough food to go around, how do we decide which family members should get it? Is it OK to start a civil war, if there are not enough resources to go around? There is also a need to deal with our many personal disappointments, such as finding that the advanced degrees we worked so hard on will have little use in the future, and that life expectancies are much lower. Perhaps there is still a need for religion, even though many have abandoned the idea. The “story line” of religions may not sound exactly reasonable, but if a particular religion can provide reasonable guidance on how to handle today’s problems, it may still be helpful.

Climate Change Paradigm

The MSM view of climate change seems to vary with the country. In the US, the view seems to be that it is not too important, and that it can be adapted to. Perhaps the models are not right. In Europe, there is more belief that the models are right, and that local cutbacks in fossil fuel consumption will reduce world CO2 production.

The Green view of climate change seems to be, “Of course climate change models are 100% right. We should rationally be able to solve the problem.” There is only the minor detail that humans (like other species) have a basic instinct to use energy resources at their disposal to allow more of their offspring to live and to allow themselves personally to live longer.

Unfortunately, a more realistic view is that climate change may indeed be happening, and may indeed by caused by human actions, but (1) we are already on the edge of collapse. Moving collapse ahead by a few months will not solve the climate change problem, and (2) collapse itself is an even worse problem than climate change to deal with.  By the time rising ocean levels become a problem, population is likely to be low enough that the remaining population can move to higher ground, and agriculture can move to where the climate is more hospitable.

Climate change may indeed cause population to drop even more than it would if our only problem were overshoot and collapse. But because the cause is related to human instincts (having more offspring than needed to replace oneself and the drive to use energy supplies that are available), changing the underlying behavior is extremely difficult.

Over the eons, the earth has been cycling from one climate state to another, with one species after another being the dominant species. Perhaps natural balances are such that the time has now come that humans’ turn as the dominant species is over. The earth is now ready to cycle to a state where some other species is dominant, perhaps a type of plant that can use high carbon dioxide levels. If this is the case, this is another disappointment that we  will need to deal with.

Nature of  Our Problem Paradigm

The MSM’s paradigm seems to be, “Our problem is getting the economy back to growth.” Or, perhaps, “Our problem is preventing climate change.

In a way, the MSM paradigm of “Our problem is getting the economy back to growth,” has some truth to it. We are slipping into financial collapse, and in a sense, getting the economy back to growth would be a solution to the problem.

The underlying problem, however, is that oil supply is getting more and more expensive to extract. This means that an increasing share of resources must be devoted to oil extraction, and to other necessary activities (such as desalinating water because we are reaching fresh water limits as well). As a result, the rest of the world’s economy is getting squeezed back. See my post Our Investment Sinkhole Problem. Squeezing the world’s economy creates great problems for all of the debt outstanding. The likely outcome is widespread debt defaults, and collapse of the world economy as we know it.

The Green paradigm seems to be, “We have a liquid fuel supply problem.”  If we can solve this with other liquid fuels, or with electricity, we will be fine. Many Greens also emphasize the climate change problem, so their big issue is finding electric solutions for the liquid fuel supply problems. There is also an emphasis on local food production, especially with respect to perishable foods.

Unfortunately, the real problem seems to be, “We are facing a financial collapse scenario that is likely to wreak havoc on all energy sources at once.” Using less oil products may be helpful for a while, but in the long term, we are dealing with an issue of major system collapses. Using less of a particular product “works” as long as the supply chain for that product is still intact, including the existence of all of the factories needed to make the product, and the existence of trained workers to operate the factories. Banks also need to remain open. World trade needs to continue as well, if we are to keep our supply chains operating. The real danger is that supply chains for many essential services, including fresh water, sewage disposal, medicines, grain production, road repair, and electricity transmission repair will be interrupted. As a result, we will need to find local solutions for all of them.

The situation we are facing is not at all good. While we can do a little, it will be very challenging to build a new system that does not use fossil fuels. In the past, when the world did not use fossil fuels, the population was much lower than today–one billion or less.

Also, in the past, we started simple, and gradually added complexity to solve the problems that arose. This time around, we need to do the reverse. We already have very complex systems, that are too difficult to maintain for the long term. What we need instead is simpler systems that can be maintained with local materials. This is not a direction in which science and technology is used to working.

Creating new systems that require only local resources (and a few other resources, if transport can be arranged) will be a real challenge. Areas of the world that have never adopted modern technology would seem  to have the bast chance of making such a change.

Importance of Tomorrow Paradigm

MSM seems to assume that we can save and plan for tomorrow. Greens have a similar view.

Perhaps, given the changes that are happening, we need to change our focus more toward to day, and less toward tomorrow. How can we make today the best day possible? What are the good things we can appreciate about today? Are there simple things we can enjoy today, like sunshine, and fresh air, and our children?

We have come to believe that we can and will fix all of the problems of tomorrow. Perhaps we can; but perhaps we cannot. Maybe we need to simply take each day as it comes, and solve that day’s problems as best as we can. That may be all we can reasonably accomplish.

This entry was posted in Planning for the Future and tagged , , by Gail Tverberg. Bookmark the permalink.

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.

224 thoughts on “Reaching Oil Limits – New Paradigms are Needed

  1. Money is a representation of use value. It does not have a use value in itself other than facilitating exchange. The use value of bread is that I can eat it and get energy and nutrients from it. I cannot eat money and it is only useful (for exchange) whilst I can exchange some money for a loaf of bread. This is uncontroversial. We all agree on this.

    Gail has also highlighted that money is a promissory system. Indeed, the term bank “note” comes from the term “promissory note”. Gail’s emphasis on the possible looming problems caused by any breakdown in the promissory system (all money and finance essentially) is a completely valid stance. As Gail has said, in these conditions of breakdown “it becomes impossible to carry through on those promises.” This too is correct.

    At this point, I want to explain exactly where my analysis and Gail’s analysis diverge somewhat. I hope Gail will carefully consider my points. We are coming from the same analytical starting point (as exemplified by the above statements of agreement about what money is and also by our agreement on the resource limits to growth), but we differ somewhat about what might be possible at the crisis point. Gail takes a more standard or orthodox economic view about what will be possible at that crisis juncture (not much essentially). I take a more theoretical approach and say “theoretically some adjusting changes are possible.” At the same time, I say these changes won’t be easy and they won’t save everything (indeed far from it).

    Let me be more specific. When the current promissory system (money and finance) breaks down in whole or in part, Gail, you essentially say that production also breaks down. More specifically you say or strongly imply that production breaks down further than that which would simply be explained by resource shortages. That is, over and above the breakdown that is materially mandated by resource shortages, you see more extensive and earlier breakdown being caused by financial problems (faliure of the promissory system) and their knock-on effects of bankruptcies, lay-offs, unemployment and so on.

    Again, I would say this is correct but I would two riders or conditions. One, this is correct in the early stages of the crisis. Two, this reamains correct whilst the government takes no action or the wrong action. However, there are actions the government can take to ameliorate the the financial aspect of the crisis. The material aspect of the crisis is fundamentally immutable as we know.

