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 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 cards 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.

982 thoughts on “Fossil Fuel Production Is Reaching Limits in a Strange Way

    • That looks like a plan for a ‘managed step down’ in energy availability.

      Fossil fuel production is set to dwindle due to the unprofitability of fossil fuel production relative to the affordability of the produced energy to energy consumers (other companies, governments, households). Less fossil fuels are sourceable at a price that is both profitable to producers and affordable to consumers.

      IMF and IEA want to work with governments to direct them in their response to a decline in the availability of fossil fuels in order to ‘adapt’ economies through more reliance on other fuel sources, like ‘renewables’ and nuclear, and through the ‘maintenance’ and ‘efficiency’ of domestic energy use structures.

      It is spun as a plan to ‘increase energy security and resilience’, to create jobs and to achieve ‘green’ objectives. The real issue is a decline in the energy available from fossil fuels, and therefore in the overall energy available, and that issue is ‘conflated’ as much as possible with ‘energy security and resilience’, ‘job creation’ and particularly with ‘green’ issues.

      Notably, IMF and IEA are not mooting the possibility of the nationalisation of energy sectors in order to countervail the falling profitability of fossil fuel production in order to maintain the extraction of fossil fuels, but about how governments should adapt to the availability of less fossil fuels. Neither is any meaningful democratic input foreseen.

      The plan is to ‘make do with less’, as economies inevitably would have to do so with less fossil fuels. The demos of countries are to have no meaningful input into whether a strategy is taken to maintain through nationalisation the further availability of energy from fossil fuels even temporarily.

      This is an historic moment, TPTB have radically abandoned the project of improved human living standards for a permanent ‘step down’ – likely the first of other such steps. It is not presented as such but as anything but.

      The use of ‘green’ issues in particular is intended to present the step down as ‘good’ and ‘desirable’ rather than as a ‘failure’ of the global political economy and as undesirable. ‘Have less and be glad of it, feel ‘holy’ about it – you will have no say about it in any case.’ It is an invocation of ‘asceticism’ and ‘submission’ in lieu of material well-being, ever the lot of the feudal poor.

      It remains to be seen whether capitalism can survive at all with less energy, ‘de-growth’, systemic unprofitability and without debt maintenance – without the real basics of capitalism. It is questionable whether IMF has really thought that through. Likely this is now headed for complete global economic collapse.

      > Recent IEA analysis has shown that global energy investment is set for an unprecedented plunge of 20% in 2020, raising serious concerns for energy security and clean energy transitions. As a result of the Sustainable Recovery Plan, the global energy sector would become more resilient, making countries better prepared for future crises. Investment in enhancing electricity grids, upgrading hydropower facilities, extending the lifetimes of nuclear power plants, and increasing energy efficiency would improve electricity security by lowering the risk of outages, boosting flexibility, reducing losses and helping integrate larger shares of variable renewables such as wind and solar PV. Electricity grids, the backbone of secure and reliable power systems, would see a 40% increase in capital spending after years of declining investment.

      • Thanks for your summary of the plan. I can understand how spinning a step down as an improvement we should want, is the way this change is being spun. It really means a loss of jobs and tax revenue.

        I wonder how electric grids will see a 40% increase in investment after years of declining investment. Total electricity output is headed for a decline, just as total fossil fuels are headed for a decline.

      • Oh dear, thanks for the excellent summary. I would add IEA talks “growth”, “job creation”, and “sustainability/resilience”. Hard to believe but I expect we will be hearing those marketing phrases ALOT.

        Their whole premise is that governments act, not the free market, not free individuals. It is a global bankers dream come true.

        • Governments do sometimes act, as in Queen Isabella who reportedly enabled Chris to sail the ocean blue much to the pain of the Aztecs, etc. The Manhattan project comes to mind, done over maybe three years total after which two demonstrations were conducted of its effect, there was a third and final demonstration ready to go, the other party decided they were believers, game over. And of course, there was the moon, JFK said we shall go because it is hard, and off we went, planted the flag, now the US is forming the space branch of the armed forces, maybe the moon is the high ground. Think defense, rocks at the L1 point hoisted by the lunar elevator, like the days of old with castles, motes, etc., smart rocks of course with small thrusters.

