How does the economy really work? In my view, there are many erroneous theories in published literature. I have been investigating this topic and have come to the conclusion that both energy and debt play an extremely important role in an economic system. Once energy supply and other aspects of the economy start hitting diminishing returns, there is a serious chance that a debt implosion will bring the whole system down.
In this post, I will look at the first piece of this story, relating to how the economy is tied to energy, and how the leveraging impact of cheap energy creates economic growth. In order for economic growth to occur, the wages of workers need to go farther and farther in buying goods and services. Low-priced energy products are far more effective in producing this situation than high-priced energy products. Substituting high-priced energy products for low-priced energy products can be expected to lead to lower economic growth.
Trying to tackle this topic is a daunting task. The subject crosses many fields of study, including anthropology, ecology, systems analysis, economics, and physics of a thermodynamically open system. It also involves reaching limits in a finite world. Most researchers have tackled the subject without understanding the many issues involved. I hope my analysis can shed some light on the subject.
I plan to add related posts later.
An Overview of a Networked Economy
The economy is a networked system of customers, businesses, and governments. It is tied together by a financial system and by many laws and customs that have grown up over the years. I represent the economic network as a child’s toy made of sticks that connect together, but that can, if disturbed in the wrong way, collapse.
Figure 1. Dome constructed using Leonardo Sticks
The economy is a self-organized system. In other words, it grew up gradually over time, one piece at a time. New businesses were added and old ones disappeared. New customers were added and others left. The products sold gradually changed. Governments gradually added new laws and removed old ones. As changes were made, the system automatically re-optimized for the changes. For example, if one business raised its price on a product while others did not, some of the customers would move to the businesses selling the product at a lower price.
The economy is represented as hollow because, as products become obsolete, the economy gradually adapts to the replacement product and loses support for earlier products. An example is cars replacing horse and buggy in the United States. There are fewer horses today and many fewer buggy manufacturers. Cities generally don’t have places to leave horses while shopping. Instead, there are many gasoline stations and parking lots for cars.
Because of the way an economy adapts to a new technology, it becomes virtually impossible to “go backwards” to the old technology. Any change that is made must be small and incremental–adding a few horses at the edge of the city, for example. Trying to add very many horses would be disruptive. Horses would get in the way of cars and would leave messes on the city streets.
The Economy as a Complex Adaptive System and Dissipative Structure
Systems analysts would call a system such as the economy a complex adaptive system, because of its tendency to grow and evolve in a self-organizing manner. The fact that this system grows and self-organizes comes from the fact the economy operates in a thermodynamically open system–that is, the economy receives energy from outside sources, and because of this energy, can grow and become more complex. The name of such a system from a physics perspective is a dissipative structure. Human beings, and in fact all plants and animals, are dissipative structures. So are hurricanes, galaxies, and star formation regions. All of these dissipative systems start from small beginnings, grow, and eventually collapse and die. Often they are replaced by new similar structures that are better adapted to the changing environment.
The study of the kinds of systems that grow and self-organize is a new one. Ilya Prigogine was awarded the Nobel Prize in Chemistry in 1977 for his pioneering work on dissipative systems. One writer (in French) about the economy as a dissipative structure is François Roddier. His book, published in 2012, is called Thermodynamique de l’evolution.
Why Energy is Central to the Economy
If the economy is a dissipative system, it is clear that energy must be central to its operation. But suppose that we are coming from a step back, and trying to show that the economy is an energy-based system that grows as more external energy is added.
Let’s start even before humans came onto the scene. All plants and animals need energy of some kind so that the organism can grow, reproduce, move, and sense changes to the environment. For plants, this energy often comes from the sun and photosynthesis. For animals, it comes from food of various kinds.
All plants and animals are in competition with other species and with other members of their own species. The possible outcomes are
- Win and live, and have offspring who might live as well
- Lose out and die
Access to adequate food (a source of energy) is one key to winning this competition. Outside energy can be helpful as well. The use of tools is as approach that is used by some types of animals as well as by humans. Even if the approach is as simple as throwing a rock at a victim, the rock amplifies the effect of using the animal’s own energy. In many cases, energy is needed for making a tool. This can be human energy, as in chipping one rock with another rock, or it can be heat energy. By 70,000 years ago, humans had figured out that heat-treating rock made it easier to shape rocks into tools.
A bigger step forward for humans than learning to use tools–in fact, what seems to have set them apart from other animals–was learning to use fire. This began as early as 1 million years ago. Controlled use of fire had many benefits. With fire, food could be cooked, cutting the amount of time needed for chewing down drastically. Foods that could not be eaten previously could be cooked and eaten, and more nutrition could be obtained from the foods that were eaten. The teeth and guts of humans gradually got smaller, and brains got larger, as human bodies adapted to eating cooked food.
There were other benefits of being able to use fire. With time freed up from not needing to chew as long, there was more time available for making tools. Fire could be used to keep warm and thus expand the range where humans could live. Fire could also be used to gain an advantage over other animals, both in hunting them and in scaring them away.
Humans were incredibly successful in their competition with other species, killing off the top carnivore species in each continent as they settled it, using only simple tools and the burning of biomass. According to Paleontologist Niles Eldridge, the Sixth Mass Extinction began when humans were still hunter-gatherers, when humans first moved out of Africa 100,000 years ago. The adverse impact of humans on other species grew significantly greater, once humans became farmers and declared some plants to be “weeds,” and selected others for greater use.
In many ways, the energy-based economy humans have built up over the years is simply an approach to compensate for our own feeble abilities:
- Need for warm temperature–clothing, houses, heat when cold, air conditioning if hot
- Need for food–metal tools, irrigation, refrigeration, fertilizer, herbicides, pesticides
- Knowledge/thinking ability of humans–books, schools, Internet
- Mobility–airplanes, cars, trucks, ships, roads
- Vulnerability to germs–medicine, sanitation
A key component in any of these types of adaptations is energy of some appropriate kind. This energy can come in various forms:
- Embodied energy stored up in tools and other capital goods that can be reused later. Some of the energy in making these tools is human energy (including human thinking capacity), and some of this is energy from other sources, such as heat from burning wood or another fuel.
- Human energy–Humans have many abilities they can use, including moving their arms and legs, thinking, speaking, hearing, seeing, and tasting. All of these are made possible by the energy that humans get from food.
- Energy from animals – Dogs can help with hunting and herding; oxen can help with plowing; horses can be ridden for transportation
- Energy from burning wood and other forms of biomass, including peat moss
- Energy from burning fossil fuels (coal, natural gas, or oil)
- Electricity produced in any number of ways–hydroelectric, nuclear, burning coal or natural gas, and from devices that convert wind, solar, or geothermal energy
- Wind energy – Used in sail boats and in wind powered devices, such as windmills to pump water. Wind turbines (with significant embodied energy) also generate electricity.
- Solar energy – Most energy from the sun is “free”. It keeps us warm, grows food, and evaporates water, without additional “help.” There are also devices such as solar PV panels and solar hot water heaters that capture energy from the sun. These should perhaps be classified as tools with significant embodied energy.
One key use of supplemental energy is to reduce the amount of human labor needed in farming, freeing-up people to work at other types of jobs. The chart below shows how the percentage of the population working in agriculture tends to drop as the amount of supplementary energy rises.
Figure 2. Percent of Workforce in Agriculture based on CIA World Factbook Data, compared to Energy Consumption Per Capita based on 2012 EIA Data.
The energy per capita shown on Figure 2 is includes only energy sources that are bought and sold in markets, and thus that can easily be counted. These would include fossil fuel energy and electricity made from a variety of sources (fossil fuels, hydroelectric, nuclear, wind, solar PV). It does not include other sources of energy, such as
- Embodied energy in previously made devices
- Human energy
- Animal energy
- Locally gathered dung, wood, and other biomass.
- Free solar energy, keeping people warm and growing crops
Besides reducing the proportion of the population needed to work in agriculture, the other things that “modern” sources of energy do are
- Allow many more people to live on earth, and
- Allow those people to have much more “stuff”–large, well-heated homes; cars; lighting where desired; indoor bathrooms; grocery stores filled with food; refrigeration; telephones; television; and the Internet.
Figure 3 below shows that human population has risen remarkably since the use of modern fuels began in quantity about 200 years ago.
Figure 3. World population from US Census Bureau, overlaid with fossil fuel use (red) by Vaclav Smil from Energy Transitions: History, Requirements, Prospects.
Besides more and better food, sanitation, and medicine, part of what allowed population to rise so greatly was a reduction in fighting, especially among nearby population groups. This reduction in violence also seems to be the result of greater energy supplies. In the animal kingdom, animals similar to humans such as chimpanzees have territorial instincts. These territorial instincts tend to keep down total population, because individual males tend to mark off large areas as territories and fight with others of their own species entering their territory.
Humans seem to have overcome much of their tendency toward territoriality. This has happened as the widespread availability of fuels increased the use of international trade and made it more advantageous for countries to cooperate with neighbors than to fight with them. Having an international monetary system was important as well.
How the System of Energy and the Economy “Works”
We trade many products, but in fact, the “value” of each of these products is very much energy related. Some that don’t seem to be energy-related, but really are energy-related, include the following:
- Land, without buildings – The value of this land depends on (a) its location relative to other locations, (b) the amount of built infrastructure available, such as roads, fresh water, sewer, and grid electricity, and (c) the suitability of the land for growing crops. All of these characteristics are energy related. Land with good proximity to other locations takes less fuel, or less time and less human energy, to travel from one location to another. Infrastructure is capital goods, built up of embodied energy, which is already available. The suitability of the land for growing crops has to do with the type of soil, depth of the topsoil, the fertility of the soil, and the availability of fresh water, either from the sky of from irrigation.
- Education – Education is not available to any significant extent unless workers can be freed up from farming by the use of modern energy products. Students, teachers, and those writing books all need to have their time freed up from working in agriculture, through advanced energy products that allow fewer workers to be needed in fields. Howard T. Odum in the Prosperous Way Down wrote about education reflecting a type of embodied energy.
- Human Energy – Before the advent of modern energy sources, the value of human energy came largely from the mechanical energy provided by muscles. Mechanical energy today can be provided much more cheaply by fossil fuel energy and other cheap modern energy, bringing down the value of so-called “unskilled labor.” In today’s world, the primary value humans bring is their intellectual ability and their communication skills, both of which are enhanced by education. As discussed above, education represents a type of embodied energy.
- Metals – Metals in quantity are only possible with today’s energy sources that power modern mining equipment and allow the huge quantities of heat needed for refining. Before the use of coal, deforestation was a huge problem for those using charcoal from wood to provide the heat needed for smelting. This was especially the case when economies tried to use wood for heating as well.
Two closely related concepts are
- Technology – Technology is a way of bringing together physical substances (today, often metals), education, and human energy, in a way that allows the production in quantity of devices that enhance the ability of the economy to produce goods and services cheaply. As I will discuss later, “cheapness” is an important characteristic of anything that is traded in the economy. As technology makes the use of metals and other energy products cheaper, extraction of these energy-related items increases greatly.
- Specialization – Specialization is used widely, even among insects such as bees and ants. It is often possible for a group of individuals to obtain better use of the energy at their disposal, if the various individuals in the group perform specialized tasks. This can be as simple as at the hunter-gatherer level, when men often specialized in hunting and women in childcare and plant gathering. It can occur at advanced levels as well, as advanced education (using energy) can produce specialists who can perform services that few others are able to provide.
Technology and specialization are ways of building complexity into the system. Joseph Tainter in the Collapse of Complex Societies notes that complexity is a way of solving problems. Societies, as they have more energy at their disposal, use the additional energy both to increase their populations and to move in the direction of greater complexity. In my Figure 1 (showing my representation of an economy), more nodes are added to the system as complexity is added. In a physics sense, this is the result of more energy being available to flow through the economy, perhaps through the usage of a new technology, such as irrigation, or through using another technique to increase food supply, such as cutting down trees in an area, providing more farmland.
As more energy flows through the system, increasingly specialized businesses are added. More consumers are added. Governments often play an increasingly large role, as the economy has more resources to support the government and still leave enough resources for individual citizens. An economy in its early stages is largely based on agriculture, with few energy inputs other than free solar energy, human labor, animal labor, and free energy from the sun. Extraction of useful minerals may also be done.
As modern energy products are added, the quantity of energy (particularly heat energy) available to the economy ramps up quickly, and manufacturing can be added.
Figure 4. Annual energy consumption per head (megajoules) in England and Wales 1561-70 to 1850-9 and in Italy 1861-70. Figure by Wrigley
As these energy products become depleted, an economy tends to shift manufacturing to cheaper locations elsewhere, and instead specialize in services, which can be provided with less use of energy. When these changes are made, an economy becomes “hollowed out” inside–it can no longer produce the basic goods and services it could at one time provide for itself.
Instead, the economy becomes dependent on other countries for manufacturing and resource extraction. Economists rejoice at an economy’s apparently lesser dependence on fossil fuels, but this is an illusion created by the fact that energy embodied in imported goods is never measured or considered. The country at the same time becomes more dependent on suppliers from around the world.
The way the economy is bound together is by a financial system. In some sense, the selling price of any product is the market value of the energy embodied in that product. There is also a cost (which is really an energy cost) of creating the product. If the selling cost is below the cost of creating the product, the market will gradually rebalance, in a way that matches goods and services that can be created at a break-even cost or greater, considering all costs, even indirect ones, such as taxes and the need for capital for reinvestment. All of these costs are energy-related, with some of this energy being human energy.
Both (a) the amount of goods and services an economy produces and (b) the number of people in an economy tends to grow over time. If (a), that is, the amount of goods and services produced, is growing faster than (b), the population, then, on average, individuals find their standard of living is increasing. If the reverse is the case, individuals find that their standard of living is decreasing.
This latter situation, one of a falling standard of living, is the situation that many people in “developed” countries find themselves in now. Because of the networked way the economy works, the primary way that this lack of goods and services is transmitted back to workers is through falling inflation-adjusted wages. Other mechanisms are used as well: fewer job openings, government deficits, and eventually debt defaults.
If the situation is reversed–that is, the economy is producing more goods and services per capita–the way this information is “telegraphed” back to the people in the economy is through a combination of increasing job availability, rising inflation adjusted-wages, availability of new inexpensive products on the market place, and government surpluses. In such a situation, debt is likely to become increasingly available because of the apparently good prospects of the economy. The availability of this debt then further leverages the growth of the economy.
External Energy Products as a Way of Leveraging Human Energy
Economists tell us that value comes from the chain of transactions that are put in place whenever one of us buys some kind of good or service. For example, if I buy an apple from a grocery store, I set up a chain of payments. The grocer pays his employees, who then buy groceries for themselves. They also purchase other consumer goods, pay income taxes, and perhaps buy oil for their vehicles. The employees pay the stores they buy from, and these payments set up new chains of transactions indirectly related to my initial purchase of an apple.
The initial purchase of an apple may help also the grocer make a payment on debt (repayment + interest) the store has, perhaps on a mortgage. The owner of the store may also put part of the money from the apple toward paying dividends on stock of the owners of the grocery story. Presumably, all of the recipients of these amounts use the amounts that initially came from the purchase of the apple to pay additional people in their spending chains as well.
How does the use of oil or coal or even the use of draft animals differ from simply creating the transaction chain outlined above? Let’s take an example that can be made with either manual labor plus some embodied energy in tools or with the use of fossil fuels: shoes.
If a cobbler makes the shoes, it will likely take him quite a long time–several hours. Somewhere along the line, a tanner will need to tan the hide in the shoe, and a farmer will need to raise the animal whose hide was used in this process. Before modern fuels were added, all of these steps were labor intensive. Buying a pair of shoes was quite expensive–say the equivalent of wages for a day or two. Boots might be the equivalent of a week’s wages.
The advantage of adding fuels such as coal and oil is that it allows shoes to be made more cheaply. The work today is performed in a factory where electricity-powered machines do much of the work that formerly was done by humans, and oil-powered vehicles transport the goods to the buyer. Coal is important in making the electricity-powered machines used in this process and may also be used in electricity generation. The use of coal and oil brings the cost of a pair of shoes down to a much lower price–say the equivalent of two or three hours’ wages. Thus, the major advantage of using modern fuels is that it allows a person’s wages to go farther. Not only can a person buy a pair of shoes, he or she has money left over for other goods.
The fact that the wage-earner can now buy additional goods with his income sets up additional payment chains–ones that would have not been available, if the person had spent a large share of his wages on shoes. This increase in “demand” (really affordability) is what allows the rest of the economy to expand, because the customer has more of his wages left to spend on other goods. This sets up the growth situation described above, where the total amount of goods and services in the economy expands faster than the population increases.
Thus, the big advantage of adding coal and oil to the economy was that it allowed goods to be made cheaply, relative to making goods with only human labor. In some sense, human labor is very expensive. If a person, using a machine operated with oil or with electricity made from coal can make the same type of goods more cheaply, he has leveraged his own capabilities with the capabilities of the fuel. We can call this technology, but without the fuel (to make the metal parts used in the machine, to operate the machinery, and to transport the product to the end user), it would not have been possible to make and transport the shoes so cheaply.
All areas of the economy benefit from this external energy based approach that essentially allows human labor to be delivered more efficiently. Wages rise, reflecting the apparent efficiency of the worker (really the worker + machine + fuel for the machine). Thus, if a worker has a job in the economy affected by this improvement, he may get a double benefit–higher wages and plus the benefit of the lower price of shoes. Governments will get higher tax revenue, both on wages (because of the new value chain and well as the higher wages from “efficiency”), and on taxes paid relating to the extraction of the oil, assuming the extraction is done locally. The additional government revenue can be used on roads. These roads provide a way for shoe manufacturers to deliver their goods to more distant markets, further enhancing the process.
What happens if the price of oil rises because the cost of extraction rises? Such a rise in the cost of extraction can be expected to eventually take place, because we extract the oil that is easiest and cheapest to extract first. When additional extraction is performed later, costs are higher for a variety of reasons: the wells need to be deeper, or in more difficult to access location, or require fracking, or are in countries that need high tax revenue to keep local populations pacified. The higher costs reflect that we are using are using more workers and more resources of all kinds, to produce a barrel of oil.
Some would look at these higher costs as a “good” impact, since these higher costs result in new payment chains, for example, related to fracking sand and other products that were not previously used. But the higher cost really represents a type of diminishing returns that have a very adverse impact on the economy.
The reason why the higher cost of oil has an adverse effect on the economy is that wages don’t go up to match this new set of oil production costs. If we look back at the previous example, it is somewhat like going part way back to making shoes by hand. Economists often remark that higher oil prices hurt oil importers. This is only half of the problem, though. Higher costs of oil production result in a situation where fewer goods and services are produced worldwide(relative to what would have otherwise been produced), because the concentrated use of resources by the oil sector to produce only a tiny amount more oil than was produced in the past. When this happens, fewer resources (including workers) are left for the rest of the world to produce other products. The growing use of resources by the oil sector is sort of like a growing cancer sapping the strength of a patient. Oil importing nations take a double “hit,” because they participate in the world drop in output of goods, and because as importers, they miss out on the benefits of extracting and selling oil.
Another way of seeing the impact of higher oil prices is to look at the situation from the point of view of consumers, businesses and governments. Consumers cut back on discretionary spending to accommodate the higher price of oil, as reflected in oil and food prices. This cutback triggers whole chains of cutbacks in other buying. Businesses find that a major cost of production (oil) is higher, but wages of buyers are not. They respond in whatever ways they can–trimming wages (since these are another cost of production), outsourcing production to a cheaper part of the world, or automating processes further, cutting more of the high human wages from the process. Governments find themselves saddled with more unemployment claims and lower tax revenue.
In fact, if we look at the data, we see precisely the expected effect. Wages tend to rise when oil prices are low, and lose the ability to rise when oil prices are high (Figure 5). The cut off price of oil where wages stop rising seems to be about $40 per barrel in the United States.
Figure 5. Average wages in 2012$ compared to Brent oil price, also in 2012$. Average wages are total wages based on BEA data adjusted by the CPI-Urban, divided total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.
What if oil prices are artificially low, on a temporary basis? The catch is that not all costs of oil producing companies can be paid at such low prices. Perhaps the cost of operating oil fields still in existence will be fine, and the day-to-day expenses of extracting Middle Eastern oil can be covered. The parts of the chain that get squeezed first seem to be least essential on a day to day basis–taxes to governments, funds for new exploration, funds for debt repayments, and funds for dividends to policyholders.
Unfortunately, we cannot run the oil business on such a partial system. Businesses need to cover both their direct and indirect costs. Low oil prices create a system ready to crash, as oil production drops and the ability to leverage human labor with cheaper sources of energy decreases. Raising oil prices back to the full required level is likely to be a problem in the future, because oil companies require debt to finance new oil production. (This new production is required to offset declines in existing fields.) With low oil prices–or even with highly variable oil prices–the amount that can be borrowed drops and interest costs rise. This combination makes new investment impossible.
If the rising cost of energy products, due to diminishing returns, tends to eliminate economic growth, how do we work around the problem? In order to produce economic growth, it is necessary to produce goods in such a way that goods become cheaper and cheaper over time, relative to wages. Clearly this has not been happening recently.
The temptation businesses face in trying to produce this effect is to eliminate workers completely–just automate the process. This doesn’t work, because it is workers who need to be able to buy the products. Governments need to become huge, to manage transfer payments to all of the unemployed workers. And who will pay all of these taxes?
The popular answer to our diminishing returns problem is more efficiency, but efficiency rarely adds more than 1% to 2% to economic growth. We have been working hard on efficiency in recent years, but overall economic growth results have not been very good in the US, Europe, and Japan.
We know that dissipative systems operate by using more and more energy until they reach a point where diminishing returns finally pushes them into collapse. Thus, another solution might be to keep adding as much cheap energy as we can to the system. This approach doesn’t work very well either. Coal tends to be polluting, both from an air pollution point of view (in China) and from a carbon dioxide perspective. Nuclear has also been suggested, but it has different pollution issues and can be high-priced as well. Substituting a more expensive source of electricity production for an existing source of energy production works in the wrong direction–in the direction of higher cost of goods relative to wages, and thus more diminishing returns.
Getting along without economic growth doesn’t really work, either. This tends to bring down the debt system, which is an integral part of the whole system. But this is a topic for a different post.
A Note on Other Energy Measures
The reader will note that in my analysis, I am using the cost (in dollars or other currency unit) of energy production, including indirect costs that are hard to measure, such as needed government funding from taxes, the cost of interest and dividends, and the cost of new investment. The academic world uses other metrics that purport to measure energy requirements. These do not measure the same thing.
Caution is needed in using these metrics; studies using these metrics often seem to recommend using a source of energy that is expensive to produce and distribute when all costs are considered. My analysis indicates that high-cost energy products promote economic contraction regardless of what their EROEI or Life Cycle Assessment results would seem to suggest.
LFTR, the Liquid Fluoride Thorium Reactor, is both the fastest way to reduce CO2 emissons by replacing fossil fuel boilers at power plants that run the turbines that are already hooked to the grid. Unlike Solar, Wind, or the others, no new transmission lines would be needed. In fact, because LFTR is scalable, it can be installed at points where the grid is already stressed, eliminating the need for more transmission lines.
If we add on the cost of fossil fuel development, delivery, reclamation, and insurance, a LFTR unit at the same site and scale has a better ROI to venture capital. Furthermore, when fracking output declines, we know OPEC is right there ready to jack the price. But that wont happen if LFTR is there to replace energy production. Because LFTR can operate at a fixed price ($0.03 to .05/kwhr) it’ll stabilize the cost of fossil fuels, and every other sector of the economy sees more predictable profits.
Except for the small prototype built at Oak Ridge in the 60s has anyone built one? I am a fan and disappointed with the delay.
Not to my knowledge. The Oak Ridge reactor was a good proof of concept, but there is still a lot of work to be done to get to a reactor design that is good for commercial use. I suspect that is one of the reasons that it wasn’t developed. Why sink the costs when the costs for working uranium reactors have already been sunk? It didn’t make for good bomb material either, due to U232 contamination.
But even if we installed thousands of the things, we would still have to worry about converting that energy into a form that allows for mobility to keep things running. IMO, reverse combustion would be required. I’m not saying that such a thing is technologically impossible, but we should have had the technology developed and the infrastructure for it going in at least a decade ago. Even if we managed to pull it off, it still does not solve the other problems with our modern society, i.e. general environmental degradation and the depletion of other resources.
I guess the point is that, even should we save some form of industrial society, it will not be without a lot of pain first, and we must learn to limit our growth, or mother nature will limit it for us, and she can be the harshest mistress of all.
“we must learn to limit our growth, or mother nature will limit it for us” Yes, exactly. This should be a major part of the discussion here at “Our Finite World”.
I think that the human race will need to feel the wrath of mother nature before it will seriously entertain such a discussion. IMO, we don’t need draconian population controls, we need a population that gets to see firsthand what their growth at all costs meme leads to. I will lay one thing out here though: Should we manage to retain some vestige of industrial civilization or even simply some of modern medicine, 3rd world countries should NOT get any of the benefits of developed countries.
NASA has nuclear engine design software its been using for years, and sent up many probes with nuclear engines that were never tested on Earth. 100% success rate. It’ll work for LFTR. Lets not forget the Oak Ridge shutdown had nothing to do with the performance of the reactor, and everything to do with Nixon getting to shut down what started out as JFK’s baby, which would have also exposed the fact other reactors were favored because he wanted bombs, and besides, both he, in CA and before him LBJ in Texas, wanted to protect oil industry profits.
“NASA has nuclear engine design software its been using for years, and sent up many probes with nuclear engines that were never tested on Earth.”
Sorry, claims like that are going to require citations, my friend.
To my knowledge, the only “nuclear engines” NASA has ever used were plutonium thermionic generators used for deep-space probes, where solar panels would be too far from the sun to work. These use the thermal energy released by spontaneous fission of plutonium to generate tiny amounts of electricity via bimetalic devices (thermocouples). They are horribly inefficient, but they work where the sun don’t shine. They are certainly not examples of technology that can be scaled up to the 2,000 gigawatt scale needed for large power projects, and they have nothing in common with LFTR technology.
I havta leave this thread cause I cant find Jan’s post to reply to. But Kirk Sorensen had a Ted talk about LFTR. Turns out, he was a NASA engineer looking for a way to power a moon base. No wind, no water, no geothermal, and no sun every two weeks. Somebody turned him on to the Oak Ridge work on the Liquid Fluoride Thorium Reactor.
Now, if LFTR had been shut down for safety, engineering, fabrication, or materials reasons the debunking would all make sense. But Nixon shut it down because 1- it was JFK’s baby. 2- it didnt produce the isotopes he wanted to build bombs with. 3- if developed, it’d produce power so cheaply it’d reduce oil profits. Which was still a big deal in his home state, California.
The good news was that Oak Ridge took the trouble to do a very careful tear down to identify any deterioration or other risks, and that Kirk was able to get a copy of that report (which I think is now online.) and plug it into the engineering tools we now have.
But it damn well better work because there isnt the time and money needed to deal with the fossil fuel problem on a global scale. Governments are too corrupt, inept, and near bankruptcy to be able to try anything else. Climate change is only going to make them even more stressed, so the solution has to come online before they crash.
“NASA has nuclear engine design software its been using for years, and sent up many probes with nuclear engines that were never tested on Earth.”
Radioisotope thermoelectric generator, or RTG, simply use the decay to make heat to make electricity; quite a bit simpler and safer than a nuclear reactor, more like a really long lasting battery.
http://en.wikipedia.org/wiki/Radioisotope_thermoelectric_generator
Not really comparable to LFTR, which has a lot of challenges, especially if you are trying to turn the Thorium 232 into U233 inside the reactor, instead of having that as a separate process.
@ Day Brown
LFTR is a good Molten Salt Reactor (MSR) technology. But it is true that it requires substantial R&D before it is ready for commercial use (c. 2025-2030). However LFTR is only one among many MSR designs; arguably the best but still… Closer to market are http://thorconpower.com/ from Martingale Inc., and the IMSR (Integral Molten Salt Reactor) from http://terrestrialenergy.com/, a canadian cie. These emphasize mass produced, factory or ship-yard assembled ‘modular replaceable units’ with a ‘no new research’ approach in order to lower capital costs and reduce build-time schedules. Both cies state a goal of four years to commercial prototypes (c. 2020). Of course, if collapse occurs within two years, even this may be too long. But I suggest that the following references are good reading pieces, even if only to cheer you up periodically after pondering on the deadly serious contents of this Blog.
