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. Harry McGibbs says:

    “The slowdown in China’s economy deepened in August, with industrial production growing at its weakest pace in 17-1/2 years amid rising U.S. trade pressure and softening domestic demand. Retail sales and investment gauges also worsened, data on Monday showed, reinforcing views that China is likely to cut some of its key interest rates this week…”

    https://uk.reuters.com/article/us-china-economy-activity/chinas-aug-industrial-output-growth-grinds-to-17-1-2-year-low-idUKKBN1W102H

  2. Harry McGibbs says:

    “EU officials have rejected Boris Johnson’s claim that “a huge amount of progress” is being made in Brexit talks, as Jean-Claude Juncker warned that time is running out.

    “Juncker, who will stand down as European commission president on 31 October, is expected to ask Johnson to spell out his ideas for replacing the Irish backstop when the pair meet over lunch in Luxembourg on Monday.”

    https://www.theguardian.com/politics/2019/sep/15/eu-officials-reject-boris-johnson-claim-huge-progress-brexit-talks

  3. Harry McGibbs says:

    “About 48,000 members of the United Auto Workers union [USA] went on strike early Monday as contract talks with General Motors broke down.

    “Union members walked out of factories and set up picket lines at 33 plants across the nation as well as 22 parts warehouses. The strike, depending on its length, could easily cost GM hundreds of millions of dollars.”

    https://www.cnbc.com/2019/09/15/uaw-calls-strike-against-general-motors-for-the-first-time-since-financial-crisis.html

    • Rodster says:

      Terrible time to start a strike with auto sales trending down. People are having a tough time affording to buy or lease new vehicles.

      • Robert Firth says:

        Excellent time to start a strike, for GM. Why pay workers to build cars nobody wants to buy? And take those hundreds of millions out of the strikers’ pension fund.

        • Strikers chance of getting the benefits they are striking for would seem to be low.

        • Kowalainen says:

          See, a completely automated car mfg site can simply throttle down as demand slumps. No industrial robot ever went on strike, got lazy or demanded a pay hike.

          Yes, Mazak manufactures CNC machines and other industrial automation equipment. We’re going full circle here with machines building machines, problem free for the owners at the cost of pennies a dime, raw materials and cheap energy.

          Yep, the spoiled wastrel humanoid worker drone is going the way of the dodo. Now I would like to hear something about Henry Ford and shred those “counter” arguments to dust.

          • At one point Musk conceded he went over board with robots on the car assembly plant and scaled it down.. But surely this AI arena evolves in gargantuan pace so at some point it will be likely increased up again..

          • Jan Steinman says:

            No industrial robot ever went on strike, got lazy or demanded a pay hike.

            Not exactly true, as those robots are most likely purchased on credit, so their owner has no make payments on them, whether they are working or not.

  4. reyesun says:

    Wonderful analysis of current global economic conditions and pending (historical) resolution.

  5. philsharris says:

    Gail and all
    A penny’s worth 1h ago British ST this morning September 16th from Kit Juckes of French bank Société Générale re Saudi. Puts it neatly I think:
    “Slower global growth was beginning to act as a drag on oil prices, but the risk premium goes the other way and that in turn is another drag on global growth”
    best Phil H

    • That is an interesting way of putting the problem:

      “Slower global growth was beginning to act as a drag on oil prices, but the risk premium goes the other way and that in turn is another drag on global growth”

      This is a big reason why Robert Rapier’s article about oil prices perhaps ratcheting up to $100 per barrel doesn’t work. The price goes up with risk premium, but then the risk premium acts to pull it back down. So the ratcheting up doesn’t really build on itself.

      • Duncan Idaho says:

        Well, what does removal of 5.5 million barrels do?
        OIL (BRENT) PRICE COMMODITY
        66.37 USD +6.12 (10.16%)
        (Just giving reality a check)

      • Sergey says:

        It’s only 1st day, maybe we’ll see series and it ends up $80+ for brent. Luckily enough this incident happened on Saturday just imagine the panic it could create if it was mid week when markets are open.

        • Duncan Idaho says:

          The 52 week low was 49.93.
          This could move, but 80 might be optimistic.

          • Kowalainen says:

            Could it be a stockholder/org with a long position who financed the attack on the Saudi processing plant?

