The Depression of the 1930s Was an Energy Crisis

Economists, including Ben Bernanke, give all kinds of reasons for the Great Depression of the 1930s. But what if the real reason for the Great Depression was an energy crisis?

When I put together a chart of per capita energy consumption since 1820 for a post back in 2012, there was a strange “flat spot” in the period between 1920 and 1940. When we look at the underlying data, we see that coal production was starting to decline in some of the major coal producing parts of the world at that time. From the point of view of people living at the time, the situation might have looked very much like peak energy consumption, at least on a per capita basis.

Figure 1. World Energy Consumption by Source, based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects (Appendix) together with BP Statistical Data for 1965 and subsequent, divided by population estimates by Angus Maddison.

Even back in the 1820 to 1900 period, world per capita energy had gradually risen as an increasing amount of coal was used. We know that going back a very long time, the use of water and wind had never amounted to very much (Figure 2) compared to burned biomass and coal, in terms of energy produced. Humans and draft animals were also relatively low in energy production. Because of its great heat-producing ability, coal quickly became the dominant fuel.

Figure 2. Annual energy consumption per head (megajoules) in England and Wales during the period 1561-70 to 1850-9 and in Italy from 1861-70. Figure by Wrigley

In general, we know that energy products, including coal, are necessary to enable processes that contribute to economic growth. Heat is needed for almost all industrial processes. Transportation needs energy products of one kind or another. Building roads and homes requires energy products. It is not surprising that the Industrial Revolution began in Britain, with its use of coal.

We also know that there is a long-term correlation between world GDP growth and energy consumption.

Figure 3. X-Y graph of world energy consumption (from BP Statistical Review of World Energy, 2017) versus world GDP in 2010 US$, from World Bank.

The “flat period” in 1920-1940 in Figure 1 was likely problematic. The economy is a self-organized networked system; what was wrong could be expected to appear in many parts of the economy. Economic growth was likely far too low. The chance for conflict among nations was much higher because of stresses in the system–there was not really enough coal to go around. These stresses could extend to the period immediately before 1920 and after 1940, as well.

A Peak in Coal Production Hit the UK, United States, and Germany at Close to the Same Time

This is a coal supply chart for the UK. Its peak coal production (which was an all time peak) was in 1913. The UK was the largest coal producer in Europe at the time.

Figure 4. United Kingdom coal production since 1855, in a href=”″>figure by David Strahan. First published in New Scientist, 17 January 2008.

The United States hit a peak in its production only five years later, in 1918. This peak was only a “local” peak. There were also later peaks, in 1947 and 2008, after coal production was developed in new areas of the country.

Figure 5. US coal production, in Wikipedia exhibit by contributor Plazak.

By type, US coal production is as shown on Figure 6.

Figure 6. US coal production by type, in Wikipedia exhibit by contributor Plazak.

Evidently, the highest quality coal, Anthracite, reached a peak and began to decline about 1918. Bituminous coal hit a peak about the same time, and dropped way back in production during the 1930s. The poorer quality coals were added later, as the better-quality coals became less abundant.

The pattern for Germany’s hard coal shows a pattern somewhat in between the UK and the US pattern.

Figure 7. Source GBR.

Germany too had a peak during World War I, then dropped back for several years. It then had three later peaks, the highest one during World War II.

What Affects Coal Production?

If there is a shortage of coal, fixing it is not as simple as “inadequate coal supply leads to higher price,” quickly followed by “higher price leads to more production.” Clearly the amount of coal resource in the ground affects the amount of coal extraction, but other things do as well.

[1] The amount of built infrastructure for taking the coal out and delivering the coal. Usually, a country only adds a little coal extraction capacity at a time and leaves the rest in the ground. (This is how the US and Germany could have temporary coal peaks, which were later surpassed by higher peaks.) To add more extraction capacity, it is necessary to add (a) investment needed for getting the coal out of the ground as well as (b) infrastructure for delivering coal to potential users. This includes things like trains and tracks, and export terminals for coal transported by boats.

[2] Prices available in the marketplace for coal. These fluctuate widely. We will discuss this more in a later section. Clearly, the higher the price, the greater the quantity of coal that can be extracted and delivered to users.

[3] The cost of extraction, both in existing locations and in new locations. These costs can perhaps be reduced if it is possible to add new technology. At the same time, there is a tendency for costs within a given mine to increase over time, as it becomes necessary to access deeper, thinner seams. Also, mines tend to be built in the most convenient locations first, with best access to transportation. New mines very often will be higher cost, when these factors are considered.

[4] The cost and availability of capital (shares of stock and sale of debt) needed for building new infrastructure, and for building new devices made possible by new technology. These are affected by interest rates and tax levels.

[5] Time lags needed to implement changes. New infrastructure and new technology are likely to take several years to implement.

[6] The extent to which wages can be recycled into demand for energy products. An economy needs to have buyers for the products it makes. If a large share of the workers in an economy is very low-paid, this creates a problem.

If there is an energy shortage, many people think of the shortage as causing high prices. In fact, the shortage is at least equally likely to cause greater wage disparity. This might also be considered a shortage of jobs that pay well. Without jobs that pay well, would-be workers find it hard to purchase the many goods and services created by the economy (such as homes, cars, food, clothing, and advanced education). For example, young adults may live with their parents longer, and elderly people may move in with their children.

