Putting the Real Story of Energy and the Economy Together

What is the real story of energy and the economy? We hear two predominant energy stories. One is the story economists tell: The economy can grow forever; energy shortages will have no impact on the economy. We can simply substitute other forms of energy, or do without.

Another version of the energy and the economy story is the view of many who believe in the “Peak Oil” theory. According to this view, oil supply can decrease with only a minor impact on the economy. The economy will continue along as before, except with higher prices. These higher prices encourage the production of alternatives, such wind and solar. At this point, it is not just peak oilers who endorse this view, but many others as well.

In my view, the real story of energy and the economy is much less favorable than either of these views. It is a story of oil limits that will make themselves known as financial limits, quite possibly in the near term—perhaps in as little time as a few months or years. Our underlying problem is diminishing returns—it takes more and more effort (hours of workers’ time and quantities of resources), to produce essentially the same goods and services.

We don’t measure our investment results with respect to the quantity of end product produced (barrels of oil produced, liters of fresh water produced, kilos of copper produced, or number of workers provided with sufficient education to work in high tech industries), so we don’t realize that we are becoming increasingly inefficient at producing desired end products. See my post “How increased inefficiency explains falling oil prices.”

Figure 2. The way we would expect the cost of the extraction of energy supplies to rise, as finite supplies deplete.

Figure 1. The way we would expect the cost of the extraction of energy supplies to rise, as finite supplies deplete.

Wages, viewed in terms of the product produced–oil in this case–can be expected to decrease as well. This change isn’t evident in usual efficiency statistics, because some of the workers are providing new kinds of services, such as fracking services, that weren’t required before.

Figure 3. Wages per worker in units of oil produced, corresponding to amounts shown in Figure 2.

Figure 2. Wages per worker in units of oil produced, corresponding to amounts shown in Figure 1.

Even investment is becoming increasingly inefficient. It takes more and more investment to extract a given quantity of oil or other energy product. This investment needs to stay in place longer as well. The ultra-low interest rates we have been experiencing reflect the poor returns investments are now making.

The myth exists that prices of all of the scarce goods and services will rise high and higher, as the economy encounters scarcity. The real story, though, is that the inflation-adjusted purchasing power of common workers is falling lower and lower, especially in the United States, Europe, and Japan. Not only can these workers afford to buy less, but they can also afford to borrow less. This means that their ability to purchase expensive goods created from commodities is falling.

At some point, this lack of purchasing power can be expected to affect the financial markets, and the prices of many commodities can be expected to fall. In fact, this already seems to be happening.

The likely impact of such a fall in commodity prices is not good. If low oil prices cannot be “turned around,” they will lead to debt defaults, and these debt defaults are likely to lead to failing financial institutions. Failing financial institutions have the potential to bring down the system, because it becomes very difficult for businesses to continue if they are not supported by a banking system that allows a company to pay its employees. Workers also need the banking system to pay for goods and to save for a “rainy day.”

A big part of what has allowed the economy to grow to the size it is today is increasing debt levels. These rising debt levels play many roles:

  • They make high-priced goods more affordable to consumers.
  • They create greater demand for goods, allowing more end-product goods to be produced.
  • They create more demand for commodities required to make end-product goods, allowing the price of these commodities to rise, so that more businesses have more incentive to create/extract these commodities.

At some point, debt levels stop rising as fast as they have in the past (because of a lack of growth in purchasing power because of diminishing returns in investment), and the whole system tends to fall toward collapse. We seem to have reached this point in the middle of 2014. China was raising its total debt level rapidly up until the early part of 2014, then suddenly moderated its growth in debt level in mid 2014. At about the same time, the US scaled back and eliminated it program of quantitative easing (QE). Oil prices dropped starting in mid-2014, at the time debt levels started moderating. Other commodity prices started falling as early as 2011, indicating likely affordability problems.

We are now in the period when many people still believe everything is going well. Oil prices and other commodity prices are low—what is “not to like”? The answer is that the system in not at all sustainable—profits of oil companies and other commodity businesses are down, just as wages of common workers in developed countries are down in inflation-adjusted terms. Companies are cutting back in investment in oil production. Soon oil production will drop. With lower oil supply, the economy will face huge challenges.

Many people believe that oil prices can bounce back up again, but this really isn’t the case, because of growing inefficiency related to limits we are reaching–the need to use more advanced techniques to produce oil; the need for desalination for water in some places; the need for more pollution control equipment that doesn’t really increase the finished goods and services we are producing but instead makes goods more expensive to produce.

Each worker is, on average, producing less and less of the finished goods we really need. Whether we like it or not, standards of living will have to fall. The amount of debt workers can afford decreases rather than increases. This new reality can be expected to manifest itself in debt defaults and increasing financial system problems.

Even if oil prices bounce back up again, it is doubtful that shale oil drillers will be able to again borrow at a sufficiently high rate to increase their production again—what lender will believe that oil prices will remain high indefinitely?

The China Connection

I have been trying to put the real story of energy and the economy together over a period of years. Prof. Lianyong Feng of Petroleum University of China, Beijing, hired me to put together a short course (eight sessions, each lasting about 1.5 hours) on the nature of our current problems for students majoring in “Energy Economics and Management.” The course would be open to everyone choosing this major, including freshman, so I needed to assume a fairly low level of background knowledge. Actual attendees included a number of graduate students and faculty, attending the course without credit.

I put together a series of lectures, which I gave during the second half of March 2015. PDFs of my lectures are also now available on my Presentations/Podcasts page.

