Debunking ‘Lower Oil Supply Will Raise Prices’

We often hear the statement, “When oil supply is lower, oil prices will rise because of scarcity.” Now, we are getting to see firsthand whether oil prices really do rise, as oil supplies become more scarce.

Figure 1. Figure from the OPEC Monthly Oil Market Report for August 2019 showing world and OPEC oil production by month.

Figure 1 shows that world oil supply hit a peak in November 2018 and has declined since then, mostly because of a decline in OPEC’s production. So, total oil production seems to be down for about eight months, relative to the peak in November 2018.

Despite this big cutback by OPEC in its oil production, prices have not responded as OPEC had hoped:

Figure 2. Average monthly spot Brent Oil prices, based on EIA data.

In fact, as I write this, Brent oil price is currently quoted as $60.48, which is back in the range of December 2018 and January 2019 low prices. Also, reducing production doesn’t seem to be reducing inventories. Figure 3 suggests that they are now higher than they were before the reduction in oil supply took place.

Figure 3. Figure from the OPEC Monthly Oil Market Report for August 2019 showing OECD commercial oil stocks.

Why aren’t oil prices rising and oil inventories falling, if oil production has fallen?

The basic issue is that the economy is very much interconnected under the laws of physics, because energy is required for every activity that is considered part of GDP. Energy is required for any kind of heat or any kind of movement. Energy is even required for electricity. Without energy from the sun, food can’t grow; without supplemental energy of some kind (such as using electricity to heat an electric stove or burning animal dung or sticks), it becomes impossible to cook food or smelt metals.

One strange phenomenon that arises from the interconnected nature of the economy is the fact that the prices of all energy products (including those not listed on Figure 4) tend to move together.

Figure 4. 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.

This strange phenomenon arises because energy products are well-buried within every part of the world economy. A person’s job requires energy consumption. The tasks that governments do, such as building roads and schools, require energy consumption. Both transporting and cooking food require the use of energy products. Refrigerating food requires energy products. These energy uses, as well as many other everyday hidden uses of energy, aren’t things that we can easily cut back on.

Consumers often think, “I will drive less, and that will cut back on my energy consumption.” Unfortunately, in the whole scheme of things, whether or not individuals cut back on their optional use of gasoline doesn’t get the world economy very far. Gasoline accounts for about 26% of world oil consumption, or about 8.7% of total energy consumption, based on the most recent BP energy data. Cutting back on the optional use of gasoline would not reduce total consumption very much. If it were possible to reduce gasoline consumption by 10% by voluntary cutbacks, it would still reduce world energy consumption by less than 1%.

The strange pattern of the price changes shown on Figure 4 indicates that there is something affecting energy prices of many kinds, simultaneously. I would describe this as “affordability.” It has to do with how affordable finished goods and services are to the population in general, much more than it does scarcity. (Economists call this affordability issue “demand.”) If finished goods and services are affordable to a large number of consumers, as they were in 2008 and in 2012 and 2013, prices will be bid up to very high levels (Figure 4). If finished goods and services aren’t very affordable, a drop-off in prices, such as that experienced in November and December of 2018 (Figure 2), is likely to occur.

When OPEC decided to cut back its production of oil in response to the low prices in late 2018, this cutback in oil production didn’t help the affordability of finished goods and services. In fact, this cutback probably made the worldwide total quantity of affordable finished goods and services a little lower. This happened because, with the cutback in oil production, the governments of OPEC countries were able to collect less tax revenue on the smaller quantity of oil that the countries were selling. In fact, this smaller quantity of oil wasn’t even being sold at a higher price.

With lower revenue, governments of OPEC countries are being forced to cut back on funding of new projects such as roads and schools. These projects will use fewer energy products, and the would-be workers will have less money to spend on goods made with energy products. Thus, these cutbacks help to lower the world’s “demand” for oil and other energy products and thus help lower the price of oil.

The fact that the economy is interconnected in this strange way makes shifting prices upward much more difficult than if scarcity were the primary issue. In effect, the whole stack of energy prices in Figure 4 must somehow be made to rise. This is difficult to do because it is the lack of wages of the many poor people around the world that is holding back “demand” for energy products. If, somehow, higher wages could be sprinkled on the many poor workers of the world, including those in India and Africa, then oil (and other energy) prices would tend to rise. With higher wages, these poor people would be able to afford items such as nice homes, cars, and air conditioning, pulling world food and energy demand upward.

One difficulty with rising oil (and other energy) prices: They don’t translate into rising wages.

Rising oil prices tend to cause recessions and layoffs. We can see this from historical data. Average wages, considering layoffs, tend to fall rather than rise during times of spiking oil prices. In fact, the chart seems to suggest that the big increases in average wages tend to occur when oil prices are under $40 per barrel. A growing supply of cheap energy thus seems to be the magic ingredient that shifts wages upward.

Figure 5. Average wages in 2017 US$ compared to Brent oil price, also in 2017 US$. Oil prices are from BP’s 2018 Statistical Review of World Energy. Average wages are total wages based on BEA data adjusted by the GDP price deflator, divided by total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.

