Why EIA, IEA, and Randers’ 2052 Energy Forecasts are Wrong

What is the correct way to model the future course of energy and the economy? There are clearly huge amounts of oil, coal, and natural gas in the ground.  With different approaches, researchers can obtain vastly different indications. I will show that the real issue is most researchers are modeling the wrong limit.

Most researchers assume that the limit that they should be concerned with is the amount of oil, coal, and natural gas in the ground. This is the wrong limit. While in theory we will eventually hit this limit, because of the way fossil fuels are integrated into the rest of the economy, we hit financial limits much earlier. These financial limits include lack of investment capital, inability of governments to collect enough taxes to fund their programs, and widespread debt defaults.

One of the things I show in this post is that Economic Growth is a positive feedback loop that is enabled by cheap energy sources. (Economists have postulated that Economic Growth is permanent, and has no connection to energy sources.) Economic Growth turns to economic contraction as the cost of energy extraction (broadly defined) rises. It is the change in this feedback loop that leads to the financial problems mentioned above.  These effects tend to lead to collapse over a period of years (perhaps 10 or 20, we really don’t know), rather than a slow decline which is easily mitigated.

If, indeed, most analysts are concerned about the wrong limit, this has huge implications for energy policy:

1. Climate change models include way too much CO2 from fossil fuels. Lack of investment capital will bring down production of all fossil fuels in only a few years. The amounts of fossil fuels included in climate change models are based on “Demand Model” and “Hubbert Peak Model” estimates of fossil fuel consumption (described in this post), both of which tend to be far too high. This is not to say that the climate isn’t changing, and won’t continue to change. It is just that excessive fossil fuel consumption needs to move much farther down our list of problems contributing to future climate change.

2. It becomes much less clear whether high-priced replacements for fossil fuels are worthwhile. In theory, they might allow a particular economy to have electricity for a while longer after collapse, if the whole system can be kept properly repaired. Offsetting this potential benefit are several drawbacks:  (a) they make the economy with the high-priced replacements less competitive in the world marketplace, (b) they tend to run up debt, increase government spending, and decrease discretionary income of citizens, all limits we are reaching, and (c) they tend to push the economic cycle more quickly toward contraction for the country purchasing the high-priced renewables.

3. A large share of academic writing is premised on a wrong understanding of the real limits we are reaching. Since writers base their analyses on the wrong analyses of previous writers, this leads to a nearly endless supply of misleading or wrong academic papers.

This post is related to a recent post I wrote, The Real Oil Extraction Limit, and How It Affects the Downslope.

Types of Forecasting Models

There are three basic ways of making forecasts regarding future energy supply and related economic growth:

1. “Demand Based” Approaches. In this method, the analyst first decides what future GDP will be, and uses that estimate, together with past relationships, to “work backwards” to figure out how much energy supply will be needed in the future. The expected needed future energy supply is then divided up among various types of fuels, giving more of the growth to types that are favored, and less to other types. Very often, estimates of growth in energy efficiency, growth in “renewables,” and growth in the amount of GDP that can be generated with a given amount of energy supply are included in the model as well.

This method is by far the most common approach for forecasting expected future energy supply, especially at high levels of aggregation. One advantage of this method is that can provide almost any answer the analyst wants. Governments are paying for reports such as the EIA and IEA forecasts, and oil companies are paying for forecasts such as those by BP, Shell, and Exxon-Mobil. Both governments and oil companies prefer reports that say that everything will be fine for the foreseeable future. Demand Based approaches are good for producing such reports.

Another advantage of this approach is that the analysts don’t have to think about pesky details like where all of the investment capital will come from, or how large an   improvement in the ratio of GDP to energy consumption can actually occur. They can simply make assumptions and point out that the forecast won’t come true if the assumptions don’t hold.

2. “Hubbert Peak Model”. This model is based on an interpretation of what M. King Hubbert wrote (for example, Nuclear Energy and the Fossil Fuels, 1956) . The basic premise of this model is that future supply of oil, coal, or gas will tend to drop slowly after 50% (or somewhat more) of the fuel supply potentially available with current technology has been extracted.

In fact, we don’t really know how much oil or coal or natural gas will be extracted in the future–we just know how much looks like it might be extracted, if everything goes well–if there is plenty of investment capital, if the credit system works as planned, and if the government is able to collect enough tax revenue to fund all of its promises, including maintaining roads and offering benefits to the unemployed.

What most people miss is the fact that the world economy is a Complex Adaptive System, and energy supply is part of this system. If there are diminishing returns with respect to energy supply–evidenced by the rising cost of extraction and distribution–then this will affect the economy in many ways simultaneously. The limit we are reaching is not that oil (or coal or natural gas) extraction will run out; it is that economic system will at some point seize up, and rapidly contract. The Hubbert Peak Method shows how much fuel might be extracted in each future year if the economy doesn’t seize up because of financial problems. The estimate produced by the Hubbert Peak Method removes some of the upward bias of the Demand Model approach, but it still tends to give forecasts that are higher than we can really expect. 

3. Modeling How the Economy Actually Works. This approach is much more labor-intensive than the other two approaches, but is the only one that can be expected to give an answer that is in the right ballpark of being correct with respect to future economic growth and energy consumption. Of course, observing signs of oncoming collapse can also give an indication that we are nearing collapse.

The only study to date modeling how long the economy can grow without seizing up is the one documented in the 1972 book The Limits to Growth, by D. Meadows et al. This analysis has proven to be surprisingly predictive. Several analyses, including this one by Charles Hall and John Day, have shown that the world economy is fairly close to “on track” with the base scenario shown in that book (Figure 1). If the world economy continues to follow this course shown, collapse would appear to be not more than 10 or 20 years away, as can be seen from Figure 1, below.

Figure 1. Base scenario from 1972 Limits to Growth, printed using today's graphics by Charles Hall and John Day in "Revisiting Limits to Growth After Peak Oil" http://www.esf.edu/efb/hall/2009-05Hall0327.pdf

Figure 1. Base scenario from 1972 Limits to Growth, printed using today’s graphics by Charles Hall and John Day in “Revisiting Limits to Growth After Peak Oil” http://www.esf.edu/efb/hall/2009-05Hall0327.pdf

One of the findings of the 1972  Limits to Growth analysis is that lack of investment capital is expected to be a significant part of what brings the system down. (There are other issues as well, including excessive pollution and ultimately lack of food.) According to the book (p. 125):

The industrial capital stock grows to a level that requires an enormous input of resources. In the very process of that growth it depletes a large fraction of the resource reserves available. As resource prices rise and mines are depleted, more and more capital must be used for obtaining resources, leaving less to be invested for future growth. Finally investment cannot keep up with depreciation, and the industrial base collapses, taking with it the service and agricultural systems, which have become dependent on industrial inputs (such as fertilizers, pesticides, hospital laboratories, computers, and especially energy for mechanization).

Jorgen Randers’ 2052: A Global Forecast for the Next Forty Years 

In 2012, the same organization that sponsored the original Limits to Growth study sponsored a new study, commemorating the 40th anniversary of the original report. A person might expect that the new study would follow similar or updated methodology to the 1972 report, but the approach is in fact quite different. (See my post, Why I Don’t Believe Randers’ Limits to Growth Forecast to 2052.)

The model in Jorgen Randers’ 2052: A Global Forecast for the Next Forty Years appears to be a Demand Based approach that perhaps uses a Hubbert Peak Model on the fossil fuel portion of the analysis. One telling detail is the fact that Randers mentions in the Acknowledgements Section only one person who worked on the model (apart from himself). There he thanks “My old friend Ulrich Goluke, for creating the quantitative foundation (statistical data, spreadsheets, and other models) for this forecast.” Ulrich Goluke’s biography suggests that he is able to prepare a Demand Model spreadsheet. It would be hard to believe that he that he could have substituted for the team of 17 researchers who put together the original Limits to Growth analysis.

The Need to Add to the Original Limits to Growth Analysis

The original Limits to Growth analysis was primarily concerned with quantities of items such as resources, pollution, population, and food. It did not get into financial aspects to any significant extent, except where flows of resources indicated a problem–namely in providing investment capital. One thing the model did not include at all was debt.

In the sections that follow, I show a model of how some parts of the economy that weren’t specifically modeled in the 1972 study work. If the economy works in the way described, it gives some insights as to why collapse may be ahead.

Economic Growth Arises from a Favorable Feedback Loop

Economic growth seems to arise from a favorable feedback loop. While it is beyond the scope of this post to show the detail of the feedback loops, I illustrate some causal relationships in Figure 2, below.

Figure 2. Author's representation of how economic growth occurs in today's economy.

Figure 2. Author’s representation of how economic growth occurs in today’s economy.

This model above is intended to reflect the situation from, say, 1800 to 2000. The situation was somewhat different before the use of fossil fuels, when far less economic growth took place. Furthermore,  as we will see later in this post, the model changes again to reflect the impact of diminishing returns as the cost of energy production increases in recent years and in the future.

The critical variables that allow economic growth to take place are (1) cheap energy available from the ground, such as coal, oil, or natural gas–if cheap renewables were available, these would work as well (2) technology that allows us to put this cheap energy to work to make goods and services, and (3) a way to pay for the new goods and services.

Debt. In this model, debt plays a significant role. This happens because fossil fuels allow a huge “step up” in the quality of goods and services, and debt provides a way to bridge this gap. For example, with fossil fuels, we have electric light bulbs, metal machines in factories, and farm machinery, all of which vastly improve efficiency. The ability to pay for the new fuel and the new devices using the fuel, is much greater after the new devices using the fuel are put in place.  The way around this problem is simple: debt.

The use of debt becomes important at many points in the economy. Increased debt can theoretically help (a) the companies doing the energy extraction, (b) the companies building factories to create the new goods and services, and (c) the end consumers, since all of these benefit greatly from the services that cheap fossil fuels provide, and can better pay afterward than before.

Government debt, such as debt used to finance World War II, can also be used to start and maintain the cycle. John Maynard Keynes noticed this phenomenon, and recommended using an increase in government debt to stimulate the economy, if it was not growing adequately. The detail he was unaware of is the fact that the debt only works in the context of cheap energy supplies being available to make use of this debt, enabling growth.

How the Causal Relationships Work.  The loop starts with the combination of a cheap-to-exploit energy resource, technology that would use this resource, and debt that allows those would like to gain access to the resources to have the benefit of them, before they are actually able to pay cash for them.

This combination allows goods to be produced which initially may not be very cheap. Over time, new methods are tried, allowing technology to improve. Consumers are able to buy increasing amounts of goods and services, both because of their own increased productivity (enabled by fossil fuels and new technology) tends to raise their wages, and because the improving technology lowers the cost of goods. Government services are expanded as tax revenue per capita increases higher than gold or diamonds export. Infrastructure such as roads are expanded making the economy more efficient.

In this context, profits of companies grow, allowing reinvestment. Investment is also enabled by increasing debt. This allows the cycle to start over again, with better technology and more infrastructure in place. Each time fuels are extracted, the cost of extraction tends to ramp up a notch, making the needed selling price higher. But as long as the cost of extraction remains low, the economy tends to grow, and the standard of living tends to rise.

Overview. One way of explaining the tendency toward economic growth is that a cheap-to-extract fossil rule has an extremely high return on investment. This very high return enables benefits to all: workers receive higher wages; businesses receive higher profits; and governments receive both higher tax revenue and the ability to build new roads and other infrastructure cheaply.

Another way of describing the tendency toward economic growth is to say that the value to society of the (cheap) energy product is far greater than its cost of extraction.  This difference provides a benefit which flows through to many parts of the economy. Economists do not recognize that this situation can happen, but it seems to be a major source of economic growth. 

The Spoiler: Diminishing Returns 

The problem with energy extraction is that we extract the inexpensive-to-extract energy sources first. Eventually these sources get depleted, and we need to move on to more expensive-to-extract energy sources. I illustrate this situation with a triangle that has a dotted line at the bottom.

Figure 3. Resource triangle, with dotted line indicating uncertain financial cut-off.

Figure 3. Resource triangle, with dotted line indicating uncertain financial cut-off.

Businesses start by extracting the cheapest to extract resources, found at the top of the triangle. As these resources deplete, they move on to the more expensive to extract resources, further down in the triangle. Looking downward, it always looks like there are more resources available–it is just that they are more expensive to extract. This is why reported reserves tend to increase over time, even as supplies are depleted. The limit is a financial limit, illustrated by a dotted line, which is why virtually no one can figure out when the limit will actually arrive.

One somewhat minor point: When I say, “Cheapest to extract resources,” I am referring to broadly defined costs. What businesses want is resources that produce goods and services most cheaply for the consumer. Thus, they are really concerned about cheapest total cost, considering the entire chain that goes all the way to the consumer, including refining and transportation. The costs would include energy used in extraction, labor costs, transportation costs, taxes, and the cost of debt. It probably should include the cost of mitigating pollution effects as well.

A major problem is that as the cost of energy extraction grows, the favorable gap between the cost of extraction and the benefit to society (as mentioned in the previous section) shrinks. There are many ways that this problem manifests itself in the economy. Figure 4 shows a list of such problem with respect to higher oil prices:

Figure 4. Image by author listing some of the problems created by rising oil prices.

Figure 4. Image by author listing some of the problems created by rising oil prices.

One indirect impact of these issues is that there are more layoffs and fewer new job opportunities. If we calculate average wages by taking (total US wages) and dividing by (total US population), we see that during periods of high oil prices, wages tend not to grow, as they had in periods when oil prices were lower–just as we would expect (Figure 5, below).

Figure 5. Average US wages compared to oil price, both in 2012$. US Wages are from Bureau of Labor Statistics Table 2.1, adjusted to 2012 using CPI-Urban inflation. Oil prices are Brent equivalent in 2012$, from BP’s 2013 Statistical Review of World Energy.

Figure 5. Average US wages compared to oil price, both in 2012$. US Wages are from Bureau of Labor Statistics Table 2.1, adjusted to 2012 using CPI-Urban inflation. Oil prices are Brent equivalent in 2012$, from BP’s 2013 Statistical Review of World Energy.

Another issue is that it is not just the price of oil that rises. The price of natural gas rises as well. We have not felt this in the United States, because demand has kept the price down below the price of shale gas extraction. The cost of coal, delivered to its destination, has risen because transport uses oil, and transport costs are a significant share of total costs. The cost of base metals has also risen since 2002, because oil is used in metal extraction. Food prices in general have tended to rise as well, because oil is used in production and transport of food. When wages are close to flat, and the cost of many goods are rising, workers find that their paychecks are increasingly squeezed.

While costs of making goods in the US are rising, and paychecks are stagnating, an increasing amount of goods are imported from areas around the world where energy costs  and wage costs are lower. This helps keep the cost of consumer goods down, but it makes the problem of lack of jobs for US workers worse.

With all of these things happening, the government has more and more problems with its funding. Expenditures continue to rise, but taxes flatten, as the government tries to help the economy grow by not raising taxes to match expenditures (Figure 5, below).

Figure 6. Based on Table 2.1 and Table 3.1 of Bureau of Economic Analysis data. Government spending includes Federal, State, and Local programs.

Figure 6. Based on Table 2.1 and Table 3.1 of Bureau of Economic Analysis data. Government spending includes Federal, State, and Local programs.

Government expenditures can be thought of as expenditures out of the surpluses of the economy. As indicated previously, these are to a significant extent possible because of the favorable difference between the cost of extracting fossil fuels and the benefit those fossil fuels provide to the economy. As the use of fossil fuels has grown over the years, these government services have grown. In recent years, the presence of more unemployed workers has driven a need for more government services.

Since the early 2000s, government revenues have flattened. The lack of revenue, together with the ever-rising government spending, is what is driving continued big deficits. The danger is that this difference cannot be fixed, without huge cuts to programs that people are depending on, like unemployment insurance, Social Security and Medicare.

How the Economic Growth Loop Changes to Contraction

In my view, what causes a shift to contraction is a shift to higher energy costs. With higher energy costs, there is less surplus between the cost of extraction (broadly defined) and the benefit to society. Because of the smaller surplus, the parts of the economy that use this surplus, such as government spending, must shrink. Causal relationships gradually shift from the ones shown in Figure 2 above, to the ones shown in Figure 7 below.

Figure 7. Higher energy cost leads to unfavorable feedback loop. (Illustration by author.)

Figure 7. Higher energy cost leads to unfavorable feedback loop. (Illustration by author.)

We gradually find that all the great things we had learned to enjoy–inexpensive roads and other infrastructure, cheap goods, rising wages, and rising government serves–start going away. We increasingly find consumers maxed out on debt. We also find companies (especially energy companies) reporting lower profits, so they have more trouble investing in new energy extraction. The government cannot collect enough taxes for all of its services, so finds itself needing to keep raising its own debt levels.

The government can kind of “paper over” its difficulties with growing debt levels for a while, by using Quantitative Easing (QE). QE has the effect of making the interest the US must pay on its own debt lower. It makes the cost of business investment in new plants and equipment (including shale oil drilling) cheaper. It also helps stretch the incomes of increasingly impoverished workers by allowing monthly payments on homes and cars to be lower than they would otherwise would be.

The Party Ends With a Thud 

Most readers can deduce that a shift from a growing economy to a shrinking economy is not a pleasant situation. It has all of the makings of collapse.

One of the big problems is debt defaults, as it becomes increasingly impossible to repay debt with interest. This creates conflict between borrowers and lenders. Debt defaults are also likely to cause huge problems for banks, insurance companies, and pension plans, because of the impact on their balance sheets. Some institutions may close.

To the extent new credit is cut off, the lack of credit cuts off new investment in energy extraction, in buying new cars and trucks, and in almost everything else. Such a cut-off in credit is likely to increase job layoffs and to lead to yet more defaults. Lack of investment in new energy extraction causes oil supply to fall quickly–far more quickly than standard “decline” models  would suggest.

Businesses that in the past found that they could benefit from “economies of scale” as they grew find that fixed costs stay the same, even as sales shrink. This means that they either need to raise prices to cover their higher per-unit costs, or lose money.

Governments find that they need to cut government services to balance their budgets.  Discontent grows among citizens as those who lose their benefits become very unhappy. Discord grows among political parties, because no one can agree how to cut programs equitably.

We don’t know how this will end, but we do know that the Former Soviet Union collapsed into its constituent parts when fossil fuel surpluses were reduced, prior to 1991. Egypt and Syria both have had civil unrest as their oil exports ended. Clearly very large government changes are possible, as surpluses disappear.

This list of potential impacts could be expanded endlessly, but I will spare readers from a more comprehensive list.

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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455 Responses to Why EIA, IEA, and Randers’ 2052 Energy Forecasts are Wrong

  1. Re EROEI for nuclear plants, I think too many costs have been ignored: centuries of care needed for the “spent” fuel, medical care for cancer and birth defects, loss of farmland, e.g. in the Ukraine, loss of fisheries from Fukushima. A government control of insurance limits on restitution for accidents, the Price Anderson Act, is an umbrella the operators require in order to expose us to the risks of the plants they build and operate.

    Arnie Gunderson is a very experienced nuclear safety engineer. His discussion here is most important to consider:
    http://fairewinds.org/media/fairewinds-videos/4-myths-nuclear-industry-wants-believe

    Thanks to all of you for your brave assessment of the physical, economic and political threats we are facing.
    Sincerely, George B. Hill MD

    • There is no possible way that we will be able to “decommission” nuclear plants in the future, because of the spiral the economy is on. Part of this is the fact that the bonds and other investments that have been set aside to provide funds for this purpose will have no value. Part of the reason is that fossil fuels will simply not available. Electric power from elsewhere is likely not to be available either. I don’t know what this really means for how these plants finish their lives, but it is not what planners hoped for.

    • edpell says:

      George, I think you are correct but most people and politicians do not think that way. They think more like the nuke plants are already paid for lets run them to they drop. On an incremental basis neglecting all future costs nuke power is almost free. Here in New York State the politicians are desperate to bring stranded nuke power from aging nukes in the north of the state down to NYC. Using a big ugly transmission line through my town and many other towns.

  2. Don Stewart says:

    Dear Gail

    You continue to refer to the Weissbach article. Here is the Abstract:

    ‘The Energy Returned on Invested, EROI, has been evaluated for typical power plants representing wind energy, photovoltaics, solar thermal, hydro, natural gas, biogas, coal and nuclear power. The strict exergy concept with no “primary energy weighting”, updated material databases, and updated technical procedures make it possible to directly compare the overall eciency of those power plants on a uniform mathematical and physical basis. Pump storage systems, needed for solar and wind energy, have been included in the EROI so that the efficiency can be compared with an “unbuffered” scenario. The results show that nuclear, hydro, coal, and natural gas power systems (in this order) are one order of magnitude more effective than photovoltaics and wind power’

    Here is my comment. The art of Science involves first the selection of what is compared to what else. As I understand it, Weissbach chose to compare power plants using different methods of producing energy. He assumed that the power plants had to operate 24 hours a day, 365 days a year. In order to make wind and solar meet his condition, he has them pump a sufficient quantity of water uphill so that the falling water can then generate power as it runs through a turbine when the wind isn’t blowing and the sun isn’t shining.

    On page 6 he specifically rejects the notion that a wealthy economy will be willing to subject itself to the vagaries of wind and sunshine. He does not consider the possibility that we may not have a wealthy economy in the future, and might be more than willing to get some electricity from interruptible sources.

    Nowhere does Weissbach measure the cost of the pollution generated by each of his alternative sources of energy. One can make a good case that the pollution cost of continued production of electricity with fossil fuels is the extinction of the human race…along with a lot of other creatures. Awkwardly, extinction doesn’t readily convert into a dollar cost.

    In short, the Weissbach study may be useful for certain purposes, but I look at those as pretty limited. It is based on the unrealistic assumptions that we can continue to have a wealthy economy producing power with fossil fuels. What is needed, I think, is some imaginative research into the potential of very low pollution systems in a much less wealthy economy.

    Don Stewart

    • Weissbach also doesn’t look at what happens when high prices energy is put on the grid. It leads to that country being less competitive, and manufacturing being transferred to a country where coals is burned. Or it leads to the situation we are now seeing in Germany, with coal burned alongside the wind turbines, in an attempt to keep the overall cost reasonable.

      It is like making water run up-hill. High-priced energy makes a mess of economies. I am convinced that that high price is indicative of higher costs of production–many of them energy-related. Conventional techniques ignore pay to humans, rent for land, and the cost of debt in EROEI calculations. Whatever amounts are paid for these things ultimately go to humans, who buy goods and services made with fossil fuels with them. When these are included, the results don’t look nearly as good. The favorable comparison if intermittent renewables to fossil fuels comes mostly from leaving a lot of things out of the intermittent renewables calculations.

      • Don Stewart says:

        Dear Gail
        Here is a concrete example of why we might want interruptible solar power.

        If one is trying to regenerate topsoil, the quickest method is rotational grazing. Native perennial grasses send roots deep into the soil. The roots are pathways for sugars made by photosynthesis to move down into the soil. The sugars are liquid. When a cow (or other heavy herbivore) grazes the grass above ground, the grass plant sheds root mass and the sugars are liberated into the soil. The soil food web promptly turns the sugars into humus, and, lo and behold, topsoil is grown rapidly in terrible clay subsoils.

        A very convenient way to accomplish rotational grazing is to use portable electric fencing powered by small, portable PV panels. One solar panel can power about 20 miles of fencing. The cost of the lightweight fencing is from 30 to 80 cents per meter. The cost of conventional fencing is 5 to 7 dollars per meter.. In Africa, some people still use herdsboys to confine the animals…but a herdsboy in an OECD country is prohibitively expensive (think of Obamacare for your herdsboy). So we can consider the fact that the lightweight fencing combined with the PV panels to provide the shock which keeps the animals confined is an order of magnitude less expensive.

        Could the fences be powered by grid electricity from a centralized power plant? Of course they could, but at great expense. Extending grid power into a flexibly divided field would involve serious expenditures of money.

        In short, the solution to our problems with soil degredation turn out to be dependent on a very much lighter, quicker, cheaper technology. Centralized power generation and traditional grids do not solve the problems at any affordable cost.

        We CAN go back to the stone age solution of herdsboys. But that will have to happen as a response to a ‘powerdown’ phenomenon for the society as a whole. It would be suicidal for any farmer to adopt that strategy in 2014. Maybe in 2016?

        This is far more detail than Professor Weissbach can deal with. What bugs me is that he blithely assumes the problems and opportunities away by assuming that we will always be so wealthy that these kinds of issues are just pocket change.

        One runs into similar problems when considering the 24/7 provision of electricity to homes. There is abundant evidence that humans are healthier when they sleep according to the cycle of the sun. It’s not healthy to watch TV at midnight. So…if you were the King and you knew that TV watching at midnight was leading to a population with chronic disease, why would you enable it?

        Personally, I think it is time to give up delusions of ‘we will always be rich’ and get down into the dirt and wrestle with the real world problems. We won’t get it right, but perhaps we can avoid catastrophic mistakes.

        Don Stewart

        • I think that metal fences of any kind are unsustainable. We are not going to have the capability to build more. Electric metal fences are even more unsustainable.

          If we have solar panels plus metal fences, your combination will perhaps work for a while. Their usefulness depends on other things–for example, people’s desperation to get food, and willingness to kill off cattle that are conveniently held in one place by an electric fence.

          • Don Stewart says:

            Dear Gail
            You are, of course, entitled to your opinion that nobody can do anything useful.

            However, if I may inject some different perspective? Forecasts of the future have been notoriously wrong. For a while, we had a boomlet in people resurrecting old ‘world of the future’ videos from the 1930s and1950s and 1980s which showed personal vehicles gliding high above gleaming cities, etc. These vehicles did not come to pass, but computers as information devices did come to pass and very few people predicted them. So…it may behoove us to be cautious when we get ourselves too worked up about what we are ‘sure’ is going to happen next.

            I am intimately acquainted with a young man who predicted that we were about to run out of oil back in 1964. He was in the Army, had a lot of free time, spent it in the library, projected some trends, predicted oil shortages, put his meager savings into Standard Oil….and sold the stock several years later for only a small loss. So I am not new to the ideas behind Peak Oil and have been wrong many times already.

            So…let’s look at lightweight metal conductor fences powered by small, self-contained solar panels. Do they make sense right now, January 18, 2014? In my opinion, they most certainly do. They are an important component of an agricultural method which stops erosion, restores topsoil, puts carbon back into the soil, rehydrates the soil, grows healthy animals, and diversifies habitat for wild creatures. In ways that are financially feasible right now without a crushing load of debt.

            Will such fences make sense in the future? There are a couple of unknowns. For example, will we be able to get the modest amounts of metal necessary to conduct the electricity? Will we be able to get the other materials which go into the fences? Will we be able to get the self-contained PV system? If collapse were to happen tomorrow, we can pretty reasonably state that a farmer who already has such fences is a lot better off than someone who is totally reliant on the industrial animal model. We can also state pretty reasonably that lighter, cheaper, and faster is a good model for resilience in the face of whatever unexpected things happen.

