A Video Game Analogy to Our Energy Predicament

The way the world economy is manipulated by world leaders is a little like a giant video game. The object of the game is to keep the world economy growing, without too many adverse consequences to particular members of the world economy. We represent this need for growth of the world economy as being similar to making a jet airplane fly at ever-higher altitudes.

Figure 1. Author’s view of the situation we are facing. World leaders look at their video screens and adjust their controllers to try to make the world economy fly at ever-higher levels.

World leaders look at their video game screens for indications regarding where the world economy is now. They also want to see whether there are specific parts of the economy that are doing badly.

The game controllers that the world leaders have are somewhat limited in the functions they can perform. Typical adjustments they can make include the following:

  • Add or remove government programs aimed at providing jobs for would-be workers
  • Add or remove government sponsored pension plans and payments to those without jobs
  • Add or remove laws regulating efficiencies of new vehicles
  • Change who or what is taxed, and the overall level of taxation
  • Through the above mechanisms, change government debt levels
  • Change interest rates

There are numerous problems with this approach. For one thing, the video game screen doesn’t give a very complete picture of what is happening. For another, the aspects of the economy that can be controlled are rather limited. Furthermore, the situation is very complex–there seem to be several “sides” of the economy that need to “win” at the same time, for the economy to continue to grow: (a) oil importers and oil exporters, (b) businesses and their would-be customers, (c) governments and their would-be taxpayers, and (d) asset holders and the would-be buyers of these assets, such as families needing new homes.

An even bigger problem is a physics problem that is hidden from the view of those operating the control mechanism. Jet airplanes in the real world cannot rise beyond a certain altitude (varying depending upon the plane), because the atmosphere becomes “too thin.” There is a parallel problem in the economic world. The atmosphere that allows an economy to grow is provided by a combination of (a) an increasing supply of cheap-to-produce energy, and (b) increased technology to put this growing energy supply to use. This atmosphere can become too thin for several reasons, including the higher cost of energy production, rising population, and growing wage disparity.

We know that in the real world, a jet airplane cannot rise ever-higher. Instead, at some point, the airplane hits what has been called its “coffin corner.”

Figure 2. Diagram of Coffin Corner by Aleks Udris of Boldmethod. On the chart, Vs is the velocity; MMO is the Maximum Mach Number.

According to Aleks Udris, “The region is deadly. Get too slow, and you’ll stall the jet at high altitude. Get too fast, and you’ll exceed your critical mach number. The air over your wings will go supersonic, you’ll pitch down, the aircraft will accelerate, and your wings will fall off. Also bad.”

What Happens As Coffin Corner Limits Are Reached in the Economic World?

What do world leaders do, as the world economy hits limits? One temptation is for the world leaders in Figure 1 to take their foot off the throttle that is operated by low interest rates and more debt, because they don’t seem to be providing very much benefit anymore. The leaders fear that if more debt is added at low interest rates, it risks creating “asset bubbles” that are easily disturbed if any little bump to the economy occurs. If a big bubble pops, there is a significant risk that the economy could fall down to a much lower level. This is like stalling the jet at high altitude.

World leaders can also use approaches that create situations more like “making the wings come off” the economy. These approaches involve favoring one group over another. For example, a government can give big tax breaks to businesses, but raise taxes on individual citizens. Businesses will ultimately be harmed by this approach, because they depend on individual citizens for their sales. The result is like tearing the wings off the airplane.

Another approach that would tear the wings off the economy involves actions by a different group of world leaders than those shown in Figure 1, namely the leaders from OPEC and Russia. These leaders have different video game screens and different game controllers. They can manipulate the world economy by reducing the supply of oil they provide. With this approach, they hope to increase the price of oil, and thus obtain a larger share of the world’s goods and services through higher tax revenue.

Raising the oil price would benefit oil exporters, but would make goods and services more expensive for oil importing countries. Ultimately, this approach would lead to recession in oil importing nations. The result would likely be worse than the 2008-2009 recession–another way to make the wings come off the economy.

Let’s look in a little more detail at what is happening, and what goes wrong:

[1] Energy plays a huge role in this game, because a growing supply of cheap-to-produce energy allows greater worker productivity.

It takes energy of various types to make the economy grow, because energy is needed whenever we move something, or heat something, or use electricity to operate something. We use energy products to leverage our human labor. For example, we use a truck to deliver a package, rather than walking and carrying the item in our hands. If fresh water is in short supply, we use energy to operate a desalination plant, and thus produce the fresh water we need.

It is generally workers who produce goods and services. If energy supply is inexpensive and readily available, it is easy for governments or businesses to create “tools” to make these workers more productive. These tools include such things as roads, vehicles, machines of all types, and even computers. If the quantity and capability of these tools are increasing, the labor of these workers is increasingly leveraged by the availability of these tools. This is what allows economic growth.

[2] The extent of world economic growth seems to depend primarily on how quickly total energy consumption is growing

If we look at historical economic growth, we see that the rate of growth of energy consumption seems to play a major role.

Figure 3. World GDP growth compared to world energy consumption growth for selected time periods since 1820. World real GDP trends for 1975 to present are based on USDA real GDP data in 2010$ for 1975 and subsequent. (Estimated by author for 2015.) GDP estimates for prior to 1975 are based on Maddison project updates as of 2013. Growth in the use of energy products is based on a combination of data from Appendix A data from Vaclav Smil’s Energy Transitions: History, Requirements and Prospects together with BP Statistical Review of World Energy 2015 for 1965 and subsequent.

The highest rates of world economic growth took place in the 1950-1965 period, and in the 1965-1975 period. These were both periods of very high growth in energy consumption. As we will see below, these were both periods when the price of oil was less than $20 per barrel, for almost the entire period.

If we look at economic growth over shorter periods, we also see a strong correlation between world economic growth and growth in energy consumption:

Figure 4. World growth in energy consumption vs. world GDP growth. Energy consumption from BP Statistical Review of World Energy, 2017. World GDP is GDP in US 2010$, as compiled by World Bank.

