Why stimulus can’t fix our energy problems

Economists tell us that within the economy there is a lot of substitutability, and they are correct. However, there are a couple of not-so-minor details that they overlook:

  • There is no substitute for energy. It is possible to harness energy from another source, or to make a particular object run more efficiently, but the laws of physics prevent us from substituting something else for energy. Energy is required whenever physical changes are made, such as when an object is moved, or a material is heated, or electricity is produced.
  • Supplemental energy leverages human energy. The reason why the human population is as high as it is today is because pre-humans long ago started learning how to leverage their human energy (available from digesting food) with energy from other sources. Energy from burning biomass was first used over one million years ago. Other types of energy, such as harnessing the energy of animals and capturing wind energy with sails of boats, began to be used later. If we cut back on our total energy consumption in any material way, humans will lose their advantage over other species. Population will likely plummet because of epidemics and fighting over scarce resources.

Many people appear to believe that stimulus programs by governments and central banks can substitute for growth in energy consumption. Others are convinced that efficiency gains can substitute for growing energy consumption. My analysis indicates that workarounds, in the aggregate, don’t keep energy prices high enough for energy producers. Oil prices are at risk, but so are coal and natural gas prices. We end up with a different energy problem than most have expected: energy prices that remain too low for producers. Such a problem can have severe consequences.

Let’s look at a few of the issues involved:

[1] Despite all of the progress being made in reducing birth rates around the globe, the world’s population continues to grow, year after year.

Figure 1. 2019 World Population Estimates of the United Nations. Source: https://population.un.org/wpp/Download/Standard/Population/

Advanced economies in particular have been reducing birth rates for many years. But despite these lower birth rates, world population continues to rise because of the offsetting impact of increasing life expectancy. The UN estimates that in 2018, world population grew by 1.1%.

[2] This growing world population leads to a growing use of natural resources of every kind.

There are three reasons we might expect growing use of material resources:

(a) The growing world population in Figure 1 needs food, clothing, homes, schools, roads and other goods and services. All of these needs lead to the use of more resources of many different types.

(b) The world economy needs to work around the problems of an increasingly resource-constrained world. Deeper wells and more desalination are required to handle the water needs of a rising population. More intensive agriculture (with more irrigation, fertilization, and pest control) is needed to harvest more food from essentially the same number of arable acres. Metal ores are increasingly depleted, requiring more soil to be moved to extract the ore needed to maintain the use of metals and other minerals. All of these workarounds to accommodate a higher population relative to base resources are likely to add to the economy’s material resource requirements.

(c) Energy products themselves are also subject to limits. Greater energy use is required to extract, process, and transport energy products, leading to higher costs and lower net available quantities.

Somewhat offsetting these rising resource requirements is the inventiveness of humans and the resulting gradual improvements in technology over time.

What does actual resource use look like? UN data summarized by MaterialFlows.net shows that extraction of world material resources does indeed increase most years.

Figure 2. World total extraction of physical materials used by the world economy, calculated using weight in metric tons. Chart is by MaterialFlows.net. Amounts shown are based on the Global Material Flows Database of the UN International Resource Panel. Non-metallic minerals include many types of materials including sand, gravel and stone, as well as minerals such as salt, gypsum and lithium.

[3] The years during which the quantities of material resources cease to grow correspond almost precisely to recessionary years.

If we examine Figure 2, we see flat periods or periods of actual decline at the following points: 1974-75, 1980-1982, 1991, and 2008-2009. These points match up almost exactly with US recessionary periods since 1970:

Figure 3. Dates of US recessions since 1970, as graphed by the Federal Reserve of St. Louis.

The one recessionary period that is missed by the Figure 2 flat periods is the brief recession that occurred about 2001.

[4] World energy consumption (Figure 4) follows a very similar pattern to world resource extraction (Figure 2).

Figure 4. World Energy Consumption by fuel through 2018, based on 2019 BP Statistical Review of World Energy. Quantities are measured in energy equivalence. “Other Renew” includes a number of kinds of renewables, including wind, solar, geothermal, and sawdust burned to provide electricity. Biofuels such as ethanol are included in “Oil.”

Note that the flat periods are almost identical to the flat periods in the extraction of material resources in Figure 2. This is what we would expect, if it takes material resources to make goods and services, and the laws of physics require that energy consumption be used to enable the physical transformations required for these goods and services.

[5] The world economy seems to need an annual growth in world energy consumption of at least 2% per year, to stay away from recession.

There are really two parts to projecting how much energy consumption is needed:

  1. How much growth in energy consumption is required to keep up with growing population?
  2. How much growth in energy consumption is required to keep up with the other needs of a growing economy?

Regarding the first item, if the population growth rate continues at a rate similar to the recent past (or slightly lower), about 1% growth in energy consumption is needed to match population growth.

To estimate how much growth in energy supply is needed to keep up with the other needs of a growing economy, we can look at per capita historical relationships:

Figure 5. Three-year average growth rates of energy consumption and GDP. Energy consumption growth per capita uses amounts provided in BP 2019 Statistical Review of World Energy. World per capita GDP amounts are from the World Bank, using GDP on a 2010 US$ basis.

