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. Harry McGibbs says:

    “Police in Moscow have detained more than 1,000 people at a rally, in one of the biggest crackdowns in years.

    “Demonstrators were dragged away from the city hall as security forces used batons against the crowd. People were protesting against the exclusion of opposition candidates from local polls.”


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

    After a year of Trump pressure, US Fed struggles to communicate
    It will mark a striking about-face for the central bank, reversing a rate increase announced just seven months ago.
    And the policy flip comes as the central bank has suffered a number of awkward stumbles in communications, as it has tried to communicate confidence in the economy, while at the same time a readiness to support continued expansion.
    Fed officials have had to backtrack and clarify recent statements, and amid President Donald Trump’s blistering, year-long public campaign against Fed Chair Jerome Powell, one central banker seemed to offer himself as an alternative for the leadership position.
    Meanwhile, although the rate cut this week is almost universally expected, economists disagree on whether the Fed is making the right move. Indeed, cutting rates now could appear highly unusual: the Fed has never done so with unemployment so low


    Just a failure to communicate…
    BAU Baby….wants it…gets it!

    • Chrome Mags says:

      It’s called intimidation by way of verbal abuse. Trump has proven it works.

      • It’s very puzzling he is allowed to behave towards FED like that in the first place, as this is only chipping away the time allotment for the empire, either there is complete chaos and impotence among the competing factions already to end such unprecedented mutiny decisively or the balkanization conforming faction (allied to POTUS) really took over most of the handles and systemic buttons these days.. believing carving out now ~10-20% out of global for themselves is enough of world’s riches anyway – well a realistic goal for a while..

        Strange, but it all seems coming too soon for that in my opinion as Euro continentals and Asians proper are still week(ish) to defy the legacy all spectrum dominance global order.

  3. Yoshua says:

    U.S gasoline and diesel prices are about to crash?


  4. milan says:

    Here’s an interesting quote from Michael Hudson:

    American foreign policy has long been based largely on control of oil. This has led the United States to oppose the Paris accords to stem global warming. Its aim is to give U.S. officials the power to impose energy sanctions forcing other countries to “freeze in the dark” if they do not follow U.S. leadership.
    To expand its oil monopoly, America is pressuring Europe to oppose the Nordstream II gas pipeline from Russia, claiming that this would make Germany and other countries dependent on Russia instead of on U.S. liquified natural gas (LNG). Likewise, American oil diplomacy has imposed unilateral sanctions against Iranian oil exports, until such time as a regime change opens up that country’s oil reserves to U.S., French, British and other allied oil majors.

    The rest of his amazing prescient speech can be found here:


    • Growing access to affordable energy is what makes the world economy grow. The military has known this for a long time. I have posted links to Admiral Hyman Rickover’s 1957 speech before. It is truly a remarkable document of what was known back about the time m. King Hubbert started writing about oil limits. This is an excerpt:

      Surplus energy provides the material foundation for civilized living – a comfortable and tasteful home instead of a bare shelter; attractive clothing instead of mere covering to keep warm; appetizing food instead of anything that suffices to appease hunger. It provides the freedom from toil without which there can be no art, music, literature, or learning. There is no need to belabor the point. What lifted man – one of the weaker mammals – above the animal world was that he could devise, with his brain, ways to increase the energy at his disposal, and use the leisure so gained to cultivate his mind and spirit. Where man must rely solely on the energy of his own body, he can sustain only the most meager existence.

      Man’s first step on the ladder of civilization dates from his discovery of fire and his domestication of animals. With these energy resources he was able to build a pastoral culture. To move upward to an agricultural civilization he needed more energy. In the past this was found in the labor of dependent members of large patriarchal families, augmented by slaves obtained through purchase or as war booty. There are some backward communities which to this day depend on this type of energy.

      Slave labor was necessary for the city-states and the empires of antiquity; they frequently had slave populations larger than their free citizenry. As long as slaves were abundant and no moral censure attached to their ownership, incentives to search for alternative sources of energy were lacking; this may well have been the single most important reason why engineering advanced very little in ancient times.

      A reduction of per capita energy consumption has always in the past led to a decline in civilization and a reversion to a more primitive way of life. For example, exhaustion of wood fuel is believed to have been the primary reason for the fall of the Mayan Civilization on this continent and of the decline of once flourishing civilizations in Asia. India and China once had large forests, as did much of the Middle East. Deforestation not only lessened the energy base but had a further disastrous effect: lacking plant cover, soil washed away, and with soil erosion the nutritional base was reduced as well.

      Another cause of declining civilization comes with pressure of population on available land.

      The military has known about these problems for a long time. I know I was once invited to the Naval War College in Rhode Island, because those in charge wanted input to use in building war games depicting the problems that might afflict them in the time of energy shortages. I suggested that they should think about falling military appropriations as being a major risk at such a time. There were many others, from other fields, invited to this large meeting as well.

      • milan says:

        @ Gail,
        thanks for the refresher on Rickover’s speech
        Oil the big unknown. O, what I wouldn’t give to know just how much is left really globally! Working in the oil and gas industry I see very well your issue of affordability and I asked a former director of our company just how much oil is left up in the Alberta oilsands since he held a management position up there for a time? He said about 10 years that is unless something happens in the Middle East. If that is the case the oilsands is where America will go for its oil? That is why all of the American companies are up there.
        I wonder if Michael Hudson understands really the oil dilemma we are in and perhaps this is why Washington is going or gone insane really?

        • I think that the current administration understands the energy dilemma incredibly better than the Obama administration. The Obama administration was taken in by the false story saying that renewables will save us; we can get off fossil fuels. It is a pleasant sounding story for politicians to tell; the problem is that it is simply false.

        • I would disagree with, “Oil the big unknown. O, what I wouldn’t give to know just how much is left really globally!”

          I would say instead, “Future prices are one big unknown. Another big unknown is how long the current low prices for all fossil fuels (plus uranium, some metals) can last, before exporting countries collapse and the world economy shrinks uncontrollably.”

          The whole story of running out of oil is complete nonsense. If prices can rise high enough, there is plenty of oil. The IEA posted this chart in 2015, showing the amount of oil it estimated was available at $300 per barrel.


          The focus on “oil running out” has confused the situation considerably. All fossil fuels and so-called renewables are tied together as a package supported by our current economy. The problem is with the economy collapsing; it has virtually nothing to do with “oil running out,” unless you consider “oil running out because of producers cutting off production because of chronic low prices” to be oil running out.

  5. MG says:

    The key intrinsic characteristic of the areas that will secure the future survival of the human species is the periodic lack of the external energy in the form of winter. It is the winter season that prevents the uncontrollable rise of the population of the human species and the irreversible destruction of the habitats suitable for the life of the human species.

    It is the presence of the winter season that forces the human species to maintain a supply of the external energy. The warm areas have no such mechanism for human population control which leads to a irreversible destruction of the habitats suitable for humans, as documented by the extinct civilizations in the warm areas that were later conquered by the humans living in the colder areas (e. g. Roman Empire).

    • Yes, that’s a good observation and why civilization of peculiar kind had evolved precisely in the wider ClubMed and ME regions with mild or no winters and fast competition-innovation forcing complex geography (long diverse shorelines).

      For instance the later stage Roman Empire ran into ‘OFW’ like problems where the grains cultivation maxed the extension of possible land appropriation (Alps – Sahara – Caucasus and or largest Euro rivers as limiting expansion borders) as well as (available manpower and scythe production within their agri sector for it all) -> so any serious threshold reaching problem in any of these variables backfired at home in the center of Empire and obviously in the provinces as well, which eventually broke out and soldiered into the future on their own, although with already mixed pop of the ‘invading’ tribes (albeit already transformed by Roman culture).

      • Xabier says:

        With the global availability of fossil fuels, mankind finally broke free of the constraints of the natural cycle, which had imposed merely regional booms and collapses, only to run headfirst into the hangman’s rope of universal resource failure, and ecosystem exhaustion and poisoning…….

        • That is a pretty good summary of our situation!

        • MG says:

          Yes, the abundant external energy thanks to the fossil fuels removed local constraints, leading to a a big world without limits. Which means also no limits for world ecosystem exhaustion and poisoning.

    • In the same vein, as you have hinted graziers of the no/mild winter seasons could have snapped very easily from older-earlier techniques of setting aside (intentionally not running as big herds 24/365) over the same landscape again and again etc. into more production output maximizing approach. It could have happened for number of reasons as tribe wars over territory (need for rapid tribe rejuvenation), short term weather-climate forcing, or just simply human greed and stupidity taking over..

    • Ed says:

      MG, great high level view.

  6. MG says:

    Today, we often read about the catastrophe of Brexit. But such opinions are a result of the distorted view of the reality, based on the past energy abundance of Britain based on coal and the poverty of Europe before the advent of oil, nuclear and natural gas. One another such view is that rising proportion of the human population is going to live in the cities.

    The truth is that the humans are going to live in the environments that do not require high amounts of additional energy for the life of the human species from several points of view like suitable all year round temperature, food and water supply, disease control.

    From that point of view, there is no need to worry about the future of Britain or Europe. There are many really serious problems in other parts of the world looming on the horizon, including many urbanized areas which will cause collapse of those parts of the world before the collapse of Europe or Britain.

    The reason is that the it is the areas that have mild climate allowed for the greatest rise of the human civilization, because these areas have intrinsic characteristics that prevented uncontrollable rise of the human populations and the ensuing irreparable damage like irreversible deforestation and soil degradation.

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

    Once President Trump signs the budget deal that was passed by the House on Thursday and is expected to be approved by the Senate in a few days, he will have added $4.1 trillion to the national debt, according to the Committee for a Responsible Federal Budget. The total national debt surpassed $22 trillion in February.
    This will mark the third time that a major piece of deficit-financed legislation will get Trump’s stamp of approval. Legislation Trump has so far signed since 2017 has added $2.4 trillion to the national debt through 2029, according to CRFB, a nonpartisan public policy group.
    The biggest contributor to the $4.1 trillion that will be added to the national debt through 2029 is the Tax Cuts and Jobs Act. This signature tax cut legislation signed by Trump in 2017 single-handedly increased the debt by $1.8 trillion, according to CRFB
    And….the same story over and over
    We are the most powerful economy in the world and we’re the world’s reserve currency and we borrow at our own currency. And for those three reasons we’re not going to default on our debt, but that doesn’t mean that we can borrow without consequences,” says Goldwein.

    The ballooning national debt will cause GDP growth to slow down further, he says. “The more we borrow, the more we have to count on capital from abroad, or else no capital at all to fund our investments and the slower growth is going to be over time. We’re already headed towards 2% growth on the current basis, and the higher our debt is, the lower that will be.”

    So much for those tax cuts would pay for themselves…..

    • Chrome Mags says:

      The people selling the tax cuts as paying for themselves knew it was untrue. A sales pitch doesn’t have to be rooted in truth. It was concocted to push back against arguments tax cuts would enlarge the debt. The plan to pay for the tax cut was to take funds away from entitlements. But that was deemed too obvious a transfer of wealth to the super wealthy, so they decided after the tax cuts went through to wait until after the 2020 election to follow through with the whole plan. So those intending to vote for the same people should know what’s coming. Your social security will get whittled down.

      • Perhaps the tax cuts were aimed at helping out the corporations as well. Many of them were not doing very well. Of course, this would allow stock prices to rise, and in that way, also help the wealthy.

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

    NORTHEASTPublished July 27, 2019 Last Update 4 hrs ago
    Thousands lose power in Washington DC after substation malfunction
    By Sam Dorman | Fox News
    Thousands of Washington D.C. residents lost power Saturday after a malfunction at a local substation.
    The outage began at around 2:30 p.m. ET and affected approximately 40,000 Pepco customers in the District at its peak. A few dozen customers in neighboring Prince George’s and Montgomery counties in Maryland were also affected, The Washington Post reported.
    Police reportedly received a surge of calls from people trapped in elevators as the city sweated out 90-degree temperatures.
    The outage affected the neighborhoods of Shaw, Woodley Park, Van Ness, Adams Morgan, DuPont, Logan Circle, U Street, and Mount Pleasant.

    A taste of the Fast Eddie Challenge is awaiting us all!

  9. http://oil-price.net/ shows, once again, both dub & Brent having finished the week down in all four of their displayed time periods (one month, three months, one year, & five years) — but now we have (at https://ourfiniteworld.com/2019/07/10/why-stimulus-cant-fix-our-energy-problems/comment-page-12/#comments):
    “U.S. Shale: Peak Oil Finally Arrives
    ” … The proof is in the pudding as shale goes, and shale heretics have been made to sit in the corner with a pointy cap on their heads.
    “This year, for a variety of reasons, and some we will touch on in this article, domestic production and shale growth in particular have hit a wall. The latest report from EIA shows a decline that breaks the upward trend line.”

    “Peak oil” was proclaimed by Deffeyes & Heinberg to have occurred in 2005 & 2008, respectively — is this the real one?
    I think US “fracking” oil is so “light” that it can’t produce things like diesel, normal jet fuel (kerosene), plastics, or asphalt (a PHD chemical engineer told me that plastics are generally not re-cycle-able — he said you have to start with new, I suppose, “heavy” [“long-chain”] oil. I think jet engines can also use gasoline — but, they get more energy from Kerosene.)

    • the fundamental problem with fracked oil is that the fracking operation in its entirety doesn’t produce enough surplus energy to sustain itself–what we actually do with fracked oil is largely irrelevant

      in other words, if conventional oil was not available from conventional wells to keep our basic infrastructure going, we could not exist as a functioning society in the sense that we know it and expect/demand it to be.

      Conventional wells used to deliver about 100:1 return, the best now give 20:1 and are in steady decline.

      The necessary return to sustain ourselves is around 14:1, fracked oil can only manage 6:1 A peasant society can exist on less than 6:1, but couldn’t produce the necessary machinery to maintain a wheeled society

      The arithmetic of our demise therefore very simple to visualise

      when we drop below 14:1, or well before then, wars of denial will intensify, because the whole thing will be a hoax, or the fault of immigrants, or something.

      The frackers will go on until they die of money-exhaustion—having confused cashflow with energy production., (just like almost everybody else) but the oildreams will continue, with nations fighting over it, failing to grasp the fundamental problem.
      The smarter among them will suddenly get it—that solar panels can’t replicate themselves, they do not deliver enough surplus net energy

      The end game will be smaller and smaller nation states fighting over local resources.

      Which exactly describes Europe in the middle ages, only this time it will be in the USA too.

      • Jay says:

        Where does the ratio 14:1 come from? How long before 20:1 reaches 14:1?

        • As far as I am concerned, we are in very bad shape right now.

          If EROEI is of interest, it is of the whole group of fuels, on a combined basis. It is too low now; we need a lot of higher EROEI fuels to raise the average. Coal is as important as oil. But more than anything, we need more total quantity.

        • the 14:1 is a general estimate, some theories put it higher, some lower, so we can call it a median. The exact ratio is irrelevant. We must go below it at some point in the next 20 years or probably less

          if you think of a hunter gatherer as at the bottom end of the scale at 1:1–ie you expend the same energy as you consume from what you catch, then that is the baseline.

