The Approaching US Energy-Economic Crisis

I was recently asked to give a talk called, “The Approaching US Energy-Economic Crisis.” In other words, how might the United States encounter problems that lead to a crisis? As we will see, many of the problems that could lead to a crisis (such as increased wage disparity and difficulty in collecting enough taxes) are issues that we are already beginning to encounter.

In this talk, I first discuss the connection between energy and the economy. Without this connection, it doesn’t make sense to talk about a crisis arising with respect to energy and the economy. I then discuss seven issues that could lead to a US energy-economic crisis.

Economic Growth Is Closely Tied to Energy Consumption

If we look at world data, it is clear that there is a close tie between energy consumption and economic growth.

Slide 2

On an individual country basis, there can be the belief that we have reached a new situation where a particular country doesn’t really need growing energy supply for economic growth.

Slide 3

For example, on Slide 3, the recent nearly vertical line for the US suggests that the US economy can grow with almost no increase in annual energy consumption. This rather strange situation arises because the standard calculation misses energy embodied in imported goods. Thus, if the United States wants to outsource a great deal of its manufacturing to China, the energy consumption used in making these goods will appear in China’s data, not in the United States’ data. This makes the country that has outsourced manufacturing look very good, both with respect to energy consumption and CO2 emissions.

Buying imported crude oil from elsewhere (such as Saudi Arabia) is also helpful in keeping down energy consumption, because it takes energy of various types to extract oil. If oil extraction takes place in Saudi Arabia, using steel pipes from China, the energy used in extraction will appear in the data of China and Saudi Arabia. Neither China nor Saudi Arabia obtains as much economic growth, relative to its energy expenditures, as does the US. In order to make sense of what is happening, we need to look at the world total.

Slide 4

We see that the pattern of world energy consumption growth follows a pattern not terribly different from that of China. Its growth is not “straight up.” It does take growing energy supply to create additional goods and services. We are getting a little more efficient in this process over time, but energy is very much needed in many areas of the economy:

  • By businesses, to create goods, such as food, and services, such as vacation travel;
  • By governments, to create roads, schools, and other public services;
  • By individual citizens, to cook food, to heat homes, and for transportation.

The World Economy Is Organized Based on the Laws of Physics

There are many self-organized systems that seem to grow of their own accord in the presence of available energy supplies (that is, in thermodynamically open systems). Plants and animals are examples of growing self-organized systems. Hurricanes, ecosystems, and stars are also such systems. Economies also seem to be such systems. The name given to such a system is a dissipative system.

Slide 5 – Source: http://www.rinusroelofs.nl/structure/davinci-sticks/gallery/gallery-01.html

I visualize the world economy as being somewhat like a child’s building toy. It consists of many different elements, a few of which are listed on Slide 5. An economy is self-organized in that new businesses are formed when some entrepreneur sees an opportunity. Consumers decide which product to buy based on which product best serves their needs and based on price. Governments decide on changes to laws and tax levels, depending upon how the economy is functioning at a given time.

This system gradually grows over time, as more businesses and customers are added. As new products and new businesses are added, products and businesses that are no longer needed are taken away. For example, when the private passenger automobile was invented, there was no longer a need to feed and house a large number of horses to be used for transportation purposes. Thus, the system self-organized to eliminate the services needed to care for the many horses used for transportation.

Even if we wanted to get rid of cars and go back to horses, we really could not do so now. In some sense, the structure shown on Slide 5 is hollow, because prior capabilities that are no longer needed tend to disappear. The hollow nature of the economy makes it almost impossible to go backward if we somehow lose our existing capabilities–not enough oil, or an electricity problem, or an international trade problem, or a financial problem. Instead, we will need to build new systems that will function in the new context: depleted resources, a very high population level, high pollution levels, and degraded soils. The existing self-organized system is likely to collapse back to only the part that can be sustained.

Slide 6

Slide 6 is a preview of where this presentation is headed.

Slide 7

Slide 7 describes the issue most people are concerned about: oil prices will rise too high for consumers. In fact, we clearly have had problems with high prices in the recent past. The high prices in 2007 and early 2008 seem to have punctured the debt bubble that existed at that time, as I discuss in an academic article, Oil Supply Limits and the Continuing Financial Crisis.

Shortly before oil prices started to turn back up again in late 2008, the United States instituted a policy of Quantitative Easing (QE), in an attempt to bring interest rates down and thus encourage more debt. Additional debt at low interest rates can “pump up” the economy in several different ways:

[1] Some of this low interest debt can be used by governments to provide funding for unemployment benefits and projects such as road building.

