Our Oil Problems are Not Over!

If a person reads US newspapers, it is easy to get the impression that all of the world’s oil problems are over. But this is not really the case.

An Overlooked Part of the Problem: High Oil Prices

A major piece of the world’s oil problem is high price. Prices continue to be far above historic levels, now in 2013.

Figure 1. World oil price (Brent equivalent) in 2011$, based on BP 2013 Statistical Review of World Energy data.

High oil prices disrupt economies around the world because when oil prices rise, the wages of the vast majority of workers do not rise to compensate. Workers find that they need to adjust their spending patterns because the higher price of oil leads to higher prices for many things, including the cost of commuting, the cost of food, and the cost of buying goods that have been shipped long distance.

When workers adjust their spending patterns, discretionary spending is cut. This leads to patterns we associate with recession, or perhaps just slow growth. Unemployment rises, and there is less demand for new homes and cars.

Governments are also affected, because many of their costs, such as building roads, are higher. They also have to pay benefits to workers who can’t find jobs, or who can only find only low-paying jobs. Governments find it increasingly difficult to collect enough taxes because of the low wages of workers. Problems with rising deficits and the debt ceiling become the order of the day. Does any of this sound familiar?

One of our biggest issues today is that we don’t have a way of getting oil prices back down again, without a drop in oil extraction. The “easy to extract” oil (and thus the  inexpensive-to-extract oil) was extracted first. There is still a huge amount of oil in the ground. The issue is that we can’t get it out, except at high prices—the same high prices that either (a) cause recession, or if governments can disguise the problem with deficit spending and low interest rates, (b) cause persistently low employment plus slow growth.

The Recent Rise in US Crude Oil Production

It is true that United States oil production is now higher than it has been in the recent past. The rise in production relates primarily to “tight oil”—the kind of oil production that is enabled by very extensive hydraulic fracturing (also called fracking). (Figure 2)

Figure 2. US crude oil production, divided into “tight oil”, oil from Alaska, and all other, based on EIA data.

We are often told that this rise in production is because of the invention of fracking. This is not really true; fracking has been used for decades, but not in the quantity it is used today. Oil production is up because oil prices continue to be high. High oil prices allow producers to use fracking in the quantity it is used today, on sites that without the technique would not be able to produce oil. Even with recent improvements in techniques, fracking remains expensive. Continued extraction of tight oil depends on oil prices remaining high.

There are other things besides high oil price that enable tight oil production. One of these things is plenty of credit, available at low interest rates. Tight oil by its nature requires considerable up front investment. Cash flow tends to be negative as production is ramped up. This means that there is a need for a lot of debt financing, so low rates are helpful. Ultra low interest rates, such as those provided by quantitative easing, also enable equity (stock) financing, because investors are so starved for reasonable returns that they will buy stocks of iffy companies, in the hope of capital gains.

Another thing that enables tight oil extraction in the United States is our law structure. In the United States, property laws permit landowners to share in the profits from oil drilling. In most other countries, profits are split between the company and the government, with nothing for local property owners. Because of the financial incentive, US property owners are often willing to put up with the hassles of hydraulic fracturing. This isn’t necessarily true elsewhere.

The United States also has other advantages that are not available in much of the world: lots of pipelines already in place, many drilling rigs available, a reasonable level of water supply, and population which is not terribly dense, so that fracking can often be done away from populated areas. The spread of technology for doing fracking around the world is far from a slam-dunk, because of the many obstacles to extraction elsewhere. These can at times be overcome with different techniques, but this adds another layer of costs, meaning oil prices need to be higher yet.

The amount by which tight oil production will continue to rise is open to a variety of interpretations. If oil prices drop because of recession, there may be very little additional production.  If credit availability dries up, tight oil production may drop. If everything goes well, US production may rise. If miracles happen, tight oil production may even rise in many areas around the world.

As I have indicated previously, I am concerned about a financial discontinuity in the very near future–a few months to a year or two–a discontinuity that is ultimately related to high oil prices. This financial discontinuity could even be related to the current government shutdown, if it goes on for an extended period. If we are reaching a discontinuity, credit markets may be so disrupted and other changes may be so significant that past projections will be irrelevant.

A Second Overlooked Part of the Problem: Inadequate Rise in World Oil Production

The second major issue we are encountering now, besides high oil price, is an inadequate rise in world oil production. Many people are concerned about a possible unplanned decrease in world oil supply (so-called “peak oil”). While this may happen, worrying about this issue misses an important issue that comes earlier: for a growing world economy, we really need a reasonably large annual increase in oil supply.

Even if we include all kinds of liquids that aren’t quite oil, such as ethanol, natural gas liquids, and coal-to-liquid, the growth of oil supply has tapered off considerably in the last 50 years. (Figure 3).

Figure 3. Growth in world oil supply, with fitted trend lines, based on BP 2013 Statistical Review of World Energy.

If we fit trend lines to historical oil production, we see that the lines become progressively flatter. To make matters worse, the number of potential customers for this oil has been rising, thanks to globalization. The World Trade Organization was formed in 1995. Adding China to the World Trade Organization in December 2001 particularly ramped up demand for all types of energy products, including oil. As China’s use of oil products soared, it put huge pressure on world oil prices. The combination of flat production and rapidly rising demand led to rapidly rising oil prices between 2003 and 2008 (Figure 4, below.) Oil prices temporarily dropped during the Great Recession, but are now back up above $100 barrel.

Figure 4. World crude oil production and monthly average Brent spot oil price, both based on EIA data.

Whether or not recent oil production really is sufficient for a growing world economy is debatable. Certainly in terms of supply equaling demand, there was enough. But in terms of how this supply was divided, it has been very unequal (Figure 5).

Figure 5. Oil consumption based on BP’s 2013 Statistical Review of World Energy.

The big historical users of oil, that is the United States, the European Union, and Japan, have seen their use of oil drop, while oil use has continued to rise in the rest of the world. The countries that have seen a drop in oil consumption also tend to be the countries that experienced the greatest downturn during the Great Recession. These same countries are now struggling with slow economic growth and little gain in the number of high-paying jobs available.

There is good reason to expect that oil use and economic growth would be highly correlated. This expected correlation comes in two different directions—from the demand side and from the supply side. From the demand side, if businesses are growing, and if workers have jobs that allow them to buy an increasing amount of goods that use oil (such as cars or motorcycles, or new houses), the demand for oil products is likely to be growing as well.

Availability of oil is also important from the supply side—that is making and transporting goods. As mentioned previously, oil is required to transport goods, and it is used in many other places in the economy—such as in growing food, in the construction of buildings, and as a chemical feedstock. Of course, if oil is cheap, it is much better on the supply side than if it is expensive, because if it is expensive, the high price of oil tends to send the required selling price of goods upward, and (oops!) lead to fewer sales, cutbacks in production and recession.

How Financial Limits Tie in With Oil Reserves

There is a common belief that we have plenty if oil, because companies and governments report high oil reserves. For example, using BP’s 2013 Statistical Review of World Energy, the amount of oil that companies seem to think is extractable is (1668.9 billion barrels of oil reserves/ 31.5 billion barrels of oil produced in 2012) = 53 years worth of oil at the 2012 rate of production. If we look at oil resources that are supposedly available, which include oil that may be available with further exploration and development, the amount seems to be higher yet. So it doesn’t look like there could possibly be a problem.

The reason why this belief is false is because the real cut-off is financial, and those making the estimates have no way of figuring out when the financial cut-off will occur. So they assume that we can extract oil that is very likely to stay in the ground indefinitely. One way of illustrating this problem is shown in Figure 6.

Figure 6. Resource triangle, with dotted line indicating uncertain financial cut-off.

Oil resources in the ground can be thought of as being somewhat like the triangle of resources shown. There is a lot of oil that is expensive to extract near the bottom of the triangle, but relatively little that is inexpensive to extract at the top. Oil companies start with the inexpensive to extract oil at the top of the triangle, and gradually work their way down through the triangle.

The least expensive oil is the oil that can be extracted with minimal problems. It is typically located near the surface, onshore, and can be extracted with the simplest equipment. Most of the easy, and thus cheap, to extract oil is now gone.

Now, if we want oil, we are being force to extract the more expensive oil, found lower in the triangle. Such oil may be deep under the sea, or near the North Pole, or may require hydraulic fracturing to extract. Sometimes the higher oil cost relates to indirect expense. For example, governments of oil exporters usually charge high taxes on exported oil. These taxes are used to keep their populations pacified with food subsidies and other benefits, such as desalinated water, so they do not revolt.

At the bottom of the triangle is an invisible financial limit, which I have shown as a dotted line. One way the limit “works” is by inducing recession in countries that obtain a very large percentage of their energy consumption from high-priced oil. Another way the financial limit works is by inducing financial collapse in oil companies. This happens when companies have huge up-front expense before they can recover their costs by selling  oil they have extracted at high oil prices.

As an example of a company hitting such a financial limit, Brazil’s second largest oil company, OGX, is trying to extract oil offshore Brazil, including the presalt area (that is oil beneath a salt layer that is difficult to drill through). OGX recently missed a debt payment because of its inability to obtain sufficient financing to work its way around a long-term negative cash flow situation.  It reports that most of the oil fields it has explored are not economically viable–the cost of extraction would be higher than the price available in the world oil market.

Because the financial limit is invisible, companies and government agencies have no way of excluding the too-expensive-to-extract oil from their estimates. A reasonable case can be made that at $100 barrel, oil price is already adversely affecting the economy. Without quantitative easing and deficit spending, the economy would be in recession from high oil prices now. Thus we are already hitting the financial limit, even though companies can see a huge amount of more oil that is theoretically available to extract. The only minor catches are that (a) consumers need to be able to afford to purchase the high-priced oil, and (b) oil companies need to be able to obtain ever-more cheap financing to extract it.

How Oil Limits Tie in with Energy Returned on Energy Invested (EROI)

Dr. Charles Hall and others have calculated Energy Return on Energy Invested (EROI) for various fuels (Hall and Klitgaard 2012). The basic premise is that the more energy is needed to extract a fuel, the less efficient it is for providing needing desired energy for society. Hall’s research has shown that over time, the EROI for each fuel extracted tends to decline. This is very similar to the rising cost of extraction over time I am showing in Figure 6. The main difference is that I include all relevant costs, including wage costs, taxes, financing costs, and distribution costs, rather than just energy costs associated with extraction.

I have talked about required oil prices already being too high, and thus causing recession. In many ways, this is parallel to saying that the EROI of oil is already too low, and is leading to recessionary problems.

Some people (for example, Garcia 2009, which seems to be used in used in Randers 2012)  would like to use EROI comparisons to determine what might be a suitable substitute for oil. I do not consider this a suitable use for EROI for several reasons:

  • Substitutability away from oil is very poor in the short-term, especially if we are up against a financial limit that will make substitution even more difficult in the future. The use of EROI in this manner assumes that substitution is really possible.
  • EROI does not consider some important variables, including the timing of investment (and thus the need for long-term financing), and governments’ dependence on tax revenue from oil. Even in the US, governments obtain considerable revenue from oil extraction. According to Barry Rogers in the Oil & Gas Journal, in North Dakota, the total “government take” amounts to $33.29 on an average $80 barrel of tight oil.
  • If substitution were to take place, huge transition costs would be incurred, such as  early retirement of the current vehicle fleet, and higher capital costs (and thus more energy expenditure) related to the new vehicles. Simply considering EROI would miss these costs.

Conclusion

When we hit oil limits, we are really up against Liebig’s Law of the Minimum. Applied in this situation, this law would say that if a necessary fuel is missing, the economy will not operate properly. This law originally was used to describe a problem in raising agricultural crops. If a necessary nutrient (such as phosphorous) was not present, it didn’t matter whether excess amounts of other nutrients were added. The plants could not grow properly unless the missing nutrient was available.

With oil, the situation is pretty similar. The economy cannot operate as usual, without an adequate supply of cheap oil (or in EROI terms, high-EROI) oil. All of the talk about substitution for oil is irrelevant, if our problem is a financial problem we are hitting right now, or in the very near future.

In order to have prevented our financial problems, several years ago we would to have needed to put in place a substitute for oil with very little or no transition costs. Ideally, the substitute could have kept transportation costs very cheap—comparable to the cost before the run-up in oil prices starting about 2003.  Ideally, the substitute would also have worked for other oil uses, such as for powering irrigation pumps, for powering agricultural equipment, and as a chemical feedstock for asphalt, for medicines, for herbicides and pesticides. To be truly an oil substitute, the new product would need to be available sufficiently cheaply that it could be taxed heavily, to make up for lost revenue from oil royalties and other taxes.

Now we are faced with what looks like an unsolvable problem. We need a cheap oil substitute, yesterday. The stories we heard saying, “Substitutes will work when the oil price rises high enough,” were a bunch of nonsense. The folks who came up with this idea didn’t realize what a negative impact high oil prices have on the economy. A high-priced substitute for oil is not at all helpful. Neither is one with huge transition costs.

Without a substitute, we need to figure out how to live in a very changed world, one facing financial collapse–a very difficult problem indeed.

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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247 Responses to Our Oil Problems are Not Over!

  1. Víctor
    Víctor says:

    Hi Gail.

    First of all excuse me for my poor English because I’m not a native speaker. I’m Spaniard. I have read in different fonts that the money the FED creates via the mechanism euphemistically called “quantitative easing” never ends in the real economy: it never gets out from the banks accounts. In their opinion, quantitative easing is done in order to prevent banks bankruptcies and never gets out from the financial system, a monster bigger than the real economy.

    If they are right, how oil companies can benefit from QE? I’m not living in the USA and I’m not an economist, so I’m not sure if the USA is living a moment of easy credit for consumers and companies.

    Thank you for your time.

    • 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.
      Gail Tverberg says:

      Quantitative Easing is part of a “package” that includes low short term interest rates and deficit spending as well.

      One of the things quantitative easing does is keep long term interest rates artificially low. Investors looking for higher yield will then invest in a variety of kinds of things–speculative oil drilling, which will tend to help keep oil supply up; investors buying houses to rent out, which will help raise housing prices, so there isn’t so much of a problem with people having more debt than their house is worth; and perhaps even factories–but it is not at all clear that many factories are being built with the money. There are probably quite a few speculative bubbles in asset prices because of QE, in stock prices, farm prices, commercial real estate, and housing prices.

      With the low interest rates, new homes and new cars are more affordable. This helps keep up “demand” for houses and cars, and thus employment in these industries. Other types of building is also affordable–for example, government building and commercial building.

      Low interest rates also lead to a need for less high taxes, because the interest on the government’s own debt is lower. If the government doesn’t need to raise taxes, it leave the taxpayers with more dollars, that they can spend on other things (including gasoline and diesel for vehicles).

      As you say, the Quantitative Easing also helps out the banks, by moving iffy debt out of the system.

      QE also assists the US in continuing to issue large quantities of debt, because this way, the market does not get over-saturated with US debt.

      If the Federal Reserve were not doing all of these things, it seems like there is a good chance that interest rates would be much higher, taxes would need to be higher, and the US would be officially back in recession. In such a case, oil prices would likely drop too low, because of the lower demand for oil. If this were to happen, the output of oil would drop–perhaps not immediately, but there would be a drop in the drilling of new wells. Over time, this would lead to a drop of oil supply.

      So I think you are right. The US is living on a moment of easy credit for consumers and customers.

  2. Don Stewart says:

    Dear Gail and Others
    One of my pet peeves is that analysts frequently fail to take into account behavior changes. They project trends which (predictably) hit brick walls, with the implicit assumption that human behavior won’t change as the wall approaches. The assumption about inflexible behavior may be a good assumption, or a poor assumption. But my complaint is that by ignorning the potential for changed behavior, the analyst mislabels the problem. The problem IS NOT the trend, the problem revolves around the human behavior change.

    Let me give you an example. Lester Brown, in an interview with Chris Martenson (which is probably behind a paywall) projects that food production is peaking and thus dire consequences await an increasing human population. Lester is assuming that everything will continue on trend and the trend will hit a brick wall and that will be that.

    Now I will show two examples of analysts who look at behavioral changes which can mitigate the projected disaster. First, look at Brian Kaller’s article:
    http://www.resilience.org/stories/2013-10-14/nothing-needs-to-be-wasted
    Brian asks the question, ‘Is it necessary to really waste 30 to 50 percent of the food we produce?’ And the answer, of course, is no.

    As a second example, see Toby Hemenway’s essay:
    http://www.patternliteracy.com/103-is-food-the-last-thing-to-worry-about

    Toby points out the work of Howard Odum showing that the primary production of food is low on the complexity chain. Would a sane government (which must exist somewhere in the galaxy) sacrifice food production to save Wall Street? Toby also mentions the fact that gardens are grossly underutilized, that more productive (but more labor intensive) farm methods can be used, and other factors which are subject to human volition.

    It MIGHT be true that a species with the very limited sapience identified by George Mobus will drive right into the brick wall at 90 miles per hour, but it is also possible that at least some people will avert the wall through changes in behavior. By failing to consider the potential for change, I think people like Lester Brown just foster an attitude of hopelessness. When we are hopeless, we shut down our problem solving apparatus. As stupid as the ‘equal time’ rule appears on TV news programs, I think that those programming interviews should make an effort to interview people who are doing something about the particular issue. It doesn’t have to be in the same program, but suppose Chris had ended with ‘and in the coming weeks we will be talking to people who are doing something about food supply’. I know that Chris and Adam Taggart are both personally doing something. You’d never get that from Lester’s comments.

    Don Stewart

    • Don Stewart says:

      Another example…
      It is common in the Peak Oil community to say that ‘food is oil’ or that ‘without genetically modified crops we would all starve’ with the background understanding that the high tech world of genetic engineering is fuel intensive.

      Take a look at these graphs:
      https://gallery.mailchimp.com/a57841e3f724f29382a368209/images/2013_08_corn_web.jpg
      They’re small, and I don’t know how to enlarge them. So I will tell you what they say.
      1. Genetically engineered corn has exploded since the year 2000.
      2. Yields have not increased very much at all since 2000.
      3. Most of the increase in corn production is due to more acreage planted in corn.
      4. Corn prices have risen pretty dramatically.
      5. We are diverting a large share of the corn crop to ethanol.

      These graphs tell you a number of things, if you bother to connect the dots:
      1. Genetically engineered corn shows no signs of solving an real problem except that it does make bales of money for Monsanto and Bayer.
      2. If we want higher yields of corn, then we are likely going to have to use more labor intensive methods rather than more fuel intensive methods.
      3. All those government officials who actually work for Monsanto should be tried for treason. Government efforts to prevent us from knowing when a product has ‘Monsanto content’ are certainly not government ‘of, by, and for the people’.
      4. A loyal citizen wouldn’t buy a product with any ‘Monsanto content’.
      5. Bill Clinton talked about the idiocy of corn ethanol in his talk at Omega. Government programs which require the production of corn ethanol are similar exercises in stupidity and/ or treason.

      I submit that the great majority of Peak Oil pundits claim:
      ‘We are running out of oil and since food is nothing but oil, we will all starve’.
      A more nuanced claim would be that:
      ‘Some of the most emergy inefficient processes revolve around stupid programs. IF we can look at graphs and draw sensible conclusions from them, and IF we can regain control of the government from the lobbyists, THEN maybe we don’t have to starve even as oil production declines.’

      Don Stewart

    • xabier says:

      George Mobus is one of the most perceptive observers around. Time spent reading him is always worth while. He’s more or less given up on Homo Sapiens, Current Model. But somehow one doesn’t despair having read him.

    • xabier says:

      Mass food production via gardening could be a game-changer, I agree.

      Change of behaviour requires Leadership, the thing we always hear about from the so-called global leaders and never get.

      None of them tire of spouting the ‘recovery and growth is just around the corner’ lie, but not one takes a photo op with a spade in their hand…….

  3. Scott Walker – Oregon
    Scott says:

    Hello Chris, I saw this article today too. “9 Depression-Era Frugal Habits You Need to Pick Up”
    Which I will put up here for any interested, it was a main stream media article…
    http://www.savvysugar.com/Great-Depression-Saving-Tips-32030865?utm_source=outbrain&utm_medium=cpc&utm_campaign=outbrain_cpc_savvy

  4. Scott Walker – Oregon
    Scott says:

    Hello, I will put these links up for anyone interested… Here are a couple of things I was looking at and listening to today.

    This first one is an interview of David Stockman about the coming financial crisis. A good interview outlining a big crisis coming that likely will be larger than 2008.

    http://kingworldnews.com/kingworldnews/Broadcast/Entries/2013/10/5_David_A._Stockman.html

    This one is an article about the honey bees and how Diesel may be to blame. It would be good to electrify our tractors and all vehicles if we only could.

    http://www.newsmax.com/SciTech/Science-environment-pollution-chemicals/2013/10/05/id/529449

    Scott

    • 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.
      Gail Tverberg says:

      Thanks! I hadn’t seen the diesel and honey bee article. With the honey bees, the problem seems to be a bunch of factors working together.

      Stockman has been saying something similar for a while now, but another good interview doesn’t hurt.

      Edit: I listened to the Stockman interview. It was well worth listening to. He doesn’t understand the oil problems underlying our current problems, but he understands why the Fed is out of ammunition, in trying to fix financial market problems.

      • Don Stewart says:

        Dear Gail
        I’ll just observe about the honeybees that they are an example of David Korowicz’s thesis about the collapse of complex system. A bee or a human or the global industrial system are all complex. The bee can endure one or two or three insults (such as pesticides or being trucked to distant locations) but at some point the bees defenses cannot cope with the insults and the colony collapses. Korowicz says something very similar about the global industrial and financial system.

        And we have a very poor record trying to predict exactly when the insults will overwhelm the homeostatic systems.

        Don Stewart

        • 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.
          Gail Tverberg says:

          Agreed!

  5. Don Stewart says:

    Dear Gail and Others
    Here is a link to Joel Salatin talking about several things we have discussed in this particular post and also in other recent posts.

    http://www.permaculturevoices.com/permaculture/permaculture-voices-podcast-015-joel-salatin-talks-to-the-next-generation-of-farmers/

    I suggest you go to the 55:30 mark for a discussion of a one acre homestead. You will get advice about how to configure the house as well as things to grow. The house recommendations cover many of the same features as an Earthship, but without the use of dry soil as an insulator or the generation of your own electricity or the use of gravity for the water system. He is assuming you already have a house, you just want to make it more efficient. Listen for about 4 minutes.

    Then skip to the 1:09:00 point where he talks about his distaste for farmer’s markets and expresses his opinion that distribution is the inefficient, weak link in the local food system, and the farmer’s market is the most inefficient link of all. He talks about the alternatives. He also drops the comment that Amazon Fresh may put Wal-Mart out of the food business. (My opinion is that the kitchen garden is the real answer to fresh produce, and he recommends a kitchen garden in his first answer.)

    The next question relates to his summation of his life experiences. He says that we mostly have no idea how productive land can be if we approach it with care and imagination and husbanding its inherent capacity for fertility. Treating a farm as something to which you add inputs is a fundamental error (Liebig’s Law is a Distraction?).

    The last two questions and answers total about 15 minutes. Of course, Joel is always informative, even when describing which pair of pants he chose to wear today…so feel free to listen to the whole thing.

    Don Stewart

  6. top hyena says:

    The Economist urges “Let decaying British towns die”:
    http://www.economist.com/news/leaders/21587790-city-sicker

    And I always thought the Economist represented the cornucopian view that there’s enough for everybody.

    Quote:

    “Hasn’t America tried more-or-less letting cities grow and shrink naturally, and isn’t the result Detroit? Yes, but this is to focus on one side of the ledger. America has some shockingly ruined cities, but it also has shockingly successful, fast-growing ones, like Houston and Raleigh. And Detroit was brought down partly by the weight of pensions owed to its police and other public-sector workers. In British towns, pensions are either much better funded or are paid by the national treasury.”

    Is that so? Yet still the UK government has debt over a trillion pounds sterling.