    However, your analysis seems to assume that the government will never or can never take action on aspects of the financial crisis. My analysis says that governments can and do take actions to ameliorate financial aspects of crisis. My analysis suggests that resources, plant and people need not be left idle solely due to financial crisis. You seem to view all aspects of financial crisis as irremediable. You seem to assume that resources, plant and people must be left idle if the current financial system (the one that is failing) cannot put them to work. This is manifestly incorrect. My example of GM proves this empirically.

    Without government intervention, GM would have failed comprehensively and the USA would either have ceased to make cars or ceased to make cars in any siginficant number or ceased to make cars from a US owned and controlled company. Those more acquianted with precise details can let me know which it is. The US government, in its wisdom, intervened with fiat and special powers which exceeded and negated the standard financial rules. The GM plant did not become idle and GM workers were not (at least not totally) laid off.

    Whilst one can question the wisdom of state support for automobile manufacture, one cannot question, in my opinion, the wisdom that says that an advanced economy cannot abandon medium and heavy manufacture. If all else fails the government must intervene to see that the nation continues to have that capacity at least while resources last. And this is exactly what happened. The government intervened and superseded the standard economic and market rules of the free market economy and finance to ensure that a vital national function continued.

    The same thing will undoubtedly occur if, for example, electricity of gasoline supply is threatened by financial problems over and above actual resource exhaustion problems. Your government will intervene to maintain supply so far as that supply is possible within real resource constraints. Will this be as good as a smoothly functioning free market system when resources are still plentiful? No. Will this be better than allowing the system to break down and deacy further and faster than it should do merely due to financial problems? Yes.

    I believe your analysis underestimates the capacity for positive state intervention in financial crises. This is a common American mistake (I hope you do not mind me saying so) as your nation and people are heavily ideologically biased to laissez-faire capitalism with a marked suspicion of government and a strong bias that government intervention is never helpful.

    If anything causes the US excess trouble (over and above that in the pipeline due to looming resource shortages) it will be this ideological blindspot to possible partial solutions delivered by government. This is not in any way a suggestion to move to a full command economy, a move which never works in my opinion. It is a suggestion that the government will need to play a larger, active role in dealing with market and financial failure. Otherwise, the scenario you paint of financial failure leading and exacerbating resource depletion will indeed come true.

    • I think that where the difference in our views comes is with respect to what happens when the financial crisis of the type we are talking about takes place.

      In my view, financial crisis is pretty much coincident with government collapse. Once it becomes clear that a government can’t keep its promises, then it seems likely that that government is not long for the world–it will be overthrown or at best, voted out of office. If the usual problem is the situation I have described–there is no possible way to collect enough taxes to run the current government, then there really has to be a very major governmental change to make the new government much cheaper to operate. For example, the central government may disappear altogether, or a dictator may take over and wipe out most social welfare programs. If central government disappears, trade becomes much more difficult, reducing manufacturing. If a dictator takes over and wipes out most social welfare programs, many fewer buyers will be able to purchase goods, also having a very negative impact on manufacturing. In neither case will the weakened government be able to do very much.

      It is the government breakdown, and the cutbacks in government spending, and the breakdown in international trade agreements, that lead to interruption in manufacturing capability. Money per se is not necessarily the problem.

      • Gail

        Latin American experience shows that the new regimes will probably keep welfare going in some form, it buys votes (this assumes the survival of sham democracy. What you don’t want to be is middle class – wealth will be extracted until you are among the destitute.

        There is some hope in having just a little property, too small to be seized – in Argentina, people with very, very small mortgages were protected by legislation, when everyone else fell liable to repossession. It was part of building a grateful voting block for the regime.

      • Gail
        The ‘international trade agreements’ mostly just remove barriers to trade and then global capitalism does what it does. Governments mostly intervene when they don’t like the results–such as the rescue of Chrysler and GM and the TBTF banks and AIG. And look at the trade barriers erected against Cuba. Back in the good old days, smuggling was a respectable trade…an example of human creativity in a world of government suppression.

        Look at Apple selling bonds in the US while it holds billions in tax shelters. Corporations can move money around without any help from governments…and despite the intentions of governments. The governments are, of course, fighting back.

        Government breakdown of regulations cuts both ways. Sometimes corporations welcome government regulation–such as the requirement that everyone in the US buy Obamacare. Usually corporations manage to make regulation a toothless tiger with regulatory capture. For example, the Texas hearings into the fertilizer plant blast show that no state agency was really responsible for the safety of the plant. The agencies point to the Fire Marshall in the town…a town that doesn’t have a Fire Marshall.

        Government regulation is frequently aimed at making the world safe for corporations and difficult for ordinary people. For example, the European Union is continuing their effort to outlaw heirloom seeds which have not been proven to be ‘safe’. The potato may have been bred in the Andes 500 years ago, but you won’t be able to plant it in Ireland because it hasn’t been through an expensive lab process. This is not just another example of bureaucratic stupidity. I imagine that the big seed companies favor outlawing the heirlooms. It is to the big companies advantage that people not ever see any alternative to the one they are offering.

        In the US, the big food companies continue to pressure the FDA to ‘regulate evenly’ all food. So the FDA comes out with draft regulations which essentially require anybody who might be thinking about selling a cow to operate a thousands of cows a day packing plant with government inspectors on hand. Joel Salatin has written eloquently about the grave danger government agencies pose to small farmers. It isn’t so much that the bureaucrats sit around thinking of ways to persecute small businesspeople–it’s that the Big Guys won’t leave it alone. They don’t want people to know that meat doesn’t come shrink wrapped in a plastic tray in a grocery store.

        We get the same thing with housing. The county I live in has regulations which make it hard for people to build small, handmade houses. The county has looked the other way in a significant number of cases. But the neighboring county (being better educated and richer) drove away a young man with a homemade trailer that he was living in.

        Food trucks are the staple way working people eat lunch. Yet Chapel Hill has made it impossible for food trucks to operate in that supposedly ‘progressive’ place. During the debate, one restauranteur wrote the local newspaper and said ‘our business is booming…and our kind of people don’t want to have to walk down the street where people are patronizing a food truck’. Needless to say, that restauranteur had a large clientele of Southern Belles marrying Rhett Butlet types at great expense.

        It MIGHT be awful to see the governments in the US collapse…but it might be fun to get rid of the b_______.

        Don Stewart

        • Don

          Giant agribusiness just want to crush small food producers. Full stop. Now they use ‘food security’ arguments, going with the times, to condemn small producers on grounds of inefficiency and lower production, ie they are a ‘threat’ to world food security!

          The problem for people trying to make a transition, is doing so successfully within this very hostile environment.

          The EU is certainly a nightmare of over-regulation without any thought of the burden it places on ordinary people.

          • From Gene Logsdon’s blog today, reprinted by
            Most tell me that they are leery of big government but that it is the only entity powerful enough to maintain a fair playing field between big corporations and small business if only it would. I have this hunch, or hope anyway, that these are the people who are going to bring some sanity not only to our economy but to our politics. And along the way, some mighty good food too.

            He is talking about the explosion of people in Ohio who are creating food related small businesses. I point out the ‘if only it would’. Everyone who looks at the issue objectively (at least in the US) concludes that the government is basically backing the Bad Guys.

            Don Stewart

          • Dear Xabier
            If one asks oneself WHY the US government almost always backs the bad guys, then I think power is the answer. Barack Obama recently met with all the TBTF bank heads. Nobody knows exactly what they said to each other.