The lack of jobs that pay well tends to hold down “demand” for goods made with commodities, and thus tends to bring down commodity prices. This problem happened in the 1930s and is happening again today. The problem is an affordability problem, but it is sometimes referred to as “low demand.” Workers with inadequate wages cannot afford to buy the goods made by the economy. There may be a glut of a commodity (food, or oil, or coal), and commodity prices that fall far below what producers need to make a profit.

Figure 8. U.S. Income Shares of Top 10% and Top 1%, Wikipedia exhibit by Piketty and Saez.

The Fluctuating Nature of Commodity Prices

I have noted in the past that fossil fuel prices tend to move together. This is what we would expect, if affordability is a major issue, and affordability changes over time.

Figure 9. 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.

We would expect metal prices to follow fossil fuel prices, because fossil fuels are used in the extraction of ores of all kinds. Investment strategist Jeremy Grantham (and his company GMO) noted this correlation among commodity prices, and put together an index of commodity prices back to 1900.

Figure 10. GMO Commodity Index 1900 to 2011, from GMO April 2011 Quarterly Letter. “The Great Paradigm Shift,” shown at the end is not really the correct explanation, something now admitted by Grantham. If the graph were extended beyond 2010, it would show high prices in 2010 to 2013. Prices would fall to a much lower level in 2014 to 2017.

Reason for the Spikes in Prices. As we will see in the next few paragraphs, the spikes in prices generally arise in situations in which everyday goods (food, homes, clothing, transportation) suddenly became more affordable to “non-elite” workers. These are workers who are not highly educated, and are not in supervisory positions. These spikes in prices don’t generally “come about” by themselves; instead, they are engineered by governments, trying to stimulate the economy.

In both the World War I and World War II price spikes, governments greatly raised their debt levels to fund the war efforts. Some of this debt likely went directly into demand for commodities, such as to make more bombs, and to operate tanks, and thus tended to raise commodity prices. In addition, quite a bit of the debt indirectly led to more employment during the period of the war. For example, women who were not in the workforce were hired to take jobs that had been previously handled by men who were now part of the war effort. (These women were new non-elite workers.) Their earnings helped raise demand for goods and services of all kinds, and thus commodity prices.

The 2008 price spike was caused (at least in part) by a US housing-related debt bubble. Interest rates were lowered in the early 2000s to stimulate the economy. Also, banks were encouraged to lend to people who did not seem to meet usual underwriting standards. The additional demand for houses raised prices. Homeowners, wishing to cash in on the new higher prices for their homes, could refinance their loans and withdraw the cash related to the new higher prices. They could use the funds withdrawn to buy goods such as a new car or a remodeled basement. These withdrawn funds indirectly supplemented the earnings of non-elite workers (as did the lower interest rate on new borrowing).

The 2011-2014 spike was caused by the extremely low interest rates made possible by Quantitative Easing. These low interest rates made the buying of homes and cars more affordable to all buyers, including non-elite workers. When the US discontinued its QE program in 2014, the US dollar rose relative to many other currencies, making oil and other fuels relatively more expensive to workers outside the US. These higher costs reduced the demand for fuels, and dropped fuel prices back down again.

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

The run-up in oil prices (and other commodity prices) in the 1970s is widely attributed to US oil production peaking, but I think that the rapid run-up in prices was enabled by the rapid wage run-up of the period (Figure 12 below).

Figure 12. Growth in US wages versus increase in CPI Urban. Wages are total “Wages and Salaries” from US Bureau of Economic Analysis. CPI-Urban is from US Bureau of Labor Statistics.

The Opposing Force: Energy prices need to fall, if the economy is to grow. All of these upward swings in prices can be at most temporary changes to the long-term downward trend in prices. Let’s think about why.

An economy needs to grow. To do so, it needs an increasing supply of commodities, particularly energy commodities. This can only happen if energy prices are trending lower. These lower prices enable the purchase of greater supply. We can see this in the results of some academic papers. For example, Roger Fouquet shows that it is not the cost of energy, per se, that drops over time. Rather, it is the cost of energy services that declines.

Figure 13. Total Cost of Energy and Energy Services, by Roger Fouquet, from Divergences in Long Run Trends in the Prices of Energy and Energy Services.

Energy services include changes in efficiency, besides energy costs themselves. Thus, Fouquet is looking at the cost of heating a home, or the cost of electrical services, or the cost of transportation services, in inflation-adjusted units.

Robert Ayres and Benjamin Warr show a similar result, related to electricity. They also show that usage tends to rise, as prices fall.

Figure 14. Ayres and Warr Electricity Prices and Electricity Demand, from “Accounting for growth: the role of physical work.”

Ultimately, we know that the growth in energy consumption tends to rise at close to the same rate as the growth in GDP. To keep energy consumption rising, it is helpful if the cost of energy services is falling.

Figure 15. 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.

How the Economic Growth Pump Works

There seems to be a widespread belief, “We pay each other’s wages.” If this is all that there is to economic growth, all that is needed to make the economy grow faster is for each of us to sell more services to each other (cut each other’s hair more often, or give each other back rubs, and charge for them). I think this story is very incomplete.

