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

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

  1. Cliffhanger says:

    I bet all this war mongering and scaremongering about NK. Is just to get American’s in the mood for war. Then Trump will pivot back to middle east against Iran to go after their oil reserves…

  2. Cliffhanger says:

    A Politician and a Geologist walk into a bar. The bartender says “we don’t have any beer because we ran out of cheap oil and the economy collapsed”.

    The Politician says ‘Nobody saw this coming”

  3. jazIntico says:

    San Francisco and Oakland Sue Fossil Fuel Companies over Rising Sea Levels


    Real culprit is the Netherlands, building polders to push its sea onto other countries, causing a cumulative effect over the centuries. Maybe Trump should nuke those selfish Dutchies.

    • Davidin100millionbilliontrillionzillionyears says:

      those two cities and their citizens use massive amounts of fossil fuels to enable their Silicon Valley lifestyles. They are fossil fuel USERS!

      in fact, the entire Silicon Valley high tech industry was created by the power provided by fossil fuels.


      if sea levels are rising, those two cities are guilty. Hypocrites!

      and IRONY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

      • Cliffhanger says:

        Well duh Captain obvious

        • Davidin100millionbilliontrillionzillionyears says:

          it’s not obvious to these two cities!

          these two cities should be suing themselves.

          if the judge has any ability at all to connect the dots, he or she will dismiss this case ASAP.

          • Jesse James says:

            I think, that is the last days of empire, that justice is forgotten.

            • Davidin100millionbilliontrillionzillionyears says:

              it would be a deep injustice if those cities prevail in their suit.

              it would be sweet justice if the presiding judge told those hypocritical cities to go frack themselves.

    • Fast Eddy says:

      Oceans are not rising…

      But even if they were — and this was caused by fossil fuels….

      They would need to sue themselves… they would not understand that though

  4. Cliffhanger says:

    Fox News publishes Christian Numerology Doomsday prophecy under it’s “Science” section. There is also a reference to pyramids and a special appearance by Planet X, which apparently the numerologist “theorizes”.

    • Tim Groves says:

      Yes it’s awful how far the dumbing down has got. It really is worse than we thought.
      This Christian Numerology Doomsday rubbish is right out there with Astrology, Velikovsky and Clim-ate Catastrophism.

      • Davidin100millionbilliontrillionzillionyears says:

        no no no no no…

        the 23rd is 9-23-2017.

        9 + 23 + 2017 = 2049

        2000 is 10x10x10 doubled

        49 is 7×7

        the price of oil is $50.41

        5041 minus 2049 = 2992

        2992 is a palindrome!


        the world will END on 9-23-2017!!!!!!!!!!!!

        it’s obvious!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  5. grayfox says:

    Tobacco companies are required to have visible warnings on product packaging that the surgeon general has determined that tobacco use can cause cancer, right? Where is the warning on the fossil fuels that it can cause sea levels to rise, among other things?

    • Where is the warning that without fossil fuels, we might all be dead? We can’t really win. We need fossil fuels so that we can cook our food and stay warm. We really have too many people now to get along with any type of alternatives.

      • grayfox says:

        Somehow I think that “we might all be dead” is overstating the case. In any event, we have done our little turn on the stage as a species. Could have been a lot better. Maybe time to let another actor on the stage?

        • Tim Groves says:

          I also think that “we might be all dead” is overstating the case. “There’s a 90% chance that 90% of us would be dead within 90 days of us all giving up fossil fuels” is a more realistic scenario. Burning FFs is going to be a tough habit to break, although nature (in the form of physical limits) will eventually force our hand even if political, economic and financial considerations don’t do so first.

          • Fast Eddy says:

            If there were not 4000+ spent fuel ponds ready to boil… I still think the 90% estimate would be low…

            I reckon the only people who would live would be those that are completely unplugged from BAU already …. those in very remote locations who are on subsistence level living…

            For those in BAU areas — starvation will get everyone — no fossil fuels no food — and wherever there are pockets of organically grown food — the hordes will arrive — like flies to shit.

            • Tim Groves says:

              I wouldn’t bet against your scenario, even re. the spent fuel ponds. From what info I’ve managed to dig up about them they are a bigger threat to the biosphere than the nuclear reactors, are and in the event of a sudden collapse it would be overoptimistic to expect that they would continue to be properly maintained or their contents safely stored out of harm’s way.

              But if we forget about them for a minute, we can imagine some people surviving collapse by virtue of them having the right genetic stuff. Traits that make someone a criminal psychopath in civilized life may turn out to be ideal for seeing the species through bottlenecks. Tough times are what generates the most natural selection, which in turn drives evolution. There will be a lot of random chance events determining who will live and who will die, but on balance the survivors of collapse will be those who are best fit the ecosystem in which they find themselves. Anyone who is unwilling to broaden their diet or to pray on other members of the same species will reduce their chances of surviving considerably.

            • Fast Eddy says:

              Most definitely….

              In fact … one might argue that even now…. power goes to those who are absolute psychopaths…

              Those who have no problem with gassing women and children in Syria in order to blame a leader that they want taken down….

              Those would shoot down an airliner and blame it on others….

              Those who would invent WMD then use the lie to destroy a country killing and maiming hundreds of thousands of innocent people….

              Wait wait… what about those who would organize two large buildings filled with innocent people to be demolished…. burning people alive … and feeling nothing as they watch terrified people jump from windows to their deaths….