ThorCon : http://atomicinsights.com/thorcon-demonstrated-molten-salt-tech-packaged-modern-construction-techniques/
IMSR : http://atomicinsights.com/terrestrial-energy-molten-salt-reactor-designed-commercial-success/
The details can be retrieved on the aforementionned Web sites.
This Blog is good stuff, but it’s a tough read. Not intellectually, because Mrs. Tverberg is an outstanding communicator, but it is tough in other ways. It would serve no purpose, I think, to worry yourself sick. I know I need the periodic break (nobody’s perfect I guess), and MSR stuff is, intuitively speaking, my favorite kind of ‘distraction’.
Of course the two years before collapse timeframe does rule out _any_ (full-fledged) technological solution. But one can convincingly argue that such a short timeframe precludes pretty much _any_ type of solution at all (at least in the usual sense of the word ‘solution’); therefore collapse would seem to be unavoidable. By what I’ve read on this Blog, Mrs. Tverberg is well aware of this, which makes it a little difficult to figure out what the ‘intention’ behind this Blog is at all. Perhaps it is just an ‘urge’ to spread the information in a clear format to cause a form of stirring in the readers in the hope that ‘something’ comes up. This would be in line with the ‘dissipative structure’/CAS (Complex Adaptive Systems) noumenon. In a CAS no single ‘unit’ can ‘compute’ the global solution to a problem on its own; the CAS itself ‘computes’ the global solution. Of course no ‘unit’ of the system would call the systems’s global solution a ‘solution’ at all. They probably would not even have enough local resources to conceive (i.e. build a model of) it. Well, being a (conscious) ‘unit’ of a CAS and know it must feel strange indeed. But that is beginning to sound real silly now, so I will stop here.
I hope you enjoy the references to MSRs and, as a member of CAS-Humanity, I wish you farewell.
DRC
“two years before collapse timeframe does rule out any (full-fledged) technological solution. But one can convincingly argue that such a short timeframe precludes pretty much any type of solution at all (at least in the usual sense of the word ‘solution’); therefore collapse would seem to be unavoidable.”
Yes! You got it!
The problem is thinking of this as a “problem,” because “problems” have “solutions.”
John Michael Greer taught me to think of this as a “dilemma,” “quandary,” or “predicament.” It has no “solutions.” It has no solutions!
Rather, we just might come up with useful “coping strategies.” For heaven’s sake, figure out how to feed yourself. Wean yourself off your automobile. Downsize your house. Learn to grow food. Reduce your expenses. Quit any full-time employment and replace it with several part-time jobs, preferably ones you can do without traveling. Grow food. Find others of like mind to work with. Heat your house with wood. Grow food. Make yourself useful to a younger person, possibly an unrelated one. Learn to repair old stuff. Stay out of Mall*Wart. Grow food!
Dear Jan and DRC
A few additional thoughts. I have previously recommended John Ehle’s novel of the settlement of a remote mountain area of North Carolina at the time of the Revolution. I recommend it again…it contains so many gems to think about.
Second, I recommend Rob Dunn’s book The Wild Life of Our Bodies. Rob is a professor in Biological Sciences at North Carolina State University. From his introduction to the book:
‘Through the stories of a handful of half-wild visionaries, I will consider some of these radical options that include giant living buildings, predators in our cities, and the restoration of parasitic worms to our guts’ wild plains.
In the end, what we need in our daily lives is not quite wilderness. Wilderness is what we did away with to allow ourselves to live free of malaria, dengue, cholera, and large carnivores eating our loved ones. We need a nature managed so as to complement our happy lives, a kind of wildness, perhaps. It is taboo (only in the ecological circles Rob inhabits…my note) to say that we should manage the nature closest to us for us, but ever since we first started to farm or control pests that is what we have always done. The step we must take now is to manage with more care and nuance. We can favor good bacteria in our mouths and discourage bad bacteria. We have just chosen not to. We can introduce harmless nematodes into our bodies to restore our immune system. We can expose ourselves to the species in which we find joy, curiosity, and happiness. We can even, more ambitiously, create green cities, cities more revolutionary than just buildings with green rooftops, cities in which entire walls are built out of life….
In the last century, we used antibiotics to kill all of the bacteria in our guts in order to get rid of a single problematic species. It was the century in which we killed all of the insects in our fields in order to control the few pest species. It was the century in which we killed wolves everywhere to save sheep in some places. It was the century in which we scrubbed our counters clean to ‘get rid of germs’. All these actions saved tremendous numbers of lives but also left us with new, more chronic problems and a nature devoid of its richness. We know more now and can act more wisely to create for ourselves more natural and healthier lives. The solution to the problems caused by our ‘clean living’ is not as simple as just playing in the dirt. Our task is to create a new kind of living world around ourselves, one that we interact with in many different ways, a living world that is not just the species that survive deforestation, antibiotics, and disturbance, but instead some more intelligent and lush garden.’
Like all good ecologists, Dunn thinks in terms of Systems. What function did hookworms perform when they accompanied humans on their journey up until the last 50 years in the industrial countries? Why did humans evolve an appendix? Can we eliminate human death by carnivores and still have a healthy ecosystem?
I think you will find his perspective a challenge to the linear doomster thinking that ‘everything has to continue just as it is and humans are awful’ which is so prevalent. Being a radical, of course, has its risks. So best to begin to do real things…but also, I believe, to step back and look at some broader picture as laid out by Ehle and Dunn.
Don Stewart
Dear Gail
I have a suggestion. I would like to see you and Mr. Hill collaborate on a little study of debt and the thermodynamic limits to oil production as described in Hill’s model.
For example, Hill’s model shows the end of the oil age around 2030, with a pretty steep decline between now and then. From the volume of oil produced, I believe that the model can produce a GDP for the global economy. From GDP, one can reasonably predict the components such as income. You know how much global debt there is today. As the income falls, how much of the debt can we reasonably expect to be repaid?
My gut feeling is that, with falling incomes, no debt will be repaid. There may be some shuffling of the cards between different classes such as workers and retirees, but no net repayment. But we are probably also near the end of our ability to increase debts. How much of the debt (including unfunded liabilities) will be repaid?
We might be approaching a ‘Weimar Moment’. Even if the debts were to be cleared following a global monetary collapse, the continuing decline in oil production would not permit a restart of the credit based economy.
That sounds like a good actuarial question.
Thanks…Don Stewart
The implosion tends to come right about the point where the trend changes from positive to negative in terms of energy consumption, as far as I can see. This is why I am worried for the banks this year and next year (or alternatively, for funds held by individuals and businesses in banks–more or less same difference).
The Hill model does not consider the debt-based financial system, so does not recognize the fact that a financial system does not work in “reverse gear”. We are already seeing beginnings of the reverse gear on the financial system in Europe.
One point I have made is that a major reason why oil from shale formations cannot restart is debt-related. Already, interest rates are higher. Even more importantly, the amount of debt that companies can borrow will go way down once the possibility of low oil prices is worked into the formula of how much companies can borrow. With this combination, there is no way that these companies can come back, or that new companies can come in.
Also, the possibility of shale production has been part of what has led to possibilities of rising world production. But if the US can’t “make a go of it”, with laws that favor it, and lots of built infrastructure, neither can any other country.
Gail
If it is possible to use a thermodynamic model to illustrate what is possible physically, and then trace that through a debt system and show the effects on debt, then some rather startling Headlines might come out of the analysis.
The Climate Change people started getting more attention, I think, when they began to talk about ‘stranded assets’ …reserves which can never be produced for environmental reasons.
It seems to me that one could come up with a scarier set of financial headlines. E.g.,
All new loans in 2015 with multi-year maturities are likely to default.
Central banks will have to confiscate X percent of personal wealth to save banks
Unfunded liabilities must be written down by Y percent
Boone Pickens to be selling pencils on street corner by end of year
Don Stewart
“Central banks will have to confiscate X percent of personal wealth to save banks”
Not necessarily Central banks. The numbers are already available if you know where and how to look. A while back it was ~50% for Japan, and ~25% for Europe IIRC.
So maybe ~35% for Japan, or another ten years or so at the present rate.
All a person has to do is put a different title on my existing posts. Business Insider got 122,000+ hits on my 2015-2016 forecast under the title, “The Current Oil Crisis is More Dangerous Than You Think.”
If you were to title it “sustainability a focus on solutions” you might get a million hits! Its actually not a bad idea. Dont change a thing with your analysis just add one sentence at the end something like this. “luckily thorium reactors show great promise for allowing energy independence in the future” . Just one myth at the end of the article.
A little creativity of that sort is all I need. It is surprising how many energy books end with some sort of happily every after ending.
Gail – Dr. Tim Morgan, Global Head of Research at Tullet Prebon, took a look at this problem in his “Perfect Storm, energy, finance, and the end of growth” letter to investors. It can be retrieved here: https://www.tullettprebon.com/documents/strategyinsights/tpsi_009_perfect_storm_009.pdf
“The economy is a surplus energy equation, not a monetary one….”
Tim Morgan copied a lot of the concepts from Dr. Charles Hall and others. The idea is sort of correct, but the way of measurement is not.
This article in The Times gave me a giggle in the café today.
https://www.thetimes.co.uk/tto/news/politics/article4331944.html
Brighton Greens at war over tax rise
Last updated at 12:01AM, January 23 2015
Britain’s only Green-led council is in turmoil over a planned referendum on a council tax increase and anger about parking charges and overflowing bins.
The local party has called on Jason Kitcat, leader of Brighton & Hove council, to resign immediately, after voting down his proposals to balance the budget and put up council tax.
Mr Kitcat is also blamed for industrial action by bin men that has led to rubbish spilling onto the pavements. He is under fire over the authority’s recycling record, which has slipped from one of the best to one of the worst in the country. Parking charges and permits have doubled in the past four years, cycle lanes have increased congestion, and a 20 mph limit has been widely opposed.
Nationally the Green party is polling better than ever and could beat the Liberal Democrats at the general election in May. However, in Brighton the Greens — split into warring factions called “mangoes” and “watermelons” — have been described as a “pantomime” administration.
Tony Mernagh, executive director of the Brighton and Hove Economic Partnership, said the Green councillors were too ideological and inexperienced. “There is huge political naivety and they haven’t helped themselves. Half of them are very good but the rest are destructive,” he said.
Mr Kitcat has proposed a 5.9 per cent council tax rise to ensure that he can balance the budget — a legal requirement — without cutting essential services. Any authority that plans to increase council tax by more than the government’s 2 per cent threshold is required to hold a referendum. If the decision is backed by the full council next month, the referendum will be held on May 7, election day.
Labour, which has 14 councillors, has opposed the referendum on the grounds that it would cost £1 million to hold it and to rebill taxpayers. However, the Tories, with 18 councillors, may abstain, pushing the idea through.
Privately the Tories, who are pressing for a council tax freeze, admit they are keen to split the left-wing vote and argue that a referendum on election day would get their own voters out. Graham Cox, Conservative candidate for Hove & Portslade, said: “Our citizens should have the opportunity to vote in a referendum on the level of council tax.”
The Greens appear likely to lose control of the council in May while Caroline Lucas, the former party leader — who has distanced herself from the council — is fighting to retain her Brighton Pavilion seat.
Mr Kitcat, 35, a Mango (green outside and yellow inside, “with a Lib Dem core”), is seen as a pragmatist, prepared to work with other parties. He is often thwarted by a “socialist faction”, led by Phélim Mac Cafferty, a Watermelon (green outside and red inside) said to be in hock to the trade unions, who opposes austerity measures.
Mr Kitcat has recently had to broker a deal with unions over equal pay, to avoid a £700 million legal bill. The settlement meant some groups of women got a rise and three years of backdated pay, but it infuriated the bin men, who went on strike before Christmas.
“Phélim and Caroline Lucas and the Watermelons were all out on the picket line, opposing Jason’s deal on equal pay,” said Warren Morgan, Labour’s group leader. “It’s an experiment that has failed. Unlike the rest of the country, where people are looking at alternatives to the main parties, here people want a return to normality.”
Peter Kyle, the Labour candidate for Hove & Portslade, said the “pantomime council” was both “damaging and silly”.
Mr Morgan claimed that the Greens had reversed a 40 per cent recycling rate to 26 per cent, pushing it down the recycling league table to 305 out of 350.
Mr Kitcat, who has already said he will stand down in May, defended his record while admitting that his councillors regularly voted against him. “It is a high-profile thing being the only green council,” he said. “It is challenging for our party in terms of philosophy and experience. We have not been in charge before.”
He claimed that a new decision to add a common recycling bin and remove individual ones was beginning to improve recycling rates. “We have reduced the carbon footprint year on year. We have installed solar panels, insulation and efficient boilers into council homes and we are launching a new low-emission zone,” he said. “We have changed parking tariffs to push people off the roads and the air is cleaner.”
At some point a system is beyond repair then it requires policy by other means to change.
Listened to the BBC last night regarding Greece. Collapse in the making. Featured story regarding a car business own by a Family. Had over 200 employees and the crisis hit. over night half of their customers disappeared and now they are down to only 28 employees they consider family.
The problem they encounter is corruption and namely extortion by tax officials who use the 40,000 page tax code to shake down bribe money out of their pocket to allow them to stay in business.
It has gotten so bad that the owner interviewed stated not one more euro will be paid. She will shut down the business and let it go at that because enough is enough.
Syriza is maintain their lead in the polls with three days to go.
It should be entertaining to watch Greece on the news anyway in the coming weeks and months,
http://uk.reuters.com/article/2015/01/22/uk-greece-election-polls-idUKKBN0KV21020150122
Not sure how interesting. There seems to be a common playbook. The global bankers will call their loans, cut off credit, and cancer the Greek leader. They will then offer to take,…, well.., all of Greece as partial payment for their loans. A new puppet will be installed and a serve military dictatorship will kill any Greek who opposes the government.
Lots of nice Greek islands for sale to the 1%.
Unless Greece joins the BRICS and the SCO.
The owner later in the story admitted that the Greece crisis was the fault of the voters ‘everyone’ knew what was going on or at least half of the population. Reminds me here in the USA, everyone I talk to about the government KNOWS WHAT IS GOING ON on let the political system continue to march in the direction of collapse. Most adults realize the public funds will not cover their coverage or that the deficit will ever be paid back with money that is worth anything. Greece today, United States tomorrow!
Not good!
Great post Gail. Liked oil cons vs pop at ag
Dear Gail and All
One of the questions addressed in this post is whether ‘retro-evolution’ is possible as fossil energy declines. Here are two videos which may give you some food for thought…relative to food. So far as I know, there is no substitute for actually looking at the videos rather intently and thinking about the question that you are interested in. You have to see how it works, not my summary of how it works.
The first is a video of the legendary gardener Ruth Stout using mulch in her garden:
https://www.youtube.com/watch?v=GNU8IJzRHZk
I want to call your attention to the fact that, for some reason, the Ruth Stout videos have been suppressed on the internet. So consider yourself lucky to see this video coming from some place beyond the long arm of the law.
I want you to particularly notice the simple tools that Ruth uses, and the relative ease with which this elderly woman avoids supermarkets.
The second video is a very recent farm extension podcast, which features a young German who has spent the last few years intensively researching mulch as used in both tillage systems and in no-till systems.
http://www.extension.org/pages/71822/rotational-no-till-and-mulching-systems-for-organic-vegetable-farms-webinar#.VMJYllqaDu0
(I am registered, at no cost, to see these videos. I think you will be able to watch them. If they want you to register, then register.)
I want to call your attention to the parallels and the divergences between the young German’s methods and Ruth Stout’s methods.
*Both are using hay mulch to conserve soil structure, conserve water, suppress weeds, avoid erosion, and provide fertility. The German points out that you need one acre to grow hay to mulch one acre of vegetables.
*The modern farming system is much more reliant on industrial equipment. The modern system produces lots more GDP, but probably not too much additional food.
*The modern system DOES mean that people don’t have to get out in their garden and do something. Ruth Stout says ’99 people out a hundred won’t do what I do’.
*Gardens in natural settings, such as Ruth Stout’s, have more trouble with animals such as deer and raccoons. Expansive, clean, farms leave much less room for animals and so have less trouble. Wire fencing or dogs or hunting or something needs to be done to avoid simply growing crops for wild animals if one is gardening in a natural setting. There will be far more wild critters around, but you have to keep them away from your garden…which is the easiest, most abundant place to find food. Make them work for their food.
Can a Ruth Stout method feed the world? I think that is the wrong question. The question should be, ‘Can a Ruth Stout system feed the One Percent who are willing to garden?’ The answer to that question rests on land access. When the 99 percent have died, then there will be plenty of land. But there are obviously bottleneck issues. These previous statements apply to the industrialized citizens of the world. Those countries which still have lots of subsistence farming and gardening will obviously have different answers.
Don Stewart
Don, that 1percent that survives will unlikely have not even heard of Ruth or Any of your brillent informational comments, nor have any idea or care to know.
Thanks for the link.
What’s interesting is that webinar by Jan-Hendrik Cropp (DE) presents several diverse options how to proceed with “mulch and no till system” or combinations of methods thereof, usually people only push their limited single link avenue for particular climate site etc.
Interesting part where US small scale farmers are not aware of that low cost diy covercrop silage as widely practiced in Europe/World for decades, while on the other hand Europeans are in need of reimporting the knowhow of intensive grazed pasture management from the “first adopters” of US/NZ.
Overall, many of these “permaculture” techniques were tested and adopted very successfully decades ago, but unless the current system and its hooks (subsidies, cheap fuel and chemicals, longdistance JIT/supermarkets) goes away, the mass adoption will be slow. But in the end, it will probably take just one “alternative” farmer per each given local and the criticial mass of “aha moment” would be reached, getting closer bit by bit, not there yet though.
Dear worldofhanuman
Glad you liked it and found it provocative….Don Stewart
JMG claims in his latest blog post that right time to relocate to farmland count(r)y is almost exhausted, perhaps long ago and now we are past the optimal entry point. Now Gail alarms the bell we are likely hit some severe financial system dislocation around 2015-16..
I guess it depends what are your plans, abilities and possibilities.
Perhaps, true statement would be if your plan was to slowly build a farmstead full of new/hitech stuff, lets say over the span of 10yrs starting now, that’s pretty risky/silly adventure anyway.
On the other hand, people willing to relocate in the style of “collapse now – avoid the rush” meaning re-using older (servisable) equipment, adopting very low tech lifestyle including fewer m2/person space arrangement demands etc., … might still put lasting roots before the grand fireworks “guaranteed” before say 2020-25.
“JMG claims in his latest blog post that right time to relocate to farmland count(r)y is almost exhausted, perhaps long ago and now we are past the optimal entry point. Now Gail alarms the bell we are likely hit some severe financial system dislocation around 2015-16.”
This makes it sound like it must be an individual action: “Yup, got my 40 acres and a mule and a wife and two strong boys, and we gonna weather this storm!”
But there are people who have started planning and working on such things quite a while ago, which means there may still be time if one is willing to give up the high-energy notion of “the rugged individualist” and is willing to cast one’s lot in with others. Indeed, that’s the only way I see for survival, but I am certainly biased.
“people willing to relocate in the style of “collapse now – avoid the rush” meaning re-using older (servisable) equipment, adopting very low tech lifestyle including fewer m2/person space arrangement demands etc., … might still put lasting roots before the grand fireworks “guaranteed” before say 2020-25.”
That’s our agenda, but we could use some help!
Jan, I think that the trickiest part will be making it past the initial shakeup. If we get a sudden break in JIT supply chains, a lot of people won’t be feeling too cooperative. A sudden breakage would lead a lot of people to regressing to greedy, scared and unthinking animals. A gradual breakage with unreliability appearing more and more frequently might be a lot different. It would give people time to prepare both physically and mentally.
Thanks!
Don, I think that part of the problem with people not be willing to garden is that the very concept of producing their own food has never occurred to them. Many in the developed world are that disconnected from their food supply. I think that if JIT supply chains start to become unreliable, once the idea caught on regarding producing at least some of one’s own food, it will be more than 1% who are willing to do it. Of course, there are people who will want to “head to the mountains” and hunt their food too, but the idea of setting up a reliable system for always having at least something without industrial support is something that would seem ingenious and revolutionary with a lot of people today, even though doing this would simply be a reversion to the mean of the past 10,000 years of human history.
Syriza is maintaining its lead in polls with three days to go to elections in Greece on Sunday.
The centrists (almost) managed a single parliament since austerity before the “extremes” took over.
http://uk.reuters.com/article/2015/01/22/uk-greece-election-polls-idUKKBN0KV21020150122
Political groups are blaming OPEC for falling oil prices. Oh dear me the big boys can’t take their own medicine. If the Us or EU want higher prices they can put their money where their mouth is. Set a price and start stockpiling. Since we are all printing money it won’t actually cost anything. Just make the Saudis richer.
Pingback: Achaques e Remoques
Oil-Qaeda shill.
Gail, I think corporations are becoming energy dissipators in their own. I am thinking of a company that does design only, no manufacturing at all. It runs large rooms full of computer and communications equipment. It uses corporate jets and stretch limos to send its biological communications devices to the right places. The few humans involved are a minor aside.
I agree. The higher level technical you get, the more equipment is needed, using parts from around the world. The folks are frequently off at conferences, delivering papers to their peers from around the world.
Other companies have a lot of employees, but they tend to get packed in tightly, to use as little heat/floorspace as possible. The public areas of the company are fancy, in any expensive office building, with big conference rooms. And as you say, all of the fanciest computer and communications equipment.
Gail, I was recently reading David Leonhardt’s piece in the Times about wage/income stagnation in capitalist democracies (http://www.nytimes.com/2015/01/15/upshot/trying-to-solve-the-great-wage-slowdown.html), and he cites Canada and Australia as exceptions to the trend. Many reasons are given for this, but the word energy never appears. Could there be an energy connection? Canada and Australia are among the very few capitalist economies (I think Denmark and Norway are the only others?) that are net energy exporters.
Canada and Australia as energy exporters help, plus due to high taxation on fuels we did not experience the Land Export Model problem of increasing our own consumption of our energy faster than we brought new production online.
The real secret though, is debt. We’ll see how different Canada and Australia are once the housing bubbles pop.
Debt is probably a good point. I know that the people of Norway have spent their incomes, and then some, on new houses and boats. So it is not a whole lot different.
Be you sure! And cabins in the mountains or by the sea, often larger and more luxurious than their homes. And apartments in Spain.
I strongly suspect that energy is behind Canada’s and Australia’s ability to keep wages growing. In Australia’s case, the extraction of other minerals may play a role as well. I think this year, and in 2015, the situation is turning around. In fact, it seems like with falling commodity prices, both of those countries would start being affected pretty quickly.
Gail – Converting BTU’s into more manageable units, like kilocalories, allows even the sleepy breakfast eater to comprehend how much energy he/she is using while they munch on cereal and read the back of the Wheaties box. In Figure 2, 316.95 million BTU’s per person per year in the US converts to 218,822 kilocalories per person per day. As the IEA also pointed out; the average energy consumption in the US changed little from the 1970’s to 2010, at an average of 334 million BTU’s per person per year. This is 230,593 kilocalories per person per day. Earl Cook in his seminal article in Scientific American, “The Flow of Energy in an Industrial Society” (1971), pegged the number at 230,000 in 1970. Plus ça change, plus c’est la même chose. (The more things change, the more they stay the same.)
I went through all this in my first book, The Laws of Physics Are On My Side (2013). The key here is to use a “metric that crosses all platforms.” Using kilocalories allows people to calculate their own energy use and compare it to horses, tractors, built roads and buildings (embedded/embodied energy), etc. It also allows people to calculate their “energy slave” equivalent. If we now use 218,822 kcal/day/person, it is like having 87 slaves at our disposal (88 minus you the energy user).
Calculating your own energy use, using a metric that crosses all platforms, also allows people to develop alternatives that give a net return that is far superior to industrial agriculture. As I have said many times, I am 25-35 TIMES more efficient than industrial agriculture. The sticker is actually getting paid a fair price for what I grow.
BTW, “External Energy Products as a Way of Leveraging Human Energy” is spot on. I go through similar ideas in my first book (mentioned above) but in an energy context.
If the timeline 1970s-present means more or less a peak, stagnation plateau, then what about the actual decline from 87slaves way lower in the “near futur”? Apparently this must take tall on many fronts for both the master classs and the sheeple, like health, longevity, security, distance travelled..
The reversal of affordability will smack even the systemic support of upper middle classes, when the JIT system can no longer or not as dependably service their hitec toys and overall apparatus incl. the healthcare system, not only cars and e-gadgets.
What a pickle and chaos.
A fine predicament indeed.
Thanks. I like kilocalories, because it is something every reader can relate to. They know about how many kilocalories of food they consume in a day.
I take it that your “25 to 35 times more efficient than industrial agriculture” compares the energy you spend growing food to what industrial agriculture would spend. We still have to store it, prepare it, and cook it, so on a garden to table basis, the comparison is still quite a bit more than one calorie expended to one calorie eaten, I would imagine. A lot of folks assume we can get the total energy requirement down to less than 1:1, but I really doubt we can.
As I wrote about this at length in my first book and have posted this number on the Web for several years (including comments on your articles), I just gave you the short version. When discussing industrial agriculture versus my small-scale sustainable model, I use 7-10 kilocalories fossil fuel to produce 1 kilocalorie food in industrial agriculture. Of course there is variation, but the 7-10 measure has achieved a significant consensus over the years. This would be an EROI for industrial ag of 1:7-1:10, or .14-.10 if you dismiss the ratio sign. Since my actual measurements are 3.5:1, that is 25-35 times more efficient (3.5:1 / 1:7 = 3.5 / .14 = 25 or 3.5:1 / 1:10 = 3.5 / .10 = 35). Source for the 7-10 number below.
As for your main point of energy to store it, prepare it, cook it, etc.; these are the same for either industrial ag or sustainable ag. There is certainly room for improvement by doing the processing ourselves, doing our own cooking, etc. (Example: making sauerkraut at home is far more energy efficient than buying it in a store.) I go into this in detail in my second book.
In a nutshell, if you start from a base of fossil fuels, there is precious little you can do to counter the energy waste by the time you get the food. If you start from a base of human energy, you have a large latitude in what you can do to keep your energy footprint low.
Heller, Martin C., and Gregory A. Keoleian (2000:42) Life Cycle-Based Sustainability Indicators for Assessment of the U.S. Food System, Ann Arbor, MI:Center for Sustainable Systems, University of Michigan
Thanks!
In North Dakota, the number of rigs drilling new oil wells dropped from 187 this time last year to 161 this week — the lowest level in five years.
“My prediction is we’re down to 50 rigs by June,” said Jim Arthaud, CEO of MBI Energy Services, based in nearby Belfield, N.D.
I’d say we’ll lose 20,000 jobs by June,” said Arthaud.
They said things aren’t good, that oil prices are low, and they aren’t going to be drilling as many wells,” said John Roberts, who was recently laid off as a crew van driver for Schlumberger. “They gave me 24 hours to leave my house.”
Roberts, who was given housing by the company, is now staying on his friend’s couch. All his belongings are packed in his car.
No union equals no written contract equals you get tossed out on your ear whenever it suits the corporation. Here in New York all are at will employees meaning you can be fired at any time for no reason.
I think we are returning to the day workerers or the workerers hired for the particular project. This is caused by the need for higher efficiency. I would say that these highs and lows of the oil price indicate that the economic growth has stopped and that the extraction of the resources will continue in much smaller scale after the Seneca cliff and that such projects will be more and more funded by the state via subsidies, loans that will not be paid etc.
