A Different View of Venezuela’s Energy Problems

It would be easy to write a story about Venezuela’s energy problems and, in it, focus on the corruption and mismanagement that have taken place. This would make it look like Venezuela’s problems were different from everyone else’s. Taking this approach, it would be easy to argue that the problems wouldn’t have happened, if better leaders had been elected and if those leaders had chosen better policies.

I think that there is far more behind Venezuela’s financial and energy problems than corruption and mismanagement.

As I see the story, Venezuela realized that it had huge oil resources relative to its population, back as early as the 1920s. While these oil resources are substantial, the country misestimated how high a standard of living that these resources could support. To try to work around the issue of setting development goals too high, the country chose the path of distributing the benefits of oil exports in an almost socialistic manner. This socialistic approach, plus increased debt, hid the problem of a standard of living that could not really be supported for many years. Recent problems in Venezuela show that these approaches cannot be permanent solutions. In fact, it seems likely that Venezuela will be one of the first oil-exporting nations to collapse.

How the Subsidy from High-Priced Exported Oil Works 

Oil is a strange resource. The cost of oil production tends to be quite low, especially for oil exporters. The selling price is based on a world oil price that changes from day to day, depending on what some would call “demand.” The difference between the selling price and the cost of extraction can make oil exporters rich. In a sense, this difference might be considered an “energy surplus” that is being distributed to the economies of oil exporters. The greater the energy surplus being distributed, the greater the quantity of goods and services (made with energy products) that can be purchased from outside the country with the hard currency that is made available through the sale of oil.

In fact, the existence of such a profitable resource tends to crowd out development of other, less profitable, enterprises. Thus, Venezuela has tended to be a country whose economy revolves around oil. There is a small amount of agriculture and quite a bit of services, but for the most part, the goods used by the economy must be purchased from outside the country. Furthermore, nearly all of the revenue that is available to purchase these goods comes from the sale of oil exports. Thus, the economy tends to follow the fortune of oil sales.

Figure 1 shows a rough estimate of the benefit that Venezuela’s oil exports have provided in inflation-adjusted US dollars. Based on this approach, the per capita benefit from oil exports seems to have peaked very early, in about 1981.

Figure 1. Venezuela per capita value of oil exports, calculated by multiplying Venezuela’s year-by-year quantity of oil exports by the price in 2017$ of oil, and dividing by estimated population. Both price and quantity determined using BP 2018 Statistical Review of World Energy. Population based on 2017 United Nations middle estimates.

The people of Venezuela did not realize that the amount of benefit that oil exports would provide would start falling very early. Instead, leaders set their sights on living standards that would be affordable if the level of subsidy that the economy could obtain from oil exports were to remain as high as during the 1973 to 1981 period.

Figure 2 shows how much energy the population, on average, consumed over the 1965 to 2017 period. This figure shows that energy consumption per capita rose dramatically between 1973 and 1981. In this way, citizens were able to benefit from the huge rise in per capita oil export revenue, shown in Figure 1.

Figure 2. Energy consumption per capita for Venezuela, based on BP 2018 Statistical Review of World Energy data.

This higher level of energy consumption meant that the economy readjusted in a way that added more goods and services using energy. For example, the economy added paved roads, airports, schools, electricity generating capacity and healthcare. People came to expect this higher standard of living going forward, even if the level of subsidy that oil exports had been adding was rapidly disappearing.

The way the amounts in Figure 1 “work” is that they depend both on the quantity of oil exported and the market price for that oil. If Venezuela’s oil exports are not rising quickly enough, or if the price of oil is not high enough, the level of oil subsidy fails to rise enough to support the economy. Also, rising population becomes an issue because as population rises, more homes, cars, electricity, streets, and other goods (requiring energy consumption) are needed. Because Venezuela must import practically everything other than oil, it must either (a) export an increasing quantity of oil per year, or (b) get an increasingly high price for the oil it exports, if it wishes to support its rising population at its chosen standard of living.

It became evident very early that Venezuela had set its sights on a living standard that was far higher than it could really support. In the period since 1965, Venezuela’s first debt crisis took place in 1982, as the subsidy suddenly started falling. Later debt crises occurred in 1990, 1995, 1996, 1997, 1998, 2004, and 2017. Clearly, as soon as the per capita subsidy started falling in 1982 (see Figure 1), Venezuela’s economy became very troubled. It could not really support its chosen standard of living.

How could Venezuela hide the problem of an unsupportable living standard for over 35 years?

