A few years ago, especially in the 2005-2008 period, many people were concerned that the oil supply would run out. They were concerned about high oil prices and a possible need for rationing. The story was often called “Peak Oil.” Peak Oil theorists have also branched out into providing calculations that might be used to determine which substitutes for fossil fuels seem to have the most promise. What is right about the Peak Oil story, and what is misleading or wrong? Let’s look at a few of the pieces.
[1] What Is the Role of Energy in the Economy?
The real story is that the operation of the economy depends on the supply of affordable energy. Without this energy supply, we could not make goods and services of any kind. The world’s GDP would be zero. Everything we have, from the food on our dinner table, to the pixels on our computer, to the roads we drive on is only possible because the economy “dissipates” energy. Even our jobs depend on energy dissipation. Some of this energy is human energy. The vast majority of it is the energy of fossil fuels and of other supplements to human energy.
Peak Oilers generally have gotten this story right, but they often miss the “affordable” part of the story. Economists have been in denial of this story. A big part of the problem is that it would be problematic to admit that the economy is tied to fossil fuels and to other energy sources whose supply seems to be limited. It would be impossible to talk about growth forever, if economic growth were directly tied to the consumption of limited energy resources.
[2] What Happens When Oil and Other Energy Supplies Become Increasingly Difficult to Extract?
Fossil fuel producers tend to extract the fuels that are easiest to extract first. Over time, even with technology changes, this tends to lead to higher extraction costs for the remaining fuels. Peak Oilers have been quick to notice this relationship.
The question that then arises is, “Can these higher extraction costs be passed on to the consumer as higher prices?” Peak Oil theorists, as well as many others, have tended to say, “Of course, the higher cost of oil extraction will lead to higher oil prices. Energy is essential to the economy.” In fact, we did see very high oil prices in the 1974-1981 period, in the 2004-2008 period, and in the 2011-2013 period.
Unfortunately, it is not true that higher extraction costs always can be passed on to consumers as higher prices. Many energy costs are very well “buried” in finished goods, such as food, cars, air conditioners, and trucks. After a point, energy prices “top out” at what is affordable for citizens, considering current wage levels and interest rate levels. This level of the affordable energy price will vary over time, with lower interest rates and higher debt amounts generally allowing higher energy prices. Greater wage disparity will tend to reduce the affordable price level, because fewer workers can afford these finished goods.
The underlying problem is that, from the consumer’s perspective, high oil prices look like inefficiency on the part of the oil company. Normally, being inefficient leads to costs that can’t be passed along to the consumer. We should not be surprised if, at some point, it is no longer possible to pass these higher costs on as higher prices.
If higher extraction costs cannot be passed on to consumers, this is a terrible situation for energy producers. After not too many years, this situation tends to lead to peak energy output because producers and their governments tend to go bankrupt. This seems to be the situation we are reaching for oil, coal and natural gas. This is a much worse situation than the high price situation because the high price situation tends to lead to more supply; low prices tend to collapse the production system.
The underlying problem is that low prices, even if they are satisfactory to the consumer, tend to be too low for the companies producing energy products. Peak Oilers miss the fact that a two-way tug of war is taking place. Low prices look like a great outcome from the perspective of consumers, but they are a disaster from the perspective of producers.
[3] How Important Is Hubbert’s Curve for Determining the Shape of Future Oil (or Coal or Natural Gas) Extraction?
Figure 1. M. King Hubbert symmetric curve from Nuclear Energy and the Fossil Fuels. Total quantity of resources that will ultimately be extracted is Q.
Most Peak Oilers seem to believe that if we see Hubbert shaped curves in individual fields, we should expect to see a similar shaped curve for total oil supply or for the supply of other fossil fuels. They think that production patterns to date plus outstanding reserves can give realistic views of the future extraction patterns. Frequently, Peak Oilers will assume that once production of oil, coal or natural gas starts to fall, we will still have about 50% of the beginning amount left. Thus, we can plan on a fairly long, slow decline in fossil fuel production.
However, many Peak Oilers will agree that if the energy used to extract energy is subtracted, the result will be more of a Seneca Cliff (Figure 2). Seneca is known for saying, “Increases are of sluggish growth, but the way to ruin is rapid.”
Figure 2. Seneca Cliff by Ugo Bardi.
Peak Oilers also tend to limit the amount of resources that they consider extractible, to exclude those that are particularly high in cost.
Even with these adjustments, it seems to me that the situation is likely to be even worse than most Peak Oil analyses suggest because of the interconnected nature of the economy and the fact that world population continues to grow. The economy cannot get along with a sharp reduction in energy consumption per capita. Some governments may collapse; many debtors may default; some banks may be forced to close. The situation may resemble the “societal collapse” situation experienced by many early economies.
One concern I have is that the Hubbert model, once it became the standard model for what energy supply might be available in the future, could easily be distorted. With enough assumptions about ever-rising energy prices and ever-improving technology, it became possible to claim that any fossil fuel resource in the ground could be extracted at some point in the future. Such outrageous assumptions can be used to claim that our biggest future problem will be climate change. After hearing enough climate change forecasts, people tend to forget about our immediate energy problems, since current problems are mostly hidden from consumers by low energy prices.
[4] Is Running Out of Oil Our Biggest Energy Problem?
The story told by Peak Oilers is based on the assumption that oil is our big problem and that we have plenty of other fuels. Oil is indeed our highest cost fuel and is very energy dense. Nevertheless, I think this is an incorrect assessment of our situation; the real issue is keeping the average cost of energy consumption low enough so that goods and services made from energy products will be affordable by consumers. Even factory workers need to be able to buy goods made by the economy.
Figure 2. Historical oil, natural gas, and oil production, based on Statistical Review of World Energy, 2017.
The way the cost of energy consumption can be kept low is mostly a “mix” issue. If the mix of energy products is heavily weighted toward low cost energy-related products, such as coal and labor from low wage countries, then the overall cost of energy can be kept low. This is a major reason why the economies of China and India have been able to grow rapidly in recent years.
If underlying costs of production are rising, mix changes cannot be expected to keep the problem hidden indefinitely. A recession is a likely outcome if the average price of energy, even with the mix changes, isn’t kept low enough for consumers. Energy producers, on the other hand, depend on energy prices that are high enough that they can make adequate reinvestment. If they cannot make adequate reinvestment, the whole system will tend to collapse.
A collapse based on prices that are too low for producers will not occur immediately, however. The problem can be hidden for a while by a variety of techniques, including additional debt for producers and lower interest rates for consumers. We seem to be in the period during which the problems of producers can be temporarily hidden. Once this grace period has passed, the economy is in danger of collapsing, with oil not necessarily singled out first.
Following collapse, large amounts oil, coal and natural gas are likely to be left in the ground. Some of it may even cease to be available before the 50% point of the Hubbert curve is reached. Electricity may very well collapse at the same time as fossil fuels.
[5] How Should We Measure Whether an Energy-Producing Device Is Actually Providing a Worthwhile Service to the Economy?
The answer that some energy researchers have come up with is, “We need to compare energy output with energy input” in a calculation called Energy Return on Energy Invested (EROI). This approach looks like a simple ratio of (Energy Output)/(Energy Input), but “the devil is in the details.”
As I looked through the workings of the Limits to Growth model, it occurred to me that the EROI calculation needs to line up with how the economy really operates. If this is the case, we really need a very rapid return of the energy output, relative to the energy input. Also, in the aggregate, the energy output needs to scale up very rapidly. Furthermore, the energy output needs to match the types of energy needed for the devices the economy is currently using. If the output is different (such as electricity instead of fossil fuels), the EROI calculation needs to be adjusted to reflect the expected energy cost and time delay associated with a changeover in devices to match the new type of energy output.
In a footnote, I have attached a list of what I see as requirements that seem to be needed for EROI calculations, based on the LTG model, as well as other considerations.1
Of course, in a setting of many researchers working on a subject and many peer reviewed papers, a concept such as EROI is gradually modified and enhanced by different researchers. For example, EROI is turned around to become the Energy Payback Period. This is used to show prospective buyers of a device how helpful a particular device supposedly is. Researchers who are trying to “push” a type of energy product will find ways to perform the EROI calculation that are as helpful as possible to their cause.
The problem, though, is that if more stringent EROI requirements are put into effect, wind and solar can be expected to do much less well in EROI calculations. They very likely drop below the threshold of being useful to the economy as energy producers. This is especially the case if they are added to the economy in great numbers to try to significantly replace fossil fuels.
Regardless of their value as energy producers, there might still be a reason for building wind and solar. Building them probably does help the economy in the same sense that building unneeded roads and apartment buildings does. In theory, all of these things might someday be somewhat useful. They are helpful now in that they add jobs. Also, the building of wind and solar devices adds “demand,” which helps keep the price of coal in China high enough to encourage additional extraction. But in terms of truly keeping the world economy operating over the long haul, or in terms of scaling up to the quantity of energy supply that is really needed to operate the economy, wind and solar do very little.
[6] How Should Net Energy Be Defined?
Net Energy is defined by EROI researchers as (Energy Output) minus (Energy Input). Unfortunately, as far as I can see, this calculation provides virtually no valid information. Instead, it promotes the belief that the benefit of a device can be defined in terms of (Energy Output) minus (Energy Input). In practice, it is very difficult to measure more than a small fraction of the Energy Inputs needed to produce an Energy Output, while Energy Output does tend to be easily measurable. This imbalance leads to a situation where the calculation of (Energy Output) minus (Energy Input) provides a gross overestimate of how helpful an energy device really is.
If we are dealing with a fish or some other animal, the amount of energy that the animal can expend on gathering food is not very high because it needs to use the vast majority of its energy for other purposes, such as respiration, reproduction, and digestion. In general, a fish can only use about 10% of its energy from food for gathering food. Limits to Growth modeling seems to suggest a similar maximum energy-gathering usage percentage of 10%. In this case, this percentage would apply to the resources needed for capturing, processing, and distributing energy to the world economy.
Perhaps there is a need for a substitute for Net Energy, calculated compared to the budgeted maximum expenditure for the function of “Energy gathering, processing and distribution.” For example, the term Surplus Energy might be used instead, calculated as (10% x Energy Output) minus (Energy Input), where Energy Inputs are subject to suitably wide boundaries. If an energy product has a very favorable evaluation on this basis, it will be inexpensive to produce, making it affordable to buyers. At the same time, the cost of production will be low, leaving plenty of funds with which to pay taxes.
Alternately, Surplus Energy might be calculated in terms of the tax revenue that governments are able to collect, relative to the new energy type. Tax revenue based on fossil fuel production and/or consumption is very signification today. Oil exporting nations often rely primarily on oil-based tax revenue to support their programs. Many countries tax gasoline consumption highly. Another type of fossil fuel tax is a carbon tax. Any replacement for fossil fuels will need to replace the loss of tax revenue associated with fossil fuels, because taxation is the way Surplus Energy is captured for the good of the economy as a whole.
When we consider the tax aspect, we find that any replacement for fossil fuels has three conflicting demands on its pricing:
(a) Prices to the consumer must be low enough to prevent recession.
(b) Prices must be high enough that the producer of the replacement energy supply can earn adequate after-tax revenue to support its operations.
(c) The mark-up between the cost of production and the sales price must be high enough that governments can take a very significant share of gross receipts as tax revenue.
The only way that it is possible to meet these three demands simultaneously is if the unsubsidized cost of energy production is extremely low. Wind and solar clearly come nowhere near being able to meet this very low price threshold; they still rely on subsidies. One of the biggest subsidies is being allowed to “go first” when their energy supply is available. The greater the share of intermittent wind and solar that is added to the electric grid, the more disruptive this subsidy becomes.
Afterword: Is this a criticism of Peak Oil energy researchers?
No. I know many of these researchers quite well. They are hard working individuals who have tried to figure out what is happening in the energy arena with very little funding. Some of them are aware of the collapse issue, but it is not something that they can discuss in the journals they usually write in. The 1972 The Limits to Growth modeling that I mentioned in my last post was ridiculed by a large number of people. It was not possible to believe that the world economy could collapse, certainly not in the near term.
Early researchers were not aware that the physics of energy extraction extends to the economy as a whole, rather than ending at the wellhead. Because of this, they tended to overlook the importance of affordability. Affordability is important because there is a pricing conflict between the low prices needed by buyers of energy products and the high prices needed by producers. This conflict becomes especially apparent as the world approaches energy limits; this conflict was not easily seen in the data reviewed by Hubbert. Once Hubbert missed the affordability issue, his followers tended to go follow the same path.
Researchers needed to start from somewhere. The start that Peak Oil researchers made was as reasonable as any. They were convinced that there was an energy problem, and they wanted to convince others of the problem. But this was difficult to do. When they would develop an approach that they thought would make the energy problem clear to everyone, other researchers would modify it. They would take whatever aspect of the research seemed to be helpful to them and would tweak it to support whatever view they wanted to encourage–often with precisely the opposite intent to what the original researchers had expected.
Thus, the approaches that Peak Oil researchers thought would show that there was a likely energy shortage ahead ended up being used to “prove” that we have an almost unlimited amount of fossil fuel energy available. It seems as though the world has such a strong need for happily-ever-after endings that self-organization pushes research in the direction of showing outcomes people want to see, even if they are untrue.
Footnote:
[1] The following is from an e-mail I sent to some energy researchers concerned about EROI calculations:
A concern I have is that EROI really needs to match up with the concept of Fraction of Capital to Obtaining Non-Renewable Resources (FCONRR) in the Limits to Growth model. If a person looks at how the 2003 World3 model functions, the person can figure out several things:
1. FCONRR is what I would call a calendar year “in and out” function. Forecasting EROI using a model year approach gives artificially favorable indications. FCONRR calculations line up fairly well with many fossil fuel EROI calculations, but not with the usual model approach used for capital devices used to generate electricity.
2. I would describe FCONRR as corresponding to “Point of Use (POU) EROI,” not Wellhead EROI.
3. If a newly built device causes a previously built capital device to be closed down before the end of its useful lifetime (for example, solar output leads to distorted electricity prices, which in turn leads to unprofitable nuclear), this has an adverse impact on FCONRR. Thus, intermittent renewables need to be evaluated on a very broad basis.
4. In the model, FCONRR starts at 5% and gradually increases to 10%. This is equivalent to overall average calendar year POU EROI starting at 20:1 and falling to 10:1. The model shows the world economy growing nicely, when total FCONRR is 5%. It gradually slows, as FCONRR increases to 10%. Once overall FCONRR exceeds 10%, the model shows the world economy contracting.
5. I was struck by the fact that FCONRR equaling 10% corresponds to the ratio that Charlie Hall describes as the share of energy that a fish can afford to use to gather its food. Once a fish starts using more than 10% of its energy for gathering food, it is all downhill from there. The fish cannot live very long, without enough energy to support the rest of it functions. Similarly, an economy cannot last very long, without enough energy to support its other functions.
6. In the model, necessary resources out depend on the population. The higher the population, the more resources out are needed. It is falling resources per capita that causes the system to collapse. This is why FCONRR needs to stay strictly below 10% and energy consumption must be ramped up rapidly. This would suggest that average POU EROI needs to stay strictly above 10:1, to keep the system away from collapse.
7. If there are not enough resources out in total, for a given calendar year, this becomes a huge problem. The way this works out in practice is that if a device uses a lot of upfront capital, these devices can sort of work out OK, if (a) only a few are built each year, (b) they have very high EROI, and (c) they last a long time. Thus, hydro and dams can work. But devices with an EROI close to 10:1 cannot work, especially if they need to be scaled up quickly and need a lot of supporting infrastructure.
8. Clearly, using the FCONRR approach, eliminating a high EROI fuel is as detrimental to the system as adding a low EROI device with a lot of upfront capital spending required. It is the overall output compared to population that is important. The quantity of output is even more important than the EROI ratio.
[“A collapse based on prices that are too low for producers will not occur immediately, however. The problem can be hidden for a while by a variety of techniques, including additional debt for producers and lower interest rates for consumers.”]