Does it remind you something? Yes, the burst of the bubble in 2008 was just the example of one or two sectors (housing and cars) that started to implode. Now we have a bigger problem: imploding energy production, as the high priced oil bubble bursts. Maybe we are past the peak of the industrial world, as more and more industrial production needs to be subsidized in variuos forms. And we are just realizing it when looking back…
That is sad: losing your job and housing simultaneously. I have run into a different version of this–an employer going essentially bankrupt, and both the (a) the retirement funds people have in the company’s own stock going to virtually zero and (b) people getting laid off having their auto loan from the employee credit union becoming immediately due. I don’t know if this particular combination can come up now, but it got me to think carefully about putting all of my eggs in one basket.
That’s why you need family. Five years ago I became disabled. My daughter had recently got married so she and her husband moved in to help out and also save up for their own place. A few months later her father in law lost the fishing resort job where he was the onsite manager. He moved into the other spare bed room. We had gone to the same church as children and knew the same people so Jack and I became buddies. We would stay up watching football and on nights when we both couldn’t sleep we would sit at the kitchen table, drink coffee and talk.
A year ago he finally got on disability and the the kids got a house so he moved in with them. It worked out great. He had the support he needed, I had someone to mow the grass and help build dog ramps, and he had more time with his son. And now for the first time in 43 years I live in a child free home with just my wife. Still have to keep quite because it disturbs the dogs if we make too much noise. It’s almost midnight and just had to let them out to bark at armadillos.
3 paragraphs into this article, and I already have a Buzzword Bingo!
Yeah, pretty clear that this is just another Chicken Little blog site. So long, folks!
Perhaps you should have done the back-reading that I suggested. Every angle you mentioned has been evaluated and discussed.
Hi Gail,
I did a little research a while back on the transition of the Japanese economy from the boom of the 1980’s to recession in the early 1990’s from the perspective of the nuclear industry. I found an interesting correlation in new plant development and the economy itself. I never drew any conclusions, as I was distracted by another topic, but plant development followed a logistic curve , which is usually associated with population growth, starting in the 1970’s and peaking around 1990.
You’d think that cheaper energy would be great for the economy, but there seems to be something else at work aside from assumptions about shifting production to China, Vietnam, etc. Perhaps you are on to something with this article.
I’m looking forward to your future posts.
Energy consumption throughout a population is correlated with not only declining death rates, but also declining birth rates. The former generally falls faster than the latter as energy use increases.
Good way of putting it!
I have never understood why Japan has refused for 30 years to deal with energy of course so has the US and EU. But Japan has NOTHING in terms of indigenous energy.
“But Japan has NOTHING in terms of indigenous energy.”
They probably have some pretty decent geothermal opportunities with all the active and dormant volcanoes, plus a massive subduction zone right off the coast.
They are working on trying to extract methane from clathrates, and they could conceivably invest in using deep water ocean energy or even tidal; the energy costs about five times as much as coal or nuclear, but if they built it now at a cost of $0.25 per KwH, then when coal and nuclear get passed that point, it will turn out to be a viable investment in the long run.
I wonder what they have for wind power potential.
They entered World War II didn’t they? What else were they supposed to do about energy?
Gail, you are one of the few people in the world aware of the energy motivation for Japan in WWII. Excellent.
Charlie Hall has been talking about this for years.
Good grief, some history study will tell you that FDR knew exactly what he was doing when he cut Japan off from USA oil supplies. He needed to get the USA into the war, and halt Japanese expansion, in about that order of priorty. Pearl Harbor was no accident.
Martin Cruz Smith wrote an excellent novel “Tokyo Station” based heavily on this aspect of Japan’s entry into WWII. Strongly recommend it, because it also gives some insight into irrational behaviour and its effects on people when energy is an issue – makes it all very real.
Thanks!
That is an interesting point. I imagine the story goes somewhat like this:
At some point, the building of nuclear power plants reached a saturation point–really diminishing returns. Adding more nuclear power plants would provide more energy than could be productively used at that point. (I think the building of new homes, roads, and factories in China is now reaching a saturation point as well.)
In order to build the nuclear power plants, a great deal of new debt was no doubt added. Debt was also added to build factories and subway systems to use this new-found energy, and to help the Japanese people buy new high rise homes that used this energy. The combination of the debt and the cheap energy had a hugely stimulative effect on the economy. With more efficient farm and fishing equipment, fewer workers were needed in these fields, and in fishing, and processing food of all kinds. Instead, the debt provided funds so that these people could be brought to the city and could make goods for the world economy. The total amount of goods and services produced by the Japanese people skyrocketed. Instead of simply producing rice, fish, and a few things for themselves, they could produce goods for the world economy.
Helping Japan along on this endeavor was the impact of skyrocketing oil prices about 1973-1974. When oil prices reached these high levels, one thing that was obvious to people around the world was that they could not continue to make the big, inefficient cars (with a new design every year!) that they had made in the past. Instead, they needed cars like the efficient ones the Japanese made. Suddenly Japan was a star. The nuclear power plants had been made fairly cheaply (no one worried too much about tsunamis), so the electricity was fairly cheap. The Japanese population was diligent and quickly became well-educated. They could soon churn out goods with nuclear energy, in fairly efficient factories.
But once the nuclear saturation point was reached, debt became a “downer.” Instead of new debt helping to move more workers out of farming and fishing into other jobs, the country was faced with old debt that needed to be paid off. This had precisely the opposite of a stimulatory impact on the economy. The government needed to issue increasing amounts of debt to give the illusion that the economy was OK.
Eventually, competition came along from parts of the world where the standard of living was lower. The climate was often a little warmer, so people did not need as sturdily built homes, and often didn’t need to heat them. They could burn coal for electricity–which could be cheaper than nuclear electricity. Much of the population was not as educated, and they did not have as strong an ethic with respect to caring for the environment, so their costs were lower this way as well. The one-child policy of China meant that very often both husband and wife could simultaneously be members of the work force. This helped hold down needed wages as well, because they could have an adequate household income on fairly low wages if both worked.
Of course, all good things can be expected to come to an end in China, just as in Japan. A person can see where the Chinese story is headed, by observing the difficulties Japan encountered. China also has the difficulty of raising enough taxes to take care of all of the elderly Chinese.
Much of the debt in Japan is being purchased by the Japanese themselves as retirement funds. I am afraid I can see how that will turn out.
The next great place is perhaps Africa, because its climate is warmer yet. The problem there is that they don’t have cheap energy supplies, so I don’t think our moveable “next great economy” has anywhere else to go.
As far as I know, China has little by way of a welfare state. That has two effects: the first is that the government does not need to include these costs in its budget, so taxes are unaffected. Secondly, families provide financial support to those in need of medical care. That means that personal savings rates need to be that much higher than in the West. It also means that the one child policy logically ends with one worker supporting six parents and grandparents.
Despite that gargantuan development, the chinese have not moved all into the city yet.
In the country side, there is a particular model, where olderly people live together in communes/villages and those bit younger of the bunch provide more services for the oldest ones. They all draw some very basic ration from the gov. so not hard core starving, plus some incoming funds from family if available, and obviously substinance small scale farming usually takes place at that place as well. Not sure how widespread it still is, gather at least few dozen% of older people function like that. Impossible model to implement in the west as of now.
Intergenerational debt is a big issue, in my mind. Unless society decides that we just walk away from elders when they get sufficiently old that they are not supporting themselves, there is an intergenerational debt. In traditional societies, this was handled by grandparents living with the children, and helping with childcare and farming. If the extent of medical care was not too great, there was not a long period when the elder person was in terrible condition, and needed to be waited on hand and foot. If nothing else, lying in bed with bedsores and other untreated conditions would likely bring a fairly quick end to the older person.
Once industrialization takes place, the elder is very often separated from the children in households. So there are more households to take care of.
I won’t go into all the details, but one child supporting six parents and grandparents just doesn’t work, whether it is done at home; whether an attempt is made to invest money in the appreciating housing or the stock market; or whether the government volunteers to do it. Any actuary will tell you that there becomes a huge problem. If the amount of external energy added to the economy goes down, there is a huge problem.
Jared Diamond has a good chapter on the fate of the inactive elderly in pre-agricultural societies, and the sick in general.
I have heard quite a bit of anecdotal evidence of Spanish peasants hastening the end of their elderly relations…..
And it was not uncommon for old men to hang themselves from the fruit or olive trees, and the old crones to throw themselves in the well when old age became too much, and the young too cruel.
The current pattern of elder-care in advanced economies is an unprecedented historical anomaly, and will not last much longer.
Is this regrettable? I think most of us would be somewhat relieved not to have to face the prospect of a living death which medical science now imposes on us in extreme old age.
My wife’s 72 year old mother has been very ill for almost 9 years. She had insulin depended diabetes for many years but falling down a flight of stairs resulting in a broken hip, then falling into a two week long coma and having her kidneys fail has been rough. This poor woman ends up in intensive care every four or five months and is subjected to torturous treatment to keep her from dieing. Even with supplemental insurance and Medicare just her out of pocket drug cost is over $1000 a month.
My wife will do almost anything to help her mother and spends three or four days a week helping her father with her care but she has told me please don’t subject her to the same heroic care her mother is getting.
I have an old dog who can barely walk. I had to build a wheel chair ramp to my front door so he can hobble out to do his business. He has a good appetite and sleeps good but when he can’t go outside on his own we will have him put down. Now no one will put me down when I can no longer make to the bathroom by my self but they wont have to, I will save them the trouble.
The US will completely bankrupt itself trying to give sixty million aging Boomers full medical care.
Nice exercise, in ivory tower academic style – too bad reality is too elusive or maybe politically incorrect to be included. Making this “analysis”, despite what your fanbois here say, about as useful as a finding that sand can be found in a desert. Back to The OIl Drum with you, where you can tell me again about Peak Oil by 2012.
Reality detachment disorder can be treated with injections of real world events and real world history, and by not using useless academic analogies and worthless academic “models”. But never let the facts get in the way of some good philosophical greentarded propaganda. There aren’t enough hours in the day to rip this post to shreds, but I have to go burn some energy and release some airborne carbon, for the good of the economy.
“Prices don’t respond as expected.”
“Someone needs to figure out what is really going on.”
^I fully agree with the two quotes above.
Perhaps markets are being manipulated?
Quantatative Easing, $2.5 trillion in excess reserves, $60 trillion in debt, more oil futures contracts being traded in a day than oil is consumed in a month, etc… and that’s just the US alone? Manipulated? Nawww, couldn’t be.
But without the expensive and not-so-economical tight oil, oil production actually has peaked. If prices stay this low, not only is a lot of that shale oil going to go away, the producers are going to default on the junk bonds that they issued and we’re going to be in for fun times. If they charged what it actually cost to pull the stuff out of the ground, develop future production, pay shareholders, pay taxes, etc… very few people could afford to purchase their product. If prices go back up into some twilight zone region, they might be able to keep rolling their debt over for a time, but eventually the price will be paid, one way or another.
Quantitative easing is just market failure in the Large Economy Package.
Great marketing from TPTB though.
I see quantitative easing as a blunt and inefficient tool with a reasonable expectation of unintended consequences. Among these is the misallocation of scarce resources leading to, over the medium term, say three to six years, of inefficiencies in the use of energy.
Prior to the QE era, we managed a little over one percent improvement in output per unit of energy consumed in the developed world. It follows that if QE introduces enough inefficiency into energy related systems, then GDP produced per unit of energy consumed will, if the structure remains unchanged, decline.
I note that Japan’s GDP in current US$ was 4.571Tn in 2005 and 4.919Tn in 2013,
but figures for energy consumed are difficult to find, and also it is difficult to be sure they are equivalent given the shutdown of nuclear reactors. So it is a maybe at best.
With all the attention drawn from QE to stock markets and to inequality, this seems to need a closer look.
Use BP Statistical Review of World Energy to give you Japan’s energy consumed figures. That is the standard source. It has a spreadsheet that can be downloaded from the Internet. http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-energy.html
The EIA and the IEA have some data as well. The EIA is way behind, and not converted to common units, so hard to use. The IEA data is generally behind a paywall. They tend to include more biomass that is outside markets in their consumption numbers than other sources.
Oh lookie here another troll. A useless eater who just mocks others and doesn’t have the credentials to create their own blog to tell others why they should listen to him/her.
Ignore trolls. They go away when you take away their oxygen — attention.
Gail,
Interesting article – look forward to Part 2.
I’ve heard others argue that solar is a game changer, with the argument going something like this:
1) Solar PV technology is increasingly cost competitive , and volume is increasing. This will lead to economies of scale, accelerating production, and increasing pace of technological advancement both in the PV and battery technology.
2) Solar will drive down demand for fossil fuel, putting further cost pressures on oil and nat gas.
3) The overall impact of (1) and (2) will be significantly reduced costs for all forms of energy, which (in line with this article) implies substantial economic growth over the next 10-20 years.
4) Of course, there will be pain / debt issues in the fossil fuel industry, but this will pale in comparison to overall growth.
Your thoughts on this?
“I’ve heard others argue that solar is a game changer”
I dunno.
There isn’t a single solar-powered solar panel factory on this planet. It’s gonna take petroleum to make solar panels for some time to come.
Jan, this only proves coal fire electric is cheaper than solar PV electric. It does not prove solar PV powered PV factories are impossible or have less than X EROEI.
The reason no one has a Solar Photovoltaic powered Solar Photovoltaic factory is that no one would invest in a massive factory that can only run six hours per day, when they could have a 24/7 factory with a different power source. Adding enough lithium batteries to store electricity to run it all night would likely require all the lithium in the world. It might work with Lead Acid deep cycles, but it would be pretty darn massive and expensive.
You could perhaps do it on a small scale, but then you would run short of some of the materials needs. So besides being expensive, it would not be big enough scale.
If solar PV really needs to be able to compete with coal (if it is to replace it), then it has to be cheaper than coal. Everyone would want to build solar panel factories using solar PV. It is a very long way away, in my book.
“If solar PV really needs to be able to compete with coal (if it is to replace it), then it has to be cheaper than coal.”
Sounds like an infinite chase to me. If it costs $0.05 per KwH to make electricity with coal, and $0.15 per KwH with PV, it isn’t worth it, so no one does it. Then, when coal costs $0.15 per KwH, the PV will cost $0.45 per KwH, so no one will do it. Then when coal costs $0.30 per KwH, PV will cost $0.90, so no one will do it.
Barring, of course, some massive breakthrough in storage and materials.
Instead we have subsidized production of PV, which will in turn have its own problems. Oh well, maybe Google and Apple will save us all.
One of the cheapest electric supplies is hydro. You can put a PV plant next to a hydro dam. Yes, when all those coal and nat gas fired plants go, the cost of hydro and nuclear will be bid up.
“One of the cheapest electric supplies is hydro. You can put a PV plant next to a hydro dam.”
How to build and maintain the hydro dam without coal and oil? Perhaps with a really huge new hydro dam, and then a plant to use electricity to synthesize hydrocarbon fuels, a huge arc furnace, and factories to make all of the stuff the dam needs. Maybe make the dam out of cut interlocking granite blocks instead of reinforced concrete.
If everyone is a lot poorer because of the lack of electric of coal and natural gas electricity, how are they possibly going to bid up the price of hydro and solar PV? In fact, how are they going to afford to keep the electric grid operating? Don’t you have a collapse situation instead?
“how are they [places with hydro power] going to afford to keep the electric grid operating?”
I think we’ll see decentralization. The Pacific Northwest could throw a switch and cut off the rest of North America. (Well, it might be a little more complicated than that.) There’s the Pacific Intertie, a half-million-volt DC line that exports power to California. Because it is DC, it does not have to synchronize, and so could be brought up and down at a moment’s notice, whereas the big AC interties must be carefully synchronized.
There’s a similar situation on the East Coast, where Quebec and Ontario could cut off the connections from the big Canadian Shield dams to the US North East.
“I’ve heard others argue that solar is a game changer, with the argument going something like this:”
“Your thoughts on this?”
Have you read any other articles on this site? Particularly:
Eight Pitfalls in Evaluating Green Energy Solutions
http://ourfiniteworld.com/2014/11/18/eight-pitfalls-in-evaluating-green-energy-solutions/
Jay Kurtz,
Best not come into this site and make such a woefully ignorant comment without doing a little backreading first. There has been a lot of water under the bridge here. Gail has done a monumental bit of work. Read. Just some advice.
Wow, did not realize an innocent question would lead to such a rebuke. I just found this site, and I enjoyed the article. Excuse me for not having a history here.
If my comment is ignorant, please, enlighten me.
Please accept my apologies for this kind of behavior.
Jay Kurtz,
My apologies. I did not intend to rebuke. Just my impatience showing through. Often we have to revisit ideas that have already been thoroughly hashed out and it gets repetitive. Welcome to the site.
I wouldn’t be too critical of a new reader. It is almost impossible to read all of the posts I have written. There are over 220 on this site, and more on The Oil Drum. Getting questions from new readers reminds me of where a lot of my audience is “coming from”. Most readers are fairly new, or have scanned some articles, but didn’t understand more than about 30% of them.
Thanks, but nothing in the article you reference addresses the scenario I laid out.
“Thanks, but nothing in the article you reference addresses the scenario I laid out.”
“1) Solar PV technology is increasingly cost competitive , and volume is increasing. This will lead to economies of scale, accelerating production, and increasing pace of technological advancement both in the PV and battery technology.”
Pitfall 2. Green solutions that use rare minerals are likely not very scalable because of quantity limits and low recycling rates.
“2) Solar will drive down demand for fossil fuel, putting further cost pressures on oil and nat gas.”
“Pitfall 4. Green technology (including renewables) can only be add-ons to the fossil fuel system.
A major reason why green technology can only be add-ons to the fossil fuel system relates to Pitfalls 1 through 3. New devices, such as wind turbines, solar PV, and electric cars aren’t very scalable because of high required subsidies, depletion issues, pollution issues, and other limits that we don’t often think about.”
So, unless you are talking about some revolution that allows solar panels and storage without rare earths, with extremely high EROEI, long life cycle, at a competitive price that does not require subsidies, the article addresses it in detail.
If you are talking about a massive revolutionary breakthrough in technology, that would be a pleasant surprise. Like solar panels and storage made entirely out of silicon and carbon, printed out in your own garage with a 3D printer, and it generates energy equal to all of its inputs within six months. Heck, even if it did all that from an industrial factory.
Matthew Krajcik:
“Pitfall 2. Green solutions that use rare minerals are likely not very scalable because of quantity limits and low recycling rates.”
This is currently a non-issue: PV panels volume is increasing, and prices are decreasing, so clearly the market see’s no pitfall here. Perhaps rare minerals may be an issue in the future, but if so, like all commodities, the price mechanism will stimulate new sources / innovation. (See: Oil)
The rest of your response is not worth my time, since the arguments are even more ridiculous that the one I have quoted.
I will note that several big box retailers are investing heavily in solar, with Walmart leading the way. So there must be something to this solar thing.
http://www.slate.com/blogs/moneybox/2014/10/21/walmart_green_energy_it_can_produce_more_solar_power_than_35_states.html
“This is currently a non-issue: PV panels volume is increasing, and prices are decreasing, so clearly the market see’s no pitfall here. Perhaps rare minerals may be an issue in the future, but if so, like all commodities, the price mechanism will stimulate new sources / innovation. ”
First, I would like to point out that you asked what Gail’s opinion on solar PV was, and I linked to the article about that very subject, which you then said was completely irrelevant; I was simply showing why the article was in fact relevant. The article and its arguments are not mine.
It seems to me that you are saying that if rare earths become more expensive, and thus the cost of manufacturing solar PV and batteries goes up, they will come up with new materials to bring the price down. Maybe they will, or maybe they won’t; I don’t think blind faith that a new technology will come along and solve the problem is a good bet, but I am not saying it is impossible. If it happens, great.
The more likely solution will be that if the government in power at the time is in support of / paid off by the industry, environmental regulations can be reduced / removed, probably with support from environmentalists, in order to allow large scale rare earth mining in the United States and elsewhere.
Various levels of governments giving credits goes a long way toward helping demand, as well as ridiculously high credits for the electricity fed into the electric grid. These things distort people’s view of the worth of the panels. In particular, “net metering” is very unfair to the electric utilities, because it gives far more credit than the value of this intermittent electricity to the grid.
There is also a feeling that people can help themselves somewhat, if the electricity goes off. They can still recharge their phones and their portable computers. This is true–the electricity provided by solar panels is best for this type of application. You would need a big installation plus batteries if you wanted to run your electric frying pan on one in the evening, however.
Dear Gail
Regarding electric frying pans used at night.
If people get serious about being able to cook with PV panels, they will cook one meal every day, at noon, and will eat leftovers at other times. DC rice cookers are readily available from Asian sources. They typically draw 400 to 600 watts for about an hour.
A rice cooker doesn’t fry very well, but it can be used for browning. And most people will be eating foods cooked in small amounts of water, which rice cookers do exceptionally well.
Don Stewart
AAARRRGGGHHH!!!
PV-powered electric cooking is like, well, putting dinosaurs into the ground for 250 million years and then digging them up to use for cooking!
Better to use reflectors and fresnel lenses for cooking. You can get a LOT more energy that way than by turning it into a stream of electrons first!
We need to focus very carefully on using “appropriate transformity,” as HT Odum would say. Electricity is extremely high-transformity energy — let’s not waste it on making things hot! (Heat is a very low-transformity form of energy.)
Jan
I don’t disagree. I am just pointing out that IF one wants to use PV, then one has to reconfigure one’s day to use the energy from it when the sun is shining.
However….I have recently been talking to a sturdy but finite lady homesteader. She was bemoaning the fact that it takes her an hour to cook her oat groats for lunch. She does have some PV panels. I pointed out that she can buy a rice cooker which will have her oats ready when she wants to eat, without having to hover over them, letting her do her work around the farm.
Starting from the demand that ‘I want it when I want it’ is a sure prescription for failure.
Don Stewart
Forget solar PV. Our financial problems are now, in 2015 or 2016. We don’t have time to get solar costs down.
There is also a problem with solar PV being a “top of the mountain” application. Yes, perhaps we can have it if we can keep all of industrial society together. If we can’t, the electric grid doesn’t work, so any electricity we were planning to put on the electric grid is lost. People who have a few separate solar panels will be able to use them to charge their cell phones (assuming that there are cell towers working) and maybe even run an irrigation pump. (An old-fashioned water mill would do the same job, much more cheaply, though).
I don’t know about scalability. If we stick strictly to silicon panels, and can get enough coal to process all of them, maybe they can be sustained. But when you start getting to fancy newer elements with limited availability, I doubt that we could scale them, even if we could keep the whole system together. Making storage batteries and transporting them around the world would be a problem as well.
Of course, electricity is not oil. We need a cheap oil replacement yesterday, to fix our oil problem for all of the equipment that today uses oil.
Electricity is an entirely different concern, of particular concern to those concerned about climate change. The electricity issue is finding a replacement for coal. The cost of solar PV needs to be compared to the price of coal, in that context. Coal is cheap.
Reading Spengler he says history happens once for real. Analysis or science is theory best used on dead objects. Westerners see the world functionally developing in time. They have to analyze but the analyzed is past, dead. The future is becoming. Grecoromans lived near and in present. History was mythic, future nonexistent. Middle ages was magical mindset, superstitious.
I am still readi g but the gist seems to be that society is like any organism. Its destiny is preordained from birth, like a bird lives 3-5 years, etc. Cultural outlook may differ, i.e. all westerners see life in analytical terms, functionally but outcome is same.
The galactic pictures posted above interesting. See individuals as cells, institutions as organs, etc. Health of organism depends on leadership, fitness training, diet noone controls this, has big picture and society is like a 70 year old waking up to the fact in panic that he is not immortal, like an old hippy biker suddenly diagnosed with cancer.
gaw,
your point is?
One of the issues I need to address to a greater extent is prices. In a complex world, prices don’t respond as expected. We know that banks colluded to distort interest rates. Even this kind of distortion can take place, when many things are hidden from view through the futures market, and the availability of virtually-free QE money. Also, both buyers and sellers of oil have debt that distorts their vision of what needed prices should be; they may hold futures contracts as well, further distorting how they respond to price changes.
The underlying problem of course is that the amount of discretionary spending for most consumers keeps eroding, as wages lag behind the rising cost of goods and services, indirectly because of the rising cost of the extraction of oil and many other types of diminishing returns. All kinds of funny business must be kept in place to keep this problem from affecting commodity prices. We see breaks in the system, as in 2008. At some point, we won’t be able to fix breaks in the system, and prices will plunge, or the financial system will “break”.
According to Steve Ludlum and I think the Hillsgroup as well, a couple of years ago we switched from pricing oil at the ‘upper bound’, to pricing oil at the ‘lower bound’, or in other words the price switched from being priced by the big banks and money boys to being essentially priced by what the buyers of oil, at the gas pump, could afford to pay. The central banks are basically becoming irrelevant. The wall street journal said this morning that the ECB was going to print 60 billion euro a month for the next year and a half, if I have my numbers right. This shows that the central bankers do not have a realistic grasp of the problem. Many people are saying that this current year is going to see the world lose faith in the central bankers. I have lost faith in them already.
I am not sure about the central banks becoming irrelevant. The huge gap that is developing between the dollar and other currencies is becoming more and more of a problem. As the ECB prints money, the gap is likely to get worse. It makes the repayment of US dollar based debt increasingly impossible, among other things. Also makes it difficult to sell US goods to foreigners.
I am wondering if there has been manipulation in some of oil prices we have had in the past, to keep prices as high as they have been. A big issue, though, is that the prices of all commodities have been drifting downward, indicating that consumers can no longer afford them–the benefit supplied is not great enough to justify their prices.
Perhaps we should no longer seek to sell our products to foreign markets and concentrate on developing, or re developing our domestic market. IF the USD makes our goods too expensive for other economies to purchase, it will start forcing all economies to look inward and start the process of de-globalization. It will hurt our “economic growth” in the short term but lead to a more resilient local economy in the long term.
Computers, phones, and other high-tech devices need many types of metals–virtually all elements of the periodic table. We don’t possible have all of those at home. We are therefore very dependent on imports. In order to afford imports, we have to have exports. We are trapped.
Hello Gail, nice start, waiting for the sequel !
A book that could interest you, from Georges Bataille :
http://www.amazon.com/Accursed-Share-General-Economy-Consumption/dp/0942299116/ref=sr_1_5?ie=UTF8&qid=1421929230&sr=8-5&keywords=georges+bataille
Also :
http://en.wikipedia.org/wiki/The_Accursed_Share
It’s quite a curious one, written in 1945 I think (published in 49)
Note : I’m not exactly sure the Amazon link is the one I’m thinking about (in French called “la part maudite”) but I think it is.
The first lines, roughly translated :
“Essentially wealth is energy : Energy is at the basis and end of production. Plants that we grow in fields and anaimals that we raise are energy sums that agricultural work has made available. We use, we consume these animals and plants in order to acquire the necessary energy for all our work. Even our inert products — a chair, a plate, a building — correspond to the necessities of a dynamic system. The use of my muscular energy implies some resting moments where I am eated on a chair : the chair helps me to save energy that I use right now to write these lines …”
Note : sorry for the typos (typed on a phone), especially “where I am eated” –> “where I seat”
Thanks! I will look into The Accursed Share. I seems at be available at a reasonable price.
One thing that has struck me, in visiting homes of people from India, is that getting up from off the floor many times a day provides a lot of exercise. I imagine that getting along without a Western toilet would have a similar effect. A physical fitness test now for older people is how well they can get up off the floor. If people had been doing this many times, every day of their lives, they would be in a lot better physical shape, now.
It’ a consumption based economy, not a lot different from yeast in a vat of sugar. You grow until you run out of sugar, then you die off until there are only so many yeast cells as can consume sugar produced by other photosynthetic organisms daily.
Once the stored energy is depleted down to the extent it cannot be drawn up with less energy than it takes to draw it up, then you survive only on what is available on a pay as you go basis. Very simple really.
The only real question is how rapidly the demand destruction occurs, and whether that is more rapid than the resource depletion. The demand destruction comes first from the current population using less per capita energy, then after that comes from fewer humans consuming the energy.
RE
RE:
I think we are more like a beehive than a Petri dish full of yeast.
In the Petri dish, each yeast cell fends for itself.
In the beehive, the 99% work for the 1% (the Queen)
and they all depend on a nearby field providing sufficient resources (nectar).
I hope you do a podcast on your Doom Diner site about this topic.
