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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1,594 Responses to Low Oil Prices: An Indication of Major Problems Ahead?

  1. Third World person says:

    Deepfake Videos Are Getting Real and That’s a Problem

    Computer-generated videos are getting more realistic and even harder to detect thanks to deep learning and artificial intelligence. these so-called deepfakes can be playful, but can also have real, damaging consequences for people’s lives.

    • Third World person says:

      now no politicians need worried about anything

      • xabier says:

        Maybe the EU’s Juncker could amend videos in order to make himself look sober.

        Teresa May could look confident, decisive and competent……the possibilities are endless.

        Video and advertising culture has also taught people to respond instantly, rather than analyse and reflect.

        As for reading comprehension – of anything but the most simple sentence – ,hasn’t that collapsed?

    • All of the new “information” in our lives becomes a problem, rather than a solution.

      With inadequate energy supply, it looks like we can switch to an information economy, but we really cannot. We end up in a world of endless unwanted phone calls and movies that are meant to deceive.

      • Dennis L. says:

        This is more speculation than understanding so please do not take as an opinion.
        There is conjecture that the universe is basically information, eight dimensions I believe and if memory serves me right projecting it down through dimensions gives tetrahedrons. We do something similar when we draw 3D figures on paper. It seems to me that underlying understanding our visible world could be in these ideas. Quantum mechanics is bizarre at best and yet LEDs are a demonstration of this behavior visible to us in a somewhat analogue world which apparently is not the “real” world.

        In an interesting twist, Putin has declared rap music should/will be regulated so as not to corrupt their society. The west seems to have lost the wisdom of the ages, the Catholic church was at one time very involved in movie censorship which seems to have ceased around the time of Vatican 2, with Pope John XXIII who as I understand it was a “common” man. Judging from the behavior and out right failure of the lives of many “stars”, perhaps common is not always a very good way to go.

        Information can be organized, the noise rejected; it is not easy but Claude Shannon did some interesting work in this area around 1950 or so. In the universe, information came from someplace, perhaps we don’t as of yet see from whence it came.

        Dennis L.

        • Rodster says:

          Have you been eating wild mushrooms again?

          • Dennis L. says:

            Laughing quietly, very nice.

            You might drop over to Quantum Gravity Research, they seem to have some interesting ideas, we have pretty well beat every idea on this blog to death with a great deal of certitude that we know everything. Wilhelm Roentgen once commented after discovery of the nucleus that now we know everything about physics or something close. Well, not quite.

            Gail touches on this very often when she mentions a “guiding hand” or something similar.

            Claud Shannon was real and modern information theory was the result – he was initially employed by Bell Labs and moved on to MIT.

            Vatican II changed many things in the Catholic church and much to our loss in my opinion, many dioceses are now bankrupt secondary to very poor behavior. We as humans need norms, general patterns of good behavior even if we fail(sin?), we need to try, we seem to need a belief in something bigger than ourselves. Man seems to fail at this regularly, does anyone recall a pediatrician(physician) on television set as a role model who in the end was found to have feet made of clay?

            We are having some societal challenges and they will need to be solved or resolved in some manner, we need hope without it we succumb to nihilism.

            Dennis L.

            • We definitely need hope. It looks very much like there is a guiding hand, somewhere in this whole process. But it is hard to prove this to people who are convinced that we know everything through science.

            • Flippr says:

              Dennis, are you saying that humans can’t be good without religion? Catholicism is the only way you can find hope?

              And Gail, it sounds like your saying you can prove there’s a guiding hand? I’m not convinced science knows everything, can you please provide your proof?

            • I don’t think that Catholicism is half-way correct. The self-organizing power of the system leads to all religions on earth, including African religions. These religions gradually change over time, as conditions change.

              There seem to be a lot of overlapping themes among many of these religions. The system operates better, when we co-operate with those close to us. Simply choosing what is best for ourselves doesn’t generally provide the optimal group outcome. Instead, it is better if we treat our neighbor as we would want to be treated. We have specific responsibilities to our families.

              Also, the Higher Power of creation is really an ongoing higher power, active in our lives and within the system today. This Higher Power acts through seeming coincidences. There may be something for us after death, but exactly what is unclear. Enough different cultures have buried their dead with some items from the current world, that it seems like this belief has been quite prevalent. We don’t know whether this is simply wishful thinking. Likewise, we don’t know whether belief in hell is simply wishful thinking that those who do not behave as we would like, will meet a bad outcome in the next life. I understand that some Africans believe that stealing food from other people’s crops will lead to illness in today’s world. This would seem to be another version of the story.

