Energy Is the Economy; Shrinkage in Energy Supply Leads to Conflict

It takes energy to accomplish any of the activities that we associate with GDP. It takes energy to grow food: human energy, solar energy, and–in today’s world–the many types of energy used to build and power tractors, transport food to markets, and provide cooling for food that needs to be refrigerated. It takes energy to cook food and to smelt metals. It takes energy to heat and air condition offices and to power the internet. Without adequate energy, the world economy would come to a halt.

We are hitting energy limits right now. Energy per capita is already shrinking, and it seems likely to shrink further in the future. Reaching a limit produces a conflict problem similar to the one in the game musical chairs. This game begins with an equal number of players and chairs. At the start of each round, a chair is removed. The players must then compete for the remaining chairs, and the player who ends the round without a chair is eliminated. There is conflict among players as they fight to obtain one of the available chairs. The conflict within the energy system is somewhat hidden, but the result is similar.

A current conflict is, “How much energy can we spare to fight COVID-19?” It is obvious that expenditures on masks and vaccines have an impact on the economy. It is less obvious that a cutback in airline flights or in restaurant meals to fight COVID-19 indirectly leads to less energy being produced and consumed, worldwide. In total, the world becomes a poorer place. How is the pain of this reduction in energy consumption per capita to be shared? Is it fair that travel and restaurant workers are disproportionately affected? Worldwide, we are seeing a K shaped recovery: The rich get richer, while the poor get poorer.

A major issue is that while we can print money, we cannot print the energy supplies needed to run the economy. As energy supplies deplete, we will increasingly need to “choose our battles.” In the past, humans have been able to win many battles against nature. However, as energy per capita declines in the future, we will be able to win fewer and fewer of these battles against nature, such as our current battle with COVID-19. At some point, we may simply need to let the chips fall where they may. The world economy seems unable to accommodate 7.8 billion people, and we will have no choice but to face this issue.

In this post, I will explain some of the issues involved. At the end of the post, I include a video of a panel discussion that I was part of on the topic of “Energy Is the Economy.” The moderator of the panel discussion was Chris Martenson; the other panelists were Richard Heinberg and Art Berman.

[1] Energy consumption per person varies greatly by country.

Let’s start with a little background. There is huge variability in the quantity of energy consumed per person around the world. There is more than a 100-fold difference between the highest and lowest countries shown on Figure 1.

Figure 1. Energy consumption per capita in 2019 for a few sample countries based on data from BP’s 2020 Statistical Review of World Energy. Energy consumption includes fossil fuel energy, nuclear energy and renewable energy of many types. It omits energy products not traded through markets, such as locally gathered wood and animal dung. This omission tends to somewhat understate the energy consumption for countries such as India and those in Middle Africa.

I have shown only a few example countries, but we can see that cold countries tend to use a lot of energy, relative to their populations. Iceland, with an abundant supply of inexpensive hydroelectric and geothermal electricity, uses it to heat buildings, grow food in greenhouses, mine “bitcoins” and smelt aluminum. Norway and Canada have both oil and gas supplies, besides being producers of hydroelectricity. With abundant fuel supplies and a cold climate, both countries use a great deal of energy relative to the size of their population.

Saudi Arabia also has high energy consumption. It uses its abundant oil and gas supplies to provide air conditioning for its people. It also uses its energy products to enable the operation of businesses that provide jobs for its large population. In addition, Saudi Arabia uses taxes on the oil it produces to subsidize the purchase of imported food, which the country cannot grow locally. As with all oil and gas producers, some portion of the oil and gas produced is used in its own oil and gas operations.

In warm countries, such as those in Middle Africa and India, energy consumption tends to be very low. Most people in these countries walk for transportation or use very crowded public transport. Roads tend not to be paved. Electricity outages are frequent.

One of the few changes that can easily be made to reduce energy consumption is to move manufacturing to lower wage countries. Doing this reduces energy consumption (in the form of electricity) quite significantly. In fact, the rich nations have mostly done this, already.

Figure 2. World electricity generation by part of the world, based on data from BP’s 2020 Statistical Review of World Energy.

Trying to squeeze down energy consumption for the many countries around the world will be a huge challenge because energy is involved in every part of economies.

[2] Two hundred years of history shows that very slow growth in energy consumption per capita leads to bad outcomes.

