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 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.
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2,716 Responses to Why We Should Be Concerned About Low Oil Prices

  1. Fast Eddy says:

    “The banking system is loaned up,” Chanos said. “Because of the nature of the problem, and debts are still growing twice to three times as fast as the economy, a lot of loans are just simply new loans to keep the old loans current, so-called Ponzi finance.”


  2. Harry Gibbs says:

    It looked like global trade had been enjoying a bounce towards the end of last year and in Q1 of 2017… but had it?

    “…World economic growth and world trade growth typically go hand in hand. Perhaps the plateauing of world trade volumes—witnessed since the start of 2015—is over and the relentless expansion in global commerce is on again?

    “Unfortunately, we will have to put the champagne back on ice, for now, at least.

    “An analysis of the latest global export volume data, published in late April 2017 by the reputed World Trade Monitor, shows that almost all of the recent rise in volumes is due to a jump recorded in November 2016 (as Fig. 1 shows). Increases on a similar scale were not reported in the three subsequent months (the last for which data is available).

    “As the six-month moving average indicated by the dotted line shows, the appearance of the end of the plateau of world trade is created entirely by the spike in recorded global export volumes in November 2016.

    “Worse, further analysis of the raw World Trade Monitor data reveals that the jump in world export volumes recorded in November 2016 is a historical anomaly.

    “The revival in export volume growth varies considerably across regions of the world economy. Compared to a global export volume expansion of 2.4 percent over the six months from September 2016 to February 2017, export volumes grew 0.1 percent in the Euro zone, 1.0 percent in the United States, 2.5 percent in Emerging Asia, 7.9 percent in Japan and a whopping 12.4 percent in Latin America. Other than Japan, the major poles of the world economy have seen feeble growth in export volumes. Simply put: To date, there has not been a broad-based recovery of world trade.

    “While data on world trade volumes tends to get a lot of press, few articles report on developments in average world export prices. Such prices matter because they are an important determinant of profit margins from exporting. Moreover, falling export prices are likely to result in shippers and other transportation service providers facing more pressure from customers to lower charges.

    “The latest data on world export prices is not good. The World Trade Monitor’s index of global export prices is 20.5 percent below its peak. Looking at the data over time much of the deterioration in export prices happened in 2015 and 2016. There is no comparable improvement in world export prices to match the strange jump in world export volumes in November 2016.

    “This is not just a commodity price or currency phenomenon; every major region of the world has seen export prices languish below previous peaks, with the shortfall ranging from 9.8 percent for U.S. exporters to 45.9 percent for exporters from the Africa and the Middle East. Excess capacity in heavily traded sectors—such as steel and aluminum—as well as the spread of government-provided export incentives have almost certainly reduced prices in global markets.

    “These findings are also important in light of the debate of the “global trade slowdown.” Leaving aside the fact that global export volumes in fact stopped growing, some analysts have argued that slow global trade growth is because global demand levels—in particular, capital expenditure levels—have been weak…”


    • Those are good points. If capital expenditure levels are low, commodity prices will be low.

      When we run into problems with diminishing returns, as was did in the years starting about 2000, necessary capital expenditures rise rapidly. We cannot keep up with needed rising expenditures, so commodity prices drop back.

    • Thanks! This is parts of the same story I am writing about. Diminishing returns is causing the economy to disintegrate.

      • Greg Machala says:

        I agree…diminishing returns best describes what we are experiencing. The question I keep coming back to is what will be the proverbial straw that breaks the camels back. There are problems almost everywhere you look. And now (just days ago) another potential threat became a reality and was flying under the radar – cyber attacks. How far-fetched would it be to have every American’s bank accounts zero’d out by some potent cyber attack? Or the ATM shut down. Or, the electric grid shut down by cyber attack? The global economy is so vulnerable right now.

        • Van Kent says:

          I actually like that cyber attack scenario a lot Greg..

          We know the economy isnt working..
          We know the debt levels are too high..
          We know most consumers are about $200 from defaulting..
          We know the entire global world economy should restructure..
          We know nobody will ever admit free market global capitalism was destructive and is about to destroy the biosphere..
          We know the string is about to snap..
          We know we need martial law and rationing.. soon.. somehow..

          But if we do it by WWIII, everything will be in smoking ruins..
          If we do it by defaulting a major economy, the world JIT economy and the financial world crumbles..
          If we do it by IMF SDRs or BIS SDRs, then people will riot..

          Somehow that scenario you described there Greg sounded almost like the smallest of many evils. Bring in an unknown threat. That people havent already made their minds about who to blame. By making cyber attacks by some mysterious attacker the main villain, then everybody else can still be the white knight in shining armour. And a major cyber attack would let TPTB implement any policies that they feel they need. All the while bringing the world economy in an controlled crash, while having martial law and rationing among the populaces.