    • 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.
      Gail Tverberg says:

      I haven’t looked at European figures, but I cannot imagine that the governments will possibly be able to pay the pensions promised (or alternatively, that the money provided by the pensions will be worth very much, when it actually comes to buying goods and services).

      We are beginning to see a situation with a shrinking “economic pie” instead of a growing one, in the US, Europe, and Japan. Everything looked great, as long as the model showed growth forever, and citizens getting a reasonable percentage of a growing economy. But if the economy is flat or declining, it is very hard to make the numbers work out right.

      I suspect households in Japan have high ownership of Japanese government bonds because households are trying to fund their own retirements. I am afraid Japanese households will run into the same difficulty as everyone else.

  7. danny says:

    Can anyone tell me how much of GDP is deficit spending and quantitative easing? And how much oil the US. consumes versus how much oil it produces. The numbers seem way off!

    • 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.
      Gail Tverberg says:

      With respect to oil production vs oil consumption oil consumption. The US in 2012 produced 6.5 million barrels a day of crude oil. The US’s net imports was 7.4 million barrels a day. (The US actually imported 8.5 million barrels a day of crude, and exported enough products to bring the net imports down to 7.4 million barrels a day.)

      The US consumed 18.5 million barrels a day of oil products in 2012. The difference between the 18.5 million consumed and the (6.5 million bpd of US crude) plus (7.4 million bpd) is 4.6 million bpd of “other stuff” the US produces, that isn’t really oil, but is included in the total to hide the problems with crude oil. It includes ethanol, plus “natural gas liquids” (propane, butane, and ethane), plus “refinery expansion” that takes place when the US processes crude oil (including imported crude oil).

      So one way of looking at the amounts would be to say that the US imported 7.4 million barrels a day out of 18.5 million barrels of consumption or 40% of the total. If you don’t give the US credit for all of the other stuff, the US imported 7.4 million barrels a day, out of (7.4 + 6.5 =) 13.9 million barrels of oil per day, or 53% of the total.

      With respect to the question about how much of GDP is deficit spending and quantitative easing? Quantitative easing does not directly go into the GDP calculation, so the answer in one sense for QE is $0. In another sense, both the deficit spending and quantitative easing (to keep interest rates low) were necessary to keep the economy from imploding, so a fairly large percentage of GDP is a result of these programs.

      In total the amount of US debt is over $16 trillion. The national debt increased from $14.8 trillion at 9/30/2011 to $16.1 trillion at 9/30/2012, an increase of $1.3 trillion. This compares to US GDP of $15.7 trillion for 2012, or about 8%. I don’t think it is very helpful to compare this deficit to GDP, because we don’t pay taxes on GDP–taxes are on a much smaller base, predominantly wages. Wages amounted to $6.9 trillion dollars. If the shortfall were to be collected as a tax on wages, it would need to amount to something like 19% of wages. (Social Security taxes were raised by 2% of wages, so part of the shortfall has already been made up.)

  8. Don Stewart says:

    Dear Gail and Others
    There is so much disagreement about houses that I feel a brief exploration of the topic is in order. The first stop recommend is this video with Paul Wheaton talking earlier this year in San Diego. Click on the video. Go to the 10:45 minute point and then the 21 minute point and then to the 29 minute point for brief discussions of Annualized Thermal Inertia, really cheap houses, and solar drying of food. Then click on the second link for an explanation of what is going on in terms of using earth as a thermal inertia storage medium. For the sensitive, I will warn you now that Paul sometimes uses strong language…I don’t think these short clips are too bad.

    http://www.permies.com/forums/f-88/podcast
    http://www.richsoil.com/wofati.jsp

    The Earthships also use thermal inertia, but incorporate some other ideas as well.

    An early Arctic explorer spent a winter on Greenland in a sort of tube. By the end of the winter, his breath had frozen around him so that he could barely get out of the tube. At the other end of the spectrum, Adam and Eve wandered around Eden and most likely never built a house. In effect, the garden was their house. So humans can survive in all sorts of places called ‘home’. Parisians are noted for sleeping in little cubbyholes and living in cafes. Citizen Kane built Xanadu, with countless rooms and so many treasures they could not be catalogued. California in the 1950s invented the notion of ‘bringing the outside inside’, and built patios that melted seamlessly into drawing rooms. I once ate dinner in a California winery where it was hard to tell what was on the inside and what was on the outside. Many Mediterranean cultures used houses as a place to hide the women from prying eyes. In San Francisco, women use their house as a place to decorate themselves in preparation for their forays into the cafes. Today, many people have home offices. I once saw a house in New Jersey which was built as a weekend corporate getaway for the company bigwigs in Manhattan–not a practical thing in it and very expensive. In short, there are a wide variety of different practical definitions of ‘home’ or ‘house’.

    It is obvious that the requirements one asks of a house depend on how one plans to use it. Paul Wheaton thinks and acts like a homesteader. Most of the day will be spent out and about doing the work that needs to be done. The purpose of the house is, first, shelter and then practicality (including things like computers) and then comfort at the end of the day. If we think about the 1950s suburban house and then we think about how David Holmgren proposes to repurpose it for the Age of Energy Descent, we find quite different purposes and consequently different activities taking place and physical modifications.

    Earthships, which came along 30 or so years ago, were typically built on cheap land in the arid West by people who didn’t have the psychological need for close neighbors (and maybe had the opposite) and who wanted to be more self-reliant. The land was cheap because it didn’t have utilities. If you have ever tried to get utilities extended to a remote homesite, you know what an expensive proposition that is. So the houses were designed to be off-grid. And if you are going to be living in that glorious landscape, it seems a crime to live in a tube such as sheltered our Greenland explorer. The Earthships cleverly integrated the thermal mass of earth, the insulating power of used tires packed with dry dirt (dry dirt is important in the two links above), a clever water cycle, full use of gravity, and the greenhouse effect of a wall of glass. Somewhat reminiscent of the Biosphere effort in Arizona.

    One of the threads which unites all these houses is the desire for energy efficiency. There is little or no external energy used for heating and cooling. Unless you live on an island with trade winds, that means insulation with earth. What you will choose to build depends on your land, your neighbors reactions, your own proclivities, how you plan to use your house, and your budget. All these guys avoid mortgages.

    Finally, a great deal of energy in the home goes to the manipulation of food: refrigerators, stoves for canning, glasses for canning, etc. Solar drying cuts out a lot of that external energy requirement. (Fermentation cuts out the processing energy, but requires either glass or earthenware storage which does require energy to make).

    Don Stewart

    • Don Stewart says:

      Dear Gail and Others
      Two more pictures of unconventional houses in Paul’s talk. At 58:30 he shows a picture of a tiny house. At 1:01 he shows a picture of an insulated shipping container which has been turned into a house.

      Note Paul’s discussion of the plain front on the shipping container. The inside and back are nicely fixed up to be friendly to humans. The front is plain so that the owners are not drawing the attention of people driving by. This is probably illegal (as is the tiny house). Having a house which doesn’t draw attention helps if you are doing something illegal.

      Why are these illegal? Because humans are inherently drawn to dividing ‘us’ from ‘them’. In the Robber’s Cave experiments in Oklahoma in the 1950s, boys were selected who were as uniformly white and middle class as the scholars could manage. When taken to the camp, the boys nevertheless quickly divided into two groups and the scholars had to cut the experiment short to avoid violence.

      If you have a shipping container in your back yard to store all the surplus stuff you have, you are one of ‘us’. Possibly up to your eyeballs in debt, but ‘comfortable’. People who refuse to go into debt and live instead in shipping containers are definitely ‘them’. A shipping container in the yard storing stuff does not have a negative impact on property values (except in very ritzy zip codes), while very few people want anyone living next to them who is so ‘other’ that they live in a shipping container.

      Don Stewart

    • xabier says:

      Don

      Great stuff.

      You missed out: home as a place to watch TV and absorb propaganda……

  9. Gail Tverberg, My friend and fellow economist the late John Attarian
    and the quarterly journal The Social Contract have thought about and
    published on many of the issues of concern to you and many who
    comment on your postings. In the spring of 2003, John served as the
    editor for a special issue of The Social Contract on “Ecological
    economics: highlighting the work of Herman Daly.” John also
    published a number of articles in The Social Contract and elsewhere
    outlining his concerns over issues such as peak oil and the end of
    cheap oil, population sustainability and immigration, the sustainability
    of our entitlement systems and government debt, and the like. One
    of the best pieces that John did was his article on “Economism”
    which one can read from the following link:

    http://www.thesocialcontract.com/artman2/publish/tsc1504/article_1326.shtml

    In 2002 John published an article in The Social Contract on the end
    of cheap oil. Prior to his untimely demise at 48 in late 2004, John
    and I discussed a lot the oil situation and we both concluded, as
    John set out in two short article he published that year, that we were
    likely to hit peak oil before the end of the next administration which
    turned out to be Bush’s second. We both expected an oil shock
    which occurred in 2007 and 2008 and was surely a catalyst in
    engendering “the great recession” as the Canadian economist Jeff
    Rubin has pointed out.

    There should have been a serious discussion of this issue in the
    2004 election, but there wasn’t. After the oil shock, it should have
    been discussed in the 2008 election, but again wasn’t. And it
    clearly wasn’t in the 2012 substanceless election.

    Over the years I have argued with John, with people connected with
    The Social Contract and with others that pamphleteering on these
    issues isn’t enough. What is needed to get these issues seriously
    discussed to start coming up with some solutions and action is to
    open up our political processed to third parties willing to discuss
    them and the hard choices we face. But this is not possible
    without voting reform since, as you can see from the following link
    on Duverger’s law, it is our system of plurality voting which engenders
    and sustains our rigid, and increasingly dysfunctional, two party
    system. In reading the link:

    http://janda.org/c24/Readings/Duverger/Duverger.htm

    people need to be aware that when Duverger (a Frenchman) speaks
    of a majority he actually means a plurality in most cases.

    I am not as pessimistic as some about our ability to tackle our
    problems if we can get a serious discussion of them in the
    public forum. A necessary, though not sufficient, condition for
    this is voting reform. On this score, I would invite you and your
    readers to take a look at Chapter 1 and Appendix 7 of the
    electronic book on my website http://www.nationalrenewal.org.

    Given the announced retirement of Senator Saxby Chambless
    and our Michigan Senator Carl Levin, I would like to try to
    organize an effort to solicit their support for initiating in the
    Senate a voting reform act to open up our political processes
    to third parties and independent candidates. I hope that you
    and your readers might take a look at my website and that
    you might consider in one of your postings looking at the
    issues I have tried to raise there.

    John Howard Wilhelm, Ph.D.,
    Economics
    Ann Arbor, Michigan
    Tel. 734/477-9942

    • 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.
      Gail Tverberg says:

      Thanks for the information and the links. I read the article, “Economism and the National Prospect” by John Attarian. He does a good job of describing the situation. It is almost a national religion at this point. Of course, the fact that we live in a world with limits means that at some point, (likely not far away), it becomes clear that the national religion is a false one–everything falls apart.

  10. Don Stewart says:

    Dear Gail and Others
    Some of you have claimed that Earthships are ‘for rich people’. Here is one desgined for Haiti:
    http://earthship.com/Designs/simple-survival

    Now, this uses industrial trash such as used tires and cans and bottles and it uses new industrial products such as cisterns and solar panels and rebar and insulation. If you are ONLY interested in solutions which would work in the total absence of an industrial system and completely without reused trash, this isn’t for you. On the other hand, if you are interested in living well in the system as it exists today, but without going into debt, and being far more independent of the vagaries of the economy, then take a look.

    http://earthship.com/Designs/simple-survival

    Also, if you want to find out more about black water and gray water and how they are treated, just use the appropriate words and you will turn up a wealth of information. The graywater from the living area in the back of the house, for example, flows by gravity through PVC pipes to the garden beds up in the greenhouse part of the dwelling. They use panty hose as a grease trap.

    Don Stewart

  11. Wim Weber says:

    Dear Ms Tverberg,

    You might be interested to learn that Shell CEO Peter Voser is now sharing your view on the limits of shale:

    http://www.ft.com/cms/s/0/e964a8a6-2c38-11e3-8b20-00144feab7de.html#ixzz2h72mIF5H

    “Mr Voser also said rhetoric about the US shale revolution being exported to other countries was “hyped”, and that the rest of the world was in an early “exploration phase” which could yield “negative surprises”.

    • 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.
      Gail Tverberg says:

      Yes, I saw that article. Thank you. It is good that oil company executives are speaking out.

  12. hmolitch
    Hickory says:

    I wonder if there is an upper limit of the percentage of GDP that a country can spend on energy before it precipitates economic contraction? I suppose part of the answer depends on whether the energy dollars spent get recycled into the economy effectively, or removed from it.
    Here is my list of adjustments that this country can make to downsize its energy/resource demand-
    1. Ration public money spent on medicare for the elderly to what would be considered today as severe in degree. Medicare payments would be reserved for those expenditures that have the lowest cost to benefit ratio (yes- rationing).
    2. Downsize the military at about 3 %/yr until we are down about 50% from today. It would still be massive.
    3. Drop meat consumption by half/capita, and drop all farmland biofuel subsidies.
    4. Carbon tax (at an equivalent of 25 cent/gallon, with the proceeds to used for efficiency and innovation credits).
    5. Lastly- we need a campaign to popularize euthanasia and hospice. it shouldn’t be hard to sign out.
    Of course, in the big analysis, these measures are just buying a bit of time.
    Thanks for your writings Gail.

    • “I wonder if there is an upper limit of the percentage of GDP that a country can spend on energy before it precipitates economic contraction?”

      It’s 5% for oil. Details are here:

      22/7/2013
      US oil demand peak was in 2007
      http://crudeoilpeak.info/us-oil-demand-peak-was-in-2007

      • 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.
        Gail Tverberg says:

        There can be a difference in calculation if you use retail prices or cost of a barrel of oil–you sometimes see a different figure for that reason.

      • Good reference, Matt. However, do you ever wonder why the Europeans could survive better on more expensive fuel, or the Japanese and Chinese. Why is the USA paradigm the only one we track? Europe and Japan don’t produce any gasoline, and China but a fraction of their demand, despite that their wage rates are much lower.

        • 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.
          Gail Tverberg says:

          I would argue that the Europeans are not surviving better on more expensive fuel. Their economies are collapsing. The taxes on oil were to try to keep those economies from collapsing sooner–get people to use smaller cars and ride the trains or bicycles to use less oil. The taxes on oil have helped redistribute oil to China and India.

          • xabier says:

            That’s quite right about Europe. Americans might look at the prices and say: How on earth can they manage?! But cities are configured differently and distances generally so much smaller.

            When I worked in central London, I was able to walk 15 minutes to one office, and then 15 minutes in the opposite direction to another from a conveniently located apartment, but otherwise the metro rail and bus services work pretty well: even from the suburbs of London one can get to town in say 12 minutes by train and have a rail station some 10 to 20 minutes walk away.

            But high fuel costs are certainly having an impact on businesses that have to use a lot, and this is driving down discretionary income also. The European Union are starting to get worried about high energy costs and the adverse impact on industry (a bit too late!).

    • 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.
      Gail Tverberg says:

      I generally agree with you.

      I think on Medicare, we have to have some recognition built in that at advanced ages, it doesn’t make as much sense to do very much. Intensive care, and for that matter brain surgery, doesn’t make sense on 85 years olds. There are simple palliative things that should be available to all (pain relief, for example). And caffeine is a great stimulant–works well for many elderly.

      People used to die at home. My husband’s aunt died at our home, while living with us, a few years back. She was being served by hospice. I hired a young woman to come in and stay with her in her declining days, while I was at work.

      • Scott Walker – Oregon
        Scott says:

        Hello Gail, it looks like we may have to change our diet as the future goes on and the good fish get more scarce. You may not believe this but when I was a teenager in the early 1970’s you could still buy Abalone in cans like Tuna. Now it looks like Jelly fish will be on the menu, I hope they are eatable, not sure though….

        http://www.nbcnews.com/science/jellyfish-are-coming-experts-tangle-exploding-population-8C11352067

        • 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.
          Gail Tverberg says:

          The overfishing problem and the jellyfish in the wake of other fish problem is pretty severe. I noticed that a few days ago, there was an article about jellyfish paralyzing the water intake at a nuclear reactor in Sweden.

    • humankind is a species unique in its ability to grant itself ‘human rights’
      looked at dispassionately, human rights is in direct conflict with the laws of nature, because nature makes laws, we do not.
      but human rights are with us, if only in the short term, because we have the means to sustain them.
      unfortunately very few people realise that our ‘human rights’ are supported by energy input of fossil fuels, and that before hydrocarbon burning added itself our lifestyle, the concept of human rights didn’t exist.
      To refer to your ‘list of essentials ‘ there, they contravene everybody’s human rights, to live life as we wish. —A dead end I agree, but one we shall continue with until we get to that dead end.
      Your list can be filed under Wish politics, and Wish economics

  13. Ert says:

    Saw this today the first time… my be interesting.

    Regarding Oil-Limits if found some time ago the LFTR technology quite intriguing. Now there is an other but similar concept, that seems removes some deficiencies of the Liquid Fluoride Thorium Reactor: the Dual Fluid Reactor (http://dual-fluid-reactor.org/video).

    Still is a fluid based Thorium breeder reactor – so “explosion” potential is extremely minimized and all the other advantages as less Plutonium, simple and available fuel, simple exchange and remove-ability of fuel.

    Still some game-extension-options available 😉

    • Scott Walker – Oregon
      Scott says:

      Thanks, very interesting on the Thorium reactors. I think we will be able to make plenty of electricity, but we still do not have a good enough battery. We can make hydrogen with it to store the energy, but that is difficult to deal with. We can make lots of electricity it seems but to make it portable is the problem still.

      Even if we can make unlimited electricity it still does not solve our overpopulation problem and resource scarcity.

      But that was hopeful news for clean power.

      Scott

  14. ravinathan – After much inner work, and now in my early 50's, I have gifted myself with a sabbatical from a corporate career to develop a vocation that will allow me to better integrate soul and role. According to the philosopher Ken Wilber, the culture of a country or society serves to expedite the development of a person born into that culture up to its average developmental level or center of gravity. However once a person reaches that stage, the culture then resists her growth into higher levels of development that lie beyond its orbit. Born into the traditional (Spiral Dynamics: Blue and Kegan: Socialized Mind) culture of India and having emigrated to the modern (Spiral Dynamics: Orange; Kegan: Self Authoring) culture of corporate America and the West, I have become increasingly dissatisfied with my own deeply conditioned mind and drawn to question the beliefs and assumptions that govern my stance and action in the world. After the spiritual seeking of many decades and countless days on the meditation cushion noticing repetitive thoughts that invoked, anger, fear and stress, I have been very fortunate in finding "The Work of Byron Katie." The Work is a method of inquiry that uses four questions and turnarounds to investigate any stressful belief. Often compared to Cognitive Behavioral Therapy, The Work is a simple, yet effective method of self help that can be used at a very fundamental level to alleviate stress and with practice serves as a profoundly effective technique to realize one's ever present condition as consciousness in every moment. It's simplicity is deceptive; it's potency is transformative. The Work works at light speed. In the context of The Work, I can understand what Oliver Wendell Holmes meant when he said: “I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.” The Work fits that description. With The Work, I have come to see the gift in a stressful emotion; those 3 AM fearful awakenings, the flash of anger during a business meeting or the cringing shame of hearing a criticism from my wife. I view them all now as temple bells calling me to inquiry; Durga's kiss awakening me to Spirit - my ever present condition - that I can rest deeply in, any time I choose, even as I lie awake at 3 AM! Who knew that a stressful emotion can be looked forward to, for it shows me what's left, the remaining stress inducing beliefs that lie unexamined in the underworld of my consciousness. The Work can literally blow your mind and I invite you to it. Best of all it costs nothing, is easy to learn and the information you need to practice can be downloaded from the website. For those who need a trained facilitator to learn inquiry, there is even a free helpline, staffed by trained volunteers that can be accessed for the price of a phone call. No guru, no complex theory or esoteric practice, just four questions, so respectful of our free will that they don't even ask to be answered. The purpose of this blog then is to: Serve as an honest record of my experience of building a vocation where my deep gladness meets the world's deep need. To be of service to anyone who is contemplating or planning to make such a transition while benefiting from the perspective of those readers who choose to share their perspective here. To enable me to "witness" myself through my own words. As a means to make object what is subject - to 'have', instead of 'being had' by what I have assumed to be true without investigation. To develop my written communication skills so critical to my ability to connect with others from the heart. To discuss topics that interest me deeply, in a way that is lucid, provides an unique perspective and is interesting and meaningful to the reader.
    ravinathan says:

    For those following the current stalemate in Congress, Chris Hedges reports on the ideology of a republican leaders such as Ted Cruz who are bent on derailing Obama Care. The parallels that he draws between the Christian Right and the fascists are compelling. He also rails against the liberals in the Democratic Party who he believes have enabled the corporate take over of government and have their own way failed the poor and dispossessed. I don’t see any way out of this impasse unless a large external event such as a stock market tumble forcing a compromise. http://m.truthdig.com/report/item/the_radical_christian_right_and_the_war_on_government_20131006

    • 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.
      Gail Tverberg says:

      Behind this all the fact that there is no way that we can pay for current programs, much less pay for Obama Care as well. We are at a point where citizens (with stagnating wages) cannot afford the government we have put in place.

  15. Wim weber says:

    Dear Ms. Tverberg,

    You might like this recent interview with Peter Voser, CEO of Shell, who admits that investments by the company in US shale have not paid off, and that shale in other countries is in for “negative surprises”.

    http://www.ft.com/cms/s/0/e964a8a6-2c38-11e3-8b20-00144feab7de.html#axzz2h1hw3IHV

    • 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.
      Gail Tverberg says:

      Interesting! Thanks for the link.

  16. Gail, over at zero hedge was this paragraph: “Recognizing that the economy is still weak, the Fed at its latest meeting yet again declined to begin tapering. When the Fed is finally forced to cut back, interest rates will rise, Wall Street will call for relief, and the economy will slump. This may be delayed with additional printing for a couple of months, but the adjustment will occur and it will be severe, probably much worse than in 2008. However, this time there are no arrows left in the government’s quiver to spend or print its way out of trouble.”

    “No arrows left in the govt. quiver” caught my eye, because that’s what I keep coming back to is the question of what happens after QE and huge borrowing are no longer on the table? Since 08 some form of QE has been the go to strategy to keep defaulting paper at bay, but without it, uh, well… My thinking on this is the Fed will QE right up until it is forced to stop by one market force or another and the govt. will borrow 700b-1trillion a year until congress stops it.

    The govt. shutdown has been in the works for a long time now as the R’s want to reduce deficits, so we may be seeing pressure to taper QE and reduce deficits taking hold both in this 4th qtr. I’m very interested to see how all this plays out and it’s fiscal consequences for the economy. We may be on that edge of discontinuity you mention.

    • 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.
      Gail Tverberg says:

      I think we are thinking along the same lines.

      In addition, there is no real way the budget can be balanced. The Federal Government is on a “cash” basis, rather than an accrual basis. This means that even if Social Security does have some funds theoretically built up, those funds have in fact already been spent, and replaced with non-marketable government debt. Thus, as the baby boomers retire, the entire cost of their Social Security and Medicare benefits must be paid for on a pay-as-as you go basis. This is happening at a time when young people are having a hard time getting decent jobs, and are also being saddled with student loans.

      • Ed – I am interested in energy issues.
        edpell says:

        Yes, indeed. My oldest son is working in China because he could not find a job in the US. My middle son is working in the US but would not be able to get to work if we had not bought him a car that he could never afford given his income. My youngest I have no idea what to tell him to do he just finished high school.

  17. Don Stewart says:

    Dear Gail and Others
    Relative to the Omega Institute conference. If you are interested in trying to foster changed behavior, there are two speakers that I highly recommend.

    First, I would watch Bob Berkebile on Sunday morning. Bob is an architect. Whether you agree with his ‘living buildings’ designs or not, I think you will be impressed by the way he gets in touch with his clients. He goes into the tornado stricken town of Greensburg, KS, and asks them questions no one has ever asked them before. Then he designs a green solution which includes their concerns. I think you will particularly notice the key role played by local schools in his solutions. Notice that the school officials have no sense that they play a larger role.

