Our Energy and Debt Predicament in 2019

Many people are concerned that we have an oil problem. Or they are concerned about recession and the need to lower interest rates.

As I see the situation, we have a problem of a networked economy that is not functioning well. A big part of this problem is energy-related. Strange as it may seem, energy prices (including oil prices) are too low for producers. If debt levels were growing more rapidly, this low-price problem would go away.

The “standard way” of encouraging more debt-based purchases is by lowering interest rates. But we are running out of room to do this now. We also seem to be running out of economic investments to make with debt. If expected returns on investment were greater, interest rates would be higher.

Without economic investments, demand for commodities of all kinds, including energy products, tends to stay too low. This is the problem we have today. Our debt problem and our energy problem are really different aspects of a networked economy that is no longer generating enough total return. History suggests that these periods tend to end badly.

In the following sections, I will explain some of the issues involved.

[1] Our problem is not just that oil prices are too low. Prices are too low for practically every type of energy producer, and in many parts of the globe.

Oil: OPEC oil producers have cut back production because they view oil prices as too low. OPEC reports a cutback in production of 2.7 million barrels per day between November 2018 and July 2019 (from 32.3 million bpd to 29.6 million bpd).

In the US, there has been an increase in bankruptcies of oil producers during 2019, relative to 2018. There has also been a reduction in the number of oil drilling rigs of 17% since the week of November 16, 2018, according to reports by Baker Hughes. These are signs of producer distress.

Natural gas: While recent US natural gas prices have bounced up off their recent lows, as recently as August 8, 2019, we were reading:

U.S. gas futures this week collapsed to a three-year low, while spot prices were on track to post their weakest summer in over 20 years. In other markets, such lackluster pricing would cause investment to retrench and supply to contract.

But gas production is at a record high and expected to keep growing. Demand is rising as power generators shut coal plants and burn more gas for electricity, and as rapidly expanding liquefied natural gas (LNG) terminals turn more of the fuel into super-cooled liquid for export.

Analysts believe the natural gas market is not trading on demand fundamentals because supply growth continues to far outpace rising consumption. Energy firms are pulling record amounts of oil from shale formations and with that oil comes associated gas that needs either to be shipped or burned off.

When we look worldwide, we see that the Wall Street Journal is reporting, “U.S. Glut in Natural Gas Supplies Goes Global.” A chart from that article shows falling natural gas prices in Europe and Asia, almost to the level of US natural gas prices.

Coal: The US Energy Information Administration writes, “More than half of US coal mines operating in 2008 have since closed.” USA Today writes, “Is President Trump losing his fight to save coal? Third major company since May files for bankruptcy.”

China has also been closing coal mines in response to low prices. Its coal production ramped up quickly after it joined the World Trade Organization in 2001, but since the 2012 to 2013 period, production has been close to level. An academic paper talks about a “de-capacity program” undertaken in China in 2016 in response to plunging coal prices and overall financial loss of coal enterprises.

Figure 1. 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.

Uranium: A recent article says, “Plummeting global uranium prices hit Namibia hard.” Another article talks about the huge amount of capacity that has been taken off-line because of continued low uranium prices. The article estimates that 25% to 35% of global uranium production had already been taken off-line by the time the article was published (May 20, 2019).

Ethanol: According to the Wall Street Journal, the ethanol industry has been losing money since at least 2015, and is now closing ethanol plants in three states. The trade war has exacerbated its problems, but clearly its problems began before the trade war.

[2] The general trend in oil prices has been down since 2008. In fact, a similar trend applies for many other fuels.

Figure 2 shows that oil prices since 2008 have been trending downward.

Figure 2. Inflation adjusted weekly average Brent Oil price, based on EIA oil spot prices and US CPI-urban inflation.

Figure 3 shows that other energy prices have been following a similar price trend to that of oil. This situation happens because energy products are primarily used in finished goods and services of many kinds, such as cars, homes, vacation travel, and air conditioning. If demand for finished goods and services is high, prices for all commodities can be expected to be high; if demand for finished goods and services is low, prices for all commodities can be expected to be low. Thus, it shouldn’t be too shocking that the problem of prices that are too low for energy producers is very widespread.

Figure 3. 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. They are annual averages, so smooth out quite a few smaller bumps.

[3] The situation of prices being too low for many types of energy producers simultaneously is precisely the problem I found back in December 2008 when I wrote the article Impact of the Credit Crisis on the Energy Industry – Where Are We Now? 