          The game isn’t over, the best is yet possible, that doesn’t mean we can’t make a mess out of it.

          Dennis L.

          • In the book the Moon is a Harsh Mistress the rebellious mooners throw rocks at the Earth. At one point the AI as “Can I stop throwing rocks at Cheyenne Mountain?” Why? “Because it no longer exists.”

            Then there are the” rods of the gods”. This is the idea of throwing down titanium rods from orbit to destroy things and ill people.

      • Reducing the extraction and consumption pressure on the dwindling resources is not a dystopian plan.

        It is simply returning to LTG scenario 2. And hope, lots of it, that eventually fusion power will come online.

        However, hope is as you already know, a fools errand and an overall shitty strategy.

        The coronavirus + consumerism curtailment = Scenario 2.

        You might disagree with me, but then you’d be wrong.

      • Could it work in the interim for homes? Move to reduce industrial use(as in the Honeymooners,) “To the moon.”

        My biggest concern with solar, and I have all the pieces including much of the supporting infra structure in place, is being put in a position not unlike a person who spends his first piece of gold. How do I share it with my neighbors whose help I require? Is their assistance more valuable than the meager amount of solar energy. Do I want that bullseye painted on my back?

        We have explored many alternatives and the positive is we have a good idea what not to do, what won’t work in many instances; we need something in the near future which will make life passable while we wait for the next big thing. Get rid of industrial pollution, find new resources(the best ones may well be buried at the center of the earth, gravity you know, I don’t think it wise to go there, earth is home) off planet and exploit them. Do this with existing technology that only requires advanced engineering, there isn’t time to invent new ideas and have them be useful.

        From our discussions it seems it is this or back to the spear in which case I am more than 35 years past my pull date, that form of civilization does not need to concern itself with pensions as all(well most) die in their mid thirties, and not necessarily an easy passage.

        Dennis L.

        • You have to think about what you are going to do with solar and what it will get you.

          In most parts of the world where my readers come from, the biggest energy need is heat in the winter. Solar is particularly bad for this.

          Jobs, and the benefits that jobs provide, is another need that comes from energy. I have a hard time seeing that solar will provide much in the way of jobs. You can’t run industry with solar, to any extent. You can’t keep office buildings open with solar, operating all of the equipment, including the elevators and computers. You can’t do road construction or build homes with solar.

          Growing food is a major need. It is hard to see how solar is helpful for this. Getting food transported to population centers in a major need, but solar can’t help with this. It is hard to see how it would operate the big refrigerated units that grocery stores use, year around. On and off refrigeration isn’t worth much.

          Cooking food is essential. Electricity from solar panel could, in theory be use to cook food. But if you want to cook in winter with solar panels, you would likely need an awfully lot of batteries to store up whatever electricity is available, so that you have enough during long cloudy periods. If your home is not heated, you may not have running water, another issue. A person would need to plan ahead carefully, with this usage. An insulated solar cooker box could be used outdoors, or cooking over a fire outdoors, might supplement. In fact, it would likely be a cheaper alternative.

          I expect what most people are looking from solar is a few nice-to-haves. Having lights on at night is a nice-to-have. Being able to watch television or use a computer is a nice to have. Being able to charge a phone is a nice to have, assuming the rest of the system is working adequately for the charging to be helpful at all.

          I envision losing a lot of essentials. Trying to patch up with some nice-to-haves is not really going to fix basic problems, however.

          • It is obvious that the lions share of the energy remaining will not be designated for human affairs at all.

            It is not a basic human right to weigh in at some 150kg’s, drive a big fat SUV and wear a MAGA hat while being close to zero productive. But that hoi-polloi suit well as the voter herd for a new world order. To the dismay of the scam artists and the sanctimonious hypocrites soon without a livelihood.

