Beginning of the End? Oil Companies Cut Back on Spending

Steve Kopits recently gave a presentation explaining our current predicament: the cost of oil extraction has been rising rapidly (10.9% per year) but oil prices have been flat. Major oil companies are finding their profits squeezed, and have recently announced plans to sell off part of their assets in order to have funds to pay their dividends. Such an approach is likely to lead to an eventual drop in oil production. I have talked about similar points previously (here and here), but Kopits adds some additional perspectives which he has given me permission to share with my readers. I encourage readers to watch the original hour-long presentation at Columbia University, if they have the time.

Controversy: Does Oil Extraction Depend on “Supply Growth” or “Demand Growth”?

The first section of the presentation is devoted the connection of GDP Growth to Oil Supply Growth vs Oil Demand Growth. I omit a considerable part of this discussion in this write-up.

Economists and oil companies, when making their projections, nearly always make their projections depend on “Demand Growth”–the amount people and businesses want. This demand growth is seen to be rising indefinitely in the future. It has nothing to do with affordability or with whether the potential consumers actually have jobs to purchase the oil products.

Kopits presents the following list of assumptions of demand constrained forecasting. (IOC’s are “Independent Oil Companies” like Shell and Exxon Mobil, as contrasted with government owned companies that are prevalent among oil exporters.)

Kopits 10 Assumptions of Demand Constrained ForecastingThus, it is the demand constrained view of forecasting that gives rise to the view that OPEC (Organization of Petroleum Exporting Nations) has enormous leverage. The assumption is made that OPEC can add or subtract as much supply as much as it chooses. Kopits provides evidence that in fact the Demand view is no longer applicable today, so this whole story is wrong. 

One piece of evidence that the Demand Model is wrong is the fact that world crude oil (including lease condensate) production has been nearly flat since 2004, in a period when China and other growing Eastern economies have been trying to motorize. In comparison, there was a rise of 2.7% per year, when the West, with a similar population, was trying to motorize.

Kopits 20 Motorization and Oil in Historical Context

Kopits points out that China’s big source of oil supply has been US main street: China bids oil supply away from United States, to satisfy its needs. This is the way that markets have made oil available to China, when world supply is not rising much. It is part of the reason that oil prices have risen.

Another piece of evidence that the Demand Model is wrong relates to the assumption that social tastes have simply changed, leading to a drop in US oil consumption. Kopits shows the following chart, indicating that the major reason that young people don’t have cars is because they don’t have full-time jobs.

Kopits 35 Driving and Employment

Kopits makes a comparison of the role of oil in GDP growth to the role of water in plant growth in the desert. Without oil, there is less GDP growth, just as without water, a desert is starved for the element it needs for plant growth. Lack of oil can considered a binding constraint on GDP growth. (Labor availability might be a constraint, but it wouldn’t be a binding constraint, because there are plenty of unemployed people who might work if demand ramped up.) When more oil is available at a slightly lower price, it is quickly absorbed by markets.

“Supply Growth” is the limiting factor in recent years, because the amount of extraction is rising only slowly due to geological constraints and the number of users has risen to the point that there is a shortage.

Experience of Major Oil Producing Companies

Kopits presents data showing how badly the big, publicly traded oil companies are doing. He looks at two pieces of information:

  • “Capex” – “Capital expenditures” – How much companies are spending on things like exploration, drilling, and making of new offshore oil platforms
  • “Crude oil production” –

A person would normally expect that crude oil production would rise as Capex rises, but Kopits shows that in fact since 2006, Capex has continued to rise, but crude oil production has fallen.

Kopits 40 Oil majors capex and production

The above information is worldwide, not just for the US.  At some point a person might expect companies to start getting frustrated–they are spending more and more, but not getting very far in extracting oil.

Kopits then shows another version of Capex history plus a forecast. (This time the amounts are labeled “Upstream,” so the expenditures are clearly on the exploration and drilling side, rather than related to refineries or pipelines.)

Kopits 41 Upstream Spend continues Strong

The amounts this time are for the industry as a whole, including “NOCs” which are government owned (national) oil companies as well as IOCs (Independent Oil Companies), both large and small. Kopits remarks that the forecasts shown were made only six months ago. When talking about the above slide Koptis says,

People in the industry thought, “Capex has been going up and up. It will continue to do very well. We have been on this trajectory forever, and we are just going to get more and more money out of this.”