          If you go to the other end of the scale, to where in the 1930s, the energy in one barrel of oil returned sufficient to get 100 barrels of oil–or 50:1 in the case of coal, then we are somewhere between the two. The best wells now deliver only 20:1–so we are clearly on the way down and no amount of wishful thinking (or windfarming) is going to change that

          Modern civilisation was constructed on that 100:1/50:1 ratio–ie all the rail and roads, cities, major wars endless payrises and so on were made possible by those high ratios which gave the industrial world not just energy, but massive surpluses of energy. Henry Ford wasn’t selling cheap cars, he was selling cheap energy, which got even cheaper. (At least for a while)

          it’s the surplus part that’s important

          Oil now harder to get hold of. It started at 100 ft down, now it’s 5 + miles down. Fracked oil is like sucking beer out of the barroom carpet—we’ve always known its there (since 1952) but until now it wasn’t worth extracting. Now we are desperate to sustain the oil-illusion.

          We pour money/energy into frack wells to follow some economic model of oil production. (Remember money is only a token of energy exchange—so fracking is effectively exchanging cheap(er) energy for expensive energy)

          We still extract “oil” but it costs more and more to get hold of, the deeper we go. Trouble is the vast majority just see “oil” and think the usable energy value of it is constant.

          It isn’t.

          that means there’s less and less to spread around to give ourselves the good life and pretend that paradise is forever. Politics has nothing to do with it–voting for prosperity is part of the scam.
          The ratio is already dropping below the level we need to sustain our expected lifestyle, which is why the average living standard has remained more or less static for 30/40 years

          So stick a pin in your calendar and starting hoping. Or even praying if you are so inclined.

          • Tim Groves says:

            Just as well you got that North American trip done while there’s still affordable intercontinental air travel, Norman. That sort of thing might not be doable for much longer.

            I am not at all worried about the impending collapse. Im not indifferent to it, as I would be if I were a good stoic, but I’m not worried either. If I were to pick an adjective to describe my attitude to the collapse, it would be “concerned”, just as I would be if diagnosed with fatty liver or a hole in the heart. I know that if collapse is heading my way there’s nothing I can do to stop it arriving and that worrying about it would erode my quality of life while not making any difference to the outcome.

            • i was worried about confessing to my trip in case i got banned from OFW

            • The lack of available flights to the US may not look at all like high prices, though. It may look like reduced flight schedules because airline companies cannot make a profit on many types of flights. Short flights effectively disappeared back about 2008 in the US. If they were available at all, they were only available at very high cost. Now carriers around the world are in the process of schedules because of lack of availability of 737 Maxes. There is also the issue of carriers failing for financial reasons. We have been reading about low-cost airlines failing, and profits during the first half of 2019 have been down something like 50%, if I remember the recent link posted correctly.

    • There is a widespread belief that “Peak Oil” means high prices.

      “Peak Oil” really means, “Prices remain too low for producers for an excessive period.” We are encountering the same problem with coal and with natural gas. So, in not very long, we will be encountering peak coal and peak natural gas, as well.

      The reason why conventional oil ran out is because, at that price, there was no more conventional oil available.

      The prices of all of the types of energy rise and fall together. (In fact, the prices of quite a few metals rise and fall in the same manner. So do uranium prices. These prices are, to a significant extent, determined by interest rates and debt levels. They can be thought of as prices based on the amount that all consumers, in the aggregate, can afford.)


      Economists have led us to believe that scarcity is what raises prices. This is true, only for brief intervals, and only for relatively small segments of the goods and services that we buy. Energy products are so intertwined in everything that we buy that all prices tend to rise and fall together.

      Energy types of all kinds are required for making and transporting goods and services. The laws of physics make the economy behave differently than most people understand. If energy prices rise, the cost of making finished goods and services rise.

      The problem is that wages don’t rise at the same time, because the reason for the rising cost is diminishing returns. Diminishing returns is equivalent to becoming more and more inefficient, simply because of problems within the system that make cheap to produce products no longer available. For example,

      –Scrubbers are added to coal fired electricity production, to remove more of the smog causing particles from the output. This adds extra energy cost to the system, but does not produce more coal.

      –Deeper oil wells are drilled, or more fracking is used, or oil is extracted with with more impurities in it. The extra energy cost makes the delivered cost of producing the oil higher.

      –A large share of the cost of natural gas is shipping. We now have to ship natural gas around the world, often as LNG.

      This makes the cost of creating finished oil, coal, and natural gas products higher. The problem is that customers, in the aggregate, cannot afford to pay more for the higher cost of delivered energy products. The economy tends to go into recession, as soon a prices are raised to accommodate the higher production costs. This makes average wages lower, because of all of the layoffs.


      One way of understanding this is that all the extra work doesn’t really raise the quantity of finished goods and services that the economy is able to produce. The economy is simply increasingly spinning its wheels, adding more and more steps that are required by diminishing returns (as well as fixing entropy problems such as increased pollution), but which don’t really produce more end products (such as cars and homes) for customers. The economy tends to shrink back, instead of growing. The cost of producing energy products has risen too high for the wages of consumers to accommodate.

      Low energy prices act differently than high prices. High oil prices cause a recession fairly quickly. Low energy prices drive producers out of business slowly. They voluntarily cut back. (For example, OPEC and Russia.) That is what we are seeing now. This is what peak oil really is.

      • Dennis L. says:

        Meadows in the Ulm lecture seems to think there will be a oil price spike about now or in 2020. It is interesting that he would remove it from the original study and still thinks prices are not relevant, basically ignoring economics if I understood him correctly.
        Dennis L.

  10. Harry McGibbs says:

    “Profits earned by China’s industrial firms contracted in June after a brief gain the previous month, fuelling concern that a slowdown in manufacturing from a bruising trade war will drag on economic growth.”


  11. Harry McGibbs says:

    “Deutsche Bank created over the years a whopping $53.5 trillion (€48 trillion) book of derivatives contracts that it now is seeking to unload, but experts say getting rid of those assets is no easy task.”


    • Harry McGibbs says:

      “To satisfy government regulations and hedge their own losses, financial institutions devote substantial resources to predicting how much their assets will be worth in the future…

      “The calculations are expensive to run, requiring either an in-house supercomputer or a big chunk of cloud computing time. That’s why some experts are looking to a much-hyped technology to lower costs and cut down on processing times: quantum computing. ”


      • Models can claim to tell you a lot of things. I see that this article says:

        In fact, the predictions are pretty scientific, not unlike weather models. They are rooted in historical trends and attempt to account for events that cause large fluctuations in prices, such as a recession or a major change in interest rates. If an analyst finds that a portfolio has a high likelihood of plummeting, they can pad the portfolio with less risky investments.

        Making this “pretty scientific” predictions even faster is a goal. Of course, the issue is that these pretty scientific estimates based on the past, in fact, face turning points. These models tend to be dreadful at predicting turning points.

    • I can believe that unloading those derivatives is no easy task. The reason they want to unload them is the reason no one else will want them. Also $53.3 trillion is a whopping big amount.

    • MR. Bongo says:

      I make a bet with another bank that the price of acorns in mongolia will rise for a billion. That contract is now a asset? That is a “asset” value on the books? For every bet there is a winner and a loser. No value is created yet a derivative is treated like it has value. Where are the losers and how do you collect? If you try to collect that bank is insolvent and the house of cards folds. The contracts can not be collected on yet it holds value. Trillions of dollars of IOUs owed to each other and then called assets. The largest debt created financial instrument reservoir on the planet. Government dept is tiny compared to it. Baseball cards traded and treated like its real. And it is real. As long as you can trade the imaginary albeit official financial instrument for real goods. Just like baseball cards the value is based on an idea. Must be nice. Wish I could create debts with friends then we both spend the money. If I could of course I would. Just like the banks.

  12. Downunder says:

    Hi Gail
    I thought that I should let people know of my experience with solar power. For the last 15 years we have been running a fridge, chest freezer, tv lights and recharging laptops an mobile phones as well as being able to use workshop equipment from our setup. We started with 7 180 watt panels and about 5 years ago added another three. This recharges deep cycle flooded cell lead acid batteries, old technology but so far very reliable and at the moment they seem to be taking the same amount of power to fully recharge as in the past which I am told is a sign that they are still good. We are at a little over 38 degrees south and mostly get at least an hour of sun most days in winter which means we rarely go more than a day or two without recharging fully. We do have a gas oven and do any work that needs a large amount of power when the sun is shining. So even if we have to replace the batteries soon it will have worked out cheaper than being on the grid and we get no power cuts for line maintanence. Of course if our battery controller or inverter were to go then there would be a lot more expense. Another thing that helps is that we have solar power with a wood stove with a boiler in it. Oh the wood is free scrounged from the local area initially but now using the trees that we planted 19 years ago when we first brought the place.

    • I think that the problem people lose sight of is the fact that homeowners’ use of energy is relatively small, compared to what industry uses. This is an IEA chart of world electricity consumption by sector:


      According to this, residential electricity amounts to 27% of world electricity consumption. By replacing your home electricity consumption, you are replacing only 27% your total electricity consumption. You still are left with your natural gas usage for cooking plus fuel for your auto and any other equipment you may have. You really haven’t replaced very much of your total energy use considering roads, schools, stores, clothing, and the many other things you depend on. Any you don’t live in a part of the world that has a terribly long, cold winter to contend with.

    • Niko B says:

      I have solar grid connect downunder in Northern NSW. When we got our 1.2kW array it cost $12000 of which the gov we love paid $9000 leaving us $3000 to pay. The inverter blew up 3 years later which I had to replace for another $1500.
      Over the last 12 years I don’t think that it has produced anywhere close to $13500 worth of electricity. Without batteries I can’t store it so now most of the power goes to the grid which doesn’t really need it.

      I have friends here who had a similar but sized but stand alone system with lead acid batteries. Which has now been completely replaced 10 years later as the batteries were so wretched. Now 5kW with Li-ion batteries. They run fridges, air conditioners, and electronics. Cooking and heating is gas and wood. I think it cost them at least $30000.
      It will never pay for itself and provide excess power to compensate for the system’s mining, manufacture, delivery, upkeep and disposal. Nor is there any contribution to the grid infrastructure that they use constantly when away from home.

      It looks good on the surface but dig deeper and it is not a wider solution.

      • adonis says:

        4500 dollars divided by 12 years is a good deal the aussie government has done well renewable technology is going to cost government or taxpayers a lot of money , money we will never pay back is renewable technology the way to go yes but it will not support our current population that is why a cull has almost certainly been prepared .

        • I don’t think so-called renewable energy even supports itself. You can’t make solar panels with the output of solar panels, for example. You can’t make batteries with it either.

          • adonis says:

            could renewable technology work in combination with non-renewable energy and nuclear with a lower population thats what i meant is it feasible to keep the financial system going if population numbers were decreasing

      • I think this is a good summary, “It looks good on the surface but dig deeper and it is not a wider solution.”

  13. GBV says:

    Interesting article on Zerohedge:


    This part caught my attention in particular:

    But it’s not just us who pointed out the plunge in RV sales: Michael Hicks, a Ball State University economist who tracks the industry, warned that the collapse in RV shipments could indicate a wider economic downturn. Hicks said shipments had fallen sharply just before the last three U.S. recessions.

    “The RV industry is a great bellwether of the economy,” said Hicks, because the vehicles are an expensive and discretionary purchase, easily delayed by consumers who start to worry about their financial stability.

    Zerohedge seems to be confused as to why RV sales are increasing, especially if one takes the statement by Michael Hicks above to be true.

    But it suddenly popped into my head – what if people were losing their homes and were turning to RVs as alternative housing? I don’t know if that is likely, given the (lack of?) pricing difference between a house and an RV (neither of which I’m familiar with, at least in the US market, being a Canadian… eh!).

    I quickly Googled a search on housing prices vs. RV prices, and to my surprise this popped up:


    I wouldn’t have thought this trend would have taken place in Canada given our harsh winter weather, but I suppose the western coast of BC is a lot milder, and Vancouver housing prices are so obscene that I shouldn’t have been surprised by this trend…

    Anyways, as usual, Zerohedge jumps straight to accusing the Bureau of Economic Analysis of grotesque data manipulation. Perhaps that’s true, but I can’t help but wonder if there is a simpler explanation for it…


    • MR. Bongo says:

      RVs have been popular amongst a couple of segments. One is people who cant afford a house. The other is people who are moving to where the work is. Government doesn’t like the former trend as property taxes are not collected. Hence the ubiquitous laws against living in RVs even on your own land. For public safety of course. The latter requires there be work somewhere that you are qualified for. And you may be able to buy a RV with debt!

  14. Harry McGibbs says:

    “A global economic growth rut risks deepening, despite expectations that major central banks will cut rates or ease policy further, according to Reuters polls of over 500 economists who remain worried about the U.S.-China trade war…

    “Peter Dixon, economist at Commerzbank, said, “…it is questionable whether monetary easing will actually achieve much. We are running out of monetary options and perhaps governments need to think about their fiscal alternatives.”


    • Harry McGibbs says:

      “Each passing week is bringing more evidence that the pessimists are right about the underlying momentum of the global economy. The threat of a prolonged dislocation of international commerce from a trade war, on top of a recovery that was already starting to look tired, has put policymakers back on alert.”


    • Economists are definitely running out of options for cutting rates further.

      The article talks about reducing estimates of future economic growth. I saw a WSJ article today talking about revisions to US economic growth:

      Economic Growth Didn’t Hit 3% Mark Last Year, Revised Data Show

      Gross domestic product, a broad measure of the goods and services produced, was up 2.5% in the fourth quarter of 2018 from a year earlier, the Commerce Department reported Friday. That was down sharply from its most recent estimate of 3%, and was largely due to lower business investment and exports than previously estimated.


      The department released the figures as part of its revisions to GDP data going back to 2014.

      After a while, a person wonders what we are supposed to believe.

      • Artleads says:

        Your last line points to what I variably call “aesthetic intuition” or “imagination,” or what Eckhart Tolle calls ” faith.” Our materialist culture doesn’t access these qualities very well. It is somewhat helpful to feel or imagine where where we stand, and less so trying to think it through; there is far too much complexity to think through. But without your approach to facts and analysis, the faith/aesthetic/imagination approach does less well than it might.

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

    Tell me again when we hit bottom….
    Bloomberg) — America’s biggest owner of drilling rigs fell the most in seven months after the chief of Helmerich & Payne Inc. said he called the bottom too soon.

    Three months ago, when Helmerich had 220 of its rigs hired out, Chief Executive Officer John Lindsay told investors the second quarter would be the nadir for his fleet. But after the number of Helmerich rigs at work shrank to 214 a few weeks ago, Lindsay says his earlier projection was “premature.”
    “The full effect of the industry’s emphasis on disciplined capital spending continues to reverberate through the oil field services sector,” he said in a Wednesday statement. “We are reluctant to predict another bottom and see further softening during our fourth fiscal quarter as our guidance would indicate.”
    The hired hands of the shale patch who drill and frack wells are suffering from a slowdown in North American spending brought on by investor demands for higher returns. The U.S. oil rig count has fallen 11% this year, according to Baker Hughes.
    Well, Guys, what’s Rock Bottom?

