Gail in China: In Her Own Words and Pictures

Aired on  Our Finite World and the Doomstead Diner on April 29, 2015

Also available as a downloadable mp3:

As regular readers of  Our Finite World and the Doomstead Diner know, Gail recently took a month long trip to China, where she was invited by Professor Feng to give a compact University course to undergraduate students (with graduate students and faculty sitting in if they liked) at the China University of Petroleum in Beijing.

China University of Petroleum – Beijing (CUPB) is a national key university in China, located in the world famous scenic Changping District, the area close to the Great Wall and Ming Tombs. It is one of the 100 institutions implementing the national “211 Project”.

The university is equipped with the first-class facilities, including a library with a collection of 300,000 books, modernized classrooms, new computer facilities and a comprehensive sports center.

Above all, CUPB has an excellent academic staff body of 545, including 121 full professors and 128 associate professors.

Unfortunately, internet access from China is limited for a couple of reasons.  First off, any number of websites (like Google for example) get the Thumbs Down from the Chinese government.  WordPress is another site not well liked by the Chinese Central Committee.  While you can access some WordPress sites from China, actually getting onto your Admin board to do publication work is close to impossible.  Besides that, access is spotty in terms of bandwidth and speed, so even if a site is theoretically accessible, the infrastructure won’t allow you to access it in any usable form in many locations.  So Gail was a bit concerned before leaving that she wouldn’t be able to fill in the OFW readers on her trip while she was over there. personally am notorious for finding end-around means of getting things up on the net that are otherwise difficult to do (you have to be creative when you get booted off as many websites as I have been. 😀 ), so when Gail mentioned this problem on OFW, I emailed her and suggested she send me her Updates from China * in email, which I would then publish for her on OFW under my byline.  While website work is pretty tough from China, you can pretty much get your emails out.  How well this plan would actually work was a question mark since neither of us had tried such a thing before, but it turned out to work marvelously well.

Upon her return here to the USA, basically RIGHT OFF THE PLANE, I snagged Gail for an Interview while her recollections of the China Trip were still fresh in her mind, despite the Jet Lag of course.  😀   We cover numerous topics in this discussion, including Chinese economic issues, Water and Air Pollution issues, Demographic issues and venture off as well into discussion of the various monetary issues we see ongoing in Europe as well.

As these things go, this one is one of the best we have ever done, right up there with my personal favorite with David Korowicz, the Irishman with the Gift of the Blarney Stone who wrote Financial System Cross-Contagion: A Study in Global Systemic Collapse and a few other well documented and researched papers.  Also right up there with the most popular discussion generally speaking with Nicole Foss (aka Stoneleigh) of The Automatic Earth blog.

Hope you enjoy the discussion.  While you listen, here below are a few more pictures from Gail from the China Trip.  You can find more of them in the China Trip articles in the archives on Our Finite World.

In Taich Electric Board Room

Inside the Taichi Electric boardroom where we met with officials. The people shown came with our group, however. Lots of smoking; windows were open and no heat despite  temperature in the low 50s. No elevators in buildings we visited.

Inside graduate student officeInside the graduate students’ office where I spent my time in Beijing when not teaching. Note blue jacket, backpack, and purse. 

Where we met at third factoryWhere we met at the 3rd factory we visited in the electrical industry in Wenzhou. The individual shown is a retired professor who accompanied us on the trip.

Popular cheap noodle dishPopular cheap Chinese noodle dish in the school cafeteria. It consisted of tomato sauce with vegetables, noodles and a fried egg on top. It came with unlimited refills on the noodles and sauce, for the equivalent of $1.30.

Some sea food at restaurantPart of seafood selection at a Chinese restaurant. Most fish was cooked and served whole. Eating it with chop sticks was challenging.

Equivalent of UPS delivery for studentsThe equivalent of UPS delivery for students at the university. If a student knows the date a package is expected to come, the student can go and check the sidewalk for it. I didn’t find out what happens when it rains or snows.

Shrine at third factoryMapShrine at the 3rd factory in Wenzhou. Religious expression seems to be permitted in some areas outside of Beijing.

*Gail’s China Trip Travelogue Posts

About Reverse Engineer

Reverse Engineer is Admin and Chief Cook & Bottlewasher on the Doomstead Diner Blog & Forum, and hosts the Collapse Cafe Video Discussions and Podcasts, and the Frostbite Falls Daily Rant spleen venting Collapse-tainment show. Fans of George Carlin, Bill Hicks and Rick Mercer tend to like the material, Academic folks, not so much.
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240 Responses to Gail in China: In Her Own Words and Pictures

  1. Fast Eddy says:

    Matthew – your garden house connected to a water ram won’t work.

    Let’s say at the last moment the PTB remove all fuel from all reactors and put it into storage ponds.

    There will be no way to dry cask any of the fuel rods post collapse. That requires very complex machinery. So the fuel will need to be cooled for many decades.

    Storage ponds require continuous maintenance.

    Let’s see what happens when a fuel pond is not maintained properly:

    As far as I know the UK and US economies are still functioning. There are no riots or chaos in either country. The electricity is still on. Spare parts are still available.

    Yet look at the state of their nuclear institutions.

    Post collapse you think this will improve? Good luck with that

    • Never under estimate people’s capacities for complacency, corruption and incompetence … that is pretty shocking. At first glance I immediately assumed the reactor was in the FSU …

  2. edpell says:

    Gail, we need a Finite World News service. News covered from a finite world perspective. FWN, “all the news in perspective”.

    1) Senator Shmuzer calls for increased infrastructure spending at a time when such spending provides negative five cents per dollar spent.

    2) Presidential candidate Loveya outlines path to citizenship for all at a time when twenty states are running out of potable water.

    3) Bipartisan support for six new LNG terminals along the east coast is questioned by Tverberg who points out that a third of the industry is loosing money.

  3. Jan says:

    Dear Gail,

    since some time I have been following your blog as I am interested in the “affordability approach”.
    Personally I am not afraid of reducing energy spending, life is beautiful in a lot of ways. In fact I doubt more the crazyness and selfishness of some people and their games of power than technical challenges.

    Today I had some time to make some rough, defective and totally unprofessional calculations I’d like to share nevertheless:

    The german government estimated in 2013 a theoretically and technically achievable potential of annually 2.900 TWh by classic onshore wind power stations (without economic efficiency calculation).

    Germany’s primary energy consumtion is specified (eurostat) as roughly 300 Mio TOE that is about 3.500 TWh. Maybe that could be installed with some more offshore mills added. Assumed a 2 MW windmill generates 4.000 MWh annually, then 3.500.000.000 MWh / 4.000 MWh = 875.000 windmills are needed, each with costs of about 4,5 Mio EURS makes a 3.938 Mrd EURs investment (Mrd are US billons) – the german annual GDP amounts to 3.100 EURs.

    A study suggests a fair price of 0,10 EURs/kWh for amortisation of 2 MW mills in Austria. 3 Mio TOE = 3.489.000.000.000 KWh/a x 0,10 EURs/kWh = 348,9 Mrd EURs annually. Currently industrial consumers pay averaged 0,12 EURs/KWh (Eurostat) in Europe and in Finland (lowest price level) 0,08 EURs. Natural gas for household consumers is priced average 0,065 EURs/KWh, in Sweden 0,123 and in Romania 0,029 – that is due to taxes. Industrial consumers pay average 0,041 EURs. The average Euro-super 95 price per litre was 1,53 EURs that amounts to (1l ~ 11 kWh) 0,173 EURs/kWh. Electricity costs for household consumers in Germany mounted up to 0,298 EUR/KWh average in 2013. Photovoltaic in Germany can produce electricity for 0,078 – 0,142 EURs/KWh

    New approaches to improve the EROI use kites. There are several concepts, running on rails or underwater or letting kites circle in eights releasing the guy rope exciting an electric generator winch. The kite is then retracted on a more direct way. Asserted 100-500 KW, not too much. They promise prices of 0,04 EURs/KWh.

    Another approach is a solar thermal power with mirrors melting salt, the current price is about 0,12 EUR/KWh, other sources speak of 9 – 22 cents and expect a fall of 50% during the next 5 years.

    It is possible to convert electricity into fuel.
    If the price fits it would solve a lot of problems that occur with electric transportation and storage.
    The combination of a solar plant in the desert delivering synthetic fuel that could be transported and used like oil would solve all our problems. It is also possible to create hydrogen directly from sunlight and convert this to methane

    If we assume an price for electricity of 4 cents and 11kWh per liter we would need 44 cents for the energy – to keep the fuel price of 1,53 EURs we still have 1,09 EURs per litre for fuelification, transport, taxes and to save banks.

    What is the resumee of this little survey? From the german/european point of view to substitute fossile fuels completely a huge investment has to be made and probably some more research. But this investment is not completely irrealistic. There are some hopeful approaches that indicate renewable energy need not be more expensive than fossile fuels today. Maybe fossile fuel already is to expensive but that’s another discussion. In case these optimistic forecasts will not come true, industrial consumers will have to pay 3x the current price for natural gas. That is only three times, not thirty times!

    Now I will walk up the garden path (Jetzt begebe ich mich auf’s Glatteis!): If a product was made 100% out of energy it would become 3x more expensive. Usually products are not made 100% out of energy but a lot of energetic aspects (transportation, higher wages to pay the more expensive heating) might sum up.

    Let’s say the average product would become double as expensive – and now is the point – wouldn’t that mean life standard has to decline 50%? Because people could just afford 50% of the products they buy now?

    But a 50% reduction is still more than what we have seen in the 19th century and much more than a lot of people have currently in the third world – and survive happily. Modern economy and lifestyle in general could still be possible – that would not mean stoneage again!

    Yes, that would mean a change and a change of course has network effects like your Leonardo sticks or the Mikado pin-up sticks. And it is a large system change – but it is not open ended it will end up at least after three times higher energy costs!

    If your scenario comes true though that energy prices are already too high or oil production breaks down suddenly and the substituting capacities are not yet established then we are fucked up thanks to our golden, intelligent, histeric elite!

    There is one more point: If let’s say Europe or China or the USA have three times higher energy costs than Russia, Iran, and Saudi-Arabia what will that mean for the balance of power? Will the importing countries try to steal the cheap resources or will the countries with cheap resources try to use them to produce cheaper products or to lead a war against the countries with less resources because the latter cannot defend?

    Thanks for wading through my English!


    • We need much lower energy prices than we have currently to keep the system going. Our high energy prices are bringing the system down. Matching current energy prices is not nearly good enough. Try for the equivalent of $20 barrel oil.

  4. VPK says:

    Thought I would add that “People” magazine has a 10 year anniversary issue commemorating “Dancing with the Stars” that has provided needed relief from the doom and gloom.
    You can obtain a copy at your local Walmart checkout lane. Buy several as they will be prized after the “fall”‘ and will undoubtedly be much sought for as barter.

  5. Stefeun says:

    Two links from Matthieu Auzanneau’s tweets (the box in his blog OilMan):
    Btw Gail are you aware of his book “Or Noir” (an anthology of petroleum)? unfortunately, in French only, so far; wether it’ll be translated into English depends on the FR sales…

    1. “Bitter Lake” by Adam Curtis:
    “Bitter Lake – review: Adam Curtis’s beautiful, gripping film unravels a story of violence, bloodshed and bitter ironies.
    Beginning with a fateful meeting between President Roosevelt and King Abdulaziz of Saudi Arabia, Curtis delves into a mass of historical archives to shed light on Afghanistan and the west”

    The last 20 minutes of the film (the full 2h16min film seems to be also available on Youtube):

    2. “40 maps that explain the Middle East (some maps are animated)
    by Max Fisher on March 26, 2015
    Maps can be a powerful tool for understanding the world, particularly the Middle East, a place in many ways shaped by changing political borders and demographics. Here are 40 maps crucial for understanding the Middle East — its history, its present, and some of the most important stories in the region today.”

    • Thanks! The 40 maps are interesting.

    • Fast Eddy says:

      Thanks for the link

      Glenn – did you see the part where the king agrees to the deal whereby he opens the oil spigot for America in return for protection?

      Of course this is like the mafia don saying to the restaurant owner ‘we will protect you for a fee — but if you refuse to pay we will smash your face in – capiche?’

      America decides the price of oil. America decides who pumps how much. Period.

      If a country refuses to kiss the ring, then get ready for a CIA directed coup.

      That is the way the world works. That is the way the jungle works. The strongest male smashes all other males in the face until a younger more powerful male takes him down.

      • Glenn Stehle says:

        I agree that the Saudi royal family is probaby still pretty much at the beck and call of Washington.

        However, the United States is a once-great empire very much in decadence and decline.

        Russia is a Phoenix rising from the ashes of its old Soviet empire, and China has become a productive powerhouse, ready to flex her geopolitical muscle.

        We no longer live in a uni-polar world, but a multi-polar world.

        • Fast Eddy says:

          The US is without question coming apart at the seams. But then the entire world is coming apart at the seams for pretty much the same reason – we are well past peak cheap to extract oil.

          What we are seeing now is starving dogs fighting for the remaining rotting scraps. There will be no winner in this.

    • Artleads says:

      I’ve been thinking that maps are very important. Then here are a lot of maps. I don’t know how to apply them, although I suppose that many people do. In the middle of this magnificent blossoming of information, I propose something that strikes me more practical and universal: a map of watersheds. Beyond a map of watersheds, maps to show the history of soils and vegetation and rivers. Those are what life depends on, and I contend (until proven wrong) that such basic mapping will tend to calm conflict and promote cooperation.

      • Stefeun says:

        maybe you can try this database:

        I didn’t find the filter “life opportunities”, though… but perhaps combined with google earth…. More seriously, at first approach I would say that bio-density is deeply connected with hydrology. Anyway, if you’re planning to survive during/after the collapse, looking for a reliable and safe fresh water source cannot be a bad idea.

        • Artleads says:

          Thanks, Stefeun. Everybody I show these two mapping projects to is duly impressed. I don’t quite know why, since they don’t propose doing anything with them. I have almost the opposite problem. I want to do something with them, but actually seem no more able to than I could understand the stock market. I’d have to ask someone who is map savvy to weigh in on what sorts of maps could be helpful with the notion of simplifying and clarifying how land is used and treated now, and how it could be desirable to treat it in the future. I don’t want to pursue an education in how to use sophisticated maps. I seem to have at kindergarten level with everything. As with most people.

        • Artleads says:

          “More seriously, at first approach I would say that bio-density is deeply connected with hydrology. Anyway, if you’re planning to survive during/after the collapse, looking for a reliable and safe fresh water source cannot be a bad idea.”

          Dear Stefeun,

          Thanks for this, which gets down to basic reality: water=vegetation.

          And more vegetation = more water.

          More vegetation and more water = a cooler and more survivable microclimates
          Since the aggregate of cooler and more survivable microclimates MIGHT slow climate heating, it behooves the global community to equitably distribute water globally. Better distributed water leads to better distribution of optimal microclimates. Water that is equitably distributed must be used to optimize vegetation growth. That would obviate (in theory) many of the geopolitical conflicts (as in the Middle East) that I consider far less basic than climate catastrophe, which is the certain outcome of BAU.

          • “That would obviate (in theory) many of the geopolitical conflicts (as in the Middle East) that I consider far less basic than climate catastrophe, which is the certain outcome of BAU.”

            The population of most of the MENA nations have increased ten-fold in the last 70 years. Some of them are slowing down. However, most of this growth was enabled by trading oil for food. Now, their total exports of oil are declining – some due to dropping production, some simply due to increased domestic consumption.

            You are proposing that, in exchange for nothing other than the hope of less violence, we should spend energy and resources to transport water to the Middle East.

            The Empire of Chaos seems to have decided the best plan is to simply relocate all the extra people to Europe.

          • Stefeun says:

            Thanks Artleads,
            but in my view it’s even simpler: No Water = No Life.

            The water supply and distribution is currently being totally disrupted (climate change, depletion of aquifers, pollution issues, dams & irrigation, etc…), and there’s not much we can do to fix it without taking high risk to worsen things globally, as our multiple problems are all intertwined and smooth-shrinking is not an option.
            There is NO solution, our civilisation WILL collapse, whatever we do or do-not, and my opinion is that the first shock will be much greater (and sooner) than most are expecting. Thinking about fixes to BAU is time-waste, you have to imagine yourself living in the aftermaths of the collapse, if you think it’s worthwhile, and with no guarantee that it’ll be even possible.

            Add to that that most of our fresh water depends on BAU (for example I heard that within 3 days of electricity shortage in London, all taps would stop flowing), as well as most of our sanitation systems (remember it was a big problem in towns before sewage was implemented, and still is nowadays in some places or periods),
            so yes, I stick to my recommendation: a remote spring is a priority for those who plan to survive.

