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.

2,885 thoughts on “Fossil Fuel Production Is Reaching Limits in a Strange Way

  1. I have been following that thread (in french) for a few months and that guy has always been right in his predictions.

    Now he seems to tell that some people who had covid-19 a few months ago start dying.
    What could be worse?

    • Thanks for that link. The grammar is simple enough for auto translation software to handle very well. Here are a couple of recent excerpts:

      In England, people suffering from symptoms of “prolonged COVID” will receive specialized care, the National Health Service said on Wednesday, with clinics set up to treat symptoms ranging from shortness of breath to loss of cognitive abilities.
      Thousands of people suffer long-term side effects for weeks or months, even if they have only had a very mild case of COVID.

      According to NHS England, some estimates indicate that 10% of patients with COVID may still have symptoms more than three weeks after infection, and that about 60,000 English people still suffer from symptoms of COVID after more than three
      Switzerland admits that it is no longer able to follow the chain of transmission.
      Spain becomes the first European nation to exceed one million cases, France arrives
      According to a study published by the US CDC, there are nearly 300,000 deaths caused by COVID, while official figures are less than 230,000 deaths, confirming what WHO explains in its internal reports: deaths are underestimated in most countries by 20 to 40%.

      More and more current clinical trials on vaccines are being abandoned due to serious deaths/intoxications.

      European countries are starting to completely re-define (Ireland, Czech Republic, etc.)

      The largest study on the transmission of COVID-19 highlights an already suspected phenomenon that blames many “specialists”: children are have an important role of transmission within homes, even without any
      symptoms. (
      Some deaths begin to occur months after being
      sick. People are beginning to die from the “extended COVID” mentioned in the previous message.
      China, as it has been since the beginning, continues to manipulate its figures.
      Chen Shih-chung, said that China’s assertion that nearly 11 million coronavirus tests would all come back negative was “really great, but how is that possible?” Mr Chen said that “everyone knows that the reagents in the test kits have a number of false negatives and false positives”. Commenting on the alleged test results, which would be universally negative, he said: “It’s also a good thing, but it’s just an impossible result,” the NAC reported.
      This is further evidence that the situation in China is still not transparent at

      • >>and that about 60,000 English people still suffer from symptoms of COVID after more than three months.

        That is about 0.1% of the population, or 1 in a 1000. Not so long ago, if only 1 in a 1000 were badly affected by a new, virulent disease, it would have been considered a miracle. Now for 1 in a 1000, we are slowly killing off the economy? I write ‘slowly’ but I expect the economy to ‘pop’ sometime.

        • Your claim is incorrect. For many potentially lethal viruses, you either die or recover, end of story. True for almost all flu viruses, for smallpox, for measles, for numerous others.

          • Your claim that MOO’s claim is incorrect is unsubstantiated by your explanation of why it’s incorrect. Out looks to me as if you’ve straw manned his claim, trying to make it look as if he claimed something that he didn’t claim.

            “Not so long ago, if only 1 in a 1000 were badly affected by a new, virulent disease, it would have been considered a miracle.” That was MOO’s claim, and nowhere in your comment did you debunk it or demonstrate it to be erroneous. It may be wrong, but you haven’t shown where; you seem to have simply tried to sow confusion by conflating it with other claims regarding viruses, which have no direct bearing on what he said.

            Of course, I may be suffering from galloping senile dementia that makes it impossible for me to see the brilliance of you comment. That’s certainly a possibility as human society on the whole appears increasingly irrational to me these days and Occam’s razor suggests its more likely to be me than them.

            • @Tim Groves, I agree me comment was a bit opaque. I meant that it was not the case that most viral diseases in the past had more that 1 per thousand who suffered for more than three months not knowing whether they would live or die. Some, yes, but for many diseases, no, this would not be considered a “low number” of people who suffered with prolonged symptoms. For many viral infections, you either die or recover and it’s over.

