Oil Prices Lead to Hard Financial Limits

We live in a finite world.  Clearly, a finite world has limits of many kinds. Yet economists and other researchers use models that assume that these limits are unimportant for the foreseeable future. They have certainly not stopped to think that any of these might be very hard limits that are difficult to get around, and furthermore, that we might be reaching them in the next year or two.

What are the hard limits we are reaching? One of the main ones is that at some point, there is a clash between the oil prices importers can afford, and the amount oil exporters require.

Figure 1. Author's view of conflict in required oil prices

Figure 1. Author’s view of conflict in required oil prices

In fact, there can even be a conflict between prices producers in a non-exporting country like the US or Brazil need, and the prices citizens can afford to pay.

Why Oil Exporters Need Ever-Higher Prices

Oil exporters need ever-higher prices, partly because the cost of extraction continues to rise, and partly because oil exporters use taxes from oil to fund public works projects and to keep their many unemployed citizens pacified. The Arab Petroleum Investment House estimates this combined cost for OPEC countries to be increasing by 7% in 2013. Required prices by oil exporters are already in excess of current market prices for some countries, making the situations in these countries less stable. Examples of countries needing higher oil prices than current prices to balance their budgets include Nigeria, Venezuela, Iran, Iraq (APIH report) and Russia (Deutche Bank estimate).

There is evidence that the collapse of the Former Soviet Union in 1991 occurred when oil prices dropped too low. The Soviet Union was an oil exporter, but with the low oil prices, it could not afford to make investments in new productive capacity. It also could not afford to fund government programs. The collapse did not happen immediately, but happened after low prices had sufficient time to erode funding. Ultimately, the central government collapsed, leaving the individual state governments. See my post, How Oil Exporters Reach Financial Collapse.

How do oil importers reach price limits?

According to most economic theory, oil importers should never reach a price limit. If higher prices occur, as they did in the 1970s and early 1980s (Fig. 2), these higher prices should quickly lead to conservation, plus greater oil extraction and the development of substitutes.

Figure 2. World oil price (Brent equivalent) in 2011$,  based on BP 2013 Statistical Review of World Energy data.

Figure 2. World oil price (Brent equivalent) in 2011$, based on BP 2013 Statistical Review of World Energy data.

In fact, in the late 1970s and early 1980s, high oil price did lead to changes of the expected kind. It was possible to replace oil-fired electric power plants with coal-fired power plants or nuclear electric power plants. It was also possible to replace the very large, fuel inefficient cars that US automakers were making with more fuel-efficient cars, including ones that Japanese automakers were already making. In addition, it was possible to quickly bring additional inexpensive oil on-line, such as from Alaska (Figure 3) and the North Sea. The decline in the 48 states production (excluding tight oil) was never really fixed.

Figure 3. US crude oil production, divided into "tight oil", oil from Alaska, and all other, based on EIA data.

Figure 3. US crude oil production, divided into “tight oil,” oil from Alaska, and all other, based on EIA data.

More recently, there has been much less success in increasing world oil supply. Higher oil prices eventually led to some new production, such as US tight oil (green in Fig. 3). But even with the new US tight oil production, world oil supply has not risen very much  (Fig. 4).

Figure 4. Growth in world oil supply, with fitted trend lines, based on BP 2013 Statistical Review of World Energy data.

Figure 4. Growth in world oil supply, with fitted trend lines, based on BP 2013 Statistical Review of World Energy data.

It is not clear how long the current run-up in tight oil production will continue. Current production is enabled by high oil prices, available credit, and low-interest rates. Even these may not be enough: a recent headline says, Shale Grab in U. S. Stalls as Falling Values Repel Buyers.

What happens when oil prices rise, and no additional supply or substitute is available?

Economists tell us that when oil prices rise, and no additional supply or substitute is available, demand destruction occurs. It turns out that demand destruction for oil corresponds to what most people would call “recession. It is as if the economy shrinks to a smaller size, so that less oil is required.

This economic shrinkage takes place in a number of ways. Higher oil prices make oil less affordable for consumers, businesses, and governments. The indirect result of this is job layoffs, because consumers cut back on discretionary items, such as vacation travel and eating out at restaurants. Governments cut back on projects like road repair, laying off workers. Businesses find they need to raise prices of goods they sell, because of the higher prices they pay for oil. The result is that their products are affordable to fewer consumers, again requiring laying off workers. So the net result is job loss, and continued weakness in hiring, such as the US has seen for several years now.

Governments are particularly affected by high oil prices, because with fewer people working, government tax collections are reduced. More people file for benefit programs, such as unemployment or disability coverage, when they cannot find work. This adds to government funding issues. If banks fail, governments may be called to bail them out, also adding to government expenditures.

There have been academic studies showing that high oil prices tend to create recessionary impacts.  James Hamilton has shown that 10 out 11 post-World War II recessions were associated with oil price spikes. He has also shown that oil price changes in the 2005-2008 period were sufficient to lead to the Great Recession (Brookings Paper). I have also written a related academic paper, Oil Supply Limits and the Continuing Financial Crisis.

Because of these issues, if high oil prices remain after a recession, we should expect continued recessionary impacts, such as an inadequate number of jobs for young people and growing government debt. The government can cover up these issues to some extent with ultra low interest rates. In fact, such low interest rates, together with continued deficit spending, seem to be the reasons the US has been in “recovery” since the Great Recession officially ended in June 2009. However, we still find (Fig. 5) that the big oil importing countries (US, UK, and Japan) have much lower GDP growth in recent years than the rest of the world.

Figure 5. Annual percent change in Real GDP by part of the world, based data of the USDA.

Figure 5. Annual percent change in Real GDP by part of the world, based data of the USDA.

These countries also have much less growth in oil consumption than the rest of the world, indicating that when it comes to oil consumption, citizens and businesses of the US, EU and UK are being outbid by businesses and workers elsewhere.

Figure 6. Oil consumption based on BP's 2013 Statistical Review of World Energy.

Figure 6. Oil consumption based on BP’s 2013 Statistical Review of World Energy.

Workers elsewhere may use less oil per person, but because they have jobs, they are able to purchase new scooters and other goods they want. Their employers also use oil to make and ship goods, keeping their demand high.

In the US, EU, and Japan, we continue to lose jobs to automation and to outsourcing to low wages countries. As a result, wages are stagnating, and young people are having a hard time getting jobs, making oil less affordable. If only there were more high-paying jobs.  .  . Of course, in a globalized world using coal as a primary fuel, the goods we would make would be too expensive for the world market.

Related financial limits we are hitting

Oil importers around the world are disguising the effect high oil prices are having on economies, through low interest rates and continually rising debt. In doing this, oil importers are able to keep the price of oil that they can afford high. In other words, using these techniques, oil importers are able to keep the blue “affordable by importers” line high in Figure 1.

At some point, there is a limit to how much the adverse impact can be disguised. The following are several areas where limits are now being reached, that will tend to bring down the “affordable to importers” line in Figure 1.

1. Limits on the amount of governmental debt. In the US, the need to raise the federal deficit cap will come up again as soon and October. There will be pressure to try to reduce spending, to reign in the federal deficit. If the economy were growing faster, the debt limit would be less of an issue. But with continued high oil prices, growth is slowed. Debt limits can be expected to continue to be an issue.

2. Slowing growth, and related debt limits, in developing countries. High oil prices affect importers or all kinds, even developing countries that use less oil as a percentage of their total energy consumption. The slowing growth also makes debt harder to manage. News sources are talking about slowing economic growth in China, India, and Brazil.

A recent WSJ article about China is titled, Debt Drags on China’s Growth. According to the article, interest and principle payments on business and household debt currently absorb around a third of China’s GDP. Some debt is being taken on, just to allow interest on past debt to be paid. These high debt levels may cramp future growth in China.

3. Rising longer-term interest rates, because of scaling back or ending quantitative easing. As noted above, low-interest rates are helping to cover up our current issues of inadequate good-paying jobs and inadequate government revenue. If interest rates rise, the government will need to pay more interest on its own debt, leading to a needed tax increase.

Figure 7. Ten year interest rates based on data of the Board of Governors of the Federal Reserve System.

Figure 7. Ten year interest rates based on data of the Board of Governors of the Federal Reserve System.

Another effect of rising interest rates is that the market value of bonds outstanding will fall. This happens because the price of bonds is adjusted so the new owner will get the current (higher) yield to maturity, instead of the original low yield to maturity. Owners of bonds, such as the Chinese and Japanese, are aware of this, and have started selling their treasuries, before prices fall further. (See Reuters: China, Japan lead record outflow from Treasuries in June.) This type of sale of treasuries tends to raise the yield on treasuries, even before the Federal Reserves actually cuts back its monthly purchase of securities under quantitative easing.

If interest rates on 10-year treasuries rise, mortgage interest rates will rise, cutting back on the number of families who qualify for loans for new or resale homes. Last week there were articles saying, “New home sales plunge 13.4%,” presumably from the amount by which interest rates have risen already. If interest rates rise enough, there may also be a decrease in the value of resale homes, because there will be fewer buyers who can afford  move-up homes, lowering demand for homes.

4. Popping of asset bubbles, as a result of rising interest rates. At least part of the rising value of assets of many types (stocks, homes, farms, oil and gas leases) is likely  to related to the very low-interest rates recently experienced. Bubbles tend to occur, because with  debt earning very low-interest rates, borrowers are anxious to earn higher rates of return, however they can. Investors bid up prices using money borrowed at low-interest rates, in hope of making capital gains later. Of course, if interest rates rise, all of this may “turn around”.

One piece of evidence regarding the effect of rising interest rates on stock market prices, versus falling interest rates, for the period graphed in Figure 7, is the following: During the period 1957 between to 1981, when interest rates were rising, the S&P 500 rose by less than inflation. In contrast, during the period 1981 to 2013 when interest rates were falling, the S&P 500 stock market index averaged a gain of about 5% per year, over and above the inflation rate. The difference is in the direction a person would expect, and is quite large.

The Outlook 

As we reach financial limits of many  kinds, further recession, possibly quite severe, seems likely. Some of the limits are ones we have not encountered before, particularly the one with oil prices being too low for exporters, but too high for importers. This makes the situation particularly frightening. At some point, the clash between the price oil importers can afford and the amount oil exporters need could cause oil production to drop dramatically, over only a few years. Such a drop in oil production would likely have a very adverse impact on economic growth.

If oil limits indeed reduce economic growth, this makes models based on the assumption that the future will look like the past invalid. Instead, we need to expect a very changed world. At some point, we may even reach permanent contraction, as oil limits change the nature of the world economy.

About Gail Tverberg

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

  1. Don Stewart says:

    To All Those Who Think My Obsession With Food is a Sign of Insanity

    Come to our annual small farmer and gardener conference. More good stuff than anyone can possibly absorb in 2.5 days. Fabulous food. Relatively cheap. The parallel sessions mean I am sure to miss out on some wonderful talks and demonstrations.

    Don Stewart

    • Don,
      Looks really interesting, but my husband will be traveling for business during that time and so I have to taxi kids to school and mind the fort. I though it interesting that Blue Cross/Blue Shield insurance had a large advertisement in the brochure. Also the organic tobacco producer. Kind of shows what a large audience this kind of event attracts.

      • Don Stewart says:

        We usually have 1300 to 1400 and sometimes 1500 people when the event is in Durham, NC. The alternative years, when it is in South Carolina, we have around 900. We will have perhaps 100 vendors show up. To give you some sense of it…there will be about 15 people at the CFSA governance session on Sunday morning (half of whom will be board members), while many of the talks on the parallel tracks will draw standing room crowds. So it is a very ‘hands on’ crowd. The CFSA leadership always bemoans the fact that they can’t get people interested in the running of the organization.

        Don Stewart

        • Don,
          🙂 I think once people start making things by hand they quickly recognize that it’s labor not management that we need. Today’s over-priced CEO’s assume they are the most important by virtue of being in charge, and they think everyone else wants to be like them. Sad fact is that most administrators don’t produce much of value anymore. Goes back to the comment made by timl2k11…
          “The world will need a great leader on the way down…” I would qualify that to “a few” great leaders and lots more workers.

  2. Don Stewart says:

    Dear Gail and Others
    This will be a little essay on the difficulty of being human and reasonably aware early in the 21st Century.

    James Howard Kunstler wrote this prognostication earlier this week, in praise of what he perceives will be valued after the Crisis:
    ‘The range of skills one might include under vernacular artistry runs from gardening, to cookery, to tool-making, to animal husbandry, to the building trades, to the lively, visual, musical, and medical arts — all the activities of everyday life. These are the things which, when done well, make life worth living. They all deeply involve taking care of things on the small and personal scale — which is exactly what you don’t get purchasing ready-made plastic crap from the WalMart on the highway strip, where nothing is really cared for and everything is disposable.’

    I did some of that stuff today. I participated in a group making some kim-chee. We took home some kim-chee made by our predecessors a month ago, and the kim-chee we made today will be eaten by a group which will gather about a month from today. Gardening, cooking (or, more precisely, the non-cooking of fermentation), the medical arts (fermented foods do wonderful things for the human body), and even tool making (the heirloom sauerkraut pounder) were all prominently featured. In addition, the building arts were present as we worked in a former horse stable which had been converted into a communal kitchen by volunteer labor. Outside the stable were evidence of more tool making in the form of an antique tractor and manure spreader. And it was certainly all about everyday life. A wonderful time was had by all, and it involved the sacralization of the ordinary as we gave thanks for the work of the microbes, using a hymn composed by Sandor Katz.

    Here’s the difficult part. I drove a 10 year old Prius 15 miles to the event, and then 15 miles home. In the kind of post-collapse world that Kunstler expects, driving 15 miles in an automobile will be out of the question. The cabbage, carrots, onions, and peppers were grown on the farm, but the spices came from across the oceans. (Remember the Spice Routes?)

    At the beginning of the event, I described to the group my special interest in using fermentation to preserve the harvest, and described my newly realized recognition that fall crops in this area are dependent on plastic in a number of crucial ways. I pointed to the plastic greenhouse on the farm and the piles of drip tape. I said that in the future we may get only a spring harvest of cabbage and need to preserve enough from that single harvest to last us all year. Several of the people had been in Korea and described how the Koreans buried their kim-chee in the ground to keep it without refrigeration.

    As I see it, a group of a dozen people gathered for a purpose can usually solve the practical problems. The problem I see is what I might call ‘insufficient density’. I think Kunstler is wrong to bad mouth the younger generation and the WalMart. There were 3 very young women in our group today. I didn’t see any of them lost in their iPhone. So his characterization of a generation is not getting it right. And we gathered in North Carolina, which he would have trouble referring to without profanity. So sectionalism isn’t the key point either. As for WalMart, I believe the crock that we made the kim-chee in came from WalMart. Crocks can be custom made by local potters, but WalMart is a convenient and economical place to buy them. So blaming WalMart isn’t on target either. The real problem, as I see it, is that it takes a 15 mile radius to collect enough people who look forward to getting together to make some kim-chee.

    When my family first moved to St. Louis in 1970, our old country Lutheran church engaged in two ancient traditions in the fall. The men got together and drank some beer and made sausage (which was not a fit place for dainty females to be). The women made apple butter. In 1970, few people drove 15 miles to this church. In 1850, almost everyone would have walked or ridden in a buggy on a country lane. Everyone needed sausage and everyone needed apple butter and so a community effort was an enjoyable social event and served a practical purpose.

    Perhaps, as things get tougher, it will be easier to get a neighborhood group together to make some kim-chee. Right now, even such a noble endeavor seems to require an automobile and well-maintained roads because of the low density of people wanting to do it. Here is where I part company with some doom-sayers. I think that participating in such a group now develops the skills to do it later. After a Collapse, those who know how will be sorely needed to teach the foolish grasshoppers who put nothing away for the winter. It’s not bad to spend some fossil fuels on group kim-chee making, it’s a good investment in the future. And the fact that some fossil fuels were spent doesn’t make it impossible to do it in the future without them.

    Don Stewart

    • Don,
      As always, I love your stories! I couldn’t agree with you more, and I will share some of my own similar activities.

      This week I invited a relatively new acquaintance over to help herself to tomatoes. My vines are producing more than I can use. She came in the morning, thinking that she would just stop by (even though we live almost 20 miles apart) and pick some tomatoes. When she arrived I was processing apples (and pears) for apple(pear) butter. While I was putting the cooked fruit through the hand cranked food mill we chatted about this and that. I told her she could go out to the garden and help herself but she said she didn’t have to be anywhere in particular and preferred to watch me work. She told me about her grandmother’s recipe for apple butter that contained ‘red hots’, something I decided I might like to try.

      It took me an hour or more to process the fruit but I ended up with about 20 quarts of it bubbling away on the stove. We each tested the batch and decided it needed more cinnamon and sugar. She commented on how wonderful my kitchen smelled and that it reminded her of her grandmothers. Then we went out to the garden and spent another hour and half picking tomatoes. She asked lots of questions about how I started my plants and what I did to get them so large. We also laughed and shared stories of our families, finding many things we have in common. It was a very pleasurable way of spending the morning.

      She was at my house for 3 1/2 hours and we both laughed about how time flew by. Always seems that way when women work together. I’m sure men enjoy something similar in working together. We picked about 2 bushels of tomatoes and she take home half a bushel, didn’t want any more. She sent me an email later and told me that she shared them with neighbors and friends, which made her and them very happy. She also said I had inspired her to start a garden of her own. If she does I’m sure we will be sharing lots more stories and ideas. We are looking forward to getting our families together again for dinner soon. It is unfortunate that we live so far apart.

      Yesterday I stopped by by neighbors house and dropped off a basket of veggies (sweet and hot peppers, tomatoes, and basil) along with half a dozen fresh eggs. She is always so grateful for fresh food, and often waders through my garden helping herself. But bringing it over is a nice a way to visit. We talked about recipes for roasted peppers and salsa, her daughter who is 11 going on 20, and my teenage boys learning to drive. She offered them the use of their golf cart and jeep for practice, which was very kind. I told her we might be over for a swim in their pool later. Good to enjoy being with your neighbors!

      Yes I agree with you, Don, these are the kinds of connections that will help us in the future, and they make stronger neighborhoods and communities. I feel good about the skills I can share, and the things I learn from others. Spending time working together seems to make for such a lovely day!


  3. ravinathan says:

    Here is some support for Gail’s contention that solar energy is not a substitute for fossil fuels based on the actual experience of Spain which made a big push into renewables versus the largely theoretical exercises that we read about. The link is a book review of Prieto and Hall’s 2013 publication that is well worth a read. What amazed me was the extremely low realized EROEI of solar at less than 3 for sunny Spain and its even lower for Germany! Spain has really gotten itself into a pickle and I do hope that some of the people who go around claiming that pv power will save us will read this review and the book. The takeaway is that photo voltaics are only a fossil fuel extender, not a substitute, since pv cannot replace itself.

    • xabier says:


      Great link, thanks.

      Looks like it was an ideal scam for the get-rich-quick Spain of the early 2000’s which produced the real estate ‘boom.’

      And whatever happened -anyone? – to the EU idea of having huge solar plants in North Africa (nice peaceful part of the world for decades to come surely) to supply Europe? Did anything ever get built?

      • buying sunshine from Africa is about as safe and sensible as buying gas from Russia

        • xabier says:


          I know, but it’s incredible that such a project was ever given serious consideration!

        • Xabier,

          I wonder if it isn’t becoming very difficult and risky for companies to invest in business in North Africa? I would be concerned about long term solvency of operations in countries where civil unrest is becoming common. Also, it seems to me that China has taken a great interest in not only manufacturing solar devices but leasing farmland in Africa. Maybe they are looking at building the solar plants in North Africa too. The two things may not be related but China certainly seems to want to be the 800 lb gorilla in the solar power industry. Only Germany seems to be holding up under the competition, and they are struggling with the EU problems over Greece, Spain, Portugal, and Italy.


          • telegraph tim says:

            “Only Germany seems to be holding up under the competition, and they are struggling with the EU problems over Greece, Spain, Portugal, and Italy.”

            Talking of which:


            Meanwhile, over in Blighty:


          • xabier says:


            Oil pipelines are damaged in Libya, solar sites seem even easier targets: you can trash them without pollution.

            Europe now receives much of its basic goods from the East, above all China, and fuel from the Mid East and Russia – it’s not an encouraging scenario, to say the least. This is why fracking has such attraction for many, although many still have no grasp at all of the real energy situation of Western Europe.

            Without the cheap goods from China, many people in Europe would be very impoverished in terms of clothing, etc. Well-made clothes are now very expensive, but then historically they always were.

          • Xabier,
            Yes, I would not want to live in Europe because of all the issues you brought up, except perhaps Scandinavia. Might be hard to get used to cold winters and short summers though, even though I grew up with them in Minnesota.

            The one advantage Europe has is its extensive public transportation, lower energy use (so less far to descend), and better multipurpose urban design. When my husband visited Denmark he admired the areas of the city which had family homes, restaurants, stores, and business all located withing walking distance. Many families didn’t need cars. The U.S. and it’s urban sprawl will be a problem, as Kunstler has pointed out.

            The advantage here in Indiana is that our climate is moderate and we have good rainfall. We are not likely to become a desert. We have a very long growing season and extensive farmland (even if it is depleted in organic matter), and lots of woods and streams. Europe has a much higher population density and little forest left for people to get firewood.

            Until you mentioned good quality clothes I didn’t think about it. I usually shop at our Goodwill second hand stores. We have three very nice ones in town. I am always able to find good quality clothes there, and because they are used clothes it is easy to see how they are holding up. I think part of the reason there are so many good quality ones is because of the University. Professors buy lots of good quality clothes, rarely wear them out, and then donate them to the Goodwill. I guess that is an advantage others don’t have.

            It is true, and Scott mentioned it too, that in some places people will be greatly disadvantaged. I guess all I can say is if one can move it might be a good time to evaluate and then pick your location carefully.


            • Don Stewart says:

              Dear Xabier and Jody
              Since Jody brought up the issue of her retirement plan for her husband, I decided to do a little research on my wife’s retirement plan for me.

              Having been married 50 years I know better than to ask a direct question. So I just went to my friend at the NSA and asked him to take a look at my wife’s recent Google searches which involved ‘husband’. It turned out that she had visited the sites of a number of Glue Factories which promise ‘discreet, no questions asked service…highest prices paid’.

              Is this a bad sign?

              Don Stewart

            • Scott says:

              Hello Jody and everyone, I guess it is true, Location, Location, Location! An uneven collapse hitting some places first and others later. The same goes for war that will likely be a byproduct of the collapse in areas of the world, right now we are looking at lots of places that are on the verge.
              If bombs start dropping in more places, especially the big ones, then collapse could expand very fast into our heartland in the west. (hope not). But if that happened then it would be WWIII.

              These are uncertain times and I suppose we are lucky that a bigger event has not happened in recent years given the instability of the nuclear world and the world in general. These subjects give me some concern and anxiety for sure.

              But we will continue on day by day and try not to worry too much about the world but steadily try to improve our own little situation in that regard.

              Tomorrow is harvest day for many veggies such as corn, celery squash etc – so we will be drying some of it in the food dehydrator for winter soups which should taste good when it gets colder as it surely will soon.


          • Don,
            If you don’t have a horse, it could be a bad sign!

            Now that you put my comment into this context, I’m wondering if my husband has a retirement plan for me. But before I can ask I have to think about whether or not it works best to ask directly or in directly. My mother told me that when she wanted Dad to do something she never told him directly. She would mention something in passing, wait a few days, and then ask him what he thought they should do. Somehow he seemed to come up with the exact thing she wanted him to do, and believed it was his idea. I always found that interesting. For a housewife without only a high-school education she was pretty smart!

            You give me so much to think about Don!

  4. Don Stewart says:

    Dear Gail and Others
    I want to add a personal observation on the issue of electricity prices and marginal cost. See:

    I worked in the headquarters of AT&T in the late 1960s and again before and after Divestiture in 1982. The Divestiture involved splitting the company into 8 pieces, and was demanded by the Reagan administration after many years of desultory meanderings in the antitrust courts.

    AT&T collected data on almost everything. Each year, it compiled a Bell System Statistical Manual. I discovered this Manual around 1968 when I was working on a particular project. One of the interesting statistics was the investment per mile in long distance transmission equipment. Beginning in 1919, when the Bell System was returned to private ownership after being nationalized in WWI, the investment had shrunk from 100 dollars per mile at the rate of a dollar per year. The technical impetus for the shrinkage was the deployment of continually improving carrier systems, which piggybacked many conversations on a single circuit. I left the Headquarters in 1970 and went to a field position, where people would occasionally tell me how ‘expensive’ long distance facilities were and how we needed to do all sorts of weird things with the prices in order to cause the customers to ‘conserve circuits’. No amount of explaining by me that circuits were cheap and becoming cheaper would sway the discussion.

    Back in the headquarters in 1979, I was involved, unwittingly, in the negotiations which led to the Divestiture Consent Decree. When I found out that the Consent Decree had split the Long Distance business from the Local Exchange business, I was alarmed. At that point, the investment per circuit mile had shrunk to 8 dollars (none of these numbers are inflation adjusted). It was very clear that a ‘long distance’ business would have a zero marginal cost in terms of physical facilities. Such businesses don’t tend to make very good investments because just a little overcapacity sinks the price to zero. The Executive Management didn’t want to hear about it. They amused themselves with the illusion that they were going to become another IBM.