If it’s not already the case, it’ll soon rather be as such: ‘regulatory forbearance’ for egregious accounting loss, and outright monetization through special central bank channels; for developed countries member of the ‘Club’ anyway …
I’ve heard ‘they’ will always print rather then let it go down via deflationary spiral.
“They will throw their money in the streets, tossing it out like worthless trash.”-Ezekiel 7:19
https://swh-826d.kxcdn.com/wp-content/uploads/2012/12/Hyperinflation-in-Germany-1923.jpg
Well the ‘Club’ will be able to get away with it for a while because it still possess the most of the knowledge tree, skill tree and accumulated industrial capital tree to make the most out of the remaining fossil energy.
But for the non ‘Club’ members, it’ll probably get a little dicey.
Eventually though, we’ll all be one big unhappy family !
unless they are planning depopulation utilizing the 5g system the financial system may never collapse thanks to QE infinity our future looks like it will go the way of Venezuala
I looked up the section in Ezekiel. Starting at verse 7:10 NIV, it says:
10 “‘See, the day!
See, it comes!
Doom has burst forth,
the rod has budded,
arrogance has blossomed!
11 Violence has arisen,
a rod to punish the wicked.
None of the people will be left,
none of that crowd—
none of their wealth,
nothing of value.
12 The time has come!
The day has arrived!
Let not the buyer rejoice
nor the seller grieve,
for my wrath is on the whole crowd.
13 The seller will not recover
the property that was sold—
as long as both buyer and seller live.
For the vision concerning the whole crowd
will not be reversed.
Because of their sins, not one of them
will preserve their life.
14 “‘They have blown the trumpet,
they have made all things ready,
but no one will go into battle,
for my wrath is on the whole crowd.
15 Outside is the sword;
inside are plague and famine.
Those in the country
will die by the sword;
those in the city
will be devoured by famine and plague.
16 The fugitives who escape
will flee to the mountains.
Like doves of the valleys,
they will all moan,
each for their own sins.
17 Every hand will go limp;
every leg will be wet with urine.
18 They will put on sackcloth
and be clothed with terror.
Every face will be covered with shame,
and every head will be shaved.
19 “‘They will throw their silver into the streets,
and their gold will be treated as a thing unclean.
Their silver and gold
will not be able to deliver them
in the day of the Lord’s wrath.
It will not satisfy their hunger
or fill their stomachs,
for it has caused them to stumble into sin.
Perhaps Ezekiel knew someone who had been through collapse before. Reminds me of the Revelation 18: 11-13, talking about the collapse of Babylon:
11 “The merchants of the earth will weep and mourn over her because no one buys their cargoes anymore— 12 cargoes of gold, silver, precious stones and pearls; fine linen, purple, silk and scarlet cloth; every sort of citron wood, and articles of every kind made of ivory, costly wood, bronze, iron and marble; 13 cargoes of cinnamon and spice, of incense, myrrh and frankincense, of wine and olive oil, of fine flour and wheat; cattle and sheep; horses and carriages; and human beings sold as slaves.
Revelation 18:19 says:
“‘Woe! Woe to you, great city,
where all who had ships on the sea
became rich through her wealth!
In one hour she has been brought to ruin!’
The collapse must have happened quickly!
ive always wondered are the revelations about past events or prophecy about future events ?
Some of both. Collapses are recurrent events. They happened before; expect them to happen again. Revelation is written in very veiled language, for fear of persecution, I was told.
Gail, really good rendition of post collapse from the Bible. Collapse has been for a long time a recurring theme, so I’m sure that was written from experience. “The merchants of the earth will weep and mourn over her because no one buys their cargoes anymore…” Yeah, and the consumer will mourn too because they no longer have a currency that will pay for what the merchant is offering. And in today’s world society will mourn because cheap energy is no longer bountiful to provide the surplus energy to do all the things we need to do.
Now we have a new religion. One that tells us what we need to be concerned about is climate change. Too much carbon in the atmosphere. We must repent and support those selling “green devices.”
We might be better off listening to those in the Bible telling us to be beware of collapse. They know what really happens. Now we have people with models that they have created, telling us what will happen. Also telling us that we have the power to change things, if we just change our lives to live according to the principles handed down by these modelers.
What if they really don’t know what they are doing? What if EROI theory points the way to the wrong solutions? What if prices fall rather than rise, as we approach limits, leaving much of the fuel in the ground. The modelers missed these details. The details they put in make the politicians happy, because it tells of their huge power.
Thanks to FW, it’s become crystal clear to me that the greatest obstacle we face is the renewable-energy-is-the-solution one. And I’m sure no one will agree with me that there is nothing wrong with the world that couldn’t be fixed by working from the inside out. There are no external solutions without that.
lol
even over on Resilience, articles saying we’re screwed are starting to appear
all is definitely lost now
Bad Bronze Age Fiction.
Largely it was novelization of ancient oral history—and not very accurate oral history at that. With some great themes but sketchy characterization. Comparable in many ways to today’s fake news.
Gore Vidal did a bit of lampooning of it in Live from Golgotha.
https://images.gr-assets.com/books/1348247207l/1191362.jpg
Some juicy stories, though.
I tend to view The Bible as an old, old dung heap, with some jewels buried in it.
The ELCA Lutheran Church I belong to very much endorses looking at the Bible as a document that is far from “dictation by God.” It is a collection of stories and myths passed down through the centuries, some of which have historical basis. (Some were never intended to be literally believed.) We need to look at the myths in comparison to the myths of other cultures. We also need to look at what archeological records say. We can learn from these documents, even if they are clearly not literally true.
There’s an ancient Chinese text to much the same effect, from a time of prolonged famine:
‘What use now are our gold and jewels, and fine silks and jades? We can’t eat them….’
https://www.moonofalabama.org/images8/venelectioncomp.jpg
Obviously, propaganda!
Well, a whopping great 37% of all registered UK voters voted in favor of Brexit—which is more have voted for the winning party in any UK general election since before WW1, but the Remainers still argue it isn’t enough. Go figure!
Billionaire investor Howard Marks: America should be worried about ‘rising tide of anti-capitalism’
https://www.cnbc.com/2019/01/31/howard-marks-is-worried-about-the-rising-tide-of-anti-capitalism.html?__source=facebook%7Cmain
“The cost of capitalism is that there are some people who succeed a lot and some people who don’t succeed.”
The cost of capitalism is that there are some people who keep their heads and some who don’t..FTFY
Reblogged this on Por mis finanzas.
Thanks!
Hello folks, I hope this is not misplaced, but I have to disturbe you. This has to come out. A great warning to humanity:
The 5G-system will drive humanity to extinction soon after it’s implemented in the summer this year. Because it will kill our insects, the base of the food chain for us humans. And our pollinators. Google the internet for more information on this topic. There are a lot of studies about the dangers of 5G.
Here are some of the most important articles:
It’s official – cell phones are killing bees (Inhabitat 05/21/2011)
Electromagnetic radiation from power lines and phone masts poses ‘credible’ threat to wildlife, report finds (The Telegraph 18.5.2018. This newspaper is an ordinary, big newspaper)
http://larslitterara.blogg.se/2019/january/very-urgent-message-to-humanity-about-our-impending-doom-2.html
That’s interesting. Neonicotinoid pesticides seem to be harming bees as well and of course Trump, being the political embodiment of Odum’s ‘maximum power principle’, has reversed the ban on them:
https://www.theguardian.com/environment/2018/aug/04/trump-administration-lifts-ban-on-pesticides-linked-to-declining-bee-numbers
I have been reading about this for a while and this quote is interesting:
“If Neil Armstrong had brought a cell phone to the moon in 1969, it would have appeared from earth to be the brightest object in the universe in the microwave spectrum. In the daytime, the sun would have been brighter, but at night, the cell phone would have outshone every star.”
https://www.cellphonetaskforce.org/cell-phones-questions-and-answers-2/
There has been a catastrophic decline in insect numbers already, and I would guess that 4G is already implicated.
http://www.thesleuthjournal.com/earths-ecosystems-are-on-a-collision-course-with-extinction-insect-populations-have-declined-by-up-to-98-percent-in-some-areas-of-the-world/
Maybe nature will succumb before the idiots withs guns and/or printing presses do?
According to a link I found,
“Some have compared the coming 5G network to being locked in a low level microwave oven 24 hours a day.”
What could possibly go wrong?
We were taught as children that Homo Sap, is so fantastically successful and admirable because of ‘the ability to adapt to almost any environment’.
Whereas it’s more accurate to say that Mankind is quite brilliant at adapting almost any environment into one that is poisoned, degraded and fatally depleted.
http://endoftheamericandream.com/archives/why-are-so-many-concerned-about-the-potential-health-dangers-of-the-5g-cell-phone-network-that-is-going-up-nationwide
We can’t expect to extinct insects before humans? Even if we kill 99% of them they should recover quickly with humans gone.
“Greg Ip of the Wall Street Journal thinks the Fed is signaling not a pause, but a complete halt in interest rate rises. And he has a theory about why the Fed has suddenly decided to end monetary tightening:
“”In the last six weeks Mr. Powell does seem to have shifted his views on inflation risk. He seems to have concluded that the lowest unemployment in 50 years isn’t going to push inflation back above 2% anytime soon, and that would be a prerequisite to tightening again.
“”If real rates above 0.5% are a threat to both economic growth and 2% inflation, then that suggests the economy is fundamentally more fragile than in the past.
“And he goes on to argue that the economic fragility that renders higher interest rates unsustainable is not confined to the U.S., but is a global phenomenon. Something has fundamentally changed since the 2008 financial crisis.”
https://www.forbes.com/sites/francescoppola/2019/01/31/what-is-the-real-reason-for-the-feds-sudden-decision-to-stop-raising-interest-rates/#6582a28047ba
“New research now shows that when central banks push rates below zero, it can have bad effects on the economy.
“”[…] we showed that a negative policy rate was at best irrelevant, but could potentially be contractionary due to a negative effect on bank profits,” states the paper titled: “Negative Nominal Interest Rates and the Bank Lending Channel,” by researchers at Harvard University, Brown University, and Norges Bank. The authors include Lawrence Summers, former U.S. Secretary of the Treasury and one-time president of Harvard.”
https://www.forbes.com/sites/simonconstable/2019/01/31/the-unintended-consequences-of-central-bank-policies-part-2-of-2/#6fd1b86a6153
Just having a quick look around the world at interest rates, and it doesn’t look like many major central banks are in the mood for tightening in 2019:
The ECB’s rate on bank overnight deposits, which is currently its primary interest rate tool, remains at -0.4% (The main refinancing rate, which determines the cost of credit in the economy, remained unchanged at 0%).
The Bank of England has kept their rate on hold at 0.75% since August 2018 and is unlikely to raise that with Brexit piling pressure on an already weak economy. It could even cut them.
The Bank of Canada is holding its benchmark interest rate unchanged at 1.75%, as their economy has contracted twice in three months and is flirting with recession.
As per the OP, the Fed has paused and perhaps even halted interest rate rises at 2.5%.
The Bank of Japan is holding their short-term interest rate at minus 0.1% and warns of downside risks.
Factory activity is shrinking across much of Asia… ““The weak Purchasing Managers Index (PMI) readings reinforce expectations that central banks in Asia will put any further interest rate hikes on hold this year.”
https://www.straitstimes.com/business/economy/factory-activity-shrinks-across-asia-as-cooling-china-threatens-global-growth
Oh, I forgot China:
“The rapid deterioration in China’s economic data could spur the central bank to cut its benchmark interest rate as soon as Friday, according to Barclays Plc economists.”
https://www.scmp.com/economy/china-economy/article/2184597/china-may-cut-benchmark-interest-rate-lunar-new-year-says
Sounds good!
This kind of research helps keep zero as the bottom interest rate.
Negative interest rates have a bad influence simply because they encourage “investors” to throw their money at investments, even if they are lousy ones, rather than let the banks and inflation cannibalize their savings.
Funny how careful you are with money when you have to pay high interest rates if you borrow it, or if there are a lot of competing high yielding solid investments.
It seems to me that the FED is starting to realize that goosing interest rates is not going to attract as much foreign capital any longer as foreigners come to grips with the specter of inevitable monetization /inflation, while on the other hand, the costs of servicing the increased debt, just from higher interest rates alone, is a sure thing.
If maintaining the stock market so rigorously at the current levels for the economy or the CBs for the treasury to skim a few extra dollars of capital gains is so vital, then there is indeed very little room left to maneuver.
IMHO, the FED is like the poor antelope that is trapped by the drinking pool’s edge by two predators. If it leaves the water, then it will have to face a pack of ravenous wild dogs. If it stays in the water, then it’s the hungry crocs. It is no longer a deer in the headlights. It’s an antelope awaiting its inevitable fate.
PS: I’d stay in the water. Crocs usually drown their victims first. Wild dogs literally eat their prey alive.
Oh, and the argument that well the FED can simply service any increased debt by inflation merely accelerates the collpase.
Inflation hasn’t worked well for quite a while. Not enough debt growth getting back into workers wages. QE helped for a while, but once that let up, inflation started turning to deflation.
And a deer in the headlights doesn’t know what is about to happen, whereas the antelope at the water’s edge does.
Martin Armstrong has a different take on it. He also believes the Fed will later on raise interest rates and that the American stock market will go up in tandem.
“Italy falls into recession”
https://www.armstrongeconomics.com/international-news/italy/italy-falls-into-recession/
I suspect that the employment numbers are heavily weighted toward low-income jobs that are not capable of generating enough disposable income to drive inflation.
“Mianzi can refer to self-esteem, reputation, and social status. It dates back to the fourth century BC, but it is just as relevant today. Today, mianzi is a currency that can be gained and lost through behaviour and place in society, and it governs all aspects of life from business interactions to love lives…
“Instead of having goods delivered to their homes, consumers in China gain mianzi by having shopping delivered to their offices, so their colleagues can see. “Receiving the purchase at one’s office address may enhance one’s face and thus result in a positive emotional response, which compulsive buyers crave and strive to achieve,” the authors write.
“In a study in the USA, compulsive buyers reported hiding their habit by shopping online in the privacy of their own homes because they were ashamed of it. But in China, people were more likely to shop online in public, hoping people would look at their screens and see they were shopping…
“As a result, over the past few years household debt has soared. “We have discovered that there are many people in China, like anywhere else in the world, that will over-consume relative to their income,” Pettis adds.
“This has implications for China’s economy as a whole. China is in $34 trillion of public and private debt, according to Bloomberg. In 2017, China’s borrowing rose 17 per cent to 266 per cent of gross domestic product.”
https://www.wired.co.uk/article/china-debt-crisis-mianzi
The most primitive conception of the self: ‘Look how fat my wives and pigs are!’, in essence….
++++++++++
Debt, Not Trade War, Is China’s Biggest Problem
Officially China’s debt is a small number: 47.60%. Unofficially, it’s hard to figure it out. For a good reason: the government is both the lender and the borrower. One branch of the government lends money to another branch of government. Government-owned banks, for instance, lend money to State Owned Enterprises (SOEs) and Town Village Enterprises (TVEs). But there are some unofficial estimates. Like one from the Institute of International Finance (IIF) last week, which place China’s debt to GDP at 300%!
https://www.forbes.com/sites/panosmourdoukoutas/2018/11/24/debt-not-trade-war-is-chinas-biggest-problem/#2809abd54c4d
China central bank chief warns of ‘Minsky moment’
https://www.ft.com/content/4bcb14c8-b4d2-11e7-a398-73d59db9e399
I think that this is part of the problem:
“Government-owned banks lend money directly to government owned corporations. They usually function as welfare agencies.”
This reminds me of California, its green policies, and PG&E. It is hard for this to end well.
“The danger occurs because lower oil demand growth [from a weakening economy] in China comes just when independent refining capacity there is rising. The capacity growth has been financed primarily by debt, most likely supplied by China’s alternative lenders.
“As demand slows, these refiners will turn to international markets, dumping products in Singapore, the Americas, or Europe to earn hard cash. In doing so, they could plunge the global refining industry into a serious recession and drive crude prices down sharply.”
https://oilprice.com/Energy/Oil-Prices/The-Next-Big-Threat-For-Oil-Comes-From-China.html
US refining capacity has been operating close to maximum output. If the world economy were growing, it might have made sense to add more refining capacity.