    • It is the support system for the oil and gas industry that is hit early on. Oil and gas companies cut back on their use of contractors, particularly for drilling new wells. They instead finish their inventory of “Drilled but Uncompleted Wells,” keeping the supply up.

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

    We’ve hadn’t a Elon Bashing story of late…here it is…happy now…
    Shares of Palo Alto-based Tesla Inc. plunged 13.61 percent in trading Thursday to $228.82 per share — marking the automaker’s seventh-worst one-day performance in its history.
    Wall Street pummeled the stock after Tesla released a raft of bad news after the closing bell on Wednesday: The automaker posted a wider-than-expected loss of $408 million in its most recent quarter, co-founder and CTO J.B. Straubel said he was stepping down, the company installed fewer solar panels than ever before, and Tesla opened two dozen new retail and service locations, just months after scuttling plans to close most of its stores.
    Meanwhile, production of the Tesla’s older, more expensive cars, the Model S and Model X, dropped by 41 percent year-over-year, amid declining sales of both models.

    Looks like ….

    The End is near…ahhh, Give the Guy another infusion..BAU Baby

  17. Aviation Deathwatch
    Airline profitability down by nearly half so far in 2019


    • I looked at the article to see a little more about what is happening. It reports:

      On the positive side, the latest report indicated a pickup in global average passenger yield in April, a month-on-month increase of 1.3 per cent, the largest such rise since February 2018.

      However this was within an overall downward trend in passenger yields which are down by 30 per cent since 2011 and by 4.3 per cent from April 2018.

      I looked up “Passenger Yield.” This is reported to be

      Measure of average fare paid per mile, per passenger, calculated by dividing passenger revenue by revenue passenger miles (RPMs). Typically the measure is presented in cents per mile and is useful measure in assessing changes in fares over time.

      The year 2011 is the year for peak oil prices. Passenger yield reported to be down by 30% since 2011, so it is not surprising that paid fares per passenger mile are down.

      We should keep an eye on airlines. We have seen a few bankruptcies lately. We may see more.

  18. Sven Røgeberg says:

    The principal analyst of oil by Rystad Energy, Bjørnar Tonhaugen, foresees a doubling of US shale oil production towards 2030.
    He dismisses all the usal argument against optimisme.
    I dont know how many of you are capable of reading norwegian, but you will find a chart.

    • Mark Sharkey says:

      google translate can read norwegian

    • I don’t think that analyst Tonhaugen understands why the economy is seems to be trying to contract now. He also doesn’t understand why oil prices don’t necessarily rise when there is an oil shortages. The economic system is more complex than he understands. He also thinks that there are 15 years worth of the best oil locations for drilling in shale left. Financing seems to be leaving shale companies now.

  19. Yoshua says:

    “A total of 271 Chinese property #developers have declared #bankruptcy so far this year amid the liqudity crunch following tightened financing rules for the sector and slower home sales.” Yuan Talks

    • Wow! The housing sector doesn’t sound like it is doing too well.

      • Denial says:

        What is your prediction for the u.s housing? It’s gotta be ready to snap

        • A person would think it would be about ready to snap. I ran across this image of US ZIP codes by period in which the plurality of houses had been built.


          Even with these very old structures, the North East has very high housing prices. The poor owners are stuck with high mortgage rates, plus high costs of getting houses up to current standards (better wiring, more insulation, etc.). My daughter told me about a friend of hers who bought a house on a small road that is privately owned by two residences. The two homeowners are left with the cost of keeping the road in repair.

          There are a lot of newer houses in parts of the country where people moved later. But the cost of homes in general tends to be very high along the West Coast as well.

          I am fortunate enough to live in Georgia. My house was built in 1980-1989, which is not too unusual for the area. Housing prices are less outrageous here than in many areas of the country.

  20. Yoshua says:

    Total has decided to sell off upstream assets that have a high breakeven point. Total needs today USD 50 oil to breakeven.


    • It is a wonder that upstream assets that have a high breakeven point, such as North Seas oil, have any value at all. It remains to be seen what Total will actually get for these assets. I suppose there still are a lot of people who believe, “Oil prices always rise.”

      • Yoshua says:

        Total doesn’t seem to be so sure about rising oil prices.

        I read last year when WTI futures were rising…before they collapsed…that Shell who was dealing with physical oil, didn’t share the optimism with the future traders of rising oil prices.

  21. Harry McGibbs says:

    “Caterpillar Inc. shares fell after the heavy-equipment maker projected 2019 earnings at the low end of its forecast amid rising costs, declining sales in Asia and a slowdown in oil and gas spending in the prolific Permian Basin.”


  22. Harry McGibbs says:

    “It’s hard to wrap your head around just how low U.S. interest and bond yields are—still are—a decade after the Great Recession ended. Year after year, prognosticators said that rates were bound to go back up soon: Just be ready. That exercise has proved to be like waiting for Godot…

    Where low rates really bite isn’t in current returns but in the future gains investors can reasonably expect. Interest rates set a kind of baseline for the return on all assets. As they fall, bond values rise and stocks often do, too. But once rates have settled at or near rock bottom, there’s less room for that kind of price appreciation.

    “All this has sent investors looking under every available rock for more return—even if it means taking more risk. The fear is this could lead to the formation of bubbles and eventually destabilize the financial system.”


    • Harry McGibbs says:

      “Markets are turning up the pressure dial on central banks to boost policy easing. Benchmark bond yields have in unison dived below or close to key interest rates in the world’s biggest economies. While this has happened before in the U.S., it’s never been seen before in the euro area. That show investors expect the Federal Reserve and European Central Bank to deliver stimulus soon.”


      • Harry McGibbs says:

        “European Central Bank President Mario Draghi will move back into the spotlight as stock-market investors cheer a shift back toward easier monetary policy by major central banks, with the ECB widely expected on Thursday to at least lay the groundwork for an interest rate cut, and possibly further action, later this year.”


      • Meanwhile, pensions are having a terrible time with the low interest rates.

        The WSJ writes, The Plan to Save Truckers’ and Miners’ Pensions Is Running Out of Time.

        Among other things, it says, “The [multi-employer pension] plans in the worst financial condition are short an estimated $100 billion to pay out retirees.”

        A plan to put a bandaid over the problem this year by offering $48.5 billion in forgivable government debt is being sent to the US Senate, but appears unlikely to pass. No one knows how much the remaining plans (those multi-employer plans that are not in the worse financial condition) are short.

        • At some point the Senate (or other chambers and bodies) will vote for such ‘forgivable gov debt’ without any hesitation and even for several such deals in a day..
          Then watch out..

          • Of course, the government doesn’t carry any estimate of amount that it will pay on its balance sheet. Its accounting is basically cash, with a few adjustments for the student loans and a few other programs, as I understand the situation.

      • It becomes a problem, when rates are already low. How does a person reduce them further?

        Or is it necessary to offer loans to groups that can’t possibly pay them back. For example, I just put up a link to a WSJ about pension plans that are short of funds. Legislation is being proposed to give big forgivable loans to these plans.

        The groups in difficulty represent unions in such fields as mining, truck driving and brick laying. These unions had a lot of members in the past, but they don’t have many members now. Current members are not going to be able to contribute enough more to make up the shortfall to pay promised benefits to the huge number of retirees. Presumably, the hope is that interest rates will rise and the stock market will rise (even more), allowing future investment gains to eventually solve the problem. But who can imagine that the new loans will ever be paid back?

    • I am certain that there is a strong connection to the things that we have been talking about here.

      When the world has the benefit of a rapidly growing supply of cheap-to-produce energy, interest rates and inflation rates are high. It looks like these high rates will continue forever, so actuaries forecast that the future will be like the past.

      It doesn’t work this way in a finite world, however. Diminishing returns set in, and the cost of energy production tends to rise. Growth slows. Returns on investment in general tend to fall, because a fixed number of dollars buys fewer and fewer Btus of energy. More and more debt is issued to hide this problem. This can’t work out well.

  23. Harry McGibbs says:

    “Global debt is officially $184 trillion, which is 225% of global GDP. This is $86,000 for every person in the world, which is 2.5 times annual income.

    “We estimate that official figures are understated by a factor of 2.5, so debt is actually $460 trillion, which is 560% of GDP and $215,000 per person.

    “These numbers are astronomical, raising the risk of economic blowback once interest rates and inflation rise, as they eventually will…

    “No one knows when the debt spiral will end, but it’s a virtual certainty that it will not end well.”


    • Chrome Mags says:

      “These numbers are astronomical, raising the risk of economic blowback once interest rates and inflation rise, as they eventually will…”

      When that happens look out, because in my opinion that will be a sign the situation is in end game, before collapse.

    • The first article only has an abstract that I see. I am not sure I can comment too much on it specifically.

      Regarding the second article, I notice that they are assuming that what they want to do us use the battery to help the homeowner to use a somewhat larger share of the solar energy the house generates, by saving some until later. This still leaves the grid in essentially the same place it was before, with likely way too much electricity in the aggregate, when the sun is shining, and not enough electricity when it is not. It still needs close to the same amount of electricity backup as in the past. It likely will still have the problem of excess electricity causing negative prices for other electricity providers.

      The useful thing the article does is point out the problem with diminishing returns from adding more batteries. If the grid uses batteries, it will likely have the same problem with diminishing returns from batteries. Either way, backup providers will be needed, and they need to be paid for their services.

      Rather than using an EROEI approach, I would personally prefer an approach where we assume that the provider of wind or solar energy only gets paid what the electricity is worth to the electric company buying its services. Also, the homeowner with roof solar only gets a rate credit, based on the savings to the electricity provider.

      My first pass would be that the rate credit for a homeowner would be roughly 2 cents per kWh, and that the purchase price of the intermittent electricity would be about 2 cents per kWh. (The credit might be higher where it is necessary to burn oil to produce electricity, such as Hawaii and Saudi Arabia.) In fact, I have seen some recent bids for intermittent electricity below 2 cents per kWh, indicating (if no subsidies are in effect) a high EROEI.


      (Median Purchasing Price Agreement (PPA) prices compared to forecast future natural gas prices. Chart by Department of Energy (Chart 54) in its 2017 Wind Technologies Market Report.)

      The reason for the relatively low price is that, on a first pass basis, the intermittent output of solar panels and wind turbines only save fuel. The electricity provider still has a whole lot of other costs. In fact, the provider likely has more costs, because of the need to monitor the new interconnection, and to get the electricity integrated with the rest of the grid. The electricity provider likely will need to add batteries to handle the rapid up and down ramps, if there is very much intermittent electricity on the grid.

      Then the question is, “What is the payback period at 2 cents per kWh, given the actual terms available, including interest rate charges? In some cases, bid prices seem to be low enough to meet this hurdle. So in some cases it make sense, especially if a utility pricing model is used by the electricity provider, so that the utility can collect enough revenue in total, and allocate it back to the backup providers.

      If the system is on a competitive pricing approach, I still see intermittent electricity as being very damaging to the system, if it is allowed to go first. Allowing wind and solar to go first allows them too much of an advantage. Prices in the aggregate come out too low. Unless this can be worked out, wind and solar, even at 2 cents per kWh, may still be too damaging to the overall system to make sense.

      Adding battery backup for several hours to wind and solar may help somewhat, in allowing the providers to take more of the load. Even with a lot of backup battery, it is hard to make a case that the electricity provided is worth more than 3 cents per kWh to a grid system, however.

      EROEI allows you to think you know, more than you really do. Absolute costs are very important.

      • Sven Røgeberg says:

        Thanks! I dont know if i understand all the details. Is a rate credit a kind of discount on the electricity bill?

        • About half (more in some cases) of an electric utility’s costs are fixed costs. It needs to put electric transmission lines in place and service them. It needs to send bills to individual users, keep the system in balance, and many other things.

          Furthermore, only part of the variable costs are fuel costs. Some of the variable costs are labor. They really aren’t very variable, if a company has a trained workforce that needs employment year around.

          The amount that is charged to various users varies greatly, depending on how much of the fixed costs seem to be attributable to them. In 2018 for the US as a whole, the average retail cost of electricity was as follows:

          Residential: 12.89 cents per kWh
          Commercial (stores and offices): 10.66 cents per kWh
          Transportation: 9.77 cents per kWh
          Industrial: 6.93

          There are “low states” and “high states.” Industrial activity is concentrated in low states.

          Washington state, with its supply of aging hydroelectric dams, has average rates as follows:

          Residential 9.73 cents per kWh
          Commercial 8.70
          Industrial 4.73

          Hawaii, with its dependence on imported oil and renewables, has 2018 rates as follows:

          Residential 32.48
          Commercial 30.00
          Industrial 26.11

          Needless to say, virtually no industrial organization will choose to move to Hawaii. Homeowners in Hawaii will not operate air conditioners much, either. They will leave their lights off as much as possible as well. The state depends on imported goods of every kind, from elsewhere. Hawaii could never exist as a stand-alone entity, with rates this high. But its electricity needs are low, and tourists are able to spend a high amount for electricity. The US government with its base in Hawaii also is willing to pay a high electricity price.

          California’s 2018 average electricity prices (including a lot of renewables) were as follows:

          Residential: 18.90
          Commercial: 16:46
          Industrial: 13.35

          Looking at fuel costs, the average cost of fuel for electricity from coal providers is about 2 cents per kWh.

          The price of natural gas historically has bounced around a lot. It also depends on whether a state has a good supply of natural gas nearby (piping it a long distance, and storing it for when it is needed, is a problem). The price of natural gas on average, has been in the 3 to 3.5 cents per kWh range.

          Sorry to bore you with all of this. I needed to look up the details at this point.

          A big problem has been, “How should a utility compensate a homeowner for the electricity from his own panels.” The original method of choice was “net metering.” In other words, the homeowner would get credit at the retail price level for the output of his solar panels. With this price level, it became (fairly) easy to show that solar panels are worthwhile, especially if there are a huge number of tax credits and other incentives involved that indirectly reduce the amount the homeowners’ costs.

          The catch is that the benefit to the utility is a whole lot lower than the retail rates it is charged. Net metering is terribly detrimental to the utility. It also hurts the rest of the customers. This is what I am trying to get at.

          • Sven Røgeberg says:

            Thanks, Gail, that was easier to follow. My critic of Jørgen Randers has, as i expected, generated a lot of dispute. I got an «answer» to day, where the autor links to this article as «proof» that i was wrong:
            Randers is going to write an article later today. I will get a chance to anwer them both. Stay tuned;)

          • MR. Bongo says:

            THe utility company is perceived as a enemy, a fat cat even as it provides basic sustenance. People can not conceive of a world without electricity. It is regarded as a social justice right. Harming the utility company is not seen as jeopardizing this right. The idea that rights exist that can be supported by law without resources or infrastructure is directly related to the idea that money has inherent power. This belief seems to more emotional than intellectual. We talk intellect. We live emotion.