It’s a good topic, but to do a good show with it I need a few people who can chat from this perspective.
I’m planning a 3rd Anniversary Vidcast for mid-February. Maybe able to look at this topic then depending who shows up.
RE
Maybe so. I think pollution plays a role too, both in the case of yeast, and in the case of human populations. We don’t always know what the pollution is. We hear about the lead drinking containers in ancient Rome causing lead poisoning. Someone examining our civilization a thousand year from now may talk about plastics poisoning our environment, or the use of herbicides and pesticides on food, or a whole list of other things (mercury, lead, prescription pills in drinking water, hormones in meat, materials in land fills, materials collected in filters from coal fired power plants, food coloring in grocery products, etc.)
Gail,
I fully agree.
We humans are way too certain that all the synthetic chemicals we expose ourselves to (Bis-PA?) are harmless. And yet we have a marked rise in cancers and autism.
But all that aside, the human economy is not a homogenous Petri dish of yeast but more akin to parasitic sub-populations, one exploiting the next; each making “promises” (a.k.a. debt obligations) one to the next one the assumption that energy and other resources for fulfilling those promises will forever be there.
In other words, ha ha; the Stone Age didn’t end because “we” ran out of stones and the digital age will not run out because we will always be able to make more bits.
“In other words, ha ha; the Stone Age didn’t end because “we” ran out of stones and the digital age will not run out because we will always be able to make more bits.”
What? The Stone Age “ended” because people were able to make tools out of bronze. The Bronze Age “ended” not because people stopped making Bronze, but because they were then able to mass produce Iron goods in greater quantities at lower prices. Not at all related to resource depletion; in fact, all the the ages are the exact opposite of running out, but instead moving to the next level of exponential growth.
MK,
Of course in your jest you are correct.
We do not have to worry about “running out” because over the last 4000 years
we have been filling her up.
Her being the atmosphere and the thing we fill her up with is our waste products, primarily CO2. We will choke in our waste product long before we “run out”.
Good point.
See my comment to Step Back.
What people miss is that the system will end because the debt system can’t be serviced; there are just too many demands on wages to keep up the price of fuels; consumers have too little funds left to repay debt with interest; investors discover that the projects available with today’s high cost of energy have a negative return, when all costs are included.
A good thing is that if there are survivors their societies must become more interwoven with the natural world, not producing as much pollution and waste:
“While it is therefore wrong to set natural and engineered systems on opposite sides of a spectrum, there are nevertheless important differences. Nielsen and Müller (2009) argue that in natural systems, the cycles are local, decentralized and develop towards being increasingly closed with decreasing emissions and waste as a consequence. In engineered systems, however, the cycles are increasingly global, transport-intensive and have evolved to be open with increasing emissions and waste as a consequence.”
http://www.paecon.net/PAEReview/issue68/RammeltCrisp68.pdf
“When the needs of a system cannot be met from within itself, we pay the price in energy and pollution.” – Bill Mollison
Pollution and waste are the flip side of energy use. We are constantly using more materials from lower grade ores. There is huge energy cost associated with attempting to recycle.
In some sense, concentrated ores of minerals of any kind, not just fossil fuels, are one-time gifts. We have been dissipating these one-time gifts; this dissipation is another face of our problem with diminishing returns.
The idea that we can use less is an attractive one, but the way that complexity works, and the way our networked system works, it is very doubtful that we can. It looks like the financial system collapses instead, bringing down the whole economy.
Further, the idea that “we can just use less” is always predicated on the basic supposition that we have plenty in the first place. Replace “plenty” with “not enough” and the idea of using less becomes much less palatable. Amazing that so many of us still can not see that.
@Matthew, maybe because the process was much slower back then? The rapid increase in methane release now is anyway a fact. Nobody knows all the variables, but why take the chance?
For my part I hope start making biochar in some years. If you don’t want to take this chance, make biochar!
– Arctic and American Methane in Context: http://www.realclimate.org/index.php/archives/2013/11/arctic-and-american-methane-in-context/
(Shakhova et al (2013) did not find or claim to have found a 50 Gt C reservoir of methane ready to erupt in a few years. That claim, which is the basis of the Whiteman et al (2013) $60 trillion Arctic methane bomb paper, remains as unsubstantiated as ever. The Siberian Arctic, and the Americans, each emit a few percent of global emissions. Significant, but not bombs, more like large firecrackers.)
You talk about shoes. Have you heard about the new “Shoe City” the Chinese are building in Ethiopia: http://www.doorsofperception.com/development-design/shoe-city-vs-sole-rebels-2/
It’s a very strange world. 100 years ago shoes were made locally, now soon all shoes are made in Ethiopia! And when the economy collapses, nobody will know how to make shoes anymore. Not even the Ethiopians, as they just operate the machines for the Chinese.
Interesting point!
I might mention that the need for shoes is much greater in cold parts of the world than in warm parts of the world. In warm parts of the world, it is often possible to go barefoot comfortably, unless a person is trying to, say, traverse hot sand or rocks. Even then, sandals will provide adequate protection. These can be made very simply.
In cold parts of the world, protection from the cold is needed. This is very difficult to obtain. I know when we visited a place in Norway where living conditions of the period around 1100 were reproduced, one issue the guide mentioned was the virtual impossibility of keeping feet warm enough in the winter, when working outside. This seems to have been a source of foot problems. I suppose one response would be to stay inside as much as possible during winter. Any kind of enclosure would help keep body heat inside.
Yes, it’s going to become a lot different! Here is snowing a lot for the time, but I note people don’t even care to cover their cars or take of the snow. They just start the diesel heater one hour before they leave with the remote control from inside home, simply letting the snow and ice covering their cars melt away. So when they leave the house the temperature inside the car is already 25 warm degree.
Some people live in a temperature bobble all winter, living in hot homes, always entering a hot car, doing their shopping in a shopping mall and so on. And soon they’ll not even have shoes. How can they survive?
You have identified the problem. It is hard to come up with an answer.
They wont. It is that simple.
Also humans will not and can not go back to living arrangements comparable to the 1600,1700 1800 or any other period. Too much people with too much skills which are not remotely close to being necessary for survival. ( myself included, as an engineer who works in software development and research).too much built infrastructure, too much waste, too little wild life left, too much nuclear power plants, too much faith in human ingenuity and or politics. And so forth.
Think about everything you do during the every day life. How will you do one of these tasks without industrial civilisation? brushing your teeth in the morning, driving to work, cooking your food, buying some clothes, work at most workplaces itself, commenting on a blog 😉 and what have you…
Some people managed to live a life which is less dependend on industrial civilisation. And some people are not embedded in the system at all. ( very few, mind you)But this lifestyle for 7 billion people affords some very tough shifts in perception of the human endaevour and the perception of our selves and our relation to nature and so on. And i can not imagine that this will happen on an instant. Also it may not be possible to feed so much people without indsutrial agriculture and with all the depleted soils and aquifers…
In addition climate change, the accomponying 6th mass extinction and the polluted environment may cause the extinction of most of complex life forma on earth in this century or the next. (Humans included) the collapse of all financial institutions and all possible outcomes from rearranging society and economics to full blown thermonuclear war may or may not accelerate this. But i doubt that we are going to beat the laws of physics this time around…
“Also humans will not and can not go back to living arrangements comparable to the 1600,1700 1800 or any other period. ”
Those who survive, must. It will probably not be anywhere near 7 billion, maybe closer to 100 million.
“Think about everything you do during the every day life. How will you do one of these tasks without industrial civilisation?”
You won’t. Those who survive will have very different lives compared to modern western lifestyles.
That is what I wanted to point out.
How can they survive? [barefoot in winter]
We have, on average, 17 days of frost here. Long before our time, a local historian went without shoes for the winter to be able to afford the cost of paper to record the history of this town. So, while that may seem exceptional to us, physically, it cannot ne ruled out.
Pingback: A new theory of energy and the economy – Part 1 – Generating economic growth | Зеленое будущее
Pingback: Uma nova teoria de Energia e Economia, por Gail Tverberg | Haraquiri - mostrando as entranhas
Gail,
Wonderful post. A few years ago I was working on modeling oil production only as a function of price, but ran into a problem, the price and the volumetric flowrate of oil didn’t correlate well in my model. I tried normalizing to gold, GDP, CPI and non of those worked. After reading the work of Benjamin Ayers and Robert Warr, and doing some of my own work over at http://statisticaleconomics.org I developed a measure of marginal utility of a currency by determining the amount of energy that can be bought by the currency. I call this the Energy Price Index. I use the data from EIA’s Monthly Energy Review with a little modification as the delivered nuclear fuel costs are no longer reported. When I applied the marginal utility of the dollar to the WTI price as a proxy for global production the model worked rather well.
Where this gets interesting is when you apply the EPI to the Social Security Administration’s Average Wage Index. When we look at the distribution of wages and specifically the mean and variance of the log of the wages, we see a picture where the complexity of our economy should be growing (variance greater than 1) but since 1999 the mean wage adjusted by the EPI is declining. Curious I plotted the money supply (M2) vs the EPI (marginal utility of money) What I saw was the same powerlaw form as of a polytropic process. What this means is that the QE that has been ongoing since the dotcom bubble has been actively cooling the economy (reducing the average utility of our income).
My understanding of debt is different. I see it as an expectation of the future path of an endeavor, The interest rate and terms dictate what the debtor thinks is the value of their share of the future of that endeavor.
I disagree with the idea of high capital cost of energy production being the correct metric. The better metric is the delivered cost of exergy to the economy. If we lower the cost of delivered exergy and increase the supply of available exergy then that is how we achieve growth. Don’t discount nuclear so quickly, much of the cost is tied up in dealing with a regulator that has unlimited regulatory warrant, predicated on the false hypothesis of Linear no threshold. But that is a different topic for another day.
Thanks for your thoughts on the subject. I would be interested in seeing a copy of your work on EPI and wages if it is available. An Internet link would be ideal. Otherwise, an e-mail to GailTverberg at comcast dot net would work.
I think debt can have multiple conflicting definitions. The reason we encounter a problem is because the expectation of the future path of the endeavor is not correct in a finite world–it is invariably too optimistic. There is no real tie with the underlying resources, the cost of extracting these resources, and the ability of workers to pay for these high-cost resources, in their mix of goods they buy, which includes food and fuel.
I have not studied the delivered cost of exergy. I think it is easy to forget that nuclear has its own challenges. Decommissioning cannot be done with electrical energy, as far as I can see. It needs oil products, given the machinery we have today. Also, high quality deposits of any mineral are limited in size. After that, we need to move on to smaller deposits in harder to access location, requiring more fuel products of the right type to access. Thus, the cost rises and our ability to actually keep the supply line working becomes increasingly difficult.
There is also the theoretical alternative of getting a substantial part of the nuclear fuel back through reprocessing, but this involves building and maintaining plants, and the supply lines needed for this process, including the maintenance of roads. There is also the issue that many of our nuclear plants are already near the end of their working lifetimes. We will need oil to build new ones–we don’t have machinery using electricity that do this. We need many supply lines to be in place to build these new plants. One of these is the continued education of engineers who can build nuclear power plants. I don’t believe exergy measures this kind of energy. It is measured by Howard Odum’s transformities, however.
We can think of technologies of increasing complexity as forming a mountain. In this mountain, nuclear energy is near the top. It is easy to say–this is very efficient–Let’s just use nuclear power (or LED light bulbs, or electric cars). What we forget is that we need the whole mountain of the rest of the economy, including the continued functioning of our banks and the continued functioning of oil supply, to actually make these products. They look like salvation, but they really aren’t.
Cal Abel says:
Hi Cal,
The problem with correlation between price, and quantity is that you are probably trying to use the production rate (barrel per year). If you use the accumulated production as reported by the EIA you will find an excellent correlation with an exponential function. That is, use the CDF and not the PDF (Hubberts curve) of the distribution.
If you go to our site, and look at study graphs you’ll find a family of accumulated production curves by pulling up Graph# 4 (Cumulative Production Family vs Time) under Study Graphs. In the report we used them to calculate URR of C+C by a best fit method to the EIA data set. It come out to 2286 Gb.
The curves are actually logistic curves, but an exponential curve fits very well to the price data set, and we show an example in Graph# 17:
http://www.thehillsgroup.org/depletion2_010.htm
We calculated this from the energy dynamics of the process. From an economic perspective the reason that the accumulated distribution works, and the production rate doesn’t is probably because the accumulated distribution accounts for capital formation in the process. However, we will leave that to someone like Gail to figure out.
http://www.thehillsgroup.org/
Reblogged this on Allcoppedout's Blog.
Hi Gail,
I would like to add that there is an important concept that escapes most people. Most people normally equate energy, and work. They are not the same thing, although they are measured with the same units, such as BTU. Energy is a property of matter, it can be neither created nor destroyed. Work is not a property. Work is created when energy is transferred. That process ALWAYS results in losses. One BTU of energy never results in one BTU of work. It takes work (goods and services) to produce petroleum, and its products, not energy.
We have put up a page that explains this important concept for petroleum production:
http://www.thehillsgroup.org/depletion2_019.htm
On average it takes 4.9 BTU from the well head in the form of energy from petroleum to put one BTU of work back into it. This is the reason that a small increase in the cost to produce petroleum has a large impact on the economy it is supporting. What we call high cost oil is in actuality low energy oil for the economy. A one dollar increase in the cost to extract petroleum takes almost $5 out of the non energy goods producing sector of the economy. Since the work to produce petroleum has been increasing since the first barrel was extracted, and will continue to increase, without rapidly growing production to compensate, its negative impact on the economy will continue to intensify.
Nice article, thanks.
BW Hill
http://www.thehillsgroup.org/
‘On average it takes 4.9 BTU from the well head in the form of energy from petroleum to put one BTU of work back into it. ‘
Dear Mr. Hill
I am not sure I understand that statement. Can you elaborate?
Thanks….Don Stewart
Don Stewart says:
“I am not sure I understand that statement. Can you elaborate?
Thanks….Don Stewart”
A gallon of 37.5 API crude has an energy content (exergy) of 140,000 BTU (5.88 million per barrel). Because petroleum is used primarily as an energy source it must be able to supply enough energy to power its own extraction, otherwise it would be an energy sink, and not of much value. To use that energy it must be converted to work; goods and services (drilling rigs, pumps, etc.) That conversion takes place with an efficiency of about 20%; which is similar to an internal combustion engine.
When wells get deeper, water cut increases, and permeability declines it requires more work to extract the oil. When the work to extract it increases by one BTU, it takes 4.9 BTU of energy from the petroleum stream (the original 140,000 BTU/gal) because of the efficiency of the conversion. The oil has less value to the economy on a 1:4.9 ratio. That is why many oils actually have very little value to the economy, such as shale. Shale wells are often very deep (up to 11,200 feet), and have very low permeability (close to zero).
Factoring in the production of waste heat (that thermodynamics says is required to make the process go forward) brings the maximum energy that can be used to extract oil from the initial 140,000 BTU per gallon to about 20,000 BTU (840,000 per barrel). That is very close to what many high production cost oils are now requiring for extraction.
Our site has many pages dedicated to explaining this phenomena, and many graphs. Oil production is primarily an energy production process, and is only indirectly related to the volumetric quantities that are produced. The value of a barrel of oil is the result of the energy it delivers to the economy. The relationship between energy, and volume changes with time, production costs, and the increasing difficulty of extracting it.
http://www.thehillsgroup.org/
Dear Mr. Hill
Thanks for your response.
‘Factoring in the production of waste heat (that thermodynamics says is required to make the process go forward) brings the maximum energy that can be used to extract oil from the initial 140,000 BTU per gallon to about 20,000 BTU (840,000 per barrel). That is very close to what many high production cost oils are now requiring for extraction.’
Is the end product that you are calculating relative to directly useful? Is it gasoline at the pump, including the cost of processing the credit card? Does it include the cost of the car? …In other words, I am trying to figure out where the boundary is in your analysis.
If it is petroleum products at the refinery gate, then there is generally another ‘trophic level’ before a human gets any benefit. For example, diesel fuel has to be used to drive a tractor or power a truck or shovel. If so, that would seem to make the whole enterprise very shaky.
A similar set of choices of boundaries applies to food. On farm food production is pretty fuel efficient. But once the food leaves the farm, the real fun with fuels begins as the food is sliced and diced and delivered and refrigerated and cooked and the net result is 10 calories consumed by the system for every dietary calorie delivered.
If your boundary is the refinery gate, and we try to add on to that the industrial food system, it seems that we are definitely in trouble.
Am I thinking about this the right way?
Thanks…Don Stewart
Let me see if I understand this in simplistic terms:
To drill a well, you have to do work. That work is breaking up and moving dirt and rock. You are saying that, for every joule work done of moving dirt and rock out of the way, 3.9 joules are wasted, i.e. one joule of work done plus 3.9 joules of wasted energy equals 4.9 joules of energy expended for every joule’s worth of dirt and rock moved?
I agree that it is a good point that you don’t get to really use all of the oil, because of the oil used in the process. The statement gets to be less true, if it is possible to substitute less valuable products like natural gas, coal or even nuclear energy for providing the energy used in extraction.
It sounds like you are doing something fairly different from the standard EROEI analysis however. Wikipedia says that the EROEI of Shale oil is 5, and shows a chart of Hall and Murphy that seems to be similar. This analysis would suggest that out of 6 barrels extracted, 1 goes to the process of extraction while 5 goes to the end user. Thus, 1/6 (or 17%) of the energy (not necessarily oil) goes to extraction. You are saying something fairly different–something equivalent to 100% of the energy is used for extraction. That is quite different. What exactly is the difference? Are you saying that Hall and Murphy our leaving out the energy conversion loss?
For what it is worth, I calculated Saudi Arabia’s (oil and natural gas consumption) as a percentage of its (oil and natural gas production) based on BP data for 2013. The numbers suggested that Saudi Arabia is using about 36% of its own oil and natural gas to service its entire economy. It is not clear that there is much purpose for the economy, apart from oil extraction and keeping the rest of the population pacified. In the 1974-1977 period, about 6% of the oil and gas production was used internally.
Gail says:
Wikipedia says that the EROEI of Shale oil is 5, and shows a chart of Hall and Murphy that seems to be similar. This analysis would suggest that out of 6 barrels extracted, 1 goes to the process of extraction while 5 goes to the end user.
The Etp model produces Total Production Energy values. That includes extraction, processing, and distribution energy cost. The EIA has stated that refining energy cost is equal to 16,300 BTU/ dollar of finished product. That comes out very close to what we have determined. Using a wholesale weighted average price for finished products for 2010 gives about $3.00/gal, or 48,900 BTU/gal.
Using Hall’s ERoEI of 5:1:
Extraction……….28,000 BTU/gal
Processing……..48,900
Distribution……..6,500 (based on $40/barrel)
Total………………83,400 BTU/gal
Waste heat at 29% (minimum) = 40,600 BTU/gal
Based on a 140,000 BTU/gal (API 37.5) leaves 16,000 BTU/gal of usable energy for the end consumer.
LTO is lighter oil than conventional, so its energy content (exergy) is lower. This is shown in Graph# 20:
http://www.thehillsgroup.org/depletion2_011.htm
LTO is at best a very feeble energy source; at worst it is negative.
http://www.thehillsgroup.org/
If you are using EROEI and ETP, are you not at risk of double counting some of the losses?
Also, it seems counting refining loses in BTU per dollar would give highly variable results, based on gasoline prices? Why not refining cost in BTU per barrel?
I would agree that EROEI really needs to be adjusted for processing and distribution costs. It has always struck me strange that it was not so adjusted–especially when so many talk about “Net Energy” as the amount that is left afterward, without understanding what part of the costs that are omitted. EROEI is “wellhead” costs, so excludes nearly all processing costs and all distribution costs.
It would seem like whether or not you need to gross up for waste heat would depend on how the amounts you are working with are calculated. I know when I saw an oil platform in operation, the energy used was electricity, but it was from the natural gas extracted as a co-product with oil. Presumably, the calculation would take the amount of natural gas fed into the operation, not the amount of electricity coming out of the operation. I also know that all of the hydroelectric, nuclear, and solar amounts provided by the EIA and BP in their reports are “grossed up” amounts–amounts of fossil fuel that would need to be burned, to produce the given amount of electricity. On the other hand, refineries use huge amounts of electricity from the grid. I don’t know how the EIA treats that — as a “grossed up” amount or just the energy seemingly provided. My first guess is that they would provide grossed up numbers, but I don’t know.
One piece that you may not have thought about is the fact that a lot of the energy used in refineries is really natural gas used in the process of “cracking” the very long hydrocarbons of very heavy oil, such as bitumen from Canada. That natural gas isn’t really burned, as I understand it, so there would be no point to “grossing it up.” Such energy wouldn’t be involved in processing LTO. (That is why heavy oil trades at much lower prices than lighter oil–the cost of refining is much higher.) The US has an advantage over other countries on the cheap cost of natural gas, which is why we do so much refining of heavy oil in the United States. Of course, transportation energy of oil from shale formations is much higher, because they use rail transport so heavily.
Apart from the issue of exactly what Extraction, Processing and Distribution costs are, and whether they need to be grossed up or not, my other gripes about EROEI amounts are
1. They don’t include an allowance for government operations needed to support the endeavor. Clearly roads need to be repaired, and other government services need to be considered. In the Middle East, these costs are very high. Governments used to collect royalties “in kind”–just take some of the fuel off of the “top,” as payments
2. They don’t consider an allowance for the return on investment needed to support this operation. Arguably, part of this return is a return on debt. Thanks to government intervention, this rate is very low. But there also needs to be a return on equity. And this return on equity needs to run for the entire period where equity investment is needed–from the time the land is leased, to the time extraction is completed. It would depend on the length of time funds are tied up–currently EROEI calculations don’t reflect this difference. If anyone expects EROEI to distinguish among different energy products, at a minimum EROEI calculations need to distinguish “quick-in; quick out” products from ones which require a long-term investment in capital. If the return is zero, investors will quit.
I know the EROEI folks say something like “We need a minimum EROEI of at least 10” or some other number. But I think that information gets lost on a lot of readers. Also, that minimum is very different for different energy products, something else that gets missed.
Dear Gail
Mr. Hill will correct me if I misinterpret their model.
The EROEI people are fond of the ‘waterfall chart’ which shows that the net energy available descends with increasing speed as the ratio approaches 1 to 1. They then tack on the notion that we need at least 5 to 1 or 8 to 1 or 10 to 1 or something. However, the Hill’s Group model uses a fully loaded cost of production, due to the way the core equation was estimated. So Hill’s Group graphs will show an approach to zero in a much nearer time frame than most EROEI based charts.
In fact, the way I read them, the Hill’s Group charts indicate that new oil supplies became uneconomic in 2012. The big expansion in tar sands and shale was a bubble which is not sustainable in the absence of extraordinary interventions.
In short, ‘new oil’ is already in the rearview mirror. Which has implications for things like E&P and oil field services and financial investing by those desperately seeking non-zero returns. It also means that the market value of oil producers (including, perhaps, countries such as Saudi Arabia) should be the monetary value of the current assets as a rapidly depreciating quantity. In addition, there are non-linear effects because consumers incomes will be simultaneously falling…which leads to predictions of falling oil prices. I am not sure I can visualize all those non-linearities without getting into the equations and fooling around with them a la Limits to Growth.
In short, what would a Limits to Growth model for an oil company look like? What parallel Limits to Consumption model would be applicable to consumers? Can we make a Limits to Financialization model?
Don Stewart
Don Stewart asks
Is the end product that you are calculating relative to directly useful? Is it gasoline at the pump, including the cost of processing the credit card?
The Etp model gives the Total Production Energy. That is, the energy to extract, process, and distribute a unit (gallon, barrel) of oil. That would be the total energy required to deliver the finished product to the end consumer.
To calculate this directly would be impossible, there would literally be an almost unlimited number of places for that energy to go. Like you said, “the energy to process the credit card”, or how about the gas that the rough neck put in his pickup to drive out to the drilling site. These all represent energy cost for that production cycle, and must be included.
To project onto your next question, how do we test such a determination? We have used several methods to test the models output. I’ll refer to two of them here:
Like we explain in The Study Overview at the site, the only data set that we can be almost 100% sure is correct is the historic price of petroleum. Energy is obviously an essential component of the economy, so it must have an intrinsic dollar value. Solving the Etp equation for the price of petroleum (WTI as reported by the EIA) produces this graph:
http://www.thehillsgroup.org/depletion2_010.htm
The black curve is the equation derived, and the dots are the actual prices reported. The curve was “not” derived by doing a best fit to the data. It was derived directly from the Etp function. In our report “Depletion: A determination for the world’s petroleum reserve” we describe how that was accomplished.
The second method we use to test the model, and produce values is by using a BTU/$ approach. The EIA , and the World Bank report on total world energy production, and world GDP. Graph# 12 is a plot of their data:
http://www.thehillsgroup.org/depletion2_008.htm
What this graph gives is gross energy in dollar terms. It does not take into consideration the energy it takes to produce energy. This method has some limitations because it assumes that all energy sources must in $ terms be equivalent. On small value items this may not be true, but on large $ expenses it appears to hold fairly well. The reason is that to be a marketable commodity any energy source must be competitive with other energy sources. If not, the producer would be better off financially buying its energy for production from other sources. We see this in the purchase of natural gas to refine petroleum. The quantity of NG purchased by the refining industry goes up, and down with the price of NG.
The BTU/$ approach has its limitations, but overall it works reasonably well. It correlates the price of petroleum to what the Etp model predicts quit closely. It is also useful to test claims that are often made by others. There was a recent quote that NG had an ERoEI of 70:1. A quick calculation using the BTU/$ approach shows that NG would have to be selling for about $0.20/MMcuft for such a claim to be accurate. A new Volt is about $38,000.00. From Graph# 12 for 2015 it takes 5,632 BTU to generate $1 in goods in services. The energy equivalent in oil is about 36 barrels. To replace 2 billion ICs with EVs is not likely to happen. It would take over 3 years of total world petroleum production to do it.
Like the Etp model the BTU/$ method gives all energy needed to produce goods and services. This includes what we call “societal costs”: roads, military, judicial, regulation, and all the cost associated with producing goods and services. Societal costs can be very high. It even includes the shoe leather the rough neck scrapped off while drilling the last well they worked on! Calculating direct producer costs is another kettle of fish, and will have to wait for another day. This post is getting too long as it is.
http://www.thehillsgroup.org/
Dear Mr. Hill
Profuse thank yous for your generous donation of time in answering.
One more question, if this isn’t overkill. You say:
‘by 2010 a dollar would only have bought 6,946 BTU’
Could you use the curve to figure out how much oil has been promised for future delivery in terms of formal debt, and for the sum of formal debt and unfunded liabilities? Or, looked at from the other angle, how much oil will one get when the debt or promise is paid?
It seems as if the answer to the first question must be somewhere around a thousand BTUs, and the second is a curve which declines to zero by 2030. Is this a valid way of using the model?
Thanks…Don Stewart
Don Stewart says:
Or, looked at from the other angle, how much oil will one get when the debt or promise is paid?
This is an intuitively very good question, and goes to the heart of the problem of credit formation surrounding petroleum production. As a hypothetical example: lets say a producer in Oklahoma drilled a 4000 foot well in 1980 that produced X barrels per day. In 2012 the same producers drilled another 4000 foot well that produced X barrels per day. Now, it probably took as much energy in 2012 to drill a 4000 foot well as it did in 1980. In 1980 the producer was getting 31,227 BTU for a dollar, in 2012 they were getting 6,380 BTU for a dollar. In terms of energy the cost of the two wells was the same. In dollar terms it increased by 4.9 times.
The driller of the well has to pay interest on that money, either to the financier, or through loss of opportunity cost if self financed. The driller is only getting X barrels per day. If interest rates do not decline, in 2012 they would have been paying 4.9 times as much per barrel for the use of that money than they did in 1980. A declining BTU/$ value almost assures that interest rates will decline, or the end consumer will soon find that they can not afford oil. Because oil is a foundational commodity (you can not run our present civilization without it) things start getting messed up in the financial system when interest rates hit zero.