I see three major ways the insupportable living standard could be hidden:

(a) Pushing the problem off into the future using added debt

Nearly everyone is willing to believe that oil prices will rise as high as is needed to extract oil resources that seem to be available with current technology. Would-be lenders are also willing to believe that oil resources can be extracted as rapidly as needed to support the economy. Given this combination of beliefs, Venezuela has had little difficulty adding more debt, even in periods not long after it has been forced to restructure previous debt.

Recently, the biggest lender to Venezuela has been China. With this arrangement, Venezuela has been able to obtain the economic benefit of part of its oil resources, before the oil has actually been extracted. Unfortunately, this arrangement makes Venezuela more quickly susceptible to the adverse impact of a downturn in oil prices. To make matters worse, the debt to China appears to include a provision that creates a lower repayment level (in oil) if prices rise, but creates a higher repayment level (in oil) if oil prices fall. This provision no doubt looked favorable to Venezuela, back in the time period when it was believed that oil prices could only rise.

As far as I know, Venezuela is the only oil exporting country that has used debt as extensively as it has. Some oil exporters, such as Saudi Arabia, have taken the opposite approach, setting aside reserve funds to use in the event that oil prices fall. Needless to say, Venezuela’s use of debt has tended to make its economy very vulnerable to restructuring or defaults if oil prices fall.

(b) Pursuing economic simplification 

A complex economy is one that is set up, as much as possible, to keep up with growing technology. A significant share of expenditures go both toward making new capital goods and maintaining existing capital goods. There are considerable differences in pay levels, to make certain that those who are providing technical expertise are adequately compensated for their efforts. Business leaders also are adequately compensated for their contributions.

A much simpler economy, which is what most of the Venezuelan leaders have been aiming for, is an economy in which everyone gets a basic level of housing, transportation, and healthcare, but virtually no one gets very much. There is also not much investment in new technology and new capital goods because nearly all of the hard currency being obtained by selling oil exports is being used to purchase imported goods and services to support the basic level of goods and services (such as roads, electricity, education, and food) being provided to the many citizens of the economy. Since the external value of oil exports sets an upper limit on the quantity of goods and services that Venezuela can import, this leaves virtually no capacity to purchase imported goods and services needed to support new capital investment and research.

In Venezuela’s economy, the cost of both oil and electricity have been kept very low–below the cost of production. This helps keep citizens happy, but it also cuts off funds for new investment in these areas. This, too, is part of the simple economy approach.

One disadvantage of a simple economy is that the low wages for engineers and other professionals encourage these professionals to move to other countries, where compensation is more adequate. Another disadvantage of a simple economy is that it encourages bribery, because graft is a way of adjusting the system so that those who “can make things happen” are adequately compensated for their efforts. The simple economy approach also tends to discourage research and investment in new areas, such as natural gas production and improved methods of heavy oil extraction.

A simple economy can be kept operating for a while, but it quickly reaches limits in many ways:

  • The limited skill level of residents who have not emigrated for higher wages elsewhere makes the completion of complex projects, such as new electricity generation facilities, difficult.
  • The inadequate level of oil export revenue puts a limit on the amount of spare parts and other goods needed to maintain the infrastructure, such as electricity transmission.
  • As existing oil wells deplete, little funding (in hard currency needed for imports) is available to make investments in new wells for extraction.
  • Research on new techniques for oil extraction is also inhibited.

(c) Neglect of current systems becomes an increasing issue, as the lack of hard currency revenue from oil exports becomes a bigger issue. 

Venezuela can, in theory, buy what it needs from abroad, but there is a limit to the total amount of goods and services that can be imported, based on the amount of hard currency funds it obtains from selling crude oil. If the price of oil falls, then Venezuela must, in some way, cut back on goods and services that it had previously supplied. One of the least obvious way of doing this is by cutting back on maintenance and repairs.

The recent long electricity outage in Venezuela seems to be at least partially related to neglect of usual maintenance activities. It seems that Venezuela’s state-owned electrical company failed to keep the brush cleared under electric transmission lines leading away from the very major Guri Dam. It now appears that one of the causes of Venezuela’s recent long electricity outage was damage to transmission lines caused by a brush fire within the Guri complex. This could perhaps have been prevented by better maintenance.

Figure 2 shows that energy consumption per capita has been falling, especially since 2011. This would suggest that standards of living have been falling. Needless to say, if Venezuela’s oil exports drop further, a further reduction in standard of living can be expected.

Why Is America Issuing Sanctions Against Venezuela’s Oil Company PDVSA?