Now why is that? The reason is that in a Demand constrained model for those of you who took economics–price equals marginal cost. Right? So if my costs are going up, the price will also go up. Right? That is a Demand constrained model. So if it costs me more to get oil, it is no big deal, the market will recognize that at some point, in a Demand constrained model.

Not in a Supply constrained model! In a Supply constrained model, the price goes up to a price that is very similar to the monopoly price, after which you really can’t raise it, because that marginal consumer would rather do with less than pay more. They will not recognize [pay] your marginal cost. In that model, you get to a price, and after that price, there is significant resistance from the consumer to moving up off of that price. That is the “Supply Constrained Price.” If your costs continue to come up underneath you, the consumer won’t recognize it.

The rapidly growing Capex forecast is implicitly a Demand constrained forecast. It says, sure Capex can go up to a trillion dollars a year. We can spend a trillion dollars a year looking for oil and gas. The global economy will accept that.

I quote this because I am not sure I have explained the situation exactly that way. I perhaps have said that demand had to be connected to what consumers could afford. Wages don’t magically go up by themselves (even though economists think they can).

According to Koptis, the cost of oil extraction has in recent years been rising at 10.9% per year since 1999. (CAGR means “compound annual growth rate”).

Kopits 43 Costs are Rising Fast

Oil prices have been flat at the same time. On the above chart, “E&P Capex per barrel” is pretty much the same type of expenses as shown on the previous two charts. E&P means Exploration and Production.

Kopits explains that the industry needs prices of over $100 barrel.

Kopits 45 Industry needs oil prices over 100

The version of the chart I have up is too small to read the names of individual companies.  If you would like a chart with bigger names, you can download the original presentation.

Historically, oil companies have used a discounted cash flow approach to figure out whether over the long term, pricing for a particular field will be profitable. Unfortunately, this “standard” approach has not been working well recently. Expenses have been escalating too rapidly, and there have been too many new drilling sites producing below expectation. What Kopits shows on the above slide is the prices that companies need on different basis–a “cash flow” basis–so that each year companies have enough money to pay today’s capital expenditures, plus today’s expenses, plus today’s dividends.

The reason for using the cash flow approach is because companies have found themselves coming up short: they find that after they have paid capital expenditures and other expenditures such as taxes, they don’t have enough money left to pay dividends, unless they borrow money or sell off assets. Oil companies need to pay dividends because pension plans and other buyers of oil company stocks expect to receive regular dividends in payment for their equity investment. The dividends are important to pension plans.

In the last bullet point on the slide, Kopits is telling us that on this basis, most US oil companies need a price of $130 barrel or more. I noticed that Brazil’s Petrobas needs  a price of over $150 barrel. (OSX, Brazil’s number two oil company, recently went bankrupt.)

In the slide below, Kopits shows how Shell oil is responding to the poor cash flow situation of the major oil companies, based on recent announcements.

Kopits 46 The Majors Respond

Basically, Shell is cutting back. It no longer is going to tell investors how much it plans to produce in the future. Instead, it will focus on generating cash flow, at least partly by selling off existing programs.

In fact, Kopits reports that all of the major oil companies are reporting divestment programs. Does selling assets really solve the oil companies’ problems? What the oil companies would really like to do is raise their prices, but they can’t do that, because they don’t set prices, the market does–and the prices aren’t high enough. And the oil companies really can’t cut costs. So instead, they sell assets to pay dividends, or perhaps just to get out of the business. But is this sustainable?

Kopits 48 conventional oil production

The above slide shows that conventional oil production peaked in 2005. The top line is total conventional oil  production (calculated as world oil production, less natural gas liquids, and less US shale and other unconventional, and less Canadian oil sands). To get his estimate of “Crude Oil Normal Decline,” Kopits uses the mirror image of the rise in conventional oil production prior to 2005. He also shows a separate item for the rise in oil production from Iraq since 2005. The yellow portion called “crude production forward” is then the top line, less the other two items. It has taken $2.5 trillion to add this new yellow block. Now this strategy has run its course (based on the bad results companies are reporting from recent drilling), so what will oil companies do now?

Kopits 49 -Oil Majors Cut Capital Expenditures

Above, Kopits shows evidence that many companies in recent months have been cutting back budgets. These are big reductions–billions and billions of dollars.