The article mentioned was written in December 2008. If we look back at Figure 2, this was a time when oil prices were very low. I had first noticed a cutback in credit of various kinds (including credit card debt and mortgage debt) in the middle of 2008, about the time oil prices crashed. Later in the year, additional financial problems emerged, including the collapse of Lehman Brothers. Banks became less willing to offer credit to buyers who were deemed insufficiently creditworthy.

In my December 2008 article, I wrote about suppliers in various supply chains not being able to get credit. Without credit, supply chains could not operate. Businesses depending on supply chains were forced to cut back on their purchases. In fact, some suppliers went bankrupt. Workers were laid off in this process; these layoffs added to the lack of buyers for finished goods and services. Energy prices of many types crashed simultaneously because of the lack of demand for commodities used to make finished products of many kinds.

The fix for the problem back in late 2008 was for the US to begin Quantitative Easing. Quantitative Easing lowered longer-term interest rates and allowed more credit to get back to supply chains. By 2011, oil prices had risen to a level that was more tolerable for producers. These higher prices slowly slipped away, especially disappearing when the US discontinued its Quantitative Easing program in 2014.

If a person looks at the late 2008 situation, it is clear that a lack of debt availability indirectly led to low commodity prices. Prices dropped almost vertically when the debt bubble popped. This time, the situation is a little different. We arrived at low prices through the long diagonal black dotted line on Figure 2; this time other factors besides an obvious lack of debt have been involved.

One issue that seems to be involved this time is a shift in relativities between the dollar and other currencies, making energy products more expensive for those outside the US.

A second contributing issue this time is growing wage disparities, as goods are increasingly manufactured in low-wage countries. Low-wage workers (both in developing countries and in advanced economies trying to compete with developing countries) are less able to buy finished goods and services. This contributes to the lack of demand for finished goods and services using commodities of all kinds, including energy products.

[4] In the right circumstances, a rapidly growing supply of cheap energy products can help the world economy grow.

If we look back, there was a period of rapid growth in the world’s energy consumption between World War II and 1980. This was a period of rapid growth in the world economy.

Figure 4. Average growth in energy consumption for 10 year periods, based Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects (Appendix) together with BP Statistical Data for 1965 and subsequent.

In fact, both population and energy consumption per capita were growing. This growing energy consumption per capita allowed living standards to grow as well (Figure 5).

Figure 5. Energy growth amounts shown in Figure 4, divided between amount that supported population growth (based on 2019 world population estimates and earlier estimates by Angus Maddison) and all other, which I have called “living standards.”

Most people would agree that a major increase in living standards took place between World War II and 1980. New buildings were constructed to replace those destroyed or damaged during World War II. Many people were able to buy cars for the first time. Interstate highway systems were built. Electric transmission lines were built, and oil and gas pipelines were laid. In rural areas, homes were often electrified for the first time. With the aid of energy saving appliances and birth control pills, many women joined the workforce. The US, Europe, Japan, and the Soviet Union all saw their economies grow.

[5] It is striking that the period of rapid energy consumption growth between World War II and 1980 corresponds closely to the long-term rise in US interest rates between the 1940s and 1980 (Figure 6).

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

If interest rates rise, it becomes more expensive to borrow money. Monthly payments for homes, cars, and new factories all rise. Evidently, the US economy was growing robustly enough in the 1940 to 1980 timeframe that US short term interest rates could be raised without much economic harm. The big concern seemed to be an overheating economy as a result of too rapid growth.

The huge increase in interest rates in 1980-1981 put an end to any concern about an overheating economy (compare Figures 6 and 7). Oil prices came back down once the world economy was in recession from these high interest rates.

Figure 7. Historical inflation-adjusted Brent-equivalent oil prices based on data from 2019 BP Statistical Review of World Energy.

[6] Starting about 1980, the US economy began substituting rapidly growing debt for rapidly growing energy supplies. For a while, this substitution seemed to pull the economy forward. Now growth in debt is failing as well.

Figure 8 shows how the ratio of total US debt (including governmental, household, business and financial) has changed since 1946. It becomes clear that once the big “push” that the economy received from rising consumption of energy products began to fail about 1980, the US moved to the addition of debt as a substitute.

Figure 8. Ten-year average increase in US debt relative to GDP. Debt is “All Sectors, Liability Level” from FRED; GDP is in dollars of the day.

I think of debt as being one of many kinds of promises. Figure 9 illustrates that while the total amount of goods and services has been growing, debt levels and other kinds of promises have been growing even more rapidly.

Figure 9. Promises of future goods and services tend to rise much more rapidly than actual goods and services. Chart by Gail Tverberg.