      • “We want to be on track to become a multi-planet species & spacefaring civilization to find out what the universe is all about.” (not from Tim)

        Another posting discussed the lack of progress in physics. If there is no physics beyond what we currently think we know (i.e., no faster than light) can we still explore the universe? The answer seems to be both yes (for relatively near things like the galaxy and no for objects that are further away.

        I have thought about this for a long time, Google “Far Edge Party.”

        In 2012, I made a bad situation worse with this article from the transhumanist magazine:

        Assuming we can’t go faster than the speed of light, i.e., no warp drive or wormholes, how can the curious among us explore the 100,000 light-year diameter galaxy?  (And perhaps beyond.)

        This would presumably be post-singularity, so you can assume uploading and variable clock rates for the uploads from a million times down to near zero.

        For motive power, at this point, I would bet on Forward’s approach of TW or PW lasers pushing light sails.  The lasers can be modulated and that gives as much bandwidth as you could want.

        Unfortunately, the raw proposal puts you out of touch with the solar system and your fellow explorers.  Given the ground rules, the speed of light delay is unavoidable.  The effect is that you can learn all you want about things that are `100,000 light-years in the distance, but it is going to take that long to get there and the same to send information back. There are lots of neat proposals, one of the best was by Eric Drexler.

        Of course, if we do figure out a way around the speed of light, all bets are off.  But I suspect the Universe is wired up in such a way that prevents that.

    • “We want to be on track to become a multi-planet species & spacefaring civilization to find out what the universe is all about.”

      I suppose that sounds grander than:

      “We are not ‘on track’ to become a multi-planet species & spacefaring civilization to find out what the universe is all about, and we have made zero progress in that regard, but it supposedly sounds good for some reason to moot such nonsense.”

    • Necessity is the mother of all invention. And the best things of IC already have been invented.

      It’s only a matter of implementing it on a grand scale.

        • Recumbent bikes seem quite safe. Not much distance to fall. However, they are much faster than a normal bicycle due to its superior aerodynamics.

          By the way, did it look something like this when you went to work?

          • It certainly helps to have a paved road for these bicycles to go fast. I wonder how they would work through wet muddy terrain. Also, how does one carry “stuff” along (groceries, a computer, change of clothes, small child)?

            • We won’t be able to take long trips. Draconian “plans” like the one someone posted re Canada’s force us into small, non commute villages anyway. So it’s either the brave-new-world-order way or some pleasanter way to stay put. Trips within a village setting on bikes with carts might work on flat land? Otherwise it could be donkey-drawn carts. Work for folks to clean up the dung and use it for compost. Not enough donkey food for industrial scale, but should be workable here and there. They could start out as tourist attractions while there still are tourists, and continue from there.

            • Gail, my tricycle had a large basket between the rear wheels. It could carry a week’s food shopping, or two small children, and since it was below the unladen centre of gravity, it made the vehicle more stable, not less. If you have time, check out the reference I posted: these people really thought through the problems.

    • The UK needs a serious, thought out, detailed economic strategy for the future, and a resort to absurd jingoism is no substitute for a serious political plan.

      • “Boris, after a careful study of the alternatives, we recommend that you come up with a detailed economic strategy.”

        “But I am too stupid to do that, and so are my advisors, whom I hired because they were even more stupid.”

        “Then we recommend you try our alternative plan.”

        “And what is that?”

        “Absurd jingoism.”

        “Excellent suggestion! It will be remembered in the next Honours List.”

  1. Gail, I believe you in everything except inflation, it is up.

    ” Retail sales by category.
    Sales at new & used auto dealers and parts stores jumped 3.6% in September from August, to $115 billion (seasonally adjusted), and was up 8.2% from September last year.

    This was powered by historic price spikes of used vehicles of 6.7% in September from August, and of 15.1% over the past three months. But used vehicle retail volume, measured in the number of vehicles sold, in September was still below last year. People bought fewer used vehicles but paid more for them.

    The average transaction price of new vehicles has also risen, under the dual impact of consumers buying higher-priced vehicles, particularly high-end trucks, and price increases of new vehicles. Total new vehicle sales, including fleet sales, in September were still down about 4.3% from a year ago. But retail sales were stronger year-over-year.