        • In the US, electricity rates are typically charged as cents per kWh consumed, even though the costs of an electric company are mostly fixed costs.

          Net metering as a credit for self-produced electricity means that people are charged for only the hours they consume. I am saying that they should be given a credit that is about 2 cents per kWh, in most places, for locally produced electricity. This would be a much lower benefit to the person. Electric companies have already been moving away from net metering, because its doesn’t make sense.

          • Sven Røgeberg says:

            Hi Gail! Hier is Jørgen Randers answer to my critic. Please feel free to comment before i send in my answer.

            • Sven Røgeberg says:

              Btw here are the links Randers give as support for his view that 1. RE generates net/surplus energy and 2.that the transition to a substantially cleaner, more affordable, and more reliable energisystem in 2050 is possible .
              1. https://sinovoltaics.com/learning-center/solar-panels/energy-payback-time-for-solar-systems/
              2. https://eto.dnvgl.com/2018/main-report

              In 2018 Randers co-autored this report:

            • Hi Sven,

              These are some issues I see:

              1. The ratios of net energy generation that you are analyzing are on a “life of the wind turbine” or “life of the solar panel” basis. As a practical matter, the energy is expended up front. The energy deficit is made up over time. There is no real return until this deficit is made up. The model net energy calculation therefore significantly overstates net energy output for years when the number of devices is growing. Of course, the payback will improve significantly in years of decline. This is not too different a situation from the problem that shale oil drillers face. There are many years when energy flow (or cash flow) is negative, only (hopefully) to be made up with better returns in the future. It is not possible to build new devices until the actual energy is available. A year-by-year net energy estimate is really needed. In fact, the calculation should also take into account energy input requirements for supplementary equipment required, such as batteries used by electric utilities and/or homeowners. When this is done, the net energy output is likely to be very much lower than what your model suggests.

              2. You say that the lifetime of wind turbines and solar panels is about 20 years. By the standards of electricity generating companies, this is a very short time. Many US still-operating hydroelectric plants were built before 1930. Nuclear and coal generating plants seem to last for 60 years or so. (The average age of existing US plants is 39 years, based on EIA data.) With as short a life span as 20 years, the world is put on a constant treadmill of building more solar panels and wind turbines. Replacement of old devices with new ones is not necessarily easy, either. For example, if the size of wind turbines changes, the new ones need to be spaced more widely.

              3. Battery backup for wind and solar can be expected to be increasingly needed, as more wind turbines and solar panels are added to the grid. If lithium batteries are used, we are dealing with a substance where reprocessing is energy intensive and the end product may still be unsuitable for making new batteries. Less than 5% of lithium is reprocessed now. While money is being allocated for more research, there is no guarantee that this hurdle will be cleared. Without adequate reprocessing, we encounter a pollution problem and a lack of adequate lithium problem.

              4. The share of the world’s energy consumption currently coming from wind and solar in 2018 is only about 3.5% of world’s fossil fuel energy consumption in 2018 (or about 3.0% of total energy consumption), according to recent BP data. People often get confused, because they do not realize that electricity consumption today is only a small part of total energy consumption. Most ratios of wind and solar in use today are quoted as a percentage of electricity generation, not total energy consumption.

              The calculation of wind and solar as a percentage of world energy supply is as follows: Wind and solar together comprise 7.0% of world electricity supply. Using BP’s conversion factors for electricity to energy, world electricity supply amounts to 43.4% of world’s total energy supply. When we put those two numbers together, 7.0% x 43.4% amounts to 3.0%. The IEA uses less generous electricity conversion factors. The IEA is sometimes quoted as saying that electricity amounts to 20% of world’s energy supply. With this conversion, wind and solar amount to only 1.4% of world energy supply.

              Starting from a base where wind, water, and solar together amount to 10% of total energy supply, it is hard to get to anywhere near 100% in less than generations. Talking about replacing fossil fuels, or total energy supply, with wind and solar becomes absurd.

              5. Any transition would take generations and generations. Wind, solar and water today come to about 10% of world energy supply. The amount of ramping up would be huge. First, new methods would need to be discovered so that wind and solar could substitute for fossil fuels in many different areas. For example, we cannot currently pave roads with intermittent electricity. The entire supply chain would need to be figured out, with only the intermittent resources of wind, water nd solar. Once we figure that out, we would need to start building new factories. Once new factories are built, new supply chains would need to be developed so as to provide these factories with the resources that they need. Only then, would we be able to create the desired end products.


            • Sven Røgeberg says:

              Thanks, Gail. I am not quite sure that i understood everything under 1? This sentence confused me: «Of course, the payback will improve significantly in years of decline.»

            • I am trying to look at total results on a year-by-year basis, on an energy-in energy-out basis. For example, for solar panels, for the year 2019, I want to look at how much energy is expended in bringing the total system into operation, compared to the output for the total system. Thus, I want to include both energy investments in solar panels and battery backup. Energy investments in long distance transmission should be included as well. These should be compared to the total electricity output of the system, in 2019, based on both input from recently installed solar panels and solar panels installed in prior years.

              The reason I do this is because the physical energy system operates on a “here and now” energy flow system, not on guesstimates about the future.

              In the years when more and more solar panels and battery backup are being installed, a person would expect that the energy flows would be very much lower than the model averages, hence lower actual EROEIs. In the years when the system is in decline (something better has been discovered, for example, so solar panels are being phased out), and solar panels and batteries are no longer being added as much, what I am saying is that the comparison will be much more favorable.

              I have complained for years about “models of future results” being used to produce average lifetime EROEIs for wind and solar. Besides the ramping up and ramping down problem that I just discussed, there is also the problem of not really forecasting what goes wrong in these models. These models tend to be hopelessly optimistic, just like the shale drillers models are. They don’t foresee the many real-world problems that occur. The operators observe that results aren’t as good as expected now, but perhaps they will improve later. Thus, the models are a way of proving to the world that under a “no future problems” scenario, the solar panels or wind turbines will produce net energy. This is way too much like the shale drillers models.

              Did you post a comment with a link to a draft of what you wrote? I thought I saw it, but then it disappeared. Perhaps I accidentally deleted it. If you did, please post another link.

            • Sven Røgeberg says:

              Thanks for the explanation, that was understandable! I will use your insights also from previous comments in my answer to Randers. This was my first answer to him with links to some of your articles
              I can try to send you draft of my new article to your e-mail!

            • Sven Røgeberg says:

              I tried to send the draft to: Gail-Tverberg@comcast.net
              Can`t be delivered to this adress?

            • There is no dash after Gail in the email address.

            • Sven Røgeberg says:

              Here is my answer to Jørgen Randers in todays Aftenposten. As you see, Gail, i was allowed to add a final section framing the RE-issue in a broader context familiar to all of us here on OFW.

            • Thanks! That is a very fine response, in my opinion.

              This is what Google Translate provides for the first part of the article:

              Sloping security for renewable energy based on reality removing models | Sven Røgeberg

              The greater the proportion of renewable energy, the greater the problems it creates in the electricity system.

              Models of EROI (energy return on energy invested) for renewable energy cause civilian engineer Kristian Hall and BI professor Jørgen Randers to think that they know more than they actually do. However, in my view, trying to calculate EROI for some wind turbines and solar panels, assuming the amount of electricity they can supply to the power grid in the future, is an incorrect measurement method. Meta-analyzes only aggregate an incorrect scale.

              EROI models only deal with the easy-to-count energy consumption. In a network-based economy, there is a lot of energy consumption that is not so easy to count, but which is crucial for the operation of wind and solar systems.

  24. Yoshua says:

    U.S crude production down another 700.000 bpd last week.


    • I found an article about the gulf closures for Tropical Storm Barry. Tropical Strom Barry did not hit until July 13, but I am sure that they started preparations earlier. The latest report was for the week ending July 19.


      One thing the article says is

      The oil industry has been moving tankers out of the area and shut down more than half the Gulf of Mexico’s oil production. The government estimates that as of Friday morning, 59% of current production, or 1.1 million barrels of oil per day, had been curtailed, as the industry evacuated workers in the Gulf. About 49% of all natural gas production had also been shut-in.

      So 1.1 million barrels a day were shut in as of the time this article was published (July 12), according to government estimates.

      The article also says,

      Like other analysts, Kloza said the storm may not damage much energy infrastructure but it will wreak havoc with the government’s weekly oil market report, watched by the market globally for its supply/demand data. The next report is due Wednesday at 10:30 a.m., and the data could be skewed by the storm. The data could be impacted both by the storm disrupting exports and imports. The industry may also not be as focused on supplying the data in the New Orleans area as it normally would be.

      “It really screws up EIA reports next week and perhaps the week after that. We’re going to get some screwed up data. Also, we could get sweet crude go up in price at the Gulf Coast but Cushing doesn’t match it,” he said, suggesting the spot market on the coast could get bid higher than the price of crude at Cushing, the US storage hub.

      There are many other effects as well, including closed refineries, oil in storage in the gulf, and transportation logistics for all of the oil.

      I think this week’s and last week’s reports are likely badly distorted by the storm. So I wouldn’t get excited about the funny numbers you see. If domestic production was as follows, for the following week endings:

      7/5/2019 12.3 million bpd
      7/12/2019 12.0 million bpd
      7/19/2019 11.3 million bpd,

      but Gulf of Mexico production was down 1.1 million barrels, the remainder was still rising.

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


    Climate change: 12 years to save the planet? Make that 18 months
    “I am firmly of the view that the next 18 months will decide our ability to keep climate change to survivable levels and to restore nature to the equilibrium we need for our survival,” said Prince Charles, speaking at a reception for Commonwealth foreign ministers recently

    Was Al Goes there too!?


    Don’t worry Charlie the planet will be just fine …if it ain’t CC something else will shake the human fleas off the face of the planet!


    Ya, we sure are gonna save the planet alright…pleaaasssee

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

    JPMorgan: We Believe The Dollar Could Lose Its Status As World’s Reserve Currency

    Almost eight year ago, we first presented a chart first created by JPMorgan’s Michael Cembalest, which showed very simply and vividly that reserve currencies don’t last forever, and that in the not too distant future, the US Dollar would also lose its status as the world’s most important currency, since it is never different this
    the end of World War II, the U.S. accounted for biggest share of world GDP at more than 25%. This number is brought to more than 40% when we include Western European powers. Since then, the main driver of economic growth has shifted eastwards towards Asia at the expense of the U.S. and the West. China is at the epicenter of this recent economic shift driven by the country’s strong growth and commitment to domestic reforms. Over the last 70 years, China has quadrupled its share of global GDP to around 20%—roughly the same share as the U.S.—and this share is expected to continue to grow in the years ahead. China is no longer just a manufacturer of low cost goods as a growing share of corporate earnings is coming from “high value add” sectors like technology.
    Recent data on currency reserve holdings among global central banks suggests this shift may already be under way. As a share of overall central bank reserves, the USD’s role has been declining ever since the Great Recession (see chart). The most recent central bank reserve flow data also suggests that for the first time since the euro’s introduction in 1999, central banks simultaneously sold dollars and bought euros.
    Central banks across the globe are also adding to gold reserves at their strongest pace on record. 2018 saw the strongest demand for gold from central banks since 1971 and a rolling four-quarter sum of gold purchases is the strongest on record. To us, this makes sense: gold is a stable source of value with thousands of years of trust among humans supporting it.

    This was posted on PO News and came from Zerohedge website.

    • This is one of the big unknowns. How does the financial system continue to function, with all of the disruption that is taking place? Can the world economy continue to function in a somewhat different form than it has now? Gold didn’t work well before, because its value is fixed and the economy needs to grow.

      • Dennis L. says:

        If economic growth is tied to energy production and energy production has peaked then growth is no longer possible. Even with paper assets, the value increases but the cash flow to the investor is virtually stagnant, selling an asset is one off.
        Steven Collum seems to think that the actual value of many stocks is gone due to stock buy backs and the associated debt now on company books, or book value has gone close to zero, there are exceptions, BRK has billions in cash and minimal liabilities.
        Supposedly even the vaunted 1% showed a decrease in wealth last year, they are essentially the skimmers so is the amount left to skim decreasing?
        Gold as a matter of trust is an absolute, gold does not grow in its ability to dissipate energy. Does a society able to back its debts with gold have a trust premium?
        Perhaps building various scenarios without growth or negative economic growth after collapse might be an interesting intellectual endeavor. Life will go on.

        Dennis L.

        • A system without growth or with negative economic growth fundamentally doesn’t work, because of all of the diminishing returns built into the system. Maybe an article explaining some of the problems might be helpful.

          A related issue is that, in some sense, we are dealing with a fixed maximum extraction amount for fossil fuels, metal and non-metallic ores, and for things we take from the biological system we live in. (Other creatures need biological products. We are already cutting down too many trees, have killed off too many wild animals, and are overusing these biological resource.)

          Suppose we call this maximum amount 1,000,000 for each of these things. Right now, we are subtracting an increasing amount each year from this maximum fixed resource supply. Changing the situation to subtracting a fixed amount each year, or even a declining amount each year, doesn’t really fix the situation. We are still subtracting something each year from the initial 1,000,000, and leaving the rest of the world ecosystem worse off.

          We would need to reverse our subtraction, to actually help fix the world situation. In other words, we would need to add back ores of all kinds, reforest land, and start using less biological products from other species, to allow other species to compete. We could not till our soil, because this adds to problems with eroding topsoil. We could not irrigate, because of issues with adding salt deposits. We could not take water from depleting underground aquifers that refill very slowly. We would need to stop fishing, to allow fish stocks to replenish. We could not make solar panels, wind turbines, and electric cars, because these too take depleting resources.

          • Artleads says:

            “We could not till our soil, because this adds to problems with eroding topsoil. ”

            And this would also release massive amounts of carbon locked up in grasslands. Topsoil loss and carbon release as twin results of messing with the land. Food production might just have to be concentrated in the indoors under LED (or more economical) lighting. But with fewer scarce materials involved than now?

            • DJ says:

              How would you get electricity for the LED?

            • Artleads says:

              We can’t do without electricity. But we could hold on to some of it through radical change.

            • I am not so certain about holding on to electricity supply. A few solar panels, an inverter, and a bank of batteries would hold up a little until one of them fails. Maybe 5 years, unless you are lucky, or keep a backup supply or replacement parts as well. Little electricity in winter, though.

              If you add a electricity transmission network system to the mix, plus the need for balancing and backup (and extra support) from fossil fuels, I can’t imagine any system lasts very long at all. The first windstorm brings transmission lines down, and they can’t be repaired.

              A motorcycle, with a little fuel supply stored up (or available for purchase nearby), might be more reliable. I know that gasoline powered devices were available long before electric in rural and outlying areas. This may be the case later as well. Gasoline is easy to transport and store; electricity is not.

            • I am afraid you are asking for too much complexity. It couldn’t happen. LEDs require world trade, for example.