    Second, watch Bill Clinton’s keynote address. Clinton talks about the President of Brazil and how she is doing things right…much like Bob Berkebile is doing things right. He contrasts her approach with that of Assad, Jr. in Syria.

    What else does Clinton have to say?
    1. Complaining about things is disempowering.
    2. Every day offers opportunities
    3. Distinguish between Headlines and Trendlines.
    4. A key concern is sustainable farming. We have many rich countries who cannot feed themselves who are buying up land, farming it unsustainably, and pushing out small farmers. This is disastrous.
    5. A rational health care program for the US requires thinking, and you almost never see that in DC. It’s like walking and chewing gum at the same time. We are paying an extra trillion dollars each year to be sicker and live shorter lives.
    6. We are all interdependent. Divorce is not an option. The Israelis and the Palestinians don’t realize it, but they are interdependent.
    7. The four main obstacles to achieving the world we want:
    a. Gross inequality
    b. World is too unstable…people are scared
    c. Unsustainable production of energy and other resources
    d. Consciousness is not what it needs to be if we are to develop solutions which will work. We have to let our eyes overrule our ideologies.

    He spoke some more about Health Care. In Rwanda, the Clinton Foundation is involved in their effort to develop and implement, by 2020, a health care system which Rwanda can afford with zero foreign aid. We have to learn to pay attention to how other people do it…just like a football coach looks at films of the other team. And we have to confine our debates to the realm of reality.

    He recalls a conference he attended in Brazil where all the players in a contentious issue were sitting at a table discussing the issues ‘as if they had half good sense’…which you never see in DC.

    Don Stewart

    • 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.
      Gail Tverberg says:

      Thanks! Most of those ideas sound good.

    • xabier says:

      Clinton’s point 7: as it has always been and ever shall until the last human animals take their last breath – fear, struggle, insecurity, fights for dominance, inequality (ineradicable), irrational hatreds.

      These can destroy the most promising societies and relations. We are an animal that cannot be sure that the next member of its species to come along will not enslave, torture, murder or abuse it, or just plain lie (Clinton was good at that was he not?)

      Mostly it doesn’t happen, of course – when it does there is no real society: in war -and even more in civil war – it happens a lot. The Old Testament refers to mothers eating their own children and families murdering one another at times of stress and starvation.

      Take a look at any office and its politics….. Look at family quarrels…. All of it irrational and wasteful. In practical terms, inevitable.

      Everything good beautiful and sane is destroyed eventually, maybe to re-emerge somewhere else.

      It’s the old curse. Someone asked the sage Rumi in the 13th century to prove he had a perception of the Divine and special powers to help mankind and improve its lot, so – in the middle of winter – he produced a perfect-looking apple, which was delicious. The third bite produced a nasty worm. Spitting it out, the eater said: ‘How can a Heavenly Apple have a worm in it?! ‘ Rumi replied that everything that enters the Earth is corrupted, and it’s foolish to expect anything else.

      Not that we are excused from struggling, of course!

      • Don Stewart says:

        Dear Xabier and Others
        There was a lot of content in several of the presentations about ‘changing consciousness’…but it wasn’t about drumming or chanting or praying. It was mainly about giving people experiences through the built environment and also giving instant feedback.

        I believe it was Clinton who talked about the importance of using the advances in communications to give rapid feedback to people to assist learning. This is a huge topic, and I won’t go into it here. Suffice to say that the information revolution opens up lots of opportunities.

        In terms of ‘experiences change consciousness’, it all started with Jeremy Rifkin who talked about how the changes humans have experienced from early gatherer/ hunter days to today’s abundance of data on demand have changed the way we think. (The counter argument is that our hormonal systems haven’t changed appreciably…just the data they are operating on.) Then we saw a succession of architects who show us pictures of the built environment which not only achieve ecological goals but also change the way we perceive events.

        For example, if you are sitting at your dining table in an Earth Ship that you yourself made out of earth and junk and you go over to the banana tree growing in your solar greenhouse and pick a banana watered by the graywater from your own house which came from water catchment on your roof, and you sit down and eat the banana and save the peel for composting and look out at the blackwater nourished plants outside and the animals they have attracted, and you are cool in the summer and warm in the winter because of all the thermal mass surrounding the house, is your consciousness different than that of someone buying a million dollar apartment on Park Avenue in NYC?

        Does the Yoga class which meets in the sewage treatment plant at Omega amid lush greenery have a different consciousness than a yoga class meeting in a typical high school basketball gym?

        David Orr gives the concluding talk about how Oberlin College built their new building specifically to give the students a daily experience which will foster a new consciousness. What does it mean when students can go skinny dipping in one of the pools outside while a meeting is in session in the building?

        What does it mean when school buildings are recognized as essential community assets, as opposed to a way to teach kids to pass multiple choice tests with high efficiency? If kids at schools are regularly exposed to adults who are there on serious, adult business, does it make any difference?

        What does Majora Carter mean when she says that ‘my neighborhood needs to become the kind of neighborhood where people go to parks’. What does it mean when Mayor Bloomberg talks about the proliferation of parks in his regime, and comes to Majora’s park to pose with his shovel?

        To put all this together, I can’t refer you to a 5 minute segment of any single talk. It’s woven through practically all the talks.

        Don Stewart

        • 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.
          Gail Tverberg says:

          Somehow, I have a very difficult time seeing these new buildings with lots of glass and solar panels being affordable by more than a tiny percentage of the population. Suppose the economy goes down hill. More people will lose their jobs. The information revolution is likely to come to a swift halt, as the huge energy inputs required to keep up Internet is no longer available. Perhaps electricity is not available at all, or only very intermittently.

          Most of the folks with the fancy new homes will owe mortgages to banks on them. As the economy goes downhill, their inability to pay these mortgages will become one of the drains on the economy. Banks fail.

          Other members of the economy are jealous of the fancy homes. They are without jobs and hungry. They throw stones through the windows of the fancy new homes. New windows are not available for replacement. Oops!

          The money that was spent on the fancy new homes could instead have been spent on simple tools for all–shovels and wheelbarrows, and instruction in simple skills that do not depend on our whole modern energy network. How to get along without solar panels and things that can’t last indefinitely.

          But somehow, people have latched onto the belief that we can somehow hold on to what we have with more and more fancy stuff for at least a few, made because we still have some energy. And they have stopped thinking about the fact that each of these expenditures requires trade-offs for other expenditures that could be made, and the necessary debt leads to other limits down the line.

          • Don Stewart says:

            Gail
            Regarding the ‘fancy and expensive’ houses. I can only recommend that you listen to Michael Reynolds talk about the economic independence that living in an Earth Ship brings. The residents typically have no debt, no utility bills, and they are growing a lot of food. The place is beautiful because of all the plants.

            Reynolds repaired the ancient Mercedes that he drives (on grease) with salvaged auto door panels. The houses are built with walls of plastic bottles and metal cans from dumps. If the production of trash stops, then someday Michael will have to look for different materials. But it’s a sane and sensible way to live today. If the solar panels fail and nobody is making them anymore, then he will live without electricity. Or maybe the wind turbine will still function. He notes that some have worked for 30 years with zero maintenance. He doesn’t need a lot of electricity.

            As for the sewage. I am sure that Omega spent more than is required simply because they are in an upscale neighborhood. Albert Bates, in a distinctively downscale neighborhood, accomplishes the same biological transformation of waste into nutrients with much simpler facilities. I doubt that the neighbors in Dutchess county would appreciate Albert’s outdoor pissoir.

            You can find lots of material on the obstacles local governments have placed on Michael’s houses. But things may be changing. He has a current project in midtown Manhattan which has not yet been vetoed by the City.

            You look at it and say that ‘this won’t survive the kind of collapse I foresee’. Albert would tell you ‘I thought the same thing in the 1970s’. What all the speakers see around them is gross ecological ignorance and abuse which is destroying the ability of the the planet to support the abundance of biological life that it might support, and the architecturally inclined are trying to design in such ways that the biological processes which are at work are transparent. David Orr said ‘we learn when we see and experience’.

            As for the rampaging mobs, I recommend Michael’s words about ‘tomato independence’.

            I won’t try to convince you that making a built environment designed to have a positive impact on human consciousness is a good idea. Some will be intrigued and will investigate.

            Don Stewart

          • Don Stewart says:

            Gail
            Just one more thought for you. This all began with a derisive comment about the sewage treatment building at the Omega Institute being a tourist destination.

            Now let me ask you this question. Suppose the person who made the derisive comment actually observed the transformation of their own waste into biological nutrients every day…by the design of the built space. Every day they would observe a miracle.

            Do you think they would have made the derisive comment? Would they vote for dumping sewage into the Chattahoochee? Would they assume that gigantic sewage plants with complex designs are a good expenditure of the taxpayer’s money?

            Don Stewart

            • 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.
              Gail Tverberg says:

              i’m not quite sure what the options are. I may have missed something–I don’t read the comments together with what preceded them, so sometimes forget what the original context was.

              In the long term, the only options we have are simple ones that we can make with local materials, and that local people can afford. Thus, both big and small sewage plants are probably out, unless the small plant truly can be made with local materials by local people. In the long run, the best option is probably less dense population, so that sewage is not such a problems.

              In the short term, there is a problem with sewage. Then whatever is cheap per person and can be maintained by local people, without electricity use,”works”.

        • xabier says:

          Don

          I’m with you on many points.

          Radical change in architecture, education, community resilience is urgently needed: but that’s not where our civilization is heading. We are reinforcing our mistakes and misunderstandings.

          On the whole, one feels like a passenger strapped in while a delusional drunk is in charge of the bus…….

          • Don Stewart says:

            Xabier
            The conclusion of the session was a panel. Someone posed the question ‘what keeps you from jumping off the bridge?’. Mostly, I think, they concluded that it was the work itself. David Orr, who is a political scientist, said ‘we will win because we are right’. Whether you have that much faith in truth and justice will determine how you line up on the issue of ‘why don’t you just jump off the bridge?’.

            On a slightly different tangent. I have started reading The Social Conquest of Earth by E.O. Wilson. It’s been on my shelf for a while. Bill Clinton contributed this blurb:

            ‘I just finished The Social Conquest of Earth, a fabulous book’.

            On page 44: ‘The cohesion forced by the concentration of groups to protected sites was more than just a step through the evolutionary maze. It was, as I will elaborate later, the event that launched the final drive to modern Homo Sapiens.’

            Now, a little background. Wilson shows that biological diversity increased greatly as the social insects proliferated. The insects evolved slowly and the other plants and animals evolved along with them. Many plants are now absolutely dependent on the social insects. So the introduction to Earth of the social insects multiplied Life.

            Social Humans, and especially their invention of agriculture, have been a disaster for Life. Page 16: ‘Wherever humans saturated wildlands, biodiversity was returned to the paucity of its earliest period half a billion years previously.’

            So, taking Bill Clinton at his word, he understands that the campfire which nourished humans and made us what we are is no longer adequate. Arguably, even the campfire has fallen apart under the spell of Ayn Rand and the Neoliberal Economists. But restoring the campfire consciousness would not be adequate to avoid disaster given the capacity of modern humans to destroy Life. Therefore, as difficult or impossible as it may seem, we have little choice but to try to find and nourish a new consciousness. That, or hoard some resources for one last, solitary party.

            Or, perhaps, adopt the Permaculture (or any other variant of biological agriculture) ethics and intervene to maximize biological life on the land you have an influence on. It is conceivable that humans could increase Life, as the social insects did, but the odds are pretty long.

            Don Stewart

        • Ed – I am interested in energy issues.
          edpell says:

          Don, Omega is located on one side of Long Pond lake. There are about 300 persons living around the lake full time. Omega brings in 500 folks a week for drumming and tennis for lawyers and what not. They used to collect the feces of these 500 people in large underground tanks. They would then to sucked into tank trucks and trucked the 90 miles to the transfer station in Albany, New York. What happened after that I do not know. That is the same place my septic tank non-digestible waste is trucked to.

          They switched to their on-site sewage treatment for the other unsustainable influx of 500 people. I do not know how much heavy metal load we are now getting into our aquifer from the continuous buildup of un-processable components like mercury in the feces. How long will it be sustainable?

          As an aside there is a 435KV extra high voltage transmission line to one side of Omega and a 230KV high voltage transmission line to the other side of Omega. The 230KV is to be upgraded to 435 extra high as part of the New York State Energy Super Highway. The superhighway will bring stranded nuclear and coal power from upstate New York through my backyard to New York City. The upstate generators are running at reduced rates due to the death of the old upstate cities. This will allow full throttle use of the nukes with full throttle nuclear waste production and full throttle coal burning with full throttle air pollution including more mercury.

          Another aside it is interesting to see how many folks from Manhattan are buying and building up mini farms 100 miles north of New York City as insurance. Beautiful new barns are being built that are architecturally superb, new tractors are bought, servants are hired to do the work etc….

          • Don Stewart says:

            edpell
            There was discussion about the utilities using eminent domain to take the Omega property. I get the impression that they are trying to fight it by getting the neighbors involved.

            As for the toxic metals. Biological waste treatment can sequester metals. Janine Benyus touched on this during her talk. Geoff Lawton, when he was doing his Greening The Desert work in Jordan, found that if he made swales and planted plants, they sequestered salt from this heavily salted earth. I don’t think he really understood why, at the time. Janine Benyus now seems to understand it, to some extent. Biology works miracles.

            Don Stewart

          • Don Stewart says:

            edpell
            To your point about new tractors and barns. Darren Doherty is a Regenerative Agriculture consultant in Australia. He has been spending some time in the US recently. He says that lots of people in Australia have made money in the housing boom and decided to buy country land. Then, some of them give him a call to figure out what they should be doing with the land.

            He says that when he pulls into their driveway, he gets a good idea how long they will last. If they have a shiny new tractor and a barn stuffed with new, but useless, stuff, they won’t make it very long.

            Of course, if you have enough money, and continue to make money in the city or through financial means, then the farm just becomes a sink, albeit a pleasant one. If you ever get to Asheville, NC, go to see the Biltmore Estate. New York City money built this medieval estate in the early 20th century. They imported stone masons from Italy, etc. They aspired to be self-sufficient, with artisans of various kinds working in blacksmith shops and bakeries and things. But I am sure it just lost money. But there was plenty more coming in all the time.

            Don Stewart

        • all creatures discharge waste
          we are therefore faced with a problem:
          We leave it where it is and walk away from it
          We remove it to somewhere else
          We pay somebody else to move it and hopefully find a use for it
          Speaking in a collective sense, I fear that we will expect the latter to go on happening precisely because it ‘always has’, forgetting that universal sewage disposal is a luxury of a minority and is energy intensive.
          Bloggers on here know that, but I’m afraid that if you bring up the subject in polite conversation (risky) among most people, the solution is that the ubiquitous ‘they’ will figure out a solution to the energy problem
          While some may be able to cope with the problems, most will not, and there is much more to this than recycling for beneficial use. Without the necessary energy input, we will be faced with the disease that accumulated body waste creates within any community, I covered this in my article ‘Survive’ which shows just what is costs to keep a crowded community healthy. http://www.endofmore.com/?p=763
          And we ARE crowded.
          Earthships no doubt function very well. I can only suggest building them in the fetid heart of Lagos or Mumbai

          • Don Stewart says:

            Dear End of More
            The original Earth Ships used composting toilets. Now they use flush toilets but the waste never leaves the property. It is processed biologically and is released outside, as you can see from his pictures.

            You could, of course, still use composting toilets. In the New Mexico high desert, where he developed these, graywater is entirely too valuable to waste.

            I have no idea what he will do with the wastewater in Manhattan. I do know that NYC has some building codes which are designed to reduce stormwater runoff. Some new big buildings near the Battery have used innovative ways to reduce the storm flooding. So I suppose NYC may be more amenable to innovative ways to deal with water than some other cities.

            Don Stewart

  18. Don Stewart says:

    Dear Gail and Others

    Thanks to some rather slurring comments, I found out about the Omega Institute’s symposium ‘Where Do We Go From Here’. You can find it at:
    http://www.eomega.org/workshops/conferences/where-we-go-from-here

    Find the place where it invites you to participate in the Live Streaming and click. It’s free. The sessions today are supposed to play starting today and lasting for a few days. The sessions tomorrow can be viewed live or as they replay them. Bill Clinton’s address on Friday evening will play at least at 2pm tomorrow, Sunday.

    To determine whether you are interested in watching, here are my comments from today. First, I believe Gail assumes that our financial economy requires exponential growth, and that lacking exponential growth, the financial economy will collapse and take the real economy with it. This would be in line with Hubbert’s observation in the 1980s about what happened in 1929 in the US economy: we either failed to disconnect the physical economy from the financial debacle on Wall Street, or else we refused to do so. I don’t see any of the speakers making that assumption. I would say that they are all assuming that the real economy can change more or less graciously even if financial values collapse. They all seem to assume that Apple and Google and Twitter can have high values even if the traditional bricks and mortar economy is sick. Your opinion on that subject may be the most important determinant of whether you want to watch.

    The head of the Omega Institute began the program with a brief introduction. The Institute has been striving for a closed system in terms of their physical plant. For example, in their new building they pump water to the surface (with solar pumps), use the water, put it through a cleansing process utilizing plants, and return the water to the aquifer from which it came. He commented that the solution to our environmental problems is being constantly aware of the systems within which we are embedded, such as the billion organisms which inhabit our skin. He observed that being connected to electronic devices all the time is a distraction which separates us from awareness of the systems which support life. He emphasized that there is no ‘Away’. If you go in search of Away, you will find a terrible place.

    Jeremy Rifkin gave a wide ranging talk with more policy prescriptions than I could count. His basic thesis is that the Industrial Economy powered by fossil fuels is on life support. There are no productivity improvements left in the old paradigm. The executives of the companies he consults with know that, with the possible exception of the fossil fuel companies and the electric utilities. He believes that there is plenty of energy from solar, wind, geothermal, and the like to provide all of us with a good life…as Ghandi described a good life as opposed to what we might wish for. Rifkin observed that the revolution in digital communication is enabling the new energy systems. The future belongs to distributed energy…not the centralized utility structure we have today. He observed that GDP is a measure of our debt rather than our well-being. Rifkin traced the trends in human consciousness brought about by our changing environment–from the hunter/gatherer societies through the hydrological societies of irrigated grains to the rise of ideological loyalties in the 19th century to the psychological perceptions in the 20th century. In the 21st century, in one generation, we must change to an ’empathic biospheric consciousness’. He foresees a doubling of the efficiency with which we use energy.

    Rifkin foresees ‘the end of work’ as automation and communications eat away at traditional careers. But he does think that, for the next 30 years, there will be lots of green-collar jobs retrofitting our environment to a lower and different level of energy. He observes that the biggest source of CO2 is buildings, the second is agriculture, and the third is transport.

    Majora Carter showed examples of her work in South Bronx. I have seen these before, and missed most of her talk.

    Michael Reynolds showed pictures of the Earth Ships he constructs. He lives in New Mexico, which has viewed his creations with suspicion to hostility to legal threats. Currently, he is building in Malawi and Tierra del Fuego. His houses are virtually self contained. They require no external heat or cooling, they generate their own electricity, and they grow a lot of food. Gray and black water are cleaned biologically and used to grow food. They are constructed from industrial debris and packed earth. Reynolds is my kind of guy: dissheveled, irreverent, funny. Dealing with local governments requires an AK47, etc. He spoke after the very buttoned down Majora Carter, and I heard a lot of laughter…I think the audience was liking his message.

    Janine Benyus is the inventor of the term Biomimicry. The attempt to mimic Nature’s methods to accomplish human goals. When she is describing the marvelous things that Nature is able to accomplish with minimal resources, she could be a Permaculture guru instructing students. For example, she tells the audience that fungi catch nematodes, extract the nitrogen, and trade it to the trees in return for sugar. Whales defecate in the Bay of Maine which provides food for fish. Benyus repeated the current emphasis on the importance of gut microbes.

    Benyus states that a review of 724 studies shows that increased hardship increases cooperation among plants. There have been no studies which show that plants resort to a ‘survival of the fittest’ mode in response to stress.

    Benyus is working on a solar panel which can be produced locally with a 3D printer. Not yet ready for prime time.

    Paul Hawken, who never graduated from high school, but has written bales of books and now teaches college courses, said that ‘Hope is the narcotic that covers up our fears’.

    One of the interesting things he did was develop pictures of bubbles which contain all 7.1 billion humans, all the carbon in the air, all the estrogen, and all the testosterone. They are pretty small bubbles. He observes that what makes the human world go around is contained in those small bubbles of estrogen and testosterone. (I have long been fascinated by the importance of moving a few hormones in the human body…they can lead us to matrimony or dedication to a religious society or to sacrifice our lives for some cause. A few parts per million.). Hawken believes that the IPCC reports are stated in ways that disempower individuals. The reports imply that it is only governments or multinational corporations which can move the needle on carbon dioxide. So he is writing a new book which begins from the individuals point of view and builds up a credible program for control of carbon dioxide.

    His book will recognize that carbon finances the business of life. For example, the exchanges between the fungi and the trees are all about carbon. So Hawken believes it is important not to demonize carbon. We can also have too little carbon in the air, and send Europe back into a little ice age. Understanding and staying in the sweet spot is the name of the carbon game. (I would add, carbon in the soil is one key to agricultural productivity.)

    Hawken also mentioned that Nature saturates the sound spectrum. If you have seen the TED talks on sound in mountain meadows, you will understand that.

    The concluding talk of the day was Rob Hopkins, of The Transition Network. He gave numerous examples of what is being accomplished by local groups on their own initiative. I had seen almost all of this before, but I think the audience was pretty impressed. People like to see action such as Hopkins and Reynolds showed.

    I haven’t seen Clinton’s address yet.

    Don Stewart

    • 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.
      Gail Tverberg says:

      Thanks for your summary. This sounds like a lot of stuff I have heard before and am not impressed with. Somehow they seem to think we can keep our high tech world, and live on renewables. This is not a combination that can possibly work.

      Michael Reynolds Earth Ships sound at first like they might have some possibilities, but when I use google to look at what he builds, I see buildings with solar panels and glass windows. Solar Panels and glass windows are not sustainable. He is following the same path as all of the others. Where does he think replacement solar panels and windows are going to come from?

      I suppose if one is trying to create a world where a few people perhaps can live well for a while, and you think the current system can hold together, then this is the direction some people might look.

      • xabier says:

        There’s a big problem with the ‘Green initiatives lead to job creation’ meme, as we’ve seen in Europe:

        1/ It’s very expensive. In a time of contracting incomes from work and savings, householders will opt not to do it, unless still well-off and attracted by grant and subsidy assistance (money goes to money folks!)

        2/ They can be forced to do it by legislation that makes it impossible to sell or rent a property unless new standards are met. This reduces surplus for consumption in other areas of the economy which are struggling. It puts up property prices.

        3/ Public property owners are forced to do it, and they raise local taxes to finance it: again, major consumption repercussions.

        4/ Very poor/retired/sick/idle – the economically redundant – people are given grants to do the work: but the money comes from increased power tariffs on those who are still working – again, consumption in other areas is squeezed.

        More elderly poor freeze to death as a result of not being able to heat themselves. (NB Many Green improvements are badly designed, and actually lead to increased power consumption – ie house now too cold in summer and needing heating! Windows too small and needing more electric light!)

        5/ Many of the materials and devices come from the globalized economy – China benefits, even more money and jobs flow out. National suppliers fold -see Spain and other European countries. There is no great renewable industry upsurge in jobs.

        Moreover, as the Depression deepens, the Chinese cut quality, leading to early failure of devices: is this is meant to be an advance?!!!

        So once again we come back to the irony of Green measures leading to further contraction in consumption and severe damage to other industries – creating further unemployment and hardship, reduced tax revenue and increased loan defaults…..

