World GDP in current US dollars seems to have peaked; this is a problem

World GDP in current US dollars is in some sense the simplest world GDP calculation that a person might make. It is calculated by taking the GDP for each year for each country in the local currency (for example, yen) and converting these GDP amounts to US dollars using the then-current relativity between the local currency and the US dollar.

To get a world total, all a person needs to do is add together the GDP amounts for all of the individual countries. There is no inflation adjustment, so comparing GDP growth amounts calculated on this basis gives an indication regarding how the world economy is growing, inclusive of inflation. Calculation of GDP on this basis is also inclusive of changes in relativities to the US dollar.

What has been concerning for the last couple of years is that World GDP on this basis is no longer growing robustly. In fact, it may even have started shrinking, with 2014 being the peak year. Figure 1 shows world GDP on a current US dollar basis, in a chart produced by the World Bank.

Figure 1. World GDP in “Current US Dollars,” in chart from World Bank website.

Since the concept of GDP in current US dollars is not a topic that most of us are very familiar with, this post, in part, is an exploration of how GDP and inflation calculations on this basis fit in with other concepts we are more familiar with.

As I look at the data, it becomes clear that the reason for the downturn in Current US$ GDP is very much related to topics that I have been writing about. In particular, it is related to the fall in oil prices since mid-2014 and to the problems that oil producers have been having since that time, earning too little profit on the oil they sell. A similar problem is affecting natural gas and coal, as well as some other commodities. These low prices, and the deflation that they are causing, seem to be flowing through to cause low world GDP in current US dollars.

Figure 2. Average per capita wages computed by dividing total “Wages and Salaries” as reported by US BEA by total US population, and adjusting to 2016 price level using CPI-Urban. Average inflation adjusted oil price is based primarily on Brent oil historical oil price as reported by BP, also adjusted by CPI-urban to 2016 price level.

While energy products seem to be relatively small compared to world GDP, in fact, they play an outsized role. This is the case partly because the use of energy products makes GDP growth possible (energy provides heat and movement needed for industrial processes), and partly because an increase in the price of energy products indirectly causes an increase in the price of other goods and services. This growth in prices makes it possible to use debt to finance goods and services of all types.

A decrease in the price of energy products has both positive and negative impacts. The major favorable effect is that the lower prices allow the GDPs of oil importers, such as the United States, European Union, Japan, and China, to grow more rapidly. This is the effect that has predominated so far.

The negative impacts appear more slowly, so we have seen less of them so far. One such negative impact is the fact that these lower prices tend to produce deflation rather than inflation, making debt harder to repay. Another negative impact is that lower prices (slowly) push companies producing energy products toward bankruptcy, disrupting debt in a different way. A third negative impact is layoffs in affected industries. A fourth negative impact is lower tax revenue, particularly for oil exporting countries. This lower revenue tends to lead to cutbacks in governmental programs and to disruptions similar to those seen in Venezuela.

In this post, I try to connect what I am seeing in the new data (GDP in current US$) with issues I have been writing about in previous posts. It seems to me that there is no way that oil and other energy prices can be brought to an adequate price level because we are reaching an affordability limit with respect to energy products. Thus, world GDP in current dollars can be expected to stay low, and eventually decline to a lower level. Thus, we seem to be encountering peak GDP in current dollars.

Furthermore, in the years ahead the negative impacts of lower oil and other energy prices can be expected to start predominating over the positive impacts. This change can be expected to lead to debt-related financial problems, instability of governments of oil exporters, and falling energy consumption of all kinds.

Peak Per Capita Energy Consumption Is Part of the Problem, Too

One problem that makes our current situation much worse than it might otherwise be is the fact that world per capita energy consumption seems to have hit a maximum in 2013 (Figure 3).

World daily per capita energy consumption

Figure 3. World Daily Per Capita Energy Consumption, based on primary energy consumption from BP Statistical Review of World Energy and 2017 United Nations population estimates.

Surprisingly, this peak in consumption occurred before oil and other energy prices collapsed, starting in mid-2014. At these lower prices, a person would think that consumers could afford to buy more energy goods per person, not fewer.

Per capita energy consumption should be rising with lower prices, unless the reason for the fall in prices is an affordability problem. If the drop in prices reflects an affordability problem (wages of most workers are not high enough to buy the goods and services made with energy products, such as homes and cars), then we would expect the pattern we are seeing today–low oil and other energy prices, together with falling per capita consumption. If the reason for falling per capita energy consumption is an affordability problem, then there is little hope that prices will rise sufficiently to fix our current problem.

