Expect low oil prices in 2020; tendency toward recession

Energy Forecast for 2020

Overall, I expect that oil and other commodity prices will remain low in 2020. These low oil prices will adversely affect oil production and several other parts of the economy. As a result, a strong tendency toward recession can be expected. The extent of recessionary influences will vary from country to country. Financial factors, not discussed in these forecasts, are likely also to play a role.

The following are pieces of my energy forecast for 2020:

[1] Oil prices can be expected to remain generally low in 2020. There may be an occasional spike to $80 or $90 per barrel, but average prices in 2020 are likely to be at or below the 2019 level. 

Figure 1. Average annual inflation-adjusted Brent equivalent oil prices in 2018 US$. 2018 and prior are as shown in BP’s 2019 Statistical Review of World Energy. Value for 2019 estimated by author based on EIA Brent daily oil prices and 2% expected inflation.

Figure 2 shows in more detail how peaks in oil prices have been falling since 2008. While it doesn’t include early January 2020 oil prices, even these prices would be below the dotted line.

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

Oil prices can temporarily spike because of inadequate supply or fear of war. However, to keep oil prices up, there needs to be an increase in “demand” for finished goods and services made with commodities. Workers need to be able to afford to purchase more goods such as new homes, cars, and cell phones. Governments need to be able to afford to purchase new goods such as paved roads and school buildings.

At this point, the world economy is struggling with a lack of affordability in finished goods and services. This lack of affordability is what causes oil and other commodity prices to tend to fall, rather than to rise. Lack of affordability comes when too many would-be buyers have low wages or no income at all. Wage disparity tends to rise with globalization. It also tends to rise with increased specialization. A few highly trained workers earn high wages, but many others are left with low wages or no job at all.

It is the fact that we do not have a way of making the affordability of finished goods rise that leads me to believe that oil prices will remain low. Raising minimum wages tends to encourage more mechanization of processes and thus tends to lower total employment. Interest rates cannot be brought much lower, nor can the terms of loans be extended much longer. If such changes were available, they would enhance affordability and thus help prevent low commodity prices and recession.

[2] World oil production seems likely to fall by 1% or more in 2020 because of low oil prices.

Quarterly oil production data of the US Energy Information Administration shows the following pattern:

Figure 3. Quarterly World Crude Oil and Natural Gas Liquids production, based on EIA international data through September 2019. This is a fairly broad definition of oil. It does not include biofuels because their production tends to be seasonal.

The highest single quarter of world oil production was the fourth quarter of 2018. Oil production has been falling since this peak quarter.

To examine what is happening, the production shown in Figure 3 can be divided into that by the United States, OPEC, and “All Other.”

Figure 4. Quarterly world crude oil and natural gas liquids production by part of the world, based on international data of the US Energy Information Agency through September 30, 2019.

Figure 4 shows that the production of All Other seems to be steady to slightly rising, more or less regardless of oil prices.

OPEC’s oil production bobs up and down. In general, its production is lower when oil prices are low, and higher when oil prices are high. (This shouldn’t be a surprise.) Recently, its production has been lower in response to low prices. Effective January 1, 2020, OPEC plans to reduce its production by another 500,000 barrels per day.

Figure 4 shows that oil production of the United States rose in response to high prices in the 2010 to 2013 period. It dipped in response to low oil prices in 2015 and 2016. When oil prices rose in 2017 and 2018, its production again rose. Production in 2019 seems to have risen less rapidly. Recent monthly and weekly EIA data confirm the flatter US oil production growth pattern in 2019.

Putting the pieces together, I estimate that world oil production (including natural gas liquids) for 2019 will be about 0.5% lower than that of 2018. Since world population is rising by about 1.1% per year, per capita oil production is falling faster, about 1.6% per year.

A self-organizing networked economy seems to distribute oil shortages through lack of affordability. Thus, for example, they might be expected to affect the economy through lower auto sales and through less international trade related to automobile production. International trade, of course, requires the use of oil, since ships and airplanes use oil products for fuel.

If prices stay low in 2020, both the oil production of the United States and OPEC will likely be adversely affected, bringing 2020 oil production down even further. I would expect that even without a major recession, world oil supply might be expected to fall by 1% in 2020, relative to 2019. If a major recession occurs, oil prices could fall further (perhaps to $30 per barrel), and oil production would likely fall lower. Laid off workers don’t need to drive to work!

[3] In theory, the 2019 and 2020 decreases in world oil production might be the beginning of “world peak oil.” 

