Low Oil Prices: An Indication of Major Problems Ahead?

Many people, including most Peak Oilers, expect that oil prices will rise endlessly. They expect rising oil prices because, over time, companies find it necessary to access more difficult-to-extract oil. Accessing such oil tends to be increasingly expensive because it tends to require the use of greater quantities of resources and more advanced technology. This issue is sometimes referred to as diminishing returns. Figure 1 shows how oil prices might be expected to rise, if the higher costs encountered as a result of diminishing returns can be fully recovered from the ultimate customers of this oil.

Figure 1. Chart showing expected long-term rise in oil prices as the full cost of oil production becomes increasingly expensive due to diminishing returns.

In my view, this analysis suggesting ever-rising prices is incomplete. After a point, prices can’t really keep up with rising costs because the wages of many workers lag behind the growing cost of extraction.

The economy is a networked system facing many pressures, including a growing level of debt and the rising use of technology. When these pressures are considered, my analysis indicates that oil prices may fall too low for producers, rather than rise too high for consumers. Oil companies may close down if prices remain too low. Because of this, low oil prices should be of just as much concern as high oil prices.

In recent years, we have heard a great deal about the possibility of Peak Oil, including high oil prices. If the issue we are facing is really prices that are too low for producers, then there seems to be the possibility of a different limits issue, called Collapse. Many early economies seem to have collapsed as they reached resource limits. Collapse seems to be characterized by growing wealth disparity, inadequate wages for non-elite workers, failing governments, debt defaults, resource wars, and epidemics. Eventually, population associated with collapsed economies may fall very low or completely disappear. As Collapse approaches, commodity prices seem to be low, rather than high.

The low oil prices we have been seeing recently fit in disturbingly well with the hypothesis that the world economy is reaching affordability limits for a wide range of commodities, nearly all of which are subject to diminishing returns. This is a different problem than most researchers have been concerned about. In this article, I explain this situation further.

One thing that is a little confusing is the relative roles of diminishing returns and efficiency. I see diminishing returns as being more or less the opposite of growing efficiency.

Figure 2.

The fact that inflation-adjusted oil prices are now much higher than they were in the 1940s to 1960s is a sign that for oil, the contest between diminishing returns and efficiency has basically been won by diminishing returns for over 40 years.

Figure 3.

Oil Prices Cannot Rise Endlessly

It makes no sense for oil prices to rise endlessly, for what is inherently growing inefficiency. Endlessly rising prices for oil would be similar to paying a human laborer more and more for building widgets, during a time that that laborer becomes increasingly disabled. If the number of widgets that the worker can produce in one hour decreases by 50%, logically that worker’s wages should fall by 50%, not rise to make up for his/her growing inefficiency.

The problem with paying higher prices for what is equivalent to growing inefficiency can be hidden for a while, if the economy is growing rapidly enough. The way that the growing inefficiency is hidden is by adding Debt and Complexity (Figure 4).

Figure 4.

Growing complexity is very closely related to “Technology will save us.” Growing complexity involves the use of more advanced machinery and ever-more specialized workers. Businesses become larger and more hierarchical. International trade becomes increasingly important. Financial products such as derivatives become common.

Growing debt goes hand in hand with growing complexity. Businesses need growing debt to support capital expenditures for their new technology. Consumers find growing debt helpful in affording major purchases, such as homes and vehicles. Governments make debt-like promises of pensions to citizen. Thanks to these promised pensions, families can have fewer children and devote fewer years to child care at home.

The problem with adding complexity and adding debt is that they, too, reach diminishing returns. The easiest (and cheapest) fixes tend to be added first. For example, irrigating a field in a dry area may be an easy and cheap way to fix a problem with inadequate food supply. There may be other approaches that could be used as well, such as breeding crops that do well with little rainfall, but the payback on this investment may be smaller and later.

A major drawback of adding complexity is that doing so tends to increase wage and wealth disparity. When an employer pays high wages to supervisory workers and highly skilled workers, this leaves fewer funds with which to pay less skilled workers. Furthermore, the huge amount of capital goods required in this more complex economy tends to disproportionately benefit workers who are already highly paid. This happens because the owners of shares of stock in companies tend to overlap with employees who are already highly paid. Low paid employees can’t afford such purchases.

