Why We Should Be Concerned About Low Oil Prices

Most people assume that oil prices, and for that matter other energy prices, will rise as we reach limits. This isn’t really the way the system works; oil prices can be expected to fall too low, as we reach limits. Thus, we should not be surprised if the OPEC/Russia agreement to limit oil extraction falls apart, and oil prices fall further. This is the way the “end” is reached, not through high prices.

I recently tried to explain how the energy-economy system works, including the strange way prices fall, rather than rise, as we reach limits, at a recent workshop in Brussels called “New Narratives of Energy and Sustainability.” The talk was part of an “Inspirational Workshop Series” sponsored by the Joint Research Centre of the European Commission.

Figure 1. Empty Schuman room of the Berlaymont European Commission building, shortly after we arrived. Photo shows Mario Giampietro and Vaclav Smil, who were the other speakers at the Inspirational Workshop. Attendees started arriving a few minutes later.

My talk was titled, “Elephants in the Room Regarding Energy and the Economy.” (PDF) In this post, I show my slides and give a bit of commentary.

Slide 2

The question, of course, is how this growth comes to an end.

Slide 3

I have been aided in my approach by the internet and by the insights of many commenters to my blog posts.

Slide 4

We all recognize that our way of visualizing distances must change, when we are dealing with a finite world.

Slide 5

I should note that not all economists have missed the fact that the pricing situation changes, as limits are reached. Aude Illig and Ian Schindler have recently published a paper that concludes, “We find that price feedback cycles which lead to increased production during the growth phase of oil extraction go into reverse in the contraction phase of oil extraction, speeding decline.”

Slide 6

The comments shown in red on Slide 6 reflect a variety of discussions over the last several years. Oil prices in the $50 per barrel range are way too low for producers. They may be high enough to get “oil out of the ground,” but they are not high enough to encourage necessary reinvestment, and they are not high enough to provide the tax revenue that oil exporters depend on.

Slide 7

Most people don’t stop to think about the symmetric nature of the problem. They also don’t realize that the adverse impacts of low oil prices don’t necessarily appear immediately. They can temporarily be hidden by more debt.

Slide 8

There would be no problem if wages were to rise as oil prices rise. Or if there were an easily substitutable source of cheap energy. The problem becomes an affordability problem.

Slide 9

The economists’ choice of the word “demand” is confusing. A person cannot simply demand to buy a car, or demand to go on a vacation trip. The person needs some way to pay for these things.

Slide 10

If researchers don’t examine the situation closely, they miss the nuances.

Slide 11


Slide 12

Many people think that the increasing use of tools can save us, because of the possibility of increased productivity.

Slide 13

Using more tools leads to the need for an increasing amount of debt.

Slide 14

Read this chart from left to right. If we combine increasing quantities of resources, workers, and tools, the output is a growing quantity of goods and services.

Slide 15

Read this chart from right to left. How do we divide up the goods and services produced, among those who produced the products? If we can only use previously produced goods to pay workers and other contributors to the system, we will never have enough. But with the benefit of debt, we can promise some participants “future goods and services,” and thus have enough goods and services to pay everyone.

Slide 16

If we decrease the amount of debt, we have a big problem. Instead of the debt adding to the amount of goods and services produced, the shrinkage acts to decrease the amount of goods and services available for distribution as pay. This is why moving from deficit spending to a balanced budget, or a budget that reduces debt, is so painful.

Slide 17

When I say (resources/population), I mean resources per capita. Falling resources per capita makes it harder to earn an adequate living. Think of farmers trying to subsist on ever-smaller farms. It would become increasingly difficult for them to earn a living, unless there were to be a big improvement in technology.

Or think of a miner who is extracting ore that is gradually dropping from 5% metal, to 2% metal, to 1% metal content, and so on, because the best quality ore is extracted first. The miner needs to work an increasing number of hours to produce the ore needed for 100 kilograms of the metal. The economy is becoming in some sense “worse off,” because the worker is becoming “inefficient” through no fault of his own. The resources needed to provide benefits simply are less available, due to diminishing returns. This problem is sometimes reported as “falling productivity per worker.”