              There is a lot we don’t know. The self-organizing system is so miraculous, however, that we need to believe that there are things that are beyond our understanding that may happen in the future.

            • as far as we can tell, humankind is the only species that possessed a concept of far future and deep past
              We can recall our grandparents faces–see pictures beyond them. No other animal can do this.
              Similarly we can plan/imagine a future, keep track of offspring when they are no longer around, should we wish to do so

              because of this we project ourselves into an imagined ”future” that goes on forever, we cannot accept that our single existence is all there is

              So we create alternative realities to accomodate this.

              Ancestor worship—they watch over us etc etc—or some ‘healer’ from the past who, through repeated tellings. takes on a supernatural presence in our lives–a natural development of this is the desire to have a better existence than the one we have, reinforced by priests who repeat that over and over,

              It is natural to believe that. Most of human existence has been rubbish–who wouldnt want something better to look forward to?

              on the plus side, organised religion does offer a cohesive community

            • Pintada says:

              Undoubtedly, we are all heading for the great sleep. Some have said that we exist now so that we can prepare for that final rest, and therefore “do it” properly.

              This we have now Is not imagination.
              This is not grief or joy.
              Not a judging state,
              Or an elation,
              Or sadness.
              Those come and go.
              This is the presence that doesn’t.
              – RUMI
              What is the “presence” of which Rumi speaks? Words sometimes used synonymously are the sacred, spirit, the transcendent. All suggest the nearness of something greater than the rational mind and the human ego.

              Baker Phd, Carolyn (2013-11-19). Collapsing Consciously: Transformative Truths for Turbulent Times (Sacred Activism) (p. 112). North Atlantic Books. Kindle Edition.

              Even if one simply learns that he is not the center of the universe and then knows nothing else after death, it is better than not taking advantage of the simple truth that death is coming to learn.

        • Information is made possible by energy dissipation. Self-organized balancing prices are a high form of information.

  2. Third World person says:

    This moment in history marks the end of a long, sad tale of greed and murder by the white races. It is inevitable that for the final show we vomited a grotesque figure like Trump. Europeans and

    Americans have spent five centuries conquering, plundering, exploiting and polluting the earth in the name of human progress.
    They used their technological superiority to create the most efficient killing machines on the planet, directed against anyone and anything, especially indigenous cultures, that stood in their way. They stole and hoarded the planet’s wealth and resources.
    They believed that this orgy of blood and gold would never end, and they still believe it. They do not understand that the dark ethic of ceaseless capitalist and imperialist expansion is dooming the exploiters as well as the exploited.

    https://www.truthdig.com/articles/reign-of-idiots/

    i love Chris hedges writing

    • Third World person says:

      South Korea: Suicide nation

      Loneliness, poverty, chronic illness, losing one’s job, the death of a loved one or the breakdown of a marriage – there are many reasons why people fall prey to heartbreak and despair, but most of us, thankfully, will find a route out of that unhappiness or at least develop ways of dealing with it.

    • not 5 centuries

      the viable steam engine was invented in 1776—along with the American revolution. Before then, there wasnt enough power available for conquest. Before then it was conquest of the American continents by European states, Spain, France England etc

      Americans (as a cohesive nation) didnt start muscle flexing until the 1860s onwards, things didnt really get under way till the 20th c when oil came on the scene

      • Jason says:

        It/s too easy to lump some people into an isolated group and blame certain aspects of history on them. America was a product of its time in European history and culture. We gave the world democracy and the beginnings of the rights of individual man, vs the providence of Kings and authority of church. The conquering of natural America, including natives, the ownership of slaves, was not activities invented and carried out by the “White race”, these are activities that happened throughout the world and throughout time. One could say our culture has lead to an introspection and admittance to our past mistakes. We didn’t conquer the world through military might, we rescued Europe from Fascism and protected the world from Communism. Only the discovery of oil and its byproducts allowed such a global array of affects, both good and bad. Chris is a bit one-sided in his opinions that he expresses. There is always a mixture of good and bad in the world and in every culture.