To answer your original question, “how much oil does one get when a future note comes due”? Is it equal to what the principal face value of the note would have bought at the time of issuance? The example above indicates that it would only be equal if the interest rates decline. Because of ZIRP, we are now in the situation were the buyer of oil is getting priced out of the market. This page at our site demonstrates what is happening:
http://www.thehillsgroup.org/depletion2_022.htm
The values from the page above were calculated from the energy dynamics of petroleum production (the Etp model) and the BTU/$ function. It should be possible to demonstrate this from an economic perspective (although we have not done that).
http://www.thehillsgroup.org/
The amount of debt that is borrowed at the time oil is extracted is a lot more than the debt borrowed by the oil company. The vast majority is borrowed by consumers and businesses for other purposes. For example, a lot of people working on oil extraction in Norway went out and bought fancy houses and boats, using their income from oil extraction as the basis for their house and boat loans. And then the oil use used to build cars, people in the countries where the cars were purchased used debt to purchase them as well. The question becomes: how are all of those debt going to be paid back? Aren’t there going to be a lot of defaults because Norwegian engineers will never get their jobs back (and unemployment insurance not be enough to cover their loans)? The issues is not just the rate of interest–it is the ability to repay the principle as well.
To “work,” the system needs to operate in a mode of economic growth. If one country is down, and everyone else is up, perhaps this can be tolerated. But economic contraction for very long tends to bring the system down.
Matthew Krajcik says:
Also, it seems counting refining loses in BTU per dollar would give highly variable results, based on gasoline prices? Why not refining cost in BTU per barrel?
Hi Matthew,
The values are calculated from the Etp model, but we try to use high quality data sources to confirm the results any time it is possible. The EIA is one of the best available. One of the weak points of the model is that it gives “Total Production Energy”. One number without splitting that into extraction, processing, and distribution. We have to use a lot of numerical analysis to come up with the individual energy cost breakdown. The model itself is based on a fundamental thermodynamic equation, “The entropy rate balance equation for control volumes”. It has been tested extensively against several high quality data sets. So we trust it. The numerical analysis – not so much.
For instance, in the example above, which uses the 16,300 BTU/ $ of finished product from the EIA, processing and distribution (48,900 + 6,500) equals 55,400 BTU/gal. The model’s output is 53,458 BTU/gal. A 3.5% margin of error.
When using the hybrid method (the model and the BTU/$ method) there is always the danger of double counting. We have built up a large enough set of tested cases to use as a baseline. That gives data points to refer to after doing a calculation. It is a matter of doing a lot of checking to see if the result makes sense. The BTU/$ approach is using gross energy figures, but many calculations require the energy determination after waste heat has been subtracted. That is were you have to be really careful not to double count. One side of the equation is gross energy, and the other is net after the waste value has been subtracted. You do those several times to make sure it is right!
Hope that answers your question?
http://www.thehillsgroup.org/
I know that when you get mechanical/electrical energy by burning a fuel, you get heat energy as well. We have decided in this country to treat the heat energy as waste. In some countries (like Sweden and Russia) there is a real attempt at cogeneration. We have said “no” to this–it creates a natural monopoly. So in this country, the heat by-product is waste.
In fact, the major type of energy that has been needed in most economies in the past is heat energy. Look at my Figure 4. Heat is what is used to break chemical bonds. It is used in smelting, baking, heating homes and businesses, and to run turbines to generate electricity. “Waste” heat from my ICE is what keeps my automobile warm in winter.
Now, the current fad seems to be to work backward–generate electrical energy using wind or solar, when very often what we need is heat for someone’s apartment, or to heat a frying pan. Electricity is more convenient to transport, I suppose. But it seems like a waste to me. Instead of putting solar PV panels on the roof, the person would be better off using a solar reflecting oven, or even burning some wood.
The market price brings all of these things together in my mind. I don’t find discussing these things very enlightening to readers who aren’t engineers. We rarely use oil to make electricity, so that isn’t an issue. We use oil where another less expensive fuel doesn’t work well, whether or not there is theoretical waste in the process.
“Now, the current fad seems to be to work backward–generate electrical energy using wind or solar, when very often what we need is heat for someone’s apartment, or to heat a frying pan.”
HT Odum would say that electricity is a form of energy with “high transformity,” meaning it contains a lot of embedded energy. You only get about 35% of the energy out of coal, and you lose another 10% in transmission losses, so watt for watt, electricity is “worth” about four times as much as coal.
So yes, it does seem like a stupid waste to heat things with electricity. In the Pacific Northwest, we built big dams and had very cheap electricity, which caused us to be wasteful.
And yet, it’s so convenient! I’m heating seed trays with electricity right now. How difficult it would be to heat seed trays by most other means! I want to take a stab at heating them with compost heat one of these days.
Jan
It’s rather humbling to me to look at what the French market gardeners were able to accomplish, without electricity or plastic or refrigeration. You note the convenience. It would be hard for most of us to go back to doing things the old ways.
Don Stewart
Electricity is convenient, but it is another one of the things at the “top of the mountain” of complexity that we have put together. Grid electricity is likely to be fairly early to become unavailable. It was late to be added, especially for farm families. Even today, many people in India and Africa do not have access to grid electricity.
Oil is more portable. It is easier to use without a huge system being in place. I listen to my parents’ stories, and it becomes apparent that their parents had access to oil, but not electricity, for quite a while. When they did get electricity, it was powered by batteries, and hooked up to a few light bulbs. My mother talks about a gasoline powered clothes washer.
There is a popular story being passed around, saying that we will have electricity in the future, but oil will be very expensive. I see this story as basically untrue. Electricity may be available, if you personally have figured out a way to assure the production and storage of electricity. Even then, it only works until something in the system “breaks” (such as the inverter, or back up batteries) and cannot be replaced. Oil is likely to be unavailable (just like grid electricity). So it is not a cheapness/expense issue.
There will always be waste heat when you burn things to do work. A lot of it. No matter what gizmos you hook up to capture that energy, some of it will be bled off to the world as heat. If you can generate some electricity, then use the waste heat to heat some homes, you are probably doing very well.
Gail said:
I know that when you get mechanical/electrical energy by burning a fuel, you get heat energy as well. We have decided in this country to treat the heat energy as waste.
Hi Gail,
I think you are confusing heat that is wasted, with “waste heat”. And yes, we could certainly go a long way to eliminating our ongoing energy crisis by capturing the heat that we are now just dumping into the atmosphere. I’ve never done any calculations on that subject, but I would imagine that it is quads of BTU (10^15) per year.
“Waste heat” is a term out of thermodynamics. It refers to the heat remaining in the combustion products after you have reduced their temperature to that of the environment (assumed to be 77 deg F). At that point there is no way of using it to produce “work”. The quantity of waste heat produced is a function of the combustion equations, and depends on the temperature that combustion takes place at. For example: 37.5 API crude must produce at least 29% waste heat for the combustion process to occur. Natural gasoline, or pentane (C5H12, API 93.5) another liquid hydrocarbon must lose 43% of its energy content during the combustion process.
Thermodynamics is a very difficult subject because many of the concepts it uses have no representative mental picture associated with them. The classic example is entropy. There is no way to build a picture of entropy in your mind. I have been using it in engineering calculations for more decades than I want to admit, but I can’t honestly say that I can see a picture of it. You learn it by using it.
Of course, this makes explaining our precarious situation to others very difficult. To understand it requires concepts that can only be alluded to, but they are very important, if not critical! So thanks for your insistent day after day pounding. If only 3% of the population come to terms with our predicament we may, yet, avoid one mighty bad train wreck.
http://www.thehillsgroup.org/
I absolutely love your hompeage and enjoy your posts here and on other forums/blogs. Thanks for the good work. Keep it up 😉 .
One example we had in the first engineering classes on thermodynamiks to approach entropy was baking a cake. First you have the ingredients seperated then you put them together and into the oven. When the cake is ready try to get all your former ingredients back out of it in a seperated way. There you have some aspect of entropy.
I know that this is pretty simplistic, but it helps to imagine entropy during the process for all those who had no contact with engineering/ physics and so forth. (Entropy As a measure of disorder)
I also enjoy your work Gail. Your research is done very well. Especially connecting finance with our energy predicaments is something the most people can not do very well because they specialize to much on one or the other.
(Maybe your understanding of climate change/science needs some refinement, but that does not matter very much, because our energy and finance predicament will very likely be the first in row to fell industrial civilisation. )
“….we are marching towards extinction, with blinders on our eyes…” For all the punk fans out there.
Thanks!
Gail, What if the answer, is In fact “less efficiency”.
Certainly a too high price of oil is harmful,
but a too low price perhaps equally or greater harm.
Certainly a low price of oil means fewer rigs, fewer drillers,
means a reduced need for housing, transportation, food preparation,
certainly at a point, a point where production cost is equal or greater
than price, low oil price means reduced employment.
What if in many areas we have reached the peak of efficiency verse employment
and more efficiency simply means less employment.
Efficiency too has diminishing marginal returns.
Certainly robotics are more efficient than humans in many areas
but certainly they will result in far less employment of humans.
If an abundance of energy increases population, as is proposed, then
why does Japan have declining population, fewer children per couple,
whilst many poor countries, have many more children per couple
.
At a point, Efficiency drives reduced population; not vice versa.
If food is abundant you need less people to farm and harvest it.
If medicine is abundant, you need fewer family, you are less concerned
that an heir may pass.
If energy is abundant you need less people to say collect firewood.
You need fewer family.
“If an abundance of energy increases population, as is proposed, then
why does Japan have declining population”
Japan has an abundance of energy? I think they are massively dependent on imports.
There are many things that contribute to bringing down fertility rates to around replacement levels. I would say that energy abundance equals more population is more of a general rule, certainly not an absolute one.
As I told someone else, the primary purpose of an economy is to serve human beings. It is really easy for all of the efficiency efforts to remove human jobs. The other thing they do is make goods like cars much more expensive, requiring workers to borrow more money in order to afford one.
At this point, things are so badly messed up, I am doubtful things are fixable, regardless what we do.
Japan is very short of energy. About all it can do is make nuclear electricity from imported fuel. It also has too many people in a small area. It is not sustainable as it is. People sense this, and are having small families. Also, with government pension programs, there appears to be no need to have children to support you. (In reality, the government plan is not really guaranteed.)
People from poor countries know that many of their children are likely to die before adulthood. They generally can’t afford birth control. They know that every family has several children. So they do what others do. If they want to have a reasonable chance of having children to support them when they are old, they need to have several children.
It is fascinating the way in the Japanese seem to intuit the gravity of their net energy crisis and the ways in which the young especially are responding by retreating into fantasy, turning their backs on romance and family-making, and in many instances holing themselves up permanently in their rooms: http://www.bbc.co.uk/news/magazine-23182523
I have read about the situation with Japanese young people retreating into fantasy before. Even in the United States country, there are a lot of young people spending their free time playing video games and putting off marriage indefinitely.
It is the result of cognitive dissonance = the official image of the world presented by the institutions and the leading personalities (state, church, parents, pop stars etc.) does not correspond with the reality.
Gail and MG, critical points you make.
Consider that the decline in US oil production per capita from the peak in 1970 correlates virtually 1:1 with the rate of deceleration of the rate of growth of world population (first derivative) since the change rate peak in the 1970s, which will achieve a first-order exponential decay by no later than the early 2020s.
That is, the world reached peak capacity to increase the rate of change of growth of the primary energy source required for modern, high-tech, high-entropy civilization 40 years ago, and we no longer have the capacity to produce affordable supplies of the primary energy per capita that we can afford to burn and grow real GDP per capita and the population and its replacement.
At the trend exponential decay rate since the 1970s, world population will peak in the next 5-7 years and decline inexorably no later than sometime in the 2030s.
Dear BC, interesting observations and predictions. We are really loosing energy and that makes the growth impossible… Add to that the fact that we have huge masses of the people who do not realize that we are loosing energy and, as a consequence, simply hit the concrete wall. The decline of the human population can not be reversed…
Gail I will give a quick and over simplified example with round figures.
A friend of mine works for Coca Cola
Initially they had 3 bottling plants
in each bottling plant
they had 2 bottling lines the bottling lines required 100 employees
with advance in technology
they installed 6 bottling lines the bottling lines required 50 employees
with advance in technology
they installed 12 bottling lines the bottling lines required 25 employees
with advance in technology
they now have 25 bottling lines the bottling lines require 2 employees
Now they can close 2 of the bottling plants, they don’t need them
or their employees.
Simply put you had 100 employees in each of 3 bottling plants
no one on government assistance
now you have 1 bottling plant with 2 employees with 298 on government assistance.
If you can make it faster and cheaper with low oil cost and technology
if the cost of the bottling line + energy is far greater than employee salary
and that hassle of employees (days off, vacation, overtime, health)
As more and cheaper energy goes through the system LESS business
and FEWER employees are needed. This is contrary to the premise that
“As more energy flows through the system, increasingly specialized businesses are added.”
Coke may have more consumers, Coke may have more sales
and Coke may be produced for less, and Coke may make more money.
BUT
You now have a lot of people on Government assistance,
very simply looking at just One plant – you had 100 people self supportive buying cars,
having a home, shopping for necessities and luxury goods.
NOW
You have 2 people self supportive and 98 who can’t afford the new Car,
the home or the luxury goods.
Long story short, cheap energy means you need fewer people
and technology means you need fewer people
efficiency means you need fewer people
–
NOW there is a time when GDP decreases because fewer people
are needed, fewer get a salary, fewer buy the house or buy a smaller house
or rent an apartment, fewer buy that luxury car.
–
WE in the US are Now at the LOWEST labor participation rate since 1978.
.
.And in the last 3 years have hit the HIGHEST SNAP (food stamp)
participation rate ever.
.
.And at the HIGHEST 17 Trillion in Debt level Ever. (with no end in sight).
.
In 2013 it was estimated by Forbes that PER TAX PAYER the debt
including unfunded programs is 1.1 MILLION per tax payer.
.
Efficiency has produced little if nothing, perhaps comfort for the wealthy
.
Low Oil will only result in MORE layoffs, how many thousands are being laid
off right now,
–
Some estimate low oil will result in a minimum of 20,000 layoffs by June 2015
I bet the estimate is very low, and includes only the Oil companies,
–
Is anyone saying Cheap Oil will increase employment 20,000 by June 2015 ?
I have not read it. And that is a break even.
.
.
“As more and cheaper energy goes through the system LESS business
and FEWER employees are needed. This is contrary to the premise that
“As more energy flows through the system, increasingly specialized businesses are added.””
I think the problem here is impatience; you want the people to be employed in totally new fields that don’t even exist yet, instantly. This is no different than when we went from ~90% of people working on farms, to ~50%, which lead to the industrial revolution. Those new factories did not spring into existence instantly.
I think this is a huge problem with a lot of things, such as the price and supply of oil, or interest on debt, or anything; people expect instantaneous results, when there is in fact an amount of latency for effects to ripple through the system.
I agree that laid off workers are a real problem, as are a lack of jobs. When I mentioned more specialized businesses, I didn’t mean that was the only impact. Some of the more specialized businesses are the laid-off workers trying to sell something they make at home, for example.
A big issue I see, and that you are pointing out here, is that people need to be the main focus, not businesses and not government. Somehow, the purpose of businesses has to be just as much to make jobs for people, as it is to make goods and services for people. (Of course, making this change won’t really save the economy from collapse.) The theory at one point was that new jobs would appear, to replace the old ones. The problem now with the new jobs that appear is that they are part-time minimum wage jobs that no one can live on.
This is a particularly ambitious posting — thanks! It ties together a number of things that people don’t normally tie together.
Very well said! Normally people think energy is just a small part of the system. They don’t get that without energy, no culture, no education and so on. But energy is the system.
I just discussed with a woman who said we should try better to understand the system, not just criticize it. I linked to this post, explaining that energy is a core matter to understand the system we live in. She was rather mad on me, and said this was a matter of the ideology of capitalism, not a matter of energy.
One of the principal characteristics of life in the 20th century industrial economies was political activism, usually conceived as a way to Utopia. In that world-view, all is ideology, politics, struggle.
Bring the fundamental importance of energy to the attention of such people and they are inclined to get angry, as you are thereby taking their Utopian future away from them and disabusing them of their belief that it is all about politics.
Ideology all too often gets a man or woman to kill; but, Left or Right, it never made a mule budge, a calf fatten, the sun shine or a river flow…..
A lot of times, it is about politics. Politics and energy often intertwine, and politicians often get it wrong. Take using corn to produce ethanol for fuel, for instance. That is one of the dumbest things to do, unless you are a farmer who profits from it or a politician who gets reelected because of it.
It also cuts back needed farm subsidies. Win! Win! Win!
My my! Gail, you can do snark! And well!
(But wouldn’t you just call that a back door subsidy?)
One of the first posts I ever wrote (back in May 2007) was on corn based ethanol. It seems like the problem never goes away. There are many aspects of the problem most people aren’t aware of.
xabier,
Haven’t “seen” you much around the blogosphere much lately. How ya been?
“She was rather mad on me, and said this was a matter of the ideology of capitalism, not a matter of energy.”
(A native English speaker would say “mad at me.”)
If one sees life as a dissipative mechanism, I think that capitalism is arguably better at that than the alternatives. But ultimately, they’re two sides of the same coin, no?
— JK Galbraith
My wife from the Philippines still has the same problems with these short between words after 12 years here. I think they have a name, prepositions or something? I’m not sure.
Thanks! When it gets this long and complicated, I worry that many people will give up on the post–find something shorter and more entertaining to read.
It’s important to note that while average living standards may be flat or in decline, it’s still very possible for a tiny segment of a national or global society to experience rapidly increasing living standards. This is the world Thomas Piketty’s Capital in the 21st Century describes.
The continuing rise in living standards of a tiny minority has provided them with enormous, outsized political power, power that they use to influence the world’s larger countries to extract the maximal amount of fossil fuel energy regardless of the short and long term consequences. This very extraction of energy helps further increase their wealth and power, thus creating an unstable positive feedback loop that temporarily greatly benefits the world’s wealthy while blocking the (albeit limited) ability of everyone else to try to plan for descending living standards and work to develop the next economies that will be need to support some level of human survival.
In some respects, I think today’s international businesses have taken on the role of the very wealthy. They can escape taxes by moving to different jurisdictions. They can pay their leaders outsize wages. I would worry more about manipulation by very wealthy businesses than be very wealthy individuals, myself.
That’s what they do:
http://www.mirror.co.uk/news/world-news/panicked-super-rich-buying-boltholes-5044084
Great article Gail!
It appears that energy and debt are part of every transaction in our economy, but their effects have not been modeled correctly. In a way, we measure the amount of transactions in money amounts but don’t account for the energy component. Viewing a galaxy through different telescopes is a good illustration of how the invisible (to the naked eye) can have a different structure than the visible.
If we could visualize the visible economy perhaps it would look like a galaxy:
http://i.imgur.com/eTaw8mf.png
The intensity of red to white could indicate complexity or vertical integration of money structures. We could also perceive energy being used in the same economy with a different spectrum filter:
http://i.imgur.com/ipOxHCM.png
And debt is really important to the economy too. With yet another spectrum filter we could perceive its effects:
http://i.imgur.com/T2nBlCD.png
An equation or simulation that modeled the effect of energy and debt would be useful, such as:
SizeOfEconomy$ = EconomyAtWork(energy, debt)
Exactly! Debt isn’t some evil thing that was thought up by fractional reserve bankers; it is essential to the system. The low interest rates and low wages now are symptoms of real problems with the system. Now the problems seem to be flowing through to low commodity prices too. It is hard to keep up repayment of the debt, when all sources from which repayment might come (except more debt) are sinking.
Thanks!
I think your approach to explaining these issues is excellent. I like your empirical analysis for confronting the issues and narrowing the cause and effect. I have a few thoughts and questions but will post these below (after catching up with everybody’s comments!)
This weekend I have been reading the latest from JMG, Kunstler, and others (including comments) and, to me at least, we all seem to be on the same page of music. But I think that you stand head and shoulders above all of these writers. Your presentations are full of well-reasoned and logical arguments. It would be a lot easier to just make proclamations of your opinions, but you bridge the gap between reason and prediction. Intelligence is the ability to anticipate outcomes in the future based on a constructed model.
The economist’s models are failing. Liquidity (flow of credit) is not the cause for our economic malaise. It may have been in the past. But the minimum requirements of cheap energy for economic growth have been ignored. I suspect that this has occurred due to the rise of more jobs (and more wages) despite automation (or mechanization) over the last few hundred years. To economists, it appeared that jobs were being created due to innovation and complexity, not cheap energy. Perhaps economists reached the conclusion that figuring out how to increase complexity (more transactions, more credit, more globalization) was the key to economic growth. In their minds, the factors would be ranked by importance:
products > debt > innovation > wages > energy > resources
In reality the ranking should be more like:
cheap energy + cheap resources >>>>> debt > wages > innovation> products
Again, thank you! I have been reading your articles since last January and have learned a whole lot (and from all of the great commenters). Sometimes my web searches pull up your old old articles and comments from the The Oil Drum and I am amazed at how long you have been at it. 🙂
Thanks! I have been at writing blog posts since 2007. My first published article on the subject, in a company magazine, was in 2006.
Sometimes when I look back, I am surprised at how little has changed. This is an early 2007 article: http://ourfiniteworld.com/2007/04/22/our-world-is-finite-is-this-a-problem/
I took the liberty and modified your chart to show a “Scenario 3” where the US Real GDP tops at around $14 Trillion. It’s the blue line. That’s pretty impressive, since it is half of scenario 1 and 2. I know your Tverberg Estimate of Future Energy Production has a peak around 2015 *gulp*, so the US real GDP may drop more….
http://i.imgur.com/RZMTFZd.png
Also, it seems that instead of hyper-inflation (still a future possibility), it appears TPTB decided for hyper credit (QE+ZIRP), would be that a correct statement? Either way, the system is compensating for peak oil and diminishing returns. We live in interesting times! :-O
That is good! You are right, GDP would drop more quickly than I showed in my 2007 post. But I didn’t really dare say that back in 2007, when I first started writing about these things.
I have been talking about the financial system being hit, since the very beginning of my writing about the subject.
If not all the gains were taken out of the economy by the 0,01%, you wouldn’t need so much debt.
Gail
Great piece. A thought to ponder. I have been working on how large corporations through efficiency are now taking Human energy out of the economy. In an equilibrium based economy 60% of productivity gains go to capital and 40% to labor. Now corporations are taking over 100%. This is unsustainable. I have some materials at http://outofozeconomics.weebly.com/ Our current day model is not only at peak oil but also peak efficiency. Adding more productivity where the corporation takes all gains concentrates energy on balance sheets versus the economy as a whole. The whole ecosystem is moving in the wrong direction. Thanks
Curtis
Thanks for the link.
As I see it, businesses are just middle men. They should be treated like overhead expense in creating jobs. Getting more profits for owners, and more debt payments for rentiers, does not help the ordinary citizen.
I often think we don’t understand what true efficiency is. Education and medicine in recent years have been adding far more costs than they do benefits, for example. See my post http://ourfiniteworld.com/2014/12/29/how-increased-inefficiency-explains-falling-oil-prices/
“Getting more profits for owners, and more debt payments for rentiers, does not help the ordinary citizen.”
This is the part of the story I completely miss throughout your articles.
We have now reached a point where the richest 80 people in the world have more wealth than the poorer half of all humanity.
To me, this proves that the FINANCIAL limits and DEBT problems that seem so powerful to you, are completely artificial. The world is awash with money and wealth, it just doesn’t reach the people anymore. Your view on limits remains a unique and wonderful contribution to the economic debate. But it should have been the REAL natural limits we hit, with the economy running at full speed, and the classic peak oil scenarios come true, where prices go through the roof overnight because oil runs out, and only then should the deflationary collapse happen. All you would have to do is change all the slaves into consumers, and some years later we have real peak water, oil etc.
Instead, what we see NOW, is peak capitalism or whatever you wanna call it. Maybe the results are the same, but imo, this is why so many people are at odds with your analysis, it has this dark spot.
I am afraid not really. The money the rich people have is mostly funny money–promises of things to come, that will never be. We start to believe that all of the pixels representing bank accounts, and other people’s bank accounts, represent real “stuff” that will be available in the future.
We are headed toward a Ponzi scheme type outcome for our investments. It is hard to keep things going in such a case.
Pingback: A New Theory Of Energy & The Economy, Part 1 | ZombieMarketsDevelopment
Thank you Gail, excellent post.
I especially liked “the selling price of a product is the market value of the energy embodied in the product”. Actual price is the result of a power-struggle (so “market value” is important to precise), and we start having problems when this price (ie what customers can afford) becomes lower than its all-included cost.
Also liked “external energy is used to leverage human labor”, which helps to make products cheaper, as long as the energy is cheap.
Both images are quite simple to understand, and very useful to understand the situation and its trends.
Thanks for your vote of support. It seems like a lot of people have made other assumptions about how the economy works.
Pingback: A New Theory Of Energy & The Economy, Part 1 | ZombieMarkets
Pingback: A New Theory Of Energy & The Economy, Part 1 - UNCLE - UNCLE
A big part of the lower price of shoes and goods in general is not technology or oil, but globalization. By simply having people in developing countries make the goods for $1 per day, and without all the regulations for safety, pollution, etc that we have in the developed world, it is possible to make goods at much lower prices.
Whether such a system could exist with sail-powered ships, or whether diesel-powered freighters are required, I don’t know.
“Any change that is made must be small and incremental–adding a few horses at the edge of the city, for example. Trying to add very many horses would be disruptive. Horses would get in the way of cars and would leave messes on the city streets.”
Or rather, instead of doing it bit by bit everywhere, it would work far better to do it 100 percent in a small area at a time – switch one town from cars to bicycles and horses all at once.
Globalization has played a big role in getting the price of goods down, but it has also played a big role in getting wages down, especially for folks who are not in the top few percent of the work-force in earning capacity. In many ways, globalization is a big part of our problem.
Low priced production areas are often in warm parts of the world that don’t need as much heating or as sturdily built homes. Using coal also keeps costs down. So does the omission of health care, pensions, safety, and pollution control. Trying to compete with this just doesn’t work. I don’t see any way of making enough sail boats for more than an occasional luxury product for the rich.
Dear Gail and All
‘the debt system, which is an integral part of the whole system’…and then a note that you will write a separate article on that subject.
Not wishing to raise issues prematurely, but Charles Hugh-Smith writes today on ‘debt-serfdom’, and the parallels between today and the Irish Potato Famine:
http://www.oftwominds.com/blogjan15/debt-serfdom1-15.html
What Charles is describing is also similar to the ‘company store’ in a mill or mining town, or the loans from the bank in town to a very small farmer. There is a realistic scene in the movie The Chase (Marlon Brando and a whole raft of Hollywood luminaries) where a poor black farmer comes into town to talk to the banker about his loan. Written by Horton Foote and screenplay by Lillian Hellman.
I think that advertising is also used to keep people in debt-serfdom. I see lots of low income people driving very expensive cars. The Sales executive at Honda says the loans are suicidal…does financial capitalism finally eat its own tail?
Don Stewart
“I think that advertising is also used to keep people in debt-serfdom.”
Of course it is and that’s the whole purpose of the Ponzi scheme known as fractional reserve banking. You need to make the serfs keep paying into the system. Why is that some of the more lucrative businesses are Payday Loans, Quicken Loans, and JP Morgan Chase going in bed with the Federal and State govt in behalf of the EBT systems? It’s a HUGE business for people who don’t have the money to pay now. Chase bank gets a cut from every EBT transaction. They rake in BILLIONS every year off the backs of the poor and taxpayers.
And the irony of it all is that JPMorgan and all those other big banks didn’t really ever EARN that money that now get interest from. It was printed out of thin air and given to them (loaned into existence and then loaned out again!)
And now the total US debt, both public and private is $60 trillion. That interest has more than caught up to our ability to pay. It’s going to leave a mark when those defaults really start piling up. A skid mark.
Don, Chris Martenson posted a new article which explains the need for debt slaves quite nicely. Hint: It’s required for the system to function
http://www.peakprosperity.com/blog/91558/when-ends-everybody-gets-hurt
I think Chris Martenson listened to what I had to say to him in the interview I had with him last week. I notice that his China graph has a link to my OFW story, as well.