The average world per capita energy consumption growth rate in non-recessionary periods varies as follows:

  • All years: 1.5% per year
  • 1970 to present: 1.3% per year
  • 1983 to present: 1.0% per year

Let’s take 1.0% per year as the minimum growth in energy consumption per capita required to keep the economy functioning normally.

If we add this 1% to the 1% per year expected to support continued population growth, the total growth in energy consumption required to keep the economy growing normally is about 2% per year.

Actual reported GDP growth would be expected to be higher than 2%. This occurs because the red line (GDP) is higher than the blue line (energy consumption) on Figure 5. We might estimate the difference to be about 1%. Adding this 1% to the 2% above, total reported world GDP would be expected to be about 3% in a non-recessionary environment.

There are several reasons why reported GDP might be higher than energy consumption growth in Figure 5:

  • A shift to more of a service economy, using less energy in proportion to GDP growth
  • Efficiency gains, based on technological changes
  • Possible intentional overstatement of reported GDP amounts by some countries to help their countries qualify for loans or to otherwise enhance their status
  • Intentional or unintentional understatement of inflation rates by reporting countries

[6] In the years subsequent to 2011, growth in world energy consumption has fallen behind the 2% per year growth rate required to avoid recession.

Figure 7 shows the extent to which energy consumption growth has fallen behind a target growth rate of 2% since 2011.

Figure 6. Indicated amounts to provide 2% annual growth in energy consumption, as well as actual increases in world energy consumption since 2011. Deficit is calculated as Actual minus Required at 2%. Historical amounts from BP 2019 Statistical Review of World Energy.

[7] The growth rates of oil, coal and nuclear have all slowed to below 2% per year since 2011. While the consumption of natural gas, hydroelectric and other renewables is still growing faster than 2% per year, their surplus growth is less than the deficit of oil, coal and nuclear.

Oil, coal, and nuclear are the types of energy whose growth has lagged below 2% since 2011.

Figure 7. Oil, coal, and nuclear growth rates have lagged behind the target 2% growth rate. Amounts based on data from BP’s 2019 Statistical Review of World Energy.

The situations behind these lagging growth rates vary:

  • Oil. The slowdown in world oil consumption began in 2005, when the price of oil spiked to the equivalent of $70 per barrel (in 2018$). The relatively higher cost of oil compared with other fuels since 2005 has encouraged conservation and the switching to other fuels.
  • Coal. China, especially, has experienced lagging coal production since 2012. Production costs have risen because of depleted mines and more distant sources, but coal prices have not risen to match these higher costs. Worldwide, coal has pollution issues, encouraging a switch to other fuels.
  • Nuclear. Growth has been low or negative since the Fukushima accident in 2011.

Figure 8 shows the types of world energy consumption that have been growing more rapidly than 2% per year since 2011.

Figure 8. Natural gas, hydroelectric, and other renewables (including wind and solar) have been growing more rapidly than 2% since 2011. Amounts based on data from BP’s 2019 Statistical Review of World Energy.

While these types of energy produce some surplus relative to an overall 2% growth rate, their total quantity is not high enough to offset the significant deficit generated by oil, coal, and nuclear.

Also, it is not certain how long the high growth rates for natural gas, hydroelectric, and other renewables can persist. The growth in natural gas may slow because transport costs are high, and consumers are not willing/able to pay for the high delivered cost of natural gas, when distant sources are used. Hydroelectric encounters limits because most of the good sites for dams are already taken. Other renewables also encounter limits, partly because many of the best sites are already taken, and partly because batteries are needed for wind and solar, and there is a limit to how fast battery makers can expand production.

Putting the two groupings together, we obtain the same deficit found in Figure 6.

Figure 9. Comparison of extra energy over targeted 2% growth from natural gas, hydroelectric and other renewables with energy growth deficit from oil, coal and nuclear combined. Amounts based on data from BP’s 2019 Statistical Review of World Energy.

Based on the above discussion, it seems likely that energy consumption growth will tend to lag behind 2% per year for the foreseeable future.

[8] The economy needs to produce its own “demand” for energy products, in order to keep prices high enough for producers. When energy consumption growth is below 2% per year, the danger is that energy prices will fall below the level needed by energy producers.

Workers play a double role in the economy:

  • They earn wages, based on their jobs, and
  • They are the purchasers of goods and services.

In fact, low-wage workers (the workers that I sometimes call “non-elite workers”) are especially important, because of their large numbers and their role in buying many items that use significant amounts of energy. If these workers aren’t earning enough, they tend to cut back on their discretionary buying of homes, cars, air conditioners, and even meat. All of these require considerable energy in their production and in their use.

High-wage workers tend to spend their money differently. Most of them have already purchased as many homes and vehicles as they can use. They tend to spend their extra money differently–on services such as private education for their children, or on investments such as shares of stock.

An economy can be configured with “increased complexity” in order to save energy consumption and costs. Such increased complexity can be expected to include larger companies, more specialization and more globalization. Such increased complexity is especially likely if energy prices rise, increasing the benefit of substitution away from the energy products. Increased complexity is also likely if stimulus programs provide inexpensive funds that can be used to buy out other firms and for the purchase of new equipment to replace workers.

