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.

Note:

[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. GBV says:

    Will be interesting to see if this study has any impact, or if people will still keep going on about man-made climate change and how it’s the biggest problem we face today…

    https://www.zerohedge.com/news/2019-07-11/scientists-finland-japan-man-made-climate-change-doesnt-exist-practice

    Cheers,
    -GBV

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

      Cheers, First, tried to find the “study” myself and was not able to at all from Zero Hedge or the reference it was summarized into by “Science Daily”.
      This from Wikipedia
      Science Daily is an American website that aggregates press releases and publishes lightly edited press releases (a practice called churnalism) about science
      The site was founded by married couple Dan and Michele Hogan in 1995; Dan Hogan formerly worked in the public affairs department of Jackson Laboratory writing press releases.[4] The site makes money from selling advertisements.[4] As of 2010, the site said that it had grown “from a two-person operation to a full-fledged news business with worldwide contributors” but at the time, it was run out of the Hogans’ home, had no reporters, and only reprinted press releases.[4] In 2012, Quantcast ranked it at 614 with 2.6 million U.S. visitors?

      In many of these cases the authors are misrepresented, so not impressed

      • Tim Groves says:

        I didn’t look at this particular paper in detail and it may not have much merit, but the peer-reviewed science publishing establishment also has a badly tarnished reputation these days, doesn’t it?

        Nature, Science and prestigious journals specializing in physics, medicine, climatology it goes without saying—and lets not get into the pathetic state of social science publishing— publish seriously flawed study after seriously flawed study as if there were no peer review. And yet you are concerned about this one particular site?

        We’d better wake up and and start realizing that we have already lost what credible peer reviewed science publishing we ever had. Come on, admit it, would you have raised this objection to this particular paper if the authors had concluded we have only 18 months to save our world?

        What irritates me about people like you is that even with the litany of junk papers that make it to Nature etc., you still treat these propaganda organs and their peer review process as if they represented some kind of standard of excellence. Which they don’t. They are as corrupt as the Catholic Church was when Luther nailed his 95 Theses to the door of that church.

        • I didn’t realize before I got involved with publishing a few peer-reviewed papers myself that the journals often ask authors for a list of people that they would consider suitable for peer review. Even if they don’t, the current fashion is for the rise of lots and lots of journals with particular focuses, whether it is EROEI, or how future growing energy supply will save us, or something else. Every journal has a list of like-minded people for peer review. The result is a situation where new papers are expected to follow in the footsteps of past papers, whether those are right or wrong.

          In the economics area, if early authors neither knew or cared about how energy consumption affected the economy, this would be the expectation for future writing.

          Peer review, while it can be beneficial, can also perpetuate wrong ideas.

    • Rodster says:

      What’s the saying? “Keep your eye on the ball”. Because while those are fixated on GW, Kl.imate Khange, Kl.imate disruption or whatever the flavor is this month, there are more pressing problems such as global plastics pollution that is having an immediate impact on the oceans. Studies are suggesting that we are currently eating approximately a credit card a week in our foods because plastics pollution.

      Then there is NPP with nuclear waste that is being created. Russia has just built the first floating NPP. It should be interesting to see how long that can go before the first accident. Then of course the godfather of GW and CC, James Hansen is pushing for more NPP’s. Now the Nutty Professor, Guy McPherson is calling him out for his hypocrisy.

    • Well, for #1 we know for sure by now that there is a faction in the upper echelons of power which is deliberately using climate change as a ramrod to push certain unpopular policy shift priorities like deny diesel products to lower classes and or generally tame or corral consumer appetites in desired way.

      For #2 chances are it could be a complete hoax – I’m not decided upon that one and frankly it doesn’t matter at all because we can get scenarios and sequencing like little ice age first and then runaway warming period etc.