Falling productivity per worker tends to lower wages. And lower wages put downward pressure on commodity prices, because of affordability problems.

Slide 18

The problems that prior civilizations reached before collapse sound in many ways like the problems we are seeing today. We are seeing increased specialization, and falling relative wages of non-elite workers.

Slide 19

We seem to have already gone through a long period of stagflation since the 1970s. The symptoms we are seeing today look as if we are approaching a steep downslope. If we are approaching a crisis stage, it may be much shorter than the 20 to 50 years observed historically. Earlier civilizations (from which these timeframes were observed), did not have electricity or the extensive international trade system we have today.

Slide 20

The period since 1998 seems especially flat for wages for US wage earners, in inflation-adjusted terms. This is the period since energy prices started rising, and since globalization started playing a greater role.

Slide 21

This is a list I made, showing that what looks to be beneficial–adding tools and technology–eventually leads to our downfall. The big problem that occurs is that non-elite workers become too poor to afford the output of the economy. Adding robots to replace workers looks efficient, but leaves many unemployed. Unemployment is even worse than low pay.

Slide 22

We can think of the economy as being a self-organized network of businesses, consumers, and governments. New products are gradually added, and ones that are no longer needed are eliminated. Government regulations change in response to changing business conditions. Debt is especially important for economic growth, because it makes goods affordable for customers, and it enables the use of “tools.” Prices are created almost magically by this networked system, through the interaction between supply and demand (reflecting affordability, among other things).

Slide 23

It is only in recent years that physicists have become increasingly aware of the fact that many types of structures form in the presence of flows of energy. We have known for a long time that plants and animals can grow when conditions are right. The networked economy illustrated on Slide 22 is one of the types of things that can grow and flourish in the presence of energy flows.

Slide 24

This is my view of how an economy, as a dissipative structure, works. “Tools and technology” are at the center. If a person doesn’t think too much about the issues involved, it is easy to assume that tools and technology will allow the economy to grow forever.

There is a potential for problems, both with respect to inputs and waste outputs. Early modelers missed many of these “issues.” M. King Hubbert created a model in which the quantity of energy supply and technology are the only issues of importance. He thus missed the impact of the Waste Output problems at the right. The Waste Outputs lead to falling prices as limited supply nears, and thus lead to a much steeper drop in production than Hubbert’s symmetric model would suggest.

Slide 25

Peak oilers recognized one important point: our use of oil products would at some point have to come to an end. But they did not understand how complex the situation is. Low prices, rather than high, would be the problem. We would see gluts rather than shortages, as we approach limits. Much of the oil that seems to be technologically extractable will really be left in the ground, because of low prices and other problems.

Slide 26

Here, I am getting back to the topic I was originally asked to talk about. What else, besides low energy prices and too much debt, are likely to be problems as we reach limits?

Slide 27

The easy way of modeling the use of wind turbines and solar turbines is to assume that the electricity produced by these devices is equivalent to electricity produced by fossil fuels, or by hydroelectric. Unfortunately, this is not the case.

Slide 28

Trying to integrate solar panels into an electric grid adds a whole new level of complexity to the electrical system. I have only illustrated some of the issues that arise in Slide 28.

The fact that the price system doesn’t work for any fuel is a major impediment to adding more than a very small percentage of intermittent renewables to the electric grid. Intermittent renewables can only be used on the electric grid if they have a 24/7/365 backup supply that can be ramped up and down as needed. Unfortunately, the pricing system does not provide nearly high enough rates for this service. We are now seeing how this works out in practice. South Australia lost its last two coal-fired electricity power plants due to inadequate wholesale electricity prices when it added wind and solar. Now it is experiencing problems with both high electricity prices and too-frequent outages.

