Why Oil Prices Can’t Bounce Very High; Expect Deflation Instead

Economists have given us a model of how prices and quantities of goods are supposed to interact.

Figure 1. From Wikipedia: The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product.

Unfortunately, this model is woefully inadequate. It sort of works, until it doesn’t. If there is too little of a product, higher prices and substitutions are supposed to fix the problem. If there is too much, prices are supposed to fall, causing the higher-priced producers to drop out of the system.

This model doesn’t work with oil. If prices drop, as they have done since mid-2014, businesses don’t drop out. They often try to pump more. The plan is to try to make up for inadequate prices by increasing the volume of extraction. Of course, this doesn’t fix the problem. The hidden assumption is, of course, that eventually oil prices will again rise. When this happens, the expectation is that oil businesses will be able to make adequate profits. It is hoped that the system can again continue as in the past, perhaps at a lower volume of oil extraction, but with higher oil prices.

I doubt that this is what really will happen. Let me explain some of the issues involved.

[1] The economy is really a much more interlinked system than Figure 1 makes it appear.

Supply and demand for oil, and for many other products, are interlinked. If there is too little oil, the theory is that oil prices should rise, to encourage more production. But if there is too little oil, some would-be workers will be without jobs. For example, truck drivers may be without jobs if there is no fuel for the vehicles they drive. Furthermore, some goods will not be delivered to their desired locations, leading to a loss of even more jobs (both at the manufacturing end of the goods, and at the sales end).

Ultimately, a lack of oil can be expected to reduce the availability of jobs that pay well. Digging in the ground with a stick to grow food is a job that is always around, with or without supplemental energy, but it doesn’t pay well!

Thus, the lack of oil really has a two-way pull:

(a) Higher prices, because of the shortage of oil and the desired products it produces.

(b) Lower prices, because of a shortage of jobs that pay adequate wages and the “demand” (really affordability) that these jobs produce.

[2] There are other ways that the two-way pull on prices can be seen:

(a) Prices need to be high enough for oil producers, or they will eventually stop extracting and refining the oil, and,

(b) Prices cannot be too high for consumers, or they will stop buying products made with oil.

If we think about it, the prices of basic commodities, such as food and fuel, cannot rise too high relative to the wages of ordinary (also called “non-elite”) workers, or the system will grind to a halt. For example, if non-elite workers are at one point spending half of their income on food, the price of food cannot double. If it does, these workers will have no money left to pay for housing, or for clothing and taxes.

[3] The upward pull on oil prices comes from a combination of three factors.

(a) Rising cost of production, because the cheapest-to-produce oil tends to be extracted first, leaving the more expensive-to-extract oil for later. (This pattern is also true for other types of resources.)

(b) If workers are becoming more productive, this growing productivity of workers is often reflected in higher wages for the workers. With these higher wages, workers can afford more goods made with oil, and that use oil in their operation. Thus, these higher wages lead to higher “demand” (really affordability) for oil.

Recently, worker productivity has not been growing. One reason this is not surprising is because energy consumption per capita hit a peak in 2013. With less energy consumption per capita, it is likely that, on average, workers are not being given bigger and better “tools” (such as trucks, earth-moving equipment, and other machines) with which to leverage their labor. Such tools require the use of energy products, both when they are manufactured and when they are operated.

Figure 2. World Daily Per Capita Energy Consumption, based on primary energy consumption from BP Statistical Review of World Energy and 2017 United Nations population estimates.

(c) Another “pull” on demand comes from increased investment. This investment can be debt-based or can reflect equity investment. It is these financial assets that allow new mines to be opened, and new factories to be built. Thus, wages of non-elite workers can grow. McKinsey Global Institute reports that growth in total “financial assets” has slowed since 2007.

Figure 3. Figure by McKinsey Global Institute showing that growth in debt in financial instruments (both debt and equity) has slowed significantly since 2007. Source

More recent data by McKinsey Global Institute shows that cross-border investment, in particular, has slowed since 2007.