I wanted to get to the debt issue in the current post, but I could see that to do justice to the rest of the story it would not be possible at the same time.
Thanks! A person would think that educational loans would be an “investment in a productive asset.” At one time, they really would be–your enhanced brain would make the loan worthwhile. But now, young people are over a barrel:
(1) Not nearly enough jobs, and very poor pay for those without advanced education.
(2) Even if you do get a loan and go to school, a large share of folks will have bad outcomes–dropping out of school; not being able to find a job in the field; finding a job in the field, but it not paying enough to pay back the loan; temporarily finding a job in the field, but finding that additional retraining is quickly needed, because “technology” is changing–your degree no longer is what is needed.
I did some work on the great famine a while back, and was surprised by some facts. Among others, that event marked the end of an era where famine was a fact of life, not just in Ireland, but throughout Europe.
We see the world quite differently today.
Are you talking about the Great Famine of Ireland, in 1845 to 1852? Do you have any good references of it being the end of an era where famine was a way of life?
To me, that timeframe is about the time that coal started to begin to make inroads. Better agricultural tools could be made, allowing horses to do more of the work (at least for some crops–I am not sure about potatoes). So I could understand that coal was behind this. It would be Europe of course that would be affected. (This could have a downside as well as an upside–people would be put out of work by horses handling more of the labor. But if they could work in factories, more in total could be made.
Also, Malthus wrote his essay in 1798. That was a little before this timeperiod.
That was the famine the Irish refer to as An Gorta Mor. Even today it is difficult to have a detached discussion on the facts. I will try to put something together and reply separately.
No references come to mind on the end of famines, I have noted that there was an earlier famine in the 1820’s limited, if I recall correctly, to the south west of Ireland.
There are other, earlier references, but no famine after 1852.
Matt Simmons many years ago said we have a liquid fuels problem due mainly to our transportation system. We convert a lot of crude to gasoline, diesel, and aviation fuels. If we were to use other forms of transportation and fuels, we might not be having this discussion for several more decades. This begs the question what should we be doing?
His analysis said that the transportation system that will survive will be the ones that can ship people and cargoes with the lowest unit of energy per mile. He pointed first to barge companies, rail companies, and last was aviation companies. I see a lot more people on bikes these days.
I have a stated position on this site as touting electric vehicles. The concept of capturing sun light, storing it in batteries and using that electricity to power a car, heat and power aspects of our homes, and provide surplus energy to the grid is a goal I think we can embrace. Are we there yet? No way. We are making progress. We do have PV cells with efficiencies of around 45%. Batteries such as lead acid held 20 whr/kg and lithium based batteries are currently in the 90 to 180 whr/kg range with announcements of having 3 times as much energy stored in various laboratories. The potential is there.
I have presented calculations on this site that “shows” that the amount of capital spent on the Iraq war, if spent on PV, could drive enough EVs to make us “energy independent” — for a while. I have done some personal calculations that point to the fact that I can produce enough solar thermal to be relatively warm in a SE USA winter. It’s not 100% nor is it 73 degrees year round but it does not involve cutting down our forests for heat.
I like to eat and stay warm. I enjoy my family and friends. I have to ask myself and you all, what do we have to do to as a society to prepare for what Gail has outlined? I can give up driving a car but a bicycle would be a good alternative. I can cut back on fossil fuel usage using PV and various types of solar thermal. I can encourage others who have a knack for electronics and chemistry to find cheaper ways to create PV cells and better batteries. I can encourage those reading these words to change your mindset to be adaptive as outlined by Gail, John Michael Greer, Nicole Foss, Chris Martenson, and others. I can and have grown food. I have yet to make my own clothing, house paints, and other materials
If solar were to replace most fossil fuels, we would only be discussing our global debt problem and not debt and energy. Considering the alternatives to not doing anything, doing something is better.
Has anyone noticed that our politicians are fairly quite on this topic? I wonder what’s up? If “Drill, Baby, Drill” does not work out, what’s **their** Plan B?
“I have a stated position on this site as touting electric vehicles. The concept of capturing sun light, storing it in batteries and using that electricity to power a car, heat and power aspects of our homes, and provide surplus energy to the grid is a goal I think we can embrace.”
The problem is that you need to burn oil and coal to get the electric motors, the new cars, the lithium, the batteries.
Do the batteries plus solar PV system combined have the ability to produce as much energy as is embedded in them, or are you simply storing coal energy at home? Just moving the energy consumption and pollution to China, so you can have nice clean air where you live?
The bigger problem I see is that we do not have enough time to do thorough research and development to make sure we are making solar systems that will actually provide more than they consume.
Yes, so far EVs are not economical and represent a tiny fraction of total vehicle sales.
Now with the crash in the price of oil, EV sales will likely cease growing and contract YoY hereafter.
At the trend rate of growth of EV and total vehicle sales and as a share of the total fleet, it would take until late next decade for EVs to reach 10% of sales.
Moreover, about one-third of total US vehicle sales since 2011 have been financed with subprime auto loans. Without these loans, vehicle sales would be 12-13 million instead of 16-17 million.
The auto-, oil-, debt-, and suburban housing-based economic model is over, and there is nothing set to replace it to permit further growth. The “financialization” that emerged in the 1980s with falling nominal interest rates has reached diminishing returns with “financial repression” and total net annual flows to the financial sector equaling annual growth of GDP.
We are clearly experiencing the structural effects of Peak Oil, “Limits to Growth”, the end of growth, the end of capitalism, and an emerging permanent era of “austerity” and what I expect will be a kind of neo-monasticism or neo-asceticism for the bottom 90%+ amidst increasing inequality, gov’t reaction and surveillance, and fiscal constraints.
If we “only” had a liquid fuels problem, we would be in good shape. It would be even better if we could count on a Hubbert Curve for depletion. Unfortunately, both of this stories are not really true. They have been passed around by the peak oil community.
If order to plan for anything else, we would somehow need to set up a parallel system that could provide for our needs and be served by whatever limited energy we can find in the future. Figuring out government would be a big issue. That absorbs a lot of current energy. Another issue would be importing goods from afar. That would pretty much have to go away as well (unless we can make enough wooden sail boats to handle our needs). I can see why politicians are quiet on this topic.
It seems to me that economic growth has always depended on the discovery and exploitation of new resources — whether those new resources were a new forest, a new hunting ground, a new place to catch fish, new materials that can be mined and shaped into something worth having, or new energy sources.
We really aren’t so much different than the yeast in a petri dish who grow and multiply rapidly into new untapped sources of food and energy, but who end up spoiling every area we grow into to the point where the only end result possible is mass die-off.
Since the age of oil began, new and vast discoveries of oil propelled human civilization into a growth frenzy, and our total population count right along with it. With each new boom came the inevitable bust, but even on the downslope of each bust and in the resulting doldrums, there was ALWAYS a new boom shaping up on the horizon — a new oil discovery to be thoroughly exploited as fast as could be accomplished, injecting a new burst of “wealth” and frenzied activity into the economy.
Today, sadly, we have reached the end of the line. There is no BOOM on the horizon — no vast new source of oil or energy to re-gear for, no hyper economic growth coming that will pay off all the old debt and create a new batch of debt to be paid off by yet some other future boom.
This BUST is the last BUST. We have scraped and scoured planet earth and there is nothing left except the tired old legacy oil fields pumping the last of their once magnificent reserves, and probably a half million stripper wells coughing up a barrel or two per day. The fracking boom was the last boom, and the bust we are seeing now will be the last bust.
I suspect that as the financial system, completely incapacitated by the lack of new vast quantities of oil coming online, will simply creak to a halt and fall over at some point in time. We see that happening now. The signs are unmistakable. Where will you be when BAU violently unwinds — that hollowed out economy collapses on itself — leaving a puff of noxious smoke where it once existed?
“Where will you be when BAU violently unwinds — that hollowed out economy collapses on itself — leaving a puff of noxious smoke where it once existed?”
I suppose that depends on where I need to be, which depends on how the collapse plays out, not only globally, but also locally. Does it play out in a major war? Do we wake up one morning to find that the banking system is frozen, accounts and retirement accounts have been largely cleaned out except for a pittance? Do supply chains break suddenly, or a little bit here, then a little bit there? What happens to the rule of law?
Where you should be when BAU unwinds is something that you should be very flexible on. I’d prefer to stay right where I am, but if I need to go hide in a remote cave, I know where to find caves that are both remote and have water. Having some flexibility in your thinking will be necessary, IMO.
Paul, is that you?
I think part of it too is that even now, when we do discover large amounts of new oil, as in the shale states, the direct and indirect costs of extraction are so high that all of the benefit of the oil now stays in the shale states. Nothing is left over for the rest of the United States and the world. If the cost were only $20 barrel, we could get that same oil out. The shale states would have much less benefit–fewer workers, drilling rigs, less in royalties. But the rest of the economy would have the benefit of the $20 oil to use. It is as if the $100 oil absorbs all of the benefit of the oil, right where it is drilled, in new bigger houses, new grocery stores, new schools. The rest of the economy loses out.
People can and do move for greater opportunity whether agricultural land or jobs in the oil patch. The “putting down” or holding back of more productive areas doesn’t do a thing for less productive areas sans transfer payments (un-earned?). Some areas choose to not tap their local resources such as NY and shale formations.
It does if we are dealing with constrained oil supply and other resources that may be constrained as well. The system is sufficiently complex that it is hard to see the connection, however. What happens is that the use of excessive resources has an impact on world oil prices and (because of world oil prices) world wages, so that the effect is that there is enough oil to go around, given the system as it is currently optimized. Theoretically, cancer growing in your body isn’t a problem; you can just eat more. But it really is.
Pingback: » A new theory of energy and the economy – Part 1 – Generating economic growth Olduvai.ca
http://www.technologyreview.com/news/534266/hawaiis-solar-push-strains-the-grid/?utm_campaign=newsletters&utm_source=newsletter-daily-all&utm_medium=email&utm_content=20150120 Has a piece about Kauai, Hawaii’s attempts to use & store solar-PV-generated energy, for their power grid — they haven’t made it work YET (of course), but, the underlying questions of how such a thing could “scale up” in the world (e.g., getting & transporting lithium from places like the Andes), without the fossil-fuel-based infrastructure, don’t get asked in that piece.
Although lossy, it seems to me it would make more sense to use the surplus electricity to pump water uphill into a dam and use hydro when there is not enough sunlight or demand surges.
Actually, other than the environmental damage and impact on tourism, it seems Hawaii could use more hydro anyways, since they have mountains with the most rainfall in all the world at something like 6 meters per year of rain.
They also seem good candidates for geothermal, and for using cold deep ocean water cooling to replace air conditioners.
Yes, and also what about wave and tide turbines?
“Yes, and also what about wave and tide turbines?”
The reports I’ve seen, wave and tide power is somewhere in the $0.25 to $0.50 per KwH range, about triple solar and five times coal or hydroelectric. Perhaps a massive investment in R&D would eventually bring that price down, but for now it is massively expensive compared to other sources of electricity. Hawaii would be a good candidate for those as well.
Wave and tide power machines are subject to huge surges in water forces. They tend to degrade quickly. I see this process as close to building shale wells. You need to keep building replacements all the time, or the process cannot work for very long, regardless of what the cost might be. You also need the whole rest of the economy (including oil) to support the process. I see these approaches as ways of generating a lot of revenues for academic papers, but not of much use otherwise.
I think tidal power has become complicated due to its interface to civilization. When the non-negotiable design factor is to interface to the electrical grid, a lot of things look impossibly difficult! “Appropriate technology” tidal power need not be so complicated.
Every dock made has to go up and down with the tide. It would be a simple matter to put a simple rack-and-pinion mechanism on the dock that would translate linear motion to rotational motion. That rotational motion could then pump fresh water, grind flour, move heavy objects, etc.
A good source for such ideas is Low Tech Magazine. Did you know that there were once networks of kilometres of mechanical rotating wooden shafts, used to pump water out of mines, using distant natural energy sources? It’s fascinating stuff, and it’s gratifying to see concrete examples of how humans utilized appropriate technology before fossil sunlight exploitation.
I like Low Tech magazine. I was the one who contacted Kris de Decker and talked him into letting The Oil Drum repost some of his articles there. One quote I saw about stoves from his site:
This doesn’t relate to your comment, but it does relate to my earlier comment about electricity not being all that efficient a way of delivering heat energy.
It took a while to lift LED lighting to near its theoretical maximum, maybe something similar can happen to solar pv:
http://nextbigfuture.com/2015/01/basic-science-shows-graphene-has-long.html
“The scientists used “doped” samples of graphene, which means that they added or subtracted electrons from it by chemical means. The experiment revealed that, when doped graphene absorbs a single photon, this can excite several electrons and do so proportionally to the degree of doping. The photon excites an electron, which then rapidly “falls” back down to its ground state of energy. As it does so, the “fall” excites two more electrons on average as a knock-on effect. “This indicates that a photovoltaic device using doped graphene could show significant efficiency in converting light to electricity”, says Marco Grioni.”
This is a shorter link to the article. http://www.technologyreview.com/news/534266/hawaiis-solar-push-strains-the-grid/
They need batteries or something to balance the load, but so far batteries don’t work well enough. Of course, no one figured out the whole cost before attempting to go this direction.
Dear Gail, I’ve been touching this topic
http://ustednoselocree.com/background-climatico/otros/hasta-que-punto-es-inminente-el-colapso-de-la-civilizacion-actual-indice-tentativo/to-what-extent-is-global-civilization-collapse-near-summary/
in the last few days, and I guess you will appreciate it. You’re comprehensively quoted. Can read your text tomorrow. Best regards.
Thanks for the link. I need to learn Spanish.
Based on numbers that I have access to 70% of all fuel consumed in USA is used for transportation. Of the fuel consumed for transportation, 65% is consumed by personal vehicles.
From the perspective of dissipative structures in biological systems, I think that this would be best illustrated by cancer cells in a tumour…
Is there analysis for “core” industrial fuel use for industries such as agriculture, manufacturing and military?
Further comments…
The graph for figure 3 is quite “thin” on logic. A better graph would show population, production/use of antibiotics (and perhaps a few other medical innovations) and world agricultural production. Otherwise it is open territory for people to point out the most extravagant users of fuel typically have much lower population growth (and population) than those who consume the least fossil fuels.
Perhaps a better way to approach the topic of modern economy would be taking a look at a few case examples of countries (perhaps the top, middle and lowest on the chart of agriculture) and seeing what would impact their economies the most. For example, the US losing a lot of fuel import (say, due to massive problems in Mexico and simultaneously in the ME) probably would impact a lot of the frivolous driving. But “there’s an app for that” problem in that people could start riding transit, using bikes and even carpooling (using an Uber-like app)…A hack attack that takes out electronic banking would likely have a far greater impact.
Globally the effects of multi-drug resistant bugs (particularly since we are now using human antibiotics on fish and other animals) is likely far worse impact than losing a large amount of global oil production. The effects of climate change are also likely now more important an effect on food production.
The question is perhaps: how leveraged has the fuel use in a particular country become? While economy might seem like the Leonardo sticks perhaps it is more like a mess of sticks in Kerplunk?
We are not talking about a change that somehow nicely allows economies to “use less”. So I expect all economies of the world will be close to equally affected. Perhaps some in Africa and parts of India are far enough removed, but once we become dependent on the system, anything that breaks it is a problem.
If we look back to before fossil fuel use, world population grew very slowly. Fossil fuel use allowed the rate of growth to speed up, primarily by letting more children live to maturity, and by letting more old folks continuing to live. Better nutrition and sanitation played a big role in this–medicine, except possibility for antibiotics, a much lesser role. Once we have lots of energy, people can afford birth control. Governments make lots of promises that they will take care of citizens in their old age, implying that they don’t need children to take care of them. The minor detail is that governments can’t really do this, but it is the promise that gets people to cut back on number of children.
To some extent, the cutback on number of children today reflects the fact that many young people today are too poor (after student loans etc) to afford to have a family. Wages are too low. It is really a sign of collapse not being far away.
Hi Gail,
First, I agree with your general analysis as well as your assessment of the final outcome: collapse is not far away. However, I do think if you are going to perform an analysis of this nature that it be something that really is solid. I still think that simply overlaying oil usage and population is not strong enough to really convince people; I also think that by looking a bit deeper some of the real weaknesses of “industrial civilization” may be exposed.
Data such as these ( http://blogs.berkeley.edu/2011/11/02/lost-children/) show a distinct knee in the graph for infant mortality. That knee definitely seems to correspond to increasing oil usage but also to things like increasing use of antibiotics, access to hospitals with well-trained personnel and general improvement in supply chain for these hospitals. Definitely all are emergent from fossil fuels but I think is would be good to clarify how solid these “threads” are to the fuel use.
Have you seen this paper by Turchin?
http://isites.harvard.edu/fs/docs/icb.topic1123356.files/Peter%20Turchin%20Paper.pdf
The question, in my mind, is where energy links in with events he’s mapped which should really drive home the point of where things are at for BAU. See also Martin Armstrongs predictions for “big bang” starting in 2015 with major troubles going along to 2020 (http://armstrongeconomics.com/2014/12/07/big-bang-2015-75/) in that this problem is not confined to just USA but is global…
I am not really talking about the issues that these folks are discussing.
I am talking about reaching limits of a finite world. In particular, the cycle of economic growth turns to something that is more like a Ponzi scheme in the way it operates, as economic growth evaporates. In fact, we seem to already be pretty much at this point–it is only financial schemes that have kept the world economy afloat. At some point, even these start to give way–which is what is happening now. With the large amount of derivatives and other financial products currently being sold,what is likely to happen first is many defaults related to these products. We can’t know for certain how these will flow through the system, but most countries are up to their ears in debt already. They can’t afford to do a bailout that is bigger than 2008’s bailouts. They are likely to haircut bank accounts–either of employers or of consumers. Either way, it will be a big problem, and start a bad downward spiral.
“To some extent, the cutback on number of children today reflects the fact that many young people today are too poor (after student loans etc) to afford to have a family. Wages are too low. It is really a sign of collapse not being far away.”
https://app.box.com/s/75sa0oswimkdphhdia5g
Indeed, Gail. I invite you and readers to see the link above for the rate of change of deceleration of the 10-year change of world population. By no later than 2020-21, the rate of deceleration will achieve a first order exponential decay from the peak in early to mid-1970s***, implying an accelerating decay rate thereafter, meaning that world population will peak as soon as the end of this decade or early 2020s, with population commencing a decline by the mid-2020s.
Consider the myriad coalescing factors we face that will coincide with the peak of world population in the next 5-6 years and the decline thereafter. The human ape population will not reach anywhere near 9 billion as the UN anticipates.
***It will have taken ~50 years for the first order of exponential decay to occur from the 1970s, whereas it will require as few as 5-6 and then no more than 2-3 years for the second- and third-order deceleration regimes before population declines.
yuri
I think that you are on to something, here, with your question about “core” fuel use. Not necessarily a command economy, but one that refocuses effort on maintenance of vital functions of a civilization. If you eliminate trivial motoring and the manufacture of useless cheap plastic junk, the economy may shrink and people will be hurt by it, but a FF-based civilization may be sustained for decades if not centuries to come.
I think too many people think our problem is a liquid fuels problem. It really is a broken financial system problem, which comes from the limits we are reaching that happen to include liquid fuels. It is hard to see how a new system would be any better, though. The new system would need debt as well, and it wouldn’t work any better. The thing that looks likely to break is the banks and the financial system. It is hard to pay workers without banks.
“The new system would need debt as well, and it wouldn’t work any better.”
Why must a system be based on debt and not savings? It would be slower to accumulate the initial energy, but without the burden of compounding interest, it seems it would be more stable and not require growth?
I will try to explain that in another post.
Basically, we are always behind in the process, so debt is absolutely essential to the system. Accumulation of metal products and other goods that represent real value is incredibly slow, if all an economy has to work with is charcoal made from burning trees. It is difficult to make more than a few metal tools using charcoal from trees, without causing deforestation. Farmers find it difficult working with wooden plows. Most of the population must work at growing and processing food, when tools are this limited. Heat energy is particularly needed, and supplies of this from wood are very low. Wind and water power don’t provide them either–they provide mechanical energy. Solar from the sun is too diffuse.
In order to set up a system that will create goods or get an accumulation of wealth, in the form of goods that can be used for making products or generating electricity, we need a combination of energy products from the ground plus other resources that can be used with the energy products, like ores to produce steel. These can be used to make things such as modern hydroelectric plants, factories, and even nuclear power plants, wind turbines, and solar PV.
In order to afford all of these resources, the only approach is debt. This debt is at many levels–for the ultimate consumer of the product to be able to afford the new car or house; for the businesses in the supply chain to be able to put their businesses together and operate them; and for the company extracting the ore to extract the oil. There may also be a need for government borrowing to afford to put in roads, to facilitate the whole operation. Of course, as new workers are added to these businesses, they will take the income they gain, and use it as a basis for new debts as well, such as mortgages on houses. (Making new renewables, such as solar VP, is even worse than fossil fuels for requiring a lot of debt.)
As long as the gains the economy is getting from economic growth are great enough to service all of this debt, the economy is in reasonable shape. The problem is that diminishing returns sets in, in many ways–not just in the extraction of oil, but also in the extraction of minerals, and in obtaining fresh water (among other things). True economic growth starts falling, and it becomes harder and harder to service the debts. More and more of the money goes to the “rentiers” as interest. Businesses take a bigger share of the total. Governments find more calls for their services, and take more of the total. Wages for the folks who will ultimately be consumers of the products fall. Governments try to cover up the problem of inadequate wages in whatever ways they can–particularly low interest rates and more debt.
At some point, the whole system of economic growth allowing the repayment of debt with interest stops working. Instead of being a virtuous circle, of more debt allowing more economic growth, it becomes a vicious circle. An investment of $1.00 pays back less than $1.00, say $0.98. If someone were planning the process, we would call it a Ponzi Scheme. More and more investment is done, but because of diminishing returns, it is not even possible to earn back the amount invested. Banks start charging for holding your money. Eventually the financial system collapse. I expect defaults on derivatives and other financial products will play a role in this.
There is also the issue of intergenerational debt. This is not really an issue, if as soon as grandma and grandpa stop being able to contribute enough to the economy to pay for their own well-being, they are simply left behind, the way the hunter-gatherers abandoned those who were unable to keep up with the group. If the elderly are promised retirement income and health care, this sets up a form of debt that the younger generation must pay to the older generation. To some extent, this shows up in savings for pensions. These “savings” are really mostly debt-based, though. Otherwise, this debt is funded on a pay as you go basis, so as you say, it doesn’t have the interest “problem” of other debt. But it is still a major problem, when the economy shrinks.
“In order to afford all of these resources, the only approach is debt.”
What about financing through equity instead of debt?
Also, would it work much different with simple interest instead of compounding, and with direct loans from person to person or company to company, instead of loans through fractional reserve banking?
It doesn’t work. There is not enough equity built up without more and more use of fossil fuels. And even then, debt is needed. I will explain in a post.
And debt without interest, as in intergenerational debt (aka Social Security and Medicare for grandpa and grandma) is a real problem as well, even without interest charged.
“There is not enough equity built up without more and more use of fossil fuels. And even then, debt is needed. ”
How can there be resources for debt, but not equity? In both cases, the funding comes from someone’s savings.
Whether a person buys bonds in a company to enable it to go about its endeavor, or whether the person buys stocks, I don’t see how it is necessarily different. The key difference I see is that the consequences of reducing the dividend are far less than skipping an interest payment.
If the company is not making money, it is a huge problem, whether the financing is debt or equity. We basically have something pretty much like a Ponzi Scheme to deal with.
This is an excellent point, Gail. It really isn’t a liquid fuels problem, but a financial one. It all comes down to finite resources and its interface with the built economy.
Yes. If we didn’t have a built economy that expects paved roads, grid electricity, trucks and today’s jobs, we would have much less problem.
From the physical point of view, we can say, that the debt is the distance in time and space. E. g. somebody, who gets a mortgage, sets out on the road to achieving the defined real estate. To overcome this distance, he needs resources and energy. The resources include not only metals etc., but also human resources. And energy includes not only oil, but also human energy. It means, that other people allow this person to achieve its own home under certain conditions. Otherwise he or she does not get it, i. e. does not reach the end of the journey.
That is why the debt can not be overcome by printing more and more money, as the diminishing ability of the money to transfer resources and energy makes paying the debt impossible. This diminishing ability of the money to transfer resources and energy is also responsible for the fact that we have more and more super rich people, the dwindling middle class and ever bigger group of the poor.
The deflation means, that the ever increasing amounts of “printed” money pumped into the economy can not keep pace with the fact that the ability of the money to transfer resources and energy is going down. It is like the diminishing efficiency of the money. (That is why ability of the money to transfer energy and resources is more important than the ERoEI of oil. We still have huge amounts of coal and human resources that can help us reach also the uneconomical oil.) The diminishing function of the money (or gold or other precious metals or stones) does not save anybody from the deflation.
The physical limits simply stop the transfering power of the money. The money, gold etc. is hoarded, but has ever decreasing value as regards achieving new goals. i. e. breaking the limits.
http://theeconomiccollapseblog.com/archives/the-velocity-of-money-in-the-u-s-falls-to-an-all-time-record-low
We need resources (also human resources) and energy (also human energy) to overcome the limits of the physical world. When we do not have them, we have reached the limits…
Thanks! I think part of the problem with money is the fact that so much of people’s current income is already pledged for one thing or another: car payments, house payments, mandatory health insurance, student loan repayments. There are wealthy people with a lot of paper assets, but as a practical matter they don’t have much need to buy very much on day to day basis. After all, they can only eat the same amount as the rest of us, sleep in one bed at a time, and wear one set of clothes at a time. There is a limit to how much “stuff” they can accumulate. The majority of stocks/bond/savings is designated for “retirement,” often in 401k plans, or in pension plans. It can’t be spent either.
The EIA has numbers that are fairly confusing. The total energy consumed in the US is something like 98 quads per year considering coal, natural gas, oil, biofuels, etc. Of this 27 quads is transportation fuel. Of the 27 quads of transportation fuel, about 16 quads is gasoline (ex ethanol additives), and about 6 quads is diesel.
I prefer to look at “heat content” charts, because then the numbers can be compared across sectors. This is some places there is some data. http://www.eia.gov/totalenergy/data/annual/index.cfm#petroleum
http://www.eia.gov/totalenergy/data/annual/index.cfm
Brilliant, Gail. Thanks.
A bit of arcane information related to the post:
https://app.box.com/s/vgdd8qqkw4s23dd7y0gumlgmdppevx4g
Adjust the value of US “oil” production for the change in the money supply (M2) and population, and the adjusted value of US “oil” production is where it was 40-50 years ago, and it’s down more than 50% since 1959-60. That is, the M2-adjusted, per capita supply of the primary energy source for the US economy and society is no higher than in the mid- to late 1960s to mid-1970s.
It should be no surprise, then, why real wages for the bottom 80-90% are no higher than 50 years ago. Those in the top 1-10% who have seen net gains in compensation over the same period received the bulk of the gains from the effects of the growth of debt to wages and GDP and the resulting “financialization” of the economy, i.e., gains to income from interest, dividends, capital gains, pass-through income, and fees for services from the financial and other “financialized” sectors, including health care and education (“financialized” via the insurance industry for the former and student loan debt for the latter).
For the vast majority of American households, their purchasing power after taxes and the increase in the cost of living is no higher than in the 1960s; for Millennials coming of age, it’s even worse.
Given the adjusted value of US oil production and the level of debt to wages and GDP and associated wealth and income inequality and its effects, our domestically produced primary energy source is insufficient to sustain even a 1960s-like, real, after-tax purchasing power for the bottom 80-90%, let alone increase it hereafter.
Eventually, if not already today, the value and supply of our primary energy source per capita will be insufficient to sustain the current production of the energy source, which will mean a further decline in available liquid fossil fuel net energy for the economy, a reduction in the real, after-tax available income and purchasing power of the bottom 80-90%, and thus a reduction in the overall standard of material consumption and standard of living.
Without the sufficient amount and growth of primary energy, there is no way we will be able to afford in net energy terms to build out a renewables/alternative energy infrastructure to necessary scale AND grow or sustain the economy AND simultaneously sustain the existing fossil fuel infrastructure indefinitely hereafter.