The net result of greater wage and wealth disparity is that it becomes increasingly difficult to keep prices high enough for oil producers. The many workers with low wages find it difficult to afford homes and families of their own. Their low purchasing power tends to hold down prices of commodities of all kinds. The higher wages of the highly trained and supervisory staff don’t make up for the shortfall in commodity demand because these highly paid workers spend their wages differently. They tend to spend proportionately more on services rather than on commodity-intensive goods. For example, they may send their children to elite colleges and pay for tax avoidance services. These services use relatively little in the way of commodities.

Once the Economy Slows Too Much, the Whole System Tends to Implode

A growing economy can hide a multitude of problems. Paying back debt with interest is easy, if a worker finds his wages growing. In fact, it doesn’t matter if the growth that supports his growing wages comes from inflationary growth or “real” growth, since debt repayment is typically not adjusted for inflation.

Figure 5. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

Both real growth and inflationary growth help workers have enough funds left at the end of the period for other goods they need, despite repaying debt with interest.

Once the economy stops growing, the whole system tends to implode. Wage disparity becomes a huge problem. It becomes impossible to repay debt with interest. Young people find that their standards of living are lower than those of their parents. Investments do not appear to be worthwhile without government subsidies. Businesses find that economies of scale no longer work to their advantage. Pension promises become overwhelming, compared to the wages of young people.

The Real Situation with Oil Prices

The real situation with oil prices–and in fact with respect to commodity prices in general–is approximately like that shown in Figure 6.

Figure 6.

What tends to happen is that oil prices tend to fall farther and farther behind what producers require, if they are truly to make adequate reinvestment in new fields and also pay high taxes to their governments. This should not be too surprising because oil prices represent a compromise between what citizens can afford and what producers require.

Figure 7. Illustration indicating that the world has already reached a point where no oil price works for both oil suppliers and oil consumers.

In the years before diminishing returns became too much of a problem (back before 2005, for example), it was possible to find prices that were within an acceptable range for both sellers and buyers. As diminishing returns has become an increasing problem, the price that consumers can afford has tended to fall increasingly far below the price that producers require. This is why oil prices at first fall a little too low for producers, and eventually seem likely to fall far below what producers need to stay in business. The problem is that no price works for both producers and consumers.

Affordability Issues Affect All Commodity Prices, Not Just Oil

We are dealing with a situation in which a growing share of workers (and would be workers) find it difficult to afford a home and family, because of wage disparity issues. Some workers have been displaced from their jobs by robots or by globalization. Some spend many years in advanced schooling and are left with large amounts of debt, making it difficult to afford a home, a family, and other things that many in the older generation were able to take for granted. Many of today’s workers are in low-wage countries; they cannot afford very much of the output of the world economy.

At the same time, diminishing returns affect nearly all commodities, just as they affect oil. Mineral ores are affected by diminishing returns because the highest grade ores tend to be extracted first. Food production is also subject to diminishing returns because population keeps rising, but arable land does not. As a result, each year it is necessary to grow more food per arable acre, leading to a need for more complexity (more irrigation or more fertilizer, or better hybrid seed), often at higher cost.

When the problem of growing wage disparity is matched up with the problem of diminishing returns for the many different types of commodity production, the same problem occurs that occurs with oil. Prices of a wide range of commodities tend to fall below the cost of production–first by a little and, if the debt bubble pops, by a whole lot.

We hear people say, “Of course oil prices will rise. Oil is a necessity.” The thing that they don’t realize is that the problem affects a much bigger “package” of commodities than just oil prices. In fact, finished goods and services of all kinds made with these commodities are also affected, including new homes and vehicles. Thus, the pattern we see of low oil prices, relative to what is required for true profitability, is really an extremely widespread problem.

Interest Rate Policies Affect Affordability

Commodity prices bear surprisingly little relationship to the cost of production. Instead, they seem to depend more on interest rate policies of government agencies. If interest rates rise or fall, this tends to have a big impact on household budgets, because monthly auto payments and home payments depend on interest rates. For example, US interest rates spiked in 1981.

Figure 8. US short and long term interest rates. Graph by FRED.

This spike in interest rates led to a major cutback in energy consumption and in GDP growth.

Figure 9. World GDP Growth versus Energy Consumption Growth, based on data of 2018 BP Statistical Review of World Energy and GDP data in 2010$ amounts, from the World Bank.

Oil prices began to slide, with the higher interest rates.

Figure 10.

Figure 11 indicates that the popping of a debt bubble (mostly relating to US sub-prime housing) sent oil prices down in 2008. Once interest rates were lowered through the US adoption of Quantitative Easing (QE), oil prices rose again. They fell again, when the US discontinued QE.