Figure 4. Figure by McKinsey Global Institute showing that global cross-border capital flows (combined debt and equity) have declined by 65% since the 2007 peak. Download from this page.

This cross-border investment is especially helpful in encouraging exports, because it often puts into place new facilities that encourage extraction of minerals. Some minerals are available in only a few places in the world; these minerals are often traded internationally.

[4] The downward pull on oil and other commodity prices comes from several sources.

(a) Oil exports are often essential to the countries where they are extracted because of the tax revenue and jobs that they produce. The actual cost of extraction may be quite low, making extraction feasible, even at very low prices. Because of the need for tax revenue and jobs, governments will often encourage production regardless of price, so that the country can maintain its place in the world export market until prices again rise.

(b) Everyone “knows” that oil and other commodities will be needed in the years ahead. Because of this, there is no point in stopping production altogether. In fact, the cost of production is likely to keep rising, putting an upward push on commodity prices. This belief encourages businesses to stay in the market, regardless of the economics.

(c) There is a long lead-time for developing new extraction capabilities. Decisions made today may affect extraction ten years from now. No one knows what the oil price will be when the new production is brought online. At the same time, new production is coming on-line today, based on analyses when prices were much higher than they are today. Furthermore, once all of the development costs have been put in place, there is no point in simply walking away from the investment.

(d) Storage capacity is limited. Production and needed supply must balance exactly. If there is more than a tiny amount of oversupply, prices tend to plunge.

(e) The necessary price varies greatly, depending where geographically the extraction is being done, and depending on what is included in the calculation. Costs are much lower if the calculation is done excluding investment to date, or excluding taxes paid to governments, or excluding necessary investments needed for pollution control. It is often easy to justify accepting a low price, because there is usually some cost basis upon which such a low price is acceptable.

(f) Over time, there really are efficiency gains, but it is difficult to measure how well they are working. Do these “efficiency gains” simply speed up production a bit, or do they allow more oil in total to be extracted? Also, cost cuts by contractors tend to look like efficiency gains. In fact, they may simply be temporary prices cuts, reflecting the desire of suppliers to maintain some market share in a time when prices are too low for everyone.

(g) Literally, every economy in the world wants to grow. If every economy tries to grow at the same time and the market is already saturated (given the spending power of non-elite workers), a very likely outcome is plunging prices.

[5] As we look around the world, the prices of many commodities, including oil, have fallen in recent years.

Figures 3 and 4 show that investment spending spiked in 2007. Oil prices spiked not long after that–in the first half of 2008.

Figure 5. Monthly Brent oil prices with dates of US beginning and ending QE.

Quantitative Easing (QE) is a way of encouraging investment through artificially low interest rates. US QE began right about when oil prices were lowest. We can see that the big 2008 spike and drop in prices corresponds roughly to the rise and drop in investment in Figures 3 and 4, above, as well.

If we look at commodities other than oil, we often see a major downslide in prices in recent years. The timing of this downslide varies. In the US, natural gas prices fell as soon as gas from fracking became available, and there started to be a gas oversupply problem.

I expect that at least part of gas’s low price problem also comes from subsidized prices for wind and solar. These subsidies lead to artificially low prices for wholesale electricity. Since electricity is a major use for natural gas, low wholesale prices for electricity indirectly tend to pull natural gas prices down.

Figure 6. Natural gas prices in the US and Canada, indexed to the 2008 price, based on annual price data provided in BP Statistical Review of World Energy, 2017.

Many people assume that fracking can be done so inexpensively that the type of downslide in prices shown in Figure 6 makes sense. In fact, the low prices available for natural gas are part of what have been pushing North American “oil and gas” companies toward bankruptcy.

For a while, it looked like high natural gas prices in Europe and Asia might allow the US to export natural gas as LNG, and end its oversupply problem. Unfortunately, overseas prices of natural gas have slid since 2013, making the profitability of such exports doubtful (Figure 7).