          It all sounds so good, compared to all the other choices, it almost sounds exactly what I would do..

          It was never the energy.. it was never the economy.. it was never the banks or the governments, it was a mysterious cyber attack that crashed the US economy..


          • Fast Eddy says:

            ‘We know we need martial law and rationing’

            We absolutely do not need either of these — nor will we get either of these — these are both BAU Lite scenarios…

            BAU = no growth = collapse of the financial system = total chaos

        • Buzz Lightyear says:

          Sounds like the plot of Mr Robot…

          Young, anti-social computer programmer Elliot works as a cybersecurity engineer during the day, but at night he is a vigilante hacker. He is recruited by the mysterious leader of an underground group of hackers to join their organization. Elliot’s task? Help bring down corporate America, including the company he is paid to protect, which presents him with a moral dilemma. Although he works for a corporation, his personal beliefs make it hard to resist the urge to take down the heads of multinational companies that he believes are running — and ruining — the world.

          • Van Kent says:

            Yup, sounds a lot like the tv-programs and movies etc. etc. etc. coming out just before the last big false flag..

            Its like they got a “script” how to program the public consciousness. Using plotlines in tv and movies.. then just feed and finance the right projects in Hollowood, before and after, voila. And when reality is stranger than fiction, then nobody deares to lay a finger of blame of the Reichstag fire on the deep state.. Brilliant strategy, actually..

            Also would kinda explain why the deep state is so panicky about reigning in the Donald, fast.

            • JT Roberts says:

              The entertainment system certainly contributes to cognitive dissonance as people are no longer able to decipher reality from a fantasy. If fantasy is mirroring realty they won’t believe it. If reality mirrors fantasy it never really happened.
              Critical thinking is gone for the vast majority.

            • Fast Eddy says:

              I was speaking to a friend yesterday who lives in Canada… this is a guy with degrees from a top Canadian university — he runs the Ontario office of a listed company…

              He was ranting on about how the Russians control Trump etc etc etc… how the oligarchs fund his empire …. who bailed him out when he was bankrupt…

              Basically regurgitating whatever the MSM tells him to believe…

              I told him that this was not true — I know the broker who did this deal —
              he was not bailed out by Russians https://www.forbes.com/sites/mclifford/2015/09/11/when-donald-i-know-china-trump-met-his-match-on-a-hong-kong-golf-course/#48686952718d

              If he believes this stuff… then everyone who believes the MSM’s role is to inform them (and that is just about everyone)… believes this stuff.

              Parallel universe.

            • Buzz Lightyear says:

              VK, you appear to have a very good handle on things. Reality and fiction appear to be interchangeable and intertwined to the point where they trip over each other.

              Like when the BBC reported the collapse of building seven twenty minutes before it actually happened…

            • Van Kent says:

              I think it was William J Casey who commented that: “our disinformation program is complete, when everything the US public believes is false”

              When thinking, just one tiny bit, who the guy was who said that, and what implications such a comment has.. yikes..

              Then its just our job to look at the things that actually happens. Where the money actually flows. Because we know there are entire institutions trying as best they can to influence our picture of reality.

              Sometimes in my twenties, two decades ago, I just couldnt figure out why nobody had written the Thomas Paine ‘Common Sense’ of our times.. it took me decades to understand it couldnt be done.. at all..

            • Buzz Lightyear says:

              Definitely too much information fog now. It’s difficult to know who to trust. Alternative media would like to take you by the hand while saying you can trust us we’re on your side and yet they parade ex cia ex nsa etc opperatives and whistleblowers in front of you as credible sources

              as far as i’m concerned there is not one trustworthy source of information that I know of and I’ve been hunting for a long time

              Disinformation, distraction, psyops, false narratives are the names of the game

              I would resort to my own intuition and the reality in my immediate surroundings but what good is that – the equivalent of burying your head in the ground – unplugging

              but it is tempting to unplug – I’ve just about had enough of chasing untruths. The search for meaning in this world is like trying to scratch an itch that can never be scratched. So what’s the point. Just live like a drone on autopilot attending to basic needs. My pets have a better time than I do. They’re not aware of their own mortality or of impending economic disaster. Ignorance truly is bliss.

