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.

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 inadequate supply.
This entry was posted in Financial Implications and tagged , , , , . Bookmark the permalink.

2,684 Responses to Why We Should Be Concerned About Low Oil Prices

  1. Dom says:

    I will never thank Gail enough for the existence of this blog. And also his commentators whom I come to read every morning.
    Yes, this may be a long way to see the big picture, you have to look, read, take paths without issues, turn around, go wrong, doubt. And then one day we get this 3D vision of our system and human nature. What a shock !
    After that it is a rather lonely path because we are shifted with those who continue to dope to hope. But, I do not forget that I also doped to hope in the past.
    I am not aware of such a blog in France, pity.
    Continue, I like your little group, I learn a lot and sometimes I laugh to read you.
    Enjoy the present.

    • Kurt says:

      Phrase of the year — “dope to hope”

      Love it!!!

    • Fast Eddy says:

      How did FW come into being?

      Why does Gail write articles when there is no financial gain?

      There are perhaps a dozen+ people who get it. How did we end up on FW?

      Why was the internet created?

      Who created it?

      What about google?

      Perhaps there was a single purpose — FW — to bring a handful of people together — out of 7.5 billion.

      Now what?

    • ITEOTWAWKI says:

      “I am not aware of such a blog in France, pity.”

      Dom, there’s Matthieu Auzanneau that has a blog called Oil Man…he posts sporadically, but he has had some nice write-ups on the topic of oil:

      http://petrole.blog.lemonde.fr/author/petrole/

      Bon courage! 🙂

      • Dom says:

        Thanks Iteotwawki.
        I read his blog, his articles are interesting. His blog belongs to ”Le Monde”. ”Le Monde” belongs to a group ”Bergé-Pigasse-Niel”. The majority of french press belong to financial, industrial groups. We call them ”les chiens de garde” (guard dogs, in english ?).
        I find informations by french blog ”alternatifs”.
        The interest of Gail articles is overview: oil pic, renewables energies, finance, economy, climate… + the debates between readers.

        • ITEOTWAWKI says:

          Haha “les chiens de garde”? We don’t have that expression in French Québécois!

          • Dom says:

            You are from Québec ? You speak french ?
            French media = propagande

          • Dom says:

            Super que tu parles français !
            Est-ce toi qui a parlé de J. Krishnamurti. Il a fait partie de mes lectures il y a quelques années et m’a aidé à comprendre la nature humaine, parmi d’autres écrivains.
            Je pense que les personnes qui ne voient pas l’effondrement à venir ne comprennent pas la nature humaine.
            Toujours plus, encore plus, encore….
            Le désir, un puits sans fond.

            • ITEOTWAWKI says:

              Salut Dom, non je ne le connais pas vraiment…c’est juste qu’au fil des ans sur les centaines d’heures dont j’ai passé à lire sur notre “predicament” (il y a pas de mot équivalent en français) lorsque je vois une citation que j’aime je la copie sur un fichier Word. Il s’adonne qu’une fois, je me souviens pas trop dans quel contexte, l’article avait cité Krishnamurti et j’avais adoré, car c’est tellement vrai!!!!

              “It’s no measure of health to be well adjusted to a profoundly sick society.” -Jiddu Krishnamurti

              Tu as raison c’est incroyable que PERSONNE ou du moins presque personne ne voit venir l’effondrement complet de notre société industrielle (dans mon entourage, qui est composé de monde quand même éduqué, ils n’ont aucune idée)…mais c’est mieux comme ça, car si tout le monde le savait, il y aurait la panique et l’effondrement se produirait encore plus vite…dans tout les cas, ça fait au moins depuis 6 ans que je sais ce qui nous attends et en conséquence je profites de chaque jour…d’ailleurs je viens de finir un tour de bicyclette de 50km par une superbe journée ensoleillée ici à Montréal…ce sont des moments que je savoure pleinement (beaucoup plus que si je pensais qu’il me restait encore des décennies devant moi, qui ne sera clairement pas le cas!)

              Je te souhaite Carpe Diem Dom!

  2. Karl says:

    Venezuela: Where supplies are few and pain is everywhere:
    http://www.cnn.com/2017/05/17/americas/venezuela-pain-and-poverty/

    This makes me want to buy more food. The little girl with the bowl of rice reminds me of my daughter. I don’t really give a rat’s behind about adults, but watching children go hungry is going to be soul crushing. Jesus, we really made a mess of things……

    • Slow Paul says:

      I also have children of that age, heartbreaking stuff. There will come a time for this misery in the wealthier parts of the world as well, until then I’m thankful for each day of BAU!

    • Fast Eddy says:

      If you buy or grow more food….

      The fathers of children in the same situation as that child …. will kill you for your food….

      And mothers will be outside your farm gate with empty bowls… begging for food…. and if you cannot or will not feed them … they will climb the fences and take the food from your garden…

      If you shoot them during the day … they will hide in the surrounding area and raid your garden at night.