            In short, these fences can be described as increasing the quantity of solar energy harvested and increasing the efficiency with which the solar energy is used, and increasing the information content…mostly through the biology, with an assist from manufacturing.

            Quantity of energy harvested, efficiency of use, and increased information are what made our planet into a productive, habitable place. I wouldn’t let uncertainties about the future stop me from doing what seems like a no-brainer.

            Don Stewart

  3. Don Stewart says:

    Dear Gail and Jan Steinman
    I asked about ‘remineralization’, a phrase used by Albert Bates. I listened to an audio of a workshop Darren Doherty did in California. He talked about mobile slaughter houses which are brought right onto the farm. Most of the phosphorus that is in the cow is in the bones. Roughly half the cow is meat which is taken away to be sold. The rest remains on the farm and goes into compost. The bones, however, are burned and put back onto the land to restore the phosphorus.

    Darren talks about the impending end of mined phosphate rock.

    People are also talking more about using biosolids from sewage plants. The biggest problem here is the unhealthy habits of humans which put bad stuff down toilets (as I understand it). Human feces also contain quite a bit of phosphorus.

    Either or both of these might be referred to as ‘remineralization’.

    Don Stewart

    • Ernesto says:

      In 2008 the price of oil fell . It surprises me that the production afterwards didn’t fall, it only disminished a little. Why did it not disminish more?

      • Ernesto says:

        The production of oil doesn’t seem to be much influenced by the price since 2005. It’s more or less constant regardless the price.

      • Jan Steinman says:

        Production did fall!

        Note that, when supply and demand are closely matched and inelastic, there is no discernable relationship between supply and price.

        If you have one single barrell of oil you can’t sell, you may be willing to take any price.

        Likewise, if you are short one single barrell of oil for something essential that you do, you may be willing to pay any price.

        The single biggest thing this chart illustrates to me is that supply and demand are closely matched and inelastic. Otherwise, small changes in supply would only provoke small changes in price.

      • SlowRider says:

        Produciton might have fallen if the price had stayed low for long enough.

      • There is a long lag time in oil operations. Wells that have been put in place continue to produce but at a lower rate. Fewer new wells will be added, but this doesn’t affect production very quickly.

        Now the news is that the companies that are drilling oil are losing money (or not making enough to pay for new investments with their profits). This lack of profitability means that the prices are not high enough.

  4. Paul says:

    I think more people will begin to catch on to what we are facing after reading this – the FT.com had something along the same lines last week – so it’s going MSM

    And if it is going MSM that means those at the top want people to know about this – which probably means they are prepping the world for something big probably not too far down the line.

    You don’t stir up the docile sheeple unless you have a reason.

    US Army colonel: world is sleepwalking to a global energy crisis

    A conference sponsored by a US military official convened experts in Washington DC and London warning that continued dependence on fossil fuels puts the world at risk of an unprecedented energy crunch that could inflame financial crisis and exacerbate dangerous climate change.

    The ‘Transatlantic Energy Security Dialogue’, which took place on 10th December last year, was co-organised by a US Army official, Lieutenant Colonel Daniel L. Davis, in association with former petroleum geologist Jeremy Leggett, chairman of the UK Industry Taskforce on Peak Oil and Gas.

    Participants, who addressed one another via video link, consisted of retired military officers, security experts, senior industry executives, and politicians from the main parties – including two former UK ministers. According to US Army colonel Daniel Davis, a veteran of four tours of duty in Afghanistan and Iraq, and regular contributor to the Armed Forces Journal:

    “We put the event together because the prevailing idea that we have a bright future of increasing oil and gas production that can sustain our current way of life indefinitely is based on a selective appraisal of the data. We brought together experts from across the spectrum, and with a wide range of opinions, to have a comprehensive look at all the relevant data. When you only look at certain things, like the very real resurgence of US oil and gas production, the picture looks fine. But when you dig deeper into the data, it becomes clear that this is only part of the picture. And the big picture proves that our current course cannot continue without significant risks.”

    The dialogue opened with a presentation by Mark C. Lewis, former head of energy research at Deutsche Bank’s commodities unit, who highlighted three interlinked problems facing the global energy system: “very high decline rates” in global production; “soaring” investment requirements “to find new oil”; and since 2005, “falling exports of crude oil globally.”

    Lewis told participants that the International Energy Agency’s (IEA) own “comprehensive” analysis in its World Energy Outlook of the 1,600 fields providing 70% of today’s global oil supply, show “an observed decline rate of 6.2%” – double the IEA’s stated estimate of future decline rate out to 2035 of about 3%.

    The IEA report also shows that despite oil industry investment trebling in real terms since 2000 (an increase of around 200-300%), this has translated into an oil supply increase of just 12%. Lewis said:

    “That is a very striking number and one I think that should be ringing alarm bells. It indicates to me that something has fundamentally changed in the economics of the oil industry and that you’re having to invest more and more for diminishing incremental production.”

    Lewis also referred to US Energy Information Administration (EIA) data showing that although global crude oil exports increased “year on year from 2001 to 2005”, they “peaked in 2005 and have been trending down since 2009.” Lewis attributed this trend to rapidly rising populations in the Middle East which has led to escalating domestic oil consumption, effectively eating into the quantity of oil available to export onto world markets.

    OPEC (Organisation of Petroleum Exporting Countries) populations since 2000 have increased at twice the rate of the world as a whole. This has driven them to increase their oil consumption four times faster, or by 56%, relative to the rest of the world.

    Such increases in domestic consumption, curtailing global exports, have been enabled by a corresponding increase in domestic subsidies, said Lewis. Fossil fuel subsidies have increased to $544 billion, nearly half of which amounted to oil subsidies dominated by Saudi Arabia and Iran.

    Against this consistent trend of rapidly declining oil exports, Lewis questioned the IEA’s projection of an increase in global crude oil exports and imports from 35 to 38 million barrels a day out to 2035. He pointed out that if such domestic subsidies are removed by OPEC to facilitate increased exports, this would increase “the risk of greater domestic stress and social disorder”, as already seen since the ‘Arab spring’.

    Lewis’ presentation was complimented by geoscientist David Hughes, formerly of the Geological Survey of Canada, who cited a wealth of official data demonstrating that shale oil production is likely to peak around 2016-17. Similarly, US shale gas production has sustained a plateau for the last year that is unlikely to retain long-term sustainability due to spectacularly high decline rates, and because the vast majority of production comes from just two or three plays.

    The upshot is that continued dependence on fossil fuels is becoming increasingly expensive, with oil prices continuing to rise for the foreseeable future, impinging evermore on global economic growth. At worst, declining global exports point to a risk of an oil crunch that could, in turn, trigger another financial crash.

    Co-convener of the conference Leggett, author of the new book, The Energy of Nations, said:

    “It should not be forgotten that only a very few people warned that the financial incumbency had their particular comforting narrative catastrophically wrong, until the proof came along in the shape of the financial crash.” According to Leggett, a global energy crisis is unlikely to “erupt fully until 2015 at the earliest.”

    According to Lt. Col. Davis, scepticism of the oil industry’s bullishness about future production is growing amongst senior Pentagon officials:

    “A lot of high-ranking officials are starting to ask exactly these hard questions about the sustainability of the current energy system. You’ve got to remember that for the military, it doesn’t matter what you want to do. What matters is what you can do, and it’s our top priority to make sure we understand potential limits to our operational capability. Even the EIA is forecasting that we could see a peak of shale production by 2018 followed by a plateau and decline, and the Pentagon knows this. But our transport infrastructure is totally dependent on liquid fuels. How are we going to sustain that infrastructure with these decline rates? That’s why serious questions are being asked by high level US military officials as to what exactly the Army, as well as American society in general, is going to do to address this challenge.”

    http://www.theguardian.com/environment/earth-insight/2014/jan/17/peak-oil-oilandgascompanies

    • xabier says:

      Paul

      An intelligent and well-informed soldier is always worth listening to. As it says, they deal in reality. Unlike politicians: in the UK, the Prime Minister is still preaching the untold wealth and job creation that will come from fracking, and offering bribes to local government and residents to permit it….. I am ceasing to find it amusing.

      • Paul says:

        Or soldiers — this came out some time ago and was ignored http://www.spiegel.de/international/germany/peak-oil-and-the-german-government-military-study-warns-of-a-potentially-drastic-oil-crisis-a-715138.html

        I sent that to a banker friend at the time and his comment ‘that’s from the military – they just want to scare people so they can justify buying more toys (weapons)’

        Cognitive dissonance is indeed powerful!

        I wonder how skeptics of peak oil and the implications of the end of cheap energy will react when they see that Guardian article — I think most still think we will innovate our way out of this – a lawyer recently said to me ‘but have you seen that they are developing an energy source made from bacteria and are testing it out as jet fuel in a plane?’

        Ya – and Japan is mining the depths of the ocean for energy trapped in ice — and fusion will be with us any day now (sorta like that sign ‘free beer – tomorrow’)

        And of course if all that fails Jesus will make an appearance and help us power the world for 1000 years with one barrel of oil.

        The fact that this is going MSM when the propaganda machine was telling the donkeys (sheeple) that we had ‘100 years of oil’ makes me think that we are fairly close to a tipping point in all of this.

        Could it be that the Central Banks are beginning to see that their efforts are beginning the phase of pushing on a string?

        I note that Bernanke when he stepped down said something to the effect ‘I know a lot of people are angry with me – but when they realize why I did what I did they will understand’

        Does he mean he kept the wheels moving for as long as he could with QE and ZIRP?

      • Paul says:

        One thought on politicians – I have been very hard on them as have many others.

        However I am going to take a walk in their shoes and try to understand why they are carrying out these disastrous polices (financial, energy, foreign policy, environmental)

        The ultimate decision makers are fully aware that peak oil has passed – and they know the implications – because they have access to classified research from think tanks.

        I wonder if I was in that group and I knew with some certainty that an ‘end of world as we know it’ scenario was virtually certain – and that all my wealth and power would not be of much use (I and my family die too) – would I also not make decisions that kicked the can – even though they had devastating consequences for many in the here and now?

        Would I care about the environment if I thought the environment was toast anyway (I go back to the 400 nuclear plants and untold hundreds of pools with spent fuel rods – I guarantee you the governments know full well what happens if we cannot service those).

        Would I care that we had to tear a country like Iraq to pieces so that we could keep the wheels of the world oiled for a year or too more? Sure – it’s terrible that the people suffer – but they suffer and die so the world can go on a bit longer – and they will die anyway?

        I am not saying I agree – but I am trying to understand the moral issues that these people have to deal with – surely not all of them are sociopaths.

        On the other hand, there are many in the global elite who see the rest of us as chattel and riff raff — who if given the choice would exterminate all but the chosen few (call it the Ultimate Country Club) if it meant they could survive. So I do think the elite would be in self preservation mode and trying to work out how they survive and thrive.

        As the saying goes, never let a good crisis go to waste – ‘John Galt’ and his masters of the universe might see this as a great opportunity on many levels.

        Now can you imagine a world populated only by alpha males exclusively – the country club would turn into an endless war zone!

  5. Pingback: Gail Tverberg: How the EIA, IEA, and Other Researchers Are Modeling the Wrong Growth Limit | Jo W. Weber

  6. Pingback: Gail Tverberg: How the EIA, IEA, and Other Researchers Are Modeling the Wrong Growth Limit | naked capitalism

  7. Tim Olsen says:

    Very good and very interesting!

    But I do have some diverging thoughts on it. These analyses seem to view energy costs in Boolean terms, as either “cheap” or “expensive” (both in economic and ERoEI terms) and then predict collapse based on the challenge that comes with expensive. That implies to me something on the order of at least a doubling in energy costs. But they quickly discount renewables as expensive, when in fact they are nipping at the heels of fossil costs now. Another 20-40% increase in energy costs might be tough, but very possibly survivable if society has the will to be smart about it. Hmm. Now faith in the human species – there’s a tough one. But really, who’s modeling a mid-cost renewable scenario?

    And economic systems present their own unwieldy animal, regardless of energy costs. If we sidestep money for a moment, the carrying capacity folks have already done a lot of work on simple global resource/population balancing, with survivable results anywhere from 2-9 billion people. That’s still not too encouraging, especially when everyone spouts off about “sustainability” now without ever mentioning population. I suspect the best thing for us is to hit that pain point quickly and get on with the readjustment. Perhaps the biggest danger is for the economic power centers of the world to skew the system away from pain long enough to really get us into trouble.

    • Paul says:

      Tim – from Bloomberg – ‘a $10 inflation adjusted increase in the price of a barrel of oil results in a 0.5% drop in GDP in a developed economy’

      In 1998 I believe oil was just under $12 a barrel – inflation adjusted I believe it should be around $30 now.

      Of course the CPI is a crock of dung so let’s say the real price should be $60. But it hovers around $100.

      So that means a drop of 2% of GDP. In August 2008 it was nearly $147. That’s a hit of over 4%. That is a game changer re: economic growth – it means stall speed.

      I (and many far more capable others) would suggest that oil is already too expensive and that it has essentially stopped growth – that QE ZIRP are being deployed to combat that drop in GDP — that our economic system cannot function on 100 buck oil as it is – so it definitely cannot endure a 40-60% increase on the current price.

      Of course the renewable energy issues have been dealt with ad nauseam on this site an others – even if solar was delivering energy more cheaply than oil — you cannot replace oil with it – in particular you could not produce fertilizers and pesticides.

    • $100 oil is doing consumers in, which oil companies are losing their shirts. Intermittent renewables are raising grid costs. We are already at the edge of collapse, in terms of government finances and ultra low interest rates supported by QE. So I don’t see we have anyplace to go. We are pretty much there. There is no more 20% to 40% more, I am afraid.

      There were about 1 billion people on the earth before we used fossil fuels. We have degraded a lot of resources since then–for example, the seas are very overfished. After collapse (which will likely take out renewables as well as fossil fuels) it is likely that the world will not ever support 1 billion people. If people expect to live in the kind of surroundings we have today, the number survivable is likely much under 1 billion. I don’t know where you get your ideas from.

      • Paul says:

        When the decision was made to ‘Drill Baby Drill’ and I realized (only after digging and digging) that fracking was not going to deliver 100 years of cheap energy as promised rather it would result in at best a decade of fairly expensive energy before peaking — and I understood that it was exempted from EPA rules — I came to the conclusion that we were approaching the end of our rope.

        Surely you don’t approve something that is very obviously environmental suicide – unless you have run out of other options.

        I think this is the last kick of the can down the road — when the fracking fable bursts — even those living under bridges right now and eating in food banks will look back on these recent years fondly – because they will be very prosperous times compared to what is coming.

  8. johnwerneken says:

    Bull.

    There is NO limit to resources…the Universe is large. The only questions are how to deny popular desires security and for protection from risk and retain savings sound currency and the profitability of investment.

    • timl2k11 says:

      Oh boy. The crazies are coming out of the woodwork! Perhaps you would like my website http://ourinfinteworld.com !

    • Jan Steinman says:

      “There is NO limit to resources…the Universe is large.”

      Yes, if we could just get to one hydrocarbon lake on Titan, orbiting Jupiter, all our energy problems would be solved!

    • Paul says:

      Let’s do a little test:

      CNN announced today that the Curiosity Explorer has discovered a subterranean ocean of sweet crude on Mars that is 1000x the size of all the oil ever extracted from the Middle East and US combined.

      A spokesperson said ‘this is an incredible find – it solves the earth’s energy problems for the next 200 years at least’

      Is the spokesperson correct?

      • edpell says:

        No help for us on Earth but Elon Musk and his 80,000 martians will be happy.

      • removing the obviously humourous intent in all this, while there is no doubt that ‘useful’ commodities exist on other planets, solar systems and so on, the same problems exist in getting hold of it as here on earth.
        Our prime commodity is oil and other hydrocarbons we can burn and convert to other useful commodities. (that underpins our civilised infrastructure) There is no shortage of oil here—the problem is the energy necessary to get hold of it. Thus if oil costs more to extract than the energy obtained from it, then it stays in the ground.
        There is little doubt that the universe is awash with oil, again, all we have to do is go get it.
        But the same cost mechanism ( basically part of the laws of physics) applies throughout the universe as it does on Earth….. if we expend more effort (in purely calorific terms) in getting it, than we obtain from the oil we bring back, then the exercise is futile.
        This is why interplanetary expeditions might do a lot for national prestige, but ultimately they are job creations schemes for PhDs. . If you go somewhere and only bring back photographs and souvenirs, you’ve just been on vacation.

    • Paul says:

      I might also add – that when I read comments like this (interpret as ‘we have pillaged one planet – surely there are others out there that we can rape as well’) – I can’t help but thinking of how the animals, and the plants, the few humans who remain eking out a sustainable lifestyle — and of course the earth itself —- will smile when the cancerous, materialistic, Facebook, Twatter, Dancing with Stars-obsessed cancer that is modern man is wiped out.

      • Jan Steinman says:

        C’mon now, Paul — don’t hold back; tell us how you really feel!

        You’re beginning to sound a lot like Derrick Jensen…

        • Paul says:

          What’s not to like about a guy who lives with a native tribe heheh (he walks the walk)

          I’ve got Jensen’s End Game on order – I have watched an interview with him and I think he is to a certain extent, a voice of reason – there is no compromising with the beast that demands infinite growth. The green movement truly is an exercise in futility – nothing short of revolution – or collapse – will result in meaningful change.

          Where I differ is that I would never advocate or use violent means to attack the system – even though I think it is destroying the planet. There is no winning that battle — and I do not wish to join Bradley (or Chelsea) Manning in the dungeon.

          Alas – there is not need to martyr oneself like Wiebo Ludwig – the system is currently committing suicide — and the amusing thing is that as the head turns purple — the beast is so bloody stupid that it reacts by tightening it’s stranglehold on itself.

          The beast is so stupid that even though many people are saying ‘hey beast – you don’t look so good — you are turning a deeper hue of purple every day – maybe you should not choke yourself like that’ – the beast gasps ‘screw you moron – I know what I am doing’

          Green Capitalism: The God That Failed

          As our locomotive races toward the cliff of ecological collapse, the only thoughts on the minds of our CEOs, capitalist economists, politicians and most labor leaders is how to stoke the locomotive to get us there faster. Corporations aren’t necessarily evil. They just can’t help themselves. They’re doing what they’re supposed to do for the benefit of their owners. But this means that, so long as the global economy is based on capitalism and private property and corporate property and competitive production for market, we’re doomed to a collective social suicide – and no amount of tinkering with the market can brake the drive to global ecological collapse. http://www.truth-out.org/news/item/21060

          We have a stark choice: We can save capitalism or save human civilization. There is no possible future that contains both. http://www.truth-out.org/news/item/21215-beyond-growth-or-beyond-capitalism

          • I am not sure we are even being given that choice. There is clearly no future that contains both. But I think we are kidding ourselves–we really don’t have much ability to control climate. And mankind has been over-using the world’s resources hunter-gatherer days. Long-term solutions may not include humans–we don’t know.

    • We will all leave the earth and move to Mars, then!

  9. I have a question for Gail. All analysis of the ROI and EROEI on solar installations is based on a 20 year amortization. Solar panels will last, however, for a 100 years or more.

    If you redo the analysis based on a longer lifespan, solar is much cheaper than all fossil fuels right now. The issue is that the simple ROI calculation that is used cannot create a real present value for cash flows this long. The formula’s used disguise this massive, society changing benefit.

    Is there anyway this can be corrected|

    • Our civilization will not last 100 years. I doubt it will last 20 years.

      If we are talking solar panels on the electrical grid, the length the system last is determined by the shortest-lived part of the system. That may be the electrical transmission wires or it may be the inverters. At any rate, I doubt it is as much as 20 years. Most EROEI analyses don’t consider the changes that are needed to the grid itself, or the need for energy storage. Weissbach et all show that solar is much inferior to fossil fuels when these are included. See http://www.sciencedirect.com/science/article/pii/S0360544213000492

      I would add that high priced solar tends to make an economy less competitive in the world marketplace. As a result, manufacturing tends to shift to China and other places with coal usage for the world. This raises CO2 for the world, regardless of what narrow bounded EROEI calculations say. Charles Hall and Pedro Pietro give an EROEI of 2.5 for solar PV in Spain–and Spain has more solar hours than other places in Europe.

  10. Creedon says:

    John Williams at Shadow Stats is predicting hyper inflation for later this year. I would like to know Gail’s reaction to this. Thank you

  11. mf says:

    this post has all the marking of past predictions of doom, and it will fail (not that too many people will remember) for the same reasons that past predictions of the end of the world as we know it failed: linear extrapolation applies poorly to actual societies. With due respect to Gail, actuaries have a tendency to use this method of predicting future events.

    First, the term “peak oil” (or peak most other things) is a misunderstanding of reality. The reality is that the population growth worldwide has outran the abilities of oil based civilization to match the said growth at least three decades ago. It is the matter of simple numbers. The result of which is not a collapse, but social inequality. There is no peak oil if X% of the population can be kept from using oil. In most of the world this is known as a shantytown, sometimes also called the wrong side of the tracks. It leads to all manners of social unpleasantness, but it can be distressingly stable, as an example of South America (to name one) demonstrates.

    The debt growth in developed countries is a political mechanism through which living standards in the developed world are dropping, to allow for living standards elsewhere to partially rise, given constraints on currently commercialized resources. For some time to come, pauperization will be spreading in the developed world through periodic waves (each called a crisis). The next crisis will be so called “retirement crisis”. It is said, correctly, that most people have not been saving enough to retire, and so they have to continue working. In the next crisis large numbers of them (older people) will be shaken out of the labor force and unable to return. In the end, there are only so many openings for Walmart greeters. The lucky ones will consolidate living arrangements with their children, unlucky ones will suffer, and some will die earlier than they would otherwise have to.

    This will continue until the developed world re-discovers industrial policy. Technological solution is most likely second wave of electrification. Nuclear power may be the next leg to stand on, as are renewables. Hydrocarbons are most likely abiotic, at least in part, global warming is political bunk, and there are still methane calthrates. The coping mechanism for transitory scarcity is, unfortunately, inequality and economic hardship.

    I think that anyone who sits there saying, “collapse is coming” will look silly, for these aforementioned reasons.

    • timl2k11 says:

      “Hydrocarbons are most likely abiotic”
      You must have gone insane?

    • Paul says:

      Abiotic — that’s akin to oil growing on trees right? Like money growing on trees? Like turning lead into gold?

      I have some news for you – the oil we are using was created over many millions of years – we have used up roughly half of it – most of the other half will not be extracted because the costs involved in extracting it are too high i.e. nobody would be able to afford oil at 200 bucks or more a barrel (they can barely afford it at 100) + the amount of investment required to grab that oil would pull investment out of the economy thereby collapsing the global economic system.

      Now if you can wait around a few hundred million years for organic materials that are breaking down today to turn into oil then sure – everything will be coming up roses.

      As for looking silly – look around you my friend – Spain’s youth unemployment just surpassed Greece’s at 58% – China has printed 15 trillion dollars since 08 and is unable to stop – Japan and the US are printing like there is no tomorrow and unable to stop – France’s economy is cratering – nobody is recovering – the world is hanging from a thread of QE/ZIRP – and that thread is weakening by the minute.

      The collapse is happening right before your eyes – and you are unable to see it – which begs the question – who is being silly?

    • Stilgar Wilcox says:

      “Hydrocarbons are most likely abiotic, at least in part, global warming is political bunk,”
      Sorry mf, but you lost all credibility with those two comments.

    • Time will tell. Our financial mess is pretty bad now. I am not talking about “peak oil,” I am talking about “Limits to Growth”. It is pretty clear that in a finite world, we eventually run into limits.

  12. Don Stewart says:

    Dear All

    A recurring subject here has been ‘what happens when crisis strikes?’. Do we descend into savagery (no offense to the real savages) or do we manage to pull together, somehow?

    A couple of straws in the wind. First, Janine Benyus, the biomimicry expert, stated in her talk at Omega last fall that stress overwhelmingly promotes increased cooperation. I don’t have a citation.

    Second, there is a discussion in the book Revolutions That Made the Earth by Lenton and Watson. The book traces both the purely physical processes as well as the biological and cultural processes which have turned the Earth from a barren place into a place teeming with life. It’s full of detailed explorations into chemistry, so perhaps not easy reading for many of us. But there are some things which even someone like me can perhaps understand.

    You first need to know that there have been several ‘snowball Earths’ in our 4 billion year history. These snowball periods wiped out a lot of life. You also need to understand that animals are unique in the functional specialization of their cells and in the altruistic behavior of their cells which permits the animals body to function as a single organism. On page 281 we get some interesting discussion:

    ”extreme glaciations would produce just the conditions in which altruistic traits would most readily evolve. This was an environment in which many small populations of proto-animals would have been isolated from one another for very long periods of time….For (altruism) to prosper, the altruistic gene has to have a high frequency in the population, and it must be linked to mechanisms for keeping out invaders and suppressing cheaters. Animals have developed sophisticated methods to perform these functions. They have genes, for example, that will kill cells that might otherwise pose a threat, while their immune systems keep foreign invaders at bay.’

    When scientists look for evidence that hardship promotes altruistic behavior, they find it in the McMurdo dry valleys in today’s Antarctica (page 282).

    While genes are clearly still important for human behavior, it is also true that culture is very important. If we can imagine a population of small groups which are largely self-sufficient, each group with distinctively different cultural approaches to dealing with the Crisis, then what we might expect to emerge on the other side of the chasm is a much reduced total population, with the survivors belonging to those groups with a cooperative culture and also a sound physical plan for dealing with survival issues.

    Your attitude toward this can be either to focus on the likely population decline, or else to work to place yourself among those with the best chance of survival.

    Don Stewart

    • Jan Steinman says:

      “hardship promotes altruistic behavior”

      The way I think of it is that high energy situations promote competition, whereas low energy situations promote cooperation. This is right out of Ecology 101, backed up by Odum and Holmgren and Holling.

      “Your attitude toward this can be either to focus on the likely population decline, or else to work to place yourself among those with the best chance of survival.”

      Well put, and worth repeating!

      • Paul says:

        “hardship promotes altruistic behavior”

        Jan – exploring this further – a year and a half ago a friend and I trekked into one of the most remote parts of Papua because we wanted to observe a subsistence tribe.

        After getting off the tourist trails around Wamena we headed into the mountains – after humping up and down 3000m over a number of days we made it to our destination – a series of tiny villages that our guide indicated only a handful of foreigners would visit in a year.

        The one we camped in was truly a totally self-sustaining community – there was almost nothing in there from the outside world – a glass jar or plastic bottle would have been hugely prized (reminded me of The Gods Must be Crazy) All food would have been grown on the hillsides (mostly sweet potatoes) – they had some swine as well. Other than that – nothing.

        The people were stunted with few over 4 and a half feet tall – thin – and miserable. Usually when one enters a village the kids are joyous – not here – they barely looked at us – perhaps they didn’t have the energy to smile (we saw evidence of malnutrition in the form of distended bellies).