One consideration supporting the hypothesis that we are really facing an affordability problem is the fact that in recent years, energy prices have been too low for companies producing oil and other energy products. Since 2015, hundreds of oil, natural gas, and coal companies have gone bankrupt. Saudi Arabia has had to borrow large amounts of money to fund its budget, because at current prices, tax revenues are too low to fund it. In the United States, investors are cutting back on their support for oil investment, because of the continued financial losses of the companies and evidence that approaches for mitigating these losses are not really working.

Which Countries Are Suffering Falling GDP in Current US Dollars?

With lower oil prices, Saudi Arabia is one of the countries with falling GDP in Current US$.

Figure 4. Increase in GDP since 1990 for Saudi Arabia in current US dollars, based on World Bank Data.

Saudi Arabia pegs its currency to the dollar, so its lower GDP is not because its currency has fallen relative to the US dollar; instead, it reflects a situation in which fewer goods and services of all kinds are being produced, as measured in US dollars. GDP calculations do not consider debt, so Figure 4 indicates that even with all of Saudi Arabia’s borrowing to offset falling oil revenue, the quantity of goods and services it was able to produce fell in both 2015 and 2016.

Other oil-producing countries are clearly having problems as well, but data is often missing from the World Bank database for these countries. For example, Venezuela is clearly having problems with low oil prices, but GDP amounts for the country are missing for 2014, 2015, and 2016. (Somehow, world totals seem to include estimates of the total omitted amounts, however.)

Figure 5 shows similar ratios to Figure 4 for a number of other commodity producing countries.

Figure 5. GDP patterns, in US current dollars, for selected resource exporting countries, based on World Bank data.

A comparison of Figures 4 and 5 shows that the GDP patterns for these countries are similar to that of Saudi Arabia. Because resources (including oil) do not account for as large a share of GDP for these countries as for Saudi Arabia, the peak as a percentage of 1990 GDP isn’t quite as high as for Saudi Arabia. But the trend is still downward, with 2014 typically the peak year.

We can also look at similar information for the historically big consumers of oil, coal and natural gas, namely the United States, the European Union, and Japan.

Figure 6. Increase in GDP since 1990 for the United States, the European Union, and Japan, in current US dollars, based on World Bank data.

Here, we find the growth trend is much more subdued than for the countries shown in the previous two charts. I have purposely put the upper limit of the scale of this chart at 6 times the 1990 GDP level. This limit is similar to the upper limit on earlier charts, to emphasize how much more slowly these countries have been growing, compared to the countries shown in Figures 4 and 5.

In fact, for the European Union and Japan, GDP in current US$ is now lower than it has been in recent years. Figure 6 is telling us that the goods and services produced in these countries are now lower in US dollar value than they were a few years ago. Since part of the cost of goods and services is used to pay wages, this lower relativity indirectly implies that the wages of workers in the EU and Japan are falling, relative to the cost of buying goods and services priced in US dollars. Thus, even apart from taxes added by these countries, consumers in the EU and Japan have been falling behind in their ability to buy energy products priced in US dollars.

Figure 6 indicates that the United States has been doing relatively better than the European Union and Japan, in terms of the value of goods and services produced each year continuing to grow. If we look back at Figure 2, however, we see that even in the US, wage growth has lagged far behind oil price increases. Thus, the US was also likely headed toward an affordability problem relating to goods and services made with oil.

The Asian exporting nations have been doing relatively better in keeping their economies growing, despite the downward pressure on energy prices.

Figure 7. Increase in GDP since 1990 for selected rapidly growing Asian exporting countries in current US dollars, based on World Bank data.

The two most rapidly growing countries are China and Vietnam. There seems to be a recent slowing of their growth rates, but no actual downturn.

India, Pakistan, and the Philippines are growing less rapidly. They do not seem to be experiencing any downturn at all.

Considering the indications of Figure 4 through 7, it appears that only a relatively small share of countries have experienced rising GDP in current US dollars. Although we have not looked at all possible groupings, the countries that seem to be doing best in terms of rising current US$ GDP are countries that are exporters of manufactured goods, including the Asian countries shown. Countries that derive significant GDP from producing energy products and other commodities seem to be experiencing falling GDP in current US dollars.

To fix the problems shown here, we would need to get prices of oil and other energy products back up again. This would indirectly raise prices of many other products as well, including food, new vehicles, and new homes. With lagging wages in many countries, this would seem to be virtually impossible to accomplish.