      Actually, try a little mind game, deploying third-fourth turnings, e.g. I personally know about members of a family doing ~20x turnings in one lineage so far, they recognize their ancestors pretty good (portraits, writings, ..) at least to mid 16th century, and there are even way older families and organizations with some aggregate knowledge.. Now for simplicity let’s assume 20x such turning equals 500yrs of history. So from last ice age that’s only ~23x of such described 20x blocks of turnings.. You see it’s almost nothing in the time and space, even from human perspective..

      • Oops, sorry for my confusing -math- lolz..
        So, lets try again, ~20x generations ~= 5x turnings ~= 500yrs;
        from that lets assume last proper ice age ended ~115 turnings ago..
        Not exactly long for civilization attempts, which are even more so skewed toward the last half or third of it, since ~4000BC meaning past ~60 turnings..

    • Shunyata says:

      This is a non-peer-reviewed paper on Archiv, no data, and almost no discussion of method. I would consider it a rhetorical piece.

      • GBV says:

        “Peer review is a form of censorship, which is tyranny over the mind. Censorship does not purify; it corrupts…There is a lot of junk science and trash that goes through the peer review process.” – Wal Thornhill

        “The mistake, of course, is to have thought that peer review was any more than a crude means of discovering the acceptability — not the validity — of a new finding…We portray peer review to the public as a quasi-sacred process that helps to make science our most objective truth teller. But we know that the system of peer review is biased, unjust, unaccountable, incomplete, easily fixed, often insulting, usually ignorant, occasionally foolish, and frequently wrong.” – Richard Horton

        *And now for the Conceptual Penis…* (https://www.wakingtimes.com/2018/02/19/scientific-peer-review-sham/)

        Recently two scientists performed a brilliant Sokal-style hoax on the journal Cogent Social Sciences. Under the pen names “Jamie Lindsay” and “Peter Boyle,” and writing for the fictitious “Southeast Independent Social Research Group,” Peter Boghossian and James Lindsay wrote a deliberately absurd paper loosely composed in the style of “post-structuralist discursive gender theory” — what exactly that is they made no attempt to find out.

        The authors tell us:

        “The paper was ridiculous by intention, essentially arguing that penises shouldn’t be thought of as male genital organs but as damaging social constructions…We assumed that if we were merely clear in our moral implications that maleness is intrinsically bad and that the penis is somehow at the root of it, we could get the paper published in a respectable journal.”

        And they did. After completing the paper, and being unable to identify what it was actually about, it was deemed a success and ready for submission, which went ahead in April 2017. It was published the next month after some editorial feedback and additional tweaking. To illustrate how deliberately absurd the paper is, a quote is in order:

        “We conclude that penises are not best understood as the male sexual organ, or as a male reproductive organ, but instead as an enacted social construct that is both damaging and problematic for society and future generations… and is the conceptual driver behind much of climate change.”

        In plain English, they (seemingly) argued here that a penis is not a male sexual organ but a social construct; the “conceptual penis” is problematic for “gender (and reproductive) identity,” as well as being the “conceptual” driver of climate change. No, really. How this ever got published is something to ponder. The paper is filled with meaningless jargon, arrant nonsense, and references to fake papers and authors.

        As part of the hoax, none of the sources that were cited were even read by the hoaxers. As Boghossian and Lindsay point out, it never should have been published. No one — not even Boghossian and Lindsay — knows what it is actually saying.

        Almost a third of the sources cited in the original version of the paper point to fake sources, such as created by Postmodern Generator, making mock of how absurdly easy it is to execute this kind of hoax, especially, the authors add, in “‘academic’ fields corrupted by postmodernism.”

        Cheers,
        -GBV

    • richard b says:

      I’m amazed that there are any climate deniers/sceptics on OFW since man made climate change is simple common sense backed with consistent and coherent evidence in the natural world. And all of this within never seen before timeframes.

      So are we headed for worse? Of course yes. And will we halve our emissions in the next 10 years and go carbon zero by 2050? Of course not. It’s equally wierd to be that any rational bieng could believe such evident nonsense.

      And so Guy MacPherson, our favourite nutty professor, is to my mind, spot on. Not with timing, because no way do I imagine that mankind will be extinct by 2030, but by the end of the century is a lot more moot.