        • cheap surplus energy provided democracy—or at least a temporary illusion of it

          fascism wasn’t conquered—it was delayed…..again through the availability of cheap surplus energy

          the ‘Americas” were cheap open spaces to spread into

          • Jason says:

            It will be interesting too see what type of government society turns too as fossil fuels run out. Interesting from a future perspective, not so interesting to live through I think. We still have quite a bit of open space in America, perhaps this will help speed up the healing of the damage modern man has done.

            • i dont see how it can evolve into anything other than a version of fascism

              people ”demand” what they had—blame others for not having it, and believe a fuh rer who promises it

        • JesseJames says:

          Correct Jason, slavery existed long before a small portion of the “white race” decided to profit from it. Slavery existed in Africa, and in many Muslim nations throughout history. It still exists today in certain cultures. Like many current social justice warrior creeds today, it is in vogue to blame the “white race” for slavery. Perhaps they should recognize that it was the “white race” and only the white race that ended slavery and brought the light of personal freedom to much of the world what endured that horrific practice.

          • it was africans who sold africans to the slave shippers and traders

          • xabier says:

            In fact. ‘the white race’ is just rhetoric – whether pro or anti-Empire; like calling all Africans ‘black’. Tell that to the Berbers!

            Other rather light-skinned Imperialists in history: Turks, Afghans, Chinese, Japanese Arabs, Persians, Syrians……

    • Duncan Idaho says:

      I agree, Hedges gets it right.

    • Lilly says:

      I have looked at the Chris Hedges piece, frankly just a load of buzzword spaghetti. I wish people would stop promulgating race hate, we are all the descendants of genocidal monsters and life is terribly simple, we have all forgotten we are just animals programmed like heat seeking missiles to home in on the resources, nothing more nothing less. It’s all about resource grabs and preening opportunities plenty of that on here.

  3. JamesLew says:

    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.

    • That is a really nice collection of graphs on wage disparity and failure of the wages of the lower classes to grow. Many other links too.

    • Chrome Mags says:

      Things never really went back to the way they were before 2008. Mark that year in the historical accounts as a major step down year. It wasn’t collapse, but it was a step down, from which nothing could get it back, not even trillions in phony money conjured up to jump start the economy.

      We all wonder when the next step down will occur. I figure there will be 3, and by then things will be so tough you won’t know one step down from another.

      • el mar says:

        please explain the 3 steps.
        Thanks!

      • the steps down correlates with my skimming stone analogy

        the stone bounces on the water–loses energy–bounces up but lower—hits the water again–bounces lower—hits the water again, losing energy each time till it sinks altogether

  4. Volvo740 says:

    It’s amazing how many commenters out there don’t understand how we’re living off of millions of years of stored sunlight, and consuming it all in 300 years.

    Here is one:

    Darnell Retweeted
    Dr. Brian Poe
    @PoeBrianL
    Replying to
    @RoyScranton…
    “It would help if people of all demographics—especially established power—would clearly state that if fossil fuels aren’t aggressively phased out & other emergency interventions taken, billions of untimely deaths are expected.”

    One could add that billions of deaths would occur if we aggressively phase out fossil fuels. I’m quite sure they aren’t talking about diesel fuel for tractors! Or fertilizers.

    • it has been suggested that homo sapiens evolved as a species to get rid of excess stored carbon from the planet

      we’just about finished that job

      any ideas on what comes next?

      bear in mind that we also represent a store of excess carbon in the system–and we certainly seem to on the point of self-disposal

      • Hubbs says:

        Technically, and in a very abstract way of thinking, from an evolutionary standpoint, life forms evolve in endless competition with other life forms in a battle to see who can capture the most energy and use it most efficiently, as manifested by reproductive fitness. I’d say H. sapiens has been doing just fine (7 billion population added in less than 2 centuries) in this endeavor, but don’t forget, extinction is part of the evolutionary landscape too.

      • Yep, that’s the humans appearing on the scene in clockworky fashion as nature’s desired terraforming agent using fossil fuels, which I had bounced around here for several past years. However, even for overshoot – rapid decline – if you zoom in there must be some stages of echo booms and stabilization, doesn’t matter how short. But the entire process will be counted at least in generations not faster.