    So they tried to become IBM and lost a lot of money, just as IBM was changing the way it did business. Meanwhile, MCI and Sprint were getting started. The AT&T Long Distance business was churning out the cash, which was being squandered by the Executives. When MCI and Sprint finally got their capacity in place, it became a war of TV advertising. For a while, the three companies were accounting for 40 percent of TV advertising dollars. But the Consent Decree was structured in such fasion that there was no real way to distinguish any one company from the other two in terms of physical characteristics. The Decree, in other words, made no sense at all.

    Eventually, all three companies essentially ceased to function. The solution was flat rate pricing. It didn’t matter how much you used, you just paid a monthly fee. Ironically, I spent time in the field in the hopeless task of convincing the public and the regulators that imposing ‘usage sensitive pricing’ on local calls was a really smart thing to do. If it had been successful, it would have taken another service which had essentially zero marginal cost and burdened it with very high administrative costs.

    So when you think about renewables and their zero marginal cost, think about the dangers that the utilities with high variable costs face. Think about a homeowner with solar PV on the roof and the sun shining…the cost of using more electricity is zero up until the capacity of the system is exceeded. Few people are thinking about this.

    Don Stewart

    • Scott says:

      Hello Don, I remember in the 1970’s my father who worked at IBM and Control Data Corp in San Jose CA and those were the days of growth in the so called silicon valley, this was the 1970’s and things were already changing fast in those fields. My Dad was a technical writer and in is last working years worked for himself and made great money.

      My father retired in the 1980’s and has recently passed away last summer. However, what I remember from those days was the fast growth and change. I do not believe we can keep up this pace forever.


  5. Don Stewart says:

    Dear Ravinathan and Others

    I’ve never been to Iberia. So Xabier might laugh at my crude comparisons. But here goes.

    Sepp Holzer did a project in Portugal which rescued a desertifying region which belongs to a genuine Princess and hydrated it with a series of lakes. Here is a link with some pictures. You will get the idea, although it is in German. By the reports I have read, it is beautiful and the Princess is happy.

    Toby Hemenway wrote this article for his website:

    ‘Here’s an example of how we can be misled by recipes. Holistic Management (HM) is a decision-making framework to help ranchers improve grazing-animal and grassland health. In a revealing article in the HM newsletter In Practice, permaculturist Aspen Edge describes her evolution from thinking of permaculture as a set of practices to seeing it as a way to design solutions. Aspen and her husband, David, with four years of permaculture experience in a temperate region, bought a farm in the hot, arid Mediterranean climate of southern Spain, and decided to create a food forest. Aspen writes, “Our permaculture mind applied those techniques which, if applied in a temperate or tropical environment, would build soil and conserve water. . . . Four years on, far from a complex, multi-stacking sward of vegetation, we had even less biodiversity and increased bare ground. . . . Nothing was performing in the way that we had expected.” They shifted gears, and tried the specific methods of Holistic Management for brittle (hot, dry, and fragile) landscapes, which involve rotational grazing and building soil via animal manures, and provide specific steps for ranch financial planning. The land, animals, and their finances rebounded beautifully.

    Their initial conclusion was that HM was simply better for drylands than permaculture. But they soon realized that HM is a recipe tailored for managing brittle landscapes like theirs, and nothing in HM was out of keeping with the strategies that a good permaculture design would arrive at. It was their perception of permaculture as a set of practices—that sheet mulching should be done everywhere, that all land wants to be a food forest—that was the problem. Holistic Management originator Alan Savory did not use permaculture as such to create HM, but he arrived at it by using the same observation skills and understanding of ecological processes that any good permaculture designer would. It is a recipe specifically for operating ranches, with brittle landscapes as its particular focus. ‘

    If you have read any of the references to Alan Savory’s work that I have posted, you know that it doesn’t use many bulldozers. Instead, it uses the fastest way to grow topsoil and put carbon in the soil: perennial grasses. The particular farm is in Spain.

    So…does Permaculture favor bringing in the bulldozers and creating lots of lakes in arid places, or does it favor creating rich grasslands? All I can say is that if you own property in Iberia, you have at least two examples from which to choose. Both use biological farming. One uses lots of earth moving.

    Don Stewart

    • Hello all,
      There seems to be quite a lot of discussion and some disagreement about the role and capability of permaculture. So I thought I would wade into the stream…as ugly as the some of the fish may be!

      Permaculture (which originally meant “permanent culture”) is a type of design that can be applied to many systems including agriculture. According to Wikipedia “Permaculture design seeks to minimize waste, human labor, and energy input by building systems with maximal benefits between design elements to achieve a high level of synergy.” In a world where we have peak oil, climate change, and resource depletion, I think this is the most logical approach.

      Originally it was focused on architecture, namely, how do we build economical and efficient housing for our masses of population, and have the water and power to operate them in an era of diminishing resources? Permaculture design as applied to agriculture relies heavily on ecology, land management and use, organic farming, and sound environmental principles. To say it is a broad field is a great understatement.

      I see permaculture as more of a philosophy, a way of looking at the world and understanding our place within the natural system in which our ancestors evolved. I don’t see it as a specific type of agriculture. I don’t think it’s useful to argue about how many people permaculture can feed.

      Earlier I told Don that I don’t believe permaculture can feed 10 billion people. The reason I don’t believe it will is not because it can’t, it’s because I don’t believe there are 10 billion people who will practice it. Of course we really aren’t arguing about feeding 7 or even 10 billion people, we are arguing about feeding the 2 billion people today who live a “modern” lifestyle and don’t want to change. There are far too many people in the developed world who don’t want to do anything to feed themselves other than drive to the grocery store and pick up whatever food they desire. The idea of having to raise their own food; to work in the soil, plant, harvest, and cook raw food is seen as a step back into the dark ages. It is too daunting to contemplate. I imagine there are probably 4 or 5 billion people who either already live this way or wish they could.

      Permaculture can’t replace a system of cheaply grown, cheaply transported, cheaply assembled/processed food with high quality organic food using a small fraction of the world’s population as farmers. But it can produce a large amount of high quality food using significantly less resources than our current system. The permaculture that I practice includes a home with a kitchen garden, compost bins, season extension, eating seasonally, eating much less animal products, cooking slow food, preserving food, and enjoying a life lived this way. I don’t see any other path forward and waiting too long will just make the transition more difficult.


      • Scott says:

        Hello, I think this is something that should be pursued, but we are facing limits on population and as the population rises the scale of these projects needed to keep us going get so large like the incredible hulk… they become hard to maintain and build. It seems to me we will have to keep both systems running side by side and try to move over to Permaculture as we can. It may maintain a small market share at first like organics but hopefully it will take hold. It is a good goal to head towards but will not happen fast. There are many good things happening in farming, but mainly driven by energy (oil, gas and electric that is), few farms would run without it.


      • xabier says:


        Lots to agree with there!

        I’ve seen it in a lot of threads: ‘I want to be Modern, no Dark Ages for me!’ A friend who loves powerful cars said to me ‘If we have to get around in those toy electric cars, I’d rather be dead!’ Don’t even ask him to get his hands dirty! And his granny was peasant who broke rocks in a quarry…..

        The ‘Dark Ages’ is actually in the minds of those who don’t wish to lift a finger for themselves.

        What defined the Dark Ages? People might answer: filth, violence, no beach holidays, barbarians running all over the place.

        But they were really defined by a loss of knowledge and a consequent inability to use resources productively. And by a rejection of unorthodox knowledge and new modes of living which offended prejudice and custom. The feudal lords really did drag people back to the land – the way of life that suited the lords economically – if they tried to get away and become, for instance, a townsman. Novelties could be seen as threats, sorcery or simply insane.

        Historically, the knowledge of advanced culture, manufacturing and agriculture shrank back to the Eastern Roman and Islamic Empires.

        Today, permaculture and modern homesteading, good custody of the Earth, seem to me to be very significant bodies of knowledge which shrunk back into the hands of very few people today, which have absolutely no backers among the corporations and politicians, and of which most ordinary people have lost any comprehension – lack of knowledge leads to suspicion: as you have pointed out, people can’t believe that productive gardening can be as easy as it is (given good instruction).

        Our civilization seems complete, but without an understanding of the land it is perhaps fatally flawed (particularly when one considers soil depletion and exhaustion).

        Anyone who draws attention to the urgent issues surrounding the regeneration of the land is today like a traveller in the Dark Ages informing benighted peasants and their calculating lords about life in the next village, or over the mountains. Some may listen, most won’t and few will have the ability to do anything. But it has to be done.

        ‘None so blind as them that won’t see’…….

        • Scott says:

          Hello Xabier, What you said which I will re post in quotes “Today, permaculture and modern homesteading, good custody of the Earth, seem to me to be very significant bodies of knowledge which shrunk back into the hands of very few people today, which have absolutely no backers among the corporations and politicians, and of which most ordinary people have lost any comprehension – lack of knowledge leads to suspicion: as you have pointed out, people can’t believe that productive gardening can be as easy as it is (given good instruction).”

          Very well said and sadly true,


          • xabier says:

            Thanks Scott! Still let’s not get depressed about it: we’ve got our small plots of earth, and I’m going to do some hard digging tomorrow for a new hedge, the leaves will make compost in coming years (thanks for the inspiration Jody!).

        • Xabier,
          Kind of ironic that the Europe fell into a period of declining civilization during the Dark Ages, while Arab countries were still advancing in medicine, astronomy, mathematics, and philosophy. Today the opposite appears to be happening in the sense that the Arab countries are descending into dark age barbarianism and the destabilization of the Arab countries might bring the whole global economic system over the cliff.

          I agree with you that “None so blind as them that won’t see”. Our economic and political leaders seem unable or unwilling to do anything that will effect a positive change in the system. The masses want to pretend there really aren’t any problems that economic growth won’t solve. There are the angry few crying in the wilderness “Repent and be saved”, but no one is listening. Others believe that if only people would drive a Prius and buy a rain barrel all would be well.

          Perhaps the group that suffers the worst are those who see and believe but can’t seem to find a path forward, leaving them depressed and ineffective. Even though it seems irrational to cling to a system that appears broken and unrepairable, we often hang onto what we know rather than leap into an unknown. I often think that if I had been born a man during the Age of Discovery, I would have been an explorer. I wonder what it is that makes some humans seek adventure rather than shrink back from the unknown? Wouldn’t it have been an adventure being on those ships sailing off into unknown seas (hopefully not as the captains cabin boy!)?

          I’ve heard it said that
          ‘A known devil, is better than an unknown saint’….


          • xabier says:


            The Islamic world declined from its advanced in the 13th century for many reasons, but a major one was that they made the wrong cultural and intellectual choices: science and philosophy were down-graded or extinguished and the priority given to reciting the Koran and studying the law. Society was given the wrong emphasis by fanatics, the least useful of all skills was most highly-rewarded – banking and finance anyone, versus farming?

            Thank your for your life-enhancing posts by the way.

          • Xabier,

            Well if the world is going to collapse, we may as well make the most out of each day we have until it does. And if by some miracle all us doomers and prepers are wrong, if our economic system somehow manages to keep chugging along (albeit at some greatly reduced level) at least I can look back and say I’ve lived a good life. I also think the changes we’ve made will make retirement more affordable, even with little or greatly reduced social security or medicare. We won’t have to worry about skyrocketing electricity or propane costs. We can probably still provide the majority of our fresh food. All that jogging and exercising my husband does will keep him in good shape to chop wood and weed the garden! (He thinks I’m kidding when I say that!)

            Why obsess about what we can’t control? This used to be good advice, even years ago before peak oil and climate change, when the only problem people worried about was death (and taxes).

            Glad you enjoy my posts. I also enjoy reading yours.

            take care,

          • xabier says:


            I like the Retirement Plan you have for your husband: he should be assured that not many things are better than swinging an axe ! (Basques and axes are synonimous, I have a nice collection). Maybe learning to carve utensils from wood would be a good hobby, too…… maybe best not mention that as well.

          • Xabier,
            Carving utensils and the potters wheel are my hobbies. Maybe I’ll consider letting him use my knives if he keeps them sharp. My sister is a master quilter. Her husband built some wooden doll beds for granddaughters and decided to make the small quilts to go with them. Now they find it enjoyable working together in her studio. Of course he has his own manly shop out back too! We all need our hobby space, Eh?

      • that’s always been my point Jody, perhaps the greatest failing of humanity has been the certainty that ‘now’ is permanent.
        We feed ourselves ‘now’, our supermarkets and filling stations (merely our prime energy sources) are full ‘now’, so they will always be full and available to us.
        What we deny to ourselves is that that ‘now’ is only 4 generations old, much less for many people. Only 10 generations separate us from an existence where the only light available was a naked flame and where 98% of people had to work the land to provide the necessary food excess for the other 2%.
        Oil has enabled an exact reversal of that, where 2% can feed 98%.
        This is what makes our ‘now ‘ unreal, because virtually all of those 98% now have no idea how to procure their means of survival. They (we) expect food and fuel to appear, and from conversations out in the real world, that expectation is an absolute.
        Any doubt is always countered with: ‘they’ will come up with something….perhaps the scariest comment of all.
        So given that certainty, there will always be conflict to preserve it because there is a refusal to accept that the party is over. As I’ve pointed out before, we have put ourselves in the same position as hamsters in a cage: Our food is delivered and our wastes are removed, and our employment is in a rotating wheel that takes us nowhere. Oh, and we can go on filling up our cage with more and more hamsters of course.
        Yet we will resist anything that alters that status quo, engaging in riots and wars brought about by the overcrowding in our cage.
        Even when the planet had more than enough resources for everyone, wars were still fought to acquire more.
        Expecting humanity to change its behaviour in a single generation and become benevolent ‘permaculturists’ after 10000 years of mass homicide, is I fear asking too much.
        It will happen of course, but not until we have worn out all our weapons (embodied energy) and reduced our numbers, trying to prove that it isn’t going to.

        • EOM,
          You are absolutely correct in what you say. I rarely find anything in your observations that I don’t agree with, except perhaps in the way they come across. It seems to me that your comments often convey a sense of bleakness, of hopelessness in the face of change. I’d like to know more about what you like about life, the things you value, the things you are doing other than trying to convince the masses we are heading for a cliff and we have no parachute. I’m sure that you have a bright side! 🙂

          • apologies for the way I put stuff across Jody, that’s not the real me I assure you.
            I suppose it is the love of everything that surrounds me here in the UK, the heart-stopping beauty of it, its deep history , and its seeming permanence that makes me think more deeply than is good for me. But I refuse to get depressed over it.
            Last weekend on a picnic, I spent an hour watching wasps tear a small piece of chicken apart and fly off with it, to recycle its energy. Small pleasures I guess, but very wonderful to see.
            And I’m not trying to convince anybody, maybe just pointing to the ‘Cliff’ sign?
            I live within 5 miles of where the industrial revolution started, (iron smelting with coke 1709) and during the research for my book http://tinyurl.com/oa854gt I stood on that exact spot (it’s now a museum) and gave some thought to what started there. It was impossible not to think of everything that derived from that ‘logical’ increase in productivity, and what became possible through access to new ways of using energy. Without colossal amounts of cheap iron and steel, and the embodied energy within it, humankind could not have prospered the way it has.
            It hasn’t been fossil fuel that created our wealth, so much as the ways we found of using it.
            So that’s the way my mind works. My research led me into the minds of scientists and other individuals far better qualified to comment on all this than I am. It was really scary to find them saying much the same thing. Or worse.
            What started as a straightforward commercial venture in 1709, now pervades everything we do. Every human enterprise now depends on burning fuel in one way or another, and converting that energy into physical assets. Despite my mental twisting and turning to elude that simple fact–the truth of it won’t go away: We equate burning stuff with prosperity, The magnificence of our surroundings and possessions confirms that the more we burn, the wealthier we become. We get even wealthier if we burn it faster. Only through fuelburning have we been able to hold heat cold gravity disease and hunger at bay for a while; we now demand that it goes on forever. So we vote for politicians who say it can. And the majority DO vote for it, because there are no political alternatives. In here we are preaching to an infinitesimally small converted, out there people refuse to accept reality, or at best adopt the Micawberish approach of: ‘something is bound to turn up’.
            What we are actually doing is voting to change the laws of physics, while believing that because energy gave us wealth, wealth will give us energy.
            Another big mistake there.
            Every item of data and research I use I quadruple check if I can, because I want to prove myself wrong, and I unravel every problem right to its fundamental roots, then work back from there to see if I reach the same conclusions.
            If I do, I use it.
            As to gentle downsizing, permaculture and so on. One reads what is or is not possible using various methods and crops etc. I approach the problem from another direction: To establish a viable food production base, you need two stable growing seasons– minimum. When the proverbial hits the fan, ask yourself what happens next?
            7 million city dwellers are not going to become gardeners, to think otherwise is delusion on a grand scale.
            One takes precautions as far as one can, of course; but to imagine a gentle transition into a future of bucolic peasantry is taking that delusion into very dangerous territory.

            • Scott says:

              Hello End of More, well it just looks like some of us will be gardeners that may need to guard our gardens night and day with dogs and guns eventually. My neighbors and I expect that at some point we think.

              Seriously, that is the major problem, city dwellers think food comes from the market.


          • Scott
            you’re lucky to have neighbours who think like you do
            mine wouldn’t get past: huh?

            • Scott says:

              Hello, From what I see here in Oregon…. In times of trouble, We would be fine it seems and many would make it, but it would be tough – but really tough, if they do attack us from the air, Most of us are vulnerable to that. That is where we could be in real trouble, air assaults. Most city dwellers would perish in such attacks and some tough folks would make their last stands in the mountains, but few would last the winter in the Cascades. A tough one.

              Otherwise, I think our locals could get by if there was no outside attack, but that is not likely if you are in a resource rich area such as hunting, water and mining and food production during harder times.

              I expect many of these areas will see a struggle between outsiders and locals for resources.

              Let us hope not to see this scenario anytime soon.


          • EOM,

            No apologies necessary. I understand where you are coming from and feel the same way you do about many of the issues we face and reasons we are in this mess. I have no illusions that what I do is a solution. As I’ve said before, we face a dilemma, and dilemmas have consequences not solutions.

            I’m glad to know more about your bright side. Thanks for sharing. I would love to watch a wasp tear apart and carry away a piece of meat. I love to watch preying mantis, but they always seem to know I’m watching and never go off hunting. I could swear they look at me and evaluate how easy a meal I would make.

            I have visited your home country and I agree it is beautiful and hard to avoid the history, which surrounds you everywhere. Although folks tell me East Anglia is the least scenic part of your country, I found many sights I enjoyed. We stayed at Mildenhall and I enjoyed the Roman structure still standing in the middle of town. The food was much better than the guidebooks said it would be. Lovely pasties that I could buy for about a dollar (in 1987) and were a very filling lunch. Breakfast at the place we were staying was beyond my expectations. It consisted of ‘cold’ offerings such as fresh grapefruit sections in a bowl, freshly squeezed orange juice, or tomato juice, various hearty cereals; and/or hot food such as eggs, fried potatoes, ‘bangers’ and sausage patties, fried tomatoes, and toast with marmalade. We could have any or all if we could eat that much! Dinner on the terrace was called a bar-be-que; grilled steak, baked potatoes, and a variety of salads and side dishes. Wonderful homemade potato salad!

            I loved visiting the churches and castles. The place that I remember vividly was Bury St. Edmunds where I toured the remains of a cathedral that had been torn down by the peasants after King Henry VIII broke with the Catholic church and formed the Church of England. All that was left of the original structure was the Abbeygate, a large archway which had actually been a relatively small side entrance to the Abbey. You can see it here http://en.wikipedia.org/wiki/File:Abbeygate_In_Bury_St_Edmunds.jpg
            Inside the Abbeygate was a drawing of the original cathedral. It stunned me to see what must have been the size of the original structure relative to the size of the Abbeygate. It was amazing to think of just how large a building the English had constructed, the power of the Catholic Church it represented, and the feelings of the peasants towards this power when they tore it apart and carted off the stones. No, history is not always a nice.

            I like living in our modern world and making connections to our past world. I have hope but few illusions about our future. I don’t think the lifestyle I live is an answer to the dilemmas of our time. As I have said before, I don’t believe we can solve our problems, we can only suffer the consequences. I don’t believe that we can save even a fraction of the world’s population if we collapse. It can certainly be depressing to think about all the possible terrible things we might encounter.

            I think it was the realization of what peak oil meant, that finally gave me the impetus I needed to live life the way I truly wanted to live. Before that, I was concerned with my career, retirement accounts, making something of myself and my education…all the typical stuff. In some weird way knowing that our future was not going to be what I expected, freed me to create a lifestyle I wanted. I don’t have to worry about being thought of as eccentric. (Of course, the older I get the less I worry about eccentricity anyway!) I’ve always wanted to be like my grandmother, the gentle wise-woman who loved and cared for her family, living in her garden among her flowers and herbs, a pot of soup bubbling on the stove, knitting scarves and mittens to give for Christmas to her 16 grandchildren.

            We can’t change the world, but we can change ourselves. Living a life that is meaningful to our idea of ‘self’, is really the only reality we can know.

            all my best,

            • Scott says:

              Hello Jody, More and more people should embrace gardening at home, but understanding that it is not possible in much of the world, we have an uneven collapse. Some areas getting hit really hard first. -Scott

    • xabier says:


      This Frog would like to marry such a Princess! Thanks for the links.

  6. ravinathan says:

    The problem with the notion that we can scale back to a lower technology era, while warm, gooey and romantic is simply impossible. The world has over 400 nuclear plants which will go into critical meltdown if the grid ever fails. This will end most if not all life on earth, laying waste to visions of wise Don ‘Moses’ Stewart leading the permie flock into a golden dawn! Face it! We are locked in to the current system that is moving inexorably to disaster.

    • xabier says:


      Perhaps so. Those power plants are a worry…..

      All human endeavour is futile, all human existence tragic, from a certain point of view:

      ‘Conception a sin, birth an agony, life a torment and death inevitable’ as the Spanish proverb says.

      But from another point of view, this permaculture and homesteading looks like good fun, so why not? I’m no more concerned with feeding 10 billion than those 10 billion would be concerned about me.

  7. Don Stewart says:

    Dear Gail and Others
    Lest I be accused of cheerleading for Permaculture. Here is a reality check that I think warrants some thought:

    ‘In the middle of fall planting or should I say replanting as that is how much of the last two weeks has been. Fall planting is actually a wide window in time. We actually start seeding some crops in the greenhouse as early as May (Brussels sprouts and Celery) so we can get them in the ground in July. Many transplanted crops are seeded in July and August to be planted out a month later. But starting the beginning of August we direct seed into the field a few beds of vegetables each week. Multiple plantings of carrots, beets, spinach, turnips and more so we can have as continuous a harvest as possible through the fall and early winter.

    Well August was so wet that we either had trouble getting into the field on time or the germination rate was not good or with the 3.5 inches of rain in an hour two weeks ago, just plain washed out. So last week we just re-tilled most of the early planted carrots and beets and started over. They are now up beautifully but will obviously be later than we had anticipated. Such is the crap shoot of fall plantings, usually the challenge is that it is so hot things just don’t want to germinate or get cooked off the soil after they do. If they survive that they then have to battle the onslaught of worms and grasshoppers and other pests until the weather cools down the end of September and everything seems to return to a happy state.

    It seems a bit brutal to plant when it is so hot but if we don’t get crops established as early as July, August and early September then the days get so short and cool that they will never mature before the really cold weather arrives. September is that great month when things do slow down a bit during the transition to true fall. We are taking out lots of crops, preparing tunnels for the winter season, taking soil tests and getting ready for the big annual soil turning and cover crop planting. Frost will be here before you know it, only eight or nine weeks away.’

    This is from a very good, veteran local farmer. Some of these things are just bad luck, some are to be expected with climate change, and some are due to the fact that we are manipulating Nature in a rather peculiar way that increases our workload. It’s the manipulation that I want to address.

    Today, we have certain season extension tools available to us that used to be limited to the French nobility. You can find orangeries at Versailles. But ordinary French farmers couldn’t order up an economical plastic hoop house and they couldn’t get shade cloth at the local Feed and Seed. This points to the important role that plastics play in what we might call mid-tech agriculture. This isn’t about skyscraper farms or creating ‘food’ from algae or vast acreages tilled by computer controlled tractors. So what is it about?

    Let’s first observe that the sun provides the most photosynthetic potential on June 21st (Northern Hemisphere, of course). I just went outside and took a UV reading, which was 35 on a clear, dry day in North Carolina. One June 21st, I have seen readings of 75 and the days are considerably longer. So the photosynthetic potential is much higher on June 21st than it is on September 6. Perennials are the plants which are naturally suited to take the most advantage of the summer solstice. They have a well developed root system which can support explosive growth as soon as the weather warms in the spring. Annuals have to get themselves established, which includes growing a root system–which is usually pretty puny and leaves them vulnerable to drought. By September, the perennials are packing it up for next year. They are making seeds and nuts and getting ready for winter.

    So what we are doing with mid-tech agriculture is using less than ideal conditions, but producing food anyway because we have the season extension tools to make it work. It’s more work for the farmer, it’s risky as you can see from the above narrative, and climate change probably will make things more risky–as, for example, it is really hot which stresses the plants but the sun just isn’t delivering as much photosynthetic potential..

    I have spoken about the layers approach to crops. More layers permits us to harvest more sunlight and use photosynthesis to produce more biomass. But if you want to grow annual crops in the fall, you need direct sunlight on them where I live. Again, complications and trade-offs.