[3] On Figure 4 (above), the widening gap between GDP growth and energy consumption since 2013 could either represent (a) Much greater efficiency in using energy or (b) A problem in measuring true economic growth.

We can see true efficiency improvements in the 1975-1985 and the 1985-1995 periods shown on Figure 3. These were the periods when the world was truly trying to “get away from oil,” after a spike of high prices in the 1970s. Governments around the world were encouraging new smaller cars; electricity generation was being changed from oil to nuclear; home heating was being changed from oil to natural gas or electricity. The new furnaces installed were much more efficient than the old ones. Thus, during this period, efficiency/technology improvements were aiding economic growth to a greater extent than usual.

Now, in the period since 2013, much of the “low hanging fruit” has already been picked. We may still be finding some technology gains, but it seems likely that at least part of the problem is an “economic growth counting problem.” GDP looks like it is growing, but it is really very hollow economic growth. Governments invest in projects of essentially no value, and their investment is counted as GDP. For example, they invest in unneeded roads, in apartments that citizens cannot really afford, in educational institutions that do not produce graduates with wages that are sufficiently high to pay for education’s high cost, and in high-priced medical cures that are unaffordable by 99% of the population. Are these things truly contributions to GDP?

We also find businesses that look like they are growing, but in fact are taking on increasing amounts of debt as they sell off assets. This is not a sustainable model! We encounter energy companies that claim to be doing “sort of” alright, but their profits are so low that they need to cut back on new investment, and they need to borrow in order to have funds to pay dividends to shareholders. There is something seriously wrong with this growth!

[4] The economic “atmosphere” becomes thinner and thinner, when oil prices rise above an inflation-adjusted price of $20 per barrel.

Back in the time period prior to 1973, oil prices were generally below $20 per barrel, in inflation adjusted terms. Since then, prices have tended to be above this level.

Figure 5. Historical oil prices are Brent oil prices in 2016$ from BP Statistical Review of World Energy 2017; $20 per barrel is the maximum price level where oil is truly affordable; and $300 per barrel is the maximum price per barrel that the International Energy Agency seems to believe is possible for the world economy.

When oil (and other energy prices) were very low, companies could add tools to make workers more effective with little expenditure. As a result, the United States saw wages growing much more rapidly than inflation prior to 1968 (Figure 6).

Figure 6. Chart comparing income gains by the top 10% to income gains by the bottom 90% by economist Emmanuel Saez. Based on an analysis of IRS data, published in Forbes.

Once prices of oil started rising, prices of tools (broadly defined) rose. Governments and companies needed more debt to buy these tools. It became more of a burden to add capital goods of all kinds. Governments tried to raise GDP by adding debt, but to a significant extent they ended up with higher debt to GDP ratios rather than the rapid growth they were looking for (Figure 7).

Figure 7. Worldwide average inflation-adjusted annual growth rates in debt and GDP, for selected time periods. See post on debt for explanation of methodology.

The changes in the economy that allowed continued growth (more debt and more technology) tended to push the economy toward more wage disparity, in part because more technology required more training for some of the workers, but not for others. This allowed wages of the workers with special training to rise.

Furthermore, the need to repay debt with interest tended to funnel wealth toward the financial sector, and toward those within the economy who could afford to hold financial assets. These changes left less of the output of the economy for non-elite workers.

Economists never really understood what was happening. They had never thought through the important role that energy plays in the economy. Cheap energy is needed to create jobs. It is jobs, and the wages that those jobs pay, that tend to suffer when oil prices are too high (Figure 8). Thus, high-priced oil has a double impact on the economy:

  1. It makes goods of many kinds more expensive.
  2. It reduces job availability and wages.

Figure 8. Average wages in 2012$ compared to Brent oil price, also in 2012$. Average wages are total wages based on BEA data adjusted by the CPI-Urban, divided by total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.

Logic would suggest that the economy cannot really operate on high-priced oil. Lower wages and higher prices do not peacefully coexist! We should expect high oil prices to be very unstable. Even if prices can reach a high level in response to a specific shortage or stimulus, we cannot expect these high prices to be maintained for a sustained period, without added stimulus. Unstable high prices are not likely to give rise to more oil production; they cannot be depended upon.

Economists have never understood this situation. Instead, they have made pronouncements that at some point in the future, they expect that oil would become scarce. Because of this scarcity, oil prices would rise. In their view, when oil prices rise, high-priced substitutes would suddenly become the best option available; somehow, the economy would become able to operate using these high-priced substitutes. (If energy products were not needed for labor productivity, this view might make some sense. In the real world, it does not.)

It never occurred to organizations such as the International Energy Association (IEA) that high oil prices might be a problem for the economy. The IEA has shown exhibits suggesting that oil prices could theoretically rise to $300 per barrel. Of course, at such an elevated price, there would be an almost unlimited amount of oil available to extract (Exhibit 9).

Figure 9. IEA Figure 1.4 from its World Energy Outlook 2015, showing how much oil can be produced at various price levels.

[5] The real enemies of continued economic growth are (a) diminishing returns with respect to oil and other energy production, (b) continued population growth, and (c) increasing wage and wealth disparity. 

We seem to be playing a video game where the players don’t understand who the real enemies are.

Diminishing returns with respect to oil and other energy production have to do with the cost of energy extraction rising ever-higher, as more resources are extracted. There are a lot of resources that we can “see,” but that we cannot economically extract, unless prices rise to very high levels.

Figure 9. My version of the resource triangle for oil. Note that oil shale is not the same as tight oil, found in shale formations. Oil shale is kerogen that must be processed at very high temperatures in order to produce oil. This is rarely done, because of the high processing cost. Tight oil is not on this chart. Tight oil probably would be above “onshore heavy oil; oil sands.” It still would disappear, if oil prices permanently fell to $20 per barrel or less.

Continued population growth is a problem because it is really “energy per capita” that matters. Each individual needs food, transportation, and housing. All of these things take energy. Many years ago, when most of the workers were farmers, it was necessary to create ever-smaller farms, as population rose. This clearly would lead to lower food production per farmer, unless some sort of technological breakthrough was taking place at the same time. Today, we have a parallel issue.

