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

    • What struck me was that oil consumption since 2014 was down in these four countries: Mexico, Brazil, Venezuela, and Ecuador. In fact, when I look at BP Statistical Review of World Energy, total energy consumption is down since 2014 for these four countries, plus Trinidad & Tobago. All of these countries depend on oil for tax revenue. Brazil is not an oil exporter, of course.

      • Davidin100millionbilliontrillionzillionyears says:

        Latin America is on the periphery of the core first world countries.

        the early signs of the end of BAU should come from the periphery.

        isn’t it like the world is a human body going into hypothermia where the body keeps more heat in its core and the limbs get colder and the smallest extremities – fingers and toes – start to die from frostbite?

        the core is mostly Western Europe and the USA, and they will do everything possible to stay alive.

        the weakest countries will show the first signs of dying.

        • Lastcall says:

          Possibly more like diabetes; too much sugar (money printing) resulting in eventual amputation of gangrenous parts to save the core

        • psile says:

          This is already happening, even in the core, with places like Greece being quarantined from the system, and put on life support. Other countries like Libya, Syria and Venezuela, also in some arc of their collapse phase, aren’t so fortunate.

          This can only go on as long as the core can keep regrouping to stem the contagion. But in a system predicated of infinite growth in a finite world, this strategy can only work for a limited time. In fact, one can see the writing on the wall from here.

        • Tim Groves says:

          I think hypothermia and diabetes are both reasonable analogies, The periphery states can be considered to act as a kind of economic pressure regulator or buffer for the economies of the core states. In addition to supplying natural resources, agricultural produce and cheap labor to the core as needed, they absorb investment, loans and exports from the core when convenient for the core. But they are often little more than “colonies” of the core states and they usually lack the status (meaning the economic, military and political clout) required to demand equitable treatment, and so unless they are of strategic importance they tend to be the first places to be deprived of goodies and other support when expansion moves to contraction and continued support becomes inconvenient for the core states.

        • You may be right. The countries with a lot of problems now are ones that depend on a high price for oil (or coal or natural gas). The countries that are (for now) doing well are Western Europe and the USA, since low fossil fuel prices help them.

        • Fast Eddy says:

          It will be fascinating to watch this unfold…. will countries on the periphery such as Venezuela be allowed to completely collapse completely (no electricity – no oil – no food…) at some point …

          Or do the core countries keep them on some very low level of life support – along the lines of what we see in Haiti.

          I suspect the latter — allowing a nation to crash into starvation disease and violence — would startle the sheeple…. they would start wondering why nobody is stepping into help …. and they might suspect the world really is about to end

  1. Christopher says:

    Interesting talk by the psychologist Jordan Peterson concerning BAU and human psychology:

    • Cliffhanger says:

      Notice they don’t say that the US middle class in now the minority.

    • Similarly, in the morning JC Juncker (EU & old tax heaven apparatchik) was blasting on all TV channels about today’s wonderful levels of prosperity, growth etc.

      • xabier says:

        Ah, Juncker: through the bottom of his raised glass, everything looks wonderful, I don’t doubt…..

        • Would you pls. update us on the Catalan situation, is it of some concern that the central govs want to prosecute (and prospectively threaten more) local official who are organizing the plebiscite on separation from Madrid. Or it is just benign situation, excepting nothing out of it..again for now ?

          • xabier says:

            worldof

            It’s the same-old same-old, same as for 100 years.

            The Catalan nationalists are single-policy fanatics, totally impervious to reason, and most other politicians in Catalonia are forced to go along with it lest they lose their share of votes or other more embarrassing issues are talked about – like the Catalan economy being screwed and fully dependent on trade within Spain and…hahem…. corruption.

            I am sure Rajoy would be negotiating if Merkel and the ECB/ EU Commission thought it was a dangerous issue that could blow things up.

            He can just ignore it all, stick to the strict terms of the Constitution and, ultimately, prosecute any politicians or officials who participate in the referendum and exclude them from any public employment or office when convicted.

            Careers would be ruined, although I suppose the politicians have guarantees from their parties of getting some kind of party office job if they take on the risk. They can just be picked off one by one over the next few years and prosecuted. No need for drama.

            There is a very large minority against independence, and Madrid will never recognise the validity of the ‘national self-determination principle’ as against the perpetual unity of the Crown of Spain, not until the state itself no longer functions. But you can’t tell that to a nationalist.