The real story is that energy products can be used to leverage human labor. For example, it is inefficient for a human to walk to deliver goods to customers. If a human can drive a truck instead, it leverages his ability to deliver goods. The more leveraging that is available for human labor, the more goods and services that can be produced in total, and the higher inflation-adjusted wages can be. This increased leveraging of human labor allows inflation-adjusted wages to rise. Some might call this result, “a higher return on human labor.”

These higher wages need to go back to the non-elite workers, in order to keep the growth-pump operating. With higher-wages, these workers can afford to buy goods and services made with commodities, such as homes, cars, and food. They can also heat their homes and operate their vehicles. These wages help maintain the demand needed to keep commodity prices high enough to encourage more commodity production.

Raising wages for elite workers (such as managers and those with advanced education), or paying more in dividends to shareholders, doesn’t have the same effect. These individuals likely already have enough money to buy the necessities of life. They may use the extra income to buy shares of stock or bonds to save for retirement, or they may buy services (such as investment advice) that require little use of energy.

The belief, “We pay each other’s wages,” becomes increasingly false, if wages and wealth are concentrated in the hands of relatively few. For example, poor people become unable to afford doctors’ visits, even with insurance, if wage disparity becomes too great. It is only when wages are fairly equal that all can afford a wide range of services provided by others in the economy.

What Went Wrong in 1920 to 1940?

Very clearly, the first thing that went wrong was the peaking of UK coal production in 1913. Even before 1913, there were pressures coming from the higher cost of coal production, as mines became more depleted. In 1912, there was a 37-day national coal strike protesting the low wages of workers. Evidently, as extraction was becoming more difficult, coal prices were not able to rise sufficiently to cover all costs, and miners’ wages were suffering. The debt for World War I seems to have helped raise commodity prices to allow wages to be somewhat higher, even if coal production did not return to its previous level.

Suicide rates seem to behave inversely compared to earning power of non-elite workers. A study of suicide rates in England and Wales shows that these were increasing prior to World War I. This is what we would expect, if coal was becoming increasingly difficult to extract, and because of this, the returns for everyone, from owners to workers, was low.

Figure 16. Suicide rates in England and Wales 1861-2007 by Kyla Thomas and David Gunnell from International Journal of Epidemiology, 2010.

World War I, with its increased debt (which was in part used for more wages), helped the situation temporarily. But after World War I, the Great Depression set in, and with it, much higher suicide rates.

The Great Depression is the kind of result we would expect if the UK no longer had enough coal to make the goods and services it had made previously. The lower production of goods and services would likely be paired with fewer jobs that paid well. In such a situation, it is not surprising that suicide rates rose. Suicide rates decreased greatly with World War II, and with all of the associated borrowing.

Looking more at what happened in the 1920 to 1940 period, Ugo Bardi tells us that prior to World War I, the UK exported coal to Italy. With falling coal production, the UK could no longer maintain those exports after World War I. This worsened relations with Italy, because Italy needed coal imported from the UK to rebuild after the war. Ultimately, Italy aligned with Germany because Germany still had coal available to export. This set up the alliance for World War II.

Looking at the US, we see that World War I caused favorable conditions for exports, because with all of the fighting, Europe needed to import more goods (including food) from the United States. After the war ended in 1918, European demand was suddenly lower, and US commodity prices fell. American farmers found their incomes squeezed. As a result, they cut back on buying goods of many kinds, hurting the US economy.

One analysis of the economy of the 1920s tells us that from 1920 to 1921, farm prices fell at a catastrophic rate. “The price of wheat, the staple crop of the Great Plains, fell by almost half. The price of cotton, still the lifeblood of the South, fell by three-quarters. Farmers, many of whom had taken out loans to increase acreage and buy efficient new agricultural machines like tractors, suddenly couldn’t make their payments.”

In 1943, M. King Hubbert offered the view that all-time employment had peaked in 1920, except to the extent that it was jacked up by unusual means, such as war. In fact, some historical data shows that for four major industries combined (foundries, meat packing, paper, and printing), the employment index rose from 100 in 1914, to 157 in 1920. By September 1921, the employment index had fallen back to 89. The peak coal problem of the UK had been exported to the US as low commodity prices and low employment.

It was not until the huge amount of debt related to World War II that the world economy could be stimulated enough so that total energy production per capita could continue to rise. The use of oil especially became much greater starting after World War II. It was the availability of cheap oil that allowed the world economy to grow again.

Figure 17. Per capita energy consumption by fuel, separately for several energy sources, using the same data as in Figure 1.

The stimulus of all the debt-enabled spending for World War II seems to have been what finally encouraged the production of the oil needed to pull the world economy out of the problems it was having. GDP and Disposable Personal Income could again rise (Figure 18.)

Figure 18. Comparison of 3-year average change in disposable personal income with 3-year change average in GDP, based on US BEA Tables 1.1.5 and 2.1.

Furthermore, total per capita energy consumption began to rise, with growing oil consumption (Figure 1). This growth in energy consumption per capita seems to be what allows the world economy to grow.

I might note that there is one other exceptional period: 1980 to 2000. Space does not allow for an explanation of the situation here, but falling per capita energy consumption seems to have led to the collapse of the former Soviet Union in 1991. This was a different situation, caused by lower oil consumption related to efficiency gains. This was a situation of an oil producer being “squeezed out” because additional oil was not needed at that time. This is an example of a different type of economic disruption caused by flat per capita energy consumption.