Some readers will remember that I have pieced together data from different sources to put together a reasonable approximation to world energy consumption since 1820. In Figure 3, I have added a rough estimate of the expected drop in future energy consumption that might occur if either (1) the beginning of peak fossil fuels is occurring about now because of continued low fossil fuel prices, or (2) world economies choose to leave fossil fuels and move to renewables between now and 2050 in order to try to help the environment. Thus, Figure 3 shows my estimate of the pattern of total world energy consumption over the period of 1820 to 2050, at 10-year intervals.

Figure 3. Estimate by Gail Tverberg of World Energy Consumption from 1820 to 2050. Amounts for earliest years based on estimates in Vaclav Smil’s book Energy Transitions: History, Requirements and Prospects and BP’s 2020 Statistical Review of World Energy for the years 1965 to 2019. Energy consumption for 2020 is estimated to be 5% below that for 2019. Energy for years after 2020 is assumed to fall by 6.6% per year, so that the amount reaches a level similar to renewables only by 2050. Amounts shown include more use of local energy products (wood and animal dung) than BP includes.

The shape of this curve is far different from the one most forecasters expect because they assume that prices will eventually rise high enough so all of the fossil fuels that can be technically extracted will actually be extracted. I expect that oil and other fossil fuel prices will remain too low for producers, for reasons I discuss in Section [4], below. In fact, I have written about this issue in a peer reviewed academic article, published in the journal Energy.

Figure 4 shows this same information as Figure 3, divided by population. In making this chart, I assume that population drops only half as quickly as energy consumption falls after 2020. Total world population drops to 2.8 billion by 2050.

Figure 4. Amounts shown in Figure 3, divided by population estimates by Angus Maddison for earliest years and by 2019 United Nations population estimates for years to 2020. Future population estimated to be falling half as quickly as energy supply is falling.

In Figure 4, some parts of the curve are relatively flat, or even slightly falling, while others are rising rapidly. It turns out that rapidly rising times are much better for the economy than flat and falling times. Figure 5 shows the average annual percentage change in energy consumption per capita, for ten-year periods ending the date shown.

Figure 5. Average annual increase in energy consumption per capita for 10-year periods ended the dates shown, using the information in Figure 4.

If we look back at what happened in Figure 5, we find that when the 10-year growth in energy consumption is very low, or turns negative, conflict and bad outcomes are typical. For example:

  • Dip 1: 1861-1865 US Civil War
  • Dip 2: Several events
    • 1914-1918 World War I
    • 1918-1920 Spanish Flu Pandemic
    • 1929-1933 Great Depression
    • 1939-1945 World War II
  • Dip 3: 1991 Collapse of the Central Government of the Soviet Union
  • Dip 4: 2020 COVID-19 Pandemic and Recession

Per capita energy consumption was already growing very slowly before 2020 arrived. Energy consumption took a big step downward in 2020 (estimated at 5%) because of the shutdowns and the big cutback in air travel. One of the important things that energy consumption does is provide jobs. With severe cutbacks intended to contain COVID-19, many people in distant countries lost their jobs. Cutbacks of this magnitude quickly cause problems around the world.

For example, if people in rich countries rarely dress up to attend meetings of various kinds, there is much less of a market for dressy clothing. Many people in poor countries make their living manufacturing this type of clothing. With the loss of these sales, workers suddenly found themselves with much reduced income. Poor countries generally do not have good safety nets to provide food for those who are out of work. As a result, the diets of people subject to loss of income became inadequate, leading to greater vulnerability to disease. If the situation continues, some may even die of starvation.

[3] The pattern of world energy consumption between 2020 and 2050 (modeled in Figures 3, 4 and 5) suggests that a very concerning collapse may be ahead.

My model suggests that world energy consumption may fall to about 28 gigajoules per capita per year by 2050 (for a reduced population of 2.8 billion). This is about the level of world energy consumption per capita for the world in 1900.

Alternatively, 28 gigajoules per capita is a little lower than the per capita energy consumption for India in 2019. Of course, some parts of the world might do better than this. For example, Mexico and Brazil both had energy consumption per capita of about 60 gigajoules per capita in 2019. Some countries might be able to do this well in 2050.

Using less energy after 2020 will lead to many changes. Governments will become smaller and provide fewer services such as paved roads. Often, these governments will cover smaller areas than those of countries today. Businesses will become smaller, more local, and more involved with goods rather than services. Individual citizens will be walking more, growing their own food, and doing much less home heating and cooling.

With less energy available, it will be necessary to cut back on fighting unfortunate natural occurrences, such as forest fires, downed electricity transmission lines after hurricanes, antibiotic resistant bacteria, and constantly mutating viruses. Thus, life expectancy is likely to decline.