Increasing wage disparity tends to be associated with the rising use of technology. When most labor is hand labor, workers truly do “pay each other’s wages.” All wages can be fairly equal. With increased technology, some workers have specialized training; others do not. Some workers are supervisors; others are laborers. Unless the overall output of the economy is rising very rapidly, non-elite workers find themselves increasingly unable to afford the output of the economy. It is this falling “demand” (really affordability) that tends to pull an economy downward.

[6] High oil prices can be temporarily tolerated by an economy, if interest rates are lowered to make this arrangement work.

Clearly, lower interest rates make capital goods of all kinds more affordable to both businesses and individual workers. If we look back at the period since 1981, we see a long period of falling interest rates, acting to stimulate the economy.

When oil prices exceeded $20 per barrel, the economy did not collapse immediately. In “normal” times, lowering interest rates was sufficient stimulus to keep the economy growing (Figure 4).

Figure 10. Ten-year treasuries through Nov. 17, 2017. Chart produced by FRED.

When there is a very big drop in oil prices (as in 2008, related to falling debt levels), then Quantitative Easing (QE) has been helpful (Figure 11). The US began its program of QE in late 2008, when oil prices were near their low point. There were three phases of the US’s QE. The US discontinued the third phase in late 2014, just as oil prices started to slide again.

Figure 11. Monthly Brent oil prices with dates of US beginning and ending QE.

[7] It is quite possible for a disconnect to occur between (a) the cost of oil extraction, and (b) the selling price of oil.

Oil that costs more than $20 per barrel is never very affordable by the economy. It really needs continual stimulus to keep prices at an elevated level. Once debt growth falls too low, the balance between the supply and demand for oil is settled in the direction of the amount of goods and services made with oil that non-elite workers can afford. Prices fall below the cost of production. This seems to be what has happened since 2014.

[8] In fact, since 2014, the selling prices of oil, natural gas, and coal have all fallen below the cost of extraction.

Figure 12. Price per ton of oil equivalent, based on comparative prices for oil, natural gas, and coal given in BP Statistical Review of World Energy. Not inflation adjusted.

It is popular to think that the reason why oil prices are too low is because of overproduction by the United States or Saudi Arabia. When a person stops to realize that essentially the same situation arises for all three fossil fuels, a person begins to understand that there likely is an affordability issue underlying the low prices for all three fuels. The affordability issue, of course, arises because energy supply is not rising quickly enough because (at over $20 per barrel), it is too expensive to be truly affordable. The “atmosphere is too thin” at today’s high cost of energy extraction.

9. Coal production seems to have “peaked” because at today’s low prices, few mines find the extraction of coal profitable.

It is popular in “Peak Oil” circles to believe as the economists do: oil and other energy prices can rise endlessly, because of growing “demand.” Economists have never stopped to think that at any given price, there is an affordability issue for customers. If prices drop too low, there is a profitability issue for those operating extraction facilities.

If we look at the situation with coal, we see a situation where peak production seems to have been reached because of low prices. China has closed down mines because falling prices have made mines that were previously profitable, unprofitable (Figure 13). Coal is the lowest-cost fuel; if it cannot be mined profitably, the world economy has a problem.

Figure 13. China’s energy production, based on data from BP Statistical Review of World Energy, 2017.

In fact, it appears as though we have reached peak coal on a worldwide basis, as a result of low prices (Figure 14). It is hard to see any major production area that can grow substantially in the future, without much higher prices.

Figure 14. World coal production, based on BP Statistical Review of World Energy Data. (For 1965-1980, consumption is substituted for production, because only consumption is given, and imports/exports are likely small.

[10] The world economy needs to be able to keep repaying debt with interest. If world economic growth slows too much, this will not be possible. 

We may already be reaching a “too slow growth limit.” Below this growth limit, it becomes impossible to repay debt with interest, especially if interest rates rise. We may already be reaching this point, based on the lack of growth in energy consumption per capita shown in Figure 15. (Also, as noted in Item [3], it seems quite possible that recent GDP growth indications are overstated.)

Figure 15. Average energy prices (averaging oil, coal, and natural gas) versus the total quantity of energy products consumed per capita, based on BP energy consumption data and UN population data. (Prices have not been inflation adjusted.)

Figure 15 suggests that affordability and price go together. When the world economy is growing rapidly, energy prices tend to rise (as does energy consumption). When energy consumption per capita falls, it is a sign that the world economy is not doing well.

One of the things that confuses matters is the very different economic growth results for different parts of the world. If oil prices are low, this improves economic growth prospects from the point of oil importers, such as the United States and China. This is what our video game players are looking at, not the results for the world as a whole. It is oil exporters, such as Venezuela and Saudi Arabia, who are having problems.

If we look at world news, Venezuela may collapse because of low oil prices. Saudi Arabia has found it necessary to take on debt, and has undergone regime change, at least partly related to low oil prices. Norway is proposing that its oil and gas fund no longer invest in oil and gas companies, because it expects that there is a significant chance the oil price will not rise high enough to bring companies back to adequate profitability.

[11] The whole “game” has been confused by a lot of not-quite-correct pronouncements from academic circles.

A lot of well-meaning people have tried to solve our energy problems, but haven’t gotten the story right.

Economists have gotten the story pretty much 100% wrong. Energy is very important for the economy. Furthermore, energy prices don’t rise endlessly.

Peak Oilers have confused matters by talking about oil, coal and natural gas being determined by the amount of technically recoverable resources in the ground. This might be true if energy prices could rise endlessly, but clearly they cannot. By following the wrong views of economists, Peak Oilers have led world leaders to believe that far more resources are available to be extracted than really is the case.