            Look at it this way: The financier could be any house owner in IC. 100 drones a thousand dollars a pop is almost less than a shitty 35m^2 single room student apartment located in a dusty mid size town in Sweden.

            Spending a couple of million dollars on hobbyist gear is nothing compared to the profits that can be made from “introducing” an artificial scarcity.

            What I am saying is that it could be basically anyone with an axe to grind or profit to make “helping” out the Houthis. So who is long on oil?

            • The key aspect of any “meddling” is to enter the game and support a faction within the power structure and with right timing the pot is yours for few pennies in true pirate/gambling attitude. For example, there was no apparent moral hazard to support former Stalinists who later in the 1960’s started flirting with reforms in the CEE (and when they lost – emigrated they landed on cushy capitalist jobs and pensions), well finally succeeded two decades later, similarly meddling in Asia, S/C America or any other setting.

              In terms of ME this is truly jamming pit of snakes as the Gulfies hate each other, plus the Iranian and Israeli vector, and the underlying US dependence on petrocurrency recycling. And the latest development Chinese plan of sending troops and hundreds of $B into Iran..

              So in this Yemen case there are evidently multiple parties – suspects, too soon to call without further clues and info as msm never plays fair. I’ve not watched it so closely yet, so perhaps you and others figured it out already from available material.

            • Kowalainen says:

              Another theory I entertain is that Ghawar is drying up and the Saudis want to feed their processing plants with Iranian and Yemen crude extracted utilizing their latest reservoir management tech.

              Staging a false flag attack forcing the US to respond by ousting the Iranian regime and putting an end to the Yemen rebellion securing the access to that crude is a possibility.

  6. John Saunders says:

    “China has also been closing coal mines in response to low prices.” Could it also be due to the requirements of the Int. Emmissions Comp. Committee and cost to include systems and devices for the reduction of polutants that was causing health issues in the area.
    Statements:
    “First, increasing debt can be used to build factories (etc).”
    Second, increasing debt levels by governments are often used to hire workers or to raise benefits for the unemployed or the elderly (etc).”
    Third, consumers can afford to buy more of the output of the economy, if their debt levels are increased (etc).”
    These three concusions appear to indicate that the global economy is in a never ending downward spiral. Goverment leaders appear to apease voters with promises they are unable to fulfill without upsetting them, and meeting their demand without increasing taxes or incurring debt to pay benefits as promised. A prime example is currently being played out in France. Rail workers are upset over a hike in the retirement age from 59+. Promisses made at a time when the average person died around 60-65. Averaging 10 years of payout. Now folks are living into their 80s. And revenues/expenses have not increased taking GDP etc into account.

    • You are right about the never-ending promises. When something isn’t working out, new promises are added to the previous promises. For example, a number of pension plans have been having trouble making payouts. This was fixed by offering the pension plans loans with which to make current payouts. This kicks the problem down the road a bit. In the future, the pension plans will still have as much (more, probably) to pay out to retirees, plus it will have its government loan to repay.

      Similarly, I understand that Greece’s debt problems have been “solved” buy simply giving it larger loans, so that if the new loan can be repaid, it will repay the old loans plus interest.

      I am not sure what group you are talking about when you say, “Int. Emmissions Comp. Committee.” China certainly has had a huge problem with particulate emissions. I looked up to see what I could find out about China’s air pollution problem. I found an January 2019 article in Science Daily called, China’s war on particulate air pollution is causing more severe ozone pollution.

      In early 2013, the Chinese government declared a war on air pollution and began instituting stringent policies to regulate the emissions of fine particulate matter, a pollutant known as PM 2.5. Cities restricted the number of cars on the road, coal-fired power plants reduced emissions or were shuttered and replaced with natural gas. Over the course of five years, PM 2.5 concentrations in eastern China have fallen nearly 40 percent.

      The number of air quality monitoring stations across the country has grown to over 1,000, collecting unprecedented amounts of environmental data. Sifting through that data, researchers from the John A. Paulson School of Engineering and Applied Sciences (SEAS) and the Nanjing University of Information Science & Technology (NUIST), found something surprising: While PM 2.5 pollution is falling, harmful ground-level ozone pollution is on the rise, especially in large cities.

      So you are right about China starting a war on particulate air pollution about 2013. They are replacing it with a different kind of air pollution–ozone pollution similar to what Los Angeles has been fighting.

