Will the World Economy Continue to “Roll Along” in 2018?

Once upon a time, we worried about oil and other energy. Now, a song from 1930 seems to be appropriate:

Today, we have a surplus of oil, which we are trying to use up. That never happened before, or did it? Well, actually, it did, back around 1930. As most of us remember, that was not a pleasant time. It was during the Great Depression.

Figure 1. US ending stocks of crude oil, excluding the Strategic Petroleum Reserve. Amounts will include crude oil in pipelines and in “tank farms,” awaiting processing. Businesses normally do not hold more crude oil than they need in the immediate future, because holding this excess inventory has a cost involved. Figure produced by EIA. Amounts through early 2016.

A surplus of a major energy commodity is a sign of economic illness; the economy is not balancing itself correctly. Energy supplies are available for use, but the economy is not adequately utilizing them. It is a sign that something is seriously wrong in the economy–perhaps too much income disparity.

Figure 2. U. S. Income Shares of Top 1% and Top 0.1%, Wikipedia exhibit by Piketty and Saez.

If incomes are relatively equal, it is possible for even the poorest citizens of the economy to be able to buy necessary goods and services. Things like food, homes, and transportation become affordable by all. It is easy for “Demand” and “Supply” to balance out, because a very large share of the population has incomes that are adequate to buy the goods and services created by the economy.

It is when we have too much income and wage disparity that we have gluts of oil and food supplies. Food gluts happened in the 1930s and are happening again now. We lose sight of the extent to which the economy can actually absorb rising quantities of commodities of many types, if they are inexpensive, compared to wages. The word “Demand” might better be replaced by the term “Quantity Affordable.” Top wage earners can always afford goods and services for their families; the question is whether earners lower in the wage hierarchy can. In today’s world, some of these low-wage earners are in India and Africa, or have no employment at all.

What is Going Right, As We Enter 2018?

[1] The stock market keeps rising.

The stock market keeps rising, month after month. Volatility is very low. In fact, the growth in the stock market looks rigged. A recent Seeking Alpha article notes that in 2017, the S&P 500 showed positive returns for all 12 months of the year, something that has never happened before in the last 90 years.

Very long runs of rising stock prices are not necessarily a good sign. According to the same article, the S&P 500 rose in 22 of 23 months between April 1935 and February 1937, in response to government spending aimed at jumpstarting the economy. By late 1937, the economy was again back in recession. The market experienced a severe correction that it would not fully recover from until after World War II.

The year 2006 was another notable year for stock market rise, with increases in 11 out of 12 months. According to the article,

Equity markets rallied amidst a volatility void in the lead-up to the Great Recession. Markets would make new all-time highs in late 2007 before collapsing in 2008, marking the worst annual returns (-37%) since the aforementioned infamous 1937 correction.

So while the stock market consistently rising looks like a good sign, it is not necessarily a good sign for market performance 6 to 24 months later. It could simply represent a bubble forming, which will later pop.

[2] Oil and other commodity prices are recently somewhat higher.

Recently, oil prices have been too low for most producers. Now, things are looking up. While prices still aren’t at an adequate level, they are somewhat higher. This gives producers (and lenders) hope that prices will eventually rise sufficiently that oil companies can make an adequate profit, and governments of oil exporters can collect adequate taxes to keep their economies operating.

Figure 3. Monthly average spot Brent oil prices, through December 2017, based on EIA data.

A major reason for the recent upward trend in commodity prices seems to be a shift in currency relativities for Emerging Markets.

Figure 4. Figure from Financial Times showing currency relativities based on the MSCI Emerging Market currency index.

While the currency relativities for emerging markets had fallen quite low when commodity prices first dropped, they have now made up most of their lost ground. This makes commodities more affordable in Emerging Market countries, and allows them to do more manufacturing, thus stimulating the world economy.

Of course, if China runs into debt problems, or if India runs into problems of some sort, or if oil prices rise further than they have to date, the run-up in currency relativities might run right back down again.

[3] US tax cuts create a bubble of wealth for corporations and the 1%.

With low commodity prices, returns have been far too low for many corporations involved with commodity production. “Fixing” the tax law will help these corporations continue to operate, even if commodity prices remain low, because taxes will be lower. These lower tax rates are important in helping commodity producers to avoid collapsing as a result of low commodity prices.