            I think it goes like this. Obama describes what actions he want them to take. The respond with demands about what he will do for them IF they do what he wants. Finally, sitting around a table, these powerful people agree on something. Obama can command the Executive Branch and the bankers can command trillions of dollars of money. They get personal satisfaction out of ‘being in control’.

            Now consider Obama addressing a meeting in Cedar Rapids, Iowa of about 5000 country bankers. 5000 country bankers do not speak with any single voice, and cannot effectively negotiate. Therefore, Obama cannot discern what it is he might do for them, even if he wanted to. So Obama’s real position is the continued consolidation of the banking system into something that he can influence. Politicians don’t like anarchic enterprises.

            Don Stewart

        • Don

          I agree with you entirely: decisions are made by those few who have concentrated executive and financial power in their hands, and to hell with the rest.

          In the same way, the world was settled by ‘three old men and a boy’ (a young official who took the notes) after WW1; and Roosevelt, Churchill and Stalin blithely settled the fate of Eastern Europe at their various conferences. I once met one of the diplomats who dealt with Stalin, he said it was all very personal indeed. (He had a lovely story, too, about a French diplomat who said to him regarding the Czechs and their betrayal by the West: ‘Of course, you are going to give him (ie. Hitler) that country, aren’t you? Now, I think e should dress for dinner. ‘ A whole country, mark you.

          Elections don’t regulate this process at all. The Swiss system of referenda is interesting, but then that’s a micro-state. We are dealing with Empires. Crumbling ones.

        • I agree on government regulation. Insurance companies are regulated by states. That means that there are 50 sets of conflicting, not too strong, laws. No insurance company wants federal regulation, because it might actually do something. Many companies are captives, which are domiciled offshore, and have even less regulation (and taxes).

          In case of insolvency, most states have post-insolvency assessment funds, that assess the companies that are not bankrupt, to pay for claims related to the bankrupt company. That method only works with an occasional small failure. If there are many large failures, from a systemic problem, it doesn’t work at all.

      • Gail- 1930s Germany was able to build new infrastructure and get people working – or at least employed as soldiers despite the US calling in their huge loans to pay for their own infrastructure projects to relieve unemployment like the Hoover Dam. I should do my own research but despite the lack of money major works were still carried out.

        the chaotic systems like Afghanistan, Congo and Somalia tend to try out dictatorships before they end up a claptocrasy. None of these option appeal to me- I was rather hoping for the Ecotopia of a fictional NW America.

    • Ikonoclast

      I’ve noticed that some Americans get quite excited about the idea of State action – it’s a novel idea to them!
      And many intelligent observers in Europe, Britain and Latin America have the gravest reservations – based on hard experience! Recently, in Britain, it sometimes seems that nearly everything the State touches gets screwed, to put it bluntly……

  2. I need to add an addendum to the above. Gail is correct in saying that much current debt (especially private debt) implies a promise to repay the creditors and thus a promise that they, the creditors, will be able to reinvest (create more plant or stock) or consume in the future. These promises cannot now be kept.

    Those owing the debts will not be able to generate the income to repay the debts due to resource shortages limiting production. Thus the debt must be defaulted upon. Default destroys the debt monies and thus default destroys the promises; the promise to repay and the implied promise that the creditor can further invest or consume. Default realigns the financial system with future real consumption possibilities. Default is completely good and correct in this empirical sense.

    Where future investment monies are not available due to defaults, this may impede future production or this may just realign the lesser available investment funds with the lesser available places for productive investement (the latter being due to resource depletion). Where it is the former and the government discerns idle resources, plant and workers, these can be put to work by government mandated actions, by the extra-market and extra-financial operations that an effective government always has within its power.

    • Besides the government breakdown issue I noted in my other response, I would also point out that in order to put the idle plant to use, there is a need to buy energy resources to make the plant operable. If the problem in the first place is that the government is “broke,” then getting those energy resources from another country may be out of the question–the other country won’t sell the energy resources for the kind of money that the broke country can provide. (Think of Greece.) Perhaps if the country has the energy resources within its own territory can it do something about the situation–send troops over to take the energy resources. Of course, then they won’t be available for the original purpose. We get back to the energy issue again.

      • Gail

        In a crisis like that which is taking place in Argentina, which deals a huge blow to an economy but does not stop it completely, with goods continuing to move, people to be fed in some form, etc, what one sees is the sudden impoverishment of the great mass of people; the near-complete destruction of middle-income groups; the comparative immunity of the very rich; and the creation of a pauper mob manipulated by the regime that comes to power in the wake of the Crisis (in return for welfare.)

        Violent crime rises dramatically, and life is in every way degraded – intermittent electricity, fuel shortages, deteriorating food and water quality, and so on. All the organs of State remain in existence, police, army, town council – except now they are looking for bribes and may be setting out to rob you. The State is there, it just doesn’t do you much good and often isn’t visible. It’s a step down from a fully-functioning advanced economy, but not quite into Hell.

        Argentina is well worth studying, although I believe there are few reliable economic statistics due to State manipulation. Many elements in the Argentinian situation are already visible in Spain – destruction of middle income groups, sharp rise in violent crime and robbery, repressive State measures, immunity of the elite, everything obscured by Stet propaganda: even saying that young people fleeing Spain are ‘seeking adventure, not desperate for jobs’!!!!!

        • Thanks for that description of Argentina. I used to work with an actuary from Argentina. She would tell me about the problems her parents were having, and it agrees with your description.

          When I read your description, some of it struck me as also matching up with the current state of Russia, in its degraded state. When I visited Russia last year, there were many complaints about how impossible it was to get public officials to take action on any complaint. Many problems with corruption were noted. The water in Russia is nearly all non-potable, even though it was, prior to 1991. Roads are not good at all, especially if a person gets away from the main roads. There has been outside investment in Russia, but that doesn’t fix basic infrastructure, like roads and bridges.

          • Yes, look at Argentina for an example of what a currency crisis looks like as they had one in recent years. I remember the pictures of the torn up streets and broken glass after the riots.

            Tonight I am listening to the latest James Howard Kunstler podcast about the old inland waterway system and how it is still there. Here is the link if anyone wants to listen, it is a good talk, he is talking to a guy that is restoring the old ways back there.—

            — 18 Apr 2013— JHK talks with Erik Andrus of the Vermont Sail Freight Project. They are building a boat dedicated to shipping Vermont farm products to New York City and other markets via Lake Champlain, the Champlain Canal, and the Hudson River.


            • Yes, I agree with you Gail on New York. I do not think we can feed them all with “Sail Barges” but it would perhaps help support a much smaller population like in the very old days. I am thinking that most folks in the city will not have much of a chance when and if this thing hits hard.

          • Gail,
            In regards to the finance end of things, I was also looking at this main stream media article tonight, here it is pasted in…

            Treasury Chief Warns of New World If US Defaults on Any Bills

            Thursday, 25 Apr 2013 03:47 PM
            The United States might run into trouble accessing debt markets if it defaulted on any of its financial obligations, even if it were able to keep up payments on government bonds, Treasury Secretary Jack Lew told Congress.