            • DJ says:

              It seems a little backward to harvest electricity from a solar farm to run a LED lighted indoor plant farm.

            • Artleads says:

              Gail, you are the knowledgeable person that we look to for such issues. (I promote your writing very widely online.) So let’s say I’m just dreaming–what I’m seeing is a reset (deliberate or natural) of how the world run on fossil fuels does business. The quality of such measures like health care is slipping very steadily away. I don’t see a sudden collapse signalling the end of fossil fuels. That would kill very many people.

              Nobody is remotely equipped to deal with that. If the self organizing system knows that, it will avoid that sudden rupture. It will continue to do what it’s doing and keep throwing this group and that under the bus while somehow holding on. Yes, the economic numbers for producing ffs mightn’t add up. But if you say there are great amounts of fuel in the ground, just not at a marketable price to produce, I can’t for the life of me see (although I’ve been repeatedly told) why a self organizing system can’t find a way to get it out of the ground for VERY STRATEGIC use.

              Yes, for environmental reasons alone, the fuel system has to contract drastically–why is it being used to heat buildings in the Tropics? Or to take people on long commutes when better planning could have them live where they work? I know there is always something flawed with my reasoning, but they always seem to hinge on the assumption that there is no such thing as paradigm change. I can’t buy that. As a species, we once lived in trees, and for some reasons of advantage, we came down to the ground. So we do seem capable of radical change when it’s the only way to survive.

            • I know that the reason why people living where they work no longer works:

              1. Employers consider keep an employee only as long at the employer wants him. If a cheaper alternative is available overseas, the employee is out the door quickly. Or the employee works on a contract. This creates a problem with homes, which often are owned, or have leases.

              2. People come in families. Multiple family members work. It may be that two spouses work, or that two spouses plus an adult child (or parent) work. It is impossible for everyone to live where they work.

              The experience of a lot of economies in the past is that they collapsed. Some of them managed to send a lot of their excess population elsewhere, and that saved them.

              The thing that theoretically could save part of the population is some sort of simplification–some unneeded pieces collapsing perhaps.

              I am having a hard time seeing how the fuel could be extracted from the ground. Everything I can see says that the economy needs fuel prices that fall, when inflation and efficiency gains/losses are considered.

              The fossil fuels that are left are so difficult to extract and transport to livable parts of the globe, that I expect that they will be left in place. Perhaps if there is enough climate change, the coal in Alaska will make sense to extract, because the area will be more inhabitable by people. Siberia may have some coal as well–I don’t really know. We would need some changes of that sort, to make fuels easier to extract.

            • Artleads says:

              Thanks a lot, Gail. As usual, you have thought through the situation in practical terms that elude some of us. Your point (1) is most compelling. It would be hellishly messy having a laid-off employee have to leave their domicile as well. It could be that the housing near work could be independently managed, and EXCLUDE a worker living in a mobile tiny “house” on top of a Burger King roof from working for Burger King. If the worker goes AWOL their housing is removed, or they get a credit for abandoning it to someone else. But push come to shove, the system (or local, decentralized sub-system) must ensure that extremely cheap and basic shelter and one free meal a day is provided for every needy individual.

              I have an art show coming up, and I’m working on a shed booth based on cardboard box and PVC construction. The booth and exhibits have to fit in my compact car, and the cost will be minimal. But that is not the homeless shelter I speak of.

              Shelter, homeless or otherwise, depends on a functioning industrial system that in turn depend on freight using cardboard boxes. Cardboard strawbales don’t need the plastic bottles that go in them to be stuffed around with fire-retardant paper pulp (making “cardboard box strawbale”), but it addresses SOME plastic and paper waste AFAICS. It’s also temporary, a transitional strategy to a future I can’t foresee. The construction (which I’ve been experimenting with these past 3 years) is modular, and can be transported with a dolly and a pickup.
              END PART 1

            • Artleads says:

              PART 2

              Mixed Use

              Simply means that available housing is built close enough to available jobs to allow pedestrian commute from home to job.


              The simplification you speak of would exclude the complexity of building sizeable, regular housing, with wood framing and very complex siding and insulation, implied within the above link.

              It’s important to note that I don’t think of cardboard strawbale in any sort of Mad Max context. A Mad Max solution to anything is quite far out of my range. I’m seeing cardboard as groovey, artful, cool, adaptable, like some kind of public art that adds value to a place. Water? It can’t look and feel too different from how it looks and feels now. Obvious things, like the obligatory roof catchment for new construction in my county. I believe I’d pick up a clue, although I live in the desert, that water was going away in foreseeable future. There simply has to be lot more conservation of water.


              If you dig down 10 feet in my yard, you hit coal. Coal is so plentiful here that in the old mining days they blew up houses that caught fire, fearing the conflagration if the fire spread. The mine closed due to the introduction of diesel and heaven knows what else.

              This was in the 50’s, ages before I arrived here. People moved out and this became a ghost town. I daresay a lot of the coal mining equipment get pilfered. But not all. All through the decades till now, remaining equipment gets stolen, given away, sold. Nobody thought, at any stage, to save what was left in the 50’s just to see what we might learn from it in the future. To compound the fact is the religious certainty that everything coal is evil and should be off the list of any topic of discussion. I imagine it would be prohibitively expensive to restart coal production as well, even if we wanted to.

              So avoidable mistakes are made that render coal power moot in my local scale. I’m sure similar mistakes have been made elsewhere, but also continue to be made.

            • I suppose that if population falls in areas such as where you are now, it might make economic sense to destroy homes and extract the underlying coal. I know that a whole lot of coal has been left behind because it is underneath other land uses that are today deemed important, such as roads, schools, homes, and commercial buildings. This is one way that collapse could allow the extraction of more resources.

          • Curt Kurschus says:

            Agreed, Gail. Judging by conversations I have had with others offline, most people seem to be either unable or unwilling to understand or accept that growth in the economy requires growth in input of resources and involves growth in output of wastes. Recycling is more akin to moving resources around within the system and therefore cannot grow the economy, it also requires further resource inputs from outside the system (such as, at a minimum, additional energy inputs). Growth itself fuels global warming (thanks to thermodynamics) as well as environmental destruction and pollution. Nobody wants to know about that. We must have growth, therefore we shall have growth, and people who like to express concern about environmental issues listen to, support, and vote for the “sustainable growth” policies presented by “Green” politicians.

            • Recycling sounds like it would be a huge benefit, but the energy requirements and the human labor requirements often mean that it is not. If someone can use something that you were going to throw out, as is, that might be a net benefit, at least to the new user. Hand me down clothes, for example.

          • Xabier says:

            The stark truth of the global resource situation is that it must be either voluntary ‘suicide’ -ie massive planned population reduction and de-industrialisation; or involuntary – ie we will just press ahead with over-extraction until collapse and mass starvation/epidemics/war ensue.

            As voluntary reduction is, at the civilizational level, simply impossible, it will be the latter.

            Look at those idiots in Asia, Africa, S America who want to join the industrial party which started 250 years ago in Britain: it’s a suicide club, but it -quite rightly – looks a lot better to them than slum life or being a dirt farmer. And to their corrupt elites, it looks like Heaven.

            And it’s ‘their right’……. The bad news for them is that Nature recognises no ‘rights’.

            What remains after the collapse in the various regions of the world is anyone’s guess.

            Not much, I suspect.

            • Right. These countries can’t join the industrial party. We don’t have enough cheap energy supply left. There are too many entropy effects already.

            • Artleads says:

              I do my best to tell them to stop the craziness. They keep running into internal contradictions–like poisoning their only source of water to mine for bauxite, even when the IMF warned them against it. Even when the market for aluminum is in decline (as I read here). There are just a whole cluster of insane beliefs that seem more based on aesthetic ideas than anything strictly practical.

        • MR. Bongo says:

          Gold was an agreed upon standard. Its durability as a metal and relative scarcity made it ideal. Plus it wasn’t really a consumable resource. It stuck around. The idea was that money had to be backed by real goods. Its rather inconvenient hauling 20 tons of wheat to a house closing. That idea could not keep up with the growth rate of our species so it was discarded. It was still an idea however an agreed upon standard. There is no way to go back to having money backed by a physical commodity even an ideal one such as gold. “a society able to back its debts with gold” does not exist. Unless you just declare it to be worth a trillion a gram. Then whats the point its still not based on any real relationship to consumable resources. Gold is still an Idea . IMO the concept of money itself is incongruent to perpetual growth. Abandoning the idea of money would seem to be harder even then the idea of abandoning the idea of perpetual growth. Money dies as we hit limits. That includes gold.

      • adonis says:

        is it possible that growth ended in 2008 and we have been in degrowth since then

  27. MG says:

    The use of drugs in Slovakia is on its high like during the 90s, after the fall of the Soviet empire.

    Today, it is the cocaine that is especially popular among the managers, lawyers and businessmen while in the 90s, it was the heroin that was the most widespread drug. The pervitín is a drug of poorer managers today.


  28. Harry McGibbs says:

    “The carmaker Nissan plans to cut more than 10,000 jobs around the world as part of efforts to turn itself around, Japanese media have reported. Nissan announced in May it would cut 4,800 jobs from its global workforce of around 139,000 as it grapples with a fall in profits to a near-decade low amid “a difficult business environment”.”


    • Harry McGibbs says:

      “Mercedes-Benz owner Daimler swung to a €1.2bn loss in the second quarter after the manufacturer was forced to make payments for diesel-related legal issues and to cover the costs of replacing Takata airbags, as it battled a global slump in car demand.”


    • That makes 10,000 people who will need to look for jobs in other industries. In countries that are already dealing with inadequate jobs that pay well, this could be a problem.

      • Harry McGibbs says:

        It feels as if we are circling the drain at this point, I must say, but perhaps I am just emotionally disorientated by having Boris Johnson as Prime Minister. These are strange days indeed.

        • Xabier says:

          I can sympathise: although I prepared myself for it mentally in advance, it’s rather hard to take. I may just stop looking at the UK political news for a few months.

    • The carmaker Nissan plans to cut more than 10,000 jobs around the world

      I found out yesterday the company I work for are handing back our Nissan & Hyundai franchises. They are slow sellers where they’re located but the whole motor industry here in Australia has been quiet for some time. We still have 2 Honda dealerships but even they have been quiet. I’ve been in the motor trade for over 30 years & it’s always been ups & downs but this is the longest I’ve seen it this quiet.

  29. Harry McGibbs says:

    “If late reporters are excluded, [oil] consumption in the top 15, accounting for 45% of world consumption, fell 2.2% in the three months to May compared with 2018, the fastest decline since the recession of 2008/09.

    “Since 2006, consumption growth in the top 15 has been a reliable leading indicator for the top 18 and demand more generally, which is not surprising given the interconnectedness of the global economy.

    “Decelerating oil consumption growth since the second and third quarter of 2018 has corresponded closely with the slowdown in global manufacturing activity and freight movements.”


  30. Harry McGibbs says:

    “Three of Europe’s largest economies are under threat of recession, which could spell a crisis across Europe.

    “Dozens of companies in Germany have turned to “short-time” work — cutting employee hours — a canary in the coal mine of industrial weakness

    “Britain could also already be in a recession despite having not left the EU due to the uncertainty caused by Brexit.”


    • Harry McGibbs says:

      “A double whammy of Brexit uncertainty and a slowdown in global trade has seen order books in Britain’s factories shrink at their fastest pace since the financial crisis, the CBI has said. Urging the next prime minister, confirmed on Tuesday as Boris Johnson, to strike a deal with the EU, the employers’ organisation said industrial output also fell in the latest quarter, for the first time since the spring of 2016.”


      • Harry McGibbs says:

        “Industry in Europe’s largest economy took another battering in July, with a measure of manufacturing dropping to its lowest in seven years. Germany’s factory Purchasing Managers’ Index dropped to 43.1 from 45, below even the most pessimistic forecast in a Bloomberg survey.”


        • Harry McGibbs says:

          “Deutsche Bank has suffered its biggest quarterly loss since the depths of the financial crisis…”


          • Harry McGibbs says:

            “Italy’s depositor protection fund on Tuesday kicked off a 900 million euro (£807.9 million) rescue process for troubled bank Carige… Genoa-based Carige, weakened by decades of mismanagement, risks collapse as a result of bad loans accumulated during Italy’s recession that followed the global financial crisis a decade ago.”


          • The Financial Times article has now been updated to show that its loss was Deutsche Bank’s worst loss since 2015, rather than since the depths of the financial crisis.

            Even with this change, the article indicates terrible results, even worse than analysts were expecting. The bank’s shares are reported to be at €6.77, trading close to the lowest in the bank’s 149-year history. It sounds as if a lot of the bank’s services have problems, even ones that the bank is not discontinuing. Revenue from fixed income trading declined 11%. Merger advisory and capital markets fee revenue fell almost a third.

        • I looked at the article to see how the German economy might still be considered to be expanding, if the manufacturing PMI dropped to 43.1. It turns out that the services PMI is still 55.0, so that the combination of manufacturing and services is still above 50. Government services are not included in this combined PMI. Government services are most likely expanding as well. So, as long as the economy can live in a “services and government only” mode, it can continue to expand.

          But it seems like at some point there would be spill over from the manufacturing sector to other sectors. Eventually, there will be layoffs. These layoffs will affect the purchase of services as well as tax revenue. All of this seems to move fairly slowly. Falls in employment don’t come until companies can see how poorly they are really doing.

          • Xabier says:

            In fact in Spain, for instance, bigger companies cannot sack staff just as they please and have to go to court to get permission – you have to show real losses, not merely foresee them due to worsening trade conditions, in order to get that. This amplifies the lag, and I suppose one could see it as stabilising.

            • A law requiring companies not to fire staff as they please tends to make an economy less competitive in the world economy.

              In the US, there is some difference in state laws regarding employment. I know that state of Georgia is an “at will” state for employment. It has been described as “any hiring is presumed to be ‘at will’; that is, the employer is free to discharge individuals ‘for good cause, or bad cause, or no cause at all,’ and the employee is equally free to quit, strike, or otherwise cease work.” There are better technical descriptions.

              At-will employment has been a headache for my sons, as their programming jobs have been disappearing to China and India. It makes it difficult for workers to count on a particular job lasting. An employer can call you in one morning and tell you, “Gather up your things. We have decided we don’t need your services any more. Thanks for your fine services to date. We will give you a check for a (few weeks pay), as you leave.”

    • that’s why I wrote this piece last year—the EU can keep going only so long as the ‘prosperity pump’ is kept primed

      the EU is a collection of disparate people who were at war for millennia. the EU has only been in existence for 60 years or so. It has no basis in political reality, only economic opportunism


      • Harry McGibbs says:

        Aye – ’tis a very fine article. The clan McGibbs approves.

      • I agree. The more cheap to produce energy is available, the more that can be spared for umbrella organizations like the EU.

        • Xabier says:

          The hierarchy of power is also the hierarchy of energy surplus:

          Clan, tribe, kingdom, empire, supra-national and global entities.