Besides the world demand slowing, there is the issue of everyone else besides China adding capacity. According to this article from October 2018: https://www.rt.com/business/442516-china-global-refining-boom/
Wow! Where is all of that oil going to come from? Crude oil demand comes from refiners who have loans to pay off. Demand for oil products comes indirectly from workers buying goods and services. The price of crude oil may rise, but the amount of products produced with this crude oil will crash prices of finished products. I would expect gasoline prices to be especially low.
“Fears of a Eurozone slowdown have mounted after the economy stagnated at the end of 2018, growing just 0.2 per cent between the third and fourth quarters.”
https://www.ft.com/content/4701031a-253f-11e9-b329-c7e6ceb5ffdf
Italy now officially in recession:
“The Italian economy shrank by 0.2% during the quarter for the three months to December of 2018, following a 0.1% contraction in the previous period… Just to be clear; a recession is defined by economists as gross domestic product (GDP) falling for two consecutive quarters…
“To be blunt, Italy could not be bailed out. It is so large; a crisis would cripple the Eurozone.”
https://www.forbes.com/sites/stephenpope/2019/01/31/italy-recedes-into-recession-rome-rejects-reality/#13ddf6fa53e2
The reason that Italy cannot be bailed out:
“The EU Commission knows that with a debt to GDP ratio of 131.8%, Italy has the second largest debt burden in relative terms…second only to Greece. However, the Italian economy is eight times as large as that of Greece and given the Eurozone is still haunted by the memory of the debt crisis that required bailouts for several countries it has insisted that the Italian government rein back on its spending plans.”
If Italy cuts back on its debt growth, Italy is guaranteed to have slowing growth/rising shrinkage going forward.
Thanks for your continuing effort to publish quality articles, Gail. I have been a reader of your blog since 2011 although I have to admit that I haven’t been following this blog as closely over the past 2 years as I used to. That hiatus, however, opened my eyes to realise even more how everything we have been taking for granted in the Post-WW2 era is dissipating in front of our eyes without the expected public outcry to happen. The political left and right are on the rise, the middle class a dying breed and over here in Europe, especially in Germany, politicians intend to restrict car ownership via “green” legislation. Now the baby boomers are retiring and will put the
final nail in the coffin: terrible demographic and economic outlook in all ageing western societies and a dwindling energy surplus are going to vastly reduce the standard of living. We all are witnessing collapse in progress.
I am afraid you are right.
The young people, especially, are upset about things, though. They are especially hurt by the lack of jobs that pay well and the huge educational expense that often doesn’t give rise to the high-paying jobs that they expected. It is hard to know who to cry out against. People can’t imagine that our problem can be an energy problem, if the prices aren’t high.
More bad news for Aussie property prices:
House prices keep falling, ahead of federal election and banking inquiry report
https://www.abc.net.au/radionational/image/10468472-3×2-700×467.jpg
Australian property prices have fallen at an even faster rate in the new year, dropping an average of 1 per cent last month nationally.
Key points:
Sydney (-9.7pc) and Melbourne (-8.3pc) property markets fell the most in the last year
Hobart prices (+7.4pc) had the biggest price rise in 2018
Darwin’s median price was lowest ($412,940), while Sydney was the priciest ($795,509)
Since peaking in October 2017, the nation’s property prices have fallen 6.1 per cent, with the median price now sitting at $528,553, according to property analyst CoreLogic’s most recent figures.
The current downturn is now worse than the peak-to-trough decline of the global financial crisis (GFC) a decade ago — during which national prices fell about 5 per cent.
It’s not all bad….
Banks are tightening up their loan requirements in response to tougher new regulations but also after the Banking Royal Commission, which has put a spotlight on the sale of unsuitable products to customers and on unsustainable lending.
According to news reports, a bank recently went so far as to look through a potential borrower’s bank statements and asked why he was spending so much on kebabs.
It will put further downward pressure on house prices, particularly in Sydney and Melbourne where many buyers load up with as much debt as possible to enable them to compete with other homebuyers.
On top of that, regulators have placed a brake on the amount of money banks can lend for investment properties.
Adding to pressure on property investors is the possibility of a Federal Labor government taking power next year. Labor’s pledge to wind back the favourable tax treatment of investment property will deal another blow to the housing sector.
While consumers will be more cautious, the average household will save about $10 a week from lower petrol prices and that will provide some support to household spending, says Shane Oliver.
There is also the prospect of large income tax cuts this year. At its mid-year economic update in late December, the Government announced the deficit was shrinking and the 2019-20 year was on track for the first annual surplus in a decade..
While the Government insists the return to surplus is due to its good economic management, in reality it’s due to higher commodity prices, infrastructure spending and higher company tax collections
For his part, McGuinn is optimistic about the property market and economy.
“At some stage, probably in the next month, in the next six months, things will bottom. And then, people will say, ‘S***, the whole world didn’t blow up. Property prices doesn’t go back down to pre-2000 numbers. It did drop back a bit, but they’re still better than they were in 2014. Now is a good time to buy — while the market’s bottomed’,” he says
Sure it will…https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12188955
Jeez, that was surreal. That Shane Oliver, he’s strictly a pay to say character. Wouldn’t call him an economist. Grifter, more like it.
“Home prices in Hong Kong fell 2.4 per cent in December, practically wiping out virtually all of last year’s gains, according to government data released on Thursday.
“Last month’s decline means house prices have slipped 9.2 per cent since they reached a peak in July. Some small flats have lost up to 20 per cent of their value because of falling property prices, causing the negative equity trend to reappear.”
https://www.scmp.com/business/banking-finance/article/2184529/negative-equity-rears-head-again-262-homeowners-see
No matter what the cause, once the total amount of oil being produced begins to decline, the economic output will begin to shrink. That is because oil products are critical for moving goods and people. A shrinking global economy will soon collapse, because of the level of debt throughout the banking and business sectors. It nearly happened in 2008, from a human caused crisis of a relatively small amount of bad housing debts. An economic contraction forced by less energy available to do work will be far more problematic. Nothing like it has ever happened. The governments will come up with creative temporary solutions, but nobody can change physics. It takes energy to do the work of moving goods and people. Less transportation = shrinking economy. It’s not rocket science.
The Economist is now reporting that international trade is becoming more regional. For example, Asian countries are sourcing parts from other places in Asia. This is part of what happens.
I think China’s refusal to take US trash of certain kinds was a big step away from unrestricted international trade. When it would buy US trash to recycle/burn, then ships that delivered goods to the US had a different product to fill their ships with on the return voyage. Most of this recycling was subsidized. It was these subsidies that were paying for the oil to ship this trash back in otherwise empty ships. Once China decided that there was no profit for them in this arrangement, and cut decided to stop accepting the trash (1/1/2018), ships would need to go back empty. This indirectly raised needed shipping rates the other direction. It suddenly didn’t make sense to ship goods as far. Either that, or shipping companies would go out of business.
I spent a couple of weeks in Melbourne a while back. A R&D company would order parts to be built from China. These parts were not mass manufactured so I found it interestingly that there were no Aussie suppliers.
“Following collapse, large amounts oil, coal and natural gas are likely to be left in the ground”
What about In a socialist and smaller world e.g when there is a billion plp.
Same result. I don’t think it will be possible to keep up all of the infrastructure that needs to be maintained, to keep the system operating. Most electricity costs related to transmission and distribution. A large part of transport costs relate to maintaining and rebuilding roads. Natural forces (freezing and thawing, windstorms, hurricanes) continue to happen, and the amount of damage to the system from these natural events is as large as ever, even if the population is lower. It will take the same absolute amount of energy to repair them, and disrupt the workforce from their regular occupations to keep the systems up.
There will be a problem of how to make the remaining people occupy more compacts areas, to reduce the very high level of transport costs. But this cannot really happen, because farmers will be needed in agricultural lands even more than ever, and mineral resources will remain as widely scattered as today. If we have already mined the easy to mine coal, this will not change. Also, if water tables have dropped to very low levels, this will not change for hundreds of thousands of years.
Schools will be needs for all of the advanced technology we have today. At the same time, people will need to learn how to farm and do other tasks with much less energy inputs (irrigation, fertilizer, insecticides, soil amendments transported from a distance). The need to know more, rather than less, will put pressure on school systems.
“Schools will be needs for all of the advanced technology we have today.”
Is the idea to teach them how to fix things instead of tossing them out? Just not sure any of that stuff is fixable, but who knows with the right training, maybe. People use to be able to pull blown vacuum tubes out of TV’s and take them to a table in a grocery store, plug it in to test it, then get a replacement in the cabinet below the table. But that was simpler tech. Now the use of complex circuitry makes it much more difficult. Would need an army of electrical engineers/technicians armed with transistors, chips, and micro tools to reinsert new circuitry. Sounds like a difficult task with the spoiled masses.
I don’t think you can go back to old technology. You can keep trying to improve, perhaps stay the same, or drop to a very low level; that is, basically do without. Since people don’t want to do without, you pretty much have to try keep on doing the same thing, or perhaps improve a bit. So any new manufacturing needs to use the current patterns or better. Repairs as well.
When we lose electricity and energy supply in general, there is not much need for repair: there will be surpluses of unusable things. As we move to more and more energy efficient devices, the need for repair is irrelevant, too, as you can not function with the old devices.
Our problem are not devices, but stable supply of quality energy.
devices or energy—both are useless unless used in conjunction with each other
“The world’s GDP would be zero”.
It wasn’t zero in 1000 or 1900.
I included human labor in my list. I also indirectly included labor from animals. These are energy inputs. So is burning biomass.
Humans (and pre-humans) have been supplementing their own feeble energy supply for over one million years. This is what makes humans different from other animals. It allows humans to have smaller teeth and jaws, since we can cook part of our food. It allows a bigger brain. Without supplemental energy, humans are dead.
The reason that humans tend to have such a bad impact on other species is because, without fossil fuels, humans tend to overuse renewable resources. In fact, even in hunter-gatherer days, humans were burning down whole forests so that their food supply would be better. It is as much the renewable energy that is a problem as the non-renewable energy.
Exactly, one had to look in the rear view mirror why the various waves of peoplez relocation had taken place in several waves even prior ~1500BC, not mentioning the “written about/recorded ones” since the age of Antiquity. No it was not only about leaving the ever changing climate, the element of humanoids (over-)forcing on local resources was also present, probably being the key driving point anyway..
lou you might like this.. she is a financial person.
jack
>
https://medium.com/insurge-intelligence/venezuelas-collapse-is-a-window-into-how-the-oil-age-will-unravel-f80aadff7786?fbclid=IwAR0b_G3CaVFIqj06QKxB7GnZ2gdLHVRIljGkXXaH4GWFoW9QnhzHDy7g2nE
Gail is referenced in this article! Woot Woot!
Where?
This paragraph, at the very end is a link to your article (4/19/18)
“This creates a counter-intuitive dynamic — even as production soars, the quality of the energy we are producing declines, its costs are higher, industry profits are squeezed, and the surplus available to sustain continued economic growth dwindles. As the surplus energy available to sustain economic growth is squeezed, in real terms the biophysical capacity of the economy to continue buying the very oil being produced reduces. Economic recession (partly induced by the previous era of oil price spikes) interacts with the lack of affordability of oil, leading the market price to collapse.”
https://ourfiniteworld.com/2018/04/19/why-oil-prices-cant-rise-very-high-for-very-long/
Thanks! You can tell that I didn’t really read the article. Maybe my low-price story is starting to sink in a bit.
N. Ahmed ends his article in this way: «Meanwhile, the environmental consequences of fossil fuel dependency are making investors re-think the financial viability of these industries, creating a growing risk that they become stranded assets. In this emerging future, the trajectory of endless economic growth as we know it cannot continue. Either way, the warnings signs are unmistakeable. As we shift into a post-carbon era, we will have to adapt new economic thinking, and restructure our ways of life from the ground up.
Right now the Venezuelan people find themselves locked into a vicious cycle of ill-conceived human systems collapsing into violent in-fighting, in the face of the earth system crisis erupting beneath them. It is not yet too late for the rest of the world to learn a lesson. We can either be dragged into a world after oil kicking and screaming, or we can roll up our sleeves and walk there in a manner of our own choosing. It really is up to us. Venezuela should function as a warning sign as to what can happen when we bury our heads in the (oil) sands.»
What or who is this «we» he talkes about? The «international Community»? It does’t exist as an agency.
Regardless of who “we” is, I don’t think that there is any “we” that really has a choice on this. The economy collapses, regardless of what we do. Perhaps one part of the world goes down a little less rapidly than another. Perhaps that can be influenced a bit. But our role is pretty limited.
Quite true, there is no ‘we’ with any real agency in all of this: the complexity is over-whelming.
Only small, personal, adaptations are possible for a very few, and no great reliance can be placed on them, as property rights, the right to direct one’s own labour, etc, dissolve in eras of crisis and decline.
I’m still planting apple trees, though, as it’s very satisfying.
Copy/pasted from your linked article, BD:
“The vast bulk of Venezuela’s oil is not conventional crude, but unconventional “heavy oil”, a highly viscous liquid that requires unconventional techniques to extract and flow, often with heat from steam, and/or mixing it with lighter forms of crude in the refining process. Heavy oil thus has a higher cost of extraction than normal crude, and a lower market price due to the refining difficulties. In theory, heavy oil can be produced at below break-even prices to a profit, but greater investment is still needed to get to that point.”
Most know the story of Exxon investing billions to extract and refine their heavy oil. I don’t know the details of Exxon’s deal with Venezuela, but Chavez ran that company off with the idea the country would be financially better off without foreign companies profiting, however now the country has recently put together a 5 billion dollar deal with Russia. So apparently foreign help is needed to work their heavy oil.
I think what we are seeing worldwide is non-conventional oil is not anywhere near the same as conventional oil. Fracking is a losing prospect held up by good sales pitches to dupe investors, Canadian tar sands is a real messy business that doesn’t make money like conventional oil and Venezuela is having their problems with their heavy oil as well.
The conventional oil age production has flatlined since 05, and what keeps the total used going up so far is non-conventional, but from the problems at hand we can easily see numerous struggles occurring, cracks in the dam showing up as people revolt in different parts of the world. Tensions are rising. The oil age is still going but the signs are there it’s not the same, we’ve entered a latter stage.
Right!
Well, Nafeez has been evolving indeed, that’s to his credit.
Now he even discusses the affordability angle of the conundrum. Also the point he made about legacy errors cascading from past policy decisions across long series of different gov tribes is also good, i.e. path dependency modeling and sequencing essentially (with predictive power)..
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I think there is a political value to oil due to its inherit physical properties that will outweigh any assigned monetary value and those properties will not change in the next thousand (million?) years. Placate your citizens with cheap fuel, control distribution for political influence or supply your military. Either way the oil is coming out of the ground. Those willing to invest in it will change to those who have little interest in making money off of it.
I think you have the fundamentals of oil usage a bit confused
The ancient Egyptians built the pyramids most likely without a profit motive nor fair wages. Would you say their usage of stone confused? Did it stop them from building the most durable structure known to mankind?
Eygpt is a country that delivers sufficient energy year round to supply food in plenty—apart from an occasional famine year due to low water
so an industrial tomb construction system developed, where you ‘bought’ the services of tomb builders at whatever level you could afford, according to your status in life
currency was food (direct energy)
a (food surplus) rich man paid workers in grain which funnelled itself down the labour tiers much as we get a wage, then divert that wage to pay for food rent clothes and so on (and hopefully save a bit for retirement)
Thus a wealthy man could buy many years of energy for his ultimate tomb
The pharoah, being wealthiest of all, could afford the biggest tomb employing thousands of workers (who he had to pay in grain) thus they might be employed for 20 years. He was just diverting muscle power into pointless activity. Though it meant something to them, obviously.
Their retirement was a splendid pyramid or a lesser hole in the ground—that was their life focus…..death.
my point being that it was a ‘system’ that created employment that was seen to be ‘useful’ but which was ultimately idiotic and pointless. (tombs were robbed anyway) The cult of the dead was a form of mass hysteria (as we did later with monasteries and cathedrals, fed with lies so our labour would be seen to be productive in some way
We do the same thing now
the only really essential workers are the food producers—the rest of us do ‘make work’ jobs that exist only because the food producers supply enough to eat for everybody.