            Lew was responding to questions about a bill in the U.S. House of Representatives that would prioritize payments on government bonds and Social Security if the United States hits its debt limit, in order to avoid a credit default.

            If passed, the law would make it easier for Republicans to use a fight over the nation’s legal borrowing limit, known as the debt ceiling, to try to extract spending cuts from President Barack Obama.

            “The thing I would urge you to consider is, you enter a world we’ve never been in once the United States is not meeting its obligations,” Lew told a House subcommittee. “We cannot assume markets will function in an orderly way if that (happens).”

            The current suspension of the debt limit expires on May 19, although the Treasury can use emergency cash-management measures to push off the day of reckoning into August. The date could fall even further in the future given unexpectedly strong tax revenues and the possibility of a big payment to the Treasury from housing finance giants Fannie Mae and Freddie Mac.

            Lew has said it is impossible to try to pinpoint when exactly the use of these emergency maneuvers would be exhausted due to a delayed tax filing season and uncertainty about the effect of steep government spending cuts known as the sequester.

            Once the United States reaches its debt limit, the government faces the prospect of defaulting on financial obligations, and potentially its debt, which could shake up markets and damage the economy.

            Staff at the International Monetary Fund warned that failure to smoothly raise the U.S. debt ceiling could do serious damage to the global economy.

            © 2013 Thomson/Reuters. All rights reserved.

            Read Latest Breaking News from

            • Thanks! Yes, the US is not far away from defaulting, and there are a lot of other countries not doing well either. If interest rates should go up (perhaps because of the end of QE, or because of default) we would be in particularly bad shape.

          • Gail

            If you dig around on the net, or know people from Argentina (my step-mother is from Buenos Aires, and friends of hers fled to Spain because of the violence, particularly against women) the information can be found. But for anyone relying on the MSM, the impression is: ‘Oh Argentina, they had a Crisis a decade ago didn’t they, but it’s all better now isn’t it? Jobs being created again, good agricultural exports to China, and so on.’

    • The story is Court Deals Blow to Ecuador Plaintiffs in Chevron Case.

      An Ontario court rejected an attempt by Ecuadorean plaintiffs to collect a multibillion-dollar environmental award from Chevron Corp. in Canada, giving the oil company a fresh victory in a legal battle that has sprawled far beyond the Amazonian jungles where it began.

      The Ecuadoreans sued Chevron for contamination in the South American country, and in 2011 a court in Ecuador awarded them a verdict that has risen to $19 billion after appeals. Chevron has refused to pay, arguing it isn’t responsible for the contamination and attacking the ruling as illegitimate. Since Chevron doesn’t have assets in Ecuador, plaintiffs have sought to collect the judgment against Chevron subsidiaries in Canada, Brazil and Argentina.

      For those who aren’t familiar with this, I have written that case against Chevron is pretty absurd. I saw a good many of the details with my own eyes. It is more or less an attempted shakedown by the Ecuadorian government using false testimony and very unfair court proceedings. If there were truth to it, Chevron probably would have settled.

      The Dubious Lawsuit Against Chevron – Part 1

      A Baseless Lawsuit against Chevron in Ecuador

  3. Adding to the complexity is the way prices for fuels are set by an auction-style system. If buyers come to the market today wanting 100 barrels of oil at the price of yesterday’s close, and there are only 99 barrels on offer, the price will rise, not by 1%, but by whatever it takes to achieve 1% demand destruction, which might be a 10% or more price rise if we are getting down to the inelastic part of usage.

    This is no way to run the serious business of allocating fuel during a shortage. The (Australian) Liquid Fuels Emergency Act mandates what happens when an emergency hits. This Federal legislation has mirroring legislation in all States and Territories, and a Council of Ministers to oversee it. I expect other countries have similar legislation, or legislation-in-waiting ready to be passed quickly. There will also be an extended grouping that includes oil refiners and importers, who have all signed up to cooperate. Usage will be divided into Necessary and Discretionary.

    The Necessary category includes: the Government (3 levels in Australia), the armed forces, police, fire services, emergency services, hospitals and old-age care facilities, the courts, prison system, farming, food processing facilities, food retailers, food transporters, water reticulation, sewerage, raw energy producers, electricity producers, telecommunications, radio and TV stations, public transport, taxis, … and much more. This list was removed from drafts when the final Bill was presented to Parliament, but I have it in my archives from a web-site that no longer exists.

    For the Discretionary category there will be rationing. The ration books have already been printed and distributed around the country. The ration may be set to zero, at the discretion of the Council of Ministers. Queuing at petrol stations will not be allowed to disrupt traffic on the roads. Police/Army will regulate traffic and queuing. Strictly paperwork and payment first, fuel second.

    During the review period for the changes to the Act in 2006, I phoned the relevant department for some detail or other, and got talking to someone who must have had a good liquid lunch, and I asked him what proportion of the total would be in the Necessary category, given the extensive list. He said no one really knew but they were struggling to get the numbers down to 70%.

    So don’t think for a moment that they aren’t planning ahead, or that it will be BAU and free-market rules when the time comes.


    • Your summary mirrors my impression of what would happen with rationing.

      If there is any left to ration, that there gets to be a host of details. Do you mail out ration booklets, and if so, using what list? How do you prevent theft? Do you allocate based on number of cars, or should people with jobs be given preference, so that they can get to work? If you hand out ration booklets, that means more trips, especially in rural areas. How do you distinguish between parts of the country where very little fuel is used (Hawaii comes to mind-distances are very short) and places where much more fuel is used (Wyoming–the nearest grocery store may be 30 miles away)?

      • the concept of rationing can be twinned with the delusion of ‘downsizing’

        we have all become accustomed to buying what we want rather than what we need. We ”need’ 2500 calories a day as food, but we ‘want’ and expect far more. Thus the millionaire can grab as many calories as he wants, and burn them as food, gasoline, jet fuel or to heat his swimming pool—all ‘calories burned’–we all do that to a greater or lesser degree, 
its called market forces.
If on the other hand, we are all restricted to some kind of basic calorie usage, (whether fuel or food) then the economy will collapse faster than the food supply, because the millionaire burning all those calories of energy gives employment to lots of other people.We ration food, and the suprmarket system shuts down immediately, We ration jet flights, and millions are thrown out of work, same for auto workers and gasoline. when gasoline was rationed in wartime, autoworkers were building tanks. and planes ie–employment was sustained by war work. Soldiers drove the tanks and burned gas. ultimately employment is always dependent on energy consumption in one form or another. Although we had wartime rationing, fuelburning increased. In fundamental terms, wars are about energy availability and use,
        We are exhorted to slow down use less, but our society has no brakes and no reverse gear and the accellerator is jammed to the floor. We have created a society dedicated to unlimited fuelburning because that provides our sustenance. No, it cant go on indefinitely, but we will let it do so until a force greater than ourselves stops us, when our infinite demand smacks into the wall of finite resources.
        And then it will be all out conflict. As James Lovelock puts it so chillingly, Man is a hunting carnivore, not a gentle gardener
        man’s eyes face forward for a very good reason, we are predators.

        • Actually, we need more than the 2500 as food. We also need some calories to cook part of that food–we cannot eat it all raw. (Finely grinding might also work, but also uses calories.) In cold parts of the world, we need clothing and some sort of shelter. We may even need some heat in winter. All of these things send calorie needs up, especially the closer you are to the poles.