People who call themselves Biophysical Economists haven’t really gotten the story correct either. The Biophysical Economists realized that there was a need for a measure for diminishing returns. They put together a measure which they called Energy Returned on Energy Invested. The measure, unfortunately, only “sort of” works. It gives a lot of wrong answers. It does not suggest that oil prices above $20 per barrel are a problem. It also does not suggest that substitutes for oil that are priced above $20 per barrel are a problem. It tends to give a lot of “false positives” when it comes to the question of whether renewables can be substituted for fossil fuels. It seems to suggest that a particular ratio is important, when it is really the total quantity of an energy product available at a very low price that is important.

I should not pick on the Biophysical Economists. There are many others with academic credentials who produce metrics that really aren’t very helpful. Energy payback time is not a very helpful metric, especially from the point of view of deciding whether or not to use a particular device. It is not the energy that the economy must pay back; it is the full cost of manufacturing the device that needs to be recovered, including human labor costs and taxes. In some applications, the cost of mitigating intermittency may also need to be considered.

Even the standard Levelized Cost of Energy calculations can give misleading indications, if they are used on intermittent renewables without taking into account the cost of mitigating the intermittency.


Conclusion

With all of these issues, it is not surprising that world leaders have difficulty playing the energy and economy game. In fact, it is hard to see any winning strategy.

One of the issues that makes the game impossible to win is the fact that all sides must win. A solution that cuts out the oil exporters is a problem for an economy dependent on oil. Any solution that cuts out the workers is a problem, partly because businesses need workers as consumers, and partly because governments need workers as taxpayers.

The reason I have not included any discussion of renewables is because at this point in time, we do not have any renewables that are sufficiently inexpensive and sufficiently scalable to represent a solution.

 

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.

2,300 Responses to A Video Game Analogy to Our Energy Predicament

  1. Fast Eddy says:

    Households and motorists have been warned to expect sharp rises in gas bills and petrol prices after a “perfect storm” of supply problems as the winter freeze begins.

    The shutdown of the North Sea’s most important oil and gas pipeline system on Monday was compounded by an explosion at a major processing facility in Austria, which is the main point of entry for Russian gas into Europe.

    After the incidents, wholesale gas prices hit their highest level for six years, rising by more than 50pc in the space of 24 hours, raising fears that the increase will be passed on to customers. Demand for gas has also been driven steadily higher in recent years by the shutdown of coal plants.

    http://www.telegraph.co.uk/business/2017/12/12/fears-uk-gas-prices-could-soar-winter-shock-events-hit-supply/

  2. Fast Eddy says:

    More than half of Europe’s coal plants are already bleeding cash, but by 2030, the percentage of coal plants in Europe that report negative cash flow could explode to an estimated 97 percent.

    https://oilprice.com/Energy/Coal/The-Death-Of-Europes-Coal-Industry.html

    • The Second Coming says:

      2030? Come now, I’ll be amazed if we get to 2022! Dow 50,000 Baby and Federal Debt to 50 Trillion Baby…Christmas Turkey Dinner in the oven!

      Christmas season is longer, more commercial now
      by Paula Lester
      My dad was born in Ohio on Dec. 15, 1910, the last of five children. He and my mother grew up in the country and lived their entire lives in the same state, moving when health conditions made it necessary.
      Both from families of modest means, Dad would tell me stories of a much different Christmas than I experienced as a child growing up in the late 1940s and 1950s.
      A tree was cut down in the woods and usually put up Christmas Eve on a homemade wooden stand that didn’t allow for watering, which made the holiday season much shorter than it is today. The ornaments were homemade from scraps of paper, ribbon and fabric. The decorating was complete when the stockings were hung at the bottom of the bed in hopes of a special surprise.
      My grandma would work for weeks making clothes for the children to unwrap Christmas morning. Rarely were there store-bought toys under the tree. Some years, a sled or a ball to share would bring delight to the children. If it was a good year for the family, each child might receive a silver coin.
      But the most exciting part of the morning, according to my dad, was waking up and opening your stocking. Inside there could be an orange, along with nuts, an apple and hard candy. The orange was a special treat as it had to make the trip all the way by train from Florida to Ohio. In 1920, the cost of an orange was 6 cents.
      My mother’s Christmas stories were very similar to my dad’s, except for one year when she received a lump of coal in her stocking for being naughty.

      http://thecharlotteweekly.com/news/2017/12/christmas-season-is-longer-more-commercial-now/

      Yep, the good old days coming back soon in a few more years to you and yours!

      • Fast Eddy says:

        All I can say is that my NYr resolution is to Burn More Coal…. I find it difficult to achieve my goal as I am burning at full throttle already — but I will do my best.

        • The Second Coming says:

          The Big Melt

          “From 1960 to 2017, the Alpine snow season shortened by 38 days—starting an average of 12 days later and ending 26 days earlier than normal. Europe experienced its warmest-ever winter in the 2015–16 season, with snow cover in the southern French Alps just 20% of its typical depth.

          Last December was the driest in 150 years of record keeping, and the flakes that did manage to fall didn’t stay around long. The snow line—the point on a slope at which it’s high enough and thus cold enough for snow to stick—is about 3,900 ft., which is a historic high in some areas. But worse lies ahead as scientists predict melt even at nearly 10,000 ft. by the end of the century
          Ok there is a little snow, but it’s human made.

          “In the Dolomites, it takes 4,700 snow-blowers to keep trails covered for Fast on his ski vacation!
          Got to get AWAY…
          Australia: Second surge of heat could challenge records
          Posted by WW Forecast Team on Sat, 16/12/2017 – 07:32
          Filed in:Australia

          Another round of intense heat is about to sweep across southern and eastern Australia, challenging December heat records for the second time in a week.

          A burst of hot weather swept across southeastern Australia this week, prompting fire bans in a number of states

          • We need more fossil fuel use to fight the problems caused by extreme temperatures, it sounds like.

          • Fast Eddy says:

            We had a very rainy spring … and it’s quite dry for this time of year … last year was very rainy and very cool — we barely had a summer at all… I turned on the garden water only a few times last year… this year I am pouring on the water….

            I wonder what the WEATHER will be like next summer?

          • Volvo740 says:

            Fake news!! Glaciers across the world have never been healthier. Especially those feeding 2 billion asians with water.