Figure 7. Prices of natural gas imports to Europe and Asia, indexed to 2008 levels, based on annual average prices provided by BP Statistical Review of World Energy, 2017.

Coal prices have followed a downward slope of a different shape since 2008. Note that the 2016 prices range from 32% to 59% below the 2008 level. They are even lower, relative to 2011 prices.

Figure 8. Prices of several types of coal, indexed to 2008 levels, based on annual average prices provided by BP Statistical Review of World Energy, 2017.

Figure 9 shows the price path for several metals and minerals. These seem to follow a downward path as well. I did not find a price index for rare earth minerals that went back to 2008. Recent data suggested that the prices of these minerals have been falling as well.

Figure 9. Prices of various metals and minerals, indexed to 2008, based on USGS analyses found using this link: https://minerals.usgs.gov/minerals/pubs/mcs/

Figure 9 shows that several major metals are down between 24% and 35% since 2008. The drop is even greater, relative to 2011 price levels.

Internationally traded foods have also fallen in price since 2008.

Figure 10. Food prices, indexed to 2008 levels, based on data from the United Nations’ Food and Agricultural Organization.

In Item [4] above, I listed several factors that would tend to make oil prices fall. These same issues could be expected to cause the prices of these other commodities to drop. In addition, energy products are used in the production of metals and minerals and of foods. A drop in the price of energy products would tend to flow through to lower extraction prices for minerals, and lower costs for growing agricultural products and bringing products to market.

One surprising place where prices are dropping is in the auction prices for the output of onshore wind turbines. This is a chart shown by Roger Andrews, in a recent article on Energy Matters. The cost of making wind turbines doesn’t seem to be dropping dramatically, except from the fall in the prices of commodities used to make the turbines. Yet auction prices seem to be dropping by 20% or more per year.

Figure 11. Figure by Roger Andrews, showing trend in auction prices of onshore wind energy from Energy Matters.

Thus, wind energy purchased through auctions seems to be succumbing to the same deflationary market forces as oil, natural gas, coal, many metals, and food.

[6] It is very hard to see how oil prices can rise significantly, without the prices of many other commodities also rising.

What seems to be happening is a basic mismatch between (a) the amount of goods and services countries want to sell, and (b) the amount of goods and services that are truly affordable by consumers, especially those who are non-elite workers. Somehow, we need to fix this supply/demand (affordability) imbalance.

One way of raising demand is through productivity growth. As mentioned previously, such a rise in productivity growth hasn’t been happening in recent years. Given the falling energy per capita amounts in Figure 2, it seems unlikely that productivity will be growing in the near future, because the adoption of improved technology requires energy consumption.

Another way of raising demand is through wage increases, over and above what would be indicated by productivity growth. With globalization, the trend has been to lower and less stable wages, especially for less educated workers. This is precisely the opposite direction of the change we need, if demand for goods and services is to rise high enough to prevent deflation in commodity prices. There are very many of these non-elite workers. If their wages are low, this tends to reduce demand for homes, cars, motorcycles, and the many other goods that depend on wages of workers in the world. It is the manufacturing and use of these goods that influences demand for commodities.

Another way of increasing demand is through rising investment. This can eventually filter back to higher wages, as well. But this isn’t happening either. In fact, Figures 3 and 4 show that the last big surge in investment was in 2007. Furthermore, the amount of debt growth required to increase GDP by one percentage point has increased dramatically in recent years, both in the United States and China, making this approach to economic growth increasingly less effective. Recent discussions seem to be in the direction of stabilizing or lowering debt levels, rather than raising them. Such changes would tend to lower new investment, not raise it.

[7] In many countries, falling export revenue is adversely affecting demand for imported goods and services.

It is not too surprising that the export revenue of Saudi Arabia has fallen, with the drop in oil prices.