Because of this difficulty with spiking energy prices, high energy prices tend not to last for very long. One issue is that regulators quickly raise short-term interest rates to solve what they perceive as “the problem of rising food and energy prices.” Once recession sets in (gray bars in Figure 6), regulators find that they need to lower interest rates and raise the level of debt to stimulate the economy again. With lower interest rates and more debt, major purchases (such as homes, cars, and factories) become more affordable, because purchases bought on credit have lower monthly payments. With greater affordability, food and energy prices again rise, to again encourage more production.

Figure 6. Three-month and ten-year interest rates through July 2019, in chart by Federal Reserve of St. Louis.

So we end up with an endless see-saw of energy and food prices. In fact, the peaks have tended to fall lower and lower since 2008, as can be seen in Figure 7, showing monthly average prices.

Figure 7. Monthly average Brent Oil prices since January 2000, based on data of the US Energy Information Administration.

Monthly average peaks started at $132.72 in July 2008. More recently, peaks have fallen as follows:

  • Peak of $125.25 for the month of March 2012
  • Peak of $109.54 for May 2014.
  • Low month average price of $30.70 in January 2016.
  • Most recent average peak was $81.03, for the month of October 2018.

From this pattern of falling peaks, we can see that the stimulus being used recently (which includes Quantitative Easing in some parts of the world) has become less and less effective at stimulating demand for food and energy products.

It looks as though growing debt at ever-lower interest rates is becoming a less effective workaround for the economy’s real need, which is a need for a rapidly growing supply of under $40 per barrel oil and other low-priced energy products.

Oil prices can be a problem in two different directions: (a) Too high for consumers or (b) Too low for producers.

From the Point of View of the Consumer. Many people have had the “Ah Ha” moment, in which they have figured out that high oil prices are a problem from the point of view of consumers. In part, they have deduced that these high oil prices may mean that we are “running out” of cheap-to-extract oil. Processes are becoming more complex, and as a result, consumers need to pay more to cover the higher cost of extracting and refining the oil.

But there is a related issue: Higher oil prices are likely to cause recession. If oil prices rise, the prices of many different types of goods and services (such as food, goods transported by truck or airplane, and vacation travel) rise at the same time. Wages don’t rise as quickly, in part because it is the true energy content (measured in Btus, barrels of oil equivalent, or something similar) that the economy requires. If the economy needs to dedicate a larger share of its resources to producing energy products, this is an issue that is akin to growing inefficiency. There are fewer resources remaining (such as human labor, metals, fresh water, and energy products) for investment that might provide goods such as new homes, cars, clothes and air conditioning.

With fewer resources to use, the economy reacts by shrinking back. I think of the situation as being akin to the way a chemist might “make a smaller batch,” if the quantity of one necessary reagent is low. An adequate supply of energy products is what makes the economy operate as it does; if buying an adequate amount of energy products becomes too expensive for consumers, a cutback in the buying of discretionary goods is forced on the economy (Figure 8). Lowering interest rates tends to make the debt repayment portion on new purchases lower, helping to alleviate the squeeze.

Figure 8. Chart made by author in 2010, to illustrate a talk called Peak Oil: Looking for the Wrong Symptoms.

From the Point of View of the Oil Producer. There are oil producers of many kinds, including:

  • Tight oil producers from shale operations,
  • Heavy oil producers in places such as Canada and Venezuela,
  • Producers of oil from deep water such as Brazil and Angola, and
  • Middle Eastern oil exporting countries that seem to have a very low direct cost of oil production.

Strange as it may seem, Middle Eastern oil exporting countries are among the most vulnerable to problems associated with continued oil low prices. The reason why these countries are so vulnerable is because their entire economies are oriented toward oil and gas production. They often have large populations with inadequate income unless the government provides them with handouts or with programs that provide jobs. If these governments need to cut back too much, there is a real danger that the governments will be overthrown. In fact, the population may break down into warring factions. Oil production may stop because of internal disorder.

It is because of issues such as these that the OPEC countries have cut back on oil production, in the hope that prices would rise to more acceptable levels for their countries. Fiscal Breakeven prices, relating to the level of oil prices that are needed so that each government can collect sufficient taxes for its budget, are published from time to time.

Figure 9. Chart published by the Arab Petroleum Investments Corporation (APICORP) giving Fiscal Breakeven Prices estimated to be needed for 2013.

Now that oil prices have been low since late 2014, Middle Eastern countries won’t admit to the true level of oil prices that are needed to operate their countries in the way that they have in the past. Their populations have been rising faster than their oil production, so it is hard to believe that the oil prices that the countries truly need, if they do not cut back on programs, are any lower than the amounts shown in Figure 9. At about $60 per barrel, the current Brent Oil price is clearly far too low for the major oil producers of the Middle East.

Shale and heavy oil producers are often less vulnerable than Middle Eastern producers, because the entities funding their operations (that is, buyers of shares of stock and providers of debt) believe that “of course” oil prices will rise in the future because of scarcity. Because of this, they are willing to provide additional funding, even when a recent owner has gone bankrupt from low prices. Middle Eastern oil producers have less of this benefit. If the money isn’t available for major programs, they are forced to cut back. Growing debt is unlikely to cover more than a portion of the shortfall.