        We also observed that there were very few people in each village – perhaps a few huts each – so clearly resources were scarce and that dictated the low populations.

        Without a doubt these people were suffering great hardship – but they appeared to be living together in relative harmony – from what we were told they were not murdering each other to get a larger share of the meager food supply (although there exists inter-tribal warfare over resources)

        So I would agree that hardship can breed cooperation – with a caveat – I think this only happens when there is no mismatch between resources and population.

        I suspect in these villages – if the number of families grew too large and people could not be fed – cooperation would quickly turn into violence within the community

        Applying that theory to my decision to live in a small ‘village’ in BC (under 1000 people) – if the ‘lights went out’ (or the groceries no longer arrived at the shops – or nobody had the means to purchase them) what would happen – would people cooperate or would they attack each other?

        At least in the short term the population would massively outweigh the food resources in the town – most people would have at best a couple of weeks food stocks on hand (because most people are blissfully unaware of what is imminent so they would have made no preparations at all).

        I am inclined to think that rather than cooperating, the people of the town would not be any more sophisticated than the people in the village in Papua – I think that once they had hungry families to feed there is a very good chance they would first ask the ‘haves’ to share — and if they refused (on the grounds that everyone would still starve) — the would seize food by force.

        I think that if most of the 1000 people in the village died off from cold, hunger etc… and the few that had some means to stay alive were able to make it through the initial stages of collapse in decent shape (and with the knowledge of how to raise food) – the small remaining group would most definitely cooperate – because the population and food supply would be in balance.

        Thoughts?

        • Dave says:

          “hardship promotes altruistic behavior”

          Regarding collapse of Anasazi society (Jared Diamond, “Collapse”, pg 151):

          “…abundant evidence of strife, including signs of cannibalism…warfare evidently became intense, as reflected in a proliferation of defensive walls and moats and towers, clustering of scattered small hamlets into larger hilltop fortresses.”

          “While everyone acknowledges that cannibalism may be practiced in emergencies by desperate people, such as the Donner Party trapped by snow at Donner Pass en route to California in the winter of 1846-47, or by starving Russians during the siege of Leningrad during World War II, the existence of non-emergency cannibalism…was reported in hundreds of non-European societies at the times when they were first contacted by Europeans.”

          Dilworth (“Too Smart for Our Own Good”) implies that “altruism” may in fact be a value judgement such that at times of hardhip it is sometimes undesirable to be altruistic (pg 59):

          “As regards infantcide…a study of modern hunter-gatherers revealed that it was practiced in 80 of the 86 societies examined; and it was estimated that between 15 and 50 per cent of all live births ended in infanticide…women practise infanticide when in their opinion it is necessary. Sometimes a child is born that cannot be supported, in which case it is destroyed. …if the season is very hard [i.e. altruism in face of hardship] and she already has an infant under a year old…she is forced to kill her newborn child.

          • Paul says:

            Thanks for reminding me of those Diamond insights. Highly relevant to this discussion.

            Of course we are not savages like those people so we’d never do any of those things to survive 🙂

            Now I am really struggling with the ‘be part of a close knit community’ thing – unless the whole community has bought into this then you are as secure as the weakest (hungriest) members of your community.

            I am wondering if the survivors of this will be those who have serious bush skills and set out on their own. Not an option for most even if they have those skills. Likewise – those living like hermits in very remote places and rely minimally on civilization for their survival. Few and far between….

          • Don Stewart says:

            Dear Dave
            I think most people agree that altruistic behavior is frequently limited to those within the small group. That is how small groups of Anasazi could co-operate to build defensive fortifications, rather than ‘every man for himself’. The citation I gave required that altruistic behavior needed a small group in an isolated position in order to evolve, and to also be under stress.

            What will happen if you have a mass of millions of people who have no common bonds and are subjected to stress is a different story. We have found remarkable sharing behavior among plants. For example, some plants share sugars on a seasonal basis…Plant A uses sugars in the spring but then supplies Plant B which needs sugars in the summer, etc. Plants attract microbes to their root zone with exudates (sugars) and the microbes mineralize nutrients that the plants need. Plants, of course, don’t have brains. Whether we can call their behavior ‘altruistic’ is contentious. Michael Pollan’s recent New Yorker article on Plant Intelligence explored the controversy surround the use of words like ‘intelligence’ and ‘altruism’ to describe the behavior of creatures that don’t have brains. There isn’t any debate about WHAT the plants are doing, it’s about the language we use to label it.

            The book Moral Tribes explores the possibility that humans can evolve altruistic behavior beyond the close knit, small group. I don’t have a strong opinion on that one. The history of inter-tribal violence isn’t encouraging to me. Some people think that trade relations decrease inter-tribal violence.

            As for the infanticide, that can be seen as altruistic behavior. For example, in Edo Japan families regularly practiced infanticide, not because it was legally required, but because they could see that limiting family size was a good thing for the family. For example, farm families were legally restricted to live on their land, and that land had a finite extent, and they were capable of producing only so much food. What evolved was the practice of infanticide if surplus children were born. Infanticide was for the good of the group, not maximizing ones own genes in future generations.

            Establishing small groups today who have strong common bonds and also the practical attitudes which will be required for survival, and who are able to somewhat isolate themselves so that they become largely self-reliant, is a tall order. As you can see from the Trans-Pacific Partnership, the Powers That Be envision a sort of global corporate governance where everything is done for money and there are no common bonds, no isolation, no self-reliance, and anyone practicing infanticide will be shot. If you combine Gail’s ideas about the future with the atomization of the individual promoted by the TPP, I think you end up with people killing each other. The number of survivors will be small.

            Don Stewart

            • Jan Steinman says:

              “altruistic behavior needed a small group in an isolated position in order to evolve, and to also be under stress.”

              I’m coming to that conclusion, as well. Times are not yet tough enough for people to collaborate closely. Individualism is a high-energy thing; collaboration is a low-energy thing.

              I’m also thinking that genes play an essential role. Before fossil-sunlight, people lived in tight groups of mostly-related people. That may explain the failure of most intentional communities to gain traction. Prohibitions against incest appear to be deep-seated, but I’m thinking a core group of related individuals may be essential for long-term survival, with carefully-selected mates from neighbouring tribes or clans allowed entry.

              “We have found remarkable sharing behavior among plants… Whether we can call their behavior ‘altruistic’ is contentious.”

              I prefer terms from ecology, such as commensalism, mutualism, symbiosis, parasitism, etc. I don’t think intelligence makes any difference at all. When raptors divide up rodents temporally, hawks by day, owls by night, are they being “altruistic?” It doesn’t really matter, does it?

              I find it strangely reassuring that raptors can collaborate without big brains. Perhaps intelligence is more an impediment than beneficial.

              “Establishing small groups today… is a tall order. As you can see from the Trans-Pacific Partnership, the Powers That Be envision a sort of global corporate governance… If you combine Gail’s ideas about the future with the atomization of the individual promoted by the TPP, I think you end up with people killing each other. The number of survivors will be small.”

              I’m more optimistic, not of any pollyanna tendency, but because of Odum, Holling, and Tainter.

              How can globalism survive expensive fossil fuel? How can tremendously complex trade agreements survive the energy-expensive cost of maintenance and enforcement? How can such agreements be enforced as global finance, transportation, and even communication systems grind to a halt?

              I don’t see the local sheriff busting a farm stand because it was not open to competitive bidding from across an ocean. I can’t imagine housing homeless people incurring the wrath of the global building code enforcement agency. I don’t think even simple enumeration will be possible, let alone knowing how many babies survive, let alone knowing how they died.

              No, if any of these things happen, it will be due to local warlords or fiefdoms, not global agreements.

              I continue to fight trade agreements. They are evil, and are hastening demise. But they are the last gasp of a global civilization going supernova. Just try to stay out of the way as they implode under their own weight. (The TPP is over 1,000 pages! As energy declines, who’s going to read it, let alone understand it and enforce it?)

        • You have had some interesting experiences! I expect a sudden change makes a difference. If people have adapted to living on a lot, suddenly going to little will be a problem, especially if they are lacking the skills to make the change work. If there is sudden change, and there is clearly not enough to go around, it seems like there will be fighting over resources–sort of our current situation.

        • xabier says:

          Paul

          That’s very interesting about the village.

          A great deal of violence among the poor originates with drugs and alcohol, and an abundance of weapons.

          Poor shanty town versus poor village: better odds of peace in the latter I should imagine?!

          Altruism does also seem to be hardwired into us: I was given a book from the 1830’s to repair, on a cholera epidemic in an English town. The author noted that although it hit the poorest of the townspeople the hardest, and their suffering was very great, there were hardly any instances of hard-heartedness and they helped one another as much as possible with great kindness (while being very suspicious of the authorities!). Only two incidents of the healthy throwing the sick out of their lodgings, among thousand who were affected.

      • On the other hand, wealth tends to be more evenly distributed when there is greater wealth in total, if I am reading this article correctly. http://www.sciencecodex.com/the_entropy_of_nations-125589

        • Paul says:

          Jan, Don – perhaps the clan structure that existed in Scotland is a relevant model of how a relatively small community might cooperate.

          • xabier says:

            Paul

            Ah, Braveheart!

            Except that the clan members were essentially slaves who lived in fear of their lords. Clan chiefs originally had the right to burn disobedient clan members to death in their huts, and their rule was absolute.

            A close friend of mine is the grand-daughter of a clan chief. The founder of the tiny clan (c1200) was a French knight, the friend of the Scots king from his days as a boy in France, who was granted the land to build a fort, and the people on it as serfs. Another more famous clan was founded when the locals were butchered and settlers imported to form the new clan.

            The system has softened a little over the years! Scots nationalism is a real hoot when one digs into the facts (like most nationalisms based on sentimental notions of race and brotherhood).

          • Dave says:

            Xabier writes:

            “…Clan chiefs originally had the right to burn disobedient clan members to death in their huts”.

            Is this what is meant by the altruism present within small groups (i.e. “clans”)?

            I suspect that if conditions for a small group ever get really bad, the most competant leaders will have little patience for members who demonstrate the “Tragedy of the Commons”. Think about captains of ancient seagoing sailing vessels. Limited food & water, constant danger from unpredictable weather, primitive navigation equipment. Yet these vessels were able to pretty successfully sail & deliver cargo.

            How?

            Any crewmember who was lazy or a troublemaker had much of the skin torn off his back by “20 lashes” (or more) from a whip with multiple strands. If this didn’t restore the lazy crewman’s motivation, there was always the opportunity to be “keelhauled” – sort of like waterboarding on steroids.

            Altruism will be one of the first luxuries jettisoned when widespread collapse ensues. Just ask anybody who has spent significant time behind bars.

    • Thanks for your uplifting comment!

  13. Jonathan Madden says:

    I am puzzling over a hypothetical political rearrangement that appears at first sight to improve matters on a large scale, but which is I expect smoke and mirrors.

    Assume that the US, China and Saudi Arabia choose to become one large federated state. So it then has a single federal government, one currency, and a single reserve bank.

    In doing so, a large quantity of external debt and bond surplus in neutralised. Oil production becomes more closely in line with internal demand, etc. Internal production and consumption of goods tends to equilibrium.

    This is perhaps similar in some ways to the merging of East and West Germany. One could throw into the superstate the entire EU as well.

    While in itself this has no effect on prospects for growth or the cost of energy extraction, it does appear to remove the destabilising effect of government debt. Movement of workers within the new state would be boosted. Global finances appear to have been detoxified.

    Thanks for any comments.

    • I think the problem is more a difference in the wealth of different areas than it is of debt, per se, between countries. As long as there are different countries, the value of the currencies can rise or fall, to keep debt levels within bounds. The Euro is having problems because of different wealth levels of its countries. With a common currency, their currency can’t rise or fall.

      Or course, the US$ being the reserve currency has also allowed the US to live beyond its income, for years and years. This is really a separate problem. If there were a common currency, then the US could not run up so much intra-country debt.

      Increasing trade among regions is not necessarily good. The warm countries, especially if they use coal for fuel, have a big cost advantage over the colder countries, because people in the colder countries need to have higher wages to afford sturdy homes and fuel to heat their homes. Combining the countries leads to a lot of job loss in the cold countries. This is part of our problem now. Read my post, Twelve reasons why globalization is a huge problem.

  14. Stilgar Wilcox says:

    All these ideas of survival after a full on collapse are well intentioned, but unless there is a way of replenishing food caches and having a source of naturally running fresh water, it will be extremely tough. What if you need a dentist – going use a pair of pliers? – what if the root breaks off? Need antibiotics – where are those coming from? Break a bone – what then – set it yourself? People are spoiled by modern day conveniences and services, so the transition to a subsistence lifestyle will be too much for most. Gail has broached this topic before and her thoughts convinced me it will not work for most. Probably the people to last the best will be those that fended for themselves in the outback long before collapse or are part of a permaculture commune. But they probably will only allow those under 30 years of age due to the need for high energy and perfect health.

    I’ve thought about stocking up on food and may do so with enough for a few weeks just to see how things pan out, to see if something springs forth in the aftermath we could live with. But I’m not going to go hog wild at 60 with my wife trying to transition into a high labor, peasant lifestyle.

    • xabier says:

      Stilgar

      I agree, I suspect none of us here will transition to being rural labourers. Gardeners, maybe.

      Some food stocks to see one through any major economic is certainly wise, but some things one might not wish to survive……

      In traditional peasant-based agriculture, you are done for at 40 as far as the really hard labour is concerned. It was, incidentally, found in the trenches of WW1 that anyone over 35 to 40, however healthy, exercised and well-fed, broke down physically quite rapidly compared to younger men. Can’t buck Nature.

      • The funny part is that the ones that are preparing for the collapse are mostly over 40 year old. Humans are really selfish. If human cared about the continuation of the human race, as soon as shortage of food and gas start appearing, people over 40 year old should let it go and accept to died. They should heads for the woods and kill themself. This is propably what I would do. I am 47 year old and I am preparing a bug out bag and getting used to the idea of letting go.

        There is a fail safe mecanism in life that ensure that every specy go extinct. It is called narcissim and selfishness.

        • Paul says:

          Is it selfishness or is it being aware of what is imminent and the survival instinct kicking in?

          I think most 20 year olds are not preparing because they are not aware of what is coming (they will however notice when Face Book and Twatter no longer function).

          But hey why pick on the youth – we can include 99.9% of the population in that.

        • Letting go is your fantasy while things are reasonably OK, because you have that delusion that you are in control of your own body
          You are not
          You are controlled by genetic forces that use you as a vehicle for their survival.
          You doubt that? Touch something seriously hot—your hand withdraws faster than you can think. Why? because your genetic control system recognises extreme heat as a risk to your whole–so prevents you from harming yourself.
          The same thing applies standing on a cliff edge, but lie down and peer over and your genetic forces are happy with that, because theres no risk to your whole. You might think about jumping, but lying down theres no risk of actually doing it.
          OK some individuals are suicidal, but it is very rare. We are controlled by forces that will not allow that.

    • Paul says:

      I completely agree – even if one could make it through it would be a brutish life – I have no utopian visions of living in some sort of a commune where there is love, joy and peace.

      But what I have done is this:

      – bought some remote land that has fruit trees, lots of berries, arable land and most important a very reliable fresh water spring
      – I had the land evaluated by a very experienced organic farmer to make sure it was suitable for a self-sustaining lifestyle
      – I am putting a small house up with a large cold storage area in the secure basement below
      – I am planning to buy enough food to get through one year assuming I can access few other food supplies
      – I have an Ontario hunting license but will get the proper one for BC and I will buy what I need for that.
      – I will be buying a large range of tools including what is needed for small scale farming – some I will buy duplicates for
      – I am learning as much as I can about farming and storing food
      – I keep healthy getting on my bike and putting in the km virtually every morning

      Why bother?

      My wife sometimes wonders exactly this – because as she quite rightly points out the odds of transitioning through to whatever comes next are slim – and even those who do make it will as you mention will likely have minimal medical care and live a very harsh life.

      I recently read a classic book about a family that settled in southern Ontario around 1800 – it was basically the wife’s diary – and there life was incredibly harsh with years of near starvation – keep in mind these are people who KNOW how to farm – they are not spoiled buggers like me. So I am fully aware of what I am up against.

      This all seems so surreal – the inclination is to think that surely it will not come to that — but when we look at what is happening around us we know for certain this is coming – and it is coming soon – from reading the comments on this forum there is no hysteria – the contributors all seem to be reasonable, intelligent people – no religious fanatics screaming the sky is falling – that such intelligent people are able to see this to a certain extent keeps me sane (if there weren’t so many clearly sane people agreeing then I’d wonder if I had lost the plot)

      As we have an element of consensus that the world as we know it is coming to an end, we can either choose to be complacent or just throw up our hands in despair – but when this hits as I say to my wife – your survival instinct is going to kick in – you will not lie down in a corner and die (or swallow a mouthful of pills) – you will fight to live – as will I.

      And you will be grateful for the food stores – and the 20 cords of wood that I plan to pre-cut – and the shovels and rakes and tools – and the other things that were put in place in advance to at least give us a chance.

      And she says yes you are right – it is worth making the effort regardless of the odds.

      Ultimately I have desired to live a life of adventure and travel – I have never sat in an office cubicle with a bunch of suits – I was in Haiti after the quake – chose to live in Shanghai for a year in the former French concession to witness what was happening in China – I went to Egypt and got into the riots – likewise in Bahrain last year (you want to feel alive – get in the middle of something like that – I understand why photographers get addicted to war) – I went to Greece to observe what collapse looks like – I’ve trekked to the furthest depths of Papua – I’d have gone to Afghanistan but the wife vetoed that.

      So in some respects what is coming is almost exhilarating – this is the greatest adventure of all time – we are almost certainly going to witness the end of the Industrial Revolution – and it won’t likely happen over a many years – this will likely happen overnight – so we get a front row seat.

      There is of course the downside that most of us will probably perish – but what the hell – there’s nothing you can do so best to enjoy the fireworks – and the challenge of trying to survive.

      Better than rotting away in a hospital bed with some terminal disease – and it is surely better than spending your remaining years in a suburbic stupor watching reruns of Dancing with Stars and American Idol – and making weekend forays to the Walmart to buy a new made in china garbage can.

    • Attitudes on this subject definitely vary with age. Young and able has some definite advantages.

      • SlowRider says:

        Yes there are many views, but few are really thinking it through.

        Traditional forms of prepping could make most sense in a scenario that allows the prepper to keep a low profile: a long descent with basic supplies available for a considerable part of the population, kind of N-Korea style. You need vitamin pills, tools, batteries, medicines, spare glasses, toothbrushs, gold etc. Preferably small, light, indispensable items. I think that to get there, you would need to scale down your consumption and prepare in time. But according to Gail, unfortuanately this isn’t the most likely scenario.

        In a violent collapse with huge urban populations in great pain, most things might be taken from you or lost in some way. There would be war between different regions at different stages of collapse. There would be huge crowds of completely desperate people you somehow have to deal with, because they would be everywhere. You would have to look almost as skinny as the rest of them, eating through your pile of chocolate and grains as slowly as possible, reading old books with your candles and purifying dirty water at home. While hoping that things will get better before your hoard runs out. You would still need a house to live in and to keep your things, altough you defaulted on your mortgage, property tax or rent long ago, and defend it against criminals every night. If you walk around in warm clothes in winter, people will attack you to get them or follow you home. And don’t even start to sell stuff on the black market – you become a target immediately. So it’s all just a big mess I really wouldn’t care to prepare for.

        Maybe the price of oil and the events on financial markets are really good signs to watch, to understand in which direction we are headed. With oil at 50$ in 2024, I would say we had a slow decline, and prepping makes sense. With oil at 500$ or 5$ in 2024, I would say we had a huge crash and some of us won’t be there anymore.

        • You are right about it being hard for any one person to live at a level very much above the rest of the population, unless they had high walls and guards around their property. I know that Secular Cycles talks about “security” being one of the big issues when trying to build up a new civilization. People would live on hilltops, even if the good soil isn’t there, to make it easier to ward off attackers.

  15. Paul says:

    On the topic of preparedness.

    Speaking to a friend here in Bali and he reckons that being tropical and fertile there is an abundance of food to be picked from the trees and rice fields.

    I wonder about that though.

    1. Bali (and other places like this) were lands of plenty in the past because populations were small – Bali now has 4.2 million people.

    2. When the next crash comes let’s examine what is likely to happen – the grocery stores get overwhelmed and empty quickly. There is no credit so new food stocks do not arrive. Energy becomes scarce so one cannot count on keeping freezers working. What would people likely do? Most have food stores for say a week or two at best.

    Then what? Pick fruit off trees? We have a fair number on our property – but they do not provide that much and it is sporadic – there are currently no bananas ready to eat – we pulled 4 papayas yesterday. We have a good sized veg garden but only cucumbers are ready to harvest.

    After that what would we do?

    This is perhaps the most fertile place in the world but there is no way in hell it can feed 4.2 million people on demand like that. Even if there was enough food coming out of the ground how would the food be transported if there are gasoline shortages?

    Alas not a problem – because hopefully we will have time to get off what will be a sinking ship and into the safeharbour of Canada where we have some acreage in the remote BC mountains. It’s a small community of people who have the skills to survive – and who will band together and cooperate.

    We are planning to put in place a good sized stock of long lasting foods including freeze dried items – at least enough to get us through one season so that we have the opportunity to build food stocks derived from the land.

    But hang on a sec – as we all know most people do not buy into the scenario that I think most on this site expect to play out. Do they have freeze dried food? They might have a cupboard full of jams and jellies – and a couple of hunting rifles……

    So what happens when the SHTF in a small community like that – a community that is totally unprepared for a situation where you walk into the grocery store – and the shelves are empty?

    Even if you are prepared to the hilt – what happens when everyone around you has a week or two of food on hand. Of course we’d like to cooperate and share but that would only ensure those who are prepared follow the rest of the community into starvation.

    I hate to be so negative but I just came back from Wales which has been swamped by storms and a lady said to me ‘you know the weather forecast is bad when the shops have no milk or bread – because people rush in and buy it all up’

    And that got me thinking – what is likely to actually play out if the grocery stores empty – regardless of where you are. I mean in specifics – what would people do?

    I used to think gold was a hedge – then I thought food stocks were – I am fast reaching the conclusion that there is no hedge – when people are faced with starvation – and you are the only one with a reserve of food – what are they likely to do?

    Perhaps being part of a small community is not the answer – particularly if the whirlwind strikes in winter. Perhaps the hermit option is the only option.

    Food for thought – pun intended 🙂

    • Jan Steinman says:

      Except as a distance cyclist or backpacker, I’ve never understood the fascination with freeze-dried foods.

      They are expensive and have a high carbon footprint. It seems to me — no personal slight intended — that they are a form of “I’ve got mine, screw you” hoarding.

      You can store properly dried grains and legumes in free 20 litre pails you pick up behind the local paint store. These last for years if sealed adequately. I just opened a bucket of wheat that was eight years old — and ground some up for breakfast pancakes; it was delicious!

      With proper rotation, you can maintain a multi-year food supply without bringing any new plastic into the world. Ideally, if you live in farming country, you can make friends with someone who will sell (or even give) you some “off the truck.” Otherwise, I recommend Bob’s Red Mill, a bulk-foods supplier who retired and gave his company to his employees. Bob’s stuff is still packed in paper bags, too!

      Again, no personal slight intended. It’s just that I identify hoards of freeze-dried food with survivalists. I’m a “thrivalist,” working to adopt thrift, frugality, and energy storage as an ongoing life-style, rather than having a cache to get you through some “event.”

      I think what we’re going through is not an event. It is a process. It may have periods of painful crash now and then, but mostly, it will resemble a glacier (remember those?) in its inexorable, barely-noticeable grind. We may find skeletons surrounded by wrappers of freeze-dried food, who consumed their “emergency rations” while waiting for the crash to happen, not recognizing it all around them as it slowly occurred.

      • xabier says:

        Jan

        Yes, just like the provincial Romans who buried their silver salvers and ewers and coins, expecting to dig them up when ‘it’ had passed, and which remained buried for the next two millenia.

        As you say, not an Event, but a process, a very extended one.

        On gold, I recall an Argentinian saying that no-one ever bought anything with gold during their Crisis, it had to be changed up first into dollars or pesos (at a loss of course).

        You could be tortured to death for it though. But those kinds of people will torture you, or your kidnapped relative, even if you genuinely have none: how do they know you aren’t lying?

        • Paul says:

          xabier – I don’t personally know anyone who did this, but there are plenty of Jewish people who are alive because they had gold or diamonds that they used to get themselves out of Europe during WW2.

          History is littered with examples of how those with gold used it to survive various ‘events’

          I have no certainty that owning some gold will be of any use to people in the Big Event that is coming – but I am very certain that holding any currency – any bond – any stock – is not going to be of any use (well – perhaps one could use it to light a fire or wipe one’s behind)

          I own none of those 3 and instead I have put spare cash mostly own gold because I think there is some chance that it may come in useful during the Big Event.

          Perhaps it will not. And if that is so then so be it.

          On the other hand, I suppose I could just blow that money on wine, women and song – and then waste the rest of it stupidly – but for some strange reason my wife won’t allow that ….. so I’m afraid gold it is (and a wee bit of wine and some good Scottish whiskey)

          • xabier says:

            Yes, it’s very true, gold can be useful, in some emergency situations: all depends on what is sought by whom and when and whether fiat is still accepted. Gold was useful in Argentina, but still had to be converted into fiat.

            Jews got out of Spain into France and paid everything they had for it, arriving cold, hungry and scratched, but get out they did. The guides kept their word and got them out, but robbed them – few people are honest through and through!

            Amusingly, people on the borders accumulated so much cash from smuggling people and goods, real illicit fortunes, that the post-war French Government withdrew the old notes and issued new currency in order to deal with them: their wartime gains wiped out at once.

            Then again, one thinks of the Jewish dealers in the Ghetto of Warsaw, who happily bought up treasures (furs, paintings, watches, jewels) in exchange for medicines and cans of food, rubbed their hands in glee at the thought of the post-war killing to be made, and……. (this is not often referred to for obvious reasons of taste).

            When ration cards lost their value at the end of Nazi Germany, one had to depend on having valuables to exchange for food, or the charity of others, farmers and the like (and many were charitable). A wide range of contacts was vital to good nutrition and shelter.

            So, some gold, some jewels, lots of cash, some productive land, some stored food (Don’s Home Economy) . Weapons, in moderation. And a winning personality!

            • Jan Steinman says:

              “And a winning personality!”

              It’s all about attitude, no?

              “Everything can be taken from a man but one thing; the last of the human freedoms — to choose one’s attitude in any given set of circumstances, to choose one’s own way.” — Victor Frankl

              “Our attitude toward life determines life’s attitude towards us.” — Earl Nightengale

              “You cannot tailor-make the situations in life but you can tailor-make the attitudes to fit those situations.” — Zig Ziglar

      • Paul says:

        Jan – I live on the other side of the world from where I intend end up if I have a way to get there. So I don’t have the option of rotating foods or messing around with making sure things don’t get spoiled. The last thing I need to have happen is we arrive and we find the whole lot is ruined.