Figure 12. Saudi Arabia exports and imports of goods and services based on World Bank data.

Because of the drop in exports, Saudi Arabia is now buying fewer imported goods and services. A person would expect other oil exporters also to be making cutbacks on their purchases of imported goods and services. (Exports in current US$ means exports measured year-by-year in US$, without any inflation adjustment.)

It is somewhat more surprising that China’s exports and imports are falling, as measured in US$. Figure 13 shows that, in US dollar terms, China’s exports of goods and services fell in both 2015 and 2016. The imports that China bought also fell, in both of these years.

Figure 13. China’s exports and imports of goods and services on a current US$ basis, based on World Bank data.

Similarly, both the exports and imports of India are down as well. In fact, India’s imports have fallen more than its exports, and for a longer period–since 2012.

Figure 14. India’s exports and imports of goods and services in current dollars, based on World Bank data.

The imports of goods and services for the United States also fell in 2015 and 2016. The US is both an exporter of commodities (particularly food and refined petroleum products) and an importer of crude oil, so this is not surprising.

Figure 15. US exports and imports of goods and services in US dollars, based on World Bank data.

In fact, on a world basis, exports and imports of goods and services both fell, in 2015 and 2016 as measured in US dollars.

Figure 16. World exports and imports in current US dollars, based on World Bank data.

[8] Once export (and import) revenues are down, it becomes increasingly difficult to raise prices again. 

If a country is not selling much of its own exports, it becomes very difficult to buy much of anyone else’s exports. This impetus, by itself, tends to keep prices of commodities, including oil, down.

Furthermore, it becomes more difficult to repay debt, especially debt that is in a currency that has appreciated. This means that borrowing additional debt becomes less and less feasible, as well. Thus, new investment becomes more difficult. This further tends to keep prices down. In fact, it tends to make prices fall, since new investment is needed to keep prices level.

[9] World financial leaders in developed countries do not understand what is happening, because they have written off commodities as “unimportant” and “something that lesser-developed countries deal with.”

In the US, few consumers are concerned about the price of corn. Instead, they are interested in the price of a box of corn flakes, or the price of corn tortillas in a restaurant.

The US, Europe and Japan specialize in high “value added” goods and services. For example, in the case of a box of corn flakes, manufacturers are involved in many steps such as (a) making corn flakes from corn, (b) boxing corn flakes in attractive boxes, (c) delivering those boxes to grocers’ shelves, and (d) advertising those corn flakes to prospective consumers. These costs generally do not decrease, as commodity prices decrease. One article from 2009 says, “With the record seven-dollar corn this summer, the cost of the corn in an 18-ounce box of corn flakes was only 14 cents.”

Because of the small role that commodity prices seem to play in producing the goods and services of developed countries, it is easy for financial leaders to overlook price indications at the commodity level. (Data is available at this level of detail; the question is how closely it is examined by decision-makers.)

Figure 17. Various indices within US CPI Urban, displayed on a basis similar to that used in Figure 7 through 11. In other words, index values for later periods are compared to the average 2008 index value. CPI statistics are from US Bureau of Labor Statistics.

Figure 17 shows some components of the Consumer Price Index (CPI) on a basis similar to the trends in commodity prices shown in Figures 7 through 11. The category “Household furnishings and operations” was chosen because it has furniture in it, and I know that furniture prices have fallen because of the growing use of cheap imported furniture from China. This category shows a slight downslope in prices. The other categories all show small increases over time. If commodity prices had not decreased, prices of the other categories would likely have increased to a greater extent than they did during the period shown.

[10] Conclusion. We are likely kidding ourselves, if we think that oil prices can rise in the future, for very long, by a very large amount.

