Not long ago, I wrote Ten Reasons Why High Oil Prices are a Problem. If high oil prices can be a problem, how can low oil prices also be a problem? In particular, how can the steep drop in oil prices we have recently been experiencing also be a problem?
Let me explain some of the issues:
Issue 1. If the price of oil is too low, it will simply be left in the ground.
The world badly needs oil for many purposes: to power its cars, to plant it fields, to operate its oil-powered irrigation pumps, and to act as a raw material for making many kinds of products, including medicines and fabrics.
If the price of oil is too low, it will be left in the ground. With low oil prices, production may drop off rapidly. High price encourages more production and more substitutes; low price leads to a whole series of secondary effects (debt defaults resulting from deflation, job loss, collapse of oil exporters, loss of letters of credit needed for exports, bank failures) that indirectly lead to a much quicker decline in oil production.
The view is sometimes expressed that once 50% of oil is extracted, the amount of oil we can extract will gradually begin to decline, for geological reasons. This view is only true if high prices prevail, as we hit limits. If our problem is low oil prices because of debt problems or other issues, then the decline is likely to be far more rapid. With low oil prices, even what we consider to be proved oil reserves today may be left in the ground.
Issue 2. The drop in oil prices is already having an impact on shale extraction and offshore drilling.
While many claims have been made that US shale drilling can be profitable at low prices, actions speak louder than words. (The problem may be a cash flow problem rather than profitability, but either problem cuts off drilling.) Reuters indicates that new oil and gas well permits tumbled by 40% in November.
Offshore drilling is also being affected. Transocean, the owner of the biggest fleet of deep water drilling rigs, recently took a $2.76 billion charge, among a “drilling rig glut.”
3. Shale operations have a huge impact on US employment.
Zero Hedge posted the following chart of employment growth, in states with and without current drilling from shale formations:
Clearly, the shale states are doing much better, job-wise. According to the article, since December 2007, shale states have added 1.36 million jobs, while non-shale states have lost 424,000 jobs. The growth in jobs includes all types of employment, including jobs only indirectly related to oil and gas production, such as jobs involved with the construction of a new supermarket to serve the growing population.
It might be noted that even the “Non-Shale” states have benefited to some extent from shale drilling. Some support jobs related to shale extraction, such as extraction of sand used in fracking, college courses to educate new engineers, and manufacturing of parts for drilling equipment, are in states other than those with shale formations. Also, all states benefit from the lower oil imports required.
Issue 4. Low oil prices tend to cause debt defaults that have wide ranging consequences. If defaults become widespread, they could affect bank deposits and international trade.
With low oil prices, it becomes much more difficult for shale drillers to pay back the loans they have taken out. Cash flow is much lower, and interest rates on new loans are likely much higher. The huge amount of debt that shale drillers have taken on suddenly becomes at-risk. Energy debt currently accounts for 16% of the US junk bond market, so the amount at risk is substantial.
Dropping oil prices affect international debt as well. The value of Venezuelan bonds recently fell to 51 cents on the dollar, because of the high default risk with low oil prices. Russia’s Rosneft is also reported to be having difficulty with its loans.
There are many ways banks might be adversely affected by defaults, including
- Directly by defaults on loans held by a bank
- Indirectly, by defaults on securities the bank owns that relate to loans elsewhere
- By derivative defaults made more likely by sharp changes in interest rates or in currency levels
- By liquidity problems, relating to the need to quickly sell or buy securities related to ETFs
After the many bank bailouts in 2008, there has been discussion of changing the system so that there is no longer a need to bail out “too big to fail” banks. One proposal that has been discussed is to force bank depositors and pension funds to cover part of the losses, using Cyprus-style bail-ins. According to some reports, such an approach has been approved by the G20 at a meeting the weekend of November 16, 2014. If this is true, our bank accounts and pension plans could already be at risk.1
Another bank-related issue if debt defaults become widespread, is the possibility that junk bonds and Letters of Credit2 will become outrageously expensive for companies that have poor credit ratings. Supply chains often include some businesses with poor credit ratings. Thus, even businesses with good credit ratings may find their supply chains broken by companies that can no longer afford high-priced credit. This was one of the issues in the 2008 credit crisis.
Issue 5. Low oil prices can lead to collapses of oil exporters, and loss of virtually all of the oil they export.
The collapse of the Former Soviet Union in 1991 seems to be related to a drop in oil prices.
Oil prices dropped dramatically in the 1980s after the issues that gave rise to the earlier spike were mitigated. The Soviet Union was dependent on oil for its export revenue. With low oil prices, its ability to invest in new production was impaired, and its export revenue dried up. The Soviet Union collapsed for a number of reasons, some of them financial, in late 1991, after several years of low oil prices had had a chance to affect its economy.
Many oil-exporting countries are at risk of collapse if oil prices stay very low very long. Venezuela is a clear risk, with its big debt problem. Nigeria’s economy is reported to be “tanking.” Russia even has a possibility of collapse, although probably not in the near future.
Even apart from collapse, there is the possibility of increased unrest in the Middle East, as oil-exporting nations find it necessary to cut back on their food and oil subsidies. There is also more possibility of warfare among groups, including new groups such as ISIL. When everyone is prosperous, there is little reason to fight, but when oil-related funds dry up, fighting among neighbors increases, as does unrest among those with lower subsidies.
Issue 6. The benefits to consumers of a drop in oil prices are likely to be much smaller than the adverse impact on consumers of an oil price rise.
When oil prices rose, businesses were quick to add fuel surcharges. They are less quick to offer fuel rebates when oil prices go down. They will try to keep the benefit of the oil price drop for themselves for as long as possible.
Airlines seem to be more interested in adding flights than reducing ticket prices in response to lower oil prices, perhaps because additional planes are already available. Their intent is to increase profits, through an increase in ticket sales, not to give consumers the benefit of lower prices.
In some cases, governments will take advantage of the lower oil prices to increase their revenue. China recently raised its oil products consumption tax, so that the government gets part of the benefit of lower prices. Malaysia is using the low oil prices as a time to reduce oil subsidies.
Most businesses recognize that the oil price drop is at most a temporary situation, since the cost of extraction continues to rise (because we are getting oil from more difficult-to-extract locations). Because this price drop is only temporary, few business people are saying to themselves, “Wow, oil is cheap again! I am going to invest a huge amount of money in a new road building company [or other business that depends on cheap oil].” Instead, they are cautious, making changes that require little capital investment and that can easily be reversed. While there may be some jobs added, those added will tend to be ones that can easily be dropped if oil prices rise again.
Issue 7. Hoped for crude and LNG sales abroad are likely to disappear, with low oil prices.
There has been a great deal of publicity about the desire of US oil and gas producers to sell both crude oil and LNG abroad, so as to be able to take advantage of higher oil and gas prices outside the US. With a big drop in oil prices, these hopes are likely to be dashed. Already, we are seeing the story, Asia stops buying US crude oil. According to this story, “There’s so much oversupply that Middle East crudes are now trading at discounts and it is not economical to bring over crudes from the US anymore.”
LNG prices tend to drop if oil prices drop. (Some LNG prices are linked to oil prices, but even those that are not directly linked are likely to be affected by the lower demand for energy products.) At these lower prices, the financial incentive to export LNG becomes much less. Even fluctuating LNG prices become a problem for those considering investment in infrastructure such as ships to transport LNG.
Issue 8. Hoped-for increases in renewables will become more difficult, if oil prices are low.
Many people believe that renewables can eventually take over the role of fossil fuels. (I am not of the view that this is possible.) For those with this view, low oil prices are a problem, because they discourage the hoped-for transition to renewables.
Despite all of the statements made about renewables, they don’t really substitute for oil. Biofuels come closest, but they are simply oil-extenders. We add ethanol made from corn to gasoline to extend its quantity. But it still takes oil to operate the farm equipment to grow the corn, and oil to transport the corn to the ethanol plant. If oil isn’t around, the biofuel production system comes to a screeching halt.
Issue 9. A major drop in oil prices tends to lead to deflation, and because of this, difficulty in repaying debts.
If oil prices rise, so do food prices, and the price of making most goods. Thus rising oil prices contribute to inflation. The reverse of this is true as well. Falling oil prices tend to lead to a lower price for growing food and a lower price for making most goods. The net result can be deflation. Not all countries are affected equally; some experience this result to a greater extent than others.
Those countries experiencing deflation are likely to eventually have problems with debt defaults, because it will become more difficult for workers to repay loans, if wages are drifting downward. These same countries are likely to experience an outflow of investment funds because investors realize that funds invested these countries will not earn an adequate return. This outflow of funds will tend to push their currencies down, relative to other currencies. This is at least part of what has been happening in recent months.
The value of the dollar has been rising rapidly, relative to many other currencies. Debt repayment is likely to especially be a problem for those countries where substantial debt is denominated in US dollars, but whose local currency has recently fallen in value relative to the US dollar.
The big increase in the US dollar index came since June 2014 (Figure 3), which coincides with the drop in oil prices. Those countries with low currency prices, including Japan, Europe, Brazil, Argentina, and South Africa, find it expensive to import goods of all kinds, including those made with oil products. This is part of what reduces demand for oil products.
China’s yuan is relatively closely tied to the dollar. The collapse of other currencies relative to the US dollar makes Chinese exports more expensive, and is part of the reason why the Chinese economy has been doing less well recently. There are no doubt other reasons why China’s growth is lower recently, and thus its growth in debt. China is now trying to lower the level of its currency.
Issue 10. The drop in oil prices seems to reflect a basic underlying problem: the world is reaching the limits of its debt expansion.
There is a natural limit to the amount of debt that a government, or business, or individual can borrow. At some point, interest payments become so high, that it becomes difficult to cover other needed expenses. The obvious way around this problem is to lower interest rates to practically zero, through Quantitative Easing (QE) and other techniques.
(Increasing debt is a big part of what pumps up “demand” for oil, and because of this, oil prices. If this is confusing, think of buying a car. It is much easier to buy a car with a loan than without one. So adding debt allows goods to be more affordable. Reducing debt levels has the opposite effect.)
QE doesn’t work as a long-term technique, because it tends to create bubbles in asset prices, such as stock market prices and prices of farmland. It also tends to encourage investment in enterprises that have questionable chance of success. Arguably, investment in shale oil and gas operations are in this category.
As it turns out, it looks very much as if the presence or absence of QE may have an impact on oil prices as well (Figure 4), providing the “uplift” needed to keep oil prices high enough to cover production costs.
The sharp drop in price in 2008 was credit-related, and was only solved when the US initiated its program of QE started in late November 2008. Oil prices began to rise in December 2008. The US has had three periods of QE, with the last of these, QE3, finally tapering down and ending in October 2014. Since QE seems to have been part of the solution that stopped the drop in oil prices in 2008, we should not be surprised if discontinuing QE is contributing to the drop in oil prices now.
Part of the problem seems to be the differential effect that happens when other countries are continuing to use QE, but the US not. The US dollar tends to rise, relative to other currencies. This situation contributes to the situation shown in Figure 3.
QE allows more borrowing from the future than would be possible if market interest rates really had to be paid. This allows financiers to temporarily disguise a growing problem of un-affordability of oil and other commodities.
The problem we have is that, because we live in a finite world, we reach a point where it becomes more expensive to produce commodities of many kinds: oil (deeper wells, fracking), coal (farther from markets, so more transport costs), metals (poorer ore quality), fresh water (desalination needed), and food (more irrigation needed). Wages don’t rise correspondingly, because more and more labor is needed to provide less and less actual benefit, in terms of the commodities produced and goods made from those commodities. Thus, workers find themselves becoming poorer and poorer, in terms of what they can afford to purchase.
QE allows financiers to disguise a growing mismatch between what it costs to produce commodities, and what customers can really afford. Thus, QE allows commodity prices to rise to levels that are unaffordable by customers, unless customers’ lack of income is disguised by a continued growth in debt.
Once commodity prices (including oil prices) fall to levels that are affordable based on the incomes of customers, they fall to levels that cut out a large share of production of these commodities. As commodity production drops to levels that can be produced at affordable prices, so does the world’s ability to make goods and services. Unfortunately, the goods whose production is likely to be cut back if commodity production is cut back are those of every kind, including houses, cars, food, and electrical transmission equipment.
There are really two different problems that a person can be concerned about:
- Peak oil: the possibility that oil prices will rise, and because of this production will fall in a rounded curve. Substitutes that are possible because of high prices will perhaps take over.
- Debt related collapse: oil limits will play out in a very different way than most have imagined, through lower oil prices as limits to growth in debt are reached, and thus a collapse in oil “demand” (really affordability). The collapse in production, when it comes, will be sharper and will affect the entire economy, not just oil.
In my view, a rapid drop in oil prices is likely a symptom that we are approaching a debt-related collapse–in other words, the second of these two problems. Underlying this debt-related collapse is the fact that we seem to be reaching the limits of a finite world. There is a growing mismatch between what workers in oil importing countries can afford, and the rising real costs of extraction, including associated governmental costs. This has been covered up to date by rising debt, but at some point, it will not be possible to keep increasing the debt sufficiently.
The timing of collapse may not be immediate. Low oil prices take a while to work their way through the system. It is also possible that the world’s financiers will put off a major collapse for a while longer, through more QE, or more programs related to QE. For example, actually getting money into the hands of customers would seem to be temporarily helpful.
At some point the debt situation will eventually reach a breaking point. One way this could happen is through an increase in interest rates. If this happens, world economic growth is likely to slow greatly. Oil and commodity prices will fall further. Debt defaults will skyrocket. Not only will oil production drop, but production of many other commodities will drop, including natural gas and coal. In such a scenario, the downslope of all energy use is likely to be quite steep, perhaps similar to what is shown in the following chart.
Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply?
WSJ Gets it Wrong on “Why Peak Oil Predictions Haven’t Come True”
Eight Pieces of Our Oil Price Predicament
 There is of course insurance by the FDIC and the PBGC, but the actual funding for these two insurance programs is tiny in relationship to the kind of risk that would occur if there were widespread debt defaults and derivative defaults affecting many banks and many pension plans at once. While depositors and pension holders might try to collect this insurance, there wouldn’t be enough money to actually cover these demands. This problem would be similar to the issue that arose in Iceland in 2008. Insurance would seem to be available, but in practice, would not pay out much.
Also, I learned after writing this post that bail-ins were mandated for US banks by the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010. In the language of the summary, bank depositors are “unsecured creditors,” and are thus among those to whom the burden of loss is transferred. The FDIC is not allowed to borrow extra funds, beyond bank funds, to cover this loss.
 LOCs are required when goods are shipped internationally, before payment has actually been made. They offer a guarantee that a buyer will be able to “make good” on his promise to pay for goods when they arrive.
The OECD reckons that the drop in oil price is set to boost the 34 developed economies by 1% overall but oil producers are set to lose out. Norway to lose 6.5% GDP, Russia 5%. (The modest boost to OECD overall seems to be the only “point” to low oil prices, OPEC are undercutting themselves by maintaining low oil prices.)