        I have no idea how long the ponze can go on so I prefer food stuffs with the longest shelf life – and from what I understand freeze dried is the best option (for me it’s really the only option).

        The way I see this playing out is that there will be a run on grocery stores – and then you can forget about purchasing food. The government might try to ration but that will fail.

        So that means you starve – or you have supplies to get you through until you can produce enough to eat.

        The way I try to envision this is I imagine the shops were closed – the power was off – for good. Those are rather confronting thoughts. What would I do – what should I do to prepare for this?

        Basically I want to have a cache that would get us through the initial period – say one year – the idea being that this buys time to build up a proper garden + reap some harvests from the fruit trees and berry bushes. I am sure that will be terribly difficult – but if we don’t have a fall back in terms of food we will not survive long

        (as I point out on another comment – if neighbours have not done the same, even in a small village – they’ll be at your door – so what then? No guarantees no matter what one does)

        I am planning to spend the majority of this summer in BC learning how to properly grow food and working on our soil. I’d like to be able to shift full time and make the long adjustment – but this could go on for years – and I have commitments to things in Asia – so this is the best compromise I can make (and I am aware that it is quite possibly nowhere near enough)

        As for a carbon footprint and plastic bags …. well… I think that is the least of our worries at this point (and that is from someone who lives in a one-bedroom recycled wood house)

        • Jan Steinman says:

          Given your circumstances and beliefs, I can understand your purchasing freeze-dried food.

          We’ll have to agree to disagree on closed grocery stores and such. I think we’re more likely to see “boiling frogs” than a hard, fast crash. I’m fine with either way, but I think optimizing for one or the other could be trouble.

          • danny says:

            I hope you are right about the boiling of frogs part…as pessimistic as that sounds but if you look at the nature of crashes they start off slow and then proceed very fast. What good is all that food if you don’t have any way to cook it? No gas?!

          • Paul says:

            I hope that is not the case – I prefer a slow boil.

            However after Lehman went down cargo was left rotting on the docks in China – because credit stopped – the factory/farm on one side did not trust the letters of credit (LC) from the other side – so they held the shipments.

            If that had continued for very long the super markets would have been emptied very quickly (the credit issue would have gone global and the wholesalers in say Toronto would not have shipped to the shops)

            The only reason this did not happen was that Central Banks stepped in and agreed to back stop all financial institutions.

            I am not at all confident that the Central Banks can do this again – I think they used up their powder in 08.

            I think when this hits it will be too big to control – the bubbles are far bigger now than in 08 and the global economy is far more fragile – and the debts overwhelming. I think massive defaults are imminent because the taxpayer cannot backstop this again (sovereign debt is just too large now in most countries).

            A good friend who ran the bond division of a Canadian bank in Asia for many years put it to me in 08 ‘if a significant country defaults it will be a Mad Max situation globally’ – thankfully we avoided that in 08 – I don’t think we can this time.

            As Tainter and others indicate once things unravel there is not putting them back together. Supply chains bust and they cannot be repaired.

            If you can download the documentary Money for Nothing – Inside the Fed that gives some huge insights into the financial aspects of the end of cheap energy.

        • Danny says:

          Gold? Why not silver is cheaper and more available for the average person. Also it is available in coin form already therefore it can’t be confiscated by the government. Or at least that is what they tell me. I read Automatic Earth and they see a collapse with opportunity to do permaculture. I am with the other readers it almost seems like they are pushing a personal agenda selling a product to allow themselves to travel and live it up before collapse. The collapse they are talking about it seems like you want to be able to move and adapt thinking you can just get fat on the farm while everyone else is starving is naive. When it comes to future outcomes I see a lot of myopia based on what the people have invested. If someone has lots of gold all they can see is inflation….Likewise is someone is pushing living on the land etc..all they can see is deflation. And if someone sees BAU because they have stock market money and large pensions rolling in…Me I have none of the above—just my health and trades that I have learned over the years. I see the heavy hand of government stepping in and a Soviet style government here in the U.S….not so pretty for the rest of the world….

          • Jan Steinman says:

            “I see the heavy hand of government stepping in and a Soviet style government here in the U.S… not so pretty for the rest of the world…”

            Only for as long as the oil flows.

            Big, oppressive government takes lots of energy! I don’t think Odum and Tainter would see big oppressive government in a low-energy future.

            (Of course, little, oppressive government is another matter entirely. I see a return of fiefdoms, no larger than as far as one can send cavalry.)

            • I agree that big oppressive governments are going away. There may be small oppressive governments, with one person governing a local clan. Perhaps in between, there will be fiefdoms, with a dictator and supporting personnel.

          • Paul says:

            Gold or silver – I think both have demonstrated throughout history to hold value during strife

          • I have tried to stay away from selling any approach. I would agree silver would seem to be more practical for coins than gold. I have gotten a lot of offers for employment (pr at least pay for articles) if I would help some site support their view of “Doing _______ will make you rich, or at least keep you from suffering from the effects of collapse.”

      • I don’t see freeze dried foods as getting anyone anywhere. You really have to have a way of growing/hunting food, and you may be able to supplement that with stored food (like wheat, rice and legumes) for a while. But for the long run, you have to have a way of feeding yourself.

        • Paul says:

          Gail – to clarify – I see them as a bridge for those who have not made the total advance commitment to self-sustainability in advance of the coming crash.

          I see a hoard of food stuffs as giving me a chance of surviving until I can provide food from our farm.

          As for those who have already made the commitment and live off the land to some extent now – I wonder how many are truly ready for the day when the grocery store is no longer an option.

          Perhaps a bit of a buffer might smooth the transition when reality does hit.

          That said, I am under no illusions – we might run through our stocks and be unable to survive.

          Or more likely, because our neighbours will have no stocks – they will demand we share.

        • danny says:

          no Jan you do not understand all oil will be owned by the government…you will not be in a democracy, you will not have any availability to oil . All resources will go to the “society” there will be none left over for you and fido to go on vacation…that is it….you will be given a ration that is all. That type system can go on for a long time. Danny

  16. Paul says:

    Peter (sorry unable to reply directly up top)

    “Paul, I am always puzzled why if the world descends into chaos gold would be of any use ? Unless the economy begins to normalises to a form as it is today. Surely housing, food and sources of warmth would be paramount and barter in one form or another would be of useful “stuff”? best Peter”

    Agree – I have revised my thinking on gold. In mid 2007 I plunged into physical gold as I saw what was coming – thinking it would hold value as currencies collapsed.

    I have continued to hold gold because I believed that what was coming was a massive reset of the economy after QE and ZIRP failed. I had always thought that having some gold would help me and my family through the desperate times that would come during the reset.

    In recent months I have revised my thinking on this. I have always suspected the issue was related to the end of cheap oil and that the crisis is a symptom of this – but hoped that I might be wrong.

    But in recent months I am 99.9% convinced that peak cheap oil is the issue – partly because I discovered Gail’s excellent blog and also because I have seen a few critical articles

    http://www.theguardian.com/environment/earth-insight/2013/dec/23/british-petroleum-geologist-peak-oil-break-economy-recession

    http://www.csmonitor.com/Environment/Energy-Voices/2013/0412/The-decline-of-the-world-s-major-oil-fields

    And:

    Toil for oil means industry sums do not add up (FT.com)

    Rising costs are being met only by ever smaller increases in supply

    The most interesting message in this year’s World Energy Outlook from the International Energy Agency is also its most disturbing.

    Over the past decade, the oil and gas industry’s upstream investments have registered an astronomical increase, but these ever higher levels of capital expenditure have yielded ever smaller increases in the global oil supply. Even these have only been made possible by record high oil prices. This should be a reality check for those now hyping a new age of global oil abundance.

    I now think that there will be no reset – I now think that the period we are experiencing since 2008 – which for many, particularly the middle classes (I should say former), pensioners and poor, is indeed terrible – is as good as it is going to get – in hindsight (to those who survive) this is going to look like a period of great prosperity.

    I think that when the next shoe falls the game is up and I no longer believe that holding gold (or any other asset for that matter) will insulate anyone from what is coming.

    I see gold as a store of wealth – it has been used as such for 1000’s of years because it is scarce and portable – a lunch box full of gold represents a very nice house in terms of current value.

    So anyone with excess wealth could have stored it as physical gold.

    But the times they are a changing – going forward I am doubtful that there will be any excess wealth to be stored – the assets that matter will be simple – primarily food and things that allow you to produce food (a shovel for instance).

    I suspect in a world where 7 billion starving people are scraping and clawing for food they will have no use for gold — put a pile of gold 20 metres in front of a pile of food and I guarantee you people will ignore the gold in a pellmell sprint to feed themselves.

    Perhaps gold might return to it’s former status as a store of wealth when the transition from the industrial age to the new paradigm occurs – but I doubt any of us will be around for that.

    I used to think Preppers were fanatics (perhaps most are and think the end of days is a god-inspired event) – but although I continue to hold gold, I am now spending a fair bit of time researching freeze dried foods – because when this hits – food will be the new gold.

  17. danny says:

    Can you give us a link? Can it really replace liquid fuel? How long would it take to implement? I would feel more confident if something like this had come along 20years earlier..how would you convert all the vehicles to run on this? Like a semi truck? You still have a supply chain deconstruction going on. We need an abundant liquid fuel to replace oil….or it is a distraction like the “bloomBox” danny

  18. rob222 says:

    Gail, have you seen the optimistic committee review led by Dr. Robert Hirsch on Lawrenceville Plasma Physics approach to fusion? If fusion does become available, how would that impact your views on a coming collapse?

    Regards,
    Bob

    • Fusion makes electricity, oil (and coal and gas) makes ‘stuff’
      The world economy relies on stuff
      you can’t eat electricity

      • edpell says:

        If you have enough electric and it is cheap enough you can make oil or at least methane.

        • Jan Steinman says:

          “If you have enough electric and it is cheap enough you can make oil or at least methane.”

          After building the necessary infrastructure… out of what?

          That sounds a lot like the “hydrogen economy” that was supposed to arrive “any day now.”

        • You also need enough investment capital and time. Some people talk about using ammonia as fuel, but we still would have to adapt our vehicles and figure out ways to ship it and sell it.

          • Jan Steinman says:

            “Some people talk about using ammonia as fuel”

            But the Haber-Bosh process uses natgas to make ammonia, no? It uses it both as feedstock and for the energy source for the endothermic reaction.

            Like batteries, ammonia is an energy carrier, not a source. Without natgas, one would be better off using the source of the energy used to create ammonia, rather than the ammonia itself. For example, solar or wind electricity could be used to split water to create the hydrogen feedstock and to provide the reaction heat, but entropic losses mean that one would be better off just using that electricity via batteries or flywheels or directly into the grid.

            • Some people are talking about using “stranded” wind as a fuel for ammonia, I believe. If there is too much wind at a particular time of day, or if the grid has gone bust, then the wind turbines could be used for something we actually need.

    • I haven’t seen it, but I don’t think it would matter.

      1. Our problems are now. Fusion is still a long way off, before it is commercialized, no matter what its state now.

      2. Fusion would only give us electricity. We need liquid fuels. If fusion is dirt cheap, it might be possible to use electricity to make liquid fuels, but that is even farther off in the future. (Electricity is a climate issue, not a liquid fuel issue.)

    • That is an interesting analysis. I’m to sure I would really agree with it. Maybe parts are OK.

      I notice in the charts in his linked Brief Guide, he is showing energy production to be relatively flat to 2030 (Figure 8 and 9). He seems to think EROEI is the only problem, not a drop in oil production as the cost of extraction rises too high for buyers to afford products, and for governments to be able to keep up the infrastructure.

      There is a huge difference in how much energy countries need, depending on whether they are cold countries or wet tropical countries. I am not sure how this is factored into his analysis. It seems like his analysis doesn’t quite have enough variables in it.

      • Bill McEachern says:

        I did not look at the study in the link but on “the huge differences in energy that countries need”. I took some data from the IEA website more than a few years back (like 10 years ago) and plotted energy consumption vs GDP to get what I called energy specific GDP – I think it was for the OECD countries but I can’t recall what the basis was for the list of GDP numbers. It was remarkable how low the range of was. As I recall Japan and Denmark (both pretty small countries) were significantly higher in GDP for a unit of energy. All the rest were pretty much in a tight band with some stragglers at the end like Poland, China and the less developed had much lower GDP per energy consumed. I could try and dig it up but I don’t think there is a way to post a graphic. I am not sure i still even have it and it was based on ~2002 data – not exactly current..

  19. ravinathan says:

    An interesting analysis by Albert Bates showing where the various collapse writers fall in the grid of violent versus peaceful change and collapse versus ecotopia. He has not positioned our Gail on this map. My sense is that Gail would fall on the Collapse line, biased more to the violent end since she appears pessimistic about soceitys ability to cope. Although the collapse axis refers more to ecological collapse and Gail speaks to economic collapse there is enough evidence that one would lead to the other as people burn biomass to survive as seen in Greece and the extreme pollution in China from coal burning.
    http://peakoil.com/enviroment/albert-bates-charting-collapseniks

    • Jan Steinman says:

      Nice! Thanks for providing that link.

      I think where Bates falls down is in not allowing for geographic diversity. As energy declines, I expect almost all of those models indicate that globalism will go away, with populations becoming more isolated, meaning one could have violent collapse on one continent, and yet have pockets of peaceful ecotopia on another continent.

      In particular, I’m hopeful that islands can provide the bit of additional isolation needed to foster other paradigms. Could New Zealand (for example) have a peaceful transition to ecotopia, while the Far East simultaneously sees violent collapse?

      But perhaps it is not Bates’s failing so much as it is those he plots on his graph. He shows Holmgren as “moving” between two points — but really, who has a perfect crystal ball? Is that “motion,” or is it Holmgren’s understanding that a range of situations are possible at the same time?

      I think there is lots of room for different simultaneous scenarios. A principle of evolution is separation of populations. Thus, peaceful bonobos evolve on one side of the Congo River, while warlike chimpanzees evolve on the other side.

      Humans have been mashed up into a single population, due to cheap energy. Expensive energy necessarily changes that. Human differential evolution has been halted for a few hundred years, and may soon continue. That may include different outlooks and coping strategies that will plot different populations in different locations on Bates’s graph.

      • ravinathan says:

        Jan, Holmgren has changed his perspective radically and the two points represent the former Holmgren and the current one. The new Holmgren article can be found on Holmgren.com and it is well worth a read.
        I do see your point on diverse geographic outcomes and would point to the fragility of global supply chains and financial systems as well as the global ramifications of climate catastrophe which is unlikely to spare any location. I also think that Holmgren has realized that permaculture presupposes a functional ecosystem to allow a transition away from agricultural monoculture. Can we assume that to be the case in the face of self reinforcing climate feedback loops?

        • Jan Steinman says:

          “Holmgren has realized that permaculture presupposes a functional ecosystem to allow a transition away from agricultural monoculture. Can we assume that to be the case in the face of self reinforcing climate feedback loops?”

          Don’t know. Can’t let that keep one from trying, no?

          I do think there will be “functional ecosystems,” perhaps consisting entirely of adaptable, generalist “trash” species: cockroaches, rats, canada geese, scotch broom, perhaps even humans… 🙂

          If anything, Permaculture is all about adaptation to change. If it doesn’t provide us with coping strategies, I don’t know what will.

          • Don Stewart says:

            Dear Jan and Others
            Does anyone know what Albert is referring to when he says ‘remineralizing the soil’? When I originally saw those words, I did a google search and didn’t end up with much, other than that it is a term of art for the Biodynamics crowd.

            Thanks…Don Stewart

            • Jan Steinman says:

              “Does anyone know what Albert is referring to when he says ‘remineralizing the soil’?”

              I think he’s referring to using various sorts of rock dust. I’m not sure how to do that without using lots of energy, unless you’re at the toe of a glacier.

              There is a thriving industry around supplying organic and biodynamic farms with rock dust. I use greensand (glauconite) in relatively small amounts in potting soil mix for potassium, but I can’t imagine using it in broadacre agriculture. (Perhaps I simply lack imagination…)

            • Don Stewart says:

              Jan
              I had the same question about rockdust. It is a byproduct, so relatively cheap for the gardener. But the results I have seen in formal trials haven’t been that impressive. Some say that it will still take decades for the rock dust to weather down to something useful. I couldn’t imagine trying to do broadacre.

              Thanks…Don Stewart
              PS Albert will be here in about 3 weeks. I will ask him, if I can corner him.

            • I don’t really know. But we know that minerals come from soil building up from the bedrock. We have had a huge problem with erosion. Also with minerals being extracted from the soil through farming. Even when manure is used to fertilize the soil, I am not sure those minerals get back into the soil, especially if the diets of the animals were deficient in those minerals.

          • xabier says:

            Jan

            If we don’t try things, we might as well lie down and die. If everyone c 900 had just said -‘Can we be sure about doing this, the Vikings might come………’

            Everything is so volatile now, we have to go with it.

      • messtime says:

        Uh, i am far from being an expert on NZ, but it seems to me that NZ pretty much follows the American model of agriculture, there are a few exceptions and i do not know if this is connected, but NZ has what seems to me a big possible problem in the future with the very huge “native” population (maori & pacific islanders) living here. Everybody in NZ pretty much lives “business as usual” and it is a heavy car culture. Truth probably is that NZ needs to start right now implementing the agricultural practices of the few here who seem to be successful in organic or more natural types of farming practices. If possible NZ needs to stop trying to supply the huge China market, and produce for the local market only. In my opinion NZ is a mess with huge populations of Chinese and people from India and other third world countries and lots of them probably unemployed. It is my impression that a lot of the dairy operations have had big financial problems and i think maybe some or a lot of the dairies might now be owned by the Chinese business people or firms in China. I don’t know. Don’t look good to me, but i am not that knowledgable really.

        • I haven’t been following the New Zealand situation. I know Nicole Foss is planning on moving to the South Island (temporarily?). She told me she liked the location because “it has a big moat around it.” But maybe the location isn’t quite ideal, or the South Island is truly different.

          • Ert says:

            How many options are there?

            1. The country of destiny must offer an economic existence now.
            2. You have to speak the native/core language.
            3. You should be able to integrate into the society – mentally and physically.
            4. The north halve has a to high climate and atomic risk factor
            5. The equatorial region will be to hot and stormy if climate change hits
            6. It should be not to cold now (heating energy)
            7. You need rich soil and a medium climate – there is no time to wast to get started.
            8. Groundwater shall be available.
            9. Not to highly populated
            10. But still manageable without a car.

            This doesn’t leave much options…..

            • I agree with your list. I also agree that the list doesn’t leave many options.

              Historically it is the warm countries that were the population centers without fossil fuels. Fossil fuels enabled much higher population in cold countries, and allowed them to industrialize. Competition on industrialization from warm countries with coal brings down the economies of cold countries. I expect warm countries will be the “place to be” if they are not too overpopulated.

            • Jan Steinman says:

              “Historically it is the warm countries that were the population centers without fossil fuels.”

              I agree in the context of “population centres,” but it is certainly possible for cold climates to support human life, or else the Americas would be unpopulated, since it was pretty cold crossing the Bering Sea causeway!

              So conversely, if one thinks “population centres” are to be avoided, perhaps it would be best to head North?

            • There were certainly people everywhere, but the population densities were much lower in cold areas. The population that can be supported in cold parts of the world generally should be expected to be lower per square mile or square kilometer.

            • interguru says:

              When we humans left Africa, they left many diseases and parasites behind. The animals in Africa co-evolved with us, and know how to evade our spears.

              Up North we had fewer diseases and parasites. The large mammals had no idea how to evade us. Like any invasive species, without biological controls we flourished.

          • messtime says:

            I started in Auckland 2 months, then moved up to Whangarei north of Auckland. I wanted warmer weather. I have not visited the South Island yet. The South Island has snow and cold in the winter time, my current income does not allow for high winter heating bills. Some people like the South Island better. There seems to
            be a fair amount of Americans living here, i mean average income types, not particularly wealthy (I heard a figure somewhere, may not be true: Approx. 15,000 from the US. I meet them sometimes working like maybe for the NZ post office or meet some working for some retail stores, like maybe a book store or kitchen supply store, etc. Speaking for myself, i do not know where else to go. I think maybe this is better than Australia. Australia is burning up now as per the information shown on the NZ television & desdemonadespair.net. I mean heavy-duty heat waves in Australia nowadays. NZ has been having bad drought, and maybe the drought situation is arriving again, i don’t know. Where else can an American go if you want to leave the US and have some sense of familiarity? Even some caucasians are leaving South Africa for NZ because of serious problems developing there. A lot of people come here from the UK, it seems to me. I don’t know who Nicole Foss is, but she may like the weather and social conditions better in the South Island than the North Island where i live. Some Americans like it here a lot – i don’t like it here that much. I wished the US was not such a mess, i would stay in the US if i was comfortable there. In my opinion it’s a mess everywhere in the world, you can only pick the lesser mess you want to move to.

            • I think the issue is, “The grass always looks greener on the other side of the fence.” People think conditions are better elsewhere. Nicole Foss writes on The Automatic Earth, about possible financial collapse and also about energy issues. Her views are somewhat different from mine, but some readers follow her.

    • Thanks. I saw this article earlier. I was just a glad they left my name off. I agree that economic and ecological collapse are related, and that I am probably on the violent side.

      I will be speaking at the Age of Limits Conference again in southern Pennsylvania again this year. I understand Dennis Meadows will be one of the speakers too this year.

      • Ert says:

        @Gail

        You are already on the “to-do” list: “After co-teaching a permaculture course in Belize with Nicole Foss next month, we will be vetting this analysis with Dmitry Orlov, Dennis Meadows, John Michael Greer, Gail Tverberg, KMO and others at the Age of Limits conference in Pennsylvania in May. “ 😉

        Source: http://peaksurfer.blogspot.de/2014/01/charting-collapseniks.html

        • Jimmy says:

          Hi, as New Zealander, I would like to point out some salient facts. Before European settlement began around 1840, the Maori population had peaked at less than 150,000, and was in some ecological strife. They were an advanced Stone Age culture; NO metals – as is consistent with a post oil crash world.
          Their agriculture wasn’t very successful, and they had wiped out a number of indigenous species. They operated as tribal groups, often at war with each other, with cannibalism an accepted practice.
          There are now 4.5 million people living unsustainably in NZ; 30 times the peak population pre fossil fuel driven expansion.
          NZ is no utopia, and the pre-European Maori way of life may well be a portent of things to come.

          • Paul says:

            I moved to Bali 6 years ago partly because it is extremely fertile and warm. As the saying goes ‘the balinese don’t work hard because they could pick all they needed from the trees around them year round’

            Well guess what – Bali now has over 4 million people – and it has been importing rice for years – farmland is being converted to hotels and villas at an alarming rate so even less rice is being harvested each year

            And to top it off – like most places bali uses oil and gas based pesticides and fertilizers – so when those are no longer available/affordable – guess what’s going to happen here.

            I can imagine foreigners will be under the gun because many locals sold their land and wasted the proceeds on living large – and are now broke.

            Given the opportunity (i.e. chaos) they will likely be knocking on the door saying I’m taking this back.

            I have now concluded that this place will not offer any sort of sanctuary – it will be no different than any other place that is over-populated — and it may be worse for those of us who are not local.

            Our fallback is 20 acres in the mountains of BC Canada – but not sure if that will be any different – hungry people do desperate things regardless of their race – so even if one prepares that may not be enough

  20. Ian Page says:

    Gail, I love your analysis ( as usual)

    Two additional issues figure 7 doesnt address.

    1. Substitution- as energy laden products and services become increasingly expensive. lower energy input substitutes tend to appear. ( Please excuse me using an economists argument- but apart from the fact that they ignore the issues of whether appropriate substitutes can exist, and that they don’t appear instantly, IMHO they are right on this one)

    On the energy front, wind and solar now appear to have better EROEI than new oil wells ( but not yet for coal although the curves are expected to cross soon) and the EROIEI’s are iaccording to

    On the materials side petrochemical based products and systems are getting very expensive, while the lower cost 19th century coal based chemicals would be expected to reappear, and the newer “green chemistry” intermediates start to substitute petrochemical intermediates. The recent experience in Scotland at grangemouth refinery and intermediates plants fits in to your projections

    2. Structural substitution. You point out that one aspect of low energy availability or high energy cost in a country is that production moves to higher energy access countries or lower wages are enforced as you pointed out in a previous post. Either way there is less income to buy products and services and keep the system going.

    However there is a problem ( not with your analysis but with the existing system). Production centralizes in the lowest cost location . In the limit with one factory per product set. All inputs then have to be moved long distances to the factory and all products have to be moved long distances to their customers.. Also the workers have to be moved from significant distances to the factories, central offices etc. ( its been pointed out that every day the London transport system moves many more people than were involved in D-Day , twice). This required a lot of infrastructure , good freeways, trucks, ports , etc that as you point out is inevitably going to become much more expensive. Thus countries and systems that minimise this centralization should have competitive advantage, in the limit then most people would walk to work , and most materials are recycled very locally to a very high degree.Which has very fundamental implications ( try recycling all mobile phones locally!)

    Both directions seem inevitable, but there is much friction preventing such change, and many jobs and companies will need to change or fail at huge investment cost.

    As you point out, investment is a derivative of spare cheap energy and thus getting very short, Having entered the energy desert, we have only a few years of high ( old) EROI energy left to get us to whatever is on the other side.

    Professer Hall provides a figure for your model : He states that an average EROEI of 14:1 is required for an economy to sustain itself and Invest-( I’m not sure whether that allows anything for consumption and thus for the economy to actually provide gainful employment and purchasing power).

    Tim Morgan’s SEED database puts both the US and the UK ( and many other countries) below this currently and thus having no chance of repaying the debts taken on as a whole. Survival in both cases thus nvolves robbing peter to invest in energy sources greater than 14:1 EROEI . Arguably the financially disastrous ( for investors) US shale gas experience yielding shale gas at an EROEI of about 50:1( ignoring environmental, disposal , and clean up costs) , is an example of this in action.

    I suspect as a result that we don’t have enough time or investment left and will perish on the journey.

    Ian
    Requiam for the High Energy CIviliation

    “Look on my works, ye mighty, and despair!’
    Nothing beside remains. Round the decay
    Of that colossal wreck, boundless and bare,
    The lone and level sands stretch far away”.

    Shelly :Ozymandius.

    • Paul says:

      Although at some point (perhaps now?) replacements will be cheaper but I reckon that does not matter – we are many times beyond in terms of the price of oil – of what the economy can handle.

      From Bloomberg: each $10 increase in the price of oil lops 0.5% off a developed economies growth. Oil at 100 bucks is many times over what is needed to maintain growth.

      So even if solar were cheaper with oil at 100 bucks – it would not be cheap enough to allow us to maintain an industrial society.