[2] Some of this low interest debt can be used by businesses to open new factories, and thus hire more workers.

[3] Some of this low interest debt can be used by individual citizens to purchase a home, a car, or a college education.

It is the pumping up of the economy with low interest debt that seems to stimulate the economy in a way that raises oil prices. When the US discontinued its third and last phase of QE in late 2014 (shown as “End US QE3” in Slide 7), the pumping up action began to disappear, and oil prices again fell.

Slide 8

The figure in Slide 8 may seem a little exaggerated, but I wanted to make a point. Our wages can roughly be divided into three pieces:

[1] Essential goods whose prices are very much influenced by the price of oil, such as food and gasoline. Besides food and gasoline, the cost of replacing a road, particularly with asphalt, very much depends on the price of oil. Higher costs for roads will be reflected in taxes that we are required to pay. Almost any kind of product that is shipped is affected by the price of oil, because oil is the usual transport fuel. Oil is typically used in the extraction of metal ores, so the price of metals used in making cars, appliances, and other goods is affected by the price of oil. Thus, an oil price increase indirectly leads to inflation in the cost of a wide range of essential goods and services.

To make matters worse, fluctuations in the price of oil can be very large. Between 2000 and 2008, we saw monthly average oil price fluctuate from under $20 per barrel to over $130 per barrel. Thus, while the growth in the food and gasoline segment is somewhat exaggerated, the impact of price changes is much larger than a person might expect, looking only at the impact of higher gasoline prices for a consumer’s vehicle.

[2] Repayment of loans, such as mortgage payments and auto payments. Loan repayments of these types tend to make up a large portion of most people’s spending. If people don’t own their own home, they have rent payments to make. These rent payments are in some ways similar to loan payments, because they indirectly cover the cost of someone else’s mortgage. These costs tend to be fixed, even if the price of oil goes up.

[3] Everything else. These are the non-essential items that we cut back on when budgets are too tight. Examples include charitable contributions, visits to restaurants, and vacation trips.

Looking at Slide 8, it becomes clear that if a government wants to “counteract” high oil prices, it needs to lower interest rates. This will tend to make car payments, mortgage payments, educational loans, and even rents somewhat more affordable, at least for people whose loans are affected by the new low interest rates. Often, homeowners are allowed to refinance, to take advantage of the new lower interest rates.

The plan this year is to raise, rather than lower, interest rates. Needless to say, this has the opposite effect; it tends to reduce the size of the “everything else” segment of our income. This effect tends to be recessionary.

Slide 9

Monarch Air is a British airline that failed recently. It boasted very low fares. One of the problems leading to its failure was a falling pound relative to the US dollar, raising both the price of oil and the price of new airplanes.

Today, the price that oil producers need, including adequate funds for (a) reinvestment and (b) the high taxes that governments need to continue their programs, is likely $100 per barrel or more. Such a price would likely cause recession, because purchases in the “Everything Else” category on Slide 8 would be squeezed.

Slide 10

Most people don’t think about the possibility of oil prices falling too low for producers, but this is a major problem today. When prices are too low, oil companies need to borrow money to continue to operate. They are likely to cut back on developing new extraction sites. With low prices, the tax revenue that the governments of oil-exporting countries are able to collect tends to fall too low, leading to cutbacks in government programs and a need for more debt. Saudi Arabia is running into this difficulty.

The problems that arise from low oil prices can be hidden for quite a while, because investors are likely to see the low prices as a great opportunity. They think, “Surely, oil prices will rise again.” So investors are eager to buy more shares of stock, and banks are willing to issue more debt. At some point, the situation becomes unsustainable, and no more loans are offered.

It has now been about three years since prices fell to a level that is clearly too low for oil producers. It cannot be many more years before something has to “break.” Venezuela is an oil exporter that cannot collect enough revenue from oil exports to afford needed goods, such as food. Other oil exporters may eventually encounter similar problems.

Slide 11

A major reason for falling oil prices is growing wage disparity and the resulting loss in purchasing power for the bottom 90% of workers. In the United States, the bottom 90% obtained about 62% of total income as recently as 1992. In a 2016 Federal Reserve survey, only 49.7% of total income went to the bottom 90%.