There are other producers in the energy price “stack” in Figure 4 that are vulnerable to collapse or bad outcomes from continued low energy prices. One example is coal producers in China. China seems to be experiencing Peak Coal because of continued low coal prices; While new mines have been opened, they do not act to increase the total quantity produced, because so many mines needed to be closed because they were losing money at current low prices.

Figure 10. China energy production by fuel, based on 2019 BP Statistical Review of World Energy data. “Other Ren” stands for “Renewables other than hydroelectric.” This category includes wind, solar, and other miscellaneous types, such as sawdust burned for electricity.

If the world economy is hoping for China’s increasing demand to pull the world economy forward in the future, it is likely kidding itself. China cannot expect imports to make up for its lack of growth in coal production. China’s lack of adequate energy supplies likely underlies the tariff issue that we hear so much about. There is a need to pull back production of goods from China, if China doesn’t really have the energy resources to continue in the role it has been playing.

The big question is how high oil prices will be in the future

The contention of the IEA and many others is that energy prices can rise arbitrarily high. For example, the IEA showed the figure I have numbered Figure 11 in its World Energy Outlook 2015 .

Figure 11. IEA Figure 1.4 from its World Energy Outlook 2015, showing how much non-OPEC oil can be produced at various price levels.

The big groupings in Figure 11 are

  • Conventional Crude (such as from the Middle East and perhaps deep water like Brazil),
  • Tight Oil from Shale, and
  • Extra Heavy Oil and Bitumen (such as from Canada and Venezuela).

Evidently, in 2015, the IEA believed that $300 per barrel oil prices were not too high to show as a possibility on a chart. With $300 per barrel oil, there would certainly be enough oil. At such a high price, it might be possible to move the city of Paris, France, out of the way and extract the tight oil from shale underneath it!

Unfortunately, in the real world, prices cannot rise this high. Market prices are set by the laws of physics. The economic limit we reach is a price limit that pushes the economy back into recession. We have seen in Figure 7 that this price limit seems to be dropping lower and lower, over time. In fact, I am one of the coauthors of an article published in the journal Energy called, An Oil Production Forecast for China Considering Economic Limits. This 2016 article makes the point that the economic limit we are reaching is a limit on how high oil prices can rise. I am the lead author of Section 2, which discusses this issue at length. If prices cannot rise high enough, the vast majority of the oil that seems to be available based on published reserve amounts and geological surveys cannot really be extracted.

Whether there are ways to raise oil and other energy prices higher than they are now remains to be seen.

Why don’t standard models forecast low oil prices in the future? 

Economists have put together a simple model of how the economy works. In their model, there are always substitutes. The only thing that goes wrong seems to be that prices rise, if there isn’t enough supply. These rising prices encourage greater supply and substitution. The type of chart a person typically sees is a Supply and Demand curve as shown in Figure 12.

Figure 12. Supply and Demand model from Wikipedia.
Attribution: SilverStar at English Wikipedia CC BY 2.5 (http://creativecommons.org/licenses/by/2.5)%5D, via Wikimedia Commons

They have never considered a situation where energy products are deeply buried within essentially all goods and services that are made. If there isn’t enough supply, a “smaller batch” of the world economy is made. We think of this as recession, but it can take on other forms as well:

  • Depression
  • Wars
  • Epidemics
  • Defaulting debts; falling prices of assets
  • Failing governments and intergovernmental organizations
    • Collapse of the central government of the Soviet Union in 1991
    • UK’s decision to leave the European Union
  • Increasing conflict between political parties and between countries
  • A reduction in globalization
  • Ultimately, the collapse of a civilization

Economists have not understood the connection between physics and the economy. There is a need for a sufficient quantity of affordable energy products every moment of every day. In fact, we seem to need a vastly increased quantity of inexpensive-to-produce energy supplies right now if we are to fix the world economy’s problems from an energy point of view. The “lower interest rates and more debt” way of hiding problems seems to be reaching an end point. If nothing else, interest rates today are close to as low as they can go.

Is the economy approaching a singularity?

In physics and math, a singularity is a point at which a function takes an infinite value. We end up with a situation that seemingly cannot exist. It is like dividing the number 1 by the number 0. No matter how many times that the number 0 is added together, it will never equal 1.

The economy seems to be reaching an equally strange situation. It is not a situation where we are running out of oil; it is a situation of too much wage disparity, and this wage disparity makes the prices of many commodities too low for producers of these commodities. For example, farmers cannot afford to pay their mortgages. And prices for all fossil fuels and many metals are too low for companies extracting these materials to make an adequate profit for reinvestment and taxes. The problem is not simply low oil prices.

This situation of excessive wage disparity is related to globalization, with many workers around the world earning very low wages, so that they cannot afford goods such as homes and cars. It is related to the increased use of robots substituting for manual labor. It is also related to wage disparity within countries as jobs become increasingly specialized.

As this situation plays out, energy prices fall when common sense would seem to suggest that they should rise. In fact, the problem of falling prices extends to more commodities than fossil fuels and food; it extends to minerals of many kinds, including copper and aluminum.