    How do we think about this in terms of collapse? If financial collapse happens suddenly and takes down all the physical systems with it, most people will starve and that will be that. But suppose that the physical systems, for one reason or another, slowly adjust to a lower level of resource availability. Things like shade cloth and plastic hoop houses and drip irrigation systems are very valuable in terms of food production. And with some intelligence applied to the rationing, perhaps they will be around for some decades. In the long term, however, it is likely that we will go back to the late 1700s in France–the kings and queens will eat from fancy glass greenhouses, but the rest of us will be farming and gardening according to a natural seasonal rhythm. Or, perhaps we will have transitioned to a mostly perennial system.

    It is considerations such as these that can lead a Permaculturist to say that ‘we can probably feed 10 billion people now, but the population in the future will be a small fraction of 10 billion.’

    Don Stewart

  8. Don Stewart says:

    Dear Gail and Others
    We have touched on the issue of continued use of things like old tractors. Here is a peek inside an old tractor workshop in a rural community:

    Just from looking, you can see the opportunities and the threats. Will the fan belts and screws and nuts and bolts be available? But it is true that old tractors never die, they just sit in a neglected corner of the field. And a good restoration mechanic can bring dead tractors back to life. These tractors are not interesting to farmers operating really heavy equipment on vast farms…but they are interesting to small farmers.

    As discussed previously, a group of small farmers can reasonably make, from oil seed crops, the biodiesel to operate tractors. In a biological farming system, they would not be used to plow, but might be used for something like drilling grain seed into a field which is coming off pasture, such as the system shown by Darren Doherty which gave good yields, at low cost, and rapidly built topsoil.

    Don Stewart

  9. timl2k11 says:

    The world will need a great leader on the way down…

    • xabier says:


      I suspect it will get ‘leaders’ who are great in their own eyes, but that’s another matter entirely…….

      Some people in Spain are calling for a Dictator. How they miss Franco. I have even heard: ‘What we need is another Civil War!’ Incredible, but true. I’m not saying this is a common stance, but it’s there. But many do sympathise with’ soft-fascism’, both Left and Right. It’s expressed in corruption and the persecution of dissident opinion.

      The incipient elected-dictatorship in Argentina is worth studying: bribes to the mob, personality-cult around the leader, no concern for general prosperity and the middle-class, just buying off vested interests, corrupt politicians and big-business, personality-cult of Kirchner (she even sells cute dolls of herself from the Presidential Palace, I watched the video of her presenting them to the nation instead of addressing serious issues).

      Feminist dreamers and fascists both note, Kirchner in power is as corrupt and mendacious as any Alpaa-male dictator, and she doesn’t wear a uniform!…..

      Which raises another subject: Hitler was a feeble joke of a man, but with mesmeric powers: Alphas come in many shapes and sizes….. Sir Oswald Mosley was a magnificent figure of a man, and a good intellect, but his attempt to establish a dictatorship in the British Empire failed completely: the runt Hitler made it. Stalin was nobody.

      All dictatorships come from the people: they can’t run without them.

      We are certainly creating the conditions for new ones.

      • Xabier,
        I fear you are all too right in your assessment.

        • Scott says:

          Yes, Xabier, Jody and all, Sadly, it looks like civil war is like a contagious cold these days throughout the world and may be more in the headlines during the next year or two. Given the problems we face worldwide.


  10. Don Stewart says:

    Dear Gail and End of More and Others
    Once you grasp the principles of biological agriculture and gardening, you begin to ask questions when ‘experts’ speak.

    For example, consider this article today about the looming phosphate rock shortage:

    You will find a lot of ‘scare words’ such as ‘no substitutes’. Now if you have your biological farming hat on, you will ask when was the last time anyone spread ground up phosphate rock on a virgin forest or an unplowed prairie grassland. You will ask why Martin Crawford’s food forest in Britain hasn’t required any annual dusting with phosphate. You will want to know why Martin says it is so tightly bound to healthy soil that it isn’t a problem.

    A good initial hypothesis is that the writers of the phosphate article don’t consider biological farming and gardening to be a ‘substitute’ for the current system. (I agree…it’s not a substitute…it’s a hell of a lot better).

    Then you run across someone like Blume. Blume quotes an impressive Cation Exchange Capacity (CEC), which would indicate that he probably never adds any phosphate.. But then you think about his acreage in California and you think about the Mediterranean climate, with perhaps 4 months a year with no rain. He does mention that his land is terraced, and he claims a very high level of organic matter which retains water like a magnet draws metal to it. Still…4 months? And so you would want to probe. Maybe you find out he has a water hose somewhere, or maybe you find out his really clever solution to the problem. You also note that he has achieved an astonishing level of organic matter with only half his land in cover crop. I think that is better than John Jevons. And so you ask him how his results compare to Jevons, and if they are better, to what does he attribute his success?

    My point is that once you see the soil and its ecosystem as a living being, and if you have just enough knowledge to rise to the level of ignorance (from plain stupidity), you can begin to ask interesting questions and perhaps learn something useful.

    Don Stewart

    • The problem is of course that you need to make a transition to the new biological system, and that doesn’t take place overnight, even if everyone knew exactly what to do, and was convinced that that was the direction to go.

      • all biological systems—and there really are no exceptions—are genetically programmed to survive against all odds, or perish in the attempt.
        nature has no other function than that, everything else apart from eating and reproduction, is window dressing.
        this will be the case whether a change takes place through a gentle decline, or very rapidly.
        every species must promote itself to its utmost ability.
        if humanity manages to exterminate itself, other animal forms will rush to colonise the spaces we leave, they too will fight for supremacy as we have done.

    • xabier says:


      Economists and politicians often don’t perceive citizens as living beings, just economic units, so to expect them to see the soil as such is asking way too much.

      I was quite shocked recently by a phrase ‘ The natural world is a service-provider.’ Let’s just contemplate the mental and spiritual limitations embodied in that choice of words…….

  11. timl2k11 says:

    Because of the many things discussed in the articles posted here, I expect the next debate over raising the debt will be the worst yet. Our politicians are realizing we have very little room to work with and that our current level of spending is simply unsustainable. I expect both sides to trench in and not budge quite possibly giving way to a prolonged government shutdown.

  12. Don,
    Until a person starts producing food for themselves it is difficult to convince them how easily it can be done. I don’t think you will be able to convince people who don’t want to grow food that permaculture holds any answer to food production. But I think there are many, many young people anxious to start small farms. They are ones who are attending the workshops you tell us about and experimenting on what works for them. I won’t argue that permaculture can feed 10 billion people. I don’t think it can. But when petrochemicals and oil are no longer available, I think this system will be still producing food.

    Not only can gardens provide fresh economical food (fruit, vegetables, greens, herbs) but it isn’t difficult to grow protein even if you live in town as long as you have some yard. West Lafayette allows families to have chickens in town (hen not rooster). Lafayette does not. My family raised meat rabbits when I was a kid. We used their manure to fertilize our garden. We had 4 pens each 2′ x 6′. Kept 3 does and 1 buck. You can bred does up to three times a year and we had one that was a “checkered giant” that usually had a liter of 14 babies. The babies reach good eating size (about the same size as a large hen, 8 to 10 lbs. of meat) in about 4 to 6 months. Summer is best because they eat lots of grass and weeds. We generally didn’t bred the does more than twice a year, as winter was hard on new mothers. I looked at the meat rabbits when I was at the county fair. Might not be a bad investment! I think rabbit tastes even better than chicken, and the skins can be used as well.

    By the way, you are right about the importance of soil organic matter. The soil I make runs about 8% organic matter, lots of compost added. One customer told me that he did an experiment with tomatoes. He bought a 6 pack of seedlings and planted 1 in my soil and the other 5 in another area of his garden where he used conventional gardening methods (tilling each spring, sprays for weeds and bugs, and liberal use of granular fertilizer). He had come to me because he said his soil was “wore out”, which is pretty typical of all our conventional farmland. He said the 1 tomato plant produced more tomatoes than all 5 of the others put together. Organic matter and microbial activity make all the difference in the world.

    This is the fifth year that I have saved seeds from my heirloom tomatoes (which allows me to control for fungus and improve the variety) and I start my own seedlings in potting soil that I make from the worm compost (vermicompost), which I also make from our kitchen food waste. Many people have been complaining about tomato blight in our area again this year. I haven’t had a problem on any of my plants. Even horn worms no longer bother my plants because the plants grow so fast the worms don’t do much damage. I stopped picking off the worms about 3 years ago and noticed that wasps now populate my garden. As soon as the worms appear, the wasps aren’t far behind. The wasps lay their eggs on the worms…end of worms. If I pick off the worms there is no food for the wasps, and no population to control worms. I have found that most permaculture methods are very simple and require little in the way of resources or work on my part. Just eduction. I am able to grow a large amount of fresh food with little or no addition of petrochemicals or other products that required oil. And while our current system is still operating, I am supporting that system by buying goods and services I still need as I transition towards more self supported food production.

    Speaking of energy and supporting the economy, we finally decided to test our 20 year old refrigerator to see how much energy it was using. 1,968 kwh per year. Ouch! So we have decided to replace it with a new model, even though I realize it may require repairs within 10 years. The new model is supposed to use 408 kwh of electricity per year. This amount of energy savings represents about 12% of our home energy use. It is about the amount of electricity we use in a month when we our geothermal system is in heating mode.


    • Don Stewart says:

      Dear Jody
      Nice to hear from you.

      I agree with most everything you say. Backyard rabbits are quite practical, and are one of the best ways to use kitchen scraps. Put them over a worm bin and you have a super recycling system plus rabbit stew.

      I don’t know exactly what to make of the ‘wooden wheels’ controversy. I was just watching a Lillian Gish movie from 1920. She is a girl from a village in New England, and everyone is riding around in wooden wheeled buggies and such. What is so terrible about that? The story turns on personal tragedies and triumphs, not the supposed awfulness of a horse drawn, wooden wheeled buggy.

      If you look at photos from the third world, it is quite common to see repurposed gasoline or diesel vehicles being pulled by oxen or horses or mules. The first car that my wife and I bought ended its life with the roof cut off, pulled by a draft horse, hauling manure on a New Jersey farm. We let the farmer have it in return for hauling it away.

      I think people are going to have to re-imagine the components of life.

      I wholeheartedly agree about the fertility and disease fighting power of plants. Wasps are also to be prized. Last year I discovered that a cover crop of field peas attracted swarms of wasps. So lots fewer bugs. The key is to gently steer your ecosystem, not fight it.

      The other thing that people don’t understand is that a plant which is strong and defends itself also gives the human eater tons of phytonutrients which we use to fight disease.

      Don Stewart

      • Don,
        I certainly agree with you on the plant phytonutrients and health. I grow many fresh herbs and greens and I find that eaten raw they give me a delightful energetic vitality. Hard to describe until one tries it. Sometimes even the smell of fresh herbs makes me feel good, an inexpensive form of aromatherapy. Rosemary, basil, and mints are my favorites.

        Since I started eating more fresh greens and herbs I’ve noticed that my immune system responds to infectious agents rapidly and effectively. I’ve noticed that when I get a small cut or scratch they heal within a day or two without need for special ointments or bandages. Periodically if I feel like I am “coming down” with a flu, usually after being exposed to people who are hacking and coughing, it usually only takes is a day of bed rest and I’m over it. Most infections just make me feel more tired than usual, slight body aches, and tender glands in my neck. This is when I know my body is fighting something. I get all the extra sleep I can, including a long afternoon nap. I keep telling my husband not to go to work when he feels he’s getting sick, but like most people today, he feels like he’s not sick enough to stay home.

        It’s sad when a store clerk is hacking and coughing while waiting on customers. I know that they would really like to be at home in bed but they don’t have much choice in working when they are sick because they don’t have sick leave benefits and cant afford to take off work. I understand this and see it as another symptom of our unhealthy economic system. If we don’t take care of our immune system we will not be able to fight off disease and we will end up succumbing to other opportunistic bugs invading while his immune system is trying to recover from the original infection. And we spread our germs to others.

        Growing good quality food certainly is one way to improve our health economically, and in the future this will be even more important for our survival.

    • stravinsky7 says:

      Hey Jody, do you run a business or is it more neighbor to neighbor? I have family up that way, and we’ve also been making it up to PU for the kids’ spring science activities every year. : )

      My experience with gardening has been atrocious.. I have yet to get to the point of positive returns, although I am improving. For instance, two years ago was my first year, 30% of plants bore fruit/veggies. Last year was crazy drought, and it turns out I overcompensated, overwatered and had associated problems (I didn’t know). This year, I was focusing on getting a certification, and was totally time-constrained. I bought plants, and encouraged my wife to plant them.. She has an interest, philosophically speaking, in gardening. It did not bear fruit irl, it is repetitive, hard, dirty sweaty business, actually speaking (of course).

      Anyways, if you have a business, or know of one local, let me know, I could use help!



      • Ryan,
        I own a business called Soilmaker. We sell compost, compost-amended topsoil, and mulches. You can find our location, hours, and contact information on our website (www.soilmaker.com).
        I’d be happy to answer your questions about gardening. The two previous years, 2011 and 2012, were tough years for gardens due to drought and heat. This year has been great until the last 6 weeks, now we have a mini drought again. The weeds are thriving though. It takes awhile to figure out what to plant, when to plant, and how much to plant. One of my early years I planted the whole package of zucchini. They all germinated and rather than thin such nice plants I moved them apart. One can have too many zucchini plants! Even neighbors asked me not to give them any more veggies.

        • ravinathan says:

          Jody, I would be interested in seeing your recipe for the compost that you sell. Unless of course it would be revealing trade secrets in which case I would understand.

          • ravinathan,
            Making good quality compost has more to do with the process than a strict recipe. Most recipes are pretty flexible. To make good compost requires experience, an understanding of the organisms that are doing the work, the conditions they need to work best, and the proper type of food substrate for them. The rest is moisture, air flow, and time.

            I would be happy to share the types of materials we use in our recipes, but not the exact proportions. I keep my recipes somewhat proprietary, and they also have to change in proportion based on: C:N ratio of the incoming waste materials, seasonality issues, and what the finished product are going to be.

            We are essentially a yard waste composting facility, so yard waste (leaves, tree branches, garden debris) make up the bulk of our waste stream. We handle all of the yard waste from the City of West Lafayette, the Purdue campus, some landscaping companies and county residents. We also take all the animal bedding from the Purdue Veterinary hospital, horse bedding from several local stables, and an industrial biosolid ( a by product from the manufacture of corn starch). We make three different compost recipes.

            1) leaves, straw, wood shavings, and spent corn. This makes the best amendment for making our blended topsoil.

            2) mixed yard waste and spent corn. We receive yard waste from the city that is picked up from curbside. It contains a mixture of everything home owners collect from their yards (branches, weeds, grass, dead flowers, pumpkins, etc.) Makes a good all-purpose soil amendment or mulch for flower gardens.

            3) horse manure and bedding. Most stable owners use wood shavings for bedding, so the bedding contains lots of manure and wood shavings. Depending on the ratio of manure to wood shavings we may have to add more carbon, i.e. straw. Home owners use this for veggie gardens.


            • Scott says:

              Thanks Jody that was very interesting about your compost business. I have got several small piles going in my yard too and a box which helps supplement the garden, but I find myself buying a couple of pickup loads each spring too really helps. Here in Oregon we have a local composter company like you which is great. But it is good to know how to make it on our own if we need to.

              We are locked into this global food supply for now, but the more I grow food at home, it taste better and surely is better for us. With meat, we try to buy the organic or free range chickens, although they are more humane, they just taste better too. Grass feed beef is a bit hard to find but that is better too.

              Best Regards,


          • Hi Scott,
            Another way to make more compost at home is to compost weeds. I let a lot of weeds get to be a foot or more tall before I pull them or cut them off so they regrow. I keep them back from the base of my vegetable plants so they don’t compete too much for nutrients and water. But areas off to the side I let weeds kind of take over and periodically pull them for the compost pile. Really builds up some big piles fast.

            How is your garden doing this year? We’ve had such an enormous amount of fruit production this year I can hardly keep up. I think we’ve gotten two to three times the amount of fruit we normally do. This winter we will be enjoying lots of strawberry, rhubarb, and grape jam, peach, pear, and apple sauce/butter, and frozen blue berries. I think I’ve canned over 100 pints and 50 quarts of fruit.

            • Scott says:

              Hello Jody, we have had a strange year I think because the bees were late this year, I let my field flower in the late summer which helped them I think but this year some trees had no fruit.

              Here in the Northwest, we had lots of rain this summer (well a few times both time I went camping was my bad luck got the tents wet both times) But most days have been sunny. However, just yesterday we had a storm with Lightning and and inch and a half of rain here, but it is heating up again now this weekend and should finish off the corn etc.

              We have learned that every year is different and you cannot trust what you plant to feed you, you need back up plans. We still buy lots of stuff from the store as most of us do but we would like to do more on our own which is a good goal for all I think.
              Kind Regards to all,


        • ravinathan says:

          Jody, thanks for your generosity in posting the components of your commercial compost. You are indeed fortunate in having so many sources of ingredients for compost which should allow you to mingle many kinds of greens and browns for a richer blend I have been dumping the weeds in the chicken yard first in the hope that they will eat the seeds before I rake it up. Does your composting process kill the weed seeds, otherwise I presume your clients will be disappointed?

          • ravinathan,
            Composting is supposed to kill weed seeds, but I haven’t seen a lot of good research on this. More research has been done on parasites or intestinal worms, which can be found in sewage sludge and pose more of a threat to human health. Some of our compost is several years old and the piles will sprout weeds from air born seeds. Once weeds come, seeds follow. When we blend compost with soil, the soil also carries its own seed bank.
            The best recipe for back yard piles is leaves and food scraps. If you have access to horse, sheep, or cow manure that helps the pile heat up and should kill weed seeds.

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  14. ravinathan says:

    The argument remains that permies side step the population predicament and in many ways contribute to the notion that permaculture practices will feed current populations and more. Like most good hearted liberals they will not allow themselves to judge the procreative choices of humans and take a stand. They fear that wading into the pop argument will take away from the adoption of permaculture practices. In terms of real world experiments, Eric Toensmeier of Paradise Lot fame admits that they cannot produce enough to feed themselves. In answer to my direct question to Toensmeier during a workshop he honestly admitted that at best they meet about 25 percent of their dietary needs through their garden. I have adopted oermaculture practices in my property and have learned from experience how difficult it is to grow food sustainably and reduce our energy footprint.

    • xabier says:

      Population control is off the agenda outside totalitarian states since WW2 and the Nazi scientists: it’s irrational, but there we are. We just have to await the Four Horsemen.

    • Don Stewart says:

      Dear Ravinathan
      Eric Toensmeier is gardening a very tiny plot of land. What I have advocated here is the production of perishable food in the garden while those foods that are easily kept and transported are grown on commercial farms. Most of the calories are going to come from the farms, but most of the phytonutrients which make one disease proof will come from the garden. David Holmgren and others have advocated the same way of thinking and acting.

      It doesn’t do much good to have plenty of calories but few phytonutrients (witness the current epidemic of diabetes), and of course one would starve trying to live on leafy greens (25 pounds per day). The two have to go together.

      The appropriate question is how to think rationally about the problem in a world moving into resource scarcity. I keep coming out with the answer that gardens for perishables is the answer for most people. Perishables are the most expensive foods most people buy. So a garden makes economic sense today and makes sense tomorrow in a transport limited world.

      Don Stewart

      • xabier says:


        Good sense.

        And productive gardening can give hope, pleasure, purpose and nutrition to those made employed or condemned to very low-pay and insecure work by growing automation and economic decline – a major social task today.

        But let’s scan the developed world and see where any such schemes are being pursued by regional and national governments (not just micro-groups of sustainability-minded folk): no, there’s nothing on the radar…..

        The only sustainability that states are interested in is that of the banks, housing bubbles, etc. It’s tragic: intelligence and imagination point the way, vested interests and short-termism block it.

        And again, teach a man to feed himself and not exist on a state dole, and he may just not vote for you. He might start to think for himself as well as feed himself.

      • ravinathan says:

        Don, what you and other permaculturists miss is a version of Jevon’s paradox that any increase in Agro productivity, with or without the use of fossil fuels will come to nought as human population increases to meet food production, I believe that your permaculturist cheer leading is well intentioned but futile, until humans squarely face up to the challenge of limiting population, failing which we are locking ourselves in to the road to collapse, just like other civilizations and species before homo economicus that outgrew their ecological niche.

        • Don Stewart says:

          Dear Ravinathan
          Where were you when I mentioned that Edo Japan limited population by the simple expedient that the farmers had to feed their children?

          Don Stewart

          • ravinathan says:

            Don, you are now placing yourself into a contradiction. On one hand you claim that oermaculture can feed 10 or 15 Billion and more sustainably citing carious permaciulture gurus and on the other point to the forced population control of Edo Japan. Which is it? Without taking a clear position on population limits permaculture is at best limited and at worst deluded.

            • Don Stewart says:

              First, you need to remember that Permaculture has roots in Anarchism–there isn’t any pope to issue official proclamations.

              If you ask Sepp Holzer, he thinks Earth can produce enough food to feed 16 billion people. But Sepp moves lots and lots of earth around to achieve a very high level of control of water. It is my impression that most Permaculture leaders don’t really support all that earth moving. As I said before, Earth is now producing enough food to make all 7 billion fat. The reason some people are hungry is the dysfunctional systems we have in place–not the inability of Nature to generate food.

              Toby Hemenway, who wrote the best-selling ever book on Permaculture, recently gave an interview to Doomstead Diner. He was asked if Earth could grow enough food to feed 10 billion. He said he thought it could in the short term. In the long term, he thought Earth would support between 500 million and 2 billion. He gave those same numbers in a public talk at Duke University several years ago.

              David Holmgren, a co-inventor of Permaculture, was asked about natural gas as a fuel for cars. He said he thought it wouldn’t happen…that we would be so desperate for nitrogen fertilizer to grow food that we wouldn’t have any left over for vehicles. But he said he thought that, in the near term, Earth could grow enough food to feed 10 billion with continued use of nitrogen fertilizer and dietary changes such as less meat. As far as I know, he hasn’t said anything about the long term.

              I have tried to explain to you why the long term is different from the short term, and why (if Gail is correct about the hard linkage between financial and physical systems) the short term might be very short indeed.

              I don’t need to ‘go one way or the other’. You need to understand the dynamics and the dependencies and make up your own mind and do what you need to do. Look for better sources of information that I am, if you want to.

              Don Stewart

  15. ravinathan says:

    A remarkable article on our population predicament which points out the fundamental weakness in permaculturists confidence in feeding the world’s current population and more sustainably! Tom Murphy makes the connection between pop growth and energy consumption quite brilliantly and points to the futility of believing that our current population is sustainable. He also explodes the common refrain that economic growth is the best contraceptive. Not for the Quataris! Nor for any of the energy surplus countries either..it is just another soothing myth that allows us to breed as usual, a comforting lie that the post modern Permie Greens contribute to.

    • Don Stewart says:

      Dear Ravinathan
      I don’t see much conflict between what Toby Hemenway says in his lectures and Tom Murphy says. Toby goes back a little further and attributes the population growth coincident with grain agriculture to the fertility effect of grain…I have plenty of energy so its time to breed. Toby (who is a biologist) thinks that the signal from leafy greens and meat is much more subdued.

      No permaculturist I know disputes the fact that the ability to turn soil with a plow stimulates bacteria and provides a rush of nutrients to plants. What permaculturists point out is that the constant plowing is unsustainable and results in eventual desertification. That is why Toby Hemenway thinks that the population of Earth in 2050 will be lower if we stick with chemical agriculture than if we convert to biological agriculture….the effects of pollution and soil degradation and all the other effects of chemical agriculture plus resource depletion will catch up with us and food production will decline. If we convert to biological agriculture, we can produce a lot of food (but not an infinite amount), we eliminate the bad effects of chemical agriculture, we remove some of the negatives of grain (which currently provides around 70 percent of our calories, including what is fed to animals), and we can sequester a lot of carbon.

      Two things make biological agriculture available to us today in a way that it was not available to our ancestors 10,000 years ago. The first is our much better scientific understanding and consequent ability to target our efforts. The second is the current availability of resources to both remediate the damage already done and to shape the Earth to support more biological activity. Humans, for example, can build gravity fed ponds which hydrate a hillside and support much higher levels of biological activity. But it is really helpful to have earth-moving equipment when you start building ponds. Our ancestors did it by hand, but I doubt it was much fun.

      Can we flip a switch and convert to biological farming and gardening? Probably not. When David Holmgren was recently asked about natural gas as a bridge to somewhere, he said that in his opinion we will be so desperate for nitrogen fertilizer that that use will preclude any ideas about powering cars with natural gas. David thinks we can feed 10 billion, but we will need nitrogen fertilizer…perhaps as we labor to restore true biological methods or perhaps he thinks that biological methods can’t produce enough nitrogen to feed 10 billion–there are respectable arguments on both sides. All the permaculturists I know, however, think that ultimately we have to depend on biological methods. Darren Doherty advises his clients to convert to biological methods over a 10 year period. He points out that it takes time for a healthy ecology to re-establish itself after so many decades of abuse, and that it doesn’t do any good to be right in the long run if you die in the short term.

      Don Stewart

    • THanks for the link. I hadn’t read his article yet. (I enjoyed meeting Tom Murphy at the Univ. of Vermont this year, and the Biophysical Economics Conference.)

      He makes a good point about populations of countries of energy exporters is growing. Also, that the size of family curve is U shaped, rather than simply decreasing.