      Where most OFM readers are spot on is that renewables are not up to the job of saving us at all.

      Here’s a really interesting article from Forbes setting out their limitations. In the end the author argues for a global Manhattan project but it’s very doubtful that this would come up with anything.

      https://www.forbes.com/sites/stevedenning/2019/07/12/the-one-viable-solution-to-climate-change/

      • No one is denying that the climate is changing.

        What we are denying is the idea that humans have any power to change the situation, other than dying out themselves more quickly than they would otherwise would die out.

        Ancient people did rain dances and prayed to the gods that supposedly governed rain. All of this emphasis on what we humans can supposedly do about climate change is no different. Climate change is the new religion of the day.

      • Tim Groves says:

        Richard, I too am surprised that there are so many people on OFW who are skeptical of the idea that human emissions of CO2 are making any discernible difference to that coupled non-linear chaotic system we call the climate system.

        For so long I’ve witnessed the vast majority of “public intellectuals” paying deference to the orthodoxy on this issue that I had come to expect the mass of curious intelligent laypeople would never wake up.

        But it seems that decades of fruitless and increasingly shrill alarmist predictions are finally having the effect of forcing people to question why they never questioned the “simple common sense-backed” dogma that so many people apparently still find credible.

        A couple of centuries ago in the West, consensus-hugging types used to get very edgy when dissenters suggested that inclement weather wasn’t caused by acts of God. Back then, witches were no longer thought capable of “cooking the weather” but even in respectable scientific circles the Deity was considered personally responsible for all kinds of natural phenomena including the weather. That dogma was based soundly on the Bible—which had “peer reviewed” by generations of the clergy and found flawless— and very few people felt justified in questioning it.

        These days very few people hold God responsible for unseasonable or excessive bouts of rain, snow, drought, heat, cold, floods, tornadoes, hurricanes or the like. But instead they put all the blame on these poor little innocent molecules of a trace gas that sustains life on earth and does no physical, chemical or biological harm to anyone in the concentrations in which it is commonly found in the air.

        Actually, however, blaming God makes a lot more sense since God is, at least conceivably, almighty, while the gas molecules most definitely are not.

  2. DB says:

    People on Moloka’i’, one of the Hawaiian islands, have been trying to go 100% solar power. This article, written by a sympathetic author, shows that their success has been very limited, despite much cost and effort:
    https://www.hakaimagazine.com/features/the-hot-mess-of-hawaiis-renewable-power-push/

    The hope and illogic run deep among supporters. The optimists see it as a case study of success, not failure. Many of the problems with solar power that Gail and others have noted figure prominently in the story.

    • Rodster says:

      Even King Saul aka Donald Trump even figured out that wind and solar power is a losing proposition.

      • I notice that renewable generation investment worldwide is down 14%, comparing the first half of 2019 to the first half of 2018.

        https://dieselgasturbine.com/global-investment-in-renewables-dropped-14-in-first-half-of-2019/

        Global Investment In Renewables Dropped 14% In First Half Of 2019

        Excerpts:

        China saw the steepest slowdown—39%. The country invested US$28.8 billion in the first six months of the year, the lowest figure for any half-year period since 2013, BloombergNEF said.

        BNEF’s figures for clean energy investment in the first half of 2019 show mixed fortunes for the world’s major markets. The “big three” of China, the U.S. and Europe all showed falls, but with the U.S. down a modest 6% at US$23.6 billion and Europe down 4% at US$22.2 billion compared to 1H 2018, far less than China’s 39% setback.

        • Rodster says:

          And the funny part is how most if not all of the so-called renewable energy is only made possible via fossil fuels.

          • Right on — have people noticed, that without fossil fuels, there wouldn’t BE any power grids, or even hydro, nuclear, or even wind/solar?
            Anyway, what AC power grid gets even nearly half its energy from IRE (intermittent renewable energy — wind, solar, tides, etc.)?