Figure 11. Figure showing collapsing debt bubble at the time US oil prices peaked, and the use of Quantitative Easing (QE) to stimulate the economy, and thus bring prices back up again.

While these charts show oil prices, there is a tendency for a broad range of commodity prices to move more or less together. This happens because the commodity price issue seems to be driven to a significant extent by the affordability of finished goods and services, including homes, automobiles, and restaurant food.

If the collapse of a major debt bubble occurs again, the world seems likely to experience impacts somewhat similar to those in 2008, depending, of course, on the location(s) and size(s) of the debt bubble(s). A wide variety of commodity prices are likely to fall very low; asset prices may also be affected. This time, however, government organizations seem to have fewer tools for pulling the world economy out of a prolonged slump because interest rates are already very low. Thus, the issues are likely to look more like a widespread economic problem (including far too low commodity prices) than an oil problem.

Lack of Growth in Energy Consumption Per Capita Seems to Lead to Collapse Scenarios

When we look back, the good times from an economic viewpoint occurred when energy consumption per capita (top red parts on Figure 12) were rising rapidly.

Figure 12.

The bad times for the economy were the valleys in Figure 12. Separate labels for these valleys have been added in Figure 13. If energy consumption is not growing relative to the rising world population, collapse in at least a part of the world economy tends to occur.

Figure 13.

The laws of physics tell us that energy consumption is required for movement and for heat. These are the basic processes involved in GDP generation, and in electricity transmission. Thus, it is logical to believe that energy consumption is required for GDP growth. We can see in Figure 9 that growth in energy consumption tends to come before GDP growth, strongly suggesting that it is the cause of GDP growth. This further confirms what the laws of physics tell us.

The fact that partial collapses tend to occur when the growth in energy consumption per capita falls too low is further confirmation of the way the economics system really operates. The Panic of 1857 occurred when the asset price bubble enabled by the California Gold Rush collapsed. Home, farm, and commodity prices fell very low. The problems ultimately were finally resolved in the US Civil War (1861 to 1865).

Similarly, the Depression of the 1930s was preceded by a stock market crash in 1929. During the Great Depression, wage disparity was a major problem. Commodity prices fell very low, as did farm prices. The issues of the Depression were not fully resolved until World War II.

At this point, world growth in energy consumption per capita seems to be falling again. We are also starting to see evidence of some of the same problems associated with earlier collapses: growing wage disparity, growing debt bubbles, and increasingly war-like behavior by world leaders. We should be aware that today’s low oil prices, together with these other symptoms of economic distress, may be pointing to yet another collapse scenario on the horizon.

Oil’s Role in the Economy Is Different From What Many Have Assumed

We have heard for a long time that the world is running out of oil, and we need to find substitutes. The story should have been, “Affordability of all commodities is falling too low, because of diminishing returns and growing wage disparity. We need to find rapidly rising quantities of very, very cheap energy products. We need a cheap substitute for oil. We cannot afford to substitute high-cost energy products for low-cost energy products. High-cost energy products affect the economy too adversely.”

In fact, the whole “Peak Oil” story is not really right. Neither is the “Renewables will save us” story, especially if the renewables require subsidies and are not very scalable. Energy prices can never be expected to rise high enough for renewables to become economic.

The issues we should truly be concerned about are Collapse, as encountered by many economies previously. If Collapse occurs, it seems likely to cut off production of many commodities, including oil and much of the food supply, indirectly because of low prices.

Low oil prices and low prices of other commodities are signs that we truly should be concerned about. Too many people have missed this point. They have been taken in by the false models of economists and by the confusion of Peak Oilers. At this point, we should start considering the very real possibility that our next world problem is likely to be Collapse of at least a portion of the world economy.

Interesting times seem to be 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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1,399 Responses to Low Oil Prices: An Indication of Major Problems Ahead?

    • Delusional reporting.

      • Davidin100millionbilliontrillionzillionyears says:

        yes…

        the author has no clue about oil demand…

        it’s sort of amusing, since I actually do have peak oil demand “in sight”…

        (I’m sure others do also…)

        I see 2019 coming, and I see (as an estimate) a global recession coming then…

        abracadabra…

        oil demand drops next year and never again reaches this year’s level…

        • Just substitute “affordability” for “demand” in your statement, and you will have the story right:

          “oil affordability drops next year and never again reaches this year’s level”

    • Gregory Machala says:

      They need to look a little harder – limits are closer than they realize.