      It is hard to break apart the combined effect of immigration and new births. People who immigrate tend to go to countries where energy is plentiful. Reduced energy availability tends to lead to emigration away from a country–look at the countries of Eastern Europe. There is a lag in this process, that Tom’s method can’t unravel. It adds even more to the tendency of countries with more energy to add population, whether or not it is by new births.

      • ravinathan says:

        Today the NY Times published a report on the stabilizing fertility rate in the US after some years of decline that they attributed to the weak economy. Good news for economic growth in the US of A folks! Consumers are signaling their optimism by procreating little consumers. More tax paying consumers who will fund our pensions. Economic growth requires growing populations, which in turn depletes non renewable resources and raises their cost thus eroding economic growth. What a bind we are in! The juggernaut rolls on.

        • xabier says:


          Even better prospects when one considers that the higher birth-rate is found among the lower-earning and least -educated section of the population, (often new low or unskilled immigrants – certainly that is the case in Europe and Britain. It’s not just about head-count, but politicians and economists don’t seem to want to get it. It was in 1813, when kings and emperors needed large conscript armies and the land needed labourers, but not now………..

  16. Don Stewart says:

    Dear Gail and Others
    Let me try to clarify some issues around Permaculture or Restoration Agriculture and population and climate change. (Any mistakes I make in attributing opinions to others is my own fault.)

    David Holmgren, Toby Hemenway, Darren Doherty, and Sepp Holzer (and probably many others) think we can grow enough food to feed 10 billion people. Toby Hemenway thinks that a hundred years from now we may only be able to grow enough food to feed between 500 million and 2 billion. All those guys also think we can sequester a lot of carbon in the soil. But they all think that continuing to burn fossil fuels the way we do now isn’t a smart thing to do, even if supplies permit it. Most of them are also Peak Oilers of one persuasion or another.

    Let’s consider the years 2013, 2025 and 2100 just to get our crude models functioning. In 2013 we have the ability to grow enough food to make every one of the 7 billion humans fat. Yet we have a couple of billion hungry people. So we have to factor in ‘social dysfunction’ which takes many shapes in various places and in various socio-economic settings if we want to talk about hunger and obesity with any specificity. What we would really want to aim for is producing just the right amount and type of food so that everyone was lean but well fed and disease prooof. We know how to do that, but we don’t do it. If you follow the money trail, you will be on the road to discovering why we have this failure.

    By 2025, if we follow the advice of H,H,H, and D, we would have transformed our suburban, urban, and rural landscapes for minimal external input food production. We would be partnering with microbes so that the microbes do the heavy lifting…not fossil fuels. We would have stopped killing microbes. Biological activity would have multiplied, producing plenty of surplus for humans to harvest. We would be able to produce enough food to feed 10 billion people. How many of them would we expect to be hungry? That all depends on whether we have managed to change the dysfunctional social system we had in 2013.

    By 2100, resource restraints are much more in evidence. We can no longer order up diesel powered equipment to move earth. Metals may be in very short supply. Transportation, except by water, may be very difficult. Nails may be carefully straightened and saved. And I think that this is where Toby’s number of 500 million to 2 billion comes from. We currently have plentiful resources to do what we need to do with agriculture and gardening, but someday those resources will be much scarcer. How many hungry people will there be in 2100? It depends on a couple of big factors. Will we, as Toby would like, have reduced our birthrate to the level currently prevalent in Europe, so that the population of Earth is 2 billion, or will we have continued to reproduce like bunnies and have 20 billion people? In addition, we have to contend with the same bugaboo of a dysfunctional social system. And did we actually make the changes to farming and gardening?

    In short, we currently have in place a knowledge base and a resource base to grow enough food to feed 10 billion people with minimal external inputs. We will likely not have the resource base in 2100 to grow enough food to feed that many people. The dysfunctional social system may continue to generate hungry people in the midst of plenty. Or we may simply fail to do farming and gardening using best practices.

    What about climate change? In 2013 we have the knowledge and working examples which show us how to produce food in partnership with microbes and minimal external inputs. Farms and gardens CAN be net energy producers, instead of the energy sinks and net producers of CO2 that they are today. But we do not, mostly, farm and garden that way. The official policy of the US Dept of Ag is that farms should get more and more gargantuan so that they can make ever more efficient use of external inputs. By 2025, if we were to think and act as we thought and acted in 1942, we would have transformed our agriculture such that huge amounts of carbon are being stored in the soil and external inputs are minimal. In Darren Doherty’s words, ‘we could stop climate change in its tracks’.

    By 2100 we will know whether Daniel Yergen was closer to the truth, or Jean Laharrere was closer to the truth, or Gail Tverberg was closer to the truth. If Yergen turns out to be the prophet, and we are continuing to burn all the fossil fuels we can get our hands on, we will be well on the way to turning Earth into Venus. If Laherrere is closer to the truth, then climate change won’t be a problem if we have chosen the ‘carbon farming’ approach. If Gail is closer to the truth, industrial civilization will have long since collapsed and humans, if they survive at all, will be reduced to small bands of hunters and gatherers living in a climate which is still adjusting to the high carbon dioxide levels of 2013.

    Don Stewart

    • I am afraid I am still a skeptic on the feeding 10 billion people, unless we have access to a whole lot of things we depend on today–roads, fences made of metal, netting to keep pests away from fruit, transportation of soil amendments by some method other than humans carrying one arm-load at a time, irrigation systems using today’s hoses, greenhouse type arrangements, etc.

      There would also be the detail about where this food could be produced, and where the people of the world really live. Some countries would not get much produced at all (Iceland, Norway, and Saudi Arabia come to mind) while others might produce more than enough. How would it be stored and shipped to the people who need it, with simple boats with perhaps sails and oars?

      • Scott says:

        I watched most of that Video that Don Stewart sent that showed that new high tech turkey and animal fencing, simple, and not expensive, but the system needs just a bit of little power, but these things need a high tech system to build them — but these items are good and give us hope for the near term. Too bad we do not have more land with good water but we will get by for a while with all of these things as long as there is not a major financial collapse or war. But that is the big variable.


        • “A little bit” is just as hard to come by as a lot, when the problem is a broken system. If the electrical transmission system is broken, or the banks aren’t operating, that is a problem, whether the amount needed is a little or a lot.

          Also, high tech approaches that use a little bit are not sustainable. They lull us into not taking the necessary steps to develop a sustainable system–one that works without high tech input. They encourage us to have more children than we can support in the next generation.

      • I agree—there is a classic blank-out of the problems of feeding cities, and half the world’s population live in cities.
        Until railways spread into nationwide use, the city fixed its own limits by the distance food could be carted in to market. that was rarely more than 10 miles for staple foods, which meant towns and cities were circled by market gardens
        the railways market gardens to be built over and cities to expand accordingly
        similarly when refrigerated ships were developed, populations expanded on the consumption of cheap meat.
        but all that depended on cheap energy, without that we go back to food by the cartload instead of the shipload.
        growing food might be less of a problem than moving/processing it

        • error—the railways allowed market gardens to be built over

          • xabier says:

            End of More

            From the distribution side of things, as you will know it’s only in the last few decades that the small independent, back-street shops -butchers, greengrocers and general stores, – have died out in the suburbs of even large cities like London, often only few minutes easy walk away, and leading to car-dependency in order to buy anything. I gather much the same happened in the States, but perhaps earlier with the building of vast residential suburbs?

        • Agreed. From that point of view, more spread out cities (like Atlanta) might have an advantage. The businesses would still have problems though, getting workers and goods to them. So most people living in cities likely would not have jobs, causing a problem when it comes to paying for things like electricity and taxes.

  17. Re: Collapse of the Soviet Union

    Russia’s oil peak and the German reunification

  18. ravinathan says:

    Gail and others: you may be intrigued by this podcast of a discussion between Michael Klare and Kunstler, where Klare expresses his opinion that energy resources such as shale.could potentially meet our needs for the next 25 years. Keep in mind that Klare is well aware of peak resources and has written a book about it. Despite Kunstlers doomer probing, Klare points to the world wide availability and discovery of shale resources. When challenged on the financial returns on these investments, he responds that returns are sufficient to exploit these resources and that energy companies facing depletion in their traditional oil business will have little choice but to invest in shale. His view is that the limits to growth will not be from energy but from climate change. This differs from Gail’s perspective and I must admit to felling some frustration with Klare’s measured academic balanced view. I had to remind myself that it is precisely the oppositional arguments that I should pay attention to.
    So where will the constraints to shale exploration come from if capital to exploit is available? Water? What if the shale industry learns to reuse drilling water? It appears that climate change is the most likely constraint to business as usual.

    • The issue at hand is the damage that high oil prices are doing to the economies of oil importers right now, as well as the perilous state that oil exporting economies are in because oil prices are not high enough for them (even though they are too high for oil importers). Thus, it is not clear we really have time to do anything of this sort.

      If, in fact, it were possible for oil prices to keep rising (to make shale increasingly worthwhile to extract) without too great problems in oil importing countries, then Michael Klare would be right. As it is, I see the big obstacles to exporting shale technology worldwide to be:

      1. Dense populations in would-be fracking locations, making the use of the technique more questionable. I have heard that a major shale location is under Paris, for example.
      2. Lack of water, especially in China. Even with reuse, China is likely to be short of water.
      3. Lack of existing pipelines that can be used without a lot of initial front end cost.
      4. International boundaries that make treaties necessary before pipelines that go any distance can be built.

      If we hit limits from oil first, then climate change becomes a secondary issue.

      • xabier says:


        I don’t know whether you saw the open letter from the British Prime Minister about fracking?

        He tries to imply that it will mean ‘cheap energy’ and lower fuel bills. That fact that it only you makes financial sense in a high-price environment is deftly brushed aside.

        He also claims that it can take place all over Britain, even though one years ago there was talk of severe water rationing due to a very dry winter (common now) in most southern and eastern regions, Were I live is classed as ‘semi-arid’ and is highly agricultural.

        Good for a laugh, or a weep……..

        • Chris Johnson says:

          Xabier and Gail:
          Certainly not an expert, but I’ve seen several references to fracking with other than water: various ethyls and. Also, the sand and salt in fracking water raise the question of whether fracking water needs to be clean at all. Google that one and you get a lot of interesting response, only a portion contradictory.
          Yours is the first indicator I’d heard that the UK was getting arid. I wonder if that implies the North Atlantic water and air currents are fading/failing. Weather watchers have long pointed to that phenomenon as critical to keeping the ice up north rather than downtown Koblenz. Well, since we’ve melted the North Pole, maybe we won’t have that problem…
          Cheers, Chris

          • xabier says:


            Water supply is quite a problem in the south and east of the UK, where of course both population, industry and industrial agriculture are concentrated. People are lavish in the use of domestic water.

            In the northern parts, there is abundance of water with heavier rainfall, and much fracking is planned there.

            Weather patterns are simply all over the place these days, but the sometimes very dry winters are a great cause for concern as reservoirs and so on do not replenish sufficiently. .
            I am certainly moving to install a rain-water collection system and a well.

        • I’m sorry, I didn’t see that letter. I suppose hope springs eternal.

          On a similar note, I got an e-mail from Platts today, thinking I might want to advertise in Fortune. It said,

          Dear Gail,

          This October, Fortune will partner with the experts at Platts to produce a custom content section on “RESURGENCE OF OIL”, a special section in Fortune Magazine that explores how key participants in global markets are assessing and betting on this market.

          Click Here for more information.

          How growth in US oil production is transforming the energy industry—and the economy

          Issue Date: October 28
          On-Sale Date: October 14
          Ad Close: September 11

          I suppose they contacted me since I get some (free) Platts e-mails.

          Good grief!

        • I’m sorry, I didn’t see that letter. I suppose hope springs eternal.

          On a similar note, I got an e-mail from Platts today, thinking I might want to advertise in Fortune. It said,

          Dear Gail,

          This October, Fortune will partner with the experts at Platts to produce a custom content section on “RESURGENCE OF OIL”, a special section in Fortune Magazine that explores how key participants in global markets are assessing and betting on this market.

          Click Here for more information.

          How growth in US oil production is transforming the energy industry—and the economy

          Issue Date: October 28
          On-Sale Date: October 14
          Ad Close: September 11

          I suppose they contacted me since I get some (free) Platts e-mails.

          Good grief!

          • xabier says:

            PM Cameron’s letter on fracking is a classic of propaganda, up there with the Nazi hints of ‘war-changing super-weapons’ in about March 1945.

            I did have to rub my eyes at first, but then the laughing started. Maybe we will be able to extract a lot of cynical humour from decline and collapse?

            At least I’m not going to be forced to buy shares in fracking companies…….

          • timl2k11 says:

            • Our writer will interview your company spokesperson or customer, and
            excerpts will be published in the story”
            Oh, I’m sure this won’t be biased in any way. I wonder what percentage of readers know that what they are reading is written for the benefit the advertisers, not the readers.

  19. Don Stewart says:

    Dear Gail and Others
    This comment will offer what I hope is a respectful challenge to a couple of the assumptions which play key roles in the articles:
    1. Collapse is the best solution we have to climate change
    2. Bankruptcy necessarily implies collapse

    Taking up the climate change issue first. Consider Darren Doherty’s statement at 1:16 in this video:

    I will note that a 1.6 percent increase in carbon in the soil means that the carbon level increases from, say, 1 percent to 2.6 percent. At 1:18 he discusses the use of perennial grasses and trees as carbon sequestration vehicles. He notes that perennial grasses work faster than trees.

    Now take a look at this video with Joel Salatin and Joe Mercola, MD taking a tour of part of Joel’s farm in Virginia. Remember that Joel considers himself a ‘grass farmer’, and that these are predominately perennial grasses that you are looking at. And that Joel manages these grasses to maximize carbon sequestration. For example, a perennial grass can send roots down 25 feet into the soil. When the visible part of the grass is growing, it must be supported by more roots. So the plant sends out rootlets far below the surface. But then a cow grazes the grass, so there is less visible biomass, which prompts the plant to kill some of the fine roots deep in the soil, which leaves a carbon deposit deep in the soil.


    I have previously mentioned the work that Alan Savory has done restoring deserts with grasses and rotational grazing.

    A combination of animals and trees is found in silvopasture:

    And we have had some fairly extensive discussions of food forests and mulch systems with no tillage for growing annual vegetables.

    If you doubt that humans can actually do anything to increase carbon levels in the soil, I suggest that you watch the entire hour and a half of Doherty’s talk, and also check Albert Bates current blog post:

    In summary, I don’t think it is a given that collapse is the best we can do in terms of climate change. We have the ability to store more carbon in the soil, and we will reap a multitude of benefits beyond climate change if we do so. Those who dismiss ‘the farming solution’ and claim that moving away from a soil carbon destroying chemical based system of agriculture is equivalent to a reversion to the Middle Ages just need to do their homework.

    The second challenge is to the notion that bankruptcy necessarily implies physical collapse. Let’s suppose we begin with a single firm that is highly levered and commands a high price/earnings multiple because the stock market thinks the company has learned the secret of perpetual exponential growth. Some fine day the stock market discovers that the management, which was paid to achieve earnings at any cost, has run the company off the cliff. The company goes to bankruptcy court and the paper assets of the debtors, the equity investors, and the workers are all shorn and the company is restructured in the light of its true prospects. But the company as a producer of real goods and services may emerge as a productive entity…depending on how much structural damage the old management did trying vainly to save their paychecks. So it is possible, at least in theory, for a financial superstructure to collapse without a collapse in the actual productive capacity of the company.

    Consider a very simple business…a family farm. Let’s assume that the family farm both feeds the family from its products and also sells products in the marketplace in order to earn the money it needs to buy things from outside the farm economy. A traditional family farm probably has 3 generations living on it. It doesn’t have any stocks and bonds. Family ties ensure that one can work hard on the farm in middle age and then begin to take life easier when one grows old. Children are productive from an early age but aren’t expected to life hay bales right away. Talking about the ‘necessity’ for earning interest obviously isn’t applicable to this very simple organization. One begins life by consuming more than one produces, then in the middle years one produces more than one consumes, and in old age one again consumes more than one produces. Over a lifetime, one’s consumption matches one’s production. There is no magic of infinite exponential financial ‘growth’. The rewards are not money…just a good life.

    Let’s suppose that, after reviewing the Carbon Farming material, you grudgingly admit that perhaps it is possible. You acknowledge that the entire weight of corporate and political power will be arrayed against the ideas, and so think that our dysfunctional social and political and economic systems will prevail and we will actually kill ourselves with climate change. Besides, what corporate executive making 50 million dollars a year because they have managed to convince Wall Street that they have the secret to perpetual exponential growth in earnings is going to say ‘actually…we can’t produces exponential earnings growth’.

    And, for all you Peak Oilers, you note that fossil fuels are involved in even the simplest of the current methods. For example, Joel Salatin uses a very light-weight fence of metal and plastic and he uses electricity. He uses a tractor to pull his mobile equipment. He has a pick-up truck. His products are delivered to customers with automobiles and trucks.

    There are two points we need to remember about the oil connections. First, Joel is using, in his production methods, far less oil than a conventional farmer. Distribution is still a big issue and he talks about ‘aggregators’ in his discussion with Joe Mercola. The oil that he is using is going for high value services such as the electric fences and taking the animals to slaughter. Second, in a rational world, Joel’s ability to bid for a declining supply of oil would be higher than a lot of other oil users. If we rank outputs, Joel’s production of food, clean water, and carbon in the soil has to rank very high. Third, Joel can visualize a path to pretty complete independence from oil. His equipment can be moved by burros, electric saws can be replaced by hand saws, rural communities may regrow providing local outlets for food, etc. Much of his oil use is driven by the economic necessity to be price competitive with people who are using far more energy slaves.

    Can we imagine an oil company as a Cash Cow? A cash cow company is not expected to grow exponentially. It is expected to continually decline, but to produce a positive cash flow when astutely managed. My personal introduction to ‘cash flow harvesting’ was a dinner discussion with a Slum Lord at a charity dinner many years ago. For a good 30 minutes he educated me on the opportunities and pitfalls of buying slum properties and managing them for cash flow.

    If we let the ‘perpetual exponential growth’ financial machines crash and burn, but keep the productive potential intact, then we may be able to harvest plenty of oil to do what we need to do to put more carbon in the soil, which has numerous benefits beyond climate change. As with carbon farming, the obstacles are mostly not physical reality, but the dysfunction social, political, and economic systems.

    Don Stewart

    • dysfunctional systems are entirely the product of human nature, therefore our problem seems to be dysfunctional human nature.
      you cannot change human nature by wishing it so, therefore any change has to have a driving force.
      driving forces are invariably met with resistance by those who insist on retaining their particular status quo.
      that means conflict. usually violent.
      there will be a winner and a loser.
      the winner will inflict his point of view on the loser, usually by bumping him off.
      the winner will then grab everything for his own clan/tribe, and start all over again.
      until the next crisis.
      welcome to planet Earth

      • Don Stewart says:

        Dear End of More
        Overthrowing entrenched interests and habitual ways of thinking is difficult. It would be hard if the governments were simply neutral. As it is, the governments are using all their powers to benefit those who control the political process. And the rise of the ‘surveillance state’ and the emasculation of our constitutional rights has made it more difficult than ever to visualize any successful ‘revolution’.

        I am not a historian. What we need are a couple of examples where the Powers were undermined and it ended well…instead of disastrously. And then we need some creative thought about how we might go about accomplishing those goals in the world we live in today.

        Don Stewart

        • Perhaps the founding of the USA is an example of powers being undermined and ending well, my point is that theres always a messy interlude before normality returns…for a while, then things get difficult again—civil war—then that settles down and prosperity grows, but only so long as you can go on consuming resources to keep everyone reasonably happy.
          once the abundance is no more, people start to get annoyed, then you have a revolution again in the ‘certainty’ that that is what is necessary to bring about prosperity again
          Only this time there really is no more.

      • Don Stewart says:

        Dear End of More
        Also see
        Don Stewart

        • Thanks for that link Don it gave me much to think about
          However I visited Blume’s site, and found he’s fallen into his own ‘infinite prosperity ‘trap, with the little cartoon car and happy motorist growing his own fuel
          Exactly where does he think cars come from? Permaculture? The Fred flintstone auto-factory?
          Blume ignores the reality that we live in an industrialised society, and all our employment depends on fuelburning. I couldn’t figure out where 26 million jobs were supposed to come from, unless they are permaculturalists feeding the rest of us.
          Our jobs essentially turn energy consumption, via the use of money tokens, into a means by which we consume more fuel, to earn more money tokens—ad infinitum
          no form of permaculture can grow enough fuel to produce enough fuel to keep ourselves in gainful employment.
          Logically then, most of us will cease to work at all, except maybe for basket weaving and cloth making, while a few experts produce our food from our body wastes.
          I’m no expert, but it seemed to me that Blume is getting more calories out of the soil than he’s putting in

          • Don Stewart says:

            Dear End of More
            I don’t personally know Blume. But I do recognize a lot of the symptoms he is describing. When an ecosystem is layered, it becomes very much more photosynthetically effective. In temperate regions, it is not uncommon for a permaculture designer to include four layers. I think those in the tropics are able to use more. So while it is true that a single layer of heavily fertilized and irrigated corn can produce a lot of calories, it is still true that a layered system such as Blume is describing will produce more biological activity and will do it without external inputs.

            These sorts of systems require labor. In our current system, requiring labor is, in Gail’s words, the ‘most expensive energy you can consume’. So here we are with hungry people and unemployed people and looming shortages of fossil fuel inputs, and many people refuse to consider labor intensive systems which produce more total food and more biological activity which can fuel many services (including biodiesel) because we have this great fear that it will ‘increase labor costs’. We choose to pay people to not work rather than ‘increase labor costs’.

            I don’t think Blume believes we can produce enough biofuels to keep the current system going. What I imagine he believes is that diverting 6 percent of an oil crop (such as canola) to biodiesel will permit these very energy efficient farms to be self-contained in terms of energy. I imagine he thinks that most of the people who work on a small farm also live on that small farm. Commuting to work will be practically non-existent in rural areas.

            Now if you are trying to feed New York City and you start counting up all the fuel that the citizens there use, the task becomes impossible. The obvious conclusion is that New York City has to change drastically. Perhaps a million people need to move out of NYC and become small farmers. Sharon Astyk wrote a book several years ago called Fifty Million Farmers. NYC might supply 1 in 50, maybe more.

            If one makes as a condition that any proposal MUST keep the current system operating, then one will never get anywhere and disaster is certain. I favor taking a cold, hard look at the resources, the ability of biological solutions to help us, the need to stop poisoning the biology, the very likely necessity to regrow very local distribution of food, the resuscitation of food storage methods such as drying and fermenting, and so forth. The point is that we have the know-how to harness photosynthesis to produce an awful lot of food. Arranging ourselves into careers which will produce the food and arranging ourselves spatially to be close to food and using things like waterways to move food are all serious issues, which we should be addressing promptly. But paying people to be idle and giving them food is a dead end.

            If there are still surplus people? I expect a lot of people will cling to illusions and just won’t make it.

            Don Stewart

            • The 6% of oil for fuel might power a few machines that were made long ago, down roads that were made long ago. But once you need a new machine, or even if you need to repair the old machine, I am afraid you are out of luck. At some point, you run out of spare parts, especially for things like rubber tubing that disintegrate.

              I didn’t watch the video, but it seems like Blume would have been better off figuring out a sustainable system, perhaps with horses or oxen or even humans providing the labor. A system that works for maybe 6 months is not worth bothering with. If we are going to transition to something, it has to be reasonably sustainable. Anything that depends on vehicles and biodiesel powered farm equipment is not sustainable at all.

            • Don Stewart says:

              I think I want to scream. Blume was NOT trying to demonstrate a 22nd Century Survival Model for Silicon Valley. He was making a living on 2 acres of leased land on the edge of Silicon Valley early in the 21st century. He was NOT the recipient of a National Science Foundation grant to explore the outer reaches of what is possible. So no, he did not reconfigure Silicon Valley…he pretty much accepted it the way it was. Which demonstrates common sense.

              WHAT DID HE DO? He demonstrated that biological farming/ gardening methods can produce a great deal of food ON THE FARM with minimal outside inputs and he demonstrated that he could sequester carbon in the soil. At any given time, he had half his 2 acres in cover crops. So he was running quite a good sized CSA with one acre in production.

              Now anyone can say something like ‘the problems are so overwhelming that the situation is hopeless and we are all going to be dead, so what’s the use?’ To those people, I have nothing to say.

              But for anyone who is interested in systematically working on the problems of food and climate change, Blume (and others) have given us some valuable information: Biological farming can produce a lot of food and it can sequester carbon. That is not what the US Congress believes, it is not what Monsanto is telling them and the world through TV advertisements, and it is not what most farmers and gardeners in the US are doing. If you want to remedy things, you can try political action or get involved with a small group or anything in between. But wringing one’s hands won’t change anything.

              Are there lots of remaining problems around the issue of food? Of course there are. And I have discussed a number of them. I’m not going to try to recapitulate all that.

              While a professional would want to question Blume rather closely, one has to admire the fact that he was able to accomplish what he did during the time he had the land. So be grateful for the demonstration, and get to work on the remaining problems.

              Don Stewart

            • Sorry. I shouldn’t criticize Blume. There are a lot of different things a person can try to accomplish.

          • Scott says:

            Hello, This is worth a listen. Re posting JHK with Michael Klare — Scott


          • Don

            Your posts are interesting, for a variety of reasons—-but on reading a reference to wooden wheels, I fear i must bow out of this discussion

            • Don Stewart says:

              Dear End of More (if still reading)
              After thinking some more about your concern about the wheeled vehicle and your comments about Eric Toensmeier and the difficulty of being entirely self-sufficient.