Finally, the growth of unprecedented debt to wages and GDP did not create REAL “productive wealth” for the bottom 80-90% or for the society over the past half century but rather a MASSIVE rentier claim on production, wages, profits, and gov’t receipts by the top 0.01-0.1% to 1% in perpetuity, a debilitating constraint that will preclude growth of real GDP/final sales per capita indefinitely hereafter.
Excellent analysis! Shorter: we’re truly screwed!
LOL! James, I need you as my editor. 😀
Wouldn’t you use US oil consumption, rather than US oil production, in your analysis? After all, consumption represents what folks can afford.
It is also tied in with job use.
Yes, good suggestion, Gail, but my intention was to show the relative CAPACITY of what we can afford domestically TO PRODUCE at a given cost and supply that we can implicitly AFFORD to consume.
We first have to be able to afford to produce domestically what we consume as a final product for firms, households, and gov’t at a price we can afford to produce profitably domestically AND consume to sustain our living standard.
I hadn’t thought about it that way.
An Actuary explaining economics is like having your auto mechanic remove your appendix.
Attend your local junior college and take an economic and physics class. Get a real education.
An economist explaining economics is like a voodoo priest performing voodoo.
Straight Thinking in Economics
Straight thinking is hard work. Few of us have acquired the careful, orderly mental habits and discipline demanded by straight thinking. For many people straight thinking is especially difficult in economics. Not that economics is inherently more difficult of more complex than many other fields. But economics is so mixed up with our everyday lives that, without realizing it, we have accumulated a mass of opinions, ideas, hearsay and half-truths that subtly dominate our minds when economic questions arise.
Also, Economics is not a real science with repeatable tests and results except very small tests with small groups of people testing for very specific things. There are several schools of Economics, each with their own doctrines and perspectives and solutions.
Social scientist, unfortunately can seldom controlled experiments to validate theories. So how can economists be sure their theories are right?
The answer is that when they state a theory they then go out into the real world to see how well it works.
It would seem according to several academics in the know that many economists are unable to do this.
Daniel Kahneman, Steve Keen, Charles Hall, David Murphy (astrophysics, I know you like physics as well!)
As for beliefs and opinions, we all swim in a see of them and by their very nature we often miss our own assumptions (see Kahneman)
ps I still not clear what the specific issue(s) that you have with Gail’s post are?
Unwilling,
To start with, devices, humans and animals are not energy in the context of economics and physics, unless you want to burn them as a heat source which is not the context here. They consume energy, produce waste, transfer energy and made products.
In economics humans are labor. Animals and devices are capital which all can be used in the production of goods and services.
Maybe the division is arbitrary, and wrong for understanding what is really happening. The various types of energy I describe are substitutable. Capital is embodied energy.
“Capital is embodied energy.”
Are you talking about physical capital, such as factories, machines, and such?
A lot of very smart people seem to think “capital” is little bits of coloured paper, or even invisible magnetic bits on a spinning disk. But I think that’s where the second half of your essay (debt) comes into play.
It would be nice to have some simple term-of-art to distinguish between the two forms of “capital.” I agree that physical plant is capital. It may even be that, pre-Bretton Woods, money was an adequate symbol for capital. But it seems to me that there is way more money around than there is physical capital these days.
I am thinking about physical capital such as factories, machines, and pipelines. It would include computers too, but not colored paper, or bank balances.
“when they state a theory they then go out into the real world to see how well it works.”
Want to know the difference between science and economics?
Science uses mathematics to predict the future; economics uses statistics to predict the past.
Economics is a pseudo-science, at least the way it is practiced. Most economists include neither debt nor resource scarcity in their models. That’s why economic crises hit and they start bellyaching that they never saw it coming. Their models don’t match the real world, but policy is made based on the assumption that they do.
Had you had ever attended a beginning level economics course. You would know scarcity is the corner stone of economics
Yes, I have. Tell that to the economists at the fed who completely ignore it. Everything today is about aggregate demand, not supply constrained models.
All resources are supply constrained. That’s a given. It’s assumed and you shouldn’t have to be reminded every time you here something from an economist. Did you miss the first day of class? Also, the study of economics doesn’t guarantee the continued increase in standard of living. You have just become accustom to it from your perspective of past economic success.
You need to spend more time reading mainstream economists to see what they say. Read some Krugman, Bernanke, Friedman, Keynes.
Yet the models used by the people making policy decisions don’t take supply constraints into account beyond a very narrow view that unwisely assumes that more capital always means more resources.
Economists endorsed the idea of globalism after it became apparent that without it, national economies could no longer grow. Globalization is going to kill us because it removes from local control the basic production of necessities. Speaking of economics, here is part of a post on The Automatic Earth from yesterday concerning the Davos crowd and the World Economic Forum:
“When it comes to basic necessities, to food, water and shelter, we shouldn’t strive to compete with other economies. That is not good for us, or for our peers in those other economies; it’s good only for those who skim off the top. The larger and more globalized the top, the more there is to skim off. All the ‘reform’ is geared towards making our economies ever more dependent on the global economy. And that is not in our best interest.
It’s not all just even about money, it’s about our security, and independence. Everybody likes the idea of being independent, but at the same time few realize that globalization is the exact opposite of independence. Global trade is fine, as long as it’s limited to things we don’t need to survive, but it’s not fine if and when it takes away the ability of a community or a society to provide for itself.
Protectionism has acquired a really bad reputation, as if it’s inherently evil to try and protect your community from being gutted by economic ideas and systems it has no defense against, or to make sure it can generate and provide for its own basics at all times. But that’s just propaganda too.
If our societies are not designed and constructed to provide for themselves, they’ll end up with no choice but to go to war with each other. Along the same lines, if our societies don’t have strict laws in place that guarantee we can’t and won’t destroy the natural resources of the land we live on comes with, we’ll also end up going to war with each other.
We’re not going to solve the Gordian knot of the entire global economy and all the hubris and propaganda the present leading politicians, businessmen and ‘reporters’ bring to the table. And we probably shouldn’t want to. Our brains did not develop to do things on a global scale. The clowns will blow themselves up sooner or later. We should focus on what we can do, meanwhile, in our immediate surroundings.
And it’s pretty easy from there, really. The economic problems we have are mostly artificial. They have been induced by the broken economic model the Davos crowd, the central bankers and you know who else would have us believe is the one and only, and that they are busy fixing for our sake and greater glory. But they care only about their own glory.”
On the other hand, without the growth that was obtained from globalization, the financial system would have collapsed earlier. So in some sense, we are better off, even if it is not sustainable.
The US started hollowing out its manufacturing not too long after the oil problems of the 1970s. Japan came first in globalization, before the other Eastern countries.
Liquid Assets,
Economists run the Federal Reserve Bank and all the central banks in the world. How has their “straight thinking” worked out? Has the world ever been in such a fiscal mess before? How have all of those over-educated PhDs in Economics done better than an Actuary could do? Economics is the dismal “science” in part because it is predicated on the assumption that their can be infinite inputs into the system. Before you insult Gail and suggest she get a “real education,” consider that this whole edifice of “Economics” and endless growth is based on and within a finite world.
InAlaska,
Two perceptive posts you wrote. Thank you.
I would like to add this post. I think most of you will appreciate. I sure love this post….
By falak pema
Economics is a means to achieve an end, like language.
So linguists are capable of understanding the logic of communication for DECISION MAKING; whether it be in words and intellectual concepts or in numbers/statistics and algorithms.
The issue here is that perfect markets like perfect speech do not exist for themselves in society, except for the “initiated”, but have a different function as a VEHICLE for body politic; which defines the AIMS and uses the means, all the means : of language as of images and of statistics and mathematical constructs.
So the thesis of the Mises/Hayek type Shamans that Economia is the “be-all” of society is just wrong. No more than the works of Shakespeare or Hugo, or of Picasso etc.
They do not define politics and power in society. They may influence it but they don’t define it’s objectives.
Linguists like economists can add substance to a political construct that defines the power play in civilization. And in that respect markets are just a means and their perfection as important as a perfect face on the screen.
All imagery or conceptual work in life is virtual.
It becomes real when it faces the real world of power and its continual balancing act; facts and irreversible acts that define our future as they have our past.
Chomsky is more relevant today to society than Mises.
The first analyses real political acts and consequences the other confines himself to theoretical pontification about the real economy looked at through the lens which keeps referring to the mantra of perfect markets.
Not saying markets are not important just saying they are not ALL important.
For the Mises theory to become reality we would have to live in a perfect “anarchy” state without government. The last time they wanted the state to “shrivel away” it was called the “ultimate step of communism” and it parented Stalinism. So…you have to know what you wish for in the REAL world.
History says you are wrong. You keep harping about a system that has gone off the cliff twice because of market forces being spiraled into Vesuvian eruption under irrational exuberance and greed and thanks to lack of Government regulation : in 1929 and 2008.
You are into DEEP denial of historical FACTS.
The historical thread shows us neo-feudal oligarchs are just as destructive of wealth creation as are statist hegemonists.
The only realistic solution is to balance state power and private oligarchy power and make sure NEITHER is in dominant position by having transparent control of public and private spending and by ensuring due diligence and SANCTIONS.
Today we have a Mussolinian economy of crony collusion between statists and oligarchs. We have the worst of both worlds.
We need good state governance and non monopolistic private sector innovative investment, compatible with “general good”, that does not run us off the cliff in mad speculation nor poison the planet.
The GDP should be run on an equitable basis between both power structures.
Whether this divide is 30/70 or 50/50 between private and public and how its used and how its controlled and monitored is the role of the Republic. And it should be debated and then voted and then executed in a legal framework which is NOT CORRUPT.
http://www.zerohedge.com/news/2014-08-24/you-cant-run-economy-spreadsheets#comment-5138074
———–
Economics is politics. Politics is war by other means. War is the business of empire (hegemony). War is good business for imperialists.
Therefore, economics is the intellectual and political rationalization for the business objectives of imperial expansionism, expropriation, and co-optation of client-states’ elites by means of state violence when necessary, which is more often than not when resources become increasingly scarce and the hegemonic frontiers of expansionism are threatened.
Yet, most Americans do not yet perceive the US as an empire (successor to the British Empire), not surprisingly, which would necessarily require the inference that empires peak, decline, and eventually collapse, and we have been in relative decline since the 1970s-80s, which most of the working-class bottom 90% would have to concede were they honest with themselves and their fellows. And, no, McConnell, Romney, Rubio, Paul, et al., care not about the working-class bottom 90% but themselves and those deep-pocketed Republicans who cut the largest campaign finance checks.
But one suspects that the 80-90% of the population who were slaves during the Greek city-state dominance and later Roman Empire neither perceived themselves living in the context of imperial decline and incipient collapse, as their daily life experience was preoccupied with acquiescing to their imperial masters’ demands and the imperative to survive and thereafter subsist within their circumstances, if they/we’re luck . . ., or not.
https://www.youtube.com/watch?v=98AJUj-qxHI
Same as it ever was . . .
An atheist attending a seminary school is probably more useful than a rational person attending a modern neoliberal economics class.
Economics is the study of how the goods and services we want produced and how they are distributed among us. This is called economic analysis. Economics is also the study of how we can make the system of production and distribution work better. This is called economic policy.
Another slightly different definition of economics favored by may economists is the study of how our scarce productive resources are used to satisfy human wants. This definition emphasizes two central points. First, productive resources are scarce (in the sense that we are not able to produce all of everything that everyone wants for free, thus we must “economize” our resources). Second, human wants, if not infinite, go so far beyond the ability of our productive resources to satisfy them that we face a major problem in trying to make the best possible use of our productive resources.
Junior College, the only institutions in which economics classes belong!
That fits in my parameters!
Robert Malthus, one of the first economists saw economics as a dismal science. He predicted that population growth would persistently out run the earth’s capacity of feed it. So that man’s standard of living would seldom rise much above the subsistence level.
That was 200 years ago.
http://en.wikipedia.org/wiki/Thomas_Robert_Malthus
It seems it was Thomas Carlyle in response to Malthus
” He predicted that population growth would persistently out run the earth’s capacity of feed it. ”
And without petroleum based fertilizers, he would be correct. While any problem may be miraculously overcome by a revolutionary technology, I do not think it is good policy to simply believe that any disaster will be averted by a last-minute breakthrough.
And yet from the beginning of man, revolutionary technology has advanced man kinds standard of living and you sit at the keyboard of a computer not in a cave.
It has been a bumpy ride, not all ups, and the fact that we are higher than we were during the paleolithic by leaps and bounds is no guarantee. Past performance is no guarantee of future returns. Either we find a replacement for oil (oil, not coal or natural gas, but oil,) or we will settle into a much less energetic lifestyle. Those are our choices, and the former may not be a realistic choice.
Yes, but most of the innovations enabled growth; they were not there to save humanity from mass die-off at the last second.
It may yet happen, but I do not think blind faith in technological innovation is a good policy. Better to be pleasantly surprised than shockingly disappointed.
“Robert Malthus, one of the first economists saw economics as a dismal science”
Uhm, Malthus was a theologian, and Thomas Carlyle coined the phrase “dismal science.”
Got any more “junior college” wisdom to share with us?
My article on Why Malthus was Wrong has been very popular.
http://ourfiniteworld.com/2012/12/12/why-malthus-got-his-forecast-wrong/
Thank you for reminding us of that, although it seems the title should rather be, Malthus wasn’t wrong, he was just off by a few centuries. Through that article, it was good to find Garrett Hardin’s analysis of Malthus’s “Feast” paragraph that only made it into the second edition.
Malthus was not wrong, he was right. The reason for that is, the Earth is finite and has limited resources. The human population has reached 7 billion. If it continues to grow, or even if it doesn’t, it will exceed the ability of the Earth’s remaining land base to support us. In fact, it already has. Several of the Earth’s planetary limits have already been exceeded and we are cannibalising what remains of the Earth’s surviving natural resources just to keep going. What I mean is, we are using up the very resources that we rely on as a species to survive into the future. And at the same time, we are making it impossible for much of the rest of life on Earth to survive, which is why so many species are going extinct now and most will be wiped out before we are done.
For those of us living in the developed world, it is hard to picture this, because we are living off the exploitation of resources and labour in less well off countries.
There are also glaring examples of excessive exploitation in the developed world. For example, in California, which leads the world in the production of almonds, walnuts and pistachio nuts, there is not enough surface water available to supply the industry and so nut farmers are irrigating their crops using underground water. With the ongoing drought in California, the underground aquifer is not being recharged, so it won’t be long before the nut farmers run out of water and the industry goes bust. It will go bust and it will also leave the aquifer dry, with no possibility of refilling with water while the drought lasts, which could be for years or forever.
I read Garrett Hardin’s “Tragedy of the Commons” back in Ecology 101. I found it much straighter thinking than Economics 101.
“That was 200 years ago.”
I would say that was 0.2% of our existence as humans, ago.
Someone needs to figure out what is really going on.
A friend of mine who worked at NIH noted that breakthroughs usually came about from people outside the subject area. For example a dentist might make a very important cancer finding. This is because an outsider is not plugged into the current thinking ( which may be leading to a dead end.)
As an example, Jane Jacobs, who only had a high school education, completely redirected urban planning.
Whatever you think of Gail, she was not part of the misdirected herd thinking that dominated economics before 2008.
I have posted a link previously to my post that foresaw the 2008 disaster: http://www.theoildrum.com/node/3382
I sent links to a few economists I have corresponded with (James Hamilton, Steve Keen, and Kent Klitgaard). Let me know if you think of others I should send links to.
Liquid Assets,
Go easy there cowboy.
Research Says: Studying Economics Turns You Into a Liar
http://www.theatlantic.com/business/archive/2012/12/research-says-studying-economics-turns-you-into-a-liar/266423/
An actuary explaining economics is like a mechanic explaining how your car works. An economist explaining economics is like a car salesman explaining how your car works.
There’s a lot to be said for working in the grease pit where your paycheck depends on results not claims and predictions you are never held to account for.
Way too many economists work for politicians. They seem to produce the results the politicians would like to hear–hot unlike a car salesman.
Yay! I’m somebody now! Gail replied to me. Kidding but you do know you’re somewhat of an internet celebrity right?
I reply to a majority of commenters. I actually learn things from commenters.
I am not sure how a celebrity is defined. There are a lot of folks who don’t know about my writings.
FrY10cK,
I am affrad that majority of the people do not understand what Gail is writing about. Even a lot of commenters here do not understand all of the consequences, as the subject is new to them or do not know all of its aspects. Being a fan and have a deep knowledge based on the scrupulous study are two different things. And the latter is not reserved for everybody due to numerous and numerous reasons.
Mainstream economics are the 20th Century version of Astrology 😉
“Eni warns oil may shoot up to $200 without Opec cuts
Italian oil group Eni has warned oil could shoot up to $200 a barrel if the Opec cartel fails to cut supplies.
Eni’s chief executive, Claudio Descalzi, said the oil industry would cut capital spending by 10-13% this year because of slumping prices.
He said that would create longer-term shortages and sharp price rises in four to five years’ time.
Mr Descalzi was speaking at the World Economic Forum in the Swiss resort of Davos.
He said: “Opec is like the central bank for oil which must give stability to the oil prices to be able to invest in a regular way.”
Politicians, economists and industry leaders in Davos have been voicing their worries over the impact of lower prices.
We worry a little bit that the price signal may give disincentive for new energy types to develop, and could reduce investment in new non-fossil energy” Zhou Xiaochuan People’s Bank of China governor
Total and BHP Billiton both said on Wednesday that they would cut back on shale oil projects.
Opec secretary general Abdullah al-Badri, also speaking at Davos, defended the group’s decision not to cut output. …”We will go back to normal very soon,” he said.
http://www.bbc.com/news/business-30913321
Thank you again, Gail, for fitting all the pieces of the puzzle together for us all.
As you stated, interesting times ahead!
It seems Claudio is assuming that if supply falls and prices rise, demand will stay the same. I suspect demand will collapse well before $200 per barrel.
Our system needs oil. There is a real chance that there will be other changes as well at high prices–businesses closing, debt defaults. Everything is hooked together.
It may happen like that, but I suspect it to be more like 2007 repeated on a decreasing time cycle, only 10 years this time.
This also seems to fit a theory of diminishing capacity where the response to the crisis is weakened by the previous crisis and the causing conditions close in, causing the cycles to get shorter and shorter until it becomes a long emergency.
I see the current cycle being dominated by the combination of a small bump in supply (largely US shale) and a small dip in demand, causing the wild fluctuation, because that demand is largely inelastic.
Like the post-1970’s respite, I can see the world using the present relief to enhance consumerism rather then do something to help avoid the disruption caused at the end of this period. Expect to see a resurgence of the hummer!
Prices don’t respond as expected. I need to write about that also.
Schreiber ended his presentation that day with a quote from economist Rudi Dornbusch: “In economics, things take longer to happen than you think they will, and then happen faster than you thought they could.”
Druckenmiller Alums at PointState Make $1 Billion on Oil
By Katherine Burton, Kelly Bit and Simone Foxman
Hedge fund manager Zach Schreiber stood on stage at Avery Fisher Hall in New York eight months ago and made a bold prediction.
“We believe crude oil is going lower — much lower,” Schreiber, 42, told the audience of roughly 3,000 investors, including some of the biggest money managers in the industry. “If you are long, I’m sorry for you.” Then he showed a slide of a car stuffed with clowns.
The New York-based investment firm’s profit was about $2 billion in 2014 with about half of that from the oil trade, according to people familiar with the matter, who asked not to be identified because the firm is private.
Quoting Led Zeppelin’s “The Song Remains the Same,” he said the same scenario had unfolded in the natural gas market, where increased production had driven the commodity down.
For PointState, it was a blip. The firm’s other $1 billion profit last year included a big wager on healthcare stocks and other macroeconomic themes, said the people.
You can make $$$ on thw way up or on the way DOWN!
The fact that the ‘cream’ of our society is fixated on making $$$ and not creating wealth (a big difference) is what will help cause our downfall.
True. It’s only the oil drillers who (after their hedges run out) can’t make profit on the way down.
Prof Keen had something recently – a lecture in Berlin IIRC, debunking buyer preferences – I’m not sure if that is what you meant.
Also, regarding the oil price, I have to wonder what is “normal”.
http://www.debtdeflation.com/blogs/2014/12/08/talks-in-germany/
“Berlin Lecture Powerpoint Slides: Why Neoclassical Economics can’t explain market demand or supply”
Thanks! I downloaded the two presentations. He mentions Ayers and Warr, but he doesn’t seem to really understand the role cheap energy plays, at least that I could see.
I am not really talking about buyer preferences–or debunking them for that matter. You are getting closer, when you say, “I have to wonder what is normal.”
I you see something specifically I should look at, let me know. I don’t casually sit down and listen to lectures, especially if I am not sure they have anything to say. I prefer printed material–I can read the introduction and conclusion, and decide if I want to read more.
Unfortunately access to written material tends to be restricted by paywalls, hence I find myself scrabbling around video material, then trying to decide whether to buy another book just to have a reference to the material. The reference I gave on buyer preferences may be useful in the context of the choices that must be made between paying off debt, exploiting newer oilfields, investing in alternative energy, or just blowing the money in the nearest casino. At the very least, be cautious of economist’s certainties.
Gail, may I translate this to Czech and publish on my blog please?
No problem!
.
To be candid, I think the Bible taught us this.
Cycles, 7 years production, 7 years famine.
OPEC was able to control production and price, but now that control
was lost, so these cycles for a time were periodically held,
now we see the cycles because the control was lost.
.
Soon we will see oil rig cut back, exploration and drilling cut back,
then excess consumed, and then demand exceed supply because
rig, exploration and drilling were cut back.
The price shall then rise again.
Cycles – then when price rises, more drilling, exploration and rigs,
and the price falls.
.
Biblical.
.
“To be candid, I think the Bible taught us this.
Cycles, 7 years production, 7 years famine.”
The Famine in Egypt was a one-time thing, not a repeating cycle. You are perhaps confusing that with leaving fields fallow every seventh year, and the 50th year of Jubilee with debt forgiveness and returning property to the original owners.
The Bible I believe to be based in good part on fact.
But I believe the Bible is in large part written to provide moral teachings.
The moral teaching of the 7 year famine, in my opinion, is to count on cycles,
in times of plenty, put something aside in case there are times of little.
Whether that be money or food, be prepared, put a little in the bank.
.
The point was, that If not for OPEC, meaning price and quantity control, the price of oil would not have done what it did. Just like De Beers diamond cartel.
As OPEC lost its control over price and quantity, normal cycles resumed.
.
I do not think Gail, with all due respect to Gail, mentioned OPEC and its control.
Clearly for many years OPEC set the quantity and pricing, and did so based on
part on wages and economy. The price of oil was artificially controlled for many years, we are just now, and for many reasons, seeing the loss of that control.
.
.
“As OPEC lost its control over price and quantity, normal cycles resumed.”
OPEC has not lost control. Demand fell below supply, due to recession partially caused by higher oil prices, and partially due to US fracking bringing more oil online. They requested that the US set production targets the same as OPEC countries, America refused, so OPEC chose to allow the market to be glutted to wipe out their high cost competitors.
I am not convince that OPEC has the control that most people think it has.
There is one theory that I think might have some validity, and that is that the relatively high but level prices we had from 2011 to mid 2014 were the result of some sort of futures market manipulation, using lease and buy-backs of oil in the futures market using more or less free QE money. The perpetrators could have been anyone who wanted prices high–Saudis, or US shale or Canadian interests. Once the United States QE money disappeared, the price fell flat. The oil prices starting rising at the end of 2008, precisely at the time the QE money was added, making a person suspicious that something involving QE money could be going on behind the scenes.
“The Bible I believe to be based in good part on fact.”
Prof Michael Hudson has research on ancient Sumeria and Mesopotamia circa 1800BC on stablity and Debt cancellation. ( I do not have a link to a paper on his reasearch bu see 11-15mins of this video)
https://www.youtube.com/watch?v=yQZGv2xL-fw
The period cited there is on the ascension of a new ruler or thirty years into the reign. The Code of Hammarubi may have had a similar provision but the only surviving record of that has areas that were censored.
In any case The Biblical Jubilee was likely a formal agreement of ancient good practice, at a time when Law and Religion overlapped.
“how can you have a stable society when you have exponential growth of debt?”
This is not just bronze age nonsense. Periodic economic collapses, about every 50 years, still lead to massive debt cancellation.
The Bible? You really are clutching at straws, Grobertsoni. Don’t you know that anything in the Old Testament, including ‘7 years production, 7 years famine,’ was based on conditions pertaining over 2,000 years ago? A time when, incidentally, the total human population on planet Earth was only 241 million and they had barely discovered how to produce iron. Even then, humans were destroying the biosphere very rapidly, burning down the forests to keep warm, smelt iron and build ships. Besides ridding the Earth of most of its great mammals (the size and number of which are barely imaginable today), we turned rainforests into Sahara Desert, turned the Australian outback from lush forest into arid desert, denuded the landscapes of Greece and southern Spain which are now almost desert but were once covered in lush forests, and so on. We really are in the last stages of destroying the biosphere, with deforestation proceeding so quickly it is unlikely any tropical rainforests will survive by the end of this century.
And that is just a nano-second of time in geological terms. It is happening with incredible speed, like all of the other devastating human assaults on nature. The fisheries of the seas are expected to be wiped out, extinct, by 2050. Nothing is protected anymore. The world has been captured by corporate interests and every last resource in nature is being monetised, exploited and depleted as we speak. The Canadian boreal forests are being turned into lifeless lunar landscapes to expose their tar sands. This is what ‘greed is good’ really means. This is the impact of Wall Street with no bounds and the corporate world destroying what is left of what humanity, and life on Earth, needs to survive. Get your head together, Grobertsoni, and pray to your god, and mine, that we deal with all this in time, or we are totally ruined.
“we turned rainforests into Sahara Desert”
What? I’m pretty sure the Sahara started becoming a desert after the Amazon river stopped flowing into it. Way before humans. While humans have done a lot, you give us far too much credit.
That was millions of years ago. Climate changes within the last 10,000 years enlarged a small Sahara. Deforestation by humans did the rest and it continues today. The Romans got most of their lions for the Colosseum from the Sahara, when it still had grasslands. The southern boundary of the Sahara has been creeping south, through the Sahel, as deforestation and drought kills off all vegetation.
Are you talking about Pangea? Because I am pretty sure the Amazon river is in South America and the Sahara is in Africa.
“I have been investigating this topic and have come to the conclusion that both energy and debt play an extremely important role in an economic system.”
Spot on Gail, as usual !
Michael Pinto did an interview with Greg Hunter and he said there is a direct correlation between low fuel prices and economic activity and the reverse is true. When energy pricing GOES UP, they economy goes in the opposite direction. In fact as he mentioned fuel and energy pricing also affects demand for things like copper, etc. The Baltic Dry Index activity reflects lower growth in the global economy. ALL feedback to energy costs.
.Knowing this.
.
What if you were to create a crisis,
or take a modest concern and blow it out of proportion,
and then have the Government spend billions of dollars to solve it.
And though billions spent artificially supported job creation, while solving little.
Spending did in fact increase employment, as well divert attention from other crisis.
Hmmmm.
Of course you would have to pay the debt later, but years from now and someone
else could figure that out.
Hmmmm.
Global warming. Could that possibly fit the category.
.
Has any carbon capture or emissions reductions actually occurred? No? Huh. Looks like this isn’t the crises you are looking for.
Matthew, you are correct. Carbon capture has not been significant neither have carbon reductions, in fact, carbon emissions over the past 20 years have increased significantly.
However, despite the fact carbon emissions have increased significantly over the past 20 years, the global temperature has not, in fact it increased little if not at all, it is commonly referred to as a “pause”.
It is man’s arrogance to believe we may control the climate, certainly all forms of pollution should be curtailed, from plastic bottles, to nuclear, but a concern that global temperature may rise 1 degree C over the next 100 years, whilst we all know technology will increase exponentially over the next 100 years, makes carbon emissions to me, a modest concern blown into a crisis. I don’t think there is any justification for companies like Solyndra being granted millions, I think there are far better ways to spend your and my dollars.