Preliminary calculations by the Paris-based think-tank suggest the recent oil price fall to $60 a barrel from $115 this summer will boost growth across the club of 34 developed nations by 1pc through cheaper oil import bills alone.
However, Ms Mann said countries that rely heavily on oil revenues to fuel growth such as Norway will see as much as 6.5pc shaved off GDP in 2015.
While the OECD has not calculated how the Russian economy will be affected by the fall in oil prices, the country’s central bank has said GDP could contract by 5pc next year if oil stays at around $60 a barrel.
The IMF paints a similar picture. Saudi needs about $100 a barrel to break even, so why maintain high production and low prices?
As Chart 8 shows, the effect is, not surprisingly, negative for oil exporters. Here again, however, there are substantial differences across countries.
In all countries, real income goes down, and so do profits in oil production; these are the mirror images of what happens in oil importers. But the degree to which they do, and the effect of the decline in the price of oil on GDP depends very much on their degree of dependence on oil exports, and on what proportion of revenues goes to the state.
Oil exports are much more concentrated across countries than oil imports. Put another way, oil exporters depend much more on oil than oil importers.
Thanks! I thought it was interesting that neither the IEA nor the IMF seemed to think that derivatives exposure to oil prices, and the impact on banks, was important enough to mention. Also, the impact of rising interest rates, as default rates rise in parts of the world. It is very tempting to think the impact is symmetric and offsetting, but this is not really the case.
Dear Gail and All
A few more thoughts about oxytocin, collapse, Donald Trump, the petrodollar, etc.
Several years ago I was working in Atlanta. I was at a party, where a young female lawyer was also present. I lived about a block from where she did. She didn’t have a car, and I offered her a ride home. On the drive, we got to talking about Donald Trump and his prenuptial agreement with Marla Maples and how her father had essentially sold her to Trump. Since she was a lawyer, I assumed she would be very cynical about marriage, and sympathetic to pre-nuptuals. She surprised me by saying ‘a prenuptial is the death of a marriage’. We didn’t have time to talk about it before I delivered her to her door, but the surprise I received when she said that stayed with me.
Now, let’s look a little more closely at information theory and language and oxytocin. Gregory Bateson defined information as ‘a difference which makes a difference’. Let’s suppose you are reading one of my posts and you reply to me ‘Stewart, you are full of s..t. Well…I either was or I wasn’t, and you have given me some information which may be of some value to me.
But, amazingly, let’s suppose that you respond by congratulating me on an insightful post. My oxytocin factory in the brain will get busy. You will be noted in my book as ‘a friend’. If I subsequently congratulate you on ‘a brilliant post’, then your oxytocin factory gets busy. This is like the rounds of gift-giving studied by the behavioral economist I linked to. Far better than trading compliments on the internet, of course, would be if I baked you a cherry pie and you gave me a bunch of collard greens in return.
I think we can say that Donald Trump probably fails most oxytocin tests. Instead, it’s all about money. The Ford Motor Company and Wal-Mart have both been famously at war with their suppliers. But the suppliers keep coming back because of the money. And the money, I submit, is what keeps the Global Capitalist enterprise alive. If money represents oil, and if oil is in decline, then that means that the Global Capitalist enterprise is in decline.
The oxytocin exchange triggered by the exchange of cherry pies and collard greens operates at a much more primitive level, and is sustainable in ways that a money system based on oil is not sustainable.
I also want to comment on the richness of the oxytocin exchange. Let’s suppose Wal-Mart pays me a hundred thousand dollars in return for the delivery of 50,000 widgets. The payment really doesn’t contain much information, as Bateson would define it. I don’t know if Wal-Mart will re-order next month, how much they will be willing to pay, etc. But once the oxytocin exchange pathway is working well, then trust between the parties is the glue that holds it together. I now have some information about my trading partner which makes a difference.
I want to observe that it probably doesn’t make any difference about superficial differences is the oxytocin exchange is based on mutual help. I looked at some farm records from before the Civil War. A white family lived next to a free black family, and they happily traded work with each other. You couldn’t get much more of a social difference than a fairly prosperous white family and a poor free black family in a society which practiced slavery, and where it was strictly illegal to teach a slave to read. Yet the exchange of cherry pies and collard greens and the oxytocin pathway made everything work.
So when we say that ‘we can’t imagine what might replace the Global Capitalist system’, I suggest that we need to step back and look at the system that Mother Nature designed us to live within. And learn how to make cherry pies and grow collard greens.
This discussion is getting too technical and too serious, so I am starting a new thread — a thought experiment.
If we could preserve one item to show the post apocalyptic population what life was like in the age of abundant energy, what do you nominate?
I will start with this one, “Christmas Light Display as Seen by Drone Wizards in Winter”
Dear inter guru
I nominate this article from our most prestigious newspaper of record…Don Stewart
All this time, I thought the “Kardashians” were a race of sentient beings on Star Trek, somewhat of a cross between Klingons and Romulans.
I am immune to pop culture. 🙂
Dear Gail and All
For those of a mathematical bent who enjoy modeling fossil fuel decline, I suggest a look at Mobus and Kalton’s Principles of Systems Science. George says a lot of copies have been sold, so maybe your friendly local library can get you a loaner.
On page 230 is a Quant Box addressing System Dynamics of Fossil Fuel Depletion. I won’t try to reproduce the equations here (my skill typing equations is pretty poor). Briefly, you can use a spreadsheet to make your own projections.
The results are similar to Ugo Bardi’s Seneca Cliff or Gail’s hand drawn graphs. Gross production rises exponentially and then goes off a cliff. Net production peaks earlier and exhibits the same ‘off the cliff’ behavior.
Also similar to Hills Group decline projections….Don Stewart
Oxytocin. I know a lot of professional photographers who have quit photographing weddings because they are ‘sick and tired of dealing with the mother of the bride’. Now, if you met these women at The Junior League, you would probably get along just fine. What makes them become ogres at their daughter’s wedding.
One hypothesis is the oxytocin effect. The mother of the bride is second in the oxytocin lineup, right behind her daughter. The father of the bride and the groom are down the list. The father of the groom is probably not significant at all…he’s probably giving odds on how long it will last.
We know that oxytocin increases our bond to ‘our group’, but estranges us from ‘those people’. We might speculate that the mother of the bride is tolerating ‘his side’, is strongly bonded to ‘our side’, and considers the hired help the enemy. After all, they may screw up what should be the most beautiful day of her precious daughter’s life. And so the photographer and the caterers and such servants are blamed for anything which doesn’t cast the most glorious light on the bride.
Don, you come out with some really interesting stuff. It seems that the hormone oxytocin plays an important social role, in trust, generosity, empathy, recognition, bonding, pairing, sexual performance, maternal behaviour etc. It is a part of how we have evolved as a social animal. Ethnocentric behaviour is also produced by the “bonding hormone” oxytocin itself.
It seems that evolution has designed us toward ethnocentricity and that modern cosmopolitanism is inevitably problematic. It may be that the promotion of non-ethnocentric environments and behaviour actually makes us overall less empathetic and less social, which would spell social dysfunction, a lack of social cohesion for multicultural societies like the US and the UK.
Which is why the MSM goes full out everyday in the attempt to stigmatise natural ethnocentric behaviour, people are not “wired” for multiculturalism, they are wired for their own ethnic group. It may be that the governments are trying to take us down a “moral” path that is radically contrary to how we are naturally designed and which will just make people anti-social, dysfunctional and less happy.
Likely global economic collapse will resolve many of these issues.
Recent studies have begun to investigate oxytocin’s role in various behaviors, including orgasm, social recognition, pair bonding, anxiety, and maternal behaviors. For this reason, it is sometimes referred to as the “bonding hormone”. There is some evidence that oxytocin promotes ethnocentric behavior, incorporating the trust and empathy of in-groups with their suspicion and rejection of outsiders. Furthermore, genetic differences in the oxytocin receptor gene (OXTR) have been associated with maladaptive social traits such as aggressive behaviour.
Oxytocin and intergroup bonding: Oxytocin can increase positive attitudes, such as bonding, toward individuals with similar characteristics, who then become classified as “in-group” members, whereas individuals who are dissimilar become classified as “out-group” members. Race can be used as an example of in-group and out-group tendencies because society often categorizes individuals into groups based on race (Caucasian, African American, Latino, etc.). One study that examined race and empathy found that participants receiving nasally administered oxytocin had stronger reactions to pictures of in-group members making pained faces than to pictures of out-group members with the same expression. This shows that oxytocin may be implicated in our ability to empathize with individuals of different races and could potentially translate into willingness to help individuals in pain or stressful situations. Moreover, individuals of one race may be more inclined to help individuals of the same race than individuals of another race when they are experiencing pain. Oxytocin has also been implicated in lying when lying would prove beneficial to other in-group members. In a study where such a relationship was examined, it was found that when individuals were administered oxytocin, rates of dishonesty in the participants’ responses increased for their in-group members when a beneficial outcome for their group was expected.  Both of these examples show the tendency to act in ways that benefit people with which one feels is part of their social group, or in-group. Oxytocin is not only correlated with the preferences of individuals to associate with members of their own group, but it is also evident during conflicts between members of different groups. During conflict, individuals receiving nasally administered oxytocin demonstrate more frequent defense-motivated responses toward in-group members than out-group members. Further, oxytocin was correlated with participant desire to protect vulnerable in-group members, despite that individual’s attachment to the conflict. Similarly, it has been demonstrated that when oxytocin is administered, individuals alter their subjective preferences in order to align with in-group ideals over out-group ideals. These studies demonstrate that oxytocin is associated with intergroup dynamics. Further, oxytocin influences the responses of individuals in a particular group to those of another group. The in-group bias is evident in smaller groups; however, it can also be extended to groups as large as one’s entire country leading toward a tendency of strong national zeal. A study done in the Netherlands showed that oxytocin increased the in-group favoritism of their nation while decreasing acceptance of members of other ethnicities and foreigners.  People also show more affection for their country’s flag while remaining indifferent to other cultural objects when exposed to oxytocin. It has thus been hypothesized that this hormone may be a factor in xenophobic tendencies secondary to this effect. Thus, oxytocin appears to affect individuals at an international level where the in-group becomes a specific “home” country and the out-group grows to include all other countries.
You may be correct that governments are trying to ram a square peg into a round hole with the multicultural thing. We sort of get along so long as there is enough to go around, but watch what happens when there isn’t.
My understanding of the massacres that took place in Rwanda some years ago were related to not enough to go around as Tutsi and Hutu populations increased putting heavy demands on finite farmland.
This resulted in the most vile atrocities being committed.
Don’t think that this can’t happen where you live? Are you 100% sure?
This was posted earlier and is a relevant and insightful read regarding what truly drives our behaviour and the illusions that mask the reality which is that we are all just deviant apes at the end of the day (who believe we are special) http://regmorrison.edublogs.org/files/2011/11/enigma_code-1fz5tz1.pdf
We humans have a preoccupation with creating institutions that attempt to mask this reality, one of the most important ones is religion.
Most religions try to suppress our genetic instincts but of course they totally fail.
Are we really any less murderous because of religion? Of course not, we murder and plunder as wantonly as we have since the beginning of time. In spite of religion telling us this is sinful behaviour continue to kill each other and we do not share because that is OUR NATURE.
We of course always come up with justification after justification for the reasons why we commit these acts. Religion has been an abysmal failure in attempting to curb such acts and in fact, throughout history, religion has recognized that it cannot tame the beast, and therefore has embraced it. Look at how many times religion has sanctioned war and genocide.
Over tens of thousands of years nothing has changed. Absolutely nothing. We are no more civil to each other than we ever were. And we never will be.
Because we are hardwired to survive and procreate. And if anything gets in the way of those too primordial urges, heaven help them. Our default is violence and brutality.
But hold on you say, where I live that is not the default position, we get along.
I call bullshit on that. We get along only because we in the west have pillaged the resources of the rest of the world so that we have an abundance. Does the US not use 25% of all resources with only 5% of the population?
I say again, if you think your country could never be a Rwanda, just wait to see what happens when the abundant resources are no longer available.
Humans are humans are humans. And not only that, we are animals and we act on the same drives as all animals. Some are not better than others. Some just are born into better circumstances.
“Don’t think that this can’t happen where you live? Are you 100% sure?”
W, I live in the UK. Religious wars ceased in central Europe with the Peace of Westphalia. AFAIK, countries drew their alliances in later wars in terms on national interest and without regard to religious sect. The UK continued to have religious sectarian uprisings and civil wars through the modern period (Irish republicans and Scottish jacobites) and we had the IRA/ Unionist terrorist campaign/ civil war into the 1990s, with some of it still going on. NI showed us what we are capable of and it aint pretty.
1 “Love is universal”. Actually no it isn’t, ingroup preference increases in proportion to natural oxytocin-driven bonding.
2 “Ingroup preference is hate”. Actually no it isn’t, see 1.
3 “Equal preference between in and out groups is love.” Actually no it isn’t, see 1.
4 Equal preference is not driven by love, it is driven by other psychological motives that usually pass for love, eg. the desire to appear “moral” or acceptable, to conform, to function successfully in a multicultural society, the interests of one’s own ingroup within that society etc.
5 The dominant universalist ideology in our societies is based around moral and psychological myths. Its discourse is more akin to that of the religious zealot than the reasonable scientist.
6 The dominant ideology is a part of the ‘superstructure’ of ideas that is driven by the development of the modern economic base toward globalism and the mass importation of workers.
7 It has deeper roots in middle eastern religious ideas adopted during the historical period.
8 It is unnatural and it is harmful to societies and citizens.
Gail, I agree the system “as is” will seize up and stop. But then a new system can be imposed by the government. In which the government allocates money. Yes, it will be emitted as debt but debt the government knows will never be paid back. The money will not be a store of value simple an immediate permission to use existing resources. If citizens want to pay their property tax and keep their house they will work for money, not to mention buying food. Oil producers will be funded as oil is needed to keep the government including military and police and food production going. Yes, it will be a bumpy slope downwards but I feel production can be commanded to continue for (?) 30 years. No, not for all but for some.
First: What you’re saying can not apply to the reserve currency of the world, otherwise that reserve currency would have America’s exorbitant privilege (Charles de Gaulle) as it resulted in an asymmetric financial system where foreigners see themselves supporting American living standards and subsidizing American multinationals.
Second: Here is the problem that is hidden from the America public:
Private-money (Bank-Money, example, dollar) and usury (interest) on the power of PRIVATE SECTOR.
This will then be turned into debt (serfdom), inflation, hyperinflation, deflation, and depression throughout society.
Here is the solution that you are NOT supposed to talk about:
Sovereign Money: http://sovereignmoney.eu/
“Once a nation parts with the control of its currency and credit, it matters not who makes the nation’s laws. … Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.” — Mackenzie King, Canadian Prime Minister 1935-1948.