The problem that occurs is that the change in tax law opens up all kinds of opportunities for companies to improve their tax situation, either by changing the form of the corporation, or by merging with another company with a suitable tax situation, allowing the combined taxes to be minimized. See this recent Michael Hudson video for a discussion of some of the issues involved. This link is to a related Hudson video.

Groups evaluating the expected impact of the proposed tax law did their evaluations as if corporate structure would remain unchanged. We know that tax accountants will help companies quickly make changes to maximize the benefit of the new tax law. This is likely to mean that US governmental debt will need to rise much more than most forecasts have predicted.

In a way, this is a “good” impact, because more debt helps keep commodity prices and production to rise, and thus helps keep the economy from collapsing. But it does raise the question of how long, and by how much, governmental debt can rise. Will the addition of all of this new debt raise interest rates even above other planned interest rate increases?

[4] We have been experiencing artificially low oil prices since 2013. This helps the economic growth to be higher than it otherwise would be. 

In February 2014, I published an article documenting that back in 2013, oil prices were too low for oil producers. If a person looks at Figure 3, oil prices were over $100 per barrel that year. Clearly, oil prices have been much too low for producers since that time.

Unfortunately, it looks like these artificially low oil prices may be coming to an end, simply because the “glut” of oil that developed is gradually being reduced. Figure 5 shows the timing of the recent glut of oil. It seems to have started early in 2014.

Figure 5. US Stocks of crude oil and petroleum products (including Strategic Petroleum Reserve), based on EIA data.

If we look at the combination of oil prices and amount of oil in storage, a person can make a rough estimate of how this glut of oil might disappear. Quite a bit of it may be gone by the end of 2018 (Figure 6).

Figure 6. Figure showing US oil stocks (crude plus oil products) together with the corresponding oil prices. Rough guess of how balance might disappear and future prices by author.

Of course, one of the big issues is that consumers cannot really afford high-priced oil products. If consumers could not afford $100+ prices back in 2013, how would it be possible for oil prices to rise to something like $97 per barrel by the end of 2018?

I am not certain that oil prices can really rise this high, or that they can stay at this level very long. Certainly, we cannot expect oil prices to rise to the level they did in July 2008, without recession causing oil prices to crash back down.

What the Economy Needs Is Rising Energy Per Capita

I have published energy per capita graphs in the past. Flat spots tend to represent problem periods.

Figure 7. 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.

The 1920-1940 flat period came shortly after the United Kingdom reached Peak Coal in 1913.

Figure 8. United Kingdom coal production since 1855, in figure by David Strahan. First published in New Scientist, 17 January 2008.

In fact, the UK invaded Mesopotamia (Iraq) in 1914, to protect its oil interests. The UK wasn’t stupid; it knew that if it didn’t have sufficient coal, it would need oil, instead.

There were many other disturbing events during this period, including World War I, the 1918 flu pandemic, the Great Depression, and World War II. If there are not enough energy resources to go around, many things tend to go wrong: countries tend to fight for available resources; jobs that pay well become less available; deflation becomes more likely; population becomes weakened, and epidemics become more likely. I wrote about the 1920 to 1940 period in a recent post, The Depression of the 1930s Was an Energy Crisis.

The 1980-2000 flat period included the collapse of the Soviet Union, in 1991. The Soviet Union was an oil producer. The Soviet Union collapsed after prices had been low for a long time.

Figure 9. Former Soviet Union oil consumption, production, and inflation-adjusted price, all from BP Statistical Review of World Energy, 2015.

Even many years after the collapse of the Soviet Union, population growth in former Soviet Union countries and its affiliates was much lower than in the rest of the world.

Figure 10. World population growth rates between 2005 and 2010. Source: https://en.wikipedia.org/wiki/List_of_countries_by_population_growth_rate

Lower population (through falling birth rates, rising death rates, or rising emigration) are a major way that economies self-adjust because of falling energy per capita. Economies tend to fix the low-energy per capita problem by adjusting the population downward.

Recently, we have again been hitting flat periods in energy consumption per capita.

Figure 11. World per capita consumption of oil and of total energy, based on BP Statistical Review of World Energy data and UN 2017 population data.