These lectures were videotaped by Prof. Feng’s staff, and I am in the process of making You Tube Videos from them, in addition to the original MP4 format. (YouTube videos cannot be seen in China.) My current plan is to give a brief discussion of these lectures, in future posts.

Following the lecture series, I visited several places in China, to see how the economic slowdown is playing out in China. This included visits to Northwest China (Hohhot and Hardin), Northeast China (Daqing and Harbin), and Southeast China (Wenzhou area). In Wenzhou, I visited three different companies attempting to sell electrical equipment on the world market.

From these visits, we could see how the world economic slowdown is affecting China, and how China’s own slowdown in debt growth is adding to the world slowdown. We could also see that the slowdown has not yet run its course China–growth in housing continues, even as the need for it seems to be slowing. College students are finding it difficult to find high-paying jobs in oil and other commodity sectors. The lack of growth in high-paying jobs will provide downward pressure on housing prices as well.

I plan to write a post about this situation as well.

This entry was posted in Financial Implications and tagged , , , , by Gail Tverberg. Bookmark the permalink.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.

486 thoughts on “Putting the Real Story of Energy and the Economy Together

  1. 21:04:2015: NASA Mission Control: T minus 11m and counting…#CaliforniaGroundZero:

    You’ve all watched Interstellar right? https://www.youtube.com/watch?v=UDVtMYqUAyw
    These guys have it absolutely nailed with that movie except we don’t get to find crazy worm holes to crawl through etc.

    This is the best summary yet about the situ report in NotSoSuperCaliFragilisticExpialiDroughtus

    ZeroHedge
    “As if anyone actually needed another reason to move out of the crazy state of California, now it is being reported that conditions in some areas of the state “are like a third-world country” due to the multi-year megadrought that has hit the state. In one California county alone, more than 1,000 wells have gone dry as the groundwater has disappeared. The state is turning back into a desert, and an increasing number of homes no longer have any water coming out of their taps or showerheads.

    So if you weren’t scared away by the wildfires, mudslides, high taxes, crime, gang violence, traffic, insane political correctness, the nightmarish business environment or the constant threat of “the big one” reducing your home to a pile of rubble, perhaps the fact that much of the state could soon be facing Dust Bowl conditions may finally convince you to pack up and leave. And if you do decide to go, you won’t be alone. Millions of Californians have fled the state in recent years, and this water crisis could soon spark the greatest migration out of the state that we have ever seen.

    “The conditions are like a third-world country,” said Andrew Lockman, a manager at the Office of Emergency Services in Tulare County, in the heart of the state’s agricultural Central Valley about 175 miles (282 kilometers) north of Los Angeles.

    “As California enters the fourth year of a record drought, its residents and $43 billion agriculture industry have drawn groundwater so low that it’s beyond the reach of existing wells. That’s left thousands with dry taps and pushed farmers to dig deeper as Governor Jerry Brown, a 77-year-old Democrat, orders the first mandatory water rationing in state history.”

    I’m telling you folks in America, forget anything that happens outside your borders because that clock’s rapidly counting down.

    http://www.zerohedge.com/news/2015-04-20/another-reason-move-away-california-conditions-are-third-world-country

    • You’ve all watched Interstellar right?

      Every evening when I go out to milk the goats! The moon is just past new — good time for sky-watching. Jupiter is high in the sky right now, and Venus is an evening star. Mars sits about 40° in the east, and Saturn is just above the SW horizon.

      But I guess that’s more like “Interplanetary” than “Interstellar.”

      Or were you referring to some aspect of popular culture? 🙂

    • I’m telling you folks in America, forget anything that happens outside your borders

      YES! PLEASE!

      [jedi mind trick mode]Repeat after me: there is no cool, wet, resource-rich, undefended country to the north of you. It is just a howling wilderness. You’d die there. Best to sit it out where you are.[/jedi mind trick mode]

        • Alaska isn’t near so cold as it used to be.

          However, I personally would prefer not to see a migration of Californicators to the Last Great Frontier.

          RE

      • It just takes a pipeline to bring that cool fresh Canadian Rocky Mountain water to California. If there are indigenous people in the way well the U.S. death industry knows how to deal with them. Sorry, Jan, it is not me. Money talks everyone else had better get out of the way or as the aliens said in “Independence Day” when asked what they wanted humans to do “die”.

        Hey nobody lives up there it is too cold. The few that do are overly polite and friendly and will never object.

        • Hey nobody lives up there it is too cold. The few that do are overly polite and friendly and will never object.

          It appears that somebody in government here made A Big Mistake and gave First Nations people sovereignty over treaty lands. It looks like they are successfully stopping the Northern Gateway, which would have pumped tar sands dilbit to a pristine port at the head of a difficult, twisty passage on the way to China.

          Who would have known that the worthless ground we forced the aboriginals onto would someday be necessary to run pipelines through?

          • Most of British Columbia natives do not have treaties, it is a real mess how they managed in ~230 years to not successfully make treaties. Seems mostly due to provincial government refusal.

        • As a member of the TPP Canada no longer has “people” it only has corporations and profits.

          Yea, well, we were never more than “subjects to the Crown,” anyway.

      • Thank God you didn’t mention we have one of the biggest land mass of any country and only 34 million people and a defence force of 100,000 – yikes Portland could annex us!