          And then it all unwinds again, until you are knocking your naked neighbour over the head with the jawbone of an ass……

  31. Dennis L. says:

    Complexity and end use energy source for us humans. Note, they add trace minerals, modern ag. is very complex if it fails there are serious consequences. Five hundred tons of energy(read feed) per day used at this farm.
    If this system collapses, someone needs to save our bacon, lame joke.

    • What is even more depressing is that the offered antidote in the way of various permaculture – rejuvenation agriculture practices in the end work on very low output / surplus ratios. Although there are many confirmed advantages, e.g. re-building inches of top soil in a decade and getting more diverse potentially healthier food production, the bottom line simply remains that the combo of permaculture practices + somewhat higher output is impossible without added large outside loop mainly in the large inputs of grains into such system, which in effect feed the topsoil and animals (in the role both of food and as working agents on the ground).

      In a way it is similar to claims (&rosy hopes) of renewable energies – technologies.
      As it’s not and it could not be a closed cycle at least for the desired capacity and scale demanded to replace the legacy system..

      • Dennis L says:

        I agree, the trace minerals most likely are transported long distances and subject to disruption, the technology monitoring this system is complex, the operator’s station has four monitors. Those of us who own land are very sensitive to its use and abuse, modern farmers need to be pretty smart cookies to survive, margins are low, capital costs high.

        It is a long way from farm to supermarket shelf and even with mechanization, farm work can be exhausting and as the farmers age, so does their endurance. There aren’t many people with the skills and experience to run an operation as pictured and without them significant food inflation would probably occur.

        Dennis L.

      • I am afraid you are right. I was surprised when I started reading permaculture literature, and found that grains were pretty much left out completely. Somehow, people were supposed to get grains elsewhere, and add them to the mix. Grains are much easier to store over winter, for one thing. They also are good from a calorie point of view.

        • beidawei says:

          I get a lot of raised eyebrows whenever I refer to Permaculture as an “Australian gardening cult.”

        • Yes, the human consumption of grains is one aspect, but what I tried to emphasize is the often overlooked (HIDDEN) bottom line that all the running successful established ‘permaculture farm’ enterprises are selling their: veggies, eggs, poultry, pork and cattle meat, veggies, .. using enormous OFFSITE inputs of grains to have the system working in the first place.

          The idea (PR) is that the improved topsoil and higher quality of produce of the farm somehow offsets the other place (grains producer) – but that’s not realistic and sincere as grains oriented farms are depleting top soils (moisture, ..) much faster.

          So in a way, even the best practice examples of ‘permaculture farm’ which are trying to match industrial agro production in volume are in the end only shifting prosperity of nature from one man made plot of cultivated land to another.

          Don’t get me wrong, eventually it’s the only known way forward, but on the condition of X-times less people to feed and X-times less overall output produced to make it somewhat mid term sustainable (or at least slowing destruction of nature) when applied as repairing technique for soil – ecosystem depleted areas.

          • Xabier says:

            Priority must be given to the soil and natural systems, and not to human lives, insignificant and redundant as most of us really are. The 83 million humans added every year, of what worth are they? I include myself in that.

            Large and flourishing human populations are a rather senseless aim.

            Whatever we do in terms of farming, though, can be bowled over in a trice by a profound change in weather patterns, whether peramanent or just over a few years

            My own feeling is that the window in which humans were able to live in dense populations based on intense agriculture is now closing, for good.

            • Everything about overpopulation seems weird though.
              Sometimes I get the impression families with starving ~9kids are in certain sense happier than single kid abundance often found in the core countries. There must be some natural forcing in this – and I guess it’s related to the ‘role’ of humans to terraform this place after the last ice age..

            • I really don’t see that having kids one after the other while they go hungry is happy in any sense of the word.

              That is basic survivalism—much like the nest full of baby birds were the one who happens to be slightly stronger edges out the slightly weaker, gets fed more and by doing so thrives while the weaker ones die.

              In primitive societies, boys got fed more than girls because boys could go out and get more food. Girls were surplus. That still goes on the certain societies even now

          • You are right, of course. The enormous offsite inputs of grains have kept the permaculture system working in the first place.

            I think that there are a lot of other offsite inputs that keeping the system going as well:

            1. The government that keeps order, provides schools, roads and other services. There needs to be enough profit from the system to pay annual taxes on land. There needs to be enough “profit” within the system to spare the time of people (away from growing and preserving food) to work on all of these endeavors, even to include writing and publishing books to keep knowledge transmitted in written form.

            2. The industrial system that allows many things that we take for granted such as antibiotics and metals for shovels and barbed wire fences. Even nails and axes, in the quantity we would need today, would be impossible, without cutting down too many trees. Books would be impossible in quantity, without the industrial system. Needless to say, the internet would also be impossible.

            • Xabier says:

              The preservation of literacy in the West was made possible by the large herds of sheep and cattle kept by the Church, in order to provide the materials on which to write, until the paper mills came along. (The first paper mills ran on waste linen from old clothing, which produced superb paper).

              So they had to provide a sufficient surplus of skins over and above those needed for shoes, clothing, belts and harnesses, etc.

            • Good point! It would be hard to do today, with 7.7 billion people worldwide.

      • DJ says:

        Biointensive aims to not use direct inputs. Of course there is still indirect- shovels and buckets .

    • Hubbs says:

      Thanks for posting this video. These are very sharp fellows, the kind needed to revive this country. But as you say, the technology trap could be very treacherous. I was born in St. Paul. Almost makes me want to return, but doubt I could survive the winters at age 64.

    • The complexity supporting the farm is incredible! Not something that a permaculture practitioner could match, no matter how hard he or she tried.

      A major way the economy grows is by shrinking share of people’s wages that they have to pay for food (or the share of their time that they have to spend growing their own food). Then, they can afford to pay an increasing share of their wages for other purchases, such as housing, clothing, transportation, government, the luxury of eating at restaurants. An economy that spends a large share of its time growing food can’t do much else.

  32. jupiviv says:

    A recent article from Alice Friedemann’s blog:
    High-Tech can’t last: there are limited essential elements

    “While just 12 minerals were used to fabricate microchips initially, now over 60 different kinds of minerals are required (NMA 2017):

    The U.S. is 100% dependent on imports for 19 different minerals and over 50% for another 43 minerals. These trends are unsustainable in a highly competitive world economy in which the demand for minerals continues to grow and supply stability is a growing concern.
    Many of these minerals are both rare and past peak production
    Many of them come from only one country (single-source failure)
    China is the sole source for many of these minerals, and other countries such as failed nations like the Democratic Republic of Congo are not a reliable source.”

    • Alice Friedemann also has a recent article up about wind energy.

      Germany’s renewable energy program, Energiewende, is a big, expensive failure

      According to the article:

      The direct cost drivers of electricity prices are the feed-in tariffs set out in the legislation: operators of wind farms, PV and biomass plants will receive a guaranteed price per kilowatt hour, fixed for 20 years after commissioning. This is set at a level that is many times higher than the market price. The difference is passed on to (almost) all consumers via the electricity price. In addition, producers are guaranteed to be able to sell electricity into the grid at that price, regardless of whether there is a need for it or not.

      In the period 2000–2016, 176 billion euros were paid by electricity consumers to renewables companies, for electricity with a market value of just 5 billion euros.

      She later says:

      Tax consultant Daldorf, analyzed over 1600 annual financial statements of wind energy projects between 2005 and 2013. They found that the vast majority of wind farms in Germany operate at a loss. With many local wind farms, investors are lucky to get their original investment back at all. Daldorf gives the following reasons for the poor performance of windfarms:

      poor wind assessments or no one-year wind measurements on site
      erroneous wind indexes as a basis for planning
      overly low margins of error in wind forecasts
      underestimates of plant downtime for maintenance and repairs
      ’planning optimism’ of the project promoters as a strategy for maximizing profits

      The operators and investors bear the full risk. Before they can make a profit, the following costs must be covered from the sales achieved:

      lease costs
      insurance premiums, fees
      maintenance costs
      repairs, reserves for dismantling costs
      management costs
      administrative and other costs

      This der Spiegel article says something similar


      Some of what she says seems to be directly from this article


  33. jupiviv says:

    @Gail, thanks for the article. Of late a mixture of worldly affairs and boredom has prevented me from following and participating in collapse issues but I still pop in every now and then.

    • The situation is a little like watching a boat sink slowly. We can see a problem. Everyone else is off looking in a different direction, based on some model they believe. Until water starts sloshing over the deck, it is difficult to see how serious the problem is.

  34. jupiviv says:

    Since Fast Eddy has begun posting again, he might find this paper enjoyable:


    “The idea of meeting our country’s energy needs with wind power and solar energy has proven to be an illusion. At present, around 29,000 wind turbines and 1.6 million photovoltaic systems together account for just 3.1 % of our energy requirements. There were hardly any successes in the heating/cooling and transport sectors.

    Well over a hundred billion euros have been spent on the expansion of solar and wind energy over the same period. The financial obligations undertaken in the process will continue to burden taxpayers for another two decades and will end up costing German consumers a total sum of around 550 billion euros.
    For approximately half of September 2017, the power delivered by the wind fleet was less than 10 % of the nominal capacity. Values above 50 % were reached only 5.3 % of the time, in essence only on 8 and 13–15 September.

    Electricity consumption in September 2017 was 39,000 GWh. Wind turbines delivered for 6400 GWh of this and PV systems another 3100 GWh. The minimum power input by all of the PV and wind energy systems was below 0.6 GW, representing less than 1% of the installed capacity of 96 GW.”

    And the cherry on top:

    “The cardinal problems – weather-dependence and low energy density – are unsolved or unsolvable.”

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

    New RULES
    TAX CUTS for the Super Rich and Food CUTS for the Super Poor…
    Making America Great Again…that should motivate them!
    Trump Administration Moves to End Food Stamps for 3 Million People
    Mike Dorning
    BloombergJuly 23, 2019, 12:00 AM EDT
    (Bloomberg) — The Trump administration is moving to end food stamp benefits for 3 million people with proposed new regulations curtailing the leeway of states to automatically enroll residents who receive welfare benefits.
    Agriculture Secretary Sonny Perdue said state governments “have misused this flexibility.”
    “We are changing the rules, preventing abuse of a critical safety net system, so those who need food assistance the most are the only ones who receive it,” he added.
    Conservatives have long sought cuts in the federal food assistance program for the poor and disabled. House Republicans tried to impose similar restrictions on the food stamp program last year when Congress renewed it but were rebuffed in the Senate.
    Warren Buffett’s Berkshire Hathaway Just Got a $300 Million Raise
    Matthew Frankel, CFP 6/29/2019

    What’s a few Hundred Million $$$ among friends…???

    • I expect that the recipients of these funds will mostly be wealthy people. They won’t do much to bid up the price of commodities. They will spend a lot on more paper shares, and perhaps some higher education for their children.

    • neil says:

      Maybe someone can look at state-to-state number to figure out if this is temporary or the beginning of a sustained trend? https://www.eia.gov/petroleum/production/#oil-tab

    • The downturn occurred during the week that oil production was closed down for a tropical storm in the Gulf of Mexico. If you look at historical data, there seem to be a lot of these temporary dips. I think that the decline in rig count is more telling, for now. I expect that we need to wait a bit, to look at the trend in actual production amounts.

    • You may really be right about US oil production peaking.

      See this Seeking Alpha article. https://seekingalpha.com/article/4276550-u-s-shale-peak-oil-finally-arrives

      I think the issue is really low prices. Chronic low prices for energy seem to be what bring about peaking fuel supply.

      • Yoshua says:

        The higher U.S shale oil production reaches, the larger the decline is as well. The Wolfcamp basin for an example has a 600.000 barrels decline to be replaced this year according to this estimate:


        The cost to replace shale oils decline rate at this level of production is probably to high at current WTI price?

        • Hm, what about the WTI price when Hormuz throughput is (semi-)closed for a while (say at least few yrs).. Obviously, and meanwhile the overall mega trend of evaporating purchasing power per capita is likely to continue, so consumers would have to triage their shopping/spending preferences to compensate for this rising energy prices, plus the gov-CBs would have to buy-stand behind more debts to prop up the stretched system as the rising energy prices soak into everything..

          Simply, I’m very skeptical this is the endgame now – also as discussed/linked here and at Surplus there are several alt plays of oil and natgas in the US, which are just waiting to be developed – focused on at the right time/circumstances, which could be frankly anything from ‘genuine’ market upsurge after next recession/GFC round or anything like command style-war effort economy mandate etc..

          There are too much powerful players (same factions) behind the levers and they are not yet about to abandon their empire status for nothing – it’s not desperate situation for now by any stretch. Lets wait and see in a decade or so.

          • Yoshua says:

            Well…it actually looks as if the shale producers are able to replace the decline rates with new production and even increase production at these prices:


            • Yep, I was hinting at the previous discussion which dealt exactly with the multitude of different ‘alt plays’ there as depicted in your post. These are of different making, need different extraction methods and capital deployed, but the bottom line remains, the drive to get them out by whatever means-debt schemes remains (very strong).

            • The fact that Haliburton is laying off workers because companies are cutting back on drilling is a bad sign. There are still a lot of “Drilled but Uncompleted (DUCs) Wells” that companies can finish off and get oil from, at a lower cost. As I understand the situation, companies have been reducing their backlog of DUCs, to keep production up while cutting expenses. This works for a little while, but then the inventory is gone, and it is necessary to drill new wells at higher cost.

  36. Harry McGibbs says:

    “The Asian debt crisis of 1997 devastated the region for many years, and was felt in markets throughout the world. The last tremors of the 2008 global banking crisis are still resonating. Now, financial media and other observers question whether rising debt levels in Asia can trigger a new crisis. Unfortunately, the signs are ominous, and the health of the real and financial sectors is deteriorating.”


    • Harry McGibbs says:

      “…the ECB is starting to push for more justification to continue with quantitative easing and, perhaps, even direct buying of equities that the Bank of Japan and the Swiss National Bank have been engaging in for years now. Even the U.S. Federal Reserve is conducting a review of its strategy vis-à-vis price inflation and its mandate. Those results are expected early next year.

      “This is a sign that central banks are starting to panic over the fact that, no matter what they do, price inflation remains stubbornly low and falling.”


      • Harry McGibbs says:

        “Massachusetts Sen. Elizabeth Warren said there are warning signs for another financial crisis that would devastate the United States…

        “”I warned about an economic crash years before the 2008 crisis, but the people in power wouldn’t listen,” Warren wrote in a Medium post. “Now I’m seeing serious warning signs in the economy again — and I’m calling on regulators and Congress to act before another crisis costs America’s families their homes, jobs, and savings.””