The catch is that increased complexity tends to reduce demand for energy products because the new way the economy is configured tends to increase wage disparity. An increasing share of workers are replaced by machines or find themselves needing to compete with workers in low-wage countries, lowering their wages. These lower wages tend to lower the demand of non-elite workers.

If there is no increase in complexity, then the wages of non-elite workers can stay high. The use of growing energy supplies can lead to the use of more and better machines to help non-elite workers, and the benefit of those machines can flow back to non-elite workers in the form of higher wages, reflecting “higher worker productivity.” With the benefit of higher wages, non-elite workers can buy the energy-consuming items that they prefer. Demand stays high for finished goods and services. Indirectly, it also stays high for commodities used in the process of making these finished goods and services. Thus, prices of energy products can be as high as needed, so as to encourage production.

In fact, if we look at average annual inflation-adjusted oil prices, we find that 2011 (the base year in Sections [6] and [7]) had the single highest average price for oil.1 This is what we would expect, if energy consumption growth had been adequate immediately preceding 2011.

Figure 10. Historical inflation-adjusted Brent-equivalent oil prices based on data from 2019 BP Statistical Review of World Energy.

If we think about the situation, it is not surprising that the peak in average annual oil prices took place in 2011, and the decline in oil prices has coincided with the growing net deficit shown in Figures 6 and 9. There was really a double loss of demand, as growth in energy use slowed (reducing direct demand for energy products) and as complexity increased (shifting more of the demand to high-wage earners and away from the non-elite workers).

What is even more surprising is the fact that the prices of fuels in general tend to follow a similar pattern (Figure 11). This strongly suggests that demand is an important part of price setting for energy products of all kinds. People cannot buy more goods and services (made and transported with energy products) than they can afford over the long term.

Figure 11. Comparison of changes in oil prices with changes in other energy prices, based on time series of historical energy prices shown in BP’s 2019 Statistical Review of World Energy. The prices in this chart are not inflation-adjusted.

If a person looks at all of these charts (deficits in Figures 6 and 9 and oil and energy prices in general from Figures 10 and 11) for the period 2011 onward, there is a very distinct pattern. There is at first a slow slide down, then a fast slide down, followed (at the end) by an uptick. This is what we should expect, if low energy growth is leading to low prices for energy products in general.

[9] There are two different ways that oil and other energy prices can damage the economy: (a) by rising too high for consumers or (b) by falling too low for producers to have funds for reinvestment, taxes and other needs. The danger at this point is from (b), energy prices falling too low for producers.

Many people believe that the only energy problem that an economy can have is prices that are too high for consumers. In fact, energy prices seemed to be very high in the lead-ups to the 1974-1975 recession, the 1980-1982 recession, and the 2008-2009 recession. Figure 5 shows that the worldwide growth in energy consumption was very high in the lead-up to all three of these recessions. In the two earlier time periods, the US, Europe, and the Soviet Union were all growing their economies, leading to high demand. Preceding the 2008-2009 Great Recession, China was growing its economy very rapidly at the same time the US was providing low interest rates for home purchases, some of them to subprime borrowers. Thus, demand was very high at that time.

The 1974-75 recession and the 1980-1982 recession were fixed by raising interest rates. The world economy was overheating with all of the increased leveraging of human energy with energy products. Higher short-term interest rates helped bring growth in energy prices (as well as food prices, which are very dependent on energy consumption) down to a more manageable level.

Figure 12. Three-month and ten-year interest rates through May 2019, in chart by Federal Reserve of St. Louis.

There was really a two-way interest rate fix related to the Great Recession of 2008-2009. First, when oil and other energy prices started to spike, the US Federal Reserve raised short term interest rates in the mid 2000s. This, by itself, was almost enough to cause recession. When recession started to set in, short-term interest rates were brought back down. Also, in late 2008, when oil prices were very low, the US began using Quantitative Easing to bring longer-term interest rates down, and the price of oil back up.

Figure 13. Monthly Brent oil prices with dates of US beginning and ending Quantitative Easing.

There is one recession that seems to have been the result of low oil prices, perhaps combined with other factors. That is the recession that was associated with the collapse of the central government of the Soviet Union in 1991.

[10] The recession that comes closest to the situation we seem to be heading into is the one that affected the world economy in 1991 and shortly thereafter.

If we look at Figures 2 and 5, we can see that the recession that occurred in 1991 had a moderately severe effect on the world economy. Looking back at what happened, this situation occurred when the central government of the Soviet Union collapsed after 10 years of low oil prices (1982-1991). With these low prices, the Soviet Union had not been earning enough to reinvest in new oil fields. Also, communism had proven to be a fairly inefficient method of operating the economy. The world’s self-organizing economy produced a situation in which the central government of the Soviet Union collapsed. The effect on resource consumption was very severe for the countries most involved with this collapse.

Figure 14. Total extraction of physical materials Eastern Europe, Caucasus and Central Asia, in chart by MaterialFlows.net. Amounts shown are based on the Global Material Flows Database of the UN International Resource Panel.