      • “undefended country “Well I would think the keeper of the great white north would but up a bit of a row. They didn’t do too terribly in WW2. It would be pretty hard to portray the McKenzies as trrists. Of course if you have no water and someone else does.. thirst helps stimulate the imagination. Heres a Idea! They are all french anarchists, splinter members of ISIS. Their fiendish plan conceived in between raping adolescent girls that they then sold into slavery is to bring down the upholders of democracy by withholding water from them. I can smell the cluster bombs already. Its clear whats needed. A humanitarian water pipeline from BC to Vegas. What sort of monster would deny people humanitarian aid?

          • “All of that bombing and such is unnecessary. We already have a puppet government.”
            No Jan dont be modest. I think your idea of saving BC from the trrists is worthy of consideration especially since as you say Canada is a vassal state and does not feel the need to defend its resources. Goat meat for all! Huaaa. I just hope that post collapse the mega humans in the seatac area dont see fit to cross that bit of water to sample the delicacy of goat meat and Victoria women. Black ball has a piraty sound dont you think? What was that zombie flick in Everett Wa. where they held up in the mall then made a run for a boat and the islands?

    • We forget that “fixing” these problems would take a huge amount of energy and mineral resources. We would likely need many, many huge desalination plants and pipelines to try to work around the California drought. It couldn’t be done, even with $20 barrel oil, I expect.

  2. This is how the people who do matter think.
    >(parts of the original article snipped)

    >Rich, high-IQ foreigners need somewhere to put their fortunes, and the Bay Area real estate market offers among the best combination of rate of return and stability.
    >. Enormous capital circulating in that region from foreigners and newly minted millionaires & billionaires in the web 2.0 boom & stock market boom. It’s a like a free market feeding frenzy there, of people becoming instantly wealthy despite the left insisting that the American dream is dead and America is in decline.

    > America still center of the universe, and Silicon Valley is the center of America, with Manhattan a close second. Everything that is important in the world is going on there. Tesla, Google, Facebook, Snapchat, Uber, Apple, etc – all in Silicon Valley.

    >. America is an economic safe haven, especially since 2008 and 2013. Other countries are rife with a combination of either inflation, deflation, stagnation and corruption – America has none of that. Real GDP growth of 2-3% may not seem great, but it beats all other g-8 nations.

    >No currency risk. (snip)

    ==

    The wealthy is concentrating into a few places. The money will flow around.

    Most of the world is actually fairly insignificant economy-wise.

    Let’s be honest. Even if the poorest 80% of the world disappear tomorrow without trace, it won’t really hurt the global economy too much.

    • The same can be said for the wealthy. If the global economy collapsed tomorrow the 80% will get along fine without us.

      • No. They will be at a loss about what to do . Eventually they will fight among one another, and the winner would tend to be somewhat related to the powerful of the older times.

      • Oh come now. When the collapse comes this will be over. Provided we are all not dead from radiation poisoning, luxury will consist of finding a can of dog food hidden in a closet in a burned out house. And hungrily scooping it into your mouth with your fingers.

        Anyone who thinks the wealthy will be able to ride this out is spouting nonsense.

        No energy = no civilization, except at a very basic level.

        • The really wealthy and powerful have underground cities to hide in – such as the one in the Urals that the Russians have been building since the 1970s, and is now larger than Washington, DC.

          How long people can actually live in underground bunkers, only time will tell.

          • Actually quite a long time.

            There was a family in Serbia who lived underground. They went hiding when HItler invaded on 1941. They were discovered on 1993, after communism fell.

            Somehow the patriarch of the family kept them alive for 52 years underground.

            • And to the best of my knowledge, they did reproduce (I think it was the family of a few siblings which went hiding together).

        • Colonial America had technology. It was 18th century technology. Landed gentry, crafts people, merchants, and laborers.

    • If the poorest 80% of the world disappear, it will affect commodity markets. Prices will drop, and it will be hard to keep production up. The poorest 80% disproportionately buy commodities, especially food. We actually do need them, to keep the commodity markets in balance.

      • Big deal . Mr. Billionaire had $1 billion. he now has $200 million. Still a formidable amount.

        • He will have nothing. Because all assets that currently have value will be worthless in a world without energy.

          • Except arable land, livestock, guns and ammo, clean fresh water sources. Those assets should appreciate in value, although the dollars will probably be worthless.

  3. Hi Gail and everybody

    And Paul! I got this for you: your Harvard paper draws one of its stronger scenarios on La Hague’s supposed radioactivity releasing capacity, taking it from another terrorism driven paper:

    Click to access 010926BriefNRA1v4.pdf

    If we dig further, this paper mentions another one (not linked) the same guys wrote trying to assess the magnitude of the release in case the smaller pool of the facility went dry. Which is very surprising is this assumption they make:

    “The impact analysis is a rather simple evaluation of the order of magnitude, because we assumed identical dispersion conditions as in the case of the Chernobyl accident. ”

    So they conclude La Hague’s release will be directly proportional to Chernobyl according to the amount of fuel involved. Wich means they are neglecting the fact that at a pool there is usually only one flammable material (zircalloy) to be found and that at Chernobyl this have been greatly multiplied by the graphite in the reactor core. Only graphite can explain the 6,000 feet high hot air column that spreaded so much the stuff, you won’t have anything like this with zirconium alone, no radioactive cloud as in Prypiat.

    And about your DC Bureau article, it just makes no attempt whatsoever to back its mega explosion thesis

    I’ve found also an article at enenews supporting the idea the blowing at Daichii 3 core was due to a small criticality event, wonder how many of these could arise in the future. I wrote to IAEA and they sent me many articles where the chances of criticality are estimated and finally expressed in a mathematical way I can’t understand. Would anybody be able to translate it into something like %?