The overall point being, that without the currency of energy being in surplus (oil or grain) you cannot motivate workers or military to do anything at all
I got to wondering if whether having people working on pyramids also served a function of having a group of people whose efforts could suddenly be diverted in a different direction, if needed. Sort of a spinning reserve, from an electricity point of view. Thus, if the country were invaded, or needed help fighting some natural disaster, these people could be taken off the pyramid building for a while.
Building cathedrals would work the same way.
Sort of like the National Guard. Ready to be called up when needed.
Interesting. If you somehow combine Modern Monetary Theory and “deficits don’t matter”, the IMF call for government issued digital currency and a growing consensus for massive infrastructure upgrades (roads, bridges, power, 5G) we could have that spinning reserve.
We certainly have a lot of people working on things today that really aren’t necessary. And lots of promises based on these unnecessary things.
Interesting point you brought up here Gail, as you probably knew while writing it, most of the big cathedrals have been multi decade and often multi centuries building projects. So “the family enterprises” kept the know-how, employment, and expertise ready for another clients and projects through time.
rock bashing is the best military fitness training, especially if you’re used to it in desert heat
building skills are also retained this way. even with written records, trade secrets are often not recorded, and must be learned from a mentor. in Japan, they still burn down a wooden temple on purpose after some period, to rebuild it. the object is to train the next generations how to build such temples. a side aspect is they get a building with that “new temple” look and smell.
Interesting!
We are running into a problem with nuclear energy in the West. There are not enough new units being built to keep up a trained supply of engineers etc. Young people looking into this field are likely to think it is a dead end.
The constant production of the quality food in Egypt was possible thanks to the floods with the mineral rich deposits. That way the population was kept healthy and, consequantly, the productivity relatively constant by the gravitational force of the river.
In todays agriculture (or the agriculture that does not use floods with essential minerals as its way of constant revival of the soil), we are more and more missing trace minerals that are not returned to the soil.
The fact that the ageing of the populations has been here for decades (https://econimica.blogspot.com/2019/01/depopulation-and-monetizationlike-peas.html) is no wonder, if the quality of the food already started to decline in the past.
We have already passed certain important limits, including the limits of the production of the quality food. And when we try to compensate for these losses of the important minerals in todays food production, we need to invest more energy into the food production (https://www.sciencedirect.com/science/article/pii/S0889157516302113)
when I wrote that—I realised I should have put ‘was’ instead of ‘is’
ancient Eygpt had the spare muscle power to build stuff, now they don’t. Too many people taking too much from the land
Now the Aswan dam controls the floods and delivers electricity, but the dam itself silts up and retains all the nutrients that used to be a free gift from the river.
also cutting/hauling rocks around in desert heat was the best battle training, hence their armies were all powerful as the need arose.
Tomb building was a job creation scheme, though they didn’t see it that way of course
Overcome your orthodox view of Egyptology!
Some argue the Sphinx and Great Pyramids may be 12,500 years old. Others suggest it is possibly as much as 800,000 years old:
http://mgu.bg/geoarchmin/naterials/64Manichev.pdf
If we can’t even get the dates on the pyramids right, it makes me wonder what we really know about ourselves and our past as a species (and thus brings into question our future – i.e. if we’re 800,000+ years old, I’m not so worried about collapse and post-BAU, for the species anyway…)
the laws of physics define the amount of energy input needed to move a certain weight–petrol or muscle–you can work it out
the weight of the gt pyramid is known so the effort needed to construct it can be estimated, thus the amount of human muscle
its age is irrelevant, though weathering would preclude 1m years
i wasn’t dealing in arguments or suggestions, just the energy input output needed
It’s age is absolutely relevant, at least to the argument I was trying to make.
We base a large part of the narrative of our existence on assuming we know how old a giant pile of (perfectly constructed) rocks in the desert are. If we are so wrong about it’s age, perhaps we are just as wrong about our origins / age as a species.
If we are wrong about all those things, how can we have any idea what post-BAU will be like for humanity? Lots of people come on here talking about human extinction, but in the off chance we were around 800,000 years ago to build a massive stone temple perfectly aligned to the stars (and true north), and perhaps even did it without fossil fuels, then my hopes for the future of humanity just got a lot higher!
lol–c’mon now—I took the trouble to get 1 minute into that video—got to the part where Charlton (my cold dead hand) Heston starts on about human footprints alongside dinosaur footprints
I was out of there.
I’d already booked to visit the nutcase who built the ark, with people riding on dinosaurs like donkeys. I imagine Heston has got the job of tour guide there now he doesn’t do Moses any more
I don’t wish to be dismissive of your beliefs (we’re all entitled to those) but I think you may be in the wrong forum
Sadly, the first part of that film is the worst in that it was so easily debunked:
https://rationalwiki.org/wiki/Paluxy_River_tracks
Some of the other items touched on are interesting though, in particular, the Piri Reis map.
RationalWiki’s claims that the Piri Reis map are bullsh*t do little to debunk the theory (and leave me questioning RationalWiki’s agenda – to debunk actual fake science, or to reinforce all orthodox/mainstream science as religious dogma):
+++++
The Piri Reis map, which shows Antarctica free of ice, is definitely not accurate in its portrayal of the land mass beneath the Antarctic ice (as the show claimed it was). The area shown (and that its so-called “expert” Graham Hancock claims to be Antarctica) could simply be a fanciful addition of a terra incognita, which was a common thing back in those days.
+++++
If you have Netflix, I recommend checking out the documentary called “The Pyramid Code” (https://www.netflix.com/ca/title/70212989), as it too challenges the current mainstream view of Egyptology.
Could be all fluff I suppose, but my experience in life has taught me that few people actually ever go out and learn something from the source – they just read the basic concepts in a book (e.g. reading economics textbooks that summarize Marx, Keynes, etc. rather than going to read the actual works of those individuals and the sources they were inspired by), assume what they read are universal truths, and go off to extrapolate their own views based on a flawed understanding of the source.
Any questioning of said universal truths (which, incidentally, also undermines whatever views they’ve extrapolated from those universal truths) is akin to heresy, and typically results in ad hominem attacks, ignoring / dismissals, etc. It’s as if one is crucified simply for suggesting something that doesn’t fit in everyone’s oh-so-certain view of the world and who we are as a species…
Perhaps rather than trashing something because it doesn’t agree with what we believe to be the truth, we should all consider looking more closely at things that challenge our views so we can learn/grow. Just a thought.
while we can be sure that ancient peoples possessed skills that we can’t imagine them having. it doesn’t mean that those skills somehow bypassed the laws of physics. Up close, the workmanship is awesome, to say the least
stone was cut, first by bashing it with harder stone, later by metals, and splitting it with dried wood forced to expand by soaking it in water
Physical laws make it so that if you want to break something you must use an object/force harder than it, or use heat to change it (eg melt) it, or lever it. There is no other way
If you use heat, then fuels have to be used. Trees burn, rocks and stable metals don’t. Metal implements have to be made and kept hard.
If that video had a serious viable point to make, it was negated by starting out with proven fantasies told by a proven idiot. Why he felt it necessary to do that is beyond me. I can only assume he’s started to believe his screen image.
When stone is cut, and exposed, the dates of exposure can be fixed by established scientific methods, carbon dating etc.
The Piri Reis map is most likely explained by the concept of ”the great southern continent” search. Mapmakers just filled one in there. Erasthones had figured out the Earth’s circumference 2000 years earlier, when most people thought it was flat. (some still do)
” In general, a fish can only use about 10% of its energy from food for gathering food.”
I have told this today to my friend, who is a biologist. He said, that fish (reptiles) are different from other spiecies in that they grow until death. Unlike humans or mammals etc. who stop to grow at certain age.
that fish (reptiles)
Just need to add some simple literacy– fish are not reptiles.
He probably meant that reptiles are from fish and preserved this characteristics.
Wrong again—-
https://en.m.wikipedia.org/wiki/Evolution_of_reptiles
“The origin of the reptiles lies about 320–310 million years ago, in the swamps of the late Carboniferous period, when the first reptiles evolved from advanced reptiliomorph labyrinthodonts.[1] The oldest known animal that may have been an amniote, a reptile rather than an amphibian, is Casineria[2][3] (though it has also been argued to be a temnospondyl amphibian).[4]”
It does not matter, he mentioned certain special characteristics, which seems interesting to me: the lifelong growth.
I agree MG–
This is a economics blog—-
Reality is optional.
(and, if one is observant), gets in the way of ideology)
When referring to another contributor as “wrong again”, it is considered bad form not to have a decent command of the facts one is making the judgement about. In this case, Duncan, reptiles and all land-living vertebrates (which includes humans except for spineless politicians) ARE from fish, as you would know if you’d bothered to check Wikipedia a bit more thoroughly.
Now, be a mench and give MG a well deserved apology.
“Labyrinthodontia (Greek, “maze-toothed”) is an extinct amphibian subclass, which constituted some of the dominant animals of late Paleozoic and early Mesozoic eras (about 390 to 150 million years ago). The group evolved from lobe-finned fishes in the Devonian and is ancestral to all extant landliving vertebrates.”
https://en.wikipedia.org/wiki/Labyrinthodontia
Do some animals grow throughout their lives?
“The actual size of most mammals – including humans – is mostly set from birth. Our growth rate is influenced by the environment, but our skeleton stops growing once we reach adulthood. But it’s true about kangaroos — they indeed never stop growing. The skeletons of kangaroos and the larger wallabies continue to grow – slowly – throughout their lives.
There are many other kinds of animals with the capacity for unlimited growth. For example, invertebrates, such as corals, never stop growing. This pattern is called “indeterminate” growth – adult size depends largely on environmental conditions.
Most fish, amphibians, lizards, and snakes are indeterminate growers. In theory, they can get as big as their environment and diet allow. So why don’t we see huge creatures in nature? It’s mainly because the longer an animal lives, the more likely it is to come in contact with predators, diseases, and natural disasters that end its life before it gets very big. And, for many species, there may be structural constraints – where a single set of organs can only support a body of finite size.”
https://earthsky.org/earth/do-some-animals-grow-throughout-their-lives
Economies also grow, up until they collapse. They are not like humans or other mammals who stop growing.
Oil price might pass $200 because of non-peak-oil issue within a year:
https://www.pkverlegerllc.com/assets/documents/180704200CrudePaper.pdf
doesn’t work
the oil infrastructure we have is/was a construct of cheap surpluses
if you check back to 07/8, oil reached $147 and crashed—why? because the global system couldn’t afford it
The oil system functions by it being affordable to as many people as possible
it isn’t possible to supply oil as a luxury item to the very rich—because their wealth is dependent on the same mass-economy as the rest of us
I see this is a paper about the expected impact of a new United Nations rule mandating low-sulfur diesel for shipping, to go into effect in 2020. Another option ship owners can use is to install equipment on the ship to clean up its sulfur emissions.
I see this recent article from Helenic Shipping News: https://www.hellenicshippingnews.com/trumps-maritime-fuel-policy-will-sink-energy-markets/
It makes quite a few points:
Thus, there are many workarounds available.
There is a somewhat of a total quantity of diesel issue, which some have been talking about. This is part of what drives up the differential between diesel and gasoline. Gasoline is easy to substitute ethanol for; oil from shale also provides quite a bit gasoline, and less diesel. The cutback in Venezuela’s production affects diesel output. When Saudi Arabia cuts back on its production in January this year, this likely will also be targeted toward the heavier grades of oil that deliver diesel.
I think that it is possible that the diesel to gasoline relativities may rise some more. But raising overall oil prices, I would be doubtful of.
Thinking about the anti-pollution issue, there are other issues as well:
1. Whichever route shippers choose to use to implement the rule, it will take energy (mostly oil, but also some natural gas and coal) to implement the rule. More scrubbers need to be built and operated. More complex refining needs to be done to certain heavy grades of oil. Thus, one direct impact would be to raise the demand for fossil fuels in general, and thus their prices.
2. Shippers will have other higher costs as well. There will be more worker time to operate the scrubbers, I am sure.
3. Shipper will try to tack these costs on to their overall shipping costs. But this is a supply and demand situation. It is not at all clear that they can make these higher costs “stick.” The likely impact is to make shippers less profitable, and drive some out of business.
4. Ten years ago, when this rule was mandated, it probably looked like the world economy would be in good enough condition that it could “afford” to spend some of its diesel fuel and other energy products on this project. If we are reaching peak international trade already, this is just one of the kinds of changes that tends to send the world economy more in that direction.
Driving on ethanol as gasoline substitute essentially means driving on soil (depletion).
It’s the worst thing possible, much preferable other options: like not driving low occupancy passenger carz anymore (only emergency and strategic infrastructure services, farming) people should travel on rail and last mile on electric bikes. Nowadays it’s a bit late to implement “the obvious” though..
You are right about driving on ethanol meaning that we are driving on soil depletion. Hardly sustainable!
One thing we don’t think about is that air travel is surprisingly cheap, compared to travel over land, when the cost/energy use of all maintenance and repair is built in. Air travel seems to be growing a lot now. Part of it is the shipment of a lot of packages by freight. Part of it is that in countries without good roads, it is cheaper to build airports at two locations, and operate flights between them, than to pave the roads for the entire distance. Paving roads is a very energy-consuming process. You need to have a whole lot of use of those roads to make them economic.
The Romans had their roads built by the army (and it’s own slaves): as the state employed them permanently, it got good value from them even when they were not engaged in strictly military duties – a brilliant arrangement in its way.
Whereas the kings who came after the Romans could only use soldiers for war, not infrastructure: a huge drain on their budgets if war didn’t gain them valuable resources.
as I understand it, the Roman army kept itself in superb physical condition by road and fortress building
I didnt think they used slaves, because the slaves would have had to be guarded, fed and overseen by the soldiers themselves, difficult when the army is on the march in new territory–but I could be wrong on that. In a battle the slaves would run away or go over to the enemy I would have thought.
in established towns slave usage was a different matter of course.
Their work was awesome, not only building an 18ft wide paved road, but clear cutting a 60 ft swathe on either side to deter ambush
the army took its sustenance from the land it marched through–which oddly enough is reflected in our own time. When you have a big military, its support has to come from somewhere. Right now the US military costs 15% of GDP, which in (supposedly) peacetime is ridiculous but they have to keep spending to keep everyone employed, —So there are constant oilwars to justify it all.
Hi Norman: it surprised me too, but the Romans even used slaves in battle, and armed them – guarding the baggage train for instance. Officers could take large numbers of slaves on campaign, and I think even legionaries had them in camp.
‘Veteran’ soldiers were excused heavy and dirty duties – only had to fight – so the slaves no doubt did those for them.
Of course, under the Roman system well-behaved slaves could earn their freedom one day, so had an incentive to co-operate. (Vikings also freed slaves for good behaviour).
In moments of great crisis slaves were also conditionally freed so they could be recruited as soldiers for battle, and the freedom confirmed if they survived. Many probably then became soldiers, as the pay was excellent -probably one of the best regular jobs available in those days.
The Spartans couldn’t do that, as their slaves hated them and couldn’t earn their freedom in any circumstances.
I heard recently that some slaves (perhaps only in some countries) were simply people who were debtors who could not repay their debts. They took “jobs” as slaves as a way to repay their debt. They might be as hard working and loyal as anyone else.
In the US, I remember hearing that the US has been using non-citizens in the military and giving them citizenship upon honorable discharge. So it sort of works as a way to earn citizenship.
A system, and infrastructure, which were not created rationally and with foresight are not susceptible to much rational adaptation or redirection.
‘Fate’, I suppose -which the Ancients always recognised as something one cannot struggle against.
The ‘three sisters’ spin the thread and cut it when they choose, not mere humans…..
only with hyper-inflation will oil get to 200 dollars it will happen when QE for the people begins and it could happen within a year buy precious metals
A recent article used the term “techno-utopianism” to describe the mentality of people denying the results of “climate change” — no doubt, it’s also big in denial about the results of fossil fuel depletion.