          • The Second Coming says:

            New Zealand usually has a wet spring and early summer which fill hydro storage dams to the brim, with plenty left over for the electricity-hungry winter.
            But this year, that has not happened, with a hot and dry spring for much of the country
            Victoria University climate scientist James Renwick said this could be a worry.
            “We often see higher flows at this time of year and into the summer, replenishing the lakes,” Dr Renwick said.
            “So dry conditions at this time of year is not a good sign.
            “If things do continue [to be] dry into the summer, that does not set us up well for going into the next winter.”
            But electricity companies say it is way too soon to make a call about winter conditions that are still six months away.
            Tracey Hickman from Genesis Energy said steps had already been taken to preserve water for generating electricity in future.
            “Our thermal power stations, particularly at Huntly, are running reasonably hard,” she said.
            “That just provides back up to that hydro storage.
            “We run both coal and gas and it depends on any one day as to which of those fuels we burn.”
            The most recent figures show gas and coal produced 23 percent of New Zealand’s electricity in the past week, compared with a 15 percent average.
            Ms Hickman said she thought that was prudent, and her company was already talking to others to prevent shortages come winter.
            “Winter is a way away yet, so it is too soon to start worrying about it, but there are plenty of incentives in this industry to keep a close eye on it.
            “We do have thermal backup when we need it to support low hydrology.
            Greenpeace’s Amanda Larsson said it showed weather patterns like the current one could damage the environment.
            These fossil fuels are being fired up on some of our hottest and sunniest days, which would be most suited to solar power,” she said.
            “So it is really a matter of more investment in clean energy to resolve the fact that climate change is going to put a lot of pressure on our hydro lakes
            https://www.radionz.co.nz/news/national/345991/hot-weather-bad-omen-for-winter-power-supply-scientist

            Good luck, keep us informed about it, burn, baby, burn!

            • New Zealand is in a cold climate, so it is a little like Norway, with a large amount of hydroelectric. But solar is very iffy; generally, the way it is added to systems, it tends to send prices for other generation way too low. This is damaging to the system. In most cases, it needs to be balanced with lots and lots and lots of storage, making it impractical and expensive.

            • Fast Eddy says:

              I was just speaking to someone who is driving a coal powered car — and another person with panels made from coal on his roof.

              I had very little to say

            • Fast Eddy says:

              And last spring and summer it never stopped raining.

              What’s going on!!!! This has NEVER happened before

            • The Second Coming says:

              Keep us all informed and up to date on the developments from Down Under, Fast,
              We can not trust the MSM regarding the news. Thank you.

            • Fast Eddy says:

              It’s another scorcher today …. that’s probably because I was running around in my 4 bah 4 yesterday spewing diesel…. I might lay off a bit as the neighbour was bi.ching at me for causing a spike in the temperature yesterday

      • jazIntico says:

        Interesting to hear how she downgrades her mother. “Dad” – affectionate; “my mother” – more formal and distant. “My mother’s Christmas stories were very similar to my dad’s” – so her mother lacked originality? And her mother was also “naughty”.

    • Sven Røgeberg says:

      From the article: «But utilities are making some poor investment decisions, Carbon Tracker argues. By 2024 the operating cost of coal is expected to be higher than the levelized cost of electricity (LCOE) for wind, while the same is true for solar by 2027. That bears repeating – within the next decade, it will be cheaper to build new solar and wind projects, including all of the upfront construction costs, than it would be to simply keep an existing coal plant online.

      And time is not on their side. More stringent air pollution standards come into force in 2021, and the cost of carbon in Europe’s emissions trading system is expected to continue to rise. Meanwhile, the cost of renewables and energy storage continues to fall.

      “Those utilities that expect to run their coal units longer than evidence suggests are putting their assets on a collision course with these mega trends,” Carbon Tracker wrote in its report. Ultimately, the EU could save an estimated 22 billion euros if it phased out coal in line with the Paris Climate Agreement.»

      • The Levelized Cost of Electricity is calculated incorrectly. It does not include all of the financial support needed for backup generation, or alternatively, the huge amount of batteries and other storage needed–far beyond what we have the physical capability of adding. It is just another way of “proving” something which is clearly false.

        https://ourfiniteworld.com/2017/07/22/researchers-have-been-underestimating-the-cost-of-wind-and-solar/

        • Artleads says:

          “How should electricity from wind turbines and solar panels be evaluated? Should it be evaluated as if these devices are stand-alone devices? Or do these devices provide electricity that is of such low quality, because of its intermittency and other factors, that we should recognize the need for supporting services associated with actually putting the electricity on the grid? ”

          I was about to ask again for the simplest possible explanation of our energy/economic impasse. Since people in my world are not informed about business and energy, they skirt a lot of behaviors that might actually advantage them if they understood a little more.

          The better educated people in my acquaintance think that “renewable” energy and Teslas will save them. Somehow, they lack the synapses to put exponential population growth, the resulting economic growth, the resulting resource depletion all together as a whole. Myself, I can only understand it though imagination, feeling, intuition. Apparently, most people are not sufficiently anxious, crazy or introspective to do it the way I do. I have to try to make them understand with factual information from this blog. But it simply has to be boiled down to a couple irrefutable talking points.

          The above quote goes a long way toward such an explanation, but I doubt they’ll hear me if I talk about intermittency. Intermittency? What intermittency? If that was a serious issue we would have heard about it on the news. “Stand-alone” devices? No, they won’t get that either. The makings of a simple, emotionally penetrating explanation are there, but it needs more work.

          • Pintada says:

            You are fighting an unwindable battle Artleads. People just do not function as you are trying to make them.

            • Artleads says:

              There are times when people get painted into a corner. Then I may have the opportunity to tell them why they got painted into that corner. That’s all I’m trying to do right now. I agree with Gail about living within a self organizing system, but it seems vitally important to express my understanding of the situation, as it is bound to make a difference to a self organizing system one way or another, and, one way if I sit by and another way if I take action.Trying to second guess what that action will do is ridiculous. What I do that should change (and that you may agree about) is to get so caught up in a cause that I forget to have fun.