              End of the day…. psychopaths end up kings of the hill… now …. and post BAU….

        • Jesse James says:

          “Is overstating the case” says Grayfox while he eats his dinner, generated by FF, turns on his water faucet, thanks to FF, powers his stove, thanks to FF, goes to work, using transportation powered by FF. Yea, it is definitely overstating it all right.

          • Davidin100millionbilliontrillionzillionyears says:

            100 years from now…

            we MIGHT all be dead!

            grayfox, am I overstating the case?

            I do tend to do that, especially about the future.

            but tonight:



        • Greg Machala says:

          Population density is too high to allow a transition away from an external fuel source. We also have populations in places where there should be deserts or tundra. We have also been weakened by the “wheelchairs” and “crutches” we have used all of our lives. We have also lost much of the knowledge of how to preserve food, make medicine and know what native vegetation is edible. We are so far removed from the natural world that there is simply no way we can revert back to subsistence living.

      • jazIntico says:

        Food, glorious food. How could we ever do without it?

        • Davidin100millionbilliontrillionzillionyears says:

          please, sir, may I have some more?

          • jazIntico says:


            • Davidin100millionbilliontrillionzillionyears says:

              who said “greed is good”?

            • Fast Eddy says:

              Greed is what keeps BAU alive….

              Before you get too hot and bothered about that comment…. would you be willing to take a 30% cut in your lifestyle… and donate that cash to some poor bastard in a Calcutta slum?

              Of course you would not….

              If you were approached by a head hunter with an offer at a salary double what you make… would you consider it? Of course you would….

              We are all very greedy little bastards…. we all want MORE….

              That’s what makes the world go round….

        • Davidin100millionbilliontrillionzillionyears says:

          without fossil fuels, would we (at least me in the northeast USA) have any…

          peanut butter (the real kind: roasted peanuts and salt)

          dark chocolate (almost anything from 50 to 70 percent cocoa)

          [but not those two together]

          prime rib (with all the fat, please)

          lots of available food tonight!


      • xabier says:

        We need fossil fuels and the fertilizers derived from them; we need ever more debt enabling the masses to buy goods and services; we even need – God help us! – Saudi Arabia and the shale crooks.

        And central bankers, to co-ordinate globally and somehow keep the whole crazy show on the road, clearly doomed as it is……..

      • bandits101 says:

        “we might all be dead”……
        Without fossil fuels 75% would never have been born and/or those that were born, never would have achieved child bearing age. So yeah might all be dead, is very similar to never being born.

  6. Cliffhanger says:

    A rapper’s new video shows a white child being ‘lynched.’


    • Fast Eddy says:

      One could imagine there will be some payback for slavery….

      • Cliffhanger says:

        Once the oil runs out they are going to have to open up all the prisons and jails eventually. And then things will get ugly…And there are good reasons why those right wingers had their nazi march in crackerjack Virginia. And not in Downtown Detroit or Chicago.

        • Oil doesn’t “run out” except in the minds of peak oilers. What happens is wages of common workers fall too low, and government cannot collect enough taxes. Networked systems don’t work the way peak oilers imagine.

        • Greg Machala says:

          “They are going to have to open up all the prisons and jails eventually.” – Why? What if the guards and cooks just never show up for work? What is the incentive to open the jails?

          • Fast Eddy says:

            I would imagine they would just leave the animals in the cages when BAU ends….

            The problem is…. there are plenty of animals among us …. who are kept in check by the threat of incarceration….

            When the police and courts and jails are no more… when civilization collapses ….. we will be on display in all our glory….

        • bandits101 says:

          Yes I’ve been thinking that for years. Prisons are expensive, incarceration is expensive. Then again, so is education, health care, law enforcement, the military, border protection, highway maintenance, EPA, and government itself. I wonder in what order the various departments will be abandoned or will each be slowly strangled.

  7. Cliffhanger says:

    Mario Kart Switch: Walmart Edition!

  8. J. H. Wyoming says:


    WASHINGTON (Reuters) – “The U.S. Federal Reserve left interest rates unchanged on Wednesday but signaled it still expects one more increase by the end of the year despite a recent bout of low inflation.”

    Do you see what the Fed did? They suggested a rate hike, but when it actually came time to do that they put it off until October. This is a game of delay they are quite adept at. There’s also a hint there that low inflation could possibly delay a rate hike beyond October.

  9. Lastcall says:

    I kind of agree with this comment from Surplus Energy Economics (not the energy is a side issue part, but the PC that permeates and corrupts discussion – don’t scare the horses anyone);

    ‘It’s no coincidence that it was around the turn of the millennium that political correctness really took hold…and the debt and wreckage of incompetence have been busily piling up since. New Labour was the first British government that put PC at the core of what it stood for.
    I admire Dr Morgan’s work greatly but I have a suspicion that energy is just a side issue. Political correctness (cultural Marxism) is the real issue here that is driving us over a cliff. The debt explosion is more of a consequence of the universal application of the PC philosophy of ‘all must have prizes’ than the trend cost of energy.

    We as a people have turned our backs on reason and replaced it with a phoney ‘feel good’ PC version of reality. Our leaders are blindsided to problems as they now outsource their thinking to whatever idea is acceptable to the gods of diversity, tolerance and fairness…
    PC – it’s brilliance is that it has convinced us to destroy our own institutions and country from within . Truly we are a ‘nation building up it’s own funeral pyre’.


Comments are closed.