            WRT your “kindergarden feeling”, I also often feel like “a hen that has found a knife”. Things are complex indeed, and many people like to complexify at will, thereby losing the global view. I personally resolved to keep in mind only the deep trends, and try to figure out how they interact (which is already tricky, too much sometimes). I tend to follow the KISS principle (Keep It Simple, Stupid!).

            • Fast Eddy says:

              We also have to consider how crops are grown.

              There is the issue of petroleum based pesticides and fertilizers (which will not be available) but also of concern with respect to water:

              Worldwide, in 2012 over 324 million hectares are equipped for irrigation, of which about 85 percent or 275 million ha are actually irrigated.

              Irrigated agriculture represents 20 percent of the total cultivated land, but contributes 40 percent of the total food produced worldwide.


              Irrigation usually means pumps. So forget about irrigation.

            • Stefeun says:

              Thank you —- (fill in with your name of the day),
              the FAO link is very interesting.

              The problem with renewable freshwater resource is not the total amount, it’s that it’s VERY unevenly distributed (plus quite easy to pollute). Morover, as you highlight, without external energy, the good areas are likely to become tiny seldom spots. Except in places like Iceland, but I wouldn’t live there without external energy either!

              “Countries could be defined as water-stressed if they withdraw more than 20 percent of their renewable freshwater resources, as approaching physical water scarcity when more than 60 percent is withdrawn, and as facing severe physical water scarcity when more than 75 percent is withdrawn. Using these thresholds, water stress is progressing with 36 countries experiencing it in 1998 and 45 countries in 2011. Out of the 45 countries withdrawing more than 20 percent, 20 withdraw more than 60 percent and of these 15 withdraw more than 75 percent. Ten countries withdraw more than 100 percent of renewable freshwater resources, of which 6 in the Arabian Peninsula, 1 in Northern Africa, 2 in Central Asia and 1 in the Caribbean.”

            • Fast Eddy says:

              Fast Eddy has a nice ring. I will consolidate under that for now.

            • Artleads says:

              First, there are steps we could take that would do no obvious harm:

              – Survey in relevant geographic areas (if not globally) the “state of water use” to include:
              – infrastructure like dams
              – dams that are being planned
              – issues of financing for dams, irrigation systems, etc.
              – condition of aquifers
              – condition of watersheds
              – challenges to keeping water in watersheds rather than transferring it away
              – issues around alternative ways to grow food
              – permaculture and non chemical ways to grow food
              – climate change as a major determinant of decision-making
              – issues of relevant education
              – what areas can be ethically left to their own water devices
              – issues of the state and the management of water
              – down river allocation of water and other related subjects
              – issues of the rights of rivers to flow naturally

              I’m sure this is only a partial list of what we could begin to look at. What would be the harm of a global “conference” on water that starts with the hypothesis that it is a global-commons good to distribute water equitable throughout the planet? It would be only a survey, a way of thinking more clearly about water, thereby enabling, to the extent feasible, potentially more rational decisions about water. Whatever would or would not be done with the gleaned insight would be a matter for the future to decide.

  6. Tolstoy's Degenerate Grandson says:


    I cannot help wondering if this Tesla thing is a planned PR exercise by the PTB to divert the masses attention from the peak oil issue.

    The company is after all receiving massive government subsidies. Why?

    Many people I speak to are pointing to Tesla as the great hope for the post carbon world. In fact just last night a friend who is ‘sick with worry’ whenever he thinks about the oil situation tossed across an email saying ‘what about these Tesla batteries’

    So the strategy (if this is a spin job) is working very well. People who might be awakening to the end of oil have their saviour:

    • edpell says:

      Elon is a smart person. I do not think he has claimed he will save BAU. He just looks and uses what is available. He does seem to be against nuclear so he does solar. Good for him. He lives in sunny California with deserts with many sunny days. Does he have a solution to save $2 a day Indian farmers? No. Does he have a plan to save millionaire Californians? Yes.

      • Fast Eddy says:

        He is very much like Jesus.

        But instead of feeding thousands with a loaf of bread, he has worked out to create a company that is essentially worthless and yet realize a valuation in the billions.

        Tesla is worthless. It would not exist without government subsidies.

        Which begs the question – why is the government feeding this dog? I can only conclude that they do this to deflect attention from the peak oil problem.

  7. doomphd says:

    ed, there have been suggestions (not mine, not qualified) that humans and/or stuff they build can travel at speeds greater than the speed of light.

  8. edpell says:

    It is suggested that we use the good treatment of women to lower the fertility rate. I am all in favor of treating women and men well. But this is not a feedback mechanism. If the fertility rate becomes too low do we propose treating women increasingly badly until the fertility rate is high enough? I think not.

  9. doomphd says:

    Yes, we have finite world problems right now, along with a (probable temporary) glut of oil. What some are trying to avoid is a steep crash with no way out. Violence (wars), riots, mass starvation and/or plague are not anything to look forward to. Also, it might actually be too late in the game to try anything new. However, workable fusion would be a game changer. There is practically unlimited fuel (H2O) and no nasty fission products or transuranic fuel to deal with. There is some radiation (neutrons, gamma rays) produced when it’s active, depending upon the reaction path chosen. There are also some neutron activation products to contend with around the reactor, but these are minor problems compared with what is routinely handled by fission reactors.

    If you have enough power, you can do some pretty impressive things, like mine present-day waste. Alchemy, converting one element into another, which always gets a bad wrap because the ancients didn’t have access to nuclear technology or power, becomes possible. Nuclear waste produced by our fission legacy can be converted to more benign forms. One could even mine granite for its accessory apatite, to get at primary phosphorous for food production. Pumping seawater uphill for a few hundred miles and then desalinating it in the middle of a dry continent doesn’t seem so far fetched. Reverse engineering CO2 pollution of the atmosphere-ocean becomes possible. Fusion also opens the door to deep space travel via “warp drive”, but I am not expert here. I can put you in touch with those that are so, if interested.

    So, I am aware of the human “condition” or predicament. One can always hope that true wisdom would accompany any new technology. Otherwise, it’s just setting the stage for an even bigger collapse down the road.

    • edpell says:

      If they human race were one solid ball with no need for any overhead like farms, houses, air. Then if we increase by 1% per year for 11,000 years the surface of the ball will be moving at more than the speed of light. Since we have not broken the speed of light barrier yet, even with infinite free cheap energy we will have feedback mechanisms that limit the populations. The four horsemen or something else of our own choosing. I vote for a limit of two children per couple for free and then one million dollars for the third, 10 million for the fourth, 100 million for the fifth, and so on by factors of ten. Any violation and all the family is irreversibly sterilized.

      • edpell says:

        Just for detail the ball will be 300 light year in radius at that point with 1.3E57 humans in it.

      • auntie says:

        Sanjay Gandhi was big on mandatory sterilization. Suicide vest on a female got him way back before it was popular.

  10. doomphd says:

    What most of us wishing to maintain some semblance of BAU need is enough primary energy to replace oil. Oil and other hydrocarbon products (e.g., methane) can be made from the simple building blocks they combust to, namely CO2 and H2O. With enough power, you can make hydrocarbon products, like diesel. Audi has just announced they can do it at commercial scale. The trick is getting the primary energy. Audi is talking about alternate energy like wind and solar, but we know, or at least strongly suspect that this won’t scale, or not in time.

    I’m working with some folks trying to get a low-cost fusion reactor going. My role is advisory. The lead scientist thinks he needs only $40,000 to get a prototype running. It will flash on. For an additional $10,000 or so he promises a more sustained reaction. After that, assuming it is net energy positive, the funding should, in theory, be easier to obtain. He is avoiding federal funds, but frankly I’m uncertain that it will keep the feds from taking it away, once demonstrated.

    So anyone out there got $40-50K of mad money they want to invest to possibly save some semblance of BAU? No guarantees, but it just might work, and you’ll be holding some valuable stock. We know time is of the essence. You can probably reply to my web site, if interested, and we can provide more information, a company web site, etc.

    • Greg Machala says:

      Even if fusion is perfected and can produce limitless supplies of liquid fuels, you are still left with the finite resource problem – water, iron, copper, lead, food. And then there is that pesky pollution problem too. It seems everything in nature works in cycles of ups and downs. There is no steady state and no perpetual growth in the natural world.

      • “Even if fusion is perfected and can produce limitless supplies of liquid fuels, you are still left with the finite resource problem – water, iron, copper, lead, food. ”

        If net energy yielding fusion outside of stars is possible and practical, and is developed in time, I think the biggest problem would be rapid global warming, if more heat was being generated then vented into space.

        With abundant quantities of energy, those other problems would pretty much cease to exist. Population would peak at 11 Billion and decline, since everyone having abundance and low infant mortality would lead to negative real population growth – below replacement reproduction. Robots could do 90% of all the jobs. Ocean water could be distilled on demand to provide unlimited fresh water. We could turn the Sahara into farmland. We could mine asteroids for all the minerals we need.

        Even if it is possible, it won’t be until 2050+ before the Tokomak reactor is built to test if it can even break even on energy. Z-pinch and Laser Fusion are currently in continuous development, but who knows. Thorium is decades away. So even if any of them could save us, they will probably be way too late.

    • Good luck! M. King Hubbert talked about “reversing combustion” if the system could get enough cheap nuclear energy to combine CO2 and H20. It is the huge energy requirement that is the deal-killer.

    • ktos says:

      “Audi has just announced they can do it at commercial scale.”
      I haven’t heard about that. I’ve heard that they made a demonstrative installation that has eroei way below 1:1.

  11. doomphd says:

    “Edison batteries”, a robust but heavy and expensive Ni-Fe type, are known to last a long time, up to 20 years. See:–iron_battery

    I wonder how the solar PV panel ages. Does it just slowly lose charging ability because of diffusion of key elements in the glass?

    • Tolstoy's Degenerate Grandson says:

      Even if solar energy was economically viable it would not matter. BAU needs oil. Or some substance that can replace all:

      A partial list of products made from Petroleum (144 of 6000 items)

      • BAU must almost certainly end in the near future: there is no more perpetual growth to be had. Trying to use solar and wind and grow the economy 2% per year is shear madness.

        If there is a future that involves windmills and solar panels, it is at >90% less energy than today, with a new financial system and all the debts and obligations of today wiped out.

        • Tolstoy's Degenerate Grandson says:

          Maybe if solar panels and windmills grew on trees. But they don’t. They require massive fossil fuel inputs to be manufactured.

          Feel free to ignore the obvious.

          • Greg Machala says:

            Manufactured is the key word that many choose to ignore. You don’t have to manufacture crude oil – just extract if from the ground. Oil almost literally does grow on trees except today the low hanging fruit (which built our industrial world) is mostly gone. Attempting to replace oil with solar panels and wind turbines is going backwards.

            • “Attempting to replace oil with solar panels and wind turbines is going backwards.”

              Are you one of those people that believes abiotic oil will provide us with supply forever?

            • Unfortunately, I agree with Greg.

              We have a new religion of “Renewable will save us.” I am not a member of that religion.

            • Tolstoy's Degenerate Grandson says:

              Absolutely going backwards.

              Solar panels are filthy dirty technology that require massive inputs of lignite coal in their production.

              How hilarious that the greenies ignore this when touting the so-called clean energy. It is anything but.

              We would be better off just burning the coal and generating electricity than using coal to build panels that simply release that energy over their life span.

            • auntie says:

              “We have a new religion of “Renewable will save us.”
              Well its that or long pork. People choose hopium. cant blame them really.

            • Tolstoy's Degenerate Grandson says:

              Good point. When oil did spurt out of the ground it was actually better than if it grew on trees because with trees you have to wait for harvest time. With oil it spewed forth in massive amounts

              Those days are long gone of course

    • Greg Machala says:

      Twenty years is nothing in the grand scheme of things. Imagine for a moment if the world used batteries to store electricity. That is a lot of batteries that would need complete replacement every 20 years. The resource and energy cost to recycle and recreate these batteries would be a massive. With oil it it easy – just extract and burn.

  12. Tesla to expand battery technology to homes, businesses

    Emailed the above to James Kunstler, to which he replied:

    “Yes, all very nice.
    “We already have batteries in a range from pretty good to better.
    “But then you need the solar rig… (about $30,000), and the panels wear out after 25 years… and, well.

    “Amazing what you can do with PR, though.”

    I might add, batteries, in my experience, don’t last anywhere near 25 years.

    • Tolstoy's Degenerate Grandson says:

      I had quotes on solar (will probably only go with a hot water solution) and the one vendor who has been in the biz for over 30 years said ‘you will never get 25 years out of any battery pack – the most I have ever seen is 15 years. Some last 8 some 12 so that is the range you can expect if you want to store power’

      That said, it is good that people believe solar can save the world because people know oil will end at some point, and solar gives them hope that civilization will carry on post oil.

      Hope (even if it is only hopium) is crucial.

      • Brunswickian says:

        Lead acid batteries can last 20 years – I have some 2V PVStor 560aH – they groan when asked to start a freezer though. Too make them last they must be held fully charged and not discharged more than 10 – 15% overnight. Holding them at less than fully charged will age them quicker. So enough panels are required to fully charge them every day – the absorb stage is most important to get to 100% SOC. Only use heavy loads when the sun is shining.

        Oh yeah, it helps a lot if the ambient temperature is under 20C. In hot climates you are SOL.

      • Brunswickian says:

        These cells handle higher temps better but gel does not like charge rates above .05C to avoid bubbling Gel got a bad rap because of that. In fact they are amongst the longest lived if you treat them right.

        The UCH range looks good, but isn’t on the website, you’ll have to enquire.

        I HAVE 12X 600aH 2v OPzS cells so far, so good.

      • auntie says:

        Duty cycle is everything. If you baby them bye forgoing power draw when its bad for the batteries and run a good smart algorithm to charge it will extend battery life. 12 is optimistic even so, for lead acid. Solar water panels can work very very well to heat good choice TDG. Are you humming kumbayah :).

        • Brunswickian says:

          10% is the minimum I’ve seen. I have a Taiwanese MPPT controller with built in SOC monitor (500 amp shunt). Currently I am only drawing 40ah per night (two freezers and freezer converted to a fridge with external thermostat) from a 24v bank of 643ah(C10) 2v cells. It won’t take much imagination to increase that. They are brand new. I have 7.5 kW of PV panels, due to the incredible price drop. God bless the the Chinese! Do I think this is sustainable? Well no. Along with the 1200l of kerosene, primus cookers, wetback woodburning stove, GoSun cooker, solar oven etc. etc.

          I am taking my chances- I’ve known this was coming for 15 years.

          There are no guarantees.

    • Another piece on the subject today, at
      I use solar 5 days a week (to run this netbook, etc.), & I might get a few $/year worth of grid power out of it — I spent hundreds of dollars on the system (the solar panel was made in China), & recently had to replace the lead-acid deep-cycle battery (again).

  13. “although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market.”

    This says a lot, to me. Glenn Stehle (and others) have provided some good perspective to this conversation. A stimulating discussion indeed.

    To me, in simple layman’s terms, diamonds command a higher price because “we made it up.” It’s a shiny mineral, nothing else. Value is in the eye of the beholder, which in this case is a human-created economic system with “rules” that suit its survival (and a diamond’s market-price).

    Water is necessary for survival, and should never have any sort of “high price” in any market, we are humans, and need water to survive. Any important variables which stem from that need (population, resource scarcity, technological, science) should not come from any human-created economic system as it pertains to a basic survival element for our species.

    (I realize that’s a lot of “should be, could be” … sorry)

    Oil, we are probably firing our last “salvo” overall in terms of long-term production … and scarcity will enter the equation by physical force, whether our MSM chooses to report it or not. Prices will reflect that if our economic system has integrity.

    Great audio Gail (you have a new reader), great discussion, THIS is how I hope online discussion continues.

    • “Water is necessary for survival, and should never have any sort of “high price” in any market, we are humans, and need water to survive.”

      What if there are 20 people, and only 10 litres of water?

      Of course, economists will not address reality. The price of the water will be irrelevant in that scenario, as the market will probably be settled in blood rather than dollars.

      • All species reproduce more than needed to replace the parent. The “normal” model is that some die, but the best adapted tend to be the survivors.

        Our financial system operates in a situation where there is enough to go around. Historically, wars and epidemics have helped solve mismatches. Epidemics take a disproportionate number of those who are weakened by inadequate food/water supply.

        • Stefeun says:

          Epidemics may very well play a huge role during the contraction phase, because of defective sanitation, but also due to that we’re currently losing the race against pathogenes.

          We have overused antibiotics and exhausted all types available, so the only hope in this matter seems to be the development of new generations of antibiotics, such as these “Eligobiotics” that “can be programmed at will to eradicate bacteria based on their genomic sequence.” (
          Without any pernicious effect..?

