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.

Conclusion

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. Pingback: A Different View Of Venezuela’s Energy ProblemsSince 1998 Hitrust.net = Privacy and Protection | Since 1998 Hitrust.net = Privacy and Protection

  2. Harry McGibbs says:

    “Two Russian air force planes landed at Venezuela’s main airport on Saturday carrying a Russian defense official and nearly 100 troops, according to media reports, amid strengthening ties between Caracas and Moscow.”

    https://www.reuters.com/article/us-venezuela-politics/russian-air-force-planes-land-in-venezuela-carrying-troops-reports-idUSKCN1R50NB

  3. Harry McGibbs says:

    “Fears of global recession continued to spook equity markets this morning, with stocks in Asia down sharply and those in Europe sliding. Investors ditched shares and fled to the safety of bonds as risk assets fell out of favour on growing fears of a recession in the United States, sending global yields plunging.”

    https://www.thetimes.co.uk/edition/business/global-markets-spooked-by-recession-fears-bjdxcpcr7

  4. Harry McGibbs says:

    “Britain’s escalating national emergency over Brexit has led optimism in the financial services industry to plunge at the fastest rate since the financial crisis, according to a business survey.”

    https://www.theguardian.com/business/2019/mar/25/city-optimism-falling-at-highest-rate-since-financial-crisis-brexit-cbi

  5. Harry McGibbs says:

    “Since the start of the year, some of the most visible companies in the US have warned growth is cooling in one segment or another of their businesses — at a time when global economic growth is under a microscope.

    “Apple set the stage back in January with a revenue warning. Then weeks later, the industrial giant Caterpillar said its outlook for this year assumed “modest” sales growth. Amazon offered weak sales guidance in February, and FedEx said this week that its sales and profits came up short due to macroeconomic weakness.”

    https://www.businessinsider.com/economic-slowdown-here-are-some-of-the-notable-companies-warning-2019-3?r=US&IR=T

    • Harry McGibbs says:

      “US corporate debt, excluding debt by banks – so “nonfinancial” corporate debt – has surged in recent years by all measures and to such an extent that it was featured prominently in the Fed’s Financial Stability Report, in terms of what might trigger the next financial crisis. The Fed is counting total nonfinancial business debts, which include the debts of businesses that are not incorporated. It found about $17 trillion in debts…

      “But the US is only in 25th place.”

        • One thing I get confused about: in the US, businesses take out a lot of debt using the sale of bonds, rather than getting most of the debt through banks. Does this get included in the total? Even something as small as an individual church can sell bonds to finance the building of the church.

          Also, the US has by far the biggest stock market in the world. “Equity” is somewhat different from debt, but not a whole lot. I wonder what happens when “debt” and “equity” are added together. In recent years, US businesses have been taking out more debt and buying back their stock. In total, there is a lot more debt outstanding, than value of stocks.

          • Hubbs says:

            Buying back their own stock at the highs. If the stock market “crashes,” companies stranded with “worthless” stock they have paid dearly for, unless of course, they have “hedged” themselves accordingly, and the counterparty can actually pay up.

          • Jan Steinman says:

            “Equity” is somewhat different from debt, but not a whole lot.

            Two differences that people pay more attention to with the storm clouds on the horizon:

            1) Return on equity is variable, or even zero, whereas bonds typically pay a fixed rate of return. So when profits look unsure, people switch from equity to bonds, whereas if the likelihood of good profit looks good, people switch from bonds to equity.

            2) In forced liquidation, bonds get paid out before equity. (Actually, legal fees typically get paid first, then taxes due, then employee salaries, then lines of credit, then corporate bonds, and then finally, equity.) So in a liquidation of a heavily-leveraged company, equity is the most likely to simply “go away” entirely. This reinforces the flight to bonds with perceived hard times coming.

  6. Name says:

    “DUBAI/LONDON (Reuters) – Budget needs are forcing Saudi Arabia to push for oil prices of at least $70 per barrel this year,…”
    “Riyadh, OPEC’s de facto leader, said it was steeply cutting exports to its main customers in March and April despite refiners asking for more of its oil.”
    https://www.reuters.com/article/us-saudi-oil-prices-analysis/more-shale-who-cares-saudi-arabia-pushes-for-at-least-70-oil-idUSKCN1R31IP

    KSA will cut oil output, trying to push the price up, but they will just damage world economy. German manufacturing PMI below 45. It’s not looking good.