The slowdown in world energy consumption per capita in 2008-2009 was clearly a major problem. Oil, coal and natural gas consumption fell simultaneously. Oil consumption per capita fell more than the overall mix, especially affecting countries heavily dependent on oil (Greece with its tourism, but also the US, Japan, and Europe).

The recent shift in political strategy to more isolationist stances also seems to be the result of flat energy consumption per capita. It is doubtful that Donald Trump would have been elected in the US, if world energy consumption per capita had been growing robustly, and if wage disparity had been less of a problem.

The primary cause of the 2013 to 2016 flat trend in world energy consumption per capita (Figure 11) is falling coal consumption (Figure 12). Many people think coal is unimportant, but it is the world’s second largest source of energy, after oil. We don’t have a good way of getting natural gas production to rise enough, to make up for loss of coal production.

Figure 12

Wind and solar simply do not work for solving our problem of flat or shrinking energy consumption per capita. After spending trillions of dollars on them, they make up only a tiny (1%) share of world energy supply, according to the International Energy Agency. They are part of the little gray “Other” sliver on Figure 13.

Figure 13. Figure prepared by IEA showing Total Primary Energy Supply by type from this IEA document.

Something Has to “Give” When There Is Not Enough Energy Consumption per Capita

The predicament we are facing is that energy consumption per capita seems to be reaching a maximum. This happens because of affordability issues. Over time, the price of energy products needs to rise to keep up with the rising cost of creating these energy products. But if energy prices do rise, workers earning low wages cannot afford to buy goods and services made with high-priced energy products, plus honor all of their other commitments (such as mortgages, auto loans, and student loans). This leads to debt defaults, as it did in the 2008-2009 recession.

At some point, the affordability problem can be expected to hold down energy consumption. This could happen in many ways. Spiking prices and affordability issues could lead to a worse rerun of the 2008-2009 recession. Or if oil prices stay fairly low, oil-exporting countries (such as Venezuela) may collapse because of low prices. Even if oil prices do rise, we may find that higher prices do not lead to sufficient additional supply because investment in new oil fields has been low for many years, because of past low prices.

As long as the world economy is expanding (Figure 14), individual citizens can expect to benefit. Jobs that pay well are likely to be available, and citizens can afford to buy goods with their growing wages. People who sell shares of stock and people who get pension benefits can all receive part of this growing economic output.

Figure 14. Author’s image of an expanding economy.

Once the economy starts to shrink (Figure 15), we start having problems with dividing up the goods and services that are available. How much should retirees get? Governments? Today’s workers? Holders of shares of stocks and bonds? Not all commitments can be honored, simultaneously.

Figure 15. Author’s image of declining economy.

 

One obvious problem in a shrinking economy is that loans become harder to repay. The problem is that there is less left over for other goods and services, after debt plus interest is subtracted, in a shrinking economy.

Figure 16. Figure by author.

Changing interest rates can to some extent help offset problems related to higher energy prices and shrinking supply. The danger is that interest rates can move in the wrong direction and make our problems worse. In the lead-up to the Great Recession of 2008-2009, the US raised short-term interest rates, helping to puncture the sub-prime mortgage debt bubble.

Figure 17. Figure comparing Case-Shiller Seasonally Adjusted Home Price Index and Federal Reserve End of Quarter Target Interest Rates. See Oil Supply Limits and the Continuing Financial Crisis for details.

We now hear a lot of talk about raising interest rates and selling QE securities (which would also tend to raise interest rates). If growth in energy consumption per capita is already flat, these changes could make the problems that the economy is facing even worse.

Our Economy Works Like a Bicycle

Have you ever wondered why a two-wheeled bicycle is able to stay upright? Research shows that a bicycle will stay upright, as long as its speed is greater than 2.3 meters (7.5 feet) per second. This is the result of the physics of the situation. A related academic article states, “This stability typically can occur at forward speeds v near to the square root of (gL), where g is gravity and L is a characteristic length (about 1 m for a modern bicycle).”

Thus, a bicycle will be able to continue in an upright manner, as long as it goes fast enough. If it slows down too much, it will fall down. Our economy is similar.

Gravity plays an important role in determining the speed of a bicycle. If the bicycle is going downhill, gravity gives an important boost to the speed of the bicycle. If the bicycle is going uphill, gravity very much pulls back on the bicycle.

