Fossil Fuel Production Is Reaching Limits in a Strange Way

Strangely enough, the limit we seem to be reaching with respect to fossil fuel extraction comes from low prices. At low prices, the extraction of oil, coal, and natural gas becomes unprofitable. Producers go bankrupt, or they voluntarily cut back production in an attempt to force prices higher. As the result of these forces, production tends to fall. This limit comes long before the limit that many people imagine: the amount of fossil fuels in the ground that seems to be available with current extraction techniques.

The last time there was a similar problem was back in 1913, when coal was the predominant fossil fuel used and the United Kingdom was the largest coal producer in the world. The cost of production was rising due to depletion, but coal prices would not rise sufficiently to cover the higher cost of production. As a result, the United Kingdom’s coal production reached its highest level in 1913, the year before World War I started, and began to fall in 1914.

Between 1913 and 1945, the world economy was very troubled. There were two world wars, the Spanish Flu pandemic and the Great Depression. My concern is that we are again headed into another very troubled period that could last for many years.

The way the energy problems of the period between 1913 and 1945 were resolved was through the rapid ramp-up of oil production. Oil was, as that time, inexpensive to produce and could be sold for a very large multiple of the cost of production. If population is to remain at the current level or possibly grow, we need a similar “energy savior.” Unfortunately, none of the alternatives we are looking at now yield a high enough return relative to the required investment.

I recently gave a talk to an engineering group interested in energy research talking about these issues. In this post, I will discuss the slides of this presentation. A PDF of the presentation can be found at this link.

The Low Oil Price Problem

Oil prices seem to bounce around wildly. One major issue is that there is a two-way tug of war between the prices that citizens can afford and the prices that oil companies require. We can look back now and say that the mid-2008 price of over $150 per barrel was too high for consumers. But strangely enough, oil producers began complaining about oil prices being too low to cover their rising cost levels, starting in 2012. Prices, at a 2019 cost level, were at about $120 per barrel at that time. I wrote about this issue in the post, Beginning of the End? Oil Companies Cut Back on Spending. Oil prices now are in the $40 range, so are way, way below both $120 per barrel and $150 per barrel.

Interest rates and the availability of debt also play a role in oil prices. If interest rates are low and debt is readily available, it is easy to buy a new home or new car, and oil prices tend to rise because of the higher demand. When prices are too low for producers, central banks have been able to lower interest rates through a program called “quantitative easing.” This program seems to have helped oil prices to rise again, over a three-year period, after they crashed in 2008.

OPEC producers are known for their low cost of production, but even they report needing high oil prices. The cost of extracting the oil is reported to be very low (perhaps $10 per barrel), but the price charged needs to be high enough to allow governments to collect very high taxes on the oil extracted. If prices are high enough, these countries can continue the food subsidies that their populations depend upon. They can also sponsor development programs to provide jobs for the ever-growing populations of these countries. OPEC producers also need to develop new oil fields because the old ones deplete.

Oil production outside of the United States and Canada entered a bumpy plateau in 2005. The US and Canada added oil production from shale and bitumen in recent years, helping to keep world oil production (including natural gas liquids) rising.

One reason why producers need higher prices is because their cost of extraction tends to rise over time. This happens because the oil that is cheapest to extract and process tends to be extracted first, leaving the oil with higher cost of extraction until later. 

Some OPEC countries, such as Saudi Arabia, can hide the low price problem for a while by borrowing money. But even this approach does not work well for long. The longer low oil prices last, the greater the danger is of governments being overthrown by unhappy citizens. Oil production can then be expected to become erratic because of internal conflicts.

In the US and Canada, oil companies have been funded by bank loans, bond sales and the sale of shares of stock. These sources of funding are drying up, as many oil companies report poor earnings, year after year, and some are seeking bankruptcy protection. 

Chart 6 shows that the number of drilling rigs in operation has dropped dramatically in both the United States and Canada, as oil companies cut back on drilling. There is a lag between the time the number of drilling rigs is cut back and the time production starts to fall of perhaps a year, in the case of shale. These low drilling rig counts suggest that US and Canadian oil production from shale will fall in 2021.

Of course, unused drilling rigs cannot be mothballed indefinitely. At some point, they are sold as scrap and the workers who operated them find other employment. It then becomes difficult to restart oil extraction.