          “Antimicrobial resistance is a ticking time-bomb […] for the world. We need to work with everyone to ensure the apocalyptic scenario of widespread antimicrobial resistance does not become a reality.” – Pr. Dame Sully Davis, UK Chief Medical Officer

          • “Epidemics may very well play a huge role during the contraction phase”

            That’s probably inevitable. The alternative to more Big Pharma may be advancing understanding of the human microbiome. Having the right balance of bacteria and other microorganisms on your skin and in your gut may go a long way to protecting you from bacterial infections.

            Filtering water with sand and charcoal can also go a long way, and is more practical in the long run than relying on boiling water or adding chlorine or using a UV light bulb.

            • Fast Eddy says:

              Who needs all these modern ideas anyway. We should return to the way things were done in the middle ages.

              I am sure natural remedies will be able to prevent plague, TB, syphilis, cholera and the other mega diseases that will tear across the planet when antibiotics and vaccinations end.

              We will however have plenty of radiation available for treating cancer.

            • Old ideas like Quarantine work amazing. Just lockup anyone trying to move from one place to another for 40 days to make sure they are disease free. Simple, and effective.

    • Greg Machala says:

      The way I see gold, diamonds, dollars, cars and other things we as a society value: is that in order for them to have value, all the necessities of life need to be in place (essentially for everyone). With abundant energy doing the heavy lifting, we no longer toil just to have the basic necessities of life. Thus, we have more free time and put value on non-necessities (whatever they may be). However, this paradigm requires never ending inputs of energy. When the energy supply dwindles so does the value of the non-necessities.

    • You are welcome. There are new audios/videos by Reverse Engineer (plus Steve Ludlum) as well. I am trying to figure out where to put them up.

      [soundcloud url="" params="auto_play=false&hide_related=false&show_comments=true&show_user=true&show_reposts=false&visual=true" width="100%" height="450" iframe="true" /]

    • bwhill says:

      Gail said:

      Remember, though, that the energy used to produce oil is generally not oil–it is generally from a cheaper energy source.

      The largest portion of the energy consumed to produce petroleum, and its products occurs in the refining stage. Refining is a gas fired process, and most of the gas used is stilgas; the gas that is driven off of the crude when it is heated. Stilgas is composed primarily of methane, ethane and butane; the lighter hydrocarbon fractions. The refineries purchased it when they purchased the crude. Petroleum production also requires a lot of electricity; which is produced from coal, natural gas, or nuclear. The conversion of those sources into electricity results in a high percentage of loses. Determining whether or not the energy used to produce petroleum, and its products is lower cost than the energy that comes from the petroleum itself is problematic at best. To do so would require reviewing the entire production process, extraction, processing, and distribution. Attempting to get an accurate appraisal that included all the cost, throughout the entire production process, would be a daunting task.

      To include the energy costs from fossil fuels, or all energy sources would depend on the initial objective of the study. Using the energy costs of just fossil fuels is a subset of the entire cost structure, and would have to be used with discretion to avoid coming to erroneous conclusions when the results were applied elsewhere. The bottom line is that when it requires more energy to produce petroleum and its products, than is delivered by the petroleum, it has then transitioned from an energy source to an energy sink. It is doubtful that we will be able to maintain our present modern industrial civilization when that occurs.

      • From what I have seen, electricity to operate refineries to a significant extent comes from off of the grid. I know this is the case, because every time there is a major hurricane with power outages, it leads to refinery shutdowns. Also, refineries are businesses that have major concerns about reliability of electrical supply, because an outage would cause an unplanned shutdown of the refinery. Of course, offshore oil plants use the associated natural gas for producing electricity to operate the platform and to do the initial separation of the oil and natural gas.

        What kind of electricity is available for the electric grid will depend on the area. Often there is cheap natural gas produced in the area, so the electricity is from natural gas. When I visited Daqing field in China recently, I noticed the many electrically powered oil wells that appeared to be connected to the electric grid. When I asked what fuel powered the electric grid, the response was “coal”.

        I cannot imagine that electricity anywhere used in oil production would come from burning liquid oil products that could be sold at reasonable prices. It would all come from low-valued gases or from other sources: coal, hydroelectric, or nuclear.

        In my view, there are huge differences among different kinds of oil in the amount of energy needed for processing after extraction. For example, oil from Daqing is light and sweet, so refine ring needs are much less than for many other types of oil. For Daqing, I would expect that electricity powering the pumps and the separating units would amount to a significant share of fossil fuel energy used.

        Regarding types of energy used by refineries, natural gas is used to a significant extent when “cracking” long chain hydrocarbons is required. This is the case for heavy oil, such as when oil from Canada, Mexico, Venezuela, or Kern River in California is processed. The US has been doing huge amounts of this processing, because with our cheap natural gas supply, we can provide this natural gas more cheaply than elsewhere, thus can provide refining services cheaply. (This natural gas is used directly, not burned, if I understand the process correctly.) In some cases, such as for Mexico, we seem to import crude oil, apply this process to it, and export finished products back to the country where the oil came from. Thus, we are simply selling cheap processing services.

        It seems to me that it that it would be very easy to get a high estimate of energy used in the United States for refining if a person accidentally divides “Gross” energy usage (including that used on oil that is eventually reexported as products) to “net” oil production amounts. Also, because cracking applies to heavy oil, these factors really should be calculated using heavy oil as a base, not all oil. If these details are not attended to, it would be easy to get a misleadingly high energy cost factor to apply to the very light oil that comes from Bakken and shale in Texas.

        A different error that would be easy to make would be to assume that the natural gas used in the cracking operation is burned and used as electricity, rather than being used directly. If government figures are used, it would be easy to make an unneeded upward adjustment for energy use, related to energy losses associated with the efficiency of electrical plants burning natural gas.

  14. Pingback: Lies, Damn Lies & Diner Statistics | Doomstead Diner

  15. edpell says:

    BWHill, very interesting point gas and coal ride the coat tails of oil.

    If we are at 54% of oil consumed in production and adding 2.47% per year then in 10 years we are at 79% consumed in production. Pretty much dead except for feedstock for high value add chemicals. Of course with the system at a stand still not much demand for those either.

    • Glenn Stehle says:

      Well if that is indeed what bwhill is saying, then it appears his “calculations” have been influenced by his own predisposition for gloom and doom.

      bwhill’s claim can be expressed in the language of EROEI, and if we do that, what he is claiming is that the EROEI for oil production is currently 1.85:1, and if it continues to fall at the rate it is currently falling it will be 1.27:1 in 10 years.

      Here is how Jay Kimball explains EROEI:

      Oil production in the US peaked in 1970. The easy “sweeter” stuff has been extracted. What remains is deeper in the ground or farther off-shore, requires much more energy to extract, and is more toxic to produce. It takes energy to make energy. Energy Return on Investment (EROI) also known as ERoEI (Energy Returned on Energy Invested), is a common way of expressing the efficiency of the energy production process. The EROI for oil and gas, as well as other fossil fuels, has been falling for decades (see chart below). If it was a financial stock, you would have sold it years ago.

      It is important to track EROI. Producing a barrel of oil consumes more and more energy, thus exponentially accelerating the consumption of the oil. It is like the mythic Ouroboros – a snake eating its own tail. A high EROI is better than low EROI. As we approach an EROI of 1:1 (e.g. consuming 1 barrel of oil to produce 1 barrel of oil), it’s game over – why bother.

      To show just how pessimistic bwhill’s “calculations” are, Kimball cites a study by researchers at State University of New York and Boston University. The study, titled “A New Long Term Assessment of Energy Return on Investment (EROI) for U.S. Oil and Gas Discovery and Production,” comes up with an EROEI for oil production many times what bwhill does, as is illustrated in this graph:

      In my opinion, the claims of “the-sky-is-falling” brigade only serve to discredit the more realistic claims of those like Kimball, claims which refrain from distortions and exaggerations.

      • Glenn Stehle says:

        I should add that the researchers estimate the EROEI for new discoveries to be less than what the above graph reflects, which is a mix of new production and legacy production. Here is what the researchers said:

        EROI for finding oil and gas decreased exponentially from 1200:1 in 1919 to 5:1 in 2007.

        Nevertheless, 5:1 is a far cry from 1.85:1, and 2007 was before the “shale revolution,” which I suspect has improved EROEI slightly, although not nearly as much as what Barak Obama and Rex Tillerson would have us believe.

      • What does ERoEI include? Just the cost of extracting each barrel, or all of the embedded energy in all of the equipment? What about transporting and refining the oil? What about distributing the finished products? Is it based on total energy in a barrel, or total useful energy? What about the energy to fly the workers to the oil patch, the trucks to haul the gear, or with ocean oil rigs, the helicopter and its fuel to transport workers and materials to the rig?

        • Glenn Stehle says:

          What does ERoEI include?

          • the cost of extracting each barrel


          • the embedded energy in all of the equipment?


          • What about transporting and refining the oil?


          • What about distributing the finished products?


          • Is it based on total energy in a barrel, or total useful energy?

          Total energy in a barrel or mcf:

          Crude Oil 6.119 GJ/bbl = 5.8 mmBTU/bbl or 39.7 mmBTU/ton or 145.7 MJ/gal or 38.5 MJ/L or 43.8 MJ/kg (=GJ/ton)
          1 cubic foot of natural gas 1,008 to 1,034 BTU

          • What about the energy to fly the workers to the oil patch, the trucks to haul the gear, or with ocean oil rigs, the helicopter and its fuel to transport workers and materials to the rig?


      • I see the problems coming from the financial/wage direction rather than EROI. I won’t rule out someone coming from that direction having something worthwhile to say, but I see less productivity per worker as being more important–something that EROI doesn’t measure at all. Also, the falling competitiveness of countries using very much oil in their energy mix, when the cost of oil rises. This leads to considerable job loss.

        I thought this survey of how many people consider themselves middle class to be interesting. The number calling themselves middle class has dropped from 61% to 51%, while working class has risen.

    • bwhill says:

      edpell said:

      “If we are at 54% of oil consumed in production and adding 2.47% per year then in 10 years we are at 79% consumed in production. Pretty much dead except for feedstock for high value add chemicals. Of course with the system at a stand still not much demand for those either.”

      The recent price drop was precipitated by a decline in the overall quality of petroleum being extracted. The industry, because of that drop, appears to be losing in the area of $1.3 trillion per year. That, of course, will not be sustainable for very long.

      As we have claimed for some time the affordability of petroleum has declined because of the ramifications of depletion. The increasing scarcity of high quality conventional fields has lead producers to pursue lower quality sources of supply like shale, bitumen, and ultra deep water. These type of sources have low energy delivery capabilities, and are thus more expensive sources of supply for the economy. They are so expensive that the economy can not use them, and continue to grow.

      We have outlined what is happening on this page:

      As mentioned above, the present price structure is not sustainable, consequently, the higher cost production products will have to be phased out. Our analysis indicates that it will require a reduction of 30 mb/d of production to bring total production back to the breakeven point. If that does not occur the industry’s present debt of $2.5 trillion will grow exponentially. In that event, the entire world’s petroleum enterprise would soon default!

      • edpell says:

        Gee, and the Rockefeller got out of oil about a year ago.

        • bwhill says:


          “EROI for finding oil and gas decreased exponentially from 1200:1 in 1919 to 5:1 in 2007.”

          That is incorrect, and it is very easy to prove that it is incorrect. With an ERoEI of 1200:1 that would imply that it would take 117 BTU to produce a gallon of oil, (1/1200*140000 BTU/gal) or 4,900 BTU/barrel. Most petroleum in 1919 was being produced in the US, and the average well depth was about 4000 ft. (there are 778.17 ft-lbf to a BTU). A barrel of oil weighs 302 lbs. (API 37.5°). If being pumped with a 20% efficiency (which would be pretty good for a 1919 mule pumping oil) it would require 7762 BTU just to pump the oil out of the ground. That does not include the drilling energy cost, or any other energy inputs to produce the oil.

          The author here is extrapolating an exponential curve out to 1919 when the ERoEI function is actually a logistic curve. Drake’s 1859 ERoEI on a 63 foot well, and a bucket with a rope was probably about 340:1. The ERoEI curve has to be a logistic curve because the accumulated production curve is a logistic curve (Hubbert sort of noticed that). The number of completely ridiculous quotes that we run into on the internet is amazing. In 2007 the average ERoEI of the world’s petroleum producers was 11:1.

          • Glenn Stehle says:

            Good grief, bwhill!

            Have you never heard of a flowing oil well? Or the kinds of volumes that wells in the early days flowed?

          • “If being pumped with a 20% efficiency”

            The first wells were gushers. The oil came shooting out of the ground under its own pressure. If it caught fire, dynamite was needed to seal shut the hole.

            It seems likely the ERoEI being used is to extract only, not counting the embedded energy in the equipment, the energy cost of drilling, transporting or refining. That’s the problem, people need to clearly define their terms, especially when different people use the same term to have a different precise technical meaning.

            • bwhill says:

              The first wells were gushers. The oil came shooting out of the ground under its own pressure.

              Spindle Top, 1907, flowed at an estimated 100,000 barrels per day for six weeks before it was put on pump. It was probably the greatest well ever drilled in North America. This notion that oil just flowed continually out of the ground is nonsense. Once the pressure falls, which usually happened in a few days to weeks, even for wells that started out as gushers, were then pumped. Early fields were drilled up so rapidly that the field pressure fell to zero within months. By 1919 gushers were getting rare, and the majority of oil production was coming from already developed fields. Fields that has long since lost their initial formation pressures.

            • Glenn Stehle says:

              @ bwhill

              You overgeneralize.

              There are a number of drive mechanisms operative in oil and gas reservoirs, the solution gas drive mechanism operative in the Spindletop Field being only one of several.

              As the drawing below illustrates, the Spindetop Field is located atop a salt dome and is essentially a closed reservoir. The energy which caused the wells to flow originally came from the release and expansion of gas which was in soution in the oil.

              Think of it like the gas escaping from a carbonated drink or a bottle of champagne, of how, if you shake it up first, the fluid shoots out the top when you uncork it. And just like the champagne bottle, after the gas in solution in the champagne all escapes, there is no energy left to push the remaining liquid upwards.

              Driving around Spindletop outside Beaumont puming units can still be seen pumping away, the original reservoir pressure having been reduced so that the wells no longer flow by themselves.


              But in addition to solution gas drive there are other drive mecanisms operative in different reservoirs, such as water drive.

              In the case of a water drive reservoir, the reservoir pressure is maintained by the encroachment of water from below. Oil floats on water, so as the oil is removed from above, the oil-water contact slowly rises. The well will continue to flow until the oil-water contact reaches the well bore, at which time the well waters out.


              Of course most reservoir structures are big enough to have a number of wells on them, in which case the wells located lower on the structure will be the first to water out, and those on top of the structure will continue to flow until the oil-water contact reaches them too. The last well to water out and stop flowing is the well located on the highest point on the reservoir. Wells on top of a large reservoir can therefore flow for decades before they water out.


              Another type of reservoir drive mechanism is the gas cap drive. In this case reservoir pressure is maintained by the expansion of a gas cap which is located on top of the oil, as the following drawing illustrates.


              A well located below the oil-gas interface will continue to flow oil until the oil-gas interface reaches the well’s completion interval. The well can then be shut in so as to preserve the gas cap and thus reservoir pressure, permitting wells completed lower on the structure to flow, or the gas cap can be flowed off, in which case those wells lower on the structure still located in the oil zone will have to be put on artifical lift.

              Of course many reservoirs have a combination of drive mechanisms all at work at the same time, as illustrated in this drawing:


          • Glenn Stehle says:

            bwhill said:

            The author here is extrapolating an exponential curve out to 1919 when the ERoEI function is actually a logistic curve.

            The authors aren’t extrapolating anything.

            The authors used actual data.

            The data of energy used in oil drilling and production operations is available from the United States Bureau of the Census of Mineral Industries from 1919 to 2007 (Tables 5 and 6). The publications of the Census of Mineral industries are in print until only 1992.

            More recently the authors used data derived from the Energy Information Administration (EIA) website as well as the online version of the Census of Mineral Industries.

            Indirect (offsite) energy costs were derived by multiplying inflation-corrected expenditures for capital goods and materials bought by the oil and gas industry by a factor approximating the energy intensity of the oil and gas industry expenditures.

            • bwhill says:

              Glenn Stehle said:

              “The authors aren’t extrapolating anything.
              The authors used actual data.”

              The authors came to a conclusion that a high school physics student could show is an impossibility! You then defend them with mythological ever flowing wells. Include a Fairy God Mother, and a few Santa Clauses and your dissertation will be complete!