      Add to that the fact that solar cannot replace oil – oil is in everything from your gas tank to plastics and most importantly – in fertilizers and pesticides. No cheap oil = expensive food. Expensive food = famine.

      I do not see substitution as offsetting the issue of expensive oil. The industrial revolution occurred solely because we have a large amount of cheap energy – particularly oil – to drive it.

      The age of industry is for all intents and purposes – coming to an end.

    • I somewhat agree with you–only somewhat.

      Substitution goes along all the time, as oil prices get higher. I am not convinced that EROEI tells you very much. I look at total cost of energy production. EROEI is too narrowly defined, in my view. Wind Turbines and solar panels, because they need subsidies, are giving a strong clue that they are not more efficient. Energy sources should be able to withstand high tax rates, to support the government.

      Another clue that solar and wind turbines are not more efficient is this type of study, which looks at costs from a wider range than EROEI. For example, this study by Weissbach http://www.sciencedirect.com/science/article/pii/S0360544213000492 (which I have seen Charles Hall reference). The abstract of this article says, “The results show that nuclear, hydro, coal, and natural gas power systems (in this order) are one order of magnitude more effective than photovoltaics and wind power.”

      As I see it, we are already at too low an average EROEI. In fact, I said exactly that at the last Biophysical Economics Conference, which is where people talk about EROEI issues. http://ourfiniteworld.com/2013/06/24/energy-products-return-on-investment-is-already-too-low/

      While too low EROEI contributes to our problem, our real issue is lack of investment capital and other related financial issues–inability of governments to collect enough taxes and inability to pay back debt with interest. EROEI is a limit, but it is not really the right one because it doesn’t consider needed investment capital for the economy as a whole (among other things).

      Charles Hall is trying to draw a big box around our problem. That can be helpful for some purposes. But I don’t think his methodology gets us to the right end point, which is why I use different methodology.

  21. Peter Marcham says:

    Hi,Gail, Are you aware of the work done by Tim Morgan and his book “Life after Growth” he works with concept of surplus energy which echos much of what you are saying and have said!!
    So do read his blog http://surplusenergyeconomics.wordpress.com/ .

    • I have seen a little of his work. I can’t say that I have gone out of my way to read it.

      He takes a fair about of Charles Hall’s EROEI stuff, and tries to go off from there. I don’t really see that that is the right approach to take.

  22. Trying to find a reason why governments worldwide employed an obviously fatal stragegy has boggeld my mind for some time now. I think, I might have come up with an explanation that goes a little further than just “greed and stupidity”.

    When pursuing geopolitical objectives, the most successfull strategy since industrial revolution has been realism (today followed by neorealism).
    http://en.wikipedia.org/wiki/Neorealism_%28international_relations%29

    In short, this strategy rests on the conviction that any other nation is a potential enemy. All wars, indeed all conflicts between nations, since the beginning of industrialization, have been decided by one side being able to outproduce the other. Neorealism therefore commands you to prepare your country to win any potential armed conflict with any other country by building up economical muscle, GNP growth.

    As in all wars industrial output has been the deciding factor, and anybody else knew that also, it was only logical to abandon armed conflict between equally developed nations with comparable GNP and replace it with economic competition. (cold war).

    In this mindset it is impossible to find an amicable solution to global problems like global warming or diminishing ressources. As Robert Axelrod showed (Axelrod, Robert (1984), The Evolution of Cooperation), two parties with the “realism/neorealism” mindest, that are engaged in a prisoner dilemma, are locked into mutual distrust and are unable to change into a productive cooperative strategy.

    This kind of reasoning also suggests, that the “mitlitary-industrial-complex” is nothing else, than the implementation of the most successfull strategy for acchieving geopolitical dominance in the past. Also neoliberalism and neorealism (neo-neo-strategie) go very well together.

    As ressources diminish, abandoning the neorealistic/neoliberal strategy will mean, that you will probably loose any competition with other nations over ressources your people and your country demand. For any democratic system abandoning this strategy is therefore impossible!

    Even if you know, as a democratic leader, that this strategy will mean collapse for everybody, you will not be the one to change from egoistic to cooperative strategy first, because possibly there is no way back to egoism and your country stands in danger to loosing its “freedom?” to other nations.

    Basically, in this mindset, “caring for your people” demands of you as a leader, that you hold course towards self-destruction, because you believe destruction by other parties is the alternative.

    This is the only “logical” reasoning I came up with for the collective stupidity of humankind. Note that I do not share that believe, I just wanted to put myself in the mindset of believers in neo-neo strategies to find why we are not ble to change course.

    • edpell says:

      This goes along with the idea there are only two choices war now or war later. If you are currently weaker but growing wait. If you are stronger war now.

    • Thanks for your thoughts. I hadn’t thought about those things.

      I agree that the recent strategy uses up resources quicker than otherwise, but I think the human strategy, no matter what it is, uses up finite resources. Even a steady-state situation simply depletes resources somewhat more slowly. When we are already reaching limits, a steady state doesn’t really help.

      If we could get our resource usage below what could be integrated with renewable resources, that theoretically would work. The catch is the even back in hunter-gatherer days, we didn’t do that. Our need to use heat for cooking our food, and our willingness to kill off whole species, led to deforestation and extinction of major species long before we learned to farm. We certain were not living within what renewable resources permitted as early farmers either–we were depleting the soil, and killing off more species. Having fossil fuels helped us to ramp up usage, and delay the day of reckoning.

  23. Bill S. says:

    We might be able to delay the financial collapse by implementing a steeply progressive income tax on those with significant income above what they currently use to meet their basic needs. Obviously, if you tried to increase taxes on the poor and large middle class, you might actually accelerate the date of the collapse. But taxing the sports, hedge fund, Hollywood, and oil well billionaires might raise a significant amount of money to delay the government collapse for a few years. It is better to run out of food next year, than to run out of food next week.
    Of course, as we all know, that will never happen, due to the influence of the wealthy in Washington, and their control of the mass media. And the richest few percent in the US have been capturing a greater and greater share of all the income, for about the last 30 years. That is a huge amount of money and wealth. It is in the trillions of dollars.
    I’m guessing that the top 0.3% plan on flying off to somewhere like New Zealand. I hear that many Hollywood stars already own homes and farms down there. They only let people with substantial assets move there.
    I think you will know that the end is near when the government resorts to creating money out of thin air like crazy, leading to hyperinflation and a worthless dollar. Call it QE squared. When they see that the downward spiral has begun, they will do anything trying to stop it. That would be bad, because even having a bunch of cash won’t do you much good. Gold or silver coins might have some value, the smaller the better, to change for the paper being used at the time to conduct transactions.

  24. Pingback: Why EIA, IEA, and Randers’ 2052 Energy Forecasts are Wrong | Our Finite World « Olduvaiblog: Musings on the coming collapse

  25. Hi Gail,
    Very interesting analysis, but I see 3 problems:
    This comment from your text “Government expenditures can be thought of as expenditures out of the surpluses of the economy.” just isn’t right for a sovereign currency economy, as the USA has been since going off the gold standard in 1971. See Modern Money Theory. The only factor that limits the federal gov’t’s expenditure is avoiding inflation.
    You have not considered energy efficiency. I can’t go into all of the analysis, but the present USA GDP could be sustained on about 1/4 of the energy currently expended, and most of the energy saving investments needed will have attractive paybacks as fossil fuel prices rise. Over a 30 or so year horizon we could double GDP while halving energy use, and renewables could easily meet the resulting energy needs.
    Renewables don’t get considered in the right context either. The key factor overlooked is that they are renewed, rather than exhausted as is the case for fossil fuels. Consider the case of using fossil fuel to manufacturing enough PV capacity to build and operate a new large scale PV factory. the new factory can then build additional PV capacity (multiple factories) with no fuel expenditure, and that sequence can be cascaded. Renewables then become very economic.
    Combining these 3 factors, your foreseen collapse becomes avoidable and unlikely.
    Cheers, Murray

    • Jan Steinman says:

      “You have not considered energy efficiency.”

      Energy efficiency is a chimera — looks good on paper, until you consider all the externalities.

      Achieving 100% efficiency would, in theory, require infinite resources. There is a “sweet spot” on the efficiency curve at which the needed embedded energy makes the most use of current energy.

      Why do we insist that we can do better than several billion years of evolution? And yet, the best efficiency nature has come up with is about 8% conversion of sunlight to chemical energy — but most plants come in at less than half that.

      Efficiency is a form of complexity, no? That Prius that gets 50+ mpg is tremendously complex! It requires the entire sum of civilization to produce and maintain! The semiconductors have a huge “tail” of energy that stretches through a functioning University system, global financial system, global transport systems, and of course, mining and refining of rare earth materials

      A 40+ mpg diesel engine from the mid-80’s has no essential semiconductors. You maintain them with a machine shop, which uses mining and metallurgy, but avoids many of the other global systems necessary.

      A 1,000 mile per acre horse has no semiconductors, no mining, no machine shop — and it reproduces itself.

      Many technophiles assume efficiency arrives and poof! It is there to stay! All that is required is the initial investment! But I’m fairly certain Joe Tainter would include super-efficient engines and such are some of the “complications” that cause civilizations to fail when they find they can no longer maintain them.

      “Consider the case of using fossil fuel to manufacturing enough PV capacity to build and operate a new large scale PV factory.”

      Know of any?

      I’ve issued this challenge before: show me a PV factory that produces new PV panels using only PV-supplied energy. There aren’t any! Unlike horses, who achieve this wondrous result without any help from us.

      • xabier says:

        Jan

        They shot nearly all the plough horses in Britain in the late 1940’s as part of the brave new Socialist petrol-driven Utopia and the advent of scientific industrial farming.

        The product of hundreds of years of careful breeding.

        When they were no good for the job anymore, they were fed to dogs. There’s not much use for an unrepairable Prius…….

        Well, we all know what the punishment inflicted by the Gods for Hubris is.

        • Lizzy says:

          Xabier, good point. My friend’s father, though, used to drive a team of 4 horses on his farm in the 1960’s. Not shire horses, just ordinary farm hacks.

          • Horses drawing ploughs might look like an ideal state of rural bliss, but the economics don’t stand up
            If you work a horse for a day (depending on the heaviness of that work) it needs a corresponding time to rest, it also needs 2 acres of land to supply its fuel. A horse drawn plough simply cannot produce sufficient human food as its end product….and that is what we are talking about here.
            Human beings have pulled off the neat trick of converting petroleum into food, and bred accordingly. This is why horse drawn ploughs will not replace tractors until the human population has reverted to pre-industrial levels.
            Of course, if we’ve eaten all the horses, things might get even more unpleasant than that.

            • Jan Steinman says:

              With Permaculture, there need be no ploughs.

              I was talking about horses for basic transportation needs: bringing food into villages, bringing basic supplies to farms, etc.

          • xabier says:

            Lizzy

            I understand that there are still some good working breeds left in the West, and of course the stock of labouring animals of all kinds is still considerable in the countries we patronise as ‘undeveloped’.

    • edpell says:

      Charlie Hall gives us a EROEI for PV of 8. Let’s assume this is using a 24 year life time for the panel. So every three years a PV panel makes enough energy to make one PV panel. Not bad a 3 year doubling time. But wait…. now we want energy after the sun set and on cloudy days. So we build ourselves a big battery, or a big molten salt thermal storage unit. If the latter we also build ourselves an electric turbine powered by steam from the thermal storage. Now the EROEI for PV is ??? I do not know may be 4. So the doubling time is now 6 years. Now we want to have and maintain a electrical power distribution grid and road to get to the grid for installation and repair. So we are at EROEI of 2. Now every 12 years we get a new panel and have 12 years left on the old panel. After 24 years we have a new panel and 12 years left on the old panel. Zero growth we are just treading water just replacing the PV that makes PV.

      We can still make this work if we get rid of the overhead of electrical distribution and roads. So if we can make everything needed on site with local materials we are OK. Most places have sand. That covers silicon and glass cover plates. The aluminum frame well maybe we can keep recycling it but the new aluminum for build out is an issue.

      PV may work but it is so close to the edge that it is hard to do the calculation with enough accuracy to know for sure.

      • edpell says:

        On the other hand there is no reason to use electric from PV to make PV. What is needed to make PV is heat. Simple sunlight concentrated by mirrors may do. Then the ERORI is free light light in plus energy to make mirrors and some amount of electric out over a period of 24 years.

      • I think that the calculation is even worse than you describe, because EROI is too narrowly defined. In particular, it does not do a good job of reflecting true solar PV costs. I know that a study that Pedro Prieto and Charles Hall did with respect to Spain’s EROI for solar PV (documented in the book, Spain’s Photovoltaic Revolution: The Energy Return on Energy Investment) comes out with an EROI of 2.5. So I think you need to start with something closer to 2.5, not 8. And it goes down from there.

        • Ert says:

          @Gail

          Thanks for that link! I’ve been searching for such a reference a long time – and even the first 5 pages which can be read at Amazons’s “look inside” are a well done introduction into the concept of EROEI.

    • Your money argument misses me. I am talking about the wealth that we gain from our coal and natural gas and oil that allows us to make goods and provide services. If you and I had to do our “farming” by digging with a stick among the tall weeds, we wouldn’t get much farming done. It takes energy to make any metal object. How would we go about building a house, or traveling to a doctor’s appointment, without energy? If you ride a train, it takes a huge amount of energy to make the metal for the train and to make the metal for the train tracks. There may be some saving on day-to-day fuel, but you have to look at total fuel consumption.

      I am confused at why you think that the present USA GDP could be sustained on about 1/4 of the energy currently expended. Will you walk to work 3 days out of 4, and stop buying new cars and houses? Will you vote to have your state stop road construction? Will you stop taking medicine? Will you turn down your thermostat to the point your pipes freeze? Will you stop eating meat–to get the energy in your food down? We don’t have the option of changing the scattered nature of our population or our climate. Building new homes that are different takes a lot of energy.

      We don’t have 30 years–we are at a crisis stage today–now.

      Am important point about renewables is that wind and solar PV are just for electricity. Our big fuel shortage is oil. Wind and solar do essentially nothing for oil. Biofuels help oil a bit, as “oil extenders.” We can dilute our gasoline by up to 10% with ethanol. But biofuels use huge amounts of land, so we are close to maxed out now.

      Renewables don’t really save much fossil fuel energy at all. It is easy to get the idea that they save energy by the fact that you don’t have to input an energy product on a regular basis. Renewables make up for this lack of energy need in many other ways (1) high energy is needed to make the devices, (2) need to change the electric grid to accommodate them, and (3) need to store electricity (or overbuild capacity) so as to not have huge fluctuations by time of day, and from season to season, (4) lots of replacement parts especially for wind turbines, but also inverters for solar panels. When studies are done that take into account the real-world issues, renewables come out behind. For example, Weissbach et al did an analysis Weissbach et al did an analysis that was published in Energy in early 2013 that indicated that renewables were an order of magnitude less efficient than fossil fuels in generating electricity (in other words, 1/10 as efficient) when all costs were included.

      If we were to have an oil shortage, we would have a hard time keeping our electricity system repaired. Because of this, “renewables” aren’t even necessarily very long-lived

    • Paul says:

      Even if this was possible (and Jan does a great job explaining why it is not), then it would have to happen now. Because we are collapsing now.

      To add to Jan’s comments on why this is not possible – when we realize new efficiencies we generally do not cut back rather we quickly use that energy for some other purpose (ie. we do not reduce consumption)

      An engineer friend here in Bali was telling me that even though cars are far more efficient these days they still use the same amount of energy – because they have more gadgets that use energy – and they have more bells and whistles that require energy to manufacture and maintain.

      I think the only way we realize a nett gain from efficiencies is if the price of energy increases – but as has been demonstrated – high energy costs are an economic death spiral because when people pay more for stuff they buy less of it – and that means layoffs – recession – and eventually collapse.

      • I keep saying that people spend the money they earn. So if reducing energy use makes a product cheaper, they will buy more of something else. In recent years, interest rates have been kept very low. This helps keep spending up further.

        It seems strange to me that there are not more cars available that are less expensive than current cars–it seems like everyone includes a whole lot of bells and whistles.

  26. Lorenz H says:

    Dear Gail,
    i read many of your analysis with great interest, and i learned a lot so far.
    There is one point in which i think different. In this text as well as in others you say
    “1. Climate change models include way too much CO2 from fossil fuels.”
    What worries me most of an pobable collapse of current industries is a clinging of people and societies to deeply learned habits.
    We/they just need energy as the most essential resource for modern living.
    So if collapse brings production of oil/gas down, people will switch to what is available in their environment.
    This can be lignite in the case of germany, coal in china, trees and biomass in almost any place of the world.
    In germany, there is currently a revival of electricity production from lignite. i don’t think there will be no gas at all even in a case of collpse, so governments will distribute it away from consumer to e.g. trucks and maintenance of power plants. (the big diggers even work with electricity produced by the plant).
    china in my opinion will also centralize as much resources as it can to extract as much cheap energy (coal) from its resources as it can.
    from unburnable carbon we know that there is far more in the ground than we can afford to burn, so even if we will not be able to extract the expensive resources, there will still be a lot of not so much expensive ones. mankind will try as hard as they can to get these resources, because they will mean power (for a short time) over societies who posses less of those resources.
    the other worrying thing will be people burning all biomass in their surroundings they can get a grip on. to have a warm house, a warm meal, a hot bath.. will be the primary goal for every individual, and not a collective plan to avoid something as so complex as global warming.
    there is a very eye opening example happening in greece right now, where many people cannot afford to heat their homes with the oil heater anymore, and therefore start burning contaminated wood and the like, producing a health threatening bell of smog over athens in the cold winter days. (report in german: http://www.spiegel.de/wirtschaft/griechenland-giftiger-smog-ueber-athen-und-thessaloniki-a-940959.html)
    i think this will be the scenario to expect, and this will ultimatively add to GHG emissions worldwide, together with continued coal burning pushing emissions into ranges of catastrophic climate change.
    sadly, i don’t see a way how to avoid this natural behaviour of man. but after all, it is still nature, and we know that nature sometimes fails..

  27. John Drake says:

    The timing and methodology by which system collapse might unfold is very likely closely linked to the rate at which available net energy to feed that system will decline.

    Hence a detailed EROEI study on a country-by-country or even region-by-region basis would provide most useful information about how and when certain system limits might be reached and how that might translate into visible economic and social consequences.

    • The issue is really not net EROEI. The issue is really more rising investment needs than falling net energy availability.

      The issue is that the amount of energy for investment needs to rise very rapidly (exponentially, hyperbolically ??), at the same time that it is taking more and more energy to make energy. So while EROEI is part of this problem, it is really not the major part of this problem. We need energy investment in several areas simultaneously:

      1. To extract energy resources. The fact that EROEI is falling generally means that the investment needs to be made farther in advance, tying up even more resources for this purpose.
      2. To build structures that enable energy extraction, but are not part of the EROEI calculation. For example, to keep up energy extraction in the Middle East, we need to build and operate more and more desalination plants. We need to upgrade our railroads, so that they can carry Bakken oil without it exploding. We need to add pipelines.
      3. To maintain all of the roads, pipelines, schools, hospitals, electrical transmission lines, and other parts of our infrastructure that tend to degrade over time, but are necessary for the continuation of today’s system.
      4. To actually grow the economy as a whole.
      5. To clean up pollution issues.

      It is the combination of these investment needs that tends to grow very rapidly. Focusing on EROEI doesn’t really get to the right solution. That is why I have avoided talking about EROEI. There is a lot of misunderstanding about this issue.

  28. Gail,
    In your growth/Decline model you denote ‘debt’ as an economic driver/indicator, as indeed it is. What is interesting and also confounding is that debt is really a placeholder for a whole slew of implicit and explicit social agreements that distribute risk and benefits as well as defining participation of labor and rates of labor etc. There is a whole universe of social and political complexity bound up just within in the idea of ‘debt’.

    More important, perhaps, is the fact that any salvage (salvation?) to come in the face of collapse will come out of the socio-political realm. In fact, collective ingenuity must order a new technology and a new energy model respecting post collapse resource realities. To call this future driver of technology and energetics ‘debt’ seems a gross oversimplification, though it works for the time being!

    Great Article, by the way!

    • I think debt will play a very different role post-collapse. It certainly cannot be a primary financing mechanism. You are right that there are many other things tied in with debt. Debt enables our current financial system to channel interest payments from the poor to the rich, increasing the disparity between the poor and rich.

  29. Ikonoclast says:

    Gail writes; “The limit we are reaching is not that oil (or coal or natural gas) extraction will run out; it is that economic system will at some point seize up, and rapidly contract.”

    I agree, but not for exactly the reasons Gail posits. The real limits are still ultimately physical. And oil or fossil fuel limits are not the only important limits. Fresh water availability limits are becoming very important.

    Financial limits impose “frictional” constraints but not absolute constraints. A collapsing finance system slows the rate we can use up resources (hence the friction analogy). The physical resource limit still imposes the hard constraint. Or more correctly, the limitation occurs after and progressively more past the Hubbert peak.

    A government has access to more strategies than QE or money creation. There is also conscription and requisition. Labour can be conscripted, very forcibly if necessary, and materials can be requestioned, with or without adequate compensation. I would not discount conscription and requisition even in the USA once the crisis occurs. This degree of conscription and requisition will likely see resources still being used up faster than Gail’s financial collapse hypothesis suggests (but not as fast as a full BAU scenario would suggest).

    Central government is more necessary than ever in an existential crisis. I’ve yet to meet a person who would suggest that the democracies (or Russia for that matter) could have won WW2 by disbanding government and government run organisations like the national army. Equally, it is absurd to suggest this looming existential crisis could be met by disbanding national government and permitting anarchy.

    • The way I explain the situation is that we are facing many limits at once. All need more resources to solve their problems. Money is what ties everything together. So the problems show up in the financial system. Also, the return on investment drops so low, that it becomes impossible to pay back debt with interest. I agree that the shortfalls are in the real resource area, but it seems to me that they show up in the financial area, also the collapse of governments. Lack of debt availability also becomes a real problem, very quickly.

      I am not sure how conscription of resources would work. Perhaps taking over a coal mine without compensating the owners? Things are so complex today, that it would be hard for the government to run any kind of energy facility on their own.

      • Ikonoclast says:

        Conscription of men and requisition of resources worked in WW2. The bottom line is that it does work. Albeit the financial “fig-leaf” was maintained in the USA to keep capitalist corporations producing war materials. Bond issues were made to raise the funds. Clint Eastwood’s excellent film “Flags of Our Fathers” covers this issue.

        If private enterprise fails to produce enough oil (where it is still physically available) and if large US Oil companies collapse then the US government will step in and take them over as it did with GM and its Chapter 11 bankruptcy. If the civilian workforce fails to meet drilling needs etc., the US Army Corps of engineers will be expanded and co-opted to maintain drilling and extraction effort and strategic stockpiles of the US strategic oil reserve.

        I can practically guarantee you that this will happen from my general knowledge of the US military imperative and the US military-industrial complex. This might not be as efficient as private enterprise where the market is working but it will still be much more efficient and effective than private enterprise in depression and market failure mode. Of course, many real material and energetic shortages will still be a drag on this effort.

        I think you are over-emphasising financial failure. It is important but not all important. If strategic industries are in trouble because of financial and market failure the US Federal government and military-industrial complex will not just simply roll over and die. Many statist and central command stratagems will come into play. Realpolitik tells us that with a great degree of certainty.

        • Paul says:

          I do not think there will be a federal government in the US for long once the SHTF and the economy unravels.

          Who pays the salaries of the officials? Of the soldiers required to maintain order (martial law)? How do you communicate when the grid goes down? How do you organize troops when the strategic oil reserves are used up?

          I think at best – we will see very localized government – at worst we will see armed gangs fight it out for control of areas.

          Afghanistan is a prime example of what happens in the event of collapse. After the Russians were defeated the US pulled all support and the country collapsed.

          The situation on the ground was this – gangsterism was rampant – there was no government – if you wanted to get down your street you had to pay the goons to drive past. Regional warloads ran their districts and they parceled off control to smaller areas to loyal mafias. Life for the average person was utter hell.

          That was why the Taliban was welcomed – they were of course brutal – but they were less brutal than the gangsters who had control – so they were embraced by the people – because they brought organization to chaos.

          As for conscription – that’s what built the pyramids – so sure – perhaps that could happen – the local gangsters force people to pick up shovels and dig coal – but beyond that I do not see how conscription would help run a fracking operation – the technology required to extract oil would simply cease to exist.

          Let’s be frank – we are talking about a return to a pre-industrial era —- compounded by literally billions of people starving across the world. Hardly conducive to being able to maintain any of the technologies we take for granted today.

          The only reason we have the society and the economy that we have today is because we have had an ocean of cheap oil – once that is gone there is no way any of this will be possible

          • xabier says:

            Paul

            There are goons, and goons, as you rightly point out. In Argentina, when violence rose dramatically and retail spaces shut, the mafia stepped in to provide secure trading environments in old warehouses: the traders had a cheap and secure rental space, and no one got robbed or assaulted, either in the buildings or just outside in the car lots. Any misbehaviour was dealt with, shall we say, very firmly….such as to preclude any repetition of the offence!

            Criminals do have a code of honour: a cousin of mine in Spain was very kind to the old mother of the local Arab drug gangsters. This has proved useful in certain situations -they considered they had a debt of honour to him and they do keep their word. As he has told me, the Arab criminals have proved kinder, more loyal and more honourable than some ‘upstanding citizens’…

            Better dealing with such people than a totally corrupt and badly-paid policeman, soldier or local politician.

        • In World War II, we had a lot of cheap energy we could pull out of the ground (given an excuse to run up government debt)! We also had a lot of unemployed people we could put to work–both men who were still unemployed or underemployed, thanks to the depression, and women who no longer needed to work so many hours at home, thanks to labor saving devices. We had quite a few factories that we could put to work for somewhat different purposes–not most of the factories are offshore. This time truly is different.

  30. Interguru says:

    Do you want to see what collapse looks like now, right here in the US.

    Try a visit to Eastern Kentucky.

    “The first person I encounter is Jimmy — I think he’s called Jimmy; there is so much alcohol and Kentucky in his voice that I have a hard time understanding him — who is hanging out by the steps of the local municipal building waiting for something to happen, and what happens today is me. ”

    http://nationalreview.com/article/367903/white-ghetto-kevin-d-williamson

    This is an optimistic picture. Their cash economy is supported by government entitlements, and the infrastructure is supported from outside funding. Still it’s a sobering article.

    • Paul says:

      I was in Greece last year to have a look at what collapse looks like – half the shops in Athens were closed or bereft of customers – the youth are absolutely desperate to find work – most are living if they have skills

      As of now the EU continues to support Greece – when that stops (and it will stop at some point) then the situation there today will look prosperous by comparison.