If oil prices cannot be brought back up again after 2020, world oil production is likely to drop precipitously. Even the “All Other” group in Figure 4 would be likely to reduce their production, if there is no chance of making a profit.

The big question is whether the affordability of finished goods and services can be raised in the future. Such an increase would tend to raise the price of all commodities, including oil.

[4] The implosion of the recycling business is part of what is causing today’s low oil prices. The effects of the recycling implosion can be expected to continue into 2020.

With the rise in oil prices in the 2002-2008 period, there came the opportunity for a new growth industry: recycling. Unfortunately, as oil prices started to fall from their lofty heights, the business model behind recycling started to make less and less sense. Effective January 1, 2018, China stopped nearly all of its paper and plastic recycling. Other Asian nations, including India, have been following suit.

When recycling efforts were reduced, many people working in the recycling industry lost their jobs. By coincidence or not, auto purchases in China began to fall at exactly the same time as recycling stopped. Of course, when fewer automobiles are sold, demand for oil to make and operate automobiles tends to fall. This has been part of what is pushing world oil prices down.

Sending materials to Asia for recycling made economic sense when oil prices were high. Once prices dropped, China was faced with dismantling a fairly large, no longer economic, industry. Other countries have followed suit, and their automobile sales have also fallen.

Companies operating ships that transport manufactured goods to high income countries were adversely affected by the loss of recycling. When material for recycling was available, it could be used to fill otherwise-empty containers returning from high income countries. Fees for transporting materials to be recycled indirectly made the cost of shipping goods manufactured in China and India a little lower than they otherwise would be, if containers needed to be shipped back empty. All of these effects have helped reduce demand for oil. Indirectly, these effects tend to reduce oil prices.

The recycling industry has not yet shrunk back to the size that the economics would suggest is needed if oil prices remain low. There may be a few kinds of recycling that work (well sorted materials, recycled near where the materials have been gathered, for example), but it probably does not make sense to send separate trucks through neighborhoods to pick up poorly sorted materials. Some materials may better be burned or placed in landfills.

We are not yet through winding down the recycling effort. Even the recycling of materials such as aluminum cans is affected by oil prices. A March, 2019, WSJ article talks about a “glut of used cans” because some markets now prefer to use newly produced aluminum.

[5] The growth of the electric car industry can be expected to slow substantially in 2020, as it becomes increasingly apparent that oil prices are likely to stay low for a long period. 

Electric cars are expensive in two ways:

  1. In building the cars initially, and
  2. In building and maintaining all of the charging stations required if more than a few elite workers with charging facilities in their garages are to use the vehicles.

Once it is clear that oil prices cannot rise indefinitely, the need for all of the extra costs of electric vehicles becomes very iffy. In light of the changing view of the economics of the situation, China has discontinued its electric vehicle (EV) subsidies, as of January 1, 2020. Prior to the change, China was the world’s largest seller of electric vehicles. Year over year EV sales in China dropped by 45.6% in October 2019 and 45.7% in November 2019. The big drop in China’s EV sales has had a follow-on effect of sharply lower lithium prices.

In the US, Tesla has recently been the largest seller of EVs. The subsidy for the Tesla is disappearing in 2020 because it has sold over 200,000 vehicles. This is likely to adversely affect the growth of EV sales in the US in 2020.

The area of the world that seems to have a significant chance of a major uptick in EV sales in 2020 is Europe. This increase is possible because governments there are still giving sizable subsidies to buyers of such cars. If, in future years, these subsidies become too great a burden for European governments, EV sales are likely to lag there as well.

[6] Oceangoing ships are required to use fuels that cause less pollution as of January 2020. This change will have a positive environmental impact, but it will lead to additional costs which are impossible to pass on to buyers of shipping services. The net impact will be to push the world economy in the direction of recession.

If oceangoing ships use less polluting fuels, this will raise costs somewhere along the line. In the simplest cases, oceangoing vessels will purchase diesel fuel rather than lower, more polluting, grades of fuel. Refineries will need to charge more for the diesel fuel, if they are to cover the cost of removing sulfur and other pollutants.

The “catch” is that the buyers of finished goods and services cannot really afford more expensive finished goods. They cut back in their demand for automobiles, homes, cell phones and paved roads if oil prices rise. This reduction in demand is what pushes commodity prices, including oil prices, down.