Another problem is that new [long distance] transmission makes buying from neighbors optimal, over at the left of Slide 28. This is a new version of the tragedy of the commons. Once long distance lines are available, and a neighbor has a fairly inexpensive supply of electricity, the temptation is to simply buy the neighbor’s electricity, rather than build local electricity generating capacity. The greater demand, without additional supply, then raises electricity prices for all, including the neighbor who originally had the less expensive electricity generation.

Slide 29

It is easy to assume that EROEI (Energy Returned on Energy Invested) or some other popular metric tells us something useful about the cost of integrating intermittent renewables into the electric grid, but this really isn’t the case.

Slide 30

We are now beginning to see what happens in “real life,” as intermittent renewables are added. For example, we can now see the problems South Australia is having with high electricity prices and too many outages as well as the high electricity prices in Germany and Denmark (Slide 29).

Slide 31

Wind and solar are not very helpful as stand-alone devices. Yet this is the way they are modeled. Some researchers have included installation costs, but this still misses the many problems that these devices cause for the electrical system, especially as the share of electricity production by these devices rises.

Slide 33

A networked system works differently than a system that is “user controlled.” It builds itself, and it can collapse, if conditions aren’t right. I have shown the economy as hollow, because there is no way of going backward.

Slide 34

Many people miss the point that the economy must keep growing. In fact, I pointed this out in Slide 2 and gave an additional reason why it must keep growing on Slide 16. As the economy grows, we tend to need more energy. Growing efficiency can only slightly offset this. Thus, as a practical matter, energy per capita needs to stay at least level for an economy to grow.

Slide 35

If energy prices rise, this will tend to squeeze out discretionary spending on other goods and services. If we cannot obtain energy products sufficiently cheaply, the system of economic growth will stop.

Slide 36

The fact that energy prices can, and do, fall below the cost of production is something that has been missed by many modelers. Prices can go down, even when the cost of production plus taxes needed by governments rises!

Slide 37

Wind and solar are part of the category at the top called “renewables.” This category also includes energy from wood and from geothermal. Many people do not realize how small this category is. Hydroelectric is also considered a renewable, but it is not growing in supply in the United States or Europe.

Slide 38

It takes energy to have an intergovernmental organization, such as the European Union. In fact, it takes energy to operate any kind of government. When there is not enough surplus energy to go around, citizens decide that the benefits of belonging to such organizations are less than the costs involved. That is the reason for the Brexit vote, and the reason the question is coming up elsewhere.

Slide 39

The amount of taxes oil-producing countries can collect depends on how high the price of oil is. If the price isn’t high enough, oil-exporting countries generally have to cut back their budgets. Even Saudi Arabia is having difficulty with low oil prices. It has needed to borrow in order to maintain its programs.

Slide 40

Oil prices have been too low for producers since at least mid-2014. It is possible to hide a problem with low prices with increasing debt for a few years, but not indefinitely. The longer the low-price scenario continues, the more likely a collapse in production is. Also, the tendency of international organizations of government to collapse (Slide 38) takes a few years to manifest itself, as does the tendency for civil unrest within oil exporters (Slide 39).

Slide 41

Slide 42

It is easy to miss the point that modeling a piece of the system doesn’t necessarily tell a person very much about the system as a whole.

Slide 43

Once an incorrect understanding of our energy problem becomes firmly entrenched, it becomes very difficult for leaders to understand the real problem.

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

About Gail Tverberg

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

2,716 thoughts on “Why We Should Be Concerned About Low Oil Prices

  1. FE – you get to live another day


    You cannot natural law and order (free market). The blowback will be unbelievable.

    Read up on The Great 1988 Yellowstone fire. By preventing small fires (recessions), the final big fire was devastating and the very hot temperature caused Yellowstone to recover very slowly. It does seem that humans never learn from mistakes.

    • There is no papering over this…sooner or later the dam of physical laws will break and that will be the end of it….in the meantime GO TEAM PPT!!!!

      CBs back-stop everything…buy cars, trucks, everything produced…just so that we can get another day, month, year!!!!!

      • Imagine if the Fed would have had a plunge protection team in 1929….. we could have avoided the Great Depression!!! (sarc….)