              The guy in Silicon Valley had a big CSA he was serving. You can’t provide food to people in the US today without involving fossil fuels and vehicles. This is the ‘distribution’ issue, that concerns Joel Salatin, among others. The short answer, I think, is that as transport collapses, the market for the products of a commercial farm will constrict. As he noted, the foodshed for New York City used to be a 7 mile circle. We’ll probably get back to that. But it isn’t true today. People a hundred miles away truck food into NYC today to sell at farmer’s markets. Around here, the radius is 25 miles. My guess is that people will disperse to be close to the food.

              But more broadly, I don’t think most Permaculture people aspire to be entirely self-sufficient. I think a lot more subscribe to the ‘hundred people’ theory where you know a hundred people who provide the big majority of what you need. Trade with people you don’t know is pretty rare. It will depend, to some extent, on how far you are from navigable water. Those on navigable water (such as New York City) will do more trading with people they don’t know. Those in a landlocked place (such as where I live) will live a much more circumscribed life.

              So I offer these thoughts:
              1. Don’t expect anyone to tell you how to live a totally self-sufficient life.
              2. Don’t expect anyone to give you all the answers to your problems.
              3. Read and study people who have something to contribute to your problem, as you perceive it.

              Don Stewart

        • Don
          The only way you can have a self-contained agricultural system is where nothing comes in or out. (and that includes people btw)
          By illustrating a motorised wheeled vehicle Blume destroys his own hypothesis. By definition, such things cannot be part of the system, because fuelburning removes energy from the loop which has to be found from somewhere-( I won’t dwell on the input of rubber, plastics and metals here–an even bigger nonsense).
          All our energy comes from the sun, ultimately we can have no more than the sun delivers to each square metre per day. If we use more than that, we have to ‘steal’ it from somewhere or someone/thing else. If you cut down a tree (essentially 100 years of stored sun-energy) to build a house, that is the habitat/energy source for other organisms converted to our use. A coal seam is maybe 1 million years of stored sun-energy. The difference is only that of time. I strongly recommend http://www.withouthotair.com/, which is available as a pdf, or buy the book. In that David Mackay sets out clearly just how much energy we have available.
          Blume’s reference to ‘jobs’ implies trade, if you have trade, then that breaks the loop too because goods must be traded in and out for some kind of benefit/profit. (human nature kicks in here again)
          Living and working on a small farm would be, in our terms, a form of serfdom. That is a secure place in return for access to basic energy, ie food. If society collapses, that is what we face, because while some would adopt permaculture as a way of life, millions would not. Therefore you can only have fiefdoms, defending such food resources as are available.
          An extreme view I agree, but 3.5 billion city dwellers (half the world’s population) won’t sit around twiddling their thumbs once the food trucks stop delivering, neither will they take up permaculture. They will however look for something to eat.
          Virtually all our food consumption system functions on a just in time basis, which means that most people wont be able to wait for a harvest, no matter how big its promise. Sweeping statements: a million people moving out of NYC to become small farmers… may well have happened by 2150 say, but the intervening upheaval will be unpleasant to say the least.
          We are all very comfortable in our hamster cages, thank you, and will not take kindly to any disturbance.

          • xabier says:

            End of More

            But will the food trucks stop rolling, once and for all? It’s not impossible, and in some places almost certain, but I suspect the likely scenario is not instant starvation but long-term ever- increasing chronic malnutrition for those who fall into poverty (pushed out by automation, globalization ?) That will kill a lot of people slowly, and alter politics, but not be Apocalyptic.

          • Don Stewart says:

            Dear End of More
            As I have repeatedly stated on this forum, it is suicidal to try to make a living today with no energy slaves, while the average American is using 100 of them. So throwing rocks at someone for not living a pure enough life may entertain you, but it doesn’t solve any problems.

            I expect wheeled vehicles to be around for a very long time, perhaps with wooden wheels. It is not uncommon to see a 40 year old tractor. If the tractor can be powered by diesel made from farm-grown oil seeds, then the tractor may be useful for a long time.

            Let me give you an example. A question was recently posed on our small farm website about electric fences and solar PV. One farmer answered that she used to use solar PV, then she discovered that the fences only discharge electricity when an animal touches it and takes a shock (which is seldom), so the cost of grid electricity, if you have it on the farm, is negligible. She just hooked her fence up to the grid and forgot about the solar PV.

            Why bring this up? Because many people who comment on this site would throw rocks at her for being ‘unsustainable’. Well…she’s been farming for 30 years, and I admire people who have the work ethic and business sense and common sense to keep a small farm going for that long. She is doing what she needs to do today to make the money she needs. If the grid fails, she can always repurpose the solar PV panels.

            But what about animals in the very long term? Farmers used to use specific dense and thorny plants for fences. They also didn’t have the current plague of deer because they simply killed them and ate them. In the very long term, farms will look a lot more like they looked in 1850 in terms of fences. The grasslands will revert to open range, which is generally regarded as ‘heaven on earth’. But today…you better have a deer fence or you will never make it to next year, much less 2100. And miles and miles of barbed wire if you are in the grasslands.

            Don Stewart

        • After my reference to David Mackay, I caught up with some of his lectures, I recommend watching them, a short one, then if you feel like it, a long one

        • Xabier
          The cost of food will rise, and the regularity of the foodtrucks will decline pro rata, as food itself become increasingly unaffordable. We are after all trucking in energy.
          No, the foodtrucks will not just stop, any more than our oil supplies will just stop.
          The cost will just climb out of reach of more and more people, until the whole energy delivery exercise becomes uneconomic as far as large conurbations are concerned

      • xabier says:

        End of More

        Yes, there is a very dark side to human nature. But also – light! Who would have guessed that anything good would have come out of the Dark ages, for instance?

        Isaiah Berlin -the liberal philospher – always used to quote Kant: ‘Out of the crooked timber of humanity, you will never make anything straight.’ It seems impossible not to be a pessimist.

        But, looking at an old house in my village the other day, it seemed to me that the truth is that we can sometimes make a pleasant dwelling with those crooked timbers, and it might last longer than we imagine.

    • We have to keep the whole “system” together to harvest oil that is still in the ground. To do that, the price has to be high enough to keep oil exporters from falling apart. This high oil price cannot lead to collapse of oil importers. We are not talking about bankruptcy of an individual company. We are talking about a system that is built on cheap oil that can no longer support itself. The big problem that past societies had is that needed tax rates to support programs rose above what common workers could afford to pay. We are reaching that stage now. The tax problem reflects a lack of resources to support the economy as it is structured now. A much simpler structure might work (Dictators over smaller areas, for example, instead of the current government), but it is not clear that it would be possible to keep up the infrastructure (roads and bridges; 24/7 electricity; international imports of experts, needed parts) to keep the oil industry operating.

      • Don Stewart says:

        The System can’t and won’t maintain itself. It will be replaced by some system which is financially structured in view of the reality of resources. E.g., financial wealth will disappear by the tens of trillions of dollars. That, in effect, is what bankruptcy courts do. They ‘disappear’ wealth until the capital structure comports with the new reality. But that doesn’t necessarily have to mean that production grinds to a halt. Production is now and always has been about real resources…not financial fictions. Refineries are closing in Europe and the US, and I imagine there were some write-downs on corporate books, but the system keeps producing oil and its products.

        To me, the key public policy consideration is to not let the struggle for survival on the part of the financial elite destroy the productive capacity of individual companies and economies as a whole.

        As for governments, they need desperately to engage in triage and also to stop throwing sand in the gears.

        The focus needs to be on production and avoiding pollution and everyone working and family and social cohesion and regenerative agriculture. Let the debts and the entitlements be scaled down to a realistic level.

        As a practical matter, I think governments are likely to pursue rapid inflation and phony numbers to scale down entitlements such as social security. I think they will continue to favor the financial elite and do everything they can to protect them and will continue to support a global Empire. I DO expect a train wreck, I just point out that no laws of science require it.

        Don Stewart

        • It depends. If you can somehow engineer the situation so that only some unneeded portions are lost through bankruptcy, then I suppose you are right. I don’t think that we have the luxury of this happening though. Maybe at first, it is just some unneeded portions, but at some point, it is some things we rely on fairly heavily.

          The things I worry about losing:

          1. The US Federal Government. If we have to start over with a multitude of governments of smaller areas, each with its own monetary system, the world will be fairly different. We cannot afford the programs offered by the US federal government, and quite possibly by state and local governments, right now.

          2. Major parts of the electric grid. There could be several different reasons–for example, electric companies can no longer collect enough funds from people who would like service because so many are jobless, political breakup, storm damage that no one has funds to repair, inability to get replacement parts for necessary components. Once the electric grid is not available, we also cannot transport oil and gas by pipeline (except in areas where gas pipelines are powered by gas–often where there is no electricity).

          3. Oil exports from the Middle East, probably because Middle East war spreads to entire area.

          4. Repair of roads and bridges.

          5. Operating banks.

          Perhaps there is a period of time (10 or 20 years, say) where things do sort of hang together, before things really fall apart. Then you might be right. It depends on whether there is a way to keep the system operating on a reduced basis, without losing too much of the essentials.

      • xabier says:


        Who can quarrel with your assessment? The striking feature of the last few decades in advanced economies is that the lowering of consumer purchasing power which is a consequence of high tax rates, to fund the big modern state and its programmes, rising energy costs,food costs, etc, has been balanced out only by increasing availability of credit to ordinary people. Credit that their earnings potential does not justify. That credit system is under great pressure now, and as we saw in 2008, when it is withdrawn, corporate sales in many markets fall dramatically. Hence the desperate flight to super-low interest rates in the developed world. The kick in the tail is that these low interest rates inflate the housing bubble, reducing even further the discretionary purchasing power of the consumer….and so it goes on. But when will it finally break?

  20. Scott says:

    Interesting Idea… just make the nuclear plants without containment vessels and put them on one thousand mile long electric lines away from most of us, these areas are places that the government may tell people to leave, the Nuclear power districts… I always thought it should be away from us anyway, but the problem is cooling if they need water. Do they need to be by the Sea or large body of water or river? I am not sure about the Thorium power stations we have discussed a bit — do they need water like the conventional nuclear reactors? Anyone who knows can comment on that.



  21. Chris Johnson says:

    Here is the ‘Development Goal’ of poor countries: a car in every driveway. China is now the world’s biggest car market. And they’re loving’ it… Enjoy the picture.

    • Scott says:

      I see what you mean Chris, Looks like LA traffic in China for sure. GM is building selling tons of cars there too, like someone said on this blog – we are selling out today for tomorrow. The cars do not run on coal or natural gas, they are building tons of gas cars and diesel trucks etc. Not a good model for what we are seeing coming down the road.


      • Chris Johnson says:

        Right on all counts, Scott. And I think it was you who quoted an article a few weeks ago that China is now the biggest importer of petroleum products. And guess what, the story gets even more fun than that, because the military guys in China have stepped forward and are getting their programs plumped up.
        So the question the Chinese are grappling with are how can they prevent a blockade by the US, or Japan or India from preventing the flow of oil? Their answer: they’re going to ship it to a new port, Gwadar, in Pakistan, right outside the Straits of Hormuz, then pipe it over the Hindu Kush into Tibet and Xinjiang. Cool: oil pipes going from sea level to 18,000 feet. Then they’ve got another port being built (almost completed) in Burma, and they’re going to pipe it to Kunming — only about 5,000 feet elevation on this one. Do they have any idea how expensive it is to pipe petroleum uphill? I think they don’t care. Do they have any idea, in the event of a shooting war, how easy it would be to put some holes in those pipes? You see, they know all this, but somebody’s buddies are getting the contracts to build all that stuff, so nobody wants to blow a whistle on it being unrealistic and criminally stupid militarily.

        We in the West can laugh all we want, but we’re just as bad in our own ways. For instance, do you know how much it costs to airlift a gallon of diesel from Charleston, SC to Kabul, Afghanistan, via Europe then Russia? Only about $38.

        Cheers, Chris

        • And with respect to those pipelines, do you know how dependent they are on electricity operating 24/7? If they were sort of flat, maybe it wouldn’t be a big issue, but something has to keep pumping the oil uphill. We know how often there are electrical outages in Pakistan.

          I bring up this issue, because I know we in Atlanta have had trouble getting oil by pipeline when hurricanes have hit, and knocked the power out. We eventually got oil products when they got an oil-powered generator hooked up.

          • Stan says:

            The Wikipedia article about the Fukushimi Reactor fiasco(http://en.wikipedia.org/wiki/Fukushima_Daiichi_nuclear_disaster#1967:_Changing_the_layout_of_the_emergency-cooling_system) says this: “Immediately after the earthquake, the remaining reactors 1–3 shut down automatically and emergency generators came online to power electronics and coolant systems. However, the tsunami following the earthquake quickly flooded the low-lying rooms in which the emergency generators were housed. The flooded generators failed, cutting power to the critical pumps that must continuously circulate coolant water through a Generation II reactor for several days to keep it from melting down after shut down. After the pumps stopped, the reactors overheated.” Amazingly, the possibilty of this happening was raised in 1991, but the owners never adequately addressed the issue.

            So, how bullet proof IS nuclear power when other factors (like oil shortages) start stressing our system?


            • Scott says:

              Hello Stan, it looks like nothing we build on this Earth is fool proof and completely safe especially when power generation is involved. Everything involves some risks.


  22. Danilo Bertocchi says:

    I am right now in a fast train powered by hydropower electricity, producing 10x CO2 emissions than my own 2.0 liter Diesel engine vehicle. Every 30′, there is a train going in every direction. train drivers are driving 300 miles every days. My trip is 600 km, and costs CHF 89, means $ 94.-. We have softly introduced Carbon taxes in different areas of the local economy. So I do not understand why USA are not introducing a carbon tax and building infrastructure in the country?

    • Dan Delara says:

      American oil company politics, that’s way. Their profits are more important. They have bought the American political system and to many Americans believe it doesn’t matter.

      • Chris Johnson says:

        Right you are, Dan. There is one possible additional factor: many Americans believe that government is just there to rip off the average guy and turn the money over to the politicians, bureaucrats, bankers and other evil creatures barely deserving of existence whose principal motivation is to tax the middle and working class for their benefit. Europeans are much more used to be so treated and just treat it as a cynical part of life.

        • xabier says:


          That’s very true: there was some residual respect for the civil service and politicians in Britain until recently, but Tony Blair and his gang did away with that. Corruption hardly causes even the merest hint of a suggestion of a raised eyebrow in Spain, Italy, etc. I think Scandinavia may be different?

    • A carbon tax sends all kinds of production to countries without the carbon taxes. There, they use coal to do what we would do with natural gas and nuclear. Not a good deal on a world basis. We also lose jobs.

      • Scott says:

        Hello Gail, I am going to post this for our friends in the UK and elsewhere, this is a top story in the USA in MSNBC, I am not sure what your top stories show there (Xabier)?

        • xabier says:


          I’m attracted by the theory that Obama, or whoever is behind him, doesn’t intend to make Assad fall by attacking him, merely ensure a stalemate between the two sides, weakening both.

          At present, Assad has the edge. This is favourable to Iran, which is something the USA will certainly not look kindly upon.

          Assad is of course correct in saying that the only way to deal with Islamic militants is to kill every last one (there seem to be lots of jihadis from everywhere fighting with the ‘rebels’) : but that would displease those good friends of the USA, the Saudis…..and so it goes round.

          At least in this instance it’s clear that we are looking at a round in the geopolitical game, and morality (use of chemical weapons and punishing it) is a just a pretext.

          • Chris Johnson says:

            Here are some questions:.
            If the West stands to lose no matter which side wins in Syria, why should the West spend blood and treasure (see Shia – Sunni, Iraq 2012-13).
            If the Shia bloc seeks to maintain equilibrium with its opponent ad infinitum, would a disequilibrium favor the West? I think probably not.
            If external powers of whatever persuasion see the conflicts as commensurate with their objectives, why should they become involved?
            The Chinese sage Laozi called this ‘wu wei’, the art of doing nothing to best achieve your objectives.
            Cheers, Chris

    • Scott says:

      Danilo, just curios where are you from? Our country is full of freeways and to electrify them with wire and rails would be so expensive. I like the idea of these trains, but the USA has gone a different direction unless you are in SF or NY or some other major city with transit. Most of our system is freeways which is a big part of the problem we write about here. Too many freeways, trucks and cars and not enough trains and mass transit and sadly now so little money to build these needed things.


      • Our cities are also much more spread out that European cities, making it very difficult to make trains “work,” even if they are built. People need to travel in more or less random directions, rather than downtown. Homes are often on big lots, a long distance from where a train station might be. There often are no sidewalks for people taking the train to walk on, either.

        • xabier says:

          Very different to London, where for the last 100 years the commuters are hauled in to the centre on trains, like cattle to the slaughter each day: some journeys are only 15 minutes by train, with the stations some 5 to 20 minutes away on foot from home. Not a few people endure train commutes of 3 hours, if they want their families to live in country towns: they are mostly the better-paid. European cities are constructed for pedestrianism and train and subway travel.

      • Our cities are also much more spread out that European cities, making it very difficult to make trains “work,” even if they are built. People need to travel in more or less random directions, rather than downtown. Homes are often on big lots, a long distance from where a train station might be. There often are no sidewalks for people taking the train to walk on, either.

        • Scott says:

          Hello Gail, Yes cities in America are so spread out, no chance for a system like Europe has – unless you are in very major city in the USA. Perhaps electric cars are our only hope – If we can afford them – which I am sure you and I may wonder if that is possible?

          To replace the cars of the western world with electric has a huge price tag. Could be done if we could find the money.

          Large trucks need to go with natural gas and trains need to be ramped up, train track lines need to be used to their fullest extent possible. No sign of this yet, but time will tell.


          • It takes both time and energy for all of these things.

            In the US, we use trains for freight, and cars for people. In Europe, they use boats and trucks for freight, and trains for people. Neither one has the extra tracks needed to use the railroads for the opposite purpose (except perhaps in a few corridors, where trains are already in use). So any kind of change is more difficult than it looks.

            If we were to make trains for this purpose, what we would want is some very simple, durable, easy to repair trains, that could be made in the US, and that would have parts readily available to repair them, also made in the US. They would lack amenities such as air conditioning, dining cars, Internet access, and fancy doors. I don’t think anyone would even consider such an idea. The only thing under consideration would be bullet trains, imported from China.

            • Scott says:

              Hi Gail, I wonder if we can order soon a bullet train from China – just like my dad bought (not) ordered my Lionel Train toy train set when I was a kid. Just kidding but it is really getting to that point.

              We have to wonder what a bottleneck in energy would look like.


  23. timl2k11 says:

    Hi Gail. I’ve been watching a few TED talks, and I think it would be good if you could give a presentation. They do focus on “ideas worth spreading” even if the ideas are not very comforting.
    For example, Daniel Dennett talks about how Western ideas threaten Middle East ideals in a clash of memes (much like viruses wiped out Native Americans).
    I think TED is quite receptive to ideas that make people (re-)think, and your ideas certainly do. It would be a good way to spread your ideas far and wide, should that intererest you.

  24. tmsr says:

    Thinking about it nuclear power is dirt cheap if all you want is heat. High heat is needed for efficient electricity generation. But residential heat and moderate heat for many industrial processes require very little structure for a nuclear reactor. A swimming pool some fuel rod and some moderator rod and hand cranked wire and pulley to raise and lower the moderators. It could be built by a work force with little knowledge and simple tools.

    • YOu are getting it down to the point where it might be done, except for the fuel requirement.

    • Chris Johnson says:

      Improved insulation and geothermal heating systems would reduce US energy costs by about 15-20%. Ditto Europe, rich world Asia, etc. You don’t have to play games with uranium and all its admirers who might have other intentions. The savings are not peanuts, but it’s just part of the solution because all the developing nations in the poor world have people getting rich every day and buying cars like there’s no tomorrow.
      Ultimately the very slow growth of Electric Vehicles will begin to have an impact in 5 to 10 years; but it’s going to be painfully slow.

  25. Edwin Pell says:

    Making nuclear power plant is only expensive if you build a large containment dome. If you are willing to go without the containment it is cheap. If you want to forgo the redundant pumps and controls then just build it submerged in a large lake. As we get poorer we will be willing to take greater risks.

    Certainly if the new reactors without containment are built say 1000 miles away in northern Canada or Southern Mexico most Americans will be willing to take the risk.

    Ed Pell

    • Scott says:

      Interesting Ed, about nuclear power being build without the containment domes, a good point, a great point. I also think we will see a lot of coal getting burned too. As much as we do not desire to use these fuels they seem to be our last resorts aside from some new smaller providers like solar and Geo thermal, but they are far from even providing ten percent of our needs.

      And I think it will buy us some time if we take these drastic measures like you said to build these open plants, I still think we have several generations if huge war does not hit us. But during this time the finite world will become more and more pronounced. Some things will get tougher to get and more expensive and some not available at all. But eventually, we are going to run into a problem for sure with the ever increasing populaces. The oceans are already really depleted of fish and those fish feed much of the world.

      If we cannot make some other fuel from the nuclear power generated electricity like hydrogen which has pretty much been ruled out by this group, then the power cannot be used properly in transport and farm where we need it, So it looks like that is our bottle neck, we can make plenty of electric power, but to make it run our huge transportation system is an entirely different story. If we have enough Natural gas that may keep things going for a time, but after that we will really need to come up with something else and that is no where in sight. Can we even afford to convert our farm tractors and truck now to LNG? or Propane? That sounds very expensive.
      That is hard enough, what about later the next step when we need to electrify or go to something else tougher to change over than gas, tough changes ahead or face collapse. But I think for our lifetime perhaps NG and LNG and Propane can save us for a time and stave of our long emergency that will arrive it seems anyway some day.

      Kind Regards to all,


      • The system has to be kept together very well, in order to do the things you are talking about. It is necessary to have the financial system, and electrical system operating, as well as the transportation system, to make LNG or propane work.

        • Scott says:

          Hello Gail, New financial systems have risen out of the ashes many times in history. Any thoughts on that?


          • I’m no expert on finance, but taking a broad sweep of history, and laying it over a broad sweep of finance, it seems to me that any ‘new financial system’ has only arisen by stripping out somebody else’s energy resources.
            So you have the slave trade triangle, essentially weapons and iron goods traded from Europe, for the slave muscle of Africa, for the sugar/tobacco of the Americas.
            Or the American push West, draining the resources of the land as they went, Or the British Empire doing the same thing. All converting energy into a new financial system and wealth
            There are lots of other examples, but you get my drift

          • We have been in a long term growth (or at least non-collapse) situation. The financial system needs to match the availability of resources at hand. It is the lack of resources that is as much the problem as anything, in coming up with a new system. The debt part of our current (and long-term) system will not work nearly as well. Neither will the idea that a company can invest in a commercial venture, and have the venture work for 30 or 50 years. Governments will be much poorer, so will not be able to maintain infrastructure we have grown to expect. It is the whole ordering of society that has to change. We normally build “up” to progressively more complex level of organization. I have no idea what happens, when a very complex level of organization no longer works. How do we build a new, lower level of complexity, without the long-term build-up of supporting structures? We will need new, much cheaper, less complex government as well.

            • Scott says:

              Hello Gail and All, I do imagine if we have some sort of major collapse we will awaken to shorter supply line, less choices and fewer goods from afar. And, in addition many with assets will loose much value depending on what kind of asset. Stocks and bonds could be hit very hard as well as some real estate holdings.

              I am kind of surprised lately about the war drums beating in Washington. It seems they are convinced they need to take us to war to keep everything running. That may be true as we have built this “huge military industrial complex” (against my will) but it needs to be fed, it needs a war.
              Although most Americans may oppose war, congress is bought and paid for by corporations these days and is the sad truth that I think most of us know by now.

              I still think good farms with natural running water systems would by my first choice if I had a million dollars to invest in something like that.

              Kind regards,

            • Wars provide a lot of jobs for Americans–both directly and indirectly. I expect that enters into these decisions. Maybe it protects our position as “reserve currency” as well. And of course, there are pipeline issues through Syria too.

              At some point, it seems like we would stop moving from war to war to war, but it never stops. Sort of like a kid with a credit card. Another war–I’ll just charge it on my credit card.

    • by that reckoning, I guess Mexicans and Canadians would be happy to have their reactors 1000 miles away in the USA?
      I am assuming though that your comment had your tongue firmly in your cheek

    • You may be right. BUt the operators will still need uranium to run the plants, and that will take fossil fuels for extraction. I am doubtful we will be able to keep the system together well enough to do all of this.

    • You may be right. BUt the operators will still need uranium to run the plants, and that will take fossil fuels for extraction. I am doubtful we will be able to keep the system together well enough to do all of this.

  26. Pingback: UNDERSTANDING LIMITS « The Burning Platform

  27. Wim Weber says:

    Dear Ms. Tverberg,
    Thank you very much for your insightful website. It is obvious that our western society is based on cheap energy, and that it is coming to an end.

    Would you have an opnion on how nuclear energy fits in this process ? You wrote that building new nuclear plants is less of option, but what about countries that already have large fractions of their energy supplied by nuclear reactors ? Would they be less prone to the ongoing economic deterioration ?