      I recommend a rock cut and a fast car — or ITEO’s solution — a tall building ….

      Or perhaps borrow from both solutions and drive a fast car off of a very high cliff and smash onto the rocks below

      • ITEOTWAWKI says:

        I like the idea FE 🙂

      • jeremy890 says:

        That’s what FE talking about….

        Well, now we know the ending…..spoiler

      • Karl says:

        I’m still holding out hope that your “Elders” have contingency plans to avert the radioactivity. If they don’t, a rock cut (or more likely a less dramatic fistful of pills and bottle of scotch) will be available. As long as there is no radioactivity, I remain unconvinced preparation is futile. You claim all the time that there will be no food. If that is true, one only has to make it long enough for the bulk of humanity to starve to death and reduce the population to a sustainable level. I don’t know what that number is, but surely when the world population numbers in the millions rather than billions some sort of quasi-primitive existence will be possible. If there is no food or electricity, I can’t imagine it taking longer than 3-9 months for the bulk of humanity to perish. That is a long time to hide out, granted, but some minimal probability of survival exists. Mr. D.N.A. commands I make a run at it.

        I don’t blame anyone for making a hasty exit stage left post SHTF, but the certainty with which you proclaim this an extinction level event smacks of a religious belief. It also does a disservice to those people who might be in a position to make a run at surviving. Its good to have one’s eyes open to the severity of the situation, but less helpful to proclaim an oracle-like ability to see how this all plays out. I think the fact that none of the “peak oil” guru’s saw the impact of CB printing and unconventional oil stands as testament to that…….

        • xabier says:

          We can only advance hypotheses, it’s true. No-one truly knows.

          But there seems to be a fair body of well-informed scientists who have concluded that we may very well face a bottle-neck event, perhaps leading to the extinction of our species, and many other life forms.

          Many of them started out feeling rather more optimistic, I believe, but have been reluctantly swayed by the weight of evidence as it accumulates. Even Tainter was originally much more optimistic by his own admission.

          All previous collapsing civilisations have collapsed back to the still existing ‘primitive’ level (in fact, quite sophisticated in terms of knowledge, skills and practical intelligence) that preceeded them ie. farmers, hunters and gatherers, fishermen, etc. A town only survived if it could still function as a village or little port of some kind.

          Only the higher structures and urban populations went away, or put another way, the icing was eaten away, but one still had the cake.

          Anyway, we could ask, if feeling hopeful: can we map the regions and identify the societies

          1/ Where such primitive structures are still almost completely intact and not hollowed out by fossil fuels and easy transport of freight and food,

          and 2/ What regions might still offer an ecological niche to humans to carry out these activities, in the light of the horrendous ecological catastrophe which is upon us – and accelerating?

          In one or two spots on the globe this might indeed be possible where these two are found to coincide: any ideas anyone?

          The tragedy, it seems to me, is that our cheap-energy civilization was distinguished by the destruction of the original structures,(hugely accelerated post-1945); the ecological niches to which they are adapted, and their associated bodies of knowledge and cultures. It couldn’t in fact operate any other way.

          • Karl says:

            Xabier, I tend to agree. Believe me, I understand the severity of the situation. I just think that most Non-desert or arctic environments will support SOMEBODY once population levels fall sufficiently. The lack of skillset will preclude most from living primitively even if they otherwise would be amongst the survivors. I do think the surviving infrastructure will act as a cushion of sorts. Shovels, saws, lighters, clothing, knives, guns, etc. Will be around in some form for quite a while. Lets hope it will be enough to help survivors relearn necessary primitive skills.

            As to best locations, I suspect initially low population density areas will be the best. Post die-off, anywhere that can grow food and not be subject to weather extremes should be fine. All of this assumes radiation is not an issue, of course. If we get nuclear war and cooling pool cookoff, all bets are off.

            • Fast Eddy says:

              All that will happen if anyone survives is they will try to restart the industrial revolution — using the only source of fuel available – trees…

              They will cut down all the trees in close proximity — and all that will happen is extinction gets delayed a few decades.

              Why is it that so many people are concerned about the extinction of humans?

              Can’t you see that we are responsible for extincting millions of other species? That the sooner we are gone the better?

            • DJ says:

              In northern regions it is not possible to deforest without fossile fuels. (Of course we may mess up climate so much so there are no more northern regions.)

            • Karl says:

              “Can’t you see that we are responsible for extincting millions of other species? That the sooner we are gone the better?”

              There is the misanthropy that I always suspected underlined your views. I believe that humans have just as much right to exist as any other species. In fact, I’ll go further, and posit that without human beings to appreciate their existence, other species don’t matter at all. There could be millions of other planets like ours, teeming with non-human life on the other side of the galaxy, and that fact would be utterly meaningless without a human (or other intelligent lifeform) to appreciate it.