How the Economy Works, and What Goes Wrong as Limits Are Reached

Slide 7 shows one way of visualizing how the world economy, as a self-organizing system, operates. It is somewhat like a child’s building toy. New layers are added as new consumers, new businesses and new laws are added. Old layers tend to disappear, as old consumers die, old products are replaced by new products, and new laws replace old laws. Thus, the structure is to some extent hollow.

Self-organizing objects that grow require energy under the laws of physics. Our human bodies are self-organizing systems that grow. We use food as our source of energy. The economy also requires energy products of many kinds, such as gasoline, jet fuel, coal and electricity to allow it to operate.

It is easy to see that energy consumption allows the economy to produce finished goods and services, such as homes, automobiles, and medical services. It is less obvious, but just as important, that energy consumption provides jobs that pay well. Without energy supplies in addition to food, typical jobs would be digging in the dirt with a stick or gathering food with our hands. These jobs don’t pay well.

Finally, Slide 7 shows an important equivalence between consumers and employees. If consumers are going to be able to afford to buy the output of the economy, they need to have adequate wages.

A typical situation that arises is that population rises more quickly than energy resources, such as land to grow food. For a while, it is possible to work around this shortfall with what is called added complexity: hierarchical organization, specialization, technology, and globalization. Unfortunately, as more complexity is added, the economic system increasingly produces winners and losers. The losers end up with very low wage jobs, or with no jobs at all. The winners get huge wages and often asset ownership, as well. The winners end up with far more revenue than they need to purchase basic goods and services. The losers often do not have enough revenue to feed their families and to buy basic necessities, such as a home and some form of basic transportation.

The strange way the economy works has to do with the physics of the situation. Physicist Francois Roddier explains this as being similar to what happens to water at different temperatures. When the world economy has somewhat inadequate energy supplies, the goods and services produced by the economy tend to bubble to the top members of the world economy, similar to the way steam rises. The bottom members of the economy tend to get “frozen out.” This way, the economy can downsize without losing all members of the economy, simultaneously. This is the way ecosystems of all kinds adapt to changing conditions: The plants and animals that are best adapted to the conditions of the time tend to be the survivors.

These issues are related to the fact that the economy is, in physics terms, a dissipative structure. The economy, like hurricanes and like humans, requires adequate energy if it is not to collapse. Dissipative structures attempt to work around temporary shortfalls in energy supplies. A human being will lose weight if his caloric intake is restricted for a while. A hurricane will lose speed, if the energy it gets from the warm water of the ocean is restricted. A world economy with inadequate energy is likely to shrink back in many ways: unprofitable businesses may fail, layers of government may disappear and population may fall, for example.

In the discussion of Slide 7, I mentioned the fact that if we try to “stretch” energy supply with added complexity, many workers would end up with very low wages. Some of these low wage workers would be in the US and Europe, but many of them would be in China, India and Africa. Even though these workers are producing goods for the world economy, they often cannot afford to buy those same goods themselves. Henry Ford is remembered to have said something to the effect that he needed to pay his workers enough so that they, themselves, could buy the cars they were making. To a significant extent, this is no longer happening when a person takes into account international workers.

The high interest rates that low-wage workers pay mean that loans don’t really help low-wage workers as much as they help high-wage workers. The high interest on credit card debt and personal loans tend to transfer part of the income of low-wage workers to the financial sector, leaving poor people worse off than they would have been without the loans. 

COVID shutdowns are extremely damaging to the world economy. They are like taking support sticks out of the dome on Slide 7. They produce many more unemployed people around the world. People in low wage countries that produce clothing for a living have been particularly hard hit, for example. Migrant workers and miners of various kinds have also been hard hit.

We Seem to Be Reaching a Major Turning Point

Oil production and consumption have both fallen in 2020; oil prices are far too low for producers; wage disparity is a major problem; countries seem to be increasingly having problems getting along. Many analysts are forecasting a prolonged recession.

The last time that we had a similar situation was in 1913, when the largest coal producer in the world was the United Kingdom. The UK’s cost of coal production kept rising because of depletion (deeper mines, thinner seams), but prices would not rise to compensate for the higher cost of production. Miners were paid very inadequate wages; poor workers regularly held strikes for higher wages. World War I started in 1914, the same year coal production of the UK started to fall. The UK’s coal production has fallen nearly every year since then.

The last time that wage disparity started to spike as badly as it has in recent years occurred back in the late 1920s, or perhaps as early as 1913 to 1915.  The chart shown above is for the US; problems were greater in Europe at that time.