            • Fast Eddy says:

              Trust in the gods…. of FW… to bring you clarity

            • Van Kent says:

              Sounds like things I have also thought through. Dont know much about meaning though. Sometimes for me its the want to figure this puzzle out. Sometimes its the want to be able to explain why it all went to shit. Sometimes its an deep disappointment in our species, is this really all we are good for. Sometimes its an intellectual problem to be solved, if this was to be survived, by somebody, somewhere, how would they do it? Mostly the meaning for me, is that Im completely free to do as I very well please, the world will end anyways 😉

              But as for reliable information.. I dont think there is a one good source anywhere. Gail tells whats on her mind. Norm tells it like it is about energy. Robert Scribbler puts it out on climate. There are reliable nodes of information about some certain type of information here and there. But to have one to tell it all, like it is, I dont think such a thing exists. Except Eddy. There is one absolutely reliable source of information.. 😉

              I still like Nafeez Ahmed and George Monbiot a lot. I also think Kate Raworth or Tim Jackson dont mean to fool people. They are just doing the best they can. In some ways that also goes for Orlov I guess. Lots of people are doing the best they can in these circumstances.. Guess people like Brandon Smith from alt markets, they mean well.. but are they a reliable source of information.. well..

            • Buzz Lightyear says:

              Reminds me of the pin boards that the FBI use to connect all the suspects involved in a crime

              Maybe if you build up enough of the map eventually something clicks… now everything makes sense… the thing you were looking for… it was under your nose the whole time

              In real life you ask questions… you dive down the rabbit hole… you get some answers… but you get a whole lot more questions too

              instead of becoming clearer the board gets darker and muddier… to the point where you start to question why you even need to know these things… what benefits will this knowledge bring when all aroun you are willfully blind?

              At some point the need to protect your sanity… what’s left of your soul… kicks in and that’s when the desire to unplug arises

              In my case it means being out in nature more and appreciating the small things… narrowing down to the activities that you truly value and taking out the trash

  3. Although I give it a small probability of lets say .5-5% for many reasons (global inter-contentedness at this stage), wouldn’t it be rich joke if the Chinese ponzi self destructed first without launching immediate global punishment on the rest (ala failed attempt to force non usd oil/gas payments etc), while the western ponzi manages to reanimate itself, circle the wagons, albeit for only few more years?

    This would be crushing development for most of the doom and gloom global reset newsletter industries, since most of the world’s capital would slosh into usd, sterling, swiss frank, .. , instead.
    The Chinese admin would likely implode and riots bring back the Clintonesque power faction, which reportedly lost to nationalists recently, and they would dance for few bucks like Yeltsin 2.0..

    Improbable, dreamy, silly sub scenario, but remember this is a crazy world in the first place.


  4. Duncan Idaho says:

    “If there is going to be a climate catastrophe,” says Ohio State glaciologist Ian Howat, “it’s probably going to start at Thwaites.”


    • Fast Eddy says:

      Hopefully that hunk of ice will float up my way… I could use some cubes for the post BAU party for the drinks…

  5. JT Roberts says:

    Something worth considering is the dynamic change in the energy system particularly oil. Even though affordability is a major pressure on pricing creating an environment that prevents the industry from generating sustainable production there has to be other fundamentals fueling the change. Access to credit is a major one as has been the economic driver since the 80s. Now there is little chance that private debt will grow wages are to low and there isn’t any relief without a complete reset in private debt. But even with that it’s unlikely that the economy can change its downturn because of a fundamental change in the energy industry.

    In all the controversy over the Hills Group analysis a simple fact remains. The energy industry, particularly oil, has gone from a net supplier to a net consumer in the last 5 years. That was in simple terms the conclusion of the report. So think about it. If the oil industry consumes more energy than it supplies how will affect prices? What advantage is there for them to increase prices considering it will increase operating costs?

    It’s like the industry is a plane as long as they could provide a surplus or high EROEI to the economy then they could maintain speed and stay in the air. As the surplus diminished the industry could plateau rather then climb. But as it became a consumer it no longer had the economic energy to stay in the air. Kind of like the engines are under powered. However if you adjust the attitude down you can keep the plane up but you’re in a continuous decent.

    This is what is happening. If prices try to rise there is a double drag. More economic headwinds and less power.

    As the energy consumption shifts from the economic industrialized world to the energy industry the situation will only grow worse. Meaning the attitude will have to pitch down at a steeper and steeper angle. This will continue until the system hits the ground.

    So there is no solution that can possibly keep the BAU alive. All the levers have been pulled. All the lifeboats have been deployed.

    This is also not a linear event it increases in speed exponentially as it progresses. Don’t believe it? Take a debt to GDP graph turn it upside down tell me what you see?

    The system clearly turned over the fall of 2014 and it ain’t going to recover.

    • Yorchichan says:

      “The energy industry, particularly oil, has gone from a net supplier to a net consumer in the last 5 years.”

      How can that possibly be true? Where is all the extra energy being used by other than the energy industry coming from? It can’t all be coming from storage.

      • el mar says:

        The “other” industrie still gets a part of the energie, but it is now less than 50 % of the output of the energy industrie. And its share is shrinking exponentially.