        The know-how cat is out of the bag already – irreversibly, if you have biomass, you have charcoal, if you have charcoal you can do iron and agricultural tools, doesn’t matter if that’s only sickle and few bolts level regression. Hence agricultural civilization of some sort is here to stay unless something way bigger than nuclear standoff takes place, e.g. un precedent wobble in sun’s output and its effect on climate, space ray burst, etc..

        So, one should not be worried about people in general, but rather stay more alert about immediate surroundings, neighbors, relatives, compatriots and migrants as we likely crash into uneasy depop scenario soonish..

        • Volvo740 says:

          Yes. Pretty regional though. It seems. Seattle, Mexico City, Miami. Different situations.

        • xabier says:

          ‘While mankind had its plans, the Earth had her own.’

          Always loved that quote from Doris Lessing, from ‘Shikasta’.

  5. Baby Doomer says:

    Ron Paul: A 50% correction will spark depression-like conditions that may be ‘worse than 1929’

    https://www.cnbc.com/2018/12/14/ron-paul-market-meltdown-could-spark-depression-like-conditions.html

    • There is a poll at the end of the article. Slightly over half of those taking the poll say that they think the market is headed for a major downturn. The remainder is divided between, “No downturn,” and “Undecided.”

      • Lastcall says:

        Ha of course there is a poll; if it moves they poll it, if it doesn’t they poll it until it does.

        I wont miss some of the rubbish polls that proliferate lately; how many people with first year stats think they can make a career out of it?

      • As you probably know Paul is macro economic perma doomer (given current system), he has been saying exactly the same since 2007/8 and even several decades before that..

        And on some occasions the msm just picks the message up again, like right now for some reason, i.e. people slowly getting uneasy about the wobbling situation and or preparing alibi as “we did forewarn you..”

  6. Chrome Mags says:

    https://news.url.google.com/url?sa=j&url=https%3A%2F%2Fwww.bbc.com%2Fnews%2Fworld-europe-46588033&uct=1526525743&usg=Wzk4vqOydPdSnQ8KXkl2RrCMie0.

    ‘Hungarians rally again against ‘slave laws’

    “About 10,000 people have rallied in Hungary’s capital Budapest against new labour laws, which have been labelled “slave” legislation by opponents. The crowds marched towards parliament and the state TV headquarters, in what was the fourth and largest protest since the laws were passed last week. Police fired tear gas to disperse protesters near the TV station. New rules mean companies can demand up to 400 hours of overtime a year and delay payment for it for three years.”

    Imagine being forced to work an extra FOUR HUNDRED HOURS of OVERTIME a YEAR and not getting paid for 3 YEARS!!! What companies will do is end the company name after 3 years and open with a new name, and tell employees they have to get their overtime from the previous company, even though none of the top executives or the address will actually change.

    They do that with those counter top chicken cookers. They provide a warranty, but end that company name a couple months after advertising on TV so they can avoid replacing broken or damaged parts. Then a year later they come back with the same unit, except for a minor name change or slight design variation and sell on TV, rinse, repeat.

    RESISTANCE PEOPLE!!! I wonder how long before our govt. comes up with a similar plan. I’m still surprised they didn’t end minimum wage once they had the power to eliminate it. They talked about getting rid of it for decades. As thing squeeze down except more of this type of legislation. Going to get tougher and tougher to pay the bills.

    • And not get paid for three years! That sounds like the big problem. How many of these companies will still be around? Will the currency still buy the same goods and services? It sounds like something that won’t work.

      • Chrome Mags says:

        Won’t work for who, the workers maybe not, management yes, if they can get away with it. Hard to say no to management when your paycheck is all that keeps the family afloat and probably harder yet to get paid so much later. It’s hard enough to get people to pay when something is due, let alone 36 months later. “We don’t show you had as much overtime as you claim. You say 1200 hours, our records show 13 hours”. Then what’s the recourse?

        • Jason says:

          Common sense says people will get what they are owed one way or another. You discredit the working too much.

          • Chrome Mags says:

            I don’t discredit the working – I see an attempt to defraud the workers by a plan to pay them 3 years later, which could easily lead to not paying them. Are those terms you would agree to?

        • They can get away with it because CEE effectively became German-French colony, and both sides of the deal know it and acknowledge it in some capacity daily. Local people strive for maintaining the illusion they are again fully integrated (semi-) core part of the West, but obviously as they lack the proper seat at global debt issuance table, hence have to keep subjugated in these factories and warehouses at conditions (pay, working hours, . ) which would make sedate Western proles riot immediately..