I think of the situation of an economy having rising energy consumption per capita as being very much like riding on a bicycle, speeding down a hill. The person operating the bicycle would not need to provide much extra energy to keep the bicycle going.

If energy consumption per capita is flat, the person riding the bicycle must provide the energy to make it go fast enough, so it doesn’t fall over. This is somewhat of a problem. If energy consumption per capita actually falls, it is a true disaster. The bicyclist himself must provide the energy necessary to push the bicycle and rider uphill.

In fact, there are other ways that a speeding bicycle is analogous to the world economy.

Figure 18. Author’s view of analogies of speeding upright bicycle to speeding economy.

The economy needs a constant flow of outside energy. In the case of the bicycle, the human rider can provide the energy flow. In the case of the economy, the energy flow comes from a mixture of various fuel types, typically dominated by fossil fuels.

Growing debt (front wheel) is important as well. It tends to pull the economy along, because this debt can be used to pay wages and to buy materials to make additional goods and services. Thus, the effect of this increase in debt is indirect; it ultimately works through the bicyclist, the gears, and the back wheel.

In fact, the financial system as a whole is important for the “steering” of the economy. It tells investors which investments are likely to be profitable.

The gearing system of the bicycle plays a modest role in the system. Changing gears allows greater efficiency in the use of the energy that is available, under certain circumstances. But energy efficiency, by itself, cannot operate the system.

If the human rider does not provide sufficient energy for the bicycle to go rapidly enough, the bicycle glides for a while, and then falls over. The world economy seems to be similar. If the world economy does not obtain enough energy per capita, economic growth tends to slow and eventually collapses. The collapse can relate to the whole world economy, or to parts of the economy.

The Problem of Parts of the Economy Not Getting Enough Energy

We can think of the economy as being made up of many bicycles, operated by bicycle riders. At the beginning of the post, I talked about the problem of wage disparity. This issue occurred at the time of the 1930’s Great Depression and is occurring again now.

We might call wage disparity “too low a return on the labor of some workers.” In groups of animals in ecosystems, too low a return on the effort of these animals is what causes ecosystems to collapse. For example, if fish have to swim too far to obtain additional food, their population will collapse. It should not be surprising that economies tend to collapse, when the return on the efforts of part of their workers falls too low.

Wage disparity has to do with how well the operators of bicycles are doing. Are the operators of these bicycles receiving enough calories, so that they can keep pumping their bicycles fast enough so that the speed is high enough to remain upright?

If energy consumption per capita is growing, this greatly helps the operation of the economic system. If there is growing availability of inexpensive energy, machines of various types, including trucks, can be used to increasingly leverage the labor of workers. This increased leveraging helps each worker to become more “productive.” This growing productivity, thanks to growing energy consumption, allows more goods and services to be produced in total. It also allows the wages of the workers to stay high enough that they can afford to buy a reasonable share of the output of the economy. When this happens, “gluts” of unaffordable goods are less of a problem.

If energy consumption per capita is flat (or worse yet, falling), greater “complexity” is needed, to keep output of goods and services rising. Greater complexity involves more specialization and more training of individual members of the economy. Greater complexity leads to larger companies, more government services, and more wage disparity. Unfortunately, there are diminishing returns to complexity, according to Joseph Tainter in “The Collapse of Complex Societies.” Ultimately, increased complexity fails to provide an adequate number of high-paying jobs. Wage disparity becomes a problem that can cause an economy to collapse.

If there is not enough economic output, the physics of the economy tries to “freeze out” workers at the bottom of the hierarchy. Workers with low wages cannot afford homes and families. The incidence of depression rises. Debt levels of disadvantaged groups (such as young people in the US) may rise.

So the situation may not be that the whole world economy fails; it may be that parts of the economy collapse. In fact, we are already seeing evidence that this is taking place. For example, life expectancies for US men have been falling for two years, because of growing problems with drug overdoses.

Conclusions

In 2017, the world economy seemed to be gliding smoothly along because the economy has been able to get the benefit of artificially low energy prices and artificially low interest rates. These artificially low prices and interest rates have given a temporary boost to the world economy. Countries using large amounts of energy products, including the US, especially benefitted.