        By the way, the result of this development may actually become visible.
        I saw the folling comment from Cathal Haugian on the peak oil.com side within a comment from shortonoi. Perhaps Cathal can provide more information about the background:

        “Conquest of Russia has failed.All 5th column agents in Moscow have been cleaned out.The Families agree that the Age of Capital has ended. (See my thesis, Volume 3, which referenced the Hills report) Families have agreed and are about to make major change to money flows. (see Volume 2, last chapter.) So I suppose this is it; make sure you protect yourself going forward. Make sure you have a few Coins.
        Good Luck
        Cathal ”


        el mar

        • JT Roberts says:

          Correct El Mar.

          You see what’s happening

        • Grete says:

          Thanks for your almost very clear comments.
          Also thanks to Norman, CT, Van Kent and Fast Eddy and all the others.

          Here in Germany, specially the south :-), everything is great. At the moment our “airplane” have enough fuel to stay in the air. 🙂 But for how long?
          I’m working in a mechanical eneneering company, which produce two third of the machines for export. More than half for car industrie, and the big part of the rest to the energy industry. All is great. The orders are extremly high and it is unclear how to produce all this machnes.
          I think only a few people have a clue wat will come, I know only one.
          I think I will quit the job because it is like ro go all morning to a nuthouse.

          On the ne side the work with peak oil and OFW is like to die a little bit every day, but also to see the beautiful things in live. Like Yin Yang

          • JT Roberts says:


            It’s hard to breakdown complex ideas like Gail’s and the Hills Group. I try to associate them with more basic concepts that will include a broader audience. This isn’t easy because often a small gap is exploited to discredit the general thought.

            I also post on the fly from an IPhone and the spell assist screws things up before I notice it’s in the post.

            • Grete says:

              I also try to discuss this matter with a lot of people, send them some articles and vids.
              But the way to go inside is very hard and needs a lot of time and causes a lot of pain.
              And now I’m very deep inside the thinking of peak oil and the consequences about it.
              Specially my hushband denies a deeper dicussion. Not so nice 😦

              Knowing the consequences allows me a deeper understanding of our life and the focus on the essential.
              I’ve learned a lot about life, capitalism, money, biology, brain, health, community, etc.

              And I’m only a increddible small part of nature. So what?

              I hope we will have another decade, I know the predictions are not so.

            • Van Kent says:

              I wouldnt recommend trying to discuss these things too far and wide. Human brain chemistry shows, that if you talk about divorces, miscarriages, or the sure to come extinction level event of the human race.. then the same structures in the brain are activated, as if the person was in pain himself..

              There seem to be very few who can handle the pain..
              Everybody else just tries to protect themselves from the pain, in any way possible..

              I dont think Eddy much tries to talk about these things to mrs. Eddy.. and they seem to have a great time despite Eddy being… well Eddy.. so take heart and enjoy the time you have left with your husband. At least thats the way I see things. Carpe diem.

            • Fast Eddy says:

              You are correct — Madame Fast is mostly aware — but she has no interest in discussing these matters. It depresses her

          • Van Kent says:

            Before quitting your job, please consider one thing.

            If we have time to go in to martial law, rationing and everybody having a simple blank zero in all our bank accounts.. then being part of an essential economic structure keeps you “in the loop”..

            Everybody who isnt essential.. will have an even harder time..

            But this of course is only, if we are lucky enough to ever get martial law..

            • DJ says:

              But, is it not so that those with the largest number is in charge? Why would they want to reset that?

            • Van Kent says:

              Largest number? I dont follow.. care to explain a bit further?

            • Grete says:

              Van Kent,
              I also think, that when martial law comes, there will a hard time. We will see things, which we don’t want to see. It will be a fight and the fittest or best connected or the most clever people will win. In regular times I’m going to retire in ten years. I’ve a good job and no clue if there will be a demand for my knowledge and especially in my age.
              So I think not to work and to spend the time and money for some good years and then ok. Or to continue work and hope there will be harder but feasable.
              Here in the south of Germany in the region Stuttgart there is a lot of automobile industry.
              When the oil supply goes down there will be a lot of problem.

            • DJ says:

              Van Kent,
              The richest are those with real power now. If they allowed a reset how would they ensure to keep the real power?

            • Van Kent says:

              Dont worry. When the German auto industry goes, when oil is no longer affordable for consumers.. then the world economy also goes. Germany is still one of the strongest players.. yet.. it wont be the first to fall

              Stuttgart sounds a bit difficult. Too many people all around. In central europe its not about being strong or smart.. when everything goes south.. central europe will be a difficult place.. but then again.. so will all other places be as well

            • think of germany as a shop selling top quality merchandise.

              no matter how good, if their customer base vanishes, they go down along with everybody else

            • Van Kent says:

              The way I see it, during the transitioning period of martial law, the only riches will be clout. The ability to draw upon networks of people and get entire (other) networks activated.