        But we have come to our senses… we know how to guarantee prosperity forever… we have ourselves what is known as a Perpetual Economic Motion Machine (sarc…)

        This Machine will allow the poorest wretch in Somalia to Live Large (sarc…)

        To hell with BAU Lite… this is BAU Large…. Pave every inch of this MOFO!!!

        • Hahaha FE love this song….brings me back to the 80s and 90s when I would go see my beloved Expos at the Olympic Stadium…every time the ‘spos would win, they would play this song in the stadium 🙂

            • Number 10, The Hawk, one of my all-time favourite Expos, along with Gary Carter, Tim Raines, Tim Wallach and of course are very own Canuck Larry Walker!!!!!

            • Larry Walker —- when he lost best Canuck athlete of the year to gilles villeneuve — commented ‘I lost to a machine’


            • Haha did not know that…too bad Walker is such a nice guy and Villeneuve a total a-hole…

            • “Walker had the off-season to get over it. He didn’t. He says he usually doesn’t care about individual honors, but this was different. “It’s the one award that would have meant more to me than anything else,” he says. After a pause, he adds: “I’m from Canada and I like to think I represent my country well. So it’s frustrating – I got beat by a machine.””

  2. Housing prices won’t go down. They will continue rising, or at least stabilized, for probably another 20 years. This is true because people need a place to live, and will pay anything.
    This is also true for the bond market, since the bond market in a sense prices everything else, and has central bank support.
    The stock market is a different story. There is certainly a mania, and central banks do support it, but they may pull out just at the last second to avoid the hyperinflation tipping point, and force investors and pensioners to take the losses.

    You heard it from me : the stock market will be the first to go. Real estate and bond markets will take some time.

    • Are the ghosts of 2005-2006 live and well? Housing will only go up right? Housing prices are directly related to mortgage interest rates. If interest rates can continue falling prices will go up. If the Fed raises rates the price will go down. The last time the market crashed both housing and WS fell. Something different this time?

      Actually this time is worse. Now we have Fannie May and Freddy Mac back stopping commercial paper on residential real estate investment trusts.

      Too bad what you think is pure speculation without facts.

    • …another 20 years…

      dolph I have a theory…I think you’re from an alternate universe to us, where everything is the opposite to us….in your world physical limits don’t exist, conventional oil is not stuck at 75M barrels per day for the last 12 years, it has actually grown to 100M barrels per day (and no need for that junk called shale and tar-sands) consumers across the world are not tapped out, millennials have tons of high-paying jobs available to them and they are starting families by the millions and also of course….buying houses….thus the system can chug along forever…somehow the dolph from our universe and yours got switched, so our dolph, who fully understands physical limits, is in the alternate universe (he must actually be quite happy about that)…reminds of “The Bizzaro Jerry” episode from Seinfeld:

      • I forgot to add there’s also a lady in that universe named Ailgay Verbergtay who has a blog called Our Infinite World with the tagline Exploring how abiotic oil helps the economy 🙂

        • Abiotic oil is nothing.

          I’m working on living by lying down, placing a slice of chorizo on my stomach, and inhaling the nutritional fumes.

          It has a lot of potential I think!

          Unfortunately, I still need a more conventional intake at the end of the day – but I can feel my Transition capacity growing. Really, I can. 🙂

          • You mean you’re not a breatharian?

            Shame on you

            Inedia (Latin for “fasting”) or breatharianism /brɛθˈɛəriənɪzəm/ is the belief that it is possible for a person to live without consuming food. Breatharians claim that food, and in some cases water, are not necessary for survival, and that humans can be sustained solely by prana, the vital life force in Hinduism.
            Inedia – Wikipedia

    • So why did housing prices in the US drop so much in the late 2000’s? Doesn’t the ability to get a mortgage have something to do with housing “demand”?

      • Dolph …. you indicate you are a doctor…. medical doctor? witch doctor? chiropractor? you played doctor when you were a kid?