World oil prices have been falling too low, at least since 2012. The biggest decreases in prices have come since 2014. With energy prices already very low compared to what producers need, there is a need right now for some type of stimulus. With interest rates as low as they are today, it will be very difficult to lower interest rates much further.

Also, as we have seen, debt-related stimulus is not very effective at raising energy prices unless it actually raises energy consumption. What works much better is energy supply that is cheap and abundant enough that supply can be ramped up at a rate well in excess of 2% per year, to help support the growth of the economy. Suitable energy supply should be inexpensive enough to produce that it can be taxed heavily, in order to help support the rest of the economy.

Unfortunately, we cannot just walk away from economic growth because we have an economy that needs to continue to expand. One part of this need is related to the world’s population, which continues to grow. Another part of this need relates to the large amount of debt that needs to be repaid with interest. We know from recent history (as well as common sense) that when economic growth slows too much, repayment of debt with interest becomes a problem, especially for the most vulnerable borrowers. Economic growth is also needed if businesses are to receive the benefit of economies of scale. Ultimately, an expanding economy can be expected to benefit the price of a company’s stock.

Observations and Conclusions

Perhaps the best way of summing up how my model of the world economy differs from other ones is to compare it to other popular models.

The Peak Oil model says that our energy problem will be an oil supply problem. Some people believe that oil demand will rise endlessly, allowing prices to rise in a pattern following the ever-rising cost of extraction. In the view of Peak Oilers, a particular point of interest is the date when the supply of oil “peaks” and starts to decline. In the view of many, the price of oil will start to skyrocket at that point because of inadequate supply.

To their credit, Peak Oilers did understand that there was an energy bottleneck ahead, but they didn’t understand how it would work. While oil supply is an important issue, and in fact, the first issue that starts affecting the economy, total energy supply is an even more important issue. The turning point that is important is when energy consumption stops growing rapidly enough–that is, greater than the 2% per year needed to support adequate economic growth.

The growth in oil consumption first fell below the 2% level in 2005, which is the year that some observers have claimed that “conventional” (that is, free flowing, low-cost) oil production peaked. If we look at all types of energy consumption combined, growth fell below the critical 2% level in 2012. Both of these issues have made the world economy more vulnerable to recession. We experienced a recession based on prices that were too high for consumers in 2008-2009. It appears that the next bottleneck may be caused by energy prices that are too low for producers.

Recessions that are based on prices that are too low for the producer are the more severe type. For one thing, such recessions cannot be fixed by a simple interest rate fix. For another, the timing is unpredictable because a problem with low prices for the producer can linger for quite a few years before it actually leads to a major collapse. In fact, individual countries affected by low energy prices, such as Venezuela, can collapse before the overall system collapses.

While the Peak Oil model got some things right and some things wrong, the models used by most conventional economists, including those included in the various IPCC reports, are far more deficient. They assume that energy resources that seem to be in the ground can actually be extracted. They see no limitations caused by prices that are too high for consumers or too low for producers. They do not realize that affordable energy prices can actually fall over time, as the economy weakens.

Conventional economists assume that it is possible for politicians to direct the economy along lines that they prefer, even if doing so contradicts the laws of physics. In particular, they assume that the economy can be made to operate with much less energy consumption than is used today. They assume that we collectively can decide to move away from coal consumption, without having another fuel available that can adequately replace coal in quantity and uses.

History shows that the collapse of economies is very common. Collectively, we have closed our eyes to this possibility ever happening to the world economy in the modern era. If the issue with collapsing demand causing ever-lower energy prices is as severe as my analysis indicates, perhaps we should be examining this scenario more closely.


[1] There was a higher spike in oil prices in 2008, but averaged over the whole year, the 2008 price was lower than the continued high prices of 2011.

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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880 Responses to Why stimulus can’t fix our energy problems

  1. It's different this time around....NO says:

    (Bloomberg) — Editors Note: There are few places as chaotic or dangerous as Venezuela. “Life in Caracas” is a series of short stories that seeks to capture the surreal quality of living in a land in total disarray
    As a friend puts it, Venezuela has two seasons: one without mangoes and one with them.

    “People lucky enough to have the trees on their their property used to stuff shopping bags full and press them on friends, neighbors, co-workers, anyone, trying to get rid of the distant peach cousins before they went bad. With so many mango trees in Caracas, these were futile efforts. Mounds upon mounds would end up rotting, emitting a sweet, pungent odor. We miss it”
    Without BAU…coming soon to a neighborhood near you
    “People used to select the juiciest, and least dented, leaving the dregs behind. No more. Hunger is so rampant that Caraquenos have made mad dashes to grab all they can this year, with some trees ripped clean before the fruits are ripe. Streets are littered with peels and pits; rich in vitamins A and C and loaded with fiber, mangoes are food and food can’t go to waste for a second.”