With continued low oil prices, production is likely to start falling and may continue to fall for years. It is hard to bring scrapped drilling rigs back into service, for example. The experience in the UK with coal shows that energy prices don’t necessarily rise to compensate for higher costs due to depletion. There need to be buyers for higher-priced goods made with higher-priced coal. If there is too much wage disparity, the many poor people in the system will tend to keep demand, and prices, too low. They may eat poorly, making it easier for pandemics to spread, as with the Spanish Flu in 1918-1919. These people will be unhappy, leading to the rise of leaders promising to change the system to make things better.

My concern is that we may be heading into a long period of unrest, as occurred in the 1913 to 1945 era. Instead of getting high energy prices, we will get disruption of the world economy.  The self-organizing economy is attempting to fix itself, either by getting more energy supply or by eliminating parts of the economy that aren’t contributing enough to the overall system. Conflict between countries, pandemics, bankruptcies and economic contraction are likely to be part of the mix.

Coal Seems to Be Reaching Extraction Limits as Well 

Coal has essentially the same problem as oil: Prices tend to be too low for producers to extract coal profitably. Many coal producers have gone bankrupt. Prices were higher back in 2008, when demand was high for everything, and again in 2011, when quantitative easing had been helpful. 

There have been stories in the press in the past week about China limiting coal imports from Australia, so as to make more jobs for coal miners in China. The big conflict among countries relates to “not enough jobs that pay well” and “not enough profitable companies.” These indirectly are energy issues. If there was more “affordability” of goods made with high-priced coal, there would be no problem.

Coal production worldwide has been on a bumpy plateau since 2012. In fact, China, the largest producer of coal, found its production stagnating, starting about 2012. The problem was a familiar one: The cost of extraction rose because many mines that had been used for quite a number of years were depleted. The selling price would not rise to match the higher cost of extraction because of affordability issues.

The underlying problem is that the economy is a dissipative structure. Commodity prices are set by the laws of physics. Prices don’t rise high enough for producers, if there are not enough customers willing and able to buy the goods made with high-priced coal.

We Have a Major Problem if Both Coal and Oil Production Are in Danger of Falling Because of Low Prices

Oil and coal are the two largest sources of energy in the world. We can’t get along without them. While natural gas production is fairly high, there is not nearly enough natural gas to replace both oil and coal.

Looking down the list, we see that nuclear production hit a maximum back in 2006 and has fallen since then.

Hydroelectric continues to grow, but from a small base. Most of the good sites have already been taken. In many cases, there are conflicts between countries regarding who should get the benefit of water from a given river.

The only grouping that is growing rapidly is Renewables. (This is really Renewables Other than Hydroelectric.) It includes wind and solar plus a few other energy types, including geothermal. This grouping, too, is very small compared to oil and coal.

Natural Gas Has a Low Price Problem as Well

Natural gas, at first glance, looks like it might be a partial solution to the world’s energy problems: It is lower in carbon than coal and oil, and it is fairly abundant. The problem with natural gas is that it is terribly expensive to ship. At one time, people used to talk about there being a lot of “stranded” natural gas. This natural gas seemed to be available, but when shipping costs were included, the price of goods made with it (such as electricity or winter heat for homes) was often unaffordable.

After the run-up in oil prices in the early 2000s, many people became optimistic that, with energy scarcity, natural gas prices would rise sufficiently to make extraction and shipping long distances profitable. Unfortunately, it is becoming increasingly clear that, while prices can temporarily spike due to scarcity and perhaps a debt bubble, keeping the prices up for the long run is extremely difficult. Customers need to be able to afford the goods and services made with these energy products, or the laws of physics bring market prices back down to an affordable level.

The prices in the chart reflect three different natural gas products. The lowest priced one is US Henry Hub, which is priced near the place of extraction, so long distance shipping is not an issue. The other two, German Import and Japan Liquefied Natural Gas (LNG), include different quantities of long distance shipping. Prices in 2020 are even lower than in 2019. For example, some LNG imported by Japan has ben purchased for $4 per million Btu in 2020.

The Economy Needs a Bail-Out Similar to the Growth of Oil After WWII

The oil that was produced shortly after World War II had very important characteristics:

  1. It was very inexpensive to produce, and
  2. It could be sold to customers at a far higher price than its cost of production.

It was as if, today, we had a very useful energy product that could be produced and delivered for $4, but it was so valuable to consumers that they were willing to pay $120 for it. In other words, the consumer was willing to pay 30 times as much as the cost that went into extracting and refining the oil.