The Wide Range of GDP Indications We See 

In this post, I am talking about GDP of various countries, converted to a US$ basis. This is not quite the same as the GDP that we normally read about. It is not until a person starts working with world data that a person appreciates how different the various GDP and inflation calculations are.

GDP in US dollars is very important because energy products, including oil, are generally priced in US$. This seems to be true, whether or not the currency used in the actual transaction is US$. See Appendix A for charts showing the close connection between these two items.

The type of GDP is generally reported is inflation-adjusted (also called “real”) GDP. The assumption is made that no one will care (very much) about inflation rates. In general, inflation-adjusted GDP figures are much more stable than those in Current US$. This can be seen by comparing world GDP in Figure 8 with that shown in Figure 1.

Figure 8. GDP in 2010 US dollars, for the world and for the United States, based on World Bank data.

Using inflation-adjusted world GDP data, there doesn’t seem to be any kind of crisis ahead. The last major problem was in the 2008-2009 period. Even the impact of this crisis appears to be fairly small. The 2008-2009 crisis shows up more distinctly in the Current US$ amounts plotted in Figure 1.

World GDP growth figures that are published by the World Bank and others combine country by country data using some type of weighting approach. Economists tend to use an approach called Purchasing Power Parity (PPP). This approach gives a great deal more weight to developing nations than the US dollar weighted approach used elsewhere in this post. For example, under the PPP approach, China seems to get a weighting of about 1.9 times its GDP in US$; India seems to get a weighting of about 3.8 times its GDP in US$. The United States gets a weight of 1.0 times its GDP in US$, and the weights for developed nations tend to be fairly close to 1.0 times their GDP in US$. The world GDP we see published regularly should be called “inflation-adjusted world GDP, calculated with PPP weights.”

The relationship among the three types of GDP can be seen in Figure 9. It is clear that GDP growth in Current US$ is far more variable than the inflation-adjusted growth rate (in 2010 US$). PPP inflation-adjusted GDP growth is consistently higher than GDP growth with US dollar weighting.

Figure 9. World GDP Growth in three alternative measures: Current dollars, Inflation-adjusted GDP is in 2010 US$ and adjusted to purchasing power parity (PPP).

It is also clear from Figure 9 that there is also a big “Whoops” in the most recent years. Economic growth is at a record low level, as calculated in Current US$.

World “Inflation” Indications

The typical way of calculating inflation is by looking at prices of a basket of goods in a particular currency, such as the yen, and seeing how the prices change over a period of time. To get an inflation rate for a group of countries (such as the G-20), inflation rates of various countries are weighted together using some set of weights. My guess is that these weights might be the PPP weights used in calculating world GDP.

In Figure 10, I calculate implied world inflation using a different approach. Since the World Bank publishes World GDP both in 2010 US$ and in Current US$, I calculate the implied world inflation rate by comparing these two sets of values. (Some people might call what I am calculating the implicit price deflator for GDP, rather than an inflation rate.) I use three-year averages to smooth out year-to-year variability in these amounts.

Figure 10. World inflation rate calculated by comparing reported World GDP in Current US$ to reported World GDP in 2010 US$. Both of these amounts are available at the World Bank website.

The implied world inflation rates using this approach are fairly different from published inflation rates. In part, this is because the calculations take into account changing relativities of currencies. There may be other factors as well, such as the inclusion of countries that would not normally be included in aggregations. Inflation rates tend to be high when demand for energy products is high, and low when demand for energy products is low.

Figure 10 shows that, on a world basis, there have been negative inflation rates three times since 1963–in approximately 1983-1984; in the late 1990s to early 2000s; and since about 2014. If we compare these dates to the oil price and energy consumption data on Figures 2 and 3, we see that these time periods are ones that are marked by falling per capita energy consumption and by low oil prices. In some sense, these are the time periods when the economy is/was trying to stall, for lack of adequate demand for oil.

The workaround used to “fix” the lack of demand in the late 1990s to early 2000s seems to have been an increased focus on globalization. China’s growth in particular was very important, because it added both a rapidly growing supply of cheap energy from coal and a great deal of demand for energy products. The addition of coal effectively lowered the average price of energy products so that they were again affordable by a large share of the world population. The availability of debt to pull the Chinese and other Asian economies forward was no doubt of importance as well.