And to put ‘money’ into perspective:
If you asked an American in 1910 “what money is” he would have shown you a gold coin. If you had shown him a dollar bill he would tell you, “this is not money; dollar is a bank-note. It can become worthless overnight.”
Now, try to explain this concept to an American today as their source of information is misinformation and obscurity… and therein lies the problem of our monetary collapse”– Keith Weiner, at “Monetary Metals
Thanks for that quote. I have seen a similar one from Nathan Rothschild.
If anyone was wondering who ultimately controls the world stop wondering. The Fed is a private entity that prints the reserve currency. Therefore the owners of the Fed control the world.
No wonder they are ordering the gassing of women and children in Syria and the shooting down of an airliner over Ukraine. The Russians cannot be allowed to destroy the reserve currency.
Of course destroying the USD does not destroy those who control it, but it would force them to go through the hassle of gaining control over whatever replaced the USD.
Need to add another layer at the top: Owners of the Central Banks (the people who give the central bankers their marching orders)
These men prefer to remain behind the curtain in the dark corner. They are beyond seeking glory, they let their stooges like Obama and Yellen and Draghi absorb the limelight. They are not interested in fame, they are interested in power, in controlling the world.
And they do. When you have the power to print the foundation of the global economy i.e. the Reserve Currency. Then you run the world.
Ever wonder why nobody save Ron Paul questions why a private entity has the exclusive right to print USD? Absolutely never will you see this questioned in the MSM.
Before I continue, I should let you know where I stand at the moment: I have a bleak view of humanity for the next 20 years.
Can you give us a thumbnail sketch of what you see coming in the next two decades.
There are mainly three events:
1) Collapse of the US Empire
2) Relentless decline of energy that will lead to shortages of everyday needs and food
3) And the worse of all: Decline that will lead to the extinction of the most dangerous animal ever to walk the earth: Homo sapiens.
How the collapse of the US Empire unfolds (unknown even for the players and diplomats involved, because the conducting negotiations and nations expectations are all moving targets) could exacerbate the other two.
Keep in mind that 2 and 3 will happen. How US goes down is the key in how fast 2 and 3 unfolds.
Oversimplified… But you will get the picture
So, as US goes down, we are left ‘Mainly’ with three scenarios:
a) BRIC’s (mainly Russia and China) let US being in charge. Quick Example: US builds and owns the pipelines. Russia supplies the oil/natural-gas, and China owns the manufacturing.
Under this scenario US can collect rent and is able to buy time. Petrodollars saved.
b) IMF (SDR’s) gets involved and gets to collect these rents. Good for some US financials but US dollar and US middleclass collapses. US oil consumption would have to go down by more than half. So, this scenario, for me, is a NO NO because US politicians and their families wouldn’t survive for five hours. Martial law would have to be used to enforce government authority. But, for how long? Once the government can’t pay the military.
NOTE: Accordingly to James Rickards (“IMF is the ultimate backup when central banks fail.”), SDR will become the next reserve currency and US will debase the dollar against gold and tax gold profit very high. And the US will blame the SDR (IMF) for the dollar collapse.
The Death of Money: The Coming Collapse of the International Monetary System by James Rickards
c) US go on the attack. This is what I believe will happen
US starts Proxy-wars on the boarders of Russia
US crash the prices of all commodities thus bankrupting the world
US floods the Middle East with guns and ammunitions
Military Coup D’état in South America thus overthrowing elected governments and crashing unions (wages)
If these don’t work, I can see the US dropping a couple nuclear bombs, say in Iran and Syria, as warning for the Russians and Chinese.
Russia and China will never attack the US. Then, the question to ask is: If Russia and China don’t give in to US demands, how long will Russia and China go without retaliating.”
Here is your WW-3. And, if it goes nuke, say that you survive, how long you give to the nuclear radiation to kill everything, and everybody else.”
Answer: Less than 10 years
There’s your answer!
“I don’t know (how WW-3 will be fought). But I can tell you what they’ll use in the fourth. They’ll use rocks!” – Albert Einstein
This is really what it comes down to. Do TPTB really exist? If they do will they abandon their plans to rule everything and be content to rule just a continent or so of serfs or would they rather use the vast powers of destruction that exist to fry everything and live out their lives amusing themselves in various ways in their bunkers. On the other hand Russia could fold- again- and be assimilated into the borg, China along with it, and we FINALLY get to see the NWO. It wont be a pretty sight. 6.5 billion people are going to die regardless. Or something else. My vote is for something else.
Thanks for your view of the future.
A quote that should be added to this discussion:
“Decayed civilizations always make war on independent intellectual inquiry, art and culture for this reason. They do not want the masses to look into the pit.
This obliteration of “false hopes,” requires an intellectual knowledge and an emotional knowledge. The first is attainable. The second, because it means that those we love, including our children, are almost certainly doomed to insecurity, misery and suffering within a few decades, if not a few years, is much harder to acquire.” – Chris Hedges
The problem is that the government is very likely to fail, fairly early on. It seems to me that at best, what you will have is new smaller governmental organizations, each issuing currency that is good only in their small domain. With such money, it will be impossible to do oil production, because the international trade that is necessary to keep the oil extraction system operating (spare parts, new equipment, trained professionals, international drilling rig companies) will “dry up”.
“you will have is new smaller governmental organizations, each issuing currency that is good only in their small domain.
Y’mean, like this?
Unfortunately, the $$ is largely a tourist thing at the moment. About 0.05% of our market sales involved $$ last year — one $$5 bill! The SSI Monetary Fund would like to see it become a “real” currency, and are working on plans to ensure it is viable in an emergency. ($$ is apparently the only currency in the world that is as much as 50% backed by gold — for each $$1 issued, $0.50 worth of Canada Maple Leaf coin is put in a safe somewhere.)
With such money, it will be impossible to do oil production”
YAY! Bring it on!
Seriously, I imagine powerful fiefdoms arising around the best producing wells, able to continue extraction by tribute from the surrounding region. But perhaps even that is too optimistic.
Russia’s gov lost 20% of its USD in 2014, 3/4 of it in the second half. Assuming oil stays at 60 (of course, the assumption has absolutely no grounds), I guess they can hold on for half a year or more
Are we talking about russian reserves vs. junk bonds?
In 2001, Argentina’s reserves falled steadily down to 17 bn, and this was the critical point where they started falling exponentially and unstoppably, to finally reach zero in just a month or so. Taking account of inflation and population growth this could be rounded to 20 bn now. In fact, they reached 25 bn a year ago and many people were getting nervous about it, but the gov reacted and put it to 35 now I think (China’s 11bn swap could be helping). But we are not engaged in currency war. Taking account of populations size, 20 bn would be 80 for Russia and 25 would be 100 bn.
So Russia still has some 300 bn to go through by its own. Moscow has lost 75 bn in 2013 second half, for a 20 dollars or so fall in the mean price of oil relative to the first half (some 90 usd vs 110). 60 usd as a mean price would entail almost a 200 bn loss in 2015 first half and so with 300 they could theoretically get september before reaching criticallity and going broke.
In case oil mean price would be 30, Vlad’s deadline would happen to be june. Anyway, he would survive to attend next IMF SDR meeting, scheduled to be held in april or may I can’t recall.
That’s just to play with figures
US have been attacking (Currency Wars) the world since 1944. The problem now is that Europe and Asia are coming together (gas-pipelines), with Russia right in-between (with their own banks), so the US won’t be able to collect rent (currency war) them, if they don’t use the dollar.
But Europe and China know that they can no longer finance US lifestyle because US needs are too big.
Just to put in how unsustainable is the US delusion (problem):
World oil production as of July 2014: 77 million barrels a day
But let’s say 80 million barrels a day. And let’s price each barrel at $100 dollars a barrel.
So: 80 million X $100 dollars a barrel = $8 billion dollars a day. $8 billion X 365 days = $2.9 trillion dollars.
US healthcare cost (alone) in 2013 = $2.9 trillion dollars
See the Problem?
Bankrupted US Healthcare
Leaves 1 out 5 Americans without it
And it bankrupts about 1 million American families a year. Families with healthcare insurance.
Oil goes to billions and billions of people worldwide. US alone consumes about 1/5
Oil employees millions and millions more people than the US healthcare
World’s food production for 7 billion people depends, pretty much entirely, on oil
The question to ask: “When will the world say enough is enough?”
Then, the whole house of cards comes crashing down.
I have a slightly different view. USD was set as world reserve currency in 44, while this was an agreement among “free” world countries. It wasn’t until early 70´s usd betrayed its part of the deal and became petrodollar, leading to the situation you describe as being at war with the rest.
At the present moment Russia is the only country remaing outside usd system (debt to gdp ratio: 10%), so it’s the only place where the Fed can still expand to delay its collapse. That’s why we are witnessing a currency war among the Fed and Russia’s CB, dollar vs. ruble: the former willing to absorb the other and Russians willing to avoid the harsh devaluation and the general impoverishment that would be imposed as a condition to receive usd loans.
Russia doesn’t wants to get caught on the usd trap, but I am not so sure to what extent the rest of the world is willing to get out of it. Europe didn’t really supported De Margerie when he proposed selling Total’s products in euros (and it’s likely he was murdered because of this). And I wouldn’t say in Arg. the prevailing opinion is to move away from usd (all politicians are willing to pay usd debt and get more loans); I don’t see Dilma throwing usd into the garbage bucket… But in case usd ever gets subsumed under SDR to avoid the crash of the house of cards, people won’t be sorry neither, and usd devaluation would be fine to all of us indebted in dollars but unable to print them…
And, as always, China is waiting silently… Perhaps they’ll give us a big surprise one of these days, showing what kind of deals they’re doing with the russian bear and forcing Obamacare to go under the bus
If you don’t mind, the reply I left to Creedon touches on these matters that you wrote.
This reply that I am telling you is on this “Thread,” as well; but I am not sure if it’s up or down from yours, so I placed its link, so you don’t have to look for it.
David Stockman: the explosion of mainly oil and gas production did not reflect the natural economics of the free market, and certainly no technological innovation called “fracking.” The later wasn’t a miracle; it was just a standard oilfield production technique that was long known to the industry, if not to CNBC. It became artificially economic during recent years only due to the massive and continuous distortions of both commodity prices and capital costs caused by the world’s central bankers.
Stockman is so tantalizingly close to understand what the true nature of this crisis is. How is that he cannot appear to ask the obvious question which is ‘why would the central bankers supply the fuel for the fracking explosion?’
As T Boone Pickens stated the other day, without shale oil the price of oil would have marched well past the $147 level of 2008. Of course he’s not going to say it but everyone knows what high priced oil does to an economy so in effect he was saying that fracking has kept civilization in place for a few years longer.
Strange how a switched on fellow like Stockman can’t connect the dots. He is not the only one of course.
To even think the unthinkable is unthinkable for most.
Merry Christmas to all. I have just read JMG Christmas eve post. He makes a point which makes me feel rather dumb. In 2012 we passed what the Hillsgroup calls the “half way point for oil,” it take one half of a barrel of oil to produce a barrel of oil. Now correct me if I am wrong, but doesn’t that mean that when the EIA publishes total liquids numbers like 85, 90, 95 MBD or whatever they are that half that number is being used to produce the oil, so that obviously the oil that we have available to use is half the EIA published number. In other words the net energy is the energy we have available to use after the oil used to bring the oil up is subtracted. John Michael Greer makes this obvious point, so I must give him credit. Net energy is the energy that we have available to use and it is steadily going down. The fracking fields are probably actually producing very little net energy. The bottom line is that this means that the world economy will have to continuously contract.
Put another way, a larger and larger part of our economy, jobs, money, ect, are being devoted to producing something, ‘oil’, that has less and less value over time, so at some point the economy that is spending so much labor and money producing something of less and less value must collapse.
We use close to 100% of the energy that is extracted in some way or other. Some of the oil product is used as a raw material, so that is not really used as energy. Some of it ends up as waste heat, so we can argue that that doesn’t get productively harnessed.
I don’t think we really know when we hit 50% on oil extraction and processing. There is a very nebulous line as to what is included and what is not. In the Middle East, they clearly need some of the energy from oil to keep order in the economy. The price has to be high enough that tax revenue can be used to build desalination plants, roads, and create jobs in various ways for the population which might otherwise revolt. If a person includes only oil-lifting energy costs at the well-head (which is what is in EROEI), it gives a very low estimate. Adding refining and distributing costs adds more. Taking into account the amount that workers get indirectly through their wages adds yet another layer. Adding the amount the government gets through the tax revenue it collects adds yet another layer. We may very well be at 50%, if the various indirect layers are included–I just don’t know.
Dear Gail and Creedon
First, I will admit that I don’t know exactly what The Hills Group has in mind. I have not spent the money for their detailed studies.
However, I can add some general comments which may be helpful…or not.
A couple of decades ago, Harold Morowitz wrote in his book Energy Flow in Biology: ‘the flow of energy through a system acts to organize that system’.
When the system gets organized, we call it a dissipative structure. Dissipative structures tend to evolve in time to more efficiently turn the energy coming into them into low grade heat.
We might expect that the Global Capitalism system is pretty efficiently turning fossil fuel energy into low grade heat. Therefore, we might also expect that any reduction in the flow of fossil fuel energy will require a new organization of the system. This isn’t really about EROEI as we know that computation, it is about an emergent system which is dependent on energy flows. And if the energy flows are declining, then a new and simpler system MUST take the place of the current system.
We might think of a lion in the Serengeti. The energy available is what is fixed by photosynthesis (neglecting the energy which warms the earth). Suppose that climate change results in the desertification of the Serengeti, with a parallel loss of energy from photosynthesis. Then Nature will reorganize the system. Lions may just no longer have a place in the newly desertified plain. Calculating the EROEI of a vanished lion in a vanished ecosystem is probably not very informative.
It might be true that Global Capitalism had been rapidly financializing everything as a response to increasing fossil fuel availability, but that the financialization reached a crisis point in 2007-2009, and the Global Capitalism system was in the process of reorganizing itself to get rid of the huge financial institutions which no longer made sense—just like our lion in the Serengeti.
However, our real world human lions control institutions called Central Banks. Lions, human or otherwise, do not take kindly to their own demise. And so the governments of the world have doubled down on the financialization of everything and have used strong-arm tactics (from seizing your assets to funding fracking with junk bonds to war with Russia) to try to keep the old Lions in place.
Nassim Taleb has written about the necessity for ‘small tremors’ to release the pressure which otherwise builds up and results in a devastating earthquake. The Central Banks and political powers have been unwilling to permit those ‘small tremors’, so we can’t really look at the current situation and draw any firm conclusions about how the global economy is reacting to less fossil fuel energy. If we believe Taleb, we might expect a devastating earthquake which changes everything very quickly.