Kopits 50 Majors Capex

On the above chart, Kopits tries to estimate the shape of the downslope in capital expenditures. This chart isn’t for all companies. It excludes the smaller companies, and it excludes the National oil companies, so it is about one-third of the market. The gray horizontal line at the top is the industry consensus back in October. The other lines represent more recent estimates of how Capex is declining. The steepest decline is the forecast based on Hess’s announcement. The next steepest (the dotted gray line) is the forecast based on Shell’s cutback.  The cutback for the part of the market not shown in the chart is likely to be different.

Oil and Economic Growth

Kopits offers his view of how much efficiency can be gained in a given year, in the slide below:

Koptis 54 Oil Efficiency and GDP GrowthIn his view, the maximum sustainable increase in efficiency is 2.5% in non-recessions, but a more normal increase is 1% per year. At current oil supply growth levels, OECD GDP growth is capped at 1% to 2%. The effect of constrained oil supply is reducing OECD GDP growth by 1% to 2%.


Kopits 59 ConclusionsWhile demand constrained models dominate thinking, in fact, a supply constrained model is more appropriate in recent years.

We seem to be short of oil. Whenever there is extra oil on the market, it is quickly soaked up. Oil prices have not collapsed. No one is nervous about a price collapse.

China recently has been putting little price pressure on the market–its demand is recently less high. Kopits thinks China will eventually return to the market, and put price pressure on oil prices. Thus, oil price pressures are likely to return at some point.

Gail’s Observations

An obvious point, which I thought I heard when I listened to the presentation the first time, but didn’t hear the second time is, “Who will buy all of these assets on the market, and at what price?” China would seem to be a likely buyer, if one is to be found. But when several companies want to sell assets at the same time, a person wonders what prices will be available.

The new strategy is, in effect, maintaining dividends by returning part of capital. It is clearly not a very sustainable strategy.

It will take a while for these cut-backs in Capex expenditures to find their way through to oil output, but it could very well start in a year or two. This is disturbing.

What we are seeing now is a cutback in what companies consider “economically extractable oil”–something that isn’t exactly reported by companies. I expect that what is being sold off is mostly not “proven reserves.”

In this talk, it looks like lack of sufficient investment is poised to bring the system down.  That is basically the expected limit under Limits to Growth.

In theory, if an expansion of China’s oil demand does bring oil prices up again, it could in theory encourage an increase in drilling activity. But it is doubtful that economies could withstand the high prices–they are already having problems at current price levels, considering the continued need for Quantitative Easing to keep interest rates low.

A recent news item was titled, G20 Finance Ministers Agree to Lift Global Growth Target. According to that article,

Mr Hockey said reaching the goal would require increasing investment but that it could create “tens of millions of new jobs”.

The cutback in investment by oil companies is working precisely in the wrong direction. If these cutbacks act to cut future oil extraction, it will bring down growth further.

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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547 Responses to Beginning of the End? Oil Companies Cut Back on Spending

  1. Stan says:

    Goods news! New report details unlimited oil.
    “Report: Good Thing World Has Unlimited Quantity Of Oil”
    Go to


  2. SlowRider says:

    Many comments here mention the ultra rich, corrupt elites and the dying middle class (although much less than in other forums). Often with a basic assumption that a more equal distribution of wealth would make things better. This blog completely cured me of this thinking.
    If our problem is a finite world, exemplified here by too expensive oil, the conclusion must be that the middle class is exactly the problem. The capitalist 1% system may be the one that best maintains the status quo. A billionaire doesn’t spend much of his money on resources, even if he travels by private jet. But give 1 billion to the middle class, and what will they do? Buy the equivalent of 20.000 cars. After that, we are that much closer to the limits.
    China is the perfect example, they are trying to go “middle class” right now, running themselves and the rest of the world into all kind of troubles. Oil limits are the most fascinating. I can’t say I support the view expressed in one comment, of looking forward to collapse, because we all go down with that boat. But to watch the middle class wake up from their fossil dream will be a sight to remember.

    • Paul says:

      Excellent points.

    • Danny says:

      “The capitalist 1% system may be the one that best maintains the status quo”…This only works when you can feed a population as soon as they are starving the natives get restless…and then we know what happens….Also it is hard to imagine how much they do or don’t consume….I have worked on some 1 percent houses and they have heated driveways so the snow melts even at -15 degrees…the houses are very large and wasteful as far as energy goes…oh and don’t forget the heated toilet seats…a must have for every 1 percenter! See it how easy it is to hate them! Now add in the fact that the middle class can’t heat or eat and then you will need a sizable army to protect them.
      I see the idea that America could still maintain status quo on a macro scale of this but I don’t know if that is possible.