            • Remember, though, that the energy used to produce oil is generally not oil–it is generally from a cheaper energy source. If it is hydroelectric or nuclear or derived from burning biomass, some researchers would leave it out, because it is not fossil fuel.

  16. edpell says:

    Do we have expectation for the year of peak production for oil, gas, and coal? I think oil is passed either 2005 or 2015 depending on exactly what one counts. But gas? coal?

    • bwhill says:

      edpell asked:

      “Do we have expectation for the year of peak production for oil, gas, and coal? I think oil is passed either 2005 or 2015 depending on exactly what one counts. But gas? coal?”

      The contemporary Econ 101 response would be that as oil is phased out other energy sources would replace it. NG, coal, and Alt E production would increase to compensate for the decline in oil production. That would be a very naive conclusion, and it ignores two very obvious considerations: depletion is an ongoing event that is occurring to all fossil fuels, and petroleum is a unique commodity for which we have no replacement.

      Petroleum is unique because it allows for the conversion of a very high density energy source into useable work, with a very high rate of efficiency. It is easy to transport, store, and it can generate a huge amount of work in a very short period of time. Those have been the characteristics that have allowed the world to build an energy intensive global industrial society. They are also the characteristics that are needed to maintain that society.

      As oil loses its capacity to power the modern world, the demand for other energy sources will also be reduced. Their demand originates from the existence of the present system, and without petroleum that system can not be continued. Depletion of other fossil fuels not withstanding, their production will fall with petroleum.

      Glenn Stehle asked

      “When was the demand for the oil that it takes to produce oil ever 0?

      1859; the day before Drake finished his well!
      PS: it has been going up ever since, and is now 74,500 BTU/gal. Next year it will be a little more!

      • Glenn Stehle says:

        So you are saying that the “quantity” of oil that “it takes to produce oil” is currently 2.25mb/d?

        And furthermore, you are saying that “quantity” has increased from 0 to 2.25 mb/d over the 156-year period between 1859 and 2015, and not, for instance, over the past 12 months?

        I just want to clear that up.

      • Glenn Stehle says:

        And there appear to be some inconsistencies in two figures you cite.

        If, as you first stated, the “quantity” of oil that “it takes to produce oil” is currently 2.25mb/d for 91 mb/d, then 2.47% of the oil produced is currently consumed to produce more oil.

        However, your second statement is that it requires 74,500 BTU to produce a gallon of oil. But since there are 138,000 BTU in a typical gallon of oil (BTU content varies according to the specific characteristics of different types of oil), then this calculates to 54% of the oil produced is currently consumed to produce more oil.

        So which is it, 2.47% or 54%, this figure being the percentage of the oil currently produced which is consumed to produce more oil?

        • bwhill says:

          Glenn Stehle said:

          If, as you first stated, the “quantity” of oil that “it takes to produce oil” is currently 2.25mb/d for 91 mb/d, then 2.47% of the oil produced is currently consumed to produce more oil.

          Here is a repeat of the statement made above:

          Third it takes energy to produce energy, that is, it takes oil to produce oil. As time progresses that quantity increases. By our calculations that is now 2.47% per year, or on 91 mb/d that is 2.25 mb/d per year.”

          Your restatement of the original is incorrect. You are obviously are having trouble reading it.

      • I generally agree. In my view, the financial system collapses early on. My guess is that the financial system collapses first, and brings down oil, coal and gas at once. Otherwise, even a small decline in oil would bring it down, collapsing the others.

  17. Stilgar Wilcox says:

    TDG, I agree with what you’re writing, but graphs can be deceiving. In that one the red line range is from 62. something to 67. something, just a 5% differential.

  18. bwhill says:

    Hi Gail

    First an apology for not forwarding to you the report I said I would send you. We had a little fire here at our office a few weeks ago. We lost some equipment, but it was mostly smoke damage. It seems, however, to be taking forever to get things back on track. Once that daily routine is broken it seems to take a magnitude of order of extra effort to get things running smoothly again. Things keep popping up that you would never have imaged would be a problem.

    But, relating to demand? We have done quit a lot to get a better understanding of the demand situation. In essence, demand is not what it is generally reported to be. First of all, crude production that goes into storage is considered “demand”. As you know crude inventories are hitting all time high levels throughout the world. Second, the recent 50% drop in crude prices has had little, or no impact on finished product demand. Here is the EIA link for the US:

    check – “Finished Motor Gasoline” (half way down the page) then Graph at the top of the page
    “Distillate Fuel Oil”

    With a 50% drop in prices one would expect a considerable increase in consumption. It is not happening! Third it takes energy to produce energy, that is, it takes oil to produce oil. As time progresses that quantity increases. By our calculations that is now 2.47% per year, or on 91 mb/d that is 2.25 mb/d per year. Subtracting out the crude going into storage, almost all the present demand increase is coming from the petroleum industry itself! That would indicate that there is little, no, or negative growth in the rest of the economy. Perhaps, the only thing now keeping things going is a growing petroleum industry, and with a 50% decline in prices that is not likely to be growing for very long!

    • Tolstoy's Degenerate Grandson says:

      Thanks for those insights.

      Reminds of the adage about not being able to get blood from a stone… no jobs no money honey.. and food takes priority over gasoline.

      The closing of hundreds of McDonald’s stores is another symptom of the death of the consumer. The MSM would have us believe that people are suddenly having epiphanies and eating healthier.

      Utter nonsense of course. What is surely happening is people are not eating out because they cannot afford to and they are instead buying the cheapest processed ‘food’ they can find in the discount grocery stores.

      We’re building a lovely little Potemkin village with the stock market roaring ahead yet behind the facade there is some serious pain happening.

      The well off have no idea of what is going on because the 50 million or so on food stamps are not lining up for bread in this Depression.

      In fact friends who live in a university cocoon community were telling me just the other day that things were improving, the labour market was much better blah blah blah…

      Keep on drinking that kool aid folks. Because the moment people like this realize it is spiked with horse urine, the apple cart tumbles down the ravine and shatters on the rocks below.

    • Glenn Stehle says:

      ► bwhill said:

      ….demand is not what it is generally reported to be. First of all, crude production that goes into storage is considered “demand”

      That’s an interesting claim. Do you have any evidence to back it up?

      The reason I ask is because your claim runs counter to, for instance, the IEA Oil Market Report, which makes it very clear that when it talks about “demand” it is talking about demand for finished end-user products delivered to consumers.

      For example, here is a graph from the report:

      As one can see, products include LPG & ethane, jet fuel and kerosene, motor gasoline, gas/diesel oil and residual fuel oil.

      Also, as one can clearly see, in no calender quarter over the past four years has there been a y-o-y decrease in the finished products deliverd to consumers around the world.

      ► bwhill said:

      Second, the recent 50% drop in crude prices has had little, or no impact on finished product demand. Here is the EIA link for the US…

      Your claim that the demand for finished products in the United States is flat is consistent with what the IEA is reporting. Here is the IEA’s graph for the US, and as one can see product demand for January 2015 is the same as it was for January 2014.

      What is omitted from your polemic, however, is what is going on in places like China:

      If we add all the nations of the world up, the IEA reports that demand for products rose 1.3 mb/d y-o-y in 1Q15. Turning its gaze towards the future, the IEA report goes on to state that:

      The forecast of global oil demand for 2015 has been raised by 90 kb/d to 93.6 mb/d, a gain of 1.1 mb/d on the year and a notable acceleration on 2014’s 0.7 mb/d growth, as the global economy slowly gains momentum.

      ► bwhill said:

      Third it takes energy to produce energy, that is, it takes oil to produce oil. As time progresses that quantity increases. By our calculations that is now 2.47% per year, or on 91 mb/d that is 2.25 mb/d per year. Subtracting out the crude going into storage, almost all the present demand increase is coming from the petroleum industry itself!

      So “by our calculations” the “quantity” of oil that “it takes to produce oil” is 2.25mb/d? And all that 2.25mb/d is “present demand increase”?

      Demand increase is the comparison of demand at one moment in time to demand at another moment in time. When was the demand for the oil that it takes to produce oil ever 0?

  19. richard says:

    “My gut feeling is that the big players are currently pushing up the stock values”
    And if the little guy figures out what is happening and writes some code or develops workarounds …
    A few weeks in jail while they figure out the charges will scare off the others …

  20. Stefeun says:

    HFT (high frequency trading)
    Who is in control?

    Last Wednesday on French TV Canal+ they broadcasted an interesting documentary film, that likely happens to have been largely inspired by an article published on The Guardian on June 07, 2014 (found a link to this article on the Nanex website

    “Fast money: the battle against the high frequency traders
    A ‘flash crash’ can knock a trillion dollars off the stock market in minutes as elite traders fleece the little guys. So why aren’t the regulators stepping in? We talk to the legendary lawyer preparing for an epic showdown.”

    by Andrew Smith

    A few excerpts:
    “To Lewis, it looked as though the finance industry had found a new way to fleece the public – the ordinary savers and workers with pensions. Already, the system had caused several big scares, most notably the “Flash Crash” of May 2010, in which $1 trillion was wiped off the value of markets in the space of 10 minutes. Yet, the deeper he delved, the more forcefully a depressing truth emerged: that a fortress of legislation had been built around the stock exchanges and powerful traders (mostly banks and hedge funds) by lobbyists and politicians. Immoral as these practices might be, they were no more illegal than had been the packaging of sub-prime mortgages into tradable securities prior to the crash of 2008-2009.
    In the last seven years, the trading environment has changed out of all recognition, spurred largely by the introduction of new regulation at the end of 2007. Designed to increase transparency, this forced brokers to offer clients the best possible price across all 13 US exchanges, meaning that price information had to be synchronised – a fiercely difficult technical challenge that rendered the market hard to monitor and abruptly brought Einsteinian physics into play, as data raced between exchanges at light speed.

    Since then, big HFT firms have gone to great lengths to gain tiny time advantages, both through software (the algos) and infrastructure. Mountains have been drilled through; billions of dollars, euros and pounds spent constructing gargantuan automated data centres (some with duplicates as backup, so expensive is down-time) and microwave transmission systems, such as the one between Frankfurt and London, because light travels marginally faster through air than through fibre-optic cable.
    Traders’ servers are housed in black cabinets whose contents are jealously guarded. Players pay for their feed, cabinets (one large trading firm is said to run 60), a power supply and cooling system, with some now graduating to huge “super-cabinets”, which allow for yet further reduction in cabling. High-frequency traders buy an insuperable advantage over the public – and none of this is illegal.
    The numbers were now mind-boggling. In the 1960s, an average share in a company would be held for four years, a figure that had fallen to eight months by 2000, en route to two months in 2008. But now the average share was held for 20 seconds, with 10 on the horizon and the fastest machines able to fetch quotes in a millionth of a second. Within two years of the Flash Crash, HFT accounted for 70% of market activity in the US and almost 40% in Europe. Meanwhile, more than 50 so-called “dark pool” markets had risen to shelter slower traders behind anonymity, but most of these had been colonised by predator algos, with some deteriorating into “toxic dark pools”, where no one was safe. Algo-designing quants now earned hundreds of thousands, even millions a year and NxCore was processing a trillion bytes of information per day. The faster the machines got, the less anyone could tell what was really going on.
    The bigger issue is that we don’t know how it’s working or what it could give rise to. And the attitude seems to be, ‘out of sight out of mind’.(…) Then you actually have rules where nobody knows what the rules are: the algorithms create their own rules – you let them evolve the same way nature evolves organisms.
    ‘the way the banks find some bandwagon and try to exploit it as much as they can. And when people get worried, they claim there’s nothing wrong with getting two or three years of profit out of this socially useless bandwagon, then moving on to another… We’re all just servicing the banking industry now’ ”

    So HFT clearly is a massive fraud, an out-of-law parasitic activity that plays with very big money, using hidden tools that self-adapt and are escaping from human understanding.
    Some even talk of the risk of ‘singularity’ (when machines take over human control), but I don’t think we’ll have time to get that far; at least, not for long, due to lack of energy and disruption of supply-chains.
    I’d rather see one of the next flash-crashes as a black swan, likely to trigger the fall of dominos. Wether someone has an emergency button to stop the unraveling is a big questionmark.

    My gut feeling is that the big players are currently pushing up the stock values, playing the fooler game as much as they can, and then, at the moment some signal is given (voluntarily or not), withdraw their assets all at once. Such a crash would actually reset the game, but likely far beyond (or below) what they seem to have in mind. Our very high level of interdependance (tight-coupling) seems to be widely underestimated, as is the role of energy.
    House of cards in a growing storm…

    • When the “big guys” have the computer software to manipulate the system, they will. Too many houses of cards.

      • Stefeun says:

        …or be manipulated by the softwares.
        Although I don’t believe that all conditions are there for a “singularity” to happen, I must recognize that Artificial Intelligence seems to improve at a very fast pace, and accelerating (exponentially?).

        Now a robot can learn from watching a video (and share with all its fellow-machines within milliseconds..?):
        “DARPA robot can learn tasks from Youtube video and a neural net can understand video 20 times faster than a human”

        They start to introduce evolutionary patterns:
        “Coevolution of Competitive and Cooperative Agent Behavior
        Realistic and complex behaviors for artificial agents can be inspired by real-life predators and prey. The predator-prey domain can be used to study the evolution of both competitive and cooperative behaviors because the agents cooperate within teams and compete across teams. If teams of artificial predators and prey are coevolved, an arms race emerges. That is, if the predator team is more successful in the first few generations, the prey team quickly evolves to out-survive the predators in the following generations, and so on. A neuroevolutionary architecture called Multi-Component ESP promotes this arms race.
        More recently, we have been collaborating with biologists (Dr. Kay Holekamp and Marc Wiseman) at Michigan State University who study spotted hyena behavior. Hyenas sometimes cooperate to capture large, difficult-to-catch prey like zebras, but mostly prefer to hunt alone, feeding on smaller prey. Experiments were designed to study some factors that affect the evolution of cooperation in predators during hunting:
        – shared or individual reward upon prey capture
        – communication among predators
        – net return from catching a particular type of prey
        Hyenas have many ways of communicating (vocal, visual, tactile) and the next goal is to simulate the evolution of these various kinds of communication in artificial predators.”

        I understand this research is fascinating, but the “artificial predators” are also frightening.
        Those guys in Austin have lots of other projects that let me puzzled:

        PS: note that in this lab they’re working on the reward structure, on emotions,… but not on consciousness (at least it doesn’t seem to be one of their priorities,
        I find this very telling ; make your own conclusions.

    • auntie says:

      Huge billboard in the exit of a Nevada casino “Dont leave until you get even”

  21. edpell says:

    It seems clear to me that the price of oil is not determined by the market but instead by political means.

    • Glenn Stehle says:

      It is probably a combination of both. Political means reigned absolute until the early 1980s. First state and federal governments in the United States determined oil supply, but after the US reached peak oil in the early 1970s the government of Saudi Arabia assumed this role.

      But Saudi Arabia overplayed its hand. It got too greedy. It raised oil prices by more than ten-fold in less than 10 years. This proved too damaging to the interests of capital, to the profits of capital, in the United States.

      The response was Carter’s appointment of Paul Volcker as chairman of the Federal Reserve in 1979, who Reagan would keep on after he was elected. Volcker raised interest rates far above previously unheard of levels, which caused a world-wide recession:

      As a result world oil demand plummeted:

      It is not at all clear whether Volker’s principle enemy was land (oil) or labor. But one thing is clear: In Adam Smith’s classical framing — with its competition between the triumvirate of land, labor and capital — Volkler was 1000% on the side of capital. His manipulation of U.S. monetary policy decimated both land (oil) and labor, and restored the profitability of capital to levels not seen since the Gilded Age or the Roaring Twenties.

      So even though the proximate cause of the world-wide recession of the early 1980s was Volkler’s monetary policies, I nevertheless believe the ultimate cause involved high oil prices.

      But land, in the form of higher oil prices brought about by the depletion of conventional oil fields, is now beginning to exert its influence once again.

      So who knows, in the perrennial competition between land and capital, in the Chiliastic showdown between Malthus and Ricardo, maybe Malthus will ultimately triumph. And maybe the utility theory of value apologists will have the last laugh after all. As Robert L. Heilbroner noted, the market fundamentalists have long argued that morally or politically determined prices “are doomed to failure because ‘the market’ will invalidate these efforts one way or another.”

      But I think Smith was clairvoyant enough to foresee this. As he wrote in Wealth of Nations:

      In a country which has acquired that full complement of riches which the nature of its soil and climate and its situation with respect to other countries, allowed it to acquire; which could therefore advance no further, and which was not going backward, both the wages of labor and the profits of stock would probaby be very low.