We cannot expect this temporary condition to continue, however. Low oil prices have already started to disappear, with Brent oil prices at nearly $69 per barrel at this writing. The trends in oil prices and oil stocks in Figure 6 are disturbing. If oil prices begin to rise toward the price needed by oil producers, they are likely to trigger a recession and a drop in world energy consumption, just as spiking prices did in 2008-2009. There is a significant chance of collapse in the next 12 to 24 months. It is hard to know how widespread such a collapse may be; it may primarily affect particular countries and population groups.

To make matters worse, our leaders do not seem to understand the situation. The world economy badly needs rising energy consumption per capita. Plans to raise interest rates and sell QE securities, when the economy is already “at the edge,” are playing with fire. If we are to keep the world economy operating, large quantities of additional energy supplies need to be found at very low cost. It is hard to be optimistic about this happening. High-cost energy supplies are worthless when it comes to operating the economy because they are unaffordable.

Many followers of the oil situation have had great faith in Energy Returned on Energy Invested (EROI) analysis telling us which kinds of energy supplies we should increase. Unfortunately, EROI doesn’t tell us enough. It doesn’t tell us if a particular product is scalable at reasonable cost. Wind and solar are great disappointments, when total costs, including the cost of mitigating intermittency on the grid, are considered. They do not appear to be solutions on any major scale.

Other researchers looking at the energy situation have not understood how “baked into the cake” the need for economic growth, rising per capita energy consumption, and rising debt levels really are. Rising debt is not an error in how the financial system is put together; a bicycle needs a front wheel, or it cannot operate at all (Figure 18). I have written other articles regarding why debt is needed to pull the economic system forward.

This economic growth cannot be “fake growth” either, where a debt Ponzi Scheme seems to allow purchases that real-life consumers cannot afford. Quite a bit of what is reported as world GDP today is of a very “iffy” nature. If China builds a huge number of apartments that citizens cannot afford without subsidies, should these be counted as true GDP growth? How about unneeded roads, built using the rising debt of the Japanese government? Or recycling performed around the world, because it makes people “feel good,” but really requires substantial subsidies?

At this point, it is hard for us to know where we really are, because every government wants to make GDP results look as favorable as possible. It is clear, however, that 2018 and 2019 can be expected to have more challenges than 2017. We have interesting times ahead!

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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1,647 Responses to Will the World Economy Continue to “Roll Along” in 2018?

  1. Fast Eddy says:

    Australia’s renewable energy sector responds to the success of South Australia’s Tesla lithium ion battery.

    South Australia will build the world’s largest solar thermal plant, and a Queensland wind farm may be the site of a new record-breaking battery. The Aurora solar plant in Port Augusta, SA, will begin construction this year, and is slated to provide 100% of the state government’s electricity needs by 2020, the state’s acting energy minister, Chris Picton, announced on Wednesday. In Queensland, French utility Neoen – which partnered with Tesla in SA to create the world’s largest battery – may trump its own creation by building an even larger storage system at the Kaban Green Power Hub, 80km from Cairns. In December the (South Australia) state government hailed the battery’s effectiveness in dealing with power outages, and Neoen and Tesla have recently announced plans for a second collaboration to build a 20MW battery in Victoria. In order for the proposed Queensland battery to be the world’s largest, it would have to beat a soon-to-be-completed battery in South Korea, from Hyundai Electric & Energy Systems Co, which at 150MW would take the crown from South Australia.

    https://www.theguardian.com/environment/2018/jan/11/big-new-renewable-projects-planned-across-australia-as-tesla-effect-hits

    • Hopefully and eventually this build up of overcapacity in batt storage will repeat the previous examples, when at sudden demand slump, the overcapacity/overstock leads to very narrow window of fire sale prices..

      Nothing is guaranteed but It might happen again.

    • Another related article I ran across:

      Tesla’s massive battery in Australia was paid up to $1000/MWh to charge itself
      https://electrek.co/2018/01/14/teslas-massive-battery-in-australia-was-paid-up-to-1000-mwh-to-charge-itself/

      Yesterday, Saturday 13th, in South Australia the Tesla battery at Hornsdale Power Reserve was paid AU$1,000/MWh (USD$790/MWh) to absorb excess electricity from the power grid. The battery owners will later be able to sell this energy also.