On January 28, 2019, the United States imposed sanctions against Venezuela’s state oil company, PDVSA. The reasons given for these sanctions are the following:

  • To hold accountable those responsible for Venezuela’s tragic decline in oil supply
  • To restore democracy
  • To help prevent further diverting of Venezuela’s assets by Maduro, and thereby preserve those assets for the people of Venezuela

These reasons sound good, but I expect that the primary real reason for the sanctions was to try to take Venezuela’s oil production offline and, through this action, force oil prices higher.

World oil prices have been far too low for oil producers since at least 2014.

Figure 3. Historical inflation-adjusted oil prices, based on inflation adjusted Brent-equivalent oil prices shown in BP 2018 Statistical Review of World Energy.

Many people, thinking about the oil price situation from the consumers’ point of view, are completely unaware of the problem that low oil prices can cause for producers. Oil producers may not go out of business immediately because of low oil prices, but eventually the low prices will cause a cutback in investment, and thus production. Countries that have sold some of their oil production in advance, such as Venezuela, are especially vulnerable.

Figure 4. Venezuela’s energy production by type, based on data of BP 2018 Statistical Review of World Energy.

Figure 4 shows that oil production for Venezuela has been dropping for a very long time. Its highest year of production was 1970, the same early high year as for the United States’ oil extraction. Natural gas is mostly “associated” gas, which is made available through oil production. Hydroelectric is small in comparison to oil and gas. Hydroelectric production has been generally falling since 2008.

There is a widespread belief among oil executives and politicians that reducing oil production will force oil prices up. I expect to see, at most, a brief spike in oil prices. The major issue is that the world economy is a networked system. Prices for oil and for electricity cannot rise higher than consumers, in the aggregate, can afford. If there is too much wage disparity around the world, the low wages of many workers will tend to hold oil prices down, because these workers cannot afford goods such as smartphones and automobiles made with oil and other energy products. These lower oil prices reflect the fact that the economy has been changing in ways that leave less surplus energy to distribute to oil exporters to operate their economies.

The way the networked economy works is determined by the laws of physics, whether we like it or not. As far as I can see, the end of oil extraction comes because oil prices cannot be raised high enough to make extraction profitable. Once oil extraction becomes unprofitable, oil exporting nations will start collapsing. Venezuela is the “canary in the coal mine” in this collapse process, because of the extensive use it has made of debt.

What If Oil Prices Can Be Forced Upward? 

If somehow oil prices could be forced up by reducing Venezuela’s exports to practically zero, this would have a double benefit:

  1. More oil from around the world, including the United States, could be profitably extracted, because oil resources that are more expensive to produce would suddenly become profitable.
  2. Venezuela’s oil could be more profitably extracted.

If prices actually rise, and if the United States remains in control of the situation, the US could theoretically expand Venezuela’s oil production. Venezuela has the largest oil reserves of any country in the world. Its expected cost of production is relatively low, if the exports of oil are not expected to support essentially the whole economy. The cost of pulling the oil out of the ground in Venezuela seems to be about $28 per barrel, if we believe a 2016 estimate by Rystad Energy.

Figure 5. Cost of producing a barrel of oil and gas in 2016. WSJ figure based on Rystead Energy analysis.

The cost of supporting the entire economy with the revenue from oil exports is far higher. Figure 6 shows that back in 2013-2014, the cost of oil, including the subsidies needed to maintain the operation of the rest of the economy, amounted to about $110 per barrel. I would expect that with all of Venezuela’s debt, the real cost might be even higher than this.

Figure 6. Estimate of OPEC break-even oil prices, including tax requirements by parent countries, from Arab Petroleum Investments Corporation.

If the US doesn’t plan to support all of Venezuela’s population with the export revenues from oil extraction, it can theoretically extract the oil more economically than the $110 per barrel price that is needed to support the whole economy. Thus, it could get along with a price closer to $28 per barrel.

Furthermore, the investment capabilities and technical expertise of the United States could, at least in theory, ramp up Venezuela’s oil production, if this is desired at some future date. Similarly, “non-associated” natural gas production could be ramped up, if desired, because this seems to be available, but has been neglected.

I expect that all of this development would be more difficult and expensive than a simple comparison such as this seems to suggest. The ultimate problem is that a whole economy needs to be in place to make the extraction possible. Even if a cursory examination suggests that substantial savings are possible, the cost associated with maintaining necessary support services would make the total cost of energy extraction much higher.


Venezuela seems to be the canary in the coal mine with respect to where oil exporters are headed. Other countries will want to push them out of oil production, so as to try to raise prices for themselves. Debt defaults and lack of availability of debt may also become issues.