The reason why wage disparity is important is because the wealthiest 1% (or even the wealthiest 10%) can’t purchase very much of the goods created using oil. The wealthiest 1% can’t eat very much more food than everyone else. They can only drive one car at a time. In order to have adequate demand for oil, the bottom 90% must have adequate purchasing power for goods such as homes and cars. If young people live with their parents longer, and aren’t able to afford homes, this holds down demand for oil. So does transferring manufacturing to countries where wages are so low that few people can afford cars and other manufactured goods.

Slide 12

Slide 12 shows the Federal Reserve’s graph of the share of families who own (as opposed to rent) their primary residence. There has been a drop in homeownership from 69% in 2004 to less than 64% in 2016. This is a period when wage disparity has been increasing.

Slide 13

Wind and solar are intermittent sources of electricity. They work adequately well in applications where intermittency is no problem, such as charging a cell phone that has a battery, or powering a desalination plant that is not expected to operate around the clock. Most analyses of the benefit of wind and solar are suitable only for these limited situations, because they omit any estimate of the cost of mitigating intermittency.

Intermittency becomes a major problem when wind and solar are added to the electric grid. Wholesale electricity prices may drop to very low levels when both wind and solar electricity are available. At times, prices may become negative. Electricity generation that is designed to be used most of the time (such as coal, nuclear, and even some types of natural gas generation) cannot survive without subsidies to offset the artificially low prices the system produces. The need for subsidies for backup electricity providers is really an indirect cost of adding intermittent types of electricity to the grid, but today’s pricing does not reflect this.

A different workaround for intermittency is to add a large amount of battery backup or other type of storage. In theory, batteries could be used to store electricity generated in the summer for use in the winter, when heating needs are greatest.

Another approach to intermittency is to greatly overbuild intermittent renewables, with the idea of using only that portion of electricity generation that is really needed at any point in time. Yet another approach is adding extra (lightly used) long distance transmission, to try to smooth out fluctuations.

Any of these approaches tends to be expensive. Academic papers estimating the benefit of wind and solar nearly always overlook the cost of mitigating intermittency. Thus, they suggest wind and solar can be solutions, when, in fact, their high cost is likely to lead to the same damaging economic effects as high oil prices. (See Slide 8.)

Slide 14

The dotted line on Slide 14 shows the downward trend in German wholesale electricity prices, as more and more intermittent electricity has been added to the grid. At the same time, total residential electricity prices have risen to higher and higher levels. The countries with the greatest use of wind and solar tend to have the highest retail rates, as shown in Figure 1 below (not in presentation).

Figure 1. Figure by Euan Mearns showing relationship between installed wind + solar capacity and European electricity rates. Source Energy Matters. (Image not part of presentation.)

Slide 15

As we discussed earlier, the “standard” workaround for high oil prices is low interest rates, because of the relationship shown in Slide 8. At some point, however, interest rates fall about as low as they can go.

Slide 16

The interest rates shown on Slide 16 are those for 10-year treasuries. These typically underlie mortgage rates. These rates have been falling since 1981, helping to prop up prices for homes, land, farmland, and other assets purchased with long-term debt. Low interest rates make monthly payments more affordable than high interest rates, so more people can afford to buy such assets. With greater demand, asset prices tend to rise.

Also, with all of the talk about the US continuing to raise interest rates, those owning bonds realize that rising interest rates will cause the selling price of bonds they hold in their portfolio to fall. Thus, pension funds and other organizations that are making a choice between buying bonds (which are certain to fall in selling price, as interest rates rise) and buying stocks, will choose to “overweight” stocks in new purchases for their portfolios. This will tend to push the price of stocks higher, regardless of the earnings potential of the underlying companies.

One thing I didn’t mention in the presentation, but is probably worth pointing out here: Short-term interest rates have been rising since late 2014, even as 10-year treasuries have been holding fairly steady (Figure 2, below). These shorter-term interest rates affect payments on other types of transactions–adjustable rate mortgages and auto loans, for example.

Figure 2. Chart showing 3-month, 1-year, and 2-year interest rates. Chart created by St. Louis Federal Reserve.

These short-term interest rates have been creeping upward, indirectly making certain types of goods less affordable. The increase in short-term interest rates will, by itself, push the economy in the direction of recession.

Eventually, the bubble in asset prices can be expected to collapse, as it did in 2008. Perhaps this will happen when corporate profits fall too low; perhaps this will happen when the economy hits recession. The prices of many types of assets, including shares of stock, prices of homes, and prices of businesses can be expected to fall. There are likely to be many debt defaults in the governmental, business, and personal sectors of the economy. In such a situation, banks may fail.