      • SlowRider says:

        How well the 1% will handle collapse and after, that is hard to predict. Meanwhile, the concentration of wealth postpones collapse. Imagine a democratic redistribution of wealth. You can start with China, which has over 300 billionaires and thousands of millionaires right now. They like french wine at 5000 $ and heli-skiing in Switzerland. OK, we redistribute that money to the Chinese people, so every family can buy a car and move to the suburbs. Next thing is, we run out of oil, steel and water.

        • Danny says:

          I am not saying redistribute it…but you can’t have the 1% percent living while the rest does not add up.It is not a solution…as we go deeper into this jungle the rich will be scapegoated and eventually destroyed. We may have to release a virus and wipe out a large part of world population. I am surprised nature hasn’t done this already….I know she has tried we are just so neurotic as a species we have been able to keep her at bay. Danny

    • Jan Steinman says:

      You hit the nail on the head, SlowRider.

      The task at hand is much more difficult than getting people to change their lightbulbs. The middle-class must strive for what I call “sufficient poverty.”

      I know it’s possible to live a comfortable life on very little. I don’t know how many people it’s possible for, however. That would require a huge reform of capitalism and government. By breaking up big corporate farms, it might be possible (for example) to give lots of people “forty acres and a mule.”

      Even were that possible, I don’t know how many people would take such an offer today. Things aren’t tough enough. People look around and say, “Things aren’t that bad!”

      We are definitely in the “boiling frogs” phase of collapse. Things are imperceptibly worse day by day, month by month, year by year. People look around and say, “Well, at least it’s not as bad as Syria or Greece or Egypt,” and thus refuse to take action. When things get bad enough for most people to act, it will be too late.

      • Don Stewart says:

        Dear Jan and Others
        A few days ago I read an article about Nature’s complexity and compared Nature’s way with our capitalist idea. Nature almost always have several different ways to accomplish a task. If one solution fails, there are others waiting in the wings. But capitalism, in the name of efficiency, destroys all redundancy.

        The article used ‘knot mathematics’ to illustrate. For example, a fishing net would score high in terms of complexity with knot mathematics. But if you take a string and just spool it into a pile, it may look complicated but it is really very simple…pick it up by one end and it unspools into a single strand.

        I would have preferred that the example be a chain. A chain ‘is only as strong as it’s weakest link’, as we all know. So the seemingly complex supply chains that undergird modern capitalism are actually very simple structures, and resemble a chain in susceptibility to weak links.

        A web like structure for food and water and energy would look like this:
        1. A multitude of independent, but interdependent, small farms and gardens
        2. Lots of people collecting rainwater from their roofs for drinking.
        3. Lots of people collecting solar or wind or other renewable energy for household use. Not much dependence on batteries.
        4. Lots of non-cash exchanges, such as food sharing and work sharing and payments in kind. Much smaller cash economy.

        A problem in getting from here to there is that our society is going ninety miles an hour toward further consolidation of ownership. If a collapse happens, we will not only have to figure out how to practice the skills we need to survive, we will have to simultaneously take by force the resources which are controlled by the, now dysfunctional, corporate entities and governmebnts.

        Don Stewart

        • timl2k11 says:

          Yes, what could have been, should have been, but isn’t.

        • Interguru says:

          ” Nature almost always have several different ways to accomplish a task.”

          Nature is also very profligate of individuals. In working between the different ways large numbers of individual organisms perish. When “nature” straightens out our mess, many ( billions? ) of us will go.

          Remember: Nature always bats last

      • SlowRider says:

        Live comfortable on very little? Tell that to the global “emerging middle class”. They want the dream, the full package! Job, car, family, quality food, house, health, insurance, travel…

        • Jan Steinman says:

          Hey, I didn’t say it would be popular — just necessary!

          What we don’t choose for ourselves will be chosen for us by nature eventually. Get poor now, and avoid the rush!

  3. Christian says:

    Well, top 1% is still a problem because they will try to impede we find any way out of capitalism, even when things will look really bad. Have found an interview to Graeber, very interesting even if my english skills and his speach velocity doesn’t match all the time:

    • Stilgar Wilcox says:

      Exactly, that’s what I’ve also read in different books. The wealthy and the powerful have so much vested in the status quo, that even if they see it’s all headed in the wrong direction they will still reject any kind of Plan B. That makes sense too, because if you imagine you were are wealthy and got it made in the shade, the idea of having to start over is horrendous.