One item of interest is the fact that in Venezuela, lack of oil revenues can adversely affect electricity supply. Thus, we should not be surprised if electricity supply fails at about the same time that oil production falls. Even electricity supply provided by hydroelectric plants seems to be at risk.

Another item of interest is how Venezuela’s attempt at even distribution of goods and services, using a somewhat socialistic approach, is working out. This approach (which is now being advocated by some political candidates) seems to have some short-term benefits, because it tends to keep the population happy–almost everyone seems to have a minimum standard of living. But, over the long term, this approach leads to the loss of the ability to maintain today’s high-tech economy. This approach doesn’t prevent collapse either, because a lack of investment and expertise eventually causes important parts of the system to stop operating.



About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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1,454 Responses to A Different View of Venezuela’s Energy Problems

  1. Sheila chambers says:

    So you think the US want’s to curtail Venenzualia’s oil production to raise prices? Venenzualia oil production was already in decline so if that was the goal of the US, all it had to do was, nothing.

    I suspect the real reason it wants Maduro out & Gwido in is that US fracked oil production will soon tank, the value of stocks of fracking companies is crashing, they have been losing money for years & paying dividends by borrowing, but if the banks won’t lend them more $$ & investors stop investing in a losing enterprise, production from fracking will collapse & oil prices will rise, temporarily if the economy can’t support those higher prices & past high oil prices proved it can’t.

    Also Venenzualia’s oil is very heavy but it can be upgraded with light fracked oil to produce transportation fuels that the OIL powered, US military empire needs.
    I guess the US empire doesn’t think that Venenzualia’s economy isn’t collapsing fast enough so it’s forcing it’s collapse so it can install it’s puppet who will then allow US oil companies to take over Venenzualia’s oil fields, ship it’s oil to US refineries so it can upgrade it with it’s fracked oil.
    That move will probably stall our collapse.

    • This looks dead on, excellent analysis Sheila, thank you. Interesting to see what Gail says, perhaps I’ve missed something..

      • John Doyle says:

        I think so too. I did read that Venezuela’s oil cannot be fractioned in Venezuela. No plants were allowed to be stationed there[?]. This means that for petrol and kerosene etc Venezuela has to import it all for domestic consumption. That certainly doesn’t help.

        I wouldn’t blame socialism. You have to blame the management of it, often highly incompetent. The USA is partly socialist, what I call ‘small S’ socialism. The Military and the police are included as well as social security ,infrastructure and education and healthcare. These are partly privatised at great cost to the nation, now looking decidedly third world, because of it. At least when you call the Police they don’t have to ask you for your credit card number.

        • “At least when you call the Police they don’t have to ask you for your credit card number.”

          Yes, John – there are some benefits:
          In my part of the UK, Somerset, the police don’t even turn up, they are so laid back. But I must admit that crime is somewhat limited here.

          • Dan says:

            Here in police states of america I’m more intimidated and fearful of the police than criminals or crime. In fact when you factor in taxed to pay for them to act like an occupying army they have taken more from me than any criminal ever could.

    • Rodster says:

      I tend to agree with this as well and some who follow the geopolitics surrounding Venezuela say pretty much the same thing. The rolling (US sabotage) blackouts and US sanctions have crippled Muduro’s country.

      There are also reports that there is plenty of food in the country and that most have gone to a non meat diet becuase it’s too expensive.

      • Phil D says:

        No, 20 years of ham-fisted socialism crippled the country. The (very recent) sanctions are just the final nail in the coffin. The rolling blackouts were already a thing several years ago. They’ve just accelerated in frequency more recently.

        • Rodster says:

          The Venezuela situation is right out of the playbook of John Perkins “confessions of an economic hitman”. Yeah I see the USSA’s fingerprints all over the Venezuelan crisis. I stopped listening to the USSA with “that Saddam Hussein has WMD’s. Fool me once, shame on you, fool me twice shame on me.

          • ouigtfsyikjnj says:

            Saddam was a madman. He had plenty of chemical perhaps some biological. Chemical used both in iran iraq war and on civilians the kurds. No one liked Saddam. While the shia didnt have us kissing babies like we thought saddam was hated. Most of the Iraq military didnt put up a real fight. The ones that wernt decimated. Saddam had to go.