              I don’t want us to go extinct, I want us to survive for as long as possible. Obviously we are facing a tremendous die-off to realign our numbers with the ecosystem, but most of those people were going to be dead in the next 80 years regardless. The fact that I am going to die one day doesn’t mean I don’t care about the continuation of humanity (and especially my own descendants). If I die at 40 from the apocalypse, or 90 from old age, I still want my children and our species to go on…………

            • Fast Eddy says:

              How humans are driving the sixth mass extinction

              https://www.theguardian.com/environment/radical-conservation/2015/oct/20/the-four-horsemen-of-the-sixth-mass-extinction

              If we continue to exist long enough — we will eventually extinct every other species on the planet.

              Let’s say you were an intelligent life form from another galaxy … and you were hovering over earth observing things…

              And you had a very powerful weapon that could wipe out any species on earth with the push of a button.

              What would you do?

            • ITEOTWAWKI says:

              Karl says: ” In fact, I’ll go further, and posit that without human beings to appreciate their existence, other species don’t matter at all. There could be millions of other planets like ours, teeming with non-human life on the other side of the galaxy, and that fact would be utterly meaningless without a human (or other intelligent lifeform) to appreciate it.”

              You bring up a great point that I have thought to myself for years…We know that we have been devastating to the biosphere (probably well beyond repair when we disappear)…HOWEVER…if there was no sentient being to take in that this biosphere exists in the first place…does it really exist??? My line of thinking is in the same vain as “If a tree falls in a forest and no one is around to hear it, does it make a sound?” In other words, if we did not exist, there would be no species to perceive this biosphere…and in that case, did it really exist in the first place??…What a Catch-22…we come into existence, and therefore there is a species that is able to perceive that this planet exists, but this same species ends up destroying it….we don’t come into existence, the planet goes on it’s merry way, but with no one to perceive this planet, it might as well not exist…

            • Fast Eddy says:

              Very much so

          • MM says:

            Dimitri Orlov in his latest book proposes to go to Siberia. I do not think that many people can survive a winter in Siberia. You will die if you lack one single important tool. Russia actually has already collapsed and many other countries have as well. In these countires the people know how to get by. I think there will be many places to stay. but you must relocate to a place that does not have a pizza hut in more than 1000 km…

            • Fast Eddy says:

              When the USSR ‘collapsed’ there was still:

              – electricity
              – petrol
              – a functioning govt
              – police
              – military
              – shops selling food and other goods
              – medical care
              – functioning sewage and water systems
              – schools

              This is not really collapse at all.

              Compared to what is headed our way this would be considered a paradise.

              The meanest ghetto of Manila would be considered a paradise.

            • Buzz Lightyear says:

              Dear FE,

              Agreed

            • Buzz Lightyear says:

              I would much rather collapse in the tropics than in siberia

              you can survive half naked or go all the way… chasing small reptiles and roasting them in the sun

              possibly… for a while at least…

              until the neighbours show up…

            • Van Kent says:

              Buzz,
              Tropics have a few problems..
              wet bulb temperatures mean that its so hot and humid, that if you go outside, sweating doesnt help.. the body isnt cooled at all.. going outside, walking or working in wet bulb temperatures results in one simple outcome..

              Also the tropics have a huge risk of becoming areas with absolutely huge forest fires. At some point we will not have Brazilian rain forests at all..

              Finally the tropics have the risk of level six hurricanes. Not level five. But level six. If wondering what a level six hurricane is, no worries, its something we havent seen ever, yet. But they are sure to come while the seas heat up a bit more.

              Also worth reminding is that the safest place to be, would be the places with the fewest people. The tropics should be pretty crowded with almost every other of your basic millionaire owning a sailing boat..

              So Siberia sounds marginally better to me. The only problem with Siberia is, it will have its own huge fires. The weather should be totally chaotic. And most of the vegetation that you know, wont grow at all in some years, being replaced by new invasive species.

              So maybe Alaska?

            • Fast Eddy says:

              Bali is a rainforest so there are no forest fire issues… there are also no extreme storm events because it is within 5 degrees of the equator….

              However the problem with Bali is that virtually all land is farmed using petro chemical inputs… the soil is dead…. if those inputs are no longer available the people of Bali will not be able to feed themselves.

              It is one of the main reasons I left.

            • DJ says:

              Bakhtia.
              Lykows.

            • DJ says:

              Anyhow … it must be a place horrible enough for most people to prefer death, otherwise it will be to crowded.

            • Fast Eddy says:

              I grew up in Northern Ontario — basically Canada’s Siberia… it would be one of the last places I’d choose to be come the end of BAU….

              – 35 does not work for me…. and a growing season of a month….

              Good luck with that Mr Orlov….

            • Buzz Lightyear says:

              That reminds me… where is our alaskan friend?