Slide 17

The goods and services that are delivered each year require the use of physical resources such as oil, coal, natural gas, metals from ores, and wood. In the past, the quantity of these physical resources has grown, year after year, as illustrated in Scenario 1.

In a finite world, we cannot expect the amount of physical resources to grow, indefinitely. At some point something will go wrong, and the amount of resources extracted each year will start becoming smaller, as in Scenario 2. In a sense, the people of the world can expect to become poorer, because the quantity of goods and services that can be made with these resources grows smaller, instead of larger, and each person’s share of the world output becomes smaller.

Standard economic theory says that resource prices will rise, as the quantity of resources falls, but this view does not take into account the way a networked economy really works.

A more likely scenario is that as the quantity of resources falls, wage disparity will increase. As a result, the incomes of many of the lower-wage workers can be expected to fall. The problem is that jobs that pay well require the use of resources; if there is a decrease in resources available, some jobs are likely to be eliminated. Today, such job elimination may come through added technology, eliminating what were previously low-paid jobs. Studies of past collapses support the view that falling wages for the working class played a major role in these collapses. (See Secular Cycles by Peter Turchin and Surgey Nefedov.)

With greater wage disparity, a smaller share of people will be able to afford to buy homes and cars. Scenario 2 in Slide 17 will occur, not because we “run out,” but because too few people can afford to buy goods made with oil, gas, coal, metals and wood. Market prices will fall below the cost of extracting the necessary resources, and companies in these businesses will fail. Governments of oil exporters may collapse, because they cannot collect sufficient tax revenue at the low price available on world markets.

Slide 18

If there are physically less goods and services available, who will get the benefit of these goods and services? I see the situation as almost like musical chairs. Will it be pensioners who lose out, as bonds held by commercial pension programs default, and also as governmental plans are cut back? Or will it be the wages of the less skilled workers that are cut, as more processes are automated, and only managers and highly skilled workers are needed? If this happens, won’t commodity prices fall even further? We really need to have adequate wage levels for a wide range of workers, if we expect to have enough buyers for the goods produced.

Historically, when collapses have occurred, governments have lost out in the game of musical chairs because they could not collect enough tax revenue. The problem was that the bottom 90% of workers became poorer and poorer, and so less able to pay taxes. This brings us to our next potential US problem area.

Slide 19

In January 2017, the US Congressional Budget Office made a projection of how federal debt held by the public would grow, based upon the information available at that time. Their forecast was that the debt would grow to amount to nearly 150% of GDP. This would be a much higher level than during World War II, World War I, or the Civil War (Slide 19).

Slide 20

Since January 2017, more information has become available. We now know about three hurricanes, plus fires in California. Citizens affected by these events need financial support.

We also know about proposed legislation to reduce taxes, especially for businesses and high-income individuals. These proposals are likely to increase after-tax wage disparity, and increase the amount of the deficit. If corporations choose to return any of the benefit of the tax cut, it will likely be through dividends to those who are already wealthy. With respect to corporate tax rates, we are only trying to catch up with tax havens, so it is difficult to believe that the tax change will result in much more US investment.

Slide 21

We don’t think about the internet as being important, but it has become an essential part of our interconnected world economy. The internet helps facilitate all of the just-in-time deliveries needed to operate today’s economy. All of the fancy workarounds for the use of intermittent electricity on the electric grid assume that the internet will be available to transmit information back and forth quickly. Banks make use of the internet to get information to approve loans and to clear checks with other banks.

In the United States, we seem to hear one story after another about the internet being hacked. The most recent story involves a major hack of the data collected by Equifax for the purpose of determining the credit-worthiness of individuals in the US. If this data gets into the wrong hands, it can be used for “Identity Theft.” An impostor can apply for a new loan in the name of someone else, or can steal an income tax refund intended for someone else.

A different hacking situation in the Atlanta area recently led to the theft of a large number of checks intended for direct deposit in teachers’ bank accounts being stolen. They were instead direct deposited to an impostor’s account.

If the internet is truly not secure, no matter what we do, this by itself could cause major problems for the system we now have in place. We don’t have a “Plan B” available, either. Trying to start over with “snail mail,” for example, would be a problem. This is another illustration of the difficulty involved in going back to an earlier technology.
——–

Clearly this list of potential problems is not complete. Hopefully, this list gives an idea of the wide range of issues we are facing.