It is quite possible that oil prices will bounce back up to $80 or even $100 per barrel, for a short time. But if they rise very high, for very long, there will be adverse impacts on other segments of the economy. We can’t expect that wages will go up at the same time, so increases in oil prices are likely to lead to a decrease in the purchase of discretionary products such as meals eaten in restaurants, charitable contributions, and vacation travel. These cutbacks, in turn, can be expected to lead to layoffs in discretionary sectors. Laid off workers are likely to have difficulty repaying their loans. As a result, we are likely to head back into a recession.

As we have seen above, it is not only oil prices that need to rise; it is many other prices that need to rise as well. Making a change of this magnitude is almost certainly impossible, without “crashing” the economy.

Economists put together a simplified view of how they thought supply and demand works. This simple model seems to work, at least reasonably well, when we are away from limits. What economists did not realize is that the limits we are facing are really affordability limits, and that growing affordability depends upon productivity growth. Productivity growth in turn depends on a growing quantity of cheap-to-produce energy supplies. The term “demand,” and the two-dimensional supply-demand model, hide these issues.

The whole issue of limits has not been well understood. Peak Oil enthusiasts assumed that we were “running out” of an essential energy product. When this view was combined with the economist’s view of supply and demand, the conclusion was, “Of course, oil prices will rise, to fix the situation.”

Few stopped to realize that there is a second way of viewing the situation. What is falling is the resources that people need to have in order to have jobs that pay well. When this happens, we should expect prices to fall, rather than to rise, because workers are increasingly unable to buy the output of the economy.

If we look back at what happened historically, there have been many situations in which economies have collapsed. In fact, this is probably what we should expect as we approach limits, rather than expecting high oil prices. If collapse should take place, we should expect widespread debt defaults and major problems with the financial system. Governments are likely to have trouble collecting enough taxes, and may ultimately fail. Non-elite workers have historically come out badly in collapses. With low wages and high taxes, they have often succumbed to epidemics. We have our own epidemic now–the opioid epidemic.

 

 

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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2,280 Responses to Why Oil Prices Can’t Bounce Very High; Expect Deflation Instead

  1. adonis says:

    this will be the propaganda underpinning the new world order that ‘global warming’ cannot be called a fraud anyone that does so should be thrown in jail a world like that means the end of free speech

  2. The Second Coming says:

    End of BAU? Hardly, you all need to get the MSM Data and be HAPPY.
    Middle-class income hit highest level on record in 2016, Census Bureau reports

    By Heather Long, The Washington Post • September 12, 2017

    MIKE BLAKE | REUTERS | BDN
    A construction workers carries his gear to a job site in Carlsbad, California, May 24, 2017.

    America’s middle class had its highest-earning year ever in 2016, the U.S. Census Bureau reported Tuesday.

    Median household income in America was $59,039 last year, surpassing the previous high of $58,655 set in 1999, the Census Bureau said. The figure is adjusted for inflation and is one of the most closely watched indicators of how the middle class is faring financially, as the Census surveys nearly 100,000 homes.

    The Census said the uptick in earnings occurred because so many people found full-time jobs — or better-paying jobs — last year.

    America’s poverty rate also fell to 12.7 percent , the lowest since 2007, the year before the financial crisis hit. The percent of Americans without health insurance also dropped last year to just 8.8 percent, largely thanks to expanding coverage under the Affordable Care Act.
    https://bangordailynews.com/2017/09/12/news/middle-class-income-hit-highest-level-on-record-in-2016-census-bureau-reports/

    I’m going to have a yard sale of my 20 ft storage container!

    • This is what Wolf Blitzer has to say: https://wolfstreet.com/2017/09/12/the-terrible-facts-about-the-real-earnings-of-men/

      The only wage growth that has taken place since 1972 is bringing the median earnings of women up from 60% of that of men, to a bit over 80% of that of men. The earnings of men have stayed absolutely flat.

      He points out that the earnings in the well-publicized part of the study are for all types of “income” combined, including Social Security, pension income, workers compensation, unemployment insurance and all kinds of things.

      • Artleads says:

        When you list SS as earning, it occurred to me that non parity of earning for women limits what they earn through SS. Never thought of it that way.