In such a situation of falling commodity prices, we can expect many related problems. For example, governments of countries that depend on the revenue of these exports may fail, leading to Balkanization of these countries in some cases. A wide range of debt defaults can be expected, leading to failing financial institutions that need to be bailed out. Rapidly changing relativities among currencies are likely to put markets for derivatives at the risk of failing. Needless to say, stock markets are likely to be adversely affected. So-called renewables will quickly fail because they are currently dependent on fossil fuels for repairs and the electric grid. In fact, it is hard to see any aspect of the world economy that can continue unaffected.

How does what appears to be an approaching calamity play out?

Perhaps it is fortunate that we don’t really know. Collapses of early economies seemed to take many years, typically over 20 years. Today, the world economy depends on global supply chains and the electric grid. The financial system is also very important. It is hard to believe that the overall system can stay together for many years, but perhaps, in parts of the world, it can. We just don’t know.

Given how connected the economy seems to be, and how widespread the problems seem to be at the singularity we are reaching, it almost appears that there is a plan behind what is happening. From what we can observe, there seems to be some literal higher power behind all of the energy flows that we observe in the universe. This literal higher power seems to have put into place all of the laws of physics. This literal higher power seems to also be behind all of the self-organizing elements within the universe, including humans, ecosystems and economies. I cannot help but wonder whether there is some plan for what is ahead that we don’t understand.

 

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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1,469 Responses to Debunking ‘Lower Oil Supply Will Raise Prices’

  1. Duncan Idaho says:

    Hint: We have 7.7 billion people in a collapsing ecosystem.
    Te rest is just fluff and noise.

    • Dennis L. says:

      That is succinct.
      Dennis L.

    • hkeithhenson says:

      “collapsing ecosystem.”

      Exactly. Does the human race have enough collective smarts to get us out of the mess or not?

      • Davidin100millionbilliontrillionzillionyears says:

        not…

      • Xabier says:

        As there is no such thing as collective intelligence; and as if it existed we wouldn’t be in this mess, the answer to that question must be far from positive.

        The best we can manage is that comparatively very few people among the 7.7 billion can arrive at an understanding of what is happening,but must be powerless to do anything about it.

        • DJ says:

          Even if all 7.7B understood.

          We would all wait for someone else start doing whats necessary. And since this involves unpleasant stuff, and a die-off, all 7.7B would just wait, and hope for more years and depart without too much suffering. Same as if only a few were aware .

          • collective intelligence can quickly become collective inertia

            • Kowalainen says:

              Is there a thing such as a “collective intelligence”? Delusion perhaps?

            • intelligence and delusion can be exactly the same thing

              It’s always a mistake to expect or specify any level of intelligence in anyone.

              Hawking proposed spreading humankind across the universe. A perfect example of intelligence and delusion in equal measure.

              No means exists by which it can be done. Any means that might facilitate it depends on our current industrial system, which is by comment consent, in terminal decline

              so cannot support such an enterprise. (insufficient energy)

              Not that such logic will alter existing delusions.

            • hkeithhenson says:

              “No means exists by which it can be done.”

              You are not well-read on this subject. See https://en.wikipedia.org/wiki/Starwisp

              https://en.wikipedia.org/wiki/Breakthrough_Starshot

              https://en.wikipedia.org/wiki/Project_Daedalus

              “so cannot support such an enterprise. (insufficient energy)”

              Have you looked up in the sky recently? The sun puts out enough energy to launch 1500 tons per second to near light speed.

              If human-derived entities go, they can slow their perception of time. At 10 exp -8, they can cross the galaxy in a subjective 8 hours.

              Also, Google “far edge party”

              https://www.everything2.com/title/Far+Edge+Party

              “One of the main problems of exploring the stellar systems of the galaxy even for very advanced civilizations is that a serial journey even at the speed of light would take so long time that most of the stars would have died during the journey. One solution is to parallelize the problem: the explorer travels to a new system, creates a number of copies (xoxes) of himself and sends them to other systems, while he remains behind exploring the system (this is a variant of exploring the galaxy using von Neumann machines). After around 10 million years, when all of the galaxy has been explored, the explorers gather together at a prearranged place, and exchange or merge their memories (‘The Far Edge Party’). This was proposed by Keith Henson as a possible method for a single individual to visit all of the galaxy within a reasonable time.”

              For an imagined account of a Far Edge Party, keep your eyes open for Ed Regis’ Excerpt from the Great Mambo Chicken.

            • “the explorer travels to a new system, creates a number of copies (xoxes) of himself and sends them to other systems, while he remains behind exploring the system”

              This sounds a bit unlikely to me.

            • hkeithhenson says:

              “a bit unlikely to me.”