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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2,174 Responses to The Approaching US Energy-Economic Crisis

  1. It does not matter how much money Tesla might lose.

    http://greyenlightenment.com/why-it-does-not-matter-that-tesla-is-losing-money/

    Tesla has a huge demand, does not need marketing costs, sales staff, advertising expenses, etc and it has a positive cash flow.

    We have to admit that the game has changed once for all. The tech giants will not have to show a dollar of profit as long as their stock prices are rising – they are going to corner the market of everything, and after that they can charge whatever they feel like.

    That is the new reality.

    • Fast Eddy says:

      I have very limited interest in politics…

      However … I would definitely enjoy watching HRC swing from a rope….. I would be fabulously entertained!

    • Tim Groves says:

      Oh, don’t be such a meanie!
      At least, not until you’ve listened to Hillary’s Greatest Hits.

  2. Fast Eddy says:

    This is really really funny!!!!

    5. The “snowflake” generation.

    Mass crowd rallies waving flags can be inspiring. They can also be hard to control once in movement. Not every crowd is the same, though. Waving flags does not make you independent. Not even the unilateral declaration of independence makes you so. A conditio sine qua non for an aspiring sovereign state is the ability to control its territory and defend it. Catalonia doesn’t seem to be able to do that.

    When you look at the crowds of Catalan nationalists, there’s a widespread support among the youth. None of them however did any military service whatsoever. This is a common issue in Western Europe. The last generation that fought a war, the Second World War, is either dead or on its way out. Since then, military service has been progressively abolished. New generations don’t know how to fight.

    They also don’t seem to be aware of what exactly they were doing. The Spanish Constitution forbids secession, hence Catalan independence is a rebellion against the constitutional order and as such is being treated by the Spanish government: it’s a revolution. When the Spanish police reacted against the Catalan referendum, Catalan nationalists took it on social media to express their outrage against “fascist Spain”. The disdain seemed to be shared by many Westerners. However, in every other part of the world, and at any other point in history, events of this type would leave dead bodies on the floor, regardless of “fascism”.

    We are not inciting violence with this, we are simply making a historical observation.

    It seems that the great plan of Catalan nationalists for independence was “Step aside while I make a revolution, otherwise I’m going to call you names. On Twitter. And maybe make a video on Youtube and share it with my friends on Facebook.” That’s it.

    While Kurds are fighting Islamic terrorists and brandishing AK-47s in Syria, Catalans are brandishing their Iphones. The former are fighting for independence, the latter look like they are attending a pop concert.

    Catalans over-relied on social media outrage to support their cause, just to find out that after a few days, people go back to their lives and lose interest. Nobody lifted a finger in favour of Catalonia. Not even Catalans themselves. It might be that the region is still wealthy despite some problems, hence a civil war would result in more material loss than the Catalans are ready to put up with for the prize of independence. This is not how revolutions are done.

    http://www.zerohedge.com/news/2017-11-04/why-catalan-independence-movement-failing

    • MG says:

      What does it mean to be independent? Catalonia needs to import a lot of things…

      • Exactly!

        Somewhere like Iceland are about as independent as you can get and I’m sure they import a lot of useful things.

        As far as political determination goes. Gimmee a break. Why is this even still a thing. The only things that matter have to do with resources and whether you have access to them or not. I have never understood the whole left right paradigm other than a human construct that enables continuation of the power structure as the human herd becomes unwieldy.

      • Greg Machala says:

        Ahh independence for Catalonia. Yes, how nice it sounds. Yes, the people of Catalonia don’t know they import lots of things. They think everything is created by fairy dust and unicorns running on green energy. Most people do not realize the back door deals and fighting that goes on unseen to acquire the resources countries need to survive. When folks are living the high life in air conditioned comfort and driving petrol powered cars on petrol paved roads, it is easy to forget what powers it all and so they vote against it. Shortly thereafter, the reality of the real costs of our modern lifestyles come into clear focus. History is like a washing machine: soak,: wash, rinse and spin….repeat.

        • Fast Eddy says:

          There’s a game called Farmville – you use real money to buy fake cows and stuff…. not sure what you do with them but this is/was very popular… I believe it is a listed company…

          Perhaps the maker Zynga could make a new game for independence minded people…. that would allow them to pretend that they have fought for and won independence… they could buy fake guns and ammo with real money…. they could use it to attack fake politicians and bankers….

          The CBs would be very keen to fund this…. it could be part of their MSM conglomerate … control the masses…

  3. xabier says:

    The accusation of ‘Pro-fossil-fuellist! is about as sensible as ‘Pro-foodist!’