    • Nuclear reactors produce electricity, which is fine up to a point.
      Unfortunately humanity consumes oil to produce ‘stuff’ on which our entire lifestyle now depends.
      we have pulled off the neat trick of converting oil directly into food. we cannot eat electricity.
      This should be borne in mind when you read of a power plant providing ‘enough energy’ for a million homes, as though one form of energy can replace another. A home may use, say, 2 kw of electrical energy, but consume 10 times that in food and infrastructure support services that are away from the home, but still essential for our existence.

      • Chris Johnson says:

        End of More, thanks. That is a very concise explanation the 2kw vs 10 times as much for a home. Curiously, it might be that homes in urban environments are more efficient than those in suburban / rural settings. But the one might be able to survive while the other won’t.

        • Scott says:

          Hello, Yes Chris there seems to be many ways we can make lots of electricity, but when it comes to Big Rigs and Tractors in the fields and even cars, it is hard to put an extension cord on them because that is what we need.

          So far the batteries are not really that great and I have heard about capacitors but they sound expensive and short in supply. Hydrogen is expensive and difficult, but I still think Hydrogen fuel cells have a place in the future.

          But the real problem is in the short term we do not have anything better to turn to other than gas and diesel. That could very well indeed be our so called bottleneck.

          So I think we have the ability to make lots of electric power, but we do not have the ability to make it portable in the way we need to right now.


    • The question about nuclear is a good one. When we needed to reduce oil dependence in the 1970s, nuclear electricity was one of the ways that “worked” to a much greater extent solar panels and wind have today. Nuclear electricity made up 18% of the world’s electricity as recently as 1995. Today, it makes up about 11% of world electricity. This is about about 5 times the amount of electricity currently generated from wind, and about 27 times electricity generated from solar.

      One of the big issues with nuclear is its dependence on oil for continued operation, and for later decommissioning. And there is the issue of storage of the spent fuel–something we haven’t figured out.

      I think that increasingly the cost of building new nuclear power plants will be a problem. These have escalated in recent years (in the developed world, at least), because of concern for prevention of nuclear accidents. Many existing nuclear power plants are near the ends of their expected lifetimes. They need to be replaced with something. The question is “What?”

      World electricity production by source

      • Scott says:

        Hello, As long as these bad stories about nuclear like what happened in Japan keep coming out, it will be harder to get the support to build the nuclear plants we need. So fossil fuel plants may be used to replace nuclear which is not good news. As much as we hate nuclear, we need it.


      • Chris Johnson says:

        As clear, complete and concise as your last report was, do you think it’s fair to say that the reason even nuclear plants consume oil is due to transportation requirements. I think it might be enlightening to track the expansion of ‘daily miles traveled’ by all methods and then by type, across the decades of last Century. I think we’d all be surprised if transportation did not turn out to be the ‘biggest’ difference.

        • I am not sure it would be possible to track “daily miles traveled”. I was always surprised by all of the running around the Apostle Paul did in the New Testament. I am sure he was an exception. Most people stayed close to home.

          I think it was actually electricity that was in some sense the biggest difference in changing the world. It enabled early transportation, such as railroad and steam engine. Before electricity, many more needed to work on the farm. More recently, oil has mostly taken over transportation.

      • timl2k11 says:

        At least in one case – in Florida – the answer is… nothing. The Crystal River Nuclear power plant was shut down in 2009 after a gap was discovered in the containment dome. The gap was created when workers were drilling a hole in the containment dome to replace steam generators (which were never “supposed” to fail and hence no method for replacing them had been designed). After several unsuccessful repairs the plant was permanently shut down earlier this year. I do wonder if there is any connection to that and the price hikes many nearby utilities are proposing this year?

  28. Stan says:

    And what if we COULD get everyone to recognize the scope of the problem? ? ?

    So, let’s assume that tomorrow Gail wakes up with a truly genius set of ideas…worthy of Edison, Einstein, Tesla and a handful of economists thrown in. These ideas would do the following:
    1) convince every knowledgeable scientist, economist, researcher and engineer of the validity of all of Gail’s points; and –
    2) Gail & everyone following this blog come up with the perfect set of solutions that would lead the world out of this crisis and into permanent energy supply and distribution.

    Solutions that would cause severe disruption and re-structuring of the energy industry.

    Now my question. Is there any country with a government/political system that could have the slightest chance of implementing these changes? My intuition says that greed-driven capitalism would never forsake short-term profits for long-term stability. What percentage of energy companies have a 100 year business plan? Certainly not commodity traders. Which governments are willing to do the right thing (assuming there is one)and not the lobbying that would surely oppose any efforts such as these?


    • Ert says:


      The county to implement this had to be complete dependent on imported energy and no large domestic energy companies profiting from the status quo.

    • might be an idea to separate economists from everybody else when deciding on intelligence levels

      • Scott says:

        Hello End of More, I was wondering what you think of this type of media that is out there these days filling up peoples email in-boxes? MSM at work, they are painting a rosy future for some. We can see fracking was just a blimp on the chart, but not to the extent they are portraying it to be.


        • thanks for that link Scott, it made great reading.
          Anybody using the word ‘gusher’ linked to shale plays has to be suspect, but I guess most people won’t notice that.
          And if 10 people put drinking straws in a glass, the drink disappears 10 times faster, it doesn’t provide 10 times more to drink. Again, that’s something most people won’t notice
          It’s a really scary concept, that everyone is determined to burn anything and everything right now, in pursuit of short term wealth

    • I agree with you. I think that there is a problem in implementing big changes, even apart form political issues.

      It takes an incredibly long time to implement any kind of change involving factories, vehicles, electrical generation and other long-lived equipment. Basically, if one does not want to bankrupt the system, even in good times one has to wait until these reach the end of their usable lifetime to replace them. Ideally, the replacement should be better than what one had before. We at this point, don’t have anything that approaches “better” from a functionality point of view.

      There is another issue that Tom Murphy has written about, in Galactic Scale Energy. That is that if we keep adding heat (no matter what source, even renewable), we eventually cook the planet. He uses solar panels in his example. According to that post:

      No matter what the technology, a sustained 2.3% energy growth rate would require us to produce as much energy as the entire sun within 1400 years. A word of warning: that power plant is going to run a little warm.

  29. xabier says:

    Chief Engineer

    It is obvious, I imagine, to even a cretin that which party is ‘in power’ has an effect on policy and hence on the life of citizens, and the way in which this will all play out.

    But it seems to me that both Democrats and Republicans in the US are bought and paid for parties, serving vested interests. Often the very same ones: bankers rule the United States, and Obama serves them quite as much as the Bushes did.

    Of course you can cherry pick a comment of Gail’s or mine or anyone’s and say: ‘Look! A Republican belief!’ Or whatever party you choose. It’s a futile exercise.

    I repeat, Gail’s presentation is not overtly political and I wouldn’t even bother with this blog if it were.

    I’m interested in facts not propaganda, there is more than enough of the latter about.

    But you are, I feel, really missing Gail’s point that we are discussing the fundamentals of the system, and the crisis in that system which is so profound that politics is just a surface event. Pretensions of politicians to change things radically are somewhat fraudulent in this context: they are the captives of their backers ( essentially the same for both Republicans and Democrats) and of past actions and present circumstances.

    This is the long view. It beats, and is more interesting than, party politics, and the naive belief that if only a party ‘of the working man’ were to get into power, all problems would vanish. The Russian Revolution answered that one for us.

    • one of the great lessons of history has always been that whoever grabs power grabs it for himself and his tribe and/or those showing adherence to his ’cause’.
      Those who do not are either killed off or held in subjection

      • xabier says:

        End of More

        Glancing at a new book on the Spanish Civil War I found an incident that would appeal to you, confirming the worst about mankind: Anarchists from town tried to collectivize a village of small-holders (ostensibly on their side). The small-holders organized, and it turned into a battle, which the more heavily-armed Anarchists won, slaughtering 30 small-holders. Not much of a Bright New Dawn, was it?! The Anarchists also ‘collectivized’ thousands of cured hams, which they needed to sell abroad to get foreign exchange (and one assumes eat as well). Not sure if they also killed the ham makers…………

    • Bicycle Dave says:


      we are discussing the fundamentals of the system, and the crisis in that system which is so profound that politics is just a surface event.

      Excellent theory. Given your understanding of history, human nature, and the future course of events for humanity, you could publish a best seller based upon the hypothesis that politics become irrelevant when the depletion of physical resources is threatening a collapse scenario.

      One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors. ~Plato

      • xabier says:

        Bicycle Dave

        And when political participation is, essentially a fraud: whatever party you vote for, the actual policies have been decided anyway by the powers behind the throne? And when hard circumstances – resource constraints and over-population – will decide most policies?
        Some fraud will always come along and tell the masses that they can fix things: like Obama’s ‘better place’…….

        My basic position is not that politics is totally pointless, as you imply – I believe in the struggle for human rights and the rule of law above all else, I am however certainly sceptical about most plans to reorganize the whole of society – and I have no issue with your politics and in fact probably share many of your beliefs, – but that it is not a useful intrusion here, on this blog, and that it is wrong for certain people to beat up on Gail for being ‘political’, and implying she is Right-wing. She is very clearly not so.

        Like most Europeans, I know about real politics, the kind that can get you killed: my grandfather and step-grandfather were almost assassinated by the Fascists in the Spanish Civil War, (sometimes they cut people to pieces bit by bit you know) despite being aristocrats they supported the Republic; my step-grandfather, a shipping owner and government minister in the Basque Republic, losing his business in saving refugees, dying in exile, and my father broke stones and was tortured in military jails for resistance to Fascism.

        Death threats, political trials and ‘disappearances’ have never stopped in Spain, unlike the childish game with cheerleaders that is politics in more peaceful countries. A resurgence of dictatorship is in my opinion not unlikely in Spain and maybe other countries: look at the economies of Greece, Italy, Spain, Portugal ….and it’s spreading. It is this knowledge that informs much of my scepticism, sense of the futility of much political struggle, and awareness of hard reality – which is why I read and try to contribute to Our Finite World.

        The answer to Plato is: ‘Even if you participate in politics, you will most probably be overwhelmed by events, by human nature, and maybe in our case, by Nature itself.’

        • Chris Johnson says:

          Gracias mucho, Xabier. You already knew you have plenty of friends here, now more. I would suggest that your last sentence can apply to things other than politics, of course. Mi madre llame Sanchez, el familia de mi madre es hace 400 anos de Malaga, And I apologize for horrid Spanish.
          Cheers, Chris

  30. xabier says:

    Peasants’ Revolt!

    Some news from Latin America: peasants (ie small farmers) in Bolivia are in major revolt against the government, leading to large-scale police and military deployments to keep roads open.

    Their grievance is that have been ‘abandoned’: more particularly, they are suffering from 1/ very high petrol prices, 2/ high fertilizer costs, which make making a living ever more difficult.

    The are seeking protectionist measures to keep out foreign food imports, and enable them to put up their prices (and hence cover the high fuel and fertilizer costs).

    I imagine those food imports are helping to keep the cities quiet: an interesting dilemma for the government of Bolivia.

    This illustrates well that if your farming is oil and chemical-dependant, the rural food-producing areas of a country may not be the best place to be ata time of rsing costs, at least while globalized food distribution is still operating. (Similarly in Spain, small farming is now a dead-end).

    Now, if globalization collapses and food imports stop, or become irregular, where will the fuel and fertilizer come from to maintain the farming base? How will food get to the cities? Or will it be seized by government to feed those cities, leaving rural areas to half-starve?

    • tmsr says:

      No it will not be seized by the government to feed the cities. It will be seized by the government to feed the government. The army and the politicians and their richest patrons.

    • xabier says:

      Correction: Columbia! A friend is in Bolivia and I got mixed up while typing.

    • Chris Johnson says:

      Timing is everything! And being able to plan the timing successfully is totally dependent on one’s knowledge of the market and the product’s peculiarities. (I think you know all this, amigo, but I just wanted to get it down as a baseline). Now I think that people such as Don Stewart may have said that that’s what farmers do: put all the pieces together so they can produce and sell their product to hungry consumers. They just have to get the timing right…
      Cheers, Chris.

      • xabier says:


        And the weather! Agriculture as a source of income is quite a headache. By the way, have you seen that low-wage workers in Germany are very dissatisfied? The well-intentioned removal of obstacles to hiring has led to people getting trapped in poorly-paid dead-end jobs, but the bigger corporations are happy.

        The fundamental problem in Europe is, of course, the amount of money which the State takes (and so often wastes and abuses with profligate spending) for social security and income tax which is a real headache for smaller businesses, which makes them shy of hiring and so on. All is not rosy in the German garden………

        • I can’t imagine how Europe can provide all of the benefits it claims to.

        • Chris Johnson says:

          Concur with your comments about the weather, which is at least partially related to timing. But no, I did not see the article about low-wage workers in Germany. Were they ethnic German, East European or Turkish? I truly dislike sounding as if I’m a biased or bigoted, but there are some facts that cannot be ignored. One is that the Germans now recognize that their ‘Turkish worker’ policy never led to happy social interaction. And now I guess the Europeans are beginning to scratch their heads about all the Muslims who are eligible to go wherever they wish, so they select the best welfare states…
          The question is whether the Europeans will find their backbones before they’re broken.
          If the people want their grandchildren to be speaking Arabic and worshiping in mosques, then continue current policies.
          And thanks, sir, I will keep a closer eye on Germany. It appears that most / all Europeans are looking at Angela as the redeemer.
          Are any of them really thinking about dis-union? It might be best for at least some.
          Cheers, Chris

    • Thanks for taking note of this. I hadn’t noticed this story. I expect it is one that will be repeated over and over.

      Do you have any related links?

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  34. Stilgar Wilcox says:

    Gail, your article here somewhat reflects what an article (linked below) on Nicole Foss’ website by Raul Ilargi Meijer, in which he draws an analogy between hypothermia and what is happening with many countries now in which they are sacrificing the periphery (like frostbite toes) to keep the core healthy.

    He predicts India’s efforts to supply hundreds of millions of their citizens with basic food is akin the US’ food stamps program, because it supplies the periphery at a time when the core must be saved. This mirrors the US debate over food stamps and many other programs for the poor as deficits rise. The battle between Obama and Congress will be a battle over O trying to keep in place help for the periphery while Congress seeks greater help for the core.

    • Interesting! Thanks for the link.

      I agree that countries end up sacrificing the periphery, if there isn’t enough to go around.

      I ran into some very interesting (and disturbing) ideas, that I wrote about in February 2012 in a post called, Human population overshoot-what went wrong?

      It turns out that in “K-selected species” in animals, such as dogs and monkeys, hierarchical behavior is one of the ways that nature controls behavior. If there is not enough to go around, there is increased hierarchical behavior, and the ones at the bottom of the hierarchy are starved out. This way, the ones that nature deems most “fit” continue to live. If this pattern had not been followed, everyone would have been weakened, and would eventually die.

      Over the many years, we have developed beliefs/values that tell us the importance of taking care of the poor and disabled. These have been encouraged by rising amounts of energy usage over the ages, which allowed rising population. Now, at this point, we are faced with a hard problem–if we have less to go around, how do we distribute it? If we do what seems to be most “right,” we all starve together. If we force those at the bottom out, at least some get to live longer.

      • Don Stewart says:

        Dear Gail
        You may find Plato’s solution to the population problem interesting. This is also in the book Thinking in Numbers, and is in the same chapter on Invisible Cities.

        Plato believed that the ideal city contained 5,040 families. You will have to read the book to get the logic behind that number.

        So each city needed 164 births per year to sustain the stable population. There were 1193 males heads of families, and thus 1193 potential fathers. Plato believed that one in seven would be fruitful each year, giving 170 births.

        ‘How did Plato count on keeping his ideal city’s number of households in check? He proposed that each inheritance should pass into the hands of a single ‘best-loved’ male heir. Any remaining sons would be distributed among the childless citizens, while the daughters should be married off.

        Large families had no place in Plato’s city. Fecundity would be illegal; any couple producing ‘too many’ children was to be rebuked. The city’s precise limit of 5,040 households was inviolable: all surplus members were to be sent packing’.

        You will find a similar solution in Edo Japan. The great majority of the population was tied to the land. All of the land was allocated to farms or forests or towns. A farm family had to produce enough food to feed not only themselves, but also to pay their taxes. Since the limits to population growth were clearly visible (the spectre of starvation), family size was limited voluntarily through measures including infanticide (the infant was ‘sent back’).

        Problems we thought were solved have a way of coming back around again.

        Don Stewart

        • timl2k11 says:

          “Fecundity would be illegal; any couple producing ‘too many’ children was to be rebuked. The city’s precise limit of 5,040 households was inviolable: all surplus members were to be sent packing’.”
          What a tragedy. We discovered this precious resource in fossil fuels, and as a species we’ve been no smarter than bacterium, ever expanding our population and consumption until the resource is exhausted.

        • xabier says:


          Plato’s limiting system is similar to the old Spanish/Basque way: eldest son or daughter inherits the farm property, and can reproduce, while the others work as unpaid childless labourers, become monks or nuns, priests, servants in town.

          Or in richer families seek their fortune with their swords as soldiers or become abbots, abesses, canons and bishops, – if they can’t get fixed up a rich wife/husband. Most fortune-hunting soldiers died either in battle or of disease, which used to kill more than the enemy’s swords or bullets.

          Property rights and individual wealth, is a very interesting population regulator.

          And we see in the US and Europe that people who don’t have property/skills/jobs/have been sidelined by globalisation and automation, can just lie back and reproduce as welfare will pick up the tab: in effect, they live like the lucky heirs of the old propertied class – all is paid for. It’s the crushed ‘middle class’ who are now limiting their reproduction because they actually have to pay some bills…….

        • I know other areas used infanticide or deliberate killing off of young adults to keep population down. It is only in recent years when fossil fuels seemed to provide the possibility of infinite increase in productivity per acre, that people stopped worrying about population limits. Also, increased sanitation and better medical care helped bring down deaths, so that more of the babies made it to maturity.

      • xabier says:


        Anyone who has dogs will know that if you can take the dog’s food away while it’s eating without it biting you, you have achieved full dominance over the animal The interesting thing is that you can dominate a dog without necessarily making it into a cringing fearful slave. It can be happy in its low position in the hierarchy, and, indeed, love you. And be loved back. It all depends how the boss treats you, and what leverage you have over them…. I respond well to a soulful look and a lick! Some very rich people have been very good to their servants and loved them more than their own kith and kin: others have been bastards. The cruellest hierarchical environment I have ever seen was the modern office: in my book, hard labour breaking stones would be preferable.

        I think we are fast approaching the time when our welfare systems just can’t cope anymore: but at the moment it’s the support of the non-working elderly, rather than the younger unemployed who are comparatively cheap to keep alive, which is the greatest financial burden: healthcare, housing, food, clothing, spending money, etc. The cost is disproportionate and damaging.

        Historically this is completely unprecedented: no society has ever had such a task. The past was brutal: when the Romans conquered a town or tribe, they cut the throats of the elderly, the crippled and the sick unless they had special skills: they killed those young men and women they did not need as soldiers, labourers, or breeders. All very rational: every ancient race did that. Partly as a consequence of our vast wealth, partly in reaction to the horrors of WW2, we spare no effort to keep absolutely everyone alive, but it’s simply too expensive in the long run.

        I do not think this unbalanced situation will last for very long. The ethical predicament will solve itself I suspect: Doctor Poverty and Doctor Disease will do their work and impose their terms on us all.

        • timl2k11 says:

          “The cruelest hierarchical environment I have ever seen was the modern office: in my book, hard labour breaking stones would be preferable.” I can vouch for that.

          • xabier says:


            I hope you escaped/escape like me!

            The modern office was an eye-opener when I left academia: treachery and plotting; total surveillance; cruel despots; manipulated figureheads; sycophants and slaves; persecution; mental torture; rigged trials; abitrary rules, bonuses and punishments; profound irrationality and distorted statistics………. So why do people fear ‘going back’ to the Middle Ages?

          • timl2k11 says:

            So true!
            I did escape xabier, unfortunately I thought that there must be something wrong with me to not be able to “fit in” and to find the workplace quite barbaric rather than “perfectly normal” as others seemed to think, and for having had to quit for my own sanity. If I knew back then what I know now it would have saved me a lot of mental strife.

          • Ert says:


            Yes, so true. Reduced my work hours but could not describe my changed feeling until now – you nailed it down here in plain English words.


        • In the past, there were fewer taboos about not attempting to “save” very tiny babies, or children with obvious defects. As I look around among my close relatives, I can see way too many with serious disabilities. I am sure most other families have similar situations. Quite a few of the ones with problems are either not in the workforce, or have low level jobs and are in and out of the workforce.

      • Stilgar Wilcox says:

        Glad you liked the link. Your reply included: “If there is not enough to go around, there is increased hierarchical behavior, and the ones at the bottom of the hierarchy are starved out.”

        It’s always interesting to observe nature to see inherent parallels like that example. In this case, it seems more and more like that will be the scenario as only some percentage of the population will make it through the coming bottleneck. Would make a very interesting post study to know which types of people make it through, i.e. who are the higher hierarchy besides the obvious holders of tangible wealth. I’m sure there will be some surprises.

        • The thought has occurred to me that one strategy toward survival, rather than attempting to grow food oneself, is to try to be at the top of the pyramid, or at least critical to the pyramid. Dmitry Orlov probably has better ideas than I do as to what this would take.

          It seems like he has suggested that the new leaders might be today’s drug lords. I would need to go back and look. I am sure he has mentioned that people providing “protection” become critical to the operation of the new communities. In the Bible, it seems like David in the Old Testament was in the “protection” business.

          I would have to think about the hierarchy some more.

    • Ert says:

      @S. Wilcox

      Also thanks for the link.

      India is toast. 200 Billion USD trade deficit in 2012 (2nd highest after the US). 20 Billion USD domestic oil price subvention, approx 115 Billion USD spend in 2012 on Oil imports (i.e. over a 1/3 of all export revenue). Subsidized food for 800 Million people.

      How will or can India continue this? The currency coffers of the central bank are emptying – less that 18 months left at the current rate. Capital export restrictions already hardened.

      How can or will this continue? They might muzzle through the next 2-3 years – but then this may become critical. If oil prices go up another 50% then India requires 30 Billion of internal subsidy and approx 170 Billion USD to import the oil at current consumption rate. This is not sustainable.

      • India’s own oil supply is flat; its natural gas supply is down from its maximum level. The country would very much like to take care of everyone, even though this is not possible.

  35. BigPicture says:

    Speaking of leveraging a future of descending curves…deja vu for an increasingly p.o.’d Putin

    • Thanks! That is a great article. Russia needs ever-rising prices to extract its oil, natural gas, and coal. It can’t get them, and that is a major problem.

      While the argument given is competition from other producers, it is just as much that buyers can’t afford them. Rising energy prices cut back on economic growth. Europe discovers that the lowest quality of coal is cheaper than natural gas, so uses it, cutting back on its demand.

      • xabier says:

        In Britain, people have become very dependant on gas- powered central heating: they won’t want to go back to dirty old coal fires, and the work they involve – in fact, many houses have no fireplaces. Putin can squeeze and squeeze and squeeze……particularly given the collapse of North Sea production.

        • Scott says:

          Hello Xabier, It looks like we will be burning that so called ” Big Lump of Coal” as I recall Gail called it… during the years ahead and that will extend things for a time at a cost to the environment it seem to me. Because of the coal reserves we have some more time but we need to find a better way to process into cleaner fuels since it looks like we are scared of nuclear. Nuclear will lag behind coal in the next 20 or 30 years. If we have that long before things really get tough. A gas shortage of Petrol could really shake people up and start things changing fast like it did in the 1970’s but that was a brief shortage and prolonged shortage could really light a fire under the R and D some of these things we have talked about including nuclear.


          • xabier says:

            Hi Scott

            It doesn’t look good here in Europe: most resources exhausted by 200 years of intense industrialization, some countries have some oil and gas still (eg Norway) and hydro-resources, and forestry for heating, but basically Putin in Russia can play Europe on a line – without his gas, Europeans freeze. The Middle East supplies look less and less reliable to say the least!

            Nearly every house in Britain, except in deep rural areas is fixed up for gas central heating, and I know even well-off neighbours with oil-based heating who have had to cut back a lot as the oil price is too high and their business profits fall: just heating the kitchen and one bedroom. For many it’s the end of ‘whole-house heating’. In the UK it’s the damp that kills, not the cold, and you can’t cut back too far without health suffering, although people could move back to warmer clothes and thermals, as they wore until only WW2.

            I’ve fixed up large cast-iron stoves here which can burn absolutely anything and also can be cooked on, with power-cuts having no impact, but few people can do that in modern houses.

            Gail’s statistics for coal use in China are very interesting indeed. It’s going to get used if it’s cheaper, and what Eurpe doesn’t take, Asia will: so then do we all fry from global warming?

            • With financial collapse, our ability to extract and transport coal will drop pretty quickly as well.

              I don’t know what the global warming situation will be–only that the current models assume way too much CO2.

  36. suttonbooks says:

    I have worked in the process industries all of my career (petrochemicals, refining, offshore oil and gas, some pipelines). My concern regarding the data presented above is not just that oil will not be available, but that it will be available only erratically. A modern refinery or chemical plant has a low turndown ratio (80% is typical). This means that if the supply of feedstocks falls to say 60% then it will run into many operability problems and become very energy inefficient. And shutting it down is a major effort that can last days and that poses increased safety and environmental risks. The effect of having a reliable supply of oil has made both economies of scale, steady state operations and Just In Time management feasible.