              TBH I’m quite happy where I am…

              waiting for it all to go down

          • bandits101 says:

            Xab I have no doubt that if we were simply facing an economic collapse due to unaffordable energy, we would survive in quite large numbers. Numbers enough to continue the species and who knows life could possible be better after a certain time. Especially if human numbers crash to allow environmental recovery, along with land, sea and ocean fauna regeneration.

            But, but and but…….humans have not reached 7.5Bn instantly. On the run-up we’ve done tremendous, near term irreparable damage, (the damage being done now by the 7.5Bn is exponential on top of that) led by atmospheric pollution, land degradation (soil erosion, salt and other contamination) and species extinction.

            So it’s not simply crashing from overshoot to low numbers Those low numbers have to not just eke out a living in the world described above, they have to cope with the ravages of global warming wrecking the climate and all the changes that result. As you describe the icing going leaving the cake, I think the cake itself is probably a light sponge……full of holes.

        • Buzz Lightyear says:

          Hi Karl,
          Beautifully said!

          Fast Eddy says hi!

        • Fast Eddy says:

          The only way to control spent fuel ponds is by cooling them using high tech equipment over many years. If another option existed — we would already being seeing it.

          Food…

          Soil that is farmed using petro-chemical inputs — will support no crop once the outputs are stopped – without years of intensive rejuvenation involving organic inputs.

          Effect of Pesticides on soil fertility (beneficial soil microorganisms)

          Heavy treatment of soil with pesticides can cause populations of beneficial soil microorganisms to decline. According to the soil scientist Dr. Elaine Ingham, “If we lose both bacteria and fungi, then the soil degrades. Overuse of chemical fertilizers and pesticides have effects on the soil organisms that are similar to human overuse of antibiotics.

          Indiscriminate use of chemicals might work for a few years, but after awhile, there aren’t enough beneficial soil organisms to hold onto the nutrients” (Savonen, 1997). For example, plants depend on a variety of soil microorganisms to transform atmospheric nitrogen into nitrates, which plants can use. Common landscape herbicides disrupt this process: triclopyr inhibits soil bacteria that transform ammonia into nitrite (Pell et al., 1998); glyphosate reduces the growth and activity of free-living nitrogen-fixing bacteria in soil (Santos and Flores, 1995) and 2,4-D reduces nitrogen fixation by the bacteria that live on the roots of bean plants (Arias and Fabra, 1993; Fabra et al., 1997), reduces the growth and activity of nitrogen-fixing blue-green algae (Singh and Singh, 1989; Tözüm-Çalgan and Sivaci-Güner, 1993), and inhibits the transformation of ammonia into nitrates by soil bacteria (Frankenberger et al., 1991, Martens and Bremner, 1993).

          Mycorrhizal fungi grow with the roots of many plants and aid in nutrient uptake. These fungi can also be damaged by herbicides in the soil. One study found that oryzalin and trifluralin both inhibited the growth of certain species of mycorrhizal fungi (Kelley and South, 1978). Roundup has been shown to be toxic to mycorrhizal fungi in laboratory studies, and some damaging effects were seen at concentrations lower than those found in soil following typical applications (Chakravarty and Sidhu, 1987; Estok et al., 1989). Triclopyr was also found to be toxic to several species of mycorrhizal fungi (Chakravarty and Sidhu, 1987) and oxadiazon reduced the number of mycorrhizal fungal spores (Moorman, 1989).

          https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2984095/

          Organic inputs will be hard to come by considering nothing can be grown – and most if not all animals are killed and eaten.

          Less than 1% of all farmland globally is farmed organically (and most of that land is scrub land suitable only for sheep or goats)

          Get ready to starve. No matter where you are:

          https://www.weforum.org/agenda/2015/08/which-countries-have-the-most-organic-agricultural-land/ (note – most organic land in Australia is rubbish and supports sheep only)

          • Buzz Lightyear says:

            This year I just popped the seeds into the ground

            ground that has been untouched for many years i.e. not tilled

            I gave the grass a trim first

            all the plants are growing nicely with no further imputs

            if it gets too dry I’ll water them at night

            no tilling – no loss of nutrients – plants are naturally resilient to pests

            the only problem is grass management

            and of course the scale

            on a larger scale you may want to leave enough room between rows for a mower of some sort

            but gasoline

            so yeah.. we’re screwed

            • Karl says:

              There is land all over the place that will grow food organically. Plenty of people around me have yards and fields that haven’t been soaked in petrochemicals. Is there enough to support 7 billion of us? No. Its too little by several orders of magnitude. But SOMEONE could farm it once numbers decline sufficiently. Take the continental USA. Maybe it can only support 1 million humans post-crash. That is a 99.7% die off. Devastating for the people who die, but a long way from extinction. If there is no radioactivity, collapse is survivable for SOMEONE.