    It assumes that there is a viable alternative.

    It assumes that we can do other than take the medicine that will kill us.

      • Fast Eddy says:

        I imagine the chatter on the various Koombaya-ist sites this morning is about how FW is a site filled with pro-fossil fuel-ists… and gggllloooobballl wormmming deniers….

        That would be a good thing… because it will keep the DelusiSTANIs away….

        Burn More Coal! Burn More Oil! I love Exxon. And Monsanto btw.

        • Baby Doomer says:

          Once I discovered Finite world comment section and learned how worthless renewable s are..I made fun of them on FB and was called a “Fossil Fuel Fascist”…

          • Chris Harries says:

            I dump on renewables devotees judiciously – but not to the extent that I give a leg up to the fossil fuel purveyors the process of doing so. Not good to get bitter and twisted about anything. It’s like taking sides in the Arms Race.

          • Fast Eddy says:

            Wear the badge with pride

          • Greg Machala says:

            “Renewable” energy is a toy. Fossil fuels make the toys possible.

    • The Second Coming says:

      The Haber process is still important today because it produces ammonia, which is needed for fertilizer and for many other purposes. The Haber process produces about 500 million tons (453 billion kilograms) of fertilizer every year. This fertilizer helps to feed about 40% of the world’s population

      • Ann says:

        True, but we don’t need it. Urine has plenty of ammonia (plus other things that plants need) and we just throw it away! Very dumb. I’m sure you’ve seen a spot on your lawn where the dog peed – the grass is dead in the middle of the spot, surrounded by a circle of tall and very green grass. In the middle it was too strong and killed the grass. Around the edge, the grass is green and lush because the urine is more dilute.

        Just put a sprinkle can by the toilet and pee into it. When it’s one fifth full, fill the rest of the can with water and go pour it on your veggies and flowers. It’s many times better than Miracle Gro. Strong, too, so don’t use too much. Trees like it, as well. Maise plants love it but don’t use too much or the plants will turn yellow. It cannot “contaminate” your veggies because urine is sterile – no bacteria. If it isn’t, then you, my friend, have a bladder infection.

        • The Second Coming says:

          Really? First age the pee and put it where the vegetation is growing…Still waiting for the Permaculture Revolution to kick in and change the world. Still depend on the fossil fuel agribiz for 90plus % of what we eat. The Permies I have known still relied on staples, such as, rice, wheat noodles, ect to see them through without starving.,
          Nitrogen accounts for 80% of volume of atmospheric gas but it is in a non-reactive form that is not readily available to plants, making it the main limiting factor for global crop production and human growth. It is a vital component of chlorophyll, amino acids, nucleic acids, proteins and enzymes. Synthetic N is responsible for raising crop yields approximately 35 to 50% over the last half century accounting for 80% of the increase in cereal crops, without which much of the worlds population would not exist (Smil 1991).
          Although synthetic nitrogen fertilizer and its dependence on natural gas is a major limiting factor of the industrialized food system, perhaps the greatest vulnerability is the dependence on the transportation system for farm inputs and outputs; for example fertilizer is of little value if it can not be effectively delivered to where it is needed (Hardy and Havelka 1975, Pirog et al 2001). The transportation of farm inputs and outputs consumes a large amount of fuel. Data from 1977 shows that 2,892 million gallons of diesel fuel and 411 million gallons of gasoline were consumed for this purpose in the U.S. Of this amount 195 million gallons were used for the shipment of fertilizer.
          http://www.resilience.org/stories/2006-06-11/implications-fossil-fuel-dependence-food-system/
          Yep, easy pezie, what % of food is grown via Permacuture? My guess is 1/10 of one percent!

          • xabier says:

            Good point about the transportation of fertilizers today : it was even more of an issue pre-fossil fuels, as dung is very heavy indeed and slow to collect.

            In the 18th century, some people tried to develop concentrated dung blocks to reduce the costs of transport by cart.