        If you are a real medical doctor… remind me to avoid you if I get a sliver…. you might remove kidneys….

        • Does any one remember that touching moment on this blog when dolph admitted the fragility of everything – how it could all disappear tomorrow.. it was an epiphany! (one that we had been trying to ram down his throat for months)

          Then he continued the next day on his ‘perception’ and ‘confidence’ is everything speel.


          • Doctors are notorious for self-medicating… Dolph — you need to get back on whatever you were taking that day…. it worked!

  3. So if you are going to give your kids some money, when and how much?

    I have been handing out smaller amounts with the instructions ‘spend it on doing something fun, not on normal day to day…make a memory’. Not grandchildren time yet, and I don’t encourage such!
    It would be a shame to have any worthless credits hanging around once the circus flames out!

    Hope everyone is making the most of this time. My partner and I are pushing a few boundaries that we wouldn’t have otherwise.

    These days it feels to me like we are on a plane trip where the Pilot pulls back on the gas, the plane starts to descend and the plane goes quiet. All that energy has been burnt to get us up and keep us up and now he descent begins. Best we empty the bar and make good the next few months/quarters/years/…decade?.. of time. It is truly amazing what we have access to right here, right now if you are part of the select few.

    • Perhaps you have to look for opportunities to give your kids money–doing things together (which you pay for), helping them out when expenses come up that they can’t pay for, not being concerned that you get “paid back” when an expense comes up. It is not necessarily easy giving kids money, if they can earn it themselves–hurts their egos. You may decide to spread some of your money other ways–to charities, and as more generous tips to those who provide services to you, for example.

      • The amounts are not life-changing and never will be, but they do give them a break from the day to day every now and again. One bought computer parts, another one got some car-modifications and the other some …clothes..of course!

        Our charities are few. I am planting my land in as many different species (especially food sp.) as can possibly live in our local climate; its my way of seeding the future and it would seem its needed as the seed storage facility in Norway(?) sounds like its failing. Lots of neighbours walk their kids/dogs/horses/friends through to enjoy it. Autumn colours down here in NZ at the moment. Most of the surrounding farms are virtually tree-less, but I guess I am lucky as i earn my money elsewhere.

        Otherwise we support a few local (all local, never distant) welfare groups, and choose to do business with farmers markets, local trades people etc. I don’t spend on new other than clothes; my cars are 25 and 28 yrs old and running fine. My tractors are over 50 yrs old and they are awesome.

    • Lastcall, I feel very similarly. Until I started thinking about/researching these issues, I assumed my life would proceed as I envisioned it as a young person: probably have children and then grandchildren. The children part happened (and is the best decision I ever made, having spent the first ten years of married life thinking we probably wouldn’t have any) and seeing them as independent, kind, highly-functioning adults is a constant joy. But here I am realizing my children will not reach middle age and that I probably won’t have grandchildren (and probably wouldn’t want them to be brought into this anyway) and it’s definitely affected how I feel about money and what I do with it. I, too, don’t want to be left with stacks of worthless metals or see any stocks/accounts evaporate overnight. My spouse and I always planned to “die broke” in the sense that we would plan to give away whatever we had before we died. Our kids could use whatever we could give them much sooner than waiting for it when we died—meaning that paying for all their undergrad and graduate work was a given, in addition to helping them get a house, if that’s something they might eventually want. But seeing this ominous future, I feel even more strongly that whatever I have stashed away is going to be useless at some point, so that has freed me up even more to give it away (and not just to my kids–I have many causes I help fund as much as I’m able). Both daughters are hard working and have made pretty good money decisions so far, so I don’t worry that giving them a little extra would “spoil” them in any sense of the word. And because they both also give time and money to good causes, I know I”ll get an added bang for my buck, so to speak.

      • I walk the tight rope of not pissing everything away and finding out that BAU ends up continuing for much longer than expected…. it would be nice if Bernanke would ring me up and say ‘FE – the end game will take place no later than the end of 2018…. that would really be useful in terms of budgeting.