Evidence that ship owners cannot really pass the higher refining costs along comes from the fact that the prices that shippers are able to charge for shipping seems to be falling, rather than rising. One January article says, “The Baltic Exchange’s main sea freight index touched its lowest level in eight months on Friday, weighed down by weak demand across all segments. . .The Index posted its biggest one day percentage drop since January 2014, in the previous session.”

So higher costs for shippers have been greeted by lower prices for the cost of shipping. It will partly be ship owners who suffer from the lower sales margin. They will operate fewer ships and lay off workers. But part of the problem will be passed on to the rest of the economy, pushing it toward recession and lower oil prices.

[7] Expect increasingly warlike behavior by governments in 2020, for the primary purpose of increasing oil prices.

Oil producers around the world need higher prices than recently have been available. This is why the US seems to be tapering its growth in shale oil production. Middle Eastern countries need higher oil prices in order to be able to collect enough taxes on oil revenue to provide jobs and to subsidize food purchases for citizens.

With the US, as well as Middle Eastern countries, wanting higher oil prices, it is no wonder that warlike behavior takes place. If, somehow, a country can get control of more oil, that is simply an added benefit.

[8] The year 2020 is likely to bring transmission line concerns to the wind and solar industries. In some areas, this will lead to cutbacks in added wind and solar.

A recent industry news item was titled Renewables ‘hit a wall’ in saturated Upper Midwest grid. Most of the material that is published regarding the cost of wind and solar omits the cost of new transmission lines to support wind and solar. In some cases, additional transmission lines are not really required for the first additions of wind and solar generation; it is only when more wind and solar are added that it becomes a problem. The linked article talks about projects being withdrawn until new transmission lines can be added in an area that includes Minnesota, Iowa, parts of the Dakotas and western Wisconsin. Adding transmission lines may take several years.

A related issue that has come up recently is the awareness that, at least in dry areas, transmission lines cause fires. Getting permission to site new transmission lines has been a longstanding problem. When the problem of fires is added to the list of concerns, delays in getting the approval of new transmission lines are likely to be longer, and the cost of new transmission lines is likely to rise higher.

The overlooked transmission line issue, once it is understood, is likely to reduce the interest in replacing other generation with wind and solar.

[9] Countries that are exporters of crude oil are likely to find themselves in increasingly dire financial straits in 2020, as oil prices stay low for longer. Rebellions may arise. Governments may even be overthrown.

Oil exporters often obtain the vast majority of their revenue from the taxation of receipts related to oil exports. If prices stay low in 2020, exporters will find their tax revenues inadequate to maintain current programs for the welfare of their people, such as programs providing jobs and food subsidies. Some of this lost revenue may be offset by increased borrowing. In many cases, programs will need to be cut back. Needless to say, cutbacks are likely to lead to unhappiness and rebellions by citizens.

The problem of rebellions and overthrown governments also can be expected to occur when exporters of other commodities find their prices too low. An example is Chile, an exporter of copper and lithium. Both of these products have recently suffered from low export prices. These low prices no doubt play a major part in the protests taking place in Chile. If more tax revenue from the sales of exports were available, there would be no difficulty in satisfying protesters’ demands related to poverty, inequality, and an overly high cost of living.

We can expect more of these kinds of rebellions and uprisings, the longer oil and other commodity prices stay too low for commodity producers.

Conclusion

I have not tried to tell the whole economic story for 2020; even the energy portion is concerning. A networked self-organizing system, such as the world economy, operates in ways that are far different from what simple “common sense” would suggest. Things that seem to be wonderful in the eyes of consumers, such as low oil prices and low commodity prices, may have dark sides that are recessionary in nature. Producers need high prices to produce commodities, but these high commodity prices lead to finished goods and services that are too expensive for many consumers to afford.

There probably cannot be a “one-size-fits-all” forecast for the world economy. Some parts of the world will likely fare better than others. It is possible that a collapse of one or more parts of the world economy will allow other parts to continue. Such a situation occurred in 1991, when the central government of the Soviet Union collapsed after an extended period of low oil prices.

It is easy to think that the future is entirely bleak, but we cannot entirely understand the workings of a self-organizing networked economy. The economy tends to have more redundancy than we would expect. Furthermore, things that seem to be terrible often do not turn out as badly as expected. Things that seem to be wonderful often do not turn out as favorably as expected. Thus, we really don’t know what the future holds. We need to keep watching the signs and adjust our views as more information unfolds.