            • GBV says:

              People do and have noticed, but then they just say to themselves: “oh well, no point in worrying about it… They’ll take care of it!”

              Always wonder those these mythical they are, whom the people put their faith/trust in despite their continued inability to resolve any of the world’s serious issues…

              Cheers,
              -GBV

    • Xabier says:

      Believers in the Windy Sunny Hopey cult will always see it as a case of ‘The glass is 1/10 full!’, rather than a demonstrable failure in respect of the original objective – which was 100% renewables powering a modern society.

      To fervent religious belief there are no obstacles……

      • Tim Groves says:

        On the other hand, the cornucopians who assume progress and prosperity based on endless access to affordable fossil fuels—and I’ve met quite a few of them—are in for a rude awakening.

    • In case someone will try to counter argue by saying the Hawaiian example is too lowtech or not broad on diverse renewable resources enough.. you can easily point out at El Hierro project in Spain, which is well documented -disaster- incl. the energy storage component, simply it doesn’t ever work in self sustaining mode 24/365 irrespective of any upgrades and investment-cost over runs..

    • JesseJames says:

      “The grid can only accept as much power as the island is consuming. Juario must mix and match different sized generators to balance what solar rooftops are producing while ensuring that the generators have enough “spinning reserve”—room to throttle up and down to handle those grid surprises. The Maui Electric chief operator must also keep the generators running hot to prevent inefficient combustion from sending dirtier exhaust up the stacks and violating the air quality rules that protect residents’ health.”

      So, not only do they have to run their generators “hot” all the time, but they have to have multiple, different capacity generators to manage the variability. They are moving to natural gas….expensive to ship in, in place of diesel. Their experiment will end in colossal failure, with the highest electric rates in the nation. By 2045, when they are supposedly 100% renewable, all of their present solar panels will need replacement. That will be fun to deal with.

      Too much solar on the grid results in “backwardization” causing the utility to struggle to maintain frequency. California is also having this problem. California….that is where it’s largest utility, in supposedly the wealthiest state in the nation, went bankrupt. Yea, this massive utility experiment will not end well.

    • Very interesting, long article.

      It sounds like the project started after the oil price run-up in 2008 (or perhaps earlier). So it has been going for ten or more years. Near the end, it says,

      Given the pushback and delays, Moloka‘i and Hawaiian Electric will fall far short of achieving all-renewable power on the island next year. Though solar already has the potential to provide about 50 percent of supply on cloudless days, overall, it provided just 13 percent [Emphasis added] of Moloka‘i’s power last year. And even if all the planned solar plants are built, the diesel generators would still need to burn at least three to four million liters of fuel to cover remaining power demand.

      This is not a project that is going to 100% renewable anytime soon!

    • Duncan Idaho says:

      Moloka’i’ is an interesting place, and you will only know it if you’ve spent quite a bit of time there. Never made it back to Maui when it was scheduled (where I was living).
      Not disputing the data, but just might not be top of the list. Still agree with the data on its use by my comrades here.

  3. Harry McGibbs says:

    “We may be in the longest economic expansion in American history, but there are already plenty of warning signs that the next recession may be on its way… According to a Reuters report in May, factory activity dropped to near 10-year lows, sparking fresh concern…”

    https://fortune.com/2019/07/11/next-recession-warning-signs-yield-curve-confidence-manufacturing/

    • Harry McGibbs says:

      “The [US] trucking industry is officially in a recession, according to data tracked by ACT Research. After months of suggesting a pullback was possible, ACT President Kenny Vieth told FreightWaves on Thursday, July 11 that all metrics his firm tracks meet the technical definition of a recession – two consecutive quarters of negative growth.

      ““Every freight metric we look at has been negative for at least six months,” he said.”

      https://www.freightwaves.com/news/act-research-says-trucking-sector-is-in-a-recession

      • Harry McGibbs says:

        ““We are awash in debt – whether it’s auto loans, mortgages, corporate debt, credit card debt or student loans,” Cohan said. “Why? Because the Fed has decided that interest rates are going to be low for an extended period of time, and you get rewarded to borrow money. There’s going to be a colossal reckoning, in my opinion.”