            Rajoy would be deposed as conservative (read Francoist) party leader if he allowed a referendum anyway, He has many enemies, above all the little poison-doll S. de Santamaria, all too eager to step into his shoes….

            Xabier’s prediction: No change, more useless emotion and distraction, just like Scotland.

        • To his “only” credit Jean Claude is supposedly more of a Cognac guy, than whiskey aficionado.. Anyway, one of the affordable yet quality brands went bankrupt recently (“Cesar” by Badel/Made in Croatia), sad times ahead, no cognac, no money, no diesel, no nothing.. lolz..

      • Fast Eddy says:

        That’s a very disturbing comment … considering his comment some years ago ‘when it gets really bad you have to lie’

        The end must be very near indeed

    • Lastcall says:

      Coincidental to peak in conventional oil?

      ‘Freedom House reckons that 2013 was the eighth consecutive year in which global freedom declined, and that its forward march peaked around the beginning of the century.”

      View story at Medium.com

      Further;

      ‘It does not require much effort to realise that the above situation is already explosive. This is not a matter of ideology or morals (although these are, of course, in play socially). It is a matter of survival for all. The 10%, that is, about 740 million people, live mostly in the older industrialised countries and in the “islands of development” in the so-called “emergents”. In both cases, the 10% are utterly dependent on the 90% (but most of them do not realise this).

  2. Theophilus says:

    Many of the arguments concerning solar power are based on preconceived belief systems. If we are to accurately identify the contribution that solar power can provide to our energy affordability problem, we have to have either hard unbiased data or a working model of a solar factory producing all the components of complete solar systems produced with only solar power. That includes a surplus of power to account for all energy requirements of pre and post production.

    Smarter people than myself are hotly debating the theoretical data. I choose not to participate in this debate. Why should I? If I had met the Wright brothers I would not have argued with them about the theoretical possibilities of a flying machine. I would have put the burden of proof on them to build and fly the machine. The debate ended when the plane flew. The plane flew by itself.

    Today we have solar powered systems; but they are not, and maybe they can not, fly by themselves.

    If the Wright brothers plane flew because it was being towed by Henry Ford’s model T. It would prove nothing. Currently, Solar power systems are being towed by Fossil fuel systems. The burden of proof in this debate is with solar power advocates to provide a working model. In my humble opinion, it’s never going to get off the ground.

    • That’s a good observation standpoint.

      In similar vein, I posted in some detail on Gail’s recent solar/wind article here, that given certain condition one might acknowledge the current status of development and buy the stuff at occasional fire sale prices, relatively speaking. Panels might last more than two decades, quality power electronics and wind setup perhaps beyond a decade, incl. larger batt. pack.

      Not meant as systemic solution, obviously and more purely as dirty individualistic-family play. We don’t know the exact sequencing of future events. Such steps for the mid term might turn out to be quite wise, futile or even expediently deadly counter productive, i.e. in scenario of luring – inciting sheer rage of impoverished masses and gov remnants.. Who knows..

    • Greg Machala says:

      Well stated. I agree, solar and wind power are not sources of power in and of themselves. The capture “free” energy but are not free to build. I have not seen any evidence or examples of solar panels and wind turbines kick-starting themselves into existence. Even if one were to use existing solar panels, I have not seen any instances of them building more solar panels. You are right, “renewable energy” just doesn’t scale without fossil fuel subsidy.

    • Fast Eddy says:

      It’s rather straightforward …. trillions have been spent on solar …. and a solar package with panels invertor and batteries…. is an energy sink…. far more energy goes into the package than you will ever get out…

      This contraption is never going to fly.

      And even if it could – this solves nothing.

      BAU needs cheap oil to survive.

      Solar exists ONLY to calm the cattle. Think about it – what is the first thing out of someone’s mouth when you ask them what will happen when we run out of oil?

      Oh by then we will have full on solar energy powering the world.

      Well done Don

      • Fast Eddy says:

        And if you try to change what they think – for instance you ask how you power a jetliner with solar then just ignore that inconvenient fact

        If you have trouble understanding how they can do that … for those of you who are infatuated with the geebal weeble story …. it is the same as when I posted the Euan Mearns research paper that gives strong evidence that the ocean levels of not risen at all.

        You just ignore it and continue to think what the MSM wants you to think

        • Niko says:

          Sea water acidity is increasing however and that is not good for the sea creatures with calcium carbonate exoskeletons or shells as it dissolves them.