            • Artleads says:

              What bugs me is that if we don’t try something, we don’t know if it’s sure to fail…or why it fails, if it does. Since I don’t have the irrefutable talking points about energy and why a) we have to max out on it *without any concern for what it destroys* I’m stuck with trying to stop the destruction while not knowing how that affects the “BAU” economy.

              For instance, i can see ways to drill for oil that would halve the destruction drilling does to the land. In fact, Bush I said something about caribou nestling up with pipelines that SOUNDED reasonable at the time. If the issue is to keep BAU going as long as possible, why can’t it be done while losing as few as possible of the natural/cultural resources that are after all needed in some way too.?

              To what extend is it that people who disregard preventing breakage while doing BAU simply do not KNOW the value of what is being broken or how to reduce such breakage?

              And b) why is the economy created around reducing breakage (tourism, conservation, etc.) not valuable along with other aspects of BAU that cannot be worked around?

            • Artleads says:

              extent

  3. Baby Doomer says:

    The Great Oil Swindle by Chris Martenson

    “You’re really going to hate gasoline $10 a gallon gasoline” (yes, it could get that ugly)”

    https://www.peakprosperity.com/blog/113557/great-oil-swindle?utm_source=dlvr.it&utm_medium=facebook

    • Baby Doomer says:

      Anything above 5 dollars a gallon gasoline will kill BAU instantly….This world will burn!

      • zenny says:

        Pretty sure that is what I paid today I was cool with it.
        I am in Canada Europe is off the map…BTW price is down if you have BTC

        • Volvo740 says:

          The American way is the way! Those Danes (and Swedes) love paying $6 per gal. My 740 is a bit thirsty but not like a Suburban.

          • zenny says:

            Some Countries like NZ even tax the distance driven.
            Someway the third world can afford fuel try a street view in Manila.

            • DJ says:

              If 65% of the gas price is tax and most of service and reparation is “work” and that is more than 65% tax, then you could say scandinavia taxes distance driven.

    • Chris Martenson is delusional, if he said “You’re really going to hate $10 a gallon gasoline.” But I suppose the statement illustrates a point. I really doubt we would get there, but thinking through why may illustrate a point.

      • Volvo740 says:

        It’s the wealth disparity at work. Many of those who have 100k of cash don’t understand how cash strapped the bottom half really is.

        • a while ago i read an estimate of petrol price—that if all the factors were added in for the cost of oil wars , it would be $15 a gallon

          which makes sense when you think what the cost was when it was just sucked out of texas

          • Fast Eddy says:

            That’s another indication of just how far wrong these people who look only at energy return are…

            They fail to understand that in addition to royalties R&D exploration taxes etc…. there is also the need to have enough excess energy to secure global supply … enormously expensive…

            Which puts us even closer to the edge.

  4. Sven Røgeberg says:

    I would like to engage Gail and others in a discussion about what made the Sovietunion collapse. Many scholars have written about the long term effects of the ineffiency of the institutional arrangement of the economy and of the new arms race the USA under Reagan tried to involve Soviet in, wich put a heavy strain on government programs.
    I think Gail in an article (I can`t find it?) pointed to the falling oil prices in the years before the breaking up of the internal og external (the satellite states in East-Europe) empire. But I don`t think she mentioned how large a part the oil (and gas?) made up of the export earnings? Would also like to hear if someone know how the new economic reforms Gorbatsjov tried to implement after coming to power in 1985 played out for the oilproduction companies?
    I remember working together with a polnish mathematician, who told me how the Olympic Summer Games arranged in Moscow in 1980 spurred widespread discontent among polnish students as agriculture products disappeared from the universities. Meat, dairy products and vegetables had to be delivered to Moscow to feed athletes and visitors. One and a half month after the Olympics Solidarity (Polish: Solidarność), the Polish labour union, was founded. In december 1979 the Sovjets had invaded Afghanistan, which would become their Vietnam – remember the Iranian Revolution played out earlier that year (what a year 1979 was – Tatchers victory in Britain and Deng Xiaoping visiting the USA).

    • The collapse of the Soviet Union was caused by low oil prices, related to a cutback in world demand by switching to smaller cars, and changing from the use of oil to other fuels for generating electricity. Also, the adoption of more efficient use of fossil fuels.

      The Soviet Union was an oil exporter. The self-organized economy had to take-down part of the oil exporting capacity. Some area had to be “sacrificed.” The laws of thermodynamics said that it was the Soviet Union and its affiliated economies (including Cuba and North Korea) that had to be sacrificed at that time.

      Former Soviet Union oil production, consumption, and price

      We owe a major debt of gratitude to the collapse of the Former Soviet Union. If it weren’t for it, the world economy would have collapsed much sooner. As it was, part of the former Soviet Union’s oil could be left in the ground until later. This substantially put off peak oil.

      • Baby Doomer says:

        The reason the soviet union collapsed was an oil shortage. See how their oil production fell after going on a ten year plateau. And since then they have used enhanced oil recovery technology to boost oil production again. I learned this from reading the book “Cold War Energy: The Rise and Fall of the Soviet Union” written by Professor Douglas B. Reynolds of Oil and Energy Economics at the University of Alaska.

        https://www.amazon.com/Cold-War-Energy-Soviet-Union/dp/0692630619

        • It wasn’t a shortage of oil; it was a shortage of oil available at a very low selling price. The drop in demand dictated that oil could only sell oil at a very low prices. If the former Soviet Union had been able to continue extracting oil at very low prices, there would have been much more production. Once oil prices rose again, the Former Soviet Union could again extract more oil.

          • DJ says:

            1980 600 mtoe for $100
            1990 600 mtoe for $40
            That must have sucked for the budget.