From George Mobus’ current blog post addressing oil prices:
‘Chaotic systems that are being driven (forced) often undergo dramatic shifts, say from one attractor basin to another. The sign that such a shift is pending is sudden swings in some parameter, up and down. Such swings portend catastrophic changes, like a swarm of small earthquakes just before a major one. Look for it soon, coming to a planet near you.’
Azby Brown, who later wrote his book on Edo Japan, wrote The Very Small Home: Japanese Ideas for Living Well in Limited Space in 2005, with the first US edition in 2012. From the Foreword by a Japanese architect:
‘There is a short essay written in the thirteenth century that is still treasured by the Japanese today. An Account of My Hut was penned by the poet and literary recluse Kamo no Chomei after he took to living a refined yet simple life in a small country cottage. The image of this pastoral existence of quiet contemplation exists as an ideal in the Japanese mind to this day, and is echoed in the rise of the new small home so ably introduced by Azby Brown in the present volume.
On rereading Chomei’s account of his serene lifestyle, I was surprised at the number of similarities between his age and ours. Chomei lived through a period of repeated political disturbances. The once-static world of the all-powerful aristocrats collapsed. The samurai came to power, but their rule was far from stable. The national economy was in a state of confusion, and famine was rife. Successive natural disasters rocked the nation, further destabilizing the lives of the inhabitants.
The last ten to fifteen years in Japan have been no less turbulent…Economic confusion, the Hanshin Earthquake, and terrorist activities…have increased the general anxiety within society. Nearly 800 years earlier, living in similarly troubled times, Chomei erected his ten-foot-square hut … and wrote an essay on his modest dwelling that has become a landmark of Japanese literature.’
A couple of notes from me:
*The Edo society grew out of this very turbulent period. Things got much better in Edo.
*It is sobering to realize that some Japanese recognized their problem a decade ago, recognized that it resulted from systemic changes, and yet the recent election kept in power a government which thinks that printing money can solve the problems.
*Chomei was apparently able to distance himself from the turmoil around him. That is worth thinking about as we consider Lifeboats.
*The ‘ten by ten’ dimension calls to mind William Powers book Ten By Ten written about his time in rural North Carolina.
Azby’s book is beautiful, by the way, depicting some gorgeous small houses. The Ten by Ten that Powers lived in is beautiful if you think Thoreau was onto something interesting.
My point is simply this. Our US government has decided to double down on sub-prime loans, and the federal mortgage lending institutions are going to try to resurrect the boom times in housing. A very different direction would be the construction of very small houses, not excessively burdened with government regulations or debt. The small houses might very well be a rational response as our economic system resets itself to lower fossil fuel use. It is hard to see how doubling down on sub-primes is a rational response to anything.
JMG’s prescriptions run to the sorts of solutions which were developed in the 1970s…and so they resemble the ten by ten hut from 800 years ago, Thoreau’s experiments from 150 years ago, or the very small house from a decade ago. But most of these solutions are vulnerable to government hostility, and to the hostility of those few who control almost all of the assets.
My conclusion has been that we must have some sort of government and concentrated wealth collapse in order to make the changes that we have to make. If we are exceptionally lucky, we will see the emergence of an Edo like government…which, for all its faults, saw much improved ecological and economic conditions. If we are unlucky, we will get what the Japanese got when the aristocratic order gave way to the rule of the samurai.
“In times of stress, the genes assume control and reason disapears.” — Reg Morrison
Mysticism – Slide 23
By selectively preserving the mystics ancestors evolution not only gave us the weapon that would catapult us from obsolescence to world domination, it also took out a shrewd insurance against our species’ overwhelming reproductive success. Only such a deliciously rewarding and tamper-proof device as mysticism could have prevented us from foreseeing the danger of overpopulation a long, long time ago.
And the corrosive mental derangements born of religious and political mystical beliefs will easily derail our global efforts to cooperate and survive our population peak—just as they did on Easter Island more than three centuries ago. By this means, the Gaian processes will ensure that fanatics of all kinds, both religious and political, will feed and inflate humanity’s growing fears during the next two stress-filled decades.
This will ensure that distrust and hatred between nations, races, and religious and political groups reaches a crescendo as the environment begins its savage counter-offensive against the current plague of Homo sapiens, the biosphere’s primary destabiliser.
Looked at in this light the multitude of bonding mechanisms that bind us into semi-tribal groups both large and small now seems certain to midwife our species’ collapse.
Torture and genocide have been the milestones of mysticism throughout history … the Crusades, the Inquisition, the Holocaust, Ruanda, Pol Pot’s Killing Fields, and a million other nameless obscenities. — Reg Morrison
So, prepare for the rule of the samurai, unfortunately.
this is an interesting, actually fascinating slide show but it seems to be carrying a flaw in its logic: if our genes control our behavior and tends to counteract our logical neo-cortex, than why is our genetically controlled behavior leading to species collapse and possible extinction? This makes no sense to me, or it wasn’t articulated very well.
Could it be that our survival and breeding instincts, which like any animal, usually end up stressing the resource base resulting in a die-back, have been thwarted by our ‘intelligence’
i.e. we have denied the normal die-offs by growing more food by using fossil fuel resources
Perhaps, because our genetic code has not evolved to deal with a situation that has occurred over a relatively tiny amount of time, the result is that we are now facing an extinction event.
Effectively we have done exactly what we are genetically hard-wired to do. When an abundance of food presents itself, we consume and we grow our population until we reach the limits.
Unfortunately, because the increase in population is based on a food supply that is produced by artificial means, when the foundation for the food supply disappears (i.e. the oil and gas inputs), we don’t just get a die-back.
Instead we wipe out the species, and possibly the planet.
I don’t see any contradictions between what is happening, and what that essay argues.
Dear Wee Willy
Here is a good explanation for why most people do nothing about climate change. Same logic applies to other problems such as accumulating debt, soil erosion, nuclear war with Russia, mineral depletion, etc…Don Stewart
Reg Morrison, I believe, is one ‘Key’ component that will help us connect the dots.
Before I continue, I should let you know where I stand at the moment: I have a bleak view of humanity for the next 20 years. Humans failed their moral duties, exactly as expected, because of our built-in flaws. Some of us might develop the intellect to realize it, but believing that you can change, that you can properly label it, it is nonsense. A major impediment to understand.
Let me give you two examples:
Believing in the principles of Growth and Progress (such as our religion and education system do) represented not just economic heresy but a dereliction of moral duty….. yet these excuses constitute our primary defense.
Alternatively, as spiritual beings, we were “just obeying orders.”
We would be better advised to tell the truth and plead insanity, because we are merely servants of our genes.
Our time bomb is mysticism. Its delivery system is language. And its hiding place? The unfathomable coils of our DNA.” — Reg Morrison excerpts
An interesting debate that took place some years ago between Carl Sagan, the well-known astrophysicist, and Ernst Mayr, the grand old man of American biology. They were debating the possibility of finding intelligent life elsewhere in the universe.
And Sagan, speaking from the point of view of an astrophysicist, pointed out that there are innumerable planets just like ours. There is no reason they shouldn’t have developed intelligent life.
Mayr, from the point of view of a biologist, argued that it’s very unlikely that we’ll find any. And his reason was, he said, we have exactly one example: Earth. So let’s take a look at Earth. And what he basically argued is that intelligence is a kind of lethal mutation … you’re just not going to find intelligent life elsewhere, and you probably won’t find it here for very long either because it’s just a lethal mutation …
He pointed out that if you take a look at biological success, which is essentially measured by how many of us are there, the organisms that do quite well are those that mutate very quickly, like bacteria, or those that are stuck in a fixed ecological niche, like beetles. They do fine. And they may survive the environmental crisis. But as you go up the scale of what we call intelligence, they are less and less successful. By the time you get to mammals, there are very few of them as compared with, say, insects.
If nothing significant is done about it, and pretty quickly, then he will have been correct: human intelligence is indeed a lethal mutation. Maybe some humans will survive, but it will be scattered and nothing like a decent existence, and we’ll take a lot of the rest of the living world along with us.
I think I’m lost now. I get the concept of EROI, it is pretty straight forward. Gail speaks of one of the drivers to our problems is that the value of the energy returned from fracking is lower than previously. Meaning we can do less work. Is that the same thing as EROI? Or is that the actual energy value of a barrel of oil from Bakken is less than the energy value of a barrel of oil from Ghanwar? Not taking into account how much energy it took to get it out of the ground.
Are these two different things or the same thing said in different ways?
Two different things said with the right information
First: Condensate versus conventional oil (CvsC)
Second: By Professor Patzek
A better way of looking at it, is to subtract the actual oil production from the population-based projections and calculate the unrealized oil consumption.
By this standard, the peak of global per capita consumption happened in 2005, and we now live in an era of permanent destruction of consumption.
The US and EU consume more per capita, have exported their manufacturing elsewhere, and are unable to withstand the high price of oil.
Hence the destruction of demand for 1.6 million bbl per day that already happened in the U.S. A similar destruction trend will continue to happen in the future, because the U.S. can no longer compete for expensive oil with China.
Also, China’s “mix” of fuels, with its emphasis on coal, makes its average energy cost lower. Our use of oil makes needed salaries higher, which is part of our problem competing in a world economy.
I’m not going to try to answer for Gail in terms of EROEI.
I will suggest two thought experiments which, I think, will get you into territory which is not explored in the EROEI world.
The first thought experiment is looking at rotational grazing (wholistic grazing, pulsed grazing, other names). Most of the work is being done by the sun and the grass which photosynthesizes, and the soil food web which creates plant usable nutrients and good soil structure, and the cows and sheep which graze on the grass. But rotational grazing, in its modern form, also uses PV panels connected to copper wires which keep the cattle in a small area so that the benefits of the grazing are maximized.
Suppose you are given an EROEI for electricity generated by PV panels. Does that tell you anything useful? Probably not. The fencing is a very small part of the total cost, and it is necessary to keep control of the animals. So, if you are the farmer, you would tend to look at the total operation, which is mostly dependent on free sunlight. Whatever may be the EROEI for a whole bunch of PV panels in the Mohave Desert trying to generate commodity electricity for Los Angeles isn’t your concern.
So the first thought experiment alerts us to be wary of sweeping statements about EROEI. The EROEI for PV panels may be high or low, but what really counts is the productivity of the total grazing system.
The second thought experiment is about Emergent Properties. As a system acquires more energy flow, it makes new structures. Think of how the land areas of Earth changed as photosynthesis evolved. Think of how cooking increased the flow of calories to the human body and enabled large brains. As a system loses energy flow it will be forced to change its structures again. We can say that it will have to become simpler. Some of the change may happen by physical evolution or cultural evolution, and some by extinction.
Now consider a Confined Animal Feeding Operation. It is quite an energy intensive way to get animal meat to a grocery store. As energy flows into the economy decline, will CAFOs disappear and be replaced by rotational grazing on grass? And since rotational grazing on grass cannot supply the same amount of meat as grain fed cows in CAFOs, then the human diet will have to change also. But that also means that lots of things change in the whole agricultural system.
The lesson I take away from the second thought experiment is that complex systems work out new Emergent patterns as energy flows increase, and will have to work out ‘de-Emergent’ patterns as energy flows decrease. There is also no guarantee that the new pattern which emerges as energy flows decrease will be an optimized dissipative system…it may be pretty wasteful of energy, until time has passed and evolution has done its work to devise more efficient structures.
I’m not opposed to work which identifies the EROEI of some activity, but when fundamental things are changing, they may not be as much help as some people think they will be.
I’m replying to Don here just because his email came through last and it is the easiest to tag a response to. Thank you to both of you for the additional methods of thinking about this. If, IF, I’m understanding this correctly and they’re separate things then the two items: lower EROI, lower energy value are actually additive? Meaning that the problem is not fully fleshed out if one just looks at EROI or just looks at lower energy values.
So not just that EROI has dropped from 80 to 20 or whatever you figure today but that it went from 80 @ 95% energy value to 20 @ 70% energy value (picking random numbers for illustration only)
I begin to wonder if either act as negative feedback in the production loop? Or if they both /have/ been acting as positive feedbacks and now they’ll both act as negative feedbacks?
I would agree that when fundamental changes are taking place, it is easy to be misled by things such as EROEI calculations. The major point is that you have to keep the whole system operating, even if you are using tiny amounts of grid electricity, or batteries made and imported using parts from around the world. Looking at the small amount of energy in a piece is not helpful, because it is the system as a whole that is not sustainable.
I don’t know. Both you and Ugo Bardi are smarter than I am. You tend to see the ‘collapse of everything and back to the stone age, but with a lot of baggage we have to carry’, while Ugo sees ‘strong networks’. He discusses the issue on page 161 of Extracted.
‘A complex system will normally react to an external influence by rearranging its internal structure in order to minimize the effect of the external force’.
Then he contrasts a city street grid system with a mechanical watch. ‘A city transportations system is enormously more resilient than, say, a mechanical watch. It is their very complexity that makes complex systems so resilient, despite their apparent fragility. Though the study of network resilience is in its early stages, network theory point to the same conclusions.’
For that last sentence, he references a 2006 article:
C. Hawes and C Reed, Theoretical Steps towards Modelling Resilience in Complex Systems. Published in Proceedings of the 6th International Conference on Computational Science and Its Applications.
First: Just out of curiosity, why are you so focus on “Return on Investment”?
Second: Do you live in America?
I wouldn’t describe myself as “focused on return on investment” but instead attempting to understand the different moving pieces. Far more people than myself have used this term and it seems to be a fairly standard method of discussing one aspect of the issues we’re facing.
EROI is something those around me are familiar with but they don’t get the next steps that the money we throw into the system isn’t going to give them the results they expect ie better healthcare, better education etc. and my encouragement is to use the little resources they have at hand in ways that would be more productive, well, those are difficult points to get across. But if I can explain the lower rate of return (yes, unfortunately I’m stuck in the language that others have used to frame the issues) that they might see why it is a ponzi scheme and why we’re stuck between point a and point b.
I am also asking that question because I read and what I read isn’t perfectly clear, I’m still trying to wrap my head around the different moving pieces. So I asked. 😀
As for your other question, I am not a gambler and the rest of the assumptions that go with answering that question would be wrong.
Thanks for your candid answer.
Not sure if my answer will help, but you tell me:
Stop using metrics such as EROI and GDP. Neither are good tools to understand our current situation.
On oil, follow depletion rates of existing fields; and the picture will become clear and easy to explain.
The biggest problem that we ‘the world’ face is the collapse of American Empire.
As you probably know, the US dollar became the global reserve currency in 1944 (Bretton Woods). It meant Europe borrows dollars; then, with these dollars, Europe buys resources from Africa, Asia, and South America. US was the enforcer, through Coup D’états in South America, war in Asia (Vietnam), and Proxy-Wars (East Timor).
Bretton Woods’s arrangement was very profitable to the US, and offered good jobs to US middleclass.