Many things can go wrong with this system. If the growth in added debt slows too much, we can expect to start seeing financial problems similar to those we saw in 2008. Also, if the level of debt (such as student debt) gets too high, its payback interferes with the purchase of other needed goods, such as a home. If energy providers decide prices are too low and stop producing, then promised Future Goods and Services can’t really appear. Huge defaults on promises of all kinds can be expected. This happens because the laws of physics require the dissipation of energy for physical processes underlying GDP growth.

[7] Since 2001, world economic growth has been pulled forward by China with its growing coal supply and its growing debt. In the future, this stimulus seems likely to disappear. 

Figure 10. Figure similar to Figure 5, with bump that is primarily the result of China’s accelerated growth circled.

China has been financing its rapid economic growth since 2001 with growing debt.

Figure 11. China Debt to GDP Ratio, in figure by the IIF.

We know that low prices for coal have led to flattening production since the 2012 – 2013 period (Figure 1). In fact, part of the reason for the flattening of non-financial corporate debt in recent years in Figure 11 may reflect swaps of uncollectible coal mine debt for equity, removing part of coal mine debt from the chart.

The failure of coal production to grow rapidly puts China at an economic disadvantage because coal is a very low-cost energy source. Any substitution, even imported coal, is likely to raise its cost of making goods and services. This makes competition in a world economy more difficult. And China’s debt level is already very high, putting it at risk of the problems discussed in Section [6].

[8] The world economy needs much more rapidly growing debt if energy prices are to rise to a level that is acceptable to energy producers. 

Debt acts like a promise of future goods and services. Growing debt, plus increases in other types of promises of future goods and services, helps to keep energy prices high enough for energy producers. There are at least three reasons that growing debt helps an economy:

First, increasing debt can be used to build factories, and these factories hire large numbers of people. The factories utilize various raw materials and energy products themselves, raising demand for goods and services. Furthermore, the workers hired by the factories, with their incomes from their jobs, also raise the demand for goods and services. These goods and services are made with commodities. Growing debt thus raises demand for commodities, and thus their prices.

Second, increasing debt levels by governments are often used to hire workers or to raise benefits for the unemployed or the elderly. This has a very similar effect to building new factories. These workers and these beneficiaries can afford more goods and services, and these goods and services are made using commodities. Governments also use some of their funds to build schools, pave roads and operate police cars. All of these things require energy consumption.

Third, consumers can afford to buy more of the output of the economy, if their debt levels are increased. If debt can be structured so that anyone who walks into a car dealership can afford a new car (such as longer durations, lower interest rates, and no down payment), this added debt allows increasing demand for new cars. It also allows increasing demand for the energy products used to make and operate these new vehicles. Furthermore, if new homes can be made more affordable for young people, this works in the direction of adding more mortgage debt.

The Institute of International Finance (IIF) reports that the ratio of world debt to GDP (red line on Figure 12) has been falling since 2016. This falling ratio of debt to GDP no doubt contributes to the low-priced energy problem with which energy producers are now struggling.

Figure 12. IIF figure showing total world debt and the ratio of total world debt to GDP.

Non-debt promises of many types can also have an impact on energy prices, but it is beyond the scope of this article to discuss their impact. Some examples of non-debt promises are shown on Figure 9.

[9] The world economy seems to be running out of truly productive uses for debt. There are investments available, but the rate of return is very low. The lack of investments with adequate return is a significant part of what is preventing the economy from being able to support higher interest rates.

In a self-organizing networked economy, market interest rates (especially long-term interest rates) are determined by the laws of physics. Regulators do have some margin for action, however. They can raise or lower certain short-term interest rates. They can also use their central banks to purchase existing securities, thereby influencing both short- and long-term interest rates. In addition, they can indirectly affect the system by raising and lowering tax rates and by adopting stimulus programs.

Market interest rates, in some sense, tell us how productive investments truly are at a point in time. Years ago, investments that the economy was able to make were far more productive than the investments we are making today. For example, the first paved road in an area had a huge beneficial effect. New roads were able to open whole areas up to commerce. Once an area had been developed, later investments were much less beneficial. Fixing up a road that has many holes in it takes energy and materials of many types, but it doesn’t really add productivity to the system. It just keeps productivity from falling.

After a point, adding new roads or other infrastructure doesn’t add much of anything. This is especially the case if population is level or falling. If population is falling, it would likely make sense to reduce the number of roads, but this is difficult to do, once there are a few occupied homes along a road.