        Currently I am working off of the John Key Formula…. the fact that he quite working to spend time with his family … when he is still relatively young… leads me to believe the end cannot be too far out…

        Surely he knows he will get really bored if he pulled the plug too early

        • Key’s ‘time with the family’ is nonsense.

          His kids are in their early twenties… are they going to be spending time with their parents?


          He was really saying… “things are about the blow and i don’t want to be seen as responsible/ deal with the chaos”

          • Yep.

            He’s probably on a round the world end of days tour right now… or perhaps he’s splayed out on his sofa after another heavy round of drinking and coke snorting with high class hookers from the local strip club….

            Give er Johnny!

          • Kids in their twenties are often without partners. They are struggling with lots of problems, including student loans and low-paid jobs. They need the support of their parents much more than they did in the past.

  4. You have to remember, it’s not a question of what you or I think something is worth. It’s a question of what the central banks, and their favored clients – the private banks and those that they are willing to lend to, think something is worth.

    If an old piece of art can auction off for a hundred million dollars, then surely a house still has room to go from 300, 400 thousand to 500, 600 thousand or a million, or pick whatever number you like.

    I know, it doesn’t make sense. But nothing is making sense anymore, so in order to understand things, you have to take your mind in a different direction. The bubbles are no longer popping, we now have the everything bubble, which will only burst at the final endpoint of the system itself – which may take decades.

    • If I TT you cash can you sign off on a few prescriptions for me?

    • I actually think that as the size of the ‘everything bubble’ grows, it is actually shrinking geographically. People, towns, cities, nations and entire continents are now outside the bubble and gurgling away down the drain of history.
      Those truly inside the bubble are ignorant of their privileged position. thats why recent bom-bings come as such a shock to many as they have no understanding of how their privilege depends on others’ poverty.
      We see the core squeezing harder and harder on the outsiders extracting all that they can, all the while ignorant that the game is up. Real estate is crumbling in more ways than one outside the core, but the dark art of statistical magic-kery covers this over. The ponzi marches on at only full speed or it marches not at all.

      • Bombings shock? Just stand in group and make heart signs with the hands and it will quickly go away.

        The “Stockholm truck drive” was more or less forgotten in four days, Manchester will to. In Paris siht happens all the time its not possible to remember the incidents.

        • It’s always the same – Terrorist incident occurs – People are shocked – The police ransack the perpurtrators home, his friends and family – A huge pile of wreaths followed by some people that have good reason to be emotional but also others pretending to be moved by the loss of life and injuries – Wreath pile gets removed.

          Other than a bunch of well intentioned speeches and lots of police activity, nothing really changes. Complacency rules the day once again so people can go back to their lives and then in some dark room another terrorists begins to plot an attack.

          • Also the police activity is a huge waste of tax payer money. Scotland Yard police chief said it’s all security theatre for the plebs with the added bonus that it gets them used to martial law with armed police and checkpoints everywhere

            The truth is that any idiot could set off an IED in airport foyer, a hospital, a shopping mall, etc etc because security has always been very lax in these heavily populated ideal targets for terror activities and yet over the years it has hardly ever happened. It makes you wonder why not if there are so many sleeper cells as claimed.

            The other thing is that the perps are always known by the police who their activity but are not stopped before commiting the act. Shouldn’t all suspects be rounded up and deported instead of waiting for them to do exactly what they were planning to do for months if not years?

            • I expect that the police have a list of people who might commit crimes that is at least 100 to 1000 times too large, relative to the serious crimes you are talking about. Do we just attempt to deport all of these people, even though the vast majority would never be a problem, or a very big problem? Some will be fathers and husbands.

              Also, the police list will be focused on certain kinds of crimes, and not others. Malicious cyberattacks are likely to be a major problem in years ahead, now that we are making everything “internet connected.” We now have our electrical distribution system internet controlled, in many areas. I understand that at least a few cars have internet connections that can act to control the cars (primarily where customers have added insurance monitoring systems, or advanced self-driving systems, or even local in-car wi-fi systems). Deporting criminals does nothing to stop this kind of activity.