The United States has been fairly protected from much of what has happened because its currency, the US Dollar, is the world’s reserve currency. If we look at the inflation rate of the United States using data of the US Bureau of Economic Analysis, the last time the United States had a substantial period of contracting prices was in the US Depression of the 1930s. It is quite possible that such a situation existed worldwide, but I do not have world data for that period.

Figure 11. US inflation rate (really “GDP Deflator”) obtained by comparing US GDP in 2009 US$ to GDP in Current US $, based on US Bureau of Economic Analysis data.

It was during the Depression of the 1930s that debt defaults became widespread. It was only through deficit spending, including the significant debt-based funding for World War II, that the problem of inadequate demand for goods and services was completely eliminated.

How Do We Solve Our World Deflation Crisis This Time 

There seem to be three ways of creating demand for goods and services.

[1] A growing supply of cheap-to-produce energy products is really the basic way of increasing demand through economic growth.

If there are cheap-to-produce energy products available, a growing supply of these energy products can be used to increasingly leverage human labor, through the use of more and better “tools” for the workers. When workers become increasingly more productive, their wages naturally rise. It is this growing productivity of human labor that generally produces the rising demand needed to maintain the economic growth cycle.

As growth in energy consumption slows and then declines (Figure 3), this productivity growth tends to disappear. This seems to be part of today’s problem.

[2] Increasing the amount of debt outstanding can work to make the energy extraction system work more effectively, by raising the price that consumers can afford to pay for high-priced goods.

This increasing ability to pay for high-priced goods seems to come in two ways:

(a) The debt itself can be used to pay for goods, making these goods more affordable on a month-to-month or year-to-year basis.

(b) Increased debt can lead to increased wages for wage earners, because some of the increased debt ultimately goes to create new jobs and to pay workers. Figure 12 shows the positive association that increasing debt seems to have with inflation-adjusted wages in the United States.

Figure 12. Growth in US Wages vs. Growth in Non-Financial Debt. Wages from US Bureau of Economics “Wages and Salaries.” Non-Financial Debt is discontinued series from St. Louis Federal Reserve. (Note chart does not show a value for 2016.) Both sets of numbers have been adjusted for growth in US population and for growth in CPI Urban.

Debt is, in effect, the promise of future goods and services made with energy products. These promises are often helpful in allowing an economy to expand. For example, businesses can issue bonds to provide funds to expand their operations. Selling shares of stock acts in a manner similar to adding debt, with repayment coming from future operations. In both cases, the payback can occur, if energy consumption is in fact growing, allowing the output of the business to expand as planned.

Once world leaders decide that debt levels are too high, or need to be controlled better, we are likely headed for trouble, because debt can be very helpful in “pulling the economy forward.” This is especially the case if productivity growth is low because per capita energy consumption is falling.

[3] Rebalancing of currency relativities to the US dollar.

Rebalancing currencies to different levels relative to the dollar seems to play a major role in determining the “inflation rate” calculated in Figure 10. Currency rebalancing also plays a major role in determining the shape of the GDP graph in current US$, as shown in Figure 1. In general, the higher the average relativity of other currencies to the US$, the higher the demand for goods and services of all kinds, and thus the higher the demand for energy products.

One problem in recent years is that, in some sense, the average relativity of other currencies to the US dollar has fallen too low. The fall in relativities took place when the US discontinued its use of Quantitative Easing in late 2014.

Figure 13. Monthly Brent oil prices with dates of US beginning and ending QE.

The price of oil and of other energy products dropped steeply at that time. In fact, in inflation-adjusted terms, oil prices had been falling even prior to the end of QE. (See Figure 2, above.) The shift in the currency relativities made oil and other energy products more expensive for citizens of the European Union, Japan, and most of the commodity producing countries shown in Figures 4 and 5.

The ultimate problem underlying this fall in average relativities to the US dollar is that there is now a disparity between the prices that consumers around the world can afford to pay for energy products, and the prices that businesses producing energy products really need. I have written about this problem in the past, for example in Why Energy-Economy Models Produce Overly Optimistic Indications.

At this point, none of the three approaches for solving the world’s deflation problem seem to be working:

[1] Increasing the supply of oil and other energy products is not working well, because diminishing returns has led to a situation where if prices are high enough for producers, they are too high for consumers to afford the finished goods made with the energy products.

[2] World leaders have decided that we have too much debt and, indeed, debt levels are very high. In fact, if energy prices continue to be low, a significant amount of debt currently outstanding will probably be defaulted on.