With an energy product this valuable, a company producing it would need virtually no debt. It could drill a well or two, and with the profits from the first wells, finance the investment of many more wells. The company could pay very high taxes, allowing governments to build roads, schools, electricity transmission lines and much other infrastructure, without having to raise taxes on citizens.

Besides using the profits for reinvestment and for taxes, oil companies could pay high dividends. This made oil company stocks favorites of pension plans. Thus, in a way, oil company profits could help subsidize pension plans, as well.

Now, because of depletion, we have reached a situation where oil companies, and in fact most companies, are unprofitable. Companies and governments keep adding debt at ever lower interest rates. In fact, the tradition of ever-increasing debt at ever-lower interest rates goes back to 1981. Thus, we have been using debt manipulation to hide energy problems for almost 40 years now.

We need a way to counteract this trend toward ever-lower returns. Some people talk about “Energy Return on Energy Investment” or EROEI. I gave an example in dollars, but a major thing those dollars are buying is energy, so the result is very similar.

I think researchers have set the “bar” far too low, in looking at what is an adequate EROEI. Today’s wind and solar don’t really have an adequate EROEI, when the full cost of delivery is included. If they did, they would not need the subsidy of “going first” on the electric grid. They would also be able to pay high taxes instead of requiring subsidies, year after year. We need much better solutions than the ones we have today.

Some researchers talk about “Net Energy per Capita,” calculated as ((Energy Delivered to the End User) minus (Energy Used in Making and Transporting Energy to the End User)) divided by (Population). It seems to me that Net Energy per Capita needs to stay at least constant, and perhaps rise. If net energy per capita could actually rise, it would allow the economy to increasingly fight depletion and pollution.

Conclusion: We Need a New Very Inexpensive Energy Source Now

We need a new, very inexpensive energy source that buyers will willingly pay a disproportionately high price for right now, not 20 or 50 years from now.

The alternative may be an economy that does poorly for a long time or collapses completely.

The one ray of hope, from a researcher’s perspective, is the fact that people are always looking for solutions. They may be able to provide funds for research at this time, even if funds for full implementation are unlikely.

This entry was posted in Financial Implications by Gail Tverberg. Bookmark the permalink.

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.

1,659 thoughts on “Fossil Fuel Production Is Reaching Limits in a Strange Way

  1. Wow, am I the first to reply. It is 1826 GMT,or 2026 local time, so please allow me to thank you again, Gail, for a comprehensive and most insightful post. And best wishes to all readers of OFW. But now to resume my viewing of “The Riddle of the Sands”.

  2. “The one ray of hope, from a researcher’s perspective, is the fact that people are always looking for solutions. They may be able to provide funds for research at this time, even if funds for full implementation are unlikely.”

    We don’t solve tomorrow’s problems with today’s tools. There is also a certain peace in this post, if all is lost, there is no downside risk so many investments with even a small upside potential are better than total failure.

    It will be a challenge and interesting.

    Dennis L.

    • The group I was talking to included a lot of grad students. Our whole economy is built on the idea that we can work on solutions and maybe some of them will pan out. In fact, a lot of jobs for researchers come from seemingly hopeless situations. There was no point in my saying, what you are doing will lead nowhere. We have to shrink back. Perhaps, from the lower base, a later civilization can approach from a different point of view.

      • I believe you are 100% correct Gail. The shrink back will not be voluntary with humans, because it never is. It will be sudden and harsh.

        • Tim

          For some it will be sudden and harsh, for other not so much so. Some humans are more valuable to the group than others, if I am less valuable and my brother has a more valuable son/daughter, their survival carries on some of my genes, better they survive than me, I am expendable.

          You have a note a bit down regarding Trump. Look at his wives, that is plural, they are pretty awesome as the kids say now days, look at his children. Now, making it personal, how are you doing in that area? Ouch.

          Eventually the sun burns the earth as it expands, that make life a farce? We do today what is necessary to make it to tomorrow and prepare for tomorrow with surplus that is available today. Not every day is the same, some better, some not so good.

          Dennis L.

          • Well Dennis, glad you asked. I’ve been married to same woman for 32 years. I’ve never cheated on her with hookers and bimbo’s whom I payed off, then lied about, nor caused my family constant turmoil because of my selfish, psychotic desires. I’ve never filed bankruptcy nor hidden my taxes from the courts. My son’s are both successful engineers who are honest and intelligent. Now get back to your bong and your Budweiser and leave this conversation to the adults in the room. You and Trump apparently share the same gene pool.