However, in 1971, US oil peaked. So, the world panicked, and started to redeem dollars for US gold. Keep in mind, because of the Vietnam War, Asia had lots of dollars.
So, Nixon closed Bretton Woods (Gold for dollars). And US economy faced a depression, high-inflation, and shortages.
In 1973, US fixed its economy by forcing Saudi Arabia to only sell oil in dollars (Petrodollar). Followed by OPEC, in 1975. Global dollar demand help stabilize US economy.
However, that too could no longer help US economy generate jobs, because US didn’t have enough oil to grow, so in the 1980’s US starts running large deficits; financed by the Petrodollar.
In 2008 US deficit scheme collapsed.
Then, came the US Central Bank (Fed) to the rescue (TARP, QE, and the list is long).
Calista, this is it. US is out of choices. Either the world keeps taking dollars and giving it back to America….
Or, America will have to take by force.
“The BRIC’S Bank is anti Petrodollar, not anti Money Power” — Anthony Migchels
I am sorry; I meant to say the DECLINE RATE, instead of DEPLETION RATE.
I don’t like the EROI label because it has a very definite calculation behind it, which I don’t consider broad enough, so I use different wording. When I am talking about is the same thing, but calculated in a different way. I am not talking about the energy content of the Bakken oil, although it tends to be lower as well. I am talking about the energy used in making this oil, so that the net energy is lower.
You wrote: “China’s “mix” of fuels, with its emphasis on coal….”
That’s a good point because I was born in Brazil, even that I live in DC. So when I go to Brazil my friend’s cars have, usually, two choices: Ethanol or gasoline. And they seem to be always in Ethanol.
If they have a foreign made car, gasoline is what they use.
Now, if you take a cab in Brazil, they will have a switch on the panel of the car and it gives the cab-driver 3 choices; but it is always on the natural-gas position (cheapest fuel in Brazil).
But, if the cab is heavily loaded, or it is going up hills, the driver will switch off to ethanol. Gasoline is there, because that is how engines are built, but they never use it.
Not sure with the newest car models.
Anyway, I thought you, and your readers, would appreciate these inside bits of information.
Ha! Military orders are historically the precondition of aristocracy a la Normans. You can’t expect people to vote to be serfs. So, samurai as a precondition of Edo style aristocracy. Me of course as the lord of the manor. The great crescendo shall give way to rural idyll.
“My conclusion has been that we must have some sort of government and concentrated wealth collapse in order to make the changes that we have to make.”
Coming soon, to a civilization near you! (Wherever you are!)
I agree (and perhaps in opposition to Gail, who seems to think current government is “a good thing”) that there is not much worth saving from the current nation-state system of governance.
Perhaps one unexpected benefit of the neo-liberalist mantra of “push costs down to local government” is that local government has been weaned a bit from the Federal teat. I think local and regional governments will largely supplant the rule of the nation-state. We may yet see the return of the ancient “city-state” method of governance, in which case, those in outlying regions should form their allegiances pronto.
A system that sort of works is better than no system, in my view. We don’t have anything very obvious to collapse “down to”. If we could easily go to another lower-energy system, it would be one thing. But it is hard to see what it might be.
“We don’t have anything very obvious [in terms of government] to collapse “down to”. If we could easily go to another lower-energy system, it would be one thing. But it is hard to see what it might be.”
I agree that a powerful Federal system is hard to get away from.
I think the Swiss canton/gemeinde system could be a good example of the future. The Swiss federal government is not very strong and collects a relatively small amount of taxes. It is concerned with stuff like foreign policy, but stuff like social programs (even immigration, outside of broad guidelines) is pushed down to the canton (state/province) or gemeinde (community). You file three returns, and most of your income tax goes to the local community. I seem to recall that the federal government collects less than 25% of the taxes, whereas in the US, it collects more like 90%, and then re-distributes it to smaller entities.
For example, if you meet the broad Swiss national tests for length of legal residence, etc., a committee of people from the local community in which you plan to settle ultimately determine if you can immigrate or not. This has resulted in things as simple payola (in some communities, you pay them upwards of seven figures to live there) to a grilling by the local burghers on local customs and history — all conducted in the local dialect. This is not just in the boondocks: in 1992 (at least), you were interviewed in Sweissedeutch in order to immigrate to the capital, Bern.
This seems to me to be the essence of a neo-tribalism that could arise. Perhaps Switzerland will “make it” in the post-carbon age.
Don, we know some Japanese are more prone to Edo than to Daichi, and Fukuoka is another example. Perhaps you know Hayao Miyazaki, possibly the most important filmmaker in the history of the country. His movie My Neighbor Totoro was the most viewed local film in Japan. All his movies are anime, firstly intended for children, and almost always focus on low tech and no/few FF. Very good stuff
Dear Gail and All
I have frequently said that the vast majority of traffic on the internet is a waste. Here is a guy with more credibility than I have saying pretty much the same thing.
If things get tough and internet servers have to be shut down, will we have the intelligence to organize ourselves to save what is valuable?
The old media told us what was happening?! It told us what the masters wanted us to believe. Suspect?!
Meritocracy?? Maybe in Sweden not in the U.S.
I wrote a scathing evaluation of this guy but it disappeared into the bit bucket…. not worth repeating.
I am not at all in favor of censorship. The problem is, I don’t know exactly what I AM in favor of. It is pretty clear to me that, as Net Energy declines, the ability of people to post frivolous pictures of themselves on servers needs to decline. It may be that it will be self-correcting as income and frivolous consumption and the advertisements they support decline.
A key skill for the early 21st century is learning how to very quickly sift the wheat from the chaff.
The conversation between James Howard Kunstler and John Michael Greer had an interested statement by JMG. He claimed that any reasonably good printed encyclopedia was more convenient and more useful than an internet search. I find that statement dubious, but I do agree with him that the internet can be a big time waster.
Don, I agree most of what is on the internet is boring, foolish and uninteresting. But if that is what people choose to do that’s their problem. Indeed, that is why this blog is so appreciated. Most debate on the internet turns into na na you are a poo poo head name calling very quickly.
I have zero interest in trying to convince people to ‘get serious’ with the internet, or with censoring what can appear on the internet.
However, I think that some serious discussion is in order for people who:
*Think the internet is a very good platform for exchanging serious information
*Are willing to think about ‘the cult of the amateur’ vs. ‘professionalism’
For example, here are some results from a Behavioral Economist about stories:
I forget exactly what is in this. I believe he covers oxytocin, but, if not, you can search on Zak’s name plus oxytocin.
So we see that The Heroes Quest is an effective story model, but most stories told by amateurs are not effective.
Zak studied oxytocin in people who are engaging in twitters and face books and such, and found that oxytocin does increase. Which makes people more trusting. He studied people at a wedding and found that the bride’s oxytocin is sky-high, her mother’s oxytocin is very high, and then working down the line with less oxytocin in simple friends who are attending.
Since oxytocin is a ‘feel good’ hormone, and makes us more trusting, what is not to like? Well, it turns out that there has been extensive research on oxytocin, and sometimes the effects may be counterproductive. It makes us less skeptical when we ought to be asking hard questions, for example. If we are experiencing frequent oxytocin with ‘our group’, we are less tolerant of ‘those people’…which may explain why religious groups tend to be intolerant. Life is about balance, and being in a constant fog of ‘feel good’ does not help us navigate through life’s rocky rapids. Nor is being under the constant control of testosterone good for us.
The same thing applies to cortisol. In the mornings or when beginning a new project, we benefit from some cortisol because it focuses our attention and helps us work harder. But toward evening, we are designed to slow down, in a natural setting, and cortisol ebbs and we sleep soundly. When humans watch TV late at night, they interfere with the natural cortisol cycle, don’t sleep well, and develop chronic diseases. The same thing is true about ranting and raving on the internet in the wee hours.
My argument is that communications and computing technology have given us a powerful and wonderful gift. I sincerely hope that any downslope manages to save both of them. I think that quoting statistics about how much electricity it takes to keep all the ‘not valuable’ stuff on the air is missing the point. As things get tough, the wheat will probably get sorted from the chaff. When people cut back on buying, the internet will no longer be free (meaning: paid for by commercials), but it may still be extremely valuable to us.
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T Boone Pickens says:
If you look at 2005, you’re finished as far as for the rest of the world. What saved you was the shale. American industry saved the world one more time,” he said…..
If U.S. production were taken out of the mix, oil prices would be around $150 to $170 a barrel, Pickens estimated during Tuesday’s interview, a day after OPEC talked down the oil market…
nergy entrepreneur T. Boone Pickens predicted Tuesday that Brent crude oil will be at $90 to $100 barrel in 12 to 18 months. “The world got along fine with $100 oil,” he said on CNBC.
Less global demand for oil is more to blame for the price drop than oversupply, Pickens said in a “Squawk Box” interview.
He expects a quick drop in U.S. production in hopes of bending the supply-demand curve. “Just watch the rig count. You have 1,500 rigs running on oil. Already you have dropped 75 rigs in the last three weeks.”
His advice to drillers: “Go ahead and accept it.”
One of the things that has been missed in the recent shale revolution is the Fed’s role in it.
http://peakoil.com/publicpolicy/will-the-fed-intervene-in-the-oil-market This article questions whether the Fed will intervene in the shale oil market, when the reality is that, that is what they have already done. The question is how long can they keep it up. Is shale oil going to peak next year? How long can investors keep pumping money into the shale fields as they go into decline? Read Northwest residents comments over at Peak Oil news.
The Labour councillor said a “strategic plan” was required to save jobs as the price of oil continued to fall.
Labour called on Nicola Sturgeon and David Cameron to attend the summit.
It comes after a warning that the UK’s oil industry is in “crisis”.
On Thursday, Robin Allan, chairman of the independent explorers’ association Brindex, told the BBC that the industry was “close to collapse”.
He claimed almost no new projects in the North Sea were profitable with oil below $60 a barrel.
However, Sir Ian Wood, another leading industry figure, said Mr Allan’s warning was “well over-the-top and far too dramatic”.
Sir Ian predicted conditions would begin to recover next year.
Saudi Arabia’s oil minister, Ali al-Naimi, has said oil producers’ cartel Opec will not cut production even if the price falls to $20 a barrel.
His comments reinforce Opec’s recent policy change away from restricting output as prices fall.
In November, Opec [Organization of the Petroleum Exporting Countries] said it would keep its target output at 30 million barrels per day.
The Brent crude oil price has fallen by more than 46% since its $116 June peak.
Speaking to the Middle East Economic Survey, Mr al-Naimi said: “As a policy for Opec – and I convinced Opec of this, even Mr al-Badri [Opec secretary general] is now convinced – it is not in the interest of Opec producers to cut their production, whatever the price is.
“Whether it goes down to $20, $40, $50, $60, it is irrelevant,” he said.
The world might not see the oil price back at $100 a barrel again, he added.
At least Britain is thinking about this issue. It is not clear that the US government has even given it a thought.
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More electoral dysfunction in Europe, this time the UK. With five months to the next general election it looks likely that the result with be a dead heat and that Labour will form a coalition with the separatists in Scotland, Wales and maybe even Sinn Fein. The Scottish nationalists are on 48% in Scotland and they may wipe out 40 Labour seats, making it impossible for Labour to gain an overall majority. It has been rare for Britain to have a coalition but this would be the second running.
A coalition of Labour and the separatists would be especially obnoxious to many English conservatives and likely an embarrassment for Labour and for the entire British establishment. It would make a mockery and could sharpen UK constitutional pressures. The separatists may even choose to bring down the government. I can only regret that Scotland did not vote for independence when they had the chance, giving England some independence. A Labour-separatist coalition would deprive the British of an in/out EU referendum in 2017, even though most would vote to leave.
Polls currently indicate that British voters are set to return a hung parliament for the second election in succession.
There are increasing fears in Whitehall that the election could produce an effective dead heat between the main parties – with only a ‘rainbow coalition’ made up of three or more parties able to govern.
The SNP has indicated that in such circumstances, it would not prop up a Conservative-led government – but could offer support to Labour in return for a series of costly concessions.
Mr Salmond has already suggested his MPs are prepared to start influencing English laws on a ‘vote by vote’ basis to prop up a Labour government.
Meanwhile the Greeks will go to an early general election if the parliament again fails to endorse a president from the ruling party in their third and final attempt on Monday. If so then the anti-austerity far left Syriza would likely win and send Greece toward default and Grexit.
The Swedish centrists are desperately trying to avoid fresh elections after their nationalists scuppered the budget. The government would otherwise fall within months of its election, which is unheard of in Sweden. Polls suggest that fresh elections would present an identical situation.
Einstein is being invoked these days in Stockholm. His probably apocryphal saying that insanity is doing the same thing again and again while expecting different results has a special resonance in Swedish politics.
Stefan Löfven, the Social Democrat prime minister since October, has said that next week he will call snap elections to take place in March: it will be the first time a midterm vote has been held in more than half a century in a country renowned for its stability. Yet few expect a dramatically different outcome from the messy parliamentary situation created in September’s elections, when his centre-left coalition failed to secure a majority.
“Einstein might have wanted the doctors to examine Löfven,” says a former centre-right minister. “Snap elections are unheard of, unthought of. It’s a collapse of the current order.”
Sweden Could Avoid Snap Election as Secret Talks Underway to End Budget Row
I should mention that electoral systems were designed to deliver stable, strong centrist governments in Europe, to exclude the ‘extremes’ and the separatists, and that they are ceasing to perform more or less across Europe since 2008.
Spain is another to watch. The new far left, anti-EU Podemos is leading polls with nearly 30%.
Podemos, the “extreme left” leaning fringe party, would be the strongest political party in Spain ahead of major opponents Partido Popular and Partido Socialista Obrero Español if voting took place today, according to a new opinion poll.
The Sigma Dos poll revealed Podemos, which was founded 10 months ago, could claim around 28.3% of the votes in the Spanish elections next year, around four times more than what the group received at the European elections in 2014.
Analysts have remarked that the significant rise in support for Podemos emulates the surge in voting for previously assumed fringe parties, like Britain’s Ukip, in challenging the usual rotation in government between two incumbent groups.
Political pundits have warned the poll, which signals a possible coalition government next year, could present major problems in the formation, with possibilities of a Podemos and PSOE or PSOE-PP coalition.
The broader picture seems to be retreat of liberal globalisation in the wake of the energy and financial crisis. States are collapsing and economic unions abandoned, wars raging and ‘extremists’ running amok.
‘Fragmentation’ and ‘identity’ are reshaping the world
The splintering of the old order is at its most stark — and brutal — in the Middle East. In Iraq, Syria and Libya the state has all but collapsed. Whatever one thinks of Mark Sykes and François Georges-Picot, the map they drew almost a century ago no longer describes the territorial reality. These states will probably never properly be rebuilt.