As another example, a car that gets a person from home to work is a great addition if the vehicle allows the person to take a job that he could not otherwise take. But added “bells and whistles” on cars, such as air conditioning, a musical system, sturdier bumpers, and devices to reduce emissions, are of more questionable value, viewed from the point of view of allowing the economy to function cheaply and efficiently.

Another type of investment is education. At one point, a high school education was sufficient for the vast majority of the population. Now additional years of schooling, paid for by the student himself, are increasingly expected. An investment in higher education can be “productive,” in the sense of helping to differentiate himself/herself from those with no post-secondary education. But the overall level of wages has not been rising enough to compensate for all of the extra education. It is the growing complexity of the system that is forcing the need for extra education upon us. In a sense, the extra education is a tax we are required to pay for having a more complex system.

The need for pollution control might be considered another kind of tax on the system.

Our hugely expensive health care system is another tax on the system. After paying the cost of health care, workers have less funding available for buying or renting a home, raising a family, food and transportation.

[10] Since 1981, regulators have been able to prop up the economy by reducing interest rates whenever economic growth was faltering. Now we have pretty much run out of this built-in source stimulus.

Many observers have noted that central bankers are running out of tools to fix our economic problems. The lack of room to take down interest rates can be seen in Figure 6.

Figure 13 shows that long-term patterns of reductions in interest rates (darker bands) have happened previously. These reductions in interest rates came to an end because they couldn’t go any lower, given inflation expectations and likely levels of defaults. We seem to be facing a similar situation today.

Figure 13. Chart from the Financial Times showing historic interest rates and periods during which interest rates fell.

According to Figure 13, there have been three periods of falling interest rates in the last 200 years:

  • 1817-1854
  • 1873-1909
  • 1985-2019

In the gap between the first two periods of falling interest rates (1854 to 1873), the US Civil War took place. This was a period of very poor return on investments. Somehow it ended in war.

Immediately after the second two periods of falling interest rates (after 1909), the world entered a very unstable period. First there was World War I, then the Great Depression, followed by World War II.

Now we are facing the possibility of yet another end-point for the take-down in interest rates.

[11] The total return of the economy seems to be too low now. This seems to be why we have problems of many types, ranging from (a) low interest rates to (b) low profitability for energy producers to (c) too much wage disparity. 

All of the problems listed above are manifestations of an economy that is not producing sufficient total return. The laws of physics distribute the problem to many areas of the economy, simultaneously.

A person wonders what could be ahead. We seem to be reaching the end of the line regarding the takedown of interest rates, as shown in Figure 13. If a takedown in interest rates is possible, it acts as a relief valve for some of the other problems the economy is facing, including too much wage disparity and energy prices that are too low for producers.

In Section [10], we saw that when the relief valve of lower interest rates had disappeared, wars and depressions have taken place. We can’t know the precise outcome this time, but our current situation doesn’t look good. Will we encounter wars, or a serious depression, or financial problems worse than 2008? We can’t know for certain. Or will we somehow find a way around serious problems?

 

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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1,324 Responses to Our Energy and Debt Predicament in 2019

  1. psile says:

    The farmers who worry about our phone batteries

    Lithium mining is causing water shortages and ecological collapse in Chile. Just one more example of how a transition to “renewable” “green” energy via massive extraction of nonrenewable resources will be just as deadly and foolishly unsustainable as burning FFs.

    • I remember reading about the water problem for lithium extraction in Chile before. This is a fairly recent article talking about the water problem related to lithium in Chile. Lithium firms depleting vital water supplies in Chile, analysis suggests The article is in “Engineering and Technology.”

      Evidence uncovered by E&T appears to show that lithium-mining company SQM is playing a direct role in damaging the local environment in Chile’s Atacama salt flats, as its activities reduce water levels in an already dry region, with severe effects on local communities, protected lagoons and areas of alluvial muds.

      USGS information indicates that Chile has the largest lithium reserves in the world. It only produced 19% of total world lithium production, however. Australia produced about three times as much as Chile. China and Argentina are also large producers.

    • Xabier says:

      Solving the problems of resource-hungry industrialism through further resource-hungry (and highly polluting) industrialism?

      It’s not going to work.

      Mankind’s final screw-up, I suspect.

  2. psile says:

    Cowboy Nation – Norway’s Wild West fantasy

    Equinor (previously, Statoil), Norway’s state-owned oil and gas company, is riding headlong into the world’s fossil-fuelled sunset, whilst its cowboy nation is trotting comfortably along in its trail.

    To put it in cowboy terms, ‘It’s your misfortune and none of my own’. This is a line from an old cowboy ballad, used by the historian Richard White to describe the attitude driving the exploitative, extractive, and environmentally disastrous economy of the Wild West. It still applies.