        “Cohan points out that at the time of the financial crisis there was about $5 trillion in corporate debt. Today, we’re getting closer to $10 trillion on corporate issuance, with a good portion of it sitting in junk territory.”

        https://uk.finance.yahoo.com/news/why-low-interest-rates-could-cause-a-colossal-reckoning-151351867.html

      • Duncan Idaho says:

        OPEC 14 crude only production was down 68,000 barrels per day in June.

      • We read articles earlier about a change, probably a little more than a year ago, that required rigs to have devices to monitor the number of hours drivers could drive. Before this change, many drivers were driving more hours than it is probably safe to drive. Now we are looking data, a while after the change in rule was put in place.

        The uptick in shipping about a year ago partly reflected real growth and partly reflected a change in rules for drivers that capped the number of hours they could drive more tightly, raising the number of rigs to carry the same amount of goods. Of course, this was a kind of built in inefficiency. It is possible to raise rates for this inefficiency for a while, but it is harder to make it “stick.”

        I am sure that businesses substituted away from the higher costs as much as they could, (used closer-by suppliers, for example), creating at least a small portion of the downdraft in shipping now.

        But this whole scenario is not mentioned in the article. Only that rates had risen 30%, and now are back down 20%.

  4. Harry McGibbs says:

    “..Shard Capital strategist Bill Blain suggested on Thursday that investors might want to have their “hard hat handy.” He suggested Chinese growth could slow to as low as 4% as its economy continues to mature.

    ““If China is 4%, the shocking global reality is global growth is much, much lower than the central bank geniuses expected,” Blain said in a note on Thursday.

    ““They’ve been juicing asset markets for the last 8 years with lower-for-longer rates and QE (quantitative easing) — with the effect of creating massive asset bubbles in both.”

    “Blain suggested central bankers had been hoping that Chinese-fueled rising growth would justify the levels financial assets have reached, with stock and bond markets pushing records.

    ““But it won’t — global growth is slowing because China is maturing, which means financial assets are, and will remain, a bubble,” he argued.

    ““When the market finally grasps the fact lower interest rates are not going to be supported by growth, that’s when you really want your hard hat handy.””

    https://www.cnbc.com/2019/07/11/sharp-correction-brewing-for-next-18-months-strategist-says.html

    • Harry McGibbs says:

      “The case for Chinese policy makers to ramp up stimulus grew stronger, as tepid domestic demand and falling commodity prices increase the risk of a return to factory deflation. Growth in China’s producer price index slowed to zero in June from a year earlier, the weakest reading in almost three years. Prices fell 0.3% from May.

      “The downward trend accentuates fears of a return of deflation for manufacturing, which would erode company profits and increase debt repayment pressures.”

      https://www.hellenicshippingnews.com/chinas-looming-deflation-fears-strengthen-policy-easing-case/

      • Harry McGibbs says:

        “As Beijing considers how to cushion the blow from trade, it’ll also have to weigh the country’s other major challenge: debt. China’s total debt surged to 271% of gross domestic product last year, from 164% before the global financial crisis, according to estimates by Bloomberg Economics.

        “That’s left officials wary of rolling out any broad-based stimulus.”

        https://economictimes.indiatimes.com/news/international/business/china-was-already-in-trouble-trump-just-made-it-worse/articleshow/70186944.cms

        • Harry McGibbs says:

          “Central China Securities claims borrower falsified documents Case adds to a string of frauds as defaults surge in China Central China Securities Co. said two asset management products totaling 240 million yuan ($35 million) are in danger of defaulting after the borrower falsified documents.