The fragmentation dynamic reaches well beyond the murderous sectarian conflicts engulfing the Arab world. The founding assumption of the post cold war settlement was that global economic integration would drive closer political cohesion. In today’s post, post cold war order, economic and political nationalism are marching together in the opposite direction.
The frontiers of globalisation are being rolled back. Remember the Washington consensus? The crash of 2008 read the rites over what was to have been a seamless melding of the world’s capital markets. Banking has been renationalised as governments repudiate responsibility for anyone else’s debts.
Italy seems to be taking a more ‘rightist’ course. Lega Nord has left the far right, separatist fringes with now 35% approval rating under Salvini (not voting intentions), spreading through the middle and even into the south of Italy. Euro sceptics now have a majority of votes in Italy, which was solidly pro-EU just a few years ago.
Italy is a founding EU country, with France and Germany having their own Euro sceptic/ rightist problems with Le Pen on 30%, the new Alternativ für Deutchland party on double figures in polls and the new Pegida movement now rallying tens of thousands on the streets of Dresden.
More than one third of Italians — including many in the once-hostile south — are ready to vote for the anti-EU, anti-immigration Northern League, a poll showed Sunday.
Matteo Salvini, the youthful leader of the right-wing regional party, confirmed his status as the rising star of Italian politics with approval ratings of 35 percent in a Demos & Pi poll published by La Repubblica newspaper — up five per cent on November.
Salvini, 41, who launched a bid to extend his party’s appeal to the poorer south of the country amid much fanfare on Friday, came second in the poll to Prime Minister Matteo Renzi, 39, who it said has the confidence of exactly half of Italians.
His rise is often compared with that of France’s far-right leader Marine Le Pen, who has tried to steer the National Front closer to the mainstream in a bid for power.
Silvio Berlusconi’s Forza Italia, Beppe Grillo’s Five Star Movement and the Northern League all agree that Italy cannot hope to compete with northern European rivals inside the same currency zone. Between them they represent almost 45% of the Italian electorate, rising to almost 50% once Eurosceptic parties are included.
These three parties hate each other almost as much as they loathe Renzi’s Democrats. But, still, this discontent with the euro, and the almost intuitive understanding of the single currency’s ability to set Italian workers against German and Austrian rivals with only one obvious loser – Rome – illustrates how the euro project is crumbling.
Only a couple of years ago, Italy would have stood aside from all the hand-wringing about the euro. Middle-income Italians were solidly in favour of a project of which they saw themselves as founding members. And more importantly, their vast savings and property values were in euros. Any attempt to withdraw would almost certainly entail a devaluation of 50% or more and the destruction of 50 years of scrimping.
As budgets get to be a bigger problem, I expect governmental problems will increase.
Dear Gail and All
I made a longish post about several topics, including ‘what would de-emergence look like’? James Howard Kunstler asks John Michael Greer that question in his blog today. Especially starting at about 15 minutes…Don Stewart
Thanks! Good to hear someone else’s view. (Would really wish they would write them down instead, but having a portion of the podcast to listen to is almost as good.)
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This is an Automatic Earth article.
Dear Gail and All
Here are some thoughts about EROEI, competition vs. cooperation, what happens when energy flows decline, etc. Many of my references will be to pages in Mobus and Kalton’s Principles of Systems Science.
Page 493…Order From Chaos
A dissipative system is one that….has a boundary, a source of energy, components that can interact with that energy and each other, and a sink into which the waste heat produced from all those interactions can dissipate. Under those conditions, the system will transition from a chaotic, random inner organization to an ordered organization. That is, it will go from a system with little internal structure and function, to one with much greater structure.
…in systems of any complexity, it takes work, i.e., energy, both to create and to maintain structure. Should the source of energy diminish, the system will give up organization as the second law (entropy) begins to dominate….without maintenance, things fall apart….when flows cannot be absorbed by sinks appropriate to a system, they become forms of pollution that begin to break down the system. This can even apply at the symbolic level, where energy takes the informational form of money and can become a flow that overwhelms a social, political, or economic system.
What are the ‘excessive flows for which no appropriate sinks are available which threaten to bring down our current system’? Industrial agriculture? Money printing and debt and gambling with derivatives? Greenhouse gases? Unhealthy food? Polluted water? Nuclear radiation? Stress and Depression?
Assume that energy flows available to humans decrease. What kinds of organizations do you think will collapse? Will new organizations of lower complexity emerge?
Page 503…Figure 10.10
Organizing principles continue to drive a system toward higher complexity as energy flows and higher-order principles come into play…cooperation between some structures can increase this mutual capacity to compete with yet other structures for component resources.
Do you think that all humans are now essentially united as one group cooperating in the competition for earth’s resources? How is this different from isolated tribes competing with each other for resources?
What were the enabling factors which permitted humans to unite in an assault on Nature? (Parallels to the Tower of Babel should be wryly noted.) Fossil fuels? Global Capitalism? English as a common language? Internet based social networks?
This is the essence of the phenomenon of emergence. New organizations and levels or organization are made possible because the emergent entities have new properties not seen in the assembly of components prior to the initial auto-organization and selection process.
Think of a lion on the Serengeti. Try to calculate, conceptually, an EROEI for the lion. Does the lion, in fact, require a complete functioning ecosystem in order to survive? If so, I suppose the calculation would start with the sun heating the earth and plants performing photosynthesis, or maybe all the way back to the Big Bang?
My guess is that the models from The Hills Group are somewhat similar to the lion on the Serengeti. That is, the World of Oil requires the complex economy that we swim in every day, and so do not notice. As additional paper money has been forced into that system, the production of oil has increased very little…and the net energy may, in fact, be declining. If geophysical factors are pushing up the cost of ‘maintenance’ of the World of Oil, then we may project an early end to the system as costs exceed benefits.
Do you think this is the right way to think about it?
What is the nature of ‘de-emergence’? Back to the statements on page 493, describe how ‘the system will give up organization’ will play out?
Page 496…Question Box 10.6
Space-time used to be an important constraint on social relationships, since it required a considerable energy/time input to span distances separating people who otherwise might connect well. The Internet, especially with the advent of social media, has thus transformed this relational world, since the globe can be traversed with minimal energy or time input. What kinds of energy flows continue to constrain and shape the new world of web networked relationally? What are stability/ instability factors?
Peak Oil people have usually denigrated the notion that the Internet changes everything…quoting statistics on the energy consumption of server farms and the dependence on global supply chains and all that stuff. Yet there is no question that basic communications and computation has grown extremely cheap. Do you think that cheap communications can significantly affect the trajectory of the World of Oil? Will new structures emerge which take advantage of cheap communications, leaving older structures which were dependent on oil to atrophy? Are they already emerging? Are some of the more ridiculous embodiments of social networking simply a result of the Central Banks printing so much money which is seeking somewhere to go? When the bankers are all hanging from lamp-posts, will we see some more rational structures emerge?
Final Question from Me
We have a well-fleshed out model for how to construct a pretty sophisticated society based on wood and sunshine…Edo Japan. Suppose that we experience ‘de-emergence’ and many of the structures which support our current system disappear. What barriers would have to be overcome for an Edo-like system to emerge?
Soil degradation? Lack of skills? Pollution? Dysfunctional governments? Lack of helpful ‘higher order organizing principles’?
Do you think an agrarian intentional community which tackled those issues can possibly succeed in 2015 in the US?
PS For extra credit, describe a system with few fossil fuels, but with good communications and computational power.
“This can even apply at the symbolic level, where energy takes the informational form of money and can become a flow that overwhelms a social, political, or economic system.”
I was thinking “Microsoft Windows” when I read up to the comma. 🙂
“Assume that energy flows available to humans decrease. What kinds of organizations do you think will collapse? Will new organizations of lower complexity emerge?”
Brandy Galagher, of O.U.R. Ecovilage, notes that she must interact with thirteen different bureaucracies in order to get permission to construct a building. Obviously, this cannot continue in a low energy future!
We put up a sizeable greenhouse, nearly 3,600 sqft. Before starting, I consulted with the chief of building inspectors, who said, “No permanent foundation, no permit. It’s a ‘temporary structure.'” So I pounded in 76 four-foot posts upon which to mount the arches. The first arches went up, and a “red tag” appeared, a “STOP WORK” order from the local building inspector!
Now his boss’s boss is the one who told us, “No problem!” But no one had told the guy with the clipboard that. A lot of face-saving is involved in such a situation. For instance, is the inspector’s boss responsible for this screw-up? It took six months (and an entire wasted growing season) before the middle-level manager called me in for a meeting.
“We’d always considered greenhouses to be revenue items here.” Aha! A light bulb went off over my head — a “revenue item!” This was not about public health and safety at all; it was about fiefdoms, budgets, head-count, etc.! But the boss’s boss had spoken, so the guy with the clipboard was given ten demerits and we were allowed to complete the greenhouse without a permit.
The middle-level manager has since retired, and the guy with the clipboard is now in charge. It’s going to be a royal pain building anything else here; I’m sure he will remember us as the people who embarrassed him to his boss and boss’s boss.
The point of this too-long story is that a lot of this is going to have to go away. I’m sure Joseph Tainter would recognize this as an example of the excess complexity that collapses civilizations. But what will take its place?
I don’t know, but perhaps it’s idealistic to hope that human systems will go back to their core mandate. In the case of building inspection, which has largely become a means to support “the trades” and to make it impossible for ordinary homeowners to do their own work, perhaps it will return to “public health and safety” as the core principle. But I wouldn’t bet on it. Too many careers are at stake.
I think one building inspector and a horse is all that is needed for our equivalent of a US Congressional District. We call them “ridings,” because they were originally designed to be an area that a politician or bureaucrat could cover in one day’s horse ride. The “taxes and fees” were often not much more than room and board for the bureaucrat while he did his job.
I’d like to think there will be a lot of people working for “room and board” in the future — tradesmen (who used to be called “journeymen” for a reason) as well as students and bureaucrats. Then one could nearly do away with the cumbersome and unwieldy tax system.
The word byzantine come to mind. I guess like taxes it’s what we pay for civilization.
“The word byzantine come to mind. I guess like taxes it’s what we pay for civilization.”
I was thinking more like “baroque” … and its pun.
I read of one couple in Boulder CO that gave up with the hassle of the city rules and regulations concerning their “permaculture” home site and could not tolerate going to “hearingS” any longer to fight. They simply left…the country….went to Costa Rica or some place in Cebtral America.
Peter Bane, editor of “The Permaculture Activist” also has had a similar issue with the zoning codes. They order him to “tear down” a barn building her erected because of setbacks that were violated. Go figure.
It’s all about $$$$. Friend in York County SC says them “rich folk” from Charlotte NC are “invading” and causing hardship for the locals. Fancy rules going into place to drive the poor folk out.
Here is a link which illustrates a lot of points:
Note especially the photos of the degraded and restored waterway. The restoration consisted of building some structures in the channel to slow down the water.
Click on the video to hear a curmudgeonly farmer explain to the city folks exactly what is wrong with a manicured lawn.
I just bought some intermediate wheat grass seed. Intermediate wheat grass is a perennial which makes massive root systems. How far do you think I can push the clueless neighborhood association?
I think one building inspector and a horse… Hmmm, we can do better and combine a politician and a horse and call it a “horse’s ass”.
What you describe is frightening.
Thanks for the thoughts.
Everything is so interlinked today, I think the loss of energy coming into the system will bring the system down, although not necessarily all at once.
You are probably right on your list of excessive flows for which there are no sinks.
This is a classic interview with an oil man stating exactly the truth and making a mockery of the clowns at CNBC https://www.youtube.com/watch?v=uwGz4foNsx8
If i understand what this researcher is saying, he is saying that there is a reduction in output from the Bakken’s on a month to month basis, as opposed to what I a had previously thought was a year to year basis. He is predicting a peak in Bakken’s production next year, 2015. http://peakoil.com/production/bakken-new-wells-producing-less-confirmed
To add to the previous thought, I have heard that wells in shale country cost 8 million per well. With depletion rates at rather astronomical levels it would seem to me that this oil that Shortonoil, calls Camel pee, is very expensive oil.
But that is not what the companies drilling oil have built into their models of how wells will perform. With a sufficiently idealistic model, a company can claim eventual profit in 40 years, even if they lose money almost indefinitely along the way.
He is saying that prospects for the Bakken don’t look good. The wells are “watering out”–even at early stages. This is the same as what Rune Likvern has been saying. With more water, the oil-water mix that comes out has less oil and more water, even very early in the production cycle. Costs are higher, and less oil is produced.
KSA refuses to react to market signals which will make the overshoot in the down direction larger than otherwise. Maybe the KSA wants to keep the world working, kick the can down the road. Maybe they do not want to be stuck at home with mean spirited religious ideologues and unemployed, uneducated fools.
…Maybe they want to keep the slave labor…
Merry Christmas to Gail and all the OFW crowd.
LOL. Don’t tell Santa is already stucked in the ice and we’ll miss our christmas gifts right now, I thought this was to happen next year!
Dear Gail and All
I recently posted a list of some books that I happen to have read which describe ‘different ways of living’. Then, this morning, I see this article by Nafeez Ahmed which discusses a recent scholarly book which examines our current economic stagnation and Degrowth and the potential outcomes:
the Italian economist is cautiously optimistic about the potential long-term outcomes.
“When the framework changes, as the sciences of complexity teach us, there will be other forms of economic and social organisation more suited to the new situation,” said Bonaiuti. “In particular, in a context of global crisis, or even stagnant growth, cooperation among decentralized, smaller scale economic organisations, will offer greater chances of success. These organizations can lead the system towards conditions of ecological sustainability, more social equity and, by involving citizens and territories, even increase the level of democracy.”
Bonauiti uses the term ‘degrowth’ to describe this new framework – but degrowth does not simply mean no growth, or even negative growth. It actually entails a new science of ‘post-growth economics’ in which the obsession with measuring material accumulation as the prime signifier of economic health is jettisoned, in which it is recognized that endless growth on a finite planet is simply biophysically impossible, literally a violation of one of the most elementary laws of physics: conservation of energy, and relatedly entropy.
I want to interject a little editorial into your thought processes about this article and the Part II which will follow. Yesterday, my wife’s computer finally died, and we bought a Chromebook. For about 230 dollars. When I began to work in the computer lab at college late at night, we had, in a back room, an Atlas Computer which had been built for the Navy. It had cost a million dollars. By the late 1950s it was just junk, because the solid state computers had started to come onto the market. If one tries to make any comparison between the Atlas, the first solid state computers, and a Chromebook, it is virtually impossible. It is now, quite literally, a different world in terms of mechanical computing. And, since 1960, we have begun to understand how single celled creatures do calculus, which is a whole different way to approach the world.
My point is that those who say that Business As Usual MUST continue haven’t really thought the issues through.