    I live in South Florida and BAU is still in play, though cracks are being felt, namely, very high rents, car and home insurance, real estate bubble, and overdevelopment with ever escalating taxes and crime in certain fringe disenfranchised communities. Everyday another gun shooting.
    Neighbors gladly share in their bounty of Fruit trees when in Season. Go for a walk and on the sidewalk may pick up ripe fruit, free. Of course, BAU provides an illusion all is well. I know better

    • Rodster says:

      I happen to live in SW Florida so hi there neighbor. I’ve lived in FL since the late 70’s and while rents are high now, they have pretty much been since i’ve been here. In the late 70’s I rented a 2 bedroom apt in Hialeah for close to $400. With today’s inflation that same apt probably goes for $1200. The difference now is that wages have not kept up with the Gov’t BS 2% inflation rate. What we are dealing with today is the late stages of Capitalism where the “snake is beginning to eat it’s own tail”.

      Back in the early 80’s we were dealing with the Liberty City and Overtown riots and there were many areas in Miami that you just did not go to unless you were looking for trouble. Today is no different than it was 30-40+ yrs ago. I think an individual becomes more aware of what’s happening currently when they become awake to what a mess we have created for ourselves and what we’ll be having to deal with in the future.

      A person who is not awake will see things no different today than they were many years in the past. At least that’s just how I see it.

      • It's different this time around....NO says:

        Disagree totally, sorry..came here back in 1972 and much more affordable and less crowded .
        I live in South East Miami Dade, Broward and all I read in the local papers are articles such as,
        A new report has found that six in 10 employed adults in South Florida are spending more than 30 percent of their income on rent. That’s the highest of any metro area in the country.
        Researchers Richard Florida and Steven Pedigo, who co-authored “Miami’s Housing Affordability Crisis” for the Miami Urban Future Initiative, also found that housing affordability is worse for minority populations. The report shows that black families in South Florida have less money left over after paying for housing costs than anywhere else

        Moved here from North Carolina about 3 years ago, rents are half and so is car insurance and housing.
        If I didn’t have to I would have stayed there!
        But you and I do agree on one thing wages have not kept up with inflation for the working class….the investor class made out real well…thank you Feds!

        • Rodster says:

          The price for rent in major cities or on the outskirts is always going to be higher. I rent and live three blocks from the beach in a large 1 bd rm apt and pay $700. I’ve been here for 10 yrs and the rent started out at $575. It depends on where you live but places like Miami, San Francisco, NY, Boston or any major city will typically have higher rent than a rural area. Putting things in perspective, I was offered a six figure job in 2001 to work in SF and I couldn’t afford it. A 380 sg ft studio apt was $1100 in Millbrae. When it gets to the point that rent is unaffordable everywhere is when it’s time to start worrying.

          In 1984 I moved from Broward to Ft. Myers and was renting a 2 bd/2 bath apt for $350 and was less than 10 minutes from Sanibel Island.

          • It's different this time around....NO says:

            Just look at the coverage for Homeowners insurance
            Your flood insurance premium is going up again, and that’s only the beginning
            FEMA confirmed to the Miami Herald that it is looking into switching to risk-based pricing in 2020, which would end the subsidies most coastal communities enjoy on their flood insurance premiums and show the true dollar cost of living in areas repeatedly pounded by hurricanes and drenched with floods — like South Florida
            Premiums through the National Flood Insurance Policy are already rising an average of eight percent this year; the first wave of pricier policies started in April. That brings the average annual price (including surcharges) for a policy holder to $1,062.
            It’s all part of a strategy to make the NFIP financially stable. The program is $20 billion in debt (and that’s after the government forgave $16 billion of that debt last year) because it pays out much more each year than it takes in.
            There are a couple of reasons for this, the most important of which is that the NFIP doesn’t charge homeowners like regular insurers do, by analyzing the property’s specific risks. Instead, the NFIP charges premiums based on average historical losses in the area and flood maps that are often outdated and incorrect.
            OK, ball is your Court, Rodster

  2. This time it's different...NO says:

    Click FARMS…..a new growth Industry……

    In China, the world’s largest smartphone market with over 800 million users, a unique type of farm springs up in urban areas.
    The only crops there are smartphones.
    The operations, known as click farms, can house hundreds or thousands of iPhones and Android phones on the shelves. They are plugged in and programmed to search, click, and download a certain app over and over again. The goal is to manipulate the system of app store rankings and search results.
    “The business of fake views is so widespread,” the South China Morning Post reported in 2018, “that Chinese state media CCTV reported that 90 per cent of views generated by many popular shows on video sites are fake.”
    App developers buy the service to boost their products’ visibility in an effort to win a bigger slice of the $50 billion dollar online advertising market in China.

    All show and glitz….what till folks see that BAU has no cloths!

    • It is amazing all the strange things energy is used to support.

      We use energy to make bitcoin as well.

      And to make bottled water, to ship to places that have perfectly acceptable tap water.

      • Chrome Mags says:

        I’ve lived in two locations in the US that gave me headaches from drinking the tap water. Sterling, Colorado and Oklahoma City, Oklahoma. In both locations I was forced to get bottled water and as soon as I started to drink it the headaches went away. My father gave me a hard time about it in Oklahoma City, railing on about how water was water and staring at me like something was wrong with me. He was new to that area but at 80 years of age started having strokes, small and big and became wheel chair bound thereafter living in a nursing home. I have no idea if something in the tap water contributed to his quick descent, but the question is an interesting one.