        • Don Stewart says:

          Dear Gail and Xabier

          For quite a long time I have made a point of listening to people who have a somewhat different viewpoint on life than I do. Sometimes you learn something that jolts you out of your ruts.

          So…let’s consider a few points:
          Jeremy Rifkin thinks that the only real job opportunities over the next 30 years are in the green-collar world of retrofitting us for a future with different energy sources which will not produce the energy surplus we have today. But in the Q and A, Rifkin remarks that he and his wife bought an old house to fix up and have spent far more than they would have spent on a new house. Majora Carter judges urban agriculture with the metric of ‘paying jobs created’…and finds it wanting. But Michael Reynolds puts up a picture which shows lots of urban roof space which could grow food. It is clear that Michael is thinking that more self-sufficiency is a good thing in and of itself. He gives examples of people living in Earth Ships who are so self-sufficient that working for money fades in significance. Janine Benyus explores the magical ways that Nature uses co-operation between species and within species to increase biological activity (life) in a given place. She shows that phosphorus is brought to trees by the soil food web, but that adding phosphate fertilizer destroys the soil food web by killing the mutually beneficial actions of the trees and the web…the trees take the fertilizer and don’t give the denizens of the food web any sugars. We might call this the inverse of Liebig’s Law…surplus nutrients or energy kill community. We may also recall Toby Hemenway’s hypothesis that the surplus energy in grain is responsible for increasing the human birth rate. Rob Hopkins shows pictures from the High Street in Northern Ireland where the G8 met. The shops are actually deserted, but the people organizing the meeting pasted pictures of happy bake shops and meat shops and greengrocers in the windows. The exercise is designed to hide from the G8 representatives, who are on their way to a 5 star resort, the end result of their policies. Could it be that G8 officials really see Mayberry as the ideal, or maybe they see 5 star resorts as the natural habitat for superior people such as themselves while the commoners all live carefree lives in Mayberry? Where does this leave the argument that ‘if we don’t burn the oil, the Chinese will get it’?

          We know from other sources that every attempt to use biological methods to produce food and clean water (e.g., gray and black water) require more human labor. A hog farmer in Missouri commented that he has to make friends with his 900 pound hogs and 650 pound sows, which are entirely pasture grazed, and that making friends requires face time. Confinement operations just use cattle prods. Albert Bates biological sewage system does require some maintenance, I am sure. In short, there is no shortage of work to be done.

          I will draw a few conclusions from all this. Feel free to draw your own:
          1. Surplus energy or nutrients are bad for us because they distort our behavior and destroy community.
          2. There is plenty of work to be done, but it doesn’t look like a job in a steel mill.
          3. There is zero chance of top down imposed solutions.
          4. There is a chance that people will be able to copy good examples when they are subjected to high pressures and provided with a way, however distasteful they may think it is, to deal with them. If they are boxed in and simply required to submit to the pressures, an explosion is likely.
          5. People who think in terms of the industrial model (e.g., Liebig’s Law) have a very hard time thinking in terms of biology.
          6. If there are any people still living in Mayberry, they would probably sell it to a strip mall.
          7. I am going to talk about putting valuable carbon into the soil…much less about keeping carbon out of the air.

          And finally, sometimes it is the things dropped casually that deserve a lot of thought. Michael Reynolds said his next project is ‘eliminating fire’. Is he serious? How does he plan to do that?

          Don Stewart

          • 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.
            Gail Tverberg says:

            I hope Michael Reynolds stops to figure out that we need cooked food to live, and we need heat to provide sharp edges, even on stone tools. Electricity (renewable or otherwise) will not drop from the sky, without a way to make metals. His plan to “eliminate fire” is totally and completely silly, unless he plans to eliminate people at the same time.

            I definitely agree with “3. There is zero chance of top down imposed solutions.”

        • 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.
          Gail Tverberg says:

          I think you are right that Green measures can often be counter-productive.

          In some sense, we need to start thinking poorer rather than richer. Green measures are based on the assumption that the economy is infinitely rich, and that the new measures can be used to hold down future costs. Also, that globalization is not an issue. The reality is very different. People are already poorer, and spending on these things will make them still poorer. The money goes elsewhere. Some of these things are not helpful at all if we lose electric power. They look good under on scenario only.

      • also the hundreds of old tyres per house.
        while running costs might be minimal, building costs look to be enormous, particularly the complexity of using water 4 times. That means all water has to have 4 separate systems for moving it around and that can only be done with plastic piping…I didn’t think pipework was mentioned at all, but I could have missed it. Also water needs pumps or gravity, this system needs at least 3 pumps.
        Glass is another fantasy, one of the biggest heat consumers of all
        Earth ships are for the already-wealthy, not for the masses. One is tempted to think of them in the context of medeival castles and the hovels that surrounded them and supported them

        • Don Stewart says:

          Dear End of More and Gail
          You guys are making this a lot more complicated than it is. Did you see the photograph of the enormous dump with used tires? Did you see the photographs of the cans and bottles at the dump? The man is using mostly trash. His houses are not for the wealthy but for the frugal who want to put in some sweat equity and have a house with no debt.

          They are not as cheap as some other options, which are frequently recommended and described at Permaculture sites. But they are more luxurious and they have better control of temperature and they can grow food inside them. They are also very simple. He tells the story of some people in West Africa who were building a community building, which was going to have 6 or 8 nodes to it. He showed them how to build 2. They built the rest completely on their own.

          As for sewage, the principles are very simple. For black water, you need an anerobic phase and an aerobic phase. You can do it very cheaply, as Albert Bates does, or you can do it elegantly, as the Institute does it. If you are in Dutchess County, NY, and you don’t want to get run out of the state,. you do it elegantly. If you are in Hohenwald, TN, you do it however the hell you want to. That is the reason that The Farm was located in Hohenwald. For graywater, the process is considerably simpler and yields a lot of phosphates so long as people wash their hair with shampoo.

          I have seen handmade houses in my county which cost less than a thousand dollars. They are, by the letter of the law, illegal. So far, our county officials have considered them ‘agricultural outbuildings’ and people are advised not to live in them. Some of them are very handsome, others plain. Depends on the artistic sensibilities of the builders. None involve mortgages.

          The neighboring county drives away inexpensive housing. Reynolds has been driven away from several potential homesites. The authorities want houses which cost hundreds of thousands of dollars–not handmade houses.

          And as for the pipes and glass. They are abundant and cheap. Someday, they may be unavailable. But it is an exercise in stupidity to deny yourself the use of pipes and glass today. I have said that many times, and I don’t know how else to say it. Get real. This is not about sleeping on a bed of nails.

          It’s more like Thoreau at Walden. He gratefully harvested trash to use, such as surplus railroad supply boxes.

          Don Stewart

          • 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.
            Gail Tverberg says:

            There are two directions we can go–toward sustainable, and away from sustainable. In my view, these homes are a step away from being sustainable. They are getting people used to having the availability of more energy products, and quite possibly larger homes, than they had previously. They are a step toward more expensive imported energy products. They are a step toward more hierarchical behavior–a greater share of income going to financiers, solar panel importers, and operators of high tech equipment needed to build these homes, and less income going to local people building homes with only local materials. They are a step away from sustainability, because the windows in particular likely cannot be replaced. They also look poor from a cross ventilation perspective.

            • Don Stewart says:

              Gail
              I will only respond to two points. And also note that I have never spent a night in one of these, so have only the stories of the enthusiastic supporters to rely on.

              They are not designed for debt. They are designed to be built with sweat equity from plans on land you own. The designer abhors debt. If you haven’t got the money to buy the materials, then I imagine he would counsel you to work and save until you have the money. You will note in the sidebar of some of the articles that they are raising money so that the people in Malawi can finish the community center he is helping them start. They need 60,000 dollars for materials, which has now been contributed by supporters. If you compare that figure with the cost of a community center in the US, it is peanuts.

              As to the cross ventiliation. The results speak for themselves. If you look at the interior temperature, it is very stable despite very wide swings in the exterior temperature. The plants in the greenhouse part of the house play a key role in keeping the house comfortable. There are PVC pipes in the floor which help the air circulate. The glass which permits solar energy into the greenhouse both assists in the growing of food and is also an element in keeping the temperature balanced. Without glass, I don’t think these houses could be built. You’d be back to something more like caves if you wanted a stable temperature. Another alternative is a roof with no walls and maybe the concrete floor referred to below.

              Finally, whether the house fits the cultural and climate needs of Haiti is something I don’t know. I imagine a closed house in Haiti (as opposed to an open walled shelter) would be very hot. This should be a lot cooler. I also don’t know how many people in Haiti are too poor to afford this. The Mountains Beyond Mountains doctor was just trying to get more concrete floors as a health measure. As the designer says, the deteriorating conditions in the ‘first world’ countries give something like this a market in the OECD countries which might not of have been there a decade ago.

              Don Stewart

            • Don Stewart says:

              Gail
              One more observation about the Haiti house. I am not sure it needs any solar panels at all. The water system seems to run entirely by gravity flow, including the exit to the gray and blackwater cleaning systems. If you don’t want to watch TV, or cook with an electric stove, why do you need electricity? For emergency lighting you get a hand-cranked flashlight.

              Maybe you cook outside on one of the new generation of super-efficient stoves. Or maybe you live mostly on street food plus your fresh fruits and veggies.

              But as I reread what you said, you seem to be saying that no society anywhere, no matter how poor, should move further in the direction of ‘development’. I think you will have trouble with that message.

              Don Stewart

            • 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.
              Gail Tverberg says:

              I think I am coming from a different place than a lot of people are.

              The “standard” view is that we are mitigating a slow decline in fossil fuels over a very long period (more than 40 years), and that things will more or less hold together during that time. People (such as the DeGrowth group) seem to believe that we can/should add further fossil fuel use to the poorer countries.

              I see the scenario ahead is that the world as a whole will need to transition off fossil fuels quickly, including the poor countries, essentially because of political and financial collapses. To me, there is no point in making the poor countries more dependent on fossil fuels. We should be learning skills from the poor countries, not the other way around.

              We should not be assuming any more than the absolute minimum in our planning, in terms of transportation, food from elsewhere, and electricity. If it turns out that we are lucky, and things are better than I am suggesting for a while, that is OK. But planning to make two transitions seems like a problem.

            • Don Stewart says:

              Gail
              I think there are some serious issues with what you are saying. Perhaps you can solve them, but they seem pretty daunting to me.

              Should the Omega Institute have been permitted or prohibited from building the sewage treatment plant that they built? As near as I can tell, it is a big improvement on what was there before. Less fossil fuels, less pollution, less reliant on complex systems, etc. However, it does use some very modern technology in terms of the building which surrounds the biological treatment pools.

              If you say that Omega should, indeed, be permitted to build such a system, can you prohibit a Bahama Island from building such a system (as they have, indeed, done)? What if Disney owns a piece of a Bahama island where boats dock and tourists are entertained? Are black people required to use privies while white people are entitled to flush toilets, albeit ‘eco-friendly’ flush toilets?

              The current thinking seems to be to target certain ‘bad materials’ such as coal and maybe cement plants or certain agricultural practices such as feedlots (Clinton mentioned methane from ‘certain types of agricultural operations’). But sometimes the ‘bad actors’ change their practices. If the price of methane gets high enough, the feedlots put in methane digesters and provide us with fuel. How do you propose to make all these decisions on a global scale?

              If a Hatian puts up a solar panel and starts cooking with electricity, rather than charcoal or just dry wood, most people would consider that a gain for the environment. How do you decide who gets to do it and who can’t do it?

              Consider the case of glass. There is no doubt that it takes energy to get that sand hot. But look at these houses which can usually be built by young people without benefit of mortgage. Most all of them use glass. Should they be forced to build an expensive brick house and take out a large mortgage?

              http://tcpermaculture.com/site/
              Click on either picture of houses.

              You mention financial collapse. Some countries may choose to try to break the bond between financial collapse and collapse of the real economy. How do you persuade all the countries in the world to adopt the same strategy for dealing with financial debacles?

              If I were King, I would severely restrict debt. If all those young people can build houses out of junk or natural materials plus whatever they need to purchase in the way of glass and PVC pipe, without going into debt, Power to Them. I think this would cut the financial debacle out of the picture. The Rich would simply find out that they aren’t nearly as rich as they think they are. Similarly I would drastically cut government entitlements so that everyone gets a clear view of reality and can behave accordingly. If that means trying to heal ancient family fueds so that the family can help each other…I guess the family members need to get about that. Does that mean that the poor, the halt, and the lame will necessarily suffer? I don’t know. We know that the Neanderthals took care of their injured, without benefit of governments.

              Don Stewart

            • 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.
              Gail Tverberg says:

              I am sorry, I am not up to investigating all of these things. It may be you are right.

  19. ravinathan – After much inner work, and now in my early 50's, I have gifted myself with a sabbatical from a corporate career to develop a vocation that will allow me to better integrate soul and role. According to the philosopher Ken Wilber, the culture of a country or society serves to expedite the development of a person born into that culture up to its average developmental level or center of gravity. However once a person reaches that stage, the culture then resists her growth into higher levels of development that lie beyond its orbit. Born into the traditional (Spiral Dynamics: Blue and Kegan: Socialized Mind) culture of India and having emigrated to the modern (Spiral Dynamics: Orange; Kegan: Self Authoring) culture of corporate America and the West, I have become increasingly dissatisfied with my own deeply conditioned mind and drawn to question the beliefs and assumptions that govern my stance and action in the world. After the spiritual seeking of many decades and countless days on the meditation cushion noticing repetitive thoughts that invoked, anger, fear and stress, I have been very fortunate in finding "The Work of Byron Katie." The Work is a method of inquiry that uses four questions and turnarounds to investigate any stressful belief. Often compared to Cognitive Behavioral Therapy, The Work is a simple, yet effective method of self help that can be used at a very fundamental level to alleviate stress and with practice serves as a profoundly effective technique to realize one's ever present condition as consciousness in every moment. It's simplicity is deceptive; it's potency is transformative. The Work works at light speed. In the context of The Work, I can understand what Oliver Wendell Holmes meant when he said: “I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.” The Work fits that description. With The Work, I have come to see the gift in a stressful emotion; those 3 AM fearful awakenings, the flash of anger during a business meeting or the cringing shame of hearing a criticism from my wife. I view them all now as temple bells calling me to inquiry; Durga's kiss awakening me to Spirit - my ever present condition - that I can rest deeply in, any time I choose, even as I lie awake at 3 AM! Who knew that a stressful emotion can be looked forward to, for it shows me what's left, the remaining stress inducing beliefs that lie unexamined in the underworld of my consciousness. The Work can literally blow your mind and I invite you to it. Best of all it costs nothing, is easy to learn and the information you need to practice can be downloaded from the website. For those who need a trained facilitator to learn inquiry, there is even a free helpline, staffed by trained volunteers that can be accessed for the price of a phone call. No guru, no complex theory or esoteric practice, just four questions, so respectful of our free will that they don't even ask to be answered. The purpose of this blog then is to: Serve as an honest record of my experience of building a vocation where my deep gladness meets the world's deep need. To be of service to anyone who is contemplating or planning to make such a transition while benefiting from the perspective of those readers who choose to share their perspective here. To enable me to "witness" myself through my own words. As a means to make object what is subject - to 'have', instead of 'being had' by what I have assumed to be true without investigation. To develop my written communication skills so critical to my ability to connect with others from the heart. To discuss topics that interest me deeply, in a way that is lucid, provides an unique perspective and is interesting and meaningful to the reader.
    ravinathan says:

    I would like to recommend this 2012 interview with Deborah Rogers on the shale hype. It is not often that I am able to sit through a full length interview but I was impressed with the quality of the questions and the depth of the answers.
    http://m.youtube.com/watch?autoplay=1&v=nxG4CpNSZTQ&desktop_uri=%252Fwatch%253Fv%253DnxG4CpNSZTQ%2526autoplay%253D1

    • 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.
      Gail Tverberg says:

      Thanks! She points out that after the change in reserve requirements, shale gas reserves no longer had to be audited. In fact, some companies immediately showed much higher numbers. The higher reserves gave the companies more reserves to spread their finding and development costs over.

      She also points out that the foreign companies coming in are interested only in the export market, because that way they can get the price up to a point which is in line with their costs. The oil majors can afford to wait out the time needed to do this.

      She also talks about air pollution issues associated with shale gas drilling.

    • To ravinathan and ERT: we ran out of ‘reply’ buttons above for the good discussion of Yuan floating and reserve currencies. I am very appreciative of both of your comments; you clearly knows this field well. And I agree that the USD will probably remain the basic reserve currency until it becomes very bedraggled — much worse than currently.
      One question I would like to ask, however, is whether the Euro or the Yen are playing effective roles for their owners as ‘quasi’? reserve currencies. Does their use convey similar advantages to their owners? If so, it would appear that the Chinese might be tempted to ‘jigger the books’ on this — they already treat balance sheets as ‘fill in the blank’ monthly operations that may or may not accord with actual financial conditions.
      I would be interested in your views.
      Cordially, Chris Johnson

      • Ert says:

        @Chris

        Unfortunately my experience with this field is very, very limited to grasp all he aspects.

        From all available numbers, I see that China is robust. Growth, consumption, energy production, export, etc. pp. Debt levels are low when compared to OECD and the US. Bank have high reserve rations when compared to the US and Europe. Even if there is faulty investment in the housing sector – it is financed quite solid with lots of own capital of private people. And if something goes bust? China has a lot of cash to bail their banks out – much more than the US and EU, which are already out of ammunition. But I see China is heavily affected by the limits to growth… and that will be their end – with all the others.

        The USD is currently the big advantage of the US – but it is only as good as much it is accepted by others. If China alone would start to spend their 2+ Trillion USD reserves to buy up international assets – prices in USD would rise sharply (means: The USD value would decline rapidly). So what’s China gonna do or buy with their 2+ Trillion USD in the future? There are to much aspects for me to consider.

        Regarding your question of EUR and Yen: I earn EUR – for me it is THE currency, as I have to pay taxes and the like in EUR and not in USD. Holding USD for me would be speculation in the value of my purchasing power. The EUR zone is quite big and I can pay in that big zone directly with that currency – without exchange rates and risks. Also the EUR zone produces a lot of goods that are exported, so the EUR has a good external value as some people need EUR to buy stuff from this zone.

        Therefore I see the Yen as much smaller vehicle. The Japanese economy is smaller and we all can’t really price the risk of Fukushima (not that such a think can not any minute happen in the US or Europe). But As I know, the Yen does not play a big role as international currency.

        Hope that you can get something out of my thoughts.

        • @ERT

          Thanks for your analysis, which is slightly less scornful than what I would write about the most mendacious denizens of East Asia. But neither they nor the EU nor any other economy can be blamed for wanting to modify the current arrangements. The headlines yesterday talked of China and EU establishing a swap arrangement that doesn’t require USD involvement. That’s probably a pretty smart thing to do in principle, but I would be very concerned about how its is actually used. The EU might want to hire some Sicilian consultants…
          Cheers, Chris

  20. ravinathan – After much inner work, and now in my early 50's, I have gifted myself with a sabbatical from a corporate career to develop a vocation that will allow me to better integrate soul and role. According to the philosopher Ken Wilber, the culture of a country or society serves to expedite the development of a person born into that culture up to its average developmental level or center of gravity. However once a person reaches that stage, the culture then resists her growth into higher levels of development that lie beyond its orbit. Born into the traditional (Spiral Dynamics: Blue and Kegan: Socialized Mind) culture of India and having emigrated to the modern (Spiral Dynamics: Orange; Kegan: Self Authoring) culture of corporate America and the West, I have become increasingly dissatisfied with my own deeply conditioned mind and drawn to question the beliefs and assumptions that govern my stance and action in the world. After the spiritual seeking of many decades and countless days on the meditation cushion noticing repetitive thoughts that invoked, anger, fear and stress, I have been very fortunate in finding "The Work of Byron Katie." The Work is a method of inquiry that uses four questions and turnarounds to investigate any stressful belief. Often compared to Cognitive Behavioral Therapy, The Work is a simple, yet effective method of self help that can be used at a very fundamental level to alleviate stress and with practice serves as a profoundly effective technique to realize one's ever present condition as consciousness in every moment. It's simplicity is deceptive; it's potency is transformative. The Work works at light speed. In the context of The Work, I can understand what Oliver Wendell Holmes meant when he said: “I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.” The Work fits that description. With The Work, I have come to see the gift in a stressful emotion; those 3 AM fearful awakenings, the flash of anger during a business meeting or the cringing shame of hearing a criticism from my wife. I view them all now as temple bells calling me to inquiry; Durga's kiss awakening me to Spirit - my ever present condition - that I can rest deeply in, any time I choose, even as I lie awake at 3 AM! Who knew that a stressful emotion can be looked forward to, for it shows me what's left, the remaining stress inducing beliefs that lie unexamined in the underworld of my consciousness. The Work can literally blow your mind and I invite you to it. Best of all it costs nothing, is easy to learn and the information you need to practice can be downloaded from the website. For those who need a trained facilitator to learn inquiry, there is even a free helpline, staffed by trained volunteers that can be accessed for the price of a phone call. No guru, no complex theory or esoteric practice, just four questions, so respectful of our free will that they don't even ask to be answered. The purpose of this blog then is to: Serve as an honest record of my experience of building a vocation where my deep gladness meets the world's deep need. To be of service to anyone who is contemplating or planning to make such a transition while benefiting from the perspective of those readers who choose to share their perspective here. To enable me to "witness" myself through my own words. As a means to make object what is subject - to 'have', instead of 'being had' by what I have assumed to be true without investigation. To develop my written communication skills so critical to my ability to connect with others from the heart. To discuss topics that interest me deeply, in a way that is lucid, provides an unique perspective and is interesting and meaningful to the reader.
    ravinathan says:

    It is my opinion that the Jubilee is already ongoing in so many ways. When the Fed took AIG’s off balance sheet assets onto its balance sheet it was a Jubilee for AIG. When thye nationalized Freddie and Fannie, it was a humongous debt forgiveness for these two companies which kept the creditors whole. In turn, the federal govt. enjoys a Jubilee when the Federal Reserve buys its debt. This is what sustains the game.
    To keep things even handed the government proposed writing down individual mortgages of home owners. Some benefited although the impact was not evenly distributed.
    The Federal Reserve’s balance sheet is infinitely elastic. It can grow and it can shrink if the assetsx that it holds, which are essentially debt securities ineed to be written off. We are unlikely to see a Jubilee as in biblical times when all debts were written off periodically. Instead, it will be selectively applied at key pressure points, such as too-big- to-fail banks. I would predict that we will eventually see a jubilee for student debt that already exceeds a trillion dollars and for the mortgage debt of the FHA which are also seeing high default rates. Bernanke has said the the is not worried by the student debt bubble since the debt is mostly owned by the federal government. So we have this potentially infinite loop where the govt absorbs failed private debt and the federal reserve monetizes govt. debt. How convenient!

    • Ed – I am interested in energy issues.
      tmsr says:

      So basically Jubilee for the rich.

    • 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.
      Gail Tverberg says:

      Your comments about debt forgiveness already going on is an interesting perspective.

      One question that arises is, “What happens on the next default cycle?” You mention the student debt. The government is already deeply indebted. Forgiveness of student debt would make it worse (unless it is monetized).

      There are a lot of derivatives outstanding. It would seem like quick interest rate swings could lead to defaults here as well. Quite a bit of AIG’s problems were related to derivatives. We need to go through another round of forgiveness. Aren’t there limits to all of this? Isn’t there a point sometime, when someone says, No more debts?” Doesn’t someone at some point say, “No more bailouts?”

      • Scott Walker – Oregon
        Scott says:

        Hello, One would think so, no more bail outs. but the Fed and World Central Banks must keep money flowing or the bills of credit and bills of laden stop running.

        I believe the earlier post you linked to today is true, this will likely end in hyperinflation. But the timeline is uncertain on that, but it seems to be looming. 1-3 years?