Figure 19. World per Capita Energy Consumption with two circles relating to flat consumption. World Energy Consumption by Source, based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects (Appendix) together with BP Statistical Data for 1965 and subsequent, divided by population estimates by Angus Maddison.


There have been many views put forth about what caused the Depression of the 1930s. To my knowledge, no one has put forth the explanation that the Depression was caused by Peak Coal in 1913 in the UK, and a lack of other energy supplies that were growing rapidly enough to make up for this loss. As the UK “exported” this problem around the world, it led to greater wage disparity. US farmers were especially affected; their incomes often dropped below the level needed for families to buy the necessities of life.

The issue, as I have discussed in previous posts, is a physics issue. Creating GDP requires energy; when not enough energy (often fossil fuels) is available, the economy tends to “freeze out” the most vulnerable. Often, it does this by increased wage disparity. The people at the top of the hierarchy still have plenty. It is the people at the bottom who find themselves purchasing less and less. Because there are so many people at the bottom of the hierarchy, their lower purchasing power tends to pull the system down.

In the past, the way to get around inadequate wages for those at the bottom of the hierarchy has been to issue more debt. Some of this debt helps add more wages for non-elite workers, so it helps fix the affordability problem.

Figure 20. Three-year average percent increase in debt compared to three year average percent increase in non-government wages, including proprietors’ income, which I call my wage base.

At this time, we seem to be reaching the point where, even with more debt, we are running out of cheap energy to add to the system. When this happens, the economic system seems more prone to  fracture. Ugo Bardi calls the situation “reaching the inflection point in a Seneca Cliff.”

Figure 21. Seneca Cliff by Ugo Bardi

We were very close to the inflection point in the 1930s. We were very close to that point in 2008. We seem to be getting close to that point again now. The model of the 1930s gives us an indication regarding what to expect: apparent surpluses of commodities of all types; commodity prices that are too low; a lack of jobs, especially ones that pay an adequate wage; collapsing financial institutions. This is close to the opposite of what many people assume that peak oil will look like. But it may be a better representation of what we really should expect.

2,841 thoughts on “The Depression of the 1930s Was an Energy Crisis

  1. Re: this

    So recycling – as suspected — is a crock of SH IT.

    Yet you would be hard pressed to find someone who acknowledged that fact.

    From the education system to the MSM — we get a full court press — 99.999999% of all people have swallowed the hook (you know where I am going with this….)

    In fact if you were to raise your hand in class and state Blue Boxes represent indoctrination … and that recycling is bad — you’d likely be suspended if you did not recant. Or maybe taken out back of the school and hung by your classmates…. you certainly would NOT be popular.

    And imagine stating same at a dinnah pahtee….. you’d be mocked and ridiculed and given no more wine…

    Hmmm… where have we seen this picture before???????

    Ah HA! Of course…. Gorbilworming.

    Think ABOUT IT!!!

    • But I feel so good when I put the can in the blue bin. I like doing it and I look forward to it. I’m doing my part and helping the community. It’s a great feeling. Really great. If someone were to take my blue bin away, I just don’t know what I would do.

      • Yea, you put your shit in the blue or green bin in such an environmentally continuous way, then you drive around in your car (FF or EV…doesn’t matter) and indirectly rape the earth of resources. Recycling is all BS.

        • The truck that picks up the Blue Box sh it…. here in NZ is massive … maybe Tesla could apply its new semi technology to powering it? A PR coup in the making….

        • Fair point. There’s no need to throw anything away…unless its toxic, requiring special collection. I can’t think of any material that either can’t be composted, encased in cement-type construction, or used directly for construction. Mixing junk with building material reduces the amount of those materials you need for as long as you live. (And what’s left of that on its breakdown could go in similar building material in a continuous cycle).

          But the manufacture of these throwaway items is anything but sustainable. .If there was some way to do manufacture at a given scale under given economic arrangements that “worked,” it would be different from anything we know.

          • Meanwhile how many trillion tonnes of cement has China poured in the past decade?

            Even if recycling was helpful … it would be like trying to hold back a tsunami with a

            • But you MUST make sure to recycle that beer can — you are saving our limited resources!!!

            • I don’t know how to make sense of it. We’re talking recycling (reusing, in my case). The Chinese probably throw a lot of junk away, or recycle it? They could put it in all that cement they’re piling up and they at least wouldn’t need landfills. This is all about absurdity.

        • Separating recycleable things from general trash is neater than putting it all in one bag. Carboard boxes tend to tear bags open.

          The truely recycleable stuff, rotting food, animal bones is not collected and used as fertilizer. :

          Human waste is not recycled because of the smell and bio-hazards surrounding the handling of human waste.

      • My favorite form of recycling is saving kitchen scraps to throw on the compost pile. Free fertilizer for my garden. Been doing this for 48 years and counting.

          • I’ve taken flack for tossing some chicken bones into the ocean….. WOT THA FOOK.

            My initial impulse was to

            But beginning in early childhood… I was indoctrinated into acting within the established boundaries of ‘civilized behavour’ … I resisted.