            • Dan says:

              Do you honestly believe Iraq is better off today than before we invaded? Can you explain to me if the region is better off and why?
              While you shed your tears over chemical attacks (which is atrocious) think about the tons and tons of depleted uranium we have littered Iraq with from our munitions.
              I really want your answer here on how Iraq is better off – I’ll grant you SH was an ahole but having your country invaded and occupied by a power that wants resources is no picnic either.

          • Absolutely agree Rodster, you are so right to distrust Amercia. IMO they are losing credibility daily. When I read John Perkin’s book I was reminded of another one I read a long time ago but cant remember the title. It was about all the false flags initiated by USA over the years. I remember the ‘Tonkin’ incident and Northwards proposed operation on Cuba, but little else.

        • Lastcall says:

          Very recent…since 1994… guess thats a blink in geologic time but it forever when it comes to financial terms.

          VZ has suffered the modern equivalent of a medieval siege at the hands of the US regime. But the US regime grows impatient, as they did with the Syrian govt.

          I do believe that the US regime has a lower voter ‘legitimacy’ than the Maduro Govt?
          Just saying.
          Election meddling anyone?

        • Richard Benton says:

          Evidence please You have submitted none

    • The US needs higher oil prices now. The US saying that it doesn’t plan to raise interest rates has pushed the US dollar down, making the US’s oil prices higher. But it could use even more uplift to the dollar and the price. Waiting for Venezuela’s production to fall would be to slow. Also, the country would tend to fall apart as its exports drop. Doing something before everything falls apart would, in some sense, be optimal. Otherwise, the oil production from Venezuela is permanently lost. In fact, it may already be permanently lost, because the electricity system is in such terrible condition.

      I don’t know how the US will do this. I think it will take more than US oil companies going in. There has to be a huge investment in electricity, as well, for example. I am not sure anyone has thought this through. A puppet government can’t really fix the problem, IMO.

      • Khong says:

        Could Nuclear Power hold the answer? Its reactions pound per pound has a higher energy density after all? Could it be the holy grail to all this?

        I see China is investing heavily into Nuclear Power research. And even Saudi Arabia too is investing in Nuclear Power.

        Should help kick the can down the road at the very least in your scenario, at least until we run out of fission fuel.

    • ;'/kjghc says:

      Nice comment! Enjoyed omost as much as the comments from the one who is gone who may not be mentioned 🙂

  2. Pearce m. Schaudies says:

    Greetings from the Big Mango (Bkk).
    Thanks Gail, for a very credible alternative View. It also highlights the significance of large debt collapse.

    With the coming decline or choppiness in production you indicated last post, would you anticipate the US taking the oil industry under National control? They would then make sure the military got their cut first and the rest of us got Ration cards.

    • Countries normally take over oil companies in order to gain revenue from them. Taking over money-losing operations, when the US is already having debt problems, doesn’t sound like an option most would favor. Also, it takes a whole lot of specialist to run an oil company. They have to be paid big bucks, in order to work. This also isn’t something that the US wants to get involved with.

  3. Tony Weddle says:

    Good analysis but I’m confused about the references to the US being in control or having the ability to decide how export revenues are used. Could you expand a bit more on that?

    • The United States is Venezuela’s biggest trading partner, both for exports and imports. If the US “cuts off” Venezuela, it is in tough shape. It doesn’t need to send in military.

      • Tony Weddle says:

        Thanks, Gail. Well, the US could certainly wreak havoc but I’m not sure that equates to being in control of the situation or being able to dictate how Venezeula’s revenues are used.

        • The Venezuelan economy is already on the edge of collapse. Having its biggest import/export partner cut it off would likely push it over the edge.

          Also, a portion of its exports are already pre-sold to China, and perhaps some to Russia. The US would try to cut them out of the deal. As long as they take part of the total, Venezuela is definitely headed for collapse quickly, even without US actions. If the US can cut out China/Russia, that would leave more for the US and the Venezuelan people.

  4. Harry McGibbs says:

    “At the end of 2015, managers at Rosneft, the Russian state-controlled oil firm, sounded the alarm to their bosses about the company’s investments in Venezuela. Rosneft’s local partner, Venezuelan state oil company PDVSA, owed it hundreds of millions of dollars, according to internal documents, and there seemed no prospect things would get better…

    “Rosneft was standing by its Venezuelan partner just as the Kremlin was supporting leader Hugo Chavez and his successor as president, Nicolas Maduro…

    “Rosneft has poured around $9 billion into Venezuelan projects since 2010 but has yet to break even, Reuters has calculated, based on Rosneft’s annual reports, its public disclosures and the internal documents.”