              What is cash, in a cashless society? What are bank accounts, when credit cards dont work? What use is silver and gold, when you cant make entire networks of people interacting getting more activated with one bar of gold. What good are stocks, when stock exchanges dont work. What good are government bonds, when governments are in default.

              If I were in the elites, Id take control the grain silos, the wholesale central warehouses and the biggest farms. Then would make arrangements of which networks of people are doing what, for whom. Including the military and the biggest industries of the country.

              DJ, you see if debt is seen as a problem.. and you eventually have to try to get rid of the debts.. but it cant be done by just making the other side of the equation zero. Also our pensions, bank accounts, our equity.. goes to zero.. what remains.. well as I see it, clout remains

            • DJ says:

              Van K,
              You mean collapse on purpose to have control of the process?
              I suppose I have a hard time imagining martial law living in a demilitarized country where 20 policemen can’t handle a handful disobedient youths.

              I thought:
              Rich want to keep the system that makes them rich together
              Democracy ensures the precariat has a decent standard
              Middle class pays the bill
              At some point the middle class premium shrinks so much that they don’t bother working
              And then living standard reaches riot level.
              Then comes collapse.

            • Van Kent says:

              I have also thought it would be an instacollapse.. the instacollapse scenario is still the most logical to me
              What can I say.. other than.. Norm started it..
              Norm has been wondering about they Theo-dictatorship..

              I just continue Norms thoughts, on how an “controlled” collapse in to martial law and rationing could be made.. why it would be made.. and what it would mean for us.

              Its sometimes scary how Norm “sees” the future structure forming, so I listen pretty closely what he has to say..

            • ITEOTWAWKI says:

              VK I have learned loads from Norman..followed his blog when it was still called “Your Medieval Future” years ago, read his book as soon as it came out, and still follow him regularly on Disqus (a commenting facilitator software for blogs, of which Resilience is a part and where Norman regularly destroys the delusional writers and commenters there)…however (and in all humility since Norman is on a completely other level than me) I question the Martial Law scenario…what do we all do in that scenario..do we still go to work during our shifts..who brings us our food..the NYSE is obviously closed permanently and with it all world markets taking with it pensions, insurance companies, etc….JIT is gone..I just cannot visualize it…that’s why I am more in the instadoom scenario…

            • Fast Eddy says:

              I am with you… martial law might be implemented for a very short period as a last gasp to prevent total chaos…


              The falcon cannot hear the falconer;
              Things fall apart; the centre cannot hold;
              Mere anarchy is loosed upon the world,
              The blood-dimmed tide is loosed, and everywhere
              The ceremony of innocence is drowned;

            • Van Kent says:

              Yup, me too. Trouble seeing how to do international trade without currency.
              But the cyber attack thingy got me thinking, if its”not our fault”.. its an outside threat.. Something to just soldier through.. because we are under attack.. then it could be made to happen.. globally

              The basic trust in the market nodes is still there, its just that the cyber attack made all currencies fall.

              Its not my fault I cant pay your salary.. its the cyber attack..

              In that sort of environment you could bring in an entirely new sets of rules, new currencies, to the global economy, without crashing the trade.

            • Slow Paul says:

              If there are elders as you describe them, with sinister plans on how to stay wealthy and powerful. Isn’t that exactly what BAU is? They are wealthy and powerful today, they will do the same stuff tomorrow and stay wealthy and powerful!

              I think we simply have a self organizing system which moves in only one direction. Increasing complexity. Increasing inequality. We will continue down this path until we cannot. Sooner or later there will be a critical mass of poor, starving and sick people which collapses the system.

            • Fast Eddy says:

              Exactly. BAU is a system…. nothing sinister about it…

              But BAU needs cheap to extract resources to function – particularly oil.

              The system is running out of fuel — and it will react the same way that a car does when it runs out of fuel

            • Van Kent says:

              I dont believe in Eddys Elders. Think of like a bunch of old dudes sipping on some fine fine whiskey and hatching up some supermegahyperdyper master plan.. not happening.. I have tried to give instructions on simple plans to people, and seen them going sideways because people just misunderstood what I was saying.. if this happens to simple plans, what happsens to supermegahyperdyper master plans..

              And I do believe in self correcting complex systems arranging themselves by the next need that comes along. Like a flock of birds, or a flock of fish etc.

              And I see the many layers, and many compartmentalized fractions working independantly and also reacting to each others doings.