    • This is what everyone without foresight, or memory (not even recent memory in this case, the GFC was only in 2008) always says about bubbles and manias:

      “This time it’s different.”
      It’s the new, new economy
      This is a permanent plateau
      …blah, blah, blah, blah blah.

      Usually uttered at or near tops…

    • I wasn’t here in -08, I was even more delusional then, but I suspect if someone wrote “they will just lower interest rates, negative if necessary, print money, buy bonds and ETFs” you would have said that was ridiculous.

    • “The bubbles are no longer popping, we now have the everything bubble, which will only burst at the final endpoint of the system itself – which may take decades.”

      That’s a very good point, dolph, the bubbles are no longer popping. I think the mortgage meltdown came so close to dissolving the world economy there is no willingness to allow progressions to cycle but instead they insist on doing whatever financial tricks are needed to keep it all going, even if it’s barely above zero GDP. But that does push all the bubbles in as you put it an everything bubble. So when it does finally pop, everything does. That’s a whole lot scarier than a simple recession that cycles eventually back into a growing economy. In this case the final pop would be deafening, but as you remark, who knows when it will occur.

      I for one am really sick and tired of the grinding sound of BAU no matter what mentality, but it’s all we have now so better enjoy it while we can. After that it’s freeze dried food, brushing teeth in the dark, listening to every sound, jumpy that it might be someone trying to get into your last and only food cache, to the point in which the rustling of a dry leaf initiates a bead of sweat to form on your temple followed by so much silence you can hear your quickened heart beat. You force your dry tongue off the roof of your mouth only to realize there is nothing left to quench your thirst other than some lukewarm water with that plastic taste from being stored too long. You chew on some dry pasta and delve into a memory of eating at a bistro while on vacation in Venice. Now your reality has gone from BAU to collapse to delusional fantasies. The end is near.

    • High-end art auction prices are in some ways often fake: it’s all very opaque, but the works of art are tokens in a complex game, part of the global game.

      The auction houses will lend money to the buyers in order to reach a price that maintains the illusion that the market is rising and functioning properly.

      Dealers will use borrowed money (secured against their stock) to buy in works of art to maintain market values, and so on.

      The value of certain artists cannot be allowed to fall, or fall very far, as it would be game over.

      Despite all of this, it is clear from the latest top auctions that demand is fading somewhat from the peak in, I believe, 2014.

      • I can’t think of anything more useless post BAU than a work of art

        I can still remember walking round sothebys as if it was yesterday… it was a jeff koons expo and I was thinking yeah it’s fun for now but really… people are going to invest in this stuff… a chrome plated bunny rabbit?

        Reminds me of toy collectors… grown men showing off basements stuffed wall to wall with the latest plastic figurines from their favorite shows… some of them still boxed because you know… they’ll be worth so much later on to collectors

        We are a strange species…that’s for sure

        Our priorities are all messed up

  5. Perhaps it’s time to agree on an OFW creed. We can have fun amending it until most of us regulars agree on it (with Gail’s oversight). Then perhaps interesting schisms will arise. Some of us can be defenders of the truth and others heretic morons.

    Here’s a draft:

    Article 1 – Peak oil, in the sense of an absolute limit to cheap oil has been reached

    Article 2 – Peak oil is one of many limits which have manifestations which threaten the continuation of BAU [see appendix A for a list of other limits including diminishing returns on complexity etc.

    Article 3 – BAU is dependent on a functioning financial sector. This sector is about to fail catastrophically

    Article 4 – The effects of financial collapse (see Korowizc) will see the complete and irreversible ceasing of the vital infrastructure that keep the majority of the world fed, watered and healthy

    That’s a bare bones draft for everyone to add/subtract/amend

      • Good bones!
        Now we need a ‘how to live now like there’s not many tomorrows’ manifesto.