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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1,162 Responses to Expect low oil prices in 2020; tendency toward recession

  1. Herbie R Ficklestein says:

    ‘Who the hell cares about the budget?’: Trump tears into critics of mounting federal spending and debt under his watch
    https://markets.businessinsider.com/news/stocks/trump-responds-critics-rising-federal-spending-debt-deficit-presidency-fundraiser-2020-1-1028833452
    Trump tore into critics of rising government spending and mounting debt under his watch, The Washington Post reported.
    “Who the hell cares about the budget? We’re going to have a country,” Trump reportedly said at a Friday fundraiser at his Mar-a-Lago estate.
    The comments offer a remarkable window into Trump’s approach to federal spending as the debt and deficits have increased every year he’s been in office.
    Republican calls to rein in federal spending and curb the deficits have largely died down
    Trump campaigned in 2016 on eliminating the federal debt in eight years and reining in the deficit, a key concern of Republicans throughout President Obama’s two terms in office. They often accused Democrats of being excessive spenders, which racked up the deficit.
    The 2017 tax cuts blew up the federal deficit, which neared $1 trillion in fiscal year 2019 – a 26% jump from the year before as it steadily increased every year in office.
    The Tax Cuts and Jobs Act will cost $1.9 trillion over the next decade, according to the Congressional Budget Office. Trump also signed a $1.4 trillion budget in December that boosted defense spending.
    The Committee for a Responsible Federal Budget, a nonpartisan budget watchdog, estimated earlier this month that Trump’s spending priorities will pile an additional $4.7 trillion onto the debt through 2029.

    It’s so in your face that spending and deficit spending is beyond out of control and will spiral out of control, why pretend to act like it’s a concern?
    We all know here where this eventually lead to….

    • Perhaps all of the spending will help keep the economy from crashing.

      • Herbie R Ficklestein says:

        For the last few decades it has worked, until it doesn’t…..
        Once Humpty Dumpty falls and is broken, good luck putting it all back in a functional
        Piece of an Economy.
        A foundation of our transactions is based on Trust and a reasonable explanation of the future. When that evaporators, just like this video posted February 2008….

        The fact is we have gone too far this road only to see it to the bitter end….

        • Chrome Mags says:

          “For the last few decades it has worked, until it doesn’t…..
          Once Humpty Dumpty falls and is broken, good luck putting it all back in a functional”

          True enough, Herbie, and the argument rising debt hasn’t been a problem so far won’t mean much once we’re all looking in dismay at Humpty Dumpty’s egg shell pieces.

      • Yes, ~ $5T per decade is really nothing these days..
        Obviously there are other debt chapters at play (corp, bank-fin, private, ..) so it’s more than the quoted figure in the end.. nevertheless we might have simply slipped into different time epoch, so “debts don’t matter” especially when supported openly as official policy. Imagine a socialist – populist coming into the office, the same outcome only spent on different priorities.

        He who is going to challenge this trend? The Chinese? Nope they keep dreaming about leapfrogging in the future hence head down and workaholic program continues. Europe, Japan and S Korea are aging and falling into irrelevance. And the emerging have no real (truly global) power or are being triaged out of the IC nexus..

        So, this could take a lot of additional time to unravel.
        And actually we can’t forget about the “low probability” case the Muskovian-Bezosian “abductees” eventually came about with decent energy storage formula,for their humanoid subjects and the grand finale doom will be postponed by decades or centuries.

        • Herbie R Ficklestein says:

          If we placed a reasonable rate of interest on that accumulated debt, don’t think it would be nothing, now a days! What till the chickens come home to roost. There ain’t no free lunch, regardless of the what we wish for in make believe fiscal policy land of the Federal Reserve.
          You can only “make believe” for so long, and then reality strikes out of no
          where…version of a Zen saying…
          Life Strikes at any time….

          • Robert Firth says:

            “You can avoid reality, but you cannot avoid the consequences of avoiding reality.” (Ayn Rand)

      • That is supposed to be the general idea.

    • Dennis L. says:

      Herbie,
      “We all know here where this eventually lead to…”
      The problem is we don’t, it truly is different this time, there are resource constraints and yet there are strange visuals of Navy fighter jets chasing impossible objects and then claims of need to classify the high definition data.

      Combinatorial matricies have some tantalizing hints of things unknown, the problem is the amount of math needed to even read about them intelligently.

      Earlier I sited a video about the information enigma, Herbie, we don’t know it all, life is emergent, but we don’t really understand why. Looking back it has puzzled minds far greater than ours, Einstein did not like the big bang and some physicists changing his cosmological constant so the bang could exits, he engineered the math so it did not.