            Yet if someone had taunted me with comments about chicken bones here… this reaction would be acceptable… expected even

        • Do it yourself recycling makes sense. Subsidizing someone to take a mixture of stuff to a recycling center to sort it and somehow recycle it generally does not. If recycling were focused on a limited number of things (perhaps batteries, glass, some metal goods), where there was a true economic benefit, it might make sense.

          • Recycling makes money and sense. We can’t on the one hand decry the consumption of resources but with the other hand reject recycling. One major problem is waste materials ending up in the oceans where they maim and kill millions of sea creatures. Another is landfill sites quickly filling up and the need for more. Just ask Britain right now as China is no longer taking their waste products.

            We now have to take our own bags to the store or buy new one’s, so people keep using the same bags over again. That’s a good thing. That’s a form of recycling.

            Recycling is a big business. It makes money not just for aluminum, but also paper and plastic, batteries etc. In my opinion we live in a Universe that recycles the mass; as it’s referred to it in eastern religion, ‘The Breath of Brahma’. Even an ancestor of Charles Darwin wrote a poem about the cycling of the universe. Doing the same with our waste materials is the responsible thing to do whether that extends BAU or not.

            • If it makes money then why does the US subsidize it to the tune of 8 billion dollars?

              And FYI – if you watch the video – the rubbish does not end up in the ocean — it ends up in landfills that are carefully managed.

              You know where the plastic that ends up in the ocean comes from? Not from countries like the US…

              It comes from places like Indonesia and other poor countries that cannot afford to collect and manage their waste. What happens is that people either burn the rubbish in situ… or they just toss it in the river….

              If there was money in rubbish — then you would think that in these poor places — where labour is dirt cheap… recycling would be a viable business.

              But it ain’t

              And you once again demonstrate that you are

            • To sum up JH Wyoming in a nutshell: “GL*BAL WA4MING! TRUMP! RUSSIAN HACKING!”

      • Recycling and speed limits are bullshit. They’re like someone who quits smoking on his deathbed.

      • It’s all coming together so nicely …. what a wonderful little matrix!

        And the stuuuupid humans fall for it…. imagine … even the smartest stuuuupid humans… can be made to believe… that tonnes of metal and plastic and a massive battery …. powered by …. electricity ….generated from coal…

        Is GREEN!!!!

        And if challenged… they will become hostile.

    • That video was hilarious. Ludes were around when I was going into HS.
      P+T are magicians and entertainers, so not the greatest source. I guess, aluminum aside, if you were to follow that recycle bin, there’s a racket between the bin and the landfill.

    • Thanks! I am having a little trouble figuring out how what you are writing about in the linked post is really a “Prediction for 2018,” however. It may indeed be an issue, however.

        • After you write your post, go back and decide what might be a reasonable title for it. Change the title, before you post the article.

          I discovered that once the post goes up, this doesn’t really work.

          People do like posts labelled, “Predictions for 2018,” but they get disappointed when there aren’t any productions for 2018 in the post. Alternatively, if it made sense, you could make a prediction related only to what you are talking about–single employers dominating entire market segments.

  2. Dear Gail – you say – quote:

    “I think that Tim Morgan has listened a little too much to Charlie Hall and his views regarding EROEI and “net energy.” All energy is really energy used in one way or another; there is no meaningful “net energy,” as far as I can see. Charlie Hall’s method of measuring net energy does not work well. The important thing is that per capita energy keeps growing. This happens, only if energy production can be done cheaply. The temptation is to substitute more and more debt for cheap energy production. This debt can temporarily hide the problem, but it is not a permanent solution.”
    (So far it is impossible for me to see any discrepancies between your work and the work of Tim Morgan.)

    Quote Tim Morgan (Death of a high-fashion model – November 2017 a):

    “As we have seen, growth of $47tn in recorded GDP between 2001 and 2016 was accompanied – indeed, made possible – by a vast pillaging of the balance sheet, including $135tn in additional indebtedness, and an estimated $140tn in other liabilities.
    The only realistic conclusion is that the economy has been inflated by massive credit injections, and by a comparably enormous unwinding of provisions for the future. It follows that, absent these expedients, organic growth would have been nowhere near the 3.4% recorded over the period.
    SEEDS – the Surplus Energy Economics Data System – has an algorithm designed to ex-out the effect of debt-funded consumption (though it does not extend this to include pension gaps or interbank debt). According to this, adjusted growth between 2001 and 2016 was only 1.55%. As this is not all that much faster than the rate at which the population has been growing, the implication is that per capita growth has been truly pedestrian, once we see behind the smoke-and-mirrors effects of gargantuan credit creation.”

    Quote Tim Morgan (Death of a high-fashion model – November 2017 b):

    As mature resources are depleted, recourse is made to successively costlier (higher ECoE) alternative sources. This depletion effect is moderated by technological progress, which lowers the cost of accessing any given form of energy. But technology cannot breach the thermodynamic parameters of the resource. It cannot, as it were, ‘trump the laws of physics’. Technology has made shale oil cheaper to extract than shale oil would have been in times past. But what it has not done is transform shales into the economic equivalent of giant, technically-straightforward conventional fields like Al Ghawar in Saudi Arabia. Any such transformation is something that the laws of physics simply do not permit.
    According to estimates generated on a multi-fuel basis by SEEDS, world ECoE averaged 4.0% in 2001, but had risen to 7.5% by 2016. What that really means is that, out of any given $100 of economic output, we now have to invest $7.50, instead of $4, in accessing energy. The resources that we can use for all other purposes are correspondingly reduced.