      The battery has become famous for coming online in under 100 days after an Elon Musk Twitter bet and later reacting to a crashed coal plants in milliseconds.

      Starting around 12 PM, and continuing until around 4 PM, the battery was paid during at least five separate windows. [There was negative pricing in all except 25 minutes of this period, because solar generation exceeded the amount the amount the grid could accept.]

      Roughly, during the four-hour period, the battery system absorbed greater than 66MWh of energy, which would be equal to at least AU$66,339 in revenue – and potentially up to $76,153.

      The power industry has attempted to motivate power products, users and – now – battery owners to manage these overages via market pricing. Someone, somewhere (an algorithm probably) thought this event was worth tens of thousands of dollars.

      The other alternative would have been to simply not use the unwanted electricity generated by the solar panels. The batteries allowed some of this very high priced solar electricity to be saved and sold later. The cost of coal to operate power plants to generate this much electricity would have been a tiny fraction (5%?) of the amount the battery was paid to charge itself.

      So somehow, this is an ongoing, high-cost arrangement, keeping electricity costs high for all.

  2. Fast Eddy says:

    Massachusetts turns to oil and coal during the cold snap

    For a region that prides itself as a leader against climate change, the numbers were sobering: As recently as Monday, 19 percent of New England’s energy supply came from oil, and 7 percent from coal, according to the grid operator.

    Rates had climbed even higher on the worst days of the recent cold spell, when power plants in New England burned tons of the dirtiest fuels available.

    On some days, oil accounted for more than 30 percent of the region’s energy mix. Efforts by some environmental activists to block natural gas infrastructure, mainly pipelines, have had the opposite of their intended effect.

    The goal was to prevent more greenhouse gas emissions, but the constraints on natural gas have forced electricity generators to turn to high-emission coal and oil instead. The region would have produced less pollution this month, not more, if it had better gas infrastructure.

    https://www.bostonglobe.com/opinion/editorials/2018/01/11/mass-turned-oil-and-coal-during-cold-snap-here-what-went-wrong/8geKcg8QdWBRO4TIjARUTN/story.html

    • Massachusetts has had a long-running problem with inadequate natural gas storage in the area, and limited pipeline capacity. I ran across this issue more than once back in my Oil Drum days.

      It also has a problem because natural gas is used both for heating buildings and generating electricity. When there is not enough gas available, home heating gets priority, because it would be a problem to go re-light all of the pilot lights that would go out, if the home heat were cut off.

      After enough inadequate electricity generation problems (and closing schools and industry to handle them), one of the solutions found was to stockpile oil, and burn it, when inadequate natural gas for electricity is available. Oil powered generation is fairly cheap.

      If more natural gas pipelines were built, that would partly solve the problem. There is really a need for storage as well. It is my impression that the geology is not really right for that in the Boston area.

      In the Boston area, the US is also importing LNG, at least partly from Russia. Years ago, the US built LNG import capability in the Boston area, because natural gas shortages were known to occur regularly. The tanker is scheduled to arrive January 22.

  3. Fast Eddy says:

    Power Engineering International: More renewables mean less stable grids, researchers find

    According to a paper published this week in the journal Nature Energy by researchers from Germany’s Max Planck Institute for Dynamics and Self-Organization and the UK’s Queen Mary University of London, integrating growing numbers of renewable power installations and microgrids onto the grid can result in larger-than-expected fluctuations in grid frequency. The research showed that a larger share of renewable generation in a given region resulted in larger deviations from the standard 50 Hz. For example, the UK, with more renewables than the US, also had larger frequency deviations. To integrate more renewables onto the UK grid, the research team recommends increasing primary control and demand response.

    http://www.powerengineeringint.com/articles/2018/01/more-renewables-mean-less-stable-grids-researchers-find.html

    • nope.avi says:

      Obama testified years ago that a major impediment to the construction of a smart grid was the number of electrical engineers available.

      https://pserc.wisc.edu/docsa/US_Power_and_Energy_Eng_Workforce_Press_Release_April_2009.pdf

      https://www.computerworld.com/article/2508899/it-careers/obama—we-don-t-have-enough-engineers-.html

      Many years later I realize he was suggesting that high wages being paid to electrical engineers because of a “shortage” of them would contribute heavily the high cost of building a smart grid. Instead of saying that building a smart grid would be very expensive and that we would need to raise taxes, he says that the labor costs for building an smart grid was too high and that’s why it is expensive.
      Am I reading in between the lines too much?