      Much of the universe is missing, we can’t find it, something greater than 80% I think from memory, needs to be referenced. Where is it? What does it do?

      This game isn’t over and if it is, what does it matter? Better to assume a tomorrow and do one’s best to accept change. Some of the ability to do this seems to come from mind types, open minds and that is said in a non pejorative manner. That said, being open minded does not make differences comfortable, but it does help us try and understand them.

      Dennis L.

      • Herbie R Ficklestein says:

        The ONLY reason why we are doing this insanity, is because we can get away with it!
        MY GOD, WHAT HAVE I DONE?

        Unlike other nations in the world that do not have such a luxury to live 3 times beyond their means….Of course, having a big military machine helps to keep everyone cooperative.
        Not much better than a tribe of baboons..

        No, doubt we can😜

  2. Denial says:

    Wait! what??? I have to question your stance above …..yes spending needs to keep going but wasting it on military is just plain dumb at this point…..spending on infrastructure while we still can would be much wiser……I do wonder sometimes if you are not favoring one party over the other???? Not funded by Russia are you?

    • Dennis L. says:

      Denial,
      It is all waste, it is the rate that is relative, it can be slow and perhaps this is what caused the Great Depression and WWII stopped it due to increased rate of waste. A steel plant can “waste” iron ore much more quickly that a simple iron works of the 18th century.

      Oil is subject to competition:
      “Natural gas reservoirs were buried shallowly and always associated with or close to heavy oil which was subjected to serious biodegradation, with occurrence of 25-norhopane. All above indicate that the natural gas in Santai area is typical oil degraded gas by bacteria. Biodegradation was a process of water-hydrocarbon reaction which was affected by the bacteria and thermodynamics.
      https://www.sciencedirect.com/science/article/pii/S1876380415300392

      If humans don’t use oil bacteria will albeit much more slowly which is perhaps a reason why they are bacteria. Don’t have a clue, but is is a nice sound bite.

      The paradox of life is everything including earth, sun turn to waste. The expanding universe is a conundrum, it is going the wrong way which is always sort of distressing when brought up to enquiring minds such as ourselves.

      Dennis L.

      • Whenever there is an oil spill or natural seepage of oil from beneath the sea, eventually it is eaten up by oil eating bacteria.

        I see that Amazon sells a product for $15.00 a pound that bio-remediates and removes any hydrocarbon-based stain. They advertise it for use on concrete, asphalt, porous stone, driveways, streets, garages, and parking lots.

        Pull-It-Out by Chomp seems to be another similar product.

    • It is hard to know what to spend money on.

      In a way, the US spending money on military is not as dumb as it sounds. One function of US military spending is to keep the dollar as reserve currency, so the US can perpetually do deficit spending. Military spending also likely helps keep the US dollar high relative to other currencies, allowing the US to buy commodities more cheaply than other countries.

      Money going to the military helps keep up demand for fossil fuels in a couple of ways:
      (1) The military is a big spender on fossil fuels.
      (2) The wages distributed to young people will disproportionately be spent on commodities.

      At least some of the young people who go into the military get training that they can use after they finish. Unlike many other young people, they are able to get this training without going into debt, so they are in better positions to get married and start families, when they get out. As long as wars are not fought on US territory, damage to US property is minimal.

      What we need most with respect to infrastructure is repairs to existing bridges, roads, long distance transmission lines, pipelines, and railroad tracks. Such repairs help prevent going in reverse, but don’t do much going forward. It is hard to justify much debt for this. I can’t imagine that people would be willing to spend much on infrastructure maintenance and repair.

      Adding long-distance transmission for wind and solar would be favored by some. The catch is that with our pricing system, adding the wind and solar is very detrimental to other types of electricity generation. Also, the new generation will need to be maintained properly in the future, or it is likely to cause fires, too. Wind and solar need lots of batteries as well, if they are really to be useful. Adding everything they need makes them terribly expensive as an electricity type.

    • cashisking says:

      Well Tulsi isnt funded by Russia but that 50 million defamation $ from Hillary should fund her pretty good. Trump should sue that drama queen schiff next.
      And the crowd goes wild!

    • Duncan Idaho says:

      US industrial production has fallen from 5.4% growth in September 2018 to minus-1.01% in December. “Production has been negative for the last four months.”

      • It looks like the US’s industrial production growth was very low in the 2015-2016 era as well. In fact, industrial production growth seems to have been as low as -4% in early 2016. This was when oil prices were very low, in fact, much lower than now. Somehow we got through this earlier period. China added more stimulus, for example.