        If you get a print out of what exactly is in tap water (often provided by the local water company) you’ll quickly see there are numerous trace elements including a tiny percentage of fecal matter. I suppose additives such as chlorine are suppose to kill off microbes, but I don’t take any chances. Think about how much water a person actually drinks a day and its not that much. We get Crystal Geyser gallons, the taste is great and the cost barely impacts a grocery bill.

        So I personally think tap water is highly risky, particularly over the long haul. It depends on local sources. Best to all of you that roll the dice and drink from the tap.

        • Part of the issue is what isn’t in the tap water, as well. Our bodies need magnesium. There may may be other minerals as well, that are needed that are often in tap water. Drinking desalinated water “straight” is not good for us. Even filtration systems can remove too much of necessary minerals.

          We have a whole house filter that we change every six months. It gets filled with red clay during that period. Evidently, red clay is one of the things included in our drinking water. The filter also removes chlorine and some unknown list of other things. It removes much less than reverse osmosis filters, however.

        • Usually, these water treatment facilities for tap water (at least in serious IC hub countries-regions) run within their loop a fish tank with trouts and similar so any short term as well long term problematic effects (+samples) are self evident or to be analyzed.

          If you are concerned about feces, rather immediately stop visiting any public baths-pools, hotels/motels, cruise ships etc.. that’s where it is the worst situation with utmost proven record – apart from cases of sewage entering the well/water table directly obviously.

  3. It's different this time around....NO says:

    OY, and you thought you had problems!
    “Boeing announced yesterday that the fall-out from its 737 Max crashes will cost the company at least $7.3 billion, and possibly more. Grounded In the wake of the crashes of two different 737 Max models, which lead to more than 400 deaths, Boeing had to take the plane out of the air and halt production of the popular model, which may not fly again this year. Rectify Airlines that flew the 737 Max have been pushing for compensation, and Boeing estimates that this will cost $5.6 billion. Furthermore, the company expects the production slowdown to cost an additional $1.7 billion. This is all in addition to the $100-million dollar fund the aviation giant pledged to create for the family of victims of the crash, which many critics feel just isn’t enough, as well as possible further litigation down the line”
    What about the Stock price on Wall Street UP UP UP
    Max assumptions could still be optimistic,”
    Boeing stock is up 16% this year, compared with gains of 17% for the Dow Jones Industrial in the same period. Earlier this week, United Airlines UAL, -1.52% and American Airlines AAL, -1.96% announced more flight cancellations due to the grounding.

    When you have no choice you do it, whatever it takes to keep BAU flying!

  4. MR. Bongo says:

    Cocaine and Crude

  5. It's different this time around....NO says:

    Borat is to blame…very nice…
    An entire nation just got hacked
    By Ivana Kottasová, CNN
    (CNN) Asen Genov is pretty furious. His personal data was made public this week after records of more than 5 million Bulgarians got stolen by hackers from the country’s tax revenue office.

    In a country of just 7 million people, the scale of the hack means that just about every working adult has been affected.

    “We should all be angry. … The information is now freely available to anyone. Many, many people in Bulgaria already have this file, and I believe that it’s not only in Bulgaria,” said Genov, a blogger and political analyst. He knows his data was compromised because, though he’s not an IT expert, he managed to find the stolen files online

    • Security is something that we really have no fix for. Sharing everything online really doesn’t work. I can’t imagine that putting things in the cloud helps any either.

      • doomphd says:

        when i first was told about securely storing your data in “the cloud”, i laughed out loud in the face of the person explaining it to me.

        one of my JPL colleagues would pull the hard drive from his lab PC before leaving the site. it was the only way he felt his data were secure. now we use flash drives, which are much more convenient.

  6. It's different this time around....NO says:

    US Stock Market: Direction Hinges Upon Whether Investors Keep 50bps Rate Cut Hopes Alive
    Stocks could continue to drift sideways to lower this week with the price action driven by low volume as many of the major players begin moving to the sidelines ahead of the European Central Bank policy meeting on July 25 and the Fed’s interest rate announcement a few days later.

    Expectations of a 50-basis point rate cut by the Fed will probably drop below 20% at the start of the week. This is based on a Wall Street Journal report released on Friday that said the Fed will cut rates by 25-basis point and cut rates later in the year as needed.

    If there is volatility, then it will likely remain centered around whether the Fed cuts 25 or 50-basis points. Some investors continue to say that the Fed must take the aggressive route because policymakers have to convince Wall Street that they are truly serious about providing the firepower needed to continue the current 10-year economic expansion.

    This article was originally posted on FX Empire

    More MoRe More…10 year expansion, trillions more in debt, consumers tapped out, and low growth
    We’ll be all right….stay calm, carry on and all is fine….they said so

  7. Yoshua says:

    When the Effective Federal Funds rate rise 20 bases points from the lower range, then the markets start to break down.

    If true then things are really tight.

    The Fed is forced to cut the rate by 25 bases points?


    • I am trying to understand this chart.