    • Davidin100millionbilliontrillionzillionyears says:

      but his approval rating is now down to 18%… !

      can he be ousted by a recall vote under French law?

      viva la France!

      otherwise…

      I hear that Paris is a marvelously wonderful gem of a city to visit…

      I see plane tickets for tomorrow for about 3,000 USD…

      should I stay or should I go?

  1. Harry McGibbs says:

    “The Food and Agriculture Organization’s (FAO) food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 160.8 points last month, down from a revised 162.9 in October, and its lowest level since May 2016….

    “The U.N. body’s Cereal Price Index averaged almost 164 points in November, down 1.1 percent from October. Vegetable oil prices fell for a 10th consecutive month, by 7.6 percent on the month and reaching a 12-year low.

    “Cereal prices fell partly because new crops weighed on rice export quotations and export competition drove down maize, FAO said.

    “Palm oil prices fell considerably “fueled by both persisting large inventories in leading exporting countries and the recent contraction in global mineral oil prices,” it said.”

    https://uk.reuters.com/article/us-global-economy-food/world-food-prices-fall-in-november-to-lowest-in-more-than-two-years-idUKKBN1O50U9

    • Harry McGibbs says:

      A ‘blame it on the weather’ article with some interesting intel:

      “Oil refiners’ profits in Asia have slumped to the lowest in more than four years… Oil inventories are building as new refineries in China and Vietnam are running at full tilt, adding to Asia’s supplies.

      “Oil demand also slowed after global Brent crude prices jumped to more than $80 a barrel in September and as the global economic outlook turned gloomy…

      “Factory activity and export orders weakened in November, prompting analysts to predict no quick rebound amid persistent trade tensions.

      “The margins at a typical Singapore complex refinery, a reference for profits at refineries across Asia, fell to $2.49 a barrel on Thursday, the lowest since August 2014, Refinitiv Eikon data showed. DUB-SIN-REF

      “The margins are also the lowest for this time of the year since 2008, the data showed.

      ““The glut in the market is in light oil,” Martijn Rats, Morgan Stanley’s global oil strategist said. “The gasoline crack has deteriorated an enormous amount and is very close to zero at the moment which is very unusual.”

      “Refiners now face losses of more than $1 a barrel for every barrel of gasoline they produced.

      “Several oil tankers are storing gasoil off Taiwan… KY Lin, a spokesman at Formosa Petrochemical Corp, one of the largest fuel exporters in Asia, is hopeful that the recent drop in oil prices could boost demand.

      ““Even though there’s an ongoing trade war, countries will still need to use oil,” he said.”

      https://uk.reuters.com/article/asia-oil/asian-refiners-profits-slump-as-mild-weather-exacerbates-oil-products-glut-idUKL4N1YB3N1

      • Thanks very much for the link.

        If the glut is in light oil, it could indirectly reduce that amount that refiners are willing to pay for US tight oil from shale (differential to Brent or WTI). This is what cuts back production from shale, as much as drop in WTI price.

        • Duncan Idaho says:

          I t takes at least 30 years to break even on new refinery production.
          That is why the US has very little ability to refine this light stuff.
          They can do the math.

    • All energy prices, including food, tend to move together.

  2. Harry McGibbs says:

    “Wherever Mark Connors looks at markets, from stocks to currencies to oil, he sees signs of the unknown.

    “Equity investors got whipsawed this week during two rough and volatile sessions, but Connors, global head of risk advisory at Credit Suisse, had seen worrying signs long before that. A key technical measure he tracks, the correlation between the price of stocks and currencies, had broken down starting in April. That, along with sharp drops in the price of oil, point to one thing, he says: Uncertainty about the future as central banks around the world unwind programs that bought trillions of dollars of assets.

    ““We’re seeing two of the biggest asset classes, stocks and currencies, exhibit a degree of uncertainty in their relationship in 2018 that we’ve never seen before,” Connors said. “Crude just exhibited something very unusual in the context of the last 40 years.”

    “The unwinding of central banks’ programs a decade after the financial crisis brought economies to the brink is known as quantitative tightening. J.P. Morgan Chase CEO Jamie Dimon said in July that one of his biggest fears is around how markets would behave as central banks removed their unprecedented stimulus.