    • Harry McGibbs says:

      And another post peak oil producer in a pickle:

      “…[UK North Sea] drilling activity is at a “record low rate” and supply chain firms remain under “significant financial stress”.

      “The report states that operators will need to spend £200bn over the next 16 years to achieve “Vision 2035”, an industry objective to extend the life of the UK offshore sector.”


    • Interesting! More money-losing oil operations. Anyone want to take this over?

      • As .no controls ~ $750B portfolio in their wealth fund, they can easily ‘borrow against’ that and subsidize the energy – extractive industries for many years to come. Again, lets repeat the fundamental key change, since ~2008 aftermath the question of debts, deficits, and negative yields does not matter anymore. It’s simply a new paradigm VISIBLY agreed upon and performed daily by the CBs, govs, and biggest private stakeholders GLOBALLY. It’s the (very?) last stage of the unchained credit system going back to late 17th century (in the global sense). We have to wait till serious political realignments occurs due to ECoE prosperity impoverishment (unlikely) or real physical shortages intervene first (more likely). But at that edge cliff point the chaos would be unbearable for most to cope with the situation anyway.. so why bother. Actually, even the upper management level people like Macron know that very well, (evidently several PO/surplus energy aware advisers on various gov panels) so why not having a ski holiday during ongoing protests in Paris.. good live continues..

        And again similarly, only now some of the French unions are in lukewarm fashion proclaiming they might consider to join in and mount general strike. But obviously it will be watered down version of that, not true decisive attempt like blocking refineries or other core JITs. They just want some new version of socialist policies in place and go home.

        You see it’s a very slow process, nobody is rushing anywhere as long as food and games are somewhat a plenty. It’s human nature, it’s biology, there is still lot of stuff to be burned on the altar of consuming society even when we likely reached the no growth bumpy plateau..

  5. Craig Walters says:


  6. Harry McGibbs says:

    “…it doesn’t take a catastrophe like war or drought to disrupt [food supplies]. In Venezuela, a country blessed with rich oil reserves, a political crisis driven by rocketing inflation has led to shortages of food and medicine, forcing families to live off rotten meat and leading millions to leave the country all together. The Eurozone crisis that sent Greece’s economy to the brink of collapse also brought food shortages to the struggling country.

    “Meanwhile, disease, poor weather and rising prices have led to shortages of a number of popular crops in recent years. Soaring rice prices led to panic buying in the Philippines and other Asian countries in 2008, causing a supply crisis for this staple food. Bad weather in Europe in 2017 saw prices of many vegetables rise while there also were worldwide shortages of avocados after several countries were hit by poor harvests.

    “The fuel protests that hit the UK in 2000, where farmers and hauliers blockaded oil refineries and fuel depots, led to supermarkets rationing food as they struggled to get deliveries to restock their shelves. Even the stockpiling of food by schools, care homes, hospitals and pessimistic shoppers in the UK ahead of Brexit show what effect even the mere rumour of food shortages can have…”


    • Many thanks Harry, that is a remarkable article; so much so, that I have included it as a footnote in my book. It really does show how people draw together in times of adversity. I remember the 2000 fuel crisis in UK. I was in a supermarket and witnessed an elderly gentleman ahead of me with a basket containing 2 loaves of bread (the shelves were empty). He turned around to get something from a shelf and, whoosh, the bread was gone and a young person was rapidly disappearing down the aisle!

      A salutory lesson for me who tries to think the best of people.

      • Harry McGibbs says:

        You are welcome, Peter.

        The fuel crisis of 2000 is one of the examples of supply-chain vulnerabilities used by David Korowicz in his excellent ‘Trade Off’ paper:

        “…in the UK in 2000, when the UK Home secretary Jack Straw accused the blockading truckers of “threatening the lives of others and trying to put the whole of our economy and society at risk”. This was not hyperbole. As the protest evolved over about ten days, the UK’s Just-in-Time fuel distribution system started to break down.

        “Supermarkets, which had also adapted to Just-in-Time re-supply, began to empty. Supplies and staff could not reach hospitals, forcing emergency-only admission. If it had gone on for only a few days longer, large parts of UK industry would have shut down as the normal operation of re-supply ground to a halt. One of the most advanced and complex societies on the planet was within days of a food security crisis.”


        • Xabier says:

          After the 2011 London riots, supermarkets and other stores in those areas cut their stock levels down even further.

        • Harry, you are a wonderful source of amazing information, many thanks for this one – again I can use it in my book (Part 2) WIP at present and due to be released later this year as the crisis develops. Part 1 – 3rd edition is in the final stages ready for publication in H2 – 2019 (When Brexit is finalised or NOT! Best regards.