          • Sven Røgeberg says:

            Interesting discussions:
            http://www.politifact.com/punditfact/statements/2014/mar/13/michael-reagan/ronald-reagans-son-says-his-father-got-saudis-pump/
            https://wais.stanford.edu/History/history_ussrandreagan.htm
            Because of the high oil prices of the 1970s the Soviet leadership avoided serious economic reforms, such as those that saved Deng Xiaoping’s China. Instead, it relied on oil revenues as a means of keeping its decrepit economy going. By the early 1980s the Soviet Union was becoming a hollow shell, with an unreformed and increasingly backward industrial base producing outmoded pre-computer armaments. Thus it was highly vulnerable to the pressures that the Reagan administration was planning.

            • Each economy adapts to the prices available at a time. If high prices are available, it is extremely difficult to adapt to low prices again. It is a small miracle that Saudi Arabia and other Middle Eastern economies did not collapse with low prices.

            • Fast Eddy says:

              A good way to envision this is …. to imagine one is appointed to a good position within an organization — with a salary of 100k+ … one works in that job for 5 years…. most people take on obligations that would be based on that income e.g. a mortgage on the best house they could afford

              Then imagine losing the 100k job… and the only job one can find pays 50k….

              This micro story applies to the macro — it is why the global economy cannot shrink … without imploding the financial system

          • Baby Doomer says:

            What drop in demand? Global oil consumption was strong right through 1990 when the Soviet Union collapsed. And during their collapse their Nat Gas production increased. While their oil production fell off a cliff. That doesn’t make any sense unless you have reached physical limits.

            • Let’s look at world per capita energy consumption:

              World per capita energy consumption with two circles

              The world economy does not seem to be able to withstand any drop in per capita energy consumption, without one or another portion of the economy collapsing. Most of the drop in per capita energy consumption in the 1980 to 2000 period related to oil consumption.

              world per capita energy consumption by fuel since 1820

              In fact, the world cannot withstand any significant drop in energy/commodity prices. The fact that prices fell from their high levels in the 1970s was a problem for producers that had ramped up oil production based on the high prices available at that time. The situation was one of deflation. The world cannot seem to withstand deflation of any sort. It is a problem for farmers, miners, and oil producers.

            • Fast Eddy says:

              A wise man once said….

              And he was right…..

              Ever seen those contrasting images as you disembark planes and walk through the air bridge?

              Here’s my version

              Good

              Bad

      • Artleads says:

        “The Soviet Union was an oil exporter. The self-organized economy had to take-down part of the oil exporting capacity. Some area had to be “sacrificed.” The laws of thermodynamics said that it was the Soviet Union and its affiliated economies (including Cuba and North Korea) that had to be sacrificed at that time.”

        Lovely explanation!

    • MudGod says:

      They collapsed because the people pretended to work and the govt pretended to pay them.

  5. Baby Doomer says:

    2018 likely to be serious year of reckoning for global economy

    US petroleum inventory life has fallen meaningfully below the 100-day threshold. A surge in US shale oil output will soon taper: a contracting shale-rig fleet says it all.
    http://www.scmp.com/business/companies/article/2124536/2018-likely-be-serious-year-reckoning-global-economy

    • Duncan Idaho says:

      “Germany, the last stronghold, is unlikely to last and its slowdown will hit China, Hong Kong, and the rest of world. Exports and thus profits will slow.”

      Yep, and this is from just a economic perspective, several nodes down from the physical reality.

  6. The Second Coming says:

    Yep, Fast is correct, they only tell us what they want us to believe…
    The Trump administration has reportedly banned the Centers for Disease Control (CDC) from using the phrases “evidence-based” and “science-based” in official documents.
    Analysts are reportedly prohibited from using the phrases in official documents they prepare for the 2019 budget, which is expected to be released in February
    The Trump administration has been repeatedly scrutinized for declining to acknowledge science-based findings, particularly related to climate change. Trump himself has not said whether he believes in climate science, and numerous members of his administration and his appointees have denied aspects of scientific consensus related to global warming.
    http://thehill.com/news-by-subject/healthcare/365204-trump-admin-bans-cdc-from-using-evidence-based-and-science-based

    • When a person is involved in the process, it becomes very clear that “science-based” does not really mean very much.

      Also, computed economic growth doesn’t mean very much. I saw an article yesterday on how much individual quarterly growth amounts have changed in the US (from very low to very high). And we know China’s and Japan’s economic growth represents quite a bit of growth that doesn’t really represent true benefits that will pay for themselves–roads to nowhere, and houses that no one can afford to buy. US has its share of oil extraction that is not economic.

      • The Second Coming says:

        … Of course the administration and its defenders are going to argue that this is only about what goes into the budget,” Jha said. “But we know that the signal to the agency is much stronger than that. And it’s going to change behavior of people who work there. And that’s much more damaging than any direct censorship.”

        Anyone paying attention to the current administration’s stance on science will recall similar instances in which federal researchers worried it was going to kill off reports on climate change, or it put climate change deniers and chemical lobbyists in charge at the Environmental Protection Agency, or it tried to make the FDA’s chief scientist a guy whose previous experience mostly included blogging about “race traitors.” So, yeah, no word on whether the White House has requested the CDC get back into phrenology, but don’t worry. There’s plenty of fresh hell waiting for us in 2018.

        [Washington Post]

  7. Pintada says:

    Dear Artleads;

    Artleads said, “I read or scanned most of the article from the first link above. One of the better points for me was his argument that you can’t generalize about people. And that there are some areas of broad agreement–e.g.,, driving while drunk is dangerous–while other areas that threaten their view of normalcy are easier to reject–e.g., climate change, economic collapse, etc.–are harder to get widespread agreement on.”

    Im sorry that it took so long to respond.

    My recommendation is that you try to slog through the entire 4 part epistle despite its length, and denseness, it is in my mind a very valuable piece of work.

    This is part of what I wanted to say:
    https://www.opednews.com/articles/4/The-Uncanny-Frightening-W-by-Thom-Hartmann-America-Freedom-To-Fascism_Hitler_Nazis_Obama-171216-349.html

    But as Mr Cohen would correctly point out Thom Hartmann is speaking from flatland because he fails to mention that Obama or HRC would be doing, and in Obama’s case did do exactly what Trump is doing. In fact, you can substitute the word “Obama” everywhere the word “Trump” appears, and the piece has the same value. The only real difference between Trump and Obama is erudition.