[3] Countries generally don’t want to raise the exchange rates of their currencies to the dollar, because lower exchange rates tend to encourage exports. If the United States raises its interest rates, either directly or by selling its QE bonds, the level of the US dollar can be expected to rise relative to other currencies. Thus, other currencies are likely to fall even lower than they are today, relative to the US dollar. This will tend to make the problem with low oil prices (and other energy prices) even worse than today.

Thus, there seems to be no way out of our current predicament.

Conclusion

The world economy is in a very precarious situation. Many of the world’s economies have found that, measured in current US$, the goods and services they are producing are less valuable than they were in 2013 and 2014. In particular, all of the oil exporting nations have this problem. Many other countries that are producing commodities have the same problem.

Governments around the world do not seem to understand the situation we are facing. In large part, this is happening because economists have built models based on their view of how the world works. Their models tend to leave out the important role energy plays. GDP growth and inflation estimates based on PPP calculations give a misleading view of how the economy is actually operating.

We seem to be sleepwalking into an even worse version of the Depression of the 1930s. Even if economists were able to figure out what is happening, it is not clear that there would be a good way out. Higher energy prices would aid energy producers, but would push energy importing nations into recession. We seem to be facing a predicament with no solution.

Appendix 

Growing Inflation-Adjusted GDP Comes From Growing Energy Consumption

We often hear that GDP no longer depends on energy consumption, but this simply is not true. Energy consumption is needed for practically every industrial process, because energy causes the physical transformations that are need (including heat, light, and movement). Even services that only require a lighted, air-conditioned office and the use of computers require energy consumption of some type.

An industrialized country can outsource manufacturing of many of its goods to other countries, but the need for energy products goes with this outsourcing. The transfer of manufacturing to lesser developed countries tends to stimulate building in these countries. As a result, on a world basis, the amount of energy consumed tends to remain close to unchanged.

Using data for 1965 through 2016, we find the following relationship between inflation-adjusted world GDP and world energy consumption:

Figure A1. World growth in energy consumption vs. world GDP growth. Energy consumption from BP Statistical Review of World Energy, 2017. World GDP is GDP in US 2010$, as compiled by World Bank.

Another way of displaying the same data is as an X, Y graph. A very high long-term correlation can be observed on this basis.

Figure A2. X-Y graph of world energy consumption (from BP Statistical Review of World Energy, 2017) versus world GDP in 2010 US$, from World Bank.

This high level of correlation can be seen for other groupings as well. For example, for the grouping Middle East and North Africa, there is a high level of correlation between energy consumption and GDP.

Figure A3. X-Y graph showing correlation between energy consumption and GDP in the Middle East and North Africa.

If a person calculates the implications of this fitted line, energy consumption for these oil-producing countries is actually growing faster than inflation-adjusted GDP for these countries. This type of trend is to be expected if oil-producing countries are in some sense becoming less efficient in producing oil. This could happen for a number of reasons. One is that the easiest to extract oil is extracted first, leaving the more expensive to extract oil to be extracted later. Another possible reason for this trend is rising human populations in oil producing countries. These people drive cars and live in air conditioned buildings, driving up energy consumption for these countries. Whatever the cause, this loss of efficiency in oil production can be expected to at least partially offset growing efficiencies elsewhere in the system.

 

 

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.
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2,988 Responses to World GDP in current US dollars seems to have peaked; this is a problem

  1. Cliffhanger says:

    Gas Hoarding in Texas continues .

    • Davidin100millionbilliontrillionzillionyears says:

      is that a “bomb” attached to the back of a pickup truck?

      looks like an “explosive device” to me.

      I hope the owner isn’t a smoker.

      bigger in Texas!

      lots of rust, too.

    • greg machala says:

      That is somewhere in West Texas. I think that is an Alon gas station.

    • Davidin100millionbilliontrillionzillionyears says:

      rising demand usually means rising prices.

      rising prices usually mean rising supply.

      so we might just see another burst of EOR – enhanced oil recovery.

      squeeze some extra millions of barrels out of conventional wells.

      OPEC, which now has reduced quotas, could do away with those quotas and go back to full production.

      shale oil doesn’t matter much.

      so the latest data that suggests peak oil could be in 2017 may be off by a few years.

      production could go higher than this year, after rising prices spur higher investment.

      a peak in the 2020’s is not unreasonable in this situation.

      a flat out guess of 2025 could be about right.

      and that is VERY SOON.