        Explore a few boundaries and step over them! Shake off that conditioning that goes way back, stop tolerating ignorance masquerading as an oversized ego, and don’t waste too much time worrying about how or when it ends; rather worry about what you will be doing when it does end.
        I still remember where I was when Lady Di’s death (no surprise really?) was announced; I don’t want to be caught out like that again!

        I’m in the process of buying a boat (smallish 25 ft yacht); it will be well stocked for a week of party-cruising!

        • Guy McPherson has some good thoughts along these lines (many of which are discussed on this blog)

          His prescription is:

          Remain calm: Nothing is under control.
          Pursue excellence, however defined.
          Pursue love, whatever that means to you.
          Dismantle industrial civilization.
          Be kind, beginning with yourself.

          • of course the ‘BAU at all costs’ brigade on this blog will disagree with his advice to dismantle industrial civilisation but that’s an argument that will never be settled….

            I myself agree with him. I’ve enjoyed enough comforts already to think that extending my lifespan is worth giving this omnicide we call civilisation any merits

            • The dismantling will be fought as long as possible and then happen.

            • The dismantling has been and is being fought by CBs since 2008…and psile is right…no need to do anything, the catastrophic failure of the financial system will take care of dismantling everthing (actually it will take care of not just IC, but the whole biosphere when you take into account those pesky spent fuel ponds which will be in fullt meltdown across the world)

          • And, to ad to Guy’s list:

            Don’t abandon a well-paid job to go and live in a hut in the middle of Nowhere, to await the end of history, as far from making you happy you will probably end up deeply depressed. ….

            • And if you have a well-paid job that makes you depressed – quit, because it won’t give you financial security or independence.

            • DJ

              Precisely. And the living in a hut thing surrounded by nature sounds like a much better way to spend whatever time is left than in a cubicle surrounded by drones in other cubicles

          • Do you propose we dismantle industrial civilisation post BAU or while it’s still around?

            I’m a little confused by that one I have to admit

      • So if I agree about 1,2,4,5 but have not decided on second half of 3 I should shut up?

          • How do you mean? When was the last time the financial markets failed catastrophically?

            • What? Less than a decade ago with the GFC, it almost did us in then. Everyone thought that joy ride of easy money would never end too. The next “incident” will make that look like a sideshow bagatelle.

              Please do not reply stupidly.

            • If the financial system fails catastrophically, then THAT is the different time.

        • Futuresyssy is trying to control who gets to talk here

          Which shows what kind of person s/he is

    • The trouble with article 3 is timeline is unknown. Might take a lot longer than anyone expects as people seem to have endless faith in the USD.

    • Too many predictions in your draft

      I don’t “believe” in predictions

      Could you draw up a list of scenarios instead. That would be far more scientific

      Sorry for the extra work

      • I thought is was quite well done. But second half of #3 id an assumption. #4 and #5 is likely, but not certain.

    • I generally agree with you, although I might add to the list and describe things somewhat differently.

      I generally stay away from the term “peak oil,” because the term has been used by others to mean something fairly different from what I am talking about. It certainly does not mean the beginning of oil supply declining in a Hubbert Curve, for example. Oil is a problem, but coal is at least equally a problem. We really need total energy supply per capita to be staying level or rising. This nuance gets lost in most discussions.

      • Although Gail, the fact that we peaked on conventional oil circa 2005 at 75M barrels a day (or thereabouts), must be one of the major factors of what is happening to the global economy since then…not only was conventional growing up to that point, but only a fraction of that daily production was used to get the 75M barrels out….now not only has this production not grown in 12 years, but a much bigger chunk of the 75M barrels has to be used to get the conventional oil out, which is past peak and therefore harder to extract, but also to extract unconventional oil such as shale and tar-sands…the result is the surplus energy available to our economies has greatly diminished…

        It would have been bad enough if we would have topped out at 75M barrels in conventional but with the same EROEI, but on top of it the EROEI on conventional is down as it’s harder to get to the second half AND also many of those barrels have to be allocated to unconventional extraction, making those barrels unavailable to the rest of the general economy…the result is millions getting thrown off the Industrial Civilization bandwagon…

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