“whilst we all know technology will increase exponentially over the next 100 years,”
I don’t think most of us even suspect technology will continue to increase exponentially, let alone know it.
You expect BAU to continue for 100+ years? Exponential growth forever? How?
I suppose if you look at the models of mainstream economists, that is your conclusion.
It is estimated the in some 2 year time period Solyndra spent $344 million building a factory and $660 million on production, creation, administration, etc etc. Perhaps my numbers are off, I welcome yours.
I surmise, had that same nearly 1 billion dollars been spent on cleaning plastic from the oceans, I believe we would all be a lot better off.
Had that same 1 billion dollars been spent buying rain forest in the Amazon and protecting land, indigenous people, and the environment, I know we would all be better off.
“Had that same 1 billion dollars been spent buying rain forest in the Amazon and protecting land, indigenous people, and the environment, I know we would all be better off.”
We cannot know how execution of a plan will be until it happens. Obviously, if it was known that Solyndra would fail, it would not have been subsidized or even invested in, in the first place.
Likewise, we cannot know what would happen if the US Federal government started buying up land in Brazil, what the costs and consequences would be until after it happened.
Or if the US Federal government spent $1 billion on cleaning up the Great Pacific Garbage patch, how that would have turned out; would they have used the Navy, or auctioned it off to a private bidder, or simply given the contract to some cronies without competition? Would they have screwed up and ended up with a huge oil spill along with the plastic, or succeeded wonderfully and made the world a better place?
Not again with the “temperature hasn’t risen at all.” 1998 was an outlier. 13 of the 15 hottest years globally on record (135 years) in the 21st century. Grobertson1, do a little more than talking points.
Ecuador offered 8.1 million hectares of its rainforest for sale to the world.
http://www.theguardian.com/world/2013/aug/16/ecuador-approves-yasuni-amazon-oil-drilling
Offered for 3.6 Billion.
Estimated is the world spends some 22 billion a year on global warming.
Had the UN/ World Governments come together and spent 3.6 Billion they could have bought and preserved the environment, the indigenous tribes, and stopped oil from being drilled and stopped carbon from being released.
No one cared, and keeping the oil in the ground, may have prevented 400m tonnes of carbon dioxide.
Now the Chinese are drilling oil.
– If the world really wanted to do something the fastest, cheapest, easiest, least expensive thing to do would have been to buy that rainforest.
.
Why didn’t they buy the rainforest if the real goal was to stop carbon emissions and global warming ?
.
“Why didn’t they buy the rainforest if the real goal was to stop carbon emissions and global warming ?”
Who said that was their goal?
There were/are two competing plans. One is cap-and-trade energy credits, which simply moves pollution from developed countries to developing countries to get developing countries to have industrial jobs and consume more goods and borrow more money, while lining the pockets of big financial firms.
The other plan is carbon taxes, which is to create new bureaucracies with more government employees with more regulations and paperwork.
If all they wanted was to reduce carbon emissions, they could just increase taxes directly on oil, coal and natural gas based on their average contribution to global warming. What people want, and what the lobbyists, politicians, bureaucrats and bankers want are often times not the same thing.
Too busy collapsing otherwise.
http://arctic-news.blogspot.ca/2015/01/temperature-rise.html
While most sceptics think IPPC overestimates, there are too very serious people that think they underestimate a lot. The joker is methane. There is thousands of Gt methane stored in the permafrost. An estimate suggests about 50 Gt is about to be released, a tenfold of todays levels. But nobody really knows: http://permaliv.blogspot.no/2015/01/the-methane-disaster-awaits-us.html
I think the best is a rapid collapse of civilization, as this might give survivors and allows a new start for humanity. The alternative might mean a collapse in methane release, which could ultimately lead to Venus-conditions.
“The alternative might mean a collapse in methane release, which could ultimately lead to Venus-conditions.”
Why now? Why didn’t the methane destabilize and turn the planet into another Venus when the planet was 8 degrees warmer?
If Guy McPherson is right, we’re all going to die and there is nothing we can do about it except pray. There is zero value in believing in what he says.
Although I am physicist, I was unaware of the methane threat until very recently. Since each CH4 is about 100 times more heat-trapping than each CO2 (BTW: the times 28 factor one reads is rubbish and the result of double-counting), the contribution to radiative forcing from methane is already comparable to that due to CO2. Whilst a methane burp would push up global temperatures even further, we know it wouldn’t destroy the ecosphere, for the simple reason that it has happened periodically in the planet’s recent past. Just because humans will be the trigger this time around doesn’t alter the size of the bomb. There is a lot of silly scaremongering on this issue e.g. the NatureBatsLast blog.
A methane burp is very likely to occur in the coming century and would probably destroy modern civilization though.
Just trying to be positive !
” Since each CH4 is about 100 times more heat-trapping than each CO2 (BTW: the times 28 factor one reads is rubbish and the result of double-counting)”
It has to do with the rate at which methane disperses, is absorbed or breaks down. On a 20-year timeline, 1 tonne of Methane has the same greenhouse effect as 100 tonnes of carbon dioxide; on a 100-year timeline, 1 tonne of methane has the same greenhouse effect as 20 to 28 tonnes of carbon dioxide. It looks like they’ve redefined them as 86 and 34 times at 20 and 100 years, respectively:
http://en.wikipedia.org/wiki/Global-warming_potential
“A methane burp is very likely to occur in the coming century and would probably destroy modern civilization though.”
How so? If it is not end of days, what would the catastrophic effect be? a degree or two of rapid warming?
“Just trying to be positive!”
Personally, I don’t find it useful to be “positive” by down-talking the potential for disaster. Guy McPherson may be way off the doomer deep-end, but he has put considerable research into it, and I respect his opinion.
My form of “being positive” is to take action, every day, to become more resilient in the face of whatever is thrown at me, from near-term human extinction, to business as usual forever. We both think the odds of either of those happening are outliers, but so is life itself on this tiny rock among billions of billions.
I had a dentist once who had a poster on his ceiling above “the chair.” It showed a cowboy in mid-air, being thrown off a bucking bronco, with the words, “Hope for the best, prepare for the worst, and take what comes.” That ’bout sums up my attitude! And that’s the limit to which I allow myself to engage in “positivism.”
Without Guy McPherson, who would give our “predicament” the desperately serious attention that it needs? (In fact, I haven’t picked up where Gail sees the future in more positive terms; she seems to come to the same conclusion from a different perspective, and with more agnosticism.)
I like Gail’s refusal to abandon the real world economic/energy system, although I don’t see where she takes adequate account of the reality that the economic/energy system has way overextended the human draw down (Catton) of earth’s ability to sustain us. So, if a breakdown of the economic system will destroy us, so too will the breakdown of the environmental system (destroying which seems absolutely unacceptable). In fact, they seem to be one and the same thing.
“Governments need to become huge, to manage transfer payments to all of the unemployed workers. And who will pay all of these taxes?”
Those unemployed workers could be employed to repair the infrastructure. Repair of the infrastructure would increase economic activity (and taxes) in general, and the formerly unemployed would be enabled to pay taxes? If this isn’t correct, I haven’t yet internalized the reason for it.
Regarding the use of unemployed workers to repair the infrastructure, it takes a lot of energy products to repair the infrastructure. That is why it will never be done.
What I am trying to do, but can’t do all in one post, is show how the financial system collapses very early on, and is in fact essential to the whole economy as we have put it together. In fact, we can’t even continue sort of along these lines, with a different economy–it just doesn’t work.
We have lots of people coming from different directions, saying that collapse will come from one thing or another–climate change, or collapsed fishing in the ocean, or ecological damage of various types. I am saying that the financial system ties together all of the other systems. The financial system collapses first because it ties everything together, and brings nearly all of the other systems down with it. The earth’s ecosystems will recover; they always have in the past, and they will again. It is humans who may find themselves unceremoniously dumped from the system. We are the ones who are growing like a cancer in the system. We shouldn’t be surprised if our way of operating is unsustainable.
These panelists include discussion of finance and debt, but with more climate emphasis than here.
One of the speakers in the video clip talks about the barrier to large government spending caused by financial stress. I’m slowly starting to get the connection.
I however have long been intuitively clear that any large government spending program must not require major energy use.
Potholes: Paper-crete can be made in large vats–old oil drums, etc.– that stir the mixture with hand-held paddles. While poor Americans might not want to do this kind of hard labor, poor immigrants will.
Decayed Metal: More energy demanding. Avoid all cosmetic fixes. Just see how structures can be kept from collapsing through the use of patches. How feasible this is energy-wise, I don’t know.
Transporting Workers: Avoid some energy costs by employing people to work where they live. Little or no travel.
Materials: A lot can be done with discarded paper: sealing window cracks, insulating walls, etc.. Conceivably, paper can be shredded by hand. Secondhand and donated, and discarded, materials and equipment could help.
No need to bore with a longer list. My point is that a hybrid program that combines third world scrounging/resourcefulness with first world organization and system could be a way to do a lot with dramatically reduced resources. Instead of high-end materials expenses, money would go to mostly workers so that they could survive while boosting a part of the economy.
I think Gail would say there won’t be the energy source to build future infrastructure like this. And I’m not sure I mind that. But this is still a mighty inspiring video to watch.
http://www.geofflawton.com/fe/77209-re-greening-a-mountain
For one, technology will not increase in the absence of energy and, as Gail has pointed out, the supply of cheap energy is dwindling and will soon dry up.
Secondly, to think that man is incapable of influencing climate is quite frankly, crazy, given the scale of damage to the Earth’s atmosphere, climate and biosphere already on record, as well as the sixth mass extinction which began 100,000 years ago and is now accelerating to the point where few if any wild creatures of any size will survive this century, and all because of us; we started the problem that long ago, my friend. We are in the Anthropocene, man! This means we, the human species, is now affecting all life on Earth and changing how the biosphere functions. Fasten your seatbelts, we’re in for a very rough ride and if there is still a billion living human beings left on the planet by 2100, it means we will have done a good job in saving something out of this human-induced disaster.
The dominant narrative of social and cultural progress, technological development and improvement in the human condition breaks down upon closer examination. We need a new set of lenses to look through and understand where we have been, where we are and where we are headed. What we thought of as exceptions are in fact the rule. Despoliation of the environment is not an exception but the very basis of civilization. Urban growth is not a panacea but the characteristic signature of a malignant process. You and I, friends, are not unlike cancer cells ravaging our host planet day in and day out. What makes it worse is there’s no escape from it all. We can’t help but be part of this process with everything we do. Such are the times we live in.
I mention briefly, this is not to say I do not support what Germany did in
cutting off all nuclear.
Until and unless we are able to properly dispose of nuclear waste, certainly
we should not produce it in abundance. Until and unless we are not able
to safely run a nuclear facility, we should run very few, and those very few
should be with the most recent technology and on the safest ground.
Fukishima has given us a lesson, unfortunately few have realized it.
So, I take it ,grobertson, you are a climate change denier. Have you ever asked yourself the question of how all that carbon got into the ground in the first place? What were the climate conditions in the pre-Cambrian or other such era, that allowed huge algae blooms to occur and fall to the bottom of shallow seas and be subducted by plate tectonics into the earth strata as modern petroleum theory postulates? What do you think? Was the earth hot in order to bury oil in Alaska?
Let’s stop talking about climate change. If financial collapse brings down the economy, hardly any of us are going to be around to observe it, assuming it happens. The earth’s ecosystems will recover from climate change; it is human civilization that likely won’t–but human civilization has huge other challenges, as I keep pointing out.
Climate change models haven’t built financial collapse into them, so the story they are telling is seriously distorted. Climate change is popular from a political point of view, because it takes peoples eyes off of our (other) close at hand problems. It is popular with scientists, because it generates huge funding for studying this subject, whether or not we can do anything about it. The one thing we can do that is likely to impact the course of climate change is to collapse the economy, and that seems to be happening already.
“The one thing we can do that is likely to impact the course of climate change is to collapse the economy, and that seems to be happening already.”
And I’m doing everything in my power to speed that along! (Mostly by limiting my participation in the economy by living on about $8,000 per year. You don’t really have to do anything in particular to speed collapse, Just Say No and it will go away on its own!)
And then Gail thinks we can’t survive that economic collapse that we foresee. A case of damned if you do and damned if you don’t.
Since intuition is a very serious (if incomplete) tool for understanding our predicament, I share what it is telling (suggesting to) me:
A good model: “…limiting my participation in the economy by living on about $8,000 per year. You don’t really have to do anything in particular to speed collapse, Just Say No and it will go away on its own!…”
But then, what about the potentially lethal effects of catastrophic economic collapse? Catastrophic social disorder? Rape and pillage? Disease? Starvation? If this can be predicted, then we don’t want the collapse of economic/civil order either. Is there a way to maintain it without catastrophic (beyond what it is already and its unavoidable near-term inertia) climate and environmental change? Intuition (which is akin to seeing an iceberg) tells me it is possible, while the how (the much lager section of the iceberg that is submerged) continues to elude me.
And here I must resort to mysticism, for I think that any straightforward, rational solutions will not work.
For one thing, haggling over particular projects–fracking, wind turbines, social abuses, ad infinitum throughout the planet, can’t be afforded. There is no time for that. There must be one sweeping, holistic assessment of global crisis, and an extremely simplified process for addressing it. Following the imperfect aspirations of the UN Declaration of Human Rights is one possible way to conceptually tie things together on a global level. And what we must say NO to are processes and memes that countervail this basic, simplifying, humanitarian principle.
“And here I must resort to mysticism, for I think that any straightforward, rational solutions will not work.”
Good luck with that one. Sorta worked in Selma, Alabama. Sorta worked in India. About 2,000 years ago, they nailed a guy to a cross for trying that approach.
“Gail thinks we can’t survive that economic collapse that we foresee.”
I don’t want to speak for Gail, but I don’t think she’s ever said that. Perhaps you were thinking of Guy McPherson?
“what about the potentially lethal effects of catastrophic economic collapse? Catastrophic social disorder? Rape and pillage? Disease? Starvation?”
I think it’s going to be varied and uneven. You can see it in various places already. It has happened in the Former Soviet Union. Mostly, people drank themselves to death.
Read Dmitry Orlov. I don’t subscribe to everything he says, but he has a step-wise model of collapse that is quite interesting and somewhat hopeful (to the degree that I ever indulge in “hope,” which I view as an unhealthy obsession with the future).
I don’t think most people in the western world are facing an “Orlov Level-5” collapse in their lifetime. There’s a lot that can happen between “business as usual” and “Mad Max.” In the FSU, credit, finance, and government broke down (Orlov Level-3 Collapse). You could see someone on the sidewalk who worked at a bra factory, with boxes of bras, trading them for food.
Of course, none of us have a perfect crystal ball. I’m uncomfortable in cities, so I got out. I’m not afraid of city people raping and pillaging here, because they won’t last that long — and I’ve purposely chosen a location with a moat. It will take fairly energy-rich people to rape and pillage here, although the Norse managed such a thing a while back.
” If financial collapse brings down the economy, hardly any of us are going to be around to observe it, assuming it happens. The earth’s ecosystems will recover from climate change; it is human civilization that likely won’t–but human civilization has huge other challenges, as I keep pointing out. ”
Maybe Gail meant that economic collapse, if it happened at all, would do so too far in the future for us living now to witness. I didn’t think that’s what she meant, but maybe it was.
“About 2,000 years ago, they nailed a guy to a cross for trying that approach.”
What does this mean? Trying what approach? I suppose you’d call it mysticism when ultra conservatives say that God will save the planet. What approach are THEY trying? Mysticism is part of world tradition through the ages. It so happens that Western culture has adopted a religion of rationalism that is as off the mark as any form of mysticism could be. Sometimes referred to as scientism, that approach has brought us to this sorry pass. So I don’t prescribe doing more of the same as a primary means of hanging on to life on Earth. As you say, allowing things to change by themselves might be an appropriate position to take. Maybe that’s a form of mysticism. I don’t know.
I do live outside the city, but not deliberately for reasons of survival. It may be that people who think a certain way gravitate to places that turn out to meet a complex cluster of their needs. Mine is a fairly resilient community, but I only see that as a means to figure out how to make every other place resilient. Gail’s POV is new to me, and appears to lead to a better understanding of how society works now. I would like to use that understanding to envision creative ways forward.
“Let’s stop talking about climate change.”
If by that you mean, stop talking about whether or not it is occurring, sure. I’m all in favour of simply “shunning” deniers when they show up. Whether or not one thinks they’re paid shills of the carbon industry, it is certain that, lacking attention, they go away.
But surely, talking about mitigation on a personal level is worth delving into?
With the carbon we’ve already pumped into the air, it could stop tomorrow (such as with a collapse of civilization), and there will still be effects to deal with for a long time. We’re working on water management and “season-shifting” water here, since climate change models indicate we’ll have wetter winters and drier summers.
Dear Jan
At the upcoming Organic Growers School in Asheville, NC, Laura Lengnick will be speaking on Farming In A Changing Climate:
‘This session presents adaptations by award winning sustainable farmers to reduce climate risk on their farms.’
Laura had a book originally scheduled for January (right now), but it is now due in April.
If Mr. Hill answers my last questions as I think he might, then there is probably nothing more worth discussing than how to grow food and provide one’s own water and shelter and clothing while relying primarily on photosynthesis and gravity and passive heating and cooling and all those unfashionable topics.
So let’s take the Hill model very seriously, and look carefully at what Laura has to tell us about what innovative farmers are doing.
Don Stewart
Gail, – Thanks, great article. But it is evident that the campaign of misinformation by the oil industry has affected your judgment, because you are repeating some major myths that Big Oil will be seriously delighted to see you promoting.
Firstly, you are wrong to say that climate change is popular from a political point of view. It is not. It is a topic that almost every politician from the political far right to the political centre and even the centre left tries desperately to pretend does not exist. The reason being, they owe their livelihoods to funding from big oil or, if not that, the world’s major corporate interests, which are virtually synonymous with big oil. By pretending this is not the case (as you frequently do), you fail to be honest with yourself and your readers.
Secondly, to think that scientists exaggerate the climate change problem simply to boost their research funding is totally erroneous and bordering on slander. The money going to research in this field is miniscule, it is absolutely tiny, and it is restricted by hostile governments, notably in Canada, and it is next to nothing compared to the absolutely massive subsidies going to the fossil fuels industry. It is only because scientists are prepared to work for a pittance in the interest of humanity that we now have the excellent information we need on how industrial civilisation is destroying, not only the atmosphere and climate, but the very means by which life on Earth is supported.
Thirdly, you believe climate change models don’t take account of possible financial collapse and should therefore be ignored. For this idea of yours to have any standing, you would need a guarantee that the financial system will collapse. Can you guarantee that it will? And can you also guarantee that it will collapse before we have released so much carbon dioxide into the atmosphere that we will have passed the point of no return? If you cannot guarantee that the collapse will happen within the next two or three years, and if you cannot guarantee that it will reduce carbon emissions by at least 80%, growing to 100%, by 2030, then unfortunately, to be logical about it, we must go with what the climate scientists are telling us about climate change. That becomes the critical parameter, the one to watch. We don’t, and shouldn’t have to – and would be very stupid to – listen to your prognosis because your analysis ignores a factor as fundamental as carbon emissions and therefore cannot tell us the full story. In other words, it could be in some respects false. Which it is, obviously, if it excludes climate change. Sorry about that, but that’s the situation, Gail, and you know it.
“it is evident that the campaign of misinformation by the oil industry has affected your judgment, because you are repeating some major myths that Big Oil will be seriously delighted to see you promoting.”
Yea, what he said!
But it’s your blog, and I’m willing to play by your rules.
However, a point that I don’t believe Coilin made was that if you support arguments on climate change that counter what some 98% of atmospheric scientist agree on, it may damage your credibility in other areas: “If she disagrees with 98% of climate scientists, why should I believe anything she says?”
But then, you disagree with 98% of economists, so perhaps this doesn’t bother you. 🙂
“you believe climate change models don’t take account of possible financial collapse and should therefore be ignored. For this idea of yours to have any standing, you would need a guarantee that the financial system will collapse.”
Even without financial collapse, the results will be different from the models. The models are based around either the same level of carbon emissions into the future, or increasing emissions. Where is the source of these new hydrocarbon fuels? They’ve only just started to consider the possibility that there may not be that much oil and coal production into the future.
According to the Hillsgroup study, oil as a driver of our industrial society will be gone by approximately 2030. I, at least believe this. When oil as a driver of our industrial society is gone, we will have to resort to more traditional methods of survival on this planet. I don’t really see this reflected in the modern pop culture or by scientist. Barack Obama recently came to some sort of agreement on climate change with the Chinese. Climate change can be talked about be modern society, I don’t think that the effects of the decline of the oil supply can be. We as a world economy are currently paying less for oil than it’s production costs. This can not be sustained indefinitely. The curtailment of the economy world wide and the curtailment of the oil supply is already beginning to happen, although we are probably still at peak liquids production. Complex societies exist due to cheap energy. Complex societies also exist due to slavery. This is not recognized be our popular culture. Why should they recognize it? Their very existence is threatened by it. I believe that by 2030 to 2035 all forms of our complex society, governmental, financial, academic will either be gone or on the way out. The society that survives will have to be much simpler, probably involving small communities cooperating together on a local level.
Maybe a better way of describing the situation is that I am not wasting my time and energy on climate change. The issue is analyzed to death on other sites. And as Jan pointed out, I don’t agree with 98% of economists. Why should I agree with whatever percentage of climate modelers? It is very clear that they don’t understand many of the major limits the world is hitting, including financial ones.
“Maybe a better way of describing the situation is that I am not wasting my time and energy on climate change.”
Or maybe just acknowledge that, should the financial system continue and fracking continue, yes, climate change could be the next thing to break.
Throw a bone to those who want to reduce climate change, and they won’t be so angry with you. To someone who thinks climate change is our defining issue, the difference between being a “denier” and thinking it is irrelevant is lost — especially (as you have done) if you use some of the language of the deniers.
Why go to the trouble? Because the climate change folks have the same goals, even if they don’t quite understand that yet. They want to reduce putting carbon in the air, most of us want to reduce taking it out of the ground.
You are right. I agree with you regarding CO2 emissions and I agree with Gail regarding energy dissipation. Our world should have a religious respect for fossil fuels and live it in the ground,
“I have been investigating this topic and have come to the conclusion that both energy and debt play an extremely important role in an economic system.”
The above quote is an understatement.
Gravity blueshifts (energizes) matter waves:
Therefore, any matter wave (any proton or electron) has been borrowed (blueshifted, energized into existence) at the expense of entering a gravitationally bound state, which is at a negative level of potential energy, or, said otherwise, is energetically indebted: http://hyperphysics.phy-astr.gsu.edu/hbase/thermo/phase.html#c4
The borrowed positive energy becomes dissipated into the ambient vacuum, with a lag. This dissipative loss of energy needs to be compensated by deepening the energy debt.
Read more: http://2012wiki.com/index.php?title=Novelty_theory
In other words, as you look at the situation from a physics perspective, you see the energy extracted as borrowed positive energy, which is dissipated into the vacuum. You seem to see the debt as a double debt– the debt for the energy that was used in extraction, plus the debt for the new fossil fuel that was burned in addition. Is this correct?
“You seem to see the debt as a double debt– the debt for the energy that was used in extraction, plus the debt for the new fossil fuel that was burned in addition. Is this correct?”
The proton is essentially an energetic revolving credit facility. When a proton collapses to a more negative gravitational potential energy, it borrows some positive energy into its current account. When the current account’s balance decreases below 50 percent of its initial level, the proton collapses to a still lower level of gravitational potential energy.
I need a translation, I am afraid.
Every proton is a toroidal vortex undergoing self-gravitational contraction towards ever more negative gravitational potential energy (energy debt) and ever higher borrowed actual energy:
In physics, energy (Energy = Planck quantum of action × Frequency) has the dimensionality of angular momentum:
13.7 billion years ago, the proton was miles across. Its energy (angular momentum) was maximal but potential (latent), because the proton’s angular velocity was very small.
As the proton self-gravitationally contracts, its potential energy (latent angular momentum, whose intensity is below the Planck quantum of action) becomes actualized (intensified to the Planck quantum of action). Just imagine a rotating figure skater who retracts her arms and legs and thus makes herself rotate faster by the intensification of her angular momentum.
Read more: http://2012wiki.com/index.php?title=Novelty_theory
I am afraid I need a translation.
From the famous E=mc2, it follows that potential energy is mass. In its initial gravitationally noncondensed form, mass has zero potential energy and zero actual energy. Zero-energy mass has an infinitely big Compton wavelength and is identical with empty tridimensional space. When a mass becomes self-gravitationally condensed (blueshifted), its potential energy (latent angular momentum, whose intensity is below the Planck quantum of action) becomes actualized (intensified to the Planck quantum of action):
A gravitationally condensed mass has a negative potential energy and a positive actual energy. The actual energy (intensified angular momentum) is rotationally centrifugal and initially offsets the centripetal action of the mass’s self-gravitation, thus preventing the mass’s further gravitational collapse. However, the actual energy (intensified angular momentum) becomes gradually radiated (dissipated) into the ambient space, so that the mass’s self-gravitational collapse eventually resumes:
So, humanity’s current economic model is just a temporary “parking orbit”. Having dissipated 50 percent of the initial resource of condensed angular momentum, stored in fossil fuels, humanity (~an iron core) needs to collapse to a lower parking orbit—a single couple of people (~a neutron star):
Read more:
http://2012wiki.com/index.php?title=Novelty_theory
http://2012wiki.com/index.php?title=The_end_of_the_world
As I have said before, it is not obvious to me that the collapse is down to a single couple of people. It seems like there is a possibility that there won’t be any survivors. Or if there are survivors, they will repeat this same cycle, coming from a much lower base, and never getting back to where we are able to go with fossil fuels.
“It seems like there is a possibility that there won’t be any survivors.”
“No survivors” is analogous to a black hole. “A single couple of people” is analogous a temporary neutron star. The stage of a temporary neutron star cannot be skipped:
“Or if there are survivors, they will repeat this same cycle, coming from a much lower base, and never getting back to where we are able to go with fossil fuels.”
No. The universe’s gravitoelectric potential (defined the gradient of matter waves’ constructive interference or organized complexity) is by definition continuous and unicentric, and the Earth, with its immense organized complexity, is its obvious centre:
“From the famous E=mc2, it follows that potential energy is mass.”
From CS-101, it follows that equality is fundamentally different from equivalence.
You and I may perchance have the same mass. But no one would say we were the same person.
The self-gravitation of mass heats it up and eventually converts all of it into thermal radiation. So, mass is potential energy, without any reservations.
“So, mass is potential energy, without any reservations.”
Good, because I know some massive restaurants that you can’t get into without reservations, which can take a lot of energy.
Ah, but the devil’s in the details, no? If only Jean Luc-Picard could point his finger and say, “Make it so!” Glad you got it all figger’d out, though.
The self-gravitation of mass heats it up and eventually converts a half of it into thermal radiation:
As a result, the mass reaches the critical density and tunnels into a wormhole. During the tunneling, the mass exists as pure energy.
So, mass is potential energy, without any reservations.
What is the application here?
“What is the application here?”
It is obvious, Gail. Our main energy resource is the gravitational potential energy of the proton, not the energy of fossil hydrocarbons. The proton is self-gravitationally collapsing to ever more negative gravitational potential energies.
Every individual proton is gravitationally shrinking in volume. And all protons become gravitationally accelerated towards the continuum’s central proton.
You might think those two processes are progressing too slowly to be irrelevant to our current problems. But it is not the case.
In accordance with the inverse-square law, the proton’s self-gravitation is inversely proportional to the square of the proton’s radius, which is why the proton’s self-gravitational collapse exponentially accelerates. Being the hydrogen nucleus, the proton self-gravitationally condenses into the neutron analogously to a hydrogen star, self-gravitationally condensing into a neutron star:
All other processes, including the emergence of life on the planet Earth and its evolution, are epiphenomena, mere by-products of the proton’s exponentially accelerating collapse.
Talk about the finite world…
One of the sentences in the above post should read as: “You might think those two processes are progressing too slowly to be relevant to our current problems.”