Take, for example, the matter of birth control and global population. Pessimists say that we can’t eliminate sexual activity, that birth control is a by-product of the industrial economy and will disappear in the Crash, and so the population overshoot will get worse. But what is missing in this scenario is the notion that sexual activity MUST of necessity be reproductive acts. As Bonobos and your favorite porn channel will show you, there is plenty of sexual activity which is not reproductive. And, since 1960, we have made enormous strides in understanding our hormonal reaction to sexual activity. In short, we can have sex without reproduction and without chemical birth control.
We also understand much better the other hormonal and other essential factors which control our life satisfaction. I DO NOT think that 7.2 billion people are suddenly going to get enlightened and that everything will be peace and harmony. I tend to think more that those who figure out how to achieve peace and harmony and right livelihood with less will be the survivors. But you can make up your own mind on that subject. Nobody has an exact roadmap.
Gail, you are an important author at Christian Science Monitor and I got three interesting sites reposting some of your stuff:
– China University of Petroleum (http://web.cup.edu.cn/peakoil/xxfb/93213.htm)
– Petrobras Engineers Association (http://www.aepet.org.br/site/noticias/pagina/11938/Oito-peas-da-situao-dos-preos-do-petrleo) Here they copied many of our comments
– Russian Times (http://rt.com/shows/keiser-report/episode-417-max-keiser-081/) while I couldn’t see the video
The folks copying my blog changes over time.
You list China University of Petroleum. I have been invited to visit China University of Petroleum in March, and teach a short course there.
I have been on a few Max Keiser shows, but none recently.
Zerohedge now prints many (all?) of my post. Seeking Alpha just recently started copying my posts. There is a site called The Energy Collective that copies most of my posts. Most of the authors there are coming from a very “main street” background, working on nuclear or wind or solar or biofuels. So the comments I get there are very different from those on Our Finite World.
I wonder what chinese petroleum people are thinking about all of this…
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Why Are Commodity Prices Falling?
Thanks! The article brings up some points I hadn’t thought about.
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Well, well, well.
I bounce over to Contra Corner and David Stockman (I know, I know) and read this:
But here’s the thing. The meaning of the oil crash is that the central bank fueled bubble of this century is over and done. We are now entering an age of global cooling, drastic industrial deflation, serial bubble blow-ups and faltering corporate profits.
Another quote from earlier in the article:
“Now that’s a lot more informative than the Keynesian GDP accounts, which presume that government output is actually worth something and that do not know the difference between current period “spending” derived from production and “spending” funded by hocking future income, that is, by borrowing.
“Stated differently, the current capitalism suffocating regime of Keynesian central banking and extreme financial repression has created systematic bias and noise in the so-called “in-coming data”. These distortions are the result of mis-allocations and malinvestments reflecting artificial, sub-economic costs of debt and capital. The resulting bubbles and booms, in turn, cause highly aggregated measures of economic activity to be flattered by the unsustainable production, spending and investment trends underneath at the sector level.”
I’ve enjoyed reading many of the articles at Contra Corner but would make the observation that they generally just don’t get it. That is, they don’t understand the energy connection and how the loss of cheap energy impacts the system. I enjoy his guerilla-style war with the Keynesians (such as Krugman). I suspect that Keynesian theories worked only in a growing economy and now are the wrong medicine for the ailing world economy. Or poison.
Stockman understands some pieces of the bubble problem. I guess that is all we can hope for.
Dear Gail and All
Maximum Power Principle…Greed is Good
Kurt Cobb takes on these issues today…Don Stewart
That is a very fine article by Kurt Cobb. Thanks for mentioning it. Quote:
One can print money, but not wealth.
There’s a link in the article about energy and money, but it’s a short one of 2005.
I found a 2008 version of it, a little bit more complete.
A quote about “savings” (we could say the same for debt):
“Savings in all their forms, stocks, bonds, pensions, bank accounts, and so on, are really nothing more than a claim on society’s future production which means, in reality, a claim on future energy flows. Absent those flows, savings would be meaningless.”
Promises are meant to be broken….and they shall
Exactly! And workers who produce the goods in the future will need to be ones who benefit from future energy flows as well. This leaves those holding debt, stocks, bonds, pensions, etc. with even less claim on those diminishing future energy flows.
Correct me if I am wrong…
Wealth is created from using cheap energy + cheap non-fossil fuel + debt + technological innovation.
Oh wait, I surmised that from Gail’s September 21st Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply?.
Speaking of her Sept. 21st article, it bear repeating, that before the collapse of oil prices, that there was Gail getting the story right:
“I would argue that falling commodity prices are bad news. It likely means that the debt bubble which has been holding up the world economy for a very long time–since World War II, at least–is failing to expand sufficiently. If the debt bubble collapses, we will be in huge difficulty.
“Many people have the impression that falling oil prices mean that the cost of production is falling, and thus that the feared “peak oil” is far in the distance. This is not the correct interpretation, especially when many types of commodities are decreasing in price at the same time. When prices are set in a world market, the big issue is affordability. Even if food, oil and coal are close to necessities, consumers can’t pay more than they can afford.”
Prescient, in fact.
Thank you alturium for the reiteration: Gail has the story letter-perfect.
Thank you for the link.
I liked the description of money as a energy credit (some say token). I still try to wrap my head around that concept but it is making more and more sense.
I believe that having purpose in one’s life is the type of happiness he is discussing. Serving others above one’s own needs satisfies that need for purpose (for many).
People who serve in the military (Note: I have never served in the military!) have the same type of devotion to their units. But the goal of the unit may be killing of the enemy.
Individual acts are heroic and self-less. However, I am hard-pressed (as an amateur armchair thinker) to find an example where a powerful society or state did not press home their overwhelming, but morally wrong, advantage against a weaker group.
I suspect that we relish in cooperation and shared goals (religion really helps here) that, as a aggregate, are used by the state to accomplish greedy goals (that we would not pursue individually).
“I suspect that we relish in cooperation and shared goals (religion really helps here) that, as a aggregate, are used by the state to accomplish greedy goals (that we would not pursue individually).”
What works on the macro level (nation state) also applies to the micro level (individual).
We mostly get along in societies where each of us enjoys an abundance of energy. Yet we still covet what each other has (keeping up with the Jones) and we always want more. If we get a larger share of the energy pie say by getting a higher paying position at work, we buy bigger houses and nicer cars. We are never happy.
But we do not generally kill each other over energy because we have enough that laws can be enforced to prevent us from taking from others using violence or other means.
But as the saying goes, we are 3 meals from anarchy. Take away our energy surplus which is the basis for our food supply, and we will see how quickly the micro resembles the macro.
When people are faced with scarcity people ignore the laws and they do whatever possible to feed their families.
When faced with starvation desperation rules the day and we steal not only from our neighbour, but from our brother, because the hierarchy is state – tribe – clan – self. And when there is not even enough for clan, we turn on our families. Vicious fist fights because someone took the largest chunk of dog food from the can.
Cannibalism also rears its ugly head in such situations.
The reason we do not see incidents of this sort of behaviour now is because the cavalry rides to the rescue in times of famine. Bono tells us we cannot tolerate cannibalism and writes a song and we rush in with food drops.
When the world experiences the first day of endless days without 3 meals, nobody comes to the rescue. Not even Bono.
And we will see what the true nature of the individual is.
As for religion, is not one of its main purposes to attempt to control the base instincts of man?
For example, are the 10 Commandments not just an attempt to override our natural tendencies?
Like trying to tell a lion ‘though shall not kill’
Or an alpha chimp ‘though shall not shag all the females’
As evidenced by the numbers of people lining up for confession, the efficacy of this control model is limited. And what effect it does have is made possible by an abundance of energy, with a dash of manufactured guilt thrown in
Just watch what happens to the ‘though shall not kill’ commandment when there is no food.
Our base instincts for survival will override religion in a hurry.
And for those who insist on following the 10 Commandments post-collapse, those people will be beaten to death (eaten?) and everything they own taken.
We are animals with animal instincts, and big brains. Civilization is but a thin veneer, a pretense, covering our true nature. We are apes who drive cars and eat with knives and forks.
Perhaps religion is a way of adding some balance to our lives. Both competition and cooperation have uses in producing more goods and services. Religion puts the emphasis on the cooperation aspect.
When the world experiences the first day of endless days without 3 meals, nobody comes to the rescue. Not even Bono.
Agreed. I’m not convinced that a collapse would happen within a few weeks, but your absolutely right. We, as humans, have the capacity to turn mass deaths into some reasoned-rational-afterthought-of-those-poor-basterds.
Dan Carlin (Hardcore History) in recent audio podcast about the Mongols, discussed how we tend to overlook the absolute destruction of thousands (upon thousands?) at the hands of the Mongols as some “clearing of the forest to make way for new growth”. In each and every one of those villages annihilated there may have been a Mozart or a Einstein. And not only the Mongols. Every society has been performing genocide in some manner since the beginning of time.
If we could plot each genocide as a meteor strike on a map of the world, then what would that map look like? Make the radius of each crater the number of people killed and it would resemble the surface of the moon.
The surviving religions will concoct a story to explain the coming collapse. Each religion will rework its tenets to explain how this was inevitable, maybe due to the “wickedness” that those societies had achieved. Which may be total BS.
Recently, I was discussing collapse (as I usually due in a offhand manner) with a lady who is Hindu, and she mentioned that societies collapse due to wickedness. I am not familiar with the Hindu religion so I am not sure where this comes from. But, more importantly, it dawned on me that all religions tell a similar story of wickedness and then collapse. Perhaps all these collapses were simply due to “overshooting the carrying capacity” of the region? To an outsider or a person living on the periphery, they would have no understanding to explain what happened, except to put in the context of their religion.
We are animals with animal instincts, and big brains. Civilization is but a thin veneer, a pretense, covering our true nature. We are apes who drive cars and eat with knives and forks.
On a lighter note,
The Ten Commandants do not include “Thou shall not eat thy neighbor”.
I really, sweet Jesus, hope that it doesn’t come down to that .
I forgot to put in his link. shortonoil on Sat, 20th Dec 2014 10:00 am
Naimi said the fall in oil prices was temporary.
Most likely the recent huge decline we have seen is temporary. Our projections put the 2015 WTI oil price at $76/barrel:
The swings we are now seeing in prices is a function of the volatility that is growing in the market. The variance in prices between 2005 and 2013 is 412% greater than the variance in the prices between 1960 and 2004. The price of oil is becoming increasing unstable.
This increased volatility began when conventional crude peaked in 2005, and has increased as lower quality crudes began to enter the market as substitutes. Lower quality crudes have lower per unit energy delivery capabilities. The petroleum market is primarily long term driven by inventory levels, and this has not taken into consideration the decreasing economic impact of a lower quality crude. A lower quality crude is very poor at promoting the increasing economic activity needed to increase the demand for petroleum. That is, the energy delivered from petroleum drives its own demand. Swings in prices appear when inventory levels increase, but compensatory increases in economic activity don’t follow.
The energy producers will most likely see some relief this coming year from the the present very low prices. However, the days of $100/barrel oil are gone forever; depletion of the world’s petroleum reserves ensures that conclusion.
Do you understand what shortonoil means when he says that half of the tight oil in the US is being used to produce tight oil? I’ve read the statement a couple of times, but I haven’t seen any calculations.
Constructing roads, transporting rigs, transporting millions of tonnes of fracking sand and water, transporting the oil and then refining it uses a lot of energy. In the end EROI would be very poor. But its a bubble operating on debt and it masked the reality. What can’t go on for ever eventually ceases. That is what is probably happening with the shale fracking business.
The hillsgroup study says that in 2012 we reached the half way point for oil. It than took one half of a barrel of oil to produce a barrel of oil. It would now take more than that because it would now take slightly more than a half of a barrel of oil to produce a barrel of oil. I think that this energy calculation is for world wide oil production, not just for tight oil. I am not a mathematician or an engineer. Shortonoil does not have much respect for what they are producing in the shale fields and he is rather blunt about it. As a personal comment, I would say that none of us currently alive have lived though a de-industrializing
process and so are learning how this is modeled. I am currently of the belief that as this unfolds we will see job loss and the economy shrink at a rate as fast or faster than the oil supply and so the price of oil will continually drop. This is what was not expected and is the scary thing about the future. Cheap, high grade oil creates expanding GDP. Low grade, expensive oil, even if the expense isn’t seen at the pump will create contracting GDP. Jay Hanson has been saying the same thing as Shortonoil for a long time and so does Gail as well although we all have different ways of saying it. http://www.jayhanson.org/loop.htm
If it takes one barrel of oil to produce two barrels of oil, doesn’t that mean that the EROEI (however they draw the boundaries) is only 2 to 1?
The way that Shortonoil puts it, it means that we are at the half way point for oil, which I would take to mean that half of the oil is still in the ground, although it would probably be too expensive to get all of it out. I think I would need Gail’s help in knowing the connections between EROEI and how many barrels it takes to get a barrel out of the ground. Mostly it means that net energy is going down. We as a world society still do not get this concept well. Wall street especially.
Antonio Turiel made some calculations upon WEO 2014 figures and found net oil energy to be already down.
I see that the EROEIs that Antonio used are as follows:
Conventional crude oil currently in production: 20
Conventional crude oil fields yet to be developed: 5
Conventional crude oil fields yet to be discovered: 3
Natural gas liquids: 5
LTO and other unconventional: 2
These may indeed be reasonable values selected by Antonio. My impression from reading EROEI literature is that there are no published numbers out that are that low for EROEI, for example for Natural gas liquids and for LTO. But I could be wrong.
Black is crude oil, light blue Fields to be Developped, blue Fields to be Found, Purple NGL, red LTO and yellow other unconventionals
I really do not like the use of EROEI for figuring out how much oil we can get out. To me, it measures tops of icebergs, but not at the same levels for different fuels. It is too narrowly defined to be very helpful; the real energy use is much higher. (This is why the minimum EROEI for society is said to be 5 or 10 or something like that.)
I noticed the last time I looked at thehillsgroup.org web site that they seemed to have two different levels–one based on EROEI and one that assumed much more energy use than EROEI would seem to suggest. If I understood what they were doing correctly, it was the higher level they were using, so somehow they were correcting for the understatement inherent in EROEI calculations.
By the way, thehillsgroup.org web site does not seem to be up right now. It link says it needs renewal of the domain name.
“By the way, thehillsgroup.org web site does not seem to be up right now. It link says it needs renewal of the domain name.”
It looks like “just in time renewal:”
So they should be good to go for another year. However, I get a blank page, which sometimes happens when DNS goes kerfluey.
I am a big fan of Shortonoil’s commets. He is mostly saying the same thing as Gail, although probably less diplomatically.
Agreed. I think is bona fide .
shortonoil on Sat, 20th Dec 2014 6:07 pm
As long as we continue to listen to idiotic statements like the one above, the deeper the hole will become that we are digging ourselves into.