    • As I have pointed out, I am a descendent of immigrants from Norway, a little over a century ago.

      The author of the article evidently think it is bad if Equinor and the Norwegian Fund pursue investments that the oil and gas industry would make around the world. This is the way the laws of physics make our economy operate. If there is a profit to be made, some company or person will figure out how to pursue that profit. If Equinor were to drop out, some other company would step in.

      Unfortunately, that is the way a self-organizing economy works. It is a dissipative structure. It is always on the lookout for energy to dissipate. The author can make money by publishing an article that appeals to a particular group of people who feel guilty about how the system really operates. In this way, the author, too, is helping dissipate energy.

  3. Harry McGibbs says:

    “Gross borrowings of OECD governments are set to reach a new record level in 2019 of $11 trillion. Government debt now exceeds annual GDP in Japan, Greece, Italy, Portugal, Belgium, France, Spain and the UK. McKinsey estimates that the overall global debt of governments, non-financial corporations and households has grown by $72 trillion since the end of 2007. Sovereigns account for 31% of that growth.

    “Both Euromoney Country Risk (ECR) scores and data from S&P Ratings show the quality of sovereign debt has declined in aggregate. This reflects both overall indebtedness and a flood of new sovereign issuers.”

    https://www.euromoney.com/article/b1h672whfwwjd2/the-fragile-edifice-of-sovereign-debt

  4. Harry McGibbs says:

    “The Federal Reserve has cut interest rates for a second time amid fears of a global economic downturn and concerns Donald Trump’s trade wars with China could risk further instability among world markets.

    “The Fed previously cut the rate to a range of 2 to 2.5 per cent in July, while hinting at further cuts this year. Those cuts came on Wednesday, as the Fed announced a cut of the main target rate to a range of 1.75 to 2 per cent.

    “Donald Trump, who had repeatedly slammed Federal Reserve Chairman Jerome Powell and demanded the Fed do a sweeping cut to the current rate, tweeted shortly after the announcement: “Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision!  A terrible communicator!”

    https://www.independent.co.uk/news/world/americas/fed-rates-cut-us-trump-trade-war-twitter-recession-a9111136.html

  5. Harry McGibbs says:

    “Household wealth excluding property in the world’s 53 largest countries fell slightly last year, in a first since the financial crisis of 2008, German insurance giant Allianz said on Wednesday.

    “The value of ordinary people’s bank deposits, pension savings and stock investments dropped 0.1% year-on-year in 2018, to around €172.5trn, Allianz said in its annual global wealth report.”

    https://www.fin24.com/Economy/global-household-wealth-drops-for-first-time-since-2008-crisis-study-20190919-2

    • Harry McGibbs says:

      “The trade war between the United States and China has plunged global growth to its lowest levels in a decade, the OECD said on Thursday as it slashed its forecasts.

      “The Organisation for Economic Cooperation and Development said that the global economy risked entering a new, lasting low-growth phase if governments continued to dither over how to respond.”

      http://news.trust.org//item/20190919083525-8jlzq/

    • The Allianz report on global wealth can be found at this link: https://www.allianz.com/en/economic_research/publications/specials_fmo/GWR2019_18092019.html
      https://www.allianz.com/content/dam/onemarketing/azcom/Allianz_com/economic-research/publications/specials/en/2019/AGWR_2019.pdf

      A few things Allianz says:

      In 2018, gross financial assets in emerging markets not only declined for the first time, but the decline of -0.4% was also more pronounced than in the industrialized countries (-0.1%). The weak development in China, where assets fell by 3.4%, played a key role in this. However, other important emerging markets such as Mexico and South Africa also had to absorb significant losses in 2018.

      . . . fresh savings set a new record. The increase in the flow of funds, however, was solely driven by US households, who – thanks to the US tax reform – upped their fresh savings by a whopping 46%; two-thirds of all savings in industrialized countries thus originated in the US. Were it not for tumbling stock markets, this record purchase of financial assets would have resulted in world asset growth of 2%.

      US households purchased shares, funds and other securities at the tune of EUR 860 billion – almost 50% above the level of the previous year. Other savers are clearly more cautious: Be it Europe, Japan or Australia: Households were net sellers of securities in 2018. [Might not this difference be a reason why the US stock market did relatively well, and other stock markets did worse?]

      Because of the strong growth in liabilities, net financial assets i.e. the difference between gross financial assets and debt fell by 1.9% to EUR 129.8 trillion at the close of 2018. Emerging countries in particular suffered a drastic decline, net financial assets shrank by 5.7% (industrialized countries: -1.1%).