The ancient Romans got into the “iron age” using wood to smelt their metal ores, until deforestation & soil exhaustion helped break up their empire; now, we’re stuck with fossil fuels, which don’t grow back like trees do.
Before the age of even primitive small personal firearms and mil grade guns (low yield of shallow ore mines), say up to mid-later stage of middle ages, the iron and smelting was usually brought up in economic sense only as follows: how many peasants and their sickles (hence food) could be utilized for a season and mine/blacksmith output.
It seems to me, that most of us, (particularly when we were in the younger segment of our lives) consume to the fullest extent of our abilities.
Thus when I got a payrise 40 years ago, it was consumed by necessities we couldn’t do without. Payrises though small, came in regular succession. Back then I didn’t grasp the extent of the bigger picture, that it was fossil fuels constantly priming the industrial pump that kept us housed clothed and fed—-it was just the way things were back then. It sustained me for my working lifetime very nicely. It still does.
But if you transpose that motivation to, say, the Chinese nation (as a typical example) as a whole right now, where their leaders have promised 7–9% growth forever, then the instinct and motivation is to live up to that 9%, and consume accordingly. They are as unaware of the bigger picture as I was 40 years ago, so consume to their paid limit and into an indebted future which cannot be sustained.
They now see factories=output=wages=sustenance as some kind of infinite entitlement and use it to live the good life.
Their government knows that when that progression slows and stops and reverses, the nation itself will revert to traditional chaos and become ungovernable. China itself has only existed as a cohesive whole for less than a century.
They have risen to their peak and gone over it very quickly, and unknowingly.
The USA is in the same situation. The final states only came into the union at the end of the 19th c, they too are in denial that their time has come and gone. The cohesive United States has been exclusively a construct of fossil fuels.
And just like China, without that surplus of fossil fuels, will collapse into chaos.
They too will react violently as reality sets in because they have got used to having an infinity of everything, forever.
They have both gone over the Seneca cliff
China’s energy supply is not doing very well, either. Peak coal occurred in 2013. Up through 2017, they were padding their energy supply with a lot of imports. Then they realized that they badly needed the jobs in China, so a better strategy would be to hold down imports, so that scarcity would send coal prices in China up, relative to costs outside. This is part of what is causing Australia’s problems. The higher coal prices within China allow China’s mines to stay open, and raise China’s coal supply.
https://gailtheactuary.files.wordpress.com/2018/06/china-energy-production-by-fuel-plus-consumption-to-2017.png
China’s coal production and consumption peaked in 2013. Its internal production has been reported to be up by a little over 5% in 2018, IIRC. That still leaves its total production well below the peak level in 2013. Total consumption of coal also peaked in 2013. If we look at the situation on a per capita basis, the situation is a little worse, because population is supposedly up by 2.3% between 2013 and 2018.
Other fuels tend to be more expensive for China. LNG is expensive; even piped natural gas is expensive. Chin’a oil production peaked in 2015, because of the low world oil prices. It is now the largest importer of oil in the world. Its fuel problems greatly contribute to its other problems.
China has been buying a lot fewer solar panels. Look at the downtrend since the first quarter of 2017 in this chart:
https://gailtheactuary.files.wordpress.com/2019/01/china-quarterly-investment-in-solar-and-wind-bloomberg.png
Source: https://data.bloomberglp.com/professional/sites/24/BNEF-Clean-Energy-Investment-Trends-2018.pdf
The cost of hooking them up is high; so are the needed subsidies.
thanks for that expansion on my thinking about China Gail
Norman, can you say something nice and positive about Japan please?
Because I have to live here and I don’t want it reverting to the samurai days.
observing a nation’s situation from the viewpoint of the Seneca curve/cliff
it seems to me that the conditions of the state on the upwards curve–ie medievalism, religious manias and so on, will be repeated on the downward curve, but in a much more rapid succession.
The reason for this I think, is that we all suffer from nostalgia to a greater or lesser degree—schooldays–army days, remembering the good bits, deleting the awful parts
Hence the MAGA nonsense—harking back to a non-existent dreamtime which never really happened. But unthinkers believe it did. They are promised that by the con artist in chief.
So as we slide down the far side cliff I think there’s a real risk of trying to get those times back, because ‘back then’ we remember as warm and happy and ‘good’. They never were of course.
But the fall down the cliff will mean that we slip down through those periods very quickly (as opposed to slowly on the upside)
It’s happening now–the denial of science. Vaccination is ‘junk science’ hence measles reappears. Evolution is ‘junk science’ so take it out of text books. In a collapsed society it would become illegal of course. Same with climate change. Junk science so it is removed from govt documents in various places. Religion is again supplanting proven facts, extremism is supplanting consensus.
So in Japan, whatever eras were in existence on the way up, you will meet on the way down, because the basic mindset of the people involved hasn’t had time to change.
The ruling elite frequently try to suppress all alternative thought. Copernicus and Galileo were once reviled as “fake science”. In our current predicament, “Climate change science” is purported to be “settled science” when in reality it is junk science forced by our governments for political taxing and control purposes.
As per vaccinations, another area of “suppressed” information….measles has only reappeared due to immigration from 3rd world….vaccinations or lack of is not the driving cause.
Evolution is the established dogma …. however there are numerous problems with its actual occurrence. All alternative thought is suppressed. I personally find the magical or random occurance of heliophase and dna getting together and operating as one of the most amazing processes ever seen to reproduce a dna strand to be so improbable as to be impossible. Norman, you will of course not recognize this but.the fossil record itself does not fully support the theory of continuous evolution. Instead of millions of fossils showing gradual change through all developments, we instead see million of fossils at one stage, then Huge gaps with no intermediate changes seen (such as partial legs). We should see millions of every stage. We do not. We only see different stages, with nothing in between.
Climate change….evolution….proven facts….sorry I disagree.
while I respect your personal opinion, I can’t get involved in a discussion about the scientific basis, in a broad sense, about evolution
As mentioned before China is about to receive 80bcm natgas pipeline from Russia any moment. Not much in the great scheme of things (less than EU imports as of now), but in addition to their nuclear, coal and hydro, they could perhaps manage a bumpy plateau for half a decade or more..
Completely agree. One nit: Hawaii and Alaska didn’t join the union until 1959. Arizona and New Mexico in 1912. The current USA has only been fully formed within living memory.
Speaking of living memory, I feel very fortunate, now, to have had teenage parents. You see, my grandparents figured large in my raising. My paternal grandfather was raised in West Virginia on a farm. Progress came much slower to Appalachia, and I heard plenty of stories about growing up with a hand pump well and an outhouse. They used to take a horse and wagon into town to charge a car battery once a week, so they could listen to a radio at night. No electricity, and heated with wood.
They didn’t get a car until after the war. Evidently they didn’t get an indoor plumbing until the 1960s, and my Great Grandfather thought it was disgusting that you would “sit down to eat in one room and then sit down to s*** in another” !
Anyways, not too many 39 year olds have that kind of connection to the past. That and the Appalachian tendency to ancestor worship/ family pride (I can name my male ancestors 8 generations back, and know some history about each) has definitely given a longer view of history / Industrial civilization. It really is just a fleeting, tragic blip in human history. Viewed through the lens of my family traditions and history, the rate of resource consumption is criminal, and the idea of endless progress absurd.
thanks Karl
I was generalising about American statehood—rather than going into complicated side issues about precise dates
Tibet is the same with China—whether it’s actually part of China or not
but I get your general drift
It’s funny think that, the last Army skirmish with the Indians was in 1918 (Bear valley). We only even finished the conquest of the continent from the natives 100 years ago. The oldest living American, Alelia Murphy, was 12 or 13 years old when that happened. And already we are running short on Non renewable resources. But to listen to Elon Musk, we are going to Mars! It is such preposterous nonsense. We are really just yeast in a vat.
Good stuff.
Look at “fourth turning” – it’s a related work on the ‘natural law’ of generational resets.
Fire sales begin:
Housing slump bites as Sydney apartments line up for fire sale
https://www.urban.com.au/sites/urban.melbourne/files//project-renders/front-montage-e1493784430879.jpg
Receivers called in to sell 61 brand new units at 1-5A Cliff Road, Epping NSW and 6-10 Carlingford Road.
Let’s all move to Australia where housing prices are cheap! Future electricity supplies are a little iffy, as are job prospects, however.
Gail, 1br dog boxes (apartments) are still selling for 788k AUD here in Sydney. Prices still have a L O N G way to fall.
Agreed. Our paid-for house is a much better “deal.” We paid about $230,000 for it, and it is really too big for our needs. It is conveniently located, and the annual taxes are low.
“The U.S. housing market is crumbling–a worrying indication that an economic catastrophe could be brewing. Yet, nobody seems sure why this is happening in an economy that remains hale and hearty by most measures.
“But don’t rush to your banker just yet hoping to get an easy deal. Rejections for mortgages and refinancing applications have, unfathomably, shot up to record levels.
U.S. existing home sales (which make up about 90 percent of U.S. home sales) fell off a cliff in 2018, with mortgage lenders recording a sharp fall in applications, originations and profits… Existing home sales cratered a massive 10.3 percent year-over-year ”
https://www.nasdaq.com/article/us-home-sales-are-plummeting-and-nobodys-sure-why-cm1089578
“The housing pain persists in Southern California, as higher costs weigh heavily on potential buyers. Home sales in the region fell 20.3 percent year over year in December, according to CoreLogic. That is the lowest December sales pace since 2007.”
https://www.cnbc.com/2019/01/30/southern-california-home-sales-plunge-20percent-in-december-lowest-pace-in-11-years.html
I can give an example from Illinois: a home in Zion is selling for $143,000 and the annual property tax is almost $8,000. And will most likely keep going up.
I suspect that Ginnie Mae may have something to do with the problem, in addition to higher interest rates. There was an article yesterday in the WSJ titled Cooling Housing Market Prompts Closer Scrutiny of Some Lenders.
Subtitle: Ginnie Mae worries about risks from nonbank lenders, whose share of home loans has ballooned since the financial crisis
Down in the text is says:
So these “non-bank lenders” are better known as those providing FHA and VA loans, with little down payments. Elsewhere, the text says that loans by these non-bank lenders have been ballooning as a percentage of Ginnie Mae’s portfolio, now reaching 61% of its total portfolio. Ginnie Mae’s concern is expressed as
A chart shows that Ginnie Mae’s gross issuance of mortgage backed securities peaked in 2017, and has been falling since then. This, by itself, is no doubt part of the problem.
wise words from gail: see also why when sliding down the energy cliff to a lower net-energy world will bring us more dirty sources of energy not cleaner, a paradox we should inquire into: civilication is a heat engine. the more we move into a net-energy degraded world or the less EROIE we get from our conventional sources, the dirtier it will get or biomass will become under pressure. see the tar sands in canada, shale in us. we will desperately try to use the crabon from plastic and tyre as energy source. We are deep in dept and this forces us into economic and human growth. so our need for energy is growing exponentially. https://www.theguardian.com/commentisfree/2019/jan/30/worse-than-plastic-burning-tyres-india-george-monbiot#comment-125293151
The article you link to talks about other countries selling used tires to India, and India burning them for fuel.
When I visited Mumbai a few years ago, the air pollution was incredibly bad, worse than I had experienced in Beijing. One of the issues was all of the used clothing that was being burned to provide heat for some processes. This was clothing that people had given away to charities, I believe. If there were not humans who wanted to wear the clothes, they were sent to India to be burned as a very smokey fuel. I understood that the little clay pots being used for the Diwali festival were using burned clothing as fuel.
“A surge in gold purchases by central banks to the highest since 1967 helped push global demand for the metal up 4 percent last year, the World Gold Council (WGC) said on Thursday…
“Driving the increase were central banks which bought 651.5 tonnes – 74 percent more than in 2017 and the second highest annual total on record – as countries including China and Poland
joined Russia, Turkey and Kazakhstan in adding to their reserves, the WGC said.”
https://uk.reuters.com/article/gold-wgc/central-banks-bought-more-gold-in-2018-than-any-year-since-1967-wgc-idUKL5N1ZU7FJ
Reblogged this on solarkauf and commented:
wise words from gail: see also why when sliding down the energy cliff to a lower net-energy world will bring us more dirty sources of energy not cleaner a paradox: civilication is a heat engine. the more we move into a net-energy degraded world or the less EROIE we get from our conventional sources, the dirtier it will get or biomass will become under pressure. see the tar sands in canada, shale in us. we will desperately try to use the crabon from plastic and tyre as energy source. We are deep in dept and this forces us into economic and human growth. so our need for energy is growing exponentially. https://www.theguardian.com/commentisfree/2019/jan/30/worse-than-plastic-burning-tyres-india-george-monbiot#comment-125293151
I love this quote: “What we see is not the economy. What we see is the tiny fragment of economic life we are supposed to see: the products and services we buy. The rest – the mines, plantations, factories and dumps required to deliver and remove them – are kept as far from our minds as possible. Given the scale of global extraction and waste disposal, it is a remarkable feat of perception management.”
It reminds me of when I used to work at a restaurant and all the shenanigans people don’t see taking place back in the kitchen. Because if they did, they probably would never step foot in another restaurant.
I don’t think it is so much perception management, which suggests some conscious, nefarious intent, as busy humans simply lacking the time and the inclination to look deeply into the provenance of the goods and services they buy, and the existence of which they tend to take for granted.
David Korowicz uses the example of a cup of coffee in ‘On the Cusp of Collapse’:
“Just as we never consider the ground beneath our feet until we trip, these glimpses into the complex webs of inter-dependencies upon which modern life relies only come when part of that web fails. When the failure is corrected, the drama fades and all returns to normal. However, it is that normal which is most extraordinary of all. Our daily lives are dependent upon the coherence of thousands of direct interactions, which are themselves dependent upon trillions more interactions between things, businesses, institutions and individuals across the world.
“Following just one track; each morning I have coffee near where I work. The woman who serves me need not know who picked the berries, who moulded the polymer for the coffee maker, how the municipal system delivered the water to the café, how the beans made their journey or who designed the mug. The captain of the ship that transported the beans would have had no knowledge of who provided the export credit insurance for the shipment, who made the steel for the hull, or the steps in the complex processes that allow him the use of satellite navigation. And the steel-maker need not have known who built the pumps for the iron-ore mine, or how the oxygen for the furnace was refined.
“Every café has customers like me who can only buy coffee because we are exchanging our labours across the world in ways that are dependent upon the globalised infrastructure of IT systems, transport and banking. The systems and the myriad businesses upon which they depend are only viable because there are economies of scale. Our global infrastructure requires millions of users across the world, the ship needs to carry more than coffee beans, and my café needs more than a single customer. The viability of my morning coffee requires the interactive economic and productive efforts of the globalised economy.”
Yes,well put Harry, but there is ‘reinforcement’ if you will, that distracts minds away from that thinking. Like the supermarkets that have the happy pictures of clean happy farms with smiling animals, yet behind the facade, it’s torture, and misery.
Thank goodness I’m not addicted to bean juice! 🙂
Great quote. And we also see what is written on all the packages of goods we buy. “Sustainable!” “Renewable” Enjoinders to help save the environment and reminders of what a great service buying a certain product does for the environment. No mention of the environmental toll of your morning Rice Krispies!
“China’s weakening economy is roiling export markets in the rest of Asia — and there’s more pain to come.
“From Hong Kong to Japan, exports data for December showed a marked downturn as supply-chain disruptions triggered by US-China tensions and a cyclical slowdown in the world economy, led by China, hit the trade-reliant region.