    Good to see all comments are still interesting. It seems moving to Russia looks not as such a bad choice…

    • I’d suggest writing the guy who wrote the report and asking him how he came to those conclusions

      Hui Zhang
      Telephone: 617-495-5710
      Fax: 617-496-0606
      Email: Hui_Zhang@harvard.edu

      Surely, given his background and the institution he was working for, he is not just pulling numbers out of his hat.

      • Thanks, I will. Btw, I can’t see why do you believe Harvard could be the last word on nuclear issues. I’d rather see IAEA in that role, perhaps I’ll send it to them before

        • I researched this topic for considerable time. That was the only information I could find – and it is from a very credible source.

          I’d be interested in seeing something credible contradicting this.

  4. The top 0.001%, or about 70,000, own 30% of the world’s wealth.
    The next 0.01%, or about 700,000, own 19%.
    The next 0.1%, or about 7,000,000, own 32%.

    So the top 0.111%, or less than 8 million people, own about 81% of the world’s wealth.

    Out of the remaining 19%, most of them are owned by the next 1%.

    50% of the world’s population own about 1% of the global wealth.

    ==

    It does not really take a lot of energy to maintain 8 million people in eternal luxury.

    • Kulm
      That is a very interesting observation. But I think the world is not so simple.

      Wealth is the accumulated difference between income and outgo. Most people have no net of income above outgo, and so do not accumulate wealth. The very few who are wealthy have high incomes, but do not spend nearly all of their income…instead they accumulate wealth. Since the wealthy do not spend all their income, they do not consume a proportionate amount of energy.

      In addition to the ‘free market’ cycle I describe above, at the present time the Central Banks are giving the wealthy IOUs from the general public, which consists mostly of people without much wealth.

      Don Stewart

    • It does not really take a lot of energy to maintain 8 million people in eternal luxury.

      I disagree.

      Who will feed them? Who will work in their factories? Who will clean their toilets?

      ‘Tis a short-lived parasite that kills its host.

      • I also disagree. You have to define a life of luxury. If that includes modern conveniences like electronics and electricity then you need the infrastructure to provide that. That infrastructure takes a lot of energy and know-how to create and maintain.

        • Louis XIV lived in the most luxurious place in Europe which today’s very wealthy would covet. Add some more modern conveniences which are not that hard to implement even without digital tech, and it could be defined as ‘luxury’.

          Except for digital goods, everything we enjoy were already in service by around 1935.

          • Most people in advanced countries live far better lives than the kings of past. The most obvious advantage we have is that we have far better medical care than they had. We live in far better accommodation (try a castle in the winter)

            As for slaves we all have hundreds of slaves working for us day and night. We call them ‘oil’

            I would not for a second change places with an 18th century king.

  5. #ENERGYSECURITYALERT

    The UK’s Department of Energy and Climate Change is for the first time using ministerial powers allowing Energy Secretary to revoke North Sea operating licenses for a Russian zillionaire as Russia threatens new sanctions which would pretty much shut down the UK economy given Russians have controlling interests in the North Sea.

    “The UK is forcing Russian billionaire Mikhail Fridman, owner of the $10 billion L1 energy fund, to sell dozens of newly-acquired North Sea oil and gas assets in the next 3-6 months on fears more Russia sanctions could shut down the gas fields.”

    I’m not sure if the Brits are complete idiots, smart or deluded?

    http://rt.com/business/251541-north-sea-oil-fridman/?utm_content=buffer36e4f&utm_medium=social&utm_source=linkedin.com&utm_campaign=buffer

    • #FOODSECURITYALERT

      Tescos one of the largest corporate food retailers in the UK posted the biggest corporate loss in British history, nearly 6 billion squillion, at this rate they’re going to wipe themselves off the map.

      “Tesco will guarantee itself an unwanted place in UK corporate history later when it unveils an annual loss of well over £5bn, one of the biggest ever reported by a British company.”

      http://news.sky.com/story/1469652/tesco-loss-to-be-among-biggest-in-uk-history

      • The Western Hemisphere is doing incredibly well what with

        #CaliforniaGroundZero
        #USFrackedOut
        #UKEnergyFoodCrisis
        #EuropeanGreekExit

        Stay tuned and debate fellow doomsters

        • From the Daily Telegraph:

          Tesco: Why investors shouldn’t panic

          Shouldn’t that be Why investors SHOULD panic and unload this bankrupt beast?

          And we are told the UK is one of the cleanest shirts in the basket.

          I bet dog food sales are growing as the homeless spend their few pounds on this and cheap rice. Add a little soy sauce and it’s suddenly an exotic dish

          • The UK’s FUBARd, it’s just that they’re having a pre-election “woody” where insane promises and lies are being made to the electorate. Wait until after the elections when the real cuts come into force just as the mother of deflation kicks in.

            Gail is so absolutely right it’s not even funny anymore. The only reason Tescos the UK’s largest most powerful retailer is flying full kilt into the ground is because the average Joe is losing his/her financial shirt, instead being forced to shop at discount, budget supermarkets, Aldis, Lidls etc.

            Well that is a clear cut example of economic “diminishing returns”

            Things are diminishing so fast Houdini aint got nothing on the Western hems

        • Oh yeah for those on twitter you can follow https://twitter.com/AgritechMedia, focus on
          the food, energy, water security nexus and the surge of interest in the nexus way of thinking about the interdependencies, tensions, trade-offs, but in the wider context of technology, the economy and environmental change.

          We need to start connecting the dots as the forces of gravity (deflating debt/energy) obliterates the rocket (economy) rapidly running out of fuel.