      Allianz is a big life insurer. Its big concern is that with low interest rates, people in Europe especially are not buying as much life insurance. They also are not buying shares of stock. Instead, they are putting the savings in bank deposits.

  6. Harry McGibbs says:

    “EU leaders have given Boris Johnson an ultimatum to come up with a new Brexit plan by the end of September or face up to a no deal. The deadline, agreed at a meeting in Paris on Wednesday evening, comes as the bloc’s chief negotiator Michel Barnier told Mr Johnson to stop “pretending” to negotiate.”

    https://www.independent.co.uk/news/uk/politics/brexit-eu-boris-johnson-deal-plan-deadline-ultimatum-latest-a9111066.html

    • Harry McGibbs says:

      “Investors have taken out a record number of options contracts to bet on or hedge against moves in UK interest rates, amid rising concerns that Britain may depart the EU at the end of October without an agreement on its future relationship with the bloc…

      “The options, if exercised, would allow investors to profit from unexpected rate cuts or protect themselves from the damage stemming from rapid rate rises.”

      https://www.ft.com/content/c11aa992-daa9-11e9-8f9b-77216ebe1f17

    • Xabier says:

      Perhaps the EU might stop pretending itself, and try to arrive at a reasonable settlement which respects the Referendum result, instead of trying to quash it. Cuts both ways…..

      It’s sad to Britain, the country which saved Europe from an unending, continent-wide, Fascism, humiliated in this way.

      • aaaa says:

        “Britain, the country which saved Europe from an unending, continent-wide, Fascism”
        What an awful joke you wrote

    • Chrome Mags says:

      If powerful people don’t want something they don’t have to nix it, they just have to turn it into something undecided. That’s what has happened to Brexit.

  7. OhNo says:

    Hey Gail, remember what you said about a singularity?
    I think the plan is to push it into the future as much as possible by rebranding capitalism with the “Green New Deal”. This means re-directing private consumption money to wind power, solar power, CCS and newer technologies such as EVs. You are thermodynamically right about their unviability, but until the bubble bursts there are billions, or, actually, trillions to be made by making or mining, selling, transporting and installing the cement, metals and materials needed for wind turbines, solar panels and EVs.

    View at Medium.com

    http://www.wrongkindofgreen.org/2019/01/17/the-manufacturing-of-greta-thunberg-for-consent-the-political-economy-of-the-non-profit-industrial-complex/

    • You may very well be right. Somehow, keep the bubble going!

      Sort of reminds a person of the stone statues on Easter Island.

    • From the first article:

      Anyone claiming that a carbon-neutral economy is possible is not telling the truth. All of these strategies emit more greenhouse gases than they capture. The second demand directly contradicts the first.

      These approaches are used to hide the problem, and dump the consequences on someone else: the poor, nonhuman life, the third world, and future generations, all in the service of profits in the present. The goal here is not to maintain a stable climate, or to protect endangered species, but to make money out of pretending to care.

      No kidding! But profits can be made now. Good summary of the issue.

      • OhNo says:

        Another good quote:

        *Net-zero emissions is Not a Thing. There is no way to un-burn fossil fuels. This demand is not for the extraction and burning to stop, but for the oil and gas industry to continue, while powering some non-existent technology that makes it all okay.*

        • Rufus says:

          You can un-burn fossile fuels. It takes some millions years. Of course, I mean… nature can.

          As for thermodynamics, if I remember my lessons 30 years ago, an open system is stable if it gets energy from the outside and rejects entropy outside. It can even increase its complexity. Planet earth gets energy from the sun and dissipates entropy as heat in outer space. Then complexity came to the point of the human brain…

          • Kowalainen says:

            I would say the whole ecosystem of the earth is a manifestation of the spontaneous and immense complexity which nature automatically creates once the process of evolution is set in motion by the first singular instance of reproductive and evolving life and where there is sufficient energy and raw materials available. The complexity is far surpasses the crude centralized behemoths sprinkled with single points of failure from industrial civilization.

            Man certainly want to put itself as the crown jewel in the center of this process. In fact we are a mere disastrous subsystem, a cancer which seeks to dominate the rest of the ecosystem and undermine our own basis of existence.

            • Robert Firth says:

              Agreed 100%. An open system with a stable energy input can sustain complex dissipative systems (“critters”) indefinitely. With one proviso: that they make a living using only zero entropy strategies. That is, they find existing energy gradients, and use some of that energy themselves. The beauty of this scheme is that entropy is created at the same rate, with or without the critters.