“Nikkei PMIs for seven of the region’s economies are due Friday, with four of them already in contraction or less than half a point from contraction. A separate business survey on Wednesday showed South Korea manufacturers’ confidence for February at the most depressed level since the global financial crisis a decade ago.”
http://www.theedgemarkets.com/article/chinas-economic-woes-spread-across-asia-more-pain-seen
“Singapore businesses have turned bearish about prospects, two government surveys showed, with sentiment weakest in the electronics industry amid a turn in the business cycle and concerns about the continuing trade war between the U.S. and China.”
https://asia.nikkei.com/Business/Markets/Nikkei-Markets/Singapore-firms-turn-bearish-on-outlook-as-slowdown-builds
“South Korea’s industrial output extended weakening in December to reflect the downtrend in the chip segment with indicators for present and future economic activities in the longest slump since the oil crisis of the early 1970s, raising alarm about a recession in the making.”
https://pulsenews.co.kr/view.php?year=2019&no=65117
“Samsung Electronics, the world’s biggest smartphone and memory chip maker, reported a slump in fourth-quarter net profits on Thursday, January 31, blaming a drop in demand for its key products. Net profits in the October-December period were 8.46 trillion won ($7.6 billion), it said, down 31% year-on-year… the picture is changing, with chip prices falling as global supply increases and demand weakens.”
https://www.rappler.com/technology/news/222352-samsung-electronics-earnings-report-q4-2018
Doesn’t sound good. Once a person has a smart phone, keeping it and just replacing the battery would seem to be the best option.
Not many phone models today allow you (as urser) to easily exchange/service the battery. But you are correct one should definitively seek the few on the market which still can do that, and ensure the batt pouch size is of somewhat standard dimension, replaceable in the future..
Not mentioning there are far way more important stuff than smart phones to care for..
“German retail sales plummeted by 4.3pc on the month in December, the fastest rate in 11 years, data released by the state statistics office on Thursday showed, sending a worrying signal about household spending in Europe’s biggest economy. The fall in real terms was far weaker than a Reuters consensus forecast for a 0.6pc drop.”
https://www.independent.ie/business/world/german-retail-sales-slump-at-fastest-rate-in-11-years-37768816.html
“German economic growth is set to weaken to the slowest pace in six years in 2019, held back by a deteriorating environment for global commerce hobbled by worries about trade disputes and Brexit.”
https://www.bloomberg.com/news/articles/2019-01-30/germany-slashes-2019-growth-outlook-citing-trade-spats-brexit
“Italian Premier Giuseppe Conte said the economy probably shrank in the fourth quarter, plunging Italy into a recession that would put pressure on the populist government’s spending plans. At an event in Milan, Conte said: “I expect a further contraction of gross domestic product.””
https://www.bloomberg.com/news/articles/2019-01-30/italy-s-conte-says-he-expects-fourth-quarter-gdp-contracted
The EU is not doing well!
“A marked deterioration in UK pension fund performance during the final quarter of 2018 meant that last year saw the average pension fund post its biggest losses in a calendar year since the financial crisis in 2008, Moneyfacts data shows.”
https://www.financialreporter.co.uk/later-life/pension-funds-suffer-biggest-losses-since-financial-crisis.html
“Concern about Brexit’s impact on the U.K. economy is growing, with consumer worries near crisis-era levels, investment falling and the property market suffering. Nationwide Building Society said Thursday that house-price growth ground close to a halt as values rose just 0.1 percent in January from a year earlier. That report came hours after research group GfK said consumers are the least optimistic about the economic outlook in seven years.”
https://www.bloomberg.com/news/articles/2019-01-31/u-k-house-prices-stagnate-amid-rising-economic-uncertainty
“A jump in personal insolvencies in the fourth quarter of 2018 sent the total number of people going bust last year in England and Wales to the highest level since 2011.
“Debt advisers blamed Brexit uncertainty, weak wages growth and tighter credit rules for forcing more people to declare themselves insolvent in the run-up to Christmas.”
https://www.theguardian.com/money/2019/jan/29/uk-personal-insolvencies-hit-seven-year-high
“The average cost for British lenders of issuing secured debt has leapt to its highest since just after the 2016 EU referendum, JPMorgan data shows, as investors fret that political turmoil could tip the economy into recession.”
https://uk.reuters.com/article/uk-britain-banks-funding-analysis/britains-banks-face-funding-crunch-as-brexit-looms-idUKKCN1PO1CB
“British car production fell by 9 percent last year, the biggest drop since the 2008-9 recession, and investment slumped by nearly half due to fears about Brexit, an industry body said on Thursday.”
https://uk.reuters.com/article/uk-britain-eu-autos/uk-car-output-falls-at-fastest-rate-since-recession-idUKKCN1PP00O
The UK has more going wrong than Brexit. The linked article says,
“Volumes have also been hit by a crackdown on diesel, stricter emissions rules disrupting supply and a slowdown in China, the world’s no. 1 autos market, the Society of Motor Manufacturers and Traders (SMMT) said.”
“Chinese provinces are downgrading their targets for economic growth in 2019 as exports and consumption slow, pointing to a lower national goal likely to be agreed in March.
“Of the 30 provinces which have released their 2019 growth targets, 23 lowered their goals from those set for 2018, according to local government work reports.”
https://themalaysianreserve.com/2019/01/30/chinese-provinces-slash-growth-goals-as-slowdown-hits-home/
“China said on Thursday its manufacturing activity contracted for the second-straight month in January — another sign that the world’s second-largest economy is slowing down amid domestic headwinds and the ongoing trade dispute with the U.S.
“The official manufacturing Purchasing Managers’ Index (PMI) for January was 49.5 [below 50 denotes contraction].”
https://www.cnbc.com/2019/01/31/china-economy-manufacturing-january-pmi-.html
“Shares of Geely Automobile Holdings and Great Wall Motor slumped to lead a broad decline for Chinese automakers on Tuesday as piling inventory levels and a slowing domestic economy clouded the outlook for demand in the world’s largest car market.”
https://asia.nikkei.com/Business/Markets/Nikkei-Markets/Slowdown-bites-China-s-auto-industry-as-inventories-pile-up
“Ford Motor Co.’s main partner in China is feeling the pain caused by the slowdown in the world’s biggest car market. “Chongqing Changan Automobile Co. said in a filing late Tuesday its profit for 2018 may have tumbled as much as 93 percent. Sales at its joint venture with the American maker slumped 54 percent to 377,739 units last year…”
https://www.bloomberg.com/news/articles/2019-01-30/ford-s-china-partner-warns-2018-profit-to-plunge-93-on-slowdown
“Nissan Motor Co. reported its first slide in auto sales in almost a decade, adding to the challenges the company faces following the arrest of former chairman Carlos Ghosn in Japan for alleged financial misconduct. Global deliveries fell 2.8 percent last year to 5.7 million vehicles, the Yokohama, Japan-based carmaker said in a statement Wednesday.”
https://www.bloomberg.com/news/articles/2019-01-30/nissan-s-first-sales-slump-since-2009-heightens-post-ghosn-woes?srnd=markets-vp
Fixed expenses will “eat you alive” if the number of sales drops.
Blow 50 is not good at all!
“As the trade cycle turns, so goes the global economy. But there is a new twist.
“With growth in global trade sharply diminished since the 2008-2009 global financial crisis, an upsurge of protectionism and disrupted global supply chains is all the more problematic.
“There is a distinct possibility that a turn in an already weakened trade cycle could spark a surprisingly swift deterioration in the global economy.”
https://www.marketwatch.com/story/the-slump-in-global-trade-is-a-bigger-threat-than-markets-imagine-2019-01-29
I notice the front cover of the January 26-February 1 2019 issue of The Economist has a picture of a snail and the caption “Slowbalisation: The future of global commerce.”
Of course, the article doesn’t mention energy issues.
Back to REALITY….Elon Musk MUST throw his hat in the ring to run for President…
He goes through top people like our beloved in office President Trump…
What better qualities than that?
Tesla Shocks Investors By Sneaking CFO Resignation Announcement In Last Minute Of Conference Call
But then, literally in the last minutes of the call when everybody thought that the quarter was going to come and go without any shockers the call turned back to Musk who, in Steve Jobs fashion, had to announce just “one more thing.” Only unlike Jobs, the announcement wasn’t good news.
After all questions had been taken and most analyst lines disconnected, Musk matter-of-factly announced that the $60 billion company’s CFO, Deepak Ahuja, was quitting… for the second and final time.
In short, brace for another rollercoaster year for the company which has now seen the departure of about 40 senior level professionals in the past 2 year, and whose CEO was so busy when drafting the stream of consciousness essay that passes for a Tesla earnings report, that he totally forgot to announce that the company’s 2nd in command was retiring
He announced that the CFO’s replacement was “Zach”, who was identified only by his first name at initially Elon couldn’t remember his last name. He was later revealed to be 31-year-old Zachary Kirkhorn, a senior finance analyst at the company.
So Zach Kirkhorn was promoted to VP of Finance 2 months ago & now promoted to CFO, I see the talent bench runs wide & deep @ Tesla. Will he just be a lemming for Elon, reporting numbers to Elon’s content? $TSLA
Tesla in deep poo poo….
https://www.zerohedge.com/news/2019-01-30/tesla-shocks-investors-sneaking-cfo-resignation-announcement-last-minute-conference
As long as TSLA factories pop out the cars and someone buys it, rejoice !
The more 2nd hand parts out there the better for us all..
That’s the reality for real adults, as I’m not fanboy of gas station blockades, riots, fuel rationing, mandate, and what have you.. which are ultimately coming.
TSLA is about to release their best selling model Y (crossover based on model3), unfortunately, most likely that won’t be achieved before the recession, slow down or even perhaps GFCv2 arrives. Lets hope the system is not going to completely fold down before ~2025-30..
Hi Gail,
I’ve been following you for some time, it’s interesting because your analysis is converging with another person I also follow,
Dr Tim Morgan formerly running the research dept of Tullett Prebon and now writing a blog,
idk if you’re familiar with him, it is a small world after all!
this is his final report that really shocked me out of complacency:
https://www.tullettprebon.com/Documents/strategyinsights/TPSI_009_Perfect_Storm_009.pdf
his blog is:
https://surplusenergyeconomics.wordpress.com/
tbh I think you’re both right in using a complex and nuanced approach to analysing what is really a converging multifaceted collision of limits all being reached at a similar time,
it’s interesting that Shells predictions back in 2008 included a ‘scramble’ scenario that was quite dystopian and seems to fit what is currently happening but later predictions seem injected with PR anti depressants and magical thinking to lull people into a comfortable coma before the tsunami hits.
https://www.shell.com/energy-and-innovation/the-energy-future/scenarios/new-lenses-on-the-future/earlier-scenarios/_jcr_content/par/expandablelist/expandablesection_997535809.stream/1447230546089/a919b8b6bc79106bb50a4c4a92a4572785ebc5500b0a8110b9e5a40a1e64f36a/shell-energy-scenarios2050.pdf
BP’s research predictions are just Big Rock Candy Mountain hogwash for gullible investors……probably!
what does seem pretty obvious is we are all heading into a big mess with no one taking any decisive action and I’m not looking forward to hitting retirement age in another 15 years.
maybe it is game over for our civilisation of hairless autistic monkeys who get so easily distracted by trivialities?
Dr. Tim Morgan occasionally comments on this blog as drtimmorgan. So he seems to read at least a few of my posts. I also read some of his posts. The report from Tullett Prebon you reference is from January 2013. I had seen it, and it agree with what it is saying. It is good to take time to look back at it.
I have never met Dr. Morgan in person. Dr. Morgan is not involved in ongoing EROEI discussions with any of the people I have been corresponding with; he came from the banking industry; the EROEI researchers I know have very little understanding of finance or banking. I am fairly sure there is some friction between Dr. Morgan and Dr. Charles Hall of EROEI fame. Morgan’s current work does not reference EROEI at all; it uses a different metric that he came up with himself. I don’t really understand Morgan’s metric; that makes it harder for me to fully understand what he is saying. I like to understand what the underlying calculations are indicating.
Dr. Morgan, like me, is outside academia. That also adds “distance” between what he is saying and what the EROEI researchers are saying.
https://i.redd.it/5e3rrm3uxld21.jpg
didn’t Russia make a deal with Venezuela in December?
Russia wants to “help” them…
but the USA wants to be first to “help”…
What we are always told is, Intervention occurs when it’s in the US’ interests.
One word; OIL
The global hegemon’s gotta do what a global hegemon’s gotta do.
And a weak oil-rich state’s gotta know it’s limitations.
Anyway, this national sovereignty business is basically a charade to keep the masses clueless about how the world really operates.
“Electricity may collapse” Oh yes. Australia is a good example. The reason for this is climate change denial and indecision by consecutive governments, at least for 10 years. Moreover, coal fired power plants are heat engines which do not perform well in heatwaves (thermodynamics – Carnot cycle) They are also aging (old clunkers)
29/1/2019
Victoria became power importer in January 2019 heatwave
http://crudeoilpeak.info/victoria-became-power-importer-in-january-2019-heatwave
23/1/2019
Victoria’s 600 MW brown coal plant outage leads to price spike but system survives
http://crudeoilpeak.info/victorias-600-mw-brown-coal-plant-outage-leads-to-price-spike-but-system-survives
21/1/2019
NSW power imports in January 2019 heatwave exceed 2 GW, drive up electricity prices
http://crudeoilpeak.info/nsw-power-imports-in-january-2019-heatwave-exceed-2-gw-drive-up-electricity-prices
So far, I haven’t been hearing catastrophe stories regarding electricity supply in Australia. It seems like with the number of close calls, the time is not far away, though. High electricity prices hurt demand for other things, however, such as new houses. Also, some businesses will close up shop, if prices are high too much of the time. This makes for fewer jobs.
If Australia is on the perifery of the civilized world, can we expect that its energy system will last longer? They need imports from those areas of the world that have lower energy needs as regards regulating the temperatures of the environment so that this is suitable for the human species. Most of Russia is too cold, but most of Australia is too hot. That is why these countries are mostly resource providers to the countries that thanks to the milder temperatures are more suitable for the existence of the human civilization.
Interesting observation! Civilization started where “too hot” and “too cold” or “too dry” were not much of problems. It is only with fossil fuels we have been able to fix the problems with too hot, too cold, and too dry.
Now with energy supplies seeming to fall into shorter supply, those countries that don’t seem to need much heat/cooling/extra water would seem to do better. But that doesn’t aways work out. Venezuela is a warmer country with some rain; it isn’t doing well either.
Historically, the areas with tropical forests were not conquered by the human species until the extensive use of fossil fuels. Thus, Venezuela, is on the perifery, too. The problem is too much water. Although not during the whole year, but there are months when the precipitations are very high. You need a functioning system also during those wet months, which is a situation similar to areas where extreme snowfall is present.
The rivers like Amazon or Orinoco did not become the cradles of civilizations: there is heat, there is rainfall, but there is too much water, creating swampy environment.
https://en.wikipedia.org/wiki/Orinoco_Delta_swamp_forests
The swampy area like Florida in USA was very sparsely populated in the past. You need some measures supported requiring substantial amounts of energy to overcome this character of the countryside.
Good points! I expect tropical diseases were problems as well.
civilisation, measured by artifacts, buildings, construction and so on, kicked off in the regions of the worls where ”the livin was eay”
draw a line through all the great centres of prehistory/history and they all line up around the world more or less
when man began to move into colder less hospitable area, more energy was needed for survival, so less was available for other stuff
that didn’t really change till fossil fuels appeared
As Ive said before–eskimos built igloos not cathedrals
I think the proper definition of Peak oil is running out of not just net energy, but the net energy required to sustain the current population let alone future projected world population and growth.
And actually, the question isn’t are we running out of oil. The question is, do we have enough oil to sustain….what? To sustain current let alone future populations.
But to some degree we are running out of oil. Oil discoveries have long peaked, despite newer technologies and many times in the last few decades when oil prices were at highs. Technically one can say we are not running low on oil because technically there may be more oil very deep within the earth, but it’s no good if it takes too much energy to reach it or if it’s not reachable. So realistically and affordably recoverable oil is what most people mean when they say “oil.” Too many people like to play word games between the definitions it seems.
But in reality, there is less and less technically and affordably recoverable oil to grow populations much larger (and that is assuming every single person drives and uses oil in the world, which is far from the case). It’s all a matter of scale/population size. So when someone says, “we have plenty of oil”, one must answer by asking: “for what size population and projected growth?”