        • Social Security gives relatively more benefits for the lower dollar of earnings. There is a fairly large haircut, though, for being out of the labor force for several years.

          Also, women have quite a bit longer life expectancy.

          IIRC, they also have the opportunity to use a benefit equal to 50% of the spouse’s benefit, if that is better. (Men do also.)

          This chart shows the number and average payment amounts by “primary beneficiary.” This is a little confusing. If only one spouse is alive, it is pretty clear who this is (regardless of who worked). If both spouses are alive, but one (typically the man) greatly out-earned what the other earned, then his payments would be shown as being 50% higher than the payment would be using the “normal formula.” This may be part of the reason why in most age ranges, the average amount of benefit checks seems to be 25% to 30% higher for men than for women.

          • Artleads says:

            “Social Security gives relatively more benefits for the lower dollar of earnings. There is a fairly large haircut, though, for being out of the labor force for several years.”

            I started in the system 60 years ago, and there was a benefit to starting early. As a low dollar earner, I benefitted from the advantage to that category. But as someone who stayed out of the system for many years, I was more disadvantaged by that than I realized. So mine seems to be a mixed bag.

            The chart is great.

      • Cliffhanger says:

        That’s Wolf Richter not Wolf Blitzer he is on CNN

    • Greg Machala says:

      “Median household income in America was $59,039 last year, surpassing the previous high of $58,655 set in 1999” – That is good news to you? Shirley you can’t be serious. Even if true, that means wages have been stagnant for almost 20 years now. That is terrible. Gail and others have shown many times that real wages have been stagnant much longer than 20 year too. So, this is not good news for you “The Second Coming.”

  3. Lastcall says:

    The pattern repeats…and repeats…and history is ignored.
    The manipulations of the narrative is ceaseless and yet again the perpetrators retire with their ill-gotten gains…cue Al Bore and his lied for dollars.

    ‘But I saw very quickly that Arab people and others from the region tended to have a much more nuanced understanding of the world, reflecting its true complexities, than the average American. Looking back, it was these Arab-American friends (who gave predictions and warnings about what was to come of the US invasion of Iraq) who were proven exactly right. At the time, they were sneered at and ridiculed by most for daring to offer a contrary viewpoint, even though they knew the history of America’s prior destructive meddling in the Middle East quite well.’

    http://www.zerohedge.com/news/2017-09-12/never-forget-marine-reflects-lies-our-endless-wars

  4. the Begining of the End says:

    Starting with the person at the top of the DOE, whom as recently as last year or so (before becoming the head of the DOE) thought we could just get rid of the Dept of Energy and drill, baby, drill, to keep the American Dream alive!

    https://energy.gov/sites/prod/files/2017/08/f36/Staff%20Report%20on%20Electricity%20Markets%20and%20Reliability_0.pdf

    The evolution of wholesale electricity markets, including the extent to which Federal policy
    interventions and the changing nature of the electricity fuel mix are challenging the original
    policy assumptions that shaped the creation of those markets;

    Whether wholesale energy and capacity markets are adequately compensating attributes such
    as on-site fuel supply and other factors that strengthen grid resilience and, if not, the extent to
    which this could affect grid reliability and resilience in the future; and

    The extent to which continued regulatory burdens, as well as mandates and tax and subsidy
    policies, are responsible for forcing the premature retirement of baseload power plants.

    I don’t recall seeing this posted before, maybe I just missed it (this site gets a lot of posts sometimes), but hopefully this is not a repost.

    I wonder what a global chart of baseload would look like, possible broken down by country. Per capita?

    Peak baseload?

    Will baseload erosion, combined with some black swan, be the straw that breaks the camels back?