        Scott

      • In the meantime, toll-way operators in Australia are kicking the debt can down the motorway:

        Refinancing of the debt portfolio is actively managed and funds are secured early, from diverse sources. The Transurban Group has been successful in sourcing funding during challenging credit markets, with over A$1.549 billion financed in the 12 months ending in June 2013. Debt maturities are spread over time to reduce refinance risk. As at 30 June 2013, the Transurban Group’s senior corporate debt was rated A- (stable) (S&P and Fitch) and Baal (stable) (Moody’s).
        http://news.iguana2.com/transurban/ASX/TCL/395102

        Here are some more details:

        12/2/2013 No debt repayment plan for Sydney’s toll-ways
        http://crudeoilpeak.info/no-debt-repayment-plan-for-sydney%e2%80%99s-toll-ways

        Government spin ensures the next generation of road tunnels is built:

        The financial case for the east-west link hinges on a prediction
        that toll road use will jump over the next 30 years because of rising
        wealth and shrinking petrol and CBD parking price rises.
        http://www.theage.com.au/victoria/secret-case-for-link-revealed-20131001-2ur5r.html

        • 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.
          Gail Tverberg says:

          Thanks! Our newspapers recently have had a number of stories about a possible second major airport for the Atlanta area. The airport would represent an expansion of an existing airport out on the suburbs. (There are a number of these, that mostly serve private planes and corporate jets.)

          We needs a second airport like a hole in the head. There would be some up-front expense for the people planning the airport, which I am sure would be financed by debt. Delta is fighting it–it would be a way for a local carrier to undercut its fares, for people flying to Atlanta for a convention or vacation.

          Actually, the huge International terminal added recently is a lot bigger boondoggle. It is hard to see that it will ever be used to capacity.

      • ravinathan – After much inner work, and now in my early 50's, I have gifted myself with a sabbatical from a corporate career to develop a vocation that will allow me to better integrate soul and role. According to the philosopher Ken Wilber, the culture of a country or society serves to expedite the development of a person born into that culture up to its average developmental level or center of gravity. However once a person reaches that stage, the culture then resists her growth into higher levels of development that lie beyond its orbit. Born into the traditional (Spiral Dynamics: Blue and Kegan: Socialized Mind) culture of India and having emigrated to the modern (Spiral Dynamics: Orange; Kegan: Self Authoring) culture of corporate America and the West, I have become increasingly dissatisfied with my own deeply conditioned mind and drawn to question the beliefs and assumptions that govern my stance and action in the world. After the spiritual seeking of many decades and countless days on the meditation cushion noticing repetitive thoughts that invoked, anger, fear and stress, I have been very fortunate in finding "The Work of Byron Katie." The Work is a method of inquiry that uses four questions and turnarounds to investigate any stressful belief. Often compared to Cognitive Behavioral Therapy, The Work is a simple, yet effective method of self help that can be used at a very fundamental level to alleviate stress and with practice serves as a profoundly effective technique to realize one's ever present condition as consciousness in every moment. It's simplicity is deceptive; it's potency is transformative. The Work works at light speed. In the context of The Work, I can understand what Oliver Wendell Holmes meant when he said: “I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.” The Work fits that description. With The Work, I have come to see the gift in a stressful emotion; those 3 AM fearful awakenings, the flash of anger during a business meeting or the cringing shame of hearing a criticism from my wife. I view them all now as temple bells calling me to inquiry; Durga's kiss awakening me to Spirit - my ever present condition - that I can rest deeply in, any time I choose, even as I lie awake at 3 AM! Who knew that a stressful emotion can be looked forward to, for it shows me what's left, the remaining stress inducing beliefs that lie unexamined in the underworld of my consciousness. The Work can literally blow your mind and I invite you to it. Best of all it costs nothing, is easy to learn and the information you need to practice can be downloaded from the website. For those who need a trained facilitator to learn inquiry, there is even a free helpline, staffed by trained volunteers that can be accessed for the price of a phone call. No guru, no complex theory or esoteric practice, just four questions, so respectful of our free will that they don't even ask to be answered. The purpose of this blog then is to: Serve as an honest record of my experience of building a vocation where my deep gladness meets the world's deep need. To be of service to anyone who is contemplating or planning to make such a transition while benefiting from the perspective of those readers who choose to share their perspective here. To enable me to "witness" myself through my own words. As a means to make object what is subject - to 'have', instead of 'being had' by what I have assumed to be true without investigation. To develop my written communication skills so critical to my ability to connect with others from the heart. To discuss topics that interest me deeply, in a way that is lucid, provides an unique perspective and is interesting and meaningful to the reader.
        ravinathan says:

        The US has the extraordinary privilege of its currency being a store of value outside the country. In my travels, I have often been surprised at how many people have some US dollars stashed away just in case. Estimates are that 60 percent of US currency circulates outside the country. As limits to growth continue to squeeze, it’s the periphery of nations that experience inflation and currency collapse. Paradoxically, this leads to a strengthening in the US dollar as capital flees the periphery seeking a safe haven. Isn’t that ironic? The closed loop of the govt. absorbing bad private debt while having its own debt monetized by the central bank can go on for a long time. Future attractions as the periphery crumbles: Fiscal Policy unleashed in the form of a huge jobs and infrastructure investment program in the US. Student debt forgiven. All of these steps will be lauded by the global financial markets as necessary for global recovery!!
        http://articles.baltimoresun.com/1993-03-14/news/1993073048_1_dollars-central-bank-paper-currency

        • 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.
          Gail Tverberg says:

          It seems like every time there is a crisis, we hear,”And because of the crisis, the dollar strengthened,” as more money saw a flight to “quality”. Everything headed to the bottom?

          • Scott Walker – Oregon
            Scott says:

            Yes, with all countries printing at the same time it is the ugliest house on the block which looses or should I say the dollar is the best ugly house on the block.

            Those Earth ship houses that Don was showing us were interesting, They kind of remind me of the old Adobe’s but better. If you live in an extreme climate they would do better than any of the modern homes in times of collapse as they moderate the temp inside without much need for heat or cooling.

            Unfortunately most of us here believe there will not be the money or perhaps the means to build enough of them except for a lucky few it seems. Especially if supply lines break down or inflation hits and things like windows, building materials food etc are priced out of reach for most.

            We are really watching a spectacle at the White House right now which is a sign of trouble, they finally realized they spent too much and borrowed too much money?

            I think in the hot climates a stone house would be a must without power and air conditioning but few will have them it seems.

            Scott

          • Scott Walker – Oregon
            Scott says:

            Hi Gail and everyone, Another subject I have been looking at this week is how the US Gov. still continues to expand expenditures to control far away lands. You know millions to Egypt last month and this one today. I imagine the UK is doing the same?

            Meanwhile we have no money for opening our closed government and parks.

            http://worldnews.nbcnews.com/_news/2013/10/12/20920291-as-us-ups-aid-to-perus-drug-battle-farmers-say-they-will-fight-to-defend-cocaine-source?lite

            Best Regards to all,

            Scott

          • Scott Walker – Oregon
            Scott says:

            Hello, This article about living on $5k per year was a top story tonight on MSNBC.

            http://inplainsight.nbcnews.com/_news/2013/10/13/20923154-living-on-5000-a-year-on-purpose-meet-americas-intentional-poor?lite

            I think some of us could do it – especially if on our own, alone, but perhaps my wife would not go along with this type of arrangement and especially kids these days, I do know some families that have home schooled and do not have TV’s etc. but that seems rare these days. It would be good if we could downsize like this, but easier said than done for most.

            Scott

            • Chris Harries – Tasmania
              Chris Harries says:

              Yesterday I fronted a debate on nuclear power at a film showing, and I argued the case for powering down our profligate energy consumption as a prior focus rather than use supply side issue as the primary policy focus. The protagonist speaker said “yes, I would agree, but people just won’t do that!”

              Much though I hate to say it, I think on that score he is correct. Society is going to desperately try to hang on to its comfort zone, and its not just those ruthless corporations, it’s us. We won’t let go easily. Many of my environmental colleagues have a romantic fixation of EVs, choosing to turn a blind eye to the negative climate impact. Whether it be Arctic oil, 5 km deep sub marine oil wells, landscapes plastered with wind turbines, nuclear power plants, garbage burning power plants, bio fuels diverted to keep jet aircraft flying….. almost everything we do points to points to us having to learn the hard way.

              This is not maliciousness or even selfishness on the part of the majority, it is simple denial of the reality that we live in a finite world and are already way, way over the tipping point.

              On the plus side there is a rapidly growing coterie of people who are trying to come to grips with this reality and this movement is snowballing, though in its very early days.

            • Scott Walker – Oregon
              Scott says:

              Hello, Yes Change will not come easily, even for me as we get older we get set in our ways and used to the things staying the same which they rarely do.

              Honestly, I am really going to miss some of the things we routinely buy now from around the world. And, in the future, they may be discontinued or too expensive to buy anymore and we will make substitutions and life will not be quite as nice.

              Well at least that is my view a slower collapse unless something big happens like war and that front seems to be calming just a bit. But now war has been replaced with civil unrest in many places around the world which I think will continue to be a problem and kind of a new reality.

              I hope Gail and some others are wrong about the coming sudden collapse as so far I see a slower one unfolding. Let us hope it will hang on for another Generation or so before major shut downs. But I imagine we would be at like 600 PPM on CO2 by then and much hotter. It will likely happen since we have the coal and other stuff to burn through after the light sweet crude is gone.

              Scott

            • Scott Walker – Oregon
              Scott says:

              Hello, Oh, by the way…. not a fan of nuclear, but we may have no choice on nuclear power, I still think we do not have anything better than the Thorium Reactors that I have read about that is if they can really be built like I read about, not sure yet on that but I think they could be.

              With those we could at least power up the existing grid without the warming of the CO2. I have said this before and I think we all agree no one is really a fan of nuclear, but what else do we have to make clean power without warming our planet?

              Scott

            • Chris Harries – Tasmania
              Chris Harries says:

              The issue in favour of nuclear power is energy density, being the only prospect for provision of high density energy that could replace the energy density of hydrocarbon energy. If we had to pick the better of two evils, I would now have to rank nuclear as less risky than burning coal. (That’s not to say that its risks are not significant.)

              The limitation of nuclear (and also that of solar and wind etc) is that our fixation on electrical energy does nothing to resolve all of the other multitudinous uses of hydrocarbons, everything from clothing to fertilisers, to flying of aircraft and all those industrial manufacturing and smelting processes that require carbon as their basis.

              Then there is the much more unsolvable problem of money. There’s not enough of it in the world to just close down all that hydrocarbon-burning infrastructure and build a brand new energy system to replace that can underpin industrial society as we know it. Energy transition doesn’t come easy. The world economy is already teetering.

        • Ert says:

          @ravinathan

          Interesting observation! I have recently read a similar post in another forum. The main line was that the periphery collapses first – before the center declines. Comparison where made with Rome and other (collapsed) civilizations and/or kingdoms.

          You can kind of see it in Europe: The periphery already collapses – high unemployment and no way out. But Germany seems currently unaffected (which is in certain aspects not quite true,,, but that is a bigger story).

          You mention the US and the $ domain. That may be true for the whole Americas (north & south) and some Asian and former Soviet regions. If China lets the Yuan float – there will certainly be a bigger shift and a weakening of the $.

          Therefore you may be on to something.

          • Let’s see if we have this right:
            If China floats the Yuan the BOC will lose control of the exchange rate. Losing control of the exchange rate will impact Beijing’s manipulation of trade and finance. Current opaque ponzi operations will be exposed and several minor empires may collapse.
            On the other hand, Premier Li Keqiang recently won a major victory against conservative (statist) forces in establishing Shanghai as some sort of (limited??) ‘Special Economic Zone’. The upcoming Party Congress meeting in November should provide more detail about their plans.

          • Ert says:

            @Chris

            I would not go so far as to let the Yuan float. But I would encourage use of “Cash” Yuan as a kind of shaddow currency in the grater asia – like the dollar does it. With the exchange-rate window a Yuan would be, considered from the purchasing power, as good as good as a USD.

          • ravinathan – After much inner work, and now in my early 50's, I have gifted myself with a sabbatical from a corporate career to develop a vocation that will allow me to better integrate soul and role. According to the philosopher Ken Wilber, the culture of a country or society serves to expedite the development of a person born into that culture up to its average developmental level or center of gravity. However once a person reaches that stage, the culture then resists her growth into higher levels of development that lie beyond its orbit. Born into the traditional (Spiral Dynamics: Blue and Kegan: Socialized Mind) culture of India and having emigrated to the modern (Spiral Dynamics: Orange; Kegan: Self Authoring) culture of corporate America and the West, I have become increasingly dissatisfied with my own deeply conditioned mind and drawn to question the beliefs and assumptions that govern my stance and action in the world. After the spiritual seeking of many decades and countless days on the meditation cushion noticing repetitive thoughts that invoked, anger, fear and stress, I have been very fortunate in finding "The Work of Byron Katie." The Work is a method of inquiry that uses four questions and turnarounds to investigate any stressful belief. Often compared to Cognitive Behavioral Therapy, The Work is a simple, yet effective method of self help that can be used at a very fundamental level to alleviate stress and with practice serves as a profoundly effective technique to realize one's ever present condition as consciousness in every moment. It's simplicity is deceptive; it's potency is transformative. The Work works at light speed. In the context of The Work, I can understand what Oliver Wendell Holmes meant when he said: “I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.” The Work fits that description. With The Work, I have come to see the gift in a stressful emotion; those 3 AM fearful awakenings, the flash of anger during a business meeting or the cringing shame of hearing a criticism from my wife. I view them all now as temple bells calling me to inquiry; Durga's kiss awakening me to Spirit - my ever present condition - that I can rest deeply in, any time I choose, even as I lie awake at 3 AM! Who knew that a stressful emotion can be looked forward to, for it shows me what's left, the remaining stress inducing beliefs that lie unexamined in the underworld of my consciousness. The Work can literally blow your mind and I invite you to it. Best of all it costs nothing, is easy to learn and the information you need to practice can be downloaded from the website. For those who need a trained facilitator to learn inquiry, there is even a free helpline, staffed by trained volunteers that can be accessed for the price of a phone call. No guru, no complex theory or esoteric practice, just four questions, so respectful of our free will that they don't even ask to be answered. The purpose of this blog then is to: Serve as an honest record of my experience of building a vocation where my deep gladness meets the world's deep need. To be of service to anyone who is contemplating or planning to make such a transition while benefiting from the perspective of those readers who choose to share their perspective here. To enable me to "witness" myself through my own words. As a means to make object what is subject - to 'have', instead of 'being had' by what I have assumed to be true without investigation. To develop my written communication skills so critical to my ability to connect with others from the heart. To discuss topics that interest me deeply, in a way that is lucid, provides an unique perspective and is interesting and meaningful to the reader.
            ravinathan says:

            The massive over investment in Chinese real estate (ghost cities) is a signal that the Chinese savers themselves do not see the yuan as a long term store of value. There are reports that the chinese 1 percent dispatch family overseas and purchase real estate abroad as a form of insurance. In fact, cities like New York and London have become real estate safe havens for the global rich. Dubai has become a similar destination for Middle East money. I really do not see any other currency displacing the US dollar at this time. Some observers have noted that the Federal Reserve, by opening its funding window to international banks, has actually helped prop up the euro. Zero Hedge has posted a number of articles about the mind boggling amounts that foreign banks have borrowed from the Fed using their US banking licenses to tap this source of funds. Money illusion dies hard, and Gail may be right that it will take a bout of global hyperinflation before the Fed stops printing. We seem to be quite far from that contingency given anemic economic growth and prevailing concerns about global deflation.
            Although Gail predicts that financial collapse will come first mitigating the CO2 build up, it may actually be close race. The oceans are rapidly acidifying and the die off is alarming. We may see an arctic free of ice Ina few years with all of its consequences. Climate impacts may end up triggering the economic collapse.

            • 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.
              Gail Tverberg says:

              There are really two parts to why climate change is less important. (a) If humans are soon to be mostly wiped out by indirect impacts of oil limits, then CO2 limits are not of huge import to humans–something else “took us out” first. The earth will recover fine. Whether or not humans do is a separate issue. (b) The models are not put together with correct CO2 assumptions. If the models work as climate scientist say they do, then climate change is less of an issue than it otherwise would be. This of course does not eliminate other impacts, like ocean acidification, and overfishing.

              This all points to a model which overestimates the effect of climate, and underestimates other limits of a finite world. We have been led to believe that climate change is the #1 problem, when in fact, it probably only deserves equal billing with a number of other problems. Oil limits are one of these, and it threatens to take out most of the human population sooner.

  21. Manuel says:

    In % terms, how much does electricity represent of the total energy used in the US? I mean, you have to use non-electricity sources for transportation and in industry. So I don’t think you can ‘electricize’ the entire US using only renewables. Some types of fuel are not electric.

    It seems impossible to generate electricity entirely from renewables, and much scale it to cover ALL of our energy uses besides electricity.

    Sorry for my English, I am not a native speaker.

    • Manuel says:

      much less possible to scale it to cover***

      Sorry, my mistake.

    • Ed – I am interested in energy issues.
      Edwin Pell says:

      Try googling “us energy supply by source” and pick the wikipedia page it includes this graph
      http://upload.wikimedia.org/wikipedia/commons/6/6c/LLNLUSEnergy2011.png

    • Ed – I am interested in energy issues.
      tmsr says:

      the short version electric is 40% of total

    • 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.
      Gail Tverberg says:

      There are actually different ways of converting electricity to be comparable to other fuels. The EIA and BP “gross up” electricity that is made directly from hydroelectric, nuclear, wind, solar PV, or geothermal by figuring how much fossil fuel would have needed to have been burned, to produce that amount of electricity. On that basis, the EIA indicates that 40% of US energy use in 2011 was from electricity.

      Of the electricity generated, fossil fuels generated 69% of electricity in 2012. This is down (a bit) from 71% in 2002. Nuclear is about 19% of the total. (This needs to be replaced–it is reaching the end of its lifetime.) Hydroelectric is about 7% of the total. “Other renewables” (including wind, solar PV, wood, waste, geothermal, etc.) are about 5% of total electricity in 2012.

      Renewables are hard to scale. Hydroelectric is pretty much “built out”. Wood scraps and sawdust are limited. It is possible to burn some waste for electricity. The fact that so much nuclear needs to be replaced with something in the next few years is a problem as well.

  22. Chris Harries – Tasmania
    Chris Harries says:

    Just like to thank Gail or yet another timely and clear presentation.

    I’m one of the many people in the world who were pressing the ‘peak oil’ button, gaining much traction and interest… and then…. the agenda virtually evaporated overnight…. the world is awash with new oil everybody was told. In a matter of months the term ‘peak oil’ became liability, an untruth. And so, in no time at all, the peak oil movement foundered on the rocks, its adherents dwindling.

    I think the term ‘peak oil’ itself has become the major liability because it invokes a simplistic, graspable notion of ‘peak’ then ‘decline’ as the resource got gobbled up. Not hard for anyone to imagine that. But it is time to move on.

    It’s taken a while to re-set the compass, for the oil predicament to be spelled out in understandable terms, marrying it to economics and immutable laws of physics and mathematics, and I have to hand it to Gail for communicating the depth of the problem with great clarity. So pleasing to see the debate on our oil problem become alive again, this time with a much better understanding of its true implications for our world.

    This article is one of there best and so timely.

    • Ert says:

      @Chris

      I personally mostly use the term “Peak ‘Cheap’ Oil” – then If price and economy, environment and EROEI would be irrelevant we may be far, far away from a real ‘physical’ peak.

      But I see, that most do not grasp the basic concepts of EROEI and finance and their connections with affordability and economy. And the environment is only relevant if it is before ones own doorstep.

      What many not see is that even the IEA production numbers are only the ‘raw’ output of oil & gas – but not the net value (raw – oil & gas expenditures that make the production possible). So everywhere you may look, the picture is clouded. The semi-informed people I seldom discuss with hanging their (false?) hopes on all those clouded issues – so It is really hard to discuss the core of these issues. And we may all discuss those issues here, because we (at least I) still have the (energy surplus) luxury to do so.

      In that context I always remember these lines from Meadows: “The World Bank director (most recently responsible for the global airline industry) has explained to me, the problem of peak oil is not discussed in his institution, it is simply taboo. Whoever will try to anyway, is fired or transferred. After all, Peak Oil destroys the belief in growth. You would have to change everything.”. Original Austrian source: http://www.format.at/articles/1222/525/329547/da

    • 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.
      Gail Tverberg says:

      Glad you like my article. I have been saying something like this all along. Needless to say, I don’t necessarily make myself popular with the peak oil crowd, because what I am saying is not the same as others are saying.

      This is an article I wrote back in April 2007 (before the great recession) saying some of the same things. Our World Is Finite: Is this a Problem?

  23. Gail you wrote: One of our biggest issues today is that we don’t have a way of getting oil prices back down again, without a drop in oil extraction.

    Once the discontinuity you mention occurs, the price of oil will drop and like you mention in so many words extraction of marginal sources will drop along with reduced exploration. That will probably be the beginning of the permanent descent from peak plateau. Should get really interesting once massive borrowing and (helicopter Ben) printing are off the table.
    I can hardly wait – yikes!

    • 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.
      Gail Tverberg says:

      Maybe someone else will have concocted a new idea. I am always amazed at how rules are changed, or new ways are found to try to kick the can down the road a little farther.

      But you are right, the situation doesn’t look good.

      • Ert says:

        What I do not understand is that the taxes on Energy products (Oil, Gas, etc.) in the US are not higher. Even in lower income eastern Europe countries, the taxes on gas are considerably higher than in the US.

        A slow but steady tax increase on energy products would promote energy savings and give people and industry time to adapt. An additional benefit would be that real price increases are dampened – when 60% of the price at the pump are taxes.

        Continuing the Oil & Energy game when prices are temporarily destroyed – and no one can afford higher ones will be interesting. You could tax exempt revenues from new energy explorations for a time, even lower the (low) environmental standards in the US and elsewhere…. but you can’t change the universal TANSTAAFL law as defined by R. A. Heinlein.

        • 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.
          Gail Tverberg says:

          Taxes can be distributed in various ways. Our government taxes oil as it is extracted from the ground, as most governments do.

          We do have some taxes on oil at the pump as well. If the taxes are higher, it decreases use in the US, but does not necessarily reduce world oil usage. Basically, it allows other potential users, like China and India to use it. This rather strange phenomenon applies when production of oil is constrained–production is pretty much as high as it can go, regardless of price.

          Have you read my post, Climate Change: The Standard Fixes Don’t Work?

          • Ert says:

            @Gail

            Thanks for the link – didn’t knew that one since I follow you only from the beginning of 2013. Your insight’s are truly deep and the user comments here are also great – so it requires already a lot my time to follow your new posts.

            I see your point, but think in different directions. We currently see all that affordable energy will be a problem within at least the next 20 years – as we can’t exclude a technological jump/singularity in the future. But every country or society that will become more energy efficient and self reliant will have big competitiv advantages in the future if it can run on less energy and no singularity or other miracle will appear.

            It is clear to me that someone else will take the seat in the plane or burn the liter gas I saved by biking. But that does not count for me – if everyone thought that way, we would never start to think and do differently. At least that is what keeps my hope and motivation up.

            Thanks for all the time and though you put in this great blog and all of your comments!

  24. Graeme says:

    Gail, have you read this report by David Korowicz?

    http://www.feasta.org/wp-content/uploads/2012/06/Trade-Off1.pdf

    It’s about how systemic collapse of the global economy could occur very rapidly if one or more key “hubs” of the system (such as finance) was shifted outside of its normal parameters. And that would in turn affect all of the other hubs such as energy, and lead to a self sustaining negative feedback loop which would bring the system down very rapidly.

    In essence it’s similar to the sort of argument you are making.

    • 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.
      Gail Tverberg says:

      Thanks for reminding me of it. I should go back and look at it again. I looked at it before, but looking at it again wouldn’t hurt.