[4] It is “demand,” and how high energy prices can be raised, that determines how large an energy supply will be available in the future.

I keep making this point in my posts because I sense that it is poorly understood. The big problem that we should be anticipating is energy producers going out of business because energy prices are chronically too low. I see five ways in which energy prices might theoretically be raised:

  1. A truly booming world economy. This is what raised prices in the 1970s and in the run up to 2008. If there are truly more people who can afford homes and new vehicles, and governments that can afford new roads and other infrastructure, companies extracting oil and coal will build new facilities in higher-cost locations, and thereby expand world supply. The higher prices will help energy companies to be profitable, despite their higher costs. Such a scenario seems very unlikely, given where we are now.
  2. Government mandates and subsidies. Government mandates are what is maintaining demand for renewables and electric vehicles. Conversely, government mandates are part of what is keeping down tourist travel. Indirectly, this lack of demand relating to travel leads to low oil prices. A government mandate for people to engage in more travel seems unlikely.
  3. Much reduced wage disparity. If everyone, rich or poor, can afford nice homes, automobiles, and cell phones, commodity prices will tend to be high because buying and operating goods such as these requires the use of commodities. Governments can attempt to fix wage disparity through more printed money, but I am doubtful that this approach will really work because other countries are likely to be unwilling to accept this printed money.
  4. More debt, sometimes leading to collapsing debt bubbles. Spending can be enhanced if it becomes easier for citizens to buy goods such as homes and vehicles on credit. Likewise, businesses can borrow money to build new factories or, alternatively, to continue to pay wages to workers, even if there isn’t much demand for the goods and services sold. But, if the economy really is not recovering rapidly, these approaches can be expected to lead to crashes.
  5. Getting rid of COVID-19 inefficiencies and fearfulness. Economies around the world are being depressed to varying degrees by continued inefficiencies caused by social distancing requirements and by fearfulness. If these issues could be eliminated, it might boost economies back up to the already somewhat depressed levels of early 2020.

In summary, the issue we are facing is that oil demand (and thus prices) were far too low for oil producers because of wage disparity before the COVID-19 crisis arrived in March. Trying to get demand back up through more debt seems likely to lead to debt bubbles, which will be in danger of collapsing. There may be temporary price spikes, but a permanent fix is virtually impossible. This is why I am forecasting the severe drop in energy consumption shown in Figures 3 and 4.

[5] We humans don’t need to figure out how to fix the economy optimally between now and 2050.

The economy is a self-organizing system that will figure out on its own the optimal way of “dissipating” energy, to the extent possible. In physics terms, the economy is a dissipative structure. If the energy resource is food, energy will be dissipated by digesting the food. In the case of fossil fuel, energy will be dissipated by burning it. We may like to think that we are in charge, but we really are not. It is the laws of physics, or perhaps the Power behind the laws of physics, that is in charge.

Dissipative structures are not permanent. For example, hurricanes and tornadoes are dissipative structures. Plants and animals are dissipative structures. Eventually, new smaller economies, encompassing smaller areas of the world, may replace the existing world economy.

[6] This is a recent video of a panel discussion on “Energy Is the Economy.”

Chris Martenson is the moderator. Art Berman, Richard Heinberg and I are panelists. The Peak Prosperity folks were kind enough to provide me a copy to put up on my website.

Video of Panel Discussion “Energy Is the Economy,” created in October 2020 by Peak Prosperity. Chris Martenson (upper right) is the moderator. Richard Heinberg (upper left), Art Berman (lower left) and Gail Tverberg (lower right) are panelists.

A transcript of this panel discussion can be accessed at this link:

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.
This entry was posted in Financial Implications and tagged , , , . Bookmark the permalink.

2,764 Responses to Energy Is the Economy; Shrinkage in Energy Supply Leads to Conflict

  1. Lidia17 says:

    I want to wish Gail a Happy Thanksgiving and give my thanks that she hosts this site and shares her analysis and lets us kick up dust here in the comments.

    A huge socially-distanced hug to you and all the OFW-ers.

    • Harry McGibbs says:

      A belated happy birthday to you, Gail, and indeed socially-distanced hugs all round.

      • My birthday is March 20. In the video, Chris Martenson remarks about my posting on Our Finite World since 2010.

        Actually, I started posting on Our Finite World in March 2007. I posted only on The Oil Drum between September 2007 and October 2010. I started posting back on Our Finite World (with The Oil Drum copying only the articles that they agreed with) in November 2010. So, in a sense, November 2020 is my 10-year anniversary on

        Even back then, I was talking about ideas that “Peak Oilers” found terribly wrong.