    • Harry Gibbs says:

      He doesn’t talk about Japan, which has certainly passed peak demand –

      “Domestic oil sales in Japan fell 1.2 percent to 2.79 million barrels per day (bpd) in July from a year earlier, marking the lowest volumes for the month in at least 32 years, data from the Ministry of Economy, Trade and Industry (METI) showed on Thursday. Oil demand in the world’s third-biggest economy hit a record high around 2000 but has been declining gradually for more than a decade since then…”

      http://www.hellenicshippingnews.com/japans-july-oil-sales-fall-to-lowest-for-month-in-at-least-32-yrs/

      • I wish that the economists had used a different word than “demand.” For example, affordable supply might have given a better understanding of what is happening.

        • greg machala says:

          I agree, demand is the wrong word to use.

        • Tim Groves says:

          At least in the Japanese case, an aging and declining population is reducing the “demand” and “need” for car travel, simply as older people tend to stay home more and travel less. Also, in order to save on running costs (including fuel and vehicle tax), people are shifting toward more light vehicles or hybrids, which give better mileage. These vehicle trends are reducing gasoline and diesel use without people having to think much about the question of affordability. On the whole, they are not thinking, “I’d like to drive a sports car or a luxury saloon but since I can’t afford that I’ll settle for a mini-car”, but rather “I only use a car to go down to the shops, the local restaurant and the hairdressers, so I’ll drive the cheapest vehicle I can that provides a reasonable level of comfort.”

          Once a certain number of cars become light cars, then light cars seem normal and nobody feels they are making a sacrifice on the basis of affordability. Instead they feel, “why pay more than I need for luxury I don’t need.” In the present era of diminished expectations and graceful aging, most people are no longer trying to keep up with the Joneses, but are more likely to be trading down because they are rearranging their priorities and big, luxurious, high quality and expensive have lost their mystique.

          • ejhr2015 says:

            Patchy. The monied elite are not trading down. Only we plebs have to do that. 29,000 Mercs and 29,000 BMW’s sold don’t sound like a number outside the ranks of the wealthy. Restaurants here in Oz are struggling at the cheaper end, but doing well for the expensive end. Go figure.

          • All of their friends are doing the same as well, I expect.

        • Tim Groves says:

          Another factor in Japan is urbanization. Although the overall population is declining, more people are moving to big cities, where travel by public transport is more convenient and cheaper than by car. Cars also need parking spaces, and in cities where pace is at a premium the cost of parking or housing a vehicle can be as much as the cost of renting a home in the countryside.

          You can look at the situation in terms of affordability, and this makes sense in terms of whole system analysis because people will tend to buy only what they can afford to buy. However, if you are a producer or an importer or a supplying of a product such as gasoline, what you need to work out is how much of the product you need to keep producing, importing or supplying, and so it makes more sense to think in terms of “demand”, which is shorthand for “how much the punters want to buy for whatever reason”, rather than “affordable supply”, which is “how much they are capable of buying given their financial situation”.

          The difference may not be apparent at first glance, but it rests on the fact that in the developed world, for most people affordability is not the only constraint on purchasing as is the case with people living at or below subsistence level. Once you have disposable income and you are free to dispose of it how you wish, affordability competes with desirability, attraction, and other appeals to the imagination as an accelerator or brake on demand. The famous FE bucket list is an example. None of the items on such a list are necessities. They are things that are considered fun or interesting to do. Affordability, available time, and available enthusiasm put upper bounds on them, and within those limits, the bucket lister is free to choose between, or in effect, to create a demand for various items on the list.

          • Harry Gibbs says:

            That is an interesting distinction you make.

            I also read that Japan is shutting down all its old and expensive steam-turbine oil and gas power stations, and replacing them with cheaper coal ones.

          • Harry Gibbs says:

            Tim, do you have any insights into the aversion that many young people in Japan apparently have for s.ex and romance or into the ‘hikikomori’ who rarely if ever leave their rooms? Can these be understood as extreme collateral manifestations of this process by which Japan is in some senses attempting to ‘shrink to fit’ limits?

          • Thanks for your thoughts. You are right. It is more than affordability.

  2. Cliffhanger says:

    “Economic vulnerability to Peak Oil: study published in the journal Global Environmental Change (GEC) by the leading academic science publisher, Elsevier. GEC is the most influential geography and environmental studies journal in the world.
    https://www.researchgate.net/publication/257835287_Economic_vulnerability_to_Peak_Oil

    • Cliffhanger says:

      They site Gail several times in this paper!