              Climate change is another unknowable. Once the great burning stops and plant life rebounds, there may be feedback loops in the opposite direction that we don’t know about that will prevent run away climate change.

              There is going to be plenty of death and misery to go around as mankind goes through the bottleneck. It is a reasonable position to decide to check out via a rock cut before that happens. That doesn’t change the fact that there is enough unknown about the details of the bottleneck to preclude us from calling it unsurvivable. Everyone has to decide for themselves, but I plan on soldiering on to the bitter end. Maybe I’ll live to regret it. Maybe I’ll die an old man on an organic, electric-less farm. Time will tell……

            • Fast Eddy says:

              I look out my window and I see 5 hectares of land that I own — not soaked in petro chemicals.

              Could I grow crops in that land? Nope.

              1. The soil is not of high enough quality to grow anything much in — it would require immense amounts of organic fertilizer before I could grow anything in it

              2. It is not properly fenced to keep out vermin such as rabbits

              3. Fortunately I have gravity fed water — so that would not be a problem

              4. Winter has just started.

              Here’s the thing…

              Imagine today the shops closed. Do you have seeds? Do you have a water supply? What do you do about pests eating your crop? What do you eat while you wait for your first crop?

              With no radiation collapse is survivable — but the people who will survive will be people who are not surrounded by neighbours who will be begging borrowing or stealing your food.

              They will be surrounded by others who are already living a relatively sustainable lifestyle…

              We call these people subsistence farmers

            • Buzz Lightyear says:

              Oh absolutely I’m with you… wouldn’t miss it for the world

              I don’t fear death. Come close plenty of times. But I wouldn’t want to experience prolonged pain and suffering if that was the case. Had enough of that too.

              If chaos descends on your local area and there’s no way to avoid it then you can be reassured that any suffering should over quickly.

              I think cities would become hellholes fairly quickly.

            • Fast Eddy says:

              Watered them….. you turned on the faucet? Where did the water come from – any pumps involved?

              Funny how people believe that they could easily grow enough food to feed themselves…

              I have a massive fenced garden with raised beds — massive piles of compost — a big green house… gravity fed water… a big orchard ….and I long ago concluded I would never be able to stay alive if I had to rely on that for food.

              Ignorance is apparently bliss

            • Buzz Lightyear says:

              FE (the one that makes me chuckle)

              I live in one of the most fertile territories on the planet

              We are home to some of the best seafood in the world, some of the best wines in the world, fruit, veg and dairy, wild boar, rabbits and other assorted eddible wildlife in lush forests full of pine, chestnuts and eucalyptus

              Really you should see our harvest every year

              Everyone here owns a lot of land

              When necessary whole communities work together to achieve goals – it’s how they survived in the past

              We are very lucky to have our own natural gravity fed mountain filtered mineral water supply – huge tanks in every town means we have more than we need even when the tourists turn up in the summer

              And before you say it… my ancestors have been working these territories for hundreds of years without any modern inputs – many still do

              There exists a culture of conservitism and almost religious fervour for the old ways, traditions and agricultural methods… even among the youth

              The people are vicious… they defend what’s theirs – enough said

              Now… does any of that mean we will survive economic collapse?

              No… but we’re better positioned than most to give it our best shot

            • Fast Eddy says:

              Funny… I live in one of the most fertile areas of the world — I look across the valley and it is farmland as far as the eye can see — there is effectively no winter here – I can grow some vegetables in winter — everyone owns a lot of land – at 5 hectares our property is one of the smallest…

              There is plenty of sea food — deer and pigs are pests — there is no hunting season – you can shoot as many as you can find — at any time of the year — and leave them in the bush to rot.

              Unfortunately nobody I know — and a lot of them grow food — is self-sustaining. Not a one.

              Unfortunately when you shoot at animals on a regular basis — they go deep into the bush away from humans.

              Unfortunately catching fish is not that easy when you don’t have petrol powered boats.

              Unfortunately within one tank of petrol of me are nearly 1 million people — who think that the north of the south island is where there will be food post BAU — what they dont know is that 99.9999% of all crops grown here are reliant on petro chemical inputs.

              Unfortunately here are nearly 10,000 people in a town that is less than a 90 minute walk from me.

              Unfortunately a huge percentage of people in NZ own guns.

              Funny…. I long ago realized I would starve.

              Try the Fast Eddy challenge — turn off the power for a week – eat only what you produce, hunt or gather — no petrol allowed. Wash clothes by hand. Cook on a fire. Chop all wood by hand.

              Until you have done that please f789 off with your doomsday prepper shit.

            • Buzz–remind me where you live–not that I am ready to move to joint you. I just am curious.