              Species that depart from this strategy can easily be found, but only in the fossil record. Except, of course, for the one not yet extinct.

    • Xabier says:

      Probably correct: a fantastic, colossal , mal-linvestment, but the short-term profits might be huge. – for some……

    • The second article is in the form of a play. The Manufacturing of Greta Thunberg – for Consent has been written in six acts.

      In ACT III, I deconstruct how Al Gore and the Planet’s most powerful capitalists are behind today’s manufactured youth movements and why. I explore the We Don’t Have Time/Thunberg connections to Our Revolution, the Sanders Institute, This Is Zero Hour, the Sunrise Movement and the Green New Deal. I also touch upon Thunberg’s famous family. In particular, Thunberg’s celebrity mother, Malena Ernman (WWF Environmental Hero of the Year 2017) and her August 2018 book launch. I then explore the generous media attention afforded to Thunberg in both May and April of 2018 by SvD, one of Sweden’s largest newspapers.

      In the final act, ACT VI [Crescendo], I wrap up the series by divulging that the very foundations which have financed the climate “movement” over the past decade are the same foundations now partnered with the Climate Finance Partnership looking to unlock 100 trillion dollars from pension funds. I reveal the identities of individuals and groups at the helm of this interlocking matrix, controlling both the medium and the message. I take a step back in time to briefly demonstrate the ten years of strategic social engineering that have brought us to this very precipice. I look at the relationship between WWF, Stockholm Institute and World Resources Institute as key instruments in the creation of the financialization of nature. I also take a look at the first public campaigns for the financialization of nature (“natural capital”) that are slowly being brought into the public realm by WWF. I reflect upon how mainstream NGOs are attempting to safeguard their influence and further manipulate the populace by going underground through Extinction Rebellion groups being organized in the US and across the world.

      Follow the money and the influence peddling. The story doesn’t need to be right. It just needs to profitable for some investors.

  8. It's different this time around....YES says:

    Everybody Ready!? Climate Strike Tommorow and the Fast Eddie Challenge is on!

    No future, no children: Teens refusing to have kids until there’s action on climate change
    John Bacon, USA TODAY
    USA TODAYSeptember 19, 2019, 9:33 AM EDT
    A Canadian teen’s pledge not to have children until her government takes serious action against climate change is drawing support from young people around the globe.

    Emma Lim, 18, launched a climate change movement this week called “#No Future, No Children” that includes a website where other teens can take her pledge.

    “I am giving up my chance of having a family because I will only have children if I know I can keep them safe,” she says on her website. “It breaks my heart, but I created this pledge because I know I am not alone. … We’ve read the science, and now we’re pleading with our government

    Don’t these kids really that others will reproduce to make up the numbers????
    We can’t help ourselves, wired to flat out full throttle BAU BABY…

    • Makes more room for immigrant children from Africa and the Middle East. Also, some Middle American countries with high birth rates/

      • Ed says:

        The Mormons, the Orthodox Jews, the Evangelical Christians, the Africans are all happy to pickup the slack. Race suicide is a bitter thing to watch.

      • Kowalainen says:

        Don’t ruin these people by introducing them to the horrors of the miserable and conformism producing government corporate complex in the west. Leave the people of Africa and Middle East alone.

        Haven’t we done enough harm to this planet and inhabitants already?

    • Ed says:

      This is sounding a lot like the 14 words! “We must secure the existence of our people and a future for white children.”

      • Ed says:

        But with a funny twist Since we can not secure a future for our children we will not have children. So, only the morally suspect will have children.

        • Xabier says:

          Only those who can think beyond the few minutes needed to father a child will do so, at least in quantity……..

  9. CTG says:

    Many people here say that the black swan that will bring down the modern human civilisation is something totally unknown, came out from nowhere and deliver the deadly blow. I will be damned if it is this liquidity issue.

    Check out zerohedge.com. it happened again and it is worse than yesterday. Traders asking “what is next”? Already $200B in 3 days, gone in the black hole

    • I can see that if Saudi Arabia is suddenly trying to buy a lot of crude on the world market as well as make repairs, this might raise its cash needs. But $200 billion seems like a lot.

      • Dennis L. says:

        Gail,
        Stuart Staniford did work in the early 21st century regarding depletion rates of the Ghawar field. Is he or Euan doing work like that now? Is it possible that the separation facility no longer needs to be as large as originally built? The holes in the tanks shown seem very neat with very little fire damage evident, perhaps they were empty. There is also very little damage to the associated piping in the released photos.