            • Tim,

              Thanks for your thoughts. I am still looking at genes, 5 children to two, I could afford one including a professional degree.

              Somewhere I came across a theory that Christianity had as one of its selling points one wife per man. I believe in virtue, you have it, it also seems that virtue does not always win.

              We expect a great deal out of leaders, sometimes getting the job done is good enough.

              Ad hominem attacks really aren’t very useful, and you did miss the adult beverage, Glenlivet is more to my taste.

              It is a stressful time, all the best,

              Dennis L.

  3. In a world ‘drowning’ in debt, experiencing diminishing returns for almost all ‘investments’, and central banks flooding the world in fake, fiat currency to try and prop up what is essentially a gargantuan Ponzi scheme, I really have to wonder how we can ‘fund’ a very inexpensive new energy source (to say little about the fact that even if we do ‘discover’ such a source, all the other dilemmas we’re facing are still present). It seems we’ve painted ourselves into a very tight corner…

    • it is only possible to ‘fund’ a new energy source with an ‘old’ energy source

      eg, the complexity and volume of the oil industry since the 1860s would not have been possible without the volume production of the coal industry which in turn allowed the production of cheap iron in vast quantities.

      Extracted oil only took on ‘value’ when it was shipped into factories and cities and burned.

      Burned oil was paid for with cash that was itself supported by the function of oil consumption.

      There was and is nothing else.

      The more oil burned, the more oil Rockefeller (et al) extracted-transported-sold—and burned again. And we all eagerly joined in the great burning.


      Because without the burning process cash could not exist in the necessary amounts to support the manufacture of our machines and everything they produced We all wanted higher and higher wages, so we could buy and burn more and more oil..

      This is why our economic system has stalled. Oilburning has drastically slowed, and seems likely to stop because we can no longer afford it.

      There can never be an ‘inexpensive’ energy source because of the complexities involved in getting access to it. Oil has been our ‘one trick’. It not only gave us access to energy, it gave us access to more and more of it.

      The ‘windbags’ in the alternative energy brigade simply cannot grasp that.

        • Ma’am,
          This is my first comment ever, but I’ve been reading your material for years. I’d like to thank you for all your writings, I’ve gotten much enjoyment and learned a lot. I think you are the most balanced and agreeable blogger around. Your arguments are sound and you can really see the big picture. Thank you!

          Secondly, I’m very glad you agreed with Norman’s post above. I agree, too. Very encouraging. I’m happy that there is someone like you, enlightening people and not giving them some “pie in the sky” false hope like so many others.

          It will be a difficult road ahead, but studying your reflections and insights will help many to prepare.
          Many thanks

      • “There can never be an ‘inexpensive’ energy source because of the complexities involved in getting access to it. “\

        A bit of a stretch, that word “never” can come back to bite a person. I don’t think we know everything, we have never gone backwards towards the future; why would one think that this time will be different? That does not make the path painless or stress free, but it has always been thus. In the fifties and sixties life was wonderful in the states unless one got stuck at the Chosin Reservoir or Viet Nam at the wrong time. In that case, oil was of little direct use, propellants in brass cases were of more immediate value.

        Financially, what is on paper may not have as much future value as notational value which means the discount rate is incorrect. Trick is to make the real NPV positive, some are doing it, some are not.

        “Windbags” is a strong word, if it gives one last puff that puts civilization across the gorge before us, it may be sufficient.

        If all is really that bad, why not do one last cocaine binge and go out high? My thought, perhaps that person will cease to need some useful items and a passerby may just pick up enough for one more day. It is all in the per capita and being in the right capita.

        Dennis L.

        • We must convert one energy form into another in order to support our current lifestyle.

          That is the immutable law that governs every living thing on the planet.

          Every other species except humankind, (unknowingly) accepts and lives within that law.

          We consider ourselves above it. We have holy books to prove it. Those books are wrong.

          We are a biological anomaly that accidentally discovered a way of (temporarily) subverting that law. Then we invented gods and economists and politicians to tell us it was permanent. (Infinite growth??)
          Our current existence has expanded itself only for about 10k years, during which time we have used our intellect to grab more resources to sustain ourselves, while taking from other species.

          10k years in NOT permanent. It is an eye blink of evolution

          (the total ‘energy pot’ is a fixed quantity btw)

          The same intellect that allowed us to ‘grab’ energy resources, also allowed us to delude ourselves it was infinite. What we’ve actually done is strip the future from our gg granchildren.