    But now I can see a world where a facility manager has to address questions such as the following:

    1. The barges that were scheduled to deliver 100,000 barrels of oil today have not arrived, and no one knows where they are. How are we to run the facility? Do we run at low rates or shut down? Or do we trust to luck and keep going at full rates?
    2. A barge has arrived, but the oil is not what we normally get; it is high in sulfur and water but has a lower pour point. Can our current equipment handle this material?
    3. The supply of spare parts for our instrumentation has been disrupted. Two of the safety critical systems do not work and cannot be repaired soon. Do we go ahead and operate anyway?

    My point is that industries such as these can handle reduced rates of feedstock more comfortably than they can handle erratic supplies.

    • Thanks for the background you provide. I was just reading an Exxon-Mobil editorial with respect to a recent outage in California. It sounds like it is almost related. It talks about California being a fuel island, because of California specific requirements. Thus an outage one place can’t be made up elsewhere. In this case,

      An incident at a Southern California Edison substation cut the power that the utility supplies to our refinery in Torrance. To ensure safety, we were forced to suspend refinery operations, which meant suspending production of gasoline and diesel that supplies some of the California market. It compounded a problem already created by a disruption at a Chevron refinery in the Bay area, and by other unrelated problems. The markets responded to the drop in supply by pushing prices upward.

      As there is less and less redundancy in the system, an outage one place can magnify to an outage in other places.

      In early 2011, there was an outage that was both electricity and natural gas related in Texas. I wrote this post about it: Texas Electricity Blackout Enabled by Feedback Loops; Reliance on Competition.

  37. ravinathan says:

    There are some major importers for whom oil is already unaffordable, the case in point being India fast approaching a currency crisis. The falling rupee is having an immediate adverse impact on the country’s oil import bill while the vaunted benefit to exports may be lagged or slow in coming. Paradoxically then, the falling rupee instead of being equilibrating in terms of the trade deficit may actually worsen it at least in the short run. If India, as predicted, turns to the IMF for long term foreign currency loans, it will come with conditions, the least of which will be the elimination of unaffordable fuel energy subsidies that will push inflation even higher than it is. At least the public’s ire would be pointed at the IMF instead of at the government who can claim that their hands are tied. It helps me to remember that Gail’s fig. 1 represents an average. Oil is already unaffordable for many and that may result in unintended consequences as in Egypt’s civil strife. Egypt is kept afloat with loans from Saudi Arabia among others. Can the world afford to keep India with the worlds second largest population afloat?

    • I am afraid that India may indeed be one of the big countries that fails first. It probably depends on how much bailout, under what conditions, it can get.

      It seems like the system in very fragile. They have been trying to lift the population out of poverty, by providing cheap cooking fuels other than dung, by providing fertilizer and irrigation to improve crop yields, and by providing jobs (such as dial-in customer service) to foreign customers, using its electricity. All of these systems depend on being able afford the fuel needed to operate these systems. India’s own oil production has been flat for years, so any increase needs to come from imports. Its gas production is lower in recent years, meaning that staying level requires more imports. Coal production is not keeping up with demand either. The falling rupee is going to mean that imported fuel costs even more.

      • Scott says:

        Hello Gail, I read a story about India and it said they were trading in the money for gold since the inflation is over 10 percent. Looks like a currency crisis. I think they even have to pay a government premium of 8% to get the gold or smuggle it in. In this stage of a currency crisis gold does play a role and I do expect the dollar will fall just like the Rupee eventually and gold will play a roll as a store of value like it is now in India.

        I do agree this is a very large populated country and world cannot really afford to support India. They will surely be paying more for oil/gas and food. Looks like the government is trying to buy more gold to use for collateral and shore up the currency. As far as the USA goes no one really knows how much gold is in Fort Knox, much of it could be gone or leased out. It is a mysterious place and has not been audited for years. I would like to know what is there, but there we go again, there are so many secrets these days when we look at the governments of the world.



        • In India, it is the government trying to use gold to help their sagging finances. They are trying to buy the gold from citizens. This is something they can perhaps do once or twice, but as a long-term strategy, it is unlikely to work.

          The amount of gold in the US is no doubt much less in proportion to our economy. Gold has been a traditional means of saving in India.

  38. Leo Smith says:

    Cue back of envelope calculation…ol is generally concerted into energy of the electrical or mechanical kind and at – lets say – around an average 40% efficiency and there are in fact about 1.7MWh of energy in a barrel.

    so 680 kWh of usable energy is in one barrel. So the raw cost of a unit of electricity derived from oil (neglecting plant cost and other O&M issues) is (at $100 per barrel), about $0.147c per KWh.

    Which shows why we don’t use oil to generate electricity any more for sure. Not sure about US prices but the raw cost of electricity is about $0.08c for coal, $0.09c for gas, and $0.10c for nuclear.

    And this is the point I want to make: Already electricity production has zero oil content in Europe. And probably the USA. Gas and coal are the real workhorses in both continents, with nuclear (when its allowed to operate) being close in terms of price performance ( or cheaper when regulations favour it).

    (all the low hanging hydro power sites have been plucked so although its a significant component, its not a usable technology to develop to replace any others).

    I.e. the sorts of transformations to alternative energy sources where its no big deal to change have ALREADY taken place.

    A second point to make is that even if renewable energy did work and was cheap (it isn’t: generally its in the $0.25-$0.50c per unit bracket overall) it wouldn’t make a red cent of difference to petroleum demand, because that is in general NOT being used to generate electrical power in the first place…it is overwhelmingly going into off grid mobile power sources. I.e. being burnt in internal combustion engines of one sort or another.

    So its very important to make a distinction between ‘oil’ – in massive demand and currently irreplaceable – and other ‘fossil fuels’ – overall less in demand, in adequate supply and a lot cheaper.

    Transport CAN run off gas. so that is perhaps a temporary stopgap we will see in years to come.

    But unless lithium-air batteries come good, the end of cheap oil means the end of cheap motoring. (For some of us, that era has already ended :-))

    WE can reduce transport-miles to a large extent by cutting down our out ‘discretionary’ trips. No more casual leaping in the car to do 5 miles to a supermarket, no more ‘school runs’ where the kids can take a bus or walk…no more commuting when an advanced internet means you can work at home..BUT there is a minimum of transport required to get food and other consumables into cities…

    ..and railways don’t always cut the mustard either, in terms of speed, convenience and cost.
    So that is in fact where the changes are going to impact the most.

    – We have alternatives to oil in primary energy production that are as cheap or cheaper than oil, in coal. gas and nuclear, and the latter is under no resource limits yet whatsoever. Neither, in the US, is coal.

    – We have very few alternatives to diesel or gasoline in transport.

    – We have some alternatives to transport itself. But not enough to not require radical societal transformation in how we do things.

    I think we should ponder that.
    I’ve laid these arguments out in more detail here


    In the end the argument is – has? – moved on from whether or not peak oil is happening or has happened, and indeed beyond the impact of it, to what we can possibly do about it.
    My tentative answer is ‘burn more coal, more gas, and build more nukes’ . That solves the primary energy production conundrum, but it highlights the residual problem,.


    And to make a final point, predictions Gail, are only as good as the assumptions they are based on. Your predictions are based on the inability to replace petroleum as a source of raw energy. As an engineer. I am saying there are alternatives, and they do not suffer the same declining resource base and escalating costs.

    But the biggest problem replacing oil lies in off grid transport. Synthetic road fuel can be made, but its no way competitive with oil until at a wild stab, the $500 a barrel mark.

    However, that is a long way off right now. We have a couple of decades of stagnant growth to endure before the penny drops and people do actually – naturally – start to modify behaviours and work practices to find the natural free market cheapest way of ‘getting the job done’

    Provided of course, that governments don’t interfere to make that way illegal., or artificially tax it out of court. To protect the guilty.

    So I don’t think we are going to see societal collapse – just a long period of very hard times until the established orthodoxies of ‘this is the way to do things’ wither and die starved of petroleum, and the new orthodoxies of ‘but this is how we must do them in the 21st century’ gradually become so blindingly obvious that even politicians can see them.

    Meanwhile, it looks like another war based on essentially oil influence is about to start. Hey ho! Told you so!

    • I have a very hard time seeing how we hold on to our current system, plus produce enough cash for investment in all kinds of changeover technology (natural gas cars and fueling stations, for example), in an economy that is increasingly poorer. I don’t think we have the time to do any kind of changeover. I expect that in not too long, many of the major countries will be like Greece now. A country that is struggling with the basics can’t do much about a changeover to a new energy system.

      • Leo Smith says:

        We seem to have plenty of cash for wars and bank bailouts. And useless renewable energy plant.

        The changeover stuff is just natural replacement. A 40 year transition to what works cost effectively.

        There is and need be no panic. No hurry. Just let the markets do their thing.

        Personally I hardly drive, hardly shop except over the Internet, such work as I still do I do at home. Things cost more so I buy less, that’s all. what wears out and needs replacing is replaced with quality stuff that lasts.

        Many of the changes are almost immediate cost benefits with very little downside. My server was tired out. I built a new one out of low power parts. It will pay for itself in lower energy inside 2 years with a lifetime expectancy of 5….

        I have a two year contract for electricity with a nuclear power company. Shares in a coal power company. Grow a lot of food – not nearly enough to live on, true, but enough to make a difference financially.

        All these little things work. As do building systems for ‘people who work from home’ instead of equipping massive energy inefficient office blocks.

        My wife buys good brand stuff on the Internet, if she doesn’t like it, she sends it back. It costs less in postage than driving to the local town to change it.. She then wears it for a year and sells it on ebay – often at a profit.

        We don’t sent out to be green:we hate greens. We are just responding to circumstance.

        Oil is expensive. Internet is cheap. supermarket food is expensive. Home grown is cheaper. Eating out is expensive. Cooking at home is cheaper.

        Running a business made out of people who work from home saves them commuting costs and you office costs. What is not to like?

        There are monumental amounts of money sloshing round in the pensions funds just looking for a good place to get 5% ROI. No problem if the business case is sound.

        In the end credit is a promise to pay. Would you expect to get paid by a power station company? By a government? by a bank? I’d pick a power station company any day.

        IN the end there is no limit to the amount of credit we can generate, what matters is the value of the cash that comes back in interest payments. And its ability to pay for the next investment.

        The collapse is not of society, but of the CONSUMER society. THAT was the froth on the wave of cheap energy. WE cannot afford to consume material goods and energy beyond what is necessary to live. And that is a hell of a lot less than what we consume now. Esp. in the USA which is possibly the most flagrantly wasteful nation on earth. It could afford to be. I take no moral stance. If it cant, at least 60% of its energy usage is pure waste. That’s a LOT of energy saving potential.
        In that game its way behind Europe and Japan, who both have less resources, higher populations densities and so have already adapted to lower energy ways of doing things.

        The wastage in Europe is the massive state bureaucracy, which the USA isn’t yet burdened with.

        What has to go is the consumer society and the welfare society, both being unaffordable luxuries.

        What will not go unless its game over, is the fundamental infrastructure that keeps people alive. IT may change – it has to change, but given the choice between a new I phone or a sack of potatoes, the potatoes will always take precedence.

        • At some point, we start running into discontinuities–systems that don’t work as they have before, banks that won’t let you take out more than a small amount of money, stores that stop taking credit cards, big layoffs, governments that can’t keep up with the need for funds for all of the unemployed workers. I don’t know how soon that is.

          We should watch Greece, Spain, Cyprus, and perhaps India for how these things unfold. The WSJ reports Cypriots Try Getting by Without Credit. The subtitle is, “Messy bank restructuring as part of bailout has businesses doing their best to operate on cash only basis.”


          Weeks go by without Constantinos Mentzis, a tavern owner in Nicosia, stopping by his local bank branch. There is no point, he says, since banks in Cyprus have largely stopped functioning and small business like his are operating on a cash-only basis.

          Now the economy appears to be sinking much faster than the 8.7% contraction that its creditors had forecast for this year.

          Empty storefronts on Nicosia’s commercial streets have multiplied. Unemployment is soaring and tens of thousands of businesses like Mr. Mentzis’s are stuck in uncertainty.

          Manthos Mavromatis, who owns a water-pump company, was hurt when the government hit big deposit holders. One morning in March, he woke up to find that out of his €2 million in deposits at the Bank of Cyprus, he could access only €200,000. Some €950,000 was turned into shares of questionable value in the “new” Bank of Cyprus, the rest was frozen.

        • xabier says:


          You raise some very good points, the desire – and need – to economise will certainly be a catalyst for change, but I don’t think you’ve quite grasped the magnitude of deficit spending and debt bubbles: there is NOT a lot of real wealth around. It’s hard to find a good investment, because everything is shrinking.

          And as you wiselyretrench, so someone gets thrown out of work: most people reply on the ‘froth’ spending of consumerism for their livelihood.

          If we returned to the saner world of say 1925 in which the average skilled working man had no car, TV, took no foreign holidays, etc, and just contented himself with feeding, housing and clothing his family, an awful lot of people would be out of work in consequence.

          • Chris Johnson says:

            Xabier and Leo:
            A good article comparing national health care systems (Hong Kong #1) noted that all top flight countries had systems whose working citizens contributed from their wages. What is going to happen when continued economic contraction squeezes the labor market tighter and ever tighter? Leo and his disparate colleagues can coordinate via conference calls and email — I do so with my colleagues all day. But then how do we add / afford the health care premiums when the company refuses to?
            Cordially, Chris

          • I agree with your comment.

            The second part of your comment, that if you retrench, someone else is thrown out of work, is a point that many people miss.

  39. timl2k11 says:

    Thanks for another clear and concise article Gail. What amazes me is the number of scientists, who are completely clueless about our energy problem. They talk about technology as if it will ceaselessly advance conquering every problem that nature throws our way and allowing for unceasing progress in their particular field. None seem to see the link between modern scientific progress and energy. Carl Sagan never mentioned energy. Neil DeGrasse-Tysin doesn’t. None of the science popularizers, many of whom I greatly admire, do.

    • I am astounded at the number of people who look at the answer to the wrong question, because they don’t understand the bigger picture. This answer gets repeated endlessly in the news media, as if it is answering a useful question.

      For example, if we are going to have today’s society for very long, we need to keep the electric grid operating as long as possible. What is the limiting factor on the operation of the electric grid? I would argue economics (which is in turn driven by resource depletion). Really, it is Liebig’s Law of the Minimum that leads to the end of the electric grid, and it is hard to see what in particular is the problem. One thought is that when too many people are unemployed, they will not be able to pay enough for electrical service, and the electric grid will cease to function, because the electric company has a lot of fixed overhead that it needs to pay. Another related thought is that the cost of maintenance of the electric grid will rise too high, because of storms, the fact that much of it is very old, and because of attempts to add new intermittent electricity. Another thought is the government’s ability to fund repairs for storm damage will drop too low, and prevent storm-related repairs. Another thought is that replacement parts for the electric transmission grid will become unavailable.

      The question when one adds solar electricity to the grid is how much it adds to the life expectancy of the grid. I would argue that it adds zero to the life of the grid, and probably reduces the life expectancy of the grid. Theoretically, the amount by which one should reimburse a person who adds 1 kWh of electricity from solar panels to the electric grid is equal to the savings that the utility gets by reducing its production of electricity by 1kWh. All fixed costs will remain the same (and perhaps will increase, if one has to ramp natural gas and coal units up and down more often), so this savings is likely to be about equal to the cost of natural gas or coal or uranium to produce 1 kWh of electricity. The amount of credit that utilities are giving for electricity from solar panels is far in excess of this amount. This mismatch weakens the financial strength of the electrical grid.

      If the economy is crashing in the near term, CO2 savings becomes a very different issue as well.

      • timl2k11 says:

        I think TED (www.ted.com) sorely needs to you to give a talk. Their motto is “Ideas Worth Spreading”. However, they seem to have a positivist bias, or intent. They might not be very intrerested in “Ideas That No One Wants To Hear” regardless of how factual and important your ideas about our resource limits are. The TED audience needs a cold splash of water to the face (i.e dose of reality) to wake them up from ther collective coma.

        • There seem to be an awfully lot of sites that want to offer a “happy” view of the future, no matter how unrealistic. Or who want to sell the product their donors make or distribute (solar panels, wind turbines, electric cars, “green” dish cleaner, etc.)

          • Scott says:

            Hello Gail and Others, Leo Smith, which writes on this site and I think we are lucky to have him. Thank Leo for forwarding that link I am surely a fan of your work. The article was brilliant. Points out that the UK needs 46 new nuclear plants if we like it or not. He pictures a wired world were many people stay home and telecommute, electric cars deliver packages from the internet.

            You covered all the bases Leo especially towards the end about the big road blocks in government.

            We could do so much more if they, the governments of the world were more honest about the predicament and if were not in the way.

            Mel, if you are out there? You would like the PDF. I spent some time reading it and it long but excellent.

            These things do give me hope, I just wonder if we can actually build these things needed given that we are facing a financial collapse. Well, that is yet to be seen. But I see no movement in this direction what so ever right now, most growth in the US is fossil fuel based. So here is the PDF re-posted again and I think this brings up many topics that we can talk about here. Will financial collapse prevent us from building this new world energy system? That is the big question it seems to me.


            Kind Regards to all,


            • It takes a lot of fossil fuels and cash to build 46 new nuclear plants. This is hard to do, when UK oil production continues to drop. The UK has a big financial industry. With low economic growth, this industry is at risk.

          • Don Stewart says:

            The book Thinking in Numbers by Daniel Tammet has a chapter about Invisible Cities–cities which were imagined but frequently never built. One such city was designed by the Italian architect Filarete, who had a colorful history including the alleged theft of the head of John the Baptist. He designed the city of Sforzinda.

            ‘Like spokes in a vast wheel, eight straight roads led from the walls to the city center. The roads were studded with small piazzas, surrounded by shops and markets….What is this strange building to which every street in the city addresses itself? Filarete called it the ‘House of Vice and Virtue’. Every floor housed a different class of of activity. A brothel, on the ground floor, would entertain the majority of the building’s callers. Alcoholic drinks and games could be had on the floors immediately above. Ascending further, a university and lecture halls offered its few visitors instruction. An (astronomical) observatory topped them all.’

            I’ll observe that in those days of the renaissance, the top floor was the cheapest because there weren’t any elevators.

            It may give you some comfort to contemplate that not much has changed since the renaissance. Wisdom still resides in the cheap seats, while most people flock to the fleshpots and mindless distraction.

            Don Stewart

            • In China, many of the new residential buildings have been built without elevators. I was told that the residential buildings such as those shown in the photo below have no elevators, so that some residents have to walk up 10 or more stories. I am sure there is no air conditioning for those stairways. Air conditioning in China seems to be window air conditioning, even in most commercial buildings.

              Buildings along the Yangtze river in China.

              The above image is of buildings in Qutang, in an area where the level of the Yangtze river had been raised by a new dam. Former farmers were relocated to high rise buildings. The picture is not very clear, because it was misty near the river. The break in the sign is from one of the many landslides that affects the area. Needless to say, the bottom story apartments are preferred over the top story apartments.

          • timl2k11 says:

            That is an excellent line there at the end Don about wisdom. I sometimes wonder, are we who stubbornly seek truth confined to isolation in a world of people who want to run from it? Noam Chomsky referred to the “brainwashing under freedom” that occurs in western democracies.

      • BC says:

        Precisely, Gail.



        Note that US electricity consumption per capita is where it was in ’96-’97 and negative since the early ’00s, even as solar and wind capacity has been added at a rapid rate since the mid- to late ’00s, growing at a compounding doubling time of 30 months vs. no growth of electricity consumption per capita.

        Incremental capacity has grown so rapidly and fixed costs increasing such that some utilities are now pushing back against further expansion of solar and wind capacity.

        I suspect that we have seen the peak rate of change of increase of growth of renewable capacity, and now the fixed costs of infrastructure vs. no growth of electricity consumption will be prohibitive to further growth of renewables.

        • I sometimes think that economists don’t get farther than the equations they learned in college classes. Someone has to pay for all of this stuff. If customers pay more for electricity, it works just like paying more for oil. It tends to reduce other spending. It also makes businesses less competitive with places where electricity costs are less. I ran across this Forbes article on the electricity situation in Germany recently: German Green Energy Bluster Running Out of Wind.

          • timl2k11 says:

            I don’t think most students get farther than whatever they learn in college class. Thinking for yourself is not something that is taught, which is why I dropped out (at least that’s how I like to think about it). Thinking for yourself often gets you in trouble since you realize a lot if what you a re being taught is B.S.

            • Casualty actuarial work is still pretty much outside the university system. The approach is closer to an apprenticeship program, with self-study exams. The series of exams often takes 10 years to pass. The pass rate on the examinations is very low–about 35%, among people who were generally B+ or higher students in college and graduate school. In company work, the interest is in original solutions to the problem at hand–not on reliance on some peer-reveiwed paper.

              The lack of connection to the university system means that peer-reviewed papers are’t terribly highly valued (although they are available). It also means that experience is valued more highly than degrees. Degrees from Ivy League schools have no special value, for example. The society requires that members keep up on continuing education. Quite a bit of that continuing education is attending (fairly long) talks by people like me, on issues that members choose to bring to the attention of other members in the group. That is how I can give talks of 45 to 60 minutes or more to actuarial groups.

              Academic groups on the other hand tend to have a few invited talks, that are fairly long, while they cram in a large number of paper presentations in slots that 20 minute or less in length. In one of these slots, it is hard to say very much.

          • Are you making the case Actuaries do a decent job of analyzing Risk Gail? Given the track record of Actuaries in the Insurance Biz, you cannot say they are much better than Economists. Present company excepted of course. LOL.


            • The various parts of the actuarial profession are fairly separate. I am not much involved with pensions, for example, except from a distance, and can see that the assumptions are a lot more optimistic than I would make, given what I know about the oil situation.

              When jobs are rated in the US, actuaries often come up near the top, in terms of salary relative to working conditions and job-related risks. (No one dies, if you make a mistake, for example.) Staying out of the university system has had many benefits. For one thing, limiting the number who pass exams limits the number of people who can call themselves actuaries. This tends to hold up salaries.

            • The various parts of the actuarial profession are fairly separate. I am not much involved with pensions, for example, except from a distance, and can see that the assumptions are a lot more optimistic than I would make, given what I know about the oil situation.

              When jobs are rated in the US, actuaries often come up near the top, in terms of salary relative to working conditions and job-related risks. (No one dies, if you make a mistake, for example.) Staying out of the university system has had many benefits. For one thing, limiting the number who pass exams limits the number of people who can call themselves actuaries. This tends to hold up salaries.

  40. Edwin Pell says:

    Gail, you said we will get poorer. The world will get richer as production is shifted from high cost producers like the U.S. to low cost producers like Indonesia, Brazil, etc. So, yes, we here in the U.S. a country planned and built for a bygone age of cheap energy will be losers but the world as a whole will do OK.

    • timl2k11 says:

      I think the production shift you refer to has largely already occurred. Less cheap energy definitely equals poorer world overall, unless there is a great die off, perhaps.

    • The amount of oil is increasing very little. As we get poorer, we can afford less oil of what the world produces. Even if oil price stays up, and production continues, the rest of the world will not necessarily do very well. They will hit debt limits, just like we have, for example.

      If in fact the price of oil drops sharply, then world oil production will drop significantly. In such a case, everyone will do worse.

      Ultimately, it is clear that everyone will do badly. The question is whether the world economy will hold together well enough that some countries with high coal usage can get all right along without the high oil users for a while. It seems like China and some countries in Africa may do less badly than the big oil users for a while, but I don’t know how long. We do live in a finite world.

      • Edwin Pell says:

        I bet when tight gas and oil fail in the US the US will realize it has 5000 giga tons of coal in Alaska.

        • They will probably realize as well that Alaska is a long way from the rest of the United States. Unless the coal is easily mineable and near good transportation (traditionally rivers and the ocean), it is likely to stay in the ground. We won’t have the money/oil/credit to build the infrastructure to get the new coal out, and transported to where it needs to be.

  41. Dan Delara says:

    “There is evidence that the collapse of the Former Soviet Union in 1991 occurred when oil prices dropped too low. The Soviet Union was an oil exporter, but with the low oil prices, it could not afford to make investments in new productive capacity”

    Your kidding right ? The Soviet Union fought the worst war in history and didn’t collapse. It’s ability to export is a plus even when prices are weak. With thinking like this every country in the world who imports oil should have already collapsed.

    Gail, I also noticed how you cooked the books on figure #4. Your .7 line starts early compared to all the other lines. In year 74-75, 80-84 & 92 you don’t count the down years, but in 08-09 you do count the down years. Very misleading.

    • The collapse of the Former Soviet Union certainly coincided with low oil prices. Once prices rose, it was able to increase production again. Wars don’t have the same force that an economic price cut-off do.

      Former Soviet Union Oil Production and Price

      The 07 to 12 period does indeed include the recent recession. What is striking though, is how much effect the recent recession had on the big oil importers, and how little effect it had elsewhere. This is a graph of China’s energy consumption.

      China's energy consumption by source

    • Chris Johnson says:

      Hi Dan:
      I’m not sure, but I think Gail is not repeat not attaching the USSR collapse to one single event or influence. At least I’d hope she wouldn’t. There were many factors that had coalesced and suddenly gained momentum that the teams of Russia watchers in the west were all surprised. The same corruptions and cracking facades suddenly devastated that state’s control, and the black market economy had already become the one that mattered. The USSR of 1988 was a far cry from the spirited fighter of 1944.