          We’re going to start seeing “uncontrolled flghts into terrain” shortly people!

        • Stay tuned and debate fellow doomsters

          Meanwhile, on a tiny island off the west coast of Canada, raw milk herd-shares and goat sales are up significantly. This, after my vet warned me that I might have saturated the market.

          Perhaps some of the sheeple are awakening, and are starting to realize there ain’t nobody gonna feed them but themselves.

          • @ JS Haha! Now you know why Jim Rogers said “the stock brokers will be driving taxis, the smart ones will learn to drive tractors for the smart farmers, better still become a smart farmer.” Check out the latest project I’m working on http://fluxiot.com/
            Precision agricultural tools for people who “grow” on water, but at this rate we can count California out the equation. Agreed, we’re going to see a lot more of urban, communal farming as we try to move back to agraria, but it will likely be in flux for a time. 😉

            • Check out the latest project I’m working on http://fluxiot.com/

              Interesting, but pretty darn techy.

              It looks like it needs all of human civilization underneath it, no? How do you see this coping with things like the collapse of semiconductor manufacturing, or intermittent electricity?

            • Here in the urban southwest, there are endless flat-roof buildings. What it will take for people to use them, I don’t know. Collapse, yes. But that would be almost too late for the massive change of thinking and education it requires to use those roofs wisely.

            • It’s simple Jan, it’s likely impossible 7.3 billion people will simply give up on life and die over the next 20-30 years or so unless there’s some huge life threatening event such as nuke war in which case who give a FUBAR anyway, we’re all dead, not much you can do about being dead. That said, assuming that type of existential risk doesn’t materialize we already see the 1st signs of tensions between capitalism versus the collaborative commons “zero marginal cost” society emerging given, (as Gail has correctly warned many times over) we see “diminishing returns” everywhere we look, particularly across the Western hemisphere. Investment in Ag & Foodtech IS investment in the future of the human race, so it makes sense (no pun intended) to focus on the most vital sources of energy for life and help those interested in taking advantage of the tech/networks available. The internet isn’t going away anytime soon in our view.

              Put another way, we’ll have a serious crisis on our hands if innovations don’t materialize when you define the multi-dimensional problems, “how do we collaborate intensively together, but in a sustainable way, to produce more food in the next 30 years than the previous 10,000, against growing, competing populations, 10 billion by 2050, declining resources, energy insecurity, financial instability, climate change, soil infertility, water scarcity, declining yields, ageing farmers, land, distribution issues, and a whole bunch of challenges converging to create the perfect storm? We suspect some urbanites may need simply solutions, networks to tap into to help them grow “on location & on demand”.

              We work off the axioms that we all need food, energy, water maybe some form of money acting as a medium of exchange, unit of account, store of value 24/7, 365 or the alternative is civilization and anarchy are but a few meals apart. Survival is the spirit is the soul as they say.

              Our alternative choices, are to continue in industries that we suspect will collapse first, those that quite frankly aren’t needed, nor solve societies approaching problems, or as some would recommend today, simply give up, put tinfoil hat on and wait to die because “all hope is lost” and we’re facing complete and total, imminent collapse etc. Basically go be perpetually depressed and die in a way that suits you but don’t do much else. We don’t really think that’s useful. Or alternatively with the skills you have, try to focus on stuff you’re passionate about that you know maybe could have high value to someone else even if this is our last half/century etc. We know the mega-macro risks involved, but we don’t care, we’re young (under 40) and don’t see much point in simply talking about collapse sat at home getting super depressed. We’ll try anyway by actually doing something. If we can help to sustain and enhance 1 human life even for a day, as futile as they may sound, it’s worth it, if this is to be our end.

            • the alternative is civilization and anarchy are but a few meals apart

              The two are not mutually exclusive. I think functional anarchy is the only alternative to feudalism, in the long run. “Anarchy” does not mean “without rules;” it means “without rulers.”

              Our alternative choices, are to continue in industries that we suspect will collapse first, those that quite frankly aren’t needed, nor solve societies approaching problems, or as some would recommend today, simply give up, put tinfoil hat on and wait to die

              I’ll take “none of the above,” thank you. I think there are, on a local level, many more alternatives than that.

            • “Put another way, we’ll have a serious crisis on our hands if innovations don’t materialize when you define the multi-dimensional problems”

              Innovations are what got us to where we are. No way in hell we’d have 7+B people on this planet without innovations.

              And now because of all these innovations, we are up against the wall on dozens of fronts. Water shortages – pollution – expensive to extract resources – depleted fisheries — and on and on and on.

              We can pray for more innovations to get us to the end our lives without starving to deal or eating radiation. But I don’t see how given the severity of all of these problems.

              There is no way out of this. Billions will die. Quite likely everyone.

              That is not negativity. That is just what a logical person comes up with when he rejects wishful thinking.

            • “There is no way out of this. Billions will die. Quite likely everyone.”

              Everyone is going to die eventually, no matter what*. It is just a matter of how and when.

              *Barring transferring consciousness onto The Cloud.

            • “We work off the axioms ”
              Who is this we we we we you write kemosabe? Are you a elected official or a self proclaimed representative of this imaginary plural group of people? Not one honest “I” in your entire spiel.

              “Basically go be perpetually depressed and die in a way that suits you but don’t do much else. ”

              Bend the truth just enough so you are not depressed. Do whatever it takes so you feel OK. Pop antidepressants ignore any inconvenient realities. Above all continue to squander resources without it there is no meaning. Lazy bastards not squandering resources.