        • if there’s a serious economic crash—I mean really drastic, something leading to widespread civil unrest and disorder, the don will assume emergency powers and declare martial law with himself as dictator. I think the next one really will be that bad.

          he will have no choice, and the military will fall in behind whoever pays their wages


          ///In case anybody missed my ramblings on here, I was wooed across the American border by the old fashioned charm and courtesy of the US border guards last week—85 minutes to cross into America, with passport etc in perfect order—30 seconds to escape back into Canada 2 days later.
          I was there so long I thought the Don was coming to welcome me in person after all the nice things Ive said about him
          I think the Canada border man didnt like my tears and kisses very much–but I think he was used to it/////

          • Tim Groves says:

            Going to the US is one small step for a Brit, one great leap for Brit-kind, Norm. Although last century, you could go both ways across that border in 30 seconds flat and be waved through with a smile and a “have a nice trip!”

            I crossed between Michigan and Ontario a couple of times and it was almost like there wasn’t a border at all, just a flimsy barrier like the ones you have to raise when coming out of a pay-by-the-hour parking lot.

            • that was in pre 9/11 days

              now the obstructionism is very obvious. This was my fourth crossing, and each time seems to take longer than the last, even though there’s no actual reason for the hold up—I’m not counting traffic queues here.

              At least they’ve now stopped asking me if I intend to engage in any sexual misconduct while I’m in the USA, or if I have ever been a member of the Na zi party (and yes, they used to be on the questionnaire)

              I always wanted to say “chance would be a fine thing” to the first question, but I don’t think a sense of humour is a prerequisite for an American border guard. And being a member of the Na zi party would guarantee fast access these days I think

      • Xabier says:

        Or, again, we might say: ‘Central banks must face up to the fact that they have failed to restore prosperity to the mass of people in consumer economies,and that although this, or course, doesn’t matter to them one bit -intent as they are on lining the pockets of the investor and owner class – it has dire consequences. The mass of people are increasingly unable to purchase, even on improbable credit, the goods and services which are the basis of economic growth in the model established over the last two centuries, and above all in the Age of Oil. Game over. ‘

      • Low inflation comes with low demand. Low demand is hard to fix.

    • Xabier says:

      Or we might say: ‘In fact, nothing has been truly healthy for the last decade, and now the facade of pretence is failing, the screens will be moved aside, and we are going to see the decayed and putrifying reality laid bare.’

    • It seems like the problems we have are cyclical. The issue, however, is that eventually they become too bad to fix with the interest rate and debt tools available to policymakers.

  37. Harry McGibbs says:

    “Houston oilfield service company Halliburton said it cut 8 percent of its North American workforce as it took fleets of hydraulic fracturing equipment from the field in response to a continued slump in demand for fracking services in the United States and Canada.”


  38. DB says:

    This is a long article about the difficulties of keeping hydroelectric power reasonably priced in the US Pacific Northwest:

    The dams built several decades ago have expensive maintenance and repairs to be done. Environmental rules regarding salmon protection make it more difficult to operate efficiently. (I know a fisheries biologist who studied salmon for decades and whose work showed that the declining fish runs were almost entirely due to catches in the ocean, often by non-US fishing fleets. These politically incorrect results have been consistently ignored for decades.)

    The public utilities (both local and federal) had the security of very long-term power contracts. But if those customers don’t return when the contracts expire, what would they do? They can’t just shut down operations. Breaching is very expensive and permanent, and would cripple other parts of the economy (irrigation and shipping for agriculture, recreation [a key element in the rural areas], and the jobs and revenue the utilities themselves provide to these communities).

    It seems to reinforce what Gail says about modern forms of “renewable” energy generation — that they aren’t really renewable in the long-term. Think of the enormous subsidies and energy that went into the dams’ construction. And witness in the article the astounding complexity of the components involved with hydropower.

    • Interesting story. Thanks for pointing it out. Renewable is only for a while, and then a stored up deficit in spending energy to maintain the system starts hitting you. Buyers cannot really afford the higher energy costs and go out of business.

      We also have another version of “hydroelectric won’t save us” appearing in the news, from Venezuela. Most of Venezuela’s electricity supply is hydroelectric, but yesterday, it experienced a new widespread blackout. The real cause seems to be to deferred maintenance on the electrical system over a long period. https://www.argusmedia.com/en/news/1944527-venezuela-restoring-power-after-blackout-minister

      • Harry McGibbs says:

        “Zimbabwe’s economy could grind to a halt if power outages gripping the nation persist as production plunges, exports decline, companies lay off staff and disposable incomes shrink, after it emerged that manufacturing companies are going for up to 18 hours without electricity…

        “Foreign currency shortages, recurrent breakdown of aged equipment, debt and severe reduction of water levels at Kariba [hydro] Power Station have contributed to the energy crisis in the past couple of months.”


        • I see “severe reduction of water levels at Kariba [hydro] Power Station have contributed to the energy crisis in the past couple of months.”

          People don’t understand that hydroelectric in countries with wet seasons and dry seasons is not necessarily dependable year around.

          • Yes, the problem with hydro (of any scale) even within recently considered mild-moderate climate zones are increasing swings-spikes in ‘extreme’ weather patterns, so both in sync more frequent floods as well as drought conditions could wipe you out financially. Lets imagine nowadays you get: 3x seasons of floods and 2x seasons of droughts per decade.. => lots of repairs and unrealized income hence it’s better to go nuclear in big macro scale or PV+batt for mid-smaller scale, eventually animal power in tiny scale..

            • We have had way too much faith in models that claimed that the climate would stay constant. If we had looked at past history more closely, we would have figured out that there is a huge amount of variability in climate. We know, for example, that the level of the Sea of Galilee has risen and fallen quite a bit over the years. My niece has been working on an archaeological dig in Israel and that has been an issue in what they are finding. Some past villages are under water.

    • Xabier says:

      Taking a segment of the industrial economy and labelling it ‘renewable’ changes nothing.

  39. It's different this time around.... NOW says:

    As always, FAST EDDIE was RIGHT!!!
    CARACAS, Venezuela (AP) — The lights went out across much of Venezuela Monday, reviving fears of the blackouts that plunged the country into chaos a few months ago as the government once again accused opponents of sabotaging the nation’s hydroelectric power system.
    The power in the capital went out after 4 p.m. (2000 GMT) and immediately backed up traffic as stop lights and the subway stopped working during rush hour.
    “This is horrible, a disaster,” Reni Blanco, a 48-year-old teacher, said as she joined a crush of people who flooded into the streets of the capital trying to make it home before nightfall.
    Almost three hours into the blackout authorities broke their silence and blamed an “electromagnetic attack” on a series of dams located in southern Venezuela — the same culprit it attributed an almost week-long outage in March that left millions of Venezuelans without water or the ability to communicate with loved ones.

    Yes, Fast Eddie claimed hydroelectric was not a cure all for Preppers Doomers…and this disruption proves Dams will be Damned!
    Thanks FE for ALL your WISDOM

    • jupiviv says:

      Are you the real Fast Eddy or just roleplaying as him? Honest answer please.

      • I can tell by IP addresses that “It’s different this time around…NOW” isn’t Fast Eddy. He started commenting in August 2018, under other names before adopting his current name. Fast Eddy left in November 2018.

        It’s different this time around…NOW does things differently. Not as “over the top,” for example. Not as many . . .s.

        • Forever Young says:

          Nice you keeping tabs on me, Gail…under constant moderation…I’m a bad boy.😂🤩😜


          Showing my age here, aren’t I?
          Funniest picture is them meeting the Wolfman, Frankenstein and Dracula


          Actually, my parents turned me on to them

          Back when BAU was going into it’s own…and the future looked unlimited.

          FE may be gone….but he’s forever lives here on this blog…

          • Actually, I have been doing moderation to a significant extent by IP addresses. So names may change, but if the IP address does not, the account stays under moderation. Perhaps moderation should have been removed ages ago, but I never thought about it. So some moderation may be excessive.

            I have noticed that I am getting an awfully lot of comments to moderate now, even though there is nothing wrong with them.

          • Actually, I think part of your problem is that at least some of the time you are using different IP addresses. Every new IP address has to have its first post approved by me.

            • Living the Good Life! says:

              I got no problem Gail! Please, I am honored by the moderation! Do what you feel best.
              After all, it is your blog site and aI am amazed of the time and effort you devote to it.
              Really, my heartfelt thanks for putting up with us all, good and bad.
              Can’t imagine all the hours put into it.🙄
              Glad it’s still going strong even without you know who🤔

    • DJ says:

      In other news venezulans buy lots of bitcoins.. hmm…

    • Wind and solar are not stand alone sources of energy. Calculating EROEIs at the device level, using a model of electricity they might provide in the future, is to me a very flawed metric. Meta analyses simply aggregate a flawed metric. Unless these devices can pay their full way (including paying backup providers for their services), plus pay high taxes like other energy providers, they are not really contributing net energy to the economy, the way I see it.

      A while back, I tried to explain in a post what is wrong. Look toward the end of this article.


      Also, see sections 11 and 12 of this article. https://ourfiniteworld.com/2018/04/04/why-the-standard-model-of-future-energy-supply-doesnt-work/

      Charlie Hall responds in this post. https://ourfiniteworld.com/2018/04/12/energy-return-on-energy-invested-prof-charles-halls-comments/

      If an economy is trying to produce electricity using oil, wind can be helpful for reducing the quantity of oil needed to run the generators. Other places, their use needs to be very closely evaluated. Will the goofy pricing that results simply lead to financial problems for electricity backup providers? If so, adding wind may simply make the electric supply as a whole last less long.

      • Sven Røgeberg says:

        I have an article out in the main norwegian newspaper, which criticizes Jørgen Randers view that it`s easy to fix the climate. This article is based on your way of seeing the larger picture concerning RE, and the newspaper has asked them to send over references. Let us hope the readers get a chance to read your articles.

        • One thing I should also point out is that even if EROI is calculated 100% correctly, having a high EROI is a necessary, but not a sufficient condition for a fuel to useful.

          –A proposed fuel should be sufficiently scalable, if there is any intent to mandate its use. What is truly important is total quantity of all energy production, because the economy depends on a growing supply of inexpensive-to-produce energy products. Substituting a tiny supply of one type of energy for a large supply of another will not work.
          –Regardless of what EROI calculation seems to show, actual real world production (with all of the direct and indirect costs included, including batteries and extra transmission lines) should be inexpensive.
          –The new fuel should not damage the production of electricity from other fuels because of how it is priced.
          –The new fuel should not discourage needed investment in other types of electricity production.
          –The new fuel should not damage electricity transmission systems of the country it is in, or of neighboring countries.

          This list is probably not exhaustive.

        • When I first responded, I hadn’t read your comment very closely, or looked at your article. You wrote a very fine article for the Aftenposten. It makes many of the points I was trying to make in the comment I just made.

          If it helps, I have also written articles criticizing Randers and his work and offering an alternative way to look at the situation.

          • Sven Røgeberg says:

            Thanks, Gail! BTW do you have a link to a study how the subsidizing of RE drives other providers out of buisness and thus reduce the total amount of energy from the system?

            • I am afraid that I don’t really have a study on how the subsidizing of RE drives other providers out of business and thus reduces the total energy of the system. In some sense, it is obvious that wind and solar need some sort of balancing (batteries or backup by other providers), and that they should be required to pay for its costs, otherwise these costs will come back to the rest of the system. The electricity providers with the most fixed costs (often nuclear) will be penalized most. Capacity market payments are sometimes used to help compensate other providers for the backup services they are providing. This is only sometimes done, and the payments likely aren’t adequate.

              The closest thing I might have to what you are looking for might be the Department of Energy “Staff Report to the Secretary on Electricity Markets and Reliability,” put together because of concerns regarding what wind and solar might do to harm the US electric grid, shortly after Trump was elected.


              Somewhat related:


              100% renewable energy sources require overcapacity
              To switch electricity supply from nuclear to wind and solar power is not so simple
              Date: January 25, 2017
              Source: Springer
              Germany decided to go nuclear-free by 2022. A CO2-emission-free electricity supply system based on intermittent sources, such as wind and solar — or photovoltaic (PV) — power could replace nuclear power. However, these sources depend on the weather conditions. Scientists have now analysed weather conditions using 2010, 2012, 2013 and 2015 data derived from the electricity supply system itself, instead of relying on meteorological data. By scaling existing data up to a 100% supply from intermittent renewable energy sources, the author demonstrates that an average 325 GW wind and PV power are required to meet the 100% renewable energy target. This study shows the complexity of replacing the present primary energy supply with electricity from intermittent renewable sources, which would inevitably need to be supplemented by other forms of CO2-free energy production.

              This is a 2013 study on the cost of operating reserves. https://www.nrel.gov/docs/fy13osti/58491.pdf

              This is an article about legislation recently passed in Ohio, to prevent wind energy from driving its nuclear power plants out of business.

              This article relates to testimony before a house committee on the distorting impacts of subsidies


              Just last summer, Northern Indiana Public Service Co. NI +0.41% planned to retire two of its five remaining coal-fired power plants by 2023. Now, it plans to do away with all of them over the next decade, and buy more solar and wind power instead.

              The Midwestern company’s decision is part of a shift among some American utilities toward less costly energy sources. The companies are accelerating the closure of coal plants, as wind and solar power become more economical alternatives, aided by federal subsidies, and natural gas continues to be a cheap fuel for electricity in the U.S., thanks to the shale-drilling boom.

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

    Yo…Comment 501…
    Junk-Bond Fund Draws $622 Million as Negative Yields Go Global
    Enthusiasm for speculative-grade credit has become a global phenomenon as yields compress amid dovish language from central banks around the world. With markets near certain that the Fed will lower interest rates later this month, the debate is now over the size of the cut and its impact. About $13 trillion of global debt already carries negative yields, pushing investors to take more risk to generate greater returns.
    “In a world where you have very low yields on risk-free assets, people are looking for yield in other places,” said Sameer Samana, senior global market strategist for Wells Fargo Investment Institute. “If you’re an investor who has a required rate of return of 5%-plus, your options are fairly limited.

    Yes Sir, A man gots to know his limitations!


    Yes Sir, coming to an investment fund you own!

    • Maybe shale drillers won’t have as difficult deal getting additional financing as we thought, if consumers are jumping into speculative grade credit.