    Sales at auto dealers and parts stores form the largest retail category, accounting for 21% of total retail sales:”

    I saw this, didn’t really need a new car, hate to spend money, goofed. They were giving away new cars/trucks in the spring, zero percent financing Toyota, what could go wrong?

    Dennis L.

      • Gail,

        Please forgive, but my impression has been you were in the deflation camp, it was well reasoned on your part. Several times I have noted below your posts my experiences in a number of areas, prices are up not down. Maybe they will go down, I don’t have a clue, watching what I purchase, stuff is going up almost universally.

        It depends on the metrics, gold, the dollar, or the stock market. The personal question is how to react to it, that is not an easy choice, keep returning here looking for ideas. I listen to you and others, it helps in making decisions.

        On oil, maybe it is the end of the oil age, the work started by Hubbert is playing out, nuclear is the way to go, nuclear on the moon, not on earth. We have three large accidents on earth, one of which in the US was a near miss, nuclear sometimes messes up big time.

        You have mentioned a new economy(economics) a number of times, my impression is a return to hunting and foraging is a likely conclusion by you. I don’t want to go there, I am “selling” move the dirty stuff off planet, do an end run on Meadow’s work. We have both met Meadows, you have spoken with him more than I, he is impressive, but Donella and his work ends at the edge of the earth, so there is hope; the answer is outside the box.

        Coming back to price inflation and preservation of value, that is one of the more interesting, immediate questions before us and of considerable personal significance.

        Dennis L.

        • Isn’t it so that only producer prices are down?
          Oil down, gasoline at the pump way up!
          FAO Food Index down, food at the supermarket way up!

        • Commodity prices of many kinds, especially energy, are way down, at the producer level. Others, like lumber, are way up, because the economy is working in a strange way. Some products aren’t available at all. I know some things are out of stock for long periods, requiring people to choose higher-priced alternatives.

          I am not sure that retail food prices are way up. Grocery stores perhaps aren’t giving the specials that they were before. I notice the strange specials I keep seeing, such as a bunch of roses from Columbia for $6. Someone is losing a lot of money on this transaction. Supply lines must be broken for weddings, leaving a lot of cheap extra roses.

          Going forward, if the government starts printing money big time, the value of the money in our bank accounts will erode quickly. There will be so much new money appearing that the old money won’t have much value. That will look like inflation.

          In fact, the low interest rates and extra money available has already lead to asset price inflation, affecting both shares of stock and demand for new homes. Indirectly, the demand for new homes, and additions to existing homes, leads to inflation in related items, including lumber.

          Deflation will happen if a lot of debt defaults begin, and the effect is not offset by more money printing.

          Actually, the impact I am more afraid of is that international trade will fall greatly with all of the money printing. Then there really won’t be anything to buy in the store, but a lot of people will have printed money to buy what little is available. Then it really will look like inflation.

          • Lumber prices: the lumber industry cut way back in anticipation of a steep recession, but demand fell less than they thought, creating a lumber shortage. It will correct.

            Food prices: definitely up a lot, but some of this increase, and some other price increases, are due to covid related supply chain disruptions.

            International trade is already down a lot–not so much US imports yet, but imports have fallen a lot in the rest of the world, which reduces demand for the US dollar and thus the USD has been sinking against other major currencies (which further drives up the cost of our imports). However, changes in demand in the international financial markets may drive the USD back up in coming months.

            “Money printing”–just a figure of speech. They are bank reserves, which indirectly support increased bank lending (how new money creation really happens unless you are Venezuela), if there are willing borrowers who also meet the banks’ recently tightened lending standards. I doubt the Fed’s efforts to create CPI inflation, especially “core” CPI, will be any more successful than Japan’s when they did the same thing. The conditions just aren’t right.

  2. “Food wholesalers [UK] have warned the Chancellor that their supply chain to hospitals, care homes, schools and prisons is on the brink of collapse due to restrictions on pubs and restaurants.