              I didn’t write that part. But it’s an old idea https://en.wikipedia.org/wiki/Self-replicating_spacecraft

            • the fact that something can be imagined is sufficient to morph fantasy into reality

              at least in cyberworld or wherever

              I am now going to pick up my paintbrushes and imagine I can paint like Rembrant

            • hkeithhenson says:

              If any of you want to read what I wrote nearly 30 years ago “Nanotechnology and Megascale Engineering (or Party Animals Loose in Space!)” is the last post in this newsletter.

              https://www.cs.cmu.edu/afs/cs/usr/mnr/st/std076

            • Kowalainen says:

              Industrial Civilization is indeed in decline now since it is founded on a dominance scheme.

              Decadence, obscurity and dogma eventually sets in as the dominators eventually seeks to eradicate rationality, rule of law, liberty, creativity, ingenuity and equal opportunity, by any means possible to assert and maintain power. Transforming the whole thing to a human centric sect-like system of centralized brutality maintained by the bought and paid for lackeys (in government and media).

              Nature does not lord over anybody. It has no ruler, no king. It is an order the system itself strives for, in its infinite wisdom to gradually eradicate missteps and bad expressions from the gene pool by relegating them to irrelevance.

              You must view the implicit workings of the system as its intelligence. For example; the collective “intellect” of ants (and humans in extension) does not explain the system which is the ant colony. It emerged from the evolutionary process as an interrelated system of distributed components together with its environment. The same is true for the economy as it transforms itself to an interrelated set of components which assembles into productive units of goods and services connected to a distributed and networked computer system.

              See, Norman, yet again you fall into the trap of human chauvinism and fail to see the inevitable process of nature which will eventually purge out the worst of monkey brain excesses as it seeks to continue the process of evolution by whatever means necessary.

              And just like you Hawking was an chauvinist dreamingly placing humans in space ships racing to the stars. As if the singular entity, a human, or a group of humans, can exist without the system from which it originates. The same holds true for Elon’s grand plans building a a manned base of death and misery on Mars.

              The continuation of mankind will be a space born network of computers expanding radially out from the solar system once mankind and our AI’s masters the capability of reproducing the processes of nature represented as synthetic entities suited to the vacuum of space and atmospheres with no oxygen.

              Perhaps will Keith’s microwave beams will be the first step in powering these devices as they mine away in the asteroid belt and on the planetary surfaces to “reproduce” and express their machine genome. It is true since matter can be transmuted into other elements by adding energy. And it is certainly no lack of that radiating from the sun, at least not in the foreseeable future.

              Now, what did you conclude from the hypothetical discussion we had 100 years ago?

              😉

            • i must try to be generous and assume you are winding me up

              always hard to tell on here—unless you are the reincarnation of Stephen Hawking.?

              if not, I wonder how many lols Gail will allow me to have in this window

            • hkeithhenson says:

              “eventually purge out the worst of monkey brain excesses”

              This has happened, at least twice. Between the rise of agriculture and the rise of states, there was such intense selection that it left a strong signal in our genetics.

              “https://www.laboratoryequipment.com/news/2018/05/stone-age-wars-made-genetic-bottleneck-men

              “At the dawn of civilization, just as clans of Stone Age peoples were banding together to form increasingly complex societies about 7,000 years ago, a strange thing happened.

              The men began to disappear.

              At least their lineages did. A genetic bottleneck in most corners of the Eastern Hemisphere meant that roughly one genetic variety survived out of 20, based on the genetic networks before and after the DNA collapse.

              The collapse was due to generation after generation of total war between male-driven clans, which meant the losers were essentially pruned from the family tree, removing their genetic futures from the rest of human history, according to a new study by Stanford University scientists.”

              The more recent strong selection period happened in the run-up to the industrial revolution in the UK, much of Europe, and China. This is in Gregory Clark’s work which I have previously referenced.

            • It seems like, perhaps at later dates, a pattern of one group taking another group as slaves could have a similar effect. James C. Scott in “Against the Grain” talks about large groups of people being taken slaves, and the men and women separated. The women were taken as wives and household servants. (The high rate of death in childbirth was given as a reason why more wives were needed.) The men were sent off to do heavy labor like building roads. This pattern would also seem to lead to the same lack of male genes, without having to kill off all of the men.

            • hkeithhenson says:

              “perhaps at later dates”

              The genetic data indicates that whatever was eliminating the males ended with the rise of states. Records before the rise of states are rare, but there is one story in the Bible that may be applicable. [11] Book of Numbers, from The Holy Bible, King James Version Chapter 31

              7: They warred against Mid’ian, as the LORD commanded Moses, and slew every male.

              8: They slew the kings of Mid’ian with the rest of their slain, Evi, Rekem, Zur, Hur, and Reba, the five kings of Mid’ian; and they also slew Balaam the son of Be’or with the sword.

              9: And the people of Israel took captive the women of Mid’ian and their little ones; and they took as booty all their cattle, their flocks, and all their goods.

              10: All their cities in the places where they dwelt, and all their encampments, they burned with fire,

              11: and took all the spoil and all the booty, both of man and of beast.

              12: Then they brought the captives and the booty and the spoil to Moses, and to Elea’zar the priest, and to the congregation of the people of Israel, at the camp on the plains of Moab by the Jordan at Jericho.

              13: Moses, and Elea’zar the priest, and all the leaders of the congregation, went forth to meet them outside the camp.