          But you are probably generally right.

  4. davekimble2, I think your reply supports what I have been arguing. That when the chips are down, governments (of advanced, stable countries like Australia and the USA) will take extensive measures to ensure key functions of the nation state and civil life continue as long as possible. This will entail rationing and impressment (taking or directing by state force) where necessary.

    I do not think this will immediately lead to breakdown of government, government functions and civil order in nations like Australia and the USA. In fact, just like wartime measures it will have widespread civil support when it is perceived that the nation faces an existential crisis and cannot survive short to mid-term without taking such measures.

    On the other hand, other nations with no “fat”, no leeway, will quickly succumb. Haiti springs to mind (once aid dries up) as indeed does say Mexico. Some nations are there already. I think it is pretty clear that the scenario Gail is painting is already happening in places as far apart as Nth Korea, Tunisia, Egypt, Syria and maybe even Greece and Spain not to mention considerable parts of Africa and some parts of Asia, Sth America and Mesoamerica.

    I think Gail will surprised by the resilience of government and civil order in stable, developed countries. Decline may well progress for a generation or more before these states break down, if they break down. They have successfully endured severe depressions, world wars and civil wars before. (Well Australia hasn’t had a civil war.) The “Long Emergency” that is coming, to use Kunstler’s term, will not easily break down state and civil order in advanced countries before say 2050, IMO. Then again I could be wrong. Nothing is certain but I think the probabilities and historical precedents support me on this.

    Long term, Gail may well be right. By 2100, all stable nation states as we know them now could be gone though I hope not for the sake of what will remain of the future generations.

    Very long term, say 10,000 years, I suspect the only place habitable by humans will be Antartica which by then will be a sub-tropical or even a tropical zone. It all depends how far we look ahead I guess.

    • Yes, we are in broad agreement – TPTB will do anything to keep things under control, including the scraping of free markets and the Constitution, FEMA camps, whatever it takes. The only question is how long they will be able to keep on with that state of affairs, given that fossil fuels are running out. You suggest advanced countries could manage till 2050. I wake up each morning and switch on the radio to hear whether it has already happened. Who would be surprised to hear that the Euro had collapsed while you slept? And what would be ramifications for the Dollar, Sterling, Yen and Renmimbi?

      If it takes 70% of the world’s petrol/gasoline consumption to keep the most basic functions of civilisation going, and I think it is actually a lot higher than that, we are in a very precarious position.

      Yesterday saw the northernmost tip of Australia threatened by a Category 2 cyclone, in May !, while temperatures of -3°C and snow flurries were experienced in the south.

  5. Gale, do you know how the energy accounting of countries works? If, for example, Canada produces 1M barrels of oil from the tar sands, but burns 0.25M barrels of diesel in the machinery needed to produce it, how much oil does Canada report to the world that it produced?

    • Canada doesn’t report how much energy is used to produce their bitumen and crude produces. Most of the energy used to produce oil is natural gas (just as most of the energy used to produce ethanol is natural gas). Natural gas is a lot cheaper than oil, so even at a 1:1 ratio, it might very well be a profitable exchange. The fact that oil is liquid makes it much more valuable than natural gas, because a natural gas is hard to transport. This is one reason why EROI calculations are not necessarily terribly helpful. It is also a reason why “Gas to Liquids” plants are built.

      To make the Canadian situation more confusing, Canada is both an importer and exporter of oil. The Eastern part of Canada has refineries that process light oil, which they traditionally have imported from Europe and other areas. They are now having trouble getting enough light oil imported. I believe that some of the Bakken oil has ended up being exported, for use in the Canadian refineries that can use that kind of oil.

      The Western part of Canada has the oil sands. Most of the bitumen from the western part of Canada is sent south to the US for processing. So part of the natural gas used in processing the bitumen is US natural gas, used in “cracking’ the long molecules.

  6. Thanks for another excellent article, Gail. With equally excellent comments also.

    I would recommend an interview of Steve Kopits by Steve Andrews, which sheds further light on the relationships of oil prices, capital expenditures on oil exploration and production, geologic and technologic factors, and factors such as national policy and taxes, on the willingness (and ability) of the marginal consumer to buy at the marginal oil price.
    I think Kopits’ views are consistent with Gail’s, and help explain the relatively narrow range of oil prices in recent months.

    Nicole Foss made the case for a potentially rapid devolution of a national financial system in a transcript of a recent talk.
    “Because the world of finance is mostly virtual, and the time constant for change in virtual systems is really short. So what happens is when you reach a limit in finance – and these limits are endogenous, you don’t need to trigger an event – you reach a limit in finance, and the changes can be extremely rapid. So if you look at what happened in Cyprus for instance, in two weeks they went back 50 years – they went from being a modern economy to having the banks closed, the ATMs empty, the shops shelves mostly empty, a cash-only economy, capital controls, and the value of these banks went from their full value down to next to nothing in a very short space of time. And so when you have the value of human promises suddenly disappearing, you crash the system.”

    I really appreciate your big picture analyses and syntheses.

    Bob H.

    • You are welcome. I saw the interview with Steve Kopits. It is very good. His thoughts are quite similar to mine.

      The one thing Steve doesn’t mention is the increase in credit outstanding that is fueling what he calls the “carrying capacity” for the oil price for each of these countries. He quotes a US $95-$100 barrel Brent carrying capacity for the US, and of $115-$120 barrel carrying capacity for China. If credit starts contracting, those carrying capacities suddenly start decreasing. This is another issue, over above geology and technology that he mentions, that determines how much oil can be extracted.

      This debt connection is an issue Nicole Foss is particularly concerned about, and I am too.

  7. Following from Steve Kopits comments, it occurs to me that the following set of data would be interesting if it could be compiled. A time series of total Capital Expedntiture (CAPEX) in each energy source compared to total energy produced from that energy source. Some national, regional and world data for the last 20 to 50 years might be interesting. It might all have to be inflation adjusted to be expressed in constant dollars (say 2005 dollars). It might also be a heck of a lot of work but Gail you have the time and expertise, right? 🙂

    • I am not sure that I have the data sets. Maybe someone could point me in the right direction. Steve Kopits works for a consulting firm that has access to some databases that I don’t have. This is a link to Steve’s presentation from the last ASPO-USA conference last December.

      Steve uses Barclays Capital E&P Survey for capital spending. Needless to say, oil and gas are combined.

  8. Responding to this article today at

    I wrote to my children describing the probable decline in both fossil fuels for heat and for electricity from any source and then gave them the following advice:
    This will put a premium on peasant girls as wives–they grew up arising at 4am to milk the cow…and they are mostly dumb enough to think it is a privilege. If you can’t find a sturdy peasant girl, I recommend reading John Muir’s book about his early life as a school teacher in Wisconsin. He hated to get up in a cold room and put on frozen clothing and start a fire and go to the school to start a fire so the room would be warm when the students arrived and shovel the snow so they could get into the classroom. He made a lot of inventions to help him out. One invention involved a bed which became vertical and stood him on his feet so that he could not snuggle back under the covers.