      I am not really certain what rate this chart is plotting. These are a couple of perhaps related charts I found:

      The Effective Funds Rate (EFFR) is that actual market interest rate that banks charge each other for overnight loans:

      Interest rate on excess reserves (IOER) is the rate paid to banks for deposits that they hold with the Federal Reserve above those required by banking regulation:

      This is another chart called “Interest rates relative to Fed target range”. It is by J. P Morgan, and was published in December 2018. I think that this may be an earlier version of what your chart is analyzing.

      When your charts says, “Collapse of the Emerging Markets” in 2015, it is referring to a credit crunch with high interest rates that hit emerging markets about that time. One article says, “From Turkey to Malaysia to Russia, emerging market currencies are diving.” I think of this as being related to the end of the US Quantitative Easing program in 2014.

      I thought about the chart I showed recently, showing the Foreign Direct investment in various emerging market countries. But the foreign direct investment started sliding a whole lot sooner than 2015. The high year seems to be way back in 2008.

      If you can provide more information, such as where the chart you show is from originally, that would be helpful.

    • Increased complexity is (of course) most of what is causing the inequality. It is impossible to fix, because there basically isn’t enough to go around, if the poor people get a large enough share of the total, because there are so many poor people.

    • MR. Bongo says:

      Fluff. Anyone not living in the third world is the 1percent by any metric. Thats inequality. Not enough resources in the world to bring them up to first world consumption. How interesting that arbitrary boundaries are created when this sort of matter is discussed always leading to the idea that a stockpile of resources exists in the hands of the “oligarchs” that if only released would solve our problems. The truth that our species has depleted the resources of the planet that no magical stockpile of resources exists. Not very hopeful so fantasies are created. Sven are you happy about your countries immigration policy? It truly does reflect an attempt to share resources. The mean standard of living falls. Your OK with that?

      • Sven Røgeberg says:

        My main motive for posting the article from Angus Deaton was to show that economics is the theology of our time. It denies however that there is a remnant of suffering that can`t be eliminated.

        • MR. Bongo says:

          Thank you for your reply. I see economy as basically a word that has a lot of falsehood inherent to the paradigm implicit to its meaning. A better word/ paradigm would be something that had a meaning of a consumption metric. Economy has a lot of different paradigms involved in it. Earning. Owning. Above all a belief that there are a set of action that effect consumption that are seperate from the physical world. Magic. Thats why people are so upset. If you believe that your consumption is dependant on magic and that magic is arbitrarily being withheld.

      • Nope, ~1% by whatever broader definition (say even ~5-15% in some circumstances) just means that your physical existence is not dependent on externally forced work upon you as individual, so no daily-hourly bossing etc.. basically it means receiving reliable rent for very low effort (ratio), it could be anything on the receiving end from state subsidies (gov-state capture), to rental income, IP, dividends or various other schemes.. It usually also included important component to it of not having directly – daily defend your premier position in terms of this social-political status, simply you belong – have structures around you to perform this daily task on your behalf..

        • Mr. Bongo says:

          Well the definition certainly is contentious isnt it? Because it defines haves and haves nots. I certainly wouldn’t define it terms of the state. I believe i have a high standard of living . I eat well. I have housing. I have water coming from the faucet and a flush toilet. That feces is processed in a way that has minimal impact on the environment. I have been homeless lived on the street. In the country I live in USA you are more well off being homeless than a laborer in a third world country. That’s what I have observed living in the third world. As the practice of using housing as a financial instrument proceeds to make housing less and less affordable it does detract from first world standards but there is really no comparison. I dont live under a piece of plastic get up and go down to the docks and haul grain on my head. I see the resources and consumption i have as a 100 times better than that. That makes me the 1%. If I hadn’t worked the system and made choices that looked to the future I would still be homeless. If I had lived in say sub saharan africa i would not have the lifestyle i do regardless of my actions. However those in Sub saharan africa may well have a more established “socio political status” than I do however. Whatever that is. That makes them the 1%? You cant eat socio political status. Doesn’t the use of fossil fuels effect”your physical existence is not dependent on externally forced work upon you as individual”. To my mind the use of fossil fuels are the sole way work is reduced and comfort is increased. Its a resource in the physical world. It has physical reality its not a idea. It is a finite resource. I consume a lot more of it various way than the majority of people in the world as its inherent to everything. Does that not make me the 1% by nature of my first world lifestyle when 99% of the worlds population does not live that good?

          • Thanks for your view of the situation. You are right that we are using housing as a financial instrument, and that is a big part of what is making unaffordable for young couples.

            I briefly visited India, and saw at least a bit of a very different world. I was told that some workers in an Indian slum I visited sleep on the floor of the shop where they work, and use a field outside as a toilet facility. The housing that was available was very high-priced relative to wages, and tiny. Homes for a family consisted of one small room, with fold down shelves for sleeping, as I recall. Cooking was done outside.

          • I’m afraid you still don’t get my point, I simply tried to describe, albeit in condensed way, perhaps not in the most reader friendly way, how the people as social animals in every historical time (!even before the age of fossil fuels!) try to enter the proverbial ~1% group of the rent seeking class, i.e. live of others work and the environment’s surplus. I tried to list the most important factors-drives-motives which are basically the same since antiquity, medieval times, and across various late stages to out industrial presence of today.