    • Glenn Stehle says:

      And of course markets don’t just happen. They are not the inevitable products of the workings of God or nature as the market fundamentalists would have us believe. No, far from it, markets are to a rather large degree human creations.

      Instructive in this regard is a film which General Motors produced for the 1939 World’s Fair in New York, To New Horizons: Futurama.

      Futurama was of course a future wonderland — suburbia, six-lane freeways, automobiles — envisioned by General Motors in which the car culture, and concomitantly the oil culture, had triumphed completely.

      And looking back over recent history, it’s amazing the degree to which the automotive and petroleum industries, by using the “scientitic” propaganda and PR technologies perfected in the late 19th and early 20th centuries, have been able to make the car culture envisioned so long ago come true.

    • I expect derivatives are playing a bigger role than we understand. Also rise and fall of the dollar.

  22. There have been some requests to make the mp3 of the interview with Gail available for download. I have now enabled the downloads.

    You can download from the Diner Soundcloud Channel.

    360 Listens on Opening Day! 🙂


    • Yowza! All I did was drop in the Link!

      Gail’s WP setup takes pic links, video links etc and hands back the graphic the site send out. I gotta get my WP set up to do that! lol.

      Anyhow, click the graphic and it will take you to the download page.


  23. Tolstoy's Degenerate Grandson says:

    Earth Day. I recently saw something about turning the lights off for a night to send a message that we are concerned about the planet.

    Ridiculous nonsense of course because if we reduce energy use that means growth stops and the global economy collapses. Basically we have no choice — burn baby burn – or starve.

    Like I said, pointless nonsense pumped out by ignorant (well-intentioned) people

    I’d like to put forward my own theme called Be Careful What You Wish For Weekend.

    On this day I would ask the world to try turning off the electricity and gas in your house for one weekend. Do not use any motorized vehicles.

    See how that turns out.

    And remember, if we stop growing because we despise the consumer society, or we want clean air, or we fear climate change, that weekend situation will become permanent.

    And it will result in a cascading collapse of the job market, financial system, industrial and food supply chains – and finally, starvation, disease, violence and death.

    This is the system that ‘progress’ has given us. The system that we have every single one of us embraced and cheered on because it made our lives easier, and longer.

    And it is the system we are trapped under, until it collapses in a heap of rubble.

    The grand paradox: we hate what we love. We love what we hate.

    • xabier says:

      Sawing through the branch you are sitting on, because that’s the only paying job in town……

    • It seems so intuitive that we can fix the excesses by just cutting back. Unfortunately, this doesn’t really work.

      People think that they understand the problem, but they don’t really.

  24. Stefeun says:

    A couple of links I gathered from a recent post on Paul Jorion’s blog (in French):

    – Steve Keen assesses the strange discussion via blogs between Ben Bernanke and Larry Summers (blood relations?):

    “The Inbred Bernanke-Summers Debate On Secular Stagnation
    So who is right: Bernanke who argues that the cause is a “global savings glut”, or Summers who argues that the cause is a slowdown in population growth, combined with a dearth of profitable investment opportunities, not only now but for the foreseeable future?

    I’d argue both of them, and neither simultaneously—both, because they can both point to empirical data that support their case; neither, because they are only putting forward explanations that are consistent with their largely shared view of how the economy works.

    And the extent to which they are the product of a single way of thinking about the world simply cannot be exaggerated. It goes well beyond merely belonging to the same school of thought within economics (the “Neoclassical School” as opposed to the “Austrian”, “Post Keynesian”, “Marxist” etc.), or even the same sect within this school (“New Keynesian” as opposed to “New Classical”). Far beyond.(…)”

    – Paul Volcker (another former FED resp.), presented 10 days ago a report aiming to simplify the patchwork regulating financial institutions:

    “Reshaping the Financial Regulatory System”

    Everybody seems to say (already!) that none of his recommendations will be taken into accout. So nothing new, we can still expect the TBTF banks to bail themselves out by taking directly from customers’ accounts next time.

    – Simon Johnson (former IMF chief-economist) keeps on warning of the danger TBTF banks represent, and calls for their dismantling:

    “The Old New Financial Risk
    WASHINGTON, DC – The main financial risk facing the United States today looks very similar to what caused so much trouble in 2007-2008: big banks with too much debt and too little equity capital on their balance sheets. Uneven global regulations, not to mention regulators who fall asleep at the wheel, compound this structural vulnerability.
    We already saw this movie, and it ended badly. Next time could be an even worse horror show. (…)”

    None of these fellows seems to grasp the role of energy in the economy.
    They make me the impression to be waiting for the sky to fall on their heads (rather on the people’s heads, like in 2008, themselves being already sheltered, in their minds), not understanding the underlying causes (or faking not to?), and proposing solutions they fully know won’t be applied.
    Note that I shouldn’t be upset, because solutions there aren’t any. Even those with slightly better understanding of the situation are preaching in the wilderness (NB: I’m talking of those who refuse to admit that BAU is dead).

    • Thanks for the links! Our system is incredible. The system of peer reviewed papers and academics working in very narrow areas of study makes certain that no one will figure out what is going on. This is especially the case, when funding for the system depends on grants, and these grants depend on spouting the standard line of reasoning and coming up with a way that makes the politicians look good and also makes it look like any problem we have is tiny.

      I am also beginning to think that our method of using “models” for everything is getting in the way of clear thinking. Once we have a model, it seems to inhibit clear thinking–does this model really make sense? One model is that debt will nearly always be repaid with interest. Another is that it doesn’t matter how much something costs, because we pay each other’s wages. (The key is useful “final outputs” like barrels of oil, kWh of electricity instead.) Another is EROEI–it is a wrong estimate of what should be maximized. The estimate needs to be cost-based, not based on energy inputs we can count. And published climate models are only “sort of right.” They leave out the important role limits other than climate play. Even “renewables will save us” seems to be built on a simple-minded model.

      • richard says:

        I’m close to tearing my hair out the way these posts leap from one subject to another sometimes within the same sentence – I’m just picking up on models here.
        As for models – these are exactly the same as any scientific experiment – do the research, define the inputs, set up the observations – and try to come up with a good explanation if it does not work. Unfortunately economists do not seem to be subject to the same rigors as other professions when it comes to models, with some exceptions.
        The sane thing to do is to do the “clear thinking” _before_ setting up the experiment (or model).

      • Stefeun says:

        The actual method, compared to scientific (cartoon):
        (a pity I don’t know how to paste the image directly)

        • Glenn Stehle says:

          A great deal of recent research in the fields of neuroscience, history, psychology and economics bolsters the view that “the actual method” probably comes a lot closer to describing how scientists actually operate, more so than “the scientific method.”

          Have you read any of the books written by the historian of science, Naomi Oreskes? As her historical accounts amply show, science is certainly no stranger to dogma, or the ranks of scientists to the worst sort of dogmatists.

          And as Jonathan Haidt explains in this article: “Studies of everyday reasoning show that we usually use reason to search for evidence to support our initial judgment, which was made in milliseconds.”

          The findings of Dan Kahan and other like-minded researchers delve much further into this phenomenon. On his blog he cites research which indicates that what we call “intelligence” has little to do with the ability, or the desire, to search for factual reality. Quite the opposite, what most highy intelligent people employ their superior intelligence for is to become better rhetoricians, or to better find and sift that evidence which substantiates their preconceived notions.

          • Stefeun says:

            I’ve read very few about/by Naomi Oreskes (mainly reviews about “The Collapse of Western Civilization” and comments about corrupted NGOs), but I surely agree that dogmatism should be fought everywhere/anytime it’s debunked.

            Thanks for the links to Jonathan Haidt and Dan Kahan. Your summaries of what they say about resp. “intelligence” and “reasoning” are consistent with some of the comments I’ve posted here related to “consciousness”, e.g. this one:
            you’re probably right, maybe we can’t live with “the truth”.

            Suppose that the consciousness is an evolutionary faculty aiming to put our sensations and memories together in a consistent way, AFTER the event has happened or our action is accomplished, in order to help us build up our own abstract representation of the reality, and hopefully have a better reaction next time.

            Then we would have a built-in feature that recounts us the story we want to hear (to some extent), and is able to deny some aspects of what we perceived when they don’t fit.
            It also prevents us from investigating and take the risk to find new elements that would question the whole story. We prefer a nice story, be it knowingly fake, to a potentially disturbing reality. Of course, it must have a happy end (although in reality, the end is death).”
            (NB: I know that quoting myself is pompous, but scroll a bit upwards from the target-post and you’ll find links to the very worthwhile insights Frederick Soddy had about the economy in the early 1920’s.)

            • Glenn Stehle says:

              Oh wow!

              Frantz Fannon.

              Have you read Hannah Arendt’s On Violence?

              All this is hitting close to home once nire with what is happening in Ferguson and Baltimore, amongst many other cities across the United States.

              Voices of the Unheard in the Baltimore Streets

            • Stefeun says:

              Wrt to Hannah Arendt I haven’t much more than basic idea about her concept of “Banality of Evil”, which afaik states that the absence of thinking, or not questioning the established rules, is necessary, and probably also sufficient, to lead to totalitarianism.

              I feel this statement is gathering momentum nowadays. In fact I think it started (again) with Thatcher’s TINA (There Is No Alternative). Another quote that is gaining validity at the moment, by Brecht, about nazism:
              “The belly is still fertile from which the foul beast sprang”

        • That cartoon is wonderful!

          Also, if a person focuses on a small enough piece of the story, they can perhaps show some laboratory experiment that has hope if it only can scale up, and if cost obstacles are overcome.

  25. Christian Favre says:

    I agree that the extinctions of the megafauna in N America were caused by the arrival of the ancestors of the native Americans approximately 15,000 years ago and the same for the megafauna in Australia wiped out by the arrival of the aborigines 50,000 years ago, the megafauna in New Zealand by the arrival of the Maoris 1000 years, the megafauna in Madagascar 1500 years ago, etc etc
    Scores of books lay out the evidence, so I won’t bore anyone with attempts at summarising it, but it seems to me that people who try to argue all this is a coincidence are doing it for ideological reasons because of their desire to believe that white people are despoilers of the environment whereas the natives magically live in harmony with nature, a subtle kind of racism.
    You can say that it’s not proven they caused these extinctions in the same way it’s not sure that cigarettes cause cancer, there’s always a 0.000001% chance they don’t.

    • Well said!!!

    • Simple Kiwi says:

      I concur. Maori arrived in New Zealand in 1300 CE, and their population peaked at less than 150,000 before the europeans started arriving in numbers in the early 1800s.
      There are now approx. 4.5 million people in New Zealand, including around 600,000 who claim Maori descent.
      Two points:
      1. the number of bird species lost to extinction through pre-European Maori was significantly greater than post European. Roughly 70 million person-years of purely Maori occupation versus 400 million person years post-European arrival tells us extinction rates were at least 6 x higher per person year for the Maori than post-European settlement.
      2. The Maori population had peaked because it was a comparatively low resource utilisation population (except as noted above!): no metals, no wheels, no written language – an advanced stone age culture, with a mostly hunter – gatherer approach, with some limited agriculture. They had reached the limits of the population with the resources available – and some suggest the cannibalism present was because of the lack of animal protein. (This point is arguable – it is not central, but an important possibility to consider in the point i am making).
      New Zealand is thought by many in the modern world to be underpopulated – but the present 4.5 million is 30x what was sustainable before the higher resource utilisation economy arrived.
      In other words to get back to something vaguely resembling sustainability, NZ has to have a 97% reduction in population.
      For those in more densely populated parts of the globe, i leave you to draw your own conclusions.

      • You can always apply for free land on Pitcairn, although i don’t know what its carry capacity is, and it seems the locals there live very on-grid for such a remote place.

      • Thanks!

      • auntie says:

        “For those in more densely populated parts of the globe, i leave you to draw your own conclusions.”

        Long pork

        • Simple Kiwi says:

          And for those of you who don’t know, long pork is that protein source walking around on two legs which looks a little bit like you or your neighbour.
          Best cooked slowly for a long time to avoid ingesting live parasites.

  26. Kulm says:

    Again, about 90% – 99% of the world’s population is completely economically irrelevant, and for the people who do matter even a 50% decline of the world’s wealth will mean some hiccups.

    The Seventh Extinction is the extinction of most of the humans who were not rich or powerful to enter Cat 1 civ, plus the pets, the mammals and other plants dependent upon humans.

  27. Glenn Stehle says:


    I was also especially interested in your comments beginning at minute 41:00 about housing in China.

    I have lived in Mexico for the past 15 years and have noticed a similar phenomenon here.

    In a traditional society like Mexico, land has an almost sacrosanct value. It is greatly valued even if rents are low or non-existent, a situation similar to what you describe with houses in China.

    This phenomenon is difficult to understand for someone aculturated in the United States, a place where faith in the utility theory of value is quasi-religious and is proselytized by orthodox economsts as being self-evident and beyond dispute.

    The triumph of the utility theory of value, however, is something which has occurred only recenty in the United States. The theory was rejected by everyone from Adam Smith to Karl Marx because of the paradox of value (also known as the diamond–water paradox), which is the apparent contradiction that, although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market. Economists thus looked for other foundations of value besides how much rent, or utility, something produced, that is at least until the triumph of postclassical and neoclassical economics in the 20th century.

    As Robert L. Heilbroner explained in The Problem of Value in the Constitution of Economic Thought, the utility or price theory of vaue is preferred by orthodox economists, despite its glaring empirical and logical faults, because it is a less “subversive” theory of value than those used by Smith, Ricardo or Marx. He expains that “it avoids troubesome considerations of class conflict and cooperation as the fundamental problems of social order, and puts in their place a view of social order as the outcome of individuals contending for pleasure or avoiding pain in an environment of scarcity.”

    If there is any hope for the US transitioning to a less energy intensive economy, I am convinced it will require a change of values. And while I do not want to fall victim to the implacable determinism of modern price theory, I am concerned that, given there is so much cultural inertia in the United States propelling the utility calculus of the marketplace forward, it may be that societal values cannot change as rapidly as shifting energy realities require.

    A failure to change values, however, will surely result in the social collapse you fear.

    • edpell says:

      “Never give up the land.” Those who have land have options. Those who do not have land work as field hands for food and board, no family, no future.

    • gerryhiles says:

      @ Glenn Stehle.

      Excellent post, but I doubt that many will understand, especially Usans who automatically regard Marx as anathema and who really know nothing about Smith, or even Keynes.

      If only a few had read and absorbed J K Galbraith, albeit a Canadian, we would not be in this mess.

      I daresay that you have read his “Affluent Society”. Nothing much more to say.

      • Chris says:

        I thought you gave up here. You must have too much free time on your hands. It also seems like you are pretty closed off and set in your way of thinking. This leads me wonder if you live alone. With nobody around to counter your wandering thoughts you seem to have become a bit arrogant. Your first post was angry and mean. Why?

    • I agree that it is likely to be difficult to change values. I expect we are going to have to “dial back” expectations both of medicine and higher education.

      The other thing that is a problem in shrinking back, besides the difficulty in changing values, is the likelihood that governments will have to shrink back or they will collapse. They have made far more promises than they can keep. Perhaps the central governments can turn those promises over to the states or local governments, and they can attempt to handle them instead. Even when farmers were able to farm long ago, they often avoided unprotected areas if there was no government to provide protection.

      • One of the more painful things these bloated governments are going to have to do is turn control and initiative back over to the people. Governments used to allow and count on communities protecting themselves with militias, city and community departments counted on local volunteers in many circumstances etc. etc. These days it’s all “Official trained government employees” only. Even volunteer fire departments are often filled with paid employees these days despite keeping the volunteer in their name.

        The landscape even as far West as Missouri is dotted with small local forts or strong buildings that now lie in ruin, often times nothing more than a few stones and a mark on some old map, but back in the early 1800’s they were maintained and stocked by local groups of farmers and used as meeting places and defensive strong holds in emergencies.

        Today’s huge governments are NOT going to like giving up all their control.

        • Using volunteers was a lot easier back in the days when many women were housewives and when many jobs were in the community. Of course, now we have a lot of people who have dropped out of the workforce, and would be available for such jobs, if they could find a way to work.

          I agree with you, that governments will not like giving up all their control.

      • Glenn Stehle says:

        And of course it’s not just values that will have to change.

        The entire physical infrastructure of the United States has been constructed so as to accomodate the car culture and the oil culture.

        Replacing this physical infrastructure, which is rapidly becoming obsolete due to oil and gas depletion, will be a mammoth undertaking.