And therein lies the problem. To sustain a growing population into the future, we are running out of technically affordably recoverable oil. Now, if suddenly 80% of the population vanished tomorrow, then that same amount of limited oil left for yesterdays population now could last the new and smaller/remaining 20% population size much longer, if we were just calculating the raw oil needed with no other inputs. So the economy of scale is reduced, population is reduced, and oil needs are scaled down drastically.
At current global population size, we are and have been making smaller and smaller discoveries for decades since the peak in discovery decades ago, despite consuming more. There is less oil being discovered, more oil being consumed, in conjunction to the backdrop decline rate. Now, if there was all this technically affordably recoverable oil, I think we would have found another Saadia Arabia or two by now. But we just keep finding less and the less we find is more expansive and energy intensive than the oil we discovered decades ago.
So yes, we are have a problem of diminishing net energy, but with what oil is affordably and realistically recoverable, to sustain current population size or any population size larger into the future, we are running out of total raw oil as well. We already peaked in conventional oil in the early 2000’s, and we have gone to desperate and drastic measures to keep producing other forms, but even with that, much of the world still does not drive or use much oil and if they did, and they were reflected in the numbers as those who used oil like we Westerners do, I think the story would have been very different by now.
And here is the real kicker: we don’t need to run out of all the worlds oil, or half of it by tomorrow for peak oil to crash the global economy. All we have to do is have enough of a supply shock to meet demand that the global economy shrinks by a few percent, and just a shrinking global GDP or GDP’s of developed nations for enough time would be enough to send supply shocks and shocks across financial markets and freeze up the credit markets by triggering derivative debt defaults, etc.
Just look at how close the US government said in it’s own words when the credit markets froze during the last financial crisis of 2008. They literally said they were warning politicians we had hours — not days, not weeks — before martial law would be declared and troops would be policing American cities.
If a credit crisis and contraction in economic growth in the last economic crisis was enough to do that, then surely a GDP contraction or shrinkage of 5% due to energy supply’s being constrained by 10% or so could surely do that.
Most of the Peak Oil people I followed defined it as running out of enough cheap oil to meet world economic and population demand, thus causing economic ramifications because contracted economic growth means less tax revenue for government to service it’s debt, thus causing a debt to GDP crisis and debt downgrades and currency problems. I think that is still largely a correct analysis. We were running into a problem at the peak of conventional, and bringing unconventional prolonged it, but look at what we had to do to bring that online and the debt we had to amass to do so. If that doesn’t show how dire the energy supply problem (of affordable and technically recoverable oil) is, then I don’t know what is. We are consuming more oil and finding less. So by that definition I don’t think it’s wrong to say we are running out of oil. We just aren’t going to wake up tomorrow with the gas stations completely dry. I suspect, we will see more countries have economic problems and not be able to afford oil for it’s people as more of them go into poverty because there is less jobs and economic growth and less cheap oil to create that. It is my opinion we started seeing this ‘slow burn’ of economies fall apart in the middle east and other places (many of them were peaking in their energy at those times or had energy issues, like Egypt, when the Arab spring came). And what we have been seeing since the Iraq war has been a long winded and slow burn event of countries going belly up economically and breaking out into war with radical groups as a result, and of course the larger country superpowers who have energy needs and interests as well, exploiting them for their own strategic energy needs.
The war in Syria, we know via CIA documents and other documents was mainly about energy (Russia and China doing deals and building pipelines with Assad), as well as the Iraq war, when we went in there to secure oil and actually much of that oil has not yet been used and will be brought online in the coming years, etc. All of these middle east wars since the early 2000’s have been the beginning red flags of the world slowly transitioning into the post-carbon age or post-prosperity age. And now we are likely to see similar wars spread throughout South and Central America for the same reasons — just look at the recent events in Venezuela, and the US trying to work with Colombia and/or Brazil to threaten or seize the country, which ‘coincidentally’ has a lot of oil. Oh wait a second, Bolton just recently openly stated we are sticking our nose in Venezuela for ‘strategic and energy reasons relating to oil.’ They don’t even hide it anymore.
Anyway, we are likely to see the world slip into many long and violent wars and the unipolar world go back to being a multipolar world (already started, actually) and the peak conventional oil kicked this all off. So if one is wondering, yes, we already are and have been seeing the effects of peak oil spread and it will continue to do so. It will be a slow and long decline into worsening chaos and the rate of madness will increase exponentially in conjunction to the desperation of world leaders to maintain power and feed and try to create the jobs for their people so that they don’t riot and resort to overthrowing them…which they will fail at, since the good jobs are not there for people to meet the demand, because the inequality wealth gap widens due to declining prosperity because real economic growth is flattening out. If you subtract artificial economic growth of government spending, real economic growth ahs been flat or going down for some time now in many developing nations.
Very succinct analysis Steven, Thanks
Yes, good comment.
If I understand correctly, then the forecast is ‘continue the staircase collapse, unless there is a critical failure that causes cascade and contagion globally. ‘
Stephen,
I think you are basically right. The problem for most of the people only peripherally involved with this is when they heard “peak oil,” they thought it meant “peak of all oil that is being extracted.” They heard “high prices,” and they thought the major symptom to look for was high prices. So when prices went down, they thought that the problem was over. There are still a lot of people in the world who believe that high prices are necessary to have a problem.
Yes, even if production increases, it cannot be at the level to meet our needs. Maybe I should have said this way. So we will not increase production enough to meet our needs. At the end, it comes to where I say, but you have revealed the problem in detail. Thank you.
But I understand that the limits will be forced to the end to increase production. For this, there were even wars such as Iraq and Syria. These efforts can increase production for a while. I’m not saying anything against it. But in the end, there will be no increase in production after a certain point. As long as the needs are not met, the increase in production will not save us. But this can give some people time.
The crisis does not affect everyone and countries equally. Some countries may be harder, but who cares? Nobody has to feed anyone in a world where there is a collapse.Some people can die from hungry. In fact, Venezuela is an example, people are already hungry. So the concept of peak oil that you said has already arrived.
The peaking of conventional crude oil started in 2005. Gail and me wrote an article in the Oildrum about it.
9/10/2007
Did Katrina hide the real peak in world oil production?
http://www.theoildrum.com/node/3052
Saudi crude production declined between 2005-mid 2007 and caused the US recession in Dec 2007. That – together with unwise bank decisions to invest in mortgages in oil dependent and vulnerable US suburbia – caused the oil price shock mid 2008. There was also an extra demand of 800 kb/d from China for the Olympic Games. I call it the Oilympic peak.
Saudi crude production had started to increase again in the 2nd half of 2007 but it was too late. And definitely there was not enough Saudi oil to cater for the extra demand from China in May 2008 as Saudi crude is also needed for their power plants (airconditioning in summer).The 2008 price shock caused the financial crisis which brought oil prices down.
Insofar Matt Simmons was right when he wrote his 2005 book “The coming Saudi oil shock and the world economy”.
The response of Bernanke&Co to the conventional crude peaking was to lower interest rates, the opposite of what happened in the 70s oil crises when high interest rates (as result of higher inflation from higher oil prices) killed the economy, thereby reducing oil demand and leading to lower oil prices in the 80s. So the US Federal Reserve tried to trick the system. Lowering interest rates was not enough and quantitative easing QE1-QE3 created new debt. So this debt is largely a result of this response to the conventional peak. The creation of cheap money financed the US unconventional shale oil boom. Instead of oil prices staying low, prices went up again. An energy revolution was pronounced to cover it all up. Art Berman says it’s a retirement party. Oil prices went down again when QE3 was ended.
However, the fundamental problem thwas ended. at conventional crude production stayed on a bumpy production plateau is still here with us today. A little bit increase from Iraq, but that was by design of Bush & Cheney who wanted to unlock Iraqi oil to push the expected conventional peak a couple of years into the future.
18/9/2018
What happened to crude oil production after the first peak in 2005?
http://crudeoilpeak.info/what-happened-to-crude-oil-production-after-the-first-peak-in-2005
The next event is likely to be the peaking of US shale oil production which suffers from high decline rates requiring a permanent drilling effort to replace dying wells just 2-3 years old. The latest data are always here:
https://www.eia.gov/petroleum/drilling/
In February 2019 the decline in the Permian was 246 kb/d. New wells will have a capacity of 269 Kb/d. The net gain being 23 kb/d. This unproductive game cannot continue for-ever.
But the peak oil story is more than just about the global peak. We see country peaks with devastating consequences, for example right now in Venezuela.
http://crudeoilpeak.info/venezuela-peak
26/5/2018
Peak oil in Venezuela: El Furrial field
http://crudeoilpeak.info/peak-oil-in-venezuela-el-furrial-oil-field
Mexico’s oil and gas production has also peaked.
http://crudeoilpeak.info/mexico-peak
Maybe Trump’s border wall is built to protect the US from that economic fallout. But I doubt Trump has understood peak oil.
And then there are all the ME countries where peak oil has lead to political turmoil because oil revenues decline when oil production declines which worsens other pre-existing problems. We have Sudan, Yemen, Egypt and Syria. Even the peaking of oil fields in Libya had geo-political consequences. Remember the hand-shake between Tony Blair and Gaddafi. Of course events in these countries like the Arab spring cover up the underlying oil revenue problem
It is said that if US capital and technology comes, Veneuzela’s oil production increases. Is that right? I see this approach a bit problematic, but I ask again. Increasing production after a certain point is not even possible with technology and capital. I think it reflects the current Veneuzela’s situation to some extent.
“A little bit increase from Iraq, but that was by design of Bush & Cheney who wanted to unlock Iraqi oil to push the expected conventional peak a couple of years into the future.”
Do I read you correctly, that you imply foreknowledge/expectation of conventional peak oil by certain faction of the governmental circles – security apparatus as of late 1990s – early 2000s.. ?
You don’t have to go further on detailed specifics and explanations but such “coming out” would be very unlikely and somewhat precious even on this “fringe” forum. Anyway, I’m glad at least some individuals are able to connect the obvious dots.
I asked about the possibility that Venezuela’s oil production could be increased for a while with the help of technology and capital. I think it was in the Soviet Union. Low oil production in the Soviets caused bad effects.The Soviets may have collapsed for this reason. However, as it is known, Russia was able to continue production with the help of technology and capital from the West despite this collapse.
The answer to the question I asked was partially answered by Nafeez Ahmed. Here: https://medium.com/insurge-intelligence/venezuelas-collapse-is-a-window-into-how-the-oil-age-will-unravel-f80aadff7786
Venezuela, as the US does, can continue its production for a while with extraordinary debt. But it is clear that it is not long-term. In the case of the current Veneuzela, how much can this apply? This is a separate issue
Thanks Gail,
I agree with you completely, looking at the economy from 2005 to now it’s looking like oil is still overpriced at $50, I think the affordability price for the marginal buyer right now is about $40 for WTI and heading to somewhere between $25 & $30 this time next year. But as you say the producers need a higher price and I think the markets will try to provide it, but more buyers will be priced out of the market leading to lower prices.
Thank you, Gail, for taking the time for a new write up and angle to our predicament.
Perhaps an intermission here is appropriate?
Jim Morrison kinda bummed it up in his lyrics of “Roadhouse Blues”
“The future’s uncertain anfd the End is always near.”
Woke up this morning and had myself a beer
Let it roll, baby, roll, all night long
Save our cities
Right now….
Classic Rock…suppose he had a vision
https://m.youtube.com/watch?v=aVzxRbtzxTA
PS the woman dancing in the video the Greek actress Aliki Vougiouklaki
Aliki Stamatina Vougiouklaki (Greek: Αλίκη Σταματίνα Βουγιουκλάκη Greek pronunciation: [aˈlici stamaˈtina vuʝuˈklaci]; 20 July 1934 – 23 July 1996) was a Greek actress, best known for her films and theatrical plays, and theatrical producer. She was one of the most popular actresses in Greece, and was given the title of the National Star of Greece. Theatrically she has mostly created renditions of widely known Broadway musicals as well as Greek tragedy plays. She died after fighting pancreatic cancer at the age of 62.
https://en.wikipedia.org/wiki/Aliki_Vougiouklaki
okay, intermission is now over…
excellent article, Gail… minor point:
the title would be better as “the peak oil story IS close but not quite right”…
in conjunction with the previous article, this is LTG Peak Oil…
but since it’s a convincing case that the matter really is about the energy mix…
the better phrase is LTG Peak Energy…
or LTG Peak Surplus Energy…
I will see how OCD I will be about LTG Peak Surplus Energy in the coming days…
I, myself, planning to corner the market of discarded tires!!! They burn real well and produce a blanket of smog to insulate the sky….Geo engineering at it’s finest.!
A single passenger car tire can yield up two gallons of oil according to EPA when properly processed.
Read more at https://www.momtastic.com/webecoist/2013/05/28/burn-rubber-the-worlds-9-worst-tire-fires/#CLjSuGBGJPllPmR1.99
See….problem solved for the moment.
I do need help in figuring out what to use as title. Your suggestion probably would have been better. I know that some sites that copy my articles over use different titles, anyhow.
You are right. We are reaching LTG Peak Energy. We are probably passed LTG Peak Surplus Energy. The drop in oil prices starting in 2014 severely dropped the amount that governments of exporters could collect. This is a big part of our problem. To me, it signals that surplus energy is too low. Also, China’s problem, because its coal has become unprofitable to extract, unless it cuts off imports.
She is much loved amongst Greeks, even to this day. Left too young.
Gail
I think you nailed it by bringing in rates/time into the discussion. Energy is a flow, it fluctuates and ‘rate’ is part of the discussion / calculation about EROI.
‘Investment’ can perhaps also be looked at from the point of view of maintaining economic returns from fewer energy inputs and for longer periods. For example, low maintenance / replacement costs of legacy structures could be factored in to calculations. I think of an ancient example: the survival of Roman aquaducts. Or perhaps also of rice cultivation terraces harvesting sunlight in agrarian economies.
Likewise, I like your use of the term ‘surplus energy’.
best
Phil
Thanks! Instead of Energy Return on Energy Invested, the situation is almost a Power Return on Power Invested function. In every time period, no matter how short, there needs to be a positive return.
Allowing wind turbine manufacturers and solar producers to put together fictitious estimates regarding how long their product will last, with how little additional energy inputs, and not correcting for the time differences creates a much better supposed return than is actually the case. Needless to say, all the things that can go wrong over the time period are missed as well.
You are right about low maintenance legacy structures being important. It is not a good idea to pull them down because of a strange pricing scheme required to support subsidized intermittent electricity.
Gotta steal Venezuela’s oil to keep the boat afloat.
Car-commuters can’t afford high prices!
https://imgur.com/a/SNkPCPu
We will see how that works out.
Can you say Bay Of Pigs?
Meanwhile, you can’t imagine how utterly sanguine the Caribbean is (not Cuba, I suspect) as its subsidized oil supply teeters on the brink. Not a care in the world.
Yep, the sudden refocus on Venezuela since announced ~leaving Syria-Afghanistan~ is particularly puzzling, it could be just a coincidence or not. Perhaps at some point US would try implement a strategy of no longer full spectrum global dominance but rather smaller/closer empire reach, and for that you have to control regional resources base ala Venezuela’s more directly.
Not sure how they plan to cook that heavy oil or blend it somehow with ever subsidized shale?
Refocus on the Americas seems like a reasonable assessment. Overthrowing the largest and most oil rich countries in Latin America would be a good place to start. God knows they’ve never stopped trying to overthrow Cuba. But as this program succeeds, the poor might not be content to be further and increasingly squeezed? Latin American dictatorships are not sweet and kind. How is this policy going to be maintainable even for the mighty US?
Gail, thanks for the article.
It’s very useful how you coined the “grace period” for this affordability masking time zone before the necessary resolution finally hits, be it crash or another clever (yet temporary) attempts at delaying scheme as Andrea hinted possibly a sort of grand jubilee and or in combo with triage of some regions out of pool of IC countries..
HI Gail,
did you mean afterword rather than afterward?
Another great article!
Niko
Thanks! Fixed it!
The true question is, when will the oil supply fail, in a serious way, to meet the demand?
This has never happened in the world. Never!! There have been short-term, regional shortages – which have been devastating, but solvable – but when the world begins running short, someone will not get the oil they need and expected. Which means (gasp!) gasoline shortages! Oh No!