        • Tim Groves says:

          In future, the outer skins of the EAs (Electric Airliners) will be covered in solar cells designed to produce electricity from UV, visible light and IR so they can utilize all that extra GW radiation (millions of Hiroshima bombs worth, or so we are told!) even at night. Obviously, this energy won’t be quite enough to guarentee take off on its own, but provided that all the passenger seats are fitted with bicycle pedal style generators and the plane is equipped with a huge elastic band which is fully wound up using power generated by wind turbines at the airport……

    • timl2k11 says:

      Well said. Like EVs they just shift pollution from one place to another. If only it (wind and solar) could “fly” as you say.

    • That is a really good article. We don’t think about sand being a limit factor on fracking. Or fresh water, except in a place that is very dry, like China. We run into all kinds of limits at the same time.

      • xabier says:

        The son of a friend is a researcher into fracking, for the energy companies, at Oxford University.

        He did say about a year ago that it is already recognised to be more or less un-viable in Britain, with the North (Lancashire county) being the only possible exception.

        So mufor the ‘cheap gas’ promised by the politicians.

        It’s probably a dead duck. When will they admit it publicly?

  3. timl2k11 says:

    An exasperating hunt for gasoline in Florida as Hurricane Irma’s evacuees scramble to come home

    http://www.latimes.com/nation/la-na-florida-irma-gasoline-20170912-story.html

    Man if there is ever a large scale disruption to our gas supplies we are well and truly f789ed!

    • J. H. Wyoming says:

      Certain hurricane prone states could have emergency fuel pump stations, activated only during times of need.

      • timl2k11 says:

        That’s a great idea actually, otherwise It’s sort of a problem where you need fuel to get fuel…
        It just goes to show how much BAU is taken for granted and expected to be the case in perpetuity.

      • bandits101 says:

        They would need maintained stand-by generators and emergency fuel would need to be changed regularly. So it’s much easier to turn it over by selling it. All in all I doubt it would be cost effective.

    • greg machala says:

      Imagine the whole country panicking and filling up with gas, it would take weeks to fill all the storage tanks again.

      • As soon as gas stations start running out, there is a motivation to fill up early, “in case” you don’t find a gas station with gas, very soon.

        I read an article in the paper in the past week, suggesting not letting the tank go below 1/4 tank, because of this issue. I don’t think that the situation is that bad around here, but I expect the road to Florida is still littered with gas stations without gas.

    • Kurt says:

      I don’t know. I’m just not feeling the usual ofw energy. Maybe it’s the weather or something.

      • Davidin100millionbilliontrillionzillionyears says:

        oh no!

        could this be Peak OFW?

        is there any way to get more than conventional OFW resources?

        can OFW somehow be fracked?

        or is the decline in net OFW energy now a permanent situation?

    • Cliffhanger says:

      One of my friends posted this on FB….Solutions…LOL

      • These things are not really feasible. It is nice to think we could do it, if we all worked together, but we really can’t. I didn’t get all the way through the video, but I could see that the permaculture piece very much depends on fossil fuels.

        It we not easy for the self-organized systems of the past to build up. We cannot expect to put together a few pieces, and expect the system to really work.

        • greg machala says:

          It is so evident we need growth to continue on forward. The more you understand this the more evident it becomes. For example, there is an article in a computer magazine i get that talks about Apple and how there iPhone sales growth has peaked. And the article goes on to show how Apple needs to grow into other venues like self driving cars to continue growing. It is so crazy. When thousands become millions and millions become billions of dollars of sales, one must keep growing.

          • Same with medical companies, including drug companies. How are people supposed to buy more and more drugs?

            Efficiency would seem to mean the need to spend less and less. Something is wrong here.

    • J. H. Wyoming says:

      The video uses different colored visuals and some kind of hypnotic music to lull the viewer into thinking all will be well IF this, that and the other take place. Good luck with that in a world that shifts into chaos in which events are random, violent and destructive. For any kind of co-op in which people once again trust one another to occur will need to take place after the die off or at least out of reach of chaos. But really, how do people go from individuals plugged into the matrix of packaged ready food to tilling the soil with a bunch of other people? It takes a long time for food to grow and once up and going and continually planting (provided seeds are available) It’s a huge leap and probably only will work for those that are doing that before, during and after a collapse. They’ve learned to work together, to trust and share without violence or greed and without 24/7 electronically generated entertainment. Those will not be easy traits for people to get in sync with. Let’s face it, we’ve got a whole population of people spoiled on the red pill who don’t know how or want to accept the blue pill.