  31. witsendnj says:

    HiGail, I do agree with you that the underlying expectation in many (most?) climate models is over-optimistic about continued availability of fossil fuels. However, this will not mitigate abrupt climate change, since the initial forcing of the greenhouse gases already emitted has already triggered irreversible amplifying feedbacks.
    Further, my expectation is that when society becomes too poor to extract and buy oil, and economic collapse occurs, people will burn every tree that is still standing (those that haven’t perished from pollution and wildfires) until they are all gone (or we are all dead). That will eliminate a primary carbon sink which will add immensely to global heating.
    Another consequence of economic collapse and reduced fossil fuel burning will be the rapid loss of aerosols which are currently blocking a significant percentage of UV radiation (global dimming), which will lead to a rapid rise in temperatures.
    So on balance, I cannot see that catastrophic climate change will be slowed by the end of industrial civilization, which is one reason I am perplexed as to why the deliberate provocation of collapse is endorsed by radical groups such as Deep Green Resistence.

    • I certainly see no reason to endorse collapse. It is hard to see a way out of it.

      It is really hard to see any way to change the course of climate change, however much we would like to. Reducing world population through one-child families would seem to be as effective as anything.

    • Paul says:

      There were articles last winter on desperate Greeks cutting trees to burn to keep warm. I see no similar articles this year – and Greece is actually in worse shape than last.

      So I assume the MSM is ignoring this.

      But yes, when people are cold they will burn whatever they can get their hands on. Much of the world may soon resemble a gigantic version of Haiti.

      We really are so terribly screwed 🙁

  32. cal48koho says:

    Thanks again for another of your succinct analysis of economic trendlines as you view them. It does seem odd that the original LTG study left out capital in their model since capital has been part of everyone’s model going back as far as Adam Smith and perhaps even Aristotle. I hate cluttered graphs and the LTG graph in Fig #1 is pretty cluttered but I think that you simply must attempt to put in your best guess on how capital and or debt based capital would fit in Figure #1. Of course to do that would require knowing at least on a relative scale the amount of capital allocation going back well into the early 20th century.Would that be notional capital or inflation adjusted?. I can visualize what the shape of the curve would look like but would the lens be an inflationary one of a deflationary one?
    The general theme of your discourse relates to the tacit importance of energy as the dominant variable in the economy. Not too far back you brought in Cliodyamic secular models and how they might relate to the lifespan of economies. I wonder if anyone has looked at the influence of energy in those economies and if the withdrawl of societal energy precipitated collapse? Of course energy in the past 5 millenia was pretty pricey. Slaves and animals don’t come cheap. It’s my guess that cheap fossil energy is such a new phenomenon that we will find it risky to guess the future of its impact on the trajectory of the world economy. I suspect that as cheap energy speeds up the ride on the upslope, withdrawl will speed up the descent. All the curves look Gaussian……I do have a final question. What do you make of the steep population contraction coinciding with a sharply rising birth rate. seems counter intuitive to me.

    • timl2k11 says:

      “What do you make of the steep population contraction coinciding with a sharply rising birth rate. seems counter intuitive to me.”
      Note the death rate still skyrockets far above the birth rate (how far cannot even be seen because they both shoot off the top of the graph), which implies a dramatic increase in infant mortality. People start having more children because the probability that any one of them will survive is much lower. Basically the reverse of what has slowed the birth rate in first world countries, very low infant mortality.

    • Jan Steinman says:

      “What do you make of the steep population contraction coinciding with a sharply rising birth rate.”

      Look at the black line — the death rate.

      As that line approaches vertical, an infinite number of births would make no difference!

    • Capital, as I understand it, was a portion of the resources in the LTG model. It would have been nice to have seen a line showing the trend of capital as well. These resources were in some units of weight, or perhaps volume, rather than currency values, I believe.

      Money is a strange thing–it mostly just transfers goods from one person to another. If the goods aren’t there, the money can’t perform its function. Economists tend to ignore money, and I don’t blame them. At the time of collapse, there would have been less and less to buy. If the amount of money stayed the same, I suppose that would imply inflation. If because of debt collapsing, buyers had less money, then it would be deflation. With all of our debt now, deflation may be the problem.

      In the Cliodynamic secular models, one of the big issues was rising population and stable amount of land. If, because of erosion or salivation, soil quality was going down, that would have added to the effect of not enough food-production area per person. Food is a very basic form of energy. I suppose one could include animals as well, but since they take land to feed, they max out when land per person maxes out. Below some level not all of the land was used, but stagflation hit when population = carrying capacity.

      The steeply rising birth rate has to do with lack of birth control and the high death rate–perhaps also to do with the lack of retirement programs, so parents would want a child to help care for them in their old age.

  33. Paulo says:

    Good morning,

    My strategy for reading Gail’s post is to first quickly skim, read the comments, then go back and reread the entire article. Sometimes I compare the graphs and put words to the shapes/trends. Today was a sobering experience and I fear I will mull over the ideas off and on for days.

    We have self-selected to a forum of mostly like-minded folks, or we wouldn’t be here. I too, like most of you simply do not understand why this economy keeps soldiering on? For a few years I simply shrugged and concluded that a catabolic collapse is in the works and is the likliest scenario going forward. Today, I am not so sure. I am not so sure because so much is tied to this rampaging phony stock market. I won’t reiterate the causes for its unrealistic heights and values, or pretend to understand it beyond knowing it is a bubble and due for a pop. But I will say this. It is all that is left of a hollowed-out automated industrial society and when it does pop I think it will shake to the core of even the most accepting and uninformed of the population. Many have come to the realization that they don’t really need any more ‘stuff’…..products made through automated processes or by virtual slave labour. Sales are dropping at every holiday induced buying window, and then the headlines talk about something else for awhile. Many simply cannot afford to buy much more. And many are consciously limiting their purchases for personal reasons. Is there anyone left who actually believe a lexus will make you new again? Is there a reason to upgrade a phone? Regardless, the mantra is “but obviously the economy is improving….just look at the stock market” “Sure, unemployment is not rebounding in this ‘recovery’, but just look at the stock market” And my all time CNN favourite mouthed by Christine Romans, “Those of you with 401s are happy today, just look at the stock numbers”. What happens when it pops?

    When it pops we will still have 15-20% unemployment. We will still have a generation of indebted over-educated graduates. We will still have an industrial base shipped overseas by the Mitt Romney’s of the world. We will still have a criminal class running the banking system. We will still have a lying ineffective Government, (regardless of your country of residence). We will still have declining energy sources and the inherent restraints so well discussed in this post and others. We will still have too many minorities in a privatized jail system, incarcerated for petty drug crimes or for their inevitable self; considering where they were raised and by who?

    When this market tanks, at first they will talk about a ‘necessary correction’ and a logical ‘taking some profits off the table’. But if it turns into a rout and freefall, God help us all because there will be nothing left to talk about or pretend any longer. I can see things getting out of control in a matter of days under these circumstances. One thing will to lead to another and if gas lines form or even a few bank machines run out, the speed of social media might amplify and cascade simple inevitable stumbles into wide spread civil unrest. Hoarding?

    I will always remember the mixer truck driver turning down the wrong street in the Rodney King melee. Do you remember the news clip showing him dragged out of his truck and stomped to pieces? In that case the stresses were building for years, and I won’t go into the details. But are the current financial stresses that are building and bulging any less of a threat? If the ‘market’ is all that is left of this economy, and if watching it fail is watching the last myth unravel, what is left beyond anger and despair when there is no apparent future to work and live for? Will out of work students stop paying their student loan interest? Will taxes go unpaid? Will the underground economy increase? Or, will it be all of the above and then some?

    Fiat currency and ‘faith’ in the market/future is all about trust. I am 58 and have been watching the trust in all institutions fade from the Viet Nam war, onward. (Lies about this and that, alliances and invasions for corporate gain, the supporting of despotic rulers if it suits powerful insiders, the dysfunction of Govt, and you can keep your health care policy if you choose to do so.) I don’t know about you folks but I am left with trusting my family and friends, and that’s about all these days. Everything is in overreach these days…the market, program promises, education, climate stability, everything. When we cannot even count on the ‘seasons’ to unfold with regularity in a dependable fashion, it is debatable whether we can count on any stability, whatsoever.

    I think we are teetering and that we are at a pivot point in most things. Now, off to the shop and finish that new table!!

    Paulo

    • Paulo, You are right about the rising stock market helping cover up the real problem. Rising home prices are as well.

      The value really isn’t there, so at some point stock markets have to fall. Rising interest rates could also push stock prices down –at the same time they push bond prices down, and the cost of buying anything on credit up.

      I am afraid “interesting” times are ahead.

      • danny says:

        What about in an inflationary dilemma could that not push the price of everything up…even the stock market….Could the government inflate its way out of debt?

        • Paul says:

          That worked in the past of course – but that game is over – the debt is rising faster than they can inflate – also as outlined in the book ‘This Time is Different’ by Rogoff and Reinhardt, once a country hits a threshold of debt to GDP (I think it’s 90%) it is game over – the cost to service the debt is a growth killer (and of course their research demonstrates that it is of course never different)

          The Fed is like a man in a row boat in the middle of the ocean – the boat is holed and he is bailing as fast as he can – but the water is pouring in faster than he can bail it out.

          • Actually, the debt threshold seems to depend on the amount of economic growth, at least the way I see things. With growth slowing, the debt threshold should be much lower. Some young analysts found an error in Reinhart and Rogoffs work, so the 90% doesn’t really hold–I don’t have the link close at hand now.

        • I don’t think it could happen. Even if it did, it would still leave us in a situation of inadequate energy resources leading to more any more job layoffs. No debt would have a very good chance of being repaid, so the possibility of finding future debt would be very low. If it is available, it will be at a high interest rate, to reflect the high chance of debt default.

    • edpell says:

      Francis Fukuyama wrote a book “Trust”. In which he said nations with high levels of social trust between members of the nation become rich. Oh well. I agree with you. In the U.S. trust is now limited to people you know well and for a long time.

    • Paul says:

      Paulo – I have not been to the US for some years (I choose not to) so I by no means have my finger on the pulse.

      But I sense massive anger in that country – recall JP Morgan ran a Twitter feed when that ridiculous site when public – the vitriol that spewed forth towards the bank forced JPM to shut it down the feed.

      I think that is a symptom – people suddenly felt hey, here’s a way that I can scream and I know they are listening.

      At some point the dam will bust – Chris Hedges so eloquently discusses the situation in this excellent article http://www.truthdig.com/report/item/the_last_gasp_of_american_democracy_20140105

    • SlowRider says:

      The stock market isn’t ALL that is left of the real economy – there are some real companies underneath it. I agree that the hype around stocks like Facebook, Twitter, Amazon is ridiculous. But e.g. most of the top 30 german DAX are (still) strong and healthy, like Volkswagen, BMW, Lufthansa. The problem ist that to be profitable, they COMPLETELY depend on the old consumption model going global, and that is what Gail shows cannot go on much longer. In this sense, it is a bubble that will burst, but investors agreed that they all want to make a profit while it lasts. Just get out in time.

  34. Don Stewart says:

    Dear Gail
    Adding to my two previous comments, I see that Herman Daly is pursuing the same sort of logic:
    ‘Suppose for a moment that GDP growth, economic growth as we gratuitously call it, entails uneconomic growth by a more comprehensive measure of costs and benefits — that GDP growth has now begun to increase counted plus uncounted costs by more than counted plus uncounted benefits, making us inclusively and collectively poorer, not richer. If that is the case, and there are good reasons to believe that it is, would it not then be reasonable to expect, along with Summers, that the natural rate of interest is negative, and that maybe the monetary rate should be too? This is hard to imagine, but it means that savers would have to pay investors (and banks) to use the funds that they have saved, rather than investors and banks paying savers for the use of their money. To keep the GDP growing sufficiently to avoid unemployment we would need a growing monetary circular flow, which would require more investment, which, in turn, would only be forthcoming if the monetary interest rate were negative (i.e., if you lost less by investing your money than by holding it). A negative interest rate “makes sense” if the goal is to keep on increasing GDP even after it has begun to make us poorer at the margin — that is after growth has already pushed us beyond the optimal scale of the macro-economy relative to the containing ecosphere, and thereby become uneconomic.’

    Janet Yellen and the Fed may decide to print money to promote ‘uneconomic’ fracking or solar and wind. Essentially, they are imposing the costs on the remaining aspects of the economy…a negative interest rate, if you will. Those who can’t be part of that project will have their assets taxed to support the project. In Europe, the IMF continues to talk about taking 10 percent of financial assets to shore up the banks. In the US, the Fed can print money and give it to favored corporations who promise to pursue approved projects (some call that fascism). Those of us who don’t get any of the money find ourselves poorer.

    Now, let’s take a giant leap of faith and assume that Obama and Yellen and other government officials are actually trying to do the right thing. As they desperately search for answers which are not being supplied by PhD Economists, they stumble on your blog. You convince them pretty quickly that financial failure in the oil industry means catastrophic collapse for the broader economy. They recollect the Auto industry in 2009, and what they think has been a wonderful victory in terms of government intervention, and so the thought pops into their heads ‘we’ll just let the broad base of citizens subsidize the oil industry by taking a fraction of their assets’. (Same logic with wind and solar.). The result would, they hope, be a gradual decline…but not a catastrophic collapse. So Europe saves their banks and the US saves its oil business?

    Don Stewart

    • I think all that the government would have to do is reduce its tax rates, to save the US oil industry. I think that is what Russia has done recently, to increase production. Canada keeps its rates lower, to prop up the Oil Sands industry.

      According to Barry Rodgers, in an article called North American Tight Oil Cost Comparison, the average “Government Take” per North Dakota barrel of oil is $33.29. If that were cut in half, it would help a whole lot. That includes taxes of various kinds, some local or state.

      • Don Stewart says:

        Dear Gail
        I want to make sure I understand your position:
        1. Our current economic stagnation is a result of oil being higher priced than we can afford.
        2. Taxes specific to oil are a large share of that price.
        3. If those taxes were reduced, then oil would be affordable again.
        4. Our economy would begin to grow again.

        or perhaps, considering that we are an oil importer
        3. If US and state taxes were reduced, then shale oil will continue to be profitable for some years into the future
        4. The US will get an economic boost as imports continue to fall.

        or
        3. As Deborah Rogers has shown, shale costs exceed the local taxes collected. Therefore, shale is already a drag on the economy, as costs are forced onto other goods and services. Reducing taxes further just increases the drag on the rest of the economy.

        or ????

        Do you understand my confusion? Can you help?
        Don Stewart

        • If government taxes were reduced, oil companies would be profitable again, so they could continue to extract, even at a lower sales price for oil. This would move the problem of the low prices over to the government side–low taxes to fund its other programs, and to pay for the damage that the extraction does, and the need for new roads, schools, etc. The government would need to raise taxes to make up for the loss of tax revenue from oil and gas, so the problem would be moved to a different sector. It would help the government fail more quickly. Or higher taxes would send the economy into recession just as higher oil prices would.

    • SlowRider says:

      I liked your last comments, they helped me to get my head around some things. It’s all about keeping things together, while more and more holes are appearing everywhere. But nobody dares to admit we are on a downslope, because the whole model of “investment” into the future stops to make sense then.

  35. ladydog70 says:

    Gail,

    Thanks for another well argued post. Can you say a little more about what you mean by the word “collapse”? I know I could look it up but your understanding of what a collapse would look and feel like and mine or someone elses will be different.

    Thanks for your endulgence.

    • Lindon says:

      ladydog70 — While you’re waiting for Gail to respond, allow me to provide a preview of what “collapse” might “look” like. a) Just-in-time delivery of food and other products to retail outlets throughout America will stop on a dime — no more deliveries, b) Panicked people raid the supermarkets and the department stores, c) Electrical grids go down or flicker on and off, affecting water supply to millions, d) Lack of gas for automobiles means people can’t get to work, even if their place of employment is still operational, which it probably isn’t, e) Everybody everywhere realizes that they are in serious danger, panic, fear, desperation and desperate acts become the norm, f) Local law enforcement and fully armed military units fan out across America to enforce martial law. And that’s just a start.

      • I am afraid you may be right. I am less concerned about military than I am concerned about lack of any governmental security. Instead, bands of young people without jobs go around selling “protection”. Also, if you plant something in your garden, don’t expect that you will be the one to pick it. Some hungry person may come along and pick it ahead of you.

    • Leo Smith says:

      Technically Gail’s collapse is the acceleration of positive feedback towards rapidly decreasing standards of material living. ‘Exponential decay’ as it were.

      We are seeing this already: high prices and falling demand leads to excessive burdens on highly leveraged business models. How will you pay back the capital on a factory whose products no one can afford any more? who takes the hit?

      In the end we all do, We have all contributed, wittingly, willingly or not, to the construction of vast engines geared to growth, whose growth cannot bee sustained.

      THE VALUE IN THEM HAS ALREADY GONE. It just hasn’t been actualized by default.

      What collapse then looks like is I think best understood by reading Tainter: His depictions of the fall of empires make sense. Essentially the overburden of complexity that represents an efficient way to extract resource in a growth scenario simply retreats back to its core.

      Such elements of society that are not necessary for its (the central authorities) maintenance, are left to fend for themselves. The British and European de-colonialization of the post war era is typical. The cost of administering relatively unproductive assets exceeded the benefits so derived, especially in the light of rising nationalistic movements, ergo, they are left to their own devices.

      The same may be true of sectors within the industrialised countries. ‘unproductive poor;’ will simply be marginalised, if the cost of using armed security forces to control them is less than the cost of dealing with systemic poverty in sections of the populations who have, deservingly or not, nothing to contribute to the well being of the body politic and its associated cadre of production.

      Ring fence the gangs of Los Angeles, and let them fight each other to the death….

      This sort of scenario is already playing out in the Middle East. When you run out of ‘bread and circuses’ its cheaper to buy guns and ammo. weapons of mass destruction are handy because they destroy thousands of the innocent, (but needy) in one blast. In a world that cannot – for one reason or another – feed its populations, and if most of the population is not engaged in any meaningful way with assisting in maintaining the structures that do, they are truly surplus populations that will not be missed if they should happen to fall by the wayside, apart from theoretical losses in the gene pool.

      And those that are left – as in Germany post WWII – will benefit mightily from the removal of competition for resources. Hitler may have sought lebensraum for an expanding German population, but what he achieved was a reduction in population, and the ethnic cleansing that allowed a stable monoculture to develop and expand mightily to become the top nation of Western Europe. And the final wiping clean of the slate, of post WWI German debt.

      Ugly thoughts. Cynical thoughts. Heroic struggles in which young men die in large numbers, solve population problems. International struggles in which indebted countries beat their debtors and cancel their debts, work to stop exploitation of the indebted by the creditors.

      Wars which acquire resource assets but smash the populations who consider they own them, solve resource problems. Nuke China!

      Diseases which affect the poor and ill educated but are treatable for the affluent rich, reduce the head count of poor uneducated people. AIDS

      Chemical and biological weapons that kill people, but leave infrastructure undamaged, work wonders here, too.

      When the smooth processes of societal change cannot keep pace with the underlying forces that drive societies, especially when attention is deliberately diverted away from them into spurious issues, you get mathematical discontinuities instead. things fall off the edges of cliffs. In short a lot of people are going to die. One way, or another. Until human life and the skills inherent in it once more become a rare and precious thing, not just another mouth to feed. And lower complexity solutions become adequate to supply the needs of those who are left.

      The question really is, who those people are going to be, and where and when they are going to die. And who will be last man standing and what will they own, de facto, there being very little de jure beyond the assault rifle to adjudicate with.

      where it doesn’t really matter, it will be al Qaeda style brigandage. Or drug barons or yardies or mafia.

      feudal peasants and brutal overlords. Where it does matter, it will be different. IN Europe its teetering between a massive USSR style centralised undemocratic neo communism, and a rapid devolution to nation states and principalities, sometimes at the same time.

      Similar is happening to a lesser degree in the USA. The agricultural and mining states that supply the massive cities where the populations live, may declare unilateral independence. Detroit already is a ghost town. IF a federal government doesn’t seem to be any use, why have one at all? with state legislatures already in place, why not de federalise?

      Starved of tax income the federal bureaucracies that serve and expanding society, simply vanish into the general unemployment pools, leaving local agencies to maintain whatever sort of systems they can cobble together.

      That, according to Tainter, was the reality of the fall of the Roman Empire. Roman legions withdrew from regions that were uneconomic to tax, and the locals accepted that actually the barbarians represented less tax, more social order and shrugged their shoulders and carried on ‘ welcome to the new boss. Cheaper than the old boss’.

      And that the way it will I think play out in the West. government will retrench until it becomes a matter of ‘what have the Romans ever done for us?’ or rather ‘what are they currently doing for us?’ And when the answer is ‘less than we could do for ourselves’ then – as is increasingly the mood in Europe – the suggestion is’ so why are we paying them taxes then?’

      And I think that represents a binary choice in the West, between Big State oppressive neo communist style feudalism of the Left, and the natural outcome of market and other forces that is trending towards de-globalisation and de-centralisation on the grounds of overall efficiency.

      Neither will solve the problem of the gross imbalance between need to produce and ability to produce, but I suspect that the latter will win out eventually, after every other alternative has been tried. IN between its gong to be murder. Literally.

      • You are right that the value of much of our capital goods has already gone.

        I wonder whether some of the new things that are being built in the name of maintaining the status quo–offshore wind turbines for one–will have a very short life-span, and will quickly only represent more use of energy resource that have met a very quick end, because the system is too expensive and complex to maintain.

      • Paul says:

        Wow -that is pretty negative!

        Let me try to outdo you – at least in the short term I don’t think there will be any wealthy pockets that are able to survive – we will all be in an ‘LA gang’

        Larry Ellison has bought an island in Hawaii – I wonder if that’s meant to be his refuge from collapse. If so I assume he’s kitted it out pretty good – no canned food for him – he’d have herds of animals and fields of cropland. He probably would have a vault of gold as well – hoping that still had value.

        But who will protect Larry and the chose ones – perhaps he thinks he needs no protection because nobody can reach his island when fuel is not longer available – perhaps he thinks he can wait it out while the rest of the world succumbs to starvation.

        Or maybe he has a small army of SEALS on his island. Now if I am the head of that unit would I at some point come to the realization that I could snap ol Larry in two with my bare hands?

        I suspect might will rule the day. And I doubt the Jamie Dimons of this world will be any safer than the rest of us – their wealth will be worthless – they will have nothing to offer to those who would be able to protect them. The gangsters would likely rule.

        Hmmm…. that said — Jamie Dimon and Loyd Blankfein are mafia dons in $10,000 suits – so perhaps they would continue to run the show.

      • dolph says:

        I’m afraid you are right, Leo.

        It’s interesting because you seem to be the prototypical doomer, yet you hold out this hope that a nuclear renaissance can keep this thing going.

    • Harry says:

      We very nearly found out in 2008:

      Gordon Brown discussed deploying troops on Britain’s streets as news of the 2008 financial crisis became clear, an ex-Labour spin doctor has claimed.

      In extracts of a book published in the Daily Mail, Damian McBride said the former prime minister feared “anarchy” once the scale of the crisis was known.

      According to the book, Mr Brown said: “We’d have to think: do we have curfews, do we put the Army on the streets, how do we get order back?”

      Mr Brown has not yet commented.

      Mr McBride, who resigned in 2009 after he was caught planning to smear senior Conservatives, said he had a meeting with Mr Brown on the evening before he announced the part-nationalisation of UK banks in October 2008.

      Mr Brown is quoted as saying: “If the banks are shutting their doors, and the cash points aren’t working, and people go to Tesco and their cards aren’t being accepted, the whole thing will just explode.

      “If you can’t buy food or petrol or medicine for your kids, people will just start breaking the windows and helping themselves.

      “And as soon as people see that on TV, that’s the end, because everyone will think that’s OK now, that’s just what we all have to do. It’ll be anarchy. That’s what could happen tomorrow.”

      According to Mr McBride’s book, Power Trip, Mr Brown feared panic from other countries could spread to the UK.

      [From the BBC New website, 21st Sept. 2013]

      • Lindon says:

        Add to this a recent article where we learn that the British government is now ordering German-made water cannons for population control. One can only assume that TPTB are looking down the road a ways and can see what is coming. In Britain, water cannons ought to do the trick. In America, where a huge percent of the population is armed to the teeth with lethal firearms, water cannons won’t get it done, which is why we are seeing an unprecedented militarization of the local police forces. A big storm is brewing, that much is clear.

      • Armies and police forces are no different to other forms of employment except that they are legitimately armed
        They also expect wages just like the rest of us. Problem is, its the rest of us that pays those wages.
        If those wages stop, as they must when the tax base erodes to nothing, they will go self employed.
        Then you are faced with armed militias. This has happened, and is happening now in countries in a state of societal collapse

        • xabier says:

          End

          The conservative (ie Francoist) Spanish government has just introduced new legislation to enable private security firms to enjoy the same immunities and scope of action as state police – powers of pursuit and arrest, and huge fines and prison sentences if you don’t obey their directions.

          In effect, the possibility of privately-owned political militias has been created in Spain. A very ominous development.

          • hadn’t picked up on that one
            I seriously hate being right in that context

          • Robson says:

            Francoist Spanish government? Please, tell us more about the ethnic composition/demographics of the country’s population when Franco was in power as opposed to today, and what the Francoist, ‘nationalist’ government is doing to remedy the issue, and how self-rule is so important to your government as opposed to rule from the international/antinational body that the EU is.

            The truth is that it does not matter whether you have a ‘liberal/leftist’ or a ‘conservative/rightist’ government in power, they will obey the EU as other countries do, and they will try to keep themselves in power when the time comes, as other countries do.

            The “liberal” of today is not the liberal of yesterday (pre-50s). The liberal of today has absorbed Marxist criticism to the point that people use the terms interchangeably, something that was unthinkable during or before WWII. The fusion of the words is an American doing.

            The exportation of Americanism to Europe following WWII and the powerful lobby controlling American foreign policy and the political machinery, including its essential projection apparatus (movie industry and TV), together with the country’s hegemony in the West, make sure that Europe will toe the line in many of these matters. The EU must be abolished, America isolated and a Russian & German alliance born.

            Have you read Paul Craig Roberts’ “Washington Drives the World Toward War” article? http://www.paulcraigroberts.org/2013/12/14/washington-drives-world-toward-war-paul-craig-roberts/

          • Robson says:

            Correction: The liberal of today has absorbed Marxist criticism to the point that people use the terms “leftist” and “liberal” interchangeably.

            Americans fought Soviet communism, yes, but that’s just half the truth. Capitalism has triumphed over economic Marxism, but when you read the cultural writings of Trotsky and read your average “liberal” newspaper or listen to your humanities/social studies professor today, you can’t help but see the similarities.

            “Fascism is nothing but capitalist reaction” — Leon Trotsky
            (say that to the New York bankers who funded the communist revolutionaries in Russia)

            “The theory that the struggle between Bolshevism and Menshevism is a struggle for influence over an immature proletariat is not a new one. We have been encountering it since 1905 in innumerable books, pamphlets, and articles in the liberal press. Martov and Trotsky are putting before the German comrades liberal views with a Marxist coating…” — V.I. Lenin
            (exactly, Trotsky’s supporters in America, in his days, knew this all too well, and it still goes on today. His supporters, then and now, are not principled moral universalists adhering to an universal view for all, rather, they belong to a community engaged in ethnic networking and basically all that they do or say are rooted in moral particularism: what we do is good for us, and if you did what we do, it would be bad for us).