        Let’s cross our fingers that we can do as well now.

  3. Chrome Mags says:

    https://www.marketwatch.com/story/the-federal-reserve-is-stuck-in-quantitative-easing-hell-2020-01-16

    ‘Opinion: The Federal Reserve is stuck in quantitative-easing hell’

    “Imagine doing the same thing over and over again, with little progress and no relief. Sounds like most people’s vision of hell — or the Federal Reserve’s current predicament.

    “Booth thinks we’re on the cusp of QE4, or may already be there.”

    “We’ve surpassed the $400 billion mark,” she said in a phone interview. “They call it ‘not QE’ because it’s maturities of 12 months or less and therefore presupposed to roll over within 12 months.”

    “We’ve just had commercial and industrial lending turn negative on a year-over year basis,” she told me. “Not only have banks become less willing to extend the commercial and industrial loans, there has also been less demand for them.”

    “That’s why I think if there are any signs of economic weakness by spring — particularly in manufacturing and the industrial economy — the Fed will find a way to keep the bond buying going, while calling it anything but QE.”

    “We have certainly started to see some signs of slowing, and I think Jay Powell is trapped,” said Booth. “The Fed is trying to keep a bucket filled with holes, full.”

    “Welcome to QE — or not QE — hell.”

    • Harry McGibbs says:

      “It is usually overlooked that QE has also led the central banks into an industrial role that is normally restricted to governments (except the Fed, which works hand in hand with the US Treasury in this regard).

      “For instance, while over 80% of the ECB scheme buys government and other public sector bonds, a huge chunk still goes into corporate bonds and other assets…

      “…central banks are now in the business of picking winners and losers in the corporate world. They’re likely to be embroiled in this for a long time: even if they did abandon QE, they are buying assets with lifespans of over 30 years in some cases. As the Bank of Italy has admitted, the possibility of some of these companies going insolvent creates financial risks for the whole eurozone system.”

      https://reaction.life/quantitative-easing-now-looks-permanent-and-has-turned-central-banks-into-pseudo-governments/

      • Harry McGibbs says:

        “The tools these central banks have relied on for years aren’t working. Inflation is stubbornly below their targets, and economic growth is sluggish.”

        https://www.marketplace.org/2020/01/23/central-banks-are-searching-for-new-tools/

        • Ordinary workers need to be getting wealthier to keep economic growth happening. Technology needs to be making goods and service relatively cheaper, compared to incomes. This is not happening sufficiently, around the world.

          • Sven Røgeberg says:

            The Economist summarizes the discussion on technological change
            https://www.economist.com/finance-and-economics/2020/01/16/economists-explore-the-consequences-of-steering-technological-progress?cid1=cust/dailypicks1/n/bl/n/20200122n/owned/n/n/dailypicks1/n/n/E/385692/n

            Since 2000, published work on directed technical change has focused largely on environmental challenges. Path dependence means that research on fossil-fuel technologies can often be more fertile than research on cleaner alternatives. There are more experts in the relevant disciplines, better-funded research labs and an established complementary economic infrastructure. Efficient decarbonisation might thus require subsidies for clean-energy research, as well as a carbon price. Indeed, efforts to slow global warming represent a massive attempt to realise one technological future—a zero-carbon version—rather than another.

            • I think that this is basically a bunch on nonsense. Financial outcomes show which direction technological change will take place. All of the push toward zero-carbon choices are basically a push toward inefficiency. As oil and gas prices drop, the benefit of saving energy becomes less and less.

              The world economy cannot tolerate a trend toward inefficiency, no matter how well-intentioned such a change is. As entropy grows, we can try to spend our efforts on fighting entropy, but it doesn’t help individual citizens looking for food, clothing, homes and transportation for their families.

            • Sven Røgeberg says:

              Thanks for your answer, Gail. It is consistent with what you have expressed in many different ways for many of us who are not used to seeing the economy through the lenses of physics.
              « Financial outcomes show which direction technological change will take place». Does this mean that we should just follow the money to see where the technological changes are happening? I would guess that much of this so called development – 5G and the Internet of Things – will be part of what you call a push towards inefficiency i.e.it makes ordinary workers playing more for basic energyservices?

            • 5-G is a push toward inefficiency. The higher cost will burden poor consumers especially. It will mean that they have less funds left to spend on transportation, housing, and food.

              It is not even clear that the end product delivered will be significantly better for many types of internet usage.