    (Now for all the literal minded, please note that I have a dry sense of humor–no slur on peasant girls is intended. The slur is on those who think they are entitled to arise in a warm room, put on warm clothing, and have ready a warm breakfast, get in a warm car, and drive to a warm office building on plowed and salted roads and make money to buy a big screen TV.)

    Seriously, I do think it is worthwhile to read Muir’s book because it describes a world we may see again in the not too distant future.

    Don Stewart

    • Don

      It’s just so hard to choose a mate:

      One of my family married a dirt-poor peasant girl -all she wants is two cars, TV, holidays, etc. She’s bankrupting him…… Most of the peasants in Spain have voted with their feet and left the land for the ‘big city’ (even when it”s a provincial hole.) The life of their ancestors is just too hard for them.

      My English great-grandmother, however, was brought up in a prosperous London trade family, eating fillet steak for breakfast, was not allowed to learn to cook or anything practical, and had her own carriage when she married. But when the early death of her husband threw her into great poverty,(as so often then) she buckled down to things and showed how it’s done. Amazing woman, whose memory we all venerate.

      It’s all in the character, not the background, perhaps?

    • I think living where I live (Brisbane, Australia) will be a big advantage when the energy crisis hits. For a start we need no heating. We use a little in winter but that is a luxury not a necessity. We can easily survive in comfort with one more jumper and one more blanket on the bed. It never snows or sleets here (nowhere near it.) In summer, we use some aircon in one room for comfort for the two hottest and most humid months of the year but could easily survive without aircon.

      We can and do make all the hot water we need from solar power. Our solar PV panels make twice the power our house uses but of course we need to be connected to the grid to sell extra power and get power back at night. We’ve gone from paying $2,500 per annum for power to getting all our power free (apart from the up front capital cost) and getting $2,500 p.a. profit on top of that from selling extra power. Without solar subsidies, our profit would be about $1,250 p.a. Our capital investment will pay itself off in 5 years and produce power for 20 to 30 years.

      I will happily shift from an IC petrol driven car to a small electric car when they become affordable. I suspect electric power, electric cars and decent roads will be available in Australia for at least another 20 years. Hard to predict matters beyond that. I do expect food to become much more expensive here over the next few decades. I suspect the percentage of my household budget spent on food will double or treble. That’s no big deal. I will lose excess weight and waste less money on other things. It won’t bother me.

      Of course, large events like wars sweeping the globe could puncture my little bubble of complacency. It’s just to hard too predict what will happen in that regard. However, if I lived in a snow swept place (in winters) other than say New Zealand I would be getting the heck out of there. There’s no way (given current trends) there’s going to be enough energy for heating and all other needs. Don’t move near the coast, onto flood plains or into cyclone, hurricane or twister regions either.

      Just sayin’. 🙂

      • Hello Ikonoclast,

        We live in a small town in Oregon USA. I am here in Small Town America.

        I hear you man, where we live in Oregon we have a big Hydroelectric Dam, but when I looked at Google Earth at the power lines that leave the dam they bypass my city and lead away from us to the main cities in the state. So I am not sure the Dam will help us unless the locals cut the lines and reconnect them to our local small town. I do know the locals will not take kindly to big city folks coming here to hunt their lands and fish and that could be a battle in itself someday perhaps if it comes to that.

        Not much work here — But we do have large farms, lakes and rivers and hunting nearby. You know I guess that is the best we can do moving up here. Spring is a busy time and we are busy with the food gardens which grow well here, it is hard to grow enough to eat even if you preserve and dry your harvest. We really still do buy so much from the store, more than I like.

        I do feel better here in this kind environment and maybe it is a false sense of security knowing I am amongst many strong men, loggers, hunters etc. This is the place I chose for my wife and I and you know these are also more pleasant places to live out your old age anyway no matter what happens, Even here we would see a terrible time if the grocery or gas trucks stopped running, so many dependent on checks and outside supplies. I do think a good part of the town would perish if we had to suddenly hunt for food and needed things even here.

        Just cherish each day as a gift. Each healthy day on Earth is a special day!

        • Scott


          It does indeed sound like a sane and healthy environment where you are.

          I suspect rural communities with families used to working, and able to hunt and fish, will pull together in the right way, if it is not too extreme a shock that’s coming. A strong Church community will probably help, too: after all, Christianity has strong communitarian ethics, and can help to moderate violent impulses. Here in England, about 10% of my village are semi-criminal people on welfare already (drink and drug problems, too), they lie and cheat amongst themselves, but as I have said, they stand out and one won’t make any mistakes trusting them!

          In Argentina, the specific problem that rural areas had were: 1/ Food production heading straight out of the rural areas to the cities and to earn foreign currency abroad (esp. China), so lots of malnutrition for those who were not well-connected to farmers and ranchers, and 2/ When policing really collapsed, very large, well-organised gangs laying siege to bigger properties, to rob and rape – due to the economic collapse and the black economy, there was a lot of money and gold held in such houses. They would take days to break in.

          Some people who lived through the recent Balkan wars recommend actually being prepared to abandon your house for a time, leaving things like alcohol for gangs to loot, and then returning when it’s all over. This is actually an old peasant trick from Europe -you can’t win, you dodge the blows. Another trick is to make your house look as though it’s been robbed already…………..

          Another tip from the Balkans is never to give personal food charity – maybe take it to a food bank anonymously, but if you do it personally you are signalling that you have a huge excess – people died for this (again, this is when there is starvation.)

          I’ve been studying societal collapse for the last year,and I think the most basic lessons need to be put out there outside the ‘prepper’ sites which put many people off. I’m a positive fellow really!

      • When small electric cars become more affordable, you either will be running yours on coal-fired mains electricity delivered over an upgraded local grid via a new charging point, or you will need a lot more solar panels. The kind of thinking where solutions involve “and then I’ll buy a …” are not going to solve our problems. They are just boutique solutions – only available to the well-off in an era of energy sufficiency.

        Where do you think the energy is going to come from to build the electric car factory and the car, the grid upgrades to handle the extra electricity demand, and the solar panels factories and the panels themselves, in an era of energy scarcity ?

        An extra blanket and an extra jumper (assuming you have them) is more like it.

        • Australia has plenty of coal, so yes I will be running the electric car on a mains recharging point. This is perhaps not as bad from a CO2 emissions point of view as you might think. If I stop using a 2 litre petrol engine car and start using a much more energy efficient and lighter electric car then emissions from fuel might well be less, not more. Manufacture of a small electric car and batteries, may or may not be more energy hungry than the manufacture of a medium size petrol engine car.

          Yes, perhaps it’s a boutique solution but it will work for a time. Heck, I won’t care if I have to use an electric moped with a little trailer to bring my (much more modest) shopping home. Ultimately, I could backpack my supplies home from the supermarket. If the supermarket is empty then yes of course I am soon to be dead like everyone else in my locale.

          However, in Australia we have adequate coal, natural gas, solar and wind power. We even have quite a lot of uranium for a small population country. Provided we are not stupid enought to sell all our energy sources to China we have plenty of coal, natural gas and urnaium to energetically fund a transition to renewable energy over a generation or two.

          I have already done calculations which show that an area the size of one large shopping area plus its car park will provide enough solar electricity for a suburb. Concentrating solar thermal will do the trick. Sure it still requires energy storage as heat and a grid and some backup generation. This is all feasible engineering right now.