          “The brokerage said Thursday that it conducted follow-up checks on the products following missed payments to investors in April and May and found that documents used to obtain financing had been fabricated.”

          https://www.bloomberg.com/news/articles/2019-07-12/china-broker-says-35-million-of-investment-products-may-default

          • Harry McGibbs says:

            “An unexpected contraction in Singapore’s economy sent a warning shot to the world economy as simmering trade tensions wilt business confidence and activity.”

            https://www.bloomberg.com/news/articles/2019-07-12/singapore-s-economy-contracts-sharply-as-manufacturing-slumps

            • The Singapore article says several interesting things. It says imports in the second quarter were down 7.3%, which was more than expected. It particularly singles out the electronics industry.

              The article also says, “China’s quarterly GDP numbers on Monday are expected to show a clear weakening in the economy.”

              Really? Or will China’s numbers simply reflect what the country wants to report?

            • Duncan Idaho says:

              Singapore has never won a Nobel Prize (Denmark, about the same size, has won 12).
              Let’s just say it has some “limitations” intellectually.
              As a former resident of Asia, I always passed, although I had many friends there.

            • Tim Groves says:

              It’s all part of the division of labor, Duncan. 🙂

              Why go to all the bother of growing your own Nobel prizewinners when you can simply import them?

              April 5, 2019 (behind a paywall):
              In a first for Singapore, a Nobel Prize winner is joining a university here.

              Professor Konstantin Novoselov, 44, is part of the duo behind the revolutionary supermaterial graphene. He starts work at the National University of Singapore (NUS) on Monday as distinguished professor of materials science and engineering.

              https://www.straitstimes.com/singapore/nobel-laureate-for-physics-to-join-nus

            • Or perhaps the committee picking winners is more familiar with the work of nearby scientists/economist/etc.

          • Fraud in China seems to be awfully widespread.

            • Tim Groves says:

              Cooking the books can be a way of kicking the can although it comes with negative consequences down the road. The story is told that Mao was not directly responsible for the widespread famines at the time of “The Great Leap Forward” because his underlings were afraid to give him accurate economic figures that were below what had been targeted.

            • houtskool says:

              $2 trillion in negative yielding debt is also fraud. We just try to hide it in a different way.

              Lifting up one out of three cups in China, the ball is always under a different cup. In the west, the ball simply isn’t there, so no one will notice.

        • The article’s title says, “China was already in trouble. Trump just made it worse”

          I very much agree.

          This chart (to me) regarding the proportion of jobs paying above 10,000 yuan ($1,453) shows that the Chinese economy has been headed downhill since January 2018.

          It is from your article
          https://economictimes.indiatimes.com/news/international/business/china-was-already-in-trouble-trump-just-made-it-worse/articleshow/70186944.cms

          • The question of internal instability of China is a great unknown.
            In comparison we know the French Revolution kickstarted -only- when the unbearable situation of food expenses taking already ~60% of wages turned into apocalyptic 90% ..
            Similarly, large contributing factor (apart from active foreign meddling via color revolutions) for the so called Arab spring was reaching ~40% of such outlays of income due to long term droughts, gov incompetence etc. I can’t find now the number quoted recently for today’s France, was it something like ~15% ? Perhaps some similar hard threshold awaits contemporary China as well..

    • It is easy to produce a bubble economy. Just add more and more debt at lower and lower interest rates, without having the rising energy consumption at a suitable low cost to go with it.

  5. Pingback: Why stimulus can’t fix our energy problems | Our Finite World – DE LA GRANDE VADROUILLE A LA LONGUE MARGE

  6. Rodster says:

    “AI-Trained Robots Set To Automate Recycling Centers, Will Displace Countless Jobs”
    https://www.zerohedge.com/news/2019-07-07/ai-trained-robots-set-automate-recycling-centers-will-displace-jobs

    A new wave of automation investments in recycling facilities across the US could displace tens of thousands of jobs in the next decade. Overall, robots could replace 20% to 25% of current jobs by 2030 — equivalent to 40 million job losses.