          • Nehemiah,

            “For many potentially lethal viruses, you either die or recover, end of story. ”

            I did not mention viruses. I did state ‘virulent disease’, virulent meaning (Collins English Dictionary): “(of a disease) having a rapid course and violent effect”. Which is what I meant, irrespective of what causes the disease, virus, bacterium, plasmodium (malaria).

            But since you mentioned smallpox specifically, here is what Dorothy Crawford, professor of medical microbiology at the University of Edinburgh, says in her book “Deadly Companions: how microbes shaped our history” (2009):
            “The deadly smallpox virus (Variola major) which kills around a third of those it infects, was one of the earliest human zoonotic infections…”

            Nonetheless, smallpox survivors could be left with permanent injuries:
            “… On the eighth day, the pocks start to rupture, discharging their virus-laden contents, and then drying into scabs. These are eventually shed, all too often leaving unsightly scars, and sometimes causing blindness. During the long course of the illness sufferers generally remain alert but in excruciating pain, not only from the pocks but also from damaged internal organs and suppurating mouth and throat ulcers…”

            Faces badly scarred, or blindness, for life. Hardly recovery, end of story.

            Elizabeth I got smallpox, but was one of the lucky ones who recovered:
            “In England, Elizabeth I had been queen for only four years and was enjoying herself at Hampton Court palace when the microbe struck… Fortunately, she recovered with her beauty unscathed to reign over England for another forty-one years.”

            There is at least one virus where “you either die or recover”, yellow fever:
            “This virus may just cause a relatively mild flu-like illness (typically with headache, fever, muscle aches, nausea, and vomiting), but 5-20 percent of sufferers go on to develop a fatal haemorrhagic fever… Unlike malaria, yellow fever sufferers either die or recover completely; there are no healthy human virus carriers.”

            I’d recommend the book. A very good read.

            • Okay, virulent does not necessarily mean viral, but my point holds. For very many of them, whether viral or bacterial, you either die or recover. In the case of smallpox victims, blindness seems to have been pretty rare. Survivors always were left with pock marks (thus the name, “pox”), George Washington having been one such survivor. (Painters usually did not show the pocks in their portraits.) However, this caused no practical disadvantage, and was so common that I doubt it was much of a social impediment. If you married someone with pocked skin, at least you knew they were immune from the next outbreak.

    • “More and more current clinical trials on vaccines are being abandoned due to serious deaths/intoxications.” — LOL! AI, sure. I suspect “intoxications” should be something like “toxicity.” If it really is intoxications, hippies will be at the front of the line!

    • BTW, I’m pretty sure he means patients who HAVE had covid FOR a few months are dying, not that patients who recovered months ago are dying.

    • Two years ago, my uncle ate a kumquat. Yesterday he died. Ban kumquats!

      Look, everybody dies of something. To attribute the cause to an event months or years in the past is magical thinking.

      • My granny had chickenpox as a child. She eventually died aged 86, doubtless of the complications of long chickenpox. If she hadn’t been suffering from that, she would have jumped out of the way of the bus that flattened her.

      • @robert firth, Many people who get chicken pox as infants or toddlers have the virus re-emerge a half century later (when age has weakened their immune systems) to produce a painful condition known as shingles. One species of the Plasmodium parasite (which causes malaria) causes a lifelong infection that re-emerges from time to time to inflict repeated episodes of malaria on the victim. Eventually, one of these episodes may be fatal.

        But even though you are factually wrong, I am not sure what you are arguing against. The point is not that people are dying from a covid infection they recovered from months earlier, but rather they are dying from a covid infection that they have suffered from for months.

        Also, while 60,000 may be only 1 per thousand of the UK’s total population (as you pointed out), it is likely to be many more than 1 per thousand of people who have actually contracted the virus, which is the more relevant statistic.

        Okay, I just googled this and the UK reports over 44K deaths out of 831K infections. (Infections may be underestimated, but it is interesting that the .05% death rate this represents is identical to the death rate among a group of US health care professionals who had contracted covid.) Notice that the 60,000 Brits who have been suffering from covid for more than 3 months is even more than the number who have so far died.