      • Andy
        Andy says:

        David Korowicz has just released a follow up, scary scenario. I think he imagines people will just act like stunned mullets while all this is going down. No doubt it is possible, but I don’t think it is probable. Though his intention could be to alert people to the dangers of complacency, and start contingency planning.
        http://www.feasta.org/2013/07/19/catastrophic-shocks-in-complex-socio-economic-systems-a-pandemic-perspective/

        • 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.
          Gail Tverberg says:

          I think I saw that not too long ago. It wouldn’t hurt to take a look again. I don’t see a pandemic as our big risk. I see loss of banks, or just loss of credit availability as our first risk. Ultimately government is likely to change dramatically–the federal government become much weaker, or even disappear altogether. There is the possibility of some very odd leader coming along, and convincing folks that he can solve all problems.

          • Scott Walker – Oregon
            Scott says:

            Hello, Since most of us are watching the situation in Egypt – here is a recent article tonight. Resource shortages or religion differences, perhaps a bit of both.

            http://www.oregonlive.com/newsflash/index.ssf/story/egypt-51-killed-in-new-bout-of/33376d4d4850411a9c6004b527681647

            Scott

            • From my website:

              6/7/2013
              Egypt’s future crude oil import requirements for 3 population scenarios
              http://crudeoilpeak.info/egypts-future-crude-oil-import-requirements-for-3-population-scenarios

            • 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.
              Gail Tverberg says:

              Thanks for the link to your post about Egypt. There are two questions with respect to Egypt’s oil imports (a) How will the world come up with the extra oil to export? and (b) How will Egypt really pay for it?

            • Some OPEC countries will have to supply oil to Egypt at discount prices.They need stability in the region. It has already happened:

              Kuwait’s Arabic-language al-Rai newspaper quoted oil sources as saying that an oil tanker carrying between 90,000 and 100,000 tons of diesel that happened to be travelling through the Suez Canal was diverted to Egypt. A second tanker with 1.1 million barrels of crude was ordered to sail towards Egypt, it said.
              http://www.reuters.com/article/2013/07/14/us-egypt-politics-kuwait-aid-idUSBRE96D05L20130714

              Needless to say whatever oil or petroleum products flow to Egypt, this will not be available at bowsers in Asia, for example.

            • 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.
              Gail Tverberg says:

              Interesting dynamic. And of course, we have the Iran and the Libya situations as well. And it is not clear that Saudi Arabia has all that much excess output either.

            • Scott Walker – Oregon
              Scott says:

              Hello Matt, I see the problem in Egypt and Yemen etc. Thanks, I bookmarked your website and we are fortunate to have authors such as you and some others that write on this site to talk to and to get your thoughts on these dire matters for sure.

              I like your site already and am going to do some more reading there.

              I also think many of us agree the collapse is already unfolding in certain parts of the world more profoundly while things remain somewhat normal in other parts of the world.

              Good to read your comments.

              Scott

            • 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.
              Gail Tverberg says:

              I think it is pretty easy to predict that we will continue to see at least intermittent violence going forward.

            • Scott Walker – Oregon
              Scott says:

              Hello Gail and everyone reading this, it does look like Egypt is the first country to experience a shortfall of exports and cash crisis resulting from the shortage of oil and gas to export.

              I am keeping an eye on this and perhaps we will see this spread to other places unfortunately, Yemen looks tough too with their shortfalls in exports.

              Scott

  25. Ed – I am interested in energy issues.
    Edwin Pell says:

    The current thinking about sustainable is equal to efficient. To actually be sustainable we would have to talk about controlling the size of the population. We are all in favor of efficiency. Henry Ford was in favor of efficiency. All the old time time motion study experts of capitalism were in favor of efficiency. It may hold off collapse for an extra ten or twenty years but population will always swamp efficiency, “sustainability”, permaculture, etc..

    • Don Stewart says:

      Dear Edwin
      Before you make sweeping indictments of Permaculture, perhaps you should watch, from beginning to end, Toby Hemenway’s talk at Duke on How to Save Humanity, But Not Civilization.

      Don Stewart

      • tim – Florida, USA
        timl2k11 says:

        Don, I watched the video. Very informative, but, I think, quite irrelevant on a planet with 7 billion people. How much of a population can permaculture support? I agree agriculture is a disaster, and horticulture is sustainable and permaculture is regenerative, but I don’t see how we get there until we have a massive population die-off. There are too many people (and their “needs”) “in the way”, so to speak, for permaculture. Once we have a great die-off, yes, permaculture, not agriculture, and then horticulture. From that talk, sounds like the implementation of Agriculture was humankind’s Great Mistake (sounds like a good book title).
        In other words, yes do permaculture where possible, but so much land is taken up by agricultural civilization right now it’s not going to have much of an impact.

        • Don Stewart says:

          Dear timl2k11

          At the conclusion of Toby’s talk, he was asked about the prospects for human population when all the fossil fuels are gone. He said ‘perhaps somewhere between 500 million and 2 billion’. David Holmgren recently said that biological agriculture can probably feed 8 or 9 billion people if it is present along with some fossil fuels. When the fossil fuels are gone, he also came up with numbers in about the same ballpark as Toby.

          Most of the fossil energy used in food today is not used on the farm. It is used in transporting and storing and manufacturing and packaging and retailing and storing in fridges and cooking on stoves. Adopting biological agriculture does a lot of very good things in terms of restoring land to fertility and restoring the ecosystem, but it doesn’t do anything, directly, about the functions which are performed after the food leaves the farm.

          In my opinion, there are four productive avenues for food production. One is to garden everywhere–particularly with perishables. Big farms focus on things such as grass pastures and the production of non-perishables. The second avenue is simplifying the distribution system with information networks to directly connect farmers and consumers. The third avenue is to simplify food storage and preparation through the use of things like fermentation. The fourth avenue, as we get to the point where fossil fuels are really scarce, is for people to repopulate the rural landscape to get closer to food.

          I have been watching the Omega Institute proceedings this morning. Majora Carter talked about her initiatives. She remarked that growing food in cities is impractical. ‘It doesn’t create jobs’. She was followed by Michael Reynolds, who builds Earth Ships. Michael is everything Majora is not. Majora is elegant and a MacArthur winner. Michael is dissheveled and builds houses out of junk and the houses are self-contained. There is no external heating or cooling, they grow a lot of food inside them, and they use both gray water and black water to fertilize their gardens.

          Michael has been persecuted by his native New Mexico for his buildings. He joked that local governments ‘understand AK-47s’. He said seriously that ‘Desperation is an arrow that penetrates dogma’. As the current system collapses, so will the opposition of local, state, and federal governments to the doing of eminently sensible things. (I’m not so sure about that…back to the 400 families that control everything).

          The first speaker, Jeremy Rifkin, delivers a complex story but one part of it is that the Second Industrial Revolution is on life support, and all the smart people (except the oil companies and big utilities) understand that. Meanwhile, automation and communications are eliminating jobs. So jobs and the way we do things are both endangered species. Majora Carter harks back to Martin Luther King and ‘impatience to get our share of the wealth’. Reynolds message is that life can be very good if you build yourself an Earth Ship and largely disconnect from the economy. I would say that David Holmgren is in the same camp as Reynolds, relative to ‘largely disconnecting from the economy’.

          Of course, Permaculture is founded in Anarchy, so there is no Apostles’ Creed and the variety of opinions is as wide as their are practioners. I don’t think Reynolds calls himself a Permaculturist, but you can see the similarities.

          Concluding with the population question. Toby thinks the abundance of grains in the diet led to the beginnings of the population explosion. So part of Toby’s solution is to simply get grains out of the diet. He shares that opinion with the Paleo people. David Perlmutter’s book Grain Brain is a multi-faceted attack on grains and sugars. So you see lots of different threads connecting these people.

          Don Stewart

          • Don,
            Thanks for the summary.
            Jody

          • tim – Florida, USA
            timl2k11 says:

            500 million to 2 billion without fossil fuels and sustainable? I’m just not seeing it. There seems to be a disconnect somewhere in that conclusion. Before widespread agriculture the world population was less than ten million people ( http://web.archive.org/web/20110102201303/http://www.census.gov/ipc/www/worldhis.html ). How does the earth support 10x, let alone 100x that amount of humans sustainably? I’m just not seeing it.

            • Don Stewart says:

              Dear timl2k11

              I haven’t peered into the minds of either Toby or David to see exactly what they are thinking. But lets try to put some perspective on the question. It is a problem similar to that faced by the IPCC. You have to have some different scenarios to look at and make some assumptions.

              Let’s consider Edo Japan with nearly 40 million people in the first half of the 19th century, and using no fossil fuels. If we assume that the world could achieve the same level of output as Edo Japan in, say, 2100, then 2 billion is not out of the question. Japan has very little arable land. Places such as China and the US and Africa have much more. Now think of reasons why the world might not achieve the level of Edo Japan in 2100. One possibility is extreme climate change. Another is nuclear war and its aftermath. Another is soil erosion and the continued loss of fertility. Another is the destruction by roving bands of zombies. Working in favor of 2 billion is the fact that we know a lot more science now than the Edo Japanese knew. Extraordinarily high yields have been achieved without using fossil fuels but with the application of modern science.

              But let’s change the assumptions and see how many ‘free people’ could be sustained by Earth in 2100. For that, I suggest you take a look at Toby Hemenway’s lecture ‘The Last Nomads and the Culture of Fear’. You will find it on his website:
              http://www.patternliteracy.com/‎

              Note his statement that there was absolutely nothing that the Plain Indians wanted from the US government–except to be left alone. They were very free…why submit to slavery? The Edo Japanese were not free: they were tightly yoked to a life of pretty hard work. If one tried to project how many Plains Indians the Earth might support in 2100, then the number would be far lower.

              Don Stewart

        • We exist in the context of our current civilisation through the production of excess.
          When 9 early farmers found they could produce enough (excess) food to support 1 non producer, that was the start of our civilised existence
          That 1 non producer might be a metalworker, priest, soldier or whatever. the exact job is irrelevant.
          But that 9:1 ratio continued until we reversed it with the industrial revolution because we had cheap energy available
          Our problem now is that we expect things to carry on as they have always done, but with expensive energy.
          It can’t be done
          So we must inevitably revert to the pre-industrial population ratios because we do not know how to produce food, even if there was enough land to produce it on.

          • Scott Walker – Oregon
            Scott says:

            Hello End of More, I just keep thinking about that number,…. that we will only have 30 million barrells per day by 2050 at a time we will need more than 100 to continue the current growth anomoly and the decline will surely set in before then with looming financial crisis.

            Scott

          • informationforager – If you felt connected with any of these messages then: Pray that I am forgiven, pray that I am healthy, and pray that I find my way to God and Wholeness. Thank You.
            informationforager says:

            Very well stated and understood. It’s a hard concept to really grasp that we have to constantly be involved with “takedown.” The ratio numbers you present are a clue as to what has happened to mankind. Many people in more elevated careers or positions are the least able to understand or appreciate where our world comes from.

            When my kids were 5 and 6 they thought that money grew on tress.
            When they became young teens they realized the money came from ATM’s.
            Then when they became older teens they started to realize money came from jobs.
            (Oh, so is that where you go everyday, Dad? To your job!)
            Then as they became adults they realized that money came from ‘real’ jobs. Especially full-time jobs and/or well-paying jobs.
            Then as we worked those jobs we realized that ours jobs were dependent upon everyone else going to work. Other people producing things to keep our own production going. Food planted, grown and harvested on a constantly evolving basis. As you stated so well we moved from a 9:1 takedown basis to a 1:9 basis with oil/energy discovery and production.
            If we consider the concept as a can of soup. How many tractors were used to plant and harvest the crops? How much water and fertilizer were used? How many railroads and trucks were used to transport that to the cannery? What other ingredients were used to actually make soup? How was the paper made to label the soup? Again more lumbers and mills were used to create just the label. Then railroads and trucks were used again to transport to the market? Then after all that is done I drive my car to the store, purchase the soup and return home. Was it worth it.
            As economies of scale go and creators of jobs. Yes. But the whole house of cards is built on the easy and profitable access of the takedown utilization of oil. Without it we have nothing. No, maybe not even 9:1. Thanks.

            • 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.
              Gail Tverberg says:

              Good points!

      • jcl64
        jcl64 says:

        Thanks Don for the tip on the lecture by Toby Hemenway. A very intelligent guy with some very good ideas about permaculture. One question remains though that were not mentioned, and that is the inability for 7 billion people to be doing this. Other than that I really agree with him about the deity thing – one has to learn to respect life before you can even consider believing in some all mighty god. So the earth spirituality surely has close links to the Gaia hypothesis by James Lovelock. I have always thought there was something very realistic about Genesis 3:19 – “In the sweat of thy face shalt thou eat bread, till thou return unto the ground; for out of it wast thou taken: for dust thou art, and unto dust shalt thou return.”

        I am not a very religious person, but I do believe in life and its fragility. Humanity has unfortunately placed ourselves in this “gods chosen” kind of thinking frame – elevating ourselves above nature – which again means we are unable to read the signs nature is giving us… or at least are easily fooled into either god saving our skin or a technofix just around the corner.

        • 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.
          Gail Tverberg says:

          I think we now have a religion of growth, with Ben Bernanke as high priest. Growth of technology fits in. If anyone questions it, they are treated as if they are crazy.

    • 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.
      Gail Tverberg says:

      I agree population is a big issue. Even big increases in MPG are quickly swamped by population growth.

      The other thing about efficiency is the fact that people tend to spend what they earn. If they save money because of, say, new insulation that allows their heating bills to be lower, they will spend it on something else. Pretty much everything we buy requires energy of some sort to make, so we end up using more of a different kind of energy, and we end up more or less where we started.

      It is possible to reduce people’s expenditures by raising taxes and using the higher taxes to pay down debt. (Not popular with anyone!! No one does this voluntarily.) This will tend to induce recession in the country taking such an approach. What happens on a world basis is more debatable. In the case of oil, which is in limited supply, the price will tend to drop a bit, and the supply will go to other countries not taking such action. The fact that taxes are higher in one country may not reduce world oil usage much at all, if the supply can be maintained. If world oil production drops, that is another issue.

      • Gail,
        We added insulation and a programmable thermostat and used the savings on energy to invest in more things to save energy, such as a wood burning stove. Lower energy bills helped us to afford new windows. And then using those savings we bought new doors….and then solar panels. Now we use the energy savings to pay extra principle on our mortgage, thus paying off our debt faster. Our goal is to have our home paid for and have minimal utility bills so that no matter what happens to the economy we are prepared. If the economy limps along until we retire then it will mean we have lower fixed costs.

        I don’t think Jevons Paradox means as much in a world where resources are diminishing. People should be doing everything they can to reduce energy consumption because soon they will have to whether they want to or not.

  26. Don Stewart says:

    Gail
    We have discussed the issue of Keynsian fiscal stimulation and monetary QE. Here are two interesting charts:

    http://www.zerohedge.com/news/2013-10-04/definitive-rich-vs-poor-chart-rich-hold-assets-poor-have-debt

    Oversimplified, the Republicans are in favor of measures which increase financial wealth, which is heavily concentrated among the One Percent. The Democrats are also in favor of increasing financial wealth, but also want to maintain things such as social security payments, which are far more important to the bottom 80 percent. Both Republicans and Democrats are in favor of inflating the value of housing, which is a small percentage of the net worth of the One Percent, but is what the game is all about for the bottom 80 percent. Both Republicans and Democrats view debt repayment as sacrosanct, which hurts the bottom 80 percent and is what the game is all about to the One Percent.

    If we, as a political body, are able to visualize some way out of our predicament, it may help to keep these relationships in mind. My guess is that the One Percent will be the big losers, as corporate equity and bonds decline in value and as debts simply can’t be repaid. Will the Powers That Be permit that to happen? What will they do to prevent it? The bottom 80 percent will have their entitlements reduced, which will not be as much of a shock as what is about to happen to the One Percent. (I admit to a very cloudy crystal ball.)

    The charts and analysis also point out that giving money to the bottom income groups stimulates spending, while giving it to the top groups stimulates financial bubbles. This was part of Keynes analysis during the Great Depression–he just didn’t have the statistics that we have today. But since it may seem, as it did in 1931, that the problem is lack of consumer spending, then more unpayable debts may be created attempting to inflate the incomes, and therefore the expenditures, of the bottom 80 percent.

    Don Stewart

    • Ert says:

      @Don

      You talk about QE – and a most important aspect of QE is that it is only a temporary fix or extension of the whole game.

      Why? QE does not print money – it only provides liquidity for frozen assets like bonds and mortages. With QE holders of those instruments (i.e. papers) can exchange them for cash before the contract runs out. At the end – die FED returns the assets (bonds, etc.) to the issuer or originator – and gets their cash (plus interest payments) back.

      As more “paper” the FED holds – as less is in the market and can generate new liquidity injections.

      Then there is the second aspect: Debt. Only as long the debt is secured – the rich are rich. Since Debt and Money are two sides of the same coin a collapse of the lower 80-90% may also be a problem for the 1% if the bad debt is not hidden or written down. This is also the shell game behind the housing market. The link you used showed that approx 65% of the “net worth” of the lower 20-80% is in the principal residence. If you would collapse that….

      The question for me is: “How long can the current game be extended” – when energy cost more an more and the “near easy to take” resources deplete?

      • Don Stewart says:

        Dear Ert
        The market value of a house is only important to the occupant if they have a mortgage which must be paid, or if they want to monetize the house by selling it. Suppose the Glorious Revolution arrived on our doorstep and all debts were cancelled in a Jubilee Year. Poor people would stop paying their mortgages, and would be better off for that. The wealthy would be much worse off than they perceive themselves to be as assets would simply vanish. Since there would be less money in circulation, the value of the house would also decline. But the real value of the house to poor people is in terms of shelter. That wouldn’t change. Let’s suppose the husband dies and then the wife. The heirs decide to sell the house and get much less cash for it than they thought they would before the Jubilee Year happened. Not a disastrous event.

        Don Stewart

        • Ert says:

          @Don

          You stated the reason I don’t think there will be a “peaceful” debt jubilee: “The wealthy would be much worse off…”.

          You could even tax the people for “win/revenue” of the debt jubilee – in rates scattered over 10-30 years to provide the capital for new infrastructure programs (like in Germany after WWII) – so it would not be a total free lunch…. more like: If we can’t tax the rich, we forgive debt and tax the debtors.

          Somehow I like that last idea 🙂

          A problem may be that corporations own a lot of debt – and the rich own the corporations… I do not like to let that uncontrolled gorilla loose! A debt jubilee had to be limited, so that it favors the lower 80-90% and not speculators that are high in debt.

          • Michael Murphy
            Casamurphy says:

            @Don & Ert:

            You fellows might enjoy the writings of Prof. Keen:

            http://www.debtdeflation.com/blogs/

            • 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.
              Gail Tverberg says:

              Thanks! I should look at those too.

        • 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.
          Gail Tverberg says:

          That is a good point. Of course, many may choose to move, leaving their homes behind, if conditions are bad.

          • Don Stewart says:

            Gail
            My purpose in calling attention to the wealth and propensity to spend graphs is not to make predictions. Merely to provide part of the framework which is required to make sense of what is going on. The top 400 families in the US have more assets than the bottom 50 percent. If anything threatens the assets of the 400, a rational person will expect a counter-attack. For example, Automatic Earth has recently identified pension funds as one of the last untapped resources. They recount the scandal in Rhode Island as the state Treasurer has looted the resources and turned them into fees for Wall Street.

            There clearly won’t be enough real resources to go around, no matter how much money is printed. So we can expect a lot of maneuvering by the various parties trying to get theirs first. I also wanted to point out that a financial collapse, if segregated from the physical economy, can be much harder on the rich than the poor. The inability (or unwillingness) of the US to segregate the financial collapse of 1929 from the physical economy is what prompted Hubbert’s comment.

            Don Stewart

            • 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.
              Gail Tverberg says:

              I am not certain that it is possible to segregate a financial collapse from the physical economy. It is possible to inject money into the economy, without it really getting to most of the “regular” participants, as we have discovered. But I don’t think the reverse is true. If the economy takes out the banks, this affects everyone.

            • Don Stewart says:

              Gail
              I certainly don’t claim to be an expert. But here is what I observe:
              1. In 2008, the important thing was to save the bank owners and managers. Several Wall Street ‘outsiders’ have commented that the banks should have been nationalized, their owners equity written off, any debts reduced to a reasonable level as would happen in a bankruptcy proceeding, and then the banks sold to new private investors.
              2. In 1929 the money supply was allowed to drop like a rock (Milton Friedman and Anna Schwartz). Thus, debts became very much harder to pay off and millions of people lost their farms. I assume a lot of small businesses went bankrupt. The government could have looked at the decline in money supply and arbitrarily reduced debts by a similar percentage.

              In both cases, a huge obstacle to taking action is our faith that the ‘free market’ solves all problems and that debts by private individuals are moral obligations (whereas corporate debt is viewed more as gambling).

              In addition, as my reference to the wealth and propensity to consume charts showed, the sociological effects are profound. Assuming some ‘rational response’ rests on the fragile assumption that we have a government which is both rational and fair minded.

              Ray Charles sang a song about ‘cotton is down to a quarter a pound and I’m busted…the sheriff will haul my belongings away’. I have a book written by a ‘Texas oilman’ who lost his job due to the collapse in oil prices…he took up Nature study and sketching. If we hope to have any chance of averting a collapse in the real economy as a result of a financial debacle, then we have to remove our ideological blinders and look realistically at our options. It would have been better if we had never permitted debt bubbles to be blown, but……

              Don Stewart

    • 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.
      Gail Tverberg says:

      I am not convinced that things work the way you think they do.

      With lots of debt defaults, we quickly lose banks, insurance companies, and pension plans. At some point, the government cannot even pretend to bail them all out. Maybe it can offer people the ability to take a limited amount out of their bank account each week–say $200 week. The concern I have is that businesses will not be able to buy goods from afar without banks. They also will not be able to pay their workers. We hope that they somehow will be able to bribe essential workers (those who run the water, sewer, and electric systems) to stay without pay, but that may take some doing. Also, it would be nice to get some food delivered to cities.

      I expect the loss of government programs will not be far behind the loss of banks, insurance companies, and pension plans. This could mean the loss of Social Security, Medicare, unemployment insurance, food stamps, and other programs that a lot of people will depend on. Perhaps this loss might come in stages–first big cuts, then the government may get overthrown. Loss of police force and teachers may come as well.

      The top 1% will probably still be the top 1% after all of this, but a lot less wealthy as well.(The pensions may still pay a little, and the stocks and bonds may have some value.) But the 1% will likely “pull enough strings” that they have a better chance of surviving than the other 99%.

  27. Gail, unfortunately I think the situation may be somewhat worse than what you’ve described.
    The reason I believe this is because:

    1) Supply chains worldwide are recursively interdependent. Supply chains for computers are dependent on supply chains for electronics which are dependent on supply chains for plastics and mining, which are all dependent on computers…

    2) Supply chains for all of the examples above are dependent on cheap, petroleum-based transportation fuels, for which there is no viable substitute, at least not in the quantities used today.

    3) The recursive interdependency implies that supply chain breaks will be non-linear, cascading, and to some degree unpredictable as more and more supply chains become economically unsustainable due to high fuel costs associated with transportation (e.g. heavy bulk items like coal, metals, machine parts, etc.). Any product whose profit margins are low and whose transportation costs are significant portion of production costs will start becoming either scarce, or prohibitively expensive.

    4) Eventually, higher prices caused by high fuel costs and supply chain degradation start to effect the production of energy itself. In other words, high fuel costs start to become one of the causes of high fuel costs, creating a feedback effect. This may cause some quite rapid price spikes, followed by sudden price drops as the economy can no longer sustain the high prices, followed by more spikes and drops, until the price of hydrocarbon fuels reaches a permanently high plateau.

    • 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.
      Gail Tverberg says:

      I agree with most of what you have said.

      I am not sure whether prices reach a permanently high plateau, or there start to be feedbacks that affect other systems, like the political system. People have been known to overthrow governments if things get too bad. Or government officials could just give up, figuring that it would be easier to start over than to try to fix Medicare, Social Security and other programs that there is no way that there is funding for.