            • Buzz Lightyear says:

              FE

              Charming as ever

              Who said anything about doomsday prepping – no bunkers here

              You typically made some snide remarks and assumptions to which I responded to clarify my situation – I told you the truth… nothing more nothing less

              I even finished up by saying that in the event of economic collapse the best we could do is make a go of it which basically means last as long as possible

              I was simply implying that compared to most of todays city dwellers with no practical farming hunting fishing experience rural areas are a step ahead for what it’s worth – which I agree may not be much

              All the trials you mention in your list I used to do in my youth in the summer hols… for fun!

              And like I said people here have been living that way for hundreds of years with no industrial inputs

              Like this…

              That’s my local beach by the way – we used to load up with seaweed and other useful stuff

              Dude…why can’t you just enjoy what you have for as long as it lasts instead of getting up in everybodys face like you have something to prove

              I would love to see your psyche profile

              I sense a lot of fear in this one

            • Fast Eddy says:

              Nice photo.

              Fortunately for those guys the soil they tilled was not poisoned with urea…

              And there were no spent fuel ponds yet.

            • Fast Eddy says:

              I might add that it takes a certain brand of stupid — to not recognize that the end of BAU will not resemble 1750.

            • If a person is just starting to learn about the problem, assuming that the end of BAU will resemble 1750 is not a bad idea. A person usually has to work in baby steps toward understanding the problem. The problem is not that they are stupid; they are simply less far along in understanding the predicament we are facing.

            • Fast Eddy says:

              Right…. but surely they would be open to accelerating along the learning curve with the help of the gods?

              I wish I would have had access to some gods when I started the journey

            • it will not resemble 1750—because it is impossible to unlearn knowledge

              in 1750 you died of most diseases—we will do that in the future but with the knowledge that diseases are curable—therein lies our future strife

            • Buzz Lightyear says:

              It takes an even bigger brand of stupid to not realise that that photo is recent

              There are no gaps in my understanding of what the end of BAU represents – in fact I understood it as soon as I came across this material many years ago

              Both you and Gail have mistaken my description of Galician life as it was and still is in some parts as some kind of solution post BAU

              Why do you think I posted a video of people being chased and eaten by zombies? Because I understand what happens when rules are thrown out the window and chaos ensues

              That doesn’t change the fact that my ancestors survived in this region for hundreds of years with hard work and no industrial inputs. Are you really going to dispute that?

              But from now until the collapse of BAU there exists a window of opportunity to enjoy the rural lifestyle as much as possible and even for a while as the dominoes fall before the swarming hordes turn up and consume everything in their path within a matter of days

              I used to ride in one of those cow carts 30 years ago and most of the land here is still urea free

            • Fast Eddy says:

              ‘That doesn’t change the fact that my ancestors survived in this region for hundreds of years with hard work and no industrial inputs. Are you really going to dispute that?’

              Nope.

              But they would not be able to survive the end of BAU if they were to be magically reincarnated.

              1. The soils are ruined by urea – nothing will grow in them if you do not continue to apply urea

              2. What organic farms there are will quickly be over run by hunger people.

              3. All animals that can provide manure for compost will be killed and eaten by hungry people.

              4. 4000 spent fuel ponds will release 56,000,000 Hiroshimas of radiation that will quickly enter the food chain and kill anyone who might survive the mass starvation

              Here – let me make it easy for you to reject all the facts… hum along….

            • Fast Eddy says:

              Soil that is farmed using petro-chemical inputs — will support no crop once the outputs are stopped – without years of intensive rejuvenation involving organic inputs.

              Effect of Pesticides on soil fertility (beneficial soil microorganisms)

              Heavy treatment of soil with pesticides can cause populations of beneficial soil microorganisms to decline. According to the soil scientist Dr. Elaine Ingham, “If we lose both bacteria and fungi, then the soil degrades. Overuse of chemical fertilizers and pesticides have effects on the soil organisms that are similar to human overuse of antibiotics.

              Indiscriminate use of chemicals might work for a few years, but after awhile, there aren’t enough beneficial soil organisms to hold onto the nutrients” (Savonen, 1997). For example, plants depend on a variety of soil microorganisms to transform atmospheric nitrogen into nitrates, which plants can use. Common landscape herbicides disrupt this process: triclopyr inhibits soil bacteria that transform ammonia into nitrite (Pell et al., 1998); glyphosate reduces the growth and activity of free-living nitrogen-fixing bacteria in soil (Santos and Flores, 1995) and 2,4-D reduces nitrogen fixation by the bacteria that live on the roots of bean plants (Arias and Fabra, 1993; Fabra et al., 1997), reduces the growth and activity of nitrogen-fixing blue-green algae (Singh and Singh, 1989; Tözüm-Çalgan and Sivaci-Güner, 1993), and inhibits the transformation of ammonia into nitrates by soil bacteria (Frankenberger et al., 1991, Martens and Bremner, 1993).