          This will only end when Germany wobbles in serious fashion (onset of true global recession/depression) and the industrial overcapacity of their subcontractors won’t be needed anymore..

        • xabier says:

          My ‘black sheep’ cousin in Spain, in the swimming pool business, hires workers over 50 so he can get a government subsidy for employing them, and he doesn’t pay them in full or on time.

          They are so afraid of having no work, that they continue in the job. One did rebel, and went on welfare.

          He even doesn’t pay his brother on time (for legal reasons, he can’t leave the family company).

          Local governments are also leaving workers with huge arrears of pay. When they get really fed up, the refuse workers set fire to the rubbish…..

          • But hey, at least they can say, we had it good, actually better than most,
            way back during the 16-17th century at the peak of colonial inrush bonanza..
            Or upto 1970s, perhaps somewhere till 2000s..

            It’s hard to explain people good times are just passing pigeons, it’s not meant to be permanent human condition.

            More to your/mine general point, I think there are some specific traits in certain cultures, which often push people into unnecessary servitude just to prolong the imaginary self status a bit more irrespective how self destructive to continue at all costs actually is.
            While other avenues, albeit more ‘radical” (like leaving the city) are still at hand, even at the age of ~50’ ..

    • Uncle Bill says:

      Basically, same occurred in Russia collapse. Workers still reported to work. What’s the saying?, “They pretend to Pau, so we pretend to work.”.
      Article in the news a major US Oil Company leaving Venezuela and paying it’s workers with TIRES..much more demand than money!!!!
      Record immagration in that poor country
      new Brookings Institution study forecasting that the number of Venezuelan refugees will skyrocket to 8 million should trigger alarm bells in the United States and Latin America. It would be the world’s biggest mass exodus in recent times — bigger than the Syrian refugee crisis — and could destabilize the region.

      The study, by Brookings’ Venezuelan-Israeli resident economist Dany Bahar and researcher Douglas Barrios, says its projection includes the 3 million Venezuelans who, according to the United Nations, have already left their country because of its humanitarian crisis. Most of the refugees have fled to Colombia
      This is just the start…hold onto your seats…

    • xabier says:

      Even the laws of medieval England, written by aristocrats and lawyers, allowed workers a lunch (and siesta) of one-and-a half-hours, and other proper meal times.

      Incredible regression that we are seeing now.

      • you ain’t seen nuthin yet

        human muscle is the final energy resource before collapse

        it comes in slow easy stages, each one blending into the stage before and after

  7. Chrome Mags says:

    https://peakoil.com/enviroment/will-peak-oil-save-earths-climate

    Great article on conventional vs. non-conventional oil. There is a graph part way down that shows conventional oil shaded in blue and non-conventional in yellow on top of the blue. It’s easy to see that conventional plateaued in 05 and since then it’s only peaked above that line a couple of times, with non-conventional use steeply climbing.

  8. cvfarms says:

    Thank you for your informative articles. You are changing my mental map of how the world operates. I just read an article that says each American has the energy equivalent of 600 human energy servants. Just a couple hundred years ago, not many people could afford careers that didn’t involve caring for and feeding their families. Oil gave us so many energy servants, we could afford a bizarre variety of well-paid careers. Even though the average American farmer can feed an additional 155 people (with the aid of oil-fueled machinery) it barely pays the bills. Isn’t your article discussing commodity collapse a pre-cursor to a collapse of these high-paid jobs that have nothing to do with the basics of survival?

    • Right! We very badly need commodities for to help us grow food using modern methods, and for transporting food and for refrigerating it or otherwise making it last longer. If only a small fraction of the population works in farming, it is possible to have many types of goods besides food, including clothing, devices for transport, and homes that are sturdy enough to withstand storms and can be climate controlled. It is also possible to have many types of services, including education, medicine, financial services and elected government.

      How the system will collapse back is uncertain. Hunting and gathering is the most basic system. People who currently support themselves in this way may be able to continue.

      What lifestyle above hunter-gathering can survive is less certain. If we cannot make metal tools and insecticides, farming will be very different. Intergovernmental organizations (such as the European Union and World Trade Organizations) seem to be among the most vulnerable. Financial organizations and financial promises are very vulnerable as well. Banks may fail. Governments may not be able to bail them out. Some governments may collapse, in the way the central government of the Soviet Union collapsed. Smaller units may be left on their own.