      Unfortunately, the golden rule is ‘Those with the gold rule’ will apply until BAU collapses and their loss of wealth and power opens the way for other ideas.

      • Christian says:

        That seems to be the rule. Until the system get some ugly crash people on top and in the middle will hold on. As we don’t know the details we don’t know what we will really get. In the late post at my site I’ve gone a little revolutionary and thereafter my boss at the party almost stopped greeting me. Perhaps he disliked I talked about landowners as “the new lords” cause he comes from an important agricultural town. After that I made some polite remarks and things worked better. Anyway, people start realizing how deep the cliff is expected to be.

        Slow, it’s not to redistribute anything except food stamps under the current system, but to do it under another one. The point is that at some stage middle and lower classes will do have some reaction. Were we to use shovel tech, do we’ll prefer to go coal mining or gardening?

        I’ve made some calculations based on actual amount of building here and there is enough capacity to build 6 million houses, 50 square meter each to put up 18 M people in the country, which is the urbanite population in need to move because not being able to feed them at some point in the future if they hold in cities. This could be made in 15 years, starting with 10% the first year (3 M sq meters being last year national building achievement) and degrowing within that period along with FF. Given these figures, this would not be difficult from the physical point of view, have to make it politically and organizationally workable, in case. Another (aged) 18 M could stay in towns and naturally die there (suicides are nevertheless welcome) and some 8 M could perfectly stay at home in their rural environment or small towns. In Argentina, it’s “just” a matter of willingness.

        We have 30 M hectares working on agriculture (75 M acres) and may be we’ll be a little cramped; this is enough to feed people organically and I wonder how much would rest for things as feeding horses and growing fibers. It seems not very much.

        Until the system goes down, the task is to inform so much people as possible. Last night our president said we have for a 100 years of shale… Everybody knows she’s not very reliable, wages eating inflation is a day to day reminder.

        • JudyB says:

          Christian, you guys have been through collapses before. Do you have a sense that this one will be different for you? What exactly do the Argentine people think of your President? It would be nice to have your perspective since you live there.

          • Christian says:

            Well, most people here don’t have a clue of actual predicament of mankind as we understand it and just believe we are going through another crisis. Nonetheless, I do surely believe this will be different, as for the whole world. But given Argentina has one of the best agricultural exporting ratios (tons of exported grains per capita, may be the highest) of the world, and that agriculture importance can only improve from now, it seems we can go better than more industrialized countries (if our government don’t miss it all).

            Our actual president was reelected in 2011 with an almost record breaking 54% of votes, but her image rapidly declined from that time and if elections were to be held today she may surely get under the half of that. It occurred that 2011 was also the year when our energy trade balance gone negative, and this impacted the general economy, specially boosting inflation and stopping growth in government programs. Recent measures aiming to stop inflation were very badly conceived, and their results are cooling the economy, devaluation and lose of purchase power, and improving banking benefits. And not stopping inflation. Actual political group in the government is there since 2003, and it is obvious to everybody they have known very much better times and their cycle is over, even if just a few understand exactly why they could go so well at first and so bad right now.

            • Paul says:

              Curious — is most of the agriculture in Argentina dependent on industrial methods i.e. crops grown with pesticides made from oil and fertilizers made from natural gas?

              If so then like most other countries that primarily employ industrial ag methods, Argentina will not be producing much in the way of food for some years when the SHTF.

              It takes 3+ years to grow a crop in what is dead soil and only after intensive organic inputs are introduced.

              America and Canada are in the exact same boat — dead soil from pouring chemicals on it for decades.

              The stupidity of mankind is appalling.

            • Jan Steinman says:

              “It takes 3+ years to grow a crop in what is dead soil and only after intensive organic inputs are introduced.”

              That is probably a bit too dire. I’d say that it may take three or more years to reach yield parity, but you can get something out even in the first year.

              The key is good amendments. If you don’t have a good source of organic fertilizer, you won’t get much out — even after 30+ years! But if you can “make soil,” you can produce fairly quickly.

              Of course, making soil relies on having a source for stuff like animal manures, which if your only source is CAFO cattle fed on grain that is no longer coming in on boxcars, could be a problem!