I seriously doubt that the Saudi Oil Minister believes what he has spoken. The Saudis are now trying to protect their oil market, as it is about the only thing that they produce other than sand. The world has been asking OPEC to cut its production to save the world’s other high cost producers. The Saudis know that that this would be an exercise in futility because as next year rolls around they would just be back asking for another handout. It is no wonder that Russia, nor anyone else has agreed to such a ridiculous suggestion.
Russia, and OPEC are merely working in their own best interests, and they know that the most economical route for them to take is to just let prices fall until the dead wood has been cleared out. Naimi is saying in a diplomatic fashion, “if you want to run a bunch of worthless wells in some North Dakota cow pasture that is your business, Just don’t ask us to pay for it.”
Can’t say I blame him.
This seems crazy to me. If your cost per barrel is $20, is it better to produce 5 million barrels and sell for $90, or produce 10 million barrels and sell for $40?
Why is maintaining market share more important than making more money in both the short and long term?
As oil and natural gas deplete, suppliers will attempt to charge as much as the market will bear. That – in turn – will force demand destruction as higher prices and availability curb consumption. Unfortunately, since American oil demand per household has been relatively inelastic since 1982, demand destruction can only occur if the economy is forced into a recession, and/or Americans make substantial changes to their lifestyle.
The world oil market has become relatively inelastic in the sense that large increases in upstream investment no longer produce contemporaneous increases in supply.
So cutting supply would be absolutely disastrous in a world coming to grips with (at the moment) slowly declining supply of conventional oil. Ethanol and other high priced subsidized products have been masking the decline. Now demand destruction has taken a grip, it will take herculean efforts to arrest it.
Who says we should try to stop demand destruction?
If there is a supply 1 million barrels per day in excess of current demand, cutting production should not have a negative impact. Instead, by glutting the market now, it kills the Capex needed for future production, which will lead to a sudden collapse in supply in a couple years.
Slowly rising prices, or even stable prices at a higher point, would work better to change people’s habits; drops in oil prices encourage people to continue driving alone in a 2 ton, v-8 powered SUV at high speeds. Fluctuating prices make it harder for people to make long term decisions.
The real cost in Saudi Arabia is really the $90 per barrel, because there is a need for the tax revenue that can only be supported by the high oil price. This is true in the other OPEC countries and Russia as well, and even to a greater extent. Looking only at the lifting cost of getting the oil out of the ground gives a misleading impression of costs.
It is hard to blame anyone for operating in their own best interests.
Note Jay Hanson’s comments in this link http://www.jayhanson.org/loop.htm
OPEC now has decreasing power, as its weakest members are desperate for more revenue.
I would repeat, it seems early to make too much of this fall in the price of oil. As has been said before, for the time being, it is mostly a symptom of financial bets. In order to reflect deflation happening in the real world, it mustn’t go back up too soon, too much.
It would be kind of embarassing to see it at 100$ in 2015/2016, along with a stable world economy, perhaps a little more QE, and then having to switch the argument back to the other side of the coin – collapse some years down the road because of “real” peak oil.
I see deflation baked in the cake, but with my own money, I wouldn’t like to bet on any specific way there.
I think you are wrong. We are dealing with oscillating oil prices, as we approach limits. Either high or low prices are a problem.
The current drop in prices reflects a slowdown in the world economy, because it cannot operate on $100 barrel oil, without a lot of QE and rising debt levels. The slowing world economy is concerning, because it probably cannot be reversed, and will “pick up steam” as the effects of the low oil price flow back through the system.
Let’s wait and see. A 50% drop in a few months time is huge – if it doesn’t rebound.
Oscillations have been a part of the oil market historically with high prices causing recessions, causing demand to drop resulting in lower prices. The lower prices spurred growth and we began the dance all over again.
This time is not the same.
Even $50 oil is too expensive so the dance has stopped. All that the lower price of oil is doing now is killing the oil all new projects and knocking existing projects offline.
We may very well see the price of oil increase, but it will not be driven by economic growth rather it will be driven by lack of supply. I think that any price spike would short-lived, something not dissimilar to the 2008 spike to $147, except this time it tears the global economy apart.
Shale is a one-hit wonder. I don’t think we will enjoy that respite next time around.
The assumption here is that low prices will really choke off global oil production in a significant way, and that this could set the scene for a big crash of the economy. Well, at least the rubber would meet the road again, in our time of debt and credit.
But I repeat, price must stay low sufficiently long, so that expectations of a price recovery go away for good. Not some weeks. More like 1 or 2 years. The oil price has done crazy things in the past, and we are in uncharted territory anyway.
I agree we are in uncharted territory. The question is whether the damage to the rest of the economy will be sufficient this time, so that there can be no significant bounce. Kinds of damage I can see is derivatives and loan failures being sufficiently bad that the bank structure cannot handle them; international trade is damaged, not just for a few countries, but for very many; eventually government structures and ability to make and sell electricity are damaged.
If the bounce back can come sufficiently soon, maybe there will be another small rise, before oil prices fall again.
It’s like trying to balance an elephant on a pinhead. China just announced it would support Russia and all those economies in trouble whilst scaling back US debt purchases.
Basically it’s the end of the road for America. I’m hearing reports of US national guard/military exercises up and down America lately in preparation for “something” big.
Can anyone verify these reports “States side”?
Stay safe as everything collapses
Pentagon deploys tanks in Lativa, 300km from Russia’s border
Russian Roulette: Taxpayers Could Be on the Hook for Trillions in Oil Derivatives
Posted on December 19, 2014 by Ellen Brown
“The sudden dramatic collapse in the price of oil appears to be an act of geopolitical warfare against Russia. The result could be trillions of dollars in oil derivative losses; and the FDIC could be liable, following repeal of key portions of the Dodd-Frank Act last weekend.
As Snyder observes, the recent drop in the price of oil by over $50 a barrel – a drop of nearly 50% since June – was completely unanticipated and outside the predictions covered by the banks’ computer models. The drop could cost the big banks trillions of dollars in losses. And with the repeal of the Lincoln Amendment, taxpayers could be picking up the bill.”
Thanks for the link!
Dear Gail and All
Here are some references to different ways of living. I make no pretense that this is a comprehensive compilation…it just happens to be interesting books I have read.
William Powers has written two books on simple living.
The older book is Twelve by Twelve, about his time spent in a 144 sq ft. house in rural North Carolina. The second is New Slow City, about the time he and his wife spent living in a micro-apartment in New York City. Both books are roughly about living well without spending much money…and consequently not having to work like crazy. At the end of New Slow City, he and his wife have decided to homestead in Bolivia I guess his next book will tell us how that worked out.
One of his wake-up calls in New Slow City is returning to Manhattan after Sandy, and seeing the dysfunction, and absorbing the notion of how fragile it all is.
I have frequently recommended Azby Brown’s book on Edo Japan. This is a pretty detailed picture of life on a farm, a carpenter in Edo city, and a samurai in Edo city. We can think of it as a picture of what is possible in terms of a peaceful, sophisticated, literate society emerging out of centuries of warfare. With very little in the way of mineral resources and no fossil fuels and minimum foreign trade.
Douglas Stevenson is the author of The Farm, Then and Now: A Model for Sustainable Living. The Farm was founded by refugees from San Francisco in nineteen seventy one. The Farm is registered as a church, and had a strong spiritual component from the beginning, which continues to this day. The Farm owes its existence to a revolt against the violent, aimless, delusional, and destructive modern world…not much has changed in that regard between 1970 and 2014. You will see that The Farm always tended to be in the forefront of adopting new technologies, such as radio and video and computers.
Stevenson’s summary of the key concepts and definitive actions which ‘are as relevant today as they were when The Farm was first created’:
‘Use nature as a focal point, a means to bring peace and a connection to something greater than yourself directly into your consciousness and existence. Pursue right livelihood and develop a way to support yourself that brings satisfaction, makes you feel whole and has a positive impact on the world. Consider acquiring land, the base for a home that is not controlled by a bank, moving you one step closer to independence, a buffer from the stresses that can distract us from that which is truly important. Consider acquiring land, as a way to grow food, to know its source, to touch the earth, a gentle reminder of life’s changes and cycles. Make a deliberate effort to find community and use it as a way to both receive and offer support to a wider network of family and friends.’
Nicole Foss blurb: This is a fascinating inside look at an ecovillage which has endured for decades, maturing from its initial foundation and ad hoc arrangements to become a skilled group of people living in tune with nature and forming an integral part of the rural economy of the area. Douglas Stevenson clearly lays out the challenges faced by The Farm and how these were met over many years. This is essential information needed to get new ecovillages off on the right foot from the beginning.
Albert Bates blurb: Douglas Stevenson has woven together an insider’s look at The Farm, holding nothing back. For anyone who may have fantasized what might have happened if they had just gone off and joined a hippie commune, here it is: the good, the bad, and the sublimely naive.
For readers of this blog, I would say that there is a lot more spiritual concern in Stevenson’s book, a great deal of concern about how one actually makes a living out in the country in the late 20th and early 21st centuries, less concern about the imminent collapse of civilization, and uncertainty about how The Farm might actually achieve ecological sustainability in a world of depleting resources and climate instability. At one point, Stevenson says, in my paraphrase, ‘wherever you find yourself, do the best you can’. So, for example, it is clear that the spread out community is more dependent on vehicles than Stevenson would like, but he also notes that new people coming in want even more isolation…a house in the woods with no neighbors nearby. This is a cultural change since 1970, and Stevenson doesn’t know how The Farm should respond. For example, he says that ‘The Future Farm is not a piece of land in Tennessee. It lives in the heart of every person who has visions of a green, sustainable, peaceful planet.’ How to reconcile that idea with people who are fleeing what they see as disaster in the cities and want maximum separation.
In terms of homesteaders, the best books I know were written long ago by Helen and Scott Nearing. They were not concerned about Peak Oil or Peak Resources or Limits to Growth or Nuclear Armageddon, but they did wrestle with issue such as bank debt and making subsistence agriculture actually work. I have a suspicion that touring David Holmgren’s place in Australia would be an excellent overview of what is possible. So far as I know, there are no books or videos which give a comprehensive overview.
THanks for your list.
Regarding who is in control (or attempting to), it could very well be the “worst” of us, since the “bad” folks appear to be the winners of the fights resulting of inevitably repeated overshoots, as explained by Jay Hanson in this article;
“Overshoot Loop – Evolution under the Maximum Power Principle”
Note there’s a link in note 2 to a 7 pages paper by S.N. Salthe, published in 2010 in The Journal of Natural and Social Philosophy(!): “Maximum Power and Maximum Entropy Production – Finalities in Nature”
Other interesting insights about energy, economics and politics in his website (formerly Dieoff), as well as many links (of which one to Ourfiniteworld):
This fits pretty well with FN’s argument that the will to power is the essence of reality.
Jay argues that Nature tends to maximize power, that there is no free will and we are hard wired, and that power is toward a “purpose”.
That all raises the question of whether all that has happened, the rise and fall of civilization, is in fact not only inevitable but is what Nature has aimed at the whole time.
The will to power has expressed itself in civilization and has sublimated itself in art. Arguably the western arts and sciences have already passed their pinnacle.
Certainly Hegel argued that the art forms of music, painting and literature had already been perfected. Then Nature has succeeded in its score and, satisfied, ends the concert.
We tend to think that the fall of civilization is a catastrophe, because that is how we are wired to think, but perhaps Nature has accomplished its purpose and we now furiously work up to the great crescendo.
It is a matter of perspective. Maybe we should celebrate with Nature all that has happened through the ages and the final outpouring that we now experience.
Or perhaps a slow, brooding, contemplative movement comes next, a middle movement of the great symphony of Nature. Or a Bruckner Adagio. Who knows?
Thanks for the Bruckner symphony, but my understanding of what I could read on Jay Hanson’s website is quite different of your interpretation:
– he doesn’t describe “Nature’s purpose”, but the effects of “the arrow of Time” (aka Entropy),
– this is not how we’re hardwired to think*, but to behave (mindlessly). Our consciousness of those processes could have helped us prevent their bad outcomes (eg abandoning capitalism and using democratic politics instead).
*: my interpretation is that individually, some of us can think differently, maybe also in small communities, but collectively we’re doomed to behave like any other species, ie rush for power. (some species are much wiser than us, from that point of view; but our greater power allowed us to wipe them off, often not even paying attention)
Jay Hanson seems to realize that we’ll never be able to extend this consciousness to the whole humanity, and anyway it’s too late now because we have passed the tipping point. So there’s no other option than collapse, globally this time due to our deep interconnectedness.
Stefeun, yes that is correct, he discusses power as purposeful in regard to the single organism and its evolution, “power is energy dissipation for a purpose”.
I set a grand spin on that, that the general tendency of Nature to maximise power has a general purpose toward which evolution is aimed, the construction of civilization and its culmination in perfect art.
It is a secular spin on the old cosmology where the creation exists for the purpose of the glory of God, here rather the satisfaction of the will to power in its aesthetic sublimation.
Perhaps Jay envisages small community post-collapse but even so he admits the unavoidable general tendency, “humans have never been able to intentionally-avoid collapse because fundamental system-wide change is only possible after the collapse begins.”
So I put the two together, humans cannot resist the culmination of Nature’s purpose, rather we are a vital agent of that purpose and so we should celebrate the culmination and all that has led up to it.
I think that my spin has the advantage of cheerful satisfaction, while Jay’s article could be read as hopeless or miserable.
I think we have already been experiencing the slow movements. As oil prices drop, we move toward the final act.
I found the first of these links most interesting. http://www.jayhanson.org/loop.htm
I agree with many of Gail’s ideas…but…I have become numb to the continual (since ~2005) presentations of the oil production ‘shark-fin’ graphs, almost invariably depicting the ‘falling down the cliff/slope’ as occurring ~ one year in the future. That type of fall-off may occur (vice a more gradual slope, or a ‘terraced’ or ‘step-down’ plot, but I doubt it will be 2016. The continual postings of these ‘one-year out’ ‘cliff’ graphs gives the PO community an air of ‘the boy who cried wolf’.
Remember Cassandra was right.
And the wolf finally came… at an unexpected moment.
In her 2015 forecast, Gail should highlight the major changes that happened since 2008: shale boom, debt boom, proxy-wars boom, etc..
I’m reposting this.
Stein’s Law: ” Things that can’t go on forever eventually stop”
Two lemmas ( mine — Interguru’s Lemmas )
1) They go on a lot longer than you think they can.
2) They stop suddenly without warning. Even those who see it coming have no idea when.
Our life is more and more based on the selective stimuluses from the side of the states:
They constantly raise taxes and set various direct or indirect fees, provide loans with ever decreasing interest rates: the result will come unexpectedly, because some of the collected money is used to selectively stimulate the society into oblivion (e. g. nowadays in Slovakia, we have trains for free for certain groups of the society – students, retired etc.).
Its the stimuluses that hide the truth, that also caused real estate bubble…
Maybe and maybe not. Wait until 2017 or 2018 to decide. The financial system is a major weak link.