              “try to focus on stuff you’re passionate about that you know maybe could have high value to someone else ”

              Faced with a lack of meaning brought on by the void of the impending end of illusion desperate attempts are made to find meaning.

              “If we can help to sustain and enhance 1 human life even for a day, as futile as they may sound, it’s worth it,”

              How noble. What a coincidence that your noble mission allows your continued squandering of resources.

            • @ flyonwall
              “We work off the axioms ” Who is this we we we we you write kemosabe? Are you a elected official or a self proclaimed representative of this imaginary plural group of people? Not one honest “I” in your entire spiel.

              Before you launch a full scale cyber assault, suggest you practice a little personal self control and read through the exchanges as a matter of common courtesy before you jump in button bashing away. You would then clearly have establish who the “we” is.

              The “we” is the team I work with http://fluxiot.com/ as you would have noted in the exchanges.

              No go forth, be depressed and die in the best way that suits you if all your hope is lost, we’ll give your world a miss thanks and hold out for a little longer.

    • Are there buyers for the North Sea oil and gas assets? Does putting them on the market reduce the value of all oil and gas assets (or is the size too small to make a difference)?

      • @ Gail, it’s hot off the press so not sure, still trying to figure out the ramifications. What I do know is, the UK Govt deems this an imminent national security threat given. It’s an enforced fire sale, so we’re going to see Russian retaliations for sure, but then this move could always have been political to begin with. No Russian oligarch does anything, anywhere without Putin first giving his blessing, cross him and they tend to end up dead or in prison. Are BP operating with the bears on any projects? Didn’t CEO BP Bob Dudley once get chased out of Russia with threats of arrest?

        “The UK tried to block the purchase, concerned the Russian tycoon and his company could be put on a sanctions list and jeopardized field development in the North Sea, which provides the UK with half of its energy needs.”

        “Both are very short time periods to find a buyer for assets that are aging, expensive, and in production decline.”

        “Product has fallen 6 % per year between 1999 and 2010, the Economist reported. Low oil prices, which have lost more than 50 percent of their value since summer 2014, also make North Sea drilling expensive and borderline unprofitable.”

        As there is little potential for growth in the North Sea, L1 Energy is looking elsewhere.

        Could be why Libya got smashed to pieces a few years ago with the US “leading from behind” France and the UK leading the charge. Turned out well didn’t it? What with the thousands of refugees drowing, swarming off Italy’s coastline. ISIS warned they would send 500,000 refugees across, weaponizing them, seems like they’re following through on that warning.

        What a mess, it’s all turning into!

        • Not having enough resources to go around seems to lead to bad results. We have had close to enough resources since World War II, and that has kept down the size of wars.

          • Look what happened to Germany when it was crushed economically into oblivion between WW1 & WW2. Hitler, with an IQ of 140, filled with rage, anger, hatred and just about every negative emotion under the sun exploited national chaos and despair, turned it into a unified, unchallenged hegemonic beast and unleashed hell on an industrial scale. The rest is history as they say.

  6. Dear Gail and Finite Worlders

    I have mentioned kitchen gardens on numerous occasions. Some people opine that they are ridiculous. Here is a new post on our local small farm listserv:

    From: blanked out
    To: growingsmallfarms@lists.ncsu.edu
    Cc:
    Date: Tue, 21 Apr 2015 21:16:00 -0400
    Subject: How to keep kale happy at market?
    Okay, I have to admit that I am stumped and feeling no smarter than I felt years ago when we first started growing and selling kale for local farmers’ markets. It seems that no matter what we try, our kale stands a good chance of wilting down at our afternoon markets. I am ready to hear what other folks do to keep bunched kale happy and perky….

    What we have tried- we display our kale bunches in bowls of cool water at market, we dropped Red Russian because it seemed to wilt the worst, we keep a spray bottle handy to spritz the bunches, and yes, our display is in the shade.

    We had an inch of rain last night (so they were well hydrated), the bunches were cut first thing this morning, then they were immediately re-cut and washed in tub of cold water, packed in a waxed boxes with wet newspaper and placed in the walk-in cooler until market time. Still this afternoon at market we had bunches that wilted down???

    I am too stubborn to quit growing kale, and besides everyone is finally figuring out it is actually good for you! Any ideas?

    thanks, blanked out

    Back to me. I worked on a small farm for a number of years. I have seen first hand the way leafy greens deteriorate beginning the moment they are harvested. I know how many leafy greens are brought back unsold and given to the pigs or the compost pile. The deterioration is also a marker of the deterioration of the valuable micronutrients in the green leaves.

    In my humble opinion, people like David Kennedy (of Eat Your Greens) are exactly correct. Grow them in your yard. Small farms are best suited to growing more stable crops such as sweet potatoes. But even sweet potatoes yield valuable green leaves, which still gives the nod to a kitchen garden. Some of my best friends are small farmers, but I grow everything I can in my kitchen garden.

    Don Stewart

  7. Dear Gail and Finite Worlders
    This will take up the question of whether Harari’s simple models of economic history have merit. Does confidence in the future have explanatory power independent of the availability of fossil fuels?

    In this short post, I can’t fill in all the details. See the two chapters The Marriage of Science and Empire and The Capitalist Creed in the book Sapiens. Just a few notes from me.