      • Rich Zeit says:

        Hi, let’s keep in mind a distinction between overthrowing a government and significantly changing within a reasonable time the disparity in wealth among the strata…certainly the wealthy will have resources even to exploit a changing of the guard…

    • tim – Florida, USA
      timl2k11 says:

      Nice analysis McWorm. I agree that we will see increased volatility, and I especially like your insight on the problems of recursive feedback loops. Not too many people can wrap their heads around recursion (but Gödel got it in a fantastic way).

  28. Another overlooked problem is peak oil (and global warming) in several key countries with geopolitical implications, e.g. Syria

    Peak oil, climate change and pipeline geopolitics driving Syria conflict

    Faced with dwindling profits from oil exports and a fiscal deficit, the government was forced to slash fuel subsidies in 2008 which at the time consumed 15% of GDP. The price of petrol tripled overnight, fueling pressure on food prices.

    The crunch came in the context of an intensifying and increasingly regular drought cycle linked to climate change Between 2002 and 2008, the country’s total water resources dropped by half through both overuse and waste.

    Once self-sufficient in wheat, Syria has become increasingly dependent on increasingly costly grain imports which rose by 1m tonnes in 2011-12, then rose again by nearly 30% to about 4m in 2012-13. The drought ravaged Syria’s farmlands, led to several crop failures, and drove hundreds of thousands of people from predominantly Sunni rural areas into coastal cities traditionally dominated by the Alawite minority.

    The food price hikes triggered the protests that evolved into armed rebellion, in response to Assad’s indiscriminate violence against demonstrators. The rural town of Daraa hit by five prior years of drought and water scarcity with little relief from the government, was a focal point for the 2011 protests.

    The origins of Syria’s ‘war by proxy’ are therefore unmistakeable – the result of converging climate, oil and debt crises within a politically repressive state, the conflict’s future continues to be at the mercy of rival foreign geopolitical interests in dominating the energy corridors of the Middle East and North Africa.

    http://www.theguardian.com/environment/earth-insight/2013/may/13/1

    • 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.
      Gail Tverberg says:

      I agree, Matt.

  29. Ed – I am interested in energy issues.
    Edwin Pell says:

    Bill Clinton will be one mile from my house at the Omega Institute talking about sustainable living. What does Bill Clinton know about sustainable living I wonder. The Omega Institute has a sewage treatment plant that they call a center for sustainable living. Man I love marketing.

  30. Hubbert ” You can only use metals once.” Actually If you can recycle half of a metal after each use, you can essentially use it twice – 1.0 + .5 + .25 + .125 +… = 2.0. Recycle 2/3 and you can use it three times. Unfortunately recycling requires energy.

    • Don Stewart says:

      Dear Robert
      I agree with you that pretty high recycle rates have been achieved for many metals. Yet our appetite for them must be growing.

      A couple of years ago I visited a mining museum at Cartersville, GA, which had mining vehicles on display. They ranged from mule drawn or human powered carts up to the monster vehicles of today. I would guess that the range of load capacity in the vehicles was at least ten thousand to one. There has to be a reason why we are processing so much dirt and rock to get so little metal.

      Don Stewart

    • 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.
      Gail Tverberg says:

      Right. And it is hard to make the same purity that you had originally. So it works best for low tech products. It is not even clear that a person can make a knife that holds its sharp edge with recycled metals.

      • It isn’t just metal utensils that are getting less functional, but also plastic things are getting more brittle and cheaper. I still have a plastic sieve that fits at the edge of a kettle or bowl to drain off the liquid. It was given to my grandmother 30 years ago as a complimentary gift by the local dairy. It still works great and I expect it will hold up for many decades more. Most plastic utensils I buy now breaks within a year or two. I don’t think it is planned obsolesce. I think it is lower quality feed stocks.

        • xabier says:

          Jody

          Exactly right! The decline in durability of these basic goods is very noticeable right now: Chinese and other Asian manufacturers on extremely tight margins are clearly saving every cent they can. ( So how can we put any faith in their solar panels?)

          I contrast this with our Family Wooden Spoon, which first my grandmother and now my mother have used to stir and beat for – we estimate – some 65 years (some doubt as my mother being a child cannot recall the original purchase).

          Squandering the wealth of our planet home to produce…..shoddy goods.

          • Xabier,
            You are right. I have noticed the quality of goods declining very sharply over the last five years. I am very picky about the things I buy, especially tools. I figure I may not get a chance to buy them much longer. Good quality costs more, but even spending 5 times the price is worth it if something lasts 30 or 50 years! Every spring I see homeowners loading their carts with shoddy garden tools. I wonder if it will even last a season?

            Funny you should mention wooden spoons. When I visited your country I wanted to take something back with me that was made in England. Even in 1987 I had to search very hard to find such things. But I was able to find a very nice wooden spoon made from oak. I found it in a hardware store of all places! I still use it for making bread because it is so strong. Being only 26 years old it’s still young compared to your mothers! I hope whomever she passes that along to appreciates its value.

            I have had good luck finding well made kitchen tools from Germany. I bought a wonderful garlic press that I think will last long enough to pass down to my children. I also have an excellent pasta maker from Italy. The internet is very valuable for finding such things.

  31. Don Stewart says:

    Gail
    I plagiarized these from Albert Bates site. I hadn’t seen them before…Don Stewart

    I was in New York in the 30’s. I had a box seat at the depression. I can assure you it was a very educational experience. We shut the country down because of monetary reasons. We had manpower and abundant raw materials. Yet we shut the country down. We’re doing the same kind of thing now but with a different material outlook. We are not in the position we were in 1929–30 with regard to the future. Then the physical system was ready to roll. This time it’s not. We are in a crisis in the evolution of human society. It’s unique to both human and geologic history. It has never happened before and it can’t possibly happen again. You can only use oil once. You can only use metals once. Soon all the oil is going to be burned and all the metals mined and scattered.

    M. King Hubbert, 1983

    Initially it will be denied. There will be much lying and obfuscation. Then prices will rise and demand will fall. The rich will outbid the poor for available supplies. The system will initially appear to rebalance. The dash for gas will become more frenzied. People will realize nuclear power stations take up to ten years to build. People will also realize wind, waves, solar and other renewables are all pretty marginal and take a lot of energy to construct. There will be a dash for more fuel-efficient vehicles and equipment. The poor will not be able to afford the investment or the fuel. Exploration and exploitation of oil and gas will become completely frenzied. More and more countries will decide to reserve oil and later gas supplies for their own people. Air quality will be ignored as coal production and consumption expand once more. Once the decline really gets under way, liquids production will fall relentlessly by five percent per year. Energy prices will rise remorselessly. Inflation will become endemic. Resource conflicts will break out.

    Colin Campbell, March 2002

    • 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.
      Gail Tverberg says:

      Those aren’t really cheery quotes you found. Hubbert’s quote sounds closer to the way I see things than Campbell’s.You need the financial system to hold together to get Campbell’s. I suppose if the financial system does hold together, then one could get Campbell’s scenario. Otherwise, the decline could be faster.

  32. archmagekhadgar
    Vineyard says:

    A friend send me this Washington Post report.
    http://www.washingtonpost.com/blogs/wonkblog/wp/2013/10/03/the-scariest-paragraph-about-the-debt-ceiling-youll-read-today/
    If the dept ceiling isn’t lifted, then there might be a finacial crisis that would be even worse than the crisis of 2008.

    • 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.
      Gail Tverberg says:

      Things are not looking very good right now, I agree.

  33. ravinathan – After much inner work, and now in my early 50's, I have gifted myself with a sabbatical from a corporate career to develop a vocation that will allow me to better integrate soul and role. According to the philosopher Ken Wilber, the culture of a country or society serves to expedite the development of a person born into that culture up to its average developmental level or center of gravity. However once a person reaches that stage, the culture then resists her growth into higher levels of development that lie beyond its orbit. Born into the traditional (Spiral Dynamics: Blue and Kegan: Socialized Mind) culture of India and having emigrated to the modern (Spiral Dynamics: Orange; Kegan: Self Authoring) culture of corporate America and the West, I have become increasingly dissatisfied with my own deeply conditioned mind and drawn to question the beliefs and assumptions that govern my stance and action in the world. After the spiritual seeking of many decades and countless days on the meditation cushion noticing repetitive thoughts that invoked, anger, fear and stress, I have been very fortunate in finding "The Work of Byron Katie." The Work is a method of inquiry that uses four questions and turnarounds to investigate any stressful belief. Often compared to Cognitive Behavioral Therapy, The Work is a simple, yet effective method of self help that can be used at a very fundamental level to alleviate stress and with practice serves as a profoundly effective technique to realize one's ever present condition as consciousness in every moment. It's simplicity is deceptive; it's potency is transformative. The Work works at light speed. In the context of The Work, I can understand what Oliver Wendell Holmes meant when he said: “I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.” The Work fits that description. With The Work, I have come to see the gift in a stressful emotion; those 3 AM fearful awakenings, the flash of anger during a business meeting or the cringing shame of hearing a criticism from my wife. I view them all now as temple bells calling me to inquiry; Durga's kiss awakening me to Spirit - my ever present condition - that I can rest deeply in, any time I choose, even as I lie awake at 3 AM! Who knew that a stressful emotion can be looked forward to, for it shows me what's left, the remaining stress inducing beliefs that lie unexamined in the underworld of my consciousness. The Work can literally blow your mind and I invite you to it. Best of all it costs nothing, is easy to learn and the information you need to practice can be downloaded from the website. For those who need a trained facilitator to learn inquiry, there is even a free helpline, staffed by trained volunteers that can be accessed for the price of a phone call. No guru, no complex theory or esoteric practice, just four questions, so respectful of our free will that they don't even ask to be answered. The purpose of this blog then is to: Serve as an honest record of my experience of building a vocation where my deep gladness meets the world's deep need. To be of service to anyone who is contemplating or planning to make such a transition while benefiting from the perspective of those readers who choose to share their perspective here. To enable me to "witness" myself through my own words. As a means to make object what is subject - to 'have', instead of 'being had' by what I have assumed to be true without investigation. To develop my written communication skills so critical to my ability to connect with others from the heart. To discuss topics that interest me deeply, in a way that is lucid, provides an unique perspective and is interesting and meaningful to the reader.
    ravinathan says:

    Gail, very nice summation of our energy predicament. I am not sure if you have seen this 2013 report by Deborah Rogers on shale gas. She writes about Wall Streets pumping up of shale prospects to sell debt and merger transactions. Maybe the discontinuity will coincide with the pricking of the shale bubble. http://shalebubble.org/wp-content/uploads/2013/02/SWS-report-FINAL.pdf

  34. Very nice post Gail, excellent summary.

    “Without a substitute, we need to figure out how to live in a very changed world, one facing financial collapse–a very difficult problem indeed.”

    I don’t believe (and don’t think you do either) that we will find a substitute for oil, certainly not one that will allow us to continue living a lifestyle made possible by cheap, abundant oil. The solution I adopted a long time ago was to change my lifestyle. For most of my life I have practiced the 3 R’s; reduce, reuse, recycle. “Resource conservation and environmental awareness promoting ecological balance through conscious behavior and choices that will lead to savings in materials and energy, which will benefit the environment” (Wikipedia). Now I call it Sustainable Living.

    [The following definition is from Wikipedia]
    Sustainable living is a lifestyle that attempts to reduce an individual’s or society’s use of the Earth’s natural resources and personal resources.[1] Practitioners of sustainable living often attempt to reduce their carbon footprint by altering methods of transportation, energy consumption, and diet.[2] Proponents of sustainable living aim to conduct their lives in ways that are consistent with sustainability, in natural balance and respect of humanity’s symbiotic relationship with the Earth’s natural ecology and cycles.[3] The practice and general philosophy of ecological living is highly interrelated with the overall principles of sustainable development.”

    Yesterday I spent the afternoon in the “education” tent at the farmer’s market. I was asked to be there to answer questions about sustainable living. I prepared a very nice poster showing examples of the things I do (energy conservation, recycling and composting, renewable energy, food production and preservation, and slow cooking). It was a beautiful day to be outside, but I was disappointed because few people showed much interest!

    It seems to me that most people in our society want to continue living with the current system because they don’t know a different way, they are ignorant of the ramifications of our current system, or they prefer to deny any problems exist. And even the well-educated, affluent ones that do understand the issues don’t want to give up coffee at Starbuck’s, their Apple tablet, or having to get work growing food. As long as central banks continue to create money, and the media keep telling people “all is well, don’t worry we have plenty of oil”, no one tries to change. At some point the system will collapse (relatively soon if you’re right Gail), or interest rates will finally be allowed to rise and inflation will destroy the value of our money supply. When that happens people will suddenly and traumatically realize that their job (if they still have one) and their money (if they had paper bills and coinage) won’t buy them what they need to survive. Or in other words, that their lifestyle was not sustainable.

    I had one women stop by and look at my poster. She said “That’s nice! I try to live sustainably. I recycle and I have rain barrels.” God help us!

    Regards,
    Jody

    • 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.
      Gail Tverberg says:

      There was a saying that people used to use every part of the pig except the squeal. Also “waste not, want not.” Such thinking may come back into fashion. My family members think I am “cheap” by nature.

      • “Frugal” sounds so much nicer!

        • 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.
          Gail Tverberg says:

          I need to learn the right euphemism.

        • xabier says:

          ‘I’m a parsimonious sort of man’, was how the old craftsman who taught me put it. Brought up in a poor family in the 1920’s.

        • Of course there is the expression corporate business leaders love to use
          “Doing more with less”. That may correspond more to “cheap”!

    • xabier says:

      The Green movement has done a lot of harm leading people to complacently think that if they merely drive an electric vehicle and recycle stuff, they have saved the planet…… Oh, and use a longer-life plastic bag at the supermarket.

      • 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.
        Gail Tverberg says:

        When it comes to not adversely impacting the planet, the ideal must be living like a rabbit or a fox or a fish that lives in the wild might live. Basically, we need to eat only raw food. We need to live without housing our clothing. We can have no possessions. Otherwise, we adversely impact the planet–we wiped out whole species, back when we were just hunter-gatherers, with less than 1 million total world population.

        When held to the standard of other species resource use, it becomes clear how far “green” initiatives have to go.

        • Gail,
          I think one can take the analogy to far. I can’t imagine anyone wanting to live in a hole, naked, eating only raw food. Humans evolved to use tools. We don’t need to live in holes, unless we want to live in a sod, earthen home.

          It is my impression that too few people ask the question “Where do my resources come from?” We do much harm not knowing where our resources come from, how they are produced, what the consequences are from their production. Look at the pollution in China, a consequence of our need for cheap imports. Are we absolved of our responsibility if we are ignorant of the consequences?

          The best we can do is try live with more awareness, and to make choices in the level of harm we cause.
          Jody

          • 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.
            Gail Tverberg says:

            The issue is that our use of external energy gives us a huge advantage over all of the other creatures that have to make do with what they get from eating or other metabolic actions. This is how we have come to dominate the whole earth. I wrote a post back in September 2011 describing some of the issues:

            What would humans have to do to really live sustainability with the world’s ecosystems?

            I got a shock when I read about the pattern of species extinctions which is taking place that form a part of what is called the “Sixth Mass Extinction.” It turns out that man’s adverse influence on ecosystems didn’t start a few hundred years ago, when we started using fossil fuels. Instead it started way back, when man was still a hunter-gatherer, and there were fewer than 100,000 people on earth.

            According to Niles Eldridge, in describing the Sixth Extinction:

            • Phase One began when the first modern humans began to disperse to different parts of the world about 100,000 years ago.
            • Phase Two began about 10,000 years ago when humans turned to agriculture.

            Check out the post if you want to learn more.

  35. Thanks Gail for another great post.

    I found this article by Kurt Cobb that talks more about the energy cost of the “resource pyramid”:
    http://scitizen.com/future-energies/energy-the-achilles-heel-of-the-resource-pyramid_a-14-2760.html

    Whenever reading about “vast new resources” I always encourage people to ask two critical questions:
    1. At what rate?
    2. At what cost?

    The first question can be understood using the simile of a bank account. If you have $1 million in the bank but can only extract $500 per month you will technically be a millionaire on paper, but you will nonetheless find yourself living in relative poverty.

    The second question is actually three questions:
    1. What cost economically?
    2. What cost to the environment?
    3. What cost in energy?

    I occasionally see one of these, sometimes (but far less often) two of these costs discussed in reporting on our energy and resource predicament, but I rarely if ever see a full accounting of all three of these costs. Thank you again for all of your efforts and the clarity of your thought in that regard.

    • 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.
      Gail Tverberg says:

      Thanks for the link to Kurt Cobb’s article. I think he has more hopes for renewable energy than I do. It doesn’t function on its own–only as a small “extender” to a fossil-fuel based system.

    • 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.
      Gail Tverberg says:

      Thanks for the link to Kurt Cobb’s article. I think he has more hopes for renewable energy than I do. It doesn’t function on its own–only as a small “extender” to a fossil-fuel based system.

  36. informationforager – If you felt connected with any of these messages then: Pray that I am forgiven, pray that I am healthy, and pray that I find my way to God and Wholeness. Thank You.
    informationforager says:

    Yes. High prices are still around. Why is that ignored? In 2008 when the oil went up to $145.00 a barrel the price of a gallon of gas rose up to $4.00 to $4.30 a gallon. In the months following that oil bubble I had read somewhere that the refiners knew that the public couldn’t pay the real price of a gallon of gas corresponding with a barrel of oil so they absorbed some of the costs. I wish I had that article post today to share with others.
    If a gallon of gas today is always just inching around about $4.00 what will happen when oil again goes to $145.00 a barrel? Will the refiners step in again and hold down prices? I doubt it. If a barrel of oil right now is $105.00 and we are currently paying around $3.65 for a gallon of gas shouldn’t the barrel of oil costing $145.00 cost a corresponding price per gallon increase of 38% or in real dollars $5.02!

    Then there is the total obfuscation of the deniers, capitalists and media pundits.
    1. Let’s confuse the issue ALL THE TIME by calling it “running out of oil” as opposed to a worldwide Peak of Oil production. Why don’t we confuse TOTAL WORLDWIDE OIL with the evaporation of cheap easy to get oil? Ignore what the term “Peak Oil” really means.

    2. Let’s make the picture of oil look better by including all carbon liquids and fuels irregardless of their actual non-interchangeability. Also ignore the fact that true oil production has not truly risen much since 2005.

    3. Let’s enlarge the geographical boundary of our oil possession. Let’s not call it American oil. Let’s enlarge it to mean all of North America (United States, Canada, Mexico, etc.) Look people, I just increased our total wealth by assuming that these other countries will always share with us. Also even though we can enlarge our so called immediate geographic oil possession that still has no effect on the total amount of world-wide oil. There is what there is.

    4. Let’s exaggerate the issue of lower oil usage. Demand is down so that proves that we don’t even need as much oil as we used to. That doesn’t take into account that there is a limit to how much oil can actually be economized or efficiently manipulated without effecting the economy. That doesn’t take into account the fact of a worldwide recession or high unemployment in the United States. That doesn’t take into account the fact that the Asian world is just coming on board with ramped up living standards that are oil intensive

    5. Then there is the fact that actually we are doing everything possible in the world right now to extract every single of barrel that we can find. Fracking is just wringing the sponge. Off-shore drilling is just chasing down every blind alley as fast as we can.

    I hate being a realist but I hate self-delusional denial even more. Thanks.

    • yt75
      yt75 says:

      Nice summary of the current “information twisting techniques” …

      Another one I encountered recently :
      – Total (the French oil IOC) recently published some quaterly results
      – The offcial press communication says something like : Total BOEs(Barrel Of Oil Equivalent) increased this quarter (or year on year forgot) by 2 or 3% (forgot exact figure)
      – Of course this then gets transformed the next days in the average press article in “total oil production increased !’
      – When in fact this increase was mainly due to the north sea gas platform Elgin being put back in production (after a serious accident), and the oil production still decreased.
      – As is the “production”of all IOCs (oil majors) since 2004 :
      http://petrole.blog.lemonde.fr/2013/02/21/total-production-by-the-five-major-oil-producers-has-fallen-by-a-quarter-since-2004/
      (note : above link to M Auzanneau blog, offline right now but should be back shortly)

      • informationforager – If you felt connected with any of these messages then: Pray that I am forgiven, pray that I am healthy, and pray that I find my way to God and Wholeness. Thank You.
        informationforager says:

        Thanks for the link. Very Good. Very Important.

      • 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.
        Gail Tverberg says:

        Oil companies have been getting more into gas drilling, so that their “reserve replacement” would look better. It seems like I heard that there is some effort underway to get them to report oil and gas reserves separately. I don’t really remember the details though.

        • Usually oil companies report oil and gas production separately but sometimes they show graphs with boe (barrels oil equivalent)
          http://en.wikipedia.org/wiki/Barrel_of_oil_equivalent
          in which oil and gas are added in energy units and then converted to barrels of oil

          • Danny says:

            I live in Mt and just had our energy company tell us we would be paying 13% more for natural gas and 2% for electricity to heat our homes this winter….What!!!??? I thought we had so much of the stuff we had to flare it offf!!!!!!!!!

            • Scott Walker – Oregon
              Scott Walker says:

              Hello,  Well we have been reading that the shale plays may not last very long and most wells deplete in like 5 years, not as good as the old gas wells.  Shale gas looks to be short lived.

              Scott

            • 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.
              Gail Tverberg says:

              The price is up from last year, but still below the cost of extracting shale gas. (Some gas is a by-product of oil drilling, and can be extracted very cheaply, so the price is high enough to cover its costs.)

              Natural gas is something that does not have much flexibility in quantity. If the quantity is only a few percentage above what is needed, the price will drop dramatically. The quantity is still a little higher than needed. At the new higher price, I expect some utilities will go back to coal, so the price may go drop again. This is very frustrating for those trying to produce natural gas.

  37. yt75
    yt75 says:

    “But this is not really the case”

    I like Gail’s euphemisms 🙂

    Otherwise it is indeed quite amazing how the propaganda regarding the “the US new Saudi Arabia” and the like has worked …

    For instance one can read recently in le Monde (from a raw materials “specialist”) something like :
    “The United States, who will soon export their oil again” :
    http://abonnes.lemonde.fr/economie/article/2013/09/14/la-syrie-n-enflamme-pas-le-petrole_3477546_3234.html

    Maybe one should also be reminded that the last figures regarding oil imports and consumption are (BP stats review 2013) :

    Imports :
    U.S. : 8,4 mbd
    China : 5.4
    Europe (BP definition, very large) : 9.5

    Consumption :
    U.S. : 18.5
    China : 10.2
    Europe : 18.5

  38. Pingback: Our Oil Problems are Not Over! | Our Finite World « Olduvaiblog: Musings on the coming collapse

  39. Leo Smith says:

    Substitutes WILL come along when the price is high enough BUT there is a time lag involved. And in that tie lag things can get pretty desperate.

    All western nations need to transition to a new energy infrastructure.

    The problem is that its currently the wrong one.

    • 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.
      Gail Tverberg says:

      Substitutes will come along, if things haven’t fallen apart too badly in the interim. We are very dependent on things like cheap credit right now.

    • Reverse Engineer – Reverse Engineer is Admin and Chief Cook & Bottlewasher on the Doomstead Diner Blog & Forum, and hosts the Collapse Cafe Video Discussions and Podcasts, and the Frostbite Falls Daily Rant spleen venting Collapse-tainment show. Fans of George Carlin, Bill Hicks and Rick Mercer tend to like the material, Academic folks, not so much.
      reverseengineerre says:

      Substitutes are unlikely to come along because fossil fuels represent millions of years of Energy Collection time from the Sun. On a real time, pay as you go basis, you don’t get enough usable energy hitting the earth to replace the stockpiled energy in fossil fuels. So much Energy to Waste will be Unavailable at Any Price.

      RE
      http://doomsteaddiner.net

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  41. Scott says:

    Gail I am a huge fan. At the same time I am not as dire about our current oil situation….Looking at the forward curve of oil, it is going lower, not higher. In 2020 it is trading around 80 dollars a barrel right now. Why would that be? Because high prices cure high prices….Traders aren’t stupid, they wouldn’t give something away at 80 which is going to be 300 in 7 years. Fact is, oil is going to get cheaper over the next few years. I’m not debating 2030-2050 but nothing is imminent right now. Thanks.