              But Pentagon and the Alphabet agencies do have computer simulations and expert planners consultants playing war games in almost anything.

              Now where does this leave us?

              It becomes plausible to plan a global coup.. (BTW if misspelled, coop, that is the plan of the continuation of government in case of ‘enemy attack’ funny, right)

              1. Lets first run a simple computer simulation of a cyber attack
              2. The guy in the next department sees the cyber attack simulation and plans a continuation of economy plan according to it
              3. However the collapse of the global economy starts to loom ahead..
              4. A fourth agency starts prepairing for a global cyber attack by planning viruses that would be used in it. So that defencive software could be developed.
              5. A consultant writes up a memo of impending doom by global system wide collapse
              6. Several games are run in the Pentagon war room.
              7. Insiders start to inform each other that its time to be proactive, otherwise everything goes to shit
              8. Real life cyber attacks are released on the public so that its seen if everything runs according to the simulation.
              9. The simulation shows that if done properly 99% of deaths can be avoided.
              10. The department with the false news desk starts to feed their key resources with the appropriate disinformation, so that everything will stay in deep state control, just like planned
              11. At a dinner party the alphabet agencies directors meet for a cigar in the pool room. One of them asks, when the cyber attack simulations will be a go? Everybody say it will be a go when the computer simulations shows its more likely to loose lives to an global economic meltdown. Choose the lesser of two evils..
              12. The computer is set, with the instructions to set loose the malwares as soon as the global economy seems to be in free fall crash mode.
              13. Nobody actually plans it all.. it all just happens..
              14. Insiders srill remaining in control of the countries key resources

              And all they were doing, was for a greater good..

            • Fast Eddy says:

              You are looking at it incorrectly…

              The Elders are are system…. they generally do not micro manage…. they do not call up Jeffrey Immelt and tell him how many jet engines to build this year…

              Basically .. if you buy into the system — you succeed… if you reject the system you have a difficult time earning a living…

              Heaven forbid that anyone try to rock the boat ….

              “Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of somebody, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive that they had better not speak above their breath when they speak in condemnation of it.” ― Woodrow Wilson

              The Elders control the money supply …. (Fed)

              Do you not agree with the axiom of ‘follow the money to find the power’

              “Once a nation parts with the control of its currency and credit, it matters not who makes the nation’s laws. … Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.” — Mackenzie King, Canadian Prime Minister 1935-1948.

              “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” – Woodrow Wilson, after signing the Federal Reserve into existence

              The men I quoted above are not anonymous posters on a web forum…. they were the leaders of major countries….

              Yet you are just dismissing what they said ….

              That’s like the men who shot JFK … being on their death beds and saying … we’d like to confess… and present detailed evidence …. that we assassinated JFK on the orders of the CIA management…

              And you saying — I don’t believe that. It is absurd.

            • This sounds like a fairly realistic scenario. A few years ago, I participated in a symposium that was designed to give the US Navy an idea regarding what scenarios that they should be simulating. I know that one issue I pointed out is that funding would be too low for the Navy.

            • Buzz Lightyear says:

              Just change the name if it helps. You really don’t think high level freemasons, jesuits, knights of malta, opus dei, intelligence agencies, global mafias are not pulling the strings to their benefit?

              I mean yes on a higher level everything is ordained by genetics, informational field effects, natural law etc but at the level of human activity we can at least infer that these groups are looking after their best interests whatever they may be.

              I recently read Rulers of Evil – an interesting read – which despite the title attempts to imply that all sides work for the greater good. It’s a tough conclusion to swallow given the actions we observe in many groups around the world but its easier to understand when looking at ecological systems. Individual organisms cannot exist in isolation and some fair better than others as a whole but it’s the whole that we should be focussing on. All actions whether we consider them good or bad form part of the whole. It’s just not clear to me that the combined results are always constructive.

              This planet is the only source of life that we know of. It may flourish for a while and then become a dead planet in what would be the blink of an eye to a universal being. If that is the program that’s unfolding here then there’s not a lot we can do about it. The program simply runs its course until it’s done.

              If humans were somehow able to take control of and rewrite that program i.e. through genetic engineering, nanotech etc then a branching off could occur – a mutation – something unexpected.

              These activities have going on for some time now in places like china where the rules are ignored.

            • Fast Eddy says:

              ‘The program simply runs its course until it’s done’


            • The whole way the world and the universe in general evolves is quite strange. There are many random changes that take place. Changes that are able to persist are not at all random, however. The ones that tend to persist are ones that allow offspring and thus, the system as a whole, to dissipate more energy. We can think in terms of good and bad, but this is not the system really works. At some point, the whole approach reaches a limit. It then must collapse back. Eventually a new approach may evolve, using what was able to last from the previous step. But how much that includes of our human society is not clear. It may be that a whole different approach is needed.