        If I recall correctly Matt Simmons thought that as goes Ghawar so goes the world.

        Dennis L.

      • Robert Firth says:

        Gail, if the Saudis are doing that, it gives the lie to their claim that things will be fixed in a couple of weeks. Their reserves could easily fill that gap; therefore, they expect a much longer hiatus.

        It also says that this was not a Saudi false flag operation. Such would have been calculated to give maximum kaboom with minimum actual damage; what happened was exactly the opposite.

    • This is one of the zero hedge.com articles you mentioned:

      Liquidity Shortage Getting Worse: Fed’s Repo Oversubcribed Even More As Funding Demand Jumps

      This is another zero hedge article: The Paradoxical Instability Of Fed-Induced ‘Stability’

      The author, Lance Roberts, points out that when the Fed has lifted the short-term lending rate to higher than the (self-organized) 2-year rate, bad stuff has historically followed:

      Another thing Lance Roberts points out is that the current in things are “ETF’s and “Passive Investing,” and levered credit.”

      My comment: But some organization has to make these things happen. Banks need to be involved, or some other organization. They need to keep realigning investment portfolios to match Passive Investment portfolios, for example. And somehow they have to make ETFs happen. When lots of rapid changes start taking place, this becomes difficult. This may be part of what is behind the problems right now. An earlier comment by my friend who is a quant was that we should especially expect problems in late September.

      • Davidin100millionbilliontrillionzillionyears says:

        okay, late September is not quite an ordinary time on the financial calendar…

        if you haven’t mentioned it before, it’s the end of the third quarter of the year…

        so there could be something significant to the next 11 days…

        we’ll know more soon enough…

    • Davidin100millionbilliontrillionzillionyears says:

      “Many people here say that the black swan that will bring down the modern human civilisation is something totally unknown, came out from nowhere and deliver the deadly blow. I will be damned if it is this liquidity issue.

      Check out zerohedge.com. it happened again and it is worse than yesterday. Traders asking “what is next”? Already $200B in 3 days, gone in the black hole.”

      but wasn’t the $200B just some digits on some CB computer somewhere?

      but you could be right, that this could be a big black swan, if those hundreds of billions in digital money fail to patch the system, or even cause the system to go down…

      as I just posted, the end of September may tell us how this chapter of the story ends…

      things could normalize in October…

      or get worse…

      • Christopher says:

        The 200 B is overnight lending for three days. I assume some overnight lending will have to be renewed, its not like it is 80 new Bs each day. I believe Fed can handle this with the digital printing press and eventually QE. I find it hard to believe that the Fed will be the weakest link in our global system. Something else will be responsible for the snap.

        • The news today on Zerohedge is Liquidity Scramble: Fed Announces Overnight Repos every day next week, introduces term repos.

          In short, despite the generous use of the $75 billion overnight repo, it wasn’t enough, and STIR and repo traders were spooked enough to force the Fed to engage in yet another form of liquidity injection, in the form of term repos.

          If and when that too is insufficient, the Fed will have just two options: pursue a standing repo facility, which it is already doing to an extent with term repos, and eventually launch outright POMO (i.e. QE), to boost the level of reserves in the system, as it is now obvious that $1.3 trillion in “excess” reserves is nowhere near enough for the US financial system, which needs at least another $400 billion in reserves – as shown in the chart below – to see the FF-IOER spread stabilize.

  10. The WSJ has a new article up, To Keep Exports Flowing, Saudi Arabia Looks to Import Oil
    Attacks on the kingdom’s oil facilities are changing global trade flows in unusual ways

    Excerpts:

    Missiles knocked out roughly half of the country’s crude production, and the disruption to Saudi supplies is having knock-on effects all along the global oil-supply chain. To maintain its reputation as a reliable supplier, the world’s largest oil exporter is looking to buy crude oil from at least one of its neighbors and additional oil products from the global market, oil traders said.

    Aramco was also in the market seeking products including diesel, gasoline and fuel oil for domestic use, according to traders. To preserve its own crude for exports, Saudi Arabia needs to reduce the amount of domestic crude it refines to make those products.

    The attack on the Abqaiq oil processing plant is expected to cut activity at domestic refineries by up to 1.4 million barrels of crude a day, reducing the supply of products for domestic consumption and exports, said Iman Nasseri, managing director Middle East at consulting firm Facts Global Energy.

    Aramco has told Indian refiners that it can’t deliver the premium-grade Arab Light crude they ordered. Instead, the company will send heavy, lower-grade crude.

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