      • Time for a victory lap dance.
        My analysis vindicated, lolz.

        ps now for the less funny news, expect more authoritarian stuff coming our way..

      • According to the pseudo-government article, “As at September 2017, the sectors they came from [in ECB holdings] included utilities (16%), infrastructure (12%), automotive (10%) and energy (7%).”

        I can see any of these sectors running into difficulty. Automotive is clearly doing poorly. If infrastructure is transmissions line or roads, I can imagine its funding doing poorly. Prices for energy tend to be too low. I don’t know whether utilities have “cost plus” pricing structure in the EU. If they don’t they could run into difficulty.

  4. Herbie R Ficklestein says:

    President Trump said in a Wall Street Journal interview Tuesday that the White House plans to unveil a new tax-cut proposal in 90 days.
    “We’re talking a fairly substantial … middle-class tax cut that’ll be subject to taking back the House and obviously keeping the Senate and keeping the White House,” the president said. Trump declined to provide specifics about the plan.
    The White House has been saying for several months that they plan to release a proposal for a middle-class tax cut as Trump runs for reelection. The exact contents of the package are still being discussed.
    https://thehill.com/policy/finance/479196-trump-says-new-tax-cut-plan-to-be-unveiled-in-90-days

    MORE TAX CUTS….MORE DEBT….MORE INTEREST RATE CUTS

    MORE, MORE, MORE…the cry of a mistaken soul…
    More! is the cry of a mistaken soul, less than All cannot satisfy Man. VI If any could desire what he is incapable of possessing, despair must be his eternal lot..
    William Blake

  5. Curt Kurschus says:

    Combining the news reports presented by the very esteemed Harry McGibbs with news reports and data from other sources, one gets the picture of a global economy which may already be in recession. Declining commodity prices (of particular concern being oil and copper) together with declining shipping rates, at the same time as costs are increasing. Global manufacturing declining – especially cars – as well as some service sectors – with tourism coming to mind there. Interest rates at historic lows, bankruptcies on the increase.

    Perhaps the corona virus can be useful for governments and economists as an excuse when presenting and reviewing poor economic data later on in the year. For anybody who has a serious look at the data and trends, however, the global economy has been in trouble for some time before the virus came along, just as it has been for some time before President Trump took office.

    • Harry McGibbs says:

      Bless you for the esteem, Curt Kurschus. This survey of economists points to a 2020 much like 2019 with anaemic growth and crazily ebullient markets. We shall see!

      “A significant global upturn will remain elusive this year as many economies still face an array of daunting risks…

      “The global economy in 2019 may have been near its weakest since the financial crisis thanks to trade protectionism and political uncertainty, but world stocks had a blowout year with several indexes repeatedly setting record highs.

      “With easy policy from central banks set to continue, that split between markets and events on the ground may extend into this year, according to surveys of over 500 economists covering 46 major economies conducted Jan. 10-22.”

      https://www.reuters.com/article/us-global-economy-poll/global-economy-snapback-to-prove-elusive-despite-market-joy-reuters-polls-idUSKBN1ZN00H

    • Chrome Mags says:

      “…gets the picture of a global economy which may already be in recession.”

      I wonder though after the level of financial fear wrought by the 08 debacle, if countries will admit to being in a recession or not. Maybe many already are but instead publish bogus numbers to hoodwink the populace into borrowing just a few bucks more to keep the good ship lollypop floating a tad longer. My writing’s getting very creative. Maybe it’s time for me to go to sleep…zzzzzzzzzzzzzzzzzzzz

    • The virus may push the economy in the direction it is already headed.

      Epidemics are often part of collapses. It is the old/weak they particularly target. After they hit, the economy is able to rebound, because the “resources per capita” ratio is better. I don’t think a 3% drop in population, even worldwide, would be enough, though.

      • Robert Firth says:

        Gail, I respectfully point out an exception. The Black Death killed about 30% of the population of Western Europe. The consequence was a labour shortage, and a resource surplus, that helped create a century of growth in living standards. Indeed, some historians have cited it as an important factor in the subsequent Renaissance.

        Collapse is associated with too many people and too few resources. If the latter cannot be increased, perhaps a decrease in the former is a positive development (for the survivors, of course).

        • I think we are saying the same thing. There is a collapse and a rebound that follows. The collapse often is (partly) caused by an epidemic. The fact that the immune systems of much of the population were in poor shape due to ever-poorer nutrition as the wages of common laborers sank lower and lower no doubt played a major role in allowing the epidemic to spread as it did.