            • ITEOTWAWKI says:

              FE says: “The system is running out of fuel — and it will react the same way that a car does when it runs out of fuel”

              The master resource that underpins IC and all the other resources (including shale and tar-sands) is conventional oil…we do not have enough of it anymore to grow our global economy and the financial system needs growth or it dies. So my analogy would be the fuel in your car represents conventional oil, and the tank is half-full…however when your engine (which in my analogy is the financial system) buckles, it does not matter that you still have half a tank of fuel, it is now useless…and that is why, again with LTG, not taking into account the financial system, we might of had a few decades (they were calling for 2070)…take the financial system into account, and all of a sudden that year makes no sense. All of a sudden instead of decades, we’re talking a few years for the system to fail (post-2008)….and the way the world consumer is tapped out everywhere, it looks like we’re getting real close to Armageddon…

            • Oil plays a role, but I would argue that other energy sources are also important. Coal is especially important, because historically it has been cheap. It extraction has provided lots of jobs. Coal has underpinned much of the world’s industrialization. Oil can be used in small quantity, provided the overall cost of energy remains low. The peak oil movement has over-emphasized oil, and under-emphasized the need for a low cost energy mix. Also, the quantity of the energy mix needs to keep rising.

          • JT Roberts says:


            There are others living near you who also recognize the end of this system is approaching. If your close to Selters pay a visit.


            • Fast Eddy says:

              We sincerely hope that your visit to Bethel has been a
              rewarding one. No doubt it has helped you to become
              better acquainted with the work that Jehovah’s
              Witnesses are doing to aid people in their quest for a
              better future through God’s Kingdom.

              May your visit to us be an encouragement to you in your efforts
              to learn about our loving Creator and to live by his
              righteous standards.

              Visiting Hours: Visitors are welcome to take a guided
              tour of our facilities. The regular visiting hours are:
              Monday through Friday:
              9:00 a.m. to 11:00 a.m. and
              1:00 p.m. to 4:00 p.m.

              We request that larger groups inform us in advance of
              their planned visit.

              Location: Niederselters, Am Steinfels, 65618 Selters (Taunus).
              Telephone: 49(0)6483 410

              Now what were those coordinates…. ah…. 65618…. Selters…. Taunus…. good to go…

              3…2….1…. FIRE!!!!

        • adonis says:

          Cathal has a website called ‘before the collapse’ with a few ariticles she wrote that are worth checking out el mar

      • Greg Machala says:

        I think what is happening since 2014 is that there is no longer an oil price that is both affordable to the economy and profitable for the producer. That window closed in 2014. Since that time oil in storage has grown largely due to it being too expensive for the global economy. What we are seeing on the producer side is service companies cutting costs, exploration being halted, and selling assets. In a nutshell I believe that the oil industry is cannibalizing itself.

        • ITEOTWAWKI says:

          Oil industry’s swan song…

        • JT Roberts says:

          This is true Greg but remember money is only a proxy for energy. So underneath is an energy collapse.

        • Fast Eddy says:

          I wonder if the oil majors are spending (wasting) even a nickel on exploration… the numbers they publish indicate they have cut back significantly but not totally — but they can’t exactly drop that number to 0 as that would cause panic.

      • JT Roberts says:

        They now consume over 50% of their production making them a greater consumer than producer. That was 2012 pivot point. Irreversible trend.

  6. Greg Machala says:

    Check this out. Musk said “We’re a money-losing company,” –

    Looks like workers at the Tesla factory are overworked too.

  7. psile says:

    The hammer blow will be so loud, it will be heard in space…

    57% Of Australians Couldn’t Handle $100 A Month Rise In Mortgage Payments


    Rising property costs and stagnating wages have left more than 767,000 Australian households or 23.4% in mortgage stress, according to research firm Digital Finance Analytics. Even households in affluent suburbs struggle to meet repayments as survey finds financial distress from property price surges reaching beyond ‘battlers and mortgage belt’.

    • Greg Machala says:

      So, 57% of Australians have reached limits to growth.

      • Fast Eddy says:

        The underlying drivers were “flat or falling wage growth”, much faster rising living costs and the likelihood mortgage interest payments would only go up.

        >>> The pie is shrinking….

        Widespread mortgage burdens were limiting spending elsewhere and “sucking the life out of the economy”, and the problem should be addressed to head off a housing crash and its repercussions, North said.

        “If we start seeing house prices slipping then this can turn into a US 2007 scenario rather quickly,” he said.

        • psile says:

          The RBA cannot raise interest rates again, because it will cause a contraction in the economy, But the rising cost of living, declining wages, onerous mortgage repayments and just way too much personal debt will tip this sled of the edge of the precipice, sooner or later. When the slip begins, I fully expect the RBA to panic and lower rates though, that’s how you’ll know the end is near.