  7. Harry McGibbs says:

    “Auto suppliers Johnson Electric Holdings and Sensirion slashed their earnings forecasts on Thursday, blaming a slowdown in car sales and pessimism about the prospects of a Chinese car sector recovery. The news is the latest to signal weaker global industrial activity…”

    https://www.reuters.com/article/us-autos-suppliers-warnings/bleak-china-autos-outlook-triggers-raft-of-profit-warnings-idUSKCN1U6194?il=0

  8. Xabier says:

    Human beings thrive or starve, and civilisations rise and fall, on the basis of the weather patterns
    – and hence harvests – over a very limited period. Particularly when governments fail -or are unable – to keep proper stocks of emergency dried food.

    Watch the weather, not the grander theories and predictions, whatever they happen to be – this field has been polluted by propaganda and deliberate misinformation from all sides, so it’s a sterile debate.

    But the weather itself doesn’t lie, and you can see what is happening to the crops in the fields by direct observation.

    What we see now are ever more severe oscillations, with the probability of production being wiped out in whole regions for a succession of years.

    ‘Weather bombs’ are becoming more common, undoubtedly: severe droughts, dry winters, sudden devastating storms of rain and hail, etc. It’s getting a bit crazy.

    This invariably leads not only to political unrest, but epidemics. Nothing new under the sun……

    • If a civilization has an “energy margin” of some type, it can set aside extra food in storage, or it can build long distance trading arrangements, so it is not so disrupted by short term events.

      But if it is operating at close to the edge, any little fluctuation will cause a problem. The fact that the current economy is operating close to the edge makes it more vulnerable. For example, in most families, both spouses/partners are working, and the family depends on both incomes. If one gets laid off, or even gets reduced hours of work, it causes a problem.

    • Davidin100millionbilliontrillionzillionyears says:

      “Human beings thrive or starve, and civilisations rise and fall, on the basis of the weather patterns…”

      for those long ago civilizations, what caused their severe weather patterns that led to their fall?

      it wasn’t see oh two…

      • The economy needs to be growing sufficiently that it can store up surpluses to deal with all of the weather fluctuations. Also, rising population tends to drive (food and other output) per capita too low. Farms need to be divided up, because of large families. No one can produce enough surplus. Weather changes fit together with other changes at the same time.

  9. Frederick says:

    The average consumer has been becoming poorer over time and is adding more debt in the form of revolving credit in order to support his lifestyle.

    I can offer a very interesting (although purely anecdotal) observation.
    I have been making the same 72 mile, week day commute (36 miles one way) in and out of Philadelphia for the past twenty years.
    When I first started, what struck me was that everyone seemed to be driving fairly new cars. Clunkers were very noticeably absent from the commuting vehicle rolling stock. And the number of broken down vehicles I would see along side the road were, for all practical purposes, almost non-existent. I mean, I could count the number of breakdowns I would see over the course of an entire year on the fingers of my two hands.

    But starting about a year and a half ago, it became very apparent to me that the number of roadside breakdowns had suddenly increased noticeably and so I started paying closer attention. I started seeing at least one broken down vehicle every commute, in other words, roughly two per day.

    Lately, I am seeing as many as three (sometimes FIVE) breakdowns per one way commute on a regular basis.

    I find this fascinating.

    Many of these broken down vehicles have flat tires. On the surface, this seems like a fairly simple and “benign” type of breakdown. Until one realizes that tires are a relatively low cost maintenance item; costing less than many typical car repairs, such as break jobs. In other words, people are struggling to keep up with the most basic car maintenance items.

    This anecdotal observation seems consistent with data that shows falling new car sales, an ever increasing age for the American private car “fleet”, rising prices for used vehicles, longer term car loans and higher rates of loan defaults.

    • This sort of goes with the broken down Boston transit system that the WSJ reported on a day or two ago. Too much deferred maintenance combined with a desire to bring the system up to a higher standard current standard is leading to a need to run the system at less than full service and spend a huge amounts to keep the system going. You can run a transit system without much maintenance or upgrading for a time, but it catches up with you.

    • Hubbs says:

      I have noticed an increased number of disabled semi tractors, although I dismissed it because I had moved from flat eastern coastal NC to the mountainous western area. I would see lots of trucks pulled up along I-40 west before Asheville along the six mile long climb, but that is nothing compared to out west. Are the rigs suffering from lack of upkeep?