          It is wrong to throw up your hands and give up. Places like the US and Australia can adapt, not easily, but they can adapt. We have enough energy to fund the transition to renewables if we use it wisely. Of course I know we won’t all be driving 3 IC cars per family, taking jet airliner holidays and running multiple PCs and Flatscreen TVs in our houses. Life will be much more modest than that. Places like the Middle East and Africa? Of course they are doomed almost for certain. A place like the UK is probably doomed too. China can never finish its transition to a modern economy. There’s not enough conventional energy left for that.

          A lot of bloggers here seem to expect total global collapse in five years. I used to expect that too. However, I don’t think that will be the case. Rather, expect a grinding, remorseless, slow motion collapse over a span of 20 to 50 years. Yes, places like Egypt and Syria could collapse a lot faster than that. Indeed they are collapsing right now.

          • Why do you compare a small, light electric car with a large, heavy petrol-powered car ? Surely the only fair thing to do is compare like with like. When you do that you will find that there is nothing especially green about electric cars. Small, light cars of any kind are the way to go, mopeds even better. There plenty available on the market already, but given the choice (and the current taxation regime) the majority of people don’t seem to want them. If the advertising is anything to go by, the thing that people want to know about a car is not its fuel consumption, but whether it has Bluetooth and 17-inch alloys (whatever that is).

            The transition to renewable energy is certainly technically feasible (heat storage is in its infancy, but there are many other storage technologies), but the actual scaling up of the new infrastructure, and new equipment to use it, will require that we divert existing energy from current uses to the transition. That cannot happen with today’s laissez-faire attitude to energy. When you flick the switch, you expect the energy to appear, whether it be 10 W for your green light bulb, or 10 KW to recharge your electric car battery, or 100 MW to run your solar panel factory.

            I see no sign of that message getting through to governments or the public, and the longer we leave it, the more difficult the job becomes. In fact the time when it would be possible to start and complete the transition has come and gone. You are saying that people are going to have to give up 3-car families, holidays by air, flatscreen TVs, I agree. Now imagine how difficult it is going to be to put that into legislation. Price alone is not going to do it, because it’s not doing it now. Making electricity and petrol much more expensive might work, but good luck with that.

            Slow collapse versus fast collapse – read Korowicz and Tainter before you are so sure it will be slow: the complexity and lack of resilience in the system is its biggest weakness.

            • There are a couple of videos on TED talks – How to fool a GPS & Who Are The Hackers – that point to other ways that society can collapse precipitiously. I have not studied Tainter collapse in any depth, but from what I read here and have read subsequently as a result of having had my interest piqued, I suspect these might be manifestations of same.

              I keep getting this notion of our society being like that chap who walked a tightrope between the twin towers during their construction. In that circumstance all we can say is “So far, so good!” It will be one hell of a mess it we slip.

            • If collapse historically takes 20 to 50 years (with 20 years more common recently) and we started collapse about 2006 or 2007, we could be going down the slippery slope pretty quickly, ones there are serious financial dislocations. I don’t see that timing leaves much time for electric cars.

    • An American peasant girl in the Midwest:

      And of course, I know that you wouldn’t dare describe these folks as ‘dumb’, they (if such still exist) are merely shielded from modern society and well, possess a completely different mentality. Indeed, if we could measure the innate intelligence, I’d say the peasants would fare better than us urbanites, because the statistical gap in births by smart and not-so-smart rural women is likely minimal, unlike in the urban ‘civilized’ areas, where the less intelligent have more children than the well-educated, some of whom will never give birth!

      By the way, if you believe in the blank slate theory, forget what you just read.

      • Dave Kimble

        As the Victorians knew well, nothing beats thick warm underwear!

        Or we’ll be rubbing ourselves with pig fat and sewing ourselves into our clothes each Autumn……..

        A good way to stay warm when seated and reading is to have a tea light in a clay funnel cover on a dish between one’s feet under a blanket – it generates fantastic heat! It’s a version of the old dish of charcoal once used in Spain and Central Asia.

      • Richard

        Splendid painting.

        The problem with welfare systems as they exist now in advanced economies, is not such much over – breeding dumb, but anti-social, people, who still have a great sense of grievance. And in any crisis, governments will suck the rest of society dry to maintain the welfare payments, fearing riots. It’s an ironic post-script to the noble hopes of 19thc Socialism, which wanted to put shoes and clothes on the poor and half-starved……..

        • we created our own problems with welfare systems, well meaning and essential as they were in the beginning, and still are in the majority of cases. But that still doesn’t make welfare affordable, no matter how much we want and expect it to give us cradle to grave care.
          Here in the UK, welfare began on 1st January 1909, with a payment of 5 shillings a week (That’s 1/4 of a British pound for non uk readers) to men when they reached 70. As the average age span of a working man then was 48, it didn’t represent a huge payout, and in any case, each pensioner was supported by 28 workers.
          Pretty soon politicians figured out that welfare bought votes, and industry could afford it, so we got more and more welfare over the years. (particularly after ww2) Humanity being what it is, we began to take it for granted, and then as a right, while the number of support workers fell. So the difference had to be made up from increased industrial output and taxation of those actually working.
          We now have about 6 workers for each pensioner, probably less if you discount those already working for the government. they also have to carry all rest of the social security load. This is why the system is creaking, we are in denial of its arithmetic.
          What we are doing now is struggling to support non producers, which is ultimately impossible. I intend to live to be 99, and I expect my pension to just ‘appear’ from somewhere. The reality is that that age, collectively speaking is unsustainable.
          But governments will go on trying to make that happen, because they need to stay in office. This is happening in every developed nation, we have been able to dole out benefits all round, but only because of the profits of industry driven by cheap energy, and the continuing delusion that debt can be infinite The cost of fuel is the problem, As it costs more and more to power our factories and keep ourselves in employment, there is less and less left over to support everything else. It doesn’t matter whether it’s a long haul holiday destination, or keeping a care home open, or keeping our houses at an even temperature, we have less and less excess energy in our system to give us the ‘extras’ we have come to regard as a fundamental right

          • End of More

            In Spain today, only 2 workers (and of course many of those are not productive) to every one pensioner or unemployed person. An incredible statistic. It has to go Bang!

          • Perhaps the first thing to fix is this. Followed by putting the banksters behind bars and recouping all their past bonuses on the basis that crime must not be seen to pay.

            Fix those two injustices and there might be a foundation for having a more equitable society rise from the ashes of the current one. All that would then be needed is one massive dose of extremely good luck.

        • xabier
          it’s even more scary when you consider that the money borrowed from the imf is to support this unsustainable system
          when the current tranche of cash has been spent, the ‘system’ will still need support, but by then there really will be no money left to do that.
          the 2:1 ratio in Spain really is scary

          • End of More

            I agree. And yet in Spain, it’s not really discussed – there was a headline, and then forgotten!

            Pensions are keeping many ordinary families afloat at the moment, with younger generations moving back to the family home.

            It’s an alarming situation, going only one way.

      • Richard
        That looks like Helga painted by Andrew Wyeth either in Maine or the Philadelphia exurbs.