    • 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.
      Gail Tverberg says:

      THe point I am making is that the (cost of extraction) is going up, while (the amount we can afford to pay) is going down. This causes a huge problem. What you are looking at is more closely related to (what we can afford to pay).

      • Scott Walker – Oregon
        Scott says:

        Hello Gail, Yes agreed cost to extract going up and cost to buy gas going up and wages not keeping pace, it just will get harder and harder for many.

        I think the wise ones should be downsizing things now like their homes and cars if they are planning to make a purchase. If the inflation comes that we fear – it will be very profound and miserable. People are already screaming with the partial gov. shutdown I can only imagine what they would do if prices suddenly doubled again on food and gas.

        But we could also experience deflation, when few have money or (jobs) go buy cheaper goods.
        However, I think the central bankers are bent upon inflation so we will eventually get a whopper jump in inflation at some point when all of this new printed money finds its way into the world. Now it is mostly sitting in bankers vaults so the big inflation has not happened yet.

        I believe we would be in an actual Depression right now if not for the extreme measures of the Fed and Central banks of the world but it has only made the inevitable worse. It looks like the economy is ready to collapse again and it will be dicey time in the years and months ahead it seems.

        Scott

  42. Reverse Engineer – Reverse Engineer is Admin and Chief Cook & Bottlewasher on the Doomstead Diner Blog & Forum, and hosts the Collapse Cafe Video Discussions and Podcasts, and the Frostbite Falls Daily Rant spleen venting Collapse-tainment show. Fans of George Carlin, Bill Hicks and Rick Mercer tend to like the material, Academic folks, not so much.
    Reverse Engineer says:

    “As I have indicated previously, I am concerned about a financial discontinuity in the very near future–a few months to a year or two–a discontinuity that is ultimately related to high oil prices. This financial discontinuity could even be related to the current government shutdown, if it goes on for an extended period. If we are reaching a discontinuity, credit markets may be so disrupted and other changes may be so significant that past projections will be irrelevant.”-Gail

    Discontinuity is what EVERY mathematical model ignores/discounts. All projections are made based on what occurred before, with the assumption that this will continue on in some smooth fashion, up or down as the case may be.

    So, if you think a discontinuity is on the horizon, you need to make a model which takes into account possible discontinuities. Nobody really does this.

    You are braver than most here, in terms of predicting a discontinuity in the next 6 mo- 2 years, and I happen to agree with you on this. However, QUANTIFYING it, explaining why the discontinuity will come when you think it will and explaining WHY TPTB will not be able to paper it over with more QE etc is quite a difficult challenge overall.

    http://www.youtube.com/watch?v=nJ58uPpnhrI

    RE
    http://doomsteaddiner.net

    • 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.
      Gail Tverberg says:

      Difficult doesn’t stop me from trying. I have “things falling apart” already on my side.

      • Reverse Engineer – Reverse Engineer is Admin and Chief Cook & Bottlewasher on the Doomstead Diner Blog & Forum, and hosts the Collapse Cafe Video Discussions and Podcasts, and the Frostbite Falls Daily Rant spleen venting Collapse-tainment show. Fans of George Carlin, Bill Hicks and Rick Mercer tend to like the material, Academic folks, not so much.
        Reverse Engineer says:

        It will be interesting to see what “solution” gets cobbled together by Oct 17 for resolving the Debt Ceiling problem. Even more interesting is to contemplate what occurs if the FSoA goes into technical default. I would think some CDS would have to trip on that one.

        RE

  43. top hyena says:

    Very cheeky of Liebig to give his name to a “law” that was well known and already stated the obvious:

    For want of a nail the shoe was lost.
    For want of a shoe the horse was lost.
    For want of a horse the rider was lost.
    For want of a rider the message was lost.
    For want of a message the battle was lost.
    For want of a battle the kingdom was lost.
    And all for the want of a horseshoe nail.

    From Wikipedia:

    ‘German: (positively formulated) “Diz ſagent uns die wîſen, ein nagel behalt ein îſen, ein îſen ein ros, ein ros ein man, ein man ein burc, der ſtrîten kan”; The wise tell us that a nail keeps a shoe, a shoe (keeps) a horse, a horse (keeps) a knight (or man), a knight, who can fight, (keeps) a castle (c. 1230, Freidank Bescheidenheit).’

    I see you’re not really interested in giving your name to a law, Gail, and enjoy telling it like it is: ‘The stories we heard saying, “Substitutes will work when the oil price rises high enough,” were a bunch of nonsense.’

    I never realised that nonsense came in bunches. Where’s the supermarket where I can buy me a bargain bunch? In England we have had “nonsense poetry”, of course, but when those high-fallutin’ French invented their own cultural brand of nonsense, they just had to give it the fancy name of “surrealism”. Typical.

    • 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.
      Gail Tverberg says:

      Maybe “bunch” isn’t the right collective noun. But we certainly have a lot of economic sayings that are based on nothing more than wishful thinking. Others are based on observations while the economy was temporarily expanding rapidly.

      Maybe I need a more elegant way of putting things, and a “Law” can be named after me.

  44. The main difference is that I include all relevant costs, including wage costs, taxes, financing costs, and distribution costs, rather than just energy costs associated with extraction —- and you are doing right so – money = energy, re Nate Hagens!

    • 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.
      Gail Tverberg says:

      Money certainly is closely associated with energy.

  45. Joe Clarkson says:

    One of the big unknowns is how long high oil prices can stay high without causing recession. The US is one of the world’s biggest oil users and one of the most wasteful (European economies have only half the energy intensity of the US). Because of this waste, it is relatively easy to reduce oil consumption in the US with only a modest negative effect on the economy. Every wasted barrel of oil saved helps dampen upward pressure on prices.

    I think that one reason oil prices have been relatively stable for the past few years is that energy waste is being wrung out of the world economy at about the same rate as EROI is declining. Eventually the easy efficiency gains will end, oil prices will rise and instead of mere stagnation we will have full-blown recession. If a financial crisis hasn’t happened sooner for other reasons, continuous world-wide economic recession will certainly do the trick.

    • Kristoffer says:

      I don’t agree that it would be relatively easy to reduce energy consumption in the US to the level of EU.
      The infrastructure in place makes the need for transportation much higher in US.

    • 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.
      Gail Tverberg says:

      I think that the only reason we are not in recession now is because we are covering up the problem with QE, ultra low interest rates, and deficit spending. We would be sliding back on a balanced budget.

      The US economy was built on a different model than European. It would be horribly expensive (and energy intensive) to try to change it. So I don’t think the issue is really waste. Admittedly the big SUVs could be replaced with smaller vehicles, but even doing this has a cost to it.

      • But I believe Joe Clarkson is right in that there is a small level of “energy optimization” going on now in the US, and in addition to the QEs things have been trudging along. People travelling a bit less and buying more fuel efficient cars. These are easy moves to take for many individuals, but as Joe say, when you have peeled away that first layer of energy waste you are left with the hugely inefficient energy intense structure that its all built upon. When you start cutting into those, you will start the real recession.

        Unfortunately I believe the first real cuts to the government will be in all the research related jobs – no doubt a lot of people working with climate research will be booted by republicans “optimizing economy”. This leads me to think that in the middle of these first stages of decline they are also removing the people who have knowledge about changing the system to something that wont be catastrophic to the ecology of the planet. My only hope is that the public picks up on this and demand certain changes to how the country is run.

        • xabier says:

          Science funding has really collapsed in Spain’s austerity regime. Schools badly hit, too.

          But lots of nice comfortable places for politicians still being funded easily enough……

        • 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.
          Gail Tverberg says:

          I wish I had as much faith in the academic system as you do.

          Climate change scientists assume way too much CO2 in their models, based on the belief that energy consumption can rise indefinitely. There is a “2.6” estimate in the 2013 model, which is the “peak oil” estimate, but still is very conservative (that is high) in the estimates of carbon to be burned–it assumes that we will continue to extract these fuels, even on the downslope, when there is not nearly enough to go around. It shows a median temperature rise of 1.5 degrees C, compared to other simulations that go up to 6.0 degrees C.

          The academic system follows where the grants for money are. It assumes that we can continue to add more complexity (and cost). Researchers know that if they publish something similar to what the common belief is, their papers have a good chance of being published. So it reinforces standard thinking.

          • julesbollocks – 3rd rock from the sun – time to get active rather than waiting
            julesbollocks says:

            Peak economic oil may cause the current rate of CO2 to decline thereby reducing the risk of CC in the future however there is still 30-40 years of buffered CO2 in system now as well as plenty of coal and gas. The other issue is that being a consensus project for politicians and policy makers the IPCC report has been criticised for being too conservative in its forecasts – the less likely but possible feedbacks being down played.

            The real problem, I think is humans are just living in the moment- when crisis hit Greece people desperately burned street and park trees for fuel. An element of AGW is change in land use – ironically the very wealth from oil allowed us to be environmental protective of forests which will be a resource of fuel that will be quickly plundered. And in the short term any recession in Asia may reduce the amount of aerosols and put warming back on track.

            Projections are at best tools- I think it is highly unlikely that any one will be completely correct. Add the uncertainties of oil production, social unrest, climate disruption happening now [ the speed of Arctic warming is far quicker than projected] and possible food shortages as well as the odd way the economy functions- Oil has tripled in price and the economy seems to function- just.

            Seriously- assuming the next 10 years will likely be just like the last seems the best way to get a decent nights sleep.

            • Peak oil alone won’t solve the global warming problem

              Half of oil burnable in 2000-2050 to keep us within 2 degrees warming has been used up as we hit 400 ppm
              http://crudeoilpeak.info/half-of-oil-burnable-in-2000-2050-to-keep-us-within-2-degrees-warming-has-been-used-up-as-we-hit-400-ppm

            • Scott Walker – Oregon
              Scott says:

              Matt, Thank you for that article – http://crudeoilpeak.info/half-of-oil-burnable-in-2000-2050-to-keep-us-within-2-degrees-warming-has-been-used-up-as-we-hit-400-ppm
              The world currently uses about 90 million barrels per day and by the year 2050 we only be producing only about 30 million barrels per day. The problem is simple and it is likely that the population of the world will need more than a 100 million barrels per day and the shortfall looks devastating.

              I think this problem will be well known however long before 2050. We can burn a bunch of coal if we can no longer get enough oil which will make the CO2 worse. Looks like Thorium is the best option for the world to embrace at this point. Supply lines will shorten slowly as costs grow and shortages start to show sometime down the road.

              Perhaps there will be a big move to localize more in the years ahead, People will have fewer choices and no longer will we have as much fresh vegetables and exotic fruits from all over in the dead of winter. It would be an interesting change to see go us through and I do not see it happening voluntarily, especially with the attitudes of many young people these days. Although some young people are awake to the problem.

              Scott

            • 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.
              Gail Tverberg says:

              I don’t think that we can “burn a bunch of coal if we can no longer get enough of oil”. Instead, high oil prices bring down the financial system, natural gas, oil, and coal more or less simultaneously. The combination also brings down electricity and world population. So even if there is climate change, there will be many fewer people to be bothered by it. The remaining population can simply move somewhere else, where the climate is better.

            • Scott Walker – Oregon
              Scott says:

              Hi Gail, Wow only 30 million barrels per day by 2050!!! Do you agree that is the path we are on?

              Scott

            • 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.
              Gail Tverberg says:

              If banks aren’t operating, it could be a lot sooner than 2050 that oil production goes down to 30 million barrels a day. Companies need a way to pay employees, and to collect money from customers.

            • 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.
              Gail Tverberg says:

              I expect nearly all of the other half of fossil fuels will stay in the ground, because a trip up of the financial system will tend to bring the whole interlinked system down. For one thing, we can’t make computers or anything else high-tech (an LED light bulb, for example) without our whole interlinked system that allows us to import metals from around the world. Even if we lose little things, like the ability to fly people around in commercial jets, it could have huge impacts. Another potential problem is losing the ability to make computers. This could mean that once the ones in existence wear out, and we cannibalize the others, we lose our ability to make things we need computers for–which is most everything made with today’s manufacturing techniques.

            • 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.
              Gail Tverberg says:

              I agree about the buffered system being an issue, but presumably the climate scientists put it into their model.

              If oil becomes a problem because of price, I think it could bring down the whole system quite quickly. The expected impact is like severe recession–reducing all fossil fuel uses at once. The economy is so networked, it is hard to substitute, except for simple things like burning trees down.

              I suppose forgetting everything does give a decent night’s sleep. If there is really nothing we can do–and I am afraid that is close to the situation with climate change–maybe that is a solution.

          • I do think that the current 400ppm is already very high for the planet, actually “only” 100ppm over pre industrial times. And remember 100ppm is also the difference between an ice age which is really only -5C lower on average for the whole planet. 400ppm might have a +5C in the pipeline even if we cut all emissions today, unless there is some carbon capture thing going on at the same time. Considering trees are our best way of capturing carbon, in a oil-decline scenario we would no doubt cut down and burn large parts of the worlds forests just to keep some of the machinery running, hence removing the most important carbon sink (besides the ocean). As the planet warms so will oceans ability to absorb CO2 also go down, leaving more in the atmosphere.

            And I haven’t even mentioned the fact that IPCC still does not quantify the amount of methane emissions we might get from thawing of permafrost and methane clathrates at the bottom of the sea. These are the wildcards at play here and they could be a serious problem in the very near future (and no doubt the worry that people in the NTE-camp believes in).

            I am no believer of doomsday scenarios but I do believe that Guy McPherson is onto something when he say that “Only a collapse of the industrial civilization can prevent runaway global warming.” – And the faster it happens the better we have a chance of preventing huge ecological changes to the planet (as if there wasn’t enough damage done already).

            Some research seem to indicate that the aerosols is preventing the full effect of warming to a degree that the actual warming would double if you cleaned it all out. Thats an additional +0.8C that could come rather fast if our current fossil fuel burning is turned off (no doubt this wont happen even in a collapse scenario).

            I know that we cant solve our current energy predicament by renewables alone, but I do believe they can help us as we scale down the world economy and at least give us some degree of vital technology around. Remember that e.g Norwegian steel industry is powered almost exclusively by hydroelectric power. But I believe we have discussed this before – and I am under the belief that it is possible to maintain some system even if it means the majority of the people live in poverty.

            • 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.
              Gail Tverberg says:

              As Guy says, “Only a collapse of the industrial civilization can prevent runaway global warming.” That is pretty much what I am talking about.

          • Tarjei V
            Tarjei V says:

            Gail says: “I expect nearly all of the other half of fossil fuels will stay in the ground, because a trip up of the financial system will tend to bring the whole interlinked system down”
            I think there is a definite possibility that human technological inventiveness combined with political urgency will somehow introduce a new coal age, even if oil recedes and modern financial systems crumble. As in the thirties, we might see desperate states nationalizing companies and resources, and reverting to semi-fascistic governments. The little oil there is will be rationed, and resources channeled towards rebuilding parts of the infrastructure so that coal can come in and fuel specific parts of the economy. This needn’t happen overnight.
            A hypothetical example. Country C – whose export is mainly natural resources – hits bad times, people go hungry, banks close. A semi-tyrant emerges, as described above. Some other countries in the world still have fairly cheap oil (which they keep to themselves), and function decently, so the export marked is there. Country C have coal fields, coal mines are opened, scarce oil and abundant manpower is channeled (forced) into mining, engineers are rebuilding ships and trains to coal power, the export gets going, currency flows in, further rebuilding ensues. As long as abundant coal is fairly attainable, I think humans will find a way to keep their fossil “energy slaves” even past the oil age. The key here is semi-fascism, nationalization, rationing of the remaining oil resources, in order to facilitate the transition. This, of course, makes for a possible escalation of humanity’s co2 emissions, but when the alternative is starvation and war, no one will care. It is in fact possible to argue that the end of (cheap) oil will make things worse. I don´t know if it’s likely, but I think it’s possible. The coal age didn’t end because we ran out of coal. It will possibly reemerge when we run out of oil.

            • 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.
              Gail Tverberg says:

              Even if this scenario takes place, I would argue that we still could not make high tech devices, like computers. We would in a few years lose major parts of the system, including widespread electricity distribution, because we need computers to regulated the distribution system (and probably other parts of the system). Without universal electricity distribution, we would soon lose natural gas and oil distribution, because natural gas and oil pipelines are electrically powered. At some point, we will also lose Internet availability, for those who have electricity available. Banks operating in areas without electricity would have huge problems figuring out people’s bank balances. It would be hard to get around all of the problems we would have.

      • Andy
        Andy says:

        I would also add the increased economic activity generated by fracking for both oil and gas is providing it’s own form of stimulus, as well as ultra low prices for natural gas. I haven’t seen it quantified but I imagine a years worth of fracking operations are a decent percentage of GDP, and directly responsible for a lot of the growth.

        • 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.
          Gail Tverberg says:

          There certainly has been a lot of growth in North Dakota and Texas compared to the rest of the US.

  46. mikestasse
    mikestasse says:

    Reblogged this on Damn the Matrix.

  47. tim – Florida, USA
    timl2k11 says:

    The problem is about maybe 0.1% of the general public understands any of this, not that it is complicated, in fact you show in your writing just the opposite, it is quite simple. I think the problem is that virtually everyone is part of the problem, everyone depends on fossil fuel for their livelihoods, and they don’t like being implicated. This goes for overpopulation too and why it is so taboo. A surprisingly common and terribly immature refrain I see all across the internet when someone suggests the world is overpopulated is “If that’s what you think? Why don’t you kill yourself”? When people contemplate the possibility that the world is overpopulated, resources are finite, we’ve far exceeded the carrying capacity of the planet, they will at least subconsciously question their contribution, or perhaps consider that the justification of their very existence is being… “undermined”. I think that is why I see so much immaturity and defensiveness when it comes to topics like world population, pollution (especially global warming) and energy security and why, by extension, we are doomed. No one wants to accept even a tiny fraction of responsibility for what is happening on our little planet.

    • 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.
      Gail Tverberg says:

      Most people don’t understand any of this. Part of the problem is that we have many layers of people who are in denial about our problems: government officials, economists, those who write school books, those who write newspapers (and would like advertising).

      A person might expect that academics would understand some of this, but the academic textbook companies want something they can publish for 20 years, so that they can make money on the books. The academics are under pressure to get grants and to publish lots of paper. The way they can do this is by saying what everyone else says. No one gets a grant to say (for example) that carbon capture and storage is silly, or that we don’t have enough cheap oil.

      A lot of what underlies our problems is instinct–an instinct to take care of ourselves; an instinct to have things as good as others have things (hierarchical behavior); an instinct to have enough children that they can help in our old age. It is hard to deal with that.

      • Danny says:

        Well I just went to see former treasury secretary John Snow talk and his presentation centered around how social security can be fixed and medicare is going to bankrupt the country. There was no mention of peak oil until the very end when he said “I want to end this on a positive note- the shale deposits in this country are so big and they will bring in so much revenue that this country will be in great shape for a long time to come…I kept raising my hand to ask a question but of course never got called on….So either this guy is a real idiot….which is highly likely….or he just doesn’t want to face reality. One thing that he said that really surprised me is that he said the republicans will be blamed for this short term but if we default on are debts Obama will get the blame for that…..scary that they think this is all just a chess game.

        • 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.
          Gail Tverberg says:

          Social Security is pretty much pay as you go (regardless of what you have heard). So Social Security can be “fixed” by reducing benefits, if there isn’t enough money. At least that is what actuaries believe. There would probably be revolt, if the extent of reduction that is needed were to take place. But at least it is not depending on fictitious prefunding, like most pension plans are.

          Medicare is more or less a full employment for doctors and health care workers system. The costs keep escalating, as the health care system finds more ways to spend money. US life expectancy continues to fall relative to other countries, even with all of the spending. Funding Medicare is a huge problem. I would argue that the system needs to be overhauled, to spend a lot less money. I am also not sure that we should be spending much of our health care dollars on people over 80 years old, or clearly near death. Palliative care has a place in the system.

          And of course, no one understands the nature of our oil problem. They think it is only too much imports.

          • Danny says:

            Thanks Gail I love your articles; they slice right to the point. Maybe it is not your forte but I wonder if you have thought of an article of the psychology of people that makes them unable to see certain realities before them. It almost seems that the more accomplished someone is in this current system the less likely they are to question the system that has wrapped them in such a warm comfortable blanket. I noticed this last night in the “suit yes men ” surrounding John Snow and feeding him softball questions. I am a working class electrician in flannel shirt and they probably thought it was not safe to let me ask a question- even though I do have a degree in Economics. Yes Social Security can be fixed but don’t you need to have an economy to do this? People paying into the system- when the FED has to pull back its spending and the stock market collapse and we fall into depression there will not be the revenue to fund it. The treasury dept will then have to start printing money to pay its obligations. This would then shoot everything into an inflationary spiral…..so what kind of spiral would oil be on?

            • 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.
              Gail Tverberg says:

              The psychology issue is an interesting question. Perhaps I can write an article about it one of these days. There are no doubt whole different layers of the subject–what people think, mixed with what publishers (books as well as newspapers) are willing to print. Education no doubt plays a role, as does religion. For politicians, growth has huge benefits, so there is a tendency to seek out economists with the “right” views.

          • Andy
            Andy says:

            @ Danny
            David Cohen writes some interesting articles about the human condition. It comes down to more then just an oil problem though. To me it seems that the human evolutionary trait of denial, optimism and confirmation bias has lead us to this place. As Homer J Simpson said, if stupidity got us into this mess, why can’t stupidity get us out.
            http://www.declineoftheempire.com/2013/07/the-reality-of-the-unconscious.html
            http://www.declineoftheempire.com/2013/07/flatland-a-good-enough-theory-of-human-cognition.html

            • 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.
              Gail Tverberg says:

              I think the problem is that we have evolved to use external energy–energy from burning wood, or oil or natural gas, or some other source. See my post Humans seem to need external energy. This is what sets us apart from other animals. Our bodies have now evolved to need cooked food, and we have moved to parts of the world where we require fuels of some sort to modify the natural environment.

              Once our population had outgrown what was available from burning biomass (plus a little from wind and water energy), we moved on to fossil fuels. Fossil fuels allowed humans to ramp up our population to even a greater level. But doing this created huge problems–we took over the habitat of other species, we added huge numbers of domestic animals in addition to ourselves. By our very act of living, we messed up the rest of the world.

              We can talk about living more sustainably, but conservation does very little. For one thing, we tend to spend our incomes. So if we conserve in one area, and thus save money, we tend to spend the money in other areas. The spending, wherever we do it, results in energy use, pollution, and disruption of the natural world. Population is growing so rapidly that any savings through efficiency tends to be quickly taken up by more population. So apart from a huge drop in population, it is hard to see a way to fix this problem.

        • Michael Murphy
          Casamurphy says:

          @ Danny

          If you would like to explore the philosophical side of decline, I highly recommend

          http://thearchdruidreport.blogspot.com/

          Mr. Greer over the last dozen or so posts has done a remarkable job of exploring the “cult of progress” as it relates to our predicament.

          • 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.
            Gail Tverberg says:

            Thanks! JMG makes some good points. I looked at his post about the real cost of the Internet–the fact that it depends on having an electrical grid working–something that people overlook.

        • xabier says:

          Danny

          The electrician in a flannel shirt is probably today’s equivalent of the little boy who pointed out the Emperor’s nudity and folly: so no surprise they didn’t pick you to ask a question…..

  48. Scott Walker – Oregon
    Scott says:

    Thank you Gail, It looks like the oil price needs to stay right where it is at pretty close to now as any lower price will slow down production especially of tight oil. Higher prices, would mean the economy will slow. A fine line to walk with the oil price. Trapped in a channel of slowly rising prices and cost are not a good economical model using yesterdays models of infinite growth.

    Looks like a time of “less for more” and higher prices ahead for most everything we need.

    Scott

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