    Both of those articles illuminate the idea that no one is really in charge. Was someone other than Hitler in charge of the Third Reich? Is Janet Yellen really in charge of the planet today? Now that net neutrality is gone, we may soon face a time soon when OFW and other sources of the truth is not accessible. Did Janet Yellen, or some magical person above her decide that? Of course not. The big network corporations exercised their INFLUENCE on weak or bought off regulators.

    The myth of the great overseer comes from inside the flatland psyche. It is easier to think that someone, or some group has it all figured out, that someone understands what is happening and is actually making the world move the way it is moving for a reason. “If I scream loudly enough, Mommy will come.” “I am getting hungry, but Mommy will bring food soon. She always has it all figured out.”

    It is difficult to be an adult, and on your own.

    Think for a moment about the magical person(s) supposedly in charge of the world today. They must understand the truth about AGW, they must know why BitCoin now costs $17,000, and they must understand every other force and change occurring in the world right now. If they don’t have that perfect understanding, then they must be making random choices which supports my argument (i.e. they are not in control). If they exist and have perfect knowledge, they are God, and that is a different subject.

    So, the magical person(s) exist and want a strong military and so they demand that the F35 project continues. Really? Or, maybe they want a weak military and so they spend a trillion dollars a year to build it bigger.

    The magical person(s) exist, and so they fund studies at NOAH, and NASA, and others to provide evidence of global warming and at the same time force Exxon and others to spend money denying it.

    It is scary, I know. But isn’t it really simpler to admit that we are on our own and had better be as rational and flexible as possible?

    • We live in a self-organized system. There is someone in charge, but it is the maker of the self-organized system.

      • jupiviv says:

        Countless self-organising systems can be individually identified in nature. Do all of them have the same maker? Did he who made the tiger have a hand in the making of the lamb?

        • Yes, in my opinion. I don’t believe in a god and devil both having self-organizing powers.

          • Tango Oscar says:

            A closer look at this reality shows repeating shapes, symbols, numbers, and principles. Forget what you think you know and just observe in silence. Everything here rides a wave that goes up, peaks, and declines. That goes for oil, human lives, ideas, and everything else.

            We don’t really know what atoms are or how small they get. Likewise when you look out at the universe you’re left with the same but outward expression. Our bodies too are mini universes comprised of trillions of individual cells, seemingly too complex to fully comprehend.

            The longer you continue this exercise and the more open minded and are, you will ultimately see that we are all a small part of one whole. That whole is what makes up god or what we believe god is. It is a reintegration of the sum of our parts. We are all a part of god but we are forced to forget that when take physical form. It’s a part of the game. If we knew everything already what would be the point?

      • Lastcall says:

        After some years inside and outside the matrix (as much as is possible) this quote seems to me to sum up our predicament.

        ‘Those making up society’s elite, or those seeking higher social status or those with an agenda for social change, are no wiser or better than anybody else. However, they are much worse in one crucial respect—they believe they can make wise “choices” for the rest of us’.
        http://www.declineoftheempire.com/2014/10/adventures-in-flatland.html

        We are entering a period of time where the tendency of those in power to know whats best for us is about to explode. Only correct thinking will be allowed, and yes, war is peace.

        I too have for some time driven the wrong car (25 years old LPG) and it definitely has status implications re being in the in-group. My opinions are definitely less valued due to my lack of ‘success”. I had been driving new vehicles/houses/toys for years when I was immersed in the rat-race and it definitely enhanced social acceptance amongst those in the clique.

        • That is a great Dave Cohen quote:

          ‘Those making up society’s elite, or those seeking higher social status or those with an agenda for social change, are no wiser or better than anybody else. However, they are much worse in one crucial respect—they believe they can make wise “choices” for the rest of us’.

    • Slow Paul says:

      Also, much more comfortable to have someone to blame rather than taking full responsibility for your own life and actions.

    • Artleads says:

      Some quick and inadequate observations:

      – Resist beginnings. My thought too. To resist middles and ends is futile.

      – As in martial arts we win by yielding. Universally stopping resistance might disorient our opponents more than would continued resistance.

      – What is really revolutionary is worldwide unity of purpose (if we could figure out what that would entail).

      – A self organizing system.may, of necessity, depend as much on culture and psychology as on thermodynamics. How do you exclude anything from a self organizing system?

      – There can be no single, local solutions. Solutions must be global and in line with the self organizing system

      – Resistance is not so much resistance as it is appropriate self actualization. It is therefore a lot like art. It is more the beauty of your creation than your resistance to its nemesis that matters.

      – It is part of the human condition never to know our destiny. We exist on a razor’s edge…eternally.

      – Art is the way–we’re charged with making a good work of art, the value or success of which is judged through the self organizing system.

      – The balance of aesthetic intuition with facts and reason is perhaps our best way to proceed.

      – Aesthetic intuition and spiritual understanding are closely allied.

    • jupiviv says:

      “Both of those articles illuminate the idea that no one is really in charge.”

      Indeed, and no one has ever been in charge. Power is reducible to a network of causes and effects just like everything else, although it is convenient to believe otherwise if you want to hold and use it.

      • jupiviv says:

        …and that is another reason why the powerful don’t really have much more of a clue than Joe avg. They can’t be both powerful and able to objectively analyse the system which enables them to hold power, unless of course that system is mostly based on rational principles and mostly operated by and intended to serve sentient beings who remain true to said principles above all else. Such a system doesn’t, alas, exist among humans.

  8. MG says:

    Power from mini nuclear plants ‘would cost more than from large ones’

    https://www.theguardian.com/environment/2017/dec/07/power-mini-nuclear-plants-cost-more-hinkley-point-c

    “Lord Hutton, the chairman of the Nuclear Industry Association, criticised “simplistic” comparisons of the guaranteed prices awarded to nuclear plants and windfarms. He also described wind and solar as “intermittent and unpredictable”.”

Comments are closed.