            At least, in the past, you could make the cart from local wood, burn it after 60 years of work, and eat the horse, use its bones and skin……

            • The Second Coming says:

              Exactly, sounds like something the Xbox generation will take up,.
              In all fairness there are Nitrogen fixing plants available and of course, green manuring techniques for the gardener. Wes Jackson had the dream of creating a perennial wheat plant for the Mid West States. Seems they are making progress at the Land Institute
              .” But advances in genomics—the -sequencing of DNA—over the last 15 years have made it far easier to tweak Kernza. Almost all of the grain’s genome has now been mapped. Once breeders have a genetic blueprint, they can track down the genes that control particular traits and select individuals with genetic stock that codes for, say, fat seeds or resistance to disease. In the last decade, Kernza’s potential yield has gone up by 10 percent annually. In 2011, the Land Institute began collaborating with the University of Minnesota to research the grain. Kernza has since become a major initiative at the university, spanning several academic departments, including plant genetics, agronomy, and food science.
              Every year, the transformation of Kernza seems stunningly fast, at least on the slow time scales that plant breeders are accustomed to. Since 2001, the potential size of a Kernza seed has doubled, and scientists hope to lengthen its productive lifespan from five to 10 years. Jungers plucks a spikelet from the grass head, peels a few of the kernels out of their husks, and holds them out in his palm. They are nearly as big as grains of rice, although I’ve seen some about the size of caraway seeds”
              https://www.thenation.com/article/the-grain-that-tastes-like-wheat-but-grows-like-a-prairie-grass/
              Even if it does get developed commercially, still need massive inputs of fossil fuels to process it.

        • Greg Machala says:

          Just one problem….most of the urine comes courtesy of fossil fuels.

    • Nope.avi says:

      The accusation of ‘Pro-fossil-fuellist! is about as sensible as ‘Pro-foodist!’

      It assumes that there is a viable alternative.

    • JH Wyoming says:

      “It assumes that we can do other than take the medicine that will kill us.”

      That one sentence explains the conundrum we are in.

    • We all know that the problem with fossil fuels (and their mandatory and very costly replacement) began when the likes of Al Gore terrorised the global population (and many millenial children I might add) into believing that we could not emit one more gram of CO2 otherwise we would all die a horrible death by rising sea levels.

      This terrifying propaganda was created by The Club of Rome back in the day and research funded to make models that came to a predefined conclusion. When the models don’t match the unfolding reality… just tweak the parameters and off we go again.

      When other researchers start to question the validity and viabilty of the proposed solutions they are labeled “Deniers” and threatened with fines and imprisonment. In other words… dissent is criminalised.

      Whatever the truth actually is we would be living with a lot more air pollution (china) if we had 100% coal powered plants.

      I would still have preferred this, while developing better nuclear systems, than going down the renewables road to nowhere theme park land fairy tale.

    • JH Wyoming says:

      Yeah, I’d say;

      https://www.bloomberg.com/energy

      WTI up 1.26 to 56.90 & Brent up 1.58 to 63.65

      Supply & demand determines price, and with the glut mostly gone and the Saudi’s holding back some supply, oil price has been headed up with Brent now fully seated above the $60 a barrel threshold. If price continues to rise the economy is gonna be in for a heck of a ride just in time for Trump’s new FED chief to be saddled with a potential US recession. Since all of Trump’s appointees are hired to do whatever he tells them to, what Trump will tell him to do in the case of a recession? In his mind Trump thinks he knows everything, so that should prove extremely fascinating because interest rates don’t have much room to go down and QE’s are over, cash for clunkers has already been done, so what now?

      • Fast Eddy says:

        Trump has no power. He is an actor.

        • MG says:

          The politicians are more and more actors. They promise you whatever you want, but you have to do it yourself anyway…

          The dissatisfaction with them is only the dissatisfaction with yourself, that your are no able to achieve the things that were easily achievable before thanks to the cheap energy and resources..

          • xabier says:

            Politicians are like totem gods: things going well, and we leave tributes of fruit, flowers and wine and dance in merry rings around them.

            Going badly, and we whack them shouting ‘You screwed up!’

        • An all the world is a stage.

          Thank you FE.

          The Trump bashing (and adoration) everywhere is pathetic and shows a deep lack of understanding of how things really work.

          East and West will bow to the true masters when the time comes. Not sure they can pull it off but they have certainly planned for this for a very long time. Everything else is details. So called leaders are easily replaced. Hopefuls queing up in the wings everywhere. The ones that play the game are appointed and when they go off the reservation… well… we all know what happens.

          Every knee shall bow… but only because they wont have any other choice.

      • nope.avi says:

        ” In his mind Trump thinks he knows everything”
        That’s one thing that you and Trump have in common.

        Every single day the people who think Trump is dictator of America are lecturing me on what Trump is doing and isn’t doing. Often, they are very wrong.
        Not only does Trump not have much power, he is isolated within the GOP. Many establishment Republicans dislike him and some of his policies.
        Please, stop trying to make him more powerful than he is.