          A rebound was possible because a sizable share of the population was killed off by the epidemic. Resources per capita suddenly rose. Wages rose as labor shortages appeared. This is exactly what a person expects.

          What I said in the above comment was that I didn’t think a 3% reduction in population would be big enough to fix our overshoot population problem. Some of the past epidemics killed 30% or more of local populations.

          • Robert Firth says:

            Thank you Gail. On rereading your post, it is clear you were right. Please consider my response an amplification rather than a rebuttal.

  6. Yoshua says:

    People are just dropping dead to the ground in China.

    The Corona virus is killing 3% of the infected in China. If every one in China gets inflected, then 45 million will die.

    • Davidinamonthorayearoradecade says:

      if every one in the world gets infected, then 230 million will die…

      fun with numbers…

  7. The Magus says:

    Details of those who have died after contracting the virus, which now includes someone as young as 36 years old, showed that several didn’t have a fever, potentially complicating global efforts to check for infected travelers as they arrive at airports and other travel hubs.

    https://www.bloomberg.com/news/articles/2020-01-23/china-expands-travel-limits-who-says-virus-remains-local-crisis?srnd=premium-asia

    Doctors once had little choice but to be fatalistic about deaths from pneumonia. Sir William Osler, sometimes called the father of modern medicine, famously called it “friend of the aged” (often rendered as “the old man’s friend”) because it was seen as a swift, relatively painless way to die

    Might the PTB, seeing collapse is now imminent, be introducing this virus for the purpose of killing all humans and saving them from the starvation and violence and other horrific ways we will all die when the economy ceases to function?

    If so, then this is brilliant.

    • Chrome Mags says:

      “Might the PTB, seeing collapse is now imminent, be introducing this virus for the purpose of killing all humans…”

      Or on a religious angle, it could be divine intervention now it’s pretty obvious greed is more important than any other consideration even with dire warnings on numerous issues. Maybe it is time to pull the plug. In the movie ‘Dark City’, the aliens decide their experiment is done, so they give the command to “Shut it down.”

      • We don’t really have the resources to provide the pensions promised to the huge number of people expecting them. If the virus really does target older adults and younger people in poor health, it could have a favorable worldwide benefit, in some sense.

        Of course, shutting down a large share of travel to China and disrupting businesses by a ban on travel to Wuhan and surrounding areas could have a very negative impact. A lot depends on how the virus spreads in the next few weeks. If we are dealing with shutdowns in travel and businesses on a widespread basis, the virus by itself could push the world into recession.

    • Yoshua says:

      China has an ageing population after the one child policy. This is probably the best way to cut down expenses on pensions.

      The Wuhan virus seems to have “escaped” from a lab.

    • Xabier says:

      I almost pegged it from pneumonia in 2013: I have to concur, it feels much less unpleasant than a bad ‘flu.

      That’s the danger, you don’t feel all that bad – I thought it was a chill (it was a nasty Spring here) that I could fight off – and then suddenly you are in crisis…….

      Of all the ways to go, I’d settle for pneumonia as a relatively benign option.

      • TIm Groves says:

        I was floored by a norovirus around the same time. I caught it from my dog, who caught it on a visit to the vet’s. A very interesting experience although I wouldn’t care to repeat it. No energy, 36 hours spent laying on the floor within crawling distance of the loo, complete and involuntary evacuation of the alimentary canal, thirst for water followed soon drinking after by overpowering desire to vomit. But absolutely no headache or fever that I can remember.

    • Bad Panda timing, they had to die out just at the moment PV panels and batteries finally got near the price-performance sweet-spot.
      /sarc off

  8. Harry McGibbs says:

    “Corporate America is awash in junk debt, and the situation could deteriorate substantially…

    Moody’s Investors Service warned Thursday that default risk is on the rise for the nearly $1.2 trillion of speculative-grade loans, bonds and various related instruments maturing from 2020-24.

    “While low interest rates have allowed spec-rated companies to continue to roll over all that paper, a slowdown in the economy or a reversal in Federal Reserve monetary policy could pose problems.”

    https://www.cnbc.com/2020/01/23/junk-debt-hits-new-record-posing-elevated-default-risks-moodys-says.html

  9. Yoshua says:

    “China built a lab to study SARS and Ebola in Wuhan – and US biosafety experts warned in 2017 that a virus could ‘escape’ the facility”

    WHO estimated that SARS had a 15% mortality rate.

  10. Yoshua says:

    …and a 50% mortality rate among people over the age of 60…

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