              A lot of scary thought comes from “event thinking.” Collapse will be a process, rather than an event — although it may be punctuated by events that people will be tempted to mistake for causes. Things may be okay for those who can stay one step ahead of the process. But you’d better start now.

            • Paul says:

              Jan – this is a copy of some correspondence I had with a leading permaculture expert:

              Hi Paul,

              I think the answer goes way beyond how long it would take to revitalize the soil. There is the question of how much land is dedicated to producing livestock feed, how much produces non essential (but maybe desirable) ag. products like coffee, food being produced in New zealand to be sold in Canada and so on.

              Can organic methods revitalize the soil? Yes. But so many societal changes are needed it boggles the mind.

              It would take at least three years to develop sustainable fertility on degraded soils. Longer on some soils like dry, sandy irrigated soils.

              We would need to:
              • break up agri. business holdings and get many more people back to farming, not using the Soviet model, but a new model of cooperativeness, built from necessity, not dictatorship. (if this is possible).

              • accept that eating tomatoes in January in Canada may not be wise (I don’t just the ones I have canned) relearn the art of cooking delicious meals with season appropriate foods and using much less meat (much less)

              • incorporate animal husbandry into the many smaller farms to supply essential soil nutrients

              • accept the fact that we have been greedy and major changes must take place.

              • realize that fast food (cheap) comes at a huge cost, and provides poor nutrition.

              I could go on and on but I am sure you see these points and the many others.

              If we do not plan for the changes they will be thrust upon us and mass starvation is a real possibility, more likely a probability.

              So, my short answer is, yes diligent application of organic methods would rehabilitate most soils, in fact has in some badly degraded areas.

              Also, I think the comment “that we could simply go back to organic farming fairly quickly and we’d have these massive farms back in production (albeit with far lower yields)” suggests to me the speaker has a vague idea of what organic farming really is.

              There is the assumption that all farming before the advent of chemical fertilizers and pesticides was “organic” Not so. many ag lands worldwide were seriously depleted. Have you read the Ronald Wright Massey lectures, The Short History of Progress? A good read for a thinking person.

              Going back fairly quickly does not acknowledge the many factors beyond soil fertility.

              What equipment would be used?

              Would beasts of burden be a major energy source?

              Where would enough come from ‘fairly quickly’

              How would food be distributed if it is produced on the lands now in use?

              If GMO’s or disaster of disasters, the terminator seeds (a GMO) take over, where will seed stock come from?

              We have lost so much genetic diversity where will region appropriate seeds come from? and on and on.

              All rather gloomy.

            • Jan Steinman says:

              Paul, I think your problem is that you want (or hope, or wish) to “save the world.”

              The world is not going to be saved. Small groups of people may be able to save themselves. I don’t think it helps anyone to be gloomy when there’s so much work to be done.

              Yea, I know Ron Wright personally. He lives on our island. He gave a talk to our Transition Town group, and showed this population growth video. Scary. But it does no one any good to be scared.

              I’m going tomorrow to pick up a couple dozen 180AH NiCd batteries. Gonna convert a Vanagon to electricity! I figure in the summer, I can take food into town once a week if I get three days of sunshine. In the winter, I’ll need to have vegoil for Veggie Van Gogh in order to take food into town. The hazelnuts and chestnuts won’t provide enough for frivolous use for a dozen years or so.

              It’s a race between depletion and subsistence! Have fun, and enjoy the ride!

            • Paul says:

              Jan – my concern is that all my preparations are going to be for naught when the SHTF and billions are starving.

              I think you have suggested on a past article that the best outcome would be if most people just laid down and died very quickly after the shops are looted and there is no food left in the cities.

              I very much agree with that.

            • Jan Steinman says:

              “I think you have suggested on a past article that the best outcome would be if most people just laid down and died very quickly after the shops are looted and there is no food left in the cities.”

              Ugh. I don’t think I ever said such a thing, because I don’t think it will go down like that. This is a process, not an event.

              Personally, the city will be no place for me to be. I can enjoy what cities have to offer, while feeling somewhat uncomfortable in them, and always being ready to leave. One who loves cities and has great city-survival skills might feel horrified at being out in the country!

              I think my point is that we all do the best we can, given our temperament, capabilities, prescience, and awareness. Those who lack balance in these elements will have a tough time. In particular, I think the number of capabilities will be more important than their depth. Specialists who lack breadth will have a tough time.