          • psile says:

            I mean the RBA talks a good game, but they are stuck, and cannot afford to either raise nor lower rates. But the final deflationary slip, led by the contraction in the property bubble, will cause a final desperate attempt to prevent what we know, with mathematical certainty will happen, by the wholesale slashing of rates. At best, this will buy a little bit more time, before the final curtain falls on the European experiment in the Antipodes.

      • psile says:

        It appears so, Aussies had a big run, and everything comes unstuck – entropy you know. The end of the road for the “lucky country” looms, as it eventually does for all.

        • Buzz Lightyear says:

          Venezuela looks nice this time of year

          Is that street football the natives are playing?

          How quaint

          Still… keeps the youth occupied I suppose

          Idle hands and all that

  8. xabier says:

    Interesting news about the famed Norwegian doomsday seed vault: it seems to be failing, due to utterly unanticipated warming of its location.

    ‘This is supposed to last for eternity.’

    • Greg Machala says:

      It is amazing how much we humans do not anticipate. Why do we need a doomsday seed vault? Makes no sense. The Earth is much better equipped to handle things than humans and a seed bank.

    • Greg Machala says:

      “This is supposed to last for eternity.” – Eternity in human terms is probably about 30 years.

    • JT Roberts says:

      I wonder what’s happening at the old military reactor on Greenland they’re not telling us about.

    • Buzz Lightyear says:

      Except it’s false…

      The Guardian claimed the flooding “impregnable” vault’s 300-foot entrance tunnel due to melting permafrost “questioned the ability of the vault to survive as a lifeline for humanity if catastrophe strikes.”

      There’s only one problem — the vault floods almost every year.

      Popular Science spoke to Cary Fowler, one of the vault’s designers, who told them “[f]looding is probably not quite the right word to use in this case.”

      “In my experience, there’s been water intrusion at the front of the tunnel every single year,” Fowler said.

      Fowler explained the tunnel was built along a mountain slope, and at the base two pumping stations remove water that gets into the entrance — the entrance was not made to be watertight.

      “The tunnel was never meant to be watertight at the front, because we didn’t think we would need that,” Fowler said. “What happens is, in the summer the permafrost melts, and some water comes in, and when it comes in, it freezes. It doesn’t typically go very far.”

      In fact, building the tunnel itself made the surrounding permafrost more vulnerable to melting. Permafrost is sensitive to temperature spikes and artificial developments. Designers have to be careful when building in the Arctic because permafrost melt can make buildings unstable.

      Even if all the ice caps melted, the seed vault would be totally fine, Fowler said.

      “We did this calculation; if all the ice in the world melted — Greenland, Arctic, Antarctic, everything — and then we had the world’s largest recorded tsunami right in front of the seed vault. So, very high sea levels and the world’s largest Tsunami. What would happen to the seed vault?” Fowler said.

      “We found that the seed vault was somewhere between a five and seven story building above that point. It might not help the road leading up to the seed vault, but the seeds themselves would be ok,” Fowler said.

      The Norwegian government opened the seed vault in 2008 as a “backstop” against “the challenge of natural or man-made disasters.” The vault contains more than 4,000 plant species from around the world, which sit sealed in chambers chilled to around zero degrees Fahrenheit.

      The seed vault, also referred to as the “doomsday” vault, is built 400 feet into a mountain slope in Spitsbergen island. Currently, there are between 800,000 and 900,000 seed samples in the vault.

      (Ironically, global warming was one of the threats the Norwegians wanted to hedge against. So, they put it in a region scientists say will warm faster than the rest of the world. But that questionable decision is a topic for another time.)

      Before Popular Mechanics spoke to one of the vault’s designers, meteorologist Ryan Maue pointed out some huge problems with The Guardian’s narrative.


  9. dolph says:

    Stop thinking like scientists, start thinking like Israelites.

    How do you keep the people showing up even though the system is dead? Simple. A little bit of pay and a little bit of inflation. That keeps them on the treadmill.

    You cannot for one moment allow an increase in real wages, and you cannot for one moment allow deflation. That would simultaneously increase the purchasing power of the workers’ money, and cause deflation as well, as money would be hoarded.

    You also have to buy up assets across the spectrum (stocks, housing) to keep people chasing the increasing price.

    You basically have to keep people showing up to work until they die. That’s the name of the game. It’s slave management, and you are the slaves.

    • Buzz Lightyear says:

      There are a lot of Israelies that are scientists

      So should I think like the ones that are not scientists?

      Will that do?

      Or maybe just stop thinking…

      Now there’s a solution!

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