  7. SUPERTRAMP says:

    Calm down…We can reclaim old tires and produce diesel blend….That’s what I’m talking about!
    Next Solent Green….
    Tests on oil recycled from tyres finds a cleaner diesel blend
    November 29, 2016 by Niki Widdowson, Queensland University of Technology
    Farhad Hossain, Professor Richard Brown and GDT’s Trevor Bayley in QUT’s Biofuel Engine Research Facility with a truck tyre that would yield 460litres of reclaimed oil. Credit: Queensland University of Technology
    Old tyres can be completely recycled into lower emission diesel engine oil, instead of being dumped in dangerous, highly flammable stockpiles that become breeding grounds for malaria and dengue-carrying mosquitoes
    “The process recycles end-of-life tyres into oil, carbon and steel, leaving nothing wasted and even uses some of the recovered oil as the heat source,” Mr Bayley said.
    “Carbon is the most common recovered ingredient and the steel rim and framework is the third most common ingredient, while the oil is the most valuable.
    “We are delighted at the findings of the QUT research as it will help us promote the sustainable use for end-of-life tyres
    “A recycled 10kg car tyre yields 4 litres of oil, 1.5kg of steel and 4 kg of oil, and a 70kg truck tyre provides 28 litres of oil, 11kg of steel and 28kg of carbon.
    https://m.phys.org/news/2016-11-oil-recycled-tyres-cleaner-diesel.html
    “GDT plans to have the first fully operational commercial plant delivering eight million litres of oil a year from mid-2017, followed by a world-first mining tyre processing plant in either Qld or WA.
    Gives these guys a open ended loan and some IPOs, TEN more years of kicking this baby down the ROAD..

    RIP Jim..see you soon in the Highway in the Sky…

  8. Duncan Idaho says:

    It’s official: Russiagate is this generation’s WMD
    https://taibbi.substack.com/p/russiagate-is-wmd-times-a-million

    (however, looking at the Clinton campaign may produce a different result)

    Repugs and Dims—– such a sorry bunch.

    • Greg Machala says:

      Meanwhile the money keeps flowing through the foundations, special interest groups and lobbyist. The theater continues in DC and the MSM and none of the big players go to jail. The people are being played by the two party system. The people keep picking sides without realizing that there is no choice, no real opposition, no real difference between Democrats and Republicans. The real goal of today’s politicians is to profit from passing legislation that favors corporate profits. Then, manufacture or inflame a crisis to distract attention from all their nefarious deeds. Then run for re-election using ill-gotten gains, a rigged corporate media and rigged electoral process. Rinse and repeat until there is so much corruption the gov’t collapses.

      • The “choice” between two corporate oligarchs is no choice at all, that’s why years ago I stopped playing that “game” & for a while, “voted” for third parties.
        Now after the blaitant corruption, rigging, etc in the 2016 “election” I see no point in bothering to “vote” at all, voting just assures our rulers that we still believe in the system.
        Trying to vote for change is useless in such a corrupt, fraudulent system, let the dam electoral “collage” select our corporate rulers as usual – I’m OUT!

        • Aubrey Enoch says:

          What if we all vote – NONE OF THE ABOVE ?
          Then there is my dog Spike that said, “Dad your crazy if you vote for some guy and you haven’t smelled his butt.” Spike’s is a pretty sharp little guy. He might have a point.
          I think we need better writers up there in D.C.
          This show we got playing now is’t very funny.

          • Sheila chambers says:

            OOOH, I wish we had that choice! It would win by a landslide?
            Since we don’t have the option of “none of the above”, not voting at all is the only option left to show our rulers we don’t believe in you any more or this corrupt system.
            But I’m not smelling anyones butt!

            • Jan Steinman says:

              OOOH, I wish we had that choice! It would win by a landslide?

              I recall hearing of some fellow who legally changed his name to “NOBODY” and ran, campaigned, and won.

              “Who’s gonna lower your taxes? NOBODY! Who’s going to fight crime? NOBODY! Who’s going to clean up corruption? NOBODY!

        • Sheila, I share your frustration and anger – it is the same here in UK and around the world. The French are people who don’t isht easily and they are not going to let their leaders get away with it; after all it was they who had a successful and bloody revolution.

          I see no way to change the corrupt system short of a collapse which is coming. To replace it with ‘rule by the people, for the people’ might then be invoked through our small group with its six demands: (after Brexit that is!)
          http://harrogateagenda.org.uk/

    • Why is everyone so interested in particular personalities? They are actors, being pushed in the direction the self-organizing system tells them to go.

    • Sheila chambers says:

      I HAD a reply but I was interrupted with a demand to “log in”! then the reply was deleted!
      I stopped “voting” for either of those two corporate parties years ago & tried to “vote” for third parties that won’t be allowed to win.
      After the blaitant corruption, fraud & rigging of the 2016 “elections” I have had enough!
      I’m not wasting any more of my time “voting” in a rigged, fraudulent corrupt, system, let the dam electoral “collage” select our corporate oligarch rulers as usual, voting just assures our rulers that we still believe in the system, I don’t so I”m OUT!