    • this is why european medieval castles needed 000s of servants and 000s of acres to support them

      one family lived in luxury while most of the rest lived in mire

  9. Harry McGibbs says:

    “The “everything bubble” is deflating. The fact that it’s happening relatively slowly shouldn’t blind us to the real threat: The world is dangerously underestimating how hard it’ll be to deal with the fallout once it pops.

    “Frothy markets can’t disguise the warning signs. The shift to tighter monetary policies in the West is putting pressure on global equity and real estate values. Even more critically, it’s weakening credit markets. Over-indebted emerging markets face headwinds from rising borrowing costs and dollar shortages…

    “…even after recent US interest rate hikes, the Fed has nowhere near enough room to cut rates that much without going negative. In Europe and Japan, where rates are already less than zero, easing would require substantially negative levels, which would likely be politically impossible. Even current levels are controversial. Negative rates are a disguised way of writing down debt; they penalize savers and weaken the banking system…

    “Ultimately, central banks might have to resort to QE variations such as “helicopter money.” …To make it palatable, the measure could be packaged as a way to rationalize welfare systems by reducing frictions and administration costs.

    “Direct intervention, such as lending to or investing in businesses, or taking over banks and large parts of the economy to restart activity, are also possible. Those would be awfully desperate measures, however, which points to the real problem. Since 2008, governments and central banks have stabilized the situation without fundamentally addressing high debt levels, weak banking systems and excessive financialization…

    “In any new crisis, then, policymakers are likely to be badly exposed. Central bank purchases of real estate and equities, helicopter money and more direct intervention could well fail to boost economic activity. That would contribute to a collapse in confidence in authorities, as the sight of governments forced to print money and throw it out of the window or take over markets increases people’s anxiety about the future.

    “There is already a crisis of trust – a democracy deficit – in many advanced economies, accompanied by rising political tensions. A loss of faith in the supposed technocratic abilities of policymakers to manage economies will compound these pressures.

    “The political economy could then accelerate towards the critical point identified by John Maynard Keynes in 1933, where “we must expect the progressive breakdown of the existing structure of contract and instruments of indebtedness, accompanied by the utter discredit of orthodox leadership in finance and government, with what ultimate outcome we cannot predict.””

    https://www.bloomberg.com/opinion/articles/2018-12-15/central-banks-have-few-options-to-deal-with-another-crisis

    • Harry McGibbs says:

      Good article re helicopter money and currency debasement and and the risk those pose to the financial system’s credibility:

      “Global bond investor PIMCO said that since the 18th century there have been 56 examples of direct monetary financing, from France in 1795 to Zimbabwe in 2007. All had dire economic consequences.

      “Dropping cash directly onto consumers may well be the end of that line and, if that fails to work, governments may be very reluctant to reinstate monetary financing bans in future – creating the threat of systemic collapse.

      ““The main difference between helicopter and other possibilities, lies in the credibility of the whole monetary system,” Swiss economist Reto Foellmi told a discussion on Reuters Global Markets Forum this week. “If helicopter money is done literally, they would cross a point of no return.””

      https://www.reuters.com/article/us-global-forex-helicopter-idUSKCN10816L

      • This article talks about Japan. Japan is the home of a huge debt bubble that sort of collapsed about 1992, without bringing down the whole economy.

        I think that a debt bubble that only slowly collapses represents a permanent drag on the economy. The economy had more inflation than other economies, before 1992; now it has more deflation.

        Also, the falling size of the workforce represents a drag on the economy. The economy really needs fewer homes, fewer cars, fewer roads, fewer clothes, fewer schools, and fewer of pretty much anything else. (This is true of much of Europe, as well.) It is hard to make much money tearing down old building. At the same time, keeping infrastructure operating requires more maintenance. The economy ends up creating a lot of robots (to save labor) plus a lot of make-work jobs for its citizens, because they need to do something besides tear down old buildings.

        Japan’s energy costs are high, because it imports its fuels. Nuclear was the one type of energy that helped them for quite a few years, but now it is having problems as well. It is hard for Japan to compete in the world marketplace unless it can hold down labor costs, to try to offset its high fuel costs for oil, coal, and natural gas.

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