            “Leon Trotsky (Braunstein) was an East Sider [in New York City]. The forces which fostered what he stood for centered in the Kehillah and the American Jewish Committee. Both were interested in the work he set out to do – the overthrow of an established government, one of the allies of the United States in World War One. Russian Bolshevism was helped to its objective by Jewish gold from the United States – and by the ignorance and indolence of the Gentile citizens of the United States whose crimes of omission are almost as grave as those of bolshevik commission.” — Henry Ford
            (right! which brings me straight to the point: “The Israel Lobby: Nowhere to Hide” — http://www.theoccidentalobserver.net/2014/01/the-israel-lobby-nowhere-to-hide/ )

            • Jan Steinman says:

              “people use the terms “leftist” and “liberal” interchangeably.”

              Unless you’re in British Columbia, where the ruling Liberal Party is somewhere to the right of Benito Mussolini. They’ve been busy chopping up government and selling it to the lowest bidder for twelve years now.

              They must have thought that as long as they cut public health care to the bone without actually doing away with it, no one would notice. But they may have tromped on their own pecker in the past few weeks, as they raised electricity by 28%, cut ferry routes while raising rates and eliminating free off-peak sailing for seniors, and announced that the Agricultural Land Reserve was going to be moved from an independent body to the Ministry of Mines and Industry, in order to fast-track turning agricultural land into fracked natgas wells.

              Personally, I think they know what’s coming down the pike, and they want to get the gas and oil out before the financial systems crash, after which, their main political campaign contributions will go away.

        • Paul says:

          I agree – initially there may be martial law – but when those enforcing it are not getting paid (or their pay can buy nothing) they will almost certainly use their weapons to keep themselves alive

          And that will mean taking from those who have food. I am not sure hoarding will be of much use – unless you are located somewhere very remote – I used to think a small community would offer some protection – but unless everyone else in your community has bought in and put some food supplies away – then your neighbours will be coming to you – possibly with loaded guns if you are unwilling to share your meager supplies.

      • Paul says:

        I see no reason to question the veracity of that. We all know we are 3 meals from anarchy.

        Look at the recent Philippines storm – when you are hungry and thirsty you loot. I know I would. Then of course a few people do more than take food and the stampede is on.

        Heck if anyone wonders what would happen just have a look at this Black Friday video – and these people have just come from eating Mega Meals at McDonalds so imagine what they’d do if they were actually hungry! http://www.youtube.com/watch?v=1ZyCj5HNAf0

    • That is a good question. I think the Former Soviet Union is one place that has undergone partial collapse, when their central government closed up shop. Dmitry Orlov has written quite a bit about the situation there. It wasn’t as bad as the situation that we are likely to encounter, because the rest of the world was still operating, and when oil price rose again, they could at least somewhat recover.

      Government collapse is eventually part of the situation, often into smaller pieces that fight with each other. The financial system is likely to have severe problems of one kind or another, hyperinflation or deflation, or closed banks, or limited bank withdrawals. Loss of jobs is a major aspect of collapse. The standard of living drops greatly. Basic services like water treatment and electricity may be lost. It may be hard to get credit.

      There seem to be some countries now at the edge of collapse: Egypt, Syria, and probably Libya, Somalia, Greece, Cyprus, and maybe Spain. At some point, bailouts by a central authority can’t work–the part that is collapsing is too big.

    • Paul says:

      This is a rather long research paper that supports the theory that the disease is the end of cheap oil – and that the financial crisis is the symptom.

      The entire paper is fascinating – but if you just want to get an idea of what collapse looks like the author examines this is detail with the assumption that things come to a boil in the EU

      From page 56 http://www.feasta.org/wp-content/uploads/2012/06/Trade-Off1.pdf

      • Thanks for reminding us of this paper. David Korowicz has some interesting things to say. He has thought through a lot of the details of why what looks like a little change could ripple around the world to cause huge problems everywhere.

    • thunder123 says:

      http://www.youtube.com/watch?v=S0gw1YkuLfU

      Garlic aside, there is always hope but circumstances will be a lot different this time.

      • thunder123 says:

        Germany suffered 98% destruction of its cities in aerial bombing. 10 million Germans died in WWII including six million civilians. History is about to catch up with the American World Order.

  36. Don Stewart says:

    Dear Gail
    I would like to focus on one phrase:
    ‘the lack of credit cuts off new investment in energy extraction’

    One of the things that I think we have learned from QE is that governments can print money and send it in favored directions. In the US, that was initially global financial institutions and in the last couple of years has been asset prices and housing. I remember David Stockman ranting about ‘high grade heroin’ being injected into the system, but what seems to have happened is things such as giant corporations taking over the ownership of rental property, pushing out the ‘mom and pop’ ownership which traditionally owned a lot of rental property. A giant corporation is provided plenty of money by the Fed, while mom and pop are not so favored. The net result is a move from broad based ownership and functioning free markets to a sort of state/corporate capitalism, which would have been called fascism in the 1930s.

    Much has been made recently of the withdrawal of foreign money from US shale drilling. Who is to say that Janet Yellen won’t decide to invest in fracking? Fracking has more ‘public interest’ tags than housing ever did. If Fracking is necessary to prevent physical collapse, then the Fed will simply print some money and purchase some contracts which will send money into fracking operations which a rational investor (or even foreigners :-)) might not think were very good risks.

    I will leave the question of ‘will the Fed’s chickens ever come home to roost?’ to more capable people than I.

    Don Stewart

    • Don Stewart says:

      Dear Gail
      I call your attention to Ugo Bardi’s post today, particularly this phrase:
      ‘Then, the energy transition is also an economic problem, since the present financial system tends to look only toward immediate profit, discounting medium and long term advantages. So, we have a policy problem in the sense that we need to allocate economic resources for the transition ‘

      Janet Yellen and the Fed could also decide that, instead of subsidizing large corporations building and buying houses, they want to subsidize investment in wind and solar. They could buy contracts or equity or debt with printed money which would have the effect of greatly multiplying investments in wind and solar.

      One justification might be that the ‘immediate profit’ barrier needs to be eliminated for the long term good of society.

      In short, if the Fed is going to print trillions of dollars, then ‘worthy causes’ are likely to line up at the trough. The Fed is most comfortable dealing with giant corporations, so, again, I would expect the trend toward corporate/state fascism to accelerate. Guys in garages need not apply.

      Don Stewart

      • I am a lot less connived than you are that wind and solar are really beneficial for the economy. I think they have very short life spans, when connected to the grid–especially wind. Replacement parts are likely to be a problem early on. When it comes to using resources efficiently, they are not doing very well. You may have seen Wiessbach et al.’s analysis in Energy, Energy intensities, EROIs, and energy payback times of electricity generating power plants. According to the abstract,

        The results show that nuclear, hydro, coal, and natural gas power systems (in this order) are one order of magnitude more effective than photovoltaics and wind power.

        • Don Stewart says:

          Dear Gail
          Maybe I am not expressing myself very well. IF oil is a bottleneck resource, then it may make sense for the government to command that it be produced. Exactly how they command it would be open. They could nationalize it, they can partner with corporations (as in fascism), or they can direct money that way (as in QE). The banks weren’t a financial good deal in 2008, either…but the government poured money into them because, I suppose, the government thought that taking money from the citizens was preferable to letting the banks fail. Europe has poured money into countries like Greece, and it doesn’t have very much to do with the potential profitability of giving money to Greece.

          My point is that IF the government sees energy as a bottleneck resource, they are likely to do something with force rather than simply stand aside and let the market decide.

          I’m not arguing that wind and solar make any sense in terms of economics, or that fracking could pay its own way in a perfect capitalist market. We haven’t had a perfect capitalist market in years, as the Fed and the legislative bodies have poured money into the places they wanted it to go.

          I think that if someone thinks that the oil companies will collapse and bring down the entire economy, they should consider what the government did with the auto companies in 2009. In short, its not necessarily about marginal costs and marginal revenues and all that other Econ 101 stuff.

          Don Stewart

          • Thats a great point Don, thanks for bringing it up.
            The future is indeed very uncertain, and will most certainly not turn out like any of us think it will, no matter how solid our analyses are. Black swans will come. The only thing we can do is try to build resilience.

          • I am having trouble understanding your question, because I see the government as not having very many powers. It can bring a bunch of companies under its umbrella, but history says that those companies become a whole lot less efficient. That doesn’t get us anywhere. That is why other countries are working in the opposite direction. Mexico is getting other companies from other countries to come in to explore for oil, because its own national company can’t afford to. So is Brazil’s. So is Iraq’s. These other companies coming in are being asked to work for peanuts, so it is not clear that the approach will really work.

            I see government ownership of oil companies as a way of soaking up excess profits of the companies, without having to go through the taxation process. When the problem is losses of the companies, what is the point? The way to fix the losses is to reduce government tax rates. That is exactly what Russia has done recently, to keep its production up. The US uses fairly high rates, some of which are fixed regardless of profitability. I quoted a total of $33.29 per barrel on Bakken oil. It is easy to fix this problem–lower the tax rate.

            Right now, the shale gas industry is run by hundreds of “mom and pop” and somewhat bigger companies. They are running up huge debt. The government could take over the operation, and add to its own debt, instead of the companies’ having to float debt on their own. That would tend to raise the interest rate on US government debt. Or the government could increase taxes, and send the country into recession.

            I don’t see QE as really doing what you are saying. Perhaps you mean that the government would use QE to buy the bonds of these companies, so they could continue to borrow, even though they had exceeded all reasonable credit limits. If the government could somehow stay afloat during all of this, that might have some benefit.

            Part of my problem is that we are dealing with a physical resources question. The extraction process is taking more and more physical resources. The diversion of these resources away from the rest of the economy is keeping the rest of the economy from growing. The government (as long as it lasts) can increase the diversion of resources toward oil and gas, but that still reduces the physical resources used in the rest of the economy.

            I see the government as sitting on the edge of viability right now. It seems like getting into a badly money-losing oil and gas business would not help this situation.

            • Don Stewart says:

              Gail
              It isn’t clear to me whether you regard, for example, Bakken oil as inherently unprofitable or, alternatively, as only unprofitable because the taxes are exorbitant. Deborah Rogers has some data which indicates, that shale in Texas is not generating enough tax revenue to fix the damage the drilling causes to the infrastructure. So we might look at several logical possibilities:
              a. Shale is not profitable at any price
              b. Shale can be profitable if taxes are lowered, and the consequence will be improved performance in the economy at large
              c. Shale is marginally profitable for oil companies, but has a negative return to society if we count in the damage to infrastructure (ignoring things such as ecological damage).

              I’m not sure which of those you side with.

              As for governments and their powers. Let me tell a little story. I saw a Dutch movie set in the winter of 1944. It was about some people in the Resistance, the near starvation which afflicted the Dutch in that hard time, and the efforts of the Nazis to wipe out the Resistance. The Resistance people monitored the few motor vehicles moving on the street by listening to the sounds they were making. The Nazi vehicles still had real gasoline, and made a sound that we would recognize as ‘normal’. The civilian vehicles were running on coal derivatives and didn’t sound right.

              One conclusion is that a government which was near collapse (the Nazis) still had the power to command a very scarce resource (real gasoline) and direct it to what they considered an essential purpose. It wasn’t a question of ‘economic profit maximization’.

              I am not a helium expert, but I recently heard some discussion about the US government helium program. There is very little helium available except from the US government. It turns out that certain industrial processes need helium as an essential input. But the government has been providing helium quite inexpensively. If helium is privatized, then the corporation which takes it over will go for maximum profit. It turns out that the people who fill baloons will buy all the helium and the industrial processes may be frozen out.

              Another example is biofuels. Biofuels compete with food. But it turns out that the richest 2 billion people on Earth have the money to divert all the cropland to biofuels to provide the fuel to run their vehicles, thus starving the remaining 5 billion.

              The conclusion is that economic priorities do not ALWAYS line up with social priorities. Governments, until they finally collapse, can direct resources in ways more consistent with their social priorities. If governments see the transport of food or the powering of tanks as an essential social goal, then they will do something like the rationing of WWII. It would be a very messy proposition, but might avoid a catastrophic collapse.

              As for the money involved. I forget the numbers, but I think the losses on shale are somewhere in the 10 billion dollar range. That is about 3 days worth of money printing. Even as ‘conservative’ a commentator as Charles Hugh Smith, in his article today, notes that the US is not captive to China because China owns a trillion dollars worth of T bills. If China redeems their T bills, the US will just print the money.

              Where I come out on this is that inability to make money on shale is not likely to result in catastrophic collapse. We have been unable to make money on biofuels, and that hasn’t resulted in catastrophic collapse. More likely, we will just see a continuation of the long downhill slide.

              But what I would really like to understand is more about how you come to the catastrophic collapse conclusion.

              Don Stewart

              Don Stewart

            • The catastrophic collapse comes from the need for rapid growth hitting a finite limit. Debt is one big piece of this. As long as debt is increasing, then this adds to wealth. Once availability of debt dries up, the lack of debt subtracts from wealth. If banks and insurance companies close, this could mean very big subtractions from wealth all at once, for a whole lot of people. If it leads to all of the grocery stores near you closing, and you don’t have a bank account any more ay how, it could be a big problem.

              I really don’t know what scenario happens, or over what particular time period, but I know that anything that can’t continue won’t. What will likely happen in different small pieces working together. A rise in interest rates, by itself, would be enough to cause a big problem. Add a few layoffs by employers who want to cut employees before they have to provide insurance through the Affordable Care Act, and that will add to it as well. Add some more layoffs related to government budget cuts. Or problems in Europe or Japan.

              We need oil for many things, from extraction oil, to repairing our current infrastructure, to building new infrastructure so the economy can grow. There really isn’t enough for all of this, and it is the shortfall that causes a collapse. One of the big things that has a tendency to collapse is government. We cannot afford our current level of government–something will eventually have to change. Without government, there is a big problem because of the lack of laws and the ability to enforce laws. This is a big reason collapse tends to be catastrophic.

              I expect wind turbines will be very short lived. They are hard to keep repaired, and need specialized parts. I don’t know about solar panels. I don’t think inverters have a long life, though. Neither produce liquid fuel.

              I really don’t have detailed information about the profitability of the Bakken. I am sure profitability varies from well to well. I am not sure that there really is any such thing as inherent profitability, because it depends on situations which change over time. In general, profitability depends on a combination of
              (a) Accurate forecasting of long term production from wells – I expect that most estimates are high. So companies are reporting more profit than actually will be the case over time.
              (b) Interest rates – current low rates are very helpful. Profitability drops as interest rates go up, when debt is used. Low interest rates also mean that some people will invest in stock, because nothing else gives a decent yield either.
              (c) Taxes – obviously make a difference. This is what countries normally reduce if they want more production. Of course, if they are desperate for revenue, they may raise them.
              (d) Other conditions being in place to operate–more credit if it is needed, available drilling rigs, water for fracking, and a whole lot of other things.
              (e) Regulations – If operators are required to collect natural gas, it may reduce profitability of oil wells, because it is expensive to put in pipelines and other infrastructure for gas when production drops quickly anyhow, and selling prices aren’t that good. Companies have been able to burn it off. If they are forced to collect it, it will make the overall profitability of the well worse.

            • Jan Steinman says:

              “I don’t know about solar panels. I don’t think inverters have a long life, though.”

              It’s the old complexity trade-off.

              The first photovoltaic cells created in Bell Labs in the 50s are still producing about 85% of full output. Newer amorphous silicon cells can decline that much in their first year.

              Now they have integrated Shottky diodes (to keep lit cells from discharging dark cells) and some even have integrated inverters. Those complications reduce service lifetime.

            • I remember a New York Times article about the high failure rate of recent PV panels. The search for ultra-cheap was leading to higher failure rates.

    • I think the direction of public investment is more in the opposite direction, as talked about in the cover article for Economist. The $9 trillion sale.

      The problem is that shale gas requires more resources in than it gets out. This has been covered up by optimistic accounting and low interest rates. The US could cut its taxes on shale gas, and make oil extraction more affordable, a step they could take before privatization. I doubt they will do that–the US government needs the money.

      • sheilach2 says:

        If the US government is so short of money, why isn’t it taxing where the money is?
        It needs to raise tariffs, raise taxes on the richest 5%, stop giving tax write offs for sending our jobs overseas, end all free trade agreements & stop fast track & the TPP. It needs to raise taxes on big, rich corporations who currently pay no taxes at all.

        But it won’t do any thing that rational.

        This government is far more interested in maintaining power & world dominance than taking care of this countries needs. It knows what’s coming & in preparing itself to do what ever it takes to remain in control including shooting us, jailing us or just cutting off our electricity in the middle of a heat wave or winter storm, that would get rid of a lot of humans it no longer needs. Robots will take over our war mongering.

        All this push for nuclear power forgets one little detail, electricity cannot power plows, cannot produce the raw material needed for most industrial production, it can power only a minor part of our transportation needs, it can’t make fertilizers, herbicides or pesticides.
        We could end up starving in our warm, lighted homes even if we have lot’s of electricity.

        • You are right. The US government listens to economists. They have all kinds of theories, at least 75% of which are wrong. But they have models which “prove” they are right, and they say things that the politicians want to hear.

    • Paul says:

      Don – I am wondering if one of the main purposes of QE/ZIRP is not to encourage fracking.

      Recall ‘Drill Baby Drill’ – at the time I was wondering what they meant by that. There was not more conventional oil to drill in the US – Alaska had been drilled for the most part.

      Now when I see the policy has shifted to the ponze (my made up word) of drilling hundreds of thousands of holes across America – that fracking was exempted from environmental laws – that there has been a concerted effort by the MSM to hype fracking…

      The only thing I see missing is the cash to finance this ponze (a ponze that collapses without cheap money).

      So was this all orchestrated by the Think Tanks?

      I wonder if those with their hands on the levers had a hand-wringing moment with one side screaming ‘this is NUTS – we are going to wreck the country to keep the machine running at best for 10 years?’ and the other side calmly warning ‘oil is 147 a barrel – and you see what is happening….. do you want to see what 200 means?’

      And the opponents of fracking huddled and discussed things in whispers — walked back to the meeting and in unison chanted ‘drill baby drill ….. drill baby DRILL …. drill BABY DRILL … DRILL BABY DRILL!!!!’

      Sadly – we are to the point where I suppose they are right – the train is running to fast for any of us to get off – or to stop it before it hits the wall – so we may as stay on for the short ride that remains

      I saw this recently : Greenland caves in to drilling, shrugging off oil spill dangers http://rt.com/news/greenland-oil-drilling-arctic-223/

      I am sure someone had a measured word with the people in command there and said it’s very nice that you’d like to have your pristine waters but unfortunately there will be nobody left to enjoy them. So it would be best if you jumped on the bandwagon and do your part – if you drill it might add a few more months to the global oil party.

      Oh – and if you don’t join – the NSA will google their files on you guys – and air a little dirty laundry. You are either with us – or you are against us.

      The global leadership knows that is at stake here – and they are doing everything they can to delay the collapse. War – theft – pollution – money printing – you name it….

      As the old saying goes – the ends justify the means.

  37. John House says:

    Thank you Gail for excellent analysis, as usual.

    I will say that I don’t share your view with respect to climate change. I think it has potentially far greater ability to lead to collapse in the short term.

    We know that since the widespread use of fossil fuels human population has grown from less than 1 billion to now more than 7.2 billion. The energy, tools, and chemicals from oil made this possible. Obviously a disruption in oil supply will affect food production. But climate, too, can lead to food disruptions.

    The world is only one growing season away from starvation. Global food stockpiles are lower now than they’ve been in recent times and are never more than one year’s worth – usually only a few months worth. During the last major drought (2012), stockpiles dropped dangerously low. Drought isn’t the only thing that can disrupt food supply – too much rain, temperatures that are too erratic, winds that are too strong, etc. If just one growing season is disrupted in both the north and south hemispheres, then widespread famine will be the result. I’ve seen this even in my own garden.

    This scenario may seem unlikely, but just casual observation of weather trends over the last few years shows that climate is changing rapidly and can change abruptly. “Climate chaos” may be a better term.

    If history is any guide, if there is widespread famine, there will be widespread war. With so many countries with nuclear weapons, they are bound to be used eventually.

    Even a limited nuclear exchange could lead to widespread collapse in every sense.

    Think for a moment about the enormous energy and resources that have gone into containing the Fukushima disaster, or for that matter Chernobyl (still requiring energy and resources to keep it contained). In nuclear war, electromagnetic pulses knocked out electronics – the grid. When the grid goes down, so do more than 400 nuclear reactors across the planet. Where will the resources and energy come from to contain those when we are trying to figure out how to feed 7.2 billion people? (Actually, probably several billion less after a nuclear exchange.)

    We’ve never seen the effects of even one uncontrolled nuclear meltdown, but I suspect that it would be devastating. What will 400+ be like?

    That’s just one possible immediate effect of climate change. So, perhaps it will play a greater role than what we may think.

    • Paul says:

      Dimitry Orlov at one point thought that life could go on after the collapse – but in his blog he has posted your concerns exactly http://cluborlov.blogspot.com/2011/03/nuclear-meltdowns-101.html

      I assume that if we have 400 nuclear plants melting down because there is chaos all around and no structure in place to shut these down – then that will be a life extinguishing event.

      A sobering thought to say the least.

      There is the distinct possibility that preparing for what is coming is futile.

      • Harry says:

        Gail Zawacki, whose blog I follow, was interested to find out more about the possible consequences of multiple meltdowns in the event of global economic failure and wrote to Federation of American Scientists. The President, Charles Ferguson, responsed:

        Dear Ms. Zawacki,

        Interesting and somewhat scary sounding scenario. I think the closest examples are the Fukushima Daiichi reactor meltdowns. Although these were not totally uncontrolled, they came close to such because of the prolonged electrical blackout and the inability for the crew at the
        plant to open valves in time to let off steam buildup. So, there were three reactor meltdowns; the most ever at any plant. This was even worst than Chernobyl because of the number of meltdowns but not as bad as Chernobyl because the Fukushima reactors had some type of
        containment although there were ruptures in their containments.

        Because about 90 percent or so of the currently operating reactors have relatively strong containment buildings around the reactors, my estimate is that in the worst case you outline in which the reactors are left alone and meltdowns occur at all of them, the containments
        would prevent massive radioactive contamination from getting into the environment at most plants although some containments would likely rupture.

        Even Fukushima was not as bad as some may think it was in terms of contamination. I was there in early October last year and saw that the area of evacuation is relatively small, about 10 km away from the plant is the greatest area of concern and there is a restricted zone up to 20 km it some places outside the plant. The contamination has raised the level of radiation for sure but not to the level of posing
        an immediate threat to health; the contamination is still considered to be in the low dose radiation level. Over many years of time, the contamination should be able to be cleaned up. Yes, this is a disaster, but it is not an existential threat to Japan or the rest of the world.

        I hope this response puts the worst case in perspective for view.

        Sincerely,
        Charles Ferguson

        Charles D. Ferguson, Ph.D.
        President
        Federation of American Scientists

      • Leo Smith says:

        Er no.

        400 nuclear power plants that scram because they lose power and after 30 days run out of diesel to maintain pumps are just 400 great big mothballed nuclear plants doing nothing.

        If no money was spent on Fukushima at all, it would not make one jot of difference to anything. Even the total collapse of all the overstocked spent fuel ponds would be little more than a minor hot spot in the vicinity.

        There are real things to fear, but nuclear power plant meltdown is not one of them.
        What scares me most is a typical modern city deprived of energy.

        90%+ population dead within weeks, and only a few not too fat and unfit to walk their way out.

        Total deaths from Chernobyl: less than 100 people. Maybe increasing to 4-5000 if no actual medical facilities available.

        Total deaths from energy collapse in a typical city: > 5million.

        • Harry says:

          I’m not sure on what basis you’re disagreeing with CF. His comments seem very far removed from some of the Fukushima-related hysteria I have seen on the web.

        • Jan Steinman says:

          “Total deaths from Chernobyl: less than 100 people.”

          To be fair, you should mention that there is a broad range associated with Chernobyl, with your number at the very bottom end, meaning 100 people directly killed in the disaster with 100% certainty.

          The problem with nuclear contamination is that it is insidious and untraceable. My high-school garage bandmate’s father was an engineer at Fermi I when it melted down. He died ten years later of leukemia, in his early 50s. The official stance is “the public was never in any danger,” and of course his death is not attributed to the meltdown, which officially, had zero casualties. Tell that to his grieving family.

          Ernest Sternglass used statistical methods to show that 400 “excess” infant deaths occurred following the Three Mile Island melt-down. Of course, none of those were counted in the casualty count (officially, zero), and yet, there are 400 more grieving mothers than should have been, according to statistics.

          A meta-analysis published by the New York Academy of Science says that close to one million deaths can be expected due to Chernobyl.

          You can claim these studies are flawed. You can say my friend’s father is just anecdotal. But please at least note that there is a huge range associated with nuclear events, and that your figures are at the absolute bottom.

          The problem of hundreds of events similar to Fukushima is not in the immediate casualties. It is in significantly raising the background radiation floor, which according to the nearly-universally-accepted “linear, no-threshold” model (LNT)†, will kill and injure millions.

          †The stodgy US National Cancer Institute accepts the LNT model unequivocally, and will tell you your additional risk of thyroid cancer due to atmospheric nuclear testing. Those who do not accept LNT are on the fringe.

        • I fully agree. Nobody defines what is a economical collapse. I hear collapse everywhere but nobody seem to know what it means. Nobody seem to understand complexity even among the doomsters.

          If there is a inflation but international trade is still working, it means goods are available but expensive. Could be manageable but with more violence and social unrest.

          if there is deflation but international trade is still working, it means goods are available but few can afford it. Could be manageable but with more violence and social unrest.

          Currencies lose all legitimacy and cannot be used for international trade. Countries like China will do better because they are producing real goods and can access oil from the middle-east easier. China is closer to Russian where Russia is a still big oil producer.

          Who suffers the most, all countries dependent on China for the goods. Countries that will suffers the most will be North america and South America.

          As long as countries are willing to work together and use currencies as a way to do international trade there will be no economical collpase. A economical collpase suppose that people stopm using money as a way to do bussiness. I doubt people will give up that easily.

          As long as internation trade works, the system will stay alive.

          • Lindon says:

            Without credit, there is no international trade. Credit is based on trust and enforceable international banking/credit agreements. All credit is based on the assumption of future growth. Future growth is enabled only by cheap (enough) fossil fuel energy inputs. Ergo: No more cheap fossil fuel energy inputs = no more growth = no more credit = no more international trade. The governments and banks can of course produce data that misleads decision-makers into believing that there is plenty of (cheap enough) fossil fuel to keep it all going — but that little trick will only work short term.