      I have also noticed the increased number of unrepaired dents at my apartment complex, even on some relatively new cars. Is it because they are actually older cars (it’s relative I guess when mine, a 1998 BMW Z-3 1.9 liter, is 20 years old and has a shopping car dent on the driver’s side door)…or because people can’t afford to repair them? And what about the responsibilities of lease owners if their car gets dented? Aren’t they obligated to get them repaired?

      Is delaying the repair and collecting insurance a hardship way of “borrowing?”
      Purely anecdotal with no statistical basis that I am aware of, but an interesting observation unless I have confirmation bias.

      • Dennis L. says:

        It is my understanding that the increased use of things such as DEF along with the more stringent emission standards has lead to a decrease in reliability of truck engines. CAT stopped making diesel truck engines and the business of buying “sleds” which are trucks without engines and the installing older, rebuilt engines is due to the maintenance issues.

        Tough situation for truck owners, decreased freight volume and increased maintenance costs for the equipment.

        Dennis L.

    • Chrome Mags says:

      I would not consider a set of four tires as low cost maintenance. Maybe you’re referring to auto repair. I maintain our vehicles and that’s the highest recurring maintenance cost. After oil price skyrocketed in 08, the price of tires shot up and never came back down even when oil price dropped.

      Here’s a tip on tires. The ‘best tires for the price’ in my opinion from experience are Hankook from South Korea. I got a set of four for my truck 8 months ago in winter and now even though its a lot hotter now, the air pressure on all four tires is still the exact same as when they were bought new, 34 lbs. I’ve never had that happen before even with Michelin, as tire pressures are usually quite uneven and change with the seasons. Also, great traction in wet weather and at high speeds in rainy conditions. No hydroplaning that I’ve experienced like I did with Chinese tires that wore out in 9,000 miles. Those things were complete junk. I’m not saying that about all chinese products are bad but I suggest avoiding tires from China.

      As far as new vs. old vehicles, I’m not seeing what you’re seeing with lots of cars at the side of the road or lots of older models, but this is fairly well to do CA, but it is an interesting observation for your area.

      • Yorchichan says:

        For a fixed mass of gas at constant volume, the pressure is proportional to the absolute temperature. The fact the pressure in your Hankook tires has not increased from winter to summer, means the mass of gas has decreased i.e. some air has escaped.

  10. MG says:

    The energy poor Austria faces terrible shortage of workers:

    https://www.expatfocus.com/c/aid=5394/articles/austria/what-might-austrias-labour-shortage-mean-for-potential-expats/

    “According to the most recent survey conducted by the Austrian Economic Chamber, a skilled labour shortage is hitting almost 90 percent of Austrian companies. This increases the workload for business owners and current staff, compromises the quality of service and decreases customer satisfaction. The situation has the potential for a decline in the economic success of Austrian companies in general, leading to decreases in sales and increases in costs.”

    • This looks like a problem with respect to too many retirees relative to the number of working age people. This is why a lot of countries are encouraging immmigration. Those entering the country likely would be young, but perhaps not too well educated.

      The world facebook says that Austria is 201 out of 244 with respect to “total fertility rate,” averaging 1.47 per children. This is way below replacement level.

      • DJ says:

        Still, their pop has increased 10% this century.

      • The issue is that Austria had been able to lure in working migrants from their nearby former Austro-Hungarian realm + wider Balkans with somewhat compatible mindset and so on. These people tend to have fewer kids similar to native Austrians after relocation. On the other hand incoming migrants from more exotic destinations like ME tend to have larger families for generations.. and the working participation is questionable at best.

        Also, the resource base question is a bit more nuanced, since Austria as ‘neutral’ country gained semi tax heaven status for the global upper echelons, hence lot of money per capita for doing wise (re) investments when possible, hence attained higher living standards in comparison to many W. German states-regions..

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