  28. Tolstoy's Degenerate Grandson says:

    US Economy Grinds To A Halt, Again: Q1 GDP Tumbles Below Expectations, Rises Paltry 0.2%

    And so the Atlanta Fed, whose “shocking” Q1 GDP prediction Zero Hedge first laid out nearly 2 months ago, with its Q1 GDP 0.1% forecast was spot on. Moments ago the BEA reported that Q1 GDP was far worse than almost everyone had expected, and tumbled from a 2.2% annualized growth rate at the end of 2014 to just 0.2%, in a rerun of last year when it too “snowed” in the winter. This was well below the Wall Street consensus of a print above 1.0%.

    Biggest Inventory Build In History Prevents Total Collapse Of The US Economy

    If US inventories, already at record high levels, and with the inventory to sales rising to great financial crisis levels, had not grown by $121.9 billion and merely remained flat, US Q1 GDP would not be 0.2%, but would be -2.6%.

    Time to fire up the QE machine — the tens of trillions that are pumping through the system are not enough to keep it alive. More transfusions are needed.

    • Glenn Stehle says:

      When it comes to growth in global oil demand, the United States really isn’t even a player any more. In fact, it has been a drag on global oil demand since 2007:

      The increase in private debt in the United States has ground to a halt, in spite of QE and negattive real interest rates:

      The real action is in China and other developing nations:

      The key to future oil demand will be if China can navigate its massive build-up of private debt over the next few years:

      If it cannot and China’s economy experiences a hard landing, the impact on future oil demand will be devastating.

      • You do well at finding good graphs by other people.

        I agree that rising debt is plays a big role in keeping the economy going and prices high enough. I don’t think we can keep counting on growing debt on China–if nothing else, its pollution problem is becoming a big enough problem that it inhibits growth in coal use.

      • Harry Gibbs says:

        China’s local government debt is also posing an intractable problem:

        “Jiangsu and Anhui provinces did not attract sufficient buyer interest last month for their bond offerings. As a result, Beijing’s heralded debt-for-bond swap program failed to launch.

        “The unexpected withdrawals suggest central government technocrats are running out of options to rescue the faltering economy…

        “Land sales declined 32% in the just-completed quarter for the country as a whole. In the second week of April, revenue from such sales fell 57% in 40 Chinese cities.”

        • Thanks! I had forgotten how much of the revenue of local governments came from land sales. Of course, this land usually was previously agricultural land, so would tend to displace farmers. Without cities buying up agricultural land, there is less demand for apartments in cities–people will stay where they are.

          There are obviously a number of other issues involved as well.

    • Rodster says:

      China’s economy is continuing to decline and they are under pressure to start their own version of QE. Supposedly they have created 28Trillion worth of debt since 2009.

    • gerryhiles says:

      Hi TDG.

      I do not think that you or I, nor any other radical thinker, will make a dent in conventional beliefs, but it’s kinda fun to keep trying, though I am giving up on this blog.

    • Sort of concerning, when all of that oil in inventory needs to be sold, perhaps at $20 or $30 barrel. I am sure that there are other things in inventory as well.

  29. Glenn Stehle says:


    In discussing the topic of oil price beginning about minute 33:45, you state, talking about petroleum demand, that “It’s headed downward, the amount that the economy can afford.”

    This is an empirical claim that I have heard both the MSM and the alternate media repeat ad nauseaum, to the point that it has become a tautology.

    But there is a probem with this empirical claim, and the probem is that it is false, as this graph clearly illustrates:

    And it looks like the growth in demand may even be accellerating:

    According to Cornerstone Analytics, demand is up some 1.7M/D in 1Q15 vs. initial estimates from others of less than 1M/D average rise for the year. So the price drop is clearly seeing a demand response. The recent monetary easing in rates and reserves by China will only help to increase demand further from here.

    Even demand in the United States, which has been like a lead weight on world oil demand for the past 10 years, is on the upswing, and has been so since 2012, as the latest EIA Short-Term Energy and Summer Fuels Outlook shows:

    • The problem is price; it isn’t holding up. All the oil we can have is what we can afford. At the current price, or even a lower price, we are going to extract a lot less oil, and even that amount is going to head down as depletion sets in. Peak oil comes from low prices, not high prices. That is what most folks miss.

      People miss the fact that the problem we have isn’t just low oil prices; it is low commodity prices of all kinds, and a lack of opportunities for profitable investment. Also a lack of good paying jobs. It is much harder to overcome that widespread problem than simply low prices that happen to be low. Workers are tapped out by student loans and mortgages. They can afford enough new cars and homes to keep prices up. China also can’t keep growing its debt at the breakneck speed it was in the past.

      • Glenn Stehle says:


        I’m an engineer, so I’m not really interested in rhetoric. I’m interested in causation.

        Can you show me where the high prices during 2011, 2012, 2013 and 2014 caused demand destruction?

        Can you, in turn, then show me where that demand destruction caused the drop in oil prices which began in June 201?

        • “Demand” for oil and other commodities is determined by a combination of (wages + increase in debt). There reason this is the case is because if you want to buy a new car, the two ways you can fund it are (1) directly through your wages, or (2) by getting a new loan and thus increasing your debt. Governments and other organizations can also greatly add to the increase in debt, and use this additional debt to either buy things directly (roads, jet airplanes) or to increase transfer payments to the unemployed and others allowing them to buy commodities like food and oil from their cars.

          In fact, wages of common workers are especially important in the determination of demand ( or what is affordable), because there are so many of them, and because what they buy tends to be heavily commodity oriented–food, housing, transportation, with not much services (high-priced hair styling, financial planning, dance lessons, etc). One problem we have increasingly been having is that the wages of common workers (say, those at or below 60% of the median wage) have been falling in the developed countries. This happens because with higher prices of oil, it makes more sense to make goods in China and India which mostly use coal. Also, there is direct wage competition with these countries, bringing down the wages of common workers. So falling wages of common workers is one part of the problem. Of course, as these wages fall, their ability to borrow erodes as well. “Demand destruction” thus comes through wage destruction–not the place most people would look. People who have to go back to school because they can’t find a job in their current field don’t buy new cars. Young people with lots of student loans and low wages don’t buy new houses.

          The other part of the problem is the “increasing debt” part. Governments have really had “their foot on the gas” in terms of adding debt themselves, and in terms of encouraging additional growing debt by others. But at some point, these efforts start to hit limits. China seems to have cut back in its debt growth (and in fact, on its demand in general), about the middle of 2014. Also, the United States discontinued its Quantitative Easing program over a period of months in 2014.

          In my view, the only way prices have been able to stay up since the crash in 2008 has been with the many extraordinary measures being taken. As these are discontinued, the natural tendency of prices to fall (because of affordability problems) comes back. This is a chart I have shown in the past.

          oil price and supply with notes

          You might read some of my other posts, such as and

          I probably need to explain this again in a post. It gets buried in posts with a lot of other things.

          • Glenn Stehle says:

            Show me the demand destruction.

            Speculation is fine, but the proof is still in the pudding.

            Where’s the demand destruction?

            • In wages, net of repayment of college loans. Show me young people who are going out and buying homes and starting families. I know my children aren’t, and practically none of my nieces and nephews are getting married and starting families. The ones who are starting families are barely scraping by, without college educations and with low paid jobs. A lot of them are starting families without getting married, because the tax system is more generous to low income mothers without spouses than it is to low income couples.

            • Glenn Stehle says:


              Those are personal anecdotes.

              Can you show me some empirical evidence which indicates there has been destruction of global oil demand.

            • Kulm says:


              The children who are doing it are precisely the winners of today’s capitalism, the Dark Enlightenmenters who think they will cleanse the planet the less desirable people via nonviolent means and will enter Cat 1 civ.

            • auntie says:

              “Where’s the demand destruction?”At 2 dolla and 2 quatas a gallon im burning all of it I can get my grubby little hands on. Nothing else goes down in price ever (pretty much) but the most precious substance in the world does. I eat rice instead of hamburger cuz burger is $3. I patch my old vehicle together because new ones are $40k. The one thing their is no substitute for is dirt cheap. Their may not be demand destruction for fossil fuel but something is not right. You can feel it its tangible.

    • Harry Gibbs says:

      Glenn, this is the critical paragraph from that report:

      “With WTI crude oil prices expected to average $48/bbl in the second quarter of 2015, EIA expects 2015 onshore production to decline beginning in that period because of unattractive economic returns in some areas of both emerging and mature oil production regions. Reductions in 2015 capital expenditures, cash flows, and low-cost credit availability have encouraged companies to defer investment or redirect investment away from marginal exploration and research drilling to focus on core areas of major tight oil plays.”

      That’s peak oil via low prices.

      I wonder how much of the increased demand is derived from real economic growth and how much from the contango trade.

      • Glenn Stehle says:

        I have no doubt that low prices will cause supply destruction, and in fairly short order.

        But that’s not really what we’re talking about, is it?

        What we’re talking about is what caused low prices.

        Riddle me this: What caused the low prices?

        • Glenn Stehle says:

          Here’s a clue for the market fundamentalists — the modern price theory of value fundamentalists:

          Adam Smith’s ‘Wealth of Nations’ had set forth in concrete detail, in the year of the Declaration of Independence, the 18C principles of laissez-faire — the free market as regulator of supply and demand — “liberal economics” is the name of the doctrine. Politically, it dictated that governmet should scrap mercantilism and no longer interfere with the market mechanism. [Simonde de] Sismodi, also a believer in liberty; at first promoted Smith’s ideas….

          But he also urged factual observation in what he was the first to call “the social sciences”… He thus became the first, and for a time the only, heretic among Smith’s disciples, the founders of the system….

          He had visited England and had been struck by the misery resulting from industrial progress. Why did the seemingly beneficial production of goods by machinery bring on “poverty in the midst of plenty”? The answer was: free competition keeps wages low, free enterprise makes for overproduction, which leads to recurrent “crises” — shutdowns or failures entailing unemployment and starvation….

          But Sismondi does not urge revolutionary massacre. What is needed is protective legislation.

          Sismondi does not oppose machinery; he rejects the idea that the economic situation is the inevitable effect of a law of nature, as the orthodox then affirmed. He saw the evils as the result of social and legal arrangements that could be changed.

          — Jacques Barzun, ‘From Dawn to Decandence’

        • Glenn Stehle says:

          And here’s another clue.

          Even though oilmen have always talked the talk of laissez faire, unbridled competition and rugged individuaism, they haven’t walked the walk.

          The problem of petroleum was rooted in an 1875 decision by the Pennsylvania Supreme Court. Lacking any legal precedents or knowledge of the particular nature of subterranean petroleum, the judges compared oil and gas to wild game. The analogy to animals ferae naturae was based mainly on the judges’ individuaistic conception of the ownership rights of adjacent landowners in a common oil reservoir, without concern for the public interest. Courts in other oil-producing states subsequently adopted this “rule of capture” to award title to whoever first appropriated underground oil and gas, without regard to conservation….

          The rule of capture imposed no production restraints and merely required landowners to extract oil or gas through wells drilled on their land only. To secure their share and protect their property interests, landowners competed with one another to produce as much oil and gas as possible regardless of market demand. Excess supply was needlessly wasted, forcing prices down below operating costs….

          Landowners defended their vested, traditional, common law right to exploit privately owned petroleum against the exercise of state police power to enforce conservation…. Oilmen who thrived on the competitive spirit and the lure of new fortunes rode roughshod over weaker neighbors’ rights and resisted any attempts to restrain their right to produce when and where they pleased.

          Wasteful recovery practices and the presumed diminution of domestic reserves, along with attendant periods of glut, fluctuating prices, and the growing economic and strategic importance of petroleum, underlay conservation efforts in the twenties….

          Government reguation of petroleum production has been interpreted as an enlightened policy congruent with the national interest. This theory recognized a paramount state interest in the conservation and proper utilization of petroleum resources to prevent waste… From another perspective, oilmen supported conservation to rationalize their true objective of evading the pressures of competition. Government regulation was not perceived as a neutral force balancing the interests of consumers, independent producers, and major integraed oil companies. Public policy was allegedly constructed under the influence of large producers to restrict production in order to alleviate oversupply and raise prices….

          Ideology, rather than economics or politics, guided judicial decision making regarding petroleum rights from the inception of the rule of capture in 1875 until the Connally Hot Oil Act of 1935. The courts that ultimatley resolved conflicting legal rights to petroleum between1875 and 1935 were dominated by jurists who received their legal training in the late nineteenth century. As Paul demonstrated, they were imbued with the predominate jurisprudential attitude of the era, whih put a primacy on the protection of private property against unwarranted governmental intrusion. And as Hovermkamp suggested, they were guided more by the laissez-faire approach of cassical economic theory than by interest group politics. Throughout the legal battle over regulation of petroleum production, from the rule of capture through the New Deal petroleum code, the courts consistently favored the private over the public interest….

          The early thirties witnessed a critical transition era in American petroleum as oilmen battled government officials to preserve their absolute dominion over privately owned petroleum….

          Between 1919 and 1936, oilmen and lawmakers had experienced stupendous difficulties — legal, economic, political, and administrative — in dealing with shifting voluntary, state, and federal regulation of a highly complex industry. Only after voluntary and state controls had proven ineffective in stabilizing chronic overproduction did the majority of oilmen embrace federal regulation.

          After failing to resolve the problem through voluntary cooperation, oilmen reluctantly opted for state and federal regulation.

          –Nicholas George Malavis, ‘Bless the Pure & Humbe’

        • Harry Gibbs says:

          “Riddle me this: What caused the low prices?”

          When we see a broad spectrum of finite commodities with ever rising extraction costs falling dramatically in price over roughly the same time-frame I don’t think there is a better explanation than Gail’s affordability thesis.

          As far as oil goes, the Fed’s $4 trillion bond-buying splurge artificially boosted growth in the emerging markets, making them the marginal consumers of oil. Double-digit percentage increases in oil consumption were recorded by Pakistan, Venezuela, and Azerbaijan from 2012 to 2013, and from 2009 to 2014 double-digit percentage consumption increases were recorded by Central and South America (15.2 percent), the Middle East (18.3 percent), Africa (12 percent), Asia Pacific (17.4 percent), and the former Soviet Union (12.8 percent).

          The winding up of QE, the resultant strengthening of the dollar and these markets’ exposure to dollar-denominated debt is reversing the magic.

          • Glenn Stehle says:

            Show me the demand destruction.

            • Tolstoy's Degenerate Grandson says:

              Glenn — I will step in here.

              Most of the world is in what should be referred to as a Depression.

              Unemployment rates are off the charts. Take the US for example, supposedly the cleanest shirt in the laundry basket, unemployment is really 20% maybe more based on the participation rate.


              Data out of China indicates a huge drop off in ghost-town fueled growth, perhaps down to the 1% level.

              Everywhere I look the numbers are bad. The stimulus is having minimal effect. The Baltic Dry is at record lows, commodity prices are collapsed – these are indications of negative growth numbers.

              Governments and central bankers are engaged in a massive lie. The can not and should not tell us the true story.

              So I’d like to be able to demonstrate that lack of demand is putting downwards pressure on the price of oil but that is difficult. Because I cannot find the numbers to demonstrate this.

              But the logic in me says to connect the dots:

              – there is little or no economic growth anywhere
              – the MSM is a propaganda machine that must convince the sheeple that green shoots are around the corner therefore they must present data points that do not spook the sheeple – the sheeple are ignorant and often stupid but if the MSM puts out real job numbers and real energy consumption numbers the sheeple will be terrified and go into hoarding mode and the game is over

              Therefore I have to assume these energy numbers are falsified. I simply cannot see how energy consumption is rising in this economy.

            • Rodster says:

              @TDG, that’s where Glenn is being led astray. If you believe what’s being reported by the Gov’t and Media then there is NO demand destruction. If you get past the lies you’ll uncover demand destruction pretty much everywhere you look. The MSM and all the Govt’s around the world have so badly fudged the numbers that if you believe them, then we are growing, when just the opposite is taking place. This morning after the Gov’t cooked it’s books after the 1st quarter data was released, it shows we are in a DEPRESSION and not recession for the last 7 years. Reuters comes out and tries to put a positive spin that NO, things are looking up for US growth. So everyone from West to East are trying their hardest by not showing or reporting demand destruction but just the OPPOSITE, growth. Why is McDonald’s shutting down 700 stores worldwide if demand is stable or growing? Because demand is down everywhere. Apple’s flagship iPad line has experienced more declines for the 5th straight qtr. If it weren’t for the Chinese buying iPhones in record numbers, Apple would be taking a beating.

              “U.S. data suggest economy picking up steam after weak first quarter”

            • Tolstoy's Degenerate Grandson says:

              Lie after lie after lie…. how can there be growth in energy use when we are in a Global Depression?

              It beggars belief

            • Glenn Stehle says:

              ► Tolstoy said:

              …the MSM is a propaganda machine…

              I Agree.