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

    Wait till BAU ExPLODES…head for the Hills…
    Philadelphia Energy Files for Chapter 11 Bankruptcy After June Explosion
    (Bloomberg) — Philadelphia Energy Solutions filed for bankruptcy protection and reached a financing agreement with debt holders as the fuel-making company grapples with the aftermath of a June explosion and fire at its oil refinery that forced it to shut operations.
    The company submitted Chapter 11 petitions at the U.S. Bankruptcy Court for the District of Delaware on Sunday. It also entered into a proposed debtor-in-possession financing agreement with holders of its outstanding term loan debt for up to $100 million, the company said in a statement.
    The moves provide the company “with the additional financing and liquidity necessary to ensure we can safely wind down our refining operations,” Chief Executive Officer Mark Smith said in the statement.
    It will be the company’s second trip to bankruptcy court in less than two years, after emerging from Chapter 11 in August 2018. Estimated liabilities for this round are as high as $10 billion, according to the recent filings. The East Coast’s largest oil refiner said in June that it was dismissing more than 1,000 workers and shutting its plant, which could process 335,000 barrels of crude oil a day
    There will be many bankruptcies ahead…since the Economy is essentially BANKRUPT and pretending we still are solvent

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

    Oh Boy, seems we are in deep poopoo now…
    Oil Giant Saudi Arabia Is Set to Start First Wind-Power Plant
    Anthony DiPaola
    BloombergJuly 22, 2019, 8:21 AM EDT
    (Bloomberg) — Saudi Arabia, the world’s biggest oil exporter, is poised to start generating wind power within three years as part of an effort to harness renewable energy to cut local demand for fossil fuels.
    The renewable energy units of Electricite de France SA and Abu Dhabi’s Mubadala Investment Co. completed arrangements with Saudi and international banks to finance the project, according to a statement from Masdar, as the Abu Dhabi business is known. Masdar didn’t identify the lenders.
    EdF Renewables and Masdar won a contract in January to build the 400-megawatt Dumat Al Jandal facility, which is to begin producing electricity in the first quarter of 2022. The project will be the biggest wind-power plant in the Middle East when it begins producing, Masdar said

    Cut local demand……sure it will with a growing population that embraces BAU🤣
    Seems Gail wasn’t listen to in the Middle East recently.
    Oh well, let them pretend to fix it with a tweak here and there. It at least makes good press and keeps the Green brigade happy and at Bay.
    We know better here at OFW, thanks again Gail for all your insights!

    • Saudi Arabia makes at least some of its electricity by burning oil. (Some comes from burning gas.) Getting electricity from oil is a horribly expensive way to make electricity, especially if the oil could otherwise be sold elsewhere at a reasonable price. To the extent that the energy from wind can be used to reduce its fuel use, it actually might make sense for Saudi Arabia to use wind. In some ways, Saudi Arabia is like an island out in the middle of the ocean, with a horribly expensive fuel source for its electricity. Offsetting part of its use with wind might actually make sense.

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

        Yes, especially when they have Air Conditioning and make ice
        70% of Saudi Arabia’s electricity is used for air conditioning
        In Saudi Arabia, the weather is always warm. That means the air conditioner is always on.

        Saudi Arabia uses more than 70% of its electricity on air conditioning and cooling, according to a paper (paywall) published in 2017 by researchers at King Abdulaziz University in the city of Jeddah. And in the summer months, when temperatures regularly exceed 100°F (38°C), electricity use for air conditioning roughly doubles compared to winter use.
        It is what it is

        • When the International Energy Agency writes about the future, it seems to assume that it is reasonable to think that in the future India and Africa will be able to have widespread use of air conditioning as well.

    • richard b says:

      Can someone help me out here. The world is awash in ballooning debt.

      The question is, who is advancing all of this debt? If it’s largely government paper, who are the investors with piles of cash rushing to buy zero or very low yield paper? Do pension funds really have this kind of money – after all, they can’t just buy debt, they must also buy shares and property?

      So that leaves the central banks as the buyers and that means they owe a lot of the debt to themselves. This is the same as money printing because there’s no day of reckoning here.

      Japan seems to be in this position where its debt mountain seems to be doing it little damage and keeps on growing with no sign of collapse.

      And proof that economies are shrinking and not growing comes from the fact that no inflation is coming out of this process. Or maybe there is inflation because instead of deflation we are getting low inflation? Or we are getting inflation but the official figures are a bust.

      Of course the final question is: what will bring all of this to an end? Hyperinflation for sure, but we are hundreds of miles away from that at the moment.

      • Yes, as you alluded there are many components to it.
        For one part, there is significant inflation, e.g. pro athletes/entertainers earning $1M per day of work, econobox cars no longer starting at 7-9k, house/land prices elevated etc..

        Since the last GFC we know it got serious since they all massively printed in sync.
        I guess there will be several intermediate steps before full abandonment of the legacy system, I’d expect at some point they will try phase in some energy related barter-credits to keep the global trade arteries open, how this will translate locally don’t know likely not pretty etc.

      • Regarding where all of the debt goes, I expect that quite a bit of it goes to pension plans and insurance companies. They end up holding a lot of other people’s money, and need to put it someplace. Other financial institutions may hold some of the debt as well. As a practical matter, there is a whole lot more debt in the world than there are shares of stock. Lack of other reasonable places to put money may influence decisions as well.

    • Tim Groves says:

      It’s interesting the Saudis are going for wind when they are blessed with so much sunshine. Arabia is one place where solar energy is plentiful year round and in tandem with a couple of nuclear plants for base load would provide them with all the juice they need.

      • I expect that Saudi Arabia is pretty windy as well. The wind blows at different times than the sun shines, so there is a point in diversification. The sun tends to very quickly “max out” before it needs batteries to make use of the overage when the sun shines. Wind maxes out too, but it can be added independently of solar.

        • Niko B says:

          attach solar to ice making factory. Or store solar as a frozen energy differential throughout the country. Air conditioners that freeze water in cryo balls and then pass air over them later at night to get the heat out of the air. That would be more efficient.

          • Xabier says:

            Better still, construct buildings so they don’t need powered air conditioning – numerous examples were developed historically.

            And not being so childish and soft as to require perfect comfort all the time: it’s good to be made uncomfortable, reminding one of reality and that life is not a playground.

  43. Harry McGibbs says:

    “Britain’s currency sank to a two-year low last week, dipping below $1.24 as fears of a no-deal Brexit grew.”


    • Harry McGibbs says:

      “Confrontation with the EU over Brexit means that Britain has no alternative but to ally itself ever more closely to the US.”


      • Harry McGibbs says:

        “….the US military has announced its intention to create and lead an anti-Iranian naval coalition in the Persian Gulf…

        “Iran and its powerful allies have also developed formidable asymmetrical capabilities across the region. It has both the will and means to decisively engage with a belligerent power…

        “Millions of people would stream towards Europe [in the event of war], even as the EU and the rest of the world would be facing an economic catastrophe.”


        • Chrome Mags says:

          I hope people realize the only reason things are headed towards war with Iran is because one of two political party’s decided they didn’t want the other party to continue to get credit for a deal that provided for inspections to confirm uranium was not being enriched in Iran. They needed to run down the other party so they nixed a perfectly good deal. Now we’re headed for war?! That’s the most politically desperate, spiteful and absurd thing I’ve ever heard (and I’ve seen and heard some doozies).

          • Tim Groves says:

            We’ve always been at war with Eurasia, or was it Eastasia?

            As an explanation for the current US strategy toward Iran, your theory has much to commend it, but I suspect your conclusion is erroneous. There is probably more than one reason why things are going the way they are going now.

            Also, the neocon faction and their predecessors have been pushing for war with Iran for the past forty years, regardless of which political party happened to be in power. They have not been doing this merely to run down the Democrats.

            Prior to the 2016 US Presidential election, both the Democrats and the Republicans displayed a hostile attitude toward Iran. For example:

            Unlike the Republicans, the Democratic platform does endorse the nuclear deal. However, it declares that a Democratic president “will not hesitate to take military action” if Iran violates the agreement.

            The promise to “not hesitate” to launch what would inevitably be a major war with disastrous consequences is disturbing on a number of levels. Among these is the fact that in the unlikely event Iran decided to violate the agreement, it would take Iranians at least a few years to rebuild their nuclear program to the point where they could develop even a single nuclear weapon, thereby allowing plenty of time for the international community to apply nonmilitary pressures to force the regime to resume its compliance.

            U.N. Security Council Resolution 2231, which codifies the agreement, was adopted under Article 41 of the U.N. Charter, which empowers the Security Council to “decide what measures not involving the use of armed force are to be employed to give effect to its decisions.” This is distinct from Article 42, which allows for military force only if nonmilitary means “have proved to be inadequate” and only if the Security Council specifically authorized it.

            Therefore, the Democrats’ insistence that the United States should “not hesitate to take military action if Iran violates the agreement,” like the Republicans’ promise to “retain all options” regarding Iran, is nothing short of rejection of U.S. obligations under the United Nations Charter.

            So there!

            And moreover, the Butcher of Libya—the Democratic candidate for President in 2016—was characteristically bellicose on Iran:

            Hillary Clinton’s insistence that the 2016 Democratic Party platform include the threat to unilaterally resort to military action against Iran in response to potential violations of limits on its nuclear program bears disturbing parallels to her insistence that the United States had the right to unilaterally resort to military action against Iraq due to its alleged violations of limits on its nuclear program.

            Indeed, during the 2008 presidential campaign, she accused Barack Obama of being “naive” and “irresponsible” for wanting to engage with Iran diplomatically. According to a story in Time magazine on her tenure as secretary of state, Obama administration officials noted how she was “skeptical of diplomacy with Iran, and firmly opposed to talk of a ‘containment’ policy that would be an alternative to military action should negotiations with Tehran fail.”


      • Conflict everywhere!

  44. Harry McGibbs says:

    “Credit rating agencies for years assigned high ratings to India’s Infrastructure Leasing & Financial Services (IL&FS) and its group companies despite its deteriorating finances…

    ““Various strategies deployed by the then key officials of IL&FS group and certain favours/gifts provided to rating agency officials suggest the possible reasons for consistent good ratings provided to IL&FS group,” said Grant Thornton in its report that detailed gifts or favours such as smartwatches and tickets to overseas sporting events.”


    • Harry McGibbs says:

      “India is attempting to prevent any repeat of last year’s shadow banking crisis after detecting “signs of fragility” in some of the 50 housing finance and other non-bank lenders it is monitoring, according to central bank Governor Shaktikanta Das.

      “The Reserve Bank of India is working closely with the country’s lenders to prevent the collapse of another large systemically important non-bank finance company…”


    • IL&FS is the abbreviation for “Infrastructure Leasing and Financial Services.” As I see it, IL&FS is an organization that deals with spun-off government responsibilities in many areas (including energy, roads, water and wastewater). Unfortunately, it cannot really generate an adequate profit on the financial income it can generate from selling its services. Even if it could, the cash flow isn’t working out.

  45. Harry McGibbs says:

    “Central banks world-wide are poised to unleash some of the most aggressive monetary stimulus since the financial crisis a decade ago. But the circumstances are different now, with policies aimed more at breathing life into decade-old expansions rather than at averting an economic collapse.

    “…it is unclear whether the central bankers’ depleted tools will be adequate.”


    • Harry McGibbs says:

      “New Zealanders could be in line for a cash payout, alongside temporary tax cuts if the economy crashes, according to advice from Treasury…

      “It says the “best case” stimulus would focus on tax cuts and stimulus, alongside spending money on building infrastructure, which would also boost the economy. It recommends giving money to households, particularly those in need, saying that tax changes or cash transfers (meaning a payment of some kind, possibly a benefit) meet its policy objectives of boosting the economy, but in a way that achieves equity.”


      • Xabier says:

        Ah yes, pouring more concrete, the sophisticated response of a complex economy – as everywhere…..

      • New Zealand seems to be in the position of many other countries: interest rates that are too low to cut very much further. So it looks about, trying to find something that would work to bail out the economy.

      • Chrome Mags says:

        “It recommends giving money to households…”

        This is going to be a very slippery slope if New Zealand takes a lead off position for the developed world pack, initiating helicopter cash for strapped people caught in the grips of a world with thinning surplus energy.

        I’ve actually been waiting for this to happen somewhere, sometime, but not sure when. Why? Because when interest rates have been so low for so long and no longer generating what is needed regarding growth, and the QE button has been pushed as far as it should be, then that only leaves cash for strapped regular people. The danger of that is inflation on steroids, a precursor for hyper-inflation.

        It’s not difficult to see with the trend of how things have been going that all roads eventually lead to debasing currencies. Then maybe out of absolute pure desperation a unified world currency is created, but who could afford it if it requires precious metals to get some of it? Precious metals prices would skyrocket and people would have pawn all their stuff just to get some metals to convert to new currency to buy some food. “Yes, sell the 3rd car too at a massive discount, so we can get that tiny bar of silver, so we can get $5, so we can get a gallon of milk!”

    • Xabier says:

      Let’s re-phrase that as ‘breathing life into a decade-old mega-debt bubble’ just to see how intelligent it really is.
      And it is certainly an attempt to stave off collapse.

      One of the principal problems with economics now is not just the flawed theories, the corporate capture of governments, etc, but the degenerated language used to obscure rather than elucidate.

      • Tim Groves says:

        The degenerated language is used to make things sound complicated and to impress the punters, but most of the time the basic game plan is that the owners, shareholders, syndics, executives and the other insiders just want to make as much profit as they can for themselves, by whatever means they can get away with.

        • Harry McGibbs says:

          Amen to that. Makes me think of that splendid George Bernard Shaw quote, to which there is certainly some truth:

          “All professions are conspiracies against the laity.”

    • Fixing a world economy that is essentially growing to slowly to keep energy prices up is very difficult, when interest rates are already close to zero. It certainly is uncertain whether their tools will be adequate.

  46. Harry McGibbs says:

    “Bank of England research shows that the share of corporate debt owed by highly leveraged companies across major advanced economies is now similar to, or higher than, levels in 2007. The reason that this should worry us is that “cross-country data shows that growth in the corporate debt to GDP ratio is associated with deeper recessions…

    “It is now companies which are very indebted, in notional numbers and as a percent equivalent of GDP. Many of these are zombie companies that have been borrowing to pay existing debt, pay dividends, engage in share buy backs, and/or to pay executives bigger bonuses. As we get into an economic downturn, there is a high risk that leveraged companies will default on their obligations and fire employees in an attempt to stay afloat.

    “Presently, 80-85% of leveraged loans have lite or no covenants. When companies default, lenders will have very little in protection.”


    • Harry McGibbs says:

      “Citi strategists pointed out the earnings recession is likely to continue into 2020. I’ll just note that the stock market behaved the same way in the run-up to the dot-com crash, rising quarter after quarter as earnings fell quarter after quarter. Of course, it will be different this time because today’s people are never as stupid as yesterday’s people!”


      • This article presents a nice summary of the worrisome “fundamentals” that would seem to lead to falling stock prices.

        I agree, but there is also the question of how much money is “out there” to be invested, and how high the perceived returns are on the alternative investments to stocks, particularly bonds. If money available for investment dries up, prices could indeed fall quickly.

    • Furthermore, Basel III rules seem not to fix the situation, in the case of defaults. Instead, they seem to encourage actions that would make it worse. According to the article:

      Since the 2008 financial crisis, Basel III credit and market risk rules have become stricter. Now, banks would have to increase capital allocations to their banking and trading books in the event that these products’ credit quality migrated downward and when they become even less liquid in trading portfolios than they are now. As banks have to increase capital in an economic downturn, not only will they want to sell leveraged loans CLOs, they might also have to sell other assets in order to meet capital regulatory buffers.

      I am not sure what regulators were thinking of!

      • Back then it was simply placating common sense and responsibility for the moment (PR stunt), so as to balance out the global QE wave gusher which was in the pipeline etc.. Nowadays, it would not be taken seriously during GFCvXY, they will gobble together another action rescue plan for the day, rinse and repeat..

        People seems to like this system enough that it will be resurrected from the dark coma again, again and yet again..

Comments are closed.