    • Robert Firth says:

      Happy Thanksgiving, Gail. Please enjoy many virtual hugs and a real turkey.

      “Let us be grateful to the people who make us happy; they are the charming gardeners who make our souls blossom.”

      • Harry McGibbs says:

        Oh, that’s embarrassing. Happy *Thanksgiving*, Gail – not happy birthday at all. 😂

    • Thanks very much for your Thanksgiving wishes. We will be celebrating with our two sons, neither of whom is married or has children. In fact, they will do most of the cooking.

      • Artleads says:

        Happy Thanksgiving, Gail. And thanks to Lidia for jogging us into remembering/acknowledging how much we owe to you.

  2. Zerohedge has an article, “Fed, IMF Sound Warning That More QE Could Lead To “Unintended Consequences

    Basically, the run up in balance sheets is expected to look something like this, according to Morgan Stanley.

    This implies purchasing an unprecedented $1.2 billion in assets every single hour. According to the article:

    In summary, the IMF’s recommendation was the old fallback: “Monetary policy should not and cannot do the job alone” and that “fiscal policy has a significant role to play.” Which is great in a world where politics still functions; unfortunately as the hyperpolarized political environment in the US so vividly shows, major fiscal stimulus may remain a mirage until 2022 unless the Democrats win the January Georgia runoffs.

    Which then means that it will once again be up to the Fed.

    And while stocks and bonds have been delighted by this eventuality, surging to record highs as new trillions in QE means just one thing – even higher asset prices, one wonders if we are now on the verge of a Rubicon where, if “several participants” in the FOMC and the head of the IMF are correct, the next QE fails to lift stocks but instead triggers the next crash.

    Fiscal policy, in theory, would allow actions such as taxing the rich and giving the money to the poor, so that they can buy food and pay their rents and mortgages. But with a divided Congress this can’t happen.

    Just creating more of a debt bubble for the rich seems likely to lead to another housing price crash, among other things.

    • davidinamonthorayearoradecade says:

      there is some scary stuff in there.

      yes, housing prices could be sacrificed because that affects the lower classes much more but not so much the 1%.

      then this:

      “… meanwhile what the Fed also said is that for all its concerns, it will most likely continue to pump liquidity, as the central bank is absolutely mortified of another crash – as only then will its lack of tools to sustain financial markets become apparent. As such, the Fed will do everything in its power to not only short circuit the business cycle in perpetuity, but also avoid any market drops… ever again.”

      so nothing new here: they intend to avoid any market drops, but the unintended consequences of their actions could bring a market crash.

      it’s a house of cards and could fall in any upcoming week or month or year.

      (I keep an eye on energy supply, which holds things up. Relatively small but still significant 2020 declines in energy supply could be the beginning of the end, though not yet since the house of cards remains standing.)

  3. MG says:

    I was thinking why the Limits to Growth has got this increasing birth rate and death rate after the collapse.

    It really reflects the accumulation of the genetic mutations problem, which can be solved only via increasing death rate and the corresponding increase in the death rate. However, the role of the energy decline and the epidemics, as happened e.g. with the fall of the medieval ages, or unknown impacts of the persistent nuclear pollution at the time of the creation of the study, made it harder to model the real impacts of the genetic mutations.

    Because the problem of the pollution, including the nuclear one, is that it accelerates the accumulation of the genetic mutations in the population to the point where the humans can not propagate naturally. The pollution by plastics also contributes to the degeneration of the human genome.

    That way the population growth is curbed by irreparable damage to the environment, including the clmt chng, which mainly affects the clean water availability.

    The clean water availability can be repaired only by increasing use of the cheap energy, which we do not have.

    The persistent too low energy prices in case of energy producers and the too low income of the consumers make it impossible to restart the growth.

    We need energy to remove the accumulating pollution and the genetic mutations. The current anti-coronavirus measures reflect how badly we need the cheap energy. That without the cheap energy, the system atomizes and implodes.

    • I don’t know the real reason for the increasing birth rate, except that perhaps birth control is less available. Also, mothers can see that their children have less chance of living to maturity because communicable disease again become a problem (or become more of a problem, in some parts of the world).

      The authors of The Limits to Growth have said that after the peak is hit, the model should not be believed (not necessarily in the book much, more in speeches later). I wish that they had simply truncated the model after it hit limits. I don’t think that it does a reasonable job of simulating what impact a failing world economy has on all of the variables modeled.

  4. believeeverythingyouread says:


  5. MG says:

    The current fall in energy consumption helped in fact energy consumers, as it brought the lower energy prices.