    • Tim needs to show Don and his ilk the door…. it is difficult to concentrate and write coherent posts on his site with the constant beat of Koombaya in the background

        • I am sensitive to Delusion … Stewpidity… Illogical thought… Don is a purveyor of all of these… therefore Don needs to stay away from FW…. if he thinks he can take his SE act back to FW expecting a warm welcome…. all hell will break lose….

          • Don, hello, Don?

            please post a lot here at OFW…

            we NEED you…

            we need YOU…


            • Do knows better…. he lurks… in the shadows…. nothing more….

              Watching for weakness…

              His dream is for Fast Eddy to win an all expenses paid week tour of the Antarctic…. with no internet connection…. then he would pounce… like a drunken dirty old pervert on a defenseless child….

            • Come on now, Fast, your stick here is getting long in the tooth.
              At least Don provided some honest intellectual stimulation in the discussion format.
              Give people some slack, don’t take yourself so seriously, will ya?
              Like it really matters at this stage in collapse.

              Sometime the truth is so boring….

              You don’t wish to be one, now do you?

            • The truth is not boring at all.

              Delusional comments are boring. And not to be tolerated.

              The last thing we need is for Don to clutter up FW with rubbish about organic gardening using human feces…. and Edo….

              Don and Keith are at the top of my DelusiSTANI hit list

              Stay away.

            • Don!


              come out of the shadows!

              OFW needs balance…

              the chosen one, you are…

              post, you must…


          • I looked up Don Stewart’s posts on Dr Tim’s blog. Here’s an excerpt:

            “My purpose is to demonstrate that the best current science and practice of food and fiber production is quite different from the dominant, industrial system of production. And that the evidence we have indicates that moving toward the best practices has some very good effects in terms of everything from topsoil creation to primary productivity to reduction or elimination of toxins in the food supply to reduced chronic disease and carbon sequestration.

            What I have had to say has nothing to do with problems of distribution or processing or storing food. Those will remain heavily dependent on fossil fuels, unless significant life style changes are made.”

            Looks pretty logical to me. He isn’t saying that these food production practices can be scaled up to current world population or that they are compatible with industrial civilisation, but pointing out that they can mitigate the transition away from heavily FF-based agriculture.

            • Yes… idiiiocy compouned by delusion.

              And meanwhile in F789edupISTAN… aka America…

              Former Milwaukee County Sheriff David Clarke Jr. will face the long arm of the law stemming from a January 15, 2017 incident in which Clarke allegedly ordered six sheriff’s deputies to take airplane passenger Daniel Black aside for interrogation after Black reportedly shot Clarke a disapproving look on the flight.

              Black asked if Clarke was the notorious sheriff, which Clarke explained he was. Black moved towards the back of the plane shaking his head. Clarke asked Black if he had a problem and Black shook his head no. There was no further interaction on the plane. But after the two came off the plane, Black was taken into custody by six deputies waiting at the gate for him. -RawStory

              In a Facebook post after the incident, Clarke said “Next time he or anyone else pulls this stunt on a plane they may get knocked out. The Sheriff said he does not have to wait for some goof to assault him. He reserves the reasonable right to pre-empt a possible assault.”


              NEED MORE STEROIDS!!!

      • Well, at the Surplus site, Don made under the latest article more coherent posts than your spamming re-posted same paragraphs alter ego “T.M.” so why the rage..

        You simply, don’t get it.
        Nowadays, the info is out of the bag already and dispersed enough, how to grow topsoil by inch per decade or faster, so unless we get the total human species extinction scenario, this info and practice will be mass adopted sooner or later somewhere and gaining share towards mass adoption. Frankly, I don’t care much if that’s still achieved under some quasi industrial civ retreat or more basic tribal structure scenario..

        • Here’s what Don does not ‘get’

          7.6 billion people

          Food supply nearly 100% reliant on fossil fuels and petro chemical fertilizers

          Dead soil that will grow nothing without years of intensive rejuvination

          Nothing to eat for those years

          And no manure or other green inputs to repair the soil with because 7.6 billion people will kill and eat everything – they will peel bark off trees (see North Korea) and eat that — they will kill and eat each other.

          Meanwhile they will be stewing in radiation.

          Don is F79ING MOREON — he is the King of DelusiSTAN. King Midas turned everything he touched to gold – Don turns every site he targets into a heap of steaming dung

          • That mysterious “intensive rejuvenation” which heals dead soil, is just an effort in simply allowing natural processes to run along, which developed over many hundreds millions yrs on this planet. Namely, recycling nitrogen and carbon from the atmosphere through living soil, fungi, plants, and animals.

            Actually, it takes less than two hours of single guy work daily to do that. And if we focus only on the major grazing animal (apart from hens and pigs, ..), the cow-mother calf pair needs only 2-8acres, depending on climate zone and moisture available. Plus other animals and perennial plants/trees, you can easily calculate this planet can take care of rest of the ecosystems, plus some human body on top of that, rough estimate in billion souls. Now the question is about sequencing, we can get full extinction or some compromise mix of much reduced technosphere and population. I don’t know the precise outcome, but the continuum of options is known and clearly opening before us.