          So to sustain that certainty, we must continually look for new energy resources to keep our wheels turning.
          But we’ve used most of the cheap surplus energy resources, the stuff that returned 100:1 and created the lifestyle we have.

          Now we are getting desperate, and looking to windmills to deliver the same results despite the ‘return on investment’ being at best about 18:1.
          18:1 doesn’t deliver the necessary ‘surplus’ to sustain our civilisation in its current form. Covering the land with windmills won’t change that.

          In other words we are expecting a lifestyle to continue as it always has, through the frantic chasing of energy conversion systems that bring less and less return on input.

          Or to put it in a simpler form :

          We are continually running faster and faster to stay in the same place.

          • Norman, we have been consuming energy above our natural level ever since we learned to control fire. It is part of what makes us human. Some other species may use tools, but only our genus controls fire.

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  5. Personally, I think oil peaked over a decade ago. By that, I mean the conventional, easy to get at stuff. As soon as we had to go after the difficult stuff, the clock started ticking. Not sustainable for long.
    You are correct in that we need an alternative. It probably won’t materialize anytime soon, if at all. (I did read about mini nuclear power stations as a possibility.) A long term contraction or de-growth period is in the cards. In the meantime, especially because of Covid, get red for the helicopter money dropped directly on the masses to further kick the can down the road.

    • I suppose a lot of people would like to think that that we are in charge. We don’t really have a self-organizing economy to try to deal with. If political leaders just point the right direction, we are smart enough to work around the problems of the past.

      • “I suppose a lot of people would like to think that that we are in charge.”

        A video i found at Megancer, saying more or less the same.

    • Gumtoo> You are probably correct in the sense that onset of peak oil / ERoE ended ~BAU decade+ ago already. But here comes the catch – we don’t know for how long and where the system could attempt to rearrange itself. As you alluded out of the major tech civ hubs (US, EU, China) have adopted now some form of direct digital wallet for citizens with CBs bypassing the commercial banks if needed be. Some argue it’s just another preparatory step for phasing in some ~UBI like policies in society without much work (many assembly lines are 80% robotized today and frivolous service sector tends to burn much energy hence lets curb it via GreenND like policies), mind you UBI will be ~starving min wage/ration anyway.

      This could work for a while in some places at least or not all, perhaps intervening chaos would derail any such attempted schemes early on. We don’t know, as always the uncertainty and “slow grilling” is unfortunately the most (likely and) depressing outlook..

        • The amount of waste in the food production is staggering.

          For example returning to a more plant-based diet will cut down on FF usage, transportation and other excesses associated with fat blokes who can’t exist without their lard, beef and insulin injections.

          You see, it is “life quality” to eat garbage and take medications for all its poisonous side effects.

          Yes, you don’t have to agree with me, but then you’d be wrong. And you do t like being wrong. I know.

  6. Great article. I think it unfortunate we are trained to think of energy as a utility delivered by a grid instead of a commodity we can create through the purchase of appliances sold down the street, like gasoline. I am thinking of buried units that harvest methane out of blackwater, solar water heating tubes attached to the south side of our homes, solar panels attached to roofs of our patio gazebos and steam generators that produce enough electricity to power our homes and underground bladders to store the energy in until required. Finally we need uncorruptable governments with spines that make laws we all have to live with as a just society, or pay the consequences, starting with regulations on how much power our technological inventions are allowed to use in order to work. Start wil scrapping 5G, because the drawbacks fas outweigh the benefits for anyone other than the corporations that wish to have the upper hand on us all.

    • Janet, no sarcasm intended,

      ” I am thinking of buried units that harvest methane out of blackwater, solar water heating tubes attached to the south side of our homes…”

      Engineers say you can have it cheap, you can have it fast, you can have it good, pick two. I am doing some of what you suggest, it takes time to do it cheap and the rest, while one is doing all that life is passing.

      Also, there is the talent aspect, what you suggest takes considerable real world talent, those ideas cross thermodynamics(heat gain/loss calculations), plumbing, electrical and electronics as well as considerable building skills in wood, masonry and plumbing. Conservatively, you might be talking about a minimum of the upper 20% of the population and that is probably generous, what about the other 80%?

      Think about that last sentence as not a challenge, but a question? With very little surplus energy from that scheme, what does one do with the remaining 80%?

      Dennis L.

      • Like what we do today, jobs programs. Military and infrastructure.

        Teaches kids some manners and discipline and will also provide good infrastructure.