    E.g. Slovakia, like the EU, which is heavily dependent on energy imports, is in fact having record foreign trade surpluses.

    The rising debt is unimportant as the energy consumers create it in order to keep the declining energy production and consumption going on.

    • davidinamonthorayearoradecade says:

      so people (in households and businesses) who CAN’T afford to maintain their energy consumption then cut back on their consumption, and the prices fall.

      which is good for people who CAN afford to maintain their usual level of energy consumption.

      but this will not end well if this direction of economic activity continues.

      net (surplus) energy grew for centuries and now is reversing, so the average person will have decreasing prosperity because prosperity is dependent on the flow of energy through the economy.

      then more and more people will not be able to afford to maintain their usual level of energy consumption.

      energy prices could keep going lower, but it will not matter much to the growing numbers of people who are getting poorer year after year.

      it’s a slow slow process, but it’s the endgame where smaller weaker countries can’t afford as much energy, and they keep getting poorer, and even the lower classes in bigger countries also fall more and more into poverty.

      lower energy prices are a sign that the endgame is here.

      • The process may be slow, but it will start “taking out” more pieces of the economy. At first, the impact will be small, but later the impact is likely to be like an avalanche.

  6. davidinamonthorayearoradecade says:

    GDPnow for Q4 is plus 11.0%

    that’s interesting.

  7. Mirror on the wall says:

    > Oil bankruptcies rise in the third quarter

    The number of bankruptcies in the energy sector rose during the third quarter as the coronavirus pandemic continued to take its toll on the oil and gas industry.

    Forty-four oil production and oil-field service companies filed for Chapter 11 bankruptcy between August and October, up from 29 bankruptcies during the previous three-month period. There were 17 oil producers and 27 oil field services companies that sought bankruptcy protection during the third quarter, according to Haynes and Boone.

    “Combined with the general lack of access to capital, additional filings are likely before 2020 comes to a close,” the Dallas law firm said in its latest bankruptcy report.

    A new wave of bankruptcies is sweeping the oil and gas industry after the coronavirus pandemic crushed global demand for crude and petroleum products such as gasoline and jet fuel. Unlike past downturns, oil and gas companies are under increased financial pressure after many investors pulled out of the sector in 2018 after years of underperformance.

    …. Since the previous oil bust that ended in 2016, more than 500 oil production and oil-field services companies have filed for bankruptcy, bringing more than $279 billion of debt to court, Haynes and Boone said.

    • Mirror on the wall says:

      > U.S. Shale Bankruptcies Accelerate Despite Pandemic Protection

      …. According to a new analysis by BailoutWatch, Public Citizen, and Friends of the Earth, the fossil fuel industry received between US$10.4 billion and US$15.2 billion in direct economic relief, with more than 26,000 coal, oil, and gas companies benefiting directly. In addition, indirect benefits in the form of bond funds bought by the Fed and billions of newly issued company bonds “pushed government aid to the industry past US$110 billion,” say the activists in their report Bailed Out & Propped Up, which slams government support to the “money-losing dirty energy companies” and shames the firms that made use of federal government programs. The report goes on to recommend that “Congress must explicitly exclude further aid to the fossil fuel industry from any future coronavirus relief packages.”

    • Mirror on the wall says:

      US shale has never been profitable.

      > Implications of COVID-19 for the US shale industry

      …. The year 2020 marks the 15-year anniversary of the US shale boom, which heralded an era of US energy independence and more than doubled tight shale oil production over the past five to six years. But beneath this phenomenal growth, the reality is that the shale boom peaked without making money for the industry in aggregate. In fact, the US shale industry registered net negative free cash flows of $300 billion, impaired more than $450 billion of invested capital, and saw more than 190 bankruptcies since 2010.

      • There is no mention of how much oil companies paid in taxes of various kinds over the years. Not all of the taxes depend on profitability. Some are paid at the front end, regardless of profitability.

    • Mirror on the wall says:

      The USA FF industry is practically ‘nationalised’ with the tax state picking up the unprofitability.

      The ‘market’ is a facade – and yet shareholders still get their pay outs at tax payers expense – nationalised ‘capitalism’.

      > The US oil industry is flailing despite a $10 billion pandemic lifeline

      …. The biggest benefit came from a little-known amendment to the tax code by the $2.2 trillion CARES Act. This allowed companies to accelerate tax credits and reclaim old losses to offset their current tax bills. While not explicitly targeting fossil fuel companies, the provisions disproportionately benefited the industry, which actively lobbied for them. Oil sector representatives also advocated for tailored bailout programs beyond Congress, says Lukas Ross of Friends of the Earth, a report author. In April, Texas senator Ted Cruz and other Republicans asked the Federal Reserve Board to loosen criteria for oil and gas firms to access its Main Street Lending Program. The Fed eventually made the requested changes.