    • Closing down economies, or changing the economies in a way that uses fewer workers, could be worse, because it tends to collapse the whole economic system. The system depends on growth.

      Of course, the economy was already on the edge of collapse. COVID, plus the reaction to COVID, pushes the economy “over the edge.” Europe was in worse shape than the US, so it can more easily be pushed over the edge.

  2. “A string of developments in Turkey’s struggling economy sector have prompted the Erdoğan administration to attach its last hopes to assets abroad, as well as undeclared, unregistered cash within the country.

    “The central bank has spent tens of billions of dollars of its foreign exchange reserves defending the Turkish lira, which has been repeatedly hitting record lows in the last few weeks…”

  3. “Argentine bondholder groups slammed the government on Thursday over economic policies they said were undermining investor confidence in the country, which emerged from a sovereign default in September after a $65 billion restructuring.

    “Two of the groups involved in that debt revamp said in a statement that policies since then had “failed to restore confidence” and instead had “dramatically worsened the country’s economic crisis.” Bond prices have dropped sharply since the exchange.”

        • we constructed our current existence as a surplus energy economy

          In order to sustain a surplus energy system there must be a constant availability of surplus energy (duh!!!)

          It can’t work if energy is static or diminishing.

          Been saying this for years, I’m beginning to think that the Nobel prize committee has mislaid my address and phone number.

          • No doubt down the back of their Nobel sofa, Norman.

            It does seem to me that financial chicanery can stimulate the global economy for a while even through a decline in net energy per capita, and we have seen that this year. How long they can do that is an open question though, especially as the global economy was teetering on the brink of sustained de-growth even before the pandemic.

            The current fiscal stimulus and central bank interventions feel to me like giving an unwell, old person in nutritional deficit a goodly whack of speed (I know I trot out the analogy often but I like the idea of dispensing amphetamines to the weary elderly).

            It might get them off their sick bed for a few minutes but it is going to cause so many imbalances and put the system under such stress that it is also likely to precipitate its total failure.

          • The article seems to be referring specifically to Venezuela, where oil production has fallen from about 2.5 Million barrels /day 5 years ago to 0.3 Mb/d now (approximately). They are on the cusp of producing zero. Of course there will be fuel shortages. They have no cash for imports.

            The rest of the world in the meantime has sufficient fuels, for now.

            • The big problem is low oil prices. If prices were a whole lot higher (Say $200 per barrel), Venezuela could extract a lot of oil. Its resources are the highest in the world. It is demand (and prices) that won’t rise.

          • Low EROEI is an issue, but Venezuela would be doing much better if it wasn’t being sanctioned by the US , just as Iran (who would have greater gdp than KSA I guess) and Turkey

            • Part of Venezuela’s problem is that it has borrowed large amounts of money from China by essentially pre-selling the oil reserves in the ground. It then used the borrowed money to give the population a higher standard of living than the country could really afford. Now, even if Venezuela does pump oil, a significant share of the benefit will go to China.

            • They already had usd nominated debt… But I agree that their model wasn’t good

          • Well, Norman, I can appreciate that the Golden Age is behind us. But what sort of lives do you think we should we be expecting to live in 2030, 2040 and 2050? Will they have to be nasty, brutish and short, or can we look forward to modest frugal happiness?

            • lol

              there’s an interesting question to which there can be no real answer. I’ve set this out to clarify my own mind as much as anything.

              Broadly speaking empires collapse because the energy that created/supports them is no longer available, so my thoughts for our future are based on history, where no empire has ever collapsed and faded from history without the conflict driven by denial that it is happening.

              that conflict doesn’t stop it happening, it just seems almost a ‘rite of oblivion’. The only difference seems to be one of scale.

              The difference between past empires and the present, is that the territories that comprised those empires could always (eventually) call on the surplus energy of the world to bring them back up to speed

              The Roman empire took centuries, and evolved into other nations.
              the German/Japanese took less than a decade.