      • I don’t remember being cited as “Gail the Actuary” on “The Oil Drum” in academic papers before, but I haven’t paid much attention. This article is from 2013, and that is closer to the time when I was writing for The Oil Drum. I thought that they generally used “Gail Tverberg,” even in that case.

        • Cliffhanger says:

          In Ahmed’s new book and study he sites you several times and uses several of your charts and graphs. He just sites you as Gail Tverberg

        • Buster Douglas says:

          I remember Gail the Actuary used often on The Oil Drum.

        • Mark says:

          Could be worse 😉 —from the car talk staff.
          Statistician Marge Innovera
          Studio Repair Technician Sloan Cranky
          Summer Intern Gladys Overnow
          Summer Wardrobe Coordinator Bermuda Schwartz
          Sunscreen Provisioner Les Brown
          Suppliers of Insurance to
          Dewey, Cheetham and Howe C.F.I. Care

  3. Fast Eddy says:

    “Methinks the lady doth protest too much”

    Remember that when you read the MSM

    • adonis says:

      thanks cliffhanger this story was very interesting

    • Buster Douglas says:

      Gold backed – that’s the ticket to avoiding oil sold in dollars. In a world of phony money generated by CB’s, the transition to oil trade via China could be much faster than many might think. Once gone it’s hard to see how the US could do anything to lure trade back to faith based USD’s.

  4. greg machala says:

    This is a pretty gloomy; kind of exposes all of the ongoing global crisis facing the US:
    http://www.zerohedge.com/news/2017-09-01/pat-buchanan-exposes-what-harvey-really-wrought

    • Fast Eddy says:

      6 months after the quake wrecked Haiti… I saw only one digger in my entire tour of the capital — it was idle on the side of the road. I did not see a single work crew trying to clean up the mess….

      I assume to this day the situation has not changed a great deal….

    • Davidin100millionbilliontrillionzillionyears says:

      domestic crises too:

      “The New York and D.C. subway systems are crumbling.
      Puerto Rico is bankrupt.
      Some states, such as Illinois, cannot balance their budgets.
      The murder rates are soaring in Baltimore and Chicago.
      Congress this month will have to raise the debt ceiling by hundreds of billions and pass a budget with a deficit bloated by the cost of Harvey.”

      it’s worth repeating that declining EROI makes the fixes for these problems increasingly unaffordable.

      the cheap energy to build up the Houston area is no longer available to repair the area.

      remember the New Orleans diaspora:

      population before Katrina 450,000 and after Katrina 300,000.

  5. Tim Groves says:

    From the “How Could I Have Been So Green” Department

    When Valerie Cappell and her family decided to build their dream home, they determined “to do the right thing” by making it as ecologically-friendly as possible.

    But the “Grand Designs-esq” adventure turned into a nightmare when she discovered the highly sustainable wool she had chosen to insulate the four-bed property was hosting a moth infestation of “biblical proportions”.

    Despite being reassured that treating the organic substance with pyrethrin would be sufficient to ward off insect invaders, she had to rip apart swathes of the wave-shaped house. Having consulted experts and sent portions of the infested wool for laboratory analysis, the biologist has now been told by Rentokil that her traumatic experience is shared by many others who opt for organic insulation.

    “It was soul-destroying and incredibly stressful when we couldn’t work out where all the moths were coming from,” she told The Telegraph. “I think our situation could be the tip of an iceberg – many more people must have installed this kind of insulation.”

    Ms Cappell and her family moved into the newly-built home in County Londonderry, Northern Ireland, in 2012, but it was not until this year that they began noticing moths all over the house. She has since been advised by experts that, unless properly treated, sheep’s wool is considered ‘fillet steak’ for moths.

    “We’re not green activists but we wanted to do the right thing,” she said. “We went for an adventurous design, very airy with lots of space, and we wanted it to be as ecologically friendly as possible.”

    “Passive” housing is built to a rigorous design whereby homes are build to conserve as much energy as possible. Although not quite qualifying for this standard, Ms Cappell’s home requires very little artificial heating due to the “extraordinary” amount of insulation.

    However, the cost of the ruined wool, as well as removing and replacing it is likely to come to nearly £10,000, negating any savings gained from low energy bills. Because the material was bought in 2011, Ms Cappell says she is out of time to sue the supplier, which is no longer in business.

    “The whole thing seems very unfair, and a horror story for those who have installed it,” she said, pointing out there was no obvious body to whom she could report the problem.