          • `I think at some point the big problem will be failing governments, so that the current currency will go away. Then there will be a lot of little “countries” with no trade agreements. In that case, very little may be traded, so very little may be available to import. Lack of operating banks may play a role as well.

        • Ert says:

          @Leo

          There where at least 400.000 liquidators at the Chernobyl cleanup present – I didn’t wanna be one of them. The medium and long-term effects are disastrous – so speaking only of 100 or some 1000 deaths is more then a “little” downplay….

        • Paul says:

          Whooaaa there…. can you provide something to support those claims?

          Keep in mind that the Fukushima plant is to a great extent a controlled meltdown because TEPCO continues to pour massive amounts of water onto the roaring hot cores (tonnes of this water are of course pouring into the Pacific – and will continue to do so for perhaps centuries – we can’t stop it now – how do we stop it when our economy is collapsed?).

          I am no nuclear engineer but surely if they stopped pouring water onto those cores there would be a very, very bad result.

          Now multiply that by 400………

          Also you have not addressed the bigger problem which are the spent fuel rods that sit in pools that require cooling water

          The REAL Fukushima Danger: Failure of Fuel Pools Could Trigger Worldwide Nuclear Radiation http://www.globalresearch.ca/the-real-fukushima-danger-failure-of-fuel-pools-could-trigger-worldwide-radiation/5349850

          Certainly the collapses of governments, famine etc… are enormous issues — but they are not likely extermination events.

          I lean towards Orlov’s stance – that 400 out of control nuclear plants will not be local problems – those are potentially life exterminators.

    • I don’t doubt climate change will play a role–I just don’t think that there will be much we can do about it, in the little time before collapse.

      One approach to try to fix climate change is to build more Nuclear. But as you point out, that doesn’t work, of climate disrupts electricity transmission. I would add that financial collapse says that we almost certainly won’t have the resources available to decommission those reactors, so nuclear is not a solution.

      Wind turbines are another approach. I expect lack of replacement parts will put them out of commission pretty quickly. Lack of helicopters and fuel for helicopters are another limiting item for wind turbines. Offshore wind turbines are especially bad for poor cost benefit ratio.

      The investment required for solar is high, likely adding a lot more added debt. Making solar panels is polluting as well as expensive. Many of the solar panels are from China, encouraging them to extract their polluting coal more quickly. It becomes just as much as imported energy expense, as if it came from Saudi Arabia. Inverters may not last long, or be replaceable in collapse.

      • edpell says:

        In my town we are fighting a new overhead transmission line. We want it put underground so we do not have to look at it. But the customers (NYC) should want it underground because underground lines have three times fewer outages. If our concern is wind, rain, ice, solar mass ejection, etc. underground solves it. The technology has advanced from my point of view it is the cheapest way to build a new transmission line. But even if it costs more it is needed to deal with the weather.

        • Putting transmission lines underground is one way of using up our scarce fuel resources, especially oil. Whether or not this helps us in the long run depends on

          (1) How adverse the effects are from diverting energy use from other projects,
          (2) The length of time (if any) putting the transmission lines underground would increase the overall transmission system, and
          (3) The availability of fuel for fixing the lines later, and the relative amount of that fuel.

          I don’t know how the calculation would work out. My guess is that we are better off leaving the transmission lines above ground. We have gotten use to the idea that we can use oil in any way we want, but we really can’t.

  38. If collapse is 10-20 years away, this is GREAT!  That is plenty of time for us to get SUN up and running!

    We got up our Beta Version of our PEN Education Software today for debugging and ideas for improvements from the Doom Community.  Feel free to drop in and make suggestions here for courses you would like to see offered in the future.

    RE

  39. Steve Boyles says:

    Gail, Great article as always!

    If I may, I’d like to second Jan’s request for the more ” specific ” scarier stuff here in the comments.
    I’m wondering not so much about when the plants inherit the earth but the nearer term when we might still perserve our species.

    First off don’t you feel that 10 to 20 months might be more likely than 10 to 20 years?

    Secondly do you feel that in the US ( & CA) decline will begin painfully but orderly like Greece? Or will we just paper over the problem until something pushes us off a steeper more dangerous cliff?

    Looking forward to reading your and everyone’s thoughts.
    Thanks, Steve

    • Bacteria have always been the dominant species, judged by the simple criteria of being able to kill off everything else, and to maintain what they need for their own use, then discarding

    • I do think that 10 or 20 months is more likely than 10 or 20 years to inception. But the collapse will go on for some time, extending it after that date.

      I expect that there will be a lot of turmoil in the financial markets. Interest rates may rise, and debt defaults rise. These would be big problems. These might happen fairly quickly, especially if there is an attempt to taper QE.

      I see that the senate failed to advance the bill extending long term unemployment insurance. We are likely to see more and more people falling through safety nets. I suppose this would be like Greece. It some point, it seems like there might get to be riots in the streets.

      We will almost certainly get to a point where there are even more financial problems than in 2008-2009. I expect to see big banks and insurance companies fail. I don’t know how governments will deal with the issue. A cut-off in debt availability would be a big problem. There was a big cut-off in debt, back when oil prices were at their lowest in late 2008.

      I expect at some point to see the US Federal Government to disappear. That may not happen for quite a while, though. That would be easier than cutting back all of the programs. Perhaps states will group together to form new alliances. Or the breakdown may be to an even lower level than states–say Northern and Southern California.

      I am concerned about the financial health of companies in the electricity sector. If they go bankrupt, and are not replaced, we may not have electricity.

      I think replacement parts for things will become a problem in not too many years. In some cases, it may be because the suppliers are out of business. In other cases, it is because of trade problems, or countries that have broken up, and don’t have relations with other countries. Or they may not trust easy other. There may be a lack of oil to operate ships, too.

      • DaShui says:

        The senator from my state told me the federal government is working on a contingency plan to spin its functions off to the states if the dollar collapses or there is some other problem .

      • Bill S. says:

        Few people alive in the USA will survive without a functioning electric grid. As a survivor of Hurricane Katrina in Slidell, Louisiana, in a home that didn’t flood, I can assure you that nothing works without electricity today. You can’t refine or pump fuel. I read of a study done for the US government that estimated that if a Carrington event type solar storm hit today, the grid would probably be down for months or even years. They estimated that roughly 80% of the US population would have starved to death within 2 months. Think about it, how would you do anything without electricity? For a few days around here after Katrina, the cops couldn’t even communicate. Help finally came in from surrounding States. Such would not be possible without an electric grid. That stays down, and we’re dead. People will do everything humanly possible to keep the grid up. There isn’t even enough paper money for the economy to function without electronic transactions and the Internet.

        • I agree with you that everything is dependent on the electric grid.

          After one of the big hurricanes, gasoline and other refined oil products were in short supply in Atlanta, because electricity was out that was used to operate the pumps that make the refined products move through the pipeline along the Gulf Coast. I talked to someone who was involved with getting the pipeline going again. He said that they took diesel and electric generators over to the pipeline, and used them to produce electricity to get the pipeline moving again. My contact said they had armed guards with them.

  40. Peter Strachan says:

    Thanks Gail, excellent simple summary.
    Can I offer that the average wages in the USA is likely to be the sum of total wages divided by the number of working people, not the total population.
    Re natural gas: the US is actually still a net importer but now supplies about half or 32 Bcf per day of its gas from fractured shales. You are correct that a price of over US$5.50 per mmBtu is needed for most of this gas to be profitable.
    The current surplus supply was created by the momentum from the following events:-
    1. high gas prices over the 6 years up until 2008, when gas traded between US$6 and US$10/mmBtu. This prompted more exploration and created the financial drive.
    2. The evolution of horizontal drilling and fraccing technology
    3. Availability of debt and equity from Wall St to fund expansion, which was rewarding companies for going out and leasing prospective tenements

    Low gas price has been a result of weaker economic conditions that reduced consumption, despite a switch from coal to gas for power generation.

    Also, I think your analysis would benefit from a brief mention of how price and demand elasticity works with for energy and the ability to substitute by other products (eg renewable or nuclear) and reduce demand via application of technology.

    I know these things don’t change the thrust of what you say, but it strengthens your thesis. Ultimately global population rising at 80 million pa will overwhelm any attempt to reduce usage or substitute and what we see is that when the cost of energy rises beyond a certain percentage of GDP, the economy stops wanting it and slows down. (Oil demand is very inelastic below a critical price and then it becomes very elastic beyond the pain threshold)

    • I purposely used the total population in the denominator, to capture all of the folks who can’t find jobs. This is a big part of our problem.

      I am afraid I can’t put everything in one article. I have to save some for another article.

      • Peter Strachan says:

        Re wages per person: they way you calculate that number also captures the impact of rising overpopulation. There is less to go around per person, just like GDP per person I guess so it serves a purpose.

        The other thing I forgot to say about natural gas is that a lot of the shale gas is associated with oil and so is subsidised. Effectively the producers could afford to give the gas away and still recover costs per well, based on oil revenue alone.

  41. Tom Reis says:

    Currently read a great Book written by Taleb, which helps to understand why People since the ancient greek make false assumption about the present and future. It is Full of funny Aphorismen about our blind spots written by another Risk researcher.

  42. Jan Steinman says:

    “I will spare readers from a more comprehensive list.”

    Oh, come on. Tell us how you really feel. 🙂

    In particular, it looks like the tight oil business is dependent on a continuous supply of Quantitative Easing, but no one is willing to say, “The emperor has no clothes!”

    • Yes, it does seem like they need a continuous supply of QE. At least the EIA brought their forecast for the 2014 growth down to 750,000 bpd. It may take a big bankruptcy, or rising interest rates, or falling prices to set of a chain of events that brings the problems to light.

  43. richdesign says:

    It’s always challenging and interesting to consider the interface between the human economy and natural resources. The Limits to Growth ‘World Model’ had more of a resource focus and only modelled the economy fairly simply, mainly in terms of capital investment feedback loops. The non-linear feedback loops were alarming enough there, but when you add in much more volatile economic aspects such as debt, it can only make the system even more sensitive.

    What intrigues me is how do money and resources interact? What is it that actually gives the money its real and practical value? You suggest that the US government can go into more debt (in the short term) to (temporarily) get around these energy related issues, but that only increases the supply of money, which is only a human-made resource allocation mechanism. You can’t eat money or burn it, so if the US temporarily recovers by getting more money, if it creates real practical improvement in people’s lives, it must also correspond to more actual access to energy and natural resources that is doing the real work behind the improvement. Where is that extra or renewed energy and resource coming from? Is it just that the resources and the human will were there all along and it’s the improved coordinating aspect of the money that gets it flowing again? Or is it that the increased money means that the US can get the resources from elsewhere by outbidding someone else and is just getting resources from elsewhere at someone else’s expense? The increase in the money must trigger something in the physical world to make a practical difference.

    So often we conflate money with the physical stuff it represents and we confuse the two. If we could perfectly and fairly allocate all human and physical resources around the world (i.e. exclude economic issues) would we still be faced with a problem? i.e. Is it ‘just’ an allocation and coordination issue, or is it a fundamental physical constraint which, with the best will in the world, will just eventually beat us, due to the sheer increasing difficulty of it?

    Based on The Limits to Growth I suspect that it’s the latter, governed by energy in versus energy out and fundamental physical laws. As they tried to point out, that process could still be managed (at least it could then) but our current dominant global coordinating method – the current economic system – serves that end very poorly. There is hope in that they also said that their models were only really valid until the point of collapse. They acknowledged that their models could never predict what might happened once our systems move well outside their current bounds. So maybe before, or as, the current system falls, something more sensible can prevail to at least direct a controlled decrease in material consumption. The analogy I like to use is of a climbing aeroplane which starts to lose power. If the pilot decides that ascent is what flying is all about and stubbornly maintains the same angle of climb, eventually the plane will stall and fall out of the sky. If however the pilot levels out or even points the nose down, they retain control, if if not altitude (i.e. present levels of consumption). How we manage that critical ‘stall’ period will be critical.

    One person who has expanded ‘Limits’-style dynamic modelling to include economic factors, especially debt, is Steve Keen. As a more open-minded economist who actually models aspects such as debt and time-delays in markets, he became famous for being able to foresee the global financial crisis as obvious. Because the traditional systems modelling tools, such as Simulink, Vissim, Vensim, Stella, etc. don’t handle the double-entry bookkeeping requirements of modelling debt, he developed (or is still developing) his own modelling system called Minsky. The best overview I’ve seen, which is very rich in explanatory and background material, is the page for his Kickstarter campaign for Minsky: http://www.kickstarter.com/projects/2123355930/minsky-reforming-economics-with-visual-monetary-mo
    You can see that he actually models economic systems as complex dynamic systems, which is very refreshing.

    Hopefully, this kind of thinking can predominate in time, so that we can avoid (or recover from) collapse and at least achieve controlled decline to allow more time to adapt and/or develop alternatives.

    • Paul says:

      I believe it was Steve Keen who initially alerted me to the problem that we are facing – if I am correct he was the economist who said our economy is like a balloon inside a steel box – that the steel box was a metaphor for energy costs – as the balloon expands it hits the box walls and deflates.

      Indeed he is one of the few who predicted the 08 crash – but he is one of perhaps a handful who attributed the crash to the increasing costs of energy.

    • timl2k11 says:

      “You suggest that the US government can go into more debt (in the short term) to (temporarily) get around these energy related issues, but that only increases the supply of money, which is only a human-made resource allocation mechanism. You can’t eat money or burn it, so if the US temporarily recovers by getting more money, if it creates real practical improvement in people’s lives, it must also correspond to more actual access to energy and natural resources that is doing the real work behind the improvement. Where is that extra or renewed energy and resource coming from? ”
      This is an interesting problem to me and I think I know the answer. QE and other central bank policies create the illusion that things are better than they really are, that we are better off than we really are, so people act as if we are better off than we really are. If people knew the true state of things, they would cut back spending and economic activity to the point that our overall economic output and activity would be much less than it is now, which would actually help create a smoother ride down, instead of the cliff we herd of sheep seem to headed off of.

      • Lindon says:

        I doubt that there is any possibility — real or theoretical — of a “smooth” ride down in this global economy. The way I see it, the monster that is the global economy MUST consume and equal or greater amount with each passing day, or it dies. How? Once private investors and regular people (the “sheep”) realize that the global economy is shrinking, that we are on a downward slope to oblivion, that all the great hopes and predicted technological feats that have been promised to them are pure lies — then TSHTF. Fear and uncertainty and distrust kick in. The herd mentality takes over. Really bad stuff starts happening which reinforces the negative prevailing attitudes, and it becomes a self-reinforcing cycle spinning us rapidly downward toward that ultimate collapse. Without hope and trust in the economy, it is toast, and so are we.

    • Thanks for your comment. I think the problem is actual resources in the ground, rather than an allocation. We need to build up a fairly elaborate system, before we can get those resources out, including schools, healthcare, government, and roads. What we are reaching is the point where we cannot maintain the whole system.

      Debt was a say of facilitating getting cheap energy resources out of the ground, so the economy could grow. The existence of debt increased the price the market could bear for the energy resource, and in that way helped allocated more manpower and other resources to its extraction. Once those cheap resources are replaced by expensive to extract energy resources, there is no possibility of such a favorable loop developing, thanks to debt. In fact, attempts at extraction are likely to be sink holes-debt will be defaulted on, not too far down the line. I expect “renewables” to have a very high default rate. Perhaps it will be called something different–change in amount the government will pay or feed-in tariff. Or maybe the replacements parts just won’t be available, so it stops working.

      Thanks for your reference to Steve Keen and his Minsky program. I have seen references to it before, and not gotten too involved. Just looking what he has shown, I am doubtful that he has modeled energy to do enough in his model. I expect that there would be a fairly steep learning curve for me to get into it. I am also not sure I have time. It might be that if I could contact Steve, and show him my work, it would give him some ideas about things he could add to his model. I have an e-mail address for him. I could try that.

      • Ert says:

        @Gail

        I have followed Keen somewhat over the years since 2009. I think he is very good in modelling and understands all the issues about debt, cycles, etc.

        But from at least all what I have read or seen from him, I do not remember the explicit role of (cheap) energy as the core enabler for the debt-supercycle (or at least energy as a main contributing factor).

        It was even a hard time for me to combine energy and economics – and the cross-dependency between them I only fully realized after I came to your site here. But It took me still some month until I “grooked” it to its full extend.

        Currently I have the feeling that even the super-sustainable-super-renewable-super-community folks do get the issue of climate change and economic activity wrong. To many people still think that we can keep somehow the status-quo… and only have to become a bit more greener… or 5 times more efficient (see “Factor Five” from Weizaecker) and somehow tax away the efficiency gains to not end up in the rebound-dilemma.

        When I look at the ongoing of TTIP (the transatlantic free trade disaster) I only see that politicians and global corporates still try to foster their existing business models and BAU – but the time is running out. Considering what I read at http://arctic-news.blogspot.de/ the developments in the Arctic and the methane problematic there is speeding up rapidly – we may not have 10 years anymore to act before non-reversable climate change effects come to effect.

        • Everyone would like to paint the problem as an easy one that we can easily solve, with a little effort. Unfortunately, it is a difficult one, that we probably can’t solve. Even if people understand this, they can’t bring themselves to tell people the truth. This is the reason for all of the endless fairy tales we hear.

          By the way, I have been corresponding with Steve Keen a bit in the last 24 hours. He was kind enough to respond to my e-mail about Minsky.

          • Ert says:

            @Gail

            Keep up the contact with Keen – you may be able to tune up your models with his view on Minsky’s financial instability hypothesis.

          • Paul says:

            Speaking of simple solutions.

            There are people in Bali who think bamboo houses are the way forward — anyone who doesn’t build with bamboo is ‘a disgrace to their grandchildren’

            The people buying these houses and putting their kids into the Green School are the same people flying business class to California 3x per year (amusing…)

            Oh how wonderful – but meanwhile China and India are building hundreds of coal plants this year alone – half of the south end of the island is being paved over and mega hotels open every month

            I just read an article that indicated even the child of someone who is ‘green’ (recycles, drives a Prius etc)…. will use at least I think it was 5x the amount of resources of each parent (think of all the electronics gadgets)

            The cognitive dissonance kicks into overdrive when I mention such things…. they don’t want to hear it.

            (and heaven forbid if I were to mention that bamboo houses last at best 10 years – so the resources going into them are in the long term, more than would go into a conventional house)

            People will believe what they want to believe – even if the facts get in the way.

            Heck I guess if it gives one peace of mind to build a bamboo house that’s fantastic – but it’s not going to change the outcome. So probably best their bubble doesn’t get burst since we’ve already baked the cake.

    • edpell says:

      Thanks for the info on modeling. I do not see why a new simulation program is needed. But I am happy someone is working on simulations.

  44. Lindon says:

    10 or 20 years away is a pretty safe prediction to make. But I’ve read articles that pretty convincingly make the case that the shale oil projects will play out in another two-or-so years. The “great hope” of transition to natural gas is currently being disseminated to the masses as a replacement to oil, but that is nothing but a fantasy and it will eventually be recognized as such. If indeed we do go another ten years before that ultimate “collapse”, it will be ten years of a world economy exponentially under stress, with the multi-trillion dollar deficits continuing to mushroom and unemployment running away — a proposition that a lot of smart people think is nearly impossible to endure without collapse. I try to be logical, to read constantly, to pay close attention to the facts — including those so skillfully presented by Gail in this and other articles. Logically, isn’t it true that a “big” major shock to the economy (related to energy availability and/or price especially) would send the private investors fleeing to safety, away from energy investment, and basically be the trigger that accelerates us toward that ultimate collapse? What other triggers are realistic to speculate on within the near-term future. With the economy on eggshells as it is, we’re like a herd of nervous cattle — a loud “noise” is all it would take to get the herd stampeding. A lot of people, me included, just don’t see how we can avoid a major game-changing shock to the world economy within the next couple of years, much less ten or twenty years. Monitoring the news constantly, being aware of developing trends, and being ready for anything is pretty good advice these days, I think.

    • Peter Strachan says:

      Lindon,
      You are correct. The USA will be importing as much LNG as it exports by about 2025 if I am correct.
      The energy industry is already operating under a virtual capital strike! The small to medium players find it increasingly difficult to attract risk capital and the larger players are increasingly selling assets to fund ongoing capital requirements. They look like they are making profits and report as such but take a look at successive cash flow statements and you will see that they are living on debt!

      • Lindon says:

        And it isn’t just a question of how much LNG is obtainable (at today’s or future prices). Compare EROI of LNG to conventional gas/diesel, and we end up with a large energy deficit in terms of how much LNG would be required to keep the over ONE BILLION passenger cars currently on the roads the world moving toward their destinations. That one billion was a 2010 number — with China coming to the game late, there are many more than one billion autos on the road today. What about the trillions needed to convert infrastructure to LNG, not to mention all those expensive LNG conversion kits that people will be forced to purchase and have installed. There are so many holes in the “LNG will save us” fantasy that it looks like swiss cheese — but that doesn’t stop the gullible masses from pinning their hopes on LNG. (sigh…)

        • edpell says:

          New York state released its state energy plan last week. It will use natural gas and nuclear. It predicts frack gas will double production between now and 2035. All I can do is shake my head and think how sad this all is. Maybe I will move to California they have at least some rational thought about energy planning.

        • I would compare delivered prices, including taxes, rather than EROIs. One common mistake is to assume that taxes will go away, as we switch from oil to another fuel. Roads will be even higher priced in the future. We need taxes somewhere in the system to pay for the roads. And as you say, all of the conversion expenses. If our real shortage is capital, where are all of the conversion, LNG equipment, and the like going to come from?

        • Pete says:

          Truly the only source of energy that is potentially our salvation is from the sun. The sun is the ultimate source of energy. IT created the photosynthesis that lead to all fossil fuels. If we can harness the sun in any scale-able way along with mass storage capacity, this may lead to a better outcome, albeit with far fewer human beings, well, far fewer everything.

          • Storage of solar energy is a real problem.

            Also, solar energy doesn’t replace liquid fuels. In a pinch, it is possible to make liquid fuels from coal or from natural gas (but I wouldn’t recommend doing so). Solar doesn’t get us there.

    • danny says:

      Yes 10 to 20 years would be nice! I wish we had that much time! Unfortunately through the actions of the FED we see that we don’t. They can’t stop their QE and they know it…we know it. There is no real economy today…..

    • WT de Vries says:

      Just 2 days ago (January 12th) Die Welt (German newspaper) reported on the demise of the shale gas boom in the USA: http://www.welt.de/wirtschaft/article123781286/Fracking-Boom-in-Amerika-flaut-ueberraschend-ab.html

      • It is hard to believe that shale gas will work very well anywhere. Outside the US, people don’t usually own the mineral rights, so they have no incentive to encourage production. There is a need for a lot of pipelines to rapidly declining wells. There are a lot of water needs, and heavy equipment, often in populated areas. So people often object to tracking for gas.

    • Regarding what is the trigger, in the natural gas arena, I expect that the failure of Chesapeake Energy or some of the other “big” players (none is very big) could send investors scurrying. I am not sure how far away such bankruptcies are–not too far.

      A rise in interest rates generally, would make shale oil unprofitable, and would send investors to other types of investments with better yields.

      There have been three big explosions related to shipping shale oil by rail car, if I count correctly. It is pretty clear that a big market readjustment is needed–higher liability insurance limits and rates; an extra step of stripping off the propane and butane before putting the oil in tankers, then figuring out what to do with the stripped off portion; more sturdy containers, freshly built, to transfer all of the shale oil by rail. However this works out, it will add to costs for the industry, and mean that the industry needs a higher price to make shale oil profitable. (If the limit on sending crude overseas is removed, it might help raise the price of shale oil a bit, helping to offset this effect. It also might be a way to make use of pipelines to the gulf (shipping from there) circumventing the rail shipment issues. Of course, I don’t think I would want to ship the stuff with the propane and butane still in place in a ship either.)

      Some of the companies in this arena are reaching debt limits. This by itself will cut back production. I think we have pretty much run through the sucker list (Big Oil Companies, Overseas Oil Companies).

      There are many things going wrong around the world. A big problem in Europe or Japan could indirectly transfer here, for example through higher interest rates.

      • Lindon says:

        Picture in your mind an image of BAU as a man dressed in a suit and a top hat, tip-toeing through a densely packed mine field, shuddering with fear internally at every step but trying to look as if he knows exactly what he is doing to the “well-wishers” observing his plight. That mental image of BAU is not too far from reality, IMO. One misstep, and BOOM!

      • Jan Steinman says:

        “There have been three big explosions related to shipping shale oil by rail car, if I count correctly.”

        Four?

        1) Lac Megantic

        2) Alabama

        3) North Dakota

        4) New Brunswick

        This may be outdated by the time most people read it, the way those DOT-111 cars are going up in flames.

        The most recent, in New Brunswick, stands in sharp contrast to Lac Megantic, because it was rural and hard to get to. There is no way to get fire-fighting equipment there. There is no way to get a crane in there to clear the tracks. They are purposely blowing up LNG cars to hasten being able to repair the rails. In the meantime, a major railroad route is unusable.

        Also, a coal dust train just overturned in Burnaby, BC, dumping numerous carloads of coal dust directly into a major stream, perhaps killing all the life in it.

        Like David Holmgren, I think we need to purposely kill industrial civilization before this fossil sunlight stuff kill us all! (He claims as little as 10% of everyone de-consuming to a very low energy level would crash the entire system.)

        • Lindon says:

          Jan, it breaks my heart to see what humans are doing to planet earth all in the name of stringing BAU out for a little while longer. I’ve never been a tree hugger type, but I am a lover of nature, and have a deep respect for the little rock we inhabit. To see so much poison and waste and destruction, all just to keep us limping along in our current sad state of being, is just terrible. I suspect that we’ll see a lot more of this before that collapse which is surely coming — more oil spills perhaps (probably) very large spills, more of these train explosions, more chemical waste, more ocean destruction, more nuclear issues, more fresh water depletion, and of course a LOT more CO2 in the atmosphere. If I ever appear to be “ready” or “eager” for collapse, it is only because with every day until that final collapse, we are pumping out the poison and ruining the environment for whoever may end up surviving what lies ahead.

          • Stilgar Wilcox says:

            I’m right there with you on those thoughts Lindon. Our species is at a consciousness level in which we have the brains to decimate but lack the wisdom to live in balance. So far we have been an unstoppable freight train of destruction. My hope is to survive the coming bottle-neck only so I can observe that some of the wildlife lived on. That would be a pleasurable moment if the poachers no longer have an economic benefit to destroying rare species.

            I make cabinets and had this guy called me once to ask me to build him a display pedestal for a Rare Black Sable Cat he shot in the wild, then had stuffed. He was beaming with pride and joy. I told him I thought what he had done was very wrong and hung up. How can someone think that way? But this is the dilemma of our species, that many are only interested in their own self agrondisment to the detriment of the planet.