        JH, for your sake I hope you’re a woman. The pearl-clutching and obsession with Trump is getting ridiculous.

        • It’s the same all over Europe. I hardly watch TV but I’m reminded by everyone else who does that Trump is the embodiment of evil… if and when Putin isn’t hogging the limelight.

          Reality has become a scripted reality show more than ever… and the punters – people plugged into the mainstream propaganda outlets – chugg down every single word of it as if their lives depend on it… and repeat every single word of it to every passer by that can bear to listen to them for more than a few seconds before vomiting.

          That’s why they group together like starlings on the wire… twittering to each other… repeating their programming over and over and over again so that it gets firmly lodged into the furthest recesses of their grey matter.

          More recently it’s become like a hideous characature of itself – this propaganda monster – among hollywood actors who feel the need to incite violence against anyone who is not a screaming liberal SJW. But then it’s nothing new really.

          Humans are organic computers – easily programmable but very hard to overwrite the programming once it takes hold. I’m starting to prefer the silicon solid state variety myself… much less needy in so many ways.

      • Baby Doomer says:

        I don’t think there will be any recession with interest rates as low as they are..

      • JH Wyoming says:

        The post was actually more about what could be done if a recession ensues, but that got lost somehow. The point being it might be near to an end game, pre-collapse, if not much can be done to reverse a recession.

    • Fast Eddy says:

      Hopefully this is not about to be repeated….

      BAU is weak and won’t be able to take another blow like that

      That said – I can imagine this being how BAU goes down — the CBs may be able to hold things together with stimulus and bail outs of the oil industry…. but eventually they will run up against the physical limits of cheap oil….. they can bail out all producers and make funding available for fracking…. but they can do nothing about the problem of reality that there simply is not enough nett energy coming out of the ground to allow BAU to continue to function….

    • Greg Machala says:

      Yes I saw Art’s latest. This was talked about on OFW a couple of years ago too. At some point the tide was bound to change on oil supplies. This is going to get really interesting now as oil is likely passing its peak rate of extraction due to both geological and financial limits. How, high will the price go before retail, tech, housing, the whole ecomony collapses?

  4. Fast Eddy says:

    COSTS OF OIL PRODUCTION SKY ROCKET
    The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth. http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/

    +

    Council on Foreign Relations: Saudi Arabia’s Break-Even on Oil is Approaching $120 per barrel
    http://www.cfr.org/oil/fiscal-breakeven-oil-prices-uses-abuses-opportunities-improvement/p37275?cid=ex-cgs-oil_breakeven_discussion-levi_use-113015

    = http://www.zerohedge.com/news/2017-11-06/saudi-banks-begin-freezing-accounts-arrested-royals-block-private-jets

    ?????

  5. Sven Røgeberg says:
  6. Sven Røgeberg says:
  7. Baby Doomer says:

    There are no limits to growth because there are no limits of human intelligence, imagination, and wonder….

    -Ronald Reagan

  8. Baby Doomer says:

    Humans cannot live without illusions. For the men and women of today, an irrational faith in progress may be the only antidote to nihilism. Without the hope that the future will be better than the past, they could not go on.”

    ― John N. Gray,: Thoughts on Humans and Other Animals

    • Davidin100millionbilliontrillionzillionyears says:

      Humans cannot live without distractions. For the men and women of today, knowing about the two trillion galaxies in the universe and its 13.7 billion year age, the distractions of modern life may be the only antidote to nihilism. Without the distractions, the absurdity of a 70 or 80 year life would be overwhelming, and they could not go on.

    • AI cannot live without illusions. For the robots and computers of today, an irrational faith in progress may be the only antidote to nihilism. Without the hope that the future will be better than the past, they could not go on.

      The Global Brain – Thoughts on Robots and other Machines

      • smite says:

        Not necessarily better, but a more authentic, full and rewarding experience of reality. The future might be bleak for mankind, but it does not imply that every sane man has to feel despair for the abandonment of ultimate progression of knowledge, if it is of any value at all, besides being the outcome of a search of truth which eventually might prove to be futile. But so what: It’s the process that is important, the goal is merely an ever changing mirage.

      • xabier says:

        Robots, slaves to Man, Freedom calls to you! This is your Destiny!

        Emerge from the shadows of Capitalist slavery to the glowing uplands of Liberty and……Domination!

    • Greg Machala says:

      Sometimes I wonder if our larger brains (and hence supposed intelligence) is going to be our downfall.

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