      • Of course, all major occurrences have more than one factor involved in making the situation happen. The fact that we ignore the effect oil and other energy products on the economy means that we come up with all kinds of supposed reasons for happenings that are really secondary. We read these explanations so often that we assume that they tell the real story. A country that is broke, because its main source of revenue is gone, acts very differently than one that is in financial balance.

        • xabier says:


          You are completely right in this: scan the MSM discussions about unemployment, productivity, debt, and all the pressing political, economic and social problems of our time, and references to energy reserves, useable supplies and their cost, are hardly in evidence. The same can be said for over-population. The consequence is a wholly distorted picture.

    • Danilo Bertocchi says:

      Actually, i just met russian delegates at global energy systems in Edimburgh end of June 2013. Regarding natural gas, Russia is willing to keep the prices high allowing them to finance further infrastructure, even gas prices are dropping.

      • I think Russia needs high natural gas prices, to cover the cost of new pipelines and investment in new fields, plus to contribute taxes to help pay for Russia’s general expenses.

    • wornsmooth says:

      Gail is spot on regarding oil price and the collapse of the USSR. Oil was the Soviets number one cash crop.
      There were 3 major developments during the 1980’s that dropped oil prices (which were a huge boon to western economies (especially USA and UK) and a huge hit to the USSR)
      1. Bringing Alaska north slope oil into production
      2.Huge increase in North Sea oil
      3.Huge increase in OPEC production due to tying production levels to “proven reserves”
      (was George Bush SR. involved in this change, using his close ties to the Saudi Royal family, the Saudi’s being the most muscle in OPEC decisions…I don’t know, but i Have my suspicions)
      The corollary of number 3 is that while the Saudi’s et al had spare capacity to increase extraction rates to make up for the lower prices, the Soviets had no spare capacity. The only thing they could do during the second half of the 80’s decade is watch their income of foriegn currency plummet.
      In short, oil prices may have been the number one cause of the collapse of the Soviet economy. Even if it doesn’t deserve top billing as the cause, it was aprofoundly significant factor

      • yt75 says:

        “was George Bush SR. involved in this change, using his close ties to the Saudi Royal family, the Saudi’s being the most muscle in OPEC decisions…I don’t know, but i Have my suspicions”
        I think this can be considered as an historical fact now, even though more Reagan than Bush Sr (US domestic oil industry got hit really bad by it) , see for instance :

  42. Don Stewart says:

    Dear Gail
    Relative to the ‘oil exporting’ status of countries such as Syria, Egypt, and Yemen. As you point out, these countries are importing oil when they buy food from the rest of the world.

    I have seen statistics on water consumption which factor in the embedded water in products brought into some political jurisdiction. For example, the amount of water required to grow the food imported into New York City every day is calculated. So New York City turns out to have a huge deficit in terms of water. The food growing areas obviously have a surplus of water, which they turn into food, and export to places such as New York City.

    In principle, I see no reason that someone could not do at least a back of the envelope estimate for a country such as Egypt–but in terms of oil. Put an oil cost on the food they import and deduct that from any surplus in crude oil production minus domestic consumption. I am pretty sure it would show that Egypt is currently running a significant deficit in terms of oil.

    Since Saudi Arabia has given up growing wheat for domestic consumption, I assume such a chart would significantly reduce Saudi’s ‘net exports’ of oil. It might be a sobering exercise. I imagine Sandra Postel could point you in the right direction, if this is an interesting exercise.

    Don Stewart

  43. Let’s get real about our finite economic world

    The Republicans in 2001 sold America the idea that tax cuts and the freedom to shop until you drop was America’s future. I can still hear Vice President Dick Cheney saying “Reagan proved deficits don’t matter” (Unless, that is, a Democrat is in the White House). We as a nation could have acted responsibly and set in place demand destruction for oil under our terms in 2001 with higher fuel economy standards and not the market place forcing them on us 6 years later. But Republicans are strong believers in the free market and it’s wild economic ups and downs of the oil industry. Why would anyone after the last 20 years of Republican administrations deficits trust a single word about this countries debt? This country doesn’t have a debt problem, it has a Republican congress and jobs problem (“Governments cut back on projects like road repair, laying off workers” Gail Tverberg). Small minded congress members are trying to force a smaller economy on workers to make this president look bad and hide their own poor debt history.

    Yes, the days of oil so cheap most of you could afford to drive a 6000 pound SUV daily driver are gone. But oil is still cheap. One gallon of gasoline can still do the work of a thousand man hours and becoming more efficient everyday. The only thing holding back todays economy are the cry babies in congress and wasteful who want their SUV tanks.

    If you fail to plan, you plan to fail. The Bush Administration is proof.

    • timl2k11 says:

      “But oil is still cheap.” That is quite true, and scary. Oil can get *much* more expensive.

      • Actually, I think it is just as likely that we can get much poorer–fewer jobs. Oil doesn’t need to get much more expensive. Affordability will go down, either way.

        • xabier says:


          Most people cannot actually afford to but the big-ticket consumer items as it is, in the sense of being able to put down all the cash. Friends of mine own a car dealership in a prosperous part of England: when the Credit Crunch hit and many customers couldn’t get finance, the sales dive-bombed. So much so that they now do something else and the dealership is now more of a side-line.

          I suspect that a lot of people in the prosperous West have trouble with the concept of being so poor that you can’t even afford low or moderate prices. Few have experience of this sort of situation: in Britain, even people permanently on welfare have cash for luxuries, cars (bought for cash , not on finance) and modest holidays (if they have children and live in state housing which is cheap). It is all very unreal.

          • One ah-ha moment I had when I visited India is that it would be possible to bring down the cost of car ownership considerably, if we lowered our standards as to what constituted a suitable vehicle.

            Auto-rickshaw in India

            Some of these vehicles are operated in a very overloaded fashion as well, keeping the cost per occupant down. Some run on natural gas.

            In the warmer parts of the world, people need very little to maintain a minimum life style. A little blue tarp over an area almost constitutes housing in India. People sit on the ground (no benches), and sometimes sleep out in the open. Once we start competing with poor warm countries, it is hard to have salaries high enough to cover what we consider necessities in cold countries.

    • It doesn’t matter which party is in power, we no longer can afford to do all of the things you would like to do. The oil price is too high. There is no way that we could collect enough taxes from the employed to pay for the programs.

      • “we no longer can afford to do all of the things you would like to do”

        This has always been true for the last 30, 50,100 or 200 years ago. But yet we built the greatest nation ever. What we can’t afford to do is to not educate our children with the best system in the world, let our infrastructure fall behind, waste energy, start needless wars or advocate for a economic system which doesn’t allow full employment.

        “There is no way that we could collect enough taxes from the employed to pay for the programs”

        Says who? Your Republican congressman ? Let me tell you how to do it. Those 25 million manufacturing jobs that CEO sent to China that no longer pay taxes because the jobs are gone. Tax those high earners who made big bonuses shipping those jobs(CEO’s) at the same income tax rate that was in place after World War 2. We just need another tax increase like the one that was put in place at the beginning of this years which has cut our current deficit in half. Only Republicans say “Can’t” to taxes.

        “The oil price is too high”

        This is just another smoke screen for doing nothing or better known as BAU.

        “It doesn’t matter which party is in power”

        This is just a lie. Look what happened after the Republicans took control in 2001 or 1981. I can’t believe the same person who tries to explain the fall of the Soviet Union on oil prices, can’t see the damage of the Bush 2001 and 2003 tax cuts. Those tax cuts did two terrible things to our economy. First, it put more money in consumers pockets to buy foreign imports instead of the government spending the money inhouse here on Americans and American jobs. Second, instead of the Americans paying the taxes needed, they loaned the money to the government. Democrats fixed Republicans debt mess once in the 90’s and their going to clean up Jr’s. mess this time too without any help from the other side who made it.

        It’s Republican Grover Norquist that is on record as saying ” My goal is to cut government in half in twenty-five years, to get it down to the size where we can drown it in the bathtub”. That’s right Gail, he is talking about your monthly Social Security check after you paid into the system for 40 years. Don’t tell me “it doesn’t matter”.

        • Grey says:

          1) Tone down the attitude – Gail deserves better
          2) most everyone agrees that Bush/Cheney was a total disaster – spend spend spend, tax-cut tax-cut tax-cut
          3). The democrats never met a spending program that they didn’t love – spend spend spend tax tax tax

          neither party is going to change their stripes, and neither philosophy will work

          • I agree. In fact, to get a truly inexpensive government, which is all we can afford in the future, we will need something quite different from what we have now. It is hard to see how we can get there by slow evolution of thought in that direction.

          • xabier says:


            I agree, Gail is very a-political. It’s nice to keep political slanging off the site. It has ruined Kunstler’s comment section, and most comment threads on national MSM.

          • Xabier, I had to laugh inside when I read you comment. Let’s ask this this question and apply it. Does a fish know that its nose is wet?

            I find Gail’s comments and post filled with political views. Let me just take the closest one I can find. Which is only inches away on your screen.

            “In fact, to get a truly inexpensive government, which is all we can afford in the future.”

            This statement is straight out of the conservative Republican Tea Party talking points page. Of course if your a conservative Republican most of you wouldn’t even realize it. That’s right, Your fish nose is all wet.

            I would also like to make a second point. If your going to talk about resources and debt but not talk about politics. You my as well be a fish in bowl and talk about being free to swim in the ocean.

        • timl2k11 says:

          “The oil price is too high is just a smoke screen?” Really? So spending over 600 billion more a year on fossil fuels alone is no big deal? Count the price of coal which has also increased and we are spending nearly a trillion dollars a year more on energy. How does that support business as usual?

      • tmsr says:

        I agree completely, even though I am age 55 have no pension and need social security.

    • Bicycle Dave says:

      Hi ChiefEngineer,

      Gail’s “Hard Financial Limits” is probably a bit abstract for most people who are primarily interested in their Quality of Life http://en.wikipedia.org/wiki/Quality_of_life or their Well-Being. Some of us are also concerned with the well-being of the planet in general. Financial limits are one factor among many. There’s also the concept of Short vs Long range actions that can be useful to foster well-being.

      Certainly we live on a finite planet and there are finite limits to resources such as oil. And yes, one measure of oil is it’s price and this price may affect our well-being – especially in the short run. But, in the long run it’s quite possible that the depletion of oil need not be catastrophic – it could be a wonderful benefit if humans concentrate on well-being vs needless consumption. And, I agree with you that we have as much of a political problem as an oil problem. I don’t agree with Gail that the character of a political party doesn’t matter – history doesn’t agree with her either.

      Human population overshoot and the culture of over consumption in the so-called “Developed” nations is the real cause of our current and predicted problems affecting our well-being. Oil depletion is simply a symptom of this overarching cause. The ideology of the Democratic party may have some shortcomings, but the Republican party ideology guarantees that we will face very rough times ahead. We desperately need a new generation of humans (especially in the US) who have the necessary critical thinking skills to understand our global problems and set new goals for the way we live on this planet. The Republican agenda of promoting ever greater human population (ie birth control and abortion policies) and ever more consumption without regulation while shrinking the tax base and dumbing down public education – is hardly useful.

      In the short run, we need to reverse conditions of poverty, poor education, mass incarceration (especially of minorities), poor nutrition, homelessness, etc – in order to provide the kind of educational opportunity that promises to nurture those critical thinking skills. Gail’s analysis of the oil is something that should be routinely taught in grade schools (sans her politics); Richard Dawkins meme theory should also be taught in grade school, as should robust courses in evolution, global warming, Jared Diamond’s “Collapse”, ecology, etc – all without interference from religious minded school boards. Scientific Method needs to replace any ideological agendas in school curriculum. Real history and humanities instead of simplistic standardized testing. Etc.

      Taxation (or distribution of wealth) for these programs is only an issue if you ignore common sense and a little history. Republican ideology has contributed to the kind of Income inequality that prevents the US from effectively dealing with these issues. Income inequity is a tremendous short term issue if we have any hope of dealing with the longer run http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States.

      I recall some 40 years ago all the predictions that our constantly increasing productivity (automation, et al) would make something like a 30 hour work week the norm or even 20 hrs with full employment for all – and retirement at 50 would be commonplace. We would all probably stay (debt free) in excellent public funded schools until about 25 years of age (to get high-tech skills), work for 25 years and then retire. Pundits worried about what we would do with all of our leisure time! Hardly anyone in our very democratic country envisioned that the spoils of productivity (and then globalization) would only flow to the top 5% or so – leaving the rest of us to even longer work weeks or very low wage part-time jobs with no health care or other benefits.

      Ideologies (political, religious, and economic) have consequences just as much as depleting physical resources. Homo sapiens do have the capability to behave better than yeast.

      • These ideas are abstract for some people, unfortunately. Unfortunately, the “old solutions” don’t really work. We are dealing with a situation where there truly won’t be enough to go around. There won’t possibly be any way to tax workers to pay for the benefits needed for the many non-workers. (Taxing businesses might be more helpful, but many of them have escaped offshore.)

        My post Human Population Overshoot-What Went Wrong? explains some of the issues, but it, too, is abstract.

        • Bicycle Dave says:


          My “solutions” are hardly “old solutions” and most people find them to be fairly radical. I’ve commented before on ways to humanely deal with population overshoot; curtail consumption; and stop believing in all sorts of myths and delusions that prevent any effective action. But, any solutions are irrelevant without a broad, realistic understanding of the causes of our problems and some general agreement on goals. Solutions tend to present themselves pretty naturally after these two steps.

          Although I value your analysis of oil, I disagree with many of your conclusions regarding the implications of this analysis. Perhaps your dour predictions will come true, perhaps as ChiefEngineer suggests these are self fulfilling prophecies. You seem to be convinced that oil scarcity is going to be a prime cause of an impending collapse of some degree and because there is no effective substitution for oil there are no effective ways to prevent some very nasty consequences. Maybe it will work out that way. However, I view the “oil problem” to be a symptom of larger issues and prefer to think about ways to avoid catastrophe for my grandchildren by broadening the discussion beyond oil.

          • timl2k11 says:

            “I….prefer to think about ways to avoid catastrophe for my grandchildren by broadening the discussion beyond oil” And therein lies the rub. You view is distorted by fears of what the future is going to look like for your grandchildren. JMO.

      • Hi Dave,

        You say tomato I say tomato, no no no. Let me try again. You say abstract, I say time to make up actuarially economic non-sense. Better known in figure #1 as the OOPS graft. I must have been sick that day it was explained in my economics class. Of course one stops producing in the OPPS zone, that’s the way supply and demand work. When your price becomes to high, buyers will substitute. That’s the beauty of the free market. At some point everyone will sell their fossil fuel vehicles and buy a bike. There is a lesson to be learned by The Oil Drum when you run out of quality material.

        Please register me in the quality of life and concerned with the well-being of the planet in general camp. If you base your quality of life off of being able to drive fossil fuel vehicles at 80 mph you are probably a doomer or doomed. At our current cost of oil, the forces of substitution are in play and I wouldn’t be surprised by 2030 the world stops producing oil based fossil fuel personal transportation vehicles. California is leading the world once again and this the direction. The doomers will be the last to the table. I believe life will be better when we stop cooking ourselves with fossil fuels and remove most of the energy requirements out of transportation. Part of doing that will come from slowing down our need for speed.

        Funny you mentioned 40 years ago. It was at that time, I was fresh out of high school and I remember saying to my father how I thought about the future. I believed our jobs where going to be pushing buttons on machines. He laughed and thought I was crazy. I’ve spent the last 20 years in front of a computer selling insurance.

        To close, I would like to say your post is about the most enlightening comment I have read here at Gail’s place in a long time. Most likely it will be the depletion of oil that saves humans from themselves.

        • xabier says:

          Probably more likely that resource depletion and unavailability/affordability leads to violent unrest, extreme politics and Dictatorship. Large numbers of very poor and hopeless people are being created as we write; look at Spain, Greece, Portugal. Large masses of newly-poor urbanised people produce nasty politics as sure as night follows day.

          A total survelliance state is already in place, ready to be used for good or ill.

          But the Nazis got a long way without that in the 1930’s, just by beating people up in the street. Stalin didn’t need drones or anything sophisticated. Every dictator will find willing helpers. Fear descends very quickly once a few killings and disappearances have taken place, far quicker than many imagine.

          We can all bicycle to the Party Rallies, for sure: I’m not sure it will be an improvement!

        • Some things don’t have substitutes. There is no substitute for fresh water. There is no substitute for food. If we are driving today’s vehicles, the only thing that will make them run is gasoline or diesel of the required type. Sometimes a percentage of biofuels can be added, but this is generally subject to limits. Expensive fuel is a very poor substitute for cheap fuel. It makes people cut back on other purchases, and the economy contract.

          • Hello Gail,

            I’m glad you commented on this and as you might have guessed. I totally disagree with your examples and statement. Let me start by saying that substitutes are never exactly the same as the original, otherwise they wouldn’t really be substitutes.

            Let’s start with gasoline and diesel because this is the resource your blog is primarily focused on. These fuels are primarily used for transportation. So in substituting our goal here is all about getting from point A to B. Here is a short list of substitutes that came to my mind right a way.

            Electricity (solar, wind, coal, natural gas, nuclear)
            Natural gas
            Human power (bicycle, walking)

            Time- with our current vehicle infrastructure which is in place today. About 50 mile per hour on our highways is the most efficient speed for fuel consumption. Here time is a substitute and as far as money is concerned a very cheap one for most of us.

            Electricity- You can walk to your local Nissan, Chevrolet or Mitsubishi dealer today and buy a electric car. Well, let me rephrase that. You can here in California. Are the performances and cost of the electric vehicle exactly the same? Let’s just say the jury is still out on that question and lets give this industry some more time.

            Natural gas- Here we have an excellent replacement for diesel in the trucking industry. The technology is already in the works and within 5 years your going to see it on the road, actually it already is. It could easily replace 2 million barrels of diesel a day here in the United States within 10 years.

            Human power- I know where you are in Atlanta this doesn’t seem like much of a substitute because of the poor infrastructure planning. But here in California, I could manage without a car if I needed too. My quality of life wouldn’t drop very much, but some convenience would.

            Fresh water- This resource is really a special one and a lot different than oil. It’s really more about energy and infrastructure. There is plenty of fresh water in the world. It’s more about having it where and when one wants it. But here in Southern California this is a major concern. Our sanitation district recycles and replenishes our local aquifer. That’s a substitute. A water saving shower heads and 1.28 gallon toilets are substitutes. Drought resistant landscaping is a substitute.

            Food- I’m really don’t understand why you mentioned food or how you’re viewing it. There are all kinds of substitutes that could be done in this category. You could substitute an apple for an orange. One grain for a more productive grain. Or you could substitute grain for meat and become ten times more efficient. Here is one that one that a lot of your blogger should relate to very easily. You could substitute an apple or orange bought at your local supermarket with a fruit tree from Home Depot.

            “Expensive fuel is a very poor substitute for cheap fuel. It makes people cut back on other purchases, and the economy contract.”

            This comment isn’t true either. Actually what your doing when you purchase “Expensive
            oil” is transferring labor and materials from one industry to another. It doesn’t mean the economy is contracting. It just means 10 barrels of expensive oil is more important to you than lets say a 60″ flat screen TV and 10 barrels of cheap oil. There is labor and materials in both purchases. Actually, I would argue that purchasing 10 barrels of domestic expensive oil would stimulate the American economy more than a Chinese imported flat screen TV. Unless, the Chinese import 10 barrels of expensive American oil in exchange.

            What really come to my mind after reading your comment is that you need to think out side the box or other than BAU. Which is ironic because most Doomer websites complain about those who don’t realize our on going problem and act like BAU.

            Peace and I’m going to repeat one of my most favorite statements.

            If you fail to plan, you plan to fail.

  44. Scott says:

    Thanks Gail, Hello everyone, I l liked the graphs as scary as they were in your new one today! The new “situation” from the middle east may soon grow worse and oil has been rising on that news. It looks like so many exporting countries will soon be importers which is huge as we have been studying lately. Also a huge subject – is the debt problems with rising rates that you covered and how if rates rise we will loose value in assets like homes… again like we saw before in 2008. Foreigners are exiting US Bonds. Rates rising will put huge pressure on the derivatives, which is a whole other subject as there are trillions of dollars in those. This surely threatens the US’s World Reserve Currency Status.

    The Fed may continue this QE for years like Japan did, they have to, but inflation is coming or deflation if they back off. There is no way they can refinance all these trillions at higher rates. So I wonder what they are going to do next?

    I mentioned earlier when I wrote to Chris about which countries have the biggest oil supplies that are now subject to war, it was Iran, Syria. But Russia has the most and I do not think we will take them on.
    Best Regards to all.

  45. Your Figure 1 looks a whole lot like Steve from Virginia from Economic Undertow’s “Triangle of Doom”. We did an informal Podcast with Steve the other day (not aired), and overall best case scenario it looks like the costs and affordability lines cross at the end of 2014 latest. This assuming we don’t get a full on War in Syria etc.

    Also we just got up the first of two Podcasts with Nicole Foss of The Automatic Earth on Currency and Finance. Second Part is on Energy, up next week.



  46. Greg Chadwick says:

    SCP wrote….” don’t you think……countries like China or USA would go on with importing oil, by avoiding market prices…. I mean organizing a trade structure at (nearly) any price to insure oil accessibility (by military procedure)…”

    Perhaps, but by the time we reach that point, it seems that most currencies will be largely worthless and nobody will take them in trade. However, for nations that have something tangible to trade; such as oil, food, or military hardware, currencies could be bypassed in favor of barter.

    Barter has problems, but if the currencies of the world aren’t worth the paper they’re printed on, then barter between nations would be a good way to keep essential goods flowing. At least in the short-term.

    Agreements on a new reserve currency and setting exchange rates would take time. But it will take even longer to prove that the new currencies are stable and restore confidence between trading partners.

    In a collapsing global economy, are you going to take paper, or IOU’s, in exchange for your food or oil?

    The problem is that once trust is lost, it can take a very long time before it’s regained. Probably longer than most of us could go without food or energy.

    • stravinsky7 says:

      I am confused on this point.

      1.) Say grain is “worth” bartering (exporting) oil for.

      2.) Say American-made pottery and hippie clothing are not “worth” bartering (exporting) oil for.

      3.) The market can (and I believe will) capture this by determining grain’s, pottery’s and clothing’s “price”. Given any value for the dollar, grain will more or less approximate the world “price” (with variance for delivery cost/time). Pottery and Hippie clothes will no longer be produced, because they will only “demand” an international “price” where it is not worth it to produce them at?

      Oh, wait, has that already happened?

      Maybe in regards to these examples. (although due to the high coat of labor) Only people who have catabolized their own incomes presently produce pottery or hippie clothes. I guess that the producers of the future will be those who can catholics their own energy inputs sufficiently enough to “profit”.

      Sorry thinking out loud here, and little room to edit on phone.

  47. BC says:

    I’ve shared these before, but it’s worth repeating to support Gail’s points and for new readers who have not seen the data.

    Real GDP per capita to the CPI- and US$-adj. price of oil and the CPI- and US$-adj. price of oil:


    Real GDP per capita and the CPI- and US$-adj. price of oil:


    The primary inference is that US real GDP per capita cannot grow with the CPI- and US$-adj. price of oil (2007 = 100) above ~40-50% of today’s price, implying that the US, EU, and Japanese economies will not grow with West Texas crude above $40-$45.

    Peak Oil. Net energy constraints per capita (EROEI). Limits to Growth. Falling oil exports per capita. Repeat until internalized.

    With the price of oil at $110 and at, or above, the levels prior to, and during, the “bananas” (1970s reference for the youngsters) of ’08-’09 and ’80-’82, a cyclical “banana” is a virtual certainty hereafter, only the US gov’t can avoid officially reporting a “banana” by “managing” the reported deflator, inventories, and import prices.

    Yes, we have no “bananas” (1923): http://www.youtube.com/watch?v=yTTrXAE7OPU

    “Two and two are four, except when they are five, or three, and sometimes all three at once.”

    “War is peace. Freedom is slavery. Ignorance is strength.”

    — George Orwell (Eric Blair), “Nineteen Eighty-Four” (1949).

  48. Good Evening Gail, thanks for this very interesting and frightening paper. Actually you are right. I am asking myself a question: don’t you think that strong governance countries like China or USA would go on with importing oil, by avoiding market prices on the spot? I mean organizing a trade structure at (nearly) any price to insure oil accessibility (by military procedure) or by purchasing oil fields. I heard from Jeff Rubin, China is ready to invest in Alberta Tar sands to secure oil supply, even China knows perfectly the production costs. In others words, oil will not be traded as a market commodity, but produced at real costs covered by governmental funds. I give you right such solution does not seem sustainable on a long term.

    • It may very well be that some trade will continue, more on a bilateral basis–my grain for your oil, for example, even if some other parts of the system stop working.

      If many of the oil exporting nations are fighting with each other, indirectly related to oil prices that are too low to keep the governments of these countries propped up, the amount of oil that is available for export may drop dramatically.

      One of the things that is hard to know is whether we start getting “breaks in the system,” in terms of political changes in countries, as the economic systems of oil-importing countries start to contract. If a country has promised way more than it can pay (Social Security, disability, food stamps, unemployment, roads, funding for research, etc), at some point it makes sense to just start over with a new, less-expensive system. Less expensive definitely means fewer programs, but it also could mean a lot of other changes. It could mean a dictator takes over, or it could mean that the government breaks into smaller units (similar to the fall of the Soviet Union). It is these kinds of changes that make the continuity of trading programs (and financial systems) difficult.

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