    ““If quantitative tightening continues, guess what’s going to happen? More of this,” Connor said, referring to unusually violent moves across markets…

    ““Uncertainty is here, and that means deleveraging into a market with reduced liquidity,” Connors said. “Expect more of these exacerbated moves.””

    https://www.cnbc.com/2018/12/06/markets-are-going-haywire-heres-why-these-sudden-moves-are-here-to-stay.html

    • Harry McGibbs says:

      “As a longtime market observer, what I find most interesting about the latest correction in equities has the feeling of inevitability that it will turn into something worse. It wasn’t this way in late January, when everyone wanted to buy that dip. It certainly wasn’t this way in 2007, when the magnitude of the recession was grossly underestimated.

      “Even the Federal Reserve is getting into the pessimism. Chairman Jerome Powell signaled last week that a pause in interest-rate hikes might be forthcoming.”

      https://www.bloomberg.com/opinion/articles/2018-12-06/markets-in-turmoil-a-recession-seems-unavoidable

      • Harry McGibbs says:

        “Only a globally co-ordinated debt “bonfire” can save the world’s leading economies from depression now that monetary and fiscal armouries are exhausted, a leading economics consultancy has warned.

        “Public and private debt levels are so high in the developed world and traditional policy levers are so overextended that the next recession will turn into a depression unless radical measures are taken, Erik Britton, managing director at Fathom Consulting, said.”

        https://www.thetimes.co.uk/article/we-need-debt-bonfire-says-analyst-qqwpwdl22

        • Perhaps someone should look at history. A global co-ordinated debt “bonfire” is equivalent to a debt bubble collapse. It is what is the proximate cause of collapses. Of course, the underlying cost is too little energy consumption per capita. This, in turn, is related to too high cost (to low average EROEI) of energy products.

        • zgbjdk says:

          One person’s savings (pension etc) represent someone else’s debt obligation. Wiping the slate clean of debt also wipes clean the other side of the equation…

          • A lot of “value” doesn’t really have anyone on the other side. These aren’t really debt, but they act like debt.

            The government promises (sort of) to pay you Social Security and Medicare (or retirement and health coverage in other countries). These aren’t guaranteed. They aren’t considered debt.

            A company or person owns shares of stock. The person owning it thinks it can be sold, and the proceeds used to buy things of equivalent value. If debt defaults happen (even if not related to this particular stock), prices of stock will drop dramatically, making them impossible to sell for a reasonable amount.

            A similar problem arises with the price of homes, and farmland, and mines. The prices will drop, and it will be impossible to get anything of value for them. This isn’t a debt default directly, but it happens when debts get wiped out by defaults. I don’t know of any other way to wipe out debts.

      • A person wonders what the buy-sell programs for stocks and bonds will do, when the program figures out that the world is headed into a major recession.

    • Perhaps because standards of behavior are not very high today. There really is a lot of impropriety going on, because normal “return on investment” is close to zero. It is only with impropriety that a person can support himself/herself.

  3. Duncan Idaho says:

    OIL (BRENT) PRICE COMMODITY
    62.79 USD +2.48 (4.11%)

    Still low 60’s—–

  4. Harry McGibbs says:

    The markets seem to like this, even though it is less than the 1.3m barrels p/d I was under the impression was considered desirable.

    “OPEC finally broke an impasse over production curbs, agreeing on a larger-than-expected cut with allies after two days of fractious negotiations in Vienna.

    “The cartel and its partners agreed to remove 1.2 million barrels a day from the market, with OPEC itself shouldering 800,000 barrels of the burden. Iran emerged as a winner from the contentious talks, saying it’s secured an exemption from cuts as it suffers the effects of U.S. sanctions.

    “Crude surged as much as 5.4 percent in London, raising the risk that the deal could anger U.S. President Donald Trump, who had urged the group to keep the taps open and prices low.”

    https://www.bloomberg.com/news/articles/2018-12-07/opec-said-to-agree-larger-than-expected-output-cut-with-allies

  5. Chrome Mags says:

    https://www.cnbc.com/2018/12/07/oil-markets-crude-supply-opec-russia-in-focus.html

    ‘Oil prices surge more than 4% as OPEC reaches deal to cut output’

    “U.S. West Texas Intermediate crude futures were up $2.39, or 4.7 percent, at $53.89 per barrel at 9:43 a.m. ET. Brent crude, the international benchmark for oil prices, rose $3.42, or 5.8 percent, to $62.89 a barrel.”