    • Yep, you can clearly witness it as almost every offgrid/microgrid renewables installer is purposely setting up the parameters for more grid frequency oscillation, as to offload “his own” problem on the grid, e.g. choosing in setup menu different country standard with wider frequencies etc. This in aggregate must have overall negative effect of destabilizing the formerly uniform frequency of the base-load grid..

      • Energy^2 says:

        Latest Solar Power Purchase Agreement (PPA) auctions have scored historic and surreal low prices, like 4c a KWh.
        If the single panel capacity is 250 Wh (quite a common standard capacity), only installing 4 panels would make a 1 KWh, and this is before any energy loses when inverters/chargers, controllers and cables are coming next in the system.
        For a laborer-installer, and to buy a Big Mac’s meal from the revenue of the panels he installs, 200 panels are required to be installed by that individual to get $8 – selling the power the panels have generate, for an hour.
        If each panel takes 15 minutes to install, one can do the math!
        If this is just about a one Big Mac’s meal or less, what to pay for the installer’s team, energy expanded, transportation, ocean shippers, manufacturers, miners, raw materials, banks, taxes, support and warranty?

        Something not quite right!

        • The installer nowadays asks usually EUR ~300 per day of work on home sized microgrid, plus there are usually several shorter followup visits after that to tweak the settings, solve smaller problems, rewiring job here and there, or adding – expand the system by new goodies and so on..

          You are correct, but we discuss the renewables no longer in systemic impact, but more as strictly personal leverage of (limited lifespan/usability) for the times of falling centralized systems incl. grid, food distribution etc.

    • One strange thing that the article reports is about energy trading:

      Beck told PEi that the research team’s “first surprise was that energy trading had a significant impact on the grids studied” after Germany’s grid and others displayed particularly large fluctuations every 15 minutes, corresponding to spot market trading.

      “The grid frequency had big jumps every 15-30 minutes,” he said, “and it wasn’t clear to us before that trading has such a big effect. Most people were worried about renewables because they are unpredictable and certainly produce fluctuations in frequency. Trading gives a similar order of, or stronger, fluctuation, which hadn’t been clear to us or, I think, to most people.”

      The did find the fluctuations from renewables themselves, of course.

  4. nope.avi says:

    One thing I remember reading about collapse from Joseph A. Tainter’s book is that the sophistication of products after a collapse was greatly reduced. He used pottery as an example of a product that became simpler.

    I wonder if simplification of pottery could have happened before collapse of a civilization.

    https://d7hftxdivxxvm.cloudfront.net/?resize_to=width&src=https%3A%2F%2Fd32dm0rphc51dk.cloudfront.net%2Fusxu1HQE9YvfAVoVwyw3iQ%2Flarger.jpg&width=1200&quality=80

    as it became uneconomical to make more complex pottery.
    I look at the quality of entertainment and realize that outside of cgi, and video games, there is a lot of pressure to reduce costs and effort. Technological advancement has made many careers in the arts pay less. than they used to.

    • xabier says:

      In their decline phase, the Romans greatly reduced the quality of their army equipment: one can see this in an iron helmet of the 1st century compared to the crude rubbish their soldiers were wearing in the 4th-5th centuries. A legionary of the 1st century would probably have refused to wear something so lacking in protection.

      Iron body-armour also became what appears to be moulded leather – this is made simply by dipping leather in hot oil or water, and forming it over a wooden mould. Anyone feels like making a slash and stab-proof vest, give it a go…

      Sculpture became crude and barbaric, in the worst sense of the word.

      • It seems like more effort had to go into making the basic things of life. There was less left over for extras like nice bowls and iron helmets.

        Energy per capita was lower. Energy per capita is used for both actual goods produced and for the complexity (specialized jobs, hierarchical organization, advanced education) that allowed economies to make more sophisticated devices without adding proportional energy. Part of the complexity is what disappeared.

  5. jupiviv says:

    According to an article I read recently, 75% of new construction jobs – some of them offering 6 figure incomes – have no applicants because there aren’t enough qualified people. I have a hard time believing that. Most construction jobs are lapped up by the Chads and Tyrones with government-subsidised harems of 6-10 baby mommas.