              14: And Moses was angry with the officers of the army, the commanders of thousands and the commanders of hundreds, who had come from service in the war.

              15: Moses said to them, “Have you let all the women live?

              16: Behold, these caused the people of Israel, by the counsel of Balaam, to act treacherously against the LORD in the matter of Pe’or, and so the plague came among the congregation of the LORD.

              17: Now therefore, kill every male among the little ones, and kill every woman who has known man by lying with him.

              18: But all the young girls who have not known man by lying with him, keep alive for yourselves.

            • I seem to recall that De Mille made a movie out of that back in the 50s

              lots of slaying and all the rest of it.

            • Even at a much later date, Herod was demanding the killing of boys under the age of 2.

              If it is lower population that a country wants, killing (or discouraging the births of) baby girls makes a whole lot more sense. But if a group of people is having difficulty maintaining population, young girls will be valuable, and thus kept. Feeding a large number of women past childbearing years probably would be a burden too.

            • hkeithhenson says:

              “women past childbearing years”

              That does not seem to be true in all cases. Some years ago there was a study based on Finish parish records. Turned out that a grandmother allowed a woman to have one more child on average than one without.

              It also turned out that grandfathers didn’t have any effect.

            • Kowalainen says:

              Thanks Keith, I will read them.

              Indeed left behind, or perhaps they ran to the hills, were the men (and naturally plenty of women) who find war and killing repulsive from a emotional and moral standpoint. Thus the birth of the proto-nerd who ponders about the workings of nature and concerns about survival instead of seeking cheap thrills and satisfaction in dominating others.

              The leftover aggressive/dominator garbage genes can easily be spotted among the degenerates, sociopaths and the crazies in the extreme regions of the political spectrum. The left/crypto commies stands out in particular. But it is not isolated to these people. We all carry signal of this mental disease and it should be kept in check by careful introspection and perhaps meditation.

              And it must hurt since their lack of intellect and original thought will soon render them totally irrelevant as the technology continues to be implemented everywhere and nowhere at the same time, at an ever increasing pace, even more highly abstract and hard to grasp for the simple minded dullards.

            • hkeithhenson says:

              “women who find war and killing repulsive”

              War and all this killing of men is partly the fault of the women. Or maybe we should just blame agriculture. We know that a given area being farmed (in a good year) can support about 100 times the number of hunter-gatherers. Agriculture, by providing more food, shortened the birth interval considerably compared to hunter-gatherers. The result was high population growth which ran into ecological limits such as arable land. This and the occasional crop failure set up a “kill the next clan over and take their resources or starve” situation. The genetic data indicate this went on for around 2000 years, ending with the rise of states.

              Why the rise of states ended the patrilineal carnage is something I don’t understand. Perhaps states that suppressed internal patrilineal fighting were more successful in fighting other states at the margins because they had more warriors. Or there could be some entirely unrelated reason such as disease holding down the population in states.

            • Kowalainen says:

              The state is an emergent ecosystem of mutual interdependence. Of course dominators will seek to control the state to the detriment of its inhabitants, such as the despots and lackeys of old times.

              Effective states/ecosystems does not seek to dominate others, but to grow its “genome” by expanding its connectedness to other states and forms of societal organization and cultures, such as Pax Americana.

              However, the state must have a strong ‘immune system’ towards aggressor states and internal corruption, which is led by dominators seeking to obfuscate the natural order to affirm its own archaic and obsolete genetic expression.

              It is an absolutely inevitable process of nature to eradicate all forms of dominator schemes. And the harder we resist it the more hurt we have to accept and prepare for.

              Let’s have a peek into the past:

      • Kowalainen says:

        Absolutely. The problem is the rest – the vast majority which makes the bulk of “us”.

        Total irrelevance awaits:

        • Sheila chambers says:

          Dream on dreamers, so you expect ‘bots to replace humans?
          Where will the necessarry ENERGY come from????
          OIL is going away!
          There is also a raw material shortage looming in our near future, gotta fix for that too?
          Tunnel vision is crippling our ability to plan intelligently.

          Those fast, cheap ‘bots won’t be visiting ANY of your shops, services or businesses any time soon, only HUMANS would be interested in what you produce or the services you offer but if humans have no JOB, they too won’t be visiting your shop, services or businesses so how are you gonna PROFIT without “CONSUMERS?”

          For a temporary fix, tax the crap out of the uber RICH & transfer that wealth to the low income & poor so they can be that “missing” consumer but this is only a temporary “fix” & the laws of physics will still prevail in the end & collapse will put an end to our stupidity, greed & short sightedness.

          [I edited this for you Shiela. Gail]

        • DJ says:

          The uber rich doesn’t wanna get crap taxed, they will move their capital elsewhere.

          “Taxing the rich” really means taxing the higher income earners. That only works until the productive class loses incentive to work.

          It is about time to lower minimum expected living standard.

        • aaaa says:

          robots are just a meme to give capitalists more excuses to continue penalizing labor, labor , the most of which doesn’t even need to exist, since most economies are just fluff tech bullshit now

          • Kowalainen says:

            You seem to to entertain the idea that labor is something good? It is intellectual work in the arts, sciences and engineering which is good. The rest is drudgery best suited for machines.