    “OPEC producers agreed to cut output by 800,000 barrels a day beginning in January, according to Iranian Energy Minister Bijan Zangeneh. Non-OPEC producers were proposing a 400,000 barrels a day cut, sources told Dow Jones.”

    We’ve discussed how oil price faces downward pressure from financially strapped non-elite consumers, but not so much about a consortium like OPEC constricting supply to force a higher oil price, and they can since they provide approx. 34 mbd. That’s a sizable enough supply to effect great control on oil price. However, less volume sold is also less money, so rising price will only work if the consumer can pay it.

    • Chrome Mags says:

      Allow me to clarify; Less volume sold is less money because it’s fewer barrels sold, but if a higher price can be sustained it could make more money overall, so there is a trade off between higher price and lower volume and we’ll see how much the non elite consumer can help OPEC sustain more money from sales, but we can see again how pressured these government run businesses are to bring in more loot.

  6. Yves says:

    Hello
    You write : “At this point, world growth in energy consumption per capita seems to be falling again.”
    But the 2018 CO2 emissions are at a highest level ever : https://global-climat.com/2018/12/06/forte-croissance-des-emissions-mondiales-de-co2-en-2018/?fbclid=IwAR0CY68zCuJyj3FF7hK9wH9v3_ZN2mpvi83fQ5IoBER5UNbDJPszg8jlQA8

    So how can you conclude that consumption per capita is falling ?

    • Maybe I need to look at this more closely, when year end energy data by type of fuel becomes available.

      The chart shows that between 2010 And 2017, emissions rose by 1.0% per year. This is less than world population growth during this time. Thus, for this period, (which is long enough to cause a major problem), energy consumption per capita doesn’t seem to be up very much.

      In order to prevent collapse, we need a higher increase in energy consumption. In fact, a 2.7% increase in emissions would be appropriate with such an increase. By historical standards, this is still pretty low. It may have kept us away from collapse this year.

      • Yves says:

        Ok for this year. I’m afraid that it’s beginning in France : low wages, high taxes. No Growth. No more growth in the future but increase of population. As you write : next year, it’ll be interesting. Do I have to buy a gun ? Here a lot of people shout ‘Macron get out’. No democracy now. We are on the edge of a changing world. See Jared Diamond.

        • Davidin100millionbilliontrillionzillionyears says:

          “No more growth in the future but increase of population.”

          maybe your leadership made a big mistake by letting in so many immigrants?

          “Do I have to buy a gun ?”

          why? don’t all the people in France get along well with each other?

          “Here a lot of people shout ‘Macron get out’.”

          well, that won’t solve anything, but getting him out is much easier than getting most of the immigrants out…

          viva la France!

        • it all comes back to energy depletion

          when cheap surplus oil is available—everybody can have what they want, as much as they want.

          this applies to all industrialised nations—not just France. The EU came together in a time of mutual prosperity—as that prosperity goes away–the EU will revert to more traditional methods of diplomacy.

          French people were given handouts, just like the Greeks and Italians. And the rest of the EU. Very few people know where those handouts came from. They still want to retire at 55, get free med care and free everything else, but demand an end to taxation. great!!

          they remain convinced that they were a fundamental, permanent right. As I’ve said before, people get violent when those rights are taken away—there remains that weird certainty that governments are there to deliver free money.
          And changing governments will restore such ‘rights’

          What we are seeing in France is what will happen in the USA as Trump’s promises fail to materialise and they vapourise. But on a vastly bigger scale of course. China is doing the same thing, maybe a bit differently.

    • of every barrel of oil, a proportion of that oil must be used to obtain more oil

      that proportion cannot be used for any other purpose

      if that proportion is 1%, that leaves 99% with which to ”produce” other stuff (productivity)

      if that proportion increases to –say–10-%—then that leaves 90% to produce ”stuff” –ie create jobs and make things

      so productivity per capita falls, and will continue to fall as that oil production % rises.

      when we get towards 50/50—then our economic system will collapse because we will be using half our oil to get hold of the other half (we wont be able to afford oil at all)

      we won’t get there, because denialists and conspiracy theorists will blame everyone and everything for chaos, unable/unwilling to comprehend the real reason.
      it also explains why there are oilwars now, because that state of affairs is becoming obvious, and denial is kicking in

      • The catch is that the energy isn’t really oil, used to extract oil. It is generally, other, cheaper forms of energy. So the ratio tells you much less than you think it does. Increasingly, natural gas is being used to extract oil. Or electricity made from coal.

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