        Slap down those HSR tracks and let the MIC play with the latest tech and drill young whippersnappers.

        Something like that. Fsck the soulless consumerism and fake “jobs”.

    • I’m doubtful that you can, or have to, do all these things. I see no remote chance of managing with 8 B people without industrial production. But the energy needed for warming buildings in cold places could be reduced by half, simply with insulation from what we now discard. There are many other possibilities for reducing resource use without requiring additional complexity to do it. The problem is people. There is no known way to get 8 B people to be on the same page. Capitalism probably forces people to think/behave in constrained ways that preclude cooperation/coordination/innovation. Radical decentralization would likely require much less energy decoupled from globalist capitalism. But again, everybody is caught up in a self organizing vortex. We’ll snap out of it somehow, but not in any clear or predictable way. A scary probability is that one way out would be the scenario in your last sentence. That’s because we don’t know how to get out of it through humanism instead.

      • You provided great way to visualize it.
        Radical decentralization from formerly ordered state leading to block/regional/indiv vortexes of panicky self interest. It’s like turning from stable laminar flow (providing benefits) into chaotic vortexes (disorderly sinks)..


        • Sort of like, dunno, nature.

          Semi chaotic orderliness. Sort of like the Mandelbrot and Julia sets.

          Just leave it the fsck alone any it will thrive just by process evolving by and with itself and the supreme ruler of it all do the bidding. The behemoth life form Gaia preparing for the purely synthetics to take the next step in the process of evolution.

        • Gail has intimated that there’s a scarcity of energy to enable any other scale of governance than at the local and regional levels. This is where the warlords and the dons take over. This happens because there gets to be a deficit of intelligence and planning for these decentralized places. tHE MORE eduCATED AND QUALIFIED FLEE TO THEIR GATED COMMUNITIES. We see it in Johannesburg and many other places. We give up on the poor, but only the poor can help us. The poor need rigorous but elegant governance, but this is not available to them. And they lack the cognitive skills to supply it by themselves.

  7. There is no substituting energy and, yes, there is a solution: an agraric society with a biomass producing, organic agriculture or gardening. We could bury our nuclear waste, clean up some rubbish and start giving gardens for free that currently compete with the immo bubble. But we dont do it because we dont WANT it. It is a religious thing. Those that promise the biggest love on earth after the enemy is destroyed (in an extremely cruel war), have a problem to create a garden eden with no possibilities for war and mandatory vaccination. They prefer to end in chaos, fear and darkness. The new beginning will be exactly that agrarian society, like the Harrapian, the Egypt, the Romans, the Mayan or the Middle Ages – only a few million years later, after the nuclear waste has been decayed.

  8. Thanks for this new presentation, Gail.

    “As a result, the United Kingdom’s coal production reached its highest level in 1913, the year before World War I started, and began to fall in 1914.”

    And a mere 30 years and two world wars later, the British Empire was gone, and the UK was bankrupt, consigned to strategic subjection to USA and would never regain its industrial competitiveness with the continent let alone global significance.

    Changes in energy profitability can totally disrupt the global order and can lead to entirely new hegemonies with a permanent relegation of the old global powers. The configuration of global power relations depends on energy availability among other things.

    But the absence of new, profitable energy sources to replace the old ones would take the world into unimaginable, if imaginable territory – a massive fight over dwindling energy between desperate ‘powers’ with populations bloated by fossil consumption.

    The human world would be plunged into a truly Darwinian struggle for survival, the likes of which have been more ‘theory’ than ‘fact’ in living memory. Fossil fuels are absolutely ghastly stuff and they may ultimately have an equally ghastly outcome.

    Humans, being basically driven by blind organic drives and urged on by a profit, debt and growth based capitalist economy have exploited fossil fuels to expand their numbers at a rate never before – and the population crash occasioned by unprofitable-unaffordable energy is likely to be just as spectacular.

    If the growth of global population levels mirrors that of the consumption of energy, then the collapse of the one is also likely to mirror that of the other. That will likely be facilitated by the ‘four horsemen’ of plague, famine and war – and death.

    Malthus was not so much ‘wrong’ as premature. He could not have foreseen the exploitation of fossil fuels with their many uses in food production and a general rise in living standards. What he could foresee however is what happens when the human population hits limits imposed by a finite world.

    It has long been fashionable to scoff at the old parson since fossils. ‘New technologies will always save us – like they always have. Humanity is underrated!’ Maybe, maybe not.