            • “Actually, it takes less than two hours of single guy work daily to do that.”

              You seem to be implying that it takes very little work to return nutrients to soil that is “dead”. If it were that easy, than why did the Green Revolution ever happen in the 1960s? Agriculture itself is unsustainable and was what led us to industrial civilization.

              “This planet can take care of rest of the ecosystems, plus some human body on top of that, rough estimate in billion souls. ” You have no clue of what local ecosystems could support without industrialization and international trade. I don’t either but I suspect that they would not allow 1 billion people to live. One of the reasons why technology ,and global trade have grown is because of the declining ability of local ecosystems to support local human populations. Even if population went down, sol fertility and fishing stocks would not immediately shoot back up to where they were in say…1200 AD

            • Actually, it takes less than two hours of single guy work daily FOR YEARS.

              There I completed your sentence.

              What does that person eat for those years?

              And if we focus only on the major grazing animal (apart from hens and pigs, ..).

              What do you think will be one of the first things that 7.6 billion hungry people are going to kill and eat when BAU ends?

              My neigbhour has 6 large beef cows that are kept off of our property with an electric fence. I have a 20ft container … inside the container is a large locked box…. inside the box are two 308 rifles, two 12 gauge shot guns…. two 22 rifles…. inside another large box are dozens and dozens of boxes of ammunition for these weapons.

              Hello cow… say hello to my little friend….

          • says who? you?

            I think we have a decade, at least… perhaps two…

            opinions may vary…

            here’s what else we have…

            BAU tonight, baby!

    • The thing that Tim Morgan doesn’t get is that tight oil from shale has a fairly high EROEI. According to this study, the share of energy used for extraction of oil in the Bakken 3.4% on a median basis, and 3.9% on an average basis. Since Bakken costs seem to be higher than those of the Permian Basin, we would expect the energy utilized in the Permian to be even lower. Compared to Morgan’s average cost of 7.5% in 2016, this sounds pretty good. I don’t know what basis Morgan is using, but most people never stop to look at academic articles on this subject. They just “assume” the energy cost of tight oil is high. Or they look at the cost of treating kerogen with heat (called “shale oil,”) which has absolutely nothing to do with tight oil from shale. A study that is often mistaken for a study of tight oil is this article. It has an ERoEI of 2:1, or an energy share of 50%.

      • Dear Gail,

        Quote from link:

        “The largest energy uses are from drilling and processing of produced fluids (crude/water emulsions and gas). Fluid lifting and injection and embodied energy are also important energy needs.”
        No wonder that the net energy return is so advantageous when wages evidently are not included. In order to assess an honest value of the energy balance
        you have to include all costs: wages, interests, maintenance, operation … if so, the picture will be much more dark. In our industrialized world all money eventually will trigger a corresponding energy consumption. Tim Morgan very clearly underlines that money is a proxy of energy and could therefore not accept calculations which evidently do not take ALL money values into consideration.

        • EROI almost by definition doesn’t include wages or taxes or lease costs. It reproduces only a small share of total energy expended. It doesn’t distinguish among different kinds of energy either–natural gas, which might otherwise be flare, which is co-produced and used for extraction, or diesel from elsewhere, or coal used in China to make the pipes. Interest and long time lags have no cost either.

          EROI also doesn’t distinguish between intermittent electricity and good quality electricity. I find EROI frustrating to use. It tells a whole lot less than think it tells.

        • I don’t know what Tim really looks at. I do know that EROEI calculations exclude a huge number of important variables, including time. (Could you imagine looking at the return on your bank balance, without including the variable of time?)

          He seemed to be very taken in by EROI calculations. The problem only comes when a person sits down and looks at how the calculations work in practice. A person thinks that he knows far more than he really knows.

          Richard Duncan, M. King Hubbert, and others looked at Energy per capita. This is a far more important variable, in my opinion. EROI is simply a shorthand way of trying to estimate extraction costs, using the labor of graduate students. It sort of looks like it works, when a person is comparing two very similar things (the same well, two years apart, for example). But it is not helpful in comparing two dissimilar types of energy. Researchers have not understood how poorly it works as an estimator of the value of intermittent electricity generation, for example.

          • Gail

            If what you are suggesting is true about the Bakken. Then the EROEI is 25:1. If this was true then the cost per barrel would be $2.00 on a $50.00 barrel. That would make the play wildly profitable. So why is the industry caught in a debt spiral?

            You have to include all energy inputs. Transportation infrastructure depreciation wages pensions royalties.

            Remember it’s a networked system.

            When you do the EROEI is more like 5:1

            • EROEI doesn’t measure a very large share of costs, and it doesn’t measure costs in a way that reflects the value of the energy to the economy. It also does not include a time measure in the calculation. The intention was that the metric would be a way graduate students could estimate how costs of different types of energy differed, but it doesn’t work very well in practice.

              You cannot use price to back into EROEI, unfortunately.

  3. In Tweetstorm, Trump Defends His Sanity: “I Am A Very Stable Genius”

    “…my two greatest assets have been mental stability and being, like, really smart… I think that would qualify as not smart, but genius….and a very stable genius at that!”