Suppose you got up tomorrow and heard on the “radio” that there could be gasoline shortages soon in your area. What will you do? Hmmm? Of course, you have 1/4 tank, so you won’t worry about it, right?
BULLSHIT!
You’ll jump in the car, and go screaming to the nearest gas station and fill that tank! If you have any 5-gallon gas cans handy, you’ll fill those too! Don’t tell me you won’t. I will! Bet your ass I will!
And when “everyone” does that – and you know they will – we will drain every gas station in the land. The average gas tank has about 1/4 tank right now. And nobody cares – we can get gas anytime, anywhere. But the fact is: There is not enough gasoline in the country to fill every gas tank!
All it takes is an energy panic, and we will create what we fear, a gasoline shortage. And once that mentality is implanted in our heads, we will keep that gas tank filled at every opportunity. whether we will need it or not. I will.
But the system can’t withstand that. We simply don’t make enough gasoline for everyone to have a full tank. We never have and never will. But once there are serious shortages of gasoline – which must happen someday – there will always be shortages. Human hoarding will guarantee it. It will likely lead to governmental control of all fossil fuels. There will be no choice.
Enjoy your next fill-up. Someday (soon) you will remember it fondly..
https://www.wsj.com/articles/iea-says-global-oil-discoveries-at-record-low-in-2016-1493244000
https://www.wsj.com/articles/saudi-minister-sees-end-of-oil-price-slump-1476870790
https://www.cnbc.com/2018/11/09/goldman-sachs-there-will-be-an-oil-shortage-in-the-2020s.html
https://www.ft.com/content/a1eb0e58-d7a4-11e8-ab8e-6be0dcf18713
This scenario typically plays out at any Walmart store when a disaster is heading their way. Stores are usually depleted within hours of a natural disaster such as a hurricane.
Bingo!
We have a winner.
The difference with oil, is there is no option.
You cut back, you don’t work, for the suburban proletariat, with ill thought greed head organization .
Not everyone lives in San Francisco——
“You’ll jump in the car, and go screaming to the nearest gas station and fill that tank! If you have any 5-gallon gas cans handy, you’ll fill those too! Don’t tell me you won’t. I will!”
And how will you be paying for that gas?
I don’t disagree with your assessment of how humans respond to crisis (i.e. by hording), but your model/example seems to assuming everything will continue to be the same *despite* mentioning falling demand. Thus it sounds more like the scenario Rodster describes below – a natural disaster.
It might be enlightening to ask: How did demand fall in the first place? What does the world look like when demand is collapsing? And will people still respond the same way in these conditions?
Perhaps in a world of collapsing demand, people having no jobs to commute to, no expensive cars to put gas into anymore, no money to buy said gas with in any event, and thus no means (or reason) to go running out the door and screaming down to the local gas station to “fill up”…
There is no falling demand when you add around one billion new people to the world every 12 years..And the main driver of oil demand is Asia..And there are no affordability issues there..China’s per captia income has increased five fold over the last 30 years..
“There is no falling demand when you add around one billion new people to the world every 12 years”
Demand is what you can afford, not what you want.
I can imagine those billion people want a whole bunch of things, but without dollars in their pockets (or torches & pitchforks in their hands), they’re not going to consume much of anything.
“China’s per captia income has increased five fold over the last 30 years”
I guess that will continue indefinitely?
Extrapolating past trends to predict future events… are you sure you’re not a career economist, Baby Doomer? 🙂
Or in an alternative scenario, there is no oil shortage but instead the price of gasoline becomes unaffordable to more and more people as their income shrinks so much relative to the price of crude that it becomes literally “black gold”.
https://youtu.be/NwzaxUF0k18
And then you’ll waste even more gas always driving around looking for some gas to top off your tank.
This is true. I remember reading Matt Simmons “Twilight In The Desert” where he talked about panic buying of fuel. And how it would take weeks to recover from a panic buying scenario – in normal times. If there are shortages then it would be even more difficult to replenish all the gas pumps with fuel. It is a very real danger. The trucks that deliver fuel take fuel to run on as well. So, a “run on the fuel supply bank” could strand even the trucks that deliver fuel.
Ivanhoe on Hubbert 1997. http://hubbert.mines.edu/news/Ivanhoe_97-1.pdf
Ivanhoe writes,
“Hubbert wrote virtually nothing about details of the “decline side” of his Hubbert Curve, except to mention that the ultimate shape of the decline side would depend upon the facts and not on any assumptions or formulae. The decline side does not have to be symmetrical to the ascending side of the curve – it is just easier to draw it as such, but no rules apply. The ascending curve depends on the skill/luck of the explorationists while the descending side may fall off more rapidly due to the public’s acquired taste for petroleum products – or more slowly due to government controls to reduce consumption.”
The faith that many peak oilers have that the second 50% will look like a mirror image of the first 50% doesn’t really come from Hubbert. It is more something that has been picked up along the way, to facilitate writing about how “wedges” of this and that can be used to supplement oil production. This is a wedge figure used by Robert Hirsch in the 2005 Hirsch Report. It talks about substitutes such as coal to liquids.
https://gailtheactuary.files.wordpress.com/2019/01/robert-hirsch-mitigation-wedge-after-peak-oil.png
It is interesting that you mention the Seneca cliff here. I have always felt there is a very grave underlying danger as we reach the point of peak and contraction in the energy supply. I have read many times that once we reach the ~50% point (the peak of the Hubbert bell) then any attempts we do beyond that point that do increase production will come at the expense of steeper rates of collapse when the production levels cannot be maintained. Simply put the farther we push production increases higher every year (once we past peak ~2005) the steeper the “Seneca Cliff” becomes. Like a ocean wave cresting and breaking. And to think we have been riding this wave since 2005…..scary!
While most would accept that the mid-2000’s as the peak, I always think back to the late 70s / early 80s (though I was only a baby then) as when the age of cheap oil ended and the age of financialization (and the great debt binge) began. Energy collapse aside for a moment, I would assume any financial crash/collapse would take us back to at least that point in time / standard of living, and probably past it for quite sometime (as crashes always seem to over correct before reverting back to the mean).
I know that the Limits to Growth modeling tended to show steeper rates of decline, the longer and higher the economy grew. I am not sure that the post 50% modeling is very good however, because there is no debt and no financial system in their model. It may be that no matter what happens, the crash is close to straight down.
I tend to agree with the straight down crash. But, for those inclined to believe in a slow collapse – the Seneca Cliff approach is a way to visualize how systems that are in overshoot collapse.
More like 1890 B.C.
News from the housing bubble, Australia.
Credit crunch to trigger worst housing downturn since 1890
https://www.abc.net.au/news/image/8680774-3×2-340×227.jpg
Property prices could ultimately fall by 25 to 30 per cent from their peak, marking the worst downturn since 1890, according to an independent equity market analyst who has modelled the impact of tighter lending standards likely to result from the Hayne royal commission.
Douglas Orr of Endeavour Equity Strategy, last year predicted property prices would fall 20 per cent. But he has now downgraded his forecast based on the “new revelation” late last year that all, or almost all, mortgages written between 2012 and 2016 had used the Household Expenditure Measure to assess borrower expenses. He warned of a rise in loan defaults as recent buyers found themselves in negative equity.
This does sound like a problem. How do all of the banks get bailed out? Are there international connections to this?
The big 4 banks: NAB, ANZ, CBA & Westpac all got bailed out by the U.S. Fed in 2008. Small potatoes back then. Today these 4 banks have grown even more monstrous and parasitic, the chance of another bailout even coming close to rescue is almost zero. The loan book of these banks combined in 2018 was over 120% of the GDP of the country.
Could you please link to any info on this as I thought at the time the big 4 were quite sound in their banking practices and didn’t need bailing out.
Banks have conveniently short memories — why they owe Australian taxpayers
The defenders of the big banks who are outraged over the new tax on the big four plus Macquarie either have conveniently short memories or little understanding of just how exposed these pillars of commerce were during the global financial crisis.
Pro-bank commentators seem to have forgotten how in those dark days credit markets dried up as the world wondered whether capitalism as we knew it was ending.
Critically, the world’s financial lubricant — US dollars — disappeared.
Contrary to popular belief, our banks did not sail through the GFC. Reserve Bank data showed they collectively received $US18 billion in bailout liquidity. And it was Australian taxpayers who carried the risk.
NAB, Westpac tapped into US Fed’s emergency funds
Rudd warned major bank on the brink in 2008
There’s plenty more references, just type the following keyword into your preferred search engine, “australian banks bailed out 2008”.
Much appreciated Psile. I wasn’t aware of that. Though I definitely see them being highly exposed this time around.
Psile,
Sounds just like what happened here in Canada.
We continue to suggest our “Big 6” banks are bulletproof, yet few know / accept the fact that some were bailed out during the GFC.
++++++++++
Canada’s biggest banks accepted tens of billions in government funds during the recession, according to a report released today by the Canadian Centre for Policy Alternatives.
Canada’s banking system is often lauded for being one of the world’s safest. But an analysis by CCPA senior economist David Macdonald concluded that Canada’s major lenders were in a far worse position during the downturn than previously believed.
Macdonald examined data provided by the Canada Mortgage and Housing Corporation, the Office of the Superintendent of Financial Institutions and the big banks themselves for his report published Monday.
It says support for Canadian banks from various agencies reached $114 billion at its peak. That works out to $3,400 for every man, woman and child in Canada, and also to seven per cent of Canada’s gross domestic product in 2009.
The figure is also 10 times the amount Canadian taxpayers spent on the auto industry in 2009.
“At some point during the crisis, three of Canada’s banks — CIBC, BMO, and Scotiabank — were completely under water, with government support exceeding the market value of the company,” Macdonald said.
“Without government supports to fall back on, Canadian banks would have been in serious trouble.”
During October 2008 and June 2010, the banks combined to report $27 billion in profits on their balance sheets.
++++++++++
https://www.cbc.ca/news/business/banks-got-114b-from-governments-during-recession-1.1145997
https://www.huffingtonpost.ca/2012/04/30/canada-bank-bailout_n_1466219.html
If one takes peak conventional oil was about 2005-ish. Then, I think the peak oil story was correct until about the Summer of 2008. Prices sky rocketed as fears of shortages loomed. So, the theory of peak oil and sky high prices was a valid theory – as long as classical economics was valid. Once oil become un-affordable to the general economy, classical economics broke down and the price collapsed. It seems to me that since about the year 2008, peak oil theory as well as classical economic theory – no longer apply. I think we are in an era of peak affordability and irreversible and accelerating rates of diminishing returns. I remember Gail talking about the affordability issue before anyone else could see that oil prices cannot just keep rising. I do believe Gail has a more zoomed out view of our predicament than most bloggers. And I do agree that the peak oil story was not the whole picture.
“I think we are in an era of peak affordability and irreversible and accelerating rates of diminishing returns.”
I agree, Greg. The problem as this period continues is many more consumers will become disenfranchised and the affordability of energy will continue to decline. It’s feeling like a race to the bottom as debt rises, both govt. and household, to stay above the waterline of collapse. Some countries and many individuals are already failing. Until some kind of collapse for all occurs, this period will be one of musical chairs in which more people fall off the ship until BAU can no longer hold together. The trick is to keep your chair as long as possible, because to fall off will feel awful while so many continue to enjoy the fruits of the oil age.
“The trick is to keep your chair as long as possible, because to fall off will feel awful while so many continue to enjoy the fruits of the oil age.”
Ever heard the saying “he who defaults first, defaults best”?
If the oil age is ending and everyone is going to ‘fall off”, falling off earlier might be somewhat of a boon as you may be given the opportunity to adjust your life and learn to be more self-sufficient/sustainable prior to the mother of all collapses…
GBV, I doubt it. Stay in the flow, even if you decide to spend less, at least your in the flow. Get out of the flow completely and you’ll be in a world of hurt. No thanks.
CM,
I guess the point I’m trying to make is that you will continue to be fat and lazy until you are pushed out of “the flow” that permits you to continue to be fat and lazy.
There may be a few who really make the effort to use whatever they gain by remaining in “the flow” to start to prepare and acclimatize themselves to collapse (i.e. prepping, permaculture initiatives, localized social investments), but even they won’t toughen up until they are forced to go without.
Also, consider that if everyone gets pushed out of “the flow” all at once, it will be utter chaos / pandemonium. If people gradually drop out and start to acclimatize, it may be a slightly less chaotic scenario (i.e. less blood in the streets).
But hey, I can’t blame you for wanting to remain fat and lazy! I wish I could as well, but unfortunate events that can’t be undone (and will remain with me until technology & the police state disappear) have already collapsed my life to the point that earning much above minimum wage is unlikely.
+++++++++++++++
Greg, those are good points about the timing when the peak oil story was correct. Since 2008, we have been depending on Quantitative Easing to keep interest rates low enough.
I was not popular with some of the other Oil Drum authors because I didn’t tell the story that they wanted to hear. I started writing at TheOilDrum.com about August 2007. (They recopied some articles from OFW earlier in 2007. By November 2010, they were sufficiently unhappy with my non-peak oil views that I again began writing on OFW, and TOD recopied only the posts that they didn’t object to. TheOilDrum.com closed up operations in September 2013.
This is a link to an article I wrote on Our Finite World back in April 2007, before I started writing for The Oil Drum. https://ourfiniteworld.com/2007/04/22/our-world-is-finite-is-this-a-problem/
In this article, I talk about reaching limits of a finite world. When discussing what happens after energy limits are limits are reached, I say,
1. Initially, higher prices for energy and food items and a major recession.
2. Longer term, a decline in economic activity.
3. Transportation difficulties and electrical outages.
4. Possible collapse of the monetary system.
5. Failure of economic assumptions to hold (because of lack of balance between supply and demand).
6. Changed emphasis to more local production.
7. Reduced emphasis on debt. (No one will be willing to provide debt after all of the defaults.)
8. Reduced emphasis on insurance and pensions. (Hard hit by debt problems.)
9. More people will perform manual labor.
10. Resource wars and migration conflicts.
11. Changes in family relationships. (Co-operation more highly valued.)
12. Eventual population decline.
I don’t think that what I have to say has changed much in 12 years. Notice that I don’t talk about oil, particularly.
I remember that post on OFW. I remember reading your blog as well as TOD back then. Your view of peak affordability was a new way of looking at oil prices (in 2007). I didn’t really get the impression you arguments were rejected. But then again, I was just looking for different viewpoints to try to get a bigger picture of what was going on in 2007. So, I may not have noticed the rejection of your peak affordability theory. I do remember folks arguing that oil is a necessity and people “have to” buy it regardless of price. Clearly, we know now that is not true for individuals or whole countries.
I think that there were some interpersonal dynamics involved as well. Some of the other writers thought that I had too much power and was too much in charge of what got published. If one person ends up doing a disproportionate share of the work (I wasn’t a full time grad student or professor, like several others were), things can work out that way in a volunteer organization.
Well said, my question is: what would draw a limit to financial stimulus? They try to kick the can down the road and keep up the financial system from collapsing. Maybe they will try to do a debt jubilee if all else fails. For how long they can fake it, and act as all is fine? Thanks for all, for your take on it!
I suppose there is more than one limit.
Interest rates can’t go a whole lot below zero. That is one limit. The US is a little above that limit now, but my understanding is that Europe and Japan are still close to zero or below, so that they don’t have much farther that they can go. Countries depend on borrowing from abroad, like India, can’t really do this. Also, at some point, low interest rates reduce where a country’s currency floats relative to other countries, making the purchase of raw materials expensive.
Buying back debt with money created out of nowhere can go on for quite a while. After some point, there isn’t much more that can easily be bought back. I was under the impression that Japan was reaching this limit.
The purpose of lowering interest rates and buying back debt is to try to make goods and services more affordable for the general public, despite commodity prices are high. This works best if the interest rate changes and debt buybacks lead to truly higher energy production and jobs. This works best if there is oil or other energy supply that can rapidly be raised, thanks to higher prices. If there is little benefit from the lower interest rates or debt buybacks, then pursuing lower interest rates or debt buybacks doesn’t make much sense.