              A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.Lazaras Long, as told by Robert Heinlein in Time Enough for Love

            • Paul says:

              Jan – I’ve posted two articles that indicate Big Oil capex is pulling back because they cannot make money with oil prices at $110.

              As we know, if oil is already killing growth at this price so it cannot go any higher.

              Investors are starting to pull the plug on companies like Exxon and Chevron – their share prices are massively lagging the indices so who can blame them

              So if the herd does a runner – Big Oil is left without the means to explore or extract oil.

              That means the oil stops flowing – this will not be gradual – it will likely be an overnight phenomenon.

              Recall how quickly the Lehman collapse stopped the world. Stop the flow of oil and that’s Lehman times 10000000000 – and there is no bailing that out.

              I fail to see how that is not an event — a cataclysmic event – as opposed to a gradual process

            • Sounds like my impression of the situation.

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  7. Martin Vachon says:

    The rapidly increasing energy and environmental costs of extracting energy is alone becoming an economy growth show stopper. When combining it with the increasing energy and environmental costs of extracting minerals and other resources, it’s hard to see how we can hope to maintain a significant part of our current lifestyle and population. But that’s not the main point of my comment.
    We have built during the industrial era mountains of what I would call negative real assets. ie wastes. Those assets require constant investment to control their associated risks. Let’s take what I consider the worst asset type : nuclear wastes. There are thousands of nuclear wastes pools around the world. A significant part of nuclear wastes is still in the cooling stage where it require constant cooling to avoid melting and then nuclear explosions that would typically be a hundred time more polluting than Chernobyl one, affecting dramatically life sustainability on earth. Most governments have, even in good economic times, postponed long term storage because of prohibitive costs. Just remember that long term means around 200K years during which you must put wastes in an unreacheable and geologically stable place inside specialized containers. The task of storing such wastes require much ressources and technologies. So my question is how will we manage these long term negative physical assets as the economy is shrinking, causing riots and instability ? When it may be hard just to feed people ? Nuclear energy will certainly prove to be, in my view, the most thoughtless human invention. So we have gigantic tar sands tailing ponds that constantly kill birds and surounding wildlife, ghost fishing nets that constantly kill marine life, plastic components that kill many critical species of food chain, agricultural fertilizers that also kill marine life and so on… In short, we have setup many destructive systems that will further reduce earth carrying capacity.

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  9. Don Stewart says:

    Dear Interguru and Jan
    Last evening I listened to a podcast with a medical guy who was talking about dementia in old people (in case I ever get old). He talked about ‘the nun’s study’ in Minnesota. The nuns were quite active, including politically. They left their brains to science when they died. The nun who had been most active politically lived to be nearly a hundred. The autopsy revealed that she had considerable development of dementia, but that she also had a large number of connections in her brain. The large number of connections meant that, even though she had lost quite a few, she was still able to function near normal.

    This relates to both my previous comment about the difference between a net and a chain (or rope) and also to Jan’s comments about action being the best defense.

    Don Stewart

    • Jan Steinman says:

      But the so-called “nun study” also had a bit of predestination in it. Researchers noted an 80% correlation between old-age dementia and the person’s “linguistic density”† in her early 20s!

      Nuns who showed linguistic density in their entrance essay to the sisterhood had less than 10% chance of later dementia, while those who did show linguistic density had an 80% chance of developing dementia.

      I suspect most of us commenting here have pretty good linguistic density, and probably had it in our early 20s, and so hopefully we will dodge the dementia bullet.

      †”Linguistic density” is defined as the “idea density” of writing: the amount of complexity, vivacity, fluency, etc. that combine to contain a large number of ideas in a small number of words.

  10. Don Stewart says:

    Yes, the commenter talked about that also. Learning new things is a good way to combat brain deterioration.

    Just FYI, here is the agenda for tonight’s webinar, with Kelly McGonigle of Stanford:

    Building Your “Mindset Muscle” to Train Willpower and Change How You React to Stress
    How We Can Overcome the Brain’s Defense System and Change Our Approach to the Things We Don’t Want
    The Role Your Brain Plays in Mindset and How We Experience Pain
    Do-It-Yourself Neurofeedback: One Technique That Can Change Your Brain’s Response to Pain
    How Shifting from a Self-Serving to a Compassionate Mindset Helps You Deal with Stress and Reach Your Goals

    If one expects a future involving stress and pain, the webinar sounds pretty relevant. Perhaps with more chance of success than ‘convincing corporations and governments to do the right thing’?

    Don Stewart

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