        Thomas Hart Benton made my favorite painting of a Midwestern girl. This voluptuous creature who has fallen asleep under a tree without her clothes (tired from working in the field?). Leering around the tree at her is a ‘typical’ Missouri farmer (about one fifth her size on the canvas with no redeeming features I can think of). It hangs in the Nelson Gallery in Kansas City. I think the title is ‘Corn Fed’.

        Benton is playing off just about every stereotype you can think of.

        Don Stewart

        • Don

          Try leering like that at the Basque mountain girls of the past, and they’d have had their knives out! The ‘Jota of the Knives’ is one of the least known treasures of Spanish folklore! I think Kipling said it was better to roll over and blow your brains out rather than wait for the Afghan women to find you with their knives…….

          • Dear Xabier
            A painting is what you see in it. Some critics describe Benton as ‘a corn fed hick’. But that isn’t what I see in his paintings. He had left New York City and settled in the Midwest. But he taught at the Kansas City Art Institute and was well connected to the art currents of the day. He painted four men playing cards, and one of the models was Jackson Pollock–who later moved to Long Island and invented the drip paintings.

            Now back to the issue of our luscious farm girl asleep under the tree. Here is this tiny, ugly little man leering at her with obviously malicious intent. Where is the power? Is it with this ugly, little man or is it with the girl. She could squash him like a bug. I could write a long article about all the cliches in this picture and how Benton puts them on the canvas in a humorous way and juxtaposes them to perhaps cause us to re-examine our preconceptions. Are all country farmers this repugnant? What makes City people feel so superior? Why is the Big City salesman and the sex-starved Farmer’s Daughter a staple theme of comedy (at least it was back then)? Did Farmer’s Daughters really find travelling men to be sophisticated? Does this little guy think he is God’s Gift To Women? And on and on and on. Maybe finally we are able to see the absurdity of much we take for granted. Humor is the gateway to understanding.

            Don Stewart

        • I think the title is “Persephone”. Aesthetically, I have to say I am not a fan of the painting style which has both a “naive” style and a wood engraving feel to it. I prefer clear styles that are either fully realist or fully surrealist or fully abstract etc., but that’s just me.

          • Helga was a neighbor who posed for lots of pictures for Wyeth. The pictures were not made public for a long time.

            Don Stewart

    • I am wondering if population will move farther south. We don’t have enough wood to heat all of the homes in the North, and plumbing becomes a problem in homes that cannot be kept above freezing.

      • ive thought about that long and hard and can’t come up with an answer, basically we’ve filled out homes with water, now we have to constantly find the energy necessary to keep them from freezing and making our homes uninhabitable

        • Well you can stock up on some Firewood, or Coal, or perhaps Propane, a large Tank?

      • I’m beginning to feel that there will be nowhere to move to: if we follow Guy McPherson’s arguments, we are all going to fry pretty soon!

        Recently in Spain the summers have been so very hot that even my relations have been saying it’s just too much to bear (a much higher incidence of dangerous fires, too.) They long for the end of summer. Recently- built houses do not have the heavy roofs, small windows and thick stone walls of the past, which kept things cool: thin walls, big windows, turn them into furnaces in the summer, and air-conditioning is of course soon to be too expensive for most.

        In the short-term, I see southern Europeans fleeing North.

        If it is not too cold, one can simply disconnect and drain most of the indoor plumbing, and use just one tap near where the water comes up from the mains supply. That prevents burst pipes in the house.

        • Well, all of you just stay where you are and have fun with your freezing pipes. We don’t want an excessive influx of people where I live. 🙂

        • Here in Northwest USA, our spring has arrived early, I did plant early this year almost a month early – just by reading the weather: which sees to have worked out – since it has been warmer than usual. Corn is up early this year.

          This site has been interesting to me because it has given me the opportunity to speak to people from around the world on the Internet.

          I wonder and I hope we will still be able to do this ten years from now. That is communicate for nearly free as I remember paying $100 for hour phone call overseas some 20 years ago to talk to people outside the USA.

          I wanted to tell you all a little bit more about the old days and the Indians here in America. Since we may soon have to live like an Indian let’s look at their ways.

          I have done some reading on the old days, books by Louis La Amour and Zane Grey and have found those days interesting those books are really good too. They are fiction – but reflect much history to the best of the authors ability.

          Back in 1800’s and earlier, an Indian actually needed to seek an enemy to get honer in his tribe and in order to marry and get the best girl in those days he must return a hero.

          So and Indian’s mind was a bit different from the way most modern day people;

          An Indian would pray for an enemy in order to return to his tribe

          as a warrior and therefore could have choice of the finest woman in the tribe to marry.

          No enemy then no wife.

          That is the part I have trouble with they did like to fight too much but that was the way they did it then.

          I think we could see a different version of this next time around. Maybe more survival orientated and hopefully less fighting between tribes.

          There was a lot of pride in those days and I wonder about that and I do see that so much for the survivors.

          In summary:
          Just wondering what the next go around would look like for any survivors. Perhaps in some ways like the American Indians, but more orientated to survive than fight?

          • The good thing about a site with international contributors, is that we can keep politics at bay – just look at how discussion always degenerates on the Kunstler site along the lines of political divisions in the US. The discussions start well, and then it’s all kinds of personal stuff and politics……..

            How violent do people get under stress? Very! Accounts I’ve read from the Balkans suggest that when food is very scarce in town, it’s kill to eat time, no community spirit and sharing. Rural areas did better: they were closer-knit, and the farmers were ruthless in killing intruders. (In the Middle Ages in England, it was the law that you had to blow a horn to tell people you were a stranger coming near – in peace – and not a robber.)

            Today in Spain there’s a lot of rural crime -theft of machinery, etc, and it’s rumoured that the farmers have been dealing with this in their own way: there are lots of ravines…….

            In Argentina, once people knew that the banks were going to be shut for a good length of time, that their savings were devalued, that if you lost your job that was it, and that the police would not be quick to show up to crime scenes, then violent crime just exploded from nowhere. Crime to get money, and also crime to get kicks.

            The really big problem with a bank crisis is that it can lead to lots of cash being stored in homes, so the criminal is very likely to hit the jackpot compared to more stable times.

            Rural areas might fare better, but if the welfare payments stop or become irregular, then probably those recipients in those areas will turn straight to crime even when law-abiding before – what else can they do?

          • I wrote an article quite a while back called ,”Human Population Overshoot – What Went Wrong?

            We have an instinct to have more children than needed to survive to adulthood. To keep population under control, “K-selected” species (and humans should be one) have territorial instincts as well as an instinct to kill strangers impinging on our territory. Humans have gotten around this instinct, partly because trade demands that we get along with others, and partly because of religion, teaching us to “love our neighbor” (but also leading to religious quarrels). With fossil fuels, we no longer need the killing-off-each-other instinct, because there is finally enough food and other stuff for everyone. But losing the killing off instinct leads to population overshoot. If resources suddenly get short, I am afraid the killing-off-folks-you-don’t-know instinct will come back, to balance population and resources.

            • Yes Gail

              I totally understand your concept of overshoot which seems to be our word of the day.

              I wanted to mention to the group that up here in Oregon, I have not yet seen a single Honey Bee this year. This is my third year here and they were here last year m – but are now gone, it seems so far this spring. Another alarming sign post.

              So more signs of die off.

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