        • Harry McGibbs says:

          Bless you for the kind words, Peter.

      • I often get slagged off for pointing out that in times of absolute life threatening crisis, people are only concerned with themselves and immediate kin

      • Xabier says:

        No surprise. In Bilbao these days the immigrant criminals actually specialise in robbing the weak and elderly – they never go near their equals in age or strength.

        In London, my very elderly mother had to endure a house raid by 4 large men, just hours after I’d left her.

        • Harry McGibbs says:

          My goodness – how horribly traumatic, Xabier! Did they catch them? And was she able to continue living there afterwards?

          • Xabier says:

            Fortunately, it wasn’t traumatic at all as it lasted only about 10 minutes and no violence was used or threatened, but they got into every room in that time: they were very skilled, and even walked up her creaking stairs without a sound (I’ve taken notes on their technique!)

            £10,000 in cash gone,and all her jewellery, some 200 years old and very sentimental. They wore vests with pockets into which the loot went, no bags.

            I suspect an awful lot of elderly people have stashes of cash,and these people must make a very good living: only 10% of reported crimes get to court as you know.

            For anyone interested, the initial scout was – as far as I have pieced it together – someone who hung around the street and pretended to be a building worker with tool box, always on his phone. This was one month or so before the robbery, and my mother – who is very intuitive – thought he was dodgy.

            Won’t happen in your island paradise, I’m sure.

            • IMHO, Xabier, it happens all over the world. I spent 10 years in Cape Town and this ploy was so common with the blacks that we always had to take notice when buidling work either private or public was going on. I learned to be very canny during those years having come from innocent UK, which looks as if it’s going this way too. It was never a problem in the 1950s, but that was a more civilised time I believe.

            • Harry McGibbs says:

              Well, we have had some instances of gas canisters being nicked recently, although suspicions as ever are directed at mainlanders, particularly the travelling folk who like to come here and do a spot of coursing.

              Glad your poor mother wasn’t too brutalised. But – ouch! 10k and sentimental losses, too. 😦

        • Sorry to hear that. It can leave emotional scars for life. As a trained humanistic counseller I have come across many examples of these sad cases. I am hoping that under the New Emergent Economy following GFC2 as described in my book, people’s attitudes will change, more like they did during the war here in UK.

  7. Ed says:

    Superb article Gail. Have to go to work now, will comment more later. Thanks.

  8. What we see in Venezuela is the impact of conventional oil production peaking.

    Chavez demonstrates Orinoco extra heavy oil:

    Orinoco oil is not cheap or easy to produce as it does not flow through pipelines. Naphtha or light oil is needed for blending. The funds for developing Orinoco should have been saved during the boom years of conventional oil.

    Peak oil in Venezuela: El Furrial field

    Impact of oil production decline and low oil prices: Venezuela (part 1)

    • Duncan Idaho says:

      “And I believe the history of communism is American history. America owes a great debt to the Red Menace. After all, the threat of Communism inspired us to our greatest achievements. The communists forced our hand on issues of poverty, lest the entire American capitalist project be swept away in a tide of home-grown Bolshevism. They held us morally responsible for our quotidian atrocities. They made us appreciate the arts. They made us stronger and faster. They sent us all the way to the moon.

      Watching Rachel Maddow babble and hiss about Russians cutting your gas lines, one might come to the conclusion she’s merely a xenophobic paranoiac—which she indeed is. But when you catch all the anachronistic hammer and sickle iconography that so often accompanies our recent Russophobia revival, it’s clear that we’re not merely panicking, we’re mourning, and that we’re nostalgic for a worthy opponent. We miss the Soviets. Sure we make eyes at China, (who yes, looks stunning in red), but it’s just not the same. We are all the poorer for the loss of the communist states. The whole world is.”

      • richard Benton says:

        indeed it was strange to hear the west all these years completely lose their minds over communism as though it was the worst thing that ever happened since the beginning of time. A philosophy that wanted to help people, and make them more cooperative. Not that it worked out that way mind you. Let us remember 2 things 1)The US had 10000 troops in Russia during the civil war after 1917.The Russian paranoia about foreign intervention was legitimate 2)Some of the estimates of the death tolls from alleged atrocities (the higher ones)are categorically impossible given the demographics of Russian census. Its complicated as to what exactly happened. I have no doubt “things were done “For my money I have never seen anything like the explicit photographic evidence we saw of the camps in Germany. The fact is the Soviets did do some good things. The Sputnik launch did inspire a resurgence of science in the US-no doubt. We need to work with the Russians and all humanity to get through the coming depletion of resources. I am a fan of JM Greer’s catabolic collapse model.In any case people who live in glass houses shouldn’t throw rocks.The USis not and never will be a shining city on a hill.Its just one more nation state ina long line,and its behavior dovetails with historic trends

        • I don’t think democracy is possible without a fairly high level of energy per capita. Governments take energy to operate. The simplest system is simply a medicine man or king or other ruler to be in charge, with a few assistants if needed. More complex economies can be possible with more energy per capita.