      The thing about energy production however, is, that it doesn’t matter whether the cutback in coal production was intentional or caused by factors outside the economy’s control. The result is the same for the economy. It is extremely negative, either way. When the cutback in coal production was made, a huge number of unprofitable coal plants closed and workers laid off work. All of the laid off workers were a particular problem. I find it hard to believe that China would undertake such a plan without thinking through the headaches it would create. China has imported coal to try to at least partly make up for the shortfall.

      • John Saunders says:

        My bad. That should be:
        The International Network for Environmental Compliance and Enforcement (INECE)

        • I am afraid I still don’t know too much. I looked up a Fact Sheet on the International Network for Environmental Compliance and Enforcement. The organization was founded in 1989. It is an informal network of government and non-government enforcement and compliance practitioners. The funding for the organization comes from:

          The Dutch and US environmental agencies, who founded INECE in 1989, remain key funders, with additional support from the United Nations Environment Programme (UNEP), the World Bank, and the European Commission, as well as governments including UK, Canada, Belgium, Czech Republic..

          If, in the future, countries and world organizations are not doing well financially, this seems like the kind of organization that could expect to lose funding.

    • Xabier says:

      Very true, on the whole there were just a few years of retirement to pay for in the comparatively recent past: in a memoir about village life in England, c 1920’s, the author says (in 1976) that they were so used to men dying in their late 50’s or early 60’s that they didn’t think of it as ‘untimely’ at all, as we would today – that was your lot. Women lasted longer – no doubt when relieved of their husbands……

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

        Exactly, when Germany setup a safety net for “old folks”, the Chancellor was given the age of @65. He was told most would be buried by that age and the payouts would me minimum.
        Germany became the first nation in the world to adopt an old-age social insurance program in 1889, designed by Germany’s Chancellor, Otto von Bismarck. The idea was first put forward, at Bismarck’s behest, in 1881 by Germany’s Emperor, William the First, in a ground-breaking letter to the German Parliament. William wrote: “. . .those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.”
        One persistent myth about the German program is that it adopted age 65 as the standard retirement age because that was Bismarck’s age. This myth is important because Germany was one of the models America looked to in designing its own Social Security plan; and the myth is that America adopted age 65 as the age for retirement benefits because this was the age adopted by Germany when they created their program. In fact, Germany initially set age 70 as the retirement age (and Bismarck himself was 74 at the time) and it was not until 27 years later (in 1916) that the age was lowered to 65. By that time, Bismarck had been dead for 18 years
        https://www.ssa.gov/history/ottob.html

  7. Another crack in the floor, as Macron pivoted to Russia a week or so ago, at the same time his state msm channel France24(EN) ran two ~20min exclusive segments (HK+CAN angle) on the story. Folks, that’s not coincidence, they mean it, so the fragmentation of the legacy unilateral world order continues..

    Obviously, it’s very very late to jump the ship, but extra few years of larger% share of global energy traded in EUR would help prop up the Europeans slightly. Perhaps they also got boost in acting more boldly when China announced ~.5T investments into Iran energy sector & infrastructure making the US sanction regime a joke, hoping to get some scraps from the table (deals) there and elsewhere as well.

    So, there will be either a war soon in the region or more likely (giving the domestic situation of approaching election) just another loss and egg on the face.

  8. Chrome Mags says:

    https://oilprice.com/

    I suppose everyone has seen the $8+ oil price increase this AM in response to oil infrastructure drone attack on Saudi’s?

    • Duncan Idaho says:

      OIL (BRENT) PRICE COMMODITY
      68.02 USD 7.77 +(12.90%)
      Yep, about 8.
      We will see if it can be spun to a lower price tomorrow.
      Inquiring minds will be watching——-

      • Chrome Mags says:

        It probably will gradually drop back down as it already has some today. It is now a race between drone damage frequency and extent of damage vs. how fast repairs can be made, with the knock on effect of oil price fluctuation. But too much damage for too long and oil price will stress an already slowing global economy.

  9. Yoshua says:

    The financial markets hit the panic button on the Saudi attacks. The black swan event?

    https://pbs.twimg.com/media/EEnPjvlXYAYoQyy?format=png&name=900×900

    • I think that this is related to the spiking repo rate that CTG wrote about in a little bit earlier comment. The New York Federal Reserve has added $53 billion dollars into the banking systems via repurchase agreements after the benchmark fed-funds rate moved outside its target range.

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