    Apparently these jobs are opening up because the companies have a positive outlook on 2018 due to the tax ‘reform’. Something is wrong with this picture.

    • nope.avi says:

      “According to an article I read recently, 75% of new construction jobs – some of them offering 6 figure incomes – have no applicants because there aren’t enough qualified people. ”

      This is probably a way to justify the high prices real estate developers charge to clients. An important client, that is often overcharged, are government entities. The government probably doesn’t mind because they can charge higher property taxes to compensate for being overcharged.

      It seems like the way many people learn blue collar skills is informally. Back in the day, blue collar workers had larger families so there were more kids to pass these skills onto. Technology, such as cars, were easier to fix and less reliable, so picking up some wiring skills or soldering skills was a natural part of growing up. At least, that’s my impression of the past, the dawn of industrial society: the 1910s and 1920s. It’s like that ,still, in some poor parts of the world.

    • nope.avi says:

      ” Most construction jobs are lapped up by the Chads and Tyrones with government-subsidised harems of 6-10 baby mommas.”
      You must be out of your mind.The wages of construction workers are too low to create a harem. You ‘re basing the lives of Tyrones and Chads on what appears to be too many rap music videos.

    • JH Wyoming says:

      You need a link – where’s the link, jupiviv

    • Tim Groves says:

      These Tyrones and Chads of which you speak are new to me.
      Are they folks from the north of Ireland and from the Sahel, respectively?

  6. Fast Eddy says:

    Ford’s Self-Driving Test Car Severely Damaged In Crash

    Two of the four passengers in the Argo AI car were injured and taken to the hospital in stable conditions..

    https://www.zerohedge.com/news/2018-01-12/fords-self-driving-test-car-severely-damaged-crash

  7. MG says:

    “Japan’s prime minister has kicked off a five-day European tour to Estonia, Latvia, Lithuania, Bulgaria, Serbia and Romania — becoming the first-ever head of the Asian nation to visit those countries.”

    http://abcnews.go.com/Technology/wireStory/japanese-pm-kicks-off-nation-european-tour-estonia-52305906

    Interesting is, that he is visiting the marginal countries of Europe, i.e. those that suffer the biggest population decline. It is clear, that he knows the corresponding business opportunities, based on the population decline of Japan…

    • Sungr says:

      Coal is a valuable energy resource that has built our civilization.

      Central Banks are a bunch of bureaucrats who theorize about micro-adjustments on the terms of banking paper rates.

    • JH Wyoming says:

      It was mis-management by their political leaders like Chavez and corruption that led to this situation, not a lack of burning coal.

      • Energy^2 says:

        If Lenin was inspired and influenced financed by external powers before 1915, Hitler has been strengthened by external powers, how one can believe Chavez, Putin, Castro, Saddam, Chinese Communist Party’s Politburo and all other leaders today were/are sovereign?

        This is a tightly connected world, very tightly!

        Think of it as one system and you will understand it more productively 🙂

  8. Baby Doomer says:

    For those who haven’t seen it, German military report on peak oil:. 3 years left until anarchy

    http://www.energybulletin.net/sites/default/files/Peak%20Oil_Study%20EN.pdf

    • I would not characterize the 2010 report by the German military report as saying, “Three years left until anarchy.”

      It does give very concerning expected impacts of peak oil (which could include something close to anarchy), but it doesn’t give a date for peak oil (that I could see), and it doesn’t assert how the timing will work out for the many different impacts it forecasts.

      So I would say “3 years until anarchy” is strictly Baby Boomers interpretation of the situation, based on other Peak Oil writing, and maybe a little from this report.

      • Energy^2 says:

        Peak oil date becomes a variable if one can take groups of people (i.e. nations) off of oil, keeping the style of the rest of world not impacted (POMC).
        Iraq, for example, should be using not less than what Saudi or California use in daily oil consumption, having similar climate and its agricultural potential is huge, yet Iraq is just consuming roughly what makes the oil pumps and oil export hubs running 24/7, not more!
        The fact that Iraqi oil is not accessible for Iraqis, for example, is what the Germans couldn’t determine and give it a date as peak oil event for that country!
        Peak oil is a reality today, and it is creeping slowly from one nation to another.

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