      …. But many were already unprofitable. That’s the biggest difference between the bailout of US fossil fuel companies and other industries. While airlines received huge cash infusions or benefits from the US government—more than $60 billion in loans, payroll support, and grants—they employ roughly four times more people and have proved profitable over the last decade.

      That’s in contrast to the US shale industry, which relies on fracking to extract oil and gas out of formations. It has catapulted the US to the top of the world’s fossil fuel producers, but it has never recorded a net profit despite investing billions of dollars since 2010. Unless oil prices rose well above $45 to $50 per barrel, where they have languished since 2018, many firms were unlikely to survive on their own.

      After 10 years of losses for US shale oil, 2020 may be the worst so far

      That is likely to leave the US—and taxpayers—footing the bill for a moribund industry after the pandemic. Despite the federal help, the law firm Haynes and Boone reports 36 US oil producers have filed for bankruptcy in the first eight months of 2020. That comes on the heels of 190 bankruptcies in the US shale industry since 2010, reports the consulting firm Deloitte, representing a combined $450 billion in unpaid debt.

    • Mirror on the wall says:


      > Opinion: Disaster or deliverance? What Biden victory means for oil and gas.

      …. Oil companies have cut as many as 118,000 jobs — and counting — since the pandemic began. Trouble had been on the horizon and the pandemic brought what had loomed crashing down. In the past five years, more than 500 producers and service companies have filed for bankruptcy, including more than 120 Texas producers. The Dallas law firm Haynes and Boone, which tracks Oil Patch bankruptcies, predicts more will be coming before year’s end.

      …. Energy is now the poorest performing sector among the 11 components of the Standard & Poor’s 500 Index. While the broad market is up more than 10 percent this year, the energy sector has fallen more than 40 percent.

      A Biden presidency, in other words, may be the least of the industry’s worries. While tax policies and leasing programs have some marginal impact, presidents typically have little direct effect on the industry’s success or failure….

      • Minority Of One says:

        >>While the broad market is up more than 10 percent this year

        I seem to remember reading that the FAANG Stocks (Facebook, Amazon, Apple, Netflix and Alphabet (Google) account for nearly all the growth over the last year?

    • Mirror on the wall says:

      > Trump Administration Targets Banks Divesting From Fossil Fuels In New Anti-Climate Rule

      A new proposed regulation that would bar large banks from declining to do business with particular industries or groups of companies was released on Friday by the Treasury Department’s Office of the Comptroller of the Currency (OCC) — a move that could have major implications for a wide array of divestment and boycott campaigns nationwide, including efforts to divest from fossil fuels.

      …. With Wall Street reluctant to invest, drillers have grown highly dependent on bank lending.

      In 2009, equities like stocks made up the majority of capital invested in the U.S. oil patch, according to SEC filings cited by the French multinational bank Societe Generale in a September 2020 presentation. By the first quarter of 2020, 96 percent of the capital in the oil patch was debt and just 4 percent represented equities like stocks, it adds.

      …. It’s not clear, however, to what degree many small and medium-sized energy firms remain creditworthy. On Monday, debt ratings agency Fitch said that its “2021 Rating Outlook for North American Energy is Negative, reflecting the large number of companies with Negative Outlooks,” adding that a full 45 percent of companies they followed in this sector had negative rating outlook (and that the sector’s outlook reflected “an expected improving trend in 2021.”)

      …. As this fall’s redetermination period loomed, corporate law firm Haynes and Boone surveyed oil borrowers and lenders. They found that 17 percent of producers still planned to borrow from banks this coming year (and just 25 percent said they’d source capital from “cash flow from operations” in 2021). A full 82 percent of respondents said that they expected the structure of reserves-based lending to include modified terms after this crisis, like banks declining to lend based on the value of so-called “proved undeveloped reserves” (see DeSmog’s coverage here) or more frequent scrutiny of reserves figures.

      “Banks have backed away from fossil fuel lending mostly for reasons that are very easy to quantify: they’ve proven to be terrible investments,” Clark Williams-Derry, an analyst with The Institute for Energy Economics and Financial Analysis, told DeSmog. “Just look at the $170 billion in debt swept into bankruptcy over the past 5 years, at the major write-downs of oil assets that secure bank debt, or at the ongoing chaos in reserve-based lending as companies are forced to downgrade their reserves.”