            Your argument seems to default into mere affluence level comparisons and focus only on fossil fuel era exalted injustices, which self evidently do exist, but are more or less driven by the same social forces as in other times, not by fossil fuels as such, which are only a stimulant, multiplier if you will.. of past few centuries..

            OK, lets digest it to the bone: ~1% exist on burning wood-charcoal only as well !

            • MR. Bongo says:

              I guess I’m rather simplistic. I am grateful for my fate. I don’t see why we are approaching Balkanization here in the USA when we all have it so good. The flat I lived in India would fill with smoke about 6am everyday from the family below cooking there breakfast with cow dung. Nothing… Nothing was thrown away. About 20 families shared a toilet. A hole in the ground and a trough of water. It made a truck stop bathroom look like the Ritz. That was a relatively nice place. You didn’t poop in the street. When people talk about the 1% typically the metric cited is lavish consumption. Perhaps your view is more philosophical. Class differentiation is being represented as injustice. Yet the boundaries are always artificially constructed to exclude third world which is the true mean. The result is real anger and polarization. It is a destructive force. Why? We have great lives. That’s the truth IMO. Its less theoretical and philosophical to me as I see real effects in communities torn apart by what is IMO utter BS.

            • Well, attempted systematic observation could be eventually called a philosophical..

              On the other item, the term – process of possible – probable balkanization in the US, refers to emerging groups of the same or compatible political and social values vs. the existing overall fed state umbrella. Simply prevailing mindset in California doesn’t want to have anything in common with the ‘redneck states’ attitudes and policies. Similarly in opposite guard.. and at one point one of them refuses pay taxes or render services for the commons of the other, that’s when it starts to visibly break apart, the violence-war component is only another step it could be ‘single event’ not necessarily prolonged conflict.

  8. Chrome Mags says:


    ‘U.S. Shale Is Doomed No Matter What They Do’

    “With financial stress setting in for U.S. shale companies, some are trying to drill their way out of the problem, while others are hoping to boost profitability by cutting costs and implementing spending restraint. Both approaches are riddled with risk.”

    “Turbulence and desperation are roiling the struggling fracking industry,” Kathy Hipple and Tom Sanzillo wrote in a note for the Institute for Energy Economics and Financial Analysis (IEEFA).

    “They point to the example of EQT, the largest natural gas producer in the United States. A corporate struggle over control of the company reached a conclusion recently, with the Toby and Derek Rice seizing power. The Rice brothers sold their company, Rice Energy, to EQT in 2017. But they launched a bid to take over EQT last year, arguing that the company’s leadership had failed investors. The Rice brothers convinced shareholders that they could steer the company in a better direction promising $500 million in free cash flow within two years.”

    If you’re interested in this article you’ll need to go to the link. The site has multiple pop ups interfering with my attempts to copy and paste more from that article.

    • There is a link within the article to another article, this one about about statements by the former CEO of EQT about what about what a disaster shale technology had been from the point of view of investors who owned the stock in 2008.


      • Chrome Mags says:

        It’s interesting how on the one hand people point to fracking as a way of suggesting there’s no such thing as peak oil, yet the failure to profit sufficiently for investors points out all too clearly we’re at or past peak oil. That’s the whole point, that on the way down harder to get oil costs more to produce leaving less profit, less surplus energy to do everything a growing economy requires.

        • Xabier says:

          The fracking industry is the clearest possible testament to the near-desperation of our energy situation.

          • Harry McGibbs says:

            “…a report from S&P Global Ratings released earlier this month is a sobering document. It’s especially notable given that it is coming from a company that rates the quality of debt for corporate America.The U.S. shale explosion has been fueled by debt.

            “What S&P sees is not encouraging. This year alone, 10 oil and gas companies rated by S&P Global Ratings have seen their debt ratings cut to D or SD. The D stands for default; SD is selective default, a rating that is handed down when a company voluntarily restructures their debt with their creditors.”


            • This seems to be the S&P article that the FreightWaves in talking about. Surging Distress In Oil & Gas Sector May Foreshadow A Second Reckoning (I am not sure that this link will work-use Google)
              The article says

              Key Takeaways

              We are beginning to see more defaults in the oil and gas sector this year after a relatively quiet 2018, and several lower-rated issuers appear to be in growing financial distress.

              Many of the troubled companies that survived the industry’s rash of bankruptcies in 2015-2017 are now threatened by volatile energy prices, liquidity issues, and high leverage.

              At the same time, many recently reorganized companies in the sector could end up back in bankruptcy court as they continue to shed equity value.

              It’s too early, in our view, to determine if recent consolidation efforts among certain speculative-grade companies will enhance their long-term viability.

              The article lists the individual companies with problems.

  9. Kanghi says:

    CIO of Finnish pulp paper company Stora Enso is wondering about reported growth numbers for Chinese economy. Export of cellulose to China has usually followed The growth of GDP. In May the exports dropped by 7% from the year before, and at The same time Chinese have dropped the import of recycled paper.

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