    Harari poses the question ‘Why Europe?’ and not the Asian empires of the 15th and 16th centuries. His answer is, oversimplified, that the Europeans saw the world as mostly ’empty’ and science as a way to get the leverage needed to conquer it. Christopher Columbus and the Asians saw the world as ‘full’…there was nothing to be learned, just traded for or extracted. Amerigo Vespucci was the first ‘modern man’, in that he recognized that the discovery of the Western Hemisphere opened enormous opportunities for the Europeans. When the British were trying to calculate the distance to the sun, they found that they needed eclipse observations from widely separated places on Earth, and found that Australia and Tasmania were ideal locations. They funded an expedition by Captain Cook to both make the scientific eclipse observations, study the local flora and fauna, and also expand the British Empire. Was the Cook voyage a scientific voyage or a military voyage or just curiosity? It was, in truth, a mixture of objectives which was characteristic of the European voyages of discovery.

    Cortez conquered the Aztec Empire with only 500 men by using the sciences of psychology and sociology along with technological prowess. Read the explanation for the details. With fewer than 200 men, Pizarro conquered the Incas, using a similar method. Both of these expeditions were financed by capitalists in Europe who believed that they could get rich by spending some money now in hopes of future returns. The Spanish government did not know what Cortez was up to.

    The British in India governed a huge country with 600 officers, and an entourage of scientists or warrior/ scientists, such as the officer who decoded cuneiform script and found the answer to the mysterious ancient writing about which the Indians knew nothing. The officer posited that most modern languages arose from this ancient ‘Aryan’ language. Later on, the scientists provided convenient rationales for why these ‘Aryans’ were fair skinned Nordic types. It was also apparent to Europeans that ‘mixing with the locals’ in India had degraded the ‘pure Aryan’ characteristics, and must be avoided. (This is the message from ‘science’ that I was taught in school, and why most of the white people I knew were convinced that we were on the wrong side in WWII…we should have joined Germany in attacking the Soviets and their ‘raceless and religionless’ empire.)

    While most of the Asian empires did not ever make the leap to the sort of audacious, global thinking that Vespucci began until after 1950, a few countries such as Russia did change.

    It is very easy to imagine the fertile soil for the South Sea Bubble that the combination of exploration and venture capitalism unleashed in Europe.

    I will now interject an opinion of my own. While the shift to a venture capital mindset and optimism about future opportunities preceded fossil fuels, that shift needs to be seen with a certain perspective. For example, large ships were a key to things like the Dutch Empire. But large ships require tall, straight trees for masts for the large sailing ships. Tall, straight trees (such as white pine) were fairly quickly exhausted in Britain, and had to be replace by cutting down the white pines in New England. So these rapidly growing empires were NOT free of ecological limits. By contrast, the government of Edo Japan was a sort of ‘steady state’ government, which used strict policing to maintain the forests in Japan…which belonged to the government and were sustainably managed. Thus, the difference between the extractive mindset of the European empires and Edo become apparent. Europe and the US grew rapidly with a combination of extractive economies and optimism about the future, so that Admiral Dewey found no resistance worth nothing when he sailed into the harbor in Japan which was sustainable but slow growing.

    A second point is that the enormous growth in Europe was accompanied by catastrophe in many of the conquered lands. The natives in the Carribean were virtually wiped out. The Central and South American natives declined by perhaps 90 percent. As the natives died, African slaves were imported.

    Third, the growth of output per capita is much more dependent on fossil fuels. While the European empires greatly enriched the Europeans, the output per capita did not begin its exponential rise until fossil fuels became common. Harari says that per capita production in 1500 was 550 dollars, which has increased to 8800 dollars today.

    Does ‘optimism about the future’ have independent explanatory value? I think Harari gives convincing arguments that it does…with the caveats about exactly WHO is benefitting and getting the growth. We can think of very current examples, such as the tight oil bubble and the stock market bubble. Whether these will turn out to be misallocations of capital reminiscent of the South Seas Bubble remains to be seen.

    Another current example is the ‘discovery’ of that foreign land, our gut microbes. When we eat, we are actually mostly feeding our gut microbes…a discovery worthy of Vespucci. We also now understand that the metabolism of plants is similarly dependent on soil microbes and the rest of the soil food web. The article Soil is the Stomach of the Plant, currently at Resilence.org lays out the science for the plants. My recent post on the effects of eating red meat and the production of TMAO by the gut microbes lays out the science for the humans. In both cases, the ‘scientific community’, exemplified by Monsanto, see a golden opportunity akin to that which presented itself to Cortez and Pisarro and the British in India. Rather than tell the humans that they need to live according to Nature’s Plan with biological farming and by eating a diet fitted to our physiology and the gut microbes who are our essential partners, the scientists are cooperating in the Empire Building project of engineering the microbes to permit humans to live in a way that maximizes the profits of Monsanto and company. The parallel with the 600 officers ruling India is obvious.

    In my opinion, viewing history ONLY through the lens of fossil fuels, or even resources more broadly, misses an important point. IF the management and scientists employed Monsanto did not have confidence that they could ‘manage’ the political sphere and the perceptions and habits of the population at large, then the ‘colonization’ of the gut microbes world would never take place. Instead, we would have sober advice from people like Richard Heinberg about how we all need to live within ‘natural limits’…reminiscent of the rules laid down by the Edo government.

    Don Stewart

    • “Cortez conquered the Aztec Empire with only 500 men by using the sciences of psychology and sociology along with technological prowess.”

      That’s a bit simplistic. The first thing Cortez did was burn the ships, so the men would have no notion of turning back. The rats fled the burning ships, and the diseases spread ahead of him, killing up to 90% of the population.

      He happened to arrive at the time and in a manner that fulfilled prophecy, and the vast majority of the city-states within the Aztec Empire were oppressed and looking for any opportunity to destroy the empire.