            • We need to move our bodies. Sitting around using only our heads doesn’t really work. Our bodies are constructed in a way that they need to do physical work, if our bodies are to perform as they should. Having a whole host of labor-saving devices is not as good for us as it sounds. We should be walking to our destinations.

    • Tim Groves says:

      I look at the world a little differently. We have 7.7 billion people supported by a collapsing energy and resource base. There are many many ecosystems in the biosphere and some of them are doing fine while others are doing not so fine, depending on the judgment criteria employed.

      • Kowalainen says:

        Mankind is also an ecosystem. The problem is when this ecosystem starts to act in a detriment to the ecosystem from which it originates.

  2. The WSJ has an article, China’s Central Bank to Free Up $126 Billion for Lending
    People’s Bank of China to reduce amount of reserves commercial banks are required to keep with it by half a percentage point

    The text makes a person wonder how helpful this reserve reduction will be. It says,

    Friday’s half-point reduction in the reserve requirement was the third such move this year and lowered to 13% the amount of reserves China’s largest banks are required to set aside. Smaller banks have lower set-aside requirements.

    • Hubbs says:

      Not much, but they can’t be too obvious about their reportedly (Kyle Bass) financial straits, embarrassingly due to a shortage of dollars to finance their dollar-denominated debts. This shortage may have been exacerbated by massive derivative bets that the dollar would depreciate as they borrowed in dollars. In this day and age, you can never assume that is a safe bet. Ask the other EMs.

      But, but, but, China holds over a trillion dollars of US Treasuries you may say.
      Apparently, this may not be enough.

  3. Yoshua says:

    A Eurozone bank had to borrow almost USD 1 Billion from the Fed yesterday. European banks can’t function without dollars, so the Fed is the lender of last resort to European primary dealers as well.

    The euro almost collapsed during the euro crisis. It was saved in the last minute by the Fed through a swap line.

  4. Rodster says:

    Gail, it looks like JHK has been reading your articles.

    “All the abiding normality of the past seventy years is slipping away into flux. Modernity is finally yielding – to what? Nobody knows. And nowhere is this more obvious than in the realm of money and economy. Beyond all the other quarrels of modern times — democracy versus communism, Islam versus the West, the wealthy north versus the poor south — one thing remained pretty steady: the flow of oil into the engines of economy. Turned out, the world didn’t have to run out of oil for that normality to fray badly; the oil just had to become marginally unaffordable, and voila! It’s hard for people to grok, especially here in the USA with oil production so far above the old 1970 prior peak that the proposition seems absurd.”

    https://kunstler.com/clusterfuck-nation/unsettled-weather/

  5. milan says:

    Great video of the demise of Canadian Steel to China?

    CRAZY???????????? IGNORANT POLITICIANS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    Trudeau’s $42 billion Chinese steel project will cost thousands of Canadian jobs | Ezra Levant

    • Tim Groves says:

      Justin Trudeau could well maybe possibly is Xi Jinping’s puppet!

      No doubt, anonymous sources could probably be located who would be prepared to swear on the Little Red Book and Rules for Radicals that Justin and Xi might have been involved in collusion or even in a conspiracy against the children of the Maple Leaf.

      • Kowalainen says:

        It is not simple to be a puppet to the Politbüro when the US got an edge in tech. The hegemony quickly produces two US puppets.

    • It is very doubtful that the whole project will work economically because natural gas prices worldwide are down.

      Natural gas demand depends very much on weather conditions. Cold winters and hot summers are very good for demand. Adding a whole lot of LNG capability in China, at the same time that the US is adding a lot of LNG capability, and some areas are adding to pipeline capability very quickly overwhelms the ability of users to use the natural gas. A huge amount of storage is not being put in place to hold all of this new natural gas either, as far as I know.

      This is a chart of recent LNG prices from the WSJ. It costs $2 per Mcf to ship LNG (and probably more like $3 to Asia). To make this work, the price differential needs to be higher.

  6. Forbes has a great article out called, Renewables Threaten German Economy and Energy Supply, McKinsey Warns in New Report

    But McKinsey issues its strongest warning when it comes to Germany’s increasingly insecure energy supply due to its heavy reliance on intermittent solar and wind. For three days in June 2019, the electricity grid came close to black-outs.

    “Only short-term imports from neighboring countries were able to stabilize the grid,” the consultancy notes.

    As a result of Germany’s energy supply shortage, the highest observed cost of short-term “balancing energy” skyrocketed from €64 in 2017 to €37,856 in 2019.

    “It can be assumed that security of supply will continue to worsen in the future,” says McKinsey.

    Also

    German consumers have paid dearly for the energy transition. German electricity prices are 45% above the European average, McKinsey reports. Green taxes account for 54% of household electricity prices.

    The McKinsey report is in German. https://www.mckinsey.de/branchen/chemie-energie-rohstoffe/energiewende-index

    • It also tends to destabilize their neighbor’s grid, who must invest in additional “overflow” blockage workarounds..