          Having a very diverse economy, with each person having a lot of freedom on what he/she can do, also takes a lot of energy per capita. A teacher can teach much more easily to a group of students who all memorize the same material, rather than accommodating students from many different backgrounds and ability levels. This has to do with how much complexity the economy can have.

          I expect that quite a few of the atrocities have to do with not enough cheap resources to go around. Killing off part of the population raises the food per capita.

  9. SuperTramp says:

    Folks…don’t push the Panic Button yet….but keep your thumb on it …just in case they cut rates

    The yield on the benchmark 10-year Treasury note fell to its lowest level since January 2018 on Thursday, a day after the Federal Reserve held interest rates steady and suggested it may not need to adjust rates again for the rest of the year.

    The Fed also downgraded its economic forecast for the U.S. economy and said it plans to end its program of reducing the bonds and mortgage-backed securities it holds on its balance sheet. Investors viewed the move — and subsequent comments from Chair Jerome Powell — as more restrained than expected.

    The 10-year yield held lower at 2.517 percent, while the yield on the 30-year Treasury bond was also lower at 2.965 percent. The yield on the 3-month Treasury bill, more sensitive to changes in Fed policy, was up at 2.48 percent, higher than the rate of return on both the 2-year Treasury note and the 5-year Treasury note

    Gail, very good write up on the dynamics of Venuezal and their Public Economic History under Socialism. Makes me feel fortunate to live here in kleptomaniac USA….God Bless America.
    We shall see how long our “, socialism” here continues with Social Security, Medicare/Medicaid,
    Disability, ect. My 96 year old Mother went to see her eye doctor yesterday. After a battery of eye tests, ect. Her doctor again suggested having her cataract surgery to improve her sight.
    She declined because she’s functioning and has other issues. Seems they don’t like that answer.
    Of course, if she wants it, that’s fine with me.
    Naturally, we have no clue how much this will cost the Government!
    Just saying, enjoy the credit card magical spending…it ain’t gonna last.
    P.S. for now will get a new left lense prescription for her glasses👁️

  10. SuperTramp says:

    FedEx Earnings Signal a Changing World
    InvestorPlaceMarch 20, 2019, 1:48 PM EDT
    FedEx (NYSE:FDX) stock is on the investing menu today as the “disaster of the day” and it could take the whole market down with it. The shares are off almost $10 today, or over 5%, after announcing disappointing third-quarter results.
    CEO Frederick Smith didn’t try to sugarcoat it, calling the numbers “below our expectations.” He promised new investments to lower costs and return to earnings growth.
    Smith himself said he saw “green sprouts” in the international market, although CNBC called the earnings a warning that global growth is slowing.
    Costs at FedEx Ground were up as the company launched six-day-a-week service and saw higher gas prices. FedEx International revenues were down, in part, due to weaker international currencies. Global profits were down on lower shipment weights and a customer preference for lower-profit services. Graf said the company is taking the usual responses to slowing business, buying out some employees, limiting hiring, and looking at other cost-cutting measures.
    When they start laying off employees and mandating pay cuts, we be in deep poo poo.
    Oh, doom and gloom post of the day.
    Back to watching “The Price is Right”.

    • Artleads says:

      FEDX costs for international mail are totally out of sync with the needs and affordability of most people. That is bad for social cohesion and community development across their service area. They don’t seem to lose things, and they’re fast. bUT THEY NEED TO WORK WITH cUSTOMS IN LANDS THAT THEY SERVE. tHEY SHOULD PROBABLY HAVE A CHEAP CLASS THAT TRAVELS BY FREIGHT SHIP. Customs need to decrease their costs too.

    • “New investments to lower costs” seems to equate to capital investments to replace jobs. Ultimately, this leads to few jobs and more wealth for the owners of the capital goods (assuming that the system can be kept going, and earns a profit. If it doesn’t really work, we end up with investment with no real value, especially if international package shipment dwindles, regardless of shipping cost.

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