  9. Sven Røgeberg says:

    «Nature is in freefall and the planet’s support systems are so stretched that we face widespread species extinctions and mass human migration unless urgent action is taken. That’s the warning hundreds of scientists are preparing to give, and it’s stark.

    The last year has seen a slew of brutal and terrifying warnings about the threat climate change poses to life. Far less talked about but just as dangerous, if not more so, is the rapid decline of the natural world. The felling of forests, the over-exploitation of seas and soils, and the pollution of air and water are together driving the living world to the brink, according to a huge three-year, U.N.-backed landmark study to be published in May.»
    https://www.huffpost.com/entry/nature-destruction-climate-change-world-biodiversity_n_5c49e78ce4b06ba6d3bb2d44

    • Of course, this articles ends with

      Ultimately, Watson concludes that saving nature will require a major rethink of how we live and how we think about nature, but that it is possible to turn this dire situation around if governments want it to happen.

      “There are no magic bullets or one-size-fits-all answers. The best options are found in better governance, putting biodiversity concerns into the heart of farming and energy policies, the application of scientific knowledge and technology, and increased awareness and behavioral changes,” Watson said. “The evidence shows that we do know how to protect and at least partially restore our vital natural assets. We know what we have to do.”

      No, we really don’t have a way to fix the situation, short of cutting back greatly on our own population. Our self-organizing economy doesn’t seem to have a way short of collapse to fix the situation. But our media insist that we know how to fix the situation and we can. They often seem to include “get off fossil fuels.” What? How? We somehow have a magic wand, but aren’t using it.

      • djerek says:

        It seems like the fewer useful or impactful technological breakthroughs we see, the stronger people’s faith in the omnipotence of technology gets. At this point it seems to be a common belief that the only thing preventing us from switching over to BEVs and renewable energy sources is the political will to do it, despite all evidence to the contrary.

  10. Yoshua says:

    Sergey on March 24, 2019 at 6:01 am

    “I think comfort price is above $80/bbl. As largest-state-owned CEO said (this was a private talk which was publicly released two years ago) the break-even price average $30.”

    The good news is that oil prices are still on a rising trend…the bad news is that emerging markets currencies are about to break down again… just as they did last year…just before the oil price collapsed and took down the stock markets.

    Anyway…I work in restaurants in Finland…and the most straight forward and honest people that I work with are Russians…they just don’t f**king care to lie.

    • I can easily believe that Russia really needs $80 per barrel, or more. I am really doubtful that we can get there, and stay there, for very long.

      What people tell today is “part of the truth.” For example, “If we could get off fossil fuels, we could save the earth.” We can’t get off fossil fuels, however.

      Or, “All we need to do is use less.” In fact, Jevons’ paradox holds. The amount we spend seems to depend on the size of our paycheck. If we reduce spending in one way, we are likely to increase it in some other way.

      • Artleads says:

        OPINION:

        This is why we must listen to the dictates of a higher power. It tends to accord in a most cursory way to what we intend. It informs and is informed by what we intend (if we learn how to “listen”.).

        The individual is a tiny microcosm of that inscrutable higher power. If the individual acts with a clear conscience, that puts them more in touch with the “intention” of the higher power. I guess you’d call it a dialectical process. Back and forth conversation that has its own independent outcome. Intuition and faith are greater guides to what is going down than intellect.

        It is therefore not reasonable to conclude that individuals have a total lack of control over events.

      • Yoshua says:

        It feels as if we in the West live in a phantasy bubble. The New Green Deal and technology will make resources limitless…Modern Money Theory will create a new paradise…and so on…

        Maybe because nothing has broken yet? Nothing has collapsed yet.

        Russians on the other hand have experienced the collapse of Soviet Union and a near breakdown of their economy and society.

      • Sheila chambers says:

        You are so right as usual Gail, we can’t get off fossil resources, not with 7.6 BILLION HUMANS that continue to produce too many new mouths.
        Those who still believe we can “get off oil” & “transition” to “renewables” are in for a rude dose of reality & a lot of pain.
        Knowing that we & this civilization are doomed, I “escape” by watching youtube videos of trains traveling through beautiful countries like Norway for example. Lovely country but rather chilly.
        It’s a beautiful clean, green country but I also often wonder what will happen to all those pretty little homes so far away from resources & towns, how will they cope when the trains stop, fuel stations close & the trucks stop coming?
        Same thing that will happen to most of us I expect – compost.

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