      All he really did was supply artillery support to the tens or hundreds of thousands of indigenous warriors that rose up against the Aztecs.

      The Incas were already dying from these plagues and hiding in their mountain shelters by the time anyone got to them.

      • Matthew
        You will find that your account differs substantially from that of Harari.

        Harari portrats Cortez as first ingratiuatiung himself into the kings inner circle, then seizing the king as prisoner, using the king as a puppet governor for several months, building alliances with dissidents within the kingdom, starting a civil war, and so forth. In other words, a ‘psyops’ operation such as the US routinely uses today.

        The sheer numbers of warriors in the Aztec empire could have easily overwhelmed the Spaniards by sheer force of numbers, IF they had a coherent plan. This is somewhat similar to the question of ‘why didn’t the people in the camps overwhelm their relatively few Nazi captors?’ And the answers turn out to be complicated.

        Don Stewart

  8. Dear Matthew
    Another question along the line of the conquistadors and the native Americans, and the captives in the WWII camps and the Nazi killers, is the question of why Americans don’t ‘vote the bastards out’. Studies show that the political process in the US is virtually immune to public opinion. Why is that, in a country which is supposedly one citizen with one vote, except that the ‘citizens’ with all the money are corporations or individuals who control corporations, and the real humans have little money?

    Same strategic relationships, same outcome.

    Don Stewart

      • Dear edpell
        The conquistadors has more power as an individual than any individual in the Aztec Empire. The collective citizen of the Aztec Empire had more power than the collective conquistadors, but they had no strategic plan.

        This is something like the Indian Wars on the plains of the US. The rule in the Cavalry was that a big settlement of Indians would scatter before the Cavalry charge just as easily as a small village. The numerical supeority of the large village was not effective. For a variety of reasons, which I have forgotten, the very large village that Custer charged DID NOT scatter. They fought back and their numerical superiority resulted in the slaughter of every cavalry soldier. The cavalry had rifles, but the Indians killed them with ‘a hail of arrows’.

        The French Revolution was a parallel to ‘a hail of arrows’. Circumstances worked out just right for a revolution…which pretty quickly morphed into something else, of course. The citizenry of the US may be quite unhappy with Congress, but what they are continually presented with is a choice between two virtual clones…Hillary making war on Russia or Jeb making war on Russia.

        Ron Paul has a current post talking about the political murders in Ukraine, and how nothing appears in the US media about them, Washington is silent. Putin can point it out, but ‘we all know he lies’. But you can be sure that the latest antics of the Kardashians and such will occupy our media. How is a poorly informed and distracted majority supposed to reach any serious conclusions and vote in the right people and hold them responsible? The media moguls have vastly more power than any ordinary American individual. So the theoretically superior force of public opinion runs a poor second to the manipulation by our modern conquistadors.

        Doin Stewart

        • Compare Cortez to (I think) Cook. Similar thing, tried to attack a bunch of cannibals on an Island. Had armor and black powder guns. Took a lot of casualties and had to flee.

          Once you get to repeaters, revolvers, machine guns and artillery it is very different. Once one soldier can kill dozens of people per minute at a distance, it is very different from a blackpowder weapon that takes 30 seconds to reload. If you could get around or through the armor, archery seems superior to blackpowder to me; the trade-off being, it takes years of training and hard work to be a competent archer, and only a few days to learn the basics of using a musket.

        • Glad you pointed to distraction. IMO, the only major subject worth attention is whether or not we survive, and if so, how. So I wouldn’t suggest trying to solve problems. That comes second. The first “enemy” to tackle is distraction. For without the “strategic advantage” of attentive masses, no sane policy can be devised. Hope I’m wrong.

          • “For without the “strategic advantage” of attentive masses, no sane policy can be devised. ”

            Good policy requires attentive masses? I think it would be far easier to get things done if the masses paid even less attention, especially when it comes time to make the hard choices.

        • Thanks Don.

          If you go to the city of Washington, you will find that almost all of those corporation lawyers and cowardly politicians, members of congress, and mis-representatives of the masses claim, in glowing terms, that they have risen from the ranks to places of eminence and distinction. I am very glad that I cannot make that claim for myself. I would be ashamed to admit that I had risen from the ranks. When I rise it will be with the ranks.—Eugene V. Debs

          What can Labor do for itself? The answer is not difficult. Labor can organize, it can unify; it can consolidate its forces. This done, it can demand and command.—Eugene V. Debs

    • “Studies show that the political process in the US is virtually immune to public opinion. Why is that, in a country which is supposedly one citizen with one vote, except that the ‘citizens’ with all the money are corporations or individuals who control corporations, and the real humans have little money?”

      By the time you get to election, the choices have already been whittled down to two, or one per party in multi-party systems. If you care enough, get involved earlier in the process, and at the smaller scales, such as municipal. If there were a thousand choices on the ballot, it would be pretty chaotic.

      Also, I kind of suspect the democratic process is not as amazing as people claim. Look at California, dealing with the consequences of voter initiatives. Or even Switzerland, where the people voted in a referendum to keep the money from the mining company plundering Africa, and not do anything for the people being exploited.

  9. On California, it is not one thing. It is southern republican California Santa Barbara (13, Sur) and south versus northern California (14, Norte) San Luis Obispo and north. The north has enough indigenous water for its people, industry, and some farming. The south is dry. They need desalinization for people and industry. They can not support farming with indigenous water resources.

    • southern California republican, military, propaganda.

      Google with its strong agenda setting role should be in southern California not Santa Clara.

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