    I know how it feels Don….

    This is very entertaining stuff…. I wonder if he has a team of writers or if he comes up with this on his own.

  4. The United States is poised to ramp up crude oil production by 10% in 2018 to about 11 million barrels per day, according to research firm Rystad Energy.

    Surging shale oil output should allow the United States to dethrone Russia and Saudi Arabia as the planet’s leading crude oil producer, Rystad predicted in a recent report. The prediction shows how the fracking revolution has turned America into an energy powerhouse — a transformation that President Trump has vowed to accelerate by cutting regulation. This long-term shift has allowed the U.S. to be less reliant on foreign oil, including from the turbulent Middle East. The U.S. hasn’t been the global leader, nor ahead of both Russia and Saudi Arabia, since 1975. “The market has completely changed due to the U.S. shale machine,” said Nadia Martin Wiggen, Rystad’s vice president of markets.

    Too bad they lose money on most of this oil….

  5. The high temperatures expected in parts of NSW, Victoria and South Australia could put power supplies under considerable pressure. As a result big energy users such as BlueScope Steel, Australian Paper and Visy could be hit with requests from authorities to power down over the weekend. The power off move is part of an Australian Energy Market Operator scheme aimed at shoring up energy reserves during peak summer periods.

    As part of the program large-scale companies that soak up considerable reserves of power can be asked to cut back energy use or even power off during summer heatwaves. The Australian Energy Market Operator said the program would be enough to ensure the lights and airconditioners stayed on across southeastern Australia during summer heatwaves.

    Or …. how about moving the business to a country that is not shooting itself in the head with ‘renewable’ energy policies… and not destroy one’s competitiveness?

    • It will be interesting to watch what happens in the next few months in NSW, Victoria, and South Australia. Matt Mushalik sends me links to articles he writes relating to this issue.

      This is an article he wrote:

      These are related articles:

      They are depending on natural gas, but it is hard to get the price high enough for suppliers.

      • “AGL says switching to renewables, backed with storage, demand management and some gas peaking plant, will be cheaper, more reliable, cleaner, smarter, and provide a long-term future for its investments.”
        “Smarter” is definitely an important criteria to use in closing FF generation plants.
        From the article, it sounds as if they are filled with the hopium that solar and wind energy STORAGE will fill the gap. It also sound like their FF generation plants are operating on the edge and are not being properly maintained.

      • Figure 1 in the 1st article shows that eastern Australia’s gas production is falling at a rate of 30% per yr…trending to complete depletion in 2020 at the decrease rate shown for 2017. It also shows they intend to make up for the shortfall with HOPIUM…”proved and probably reserves – undeveloped” for the next 4 yrs, but even this does not make up for the shortfall. After 2021, they enter complete absurd territory, showing that “contingent and prospective resources” will fill the gap.
        Of course they have gas in western Australia (for now) but they export most of it for foreign exchange. They have to ship it to eastern Australia to use it there which is very costly.
        I will contend that one of mankinds greatest failing, that of stupidity, especially stupid decisions made by leaders who do not have to deal with future problems, will be the trigger of serious problems one of these days. It sounds like eastern Australia is well along that path.

        • The NZ navy needs to be ready to defend our borders from Australian boat people… we need to shoot to kill anything that bobs…. we need internment camps…. we need to immediately hire Pauline Hanson as a consultant.

          Dirty Drunken Foul-Mouthed Arrogant Australians (and dogs) Not Allowed!

          Oh the irony….

      • Toss in the ‘renewable’ energy and you’ve got what is known as a

        I have the greatest confidence that Tesla can solve this problem…. the politicians need to get their acts together and make the phone call

  6. Today, I had a sudden intense urge to donate some money to support Gail’s work, but I couldn’t find the Bitcoin icon on this site.

    • “An American baby born in 2016 can expect to live on average 78.6 years, down from 78.9 in 2014.”

      let’s get this straight… this is just a projection.

      nothing is certain, but who really thinks the average American baby will live to be 78?

      that would be about the year 2095…

      many years before that, with little or no FF, health conditions will most likely have become horrible.

      • Human life seldom lives up to human expectations. Also, I expect most of us, if we thought about it and if we were being selfish and greedy, would consider quality of life as far more important than quantity.

      • extremely long odds to make it to old age in 2095. there will be a population crash well before that date unless the “miracle” of fusion energy takes place.

        • ”energy” is not the problem

          it’s what you do with it that’s the problem

          our current existence is sustained by taking energy in various forms, and converting it into other forms—thereby creating employment.

          that employment is carried on through the interplay of wages—wages being tokens of energy conversion, not numbers on money-notes and coins.

          therefore no matter how much energy we have, if we do not have ”conversion factors” then we cannot have a commercial/industrial existence—or–as doomsters know it—BAU

          Not only are we burning through usable energy sources, we are burning through everything else by which energy can be utilised, and to complicate matters—fusion produces electricity.

          But electricity is of no use unless it has an end use.

          As Ive pointed out before, our civilisation is dependent on converting explosive force into rotary motion—there are no exceptions to that rule,

          • “As Ive pointed out before, our civilisation is dependent on converting explosive force into rotary motion—there are no exceptions to that rule”
            Thanks Norman, that’s easy to understand and share

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