              ► Rodster said:

              If you believe what’s being reported by the…Media then there is NO demand destruction.

              I Disagree.

              Can you show me an example of where the media is reporting that demand is increasing?

              Quite the opposite, the MSM is reporting ad nauseaum that demand is dropping.

              For example, take a look at this CNN report at minute 0:55:


              Or this BBC report at minute 0.17


              Or this Bloomberg report at minute 0:50

            • Rodster says:

              “Can you show me an example of where the media is reporting that demand is increasing?”

              Did you read the Reuters article I linked that the economy is picking up? That’s just one of many articles. We are a consumer driven economy ergo, demand. So where are you seeing demand increasing?

            • Glenn Stehle says:

              Rodster said:

              Did you read the Reuters article I linked that the economy is picking up?

              Did that article even so much as mention oil demand?

            • richard says:

              “Show me the demand destruction.” – There are several meanings to that question.
              If you mean specifically a decline in petroleum products consumption, then a combination of increased efficiency and reduced economic activity will have that effect.
              Alternatively, if you seek a causal link between wealth or finance and the Oil and Gas sector then Roger Boyd’s talk is a good place to start, but the math is probably beyond my capabilities to explain.

            • Rodster says:

              “Bloomberg: Big Oil Losing Grip On Auto Industry — Demand Destruction Part Of Fall In Oil Prices”

              ‘Oil demand has more or less flatlined over the last decade — even as higher levels of supply resulting from the fracking boom have materialized. The peak in oil demand occurred back in 2004, and has fallen a good deal since then.’


            • Tolstoy's Degenerate Grandson says:

              Nice find!

              Throw in Hills Group exposing the fact that storage is being included as demand and this is a bad situation.

              But the MSM will no doubt tell us that the flat line is caused by more people driving Tesla cars…

            • Glenn Stehle says:

              @ Rodster

              Thank you for the link to the Bloomberg story.

              It’s just one more example of the tautology that has infected the MSM, asserting that “Demand Destruction [is] Part Of Fall In Oil Prices.”

              And I notice how they cherry pick the evidence to make their argument, zeroing in on oil demand only in the United States, and not global demand, and only from the period 2006-7 to present.

            • Glenn Stehle says:

              @ richard

              I notice that, by spotlighting the PIIGS, you employ the same strategy that Bloomberg did in “demonstrating” oil demand destruction. But whereas you used the PIIGS to show demand destruction, Bloomberg used the United States.

              Oil, however, is a fungible commodity traded on world markets. It is for this reason that it is global demand, and not local or regional demand, which influences prices.

            • “Oil, however, is a fungible commodity traded on world markets. It is for this reason that it is global demand, and not local or regional demand, which influences prices.”

              Well, there are many things that influence prices, from speculation and manipulation, to regional markets like United States oil inventories.

              Most of the growth in oil consumption seems to be in oil producing and exporting countries, which means they are consuming their own exports, which will destroy their trade balances and destabilize their countries once they can no longer afford their social programs.

            • richard says:

              “I notice that, by spotlighting the PIIGS, you employ the same strategy that Bloomberg did”
              You asked for, and I gave an example of demand destruction – I assumed that you referred to oil products only hence my reference to the PIIGS. I’d agree that it is premature to expect a global decline in oil consumption, particularly at a time when oil prices are falling.
              I have suggested a mechanism that will drive demand destruction in an earlier post.
              If you are asking for views on when the decline will begin, “soon” is the best I can do.

            • Glenn Stehle says:

              richard said:

              I have suggested a mechanism that will drive demand destruction in an earlier post.

              If you are asking for views on when the decline will begin, “soon” is the best I can do.

              Let me be very clear. I am not arguing that there will be no demand destruction in the future. Demand destruction in the future, in my opinion, is inevitable.

              But that is a very different claim than asserting that demand destruction has occurred over the past three years, or that it is occurring now.

              When one makes historical claims which are false, it tends to discredit one’s predictions for the future.

          • Good points!

        • “Riddle me this: What caused the low prices?”

          Failure for demand to grow as fast as supply at $100 / barrel.

          • Glenn Stehle says:

            Well you’re getting closer.

            But you still can’t bring yourself to state the reality staring you in the face: The low prices were caused by overproduction.

            • Tolstoy's Degenerate Grandson says:

              Over production combined with the failure of expected stimulus-fueled demand.

              Let’s go big picture though.

              If the PTB want production reduced they simply tell the Arabs to reduce. If the Arabs refuse they get moves aside (like Saddam and Gaddafi) and someone is put in place who will dance to the owners of the Fed’s tune.

              Therefore if we have a glut of oil and a crashed price, this was done on purpose.

              So why?

              My theory is that we had a mad dash to get as many holes drilled as possible while the economy could deal with $100+ oil prices without completely collapsing. QE ZIRP were the tools to get this done.

              Effectively we got ready for peak oil by getting the production numbers as high as possible – in effect massaging the peak to the highest possible point on the graph.

              And now we are on the plateau of peak oil. Little or no new oil is going to be found and extracted when we know that the cost to do so is well over $100.

              The upfront costs have been sunk and we will continue along the plateau for some time, with enough oil to keep the system alive.

              The question I have is: which gets us first, does the hoard of pre-tapped oil decline and collapse the economy, or does the economy collapse under the weight of the giant fraud that it is?

            • Harry Gibbs says:

              “But you still can’t bring yourself to state the reality staring you in the face: The low prices were caused by overproduction.”

              That is a pleasant fiction, Glenn, but I fear we are hitting the limits to growth now and that has been the primary driver behind sinking prices. Demand destruction for oil has been apparent for several years now in nations that import a lot of oil and use a high percentage of oil in their overall energy mix:


              You might also enjoy this EconMatters article by Jeffrey Snyder on the phenomenon of multiple commodities falling in price over more or less the same time-frame.

              He concludes:

              “In other words, this has been a demand problem since 2012 (and really since the housing channel of global monetarism died in 2006) that is getting worse by the month,” which seems to me more plausible than a sudden simultaneous production spurt across the board.


            • Glenn Stehle says:

              @ Tolstoy

              Well evidently Russia is now jumping on the bandwagon too. It looks like it too has decided to increase oil production. From last Friday’s Wall Street Journal:

              U.S. oil prices slipped Friday as crude traders refocused on signs of oversupply….

              Investors were swayed by indications that global oil production is growing. John Kilduff, founding partner of Again Capital in New York, said there was news that Russia is unexpectedly increasing production.

              That comes on top of Saudi Arabia increasing oil production by 800,000 Barrels in March:


              And the United States increasing oil production by 1.4 million barrels YOY in March:


              And yet the only thing the MSM and the alternate press scream is “DEMAND DESTRUCTION!”

              Heck, there hasn’t even been so much as a deceleration in the rate of demand growth, much less a decrease in demand.

            • Tolstoy's Degenerate Grandson says:

              MSM is screaming that the Baltic Dry is collapsing because there are too many ships being built.

              I am screaming that that ships are built based on anticipated cargo growth – which has not materialized (and I am speaking to shipping lawyers who are confirming this)

              Therefore there is a glut of ships.

              Might the same no be said for oil?

              Or maybe, as I have pointed out, this is the last gasp – pump as much as possible to keep prices low to delay collapse

            • Also, all of these drillers have bills to pay. They at least can get some cash flow by pumping oil from wells that are already at or near completion, so no point in cutting back.

            • “The low prices were caused by overproduction.”

              Yes, but high prices from underproduction allowed the increased production at higher cost that is now overproduction.

            • Demand = affordability. It is different at each price, and it changes over time as our ability to add debt decreases and as the wages of common workers stagnate.

            • Glenn Stehle says:

              Gail Tverberg said.

              Demand = affordability

              So the coefficient of price elasticity of demand for oil is -1.

              Well again, I must ask if you have any empirical evidence whatsoever which backs up that claim.

            • What I am saying is that economists managed to put together an incorrect model of demand as we approach limits of a finite world. Their model might be correct away from limits, but this close to limits, there is too much feedback to wages and to debt levels from high prices for it to work.

              The real issue, as we reach limits of a finite world, is that high prices adversely affect the growth of wages of common workers. They also tend to lead to rising debt (in an attempt to work around the problems of high prices). But this rise in debt has limits as well. Limits on growing debt plus stagnating wages are what caused the big drop in prices in commodities of all kinds, including oil. Unless we can get rid of this basic problem, it is hard to get a rise in prices to “stick”.

            • Glenn Stehle says:

              @ Harry Gibbs

              Thanks for the link to the article by Jeffrey P. Snider.

              It’s just one more example of an oil speculator predicting weak future oil demand, and whose predictions have been proven wrong by events since he wrote his article on Feb 12.

              The governments of Saudi Arabia and Russia both decided to up oil supply in March by at least 800,000 BOPD, which temporarily suppressed oil prices.

              But oil prices have since recovered, even above where they were on Feb 12.

              And as OilPrice reports: “The speed with which inventories are increasing has indeed slowed a bit. Two weeks ago, there was a rise of just 1.3 million barrels, one of the lowest levels in months.”

              So unless Saudi Arabil and Russia relented and cut back on production in April, demand is surging ahead.

            • Harry Gibbs says:

              Glenn, where is your evidence for a simultaneous supply glut in multiple finite commodities?

            • Glenn Stehle says:

              @ Harry Gibbs

              A “simultaneous supply glut in multiple finite commodities” is part of of Snider’s theorizing and speculation, not mine.

              And with what has actually happened with oil demand and prices over the past few months — looking in the rear view mirror — it is quite obvious that Snider’s theorizing and speculation was wrong.

            • Harry Gibbs says:

              “But you still can’t bring yourself to state the reality staring you in the face: The low prices were caused by overproduction.”

              Glenn, this is your speculation. Do you have evidence for it?

            • Glenn Stehle says:

              Harry Gibbs said:

              “But you still can’t bring yourself to state the reality staring you in the face: The low prices were caused by overproduction.”

              Glenn, this is your speculation. Do you have evidence for it?

              Harry, citing something which has already taken place is not “speculation.” Far from it, it is merely stating that which has already happened. It is history.

              You want more evidence of what has occurred, more than what I’ve already flooded this thread with? OK, try this on:

              GLOBAL SUPPLY

              Annual gains of a whopping 3.5 mb/d were split between OPEC and non-OPEC production.

              • Year-on-year (y-o-y), non-OPEC supply is estimated to have risen by about 1.8 mb/d.

              • OPEC supply soared to 31.02 mb/d in March – up 890 kb/d on February – as top exporter Saudi Arabia ramped up output towards record rates while Iraq and Libya rebounded strongly. The month-on-month (m-o-m) supply increase was the biggest since June 2011. March marked the eleventh consecutive month with production running above OPEC’s 30 mb/d supply target.

              • Early indications suggest that OPEC’s robust March production level, up nearly 1.5 mb/d on the year before, may be sustained, if not rise further, in April.

              • Global supply rose by an estimated 1 mb/d month-on-month (m-o-m) in March, to 95.2 mb/d, on increasing OPEC production, which saw the highest monthly increase in nearly four years.


              • Global growth has steadily built, rising to a fresh one-and-a-half year peak of +1.3 mb/d y-o-y in 1Q15.

              • The forecast of global oil demand for 2015 has been raised by 90 kb/d to 93.6 mb/d, a gain of 1.1 mb/d on the year and a notable acceleration on 2014’s 0.7 mb/d growth, as the global economy slowly gains momentum.

              IEA Oil Market Report: 15 April 2015

            • Harry Gibbs says:

              Glenn, you are talking purely about oil prices. I thought your comment was a response to my comment, in response to your comment:

              “Riddle me this: What caused the low prices?”

              I said, “When we see a broad spectrum of finite commodities with ever rising extraction costs falling dramatically in price over roughly the same time-frame I don’t think there is a better explanation than Gail’s affordability thesis.”

              You are posting with such frequency it is hard to keep up!

              As far as IEA forecasts go, history suggests they are best taken with a pinch of salt.

              Perhaps you can lay your cards on the table in very simple terms for me. Gail’s thesis deals with diminishing returns relating to a number of finite commodities. If she’ll forgive me for the oversimplification: prices are getting too high for consumers whilst being too low for producers. We are papering over the mismatch between costs and prices with burgeoning debt of many forms. Certainly there seems to be plenty of evidence for this claim.

              Are you taking issue with the broad thrust of her argument of is it your feeling that the data you reference indicate we have enough in the tank for another cycle of boom and bust?

            • Tolstoy's Degenerate Grandson says:

              You have hit the nail on the head:

              THE END OF CHEAP OIL Global production of conventional oil will begin to decline sooner than most people think, probably within 10 years
              Feb 14, 1998 |By Colin J. Campbell and Jean H. Laherrre

              HOW HIGH OIL PRICES WILL PERMANENTLY CAP ECONOMIC GROWTH For most of the last century, cheap oil powered global economic growth. But in the last decade, the price of oil has quadrupled, and that shift will permanently shackle the growth potential of the world’s economies.

              According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices.

              BUT WE NEED HIGH OIL PRICES: The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth.

              Steven Kopits from Douglas-Westwood said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programmes. Nearly half of the industry needs more than $120,” he said

              Sanford C. Bernstein, the Wall Street research company, calls the rapid increase in production costs “the dark side of the golden age of shale”. In a recent analysis, it estimates that non-Opec marginal cost of production rose last year to $104.5 a barrel, up more than 13 per cent from $92.3 a barrel in 2011.

            • Glenn Stehle says:

              Harry Gibbs said:

              As far as IEA forecasts go, history suggests they are best taken with a pinch of salt.

              You don’t seem to grasp that there exists a difference between past and future, between recounting history and making forecasts.

              Or maybe you subscribe to the core belief of all good totaltarians: “Who controls the past controls the future”?

            • “You don’t seem to grasp that there exists a difference between past and future, between recounting history and making forecasts.”

              The IEA has a history of making inaccurate forecasts. What makes you think their current forecasts are suddenly more accurate than all of their previous forecasts?

            • Tolstoy's Degenerate Grandson says:

              The government is lying about just about every statistic that would alert the sheep to the fact that the world is about to end.

              Does anyone really think they are going to provide true information on the energy situation?

              Highly unlikely considering that this is the cause of the coming collapse.

              Only a seriously naive person or an outright fool believes data coming out of any government

          • Glenn Stehle says:

            Matthew Krajcik says:

            Yes, but high prices from underproduction allowed the increased production at higher cost that is now overproduction.

            Only if one takes a US-centric view. Besides the United States, one must look at Russia and Saudi Arabia too. The governments of these two countries decided to up production in March, when prices were low.

            Obviously, the governments of Russia and Saudi Arabia perceive their economic and/or geopolitical interests being served by maintaining low oil prices for an extended period of time.

            The United States and Saudi Arabia may have thrown down the gauntlet in declaring an oil price war on Russia, Iran and Venezuela, but Russia evidently has decided that this is a war it can win.

            • Harry Gibbs says:


              “You don’t seem to grasp that there exists a difference between past and future, between recounting history and making forecasts.”

              Your comment to me ended with a reference to the IEA’s forecast for the remainder of 2015!

              You have also neatly side-stepped my question relating to your overall stance in relation to Gail’s diminishing returns thesis. Are you splitting-hairs over timing or are you in fundamental disagreement?

            • Glenn Stehle says:

              Harry Gibbs,

              The IEA’s forecast was not the pertinent part of the quote, “2014’s 0.7 mb/d growth” was. And I attempted to bold that part, but the bolding didn’t work within a blockquote.

              Did you miss the part about “2014’s 0.7 mb/d growth”?

              As to Gail’s diminishing returns thesis, I definitey believe it has merit.

              But if she can’t even get her facts straight as to what has already happened, why should she expect anyone to take her seriously about her predictions for the future?

            • Tolstoy's Degenerate Grandson says:


              Peak Russia + Peak USA Means Peak World

            • Harry Gibbs says:

              Glenn, let us assume that the IEA have managed not to include contango oil in their demand figures and that their rosy forecast for the remainder of the year is accurate. Any further economic growth one might wish to infer from that has to be understood within the wider context of mega-debt, QE, artificially low interest rates and ever-rising extraction costs for the finite commodities without which our paradigm cannot function – Gail’s diminishing returns thesis, in other words.

              If someone tells you you are due to be executed either tomorrow or on Thursday, it’s the word ‘executed’ that really jumps out at you. This is why I take her predictions for the future very seriously indeed.

        • auntie says:

          “Riddle me this: What caused the low prices?” QE money and debt used to purchase fracking infrastructure.

      • Equally important, prices are still too low to encourage investment. It is hard to see how companies will qualify for enough in loans to get production back up again, even if prices should bounce back up briefly.

        I agree that we are reaching peak oil through low prices.