      “In some ways, some banks are getting environmental kudos for doing things that they would have done anyway on purely financial grounds,” Williams-Derry added….

    • Mirror on the wall says:

      More US FF bankruptcies ahead.

      > Oil Crash Continues To Claim Bankruptcy Victims In U.S. Shale Patch

      …. Between the beginning of 2015 and the end of October 2020, as many as 250 North American oilfield services providers filed for bankruptcy. Another over 250 filings in the industry came from E&P companies in North America, so more than 500 bankruptcies have been filed in the North American oil and gas industry since 2015, Haynes and Boone said.

      More bankruptcies are expected by the end of the year, Rystad Energy said at the end of October.

      If a WTI Crude average of around $40 per barrel and a Henry Hub price of $3 per MMcf persist in 2021, Rystad Energy expects 54 new E&P bankruptcies next year.

      • Minority Of One says:

        Bankruptcies in the UK usually tend to mean that a company has gone into liquidation and will soon cease to exist. But in the USA you have chapter 11 bankruptcy which means the company has a few weeks where it can stop paying all debts and refinance debts with the debtees. Does anyone know – how many of these 500 or so companies have been liquidated and how many are still functioning?

  8. Harry McGibbs says:

    “With COVID-19 still raging – and rates of infection, hospitalisation, and death now spiralling out of control (again) – the near-term risks to economic activity have tipped decidedly to the downside in the US and Europe.

    “The combination of pandemic fatigue and the politicisation of public health practices has come into play at precisely the moment when the long-anticipated second wave of COVID-19 is at hand.

    “Unfortunately, this fits the script of the dreaded double-dip recession that I warned of recently. The bottom-line bears repeating: apparent economic recoveries in the US have given way to relapses in eight of the 11 business cycles since World War II.

    “The relapses reflect two conditions: lingering vulnerability from the recession itself and the likelihood of aftershocks. Unfortunately, both conditions have now been satisfied.”

    • Harry McGibbs says:

      “Gripped by the accelerating viral outbreak, the U.S. economy is under pressure from persistent layoffs, diminished income and nervous consumers, whose spending is needed to drive a recovery from the pandemic.

      “A flurry of data released Wednesday suggested that the spread of the virus is intensifying the threats to an economy still struggling to recover from the deep recession that struck in early spring.”

      • Harry McGibbs says:

        “The holidays often make people more vulnerable to feeling depressed or anxious. But for the millions of Americans suffering from a pandemic-induced financial crisis, the risk is much greater this season.

        “Many are at their wit’s end. And it doesn’t appear that help is on the way. Congress is still at odds over a package that would provide additional economic aid…”

      • The medical profession has been making the situation worse by not endorsing the use of medications that have been proven safe over the years, even if there is not absolute proof of their efficacy now.

        People are getting sick of staying at home. Young people can see that the disease outcomes are generally not very bad.

      • Robert Firth says:

        “… the spread of the virus is intensifying the threats to an economy still struggling to recover …”

        The spread of the virus was inevitable from Day One. The threat is rather from the totally inept and hysterical response to the spread, which is now redoubling its efforts to destroy the economy. Europe responded to the Black Death with far more intelligence and effectiveness. Yes, they had their flagellants, but at least they didn’t “flagellate” whole nations with absurd, infeasible. and ineffective moral exhortations. We are watching a civilisation collapse because its leaders no longer have the courage to defend it.

        “Let us break their bonds asunder, and cast away their yoke from us.”

        • Lidia17 says:

          “A mature civilization understands that risk is part of life and that there are higher purposes — even mere sociability — than avoiding death at all costs. No great venture can be accomplished if staying safe is life’s only guiding principle. Now, however, our elites mock courage and perseverance, explicitly repudiating the virtues that built this country. President Trump, upon leaving the hospital after a coronavirus infection, admonished the country to not ‘be afraid’ of the virus, in the Washington Post’s words, and to not ‘allow it to dominate’ our lives. That imminently reasonable exhortation, once expected in a leader, is still being denounced by public health experts and the media nearly two months later. If Americans do not repudiate this ethic of fear, future Thanksgivings will be even bleaker than this year’s.”

          (You get one free article here over I don’t know how long.)

    • Minority Of One says:

      >> and rates of infection, hospitalisation, and death now spiralling out of control (again)

      The rate of infection does not really matter if the large majority of those infected have no or minor symptoms. But the hype is good for inducing fear and submission amongst the general public. When I point this out to friends and family (in the UK) what they seem to hear is ‘I want you all dead’.