  5. Lastcall says:

    So much of our technological complexity is fragile…

    ‘When one examines the collapses of the tech bubble and the housing bubble, it’s evident that one of the central elements of those collapses was the gradual recognition by investors that the overvalued pieces of paper they were holding were actually little Potemkin Villages; temporarily glorious and impressive on the surface, but backed by much less than investors had imagined was there. What sort of “catalyst” is needed for a Potemkin Village or a Ponzi scheme to disappoint? Only the gradual or sudden discovery of the reality behind it: the recognition that there is no “there” there.’

    https://www.hussmanfunds.com/wmc/wmc170911.htm

    • xabier says:

      The discovery of reality is the very last thing we should wish for: we need more debt and more delusion, for everyone to believe that they are standing on a well-engineered floor with deep foundations, rather than shifting sands. It is this alone that keeps things running.

      • Lastcall says:

        I agree, and it is fascinating to see how readily each twist and turn is accepted as plausible. Belief in EV’s is a crowning achievement.

        • Protozoa says:

          If one looks at it from a purely gamekeeping POV, there are way too many useless eaters.

          Has this escaped TPTB? Unlikely.

          Would they, shock horror: take the world’s pop down to 50-100 million if it was deemed necessary to save their *sses?

          In a New York minute.

          • Fast Eddy says:

            Without a doubt…. however that would not save them so it wont happen

            • Protozoa says:

              Well well, I hear strains of Kumbaya.

              Who’d a thunk it?

            • Fast Eddy says:

              How do you reach that conclusion?

              The el ders would kill every last one of us if it meant they could maintain BAU…. but they will not … because killing off the goy im would precipitate the end of BAU and result in their immediate deaths as well.

              Koombaya? You’ve got your marbles mixed up

            • Protozoa says:

              tsk-tsk

              Ah…… presumptuousness almost like voluptuousness. Overfull.

              Robotics and AI are nearly here.

            • Fast Eddy says:

              One thing is for certain ….. the MORE ons are here.

            • Tim Groves says:

              No doubt TPTB always will do what they think they have to do in order to remain TPTB.

              Cathal reckons, “the Reset has begun.”

              David Icke warns that “AI could take over mankind by 2018.”

              Nafeez says, “Some time after January 2018, we are seeing the probability of a new crisis convergence in global energy, economic and food systems, similar to what occurred in 2008.”

              And Guy McF’son has predicted the end of civilization by 2018 due to peak oil.

              On the other hand, the World Cup is still due to go ahead in 2018 in Russia, and Game of Thrones Season 8 is slated for broadcast as early as the summer of that year, so we have no reason to be totally pessimistic. The plug will not be pulled by the Eld.ers until next September at the earliest.

            • Yes, it will.

              With less people less facilities are needed so many surviving nuclear plants can be closed.

          • Arnoux’s informed claim is there is roughly ~2B of people needed to run contemporary support systems for the overall industrial civilization. I think on this point he is more or less right, and when you apply a bit of chaos and triage into this equation, the number could be even lower, so that’s ~5.5-6.5B to be left on the cutting floor or shell we say on the altar of having tech civilization humming for few more years.

            He who thinks this “culling” won’t be at least attempted in some shape or form before ~2030 is not rational. Long term successes (and mid term for specific regions) of such policy are another matter.. not expecting viability of this can kicking long term obviously..

            • Protozoa says:

              What makes one worthy?

              Human rights? – Maybe not.

            • Slow Paul says:

              I don’t think it is plausible that useless eaters will be eliminated per se, but the people on the bottom rung of society’s ladder will simply die off from lack of essentials and medicine. People important to IC will inherently have decent jobs and some security in their lives.

            • Protozoa says:

              At this point FE usually chimes in with: you are a Kumbaya freak.

              But he is having an agonizing reappraisal right now as the crushing reality of AI and robotics soon making almost ALL of humanity redundant hits home.

            • Georgia guidestones said 500m is enough.

              Although they were wrong on one thing – Swahili will not be spoken in that world.