        • tagio says:

          I think that the lack of demand/lack of credit explanation is missing a component to complete it, often made a focal point in Steve Ludlum’s analysis. The problem that keeps the credit + supply/demand/price equation from supporting an increase in the price of oil sufficient to justify continued drilling and exploration is the fact that most of the use of oil is, as Steve puts it, “recreational”, for lifestyle – IT HELPS US LIVE LARGE, HELPS THE “MIDDLE CLASS” PARTAKE OF THE “LIFESTYLES OF THE RICH AND FAMOUS,” BUT IT IS NON-REMUNERATIVE. Except for a very few activities which en masse do not use that much oil, comparatively speaking, such as growing and transporting food, burning the oil driving in circles from home to work to market to home, burning massive quantities of oil for wars and burning the oil to create massive suburban residential oases far from work and far from farms DOES NOT PRODUCE A RETURN, IT IS JUST “WASTE” based on lifestyle choices, or “fashion” as Steve sometimes puts it. “Growth” i.e. expansion of waste, was feasible as long as supplies of oil and minerals seemed endless esp. as compared to a lower population and these resources were easy and cheap to get. “Credit” – really just an expectation of getting paid out of future returns – could be made available as long as there was cheap oil to burn. Credit is becoming unavailable because it is getting harder for bankers to see a future return, esp. out of financing consumption: the future, which we used to see as expansion of waste (i.e., more of the same, more cars, more tract housing, etc., throughout the entire world) is gone. Then there is the additional problem that the consumers are already tapped out and wage growth has been stagnant for decades. The prices end users can afford to pay and the jobs that make their income available for the purpose are disappearing because of the increased costs to obtain the oil, minerals, etc., are increasing the cost of waste, and the jobs are being priced out of existence, because they are not do not generate sufficient returns to bear the expense. Steve refers to this forced adjustment of our lifestyles as “conservation by other means.” This is a physical and thermodynamic problem that cannot be “fixed” politically or even by wiping out all debt and “starting over.”

          • I agree. I am afraid I have’t read all of Steve’s writing. It is businesses and governments as much as (or more than) individuals who will need to cut back. I don’t know whether he makes this point or not.

            Also, our system is optimized for the way it is currently constructed. Putting together a different system that uses a smaller amount of energy would itself take a huge amount of energy, plus a large amount of non-renewables resources, plus time. Doing this at the same time that we are operating the current system just wouldn’t work. So I don’t think that we should complain that it hasn’t happened.

        • auntie says:

          “It is hard to see how companies will qualify for enough in loans to get production back up again, even if prices should bounce back up briefly.”

          The will qualify. Greece always qualifies. All illusions of fiscal solvency have been abandoned. Qualification is no longer based on fiscal solvency.

    • BC says:

      A disproportionate share of the growth of fuels and overall energy consumption since 2011-12 is attributable to the shale oil and gas and energy-related transport sectors.

      However, the catch is that these sectors have reached a point at which a majority share of increasing production at a 5- and 10-year average oil price of $95-$105 was consumed to increase UNPROFITABLE production by some 3-4Mbd. The crash in the price of oil since implies that producers have no choice but to maintain production of producing capacity while reducing investment in new capacity.

      That is, production since 2012-13 has been unprofitable, whereas producing still more unprofitably hereafter and storing it at a production price of $95-$100 is uneconomic, i.e., the energy cost of energy extraction no longer warrants 19-20Mbd of US consumption.

      At $55-$60/bbl, the price-production-supply calculus might imply a 5-year average of 6Mbd instead of 9mbd and overall consumption of 16-17Mbd instead of 19-20Mbd.

      A reminder that US oil production PER CAPITA is still down 40% since 1970, despite the shale boom/bubble and a near doubling of production since 2008-09. Should the oil price fall to the 5-year average price of $40s-$60s from $95 today, as I suspect is possible hereafter, US oil production per capita will fall to and below the 50% level by the early to mid-2020s. However, years before this occurs (Today?), the level and rate of growth of uneconomic energy cost of energy production per capita will constrain production and final demand hereafter.

      Because the rate of decline of US oil production per capita has been benign but steady for over 40 years, most of us are unaware of the permanent long-term effects of US Peak Oil I in 1970, including the resulting deindustrialization, financialization, record debt to GDP, a record low for wages to GDP, decelerating productivity, and peak in real earned income for the bottom 90%.

      And now the world is where the US was in the mid- to late 1970s in terms of oil production PER CAPITA having peaked in 2004-08 and is down ~5% for crude oil and 3% for total world oil supply. As is increasingly evidenced by China’s lack of growth of production and exports***, and global trade having ceased growing per capita, world industrialization has peaked for all practical purposes per capita, including uneconomic high energy cost of energy production.

      *** Aggregating China’s reported growth of production, exports, gov’t, real estate, and wages and consumer spending, the economy is not growing after state-directed lending at 12-14% per year (banana republic-like growth) to non-productive Potemkin Village-like fixed investment that constitutes nearly half of GDP. Without the equivalent $1-$1.2 trillion in annual non-productive lending and investment by the state, China’s real GDP would be effectively 0%. These figures generally comply with recent reports of China’s weak electricity consumption, especially industrial users, and a marked deceleration of oil imports. China will hereafter face the effects of the so-called “middle-income trap” after real per capita GDP reached $7,000.

  30. One nice thing about societies with strong government and harsh punishment, you can leave parcels laying on the street and no one steals stuff.

    • They even have classes in how a young person is expected to behave–I think for fourth graders. I discovered that when I visited a grade school back in 2011.

    • auntie says:

      I always equivocate laws with enforcement. If there is no enforcement there is no law. But this is a horse of a different color. In most parts of Asia those items would disappear faster than a sugar cube in a rain storm. Even in those countries with draconian punishment. The Chinese apparently understand that a act such as theft is damaging even if it results in greater personal wealth. One could consider such a attitude the earmark of a civilized society.

  31. Pingback: Gail Tverberg in China: Diner Exclusive Interview | Doomstead Diner

  32. Chris Johnson says:

    Gerry, there is one thing that you should never forget: “Science Is Always Wrong.” Whatever the scientists of this decade say, the scientists of the future will inevitably find numerous small and large items to change. These changes do not occur smoothly; they are not a smooth graph line tending upward or down. Instead, they jerk suddenly up, then down. Kinda like an earthquake graph line. The world has been that way since day one. Blaming all or most environmental change on human activity throughout history and pre-history is probably wrongheaded and inspires a sense of guilt that enables manipulation by other practitioners, that is best avoided.

    • gerryhiles says:

      @ Chris Johnson. You make a good point.

      Henceforth I will shut up, Gail and Jan can be totally right about prehistoric humanity, even though in Australia for instance, resources such as gold, forests, iron ore and fisheries were untouched by human habitation until the arrival of Europeans.

      Similar applies to the Americas, Africa and Asia, but I no longer expect Gail, Jan and a myriad others to really look outside of the box they are in.

      Fancy Gail tripping around China, using finite resources, to lecture the Chinese not to follow her Usan model of being able to fly anywhere.

      I do not care who she cites about prehistory, she is an actuary who I happen to agree with about most things, whist Jan – her greatest fan it seems – is a goat farmer who I disagree with completely.

      But what does it matter? The fate of humanity rests in the few hands who control the financial system.

      • Timothy says:

        It rests in the hands of those who adapt to changing conditions. Perhaps ‘goat farming’ is one of them.

      • We live in a world with inadequate demand for commodities including oil. Think about my tripping around China as helping to bring it up a bit.

        Jan is a “he”–his name is a form of “John.”

        • richard says:

          I disagree. I’d suggest that there is insufficent demand for increased oil exploration, and resource development, and that in turn has reduced economic activity in some high energy activities more quickly that oil production has expanded. Pedantic, I know, but that’s where we are at.
          BTW, I’d prefer to download an mp3 of the interview – amongst other things I’m sure to be interrupted sometime during the time I’m listening … please?

        • There is plenty of Demand. What is lacking is CREDIT in the hands of the Konsumers to satisfy this Demand. If the end Konsumer cannot afford it, then the Credit issued out to the Drillers goes insolvent, and they go BK. That is obvious.


          • “There is plenty of Demand. What is lacking is CREDIT in the hands of the Konsumers to satisfy this Demand.”

            The problem is, the consumers should not be using credit to expand consumption. Without these crazy credit cycles, consumption would not have gotten so high, although I suppose that would just delay the day of reckoning.

            • They have to use Credit for consumption. 97% of all money in existence is issued out as Credit. That’s how the monetary system works.


            • Unfortunately, everything I can see is that increased demand has been linked to credit in one form or another, forever and ever.

              Eric Cline, in 1177 BC:The Year Civilization Collapsed (talking about the end of the bronze age) talks about the difficulty in translating the word “inw”. It is usually translated “tribute” paid to a king, but it probably in many cases really equates to traded goods. Even in this early day, there would seem to be an element of credit involved–faith that if I give a gift, it will be repaid (in value to me, if not in cost to the sender) with something at least equally as valuable. Because of synergies involved–being able to make bronze from tin and copper, and then to be able to use bronze to create stronger weapons–the true value after the trade was generally than before the trade, so it made sense to be generous in making these arrangements. The availability of tin (through trade) back then was equated as having some similarities to oil now.

              As we get into the time when technology made coal useful, the economy could clearly produce more goods with the use of coal than without. So credit-based arrangements for getting the coal out made financial sense. This is also true with oil. Initially, these credit based arrangements were mostly for end-products (I expect), like cars or trucks that might use oil, because oil and coal were themselves cheap to extract. Companies doing the extraction didn’t need much credit–they were great profit producers. It was the buyer of finished goods that needed the credit, and perhaps the factories doing the processing (building the cars, for example) that needed the credit.

              As we get to the current age, all steps of the process need credit, because they are so expensive and time consuming. Even companies doing oil extraction need large amounts of credit. Companies buying “renewables” need huge amounts of credit, because of the front-ending of their costs. And of course, consumers at the end still need credit.

              The result of this is a need for ever-more credit, for longer times. The catch is that payback is not rising correspondingly, because of diminishing returns. The payback has to come through economic growth, so that the debt can be repaid with interest. This growth increasingly is not really taking place–in fact, some numbers I have recently been looking at show that despite all of our technology changes, it takes more and more growth in energy consumption to produce 1% growth in GDP. It is inability to repay this debt with interest that is a major factor pushing the economy toward collapse.

            • Glenn Stehle says:

              Gail Tverberg said:

              Even in this early day, there would seem to be an element of credit involved–faith that if I give a gift, it will be repaid (in value to me, if not in cost to the sender) with something at least equally as valuable.

              Well this certainly is the view of neoclassical economists, as well as that school of evolutionary biologists headed up by Richard Dawkins and R.D. Alexander. And it is a theory which undoubtedly has at least some element of truth to it.

              And furthermore, it is the theory which serves the interests of bankers best, because under it debt becomes sacrosanct. Debt must be paid, no matter what the cost in human pain and suffering. (Can we say Greece?) And if debt is not paid, then of course the world will come to an end. But there’s nothing personal to it. It is just the way things are, an outcome dictated by economic laws and human nature.

              Harsh as such a theory might sound, it does ring with a kind of logic. It is the world that is cruel, not the people in it. For the world is run by economic laws and human nature, and economic laws and nature are nothing with which one can or should trifle; they are simply there, and to rail about whatever human suffering might be tossed up as an unfortunate consequence of their working was as foolish as to lament the ebb and flow of the tides.

              But this orthodox view is now being challenged. A great deal of recent research in the fields of neuroscience, psychology and economics shows the theory is flawed, that it gives an incomplete picture of human nature. As Herbert Gintis et al conclude in Moral Sentimets and Material Interests, the orthodox theories

              convinced a generation of researchers that, except for sacrifice on behalf of kin, what appears to be altruism (personal sacrifice on the behalf of others) is really just long-run material self-interest….

              The experimental evidence supporting the ubiquity of non-self-regarding motives,, however, casts doubt on both the economist’s and the biologist’s model of the self-regarding human actor. Many of these experiments examine a nexus of behaviors that we term strong reciprocity. Strong reciprocity is a predisposition to cooperate with others, and to punish (at personal cost, if necessary) those who violate the norms of cooperation, even when it is implausible to expect that these costs will be recovered at a later date.

              In addition there is that something at work in human interactions which Hannah Arendt spoke of decades ago in her book The Human Condition: Forgiveness.

              The possibe redemption from the predicament of irreversibility — of being unable to undo what one has done though one did not, and could not, have known what he was doing — is the faculty of forgiving. The remedy for unpredictability for the chaotic uncertainty of the future, is contained in the faculty to make and keep promises. The two faculties belong together in so far as one of them, forgiving, serves to undo the deeds of the past, whose “sins” hang like Damocles’ sword over every new generation; and the other, binding oneself through promises, serves to set up in the ocean of uncertainty, which the future is by definition, islands of security without which not even continuity, let alone durability of any kind, would be possible in the relationships between men.

              Without being forgiven, relased from the consequences of what we have done, our capacity to act would, as it were, be confined to one singe deed from which we could never recover; not unlike the sorcer’s apprentice who lacked the magic formula to break the spell….

              Forgiving, in other words, is the only reaction which does not merely re-act but acts anew and unexpectedly, unconditioned by the act which provoked it and therefore freeing from its consequences both the one who forgives and the one who is forgiven….

              The alternative to forgiveness, but by no means its opposite, is punishment, and both have in common that they attempt to put an end to something that without interference could go on endlessly.

      • auntie says:

        While goat farming may not save the world, I can not think of a more honest and therapeutic occupation. All hail Jan! Who runs bartertown? say it.

  33. gerryhiles says:

    Gail is potentially wrong about mega fauna being extinguished by ancient human migration.

    It is only a theory, whereas the fact is that both Australia and the Americas were virtually untouched, environmentally before European invasion.

    I admire and agree with Gail within he field of economics and our “finite world”, but she knows little about anthropology and psychology so should not express mere opinions, such as very questionable theories that ancient people caused the death of mega fauna.

    It is an historic fact that, since European invasion the Americas have been ruined, so why is Gail in denenial

    • I am certain I have read articles that conflict with your belief that Australia and the Americas were virtually untouched environmentally before the European invasion. This is a post I wrote related to the topic. This is what Wikipedia has to say about Australian Megafauna, and their die off, long before Europeans came.

      The issue is certainly controversial, but I do not appreciated my comments being called “mere opinions and very questionable theories”. The certainly are some scientists who believe that the Sixth Mass Extinction started when humans first migrated from Africa. Paleontologist Niles Eldridge gives an early date. According to him

      What is the Sixth Extinction?

      We can divide the Sixth Extinction into two discrete phases:

      Phase One began when the first modern humans began to disperse to different parts of the world about 100,000 years ago.
      Phase Two began about 10,000 years ago when humans turned to agriculture.
      Humans began disrupting the environment as soon as they appeared on Earth.
      The first phase began shortly after Homo sapiens evolved in Africa and the anatomically modern humans began migrating out of Africa and spreading throughout the world. Humans reached the middle east 90,000 years ago. They were in Europe starting around 40,000 years ago. Neanderthals, who had long lived in Europe, survived our arrival for less than 10,000 years, but then abruptly disappeared — victims, according to many paleoanthropologists, of our arrival through outright warfare or the more subtle, though potentially no less devastating effects, of being on the losing side of ecological competition.

      Others think a more recent date is more important.

    • Jan Steinman says:

      It is only a theory

      Yea, like gravity.

      When strongly asserting your own beliefs as though they were facts, it would have been nice to at least acknowledge that many anthropologists accept humans as a cause of the demise of the megafauna.

      The least you should have done is provided some references backing up your belief. I see Gail has provided documentation supporting the “prehistoric humans extinguished the megafauna” theory. Your turn!

    • we diverged from all other species when we learned how to make and control fire at will
      from that point on, all other species were doomed, particularly ourselves.
      Everything we do, we follow the preset genetic forces that determine survival at all costs. We have no control over that.
      We have to burn stuff to make stuff to sell stuff
      that is what we do, to make ‘money’.
      Fire gives Homo sapiens a unique advantage in that respect, which has led to colossal overpopulation, totally out of balance with our environment.
      Our leaders cannot accept this, and even if they did, cannot put into place any radical changes. They can only offer more of the same, which means trumpeting ‘growth at all costs’
      Unfortunately ‘all costs’ means our lives.
      But let’s not let that get in the way of profit and commercial success

    • brandontodder says:

      If you read the book The World Without Us by Alan Weisman you will get a very detailed account of the mega fauna that were hunted to extinction in the Americas by humans and Australia too. There used to be more mega fauna in the Americas than there are in Africa. The reason there is so much mega fauna in Africa is because those animals evolved along side humans.

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