      As for hospitalizations – the ‘Talk Radio’ guests on YT the last week or two seem to have data suggesting that currently the hospitalizations from flu-like illnesses (flu + CV19) in the UK are no worse than in previous years. But don’t let the facts get in the way of an agenda.

    • The economy was doing poorly before COVID came along. We can’t really expect it to bounce back. Many of the failing businesses were doing before COVID added to the problems.

  9. Harry McGibbs says:

    “The government has privately admitted the UK faces an increased likelihood of “systemic economic crisis” as it completes its exit from the European Union in the middle of a second wave of the coronavirus pandemic.

    “A confidential Cabinet Office briefing seen by the Guardian also warns of a “notable risk” that in coming months the country could face a perfect storm of simultaneous disasters, including the prospect of a bad flu season on top of the medical strains caused by Covid.”

    • Harry McGibbs says:

      “Britain is permanently poorer, and the British state weaker, as a result of Covid, the collapse in GDP and the gargantuan debt binge that has kept us going.

      “Our economy is the most socialised it has ever been outside of war, and we have resorted to the printing presses to finance spending in a shockingly unprecedented way, pushing the great fiat money experiment close to breaking point…

      “That, in summary, is the economic devastation described or implied by the Office for Budget Responsibility (OBR) in what is easily the most terrifying official economic assessment from a developed nation I have ever read.”

    • Robert Firth says:

      The Guardian is a sock puppet of the Remainers and has been since the beginning. Anything it says is propaganda.

      • Xabier says:

        One of the most partisan and dishonest papers around, and they have the nerve to claim that their content is unbiased and the best around as they are not owned by an oligarch!

      • Minority Of One says:

        >>The Guardian is a sock puppet of the Remainers

        It is also now MI5s favourite MSM outlet, allegedly. It still publishes decent articles every now and again, but it is necessary to sort out the wheat from the chaff.

    • Xabier says:

      Worth noting, for Brits, that the document states that UK food reserves have been seriously depleted in the course of 2020.

      I’ve been finding that supermarkets have reimposed quotas for basic foodstuffs, especially dry goods, no doubt to continue well into next year – and maybe forever?

      I’ve also encountered a general lack of items manufactured in Germany as I’ve been restocking my Doom Bunker.

      Courier deliveries have become erratic, and the notification system has generally broken down, unlike during the first lock-down. Pressure of volume one supposes More goods also arrive damaged, and badly-packed.

      • Interesting, thanks.

        Besides the Brexit / frontiers factor, speaking about whole Europe, perhaps it all kept piling up and suddenly [NOW] we are at the threshold it’s no longer enough, feeding the poverty in various domestic enclaves, Greece, migrants already arrived, UN food programs abroad-around the globe, ..

        • Robert Firth says:

          A local problem, such as a food shortage in some villages, can usually be solved locally, one step up on the pyramid. But when a local problem is made into a global problem, by the UN, the EU, Oxfam, Save the Children, or whomever, it becomes impossible to solve.

          Too many layers of administration; too many middlemen all seeking a cut; too many conflicting pressure groups pushing their own agenda. In my (biased) opinion, globalism has massively enriched the globalists, and totally failed the people.

      • Minority Of One says:

        It has been mentioned a few times before, but it is worth repeating. The UK imports almost half its food requirements, net. What are the chances that BoJo and his cronies will arrange a smooth exit from the EU, and our food supplies will continue to flow reliably after exit (not that they are 100% reliable now)?

  10. In retrospect, the Cuban Missile Crisis should have become a full nuclear war.

    Some cities in USA plus most of the East Bloc being destroyed, but that would have been a ‘blessing in disguise’ since

    1. The Sixties cancelled
    2. No Green Revolution (and probably no mass immigration as there would suddenly be a torrent of impoverished people from the East Bloc)
    3. Leading to no unchecked pop growth in the Third World.

    • Artleads says:

      It’s hard to explain even to oneself, much less to others: people matter and don’t mater at the same time. There is something more important than a given number of people staying alive. Faithfulness/adherence to that “something” could take out a lot of people in the short run and leave a more durable system behind. A blogger known to some of us used to say it was necessary to have something you’re willing to die for.

      • Indeed. In retrospect, it was humanity’s final chance.

        But Kennedy read a stupid book from Barbara Tuchman called the Guns of August, about the escalation of the July 1914 crisis.

        If he didn’t read the book, the world would have had about half the people now and we would still have prosperity.

Comments are closed.