    Pyrethrins are a class of synthetically made organic compounds and are more commonly used in temporary anti-insect solutions like moth sprays.

    http://www.telegraph.co.uk/news/2017/09/01/grand-designs-dream-home-ruined-biblical-plague-moths/

    • When infested, not easy to get rid off, in ideal conditions the larvae quasi hibernates for upto 4yrs.. So, people often declare premature victory, if they are not seen in the room for a while..

      The only somewhat “working” solution is to push-lure them out (males of the species) of areas with wardrobe by strategically setting up herbal scent and/or chemical soaps, also doing often cold flash exchanges of air in the room (fall-spring), putting wool stuff into individual sacks with good seal etc. And obviously setting up the pheromone traps for males all over.

      But again, all of that and more (cleaning-washing everything), still you are mostly dealing with the current generations, not much with the eggs and larvae of the nascent generations or incoming new specimen from your possibly infested neighbor or guest, which can fly in any day.

      Cleverness of nature hard to fight against..

  6. Cliffhanger says:

    US National Academy of Sciences: Study: Doping Western Cultures With Oxytocin Will Cure Xenophobic Rejection of Refugees (Marsh 2017)
    http://www.pnas.org/content/114/35/9314.full.pdf

  7. psile says:

    The JIT system in full breakdown. This could go on for another month in the hub of U.S. oil production and refining. I’m sure that eventually things will be restored, just so that Texans, and Americans in general, can continue their manifest destiny, until the bitter end.

    Texas Gas Stations Start To Run Dry As Drivers Panic

    The lone commenters prescription for all of this is for folks to plug their non-existent Tesla’s into the non-existent solar array’s of their now non-existent houses. What a douche.bag.

    • greg machala says:

      liquid fuels are everything. Without them the economy stops. If there are in short supply too long, people begin to die. If they are cut off suddenly and completely people begin to panic. Solar and wind power do not fit directly into our energy infrastructure. They are add-ons. Can you picture wind turbines and solar panels rebuilding Houston?

      • This Gulf-Texas situation just highlights again very vividly the sheer over-consumption going on there inside NA, energy consumption levels per person/mi is not sustainable, must and will go down, gas guzzlers, sub urban waste land, ..

        This can no longer be tweaked nowadays as you rightly pointed out. But there are plethora of scenarios beyond that, e.g. after balkanization wave sweeping through the much of NA, we can’t discount having areas, where they actually scale down successfully, for a while. Be it under warlords protectorate of China or whatever. Electric hybrid bicycle 250W (you can haul groceries into hill) costs ~1.500, offroadish small displacement scooter ~4.500, and so on.. (just comparing it to contemporary normalcy-lunacy operating 30k+ carz on credit with ~5-50x higher consumption per single occupant passenger). Hacking railway into having inserted cargo wagons for such stuff hop on/off, for the last mile to home, essentially doable.

        The US/NA will most like remain too valuable in land and water resources, so after the quick decimation, someone will very likely take over at least part of it, it could go on on different setting in some specific places.

        This is very optimistic sub scenario for near-mid term (out of many), although not much applicable for many, as it involves very different world and much lower pop, very curtailed area of law and order vs. current national scale understanding etc.

        • Fast Eddy says:

          There can be NO BAU Lite.

          When the power goes off — it will go off everywhere in a very short period of time — it will not go on again – ever.

          And you get cascading failures from there including spare parts, fuel, the entire JIT supply chain

          It takes a special kind of Delusional to not comprehend this

          • You seemed to alter your position recently, claiming-acknowledging finally that synchronized (near-mid term) collapse is unlikely. So why to relapse into old dogmas..?

            There is a reason why certain countries are hell bend on domestic/ally import replacements not only for mil-gov application, but also energy, resource extraction, public transport, healthcare, agriculture etc.

            Is it going to help make temporary bridge to nowhere, possibly..
            Is it going to prop the current model, pop levels, consumption patterns as they are, nope.
            Is it bullet proof plan against all JIT complexities, nope, but enough for attempted autarky near-midterm, and that also counts in single human lifespan in relative cross examination.

      • Tim Groves says:

        For sheer sustainability, you can’t beat this.

        Self-driving, moves people and heavy loads, 0–4mph in 10 seconds, runs on organic fuel, and the emissions can be used as fertilizer.

      • psile says:

        I think we all know the answer to that one mate. Without FF’s we’re fracked. 😉

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