              Mycorrhizal fungi grow with the roots of many plants and aid in nutrient uptake. These fungi can also be damaged by herbicides in the soil. One study found that oryzalin and trifluralin both inhibited the growth of certain species of mycorrhizal fungi (Kelley and South, 1978). Roundup has been shown to be toxic to mycorrhizal fungi in laboratory studies, and some damaging effects were seen at concentrations lower than those found in soil following typical applications (Chakravarty and Sidhu, 1987; Estok et al., 1989). Triclopyr was also found to be toxic to several species of mycorrhizal fungi (Chakravarty and Sidhu, 1987) and oxadiazon reduced the number of mycorrhizal fungal spores (Moorman, 1989).

              https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2984095/

              Organic inputs will be hard to come by considering nothing can be grown – and most if not all animals are killed and eaten.

              Less than 1% of all farmland globally is farmed organically.

              Get ready to starve. No matter where you are:

              https://www.weforum.org/agenda/2015/08/which-countries-have-the-most-organic-agricultural-land/ (note – most organic land in Australia is rubbish and supports sheep only)

    • DJ says:

      At least the poor girl has a smartphone, too bad you can’t eat apps.

  3. xabier says:

    The big art auctions are underway at Christie’s and Sotheby’s, as usual at this time of year, and the feeling is by general consent somewhat ‘subdued’, but not disastrous.

    Everything down from the last peak in 2014-15, but around 75% of lots selling (although in some cases the auction houses guarantee sales, in one auction this came to 20% of the total lots offered).

    So, the super rich art speculators still have money to play with, but are being cautious. The art dealer Gagosian was spending confidently on major works.

    Both Christie’s and Sotheby’s had their ‘star’ lots withdrawn at the last minute, although one was rather inferior.

    It’s a wonderful game to play: a Basquiat sold for $341k in 1989, made $35 million last night.

    • 100k a sq inch seems reasonable to me

      • xabier says:

        A friend bought a twig from one of these Contemporary dealers, I forget the artist’s name.

        The act of selecting and cutting the wood made it The Twig apparently, a work of art rather than just a….twig. Like Michelangelo turning a block of stone into art, that sort of thing.

        After buying a new house, he realised -surprisingly – that The Twig just didn’t look good anywhere he put it , so he consigned to the original dealer, to sell on commission.

        The Greater Fool who is willing to take on the The Twig hasn’t yet been found. A price reduction is being discussed.

        Any takers?

        WARNING: Twigs can go down as well as up. Past rip-offs are no guide to future value.

  4. Third World person says:

    another example of bau collapsing global penicillin shortages
    https://qz.com/984705/syphilis-is-on-the-rise-because-penicillin-isnt-profitable/

  5. Fast Eddy says:

    The possibility of all hell breaking loose is not zero. The WSJ reports that Venezuelan security forces are at their breaking point. Young, underpaid members of the national police are often not given food or water while on duty, and are asked to constantly beat back rapidly escalating protests in scorching heat, around the clock. Also, police and soldiers are not immune to the food shortages and economic collapse that the rest of the country is suffering through. The loyalty of the security services to the President no longer appears rock solid.

    http://www.zerohedge.com/news/2017-05-18/venezuelas-oil-production-brink-collapse

    Post BAU … martial law will not hold…

    Things fall apart; the centre cannot hold

    • Snorp says:

      I’ve “heard” Venezuela is a victim of EROI (among other things). Will that oil stay in the ground?

    • greg machala says:

      Wow if the security forces break down that will be very short period of martial law. That is very scary. I would have thought the security forces in Venezuela could hold out several years at least. What has it been now, a year?

      • Fast Eddy says:

        There are those who think that the US military or private security forces are going to protect the likes of George Soros and other elites post BAU.

        It’s just not going to happen. When they realize that the elites have nothing to offer — they will eventually turn on the elites and take from them and/or they will return to their families — where they are needed.

      • DJ says:

        It’s at least a year since they went to electricity two days a week (don’t know what happened with that? Maybe it rained?)

        And UN still doesn’t consider Venezuela has famine.

    • DJ says:

      “Spare parts”

  6. Duncan Idaho says:

    Well, the game goes on:

  7. Duncan Idaho says:
    • xabier says:

      It’s a dreadful shame that Condi won’t be sculpted in marble, like the slave-beating psychopathic women of Ancient Rome, to be dug up and admired by future generations.

      Oh, did I say future generations?

    • greg machala says:

      The car market was about the only segment doing well since the 2008 crash. If the car market bubble pops what will be left?

      • Duncan Idaho says:

        Law Enforcement?

        THERE’S A NEW SHERIFF IN THE SWAMP !

        https://vvattsupwiththat.blogspot.com/2017/05/theres-new-sheriff-in-town.html

      • Fast Eddy says:

        Retail – Restaurants – Autos

        In decline….

        The US economy has heart disease – Aids – diabetes

        • Harry Gibbs says:

          Don’t forget student debt! Perhaps we could call that ‘learning difficulties’.