            • Fast Eddy says:

              This is so beyond stewwpid I won’t even address it

      • Greg Machala says:

        I agree. The older I get and the more I have come to realize how artificial our existence has become. We are living a virtual reality. Almost every service, every device, every bite of food we eat, all comes courtesy of fossil fuel burning. Almost nothing we experience today could ever be experienced in the natural world. Our homes, entertainment, medical care, transportation, food, water and waste disposal are all transient and will all disappear soon after fossil fuels are no longer economic. In 100 years much of what we consider high tech and robust will be in ruins.

        • All of the video games that everyone is playing and the many movies that are being downloaded fit in perfectly with this artificial reality. No need to get married and have a family, for example.

          • In a way these nascent generations of “lemmings” would suffer less when departing this world in contrast to more fully developed personalities of older generations, who were troubled witnessing the riches both in the nature and in some advanced human cultures going away. It seems as sort of a trade off and “intelligent” nature’s care of doing business on such occasions..

  6. It seems what the peak oil people did was not in vain, because the Peak Oilers led to the grab of Middle Eastern oil resources before it was too late.

    That did postpone peak oil significantly, and possibly bought enough time for Singularity to arrive.

    • Cliffhanger says:

      Peak oil already occurred back in 2006. And we have permanent oil shortages coming in a few years. Euphoria is almost always a temporary condition.

      • Or maybe we do not have “permanent oil shortages.” Maybe we have permanently closed banks, and no way to buy the glut of oil that is available. Your “peak oil” beliefs guide your thinking.

        • Artleads says:

          You have made this point several times before, and it has helped my understanding greatly. Since there is not a shortage of oil, what is peaking is the effectiveness of the money system to produce it for work. If it is to continue indefinitely to do work, some other (or accompanying) system will be required for the purpose.

        • Cliffhanger says:

          I have given dozens of reasons why the permanent oil shortages are coming.

          • A networked system works in a very different way than peak oilers have modeled the system. If you believe peak oil models, oil “runs out.” A more likely scenario is that the “system collapses.” Wages of non-elite workers fall too low. The total amount of per capita energy consumption starts to fall (not necessarily oil). It becomes more and more difficult to repay debt with interest. Oil prices may be unstable, but it is doubtful that they will be high for any length of time. Banks collapse and governments collapse. Oil gluts are as likely as shortages, in my opinion. Oil gluts happen because citizens lack buying power to afford to buy goods like homes and cars.

    • Anything that gets left in the ground will likely stay there indefinitely. This is true for natural gas and most coal as well as oil.

      • Artleads says:

        But I see that as due to the failure of the money system to produce it under reduced circumstances.. Produce it for such basic needs as managing nuclear waste, growing most food, and maintaining skeleton government services.

      • Artleads says:

        So although I saw this as having essentially to do with human decisions–like not working to produce FFs without having to make a profit–any change toward producing FFs through other (and additional) forms of incentives depends on a fragile FF industry? Any “initiative” toward workaround resilience could destabilize the FF industry? One of the ways that what’s left in the ground would have to stay there? It could be taken out by some different formula, but arriving at that formula is beyond the range of a fragile system.

  7. Harry Gibbs says:

    Thought this was interesting. I’ve heard Singapore touted as a barometer for global economic health but never Sweden. Copper and Caterpillar also seem to be respected indicators.

    “Swedish manufacturing PMI tumbled to the lowest in a year in August, well below analyst expectations, with mainly production and new-order data contributing to the decline. Scandinavia’s biggest economy is driven by an export industry including global manufacturers such as Atlas Copco AB, Volvo AB and Electrolux AB, and its performance is considered to be a leading indicator for global economic trends.””

    https://www.bloomberg.com/news/articles/2017-09-12/to-gauge-if-global-growth-is-running-out-of-gas-watch-sweden?fref=gc&dti=623305194398609

  8. Cliffhanger says:

    Can’t get a job because of Crapitlism? Become a whore for a rich old man instead….

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