    “Forcing customers to leave eating and drinking venues at 10pm, combined with reduced demand for hospitality services due to social distancing, has put unsustainable pressure on the industry, the

    “Federation Of Wholesale Distributors and Food and Drink Federation argue. In a letter to Rishi Sunak, they are now calling for urgent financial support for wholesalers to prevent “mass redundancies” and “immediate risk” to public sector supply chains.”

  3. “We must hope UK interest rates aren’t yanked below zero, taking us into some kind of Alice in Wonderland world where companies and households are paid to borrow and charged if they save…

    “For the international evidence is clear. Negative interest rates don’t generate growth but do cause yet more financial instability while provoking international tension. They are deeply counter-productive, while rates are already at a 0.1pc record low – and the only argument for them is that “something must be done”.”

  4. “The coronavirus pandemic has plunged U.S. day cares into a financial crisis.

    “Child-care centers across the country—big chains, tiny in-home operations, nonprofits—are teetering. Enrollment slumped in the spring and never fully recovered. Extra expenses, like protective gear and deep cleaning, are piling up. By some estimates, some 40% of U.S. day cares are closed. Many of those that are open have half the number of children they did in February, or less.”

  5. “Senior Federal Reserve officials are calling for tougher financial regulation to prevent the US central bank’s low interest-rate policies from giving rise to excessive risk-taking and asset bubbles in the markets.

    “The push reflects concerns that the Fed’s ultra-loose monetary policy for struggling families and businesses risks becoming a double-edge sword, encouraging behaviour detrimental to economic recovery and creating pressure for additional bailouts.

    “It also highlights fears at the Fed that the financial system remains vulnerable to new shocks, despite massive central bank intervention this year…”

    • “to prevent the US central bank’s low interest-rate policies from giving rise to excessive risk-taking and asset bubbles in the markets”–LOL, that horse left the barn years ago!

  6. “In a week when several major oil and gas reports were released, most notably the IEA World Energy Outlook 2020 and OPEC’s World Oil Outlook, a regional conflict is now on the brink of spiraling out of control.

    “The toxic combination of a military confrontation between Azerbaijan and Armenia, supported by Turkey and Russia respectively, and the confrontational stance that Ankara is taking in the East Med conflict are threatening to upend European energy supplies.”

  7. Brexit talks are ‘over’, they are not over.

    ‘Oh yes they are, oh no they are not.’

    UK stands to get slapped with tariffed trade if there is no deal.

    Three months to go and all we get is this pantomime ‘standoff’.

    Westminster has become a joke, no wonder Scots want out.

    Gove would actually look the part in pantomime drag. ‘Oh yes they are, oh no they are not.’

    > Michael Gove leaves door ‘ajar’ for post-Brexit trade talks with EU

    Cabinet Office minister Michael Gove has insisted that the door is “ajar” for post-Brexit trade talks to continue with the EU after Downing Street declared negotiations as “over”.

    Mr Gove accused EU officials of not being serious about making compromises and said they would have to back down if chief negotiator Michel Barnier is to resume negotiations in London this week.

    His warning on Sunday came after Prime Minister Boris Johnson accused European leaders of having “abandoned the idea of a free trade deal” and told the country to “get ready” for leaving without a trade deal.

    And Downing Street negotiator Lord Frost told his EU counterpart not to travel for planned talks.

    But Mr Gove left room for talks to get a trade deal in order to prevent the high trade tariffs the UK faces from December 31 when the transition period ends….

    • A new poll finds that most persons in UK expect Scotland to vote for independence in just a year or so.

      > Scottish independence: 54 per cent of UK think it’s coming in ‘year or so’

      MOST people in Britain believe Scotland will vote for independence “within the next year or so”, according to dramatic new research.

      The survey found 54% of voters thought the constitutional move would be backed within such a short timescale.

      The study was part of the What Britain Thinks series run by leading pollster and academic Professor Sir John Curtice, of Strathclyde University in Glasgow, which aims to capture the mood of people across Britain.

      It was based on an online survey of 2028 people across the UK, with the research carried out from September 25 and 27.

      The results follow a bombshell poll published within the last week, which found support for independence was at a record high with 58% of Scots saying they would back independence in a new referendum….

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.