          “But what is alarming is student debt: this has exploded in recent years to unsustainable levels, and “serious delinquency” rates are already 10 per cent, shattering the confidence and spending power of one segment of the population. If interest rates rise, or growth slows down, these problems could spiral. Corporate leverage presents worries too.”

          https://www.ft.com/content/6cb6d048-3b13-11e7-ac89-b01cc67cfeec

          • Clearly young people with all of this debt put off getting married and having families. They can’t afford homes. At most, they can buy a used car, or lease a car if interest rates are low enough. Student debt affects many areas of the economy.

          • aubreyenoch says:

            This might be fake news. I’m not sure. Sounds reasonable.
            “Washington DC. – In a 5-4 decision the Supreme Court upheld a lower court ruling that Productive Behavior Deficit Disorder treatment could not be used as grounds for exemption from any of the provisions of the landmark “Back to Work America” legislation that President Stump signed in to law earlier this year.
            The suit had been filed by a Cambridge MA couple, Andre and Melissa Mohammad-Swartz.
            The Mohammad-Swartzs were claiming exemption from a court ordered placement in a Back to Work America Brigade, under contract to Farley’s Homegrown Fruits and Vegetables LLC of Miami FL, due to their diagnosis and medication for PBDD. Farley’s Homegrown Fruits and Vegetables LLC (FHFC) operations include 71,000 acres of tomatoes, 9,000 acres of melons and 62,000 acres of mixed produce throughout Florida. The Mohamad-Swartzs have a combined student debt of $583,000 after they both received a PhD in Theoretical Psychology from eHarvard/Lite Univ. of Romulus MI. When they failed to make the $6019/month loan payments they fell under the new debt statutes and were converted to Payment In Kind.
            In response to the high court ruling, Labor Secretary Ann Coulter stated that “PIK has given millions of unemployed Americans the incentive and opportunity to make a meaningful contribution to their country while they enjoy the dignity of addressing their financial obligations.”
            Simon H. Lagree, CEO of Park Avenue Financials LLC (PKAF), stated that “We are in constant communication with the Justice Department in effort to help as many unemployed Americans as possible.” Park Avenue Financials LLC, A Wall Street firm that specializes in the new Personal Debt Obligations (PDO) investment instruments has lead the lobbing efforts to block any exemptions to the Back to Work America legislation.
            “This decision should clear uncertainties in the market and we expect the demand for PDOs to rise in the coming months” stated Jason McSneer of Goldman Sachs. McSneer heads the PDO division of Goldman Sachs that bundles the Defaulted Student Loans (DSL) into marketable investment instruments.
            “They can make their payments or they can pick tomatoes” added McSneer.

  8. Fast Eddy says:

    Auto Loan Borrowers May Be Gaming Their Credit Scores, UBS Says

    As many as one in five auto-loan borrowers admitted in a survey that their applications for debt contained inaccuracies, UBS strategists led by Matthew Mish wrote, meaning fraud could be more pervasive than lenders planned for. A growing number of borrowers have searched on the Internet for “credit score,” signaling that borrowers may be getting better at figuring out how to game their credit scores, the strategists said.

    Part of that declining accuracy may have been because consumers became more adept at using tricks to boost their scores. A 2015 academic paper that looked at mortgage borrowers’ pre-crisis behavior found that “applicants have an incentive to manipulate their credit scores whenever they perceive that the marginal benefits in terms of more favorable loan terms exceed the marginal costs of raising scores.” The paper concluded that lenders, which use a mix of other ratings systems and data, relied too much on credit scores.

    https://www.bloomberg.com/news/articles/2017-05-17/auto-loan-borrowers-may-be-gaming-their-credit-scores-ubs-says

    According to a petition filed by the New York City Department of Consumer Affairs, sales people at the Major World dealer group prepared dozens of auto loan applications containing inflated income and asset statements. The false information helped unqualified buyers purchase vehicles they could not afford.

    In 2014, the I-Team reported on Margaret Zollner, a car buyer who accused staff at Major Chevrolet of tricking her into signing a loan application that falsely stated her income was $60,000, even though she was an unemployed senior citizen who needed food stamp benefits to get by.

    Zollner’s application also reported that she owned a house, but she rents her home.

    “They said I made $60,000 a year. I was on food stamps,” Zollner said.

    At the time, a spokesperson for Major World suggested Zollner was responsible for signing her name to inaccuracies on the loan application.

    http://www.nbcnewyork.com/news/local/Auto-Loan-Fraud-Subprime-Lawsuit-Major-World-Car-Dealer-New-York-City-Consumer-Affairs-Sue-421622913.html

    So if these are the types of schemes that the auto companies have been using to generate sales… combined with ultra low interest rates… extra long amortization periods…. and enormous rebates….

    And yet still — auto sales are plunging….

    What do they do to stop the plunge?

    Keep an eye on this space. It is a big fat canary

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s