              The conflict we are seeing now is effectively the collapse of the empire of the world, and as a result the population of the world is in denial. (as proof of that they vote for prosperity and infinite growth)
              The Empire of the USA is at war with itself (denial), now reliant on gods to fix things. (just like the Incas did)
              The poor and the weak are being sacrificed (just like the Aztecs did)
              The (surplus) energy that created the USA (and other states) is no longer available.

              So it will collapse, but go on fighting wars of denial, as long as the dregs of energy to do so remain available. Nations have always continued fighting, despite the needs of people suffering because of the war-drain on resources which should be feeding them.

              My guess is then that there is enough residual energy left in the system to fight for another century, maybe a bit less. With diminishing regional intensity of course.

              It will be very very nasty for all concerned.

              When the denial-wars are over, things might settle back to a level of resignation, rather than happiness. (human nature being what it is).

              100 years from now the USA will have evolved into 6 or 8 separate nation states. Which is exactly what happened to the Roman empire.
              By then there might be a degree of frugal happiness I guess. (hope anyway)


              But if nukes are used in the wars of denial, then please delete all of the above.
              Or climate change might rid the world of its pestilence. (ditto)

      • Argentina has had problems in the whole last century, excepting a few moments. But it’s true that energy played an important role in its 2001 perfect storm. And that 2011 end of exports required capital controls because consumption subsidies were not removed. Your graph is a bit old, doesn’t include recent fracking developpement

  4. “More people are going hungry as the pandemic disrupts supply chains, cripples economies and erodes consumer purchasing power…

    “Next year “is frightening us beyond imagination,” WFP Executive Director David Beasley said in an interview. “In the immediate short term, we have got to have the private sector step up and fill in this gap. If they don’t, it’s going to be catastrophic.””

    • During the Great Depression, unemployment in the Weimar Republic zoomed up to 25% and, as it did, voters became disillusioned with centrist parties and began to favor authoritarian parties, especially the Communists and the National Socialists, so the current disillusionment with democracy is not comforting.

      We are probably lucky the Nazi’s won the German political contest in the 1930s, because if Germany had gone Communist, Spain would have been next, Communist-lite Mussolini would have fallen in line, France with its strong political and cultural left would have easily succumbed, FDR whose administration included many Communist sympathizers and a few closet Communist Party members (such as White and Wallace) would have been reluctant the oppose the spread, and Britain would have stood truly alone. Thank God for Hitler.

      • Thanks N. Good comment.

        A few ants is not a problem. As soon as you discover hundreds of them in your sugar can, panic sets in.

        We used to pour some fuel into their places of birth and set it on fire. With diminishing returns within the ff spectrum, i wonder what will be the choice of destruction this time of year.

      • ” the current disillusionment with democracy is not comforting.;”

        It’s even worse. Humans are stuck with evolved psychological mechanisms. One of those is that stressed populations go to war with neighbors. As part of this process, a population (originally bands or tribes) becomes attracted to irrational leaders. While going to war may be good for genes, it’s not for people.

        There is plenty of evidence and theory supports this model. Unfortunately, very few people can grok the model. I somewhat wonder if evolution has left us with psychological mechanisms that inhibit too much insight? You can certainly see that in Patty Hearst’s kidnapping.

    • I wonder whether the presidential polls in the US are contacting young people. Nearly all of them use cell phones and the surveys are only over land lines. Neither party really represents young people.

      • A Rasmussen poll that gave Biden a 14 point lead recently did not even adjust for something as basic as party affiliation, so over-polling Democrats was not controlled for. Somebody surveyed known small donors to the Trump re-election campaign, and 40% of the Trump *donors* were unwilling to confirm that they planned to vote for Trump. 70% of respondents in one survey said they were afraid to reveal their political preferences in the workplace for fear of being victimized by the “cancel culture.” LBJ’s favorite “poll” was counting the campaign bumper stickers. These days, I would count the campaign yard signs, or look at the numbers who show up at Trump versus Biden campaign rallies.

        • I have spoken to a couple of people in my area who said they would like to put up Trump signs, but fear repercussions.

          • I can confirm that happens.

            I also can confirm that displaying the American Flag is very often a quasi Trump sign.

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