      • J. H. Wyoming says:

        Maybe the blue and red pill are the other way around, but you get the drift.

      • thestarl says:

        Couldn’t agree more though I think governments will introduce some form of draconian martial law as a last resort.To many unknown unknowns though none pleasant.

      • xabier says:

        What helps people to work together in a low-energy environment is tradition,

        We have, by and large, destroyed our traditions of communal life, and lack deities and priests to keep us in awe.

        Even the, one only has to look at the Norse Sagas to see how violence and ambition are always present. in such communities. Not to mention slavery with death as the usual punishment for any disobedience.

        I did read an interesting article about the use of black magic curses to keep Nigerian slave prostitutes at work in Europe -too terrified to disobey the gangs, afraid to run away because the curse would follow them.

        • Yes, tradition and the order that tradition provides are very important in keeping societies together.

          It is sort of like when a piece of iron is magnetized, and the electrons line up in one direction. The result provides more “power” than if there is no particular order. There needs to be a high point in the arrangement. It helps earthly rulers to have some sort of heavenly rulers to back them up.

          There was an article in the WSJ last weekend on why the Chinese school system is so effective (at least in some ways). https://www.wsj.com/articles/why-american-students-need-chinese-schools-1504882481

          One of the things that is expected is that the parents “line up” with what the teachers expect. In an example given in the story, a three year old refused to eat eggs. The teacher demonstrated to the parents that they should take a piece of egg, and force it into the child’s mouth. That is what the teacher would do; the parents needed to do that at home, as well.

          In another example, children were asked to draw a picture with rain. The teacher illustrated that rain drops are round. No other shapes were permitted. Rain couldn’t blow sideways, for example. Papers that were done wrong were hung up as examples of how not to draw rain.

          The view is that with enough work, any child can master any subject. This is a “plus” of the system. The downside is that independent thinking is not encouraged.

      • Artleads says:

        “It’s a huge leap and probably only will work for those that are doing that before, during and after a collapse.”

        What I see as happening if everybody drifts along without resistance is so horrible that it’s better either to kill yourself now or try to steer toward a better outcome. Day and night without ceasing. I also see it as pointless for individuals to believe they can be holdouts in a post collapse world. Some posters on FW have repeatedly explained why. Everybody is now part of the network (matrix?) There are no exceptions. One might even be excused for clutching at straws. In the latter vein, the Charlie Rose show from yesterday might shine some light. There are stirrings of bipartisan resolve. And Bannon (sp) made sense on quite a few points.

    • psile says:

      Laudable sentiments, but a bit too late. We are already deep into overshoot and people, especially in the West, have forgotten what it’s like to live naturally, or frugally. Everything, every place, and everyone will be overwhelmed, when the system finally collapses. That’s the nature of a population crash.

      What comes after is for other generations to determine, through trial, error and evolution. Ours will be totally consumed.

    • xabier says:

      Just nonsense as far as private-enterprise ‘transition’ goes.

      For as long as BAU runs it will coerce people into full participation: eg. ever-rising property and other taxes for which you need money, zoning laws, forced-labour, etc.

      See Western Rome: people didn’t transition into the post-Imperial era, they rebelled, were cut down or ran into the mountains or marshes as bandits.

      In Western Europe, there is a whole layer of ash in most settled areas which are witness not to barbarian invasions, but the earlier repression of the masses by the Roman state as it struggled to survive.

      The Romans in this period moved a whole legion form Britain to the Pyrenees (hence we are meant to have some legionary blood, as they reputedly killed all the men and gave their women to the soldiers) to put down the disorder: it was a legend some 700 years later.

      Then, one day , no Empire, no legions, just the old road milestones lying in the forest -just uncovered a year or two ago.

    • The photos of the lights before and after Irma show how much electricity is out.

      Even in Georgia, where I am, there have been a lot of power outages. One report in the paper said that 22% of Georgian’s were without power, presumably on Tuesday evening. Most of the Atlanta area school districts did not have school today, because too many schools were still without electricity. The area where I live (Cobb County) was hit less hard than most of the Atlanta area. Schools did operate here today, and stores were generally open. Our household only lost power briefly once–during the night, on Monday night. We could tell because the dishwasher did not run, and clocks without backup needed to be reset.

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