      • Robert Firth says:

        Which is even more bad news. Germany’s first resort for more electricity supply is Belgium and The Netherlands: there simply isn’t enough “bandwidth” to get it from anywhere else. And both those countries have embarked on their own push for renewables.

        Given their geographical proximity, it is quite probable that a weather event that affects Germany’s renewables will also affect theirs. They are in the same leaky boat, or should I say Ship of Fools?

  7. CTG says:

    Cheap fuel (food) for thought…

    https://www.zerohedge.com/news/2019-09-06/european-gas-prices-plunge-10-year-low

    Storage as of 2 Sept approx 93%

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

    Hello, Good Morning Everybody! Did you enjoy your Orange Crush at the table yet?
    Suicide rates are on the rise, especially in rural America, according to a study published Friday.

    From 1999 to 2016, the rate of suicide among Americans ages 25 to 64 rose by 41 percent, researchers reported in JAMA Network Open. Rates among people living in rural counties were 25 percent higher than those in major metropolitan areas.
    A number of factors appear to be driving suicide rates up in rural America, including poverty, low income and underemployment, said lead study author Danielle Steelesmith, a postdoctoral fellow at Ohio State University’s Wexner Medical Center.
    “Those factors are really bad in rural areas,” said Steelesmith
    https://www.nbcnews.com/health/mental-health/suicide-rates-are-rising-especially-rural-america-n1050806
    The study also found that counties with high levels of social fragmentation — based on the levels of single-person households, unmarried residents and transient residents — and a high percentage of veterans had higher rates of suicide. All of those factors were more pronounced in rural counties.
    The presence of more gun shops was also associated with an increase in suicide rates in all counties, except for the most rural ones, the researchers reported
    Suicide “is a growing American tragedy,” said Dr. Albert Wu, an internist and a professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health. “It has become a leading cause of death in the U.S., and is a major public health problem

    What till the wheels fall completely off the gravy train!….We’ve seen nothing yet!
    Suppose many in the rural parts already have that happened to them.

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

    Oh, didn’t this happen a long, long time ago in the 1930’s? Except there were many more family famers! Incorporate to a Giant Megafirm or get out!
    Back YahooNEWS
    More Dire News For Trump In The Heartland: Past-Due Wisconsin Farmer Loans Hit Record
    Mary Papenfuss
    Mary Papenfuss
    HuffPostSeptember 7, 2019, 4:17 AM EDT
    President Donald Trump’s farm belt popularity likely took another hit Friday with news that Wisconsin farmer loan delinquencies hit an 18-year record high in June.

    The past-due loans are a serious sign of the financial struggles taking a toll on farmers amid Trump’s trade war with China that he insisted would be easy to win.

    The share of farm loans that are long past due rose to 2.9% at community banks in Wisconsin as of June 30, according to a Reuters analysis of loan delinquency data gleaned from the Federal Deposit Insurance Corp. That’s the highest rate in comparable records that go back to 2001.

    Rural support was critical to Trump’s presidential victory, but it’s unlikely to hold if voters lose their farms and livelihoods to the trade war. Wisconsin is a battleground swing state that went for Trump by fewer than 23,000 votes. He won Michigan by fewer than 11,000 votes.
    Trump has arranged a mammoth $28 billion subsidy from taxpayers for farmers to help them survive the trade war, but many say it won’t be enough to make up for markets they have lost — possibly forever…..Aides spelling out farmer anger over the waivers told a stunned Trump last month that he has a “problem” in Iowa, Reuters reports.

    28 Billion subsidy!? Sounds and tastes like Socialism to me….

    But hey, who ever listens and actually believes what a politician says!?

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

    Open for Business…bring your own mosquito tent and water!
    Tourist-dependent Bahamas says it’s still open for business
    DEE-ANN DURBIN and ADRIANA GOMEZ LICON
    Associated PressSeptember 7, 2019, 1:58 AM EDT
    The Bahamas was on track for a record year of tourism before Hurricane Dorian hit. Now, the outlook for that vital sector is uncertain.
    Some of the best-known resorts in the 700-island chain, like Atlantis, Paradise Island, were unscathed by the monster storm. So was Nassau, the largest city.
    But 100 miles away, on Grand Bahama Island and the Abaco islands, many smaller hotels and vacation rentals were damaged or destroyed. That leaves the Bahamas with a double challenge: convincing tourists to keep coming without trivializing the suffering on the affected islands
    The Bahamas depend heavily on tourism, which supplies half their annual gross domestic product of $5.7 billion, according to the Bahamas Investment Authority. By comparison, tourism brings in 20% of Hawaii’s annual GDP and less than 3% of the GDP of the United States

    Sounds like we wiill have many more new arrivals here in South Florida, where I live!
    Half the economy depends on Tourism dollars….well now those poor folks.
    If I were you I would build the next raft out to Miami!

    • I suppose a cruise ship might stop at the Bahamas, if this were one of many scheduled stops, and the trip onshore only involved buying a few trinkets as souvenirs. But it is hard to see why someone would want to book at trip to a luxury resort, unless they were certain that the resort was in good shape and could obtain all of the supplies it needed.

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