    As Gail indicates, the unprofitability of energy production will lead to state support for energy sectors through banks. Unprofitability will affect the entire economy as the problem is one of customer affordability as well as producer profitability.

    The fall in profitability is thus systemic and will likely lead to the nationalisation of the ‘commanding heights’, including the energy sector, and possibly, ultimately to a completely nationalised and planned economy. It is difficult to see how capitalism can continue to function without systemic profitability, growth and debt maintenance – the real basics of capitalism.

    Capitalism may well ‘work’ the best of any economic system in a situation of growth but can it function at all without growth, without systemic profitability? If growth depends on an expansion of energy consumption, then a contraction of the latter may well scupper capitalism.

    Arguably we already have a ‘fake capitalism’ with QE, NIRP, bail outs, zombie sectors etc. – and now generalised state support of businesses and ‘workers’. A gradual ‘socialisation’ of the economy is already well underway in an attempt to countervail falling profitability-affordability. Presumably there is a limit to how far that can go before it obviously is not capitalism any more.

    But in any case, a rapid collapse in energy availability would precipitate a rapid collapse of economies and populations, so states will just have to do whatever they have to do in order to avoid that – otherwise they will be ‘picking up the pieces’ and doing what they should have done in the first place.

    None of which is to suggest that collapse – and the horsemen – can ultimately be avoided, just maybe put off for a bit, maybe not.

    • I’d agree with all of your eloquently argued points. And only add that we have entered that more “gloves off” energy resource conflicts era already, e.g. Iraq & Libya & Venezuela (petro/euro-dollar/ext. dollar volatile actors neutered), Ukraine (existing one leg of Russian->W pipeline & potential alt gas producer), Syria (denied access for Gulf->Clubmed pipeline hub), ..

      In that sense (accepting such scenario as ~correct) we are relatively long into the game at this point aka expect rapid worsening of the situation ahead.

      • Yes, and the recent invasions give us a ‘heads up’ of in what manner to expect the ‘powers’ to go about energy grabs.

        They never admit these days that it is all about self-interest. They dress up military interventions as ‘right’, ‘moral’ and even ‘humanitarian’.

        ‘Look at what heroes we are, upholding decency in the world’, even while they slaughter their way to resources.

        And as soon as one power makes such a move, the others will also have a ‘moral’ pretext to ‘pile in’ against them.

        They use ‘international decency’ as a strategic cover for pure power politics.

        Open egoists are almost preferable, such obvious dishonesty seems to compound the indecency and to add insult to injury.

        Even Nietzsche despised the ‘perfect cant’.

        > Cant. 1. hypocritical and sanctimonious talk, typically of a moral, religious, or political nature.

  9. It is difficult to believe that the system is shrinking. That affordability is a lasting problem. The people tend to believe that the problems are related to the lack of the discipline, spoiled young people, corrupt politicians or greedy companies.
    In fact, the people often work more and more, because they want more and more.
    Recently, I started to listen to a Czech Catholic radio station Proglas. The Czech Republic is known for its high proportion of atheists and the reduction of the institutional cults. What is so different about this radio station, is that it reflects the implosion of the Christian churches in a way that also the people from protestant churches can be heard on this station. What is more, they use slow speech and no advertisements, unlike the commercial or even state radios, and broadcast a lot of culture and arts. That way the cult of Mother Mary, i.e. fruitfulness, is suppressed, which seems to be the key problem of catholicism vs. protestantism.
    It seems to me this is the way how the shrinkage should look like: accepting the things as they are, acting rather slow than try to stimulate the growth (my attention was caught by the dialogues about burning out in work or in volunteering, or a dialogue with a former member of a religious order, a woman who left the order because of bullying).
    What surprised me is the fact that the founder of this radio station, a Catholic priest, had a father who was born in one of my neighbouring villages, namely a final upper village in the neighbouring valley, full of alcoholics. He left this Slovak village and went to the Czech city of Brno, which is, together with Prague, a center where the population from the depopulating parts of the Czech Republic concentrates.

    Many of us seem to have been a part of this process of implosion for a longer time without knowing it and it can be the consolation to all of us who have been tempted to have more, that we have not succumbed to this temptation…

    • If we don’t have religion, it seems like people have to have faith in something else. Recently, that seems to be the political system, the models of scientists, the powers of central banks and growing use of technology. These kinds of things have been a religion of their own. All a person needs is faith in these things, and endless video games to entertain himself/herself.

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